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TMI Blog2016 (6) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... and merely because the receipt for demolition expenses for demolishing the illegal structure on the same piece of land is in the name of the architect, the same cannot be held to be non-business expenses and disallowed by the Revenue. - Decided in favour of assessee Disallowance u/s 43B - Held that:- The Revenue failed to bring on record provisions of any law in force under which this liability of sharing of 50% unearned increase in the land on sale or transfer with the Government can be crystallized or fastened on the assessee company , rather it is a contractual liability arising from contract between the two contracting parties viz. the assessee company on the one hand and Government on the other hand through Collector. In our considered view, the afore-stated amount of ₹ 4,55,422/- stated to be payable towards unearned increase in the plot of land in the event of sale or transfer vide clause 2(g) of Schedule II of the agreement dated 03-07-194 entered into by the assessee company and Additional Collector of Bombay for grant of land in favour of the assessee company is not hit by provisions of Section 43B of the Act as the liability has not arisen on account of any su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) arising from the assessment order dated 12-12-2008 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the assessee company in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) read as under:- 1.1 The learned Commissioner of Income - tax (Appeals) - 12, Mumbai, [ Id. CIT (A) ] erred in confirming the action of the Assessing Officer [ the A.O. ] in framing the assessment order without affording reasonable and fair opportunity of being heard. 1.2 It is submitted that in the facts and the circumstances of the case, and in law, the appellate order was required to be held as bad in law on account of breach of the principles of natural justice. WITHOUT PREJUDICE TO THE ABOVE: 2.1 The Id. CIT (A) erred in confirming the action of the A.O. in disallowing of 50,000/-, being the business deduction claimed by the Appellant as demolition charges, by holding the same as non business expenses. 2.2 While doing so, the A.O. erred in: (i) Basing his action only on surm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pitalizing the same till the Year in which it would either develop/Construct any Commercial Property or Sale the available FSI against Surrender of road etc. to the Municipal Authorities. The appellant had prior to 1998 given the plots on Lease to various parties who in turn built their own industry. The appellant have sold the above plots on various date to the existing Lessee since they were the occupant of the plots since Last several years had offered the same as business income. ***** Grounds of Appeals ***** ***** 4. Demolition Expenses ₹ 50,000/- The ACIT erred in disallowing demolition charges of ₹ 50,000/- as non Business Expenses. The appellant submits that the above Expenses have been paid to BMC i.e. Bombay Municipal Corporation and the Receipt of the same had been submitted during the assessment proceedings. The appellant submits that only on handing over of vacant land to BMC the Saleable FSI would be granted hence the demolition of unauthorized hutments is a genuine Business Expenditure. Also the same has been paid to State Govt. Authorities. ***** ***** With regard to the demolition charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- as payment made for demolition charge has been furnished by the assessee company. However, the involvement of the assessee company was not clear . It was also held by the learned CIT(A) that at no point of time has the assessee company authorized the Chief Architect to take necessary action. Thus, as per learned CIT(A) , the assessee company was not able to substantiate or establish that the concerned payment of ₹ 50,000/- to BMC was in respect of business carried on by the assessee company and hence the learned CIT(A) upheld the assessment orders dated 12.12.2008 passed by the AO u/s 143(3) of the Act, vide appellate orders dated 29.10.2010. 6. Aggrieved by the appellate orders dated 29.10.2010 of the learned CIT(A), the assessee company filed second appeal before the Tribunal. 7. The ld. Counsel for the assessee company submitted before the Tribunal that the assessee company has incurred demolition expenses of ₹ 50,000/- for which the disallowance has been confirmed by the learned CIT(A). The learned Counsel submitted that the development expenses with respect to the same property and evacuation expenses for removal of illegal occupants from the same pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure in the portion of the plot of land granted by Collectors office in favour of the assessee company in 1968 as set out in SOF above and in our considered view, this is a normal business expenditure although it is incurred through chartered architect which was reimbursed by the assessee company. Hence, we hold merit in the contentions of the assessee company and allow the expenses of ₹ 50,000/- incurred by the assessee company as business expenses through its architect paid to BMC towards demolition of illegal structure on its plot of land. We donot find any merit in the contentions of the Revenue as on the one hand development expenses and evacuation expenses with respect to the same piece of land was allowed by learned CIT(A) as business expenses , which orders of the learned CIT(A) is not contested by the Revenue as no second appeal is filed by the Revenue against the orders of learned CIT(A) before the Tribunal , and merely because the receipt for demolition expenses for demolishing the illegal structure on the same piece of land is in the name of the architect, the same cannot be held to be non-business expenses and disallowed by the Revenue. We order accordingly. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Collector of Mumbai was disallowed by the AO and added to the total income of the assessee company vide assessment orders dated 12/12/2008 passed by the AO u/s 143(3) of the Act. 12. Aggrieved by the assessment orders dated 12/12/2008 passed by the A.O. u/s 143(3) of the Act, the assessee company filed its first appeal before the learned CIT(A). With respect to the disallowance u/s 43B of the Act, it was submitted by the assessee company that as per the terms and conditions for allotment of land it is permissible to sell the plot of land subject to sharing of 50% of unearned income on sale of plot i.e. profit earned by the assessee company with the Collector . It was submitted that the Government of Maharashtra and the assessee company are co-owners of the plot sharing equally in the case of sale of plots. The amount is payable to Collector s office only. The A.O. in his assessment order for the assessment year 1998-99 stated that the assessee company had disallowed ₹ 45 lacs u/s 43B of the Act. The assessee company submitted that the above amount was disallowed since the same was not paid and it was for change of user from industrial purpose to commercial purpose. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny submitted that the income received from sale of reversionary rights with respect to these plot of land have been offered for taxation in the return of income filed with the Revenue for the impugned assessment year. An amount of ₹ 64,890/- has been paid towards un-earned income vide working of the Architect in page 44-45 of the paper book filed with the Tribunal which is also allowed by the AO . But the balance amount payable of ₹ 4,55,422/- towards unearned income payable to the Collector which has been provided in the books of accounts , the Collector is not accepting this amount and raised demand of ₹ 119 crores in respect of sale of plots in the earlier years from the assessee company. Details of Collector charges of ₹ 4,55,422/- payable are placed in the paper book page 31,37,40,42 and additional working chart filed on the date of hearing on 16th March 2016. The learned Counsel for the assessee company submitted that this payment is not hit by provisions of section 43B of the Act. The assessee company relied upon the decision of Hon ble Supreme Court in the case of CIT v. McDowell Co. Ltd. [2009] 314 ITR 0167 (SC) and the decision of Hon ble Kerala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose approved by the Govt. if it is to be used for a purpose other than approved industrial or commercial purposes. We have observed that there is a condition stipulated in afore-stated clause 2(g) of the agreement dated 03-07-1964, sharing of 50% of unearned increment in the land with the Government in the event of sale or transfer of plot of land , and the liability of the assessee company with respect thereto has arisen from the agreement dated 03-07-1964 rather than arising out of any law in force which is the essential requirement to be made liable to be covered under the provision of Section 43B(a) of the Act which is reproduced below : [Certain deductions to be only on actual payment6. 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- [(a) any sum payable by the assessee by way of tax6, duty, cess or fee, by whatever name called, under any law for the time being in force, or] ****** ****** 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and hence limited verification is required to be done by the Revenue on the computation of working of ₹ 4,55,422/- which has been produced before us as the authorities below have not accepted the claim of the assessee company of ₹ 4,55,422/- being payable to the Collector and allowed the actual amount of ₹ 64890/- paid to the Collector which was computed by the Architect vide working enclosed in paper book page 44-45 filed with the Tribunal . Accordingly, we set aside and restore this issue to the file of the A.O. with limited direction to verify the computation of the working of the unearned increment of ₹ 4,55,422/- made by the assesseee company with respect to the sale of the reversionary rights in the two plots by the assessee company and corresponding existence of liability of the assessee company to the tune of ₹ 4,55,422/- in favour of the Collector in accordance with the agreement dated 03-07-1964 . The AO shall accordingly there-after verification allow the amount payable to the Collector in accordance with the terms of agreement dated 03-07-1964 . Our directions are only limited to the checking of the computational working of the amount as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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