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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ INCOME TAX APPEAL NO. 339/2014
Date of decision: 27th October, 2014
HOUSING & URBAN DEVELOPMENT CORPORATION
LIMITED ..... Appellant
Through Mr. Gagan Kumar & Ms. Niyati
Chanana, Advocates.
versus
ADDITIONAL COMMISSIONER OF INCOME TAX
..... Respondent
Through Ms. Suruchi Aggarwal, Sr. Standing
Counsel.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V. KAMESWAR RAO
SANJIV KHANNA, J. (ORAL):
Having heard learned counsel for the parties, we frame the
following substantial question of law:
"Whether Income Tax Appellate Tribunal was right in
holding that in terms of minutes of meeting held on 7 th
September, 1995 administrative expenses of 1.5% had
accrued in respect of residential quarters at Andrews Ganj
and were taxable as income?"
2. With the consent of the parties and as a short issue arises for
consideration, we have taken up the appeal for hearing and the same is
disposed of by this judgment.
3. The appellant-assessee is a company and a Public Sector
Undertaking. For the Assessment Year 2002-03, return of income of the
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assessee declaring total income of Rs.111,25,85,609/- filed on 23rd January,
2003 was taken up for scrutiny assessment. In the assessment order dated
19th March, 2004 several additions including addition of Rs.35,57,615/- on
account of 1.5% overhead and administrative charges relating to Andrews
Ganj project were made. The assessee had undertaken construction of the
Andrews Ganj project awarded to them by the Government of India. The
Assessing Officer relied upon the minutes of meeting held on 7th
September, 1995, to hold that the assessee was entitled to overhead charges
of 1.5% not only in respect of cost of construction of the community centre
but also on the cost of construction of the residential flats. This, as noticed,
resulted in the addition of Rs.35,57,615/-. The assessment order further
records that in the books of accounts this amount had been reversed.
4. The Commissioner of Income Tax (Appeals) affirmed the finding
that as per minutes of meeting held on 7th September, 1995 with Ministry of
Urban Development, overhead administrative expenses were payable not
only in respect of the community centre but in respect of residential
quarters also.
5. The Income Tax Appellate Tribunal (Tribunal, for short) by the
impugned order dated 20th December, 2013 has dismissed the appeal filed
by the assessee, recording as under:-
"5. At the time of hearing before us, the learned
counsel for the assessee reiterated the same argument as
was raised before the Assessing Officer that the
ITA No. 339/2014 Page 2 of 5
overhead charges were not leviable on general pool
accommodation. However, we find that the Assessing
Officer has reproduced the relevant portion of the
minutes from which it is evident that the assessee is
entitled to overhead charges of one and half percent on
the computed cost of the project. The computed cost of
the project would include cost of the entire project
including general pool accommodation. In view of the
above, we do not find any justification to interfere with
the orders of lower authorities in this regard.
Accordingly, ground No.1 of the assessee's appeal is
rejected."
6. Along with the grounds of appeal, the appellant before us has filed
copy of minutes of the meeting held on 7th September, 1995 and after
making reference to the same has pointed out that the said minutes have
been misread and misunderstood by the Assessing Officer and the appellate
authorities, including the Tribunal. The said minutes specifically make
reference to the community centre complex at Andrews Ganj, New Delhi as
is clear from the very first paragraph. The subsequent paragraphs,
including the paragraph quoted by the Assessing Officer entailing payment
of administrative expenses @ 1.5% relate to the development of community
centre complex at Andrews Ganj, New Delhi and not to residential quarters
which was not the subject matter of the said meeting and the recorded
memorandum.
7. Having read the said record of minutes of meeting, we felt that there
was merit in the submission made as the recorded minutes specifically refer
to the position with reference to development of community centre
ITA No. 339/2014 Page 3 of 5
complex at Andrews Ganj, New Delhi and not to the residential quarters
under construction at Andrews Ganj.
8. In light of the aforesaid submissions and noting the minutes of the
meeting, while issuing notice on 11th July, 2014, we had asked the counsel
for the Revenue to verify the factual position and inform the Court whether
the assessee had at any time received administrative expenses @ 1.5% in
relation to the residential quarters from the Government of India. We had
also recorded the submission of the assessee that the assessee never
received 1.5% as administrative expenses for construction of the residential
quarters.
9. During the hearing today, learned counsel for the respondent-
Revenue has filed before us a letter dated 25th September, 2014 of the
Assessing Officer, accepting and admitting that on verification it has been
ascertained that overhead charges were leviable by the assessee only in
respect of Andrews Ganj community centre and not on the development of
residential flats at the Andrews Ganj project. The said letter has been kept
on record.
10. Normally, we would have remanded the case to the Tribunal for fresh
decision in the light of the minutes of meeting held on 7 th September, 1995,
but in view of the facts now elucidated and accepted by the Revenue, we
are not inclined to pass an order of remit. It would be a formality. It is an
accepted position that the appellant-assessee had never received 1.5%
ITA No. 339/2014 Page 4 of 5
administrative expenses in respect of the residential quarters in Andrews
Ganj project. Clearly, therefore, the stand of the appellant-assessee that the
notes of the meeting held on 7th September, 1995 related to the
development of community centre complex at Andrews Ganj, New Delhi
and not to residential quarters is correct. The aforesaid document has been
misread. There was no accrual of income in case the Government of India
had not agreed to pay any overhead expenses or administrative charges @
1.5% in respect of residential quarters at Andrews Ganj Complex, New
Delhi.
11. The question of law is accordingly answered in favour of the
appellant-assessee and against the Revenue. Addition of Rs. 35,57,615/- is
deleted. The appeal is disposed of. In the facts of the case, there is no
order as to costs.
SANJIV KHANNA, J.
V. KAMESWAR RAO, J.
OCTOBER 27, 2014
VKR
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