SAHYOG HOMES LTD., MUMBAI V. DCIT -CC - 6 (2), MUMBAI

ITA 66/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7276 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 04-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T.S. KHALSA LD.
• Assessee Lawyers: NIRAV MEHTALD
• Section: 143(3); 40(a)(ia); 201; 194A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.66/MUM/2019 ( / ASSESSMENT YEAR: 2015-16) SA HYOG HOMES LTD. 321, MORYA ESTATE, NEW LINK ROAD OPP. INFINITY MALL, ANDHERI (W), MUMBAI 400 053 / VS. D CIT - CIR. 6 (2 ) 1903, 19 TH FLOOR, AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 020. !' ./ ./PAN/GIR NO. AANCS-8142-D ( '$ /APPELLANT ) : ( %&'$ / RESPONDENT ) ASSESSEE BY : SHRI NIRAV MEHTA-LD. AR REVENUE BY : SHRI T.S. KHALSA- LD. SR.DR / DATE OF HEARING : 14/01/2021 / DATE OF PRONOUNCEMENT : 25/01/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. IN THE CAPTIONED APPEAL FOR ASSESSMENT YEAR (AY) 2015-16, THE ASSESSEE IS AGGRIEVED BY CONFIRMATION OF INTERE ST DISALLOWANCE U/S 40(A)(IA) FOR RS.56.61 LACS. THE ASSESSMENT WAS FRAMED BY LD. ASSESSING OFFICER U/S 143(3) R.W.S. 147 ON 15/12/20 17 WHEREIN THE AFORESAID DISALLOWANCE WAS MADE. UPON FURTHER APPEA L, LD. COMMISSIONER OF INCOME TAX (APPEALS)-54, MUMBAI [CI T(A)] VIDE ORDER DATED 29/10/2018 CONFIRMED THE STAND OF LD. A O. AGGRIEVED, 2 THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. THE AS SESSEE IS STATED TO BE ENGAGED IN BUILDING CONSTRUCTION AND DEVELOPM ENT. 2. THE IMPUGNED DISALLOWANCE STEM FROM THE FACT THA T THE ASSESSEE PAID COMPENSATION OF RS.56.61 LACS TO 5 PA RTIES AGAINST CANCELLATION OF FLATS. THE DETAILS OF THE SAME HAVE BEEN TABULATED IN PARA 7.1 OF THE IMPUGNED ORDER. THE LD.AO OPINED TH AT COMPENSATION ON CANCELLATION OF BOOKING WOULD PARTA KE THE CHARACTER OF INTEREST PAYMENT COVERED U/S 194A AND THEREFORE, THE SAME WOULD REQUIRE DEDUCTION OF TAX AT SOURCE. SINC E THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON STATED PAYMENTS, THE AFORESAID AMOUNT WAS DISALLOWED IN TERMS OF PROVISIONS OF SEC . 40(A)(IA). 3.1 BEFORE LD. CIT(A), THE ASSESSEE PLEADED THAT TH E PAYMENTS WERE IN THE FORM OF COMPENSATION ON CANCELLATION OF FLATS ON THE BASIS OF MUTUAL UNDERSTANDING BETWEEN THE CLIENTS A ND THE ASSESSEE. THE ALLOTMENT LETTER DID NOT CONTAIN ANY OBLIGATION OF PAYMENT OF INTEREST IN CASE OF REFUND. THE ATTENTIO N WAS DRAWN TO THE FACT THE COMPENSATION WAS LUMSUM PAYMENT AND NO T A PERIOD COST. THE COMPENSATION WAS NOT IN THE NATURE OF INT EREST PAID ON ANY AMOUNT OF MONEY BORROWED OR DEBT INCURRED. THER E WAS NO DEBTOR-CREDITOR RELATIONSHIP BETWEEN THE ASSESSEE A ND THE CLIENTS. THE PAYMENTS WERE MERELY COMPENSATORY IN NATURE AND THERE EXISTED NO TERMS OF PAYMENT OF INTEREST IN ANY MANN ER, IN CASE THE ALLOTMENT LETTERS BEING REVOKED. THEREFORE, THE PAY MENTS WOULD NOT REQUIRE DEDUCTION OF TAX AT SOURCE. IN SUPPORT, REL IANCE WAS PLACED ON VARIOUS JUDICIAL PRONOUNCEMENTS. 3.2 THE LD. CIT(A), UPON PERUSAL OF ALLOTMENT LETTE R AND CANCELLATION LETTERS, OBSERVED THAT THE CLAUSES WER E DIFFERENT IN 3 EACH ALLOTMENT LETTER. IN FEW CASE, THERE WAS A PRO VISION OF BUY- BACK AND CONSIDERATION FOR BUY-BACK WAS ALSO SPECIF ICALLY MENTIONED. EVEN THE BUY- BACK PROVISIONS WERE NOT I MPLEMENTED IN CASE OF TWO PAYEES I.E. G.S. REALITY LTD. & NUPUR K . GARG. THERE WAS NO PROVISION OF BUY-BACK IN OTHER THREE CASES B UT THE PURCHASERS WERE LIABLE FOR INTEREST ON DELAYED PAYM ENT @24% PER ANNUM. IN OTHER WORDS, THE ASSESSEE WAS CHARGING IN TEREST OF 24% IN CASE OF DELAYED PAYMENT BY PURCHASERS. HOWEVER, IN ALL CASE THERE WAS NO PROVISION FOR PAYMENT OF ANY COMPENSAT ION TO THE PURCHASER IN THE EVENT OF CANCELLATION OF ALLOTMENT LETTERS. FURTHER IN ALL CASES, THE PURCHASERS HAD REQUESTED FOR CANCELL ATION OF FLATS AND THEREFORE THE ASSESSEE WAS UNDER NO OBLIGATION TO PAY ANY COMPENSATION. THE ASSESSEE RETURNED THE BOOKING AMO UNT ALONG WITH ADDITIONAL AMOUNT WHICH WOULD BE NOTHING BUT I NTEREST ON THE AMOUNT KEPT WITH HIM. THERE WAS NO OTHER WAY THIS P AYMENT COULD BE INTERPRETED BECAUSE THE ASSESSEE WAS UNDER NO LE GAL OBLIGATION TO PAY COMPENSATION FOR CANCELLATION OF FLAT, THE P ROPOSAL FOR WHICH CAME FROM THE PURCHASER. THE ARGUMENT THAT THERE EX ISTS NO DEBTOR-CREDITOR RELATIONSHIP WAS NEGATED BY OBSERVI NG THAT ONCE THE RELATIONSHIP ENDS DUE TO CANCELLATION OF BOOKING, T HE RELATIONSHIP OF THE BUYER / SELLER ENDS AND THE DEBTOR-CREDITOR REL ATIONSHIP COMMENCES. AS THE RELATIONSHIP OF BUYER-SELLER SNAP PED, THE ASSESSEE WAS LIABLE TO REFUND THE AMOUNT TO THE PUR CHASERS AND ANY MUTUALLY DECIDED AMOUNT PAID TO THE PURCHASERS WOULD BE IN THE NATURE OF INTEREST PAID BY THE BUILDER TO THE P URCHASER FOR KEEPING THE BOOKING AMOUNT WITH HIM FOR THE AFORESA ID PERIOD. 4 THEREFORE, THE ACTION OF THE LD. AO IN MAKING DISAL LOWANCE WAS TO BE UPHELD. AGGRIEVED, THE ASSESSEE IS IN FURTHER AP PEAL BEFORE US. 4. UPON CAREFUL CONSIDERATION OF FACTUAL MATRIX AS ENUMERATED IN PRECEDING PARAGRAPHS AND AFTER GOING THROUGH THE IM PUGNED ORDER, WE FIND THAT LD. CIT(A) HAS CLINCHED THE ISSUE IN T HE CORRECT PERSPECTIVE AND PASSED A JUDICIAL AND REASONED ORDE R. WE CONCUR WITH THE ADJUDICATION OF LD. CIT(A) SINCE VARIOUS A RGUMENTS RAISED BY THE ASSESSEE HAVE APPROPRIATELY BEEN DEALT THERE IN. IT COULD BE OBSERVED THAT AS PER ALLOTMENT LETTERS, THERE WAS N O PROVISION FOR PAYMENT OF ANY COMPENSATION TO THE PURCHASERS IN TH E EVENT OF CANCELLATION OF ALLOTMENT. THE BOOKINGS WERE CANCEL LED AT THE BEHEST OF PURCHASERS AND THE ASSESSEE WAS UNDER NO OBLIGATION TO PAY ANY COMPENSATION IN SUCH AN EVENT. THE PAYMENT WAS MADE AS PER MUTUAL UNDERSTANDING. IT IS PERTINENT TO NOT E THAT THE ASSESSEE WAS CHARGING INTEREST OF 24% ON DELAYED PA YMENTS AND THEREFORE, THE EXCESS AMOUNT PAID OVER AND ABOVE TH E ADVANCES PAID BY THE PURCHASERS WOULD BE NOTHING BUT COMPENS ATORY INTEREST IN NATURE. THE BUYER-SELLER RELATIONSHIP WAS SNAPPE D THE MOMENT THE BOOKINGS WERE CANCELLED AND THE RELATIONSHIP OF DEBTOR-CREDITOR WOULD COMMENCE. AS RIGHTLY HELD BY LD. CIT(A), THER E WAS NO OTHER WAY THIS PAYMENT COULD BE INTERPRETED BECAUSE THE A SSESSEE WAS UNDER NO LEGAL OBLIGATION TO PAY COMPENSATION FOR C ANCELLATION OF FLAT, THE PROPOSAL FOR WHICH CAME FROM THE PURCHASE R. THEREFORE, THE IMPUGNED ORDER WOULD NOT REQUIRE ANY INTERFERENCE O N OUR PART, IN THIS REGARD. THE SAID ADJUDICATION IS ALSO SUPPORTE D BY ASSESSMENT ORDER FOR AY 2017-18 AS PLACED ON RECORD BY LD. DR THE PERUSAL OF 5 WHICH WOULD REVEAL THAT THE ASSESSEE, ITSELF, HAS D EDUCTED TAX AT SOURCE ON SUCH EXCESS PAYMENTS DURING THAT YEAR. 5. HAVING SAID SO, WE FIND THAT THE ASSESSEE COULD ESCAPE THE RIGORS OF SEC.40(A)(IA) IN TERMS OF SECOND PROVISO TO SECTION 40(A)(IA) READ WITH FIRST PROVISO TO SUB-SECTION (1 ) OF SECTION 201 BY DEMONSTRATING THAT THE PAYEES HAVE DULY OFFERED THI S INCOME IN THEIR RESPECTIVE TAX RETURNS AND PAID DUE TAXES THE REON. IN SUCH A CASE, NO DISALLOWANCE U/S 40(A)(IA) IS CALLED FOR. THEREFORE, WE DEEM IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF AO FOR THE LIMITED PURPOSE OF PROVIDING AN OPPORTUNITY TO THE ASSESSEE TO DEMONSTRATE FULFILLMENT OF THESE CONDITIONS BY ADDU CING REQUISITE DOCUMENTARY EVIDENCES. THE LD. AO IS DIRECTED TO CO NSIDER THE SAME AND GRANT THE SAID BENEFIT TO THE ASSESSEE, IF OTHERWISE AVAILABLE AND FOUND IN ORDER. THE GROUND STAND ALLO WED TO THAT LIMITED EXTENT. 6. FINALLY, THE APPEAL STANDS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED ON 25 TH JANUARY, 2021 SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 25/01/2021 SR.PS, JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT 3. - ( ) / THE CIT(A) 4. - / CIT CONCERNED 5. ./% ( 0 , 0 , / DR, ITAT, MUMBAI 6. /123 / GUARD FILE 6 / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.