A realty joint venture of Mumbai-based Giraffe Developers Pvt Ltd, an associate firm of listed real estate company Hubtown Ltd (earlier called Ackruti City Ltd), has come under the scanner of the Income-Tax (I-T) department with tax authorities allegedly unearthing “bogus expenditure” of about Rs 120 crore in the books of the joint venture (JV), sources told The Indian Express.
Hillcrest Joint Venture, a JV of Giraffe Developers and Atul Projects India Pvt Ltd, was surveyed by the tax department on October 30, said sources. Giraffe Developers is an associate firm of Hubtown, according to the annual report of the firm.
The tax survey covered about three business premises of the joint venture, and was conducted under Section 133 A of the Income-Tax Act, which allows the agency to inspect the books of accounts of a firm. A tax survey is only carried at the business premises of a firm or entity.
The tax agency has alleged that Hillcrest has booked expenditure of Rs 120 crore in its books of accounts for financial year 2017-18 based on a “bogus agreement” with service providers. The department has allegedly found that the services that were to be provided under the agreement were never rendered.
Hillcrest, however, said that they have not shown any bogus expenditure in their books of accounts. “Hillcrest has surrendered Rs 120 crore (to I-T for taxation), which were claimed as extra land cost or FSI cost payable to Hubtown Ltd. The reason for the same is that the time of agreement was not mentioned and in a later stage can’t be claimed or there was no proper time of claiming of the extra cost,” said the official spokesperson of Hillcrest.
According to sources, Hillcrest is currently developing a slum rehabilitation authority (SRA) project of the Maharashtra Industrial Development Corporation (MIDC) in Andheri East in suburban Mumbai. Under the project, for every 1 sq ft of rehabilitation building, Hillcrest is entitled to 0.75 sq ft of saleable FSI.
“Post the findings of the survey, the assessment wing of the tax department will add Rs 120 crore to the taxable income of Hillcrest for financial year 2017-18,” said a tax official.
“Hubtown Ltd does not own any share in Hillcrest Joint Venture and has nothing to do with that Joint Venture,” said Hubtown Ltd in an email. The official spokesperson of Hubtown also said that while the company holds 7.20 per cent equity shares in Giraffe Developers, it has no control over the management of Giraffe Developers and, therefore, has nothing to do with Hillcrest Joint Venture.
Interestingly, the official website of Maharashtra Real Estate Regulatory Authority has listed the phone number of Hubtown Ltd’s registered office as the official contact number of Hillcrest Joint Venture. When The Indian Express called on this number, it was directed to call at the sales office of Hubtown for any queries related to Hillcrest Joint Venture. The sales office of Hubtown said that the officers cannot be reached for a response as they are on a field visit.