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TMI Blog2021 (3) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... aid taxes thereon to the extent of Rs. 6,07,789/-. 2.1. The return was processed under Section 143(1) of the Income Tax Act, 1961 (hereinafter for brevity referred to as 'Act') and the case was selected for scrutiny. The Assessing Officer passed an order under Section 143(3) of the Act on 22.03.2013 by disallowing payment of Rs. 65 Lakhs paid to the landlord towards the land expenses. 2.2. The facts further reveal that the appellant- Company has entered into a Joint Development Agreement dated 10.06.2004 with one Mr. D. Ramesh, the landlord for development of residential apartments measuring 2 acres and 7 guntas in Sy. No.70 of Jaraganahalli, Bangalore. The property in question was having various tenants and the Appellant-Company could not get possession to commence the work. The appellant-Company had to pay compensation on account of landlord to various tenants from time to time to get the possession of the property for development. The appellant-Company also spent by way of legal fees etc. to commence the work at its earliest time and to complete the project. 3. The appellant-Company developed on the land a residential building in the name and style of "M/s. Maya Indraprastha" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The Income Tax Appellate Tribunal vide order dated 28.09.2017 has allowed the appeal preferred by the Department. Paragraphs 2 to 7 of the said order reads as under:- "2. The grounds raised by the revenue are as under:-. 1. The Order of the Ld. CIT (A) is opposed to the law and facts of the case. 2. The Ld.CIT(A) ought to have appreciated the fact that the payment of Rs. 65 lakhs made to the owner's sister has not been established to be laid out for the purpose of business, when Clause 33 & 34 of the Joint Development Agreement entered into by the assessee and the owner of the land, stipulates that the owner will bear the expenditure to keep the title clear and make the land usable for development till the developer's share is transferred. 3. The Ld.CIT(A) ought to have appreciated the fact that the assessee has not adduced any evidence to prove that the onus to cure the defective title was shifted to the assessee during the course of assessment proceedings. 4. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT (A) in so far as it is relates to the above grounds may be reversed and that of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ettled by Shri.Ramesh at his own cost and such expenses is not required to be borne by the assessee company. 6. In this view of the matter, we are of the considered opinion that the order of CIT (A) is not sustainable because these paras of JDA were not considered by CIT (A) at all. Regarding various judgments cited by Id. AR of assessee, we would like to observe that in view of this fact that the assessee had not been able to establish that the payment in question was on account of business exigency and it was required to be borne by the assessee company and not by Shri.Ramesh, none of the judgments cited by Id. AR of assessee is relevant in the present case of the assessee. We therefore reverse the order of CIT (A) and restore that of AO. 7. In the result, the appeal filed by the revenue is allowed." 6. This Court has heard the learned counsel for the parties at length. The appellant decided to settle the dispute between Mr. D. Ramesh and his sister in order to continue with the construction of project on reliasation of the property that may arise from the sale of apartments and under those circumstances, the amount was paid to Mr.D.Ramesh. the Tribunal has merely relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitute reserve for the purpose of computation of capital. 10. In the case of S.A. Builders Vs. CIT (Appeals) and Another reported in (2007) 288 ITR 1(SC), the Hon'ble Supreme Court dealt with the phrase for the purpose of business expenditure. The Hon'ble Supreme Court has held as under: "In order to decide whether interest on funds borrowed by the assessee to give an interest free loan to a sister concern (e.g., a subsidiary of the assessee) should be allowed as a deduction under Section 36(1)(iii) of the Income-Tax Act, 1961, one has to enquire whether the loan was given by the assessee as a measure of commercial expediency. The expression 'Commercial expediency" is one of wide import and includes such expenditure as a prudent business-man incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency." 11. In the case of Deputy Commissioner of Income -Tax Vs. B. Kumara Gowda, reported in (2017) 396 ITR 386 (KAR), the Karnataka High Court has held that, the legal expenditure to protect lease is certainly a 'business expenditure'. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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