Sh. Nirankar Singh, Mohali V. ACIT, Mohali

ITA 903/CHANDI/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5038 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 16-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SMT. DIVA SINGH , JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.903/CHD/2013 ASSESSMENT YEAR: 2010-11 SH. NIRANKAR SINGH VS. ACIT SCF 71 CIRCLE 6(1) PHASE 10, MOHALI MOHALI PAN NO. ABRPS0919A & ITA NOS. 216 & 217 /CHD/2017 ASSESSMENT YEARS: 2012-13 & 2013-14 ITO VS. SH. NIRANKAR SINGH WARD6(1) SCF 71, PHASE X MOHALI MOHALI PAN NO. ABRPS0919A (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. PARIKSHIT AGGARWAL REVENUE BY : SMT. CHANDRAKANTA DATE OF HEARING : 04/07/2017 DATE OF PRONOUNCEMENT : 26/07/2017 ORDER PER B.R.R. KUMAR A.M. THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 903/CHD /2013 AGAINST THE ORDER OF LD. CIT(A) DT. 03/07/2013 FOR ASSESSMENT Y EAR 2010-11, AND CROSS APPEALS FILED BY THE REVENUE IN ITA NOS. 216/CHD/20 17 & 217/CHD/2017 AGAINST THE ORDER OF LD. CIT(A) DT. 17/11/2016 FOR ASSESSME NT YEAR 2012-13 & 2013-14 RESPECTIVELY. 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS IN AY 2010 -11: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, WORTHY CIT (APPEALS) THROUGH HIS ORDER DATED 03.07.2013 HA S ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF PROVISIONS OF SECTION 250(6) OF TH E INCOME TAX ACT, 1961. 2. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE , VIDE PARA 4.3 OF HIS ORDER, WORTHY CIT(A) HAS ERRED IN CONFIRMING THE AD DITION OF RS. 32,77,950/- BY ERRONEOUSLY INVOKING THE PROVISIONS OF SEC 36(L)(II I) OF THE ACT ON HIS OWN 2 A. EVEN WHEN THE LD. AO HAS NOT DISALLOWED THE SAME U/S 36(1)(III) BUT HAS DISALLOWED IT U/S 40(A)(IA) AND THE APPELLA NT WAS NOT GRANTED ANY OPPORTUNITY BY THE WORTHY CIT(A) TO ARG UE ON THE MATTER OF DISALLOWANCE U/S 36(1)(III) ; B. EVEN WHEN THE SAID SECTION WAS NEVER INVOKED BY LD. AO AND THE ISSUE OF INVOCATION OF SEC 36(L)(III) WAS DULY ACCE PTED BY LD. A.O. C. WHICH ACTION OF WORTHY CIT(A) IS BEYOND HIS POWE RS UNDER THE ACT. D. WITHOUT AFFORDING ANY OPPORTUNITY TO THE APPELLA NT TO ARGUE ON THIS ANGLE OF THE ISSUE AS THIS ISSUE WAS NEVER DISPUTED BY LD. AO AND THE APPELLANT CAME TO KNOW ABOUT THIS ANGLE ONLY FR OM THE ORDER OF WORTHY CIT(A). 3. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE , VIDE PARA 4.3 OF HIS ORDER, WORTHY CIT(A) HAS ERRED IN CONFIRMING THE AC TION OF LD. AO OF NOT ALLOWING THE DEDUCTION OF INTEREST OF RS. 32,77,950/-, PAID TO PUDA AND CLAIMED AS A BUSINESS EXPENSE, WHICH WAS IN RESPECT OF INSTALLME NTS OF SHOWROOM SITE ALLOTTED BY PUDA BY ERRONEOUSLY HOLDING AS UNDER : A. MAKING ADDITION OF RS. 32,77,950/- IN RESPECT O F INTEREST PAID TO PUDA BY WRONGLY INVOKING THE PROVISIONS OF SEC 40(A)(IA) EV EN WHEN THE APPELLANT WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 194-A OF THE A CT AND HENCE INVOCATION OF PROVISIONS OF SEC 40(A)(IA) FOR THE IMPUGNED DISALL OWANCE WAS UNJUSTIFIED. B. MAKING ADDITION OF RS. 32,77,950/- IN RESPECT OF INTEREST PAID TO PUDA BY WRONGLY INVOKING THE PROVISIONS OF SEC 40(A )(IA) EVEN WHEN THE PROVISIONS OF SAID SECTION ARE NOT APPLICA BLE OVER THE IMPUGNED TRANSACTION. C. LD. AO HAS ERRED IN MAKING ADDITION OF RS. 32,77 ,950/- IN RESPECT OF INTEREST PAID TO PUDA BY ERRONEOUSLY HOLDING THA T THE SAID EXPENSE IS DISALLOWABLE SINCE THE APPELLANT HAS ALL EGEDLY VIOLATED THE TERMS AND CONDITIONS OF AUCTION BY PUDA. 3. AFTER RAISING ABOVE GROUNDS ASSESSEE FILED AN AP PLICATION IN WHICH HE HAS FILED REVISED GROUNDS OF APPEAL WHICH ARE AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, WORTHY CIT(APPEALS) THROUGH HIS ORDER DATED 03.07.2013 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF PROVISIONS OF SECTION 250(6) OF TH E INCOME TAX ACT, 1961. 2. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE, V IDE PARA 4.3 OF HIS ORDER, WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO OF NOT ALLOWING THE DEDUCTION OF INTEREST OF RS. 32,77,950/-, PAID TO P UDA AND CLAIMED AS A BUSINESS EXPENSE, WHICH WAS IN RESPECT OF INSTALLMENTS OF SH OWROOM SITE ALLOTTED BY PUDA BY ERRONEOUSLY HOLDING AS UNDER: A. MAKING ADDITION OF RS. 32,77,950/- IN RESPECT OF IN TEREST PAID TO PUDA BY WRONGLY INVOKING THE PROVISIONS OF SEC 40(A )(IA) EVEN WHEN THE APPELLANT WAS NOT REQUIRED TO DEDUCT TAX AT SOU RCE U/S 194-A OF THE ACT AND HENCE INVOCATION OF PROVISIONS OF SEC 4 0(A)(IA) FOR THE IMPUGNED DISALLOWANCE WAS UNJUSTIFIED. B. MAKING ADDITION OF RS. 32,77,950/- IN RESPECT OF IN TEREST PAID TO PUDA BY WRONGLY INVOKING THE PROVISIONS OF SEC 40(A )(IA) EVEN WHEN THE PROVISIONS OF SAID SECTION ARE NOT APPLICABLE O VER THE IMPUGNED TRANSACTION. 3 C. LD. AO HAS ERRED IN MAKING IMPUGNED ADDITION OF RS. 32,77,950/- IN RESPECT OF INTEREST PAID TO PUDA BY ERRONEOUSLY HOL DING THAT THE SAID EXPENSE IS DISALLOWABLE SINCE THE APPELLANT HAS ALL EGEDLY VIOLATED THE TERMS AND CONDITIONS OF AUCTION BY PUDA. 3. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE, V IDE PARA 4.3 OF HIS ORDER, WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 32,77,950/- BY ERRONEOUSLY INVOKING THE PROVISIONS OF SEC 36(L)(II I) OF THE ACT ON HIS OWN EVEN WHEN THE CAPITAL ASSET, FOR WHICH THE BORROWED MONE Y WAS UTILIZED, HAD ALREADY BEEN PUT TO USE IN THE IMMEDIATELY PRECEDING YEAR. THIS ADDITION MADE BY THE WORTHY CIT(A) BY INVOKING THE PROVISIONS OF SEC.36( L)(III) IS ERRONEOUS, ILLEGAL AND DESERVES TO BE DELETED DUE TO THE FOLLOWING TANGENT S OF THE ISSUE I.E. ADDITION U/S 36(1)(III) MADE BY WORTHY CIT(A) WAS UNWARRANTED : A. WHEN THE LD. AO HAS NOT DISALLOWED THE SAME U/S 36(1)(III) BUT HAS DISALLOWED IT U/S 40(A)(IA) AND THE APPELLANT WAS N OT GRANTED ANY OPPORTUNITY BY THE WORTHY CIT(A) TO ARGUE ON THE MA TTER OF DISALLOWANCE U/S 36(I)(III). B. WHEN THE SAID SECTION WAS NEVER INVOKED BY LD. A O AND THE ISSUE OF INVOCATION OF SEC 36(L)(III) WAS DULY ACCEPTED BY L D. A.O. C. WHICH ACTION OF WORTHY CIT(A) IS BEYOND HIS POW ERS UNDER THE ACT. D. AS THE SAME WAS MADE WITHOUT AFFORDING ANY OPPOR TUNITY TO THE APPELLANT TO ARGUE ON THIS ANGLE OF THE ISSUE AS TH IS ISSUE WAS NEVER DISPUTED BY LD. AO AND THE APPELLANT CAME TO KNOW A BOUT THIS ANGLE ONLY FROM THE ORDER OF WORTHY CIT(A). 4. SINCE THE GROUND RAISED BY THE REVENUE IN AY 2012-1 3 AND 2013-14 ARE COMMON THEREFORE FOR THE SAKE OF CONVENIENCE WE REP RODUCE ONLY THOSE GROUNDS TAKEN IN ITA NO. 216/CHD/2017 FOR AY 2012-1 3 WHICH ARE AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN PARTLY ALLOWING APPEAL OF THE ASSESSEE WIT HOUT APPRECIATING THE FACTS OF THE CASE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.C IT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 32,77,950 /- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST PAID TO PUDA ON DELAYED PAYMENT OF INSTALLMENT OBSERVING THAT THE INTEREST CLAIMED BY THE ASSESSEE IS IN THE NATURE OF COMPENSATION FOR THE DELAYED PAYMENT OF INSTALLMENT AND NOT IN THE NATURE OF PENAL INTEREST AND IS ALLOWABL E AS BUSINESS EXPENSE IGNORING THE FACT THAT THE ASSESSEE HAD BREACHED TH E TERM AND CONDITIONS OF ALLOTMENT OF SITE BY PUDA BY NOT PAYING THE REGU LAR INSTALLMENT WITHIN THE PRESCRIBED TIME TO PUDA. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT THE TAX U/S 194A ON THE PAYMENTS OF INTEREST MADE TO PUDA, AS IT IS A NOTIFIED INSTITUTION U/S 194A(3)(III)(F) OF THE ACT WHEREAS THE NAME OF THE ASSESSEE DOES NOT EXIST IN THE SUCH NOTIFICATION ISSUED BY C BDT. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET AS IDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 4 ESSENTIALLY, THE APPEALS OF THE ASSESSEE AND THE RE VENUE REVOLVES AROUND TWO ISSUES. A) THE CIT(A) DELETED THE AMOUNT OF RS. 32,77,950/- PAID TO PUDA MADE BY AO INVOKING SECTION 194A AND CONSEQUENTLY SECTION 40(A )(IA). B) THE CIT(A) ERRED IN DISALLOWING THE AMOUNT OF RS . 32,77,950/- PAID TO PUDA BY INVOKING SECTION 36(I)(III) WITHOUT AFFORDING OPPOR TUNITY TO THE ASSESSEE. 5. BRIEF FACTS OF THE CASE ARE THAT THE AO HAS DISALLO WED AN AMOUNT OF RS. 32,77,950/- CLAIMED BY THE ASSESSEE UNDER THE HEAD INTEREST PAID TO PUDA. THIS INTEREST WAS PAID ON ACCOUNT OF PURCHASE OF COMMERC IAL SITE IN SECTOR 64, MOHALI FROM FREE HOLD BASIS BY PUDA VIDE AUCTION HE LD ON 20/09/2005. THE AO HAD HELD THAT AS PER THE PROVISION OF TDS 194 A R.W .S SECTION 40(A)(IA) TO DEDUCTION CLAIMED BY THE ASSESSEE HAS BEEN DISALLOW ED. 6. THE LD. CIT(A) HELD THAT THE AMOUNT BEING RELATABLE TO ACQUISITION OF THE CAPITAL ASSET WILL STAND DISALLOWED IN VIEW OF THE SPECIFIC PROVISION UNDER SECTION 36(1)(III) OF THE ACT. IT WAS FURTHER HELD THAT SIN CE THE AMOUNT IS OTHERWISE NOT ALLOWABLE TO QUESTION OF APPLICABILITY OF SECTION 4 0(A)(IA) DID NOT ARISE. THE RELEVANT EXTRACT OF THE LD.CIT(A) IS AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSION S OF THE LD. COUNSEL. AT THE OUTSET, IT MAY BE POINTED OUT THAT EVEN IF THE IMPUGNED INTEREST IS HE LD TO HAVE BEEN PAID FOR BUSINESS PURPOSES, THE AMOU NT BEING RELATABLE TO THE ACQUISITION OF THE CAPITAL AS SET WILL STAND DISALLOWED IN VIEW OF THE SPECIFIC PRO VISIONS OF SECTION 36(1)(III) OF THE ACT. THE CONTENTION OF THE APPELLANT THAT IT IS ALLOWABLE BUSINESS EXPENDITUR E IS THEREFORE NOT ACCEPTABLE. AS THE AMOUNT IS OTHERWISE NOT ALLOWABLE, QUESTION OF APPLICABILITY OF SECTION 40(A)(IA) DOES NOT ARISE. HENCE, THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER IS CONFIRMED, THOUGH FOR DIFFERENT REASONS. GROUND OF APPEAL NO. 3 IS DISMISSED . 7. BEFORE US LD. AR CONTENDED THAT THE TAXATION PROVIS IONS HAVE TO BE INTERPRETED STRICTLY ONLY WHEN THERE IS AN ELEMENT OF OFFENCE. IT WAS CONTENDED THAT IN THE CASE OF NON DEDUCTION OF TDS, SINCE IT IS NOT A CASE OF LOSS OF REVENUE AND THE RECIPIENT BEING THE GOVERNMENT AGENCY NON D EDUCTION SHOULD NOT LEAD TO DISALLOWANCE OF THE INTEREST PAID. HE FURTH ER ARGUED THAT DISALLOWANCE OF THE INTEREST UNDER SECTION 36(1)(III) BY THE CIT(A) OF HIS OWN WITHOUT AFFORDING ANY OPPORTUNITY TO THE ASSESSEE IS BAD IN LAW. 5 8. WE HAVE GONE THROUGH THE DOCUMENTS SUBMITTED BEFOR E US AND FOUND THAT PUDA IS AN AUTHORITY NOTIFIED BY NOTIFICATION NO. S .O. 3489 [NO.170(F.NO.12/164/68-ITCC/ITJ).] DATED 22/10/1970 .WHICH PROVIDES FOR EXEMPTION OF TDS .HENCE DISALLOWANCE ON ACCOUNT OF NON DEDUCTION OF TDS IS NOT WARRANTED IN THIS CASE ACCORDINGLY THE ASSESSEE GETS RELIEF OF RS. 32,77,950/- 9. REGARDING THE GROUND NO. 3,3(A) & 3D THE ASSESSEE C ONTENDED THAT NO OPPORTUNITY WAS GIVEN WHILE INVOKING SECTION 36(I)( III) THE MATTER IS REFERRED TO THE FILE OF LD. CIT(A) FOR THE AY 2010-11 FOR PASSI NG OF A SPEAKING ORDER ON THE ISSUE OF DISALLOWANCE UNDER SECTION 36(I)(III). 10. FOR THE AY 2012-13 AND 2013-14 THE REVENUE IS BEFOR E US AS THE CIT(A) HAS DELETED THE ADDITION MADE BY THE AO INVOKING SECTIO N 194A AND CONSEQUENTLY SECTION 40 (A)(IA) THE LD. CIT(A) WHILE DELETING TH E ADDITION MADE UNDER SECTION. 40(A)(IA) IS RELIED ON THE ORDER OF THE HO NBLE ITAT, AMRITSAR BENCH IN ITA NO. 206/11 DT. 23/04/2012. THUS THE ISSUE OF DISALL OWANCE UNDER SECTION 40(A)(IA) HAS BEEN RULED IN FAVOUR OF THE ASSESSEE IN THE SUB SEQUENT YEARS BY THE LD.CIT(A). SINCE THE ISSUE OF APPLICABILITY OF THE SECTION 194 -A HAS BEEN DEALT IN THE A.Y.2010-2011, SIMILAR RATIO HOLDS GOOD FOR THE APP EALS OF THE REVENUE FOR THE A.Y.2011-12 AND 2012-13. THUS FOR ALL THE THREE ASS ESSMENT YEARS IN QUESTION IT IS HELD THAT NO DISALLOWANCE IS CALLED UNDER SECTION 4 0(A)(IA) AND THIS ISSUE IS RULED IN FAVOUR OF THE ASSESSEE. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED AND APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/07/2017 SD/- SD/- (DIVA SINGH) (B.R.R.KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26/07/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR