Income Tax Appellate Tribunal - Delhi
Mahendra Shipping Ltd., New Delhi vs Assessee on 17 February, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'E' : NEW DELHI)
BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMEBR
AND
SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA No.2754/Del./2012
(Assessment Year : 2008-09)
M/s. Mahendra Shipping Ltd., vs. ITO, Ward 6 (1),
302, World Trade Centre, New Delhi.
Babar Road,
New Delhi - 110 001.
(PAN : AAACM3391F)
(Appellant) (Respondent)
Assessee by : Shri V.K. Jain, CA
Revenue by : Shri Anoop Kumar Singh, Senior DR
ORDER
PER B.C. MEENA, ACCOUNTANT MEMBER
This appeal filed by the assessee emanates from the order of the CIT (Appeals)-IX, New Delhi dated 17.02.2012 for the Assessment Year 2008-09.
2. The assessee is a limited company. It was listed with the Delhi Stock Exchange. Return was filed on 22.09.2008. Taxes were paid u/s 115JB. The Assessing Officer made additions of prior period expenses and disallowances u/s 40(a)(ia) of the Income-tax Act, 1961. The appeal filed by the assessee was dismissed by the CIT (A) vide its order dated 17.02.2012. Now, the assessee is before us by taking the following grounds of appeal :-
2 ITA No.2754/Del/2012"1) The order of the Ld. Commissioner of Income Tax
- (Appeals) -IX, New Delhi is bad in law, wrong on the facts and against the principles of natural justice.
2) a.) The Ld CIT - (A) has erred in confirming disallowance Rs.50,000/- paid to Delhi Stock Exchange, during the Financial Year 2007-08, stating it to be related to earlier years.
b.) The said payment was made by the appellant company to Delhi Stock Exchange in financial year 2007-08 as the liability to make the payment was crystalised during the financial year 2007-08 and therefore the same is allowable in assessment year 2008-
09.
3) a.) The Ld. CIT - (A) has erred in confirming disallowance of Rs.60,000/- u/s 40(a)(ia) of the Income Tax Act on sum paid to Bharat Hotels Ltd., as parking charges for reserved car parking on the grounds that the same represents a work contract and TDS u/s 194C should have been deducted on the aforesaid payment without appreciating the fact that parking space has been allotted inside of main gate entrance of World Trade Centre, Babar Road, New Delhi and the payment is in the form of deemed rent for Space earmarked for parking.
b) The Ld CIT - (A) has erred in confirming disallowance u/s 40(a)(ia) of the Act, by treating it as contractual payment u/s 194C of the Act when infact it is deemed rent for space earmarked for parking and covered u/s 1941 of the Act. The appellant company was not liable to deduct tax at source as the payment made was less than Rs.120000 p.a. u/s 194I of the Act.
c) The Ld. CIT - (A) has erred in concluding that the amount paid for reserved parking is payment u/s 194C and not 1941 of the Act, and totally ignoring the ratio of judgement laid down by the Hon'ble Delhi High Court in the case of CIT Vs Asian Airlines (2008) 175 Taxman 177, United Airlines Vs CIT (2006) 287 ITR 281 and CIT Vs Japan Airlines Co. Ltd (2008) 325 ITR 298 wherein it has been held that payment made by an airlines for landing charges and parking charges to 3 ITA No.2754/Del/2012 Airport Authority of India are in the nature of rent and hence, assessee airline would be liable to deduct tax at source under section 194I and not 194C of the Act.
4. The appellant craves leave to add, alter, amend, modify or forego any of the grounds of appeal before or at the time of hearing."
3. Ground Nos.1 & 4 are general in nature. These were also not pressed during the hearing, hence dismissed.
4. In the ground no.2(a) & (b), the issue involved is confirming the addition of Rs.50,000/- paid to the Delhi Stock Exchange during the financial year relevant to Assessment Year under consideration.
5. During the year, assessee company made a payment of Rs.60,000/- to the Delhi Stock Exchange. Assessing Officer allowed Rs.10,000/- and disallowed the remaining Rs.50,000/- treating he same as not related to the year under consideration. The CIT (A) has confirmed the addition by holding as under :-
"4.3 I have considered the findings recorded by the ld. AO as per the assessment order, the submissions made by the ld. AR and the facts of the case on record. During the year the appellant has made a payment of Rs.60,000/- to the Delhi Stock Exchange (DSE). Out of the said amount, a sum of Rs.50,000/- was treated as pertaining to the earlier years by the AO and accordingly disallowed. On going through the details furnished by the appellant in a tabular form as reproduced in the preceding para, it is seen that the said amount of Rs.50,000/- indeed pertained to the earlier years. During the proceedings before me, the appellant contended that the payments were made to the DSE "as and when asked for." The ld. AR was, therefore, required to establish that the liability to pay listing fees and other expenses pertaining to the earlier years arose during the year under consideration. In response to the above, the appellant produced letter dated 4.6.2007 received from the DSE, directing it to deposit upto date listing fees amounting to Rs.50,000/- and Rs.10,000/- as fees for revocation of suspension of trading of the shares of the appellant company. In the 4 ITA No.2754/Del/2012 said letter, the DSE has referred to the appellant's request for the delisting and has also enclosed the details of non compliance for the period from 31.3.2002 till 31.3.2007 as per Annexure attached thereto. In view of the above, the appellant was further required to explain as to when was the request for delisting / restoration made. In response the appellant filed a copy of letter dated 17.2.2002 addressed to the DSE requesting for delisting of securities. On going through the said letter, it is seen that the same is not a copy of the letter filed with the DSE but a print out of the same separately generated on computer. The copy of the letter does not even contain the signature of the appellant i.e. director of the company. Vide order sheet noting dated 15.2.2012, a finding was recorded that the appellant has not submitted any evidence that the request for delisting was made in the year 2002. Under the facts and circumstances of the case, the claim of the appellant that a request for delisting was made in the year 2002, however, the demand for the payment was made by the DSE in the year 2007, is not acceptable. The appellant has not been able to establish that the request was actually made in the year 2002. Further, the letter dated 4.6.2007 of the DSE has referred to the non compliance continuing for the period from 31.3.2002 till 31.3.2007 meaning thereby that the liability to such payments had got created in the respective financial years. I, therefore, have no hesitation in holding that the amount of Rs.50,000/- in fact pertained to the earlier years and thus has been rightly disallowed by the Id. AO. Accordingly, ground no. 2 is rejected."
6. We have heard both the sides on the issue. The assessee is following mercantile system of accounting. The details of expenditure disallowed is as under :-
S.No. Particulars Amount
(Rs.)
1. Paid towards fees for revocation of 10,000/-
suspension of trading of shares of the assessee company w.e.f. 16/12/2004 on 7/6/2007
2. Paid towards the listing fees upto 30,000/-
31/12/2004 Rs.10,000/-, for 2005 Rs.5,000/-, for 2006 Rs.5,000/- and 5 ITA No.2754/Del/2012 processing fees of Rs.10,000/- on 30/8/2007
3. Paid towards condonation fees 10,000/-
Rs.5,000/- and reinstatement fees Rs.5,000/- on 3/12/2007, as earlier short paid.
The Ld. AR pleaded that the expenditure is allowable u/s 37(1) of the Income-tax Act, 1961. These expenses are paid as and when asked for. These expenses crystallized in this year only. Hence cannot be said pertaining to earlier years. These expenses are not capital expenditure. These were also not personal expenditure. These expenditures were incurred during the previous year. These relate to the business carried out by the assessee. Ld. AR pleaded that these expenditures were wholly and exclusively for the purpose of business and these were not against an offence or prohibited law. Ld. AR also relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. Modipan Ltd. - 334 ITR 102 (Delhi). For the proposition that even when mercantile system of accounting followed and expenses settled in the present year when full details are not available in prior years is allowable expense. Ld. AR also relied on Gujarat High Court decision in the case of Sourashtra Cement & Chemical Ltd. Vs. CIT 313 ITR 523 Gujrat for the proposition that liability though related to earlier year, depend on making demand and acceptance by assessee. Such liability has been claimed and paid in the later previous years cannot be disallowed as deduction merely on the basis that the accounts are maintained on mercantile basis and that it relates to a transaction of the previous year. If for want of necessary material crystallizing the expenditure is not in existence in respect of which such income or expense relates, the mercantile system does not call for adjustment in the books of accounts on estimate basis. It is actually known liability, which is can be claimed. Estimated liability yet to be crystallized, can be said as contingently liability and not as accrued 6 ITA No.2754/Del/2012 liability. Ld. AR also relied on Delhi High Court decision in the case of CIT Vs. Exxon Mobil Lubricant P. Ltd. 328 ITR 17 (Delhi) for the proposition that liability under agreement assigned according when the agreement in executed. Expenses are allowable when they are crystallized. Ld. DR relied on the orders of the authorities below.
7. After hearing both the sides, we find that the payment of fees for revocation of suspension of trading of shares of Rs.10,000/- and payment towards condonation fees of Rs.5,000/- and reinstatement fees of Rs.5,000/- were allowable during the year under consideration as these expenses were first time arose and crystallized during this year. Similarly, the processing fee of Rs.10,000/- also arise and crystallized during the year hence pertains to the year under consideration. As far as listing fee for period upto 31.12.2004 of Rs.10,000/- and listing fee of Rs.5000/- each for 2005 and 2006 are concerned, we would like to say that the assessee had made an application on 17.01.2002 for delisting of its securities from the Delhi Stock Exchange. The application was made on 17.01.2002. The assessee was under the bonafide belief that he has not to make any payment towards the listing fees. Revenue has also not brought on record anything which could show that the listing fee for these years was demanded in earlier years. In view of these facts, we hold that the listing fees paid for period upto 31.12.2004, 2005 & 2006 arose and crystallized during the year under consideration. In view of these facts, we hold that the total expenditure of Rs.50,000/- was allowable during the year under consideration itself as these expenses cannot be termed as prior period expenses. This ground of appeal is allowed.
8. In the ground no.3, the issue involved is confirming the disallowance of Rs.60,000/- u/s 40(a)(ia) of the Act paid to Bharat Hotels Limited as parking charges for reserved car parking. The revenue has held that this amount was paid towards the work contract and the TDS u/s 7 ITA No.2754/Del/2012 194C should have been deducted on the payments. The assessee claims that it was a deemed rent for space earmarked for parking allotted inside of main gate entrance of World Trade Centre, Babar Road, New Delhi. Since it was a rent, the TDS provision as provided in section 194C of the Act are not applicable as the payment was not contractual payment. The provision of Section 194I is applicable. The threshold limit for deducting TDS u/s 194I is Rs.1,20,000/- per annum. The provisions of section 194I are not applicable on account of the threshold limited. Therefore, this disallowance deserves to be deleted. The ld. AR also relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. Asian Airlines - (2008) 175 Taxman 177, United Airlines vs. CIT - 287 ITR 281 AND CIT vs. Japan Airlines Co. Ltd. - 325 ITR 298. In these cases, it has been held that payment made by an airline for landing charges and parking charges of Airport Authority of India are in the nature of rent, hence TDS is deductible u/s 194I of the Act and not u/s 194C. On the other hand, the ld. DR relied on the orders of the authorities below.
9. We have heard both the sides on the issue. The assessee's claim that the amount paid of Rs.60,000/- for the car parking comes u/s 194I of the Income-tax Act, 1961 for the applicability of the TDS provisions. However, from the facts, we find that there is nothing on record which shows that the parking space was earmarked for the assessee. The rent agreement, if any, has not been filed on the record and no finding in this regard is available on record. The amount of Rs.60,000/- was paid on the invoice raised by Bharat Hotels Limited for the parking charges. There is nothing on record which shows that the parking was earmarked. The copy of the letter from Bharat Hotels Limited dated 26.04.2007 also did not mention anything about earmarking of the parking slot, it only states that inside the main gate entrance of World Trade Centre. Such arrangements cannot be said as a letting out of land. It can be only a 8 ITA No.2754/Del/2012 contract between the two independent parties for allowing vehicle to be parked inside the premises. Therefore, in our considered view, the provisions of section 194I are not applicable. Such payments for contractual obligations can be covered by the provisions of section 194C of then Income-tax Act, 1961. Since no tax has been deducted on the payment the provisions of section 40(1)(ai) are applicable. Therefore, we find no infirmity in the order of the CIT (A) and we confirm the same. This ground is dismissed.
10. In the result, the appeal of the assessee is partly allowed.
Order pronounced in open court on this 21st day of September, 2012.
Sd/- sd/-
(U.B.S. BEDI) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 21st day of September, 2012
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-IX, New Delhi.
5.CIT(ITAT), New Delhi. AR/ITAT
NEW DELHI