THE PRINCIPAL COMMISSIONER OF INCOME TAX, PANAJI., vs. HERITAGE PRINCES REAL ESTATE DEVELOPERS.,

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TXA/62/2017HC BombayHCBM05003191201608 January 2018Author: HON'BLE SHRI JUSTICE SHANTANU S. KEMKAR,HON'BLE KUM. JUSTICE NUTAN D. SARDESSAI3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no case was made out to interfere with the concurrent findings of fact by the Commissioner (Appeals) and the ITAT. Both authorities correctly applied the law laid down by the Supreme Court in CIT vs. Rotork Controls India (P) Ltd. The court found that the outstanding expenses of Rs. 80 lakhs related to the completed project and that the liability had crystallized. The reasoning was that the expenses were incurred within three months of the year-end and related to a completed project, making them allowable under the mercantile system of accounting and the precedent set by the Supreme Court. The appeal was dismissed, affirming the deletion of the addition.

What were the facts?

The assessee, Heritage Princes Real Estate Developers, is in appeal against an order of the Income Tax Appellate Tribunal (ITAT), Panaji Bench, dated May 11, 2016. The ITAT had affirmed the order of the Commissioner of Income Tax (Appeals), Panaji Bench, dated November 23, 2015. The Assessing Officer, by order dated March 18, 2015, had disallowed a claim of Rs. 80 lakhs towards provisions for construction expenses. The Commissioner (Appeals) deleted this disallowance, finding that the outstanding expenses related to a completed project and that the liability had crystallized, even if not incurred within the year. The expenses were incurred in April to June 2012, within three months of the year-end.

What were the issues?

1. Whether the disallowance of Rs. 80 lakhs on account of provisions for construction expenses is justified, turning on the interpretation of Section 37 of the Income Tax Act, 1961, and the principle of mercantile accounting. Assessee's Contention: The assessee argued that the outstanding expenses of Rs. 80 lakhs related to the completed project "Heritage Princess" and that under the mercantile system of accounting, the liability had crystallized. They relied on the Supreme Court's decision in CIT vs. Rotork Controls India (P) Ltd., which allows provisions for future expenses against current sales. Revenue's Contention: The revenue's primary contention, as reflected in the Assessing Officer's action, was that these expenses were not incurred during the year under consideration and thus should be disallowed. The judgment does not explicitly record separate arguments from the revenue before the High Court, but their appeal to the ITAT challenged the Commissioner's deletion.

Which sections of the Income-tax Act were involved?

Section 37

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 62 OF 2017 THE PRINCIPAL COMMISSIONER OF INCOME TAX, PANAJI., ... Appellant Versus HERITAGE PRINCES REAL ESTATE DEVELOPERS., ... Respondent Ms. Susan Linhares, Advocate for the Appellant. Mr. D. E. Robinson, Advocate for the Respondent. Coram:- SHANTANU S. KEMKAR & NUTAN D. SARDESSAI, JJ. Date:- 8th January 2018 P.C. Heard the learned counsel for the Appellant as also the learned counsel for the Respondent on the question of admission.

2.

This appeal is directed against the order dated 11 May 2016 (Exhibit-C) passed by the Income Tax Appellate Tribunal, Panaji Goa, in ITA No.23/PAN/2016 ( for short 'Tribunal' ) whereby the Tribunal has affirmed the order dated 23 November 2015 passed by the Commissioner of Income Tax ( Appeals), Panaji Bench.

3.

The Assessing Officer vide order dated 18 March 2015 (Exhibit A) disallowed the claim towards the expenses of Rs.80

2 TXA/62/2017 lakhs.

4.

In appeal filed by the assessee the question before the Commissioner was in regard to deletion of disallowance made by the Assessing Officer of Rs.80 lakhs on account of provisions of construction expenses. The Commissioner (Appeals) examined the contentions of both sides and has recorded the finding that the Appellant has shown the income from the project "Heritage Princess" on completion of the project, as the Appellant follows TXA/62/2017

5.

On challenge being made by the Revenue to the order passed by the Commissioner ( Appeals ) the Tribunal affirmed the order of the Commissioner ( Appeals ) by dismissing the appeal of the Revenue.

6.

Having considered the rival submissions, we are of the view that no case is made out to interfere into the concurrent finding of fact recorded by the Commissioner and the Tribunal. Both the authorities have correctly applied the law laid down by the Supreme Court in the case of Rotork Controls India (P) Ltd. (supra). We do not find any substantial question of law involved in the matter.

7.

In the circumstances, we dismiss the appeal. NUTAN D. SARDESSAI, J. SHANTANU S. KEMKAR, J. at*

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