ACIT 421 MUMBAI, MUMBAI CITY vs. SAMIR NARAIN BHOJWANI, MUMBAI

ITA 1022/MUM/2025Status: DisposedITAT Mumbai26 June 2025AY 2022-2341 pages
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What did the Tribunal hold?

The Tribunal decided the issues as follows: On Ground I (Disallowance under section 40(a)(ia)): The judgment does not explicitly state the Tribunal's decision on this ground. The facts indicate that the CIT(A) upheld the disallowance, and the assessee is in appeal. However, the operative part of the order only mentions the assessee's appeal being allowed for statistical purposes and the revenue's appeal being dismissed, without detailing the outcome of this specific ground. On Ground II (Taxation of Long-Term Capital Gains): The judgment does not explicitly state the Tribunal's decision on this ground. The assessee's ground is that these gains should be taxed under section 112, not at normal rates. The operative part of the order does not provide specific relief on this point. On Issue 3 (Expenses incurred on flats/buildings sold in earlier years): The Tribunal dismissed the revenue's appeal. The reasoning was that the expenses were genuine and incurred wholly and exclusively for the purpose of business, related to maintaining past projects and complying with statutory requirements like the Maharashtra Ownership Flats Act and Real Estate Regulations & Development Act. The Tribunal relied on the decisions in CIT v. Bilhari Investment Pvt. Ltd. and CIT v. V.S. Dempo & Co. Pvt. Ltd. The Tribunal noted that the revenue had not appealed against a similar allowance for AY 2018-19, implying finality on the issue. The disallowance by the AO was based solely on the lack of matching revenue in the current year, which the Tribunal found insufficient to deny deduction. The CIT(A)'s finding in allowing these expenses was upheld. On Additional Ground III (Maintenance expenses): The Tribunal admitted the additional ground as it was a pure legal issue. The judgment does not explicitly state the Tribunal's decision on this ground, but the overall outcome suggests it may have been implicitly allowed or considered as part of the expenses allowed in Issue 3. Operative Directions: The appeal of the assessee is allowed for statistical purposes, and the appeal of the revenue is dismissed. The disallowance of Rs. 3,88,56,708/- is reversed.

What were the facts?

The assessee, Samir Narain Bhojwani, is an individual engaged in real estate activities. For Assessment Year 2022-23, the Assessing Officer (AO) made a disallowance of Rs. 3,72,00,210 under section 40(a)(ia) for alleged non-deduction of tax at source on a payment made under Consent Terms to M/s Rewa Infrastructure Pvt. Ltd. The AO also disallowed expenses of Rs. 3,88,56,708 incurred on flats/buildings sold in earlier assessment years. The Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC) upheld the disallowance under section 40(a)(ia) but deleted the disallowance of expenses. Both the assessee and the revenue have filed appeals before the Income Tax Appellate Tribunal (ITAT) against the order of the CIT(A). The assessee also raised an additional ground regarding the allowability of maintenance expenses of Rs. 92,32,199.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the CIT(A) erred in confirming the disallowance of Rs. 3,72,00,210 under section 40(a)(ia) of the Income Tax Act, 1961 (the Act), being 30% of the payment made under Consent Terms, on account of alleged non-deduction of tax at source under section 194C of the Act, and whether the payment relates to a contractual obligation covered under section 194C. 2. Whether on the facts and in the circumstances of the case, the AO erred in charging to tax gains in respect of long-term capital assets, computed under section 50 of the Act, at normal rates instead of the rates mentioned in section 112 of the Act. 3. Whether on the facts and in the circumstances of the case, the CIT(A) was justified in allowing the claim of Rs. 3,88,56,708/- towards expenses incurred in respect of flats/buildings sold in earlier years, on the ground that these were legitimate business expenses necessary for maintenance and statutory compliance, despite the revenue having already been recognized from the project and the expenses being capital in nature after project completion. 4. Whether maintenance expenditure of Rs. 92,32,199/- is allowable as expenditure under section 37(1) of the Act. Assessee's Contentions: - Regarding Ground I: The payment under Consent Terms was not covered under section 194C, and therefore, the disallowance under section 40(a)(ia) is incorrect. - Regarding Ground II: Capital gains computed under section 50 should be taxed at the rates specified in section 112, not at normal rates. - Regarding Additional Ground III: Maintenance expenses of Rs. 92,32,199/- are allowable business expenditure under section 37(1). Revenue's Contentions: - Regarding Issue 3: The CIT(A) was not justified in allowing expenses of Rs. 3,88,56,708/- as these were capital in nature and incurred after revenue recognition from the project in earlier years. The assessee has not provided evidence for these expenses or why they were not claimed in earlier years. The nature of expenses like swimming pool, kids play area, etc., are capital in nature. The judgment does not record specific contentions for the revenue on Ground I or Ground II of the assessee's appeal.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194C,Section 50,Section 112,Section 37(1),Section 250

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Cases cited in this judgment(7)Show list

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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

Before: SHRI ANIKESH BANERJEE, JM &

For Appellant: Shri Yogesh Thar & Chaitanya
For Respondent: Shri Swapnil Choudhary, Sr. DR
Hearing: 09.06.2025Pronounced: 26.06.2025

Heard together (2 matters)

I.T.A. No. 261/Mum/2025
I.T.A. No. 1022/Mum/2025

Read from the judgment's own cause title. This page is filed under one of them.

2 ITA Nos.261 & 1022/Mum/2025 Samir Narain Bhojwani Per Padmavathy S, AM: These cross appeals by the assessee and the revenue are against the order of the Commissioner of Income Tax (Appeals)/ National Faceless Appeal Centre (NFAC), Delhi (in short "CIT(A)") under section 250 of the Income Tax Act, 1961 (the Act) dated 18.12.2024 for Assessment Year (A

The order continues below.

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