ACIT, New Delhi v. M/s. Triveni Ferrous Infrastructure Pvt. Ltd., New Delhi

ITA 5342/DEL/2015 | 2012-2013
Pronouncement Date: 13-11-2019 | Result: Dismissed

Appeal Details

RSA Number 534220114 RSA 2015
Assessee PAN AACCT3615R
Bench Delhi
Appeal Number ITA 5342/DEL/2015
Duration Of Justice 4 year(s) 2 month(s) 15 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Triveni Ferrous Infrastructure Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 13-11-2019
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 13-11-2019
Assessment Year 2012-2013
Appeal Filed On 28-08-2015
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE : SHRI AMIT SHUKLA JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI ACCOUNTANT MEMBER ITA NO. 5342/DEL/2015 ASSESSMENT YEAR: 2012-13 A.C.I.T. CENTRAL CIRCLE-28 NEW DELHI (APPELLANT) VS. TRIVENI FERROUS INFRASTRUCTURE LTD. R-7 NEAR MCD SCHOOL M.G. ROAD GHITORNI NEW DELHI PAN- AACCT3615R (RESPONDENT) APPELLANT BY SH. N.K. BANSAL SR. DR RESPONDENT BY SH. VED JAIN C.A. ORDER PER AMIT SHUKLA J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 05.06.2015 PASSED BY LD. CIT (APPEALS)-29 DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143( 3) FOR THE A.Y. 2012-13. FOLLOWING GROUNDS HAS BEEN TAKEN BY THE REV ENUE:- 1. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT (A) HAS ERRED IN ALLOWING THE INTEREST EXPENDITURE AS REVEN UE EXPENDITURE ON THE GROUND THAT THE SAME WAS ALLOWED AS REVENUE EXPENDITURE BY THE DEPARTMENT IN EARLIER ASSESSMENT YEAR I.E. 2 009-10 2010- 11 & 2011-12 IGNORING TO THE FACT THAT EACH ASSESSM ENT IS INDEPENDENT AND SEPARATE AND THE PRINCIPLE OF RES J UDICATA IS NOT APPLICABLE IN THE INCOME TAX PROCEEDINGS. DATE OF HEARING 25.09.2019 DATE OF PRONOUNCEMENT 13 .11.2019 ITA NO. 5342/DEL/2015 2 2. ON FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) HAS ERRED IN STATING THAT ASSESSEE HAD CLAIMED INTEREST EXPENDITURE TO THE TUNE OF RS.1 64 56 688/- FOR A.Y. 2011-12 WHERE AS NO SUCH INTEREST EXPENSE WAS CLAIMED BY THE ASSESSEE AS PER THE ASSESSMENT RECORDS. 3. ON FACTS AND CIRCUMSTANCES OF THE CASE THE C IT(A) HAS ERRED IN HOLDING THAT INTEREST EXPENSES ON DELAYED PAYMEN T OF EDC IS BUSINESS EXPENDITURE WITHOUT CONSIDERING THE FACT T HAT THE EDC IS PAYABLE BY THE DEVELOPER TO THE GOVERNMENT AUTHORIT Y FOR WORKS RELATED TO HOUSING PROJECT AND THEREFORE IT WOULD C ONSTITUTE PART OF COST OF SUCH PROJECT. 4. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUD ICE TO EACH OTHER. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURS E OF THE HEARING OF THE APPEAL. 2. THE FACTS IN BRIEF ARE THAT ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 24.09.2010 DECLARING A LOSS OF RS. 2 89 14 506/-. THE AO DURIN G THE COURSE OF THE ASSESSMENT RAISED THE ISSUE OF THE DEDUCTION ON ACC OUNT OF INTEREST OF RS. 2 46 24 237/- PAID TOWARDS DELAYED PAYMENT OF ID C/EDC CHARGES TO THE HARYANA GOVERNMENT. THE ASSESSING OFFICER HO WEVER WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSEE AND DISALLO WED THE SAME HOLDING THAT SUCH PAYMENT OF INTEREST FOR DELAYED P AYMENT IS PENAL IN NATURE. FURTHER EDC CHARGES IS PAYABLE BY THE DEVE LOPER TO THE HUDA FOR WORKS RELATED TO WATER SUPPLY SEWERAGE ETC. WHICH ARE INTEGRAL PART OF A RESIDENTIAL HOUSE PROJECT AND HENCE THE S AME WILL CONSTITUTE PART OF THE COST OF SUCH PROJECTS AND RECOVERABLE F ROM THE BUYERS. THE ITA NO. 5342/DEL/2015 3 AO FURTHER HELD THAT EDC CHARGES PAID BY THE ASSESS EE IN RESPECT OF THE HOUSING PROJECT AND HENCE WOULD CONSTITUTE STOC K OF THE ASSESSMENT COMPANY. ACCORDINGLY HE DISALLOWED THE INTEREST EXPENSE CLAIMED BY THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO ASSESSEE F ILED APPEAL BEFORE THE CIT (A). THE CIT (A) VIDE ORDER DATED 05.06.2015 DE LETED THE DISALLOWANCE HOLDING THAT THE PAYMENT OF INTEREST IS NOT PENAL IN NATURE. THE CIT (A) FURTHER HELD THAT SUCH PAYMENT OF INTEREST IS REVENUE IN NATURE AND HENCE THE SAME IS ELIGIBLE FO R DEDUCTION WHILE COMPUTING BUSINESS INCOME. 4. BEFORE US LD. DR SUBMITTED THAT THE ASSESSEE HAS MADE PAYMENT OF INTEREST AS IT HAS NOT PAID THE INSTALLMENT AT A DUE TIME AND THE INTEREST PAYMENT FOR DELAYED PAYMENT AS SUCH IS PEN AL IN NATURE AND HENCE NOT ALLOWABLE IN VIEW OF THE EXPLANATION BELOW SECTION 37(1) OF THE ACT. HE FURTHER SUBMITTED THAT THIS PAYMENT BEI NG RELATED TO THE HOUSING PROJECT OF THE ASSESSEE THE SAME HAS TO BE CONSIDERED AS PART OF THE COST OF THE PROJECT OF THE ASSESSEE AND NEED TO BE CARRIED FORWARD AS STOCK I.E. WORK-IN-PROGRESS AND THE SAME WILL BE RECOVERABLE FROM THE BUYERS. THE LD. DR CONTENDED T HAT THE ASSESSEE IS CARRYING ON THE BUSINESS AS DEVELOPER AND SUCH E XPENSES INCURRED THOUGH MAY BE REVENUE IN NATURE BUT THE SAME NEED T O BE CONSIDERED AS PART OF THE PROJECT AND THE ENTIRE COST OF THE P ROJECT WILL BE DEDUCTIBLE AGAINST THE SALES. 5. IN REPLY THE LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE INTEREST PAYMENT IS TOWARDS PAYMENT OF EDC WHICH THE ASSESSEE COMPANY IS REQUIRED TO PAY TO THE HUDA. THESE PAYME NTS ARE PART OF THE BUSINESS EXPENDITURE AND INTEREST ON SUCH IS AL SO BUSINESS EXPENDITURE AND CANNOT BE CONSIDERED TO BE PENAL IN NATURE. THIS IS JUST LIKE GOODS OR SERVICES AVAILED ON CREDIT ON WHI CH THE BUYER PAYS ITA NO. 5342/DEL/2015 4 INTEREST TO THE SUPPLIER OF SUCH GOODS OR SERVICES ON THE OUTSTANDING BALANCE BEYOND THE CREDIT PERIOD ALLOWED BY THE SUP PLIER. THUS THE SAME CANNOT BE CONSIDERED AS PENAL IN NATURE. AS RE GARDS THE CONTENTION THAT SUCH INTEREST SHOULD FORM PART OF T HE STOCK I.E. WORK- IN-PROGRESS IT WAS SUBMITTED BY THE LD. COUNSEL THA T THESE PAYMENTS ARE IN RELATION TO THE PROJECT WHICH HAVE BEEN SOLD IN THE EARLIER YEAR AS IS EVIDENT FROM THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET OF THE COMPANY. THERE ARE OUTSTANDING DUES FROM THE B UYERS AS WELL AS TO THE SUPPLIERS WHICH INCLUDE PAYMENT OF OUTSTANDIN G EDC CHARGES. THUS PAYMENT OF INTEREST ON SUCH OUTSTANDING EDC C HARGES CANNOT BE ADDED TO ANY STOCK OR WORK IN PROGRESS. THE INTER EST PAID PERTAINS TO THE YEAR UNDER CONSIDERATION AND IS REVENUE IN N ATURE AND ACCORDINGLY THE CIT (A) HAS RIGHTLY DELETED THE ADD ITION. HE FURTHER SUBMITTED THAT THE SIMILAR ISSUE HAS COME UP IN THE CASE OF ACIT VS. FERROUS TOWNSHIP PVT. LTD. ITA NO.5997/DEL/2015 DATE D 05.04.2018 AND M/S FERROUS TOWNSHIP PVT. LTD. VS.DCIT ITA NO. 5812/DEL/2015 DATED 06.09.2017 AND THE ISSUE WAS DECIDED IN FAVOU R OF THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE ORDER PASSED BY THE AUTHORITIES BELOW. ON GOING THROUGH TH E ORDERS AND MATERIAL REFERRED TO BEFORE US WE NOTE THAT ASSESS EE DURING THE YEAR HAS INCURRED AN EXPENDITURE OF RS.2 46 24 237/- ON ACCOUNT OF INTEREST IN RESPECT OF THE EDC CHARGES OUTSTANDING AND PAYABLE TO HUDA. THE AO HAS DISALLOWED THE SAME CONSIDERING IT PENAL IN NATURE AND ALSO ON THE REASONING THAT SUCH EXPENDITURE SHO ULD FORM PART OF THE WORK-IN-PROGRESS AS ASSESSEE IS A DEVELOPER AND DEDUCTION OF SAME WILL BE AVAILABLE AGAINST THE SALE OF THE PROJECT. THE CIT (A) HAS HELD THAT SUCH EXPENDITURE IS NOT PENAL IN NATURE AND TH E INTEREST EXPENDITURE PERTAINS TO THE CURRENT YEAR AND IS REV ENUE IN NATURE. AS REGARDS THE FIRST ISSUE WHETHER SUCH EXPENDITURE IS PENAL IN NATURE THE SAME IS COVERED IN FAVOUR OF THE ASSESSEE BY TH E JUDGMENT OF THE COORDINATE BENCH OF THE ITAT IN THE CASE OF M/S FER ROUS TOWNSHIP PVT. LTD. VS. DCIT ITA NO. 5812/DEL/2015 DATED 06.09.201 7 WHEREBY IT ITA NO. 5342/DEL/2015 5 WAS HELD THAT INTEREST PAYABLE ON EDC CHARGES IS NOT PENAL IN NATURE. THE RELEVANT FINDING OF THE ORDER READS AS UNDER:- 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS ESPECIALLY THE IMPUGNED ORDER AS WELL AS THE CASE L AW CITED BY THE LD. COUNSEL OF THE ASSESSEE. FOR THE SAKE OF CONVEN IENCE THE OBSERVATION OF THE HON'BLE HIGH COURT IN THE CASE O F CIT VS. ENCHANTE JEWELLERY LTD . PASSED IN IT APPEAL NO. 1006 OF 2001 DATED 20.11.2012 REPORTED IN [2013] 40 TAXMANN.COM 216 (D ELHI) [HEADS NOTES ONLY] ARE REPRODUCED AS UNDER:- ' SECTION 37(1) OF THE INCOME TAX ACT 1961 - BUSINESS EXPENDITURE - ALLOWABILITY OF [PENALTY/ILL EGAL PAYMENTS] - ASSESSEE WAS ENGAGED IN MANUFACTURE AND TRADE OF GOLD JEWELLERY - ASSESSEE CLAIMED THAT IT USED TO IMPORT JETWELLERY MANUFACTURING MACHINERY UNDER EXPORT PROMOTION COUN CIL GOODS SCHEME (EPCG SCHEME) AT A CONCESSIONAL RATE WITH AN EXPORT OBLIGATION WHICH IT COULD NOT FULFILL AND THUS WA S REQUIRED TO PAY INTEREST TO DGFT - ASSESSEE'S CLAIM FOR DEDUCTI ON OF INTEREST WAS REJECTED ON GROUND THAT SAID PAYMENT WAS PENAL IN NATURE - COMMISSIONER (APPEALS) AS WELL AS TRIBUNAL HELD THA T AMOUNT PAID WAS NOT PENAL IN NATURE AS MUCH AS IT WAS AS P ER DECLARED POLICY OF GOVERNMENT AND OCCASIONED BY FAILURE OF A SSESSEE'S CONDUCT WAS AN OFFENCE OR THAT IT DID ANYTHING THAT WAS PROHIBITED BY LAW PAYMENT IN QUESTION DID NOT FALL WITHIN MISCHIEF OF EXPLANATION BELOW SECTION 38(12) - HELD YES - WHETHER THEREFORE ASSESSEE'S CLAIM WAS TO BE ALLOWED - HELD YES [PARA 5] [IN FAVOUR OF ASSESSEE ]' 8. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE PRECEDENT AS AFORESAID WE ARE OF THE CONSIDERED VIEW THAT THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ITA NO. 5342/DEL/2015 6 ASSESSEE'S CASE IS EXACTLY THE SIMILAR AND IDENTICA L TO THE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF CIT VS. ENCHANTE JEWELLERY LTD. (SUPRA ). THEREFORE RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ENCHANTE JEWELLERY LTD. (SUPRA ) THE ADDITION OF RS. 4 26 000/- CONFIRMED BY THE LD. CIT(A) OUT OF INTEREST PAYABLE IN EDC CHARGES TERMI NG THE SAME AS PENAL IN NATURE IS HEREBY DELETED AND THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 7. AS REGARDS THE SECOND CONTENTION THAT SUCH EX PENDITURE SHOULD FORM PART OF THE WORK-IN-PROGRESS IT IS SEEN THAT THIS INTEREST IS IN RESPECT OF OUTSTANDING EDC CHARGES PAYABLE FOR A PR OJECT THE REALIZATION OF WHICH HAS ALREADY TAKEN PLACE IN EARL IER YEARS. THUS INTEREST IS ON AN AMOUNT OUTSTANDING AND PAYABLE FO R THE SERVICES AVAILED IN RESPECT OF THE PROJECT WHICH STANDS ALRE ADY COMPLETED AND SOLD IN EARLIER YEARS. HENCE SUCH AN INTEREST CANN OT FORM PART OF THE WORK-IN-PROGRESS. THE INTEREST PAYMENT ON THE OUTSTA NDING BALANCE IN RESPECT OF THE TRADE CREDITORS IS REVENUE IN NATURE AND ALLOWABLE EXPENDITURE WHILE COMPUTING BUSINESS INCOME. ACCORDI NGLY WE UPHOLD THE ORDER OF THE CIT (A) DELETING THE ABOVE ADDITION. 8. IN THE RESULT APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/11/2019. SD/- SD/- (PRASHANT MAHARISHI) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13 TH NOV. 2019 *AKS*