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2016 (1) TMI 682 - ITAT KOLKATA

2016 (1) TMI 682 - ITAT KOLKATA - TMI - TDS u/s 194A - Disallowance u/s 40(a)(ia) - compensation paid in the form of interest by the appellant to various allottees for delays occurred in delivering the respective plots - non deduction of tds - Held that:- There was neither borrowing or debt incurred by the assessee. The arguments of the ld. DR that the expression “moneys borrowed or debt incurred” is further qualified by the word ”claim” or other similar right or obligation and the liability of .....

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nt for delay in delivery of the plots is in the nature of damages and not in the nature of interest. We, therefore, are of the view that the amount in question cannot be characterised as interest within the meaning of section 194A of the Act. Consequently there was no obligation on the part of the assessee to deduct tax at source. Consequently no disallowance could be made u/s 40(a)(ia) of the Act. We therefore direct the disallowance made by the AO and sustained by the CIT(A) should be deleted. .....

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ined by the assessee. It cannot also be said that the interest in question cannot be recognised owing to denial by the State Government of its obligation to pay interest or for the reason that the State Government is unable to pay interest. In such circumstances we are of the view that the revenue authorities were justified in bringing to tax interest on the premise that there was an accrual of income under the mercantile system of accounting. - Decided against assessee.

Deduction u/s .....

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f the Act has not been satisfied. In the given circumstances, we are of the view that it is just and appropriate to set aside the order of CIT(A) and remand the question of allowing deduction u/s 80IA(4)(i) of the Act to the AO for fresh consideration. The AO will examine all the requirements for allowing the aforesaid deduction. - Decided in favour of assessee for statistical purposes.

Addition on account of Penal Interest - Held that:- The assessee submitted that the said item of th .....

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of ₹ 26.17 crore to the total income of the assessee. The assessee has accepted this addition and has not challenged the same before CIT(A) for A.Y.2007-08. In the light of the factual background on the aforesaid issue, we are of the view that a sum of ₹ 26.17 crore was income of A.Y.2007-08 and has been taxed in the said assessment year and therefore cannot be taxed again in A.Y.2008-09.- Decided in favour of assessee

Addition on account of under statement of profit - CIT .....

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l not be applicable in the present case for the reason that sale of land by the assessee is sale of stock in trade and stock in trade is not a capital asset within the meaning of definition of the said term u/s 2(14) of the Act. The extended meaning of the definition “transfer” u/s 2(47) of the Act is applicable only to transfer of a capital asset. Besides the above we are of the view that the assessee has recognised this income from the sale of land in the subsequent year i.e. 2009-10. In the g .....

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o.1739/K/13 is an appeal by the assessee against the order dated 14.01.2013 of CIT(A)-XII, Kolkata, relating to AY 2005-06. 2. Ground Nos.1 and 2 raised by the assessee read as follows : 1. That the Commissioner of Income-tax (Appeals) was wrong in confirming the Assessing Officer s action in disallowing ₹ 9,71,17,977/- u/s 40(a)(ia) in relation to the compensation paid in the form of interest by the appellant to various allottees for delays occurred in delivering the respective plots. 2. .....

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t of land for housing and for developing, operating and maintaining infrastructure facilities like sanitation and sewerage, drainage, water supply etc. The assessee also develops land by dividing land into several plots and offers it for sale to individuals, cooperatives, government projects etc. 3.1. In the course of assessment proceedings for A.Y.2005-06 there was an item of debit of a sum of ₹ 9,71,17,977/- in the profit and loss account of the Assessee. The aforesaid sum was claimed as .....

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than six months from the scheduled date of possession the assessee had to pay interest on instalments already paid by the allottee during such extended period of the prevailing fixed term deposit rates for similar period offered by State Bank of India. For the sake of ready reference clause (7) of the allotment letter is reproduced as below :- 7. Physical possession of the plot would be handed over only after full payment of the land price and registration of sale deed by the competent Authority .....

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n the nature of payment of interest and therefore the assessee ought to have deducted tax at source at the time payment or credited to the account of the payee whichever is earlier as per the provision of section 194A of the Act. The AO was of the further view that since the assessee failed to deduct tax at source on the aforesaid sum the claim of the assessee for deduction of the aforesaid sum cannot be allowed in view of the provision of section 40(a)(ia) of the Act. The AO on the aforesaid re .....

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t any income by way of interest. It was submitted by him that the expression interest has not been defined u/s 194A of the Act and therefore one has to take recourse with the definition of the expression interest as provided u/s 2(28A) of the Act. The aforesaid provision reads as follows :- 2(28A) interest means interest payable in any manner in respoec5t of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or othe .....

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cisions :- i) CIT vs H.P.Housing Board (2012) 340 ITR 388 (HP) ii) Ghaziabad Development Authority vs Dfr. N.K.Gupta 258 ITR 337. In the case of H.P. Housing Board there was a delay in construction of house and therefore H.P.Housing Board paid interest to the allottees on the agreed rate in terms of the letter of allotment. The question before the Hon ble Himachal Pradesh High Court was as to whether the same constitute interest within the meaning of section 2(28A) of the Act. The Hon ble High C .....

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on of section 40(a)(ia) of the Act could be made. 4.1. The ld. DR drew our attention to the definition of interest u/s 2(28A) of the Act and submitted that the definition contemplates moneys borrowed or debt incurred including deposit claimed or other similar right or obligation. According to him the payment in dispute in this appeal could be attributed to a claim made by an allottee under a letter of allotment which could be termed as interest u/s 2(28A) of the Act. 5. We have carefully conside .....

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2(28A) of the Act clearly presupposes borrowing of money or incurring of debt. In the present case as we have already seen the sum in question was paid by the assessee as per the terms of allotment of plots for the delay in delivery of plots. The liability of the assessee in this regard is a contractual liability. The quantification of the liability is in terms of percentage of interest payable by State Bank of India. The manner of quantification on the basis of percentage of interest paid by S .....

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aim or other similar right or obligation has to be read ejusdem generis with the expression moneys borrowed or debt incurred . In other words the expression interest should be traceable to transactions in the form of borrowing of money. The decisions referred to by the ld. Counsel for the assessee clearly lay down the proposition that the nature of payment for delay in delivery of the plots is in the nature of damages and not in the nature of interest. We, therefore, are of the view that the amo .....

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e Commissioner of Income-tax (Appeals) was wrong in confirming the action of the Assessing Officer in making an addition of ₹ 26,85,000 as the appellant s alleged interest income in relation to the deposit lying the Government of West Bengal. 4. That without prejudice to the contention raised in Ground No.3 above, the Commissioner of Income-tax (Appeals) failed to appreciate that there has not been any accrual of interest income in the hands of the appellant. 6.1 The assessee receives gran .....

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77; 26,85,000/-. According to the AO the assessee was following mercantile system of accounting and therefore the assessee ought to have recognised the income on accrual basis and offered the same to tax. 6.2. The plea of the assessee was that though the account is interest bearing in spite of several reminders the treasury has not credited any interest and since no interest was coming from the treasury interest income is not recognised. The assessee also brought to the notice of the AO several .....

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issions as were made before the AO. The ld. DR relied on the order of CIT(A). 7. We have given a careful consideration to the rival submissions and are of the view that the plea of the assessee for not recognising the interest income has been on the basis that the State Government had not issued orders for payment/credit of interest to the interest bearing treasury account of the assessee. There is no allegation that the State Government has refused to pay interest on the treasury account mainta .....

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r of the CIT(A). Ground Nos. 3 and 4 raised by the assessee are dismissed. 8. Ground No.s 5 and 6 raised by the assessee read as follows :- 5. That the Commissioner of Income Tax (Appeals) was wrong in confirming the action of the Assessing Officer in disallowing the appellant s claim for deduction u/s 80- IA. 6. That without prejudice to the contention raised in Ground No.5 above, the Commissioner of Income-tax (Appeals) failed to appreciate the fact that the appellant had been responsible to d .....

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ditions, namely :- (a) it is owned by a company registered in India or by a consortium of such companies 28[or by an authority or a board or a corpora-tion or any other body established or constituted under any Central or State Act;] 29[(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facili .....

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infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had .....

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he assessee did not make a claim for deduction before the AO. However, such a claim was made before the CIT(A). The CIT(A) had not allowed the claim of the assessee for the following reasons :- Appeal on ground no. 5 is against the not allowing the assessee to set off brought forward losses/unabsorbed depreciation. The appellant did not claim any deduction u/s. 80lA of the I.T. Act, 1961 but seeing the positive income calculated by the A.O. the assessee filed a petition u/s. 154 of the LT. Act 1 .....

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re the Hon' ble Tribunal. After going through the orders and notifications of the assessee company i.e. West Bengal Housing Infrastructure Development Corporation Ltd. it is not clear that the assessee company was ever intrusted by the Govt. of West Bengal as principle agency to develop infrastructure. The notification also did not make it clear that the assessee company would be carrying out works on the basis of in principle approval without any necessary notification of the Govt. of West .....

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961, thus assessee s appeal on ground no.5 is dismissed. 9.2. Before us the ld. Counsel for the assesee drew our attention to the order of the CIT(A) for A.Y.2008-09 wherein the CIT(A) allowed the claim of the assessee for deduction u/s 80IA(4)(i) of the Act. The following are the relevant observation of the CIT(A) :- 7. Regarding ground nos. 1 to 4 relates to disallowance of deduction u/s 80IA of the I.T.Act, 1961 to the extent of ₹ 13,73,26,244/-. The appellant is a wholly owned public s .....

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of roads, flyovers, bridges etc. All these development activities are being discharged by the appellant in accordance with approval given by Govt. of W.B. as per West Bengal Town and country (Planning and Development) Act, 1979. The assesse had also filed the required Audit Report in Form No.10CCB. Keeping in view this factual matrix appellant is eligible for deduction u/s 80IA since its income is derived from business of development, operation and maintenance of infrastructure facility. Theref .....

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r of the CIT(A) for A.Y.2008-09. It was also submitted that the CIT(A) while deciding the appeal for the assessee has not looked into the condition laid down in section 80IA(4)(i)(b) of the Act. According to him therefore the claim of the assessee for deduction u/s 80IA(4)(i) of the Act ought to be disallowed. 11. We have considered the rival submissions. The requirement of section 80IA(4) of the Act is that the assessee to claim the said deduction has to carry on the business of developing or o .....

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rised Representative harped on the point that there was a notification by the State Govt. Empowering the assesse to develop or operate and maintain infrastructure facility which can be equated to agreement between the assessee and the State Govt.. We further notice that the condition for grant of deduction u/s.80IA(4)(i) of the Act is that the assessee should start operating and maintain the infrastructure facility. As rightly contended by the ld. DR, the CIT(A) in deciding the appeal for A.Y.20 .....

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requirements for allowing the aforesaid deduction. The assessee will provide all the details to substantiate its claim for the aforesaid deduction for statistical purpose. Ground Nos. 5 and 6 raised by the assessee are treated as allowed for statistical purposes. 12. In the result ITA No.1739/Kol/2013 of the assessee is partly allowed. ITA NO.1740/Kol/2013 (A.Yr.2006-07) 13. This is an appeal by the assessee against the order dated 14.01.2013 of CIT(A)-XII, Kolkata relating to A.Y.2006-07. 14. G .....

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essee and allowed ground nos. 5 and 6 for statistical purposes. 15. In the result ITA No.1740/Kol/2013 of the assessee is partly allowed. ITA NO.1741/Kol/2013 (A.Yr.2007-08) 16. This is an appeal by the assessee against the order dated 14.01.2013 of CIT(A)-XII, Kolkata relating to A.Y.2007-08 17. Grounds Nos.1 and 2 raised by the assessee in this appeal are identical to ground nos. 1 and 2 raised by the assessee in ITA No.1739/Kol/2013 for A.Y.2005-06. For the reasons stated therein while decidi .....

