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2015 (7) TMI 45 - ITAT DELHI

2015 (7) TMI 45 - ITAT DELHI - TMI - Disallowance u/s 40(a)(ia) - TDS as per provisions of section 194 I (Rent) or S. 194C (Payment to Contractors) - assessee submitted that the assessee was having Revenue Sharing Arrangements with other parties, so TDS was not required to be deducted u/s 194 I of the Act, since it was a business transaction and the assessee itself deducted the TDS u/s 194C because the assessee was required to pay portion of the Gross Operating Profit to the various parties - CI .....

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sessee also agreed for minimum guaranteed amount. The ld. CIT(A) also accepted after making a detailed verification from the various agreements in between the assessee and the other parties that the payments on the basis of sharing of revenue would not come under the purview of section 194 I of the Act. However, in respect of SRK Travels & Tours Pvt. Ltd., the ld. CIT(A) categorically stated that as per the agreement dated 23.06.2005, it was evident that there was no involvement of the said part .....

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disallowance could have been made to that extent only. It is also noticed from the details of the licence fees paid as mentioned by the AO that the assessee paid a sum of ₹ 18,00,000/- to M/s SRK Travels & Tours Pvt. Ltd. during the financial year relevant to the assessment year under consideration. We, therefore, considering the totality of the facts modify the order of the ld. CIT(A) and uphold the disallowance of ₹ 18,00,000/- instead of ₹ 21,60,000/- sustained by the ld. C .....

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account of brokerage expenses, legal expenses etc. Those expenses were incurred by the assessee in accordance with Clause 16 of the purchase agreement wherein it was mentioned that the aforesaid expenses were to be borne by the vendee/purchaser. Therefore, the ld. CIT(A) was justified in considering the purchase cost at ₹ 2,19,47,720/-. In the present case, it also appears that the ld. CIT(A) accepted the bifurcation of the cost of the property into land and building because the same was s .....

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ifurcation of the sale price relating to land and building was done out of lump sum sale price of ₹ 2.70 crores, therefore, the ld. CIT(A) had no other option except to adopt the sale value of the building on the basis of circle rate which was at ₹ 11,870/- per sq mts at the relevant time. In our opinion the ld. CIT(A) rightly worked the Short Term Capital Gain, therefore, we confirm the addition of ₹ 4,73,881/- sustained by the ld. CIT(A). - Decided against assessee. - ITA No. .....

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in reducing the disallowance from ₹ 1,24,49,495/- to ₹ 21,60,000/- made by the assessing officer u/s 40(a)(ia) of the Act; 1.1 The Ld. CIT(A) has erred in law and on facts in giving the relief to the assessee on the above issue without considering the detailed reasons given by the assessing officer in the assessment order; 1.2 The Ld. CIT(A) has erred in law and facts in ignoring the contents of CBDT s Circular No.715 dated 08.08.1995 wherein it has been laid that provisions of secti .....

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e assessment proceedings; 3. The appellant craves to be allowed to add any fresh grounds of appeal and/or delete or amend any of the grounds of appeal. 3. The grounds raised in the assessee s appeal are as under: 1. The CIT(Appeals) has in view of the facts and circumstances of the case and in law, erred in upholding disallowance of the expenditure of ₹ 21,60,000/- u/s 40(a)(ia) on account of license fees to SRK Travels & Tours Pvt. Ltd. 2. The CIT (Appeals) has in view of the facts an .....

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The CIT (Appeals) has in view of the facts and circumstances of the case, erred in holding and interpreting that disallowance can be made u/s 40(a)(ia) even if there is a shortfall in the deduction of tax at source by the appellant. 5. Without prejudice to the above, the disallowance, if any, should be restricted to ₹ 18,00,000/-. 6. The CIT (Appeals) has in view of the facts and circumstances of the case, erred in upholding the addition of ₹ 4,73,881/- on account of short term capit .....

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ailable on record has not been properly considered and judicially interpreted and the additions made cannot be justified in view of the said material and explanation. 10. That the AO has erred in facts and on law in charging interest u/s 234A, 234B and 234C and 234D of the Act. The AO has failed to appreciate that the assessee could have never foreseen these additions being made against the assessee. 4. From the above grounds it would be clear that the grievance of the department vide Ground Nos .....

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g to ₹ 2,87,49,591/- to various parties as per following details: AMOUNT TDS-DEPOSIT 1 Delhi Warehousing Pvt. Ltd. 13,701,000.00 3,104,648.00 2 Other 500.00 - 3 Ashok Jain 41,660.00 858.00 4 Sudhir Mulji 637,305.00 13,128.00 5 Francis Wacziarg 4,357,502.00 98,742.00 6 Sheela Nath 81,830.00 1,686.00 7 Metheson Bosanquet Ent Ltd 303,676.00 6, 881.00 8 Smt. Vidyalatha Reddy 708,696.00 160,590.00 9 Smt. Rama Reddy 354,347.00 80,295.00 10 Smt. Srilatta Reddy 354.347.00 80,295.00 11 Meera Kulkar .....

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er the provisions of section 194 I of the Act and not as per section 194C of the Act as was made by the assessee in several cases. In response, the assessee furnished another table containing details of license fees paid vide letter dated 09.12.2010 as under: Details of Licence fees during the Financial Year 2007-08 S.No. Nature Name Location Amount TDS Statutory Rate 1 HOTEL PURPO SE Delhi Warehousing Pvt. Ltd. Neemrana Fort Place 1 3,701,000.00 3,104,648.00 22.66% 2 HOTEL PURPO SE Ashok Jain R .....

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RPO SE Smt. Rama Reddy Villapottipati 354,347.00 80,295.00 22.66% 9 HOTEL PURPO SE Smt. Srilatta Reddy Villapottipati 354.347.00 80,295.00 22.66% 10 HOTEL PURPO SE Meera Kulkarni Glass House 6,153,504.00 139,438.00 2.27% Sharing of Revenue Ag. 11 HOTEL PURPO SE Mountain Valley Spring Ind. Pvt. Ltd. Glass House 212,909.49 4,825.00 2.27% Sharing of Revenue Ag. 12 HOTEL PURPO SE AT Chengapa Green Hill Estate 14,105.00 291.00 0.00% 13 HOTEL PURPO SE Sagari Dalia Changapa Green Hill Estate 14,105.00 .....

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se agreements at para 4.4 of the assessment order dated 28.12.2010, for the cost of repetition, the same are not reproduced herein. The AO observed that the details and clauses of agreements entered into by the assessee with the aforesaid parties revealed that in all cases the assessee had acquired the right to use property vide all the agreements entered into with each party, and that the model, manner and clauses of each and every agreement on record are the same. He also observed that the Rev .....

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194 I of the Act, whereas the assessee had deducted TDS u/s 194C of the Act. The assessee vide letter dated 09.12.2010 explained that TDS had been made u/s 194C where agreements entered were revenue sharing agreement being purely contractual in nature as in the case of Ms. Meera Kulkarni, M/s SRK Tours & Travels, Mr. Francis Wacziarg whereas where the agreement was only for usage of space, the rates applied were as per section 194 I of the Act as in the case of M/s Delhi Warehousing Pvt. Ltd .....

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AO accordingly worked out the short deduction of TDS as under: Name Amount of Licence Fees TDS Deducted TDS Deductible Shortfall Licence Fees in relation to short deduction RS RS RS RS RS Sudhir Muljee 637305 13128 108310 95182 560059 Francis Wacziarg 4357502 98742 740557 641815 3776496 Matheson Bosanquet Ent Ltd. 303676 6881 68813 61932 364413 Meera Kulkarni 6153504 139438 1045788 906350 5333039 Mountain valley Spring India P. Ltd. 212909 4825 48245 43420 255488 SRK Travels & Tours Pvt. Ltd .....

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ses owned by them. In terms of agreement, the appellant has paid ₹ 2,87,49,591/- to various parties and also deducted tax at source on these payments, but at different rates. Disallowance has been made by the Ld. Assessing Officer u/s 40(a)(ia) of the Income Tax Act, 1961 (the Act) on the plea that the TDS should be made on the payment so made by the appellant as per provisions of section 194 I (Rent) and not as per section 194C (Payment to Contractors). Detail of various payments made as .....

