ACIT, New Delhi V. M/s. Kajaria Ceramics Ltd., New Delhi

ITA 3379/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4455 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 02-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMPOORNANAND
• Assessee Lawyers: MUKUL BAGLA
• Keywords: Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. K. N. CHARY , JM ITA NO. 3379/DEL/2014 : ASSTT. YEAR : 2010 - 11 ACIT, CIRCLE - 5(1), NEW DELHI VS KAJARIA CERAMIC S LTD., J - 1/B - 1 (EXTENSION), MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI - 110014 (APPELLANT) (RESPONDENT) PAN NO. A A BCK1613R ASSESSEE BY : SH. MUKUL BAGLA, CA REVENUE BY : SH. SAMPOORNANAND, SR. DR DATE OF HEARING : 27 .09 .201 7 DATE OF PRONOUNCEMENT : 27 . 0 9 .201 7 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 18.03.2014 OF LD. CIT(A) - VIII , NEW DELHI . 2. THE ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL R EADS AS UNDER: 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,33,32,000/ - OUT OF INTEREST PAID BY THE ASSESSEE ON EXCESS SECURITY DEPOSIT IN TERMS OF SECTION 40A(2)(B) OF THE INCOME TA X ACT, 1961? 3 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 11.10.2010 DECLARING AN INCOME OF RS.48,19,02,830/ - WHICH ITA NO. 3379 /DEL /201 4 KAJARIA CERAMICS LTD. 2 WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FROM THE DETAILS FURNISHED BY THE ASSESSEE NOTED THAT THE ASSESSEE HAD INCREASED INTEREST FREE SECURITY DEPOSIT TO ITS SISTER CONCERN M/S DUA ENGINEERING WORKS (P) LTD. FROM RS.5,35,00,000/ - TO RS.11,35,00,000/ - . HE FURTHER OBSERVED THAT AS PER THE STANDARD RENT AGREEMENTS PREVALENT IN THE MARKET, INTEREST FREE SECURITY DEPOSIT EQUAL TO MAXIMUM 6 MONTH RENT WAS USUALLY TO BE PAID. HE FURTHER OBSERVED THAT IN THE IMMEDIAT ELY PRECEDING YEAR, THE DISALLOWANCE OF RS.81,00,000/ - WAS MADE ON THE EXCESS SECURITY DEPOSIT FOR THE YEAR UNDER CONSIDERATION. THE DISALLOWANCE OF RS.1,33,32,000/ - WAS MADE BY THE AO . 4 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A ) WHO DELETED THE DISALLOWANCE BY FOLLOWING THE EARLIER ORDER DATED 12.0 7.2013 OF THE ITAT IN ITA NO. 48 79/2011 FOR THE ASSESSMENT YEAR 2008 - 09. 5 . NOW THE DEPARTMENT IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE UNDER CONSIDERA TION IS NOW COVERED BY THE DECISION OF THIS BENCH OF THE ITAT IN ITA NO. 4879/DEL/2011 FOR THE ASSESSMENT YEAR 2008 - 09 IN ASSESSEE S OWN CASE. A REFERENCE WAS MADE TO PAGE NOS. 105 TO 124 OF THE ASSESSEE S PAPER BOOK. IT WAS FURTHER STATED THAT THE SAID OR DER WAS FOLLOWED IN THE ASSESSMENT YEAR 2009 - 10 ITA NO. 3379 /DEL /201 4 KAJARIA CERAMICS LTD. 3 WHILE DECIDING THE ASSESSEE S APPEAL IN ITA NO. 1142/DEL/2013 , VIDE ORDER DATED 07.02.2014. A REFERENCE WAS MADE TO PAGE NOS. 105 TO 130 OF THE ASSESSEE S PAPER BOOK. IT WAS FURTHER STATED THAT THE AFORESAID ORDERS OF THE ITAT WERE CHALLENGED BY THE DEPARTMENT BEFORE THE HON BLE JURISDICTIONAL HIGH COURT IN ITA NO. 35/2014 AND 544/2014 FOR THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 RESPECTIVELY WHEREIN THE VIEW TAKEN BY THE ITAT WAS AFFIRMED. A REFERENCE WAS MAD E TO PAGE NOS. 99 TO 104 OF THE ASSESSEE S PAPER BOOK. 6 . IN HIS RIVAL SUBMISSIONS, THE LD. DR ALTHOUGH SUPPORTED THE ORDER OF THE AO BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 7 . WE HAVE CONSIDERED THE SUBMI SSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE ITAT VIDE ORDER DATED 12.07.2013 FOR THE ASSESSMENT YEAR 2008 - 09 IN ITA NO. 4879/DEL/2011 WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 13 TO 15 WHICH READ AS UNDER: 13. LEARNED FIRST APPELLATE AUTHORITY ON AN EXAMINATION OF THE FACTS , ARRIVED AT A CONCLUSION THAT ASSESSEE HAS TAKEN THE PREMISES @ 19 PER SQ. FT. PER MONTH AS AGAINST THE PREVAILI NG MARKET RENT OF RS.60 - 80 PER SQ. FT. PER MONTH. THUS, MAKING OF A N INTEREST FREE SECURITY DEPOSIT IS A BUSINESS DECISION. IT DOES NOT GIVE UNDUE ADVANTAGE TO THE LANDLORD. LEARNED ITA NO. 3379 /DEL /201 4 KAJARIA CERAMICS LTD. 4 ASSESSING OFFICER HAS MADE DISALLOWANCE WITHOUT ASCERTAINING THESE FACTS . 14. BEFORE US, LEARNED DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER . HE TOOK US THROUGH THE RENT AGREEMENT AND SUBMITTED THAT THE ASSESSING OFFICER HAS JUSTIFIED THE SECURITY DEPOSIT AT RS.24 LACS ON NORMAL MARKET PRACTICE. THE ASSESSEE HAD DEPOSIT ED A SUM OF RS.5.35 CRORES WITH THE LANDLORD WITHOUT CHARGING ANY INTEREST. THERE IS NO JUSTIFICATION FOR THIS STEP OF THE ASSESSEE. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A PUBLIC L IMITED COMPANY. IT DOES NOT FA LL WITHIN THE DEFINITION OF PERSONS REFERRED TO IN CLAUSE (B) OF SEC. 40A(2) OF THE INCOME - TAX ACT, 1961. THEREFORE, NO DISAL LOWANCE OUGHT TO HAVE BEEN MADE. 15. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND GONE THROUGH THE RECORD CAREFULLY. A PERUSA L OF IMPUGNED ORDE R, IT REVEALED THAT ASSESSING OFFICER HAS NOT LOOKED INTO SURROUNDING FACTS AND CIRCUMSTANCES BEFORE FORMING A BELIEF THAT ASSESSEE HAS GIVEN UNDUE BENEFIT TO ITS LANDLORD. HE PROCEEDED THE CONTROVERSY ONLY WITH A SINGLE ANGLE THAT INTERE ST FREE DEPOSITS MADE BY THE ASSESSEE WITH THE LANDLORD IS EXCESSIVE. HAD THE ASSESSING OFFICER LOOKED INTO THE REASONS FOR MAKING SUCH DEPOSITS PROBABLY HE WOULD HAVE NOT MADE THE DISALLOWANCE. APART FROM THE STAND TAKEN ON LEGAL PRINCIPLE THAT SECTION 4 0A(2)(B) IS NOT APPLICABLE ON A PUBLIC LIMITED COMPANY. THE ASSESSEE HAS DEMONSTRATED THAT IT HAS SUFFICIENT INTEREST FREE FUND AVAILABLE WHICH CAN TAKE CARE SUCH TYPE OF DEPOSITS, IT HAS TAKEN THE PREMISES ON A MONTHLY RENT @ RS. 19 PER SQ. FT. WHEREAS T HE MARKET RATE IS RS.60 - 80 PER SQ. FT. PER MONTH. HAD THESE FACTORS BEEN LOOKED INTO BY THE ASSESSING OFFICER, PROBABLY HE WOULD HAVE NOT FORMED THE OPINION THAT ASSESSEE HAS GIVEN UNDUE BENEFIT TO ITS LANDLORD. LEARNED FIRST APPELLATE AUTHORITY HAS CONS IDERED ALL THESE ITA NO. 3379 /DEL /201 4 KAJARIA CERAMICS LTD. 5 ASPECTS AND ONLY THEREAFTER DELETED THE DISALLOWANCE. WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF THE LEARNED CIT(APPEALS). 8. THE AFORESAID ORDER DATED 12.07.2013 WAS THE SUBJECT MATTER OF THE DEPARTMENTAL APPEAL BEFORE THE HO N BLE JURISDICTIONAL HIGH COURT IN ITA NO. 35/2014 WHEREIN VIDE ORDER DATED 24.08.2015, THEIR LORDSHIPS HELD IN PARAS 7 & 8 AS UNDER: 7. IN BOTH THE APPEALS ONE COMMON QUESTION IS COMMON REGARDING THE EXCESS SECURITY DEPOSIT PURPORTEDLY MADE BY THE ASSESS EE IN RESPECT OF RENTING OF THE PREMISES FROM DEWPL. THE ASSESSEE HAD TAKEN THE PREMISES ON MONTHLY RENT OF RS.19 PER SQ. FT. WHEREAS THE MARKET RENT WAS RS.60 - 80 PER SQ. FT. THE AREA WAS 21000 SQ. FT. AS PER CLAUSE 2 OF THE RENT AGREEMENT THE PARTIES HAD AGREED THAT THE RENT WOULD BE RS.4 LAKHS PER MONTH, WHEREAS THE SECURITY DEPOSIT WOULD KEEP ON INCREASING. VIEWED IN THIS MANNER, THERE WAS NO UNDUE ADVANTAGE TO DEWPL. 8. HAVING HEARD LEARNED COUNSEL FOR THE PARTIES, THE COURT FINDS THAT THE VIEW TAKEN B Y THE CIT (A), AS AFFIRMED BY THE ITAT, ON AN INTERPRETATION OF THE CLAUSES OF THE RENT AGREEMENT AND IN COMING TO THE AFOREMENTIONED CONCLUSION CANNOT BE SAID TO BE PERVERSE. IT WAS A POSSIBLE VIEW TO TAKE. ON THIS ISSUE, THEREFORE, THE COURT IS NOT PERSU ADED TO HOLD THAT ANY SUBSTANTIAL QUESTION OF LAW ARISES. 9. FROM THE AFORESAID NARRATED FACTS, IT IS NOW CLEAR THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. ITA NO. 3379 /DEL /201 4 KAJARIA CERAMICS LTD. 6 10 . IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. (O RD E R PRONOUNCED IN THE COURT ON 27 /0 9 /2017 ) SD/ - S D/ - ( K. N. CHARY ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DAT ED: 27 /09 /2017 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR