2014 (4) TMI 712 - HC - Income Tax

Validity of dismissal of revenue s appeal and admission of Cross objection No claim of deduction on purchase of land - Held that - The Tribunal rightly dismissed the appeal of the revenue as the assessee had not claimed any deduction of the sum of Rs.42,36,000/- invested in purchasing the land - there was no reason why the addition was made by the assessee but, the cross objection filed by the assessee was wrongly allowed by the Tribunal on the ground that no expenditure had really been claimed with respect to the amounts disallowed by the AO - When an expenditure of a revenue nature was incurred and shown as work in progress, it could not be said that the provisions of section 40(a)(ia) were not attracted thus, the order of the Tribunal is modified Decided partly in favour of Revenue.

Summary

Issues:
1. Condonation of delay in appeal
2. Disallowance of expenditure by Assessing Officer
3. Appeal by revenue against order of CIT (Appeal)
4. Cross objection filed by the assessee
5. Interpretation of section 40(a)(ia)

Condonation of delay in appeal:
The High Court allowed the application for condonation of delay and disposed of the matter. The revenue appealed against the order of the Appellate Tribunal dated 18th June, 2013, where the appeal by the revenue was dismissed, and the cross objection by the assessee was allowed.

Disallowance of expenditure by Assessing Officer:
The CIT had deleted the addition made by the Assessing Officer regarding the expenditure incurred by the assessee in purchasing land, stating it was not shown as a business expenditure. The CIT directed re-verification of certain disallowed amounts. However, some disallowed expenditures were upheld by the CIT. The Tribunal dismissed the revenue's appeal, concurring with the CIT's findings that the assessee did not claim deduction for the amount invested in purchasing land.

Appeal by revenue against order of CIT (Appeal):
The High Court found that the appeal by the revenue was correctly dismissed, as the assessee had not claimed a deduction for the amount invested in land purchase. However, the cross objection filed by the assessee was erroneously allowed by the Tribunal. The Court set aside the order to that extent and restored the order of the CIT (Appeal).

Cross objection filed by the assessee:
The Tribunal wrongly allowed the cross objection by the assessee, stating that no expenditure had been claimed for the amounts disallowed by the Assessing Officer. The Court clarified that when revenue nature expenditure is incurred and shown as work in progress, the provisions of section 40(a)(ia) are applicable. Therefore, the cross objection by the assessee could not have been allowed.

Interpretation of section 40(a)(ia):
The Court emphasized that when an expenditure of revenue nature is incurred and shown as work in progress, it falls under the purview of section 40(a)(ia). The Court's decision was based on a detailed analysis of the facts and circumstances of the case, leading to the dismissal of the revenue's appeal and the setting aside of the allowance of the cross objection by the assessee.