Income Tax Officer, Hyderabad V. M/s.Swarnandhara IJMII Integrated Township Development Company Pvt. Ltd., Hyderabad

ITA 1183/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69919 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 05-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: I RAMA RAO
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1183/HYD/2013 ASSESSMENT YEAR: 2010-11 DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(3), HYDERABAD. VS. M/S SWARNANDHRA IJMII INTEGRATED TOWNSHIP DEVPT. CO. PVT. LTD., HYDERABAD 81 (PAN AAHCS3641P) APPELLANT RESPONDENT APPELLANT BY: SRI B. YADAGIRI RESPONDENT BY: SRI I. RAMA RAO DATE OF HEARING: 1 8 / 11 / 2013 DATE OF PRONOUNCEMENT: 1 8 / 11 /2013 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV, HYDERABAD DATED 21/05/2013 FOR ASSESSMENT YEAR 2010-11 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING SUBSTANTIAL GROUND : II) THE CIT(A) ERRED IN ALLOWING THE INTEREST PAID BY THE ASSESSEE ON DELAYED REMITTANCES, ESPECIALLY WHEN THE AGREEMENT DID NOT REQUIRE PAYMENT OF SUCH INTEREST AND THE PAYEE IS A RELATED PERSON WITHIN T HE MEANING OF SECTION 40A(2)(B) OF IT ACT, 1961. 2. THE ASSESSEE HAD AWARDED CONTRACT OF CONSTRUCTIO N OF THE PROJECT, RAIN TREE PARK, TO M/S IJMII AND HA D PAID INTEREST ON BILLS FOR WHICH PAYMENT HAD BEEN DELAYE D. THE ASSESSING OFFICER HELD THAT THERE WAS NO PROVIS ION IN THE CONSTRUCTION CONTRACT FOR PAYMENT OF SUCH INTER EST. HE ALSO RELIED ON THE DECISION OF THE DISPUTE RESOL UTION PANEL (DRP) IN ASSESSEES CASE FOR AY 2007-08 WHICH HAD I.T.A. NO. 1183/HYD/2013 M/S SWARNANDHRA IJMII INTEGRATED TOWNSHIP DEVPT. CO . P. LTD. ==================== 2 ALSO TAKEN THE SAME VIEW UNDER SIMILAR CIRCUMSTANCE S. THE ASSESSING OFFICER, THEREFORE, DISALLOWED THE IN TEREST PAYMENT U/S 40A(2)(A) OF THE ACT. 3. ON APPEAL, THE CIT(A) FOLLOWING THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR AY 2007-08 IN ITA NO. 2072/HYD/2011, DATED 31/12/2012, DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40A( 2)(A) OF THE ACT. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE ARE OF THE OPINION THAT THE DEPARTMENT C ANNOT HAVE ANY GRIEVANCE THAT THE ISSUE UNDER CONSIDERATI ON IS SQUARELY BY THE EARLIER OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN ITA NO. 2072/HYD/2011 DTD. 31/12/2002 FOR A Y 2007-08 WHEREIN THE TRIBUNAL HELD AS FOLLOWS: 21. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THIS GROUND IS WITH REGARD DISALLOWANCE OF INTEREST PAID TO M/S IJMII AT RS. 2,21,95,301/-. THIS PAYMENT WAS DISALLOWED ON THE REASON THAT AS PER THE AGREEMENT DTD. 09/02/2004 THE ASSESSEE IS NOT REQUIRED TO PAY INTEREST TO IJM II AND ALSO ACCORDING TO THE ASSESSING OFFICER PROVISIONS OF SECTION 40A(2) ARE APPLICABLE TO THIS PAYMENT. THIS EXPENDITURE HAS BEEN ACTUALLY INCURRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. THE PAYMENT OF INTEREST IS NOT DEMONSTRATED BY THE ASSESSING OFFICER THAT IS PAID IN EXCESS OF THE PREVAILING MARKET RATE AND THE ASSESSEE HAVING INCURRED THE EXPENDITURE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THE SAME IS ALLOWABLE IN TERMS OF SECTION 37 OF THE ACT . ACCORDINGLY, THIS GROUND OF ASSESSEE IS ALLOWED. I.T.A. NO. 1183/HYD/2013 M/S SWARNANDHRA IJMII INTEGRATED TOWNSHIP DEVPT. CO . P. LTD. ==================== 3 6. MORE SO, THE HONBLE SUPREME COURT IN THE CASE O F SASSOON J. DAVID & CO. PVT. LTD. VS. CIT, 118 ITR 2 61 (SC) HELD AS FOLLOWS: THE EXPRESSION WHOLLY AND EXCLUSIVELY USED IN SECTION 10(2)(XV) DOES NOT MEAN NECESSARILY. ORDINARILY, IT IS FOR THE ASSESSEE TO DECIDE WHETHE R ANY EXPENDITURE SHOULD BE INCURRED IN THE COURSE OF HIS OR ITS BUSINESS. SUCH EXPENDITURE MAY BE INCURRED VOLUNTARILY AND WITHOUT ANY NECESSITY AND IF IT IS INCURRED FOR PROMOTING THE BUSINESS AND TO EARN PROFITS, THE ASSESSEE IS ENTITLED TO DEDUCTION EVEN THOUGH THERE WAS NO COMPELLING NECESSITY TO INCUR SUCH EXPENDITURE. THE FACT THAT SOME BODY OTHER THAN THE ASSESSEE IS ALSO BENEFITTED BY THE EXPENDITURE SHOULD NOT COME IN THE WAY OF AN EXPENDITURE BEING ALLOWED BY WAY OF DEDUCTION U/S 10(2)(XV) IF IT SATISFIES OTHERWISE THE TEST LAID D OWN BY LAW. 7. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN ALLOWING TH E ASSESSEES CLAIM OF INTEREST ON DELAYED PAYMENTS OF RS. 2,10,62,352/- TO IJM (INDIA) INFRASTRUCTURE LTD. A ND, THEREFORE, THE ORDER OF THE CIT(A) IS HEREBY UPHELD . ACCORDINGLY, THE GROUND RAISED BY THE REVENUE ON TH IS ISSUE IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 18/11/2013 UPON CONCLUSION OF HEARING. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 18 TH NOVEMBER, 2013 KV I.T.A. NO. 1183/HYD/2013 M/S SWARNANDHRA IJMII INTEGRATED TOWNSHIP DEVPT. CO . P. LTD. ==================== 4 COPY FORWARDED TO: 1. DCIT, CIRCLE 3(3), 7 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2. M/S SWARNANDHRA IJMII INTEGRATED TOWNSHIP DEVELOPMENT CO. PVT. LTD., 1-90/A, PLOT NO. 20 & 21, RBI COLONY, HYDERABAD. 3. THE CIT(A) - IV , HYDERABAD 5. THE CIT - III , HYDERABAD 6. THE DR , ITAT, HYDERABAD