TMI Blog2015 (11) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... ia) of the Act in any case do not apply, the assessee having not claimed any deduction for any expenses on account of payment to Vikram Electric Equipment P. Ltd. either in its profit and loss account or in the computation of taxable income filed. It was only that the AO recorded a loss of ₹ 19,700/-. This obviously, did not include any addition of either ₹ 4.02 crores or ₹ 1.24 crores. - Decided in favour of assessee. - ITA No. 1951/Del/2011 - - - Dated:- 17-10-2014 - SMT. DIVA SINGH, J.M. AND SHRI J.SUDHAKAR REDDY, A.M. For the Appellant : Shri Pradeep Dinodia Shri R.K. Kapoor, CA For the Respondent : Sh. Manoj Kumar Chopra, Sr.D.R. ORDER PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER This is an appeal filed by the assessee directed against the order of Ld.CIT(Appeals)-XVII, New Delhi dt. 24.2.2011 pertaining to the Assessment Years 2007-08 on the following grounds : 1. That the impugned order dated 24.2.2011 passed by the learned Commissioner of Income-tax (Appeals)XVII, New Delhi is bad in law and wrong on facts. 2. That on the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals) XVII has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable to consolidator. After considering the reply of the assessee company, the AO came to the conclusion that the payment was not genuine and therefore he disallowed the same. 3. Aggrieved the assesee carried the matter in appeal. 4. The first appellate authority held as follows :- 2.3 I have carefully considered the submission made by the appellant and perused the assessment order passed by the AO. As per the facts of this case, the appellant company was incorporated on 30.11.2006 and as such this is effectively the first year of its operation. During the year under consideration, the appellant has purchased land measuring 12.83 acres in district Gurgaon. It is observed by the AO in the assessment order that the appellant has shown the purchase price of the above land at ₹ 33,66,65,365/- which is debited to its P ? L A/c as against this, the cost of the above land paid to the land owners as per sale deeds is ₹ 30,87,97,500/- and the stamp duty is ₹ 1,85,27,910/-. The total of the above two amounts comes to ₹ 32,73,25,410/-. On being questioned by the AO regarding the difference amoutnof ₹ 93,39,946/-, it was contended by the appellant tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the alleged excess amount of ₹ 93,39,946/- is on account of transfer of right by the consolidator in the said land purchased by the appellant as per the terms of the MoU. It is argued that the above claim is genuine expenditure in connection with the purchase of land. It was also argued that the amount of ₹ 93,39,946/- which was credited as due to M/s Vikram Electric Equipment (P) Ltd. is not in the nature of remuneration as the question of payment of remuneration will arise only after the consolidator procured the entire 27 acres of land as per the terms of the MoU. It was submitted that actually no payment was made during the year to Vikram Electric Equipment (P) Ltd. and a total amount of ₹ 93,39,946/- was shown as payable to Vikram Electric Equipment (P) Ltd. But no actual payment was made to M/s. Vikram Electric Equipment (P) Ltd. during the year. Accordingly, it was argued that the impugned payment is not subject to TDS u/s 194H/194C of the Act. It is also argued that the payment made to the consolidator is on a principal to principal basis. 2.4.1. I further find that although the appellant has claimed the above amount of ₹ 93,39,946/- credited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as to which section of TDS (194C or 194H) would apply, if at all. It was, accordingly, argued that the above disallowance made on the basis of guess work needs to be deleted. Alternatively, it was argued that the appellant has not claimed the above amount as deduction and as such no disallowance u/s 40(A)(ia) can be made. 2.4.3 On careful examination of the above matter, I am of the considered view that since the expenses have been disallowed by the AO as non genuine expenses and which has also been confirmed by me in para 2.4.1 above, the question of applicability of section 40(a)(ia) become academic. If it is presumed that the above expense incurred was genuine and for the purpose of business as claimed by the appellant, then the said expense will be automatically hit by provisions of section 40(a)(ia) because in that case it has to be held that M/s. Vikram Electric Co. (P) Ltd. has been engaged by the appellant company to render its services as a consolidator under the MoU. The land is purchased by the appellant not from M/s. Vikram Electric Co.(P) Ltd. but directly from the land owners as per the sale deeds. The Ld. AR has argued that the excess amount of ₹ 93,39, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance and addition of ₹ 93,39,946/-is thus confirmed on both the counts as discussed in para 2.4.4 2.4.5. The carry forward of the value of closing stock of land is also reduced by ₹ 93,39,946/- as discussed in para 2.4.1. This ground of appeal is rejected. Aggrieved the assessee carried the matter in appeal before us. 6. We have heard Shri Pradeep Dinodia Ld. Counsel for the assessee and Shri Manoj Kumar Chopra Ld. Sr. DR on behalf of the revenue. 7. Shri Pradeep Dinodia submits that on identical set of facts, the issue has been decided in favour of the assessee and against the revenue by the D Bench of the ITAT in ITA No. 2361/Del/2011 and ITA No. 1953/Del/2011 for the assessment year 2007-08 in the case of M/s. Finian Estate Developers (P.) Ltd. Order dated 5th October, 2011. We further submit that the H Bench of the Tribunal in the case of Zebina Real Estate Pvt. Ltd. Vs. ITO in ITA No. 1429/D/2011 and 1430/D/2011 order dated 12.4.2013 followed the judgment of Tribunal in the case of Finian Estates Developers (P) Ltd. 142 TTJ 545 (Del) and allowed the appeal of the assessee. 8. Ld. DR on the other hand while agreeing with the argument that the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd around Gurgaon, who were willing to sell their land. Vikram Electric Equipment P. Ltd. was making payments from its account to the farmers and thereto have certain rights in the land. On the ultimate transfer of land to the assessee through Vikram Electric Equipment P. Ltd. the final payment was to be made to the farmers. Towards the right of Vikram Electric Equipment P. Ltd. 2% of the cost of land (in some cases, even a higher amount) was to be paid to Vikram Electric Equipment P. Ltd. as mutually agreed. This was the mutually agreed price. Vikram Electric Equipment P Ltd. worked for land acquisition and after scrutiny of the concerned documents of the land, Vikram Electric Equipment P. Ltd. would suggest the appropriate land for purchase by the assessee. Vikram Electric Equipment P. Ltd. thus acted with the farmers on its own account rather than for and on behalf of the assessee, on principle to principle basis, with the farmers on the one hand and the assessee on the other. The assessee contends that this being so, the provisions of neither section 1994C nor section 194 H get attracted to the payment made by the assessee to Vikram Electric Equipment P. Ltd. The payment along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fically agreed by the Consolidator that no sum shall accrue to it on this account till it procures 27 acres of land for the Buyer Company (unless the Buyer Company decides to procure less than 27 acres through the Consolidator) and all the issues relating to possession and mutation of such land are settled to the satisfaction of the Buyer Company. 28. The above clause also makes it evident that unless the assessee decided to procure less than 27 acres of land through Vikram Electric Equipment P. Ltd. Vikram Electric Equipment P. Ltd. was to procure 27 acres of land for the assessee, failing which, no payment was tobe made by the assessee to Vikram Electric Equipment P. Ltd. 29. This clearly shows that Vikram Electric Equipment P. Ltd. was transacting on a principle to principle basis and it can not be said that the payment was made by the assessee to Vikram Electric Equipment P. Ltd. for rendering of any service. The provisions of section 194 H of the Act are therefore, not at all applicable. 30. Moreover, the amount paid to Vikram Electric Equipment P. Ltd. was duly reflected by the assessee in the purchases closing stock. No sales had been made during the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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