Gundecha Builders, Mumbai vs Assessee

सर्वश्री आय.सी.शभमव, रेखम सदस्म एवुं श्री वर्र्ेक र्भमव, न्ममयमक सदस्म BEFORE : SHRI R.C.SHARMA, AM & SHRI VIVEK VARMA, JM

आमकय अऩीर सं./ITA No.762/Mum/2013 ( नििाारण वषा / Assessment Year :2009-10) M/s Gundecha Builders, Plot Vs. ADCIT, Rg.24(3), Mumbai No.141, Gundecha House, Jawahar Nagar, Goregaon (W), Mumbai-400062 स्थममी रेखम सं ./ जीआइआय सं ./ PAN/GIR No. : AAAFG 0848 E (अऩीरमथी /Appellant) .. (प्रत्मथी / Respondent) AND आमकय अऩीर सं./ITA No.1697/Mum/2013 ( नििाारण वषा / Assessment Year :2009-10) ADCIT, Rg.24(3), Mumbai Vs.M/s Gundecha Builders, Plot No.141, Gundecha House, Jawahar Nagar, Goregaon (W), Mumbai-400062 स्थममी रेखम सं ./ जीआइआय सं ./ PAN/GIR No. : AAAFG 0848 E (अऩीरमथी /Appellant) .. (प्रत्मथी / Respondent)

यनधमवरयती की ओर से /Assessee by : Shri Vimal Punmiya यमजस्र् की ओर से /Revenue by : Shri Vijay Kumar Bora

सुनर्मई की तमयीख / Date of Hearing : 12/03/2015 घोषणम की तमयीख/Date of Pronouncement : 17/04/2015 आदे श / O R D E R

PER R.C.SHARMA (A.M.) :

These are the cross appeals filed by the assessee and Revenue

against the order of CIT(A) dated 10-12-2012 for the assessment year

2009-2010, in the matter of order passed u/s.143(3) of the I.T.Act..

2 ITA Nos.762&1697/13

2. Rival contentions have been heard and record perused. Facts in

brief are that assessee is engaged in the development of real estate

projects. During the course of assessment, the AO made addition on

account of suppressed closing stock, apportionment of expenses,

disallowance of deduction u/s.80IB, disallowance of court fee, stamp,

disallowance u/s.14A, expenses transferred to work-in-progress etc..

3. By the impugned order, the CIT(A) deleted the addition made on

account of valuation of closing stock and treated rental income as income

from house property, allocation of expenses, split parking and court fee

stamp. However, the CIT(A) confirmed the addition on account of earnest

money and Section 14A disallowance. Against the above order of CIT(A),

both the assessee and revenue are in appeals before us.

4. Ld. AR placed on record order of the Tribunal in assessee's own

case in the assessment year 2006-07 to 2008-09, wherein most of the

grounds are covered.

5. We have considered rival contentions and gone through the orders

of the authorities below and found that during the year the AO had

followed the addition made by the AO in the immediately preceding

A.y.2008-09. In A.Y. 2008-09 addition so made was deleted by the CIT(A)

and the order of CIT(A) was confirmed by the Tribunal. We had gone

through the order of Tribunal in assessee's own case and found that the

issue with regard to addition on account of suppressed value of closing

stock which has been deleted by the CIT(A), has been confirmed by the

Tribunal in the assessment year 2008-09, vide order dated 19-2-2014.

The precise observation of the Tribunal was as under :- 3

ITA Nos.762&1697/13

"11. We have considered rival contentions and found that the AO has wrongly added expenses of previous year to the value of closing stock without finding fault in assessee‟s method of valuation, which was consistently followed by it. The AO has wrongly included indirect cost of project which is not going to form part of value of work in progress. While computing value of closing stock the AO has not pointed out any particular expenses, which should have charged to closing stock and not added by the assessee to the closing stock. Accordingly, we do not find any reason to interfere in the findings of CIT(A) resulting into deletion of addition on account of valuation of closing stock."

As the facts and circumstances during the year under consideration are

same, respectfully following the order of Tribunal in assessee's own case,

we do not find any reason to interfere in the order of CIT(A) for deleting

the addition made on account of suppressed value closing stock.

6. The next grievance of the Revenue relates to CIT(A)'s action for

treating rental income as income from house property. The issues has

been decided by the Tribunal in assessee's own case in the assessment

year 2008-09, wherein vide para 6, the Tribunal has held as under :-

"6. We have considered rival contentions and found from the record that the issue is squarely covered by the decision of Hon‟ble Supreme Court in the case of Sambhu Investment (P) Ltd. Vs. CIT (2003) 263 ITR 143 (SC), wherein the Hon‟ble Apex Court has held that wherein main intention of letting out the property or any portion thereof is to earn rental income, the income is to be assessed as income from house property and where the intention is to exploit the immovable property by way of complex commercial activities, the income should be assessee as income from business. Applying this proposition to the facts of the instant case, we found that the assessee has let out the property to earn the rental income.

Accordingly, we do not find any infirmity in the order of CIT(A) for treating the lease income as income from house property."

As the facts and circumstances during the year under consideration are

same, respectfully following the order of the Tribunal, we do not find any

infirmity in the order of CIT(A) for treating the lease income as income

from house property.

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ITA Nos.762&1697/13

7. The next grievance of the Revenue relates to deletion of expenses

on account of allocation of common expenditure. The CIT(A) has deleted

the addition vide para 4.3, after observing as under :-

"4.3. I have carefully considered the above submissions, paper book and the material available on record. Identical issue arose during AY.2006-07. The CIT(A) had given relief to the appellant. Against the order of the CIT(A), the department had filed an appeal before the IT A 1. The findings of the IT A T is in para 11 of its order which is reproduced as under-

"11. We have heard the rival submissions and perused the records placed before us. It is submitted by the learned counsel for the assessee that the assessee had maintained two separate accounts for Poiser as well as Sakinaka projects and the CIT(A) gave a finding that the assessee had maintained two separate accounts. The learned CIT(A) has given a further finding that the Assessing Officer presumed that the assessee might have debited the expenditure relating to Poiser project to Saki Naka project to get the benefit u/s. 80IB(10) because the project is fully eligible for deduction. It is a fact that the assessee has already debited expenses for Poiser project of Rs.1,05,11,664/- and the Assessing Officer has not pointed out any defect in the books of account submitted by the assessee. In view of the above, we do not find any infirmity in the order of the CIT(A) and uphold the same.

The order of the CIT(A) was uphold by the ITAT. Since the facts and circumstances are identical and the projects being the same, respectfully following the Hon.ITAT's decision, I direct the Assessing Officer to delete the addition made. This ground of appeal is allowed."

8. We found that similar issue has been decided by the Tribunal in

assessee's own case vide para 12, 13 & 14, which reads as under :-

12. The last grievance of the Revenue relates to deletion of addition of Rs.38,75,050/- on account of allocation of common expenditure to Poisar Project and Sakinaka „D‟ project.

13. The CIT(A) has deleted the addition after following the order of the Tribunal in assessee‟s own case for the assessment year 2006-

07. The precise observations of the CIT(A) are as under :-

"5.3 I have gone though the contents of the impugned assessment order as well as arguments & submissions of Ld. Authorized Representative of the appellant along with material available on record Including the Hon'ble ITA Ts orders In appellant's own case (supra) I have also gone through the chart furnished by the appellant It Is clear from the details of expenses 5 ITA Nos.762&1697/13

furnished that separate expenditure was debited under all heads of Poiser Project and the Assessing Officer has also not pointed out a single instance in his order as to which expenditure was taxable income. He has worked simply on presumption without bringing any evidence on record. On the other hand, the appellant has maintained separate books of accounts and bank account for the Poiser Project wherein no discrepancy was pointed out by the Assessing Officer So in the absence of any conclusive evidence and investigation done by the Assessing Officer and in view of the submissions made by the appellant, I am of the view that the Assessing Officer was not justified In allocating the expenditure of Rs. 38,75,050/- to Poiser Project wherein expenditure of Rs. 17,26,112/- was already debited by the appellant before making re-allocation or disallowance. On perusal of Profit & Loss Account submitted regarding 'D' wing of Sakinaka. Assessee has debited the expenses to the tune of Rs. 6,88,12,548/- and all these has been added to the closing stock. Therefore, addition of Rs. 81,37,369/- made by the Assessing Officer to 'D' wing of Sakinaka without pointing out any reason is not justifiable. The Assessing Officer should have pointed out the defects in the books of accounts of the appellant and the items of expenditure which were diverted for reducing the taxable income. Instead of that, the Assessing Officer has simply made reallocation of expenses of the project which cannot be approved and confirmed in the absence of any evidence. Further respectfully following the decisions in appellant's own case of Hon'ble ITAT Mumbai, G Bench, ITA NO.2087/Mum/2010 for A.Y.2006-07 and the reasoning of my Ld. Predecessor's appellate order for A.Y.2007 -08, the Assessing Officer is directed to allow deduction as claimed by the appellant to maintain the judicial discipline in the facts and circumstances of the instant case as discussed above. Accordingly this ground of appeal is also allowed."

14. We have considered rival contentions. As the facts and circumstances during the year under consideration are pari materia to the facts and circumstances as considered and decided by the Tribunal in assessee‟s own case, which has been elaborately referred by the CIT(A) in his impugned order Accordingly, we do not find any infirmity in the order of CIT(A) for deleting the addition made on account of allocation of common expenditure."

As the facts and circumstances during the year under consideration are

same, respectfully following the order of the Tribunal as quoted above, we

confirm the action of the CIT(A) with regard to allocation of expenditure.

9. Next issue taken by the Revenue is with regard to addition made on

account of stilt parking.

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ITA Nos.762&1697/13

10. During the year, the assessee had earned Rs.380,000/- from sale

of stilt car parking and Rs.10,07,404/- from earnest money forfeited. After

deducting expenses net income claimed by assessee u/s.80IB(10) for the

poiser project is Rs.11,82,761/-. Since the parking is part and parcel of

the project, receipt on account of sale of such parking is to be treated on

the same lines as other receipts on sale of premises. The parking was

given to the flat owners. It is also not in dispute that the local authorities

does not approve construction without the parking. Furthermore, parking

are built and approved in the residential structure of the residential

building and no separate approvals are taken.

11. We found that in the assessment year 2008-09, the CIT(A) has

deleted the addition by following the order of the Tribunal in assessee's

own case in the assessment year 2005-06 & 2006-07 after having the

following observations :-

"3.3 I have gone though the contents of the impugned assessment order as well as arguments & submissions of Ld. Authorized Representative of the appellant along with material available on record including the Hon'ble IT A T's orders in appellant's own case (supra). I find that parking is part & parcel of the housing project that is the first and foremost requirement of the residents of the residential units. Therefore, it cannot be said that sale proceeds of stilt parking is outside the purview of Sec. 80IB(10) of the I. T. Act.

The parkings are in built and approved in the residential structure of the residential building and no such separate approvals are taken. The principle decided by the Hon'ble Spl. Bench of ITAT (Pune) in the case of Brahma Associates Vs JCIT also supports the case of the appellant that if some part of the flat is used for commercial purpose, the correct character of housing project is not vitiated, Assessing Officer has not brought on record that which part of expenditure claimed to have been incurred for parking is bogus. Hence, in view of the above said arguments, case laws and submissions of the appellant alone, the Assessing Officer could be directed to allow deduction to the appellant u/s. 80IB(10) on sale proceeds of stilt parking. However, Since the findings of the Assessing Officer & Submissions of the appellant are 100% identical relying on my predecessor appellate order dtd.18/12/2009 for AY.2006-07 & order dt. 30/03/2010 for AY.2007-08 in appellant's own case, the Assessing Officer is directed to allow deduction on 7 ITA Nos.762&1697/13

Stilt Parking u/s 80IB(10) of the IT Act. Following respectfully the Hon'ble ITAT's two decisions for AY. 2005-06 & 2006-07 (supra) in appellant's own case to maintain the judicial discipline. Thus appeal is allowed on this ground too."

