TaxTMI 
TaxTMI 
2021 (11) TMI 373
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....nsolidated order. We shall first take up the cross-appeals for A.Y 2015-16. The assessee has assailed the impugned order on the following grounds before us: "Ground 1: On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) ought to have restricted the disallowance under Section 14A of the Act to the amount of exempt income earned during the year under consideration of Rs. 1,43,78,956, although the appellant has sumo moto disallowed sum of Rs. 4,85,50,063 in its Return of Income. The apppellant hereby prays that on the basis of the findings given by the learned CIT(A) in his orders, stating that disallowance under Section 14A cannot exceed dividend income , the disallowance under section 14A of the Act must be restricted to dividend income earned of Rs. 1,43,78,956. Ground 2: On the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred by confirming the addition of notional income of Rs. 2,09,73,057/as "Income from House Property" (net of standard deduction @30% of Rs. 89,88,453) by estimating @ 8.50% on the Unsold inventory of Rs. 35,24,88,351/- appearing in Schedule "Inventories" to the Balance Sheet." The appellant pr....
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....14A of the Income Tax Act,1961 without noticing that the decision of the Hon'ble Jurisdictional High Court relied upon was rendered in the context of the pre-amended provisions of section 14A relevant for Assessment Years 2001-02 to 2005-06?" 6. On the facts and circumstances of the case and in law, the Id CIT(A) has erred in directing to delete the addition of disallowance u/s 14A of the IT Act to the book profit of the assessee without appreciating the clause (f) of explanation 1 to section 115JB(2) of the IT Act." 7. "On the facts and circumstances of the case and in law, the Id CIT(A) has erred in directing to delete the addition of disallowance u/s 14A of the IT Act to the book profit of the assessee without appreciating the decision of the Hon'ble ITAT Mumbai "F" Bench in the case of Deputy Commissioner of Income-tax, Central Circle -18 & 19, Mumbai v. Viraj Profiles Ltd. in ITA NO. 4439/ (MUM.) of 2013 for A.Y. 2008-09." 2. Briefly stated, the assessee company which is engaged in the business of development of real estate, leasing and that of a Hotelier had e-filed its return of income for A.Y 2015-16 on 30.11.2015, declaring an income of Rs. 43,94,5....
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....stock-in-trade at Rs. 2,99,61,510/- [8.5% of Rs. 35,24,88,351/- (i.e the cost of construction of the finished stock)]. After allowing a deduction under section 24(b) of the Act i.e @ 30% of the ALV of Rs. 2,99,61,510/- the A.O worked out the net addition at Rs. 2,09,73,057/- in the hands of the assessee. Backed by his aforesaid deliberations the A.O vide his order passed under section 143(3), dated 12.10.2017 assessed the income of the assessee-company at Rs. 52,40,35,118/- under the normal provisions and "book profit" under section 115JB at Rs. 63,76,44,580/-. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Although the CIT(A) found favor with the assessee"s claim that the disallowance under section 14A was to be restricted to the quantum of the exempt income that was earned by it during the year, however, he observed that the same could not be scaled down below the amount of the suo-motto disallowance that was offered by the assessee in its return of income. In so far the claim of the assessee that the A.O had erred in assessing the notional lettable value of the flats/shops that were held by it as stock-in-trade of its business as that of a develope....
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....tted by ld. D.R that as observed by the AO, and rightly so, as per the CBDT Circular No. 5 of 2014, dated 11.02.2014 the disallowance under section 14A is to be made even if no exempt income was earned by the assessee during the year under consideration. In so far the assessing of the ALV of the flats/shops held by the assessee as stock-in-trade of its business was concerned, the ld. D.R relied on the judgment of the Hon'ble High Court of Delhi in the case of Ansal Housing Finance & Leasing Co. Ltd. (supra). As regards the additional ground of appeal that was filed by the assessee, the ld. D.R had not advanced any contention or rebutted the same before us. 8. We have heard the ld. Authorized Representatives for both the parities, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. We shall first deal with the claim of the ld. A.R that the CIT(A) had gravely erred in law and the facts of the case in not restricting the disallowance under section 14A to the extent of the exempt income. In our considered view, as sta....
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....e shall now take up the grievance of the assessee, that both the lower authorities had erred in assessing under Sec. 22 of the Act the ALV of the flats/shops held by it as stock-in-trade of its business as that of a developer under the head "House Property". Notably, the controversy involved qua the issue in hand lies in a narrow compass i.e. as to whether or not the ALV of the flats/shops held by an assessee as its stock-in-trade is liable to be determined and therein assessed under the head "House Property". We find that the aforesaid issue had came up before a co-ordinate bench of the Tribunal i.e ITAT, "C" Bench, Mumbai in the case of M/s. Osho Developers, Mumbai Vs. ACIT-32, Mumbai, ITA No. 2372 & 1860/Mum/2019, dated 03.11.2020. After exhaustive deliberations and considering the contrary views of two non-jurisdictional High Courts i.e. Hon'ble High Court of Delhi in the case of CIT Vs. Ansal Housing Finance & Leasing Co. Ltd. [2013] 354 ITR 180 (Del.) and that of the Hon'ble High Court of Gujarat in the case of CIT Vs. Neha Builders [2008] 296 ITR 661 (Guj.), the Tribunal had directed the A.O to delete the addition made by him towards the ALV of the flats that were held by th....
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....015) 377 ITR 165 (Bom), had observed, that in a case where a real estate developer is in receipt of rental income in respect of a property held by him as stock-in-trade of its business as that of a real estate developer, the said rental receipts was to be assessed under the head house property. Accordingly, the issue before the High Court in the aforesaid case was as to under which head of income the rental receipts were liable to be assessed. Finding favour with the claim of the assessee, it was observed by the High Court that the rental income received from letting out of the unsold portion of the property constructed by the real estate developer was assessable to tax as its income from house property. Beyond any scope of doubt, the issue before the Hon'ble High Court was as to under which head of income the rental receipts were to be taxed i.e as 'business income' or 'income from house property'. Unlike the facts involved in the case before the High Court, in the case before us, the flats held by the assessee as stock-in-trade of its business of a builder and developer, having not been let out, had thus not yielded any rental income. As the Hon'ble High Court of Bombay in the ca....
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....ut if the property is used as 'stock-in-trade', then the said property would become or partake the character of the stock, and any income derived from the stock would be 'income' from the business and not income from the property. In the backdrop of the conflict between the decisions of the aforesaid non-jurisdictional High Courts, as observed by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), the view which is in favour of the assessee has to be preferred as against that taken against him. Accordingly, following the judgment of the Hon'ble Jurisdictional High Court in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), we respectfully follow the view taken by the Hon'ble High Court of Gujarat in the case of CIT vs. Neha Builders (2008) 296 ITR 661 (Guj). In fact, we find that the issue as to whether the ALV of a property held by an assessee as stock-in-trade of its business as that of a real estate developer had earlier came up before a 'SMC' bench of the ITAT, Mumbai in the case of Shri. Rajendra Godshalwar Vs. ITO-21(3)(1), Mumbai [ITA No. 7470/Mum/2017....
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....he AO is directed to delete the addition made by estimating letting value of the flats u/s 23 of the I.T. Act." 7. In our view, the aforesaid observation of our coordinate Bench squarely applies to the facts of the present case. In the case of M/s. Runwal Constructions (supra) also, similar issue has been dealt with by our coordinate Bench. In the case of M/s. Runwal Constructions (supra), the Bench noted the judgment of the Hon'ble Gujarat High Court in the case of CIT vs Neha Builders Pvt. Ltd., 296 ITR 661 (Guj.) as also the judgment of the Hon'ble Delhi High Court in the case of Ansal Housing Finance & Leasing Co. Ltd., 354 ITR 180 (Delhi) and finally observed as under :- "10. In the case on hand before us it is an undisputed fact that both assessees have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head 'income from business'. Thus, respectfully following the above said decisions we hold that the unsold flats which are stock in trade when they were sold they are assessable under the head 'income from business' when they are sold and therefore the AO is not correct....
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....the legislature had inserted Sec. 23(5) of the Act. As per the said statutory provision, where the property consisting of any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for a period up to "one year" *"two years" vide the Finance Act, 2019 i.e w.e.f 01.04.2020] from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil. As the said statutory provision i.e Sec. 23(5) is applicable prospectively i.e w.e.f A.Y 2018-19, the same, thus, would have no bearing on the year under consideration in the case of the present assessee before us. Our aforesaid view is fortified by the aforesaid order of the ITAT, Mumbai in the case of Shri. Rajendra Godshalwar Vs. ITO-21(3)(1), Mumbai [ITA No. 7470/Mum/2017, dated 31.01.2019], wherein in context of the said aspect it was observed as under: "9. Apart therefrom, we find that Sec. 23(5) of the Act has been inserted by the Finance Act, 2017 w.e.f. 0....
