CENTUM FINANCE LIMITED,DELHI V. DCIT,CIRCLE 4(2), DELHI

ITA 2274/DEL/2023

AI Insights

Centum Finance Ltd. appealed against the order of the National Faceless Appeal Centre (NFAC), which sustained various disallowances and additions to the assessee's income for the Assessment Year 2018-19. The primary issues included the treatment of enhanced compensation received from compulsory land acquisition, the interest income thereon, and the restriction on deductions for political contributions under Section 80GGB of the Income Tax Act. The Tribunal found merit in the assessee's arguments regarding the misclassification of income and the application of the correct legal provisions concerning political contributions, leading to the restoration of these issues to the Assessing Officer for further examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396667 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act, Land Acquisition Act, 1894, Companies Act, 2013
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: S.S. NAGAR
• Keywords: Business income; Opportunity of being heard; Earning of tax free income
• Section: 143(3); 56

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘B’: NEW DELHI) BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA No:- 2274/Del/2023 (Assessment Year- 2018-19) Centum Finance Ltd., 1307, Vikram Tower, Rajendra Palace, Delhi 110008. Vs. DCIT, Circle 4(2), CR Building. PAN No: AACCC9070D APPELLANT RESPONDENT Assessee by : Shri S.S. Nagar, Adv. Revenue by : Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing : 07.05.2025 Date of Pronouncement : 29.05.2025 ORDER PER SUDHIR PAREEK, JM The instant appeal has been preferred by the Assessee against the order of National Faceless Appeal Centre (NFAC), Delhi, [in short (Ld. CIT(A)] dated 15.06.2023 for Assessment Year 2018-19. 1.1. The Assessee has raised the following grounds of appeal: ITA No.-2274/Del/2023 Centum Finance Ltd. . 2 “ 1. That on the facts and in the of circumstances of the case, the disallowance, imposition of tax and Interest with reference thereto, the quantification of taxable income and the tax liability, has been grossly unjustified, erroneous and unsustainable and necessary direction be given to the Ld. AO to give appropriate relief in accordance with law. 2. That on the facts and circumstances of the case the Ld. CIT- (A) has erred in sustaining the disallowance made u/s 143(1) without considering the facts that they are out of the preview of the section 143(1) and hence order passed is grossly unjustified, erroneous and unsustainable. 3 That on the facts and circumstances of the case and without prejudice to the Ground No. 2:0 above, the Ld. CIT-(A) has erred in confirming the consideration of enhanced compensation received on compulsory acquisition of Agricultural Land amounting to Rs. 2,54,64,942/- in the Business income rather than treating it as exempt income. 4 That on the facts and circumstances of the case, the Ld. CIT- (A) has erred in confirming the addition on enhanced compensation received on compulsory acquisition without considering the fact that the same is typo error and due to mismatch in the income shown under the head Other source of income' 5. That on the facts and circumstances of the case and without prejudice to the Ground No. 2.0 above, the Ld. CIT-(A) has erred in confirming the addition of Rs. 47,46,537/-on account of Interest received of enhanced compensation received on land acquisition. 6. That on the facts and in the circumstances of the case and without prejudice to the Ground No. 2.0 above, the Ld. CIT-(A) has erred in restricting the deduction u/s 80GGB of the Act to 7.5% of the Average net profits of the three immediately preceding financial years 7. That on the facts and circumstances of the case and without prejudice to the Ground No. 2.0 above, the CIT(A) has erred in not considering the amendments made by Finance Act, 2017 in section 182 of the Companies Act, 2013 deleting the restriction of 7.5% from 31-03-2017. ITA No.-2274/Del/2023 Centum Finance Ltd. . 3 8. Without prejudice to the ground No. 5.0 and 5.1, the Ld. CIT(A) has erred in making the disallowance by considering the provision of Companies Act which does not have any bearing under Income Tax Act and hence addition sustained is illegal, ultra virus and not sustainable in the eyes of law. 9 That on the facts and circumstances of the case the Ld. CIT- (A) has erred in the confirming the levy of excess interest u/s 234 B and 234 C of the Act. 10 That the appellant craves leave, to add, to amend, modify, rescind, supplement, or alter any of the grounds stated here in above, either before or at the time of hearing of this appeal.” 2. The brief facts of the case are that during the year under consideration, the assessee received enhanced compensation of Rs. 2,54,64,942/- on account of compulsory acquisition of agricultural land and claimed amount as exempt in the return of income. However, as per assessee/appellant due to a clerical and inadvertent mistake, the amount was reduced under the head \"Income/receipts credited to profit and loss account considered under other heads of income (other sources)\" instead of the correct head “Income/receipts credited to profit and loss account which is exempt” under Schedule BP. 2.2 As a result, CPC while processing the return u/s 143(1) of the Act made a disallowance and added the said compensation to the total income of the assessee. ITA No.-2274/Del/2023 Centum Finance Ltd. . 4 2.3 The assessee also received interest of Rs. 4,07,42,803/- on the enhanced compensation (Rs.94,93,074/-u/s 28 and ₹3,12,49,729/- u/s 34 of the Land Acquisition Act, 1894), the Learned AO, while framing assessment u/s 143(3) of the Act, order dated 30.03.2022 made an addition of Rs.47,46,537/- (i.e. 50% of the interest received of Rs. 94,93,074/-) under section 56 of the Act. 2.4 The assessee paid a sum of Rs. 2 crores to Bhartiya Janata Party (BJP) as political contribution and had claimed the same under section 80GGB of the Act. The Ld. AO restricted the deduction u/s 80GGB of the Act to ₹15,50,967/- and the Ld. CIT(A) vide order dated 15.06.2023 restricted the deduction u/s 80GGB to ₹23,26,450/- ( 7.5% of the average net profits of the preceding three financial years). 3. Heard rival contentions and perused the material available on record. 4. Reiterated the Ground nos.-2, 3 and 4 of appeal, the Learned AR submitted that in sustaining the disallowance made U/s 143(1) without considering the material facts that they are out of the preview of the section 143(1) and confirmed the consideration of enhanced compensation received on compulsory acquisition of ITA No.-2274/Del/2023 Centum Finance Ltd. . 5 agricultural land amounting to Rs. 2,54,64,942/- in the business of income rather than treating it as exempt income and the Ld. CIT(A) reluctant to consider the fact that the same was typo error and due to mismatch in the income shown under the head ‘other source of income’ and consequently CPC while processing the return u/s 143(1) made disallowance of the aforesaid enhanced compensation and added the same to the total income of the appellant. The assessee prayed to direct the Ld. AO recompute the total income of the appellant and reduced the amount of the aforesaid compensation from the total income of the asessee / appellant as per assessee’s submission aforesaid amount of enhanced compensation being exempt in nature claimed as exempt in the return of income , which is well placed in PB at page 18 but due to an inadvertent error reduced the same as ‘income/receipts credited to profit and loss account considered under other heads of income (other sources) and for which the Learned AR referred page 14 of PB. 4.1 We find material substance in the submissions on behalf of the assessee and remit back this issue to the Ld. AO to recompute the ITA No.-2274/Del/2023 Centum Finance Ltd. . 6 total income of the assessee as above. Accordingly, the issue nos. 2,3, and 4 are disposed of. 5. Ground No. 5 pertains to the addition of Rs. 47,46,537/- on account of interest received under Section 28 of the Land Acquisition Act, 1894, on the enhanced compensation received towards compulsory acquisition of agricultural land. 5.1 The Ld. AR submitted that the assessee had duly offered the interest income to tax to the extent applicable, and the addition of Rs. 47,46,537/- (being 50% of the interest received of Rs. 94,93,074/-) made by the AO under Section 56 of the Act was not warranted. The Ld. CIT(A), however, upheld the same without appreciating the nature of interest under Section 28 of the Land Acquisition Act and without proper verification of the facts. It is submitted on behalf of the assessee that he received interest on enhanced compensation of Rs 4,07,42,803/- u/s 34 of the Land Acquisition Act,1894 and while calculating the total income offered the same to tax ,in this regard referred page 16 of PB . 5.2 On consideration of the material placed on record and the legal position, we are of the view that the nature of the interest and rival ITA No.-2274/Del/2023 Centum Finance Ltd. . 7 contention requires factual verification. We, accordingly, deem fit to restore this issue to the file of the Ld. Assessing Officer for proper verification of the facts and recomputation, in accordance with law. Hence this ground is allowed in above terms for statistical purpose. 6. Ground Nos. 6 and 7 relate to the restriction of deduction claimed under Section 80GGB of the Act towards political contributions. The assessee had made a political contribution of Rs. 2 crores to Bhartiya Janata Party (BJP) and claimed the entire amount as deduction under Section 80GGB of the Income Tax Act. However, the Ld. AO restricted the deduction to Rs. 15,50,967/-, and the Ld. CIT(A) restricted the deduction u/s 80GGB of the Act to Rs. 23,26,450/-, being 7.5% of the average net profits of the immediately preceding three financial years. 6.1 The Ld. AR contended that the restriction of 7.5% of average net profits was no longer applicable without considering the fact that Finance Act, 2017 w.e.f. 31.03.;2017 deleted the first proviso to section 182 of the Companies Act, 2013 which is restricted the political contribution to 7.5% of the average profits of the immediately preceding 3 financial years. ITA No.-2274/Del/2023 Centum Finance Ltd. . 8 6.2 On perusal of the provisions of Section 80GGB of the Act and the amendments to Section 182 of the Companies Act, 2013, we find merit in the submission of the assessee. In view of the above and to meet the ends of justice, we restore this issue to the file of the Ld. AO for purpose of verification of the political contribution made, and thereafter to recompute/recalculate the allowable deduction u/s 80GGB of the Act in accordance with prevailing law. 7. On the basis of foregoing fact situation, we deem fit to restore the issue to the file of the Ld. Assessing Officer for appropriate verification and recomputation of income and deduction in accordance with law as above, with the direction to provide effective opportunity of being heard and to furnish necessary documents and submissions in support of its claim to the assessee. 7. Consequently, the appeal is allowed for statistical purposes as stated above. Order pronounced in the open court on 29.05.2025 Sd/- Sd/- (SHAMIM YAHYA) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER ITA No.-2274/Del/2023 Centum Finance Ltd. . 9 Dated: 29.05.2025 Pooja, Sr. PS/- Copy forwarded to: 1. Appellant 1. Respondent 2. CIT 3. CIT(Appeals) 4. DR: ITAT ASSISTANT REGISTRAR ITAT, Delhi "