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TMI Blog2019 (2) TMI 1363X X X X Extracts X X X X X X X X Extracts X X X X ..... at account. 2. The Ld. CIT(A) has erred both on facts in law in sustaining the disallowance of Rs. 43,93,291/- to the extent of 20% of the "Salary and Wages" of Rs. 2,19,86,456/- debited to the P&L Account. 3 The authorities below have acted arbitrarily and without any reasonable in holding the credit of Rs. 48,00,000/- as part repayment of the advance given earlier to the business associate as unexplained cash credit as per the provisions of section 68 of the IT Act. 4. The authorities below have acted arbitrarily and without any reasonable in holding the payment of Rs. 50,00,000/- made for facilitating possession of land as part of the business activity as the payment made in contravention of the provisions of section 194H r.w.s. 40(a)(ia) of the IT Act. 5. The authorities below have acted arbitrarily and without any reasonable in holding the payment of Rs. 50,00,000/- as consideration of the various movables and structure on the land purchase as part of business activity as the payment made in contravention of the provisions of section 194H r.w.s. 40 (a)(ia) of the IT Act." 3. The assessee is a private limited company and has been engaged in the business of real estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h they subsequently sold to the assesse company at an agreed price (the difference not exceeding a certain amount) with a guarantee of satisfaction over a period of 3 years and 6 months, so that there should not be any deficiency in the purchase of land by the Assessee company. The MOU thus makes it clear that the relationship between the consolidators and the assesse company qua the sale of land is on principal to principal basis and the consideration received by the consolidators is sale simpliciter and that there is no relationship of principal and agent between them. Looking at the transactions being of sale /purchase and relationship being on principal to principal basis the consideration paid to the consolidators does not amount to commission/brokerage in terms of section 194H as the same is not applicable to these transactions. The MOU also makes it clear that the contract between the consolidators and the assesse company is in the nature of 'contract of sale' with a guarantee period and not a 'contract of agency' and the difference between the agreed price and sale price for surrender of rights was an incentive /compensation /profit for offer of sale with gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a contract of a principal with a principal. The principal-agent relationship which is a sine qua non for invoking provisions of section 194H is missing in this case. It was a contract of sale with a guarantee period. The Hon'ble Delhi High Court in case of CIT vs. Mother Dairy India Ltd. 358 ITR 218 (Del.) held that amount received for undertaking procurement and marketing of milk and milk products through concessionaires is a case of purchase of milk outright and not agency sales. The Hon'ble High Court further held that amount paid for the purchases and the amount charged at maximum retail price does not constitute brokerage or commission, so as to require tax deduction at source. Thus, the ratio of the Hon'ble Delhi High Court in case of Mother Dairy India Ltd. (supra) is applicable in the present case. Hence, Ground No. 1 is allowed. 8. As regards to Ground No. 2 relating to Disallowance out of salary and wages Rs. 43,93,291/-, the Ld. AR submitted that the adhoc addition made by the Assessing Officer at 80% of the salary and wages claimed has been reduced by the CIT(A) to 20% of such salary and wages on the ground that it is excessive in nature. Keeping in view the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer as no explanation was given by the assessee during the assessment proceedings. 13. We have heard both the parties and perused all the relevant material available on record. The Assessing Officer noted Surjeet Singh's confirmation. Yet, the person himself could not be produced before the Assessing Officer as the time given was short towards the end of the assessment proceedings. The Ld. AR submitted that he can be produced if so directed by the Tribunal. Therefore, we are of the opinion that it will be appropriate to remand back this issue to the file of the Assessing Officer to decide the same afresh after verifying all the details about the cash credits including presence of Shri Surjeet Singh before the Assessing Officer and his confirmation. Needless to say, the assessee be given the opportunity of hearing by following principles of natural justice. Ground No. 3 is partly allowed for statistical purpose. 14. As regards to Ground No. 4 relating to addition of Rs. 50 lacs in respect of Shri Mange Ram, the Ld. AR submitted that the Assessing Officer disallowed the payment of Rs. 50 lacs given to Shri Mange Ram by cheque for giving possession/vacation of the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment of Rs. 42,84,325/- to one Shri Dharm Raj debited to the consolidation and other charges for want of address and IT particulars to cross verify the claim of the assesse. The Assessing Officer also invoked the provision of 40(a)(ia) r.w.s.l94H. The CIT(A) sustained the addition on account of the payment made to Shri Dharm Raj for paying him separate consideration of Rs. 42,84,375/- for built up structure, tube well, standing crops, poultry farm etc. in addition to the sale consideration of land sold by him for Rs. 1,28,12,500/- vide registered sale deed alongwith the co seller Mrs. Chand Kaur his mother. The Assessing Officer treated this payment by way of commission on extraneous grounds for certain services i.e. for obtaining possession of the land for by invoking section 40(a)(ia) r.w.s. 194H. The Ld. AR submitted that the evidence of identity & address of Shri Dharm Raj & the receipt of payment of Rs. 42,84,375/- by him for Makan, Tubewell, fasal, Pad-poudha, Murgi farm had been filed for verification alongwith sale deed of the land. As regards treating the separate additional payment to Shri Dharm Raj as mentioned above as in the nature of commission for extraneous gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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