ITO, Ward - 2(2), Kolkata, Kolkata V. M/s. Fairland Development Private Limited, Kolkata

ITA 254/KOL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3125 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2013
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 04-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 16-02-2012
• Court: TRIBUNAL
• Department Lawyers: K N JANA
• Keywords: Business expenditure

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [ () . .. . . .. . , ,, , , ! ' #!' ' #!' ' #!' ' #!', ,, , ] ]] ] [BEFORE HONBLE SRI N.S.SAINI AM & HONBLE SRI M AHAVIR SINGH, JM] !% !% !% !% /ITA NO.254/KOL/2012 #& '(/ ASSESSMENT YEAR : 2007-08 (*+ / APPELLANT ) - - ( -.*+ /RESPONDENT) I.T.O., WARD-2(2) . M/S.FAIRLAND DEVELOPMENT PVT .LTD. KOLKATA -VERSUS- KOLKATA (PAN: AABCF 0094 K) C.O.NO.29/KOL/2012 !% !% !% !% A/O ITA NO.254/KOL/2012 #& '(/ ASSESSMENT YEAR : 2007-08 (*+ / CROSS OBJECTOR ) - - ( -.*+ /RESPONDENT) M/S.FAIRLAND DEVELOPMENT PVT. LTD. . I.T.O., WARD- 2(2), KOLKATA -VERSUS- KOLKATA (PAN:AABCF 0094 K) *+ / 0 / FOR THE ASSESSEE SHRI SUBASH AGARWAL -.*+ / 0 / FOR THE DEPARTMENT SHRI K.N.JANA, SR.DR 1 2 / 3 /DATE OF HEARING : 11.06.2013 4' / 3 /DATE OF PRONOUNCEMENT : 18.06.2013. 5 / ORDER PER SHRI N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE REVENUE AND THE CRO SS OBJECTION FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-I, KOLKATA DATED 30.11.2011. 2. THE APPEAL FILED BY THE REVENUE IS BARRED BY LIM ITATION OF 5 DAYS. THE REVENUE HAS FILED A CONDONATION PETITION AND WE FIND THAT T HE REASON GIVEN FOR DELAY IN FILING THE APPEAL IS A PLAUSIBLE ONE AND HENCE WE CONDONE THE DELAY IN FILING THE APPEAL BY THE REVENUE AND ADMIT THE APPEAL OF THE REVENUE FOR HEARING. 3. THE SOLE ISSUE RAISED BY THE REVENUE IN THIS AP PEAL IS THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.42,96, 000/- INCLUDING WORK IN PROGRESS SHOWN UNDER THE CAPTION :LAND PROCUREMENT AND REGI STRATION. ITA NOS.254/KOL/2012& C.O.NO.29/KOL/ 2012 ITO.WD.2(2).KOL VS M/S.FAIRLAND DEVELOPMENT PVT.LT D. A.YR.2007-08 2 4. THE BRIEF FACTS OF THE CASE ARE THAT THE AO OBS ERVED THAT THE ASSESSEE CLAIMED AN AMOUNT OF RS.64,40,671/- TOWARDS LAND PROCUREMEN T AND REGISTRATION EXPENDITURE AS PER PROFIT AND LOSS ACCOUNT FILED. THE AO FURTHER O BSERVED THAT THE SAID AMOUNT WAS INCLUDED IN THE WORK IN PROGRESS OF THE COMPANY. TH E AO FURTHER OBSERVED THAT THE ASSESSEE HAS PRODUCED ONLY IGR COPIES AS PROOF OF R EGISTRATION IN RESPECT OF LAND PURCHASED SINCE NO FINAL DEED COULD BE OBTAINED FRO M BLRO. OUT OF THE 13 IGRS 11 WERE DRAWN IN THE NAME OF ANWAR ALI MOLLA, ONE IN T HE NAME OF RANU MOLLA AND ONE IN THE NAME OF NOWSER ALI SK INVOLVING AN AMOUNT OF RS.31,60,000/-, RS.5,68,000/- AND RS.5,68,000/- RESPECTIVELY. THE FIRST TWO INDIV IDUALS ARE DIRECTOR OF THE COMPANY. THE AO FURTHER OBSERVED THAT THE ASSESSEE WAS NOT I N POSSESSION OF THE LAND NOR ANY VALID TRANSFER HAD TAKEN PLACE IN FAVOUR OF THEM. A S SUCH AN AMOUNT OF RS.42,96,000/- COMPRISING OF THE ABOVE AMOUNTS IN THE NAME OF ANWA R ALI MOLLA, RANU PARVEEN MOLLA AND NOWSER ALI SK INVOLVING AN AMOUNT OF RS.3 1,60,000/-, RS.5,68,000 AND RS.5,68,000/- RESPECTIVELY ARE DISALLOWED AGAINST T HE HEAD LAND PROCUREMENT AND REGISTRATION AND ADDED TO THE INCOME OF THE ASSESSE E. 4.1. ON APPEAL THE LD. CIT(A) DELETED THE DISALLOWA NCE BY OBSERVING AS UNDER :- 4.3. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT IN THIS REGARD. THERE IS A FORCE IN THE SUBMISSION OF THE APPELLANT THAT, THE ENTIRE PURCHASES HAVE BEEN INCLUDED IN THE WORK-IN-PROGRES S AND CARRIED FORWARD AND NO PART OF IT AHS BEEN CLAIMED AS BUSINESS EXPENDITURE. IN THE CIRCUMSTANCES, WHERE NO CLAIM OF EXPENDITURE HAS BEEN MADE BY THE ASSESSEE IN THE PR OFIT AND LOSS ACCOUNT OR IN THE COMPUTATION OF TOTAL INCOME, THERE CAN BE NO DISALL OWANCE OF ANY EXPENDITURE. SINCE THE APPELLANT HAS ALREADY SHOWN THE PURCHASE AS WOR K-IN-PROGRESS AND THE SOURCE HAS NOT BEEN DOUBTED BY THE A.O., THE ACTION OF THE AO FOR ADDITION IS NOT CORRECT. THUS, THE APPELLANT GETS RELIEF ON THIS ISSUE. 5. THE LD. DR ARGUED AND SUPPORTED THE ORDER OF THE AO. 6. ON THE OTHER HAND, THE LD. AR OF THE ASSESEE SUB MITTED THAT THE ENTIRE EXPENDITURE DEBITED IN THE PROFIT AND LOSS ACCOUNT WAS SHOWN AS WORK-IN-PROGRESS BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT AND HEN CE NO EXPENDITURE IN FACT WAS ACTUALLY CLAIMED BY THE ASSESSEE AND THEREFORE NO D ISALLOWANCE OF EXPENDITURE MADE BY THE AO COULD HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE. ITA NOS.254/KOL/2012& C.O.NO.29/KOL/ 2012 ITO.WD.2(2).KOL VS M/S.FAIRLAND DEVELOPMENT PVT.LT D. A.YR.2007-08 3 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD, WE F IND THAT THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE HAD SHOWN A SUM OF RS.42 ,96,000/- UNDER THE HEAD LAND PROCUREMENT AND REGISTRATION CHARGES IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAD SIMULTANEOUSLY INCLUDED THIS AMOUNT IN THE WORK IN PROGRESS IN THE PROFIT AND LOSS ACCOUNT. THE AO DISALLOWED AND MADE ADDITION OF RS. 42,96,000/- ON THE GROUND THAT THE ASSESSEE WAS NOT IN POSSESSION OF THE LAND NOR ANY VALID TRANSFER HAD TAKEN PLACE IN FAVOUR OF THE ASSESSEE. THE CONTENTION OF THE ASSES SEE IS THAT NO DEDUCTION FOR ANY EXPENDITURE WAS CLAIMED IN THE PROFIT AND LOSS ACCO UNT THEREFORE NO DISALLOWANCE OF EXPENDITURE CAN BE MADE BY THE AO. IT WAS SUBMITTED THAT THE ENTIRE AMOUNT OF EXPENSES WERE DEBITED TO THE WORK IN PROGRESS OF TH E ASSESSEE. THE AR OF THE ASSESSEE IN SUPPORT OF HIS CONTENTION HAS TAKEN US TO PAGE-8 OF THE PAPER BOOK WHEREIN A COPY OF THE PROFIT AND LOSS ACCOUNT FOR THE PERIOD 14.06 .2006 TO 31.03.2007 HAS BEEN FILED FORM WHICH IT IS SEEN THAT THE TOTAL EXPENDITURE CL AIMED BY THE ASSESSEE IS RS.1,01,06,389/- AND THE AMOUNT SHOWN ON THE CREDIT SIDE OF THE PROFIT AND LOSS ACCOUNT CLOSING WORK IN PROGRESS WAS RS.1,01,04,668 /-. THUS IT SHOWS THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION FOR A SUM OF RS.42,36,000/- UNDER THE HEAD LAND PROCUREMENT AND REGISTRATION. AND THEREFORE NO DISALLOWANCE SAME COULD HAVE BEEN MADE BY THE AO WHILE COMPUTING THE INCOME OF T HE ASSESSEE. THEREFORE WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFE RE WITH THE ORDER OF THE LD. CIT(A) WHICH IS CONFIRMED AND THE GROUND OF APPEAL TAKEN B Y THE REVENUE IS DISMISSED 8. IN THE CROSS OBJECTION THE ASSESSEE HAS RAISED T HE GROUND THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 50,000/- UNDER THE HEAD SOFTWARE DEVELOPMENT, RS.32,843/- UNDER THE HEAD FINANCIAL C ONSULTANCY CHARGES AND RS.90,000/- UNDER THE HEAD DIRECTORS REMUNERATION BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE IT ACT. 9. THE BRIEF FACTS OF THE CASE ARE THAT THE AO DISA LLOWED RS.50,000/- ON ACCOUNT OF SOFTWARE DEVELOPMENT, RS.32,843/- ON ACCOUNT OF FIN ANCIAL CONSULTANCY CHARGES AND RS.90,000/- ON ACCOUNT OF DIRECTORS REMUNERATION. T HE DISALLOWANCE WAS MADE BY THE ITA NOS.254/KOL/2012& C.O.NO.29/KOL/ 2012 ITO.WD.2(2).KOL VS M/S.FAIRLAND DEVELOPMENT PVT.LT D. A.YR.2007-08 4 AO ON ACCOUNT OF SOFTWARE DEVELOPMENT EXPENSES ON T HE GROUND THAT THE SAME SHOULD HAVE BEEN CAPITALIZED AS FIXED ASSET. ON APPEAL THE LD. CIT(A) AFTER EXAMINING THE BILL FOR SOFTWARE DEVELOPMENT HELD THAT THE IT WAS PROFE SSIONAL CHARGES AND SINCE NO TDS WAS DEDUCTED THE LD. CIT(A) CONFIRMED THE DISALLOWA NCE U/S 40(A)(IA) OF THE IT ACT. SIMILARLY THE AO DISALLOWED RS.32,843/- UNDER THE H EAD ADMINISTRATIVE EXPENSES AS THE ASSESSEE HAD NOT DEDUCTED TDS FORM SUCH PAYMENT S. THEREFORE THE DISALLOWANCE WAS MADE BY THE AO BY INVOKING THE PROVISIONS OF SE CTION 40(A)(IA) OF THE ACT WHICH WAS CONFIRMED IN APPEAL BY THE LD. CIT(A). SIMILARL Y ADDITION OF RS.90,000/- WAS MADE ON ACCOUNT OF PAYMENT TO THE DIRECTORS AND ACC ORDING TO THE AO TDS WAS REQUIRED TO BE DEDUCTED FROM THIS PAYMENT U/S 194J OF THE ACT WHICH WAS NOT DEDUCTED BY THE ASSESSEE AND HENCE THE DISALLOWANCE WAS MADE U/S 40(A)(IA) OF THE ACT BY THE AO WHICH WAS CONFIRMED IN APPEAL BY THE LD. CIT(A). 10. THE CONTENTION OF THE LD. AR IS THAT SINCE NO E XPENDITURE WAS CLAIMED BY THE ASSESSEE AND THE ENTIRE EXPENDITURE WAS DEBITED IN THE WORK IN PROGRESS IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE THEREFORE NO DISAL LOWANCE OF THE EXPENDITURE CAN BE MADE BY THE AO. THEREFORE IT WAS HIS SUBMISSION THA T THE DISALLOWANCE CONFIRMED BY THE LD. CIT(A) SHOULD BE VACATED. 11. THE LD. DR RELIED ON THE ORDERS OF THE LOWER AU THORITIES. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD, WE F IND THAT FROM PAGE 8 OF THE PAPER BOOK FILED BY THE ASSESSEE BEFORE US WHEREIN PROFIT AND LOSS ACCOUNT FOR THE PERIOD FROM 14.06.2006 TO 31.03.2007 AS FILED THAT THE ENT IRE EXPENDITURE OF RS.1,01,06,389 DURING THE YEAR HAS BEEN SHOWN AS CLOSING WORK IN P ROGRESS AT RS.1,01,04,668/-. THUS IT IS SEEN THAT NO EXPENDITURE HAS BEEN CLAIMED AS DEDUCTION IN THE PROFIT AND LOSS ACCOUNT BY THE ASSESSEE. HENCE THE QUESTION OF MAKI NG ANY DISALLOWANCE OF ANY EXPENDITURE FOR NON DEDUCTION OF TAX AT SOURCE BY I NVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT DOES NOT ARISE. HENCE WE SET ASIDE THE ORDERS OF THE LD.CIT(A) AND ALLOW THE GROUNDS OF CROSS OBJECTION OF THE ASSESSE E. ITA NOS.254/KOL/2012& C.O.NO.29/KOL/ 2012 ITO.WD.2(2).KOL VS M/S.FAIRLAND DEVELOPMENT PVT.LT D. A.YR.2007-08 5 13. IN THE RESULT THE APPEAL OF THE REVENUE IS DI SMISSED AND THE CROSS OBJECTION OF THE ASSESEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 18.06.2013. SD/- SD/- [ .' #!' , ] [ .., ,, , ] [MAHAVIR SINGH ] [N.S.SAINI] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (3 3 3 3) )) ) DATE: 18.06.2013. R.G.(.P.S.) 5 / -##6 76'8- COPY OF THE ORDER FORWARDED TO: 1. M/S.FAIRLAND DEVELOPMENT PVT. LTD., SUITE NO.9A, 47 , PARK STREET, KOLKATA- 700016. 2 I.T.O., WARD-2(2), KOLKATA. 3 . CIT KOLKATA 4. CIT(A)-I, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. .6 -#/ TRUE COPY, 51/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES