Mahendra Shipping Ltd., New Delhi V. ITO, New Delhi

ITA 2754/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65475 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 30-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 06-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANOOP KUMAR SINGH SENIOR
• Assessee Lawyers: V K JAIN
• Keywords: Principle of natural justice; Bonafide belief; Non compliance; Capital expenditure
• Section: 37(1); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMEBR AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.2754/DEL./2012 (ASSESSMENT YEAR : 2008-09) M/S. MAHENDRA SHIPPING LTD., VS. ITO, WARD 6 (1), 302, WORLD TRADE CENTRE, NEW DELHI. BABAR ROAD, NEW DELHI 110 001. (PAN : AAACM3391F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.K. JAIN, CA REVENUE BY : SHRI ANOOP KUMAR SINGH, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM TH E ORDER OF THE CIT (APPEALS)-IX, NEW DELHI DATED 17.02.2012 FOR TH E ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE IS A LIMITED COMPANY. IT WAS LISTE D WITH THE DELHI STOCK EXCHANGE. RETURN WAS FILED ON 22.09.2008. T AXES WERE PAID U/S 115JB. THE ASSESSING OFFICER MADE ADDITIONS OF PRIO R PERIOD EXPENSES AND DISALLOWANCES U/S 40(A)(IA) OF THE INCOME-TAX A CT, 1961. THE APPEAL FILED BY THE ASSESSEE WAS DISMISSED BY THE CIT (A) VIDE ITS ORDER DATED 17.02.2012. NOW, THE ASSESSEE IS BEFORE US BY TAKI NG THE FOLLOWING GROUNDS OF APPEAL :- ITA NO.2754/DEL/2012 2 1) THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX - (APPEALS) -IX, NEW DELHI IS BAD IN LAW, WRONG ON THE FACTS AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE . 2) A.) THE LD CIT - (A) HAS ERRED IN CONFIRMING DISALLOWANCE RS.50,000/- PAID TO DELHI STOCK EXCHAN GE, DURING THE FINANCIAL YEAR 2007-08, STATING IT TO BE RELATED TO EARLIER YEARS. B.) THE SAID PAYMENT WAS MADE BY THE APPELLANT COMPANY TO DELHI STOCK EXCHANGE IN FINANCIAL YEAR 2007-08 AS THE LIABILITY TO MAKE THE PAYMENT WAS CRYSTALISED DURING THE FINANCIAL YEAR 2007-08 AND THEREFORE THE SAME IS ALLOWABLE IN ASSESSMENT YEAR 2008- 09. 3) A.) THE LD. CIT - (A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.60,000/- U/S 40(A)(IA) OF THE IN COME TAX ACT ON SUM PAID TO BHARAT HOTELS LTD., AS PARKI NG CHARGES FOR RESERVED CAR PARKING ON THE GROUNDS THA T THE SAME REPRESENTS A WORK CONTRACT AND TDS U/S 194C SHOULD HAVE BEEN DEDUCTED ON THE AFORESAID PAYMENT WITHOUT APPRECIATING THE FACT THAT PARKING SPACE HA S BEEN ALLOTTED INSIDE OF MAIN GATE ENTRANCE OF WORLD TRAD E CENTRE, BABAR ROAD, NEW DELHI AND THE PAYMENT IS IN THE FORM OF DEEMED RENT FOR SPACE EARMARKED FOR PARKING . B) THE LD CIT - (A) HAS ERRED IN CONFIRMING DISALLOWANCE U/S 40(A)(IA) OF THE ACT, BY TREATING IT AS CONTRACTUAL PAYMENT U/S 194C OF THE ACT WHEN INFACT IT IS DEEMED RENT FOR SPACE EARMARKED FOR PARKING AND COV ERED U/S 1941 OF THE ACT. THE APPELLANT COMPANY WAS NOT LIABLE TO DEDUCT TAX AT SOURCE AS THE PAYMENT MADE WAS LESS THAN RS.120000 P.A. U/S 194I OF THE ACT. C) THE LD. CIT - (A) HAS ERRED IN CONCLUDING THAT THE AMOUNT PAID FOR RESERVED PARKING IS PAYMEN T U/S 194C AND NOT 1941 OF THE ACT, AND TOTALLY IGNORING THE RATIO OF JUDGEMENT LAID DOWN BY THE HON'BLE DELHI H IGH COURT IN THE CASE OF CIT VS ASIAN AIRLINES (2008) 1 75 TAXMAN 177, UNITED AIRLINES VS CIT (2006) 287 ITR 281 AND CIT VS JAPAN AIRLINES CO. LTD (2008) 325 IT R 298 WHEREIN IT HAS BEEN HELD THAT PAYMENT MADE BY A N AIRLINES FOR LANDING CHARGES AND PARKING CHARGES TO ITA NO.2754/DEL/2012 3 AIRPORT AUTHORITY OF INDIA ARE IN THE NATURE OF REN T AND HENCE, ASSESSEE AIRLINE WOULD BE LIABLE TO DEDUCT T AX AT SOURCE UNDER SECTION 194I AND NOT 194C OF THE ACT. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY OR FOREGO ANY OF THE GROUNDS OF APPEAL BEFO RE OR AT THE TIME OF HEARING. 3. GROUND NOS.1 & 4 ARE GENERAL IN NATURE. THESE WE RE ALSO NOT PRESSED DURING THE HEARING, HENCE DISMISSED. 4. IN THE GROUND NO.2(A) & (B), THE ISSUE INVOLVED IS CONFIRMING THE ADDITION OF RS.50,000/- PAID TO THE DELHI STOCK EXC HANGE DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER CO NSIDERATION. 5. DURING THE YEAR, ASSESSEE COMPANY MADE A PAYMENT OF RS.60,000/- TO THE DELHI STOCK EXCHANGE. ASSESSING OFFICER ALL OWED RS.10,000/- AND DISALLOWED THE REMAINING RS.50,000/- TREATING HE SA ME AS NOT RELATED TO THE YEAR UNDER CONSIDERATION. THE CIT (A) HAS CONF IRMED THE ADDITION BY HOLDING AS UNDER :- 4.3 I HAVE CONSIDERED THE FINDINGS RECORDED BY THE LD. AO AS PER THE ASSESSMENT ORDER, THE SUBMISSIONS MAD E BY THE LD. AR AND THE FACTS OF THE CASE ON RECORD. DUR ING THE YEAR THE APPELLANT HAS MADE A PAYMENT OF RS.60,000/ - TO THE DELHI STOCK EXCHANGE (DSE). OUT OF THE SAID AMO UNT, A SUM OF RS.50,000/- WAS TREATED AS PERTAINING TO T HE EARLIER YEARS BY THE AO AND ACCORDINGLY DISALLOWED. ON GOING THROUGH THE DETAILS FURNISHED BY THE APPELLAN T IN A TABULAR FORM AS REPRODUCED IN THE PRECEDING PARA, I T IS SEEN THAT THE SAID AMOUNT OF RS.50,000/- INDEED PER TAINED TO THE EARLIER YEARS. DURING THE PROCEEDINGS BEFORE ME, THE APPELLANT CONTENDED THAT THE PAYMENTS WERE MADE TO THE DSE 'AS AND WHEN ASKED FOR.' THE LD. AR WAS, THEREFORE, REQUIRED TO ESTABLISH THAT THE LIABILITY TO PAY LISTING FEES AND OTHER EXPENSES PERTAINING TO THE E ARLIER YEARS AROSE DURING THE YEAR UNDER CONSIDERATION. IN RESPONSE TO THE ABOVE, THE APPELLANT PRODUCED LETTE R DATED 4.6.2007 RECEIVED FROM THE DSE, DIRECTING IT TO DEP OSIT UPTO DATE LISTING FEES AMOUNTING TO RS.50,000/- AND RS.10,000/- AS FEES FOR REVOCATION OF SUSPENSION OF TRADING OF THE SHARES OF THE APPELLANT COMPANY. IN THE ITA NO.2754/DEL/2012 4 SAID LETTER, THE DSE HAS REFERRED TO THE APPELLANT' S REQUEST FOR THE DELISTING AND HAS ALSO ENCLOSED THE DETAILS OF NON COMPLIANCE FOR THE PERIOD FROM 31.3.2002 TILL 31.3. 2007 AS PER ANNEXURE ATTACHED THERETO. IN VIEW OF THE AB OVE, THE APPELLANT WAS FURTHER REQUIRED TO EXPLAIN AS TO WHEN WAS THE REQUEST FOR DELISTING / RESTORATION MADE. I N RESPONSE THE APPELLANT FILED A COPY OF LETTER DATED 17.2.2002 ADDRESSED TO THE DSE REQUESTING FOR DELIS TING OF SECURITIES. ON GOING THROUGH THE SAID LETTER, IT IS SEEN THAT THE SAME IS NOT A COPY OF THE LETTER FILED WIT H THE DSE BUT A PRINT OUT OF THE SAME SEPARATELY GENERATE D ON COMPUTER. THE COPY OF THE LETTER DOES NOT EVEN CONT AIN THE SIGNATURE OF THE APPELLANT I.E. DIRECTOR OF THE COMPANY. VIDE ORDER SHEET NOTING DATED 15.2.2012, A FINDING WAS RECORDED THAT THE APPELLANT HAS NOT SUB MITTED ANY EVIDENCE THAT THE REQUEST FOR DELISTING WAS MAD E IN THE YEAR 2002. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CLAIM OF THE APPELLANT THAT A REQUEST FOR DELISTING WAS MADE IN THE YEAR 2002, HOWEVER, THE DEMAND FOR THE PAYMENT WAS MADE BY THE DSE IN THE YEAR 2007, IS NO T ACCEPTABLE. THE APPELLANT HAS NOT BEEN ABLE TO ESTA BLISH THAT THE REQUEST WAS ACTUALLY MADE IN THE YEAR 2002 . FURTHER, THE LETTER DATED 4.6.2007 OF THE DSE HAS R EFERRED TO THE NON COMPLIANCE CONTINUING FOR THE PERIOD FRO M 31.3.2002 TILL 31.3.2007 MEANING THEREBY THAT THE L IABILITY TO SUCH PAYMENTS HAD GOT CREATED IN THE RESPECTIVE FINANCIAL YEARS. I, THEREFORE, HAVE NO HESITATION I N HOLDING THAT THE AMOUNT OF RS.50,000/- IN FACT PERTAINED TO THE EARLIER YEARS AND THUS HAS BEEN RIGHTLY DISALLOWED BY THE ID. AO. ACCORDINGLY, GROUND NO. 2 IS REJECTED. 6. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE DET AILS OF EXPENDITURE DISALLOWED IS AS UNDER :- S.NO. PARTICULARS AMOUNT (RS.) 1. PAID TOWARDS FEES FOR REVOCATION OF SUSPENSION OF TRADING OF SHARES OF THE ASSESSEE COMPANY W.E.F. 16/12/2004 ON 7/6/2007 10,000/- 2. PAID TOWARDS THE LISTING FEES UPTO 31/12/2004 RS.10,000/-, FOR 2005 RS.5,000/-, FOR 2006 RS.5,000/- AND 30,000/- ITA NO.2754/DEL/2012 5 PROCESSING FEES OF RS.10,000/- ON 30/8/2007 3. PAID TOWARDS CONDONATION FEES RS.5,000/- AND REINSTATEMENT FEES RS.5,000/- ON 3/12/2007, AS EARLIER SHORT PAID. 10,000/- THE LD. AR PLEADED THAT THE EXPENDITURE IS ALLOWABL E U/S 37(1) OF THE INCOME-TAX ACT, 1961. THESE EXPENSES ARE PAID AS AN D WHEN ASKED FOR. THESE EXPENSES CRYSTALLIZED IN THIS YEAR ONLY. HENC E CANNOT BE SAID PERTAINING TO EARLIER YEARS. THESE EXPENSES ARE NOT CAPITAL EXPENDITURE. THESE WERE ALSO NOT PERSONAL EXPENDITURE. THESE EX PENDITURES WERE INCURRED DURING THE PREVIOUS YEAR. THESE RELATE TO THE BUSINESS CARRIED OUT BY THE ASSESSEE. LD. AR PLEADED THAT THESE EXPENDI TURES WERE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THESE W ERE NOT AGAINST AN OFFENCE OR PROHIBITED LAW. LD. AR ALSO RELIED ON T HE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. MODIPAN LTD . 334 ITR 102 (DELHI). FOR THE PROPOSITION THAT EVEN WHEN MERCAN TILE SYSTEM OF ACCOUNTING FOLLOWED AND EXPENSES SETTLED IN THE PRE SENT YEAR WHEN FULL DETAILS ARE NOT AVAILABLE IN PRIOR YEARS IS ALLOWAB LE EXPENSE. LD. AR ALSO RELIED ON GUJARAT HIGH COURT DECISION IN THE CASE O F SOURASHTRA CEMENT & CHEMICAL LTD. VS. CIT 313 ITR 523 GUJRAT FOR THE PR OPOSITION THAT LIABILITY THOUGH RELATED TO EARLIER YEAR, DEPEND ON MAKING DEMAND AND ACCEPTANCE BY ASSESSEE. SUCH LIABILITY HAS BEEN CLA IMED AND PAID IN THE LATER PREVIOUS YEARS CANNOT BE DISALLOWED AS DEDUCT ION MERELY ON THE BASIS THAT THE ACCOUNTS ARE MAINTAINED ON MERCANTIL E BASIS AND THAT IT RELATES TO A TRANSACTION OF THE PREVIOUS YEAR. IF F OR WANT OF NECESSARY MATERIAL CRYSTALLIZING THE EXPENDITURE IS NOT IN EX ISTENCE IN RESPECT OF WHICH SUCH INCOME OR EXPENSE RELATES, THE MERCANTIL E SYSTEM DOES NOT CALL FOR ADJUSTMENT IN THE BOOKS OF ACCOUNTS ON ESTIMATE BASIS. IT IS ACTUALLY KNOWN LIABILITY, WHICH IS CAN BE CLAIMED. ESTIMATED LIABILITY YET TO BE CRYSTALLIZED, CAN BE SAID AS CONTINGENTLY LIABILITY AND NOT AS ACCRUED ITA NO.2754/DEL/2012 6 LIABILITY. LD. AR ALSO RELIED ON DELHI HIGH COUR T DECISION IN THE CASE OF CIT VS. EXXON MOBIL LUBRICANT P. LTD. 328 ITR 17 (D ELHI) FOR THE PROPOSITION THAT LIABILITY UNDER AGREEMENT ASSIGNED ACCORDING WHEN THE AGREEMENT IN EXECUTED. EXPENSES ARE ALLOWABLE WHEN THEY ARE CRYSTALLIZED. LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 7. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE P AYMENT OF FEES FOR REVOCATION OF SUSPENSION OF TRADING OF SHARES OF RS .10,000/- AND PAYMENT TOWARDS CONDONATION FEES OF RS.5,000/- AND REINSTAT EMENT FEES OF RS.5,000/- WERE ALLOWABLE DURING THE YEAR UNDER CON SIDERATION AS THESE EXPENSES WERE FIRST TIME AROSE AND CRYSTALLIZED DUR ING THIS YEAR. SIMILARLY, THE PROCESSING FEE OF RS.10,000/- ALSO A RISE AND CRYSTALLIZED DURING THE YEAR HENCE PERTAINS TO THE YEAR UNDER CO NSIDERATION. AS FAR AS LISTING FEE FOR PERIOD UPTO 31.12.2004 OF RS.10,000 /- AND LISTING FEE OF RS.5000/- EACH FOR 2005 AND 2006 ARE CONCERNED, WE WOULD LIKE TO SAY THAT THE ASSESSEE HAD MADE AN APPLICATION ON 17.01. 2002 FOR DELISTING OF ITS SECURITIES FROM THE DELHI STOCK EXCHANGE. THE APPLICATION WAS MADE ON 17.01.2002. THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT HE HAS NOT TO MAKE ANY PAYMENT TOWARDS THE LISTING FEES. REVENUE HAS ALSO NOT BROUGHT ON RECORD ANYTHING WHICH COULD SHOW THAT TH E LISTING FEE FOR THESE YEARS WAS DEMANDED IN EARLIER YEARS. IN VIEW OF TH ESE FACTS, WE HOLD THAT THE LISTING FEES PAID FOR PERIOD UPTO 31.12.2004, 2 005 & 2006 AROSE AND CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. IN VIEW OF THESE FACTS, WE HOLD THAT THE TOTAL EXPENDITURE OF RS.50,000/- W AS ALLOWABLE DURING THE YEAR UNDER CONSIDERATION ITSELF AS THESE EXPENS ES CANNOT BE TERMED AS PRIOR PERIOD EXPENSES. THIS GROUND OF APPEAL IS AL LOWED. 8. IN THE GROUND NO.3, THE ISSUE INVOLVED IS CONFIR MING THE DISALLOWANCE OF RS.60,000/- U/S 40(A)(IA) OF THE AC T PAID TO BHARAT HOTELS LIMITED AS PARKING CHARGES FOR RESERVED CAR PARKING . THE REVENUE HAS HELD THAT THIS AMOUNT WAS PAID TOWARDS THE WORK CON TRACT AND THE TDS U/S ITA NO.2754/DEL/2012 7 194C SHOULD HAVE BEEN DEDUCTED ON THE PAYMENTS. TH E ASSESSEE CLAIMS THAT IT WAS A DEEMED RENT FOR SPACE EARMARKED FOR P ARKING ALLOTTED INSIDE OF MAIN GATE ENTRANCE OF WORLD TRADE CENTRE, BABAR ROAD, NEW DELHI. SINCE IT WAS A RENT, THE TDS PROVISION AS PROVIDED IN SECTION 194C OF THE ACT ARE NOT APPLICABLE AS THE PAYMENT WAS NOT CONTR ACTUAL PAYMENT. THE PROVISION OF SECTION 194I IS APPLICABLE. THE THRESH OLD LIMIT FOR DEDUCTING TDS U/S 194I IS RS.1,20,000/- PER ANNUM. THE PROVI SIONS OF SECTION 194I ARE NOT APPLICABLE ON ACCOUNT OF THE THRESHOLD LIMI TED. THEREFORE, THIS DISALLOWANCE DESERVES TO BE DELETED. THE LD. AR AL SO RELIED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASIAN AIRLINES (2008) 175 TAXMAN 177, UNITED AIRLINES V S. CIT 287 ITR 281 AND CIT VS. JAPAN AIRLINES CO. LTD. 325 ITR 2 98. IN THESE CASES, IT HAS BEEN HELD THAT PAYMENT MADE BY AN AIRLINE FO R LANDING CHARGES AND PARKING CHARGES OF AIRPORT AUTHORITY OF INDIA ARE I N THE NATURE OF RENT, HENCE TDS IS DEDUCTIBLE U/S 194I OF THE ACT AND NOT U/S 194C. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE ASSESSEES CLAIM THAT THE AMOUNT PAID OF RS.60,000/- FOR THE CAR PAR KING COMES U/S 194I OF THE INCOME-TAX ACT, 1961 FOR THE APPLICABILITY OF T HE TDS PROVISIONS. HOWEVER, FROM THE FACTS, WE FIND THAT THERE IS NOTH ING ON RECORD WHICH SHOWS THAT THE PARKING SPACE WAS EARMARKED FOR THE ASSESSEE. THE RENT AGREEMENT, IF ANY, HAS NOT BEEN FILED ON THE RECORD AND NO FINDING IN THIS REGARD IS AVAILABLE ON RECORD. THE AMOUNT OF RS.60 ,000/- WAS PAID ON THE INVOICE RAISED BY BHARAT HOTELS LIMITED FOR THE PAR KING CHARGES. THERE IS NOTHING ON RECORD WHICH SHOWS THAT THE PARKING WAS EARMARKED. THE COPY OF THE LETTER FROM BHARAT HOTELS LIMITED DATED 26.04.2007 ALSO DID NOT MENTION ANYTHING ABOUT EARMARKING OF THE PARKIN G SLOT, IT ONLY STATES THAT INSIDE THE MAIN GATE ENTRANCE OF WORLD TRADE C ENTRE. SUCH ARRANGEMENTS CANNOT BE SAID AS A LETTING OUT OF LAN D. IT CAN BE ONLY A ITA NO.2754/DEL/2012 8 CONTRACT BETWEEN THE TWO INDEPENDENT PARTIES FOR AL LOWING VEHICLE TO BE PARKED INSIDE THE PREMISES. THEREFORE, IN OUR CONS IDERED VIEW, THE PROVISIONS OF SECTION 194I ARE NOT APPLICABLE. SUC H PAYMENTS FOR CONTRACTUAL OBLIGATIONS CAN BE COVERED BY THE PROVI SIONS OF SECTION 194C OF THEN INCOME-TAX ACT, 1961. SINCE NO TAX HAS BEE N DEDUCTED ON THE PAYMENT THE PROVISIONS OF SECTION 40(1)(AI) ARE APP LICABLE. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (A) AND W E CONFIRM THE SAME. THIS GROUND IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 21 ST DAY OF SEPTEMBER, 2012. SD/- SD/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 21 ST DAY OF SEPTEMBER, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-IX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT NEW DELHI