M/s. Quatro Mortgage Solution Pvt. Ltd., New Delhi V. ITO, New Delhi

CO 43/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6226 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 12-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Keywords: Unexplained cash credit; Capital expenditure
• Section: 68

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SMT BEENA A. PILLAI , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 2819/DEL/2015 (ASSESSMENT YEAR: 2010 - 11 ) ITO, WARD - 20(3), NEW DELHI VS. QUATRO MORTGAGE SOLUTION PVT. LTD, 24 - C BLOCK BASEMENT, COMMUNITY CENTRE, JANAKPURI, NEW DELHI - 58 PAN: AAACQ1451E (APPELLANT) (RESPONDENT) C. O. NO. 43/DEL/2016 (IN ITA NO. 2819/DEL/2015) (ASSESSMENT YEAR: 2010 - 11 ) QUATRO MORTGAGE SOLUTION PVT. LTD, 24 - C BLOCK BASEMENT, COMMUNITY CENTRE, JANAKPURI, NEW DELHI - 58 PAN: AAACQ1451E VS. ITO, WARD - 20(3), NEW DELHI (APPELLANT) (RESPONDENT) REVENUE BY : SMT NAINA SOIN KAPIL, SR. DR ASSESSEE BY: SMT LALITHA KRISHNAMURTY, CA MS. VIDHI AGGARWAL, CA DATE OF HEARING 23/01 / 2018 DATE OF PRONOUNCEMENT 2 5 / 01 / 2019 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS IS THE APPEAL FILED BY THE LD AO AS WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD COMMISSIONER OF INCOME TAX ( APPEALS ) - 7 , NEW DELHI DATED 0 2 / 12 / 2015 FOR ASSESSMENT YEAR 2010 - 11 . 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS AS UNDER : - PAGE | 2 3. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN CROSS OBJECTION IS AS UNDER : - 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY WHO FILED ITS RETURN OF INCOME ON 05/10/2010 AT NIL INCOME . THE ASSESSEE IS ENGAGED IN PROVIDING BACK OFFICE MORTGAGE PROCESSING SERVICES TO THEIR CLIENT BEING LENDERS, FINANCIAL INSTITUTIONS, AND LAW FIRMS. THE LOAN PROCESSING IS AUTOMATED THROUGH COMPUTER SOFTWARE. DURING THE YEAR, THE ASSESSEE HAS INCURRED EXPENDITURE UNDER THE HEAD ALLOCABLE CAPEX COST FOR THE USE OF ASSETS SUCH AS FURNITURE AND FIXTURE, LEASEHOLD IMPROVEMENTS, AIR - CONDITION ING UNIT , DG SETS , GYM EQUIPMENTS, CCTV ETC . THE ASSESSEE STATED THAT ABOVE CHARGE IS RE COVERED BY ITS HOLDING COMPANY ON A FIXED RATE PER ANNUM , PAR SE A T BASIS . THE ASSESSEE HAS DEDUCTED TAX AT SOURCE ON T HE ABOVE PAYMENTS @ 2% U/S 194 I OF THE ACT CONSIDERING IT AS PAYMENT FOR RENT OF PLANT AND MACHINERIES . THE LD AO WAS OF THE VIEW THAT THE ABOVE AMOUNT IS IN THE NATURE OF RENT OF FURNITURE AND THEREFORE UNDER SECTION 194I IT ATTRACTS TDS @ 10% AND NOT @ 2 % . THEREFORE, THE LD AO DISALLOWED SUM U/S 4 0 (A) (IA) OF THE ACT . OUT OF TOTAL EXPENDITURE INCURRED OF RS . 17191605/ - PROPORTIONATE DISALLOWANCES WAS WORKED OUT AT RS. 1 , 37, 53,284 / - . DURING THE YEAR THE ASSESSEE ALSO PAID INTEREST ON SERVICE TAX FOR ASSESSMENT YEAR 2007 - 0 8 AND 2008 - 9 AMOUNTING TO R S 1105515 / - WHICH WAS DISALLOWED BY THE LD AO CONSIDERING IT AS PRIOR PERIOD EXPENSES . FURTHER, ADDITION OF RS. 333999 / - WAS MADE AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT . CONSEQUENTLY, THE ASSESSMEN T UNDER SECTION 143 (3) OF THE ACT WAS PASSED ON 2 1/ 3 / 2013 MAKING CERTAIN OTHER ADDITIONS OF RS. 38147971 / - . THE ASSESSEE CHALLENGED THE SAME BEFORE THE LD COMMISSIONER OF INCOME TAX (APPEALS) WHO DELETED THE IMPUGNED ADDITION THEREFORE THE REVENUE IS IN AP PEAL BEFORE US . 5. GROUND NO. 1 OF THE APPEAL IS WITH RESPECT TO THE DELETION OF THE ADDITION OF RS. 13753281 / - BECAUSE OF LOW ER TAX DEDUCTION AT SOURCE. THE CONTENTION OF THE ASSESSEE IS THAT IT HAS PAID THE RENT FOR THE WORK STATION HAVING COMPUTER WHICH ARE USED BY THE EMPLOYEES AS A TOOL IN THE PAGE | 3 ASSESSEES BUSINESS AND THEREFORE THEY FULFILL THE FUNCTION OF PLANT IN THE BUSINESS ACTIVITY AND HENCE AS IT IS A RENT FOR THE PLANT AND MACHINERY THE TDS IS REQUIRED TO BE DEDUCTED UNDER SECTION 194I OF THE ACT @ 2% . THE AO WAS OF THE VIEW THAT THE ABOVE RENT IS FOR THE FURNITURE AND HENCE UNDER SECTION 194I TAX WAS REQUIRED TO BE DEDUCTED @ 10% . THE LD COMMISSIONER OF INCOME TAX (A PPEALS ) DELETED THE DISALLOWANCES RELYING ON THE DECISION OF THE HONBLE KOLKATA HIGH COURT IN THE CASE OF THE CIT VS SK TEKRIWAL WHEREIN IT HAS BEEN HELD THAT WITH REGARD TO THE SHORTFALL IT CANNOT ASSUME THAT THERE IS A DEFAULT OF FAIL URE TO DEDUCT TAX AT SOURCES . 6. THE LD DR RELIED UPON THE ORDER OF THE LD AO, WHEREAS THE LD AR VEHEMENTLY SUBMITTED THAT THE ISSUE IS ALSO RAISED IN THE CROSS OBJECTION OF THE ASSESSEE THAT TAX IS NOT REQUIRED TO BE DEDUCTED @ 10% BUT @ 2%. SHE INSISTED UPON THE ISSUE THAT THIS BENCH SHOULD FIRST DECIDE WHETHER ON THE PAYMENT MADE BY THE ASSESSEE TAX IS REQUIRED TO BE DEDUCTED @ 10% AS CONTESTED BY THE ASSESSEE OR @ 2% AS CONTESTED BY THE LD AO . 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE , SO FAR AS THE DISALLOWANCES UNDER SECTION 40 (A ) ( IA ) OF THE ACT IS CONCERNED BY THE DECISION OF THE HONBLE KOLKATA HIGH COURT IN CASE OF CIT VS SK TEKRIWAL 361 ITR 432 AS WELL AS BY T HE DECISION OF COORDINATE BENCH IN CASE OF THE ASSESSEE ITSELF FOR THE ASSESSMENT YEAR 2011 - 12 , WHEREIN THE IDENTICAL ISSUE IS DECIDED AND DISALLOWANCES IS DELETED . IN VIEW OF THE ABOVE GROUND NO. 1 OF THE APPEAL OF THE REVENUE IS DISMISSED . 8. AS THE CROSS OBJECTION OF THE ASSESSEE IS ON THE ISSUE THAT TAX SHOULD HAVE BEEN REQUIRED TO BE DEDUCTED BY THE ASSESSEE @ 10% AS PER THE CONTENTION OF THE LD AO AND @ 2% AS CLAIMED BY THE ASSESSEE . WE ARE NOT ADJUDICATING APPEAL AGAINST THE ORDER OF THE LD AO UNDER SECTION 201 OF THE ACT WHERE THE ASSESSEE IS ASKED TO PAY SHORTFALL OF TAX DEDUCTION AT SOURCE OR FAILURE TO DEDUCT THE TAX AT SOURCE . THE ISSUE BEFORE US IS LIMITED TO THE DISALLOWANCES UNDER SECTION 40(A ) ( IA) OF THE ACT . AS STATED BY THE LD AR THAT NO ACTION HAS BEEN TAKEN BY THE LD AO UNDER SECTION 201 ( 1 ) AND ( 1A ) OF THE ACT IN THE IMPUGNED ASSESSMENT YEAR , THEREFORE , PAGE | 4 THE GROUND RAISED BY THE ASSESSEE IN THE CROSS OBJECTION ARE HYPOTHETICAL AND WHEN WE HAVE ALREADY DELETED THE ADDITION IN THE C ASE OF THE ASSESSEE , WE DO NOT FIND IT APPROPRIATE AT THIS STAGE TO DECIDE IT . ASSESSEE IS AT LIBERTY TO RAISE SUCH QUESTION AT THE APPROPRIATE STAGE BUT NOT IN THIS APPEAL WHERE THE ASSESSEE HAS SUCCEEDED BASED ON THE DECISION OF THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE. ACCORDINGLY, CROSS OBJECTION OF THE ASSESSEE IS DISMISSED . 9. THE SECOND GROUND OF APPEAL OF THE REVENUE IS AGAINST THE DELETION OF THE ADDITION OF RS. 1105515 / - BECAUSE OF INTEREST ON SERVICE TAX CONSIDERED AS PRIOR PERIOD EXPENSES BY TH E ASSESSEE. 10. THE LD DR SUBMITTED THAT AS THE INTEREST RELATES TO THE FINANCIAL YEAR 20 07 - 08 AND 2008 - 09, IT IS PRIOR PERIOD EXPENDITURE AND CANNOT BE ALLOWED TO THE ASSESSEE AS DEDUCTION . 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORIT IES . THE LD CIT ( A) HAS DELETED THE ABOVE DISALLOWANCES HOLDING THAT INTEREST ON SERVICE TAX HAS CRYSTALLIZED DURING THE YEAR AND THEREFORE IT IS ALLOWABLE AS EXPENDITURE DURING THE YEAR . WE CONFIRM THE FINDING OF THE LD COMMISS IONER OF INCOME - TAX (APPEALS) AND DISMISS GROUND NO. 2 OF THE APPEAL OF THE REVENUE . 12. GROUND NO. 3 OF THE APPEAL IS WITH RESPECT TO THE ADDITION OF RS. 333999 / - BECAUSE OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT . THE FACTS EMERGING FROM THE RECORD SHOWS THAT THE APPELLANT COMPANY HAS OUTSTANDING BALANCE OF ITS ASSOCIATED COMPANIES AS SUNDRY CREDITORS OF RS. 37981917 / - FOR WHICH ASSESSEE FILED CONFIRMATION OF THAT PARTY . FURTHER, THE LD AO HAS MADE THE ADDITION OF RS. 3 33999 / - WHICH IS NOT APPEARING IN THE BALANCE SHEET OF THE ASSESSEE. 13. THE LD DR RELIED UPON THE ORDERS OF THE LD AO WHERE AS THE LD AR VEHEMENTLY STATED THAT THERE IS NO SUCH OUTSTANDING IN THE BOOKS OF THE ASSESSEE. 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL CO NTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORIT IES . WHATEVER CREDIT BALANCE APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE , THE ASSESSEE SUBSTANTIATING THE SAME BY FILING A CONFIRMATION LETTER OF THE PARTY . THE LD DR ALSO COULD NOT SHOW PAGE | 5 HOW THE L D AO HAS WORKED OUT THE ADDITION OF RS. 333999 / - . IN VIEW OF THE ABOVE FACT S, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD COMMISSIONER OF INCOME TAX ( APPEAL ) . ACCORDINGLY , WE CONFIRM HIS FINDING . GROUND NUMBER 3 OF THE APPEAL OF THE REV ENUE IS DISMISSED. 15. IN THE RESULT, APPEALS FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 2 5 / 01 / 2019 . - SD/ - - SD/ - ( BEENA A. PILLAI ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 5 / 01 / 2019 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI