M/s. Rajshree Steels Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 518/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6965 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 14-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 29-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V R SONBHADRASR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Commercial expediency
• Section: 50C; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI N.K. SAINI, AM & SMT. BEENA A. PILLAI, JM ITA NO.518/DEL/2013 ASSESSMENT YEAR : 2007-08 RAJSHREE STEELS PVT. LTD., (NOW KNOWN AS RAJSHREE INFRATECH PVT. LTD.), 17, MEERA TOWER (FIRST FLOOR), WAZIRPUR INDUSTRIAL AREA, NEW DELHI. PAN: AAACR4386D VS. ITO, WARD-15(2), ROOM NO.213, CR BUILDING, IP ESTATE, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY AGARWAL, CA DEPARTMENT BY : S HRI V.R. SONBHADRA,SR. DR DATE OF HEARING : 1 4 .12 . 2015 DATE OF PRONOUNCEMENT : 19 . 02 .201 6 ORDER PER BEENA A. PILLAI, JM: THE PRESENT APPEAL ARISES FROM THE ORDER PASSED BY THE CIT(A)- XVII, NEW DELHI ON 14.12.2012 IN RELATION TO THE AS SESSMENT YEAR 2007-08, ON THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT (A) HAS ERRED IN LAW WHILE CO NFIRMING THE ADDITION MADE BY LD AO OF RS. 43,75,000/- APPLY ING PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT, 19 61, ITA NO.518/DEL/2013 2 EVEN THOUGH BEING CONVINCED THAT SECTION 50C IS NOT APPLICABLE ON THE LAND OR BUILDING OR BOTH, FORMING PART OF THE STOCK IN TRADE, AND AS SUCH THE ADDITION OF RS. 43,75,000/- IS BAD IN LAW AND MAY PLEASE BE DELETED . 2. THAT THE LD CIT (A) HAS ERRED IN LAW WHILE CONFI RMING THE ADDITION MADE BY THE LD AO OF SHARE APPLICATION MONEY RECEIVED TO THE EXTENT RS. 93,50,000/-, WITHO UT TAKING INTO CONSIDERATION THE FACTS AND EVIDENCES B ROUGHT ON RECORD, AND THEREFORE THE ADDITION SO CONFIRMED BY THE LD CIT (A) OF RS. 93,50,000/- IS BAD IN LAW AND MAY PLEASE BE DELETED. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW WHILE SUSTA INING THE DISALLOWANCE OF RS. 2,23,692/- MADE BY THE LD A O, BEING EXCESSIVE INTEREST PAID ON UNSECURED LOANS TO RELATED PARTIES ABOVE THE PRESUMPTIVE RATE OF 12%, WITHOUT CONSIDERING THE BUSINESS EXIGENCY INVOLVED AND AS S UCH THE ADDITION OF RS. 2,23,692/- IS BAD IN LAW AND MA Y PLEASE BE DELETED. 4. THAT THE LD. CIT(A) HAS ERRED IN LAW WHILE SUSTA INING THE DISALLOWANCE MADE BY LD AO OF TRAVELLING EXPENS ES OF RS. 2,61,103/- MADE @ 40%, UP TO THE 20% ON ACCOUNT OF PERSONAL ELEMENT INVOLVED, IGNORING THE FACT THAT A SSESSEE HAD DULY COMPLIED WITH THE PROVISIONS OF FRINGE BEN EFIT TAX AND PAID DUE FBT THEREON, AND AS SUCH THE ADDIT ION SUSTAINED TO THE EXTENT OF 20% IS BAD IN LAW AND MA Y PLEASE BE DELETED. 5. THAT WE CRAVE TO ADD, ALTER, DELETE, MODIFY OR WITHDRAW ANY OF THE ABOVE GROUNDS AT THE TIME OF HE ARING. ITA NO.518/DEL/2013 3 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE RELEVANT YEAR ON 29.10.2007 DECLARIN G NIL INCOME. THE RETURN WAS PROCESSED U/S 143 (1) OF THE ACT AND LATER ON WAS SELECTED FOR SCRUTINY. THE LD. AO, DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, OBSERVED THAT THE ASSESSEE IS IN THE B USINESS OF CONSTRUCTION DURING THE YEAR UNDER CONSIDERATION. T HE ASSESSEE HAD SHOWN SALE OF RS.82,95,000/-, DECLARING A LOSS OF R S.8,16,461/- AS COMPARED TO THE SALES IN THE PREVIOUS YEAR. THE AO ALSO OBSERVED THAT THE ASSESSEE HAS RECEIVED SHARE APPLICATION MO NEY TO AN EXTENT OF RS.93,50,000/- FROM CERTAIN PARTIES FROM WHOM TH E RELEVANT DETAILS/EVIDENCES IN RESPECT OF THE SHARE APPLICANT S WERE NOT FILED. FURTHER, THE LD. AO OBSERVED THAT THE ASSESSEE HAD PAID AN INTEREST OF RS.2,23,692/- ON LOANS TAKEN FROM CERTAIN PARTIE S AT 12%. THE LD. AO ALSO OBSERVED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.2,61,103/- ON ACCOUNT OF TRAVELLING EXPENSES. V ARIOUS DETAILS WERE CALLED FOR IN RESPECT OF THE ABOVE ISSUES AND THE ASSESSMENT WAS COMPLETED BY THE AO BY MAKING THE FOLLOWING ADD ITIONS:- (I) E XCESS CONSIDERATION OF PROPERTIES (LAND) U/S 50C(1) OF THE IT ACT. RS.43,75,000/ - ITA NO.518/DEL/2013 4 (II) UNVERIFIED SHARE APPLICATION MONEY/SHARE PREMIUM. RS.93,50,000/ - (III) EXCESS INTEREST PAID RS.2,23,692/ - (IV) DISALLOWANCE OF 40% OF TRAVELLING EXPENSES RS.1,04,441/ - 3. AGGRIEVED BY THE ORDER OF THE LD.AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE LD.CIT(A). THE LD.CIT(A) CONFIRMED A LL THE ADDITIONS, EXCEPT THE DISALLOWANCE OF TRAVELLING EXPENSES, WHI CH WAS REDUCED TO 20% BY THE LD.CIT(A) ON THE GROUND THAT THE ASSE SSEE HAS PAID FBT ON THE SAME. AGGRIEVED BY THE ORDER OF THE LD.C IT(A), THE ASSESSEE IS IN APPEAL BEFORE US NOW. GROUND NO.1 4. THE LD. AR ARGUED THAT THE ASSESSEE HAS SOLD PROPER TIES AMOUNTING TO RS.82,95,000/- TO NINE PERSONS. COPY OF THE SALE DEEDS WERE SUBMITTED BEFORE THE LD.CIT(A) AND THE S UBMISSIONS MADE BY THE ASSESSEE HAVE BEEN REPRODUCED BY THE LD .CIT(A) IN HIS ORDER FROM PAGES 3 TO 8. IT HAS BEEN SUBMITTED THA T THE BUYERS HAVE PAID STAMP DUTY ON THE AMOUNTS EXCEEDING THE S ALE CONSIDERATION RECEIVED BY THE ASSESSEE. THE LD. AR SUBMITTED THAT THE BUYERS HAD BOOKED THE PLOT WITH THE ASSESSEE IN THE EARLIER ITA NO.518/DEL/2013 5 YEARS. AS PER THE POLICY OF THE COMPANY, THE PROPE RTY HAD TO BE SOLD AT THE AGREED RATE AND THE AMOUNT HAD TO BE SAME AS PER THE BOOKING PRICE. THE LD. AR SUBMITTED THAT THE BUYER S HAD BEEN PAYING TOTAL CONSIDERATION IN INSTALLMENTS AND HAD GOT THE PROPERTIES REGISTERED IN THE SUBSEQUENT YEARS WHEN THE ENTIRE MONEY WAS PAID BY THEM. 5. THE LD. AR FURTHER SUBMITTED THAT BY THE TIME THE D OCUMENT WAS REGISTERED AND STAMP DUTY WAS PAID, THE CIRCLE RATE OF THE PROPERTY HAD BEEN ENHANCED BY THE GOVERNMENT FOR TH E PURPOSES OF STAMP DUTY. THE LD. AR SUBMITTED THAT THERE IS A D IFFERENCE IN THE STAMP DUTY BECAUSE THE PROPERTY WAS BOOKED WHEN THE CIRCLE RATE WAS LOWER AND THE PROPERTY WAS REGISTERED WITH THE REGISTRAR OF STAMPS WHEN THE CIRCLE RATE WENT HIGH. THE DIFFEREN CE WAS LIKELY TO ARISE AS THE PRICES WENT UP IN THIS YEAR IN WHICH T HE DOCUMENTS WERE REGISTERED. 6. THE LD. AR FURTHER SUBMITTED THAT THESE PLOTS WERE HELD BY THE ASSESSEE AS STOCK-IN-TRADE OF THE BUSINESS. THE LD . AR FURTHER SUBMITTED THAT SECTION 50C(1) IS APPLICABLE ON CAPI TA ASSET NOT HELD AS STOCK-IN-TRADE. FOR THE SAKE OF CONVENIENCE, TH E PROVISION OF SECTION 50C(1) OF THE ACT IS REPRODUCED HEREUNDER:- ITA NO.518/DEL/2013 6 SECTION 50C(1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS L ESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE STAMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABLE SHALL, FOR THE PURPOSES OF SECTION 48, B E DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RE CEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. 4.1 ON THE CONTRARY, THE LD. DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 4.2 WE HAVE PERUSED THE PROVISIONS OF SECTION 50C( 1). IT IS VERY CLEAR FROM THE SECTION ITSELF THAT THE PROVISIONS O F SECTION 50C(1) IS ATTRACTED ONLY IN A CASE OF A CAPITAL ASSET AND NOT IN THE CASE WHERE THE ASSET IS HELD AS STOCK-IN-TRADE. FROM THE FACT S IN THE PRESENT CASE, AND THE PAPER BOOK FILED, IT IS VERY CLEAR TH AT ALL THE PROPERTIES SOLD BY THE ASSESSEE DURING THE RELEVANT YEAR UNDER CONSIDERATION FORMED PART OF STOCK. THEREFORE, WE ARE OF THE CON SIDERED OPINION THAT THE PROVISIONS OF SECTION 50C ARE NOT APPLICAB LE TO THE PRESENT FACTS OF THE CASE. IN VIEW OF THE ABOVE DISCUSSION S, GROUND NO.1 OF THE ASSESSEE STANDS ALLOWED. ITA NO.518/DEL/2013 7 GROUND NO.2 7. THE LD AR SUBMITTED THAT DURING THE YEAR UNDER CONS IDERATION, THE ASSESSEE COMPANY RECEIVED A TOTAL SHARE APPLICA TION MONEY/PREMIUM AMOUNTING TO RS.1,70,50,000/- FROM NI NE PARTIES. THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS HAD FILED DETAILS OF SHARE APPLICATION MONEY AND STATEMENT OF SHARE CAPI TAL BEFORE THE AO. THE LD. AR ALSO SUBMITTED THAT THE ASSESSEE HA D SUBMITTED PANS WITH ADDRESSES THEREON, COPY OF THE INCOME-TAX RETURN, BANK STATEMENTS AND AFFIDAVITS, CONFIRMING THE RECEIPT O F THE SHARE APPLICATION MONEY FROM ALL THE PARTIES BEFORE THE L D. AO. 8. IT APPEARS FROM THE ORDER OF THE LD.CIT(A) THAT THE AO HAD ISSUED SUMMONS U/S 133(6) OF THE INCOME-TAX ACT TO CONFIRM THE GENUINENESS OF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. IN RESPONSE TO THE SAME, THE LD. AO HAD RECEIVED THE NECESSARY DETAILS FROM SIX PARTIES. IN RESPECT OF SHRI CHARANJEET KAUR, SHRI MANJEET SINGH SANDHU AND SMT. SUNEET SAN DHU THE LD. AO DID NOT RECEIVE ANY RESPONSE. HOWEVER, IT WAS I NFORMED BY THE FATHER OF SHRI MANJEET SINGH SANDHU THAT ALL THE TH REE PERSONS HAVE LEFT INDIA AND HAVE NOT COME BACK TILL DATE. HE AL SO FILED DETAILS LIKE ITA NO.518/DEL/2013 8 BANK STATEMENTS, WHICH SHOWN THE CREDIT WORTHINESS OF ALL THE THREE PARTIES AND GENUINENESS OF THE PAYMENTS MADE BY THE M TO THE ASSESSEE. 9. AT THIS JUNCTURE, THE LD. AR SUBMITS THAT THIS ISSU E CAN BE SENT BACK TO THE LD. AO FOR VERIFICATION FROM THE BANK I N RESPECT OF THE MONIES HELD BY THE PARTIES. 10. THE LD. DR DOES NOT OBJECT THE SUBMISSIONS MADE BY THE LD. AR. WE ACCORDINGLY SET ASIDE THIS ISSUE TO THE FIL E OF THE LD. AO FOR VERIFICATION OF THE DETAILS TO BE FILED BY THE ASSE SSEE. 11. ACCORDINGLY, THIS GROUND OF THE ASSESSEE STANDS ST ATISTICALLY ALLOWED. GROUND NO.3 12. THIS GROUND IS DIRECTED BY THE ASSESSEE AGAINST AN ADDITION OF RS.2,23,692/- ON ACCOUNT OF EXCESSIVE INTEREST PAID BY THE ASSESSEE. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.36,74,969/- ON ACCOUNT OF INTEREST PAID ON UNSEC URED LOANS FROM VARIOUS PARTIES/PERSONS. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD FILED DETAILS LIKE CONFIRMATIONS OBTAI NED FROM THE RECEIPT OF INTEREST U/S 133(6) OF THE ACT WITH THE DETAILS OF THE ITA NO.518/DEL/2013 9 PARTIES TO WHOM THE INTEREST HAS BEEN PAID AT 15%. THE LD. AR SUBMITTED THAT THE RATE OF INTEREST PAID TO THE PAR TIES BY THE ASSESSEE IS APPARENTLY AT A HIGHER RATE, PARTICULAR LY, BECAUSE THE UNSECURED LOANS HAVE BEEN OBTAINED UNDER COMMERCIAL EXPEDIENCY. THE LD. AO HELD THE INTEREST PAID BY THE ASSESSEE T O THESE PARTIES TO BE EXCESSIVE AND HAS RESTRICTED THE INTEREST AT 12% AND HAS, ACCORDINGLY, MADE THE DISALLOWANCE. 13. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS OBTAINED LOAN DUE TO BUSINESS EXIGENCY WHICH EVERY PRUDENT BUSINESSMA N DOES AND RAISED INTEREST BEARING LOAN AT HIGHER RATE OF INTE REST FOR THE PURPOSES OF BUSINESS. THE LD. AR SUBMITTED THAT IT IS THE CIRCUMSTANCE WHICH REQUIRED THE ASSESSEE TO OBTAIN THE LOAN AT A HIGHER RATE OF INTEREST. THE LD. AR HAS RELIED UPO N THE DECISION OF CIT VS. ROCKMAN CYCLE INDUSTRIES PVT. LTD., REPORTE D IN (2011) 15 TAXMANN.COM 306 (P&H) (FB ). 14. ON THE CONTRARY, THE LD. DR SUPPORTED THE FINDI NGS OF THE AUTHORITIES BELOW. 15. WE FIND FORCE IN THE SUBMISSIONS MADE BY THE L D. AR. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT P AID THE INTEREST ITA NO.518/DEL/2013 10 AT THE SAID RATE TO THE LENDER. IT IS ALSO NOT THE CASE THAT THE BORROWED FUNDS HAVE NOT BEEN UTILIZED BY THE ASSESS EE FOR THE PURPOSES OF BUSINESS. IF A WRONG OR UNWISE DECISIO N HAS BEEN TAKEN BY THE ASSESSEE, IT CANNOT BE SAID THAT THE DECISIO N IS DUBIOUS OR THE ASSESSEE IN SUCH TRANSACTION HAS ADOPTED METHOD TO EVADE THE PAYMENT OF TAX. IT IS ALSO NOT THE CASE OF THE REV ENUE THAT THE ASSESSEE HAS PAID ANY DIVIDEND FROM SUCH BORROWED F UNDS. IN THE INSTANT CASE, THERE IS NO SUCH EVIDENCE THAT HAS BE EN BROUGHT ON RECORD BY THE LD. AO OF ANY SUCH METHOD OR PRACTICE ADOPTED BY THE ASSESSEE. WE ARE, THEREFORE, INCLINED TO ALLOW THIS GROUND OF APPEAL. GROUND NO.4 . 16. THIS GROUND IS DIRECTED AGAINST THE AD HOC DISALLOWANCE AT 20% OF RS.1,04,441/-, WHICH HAS BEEN CLAIMED AS TRA VELLING EXPENSES BY THE ASSESSEE. THE LD. AR SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS, THE LD. AO HAD MADE AN AD HOC DISALLOWANCE OF 40% ON THE TRAVELLING EXPENSES WHIC H WAS RESTRICTED BY THE LD.CIT(A) TO 20%. IT HAS BEEN SUBMITTED BY THE LD. AR THAT ITA NO.518/DEL/2013 11 THE ASSESSEE HAS PAID FRINGE BENEFIT TAX @ 5% ON SU CH EXPENSES AND, THEREFORE, NO FURTHER DISALLOWANCE IS WARRANTE D. 17. THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER. 18. IN THE PRESENT CASE IT IS NOTICED THAT NEITHER THE ASSESSING OFFICER NOR THE LD. CIT(A) HAS GIVEN ANY COGENT REA SON WHILE CONFIRMING/SUSTAINING THE DISALLOWANCE OUT OF TRAVE LLING EXPENSES. ON THE CONTRARY THE ASSESSEE PAID THE FRINGE BENEFI T TAX AND INCURRING OF EXPENSES IS NOT IN DISPUTE. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 19. 02.2016. SD/- SD/- [ N.K. SAINI ] [ BEENA A. PILLAI ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19.02.2016 DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI. ITA NO.518/DEL/2013 12 DATE 1. DRAFT DICTATED ON 28.12.2015 2. DRAFT PLACED BEFORE THE AUTHOR 29.12.2015 3. DRAFT PLACED BEFORE THE OTHER MEMBER 4. APPROVED DRAFT COMES TO THE SR.PS/PS 19.2.16 5. FILE SENT TO THE BENCH CLERK 19.2.16 6. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 7. DATE ON WHICH FILE GOES TO THE AR 8. DATE OF DISPATCH OF ORDER.