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The Assistant Commissioner of Income Tax, Circle XV, Chennai Versus M/s. Vishranthi Realty Services

2016 (4) TMI 457 - ITAT CHENNAI

Addition of assignment fee from HTMT Global Solutions P. Ltd - CIT(A) deleted the addition based on fresh evidence filed by the assessee wereas the Assessing Officer was denied opportunity under Rule 46A - Held that:-The ld. Commissioner of Income Tax (Appeals) has summarized and relied on the submissions of the assessee filed by letter dated 10.10.2008 which are entirely on new dimension and assessment order does not speak on this issue. The pre-conditions and probabilities of entering into agr .....

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nt in which amount has been transferred and drew attention to the permit from CPWD dated 01.08.2008 at page no.60 and also drew attention to the income tax return of the assessee firm for the assessment year 2009-2010 were the assignment income was offered. These are the new set of facts which the assessee for the first time brought on record. So, considering apparent facts and circumstances and the agreements and material evidence and also the provisions of Rule 46(A) of the Income Tax Rules we .....

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prior to the date of invoice. Further the first meter reading was taken on commissioning on WTG by the territorial field officer on 13.10.2007 explaining the generated units for export and import. The ld. Commissioner of Income Tax (Appeals) has allowed 100% depreciation based on written submissions followed by the evidence supporting the installations and there is no dispute on ownership of units. The assessee submitted commissioning certificate issued by TNEB bills raised by TNEB and installat .....

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se to examine whether the WTG has been put to use for more than 180 days and adequate opportunity of being heard be provided to assessee before passing the order on merits. - Decided in favour pf revenue for statistical purposes. - I.T.A. No.1441/Mds/2012 - Dated:- 4-3-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Appellant : Shri. Suneel Verma, IRS, CIT For The Respondent : Shri. R. Vijayaraghavan, Advocate ORDER PER G. PAVAN KUMAR, JUDICIAL MEM .....

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ee wereas the Assessing Officer was denied opportunity under Rule 46A and was submitted for the first time in appellate proceedings. (ii) The Commissioner of Income Tax (Appeals) erred in directing the Assessing Officer to allow deprecation @100% on Wind Turbine Generators (WTG) as against 50% relying on the evidence filed by the assessee and Assessing Officer was denied opportunity to verify and examine the evidence. 3. The Brief facts of the case, the assessee is a registered partnership firm .....

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sions and the ld. Assessing Officer completed assessment. The assessee is providing project management consultancy services and as per tax audit report u/s.44AB of the Act the assessee is following mercantile system of accounting. The main source of income being assignment fee received from three parties on assigning of its share in the IT Park were assessee firm has entered into builders agreement on 14.04.2006 for two floors in the IT Park with the builder M/s. Vishranthi Homes Private Ltd (VH .....

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o of 35:65 whereas the assessee firm has entered an agreement to share built-up area of the developer (VHPL) on 14.06.2006 for a consideration of A19.3 crores. The assessee as a assignor entered into nomination/assignment agreement with four parties on 23.08.2007 and 29.10.2007. The assignee is entitled for a area as per the schedule of the agreement on payment of consideration agreed with assessee firm. The ld. Assessing Officer on perusal of the profit and loss account found that assessee has .....

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ishranthi Homes Private Limited and HTMT Global Solutions P. Ltd and as per escrow agreement, money advanced by the HTMT Global was credited to escrow account and not utilized by the assessee firm as the amount advanced by the fourth assignee is materialized upon the terms of escrow agreement and if escrow agreement is cancelled, the transactions entered would cease to take effect unless terms are complied before said date. The main issue being the assessee firm has not offered the assignment fe .....

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ded by the assessee due to some uncertainty of completion of the project determined. But the Assessing Officer considered vested right on transfer of A16.25 crores through RTGS deposited in the escrow account on 14.11.2007. The Assessing Officer called for the escrow account and found A7,40,88,005/- and A8,84,87,260/- was transferred to account no.CD1830 and the amount has been withdrawn by the assessee firm. The ld. Assessing Officer also examined the ledger accounts and found A8,84,84,260/- wa .....

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jurisdictional decision of High Court but the Assessing Officer had distinguished the decisions as they are not applicable in respect of construction business and concept of retention money is not applicable. With these observations, the Assessing Officer suspected that the firm has made a camouflaged arrangement to withdraw the money and utilized for personal gains of partners who are also Directors of VHPL Ltd. The Assessing Officer presumed arrangement as colorable device to avoid tax liabil .....

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which was objected by the ld. Authorised Representative as A7,40,88,005/- was transferred to VHPL Builders and A8,84,87,260/- was received by the firm on 4.12.2007 and the balance amount was received in the next year and explained the transfer of funds and transfer of rights. But the ld. Assessing Officer relied on the agreement entered with the fourth assignee on par with three assignees and taxed assignment fees from HTMT Global Solutions in the financial year 2007-08 A14,74,78,764/-. Aggrieve .....

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e being HTMT Global Solutions Private Limited was not recognized in the financial year 2007-08 and was offered in the next assessment year 2009-2010 as basic issue being transaction was subject to execution of Escrow tripartie agreement between three parties for allotment which does not give rise to income in the financial year 2007-08. The ld. Authorised Representative submitted detailed explanations by letter dated 10.10.2010 referred at para no.3 of page no.4 of Commissioner of Income Tax (Ap .....

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he bank, in case of any failure to get the project through (i.e. failure to obtain necessary approval), the buyer (i.e. HTMT Global Solutions P Ltd) can withdraw the amount from the bank (from the escrow account) straight away and the assessee has no right to stop it. The assessee also explained that these conditions were not insisted by the first mentioned three buyers and the amounts are directly received. Hence the first three assignments have become final and accordingly the said receipts fr .....

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nized as income during the financial year 2008-09 relevant to the AY 2009-10 and offered to tax accordingly. The assessee also explained that, as per the agreement with HTMT Global Solutions P Ltd, part. of the amount was to be received only after the assessee/VHPL obtaining the necessary approvals and accordingly a sum of ₹ 5.90 crores was received only on 29.08.2008 i.e. after obtaining the necessary approvals . The ld. Commissioner of Income Tax (Appeals) on perusal of ground and submis .....

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supported by the judicial decisions and accounting treatment and deeming provisions. The ld. Commissioner of Income Tax (Appeals) further observed from the evidence filed which shows that the agreement entered by the assessee firm with three assignee is different from fourth assignee (HTML) in respect of assignment rights in the commercial complex. The Assessing Officer found that assessee firm is following Mercantile system and advance received from 4th assignee should b offered to tax in the s .....

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project may or may not materialize and the l.d Authorised Representative explained that there are differences in terms and conditions entered with three assignees and the fourth assignee (HTML Global Solutions Pvt. Ltd) in respect of first three assignees assignment is full fledged and there is no preconditions and fee was offered to tax. Where in respect of fourth assignee, the agreement entered is totally conditional and is subject to assessee /builder obtaining necessary approvals for the pro .....

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rantee as per requisite stipulated conditions of the agreement. The ld. Authorised Representative submitted that the assessee firm has obtained necessary permissions from the concerned authorities on 01.08.2008. Based on this permissions, assignment rights crystallized in favour of HTML Global Solutions Pvt. Ltd and recognized as consideration in the financial year 2008-09 and subsequent to the obtaining of permission balance consideration was paid by HTML Global Solutions Pvt. Ltd on 29.08.2008 .....

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, the Revenue assailed an appeal before the Tribunal. 5. Before us, the ld. Departmental Representative argued vehemently on the findings of the Assessing Officer and who has dealt elaborately on the group concerns and assignment fees received and receivable and gave in depth analysis with accounting entries to substantiate such disputed income has to be taxed only in assessment year 2008-09 and found tax evasion system to skip the payment of taxes. The assessee and group concerns have utilized .....

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gh the fourth assignees has every right to withdraw the money. The Commissioner of Income Tax (Appeals) considered elaborate submissions referred in his order at page nos.5 to 11 based on the fresh evidence filed in the course of appellate proceedings. The evidence was not part of assessment records and entirely fresh claim was made for the first time and Assessing Officer denied opportunity to verify and examine and decide the issue. The ld.Commissioner of Income Tax (Appeals) has not called fo .....

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eals) and judicial decisions and agreement entered with the assignee and filed paper book on the agreements, guarantees and also permission letters to substantiate their claim and argued that there is no suppression of income and assignment fee was offered to tax in the assessment year 2009- 2010. 7. We heard the rival submissions, perused the material on record and judicial decisions cited. The contention of the ld. Departmental Representative that the Assessing Officer has made a elaborate exa .....

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d on the submissions of the assessee filed by letter dated 10.10.2008 which are entirely on new dimension and assessment order does not speak on this issue. The pre-conditions and probabilities of entering into agreement and realization of money on happening of event was not discussed or mentioned in the assessment order. The letter filed by the assessee on the issue of crystallization of event as per agreement on obtaining of permission brought on record for the first time before the Commission .....

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ts which the assessee for the first time brought on record. So, considering apparent facts and circumstances and the agreements and material evidence and also the provisions of Rule 46(A) of the Income Tax Rules were additional evidence has been filed. The opportunity has to be provided to Assessing Officer which the Commissioner of Income Tax (Appeals) overlooked. We are of the opinion that the matter has to be remitted to the file of the Assessing Officer, therefore, we set aside the order of .....

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d Turbine Generators (WTG). 9. The Assessing Officer on perusal of profit and loss account found assessee has claimed A4,59,08,637/-as depreciation towards WTG units and upon further enquiry the assessee firm explained that it has acquired five units of Wind Turbine Generators (WTG) with manufacturing capacity of 250KW from M/s. Pioneer Wincon Private Limited each costing A1,18,00,000/-. The ld. Assessing Officer found on verification of invoice dated 30.09.2007 assessee claimed 100% depreciatio .....

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Commissioning certificate issued by TNEB three Wind Turbine Generators are commenced on 28.09.2007 and two Turbine commissioned on 30.09.2007 and also generated three units from 28.09.2007 to 15.10.2007 and two units between 30.09.2007 to 15.10.2007. The Assessing Officer relied on the invoices collected from M/s. Pioneer Wincon Private Limited bearing no.30 to 37 and delivery challans dated 18.09.2007, 20.09.2007 and 22.09.2007 from Pondicherry unit and called for additional information from TN .....

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d WTGs for more than 180 days but claimed depreciation at 100% instead of 50% and made findings as under:- from the above responses received from the supplier and TNEB it is very clear that the assessee firm has not used the machinery for more than 180 days but claimed the depreciation at full eligible rate instead of fifty percentage of the eligible amount. As per the information furnished by the supplier all the invoice copies are raised on 30.09.2007. Nowhere in the business, it is a practice .....

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are involved in erection of the windmill. The supplier also stated that after commissioning of the WTGs it will take 2-3 days time normally to come to generation mode and after the trial runs only, the WTG will start generation. In this entire process, it is very clear that the windmills are not commissioned on 30.09.2007 as stated by the assessee . On the basis of evidence and the commissioning certificate, the Assessing Officer has restricted the claim of depreciation to 50% as the assessee co .....

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rational as per the terms and conditions entered with the supplier M/s. Pioneer Wincon P. Ltd. The seller shall supply machinery, erect, install and operate. And invoice will be raised only after completion of erection and commissioning of WTGs. The ld. Authorised Representative submitted details alongwith judicial decisions on the ground of usage of machinery for more than 180 days and Commissioner of Income Tax (Appeals) referred at page no.15 to 18 of his order. The ld. Commissioner of Income .....

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uments furnished by the assessee are (i] commissioning certificate from Tamil Nadu Electricity Board (TNEB) and (ii) a confirmation letter from the supplier of the WTGs. The contents of the letter issue by the supplier says that - "this is with reference to your WTGs commissioned at Vcerasigamani site on 28/09/2007.After commissioning of the WTGs, it has to come to generation mode which will take 2-3 days time normally. Af.er trial runs only, the WTG will start generation. After it comes to .....

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wer was generated from 28.09.2007 to 15.10.2007 in the case first mentioned 3 WTGs and from 30.09.2007 to 15.10.2007 in the case latter mentioned 2 WTGs, along with the quantity (units) of electricity generated from each of the WTG during the said period. Attached to these commissioning certificates, there were statements of electricity generated for the corresponding period, issued by the Accounts Officer (Revenue) of TNEB, containing the full particulars like initial meter readings as on 28.09 .....

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nce. Aggrieved by the order of the Commissioner of Income Tax (Appeals), the Revenue assailed an appeal before the Tribunal. 11. Before us, the ld. Departmental Representative vehemently supported the findings of the Assessing Officer and ld. Commissioner of Income Tax (Appeals) erred in deleting the addition on the facts without considering the reality which the Assessing Officer has referred in his order. The depreciation @100% has to be allowed on the machinery used for more than 180 days. Th .....

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esentative relied on the findings of the Commissioner of Income Tax (Appeals) and to substantiated his submissions with commissioning certificates of TNEB at page nos.66 to 70 of paper book and also the bills raised in respect of initial reading and argued that WTG are commissioned before 30.09.2007 and the assessee has rightly claimed 100% depreciation as per law. 13. We heard the rival submissions of both the parties and perused the material on record. The ld. Departmental Representative vehem .....

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