Mohak Real Estate Pvt. Ltd.,, New Delhi vs Department Of Income Tax
- CitationITA No. 3577/Del/2012, AY: 2007-08
Ratio decidendi
The rule this decision rests on
The Tribunal upheld the deletion of the disallowance under section 40(a)(ia) and dismissed the Revenue's appeals on the ground that the issues were squarely covered by its earlier decision in Finian Estates (ITA No. 1953/Del/2011), which the Departmental Representative could not distinguish. The reasoning rests on that binding-precedent point and on the findings that the payments to the land consolidator were made on a principal-to-principal basis for consolidation and surrender of land rights, not for services rendered as an agent. Where a payment is made to a person acting on a principal-to-principal basis, and the amount is consideration for consolidation of land and surrender of that person's rights in the land purchased, the payment is not in the nature of commission or fees for services, so that the deduction-at-source provisions of section 194H are not attracted. Where the assessee has not claimed any deduction for the payment in its profit and loss account or in the computation of taxable income, the disallowance under section 40(a)(ia) for non-deduction of tax at source does not apply. Where the Revenue cannot controvert that the issue before it is identical to one already decided by the Tribunal in a coordinate bench decision, the Tribunal follows that decision and dismisses the Revenue's appeal on the same issue.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Dy.CIT, Circle 10(1) vs. M/s Mohak Real Estate Pvt.Ltd. New Delhi New Delhi
(Appellant) (Respondent)
Assessee by : Sh.Pradeep Dinodia, C.A. Sh. RK Kapoor, C.A. Department by : Sh. P.Dam Kanunjna, Sr.D.R
ORDER
PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER
These are the appeals filed by the Revenue. ITA 4351/D/12 is filed against the order of the Ld.CIT(A)-XIII, New Delhi dated 04.05.2012 pertaining to the Assessment Year ('AY') 2006-07, and ITA 3577/Del/12 is directed against the order of the Ld.CIT(A)-XIII, New Delhi dt. 12.4.2012 pertaining to the AY 2007-08.
1.1. As these appeals belong to the same group, for the sake of convenience they are heard together and are disposed of by way of this consolidated order.
2. First let us take ITA no.4351/Del/12 pertaining to the AY 2006-07. The facts are brought out at para 4 of the Ld.CIT(A)'s order which are extracted for ready reference.
1 ITA No. 3577/Del/2012, AY: 2007-08 ITA No.4351/Del/2012, AY: 2006-078 Mohak Real Estate Pvt.Ltd., New Delhi
"The brief facts are that the appellant filed its return of income declaring loss of Rs. 91,70,837/- and AO had completed the assessment u/s 143(3) at an income of Rs. 1,41,44,619/-. In the assessment order AO has mentioned that Appellant has not started its business in the relevant year as purchase of land has been declared as investment and not stock in trade. During the year Appellant has received Unsecured Loan Rs. 38.48 Crores from DLF Universal Limited and also accepted unsecured loan of Rs. 19,55,14,500/- each from M/s Lysander Builders & Developers Pvt. Ltd. and M/s Eldoris Builders & Developers Pvt. Ltd. which was utilized in repayment of Loan from DLF Universal Ltd. ASSESSING OFFICER has further recorded in the assessment order that by issuing 391029 unsecured debentures of Rs. 500/-- each to M/s Lysander Builders & Developers Pvt. Ltd. and Eldoris Builders & Developers Pvt. Ltd., Appellant has violated provisions of section 269T of the LT. Act being made repayment other-wise than by crossed cheque or bank draft. The Additional CIT was intimated to initiate the penalty proceedings U/S 271E for the above mentioned default. ASSESSING OFFICER has held in his order that all expenses claimed by the Appellant are pre-operative expenses, hence business loss is assessed at Nil. Further ASSESSING OFFICER has made addition of Rs. 77,991/- by mentioning that same was not explained and hence unexplained credit introduced by the Appellant. Further out of the details filed in respect of Creditors, ASSESSING OFFICER asked Appellant to prove the identity of Mast Ram to whom amount of Rs. 1,40,66,628/- was payable. In the Order ASSESSING OFFICER has claimed that Appellant has taken U-turn and changed the name of creditor from Mast Ram to M/s Vikram Electric Equipment Pvt. Ltd. Further ASSESSING OFFICER has claimed that payment made to M/s Vikram Electric Equipment Pvt. Ltd. is in the nature of commission and therefore liable for deduction of TDS. Further ASSESSING OFFICER has held that amount payable to M/s Vikram is a bogus creditor. Therefore, said amount of Rs.1,40,66,6281- has been disallowed by AO by treating it as bogus creditor and also holding that Appellant has contravene TDS Provisions."
2 ITA No. 3577/Del/2012, AY: 2007-08 ITA No.4351/Del/2012, AY: 2006-078 Mohak Real Estate Pvt.Ltd., New Delhi
3. On appeal the First Appellate Authority granted part relief. Aggrieved the Revenue is in appeal before us on the following grounds.
"1. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in allowing the business loss claimed by the assessee amounting to Rs.91,75,357/- and disallowed by the AO treating the same as pre-operative expenditure related to investments?
2. Whether in the facts and circumstances Ld CIT(A) was right in holding that the credit of Rs. L,40,66,628/- appearing in the name of Sh. Mast Ram, which assessee during the course of assessment proceedings claimed to be in the name of M/s Vikram Electric Equipment Pvt Ltd as genuine?
3. Whether in the facts and circumstances of the case and without prejudice above grounds Ld CIT(A) was right in holding that the payment allowed to M/s Vikram Electric Equipment Pvt Ltd for consolidation of land are not in the nature of commission?
4. Whether in the facts and circumstances of the case Ld CIT(A) has erred in not holding that consolidation charges are merely different nomenclature for commission as such liable for deduction of tax and consequent disallowance u/s 40(i)(a) of the I T Act, 1961 in the event of default
5. The assessee craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing."
4. After hearing rival contentions we find that the First Appellate Authority at page 20 has held as follows.
"The facts of the appellant's case are identical with the facts of the above cited case of ITAT 'B' Bench, New Delhi. Therefore the payments made to M/s Vikram Electric Equipment Pvt. Ltd. as land consolidator were not for any services rendered but same were made for consolidation of land and surrendering of its rights in the land in favour of the appellant. M/s Vikram Electric Equipment Pvt. Ltd was acting as principle to principle basis and not an agent. Therefore, provision of section 194 H are not attracted in the case of appellant. The clause 3.2 of the MOU entered into between the appellant and M/s Vikram Electric Equipment Pvt. Ltd clearly show that M/s Vikram Electric Equipment Pvt. Ltd was working on principal to principal basis and the amount paid to M/s Vikram Electric Equipment Pvt. Ltd was for consolidation of 27 acres of land and surrendering of its rights in favour of the appellant company.
In view of the above the payment made to M/s Vikram Electric Equipment Pvt. Ltd was genuine payment and same was related to purchase of land and surrendering of its rights in the land purchased by the appellant company. Therefore, the addition made by the ASSESSING OFFICER is deleted. Further, the provisions of section 40(a)(ia) are not attracted in this case as the appellant has not claimed any deduction for any expenses on account of payment to M/s Vikram Electric Equipment Pvt. Ltd, either in its profit and loss account or in the computation of taxable income filed.
3 ITA No. 3577/Del/2012, AY: 2007-08 ITA No.4351/Del/2012, AY: 2006-078 Mohak Real Estate Pvt.Ltd., New Delhi
Hence, the ground of appeal No. 3 raised by the appellant is allowed in favour of the appellant."
5. The Ld.D.R. could not controvert the arguments of the assessee that the issue is squarely covered by the decision of Hon'ble ITAT the Delhi B Bench in the case of M/s Finian Estates vs. ITO in ITA no. 1953/Del/2011, where the issue of payments to M/s Vikram Pvt.Ltd. was involved. Under the circumstances we uphold the order of the First Appellate Authority and dismiss this appeal of the Revenue.
6. ITA 3577/Del/2012: The facts of this case are brought out at para 3 of the Ld.CIT(A)'s order. Here also the First Appellate Authority granted part relief. Aggrieved the assessee has come up in appeal before us on the following grounds.
"1. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition fo Rs.7,48,92,621/- made by the AO u/s 41(1) of the I.T.Act, 1961.
2. Whether the CIT(A) under the facts and circumstances of the case and in law was justified in deleting the addition of Rs.64,10,847/- made by the AO on account of rejection of books u/s 145 of the Act and estimated profit @ 8% of the gross receipts.
3. The assessee craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing."
7. After hearing rival contentions we find that the First Appellate Authority at page 20 has held as follows.
"The facts of the appellant's case are identical with the facts of the above cited case of ITAT 'B' Bench, New Delhi. Therefore the payments made to M/s Vikram Electric Equipment Pvt. Ltd. as land consolidator were not for any services rendered but same were made @ 2% for consolidation of land and surrendering of its rights in the land in favour of the appellant. M/s Vikram Electric Equipment Pvt. Ltd was acting as principle to principle basis and not an agent. Therefore, provision of section 194 H are not attracted in the case of appellant. The clause 3.2 of the MOU entered into between the appellant and
4 ITA No. 3577/Del/2012, AY: 2007-08 ITA No.4351/Del/2012, AY: 2006-078 Mohak Real Estate Pvt.Ltd., New Delhi
M/s Vikram Electric Equipment Pvt. Ltd clearly show that M/s Vikram Electric Equipment Pvt. Ltd was working on principal to principal basis and the amount paid to M/s Vikram Electric Equipment Pvt. Ltd was for consolidation of 27 acres of land and surrendering of its rights in favour of the appellant company.
In view of the above the payment made to M/s Vikram Electric Equipment Pvt. Ltd was genuine payment and same was related to purchase of land and surrendering of its rights in the land purchased by the appellant company. Therefore, the addition made by the ASSESSING OFFICER is deleted.
Further, the provisions of section 40(a)(ia) are not attracted in this case as the appellant has not claimed any deduction for any expenses on account of payment to M/s Vikram Electric Equipment Pvt. Ltd, either in its profit and loss account or in the computation of taxable income filed.
Hence, the ground of appeal No. 1 to 5 raised by the appellant are allowed in favour of the appellant."
8. Consistent with the view taken in ITA 4351/Del/2012 for the A.Y. 2006-07 in the first part of this order, we uphold the order of the First Appellate Authority and dismiss this appeal of the Revenue as the issues are the same.
9. In the result both the appeals of the Revenue for both the Assessment Years are dismissed.
Order pronounced in the Open Court on 20th May, 2015.
Sd/- Sd/- (C.M. GARG) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: the 20th May, 2015
*manga
5 ITA No. 3577/Del/2012, AY: 2007-08 ITA No.4351/Del/2012, AY: 2006-078 Mohak Real Estate Pvt.Ltd., New Delhi
Copy of the Order forwarded to:
1.Appellant; 2.Respondent; 3.CIT; 4.CIT(A); 5.DR; 6.Guard File
By Order
Asst. Registrar
6
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