HPL Infrastructure P.Ltd, Delhi V. ITO, Ward-11(4), New Delhi

ITA 2703/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4289 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 18-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST IMPUGNED DATED PASSED
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

- INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D+SMC: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO.:-2703/DEL/2018 ASSESSMENT YEAR: 2013-14 O R D E R PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 8.1.2018, PASSED BY LD. CIT (APPEALS) 22 NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 2013-14. 2. IN VARIOUS GROUNDS OF APPEAL ASSESSEE HAS CHALLENGED DISALLOWANCE OF RS. 7,79,328 OUT OF EXPENSES INCURRED ON SUPPORT HPL INFRASTRUCTURE P. LTD. 311, MAMRAM EAST PLAZA, PLOT NO. 192, 3 RD FLOOR, MAYUR VIHAR, PHASE-III, DELHI 110 096 VS. ITO, WARD - 11(4) DELHI. PAN AACCH3016N (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI AMOL SINHA, ADVOCATE, SHRI VIKAS GUPTA, CA, SHRI ASHWANI KUMAR, ADVOCATE DEPARTMENT B Y : SHRI KOUSHLENDRA TIWARI, SR.DR DATE OF HEARING 13/08 /201 8 DATE OF PRONOUNCEMENT 29 / 10 /2018 2 SERVICE. THE FACTS IN BRIEF ARE THAT ASSESSEE COMPANY HAS PAID SUPPORT SERVICES EXPENSES TO M/S. GEOWORKS REALTY PVT. LTD. FOR SUMS AMOUNTING TO RS. 7,79,328/-. LD. AO REQUIRED THE ASSESSEE TO FURNISH THE DETAILS / NATURE OF SERVICES PROVIDED BY THE SAID COMPANY AND ALSO TO JUSTIFY THE SAID PAYMENT IN RESPECT OF CARRYING OUT THE BUSINESS ACTIVITIES. IN RESPONSE, THE ASSESSEE SUBMITTED THAT IT HAD UTILIZED VARIOUS SERVICES OF M/S. GEOWORKS REALTY PVT. LTD. LIKE INFRASTRUCTURE AND SUPPORT SERVICES INCLUDING PART OF OFFICE SPACE, RECEPTION, PRINTING, PHONE EXPENSES, DOCUMENTATION WORK AND OTHER MISC. EXPENSES. HOWEVER, THE LD. AO NOTED THAT UNDER FIXED ASSETS SCHEDULE, M/S. GRPL HAS ASSETS ONLY FOR SUM OF RS. 6,86,953/- OUT OF WHICH THE VALUE OF CAR ALONE WAS RS. 4,45,000/- AND BALANCE FOR FURNITURE, COMPUTER AND EQUIPMENT. THUS, THE SAID COMPANY WAS NOT MAINTAINING SUFFICIENT INFRASTRUCTURE TO PROVIDE SUPPORT SERVICES TO THE ASSESSEE COMPANY. HE HAS ALSO NOTED DOWN THE FOLLOWING FACTS BEFORE DISALLOWING THE SAID EXPENDITURE CLAIMED:- I. ON PERUSAL OF BALANCE SHEET OF M/S GEOWORK REALTY PVT. LTD (GRPL), IT IS SEEN THAT UNDER FIXED ASSET SCHEDULE, COMPANY IS HAVING ASSETS FOR RS. 6,86,953/- AND OUT OF THESE VALUE OF CAR IS RS. 4,45,102/-, FURNITURE FOR RS. 13,500/-, COMPUTER FOR RS. 1,32,1601-, OFFICE EQUIPMENT FOR RS. 95,6911-.THEREFORE; THE COMPANY IS NOT MAINTAINING SUFFICIENT INFRASTRUCTURE TO PROVIDE THE SUPPORT SERVICE TO THE ASSESSEE COMPANY. II. M/S GRPL IS NOT MAINTAINING ANY OFFICE OF ITS OWN, THEREFORE, IT IS BEYOND BELIEF THAT THIS COMPANY CAN PROVIDE OFFICE SPACE AND RECEPTION SERVICE TO AS MANY AS FIVE COMPANIES, WHICH ARE RELATED TO THE DIRECTOR OF GRPL AND HIS FAMILY MEMBERS. III. THE ASSESSEE COMPANY ITS SELF MAINTAINING CAR WORTH RS. 65,04,6301- AND COMPUTER LAPTOP FOR RS. 24,0001-. THEREFORE, IT IS 3 BEYOND BELIEF THAT THE ASSESSEE REQUIRES CAR AND COMPUTER SERVICES FROM MIS GRPL. IV. ON PERUSAL PROFIT AND LOSS A/C IT IS SEEN THAT ASSESSEE COMPANY IS MAINTAINING ITS OWN EMPLOYEE BASE AND UNDER THE HEAD OTHER EXPENSES, ASSESSEE COMPANY HAS DEBITED TELEPHONE EXPENSE FOR RS. 32,5811-, PRINTING AND STATIONARY FOR RS. 7903/-, MISC. GENERAL EXPENSES FOR RS. 17,309/-. THEREFORE, IT IS BEYOND BELIEF THAT ASSESSEE COMPANY HAS AVAILED SUPPORT SERVICES FROM MIS GRPL. V. THE ASSESSEE COMPANY HAS PROVIDED BIFURCATION OF REVENUE RECEIVED DURING THE YEAR AND THE DETAILS IS AS UNDER.- INTEREST INCOME RS 7,83,065/- AMOUNT FORFEITED RS. 30,00,000/- OTHER RS. 45,091/- ON PERUSAL OF ABOVE RECEIPTS, IT IS OBSERVED THAT FOR THE ABOVE ACTIVITIES NO PARTICULAR SUPPORT SERVICE IS REQUIRED . AFTER MAKING AFORESAID OBSERVATIONS, HE HAS DISALLOWED THE ENTIRE CLAIM OF THE ASSESSEE. 3. BEFORE THE LD. CIT (A) THE ASSESSEE PLACED THE ENTIRE MATERIAL AND FACTS ON RECORD AND POINTED OUT THAT M/S. GRPL HAS TAKEN PREMISES ON LEASE FROM ANOTHER COMPANY, M/S. NCPL DEVELOPERS PVT. LTD. TO WHOM M/S. GRPL IS PAYING RENT AND THERE IS A SEPARATE AGREEMENT FOR MAINTENANCE WITH OTHER COMPANY, M/S. MATRIX INFOSOT PVT. LTD. THE GRPL HAS RAISED INVOICES AND ASSESSEE IS UTILIZING VARIOUS SERVICES AS INCORPORATED IN THE ASSESSMENT ORDER AND TDS HAS ALSO BEEN DEDUCTED ON SUCH PAYMENT. THEREFORE, IT CANNOT BE HELD THAT EXPENDITURE IS NOT GENUINE. 4 4. LD. CIT (A) HELD THAT M/S. GRPL IS A GROUP CONCERN AND LOOKING TO THE INFRASTRUCTURE IT WAS NOT IN A POSITION TO PROVIDE SERVICES TO THE ASSESSEE COMPANY. GRPL HAS SHOWN PROFIT OF RS. 12,62,910/- WHICH HAS BEEN SET OFF FROM BROUGHT FORWARD LOSSES RESULTING INTO NIL INCOME AND THUS, IT APPEARS THAT PAYMENTS TO GRPL HAS BEEN MADE ONLY TO REDUCE THE TAXABLE INCOME OF THE ASSESSEE COMPANY. FURTHER ASSESSEE HAS NOT SUBMITTED ANY AGREEMENT. ACCORDINGLY, HE CONFIRMED THE DISALLOWANCE MADE BY THE AO. 5. AFTER CONSIDERING THE RIVAL SUBMISSION AND ON PERUSAL OF THE IMPUGNED ORDER AS WELL AS MATERIAL PREFERRED TO BEFORE US WE FIND THAT M/S. GEOWORKS REALTY PVT. LTD. WAS GIVEN WORK ORDER BY THE ASSESSEE COMPANY FOR SUPPORT INFRASTRUCTURE SERVICES ON THE FOLLOWING TERMS AND CONDITIONS: - S.NO. TERMS & CONDITIONS OF THE WORK ORDER 1 UTILISING GRPL OFFICE PREMISES, RECEPTION, FURNITURE FOR THEIR DAY TO DAY WORK ACTIVITIES 2 USING EPABX & TELEPHONE SERVICES, FAX, ELECTRICITY COST ON DAILY BASIS. 3 USING GRPL COMPUTERS, PRINTER, SOFTWARE, INTERNET, ANTI - VIRUS SUPPORT & AMC COST. 4 US E OF PHOTOCOPIER FOR PHOTOCOPY OF DOCUMENTS, OFFICE STATIONERY FOR THEIR DAY TO DAY WORK. 5 DOCUMENTS WRITING AND SUPPORT SERVICES WERE ALSO BEING RENDERED BY GRPL. 6 RENDERING STAFF SUPPORT SERVICES OF RECEPTIONIST, ACCOUNTS, HR, MARKETING AND FIELD EXECUTIVE. 5 7 IT IS ALSO INCLUDES DAY TO DAY TEA, SNACKS AND OTHER. MISC. EXPENSES BORNE BY GRPL 8. FEE:RS: 60,000/ - + SERVICE TAX AS APPLICABLE. 9 CONFIDENTIALITY: BOTH THE PARTIES ARE AGREED THAT THEY WILL NOT DISCLOSE ANY OF THE TERMS .AND CONDITION OF THIS WORK ORDER TO THE OTHER PARTY OR ITS REPRESENTATIVES OR AFFILIATES WITHOUT THE WRITTEN CONSENT OF M/S HPL INFRASTRUCTURE PVT. LTD 10 RESOLUTION OF DISPUTES: IN CASE OF ANY CONFLICT, T ERMS& CONDITIONS OF WORK UNDER THE JURISDICTION WILOL BE HELD IN DELHI OFFICE AND DECISION OF AUTHORIZED SIGNATORY WILL BE BINDING. 5.1 IN PURSUANCE OF SAID WORK ORDER, M/S. GEOWORKS REALTY PVT. LTD. HAS RAISED INVOICES, AGAINST WHICH ASSESSEE HAS MADE PAYMENT AFTER DEDUCTING THE TDS. GPRL WAS MAINTAINING OFFICE SPACE OF 5150 SQ FT AT SECTOR 9 NOIDA AND WAS PAYING RENT OF RS. 1,50,000/- PLUS SERVICE CHARGES ON A MONTHLY BASIS BASED ON LEASE DEED AGREEMENT WITH NCPL WEB TOWER, NOIDA. APART FROM THAT, THERE WAS A SEPARATE AGREEMENT OF M/S. GRPL WITH M/S. MATRIX INFOSOFT PVT. LTD. FOR MAINTENANCE. BOTH AUTHORITIES BELOW HAVE DISALLOWED THE EXPENSES ON THE GROUND THAT, FIRSTLY , M/S. GRPL WAS NOT IN A POSITION TO PROVIDE SUCH SERVICES LOOKING TO ITS INFRASTRUCTURE; AND SECONDLY , IT WAS A MAKE BELIEVE ARRANGEMENT FROM A SISTER CONCERN TO REDUCE THE TAX LIABILITY OF THE ASSESSEE, AS M/S. GRPLS PROFITS HAVE BEEN SET OFF FROM BROUGHT FORWARD LOSSES. NOWHERE HAS IT BEEN BROUGHT ON RECORD THAT M/S. HPL INFRASTRUCTURE P. LTD., I.E., ASSESSEE, DURING THAT PERIOD HAD ITS OWN OFFICE OR INFRASTRUCTURE TO CARRY ON ITS BUSINESS. ON THE PERUSAL 6 OF PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY IT IS SEEN THAT THE ASSESSEE DEBITED FOLLOWING EXPENSES:- EMPLOYEES COST: RS. 7,57,100/- FINANCE COST: RS. 2,61,081/- DEPRECIATION AND AMORTIZED EXPENSES: RS.12,24,051/-; AND OTHER EXPENSES: RS.13,63,948/-. 5.2 OUT OF THE SAID AMOUNT, RS. 7,79,328/- HAS BEEN PAID FOR SUPPORT SERVICES AND INFRASTRUCTURE CHARGES. THUS, THE MAJOR EXPENSES RELATE TO THESE SUPPORT SERVICES CHARGES FROM WHERE ASSESSEE WAS RUNNING ITS OFFICE. IF THE SERVICE HAS BEEN RENDERED AS PER THE WORK ORDER AND ASSESSEE HAS INCURRED THE EXPENDITURE IN THE COURSE OF ITS BUSINESS, THEN SUCH AN EXPENDITURE CANNOT BE DISALLOWED SIMPLY ON THE GROUND THAT PAYMENT HAS BEEN MADE TO A SISTER CONCERN OR THERE WAS NO NECESSITY FOR INCURRING SUCH EXPENDITURE OR IT DOES NOT HAVE MUCH INFRASTRUCTURE IN THE FORM OF FIXED ASSETS. ONCE IT HAS BEEN BROUGHT ON RECORD THAT M/S. GRPL HAS TAKEN A LEASE ON RENT AND ALSO MAINTAINING THE OFFICE, WHO IN TURN IS PROVIDING SUCH OFFICE SPACE AND OTHER INFRASTRUCTURE FACILITIES TO THE ASSESSEE, THEN IT CANNOT BE HELD THAT IT IS A MAKE BELIEVE ARRANGEMENT, UNLESS ANY CONTRARY MATERIAL IS BROUGHT ON RECORD OR ANY INQUIRY HAS BEEN DONE FROM M/S. GRPL. THUS, SUCH EXPENDITURE CANNOT BE DISALLOWED. ACCORDINGLY, THE ADDITION OF RS.7,79,328/- IS DELETED. 6. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER, 2018. SD/- SD/- (L.P. SAHU) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29/10/2018 7 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI