Indo Global Warehousing & Services Pvt. Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 589/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9418 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 30-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K OJHA
• Keywords: Maximum Marginal Rate

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 589/PUN/2015 / ASSESSMENT YEAR : 2011-12 INDO GLOBAL WAREHOUSING & SERVICES PVT. LTD., ASHOKA ARCH, E-28/29, MARKET YARD, PUNE 411 037 PAN : AABCI9000N . / APPELLANT V/S D CIT, CIRCLE - 1 1 (1), PUNE . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI K.K. OJHA / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A)-I, PUNE DATED 31-12-2014 FOR THE ASSESSMENT YEAR 2011 -12. 2. THE SOLITARY GROUND RAISED BY THE ASSESSEE READS AS UNDER : THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALL OWANCE OF RS.60,00,000/-, BEING AMOUNT PAID TO M/S. GLOBAL PROPERTIES AS CONS IDERATION FOR NOMINATING APPELLANTS NAME IN THE TRANSACTION NEGOTIATED BY I T FOR PURCHASE OF PROPERTY, ON GROUND THAT THE IMPUGNED TRANSACTION WITH GLOBAL PROPERTIES IS NOT GENUINE AND THE EXPENDITURE IN QUESTION WAS NOT INC URRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE APPELLANT. THER EFORE, IT IS PRAYED TO CANCEL THE ADDITION OF RS.60,00,000/-. / DATE OF HEARING :07.06.2017 / DATE OF PRONOUNCEMENT:09.06.2017 2 ITA NO.589/PUN/2015 3. THE BASIC FACTS INCLUDE THAT THE ASSESSEE IS ENG AGED IN THE CONSTRUCTION, PROPERTY DEVELOPMENT AND LEASING OF P ROPERTIES. HE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.10.67 CRORES (ROUNDED OFF). AT THE END OF THE ASSESSMENT PROCEEDINGS, AO DETERMINE D THE TOTAL INCOME AT RS.11,26,92,440/- AFTER MAKING A SOLITARY ADDITION OF RS. 60 LAKHS ON ACCOUNT OF RELEASE OF RIGHTS. 4. RELEVANT FACTS FOR THIS ADDITION INCLUDE THAT TH E ASSESSEE IS RELATED TO M/S. GLOBAL PROPERTIES. ASSESSEE PURCHASED A LAND LOCATED AT VILLAGE MANN, TALUKA MULSHI, DIST. PUNE VIDE PURCHASE DEED DATED 22-01-2010. THE AREA INVOLVED IS 9611 SQ.MTRS OUT OF THE TOTAL LAND OF 1 9622 SQ.MTRS. BALANCE WAS PURCHASED BY M/S. SAFETEC HEALTHCARE & HYGIENE PVT. LTD. AS A PART OF THIS, ASSESSEE PAID SUM OF RS.60 LAKHS TO M/S. GLOBAL PRO PERTIES TOWARDS NOMINATION FEE FOR RELEASE OF RIGHTS. SIMILARLY, S AFETEC HEALTHCARE & HYGIENE PVT. LTD. ALSO PAID SUM OF RS.1 CRORE FOR SIMILAR S ERVICES. IT IS MENTIONED THAT M/S. GLOBAL PROPERTIES IS INVOLVED IN NEGOTIATIONS AND FINALIZING OF TERMS AND CONDITIONS OF THE SALE TRANSACTION. DURING THE ASS ESSMENT PROCEEDINGS, THE SAID PAYMENT OF RS.60 LAKHS WAS THE BONE CONTENTION . THERE WAS ENQUIRY INTO THE DETAILS OF RIGHTS RELEASED BY M/S. GLOBAL PROPERTIES. IT IS THE AOS CONTENTION THAT M/S. GLOBAL PROPERTIES INVOLVEMENT IN THE TRANSACTION IS UNWARRANTED AND THEREFORE, THE PAYMENT MADE BY THE ASSESSEE TO M/S. GLOBAL PROPERTIES, SISTER CONCERN OF THE ASSESSEE I S UNWARRANTED. THE ASSESSEE, IN RESPONSE TO THE QUERY SUBMITTED WRITTE N SUBMISSIONS JUSTIFYING THE SAID PAYMENT. IN THE WRITTEN SUBMISSIONS, IT I S SUBMITTED THAT THE ASSESSEE AS WELL AS M/S. GLOBAL PROPERTIES ARE TAXP AYERS AT THE MAXIMUM MARGINAL RATE. THEREFORE, THERE IS NO REASON WHY T HE SAME AMOUNT SHOULD BE DISALLOWED WITHOUT APPRECIATING THE FACT THAT TH E PAYMENTS WAS MADE TO M/S. GLOBAL PROPERTIES FOR BUSINESS PURPOSES. THER E IS NO INTENTION OF 3 ITA NO.589/PUN/2015 DIVERSION OF PROFITS FOR SAVING OF THE TAXES. IT I S ALSO MENTIONED THAT IN PARA NO.3 THERE WAS DISCUSSION REGARDING THE SAID PAYMEN T WITHOUT MAKING TDS U/S.194H OF THE ACT. AO IS OF THE VIEW THAT THE SA ID AMOUNT CONSTITUTES COMMISSION AND THE SAME IS ALLOWABLE ONLY AFTER THE TDS IS EFFECTED, FAILING WHICH THE PROVISIONS OF SECTION 40(A)(IA) OF THE AC T SHALL COME INTO OPERATION. EVENTUALLY, HE MADE THE SAID ADDITION REJECTING THE ARGUMENTS OF THE ASSESSEE. 5. DURING THE FIRST APPELLATE PROCEEDINGS ASSESSEE COULD NOT IMPROVE HIS CASE. THEREFORE, THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO. 6. AGGRIEVED WITH THE SAME ASSESSEE IS IN APPEAL BE FORE US. 7. SHRI PRAMOD SHINGTE, LD. COUNSEL FOR THE ASSESSE E NARRATED THE ABOVE FACTS OF THE TRANSACTION AND ALSO REITERATED THE AR GUMENTS MADE BEFORE THE ABOVE AUTHORITIES. BRINGING OUR ATTENTION TO PAGE 2 OF THE PAPER BOOK THE LD. COUNSEL EXPLAINED THE FACTS RELATED TO THE TRAN SACTION. FURTHER, BRINGING OUR ATTENTION TO PAGE 72 OF THE PAPER BOOK, LD. COU NSEL ARGUED THAT THE SAME CONSTITUTES CONFIRMATION LETTER FROM THE TATA AUTOCOMP SYSTEMS LTD., THE SELLER OF THE LAND. IT ACKNOWLEDGED THE FACT T HAT M/S. GLOBAL PROPERTIES WERE INVOLVED IN THE NEGOTIATIONS. OF COURSE, WE F IND THE SAID LETTER IS UNDATED. FURTHER, BRINGING OUR ATTENTION TO PAGE 6 0 OF THE PAPER BOOK, LD. COUNSEL READ OUT CLAUSE (F) TO DEMONSTRATE THE FACT THAT M/S. GLOBAL PROPERTIES IS ENTITLED TO PAYMENT OF CONSIDERATION OF RS.60 LAKHS TO RELEASE/WAIVE OFF ITS RIGHTS OF WHATSOEVER NATURE I N THE SAID PROPERTY. FURTHER, MENTIONING THAT THE PAYMENT OF RS.60 LAKHS CONSTITUTES A BUSINESS TRANSACTION AND THE ASSESSEE KNOWS HOW TO RUN THE B USINESS. IT IS NOT THE CASE OF THE AO THAT THE SAID AMOUNT HAS COME BACK T O THE HANDS OF THE 4 ITA NO.589/PUN/2015 ASSESSEE IN ANY UNACCOUNTED FORMS OF MONEY. IN SUC H CASES, THE ORDERS OF THE AO AND THE CIT(A) ARE REQUIRED TO BE REVERSED. 8. PER CONTRA THE LD. DEPARTMENTAL REPRESENTATIVE F OR THE REVENUE SUBMITTED THAT THE SAID LETTER PLACED AT PAGE 72 OF THE PAPER BOOK AS WELL AS THE MEMORANDUM OF ASSOCIATION (SUPRA) CONSTITUTES S ELF-SERVING DOCUMENTS.. FURTHER, IT WAS ARGUED THAT THE ORDERS OF THE CIT(A ) AND THE AO SHOULD BE STRENGTHENED WITHOUT ANY INTERFERENCE. 9. WE HEARD BOTH THE PARTIES ON THIS NARROW ISSUE O F ALLOWING OF RS.60 LAKHS PAID BY THE ASSESSEE TO M/S. GLOBAL PROPERTIE S. WE FIND THAT THERE IS NO DISPUTE ON THE FACT OF PAYMENT OF THE SAID AMOUN T INVOLVING THE BANKING CHANNELS. NOTHING IS BROUGHT ON RECORD TO SUGGEST THAT THE MONEY IS REPAID IN CASH FORM OR OTHERWISE TO THE ASSESSEE BY M/S. G LOBAL PROPERTIES. IT IS ALSO UNDISPUTED THAT BOTH ASSESSEE AS WELL AS M/S. GLOBAL PROPERTIES ARE THE TAXPAYERS PAYING TAXES AT MAXIMUM MARGINAL RATE OF TAXES. THE LETTER PLACED AT PAGE 72 OF THE PAPER BOOK IS UNDATED, WHI CH IS UNDISPUTED. HOWEVER, THERE IS NO EVIDENCE BROUGHT ON RECORDS BY THE AO TO SUGGEST THAT THE SAID PAGE IS NOT GENUINE. IN OUR VIEW, THE SAI D PAYMENT OF RS.60 LAKHS TO M/S. GLOBAL PROPERTIES CONSTITUTES A BUSINESS TR ANSACTION WHICH WAS EXECUTED BY THE ASSESSEE IN HIS WISDOM AS A BUSINES SMAN. THEREFORE, THE DECISION GIVEN BY THE CIT(A), IN OUR VIEW IS REQUIR ED TO BE REVERSED AND IN FAVOUR OF THE ASSESSEE. CONSIDERING THE SAME, IN O UR VIEW, THE ADJUDICATION OF THE OTHER ISSUE OF INVOKING THE PROVISIONS OF SE CTION 194J/40(A)(IA) OF THE ACT BECOMES AN ACADEMIC EXERCISE. AS SUCH, THERE I S NO SPECIFIC GROUND RAISED IN THIS REGARD AS SEEN FROM THE GROUNDS OF A PPEAL. THUS, THE SOLITARY GROUND RAISED BY THE ASSESSEE IS ALLOWED AND IN FAV OUR OF THE ASSESSEE. 5 ITA NO.589/PUN/2015 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF JUNE, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE; DATED : 09 TH JUNE, 2017. / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE //TRUE COPY// /ASSISTANT REGISTRAR , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A) - I, PUNE 4. CI T - I, PUNE 5. DR, ITAT, B BENCH PUNE; 6. / GUARD FILE.