The very same issue is also covered by the order of the Tribunal in

assessee's own case for the assessment year 2008-09 vide para 8 which

reads as under :-

"8. We have considered the rival contentions. The issue of deduction u/s.80IB(10) has been decided by the ITAT in assessee‟s own case in its favour for the assessment years 2005-06 & 2006-07 as referred by the CIT(A) in his order. Learned DR did not oppose the said decision of the ITAT in assessee‟s own case. In the immediately preceding A.Y. 2007-08, the Tribunal has followed the decision of earlier years having similar facts. As the facts and circumstances during the year under consideration are same, respectfully following the same, we do not find any infirmity in the order of CIT(A) for allowing claim of deduction under Section 80IB(10)."

Respectfully following the orders of the Tribunal in assessee's own case,

we do not find any infirmity in the order of the CIT(A) deleting the

deduction declined u/s.80IB(10) in respect of sale proceeds of stilt car

parking.

12. The issue with regard to allowing the court fees stamp as revenue

expenses, we do not find any infirmity in the order of CIT(A), since the

expenditure so incurred was revenue in nature. Furthermore, following the

reasoning given by us while deleting the addition made on account of

closing stock, which is already covered under the ground No.1,

hereinabove, there is no infirmity in the order of CIT(A). In the assessment

year 2008-09 vide para 11, the Tribunal has deleted the addition so made.

Respectfully following the order of the Tribunal, we confirm the action of

the CIT(A) for deleting the addition made on account of court fees stamp. 8

ITA Nos.762&1697/13

13. In assessee's appeal, on the issue of earnest money, the issue is

covered by the decision of Kolkata Bench of the Tribunal in case of

Bengal Ambuja Housing Development Ltd. Vs. DCIT, ITA No.1595/Kol/05.

Since the earnest money forfeited was in the nature of income realized

out of housing project only, same will be eligible for deduction

u/s.80IB(10). Earnest money is not a deposit but is money given by

prospective buyers as token money to assessee for purchase of flat. This

amount is part of sale consideration and not part of deposit (i.e. part of

80IB project revenue). Thus, if the deal is goes through successfully, the

same forms a part of sales consideration and in case it does not, then the

same is forfeited. Thus, earnest money is received with respect to the

business of selling of flats in the project and hence has a direct nexus with

the undertaking and hence is allowable as a deduction.

14. The CIT(A) has also confirmed the disallowance of Rs.8,51,418/-

being 1/3rd of expenses on security, legal fees and professional fees. We

found that these expenditures were incurred in respect of properties,

which was in dispute. Such expenses were indirect expenditure and item

of profit and loss account, the same cannot be added to work-in-progress

as same are indirect expenditure. Even the provisions of Section 145

which provides method of accounting also states that indirect expenditure

is to be deducted to profit and loss account and the same is not to be

added to the value of closing stock as per AS2. Accordingly, we do not

find any merit in the action of the lower authorities for disallowing

Rs.8,51,418/- being 1/3rd of the expenditure incurred on security, legal fee

and professional fee.

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ITA Nos.762&1697/13

15. With regard to the disallowance made u/s.14A, we found that the

AO has applied rule 8D, no fault was pointed out by ld. AR in the

computation of disallowance made by the AO u/s.14A read with rule 8D.

Accordingly, we confirm the action of the AO for disallowance made

u/s.14A.

16. In the result, appeal of the revenue is dismissed, whereas

appeal of the assessee is allowed in part.

Order pronounced in the open court on this 17th April,.2015.

Sd/- Sd/- (वर्र्ेक र्भमव,) (आय.सी.शभमव) (VIVEK VARMA) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भंफ ु ई Mumbai; ददनमंक Dated 17/04/2015 प्र.कु.मभ/pkm, यन.स/ PS

आदे श की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to :

1. अऩीरमथी / The Appellant प्रत्मथी / The Respondent. आदे शािसार/ BY ORDER,

2.

3. आमकय आमक् ु त(अऩीर) / The CIT(A), Mumbai.

4. आमकय आमुक्त / CIT

5. वर्बमगीम प्रयतयनधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai उप/सहायक पुंजीकार

6. गमर्व पमईर / Guard file. (Asstt. Registrar) आयकर अपीऱीय अधिकरण, भुंफई /

सत्ममवऩत प्रयत //True Copy// ITAT, Mumbai