RARE TOWNSHIPS PVT LTD,MUMBAI vs. DCIT CENTRAL CIRCLE 6 (4), MUMBAI

Before us the assessee raised an additional ground contending the action of the AO in not allowing the credit for TDS claimed by the assessee. In support of the admission of this additional ground, the ld. AR. submitted that it involved only adjudication of substantial question of law and no fresh facts were required to be examined. The ld.DR opposed the admission of additional ground. Keeping into consideration the entire conspectus of the facts and circumstances of the case and the additional ground raised before us we are convinced that its adjudication does not require any fresh investigation of facts and involves a legal issue. Therefore respectfully following the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Vs. CIT [(1998) 229 ITR 383 (SC)] we admit this additional ground for disposal on merits.

With regard to the disallowance of Property Tax claimed under section 43B of the Act, the ld. AR submitted that the assessee during the AY 2011-12 and 2012-13 made payments towards Property Tax on behalf of Collector, Bombay Suburban District (BSD). The ld. AR further submitted that the amount paid is to be recovered from the Collector, BSD since the assessee is not the owner / occupier but only a facilitator to Government work under standard contract and therefore the amount paid were accounted under the head "Advances" in the Rare Townships Private Limited balance-sheet of the assessee. During the year under consideration the assessee adjusted the above payments against its own property tax liability and claimed the same as a deduction under section 43B of the Act. The ld AR in this regard drew our attention to correspondence with concerned authorities, requesting for adjustment of the property tax paid on behalf of Collector, BSD against assessee's property tax liability. The ld. AR also submitted that the provisions of section 43B have to be liberally interpreted and therefore the amount adjusted by the assessee against its own liability towards property tax should be allowed as a deduction.

The ld. AR submitted a petition for admission of additional evidence (containing 56 pages) in support of the claim that the property tax paid during AY 2011-12 and 2012-13 were made on behalf of Collector, BSD and that a request has been submitted to adjust the said payments against the property tax demand of the assessee. The ld. AR prayed for admission of the additional evidence which would prove the claim of the assessee that the property tax liability is settled against the earlier payments made on behalf of Collector, BSD and accordingly allowable under section 43B of the Act.

The ld. DR on the other hand vehemently opposed the admission of additional evidence stating that the assessee had enough opportunities to submit these evidences before the lower authorities which the assessee failed to do. The ld. DR therefore, argued that the documents not submitted is an afterthought and cannot be admitted. On merits of the issue the ld. DR further submitted that the provisions of section 43B are very clear that certain deductions need to be allowed only on payment basis and that book entries adjusting advances against the property tax liability cannot be treated as actual payment for the purpose of deduction under section 43B of the Act. The ld. DR also submitted that the Rare Townships Private Limited adjustment of property tax claimed by the assessee was accepted by Collector, BSD in subsequent years only as submitted by the assessee and therefore even if the deduction should be allowed it can be allowed only during the year in which such adjustment was approved for adjustment. Thus, the ld. DR supported the order of the lower authorities.

We have heard the parties and perused the material on record. The details of payments made and claimed as a deduction under section 43B during the year under consideration by adjusting against the property tax liability is under –

In this regard it is relevant to note that sub-section (a) to section 43B of the Act provides that any sum payable by the assessee by way of tax, duty, cess or fee by whatever name called shall be allowed irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed, only in the previous year in which such sum is actually paid by the assessee. The legislative intent behind the enactment of section 43B was to plug the loophole in the statute which permitted deductions on an accrual basis and to prevent the assessee from claiming the deduction on the basis of mere book entries without actually paying the tax to the State. Therefore in our considered view the harmonious reading of the provision would require that the assessee is entitled for deduction towards actual payments and the same cannot be denied for the reason that the payment precedes the incurrence of liability. From the perusal of the order of the CIT(A) we noticed that the assessee had justified the claim on a different ground that the amount is claimed as a deduction as write off of advance payments made towards property tax. The assessee had submitted before the first appellate authority that there is a direct nexus between the payment made towards property tax and the business of the assessee and therefore the write off should be allowed as a deduction. The assessee has now submitted before us that the deduction under section 43B is made on the basis that the payment of Rare Townships Private Limited property tax on behalf of Collector BSD in AY 2011-12 & 2012-13 is adjusted against its own liability of property tax during the year under consideration. In this regard the additional evidences have now been submitted by the assessee to substantiate that the property tax paid during the earlier years was paid on behalf of Collector, BSD and that the same is adjusted against the property tax liability of the year under consideration on the basis of the request made to the relevant authorities in this regard. Since the lower authorities did not have opportunity to verify these additional evidences in support of the claim of the assessee, we deem it fit to remit the issue back to the AO with a direction to consider the additional evidences now filed by the assessee and examine the issue afresh to be decided in accordance with law. The AO is further directed to consider the alternate plea of the assessee with regard to the year in which the deduction to be allowed i.e. the year in which the adjustment is made or the year in which the property tax paid was allowed by the concerned authorities to be adjusted against the liability of the assessee. Needless to say that a reasonable opportunity of being heard be given to the assessee.

With regard to additional ground raised claiming credit for TDS, we remit the issue to the AO to examine and allow the credit for TDS in the year in which the income is offered to tax.

In the result, the appeal of the assessee is allowed for statistical purposes.