ITO, Gurgaon V. M/s Kec-Asiakom UB (JV), Gurgaon

ITA 2326/DEL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6633 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 1
• Next Hearing Date: 21-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 28-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH SINHA
• Keywords: Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO.2326/DEL/2016 ASSESSMENT YEAR : 2011-12 ITO, WARD 2(2), GURGAON. VS. KEC-ASIAKOM UB (JV), 1 ST FLOOR, BLDG. NO.9A, DLF CYBER CITY, PHASE III, GURGAON. PAN: AABAK1083F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRAKASH SINHA, ADVOCATE DEPARTMENT BY : NONE DATE OF HEARING : 21.11.2016 DATE OF PRONOUNCEMENT : 21.11.2016 ORDER THIS APPEAL BY THE ASSESSEE RELATING TO THE ASSESS MENT YEAR 2011- 12 ARISES OUT OF THE ORDER PASSED BY THE CIT (APPE ALS) ON 16.02.2016 DELETING THE ADDITION OF RS.48,20,118/- MADE BY THE AO U/S 40A(2)(B) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT). 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A JOINT VENTURE WITH THE FOLLOWING THREE PARTNERS AS JOINT VENTURES:- ITA NO.2326/DEL/2016 2 I) KEC INTERNATIONAL LIMITED 60 PERCENT II) UNIVERSAL CONSTRUCTION COMPANY 25 PERCENT III) UNIQUE BUILDERS 15 PERCENT. 3. THE ASSESSEE RECEIVED A CONTRACT WORTH RS.56,96, 05,620/- FROM RAIL VIKAS NIGAM LIMITED (RVNL). THIS CONTRACT WAS SUB-CONTRACTED TO M/S KEC INTERNATIONAL LIMITED (KEC), HAVING 60% SHA RE IN JOINT VENTURE IN THE ASSESSEE ITSELF, FOR A SUM OF RS.56, 88,08,172/-. THE AO HELD THAT THE ASSESSEE OUGHT TO HAVE EARNED INCOME FROM SUCH SUB- CONTRACTING INSTEAD OF GIVING IT AS SUCH. HE ESTIMA TED INCOME @ 4% OF THE CONTRACT VALUE AND MADE ADDITION FOR THE DIFFER ENTIAL AMOUNT OF RS.2,27,84,225/- U/S 40A(2)(B) OF THE ACT. THE LD.C IT(A), RELYING ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CAS E CIT VS. ORIENTAL STRUCTURAL ENGINEERS PVT. LTD. (2015) 374 ITR 35 (D EL), DELETED THE ADDITION. THE REVENUE IS AGGRIEVED AGAINST SUCH DEL ETION. 4. I HAVE HEARD THE LD. AR AND PERUSED THE RELEVANT MATERIAL ON RECORD. NONE IS PRESENT ON BEHALF OF THE REVENUE. IN FACT, THERE IS NO ITA NO.2326/DEL/2016 3 ONE TO ATTEND THE PROCEEDINGS FROM THE SIDE OF THE REVENUE IN ALL THE CASES FIXED BEFORE THE BENCH TODAY. THE LD. AR INS ISTED THAT THE APPEAL BE DISPOSED OF. I AM AGREEABLE WITH THE CONTENTION OF THE LD. AR AND, ACCORDINGLY, PROCEEDING TO DISPOSE OF THE INSTANT A PPEAL EX PARTE QUA THE REVENUE. 5. IT IS NOTICED THAT THE AO MADE DISALLOWANCE U/S 40A(2)(B) OF THE ACT BY OPINING THAT THE ASSESSEE SHOULD HAVE EARNED INCOME FROM SUB- CONTRACTING. AT THIS STAGE, IT IS RELEVANT TO NOTE THE PRESCRIPTION OF THE RELEVANT PART OF SECTION 40A(2), WHICH IS AS UNDER :- `40A(2)( A ) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERS ON REFERRED TO IN CLAUSE ( B ) OF THIS SUB-SECTION, AND THE ASSESSING OFFICER IS OF OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILIT IES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSI NESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUI NG TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY H IM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION . 6. ON GOING THROUGH THE MANDATE OF THE ABOVE PROVIS ION, IT IS CLEAR THAT THE DISALLOWANCE UNDER THIS SECTION IS MADE IN RESPECT OF THE EXPENSES INCURRED OR PAYMENTS MADE WHICH ARE NOT DE DUCTIBLE. THIS ITA NO.2326/DEL/2016 4 SECTION HAS NO APPLICATION TO INCOME ASPECT OF THE ASSESSEE. AS THE AO HAS MADE DISALLOWANCE U/S 40A(2)(B) IN RESPECT OF I NCOME WHICH THE ASSESSEE IN HIS OPINION OUGHT TO HAVE EARNED RATHER THAN CERTAIN EXPENSES INCURRED, I AM OF THE CONSIDERED OPINION THAT THE P ROVISIONS OF THIS SECTION ARE NOT ATTRACTED. I, THEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS SCORE DELETING THE DISALLOWANCE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.11.201 6. SD/- [R.S. SYAL] ACCOUNTANT MEMBER DATED,21.11.2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.