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. 3,03,6761- 6,881/- 2.27 Smt. Vidyalatha Reddy 7,08,696/- 160,590/- 22.66 Smt. Rama Reddy 3,54,347/- 80,295/- 22.66 Smt. Srilatta Reddy 3,54,347/- 80,295/- 22.66 Mountain Valley Spring Ind. Pvt. Ltd. 2,12,909/- 4,825/- 2.27 A T Changapa 14,105/- 291/- 2.06 Sagari Dalia Changapa 14,105/- 291/- 2.06 Poonama Romana Aooanna 14,105/- 291/- 2.06 The appellant who is having expertise in marketing, supervising and running of hotels, entered into business arrangements with; among other. (a) Delhi Wareho .....

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80IA of the Income Tax Act, 1961 (the Act) (prior to 1.4.2000) read with rule 18BBC (2) of the I T Rules, 1962 with retrospective effect from 07-02-1992 relevant to Assessment Year 1993-94 (Order No. 11/25- 04-2000). It provides deduction to the DWPL @ 50% u/s 80IB (7)(a) (earlier under 80IA(5)(ii)) of the Act. DWPL is getting deductions regularly u/s 80IB of the Act since it got approval. As DWPL was facing difficulties in managing the affairs of its Palace as hotel on its own without the team .....

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Palace as hotel. The appellant is not the tenant of DWPL and is also not using the Palace for their own use and also has not taken the property on lease from DWPL. Neither DWPL has given the Palace on lease to the appellant. The appellant is sharing the revenue from the Hotel operations like a profit sharing agreement which is purely a business arrangement. Further DWPL is also not the contractor of the appellant. On the contrary, the appellant is carrying out the various operations of running .....

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se are being used for running the property as a hotel. It may be noted that DWPL is an associate concern of the appellant. Directors of the appellant are also the directors in DWPL. (b) Francis Wacziarg, New Delhi (In short FW) - Owner of (a) The Verandah in the Forest, Barr House, Matheran 410102, District Raigarh, Maharashtra, (b) Two properties at Ramgarh, in the name & style of The Ramgarh Bungalows, Ramgarh Malla, Kumaon Hills, District Nainital 263 137, Uttaranchal, and (c) Hotel De L .....

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frigerator, telephone facilities, computers, televisions, bed sheets, blankets, bath towels, face towels, meals/beverages etc. etc. These are being used for running the properties as hotels. Here also the appellant is not the tenant of FW and is not using these properties for their own use and also has not taken these properties on lease from FW Neither FW has given these properties on lease to the appellant. Similarly, here also, the appellant is sharing the revenue from the said hotels like a .....

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. She has entered into business agreement for sharing of revenue with the appellant as per agreement and allowed the appellant to market and manage the affairs of the hotel from the said property. All facts are similar to the facts given in above cases (a) and (b) above with regard to running the rooms of the property as hotel and also sharing of revenue. MK is also not the contractor of the appellant. As stated herein above in other cases the appellant is carrying out business operations of run .....

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hotel and sharing of revenue. SRK is not the contractor of the appellant but as stated in earlier case also, the appellant is carrying out operations of running the property owned by SRK as hotel. It can be seen that the agreements with different parties are for sharing of revenue and are commercial in nature. For instance: (a) In case of agreement with DWPL, DWPL will be paid 15% of gross operating profits, which is calculated as per specified formula as specified in the Agreement; (b) In case .....

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17.5% of the gross operating profits, whichever is more subject to maximum of ₹ 24 Lakhs and for the subsequent 5 years-for the first three years, a minimum guaranteed amount of ₹ 24 Lakhs or 19.5% of the gross operating profits whichever is more subject to 33 Lakhs etc. It is important to see that the calculations for revenue sharing are more or less similar in natures in all agreements. As a sample we are producing the clause on revenue sharing as per agreement with Mrs. Meera Kulk .....

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1st day of April and ends on 31st day of March each year. 2.2 It has been expressly agreed between the Parties, that the "The Party of the First Part is entitles to minimum guaranteed amount of ₹ 1,50,000/- (Rupees one lakh fifty thousand only) or 30% (thirty percent) of gross operating profits (calculated every quarter) in terms of clause nos. 2.3 to 2.6 of this agreement), whichever is higher as her share in profits from the business. This shall be calculated for every quarter and .....

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facilities including: (a) Room receipts from realization of the room occupancy charges; (b) Sale of food, beverages, liquor and smokes from the restaurant bars; (c) Income in respect of all the telephones, laundry and providing other services and facilities. 2.5 Deductible Expenses: "Deductible Expenses" shall mean and include all costs pertaining to: i) Commissions and/or discount given or allowed or payable to travel agents, tour operators and tour leaders or any other agencies for .....

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of three months commencing from April 1st of each year and ending on June 30th and the subsequent even periods. The aforesaid calculation is based on business proposition and totally based on profits of the business. The calculation is to be certified by a qualified chartered accountant and has nothing to do with any rental payment. Fixed sum in some of the agreements as mentioned in this agreement is made to ensure that even if there is no/less receipt in any quarter, a minimum sum is paid to .....

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sum of money as in the case of income from house property. All these are business contracts and payment is being made as share of revenue and thus provisions of Tax Deduction at Source (TDS) as contained in Chapter XVII of the Act are not applicable on the payments made by the appellant to various parties. It is neither covered u/s 194C nor u/s 194 I of the Act. It is clear that none of the owner of properties is a contractor of the appellant and on the contrary the appellant is putting its eff .....

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n rent from the owners of the properties. The intention of the parties is to share the revenue and not to make payment of a fixed sum of rent as covered u/s 194 I of the Act. The appellant is not using the land or any building or furniture/fixtures etc. for its own use. The rooms of the properties are being using for sale as a hotel, wherein beverages and meals etc. are also served to multiple clients/customers. Thus when the provisions covered under chapter XVII is not applicable to the appella .....

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t with any of the parties wherein it is liable for deducting tax at source u/s 194 I of the Act. Similarly payment is not covered under u/s 194C as the owners of the properties are not contractors. When both provisions of the Act are not applicable, then provisions u/s 40(a)(ia) of the Act is also not applicable to the appellant. Further it can also be seen that the intention of parties is also not to give or take the property on rent or on lease. It has already been settled that the transaction .....

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as business income and not under the head as 'income from house property' as made by the Assessing Officer. The Order of CIT(A)-XXVI, New Delhi has been upheld by the Jurisdictional ITAT in their Order dated 23-042010 in the ITA No. 1340/Del/08 for Assessment Year 2003-04 against the appeal made by Assessing Officer. We are submitting herewith the copies of the same for your kind consideration. Thus when such income is not taxable as rental income under the head income from house propert .....

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x, while others requested for deduction of tax at 2% of contractual payments. It is not the intention of the assessee to deduct tax at a lower rate or at a higher rate. The appellant is not at all liable for TDS on these payments. It is deducting tax as per mutual agreement with the parties. There is no provision in the Act which restricts the appellant not to deduct TDS on behalf of the other parties. In fact, the appellant is taking additional burden in making payment to Government Treasury on .....

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#8377; 2911- Paid to Sagari Dalia Changapa ₹ 14,105/- TDS Deducted@ 2.06% of ₹ 291/- Paid to Poonama Romana Aooanna ₹ 14,105/- TDS Deducted @ 2.06% of ₹ 291/- Ld. AO has also wrongly stated that the appellant has deducted tax u/s 194 I on the payments of licence fees made to DWPL for usage of space, while payment to the others viz. Meera Kulkarni /SRK Tours & Travels Pvt. Ltd. / Francis Wacziarg have been made u/s 194C. As already stated above the agreements entered i .....

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in the matter." No such disallowance has been by made the Ld. AOs in earlier years. The appellant therefore prays to delete the disallowances made u/s 40(a)(ia) of the Act as the provisions of section 40(a)(ia) are not applicable to the appellant on the licence fees paid as detailed hereinabove. 10. The ld. CIT(A) after considering the submissions of the assessee sustained the addition of ₹ 21,60,000/- by observing in paras 6.3 to 6.6 of the impugned order which are reproduced verbat .....

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ni is entitled to minimum guaranteed amount of Rs.l,50,000/- or 30% of gross operating profits, to be calculated every quarter, whichever is higher and accordingly ₹ 61,53,504/- was paid during the year. (c) In the case of Mr. Francis Wacziarg, he is entitled to minimum guaranteed amount of ₹ 15,00,000/- or 20% of Gross Operating Profit whichever is higher and accordingly ₹ 39,37,502/- was paid during the year. (d) In the case of Mountain Valley Springs Private Ltd. it is entit .....

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following important clause: "It is hereby agreed that both parties shall hold meetings from time to time to transact necessary business and to review the affairs of the hotel. They shall mutually decide upon the appointment/engagement of experts in the field of hotel management/operations to run, conduct, operate, manage, market, direct, control and supervise the operations of the said hotel." From the above it is evident that all the agreements with the above parties are for different .....

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ome from house property but it is based on revenue sharing agreement. The license fee paid is based on business of running the hotel. The income from house property is usually a fixed amount irrespective of the income from business carried on in a house property. However in the instant case the payments made to the parties are not fixed amounts but income from business of running hotel on the basis of revenue sharing agreements. In view of the payments actually made on the basis of revenue shari .....

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asoning given the A.O. is that because TDS was made @ 22.66% in the case of DWPL, therefore, the license fee paid to the remaining-parties is also liable for TDS u/s 194 I. The above reasoning given by the A.O. is not based on proper appreciation of relevant aspects. Rate of TDS made by the assessee do not determine the nature of payment. It is the nature of payment that determines the rate at which TDS should be made. 6.4 Further, on identical issue for A.Y. 2003-04 in the case of income receiv .....

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ng officer is cryptic and she has not considered the relevant aspects. On the basis of findings recorded by her, it is not possible to hold that the finding of fact recorded by the CIT(Appeals)/Tribunal are unfounded or unreasonable. In any case, the said findings are not perverse and are based on documents and material placed on record. The reasoning is cogent and well explained. Therefore, we do not find that any question of law arises on the first aspect and we are not inclined to frame any s .....

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he terms of agreement between the appellant and the parties are almost identical as in the case of Francis Wacziarg and actual payments to the parties are also as per terms of agreement on revenue sharing basis. In view of the above, factual and legal position, the disallowance made by the A.O. in respect of the above parties vs. Sudhir Muljee, Francis Wacziarg, Matheson Bosanquet Ent. Ltd., Meera Kulkarni, and Mountainvalley Spring India P. Ltd. under sec 40(a)(ia) read with sec 194 I are not s .....

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er annum. Therefore, unlike other agreements there is a maximum ceiling of ₹ 18 Lakhs. The license fee is payable simply because the property is let out and the requirement of the appellant company to maintain proper accounts is simply because the party is otherwise entitled to license fee of 15% of Gross Operating Profit subject to minimum ceiling of ₹ 12 Lakhs and maximum ceiling of ₹ 18 Lakhs. In any case simply because the party is entitled to certain percentage of Gross Op .....

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d amount actually paid has the character of house property income. Since, there is no involvement of the party in the business affairs being run in the property and license fee paid is also fixed amount and not proportionate to the business income and the license fee paid is solely for the use of land and building, therefore, the payments made are in the nature income of house property and not in the nature of income from business carried out. In view of the above the payments made being in the .....

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s 40(a)(ia) does not cover short deduction of TDS or deduction of TDS under wrong head due to difference of opinion or any other reasons. The above submission of the appellant is not sustainable because Chapter XVII-B contains specific provisions of TDS at different rates in respect of different nature of payments like salary, interest on securities, dividends, interest, rents, payments to contractors etc. Sec 40(a)(ia) provides that payments of the nature specified therein shall not be allowed .....

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sions of Sec 40(a)(ia) would also be meaningless altogether. In view of the above, I am of the opinion that provisions of Sec 40(a)(ia) covers both non-deduction as well as short-deduction of TDS. Further, the decisions relied upon by the A.O. in this regard are distinguishable from the issues involved in this appeal. In view of the above, the disallowance made by the A.O. IS reduced from ₹ 1,24,49,495/- to ₹ 21,60,000/-. 11. Now both the parties are in appeal. The department is in a .....

