Income-tax Appellate Tribunal - G Bench Mumbai , Before S Shri Rajendra,Accountant Member and Ram Lal Negi,Judicial Member .ITA 4965 Mum 2014, AY: 2010-11 DCIT-3(2), Room No.674, M s. L.K. Earth Developers Pvt. Ltd. 6th Floor, Aayakar Bhavan, (Formerly known as FKA Excellent Exports M.K. Road,Mumbai-400 020. Vs. Pvt. Ltd.) PAN: AAACE 0897 L 142, B-Wing, Mittal Tower, 210, Nariman Point, Mumbai-400 021. ( Appellant) ( Respondent) Revenue by: Shri K.V. Vispute -DR Assessee by: Shri Vimal Punmiya-AR Date of Hearing: 25.08.2016 Date of Pronouncement: 14.09.2016 , 1961 ( 1 ) 254 Order u s.254(1)of Income-tax Act,1961(Act) PER RAJENDRA, AM- Challenging order of CIT(A)-4,Mumbai,dated 19.05.2014, Assessing Officer (AO), has filed present appeal.Assessee -company engaged in business of trading in steel, financing and building construction,filed its return of income on 26.09.2010,declaring loss of Rs.1.73 crores. Assessing Officer(AO) completed assessment u s.143(3) of Act,on 28.01.2013, determining its income at (-)Rs.1.03 crores. 2.Effective ground of appeal is about deleting disallowance of Rs. 61.26 lakhs. During assessment proceedings AO found that assessee had debited some of Rs.61,26,824 -in its P&L account for share of profit to R.D.Builders (RDB). He directed assessee to show cause as to why aforesaid expenses should not be disallowed.Vide its response dated 19 12 2012,the assessee stated that profit of construction activity had been computed after considering cost of construction and brokerage as had been done in earlier years and as per understanding between parties entered into long back, that payment to RDB was based on mutual understanding on which profit of realty business was to be shared, expenses were consistent with previous years, that arrangement with RDB was consistently followed since inception of project, that in year 2005 RDB had approached assessee with his proposal to bid for plot, that later on assessee entered into agreement with RDB, that expenditure incurred by assessee was because of commercial expediency. After 4965 M 14-LKED considering submission of assessee, AO held that claim of expenditure on share of profit of RDB was not correct and was not covered under principle of business expediency, that expenditure was incurred on basis of MoU which was made between two parties, that it could not be basis for allowability of expenditure, that expenditure incurred by it did not fulfill criteria, that same was not incurred wholly and exclusively for purpose of earning income or making profit. Finally he made disallowance of Rs. 61.06 lakhs and added it to total income of assessee. 3.Aggrieved by order of AO, assessee preferred appeal before First Appellate Authority (FAA).Before him, it was argued that assessee was in business of trading in steel, that it decided to diversify its business activities, in year 2005 RDB approached assessee with proposal to bid for plot of land, it was decided to construct residential tower with help of RDB, that company had no experience in building construction field, that it entered into MoU with RDB, that payment was made to RDB because of commercial expediency, that AO could not decide whether particular expenditure had been incurred for purpose of business or not, that genuineness of expenditure had been verified, that RDB had verified that it had received share of profit, that RDB had offered amount in question for taxation, that policy of making payment to RDB was being followed since AY. 2007 08, that department had accepted claim made in earlier years. After considering summation of assessee and assessment order, FAA held that share of profit from project was shared with RDB as per terms of MoU since AY. 2007- 08 and same had been consistently accepted by AO, that assessment for AY. 2009-10 was completed and section 143 (3) of Act, that as business entity assessee knew its interests best, that AO was not person to decide how to do business, expenditure incurred by assessee had to be seen from viewpoint of business nine and not from perspective of AO, that manner in which profits of venture were to be shared was matter of discretion of co-ventures and MoU could not be disputed after accepting same for more than three years,that there was difference between project construction cost and project maintenance cost, that payment of Rs. 61.26 lakhs made to RDB was reportedly for purpose of assistance in construction activity and gaining experience in field, that 2 4965 M 14-LKED residential tower so constructed gained popularity and assessee had been able to expand its business,that AO should respect Rule of judicial consistency, that agreement entered into between RDB and assessing was valid contract under Indian Contract Act, 1872, that AO could not take contrary view to said MoU after accepted it in earlier AY.s. He referred to cases of Raja Narasingirji (91 ITR 544), Amar Jyoti Pictures (69 ITR 755), Sassoon J David Company Private Ltd.(118ITR261)and allowed appeal filed by assessee. 4.During course of hearing before us,the Departmental Representative (DR) supported order of AO. Authorised Representative (AR) relied upon order of FAA and stated that payment made by assessee was due to commercial expediency, that same was allowable as per provisions of section 37 of Act, that disallowance in hands of assessee would result in double taxation of income, that similar payment was made in earlier years and was accepted by AO. He relied upon cases of Lakshmipat Singhania (71 ITR 291), Hero Cycles Private Ltd. (Appeal number 514 of 2008 of honorable Supreme Court). 5.We have heard rival submissions and perused material available on record. We find that assessee had entered into agreement with RDB to construct tower of residential units, that assessee had no previous experience of real estate business, that as per agreement assessee had to pay certain amounts to RDB, that in earlier years AO did not question validity of payments made to RDB, that at least in one year matter was selected for scrutiny and assessment was made under section 143 (3) of Act, that AO had not doubted genuineness of payment, that he had held that expenditure was not incurred wholly and exclusively for business purposes. In our opinion role of consistency has to be followed as per established principles of taxation jurisprudence-unless and until new and distinguishable facts are found and referred to in assessment orders of subsequent years.In case under consideration, AO has not mentioned as to how facts of instant AY. Were different from facts of earlier years when payment was allowed. AO cannot and should not change stand about allowability of expenditure as per his whims and fancies. There is no doubt that he can take new stand in subsequent AY.s,but for that he has to assign some reasons.In case of Aroni Commercials Ltd.( 362 ITR 403) honorable Bombay High Court has held as under: 3 4965 M 14-LKED Though principle of res judicata is not applicable to tax matters as each year is separate and distinct, nevertheless where facts are identical from year to year, there has to be uniformity and consistency in treatment. In case of Gopal Purohit (336 ITR 287),the jurisdictional High Court has held that that there should be uniformity in treatment and when facts and circumstances for different years were identical particularly in case of same assessee. It is also fact that RDB has offered payment received from assessee and its return of income and has paid taxes.The basic principles of tax laws stipulate that there cannot be double taxation of same income.Thirdly, AO is not person to decide as to how much and under which head assessee should incur expenditure.It is prerogative of assessee. AO is debarred from entering into proverbial shoes of assessee with regard to incurring of expenditure.Considering above,we are of opinion that order of FAA does not suffer from any legal or factual infirmity. Therefore, upholding his order we decide effective ground of appeal against AO. As result, appeal filed by AO stands dismissed. . Order pronounced in open court on 14th September,2016. 14 , 2016 Sd - Sd - ( R.L.Negi ) ( Rajendra) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated : 14.09.2016. Jv.Sr.PS. Copy of Order forwarded to : 1.Appellant 2. Respondent 3.The concerned CIT(A) , 4.The concerned CIT 5.DR G Bench, ITAT, Mumbai , 6.Guard File True Copy BY ORDER, Dy. Asst. Registrar , ITAT, Mumbai. 4 DCIT-3(2), Mumbai v. M/s. L.K. Earth Developers Pvt. Ltd. (Formerly known as FKA Excellent Exports Pvt. Ltd.)