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2015 (11) TMI 1565 - ITAT DELHI

2015 (11) TMI 1565 - ITAT DELHI - TMI - Deduct tax u/s 194H - Held that:- The expenses incurred by the assessee towards consolidation of land was not liable to deduct tax u/s 194H of the Act and disallowance u/s 40(a)(ia) of the Act. Accordingly, this ground of the Revenue is dismissed. - Decided in favour of assessee. - ITA No. 3562 /Del/2013 - Dated:- 20-11-2015 - SMT. DIVA SINGH: JUDICIAL MEMBER AND SHRI O.P. KANT ACCOUNTANT MEMBER. Appellant by : Shri Yatendra Singh Sr. DR Respondent by : Sh .....

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n declaring nil income was filed by the assessee on 31-3-2008. The case was selected for scrutiny and notice u/s 143(2) of the Income-tax Act, 1961 (in short Act ), was issued. In the assessment order, passed u/s 143(3) of the Act, the ld. Assessing Officer made disallowance of ₹ 7,43,37,863/- in terms of section 40(a)(ia) of the Act, holding that payment made to consolidator M/s Vikram Electric Equipment Pvt. Ltd., for procuring land was liable for deduction of tax at source, but the asse .....

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as not liable for deduction at source u/s 194H of the Act and, therefore, expenses incurred towards consolidation of M/s Vikram Electric Equipment Pvt. Ltd. are not disallowable u/s 40(a)(ia) of the Act. The ld. authorized representative further submitted that the assessee in the aforesaid case is also one of the associated concern of the present assessee and M/s Vikram Electric Equipment Pvt. Ltd. was also acting as Consolidator for the assessee in said case. He further submitted that the decis .....

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decision, however, relied on the order of the ld. Assessing Officer 5. We have heard rival submissions and perused the material available on record. We find that the assessee company was incorporated and engaged in the business of real estate and other allied activities. The assessee had appointed M/s. Vikram Electric Equipments (P) Ltd. as consolidator for procuring land for the assessee company and the role of consolidator was on principal to principal basis. The assessee had paid commission t .....

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e, the Tribunal has held that there was no requirement for TDS. For the sake of convenience the findings of the Tribunal in I.T.A. No. 2361 and 1953/Del/2011 in the case of Finian Estate Developers Pvt. Ltd.(supra) are reproduced as under: 23. We have heard the parties and have perused the material on record. The A.O. observed that the assessee had shown purchases and closing stock of land at ₹ 60,23,16,022/-. This included a sum of Rs,4,20,15,681/- paid by the assessee to M/s. Vikram Elec .....

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the year, the A.O. disallowed the amount out of purchases. Accordingly, he also reduced the closing stock by a similar amount. The closing stock was thus determined at ₹ 54,03,00,341/-. 24. Before the Ld. CIT(A), the assessee contended that the amount involved was not of ₹ 4,20,15,641/-, since Vikram Electric Equipment P. Ltd. had been paid only ₹ 1,24,33,376/-. It was on this contention of the assessee that the Ld. CIT(A) directed the A.O. to verify the actual amount involved .....

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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 amount0 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 .....

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the assessee to Vikram Electric Equipment P. Ltd. 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 taxable profits of the assessee during the years. The total purchases were lying as closing stock, as observed by the Taxing authorities al .....

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rder to develop a colony. In case any land which was agreed to be acquired by Vikram Electric Equipment P. Lt. was not found to be suitable, 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 a principle to principle basis, independently. 26. The stand of the Department, on the other hand, has been that MOU signed by the assessee and Vikram E .....

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e 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 rights to purchase the land in favour of the buyer company and causing the land owners to execute the sale deeds directly in favour of the buyer company, the buyer company shall pay the consolidator such sum as may be mutually agreed. However, it is specifically agreed by the consolidator that no sum shall accrue to it on this account till it pr .....

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ailing which, no payment was to be 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 cannot 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 194H of the Act are, therefore, not at all applicable. 30. Moreover the amount paid to Vikram Electric Equipment P. Ltd. was duly reflecte .....

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