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ired to pay portion of the Gross Operating Profit to the various parties. It was further stated that in the hands of the recipient the income was treated as business income (a reference was made to page nos. 349 to 351 of the assessee s paper book). It was further submitted that the ld. CIT(A) also accepted that all the agreements between the assessee and the other parties except SRK Travels & Tours Pvt. Ltd. were for different revenue sharing and there was no involvements of the party in th .....

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ess or profession and not under the head income from house property . It was further submitted that the ld. CIT(A) was fully justified in deleting the arbitrary addition made by the AO in respect of the disallowance made u/s 40(a)(ia) of the Act. As regards to the disallowance of ₹ 21,60,000/- sustained by the ld. CIT(A), the ld. Counsel for the assessee submitted that the licence fees payable to M/s SRK Travels & Tours Pvt. Ltd. was minimum of ₹ 12,00,000/- or 15% of Gross Opera .....

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the AO and further submitted that as the assessee short deducted the TDS, therefore, the disallowance was rightly made by the AO by invoking the provisions of section 40(a)(ia) of the Act since there was violation of section 194 I of the Act by the assessee. 13. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the assessee entered into agreement with the various parties who were having var .....

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the assessee and the other parties that the payments on the basis of sharing of revenue would not come under the purview of section 194 I of the Act. However, in respect of SRK Travels & Tours Pvt. Ltd., the ld. CIT(A) categorically stated that as per the agreement dated 23.06.2005, it was evident that there was no involvement of the said party in the management and day to day running of the business affairs of the hotel in that property. Therefore, the payment made by the assessee was in th .....

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AO at page nos. 2 & 3 of the assessment order that the assessee paid a sum of ₹ 18,00,000/- to M/s SRK Travels & Tours Pvt. Ltd. during the financial year relevant to the assessment year under consideration. We, therefore, considering the totality of the facts modify the order of the ld. CIT(A) and uphold the disallowance of ₹ 18,00,000/- instead of ₹ 21,60,000/- sustained by the ld. CIT(A). 14. The next issue vide Ground Nos. 2 & 2.1 of the departmental appeal and .....

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response the assessee furnished the working of the capital gain as under: Sale Consideration Cost of Transfer Net Sale Consideration Gain Land 19750000 24296373 555988 23740385 3990385 Building 2197720 2703627 60756 2642871 445151 21947720 27000000 616744 26383256 4435536 16. From the above details and the copies of sales deed and purchase agreements, the AO noticed that the assessee had sold the Land and Building for ₹ 2.70 crores which was acquired by it during the financial year 2006-07 .....

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he AO a certificate from an architect certifying the value of the Land and Building to be ₹ 1,97,50,000/- and ₹ 21,97,720/- respectively. However, the AO considered the said certificate as self-serving document because no details of valuation done and description of the property had been provided therein. The AO also pointed out that the cost of acquisition as emanating from the agreements was ₹ 2 crores. So it was not comprehensible as to how the assessee had allocated a sum o .....

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ellant has purchased basement & ground floor of the property bearing no. A-53, Nizamuddin East, New Delhi110013 for a total cost of ₹ 2,19,47,720/- on 26-05-2006 as detailed hereunder: Amount as per Sale Deed ₹ 2,00,00,000/- Cost of stamp duty/Corporation tax ₹ 16,00,000/- Paid to Ms. Anjali K Verma & Associates, Advocates for finalizing MOU etc. ₹ 11,000/- Brokerage paid to Mr. Praman Kapoor ₹ 3,36,720/- Total Cost ₹ 2,19,47,720/- Complete details wer .....

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ding at ₹ 21,97,720/-. The bifurcation of cost into land & building has been made based on discussion took place between with the various professional involved in finalization of deal at that time though the appellant could not locate basis/document for bifurcation of total cost into land and into building. Since the property was having very old construction, the appellant considered the land cost for ground and first floor at ₹ 1, 97,50,000/- (viz. ₹ 98,75,000/- each floor .....

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sset in depreciation schedule and charged depreciation at the rates applicable. As per block concept, the appellant charged depreciation on building portion while there is no depreciation on land. Further, as the property is sold within 3 years period, there is a short term capital gain on sale of land portion. The appellant bifurcated the sale consideration and cost on transfer, proportionately into land value and into building value as per cost recoded in books for each of the item at the time .....

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ther cost including stamping cost paid as per The Stamp Duty Act, 1952 which is appearing on the face of the sale deed, brokerage expenses, legal expenses etc, which the appellant has incurred in the course of purchase of the aforesaid property, the detail of which is submitted to the Ld. AO by the appellant in the course of assessment proceedings. When the Ld. AO has accepted building block of asset for depreciation purpose 'and also accepted cost of building in depreciation schedule both f .....

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plicable, which she has totally ignored. She has even not cared to give a natural justice to the appellant and taxing one transaction (i.e. proportionate value in sale of building) for two times-firstly as taxing the same as short term capital gain and further reduction in value of depreciation (by reducing the value of building block of asset). When she has ignored the basis of computation of depreciation on building block of asset, she should (a) Recompute depreciation for the financial year 2 .....

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uisition of the property sold. The Ld. AO has taken the cost of land & building at ₹ 200 Lakhs, purchased during financial year 2006-07 as compared to actual total cost incurred by the appellant of ₹ 219.47 Lakhs as per details stated herein above. She cannot disregard the audited books of account for the financial year 2006-07 without invoking the provisions of section 147/148 of the Act by reassessing the income of the appellant for financial year 2006-07 relevant to assessment .....

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change in tax liability if the short term capital gain liability is computed by way the Ld. AO has done, but she has to make necessary corrections for depreciation and capital gain u/s 50 on building as shown in page no. - attached. The appellant has got the valuation certificate for the property A53 from the certified valuer recently for convenience, which can be considered for valuation of land and building on approximate basis. It is therefore prayed to kindly issue directions to Ld. AO to de .....

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ansfer. The ld. CIT(A) pointed out that the assessee worked out the capital gain as under: Sale Consideration Cost of Transfer Net Sale Consideration Gain Land 19750000 24296373 555988 23740385 3990385 Building 2197720 2703627 60756 2642871 445151 21947720 27000000 616744 26383256 4435536 19. The ld. CIT(A) mentioned that the AO had not accepted the aforesaid working of the assessee by observing that there was no apportionment of cost between land and building either in the purchase agreement or .....

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assessee recorded cost of building into building block of asset in depreciation schedule and charged depreciation at the rates applicable. He further observed that as the property was sold within 3 years period, therefore, Short Term Capital Gain arising on sale of land portion was shown by the assessee. According to the ld. CIT(A) the AO was not justified in taking purchase cost of property at ₹ 2 crores only by ignoring other cost of ₹ 19,47,720/- including stamp duty of ₹ 1 .....

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ll the expenses of the corporation tax, stamp duty, registration fee, etc. had been borne and paid by the vendee. He, therefore, held that the AO was not justified in working out the capital gain without bifurcating the gain into land and building. The ld. CIT(A) accordingly accepted the bifurcation of the purchase cost of ₹ 2,19,47,720/- into land and building as shown by the assessee. The ld. CIT(A) further observed that the Circle rates were first introduced in Delhi in the year 2007 an .....

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ng to the ld. CIT(A) the valuation shown @ ₹ 600 and ₹ 650 per sq. feet being far below the rate notified by the Government for the year 2007 and also far below the value shown by the assessee. Accordingly, the ld. CIT(A) did not accept the aforesaid valuation report of M/s Kapil & Associates. The ld. CIT(A) bifurcated the sale value between land and building on the basis of unit rate of cost of construction for the year 2007 as per notification of Circle rate as under: Cost of P .....

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directed the AO to make the addition on account of Short Term Capital Gain at ₹ 4,73,881/- (Rs. 44,64,266/- ₹ 39,90,385/-) instead of ₹ 23,92,871/-. The ld. CIT(A) also directed the AO to give consequential effects on the depreciation claimed in view of the sale value of the building adopted at circle rate of cost of construction at ₹ 22,19,690/-. 21. Now the department is in appeal against the relief allowed by the ld. CIT(A) while the assessee is aggrieved for the addit .....

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assessee. 22. In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the ld. CIT(A) was not justified in sustaining the addition of ₹ 4,73,881/-. 23. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the AO while working out the capital gain considered the purchase value at ₹ 2 crores and .....

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