PRANAY INVESTMENT, MUMBAI V. ASST CIT 22(1), NAVI MUMBAI

ITA 828/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100765 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 05-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI R. C. SHARMA , ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ./ I.T.A. NO. 828/MUM/2014 ( / ASSESSME NT YEAR: 2009 - 10 ) PRANAY INVESTMENTS D WING, KARAN SANKALP, CORNER OF 6 TH 7 TH ROAD, RAJAWADI, GHATKOPAR (E), MUMBAI - 400 077 / VS. ASST. CIT - 22(1), VASHI, NAVI MUMBAI ./ ./ PAN/GIR NO. ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI J. P. BAIRAGRA / RESPONDENT BY : SHRI B. S. BIST / DATE OF HEARING : 13.08.2015 / DATE OF PRONOUNCEMENT : 19 .08.2015 / O R D E R PE R R. C. SHARMA , A. M.: THIS IS AN A PPEAL FILED BY THE ASSESSEE AGAINST THE O RDER BY THE LD. CIT(A) - 33 , MUMBAI DATED 02.12.2013 FOR THE ASSESSMENT YEAR (A.Y.) 2009 - 10. THE ASSESSEE IS AGGRIEVED FOR DISALLOWANCE OF INTEREST PAID TOWARDS LATE PAYMENT OF TRAN SFER DEVELOPMENT RIGHTS (TDR) U/S. 40(A)(IA) OF THE I. T. ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THA T THE MAIN BUSINESS OF THE ASSESSEE FIRM IS DEALING IN TRANSFER OF DEVELOPMENT RIGHTS. DURING THE SCRUTINY ASSESS MENT, THE A.O. FOUND THAT THE ASSESSEE HAS PAID INTEREST OF 2 ITA NO. 828/MUM/2014 (A.Y. 2009 - 10) PRANAY INVESTMENTS VS. ASST. CIT ` .10,13,906/ - ON LATE PAYMENT OF TDR TO SHIVSAHI PUNARVASAN PRAKALY LTD. IT IS SEEN THAT NO TAX HAS BEEN DEDUCTED ON THE SAID AMOUNT. BY INVOKING PROVISIONS OF SECTION 40(A)(IA), THE A.O. DISALLOW ED THE ENTIRE SUM AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ADDITION AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. IT WAS ARGUED BY THE LD. AR THAT THE PAYMENT OF INTEREST ON D ELAYED PAYMENT OF TDR WAS COMPENSATORY IN NATURE AND DID NOT RELATE TO ANY DEPOSIT/DEBT/ LOAN , THEREFORE , THE PROVISIONS OF SECTION 194A WAS NOT ATTRACTED , A CCORDINGLY, THE ASSESSEE WAS NOT LIABLE TO DEDUCT THE TDS THEREON . R ELIANCE WAS PLACED ON THE DECISI ON S IN THE CASE OF ITO VS. PARAG MAHASUKHLAL SHAH [2011] 12 TAXMANN.COM 37 (AHMBD.); SRI VENKATESH PAPER AGENCIES (HYD.) (P.) LTD. VS. DY. CIT [2012] 24 TAXMANN.COM 52 (HYD.); VISWAPRIYA FINANCIAL SERVICES & SECURITIES LTD. VS. CIT [2003] 127 TAXMANN 385 ( MAD.); AND THE DECISION OF TRIBUNAL INT EH CASE OF ASST. CIT VS. RISHTI STOCK AND SHARES PVT. LTD. 9IN ITA NO. 112/MUM/2012 DATED 02.08.2013). 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES BELOW. 6. WE HAVE CONSIDERED T HE RIVAL CONTENTIONS AND FOUND FROM THE RECORD THE MAIN BUSINESS OF THE ASSESSEE WAS DEALING IN DEVELOPMENT RIGHTS. DURING THE YEAR THE ASSESSEE PAID INTEREST OF ` . 10, 13,906/ - ON SUCH TDR W ITHOUT DEDUCTION OF TAX AT SOURCE, THEREFORE, THE A.O. INVOKED THE PROVISIONS OF SECTION 40(A)(IA) AND DISALLOWED THE SAME. THE GENUINENESS OF PAYMENT OF INTEREST WAS NOT IN DOUBT, THE A.O. WAS OF THE VIEW THAT THE TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE. AS PER THE JUDICIAL PRONOUNCEMENT LAID DOWN IN CASE OF PARAG MANS UKLAL (SUPRA) , WE FOUND THAT WHEN PAYMENT OF INTEREST IS COMPENSATORY IN NATURE AND NOT RELATE TO ANY DEPOSIT/DEBT/LOANS THAN SUCH PAYMENT IS OUT OF AMBIT ON SECTION 194A. SIMILAR VIEW HAS BEEN TAKEN BY HYDERABAD BENCH IN THE CASE OF SRI VENKATESH PAPER AG ENCIES (HYD.) (P.) LTD. (SUPRA), IT WAS HOLD THAT A PAYMENT WHICH HAS DIRECT LINK AND IMMEDIATE NEXUS WITH TRADING LIABILITY BEING CO NNECTED WITH 3 ITA NO. 828/MUM/2014 (A.Y. 2009 - 10) PRANAY INVESTMENTS VS. ASST. CIT DELAYED PAYMENT S OF PURCHASE BILLS, WILL NOT FALL WITHIN THE CATEGORY OF INTEREST AS DEFINED U/S. 2(28A), THER EFORE WHILE PAYING THE INTEREST ON DE LAYED PAYMENT OF PURCHASE BILLS , THE ASSESSEE IS NOT LIABLE TO DEDUCT THE TAX AT SOURCE U/S. 194J. 7. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENT, SINCE THE PAYMENT OF INTEREST WAS COMPENSATORY IN NATURE, RESPECTFULLY FOLLOWING THE DECISION OF THE C O - ORDINATE BENCH, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES FOR DECLINING THE SAME U/S. 40(A)(IA) ON THE PLEA OF NON DEDUCTION OF TAX AT SOURCE. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 19 , 201 5 SD/ - SD/ - ( PAWAN SINGH ) ( R. C. SHARMA ) / JUDICIAL MEMBER / ACC OUNTANT MEMBER / MUMBAI ; / DATED : 19 . 0 8 .201 5 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDEN T 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI