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1.
COMMISSIONER OFINCOMETAX-VI ..... Appellant
Through: Mr. Rohit Madan, Senior Standing counsel,
Through: Ms. Kavita Jha and Ms. Mehak Gupta, Advocates.
^ ITA270/2015 PR.CIT-7 Appellant
Through: Mr. N. P. Sahni, Senior Standing counsel.
Through: Ms. Kavita Jha and Ms. Mehak Gupta, Advocates.
05.11.2015
ORDER
1. Both these appeals arise in the background of similar facts and are ITA Nos.257of2015&270of2015 1of10 2015:DHC:11747-DB accordingly being disposed ofbythe presentcommon order.
2. ITA No.257 of2015 is directed against an order dated 12^^ April 2013 passed by the Income Tax Appellate Tribunal (TTAT') in ITA NO. 1429/Del/2011 for Assessment Year('AY')2007-08.That order is common to two appeals before theITAT - one appeal was by Zebian Real Estate Pvt. Ltd. ('ZREPL')(in respect of which the appeal has been filed by the Revenue in this Court) and the other by Zanobi Builders & Constructions Pvt.Ltd.('ZBCPL').Asnoticed bythis Courtin its order dated20^October 2015, no appeal has been filed by the Revenue as regards the order ofthe ITAT in the case ofZBCPL.In fact in the present appeal by the Revenue i.e. ITA No. 257 of 2015 there was a mistake as regards the name of the Respondent and that was permitted to be corrected by the order dated 31®^ August2015. The net result is that although the impugned order dated 12th April 2013 ofthe ITAT is common to two appeals ofthe Assessees both of which were allowed by the ITAT,the Revenue has filed an appeal only in respectofone ofthe Assessees i.e.ZREPL.
3. In ITA No.257 of2015,the question sought to be urged by the Revenue is whether the ITAT has erred in holding that ZREPL was not required to ITANos.257of2015&270of2015 Page2of10 deduct tax at source under Section 194H of the Income Tax Act, 1961 ('Act')with regard to the payment made by itto Vikram Electric Equipment Pvt. Ltd.('VEEPL')and in deleting the proportionate disallowance ofthe amount ordered by the Assessing Officer ('AO'), as confirmed by the Commissioner ofIncome Tax(Appeals)['GIT(A)'],under Section 40(a)(ia) ofthe Act.
4. ITA No.270of2015 is directed againstthe order dated 17^^ October2014 passed by the ITAT in ITA No.1951/Del/2011 for the AY 2007-08. The question soughtto be urged by the Revenue in this appeal also concernsthe payment by the Assessee Penthea Builders & Developers Pvt. Ltd. ('PBDPL')to the same VEEPL.The case ofthe Revenue is that the said payment was not allowable under Section 40(a)(ia) of the Act and that in any eventthere should have been a deduction oftax at source while making the said paymentunder Section 194H ofthe Act.
5. The common feature in both orders ofthe ITAT i.e. the order dated 12* April 2013 in ITA No.l429/Del/2011 {Zebian RealEstatePvt.Ltd. v. CIT) and the order dated 17* October 2014 in ITA No.l951/Del/2011 {Penthea Builders& DevelopersPvt.Ltd. v. CIT)is thattheITAT has while allowing ITA Nos.257of2015&270of2015 Page3of10 ? the appeals ofthe Assessees relied upon its earlier order dated 5^^ October 2011 in ITA No.2361/Del/2011 ITO v. Finian Estates Developers P. Ltd. [2012]23taxmann.com 360(Delhi- Trib.).
6. At the outset it requires to be noticed that against the aforementioned order ofthe ITAT inITO v. Finian EstatesDevelopersP.Ltd. although the Revenue did file an appeal in this Court being ITA No. 234 of 2012, the Revenue did not urge a question in that appeal regarding the payment made to VEEPL.The said appeal ITA No.234 of2012 filed by the Revenue was dismissed by this Courton 26^^ August2015 interms ofthe Court's decision dated 15^^ July 2015 inITA No.627of2012 andITA No.507of2013{CIT
V. DLF CommercialProject Corporation). As a result, the decision ofthe
7. Nevertheless,the attempt by the Revenue in both these appeals is to show that the facts of the present cases are different from the facts in ITO v. Finian Estates Developers P. Ltd. and, therefore, notwithstanding the fact that the decision ofthe ITAT in ITO v. Finian Estates Developers P. Ltd. has attained finality,the Courtshould nevertheless entertainthese appeals. ITA Nos.257of2015&270of2015 Page4of10 r
8. In order to examine the above contention, the Court has perused the orders ofthe AO,the CIT(A)as well as the ITAT in the case ofITO v. Finian Estates Developers P. Ltd. Further the Court has also been shown the notes submitted before the AO by the Assessee in the assessment proceedings in that case.The Court has also examined the Memorandum of ✓ Understanding('MoU')entered into between Finian Estates Developers(P). Ltd. and VEEPL as well as MoUs entered into separately between ZREPL and PBDPL with VEEPL.
9. It may briefly be noted that both ZREPL and PBDPL are in the business ofacquiring and developing land. They entered into separate development agreements with M/s.DLF Commercial Projects Corporation Ltd.('DLF'), described as the 'Developer' for purchase of land in Gurgaon. The understanding was that ZREPL and PBDPL would acquire ownership of land and also obtain licenses from the Director,Town & Country Planning, Chandigarh for developing the land. Subsequently, they were to sell the development rights to DLF for consideration.
ZREPL and PBDPL in turn appointed VEEPL as a'Consolidator'to acquire the land.They entered into separate MoUs with VEEPL for that purpose. The understanding was that ITA Nos.257of2015&270of2015 Page5of10 payments by way ofcommission would be made to VEEPL only after it was able to acquire at least 27 acres ofland.
10. One ofthe issues that arose even in the case ofFinian Estates Developer (P) Ltd. ('Finian') was the nature of the payments made to VEEPL and whether it is a fee for services rendered which required deduction oftax at source. That question was decided against Finian both by the AO and the CIT(A).The appeal by Finian before theITAT on the said aspect being ITA No. 1953/Del/2011 came to be allowed in its favour by the order dated 5 October 2011 ofthe ITAT.The precise question in the appeal by Finian was whether the CIT(A)had erred in upholding the order ofthe AO disallowing a sum of Rs.1,24,33,326 paid by Finian to VEEPL for transfer of rights under Section 40(a)(ia)ofthe Act. The corresponding question was whether Finian was required to deductTDS from thatsum under Section 149H ofthe Act.
11. In its order dated 5th October 2011,the ITAT examined the nature ofthe MoU between Finian and VEEPL with particular reference to the clauses therein and concluded that Finian was transacting with VEEPL "on a principal to principal basis" and that it could not be said that the payment to ITA Nos.257of2015&270of2015 Page6of10 \6 > VEEPL was for rendering services. Consequently, it was held that Section 194H ofthe Actwas"notat all applicable".TheITAT noted thatin terms of Clause 3.[2] ofthe MoU no sum was due to be paid to VEEPL forthe services rendered by it till it procured 27 acres ofland. The amount paid to VEEPL was duly reflected by Finian in its purchases and the closing stock and no sales had been made during the year in question.The payment of2% ofthe sale amount to VEEPL as consideration for transferring VEEPL's rights in the land was in terms ofClause 3.[2] ofthe MoU and it had not been shown thatsuch payment was notafair compensation.
12. As already noticed hereinbefore,no appeal was filed by the Revenue in this Court against the decision ofthe ITAT on the above aspect in the case ofFinian.
13. Turning to ITA No. 257 of 2015 filed by the Revenue in the case of ZREPL one ofthe pleas urged is that although the Consolidator VEEPL was same in both cases,the terms and conditions in the MoU with the'acquirer' were different. It is submitted that while in the case of Finian the Consolidator invested its own funds for purchasing the land for the 'acquirer' in the present case of ZREPL the acquirer paid from its own ITA Nos.257of2015&270of2015 Page7of10 V ' funds. However,learned counsel for the Revenue has been unable to show any difference in the actual clauses of the MoU between ZREPL and VEEPL when compared to the MoU between Finian and VEEPL. In the circumstances, the Court is unable to appreciate on what basis it could be said that the arrangement between ZREPL and VEEPL was not on a 'principal to principal' basis. With the Revenue having accepted the decision ofthe ITAT in the case ofITO v. Finian Estates Developers P. Ltd., and with there being nothing to distinguish it in relation to the case ofZREPL, the Court is not inclined to interfere with the impugned order ofthe ITAT which,in the opinion ofthe Court,has rightly relied upon its earlier decision in the case ofFinian.
14. Turning to ITA No.270 of2015 being the Revenue's appeal in the case ofPBDPL,an earnest effort was made by Mr. N.P. Sahni, learned Senior Standing counsel for the Revenue, to show that in the assessment proceedings before the AO the paymentto VEEPL was not one ofthe issues considered. However from the written note ofsubmissions by the Assessee before the AO during the assessment proceedings, it is seen that a specific submission was made on the payment to VEEPL. It was urged by the Assessee that the said payment was for transfer of the right in the land ITA Nos.257of2015&270of2015 Page8of10 purchased by it and did not attract TDS. It was further urged that "the Assessee company has nottaken any such type ofservice from M/s.Vikram Electric Equipment Pvt. Ltd. which is covered under the provision of Section 40(a)(ia)ofthe Act." The AO in the assessment order did make a reference to the figure of purchase of lands having been inflated by the Assessee by asum ofRs.4,20,15,681 beingthe amountpaid to VEEPL.This was disallowed since according to the AO any payment whatsoever made to VEEPL would accrue only when 27 acres ofland would be acquired. The AO correspondingly reduced the value ofthe closing stock by the said sum. When the matter travelled to the CIT(A)by way ofPBDPL's appeal,there was an extensive discussion in the order ofthe CIT(A)with regard to the payment made to VEEPL which was corrected as Rs.1,24,33,326. It was held that"this amount is related to payment ofservice charge for effecting consolidation ofland and is a revenue expense to(be)separately debited to the Profit&Loss account." The CIT(A))upheld the order ofthe AO.
15. In the appeal filed by the Revenue before this Court, there is no avermentthattheITAT erred in relying on its own decision in Finian. There is no avermentthatthe clauses ofthe MoU entered into between Finian and VEEPL are different from the MoU between PBDPL and VEEPL.There is ITA Nos.257of2015&270of2015 9of10 n no plea that the earlier decision of the ITAT in Finian is in any manner distinguishable in relation to the facts ofPBDPL. 16,Having considered at length the submissions oflearned counsel for the Revenue,the pleadings and the documents not only in the case ofPBDPL but also in the case of Finian, the Court is unable to find any distinction between the two cases as far as the clauses in the MoU between the parties and VEEPL or the payment made to the latter pursuant thereto. Again,with the Revenue having accepted the decision ofthe ITAT in the case ofFinian, and with the Revenue being unable to bring out any distinguishing feature as far as the case ofPBDPL,the Court sees no reason why it should interfere with the impugned order oftheITAT.
17. Consequently,no substantial question oflaw arises in either appeal.The appeals are dismissed.
S.MURALIDHAR,J VIBHU BAKHRU,J NOVEMBER 05,2015/dn ITA Nos.257of2015&270of2015 Page10of10