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he assessee and disallowed by the AO is identical to the facts and circumstances as it prevailed in A.Y.2005-06. While deciding the identical ground nos. 5 and 6 for A.Y.2005-06 in ITA NO.1739/Kol/2013 we have already set aside the order of CIT(A) in this regard and remand the question of allowing deduction u/s 80IA(4) of the Act to the AO for fresh consideration for the reasons stated therein. Ground Nos. 1 and 2 raised by the assessee are treated as allowed for statistical purposes. 21. Ground .....

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2012 is an appeal by the revenue. Both these appeals are directed against the order dated 04.11.2011 of CIT(A)-XII, Kolkata relating to A.Y.2008- 09. ITA No.113/Kol/2012 (Assessee s appeal)(A.Y.2008-09): 24. Ground Nos. 1 and 2 raised by the assessee is similar to ground nos. 1 and 2 raised by the assessee in ITA No.1739/Kol/2013 for A.Y.2005-06. While deciding the aforesaid ground in A.Y.2005-06 we have already held that the addition made by the AO and confirmed the CIT(A) cannot be sustained. .....

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No.3 above, the Commissioner of Income-tax (Appeals) failed to appreciate that there had occurred a double assessment of the sum of ₹ 26.17 crore once in the Assessment Year 2007-08 and again in the Assessment Year 2008-09. 26. The assessee received a sum of ₹ 26.17 crore towards penal interest on delayed payment on sale of bulk land. This sum was offered to tax for A.Y.2007-08 and has been duly taxed. Consequent to the comments of the Controller and Auditor General this sum was cons .....

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9 the assessee has included the sum of ₹ 26.17 crore as prior period income in the accounts. CIT(A) accordingly dismissed the grounds of appeal of the assessee. Aggrieved by the order of the CIT(A) the assessee has raised ground nos. 3 and 4 before this Tribunal. 27. We have heard the rival submissions. We have also perused the order of the assessment of the assessee for A.Y.2007-08. At para 3 of the said assessment order, the AO has discussed the question as to whether the sum of ₹ .....

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n progress is not in order and has resulted in understatement of income. The AO has accordingly added a sum of ₹ 26.17 crore to the total income of the assessee. The assessee has accepted this addition and has not challenged the same before CIT(A) for A.Y.2007-08. 27.1. In the light of the factual background on the aforesaid issue, we are of the view that a sum of ₹ 26.17 crore was income of A.Y.2007-08 and has been taxed in the said assessment year and therefore cannot be taxed agai .....

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30. As we have already seen that the assessee develops and sells land, flat etc. The assessee adopts a practice of recognising the income on sale of land and flats only when registration of conveyance is completed. The CAG commented in his report that since the assessee had allotted land and handed over the land and since the sale of land had been duly approved by the board of directors of the assessee and control of the land passed to the allottes and therefore sale should be treated as comple .....

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deleted the said addition observing as follows :- Regarding ground nos. 9 & 10 relating to addition of ₹ 205,00,52,000/- due to CAG s comments regarding understatement of profit for the year by ₹ 204,67,00,000/-. The assessee has submitted that the appellant followed a practice to recognise sale of land/flat only when the registration of deeds for the entire allotted land/flat would be completed. However, CAG commented in its report that since the appellant had allotted and hande .....

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tion of transfer u/s 2(47) of the I.T.Act, 1961 is not applicable to assessee company and the sale of land which is held as stock in trade should be recognised only when the legal title of the land is transferred to the relevant allottee. The assessee is consistently following this method of accounting and in A.Y.2009-10 appellant had already accounted for the relevant sales of ₹ 203.3 crores. The assessee is entitled to relief of ₹ 204.67 crores. Therefore ground nos. 9 & 10 are .....

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