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2018 (8) TMI 2006 - AT - Income TaxAddition on account of income from sale of Lodha Supremus Building - ITSC has already taxed the revenue from the project LodhaSupremus in the hand of SNCML - HELD THAT - Income taxed by the AO in the assessee s hand has already assessed and taxed in the hand of SNCML, therefore taxing the same again in the hand of the assessee will result into double taxation of the said income. While reaching to the conclusion, Ld. CIT(A) appreciated the facts from the audited financial statements and orders passed by Income Tax Settlement Commission (ITSC u/s 245 D(4) of the I.T. Act. We have also gone through the elaborated findings recorded to the effect that assessee was used as a SPV (Special Purpose Vehicle) by SNCML for the construction of LodhaSupremus , which is more likely a Cooperative Society carrying out work for and on behalf of its members out of the cost met by them and no profit could arise in the hands of SPV. Thus, the additions were rightly deleted by Ld. CIT(A) Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, there are no reasons for us to interfere into or deviate from the findings so recorded by the Ld.CIT(A). - Decided against revenue.
Issues Involved
1. Whether the CIT(A) erred in not appreciating the business activities of the assessee. 2. Whether the construction expenditure should be considered as Capital Work in Progress. 3. Whether the assessee can escape tax liability by recording business activities under different nomenclature. 4. Whether the changes in the Articles of Association by attaching building space to shares are ultra vires of the Companies Act, 1956. 5. Whether taxing the income in the hands of the assessee results in double taxation. 6. Whether the CIT(A) erred in directing the deletion of ?2,47,56,227/- on account of income from the sale of Lodha Supremus Building. Detailed Analysis Issue 1: Business Activities of the Assessee The CIT(A) did not err in appreciating the business activities of the assessee. The assessee is engaged in land development and construction. The CIT(A) considered the fact that the income taxed by the AO in the assessee’s hands was already assessed and taxed in the hands of SNCML. Taxing the same income again would result in double taxation, which is impermissible. Issue 2: Capital Work in Progress The CIT(A) correctly appreciated that the construction expenditure incurred was shown as Capital Work in Progress in the balance sheet. The funds for the construction were provided by the shareholders (SNCML), and the work was carried out on their behalf. Issue 3: Tax Liability and Nomenclature The CIT(A) found that the assessee could not escape its tax liability by recording its business activities under different nomenclature. The assessee acted as a Special Purpose Vehicle (SPV) for the construction of Lodha Supremus, funded by its shareholders, and did not record any revenue independently. Thus, no profit arose in the hands of the SPV. Issue 4: Changes in Articles of Association The CIT(A) did not find the changes in the Articles of Association by attaching building space to shares to be ultra vires of the Companies Act, 1956. The assessee was used as an SPV by SNCML for construction, similar to a cooperative society carrying out work on behalf of its members. Issue 5: Double Taxation The CIT(A) held that taxing the income in the hands of the assessee would result in double taxation. The income from the Lodha Supremus project was already taxed in the hands of SNCML, as evidenced by the order of the Income Tax Settlement Commission (ITSC) under section 245D(4) of the I.T. Act. Issue 6: Deletion of ?2,47,56,227/- The CIT(A) directed the deletion of ?2,47,56,227/- on account of income from the sale of Lodha Supremus Building. The CIT(A) found that the project was developed by SNCML, and all revenue from the project was recorded in SNCML’s books. Taxing the same income in the hands of the assessee would result in double taxation. The CIT(A) also disallowed the assessee’s claim of losses of ?1,52,974/- since no revenue was offered by the assessee independently. Conclusion The appeal filed by the revenue was dismissed. The CIT(A)’s findings were judicious and well-reasoned, with no new facts or contrary judgments brought to rebut the findings. The decision ensured that double taxation was avoided, and the role of the assessee as an SPV was appropriately considered. The order was pronounced in the open court on 23rd August 2018.
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