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TMI Blog2019 (4) TMI 1656X X X X Extracts X X X X X X X X Extracts X X X X ..... wo Buildings in the following manner: a) For building no. 157, Rabindra Sarani, Kolkata-700007 by Rs. 32,77,329/- b) For Building no. 159, Rabindra Sarani, Kolkata-700007 by Rs. 22,89,881/-. 2. Under the facts and circumstances of the case the ld. Commissioner of Income Tax (Appeals)-2, Kolkata has erred in law as well as in fact in confirming the arbitrary disallowance & addition made by the Assessing Officer (A.O.) under section 40(a)(ia) of the Income Tax Act, 1961 (Act) the following expenditures incurred by the assessee on the basis of erroneous conclusion of non-deduction of tax at source. (TDS). a) Purchases of Rs. 1,89,96,589/- from Tirupati Mercantile & Trading Co. Ltd. b) Purchase of gift items of Rs. 5,95,598/- from G.V. Promoters on account of Business Promotion. 3. The appellant craves leave to amend, add, alter, modify and withdraw any or both of the above grounds at any time before disposal of the appeal. 3. Ground No. 1 raised by the assessee relates to valuation of closing stock of unsold flats of the two building, being flat building no. 157, Rabindra Sarani Kolkata, Rs. 32,77,329/- and building no. 159, Rabindra Sarani Kolkata Rs. 22,89,881/-, both a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is sold to the existing tenants only. Hence, the cost of improvement was not taken into the entire cost of building. Therefore, cost of the closing balance of the building was not effected with the cost of improvement. " 6. The assessing officer, examined the submission of the assessee and found to be inconsistent with the policy of valuation in respect of other properties held by the assessee. It was observed by AO that in the case of property at 19 Armenian Street, total area of the property is 12385.55 sq ft. valued at Rs. 2,73,25,656/-. Expenses incurred on renovation of the property is Rs. 30,21,528/- resulting into a per square feet value of the property at Rs. 2450.20 [{2,73,25,656 + 30,21,528}/12385.55]. Out of the said area, the assessee had sold 3307 sq. ft. leaving behind a closing stock 9078.55 sq. ft. Hence, the value of closing stock of 19 Armenian Street should be Rs. 2,22,44,344/-[2450.20 x 9078.55] which is exactly the value disclosed by the assessee. Moreover, the AO noted that the submission of the assessee that renovation expenses in respect of property at 157, Rabindra Sarani and 159 Rabindra Sarani were borne exclusively in respect of the areas sold is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to determine surpluses from the sale of flats of the said two buildings. Consequently, renovation expenses incurred of Rs. 37,29,731/- and Rs. 23,52,484/- for the flats sold of thebuilding No. 157 Rabindra Sarani, Kolkata 700007 and for the flats sold of the building No.159 RabindraSarani, Kolkata 700007 respectively were not included at the time of determining the values of the unsold portions of the said two buildings i.e. at the time of arriving at the values ofClosing Stock of the said two buildings. Accordingly, the assessee has arrived at the following values of Closing Stocks of the unsold flats of the said two buildings: (i) Building No. 157 RabindraSarani, Kolkata 700007 at Rs. 22,04,490/-; and (ii) Building No. 159 RabindraSarani, Kolkata 700007 at Rs. 1,69,61,480/-. Thus, totaling to Rs. 1,91,65,970/-( Rs. 22,04,490 + Rs. 1,69,61,480). 10. We note that the Ld. A.O. has failed to understand the above mentionedfacts. Rather he has concluded erroneously that the renovation expenses of Rs. 37,29,731/- andRs. 23,52,484/- were incurred for the said two buildings as a whole. Accordingly, he has arrived at the following Closing Stock values i.e. the values of the unsold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bited in its profit & loss account. The AO noted that such details furnished revealed that all the payments made to M/s Tirupati Mercantile & Trading Co Ltd were debited on account of Printing Charges. Copy of audited accounts of M/s Tirupati Mercantile &Trading Co Ltd was also called for. Examination of such accounts, AO noticed that the said company had disclosed sales of textiles to the extent of Rs. 1,29,30,755/- as against claim of purchase of Rs. 1,89,96,589/- made by the assessee. Copy of bills raised by M/sTirupati Mercantile & Trading Co Ltd, on the assessee, were also called for examination of such bills till the date 25.06.2010 and the bills for the rest of the year were exactly similar and non-differentiable.In view of the observation made above, the assessee was required to explain why the sum of Rs. 1,89,96,589/- paidto M/s. Tirupati Mercantile & Trading Co Ltd, on account of Printing Charges shall not be disallowed u/s 40(a)(ia) of the Income Tax Act, 1961, for violation of section 194C of the Act. 13. Similarly, it was also observed by the AO from the details of business promotion expenses that the assessee had failed to deduct tax at source on payment of Rs. 5,95, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods worth Rs. 1,89,96,589/- from Tirupati Mercantile & Trading Co. Limited and paid for that accordingly. During the appellate proceedings, the assessee submitted Photocopy of the certificate from Tirupati Mercantile & Trading Co. Limited confirming that they have sold fabrics & Sarees to the assessee. We note that assesseewas purchasing from Tirupati Mercantile & Trading Co. Ltd. form 28.06.2010 and before that period asseseee have do only printing work on contract basis. So up to the date of 25.06.2010,assessee has deducted the TDS on printing work only. Thereafter, assessee started purchasing from the said party. Since job work and purchases is made from same party, same ledger is continued. Since same ledger of Tirupati Mercantile & Trading Co. Ltd. for job work and purchase is continued, the assessee fails to give effect of purchases from Tirupati Mercantile& Trading Co. Ltd. in the details of purchase above 10 lakhs from party. Hence, it is purchase from the said party, so there was no question to deduct the TDS u/s 194C. However, ld DR for the Revenue submitted before us that assessee has not produced the purchase bills and other details of the said party before AO, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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