2019 (11) TMI 655 - AT - Income Tax

Addition on account of interest paid and disallowance of rent expenses - HELD THAT - It is pertinent to note that the payment made to the parties was verified by the CIT(A) and the funds received from these parties were received by way of cheques and same were utilized by the assessee for its business purposes for completing the project. The payments of assured return in the form of interest to Dinesh Nandini Ram Krishna Dalmia Foundation and assured rental to Sh. Arun Khanna and Kailash Khanna have been made after deducting TDS, therefore, there is no dispute about incurring of expenditure. Since, the funds received from these parties were on the basis of valid MOUs against booking of space and on the basis of fixed return plans offered by the assessee, hence the expenditure incurred was for commercial expediency and is a requirement of the business. Thus the CIT(A) has given a detailed finding and there is no need to interfere with the same. Hence, Ground No. 1(i) of the revenue s appeal is dismissed. Disallowance of compensation expenses - HELD THAT - CIT(A) has given a detailed finding in respect of each unit which was doubted by the Assessing Officer. In fact, the expenditure incurred was wholly and exclusively for the business purposes, which was not refuted by the Assessing Officer during the assessment proceeding as well. Therefore, the Ground No. 1(ii) is dismissed Addition on account of not disclosing maintenance income - HELD THAT - The CIT(A) has given a detailed reasons and despite not admitting additional evidences has taken cognizance that when the mistake was detected by the assessee relating to income in respect of maintenance the same was offered to tax in A.Y. 2011-12 by showing previous year item. Therefore, Ground No. 1(iii) of the revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition on account of interest paid and disallowance of rent expenses.
2. Deletion of addition on account of disallowance of compensation expenses.
3. Deletion of addition on account of not disclosing maintenance income.

Detailed Analysis:

1. Deletion of Addition on Account of Interest Paid and Disallowance of Rent Expenses:

The Revenue challenged the deletion of additions amounting to ?22,50,000/- and ?16,30,000/- made by the Assessing Officer (AO) concerning interest paid to M/s Dinesh Nandini Ram Krishna Dalmia Foundation and assured rent paid to Shri Arun Khanna and Kailash Khanna, respectively. The CIT(A) found that these payments were verifiable as they were made by cheques and utilized for business purposes. The CIT(A) noted that the assessee entered into agreements with various buyers to raise funds for completing projects, offering fixed returns in the form of interest or rent. The payments were made after deducting TDS, indicating no dispute about incurring the expenditure. The CIT(A) concluded that the expenditure was incurred for commercial expediency and business requirements, thus allowable under Section 37 of the I.T. Act. The Tribunal upheld the CIT(A)'s detailed findings, dismissing Ground No. 1(i) of the Revenue's appeal.

2. Deletion of Addition on Account of Disallowance of Compensation Expenses:

The Revenue contested the deletion of an addition of ?1,09,17,200/- made by the AO for disallowance of compensation expenses. The CIT(A) observed that the compensation was paid to buyers who opted out due to changes in the floor plan to avoid litigation and maintain market reputation. The CIT(A) detailed specific instances where the compensation was paid and units were resold at higher rates, resulting in no loss to the revenue. The CIT(A) concluded that the expenditure was wholly and exclusively for business purposes, thus allowable under Section 37 of the I.T. Act. The Tribunal agreed with the CIT(A)'s detailed findings and dismissed Ground No. 1(ii) of the Revenue's appeal.

3. Deletion of Addition on Account of Not Disclosing Maintenance Income:

The Revenue argued against the deletion of an addition of ?50,32,287/- made by the AO for not disclosing maintenance income. The CIT(A) noted that the assessee inadvertently did not declare this income in the Profit & Loss A/c for A.Y. 2010-11, although TDS was claimed. The CIT(A) found that the mistake was bona fide and the income was offered in A.Y. 2011-12. The CIT(A) admitted additional evidence and directed the AO to credit expenses against the maintenance income and add the net income of ?1,00,966/- for A.Y. 2010-11. The AO was also directed to pass a consequential order for A.Y. 2011-12. The Tribunal upheld the CIT(A)'s decision, dismissing Ground No. 1(iii) of the Revenue's appeal.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s detailed findings on all grounds. The judgment emphasized the verifiability of payments, the commercial expediency of incurred expenses, and the bona fide nature of the assessee's actions. The order was pronounced in the Open Court on November 7, 2019.