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Income Tax Appellate Tribunal, “E” Bench, Mumbai
Before: Shri G. Manjunatha & Shri Ravish Sood
O R D E R
PER RAVISH SOOD, JM
The present appeals filed by the assessee are directed against the respective orders passed by the Commissioner of Income-tax-15, Mumbai, under Sec.263 of the Income Tax Act, 1961 (for short „Act‟), dated 18.03.2014 for A.Y. 2008-09 AND the order passed by the CIT (Appeals)-33, Mumbai, dated 13.10.2016, which in turn arises from the consequential order passed by the A.O under Sec.143(3) r.w.s 263 dated 09.03.2015. As the captioned appeals involve a common issue, therefore, the same are being taken up and disposed off together by way of a consolidated order. We shall first advert to the appeal filed by the assessee against the order passed by the Commissioner of Income-tax - 15, Mumbai under Sec.263 of the Act. Assessee has assailed the impugned order on the following grounds of appeal before us :
“1. The ld. CIT Appeal-15 in passing an order under Sec. 263without appreciating all the facts of the case of Assessee correctly.
The Ld. CIT Appeal-15 erred in passing an order under section 263 without appreciating that the ITO ward 15(1)(4) has already considered the issue while passing the order dated 21/12/2011 under section 143(3) r.w.s 148 of the Income Tax Act and the passing of the order under section 263 amounted to a mere change of opinion.
3. The Ld. CIT Appeal-15 erred in passing an order that, "I, therefore, direct that the assessment order be revised taking the full amount in compensation Rs.1,03,00,000/- as income of Assessee. This may be done after allowing due opportunity to be heard to the Assessee".
4. The Assessee craves leave to add, alter, amend and delete any of the above grounds of appeal
.”
2. Briefly stated, the assessee which a co-operative housing society had filed its return of income for A.Y. 2008-09 on 20.03.2009, declaring its total income at Rs. Nil. The return of income filed by the assessee society was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was reopened under Sec.147 of the Act.
Facts involved in the present case lies in a narrow compass. Building and layout plans for development of a property admeasuring 14220 sq. yards at Cadell Road, Dadar, Mumbai, for constructing 5 buildings (or wings) which thereafter were to be known as wings/towers “A”, “B”, “C”, “D” and “E” were got approved by M/s S.P Builders. The lay out tentative building plans were sanctioned way back in the year 1971-72. M/s S.P. Builders and/or their developer M/s P a g e | A.Y. 2008-09 M/s Shaan Apartments CHS Ltd. Vs. Commissioner of Income tax-15 Shaan Builders Pvt. Ltd. (an associate concern of M/s S.P. Builders) constructed towers “A”, “B” and “C”. Occupation certificates for the aforesaid wings viz. “A” “B” and “C” were received and flats were handed over to the owners in the year 1975. Insofar the construction of “D” wing (occupied by the assessee society) was concerned, the same was commenced by M/s Shaan Builders in the year 1978, and the construction of the building structure was completed somewhere around the year 1985. As the builder failed to comply with certain statutory requirements and failed to provide for certain facilities viz. fire fighting standby facilities, storage of water, drainage system, drinking water etc., therefore, the occupation certificate for the said building i.e the “D” wing was not issued by the Municipal Corporation of Greater Mumbai. It is the claim of the assessee that backed by absolute desperation and dire needs the flats of building “D” were occupied by the owners from July, 1985 onwards without the requisite occupation certificate. Occupants of the flats of “D” building formed the present society viz. Shaan Co-operative Housing Society Ltd., and procured the partial occupation certificates up to the 7th Floor from the Municipal Corporation of Greater Mumbai. Resultantly, the Municipal Corporation provided drinking water connections to the flats occupants up to the 7th floor, but at rates which as stated by the assessee were double the normal rates. Also, it is the claim of the assessee, that the aforesaid “D” building which had ground plus 15 floors had to purchase additional water from the open market by way of water tankers at astronomical rates. As regards the construction of building “E” which was earlier got sanctioned by M/s S.P. Builders, the same could not commence, as at the relevant point of time the said premises were in occupation of a tenant viz. M/s Mercury Paint & Varnishes Ltd which was running its paint factory on the said piece of land.
In the year 2004, another builder viz. M/s Kalpavruksh Developers took over the aforesaid property on as is, whereas basis from the earlier developer viz. M/s S.P. Builder, for constructing Building “E” on the aforesaid property. In the year 2007, the assessee society approached M/s Kalpavruksh Developers and sought reimbursement of the amounts which were spent by the society for the last 26 years and 5 months for purchase of water from the open market, additional cost of water tanker, additional cost of municipal taxes paid, and also the hardships which were suffered by the concerned members of the society. After negotiations, M/s Kalpavruksh Developers, vide a memorandum of understanding (for short P a g e | A.Y. 2008-09 M/s Shaan Apartments CHS Ltd. Vs. Commissioner of Income tax-15 „MOU‟), dated 23.11.2007 entered into with the assessee society, agreed to pay a lump sum consideration of Rs.1,03,00,000/- as against the claim of Rs.1,79,30,653/- that was raised by the assessee society. Accordingly, an amount of Rs.1,03,00,000/- was paid by M/s Kalpavruksh Developers to the assessee society.
On the basis of the fact, that the amount of Rs.1.03 crores received by the assessee from M/s Kalpavruksh Developers was not offered by the assessee for tax during the year under consideration, its case was reopened under Sec.147 of the Act. On being queried, it was submitted by the assessee before the A.O that the aforesaid amount of Rs.1.03 crores received by it was towards compensation for the past expenses which were incurred by the society mainly for procuring water through tankers from the private parties. Also, it was submitted by the assessee, that the source of the aforesaid expenses were the contributions which were made by the members of the society. In order to drive home its aforesaid claim, the assessee placed on record a „MOU‟, dated 23.11.2007 that was entered into with M/s Kalpavruksh Developers (i.e the builders). A.O in order to verify the veracity of the aforesaid claim of the assessee called for information under Sec.133(6) from M/s Kalpavruksh Developers. In reply, the builder viz. M/s Kalpavruksh Developers, vide their letter dated 01.12.2010 endorsed the claim of the assessee that the amount of Rs.1.03 cores that was paid by it to the assessee society was towards compensation for various expenses incurred and hardships faced by its members for almost 20 years. In order to verify as to whether the entire amount of Rs.1.03 cores received by the assessee from M/s Kalpavruksh Developers was in the nature of compensation for the expenses which were incurred in the past, the A.O called upon the assessee to place on record the supporting bills pertaining to payments which were made towards water supply, plumber expenses, lift installations etc. As the assessee could not produce the entire supporting bills, therefore, the A.O holding a conviction that the entire amount of Rs. 1.03 crore received by the assessee could not be safely characterized as reimbursement of expenses, therefore, for want of documentary evidence proposed to make an addition of 10% of the aforesaid amount, which was agreed upon by the assessee. Accordingly, the A.O made an addition of Rs.10,30,000/- (i.e 10% of Rs.1.03 crores) and assessed the income of the assessee society at the said amount.
P a g e | A.Y. 2008-09 M/s Shaan Apartments CHS Ltd. Vs. Commissioner of Income tax-15 6. After the culmination of the assessment proceedings, the Commissioner of Income-tax- 15, Mumbai called for the assessment records of the assessee. After perusal of the records, the CIT was of the view, that as the expenditure incurred by the assessee in the past for procuring of water through tankers, additional payments made to BMC, and also the amounts spent for laying pipeline for water connection up to the 15th Floor, being in the nature of a revenue expenditure, would have been allowed while computing its income, therefore, the compensation/reimbursement received by the assessee from M/s Kalpavruksh Developers, during the year under consideration would be in the nature of a „revenue receipt‟. To sum up, the CIT being of the view, that as the expenses on procuring water etc would have been allowed as an expenditure to the assessee society while working out its income for the preceding years, therefore, the reimbursement of the said amount during the year could only partake the character as that of a „revenue receipt‟. On the basis of his aforesaid observations, the CIT was of the view that the A.O had erred in not bringing the entire amount of receipt of Rs. 1.03 crores to tax and had wrongly confined the addition only to the extent of 10% of the amount of Rs.1.03 crores received by the assessee. Being of the view, that the assessment order passed by the A.O was erroneous, insofar it was prejudicial to the interest of the revenue, the CIT set aside his order passed under Sec.143(3) r.w.s 148, dated 27.12.2011, and directed him to pass a fresh assessment order after taking the full amount of compensation i.e Rs.1.03 crores as the income of the assessee.
The assessee being aggrieved with the order passed by the CIT under Sec. 263 of the Act, has carried the matter in appeal before us. It was submitted by the ld. Authorized Representative (for short „A.R‟) for the assessee, that as the present appeal involved a delay of 300 days, therefore, the Tribunal had on an earlier occasion, vide its order dated 26.04.2017 passed in ITA No. 1016/Mum/2015 dismissed the appeal after declining to condone the delay therein involved. It was submitted by the ld. A.R, that on further appeal by the assessee the Hon‟ble High Court of Bombay had vide its order passed in ITA No. 1073/Mum/2017 in Shan Apartments CHS Ltd. Vs. Dy. Commissioner of Income Tax, Range-1(3)(2), dated 24.07.2017 was pleased to condone the delay and had restored the matter to the Tribunal for disposing off the appeal on merits. As the Hon‟ble High Court had vide its aforesaid order also imposed a cost of Rs.20,000/- on the assessee, therefore, it was submitted by the ld. A.R that the P a g e | A.Y. 2008-09 M/s Shaan Apartments CHS Ltd. Vs. Commissioner of Income tax-15 assessee had in compliance to the directions of the Hon‟ble High Court deposited the said amount with the Tribunal on 09.08.2017. Our attention was drawn towards the copy of the receipt evidencing the deposit of the amount of Rs. 20,000/- by the assessee on 09.03.2017.
