DCIT, New Delhi V. M/s. Dia Vikas Capital Pvt. Ltd., Gurgaon

ITA 6133/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2747 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 10-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARISES OUT OF PASSED
• Assessee Lawyers: CITA ON IN RELATION TO A Y
• Keywords: Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE MR. R.S. SYAL , VICE PRESIDENT AND M S. SUCHITRA KAMBLE , JUDICIAL MEMBER ITA N O. 6133 /DEL/201 4 A SSESSMENT YEAR: 20 09 - 10 DCIT CIRCLE - 10(1) NEW DELHI VS. DIA VIKAS CAPITAL PVT. LTD. 531, 5 TH FLOOR, SPAZEDEGE, TOWER SECTOR - 47, SOHNA ROAD, GURGAON - 122018 PAN : AAACB2876J (APPELLANT) (RESPONDENT) - O R D E R PER R.S.SYAL , V .P . : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 13.8.2014 IN RELATION TO THE A . Y. 2009 - 10 . THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE D ELETION OF DISALLOWANCE OF RS. 2 , 09 , 58 , 170/ - , BEING , EXPENSES CLAIMED TO HAVE BEEN INCURRED BY THE ASSESSEE. 2. BRIEFLY STATED THAT THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF INVESTMENTS . D EDUCTION OF RS. 2 , 09 , 58 , 170/ - WAS CLAIMED UNDER THE HEAD OF P ROGRAM AND CONSULTANCY EXPENSES . ON BEING CALLED DEPARTMENT BY MS. ASHIMA NEB, SR. DR RESPONDENT BY SH. S.K. AGGARWAL, CA DATE OF HEARING 26 - 0 3 - 2018 DATE OF PRONOU NCEMENT 27 - 3 - 2018 2 ITA NO . 6133 /DEL/201 4 UPON TO GIVE DETAIL OF SUCH EXPENSES, IT WAS STATED THAT THESE WERE INCURRED FOR DUE DILIGENCE AND PROGRAM CONSULTANCY. THE ASSESSEE FURNISHED A COPY OF LEDGER ACCOUNT GIVIN G DATE - WISE PAYMENT S OF EXPENDITURE AND NATURE OF EXPENDITURE , SOME OF WHICH HAVE BEEN TABULATED ON PAGE 5 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DID NOT EXPLAIN AS TO WHY THESE EXPENSES WERE RELATABLE TO INTEREST INCOME EARNED BY IT . T REATING SUCH AMOUNT AS CAPITAL EXPENDITURE , T HE AO DISALLOWED RS. 2 , 09 , 58 , 170/ - . THE LEARNED CIT(A) OVERTURNED THE ASSESSMENT ORDER ON THIS SCORE BY DELETING THE ADDITION , AGAINST WHICH THE REVENUE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL . 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS A NON - BANKING FINANCE COMPANY ENGAGED IN THE BUSINESS OF INVESTMENTS. THE ASSESSEE INCURRED THE EXPENDITURE UNDER THE HEAD `P ROGRAM AND CO NSULTANCY TO CARRY OUT DUE DILIGENCE OF PROSPECTIVE BORROWERS AND MAKING INVESTMENTS IN EQUITY OF MTIS AND OTHER LEGAL MATTERS. SINCE THE OBJECT OF THE ASSESSEE IS TO CARRY OUT THE BUSINESS OF FINANCIAL SERVICE S PARTICULARLY THROUGH MICRO FINANCE, THE EXP ENSES INCURRED ON CARRYING OUT DUE DILIGENCE OF PROSPECTIVE BORROWERS CANNOT BE CONSIDERED AS A CAPITAL EXPENDITURE. WE, THEREFORE, APPROVE THE 3 ITA NO . 6133 /DEL/201 4 VIEW TAKEN BY THE LEARNED CIT(A) IN TREATING THE AMOUNT AS A R EVENUE EXPENDITURE. 4. A PERUSAL OF THE DETAI LS OF THE EXPENSES , TABULATED ON PAGE 5 OF THE ASSESSMENT ORDER , IS AS UNDER: - DATE PARTICULARS AMOUNT 03.06.20085 TOWARDS CONSULTANCY FEES RELATED TO TAKEOVER OF THE COMPANY 9,65,687/ - 10.11.2008 TOWARDS CONSULTANCY SERVICES AGM BOARD MEETING 2,24,7 20/ - 31.12.2008 PROVISION MADE AGAIN CONSULTANCY FEE 80,00,000/ - 31.12.2008 PROVISIONS FOR CONSULTANCY FEES 84,50,000/ - 5 . ON GOING THROUGH THE ABOVE DETAILS FROM THE ASSESSEE S LEDGER ACCOUNT, IT IS SEEN THAT SUM OF RS. 80,00,000/ - IS A PROVISION MADE ON 31.12.2008 AGAINST THE CONSULTANCY FEES. SIMILARLY THERE IS ANOTHER ITEM OF RS. 84,50,000/ - WHICH IS AGAIN A PROVISION FOR CONSULTANCY FEE. THIS TRANSACTION IS ALSO DATED 31.12.2008 . THERE CAN BE NO DOUBT ABOUT THE ALLOWING OF DEDUCTION IN RESPECT OF E XPENSES ACTUALLY INCURRED FOR DUE DILIGENCE. I F THERE IS ONLY A PROVISION NOT BA CKED BY ANY ACTUAL EXPENDITURE, THEN SUCH A PROVISION CANNOT BE ALLOWED AS DEDUCTION. IF ON THE OTHER HAND, THE SERVICES ARE ACTUALLY RECEIVED AND UTILIZED BUT BECAUSE OF THE N ON - AVAILABILITY OF THE INVOICE VALUE, A PROVISION IS CREATED FOR THE REASONABLE AMOUNT OF SUCH EXPENDITURE, THEN SUCH A PROVISION HAS TO BE ALLOWED . SINCE NECESSARY DETAILS 4 ITA NO . 6133 /DEL/201 4 OF PROVISIONS OF RS. 1 , 64 , 50 , 000/ - (RS. 80,00,000/ - PLUS 8 4 , 5 0,000/ - ) ARE NOT AVAI LABLE ON RECORD, WE SET ASIDE THE IMPUGNED ORDER TO THIS EXTENT AND REMIT THE MATTER TO THE FILE OF THE AO FOR EXAMINING THE DETAILS OF THE PROVISION S AND THEN CONSIDER THE DEDUCTIBILITY OR OTHERWISE OF SUCH EXPENSES IN LIGHT OF THE ABOVE DISCUSSION . NEEDL ESS TO SAY , THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF HEARING IN SUCH FRESH PROCEEDINGS. 6 . IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRO NOU NCED IN THE OPEN COURT ON 27 .0 3 .2018. ) SD/ - SD / - ( SUCHITRA KAMBLE ) ( R.S. SYAL ) JUDICIAL MEMBER VICE PRESIDENT N. MISHRA ) DT. 27 . 3 .2018 SH COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDEN T 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR , ITAT NEW DELHI 5 ITA NO . 6133 /DEL/201 4 DATE 1. DRAFT DICTATED ON PS 2. DRAFT PLACED BEFORE AUTH OR 26.3. . 201 8 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 27.3. . 201 8 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BEN CH CLERK .201 8 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. *