2017 (6) TMI 1291 - AT - Income Tax

Addition on account of release of rights - reason why the same amount should be disallowed without appreciating the fact that the payments was made to M/s. Global Properties sister concern of the assessee for business purposes. There is no intention of diversion of profits for saving of the taxes - without deducting TDS u/s 194J - HELD THAT - Allowing of ₹ 60 lakhs paid by the assessee to M/s. Global Properties. We find that there is no dispute on the fact of payment of the said amount involving the banking channels. Nothing is brought on record to suggest that the money is repaid in cash form or otherwise to the assessee by M/s. Global Properties. It is also undisputed that both assessee as well as M/s. Global Properties are the taxpayers paying taxes at maximum marginal rate of taxes. The letter is undated, which is undisputed. There is no evidence brought on records by the AO to suggest that the said page is not genuine. In our view, the said payment of ₹ 60 lakhs to M/s. Global Properties constitutes a business transaction which was executed by the assessee in his wisdom as a businessman. Therefore, the decision given by the CIT(A), in our view is required to be reversed and in favour of the assessee. Considering the same, in our view, the adjudication of the other issue of invoking the provisions of section 194J/40(a)(ia) of the Act becomes an academic exercise. As such, there is no specific ground raised in this regard as seen from the grounds of appeal. Thus, the solitary ground raised by the assessee is allowed and in favour of the assessee.

Summary

Issues:
Disallowance of ?60,00,000 paid to M/s. Global Properties for nominating appellant's name in property transaction.

Analysis:
The appeal was filed against the CIT(A)'s order for the Assessment Year 2011-12, where the sole ground was the disallowance of ?60,00,000 paid to M/s. Global Properties. The assessee, engaged in construction and property development, declared income of ?10.67 crores, which the AO adjusted to ?11,26,92,440, adding ?60 lakhs for release of rights. The payment was made to M/s. Global Properties for nominating the appellant in a property transaction. The AO contended that M/s. Global Properties' involvement was unnecessary, leading to the disallowance. The assessee argued that the payment was for business purposes, justifying it as a legitimate transaction. The CIT(A) upheld the AO's decision, prompting the appeal.

During the appeal, the assessee reiterated arguments, presenting documents supporting the transaction. The appellant's counsel highlighted a confirmation letter from Tata Autocomp Systems Ltd. acknowledging M/s. Global Properties' role in negotiations. The Revenue's representative argued that these documents were self-serving. The ITAT noted that the payment was made through banking channels, with no evidence of repayment to the assessee. Both parties paid taxes at the maximum marginal rate. Despite an undated letter, the ITAT found the payment a legitimate business transaction, overturning the CIT(A)'s decision in favor of the assessee. As a result, the appeal was allowed, with no need to address other tax provisions invoked by the AO.

In conclusion, the ITAT ruled in favor of the assessee, allowing the appeal against the disallowance of ?60,00,000 paid to M/s. Global Properties. The judgment emphasized the genuine nature of the transaction, considering it a business decision made by the assessee. The decision highlighted the lack of evidence suggesting any impropriety in the payment, leading to the reversal of the CIT(A)'s decision.