Mangla Land Development Corporation, Baroda V. The Dy. Commissioner of Income Tax, Circle-5, Baroda

ITA 1998/AHD/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2014 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 01-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Maximum Marginal Rate
• Section: 37(1)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASSEM AHMED, ACCOUNTANT MEMBER ./ I.T.A. NO. 1998/AHD/2016 ( / ASSESSMENT YEAR: 2010-11) MANGLA LAND DEVELOPMENT CORPORATION 103, K.P. SHOPPING CENTER KARELIBAUGH, BARODA- 390018 / VS. DCIT CIRCLE-5, AAYKAR BHAVAN, RACE COURSE CIRCLE, BARODA- 390007 ./ ./ PAN/GIR NO. : AAC FM6 241 K ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY RANJAN, AR / RESPONDENT BY : SHRI L. P. JAIN, SR. DR / DATE OF HEARING 22/08/2019 !'# / DATE OF PRONOUNCEMENT 06/09/2019 $%/ O R D E R PER MAHAVIR PRASAD - JM: THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER OF LD. CIT(A) CAB-3/78/2014-15 DATED 30.05.20 16 ARISING OUT OF ASSESSMENT ORDER DATED 26.03.2013 AND ASSESS EE HAS TAKEN SOLELY GROUND THAT ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING IMPUGNED DISALLOWANCE OF EXPENDITURE/LOSS OF RS. 27,57,500/- MADE BY THE LD. AO. ITA NO.1998/AHD/2016 [MANGLA LAND DEVELOPMENT CORPORATION VS. DCIT] A.Y. 2010-11 - 2 - 2. FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF LAND THE DURING THE ASSESSMENT PROCEEDI NG IT IS NOTICED FROM THE LEDGER ACCOUNT THAT PROFESSIONAL FEES TO T HE TUNE OF RS. 27,57,500/- WAS PAID TO SMT. VIRBALABEN K. PATEL WH O IS ALSO PARTNER IN THE ASSESSEE FIRM. WHEN ENQUIRED BY THE LD. AO ASSESSEE HAS SUBMITTED THAT SMT. VIRBALABEN K. PATE L HAS MADE EXTRA EFFORTS IN ORDER TO FETCH PROFIT FOR THE FIRM AND SHE USED TO PUT EXTRA EFFORTS FOR THE SALE OF LAND, TO DECIDE T HE COST OF LAND AND TO DECIDE THE PAYMENT TERMS AND TO GET THE RECOVERY OF FIXED AMOUNT AND RECOVERY OF DUES ETC. BUT THE LOWER AUTHORITIES WERE NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND MADE ADDITION OF RS. 27,57,500/ - BY HOLDING THAT SHE IS ONE OF THE PARTNER OF THE FIRM WITH OTH ERS AND OTHER PARTNERS DID NOT GET THE SAME AMOUNT OF COMMISSION/ REMUNERATION. 3. NOW ASSESSEE HAS COME BEFORE US BY WAY OF SECOND STATUTORY APPEAL. 4. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER AND HEARD BOTH THE PARTIES. ASSESSEES CONTE NTION IS THAT THE FIRM AS WELL AS PARTNER SMT. VIRBALABEN K. PATEL HA S PAID TAX ON THE SAME AMOUNT THIS AND IN THE CASE OF DOUBLE TAXA TION AND IN SUPPORT OF ITS CONTENTION THE LD. AUTHORISED REPRES ENTATIVE SHRI VIJAY RANJAN CITED AN ORDER OF ITAT MUMBAI BENCH IN ITA NO. 4031/MUM/2003 & ITA NO. 4032/MUM/2003 WHEREIN IT IS HELD THAT AN AMOUNT DISALLOWED IN THE HANDS OF THE COMPA NY FOR CORPORATE TAX PURPOSE, SHOULD NOT BE TAXED AGAIN IN THE HANDS OF ITS DIRECTOR AS THE SAME AMOUNT CANNOT BE TAXED TWI CE. ITA NO.1998/AHD/2016 [MANGLA LAND DEVELOPMENT CORPORATION VS. DCIT] A.Y. 2010-11 - 3 - 5. IN THIS CASE WE DRAW SUPPORT FROM THE CASE OF H ONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT VS. GUJAR AT GAS FINANCIAL SERVICES LTD. [2015] 60 TAXMANN.COM 483 ( GUJARAT) HEREIN THE SAID JUDGMENT IS REPRODUCED AS UNDER: SECTION 40(A)2 OF THE INCOME-TAX ACT, 1961 BUSINE SS DISALLOWANCE EXCESSIVE OR UNREASONABLE PAYMENTS ( SERVICE CHARGES) ASSESSEE-COMPANY WAS A 100 PER CENT SUBS IDIARY COMPANY OF G LTD., A GOVERNMENT COMPANY G LTD. WAS ENGAGED IN DISTRIBUTING GAS THROUGH PIPELINES TO IT S CUSTOMERS ASSESSEE ENTERED INTO AN AGREEMENT WITH G LTD. FO R PROVIDING SERVICES ETC. TO G LTD. IT WAS AGREED THAT ASSE SSEE COMPANY WOULD PAY CERTAIN SUM FOR EACH CONNECTION SAID CH ARGES WERE CLAIMED FOR DEDUCTION UNDER SECTION 37(1) WHICH WAS ALLOWED SUBSEQUENTLY, ASSESSING OFFICER FOUND THAT ASSESSEE WAS USING SOME SPACE OF G LTD. ASSESSING OFFICER INITIATED PRO CEEDINGS BY EXERCISING POWERS UNDER SECTION 40(A)2 AND DEDUCTED ESTIMATED RENT OF SPACE FROM SERVICE CHARGES IT WAS OBSERVED THA T ASSESSEE COMPANY AS WELL AS PARENT COMPANY, BOTH WERE ASSESS ED TO TAX AT MAXIMUM MARGINAL RATE AND, THEREFORE, IT COULD NOT BE SAID THAT SERVICE CHARGE WAS PAID TO G AT UNREASONABLE RATE T O EVADE TAX WHETHER SINCE REVENUE COULD NOT POINT OUT THAT ASSE SSEE EVADED PAYMENT OF TAX, INVOCATION OF SECTION 40(A)2 WAS NO T VALID HELD, YES [PARAS 13 AND 15] [IN FAVOUR OF ASSESSEE]. 5. THUS, IN THE INTEREST OF THE JUSTICE WE SET-ASID E THIS MATTER TO THE FILE OF THE AO TO VERIFY, IF FIRM AS WELL SMT. VIRBALABEN K. PATEL ARE ASSESSED TO SAME TAX RATE THEN IF PARTNER SMT. VIRALABEN K. PATEL HAS ALREADY PAID TAX THEN ADDITION MADE IN THE HAND OF ASSESSEE SHALL BE DELETED. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. SD/- SD/- (WASEEM AHMED) (MAHA VIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 06/09/2019 TANMAY TRUE COPY THIS ORDER PRONOUNCED IN OPEN COURT ON 06/09/2019 ITA NO.1998/AHD/2016 [MANGLA LAND DEVELOPMENT CORPORATION VS. DCIT] A.Y. 2010-11 - 4 - !' #' / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. $ / ASSESSEE 3. ) *+ , / CONCERNED CIT 4. ,- / CIT (A) 5. 012 33*+, *+#, 56$)$ / DR, ITAT, AHMEDABAD 6. 289 : / GUARD FILE. BY ORDER / $% , ;/5 *+#, 56$)$ < 1.DATE OF DICTATION ON 28.08.2019 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 29.08.2019 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 05.09.2019 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 06 .09.2019 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 06.09.2019 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 06.09.2019 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER