Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (7) TMI 201 - ITAT DELHI

2016 (7) TMI 201 - ITAT DELHI - TMI - Reopening of assessment - Held that:- On a vigilant perusal of documents and details referred by the counsels and reasons for reopening of assessment, it is amply clear that the assessee did not classify the golf course as per provisions of the Act as to whether it is part of ‘building’ or ‘plant and machinery’ and claimed depreciation @ 25% which was allowed @ 10% only in A.Y. 2003-04 and thus, in our considered opinion it can safely be presumed that the as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ales which resulted into under statement of income from sale of apartments of ₹ 3.89 crores. From the assessee’s paper book page 89, note on Labunum profitability it has been mentioned that profit for the F.Y. 2000-01 has been arrived on the basis of matching the revenue for the number of apartments sold in the F.Y. with the corresponding cost of the apartment and to support this factual contention, the assessee also enclosed a statement on profitability from Labunum Project which reveals .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

truly and fully for the period under assessment. Hence, the AO was well within his valid jurisdiction while issuing notice u/s 148 of the Act beyond four years for initiation of proceedings of reassessment u/s 147 of the Act. - On the third issue, the ld. AR fairly submitted that after settlement of interest in respect of loan advanced by M/s Gilt Facilities P. Ltd, the amount of interest including ₹ 61,11,162/- was related to prior period and not for A.Y 2001- 02. As per the details f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o A.Y 2001-02. In our considered opinion, from the correspondence copy of the agreement dated 16.8.1995 between the assessee and M/s Gilt Facilities P. Ltd it is clear that an agreement was entered with the said company and because there was a delay on the part of the assessee company, therefore, as per agreement, M/s Gilt Facilities P. Ltd vide letter dated 16.2.2001 demanded interest on unutilised amount @ 25% per annum and the assessee vide reply dated 20.3.2001 informed M/s Gilt Facilities P .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd to issue the notice u/s 147/148 of the Act. - Addition being the difference between the budget cost of the flats - Held that:- From the statement submitted by the assessee during the assessment proceedings, available at page 5 and 6 we observe that the assessee has recorded total sales value of ₹ 174.99 crores whereas sales value has been recognised @ 98% of ₹ 171.10 crores and proportionate project cost of ₹ 156.15 crores has been debited to Profit and loss account and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rly followed by the assessee and accepted by the department. Therefore, this issue is restored to the file of the AO for a fresh adjudication after affording due opportunity of being heard to the assessee. - Treatment to prior period interest as expenditure of the year under consideration - Held that:- The alleged interest amount relates to prior period however, it was accrued and crystallised during the financial period under consideration and entire amount was paid to Gilt was parted after .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the assessee to M/s Gilt Facilities P. Ltd reveals that the impugned amount was related to prior period but during the prior period there was no occasion for the assessee to claim the same as expenditure because this liability was accrued and crystallised after long conversation and correspondence with the Gilt Facilities P. Ltd as per agreement dated 16.8.1995 and the assessee paid amount after deduction of tax and the same was offered to tax by the recipient Gilt Facilities P. Ltd during A.Y .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ities below as well as before the Tribunal has submitted the details of construction on the 300 acres of land converting it into a golf course, but these details have not been submitted before the AO and the AO could not get an opportunity to verify and examine the same. Therefore, in our considered opinion, this issue requires detailed verification and examination at the end of the AO after affording due opportunity of hearing to the assessee and without being prejudiced from the earlier assess .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

session of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, but in the present case, the AO could not controvert this fact that the possession of the land in question was not transferred to the assessee and thus applicability of clause (v) of section 2(47) of the Act as part performance of contract cannot be inferred. On the basis of above discussion, we are unable to see any perversit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ns by the assessee are directed against the order of the CIT(A, dated 22/05/2009 for A.Ys 2001-02 and 2003-04. 2. First we shall take up the cross objections raised by the assessee. The assessee has raised similarly worded following grounds of appeal: 1. That on the facts and circumstances of the case, the CIT(A) has erred in upholding the validity of the order of assessing officer passed under section 143(3) read with section 147 of the Income-tax Act, 1961 ( the Act ), without appreciating tha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d in the proviso to section 147 of the Act and consequently the assessment order was illegal and bad in law 1.3 That on the facts and circumstances of the case, the CIT(A) has erred in not appreciating that the reassessment proceedings were initiated by the assessing officer on a mere change of opinion and there was no failure on the part of appellant to disclose truly and fully all material facts necessary for assessment and consequently, the assessment order was illegal and bad in law. 1.4 Tha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ut forming a reasonable belief that income of the appellant had escaped assessment, which a pre-requisite condition for validly initiating proceedings under that section. 3. Briefly stated, the facts relating to these grounds are that the assessee has challenged the validity of the assessment order dated 24th December, 2007 on various grounds. The assessee originally filed return of income on 30th October, 2001, declaring loss of ₹ 20,72,84,983. Assessment was originally completed u/s 143( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

27th November 2006, requesting the assessing officer to treat the return originally filed as return filed in response to notice under section 148 of the I.T. Act. In the aforesaid background facts, the assessee has challenged the validity of the reassessment order on the following four grounds: (a) The reassessment proceedings were initiated on a mere change of opinion, which is not permissible in law; (b) In terms of proviso to section 147 of the Act, proceedings under that section could be val .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e belief that income of the appellant had escaped assessment which is a pre requisite condition for validly initiating proceedings under that section. (d) The impugned reassessment proceedings were initiated on the opinion of the audit party which is not permissible in law. 4. The ld. AR submitted that in the case of the assessee the original assessment was completed u/s 143(3) of the Act after due application of mind on the claims made by the assessee in the return and/or during the assessment .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

amp; Inds. Corpn: 242 ITR 119 (Mad.) ❖ Waldies Limited V. ITO: 246 ITR 29 (Cal.) ❖ ITO V. Jiyajeerao Cotton Mills Ltd: 247 ITR 122 (Cal.) ❖ CIT V. Sambhar Salt Limited: 262 ITR 675 (Raj.) The submissions filed by the appellant were forwarded to the assessing officer for comments' who submitted his remand report vide letter No. ACIT/Circle(4)/2009-10/279 dated 15th October, 2008. In the remand report, the assessing officer has not commented on the submissions filed by the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dismissed. 6. In its reply to the remand report furnished by the appellant vide letter dated 17th November, 2008, the appellant, apart from the submissions made earlier also referred to the decision of the Delhi High Court in the case of Haryana Acrylic Manufacturing Co. vs. CIT in support of its contention that the reassessment proceedings are illegal and bad in law. 7. After carefully considering the rival submissions, the ld. CIT(A) has held as under: The submissions of the A.R. of the appell .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ar that he did not have any objection for re- opening the assessment proceedings at the initial stage. Subsequently also, no objection was taken in the course of assessment proceedings. However, the appellant had challenged the validity of the re-opening of the assessment proceedings only at the time of the filing of the appeal which is not only after thought and appeared to have been raised only for the sake of raising a ground of appeal. Even on the merit of the facts, I am of the view that AO .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ngs of on some of the issues there was not full and true disclosure of the information. In totality of all these facts and circumstances, I dismiss appellant's appeal on ground nos. 1 and 2. 8. Further, the ld. CIT(A) granted relief to the assessee on merits in both the years. Thus the Revenue filed appeals challenging the conclusion of the ld. CIT(A) on merits wherein the first appellate authority directed the AO to delete the addition made on account of difference between budget cost of fl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hallenging the validity of reopening u/s 147 of the Act and notice u/s 148 of the Act for both the years. 9. On the cross objections of the assessee for both the years, the allegations of the assessee to the reopening of assessment are similarly worded, which has been reproduced hereinabove. For the sake of clarity in our findings, we are considering the rival arguments of both the sides in view of the facts and circumstances of A.Y 2001-02. 10. We have heard the arguments of both the sides and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ereof was not challenged before the AO. The ld. AR also pointed out that in the present cases, the ld. CIT(A) failed to appreciate that the initiation of proceedings was barred by limitation prescribed in proviso to section 147 of the Act and consequently the assessment order was illegal and bad in law. The ld. AR reiterating his written submissions dated 28.10.2015 also contended that the reassessment proceedings were initiated by the AO on a mere change of opinion and there was no failure on t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the reasons recorded by the AO. The ld. AR lastly pointed out that reassessment proceedings were initiated by the AO without forming a reasonable belief that income of the assessee has escaped assessment which is a pre requisite condition for initiating proceedings validly. 11. Replying to the above, the ld. CIT-DR drew our attention towards relevant operative part of the impugned first appellate order and contended that from the reasons recorded it is amply clear that the AO was not guided by t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

application of mind on various facts as pointed out by the audit authority while issuing notice u/s 147 of the Act because some of the important issues involved in the appeal were altogether omitted during the course of assessment proceedings and there was not a full and true disclosure of information regarding depreciation claimed by the assessee, the assessee understated the sale proceeds resulting into escapement of proceedings and the assessee also claimed prior period expenditure which also .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sessee claimed depreciation on golf course at the rate of 25% under category of plant and machinery. The golf course is a structure of building in which various sports facilities have been provided to the members of the assessee company. The depreciation is admissible on the golf course at the rate of 10% as in the case of building, it is seen from depreciation schedule that the depreciation was claimed on golf course at ₹ 2,42, ,64,813/- as against the admissible depreciation at ₹ 1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y unless the assessee has separately claimed the depreciation on these equipments. Thus excess depreciation has been allowed at ₹ 1,37,71,043/-. Thus the income to the extent of ₹ 1,37,71,043/- has escaped assessment. 3. It is further seen from details filed during the course of assessment proceedings that the assessee sold apartments during the year. The total sale consideration has been shown at ₹ 174,99,49,491/-, However in the computation of income and profit and loss accou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y accounting or legal principles. It is also not sanctioned by the accounting standards prescribed by ICAI. There is no basis for this computation. This working is neither based on mercantile basis of accounting nor on any other provisions of law or accountancy. Thus the assessee company has under stated the sales proceeds by 3,89,33,267/- which has escaped assessment. 3.2 The assessee company has claimed interest at ₹ 61,11,162/- in respect of loan advanced by M/s Gilt Facilities Private .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

culous working of year wise interest on the amount of loan need to the assessee company. The interest of ₹ 61,11,162/- is not admissible an the assessment year as it is prior period expenditure which is not admissible. Thus the income of ₹ 61,11,162/- has escaped the assessment. 13. In view of above, in the present case, admittedly and undisputedly, reopening of assessment and issuance of notice has been initiated beyond four years of prescribed period and hence, as per first proviso .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f reassessment proceedings it was the duty of the AO to record a satisfaction that any income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts. In the reasons recorded it was alleged that the assessee had wrongly claimed deprecation on golf course. In this regard the ld. AR pointed out that the assessee has shown golf course under the head assets in the audited financial statements and not as a part of buildi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is referring to the income from Laburnum Project undertaken by the assessee and profit from the said project was consistently been accounted as per percentage completion method. The ld. AR pointed out that vide Note No. 7, Revenue recognition Schedule XXI significant accounting policies of the audited accounts for the year ended on 31.3.200, the assessee clearly mentioned that revenue on account of sale of land and constructed apartments is accounted for on the basis of percentage completion me .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

disclosure by the assessee. Therefore, reassessment beyond four years is not permissible. 15. Regarding third issue, the ld. AR pointed out that vide letter February 2004, the assessee furnished a detailed note on accrual on interest and justified its allowability after explaining the entire background of the sale alongwith detailed justification. The ld. AR also pointed out that the assessee also filed copy of the agreement dated 16.8.1995 entered into with Gilt Facilities P. Ltd. which is ava .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of entire interest paid during A.Y 2001-02. Therefore, it cannot be alleged that the income of the assessee had escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessee. 16. The ld. AR also pointed out that it was a mere change of opinion on the similar material and reopening of assessment cannot be held as valid when without any tangible material, and without application of mind, the AO held that there is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lly and truly all material facts necessary for assessment. The ld. AR lastly alleged that the AO initiated reassessment proceedings only on the report of audit party of the department and without applying his mind he proceeded to initiate reassessment proceedings which is not a legal and fair approach. 17. Replying to the above, the ld. DR fairly accepted that original order of assessment was passed u/s 143(3) of the Act and notice u/s 148 of the Act was issued beyond the period of four years. H .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s of the Act. The assessee should have specifically mentioned that the Golf course falls either in building or plant and machinery and this conduct of the assessee shows that the assessee did not file truly and fully all material facts for claiming depreciation on golf course and hence, the AO has validly reopened the assessment and issued notice u/s 147/148 of the Act. 18. The ld. DR further took us through assessment order for A.Y 2003-04 and submitted that assessee has not challenged this ord .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

golf course is a building and depreciation was allowed thereon @ 10% whereas the assessee claimed depreciation @ of 25% which is not sustainable. The ld. CIT-DR also drew our attention towards Revenue PB pages 29 and 30 and read out audit objections raised in the case of assessee for A.Y 2001-02. The ld. DR on the second issue recorded in the reasons pointed out that as per pages 4 to 12 of APB, the profit position for the F.Y. commencing from 1989-99 to 2003-04 it is amply clear that entire sal .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

num Project for the year which is not a correct approach and thus the assessee should be held liable for not disclosing truly and fully all particulars of its income during the assessment proceedings and for this reason, reassessment beyond five years is permissible. 20. The ld. DR vehemently pointed out that on the last issue recorded in the reasons, the assessee has to make claim as prior period interest expenditure and tax auditor should mention this glaring fact in the report and on this cou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

The ld. AR also placed rejoinder to the above submissions of the Revenue and contended that reasons recorded by the AO for reopening of assessment has to be read without any support and no supplementation or substitution or deletion therein or therefrom is permissible. He placed reliance on the decision of the Hon'ble Bombay High Court in the case of Hindustan Lever Ltd Vs. ACIT 268 ITR 332 [Bom] to support this contention. The ld. AR also pointed out that there is no reference of subsequent .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ceedings will be invalid on the ground of change of opinion. The ld. AR further placing reliance on the decision of Hon ble High Court of Delhi in the case of Haryana Acrylic Manufacturing Co.[supra] submitted that notice after four years u/s 148 of the Act and there is no indication in the reasons recorded about failure on the part of the assessee to disclose fully and truly all material facts for its assessment, then notice in such a situation is not a valid notice. The ld. AR of the assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he case of CIT Vs. Purolator India Ltd 343 ITR 155 para 10 to support this contention that there is no indication that the assessee has failed or omitted to disclose the material and primary facts, then reassessment proceedings beyond four years are not permissible. The ld. Counsel placing reliance on the plethora of decision including decision of Hon'ble Supreme Court in the case of Indian and Eastern Newspaper Society Vs. CIT 119 ITR 996 [SC] submitted that the opinion of internal audit pa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ntly contended that after considering the ratio of its own decision in the case of Indian and Eastern Newspaper Society [supra], it was held that the audit report has to be construed as if relevant provision of law had been brought to ITO s notice, then the said report constituted information within the meaning of section 147(b) of the Act. She also contended that when audit party had merely pointed out a fact which had been overlooked by the AO, and this was not a case of information on a quest .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es in assessee s own case was information within the meaning of section 34(1)(b) of the I.T. Act, 1922 which is a corresponding section of section 147 of the Act and in the present case notice u/s 148 of the Act dated 30.10.2006 was issued after said assessment order passed in assessee s own case for AY 2003-04 which validly empower the AO for reopening of assessment beyond four years. 25. On a careful consideration of the above contentions, first of all, we may point out that all the decisions .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t and subsequent assessment order and the AO has applied his own mind for stating reasons for reopening of assessment and initiation of proceedings u/s 147 of the Act and consequent to that notice u/s 148 of the Act has been issued to the assessee. 26. The important next question posed to us for adjudication to us is as to whether reopening of assessment and reopening of assessment proceedings beyond four years was validly initiated in the present case. The crux of the contention of the ld. Coun .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt accounting policy and on third issue of interest expenditure, the assessee besides above documents, also filed another letter in March 2004 furnishing detailed background of interest paid and legal justification for allowability of entire interest paid during A.Y. 2001-02. After submitting above, the ld. AR vehemently pointed out that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Therefore, reopening of assessment and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sessee had escaped assessment by the reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. 28. On careful consideration of above, first of all we may point out that in the case of Som Dutt Builders Pvt. Ltd Vs. DCIT, 98 ITD 78 [Kol] ITAT Kolkata Bench C held that reopening of a case by the AO on the basis of substantial pointed out by the Revenue audit is permissible under law and change of opinion comes to rescue of assessee only .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion, interest paid during the relevant period and accepted the income shown by the assessee from Labunum Project relying on the details filed by the assessee. 30. On a vigilant perusal of documents and details referred by the counsels and reasons for reopening of assessment, it is amply clear that the assessee did not classify the golf course as per provisions of the Act as to whether it is part of building or plant and machinery and claimed depreciation @ 25% which was allowed @ 10% only in A. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ale of ₹ 3,10,99,749/- in F.Y. 2001- 02 which is less than 2% of the total sales which resulted into under statement of income from sale of apartments of ₹ 3.89 crores. From the assessee s paper book page 89, note on Labunum profitability it has been mentioned that profit for the F.Y. 2000-01 has been arrived on the basis of matching the revenue for the number of apartments sold in the F.Y. with the corresponding cost of the apartment and to support this factual contention, the asses .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the part of the assessee to disclose all relevant facts necessary for assessment truly and fully for the period under assessment. Hence, the AO was well within his valid jurisdiction while issuing notice u/s 148 of the Act beyond four years for initiation of proceedings of reassessment u/s 147 of the Act. 32. On the third issue, the ld. AR fairly submitted that after settlement of interest in respect of loan advanced by M/s Gilt Facilities P. Ltd, the amount of interest including ₹ 61,11, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

clearly shows that the interest amount of ₹ 61.11 lakhs was not related to A.Y 2001-02. In our considered opinion, from the correspondence copy of the agreement dated 16.8.1995 between the assessee and M/s Gilt Facilities P. Ltd it is clear that an agreement was entered with the said company and because there was a delay on the part of the assessee company, therefore, as per agreement, M/s Gilt Facilities P. Ltd vide letter dated 16.2.2001 demanded interest on unutilised amount @ 25% per .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

AO cannot be held as valid for assuming jurisdiction to reopen the assessment and to issue the notice u/s 147/148 of the Act. To sum up, as we have observed earlier that the income of the assessee escaped assessment due to the reason of failure on the part of the assessee in disclosing fully and truly all material facts pertaining to depreciation on golf course and on the issue of income from sale of Labunum Project. Therefore, on these two counts, action of the AO to initiate reassessment proc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

02 as noted above, would apply mutatis mutandis for A.Y 2003-04 also. Consequently, cross objection of the assessee for both the years are jettisoned. Revenue appeal ITA No. 3549/ Del/ 2009 for A.Y 2001-02 and 4847/Del/ 2009 for A.Y 2003-04 33. Grounds Nos. 1 and 6 raised by the Revenue are of general in nature. Remaining grounds for A.Y 2001-02 read as under: 2. On the facts and in the circumstances of ht case and in law, the ld. CIT(A) has erred in deleting the addition of ₹ 3,89 crores .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

law, the ld. CIT(A) has erred in allowing depreciation @ 25% on Golf Course under the category of Plant and Machinery as against admissible @ 10% in case of building . Thus deleting the excess depreciation of ₹ 1,37,71,043/-. 4.1 The ld. CIT(A) has erred in treating golf course as plant. 5. On the facts and in the circumstances of ht case and in law, the ld. CIT(A) has erred in deleting the addition of ₹ 41.82 crores being the capital gain on agreement to sale dated 17.3.2003. 5.1 T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng the fact that the AO has made the addition in accordance with the provisions of section 32 of the I.T. Act. 3. On the facts and in the circumstances of ht case and in law, the ld. CIT(A) has erred in deleting the addition of ₹ 60.54.840/- made by the AO on account of excess deprecation claimed by the assessee on golf course. 3.1 The CIT(A) ignored the fact that depreciation on Golf Course is to be allowed @ 10% as applicable for buildings under the provisions of Income tax Act, 1961. Gr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

considered 98% of the total revenue at ₹ 171.10 crores as chargeable to the profit and loss account against the profit actually incurred till 31.3.2001. The ld. DR vehemently contended that neither any provision of balance amount of cost to be incurred nor any justification of recognition from sale existed. Therefore, the assessee suppressed in recognition of revenue from sale value of project to the extent of 3.89 crores which was rightly taxed in the hands of the assessee whereas the ld. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rity rightly held that there was no suppression in recognition of revenue from Labunum project which has already been offered for taxation in the succeeding year. 37. The ld. CIT-DR contended that revenues and gross profit are recognised each period based on the construction progress. She further elaborated that in this situation construction cost and gross profit earned to date are accumulated in the asset account and progress billing are accumulated in a liability account. Therefore, the asses .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ly on this basis that the assessee is regularly following percentage completion method consistently from F.Y 1998-99 to 2002-03 regularly but he has not deliberated or adjudicated contention of the AO that in what manner the assessee considered 98% of the total revenue as chargeable to profit and loss account against the cost actually incurred till 31.3.2001. It is also pertinent to note that the AO has clearly mentioned that no evidence of any further cost to be incurred in the said project was .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

res has been debited to Profit and loss account and in our humble understanding, this calculation is not in accordance with percentage of completion method. If assessee has incurred some more cost in the subsequent A.Ys, but the total sales value was received during the year under consideration, then the sales value has to be recognise accordingly. In view of the above, we are of the considered opinion that the issue requires examination and verification at the end of the AO according to the per .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ear-wise interest and the interest of ₹ 61.11 crores was not admissible in the current year as it was prior period expenditure. Therefore, the AO rightly added the same to the income of the assessee. The ld. CIT- DR pointed out that the first appellate authority gave relief to the assessee without any basis. Therefore, the impugned order may be set aside by restoring that of the AO. The ld. AR strongly supported the impugned order and submitted that the ld. CIT(A) after considering all rel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

his fact that the entire amount of 1.28 crore was paid to Gilt Facilities P. Ltd Facilities after deducting TDS which was also deposited on 17.5.2001 and the recipient Gilt Facilities P. Ltd offered this amount to in its return of income in A.Y 2001-02 only. 40. On careful consideration of above submissions, we are of the view that the ld. CIT(A) has elaborately discussed facts and circumstances of the case at page 16 last operative para wherein it was noted that the alleged interest amount rela .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

M/s Gilt Facilities P. Ltd as per computation agreed between them. However, from the copy of the chart showing the calculation of total interest amount paid by the assessee to M/s Gilt Facilities P. Ltd reveals that the impugned amount was related to prior period but during the prior period there was no occasion for the assessee to claim the same as expenditure because this liability was accrued and crystallised after long conversation and correspondence with the Gilt Facilities P. Ltd as per a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ropos these grounds, the ld. CIT-DR submitted that the ld. CIT(A) has erred in allowing depreciation @ 25% on golf course under the category of plant machinery as against 10% as allowable in the case of building which includes golf course. The ld. CIT-DR pointed out that the ld. CIT(A) has erred in treating the golf course as plant and machinery whereas the same is includible as building for the purpose of deprecation. As per provisions of the Act, the ld. CIT-DR pointed out that as per decision .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as plant and machinery @ 25%. The ld. CIT-DR pointed out that the ld. CIT(A) misunderstood the ratio of decision of the Hon'ble Supreme Court in the case of Anand Theatre [supra] as in that case, it was held that all the buildings cannot be considered as plant and machinery. However, some building using the auditorium and furniture and fitting found therein should be construed as a plant. The ld. DR vehemently pointed out that there was no basis for the ld. CIT(A) to treat the golf course a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nted relief with following observations and conclusion: Rival contentions have carefully been considered After considering the rival submissions I find a substantial support in the contention of the Id. A.R. of the appellant. It is a fact that the Assessing Officer has misconceived the facts of the case to some extent. In fact, the appellant has not claimed depreciation (a). 25% on the concrete path, driveways, interconnecting roads constructing around play grounds in the Golf Court as recorded .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for playing the Golf on the piece of land Therefore, cost of creating such technical requirement will certainly make the field of Golf Course as a plant only. Although the various courts citations relied upon by the Id. A.R. of the appellant are not directly applicable to the facts of the case but there is an oblique reference for considering the Golf Course as a plant only. As far as the reliance placed by the Assessing Officer in the decision of Hon ble Supreme Court in the case of CIT vs. Ana .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

prepared by putting several expenditures on various accounts to prepare it as per the technical requirements to play the game of Golf. In that context, it has also been noticed that the business of the appellant is to invite the players for playing the Golf and charging the fees for that. Therefore, the field so prepared was a business operated used by the appellant for carrying on its business of playing the Golf. In view of these facts and circumstances. I allow appellant s claim of depreciat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ly make the field of golf course as a plant. 45. In the second part of above operative para, the ld. CIT(A) held that the ratio of the decision of Hon'ble Supreme Court in the case of CIT Vs. Anand Theatre is not applicable and then jump to a conclusion that the business of the assessee is to invite players for playing the golf and charging the fee for that and thus the field so prepared was a business operated used by the assessee for carrying on its business of playing golf. In the last li .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

between the assessee and the revenue is that the assessee is seeking to place the golf course in the category of plant and machinery whereas the Revenue wants to treat the same as building. 46. At this juncture, we may point out that we are not in agreement with the conclusion drawn by the ld. CIT(A) that a piece of land having some landscaping for playing golf such as various level undulation, holes, small ponds etc construed a super structure which can be categorised as a plant and machinery. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng some specialised facilities for playing golf cannot be put in the category of plant and machinery. 47. In view of above, we have no hesitation to hold that the ld. CIT(A) granted relief to the assessee without any basis and without arriving to a conclusion as to whether golf course is a plant and machinery or building. Therefore, conclusion of the ld. CIT(A) is not sustainable as we are unable to see any basis for the factual observations noted by the ld. CIT(A) for putting the golf course in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Court in the case of CIT Vs. Anand Theatre [supra], CIT Vs. Gwalior Rayon Silk Mfg. Mills 196 ITR 149 [SC] and decision of Hon ble High Court of Delhi in the case of Moradabad Toll Road Co. Vs. ACIT [2014] 52 Taxmann.com 21 [Delhi] to establish that golf course is not a plant and machinery and it is to be categorised as a building and on the other hand, the ld. AR has placed reliance on the case of decision of Hon'ble Supreme Court in the case of CIT Vs. Karnataka Power Corpn. 247 ITR 268 [S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng 25% depreciation. The AO has to examine these details to ascertain the issue between the parties as stated above. We also note that the assessee in its written submissions before the authorities below as well as before the Tribunal has submitted the details of construction on the 300 acres of land converting it into a golf course, but these details have not been submitted before the AO and the AO could not get an opportunity to verify and examine the same. Therefore, in our considered opinion .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ently, Ground No 4 and 4.1 for A.Y 2001-02 and Ground No. 3 & 3.1 for A.Y 2003-04 of the Revenue are allowed for statistical purposes by restoring the same to the file of the AO. Ground No 5 and 5.1 for A.Y 2001-02 and Ground No. 2 & 2.1 for A.Y 2003-04 of the Revenue. 49. Apropos these grounds, the ld. CIT-DR strongly supported the action of the AO and submitted that as per the agreement to sale executed between the company and ITC Ltd. in F.Y. 2000-01, 22.69 acres of land was sold to I .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ent approval if sale deed could not be executed in favour of ITC Ltd, then also income accrued therefrom was to be taxed as long term capital gain in the hands of the assessee. The ld. CIT-DR also pointed out that the ITC Ltd used the land as a possession and title holder and also obtained loan by mortgaging the land. Therefore, the AO was quite correct and justified in calculating long term capital gain and taxing the same in the hands of the assessee. The ld. DR vehemently contended that the l .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s cancelled in subsequent F.Y 2009-10. Since the agreement stands cancelled and entire amount stood refunded to the assessee in F.Y. 2009-10. The ld. AR also contended that the AO misunderstood the facts and held that ITC Ltd obtained loan by mortgaging the land to various banks and this mistake was corrected by the AO by filing remand report to ld. CIT(A) wherein he fairly accepted that the documentary evidence in support of averment of the assessee that the assessee and the ITC Ltd, had actual .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the Act. In the present case, the ld. CIT-DR could not controvert this fact that neither the sale deed was executed nor possession of the land was handed over to ITC Ltd and the land in question continues to be in complete control of the assessee. We are in agreement with the conclusion of the ld. CIT(A) that mere receipt of entire sale consideration as an advance does not make the agreement as effective transfer as defined in section 2(47) of the Act. The ld. CIT-DR could not controvert this .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by the assessee and not by ITC by mortgaging the land. From the record, it is apparent that the assessee continuous to possess the land physically and it could not be transferred to ITC Ltd till a valid permission is received from DTCP. From the documentary evidence filed by the assessee before the authorities below it is clear that the land in question owned by the assessee is situated within controlled area and same is governed by the provisions of Punjab Scheduled Road and Controlled Areas Re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version