DISHA CONSTRUCTION,MUMBAI vs. JT. CIT RANGE-25(2), MUMBAI

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ITA 5538/MUM/2019Status: DisposedITAT Mumbai17 June 2021AY 2014-158 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the provisions of Section 43CA are not retrospective and do not apply to agreements executed prior to its introduction. The assessee had entered into a development agreement on 06/03/2011, prior to the introduction of Section 43CA (effective from 01.04.2014). The sale of additional area was pursuant to this pre-existing agreement. The Tribunal relied on the Bombay High Court's decision in Pr. CIT vs. Swananda Properties (P.) Ltd. and the Delhi High Court's decision in Zain Constructions v. ITO, which held that Section 43CA cannot be applied to agreements entered into before its insertion. Therefore, the addition made by the AO and upheld by the CIT(A) could not be sustained. Consequently, other arguments raised by the assessee became academic. The appeal was partly allowed.

What were the facts?

The assessee, Disha Construction, is an ITAT appeal against the order of the CIT(A)-53, Mumbai, for AY 2014-15. The AO had assessed the assessee under Section 143(3) on 20/12/2016. The dispute concerns an addition of Rs. 6,18,000 made by the AO under Section 43CA, which was upheld by the CIT(A). The addition was based on the difference between the sale consideration received for additional area sold to existing members of a society and the stamp duty value of that area. The assessee had entered into a redevelopment agreement on 06/03/2011, wherein additional area was to be sold at Rs. 15,000 per square foot. During the year under appeal, 11 members purchased additional area for Rs. 2,24,70,000, while the stamp duty value was Rs. 2,30,88,000.

What were the issues?

1. Whether the Learned Commissioner of Income-Tax (Appeals) erred in upholding the Assessing Officer's action in adding a sum of Rs. 6,18,000 under Section 43CA of the Income Tax Act, 1961, to the consideration received for agreements to sell executed during the year in respect of a redevelopment project under construction. Assessee's Contention: The price for the additional area was pre-fixed in a registered development agreement dated 06.03.2011, which was higher than the ready reckoner rate at that time. The provisions of Section 43CA, inserted from FY 2013-14, do not apply to agreements entered into prior to its introduction. Even if applicable, the difference was within the tolerance limit prescribed by the Supreme Court in C.B. Gautam. Alternatively, only 10% of the addition should be considered based on the progressive declaration method of accounting. Revenue's Contention: The appeal should be dismissed.

Which sections of the Income-tax Act were involved?

Section 43CA,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: HON’BLE SHRI MAHAVIR SINGH, VP & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

For Respondent: Shri Bharat Andhale-Ld. Sr. DR
1.

आयकरअपील सं./ (िनधा"रण वष" / Assessment Year: 2014-15) Disha Construction Jt. CIT-25(2) 220, 2nd floor, Kautilya Bhavan 201, Square One बनाम/ Gulmohar Road No. 1 C-41 to C-43, G Block Vs. Vile Parle(W) Bandra Kurla Complex Mumbai-400 049 Bandra (E),Mumbai-400 051 "थायीलेखासं./जीआइआरसं./PAN/GIR No. AADFD-9171-G (अपीलाथ"/Appellant) (""थ" / Respondent) : Assessee by : Written Submissions dated 18/03/2021 Revenue by : Shri Bharat Andhale-Ld. Sr. DR सुनवाई की तारीख/ : 01/06/2021 Date of Hearing घोषणा की तारीख / : 17/06/2021 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2014-15 contest the order of Learned Commissioner of Income-Tax (Appeals)-53, Mumbai [CIT(A)], dated 14/06/2019 in the matter of assessment framed by Ld. Assessing Officer (AO) u/s 143(3) on 20/12/2016. The grounds raised

by the assessee read as under:-

1. The Id. CIT(A) erred in upholding the action of the AO in adding a sum of Rs.618000/- u/s 43CA of the Act to the consideration received in respect of agreements to sale executed during the year in respect of redevelopment project under construction. 1.i. In doing so, the Id. CIT (A) did not appreciate that the price in respect of the additional area sold to the existing members over & above the entitled area was pre- fixed haying regard to the development agreement dt. 6.03.2011 which was duly registered with the sub-

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