×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
This appeal is filed by the Revenue against the order dated 20/07/2015 passed by CIT(A)-I, New Delhi for Assessment Year 2010-11.
2. The grounds of appeal are as under:-
“1. On the facts and in the circumstance of the case and in law the order passed by Ld CIT(A) is erroneous and the learned CIT(A) has erred
(i) Has erred in deleting the addition of Rs.22,50,000/- and Rs.16,30,000/- made by AO on account of interest paid and disallowance of rent expenses respectively.
(ii) Has erred in deleting the addition of Rs.1,09,17,200/- made by AO on account of disallowance of compensation expenses.
(iii) Has erred in deleting the addition of Rs.50,32,287/- made by AO on account of not disclosing maintenance income.
2. The appellant craves, leave or reserving the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”
3. The assessee was engaged in the real estate development in Gurgaon and Manesar. It has also received income from services of maintenance of the building. During the year under consideration, the appellant company has received income from sale of real estate and interest income. In the assessment order framed for this year, Assessing Officer has made addition on account of interest payment of Rs.22,50,000/- to M/s Dinesh Nandini Ram Krishna Dalmia Foundation on account of money received amounting to Rs.1.5 crores. Assessing Officer further added Rs. 16,50,500/- on account of assured return in the form of rent paid to Shri Arun Khanna and Kailash Khanna. The Assessing Officer treated these expenses not incurred for business purposes. The Assessing Officer also added Rs.1,09 17,200/- paid to various parties who had booked the units with the assessee. However, subsequent to the booking there was a change in the floor plan, therefore, certain parties who had booked units earlier had opted out from the booking and they were paid compensation. Such expenses were not allowed by the Assessing Officer on the ground that same were not incurred wholly & exclusively for business purposes. The Assessing Officer also added Rs.50,32,287/- on account of the service income not offered by the assessee for taxation pertaining to this year which was not taken into consideration in the A.Y. 2010-11 by the appellant. The Assessing Officer also disallowed Rs.2,56,169/- u/s 14A of the I.T. Act.
4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
5. The Ld. DR submitted that the CIT(A) erred in deleting the addition of Rs.22,50,000/- and Rs.16,30,000/- made by the Assessing Officer on account of interest paid and disallowance rent expenses. The Ld. DR submitted that these payments are doubtful and should be remanded back to the Assessing Officer as no proper evidences were submitted before the Assessing Officer.
6. The Ld. AR relied upon the order of the CIT(A).
7. We have heard both the parties and perused all the relevant material available on record. The CIT(A) while deleting Ground No.1(i) has given a categorical finding that the payments made to the parties were verifiable as the payments were received by way of cheques and same was utilized by the assessee for its business purpose for completing the projects. The CIT(A) held as under:
“I have considered the submission of the appellant and observation of the Assessing Officer made in the assessment order. It is seen that the appellant has claimed interest payment of Rs.22,50,500/- to M/s Dinesh Nandini Ram Krishna Daimia Foundation and Rs. 16,30,500/- to Sh. Arun Khanna and Kailash Khanna. The appellant has claimed that the builders required huge amount of funds to build the projects. Such funds are not easily available in the form of loan as real estate market was running in recession for last so many years. Therefore, the appellant has to look for other avenues from where funds could be generated for construction purposes. The efore, the appellant company has entered into an agreement with various buyers to raise the funds for completing the project. In order to raise the funds, the appellant has to provide investors, lenders, security of their funds and fixed returns which appellant had provided to them in the form of booking of space and assured amount of return in the form of interest or rent. The appellant has also claimed that this is a general practice in the market and in support of its contention it has submitted vide Annexure-1 of its submission wherein fixed return or assured rental plan has been offered by M/s ABC Buildcon Pvt. Ltd., M/s Supertech, Assotech Reality and Omex builders in National Capital Region. The appellant claimed that expenses incurred in the form of assured rental plan and assured interest are wholly and exclusively for the business purposes and the same are allowable u/s 37 of the I.T. Act. The appellant has submitted before Assessing Officer as well as before me that it has entered into an agreement with M/s Dinesh Nandini Ramkrishna Daimia for booking of space at ‘Vipul Tech Square’ on Main Golf Course Road, Sector-43, Gurgaon. While booking the space in said project the party i.e. M/s Dinesh Nandini Ram Krishna Daimia Foundation opted for the ‘investment return plan’ and paid Rs.1.5 crore to the appellant on 30.04.2008. For this appellant as well as M/s Dinesh Nandini Ram Krishna Daimia Foundation entered into an MOU on 09.06.2008. Copy of the said MOU is placed at page 48- SI of the Paper book. In this MOU, it is mentioned that appellant would pay guaranteed investment return to the investor at quarterly intervals. The guaranteed return was fixed at Rs.125/- per sq. ft per month as mentioned in clause (6) of the MOU. This guaranteed investment return was paid to the investor from 1st of May, 2008 till it was completed or leased out to some other party. The appellant has also filed copy of the Form No. 16A at page No. 61 of the paper book, wherein the appellant has deducted TDS on this payment u/s 194A of the I.T. Act. The TDS so deducted has been deposited to the Government account. The appellant claims that this guaranteed return investment has been paid to attract the much needed funds from the customers. If this scheme was not opted by the appellant, then appellant would have borrowed funds from the market and would have paid the interest. Therefore, the expenditure paid in the form of fixed return investment plan is for the purposes of business and same is allowable as business expenditure. Similarly, the appellant has paid assured rental to Sh. Arun Khanna and Kailash Khanna vide MOU dated 22.09.2008 filed at page No. 68-75 of the paper book. The appellant has received amount for booking in 'Vipul Tech Square' from Sh Kailash Khanna of Rs.13,32,500/- on 22.09.2008, Rs.19,45,000/- on 23 09.2008 and Rs.21,57,500/- on 24.09.2008 against the booking of space. The similar amount on the very same dates has been received from Sh. Arun Khanna. Both the parties have opted the booking under "assured rental plan scheme". As per the MOU, Sh. Arun Khanna and Kailash Khanna invested in the 'Vipul Tech Square' and have advanced money to the appellant to the tune of Rs.54,35,000/- each on account of various spaces mentioned in the agreement. As per MOU, the appellant has agreed to pay assured rental to these parties from January 2009 till the completion or actual leasing of the space to the third party.
The rate of assured return was 125/- per sq. ft. per month. It is submitted by the appellant that though the assured rental was to be paid to Sh. Kailash Khanna and Arun Khanna from January 2009, however, the appellant has requested to these parties that it is not possible to pay assured return from January 2009 and accordingly obtained waiver from these parties till March 2009. The copies of waiver obtained from Sh. Kailash Khanna and Arun Khanna are filed at page 80-85 of the paper