VLCC Health Care Ltd., New Delhi V. DCIT, CIRCLE- 26(1), NEW DELHI

ITA 3801/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2814 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 12-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Capital asset; Gift; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DLEHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 1319 & 3801/DEL/2017 ASSESSMENT YEARS: 2012-13 & 2013-14 M/S. VLCC HEALTH CARE LTD., VS. DY. CIT, CIRCLE 26 (1), M-14, COMMERCIAL COMPLEX, NEW DELHI. GREATER KAILASH PART-II, NEW DELHI. PAN : AAACC4808P (APPELLANT) (RESPONDENT) APPELLANT BY : DR. RAKESH GUPTA, ADV. RESPONDENT BY: SH. N.K. BANSAL, SR. DR DATE OF HEARING: 25/10/2-21 DATE OF ORDER : 25/10/2021 ORDER PER K. NARASIMHA CHARY, J.M. AGGRIEVED BY THE ORDERS DATED 27.01.2017 AND 19.04. 2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-9, NEW DELHI ('LD. CIT(A)') FOR THE ASSESSMENT YEARS 2012-13 AND 2013-14, M/S. VLCC HEALTH CARE LTD.(THE ASSESSEE) PREFERRED THESE APPEALS. ITA NO. 1319/DEL/2017 (A.Y. 2012-13): 2. BRIEF FACTS OF THIS CASE ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF MAINTAINING AND RUNNING BEAUTY, SLI MMING, FITNESS AND HEALTH CENTRES AT VARIOUS LOCATIONS AND ALSO PROVID E VOCATIONAL TRAINING IN 2 VARIOUS INSTITUTES. DURING THE SCRUTINY OF RETURN O F INCOME FOR THE ASSESSMENT YEAR 2012-13, LD. ASSESSING OFFICER MADE ADDITIONS, INTER ALIA, ON ACCOUNT OF COMPENSATION RECEIVED FOR DELAY IN PR OJECT TO THE TUNE OF RS.14,73,079/- AND DISALLOWANCE OF RS.6,62,799/-, W HICH ARE RELEVANT FOR THE PURPOSE OF THIS APPEAL. IN APPEAL, LD. CIT(A) DELETED OTHER ADDITIONS, BUT CONFIRMED THE ADDITIONS ON ACCOUNT OF THESE TWO FACTORS. 3. GROUND NO. 1 & 2 OF THE APPEAL RELATE TO ADDITIO N OF RS.14,73,079/-, WHICH AMOUNT WAS RECEIVED BY THE AS SESSEE FROM THE CONTRACTORS WHO DELAYED IN EXECUTION OF THE WORK TO MAKE FIT THE RENTED PREMISES FOR CONDUCTING BUSINESS. IT WAS THE CASE O F THE ASSESSEE BEFORE THE AUTHORITIES BELOW THAT THE CONTRACT SHOWS THAT THE AMOUNT OF LIQUIDATED DAMAGES WAS FIXED AT RS.20,000/- PER DAY IRRESPECTIVE OF CONTRACT VALUE AND SINCE THE CONTRACT RELATES TO BR ING THE PROFIT MAKING APPARATUS INTO EXISTENCE, ANY DAMAGE RECEIVED ON AC COUNT OF SUCH DELAY AMOUNTS TO CAPITAL RECEIPT. BEFORE THE AUTHORITIES BELOW, THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HONBLE APEX CUR T IN CIT VS. SAURASHTRA CEMENT LTD. 325 ITR 422(SC). 4. IT IS AN ADMITTED THAT THAT THE ASSESSEE HAS BEE N CONDUCTING THEIR BUSINESS AT VARIOUS PLACES IN INDIA AND IN THAT PRO CESS FOR CARRYING OUT THEIR BUSINESS THEY HAVE TAKEN PREMISES ON RENT WHI CH REQUIRE CERTAIN INTERIOR WORK FOR BRINGING THE PREMISES TO USE FOR THE PURPOSE OF ASSESSEES BUSINESS; THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH A CONTRACTOR FOR EFFECTING SUCH CHANGES TO MAKE THE P REMISES USEFUL TO START OF THE BUSINESS WITH A STIPULATION THAT IRRES PECTIVE OF THE VALUE OF CONTRACT, IF ANY DELAY OCCURRED IN EXECUTION OF WOR K, THE CONTRACTOR MUST PAY RS.20,000/- PER DAY TOWARDS LIQUIDATED DAMAGES. 3 5. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE SUBM ITTED BEFORE THE AUTHORITIES BELOW THAT SUCH AMOUNTS RECEIVED FROM T HE CONTRACTOR WERE DEBITED TO THE ACCOUNT OF THE CONTRACTOR AS PENALTY WHILE MAKING THE FINAL PAYMENTS AND THUS THE PAYMENTS TO THE CONTRACTORS W ERE MADE SHORT BY THE AMOUNTS OF LIQUIDATED DAMAGES, THEREBY BRINGING DOWN THE COST OF PROJECT. 6. IT IS, THEREFORE, CLEAR THAT THE ASSESSEE REDUCE D THE COST OF PROJECT BY THE AMOUNT OF LIQUIDATED DAMAGES RECEIVED AND TH E COST OF THE PROJECT REMAINED ONLY AT BALANCE FIGURE. IT IS ALSO CLEAR T HAT UNTIL AND UNLESS THE CONTRACTOR CARRIED OUT THE DESIRED MODIFICATION, TH E PREMISES WAS NOT FIT TO COMMENCE THE BUSINESS OF THE ASSESSEE AND THEREB Y RELATED TO BRINGING THE PROFIT MAKING APPARATUS INTO EXISTENCE . WE, THEREFORE, ARE OF THE OPINION THAT INASMUCH AS THE ASSESSEE CREDITED THE AMOUNTS RECEIVED TO THE CAPITAL ASSET AND TREATED IT AS CAPITAL RECE IPTS, THE SAME CANNOT BE BROUGHT TO TAX. HENCE, THIS ADDITION IS DIRECTED TO BE DELETED. 7. NOW COMING TO GROUND NO.3 AS TO THE DISALLOWANCE OF RS.6,62,799/-, ACCORDING TO THE ASSESSING OFFICER, THIS DISALLOWANCE IS THE RESULT OF ASSESSEE NOT PRODUCING THE BOOKS OF ACCOU NT. HOWEVER, THE FACT REMAINS THAT EVEN IN SUCH CONTINGENCY, ASSESSING OF FICER ALLOWED OTHER DEDUCTIONS. IT IS SUBMITTED ON BEHALF OF THE ASSESS EE THAT THE OPERATIONAL REVENUE OF THE ASSESSEE IS AROUND RS.258 CRORES ON ALL INDIA BASIS AND IN SO FAR AS THIS PARTICULAR EXPENDITURE OF RS.6,62,79 9/- IS CONCERNED, THIS RELATES TO THE EXPENDITURE OF GIVING GIFTS TO THE V IPS AND CELEBRITIES WHICH WOULD BOOST THE BUSINESS OF THE ASSESSEE. HAVING RE GARD TO THE MAGNITUDE OF THE BUSINESS OF THE ASSESSEE AND THE Q UANTUM OF EXPENDITURE, WE ARE OF THE CONSIDERED OPINION THAT SUCH AN EXPENDITURE 4 COULD BE ALLOWED. ACCORDINGLY, THE GROUNDS RAISED B Y ASSESSEE ARE ALLOWED. ITA NO. 3801/DEL/2017 (A.Y. 2013-14): 8. FOR THIS YEAR, THE FACTS AND GROUNDS ARE SUBSTAN TIALLY THE SAME AS INVOLVED IN EARLIER ASSESSMENT YEAR. FOLLOWING OUR VIEW FOR THE EARLIER ASSESSMENT YEAR 2012-13, WE ALLOW THE GROUNDS RAISE D BY THE ASSESSEE IN THIS APPEAL FOR THE ASSESSMENT YEAR 2013-14. 9. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 25 TH DAY OF OCTOBER, 2021. SD/- SD/- (N.K. BILLAIYA) (K. NARSIMHA C HARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25/10/2021 AKS