THE PR COMMISSIONER OF INCOME TAX CENTRAL vs. M/S CENTURY REAL ESTATE HOLDINGS PVT LTD

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ITA/225/2023HC KarnatakaKAHC01019439202305 December 2023Bench: P.S.DINESH KUMAR,T.G. SHIVASHANKARE GOWDA6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court considered the rival contentions and the records. It noted the undisputed fact that the assessee had declared the receipt of Rs. 8.59 Crores in Assessment Years 2012-13, 2014-15, and 2015-16, with the current appeal concerning Assessment Year 2013-14. The Court also noted the Revenue's submission that the assessee had taken inconsistent stands regarding applicable accounting standards (AS-7 before the Commissioner (Appeals) and AS-9 before the ITAT). However, in light of the undisputed fact of declaration of receipts in preceding and subsequent years, the Court found the issue to be Revenue neutral. Following its own decision in Pr. Commissioner of Income Tax Vs. Fortuna Projects, which was similar, the Court held that the appeal must fail. The appeal was dismissed, and the questions of law were answered in favour of the assessee and against the Revenue. No specific issue was left undecided.

What were the facts?

The Revenue (Pr. Commissioner of Income Tax) is appealing against an order of the ITAT, Bengaluru, for Assessment Year 2013-14. The Assessing Officer had made an addition of Rs. 4,23,55,400/- on the grounds that the assessee, M/s Century Real Estate Holdings Pvt Ltd, received Rs. 8,59,55,400/- as project management fees from M/s Scania Commercial Vehicles Pvt. Ltd. but declared only Rs. 4,36,00,000/-. The Commissioner (Appeals) confirmed this order. The ITAT, however, allowed the assessee's appeal. The Revenue contends that the assessee received Rs. 8.59 Crores but declared only Rs. 4.36 Crores, making the addition of the remaining Rs. 4.23 Crores justified.

What were the issues?

The High Court was to decide three substantial questions of law, framed as follows: 1. Whether the Tribunal's order was perverse in holding that project management fees were to be recognized over 5 years and had not accrued in the year under consideration, despite payments being linked to land acquisition. 2. Whether the Tribunal's order was perverse in holding that the assessee offered income in later years, without appreciating that income must be taxed in the year it relates. 3. Whether the Tribunal was right in law in holding that services were provided equally each year, failing to appreciate that income should be offered as per accounting standards and that land acquisition was the major service. The Revenue argued that the assessee received Rs. 8.59 Crores but declared only Rs. 4.36 Crores, justifying the addition. The Assessee contended that its case falls under Accounting Standard-9 (AS-9) on a completed contract basis, and the ITAT correctly applied this standard. The Assessee also pointed out that the Revenue had not disputed the declaration of Rs. 8.59 Crores in Assessment Years 2012-13, 2014-15, and 2015-16, relying on this Court's decision in Pr. Commissioner of Income Tax Vs. Fortuna Projects.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

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NC: 2023:KHC:43893-DB ITA No. 225 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 5TH DAY OF DECEMBER, 2023 PRESENT THE HON'BLE MR JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR JUSTICE T.G. SHIVASHANKARE GOWDA INCOME TAX APPEAL NO. 225 OF 2023 BETWEEN: 1. THE PR.COMMISSIONER OF INCOME TAX

CENTRAL, 3RD FLOOR, C R BUILDING QUEENS ROAD, BENGALURU-560 001 2. THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(2), 3RD FLOOR, C R BUILDING QUEENS ROAD, BENGALURU-560 001

…APPELLANTS (BY SRI.DILIP M., JR. STANDING COUNSEL) AND: M/S CENTURY REAL ESTATE HOLDINGS PVT LTD NO.10/1, GROUND FLOOR LAKSHMINARAYANA COMPLEX PALACE ROAD, VASANTH NAGAR BENGALURU-560 052, PAN-AADCC 0651M …RESPONDENT (BY SRI. M. V. SESHACHALA, SR. ADV. FOR SRI. ARAVIND V CHAVAN.,ADV.)

THIS APPEAL IS FILED UNDER SEC.260-A OF THE INCOME TAX ACT, 1961, PRAYING TO I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE.II. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO. 580/BANG/2022 DATED 30.11.2022 FOR ASSESSMENT YEAR 2013-2014 ANNEXURE- C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(2), BENGALURU. Digitally signed by MALA K N Location: HIGH COURT OF KARNATAKA

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NC: 2023:KHC:43893-DB ITA No. 225 of 2023

THIS APPEAL, COMING ON FOR FINAL HEARING, THIS DAY, P.S.DINESH KUMAR J., DELIVERED THE FOLLOWING: JUDGMENT This appeal by the Revenue is directed against judgment and order dated 30.11.2022 in ITA No.580/Bang/2022 passed by the ITAT1, Bengaluru.

2.

Heard Shri M. Dilip, learned Standing Counsel for the Revenue and Shri Sheshachala, learned Senior Advocate for the assessee.

3.

Briefly stated the facts of the case are, the petitioner filed its return for assessment year 2013-14. The assessing authority made an addition of Rs.4,23,55,400/- holding that the assessee had received a sum of Rs.8,59,55,400/- as project management fees from M/s Scania Commercial Vehicles Pvt. Ltd. (‘Scania’ for short), but declared only Rs.4,36,00,000/- in its return of income. The Commissioner (Appeals) has confirmed the order passed by the Assessing Officer. On further appeal, 1 Income Tax Appellate Tribunal

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NC: 2023:KHC:43893-DB ITA No. 225 of 2023 the ITAT by the impugned order has allowed the appeal. Feeling aggrieved, the Revenue is before this Court. 4. Shri Dilip submitted that it is not in dispute that for assessment year 2013-14, assessee has received Rs.8.59 Crores, but declared only Rs.4.36 Crores. Therefore, there is no error in the order passed by the Assessing Officer in bringing to tax the remaining sum of Rs.4.23 Crores.

5.

In reply, Shri Sheshachala submitted that the assessee’s case falls under Accounting Standard- 9 (AS-9) on completed contract basis. The ITAT has rightly appreciated the said Accounting Standard and allowed the appeal. He submitted that the Revenue had never disputed the aspect that the assessee has declared the receipt of Rs.8.59 Crores in assessment year 2012-13, 2014-15 and 2015-16. Placing reliance on the decision of this Court in Pr.

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NC: 2023:KHC:43893-DB ITA No. 225 of 2023 Commissioner of Income Tax Vs. Fortuna Projects2, he submitted that in similar circumstances, this Court has held the question of law in favour of the assessee.

6.

We have carefully considered the rival contentions and also perused the records.

7.

Though this appeal has been admitted to consider 4 questions, learned Advocates on both sides submitted that only the following 3 questions arise for consideration: 1. "Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in holding hat the project management fee was required to be recognized over a period of 5 years and that the same had not accrued to the assesse during the year under consideration without appreciating that the payments to the assesse were on the basis of land acquired and in case no land was acquired in a year, no payments were to be made"? 2. Whether on the facts and in the circumstances of the case, the Tribunal's order can be said as perverse in holding that assesse had offered the income in question in the later years without appreciating that the assesse is not free to offer the income in any year of its choice and that 2 ITA No.191/2018 connected with ITA No.192/2018, decided on 11.10.2022

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NC: 2023:KHC:43893-DB ITA No. 225 of 2023 income has to be brought to tax in the years to which year it relates"? 3. 'Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the services were provided by the assesse in equal proportion in each of the year covered by the agreement and thus failing to appreciate that assesse has to offer income as per accounting standards and the enabling the acquiring of land was the major service and services to be rendered in respect of parcel of land was not existent"?

8.

Undisputed facts of the case are, assessee has declared receipt of Rs.8.59 Crores in assessment year 2012-13, 2014-15 and 2015-16.

The assessment year under consideration in this appeal is 2013-14. 9. It was urged by Shri Dilip that before Commissioner (Appeals), the assessee has taken a stand that AS-7 was applicable and before ITAT, it has taken a stand that AS-9 is applicable. We may record that in view of the undisputed fact that the assessee has declared the receipt of Rs.8.59 Crores for the preceding and subsequent years of the assessment year in consideration, the issue is

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NC: 2023:KHC:43893-DB ITA No. 225 of 2023 Revenue neutral. Therefore, for the reasons recorded in Fortuna of Project’s case (supra) which is similar to the case on hand, this appeal must fail. Hence, the following: ORDER i) Appeal is dismissed; ii) Questions of law are answered in favour of the assessee and against the Revenue. No costs. Sd/- JUDGE Sd/- JUDGE PA CT:HS List No.: 1 Sl No.: 57

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