DCIT, CIRCLE-2(1), NEW DELHI vs. ALICE DEVELOPERS P.LTD, NEW DELHI

PER MANISH AGARWAL, AM:

Both appeals are filed by the Revenue against two separate orders of the Commissioner of Income Tax (Appeals)-I, New Delhi [CIT(A) in short] in appeal Nos. 268/16-17 and 653/16-17 for Assessment Years: 2013-14 and 2014-15 respectively, both dated 23.03.2016 and 31.03.2014 respectively.

2 ITA Nos.6899 & 6900 /Del/2018 DCIT vs. Alice Developers Pvt. Ltd. ITA No.6899/Del/2018 Asstt. Year 2013-14.

3 ITA Nos.6899 & 6900 /Del/2018 DCIT vs. Alice Developers Pvt. Ltd. customers and wrongly claimed the deduction of debenture interest paid out of such income and therefore, disallowed the same. However, ld. CIT(A) has deleted the same and allowed the appeal of the assessee. The Ld. CIT(A) had followed principle of consistency by observing that for Asst. Year 2011-12 similar claim was made by the assessee which was allowed by the AO in the assessment order passed u/s 143(3) of the Act. Since, the facts are identical, therefore, as a principle of consistency, the Ld. CT(A) has allowed the deduction claimed by the assessee and deleted the disallowance. The relevant observations of Ld. CIT(A) as contained in para 7 of the order are as under:

“I have carefully considered the assessment order and written submissions filed by the Ld. AR. The appellant company had incurred interest expenses on debentures issued for a total amount of Rs.7,29,68,948/-. Out of the said amount. the appellant had added back an amount of Rs. 5,10,26,411/- while computing its taxable income and transferred the said expenses to Project in progress. Further, the balance amount of Rs.2,19,42,537/- was transferred by the appellant to the Profit & Loss account and claimed as expenses. The AO has disallowed the above claim of expenses of Rs.2, 19,42,537/- and has transferred the same to the Project in Progress. The detailed submissions of the appellant against the aforementioned disallowance are as follows: "Contentions of the appellant company: Principle of consistency 2. In the assessment order passed in the case of the appellant for AY 2011-12, the appellant had claimed the entire interest expenses on debentures in the P&L account. However, the Ld. AO observed that such interest expenses cannot be allowed as revenue expenditure and added the same back to the income of the appellant by transfer to project in progress. In this regard, the Ld. AO further observed that the appellant company was an FDI compliant company and has to comply with the restrictions imposed by Ministry of Commerce & Industry in that the foreign money cannot be repatriated back Thus, to the extent of interest earned on Inter Corporate Deposits out of the funds received from customers for booking of flats, credit was allowed and the

4 ITA Nos.6899 & 6900 /Del/2018 DCIT vs. Alice Developers Pvt. Ltd. corresponding amount of interest expenses on debentures were allowed. In the assessment order passed in the case of the appellant for AY 2011-12 the relevant extracts there from are reproduced hereinafter "Since the assessee company had borrowed funds from M/s Equexa Ltd. & M/s Unitech Ltd. for purchase of Development Rights from M/s Unitech Ltd to develop the Housing Project at Mohali, Punjab and has paid interest on debentures issued to these companies at Rs.6,50,16,514/- which is a part of project cost as per the clause 'b' of para 2.2 of guidance note on Accounting of Real Estate Projects. Therefore, the interest expenditure of Rs.6,50,16,514/-claimed by the company in Profit & Loss a/c cannot be allowed as Revenue Expenditure. However, after considering the fact that the assessee being a FDI complaint company and has to comply to the restrictions imposed on the foreign money which could not be repatriated back for want of restriction imposed by Ministry of Commerce & Industry. The credit of interest earned on Inter Corporate Deposits out of the funds received from the customers for booking of flats is here by allowed to the extent of Rs. 29,04,658/- which has been shown as income in Profit & Loss A/c. Further credit of interest of Rs.56,20,090/- is also allowed as the same has been sou-moto disallowed by the assessee company u/s 14A and added back in computation of income for earning of exempt income which has been earned by the assessee company out of the funds on booking of flats. Therefore after considering the above facts interest to the extent of Rs.5,64,91,767/- (6,50,16,514-29,04,658-56,20,090) is hereby disallowed by treating the same as part of project cost & added back to the income of assessee." It was submitted that in the present case, the appellant has duly complied with the aforesaid treatment of the same nature of income and has transferred the amount of interest expense on debentures to project in progress, net of the interest income on inter corporate deposits (ie. 7,29,68,948-2,19,42,537) In this respect, it was also submitted that even though the principle of res judicata may not apply to income tax proceedings, the principle of consistency should be duly applied, which demands that the judicial position cannot change in subsequent years when there is no change in facts compared to earlier years. The applicability of the principle of consistency to proceedings under the Act has been affirmed by courts throughout India in a plethora of judicial pronouncements. The relevant extracts of some of these cases are reproduced hereunder:

5 ITA Nos.6899 & 6900 /Del/2018 DCIT vs. Alice Developers Pvt. Ltd.  Radhasoami Satsang v. CIT. [1992] 60 Taxman 248 (SC) 18. We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 19. On these reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter-and if there was not change it was in support of the assesses-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-Tax in the earlier proceedings, a different and contradictory stand should have been taken..."  Parashuram Pottery Works Co. Ltd. v. ITO, [1977] 106 ITR 1 (SC) "At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi- judicial controversies as it must in other spheres of human activity"  CIT v. Neo Poly Pack (P) Ltd., (2000) 112 Taxman 363 (Delhi) "It is true that each assessment year being independent of the other, the doctrine of res judicata does not strictly apply to income-tax proceedings, but where an issue has been considered and decided consistently in a number of earlier assessment years in a particular manner, for the sake of consistency, the same view should continue to prevail in subsequent years unless there is some material change in the facts. In the present case, learned counsel for the Revenue has not been able to point out even a single distinguishing feature in respect of the assessment year in question which could have prompted the Assessing Officer to take a view different from the earlier assessment years, in which the same income was brought to tax as income from business."  CIT v. Dalmia Promoters Developers (P) Ltd., [2006] 151 Taxman 202 (Delhi) 9 For rejecting the view taken for the earlier assessment years, there must be a material change in the fact situation. There is no gainsaying that the previous view will have no application even in cases where the

6 ITA Nos.6899 & 6900 /Del/2018 DCIT vs. Alice Developers Pvt. Ltd. law itself has undergone a change but before an earlier view can be upset or digressed from one of the two must be demonstrated namely a change in the fact situation or a material change in law whether enacted or declared by the Supreme Court. The Commissioner and the Tribunal have in the instant case correctly held that there was no change in the fact situation. The income earned on fixed deposits for the previous three assessment years was, in the context of the very same facts and circumstances as are relevant for the year under consideration, treated as business income of the assessed. In the absence of a change in facts or any additional input there was no compelling reason for taking a different view. The Commissioner and the Tribunal were, therefore justified in holding that the view taken for the earlier assessment years continued to be applicable even for the year under consideration."  Honda Siel Power Products Ltd. v. DCIT, [2014] 48 taxmann.com 299 (ITAT Delhi) 7.2 In this context the arguments of the assessee that similar payments were made by the assessee for the last few years and that the TPO as well as the AO have accepted the genuineness of the payments and have approved the claim that the payments were at arm's length assume significance. Though res judicata is not applicable to tax laws, when the fundamental facts remain the same in different years, rule of consistency applies. As evident from the above judicial pronouncements, the legal position accepted as correct in earlier years on the basis of same facts should not be disturbed unless there is a material change in facts or law. More so, in the present case, such position has been propounded by the Ld. AO himself and any deviation there from should not be maintainable. In the instant case, the facts have remained unchanged, i.e. issuance of debentures, making of inter corporate deposits from the advances received from customers for booking of flats, applicability of FDI/RBI restrictions on the appellant in repatriation of foreign income. It is also important to note that despite being duly apprised of the assessment order passed in the case of the appellant for the AY 2011-12, the Ld. AO has at no stage contended that there has been any change in material facts, in comparison to earlier years, much less dealt with such contention of the appellant. In view of the above, the claim of interest expenses of Rs.2,19,42,537/- by the appellant was correct and as per the principle

7 ITA Nos.6899 & 6900 /Del/2018 DCIT vs. Alice Developers Pvt. Ltd. followed in earlier years this ground of appeal is ruled in favour of the appellant.”

“Issue no. 2 Addition of interest income from Inter Corporate Deposits as Income from other sources amounting to Rs.2,19,42,537/ The appellant had duly offered for taxation interest income of an amount of Rs. 2,19,42,537/- arising from inter corporate deposits made by the appellant The AO, however, has observed that the appellant had set off this income with interest expenses on debentures. The AO consequently added the same interest income from inter corporate

8 ITA Nos.6899 & 6900 /Del/2018 DCIT vs. Alice Developers Pvt. Ltd. deposits as income of the appellant under the head income from other sources The detailed submissions of the appellant against the above addition are as follows: Contentions of the appellant company 1. The Ld. AO has gravely erred on facts of the case in observing that the appellant has not offered the interest income from inter corporate deposits for taxation. It is in this regard submitted that the said interest income from inter corporate deposits was duly offered for taxation by the appellant. Reference in this regard maybe made to the computation of income of the appellant for FY 2012-13 and the audited balance sheet (Note 12- Other Income) of the appellant for FY 2012-13, copies attached as Annexure - 2 for ready reference. 2. The Ld. AO has gravely erred on facts and in law by observing that the appellant has wrongly claimed refund of TDS deducted on such interest income from inter corporate deposits. The Ld. AO has, based on surmises and conjectures and in utter ignorance of the documents on record (viz. the computation of income and the audited balance sheet of the appellant for FY 2012-13) observed that the appellant has claimed the interest income from inter corporate deposits as capital receipt, and based on this observation has further observed that the claim of refund of TDS paid on such interest income was untenable. It is in this regard reiterated that the appellant had duly offered such interest income for taxation and had accordingly sought credit on the TDS paid on such amounts. 3. It is submitted that the Ld. AO has gravely erred on facts of the case by observing that the appellant has set off the interest income from inter corporate deposits with the interest expenses on debentures. It is in this regard reiterated that the appellant had duly offered the interest income from inter corporate deposits for taxation, and while computing the net taxable income, had deducted the interest expenses on debentures (to the extent of interest on inter corporate deposits, as detailed in Issue 1 above). The net effect of such computation of taxable income was Nil income for the appellant. It can by no stretch of imagination be construed to be a set off for the purposes of the Act. The above factual fallacies committed by the Ld. AO and the consequent addition of Rs.2,19,42,537/- to the income of the appellant under the head 'income from other sources' warrants dismissal."

9 ITA Nos.6899 & 6900 /Del/2018 DCIT vs. Alice Developers Pvt. Ltd. In view of above the income had been offered in the profit & loss account and after deduction as discussed above the income becomes NIL. However, this does not give the effect of income not reflected and hence separate addition is deleted.” 12. From the perusal of the computation of income, it is observed that while computing the income of the assessee, the AO first added the disallowance made on account of interest on debentures claimed as expenses of Rs.2,19,42,537/-. The Ld. AO besides this separately added the interest income under the head income from other sources. However, the said income has already been forming part of the gross income declared by the assessee under the head income of business or profession which fact got confirmed from para 4.1 of the assessment order where the gross income declared at Rs.3,64,22,213/- includes the interest on inter corporate deposits of Rs.2,19,42,537/-, thus treating such income separately as Income from Other Sources without reducing the same from the business income resulted into double addition. The Ld. CIT(A) had appreciated this fact and thus deleted the disallowance/addition so made separately. In view of these facts and therefore, we find no error in the order of Ld. CIT(A) which is hereby upheld.

10 ITA Nos.6899 & 6900 /Del/2018 DCIT vs. Alice Developers Pvt. Ltd. (P) Ltd. [2015] 57 taxmann.com 28 (Delhi) and in the case of Cheminvest India (P.) Ltd. [2015] 234 Taxman 761 (Delhi).

ITA No. 6900/Del/2018 Asstt. Year 2014-15.

11 ITA Nos.6899 & 6900 /Del/2018 DCIT vs. Alice Developers Pvt. Ltd.

Order pronounced in the open Court on 03.06.2026.

Sd Sd/- Sd/- (SATBEER SINGH GODARA) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 03.06.2026 PK/Sr. Ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI