Kidderpore Holdings Ltd. v. ITO

Case Laws Analysis
REFERRED Crompton Greaves Ltd. v. Asstt. CIT & Ors. 2015 TaxPub(DT) 0546 (Bom-HC)
REFERRED Aroni Commercials Ltd. v. Dy. CIT & Anr. 2014 TaxPub(DT) 1649 (Bom-HC)

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers2024 TaxPub(DT) 1955 (Bom-HC) IN THE BOMBAY HIGH COURT K. R. SHRIRAM & DR. NEELA GOKHALE, JJ. Kidderpore Holdings Ltd. v. ITO Writ Petition No. 2395 of 2022 12 April, 2024 Petitioner by: Prakash Shah a/w. Jas Sanghavi and Mr. Prabhat Chaurasia i/b. PDS Legal. Respondents by: Prakash Chandra Chhotaray. JUDGMENT *K.R. Shriram, J.* Petitioner is in the business of land development and construction of real estate properties. For assessment year 2012-2013 petitioner filed return of income on 29-9-2012 declaring a total income of Rs. 1,52,974. The return was selected for scrutiny assessment and notices were issued on 6-8-2013 under section 143(2) of the Income Tax Act, 1961 (the Act) and on 17-7-2014, 29-10-2014 and 3-3-2015 under section 142(1) of the Act. Petitioner responded to the queries vide its letters dated 2-2-2015, 16-2-2015, 16-2-2015, 9-2-2015 and 23-2-2015. By a letter dated 13-3-2015 further details were submitted to the assessing officer. This was followed by a show cause notice dated 24-3-2015 to petitioner calling upon petitioner to show cause as to why, (i) profit on the percentage completion method should not be brought to tax in hands of petitioner; (ii) transfer of proportionate undivided rights in the land in favour of the buyers should not be brought to tax as profit from the project constructed by petitioner; (iii) profits from the project should not be brought to tax as profit from the project constructed by petitioner; and (iv) the right on the property as per agreement dated October 2009 should not be treated as extinguished in favour of the buyers as per the agreements entered with them and gains from such extinguishment should not be brought to tax. 2. Petitioner replied to the show cause notice. In short, it was petitioners case that no income arose to petitioner from the project Lodha Supremus as petitioner had only constructed the project on behalf of its shareholders, i.e., SNCML, with shareholders funds. 3. An assessment order dated 31-3-2015 came to be passed under section 143(3) of the Act and the Assessing Officer made additions on account of income from sale of Lodha Supremus. The assessment order dated 31-3-2015 came to be challenged by petitioner by filing an appeal before the Commissioner of Income Tax (Appeals) (Commissioner (Appeals)). The Commissioner (Appeals), by an order dated 28-4-2015, was pleased to allow the appeal filed by petitioner by holding that the Settlement Commission has already accepted the taxability of income from the project Lodha Supremus in the hands of another assessee who was a shareholder of petitioner and in view of the same, taxing the said income once again in the hands of petitioner will result in double taxation which was not permissible. The Commissioner (Appeals) also held that the transactions between SNCML and petitioner are not sham transactions as alleged by the Assessing Officer. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2024 TaxPub(DT) 1955 (Bom-HC)

IN THE BOMBAY HIGH COURT

K. R. SHRIRAM & DR. NEELA GOKHALE, JJ.

Kidderpore Holdings Ltd. v. ITO

Writ Petition No. 2395 of 2022

12 April, 2024

Petitioner by: Prakash Shah a/w. Jas Sanghavi and Mr. Prabhat Chaurasia i/b. PDS Legal.

Respondents by: Prakash Chandra Chhotaray.

JUDGMENT

K.R. Shriram, J.

Petitioner is in the business of land development and construction of real estate properties. For assessment year 2012-2013 petitioner filed return of income on 29-9-2012 declaring a total income of Rs. 1,52,974. The return was selected for scrutiny assessment and notices were issued on 6-8-2013 under section 143(2) of the Income Tax Act, 1961 (the Act) and on 17-7-2014, 29-10-2014 and 3-3-2015 under section 142(1) of the Act. Petitioner responded to the queries vide its letters dated 2-2-2015, 16-2-2015, 16-2-2015, 9-2-2015 and 23-2-2015. By a letter dated 13-3-2015 further details were submitted to the assessing officer. This was followed by a show cause notice dated 24-3-2015 to petitioner calling upon petitioner to show cause as to why,

(i) profit on the percentage completion method should not be brought to tax in hands of petitioner;

(ii) transfer of proportionate undivided rights in the land in favour of the buyers should not be brought to tax as profit from the project constructed by petitioner;

(iii) profits from the project should not be brought to tax as profit from the project constructed by petitioner; and

(iv) the right on the property as per agreement dated October 2009 should not be treated as extinguished in favour of the buyers as per the agreements entered with them and gains from such extinguishment should not be brought to tax.

2. Petitioner replied to the show cause notice. In short, it was petitioners case that no income arose to petitioner from the project Lodha Supremus as petitioner had only constructed the project on behalf of its shareholders, i.e., SNCML, with shareholders funds.

3. An assessment order dated 31-3-2015 came to be passed under section 143(3) of the Act and the Assessing Officer made additions on account of income from sale of Lodha Supremus. The assessment order dated 31-3-2015 came to be challenged by petitioner by filing an appeal before the Commissioner of Income Tax (Appeals) (Commissioner (Appeals)). The Commissioner (Appeals), by an order dated 28-4-2015, was pleased to allow the appeal filed by petitioner by holding that the Settlement Commission has already accepted the taxability of income from the project Lodha Supremus in the hands of another assessee who was a shareholder of petitioner and in view of the same, taxing the said income once again in the hands of petitioner will result in double taxation which was not permissible. The Commissioner (Appeals) also held that the transactions between SNCML and petitioner are not sham transactions as alleged by the Assessing Officer.