ITO, Sonepat V. M/s. Jai Shiv Shakti Enterprises, Sonepat

ITA 4304/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9669 (ITAT-DELHI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-01-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 10-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Section: 143(3); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI D.R.SINGH, JM AND SHRI R.C.SHARMA, AM ITA NO.4304/DEL/2009 ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER, WARD-3, SONEPAT. VS. M/S JAI SHIV SHAKTI ENTERPRISES, 106, SECTOR-14, SONEPAT. PAN NO.AAEFJ9923F. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.K.GUPTA, SR.DR. RESPONDENT BY : SHRI GAUTAM JAIN, CA. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 10.9.2009 FOR AY 2006-07, IN THE MATTER OF ORDER PA SSED U/S 143(3) OF THE IT ACT. 2. THE ONLY GRIEVANCE OF THE REVENUE RELATES TO DEL ETION OF DISALLOWANCE OF RS.16 LAKHS ON ACCOUNT OF INFRINGEMENT OF LAW. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT ASSESSEE FIRM HAS TAKEN A CONTRACT FROM HARYAN A STATE ROADS & BRIDGES DEVELOPMENT CORPORATION LTD. (IN SHORT HSRB) FOR CO NSTRUCTING A TOLL PLAZA AT SOHNA ROAD FOR LEVY OF TOLL. THE TOLL PLAZA WAS TO BE CONSTRUCTED AS PER THE SITE PLAN AND DRAWINGS SUPPLIED BY HSRB. THE ASSESSEE H AS DEPOSITED RS.20 LAKHS AS A SECURITY DEPOSIT WITH HSRB. HOWEVER, DUE TO OBJE CTION BY THE FOREST DEPARTMENT AND OTHER HURDLES, THE TOLL PLAZA COULD NOT BE CONSTRUCTED AND AS PER THE TERMS OF THE AGREEMENT, ESTIMATED COST OF CONST RUCTION OF TOLL PLAZA AMOUNTING TO RS.16 LAKHS WAS DEDUCTED OUT OF THE SECURITY DEP OSITED. THE AO FOUND THAT AMOUNT WAS DEDUCTED FOR NOT FULFILLING THE TERMS OF THE AGREEMENT WHICH AMOUNTS TO VIOLATION OF LAW, ACCORDINGLY SAME WAS DISALLOWE D BY INVOKING PROVISIONS OF ITA-4304/D/2009 2 EXPLANATION TO SECTION 37. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE SAME BY OBSERVING THAT DEDUCTION OUT OF THE SECURITY PAY MENT WAS ON ACCOUNT OF NON- PERFORMANCE OF CONTRACTUAL OBLIGATION ON THE PART O F THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), INSOFAR AS, A S PER THE CONDITION NO.20 OF THE AGREEMENT WHICH WAS REPRODUCED BY THE CIT(A) AT PAG E 3 OF THE APPELLATE ORDER, THE AMOUNT OF RS.16 LAKHS WAS DEDUCTED BY HSRB FOR CONSTRUCTING THE TOLL PLAZA WHICH OTHERWISE WAS THE DUTY OF THE ASSESSEE. THUS , THERE WAS NO INFRINGEMENT OF ANY LAW OF THE LAND AND THE AMOUNT WAS PAID AS PER THE AGREEMENT BETWEEN THE TWO PARTIES. HON'BLE SUPREME COURT IN THE CASE OF AHME DABAD COTTON MFG.CO.LTD. 205 ITR 163 HAS HELD THAT WHERE THE PAYMENT HAS BEE N MADE BY THE ASSESSEE IN EXERCISE OF THE OPTION CONFERRED UPON HIM UNDER THE VERY LAW OF THE SCHEME CONCERNED, THE AO HAS TO REGARD SUCH PAYMENT AS BUS INESS EXPENSES OF THE ASSESSEE WHICH IS TO BE ALLOWED U/S 37 OF THE IT AC T. RESPECTFULLY APPLYING THE PROPOSITION OF LAW LAID DOWN BY THE HON'BLE SUPREME COURT, WE DO NOT FIND ANY MERIT IN THE OBSERVATION OF THE AO TO THE EFFECT TH AT PAYMENT WAS ON ACCOUNT OF INFRINGEMENT OF LAW, ON THE CONTRARY THE PAYMENT WA S FOR NON-PERFORMANCE OF CONTRACTUAL OBLIGATION WHICH CANNOT BE DISALLOWED U NDER EXPLANATION TO SECTION 37(1) OF THE IT ACT. WE THEREFORE AGREE WITH THE L EARNED AR THAT IN TERMS OF FINDINGS RECORDED BY THE CIT(A), THE EXPENDITURE SO INCURRED IS TO BE ALLOWED U/S 37 OF THE IT ACT. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY, 2010. SD/- SD/- (D.R.SINGH) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11.01.2010. VK. ITA-4304/D/2009 3 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR