Income Tax Appellate Tribunal - Agra
Acit 2(1)(1), Agra vs M/S. Pee Cee Soap & Chemicals P Ltd, Agra on 20 March, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH: AGRA
BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER AND
DR. MITHA LAL MEENA, ACCOUNTANT MEMBER
I.T.A No. 203/Agra/2015
(ASSESSMENT YEAR.-2010-11)
ACIT 2(1) (1), Vs.. M/s Pee Cee Soap &
Agra. Chemicals (P) Ltd. G-10/8,
Padamdeep, Sanjay Place
Agra.
PANNo.AAACP7281M
(Revenue)
(Assessee)
Revenue by Shri Waseem Arshad, Sr.DR.
Assessee by Shri Pankaj Garg, Adv.
Date of Hearing 10.01.2018
Date of Pronouncement 20.03.2018
ORDER
PER, A. D. JAIN, JUDICIAL MEMBER:
This is Department's appeal for assessment year 2010-11 against the CIT(A)'s order dated 21.01.2015, taking the following grounds:
"1. That the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.23,52,391/- made by the AO u/s 40(a)(ia) without appreciating the fact that the expenses reimbursed have no co-relation to the expenses incurred by the I.T.A No. 203/Agra/2015 2 consignee agents and therefore, payment made was in nature of commission.
2. That the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.23,52,391/- made by the AO u/s 40(a)(ia) without appreciating the facts that the reimbursement of expenses not linked to actual expense is nothing but commission as it is directly linked to sale made by the consignee agents.
3. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.23,52,391/- made by the AO u/s 40(a)(ia) relying upon decision of the Hon'ble Allahabad High Court in CIT Vs. Vector Shipping Service (P) Ltd. which has affirmed the decision of the Special Bench of ITAT in Merilyn Shipping that disallowance under section 40(a)(ia) of the Act is attracted only if the amount is payable at the end of the previous year and not which has been paid during the year without appreciating that Hon'ble Gujarat High Court and Hon'ble Calcutta High Court has taken a different view on this issue in the case of Commissioner of Income-IV vs. Sikandarkhan N Tunvar and Commissioner of Income Tax Kolkata-XI vs. Crescent Exports Syndicate, respectively and the decisions of Hon'ble Gujarat High Court and Hon'ble Calcutta High Court were not brought to the attention of Hon'ble Allahabad High Court. In the case of ACIT, Circle-4(2), Mumbai Vs. Rishti Stock and Shares Pvt. Ltd. in ITA No.112/Mum/2012, Hon'ble I.T.A No. 203/Agra/2015 3 ITAT, Mumbai in its order dated 02.08.2013 has examined the decision of the Hon'ble Allahabad High Court (supra) as regards to section 40(a)(ia) of the Act and concluded that the same was an 'orbiter dicta' while the decisions of the Hon'ble Gujarat and Calcutta High Court (supra) were 'ratio decidendi. The ITAT accordingly, applied the view taken by the Hon'ble Gujarat and Calcutta High Court as ratio decidendi prevails over an orbiter decta.
4. That the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.34,39,109/- made by the AO ignoring the fact that the interest on borrowed capital to the extent utilised for work in progress, closing stock carried forward to next year was required to be capitalized.
5. That the order of Ld. Commissioner of Income Tax (Appeals)-II, Agra being erroneous in law and on facts deserves to be quashed and that of the Assessing Officer deserves to be restored."
2. Ground Nos. 1 to 3 challenge the CIT(A)'s action in deleting the addition of Rs.20,34,942/-(wrongly mentioned as Rs.23,52,391/- in the grounds of appeal).
3. As per the record, the assessee carries on the business of manufacturing of laundry, soap, washing powder, detergent cake having its two factories at Artoni, Agra and Dholpur, Rajasthan. During the year under consideration, the wholly owned subsidiary company M/s Pee Cee Housing and construction Ltd., doing the I.T.A No. 203/Agra/2015 4 business of real estate got de-merged from the assessee company w.e.f. 01.04.2009 in pursuance of orders passed by the Hon'ble High Court.
4. Like earlier years, the assessee had made sale of goods on consignment basis and commission was paid to the consignment agents. Apart from the commission, the assessee also paid to the commission agent on account of redistribution and selling expenses per case as fixed charges, totaling to Rs 20,34,942/-. Payment of Rs.20,34,942/- was made without making of TDS. The details of such payment given by the assessee are as under:-
DETAILS OF REDISTRIBUTION & SELLING EXP.PAID TO DARSHAN AGENCIES FOR THE FINANCIAL YEAR 2009-2010 MONTH QUANTI Re- Redistributio Sellin Selling Total TY IN distr. n g Exp Amt. Amount CB Exp Amt. per Per CB CB Apr-09 7974 10.00 79740.00 3.00 23922.22 103662.00 May-09 6431 10.00 64310.00 3.00 19293.00 83603.00 Jun-09 7607 10.00 76070.00 3.00 22821.00 98891.00 Jul-09 7322 10.00 73220.00 3.00 21966.00 95186.00 Aug-09 7553 10.00 75530.00 3.00 22659.00 98189.00 Sep-09 4960 10.00 49600.00 3.00 14880.00 64480.00 Oct09 8131 10.00 81310.00 3.00 24393.00 105703.00 Nov-09 5999 10.00 59990.00 3.00 17997.00 77987.00 Dec-09 7713 10.00 77130.00 3.00 23139.00 100269.00 Jan-10 7177 10.00 71770.00 3.00 21531.00 93301.00 I.T.A No. 203/Agra/2015 5 Feb-10 5674 10.00 56740.00 3.00 17022.00 73762.00 Mar-10 6582 10.00 65820.00 3.00 19746.00 85566.00 TOTAL 83123 831230.00 249369.0 1080599.0 0 0 DETAILS OF REDISTRIBUTION & SELLING EXP. PAID TO DEEPALI MARKETING FOR THE FINANCIAL YEAR 2009-2010 MONTH QUANTITY Re- Redistribution Selling Selling Total IN CB distr. Amt. Exp Amt. Amount Exp per Per CB CB Apr-09 7215 10.00 72150.00 3.00 21645.00 93795.00 May-09 7109 10.00 71090.00 3.00 21327.00 92417.00 Jun-09 7014 10.00 70140.00 3.00 21042.00 91182.00 Jul-09 6516 10.00 65160.00 3.00 19548.00 84708.00 Aug-09 5862 10.00 58620.00 3.00 17586.00 76206.00 Sep-09 6771 10.00 67710.00 3.00 20313.00 88023.00 Oct09 6432 10.00 64320.00 3.00 19296.00 83616.00 Nov-09 7310 10.00 73100.00 3.00 21930.00 95030.00 Dec-09 6146 10.00 61460.00 3.00 18438.00 79898.00 Jan-10 3983 10.00 39830.00 3.00 11949.00 51779.00 Feb-10 5357 10.00 53570.00 3.00 16071.00 69641.00 Mar-10 3696 10.00 36960.00 3.00 11088.00 48048.00 TOTAL 73411 734110.00 220233.00 954343.00 It was submitted before the AO that the payment for selling and redistribution expenses was made at the fixed rate for reimbursement of expenses. The assessee, as per the AO, had made fixed payment, irrespective of the actual expenses I.T.A No. 203/Agra/2015 6 incurred by the consignment agent. In view of this, the payment was in the nature of commission and TDS has to be deducted thereon. The assessee, however, failed to deduct TDS u/s.194H on payment of Rs 20,34,942/- and therefore, the assessee was requested to explain as to why the amount may not be added u/s.40(a)(ia) of IT Act, 1961.
5. The assessee filed the following written submissions before the AO:
"6D. Re: TDS on redistribution expenses (Application of section 40(a)(ia)
i) That M/s Darshan Agencies & M/s Deepali Marketing, Ahmedabad are our selling commission agents. The terms agreed are 4% commission on sale made by them and reimbursement of redistribution and selling expenses incurred by them on our sale and on our behalf. Tax at source has been deducted on commission paid
ii) That these consignee agents incur expenses on-sales made by them which includes selling expenses and redistribution expenses. To have control over the expenses amount per carton has been fixed towards selling and redistribution expenses. The adjustment in the books of account is monthly made by debiting the head "Expenses on Consignment Sales" and by crediting the account of consignee agent. The expenses incurred by the consignee agent are from the sale amount collected by them and there always remains outstanding balance.I.T.A No. 203/Agra/2015 7
iii) That the commission agent maintained day to day details of delivery and distribution expenses and selling expenses which are duly debited by them in their accounts. At the month end on receipt of credit note from the assessee company they credited the credit note amount in the said account maintained and the sale amount is returned by them after deducting the amount of expenses as per credit note. The expenditure incurred by them is more than the amount paid to them.
iv) Since the payment of Rs. 9,54,343/- to Deepali Marketing and Rs.
10,80,599/- to Darshan Agencies are towards reimbursement of expenses incurred by them on our behalf, tax at source has not been deduced. Statement enclosed giving the details alongwith copy of account of redistribution expenses and ledger account of Darshan Agencies and Deepali Marketing.
6. The AO made the addition, observing as follows:
"I have gone through the facts of the case and submissions made by the assessee. The assessee's submission that the Hon'ble ITAT Agra Bench has decided the issue in favour of the assessee in AY 2007-08 in an appeal filed by the assessee Is correct However, the Hon'ble ITAT has decided the issue in favour of the assessee by placing reliance on the decision of Hon'ble ITAT Special Bench Judgment of Visakhapatnam in the case of M/s Merilyn Shipping & Transporters vs ACIT I.T.A No. 203/Agra/2015 8 Range-1 (ITA No 477/Viz/2008). Subsequently Hon'ble Andhra Pradesh High Court has granted interim suspension to the operation of order of Hon'ble ITAT Special Bench Judgment of Visakhapatnam Thereafter, in assessee's own case for AY 2009-10. Ld. CIT (A) by his order dated 28.02.2013 has confirmed the disallowance made by the AO.
In view of above, Rs. 20.34.942/- is being disallowed and added to the income of assessee u/s 40(a)(ia) of the Act."
7. While deleting the addition, the ld. CIT(A) has held as under:
"5.3 In the above written submission, the Ld. AR has explained that the nature of payment of Rs.20,34.942/- made to consignment agents and he has shown that these payments are in fact reimbursement of expenses incurred by consignment agents and not in form of commission. While making this addition, the AO has relied upon the order passed by the Ld. CIT(A)-II, Agra for AY 2009-10. The Ld. AR has pointed out that against the said order, an appeal was filed by the assessee (appellant) to Hon'ble ITAT, Agra and this appeal has been decided vide ITA No.124/Agra/2013 dated 28.06.2013. In this order, the issue regarding reimbursement of expenses to consignment agents held by the AO as being in the nature of commission, has been adjudicated upon. In the assessment order of AY 2009-10 also, the AO found that the assessee has made payment to consignment agents at a fixed rate over and I.T.A No. 203/Agra/2015 9 above the commission paid to them. The AO was of the view that such payment over and above the commission is not in the nature of reimbursement of expenses but it was part and parcel of commission. Since this amount was part and parcel of the commission and the assessee did not deduct tax at source, therefore, such expenses are not allowable u/s 40(a)(ia). The AO invoked the provision of section 40(a)(ia) and made addition of Rs.21,33,377/- in AY 2009-10. The CIT(A) confirmed the action of the AO. On filing of appeal before the Hon'ble ITAT, Agra Bench, it has been found that this issue is squarely covered by the order of Hon'ble ITAT. Agra Bench, Agra in another case of M/s Pee Cee Cosma Soap Ltd. Vs. JCIT In ITA No.54/Agr/2013 and ITA No.55/Agr/2013 vide order dated 30.04.2013 in the favour of the assessee and hence, addition of Rs. 21,33,377/- was deleted . The relevant findings and decision of the Hon'ble ITAT, Agra in the above mentioned order of M/s Pee Cee Soap & Chemical Ltd. for AY 2009-10 has been reproduced as under-
"7. We have heard the Id. Representative of the parties and records perused. We find that on identical set of facts the issue has already been decided by the I.T.A.T., Agra Bench in ITA Nos. 54/Agra/2013 and 55/Agra/2013 in the case of M/s Pee Cee Cosma Sope Limited vs. JCIT(supra). The relevant finding of the I. T.A. T. is reproduced as under.- (Paragraph nos.I.T.A No. 203/Agra/2015 10
5&6)
5. We have heard the Ld. Representatives of the parties and records perused. The issue under consideration whether the impugned expenditure are in nature of commission or reimbursement of expenditures. To understand nature of transaction first of all we have to see dictionary meaning of 'Commission". The related meaning as per different dictionaries are as under-
(i) As per The Law Lexicon -
Commission Agent: One who sales or buys goods for another and receives by way of remuneration a commission or percentage upon the amount involved in each transaction.
(ii) As per Oxford Dictionary -
Payment to an agent for selling goods or services.
(iii) By Farlex Dictionary -
A fee paid based on a percentage of the sale made by an employee or agent, as distinguished from regular payments of wages or salary.
(iv) As per Webster's Dictionary -
The fee given an agent or sales person for his or her services.
(v) As per Dictionary of Cultural Literacy Economics - A fee paid to a broker or other financial agents for negotiating a sale. The fee is based on percentage of sale price.
5.1 In the light of above dictionary meaning, if we see the facts of the case under consideration, we notice that the assessee I.T.A No. 203/Agra/2015 11 claimed Rs.28,14,174/- as revenue expenses on consignment sales in profit and loss account. It is relevant to note that the assessee paid commission on sale and were separately accounted for under the head commission on sale of Rs.48,55,646/- in profit loss account. The consignee agents make the sale on behalf of the assessee company to the distributor / retailer appointed by them for which they are paid commission at the fixed percentage as per the Agreement executed between them and TDS is deducted on the said commission. No dispute on this issue. Goods are sent to the consignee agents from Malanpur Unit for which the primary freight is paid on behalf of the assessee company. This freight paid is reimbursed by the assessee company by way of credit note. No dispute of this fact also. The sale of UP Rajasthan and Gujarat are through consignee agents. Agreements are executed between the assessee company and the consignee agents. The important clause for consideration is 'that in consideration of various services rendered, the second party shall be commission @ 1% (one) on the value of the sales made by the second party during the financial year. In addition the first party shall also reimburse to the second party the expenses incurred by him (to be derived on fixed cost structure basis). That on the receipt of goods by the consignee agents till the sales made by them, the consignee agents incur certain expenses on behalf of the assessee company which are otherwise to be incurred by the assessee company if the assessee company make direct sale at these places. The nature of expenses incurred by the consignee agents and reimbursed by the assessee company as per the agreement executed between them are -
(a) Unloading expenses on receipt of goods from the assessee company.
(b) Loading expenses when the goods are sent by the consignee agents for sale to distributor / dealer / retailer.
(c) Cartage paid on dispatch of goods / sale to distributor / dealer / retailer.
(d) Travelling expenses of the staff kept by consignee agents or I.T.A No. 203/Agra/2015 12 salary of the sales staff. The consignee agents sent the monthly details of sales on 'Sale Patti". On the sale Patti the consignee agent deducts their commission on sales and the expenses at the fixed cost rate structure as per Agreement. The assessee company by way of credit note amount for their expenses as per sale Patti, though the expenses incurred by the. are much more than the expenses accounted for by the assessee company. Copies of their Ledger Account of expenses incurred by them on behalf of assessee company have been filed and are put on record. It is also to note that the expenses incurred by the consignee agents on behalf of the assessee company are from the sale amount collected by them as there always remain outstanding balance. Considering the facts of the case following points are not in dispute -
(i) Consignee agents are making sales on behalf of assessee company on commission basis.
(ii) Consignee agent incurs expenses on sales on behalf of the assessee company.
(iii) Consignee agent maintains day to day details of expenses incurred by them for and behalf of the assessee company.
(iv) Monthly Sale Patti is sent by consignee agents along with ledger account of expenses incurred.
(v) In Sale Patti consignee agent, from the sale amount deduct their commission and expenses which they have to receive from the assessee company on the basis of fixed cost rate as per agreement.
(vi) On receipt of Sale Patti credit note for the expenses is issued.
(vii) In the books of the assessee company amount of credit note is debited under the head "Expenses on consignment sale". 5.2 The commission is said to be payment of commission if it is evident that it is being paid for service of a person provided in respect of sale of product of the assessee. In the case under I.T.A No. 203/Agra/2015 13 consideration, the Ld. Authorized Representative has demonstrated by filing various evidences and material, of which copies have been placed in paper book. Copies of agreement, paper book page nos. 1 to 4. copies of Sale Patti page nos. 5 to 9 of the of the paper book, copies of ledger account of expenses page nos. 32 to 50. On perusal of agreement, we notice that as per clause-3 in addition to 3% sale, the agent is entitled to reimbursement of expenses. The relevant abstract of the agreement is reproduced as below.
"1.5 That on the receipt of goods by the consignee agents till the sales made by them, the consignee agents incur certain expenses on behalf of the assessee company which are otherwise to be incurred by the assessee company if the assessee company make direct sale at these places. The nature of expenses incurred by the consignee agents and reimbursed by the assessee company as per the agreement executed between them are:-
(a) Unloading expenses on receipt of goods from the assessee company.
(b) Loading expenses when the goods are sent by the consignee agents for sale to distributor / dealer / retailer.
(c) Cartage paid on dispatch of goods / sale to distributor / dealer / retailer.
(d) Travelling expenses of the staff kept by consignee agents or salary of the sale staff.
1.6 That the consignee agents sent the monthly details of sales on 'Sale Patti", copy enclosed (page no. 5 to 29) for kind perusal of your goodself. On the sale patti the consignee agent deducts their commission on sales and the expenses at the fixed cost rate structure as per Agreement. The assessee company by way of credit note amount for their expenses as per sate patti, though the expenses incurred by the, are much more than the expenses accounted for by the assessee company. Copy of their ledger account of expenses incurred by them on behalf of assessee company are enclosed (page No. 30 to 50) in support of the I.T.A No. 203/Agra/2015 14 submission that the expenses incur by them are much more than the expenses reimbursement to them by way of credit note. 1.7 It is important to mention here that the expenses incurred by the consignee agents on behalf of the assessee company are from the sale amount collected by them as there always remain outstanding balance.
1.8 That the Assessing Officer has treated the reimbursement of expenses as commission paid only on the ground that the expenses are reimbursement at fixed rate and therefore, it is not in the nature of reimbursement of expenses but it was part and parcel of commission on which tax at source has not been deducted and consequently made addition u/s 40a(ia) of the Act. The concerned parties have also furnished the sale Patti along with claim of the expenses on sale of consignment goods the claim of expenses given detail the expenses pertaining to the monthly selling expenses loading and unloading dealing with expenses. These expenses have been adjusted and accounted for in the account of respective parties. After considering these arguments, we notice that the impugned payment is reimbursement of the expenses and are not the commission as the concerned party did not give any services in respect of the payment of expenditures made. Providing services is essentially requirement of the nature of transaction of a commission. Since this condition is not satisfied in the case under consideration therefore, it is a case of reimbursement of the expenses incurred by the concerned party on behalf of the assessee. Under the circumstances, we find that the Revenue authority is not correct in taking such expenses as commission expenses. The finding of Revenue Authorities in this behalf is on presumption basis, without considering the relevant agreement / documents and books of account maintained by the assessee. We, therefore, set aside the orders of Revenue Authorities and the claim of the assessee is allowed.
5.3 Since this is not a commission payment, therefore, there is no question of deducting tax at source under section 194H of the Act. Since the payment is not subject to tax deducted at source, therefore, provisions of section 40(a)(ia) of the Act is not applicable on the issue. We, therefore, delete the addition of Rs. I.T.A No. 203/Agra/2015 15 28,14,174/-.
ITA No. 55/Agra/2013 - M/s Suraj Bhan Agencies (P) Ltd.
6. The Ld. Representative of the parties submitted that the facts of the case in ITA No. 54/Agra/2013 in the case of M/s Pee Cee Cosma Sope Ltd. are identical to the facts of the case in ITA No. 55/Agra/2013 in the case of M/s Suraj Bhan Agencies (P) Ltd. except the figures. In that case the amount added by the AO was Rs.21,94,506/- and Rs. 16,48,186/-. Since the facts are identical with the facts of the case of M/s Pee Cee Cosma Sope Ltd. (supra) and that case has been decided after detailed discussion made in para nos. 5 to 5.4 of this order, in the light of the above discussion, the addition of Rs.21,94,506/- and Rs. 16,48,186/- are deleted."
8. Since the facts of the case under consideration and the facts of the case decided by the IT AT, Agra Bench in case of M/s Pee Cee Cosma Sope Limited vs. JCIT (supra) vide order dated 30.04.2013, are identical to maintain consistency, we follow the above order of IT AT and in the light of the fact, we set aside the order of Revenue Authorities and delete the addition of Rs. 21,33,377/- made by the A.O. invoking provisions of section 40(a)(ia) of the Act.
5.4 After following the above order, the addition of Rs.21,33,377/- made u/s 40(a)(ia) in the income of the assessee for AY 09-10 was deleted. In the above order of Hon'ble ITAT, Agra in case of Pee Cee Cosma Soap Ltd., it has been very clearly held that the impugned payments are reimbursement of expenses and are not the commission as the concerned party did not give any service in respect of the payment of the expenditure made. Therefore, it has been further held that providing services is essentially requirement of the nature of transaction to be a commission and since this condition is not satisfied in the case I.T.A No. 203/Agra/2015 16 decided by the ITAT, therefore, it is a case of reimbursement of the expenses incurred by the concerned party on behalf of the assessee. Under the circumstances, Ld. Members found that the Revenue authority is not correct in taking such expenses as commission expenses. Therefore, there is no question of deduction of tax at source u/s 194H of the Act and since payment is not subject to deduction of tax at source, therefore, provisions of section 40(a)(ia) of the Act is not applicable on the issue. After discussing these findings, the Hon'ble ITAT, Agra has deleted the addition of Rs.21,33,377/- made in the case of assessee(appellant) for AY 2009-10.
The Ld. AR after giving the details of the nature of payment of Rs.20,34.942/- during AY 2010-11 under consideration and drawing my attention to the decision of Hon'ble ITAT. Agra Bench in assessee's own case for AY 2009-10, argued that the nature of payment made during the year under consideration is similar to the nature of payment made during AY 2009-10 for which disallowance made u/s 40(a)(ia) was deleted. After going through the above mentioned order of the Hon'ble ITAT, Agra in case of the assessee for the AY 2009-10 and after examining details of payment made by the assessee in respect of the amount of Rs.20,34,942/- paid over and above the commission during the year under consideration, the impugned payment of Rs.20,34,942/- has been found by me as reimbursement of expenses as held by the Hon'ble ITAT, Agra in AY 2009-10. I.T.A No. 203/Agra/2015 17 Therefore, the amount of Rs.20,34,942/- cannot be held as commission because against such payment, no service has been rendered by the assessee and such amount has been paid to compensate for the expenditure incurred by the consignment agents. Therefore, as per the decision of Hon'ble ITAT, Agra in assessee's own case for AY 2009-10, there is no question of deducting tax at source u/ 194H of the Act on payment of Rs.20,34,942/-. Therefore, no addition u/s 40(a) (ia) can be made on making payment of this amount. As regards the decision of Hon'ble ITAT, Special Bench Vishakhapatnam in the case of M/s Merilyn shipping & Transporters Vs. ACIT Range-1 (ITA No.477/Viz/2008) discussed by the AO in the assessment order is concerned that the same has been stayed by the Hon'ble Andhra High Court and hence, in view of such decision, now addition u/s 40(a)(ia) can be made even if amount is paid during the year under consideration. In this regard, it has already been held by me that the amount of Rs.20.34.942/- paid by the assessee is not in the nature of the commission and therefore, question of reliance on the above judgment of ITAT, Visakhapatnam does not arise. However, taking into account the argument of the AO, even if this amount is considered in the nature of commission, no addition u/s 40(a)(ia) can be made now because there is judgment of jurisdictional Allahabad High Court in case of CIT, Muzaffarnagar Vs. Vector Shipping (Services) Pvt. Ltd. [2013] 38 taxmann.com 77 (Allahabad) in I.T.A No. 203/Agra/2015 18 which, it has been held that for disallowing expenses from business and profession on the ground that TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year. Since, the amount of Rs.20,34,942/- has already been paid by the assessee during the year under consideration, in view of the above decision of jurisdictional Allahabad High Court, no addition u/s 40(a)(ia) can be made even if this amount is considered by the AO in the nature of commission. Therefore, I delete the addition of Rs.20,33,942/- and accordingly, Ground no.2 is allowed."
8. The ld. DR, challenging the action of the ld. CIT(A), has contended that the ld. CIT(A) has erred in deleting the addition of Rs.23,52,391/- made by the AO u/s 40(a)(ia) without appreciating the fact that the expenses reimbursed have no co- relation with the expenses incurred by the consignee agents and, therefore, the payment made was in the nature of commission; that the ld. CIT(A) has erred in deleting the addition of Rs.23,52,391/- made by the AO u/s 40(a)(ia) without appreciating the fact that the reimbursement of expenses not linked to actual expense is nothing but commission, as it is directly linked to sale made by the consignee agents; and that the ld. CIT(A) has erred in deleting the addition of Rs.23,52,391/- made by the AO u/s 40(a)(ia), relying on the decision of the Hon'ble Allahabad High Court in 'CIT Vs. Vector Shipping Service (P) Ltd.', which affirmed the decision of the Special Bench of the ITAT in 'Merilyn I.T.A No. 203/Agra/2015 19 Shipping', that disallowance under section 40(a)(ia) of the Act is attracted only if the amount is payable at the end of the previous year and not that which has been paid during the year, without appreciating that the Hon'ble Gujarat High Court and the Hon'ble Calcutta High Court have taken a different view on this issue in the case of 'Commissioner of Income-IV vs. Sikandarkhan N Tunvar' and 'Commissioner of Income Tax Kolkata-XI vs. Crescent Exports Syndicate', respectively, and the decisions of the Hon'ble Gujarat High Court and the Hon'ble Calcutta High Court were not brought to the attention of the Hon'ble Allahabad High Court. In the case of 'ACIT, Circle-4(2), Mumbai Vs. Rishti Stock and Shares Pvt. Ltd.', in ITA No.112/Mum/2012, the ITAT, Mumbai, in its order dated 02.08.2013, has examined the decision of the Hon'ble Allahabad High Court (supra) as regards section 40(a)(ia) of the Act and has concluded that the same was orbiter dicta, while the decisions of the Hon'ble Gujarat and Calcutta High Courts (supra) were ratio decidendi. The ITAT, accordingly, applied the view taken by the Hon'ble Gujarat and Calcutta High Courts as ratio decidendi prevails over an orbiter decta.
9. The ld. Counsel for the assessee has placed strong reliance on the impugned order.
I.T.A No. 203/Agra/201520
10. We have heard the parties and have perused the material on record. The AO made the addition since the Tribunal order in the assessee's case for A.Y. 2007-08 was passed based on the Special Bench decision of the Tribunal in 'M/s Merilyn Shipping & Transporters' (supra), but the operation of the order in 'M/s Merilyn Shipping & Transporters' (supra), had been stayed by the Hon'ble Andhra Pradesh High Court and for A.Y. 2009-10, the ld. CIT(A) had confirmed the disallowance made by the AO.
11. However, the CIT(A)'s order for A.Y. 2009-10 was appealed against by the assessee before the Tribunal. The CIT(A) had held the payment to consignment agents to be of commission and not reimbursement of expenses as claimed, as is also the case for the year under consideration. The Tribunal found the issue to be squarely covered in favour of the assessee by the Tribunal order dated 30.04.2013 passed in ITA Nos. 54 & 55/Agra/2013, in "M/s Pee Cee Cosma Soap Ltd. vs. JCIT', wherein on receipt of goods by the consignee agents till the sales made by them, the consignee agents incur certain expenses on behalf of the assessee company, which expenses are otherwise to be incurred by the assessee company, if the assessee company makes direct sale at these places. As per the agreement between assessee and consignee agents, the agent was entitled to reimbursement of expenses. The agents were found to have, on receipt of the goods, till dispatch I.T.A No. 203/Agra/2015 21 thereof, incurred certain expenses on behalf of the assessee, which expenses were otherwise to have been incurred by the assessee, in case the assessee were to make direct sale of the goods. These expenses were unloading expenses on receipt, loading expenses when the goods were dispatched for sale, cartage paid on dispatch of the goods, and travel expenses paid to staff. The expenses were adjusted and accounted for in the documents of the respective parties. The Tribunal held the payment to be reimbursement of expenses and not commission.
12. 'Pee Cee Cosma Soap' (supra) was followed by the Tribunal in the assessee's case for A.Y. 2009-10 and the addition under section 40(a)(ia) of the Act was deleted. No TDS was also required to be made under section 194H and so, section 40(a)(ia) was held not applicable.
13. The ld. CIT(A) has found the facts for the year under consideration to be exactly similar to those for A.Y. 2009-10. He, accordingly, followed the Tribunal order for A.Y. 2009-10 and deleted the addition, holding that no service was rendered by the consignee agents against the payment, and that the payment was by way of reimbursement of expenses incurred by the agents on behalf of the assessee, due to which, there was no requirement of making TDS under section 194H. No addition under section 40(a)(ia) was held as called for. I.T.A No. 203/Agra/2015 22
14. The ld. DR has argued that the payment was not linked to any actual expense and so, the ld. CIT(A) erred in merely following the Tribunal order for A.Y. 2009-
10. In this regard, it is seen that submissions were filed by the assessee before the AO, as reproduced hereinabove.
15. Before the ld. CIT(A), the assessee filed written submissions dated 04.02.2014 (APB 1A to A-8). These written submissions have been reproduced in para 5.2 of the impugned order. The relevant portion thereof is as under:
"1.1 That the assessee company is carrying on the business of manufacturing and trading of laundry soap and detergent.
1.2 That the sales at Gujarat are through consignee agent M/s Darshan Agencies and M/s Deepali Marketting, Ahmedabad on which 4% commission on sales is paid to them against the bill for service provided by them and tax at source has been deducted. No dispute on this issue.
1.3 That these consignee agents incur expenses on sales made by them which includes selling expenses and redistribution expenses. These expenses are incurred by them on behalf of the assessee company and the monthly expenses incurred by them are reimbursed to these consignee agents in the subsequent month. The adjustment in the books of account is monthly made by debiting the head 'Expenses on Consignment Sales' and by crediting the account of consignee agent. The expenses are incurred by the consignee agent from the sale amount collected by them and there always remains outstanding balance.
1.4 That the commission agent maintained day to day details of delivery and distribution expenses and selling I.T.A No. 203/Agra/2015 23 expenses which are duly debited by them in their accounts. At the month end on receipt of credit note from the assessee company they credited the credit note amount in the said account maintained and the sale amount is returned by them after deducting the amount of expenses as per credit note. The expenditure incurred by them is more than the amount paid to them. Copy of account of assessee company in the books of consignee agents and copy of selling expenses account maintained by them on our behalf were filed before the Assessing Officer and are again enclosed for reference.
1.5 That the Assessing Officer only on the observation that the claim of the appellant of reimbursement of expenses as it is not linked to the actual expenses is nothing but commission as it is linked to sales made by consignee agent has held that the assessee was liable to deduct tax at source and consequently made addition by applying the provision of section 40(a)(ia) of the Act. 1.6 That from the enclosed details your goodself will appreciate that all the expenses incurred by the commission agent claimed to have been incurred on behalf of the assessee company are solely and exclusively on the sales made by them on behalf of the assessee company which otherwise would have been directly incurred by the assessee company and hence the observation of the Assessing Officer that reimbursement of expenses by the assessee company are not linked to the actual expenditure incurred by the commission agent is totally wrong and arbitrary.
1.7 That since the payment of Rs. 9,54,343/- to Deepali Marketing and Rs. 10,80,599/- to Darshan Agencies are solely and exclusively towards reimbursement of expenses incurred by them on our behalf, the details of which are maintained, it cannot under any condition whether factual or legal can be termed as commission and hence tax at source has not been deducted.I.T.A No. 203/Agra/2015 24
1.8 That moreover since on the reimbursement of expenses already incurred by consignee agent which is always less than the actual expenditure, there is no element of income in hands of consignee agent, tax at source is not required to be deducted."
16. Thus, the assessee, before both the Authorities below, filed details showing that all the expenses incurred by the agents were incurred on behalf of the assessee, only on the sale made by them for the assessee. These expenses would otherwise have been incurred directly by the assessee in case the sale was to be made by the assessee itself. The ld. CIT(A), in this regard, has observed (impugned order, page 12, first para) that '................................. and after examined details of payment made by the assessee in respect of the amount of Rs.20,34,942/- paid over and above the commission during the year under consideration, the impugned payment of Rs.20,34,942/- has been found by me as reimbursement of expenses as held by the Hon'ble ITAT Agra in A.Y. 2009-10. ........................".
17. From the above, it is amply clear that the ld. CIT(A) duly examined the details filed by the assessee and it was only on such examination that he found the payment to be reimbursement of expenses and not commission. Hence, the Department is incorrect in contending that the ld. CIT(A) did not appreciate that the reimbursement of expenses was not linked to the actual expenses, as it was directly linked with the sale made by the agents. The fact is that these consignee agents incur expenses on sales made by them, which includes selling expenses and I.T.A No. 203/Agra/2015 25 redistribution expenses. These expenses are incurred by them on behalf of the assessee company and the monthly expenses incurred by them are reimbursed to these consignee agents in the subsequent month. The adjustment in the books of account is monthly made by debiting the head 'Expenses on Consignment Sales' and by crediting the account of consignee agent. The expenses are incurred by the consignee agent from the sale amount collected by them and there always remains some outstanding balance. The commission agents maintain day to day details of delivery and distribution expenses and selling expenses which are duly debited by them in their accounts. At the month end, on receipt of credit note from the assessee company, they credit the credit-note amount in the said account maintained and the sale amount is returned by them after deducting the amount of expenses as per the credit note. The expenditure incurred by them is more than the amount paid to them. Copy of account of assessee company in the books of consignee agents and copy of selling expenses account maintained by them on the assessee's behalf were filed before the Assessing Officer and the CIT(A). The AO as well as the CIT(A) did not find any error either with the above methodology, or the accounts. Remarkably, the AO held the payment to be commission and not reimbursement of expenses, not on facts, but merely because of the supervening I.T.A No. 203/Agra/2015 26 High Court interim stay order over the special Bench decision of the Tribunal in 'M/s Merilyn Shipping ' (supra).
18. Even before this Bench, the Department has merely urged that since the payment was directly linked with the sale made by the consignee agents, it was commission and not reimbursement of expenses. While arguing so, no reference has been made to 'Pee Cee Cosma Soap' (supra), which the CIT(A)'s has followed as was also done by the Tribunal in the assessee's case for A.Y. 2009-10. In 'Pee Cee Cosma Soap' (supra), payments exactly similar to the ones presently in question were, under similar facts and circumstances, held to be reimbursement of expenses. Neither 'Pee Cee Cosma' (supra), nor the Tribunal decision in the assessee's case for A.Y. 2009-10 has been shown to have been upset on appeal. Therefore, the ld. CIT(A) is fully justified in having followed these decisions in favour of the assessee. The case laws sought to be relied on by the Department, as such, are not of any help to it, on facts.
19. Accordingly, the impugned order on this issue is upheld. The Department's grievance by way of Ground Nos. 1 to 3 is rejected as shorn of merit. The deletion of this addition is confirmed.
20. Apropos Ground No. 4, addition of Rs.34,39,109/- is disputed. The AO has discussed in the assessment order that there is a Brajdham Project being I.T.A No. 203/Agra/2015 27 constructed by a company, M/s Pee Cee Housing and Construction Ltd. For this project, M/s Pee Cee Housing and Construction Ltd. has given advance of Rs.2,90,00,000/- by borrowing funds and interest paid on such borrowed fund has been capitalized against the project for two FYs as under.-
FY 2006-07 Rs.34,80,000/-
FY 2007-08 Rs.59,89,808/-
Rs. 1,29,49,808/-
This company has got merged with the assessee company during the year under consideration. The AO noticed that the assessee has not capitalized the interest paid on borrowed capital, even though the borrowed capital together with the interest capitalized stood in its balance sheet at Rs.4.19,49,908/-. He also noticed that the interest of Rs.34,39,109/- is debited on account of borrowed capital in the books of account of the construction company. The AO asked the assessee to explain as to why the interest debited by the Construction Company may not be capitalized on account of diversion of fund to the above project, which could not be started. The assessee explained that during the year under consideration, no interest has been paid on the fund invested in the Brajdham Project. The assessee showed that in FY 2009-10 relevant to AY 2010-11, interest has been paid to M/s Jai Gopal Investment & Trading Company Pvt. Ltd., M/s Hare Krishna Investment & Trading Company Ltd. and M/s Ram Shyam Investment and Trading Company Pvt. Ltd., whereas in the year in which payment was made for Brajdham Project, I.T.A No. 203/Agra/2015 28 there was no loan taken from these parties and hence, as per the assessee, it could not be said that the interest paid in the relevant previous year has any nexus with the payment made for Brajdham Project. It had also been explained that at the year end, the entire unsecured loans have been repaid. Thus, it had been contended that the payment for Brajdham Project is made out of the assessee's own capital, reserve and surplus. This submission of the assessee was not accepted by the AO. As per the AO, it had been noticed that during the year under consideration, the assessee has paid interest to various parties, from whom, loans have been taken in earlier years. As per the AO, repayment of loans to these parties during the year under consideration makes no difference, as only the amount of interest actually debited by the assessee is being considered for the purpose of capitalization. The AO further stated that it was also evident that the interest paid by the assessee in earlier years has been capitalized by the assessee itself. Since as per the AO, there was no material difference during the year consideration, therefore, the interest debited by the assessee at Rs.34,39,109/- was capitalized and disallowed during the year under consideration.
21. From the details submitted by the assessee before the ld. CIT(A), he found (impugned order, page 23, para 7.5) that no borrowed fund during the year under consideration has been utilized for making investment in Brajdham Project and I.T.A No. 203/Agra/2015 29 hence, capitalization of any interest amount against the Brajdham project is not required to be done during the year under consideration. The entire amount of interest of Rs.34,39,109/- paid on various loans are shown to be not related to Brajdham Project. The ld. CIT(A) observed that it is shown that out of interest payment of Rs.34,39,109/-, the amount of Rs. 7,35,425/- are paid to customers on returning the advances received from them on booking in other housing projects and hence, capitalization of these amounts does not arise. The balance amount of interest of Rs.27,03,684/- has been paid on such loans that were utilized for other projects out of which, sale of inventory during the year under consideration has taken place as explained.
22. It was on these observations that the CIT(A) held that the payment of amount of Rs.34,39,109/- was not related to Braj Dham Group. He, accordingly, deleted the addition.
23. The ld. DR has contended that the ld. CIT(A) has erred in deleting the addition of Rs.34,39,109/- made by the AO ignoring the fact that the interest on borrowed capital to the extent utilized for work in progress and the closing stock carried forward to next year was required to be capitalized.
24. The ld. Counsel for the assessee has, again, strongly relied on the impugned order.
I.T.A No. 203/Agra/201530
25. Before the ld. CIT(A), the assessee, in its written submissions, stated (impugned order, para 7.2) as follows:
"3.1 The Ld. JCIT on the observation as mentioned at Page 8 & 9 of the Assessment Order has disallowed Rs. 34,39,109/- by holding that the interest paid by M/s Pee Cee Housing & Construction Ltd to M/s Jai Gopal Investment & Trading Co. (P) Ltd, Hare Krishna Investment & Trading Co. (P) Ltd and Ram Shyam Investment & Trading Co. (P) Ltd. have been utilized in the project Brajdham Construction and hence the same should be disallowed and capitalized. While disallowing the Ld. JCIT at Page 8 has mentioned that in F.Y. 2006-07 & 2007-08 the assessee has himself the capitalized the payment of interest amount on the advance given by M/s Pee Cee Housing & Construction Ltd in Brajdham Project.
3.2 The facts of the case on this issue are:-
i) That the project Brajdham Construction was started by M/s Pee Cee Housing & Construction Ltd. and for the same advance of Rs. 2,00,00,000/- was given in F.Y. 2003-04, Rs, 80,00,000/- was further given in F.Y. 2004- 05 and further Rs.
10,00,000/- was given in F. Y. 2005-06.
I.T.A No. 203/Agra/201531
ii) That M/s Pee Cee Housing & Construction Ltd. was 100% subsidiary company of the appellant and by order of the court the same was merged in the appellant company w.e.f. 01.04.2009. Thus this is the first year in which M/s Pee Cee Housing & Construction Ltd. has been merged in appellant company.
iii) That M/s Pee Cee Housing & Construction Ltd. was in real estate business. The advance given by this company in Brajdham Project is partly out of the booking amount and from M/s Pee Cee Soap & Chemicals (P) Ltd. From F. Y. 2004-05 to F. Y. 2007-08 the interest paid by M/s Pee Cee Housing & Construction Ltd. mainly to the appellant company was capitalized by M/s Pee Cee Housing & Construction Ltd. in Brajdham project.
iv) That in A. Y. 2009-10 there was sale in real estate business of M/s Pee Cee Housing & Construction Ltd. of Rs. 5.86 Crore. Moreover as on 31.03.2009 M/s Pee Cee Housing & Construction Ltd. was having sufficient share capital and reserve and surplus. In support of the submission copy of the balance sheet of M/s Pee Cee Housing & Construction Ltd. for F. Y. 2008-09 is enclosed.
v) M/s Pee Cee Housing & Construction Ltd. made repayment of the loan from appellant company in F. Y. 2008-09. I.T.A No. 203/Agra/2015 32
vi) That the amount received as loan by M/s Pee Cee Housing & Construction Ltd. from the companies as mentioned in the Assessment Order was received from F. Y. 2004-05 whereas amount of Rs. 2 Crore in Brajdham project was given in F. Y. 2003-04. Moreover the amount received from these companies have been utilized in other projects. There is no direct and indirect nexus that the amount received as loan from these companies have been utilized in Brajdham Project.
vii) That in the relevant year, as mentioned above, M/s Pee Cee Housing & Construction Ltd. has been merged in the appellant company and the following amount of M/s Pee Cee Housing & Construction Ltd. has been merged in the balance sheet of the appellant company for F. Y. 2009- 10. Share capital of M/s Pee Cee Housing & Construction Ltd. Rs. 4.89 Cr. Reserve & Surplus of M/s Pee Cee Housing & Construction Ltd. Rs.1.02Cr.
viii) Since M/s Pee Cee Housing & Construction Ltd. has been merged in the appellant company question of any payment of interest does not arise which can be said to have been capitalized as was capitalized by M/s Pee Cee Housing & Construction Ltd. in earlier years.
ix) That since the company is in the real estate business the amount invested in Brajdham project is only and only for business purpose.
Moreover for disallowance out of interest payment it is for the I.T.A No. 203/Agra/2015 33 Department to prove the nexus that loans on which interest has been paid has been invested in the projects on which no income has been earned.
x) That the appellant company has substantial funds of their own. Copy of the relevant page of the balance sheet as on 31.03.2010 is enclosed.
Share capital Rs. 5,78,50,000/-
Reserve & Surplus Rs. 19,79,75,941/-
xi) Thus it cannot be said that the investment in Brajdham Project is out of the loan received on which interest has been paid and hence the disallowance of interest made by Id. JCIT is totally wrong, illegal and deserves to be deleted."
26. The ld. CIT(A) asked the assessee to further clarify and show the details of funds being used in Brajdham Project and for funds on which the interest of Rs.34,39,109/- has been paid. The assessee was asked to explain as to where these funds have been utilized.
27. In response, the assessee filed the following (impugned order, pages 19-20) reply:
"Re: Disallowance of Rs.34,39,109/- out of interest paid
1. That from FY 2003-04 to FY 2005-06 the assessee company gave loan to M/s Pee Cee Housing & Construction Ltd. This amount was invested by M/s Pee I.T.A No. 203/Agra/2015 34 Cee Housing & Constructin Ltd in the project named Brajdham Construction.
2. That M/s Pee Cee Housing & Construction Ltd. gave inerest on loan to the assessee company and the same was capitalized in Brajdham Project. After FY 2007-08 no interest was paid by M/s Pee Cee Housing & Construction Ltd to the assesssee company as the same was 100% subsidiary company of the assessee company.
3. That the Assessing Officer on the basis that since upto FY 2007-08 interest paid by M/s Pee Cee Housing & Construction Ltd was capitalized, in the year under consideration also the interest paid by M/s Pee Cee Housing & Construction Ltd should be capitalized and has disallowed the same ignoring the fact that no interest has been paid by M/s Pee Cee Housing & Construction Ltd to the assessee company in the year under consideration.
4. That since no interest has been paid for investment in Brajdham Project, question of any capitalization or any disallowance out of interest paid does not arise. Moreover in the year under consideration M/s Pee Cee Housing & Construction Ltd. was merged in the assessee company and all the projects/capital of M/s Pee Cee Housing & Construction Ltd was accounted for in the books of the assesee company.
5. That ledger account of interest of Rs.34,39,109/- which I.T.A No. 203/Agra/2015 35 has been disallowed by the AO is enclosed. On perusal of the same your goodself will find that interest of Rs.7,35,425/- has been paid against cancellation of booking amount,. Interest of Rs.27,03,684/- has been paid on the loans received from three companies in FY 2004-05(page no2 to 5)
6. That from FY 2004-05 onwards the loans received from these companies were invested in other projects of M/s Pee Cee Housing & Constructs Ltd. These projects were started in the preceding years. A chart enclosed giving the value of inventory as on 31.03.2009 after deducting the sales earlier made, the sales during the year and the closing value of the inventory as on 31.03.2010 (page no.
1)
7. That on perusal of this chart your goodself will find that up to 31.03.2010 the major part of the stock has been sold. Since the interest paid which has been disallowed by the AO is on these projects, the question of any caitalizatin/disallowance does not arise.
8. It is also important to mention here that out of the sale proceed of the projects the loan of these three companies has been repid in the relevant previous year."
28. The assessee also filed full details of the interest amount of Rs.34,39,109/-, which are as under:
INTEREST PAID (LEDGER) I.T.A No. 203/Agra/2015 36 From Wed, 01 april,2009 to Wed, 31 March 2010 DATE PARTICULARS TYPE VR.NO. DEBIT CREDIT BALANCE Opening 0.00 Balance B/F June 15 To Rajni Bansal Jrnl 35 1,43,548.00 Interest credited to Smt. Rajani bansal against account To Divya Jain Jrnl 36 1,97,808.00 Being interest credited to Smt. Divya Jain against account To Munni Devi Jrnl 37 1,03,904.00 Interest credited to Smt. Munni Devi against account To Rajeev saini Jrnl 38 72,685.00 Interest credited to Mr. Rajeev saini against account To Brijesh Kumar Jrnl 39 72,685.00 Interest credited to Mr. Brijesh Kumar against account To Amole Saini Jrnl 40 72,637.00 Interest credited to Mr. Amole Saini against account To Umesh Tyagi Jrnl 41 72,158.00 7,35,425.00 Interest credited to Dr. Mr.Umesh Kumar Tyagi against account Jan 15 ICL-RAM Shyam Jrnl 127 10,21,807.00 Invet.& Trading Interst credited for the period from 01.04.2009 to 15.09.2010 as per sheet enclosed @12%p.a To ICL-JAI Gopal Invt. Jrnl 128 11,50,189.00 & Trading Interest credited for the period from 01.04.2009 I.T.A No. 203/Agra/2015 37 to 15.01.2010 as per sheet enclosed @ 12%p.a To ICL-HARE Kris Invt. Jrnl 129 5,31,688.00 34,39,109.0 & Trading 0 Dr. Interest credited for the period from 01.04.2009 to 15.01.2010 as per sheet enclosed @ 12%p.a TOTAL 34,39,109.00 0.00 34,39,109.0 0
29. The following inventory of 'Pee Cee Housing and Construction Ltd.' for other projects were also submitted:
" Inventories Details of Pee Cee Housing & Construction Ltd.(Transferor Company) PARTICULARS Amount as on Amount as on 31.03.2010 31.03.2009
1.Land for Real Estate Project a.At Dholpur valued at Cost Sold 1,196,422 b.At Samal Khan valued at Sold 7,652.591 Cost c.Plots at Sushant City,Pantipat 11,408,195.68 12,417.320 d. Plots at Sushant City,Jaipur 49,409,091.091 49,409.091 e.Unsold shops,offices of Padam Plaza,Agra
1.Ground Floor Shop no.24A Sold 339,410.90 339.410
2.Ist Floor Shop no 24
3.IInd Floor Shop no.24 339,410.90 339.410
4.IInd Floor Shop 515,437 no.26515,437.76
5.IInd Floor shop no.28 515,437.76 515.437 Sub Total 1,709,697.32 2,021,877 TOTAL 62,526,984.08 72,697,302
1.Plots at Sushant City, Panipat as on 01.04.2009 12,417,320.68 I.T.A No. 203/Agra/2015 38 LESS: Sold in F.Y 2009-10 1,009,125.00 Balance as on 31.03.2010 11,408,195.68 LESS: sold in F.Y 2010-11 10,085,512.00 Balance as on 31.03.2011 1,322,683.68
2.Plots at Sushant City Jaipur 49,409,091.08 Advance Rs.4,50,00,000/- received on 15.06.2009 From Pee Cee Cosma Sope Ltd against Plots At Sushant City Jaipur
3.Shops, offices of padam Plaza , Agra as on 01.04.2009 2,021,877.55 LESS :Sold in F.Y 2009-10 3121,80.23 1,709,697.32 Advances received from M/s Pee Cee Cosma Soap Ltd. For the project of Shushant City Jaipur has been utilized in repayment of loans. These loans were utilized in the above project which are running. Sales have been started &hence interest paid to the lender companies have been claimed as revenue expenditure."
30. It was on having considered all the above submissions and details, that the ld. CIT(A) arrived at the conclusion that the payment was not related to Brij Dham Project and that the AO had not been justified in capitalizing the interest of Rs.34,39,109/- against the Braj Dham Project, adding it to the assessee's income.
31. In view of the details filed by the assessee before the ld. CIT(A), as above, which were duly taken into consideration by the ld. CIT(A), the Department has not been able to make out any case that the ld. CIT(A) has erred in deleting the addition. These details have not been shown to be factually incorrect. Now, when no borrowed fund has been shown to have been utilized by the assessee in making I.T.A No. 203/Agra/2015 39 any investment in the Brij Dham Project, capitalization of any interest is entirely out of the question, as has been correctly held by the ld. CIT(A). Again, the decisions relied on by the Department do not further its cause in the facts and circumstances of the case, as discussed. Hence, the CIT(A)'s well reasoned factual findings on this issue are also confirmed and the deletion of the addition is upheld. Ground No. 4 is, accordingly, rejected.
32. Ground No. 5 is general in nature.
33. In the result, the appeal is dismissed.
Order pronounced in the open court on 20/03/2018.
Sd/- Sd/-
(DR. MITHA LAL MEENA) (A.D. JAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated 20/03/2018
*AKV*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR