Philana Builders & Developers Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 1949/DEL/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6991 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 14-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V R SONBHADRA
• Section: 194C

Judgement Text

1 ITA NO. 19 49/DEL/2011 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT ME MBER & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO.-1949/DE L/2011 (ASSESSMENT YEAR-2007- 08) PHILANA BUILDERS & DEVELOPERS P. LTD., 1-E, NAAZ CINEMA COMPLEX, JHANDEWALAN EXTN., NEW DELHI. AAECP3348P VS ITO, WARD 14(2), NEW DELHI. APPELLANT BY SHRI R.S. SINGHVI, CA RESPONDENT BY SHRI V.R. SONBHADRA, SR. DR ORDER PER BEENA PILLAI, JUDICIAL MEMBER : THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINS T THE ORDER OF THE LD. CIT(A)-XVII, NEW DELHI, VIDE ORDER DATED 24 /02/2011 ON THE FOLLOWING GROUNDS: 1. THAT THE IMPUGNED ORDER DT. 24.2.11 PASSED BY TH ELD. CIT(A)XVII, NEW DELHI IS BAD IN LAW AND WRONG ON FA CTS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER TREATING THE AMOUNT PAYABLE TO TH E CONSOLIDATOR AMOUNTING TO RS. 95,44,264/- AS NON GENUINE EXPENDITURE. DATE OF HEARING 15.12.2015 DATE OF PRONOUNCEMENT 11.02.2016 2 ITA NO. 19 49/DEL/2011 2.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN MAKING DISALLOWANCE U/S 40(A)( IA) OF THE I.T. ACT, 1961 AMOUNTING TO RS. 95,44,264/- PAID BY THE ASSESSEE TO THE CONSOLIDATOR FOR TRANSFER OF RIGHTS. 2.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN HOLDING THAT THE CONSOLIDATOR W AS WORKING AS AN AGENT OF THE ASSESSEE AND HENCE THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS ON AMOUNT PAID TO THE CONSOLIDATOR U/S 194C OR 194H OF THE I.T. AC T, 1961 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN LAW IN NOT APPRECIATING THA T THE DISALLOWANCE OF SAID SUM OF RS. 95,44,264/- WHICH I S INCLUDED IN PURCHASES DURING THE YEAR HAS NO IMPACT ON APPELLANTS PROFIT LIABLE TO TAX AS THE ENTIRE PURCHASES FORM PART OF CLOSING STOCK OF THE APPELLA NT AT THE YEAR END. 3.1 THAT THE ORDER OF LD. CIT(A) IS ERRONEOUS AND S ELF CONTRADICTORY. THE LD. CIT(A) HAS ERRED IN CONFIRM ING THE ADDITION AFTER HOLDING THAT CLOSING STOCK ALSO NEEDS TO BE REDUCED. THE LD. CIT(A) OUGHT TO HAVE HELD T HAT THE TRANSACTION OF RS. 95,44,264/- DOES NOT RESULT INTO ANY TAXABLE INCOME AS SAME IS NEITHER INCLUDIBLE IN PURCHASES OR CLOSING STOCK. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AME ND, SUBSTITUTE, WITHDRAW AND/OR VARY ANY GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT: THE ASSESSEE FILED ITS RETURN OF INCOME ON 22/02/08 DECLARING A TOTAL LOSS OF RS. 14,449/-. THE CASE WAS SELECTED FOR SCRUTINY. ACCORDINGLY, NOTICES U/S 143(2) WERE ISSUED. THE A SSESSEE COMPANY IS IN THE BUSINESS ACQUIRING AND DEVELOPING LAND. DURING THE ASSESSMENT PROCEEDINGS THE LD. ASSESSING OFFICER OB SERVED THAT THE 3 ITA NO. 19 49/DEL/2011 ASSESSEE HAS BOOKED LAND FOR AN AMOUNT OF RS. 95,44 ,264/- WHICH WAS PAID TO THE PURCHASER ON WHICH THE STAMP DUTY H AS BEEN PAID. THE DETAILS OF THE PURCHASE ARE AS BELOW: S.NO. NAME OF THE PARTY AMOUNT PAID TO LAND OWNERS STAMP DUTY PAID AMOUNT PAYABLE TO CONSOLIDATOR TOTAL COST BOOKED IN THE P&L A/C 1. SHRI MADAN LAL/SHRI KANWAR PAL S/O SH. MAM RAJ & OTHRS. 146711250 8802690 9544264 165058204 TOTAL 146711250 8802690 9544264 165058204 3. THE LD. ASSESSING OFFICER OBSERVED THAT THE ASSE SSEE HAS CLAIMED THE AMOUNT FOR CONSOLIDATION OF THE LAND. THE ASSESSEE HAD ALSO SUBMITTED THAT THE ROLE OF THE CONSOLIDATOR WA S TO IDENTIFY THE LAND, APPROACH THE LAND OWNERS, NEGOTIATE WITH THEM AND CARRY OUT DUE DILIGENCE OF LAND REGARDING OWNERSHIP, TITLE ET C. IT WAS SUBMITTED THAT THE CONSOLIDATOR SETTLES THE PRICE W ITH THE LAND OWNERS. THE LD. ASSESSING OFFICER DISREGARDED THE ARGUMENTS OF THE ASSESSEE AS NO EVIDENCE WERE PRODUCED TO SHOW THAT ANY SUCH SERVICES WERE RENDERED BY THE SAID CONSOLIDATOR. T HE LD. ASSESSING OFFICER, THEREFORE, MADE ADDITION TO AN EXTENT OF R S. 95,44,264/-. 4. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFI CER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ISSUE AT PARA 2.3 OF HIS ORDER WHICH IS RE PRODUCED HEREIN BELOW: 2.3 I HAVE CAREFULLY CONSIDERED THE ASSTT. ORDER AND THE SUBMISSION MADE BY THE LD. AR ON THE ABOVE ISSUE. AS PER THE FACTS OF THIS CASE, THE ASSESSEE COMPANY WAS INCORPORATED ON 30.11.2006 AND AS SUCH THIS IS EFFECTIVELY THE FIRST YEAR OF ITS OPER ATION. 4 ITA NO. 19 49/DEL/2011 DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS PURCHASED LAND MEASURING 6.037 ACRES IN DISTRIC T GURGAON. IT IS OBSERVED BY THE ASSESSING OFFICER I N THE ASSTT. ORDER THAT THE ASSESSEE HAS SHOWN THE PURCHASE PRICE OF THE ABOVE LAND AT RS. 16,50,58,204/- WHICH IS DEBITED TO ITS P&L A/C. AS AGAINST THIS, THE COST OF THE ABOVE LAND PAID TO TH E LAND OWNERS AS PER SALE DEEDS IS RS. 14,67,11,250/- AND THE STAMP DUTY IS RS. 88,02,690/-. THE TOTAL O F THE ABOVE TWO AMOUNTS COMES TO RS. 15,55,13,940/-. ON BEING QUESTIONED BY THE ASSESSING OFFICER REGARDING THE DIFFERENCE AMOUNT OF RS. 95,44,264/- (RS. 16,50,58,204/- MINUS RS. 15,55,13,940/-), IT WAS CONTENDED BY THE ASSESSEE THAT THE SAID LAND HAS BEEN PURCHASED THROUGH THE LAND CONSOLIDATOR M/S VIKRAM ELECTRIC EQUIPMENT P. LTD. AND THE EXCES S AMOUNT WAS PAID TO M/S VIKRAM ELECTRIC CO. LTD. BEING CONSOLIDATOR TOWARDS TRANSFER OF ITS RIGHTS I N THE LAND. IT WAS ARGUED THAT THE SAME WAS DONE AS PER THE MEMORANDUM OF UNDERSTANDING BETWEEN THE ASSESSEE AND M/S VIKRAM ELECTRIC CO. P. LTD. FOR PURCHASE OF 27 ACRES OF LAND FOR WHICH M/S VIKRAM ELECTRIC CO. P. LTD. WAS TO ACT AS CONSOLIDATOR FOR IDENTIFYING THE LAND, APPROACHING THE LAND OWNERS AND NEGOTIATING WITH THEM AND CARRYING OUT DUE DILIGENCE ETC. IT WAS ARGUED THAT THE LAND MEASURI NG 6.037 ACRES PURCHASED DURING THIS YEAR FORMS PART O F THE TOTAL 27 ACRES OF LAND WHICH WILL BE PURCHASED BY THE ASSESSEE THROUGH M/S VIKRAM ELECTRIC CO. P. LTD . AS PER THE MOU. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ABOVE AMOUNT WAS NOT APPEARING SEPARATELY IN THE P&L A/C AS EXPENDITURE BUT WAS CLUBBED WITH THE PURCHASE PRICE OF LAND AND THAT TH E SALE DEED WITH THE LAND OWNERS DID NOT INDICATE THA T THE CONSOLIDATOR WAS INVOLVED IN ARRANGING THE PURCHASE OF LAND. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT M/S VIKRAM ELECTRIC CO. P. LTD. HAS N OT SHOWN INCOME OF THE ABOVE AMOUNT IN ITS PROFIT & LO SS A/C. THE ASSESSING OFFICER HAS, ACCORDINGLY, HELD THIS 5 ITA NO. 19 49/DEL/2011 PAYMENT TO BE NON GENUINE EXPENDITURE. WITHOUT PREJUDICE TO THE ABOVE ARGUMENT, IT IS OBSERVED BY THE ASSESSING OFFICER THAT THE CONSOLIDATION CHARGES RECEIVED BY M/S VIKRAM ELECTRIC CO. P. LTD. IS IN T HE NATURE OF BROKERAGE OR SERVICE CHARGES SUBJECT TO T DS U/S 194H OF THE ACT. ALTERNATIVELY, SINCE THE PAYM ENT WAS MADE UNDER THE MOU, IT IS IN THE NATURE OF PAYMENT TO CONTRACTOR WHICH IS SUBJECT TO TDS U/S 194C OF THE ACT. SINCE NO TDS HAS BEEN DEDUCTED IN RESPECT OF THE ABOVE PAYMENT, THE ASSESSING OFFICER HAS HELD THAT THE ABOVE SUM IS DISALLOWABLE U/S 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER HAS, ACCORDINGLY, ADDED THE ABOVE AMOUNT OF RS. 95,44,264/- TO THE APPELLANTS INCOME FOR THE YEAR. 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US NOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE LD. A R AND THE DR AND HAVE PERUSED THE PAPER BOOK FILED BEFORE US. 7. THE LD. AR SUBMITS THAT ON IDENTICAL SET OF FACT S, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE D BENCH OF THE ITAT IN ITA NO. 2361/D/2011 AN D ITA NO. 1953/D/2011 FOR THE AY 2007-08 IN THE CASE OF M/S F INIAN ESTATE DEVELOPERS P. LTD. ORDER DATED 5 TH OCTOBER, 2011. WE FURTHER SUBMIT THAT THE H BENCH OF THE TRIBUNAL IN THE CA SE OF ZEBINA REAL ESTATE P. LTD. VS. ITO IN ITA NO. 1429/D/2011 AND 1 430/D/2011 ORDER DATED 12.4.2013 FOLLOWED THE JUDGMENT OF TRIB UNAL IN THE CASE OF FINIAN ESTATES DEVELOPERS P. LTD. 142 TTJ 545 (D EL) AND ALLOWED THE APPEAL OF THE ASSESSEE. 6 ITA NO. 19 49/DEL/2011 7.1. THE LD. AR FURTHER SUBMITTED THAT AGAINST THE ORDER OF FINAIL ESTATE DEVELOPERS (SUPRA) THE REVENUE HAS NOT PREFE RRED ANY APPEAL BEFORE THE HONBLE HIGH COURT. 7.2. THE LD. AR HAS ALSO PLACED RELIANCE ON THE DEC ISION OF THIS TRIBUNAL IN THE CASE OF PENTHEA BUILDERS & DEVELOPE RS P. LTD. IN ITA NO. 1951/D/2011 FOR AY 2007-08 ON IDENTICAL SET OFF FACTS. THE LD. AR SUBMITS THAT THE REVENUE HAD PREFERRED AN APPEAL IN THE CASE OF PANTHEA BUILDERS AND DEVELOPERS (SUPRA) IN ITA NO. 270/2005 BEFORE THE HONBLE JURISDICTIONAL HIGH COURT. THE HONBLE HIGH COURT AT PARA 11 HAS OBSERVED THE FOLLOWING FACTS: 11. IN ITS ORDER DT. 5 TH OCTOBER, 2011, THE ITAT EXAMINED THE NATURE OF THE MOU BETWEEN FINIAN AND VEEPL WITH PARTICULAR REFERENCE TO THE CLAUSES THER EIN AND CONCLUDED THAT FINIAN WAS TRANSACTING WITH VEEPL ON A PRINCIPAL TO PRINCIPAL BASIS AND THAT IT COULD NOT BE SAID THAT THE PAYMENT TO VEEPL WAS FOR RENDERING SERVICES. CONSEQUENTLY, IT WAS HELD THAT SECTION 194H OF THE ACT WAS NOT AT ALL APPLICABLE . THE ITAT NOTED THAT IN TERMS OF CLAUSE 3.2 OF THE M OU NO SUM WAS DUE TO BE PAID TO VEEPL FOR THE SERVICES RENDERED BY IT TILL IT PROCURED 27 ACRES OF LAND. THE AMOUNT PAID TO VEEPL WAS DULY REFLECTED BY FINIAN I N ITS PURCHASES AND THE CLOSING STOCK AND NO SALES HA D BEEN MADE DURING THE YEAR IN QUESTION. THE PAYMENT OF 2% OF THE SALE AMOUNT OF VEEPL AS CONSIDERATION FOR TRANSFERRING VEEPLS RIGHTS IN THE LAND WAS IN TERMS OF CLAUSE 3.2 OF THE MOU AND IT HAD NOT BEEN SHOWN THAT SUCH PAYMENT WAS NOT A FAIR COMPENSATION. 12. AS ALREADY NOTICED HEREINBEFORE, NO APPEAL WAS FILED BY THE REVENUE IN THIS COURT AGAINST THE DECI SION OF THE ITAT ON THE ABOVE ASPECT IN THE CASE OF FINI AN. 13. ..IT IS SUBMITTED THAT WHILE IN THE CASE OF FINIAN THE CONSOLIDATOR INVESTED ITS OWN FUNDS FOR 7 ITA NO. 19 49/DEL/2011 PURCHASING THE LAND FOR THE ACQUIRER IN THE PRESE NT CASE OF ZREPL THE ACQUIRER PAID FROM ITS OWN FUNDS. HOWEVER, LD. COUNSEL FOR THE REVENUE HAS BEEN UNABL E TO SHOW ANY DIFFERENCE IN THE ACTUAL CLAUSES OF THE MOU BETWEEN ZREPL AND VEEPL WHEN COMPARED TO THE MOU BETWEEN FINIAN AND VEEPL. IN THE CIRCUMSTANCES, THE COURT IS UNABLE TO APPRECIATE ON WHAT BASIS IT COULD BE SAID THAT THE ARRANGEMENT BETWEEN ZREPL AND VEEPL WAS NOT ON A PRINCIPAL TO PRINCIPAL BASIS. WITH THE REVENUE HAVING ACCEPTED THE DECISION OF THE ITAT IN THE CASE OF ITO VS. FIN IAN ESTATES DEVELOPERS P. LTD., AND WITH THERE BEING NOTHING TO DISTINGUISH IT IN RELATION TO THE CASE O F ZREPL, THE COURT IS NOT INCLINED TO INTERFERE WITH THE IMPUGNED ORDER OF THE ITAT WHICH, IN THE OPINION OF THE COURT, HAS RIGHTLY RELIED UPON ITS EARLIER DECISION IN THE CASE OF FINIAN. 16. HAVING CONSIDERED AT LENGTH THE SUBMISSIONS OF LD. COUNSEL FOR THE REVENUE, THE PLEADINGS AND THE DOCUMENTS NOT ONLY IN THE CASE OF PBDPL BUT ALSO IN THE CASE OF FINIAN, THE COURT IS UNABLE TO FIND ANY DISTINCTION BETWEEN THE TWO CASES AS FAR AS THE CLAUSES IN THE MOU BETWEEN THE PARTIES AND VEEPL OR THE PAYMENT MADE TO THE LATER PURSUANT THERETO. AGAIN, WITH THE REVENUE HAVING ACCEPTED THE DECISIO N OF THE ITAT IN THE CASE OF FINIAN, AND WITH THE REV ENUE BEING UNABLE TO BRING OUT ANY DISTINGUISHING FEATUR E AS FAR AS THE CASE OF PBDPL, THE COURT SEES NO REASON WHY IT SHOULD INTERFERE WITH THE IMPUGNED ORDER OF THE ITAT. 7.3. THE LD.AR SUBMITTED THAT IN THE FACTS OF THE P RESENT CASE BEFORE US, THE ASSESSEE HAS THE PAYMENT TO VIKRAM E LECTRIC EQUIPMENT P. LTD., ON ACCOUNT OF TRANSFER OF CERTAI N RIGHTS OF VIKRAM ELECTRIC EQUIPMENT P. LTD. IN THE LANDS TRAN SFERRED TO THE ASSESSEE, AND WAS NOT TOWARDS ANY SERVICES REND ERED. THE LD.AR SUBMITTED THAT AS A CONSOLIDATOR, VIKRAM ELEC TRIC 8 ITA NO. 19 49/DEL/2011 EQUIPMENT P. LTD. WAS TO CONTACT THE LOCAL FARMERS IN AND AROUND GURGAON, WHO WERE WILLING TO SELL THEIR LAND . 7.4. HE SUBMITTED THAT VIKRAM ELECTRIC EQUIPMENT P. LTD. WAS MAKING PAYMENTS FROM ITS ACCOUNT TO THE FARMERS AND THERETO HAVE CERTAIN RIGHTS IN THE LAND. ON THE ULTIMATE TR ANSFER OF LAND TO THE ASSESSEE THROUGH VIKRAM ELECTRIC EQUIPMENT P . LTD., THE FINAL PAYMENT WAS TO BE MADE TO THE FARMERS. TOWARD S THE RIGHT OF VIKRAM ELECTRIC EQUIPMENT P. LTD. 2% OF THE COST OF LAND (IN SOME CASES, EVEN A HIGHER AMOUNT) WAS TO BE PAID TO VIKRAM ELECTRIC EQUIPMENT P. LTD. AS MUTUALLY AGREED. THI S WAS THE MUTUALLY AGREED PRICE. 7.5. THE LD.AR SUBMITTED THAT VIKRAM ELECTRIC EQUIP MENT P. LTD. WORKED FOR LAND ACQUISITION AND AFTER SCRUTINY OF THE CONCERNED DOCUMENTS OF THE LAND, VIKRAM ELECTRIC EQ UIPMENT P. LTD. WOULD SUGGEST THE APPROPRIATE LAND FOR PURC HASE BY THE ASSESSEE. HE SUBMITTED THAT VIKRAM ELECTRIC EQUIPM ENT P. LTD. THUS ACTED WITH THE FARMERS ON ITS OWN ACCOUNT RATH ER THAN FOR AND ON BEHALF OF THE ASSESSEE, ON PRINCIPLE TO PRIN CIPLE BASIS, WITH THE FARMERS ON THE ONE HAND AND THE ASSESSEE O N THE OTHER. 7.6. THE LD.AR FURTHER SUBMITTED THAT THIS BEING SO , THE PROVISIONS OF NEITHER SECTION 194C NOR SECTION 194H GET ATTRACTED TO THE PAYMENT MADE BY THE ASSESSEE TO VI KRAM ELECTRIC EQUIPMENT P. LTD. IT HAS BEEN SUBMITTED B Y THE LD.AR THAT THE PAYMENT ALONG WITH PAYMENT MADE TO THE FAR MERS DIRECTLY REPRESENTED THE PURCHASE OF THE COST OF LA ND AND HAD 9 ITA NO. 19 49/DEL/2011 BEEN CORRECTLY TREATED AS SUCH IN THE ASSESSEES BO OKS OF ACCOUNT. IT HAS BEEN CONTENDED THAT ALTERNATIVELY, IN ANY CASE, THE PAYMENT MADE TO VIKRAM ELECTRIC EQUIPMENT P. LT D. HAS NOT AFFECTED THE TAXABLE PROFITS OF THE ASSESSEE DU RING THE YEAR. THE TOTAL PURCHASES WERE LYING AS CLOSING STOCK, AS OBSERVED BY THE TAXING AUTHORITIES ALSO AND THE EFFECT OF ADJUS TMENT WITH REGARD TO THE AMOUNT PAID TO VIKRAM ELECTRIC EQUIPM ENT P. LTD. WOULD ARISE ONLY ON AND IN THE INSTANCES OF SA LE OF LAND BY THE ASSESSEE. IT IS THUS SUBMITTED THAT NO DISALLO WANCE U/S 40(A)(IA) OF THE ACT IS CALLED FOR MUCH LESS ANY CO NSEQUENTIAL ACTION U/S 201 OF THE ACT. IT HAS BEEN CONTENDED T HAT VIKRAM ELECTRIC EQUIPMENT P. LTD. HAD AN IMPORTANT ROLE TO PLAY AS A CONSOLIDATOR, SINCE THE ASSESSEE REQUIRED CONTIGUOU S LAND HOLDINGS IN ORDER TO DEVELOP A COLONY. THE D.AR SU BMITTED THAT IN CASE LAND WHICH WAS AGREED TO BE ACQUIRED BY VIK RAM ELECTRIC EQUIPMENT P. LTD. WAS NOT FOUND TO BE SUIT ABLE BY THE ASSESSEE, IT WAS VIKRAM ELECTRIC EQUIPMENT P. LTD. WHICH WOULD HAVE TO BEAR THE CONSEQUENCES, INDICATING THA T VIKRAM ELECTRIC EQUIPMENT P. LTD. WAS NOT ACTING AS AN AGE NT ON BEHALF OF THE ASSESSEE, BUT WAS WORKING ON A PRINCI PLE TO PRINCIPLE BASIS, INDEPENDENTLY. 8. ON THE OTHER HAND, THE STAND OF THE LD.DR, HAS B EEN THAT MOU SIGNED BY THE ASSESSEE AND VIKRAM ELECTRIC EQUI PMENT P. LTD. LAYS DOWN THAT VIKRAM ELECTRIC EQUIPMENT P. LD . MAKES IT CLEAR THAT VIKRAM ELECTRIC EQUIPMENT P. LTD. WAS AC TING AS AN AGENT OF THE ASSESSEE, RENDERING SERVICES, FOR WHIC H, THE 10 ITA NO. 1 949/DEL/2011 PROVISIONS OF SECTION 194H OF THE ACT ARE APPLICABL E AND IT IS CORRECTLY APPLIED BY THE LD. CIT(A). 9. WE HAVE PERUSED THE AGREEMENT IN THIS REGARD. IT IS SEEN THAT CLAUSE 3.2 OF THE MOU BETWEEN THE ASSESSEE AND VIKR AM ELECTRIC EQUIPMENT P. LTD. MAKES IT CLEAR THAT VIKR AM ELECTRIC EQUIPMENT P. LTD. OR ITS AGENT AGREED TO ASSIGN THE IR RIGHTS TO PURCHASE THE LAND IN FAVOUR OF THE ASSESSEE. IT WO ULD BE APPROPRIATE TO REPRODUCE HERE, THE SAID CLAUSE 3.2: 3.2 IN CONSIDERATION OF THE CONSOLIDATOR OR ITS AGENT/NOMINEE ASSIGNING ITS RIGHT TO PURCHASE THE LAND IN FAVOUR OF THE BUYER COMPANY AND CAUSING THE LAND OWNERS TO EXECUTE THE SALE DEEDS DIRECTLY IN FVOUR OF THE BUYER COMPANY, THE BUYER COMPANY SHALL PAY THE CONSOLIDATOR SUCH SUM AS MAY BE MUTUALLY AGREED. HOWEVER, IT IS SPECIFICALLY AGREED BY THE CONSOLIDATOR THAT NO SUM SHALL ACCRUE TO IT ON THIS ACCOUNT TILL IT PROCURES 27 ACRES OF LAND FOR THE BUYER COMPANY (UNLESS THE BUYER COMPANY DECIDES TO PROCURE LESS THAN 27 ACRES THROUGH THE CONSOLIDATOR) AND ALL THE ISSUES RELATING TO POSSESSION AND MUTATION OF SUCH LAND ARE SETTLED TO THE SATISFACTION OF THE BUYER COMPANY. 9.1. THE ABOVE CLAUSE ALSO MAKES IT EVIDENT THAT UN LESS THE ASSESSEE DECIDED TO PROCURE LESS THAN 27 ACRES OF L AND THROUGH VIKRAM ELECTRIC EQUIPMENT P. LTD. VIKRAM ELECTRIC E QUIPMENT P. LTD. WAS TO PROCURE 27 ACRES OF LAND FOR THE ASS ESSEE, FAILING WHICH, NO PAYMENT WAS TO BE MADE BY THE ASSESSEE TO VIKRAM ELECTRIC EQUIPMENT P. LTD. 11 ITA NO. 1 949/DEL/2011 9.2. THIS CLEARLY SHOWS THAT VIKRAM ELECTRIC EQUIPM ENT P. LTD. WAS TRANSACTING ON A PRINCIPLE TO PRINCIPLE BASIS A ND IT CANNOT BE SAID THAT THE PAYMENT WAS MADE BY THE ASSESSEE T O VIKRAM ELECTRIC EQUIPMENT P. LTD. FOR RENDERING OF ANY SER VICE. THE PROVISIONS OF SEC. 194H OF THE ACT ARE, THEREFORE, NOT AT ALL APPLICABLE. 9.3. MOREOVER, THE AMOUNT PAID TO VIKRAM ELECTRIC E QUIPMENT P. LTD. WAS DULY REFLECTED BY THE ASSESSEE IN THE P URCHASES CLOSING STOCK. NO SALES HAD BEEN MADE DURING THE Y EAR UNDER CONSIDERATION. IT HAS NOT BEEN SHOWN TO BE OTHERWI SE. IN SUCH A SCENARIO, IN OUR CONSIDERED OPINION, NO DISALLOWA NCE IS CALLED FOR. 9.4. PERTINENTLY, NO ADDITION HAVING BEEN MADE FOR THE YEAR BY THE ASSESSING OFFICER, THE ALTERNATE CONTENTION OF THE ASSESSEE TO THE EFFECT THAT NO ADDITION CAN BE MADE DURING T HE YEAR, STANDS ACCEPTED BY BOTH THE AUTHORITIES BELOW. 9.5. THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IN ANY CASE DO NOT APPLY, THE ASSESSEE HAVING NOT CLAIMED ANY DEDU CTION FOR ANY EXPENSES ON ACCOUNT OF PAYMENT TO VIKRAM ELECTR IC EQUIPMENT P. LTD. EITHER IN ITS PROFIT AND LOSS ACC OUNT OR IN THE COMPUTATION OF TAXABLE INCOME FILED. IT WAS ONLY T HAT THE ASSESSING OFFICER RECORDED A LOSS OF RS. 19,700/-. THIS OBVIOUSLY, DID NOT INCLUDE ANY ADDITION OF EITHER R S. 4.02 CRORES OR RS. 1.24 CRORES. 9.6. IN VIEW OF THE ABOVE DISCUSSIONS, THE GRIEVANC E OF THE ASSESSEE IS FOUND TO BE CORRECT AND IS ACCEPTED AS SUCH. 12 ITA NO. 1 949/DEL/2011 CONSISTENT WITH THE VIEW TAKEN THEREIN, AS IT IS UN DISPUTED THAT THE FACTS ARE IDENTICAL, WE ALLOW THIS APPEAL OF TH E ASSESSEE. THE GROUNDS RAISED BY THE ASSESSEE STANDS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 11.2.2016 SD/- SD/- (N.K. SAINI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11.2.2016 *KAVITA, P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 09.12.15 2. DRAFT PLACED BEFORE AUTHOR 28.12.15 3. DRAFT PROPOSED & PLACED BEFORE THE 13 ITA NO. 1 949/DEL/2011 SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 11.2.16 6. KEPT FOR PRONOUNCEMENT ON 11.2.16 7. FILE SENT TO THE BENCH CLERK 11.2.16 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.