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Income Tax Appellate Tribunal, ‘D‘ BENCH
Before: HON’BLE JUSTICE P.P. BHATT & SHRI M.BALAGANESH, AM
आदेश / O R D E R PER M. BALAGANESH (A.M):
This appeal in A.Y.2013-14 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-34, Mumbai in appeal No.CIT(A)-34/ACIT-22/IT-61/16-17 dated 29/11/2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/03/2016 by the ld. Asst. Commissioner of Income Tax-22(2), Mumbai (hereinafter referred to as ld. AO).
The first issue to be disallowed in this appeal is as to whether the ld CITA was justified in confirming the addition of Rs 1,87,125/- by way of disallowance of interest on late payment of TDS in the facts and circumstances of the case.
2.1. We have heard the rival submissions and perused the materials available on record. We find that the assessee is a registered partnership firm engaged in the business of builders and contractors and had declared the income for the Asst Year 2013-14 at Rs 1,46,38,360/-. We find that the assessee had claimed the interest paid on late payment of TDS of Rs 1,87,125/- as deduction u/s 37(1) of the Act on the plea that the delay in remittance of TDS had suffered interest which is compensatory in nature. The ld AO however held to be penal in nature and by applying the Explanation to section 37(1) of the Act, disallowed the said sum of Rs 1,87,125/- in the assessment, which was also confirmed by the ld CITA. We find that the genuinity of the expenditure incurred is not in dispute. Admittedly the TDS was duly deducted and remitted with delay by the assessee and for the said delay , the assessee had suffered interest. The expenditure incurred by the assessee for the purpose of business is not doubted by the revenue. The only dispute involved is whether the said payment of interest on late payment of TDS could be construed as compensatory in nature or penal in nature. We find that the payment of interest is provided separately in the statute which is a permissible payment and accordingly compensatory in nature. Apart from this, the statute also provides for payment of penalty which is penal in nature. Hence the legislature in its wisdom had enacted separate provisions for payment of interest and penalty separately. Hence payment of interest on delayed remittance of TDS could not be construed as penal in nature. We find that the reliance in this regard has been rightly placed on the co- ordinate bench decision of Kolkata Tribunal in the case of DCIT vs Rungta Mines Ltd in dated 5.10.2018 which dealt with the similar issue of punitive charges paid to Railways for overloading of wagons as an allowable expenditure being compensatory in nature. The operative portion of the said order is not reproduced herein for the sake of brevity.
2.2. Hence in view of our aforesaid observations and respectfully following the judicial precedent relied upon hereinabove, we direct the ld AO to grant deduction for interest on delayed payment of TDS in the sum of Rs 1,87,125/-. Accordingly, the Ground No. 1 raised by the assessee is allowed.
The last issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the disallowance of project expenditure at 10% thereon amounting to Rs 6,97,498/- on an adhoc basis in the facts and circumstances of the case.
3.1. We have heard the rival submissions and perused the materials available on record. We find that the assessee during the year had incurred project expenditure of Rs 69,74,976/-. Out of this expenditure, only Rs 850/- was paid by cash and balance expenditure was incurred by cheque. The details were furnished to the ld AO during the course of assessment proceedings together with the explanations thereon. We also find from the details that the assessee had paid a sum of Rs 62,16,608/- by cheque to the Municipality; Rs 4,38,590/- by cheque to Reliance Energy Ltd ; Rs 4,000/- paid by cheque to Surveyor ; Rs 2,93,463/- paid as security charges by cheque ; Rs 1,800/- paid towards pest control expenses by cheque and Rs 16,200/- paid as transport charges by cheque. We find that the ld AO had sought to disallow 10% of the total project expenditure on an adhoc basis by observing that most of the expenditures incurred were made only through self made vouchers. It is pertinent to note that no defects were found out in the books of accounts submitted and book results were not rejected by the ld AO. Except a sum of Rs 850/-, no other expenditure is incurred in cash. Hence the observation of the ld AO that most of the expenditure is incurred in cash through self made vouchers is factually incorrect. Hence it could be safely concluded that the revenue had proceeded to make disallowance on an adhoc basis based on incorrect assumption of fact. On this count itself, the disallowance made by the ld AO deserves to be deleted. Moreover, we find that the assessee had duly furnished the head wise project cost details together with the copy of relevant ledger accounts vide its letter dated 15.2.2016 which was also filed before the ld CITA. The various details filed by the assessee are tabulated hereunder:-
SrNo Particulars Amount Remark 1 MCGM Charges 6165008/- Assessment fees, and other fees, water charges, charges for additional FSI Premium etc were paid to Brihan Mumbai Mahanagari Palika and evidences for expenses like receipts given by MCGM and copy of ledger account are attached to the paper book. All the payments were made through account payee cheques. 2 Electricity Charges 438590/- All the expenses were paid through account payee cheques and the copy of the ledger account, electricity bills are attached with the paper book. All the payments were made through account payee cheques. 3 Survey Charges 4000/- The copy of the ledger account, bills are attached with the paper book. All the payments were made through account payee cheques. 4 Security Charges 293463/- Paid to Combat Labour Suppliers & placement services bills are attached with the paper book. All the payments were made through account payee cheques.
5 Site Expense (Page 55065/- Petty cash expenses incurred on site paid to no 43 of paper site supervisor for day to day expenses. These book) expenses were made in cash as it were of petty in nature and far from office. The copy of ledger account attached. 6 Pest Control 1800/- Paid to good value Pest Control. Expenses 7 Transport charges 17050/- Paid to Kalavani B. Transport for (Page no 48 of construction work through account payee paper book) cheques. Rs.8507- was paid for small cartage charges. Total Cost 6974976/- 3.2. We find that the lower authorities had not given any finding with regard to the aforesaid details filed by the assessee and had simply resorted to make adhoc disallowance of project expenditure at 10% of value thereon without any basis and by passing a cryptic order. Hence we have no hesitation in directing the ld AO to delete the adhoc disallowance made in the instant case. Accordingly, the Ground No. 2 raised by the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced on 24/03/2021 by way of proper mentioning in the notice board.