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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Waseem Ahmed, AM & Shri K. Narasimha Chary, JM]
For the Appellant: Shri Sanjay Bhattacharya, FCA For the Respondent: Shri Rajat Subhra Biswas, CIT, DR ORDER
Per Shri K. Narasimha Chary, JM:
This appeal by assessee is arising out of revision order of Pr. CIT, Kolkata-4, Kolkata passed u/s. 263 of the Income-tax Act, 1961(hereinafter referred to as the “Act”) vide No. 6839-41 dated 03.12.2015. Assessment was framed by DCIT, Circle-11, Kolkata u/s. 143(3) of the Act for AY 2011-12 vide his order dated 28.03.2014.
Brief facts of the case are that the Assessee Company has been engaged in the business of development of land, housing and infrastructure facilities in New Town project, Kolkata. For AY 2011-12 they have filed return of income on 19.12.2011 declaring total income of Rs.10,81,33,638/-. Subsequently, they filed a revised return of income on 12.03.2012 declaring a total income of Rs.2,54,38,805/- after making deduction u/s. 80IA of the Act. The order of assessment u/s. 143(3) of the Act was passed on 28.03.2014 assessing the total income at Rs.84,15,10,694/-. Subsequently, the Pr. CIT had examined the assessment record, and finding the order u/s. 143(3) of the Act as erroneous in so far as prejudicial to the interest of the revenue on two counts, issued show cause notice u/s. 263 of the Act on 28.03.2014. Firstly, he found that the assessee company had showed the sale value and purchase value of the land and flats along with other expenditure routed through P&L Account and the waived loan amount to the tune of Rs.50.71 cr. was adjusted with work in progress. The Ld. Pr. CIT opined that it was an item of revenue in nature as the loan obtained by the assessee for the purpose of revenue expenditure; the waiver of a part thereof shall also be treated as revenue receipt and has to be added to the total income of the 2 W.B. Housing Development Corpn. Ltd., AY 2011-12 assessee. The next ground is that in the accounts of the assessee for the year ended with 31.03.2011, the assessee company did not recognize income of Rs.8.89 cr. from sale of land of 4.196 acres to Shankara Netralaya, Kolkata and the assessee had to treat it as income for FY 2010-11. After hearing the assessee through their AR, the Ld. Pr. CIT, Kolkata concluded that the waived loan amount had to be treated as revenue receipt and also the proceeds arising out of the sale of plot of land to Shankara Netralaya should also be considered for FY 2010-11. On these two grounds, the Ld. Pr. CIT directed the AO to pass fresh orders after giving the assessee an opportunity of being heard on these aspects.
Challenging the said order u/s. 263 of the Act the assessee came in appeal before us on the following grounds:
1) That the Commissioner of Income-tax (Appeals) was wrong in passing an Order u/s. 263 setting aside the Assessment Order dated 28-03-2014 with a direction to pass an Order afresh. 2) That without prejudice to the contention raised in Ground No.1 above, the Commissioner of Income-tax was wrong in holding that the Assessment Order dated 28-03-2014 passed u/s.143(3) had allegedly been erroneous in so far as prejudicial to the interest of revenue and thus he erred in setting aside the said Assessment Order. 3) That without prejudice to the contention raised in Grounds Nos.1 and 2 above, the Commissioner of Income-tax was wrong in not appreciating that during the assessment proceeding the Assessing Officer had duly examined the issues relating to waiver of loan as well as the appellant's procedure for recognition of the revenue arising from Sale of Land and thus he erred in setting aside the Assessment Order dated 28-03-2014.
4. It is the argument of the Ld. AR that the loan was obtained for acquisition of land and development thereof by constructing the bridges and roads at different places in New Town and since the loan has been taken for project purpose, it was proper to credit the waived part of loan to the cost of the project. He further submitted that since the cost of project is reduced to the extent of the waived part of land, ultimately when the property was sold there will be corresponding increase in the profits, which will be brought to tax as such; there is no prejudice to the interest of the revenue on this ground. Thereafter, he submitted that the sale of land to Shankara Netralaya was considered for the FY 2011-12 as prior period item. Besides this, he further submitted that the gross sale consideration cannot be considered to be the income but only the profit arising out of the sale after deducting the cost of the land and enhancements thereto, the profit is to be brought to tax. Ld. AR, however, fairly submitted that the assessee has got no much objection for considering both the items pointed out by the Ld. Pr. CIT in the section 263 order for AY 2011-12 but prayed
3 W.B. Housing Development Corpn. Ltd., AY 2011-12 that a direction may be given to the AO to consider these two aspects and to delete these things from the return of income for AY 2011-12 inasmuch as the assessee had shown these things in the subsequent year. He made this submission on the ground that unless appropriate directions are given in this appeal there is likelihood of double taxation in relation to both these issues i.e. inclusion of the waived loan as income and inclusion of sale of land in the return of income for AY 2012-13 by applying the principle laid down in Goetz (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC).
On the other hand, the Ld. DR submitted that insofar as the revenue receipt for the FY 2010-11 is concerned, it is not open for the assessee to say that there will be corresponding increase in the profit when the property was sold in subsequent years. So also, he defended the order passed u/s. 263 of the Act on the ground that the Ld. Pr. CIT was justified in holding that as per mercantile system of accounting which was followed by the assessee, income from sale of land to the tune of Rs.8.89 cr. accrued during the FY 2011-12 shall be treated as income in that year and the assessee at their will cannot claim the same to the subsequent years.
We have heard rival submissions and gone through the facts and circumstances of the case. We do not find any force in the resistance made by the assessee to the order passed u/s. 263 of the Act because the loan was obtained by the assessee was for revenue expenditure as such, the assessee cannot object the waived part of the loan to be treated as revenue receipt. There cannot be any valid legal resistance to this point. So also, insofar as there is no dispute that the assessee was following the mercantile system of accounting, the Ld. Pr. CIT cannot be said to have committed any error while directing the AO to consider the proceeds from the sale of land to Shankara Netralaya for AY 2011-12. Appeal filed on these two grounds and the order of the Ld. Pr. CIT is impeccable in its reasoning.
Now coming to the aspects of the submission of the Ld. AR to direct the AO to consider the inclusion of these two aspects i.e. the waived part of loan so also the sale consideration for the AY 2012-13. We also find some substance in the submission of the Ld. AR that the entire sale consideration in respect of the land sold to Shankara Netralaya cannot be treated as income, and it is just and proper that the AO will consider whether only the profits arising out of such transaction have to be taken into consideration. Since the 4 W.B. Housing Development Corpn. Ltd., AY 2011-12 assessee submits that the waived part of the loan is being considered for the AY 2011-12, the same may be given consideration in respect of the subsequent years wherein the assessee has shown the enhanced profits while reducing the cost of the project by giving credit to the waived part of the loan to the project cost. While framing the assessment for the AY 2012- 13, regard shall be had to the aspect of taxing the proceeds arising out of the sale of land to Shankara Netralaya during the AY 2011-12. Subject to these two observations the appeal stands dismissed 8. In the result, the appeal of assessee is dismissed as indicated above. Order is pronounced in the open court on 11.11.2016 Sd/- Sd/- (Waseem Ahmed) (K. Narasimha Chary) Accountant Member Judicial Member
Dated :11th October, 2016