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2016 (3) TMI 647 - ITAT DELHI

2016 (3) TMI 647 - ITAT DELHI - TMI - TDS u/s 194H - disallowance u/s 40(a)(ia) - non deduction of tds - Held 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 to be made by the assessee to Vikram Electric Equipment P. Ltd.

This clearly shows that Vikram Electric Equipment P. Ltd. was transacting on a princip .....

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nsidered opinion, no disallowance is called for.

The provisions of section 40(a)(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 Assessing Officer recorded a loss of ₹ 19,700/-. This obviously, did not include any addition of either ₹ 4.02 crores or ₹ .....

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by theld. CIT(A)XVII, New Delhi is bad in law and wrong on facts. 2. That on the facts and circumstances of the case, the ld. CIT(A) has erred in law in upholding the action of the Assessing Officer treating the amount payable to the consolidator amounting to ₹ 95,44,264/- as non genuine expenditure. 2.1 That on the facts and circumstances of the case, the ld. CIT(A) has erred in law in upholding the action of the Assessing Officer in making disallowance u/s 40(a)(ia) of the I.T. Act, 196 .....

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of said sum of ₹ 95,44,264/- which is included in purchases during the year has no impact on appellant s profit liable to tax as the entire purchases form part of closing stock of the appellant at the year end. 3.1 That the order of ld. CIT(A) is erroneous and self contradictory. The ld. CIT(A) has erred in confirming the addition after holding that closing stock also needs to be reduced. The ld. CIT(A) ought to have held that the transaction of ₹ 95,44,264/- does not result into an .....

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ng land. During the assessment proceedings the ld. Assessing Officer observed that the assessee has booked land for an amount of ₹ 95,44,264/- which was paid to the purchaser on which the stamp duty has been paid. The details of the purchase are as below: S.No. Name of the party Amount paid to land owners Stamp Duty paid Amount payable to consolidator Total cost booked in the P&L A/c 1 Shri Madan Lal/Shri Kanwar Pal S/o Sh. Mam Raj & Othrs. 146711250 8802690 9544264 165058204 Total .....

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as no evidence were produced to show that any such services were rendered by the said consolidator. The ld. Assessing Officer, therefore, made addition to an extent of ₹ 95,44,264/-. 4. Aggrieved by the order of the ld. Assessing Officer the assessee preferred an appeal before the ld. CIT(A). The ld. CIT(A) has dealt with the issue at para 2.3 of his order which is reproduced herein below: 2.3 I have carefully considered the asstt. order and the submission made by the ld. AR on the above i .....

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id to the land owners as per sale deeds is ₹ 14,67,11,250/- and the stamp duty is ₹ 88,02,690/-. The total of the above two amounts comes to ₹ 15,55,13,940/-. On being questioned by the Assessing Officer regarding the difference amount of ₹ 95,44,264/- (Rs. 16,50,58,204/- minus ₹ 15,55,13,940/-), it was contended by the assessee that the said land has been purchased through the land consolidator M/s Vikram Electric Equipment P. Ltd. and the excess amount was paid to .....

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sed during this year forms part of the total 27 acres of land which will be purchased by the assessee through M/s Vikram Electric Co. P. Ltd. as per the MoU. It was observed by the Assessing Officer that the above amount was not appearing separately in the P&L A/c as expenditure but was clubbed with the purchase price of land and that the sale deed with the land owners did not indicate that the consolidator was involved in arranging the purchase of land. The Assessing Officer has also observ .....

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is in the nature of payment to contractor which is subject to TDS u/s 194C of the Act. Since no TDS has been deducted in respect of the above payment, the Assessing Officer has held that the above sum is disallowable u/s 40(a)(ia) of the Act. The Assessing Officer has, accordingly, added the above amount of ₹ 95,44,264/- to the appellant s income for the year. 5. Aggrieved by the order of the ld. CIT(A) the assessee is in appeal before us now. 6. We have heard the rival submissions of the .....

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nd 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. 7.1. The ld. AR further submitted that against the order of Finail Estate Developers (supra) the Revenue has not preferred any appeal before the Hon ble High Court. 7.2. The ld. AR has also placed reliance on the decision of this Tribunal in the case of Penthea Builders & Developers P. Ltd. in ITA No. 1951/D/2011 for .....

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principal to principal basis and that it could not be said that the payment to VEEPL was for rendering services. Consequently, it was held that section 194H of the Act was not at all applicable . The ITAT noted that in terms of clause 3.2 of the MoU no sum was due to be paid to VEEPL for the services rendered by it till it procured 27 acres of land. The amount paid to VEEPL was duly reflected by Finian in its purchases and the closing stock and no sales had been made during the year in question .....

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chasing the land for the acquirer in the present case of ZREPL the acquirer paid from its own funds. However, ld. Counsel for the Revenue has been unable to show any difference in the actual clauses of the MoU between ZREPL and VEEPL when compared to the MoU between Finian and VEEPL. In the circumstances, the Court is unable to appreciate on what basis it could be said that the arrangement between ZREPL and VEEPL was not on a principal to principal basis. With the Revenue having accepted the dec .....

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f Finian, the Court is unable to find any distinction between the two cases as far as the clauses in the MoU between the parties and VEEPL or the payment made to the later pursuant thereto. Again, with the Revenue having accepted the decision of the ITAT in the case of Finian, and with the Revenue being unable to bring out any distinguishing feature as far as the case of PBDPL, the Court sees no reason why it should interfere with the impugned order of the ITAT. 7.3. The ld.AR submitted that in .....

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as 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. 7.5. The ld.AR submitted that Vikram El .....

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ng so, the provisions of neither section 194C nor section 194H get attracted to the payment made by the assessee to Vikram Electric Equipment P. Ltd. It has been submitted by the ld.AR that the payment along with payment made to the farmers directly represented the purchase of the cost of land and had been correctly treated as such in the assessee s books of account. It has been contended that alternatively, in any case, the payment made to Vikram Electric Equipment P. Ltd. has not affected the .....

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P. Ltd. had an important role to play as a consolidator, since the assessee required contiguous land holdings in order to develop a colony. The d.Ar submitted that in case land which was agreed to be acquired by Vikram Electric Equipment P. Ltd. was not found to be suitable by the assessee, it was Vikram Electric Equipment P. Ltd. which would have to bear the consequences, indicating that Vikram Electric Equipment P. Ltd. was not acting as an agent on behalf of the assessee, but was working on .....

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is seen that clause 3.2 of the MOU between the assessee and Vikram Electric Equipment P. Ltd. makes it clear that Vikram Electric Equipment P. Ltd. or its agent agreed to assign their rights to purchase the land in favour of the assessee. It would be appropriate to reproduce here, the said clause 3.2: 3.2 In consideration of the consolidator or its agent/nominee assigning its right to purchase the land in favour of the Buyer Company and causing the land owners to execute the sale deeds directly .....

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ause 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 to be made by the assessee to Vikram Electric Equipment P. Ltd. 9.2. This clearly shows that Vikram Electric Equipment P. Ltd. was transacting on a principle to principle basis and it cannot be said that the payment was made by the assessee to Vi .....

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