Income Tax Appellate Tribunal - Mumbai
Dcit 10(2), Mumbai vs Vidyavihar Containers Ltd, Mumbai on 23 June, 2017
7029-30 &6914-15/M/13-(09-10&10-11) Vidyavihar Containers Ltd.
आयकर अपीलीय अिधकरण, मुंबई "एफ" खंडपीठ म Income-tax Appellate Tribunal -"F"Bench Mumbai सव ी राजे ,लेखा सद य एवं सी. एन. साद, याियक सद य Before S/Sh.Rajendra,Accountant Member and C. N. Prasad,Judicial Member आयकर अपील सं./I.T.A./6914 & 6915/Mum/2013, िनधा रण वष /Assessment Year: 2009-10 & 2010-11) Dy. CIT-Range-10(2)(4), Room Vidyavihar Containers Limited No.432, 4th Floor, Aayakar Bhavan 3rd Floor, Bajaj Bhavan, 226 Vs. M.K. Road,Mumbai-20. Jamnalal Bajaj Marg Nariman Point,Mumbai-400 021.
PAN:AAACN 0291 R
(अपीलाथ /Appellant) ( यथ / Respondent)
आयकर अपील सं./I.T.A./7029 & 7030/Mum/2013,
िनधा रण वष /Assessment Year: 2009-10 & 2010-11
Vidyavihar Containers Limited The Income tax Officer
Bajaj Bhavan, 3rd Floor, 226, Jamnalal Vs. Range-10(2)(4), Aayakar Bhavan Bajaj Marg, Nariman Point,Mumbai-21. M.K. Road,Mumbai-20.
(अपीलाथ /Appellant) ( यथ / Respondent)
राज व क ओर से / Revenue by: Ms. Pooja Swaroop- DR
अपीलाथ क ओर से /Assessee by: S/Sh. A.V. Sonde & M.A. Gohel
सुनवाई क तारीख / Date of Hearing: 20/06/2017
घोषणा क तारीख / Date of Pronouncement: 23/06/2017
लेखा सद य,
सद य राजे
के अनुसार/
ार PER Rajendra A.M.-
Challenging the orders dated 4/9/2013 of the CIT(A)-22,Mumbai the Assessing Officer (AO) and the assessee have filed cross appeals for the above mentioned two years.As the issues involved in both the years are almost similar so,we are adjudicating these appeals together. The details of filing of returns,returned incomes,date of assessment orders etc.for the above mentioned years can be summarised as under :-
AY. ROI filed on Returned income Asstt. Date Assessed income 2009-10 24/09/2009 Nil 29/12/2011 Rs.29.96 crores 2010-11 28/09/2010 Nil 29/11/2012 Rs.6.10 crores Assessee-company is engaged in the business of trading in furnishing material, furniture and fixtures and life style products.
ITA/7029/Mum/2014-AY.09-10:
2.First Ground of appeal,raised by assessee,is about addition of Rs.25 crores received towards additional consideration as accrued income during the year alongwith accrued interest of Rs. 1.82 crores.During the assessment proceedings,the AO found that Rs.25 crores alongwith interest thereon had accrued to it during the year under appeal, that the P&L account had not been credited with the amount in question,that the assessee had entered into a development 1 7029-30 &6914-15/M/13-(09-10&10-11) Vidyavihar Containers Ltd.
agreement with a developer,that in terms of the supplement agreement to the original development agreement the developer was to acquire at its own cost additional TDR,that assessee was to receive additional consideration of Rs.25 crores in lieu of that.The AO observed that the assessee was following revenue recognition method.He directed the assessee to explain as to why the additional consideration and the interest thereon should not be treated as revenue receipt for the year under appeal. The assessee furnished its reply on 7/ 9/2011.The AO referred to various clauses of the supplemental agreement and held that revenue minister had sanctioned proposal and granted approval on 11/07/2008, that developer had to pay the assessee Rs.25 crores within a period of 90 days of getting the externally procured TDR, that the condition mentioned in the agreement were not cumulative and were mutually exclusive,that occurrence of events/conditions mentioned in the supplement agreement resulted in accrual of income,that one of the conditions of clause 2.1 of the agreement had been fulfilled,that there was no justification for not recognizing the revenue for the year under appeal,that the accounting policy followed by the assessee could not postpone the revenue recognition due to it, that the assessee was following mercantile system of accounting, that tax liability had arisen during the year under consideration and it could not be postponed to subsequent years. He calculated the interest at Rs.1.82 crores and added it to total income of the assessee.
3.Aggrieved by the order of AO,the assessee preferred an appeal before the First Appellate Authority(FAA)and made elaborate submissions.It relied upon certain case laws also. After considering the assessment order and submission of the assessee,he referred to clause 2.2., 2.3 and 6.1 of the supplementary agreement and observed that permission was granted for utilisation of TDR by revenue minister on 11/07/2008,that as per clause 8 of the order, permission was granted for utilization of TDR as permissible under DC Rules on the land possessed by the assessee, that redevelopment was permitted upon charging premium as per the prevailing provisions under the DC Rules, that supplementary agreement provided that the moment permission was granted to use and utilise externally procured TDR to develop the property, the assessee was entitled to receive Rs.25 crores, that when the permission was granted by the State Government it was duty of the developer to fulfill the conditions laid down in the agreement,that irrespective of the dispute among the developers the assessee had a right to receive Rs.25 crores on 91st day of the Agreement, that the AO had rightly taxed the income under appeal, that he had taxed the real income and not the hypothetical income.He further observed that in the mercantile system of accounting the accrual of income was 2 7029-30 &6914-15/M/13-(09-10&10-11) Vidyavihar Containers Ltd.
independent of its receipt, that so long as the amount was due to the assessee, same was to be treated as having accrued to it, that the decree of the court had only postponed the receipt of income, that it could not be accepted, that the date of direction by the court would be that of accrual of income as claimed by assessee, the right to receive the amount already existed, that the direction of Court did not create any right in favour of the assessee.
With regard to interest of Rs.1.82 crores (for the period 1.11.2008 to 31.3.2009) on the additional compensation of Rs.25 crores (at the interest rate of 18% for two months and 17. 25% for 3 months),the FAA observed that the assessee was entitled to receive interest on additional compensation,that there was no infirmity in the working of the AO.Finally,he dismissed the Ground raised by the assessee.
4.Before us,the Authorised Representative(AR)argued that due to ongoing litigation and failure on part of the developer to make additional consideration in November ,2008 the said amount did not accrue to the assessee for the year under appeal, that the litigation was resolved in June,2011 i.e.in AY 2012-13, that the additional consideration could not be taxed in AY.2009-10,that Income tax was leviable on real income and not on the hypothetical income,that in line with the accounting policy on income recognition consistently followed by VLC from year to year the disputed amount was to be accounted for in the year in which the possession of the constructed flats had to be handed over. He referred to page No.14 and 16 of the PB and further argued that clause 2.1 specifically mentioned that amount would be due on occurrence of certain events,that the first event took place on 20/11/2006,that the amount should have been taxed in that year, that the revenue minister passed the order for the year under consideration with regard to premium,that reducing of premium was not the pre-condition of payment of additional compensation, that the assessee had brought to the notice of FAA the fact that it had offered the amount in AY.2012-13,that return for AY. 2012-13 was filed on 28/09/12,that assessment order for the AY. 2009-10 was passed after nine months of the return of income filed for AY. 2012 -13.He also referred to Pg-No.102 of the PB and stated that the AO had taxed the additional compensation in AY.2012-13 on substantive basis-even after knowing that same income was taxed in AY. 2009-10,that it was a clear case of double addition.
The Departmental Representative (DR) supported the order of the FAA and referred to the clause 2.1. and 2.2 of the supplementary agreement.She argued that income had accrued to the assessee in the year under appeal,that assessee could not be allowed to defer the payment 3 7029-30 &6914-15/M/13-(09-10&10-11) Vidyavihar Containers Ltd.
of taxes,payment of taxes in later AY.s.would not absolve the assessee from paying taxes in relevant AY.i.e.2009-10.
5.We have heard the rival submissions and perused the material before us.We find that the assessee had entered into a development agreement for its land with M/s. Gammon Neelkanth Reality Corporation(GNRC) on 24/6/ 2005,that as per the agreement it was entitled to receive as and by way of consideration for granting development rights,residential flats having aggregate carpet area of 2.19 lakh sq.ft.along with 200 parking spaces to be constructed free of cost and made available by GNRC,that as per the agreement GNRC was also to pay such additional consideration as may be mutually agreed between the parties as and when externally procured TDR was permitted to be utilized, that second supplement agreement was signed on 14/07/2005,that as per the new agreement additional consideration was fixed at Rs. 25 crores,that it was also agreed that in the event GNRC would fail or neglect to make payment of consideration on due date the assessee would be entitled to interest @ 5% per annum over the then prevailing prime lending rate of SBI, that in terms of order dated 11/07/ 2008 of the State Revenue Minister's permission was granted for utilisation of TDR, that the company took up the matter with GNRC to make payment of additional consideration,that due to ongoing dispute among the partners of GNRC it did not make payment on time,that on failure of GNRC to make payment of additional consideration the assessee moved to Hon'ble Bombay High Court and filed winding up petition against the partners of GNRC,that the matter got resolved in term of order dated 28/4/2011 passed by the Hon'ble High Court, that the assessee offered the compensation amount and the interest received by it from GNRC for taxation in the AY.2012-13,that the AO and the FAA had taxed the compensation in the year under appeal.
Therefore,the basic question to be decided by us is in which AY.Rs.25 crores should be taxed.The AO has taxed in twice in the AY.2009-10 as well as in AY.2012-13.The fundamen
-tal principle of tax jurisprudence stipulates no double taxation and no double deduction.So, same income cannot and should not suffer taxation in two AY.s. It will be useful to refer to the supplementary agreement to determine the year in which the disputed income should be taxed.We are reproducing the relevant clauses of the agreement and same read as under:
iii) Prior to 8th July, 2004 BMC was permitting use of the Externally Procured TDR equivalent to the area of the land (i.e. 1: 1) in the corridor area i.e. between the Central Railway line and L.B.S. Marg within, which the said Property is situated provided Externally Procured TDR was generated from the slum area.
iv) By an Order dated 8th July, 2004 passed in Writ Petition No.637 of 2003 the, Hon'ble Bombay High Court granted stay of utilization of Externally Procured TDR, in the corridor 4 7029-30 &6914-15/M/13-(09-10&10-11) Vidyavihar Containers Ltd.
and at present it is not permissible for the Developer to use and utilize the Externally Procured TDR on the said Property.
v) Under the Development Agreement there is a provision for the development by the Developer of all development rights including those to be acquired by the Developer at its own, cost by way of Externally Procured TDR as therein defined if and when permitted subject to payment of additional consideration as may be mutually agreed between the parties hereto.
vi) The parties have now agreed the additional consideration that Developer shall pay to the Owner in the event of it becoming permissible to use, and utilize Externally Procured TDR on the said Property on the terms, conditions and manner hereinafter provided. NOW THIS AGREEMENT WITNESSETH AS FOLLOWS:-
1. The Parties hereto agree, confirm and declare that the said Development Agreement and Supplementary Agreement are valid and subsisting.
2.1 In the event at any time prior to the completion of the development the Hon'ble Bombay High Court or the Hon'ble Supreme Court finally resolves the matter and sets aside Order dated 8th July, 2004 or by the Hon'ble Bombay High Court in Writ Petition No.637 of 2004 or by reason of any change or modification of Law or Rules or Regulations or otherwise howsoever, it becomes permissible to use and utilise on the said Property the-Externally Procured TDR (and for the sake of clarity generated from any other property including but not limited to slum areas) or the Developer is permitted to utilise such Externally Procured
- TDR the said Property whichever, event occurs first, the Developer shall pay to the Owner within a period of 90 days thereof a sum of Rs.25,00,00,000/-'(Rupees Twenty five crores)as additional consideration (hereinafter referred to as " the Additional Consideration"). 5.1.From the above,it is clear that payment of Rs. 25 crores was to made by the developer to the assessee on occurrence of either of the two events.The Hon'ble Bombay High Court passed order on 20.11.2006,therefore the income could have been taxed in the AY.2007-
08.The assessee received additional consideration and the interest in the AY.2012-13 and offered the same in that year.The AO while completing the assessment order u/s.143(3)of the Act substantively taxed the additional compensation for the AY.2012.At that time he was aware of the fact that same amount was assessed in the earlier year.Even then he did not pass a protective assessment.Coming to the facts of the case,it is found that in the year under appeal there was order of the Revenue Minister. But,order of the Minister was not one of the conditions of the agreement.The assessee had challenged the valuation adopted by the Revenue authorities and as per the provisions of law the assessee had challenged the value -
tion.In our opinion,the order of the Revenue Minister cannot be the deciding factor for determining the year of assessment in which disputed amount could be taxed.Therefore,we hold that the FAA was not justified in taxing the additional consideration of Rs.25 crores in the year under consideration.Reversing his order,we decide the first part of the first ground of appeal in favour of the assessee.
5.2.As far as interest portion is concerned,we find that the assessee was consistently following a particular method of accounting and same had not been rejected by the AO.It has shown the interest income in the year of receipt.Here,we would like to mention that the 5 7029-30 &6914-15/M/13-(09-10&10-11) Vidyavihar Containers Ltd.
'computation of total income',u/s.5 of the Act has to made of real income and not of any hypothetical income. In short,no real income had accrued to the assessee during the year under appeal under the head 'interest income' considering the method of accounting adopted by it.The assessee had offered the entire interest income in AY.2012-13 i.e. the year of actual receipt. Considering the peculiar facts and circumstances of the case,we decide second part of the first ground of appeal in favour of the assessee.In short,first ground of appeal is allowed.
ITA/6914/Mum/2013-AY.2009-10 (By Deptt.):
6.Effective Ground of appeal,filed by the AO,is about carry-forward and set off of unabsorbed depreciation,amounting to Rs.5.32 crores,available on 01.04.2001.During the course of assessment proceedings,the AO directed the assessee to recompute its income based on the assessed losses of the earlier years.Vide letter dated 12/9/2001,the assessee furnished details of the losses including unabsorbed depreciation of Rs.5,32,25,864/-.It was claimed that the depreciation pertained to AY.s 1993-94 to 2001-02. Referring to case of Times Guarantee Ltd. (40SOT14) of the Tribunal,the AO made a disallowance of Rs.5.32 crores. 6.1.In the appellate proceedings,the FAA relied upon the case of General Motors India Pvt. Ltd. (354 ITR244) of the Hon'ble Gujarat High Court.
6.2.Before us, the DR stated that mater could be decided on merits. The AR supported the order of the FAA.We find that in the case of General Motors India Pvt.Ltd(supra),the matter had been decided as under :-
"Section 32(2) was amended by the Finance Act, 2001. The Central Board of Direct Taxes Circular clarifies the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses with the restriction of 8 years for carry forward and set off of unabsorbed depreciation. The amendment is applicable from the assessment year 2002-03 and subsequent years. This means that any unabsorbed depreciation available to an assessee on the 1st day of April, 2002 (assessment year 2002-03), will be dealt with in accordance with the provisions of section 32(2) as amended by the Finance Act, 2001, and not by the provisions of section 32(2) as it stood before the amendment.
....... Even on the merits the provisions of section 32(2) , as amended by the Finance Act, 2001, would allow the unabsorbed depreciation allowance available in the assessment years 1997-98 ,1999-2000,2000-01 and 2001-02 to be carried forward to the succeeding years and if any unabsor-bed depreciation or part thereof could not be set off till the assessment year 2002-03 then it would be carried forward till the time it is set off against the profits and gains of subsequent years."
Respectfully following the above judgment of the Hon'ble Gujarat High Court,we dismiss the above ground raised by the AO.
ITA/7030/Mum/2013,AY.2010-11:
67029-30 &6914-15/M/13-(09-10&10-11) Vidyavihar Containers Ltd.
7.First ground of appeal,filed by the assessee ,is about addition made by the AO under the head interest accrued to it during the year under appeal.He made an addition of Rs.4.69 crores ,to the total income of the assessee,as he was of the opinion that the assessee was entitled to recover the interest,amounting to Rs. 4.69 crores ,from GNRC.Following our order for the earlier AY.(paragraph 5.2.),we decide the first ground of appeal in favour of the assessee.
8.Second Ground of appeal is about addition made under the head payment of municipal taxes of Rs.55.74 lakhs.During the assessment proceedings,the AO found that the auditor had,in the audit report,made some comments about the recovery of municipal taxes.After considering the audit report,the AO issued a show cause notice to the assessee to explain as to why an amount of Rs.55.74 lakhs should not be brought to tax.He observed that amount paid/payable was shown as expenditure,that corresponding sum was not shown as amount received/receivable from the developer.In its reply the assessee stated that VLC was entitled to reimbursement of all property taxes, levies, cesses etc. in respect of the plot of land, that the developer had to pay the taxes directly to the authorities,that it had accounted for the same as income as well as expenditure, that during the year under consideration neither VLC nor the developer had paid taxes to the tune of Rs.54.74 lakhs,that it did not account for the recovery,that no reimbursement was taking place,that court proceedings were going on against the developer,that there was uncertainty about recovery/reimbursement of the taxes, that the developer subsequently paid substantial part of taxes in AY.2011-12,that the assessee accounted for recovery of that sum in that year,that there was no payment of taxes,that there was no justification for claiming reimbursement,that the sum of Rs.55.74 lakhs had been disallowed u/s.43B of the Act.
After considering the submission of the assessee,dt.02/09/11,the AO held that the liability to pay taxes was a contractual obligation on the part of the assessee as per the terms of the agreement entered with the developer,that it was obliged to collect and pay the municipal taxes,that bringing the net effect to nil would not take away the fact that revenue had accrued to the assessee or that the debit was not an expenditure covered by section 43B of the Act,that as per matching principles the amount in question,being differential amount between recovery of municipal property tax (21.03 lakhs) and municipal property tax(76.78 lakhs) had to be added to the income of the assessee.Accordingly,the AO made an addition od Rs.55.74 lakhs to the total income of the assessee .
77029-30 &6914-15/M/13-(09-10&10-11) Vidyavihar Containers Ltd.
8.1.Aggrieved by the order of the AO,the assessee preferred an appeal before the FAA.In the appellate proceedings,he held that there was no real expenditure to the assessee,that the action of the AO in disallowing municipal taxes had to be confirmed. 8.2.Before us,the AR argued that the assessee had not received municipal taxes in the year under consideration,that AO had made double addition,that disputed amount was shown in the return filed for the next AY.
8.3.We find that the assessee had debited Rs.76,78,008/- towards municipal taxes payable, that it had credited sum of Rs.21.03 lakhs as amount receivable from the developer that balance amount of Rs.55,74,642/- had not been accounted as income,that dispute was going on between the assessee and the developer,that the developer had to pay municipal taxes,that it did not hand over the money to the assessee to be deposited with municipal authorities,that payment was made in the next AY.If we consider the facts in totality,it becomes clear that it was the duty of the developer to clear the municipal dues and it paid the disputed amount in subsequent year.The assessee had no role in the entire transaction-it had to receive the money from the developer and had to pay to municipal authorities.It is not denied by the department that it was a case of double addition.Considering the peculiar facts and circumstances of the case we are of the opinion that the FAA was not justified in confirming the addition when the assessee had not received the disputed amount during the year under appeal.Reversing his order,we decide second ground of appeal in favour of the assessee.
ITA/6915/Mum/2013-AY.2010-11
9.Solitary ground of appeal raised by the AO for this year is also about carry-forward and set off of unabsorbed depreciation.Following our order for the earlier year,we decide the effective ground of appeal against the AO.
As a result,appeals filed by the assessee are allowed and the appeals of the AOs are dismissed फलतः िनधा रती ारा दािखल क गई ँ अपील मंजूर क जाती ह और िनधा रती अिधकारी क अपील िनर त क जाती ह .
Order pronounced in the open court on 23rd June, 2017.
आदेश क घोषणा खुले यायालय म दनांक 23 जून, 2017 को क गई ।
(सी. एन. साद / C.N.Prasad ) (राजे
/ Rajendra)
Sd/- Sd/-
याियक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
मुंबई Mumbai; दनांक/Dated : 23.06.2017.
Jv.Sr.PS.
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1.Appellant /अपीलाथ! 2. Respondent /"#यथ!
8
7029-30 &6914-15/M/13-(09-10&10-11)
Vidyavihar Containers Ltd.
3.The concerned CIT(A)/संब' अपीलीय आयकर आयु*, 4.The concerned CIT /संब' आयकर आयु*
5.DR "F" Bench, ITAT, Mumbai /िवभागीय "ितिनिध, खंडपीठ,आ.अ.+याया.मुंबई
6.Guard File/गाड फाईल स#यािपत "ित //True Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai.
9