2015 (3) TMI 1304 - AT - Income Tax

Tribunal clarifies interest on Post Dated Cheques & disallowance under section 40A(3)

The Tribunal upheld the CIT(A)'s order in Revenue's appeal regarding interest on Post Dated Cheques, directing to recompute interest after six months. The ... Addition on account of interest on Post Dated Cheques paid out of books of accounts - Held that:- The PDCs’ have been encashed within a period of six months as is apparent from page 11 of assessment order where A.O. has noted the date of sale of properties and date of encashment of cheques. Therefore, we find that the facts in the present case are similar in one of the Sister concern i.e. case of M/s IAG Promoters and Development Pvt. Ltd [2015 (2) TMI 12 - ITAT DELHI] therefore, following the Tribunal order in the case of group company, we dismiss this appeal of Revenue. Disallowance u/s 40A(3) in respect of which no deduction was claimed by the appellant - Held that:- The Tribunal in the group cases of the assessee on identical facts have held that the payment made for acquisition of land was not claimed as a deduction and hence the provisions of S.40A(3) of the Act is not applicable. See case of Glitz Builders and Promoters Pvt.Ltd [2015 (5) TMI 384 - ITAT DELHI] as held that when the cost of the land as well as additional payment is not claimed by the assessee as deduction, the question of any disallowance under Section 40A(3) or otherwise in the case of the assessee does not arise. - Decided in favour of assessee. Issues:1. Revenue's appeal against deletion of addition on interest on Post Dated Cheques.2. Assessee's appeal against disallowance under section 40A(3).Revenue's Appeal:The Revenue's appeal challenged the deletion of an addition of Rs. 15,75,107 made by the Assessing Officer on account of interest on Post Dated Cheques (PDCs) paid outside the books of accounts. The CIT(A) directed the Assessing Officer to recompute the interest on PDCs after six months from the date of issue, based on seized material. The Revenue contended that the CIT(A) had erred in deleting the addition. However, the Tribunal found that the CIT(A) had not deleted the addition but only directed to recompute the interest, similar to a previous case involving the same group. The Tribunal upheld the CIT(A)'s order based on the Co-Ordinate Bench's decision, concluding that the CIT(A)'s order was correct and rejected the Revenue's appeal.Assessee's Appeal:The assessee's appeal involved the disallowance of 20% of Rs. 4,50,000 under section 40A(3) of the Income Tax Act. The Assessing Officer disallowed the amount as cash payment for acquiring land. The CIT(A) upheld the disallowance, stating that the payment made to the landowner was an expense in the appellant's hands. The assessee contended that the issue was covered in their favor by previous Tribunal orders in similar cases. The Tribunal reviewed the group cases and found that since the payment for land acquisition was not claimed as a deduction, section 40A(3) was not applicable. Citing previous Tribunal decisions, the Tribunal allowed the assessee's appeal, holding that the income tax authorities were not justified in invoking section 40A(3) and disallowing the sum of Rs. 90,000. Therefore, the appeal filed by the Revenue was dismissed, and the appeal filed by the assessee was partly allowed.In conclusion, the Tribunal upheld the CIT(A)'s order in the Revenue's appeal regarding interest on PDCs and allowed the assessee's appeal against the disallowance under section 40A(3) based on previous Tribunal decisions in similar cases. The judgments provided clarity on the application of relevant tax provisions and the proper computation of interest and expenses in the respective cases.