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....the facts borne from the records, therefore, we have no hesitation in admitting the same. It is the claim of the ld. A.R that the assessee-company, inter alia, is engaged in the business of development and operation of IT Park at Pune, viz. "Commerzone" and SEZ at Hyderabad. Accordingly, from its aforesaid business the assessee company earns income from two streams, viz. (i) lease rentals from letting out of properties; and (ii) maintenance income from the activity of facility management services. It is stated by the ld. A.R that the assessee had in its original/revised return of income offered the lease rentals from letting out of the properties under the head "House Property", while for the maintenance income from the activity of facility management services was shown under the head "Profit & Gains of Business or Profession". It is stated by the ld. A.R that the CBDT, vide its Circular No. 16/2017, dated 25.04.2017 had clarified that the entire income earned from letting out of buildings/developed spaces in Industrial Park/SEZ is to be treated as the assessee"s business Income. Backed by the aforesaid facts, the ld. A.R had sought for directions to the A.O to subject the lease re....
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....the addition of disallowance under section 14A that was made to the "Book Profit" of the assessee company, without considering the import of clause (f) of "Explanation 1" to section 115JB(2) of the Act. In our considered view, the aforesaid issue is squarely covered by the order of the "Special Bench" of the Tribunal in the case of ACIT Vs. Vireet Investments Pvt. Ltd., ITA No. 502/Del/2012, dated 16.06.2017. In its aforesaid order, the "Special Bench" of the Tribunal, had observed, that "book profit" under section 115JB is not to be enhanced by the disallowance made by the A.O under section 14A of the Act. We, thus, respectfully following the aforesaid view taken by the Tribunal, uphold the view taken by the CIT(A). The Grounds of appeal nos. 6 & 7 raised by the revenue are dismissed. 15. Resultantly, the appeal filed by the assessee is allowed, while for that filed by the revenue stands dismissed. ITA No. 7109/Mum/2018 - AY-2012-13 (Assessee's appeal) 16. We shall now take up the appeal filed by the assessee for A.Y 2012-13. The assessee has assailed the impugned order on the following grounds of appeal before us. 1. On the facts and in circumstances of the c....
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....perty" for which no deduction for brokerage/commission was allowable under section 24 of the Act, however, it had also earned income from maintenance charges which otherwise would not have been possible without tenants. Accordingly, the CIT(A) in all fairness allowed as a deduction the proportionate share of the commission/brokerage expenses that was attributable to earning of the maintenance charges. At the same time, the CIT(A) was not inclined to accept the claim of the assessee that 50% of the expenses should be allowed under section 37(1) as a business expenditure. Adopting a holistic view, the CIT(A) taking cognizance of the respective incomes that were earned by the assessee from its aforesaid two streams of income, viz. maintenance charges and rental income, thus, apportioned the expenses in the same ratio. Accordingly, on the aforesaid basis, the CIT(A) allowed the assessee"s claim for deduction of brokerage/commission expenses to the tune of Rs. 6,75,536/-. 20. Aggrieved with the part sustaining of the disallowance of commission /brokerage expenses by the CIT(A) the assessee has carried the matter in appeal before us. It was submitted by ld. A.R that not only in the pr....
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.... U/s 143(3), dated 31.01.2013 A.Y 2011-12 Order U/s 143(3), dated 31.07.2013 A.Y 2013-14 Order U/s 143(3), dated 21.03.2016 A.Y 2014-15 Order U/s 143(3), dated 23.12.2016 A.Y 2015-16 Order U/s 143(3), dated 23.06.2017 23. In our considered view, now when the Department after duly scrutinizing the aforesaid claim of deduction of commission/brokerage expenses raised by the assessee in the preceding and the succeeding years, had accepted the same vide its respective assessment orders passed under section 143(3) of the Act, therefore, in the absence of any change in the circumstances, there was no justification on its part in taking a different view and declining the said claim for deduction of expenses during the year under consideration. Although the principle of res-judicata is not applicable to income-tax proceedings, however, we cannot remain oblivious of the fact that an inconsistent approach of the Department can also not be permitted. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of Radha Soami Satsang Vs. CIT (1992) 193 ITR 321 (SC). In its aforesaid order, the Hon'ble Apex Court had observed that in the abs....