HEET BUILDERS PVT LTD., MUM V. ADDL/JT/DY/ACIT/ITO, NATIONA e-ASSESSMENT CENTRE, DELHI

ITA 3082/MUM/2022

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The case involves Heet Builders Pvt. Ltd., which appealed against the disallowance made by the assessing officer under section 40(a)(ia) of the Income Tax Act. The disallowance was initially calculated on the total expenses of Rs.10,18,95,891, amounting to Rs.3,05,68,767. However, the appellant argued that only a portion of these expenses, specifically Rs.35,96,925, was charged to the profit and loss account, and thus, the disallowance should only apply to this amount. The Tribunal agreed with the appellant's position, supported by evidence from the profit and loss account and balance sheet, and reduced the disallowance accordingly.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130178 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: H
• Next Hearing Date: 31-01-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 06-12-2022
• Other Referred Cases: CIT Vs. Health India TPA Services (P) Ltd., Vipin Madanlal Thapar Vs. DCIT, Gera Development (P) Ltd. Vs. Jt.CIT, Goutam Das Judge Vs. ITO, Asst CIT Vs. M/s Vijayaraja & Co., Ilahia Trust Vs. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CHANDRASEKAR SHARMA
• Section: 40(a)(ia); 143(2)

Judgement Text

P a g e | 1 ITA No.3082/Mum/2022 Heet Builder Pvt.Ltd. Vs. ACIT/ITO, Delhi IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No. 3082/Mum/2022 (A.Y.2018-19) Heet Builders Pvt. Ltd. A-602, 6 th Floor, Plot No. 328/10, A Wing, Hubtown Heaven BIT CHS, Bhau Daji Road, Matunga, Mumbai - 400019 Vs. Additional/Joint/Deputy/ Assistant Commissioner of Income Tax/Income Tax Officer National e- Assessment Centre, Delhi स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACV4005F Appellant .. Respondent Appellant by : Anuj Kisnadwala Adv. & Chandrasekar Sharma Respondent by : Chetan M. Kacha Date of Hearing 01.02.2023 Date of Pronouncement 10.02.2023 आदेश / O R D E R Per Amarjit Singh (AM): The solitary ground of appeal of the assesse is directed against the order of CIT(A) in confirming the disallowance made by the assessing officer u/s 40(a)(ia) of the Act to the amount of Rs.3,05,68,765/- (30% of Rs.10,18,95,891/-) 2. The fact in brief is that return of income declaring total losses at Rs.1,99,52,172/- was filed on 29.10.2018. The case was subject to scrutiny assessment and notice u/s 143(2) was issued on 22.09.2019. During the course of assessment the AO noticed that assesse has deducted tax on interest amounting to Rs.89,42,956/- and on P a g e | 2 ITA No.3082/Mum/2022 Heet Builder Pvt.Ltd. Vs. ACIT/ITO, Delhi profession of Rs.12,46,633/- which was not deposited before filing of return of income and the same has been disclosed in tax audit report. On query the assesse explain that it is engaged in the business of property development. The assesse explain that almost whole of the cost about 96.47% to the amount of Rs.9,82,98,966/- has been capitalised as WIP and only being 3.53% i.e Rs.35,96,925/- has been charged to profit and loss account, therefore, disallowance u/s 40(a)(ia) should be restricted to 30% of the expenditure debited in the profit and loss account. However, the A.O has not agreed with the submission of the assesse and added 30% of the total expenses of Rs.10,18,95,891/- which come to Rs.3,05,68,767/- as disallowance u/s 40(a)(ia) of the Act. 3. Aggrieved, the assesse filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assesse. 4. During the course of appellate proceedings before us, the ld. Counsel contended that during the course of assessment and appellate proceedings the assesse has explained that it has not claimed the whole expenses in the profit and loss account, therefore, the disallowance u/s 40(a)(ia) can be made only to the extent of 30% of the expenses debited in the profit and loss account. The ld. Counsel has also filed paper book comprising copies of balance sheet and profit and loss account filed before the A.O and CIT(A) in support of its claim that expenditure were not debited to the profit and loss account. In support of his claim the ld. Counsel has placed reliance in the following judicial pronouncements: “1. Hon’ble Bombay High Court in the case of CIT Vs. Health India TPA Services (P) Ltd. (99 taxmann.com 82) 2. In the case of Vipin Madanlal Thapar Vs. DCIT in ITA No. 472/Mum/2022 dated 30.11.2022. 3. In the case of Gera Development (P) Ltd. Vs. Jt.CIT (61 taxmann.com 8 (Pune – Trib) 4. In the case of Goutam Das Judge Vs. ITO (88 taxmann.com 755 (kol Trib) P a g e | 3 ITA No.3082/Mum/2022 Heet Builder Pvt.Ltd. Vs. ACIT/ITO, Delhi 5. In the case of Asst CIT Vs. M/s Vijayaraja & Co. in ITA No. 69/Mds/2013 dated 11.06.2013” 5. On the other hand, the ld. D.R supported the order of lower authorities and referred the following judicial pronouncements: “1. Hon’ble Supreme Court in the case of Ilahia Trust Vs. CIT (2022) 145 taxmann.com 582 (SC) 2. Hon’ble High Court in the case of Ilahia Trust Vs. CIT (2022) 134 taxmann.com 346 (Kerala)” 6. Heard both the sides and perused the material on record. Without reiterating the facts as elaborated above the assessing officer has disallowed 30% of the full expenses of Rs.10,18,95,891/- which comes to Rs.3,05,68,767/- u/s 40(a)(ia) of the Act. During the course assessment proceedings before the assessing officer and appellate proceedings before the ld. CIT(A) the assesse has substantiated with relevant evidences i.e copy of profit and loss account and balance sheet as placed in the paper book that it had only debited expenditure to the amount of RS.35,96,925/- to the profit and loss account. Therefore, disallowance u/s 40(a)(ia) of the Act @ 30% comes to Rs.10,79,078/- only. However, it is observed that neither the assessing officer nor the CIT(A) has contrary prove with any relevant material that disallowance in the case of the assesse is required to be made at Rs.305,68,767/-. After perusal of the material on record it is undisputed fact that assessee has only debited expenditure to the extent of Rs.35,96,925/- in the P. & L. A/c. In this regard we have perused the decision of Hon’ble Bombay High Court in the case of Health India TPA Services Pvt. Ltd. as referred above, wherein held that since assesse had not claimed any expenditure while computing its income chargeable to tax, as a consequence there could be no occasion to disallow such expenditure u/s 40(a)(ia) of the Act. Similarly in the decision of the Tribunal as referred supra wherein the similar view has been taken that Sec. 40(a)(ia) can be invoked to disallow an expenditure which has been P a g e | 4 ITA No.3082/Mum/2022 Heet Builder Pvt.Ltd. Vs. ACIT/ITO, Delhi claimed as a deduction in computing the income chargeable under the head profit and gain of business or profession. We have also perused the two decision referred by the ld. D.R in the case of Ilahia Trust Vs. CIT of Hon’ble High Court of Kerala, we find that fact of the cases are distinguishable from the facts of the case of the assesse as in that case the assesse failed to prove that provision of Sec. 40(a)(ia) had no application on the payment made and claimed as expenditure whereas in the case of the assesse it has been proved with relevant material as discussed above i.e copy of profit and loss account and balance sheet, return of income that it has not claimed the total expenditure as a deduction in the profit and loss account. In the light of the above facts and finding we consider that decision of ld. CIT(A) in sustaining the disallowance made u/s 40(a)(ia) by the A.O at Rs.305,68,767/- is not justified, therefore, we direct the assessing officer to restrict the disallowance u/s 40(a)(ia) to the extent of 30% expenditure debited to the profit and loss account i.e Rs.35,96,925/- which come to Rs.10,79,078/-, therefore, appeal of the assesse is partly allowed. 6. In the result, the appeal of the assessse is partly allowed. Order pronounced in the open court on 10.02.2023 Sd/- Sd/- (Aby T Varkey) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 10.02.2023 Rohit: PS P a g e | 5 ITA No.3082/Mum/2022 Heet Builder Pvt.Ltd. Vs. ACIT/ITO, Delhi आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.