2015 (5) TMI 904 - AT - Income Tax

Disallowance u/s 40A(3) - Held that - Similar disallowance made by the A.O. in another group company namely Westland Developments Pvt. Ltd was deleted by Tribunal and hold the fact that the additional payments were warranted in order to avoid potential disputes amongst the claimants of the land holding which have been passed through to the land holders from generation to generation wherein there may be informal arrangements of ownership and or the payments were for commercial expediency to facilitate peaceful possession and registration of the land holding; where by the time Registry was made the landholders felt a higher payment was necessitated due to increase in value are issues which are not required to be adduced in the present proceedings. The assessee had not routed the additional payment through P & L account and the facts and circumstances in the present case are similar. Therefore respectfully following the above tribunal order issue herein is decided in favour of the assesse. Reimbursement of expenses - whether cannot be treated to be a Revenue receipt? - Held that - The assessee had made payment on behalf of country vide developers which was reimbursed to the assessee and it had not claimed any expenditure for these payments - Decided in favour of assesse. Disallowance of interest on PDCS - CIT(A) deleted the disallowance - Held that - After examining the loose papers seized at the time of search at the assessee s premises, it was noticed that Interest Is paid on the PDCs only during the period of extension of PDCs and, therefore, he directed the Assessing Officer to recompute the interest on PDCs at the time of extension of the PDCs. He has further observed that if it is not possible to work out the extension of PDCs In each case, then the Assessing Officer is directed to recompute interest on PDCs after six months from the date of Issue of the PDCs. Therefore, the ground of appeal of the Revenue that the CIT(A) deleted the addition of ₹ 5,06.625/- made by the Assessing Officer on account of Interest on PDCs is factually incorrect and contrary to the order of the CIT(A). - Decided against revenue.

Summary

Issues involved:
Cross appeals filed by assessee and revenue against the order of Ld. CIT(A) dated 24.12.2012, legal issues raised by assessee, disallowance under section 40A(3) of the Act, addition sustained as income from other sources, disagreement on certain additions made by the Assessing Officer, reliance on previous Tribunal orders in similar cases, challenge to additions made by the Assessing Officer, dismissal of certain grounds not pressed by the parties, interpretation of collaboration agreement for land purchase, reimbursement of expenses, interest on post-dated cheques, grounds of appeal by both parties, application of judicial precedents, and final decision on appeals.

Detailed Analysis:

1. The appeals were filed by the assessee and the revenue against the order of Ld. CIT(A) dated 24.12.2012. The legal issues raised by the assessee were not pressed during the proceedings, leading to the dismissal of certain grounds. The assessee, engaged in land development business, argued that certain disallowances made by the Assessing Officer were not warranted as the expenses were not debited in its Profit & Loss account. The Assessing Officer had made additions based on cash payments for land purchases and interest on post-dated cheques. The assessee contended that similar issues were decided in favor of group companies by the Tribunal in previous cases.

2. The Assessing Officer disallowed certain amounts under section 40A(3) of the Act, which were confirmed by Ld. CIT(A). The assessee argued that since no expenditure was booked for land purchases, the disallowance was not justified. The Tribunal had previously allowed relief in similar circumstances for another group company, and the assessee sought similar treatment. Additionally, an amount was added as income from other sources without proper confrontation or basis, which the assessee contested.

3. The revenue challenged the deletion of certain additions by Ld. CIT(A) and argued that the Assessing Officer's actions were correct. The revenue claimed that interest on post-dated cheques not recorded in the books warranted an addition. However, the assessee cited favorable Tribunal orders in cases of group companies to support its position.

4. The Tribunal analyzed the grounds of appeal from both parties, considering the arguments, material on record, and previous Tribunal orders in similar cases. The Tribunal found that certain additions made by the Assessing Officer were not justified as the expenses were not claimed or routed through the Profit & Loss account. The Tribunal relied on judicial precedents and previous orders to decide in favor of the assessee on various grounds, ultimately partially allowing the assessee's appeal and dismissing the revenue's appeal.

5. In conclusion, the Tribunal dismissed the appeal filed by the revenue and partly allowed the appeal filed by the assessee, based on the detailed analysis of the legal issues, interpretations of relevant provisions, and application of judicial precedents in similar cases.