ACIT, New Delhi V. M/s. Surendra Buildtech Pvt. Ltd., Gurgaon

ITA 4449/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7415 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 21-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 17-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Commercial expediency
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI H.S. SIDHU : JUDICIAL MEMBER ITA NO. 4449/DEL/2012 ASSTT. YR: 2006-07 ACIT, CIRCLE 9(1), VS. SURENDRA BUILDTECH PVT. L TD., NEW DELHI. J-3/19, DLF, QUTAB ENCLAVE, PHASE-II, GURGAON. PAN: AAICS 0538 E ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI RAKESH KUMAR SR. DR RESPONDENT BY : SHRI M.P. RASTOGI DATE OF HEARING : 21-08-2014 DATE OF ORDER : _____-08-2014. O R D E R PER S.V. MEHROTRA, A.M : THIS APPEAL, BY THE REVENUE, IS DIRECTED AGAINST TH E ORDER DATED 18- 05-2012 PASSED BY THE LD. CIT(A)-XII, NEW DELHI, I N APPEAL NO. 400/11-12, RELATING TO A.Y. 2006-07. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A REAL ESTATE DEALER/ AGENT/ BROKER, IN THE RELEVANT ASSESSMENT YEAR, WAS INVOL VED IN FRESH BOOKINGS OF THE LAUNCHED PROJECTS OF BIG BUILDERS/ DEVELOPERS A ND WAS AN AUTHORIZED DEALER/ AGENT/ BROKER OF VARIOUS DEALERS/ DEVELOPER S. THE MODUS OPERANDI OF THE ASSESSEE WAS THAT AS AND WHEN A BUILDER ANNOUNC ES ITS PROJECT, THE ASSESSEE USED TO UNDERWRITE THE BUILDERS/ DEVELOPER S PROJECT AND THEN IN TURN STARTS BOOKING OF THE PROPERTY THROUGH VARIOUS SUB- DEALERS/ AGENTS/ BROKERS, AS AND WHEN DIRECTED BY ITSELF. FOR THE PURPOSE OF BOOKINGS, THE ASSESSEE ITA 4449/DEL/2012 ACIT VS. SURENDRA BUILD TECH PVT. LTD. 2 MAINTAINED OFFICES AT VARIOUS LOCATIONS AND ALSO OP ENED TEMPORARY OFFICES AT THE PROJECT SITES OF THE DEVELOPER. 2.1. THE PERSONS WHO MANAGED AND CONTROLLED THE OFF ICES FOR THE PURPOSES OF BOOKINGS WERE ALLOWED SUB-COMMISSIONS INSTEAD OF REMUNERATION AND SIMILARLY THE SUB-DEALERS/ AGENTS/ BROKERS WHO WERE INSTRUMENTAL IN PROCURING THE BOOKINGS WERE ALSO ALLOWED SUB-COMMIS SIONS. ON ALL THE SUB- COMMISSIONS, AS PAID AND ALLOWED TO VARIOUS SUCH PE RSONS, THE TDS HAD BEEN DEDUCTED AT SOURCE AND ALL THE PERSONS WERE RE GULAR INCOME-TAX ASSESSEES AND WERE IN THE BUSINESS OF REAL ESTATE S INCE LAST SO MANY YEARS. 2.2. THE PERSONS WHO HAD APPLIED FOR THE LAUNCHED O RIGINAL BOOKINGS DIRECTLY THEMSELVES, IN THEIR OWN NAMES, THE ASSESS EE ALLOWED THEM INCENTIVE/ DISCOUNT AGAINST THEIR BOOKINGS ON ACCOU NT OF COMMERCIAL AND BUSINESS EXPEDIENCY. 2.3. THE ASSESSEE HAD FILED ITS RETURN OF INCOME D ECLARING INCOME OF RS. 41,02,408/-. THE ASSESSMENT WAS COMPLETED U/S 143(3 ) AT A TOTAL INCOME OF RS. 44,62,510/- ON 29-12-2008. THEREAFTER NOTICE U/ S 148 WAS ISSUED ON 31- 3-2011 AFTER RECORDING THE FOLLOWING REASONS: PERUSAL OF RECORDS REVEALED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 57,71,536/- IN THE PROFIT & LOSS ACCO UNT UNDER THE HEAD MARKETING EXPENSES INCLUDING INCENTIVES AND D ISCOUNTS DURING THE YEAR. IN THE A.Y. 2007-08, DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, EXAMINATION OF EXPENDITURE UNDER THIS HEAD REVEALED THAT THE ASSESSEE HAD MADE VARIOUS PA YMENTS UNDER THIS HEAD WITHOUT COMPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 2.4. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSES SEES EXPLANATION AND HELD THAT SINCE THE AMOUNT RECEIVED BY THE ASSESSEE FROM THE BUILDER WAS IN THE NATURE OF COMMISSION AND AMOUNT PAID BY THE ASS ESSEE TO THE THIRD PARTY ITA 4449/DEL/2012 ACIT VS. SURENDRA BUILD TECH PVT. LTD. 3 WAS STILL COMMISSION, PROVISIONS OF TDS AS APPLICAB LE IN THE CASE OF COMMISSION, WERE APPLICABLE FROM THE PAYMENTS MADE BY THE ASSESSEE TO THE RECIPIENTS. HE DID NOT ACCEPT THE ASSESSEES CONTEN TION THAT IT WAS IN THE NATURE OF DISCOUNT. HE POINTED OUT THAT DISCOUNT CO ULD BE GIVEN ONLY BY THE SELLER OF THE GOODS AND, THEREFORE, THE SAME COULD BE GIVEN ONLY BY THE BUILDER. HOWEVER, THE ASSESSEE WAS MERELY A BROKER AND HE HAD NEITHER DEVELOPED THE PROPERTY NOR WAS THE OWNER OF SUCH PR OPERTY, HENCE NOT COMPETENT TO OFFER ANY DISCOUNT. 2.5. AFTER DETAILED DISCUSSION, THE ASSESSING OFFIC ER HELD THAT THE PROVISIONS OF SECTION 194H WERE ATTRACTED AND SINCE THE ASSESS EE FAILED TO MAKE THE TDS IN ACCORDANCE WITH THE SAID PROVISIONS, THE SUM OF RS. 57,71,536/- WAS NOT ALLOWABLE AS DEDUCTION IN VIEW OF THE PROVISION S OF SECTION 40(A)(IA). 2.6. LD. CIT(A) DELETED THE DISALLOWANCE, INTER ALI A, OBSERVING THAT THE MARKETING EXPENSES WERE IN THE NATURE OF INCENTIVES / DISCOUNTS AND HAD BEEN INCURRED ON ACCOUNT OF COMMERCIAL EXPEDIENCY AND AL LOWED TO THE PERSONS WHO HAD BOOKED THE PROPERTY THROUGH THE ASSESSEE AN D WERE NOT IN THE NATURE OF COMMISSION AS CONTEMPLATED U/S 194H OF THE ACT. 2.7. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUND OF APPEAL. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 57,71,536/- M ADE BY THE AO ON ACCOUNT OF MARKETING EXPENSES INCLUSIVE OF IN CENTIVE AND DISCOUNTS. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF TH E PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. AT THE OUT SET LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED BY THE ITAT D ELHI BENCH G ORDER ITA 4449/DEL/2012 ACIT VS. SURENDRA BUILD TECH PVT. LTD. 4 DATED 27-5-2011 IN ITA NO. 4854/DEL/2010, RENDERED IN ASSESSEES OWN CASE FOR A.Y. 2007-08 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. SECTION 194H HAS A DI RECT BEARING ON THE CONTROVERSY. THEREFORE, IT IS SALUTARY UPON US TO TAKE NOTE OF THE SECTION WHICH READ AS UNDER :- 194H. COMMISSION OR BROKERAGE. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1ST DAY OF JUNE, 2001, TO A RESIDENT, ANY INCOME BY WAY OF COMMISSION (NOT BEING INSURANCE COMMISSION REFERRED TO IN SECTION 194D) OR BROKERAGE, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME O F PAYMENT OF SUCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATE O F TEN PER CENT: PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION IN A CASE WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR TO THE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT EXCEED TWO THOUSAND FIVE HUNDRED RUPEES: PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH COMMISSION OR BROKERAGE IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SECTION: ITA 4449/DEL/2012 ACIT VS. SURENDRA BUILD TECH PVT. LTD. 5 PROVIDED ALSO THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION OR ANY COMMISSION OR BROKERAGE PAYMENT BY BHARAT SANCHAR NIGAM LIMITED OR MAHANAGAR TELEPHONE NIGAM LIMITED TO THEIR PUBLIC CALL OFFICE FRANCHISEES. EXPLANATION. FOR THE PURPOSES OF THIS SECTION :- (I) COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES; XXXX 6. THE EXPRESSION COMMISSION OR BROKERAGE HAS BEE N EXPLAINED IN THE EXPLANATION APPENDED TO THIS SECTI ON. ACCORDING TO THE MEANING PROVIDED IN THE EXPLANATIO N, THE COMMISSION WOULD BE CONSIDERED, IF ANY PERSON RECEI VED IT DIRECTLY OR INDIRECTLY ON BEHALF OF ANOTHER PERSON FOR THE SERVICES RENDERED, AND SUCH SERVICES SHOULD NOT BE PROFESSIONAL SERVICES. IN THE PRESENT CASE, ADMITTEDLY THE PERSO N TO WHOM DISCOUNT WAS GRANTED BY THE ASSESSEE WERE NOT ACTIN G AS AN AGENT FOR THE ASSESSEE, RATHER THEY ARE THE PURCHAS ER OF THE PROPERTY. THEY HAVE NOT PROVIDED ANY TYPE OF SERVIC ES TO THE ASSESSEE. THEY HAVE JUST BOOKED THE FLAT THROUGH TH E ASSESSEE. IN FACT, ASSESSEE IS AN AGENT BETWEEN THE BUILDER A ND THE ULTIMATE PURCHASER OF THE FLATS. THE ASSESSEE HAS P ARTED WITH SOME PART OF THE COMMISSION RECEIVED FROM THE BUILD ER FROM ALLURING THE PURCHASER SO THAT IT CAN EARN MORE COM MISSION. IT IS JUST PROVIDING A DISCOUNT TO THE PURCHASER AND N OT PAYING ANY COMMISSION FOR ANY SERVICES TAKEN FROM SUCH CUSTOME RS. IT APPEARS THAT LD. AO WAS INFLUENCED BY THE NOMENCLAT URE OF THE RECEIPT IN THE HANDS OF THE ASSESSEE. HE FAILED TO DISTINGUISH WHAT CHARACTER SUCH RECEIPT WOULD ATTAIN WHEN IT WI LL BE OFFERED TO THE CUSTOMER. THE RELATIONSHIP BETWEEN THE ASSES SEE AND THE ITA 4449/DEL/2012 ACIT VS. SURENDRA BUILD TECH PVT. LTD. 6 PURCHASER OF THE FLAT IS OF BUYER AND SELLER. THE L D. FIRST APPELLATE AUTHORITY HAS APPRECIATED THE CONTROVERSY IN RIGHT PERSPECTIVE AND WE DO NOT SEE ANY REASON TO INTERFE RE IN HIS ORDER. 3.1. RESPECTFULLY FOLLOWING THE EARLIER ORDER OF T HE ITAT IN ASSESSEES OWN CASE, WE SEE NO REASON TO INTERFERE IN THE ORDE R OF CIT(A) AND THE SAME IS UPHELD. 4. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/8/14. SD/- SD/- ( H.S. SIDHU ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28-08-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR