DCIT, Circle-33, Kolkata, Kolkata V. M/S. India Housing, Kolkata

ITA 124/KOL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5877 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 23-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P JHUNJHUNWALA
• Assessee Lawyers: SAURABH KUMAR CIT SRDR
• Keywords: Fair market value
• Section: 143(3)

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 124 / KOL / 20 15 & C.O. NO.15/KOL/2015 (A/O ITA NO.124/KOL/2015) ASSESSMENT YEAR :2010-11 DCIT, CIRCLE-33, 10B, MIDDLETON ROW, 3 RD FLOOR, KOLKATA-71 V/S . M/S INDIA HOUSING 2A, SAHARA INDIA SADAN, SHAKESPEARE SARANI, KOLKATA-71 [ PAN NO. AABFI 8377 B ] /APPELLANT .. / RESPONDENT/ / CO-OBJECTOR /BY APPELLANT SHRI P. JHUNJHUNWALA, AR /BY RESPONDENT SHRI SAURABH KUMAR, ADDL. CIT-SR-DR /DATE OF HEARING 11-07-2018 /DATE OF PRONOUNCEMENT 27-07-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL AND ASSESSEES CROSS OBJECTIO N (CO) FOR ASSESSMENT YEAR 2010-11 ARISES FROM COMMISSIONER OF INCOME TAX (APPEALS)-XIX, KOLKATAS ORDER DATED 03.11.2014, PA SSED IN CASE NO.87/CIT(A)-XIX/RANGE-33/KOL/13-14 REVERSING ASSES SEES ACTION INVOKING SECTION 40A(2)(B) DISALLOWANCE OF LATTERS PAYMENT AMOUNTING TO 5,40,00,000/- IN THE NATURE OF SUPERVISION CHARGES MADE TO ITS RELATED PARTY M/S SAHARA PRIME CITY LTD., INVOLVING PROCEEDINGS U /S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. ITA NO.124/KOL/2015 & CO 15/KOL/15 A.Y 2010-11 DCIT, CIR-33, KOL. VS. M/S INDIA HOUSING PAGE 2 2. WE NOTICE AT THE OUTSET CIT(A)S DETAILED DISCUS SION DELETING THE IMPUGNED SECTION 40A(2)(B) DISALLOWANCE READS AS FO LLOWS:- 6.2 THE SUBMISSION OF AR OF THE APPELLANT HAS BEEN ANALYZED IN THE LIGHT OF THE ASSESSMENT ORDER. THE ASSET HAS BEEN HELD TO BE STOCK IN TRADE BY THE AO AND THUS THE SAME IS A BUSINESS ASSET. I FIND THAT THE AO INVOKED THE PROVISIONS OF SECTION 40A(2) OF THE ACT BY STATING THAT PAYMENT WAS NOT FOR THE PURPOSE OF BUSINESS AND THAT THE PAYMENT WAS EXCESS IVE AND UNREASONABLE. HOWEVER FAILED TO BRING ON RECORD ANY MATERIAL TO S HOW HOW THE PAYMENTS WERE EXCESSIVE AND UNREASONABLE, THIS WAS A JURISDI CTIONAL FACT WHICH WAS NOT BROUGHT ON RECORD BY THE AO. IN ABSENCE OF MATERIAL TO COME TO THE CONCLUSION REGARDING THE FACT OF WHAT CONSTITUTED R EASONABLE EXPENDITURE, THE AO WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SECT ION 40A(2). I FURTHER FIND THAT THE APPELLANT HAS EXPLAINED THAT THERE WAS NO STAFF DEPLOYED BY THE MALL FOR LOOKING AFTER ITS DAY-TO-DAY MANAGEMENT AS SUBSTANT IAL AMOUNT OF MAN-POWER AND TECHNICAL SERVICES ARE REQUIRED IN THE OVERALL SUPERVISION OF THE MALL WHICH COMPRISE OF LAND ESCAPING, PARKING, PLANT & MACHINE RY AND EQUIPMENT MAINTENANCE, FIRE FIGHTING SYSTEM, SECURITY, AIR-CO NDITONING, PROVISION OF WATER, ELECTRICITY SEWERAGE, SIGNAGE, LIFT, ESCALAOR ETC. FOR THE ABOVE MANAGEMENT AND TECHNICAL MAINTENANCE, SUB-CONTRACTS WERE GIVEN TO OUTSIDE AGENCIES SINCE THERE WAS NO ESTABLISHMENT AVAILABLE WITH THE APPELLANT FIRM TO MAKE AN OVERALL SUPERVISION OF THE MALL WHICH WAS HAVIN G ABOUT 2,50,000 SQ. FIT AREA. CONSEQUENTLY IT WAS DECIDED BY THE PARTNERS T HAT FOR AN OVERALL SUPERVISION, AGENT MAY BE APPOINTED AND AN AGREEMEN T WAS ENTERED INTO WITH M/S SHARA PRIME CITY LTD. FOR THE PURPOSES THEREOF. THE AO DID NOT CONDUCT ANY INVESTIGATION IN THIS ASPECT. THE APPOINTMENT O F A RELATED PARTY IS NOT BANNED IN LAW. HOWEVER, WHEN SUCH TRANSACTIONS TAKE PLACE THE SCRUTINY IS TO BE DONE IN DETAIL TO ENSURE THAT THERE IS NO DIVERS ION OF INCOME OR PROFITS. THUS IT WAS INCUMBENT ON THE AO TO MAKE DETAILED INQUIRE S ON SPOT AND WITH SAHARA PRIME CITY LTD. BEFORE COMING TO CONCLUSION ON THIS MATTER. THE AO, MERELY ON CONJECTURE AND SURMISE, HELD THAT IT WAS A CASE OF DIVERSION WHICH, HOWEVER, IS MERELY AN OPINION OR ALLEGATION WITHOUT ANY MATERIALS OR INQUIRY. THE AO, IN MY OPINION EXCEEDED HIS JURISDICTION ON THIS COUNT. THE APPELLANT HAD FILED ALL RELEVANT DOCUMENTS AND MATERIALS INCL UDING AGREEMENT, BILLS, TDS, SERVICE TAX PAYMENT ETC. BUT THE AO FAILED TO DISLODGE THESE DOCUMENTS WITH ANY CONVINCING MATERIAL OR FINDING. I, THEREFO RE, HOLD THAT THE DISALLOWANCE WAS NOT CALLED FOR. AS SUBMITTED, THE AR HAS DRAWN MY ATTENTION TO THE VARIOUS CASE LAWS AS CITED WHEREIN THE COURTS HAVE HELD IN THE SIMILAR FACTS AND CIRCUMSTANCES, THAT THE ACTION OF THE AO IN MAK ING DISALLOWANCE U/S. 40A(2) OF THE ACT TO BE UNTENABLE AS WELL AS UNJUST IFIED. IN VIEW OF THE FOREGOING, THE DISALLOWANCE OF 5,50,00,000/- STANDS DELETED. 3. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY C ONTENDS DURING THE COURSE OF HEARING THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE IMPUGNED DISALLOWANCE AS THE INSTANT T AXPAYERS PAYMENT MADE TO ITS RELATED PARTY WAS BOTH EXCESSIVE AS WELL AS UNREASONABLE SO AS TO ITA NO.124/KOL/2015 & CO 15/KOL/15 A.Y 2010-11 DCIT, CIR-33, KOL. VS. M/S INDIA HOUSING PAGE 3 ATTRACT SECTION 40A(2)(B) OF THE ACT. WE FIND NO ME RIT IN EITHER OF THE TWO PLEADINGS. THERE IS HARDLY ANY DISPUTE THAT THE LEG ISLATURE HAS SPECIFICALLY PROVIDED FOR THE IMPUGNED DISALLOWANCE ONLY QUA THE EXCESSIVE COMPONENT OF THE SPECIFIED PAYMENT VIS--VIS THE MARKET RATE THE REOF. THE CRUCIAL EXPRESSION USED IN THE IMPUGNED STATUTORY PROVISION IS SUCH E XPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEG ITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE. THERE IS N OT AN EVEN A SINGLE COMPARISON IN THE ASSESSMENT ORDER ABOUT THE CURREN T MARKET PRICE OF THE IMPUGNED SUPERVISION SERVICES AVAILED BY THE ASSESS EE FORM ITS RELATED PARTY. THIS HAS FORMED THE PRECISE REASON FOR THE CIT(A) T O DELETE THE IMPUGNED DISALLOWANCE. WE THEREFORE FIND REVENUES FORMER AR GUMENT TO WHICH DEVOID OF MERIT AT THE IMPUGNED DISALLOWANCE PROVISION HAS TO BE LITERALLY CONSTRUED IN VIEW OF THE PRESCRIBED PRE-CONDITION OF THE ACT. 4. COMING TO REVENUES LATTER PLEA THAT THE ASSESSE ES IMPUGNED PAYMENT IS UNREASONABLE SO FAR AS ITS BUSINESS NEEDS ARE CO NCERNED, WE FIND THAT THE INSTANT TAXPAYER REQUIRED THE SERVICE IN QUESTION I N THE NATURE OF MAN-POWER AS WELL AS TECHNICAL OPERATIONS FOR OVERALL SUPERVI SION OF ITS MALL INCLUDED LAND ESCAPING, PARKING, PLANT & MACHINERY, EQUIPMENT MAI NTENANCE, FIRE FIGHTING SYSTEM, SECURITY, AIR-CONDITIONING, WATER SUPPLY, E LECTRICITY, SEWERAGE SIGNAGE, LIFT ESCALATOR ETC. THE CIT(A)S CLINCHING FINDINGS QUA ALL THE ABOVE BUNDLED SERVICES TO THIS EFFECT AS EXTRACTED HEREINABOVE HA VE GONE UNREBUTTED FROM THE REVENUE SIDE. THERE IS FURTHER NO ISSUE REGARDI NG THE GENUINENESS OF IMPUGNED PAYMENT AS ALL THE RELEVANT DETAILS IN THE NATURE OF AGREEMENT, BILLS, TDS, SERVICE TAX ETC. FORMED PART OF RECORD BEFORE THE ASSESSING OFFICER. WE THEREFORE REJECT REVENUES INSTANT GROUND AS WELL A S ITS APPEAL ITA 124/KOL/2015 . 5. LEARNED COUNSEL REPRESENTING ASSESSEE INFORMS US THAT ITS CO 15/KOL/2015 IS ONLY SUPPORTIVE OF CIT(A)S FINDING UNDER CHALLENGE IN ITA NO.124/KOL/2015 & CO 15/KOL/15 A.Y 2010-11 DCIT, CIR-33, KOL. VS. M/S INDIA HOUSING PAGE 4 REVENUES APPEAL. WE HOLD THE SAME TO HAVE BEEN REN DERED INFRUCTUOUS AS WE HAVE ALREADY UPHELD THE CIT(A)S ORDER IN REVENU ES APPEAL. 6. THIS REVENUES APPEAL ITA NO.124/KOL/2015 WHEREA S ASSESSEES CO 15/KOL/2015 IS DISMISSED AS RENDERED INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT 27/07/2018 SD/- SD/- ( ) () ) (DR. A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S *- 27 / 07 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S INDIA HOUSING, 2A,SAHARA INDIA SADAN, SHAKESPEARE SARA NI, KOL-71 2. /REVENUE-DCIT, CIRCLE-33, 10B, MIDDLETON ROW, 3 RD FL, KOLKATA-71 3. 5 6 / CONCERNED CIT KOLKATA 4. 6- / CIT (A) KOLKATA 5. 9 ))5, 5, / DR, ITAT, KOLKATA 6. > / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 5,