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TMI Blog2022 (11) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessment was set aside by the Pr. CIT(C), Gurgaon and directed the Assessing Officer to complete the assessment de-novo and that the issue of interest expenses is within the scope of the directions given by the Pr.CIT(C), Gurgaon in his order u/s 263 of the Income-tax Act, 1961? 3. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law in deleting the disallowance of Rs. 11,52,42,000/- made by the Assessing Officer on account of interest expenses incurred on delayed payment of EDC/IDC and deduction claimed by the assessee? 4. The order of the Ld.CIT(A) is erroneous and not tenable in law and on facts." 3. When the matter was called for hearing, the ld. CIT-DR relied upon the consequential assessment order passed by the Assessing Officer in pursuance of revisional directions made under Section 263 of the Act. 4. Per contra, the ld. counsel for the Assessee pointed out that the issue in challenge by the Revenue is towards disallowance of Rs.11,52,42,000/- made by the Assessing Officer on account of interest expenses incurred on delayed payment of EDC/IDC and deduction claimed by the assessee. In this regard, the ld. counsel adverted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and internal Development charges (IDC') payable to Haryana Urban Development Authority (HUD A) through the Director, Town and Country Planning, Haryana amounting to Rs. 11,52,42,000. In addition to submissions made on 11-Jul-19, the assessee would like to submit as follows:- 1) The assessee has incurred the interest cost on EDC and IDC in terms of agreement entered into been the assessee and Governor of Haryana acting through Director, Town and Country Planning (DTCP) Haryana. Clause 1 (b)(iv) of the agreement states as under: "The unpaid amount of EDC would carry an interest of 12% per annum and in case of any delay in the payment of installment on due date, an additional penal interest of 3% per annum (making total payable interest 15% (simple) per annum would be chargeable " Further, Clause l(b)(viii)(f) of the agreement states as under: "The unpaid amount of IDC shall carry and interest of 18% p.a. (simple) for the delay in payment of installment" 2) In the light of above, it is evident that the interest cost on EDC and IDC incurred by the assessee is on account of delay in payment of installments of EDC and IDC and arising out of the business agreement ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rakash Cotton Mills P. Ltd.'s case (supra). In Commissioner of Income-Tax v. Murari Lai Ahuja and sons (P&H) 177 ITR 228, while considering the case of damages for breach of contract, the Punjab & Haryana High Court held that if the amount is expended as payment on account of compensation for breach of contract, the same shall be treated as commercial expediency and the loss incurred thereon shall be exigible to be deducted from the income of the assessee. In the said case, the assessee was engaged in the business of sale of cotton and it had failed to fulfill the contract for supply of cotton to the mills. The assessee settled the deal by paying certain sum as compensation/ damages which was held to be an allowable deduction. That judgment has been followed in a recent judgment in Commissioner of Income Tax v. SA. Builders (PJ Ltd. (2007) 211 CTR 473 by this Court 5) In view of the authoritative pronouncements of the Apex Court and the jurisdictional High Court, it is thus submitted that whenever an assessee has indicated any amount, which had been paid either by way of damages or penalty, to be an allowable expenditure under Section 37(1) of the Act the Assessing Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 of the Act after giving the assessee an opportunity of being heard, stands obliterated or made redundant Therefore, what the CIT himself could not have done, cannot be permitted to be done by the Assessing Officer while giving effect to the order under section 263 of the Act. In a recent judgment of the Honourable Bombay High Court in the case of Pr.CIT v. Royal Western India Turf Club Ltd (2019 (2) TMI241) the Honourable Bombay High Court held- Held Revision u/s 263 - addition towards entrance fees and annual subscription made by the Assessing Officer in the proceedings under Section 143(3) read with Section 263 - Held that:- This order would suggest that the Commissioner found fault with the Assessing Officer on clear four specific aspects arising out of the order of the assessment and require that the Assessing Officer passes fresh order after making proper inquiries. The question of the treatment to the entrance fees was by then nowhere in picture. The Assessing Officer on his own examined said issue. The Commissioner, undoubtedly, has powers under Section 263 of the Act to annul the entire assessment and required passing of fresh assessment order, However, when the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been considered by Pr. CIT, and he cannot consider any other item afresh for making additions. In view of the facts of the case and judicial pronouncements referred to by the appellant, it is held that EDC/IDC charges added by the AO in order under consideration were not part of the issues ordered to be examined in order u/s 263 by Pr.CIT. Hence, the addition made by the AO is deleted on legal grounds. As the addition has been deleted on legal grounds, the other grounds including related to merit of the case are not adjudicated. 4. As a result, appeal of the appellant for the year under consideration is allowed. 7. We notice that the CIT(A) has examined the issue in the light of the decision rendered by Hon'ble High Court and Coordinate Benches. The Hon'ble Gujarat High Court in the case of CIT vs. D.N. Dosani as reported in (2006) 280 ITR 275 (Guj) has observed that the powers of the Assessing Officer is confined to items for which revisional directions have been given and the Assessing Officer is not entitled to consider any other item afresh for making additions under guise of framing fresh assessment in pursuance of revisional directions. The same view has been echoed i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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