TMI Blog2012 (3) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in favor of the revenue by way of remand to Tribunal - ITA 1713/2010 - - - Dated:- 21-3-2012 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V. EASWAR, JJ. For Appellant: Mr. Sanjeev Rajpal, sr. standing counsel For Respondent: Mr. Chandra Shekhar, Mr. Saurabh Upadhyay, Mr. Manoj Agarwal and Ms. Meghna De, Advs. SANJIV KHANNA, J: (ORAL) This appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961 ( Act‟, for short) in the case of Rupa Promoters Pvt. Ltd. pertains to assessment year 2006-07. 2. Having heard the counsel for the parties, we frame the following substantial question of law : (i) Whether the Income Tax Appellate Tribunal was right in deleting the addition of Rs.50 lacs made by the Assessing Officer by invoking provisions of Section 40 (a)(ia) read with Section 194C of the Income Tax Act, 1961? (ii) Whether the Income Tax Appellate Tribunal was right in holding that M/s PGF Ltd. had directly given a contract to Rishikesh Properties Pvt. Ltd.? 3. As we have heard counsel for the parties on merits, we proceed to decide the aforesaid questions. 4. The assessee, Rishikesh Buildcon Pvt. Ltd. and Rishikesh Properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished during the course of assessment proceedings. The Assessing Officer had made another addition of Rs.41,10,527/- noticing certain discrepancies between the bills received by PGF Ltd. and the stand of the assessee. We are not, however, concerned with the said aspect as this is not a subject matter of present appeal. 9. On appeal filed by the assessee, the first appellate authority deleted the said disallowance observing as under : 7.4 I have considered the submissions of the A/R of the appellant and the facts brought out in the assessment order by the A.O. that the assessee has paid a sum of Rs.50.00,000/- (sic.) to M/s Rishikeh (sic.) Properties as sub-contractor for carrying out the work without deducting TDS under the relevant provisions of the Act, therefore the Ld. A.O. had proceeded to disallow the amount of Rs.50,00,000/- by invoking the provisions of Section 40(a) of the I.T. Act read with section 194C(2). However the AIR (sic.) of the assessee has argued before me that only expenses which have been claimed by the assessee in profit loss account can be disallowed under the provisions of section 40(a) of the Act if the deduction of TDS under relevant provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. PGF Ltd. only and not for any other group company. Similarly expenses recorded are only for contract work of client PGF Ltd. and not by way of sub contract to associate company. 7.4 From the table referred in Para 6.4 above it has been noticed that the total contract work carried out by the assessee amounting to Rs.4,85,00,000/- only and the payment of Rs.50,00,000/- does not relate to the total contract value of Rs.4,85,00,000/-. The assessee claimed expenses against the receipts declared of Rs.4,85,00,000/- only. Thus Rs.50,00,000/- does not form part of the total receipts declared by the assessee. During the appellate proceedings it has been clarified that payment of Rs.50,00,000/- made to M/s. Rishikesh Properties was not made as a part of any sub-contractual agreement and there is no evidence in the form of any contractual agreement which was required to be filed by the assessee company. In fact payment of Rs.50,00,000/- paid to M/s. Rishikesh Properties was not forming part of the receipts declared by the respondent and nor Rs.50,00,000/- was claimed as an expenditure paid to any sub-contractor or otherwise as per books of accounts of the assessee. The provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. PGF Ltd. instead of issuing in the name of Rishikesh Properties Ltd. belonging to the same management. Due to this respondent has not declared the receipt as income and paid the amount to M/s. Rishikesh Properties Ltd. which was not claimed as expenditure. We find that Rs.50,00,000/- paid by the respondent assessee was forming part of Rs.4,25,00,000/- and not linked with Rs.4,85,00,000/- declared by the respondent assessee. Since it is neither forming part of the receipts in profit and loss account nor forming part of an expenditure claimed by it, provisions of section 40(a)(ia) and section 194C are not attracted. The same would be applicable when there is a relation of a contractor or a sub-contractor for making payments for carrying out any work for it but not otherwise. The assessing officer has not looked into this aspect which was examined by the CIT (A). We therefore do not find any reason to interfere with the finding of the CIT (A) and fully agree that provisions of section 40 (a) (ia) are not applicable in this case. The CIT (A) was justified in deleting the addition of Rs.50,00,000/-. Interestingly AO made an addition u/s 40 (a) (ia) for an expenditure not claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acting also. All the three assessee herein are direct contractors and have incurred then respective expenses for work executed by them. As stated earlier, the confusion or difference arose due to difference in payment made by client or tax deducted thereon rather than value of total work executed and as accounted by all the three assessees put together. 13. A perusal of the table mentioned in 6.4 shows that PGF Ltd. had stated that the assessee was awarded work of Rs.5.35 crores. This was in conformity with and as per the stand of the assessee before the Assessing Officer in the letter dated 5.12.2008. The Tribunal in para 6.4 held that they would not like to go by the TDS certificates but would like to go by actual work recorded in the books of accounts of the assessee. The sum total of the work awarded to three companies was Rs.14.2 crores. There was difference of Rs.2 crores in the stand of the assessee and the two group companies and the figures as per PGF Ltd., which has been referred to and mentioned in the column under the heading Difference . While examining the said issue we may only note that the Tribunal did not refer to the admission and averments made by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t material and facts. The issue/question has not been examined in the appropriate and proper prospective. On the question of perversity we may refer to the decision of the Supreme Court in the Dhirajlal Girdharilal Vs. CIT (1954) 26 ITR 736, wherein it has held: It is well established that when a court of fact acts on material, partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the court was affected by the irrelevant material used by it in arriving at its finding. Such a finding is vitiated because of the use of inadmissible material and thereby an issue of law arises. 15. In, Excise Taxation Officer-cum-Assessing Authority v. Gopi Nath Sons, 1992 Supp.SCC (2) 312, it has been held as : 7. if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law. 16. In view of the aforesaid reasoning, we answer the substantial questions of law in the negative and in favour of the Revenue and agains ..... X X X X Extracts X X X X X X X X Extracts X X X X
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