Income Tax Appellate Tribunal - Delhi
M/S. Shourya Towers Pvt. Ltd., New Delhi vs Dcit, New Delhi on 29 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'G' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, HON'BLE PRESIDENT
&
SHRI K.N. CHARRY, JUDICIAL MEMBER
ITA No. 1827/Del/2017
(Assessment Year: -2012-13)
Shourya Towers Pvt. Ltd. vs DCIT
C/o M/s RRA Taxindia, Circle 23(1)
D-28, South Extension Part-1, New Delhi.
New Delhi.
AAHCS9332F
Assessee by Sh. Ashwani Taneja, Adv.
Sh. Shantanu Jain, Adv.
Revenue by Sh. S.S. Rama, CIT DR
Date of Hearing 23.08.2017
Date of Pronouncement 29.08.2017
ORDER
PER SHRI K.N. CHARY, J.M.
This is an appeal by the assessee challenging the order dated 23.02.2017 in appeal no. 295/15-16/IT/DEL/2016-17 passed by the Ld. Commissioner of Income Tax (Appeals)-14, New Delhi (for short hereinafter called as the 'Ld. CIT (A)').
2. Briefly stated facts relating for the purpose of this appeal are that according to the assessee there were two partners in the 2 ITA No. 1827/Del/2017 company i.e. one Anil Jain and one K.N. Shukla. They were developing a project at Amritsar on which about 70 crores were spent till March, 2007. However, there arose certain business dispute resulting in some arbitration proceedings and consequent settlement resulting in division of the assets of the company by way of settlement deed dated 26.04.2007, under which the Amritsar project had fallen to the share of Mr. K.N. Shukla. Assessee's contention has been that since Mr. K.N. Shukla used the clauses of the settlement deed to his advantage, in a dispute the Amritsar Court passed an order dated 11.02.2009 and when the matter was carried to the Punjab & Haryana High Court, by order 14.07.2011 the Hon'ble High Court decided the matter against the assessee. In the circumstances, according to the assessee they had written off Rs. 64,72,52,645/- as cost/expenses incurred on such project under the head "other expenses (administrative expenses) as loss on Amritsar project", in the books of Shourya Towers (P) Ltd by treating the same as bad debt as well as loss arising out of an abundant project. The assessee filed the return of income for the AY 2012-13 on 30.09 2012 and declared the total loss of Rs. 17,30,06,103/-. However, during the 3 ITA No. 1827/Del/2017 143(3) proceedings under the Income Tax Act, 1961, the Assessing Officer opined that the loss of Amritsar Project booked for the AY 2012-13 does not belong to such assessment year and even otherwise such expenditure being compensatory in nature, amounts to capital expenditure. He, therefore, disallowed a sum of Rs. 66,72,52,645/- on that count. He further disallowed a sum of Rs. 2,84,430/- by invoking the provisions u/s 14A of the Act read with 8D of the Income Tax Rules, 1962.
3. Assessee challenged these two additions before the Ld. CIT(A) and the Ld. CIT (A) by way of impugned order rejecting the contention of the assessee and dismissed the appeal, while confirming the additions.
4. The assessee is, therefore, before us in this appeal on the following grounds:
1. "That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment order and that too without assuming jurisdiction as per law, more so in terms of Section 143(2).
2. That having regard to the facts and circumstances of the case, the Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in making aggregate disallowance of Rs. 64,72,52,645/- on account of expenses shown under the head "other expenses (Administrative Expenses) as loss on Amritsar project written off"
and that too by recording incorrect facts and findings and in violation of principles of nature justice.4 ITA No. 1827/Del/2017
3. That in any case and in any view of the matter, action of Ld. CIT (A) in confirming the action of Ld. AO in making aggregate disallowance of Rs. 64,72,52,645/- on account of expenses shown under the head "other expenses (Administrative Expenses) as loss on Amritsar project written off" is bad in law and against the facts and circumstances of the case.
4. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld.AO in making disallowance of Rs. 2,84,430/- u/s 14A r.w.r. 8D, more so when there is no exempt income.
5. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B, 234C and 234D of Income Tax Act, 1961.
6. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other."
5. Grounds one and six are general in nature and ground no. 5 relates to interest which is consequential in nature.
6. In so far as grounds no. 2 & 3 are concerned, it relates to the disallowance of "other expenses (administrative expenses) as loss on Amritsar Project" written off in the books by the assessee for the AY 2012-13. It is the argument of the Ld. AR that though the settlement was reached between the parties on 26.04.2007 by way of settlement deed pursuant to the arbitration, still the disputes continue necessitating the order dated 11.02.2009 by the Additional District Court, Amritsar and order dated 14.07.2011 by the Hon'ble Punjab & Haryana High Court in civil revision no. 3081/2009, and finally a compromise before the Additional 5 ITA No. 1827/Del/2017 District Court on 17.8.2012 as such, the assessee concluded that the cost/expenses incurred on the Amritsar project have become irrecoverable only during the AY 2012-13, and they written them off in their books of account in that that year only. Basing on this he submits that the loss was crystallized only in the AY 2012-13, as such, the same had to be allowed as expenditure. Further he submits that in a real estate project the stock-in-trade is the immovable property, as such, the profit or loss which is otherwise capital in nature would be Revenue in this peculiar business.
7. Per contra, it is the argument of the Ld. DR that the rights and liabilities of the parties were crystallized in the settlement deed dated 26.04.2007 relevant for the AY 2008-09 and nothing new affecting or impacting these rights or liabilities happened subsequently. Even if we take the order of the Hon'ble High Court as the date for crystallization of these rights and liabilities it was by way of order dated 14.07.2009 in civil revision no. 3081/2009 everything was settled, as such, by no stretch of imagination could it be pleaded by the assessee that merely because the certified copy of the High Court order was obtained at a later point of time, 6 ITA No. 1827/Del/2017 the cause of action for writing off of the loss arises. He submitted that the subsequent settlement pleaded by the assessee on 17.08.2012 has nothing to do with the Amritsar property, but it relates to the implementation of the earlier settlement in respect of Jalandhar property and it clearly shows that it was made in respect of the payment of compensation made by the land acquisition collector. According to the Ld. DR the expenditure of Rs. 64,72,52,645/- claimed by the assessee does not relate to the AY 2012-13, even otherwise, he pleads that the expenditure was capital in nature and cannot be allowed as deduction.
8. We have carefully gone through the record. By way of settlement deed dated 26.04.2007 pursuant to the arbitration proceedings, the parties reached some terms of understanding as to the division of the property between Mr. Anil Jain and Mr. K.N. Shukla. Subsequent litigation on this aspect at the instance of the assessee was put to rest by the Hon'ble Punjab & Haryana High Court in civil revision no. 308/2009 by way of order dated 14.07.2009. As a matter of fact, the order of the Hon'ble High Court only confirmed the state of affairs evidenced by the 7 ITA No. 1827/Del/2017 settlement deed dated 26.04.2007 and it does not appear from the record that anything new that had happened either by way of voluntary agreement between parties or by any Court of competent jurisdiction impacting or altering the rights, liabilities or disabilities of the parties crystallized under the settlement deed dated 26.04.2007. Even the alleged compromise on 17.08.2012 reached by the parties before the District Judge, Jalandhar by way of compromise deed dated 20.07.2012 only relies on the settlement deed dated 26.04.2007 and deals with the implementation of such deed in respect of the payment of compensation by the land acquisition collector to the assessee. In no way this compromise altered, superseded or impacted in any way the earlier settlement deed nor affected any rights or liabilities crystallized under the settlement deed dated 26.04.2007. Even if we go by the plea of the assessee in respect of High Court litigation, at the latest finality was attained by 14.07.2009 with the order of the Hon'ble High Court and nothing more was required for the assessee to treat the expenditure or loss as bad debt to be written off after such date. We can, therefore, safely conclude that subsequent to the AY 2010-11 nothing new happened giving rise to a cause of action in 8 ITA No. 1827/Del/2017 favour of the assessee to write off the so called cost/expenditure/ loss treating it as bad debt. We, therefore, have no hesitation to hold that the Assessing Officer is perfectly justified in reaching the conclusion that the amount of Rs. 64,72,52,645/- written off under the head "other expenses (administrative expenses) as loss of Amritsar project" written off was disallowable as the same does not relate to the AY 2012-13.
9. In view of this conclusion, we deem it not necessary to deal with the nature of expenditure. On this premise, we confirm the orders of the authorities below and also the addition.
10. Now coming to the addition of Rs. 2,84,430/- by invoking the provisions u/s 14A read with Rule 8D of the Rules, the contention of the assessee is that during the relevant assessment year there was no exempt income, as such, no addition could be made by invoking Section 14A of the Act. Reliance is based on the decision reported in CIT vs. Holcim India Pvt. Ltd. 90 CCH 81 (Del) (HC), wherein it was held that Section 14A cannot be invoked when no exempt income was earned. On this aspect it is not the case of Revenue that the assessee earned any exempt income. We, 9 ITA No. 1827/Del/2017 therefore, while respectfully following the decision in CIT vs. Holcim India P. Limited (supra) direct the AO to delete the addition of Rs. 2,84,430/- on account of invocation of Section 14A of the Act read with Rule 8D of the Rules.
11. In the result, the appeal of the assessee is allowed in part.
Order pronounced in the open court on 29.08.2017 Sd/- Sd/-
(G.D. AGRAWAL) (K.N. CHARY)
PRESIDENT JUDICIAL MEMBER
Dated: 29.08.2017
*Kavita Arora
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
TRUE COPY
ASSISTANT REGISTRAR
ITAT NEW DELHI
Draft dictated on 24.08.2017
Draft placed before author 25.08.2017
Draft proposed & placed before the
second member
Draft discussed/approved by Second 29.8.17
Member.
Approved Draft comes to the Sr.PS/PS 29.8.17 Kept for pronouncement on 29.8.17 File sent to the Bench Clerk 30.8.17 Date on which file goes to the AR Date on which file goes to the Head Clerk.
Date of dispatch of Order.