JCIT (OSD), Noida V. M/s. ATS Infrastructure Pvt. Ltd., Noida

ITA 3251/DEL/2016

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2747 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 02-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Business expenditure
• Section: 37(1); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 3251/DEL/2016 : ASSTT. YEAR : 2011-12 JCIT(OSD), CENTRAL CIRCLE, NOIDA VS M/S ATS INFRASTRUCTURE LTD., K-19, SECTOR-19, NOIDA (APPELLANT) (RESPONDENT) PAN NO. AADCA0609B ASSESSEE BY : SH. VED JAIN, ADV. REVENUE BY : MS. SUNITA SINGH, CIT DR DATE OF HEARING: 14.01.2021 DATE OF PRONOUNCEMENT: 05.03.2021 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDER OF THE LD. CIT(A), KANPUR DATED 17.03.201 6. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DELETING THE ADDITION OF RS.12,44,02,301/- ON ACCOUNT OF DISALLOWANCE OF INTEREST PAID TO M/S GNIDA AS THE GROUNDS ON THE BASIS OF WHICH THE AO HAS MADE THE ADDITION HAVE NOT BEEN ADJUDICATED UPON BY THE LD. CIT(A). THE LD. CIT(A) HAS ADJUDICATED THIS ISSUE ONLY ON THE GROUND THAT SINC E THE INTEREST PAYMENT IS NOT FOR VIOLATION OF LAW OR FOR THE COMMISSION OF AN ACT PURPOSE OF WHICH IS AN OFFENCE AS CONTEMPLATED IN EXPLANATION 1 OF SECTION 37(1) OF THE IT ACT 1961. ITA NO. 3251/DEL/2016 ATS INFRASTRUCTURE PVT. LTD. 2 2. THAT THE LD. CIT(A) DID NOT APPRECIATE THE FACTS AND MATERIAL ON RECORD. 3. BRIEF FACTS OF THE CASE ARE THAT, THE AO DISALLO WED THE PENAL INTEREST PAID BY THE ASSESSEE ON ACCOUNT OF DEFAULT IN PAYMENT OF INSTALLMENTS TO GNOIDA. THE AO DISALLOWED THE AMOUNT OF THE INTEREST ON THREE GROUNDS. A. INTEREST WAS NOT ALLOWABLE AS IT WAS NOT ON BORROWE D FUND. B. AS PER THE AGREEMENT THERE WAS NO REQUIREMENT TO PA Y INTEREST. C. NO INTEREST PAYMENT WAS ALLOWABLE ON ACQUIRING A CA PITAL ASSET I.E. THE LEASE RIGHTS OF THE LAND. 4. AGGRIEVED THE ASSESSEE WENT INTO THE APPEAL BEFO RE THE LD. CIT (A). THE ASSESSEE TOOK UP THE FOLLOWING GROUNDS AT POINT NO. 9, 10, 11 AND 12 OF THE GROUNDS FILED: 9. BECAUSE THE AO HAS ERRONEOUSLY HELD THAT THE IN TEREST PAID TO GNIDA IS NOT ALLOWABLE SINCE THE INSTALLMENTS WERE NOT PAID WITHIN THE STIPULATED TIME AND INTEREST IS IN THE NATURE O F PENAL INTEREST. 10. BECAUSE THE AO COULD NOT APPRECIATE THAT THE IN TEREST AS PER THE RESCHEDULED PAYMENT PLAN APPROVED BY GNIDA IS NOTHI NG BUT A NECESSARY BUSINESS EXPENDITURE AND THE SAME IS FULL Y ALLOWABLE. 11. BECAUSE THE AO ERRONEOUSLY HELD THAT THE INTERE ST PAYMENT FOR ACQUIRING THE LEASEHOLD RIGHTS OF THE LAND IS CAPIT AL ASSETS AND NO PAYMENT IS ALLOWABLE ON CAPITAL ASSETS AS PER THE I NCOME TAX ACT, 1961. 12. BECAUSE THE AO DID NOT APPRECIATE THE FACTS THA T THE LEASEHOLD RIGHTS IN LAND IS STOCK-IN-TRADE IN THE HAND OF ASS ESSEE WHICH IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. ITA NO. 3251/DEL/2016 ATS INFRASTRUCTURE PVT. LTD. 3 5. THE LD. CIT (A) DELETED THE ADDITION HOLDING THA T THE PAYMENT OF INTEREST IS NOT AN OFFENCE AS CONTEMPLAT ED AS PER THE EXPLANATION TO SECTION 37(1). WHILE DELETING TH E ADDITION, THE LD. CIT (A) HELD AS UNDER: I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND WRITTEN SUBMISSIONS FILED BY THE ASSESSEE. I FIND FORCE IN THE SUBMISSIONS AND ARGUMENT OF THE LD. AR. IT MAY BE SEEN FROM THE FACTS OF THE CASE THAT THE APPELLANT COULD NOT PAY THE FULL VALU E OF INSTALLMENTS TO GNIDA AND SUBSEQUENTLY THE AUTHORITY ALLOWED HIM TO PAY THE INSTALLMENTS BUT WITH SOME INTEREST. THESE FACTS SH OW THAT SUBSEQUENT PAYMENT OF INTEREST IS NOT FOR THE INFRI NGEMENT OF LAW BUT IT IS ONLY COMPENSATORY IN NATURE. RELIANCE IS ALSO PLACED ON THE FOLLOWING CASE LAWS: CIT VS DHAMPUR SUGAR MILLS LTD. (2005) 274 ITR 34 ( ALL.) CIT VS KANPUR TEXTILES LTD. (2005) 143 TAXMAN 274 ( ALL.) CIT VS SWADESHI MINING & MFG. CO. LTD. (2005) 147 T AXMAN 614 (ALL.) SINCE, IT IS NOT FOR THE VIOLATION OF LAW OR FOR TH E COMMISSION OF AN ACT PURPOSE OF WHICH IS AN OFFENCE AS CONTEMPLATED EXPLANATION 1 TO 37(1), THEREFORE, INTEREST EXPENSES CLAIMED BY THE APPELLANT CANNOT BE DISALLOWED ON THIS GROUND. HENCE, THE ADDITION M ADE BY THE AO IS HEREBY DELETED. 6. HAVING GONE THROUGH THE RECORD, IT IS APPARENT T HAT THE LD. CIT (A) HAS NOT ADJUDICATED ON THE GROUND NOS. 9 TO 12 IN THE APPEAL FILED BEFORE HIM FOR WHICH THE REVENUE FILED APPEAL BEFORE US. THE MAIN CONTENTION OF THE REVENUE IS TH AT THE ADDITION NEEDS TO BE EXAMINED BROADLY IN THE LIGHT OF ALLOWABILITY OF THE INTEREST IN ACQUIRING THE LEASE RIGHTS ON THE LAND BUT NOT NARROWLY ON THE ISSUE, WHETHER SUCH IN TEREST IS ITA NO. 3251/DEL/2016 ATS INFRASTRUCTURE PVT. LTD. 4 PENAL IN NATURE OR NOT. SINCE, THE LD. CIT (A) HAS NOT ADJUDICATED ON THE CORE OF THE ISSUE, WE HOLD THAT THE INTEREST OF JUSTICE WOULD BE WELL SERVED BY REMANDING THE MA TTER TO THE FILE OF THE LD. CIT (A) TO ADJUDICATE ON THE GROUND S UN- ADJUDICATED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 05/03/2021. SD/- SD/- (AMIT SHUKLA) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACCOUN TANT MEMBER DATED: 05/03/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR