M/s. Pile Foundation Co., New Delhi V. ITO, New Delhi

ITA 2410/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4708 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Keywords: Business expenditure; Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A.NO. 2410 /DEL/20 1 5 AY : 20 10 - 11 M/S PILE FOUNDATION CO. 29/1, SAVITRI NAGAR, NEW DELHI 110 017 (PANAAEFP7008F) VS. ITO, WARD 38(3), NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. SALIL AGGARWAL, ADV. DEPARTMENT BY : SH. T. VASANTHAN, SR. DR ORDER ORDER ORDER ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 18.2.2015 OF THE LD. CIT(A)-XX, NEW DELHI PERTAININ G TO ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED BOTH IN LAW AND ON FACTS IN SUSTAINING A DISA LLOWANCE OF A SUM OF RS. 4, 50, 982/- ON ACCOUNT OF FOREIGN TRAVE LING EXPENSES, WHEREIN THE SAID EXPENDITURE WAS TREATED AS 'CAPITAL EXPENDITURE' AS AGAINST THE 'REVENUE EXPENDITURE' B EING CLAIMED BY THE ASSESSEE - APPELLANT. 2 1.1 THAT IN DOING SO, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ARBITRARILY REJECTED THE DETAILED EXP LANATIONS AND EVIDENCES FILED BY THE ASSESSEE - APPELLANT IN ORDE R TO SUPPORT THE CLAIM OF 'REVENUE EXPENDITURE' AND THUS, THE AD DITION SO SUSTAINED IS UNJUSTIFIED AND UNSUSTAINABLE IN LAW. 1.2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) HAS FURTHER FAILED TO APPRECIATE THE BASIC FACT THAT TH E EXPENDITURE INCURRED ON FOREIGN TRAVELLING FOR PURCHASE OF MACH INERY IS A BONAFIDE BUSINESS EXPENDITURE NECESSARY TO RUN THE BUSINESS OF THE ASSESSEE - APPELLANT, THUS, TREATING THE SAME A S CAPITAL EXPENDITURE IS UNCALLED FOR AND UNJUSTIFIED IN LAW. 2 THAT THE LEARNED COMMISSIONER OF INCOME TAX '(AP PEALS) HAS ERRED BOTH IN LAW AND FACTS IN SUSTAINING A DISALLO WANCE OF A SUM OF RS. 2,48,358/- ON ACCOUNT OF INTEREST PAID AND C LAIMED AS DEDUCTION UNDER SECTION 36(1)(III) OF THE ACT. 2.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) HAS FAILED TO APPRECIATE THE BASIC FACT THAT SUCH DISAL LOWANCE WAS HIGHLY UNREASONABLE AND BASED ON COMPLETE MISCONCEP TION OF FACTS, AS THE SAID PAYMENT OF INTEREST HAD NO NEXUS WITH THE 3 PURCHASE OF MACHINERY AND AS SUCH, THE DISALLOWANCE SO MADE SHOULD HAVE BEEN DELETED. 3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED BOTH IN LAW AND ON FACTS IN SUSTAINING A DISA LLOWANCE OF RS. 25, 33, 675/- UNDER SECTION 40(A)(IA) OF THE ACT, O N ACCOUNT OF NON - DEDUCTION OF TDS ON PAYMENT OF INTEREST BEING M/S L&T FINANCE LTD. 3.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FAILED TO APPRECIATE THE BASIC FACT THAT THE SAID P AYMENT OF INTEREST AMOUNTING TO RS. 25,33,675/- WAS DULY ACCO UNTED AS INCOME BY M/S L&T FINANCE LTD. AND DUE TAXES WER E PAID BY M/S L&T FINANCE LTD. ON THE SAME AND IN ORDER TO SU BSTANTIATE THE SAID FACT, CONFIRMATION FORM M/S L&T FINANCE LT D, WAS ALSO FILED, WHICH WAS ARBITRARILY - REJECTED BY LEARNED CIT (A) AND THUS, THE DISALLOWANCE SO SUSTAINED IS HIGHLY UNJUS T AND UNCALLED FOR ON FACTS OF THE INSTANT CASE. 4.2 THAT THE LEARNED COMMISSIONER OF INCOME HAS FU RTHER FAILED TO APPRECIATE THE BASIC FACT THAT NO DISALLOWANCE IS W ARRANTED OF THE EXPENDITURE INCURRED TO THE EXTENT OF EXPENDITU RE PAID ULS 40(A)(IA) OF THE ACT, AND AS THE ENTIRE SUM OF INTE REST STOOD 4 'PAID' DURING THE YEAR THUS, THERE WAS NO SUM REMAI NING TO BE 'PAYABLE' AT THE END OF THE FINANCIAL YEAR 2009-10 RELEVANT TO INSTANT ASSESSMENT YEAR 2010-11 AND AS SUCH, NO DIS ALLOWANCE IS CALLED FOR AND THE DISALLOWANCE SO SUSTAINED DESERV ES TO BE DELETED. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FURTHER ERRED IN LAW AND ON FACTS IN SUSTAINING THE AFORESAID ADDITIONS IN THE HANDS OF ASSESSEE -APPELLANT, WITH OUT GIVING ANY FAIR AND PROPER OPPORTUNITY OF BEING HEARD TO THE A PPELLANT COMPANY, THEREBY, VIOLATING THE PRINCIPLES OF NATUR AL JUSTICE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CONTRACTOR ENGAGED IN LAYING PILE FOUNDATIONS AND UPON A GROSS RECEIPT OF RS. 8.14 CRORES A NET PROFIT OF RS. 9,43,966/- WAS DECLARED BY ITS RETURN OF IN COME FOR A Y 2010-11 ON 27.9.2010. HOWEVER, AO VIDE ORDER DATED 22.03.2013 FRAMED AN ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (H EREINAFTER REFERRED AS THE ACT) AT AN INCOME OF RS. 42,35, 515/- BY MAKING THE VARI OUS ADDITIONS. AGAINST THE AFORESAID ASSESSMENT ORDER, THE ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A), WHO VIDE ITS IMPUGNED ORDER DATED 18.2.2015 HAS DI SMISSED THE APPEAL OF ASSESSEE FIRM. AGGRIEVED WITH THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5 3. DURING THE HEARING, LEARNED COUNSEL FOR ASSESSEE SH. SALIL AGGARWAL ADVOCATE ARGUED THE MATTER IN DETAIL WITH RESPECT T O ALL THE GROUNDS, EXCEPT THE GROUND NO. 2 TO 2.1, SO RAISED IN THE MEMO OF APPEA L AND FURNISHED FOLLOWING WRITTEN SUBMISSIONS: (A) THAT WITH RESPECT TO GROUND NOS. 1 TO 1.2, IT IS SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN SUSTAINING, A DISALLOWANCE OF A SUM OF RS. 4, 50, 9 82/- ON ACCOUNT OF FOREIGN TRAVELING EXPENSES, WHEREIN THE SAID EXPENDITURE WA S TREATED AS 'CAPITAL EXPENDITURE' AS AGAINST THE 'REVENUE EXPENDITURE' B EING CLAIMED BY THE ASSESSEE - APPELLANT. IT IS SUBMITTED THAT THE SAID EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE FIRM FOR BUSINESS PURPOSES, AS IT W AS BEEN INCURRED IN THE PROCESS OF FOREIGN TOUR OF DIRECTOR FOR ACQUISITION OF MACH INERY, AND AS SUCH, SINCE THE ENTIRE EXPENDITURE HAS BEEN INCURRED DURING THE RUN NING OF THE BUSINESS, AS SUCH, SAME NEEDS TO BE ALLOWED AS REVENUE EXPENDITURE. (B) THAT WITH RESPECT TO GROUND NOS. 2 TO 2.1, IT IS SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND FACTS IN SUSTAINING A DISALLOWANCE OF A SUM OFRS. 2,48, 358/ - ON ACCOUNT OF INTEREST PAID AND CLAIMED AS DEDUCTION UNDER SECTION 36(L)(III) O F THE ACT. (C) THAT WITH RESPECT TO GROUND NOS. 3 TO 3.2, IT IS SUBMITTED THAT LEARNED CIT (A) HAS ERRED BOTH IN LAW AND ON FACTS IN SUSTA INING A DISALLOWANCE OF 6 RS. 25, 33, 675/- UNDER SECTION 40(A)(IA) OF THE AC T, ON ACCOUNT OF NON - DEDUCTION OF TDS ON PAYMENT OF INTEREST BEING MIS L &T FINANCE LTD. IN DOING SO, THE LEARNED CIT (A) . HAS FAILED TO APPRECIATE THE BASIC FACT THAT THE SAID PAYMENT ON ACCOUNT OF INTEREST BEING PAID TO MIS L&T FINANC E AND THE SAME WAS ALSO INCLUDED IN THE INCOME OF MIS L&T FINANCE, AS CONFI RMED BY THE SAID PARTY (AT PAGE 26 OF THE PAPER BOOK). THUS, RELIANCE IS PLACE D ON THE JUDGMENT OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS ANSAL LAN D MARK TOWNSHIPS PVT. LTD. REPORTED IN 377 ITR 635 ON THE PROPOSITION THAT 'ON CE THE PAYEE HAS INCLUDED THE AMOUNT PAID BY PAYER IN ITS RETURN OF INCOME AN D PAID TAXES ON THE SAME, THEN THE PAYER CANNOT BE SAID TO BE IN DEFAULT AND THUS, NO DISALLOWANCE BE MADE UNDER SECTION 40(A)(IA) OF THE ACT'. 4. ON THE CONTRARY, THE LEARNED SR. DR, SH. T. VASA NTHA, RELIED UPON THE ORDERS OF LOWER AUTHORITIES AND REITERATED THE FIND INGS RECORDED BY THE LOWER AUTHORITIES. 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AVAILABLE WITH ME. WITH REGARD TO GROUND NOS. 1 TO 1.2 ARE CONCERNED, I FIND THAT ONE OF THE PARTNER OF THE ASSESSEE FIRM WENT ABROAD TO PURCHASE A MACH INE FOR THE PURPOSES OF BUSINESS AND THE SAME WAS SUBSEQUENTLY PURCHASED AN D PUT TO USE IN THE BUSINESS OF ASSESSEE FIRM AS WELL. IN SUCH A SCENAR IO, THE FOREIGN TRAVELLING EXPENSES INCURRED BY THE ASSESSEE FIRM, SINCE ADMIT TEDLY IS FOR THE PURPOSES OF 7 BUSINESS NEEDS TO BE ALLOWED AS REVENUE EXPENDITURE AND AS SUCH, GROUND NO. 1 TO 1.2 OF THE ASSESSEE ARE ALLOWED THEREBY DELETIN G THE ADDITION OF RS. 4,50,982/-. 5.1 WITH REGARD TO GROUND NOS. 2 TO 2.1 ARE CONCERN ED, SINCE THESE GROUNDS WERE NOT PRESSED BY THE LD. COUNSEL OF THE ASSESSEE , HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. 5.2 WITH REGARD TO GROUND NOS. 3 TO 3.2 ARE CONCERN ED, I FIND THAT ASSESSEE HAD FILED CERTIFICATE DATED 28.3.2013 FROM MIS L&T FINANCE (AT PAGE 26 OF THE PAPER BOOK FILED BY ASSESSEE) WHICH READS AS UNDER: - L&T FINANCE TO PILE FOUNDATION COMPANY 29/1, SAVITRI NAGAR, NEAR SHEIKH SARAI, PHASE-I, NEW DELHI 11 017 REG.: FINANCE CHARGES RECEIVED FROM M/S PILE FOUNDA TION COMPANY DURING THE FY 2009-10 (AY 2010-11) THIS IS TO CERTIFY THAT THE FINANCE CHARGES RECEIVE D FROM M/S PILE FOUNDATION COMPANY BY US HAS BEEN DULY REPORTE D AS INCOME IN OUR BOOKS AND ACCOUNTS INCOME TAX RETURN AND THA T SAME HAS 8 BEEN CHARGED TO TAX VIDE OUR INCOME TAX RETURN FILE D ON 29 TH SEPTEMBER, 2010 AND THE TAX DUE THERE ON HAS BEEN P AID. DATE: 28 TH DAY OF MARCH, 2013 SD/- PLACE: MUMBAI KANTILAL PARMAR (AUTHORISED SIGNATORY) 5.2.1 AFTER CAREFULLY PERUSING THE AFORESAID CERTI FICATE, I AM OF THE CONSIDERED VIEW THAT THE ADDITION IN DISPUTE IS NOT TENABLE AN D THEREFORE, I HAVE NO HESITATION IN DELETING THE IMPUGNED ADDITION, AS THE PAYEE HA S INCLUDED THE AMOUNT SO PAID BY ASSESSEE IN ITS RETURN OF INCOME AND THUS, THERE IS NO NEED TO MAKE ANY DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. AC CORDINGLY, I DELETE THE ADDITION IN DISPUTE AND ALLOW THE GROUND NO. 3 TO 3.2 RAISED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/08/2017. S SS SD DD D/ // /- -- - [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE: 31/08/2017 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES 9