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TMI Blog2024 (8) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer to delete the addition - Decided in favour of assessee. Addition u/s 40(a)(ia) - non deduction of TDS on payment of compensation for surrender of rights - HELD THAT:- We find the issue stands decided in favour of the assessee by the decision of Beacon Projects (P.) Ltd. where it has been held that the excess payment made to the purchaser on cancellation of booking of apartment could not be qualified to be interest as defined u/s 2(28A) of the Act and therefore, the builder would not have any TDS obligation. Thus amount paid by the assessee to Dipps Hospitality Pvt. Ltd. for surrender of rights which has been treated as compensation cannot be treated as interest and therefore, the assessee has no TDS obligation and therefore, section 40(a)(ia) of the Act cannot be applied - Decided in favour of assessee. - Shri R. K. Panda, Vice President And Shri Vinay Bhamore, Judicial Member For the Assessee : Shri Nikhil S Pathak For the Department : Shri Ramnath P Murkende ORDER PER R. K. PANDA, VP : This appeal filed by the assessee is directed against the order dated 12.02.2024 of the CIT(A) / NFAC, Delhi relating to assessment year 2014-15. 2. The grounds raised by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment proceedings the Assessing Officer noted that the assessee has booked its sales at Rs. 2,48,13,900/- in its books of account on the basis of agreement value, whereas the market value of these flats was Rs. 2,73,16,150/-. Thus, there is a difference of Rs. 25,02,250/-. In absence of any satisfactory explanation given by the assessee, the Assessing Officer, invoking the provisions of section 43CA of the Act made addition of Rs. 25,02,250/-, the details of which are as under: Agreement registration date Unit No Name of the Holder Agreement value Ready Recknor Value AY 2013-14 Difference in Ready Recknor (AY 2013-14) Agreement Value 04/04/2013 B3/501 Hakim Aziz 28,44,000 33,71,150 5,27,150 15/05/2013 B5/704 Ebrahim Fakhruddin Simalwada 31,27,500 33,33,000 2,05,500 08/07/2013 B2/702 Anum Tariq Kalokha 33,92,000 40,17,300 6,25,300 26/07/2013 B6/504 Mustafa Abbas Bagdadi 31,27,500 33,35,800 2,08,300 25/04/2013 B4/402 Ibahim F Siddhpuri 27,98,000 31,15,800 3,17,800 13/09/2013 B6/901 Salim Hatim Ali 30,79,700 33,71,500 2,91,800 13/09/2013 B6/902 Salim Hatim Ali 30,79,700 33,71,500 2,91,800 05/02/2014 B5/402 Ahmadi Saifuddin Sher 33,65,500 34,00,100 34,600 Total 2,48,13,900 2,73 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth totaling to Rs. 4,20,000/- which find a place in the final sale deed dated 25.04.2013. He accordingly submitted that in all the three cases, part of the amounts were received as per the agreement much prior to the date of sale and further, in view of the provisions of sub-clauses (3) and (4) of section 43CA, no addition is called for. 12. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the CIT(A) / NFAC. 13. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed by both the sides. We find the Assessing Officer in the instant case made addition of Rs. 25,02,250/- in respect of 8 flats on the ground that the market value of these flats was Rs. 2,73,16,150/- whereas the assessee company has registered the flats for a consideration of Rs. 2,48,13,900/- on the basis of agreement value and therefore, the provisions of section 43CA of the Act are applicable. We find the CIT(A) / NFAC, relying on the decision of the Pune Bench of the Tribunal in the case of Rahul Constructions Vs. DIT (supra), deleted the addition in respect of certain flats where the dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as the second issue is concerned, the same relates to the order of the CIT(A) / NFAC in sustaining the addition of Rs. 9,27,000/- made by the Assessing Officer by invoking the provisions of section 40(a)(ia) of the Act (grounds of appeal No.3 to 6). 16. Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings noted that the assessee has paid compensation of Rs. 9,27,000/- to Dipps Hospitality Pvt. Ltd. for surrender of rights. According to the Assessing Officer, this amount is nothing but interest and therefore, the assessee was liable to deduct TDS. Since the assessee has not deducted any TDS, the Assessing Officer rejected the explanation given by the assessee and made the addition of the same by invoking the provisions of section 40(a)(ia) of the Act. 17. In appeal, the CIT(A) / NFAC sustained the addition by observing as under: 7.3 I have gone through the grounds of appeal, assessment order and the submissions of the appellant. The CBDT circular No. 2/2018 (F. No.370142/15/2017-TPL) wherein the CBDT has given explanatory notes to provisions of Finance Act, 2017 vide order dated 15 February 2018 as item No. 17 in respect of notion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcess payment made to the purchaser on cancellation of booking of apartment could not be qualified to be interest as defined u/s 2(28A) of the Act and therefore, the builder would not have any TDS obligation. The relevant observations of the Hon ble High Court of Kerala in Beacon Projects (P.) Ltd. vs. CIT (supra) read as under: 6. As stated earlier, the issue that arises for consideration is whether the amount debited in the P L account of the appellant company under the head 'indirect expenses' being excess payments refunded is interest as provided under section 2(28A) of the Act. 7. Section 2(28A) of the Act defines 'interest' and this section reads thus: (28A): interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised; 8. While understanding the scope of this provision, it is important to remember the principle laid down by the Apex Court in Polestar Electronic (Pvt.) Ltd. v. Addl. CST [(1978) 41 STC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided under section 2(28A), attracting the provisions of section 194A of the Act. 10. Commissioner of Income-tax v. Cargill Global Trading P. Ltd. [2011 335 ITR 94] is another judgment of the Delhi High Court where the question considered was whether discounting charges can be treated as interest and this was answered in the negative by holding that before any amount paid is construed as interest, it has to be established that the same is payable in respect of any money borrowed or debt incurred. Commissioner of Income-tax, Shimla v. M/s.HP Housing Board, Shimla [(2012) 340 ITR 388] is a case where the question considered was whether interest paid/credited by the Housing Board on the amount deposited by the allottees on account of delayed allotment of flats is covered by section 2 (28A). This again was answered by the Himachal Pradesh High Court following the Apex Court judgment in Bikram Singh (supra). Commissioner of Income Tax, Kolkata v. M/s.MKJ Enterprises Limited [2014 (12) TMI 682] is a judgment of the Division Bench of the Calcutta High Court which also considered the question whether section 2(28A) is attracted to discounting charges of bill of exchange or factoring char ..... X X X X Extracts X X X X X X X X Extracts X X X X
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