2017 (11) TMI 1216 - AT - Income Tax

Interest on PDC - Held that - It is an admitted fact that the assessee is a part of BPTP Group and similar additions were made in respect of many group entities. Some matters were disposed of by the Tribunal also We upheld the findings of the Ld. CIT (A) and dismiss the grounds of appeals of both assessee and the Ld. CIT (A) on the aspect of interest on PDCs and set aside the issue relating to the payments made in addition to the agreement amount to the file of Ld. AO for verification as to whether the assessee has claimed the payment of as an expenditure while computing its business income. If no deduction is claimed, then the question of any disallowance would not arise. If the deduction is claimed, then the Assessing Officer would work out the disallowance as directed by the CIT(A). Disallowance u/s 40(A)(3) - Held that - As perused the orders in the group company s cases and it is held in both M/s IAG Promoters and Developers Pvt. Ltd. and Westland Developers P. Ltd. that when the payments are not claimed as expense no disallowance arises. We, therefore, hold that disallowance u/s 40(A)(3) is not sustainable and the same has to be deleted.

Summary

Issues:
1. Interest on post-dated cheques
2. Additional payments made over sale consideration
3. Cash payments for land purchase invoking Section 40(A)(3) of the Income Tax Act

Detailed Analysis:
1. The issue of interest on post-dated cheques involved the Revenue challenging the order of the Ld. CIT (A) granting relief to the assessee. The Ld. CIT (A) directed the AO to re-compute the interest on post-dated cheques based on the extended period or after six months from the date of issue. The Tribunal upheld the Ld. CIT (A)'s decision citing a similar case precedent where the direction for re-calculation was found to be logical and based on seized material. Thus, the Tribunal dismissed the Revenue's appeal on this issue.

2. Regarding the additional payments made over the sale consideration, the Tribunal found that there was no conclusive finding by the Ld. CIT (A) or the Assessing Officer on whether the payments were claimed as expenditure. The issue was remanded to the AO to verify if the deduction was claimed by the assessee, and only then the disallowance would be applicable. The Tribunal followed legal principles that disallowance does not arise when no expenditure is claimed. Hence, the Tribunal set aside this issue for further verification by the AO.

3. The issue of cash payments for land purchase invoking Section 40(A)(3) of the Act was challenged by the assessee, arguing that no expenses were claimed, thus disallowance should not apply. The Tribunal referred to precedents where it was held that when payments are not claimed as expenses, no disallowance arises. Consequently, the Tribunal directed the AO to delete the disallowance under Section 40(A)(3). Therefore, the Tribunal allowed the appeals of both the Revenue and the Assessee in part, with the findings on interest on post-dated cheques upheld, the issue of additional payments remanded for verification, and the disallowance under Section 40(A)(3) directed to be deleted.