Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAJESH KUMAR
O R D E R PER RAJESH KUMAR, A.M: These appeals filed by the assessee and Revenue are directed against the order(s) of the Commissioner of Income Tax(Appeals)-52, Mumbai for the AYs.2012-13 & 2014-15. Since common issues are involved in all these appeals, these appeals are heard together and decided by this common order. For the sake of convenience, (AY.2012-13) is taken up first.
The only issue raised by assessee in this appeal is against the order of CIT(A), upholding the order of Assessing Officer (AO), thus confirming the addition of Rs.2,28,73,670/- under the head ‘income from house property’ by estimating the deemed rent at Rs.3,26,76,672/-on unsold property held as ‘stock in trade’.
2.1. The facts in brief are that, the assessee is engaged in the business of construction. During the course of assessment proceedings, the AO observed that under the head ‘inventory’, assessee is holding finished goods of Rs.26,44,38,217/- and stock-in-trade Rs.4,22,72,320/- and accordingly asked the assessee to furnish break-up of the items shown in the inventory under finished goods and stock-in-trade. The assessee replied the query vide letter dt.31-12-2014 submitting that the finished goods consisting of 50 flats in Oberoi Splendour measuring 49,350 Sq. Ft., which have been valued at Rs.26,44,38,217/- and stock-in-trade comprising one flat in Oberoi Woods ., which has been valued at Rs.4,22,72,320/-. The assessee submitted before the AO that the said assets represented the stock-in-trade and finished goods in the business of assessee and therefore cannot be assessed under the head ‘house property’. However, AO rejecting the contentions of assessee, assessed the same under the house property by estimating the deemed rent of Rs.3,26,76,672/- and a net addition of Rs.2,28,73,670/- was made to the income of assessee.
2.2. At the outset, Ld. Counsel for the assessee submitted before the Bench that the case of assessee was squarely covered by the decision of the Co-ordinate Bench in the case of its assessee’s sister concern, viz., Oberoi Realty Limited Vs. DCIT in (AY.2012-13), dt.25-02- 2019, wherein identical issue has been decided in favour of assessee. Ld. Counsel for the assessee also referred to the decision of the another Co-ordinate Bench decision in the case of RNA Corp Pvt. Ltd., Vs. DCIT in ITA No.4419/Mum/2017, dt.05-11-2018 and M/s. Saranga Estates Pvt. Ltd., Vs. DCIT in ITA No.4420/Mum/2017, dt.13-03-2019, wherein the issue has been decided in favour of assessee by holding that stock- in-trade held by the assessee in the business of construction cannot be subjected to estimation of deemed rent and net income can be assessed under the head ‘house property’.
2.3. After hearing the rival contentions and perusing the material on record, we observe that the issue is squarely covered in favour of assessee by the decision of its sister concern and other two decisions, referred herein above. We are therefore of the view that no addition can be made by estimating the deemed rent in respect of stock-in-trade and finished goods held by assessee in the business of developers and builders. Respectfully following the said decisions, we hereby allow the Ground raised by assessee by reversing the : 4 : 502, 503 & 692/Mum/2018
order of ld CIT(A) and the AO is directed accordingly. In result the appeal of assessee is allowed.
ITA No.502/Mum/2018 (AY.2014-15):
The issue raised by assessee vide Ground No.1 of this appeal is qua upholding the disallowance of BMC charges of Rs.2,51,43,410/- by the CIT(A) as made by the AO.
3.1. The facts in brief are that during the assessment proceedings, the AO observed that assessee has spent Rs.2,51,43,410/- as charges to the BMC as per the details, below:
Sr.No. Project Rs. Remarks 1 Prisma 2,24,00,750 Regularization charges for regularizing the construction of ramp and the portions of podium constructed 2 Grande 19,00,500 Towards Regularisation of flat no.2 3 Grande 1,43,000 Towards Regularisation of elevation features 4 Grande 20,000 Towards Regularisation of construction of lift machine room 5 Grande 20,000 Towards Regularisation of construction of overhead tank 6 Grande 6,11,960 Towards Regularisation of construction of shear wall (retaining wall above terrace) 7 Grande 22,450 Delay in N.A. conversion 8 Prisma 6,600 Delay in CC revalidation 9 Grande 18,150 Revalidation charges of temporary labour housing shed Total 2,51,43,410 According to the AO, the said expenses were in the nature of penalty paid to BMC and therefore, not admissible u/s.37(1) of the Act. In the appellate proceedings , Ld.CIT(A) also confirmed the order of AO on this issue.
3.2. At the outset, the Ld. Counsel for the assessee pointed out that the issue is covered in favour of assessee by the decision of the Co-ordinate Bench in assessee’s own case in (AY.2009-10), dt.19-05-2017, wherein it was held that the BMC charges paid to the Corporation were held to be admissible expenses.
3.3. Ld. DR, however, relied on the orders of the authorities below.
3.4. After hearing the rival contentions and perusing the material on record, we observe that the identical issue has been decided in favour of assessee, in (AY.2009-10), dt.19-05-2017, wherein the Co-ordinate Bench has decided the issue as under:
6. We have considered the rival contentions of the parties and have gone through the orders of authorities below. The assessee has earned exempt income of Rs.2,69,12,453/-. The AO made the disallowance of Rs.33,78,666/- u/s.14A of the Act. On appeal before ld.CIT(A) the disallowance was sustained. Considering the contention of ld. representative of the parties as we have restricted the disallowance under section 14A at Rs.5,00,000/- on exempt income of Rs.5,92,90,214/-. Thus, keeping in view the disallowance in wherein the identical disallowance was restricted to Rs.5,00,000/-. In the case under consideration, the assessee has earned dividend income of Rs.2,69,12,543/-. Thus, following the principle of consistency as we have restricted the disallowance u/s.14A is restricted to Rs.2,00,000/- (Rupees two Lakhs). The AO is directed accordingly. Hence, ground of appeal raised by assessee is partly allowed 3.5. The assessee’s case is also covered by the decision of its sister concern in the case of Oberoi Realty Ltd., Vs. ACIT in (AY.2009-10), dt.04-11-2015 and M/s. Darshan Properties Vs. DCIT in ITA No.3098/Mum/2010, dt.24-06-211. 3.6. In all the above decisions, it has been held that the charges paid to BMC are for the regularization of construction made by the assessee are not for any contravention of any law as these are permissible deviations under the Act and therefore, respectfully following the said orders, we set aside the order of CIT(A) and direct the AO to allow these expenses. Hence, this Ground raised by assessee is allowed.
4. Ground No.2 raised by assessee in this appeal is against the confirmation of disallowance of expenses of Rs.20,97,514/- by the CIT(A) as made by the AO u/s.14A of the Act.
4.1. The facts in brief are that the AO during the assessment proceedings observed that assessee has received tax paid dividend of Rs.1,78,30,865/- and also paid interest expenses in P&L A/c and accordingly asked the assessee to justify as to why the disallowance should not be made u/s.14A of the Act, which was replied by assessee vide letter dt.18-11-2016 that assessee has neither incurred any direct expenditure nor paid any interest on investment as the said investment is out of own funds and hence the question of Section 14A r.w.r.8D does not arise. However, the AO invoked the provisions of Section 14A r.w.r.8D(2)(iii) by brushing aside the submissions of assessee and calculating the disallowance at Rs.20,97,514/-.
4.2. In the appellate proceedings, the Ld.CIT(A) affirmed the order of AO by holding that the provisions of Section 14A r.w.r.8D are clearly attracted and AO has rightly made the disallowance under rule 8D(2)(iii) of Income Tax Rules and thus, confirmed the addition of Rs.20,97,514/-.
4.3. After hearing the rival contentions and perusing the material on record, we observe that the identical issue has been decided in favour of of the assessee in assessee’s own case, in (AY.2010-11), dt.19-05- 2017, wherein the Co-ordinate Bench has decided the issue as under:
9. We have considered the rival submissions of the parties and gone through the order of authorities below. We have seen that the assessee has earned the dividend income of Rs.1,55,37,388/- which is claimed exempted u/s.10(35) of the Act. The AO made the disallowance of Rs.19,74,227/-. Considering the decision of the Co- ordinate Bench in assessee’s sister concern in case of M/s.R.S. Estate Developer Pvt. Ltd., ((supra)) and the disallowance restricted by us in and in ITA No.1010/Mum/2013. We have seen that the facts of this appeal are almost similar to ITA No.1050/Mum/2013 and in ITA No.1010/Mum/2013 and the identical issue is raised by assessee. Thus, considering the principle of consistency, we set-aside the order of AO and ld.CIT(A) and estimate a sum of round figure of Rs.1,00,000/- (Rupees one lakhs) as disallowance u/s.14A and direct the AO accordingly. Hence, this ground of appeal is partly allowed.
4.4. Therefore respectfully following the said decision of the Co-ordinate Bench in assessee’s own case, we direct the AO to make disallowance of Rs.2 Lakhs and delete the remaining amount of Rs.18,97,514/-. This Ground raised by assessee is partly allowed.
4.5. In the result, this appeal of assessee is partly allowed.
ITA No.503/Mum/2018 (AY.2014-15):
The issue raised in the first ground of appeal by the assessee is identical to the issue as decided by us in ground no. 2 in wherein a lump sum disallowance was directed instead of applying provisions of rule 8D(2)(iii) by following the order of the coordinate bench in assessee’s own case in ITA No. ITA No.7190/Mum/2013 (AY.2010-11), dt.19-05-2017. Following the same ratio we are inclined to set aside the order of CIT(A) on this issue and direct the AO to make a disallowance of Rs. 12,00,000/- and delete the disallowance to the extent of Rs. 1,44,58,051/-.
5.1. The issue raised in the second ground of appeal by the assessee challenging the order of CIT(A) upholding the addition made by the AO on account of Annual letting value is identical to one as decided us in wherein we have held the no addition can be made here the property is held as stock in trade. Accordingly following the same ratio we set aside the order of CIT(A) on this issue and direct the AO to delete the addition.
5.2. The issue raised in ground no. 3 qua disallowance of BMC Charges is identical to one as decided by us in ground no. 1 in ITA No. 502/Mum/2018. Therefore our finding in would ,mutatis mutandi , apply to ground also. Accordingly the AO is directed to delete the addition.
In the result, the appeal of the assessee is partly allowed.
Revenue’s appeal in (AY.2014-15):
In this appeal, Revenue has challenged the order of ld. CIT(A) on the ground that ld CIT(A) has wrongly directed the AO to exclude those investments which have not yielded any dividend during the year. Since we have already partly allowed in the cross appeal the issue concerning the applicability of rule 8D(2)(iii) in ground no.1 directing the AO to make lump sum disallowance of 12,00,000/-. Therefore the appeal of the revenue becomes infructuous and is dismissed.
In the result the appeal of the Revenue is dismissed.
In the result the appeals of the assessee in & ITA No. 503/Mum/2018 are partly allowed and appeal of the revenue in ITA No. 692/Mum/2018 is dismissed.
Order pronounced in the open court on 20.08.2019 (MAHAVIR SINGH) (RAJESH KUMAR) "याियक सद"य/JUDICIAL MEMBER लेखा सद"य/ACCOUNTANT MEMBER मुंबई/Mumbai; "दनांक/Dated : 20.08.2019 TNMM