Druzba Overseas (P) Ltd., New Delhi vs Department Of Income Tax

BEFORE SHRI G. C. GUPTA, HON'BLE VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. No. 2545/Del/2013 Assessment year : 2008-09 ACIT, CC-23, Vs. M/s. Druzba Overseas (P) Ltd., New Delhi M-11, Middle Circle, Connaught Circus, New Delhi GIR / PAN:AABCD5112E (Appellant) (Respondent)

Appellant by : Smt. Parwinder Kaur, Sr.DR Respondent by : Shri V S Rastogi. AR

ORDER

PER T.S. KAPOOR, AM:

This is Revenue's appeal against the order of Ld. CIT(A) dated 23.01.2013. The only effective ground taken by Revenue is the grievance with the action of Ld. CIT(A) by which he had deleted the addition of Rs.29,74,652/- made by A.O. on account of interest paid outside books of accounts.

2. The brief facts as noted in the assessment order are that the assessee is engaged in the business of development, construction and marketing of Real Estate in the commercial and residential sector. Search and seizure operation was carried out on BPTP group companies on 15.11.2007 the assessee company also belongs to BPTP group. On the basis of certain documents seized during the course of search and seizure and also on the basis of post search enquiries, it was established that the group companies of 2 ITA No.2545/Del/2013

BPTP were following a business model as a part of which only part payments of the sale consideration in respect of the land purchased were paid at the time of execution of the sale deed and the payments of balance sale consideration were made though post dated cheques (PDCs) and for the intervening period, interest was paid in cash to the vendors of the land by the vendee company on monthly basis @ 1.25% p.m., on the amount of PDCs and this cash payment of interest by the vendee company, was not accounted for by it, in its books of account. The A.O. observed that the assessee company had also purchased large chunk of land during the financial year 2007-08 and following the same modus operandi had paid interests in cash to the vendors of the land on monthly basis @ 1.25% p.m. on the amount of PDCs and this cash payment of interest had not been accounted for by it in its books of accounts. Therefore, after issuing questionnaire and after going through reply from the assessee, the A.O. made addition of Rs.29,74,652/- representing the interests on PDCs. Break up of details and calculation of interest has been made by A.O. vide para 2.6. Aggrieved, the assessee filed appeal before Ld. CIT(A) and Ld. CIT(A) partly allowed relief to the assessee by holding as under:

"5.4 Conclusion: -

Learned AR has maintained all along that interest is not paid as all the receipts are only memorandum only. Analysis of these above seized document reveals that these seized documents definitely proves that interest is paid on PDCs. Various voucher in seized documents conclusively proves that the recipient has signed on voucher for receipt of the interest. Ld AR's contention that these are only working of interest claimed by seller for putting up before senior management does not appear to be convincing. In case of claim, the receiver will not sign the voucher as recipient. Amounts are specific and calculation is 15% per annum. Therefore, Ld. AR without conceding that the interest is paid on PDCs has taken the stand that in none of 3 ITA No.2545/Del/2013

the seized material, i.e. even in receipt seized, the interest is from date of issue of PDCs. Now issue arises whether interest on PDCs are paid from date of issue or for extension of PDCs. Documents discussed above where there is clear evidence of receipt of interest is for extension of period of PDCs. Ld AR's arguments that calculation of interest on PDCs has been considered while entering into agreements holds some logic. But when dates of PDCs are extended, the recipient will definitely ask and settle for some additional compensation in form of interest. There is no evidence which proves that interest is paid from the date of sale to date of encashment of post dated cheques. However, there is concrete evidence in form of seized material to show that interest is paid and received by seller on the extension of PDCs as discussed above while analyzing the seized document. Therefore, in my view where ever the date of PDCs are extended interest is paid @ 15% per annum in cash out of Books of accounts. which are evident from seized material. Therefore, interest on PDCs to the extent of extension period appears to quite reasonable and logical.

Accordingly, interest on PDCs either as sale consideration or additional payment may be recomputed to the extent of extended period of PDCs by the A.O. and to that extent addition is confirmed. The above formulae will apply to all group companies under the management of BPTP i.e.( M/s BPTP and Associate companies) including the appellant company as evidence is found in respect of various companies of BPTP and some seized paper could not be related to specific company. Therefore, it is proper to apply this formula for all companies under the common management of BPTP Group, head by Shri Kabul Chawla. All these companies are closely linked. Some companies purchase land and transfer the same to M/s BPTP Ltd, or Countrywide Promoters (P) Ltd. for Housing or commercial projects are ultimately developed and sold by M/s BPTP Ltd and Countrywide Promoters Ltd. or in stray case by some other companies. Assessing Officer has applied the case of Eusuf Ali for applying interest on PDCs for all companies of BPTP Group for all Assessment Year under consideration. Ld AR has tried to differentiate the above cited case on facts.

In my view, as interest payment on extension of period of PDCs are established on numerous seized documents. A trend is established for the group as the overall management is controlled by one person Sh,. Kabul Chawla and activities of all companies are interrelated.

4 ITA No.2545/Del/2013 If it is not possible to work out the extension of PDCs in each case then A.O. is directed to recomputed interest on PDCs after six months from date of issue of PDCs i.e. date of sale, six months is taken as reasonable period for giving PDC as per sale deed. This view is formed on the basis the statement of Sh. Chhotu Ram which says that normally PDCs are given for 8 to 10 months. Further Ld AR has also submitted few Sale Deed in respect of some of Seized record in the case of Ramvati Beero etc where the interest working is made after 91 15 months. Taking these facts into consideration. It would be proper to compute interest after 6 months from date of Sale on conservative side. Accordingly this ground is partly allowed."

2.1 Aggrieved, the Revenue is in appeal before us.

3. At the outset, Ld. A.R. invited our attention to the fact that various paper books were filed but at present only paper book containing 76 pages was relevant as now, the mater stands covered in the case of group companies where similar addition has been dealt by Hon'ble Tribunal in I.T.A. No. 1532 and 1756/Del/2013 as placed at paper book pages 65-76. Ld. A.R. also took us to pages 73-74 of the paper book.

4. Ld. D.R. fairly conceded that the matter is covered in favour of assessee.

5. We have heard rival parties and have gone through the material placed on record. We find that similar issue arose in the case of ISG Estate (P) Ltd. which is also a group company of BPTP and findings of the Tribunal as contained vide paras 14-17 are reproduced below:

"REVENUE'S APPEAL

14. As regards ground No.1 raised by the Revenue relating to deletion of addition of Rs. 26,69,785/- made by the AO on account of interest on PDCs paid out of books of account is concerned, it is was submitted by the Ld. Counsel of the assessee that this was the interest calculated @ 15% p.m. on PDCs from the date of issue (sale deed) to 5 ITA No.2545/Del/2013

the date of encashment. We find that CIT(A) held in para 5.4 at page 17 of his order that "If it is not possible to work out the extension of PDCs in each case then A. O. is directed to recomputed interest on P DCs after six months from date of issue of PDCs i.e. date of sale, as six months is taken as reasonable period for giving PDC as per sale deed". Ld. Counsel of the assessee further submitted that since the PDCs were encashed in less than six months from the date of issue, entire interest of Rs.26,69,785/- was deleted in pursuance to the order of CIT(A). Copy of appeal effect by way of revised Tax Computation is enclosed at page 98-99 of the PB. He further submitted that the matter in the present appeal is covered by the order of the Tribunal 'C' Bench Delhi in the case of a sister concern viz., M/s IAG Promoters and Developers Pvt. Ltd dated 31.10.2014 passed in ITA No. 1674/Del113 & 1765/Del113 for AY 2008-09. (Extract copy is enclosed at pages 69-73 of the PB. Ld. Counsel for the assessee stated that the facts of the case of M/s IAG Promoters and Developers Pvt. Ltd (supra) are identical to the facts of the case of the assessee and both companies are group/sister companies.

15. Ld. DR did not have any raised any objection to the aforesaid proposition of the Id. Counsel of the assessee. 16. We have heard the both parties and perused the relevant record available with us specially the impugned order passed by the Revenue Authorities; Paper Book filed by the assessee, we find considerable cogency in the contention of the Id. Counsel of the assessee that the issue raised in ground no. 1 raised in the Revenue's Appeal is squarely covered by the Order dated 31.10.2014 of the ITAT, Delhi 'C' Bench passed in ITA No. 1756/Del/2013 (A.Y. 2008-09) in the case of M/s IAG Promoter & Developers (P) Ltd. vs. ACIT wherein the Tribunal held vide para no. 3 at page 5 as under:-

"The ClT(A) directed to recalculate the interest on PDCs and there was a sound logic for such direction. His direction is based on material found and seized at the time of search. In view of the above, we do not find any justification to interfere with the order of learned ClT(A) in this regard and accordingly, we reject ground no.l of the Revenue's appeal."

17. Respectfully following the precedent as aforesaid, we dismiss this ground of the Revenue's appeal."

6 ITA No.2545/Del/2013 6. We find that in the present case also, the PDCs' have been encashed within a period of six months as is apparent from page 11 of assessment order where A.O. has noted the date of sale of properties and date of encashment of cheques. Therefore, we find that the facts in the present case are similar to that of group companies of ISG Estates (P) Ltd., therefore, following the Tribunal order in the case of group company, we dismiss this appeal of Revenue.

7. In view of above, appeal of Revenue is dismissed.

8. Order pronounced in the open court on 25th Feb., 2015.

Sd./- Sd./- ( G. C. GUPTA) (T.S. KAPOOR) VICE PRESIDENT ACCOUNTANT MEMBER th Date: 25 Feb., 2015 Sp Copy forwarded to:- 1. The appellant 2. The respondent 3. The CIT 4. The CIT (A)-, New Delhi.

5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy.

By Order (ITAT, New Delhi).

S.No. Details Date Initials Designation 1 Draft dictated on 20/2 Sr. PS/PS 2 Draft placed before author 20,23 Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS 25/2 Sr. PS/PS 6 Kept for pronouncement 25/2 Sr. PS/PS 7 File sent to Bench Clerk 25/2 Sr. PS/PS Date on which the file goes to Head 8 Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order