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2021 (7) TMI 978 - AT - Income TaxAddition u/s 68 - related party transaction - CIT(A) has returned a finding of fact that provisions of section 68 are in applicable as assessee has proved the identity of the creditor capacity as well as the genuineness of the transaction - HELD THAT - Manpower supply service charges paid by assessee CIT(A) notes that as long as M/s. LDC Holding Pvt. Ltd. is genuine no addition could be made in the hands of assessee under section 68 - assessee had filed ledger accounts showing the payments made to LDC Holdings Pvt. Ltd. in respect of manpower supply service charges and that in the subsequent financial year the entire amount outstanding was paid by assessee. It is also been recorded by the Ld. CIT(A) that provisions of section 68 of the Act would not have any application to the said liability shown by assessee to M/s. LDC Holding Pvt. for the year under consideration. No-fault could be profound in the view taken by the Ld. CIT (A). Merely because M/s. LDC Holding Pvt. Ltd. outsourced solar plant installation work to a third-party would not make the transaction to be bogus. Similarly in respect of manpower supply charges paid by assessee except for the allegation by the Ld. AO that the employees who rendered services to assessee were related to the director of assessee would not lead to a conclusion that the necessity of such services were not required by assessee. In any case there is no evidence brought on record by the Ld. AO that assessee was not in requirement of any manpower supply services or that the solar plant machine was not installed by assessee. Application of section 68 - The amount under consideration are expenses in the hands of assessee. Section 68 cannot be applied in the present facts of the case as there is no cash credits in the books of account of assessee. Thus in our view addition made in the hands of assessee by invoking provisions of section 68 are misconceived and has been rightly deleted by the Ld. CIT(A). - Decided against revenue.
Issues:
1. Related party liability of M/s. LDC Holding Pvt. Ltd. for solar power-installation charge. 2. Liability towards M/s. LDC Holdings Pvt. Ltd. for manpower supply charges. Issue 1: Related Party Liability for Solar Power-Installation Charge: The case involved an appeal by the revenue against an order passed by the Ld. CIT (A) for the assessment year 2016-17. The Ld. AO observed outstanding dues of Rs. 2,34,55,202/- to LDC Holding Pvt. Ltd., for various charges, including solar power installation. The Ld. AO treated the payments made towards solar power installation and manpower supply charges as bogus transactions, resulting in an addition under section 68 of the Act. However, the Ld. CIT (A) found that the appellant had indeed installed the solar power plant, evidenced by financial records and depreciation claimed. The Ld. CIT (A) concluded that the liability towards M/s. LDC Holdings Pvt. Ltd. for the solar plant installation was genuine, deleting the addition of Rs. 68,70,000/- under section 68. Issue 2: Liability for Manpower Supply Charges: Regarding the liability towards M/s. LDC Holdings Pvt. Ltd. for manpower supply charges, the Ld. AO disallowed Rs. 1,00,00,000/- under section 68. The appellant provided evidence, including invoices, confirming the manpower supply and payments made. The Ld. CIT (A) noted that the entire outstanding amount had been paid in the subsequent financial year, indicating the genuineness of the liability. The Ld. CIT (A) held that section 68 was inapplicable to this liability and directed the deletion of the addition. The Ld. CIT (A) emphasized the need for genuine transactions and upheld the appellant's claim, resulting in the dismissal of the revenue's appeal. The appellate tribunal upheld the Ld. CIT (A)'s decision, emphasizing the genuineness of the liabilities towards M/s. LDC Holdings Pvt. Ltd. for solar power installation and manpower supply charges. The tribunal found no fault in the CIT (A)'s reasoning and concluded that the additions made by the Ld. AO under section 68 were misconceived. The tribunal dismissed the revenue's appeal, affirming the Ld. CIT (A)'s order on both issues.
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