ACIT, CHENNAI V. M/s. Zeal Realtors Pvt. Ltd., CHENNAI

ITA 2506/CHNY/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7997 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-01-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 26-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N GOPI KRISHNA
• Assessee Lawyers: S SRIDHAR
• Keywords: Business expenditure; Revenue expenditure
• Section: 271(1)(c)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , ! ' , $ '% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.2506/CHNY/2016 ( )( / ASSESSMENT YEAR : 2011-12 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(2), CHENNAI - 600 034. V. M/S ZEAL REALTORS PVT. LTD., THE PENINSULA, 778, P.H. ROAD, KILPAUK, CHENNAI - 600 083. PAN : AAACZ 2692 J (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI N. GOPIKRISHNA, JCIT -.+, / 0 / RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE 1 / 2$ / DATE OF HEARING : 25.06.2019 34) / 2$ / DATE OF PRONOUNCEMENT : 18.07.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -11, DATED 09. 05.2016 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2. THERE WAS A DELAY OF 3 DAYS IN FILING THIS APPEA L BY THE REVENUE. THE REVENUE HAS FILED A PETITION FOR CONDONATION OF DELAY. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND THE L D.COUNSEL FOR THE ASSESSEE. LD. D.R. WE FIND THAT THERE WAS SUFFIC IENT CAUSE FOR NOT FILING 2 I.T.A. NO.2506/CHNY/16 THE APPEAL BEFORE THE STIPULATED TIME. THEREFORE, WE CONDONE THE DELAY AND ADMIT THE APPEAL. 3. SHRI N. GOPIKRISHNA, THE LD. DEPARTMENTAL REPRES ENTATIVE, SUBMITTED THAT THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'TH E ACT') IN RESPECT OF COMPENSATION DISALLOWED. ACCORDING TO THE LD. D.R. , THERE WAS NO REFERENCE ABOUT THE PAYMENT OF COMPENSATION IN THE AGREEMENT OTHER THAN REFERRING THE DISPUTE TO ARBITRATOR. ACCORDIN G TO THE LD. D.R., BOTH THE ASSESSEE AND M/S PRINCE FOUNDATIONS LTD. DECIDE D THE DISPUTE THEMSELVES. THE ASSESSEE CLAIMS TO HAVE PAID COMPE NSATION. THEREFORE, ACCORDING TO THE LD. D.R., THE EXPENDITU RE SAID TO BE CLAIMED BY THE ASSESSEE FOR PAYMENT OF COMPENSATION CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. MOREOVER, THE PAYMENT WAS AD MITTEDLY MADE ON 30.11.2009 WHICH FALLS IN THE ASSESSMENT YEAR 2010- 11. THEREFORE, ACCORDING TO THE LD. D.R., THE SAME CANNOT BE ALLOW ED AS BUSINESS EXPENDITURE. SINCE THE ASSESSEE CLAIMS THE SAME AS BUSINESS EXPENDITURE, THE ASSESSING OFFICER LEVIED PENALTY U NDER SECTION 271(1)(C) OF THE ACT. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) IS NOT JUSTIFIED IN DELETING THE PENALTY LEVIED BY THE ASS ESSING OFFICER. 4. ON THE CONTRARY, SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE-COMPANY ENTERED INTO A JOINT VENTURE AGREEMENT WITH M/S PRINCE FOUNDATION LTD. SUBSEQUE NTLY, THE JOINT 3 I.T.A. NO.2506/CHNY/16 VENTURE AGREEMENT ENTERED WITH M/S PRINCE FOUNDATIO N LTD. WAS TERMINATED ON PAYMENT OF COMPENSATION. ACCORDING T O THE LD. COUNSEL, A FRESH JOINT VENTURE AGREEMENT WAS EXECUTED WITH M/S VGN DEVELOPERS PVT. LTD. ALONG WITH RESPECTIVE LAND OWNERS. THE C OMPENSATION PAID TO M/S PRINCE FOUNDATION LTD. WAS CLAIMED AS BUSINESS EXPENDITURE. ACCORDING TO THE LD. COUNSEL, THERE WAS A CLAUSE FO R REFERENCE TO THE ARBITRATOR. IT DOES NOT MEAN THAT THE DISPUTE COUL D NOT BE SETTLED BETWEEN THE PARTIES. IN CASE THE DIFFERENCE COULD NOT BE R ESOLVED AMONG THE PARTIES, THE MATTER MAY BE REFERRED TO THE ARBITRAT OR. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CONTENTION OF THE LD. D.R. THAT WITHOUT REFERENCE TO THE ARBITRATOR, THE PARTIES DECIDED TO PAY COMPENSA TION HAS NO MERIT AT ALL. THE PARTIES ARE ENTITLED TO SETTLE THE DISPUT E AMICABLY EITHER ON PAYMENT OF COMPENSATION OR OTHERWISE WITHOUT ANY RE FERENCE TO THE ARBITRATOR. THE MATTER WOULD BE REFERRED TO THE AR BITRATOR IN CASE THE DISPUTE COULD NOT BE RESOLVED AMICABLY BETWEEN THE PARTIES. IN THIS CASE, ACCORDING TO THE LD. COUNSEL, THE PARTIES CAME TO A N UNDERSTAND AND THE DISPUTE WAS RESOLVED AND FOR CANCELLATION OF AGREEM ENT, THE ASSESSEE HAS PAID COMPENSATION. THEREFORE, ACCORDING TO THE LD. COUNSEL, IT IS AN EXPENDITURE IN THE COURSE OF BUSINESS ACTIVITY, HEN CE, THE ASSESSEE CLAIMS AS BUSINESS EXPENDITURE. ACCORDING TO THE L D. COUNSEL, A MERE CLAIM IN THE RETURN OF INCOME AS BUSINESS EXPENDITU RE CANNOT BE A BASIS FOR MAKING ADDITION IN VIEW OF THE JUDGMENT OF APEX COURT IN CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 ITR 158. REFERRING TO THE 4 I.T.A. NO.2506/CHNY/16 ASSESSMENT ORDER, THE LD.COUNSEL SUBMITTED THAT THE ONLY OBJECTION OF THE ASSESSING OFFICER IS THAT THE ASSESSEE HAS NOT FOLL OWED THE MATCHING PRINCIPLE IN TREATMENT OF INCOME AND EXPENDITURE. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE, IN FACT, PAID THE COMPENSATI ON AND CLAIMED THE SAME AS REVENUE EXPENDITURE. MERELY BECAUSE THE AS SESSEE COULD NOT SUBSTANTIATE THE CLAIM THAT CANNOT BE A REASON FOR LEVY OF PENALTY. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE FACT THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH M/S PRINCE FOUNDATION LTD. IS NOT IN DISPUTE. THE AGREEMENT WITH M/S PRINCE FOUN DATION LTD. FOR JOINT DEVELOPMENT WAS ALSO CANCELLED ON PAYMENT OF COMPEN SATION. THE ASSESSEE ADMITTEDLY ENTERED INTO ANOTHER AGREEMENT WITH M/S VGN DEVELOPERS PVT. LTD. THE ONLY CONTENTION OF THE LD . D.R. IS THAT THERE WAS A CLAUSE IN THE AGREEMENT WITH M/S PRINCE FOUND ATION LTD. FOR REFERENCE TO THE ARBITRATOR IN ORDER TO RESOLVE THE DISPUTE. SINCE THE COMPENSATION WAS PAID WITHOUT ANY REFERENCE TO ARBI TRATOR, THE LD. D.R. CONTENDS THAT THE SAME CANNOT BE ALLOWED AS REVENUE EXPENDITURE. ACCORDING TO THE LD. COUNSEL, EVEN THOUGH THERE WAS A PROVISION IN THE AGREEMENT FOR REFERRING THE MATTER TO THE ARBITRATO R, IT DOES NOT MEAN THAT THE ASSESSEE OR THE OTHER PARTY IS BOUND TO REFER T HE MATTER TO THE ARBITRATOR. REFERENCE TO THE ARBITRATOR OR MOVING TO THE COMPETENT COURT IS FOR RESOLVING THE DISPUTE IN CASE IT CANNOT BE AMIC ABLY SETTLED BETWEEN 5 I.T.A. NO.2506/CHNY/16 THE PARTIES. SINCE THE ASSESSEE AND M/S PRINCE FOU NDATION LTD. AMICABLY SETTLED THE MATTER BETWEEN THEMSELVES ON P AYMENT OF COMPENSATION, IT DOES NOT MEAN THAT THE PAYMENT CAN NOT BE CLAIMED WITHOUT REFERENCE TO THE ARBITRATOR. THERE IS NO M ANDATORY REQUIREMENT FOR REFERRING THE MATTER TO THE ARBITRATOR WHEN BOT H THE PARTIES AMICABLY SETTLED THE ISSUE. 6. THE NEXT CONTENTION OF THE LD. D.R. IS THAT THE PAYMENT WAS MADE ON 30.11.2009 WHICH FALLS IN THE ASSESSMENT YEAR 20 10-11, THEREFORE, THE CLAIM CANNOT BE ALLOWED DURING THE YEAR UNDER DEDUC TION. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN A CLAIM WAS MADE IN THE RETURN OF INCOME AS REVENUE EXPENDITURE IN RESPECT OF PAYMENT OF COMPENSATION AND THE SAME WAS PERTAINING TO ASSESSMENT YEAR 2010 -11, THAT ALONE CANNOT BE A REASON FOR LEVY OF PENALTY, ESPECIALLY, WHEN THE PAYMENT OF COMPENSATION IS NOT IN DISPUTE. WHAT IS DISPUTED I S THE YEAR OF PAYMENT. AN INADVERTENT ERROR IN CLAIMING THE EXPENDITURE AS REVENUE EXPENDITURE FOR THE YEAR UNDER CONSIDERATION CANNOT BE A REASON FOR LEVY OF PENALTY EITHER FOR CONCEALMENT OF INCOME OR INACCURATE PART ICULARS OF INCOME IN VIEW OF THE JUDGMENT OF APEX COURT IN PRICE WATERHO USE COOPERS PVT. LTD. V. CIT (2012) 348 ITR 306. IN VIEW OF THE ABO VE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RI GHTLY DELETED THE PENALTY, HENCE THE SAME IS CONFIRMED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. 6 I.T.A. NO.2506/CHNY/16 ORDER PRONOUNCED IN THE COURT ON 18 TH JULY, 2019 AT CHENNAI. SD/- SD/- ( ! ' ) ( . . . ) (INTURI RAMA RAO) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 6 /DATED, THE 18 TH JULY, 2019. KRI. / -278 98)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 :2 () /CIT(A)-11, CHENNAI-34 4. PRINCIPAL CIT- 3, CHENNAI 5. 8; -2 /DR 6. <( = /GF.