ITO,Ward-3(1), Kolkata, Kolkata V. M/s Sunny Rock Estate & Developers Pvt. Ltd., Kolkata

ITA 949/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75036 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 18-06-2012
• Court: TRIBUNAL
• Department Lawyers: AMIT KUMAR MAITRA
• Assessee Lawyers: TA
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 949/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, WD-3(1), KOLKATA. VS. M/S. SU NNY ROCK ESTATE & DEVELOPERS (P LTD. (PAN: AADCS6898J) (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 28.01.2014 DATE OF PRONOUNCEMENT: 30.01.2014 FOR THE APPELLANT: SHRI AMIT KUMAR MAITRA, JCIT, SR. DR FOR THE RESPONDENT: S/SHRI TAPAN KR. CHAKRABORTY & SOUMITRA CHOWDHURY, ADVOCATES $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-I, KOLKATA IN APPEAL NO.225/CIT(A)-I/WD-3(4)/08-09 DATED 06.03.2011. AS SESSMENT WAS FRAMED BY ITO, WD-3(4), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 30.12. 2008. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) ALLOWING THE CLAIM OF DEMURRAGE CHARGES. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1.THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S BY ALLOWING THE APPEAL OF THE ASSESSEE COMPANY UNDER THE HEAD DEMURRAGE CHARGE AM OUNTING TO RS.31,00,000/-. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO DISALLOWED THIS DEMURRAGE CHARG ES CLAIMED AT RS.15 LAC AND RS.16 LAC BEING PAYMENT ON ACCOUNT OF CANCELLATION OF JOINT D EVELOPMENT PROJECT OF OASIS OF FORT PROJECT PVT. LTD. ACCORDING TO AO, IN VIEW OF THE CORRESPONDENCE SUBMITTED BY THE ASSESSEE THIS CLAIM OF DEMURRAGE CHARGES AND CANCELLATION CH ARGES NOTHING BUT UNDERSTANDING BETWEEN ASSESSEE AND DEVELOPER TO REDUCE PAYMENT OF TAXES. ACCORDINGLY, HE DISALLOWED THE SUM OF 2 ITA NO. 949/K/2012 M/S. SNNY ROCK ESTATE & DEVELOPERS (P) LTD. , AY:2006-07 RS.31 LAC ON BOTH COUNTS. AGGRIEVED, ASSESSEE PREFE RRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: THE APPELLANT BOOKED FOUR FLATS ON 20.01.2006 AND AGREED TO PAY RS.1.2 CR. TO M/S. FORT PROJECTS PVT. LTD. BUT FAILED TO FULFILL THE CONTRA CT AND FINALLY DAMAGES WERE SETTLED AT RS.31 LACS ON 12.04.2006 WHICH WAS PAID VIDE CHEQUE ON 25.05.2006. THE ASSESSEE FAILED TO FULFILL THE CONTRACT BECAUSE OF CASH CRUNCH ON T HE LIMITATION DATE I.E. 31.03.2006 AND PAID COMPENSATION/DAMAGES IN ORDER TO AVOID LOSSES DUE TO FALL IN PROPERTY PRICES. THE DETAILED TRANSACTION WAS EXPLAINED BEFORE THE ASSES SING OFFICER, KEEPING IN VIEW THESE FACTS AND CIRCUMSTANCES ADDITION OF RS.31 LACS IS D ELETED. THEREFORE, GROUND NO.1 IS ALLOWED. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 4. WE FIND THAT THE ASSESSEE HAS BOOKED FOUR FLATS AT 36B, PANDITIA ROAD, KOLKATA-19 AND AGREED TO PAY A SUM OF RS.1.2 CR. FROM THE DATE OF CONFIRMATION OF HIS OFFER OF THE SAME AS PER LETTER DATED 20.01.2006. FORT PROJECTS PVT. LTD. A CCEPTED THE OFFER AND AGREED TO SELL THE FLATS TO ASSESSEE VIDE THEIR LETTER DATED 24.01.2006. IN VI EW OF THE TERMS AND CONDITIONS OF AGREEMENT, ASSESSEE FAILED TO PAY THIS AMOUNT AND HE ASKED FOR FURTHER TIME AND ULTIMATELY IT WAS AGREED BETWEEN THE ASSESSEE AND FORT PROJECTS PVT. LTD. TH AT SUBJECT TO INTEREST AND DEMURRAGE CHARGES IN CASE OF TERMINATION OF THE CONTRACT TIME WAS EXT ENDED. THE ASSESSEE PAID THIS SUM OF RS.31 LAC VIDE CHEQUE DRAWN ON STANDARD CHARTERED BANK ON 25.06.2006 BUT ULTIMATELY FAILED TO FULFILL THE CONTRACT AND VENDOR ASKED FOR TOTAL DEM URRAGE CHARGES OF RS.40 LACS BUT FINALLY DEMURRAGE CHARGES WERE SETTLED AT RS.15 LAC AND FUR THER CANCELLATION OF THIS BOOKING AMOUNTING TO RS.16 LACS WAS FORFEITED. IN VIEW OF THE CORRES PONDENCE PRODUCED BEFORE THE LOWER AUTHORITIES AND EVEN NOW BEFORE US, WE ARE OF THE V IEW THAT DUE TO CASH CRUNCH THE ASSESSEE HAS NOT BEEN ABLE TO PAY THE AMOUNT OF RS.1.2 CR. WITHI N THE STIPULATED PERIOD. DURING THIS PERIOD THERE WAS SLUMP IN PROPERTY DEALS AND AS A PRUDENT DECISION THE ASSESSEE SETTLED BY PAYING SOME COMPENSATION AND DEMURRAGES. WHETHER THESE DEMURRA GES ARE ALLOWABLE OR NOT? THE ASSESSEE HAS TAKEN A CONSCIOUS BUSINESS DECISION LIKE A PRUD ENT BUSINESSMAN. AS THE ASSESSEE HAS TAKEN A BUSINESS DECISION THE DEMURRAGE CHARGES AND CANCE LLATION CHARGES ARE ALLOWABLE AS BUSINESS EXPENDITURE. WE CONFIRM THE ORDER OF CIT(A) AND THI S ISSUE OF REVENUES APPEAL IS DISMISSED. 5. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) ALLOWING SECURITY CHARGES, WAREHOUSE MAINTENANCE CHARGES AND SUPERVIS ION CHARGES. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.2: 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS BY ALLOWING THE APPEAL OF THE ASSESSEE COMPANY UNDER THE HEAD SECURITY CHARGES, W AREHOUSE MAINTENANCE CHARGES AND SUPERVISION CHARGE AMOUNTING TO RS.7,53,970/-. 3 ITA NO. 949/K/2012 M/S. SNNY ROCK ESTATE & DEVELOPERS (P) LTD. , AY:2006-07 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO DISALLOWED THE EXPENSES OF RS.7 ,53,930/- INCURRED BY THE ASSESSEE DURING THE COURSE OF HIS BUSINESS. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: THE ASSESSEE HAD SHOWN INCOME UNDER THE HEAD WARE HOUSING CHARGES RECEIVED AND SERVICES CHARGES RECEIVED IN THE PROFIT & LOSS A/C TO THE EXTENT OF RS.33.6 LACS. THE APPELLANT APPOINTED SECURITY STAFF TO MAINTAIN THE WAREHOUSE AND DEBITED THESE EXPENDITURES IN THE OPERATING EXPENSES (SCHEDULE- P ROFIT & LOSS A/C.). THE WAREHOUSE AS TAKEN FROM M/S. WILLIAMSON MAGOR IN THE CALCUTTA DOCK AREA FOR WHICH RENT OF RS.4,80,000/- WAS PAID AND IT WAS LET OUT TO M/S. R . PIYARILAL IMPORT & EXPORT PVT. LTD. FOR THE GROSS COMPOSITE RECEIPTS OF RS.16,85,400/- . THE SECURITY STAFF AND MAINTENANCE STAFF WORKED IN THREE SHIFTS AND WERE PAID RS.4,000 /- PER MONTH FOR WHICH DETAILS AND EVIDENCES WERE PRODUCED BEFORE THE ASSESSING OFFICE R WHICH IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF. AND THESE PERSONS COULD N OT BE PRODUCED BEFORE ASSESSING OFFICER SINCE THEY HAVE LEFT LONG BACK. KEEPING IN VIEW ABOVE CIRCUMSTANCES, THE ADDITION OF RS.7,53,970/- IS DELETED. THEREFORE, G ROUND NO.2 IS ALLOWED. 7. WE FIND THAT THE ASSESSEE HAS MAINTAINED THE SEC URITY STAFF TO MAINTAIN ITS WAREHOUSE AND DEBITED THE EXPENDITURE IN THE OPERATING EXPENS ES. FURTHER, IT HAS INCURRED WAREHOUSE MAINTENANCE CHARGES AND SUPERVISION CHARGES. THE A SSESSEE COMPANYS MAIN SOURCE OF INCOME IS FROM LETTING OUT OF WAREHOUSE IN KOLKATA DOCK AR EA AND THESE WAREHOUSES WERE TAKEN FROM M/S. WILLIAMSON MAGOR & CO. LTD. AT A MONTHLY RENTA L OF RS.40,000/-. THE SAME WAS LET OUT TO R. PIYARILAL IMPORT & EXPORT PVT. LTD. WHICH INCLUD ES ELECTRICITY CHARGES OF RS.2.40 LAC, SERVICE CHARGES OF RS.6 LAC AND SECURITY CHARGES OF RS.4.85 LAC. FURTHER, SUPERVISION CHARGES OF RS. 6 LAC WERE ALSO PAID. AS THESE ARE PAID FOR THE PURP OSE OF EARNING THIS INCOME THEY HAVE DIRECT CO-RELATION AND NEXUS, THE SAME SHOULD HAVE BEEN AL LOWED. THE CIT(A) HAS RIGHTLY ALLOWED THE SAME AND WE CONFIRM THE SAME. THIS GROUND OF APPEA L OF REVENUE IS DISMISSED. 8. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF RENT OF RS.4.40 LACS BY INVOKING TH E PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TDS. FOR THIS, REVENUE HAS RAI SED FOLLOWING GROUND NO.3: 3. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FA CTS BY ALLOWING A SUM OF RS.4,40,000/- DISALLOWED BY THE AO U/S. 40(A)(IA) OF THE I. T. AC T 61. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEES MAJOR SOURCE OF INCOME IS F ROM SUBLETTING WAREHOUSES TO R. PIYARILAL IMPORT & EXPORT PVT. LTD. THIS INCOME FROM SUBLETTI NG WAS ACCEPTED BY AO. EVEN THE TDS WAS DEDUCTED IN THE LAST MONTH OF THE ACCOUNTING YE AR EVEN THOUGH THE PROVISIONS OF SECTION 194-I OF THE ACT WILL NOT APPLY TO THE PRESENT CASE FOR THE REASON THAT THE TENANCY IS A SUB- 4 ITA NO. 949/K/2012 M/S. SNNY ROCK ESTATE & DEVELOPERS (P) LTD. , AY:2006-07 TENANCY UNDER LEAVE AND LICENCE AGREEMENT FOR EVERY 11 MONTHS AND THIS HAS BEEN CONTINUING FROM EARLIER YEARS. ONCE ASSESSEE IS RECEIVING LICE NCE FEE UNDER LEAVE AND LICENCE AGREEMENT, IT IS NOT RENT. IT IS ALSO A FACT THAT ASSESSEE HAS D EDUCTED TDS ON RENT PAID BUT ONLY ON THE LAST DATE OF THE FINANCIAL YEAR AND PAID TO THE GOVT. ACCOUNT ON 05.04.2006 I.E. ON OR BEFORE THE DUE DATE OF FILING OF RETURN U/S. 139(1) OF THE ACT. O NCE THE ASSESSEE HAS PAID THE TAX ON OR BEFORE THE DUE DATE OF FILING OF RETURN, THE SAME IS COVER ED BY THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. VIRGIN CREATIONS, IN I TAT NO.302 OF 2011 IN GA NO.3200/2011 DATED 23.11.2011. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT, CITED SUPRA, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND THE SAME IS HEREBY CONFIRMED. THIS ISSUE OF REVENU ES APPEAL IS ALSO DISMISSED. 10. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 11. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.01. 2014 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30TH JANUARY, 2013 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT ITO, WARD-3(1), KOLKATA. 2 ./,- / RESPONDENT M/S. SUNNY ROCK ESTATE & DEVELOPERS (P) LTD. 17, COL. BISWAS ROAD, KOLKATA-19. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .