2015 (6) TMI 558 - AT - Income Tax

TDS u/s 194H - Disallowance under section 40(a)(ia) - whether CIT(A) was right in holding that the payment allowed to M/s Vikram Electric Equipment Pvt Ltd for consolidation of land are not in the nature of commission? - Held that - Payments made to M/s Vikram Electric Equipment Pvt. Ltd. as land consolidator were not for any services rendered but same were made for consolidation of land and surrendering of its rights in the land in favour of the appellant. M/s Vikram Electric Equipment Pvt. Ltd was acting as principle to principle basis and not an agent. Therefore, provision of section 194H are not attracted in the case of appellant. The clause 3.2 of the MOU entered into between the appellant and M/s Vikram Electric Equipment Pvt. Ltd clearly show that M/s Vikram Electric Equipment Pvt. Ltd was working on principal to principal basis and the amount paid to M/s Vikram Electric Equipment Pvt. Ltd was for consolidation of 27 acres of land and surrendering of its rights in favour of the appellant company. The provisions of section 40(a)(ia) are not attracted in this case as the appellant has not claimed any deduction for any expenses on account of payment to M/s Vikram Electric Equipment Pvt. Ltd, either in its profit and loss account or in the computation of taxable income filed. See M/s Finian Estates vs. ITO 2012 (6) TMI 705 - ITAT, Delhi - Decided in favour of assessee.

Summary

Issues involved:
1. Appeal against the order of the Ld.CIT(A)-XIII, New Delhi for AY 2006-07.
2. Appeal against the order of the Ld.CIT(A)-XIII, New Delhi for AY 2007-08.

Analysis:
1. Issue 1 - AY 2006-07:
The appellant declared a loss, but the AO assessed an income higher than declared, citing various discrepancies. The AO raised concerns about unsecured loans, debentures, pre-operative expenses, unexplained credits, and payments to creditors. The First Appellate Authority partially granted relief, which led to the Revenue's appeal. The main grounds of appeal included the treatment of business loss, genuineness of creditors, nature of payments to a specific entity, and applicability of TDS provisions. The First Appellate Authority found that payments made were genuine and related to land consolidation, not commission, and provisions of section 194H were not applicable. The decision was supported by a similar case precedent. The Revenue's appeal was dismissed based on the above findings.

2. Issue 2 - AY 2007-08:
Similar to the previous case, the AO made additions under different sections, including u/s 41(1) and u/s 145 of the IT Act. The First Appellate Authority granted relief based on the genuineness of payments made for land consolidation, following the same reasoning as in the AY 2006-07 case. The provisions of section 40(a)(ia) were found not to apply. The Revenue's appeal was dismissed in line with the decision for AY 2006-07, as the issues were identical.

In both cases, the First Appellate Authority's decisions were upheld, emphasizing the genuine nature of payments related to land consolidation and the inapplicability of certain provisions cited by the AO. The appeals by the Revenue for both Assessment Years were ultimately dismissed.