M/s. Kajaria Ceramics Ltd., New Delhi V. DCIT, New Delhi

ITA 1142/DEL/2013

• Counselvise Citation: 114220114 RSA 2013
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 30-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Assessee Lawyers: V K JAIN
• Keywords: Condonation of delay

Judgement Text

ITA NO.1142/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : D : NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.1142/DEL/2013 ASSESSMENT YEAR : 2009-10 KAJARIA CERAMICS LTD., J-1/B-1 (EXTENSION), MOHAN CO-OP. IND. ESTATE, MATHURA ROAD, NEW DELHI. PAN : AABCK1613R VS. DCIT, CIRCLE 5 (1), NEW DELHI. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI V .K. JAIN, CA DEPARTMENT BY : S HRI S .N. BHATIA, DR ORDER PER A.D. JAIN, JUDICIAL MEMBER: THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 AGAINST THE ORDER DATED 03.12.2012, PASSED BY THE LD. CIT(A)-VIII , NEW DELHI. THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL HAVE BEEN TAKE N:- 2 (A) THE HONBLE CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF A SUM OF RS.11,25,000/- OUT OF TOTAL TRAVELLING EXPENSES MADE BY THE LD. A.O. ON THE GROUND THAT APPELLANT COMPANY HAS INCURRED EXPENDITURE ON FOREIGN TRAVELLING OF ITS DEALERS/SUB-DEALERS WHIC H ARE IN THE NATURE OF INCENTIVE/COMMISSION GIVEN TO SUCH DEALERS/SUB-DE ALERS ON WHICH THE APPELLANT COMPANY IS LIABLE TO DEDUCT TDS AND AS THE TDS HAS NOT BEEN DEDUCTED THEREFORE THE EXPENDITURE HAS BEEN DISAL LOWED U/S 40 (A) (IA) OF THE INCOME TAX ACT. ITA NO.1142/DEL/2013 2 3 (A). THE HONBLE CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF A SUM OF RS.81,00,000/- OUT OF INTEREST PAID MADE BY TH E LD. A.O. ON THE ALLEGED BELIEF THAT THE APPELLANT COMPANY HAS GIVEN EXC ESS INTEREST FREE SECURITY DEPOSIT OF RS.111100000/- TO M/S DUA ENG INEERING WORKS PVT. LTD. AND HAS CALCULATED PRO-RATA INTEREST @ 12% THERE ON AMOUNTING TO RS.8100000/-. 2. THE REGISTRY HAS TAKEN AN OBJECTION VIDE DEFECT NO TICE THAT CHALLAN HAS BEEN FILED IN MINOR HEAD : (400), I.E., TAX ON REGU LAR ASSESSMENT, INSTEAD OF (300), I.E., SELF ASSESSMENT TAX, WHICH IS NOT TREATED A S APPEAL FEES. 3. IN THIS REGARD, VIDE APPLICATION FILED, THE ASSESSEE HAS CONTENDED THAT THE ORDER DATED 03.12.2012 PASSED BY THE CIT (A)-VIII , NEW DELHI, I.E., THE IMPUGNED ORDER, WAS RECEIVED BY THE ASSESSEE ON 03.01.20 13 AND AS SUCH, THE LAST DATE OF FILING THE APPEAL WAS 03.03; THAT T HE APPEAL WAS FILED ON 27.02.2013 WITHIN LIMITATION; THAT ADMITTEDLY, THE CHALLAN HAD BEEN UNINTENTIONALLY FILED UNDER THE MINOR HEAD OF TAX O N REGULAR ASSESSMENT INSTEAD OF THAT OF SELF ASSESSMENT TAX; THAT A FRESH PAYM ENT OF ` 10,000/- WAS MADE ON 19.08.2013, VIDE CHALLAN NO.03823; THAT THIS CHALLAN WAS FILED BEFORE THIS TRIBUNAL ON 22.08.2013, VIDE APPLICATION DATED 19.08.2013, UNDER THE CORRECT HEAD OF SELF ASSESSMENT TAX; THAT THIS FEES C HALLAN WAS DULY ACCEPTED BY THE BENCH AT THE TIME OF HEARING ON 27. 08.2013 AND AS SUCH, THE DEFECT HAS BEEN RECTIFIED. 4. WE FIND THAT THE DEFECT IN QUESTION WAS A TECHNICA L DEFECT, WHICH STANDS DULY RECTIFIED. THERE IS NO DELAY IN THE FILIN G OF THE APPEAL. THE APPLICATION FOR CONDONATION OF DELAY WAS FILED BY TH E ASSESSEE AS DIRECTED BY THE BENCH ON 23.10.2013. ACCORDINGLY, THE APPLICATI ON IS ALLOWED. 5. COMING TO THE GROUNDS TAKEN, APROPOS THE ISSUE OF DI SALLOWANCE OF TRAVELLING EXPENSES PAID, THE ASSESSING OFFICER MADE DISA LLOWANCE OF TRAVELLING EXPENSES CLAIMED OF ` 11,25,000/-. WHILE D OING SO, IT WAS OBSERVED THAT THE TRAVELLING EXPENSES PAID BY THE ASSESSEE TO THE DEALERS WERE IN THE NATURE OF INCENTIVE/COMMISSION PAID FOR PURCHASING CER TAIN QUANTITY AND QUALITY OF GOODS AND THAT THEREFORE, TDS WAS LIABLE TO BE DEDUCTED THEREON. ITA NO.1142/DEL/2013 3 THE LD. CIT (A) CONFIRMED THE ADDITION, OBSERVING TH AT THE ASSESSEE HAD PAID INCENTIVES/COMMISSION TO ITS DEALERS, WHICH HAD BEEN DEB ITED IN THE PROFITS & LOSS ACCOUNT UNDER THE HEAD OF FOREIGN TRAVEL EXPENSES; THAT THEREFORE, THE EXPENSES HAD BEEN CLAIMED UNDER THE GARB OF FOREIGN T RAVEL EXPENSES, WHEREAS THERE IS NOTHING OTHER THAN INCENTIVE/COMMISSIO N; THAT THIS FACT WAS EVIDENT SINCE THE HIGHER SALES ACHIEVED BY THE DEALERS WOULD RESULT IN MORE BONUS POINTS TO THE DEALERS; THAT COMMISSION INCLUDES ANY PAYMENT RECEIVED DIRECTLY OR INDIRECTLY BY A PERSON ACTING ON BEHALF OF ANOTHER, FOR SERVICES RENDERED IN THE COURSE OF BUYING OR SELLING OF GOODS; AND THAT THE PAYMENT OF FOREIGN TRAVEL BEING IN THE NATURE OF COMMISSION WITH IN THE MEANING OF SECTION 194H OF THE IT ACT, IT WAS THE DUTY OF THE A SSESSEE TO DEDUCT TDS THEREON. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTEN DED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBU NAL ORDER (PLACED ON FILE) DATED 12.07.2013, IN THE ASSESSEES OWN CASE IN ITA NO.4879/DEL/2011 FOR ASSESSMENT YEAR 2008-09. THE LD. D R, ON THE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDE R. 7. HAVING GONE THROUGH THE TRIBUNAL ORDER (SUPRA) IN THE ASSESSEES CASE FOR ASSESSMENT YEAR 2008-09, WE FIND THAT INDEED THIS ISSU E IS COVERED IN FAVOUR OF THE ASSESSEE. THEREIN, UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE TRIBUNAL HAS HELD AS FOLLOWS:- 9. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. FROM PERUSAL OF THE ASSE SSMENT ORDER, WE FIND THAT LEARNED ASSESSING OFFICER HAS MISERABLY FAI LED TO APPRECIATE THE REAL CONTROVERSY. HE HAS TOTALLY MISCONSTRUED THE EXP LANATION GIVEN BY THE ASSESSEE. THE DEALERS AND SUB-DEALERS H AD PURCHASED THE GOODS DIRECTLY FROM THE ASSESSEE. THEY HAVE NOT ACTED AS A COMMISSION AGENT FOR THIRD PERSON WHERE UPON SEC. 194 H WOULD BE APPLICABLE. LEARNED FIRST APPELLATE AUTHORITY HAS APPRE CIATED THE CONTROVERSY IN RIGHT PERSPECTIVE AS DISCERNIBLE IN THE FINDINGS EXTRACTED SUPRA. HENCE, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS REJECTED. ITA NO.1142/DEL/2013 4 8. THERE BEING NO DIFFERENCE IN THE FACTS FOR THE P RESENT YEAR, AS COMPARED TO THOSE FOR ASSESSMENT YEAR 2008-09, RESPECTFUL LY FOLLOWING THE TRIBUNAL ORDER, THIS GROUND OF APPEAL IS ACCEPTED. 9. SO FAR AS REGARDS THE ISSUE OF DISALLOWANCE OF ` 81 LACS OUT OF INTEREST PAID, WHILE MAKING THE DISALLOWANCE, THE ASSESSING OFFIC ER OBSERVED THAT THE ASSESSEE HAD ACQUIRED A PREMISES FROM M/S DUA ENGINEERING WORKS PVT. LTD. ON RENT; THAT THE SAID PERSON WAS A PERSON COVERED UNDE R THE PROVISIONS OF SECTION 40A(2)(B) OF THE IT ACT, BEING A RELATED PA RTY; THAT DURING THE YEAR, THE ASSESSEE HAD INCREASED THE INTEREST FREE SECURITY DEPO SIT FROM ` 5.35 CRORES TO ` 11.35 CRORES; THAT AS PER THE PREVAILING M ARKET PRACTICE AND OTHER STANDARD RENT AGREEMENTS, THE INTEREST FREE SECURITY DE POSIT WAS USUALLY EQUAL TO A MAXIMUM OF SIX MONTHS RENT, WHICH IN THE PRESENT CASE, WORKED OUT TO ` 24 LAC; THAT SINCE THE ASSESSEE HAS NOT BEEN ABL E TO FILE ANY EXPLANATION REGARDING THE INCREASE IN THE INTEREST FR EE DEPOSITS, THE INTEREST OF ` 81 LAC WAS BEING DISALLOWED OUT OF THE INTEREST D EBITED TO THE PROFIT & LOSS ACCOUNT BY THE ASSESSEE. 10. THE LD. CIT (A) CONFIRMED THE DISALLOWANCE, HOLD ING THE EXPENDITURE TO BE EXCESSIVE AND UNREASONABLE AND OBSERVING THAT THERE WAS NO BASIS TO ARRIVE AT THE FIGURE OF ` 11.35 CRORES; THAT THE ASSESSE E HAD INCREASED THE INTEREST FREE SECURITY DEPOSITS TO A RELATED PARTY WITH OUT SUBMITTING ANY FACTS ON THE REASONABLENESS OF THE EXPENDITURE; THAT THE ASSESSI NG OFFICER HAD BEEN CORRECT IN OBSERVING THAT THE INTEREST FREE SECU RITY DEPOSIT WAS MUCH HIGHER THAN THE INTEREST FREE SECURITY DEPOSITS BEING PAID UNDER OTHER STANDARD RENTAL AGREEMENTS; AND THAT THE ASSESSEE WAS ALSO MAKING HEAVY PAYMENT ON ACCOUNT OF INTEREST, WHEREAS IT HAD ADVANC ED HUGE INTEREST FREE SECURITY DEPOSITS TO ONE OF ITS GROUP CONCERNS, IN WHICH , THE DIRECTORS WERE HAVING SUBSTANTIAL INTEREST. 11. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT T HIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID TRIBU NAL ORDER IN THE ITA NO.1142/DEL/2013 5 ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09. THE LD. DR HAS AGAIN PLACED RELIANCE ON THE IMPUGNED ORDER. HERE, IT IS SEEN THAT THE TRIBUNAL, DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE, HAS HELD AS F OLLOWS UNDER SIMILAR FACTS AND CIRCUMSTANCES:- 15. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF IMPUGNED ORDER, I T REVEALED THAT ASSESSING OFFICER HAS NOT LOOKED INTO SURROUNDING FAC TS AND CIRCUMSTANCES BEFORE FORMING A BELIEF THAT ASSESSEE HA S GIVEN UNDUE BENEFIT TO ITS LANDLORD. HE PROCEEDED THE CONTROVERSY ON LY WITH A SINGLE ANGLE THAT INTEREST FREE DEPOSITS MADE BY THE ASSESSEE WI TH THE LANDLORD IS EXCESSIVE. HAD THE ASSESSING OFFICER LOO KED INTO THE REASONS FOR MAKING SUCH DEPOSITS PROBABLY HE WOULD HAVE NOT M ADE THE DISALLOWANCE. APART FROM THE STAND TAKEN ON LEGAL PRINC IPLE THAT SECTION 40A(2)(B) IS NOT APPLICABLE ON A PUBLIC LIMITED COMPA NY. THE ASSESSEE HAS DEMONSTRATED THAT IT HAS SUFFICIENT INTEREST FREE FUND AVAILABLE WHICH CAN TAKE CARE SUCH TYPES OF DEPOSITS, IT HAS TAKE N THE PREMISES ON A MONTHLY RENT @ RS.19 PER SQ. FT. WHEREAS THE MARKE T RATE IS RS.60- 80 PER SQ. FT. PER MONTH. HAD THESE FACTORS BEEN LOOKED INTO BY THE ASSESSING OFFICER, PROBABLY HE WOULD HAVE NOT FORMED THE OPINION THAT ASSESSEE HAS GIVEN UNDUE BENEFIT TO ITS LANDLORD. LEA RNED FIRST APPELLATE AUTHORITY HAS CONSIDERED ALL THESE ASPECTS AND ONLY THEREAFTER DELETED THE DISALLOWANCE. WE DO NOT SEE ANY REASON TO I NTERFERE IN THE ORDER OF THE LEARNED CIT (APPEALS). 12. THE SIMILARITY OF THE FACTS PRESENT FOR REGARDING THIS ISSUE FOR THE YEAR UNDER CONSIDERATION, WITH THAT FOR ASSESSMENT YEAR 2008- 09, HAS NOT BEEN DISPUTED. THE PREMISES IN QUESTION, CONSISTING OF 21000 SQ . FT. OF OFFICE AREA, WAS TAKEN ON RENT IN ASSESSMENT YEAR 1999-2000. DURING T HE YEAR, TOTAL RENT AMOUNTED TO ` 48 LACS. IN ADDITION, ` 11.35 CRORES HA D BEEN PAID AS INTEREST FREE SECURITY DEPOSIT, WHICH WAS AS PER CLAUSE (2) OF RE NT AGREEMENT DATED 31.12.2008. UNDER THE SAID AGREEMENT, IT HAD BEEN AG REED TO KEEP THE RENT @ ` 4 LACS PER MONTH AND TO INCREASE THE SECURITY DEP OSIT BY ` 6 CRORES, WHICH FACTS DO NOT STAND DISPUTED. 13. IN VIEW OF THE ABOVE, GROUND NO.3 RAISED BY THE ASSESSEE IS ALSO ACCEPTED. ITA NO.1142/DEL/2013 6 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS AL LOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 07.02.201 4. SD/- SD/- [ G.D. AGRAWAL ] [A.D. JAIN] VICE PRESIDENT JUDICIAL MEMBER DATED, 07 TH FEBRUARY, 2014. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.