Income Tax Appellate Tribunal - Mumbai
Rajendra Dattatray Sawant, Navi Mumbai vs Department Of Income Tax on 30 April, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI D-BENCH, MUMBAI
BEFORE SHRI B RAMAKOTAIAH, ACCOUNTANT MEMBER
AND SHRI SANJAY GARG, JUDICIAL MEMBER
ITA. NO.4314/Mum/2011
Assessment Year: 2007-08
ITO WD 22(2)-4, VASHI RLY STN Vs. RAJENDRA DATTATRAY SAWANT,
COMPLEX TOWER NO.6, 4th FLOOR, 104 GHANSHYAM KRIPA, R.B.
VASHI, NAVI MUMBAI KADAM MARG, GHATKOPAR WEST,
MUMBAI- 400084
PAN: AAYPS3965Q
(Appellant) (Respondent)
Appellant by : Shri A.K. Kardam (DR)
Respondent by : Shri A.V. Kamat
Date of Hearing: 25.02.2013 Date of pronouncement : 30.04.2013
ORDER
PER SANJAY GARG (JM):
The present appeal has been filed by the revenue against the order of the CIT(A) dated 22.03.2011 pertaining to the A.Y. 2007-08.
2. Grounds of appeal read as under:-
"1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the SRA charges of Rs. 37,85,366/- are expenses of revenue naturethereby deleting the same out of SRA expenses of Rs. 56,42,066/- disallowed by the A.O holding the same as capital expenditure."
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in giving impugned as above without appreciating the fact that the A.O. had given a clear cut finding in the Asst. Order that the total SRA expenses claimed were of capital nature which aspect has neither been discussed nor refuted by the Ld. CIT(A) in her order.
3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in granting the relief of Rs. 3,50,370/- out of disallowance of Rs. 6,38,750/- out of the building materials made by the A.O. in the remand report of the A.O. without appreciating the fact that the remand report failed to establish that these expenses were incurred from the project under consideration and thereby the genuineness of the claim of expenses could not be established.
2ITA. NO.4314/Mum/2011 Shri Rajendra Dattatray Sawant
4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions made by the A.O. @ 20% of depreciation claimed on motor car on the presumption of personal usage while upholding the decision of the A.O. in making disallowance @ 20% on motor expenses which was made on account of personal usage."
3. The brief facts of the case are that the assesee engaged in the business of "Builder & Developer" filed his return of income declaring total income at 'NIL'. Assessment was made u/s 143(3) of the Income Tax Act. The A.O. disallowed the expenditure debited on account of SRA (charges paid to Slum Rehabilitation Authority) to the tune of Rs. 56,42,0066/- stating the same to be of capital nature and not the revenue expenses, observing as under:-
"1) Further the payments are in the nature of deposit, development charges, interest on infrastructure charges, these are of capital nature & hence will not allowable as revenue expenses.
2) Vide letter no. SRA/Eng/995/N/PL/LOI dt. 10.12.2004, the Slum Rehabilitation Authority has put a condition "That you shall pay total amount of Rs. 3920000/- towards deposit to be kept with SRA at the rate of 20000/- per tenement and total amount of Rs. 3761190/- @Rs. 560/- per sq. met. Towards Infrastructural development charges for additional chargeable built up area 6716.41 sq.mt." It makes evidently clear that it is an deposit hence by no means it shall be allowable as expenses.
3) Slum Rehabilitation Authority vide letter SRA/che/386/N/Pl/sale bidg dtd.24.07.07 has given part occupation for wing A&B whereas the charges paid in deposits slips is pertaining to sale bldg B-3 C wing Rehab Bldg No.2, Rehab Bldg B-4."
4. The learned CIT(A) partly allowed the appeal of the Assessee and deleted the disallowance on account of SRA charges to the tune of Rs. 37,85,366/-. However, the disallowance to the tune of Rs. 18,56,700/- was confirmed observing as under:
"5.1 During the appellate proceedings the appellant has challenged the same on two accounts; firstly that these charges were incurred as TDR was acquired and sold in the same financial year. As per appellant the total amount paid to SRA charges is not only deposit but also includes other charges like infrastructure charges, development charges interest etc. In any case the entire expenses are not capital expenditure as decided by the Assessing Officer. Consequently these charges were paid in order to get the TDR which otherwise was not available to the appellant but for the payments made to SRA. The appellant's plea is that they had received Rs. 77,50,080/- towards sale of TDR and hence SRA charges are debited to P&L Accounts as expenses. In support of the same a circular dated 25.11.1997 has been furnished.
3ITA. NO.4314/Mum/2011 Shri Rajendra Dattatray Sawant 5.2 I have gone through the same. There is no denial of the fact that appellant has sold TDR which has actually not accrued to him for the reason that it was obtained before completion of project. In normal course, as per SRA provisions TDR is given only on completion of project and handing over of same to SRA by them. It is a fact borne out of the circular dated 25.11.1997 that for claiming the TDR the entire amount of deposit of Rs. 20,000/- per rehabilitation tenement will become payable at the stage of claiming such TDR. The appellant has sold TDR by way of advance trading on 24.07.2006 which he acquired by Development Right Certificate No. SRA/619/Rehab, bearing Folio No.TDR/SRP/ES/M-13/Phase-I dated 20.07.2006. The circular very clearly says that it will be the deposit of Rs. 20,000/- per rehabilitation tenement will be payable for obtaining the TDR. Since the amount is in the nature of deposit which is a capital expenditure for the business of appellant as he is getting extra FSI in lieu of that in form of TDR. Under SRA Scheme the developer is entitled for the area for sale which is equal to the area given free of charge to the tenants. Obviously this TDR is over and above the sale consideration of free component of the building. The sale consideration is Rs. 77,50,080/-. Against this appellant has debited SRA charges of Rs. 56,42,066/-/- which includes maintenance deposits of Rs. 7,36,700/- and maintenance deposits of Rs. 11,20,000/-. Besides this all other expenses of Rs. 37,85,366/- are in the nature of interest on development charges, interest and infrastructural charges etc. The appellant has tried to link sale of TDR with deposit as its corresponding expenditure which is not the case at all under the SRA Scheme. Thus the amount paid for getting this TDR being deposited remain capital expenditure and hence cannot be claimed as revenue expenditure against TDR sale. In view of this the SRA charges in the nature of maintenance deposits of Rs. 7,36,700/- and Rs. 11,20,000/- totaling to Rs.18,56,700/- are to be disallowed and hence this addition of Rs. 18,56,700/- is confirmed. Coming to balance charges of Rs. 37,85,366/- expenses debited under SRA charges i.e. Rs. 37,85,366/-. It is seen that in the instant assessment year appellant has sold flats, shops, parking area, meter and others also during the year and against the same expenses incurred by way of various SRA charges which are revenue in nature amounting to Rs. 37,85,366/- are allowable and hence allowed. Accordingly ground No. 1 is partly allowed."
5. The Ld. D.R. before us has submitted that the entire SRA amount of Rs. 56,42,066/- was in the nature of capital expenditure and as such the Ld. CIT(A) wrongly deleted the disallowance of Rs. 37,85,366/- out of the said amount treating the same as revenue expenses.
It can be observed that the Ld. CIT(A) after proper application of mind has bifurcated the SRA expenses into two categories i.e. one which are in the nature of capital expenses and the other which are in the nature of revenue expenses. He has treated the deposits i.e. Maintenance deposit of Rs. 7,36,700/- and Maintenance Deposit of Rs. 1,12,000/- as capital expenses, however rest of the expenses have been treated as revenue expenses being incurred on account of development charges, interest on development charges and infrastructure charges being incurred 4 ITA. NO.4314/Mum/2011 Shri Rajendra Dattatray Sawant by the assesee for getting the income of Rs. 77,50,080/- towards the sale of TDR. We do not find any infirmity relating to the finding of the Ld. CIT(A) which has been made after proper application of mind as the disallowance has been deleted by him after properly bifurcating the expenses between the two categories i.e. capital expenses and revenue expenses. The finding of the Ld. CIT(A) on this issue is hereby affirmed.
6. The second issue is relating to deletion of disallowance of Rs. 3,50,370/- out of total disallowance of Rs. 6,38,756/- made by the AO on account of expenses on building materials.
7. The Ld. CIT(A) has made the above said deletion after proper appreciation of the evidence on the file. It is pertinent to mention here that during the appellant proceeding, the appellant had furnished certain evidence in the shape of bills and other details, which infact were not produced before the A.O. at the time of assessment proceedings. The CIT(A) called for remand report from the A.O. in this respect. The A.O. submitted his remand report vide letter dated 10.02.11, the relevant part of the same is reproduced as under:-
"Your Honour vide captioned letter has directed to submit a remand report in the above mentioned case.
Accordingly, the assesee was provided with an opportunity vide this office letter dated 07.01.2011 to explain with supporting relating to the addition made of Rs. 6,38,750/-. Mr. Abhay Kumar, CA along with Shri D N Sawant, father of assesee attended. They were asked to file confirmation of payments made to the parties. In response to the same, the representative of the assesee vide letter dated 07.02.11 filed details in Tapal in respect of following amounts:-
i) Mahavir Enterprises Purchase stated to be Rs. 9123/- and shown as outstanding as on 31.03.2007. Confirmation of the assesee and copies of purchase bills produced
ii) Yesha Associate Purchase stated to be Rs. 133130/- and shown as outstanding as on 31.03.2007. Confirmation of the assesee and copies of purchase bills produced
iii) R Sanghavi & Co. Purchases shown at Rs. 2,55,065/- and payment has been made through cheque. Outstanding is Nil in this case
iv) Ruchi Ceramics Purchase Rs. 2464/- payment made in cash.
v) Lucky Steels Traders Purchase Rs. 3620/- and payment made through cheque
vi) Metro Enterprises Purchase Rs. 7231/- and payment made in cash 5 ITA. NO.4314/Mum/2011 Shri Rajendra Dattatray Sawant In respect of Rs. 191652/- being amounts paid to various parties as listed in Page No. 23 to 26 of additional evidences forwarded along with remand report, copies of bills and details of payments made were not furnished and hence the same could not be verified.
Further, the assesee has also not furnished any details in respect of amount of Rs. 36465/- being payments made to others as per assessment order (Page 4). Submitted."
8. The appellant also furnished his written explanation in response to the said remand report. After considering the remand report as well as written reply filed by the appellant, the Ld. CIT(A) sustained the disallowance of Rs. 2,28,117/- out of the total disallowance of Rs. 6,38,750/- made by the A.O. observing as under:
"6.4 In view of this it is seen that Assessing Officer has verified and found purchases from Mahavir Enterprises, Yesha Associate, R.Sanghavi & Co and Lucky Steels Traders genuine. Then purchases made from Ruchi Ceramics and Metro Enterprises which are incurred in cash and for nominal amount of Rs. 2464/- and Rs. 7231/- respectively have been stated to be satisfactory. However in respect of other parties listed in the paper book filed by the appellant by way of additional evidences to whom total amount of Rs. 1,91,652/- for purchase of stores has been claimed to be paid, could not be verified in the absence of any bills or details of payments given. In view of this the amount of Rs. 1,91,652/- has not been taken as genuine by the Assessing Officer. Likewise another amount of Rs. 36,465/- debited as 'Others' has also not been supported by any details filed by the appellant during the remand proceedings. Thus Assessing Officer has vouched for Rs. 6,38,750/- the amount debited under the head "building Materials expenses' Rs. 1,91,652/- reflected as stores and Rs. 36,465/- reflected as 'Others' totaling to Rs. 2,28,117/- could not be found genuine.
6.5 The appellant in his reply stated that even these payments have been made by banking channels and in support of the same detailed ledger account along with bills have been furnished consequent to remand proceedings. I have gone through them and it is seen that the appellant's project has been completed in last year itself. It is also obvious from the fact that there are no closing stock reflected in the P&L Account. It is also a fact that majority of occupants of the building have taken possession and started occupying the place. In view of this the appellant's submission that still expenses by way of building material purchases and labour are being incurred was not entertained by the Assessing Officer during assessment proceedings though appellant has submitted that even after completion of the project there are job like aspalting coloring, storm drainage construction etc. which are done and hence these expenses were incurred.
6.6. I have gone through the bills and ledger account furnished consequent to remand proceedings and it is noticed that majority of purchases for stores and others have been made after the date of Occupation Certificate i.e. 24.07.2007. Then these expenses have been incurred in cash as well as cheque. From the bills it is seen that they all are not delivered to the project site of Rajendra Enterprises, Proprietary concern of the appellant for example Bill No. 986 of Ruchi Ceramic Centre shows the address as 'Sawanth Saheb'. In view of this it cannot be said 6 ITA. NO.4314/Mum/2011 Shri Rajendra Dattatray Sawant that they have been incurred for the purpose of project only and hence purchases made reflected as for stores as well as others amounting to Rs. 2,28,117/- is sustained out of disallowance of building material purchase claimed at Rs. 6,38,75/-".
9. It may be observed that the Ld. CIT(A) separately dealt with each type of expenses in view of the evidence and explanation furnished before him by the appellant and also taking into consideration the remand report of the Assessing Officer. There were certain expenses incurred by the Assessee, even after completion of the project which were claimed by the Assessee. The disallowance pertaining to the expenses which were supported with bills etc. has rightly been deleted by the Ld. CIT(A) whereas the disallowance of expenses which were not supported with proper bills have rightly been sustained by the Ld. CIT(A). The finding of the Ld. CIT(A) on this issue is hereby upheld.
10. The next ground is relating to the disallowance of maintenance, telephone, vehicle etc. The Ld. CIT(A) sustained the disallowance of Rs. 46,088/- out of total disallowance of Rs. 1,25,840/- made by the A.O. observing as under:-
"7. Ground No.3 is against disallowance of Rs. 1,25,840/- out of repairs and maintenance, telephone expenses, vehicle expenses and depreciation. For the same appellant has furnished the bifurcation of expenses incurred in cash and by cheque same is as under:
SN Expenses head Amt. paid Amt. paid by Total expenses through cheque/credit cash card 1 Vehicle Expenses 2,1204.00 1,05,53.54 1,26,734.54 2 Telephone expenses - 65,574.00 65,574.00 3 Repairs and Maintenance 9,890.00 95,623.00 1,05,513.00 7.1 It is seen that vehicle expenses and repairs and maintenance for Rs.
21,204/- and 9,890/- respectively have been incurred in cash totaling to Rs. 31,095/-. 20% of disallowance comes to Rs. 11,868/- and is sustained. Then for the expenses under the head vehicle and telephone for Rs. 105,530/- and Rs. 65,574/- incurred by cheque, the possibility of personal element cannot be ruled out and hence 20% of disallowance made out of the same at Rs. 34,220/- are sustained. Accordingly the total disallowance to the tune of Rs. 34,220/- + Rs. 11,868/- totaling to Rs. 46,088/- are sustained against the addition made under the head for Rs. 1,25,840/-. Ground No.3 is partly allowed."
11. We may observe that though the Ld. CIT(A) has held that the disallowance of 20% made by A.O. was right and also sustained the said addition made by the A.O. towards Vehicle expenses as well as telephone expenses, however 7 ITA. NO.4314/Mum/2011 Shri Rajendra Dattatray Sawant he has deleting the disallowance made by the A.O. under the head 'Repair and Maintenance'. The revenue has not contested the deletion of the disallowance under the head 'Repair & Maintenance' rather as per Ground No.4 the revenue has appealed against the deletion of 20% depreciation on motor car expenses which in fact has not been deleted by the CIT(A), rather has been sustained. Hence Ground No.4 does not survive and as such no finding is required to be given on this ground.
12. In the result, the appeal of the revenue is hereby dismissed.
Order pronounced in the open court on this 30th day of April 2013.
Sd/- Sd/-
(B. RAMAKOTAIAH) (SANJAY GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai : Date : 30th April, 2013
SK
Copy to:
1. The Appellant.
2. The Respondent.
3. The DCIT (A), Concerned.
4. The CIT concerned.
5. The DR "MUMBAI", Bench, ITAT, MUMBAI.
6. Guard File.
// True Copy//
By Order
Assistant Registrar
ITAT, Mumbai Benches, Mumbai