Income Tax Appellate Tribunal - Delhi
M/S. Ansal Properties & Infrastructure ... vs Dcit, New Delhi on 13 March, 2018
1 ITA NO. 2005/Del/2013
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'A' NEW DELHI
BEFORE SHRI G. D. AGRAWAL, PRESIDENT
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
ITA No. 2005/DEL/2013 ( A.Y 2009-10)
Ansal Properties & Infrastructure Vs DCIT
Ltd. 115-Ansal Bhawan, Central Circle-20
16-K. G. Karg New Delhi
New Delhi (RESPONDENT)
AAACA0006D
(APPELLANT)
Appellant by SH. Satyen Sethi, Adv, Arta
Tarana Panda, Adv & Gargi
Sethia, Adv
Respondent by Smt. Aparna Karan, CIT(DR)
Date of Hearing 05.02.2018
Date of Pronouncement 13.03.2018
ORDER
PER SUCHITRA KAMBLE This appeal has been filed by the assessee against the order dated 05/02/2013 passed by CIT(A)-XXXI, New Delhi.
2. The grounds of appeal are as under:-
1.1 "That on the facts and in the circumstances of the case, the learned CIT(A) has erred in law in confirming the addition of notional Annual Letting Value of Rs.5,19,11,202/- on closing stock of flats / spaces by following the Hon'ble Delhi High Court's decision in which various relevant facts were not brought out before their lordships and not considered by them.2 ITA NO. 2005/Del/2013
1.2 That without prejudice to the Ground No. 1.1 above, the appellant has filed an appeal before the Apex Court which has been admitted and is pending for decision.
2. That without prejudice to the foregoing ground, the decision rendered by the Hon'ble Delhi High Court related to the assessment year 1988-89 and rendered in the context of the provisions of section 23 as it existed prior to substitution by the Finance Act, 2001 w.e.f. 1.4.2002. The learned CIT(A) failed to consider the issue in the light of the amended provisions as applicable to the year under appeal which were substantially different. The issue should have been reconsidered and decided in the light of the amended provisions.
3. on the law, facts and in the circumstances of the case, the learned 2 IT A) has erred in sustaining the disallowance of Rs.4,68,000/- being I of Advance Rent/Lease Money which was for a period of 18.5 years in respect of land for Wind Power Project in Gujrat on the erroneous ground that the said expenditure was of a capital nature. The payment being in the nature of payment of advance rent was allowable for the year under assessment on proportionate basis.
Additional Grounds of appeal "That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) may kindly be directed to decide the undecided Ground Nos. 1.3 to 1.34 of the appeal filed before him regarding the determination of quantum of ALV of the properties."
3. The Assessee company e-filed return of income on 30.09.2009 showing income at Rs.39,04,29,465/- from business and profession. Subsequently, 3 ITA NO. 2005/Del/2013 return of income was revised on 31.03.2011 showing revised return of income at Rs.40,1981,401/-. The return was revised to enable the assessee company to claim expenses pertaining to the financial year under consideration, which were shown as prior period expenses in the balance sheet for the year ending 31.03.2010. The return of income was processed u/s 143(1) of the Income Tax Act, 1961. Notice u/s. 143(2) of the Act was issued on 27.08.2010 fixing the case for hearing on 14.09.2010. A detailed questionnaire alongwith notices u/s 143(2) and 142(1) of the Act was issued on 12.010.2011 fixing the case for hearing on 24.10.2011. In response to the notice the Authorized Representatives appeared before the Assessing Officer and filed necessary details. The Assessing Officer observed that the assessee has claimed 60% depreciation of UPS, Printers etc. by putting these items under the head "computer". The Assessing Officer disallowed the excess depreciation amounting to Rs.3,87,138/-. Further as relates to income from house property, the Assessing Officer made addition of Rs.5,19,11,202/- to the income of the assessee under Section 22 of the Income Tax Act, 1961 in respect of Annual Letting Value (ALV) in respect of vacant commercial/self-occupied assets. In respect of disallowance of expenses on completed projects, the Assessing Officer made addition of Rs.10,68,61,285/- and addition of Rs.4,68,000/- in respect of amortised cost of land in respect of wind power project wherein observed that it cannot be denied that this lease is for enduring period and it is a capital expenditure.
4. Being aggrieved by the Assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
5. The Ld. AR submits that as relates to ground in respect of addition of notional annual letting value-Rs.5,19,11,202/-, as far as, legal position is cornered, the issue is covered against the assessee by judgment of Delhi High court in assessee's own case in CIT vs. Ansal Housing Finance & Leasing Co. Ld. 92013) 354 ITR 180. The Ld. AR further submits that before the CIT(A), the 4 ITA NO. 2005/Del/2013 assessee besides raising legal issue (grounds 1.1 & 1.2) that notional ALV of flats/space lying unsold stock cannot be assessed as income from house property had also raised alternate ground (ground 1.3 to 1.34) that rates adopted to assessee ALV of the respective flats/space was arbitrary and excessive. The CIT(A) based on judgment of Hon'ble Delhi High Court in Ansal Housing Finance and Leasing Co. Ltd. (supra) sustained the addition. However, the alternate grounds were not adjudicated upon. In the assessment years 2007-08 and 2008-09, this Tribunal has set aside the identical issue to the CIT(A) [para 31-34, page 30 & 31 of ITAT order dated 17.08.2017 in ITA No. 5784/Del/2010 & 5310/Del/2012]. The only difference is that the appeals for the Assessment years 2007-08 and 2008-09 were disposed of by the CIT(A) prior to judgment in Ansal Housing Finance & Leasing Co. Ltd (supra). As such, based on the legal submissions, the additions were deleted. For the assessment year in question i.e. 2009-10, the CIT(A) disposed of the appeal subsequent to the judgment, hence, applying the legal principles, the addition was sustained. The assessee has raised "additional ground" to the effect that the CIT(A) may be directed to decide the alternate ground i.e. ground No. 1.3 to 1.34 raised in Form 35. Additional Ground raised is neither unreasonable nor lacking bonafide. Therefore, the Ld. AR prayed that necessary directions may be issued to the CIT(A) to decide the alternate grounds i.e. ground No. 1.3 to 1.34 raised in raised in Form 35.
6. As relates to the issue of disallowance of Rs.4,68,000/- being 1/20th of advance rent/lease money as capital expense for land for Wind Power Project, the Ld. AR submits that the CIT(A) upheld the disallowance following the order for the Assessment Year 2008-09. In the Assessment Year 2008-09, this Hon'ble Tribunal has allowed the assessee's appeal (Para 46.1 to 46.4, page 45- 47 of ITAT order dated 17.08.2017 in ITA No. 5310/Del/2012].
"35. In view of the judgment of the Hon'ble High Court of Delhi in Ansal Housing & Finance & Leasing Co. Ltd. (supra), the appeal of the Revenue in 5 ITA NO. 2005/Del/2013 respect of addition of ALV is allowed, however, it would not be fair not to allow the Appellant an opportunity to show that the rates adopted to assess the ALV were excessive. Accordingly, while admitting the additional ground raised by the Appellant, we deem it proper to direct the Ld. CIT(Appeals) to look into the aspects raised in Ground Nos. 6.3 to 6.36 before him in form 35. The grounds raised by the Revenue and the additional ground raised by the Appellant is disposed off accordingly."
7. The Ld. DR relied upon the order of the Assessing Officer and the order of the CIT(A).
8. We have heard both the parties and perused the material available on records. The CIT(A) has taken into consideration decision of the Hon'ble High Court of Delhi in case of CIT Vs. Ansal Housing Finance & Leasing Co. Ltd. 354 ITR 180 regarding addition of notional Annual Letting Value of Rs.5,19,11,202/- on closing stock of flats / spaces. The Hon'ble High Court held as under:
"13. In the present case, the assessee is engaged in building activities. It argues that flats are held as part of its inventory of stock in trade, and are not let out. The further argument is that unlike in the other instances, where such builders let out flats, here there is no letting out and that deemed income - which is the basis for assessment under the ALV method, should not be attributed. This Court is of the opinion that the argument, though attractive, cannot be accepted. As repeatedly held, in East India, Sultan, and Karanpura, the levy of income tax in the case of one holding house property is premised not on whether the assessee carries on business, as landlord, but on the ownership. The incidence of charge is because of the fact of ownership. Undoubtedly, the decision in Vikram Cotton indicates that in every case, the Court has to discern the intention of the assessee; in this case the intention of the assesse was to hold the properties till they were sold. The capacity of being an owner was not diminished one whit, because the assessee carried on business of developing, building and selling flats in housing estates. The argument that income tax is levied not on the actual receipt (which never arose in this case) but on a notional basis, i.e. ALV and that it is therefore not sanctioned by law, in the opinion of the Court is meritless. ALV is a method to arrive at a figure on the basis of which the impost is to be effectuated.6 ITA NO. 2005/Del/2013
The existence of an artificial method itself would not mean that levy is impermissible. Parliament has resorted to several other presumptive methods, for the purpose of calculation of income and collection of tax. Furthermore, application of ALV to determine the tax is regardless of whether actual income is received; it is premised on what constitutes a reasonable letting value, if the property were to be leased out in the marketplace. If the assessee's contention were to be accepted, the levy of income tax on unoccupied houses and flats would be impermissible - which is clearly not the case.
14. As far as the alternative argument that the assessee itself is occupier, because it holds the property till it is sold, is concerned, the Court does not find any merit in this submission. While there can be no quarrel with the proposition that "occupation" can be synonymous with physical possession, in law, when Parliament intended a property occupied by one who is carrying on business, to be exempted from the levy of income tax was that such property should be used for the purpose of business. The intention of the lawmakers, in other words, was that occupation of one's own property, in the course of business, and for the purpose of business, i.e. an active use of the property, (instead of mere passive possession) qualifies as "own" occupation for business purpose. This contention is, therefore, rejected. Thus, this question is answered in favour of the revenue, and against the assessee."
Thus, as on today the issue is decided against the assessee and in favour of the Revenue. Therefore, Ground No. 1.1, 1.2 and 2 of the assessee's appeal is dismissed.
9. As relates to Ground No. 3, this issue has been decided by the Tribunal in assessee's own case (M/s. Ansal Properties and Infrastructure Ltd. Vs ACIT ITA Nos. 5784 & 5663/DEL/2010 and ITA No. 5310 & 5345/DEL/2012 dated 17.08.2017). The Tribunal held as under:
"46.3 We find that the Assessing Officer made disallowance of Rs.2,46,411/- being 1/20th of advance rent/lease money in respect of the lease which was for a period of 18.5 years in respect of land for Wing Power Project in Gujarat. The same has been upheld by the ld. CIT(Appeals). The contention of the assessee remained that since this land was for a limited period of lease and no separate rent was being paid, the lump sum payment made was amortized in the accounts over the period of lease and was allowable as a Revenue expenditure. The Assessing Officer 7 ITA NO. 2005/Del/2013 did not agree and held that since the lease was for enduring period, it was an expenditure of capital nature and made the disallowance. The Hon'ble Gujarat High Court in the case of DCIT Vs. Sun Pharmaceuticals Inds. Ltd. (Supra) held as under:
"I find that Hon'ble High Court of Gujarat has allowed one time premium of Rs. 48.02 lacs paid in respect of land taken on lease from Gujarat Industrial Development Corporation as Revenue expenditure even though the said company was paying Rs.40 per annum as annual rent. The Assessing Officer has treated the amount paid by the assessee as paid towards acquiring a benefit of enduring nature. The same cannot be sustained due to the ratio of the judgment of Hon'ble High Court of Gujarat, which also relates to a land taken on lease. The land was taken on 99 years lease in the said case of Sun Pharmaceuticals Ltd. (supra), whereas in the assessee's case, the lease period is only 20 years. Further, the assessee is only claiming 1/20th of the amount, as Revenue expenditure every year. The said decision of Hon'ble Gujarat High Court has been rendered taking into consideration the decision of Hon'ble Supreme Court in the case of CIT vs. Madras Auto Service Pvt. Ltd. (1998) 233 ITR 468 (SC). Considering these factors, the disallowance of Rs.6,19,199/- is hereby deleted."
46.4 Respectfully following the ratio of the above cited decision, we hold that the authorities below were not justified in making and upholding the disallowance in question being capital in nature, hence it is directed to be deleted. The ground No. 1 is accordingly allowed."
Thus, the Tribunal while deciding this issue in favour of the assessee observed that the authority's below were not justified in making and upholding the disallowance in question being capital in nature. Hence, this ground of assessee is allowed.
10. As regards additional ground, which is an alternative ground, the Ld. AR submitted that Ground No. 1.3 to 1.34 were not adjudicated by the CIT (A). In submission before us, the Ld. AR submitted that in identical issues for Assessment Years 2007-08 and 2008-09 the Tribunal has set aside this issue to the CIT (A). After going through the order of the CIT(A) it can be seen that the CIT(A) has not at all adjudicated on the factual grounds that of Ground No. 8 ITA NO. 2005/Del/2013 1.3 to 1.34 set out in Form 35 raised before him. Therefore, in the interest of justice, the order of the CIT(A) regarding determination of quantum of ALV of properties is set aside to the file of CIT(A) for deciding afresh in light of the decision of the Tribunal for A.Y 2007-08 & 2008-09.
11. In result, appeal of the Assessee is partly allowed.
Order pronounced in the Open Court on 13th March, 2018.
Sd/- Sd/-
(G. D. AGRAWAL) (SUCHITRA KAMBLE)
PRESIDENT JUDICIAL MEMBER
Dated: 13/03/2018
R. Naheed *
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
Date
1. Draft dictated on 06/02/2018 PS
2. Draft placed before author 06/02/2018 PS
3. Draft proposed & placed before .2018 JM/AM
the second member
9 ITA NO. 2005/Del/2013
4. Draft discussed/approved by JM/AM
Second Member.
5. Approved Draft comes to the PS/PS
Sr.PS/PS 13.03.2018
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk 13.03.2018 PS
8. Date on which file goes to the AR
9. Date on which file goes to the
Head Clerk.
10. Date of dispatch of Order.