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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: Shri Joginder Singh, & Shri Ramit Kochar
आदेश / O R D E R Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 22/11/2016 of the Ld. First Appellate Authority, Mumbai, deleting the disallowance of expenditure of Rs.1,17,45,828/-, relying upon various judicial pronouncement and without appreciating the fact that the assessee did not carry out any activity and the only income chargeable to tax is under the head “income from other sources”.
During hearing, the ld. DR, Shri Nishant Samaiya, strongly defended the assessment order by contending that the First Appellate Authority merely followed the order of earlier year and granted relief to the assessee without examining the facts. The crux of the argument is in support of the addition made by the Ld. Assessing Officer. On the other hand, Shri Narayan Atal, ld. counsel for the assessee defended the impugned order by contending that for Assessment Year 2008-09, the M/s Laxmi Asbestos Products Ltd.
matter was considered by the Tribunal and finally sent to the Ld. Commissioner of Income Tax (Appeal).
2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion of the order of the Tribunal dated 26/10/2016 (ITA No.5774/Mum/2013, etc) for ready reference and analysis:-
“All the appeals filed by the revenue are directed against the orders passed by Ld CIT(A)-7, Mumbai and they relate to the assessment years 2008-09, 2010- 11 and 2011-12. Since issue urged in these appeals is identical in nature, these appeals were heard together and are being disposed of by this common order, for the sake of convenience.
2. The solitary issue urged in these appeals is whether the Ld CIT(A) was justified in deleting the disallowance of expenses claimed by the assessee.
The assessee company is stated to be carrying on the business of property development. During the years under consideration, the assessee did not disclose any business receipts, but claimed various types of expenses. The AO noticed that the assessee has been showing the property development activities as “Work in Progress” in the earlier years, but the same was transferred to “Investment” account during the year relevant to AY 2008-09. It was submitted that the assessee was in possession of land admeasuring 150012.32 Sq. Mts and the same was took over by the Government under Urban Land Ceiling Act.
M/s Laxmi Asbestos Products Ltd.
Subsequently the above said Act was repealed by the Government and hence the assessee has been in the process of reacquiring the title over the land. Due to the legal process involved therein, the assessee could not carry on its business activities. Accordingly it was contended that the assessee has stopped the business activities on temporary basis due to the problem faced by it in connection with the land. Accordingly it was submitted that the regular business expenses incurred by it should be allowed as deduction.
The AO was not convinced with the said expenses, since the assessee has transferred the land/property to its “Investment” account. Accordingly the AO disallowed various expenses claimed by the assessee in all the three years under consideration. The Ld CIT(A) took the view that the assessee has not closed down its business, but it was at stand still for temporary period. Accordingly he allowed the expenses claimed by the assessee in all the three years under consideration. The revenue is aggrieved by the decision rendered by Ld CIT(A).
The Ld D.R submitted that the Ld CIT(A) has not given any finding with regard to the observation of the AO that the assessee has transferred the land and related expenses to “Investment Account”. The Ld D.R submitted that the said action of the assessee would show that the assessee has permanently closed down its business, in which case, the expenses claimed by the assessee were rightly disallowed by the AO.
On the contrary, the Ld A.R submitted that the assessee was constrained to transfer the land and related expenses to “Investment Account” as per the requirement of Accounting Standard-13 issued by the Institute of Chartered Accountants of India. He submitted that the Ld CIT(A) has rightly appreciated that the assessee could not carry on business due to various circumstances beyond the control of M/s Laxmi Asbestos Products Ltd.
the assessee. Accordingly he submitted that the expenses were rightly allowed by Ld CIT(A).
We heard the parties and perused the record. We notice that the AO has taken note of the fact that the assessee has transferred the land and Work in Progress amount to “Investment Account” and accordingly the AO has taken the view that the expenses incurred against Investment cannot be allowed as deduction. We notice that the Ld CIT(A) has not addressed this point of the AO and instead proceeded to decide the issue on the basis that there was temporary stoppage of business,. while the case of the AO is that the assessee has totally stopped the business. Before us, the Ld A.R submitted that the assessee was constrained to transfer the land and WIP amount to “Investment Account” as per AS-13. This submission appears to be a new one, i.e., the same has not been submitted before the tax authorities. We also notice that the Ld CIT(A) has passed a cryptic order without duly addressing the case of the AO. Under these set of facts, we are of the view that this issue requires fresh examination at the end of Ld CIT(A) in all the three years under consideration.
Accordingly we set aside the orders passed by Ld CIT(A) on this issue in all the three years under consideration and restore the same to his file with the direction to decide the same afresh by duly addressing the case of the AO. The assessee should be provided with adequate opportunity of being heard.
In the result, all the three appeals of the revenue are treated as allowed for statistical purposes.” 2.2. We find that identical question arose for earlier Assessment Years with respect to various types of expenditure, wherein also, the assessee showed property
M/s Laxmi Asbestos Products Ltd. development activities “as work in progress” and same was transferred to investment account. Considering the submissions from both sides and explanation of the assessee that the assessee was constrained to transfer the land and WIP amount to investment account as per AS-13.
This submission was never raised before the tax authorities. Even the Ld. Commissioner of Income Tax (Appeal), adjudicated the issue without addressing the observation made in the assessment order and the explanation of the assessee. Thus, being on identical facts as done by the Tribunal in its order dated 26/10/2016, we restore this appeal to the file of the Ld. Commissioner of Income Tax (Appeal) to examine the facts/explanation of the assessee/observation made in the assessment order afresh and after providing due opportunity to the Ld. Assessing Officer as well as to the assessee and decide in accordance with law. The assessee be given opportunity to substantiate its claim. Thus, the appeal of the Revenue is allowed for statistical purposes only.
M/s Laxmi Asbestos Products Ltd.
Finally, the appeal of the Revenue is allowed for statistical purposes
This order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 09/08/2018.