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TMI Blog2023 (8) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... r transfer to TPI of which sale deed could not be executed in favour of the TPI for the reasons of non-compliance of the terms of agreement. TPI accepted the proposal of assessee - This 2.5 acres land was subsequently, sold by assessee. Thus it was not a single transaction of sale and purchase of land with TPI but the assessee was into a long term association with TPI starting from Feb, 2006. It is also established that the assessee was handicapped in fulfilling the commitment towards TPI and at the same time was handicapped with regard to 2.5 acre land of which the original sale deeds were lying with TPI. Thus there was justification on the part of assessee, to have made a proposal to the TPI in response to which TPI had replied on 15.06.2012. Thus, CIT(A) was not in error to allow the payment as one u/s 37 having commercial expediency. Further TPI has shown the amount receipt from assessee as revenue from renunciation from development rights. There is no substance in the observation of AO of diversion of sharing of profits with TPI as admittedly the amount was paid to TPI prior to the sale of 2.5 acre lands to Smt. Naina Lal Kidvai on 16.07.2012. DR has relied the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held the expenditure claimed by the assessee is not allowable of the following counts : first that there is no obligation on the part of assessee to pay an amount of Rs. 2.9 crores and secondly the payment is prohibited by law as sharing of profits on sale of agricultural land is prohibited by law. 3. Ld. CIT(A) has deleted the addition with following relevant findings : Decision I have carefully considered the submissions of the appellant and perused the material available on record. The contention of the appellant is that there was a contractual duty/ obligation incurred by it under the agreement dated 03.02.2006 to make available contiguous land, get the requisite approvals, obtain the zoning of land and to execute the sale deeds, etc. in favour of the buyer after undertaking the preceding activities. It is seen that this payment of compensation and refund of advance was in consequence of the agreement entered between the appellant and Tricone Projects India Ltd. (TPI) on 03.02.2006 which is filed at page 50-68 of the paper book, wherein the appellant had agreed to make available 75 acres of land at Village Niharpur Mandi, District Indore @ Rs. 15,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kidwai for Rs. 3.75 crores vide agreement dated 16.07.2012. For release of the title deeds and for compensation of breach of contract, appellant has paid Rs. 2,90,47,619/- and also refunded Rs. 59,52,381/- as advance received earlier. M/s Tricone Projects India Ltd. has raised a bill of Rs. 2,90,47,619/- for surrender of right fees of 2.5 acres of land at Niharpur, Indore which is filed at page 70 of the paper book. As a result, the total payment was made to M/s Tricone Projects India Ltd. of Rs. 3,50,00,000/- vide dated 12.07.2012 from appellant s bank account maintained with Induslnd Bank. It is also seen that in the very same bank, the sale proceeds of the 2.5 acres of land sold to Smt. Naina Lai Kidwai has been credited. The appellant has also filed confirmation of M/s Tricone Projects India Ltd. dated 19.01.2016 before the AO confirming the receipt of Rs. 2,90,47,619/- in the F.Y. 2012-13 and same has been credited to their Profit Loss A/c as evidenced from the balance sheet of M/s Tricone Projects India Ltd. for F.Y. 2012-13 filed at page 40 Of the paper book (Schedule 22) wherein the said amount of Rs. 2,90,47,619/- has been shown as revenue from renunciation from develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would fall in the category of allowable deduction. The facts of the appellant s case are identical with the above cited judicial pronouncement, therefore, the ratio of the said judgment is squarely applicable in the case of appellant. Hence, the compensation paid for breach of contractual obligation is an allowable expenditure and accordingly disallowance of Rs. 2,90,47,619/- is deleted. As regards the observation of the AO at page 5 of the assessment order that M/s Tricone Projects India Ltd. is 100% FDI company and they cannot enter into any such an agreement to create charge or to have right on profit on sale of such land, it is seen that the appellant had entered into an agreement with M/s Tricone Projects India Ltd. vide agreement dated 03.02.2006 whereby M/s Tricone Projects India Ltd. had agreed to buy 225 acres of approved land for development of township and in pursuant to the said agreement, appellant had agreed to provide approved and zoned land free from all encumbrances as per clause 2.1 and 3.1 of the agreement and had received advances in pursuant to said agreement. However, the appellant could provide 182 acres of land to M/s Tricone Projects India Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was a negotiated settlement which does not arise out of the clause 5.2 of the agreement. Ld. DR also submitted that the assessee has made payment out of the profits earned from the sale of the agricultural land under the garb of surrender right fee transferred it. 6.1 Ld. AR however, supported the findings of Ld. CIT(A). 7. Appreciating the matter on record, it can be observed that on 03.02.2006 agreement was entered between the assessee with TPI wherein assessee had agreed to sale 175 acres of land at Nihalpur Mundi, Indore at village Datora. Assessee had transferred 150 acres of land by 06.09.2006 and further 32.01 acres of land by 21.11.2007. However, the remaining land as per the agreement could not be aggregated and there was other issue involving necessary permissions with regard to land which assessee was not able to get. The assessee then sent a proposal to TPI to take possession of the original title deeds of 2.5 acres of land which assessee had aggregated for transfer to TPI of which sale deed could not be executed in favour of the TPI for the reasons of non-compliance of the terms of agreement on 15.06.2012. TPI accepted the proposal of assessee to get Rs. 3.5 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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