Glitz Builders And Promoters Pvt. Ltd., ... vs Assessee

M/s Glitz Builders and Vs. Assistant Commissioner of Promoters Pvt.Ltd., Income Tax, M-11, Middle Circle, Circle, Central Circle- Circle-23, Connaught Circus, New Delhi. New Delhi - 110 001. PAN : AABCG9331N.

(Appellant) (Respondent)

ITA No.1406/Del/2013 No.1406/Del/2013 Assessment Year : 2006- 2006-07

Assistant Commissioner of Vs. M/s Glitz Builders and Promoters Income Tax, Pvt.Ltd., Central Circle- Circle-23, M-11, Middle Circle, New Delhi. Connaught Circus, New Delhi - 110 001. PAN : AABCG9331N.

(Appellant) (Respondent)

Assessee by : Shri V.S. Rastogi, AR. Revenue by : Shri Vikram Sahai, Sr.DR.

ORDER

PER G.D. AGRAWAL, VP :

These appeals by the assessee and the Revenue are directed against the order of learned CIT(A)-XXXIII, New Delhi dated 28th December, 2012 for the AY 2006-07.

2 ITA-1747 & 1406/D/2013

2. Ground No.1 & 2 of the assessee's appeal are with regard to validity of issue of notice under Section 153C of the Income-tax Act, 1961. These grounds were not pressed at the time of hearing before us. Accordingly, the same are rejected as such.

3. Ground Nos.3 & 4 of the assessee's appeal read as under:-

"3. That on the facts and circumstances of the case and in law the CIT(A) erred in not accepting the appellant's contention that Additional Payments having not been claimed as deduction by appellant, no disallowance could have been made in the hands of the appellant.

3.1 That without prejudice the CIT(A) erred in upholding the disallowance of additional payments made to the recipients who were not the owners of land and to the payment made in cash.

3.2 That without prejudice the CIT(A) erred in not himself quantifying the addition to be made.

4. That on the facts and circumstances of the case and in law the CIT(A) erred in upholding the disallowance u/s 40A(3) in respect of which no deduction was claimed by the appellant.

4.1 That even on merits the disallowance was not justified."

4. While, the only ground raised in the appeal of the Revenue reads as under:-

"On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs.13,06,377/-, made by the Assessing Officer in view of the provisions of Section 37(1) of the Income Tax Act, 1961 on account of additional payment in violation of Stamp Duty Act, 1899."

3 ITA-1747 & 1406/D/2013

5. At the time of hearing before us, it is submitted by the learned counsel that during the year under consideration, the assessee company acquired various lands from farmers/villagers for and on behalf of M/s Countrywide Promoters (P) Ltd. (hereinafter referred to as CWPPL). As per the collaboration agreement between the assessee and CWPPL, CWPPL was to develop the land and sell it to the buyers. The assessee was only entitled to consolidated fee of `35,000/- per acre. In pursuance to above collaboration agreement, the assessee acquired the land and the cost of the purchase of land was debited to the account of CWPPL which made the payment there for. That in respect of some land, the assessee was required to make additional payment due to some dispute raised by the near relatives of the person who executed the sale deed. The Assessing Officer disallowed such additional payment on the ground that the genuineness of the additional payment is not established. Accordingly, the total additional payment of `13,06,377/- was disallowed. He also disallowed the sum of `4,59,999/- under Section 40A(3). On appeal, learned CIT(A) sustained the disallowance under Section 40A(3). However, in respect of additional payment to the owner of the land, he partly allowed the assessee's appeal with the following direction:-

"In view of the above additional payment made to the owner of the land or to his brother, father, sons & their spouses, who have got some legal claim over such land by way of account payee cheque is hereby allowed as an expense u/s 37 and additional payment made to other payments are not supported by any legal right over the land and similarly payment made in cash to the owner of land is confirmed as, there are instances of not conforming the receipt by few seller as stated supra. Therefore, the ground is partly allowed."

6. The assessee, aggrieved with the disallowance sustained under Section 40A(3) and part disallowance in respect of additional payment, 4 ITA-1747 & 1406/D/2013

is in appeal while the Revenue is in appeal in respect of relief allowed on account of additional payment.

7. It is submitted by the learned counsel that any payment which has not been claimed by the assessee as an expenditure cannot be disallowed. He stated that the assessee purchased the land for and on behalf of CWPPL and any payment for the purchase of land or for additional payment has been debited to the account of CWPPL. Therefore, when no deduction is claimed by the assessee for purchase of land or for additional payment, the disallowance under Section 40A(3) or for additional payment cannot be made in the hands of the assessee.

8. Learned DR, on the other hand, relied upon the order of the Assessing Officer. He stated that the assessee has purchased the land and handed over the same to CWPPL. Thus, it is a case of purchase and sale of land by the assessee to CWPPL. Merely because the assessee has not passed the entry of purchase and sale of the land in its books of account and only accounted for the remuneration from the sale of land, application of Section 40A(3) cannot be avoided. He, therefore, submitted that the order of Assessing Officer should be sustained.

9. We have carefully considered the submissions of both the sides and perused relevant material placed before us. The assessee has produced the collaboration agreement before the Assessing Officer and has submitted as under:-

"Based on the aforesaid Agreement the assessee purchased land for which the (M/s Countrywide Promoters Pvt.Ltd.) has reimbursed all costs and expenses with respect to the acquisition of the said land 5 ITA-1747 & 1406/D/2013

and also in conformity with the Collaboration Agreement the assessee has received fees calculated @ Rs.35,000/- per acre, which is duly credited to the Profit and Loss Account as the income."

10. The above facts stated by the learned counsel during assessment proceedings have not been found to be incorrect or non- genuine. As per the collaboration agreement, the assessee was to purchase the land for and on behalf of CWPPL and whatever was the purchase price including the additional payment was debited to CWPPL and the assessee only received fixed remuneration i.e. `35,000/- per acre. Thus, we agree with the contention of the learned counsel that the assessee has not claimed any deduction in respect of cost of the purchase of the land, whether original or additional payment. When the cost of the land as well as additional payment is not claimed by the assessee as deduction, the question of any disallowance under Section 40A(3) or otherwise in the case of the assessee does not arise. We, therefore, delete the entire disallowance made by the Assessing Officer under Section 40A(3) as well as additional payment.

11. In the result, the appeal of the assessee is allowed whereas the appeal of the Revenue is dismissed.

Decision pronounced in the open Court on 2nd January, 2015.

Sd/- Sd/- (H.S. H.S. SIDHU) SIDHU) (G.D. AGRAWAL) AGRAWAL) JUDICIAL MEMBER VICE PRESIDENT

Dated : 02.01.2015 VK. 6 ITA-1747 & 1406/D/2013

Copy forwarded to: -

1. Appellant : M/s Glitz Builders and Promoters Pvt.Ltd.,

M-11, Middle Circle, Connaught Circus, New Delhi - 110 001.

2. Respondent : Assistant Assistant Commissioner of Income Tax, Central Circle-

Circle-23, New Delhi.

3. CIT

4. CIT(A)

5. DR, ITAT

Assistant Registrar