As the matter has been restored to our file by the Hon‟ble High Court, with a direction to dispose off the appeal on merits, therefore, we shall herein proceed with the adjudication of the appeal. Admittedly, the assessee had received a compensation of Rs.1.03 crores from M/s Kalpavruksh Developers as reimbursement of expenses which were incurred by the assessee society for the last 26 years and 5 months towards procuring of water through tankers, additional payments made to BMC, and also the amount spent for laying pipeline for water connection up to the 15th Floor. As observed by the A.O, the source of the aforesaid expenditure incurred by the assessee society were the contributions/collections made by the society from its members. In our considered view, the A.O after deliberating at length on the issue under consideration was convinced with the explanation of the assessee society that the amount of Rs.1.03 crores received from M/s Kalpavruksh Developers was in the nature of reimbursement of the expenses which were incurred by the society for its members in the past. At the same time, as the assessee society had failed to substantiate the quantum of the amount that was received towards reimbursement of the aforesaid expenses which were incurred by it for its members in the past, therefore, the A.O had added an amount of Rs. 10,30,000/- i.e 10% of the receipt, to which the assessee had no objection.
We have perused the order passed by the CIT under Sec.263 of the Act, and also the assessment order passed by the A.O u/ss. 143(3) r.w.
As observed by us hereinabove, the CIT was of the view, that as the expenses incurred on procuring water etc. would have been allowed as an expenditure to the assessee society in the preceding years, therefore, the compensation received from the builder during the year under consideration would partake the character of a „revenue receipt‟. In our considered view, the CIT had proceeded with on the basis of a misconceived view. As the assessee is a co-operative housing society, therefore, the contributions received from its members for the purpose of meeting the common expenses of the society viz. water charges, property taxes, electricity charges etc. would be covered by the principle of mutuality, and thus the same would not be taxable under the Act. Also, the expenses incurred by the society towards common expenses of the society would also not have P a g e | A.Y. 2008-09 M/s Shaan Apartments CHS Ltd. Vs. Commissioner of Income tax-15 been claimed by it as an expense. In sum and substance, the expenses incurred by the assessee society out of the contributions received from its members in the past years i.e for procuring of water through tankers, payments made to BMC, and also the amounts spent for laying pipeline for water connection up to the 15th Floor, being backed by the principle of mutuality, would not have been claimed by the assessee as an expense while computing its income for the said preceding years. We are of the considered view that in the backdrop of the aforesaid settled position of law, it can safely be concluded, that the A.O had taken a plausible view and not held the receipt of Rs.1.03 crores as a revenue receipt. Insofar addition of 10% of compensation of Rs.1.03 crores is concerned, the same as observed by us hereinabove was made by the A.O, for the reason, that the assessee could not substantiate to the hilt on the basis of supporting documentary evidence that the entire amount of receipt of Rs. 1.03 crores was towards reimbursement of expenses which were incurred by the assessee society towards common expenses for its members in the past. Be that as it may, as the A.O while framing the assessment had taken a plausible view, therefore, the CIT could not have revised his order under Sec.263, for the reason, that the said view did not find favour with him. As a plausible view arrived at by the A.O cannot be dislodged in exercise of revisional jurisdiction by the CIT, therefore, we are unable to persuade ourselves to accept the aforesaid order passed by the CIT under Sec. 263 of the Act. Apart there from, we are also persuaded to subscribe to the claim of the ld. A.R, that where the A.O had though made detailed inquiries on an issue in the course of the assessment proceedings, but had not made any reference of the same in his assessment order, the same would not entitle the CIT to exercise his revisional jurisdiction. Our aforesaid view is fortified by the judgment of the Hon’ble Supreme Court in the case of CIT- 10, Mumbai Vs. Reliance Communication ltd. (2017) 244 taxman 55 (SC). On the basis of our aforesaid deliberations we „set aside‟ the order passed by the CIT under Sec.263, and restore the assessment order passed by the A.O under Sec.143(3) r.w.s. 148, dated 27.12.2011. The Ground of appeal
No. 1 to 4 are allowed in terms of our aforesaid observations.
10. The appeal of the assessee is allowed.
P a g e | A.Y. 2008-09 M/s Shaan Apartments CHS Ltd. Vs. Commissioner of Income tax-15 ITA No.7618/Mum/2016 A.Y.2008-09 11. We shall now advert to the appeal filed by the assessee against the order passed by the CIT(Appeals), dated 13.10.2016, which in turn arises from the order passed by the A.O under Sec.143(3) r.w.s. 263, dated 09.03.2015.
As we have quashed the order passed by the Commissioner of Income-tax under Sec.263 of the Act, therefore, the present appeal filed by the assessee against the order of the CIT(Appeals), wherein the consequential assessment order passed by the A.O under Sec.143(3) r.w.s 263 had been upheld by him would be rendered as infructuous. Accordingly, the present appeal filed by the assessee is dismissed as having been rendered as infructuous.
The appeal of the assessee in No. 7618/Mum/2016 is dismissed as having been rendered as infructuous. Order pronounced in the open court on 18.10.2019.