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TMI Blog2022 (11) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by an unsubstantiated assumption of the AO, and is not supported by any material proving otherwise. We are afraid that the aforesaid observation of the A.O does not find favour with us, as the land in question, as claimed by the assessee was purchased as an investment and formed part of its fixed asset in the balance sheet. Notwithstanding that the assessee had purchased the aforesaid property in question as a fixed asset , even if it is to be presumed that the same in the coming times is to be commercially exploited by it for constructing/developing a housing project, the same merely on the said basis would not trigger the applicability of sub-section (3) of Section 40A of the Act, as at the relevant point of time the assessee had made an investment towards purchase of a capital asset and not stock-in-trade. On a subsequent conversion or treatment by the assessee of the aforesaid capital asset as a stock-in-trade of its business of a real estate builder and developer, the provisions of sub-section (2) of Section 45 would though get triggered, but then such subsequent event would not lead to invocation of section 40A(3) of the Act. As the assessee in the case before us had at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 57,75,000 - 3. Smt. Taramunni Kutela Bhata 30.12.2014 2,83,50,000 2,63,50,000 20,00,000 Total 3,46,00,000 3,21,25,000 24,75,000 It was observed by the A.O that the assessee had shown the aforesaid land as a 'fixed asset' in its 'balance sheet'. Considering the fact that the assessee was engaged in the business of a developer and builder, the A.O held a conviction that the aforesaid land was acquired by the assessee not as an investment but for the purpose of constructing a housing project on the same. Accordingly, the A.O was of the view that the purchase of the land in question though claimed by the assessee as a part of its 'fixed asset' was in fact the stock-in-trade of its business as that of a land developer/builder. In order to fortify his aforesaid conviction the AO took support of the fact that the assessee during the year under consideration had carried out construction activities on certain piece of land and had shown the same as workin- progress in the balance sheet. Backed by the aforesaid facts, the A.O was of the view that as the assessee had made a cash payment of Rs.24.75 lac (out of Rs.3,70,78,202/-) therefore, its claim of deduction of the same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng registration charges) as a 'fixed asset' and had reflected the same as such in its balance sheet for the year under consideration. However, the A.O being of the view that as the assessee was engaged in the business as that of a real estate builder and developer, therefore, the land in question would have been acquired by him for developing a housing project and not as an investment. 8. Controversy involved in the present appeal finds its genesis in the assumption of the A.O, that the land in question was acquired/purchased by the assessee as a part of its stock-in-trade, and not as an investment as was projected in its balance sheet. Before proceeding any further, we shall deal with the scope and gamut of the Section 40A(3) of the Act which reads as under: "(3) where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees no deduction shall be allowed in respect of such expenditure." On a perusal of the aforesaid statutory provision, we find that the same contemplates declining of the assessee's cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the order of the authorities nor has the Ld. DR been able to address the applicability of the said judgement to the issue at hand. We have taken ourselves through the said judgement and seen that it proceeds on entirety different facts and circumstances and has no applicability to the facts of the present case. Consequently, it is seen that from the ratio of the judgements relied upon before the CIT(A) and also before us which have been discussed in the earlier part of this order no arguments have been advanced by the Revenue so as to contend how they are not applicable to the case at hand, no distinguishing fact, circumstance or position of law has been relied upon so as to come to a contrary finding than the one arrived at. Accordingly on a consideration of the peculiar facts and circumstances of the case and the judgements relied upon considering the relevant provision of the Act namely Section 40A(3), we hold for the detailed reasons given hereinabove that Section 40A(3) of the Act has been wrongly invoked as admittedly no expenses relatable to the addition has been claimed and the assessee has successfully demonstrated that the payment were reimbursement made by CWPPL." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O. As observed by us hereinabove, it is a matter of fact borne from the record that the purchase of the land in question for a consideration of Rs.3,70,78,202/- (supra) was shown by the assessee as an investment and formed part of its 'fixed assets' in the balance sheet for the year under consideration. Observation of the A.O that the assessee had purchased the land in question not as an investment, but as stock-in-trade of its business as that of a builder/developer is merely backed by his assumption that as the assessee was engaged in the business as that of a real estate builder and developer, therefore, the land in question in all probability would have been purchased for the said business purpose, i.e, developing of a housing project on the same. Undeniably, the dislodging of the assessee's claim is only backed by an unsubstantiated assumption of the AO, and is not supported by any material proving otherwise. We are afraid that the aforesaid observation of the A.O does not find favour with us, as the land in question, as claimed by the assessee was purchased as an investment and formed part of its 'fixed asset' in the balance sheet. Notwithstanding that the assessee had purch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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