2013 (11) TMI 1723 - AT - Income Tax

Summary

Issues involved: Appeal against order of CIT(A) regarding disallowance under u/s 40A(3) for AY 2005-06 & 2006-07.

Summary:
The appeals by the Revenue challenged the CIT(A)'s deletion of disallowance u/s 40A(3) of Rs. 14,43,280/- made by the Assessing Officer for cash expenditure on land purchase. The CIT(A) found that the expenditure was not claimed in the profit & loss account but debited to work-in-progress, following a similar precedent. The ITAT also upheld this view in a related case. The Revenue contended that the CIT(A)'s order was erroneous, but after hearing both sides, the ITAT upheld the CIT(A)'s decision, stating that the disallowance under u/s 40A(3) was not applicable as the expenditure was not claimed in the profit & loss account. The ITAT dismissed the Revenue's appeals, affirming the CIT(A)'s order for both cases.

Detailed Judgment:
In both cases, the Revenue appealed against the CIT(A)'s deletion of the disallowance u/s 40A(3) of Rs. 14,43,280/- for cash expenditure on land purchase. The CIT(A) found that the expenditure was not claimed in the profit & loss account but debited to work-in-progress, following a similar precedent set in a related case. The ITAT also upheld this view in the related case. The Revenue contended that the CIT(A)'s order was erroneous, but after hearing both sides, the ITAT upheld the CIT(A)'s decision, stating that the disallowance under u/s 40A(3) was not applicable as the expenditure was not claimed in the profit & loss account. The ITAT dismissed the Revenue's appeals, affirming the CIT(A)'s order for both cases.