TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 673
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....o Om Metals Ltd ('OM') and Wellwisher Construction and Finance Pvt Ltd ('WW') amounting to Rs. 87.05 crores reflected in its books of accounts under the head 'Inventories', is a non-business expenditure. 2. In upholding the disallowance of interest expense attributable to the monies borrowed for financing the payments to OM and WW and reducing such interest from the value of 'Inventories'. " 3. The brief facts of the case are that the assessee is engaged in the business of real estate developers and constructions. The assessee is involved in the development of IT Park situated at Plot No. I.T 5 (MIDC) Airoli Knowledge Park, Navi Mumbai. The assessment of the assessee for AY 2006-07 was reopened by Revenue on 28.05.2012 on account of an amount of Rs. 100.80 crores paid/payable by the assessee to two parties namely M/s. Well Wisher Constructions and Finance P. Ltd. and M/s OM Metals Limited . The amount of Rs. 13.75 crore were reversed out of the aforesaid amounts in AY 2007-08. The assessee had debited interest attributable on the aforesaid amount debited to inventory in the books of accounts of the assessee and in audited Financial Statements. In th....
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....favour of assessee by Mumbai-tribunal order in ITA no. 1132,1133 & 1137/Mum/2016 for AY 2007-08, 2008-09 & 2006-07 respectively vide common order dated 10.11.2017 in assessee's own case wherein Mumbai-tribunal has passed detailed order upholding the genuineness of the payments made/payable by the assessee to aforesaid parties M/s. Well Wisher Constructions and Finance P. Ltd. and M/s. OM Metals Limited to the tune of Rs. 100.80 crores for relinquishing their rights under a JV agreement wherein land of 50 acres was allotted by MIDC for setting up I T Park at Navi Mumbai . The said order of the tribunal dated 10.11.2017 is placed on record by the assessee before the tribunal which is placed in file. Further it is also brought to the notice of the bench that the Mumbai-tribunal vide common order dated 19.03.2018 in ITA no. 1134, 1135 & 1136/Mum/2016 for AY 2009-10, 2010-11 and 2011-12 respectively has decided the issue in favour of the assessee. The Ld. DR fairly agreed that so far as issue in present appeal are concerned , the issue is covered in favour of the assessee by tribunal decision. At this point of time the bench asked the Ld. Counsel for the assessee to submit the details a....
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....he 50 acres of plot of land allotted by MIDC at Navi Mumbai as sham transactions which was also later confirmed by learned CIT(A) to be sham transaction in the AY 2006-07 itself and consequently these payments as well interest payable on these liabilities were disallowed by Revenue authorities treating them to be sham transactions with an intent to evade taxes. The Mumbai-tribunal vide its common orders dated 10.11.2017 upheld the payments of Rs. 87.04 crores ( Rs. 100.80 crores less net of reversal of Rs. 13.75 crores in AY 2007-08) entered into by assessee with the said two erstwhile JV partners namely M/s Om Metals Limited and M/s Well Wisher Constructions and Finance P. Ltd. for acquiring the rights of these two parties in the said plot of land admeasuring 50 acres allotted by MIDC at Navi Mumbai for setting up I T Park as a genuine transactions vide ITA No. 1132, 1133 & 1137/Mum/2016 for AY 2007-08, 2008-09 and 2006-07 respectively, vide common order dated 10.11.2017 wherein debit to inventories by the assessee of the said net amount of Rs. 87.04 crores was upheld by Mumbai-tribunal to be genuine and allowable, by holding as under:- "5.8. We have considered the rival content....
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....ase of the WW the money received from the assessee was treated as capital receipt and MAT was paid thereon. The AO accepted the same in the assessment framed u/s 143(3) of the Act however the CIT invoked revisionary jurisdiction u/s 263 of the Act which stood quashed by the ITAT. In other words the amounts paid by the assessee to OM and WW were taxed in their hands as genuine transaction by the deptt. It is difficult to understand that when the revenue treated the transaction as genuine in the hands of two JV partners , how the same transaction can be non genuine and sham in the hands of the assessee. Moreover the chronology of events clearly shows that the application was made in the joint names of the assessee, OM and WW. The land was also allotted by MIDC on the said application made by the three joint venture partners . Thereafter MIDC on an application made by the JV partners approved the relinquishment of interest in the said land by two JB(sic. JV) partners OM and WW in favour of the assessee on payment of specified premium. It is relevant to note that records of MIDC proved that the assessee , OM and WW were the joint owners of the plot of land till the relinquishment of ri....
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....cing the cost of inventories. 6.1. Since we have decided the ground no 2 in favour of the assessee holding the transaction to be true on the ground that the same transaction which was treated as genuine in the hands of both the JB(sic. JV) partners namely WW and OM, the same can not be held to be non genuine and sham in the hands of assessee. In view of the said findings any interest which the assessee has incurred on the money borrowed has to be allowed to the assessee and accordingly we direct the AO to delete the disallowance. The ground no 3 is allowed. ITA No.1132/Mum/2016 & ITA No.1133/Mum/2016 7. The issues raised by the assessee in these appeals are identical as have been decided by the us in ITA No. 1137/Mum/2016. Therefore our decision in ITA No.1137/Mum/20146 would ,mutatis mutandis, apply to these appeals as well. Accordingly the appeals of the assessee are partly allowed. 8. In the result, the appeals of the assessee are partly allowed." We have also observed that later Mumbai-tribunal vide common orders dated 19.03.2018 in ITA no. 1134, 1135 & 1136/Mum/2016 for AY 2009-10 to 2011-12 allowed the benefit of deduction of the interest paid/payable by the ....
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.... u/s 143(3) of the Act vide order dated 22.12.2008. In the mean time the assessment of OM was completed for the assessment year 2008-09 in December,2010 in Jaipur approximately two years after the completion of assessment of the assessee and the AO at Jaipur forwarded copy of the assessment order with relevant annexures to the AO of the assessee. Thereafter the AO also sought the details of the transaction from the assessee vide letter dated 19.05.2010 and re-opened the case of the assessee by issuing notice u/s 148 of the Act on 25.05.2012 after four years from the end of the relevant assessment year. In the first para of the reasons recorded by the AO, he admitted that the assessee vide letter dated 18.10.2008 supplied the details of sundry creditors. Thereafter ,the AO while framing order u/s 143(3) r.w.s. 148 of the Act reduced the inventories of the assessee by Rs. 100.80 Cr on the ground that the transaction was a sham and non genuine despite the fact the same transaction was treated as genuine in the hands of OM and WW the two JV partners to whom the assessee paid Rs. 50.40 Cr each for acquiring the interest in the land. In the case of OM, the receipt from the assessee was t....
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....usiness and should be allowed to the assessee. Beside, the involvement of multiple agencies including Govt authorities like MIDC and AOs of OM and WW, professional consultants and escrow agents specially when none of them were related to each other further lends credence to the contention of the ld AR. The mere irregularities in the documents as pointed by the ld DR cannot be the basis to draw conclusion as to genuineness of the transaction. So far as the reasonableness of the transaction is concerned, the valuation by the registered valuer and the DVO were largely same and cannot be ignored and lost sight of while deciding reasonableness of the transaction. After considering the rival contentions, records, written submissions and case laws filed by both the parties we are of the view that the order of PCIT upholding the order of AO treating the purchase of interest in the land from OM and WW as sham is incorrect and cannot be sustained. The decisions relied by the revenue are also distinguishable on facts and therefore not applicable. In view of the above discussions, we set aside the order of PCIT on this issue and accordingly appeal of the assessee is allowed. AO is directed acc....
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....ince we have decided the ground no 2 in favour of the assessee holding the transaction to be true on the ground that the same transaction which was treated as genuine in the hands of both the JB partners namely WW and OM, the same can not be held to be non genuine and sham in the hands of assessee. In view of the said findings any interest which the assessee has incurred on the money borrowed has to be allowed to the assessee and accordingly we direct the AO to delete the disallowance." 10. In view of the said circumstances, when the addition has been deleted finding genuine case of the assessee, therefore, the interest which has been incurred upon the borrowed money is liable to be allowed. Therefore, we decide this issue in favour of the assessee against the revenue. ITA NOs.1135/M/2016& 1136/M/2016:- 11. All the issues raised in these appeals are identical to the issues which have been adjudicated by us in ITA. No.1134/M/2016, therefore, the decision in the ITA. No. 1134/M/2016 is also applied to these appeals. Accordingly, these appeals of the assessee are hereby partly allowed. 12. In the result, appeals filed by the Assessee are hereby partly allowed." We during....