MAHANT MADHAVDAS MAHATYAGI,MUMBAI vs. ACIT RG 24(2), MUMBAI

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ITA 2529/MUM/2010Status: DisposedITAT Mumbai15 June 2016AY 2006-0710 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) erred in directing to take the cost of acquisition of flats at Rs. 300/- per sq. ft. The Tribunal noted that the ITAT had previously held in assessee's own case for AY 2000-01 that receipts in lieu of rent were revenue in nature. The Tribunal also observed that it was unclear how the assessee offered profit on sale of 7 flats as long-term capital gains, as the flats were held as stock-in-trade. Therefore, the matter was restored to the AO for fresh decision after considering the assessee's submissions. Regarding rental income, the Tribunal upheld the CIT(A)'s decision to treat it as income from house property, relying on the Supreme Court's decision in Shambhu Investment Pvt. Ltd. vs. CIT. For Urban Land Ceiling Act charges, the Tribunal found no infirmity in the CIT(A)'s direction to allow deduction in the year of actual payment as per Section 43B. The addition of Rs. 1,24,31,865/- for shops and flats was deleted as these were not constructed or transferred during the year. The Rs. 20 lacs received on assignment was also not offered for taxation as it was contingent on certain conditions.

What were the facts?

These are cross-appeals by the assessee, Shri Mahant Mahatyagi, and the revenue against the CIT(A)'s order for Assessment Year 2006-07. The assessee is a developer. The Assessing Officer (AO) made additions of Rs. 20 lacs received on assignment of building on lease and land, and Rs. 1,24,31,865/- representing the value of built-up area (shops and flats) to be received free of cost. The CIT(A) restricted the addition for the built-up area by applying a rate of Rs. 1,000/- per sq. ft. The assessee is also aggrieved by the addition of Rs. 20 lacs and the Rs. 67.06 lacs assessed as income. The revenue is aggrieved by the CIT(A)'s directions regarding the cost of acquisition of flats, assessment of rental income, reduction of fair market value of constructed area, and allowing Urban Land Ceiling Act charges.

What were the issues?

1. Whether the Ld. CIT(A) erred in directing to take the cost of acquisition of flats at Rs. 300/- per sq. ft., ignoring that the assessee received flats free of cost as compensation in lieu of rent, which was held to be revenue receipt in assessee's own case for AY 2000-01 (ITA No. 3198/Mum/06)? (Section 48) 2. Whether the Ld. CIT(A) erred in directing to assess rental income as income from house property as against business income, as rent was received on exploitation of business asset (closing stock)? (Section 2(1A), Section 22) 3. Whether the Ld. CIT(A) erred in reducing the fair market value of constructed area for shops and flats from Rs. 21,000/sq.mt and Rs. 19,500/sq.mt respectively, as per Registrar's valuation, to Rs. 1,000/- per sq. ft. on an estimated basis without justification? 4. Whether the Ld. CIT(A) erred in allowing Urban Land Ceiling Act charges of Rs. 30,87,386/- on a payment basis as per Section 43B, ignoring that expenses relating to ongoing projects should be included in work-in-progress or allocated to sales/closing stock? Assessee's Contentions: - Aggrieved by addition of Rs. 20 lacs received on signing of deed of assignment. - Aggrieved by addition of Rs. 67.06 lacs assessed by AO at Rs. 1,24,31,865/-, claiming no income is assessable for this AY. Revenue's Contentions: - CIT(A) erred in taking cost of acquisition of flats at Rs. 300/- per sq. ft. ignoring prior ITAT ruling that receipts were revenue in nature. - CIT(A) erred in assessing rental income as income from house property instead of business income. - CIT(A) erred in reducing the fair market value of constructed area without basis. - CIT(A) erred in allowing ULC charges on payment basis as per Section 43B.

Which sections of the Income-tax Act were involved?

Section 43B,Section 48,Section 22,Section 2(1A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “1”, MUMBAI

Before: SHRI R.C. SHARMA & SHRI PAWAN SINGH

Pronounced: 15/06/2016

Heard together (2 matters)

ITA NO. 2529/MUM/2010
ITA NO. 3022/MUM/2010

Read from the judgment's own cause title. This page is filed under one of them.

Assessee by : Shri Vipul Joshi Revenue by : Shri Bhanwar Singh Ratnoo (DR) Date of Hearing : 17/03/2016 Date of Pronouncement : 15/06/2016 O R D E R PER R.C. SHARMA, AM : These are cross-appeals filed by the assessee and the revenue against order of CIT(A) for A.Y 2006-07, in the matter of order passed u/s. 143(3) of the Income Tax Act, 1961. The following grounds have been taken by the revenue in its appeal no. 3022/Mum/2010 : “1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing to take the cost of acquisition of flat @Rs.300/- per sq.ft ignoring the facts of the case that the assessee has not incurred any cost of acquisition of the said flat and received the flats free of cost as compensation in lieu of rent receivable from the developer and was of the nature of revenue receipt as held by the ITAT, Mumbai, in assessee's own case in A.Y.2000-01 vide order ITA.No.3198/Mum/06 dated 09.10.2009.

2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing to assess the rental income, as income from house property as against business income, as rent was received on exploitation of business asset i.e, closing stock.

3.

On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in reducing the fair market value of the constructed area @Rs.21,000/- per sq.mt for shops and @Rs. 19500/- per sq.mt for flats, taken as per the valuation rate published by the

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