2015 (5) TMI 507 - AT - Income Tax

Disallowance of interest on PDCs paid out of books of account - CIT(A) deleted the addition - Held that - The issue in question is covered by the order of the Tribunal in the group case of the assessee namely M/s IAG Promoters and Developers Pvt. Ltd. 2014 (12) TMI 216 - ITAT DELHI wherein held that ground raised by the Revenue is misconceived because the CIT(A) has not deleted the addition. The CIT(A) has only directed the A.O. to recomputed the interest on post dated cheques after six months from the date of issue of PDCs. - Decided against assessee. Disallowance of additional payment in violation of Stamp Duty Act 1899 - CIT(A) deleted the addition - Held that - Since the facts in the present case are identical to the facts considered by the Tribunal in the case of M/s. Westland Developer Pvt. Ltd. 2014 (12) TMI 254 - ITAT DELHI wherein held section 40A(3) of the Act has been wrongly invoked as admittedly no expenses relatable to the addition has been claimed and the assessee has successfully demonstrated that the payment were reimbursement made by CWPPL thus we hold that CIT (A) is justified in deleting the addition. Also see case of Glitz Builders and Promoters Pvt.Ltd. 2015 (5) TMI 384 - ITAT DELHI Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition on account of interest on post-dated cheques (PDCs) paid outside the books of account.
2. Deletion of addition on account of additional payment for land purchase in violation of the Stamp Duty Act.
3. Disallowance under Section 40A(3) of the Income Tax Act for cash payments made for land purchase.

Detailed Analysis:

Issue 1: Deletion of Addition on Account of Interest on PDCs
The Assessing Officer (AO) added Rs. 40,22,546/- as unaccounted interest on PDCs, which was allegedly paid in cash outside the books of account. The CIT(A) directed the AO to recompute the interest after six months from the date of issue of PDCs. The Revenue appealed against this decision, but the Tribunal found that the CIT(A) did not delete the addition but merely directed a recalculation. The Tribunal upheld the CIT(A)'s order, referencing a similar case (M/s IAG Promoters and Developers Pvt. Ltd.), where the CIT(A)'s approach was affirmed. The Tribunal found no infirmity in the CIT(A)'s order and rejected the Revenue's ground.

Issue 2: Deletion of Addition on Account of Additional Payment for Land Purchase
The AO disallowed Rs. 60,76,555/- as additional payment for land purchase, asserting it violated the Stamp Duty Act and was not allowable under Section 37(1) of the Income Tax Act. The CIT(A) directed the AO to quantify the disallowance, ultimately leading to the entire amount being allowed. The Revenue appealed, but the Tribunal noted that the assessee did not claim these payments as deductions. Citing a similar case (M/s Westland Developers Pvt. Ltd.), where the Tribunal deleted a similar addition, the Tribunal upheld the CIT(A)'s order, finding no justification for the disallowance.

Issue 3: Disallowance under Section 40A(3) for Cash Payments
The AO disallowed Rs. 8,25,469/- (20% of Rs. 41,27,344/-) under Section 40A(3) for cash payments made for land purchase. The CIT(A) confirmed this disallowance. The assessee argued that the payments were not claimed as deductions. The Tribunal referenced previous orders in similar cases (M/s Glitz Builders and Promoters Pvt. Ltd. and M/s Westland Developers Pvt. Ltd.), where it was held that since the payments were not claimed as deductions, Section 40A(3) was not applicable. The Tribunal thus deleted the disallowance, allowing the assessee's grounds.

Conclusion:
The Tribunal upheld the CIT(A)'s directions to recompute interest on PDCs and deleted the disallowances related to additional payments for land purchase and cash payments under Section 40A(3), referencing similar cases and finding that the payments were not claimed as deductions by the assessee. The appeal of the assessee was partly allowed, and the Revenue's grounds were rejected.