Mili Marketing Pvt. Ltd., New Delhi V. DCIT, CC-VI, Kolkata, Kolkata

ITA 1934/KOL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5866 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 16-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Keywords: Capital expenditure
• Section: 14A

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1934/KOL/2014 ASSESSMENT YEAR: 2008-09 M/S. MILI MARKETING PVT. LTD. (PAN: AABCM7097M) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-VI, KOLKATA APPELLANT RESPONDENT DATE OF HEARING 03.05.2018 DATE OF PRONOUNCEMENT 20.07.2018 FOR THE APPELLANT SHRI SOMNATH GHOSH, ADVOCATE FOR THE RESPONDENT SHRI S. DASGUPTA, ADDL. CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF LD. CIT(A), CENTRAL-1, KOLKATA DATED 16.07.2014 FOR AY 2008-09. 2. GROUND NO. 1 IS NOT PRESSED, THEREFORE, DISMISSE D. 3. GROUND NO. 2(A), (B) AND (C) ARE AGAINST THE ACT ION OF LD. CIT(A) IN CONFIRMING ADDITION OF RS.9,42,327/- WHICH ASSESSEE RECEIVED B ACK FROM BOOKING AGENT OF THE FLAT IT AGREED TO PURCHASE. 4. BRIEF FACTS ARE THAT THE ASSESSEE IS A PRIVATE L IMITED COMPANY WHICH WAS INCORPORATED ON 29.04.1997 WITH THE MAIN OBJECTS OF MAKING INVES TMENTS IN SHARES AND MUTUAL FUNDS AND PROVIDING LOANS AND ADVANCES. THE AO FOUND THAT TH E ASSESSEE HAD RECEIVED A SUM OF RS.9,42,327/- FROM M/S. S.M. ESTATE ON ACCOUNT OF R EFUND OF COMMISSION PAID ON PURCHASE OF AN APARTMENT OF M/S. DLF GROUP. ACCORDING TO AS SESSEE, IT HAD BOOKED AN APARTMENT THROUGH AN AGENT, M/S. S. M. ESTATE AND WAS MAKING PAYMENT ACCORDING TO THEIR SCHEDULE AND AFTER BEST BARGAIN, THE ASSESSEE HAD GOT REFUND OF CERTAIN COMMISSION AND DULY DISCLOSED THE SAME BY REDUCING THE AMOUNT FROM THE VALUE OF S UCH APARTMENT IN ITS BALANCE SHEET. HOWEVER, SUCH ELUCIDATION DID NOT FIND FAVOUR OF TH E AO. ACCORDING TO AO, SINCE THE PAYEE HAD DEDUCTED TAX AT SOURCE U/S. 194H OF THE ACT ON SUCH PAYMENT, THE AO CONCEIVED THE 2 ITA NO.1934/KOL/2014 MILI MARKETING PVT. LTD., AY 2008-09 2 SAME AS A REVENUE RECEIPT BY APPLYING THE PROVISION S OF SEC. 28(IV) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND CON CLUDED THAT IN THE INSTANT CASE THE ASSESSEE COMPANY HAD GOT BENEFIT IN FORM OF COMMISS ION OR DISCOUNT AS CLAIMED BY THE ASSESSEE AND ADDED THE SAID AMOUNT AS INCOME OF THE ASSESS EE. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DISMISS THE SAME. AGGRIEVED, THE ASSESSEE IS BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE NOTE THAT ASSESSEE IS NOT IN THE BUSINESS OF REAL ESTATE. IT HAD BOOKED AN A PARTMENT IN THE BELAIRE IN DLF CITY ON 10.11.2006 RELEVANT TO AY 2007-08, THROUGH THE SELL ING AGENT OF DLF GROUP M/S. S. M. ESTATES. IN THE YEAR UNDER CONSIDERATION, THE ASSE SSEE COMPANY HAD MADE TOTAL PAYMENT OF RS.1,47,97,793/- BY 31.03.2008 AND WAS ABLE TO RETR IEVE A PART OF THE COMMISSION M/S. S. M. ESTATES RECEIVED FROM DLF GROUP (SELLER). BY THE P ROCESS IT GOT BACK RS.9,42,327/-, WHICH THE ASSESSEE REDUCED FROM THE ADVANCE GIVEN TO DLF FOR PURCHASE OF FLAT AS WELL AS CREDIT OF TDS OF RS.1,12,787/-. WE NOTE THAT ASSESSEE WAS AL LOTTED APARTMENT NO. D-174 AT THE THE BLAIRE IN DLF CITY VIDE ALLOTMENT LETTER DATED 20. 11.2006. BEFORE THAT (THE ALLOTMENT OF FLAT) ITSELF THE ASSESSEE HAD AN AGREEMENT DATED 08 .11.2006 WITH THE AGENT M/S. S. M ESTATES THROUGH WHICH IT BOOKED THE FLAT FOR BUYING THE APA RTMENT AT A CONSIDERATION OF RS.3,06,47,500/-. IT WAS AGREED BY M/S. S. M. ESTA TES THAT IMMEDIATELY AFTER THE ASSESSEE HAD MADE 25% OF CONSIDERATION TO M/S. DLF AS AGREE D UPON AS PER PAYMENT SCHEDULE OF DLF LTD. AND IN THE EVENT THE AGENT GETS ITS BROKER AGE RELEASED AT 4%, THE AGENT M/S. S. M. ESTATE IN TURN WAS READY TO PAY BACK 3.5% I.E. RS.1 0,72,662.50 TO THE ASSESSEE THE BUYER OF FLAT. ON THIS AGREEMENT, THE ASSESSEE AGREED TO BU Y THE FLAT AT A TOTAL CONSIDERATION OF RS.3,06,47,500/- THROUGH THE AGENT M/S. S. M. ESTAT ES. WE NOTE ON 31.03.2008 THE ASSESSEE HAD REMITTED RS.1,47,97,993/- IN DLF ACCOUNT AS PAR T PAYMENT OF CONSIDERATION AND AS PER AGREEMENT DATED 08.11.2006 BETWEEN THE ASSESSEE AND THE AGENT WHEN M/S. S. M. ESTATES RECEIVED 3.5% OF THE 4% COMMISSION IT RECEIVED, IN- TURN GAVE ASSESSEE RS.9,42,327/- AND TDS CREDIT OF RS.1,12,787/-, WHICH THE ASSESSEE CLA IMED TO HAVE REDUCED THE COST OF ASSET, SO IT REDUCED THE SUM FROM THE ADVANCES GIVEN TO DL F FOR PURCHASE OF APARTMENT. HOWEVER, THIS TREATMENT GIVEN IN THE BOOKS OF THE ASSESSEE W AS NOT ACCEPTABLE TO AO/LD. CIT(A), WHO WERE OF THE OPINION THAT IT IS A REVENUE RECEIP T AND TAXABLE U/S. 28(IV) OF THE ACT. THE 3 ITA NO.1934/KOL/2014 MILI MARKETING PVT. LTD., AY 2008-09 3 NATURE OF EXPENDITURE IN THE HANDS OF ASSESSEE FOR ACQUIRING THE APARTMENT, IT IS A CAPITAL EXPENDITURE WHICH IS NOT IN DISPUTE. ONLY DISPUTE IS IN RESPECT OF THE RECEIPT IN THE HANDS OF ASSESSEE OF RS.9,42,327/- AND TDS CREDIT OF RS.1,12 ,787/- ON THE SAID AMOUNT. IT IS NOW WELL SETTLED THAT IN ORDER TO FIND OUT WHETHER A RE CEIPT IS A CAPITAL OR REVENUE RECEIPT ONE HAS TO SEE WHAT IT IS IN THE HANDS OF THE RECEIVER AND NOT ITS NATURE IN THE HANDS OF PAYER. IN OTHER WORDS, THE NATURE OF RECEIPT IS DETERMINED ENTIRELY BY ITS CHARACTER IN THE HANDS OF THE RECEIVER AND THE SOURCE FROM WHICH THE PAYMENT IS M ADE HAS NO BEARING ON THE QUESTION. HERE IN THIS CASE, THE ASSESSEE HAS RECEIVED THE AM OUNT IN QUESTION FROM THE AGENT THROUGH WHOM THE ASSESSEE BOOKED THE FLAT, THAT TOO BEFORE THE ALLOTMENT WAS MADE BY THE M/S. DLF. BEFORE THE ALLOTMENT OF FLAT BY M/S. DLF ITSELF, TH E AGENT HAD AGREED TO PART WITH 3.5% OF ITS 4% IT RECEIVES FROM M/S. DLF AS BROKERAGE WHEN ASSE SSEE REMITTED 25% OF THE TOTAL CONSIDERATION AS PER SCHEDULE OF PAYMENT FIXED BY M /S.DLF. THEREFORE, WE NOTE THAT THE ASSESSEE HAD AGREED UPON BUYING THIS APARTMENT OF D LF THROUGH THE AGENT M/S. S. M. ESTATES WITH THE AFORESAID AGREEMENT KNOWING VERY W ELL THAT COST OF THE APARTMENT WILL BE REDUCED BY RS.10,72,662.50 WHEN 25% OF THE TOTAL CO NSIDERATION OF RS.3,06,47,500/- IS MADE BY THE ASSESSEE COMPANY. SO, WHEN DLF GAVE BR OKERAGE TO AGENT M/S. S. M. ESTATES IT MAY BE REVENUE RECEIPT IN THE HANDS OF THE M/S. S. M. ESTATES. HOWEVER, WHEN PART OF THE SAID RECEIPT IS PASSED ON BY M/S. S. M. ESTATES, TO THE HANDS OF THE ASSESSEE COMPANY IN ORDER TO FIND OUT WHETHER THE RECEIPT IS A CAPITAL OR REVENUE RECEIPT, ONE HAS TO SEE WHAT IS THE NATURE/CHARACTER OF RECEIPT IN THE HANDS OF THE RECEIVER AND NOT ITS NATURE IN THE HANDS OF THE PAYER AS HELD BY THE HONBLE SUPREME COURT IN E MPIRE JUTE CO. LTD. VS. CIT (1980) 124 ITR 1 (SC). SO WHAT WE HAVE TO SEE IS WHAT IT IS CHARACTER OF INCOME IN THE HANDS OF THE ASSESSEE. SO, IN THESE FACTS AND CIRCUMSTANCES OF THE CASE AS ENUMERATED ABOVE, THE ASSESSEE ON RECEIPT OF RS.9,42,327/- ON WHICH TDS OF RS.1,12 ,787/- WAS DEDUCTED BY M/S. S. M. ESTATES, IN ITS BOOKS (I.E. ASSESSEES BOOK) REDUCE D FROM THE ADVANCES GIVEN TO THE DLF FOR PURCHASE OF ITS FLAT IS LEGALLY CORRECT AND THE AO/ LD. CIT(A) ERRED IN TREATING THE SAME AS REVENUE RECEIPT. SO THIS GROUND OF APPEAL OF ASSES SEE IS ALLOWED. 6. GROUND NO. 3 RELATES TO DISALLOWANCE U/S. 14A RE AD WITH RULE 8D. THE AO FOUND THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME OF RS.1,25, 12,551/- WHICH WAS CLAIMED EXEMPT. IT WAS SUBMITTED BEFORE THE AO BY THE ASSESSEE THAT SU BSTANTIAL DISALLOWANCE HAD ALREADY BEEN 4 ITA NO.1934/KOL/2014 MILI MARKETING PVT. LTD., AY 2008-09 4 SUO MOTO OFFERED U/S. 14A OF THE ACT. THE ASSESSEE ALSO SUBMITTED THAT IT HAD ALREADY ADDED IN THE COMPUTATION OF INCOME SUM OF RS.47,307/- AND RS.25,000/- ON ACCOUNT OF DE MAT CHARGES AND MEMBERSHIP AND SUBSCRIPTION AND ALSO RS .4,06,138/- OUT OF OTHER EXPENSES. HOWEVER, THE AO INVOKING RULE 8D(2)(III) MADE DISAL LOWANCE OF RS.9,08,032/-. SO, ACCORDING TO ASSESSEE, THE AO WAS NOT JUSTIFIED IN MAKING FURTHER DISALLOWANCE UNDER RULE 8D(2)(III) OF THE RULES. ON APPEAL, THE LD. CIT(A) DIRECTED THE AO TO COMPUTE THE DISALLOWANCE UNDER RULE 8D(2)(III) BY CONSIDERING O NLY THOSE INVESTMENTS WHICH HAVE YIELDED TAX FREE INCOME DURING THE YEAR AND MAKE AD DITION ONLY IF THE DISALLOWANCE SO COMPUTED EXCEEDS THE SUM AS VOLUNTARILY OFFERED BY THE ASSESSEE BY FOLLOWING THE DECISION OF ITAT IN THE CASE OF REI AGRO LTD. VS. DCIT IN IT AT NO. 1331/KOL/2011. AGGRIEVED, ASSESSEE IS BEFORE US. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE LD. CIT(A) DIRECTED THE AO TO COMPUTE THE DISALLOWANCE UNDER RULE 8D(2)(III) BY CONSIDERING ONLY THOSE INVESTMEN TS WHICH HAVE YIELDED TAX FREE INCOME DURING THE YEAR AND MAKE ADDITION ONLY IF THE DISAL LOWANCE SO COMPUTED EXCEEDS THE SUM AS VOLUNTARILY OFFERED BY THE ASSESSEE BY FOLLOWING TH E DECISION OF ITAT IN THE CASE OF REI AGRO LTD. VS. DCIT IN ITAT NO. 1331/KOL/2011. SINC E THE LD. CIT(A) ADJUDICATED THE ISSUE AS STATED ABOVE BY FOLLOWING THE DECISION OF ITAT, KOLKATA BENCHES CONSISTENTLY FOLLOWING THE DICTUM OF LAW LAID IN REI AGRO, SUPRA , THE ACTION OF LD. CIT(A) IS CONFIRMED. THEREFORE, THIS GROUND OF APPEAL OF ASSESSEE IS DIS MISSED. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 20.07.2018 . SD/- SD/- [ DR. A. L. SAINI] [A.T. VARKEY] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20TH JULY, 2018 JD.(SR.P.S.) 5 ITA NO.1934/KOL/2014 MILI MARKETING PVT. LTD., AY 2008-09 5 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. MILI MARKETING PVT. LTD., C/O, S. N. GHOSH & ASSOCIATES, ADVOCATES, SEVEN BROTHERS LODGE, P.O. B UROSHIBTALA, P.S. CHINSURAH, DIST. HOOGHLY, PIN-712105. 2 RESPONDENT DCIT, C.C. VI, KOLKATA. 3. THE CIT(A), CENTRAL-1, KOLKATA. (SENT THROUGH E-MAIL) 4. 5. CIT KOLKATA DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY