Ashiana Landcraft Realty Pvt. Ltd., Kolkata V. PCIT-3, Kolkata

ITA 29/KOL/2022

AI Insights

The case involves Ashiana Landcraft Realty Pvt. Limited appealing against the order of the Principal Commissioner of Income Tax-3, Kolkata, which was passed under section 263 of the Income Tax Act, 1961. The dispute centered on the classification of an interest payment of Rs. 47,50,000, claimed as expenditure due to delayed payment of external development charges (EDC) to the Director of Town & Country Planning, Haryana. The Principal Commissioner viewed this expenditure as penal, thus erroneous and prejudicial to the interest of revenue, leading to the appeal. The Tribunal, however, disagreed with this interpretation, viewing the payment as compensatory and not a penalty, thereby allowing the appeal and quashing the 263 order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129068 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-08-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 13-01-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 37; 263

Judgement Text

ITA No. 29/KOL/2022 Assessment Year : 2015-2016 Ashiana Landcraft Realty Pvt. Limited 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH, KOLKATA Before Shri Rajpal Yadav, Vice-President & Shri Rajesh Kumar, Accountant Member I.T.A. No. 29/KOL/2022 Assessment Year: 2015-2016 Ashiana Landcraft Realty Pvt. Limited,.......Appellant 5F, Everest, 46/C, Chowringhee Road, Shakespeare Sarani, Kolkata-700071 [PAN: AADCV9268K] -Vs.- Principal Commissioner of Income Tax-3,..Respondent Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 Appearances by: Shri Sudip Sen, Staff, appeared on behalf of the assesseee Shri S. Datta, CIT (D.R), appeared on behalf of the Revenue Date of concluding the hearing : August 23, 2023 Date of pronouncing the order : August 24, 2023 O R D E R Per Shri Rajpal Yadav, Vice-President (KZ):- The present appeal is directed at the instance of assesee against the order of ld. Principal Commissioner of Income Tax-3, Kolkata dated 20 th February, 2020 ITA No. 29/KOL/2022 Assessment Year : 2015-2016 Ashiana Landcraft Realty Pvt. Limited 2 passed under section 263 of the Income Tax Act, 1961 in A.Y. 2015-16. 2. In response to the notice of hearing, Shri Ashish Gupta, ld. C.A. has filed an application for adjournment contending therein that the assessee is under Corporate Insolvency Resolution Process (CIRP) and National Company Law Tribunal (NCLT), Kolkata Bench has approved the Resolution Process vide order dated 11 th August, 2023. Apart from the above fact, we find that the impugned order is not sustainable. Therefore, we rejected the prayer for adjournment and heard the case with the assistance of ld. CIT(DR). 3. A perusal of the impugned order would reveal that ld. Pr. Commissioner has treated the assessment order as erroneous and prejudicial to the interest of revenue on the ground that the assessee had entered into an agreement with Director of Town & Country Planning Haryana whereby it was supposed to make the payments of external development charges (EDC). Such charges were not deposited with the Town & Country Planning within the due date stipulated in the agreement but rather payment was delayed. On such delayed payment, an interest of Rs.47,50,000/- has been claimed as expenditure. In the opinion of ld. Pr. CIT, this expenditure ought to have been disallowed to the ITA No. 29/KOL/2022 Assessment Year : 2015-2016 Ashiana Landcraft Realty Pvt. Limited 3 assessee by the ld. Assessing Officer on the ground that it is penal in nature. 4. On due consideration of the facts and circumstances, we are of the view that Explanation appended to Section 37 of the Income Tax Act contemplates that if any expenditure is being incurred by an assessee on an item, which is prohibited by law, then, such expenditure will not be allowed as a deduction to the assessee. The payment herein was not for infringement of any law. Thus according to us, it is a compensatory payment, which does not fall in the category of any penalty. The ld. Pr. CIT has misconstrued the nature of this interest payment as a penalty and termed the assessment order as erroneous, which has caused prejudice to the interest of revenue by not charging of tax on this amount. Since we have held that it is not in the nature of penalty, rather a compensatory in nature, therefore, the deduction of this amount deserves to be allowed to the assessee and the ld. Assessing Officer has allowed it. The ld. Assessing Officer has not committed any error and his order cannot be termed as erroneous, which has caused prejudice to the interest of revenue. Thus we allow this appeal of the assessee and quash the 263 order impugned herein. ITA No. 29/KOL/2022 Assessment Year : 2015-2016 Ashiana Landcraft Realty Pvt. Limited 4 5. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on August 24, 2023. Sd/- Sd/- (Rajesh Kumar) (Rajpal Yadav) Accountant Member Vice-President(KZ) Kolkata, the 24 th day of August, 2023 Copies to : (1) Ashiana Landcraf t Realty Pvt. Limited, 5F, Everest, 46/C, Chowringhee Road, Shakespeare Sarani, Kolkata-700071 (2) Principal Commissioner of Income Tax-3, Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata-700069 (3) Commissioner of Income Tax , (4) The Departmental Representative (5) Guard File TRUE COPY By order Assistant Registrar Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.