Zebian Real Estate Pvt Ltd v ITO,
Business expenditure — Consolidation charges — Allowability — Tax deduction at source — Applicability of s 194H — Assessee was engaged in business of real estate and other allied activities — Assessee filed belated return claiming loss — Assessment completed, disallowing carry-forward of loss and adding payment of consolidation charges made by assessee without deducting TDS — CIT(A) confirmed addition
stating that assessee paid charges to consolidator for transfer of rights and that consolidator was working as agent to assessee hence TDS ought to have been deducted under s 194 — Held, in facts of case Finian Estates Developers (P) Ltd 142 TTJ 545 (Del), it was held that MOU between assessee and consolidator made it clear that consolidator or its agent agreed to assign their rights to purchase land in favour of assessee — Above clause also made it evident that unless assessee decided to procure less than 27 acres of land through consolidator, consolidator, was to procure 27 acres of land for assessee, failing which, no payment was to be made by assessee to consolidator — This clearly showed that consolidator was transacting on principal to principal basis and it could not be said that payment was made by assessee to consolidator for rendering of any service — Provisions of s 194H were, therefore, not at all applicable — Moreover, amount paid to consolidator was duly reflected by assessee in purchases closing stock — No sales had been made during year under consideration — It had not been shown to be otherwise — Therefore, no disallowance was called for — Provisions of s 40(a)(ia) in any case do not apply, assessee having not claimed any deduction for any expenses on account of payment to consolidator, either in its profit and loss account or in computation of taxable income filed — It was found that facts in present case were in pari materia with those in Finian Estates — Thus, finding of CIT(A) to effect that relationship between assessee-company and consolidator was that of principal and agent and not of principal and principal, was not found to be correct — Since no sales were made, no disallowance was called for — Assessee's appeals accepted.
Business expenditure — Consolidation charges — Allowability — Tax deduction at source — Applicability of s 194H — Assessee was engaged in business of real estate and other allied activities — Assessee filed belated return claiming loss — Assessment completed, disallowing carry-forward of loss and adding payment of consolidation charges made by assessee without deducting TDS — CIT(A) confirmed addition
stating that assessee paid charges to consolidator for transfer of rights and that consolidator was working as agent to assessee hence TDS ought to have been deducted under s 194 — Held, in facts of case Finian Estates Developers (P) Ltd 142 TTJ 545 (Del), it was held that MOU between assessee and consolidator made it clear that consolidator or its agent agreed to assign their rights to purchase land in favour of assessee — Above clause also made it evident that unless assessee decided to procure less than 27 acres of land through consolidator, consolidator, was to procure 27 acres of land for assessee, failing which, no payment was to be made by assessee to consolidator — This clearly showed that consolidator was transacting on principal to principal basis and it could not be said that payment was made by assessee to consolidator for rendering of any service — Provisions of s 194H were, therefore, not at all applicable — Moreover, amount paid to consolidator was duly reflected by assessee in purchases closing stock — No sales had been made during year under consideration — It had not been shown to be otherwise — Therefore, no disallowance was called for — Provisions of s 40(a)(ia) in any case do not apply, assessee having not claimed any deduction for any expenses on account of payment to consolidator, either in its profit and loss account or in computation of taxable income filed — It was found that facts in present case were in pari materia with those in Finian Estates — Thus, finding of CIT(A) to effect that relationship between assessee-company and consolidator was that of principal and agent and not of principal and principal, was not found to be correct — Since no sales were made, no disallowance was called for — Assessee's appeals accepted.
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