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TMI Blog2018 (7) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided that the assessee shall sell a minimum of 33,571 sq.ft., out of the total extent of the land and the developer shall construct in the portion retained by the assessee and also to pay a sum of Rs. 3.50 crores in addition to the said construction. The primary obligation on the assessee was to hand over the physical possession of the land on or before 15.5.1997. In the said property, there was a factory run by the assessee and therefore, the assessee had to shift his factory from the existing place to a new location, for which, it insisted upon a payment of Rs. 3.50 crores. The MOU provides that if the vacant possession is not handed over to the developer within the stipulated time, the assessee is required to pay liquidated damages at the prescribed rates. 3.1. Admittedly, the vacant possession was not handed over to the developer within the cut-off date and consequently, the respondent/assessee had paid a sum of Rs. 1.99 crores as liquidated damages to the developer. This expenditure was claimed by the assessee as Revenue Expenditure. However, the same was disallowed by the Assessing Officer. 3.2. The Assessing Officer also disallowed the payments which were to be paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal was right in allowing the claim of the assessee for liquidated damages paid to M/s.Prime Developers Ltd.,? 4.Whether on the facts and circumstances of the case, the Tribunal was right in deleting a sum of Rs. 6,16,83,896/- as interest amount disallowed in respect of advances and investments to sister concerns/associates made out of borrowed money? 5. Whether on the facts and circumstances of the case, the Tribunal was right in arriving at the fair market value for computing capital gain on sale of land at No.150, Dr.Muthulakshmi Salai, Chennai-41 on the mere statement of the assessee without any other documentary evidence? 5. Mr.T.Ravi Kumar, learned senior counsel appearing for the appellant would fairly submit that in so far as question No.1 is concerned, it is squarely covered by the decision of the Hon'ble Supreme Court in Commissioner of Income Tax Vs. Alom Extrustions Ltd., reported in [(2009) 319 ITR 0306], in which the Hon'ble Supreme Court has held that omission of second proviso to s. 43B and the amendment of first proviso by Finance Act, 2003 bringing about uniformity in payment of tax, duty, cess and fee on one hand and contributions to employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Extrusions case was not with regard to the effect of Section 2(24)(x) or Section 36(1)(va) of the Income Tax Act. In this regard, the learned counsel referred to the question of law which was framed for consideration by the Hon'ble Supreme Court in Alom Extrusions case and submitted that the question was whether omission (deletion) of the second proviso to s.43B of the IT Act, 1961, by the Finance Act, 2003, operated w.e.f. 1st April, 2004 or whether it operated retrospectively w.e.f. 1st April , 1988? . Further, it is submitted that the decision rendered by the Hon'ble Supreme Court should be applied by taking note of question which is framed for consideration. On facts, it is submitted that it is not clear in the instant case as to whether the delay in remittance is with regard to the employees' contribution or employers' contribution. This according to the learned counsel is material and has to be taken into consideration by this Court. c) Further, by relying upon the decision of the Gujarat High Court in Commissioner of Income-Tax V. Gujarat State Road Transport Corporation reported in [(2014) 366 ITR 170 (Guj)] , it is submitted that deleting the respective d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, both the Assessing Officer as well as CIT(A), disallowed the claim only under Section 43B of the Act and not under Section 36(1)(x) of the Act. Therefore, the question of law framed is incorrect and the necessity to decide the issues, taking into consideration Section 2(24)(x) or section 36(1)(va) does not arise because on facts the disallowance was under Section 43B. 8. The learned counsel for the Assessee relied on the decision of the High Court of Bombay in Commissioner of Income-tax Vs. Pamwi Tissues Ltd., in [(2008) 215 CTR 150 (Bombay)]. In the said decision, the High Court of Bombay held that the deductions be allowed only on actual payment, prior to the assessment year 2004-05 and employees contribution to PF, if not paid within due date, was disallowable. It is submitted that the decision in Pamwi Tissues case was affirmed by the Honble Supreme Court as the Special Leave Petition in SLP 20581 of 2008 was dismissed Vide its order dated 29.08.2008. In this regard, learned counsel produced a copy of the order passed by the Hon ble Supreme Court and also pointed out in paragraph No.19 in Alom Extrusions case, the dismissal of the Special Leave Petition has been noted. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees State Insurance Corporation. 12. The Assessee accepted that there was a delay of five days and accordingly, the disallowance to the tune of Rs. 50,048/-, being the contribution to the ESI Corporation was confirmed. This order was taken on appeal by the Assessee before the Tribunal. The Tribunal took note of the decision of the Special Bench of its Tribunal in the case of M/s.Kwality Milk Foods Ltd., V. The ACIT, vide its order in ITA.No.856/Mds/06 dated 16.03.2006. It was a case that had arisen under Section 43B of the Act and taking note of the same, the Tribunal has observed that in the assessee s case also, the payment specified under Section 43B has been made before the due date applicable [under the relevant Act] before furnishing return and following the decision of the Special Bench, the issue was decided against the Revenue. Therefore, the assessee is right in contending that the question of law as framed is factually incorrect and there is no belated remittance of PF contributions. The delay was in respect of contributions to the ESI Corporation and that too there was a delay of five days, which was within the grace period provided under the statute. The Revenue, havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power under 260A(6) of the Act would have power to deal with the substantial question of law. In the instant case, such issue was never raised by ITAT and therefore, the question of invoking proviso to sub-section 4, 5, and 6 of Section 260A does not arise. Thus the substantial question of law as framed is answered in favour of the assessee and against the Revenue. 15. The third substantial question of law raised is with regard to the liquidated damages paid by the assessee to the developer. The learned counsel for the Revenue contended that what is important to consider is when does the claim for liquidated damages arise and whether entries in Book of Accounts would be sufficient for allowing the same. It is submitted that unless there is a demand an award and quantification, the question of payment of liquidated damages does not arise. To support his contention, the learned counsel referred to the decisions of Asuma Cashew Company V. Commissioner of Income-tax reported in [(1990) 182 ITR 0175 (Ker)]; Sundareswaran (N.) V. Commissioner of Income-tax reported in [(1997) 226 ITR 0142 (Ker)] and Commissioner of Income-tax Vs. Seshasayee Industries Ltd., reported in [(2000) 242 ITR 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to examine and consider whether they would have or the assessee should have incurred the said expenditure including the quantum having regard to the circumstance. Thus, it is submitted that in the light of the above decision, it has to be held that the High Court of Kerala in the case of Sundareswaran (N.) V. Commissioner of Income-tax does not lay down the correct legal principle. 18. We have perused the order passed by ITAT and as mentioned above, in paragraph No.17 of its order, the Memorandum of Understanding as well as Supplementary MOU have been noted and the relevant clauses have been extracted (Clauses F,G,H & clause 4 of the Agreement): "F) WHEREAS due to the delay in handing over vacant possession which was actually done on 16.08.2001, the DEVELOPER had been insisting upon payment of compensation for, interalia, parting with liquidity, escalation in cost of construction and user by the Vendor of the Developer s property sold to them by the OWNER. G) WHEREAS OWNER represented to the DEVELOPER that the delay was occasioned due to the circumstances beyond its control and requested the DEVELOPER to reconsider their request of compensation as it was not seriously con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into a supplementary MOU. Bearing this in mind namely the undisputed factual position, if the law as laid by the Hon ble Supreme Court in Bharat Earth Movers case is applied it has to be seen whether the liability has definitely arisen in the accounting year and what is required to be certain is incurring the liability and it should also be capable of remitting with reasonable certainity though the actual quantification may not be possible and if these requirements are satisfied, the liability is not a contingent. The case of the assessee on facts is better couched than the case of Bharat Earth Movers, in the sense that the liability has been quantified and the same has been recorded in the supplementary MOU, as noted by the Tribunal. That apart, the fact that the possession of the land in question was not handed over in terms agreed to MOU is evident from the order passed by CIT(A), which has admitted that the possession of the property was handed over sometime in the year 2001. That apart, this fact has also been noted by the Assessing Officer, while completing the assessment for the Assessment Year 2004-2005 Vide order dated 28.12.2006. We respectfully agree with the view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The Revenue did not prefer any appeal before the Tribunal as against the order passed by CIT(A), which had allowed the advances and investments as claimed by the petitioner and which were disallowed by the Assessing Officer. So far as the claims which were disallowed by the Assessing Officer is concerned, the assessee was able to convince the Tribunal that there was a Board Resolution between two companies and the resolution clearly stated that the respondent-assessee company did not charge interest at the request made by the other companies and the ITAT has recorded a clear factual finding that the availability of funds, free of interest and the assessee is having a capital. That apart, it is also not established that there was a nexus in the disallowance of the interest between the borrowed funds and the interest free funds. Thus, the Revenue cannot rely upon Section 260A(2) of the Act. To advance an argument, the Court should consider the validity of the order passed by ITAT on issues which were not raised by the Revenue before the ITAT and that which were decided by CIT(A) in favour of the assessee. If such argument of the Revenue has to be accepted then finality can never ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that unless there is a nexus between borrowal and investment, the question of accepting interpretation as done by the Revenue arises. In this regard, the learned counsel also referred to the finding recorded by the Assessing Officer itself in paragraph No.3.6 of the Assessment order and paragraph No.8 onwards wherein the Assessing Officer himself has accepted the investments/advances except in respect of four companies, largely on the ground that it was backed only by the resolution of the Board and not by any scheme of BIFR, even otherwise it is pointed out that CIT(A) though granted relief for other investments and advances, ultimately remanded the matter to the Assessing Officer, directing the Assessing Officer that before giving effect to his order, has to obtain certain details and after verification of the details alone, disallowance of interest may be worked out. This observation is contained in 14.4 of the order passed by CIT(A). The learned counsel for the assessee also brought to the notice of the Court that the Assessing Officer has given effect to the order passed by CIT(A) with regard to interest disallowance by order dated 27.06.2002 and after due verificati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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