ITO 14(1)(1), MUMBAI V. AMISCO AGROCHEM P.LTD, MUMBAI

ITA 8/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 6010 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Assessee Lawyers: UPASNA SOLANKI
• Keywords: Surrender of tenancy right; Set aside
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 0 8 /MUM/2017 ASSESSMENT YEAR : 2012 - 13 INCOME TAX OFFICER - 1 4(1) (1), MUMBAI VS. M/S. AMISCO AG R OCHEM PVT. LTD., AKHAND JYOTI NO. 2, 8 TH R OAD, SANTACRUZ EAST, MUMBAI [PAN : AA ACA 4186 A ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATISH CHANDRA RAJORE, DR RESPONDENT BY : SHRI DEEPAK SHAH , & MS. UPASNA SOLANKI, A R S DATE OF HEARING : 0 5 - 12 - 201 8 DATE OF PRONOUNCEMENT : - 31 - 12 - 201 8 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: TH IS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 22 , MUMBAI, DATED 28 - 1 0 - 201 6 . REVENUE HAS RAISED THE FOLLOWING GROUNDS: ITA NO. 0 8 /MUM/2017 : 2 : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING AN AMOUNT OF RS. 2 CRORES REFLECTED IN THE BALANCE SHEET BY THE ASSESSEE AS COMPENSATION PAYABLE ON SURRENDER OF TENANCY RIGHT TO M/S. AMISCO PESTICIDES LTD., WAS NON - EXISTING LIABILITY. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE ASSESSEES APPEAL ON THE GROUND THAT THE ASSESSEE HAD SHOWN THE SUM OF RS. 2 CRORES AS COMPENSATION PAY ABLE AND ADVANCES SEPARATELY ON LIABILITY AND ASSET SIDES WITHOUT NETTING OFF EACH OTHER. 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. GROUND NO. 4 IS GENERAL IN NATURE. 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS AGAINST DELETING THE AMOUNT OF RS. 2 CRORES BY THE CIT(A) , WHICH IS REFLECTED IN THE BALANCE SHEET OF ASSESSEE AS COMPENSATION PAYABLE ON SURRENDER OF TENANCY RIGHTS TO M/S. AMISCO PESTICIDES LTD., (APL) AS AGAINST THE ADDITION BY THE AO ON ACCOUNT OF NON - EXISTENCE LIABILITY. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAD ENTERED INTO DEVELOPMENT AGREEMENT WITH M/S. UNIQUE REALTORS AND AGREED TO GRANT DEVELOPMENT RIGHTS ON PART OF THE LAND OCCUPIE D BY BUILDING NO. 1 INCLUDING A GARAGE/OUTHOUSE FOR A CON SIDERATION OF RS. 2,96,00,000/ - . ANOTHER ENTITY, APL WAS IN OCCUP ATION OF FIVE NUMBERS OF FLATS AND OUTHOUSE IN THE ITA NO. 0 8 /MUM/2017 : 3 : SAID BUILDING AS TENANT. SINCE THE ASSESSEE WAS TO HANDOVER THE VACANT POSSESSION OF THE BUILDING TO THE DEVELOPER, FREE OF TENANTS AND TENANCY RIGHTS, ASSESSEE AGREED TO PAY APL A SUM OF RS. 2 CRORES AS CONSIDERATION FOR SURRENDER OF TENANCY RIGHTS. IN THE YEAR 2006, ASSESSEE HAD ADVANCED A SUM OF RS. 2 CRORES TO APL AS AN INTER C ORPORATE LOAN, WHICH WAS DUE FROM THE SAID COMPANY AND AT THE TIME OF VA CATION OF TENANCY RIGHTS, ASSESSEE AND APL MUTUALLY AGREED TO TREAT THE SAID AMOUNT AS COMPENSATION FOR TERMINATION OF TENANCY RIGHT S AND MADE THE NECESSARY ACCOUNTING ENTRIES IN THE BOOKS OF ACCOUNTS . HOWEVER, IN THE BOOKS OF ACCOUNT AND BALANCE SHEET, THESE TWO AMOUNTS REMAIN SEPARATELY LYING IN DIFFERENT ACCOUNT S ONE ON THE LIABILITY SIDE UNDER THE HEAD COMPENSATION PAYABLE AND ANOTHER AS LOANS AND ADVANCES IN T HE BALANCE SHEET, AS THE SAME W ERE NOT NETTED OFF. THE SAID PAYMENT WAS MADE BY THE DEVELOPER, M/S. UNIQUE REALTORS DIRECTLY TO SBI, WITH WHOM THE SAID PREMISES W ERE MORTGAGED FOR SECURING LOAN BY APL IN ORDER TO OBTAIN NOC FROM SBI FOR DEVELOPING THE PROPERTY. IN OTHER WORDS, THE INTER CORPORATE LOAN DEPOSIT BETWEEN THE ASSESSEE AND APL WAS ROUTED THROUGH DEVELOPER TO THE BANK OF APL AND THIS IS HOW THIS ITA NO. 0 8 /MUM/2017 : 4 : WHOLE TRANSACTION TOOK PLACE. FINALLY, THE PAYMENT MADE BY ASSESSEE TO THE APL OF RS. 2 CRORES IS TREATED AS COMPENSATION FOR TERMINATION OF TENANCY RIGHTS AND THE ENTRIES WERE MADE IN THE BOOKS OF ACCOUNT ACCORDINGLY. AO NOT BEING SATISFIED WITH THE SAID ENTRY, ADDED THE SAME AS NON - EXISTENT LIABILITY BY OBSERVING AS UNDER: THE SUBMISSIONS FILED BY THE ASSESSEE COMPANY HAVE BEEN DULY CONSIDERED. HOWEVER, THE SAME IS NEITHER CONVINCING NOR ACCEPTABLE. THE VERY DEED DATED 14.08.2011 ON WHICH THE ASSESSEE COMPANY HEAVILY RELYING UPON ITSELF SPELLS THAT THE AMOUNT OF RS. 2,00,00,000 / - WAS ALREADY RECEIVED BY M/S.AMISCO PESTICIDES LIMITED ON 15.05.2006 AND THE AMOUNT WAS KEPT AS LOAN FIRST IN THE BOOKS OF THE ASSESSEE COMPANY LATER ON TREATED AS COMPENSATION PAID. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE COMPANY HAS ALREADY DISCHARGED THE LIABILITY OF PAYMENT OF COMPENSATION AND THE SAME IS NOT EXISTENT. IN THE SUBMISSIONS, THE ASSESSEE COMPANY HAS FAILED TO BRING ANY MATERIAL FACT TO SHOW THAT THE AMOUNT PAYABLE OF RS . 2,00,00,000 / - EXISTENT IN THE BALANCE SHEET IS A SEPARATE AMOUNT AND THE AMOUNT OF RS.2,00,00,000 / - ALREADY PAID BY M/S.UNIQUE REALTORS ON BEHALF OF ASSESSEE COMPANY TO M/S.AMISCO PESTICIDES LIMITED A SEPARATE ONE. IN THE SUBMISSIONS, THE ASSESSEE HAS ONLY STRESSED REGARDING THE TREATMENT ON THE ASSET SI DE AND NOT ON THE LIABILITY SIDE. FURTHER, THE ASSESSEE HAS FAILED TO PROVIDE AN Y BANK STATEMENT TO SHOW THAT SUCH AMOUNT OF RS. 2,00,00,000/ - HAS BEEN GIVEN AS ICL (INTER CORPORATE LOAN). FROM THE ABOVE, IT IS CLEAR THAT THE AMOUNT SHOWN AS COMPENSATION P AYABLE IN THE BOOKS OF THE ASSESSEE TO THE TUNE OF RS. 2,00,00,000/ - IS A NON - EXISTENT LIABILITY. 4. IN THE APPELLATE PROCEEDINGS, LD. CIT(A) ALLOWED THE APPEAL OF ASSESSEE AFTER CONSIDERING AND TAKING INTO ACCOUNT ITA NO. 0 8 /MUM/2017 : 5 : THE CONTENTIONS AND SUBMISSIONS OF ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 4.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE APPELLANT'S SUBMISSIONS. IT IS SEEN THAT THE OUT OF THE TOTAL CONSIDERATION OF RS. 2,96,00,000 / - RECEIVABLE BY FROM M/S. UNIQUE REALTORS, THE SUM OF RS. 2,00,00,000 / - WAS PAID DIRECTLY BY M/S. UNIQUE REALTORS TO SBI ON 15.05.2006 AGAINST LOAN OF AIMCO PESTICIDES LTD.(APL) ON BEHALF OF THE APPELLANT WHICH WAS OTHERWISE PAYABLE TO THE APPELLANT IN TERMS OF THE DEVELOPMENT AGREEMENT. THIS WAS TREATED AS AN IN TER CORPORATE LOAN GIVEN TO APL. THE SAID AMOUNT WAS SHOWN IN BALANCE SHEET AS DEPOSIT FOR PREMISES BY UNIQUE REALTORS IN THE LIABILITY SIDE OF BALANCE SHEET, AND CORRESPONDING AMOUNT PAID DIRECTLY TO APL WAS SHOWN AS LOAN GIVEN TO AIMCO PESTICIDES LTD IN THE ASSET SIDE OF THE BALANCE SHEET. IT HAS BEEN EXPLAINED THAT SUBSEQUENTLY, IN FY10 - 11 THE TRANSACTION WITH UNIQUE REALTORS WAS COMPLETED BY GIVING POSSESSION AND PROFIT ON SALE OF ASSET W AS A CCOUNTED. DURING THAT YEAR THE AMOUNT PAYABLE TO APL OF RS. 2, 00,00,000 / - WAS SHOWN AS COMPENSATION PAYABLE UNDER CURRENT LIABILITY - SCHEDULE OF 8, BY DEBITING THE FIXED ASSET VIZ BUILDING NO1. PERUSAL OF THE LEDGER ACCOUNT OF AIMCO PESTICIDES LTD SHOWS THAT DURING SAID YEAR APL REPAID THE MAJOR PART OF ADVANCE GIVEN IN THE YEAR 2006 - 07, AND CLOSING BALANCE WAS ONLY RS. 25,55,385 / - WHICH WAS CLEARED IN FY 11 - 12 & FY 12 - 13. IT IS ALSO SEEN THAT THE APPELLANT HAS TREATED THE ABOVE TWO TRANSACTIONS SEPARATELY AND THE BALANCES OF THE TWO ACCOUNTS HAS BEEN SHOWN AT GROSS F IGURES ON THE LIABILITY SIDE AND THE ASSET SIDE OF THE BALANCE SHEET IE. WITHOUT NETTING IT OFF AGAINST EACH OTHER. IT IS SEEN FROM THE DETAILS SUBMITTED THAT THE MAJOR PART OF RS. 2,00,00,000 / - SHOWN AS PAYABLE TO APL AS COMPENSATION WAS ALSO PAID IN FY 1 3 - 14. CONSIDERING ALL THESE FACTS, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE COMPENSATION PAYABLE OF RS. 2,00,00,000 / - AS A NON - EXISTENT LIABILITY AND ADDING IT TO THE INCOME OF THE APPELLANT. THE SAME IS ACCORDINGLY DELETED. THE APPELLANT'S GROUND OF APPEAL IS ALLOWED . 5 . AFTER HEARING THE RIVAL CONTENTIONS, PERUSING THE MATERIAL ON RECORD, INCLUDING THE IMPU GNED ORDER, WE OBSERVE FROM THE ITA NO. 0 8 /MUM/2017 : 6 : FACTS ON RECORD BEFORE US THAT THE WHOLE TRANSACTION OF INTER CORPORATE LOAN BETWEEN ASSESSEE AND APL WAS TRANSACTED IN ORDER TO GET IT DISCHARGED OF MORTGAGE FROM SBI, FROM WHOM APL HAS B ORROWED MONEY AND THE SAID FIVE FLATS AND OUTHOUSE OCCUPIED BY THE APL IN BUILDING NO.1, WHICH WAS AGREED TO BE DEVELOPED BY M/S. UNIQUE REALTOR S FOR A CONSIDERATION OF RS. 2,96,00,000/ - . THE WHOLE TRANSACTION WAS ROUTED IN SUCH A MANNER THAT M/S. UNIQUE REALTORS PAID THE MONEY OF RS. 2 CRORES TO SBI DIRECTLY ON BEHALF OF APL, WHICH WAS TREATED AS INTER CORPORATE LOAN BY THE ASSESSEE TO APL AND FINALLY, THE SAID AMOUNT PAID BY ASSESSEE TO THE APL THROUGH M/S. UNIQUE REALTORS WAS TREATED AS COMPENSATION FOR TERMINATION OF TENANCY RIGHTS FOR WHICH NECESSARY AGREEMENT WAS MADE IN B LACK AND W HITE AND REDUCED T O WRITING. AFTER TAKING INTO ACCO UNT THE FACTS AND CIRCUMSTANCES AND BALANCE SHEET/LEDGER ACCOUNTS FILED BY THE ASSESSEE, WE FIND THAT THE ONLY MISTAKE ON THE PART OF ASSESSEE IS THAT ASSESSEE HAS SHOWN THE TWO TRANSACTIONS VIZ., COMPENSATION PAYABLE AND ADVANCE PAID ON BOTH SIDES OF THE BALANCE SHEET AND HAS NOT NETTED THE SAME AGAINST EACH OTHER AS THE COMPENSATION PAYABLE WAS ALREADY DISCHARGED BY WAY OF INTER CORPORATE ITA NO. 0 8 /MUM/2017 : 7 : LOAN, WHICH WAS GIVEN EARLIER. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDINGS OF T HE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT(A). GROUNDS RAISED BY REVENUE ARE DISMISSED. 6 . IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF DECEMBER, 2018 SD/ - SD/ - (MAHAVIR SINGH) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI; / DATED : 31 ST DECEMBER, 2018 TNMM / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) , MUMBAI 4. / CIT, MUMBAI 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE ITA NO. 0 8 /MUM/2017 : 8 : / BY ORDER, //TRUE COPY// / (DY./ASST. REGISTRAR) , / ITAT, MUMBAI