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TMI Blog2018 (10) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... the year under consideration. The Revenue treated the entire transaction as sham and hence this interest also got disallowed. The Mumbai- tribunal has consistently since AY 2006-07 to 2011-12 has held the aforesaid transactions for acquisition of rights from erstwhile JV partners by the assessee in 50 acres of plot of land allotted by MIDC in Navi Mumbai for settin up I T Park and consequently payment of interest as genuine transaction allowable as business deduction while computing income. Decided in favor of assessee. - I.T.A. No.6170/Mum/2016 - - - Dated:- 5-10-2018 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri. Sanjay P. Sommani For The Revenue : Shri. Manoj Kumar Singh, DR ORDER PER RAMIT KOCHAR, Accountant Member: This appeal, filed by assessee, being ITA No. 6170/Mum/2016, is directed against appellate order dated 13.07.2016 passed by learned Commissioner of Income Tax (Appeals)-52, Mumbai (hereinafter called the CIT(A) ), for assessment year 2012-13, the appellate proceedings had arisen before learned CIT(A) from assessment order dated 26.03.2015 passed by learned Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 95,17,500/- with respect to borrowings on amount paid/payable to these two parties namely M/s. Well Wisher Constructions and Finance P. Ltd. and M/s. OM Metals Limited .The AO observed that the said amount of ₹ 95,17,500/- was debited to inventories by the assessee which stood disallowed by the AO and the AO directed the said sum to be reduced from inventories in the financials of the assessee , vide assessment order dated 26.03.2015 passed u/s 143(3) by the AO, the working of which is as under:- From To Days Principal Amt Rate of interest Interest Well Wisher Constructions and Finance P. Ltd. 01.04.2011 31.03.2012 365 35,250,000 13.50% 4,758,750 4,758,750 OM Metals Limited 31.03.2012 365 35,250,000 13.50% 4,758,750 4,758,750 Total 95,17,500 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Bench to learned counsel for the assessee to file copies of audited financial statements of the assessee for financial year 2011-12 relevant to AY 2012-13 before us. In compliance thereof the directions of the Bench, the learned counsel has submitted audited financial statements of the assessee for financial tear 2011-12 which are placed on record in file. 6. We have heard rival parties and have perused the material on record including cited decision of the tribunal in assessee s own case for earlier years namely for AY 2006-07 to AY 2011-12 and audited financial statements for financial year 2011-12. The assessee is in the business of real estate developers and construction. The assessee was allotted 50 acres of plot of land by MIDC in financial year 2005-06 for developing IT Park at Plot No. I.T 5 (MIDC) Airoli Knowledge Park, Navi Mumbai which it is claimed by the assessee was still under construction during the year under consideration. To support the said contention, the assessee has placed on record audited financial statements for the financial year 2011-12 which is placed in file. The short question which has arisen before us in this appeal is regarding allowabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a payment of 100.80 Cr. The necessary sanction for the said transaction was obtained from MIDC. The assessee accounted and provided for the transaction in its books of accounts as on 31.3.2006 by increasing the cost of land/inventories and correspondingly crediting the two JV partners with ₹ 50.40 Cr each and showing the remaining payable at the year end under the head sundry creditors. The transaction was accepted by the AO during the scrutiny proceedings after raising specific query which was replied by the assessee by filing the details of inventories and sundry creditors and it was only after satisfying himself, the AO framed assessment u/s 143(3) of the Act vide order dated 22.12.2008. In the mean time the assessment of OM was completed for the assessment year 2008-09 in December,2010 in Jaipur approximately two years after the completion of assessment of the assessee and the AO at Jaipur forwarded copy of the assessment order with relevant annexures to the AO of the assessee. Thereafter the AO also sought the details of the transaction from the assessee vide letter dated 19.05.2010 and re-opened the case of the assessee by issuing notice u/s 148 of the Act on 25.05.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est of the business. Moreover all the three parties are unrelated parties and not related to each other. Therefore the transaction can not be said to be non genuine and sham. Further we failed to understand as to how a transaction which is assessed to tax in the hands of two JV partners by the revenue treating the same as genuine was treated as sham in the hands of assessee. In our considered view the assessee has entered into the transaction of purchasing the interest in the land from the said two parties and after purchase, became the exclusive owner of the said land and therefore the said expenditure is wholly and exclusively incurred for the purpose of business and should be allowed to the assessee. Beside, the involvement of multiple agencies including Govt authorities like MIDC and AOs of OM and WW , professional consultants and escrow agents specially when none of them were related to each other further lends credence to the contention of the ld AR. The mere irregularities in the documents as pointed by the ld DR can not be the basis to draw conclusion as to genuineness of the transaction. So far as the reasonableness of the transaction is concerned , the valuation by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k, by holding as under:- 7. Under this issue the assessee has challenged the finding of the CIT(A) in which the CIT(A) has confirmed the order passed by the AO in connection with amount payable to two parties namely Om Metals Ltd. and Wellwisher Construction Finance Pvt. Ltd. amounting to ₹ 87.05 crores reflected in its books of accounts under the head of inventories which was held as non-business expenditure. At the very outset, the Ld. Representative of the assessee has argued that this issue has duly been covered by the finding of the Hon ble ITAT in the assessee s own case in ITA. No.1132, 1133 1137/M/2016 for the A.Y. 2006-07, 2007-08 2008-09 dated 10.11.2017. However, on the other hand, the Ld. Representative of the Department has refuted the said contention. Before going further, we deemed it necessary to advert the finding of the Hon ble ITAT in the assessee s own case (supra) on record. The relevant finding has been given in para no. 5.8 which is hereby reproduced below as under: - 5.8. We have considered the rival contentions and perused the relevant records placed before us including case laws cited by the parties. The undisputed facts are that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO accepted the same in the assessment framed u/s 143(3) of the Act however the CIT invoked revisionary jurisdiction u/s 263 of the Act which stood quashed by the ITAT. In other words the amounts paid by the assessee to OM and WW were taxed in their hands as genuine transaction by the deptt. It is difficult to understand that when the revenue treated the transaction as genuine in the hands of two JV partners , how the same transaction can be non genuine and sham in the hands of the assessee. Moreover the chronology of events clearly shows that the application was made in the joint names of the assessee, OM and WW. The land was also allotted by MIDC on the said application made by the three joint venture partners . Thereafter MIDC on an application made by the JV partners approved the relinquishment of interest in the said land by two JB(sic. JV) partners OM and WW in favour of the assessee on payment of specified premium. It is relevant to note that records of MIDC proved that the assessee, OM and WW were the joint owners of the plot of land till the relinquishment of rights by OM and WW was approved by MIDC which showed the transaction being genuine and out of business considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of the assessee upon payment of ₹ 100.80 crores. The necessary sanction was obtained from MIDC. The assessee accounted and provided for the transaction in its books of accounts as on 31.03.2006 by increasing the cost of land/inventories and correspondingly crediting the two JV partners with ₹ 50.40 cores each and showing the remaining payable at the year end under the head of sundry creditors. The transaction was accepted by the AO at the time of scrutiny proceedings. In the meantime the assessment was completed for the A.Y. 2008-09 in December, 2010 in Jaipur approximately two years after the completion of assessment of the assessee. The assessment order was forwarded to the assessee by the Assessing Officer who reopened the case of the assessee. In the case of Om, the amount to the tune of ₹ 50.40 crores was treated as revenue receipt and accordingly the taxed. In the case of WW the money received from the assessee was received as capital receipt and MAT was paid thereon. However, the CIT(A) invoked the revisionary jurisdiction u/s 263 of the Act which was quashed by the ITAT. In brief the amount was paid by the assessee to OM and WW were taxed in their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ventories/project work-in-progress by the assessee in return of income filed with the tribunal. The tribunal in assessee s own case for the preceding years as detailed by us in preceding para s of this order had held that amount payable/payments made to these two parties namely M/s Om Metals Limited and M/s Well Wisher Constructions and Finance P. Ltd. to the tune of ₹ 87.04 crores in AY 2006-07 ( net of reversal of ₹ 13.75 crores in AY 2007-08) by the assessee for acquiring their rights in the 50 acre plot allotted by MIDC in Navi Mumbai for setting up IT Park was a genuine transaction which stood allowed by tribunal. Further, the tribunal has also consequently held that interest expenses attributable to borrowings for making payments to these two parties namely M/s Om Metals Limited and M/s Well Wisher Constructions and Finance P. Ltd. are also allowable as genuine expenses. Respectfully following the aforesaid decisions of the tribunal in assessee s own case for earlier assessment years consistently from AY 2006-07 to 2011-12, we allow interest expenditure of ₹ 95,17,500/- attributable to aforesaid borrowings w.r.t. to payment to these two parties namely M/s Om ..... X X X X Extracts X X X X X X X X Extracts X X X X
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