VIDYASAGAR INVESTMENTS P.LTD, MUMBAI V. ITO 9(3)(3), MUMBAI

ITA 6764/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93327 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 22-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Competent authority

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI A.D. JAIN, JM AND SHRI N.K. BILLAIYA, A M .. , . . , ./ I.T.A. NO. 6764 /MUM/2013 ( / ASSESSMENT YEAR : 2010-11 VIDYASAGAR INVESTMENTS PRIVATE LIMITED, 6 TH FLOOR, BUSINESS PARK, S.V. ROAD, CHINCHOLI PHATAK, MALAD (W), MUMBAI 400 064. / VS. THE INCOME TAX OFFICER 9(3)(3), 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20. ./ PAN : AABCV 1066 B ( ! / APPELLANT ) .. ( '# ! / RESPONDENT ) APPELLANT BY SHRI HARIDAS BHATT RESPONDENT BY : SHRI PAVAN KUMAR BEERLA $ % & ' ( ) / DATE OF HEARING : 08-07-2015 *+,- ' ( ) / DATE OF PRONOUNCEMENT : 29-07-2015 [ . / O R D E R PER A.D. JAIN, J.M . : .. , THIS IS ASSESSEES APPEAL FOR A.Y. 2010-11, AGAINST THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 75 LACS RE PRESENTING SETTLEMENT AMOUNT PAID BY A THIRD PARTY, ON BEHALF OF THE ASSE SSEE, CONSIDERING THE SAME AS COVERED U/S 40A(IA) OF THE INCOME TAX ACT, 1961. 2. THE FACTS ARE THAT THE ASSESSEE HAD GIVEN ITS LA ND AT CHANDKHEDA, DIST. GANDHINAGAR, GUJARAT, FOR DEVELOPMENT/CONSTRUCTION OF PROJECT TO ONE M/S SAROVAR DEVELOPERS VIDE AGREEMENT DTD. 25.01.2008. THE SAID DEVELOPER HAD ITA 6764/M/13 2 AGREED TO CONSTRUCT THE BUILDING, AS PER APPROVED P LAN, FOR A CONSIDERATION OF RS. 6,75,60,000/-. THE REQUIREMENT OF OBTAINING BUI LDING USAGE PERMISSION HAVING NOT BEEN MET BY THE DEVELOPER, THE REMAINING AMOUNT OF RS. 70,00,000/- WAS WITHHELD BY THE ASSESSEE. THE DEVEL OPER FILED A CIVIL SUIT AGAINST THE ASSESSEE. HOWEVER, THE DISPUTE WAS SETT LED BY AN AGREEMENT DATED 20-5-2009, OUT OF COURT AND THE ASSESSEE AGREED TO PAY AN AMOUNT OF RS. 75 LACS TO THE DEVELOPER, AS DEVELOPMENT CHARGES. THIS AMOUNT, HOWEVER, WAS PAID BY M/S SILVERLINE ENTERPRISES, THE PURCHASER O F THE BUILDING, TO THE DEVELOPER, WITHOUT MAKING TDS THEREON. THE ASSESSEE CLAIMED THE EXPENDITURE U/S 40(A)(IA) OF THE ACT. THE A.O. DISA LLOWED THE CLAIM, HOLDING THAT THE AMOUNT WAS PAYABLE IN RESPECT OF DEVELOPME NT CHARGES OR CONTRACT CHARGES AND, THEREFORE, TDS HAD TO BE MADE U/S 194- C OF THE ACT, WHICH WAS NOT DONE, AND SO, BY VIRTUE OF THE PROVISIONS OF SE CTION 40(A)(IA) OF THE ACT, THIS EXPENDITURE, DEBITED TO THE P&L ACCOUNT OF THE ASSE SSEE, WAS DISALLOWED. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE. 3. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CONT ENDED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 75 LACS U/S 40(A)(IA) OF THE ACT, THOUGH IT REPRESENTED SETTLEMENT AMOUNT PAID BY THE THIRD PARTY ON BEHALF OF THE ASSESSEE AND IT WAS NOT PAID AGAINST ANY CONTRA CT, BUT WAS OUT OF COURT SETTLEMENT PAID TO CLEAR THE TITLE OF THE PROPERTY. 4. THE LD. D.R. HAS PLACED STRONG RELIANCE ON THE I MPUGNED ORDER. IT HAS BEEN CONTENDED THAT THE PROPERTY WAS GIVEN FOR DEVE LOPMENT OR CONSTRUCTION AND THE ASSESSEE WAS TO PAY AN AMOUNT OF RS. 6,75,6 0,000/- FOR THE CONSTRUCTION, OUT OF WHICH, A SUM OF RS. 75 LACS RE MAINED UNPAID. IT WAS THIS CONTRACTUAL PAYMENT, WHICH HAS ROUTED BY THE ASSESS EE, IN ORDER TO AVOID TAX THROUGH THE ALLEGED OUT OF COURT SETTLEMENT, WHICH HAS BEEN RIGHTLY REJECTED BY THE LD. CIT(A). ITA 6764/M/13 3 5. HAVING HEARD THE PARTIES AND HAVING PERUSED THE MATERIAL ON RECORD, WE FIND THAT IT REMAINS UNDISPUTED THAT THE CONTRACTOR FILED A CIVIL SUIT AGAINST THE ASSESSEE. HOWEVER, THE DISPUTE WAS SETTLED OUT OF COURT BY AN AGREEMENT DATED 20-5-2009 WHEREBY, THE ASSESSEE AGREED TO PAY RS. 75 LACS TO THE CONTRACTOR, AS DEVELOPMENT CHARGES. THIS AMOUNT WAS PAID TO THE CONTRACTOR, ON BEHALF OF THE ASSESSEE, BY M/S SILVER LINE ENTER PRISES, THE PURCHASER OF THE BUILDING. TDS, HOWEVER, WAS NOT MADE THEREON. THE RELEVANT RECITAL IN THE DEED OF CANCELLATION IS AS FOLLOWS:- AS PER THE SAID DEVELOPMENT AGREEMENT THE FIRST PAR TY HAS AGREED TO PAY THE SECOND PARTY TOTAL CONSTRUCTION C OST OF RS. 6,75,60,000/- OUT OF WHICH FIRST PARTY HAS PAID TO THE SECOND PARTY RS. 6,05,60,000/- (RUPEES SIX CRORE FIVE LACS SIXTY THO USAND ONLY) BY DIFFERENT CHEQUES, WHICH THE SECOND PARTY HEREBY AC KNOWLEDGES TO HAVE RECEIVED. THE FIRST PARTY HAS TO PAY TO THE SECOND PARTY REMA INING AMOUNT OF RS. 70,00,000/- (RUPEES SEVENTY LACS ONLY) ON RE CEIVING OF B.U. PERMISSION FROM COMPETENT AUTHORITY. THEREFORE, IT IS SETTLED BETWEEN BOTH THE PARTIES THAT DUE TO CIRCUMSTANCES BEYOND T HE CONTROL OF BOTH THE PARTIES B.U. PERMISSION HAS NOT BE RECEIVED. HENCE , IT IS AGREED BETWEEN FIRST PARTY AND SECOND PARTY THAT FIRST PARTY WILL PAY RS. 75,00,000/- (RUPEES SEVENTY FIVE LACS ONLY) INCLUDING INTEREST AS A FULL AND FINAL SETTLEMENT TOWARDS THE DEVELOPMENT OF THE SAID PROP ERTY. 6. THE AMOUNT OF RS. 70 LACS, AS ABOVE, WAS THUS AG REED NOT PAYABLE BY THE ASSESSEE. OUT OF COURT SETTLEMENT AND PAYMENT O F RS. 75 LACS IN PURSUANCE THEREOF WAS MADE DIRECTLY BY THE PURCHASE R OF THE BUILDING TO THE DEVELOPER. 7. IN OUR CONSIDERED OPINION, THE PAYMENT IN QUESTI ON, AS AVAILABLE FROM THE ABOVE FACTS, WAS NOT IN CONSEQUENCE OF ANY WORK CARRIED OUT BY THE CONTRACTOR FOR THE ASSESSEE, BUT IT WAS AGREED PAYM ENT TO GET THE TITLE OF THE PROPERTY CLEARED, BY WAY OF OUT OF COURT SETTLEMENT OF THE SUIT FILED BY THE CONTRACTOR. THUS, THE ASSESSEE WAS CORRECT IN NOT MAKING TDS ON THE AMOUNT PAID BY THE PURCHASER, M/S SILVERLINE ENTERPRISES, DIRECTLY TO THE CONTRACTOR, M/S SAROVAR DEVELOPER, ON BEHALF OF THE ASSESSEE. AS SUCH, THE PROVISIONS OF ITA 6764/M/13 4 SECTION 40(A)(IA) OF THE ACT DO NOT GET ATTRACTED. THEREFORE, THE LD. CIT(A) HAS ERRED IN APPLYING THE DECISIONS OF TORQUE PHARMACE UTICALS PVT. LTD. VS. ADDL. CIT, 577 (2011) TIOL 577 (ITAT CHANDIGARH) AND A CIT VS. GRANDPRIX FAB (P) LTD., 34 DTR 248, ITAT , DELHI INASMUCH AS IN THE PRESENT CASE, THE PAYMENT MADE WAS NOT QUA ANY WORK CONTRACT BUT WAS MADE TO GET A CLEAR TITLE OF THE PROPERTY. 8. FOR THE ABOVE DISCUSSION, THE GRIEVANCE OF THE A SSESSEE IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. THE ADDITION OF RS. 75 LACS MADE BY THE A.O., AS CONFIRMED BY THE LD. CIT(A), IS CANCELLED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2015. . ' *+,- $ /0 1 2 29-07-2015 . + ' :& SD/- SD/- (N.K. BILLAIYA) (A.D. JAIN ) ACCOUNTANT MEMBER /J UDICIAL MEMBER / $ & MUMBAI ; 1 DATED 29-7-2015 [ %.../ R.K. R.K. R.K. R.K. , SR. PS ITA 6764/M/13 5 ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. $ F( () / THE CIT(A)-20, MUMBAI 4. $ F( / CIT -9, MUMBAI 5. I%J : '(KL , ) KL- , / $ & / DR, ITAT, MUMBAI F BENCH 6. : M N & / GUARD FILE. ! ( / BY ORDER, # I( '( //TRUE COPY// )/(* + ( DY./ASSTT. 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