2021 (7) TMI 89 - AT - Income Tax

Addition on account of interest on PDCs Paid out Side the books of account - CIT(A) has upheld the addition of cash payment of interest on PDC, however, he directed to charge interest for six month after the sale deed - HELD THAT - Identical issue was before the Tribunal in the case of M/s. Impower Infrastructure Private Limited 2018 (5) TMI 2071 - ITAT DELHI as held assessee was used to pay part payments of the sale consideration in respect of the land purchased at the time of execution of the sale-deed and the payments of balance sale consideration were invariably made through post dated cheques (PDCs) and for the intervening period) i.e. period between the date of sale deed and the date of encashment of PDCs), interest was paid in cash to the vendors of the land by the vendee company on monthly basis @ 1.25% p.m. on the amount of PDCs and this cash payment of interest by the vendee company, was not accounted for by it, in its books of account. - Thus we uphold the finding of the Learned CIT(A) on the issue-in-dispute. The ground of the appeal of the Revenue is accordingly dismissed. Additional payment in violation of the Stamp Duty Act, 1899 - disallowance under section 37 of the Act on account of additional payments for purchase of land - HELD THAT - As decided in own case 2018 (6) TMI 63 - ITAT DELHI CIT(A) has given categorical finding that the payment for acquiring land cannot be said disbursement of expense or not claimed as expense. In case of owner i.e. assessee effectively the owner of the land is purchasing the same and selling all the rights in said land at a cost of land plus ₹ 35,000 per acre. Therefore, the cost of land plus ₹ 35,000 per acre is the sale cost which effectively claimed but due to accounting entries, such transaction gets squared up to the extent of cost of land, as such owner including the assessee is directly crediting ₹ 35,000 per acre in its P L account. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition on account of interest on post-dated cheques (PDCs) paid outside the books of account.
2. Deletion of addition on account of additional payment in violation of the Stamp Duty Act, 1899.

Detailed Analysis:

Issue 1: Deletion of Addition on Account of Interest on PDCs Paid Outside the Books of Account
The Revenue challenged the deletion of an addition of ?3,41,08,967/- made on account of interest on PDCs paid outside the books of account. The assessee, part of the BPTP Group engaged in real estate development, was found during a search operation to have paid interest in cash to land vendors for the period between the sale deed execution and PDC encashment. This interest payment was not recorded in the books of account. The Assessing Officer (AO) added ?3,30,81,969/- as unaccounted interest paid by the assessee, which was later increased to ?4,13,41,937/- through a rectification order. The CIT(A) partly allowed the appeal, directing the AO to compute interest after six months from the sale date, resulting in a deletion of ?3,34,75,648/-.

The Tribunal noted that the issue was covered in favor of the assessee by previous Tribunal orders, including in the case of M/s. Impower Infrastructure Private Limited and IAG Promoters and Developers Private Limited. It upheld the CIT(A)’s finding, confirming that interest was indeed paid on PDCs but should be computed after six months from the sale deed date. The Tribunal dismissed the Revenue's appeal on this ground, following its earlier decisions.

Issue 2: Deletion of Addition on Account of Additional Payment in Violation of the Stamp Duty Act, 1899
The Revenue also challenged the deletion of an addition of ?6,80,15,748/- made under Section 37 of the Income Tax Act on account of additional payments for land purchases, allegedly violating the Stamp Duty Act. The AO disallowed ?6,88,71,998/- but the CIT(A) accepted the assessee's contention that there was no violation of the Stamp Duty Act. The CIT(A) directed the AO to verify stamp paper and court fee charges, leading to the deletion of ?6,80,15,748/-.

The Tribunal found that the issue was covered in favor of the assessee by previous Tribunal orders, including in the case of Impower Infrastructure Private Limited and Westland Developers Private Limited. It confirmed that the payment for acquiring land was not an expense claim but part of the land cost. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)’s decision.

General Grounds:
The Tribunal found the general grounds raised by the Revenue to be infructuous and dismissed them without further adjudication.

Conclusion:
The appeal filed by the Revenue was dismissed in its entirety, with the Tribunal upholding the CIT(A)’s decisions on both the deletion of the addition on account of interest on PDCs and the additional payment in violation of the Stamp Duty Act. The Tribunal's order was pronounced on 30th June 2021.