M/s BLK-NCC Consortium, New Delhi V. JCIT, New Delhi

ITA 6481/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3436 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 08-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Section: 143(3)

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 6481/DEL/2015 (ASSESSMENT YEAR: 2011 - 12 ) BLK - NCC CONSORTIUM, B - 1, (EXTENSION)/ E - 23, COOPERATIVE INDL ESTATE, MATHURA ROAD, NEW DELHI PAN:AAAAB8961G VS. JCIT, RANGE - 22, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ARVIND KUMAR, ADV REVENUE BY: SHRI SHRAVAN GOTRU, SR. DR DATE OF HEARING 31/08 /2017 DATE OF PRONOUNCEMENT 2 2 / 11 /2017 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS. 3367081/ - ON PROFESSIONAL EXPENSES BY THE LD CIT(A) VIDE ORDER DATED 30.10.2015. 2. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS A ASSOCIATION OF PERSONS ENGAGED IN CONSTRUCTION AND ALLIED ACTIVITIES OF HAVING TWO PERSONS. IT FILED ITS RETURN OF INCOME ON 28.09.2011 SHOWING INCOME OF RS. 12993600/ - . DURING THE ASSESSMENT PROCEEDINGS IT WAS NOTED THAT ASSESSEE HAS PAID A SUM OF RS. 2.55 CRORES UNDER THE HEAD PROFESSIONAL EXPENSES. THE ASSESSEE EXPLAINED THAT THIS SUM IS 5% OF THE GROSS RECEIPT PAID TO NAGARJUNA CONSTRUCTION COMPANY WHICH IS A SISTER CONCERN OF ONE OF THE CONSORTIUM MEMBER OF M/S. NAGARJUNA CONSTRUCTION COMPANY LTD. THE ASSESSEE SUBMITTED THAT THIS SUM IS PAID AS PER AG REEMENT. IT WAS FURTHER STATED THAT AMOUNT OF WORK EXECUTED IS RS. 44.28 CRORES AND VAT CHARGES THEREON OF RS. 6.73 CRORES AND THEREFORE, THE TOTAL WORK AMOUNT IS RS. 51.02 CRORES AND 5% THEREOF IS PAID AS A PROFESSIONAL FEES. 3. THE LD AO DID NOT BELIEVE T HE EXPLANATION OF THE ASSESSEE. HE PERUSED THE CLAUSE 3 OF THE AGREEMENT THAT ANOTHER CONSORTIUM OF BL K AYSHYAP AND SONS LTD HAS AGREED TO PAY TO NCC NAGARJUJNA CONSTRUCTION COMPANY LTD A SUM OF RS. 2.92 CRORES WHICH IS EQUIVALENT TO 5% OF THE CONTRACT VALUE. THE LD AO WAS OF THE VIEW THAT THE CONTRACT VALUE DOES NOT INCLUDE VAT AMOUNT AND THE ASSESSEE HAS ALSO PAID 5% ON TH IS VAT AMOUNT. ACCORDING TO HIM 5% OF THE AMOUNT SHOULD HAVE BEEN ON THE CONTRACT VALUE EXCLUDING VAT. HENCE HE DISALLOWED 5% OF BLK - NCC CONSORTIUM VS JCIT, ITA NO. 6481/DEL/2015 (ASSESSMENT YEAR: 2011 - 12) PAGE | 2 VAT PAYMENT OF RS. 67341625/ - AMOUNTING TO RS. 3367081/ - OUT OF THE TOTAL PROFESSIONAL EXPENSES. CONSEQUENTLY, THE ASSESSMENT U /S 143(3) OF THE ACT WAS PASSED ON 10.02.2014. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD CIT(A) BUT AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE CONFIRM THE ABOVE DISALLOWANCE VIDE PARA NO. 4.3 OF HIS ORDER. 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFO RE US. 5. IT WAS SUBMITTED THAT CONTRACT VALUE PLUS VAT AMOUNT SHALL INCLUDE THE RA AND THEREFORE, 5% OF THE GROSS PROFIT SHALL BE PAID FROM RA BILL. HE SUBMITTED THAT EVEN THE VAT AMOUNT SHOULD HAVE BEEN CONSIDERED FOR THE PAYMENT. THEREFORE, HE SUBMITTED THAT THE LOWER AUTHORITIES ERRED IN CONFIRMING THE ABOVE DISALLOWANCE. 6. THE LD DR V EHEMENTLY CONTESTED AND SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. HE FURTHER SUBMITTED THAT THERE IS NO REFERENCE IN THE CONTRACT THAT EVEN ON THE VAT CHARGES ITS STATUTORY LEVY THE AMOUNT OF COMMISSION OF 5% IS REQUIRED TO BE PAID. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO GONE THROUGH THE PAPER BOOK SUBMITTED BY THE ASSESSEE CONTAINING 31 PAGES WHEREIN, THE VARIOUS SUBMISSION MADE BEFORE THE LOWER AUTHORITIES AS WELL AS COPY OF THE AGREEMENT DATED 20.07.2009 WAS ALSO PLACED. THE DELHI METRO RAIL CORPORATION LTD AWARDED A CONTRACT OF RS. 58.58 CRORES INCLUDING OF TAXES AND DUE EXCEPT UPVAT TO THE CONSORTIUM ASSESSEE. THE ASSESSEE HAS BROUGHT THE AGREEMENT UNDER TO PAY A SUM OF RS. 2.92 CRORES WHICH IS EQUAL TO 5% OF THE CONTRACT VALUE TO THE NCC. THE ABOVE 5% IS ALSO REQUIRED TO BE PAID BASED ON BILLS. THEREFORE, IT IS APPARENT THAT 5% OF THE CONTRACT VALUE IS EXCLUDING WHICH INCLUDES ALL TAXES EXCEPT VAT. FURTHER IT HAS BEEN ALSO STATED THAT VIDE LETTER DATED 26.06.2009 THE UPVAT WILL BE REIMBURSED BY DMRC TO THE ASSESSEE ON ACTUAL BASIS. IN VIEW OF THIS ACCORDING TO US THE AMOUNT OF 5% COMMISSION IS REQUIRED TO BE PAID BY THE ASSESSEE TO NCC EXCEPT VAT. THE LD CIT(A) IN PARA NO. 4.3 HAS GIVEN DETAILED REASONING FOR UPHOLDING THE DISALLOWANCE OF RS. 336708/ - AS UNDER: - 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. AR AND OBSERVATION OF THE ASSESSING OFFICER WHILE MAKING THE DISALLOWANCE ON THE ABOVE SUBJECT. FROM THE SUBMISSIONS MADE VIDE LETTER DATED 11.09.2015 AND 29.10.2015, IT IS NOTED THAT LD. AR HAS JUST REITERATED T HE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS AND NO CLARITY COULD BE BROUGHT ON RECORD WITH REGARD TO PAYMENT OF COMMISSION INCLUDING THE AMOUNT OF VAT WHILE CALCULATING THE COMMISSION PAYMENT TO M/S. NAGARJUNA CON STRUCTION CO. LTD. AT THE TIME OF ASSESSMENT PROCEEDINGS, AO HAS DISCUSSED THE ISSUE IN DETAIL AND HAS ESTABLISHED THAT VAT IS NOT A CONTRACTUAL RECEIPT BUT: IS A STATUTORY OBLIGATION, WHICH ASSESSEE HAS TO PAY TO THE GOVERNMENT AND. FOR THE PURPOSE OF COM PUTING COMMISSION, THE AMOUNT OF VAT CANNOT HE TREATED AS A PART OF CONTRACT VALUE. FURTHER, FROM THE TERMS OF AGREEMENT WHICH IS BEING RELIED UPON BY THE LD. AR THERE IS NO MENTION THAT COMMISSION IS PAYABLE ON THE AMOUNT OF CONTRACT INCLUDING THE VAT AS IN CLAUSE (3) BLK - NCC CONSORTIUM VS JCIT, ITA NO. 6481/DEL/2015 (ASSESSMENT YEAR: 2011 - 12) PAGE | 3 OF THE AGREEMENT BETWEEN M/S. NAGARJUNA CONSTRUCTION CO. LTD. AND M/S. B.L. KASHYAP & SONS LTD, RELEVANT PORTION OF WHICH IS REPRODUCED BELOW: 'BLK IS HEREBY AGREES AND CONFIRMS THAT THE PROJECT HAS BEEN AWARDED TO CONSORTIUM FOR A CONTRACT VALUE OF RS. 58,50,00,000/ - (FIFTY EIGHT CRORES AND FIFTY LACS ONLY. AS CONSIDERATION FOR THE ABOVE ARRANGEMENT AND AS ASSURED COMMITMENT TOWARDS PROFESSIONAL CHARGES AS CONSULTING FEES, BLK AGREES AND UNDERTAKES TO PAY NCC A SUM OF RS.2,92,00,000/ - (TWO C RORE NINETY HIES ONLY) (BEING EQUAL TO 5% OF THE CONTRACT VALUE AWARDED TO THE CONSORTIUM) AS HEREINAFTER AGREED. THIS AMOUNT OF 5% OF GROSS RECEIPT SHALL BE PAID PRORATE FROM R.A.BILL INCLUDING MOBILIZATION ADVANCE AND/OR ANY OTHER PAYMENT RECEIVED FROM T HE EMPLOYER ON BEHALF OF THE JOINT VENTURE... FROM THE ABOVE, IT IS CLEAR THAT 5% OF GROSS RECEIPT SHALL BE PAID PRORATE FROM RA BILL INCLUDING MOBILIZATION ADVANCE AND/ OR ANY OTHER PAYMENT RECEIVED FROM THE EMPLOYER ON BEHALF OF THE JOINT VENTURE AND TH ERE IS NO MENTION OF VAT. IT SEEMS THAT LD. AR IS TRYING TO EQUATE THE VAT' WITH AS ANY 01 PAYMENT RECEIVED FROM THE EMPLOYER ON BEHALF OF THE JOINT VENTURE, WHICH IS NOT TENABLE IN LAW AS JOINT VENTURE IS NOT FOR RECEIVING VAT PAYMENT. HENCE, THE OBSERVAT ION OF THE ASSESSING OFFICER IS QUITE RIGHT THAT VAT PAYMENT IS NOT A CONTRACTUAL RECEIPT OF THE ASSESSEE. FURTHER, THE CASE LAWS RELIED UPON BY THE LD. AR ARE DISTINGUISHABLE AND NOT RELATING TO THE FACTS AND CIRCUMSTANCES OF TE CASE, THEREFORE, CONSIDERI NG THE ENTIRELY OF THE FACTS AND CIRCUMSTANCES, AS DISCUSSED ABOVE, THE ADDITION MADE BY THE AO OF RS.33,67,081/ - BY RESTRICTING THE COMMISSION TO THE EXTENT OF RS,2,21,43,711/ - BEING 5% OF ACTUAL CONTRACT PAYMENT OFRS.44,28,74,224/ - IS UPHELD. 8. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CIT(A). IN VIEW OF THIS APPEAL OF THE ASSESSEE WHERE THE SOLITARY GROUND OF APPEAL WAS AGAINST THE ABOVE DISALLOWANCE IS DISMISSED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMISSED. 10. ORDER PRONOUNCED IN T HE OPEN COURT ON 2 2 / 11 /2017. - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 2 / 11 /2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT BLK - NCC CONSORTIUM VS JCIT, ITA NO. 6481/DEL/2015 (ASSESSMENT YEAR: 2011 - 12) PAGE | 4 ASSISTANT REGISTRAR ITAT, NEW DELHI