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Income Tax Appellate Tribunal, DELHI BENCH SMC NEW DELHI
Before: SHRI B.P. JAIN
ORDER This appeal of the assessee arises from the order of learned CIT(A)-X, New Delhi, vide order dated 17.04.2015 for the assessment year 2012-13. The assessee has raised the grounds of appeal as under: “1) That on the facts and in circumstances of the case the learned CIT(A) is not justified in sustaining disallowance of Capital receipt of Rs.24,84,655/- by treating it as commission despite the fact that this amount was shared by the broker with the appellant to reduce cost of investment. Also Section 43(1) of the Income Tax Act clearly mandates that “cost met by other person” be reduced from cost of asset as has actually been done by the appellant.”
The brief facts of the case are that assessee had filed return declaring total loss of Rs.16,0,71/- on 28.09.2012, which was processed u/s.143(1) and subsequently selected for scrutiny under CASS. Accordingly, AO issued statutory notices u/s.143(2) and 142(1) of the Act, which were complied with. During the course of assessment proceedings, it came to the notice of the AO that assessee is in receipt of commission of Rs.24,84,655/- from M/s Innovest Advisory Services
ITAs No.5568/Del/2016 2 Pvt. Ltd. on which TDS was deducted at Rs.2,48,466/- and the same was claimed by the assessee in the return of income. On perusal of P&L A/c, it was granted by the Assessing Officer that though TDS was claimed, but no corresponding commission income was declared in the P&L A/c. It was further noticed by the AO that M/s Innovest Advisor Services Pvt. Ltd. credited the commission in its books of a/c on 31.03.2012 as the same was shown under the head "liability payable", AO has further observed in the assessment order that assessee was aware of this fact while filing the return of income as it claimed the TDS, which was deducted by M/s Innovest Advisory Services Pvt. Ltd. Before the AO during assessment stage, it was claimed by the assessee that it is maintaining its books of a/c on mercantile system according to which it has not received the commission AO further observed that as per provisions of Section 9 the income has arisen to the assessee during the period relevant to A.Y. 2012-13 and further as per Section 5 of the Act the income which is accrued or arisen in the previous year relevant to AY under consideration, is taxable whether it is received or not. Before the AO in his reply dt.23.02.2015, following submissions were made: "There was mutual understanding between M/s Innovest Advisory Services Pvt. Ltd. and the assessee, that the M/s Innovest Advisory Services Pvt. Ltd. helped us to reduce our cost by returning some of our investment with M3M. Further as per mutual understanding, the M/s Innovest Advisory Services Pvt. Ltd. returned us the said amount to reduce our cost and we deduct this amount from our total investment with M3M." AO considered the above reply of the assessee and held
ITAs No.5568/Del/2016 3 that assessee though admitted to have received the commission income, but intended to set off the same with cost in a future date, which is nothing but an act of diversion of revenue received towards capital cost. Though the benefit of the TDS has been claimed in the return of income filed for the AY under consideration, but the corresponding income has not been disclosed for the purpose of taxation. Accordingly, AO rejected the submissions of the assessee and made addition of Rs.24,84,655/- to the income declared by the assessee for the A Y under consideration.
Learned CIT(A) confirmed the action of the Assessing Officer.
I have heard the rival contentions and perused the facts of the case. It was argued by the learned counsel for the assessee that the M/s. Innovest Advisory Services Pvt. Ltd. has confirmed the transaction dated 27.01.2015 available at paper book 36. Copy of the books of account of the assessee of M3M India Ltd. Golf Estate Fairway East is available at paper book 50, where the accounting treatment is very clear. The finding given by the ld. CIT(A) are quite reasoned one that the assesseee is claiming that amount of Rs.24,84,655/- being commission is capital in nature as it has not received the commission and it has resulted in deduction in the cost of property. However, the facts of the case makes it clear that M/s. Innovest Advisory Services P. Ltd. credited commission of Rs.24,84,655/- to the assessee duly deducting TDS of Rs.2,48,466/-. The TDS deducted has been claimed by the assessee in the return filed for the assessment year under consideration, but corresponding commission income has not ITAs No.5568/Del/2016 4 been shown in the return on the ground that it has not received the commission. However, the undisputed fact is that M/s. Innovest Advisory Services P. Ltd. credited the appellant with the above amount in its books of accounts as on 31.03.2012.
4.1 Also it is pertinent to mention here that in the instant case, though assessee has claimed the benefit of TDS but corresponding commission income has not been offered for taxation on the plea that the nature of commission received from M/s. Innovest Advisory Services P. Ltd. is capital in nature as it has received the same for purchase of its own property. However, the above claim of the appellant is also not acceptable considering the fact that above company has treated the same as its liability and according to which it is entitled to claim the same as an expense. From this angle, it is clear that both the deductor and the deductee are fully enjoying their respective claim, but the revenue is at receiving end. The amount on which TDS has been deducted and benefit thereof has been taken while filing the ITR, is not being offered for taxation on the basis of MOU which is mutually suitable to the assessee and the deductor company. Considering the provisions of Income Tax Act, it is held that the above MOU is self serving document devoid of any merit and nothing but just a tool to mitigate the tax liability. Thus, from the factual matrix of the case, ratio of judicial pronouncements discussed above, and clear cut provisions of section 198 and 199 r.w.r. 37BA(3)(i) of the Act, reproduced above, it is evident that appellant has failed to comply with these provisions of law. Therefore, it is held that AO has rightly made the addition of ITAs No.5568/Del/2016 5 Rs.24,84,655/- as appellant claimed the benefit of TDS deducted of Rs.2,48,466/- in respect of above commission income but the corresponding income has not been offered for taxation. Hence, the addition made by the AO is upheld. Accordingly, this ground of appeal has rightly been dismissed by ld. CIT(A) and I find no infirmity in his order.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on this day 27th April, 2017