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2015 (7) TMI 213 - ITAT DELHI

2015 (7) TMI 213 - ITAT DELHI - TMI - Disallowance u/s 40A(3) - Held that:- In similar set of facts and circumstances, the Tribunal in the case of assessee’s group company M/s Westland Developers Pvt. Ltd. categorically held that the assessee submitted detailed reasons to demolish invocation of section 40A(3) of the Act and admittedly no expenses relatable to the addition have been claimed and the assessee has successfully demonstrated that the payments were reimbursement made by CWPPL, therefor .....

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e) of the Act cannot be invoked and the AO was not correct in making impugned addition and the same was rightly deleted by the CIT(A) following the decision of Hon’ble Jurisdictional High Court of Delhi in the case of CIT vs Ankitech (2011 (5) TMI 325 - DELHI HIGH COURT ).- Decided in favour of assessee.

Addition on interest on PDCs paid out of books of account - CIT(A) deleted the addition - Held that:- From the order of the Tribunal in the case of Precision Infrastructure Pvt. Ltd. .....

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of PDCs in each case, then the Assessing Officer is directed to recompute interest on PDCs after six months from the date of issue of the PDCs. Therefore, the ground of appeal of the Revenue that the CIT(A) deleted the addition of ₹ 5,06,625/- made by the Assessing Officer on account of interest on PDCs is factually incorrect and contrary to the order of the CIT(A). The CIT(A) directed to recalculate the interest on PDCs and there was a sound logic for such direction. His direction is bas .....

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mal arrangements of ownership and or the payments were for commercial expediency to facilitate peaceful possession and registration of the land holding; where by the time Registry was made the landholders felt a higher payment was necessitated due to increase in value are issues which are not required to be addressed in the present proceedings - Decided in favour of assessee. - ITA No.4064/Del/2013,ITA No.1590/Del/2013,ITA No.1763/Del/2013,ITA No.4082/Del/2013 - Dated:- 30-6-2015 - Shri J.S. Red .....

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refore, the same are dismissed as not pressed. Remaining grounds of assessee read as under:- 1. That on the facts and circumstances of the case and in law, the CIT(A) erred in upholding made the disallowance u/s 40A(3) of ₹ 13,45,626/-. 1.1 That on the facts and circumstances of the case and in law, the CIT(A) erred in confirming the aforesaid disallowance despite that no deduction in respect thereof was claimed by the appellant. 1.2 That even on merit the disallowance was not justified. 3 .....

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2006-07 dated 22.8.2014 reads as under:- 10.10. We have also taken ourselves through the judgement of the Jurisdictional High Court in the case of CIT vs Industrial Engineering Projects Pvt. Ltd. (cited supra) which has been relied upon before us for the proposition that reimbursement of expenses cannot be treated to be a Revenue receipt. How the judgement of the Apex Court in Tuticorin Alkali Chemicals & Fertilizers is applicable to the facts of the present case has not been set out in the .....

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een advanced by the Revenue so as to contend how they are not applicable to the case at hand, no distinguishing fact, circumstance or position of law has been relied upon so as to come to a contrary finding than the one arrived at. Accordingly on a consideration of the peculiar facts and circumstances of the case and the judgements relied upon considering the relevant provision of the Act namely Section 40A(3), we hold for the detailed reasons given hereinabove that Section 40A(3) of the Act has .....

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on 40A(3) of the Act and admittedly no expenses relatable to the addition have been claimed and the assessee has successfully demonstrated that the payments were reimbursement made by CWPPL, therefore, there was no occasion to invoke section 40A(3) of the Act. Respectfully following the conclusion of the Tribunal in the case of M/s Westland Developers Pvt. Ltd. (supra) in the similar set of facts and circumstances, we hold that the AO wrongly made impugned disallowance of ₹ 13,45,626 which .....

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provisions of section 2(22)(e) of the Income Tax Act, 1961 on account of deemed dividend. 6. Apropos aforementioned ground of the revenue, ld. DR submitted that the CIT(A) has erred in deleting the addition of ₹ 16,85,489/- made by the AO in view of the provisions of section 2(22)(e) of the Income Tax Act, 1961 on account of deemed dividend. Ld. DR submitted that the impugned order may be set aside by restoring that of the AO on this issue. Ld. counsel of the assessee supporting the impug .....

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ssessee by this judgement of Hon ble High Court. 7. On careful consideration of above submissions, we note that the CIT(A) granted relief to the assessee with following observations and conclusion:- The Hon'ble High Court of Delhi in the case of CIT vs. Ankitech (P) Ltd. [20 11] 11taxman.com 100 (Delhi) has held as under in para 25 of the judgment. "Further, it is an admitted case that under normal circumstances, such a loan or advance given to the shareholders or to a concern, would no .....

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s dividend. The fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way legal fiction. It is a common use that any company is supposed to distribute the profits in the form of dividend to its shareholder /members and such dividend cannot be given to non- members. The second category specified under section 2(22) (e) of the Act. Viz, a concern (like the assessee herein), which is given the loan or advance is admittedly not a shareholder/member .....

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;. In pare no. 28; the Hon'ble High Court has observed that "Insofar as reliance upon Circular No. 495 dated 22-09-1997 issued by Central Board of Direct Taxes is concerned, we are inclined to agree with the observations of the Mumbai bench decision in Bhaumik Colour (P) Ltd's case (supra) that such observations are not binding on the Courts. Once it is found that such loan or advance cannot be treated as deemed dividend at the hands of such concerns which is not a shareholder, and .....

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y treating this dividend income at the hands of the shareholders and tax them accordingly. As otherwise, it would amount to escapement of income at the hands of those shareholders. " The Hon'ble Delhi High Court has followed the decision in the case of Ankitech (supra) in the following recent judgment dated 21.11.2011: I. CIT vs. Navyug Promoters Pvt. Ltd. (2011) 16 Taxmann.com 292 (Delhi) 2. CIT vs. MCC Marketing Pvt. Ltd. (2011 )16 Taxmann.com 411 (Delhi) The gist of the above judgmen .....

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w of above, we note that in the present case, the AO could not bring any allegation against the assessee that the asessee is a shareholder/member of M/s Payor Companies, therefore, provisions of section 2(22)(e) of the Act cannot be invoked and the AO was not correct in making impugned addition and the same was rightly deleted by the CIT(A) following the decision of Hon ble Jurisdictional High Court of Delhi in the case of CIT vs Ankitech (supra). 9. The issue is squarely covered in favour of th .....

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not want to press ground no. 1, 2, 2.1. 4, 5, 6 and 7 and the same are dismissed as not pressed. 12. Ld. counsel of the assessee further submitted that the assessee also does not want to press ground no. 3, 3.1 and 3.2 as the CIT(A) has granted relief for the assessee on this issue against which the revenue has filed appeal in ITA No.1590/Del/2013. Therefore, the assessee s ground no. 3, 3.1 & 3.2 are also dismissed as not pressed. Finally, ITA No. 1763/Del/Del/2013 of the assessee is dismis .....

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ficer 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. Ground No. 1 of the Revenue 14. We have heard arguments of both the sides and carefully perused the relevant material placed on record. At the very outset, ld. counsel of the assessee has drawn our attention towards order of the ITAT Delhi C Bench dated 9.1.2015 in ITA No. 2542/Del/2013 for AY 2008-09 in the case of ACIT vs M/s Precision Infrastructu .....

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Precision Infrastructure Pvt. Ltd. has been modified or set aside. 15. From the order of the CIT(A), we observe that the CIT(A) granted relief for the assessee with following conclusion:- Learned AR has been maintaining all along that interest is not paid as all the receipts are only memorandum only. Analysis of these above seized document reveals that these seized documents definitely proves that interest is paid on PDCs. Various voucher in seized documents conclusively proves that the recipie .....

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st is from date of issue of PDCs. Now issue arises whether interest on PDCs are paid from date of issue or for extension of PDCs. Documents discussed above where there is clear evidence of receipt of inter t is for extension of period of PDCs. Ld. AR's arguments that calculation of interest on PDCs has been considered while entering into agreement holds some logic. But when dates of PDCs are extended, the recipient will definitely ask and settle for some additional compensation in form of in .....

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refore, interest on PDCs to the extent of extension period appears to quite reasonable and logical. Accordingly, interest on PDCs either a sale consideration or additional payment may be recomputed to the extent of extended period of PDCs by the A.O. and to that extent addition is confirmed. The above formulae will apply to all group companies under the management of BPTP i.e.( M/s BPTP and Associate companies) including the appellant company as evidence is found in respect of various companies .....

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ies. Assessing Officer has applied the case of Eusuf Ali for applying interest on PDCs for all companies of BPTP Group for all Assessment Year under consideration. Ld AR has tried to differentiate the above cited case on facts. In my view, as interest payment on extension of period of PDCs are established on numerous seized document. A trend is established for the group as the overall management is controlled by one person Shri Kabul Chawla and activities of all companies are interrelated. If it .....

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ere the interest working is made after 9/ 15 months. Taking these facts into consideration. It would be proper to compute interest after 6 months from date of sale on conservative side. Accordingly this ground is partly allowed. 16. From the order of the Tribunal in the case of Precision Infrastructure Pvt. Ltd. (supra), we note that the similar issue was decided in favour of the assessee with following observations and conclusion:- 7. We have considered the submissions of both the parties and c .....

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-09 observed in para 5 as under: 5. We have heard the arguments of both the sides and perused relevant material placed before us. At the outset, the ground raised by the Revenue is misconceived because learned CIT(A) has not deleted the addition of ₹ 5,06,625/- but has only directed to recalculate the interest. We have carefully gone through the order of the learned CIT(A) and also the submissions of both the parties and we do not find any infirmity in the order of the learned CIT(A). Afte .....

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of issue of the PDCs. Therefore, the ground of appeal of the Revenue that the CIT(A) deleted the addition of ₹ 5,06,625/- made by the Assessing Officer on account of interest on PDCs is factually incorrect and contrary to the order of the CIT(A). The CIT(A) directed to recalculate the interest on PDCs and there was a sound logic for such direction. His direction is based on material found and seized at the time of search. In view of the above, we do not find any justification to interfere .....

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Pvt. Ltd., we do not see any valid ground to interfere with the findings given by the ld. CIT(A) and accordingly do not see merit in this appeal of the department. 17. In view of above, we observe that the facts and circumstances of the present case are quite similar to the facts involved in the case of Precision Infrastructure Pvt. Ltd. (supra), therefore, respectfully following the order of the Tribunal dated 9.1.2015 in the case of Precision Infrastructure (supra), we are unable to see any i .....

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duty. Ld. DR supporting the impugned order submitted that the AO was right in making addition in this regard as the additional payment made to the farmers was a made up affair and the payments were not genuine and thus it was inadmissible. Ld. DR further contended that the CIT(A) was not justified in deleting the impugned addition, therefore, the impugned order may be set aside by restoring that of the AO. Ld. counsel of the assessee replied that the issue is squarely covered in favour of the as .....

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tion. Ld. counsel further pointed out that the fact remains that there is no dispute as the expenditure was not claimed as an expense by the assessee and consequently the same was not routed through Profit & loss account, therefore, the disallowance and addition made by the AO is not sustainable. 19. On careful consideration of above rival submissions of both the sides, we note that in similar set of facts and circumstances, ITAT Delhi Bench in the case of M/s ISG Estate Pvt. Ltd. (supra), d .....

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(A) did not accept this contention viz., that the assessee having not claimed the deduction no disallowance could be made. He however, gave certain directions to quantify the disallowance to be made. As per these directions while giving appeal effect the entire claim of ₹ 20,09,701/- is to be allowed. 7.1 He further submitted that the contention in Ground No. 4 however, is that the assessee having not claimed the expenditure, the same cannot be disallowed. Similar disallowance was made in .....

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order is reproduced as under:- 13. We have heard the rival submissions and perused the material available on record. The case law relied upon by the parties has been taken into consideration. On a consideration of the same we are of the view that since in the facts of the present case the material issue is that the said expenditure was never claimed as assessee's business expenditure the occasion to make a disallowance of the same does not arise. On this fact there is no dispute as admittedl .....

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owed U/S 40A(3) is not so material as the finding is arrived at taking cognizance of the material fact that herein also no such claim of expenditure has been made. The fact that the additional payments were warranted in order to avoid potential disputes amongst the claimants of the land holding which have been passed through to the land holders from generation to generation wherein there may be informal arrangements of ownership and or the payments were for commercial expediency to facilitate pe .....

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