2013 (11) TMI 571 - ITAT JAIPUR

Genuineness of expenditure – Allowability of expenditure - Whether expenditure claimed by the assessee is exclusively for the business purposes and is reasonable - Held that:- AO has not doubted that said amount of Rs. 75,99,364/- was paid to Asipac but has denied the said payment on the ground that it was not incurred for the purpose of business of the assessee - Facts on record, prima facie establishes that said payment has been made by the assessee for the purpose of business interest of the assessee as the said amount of FDI was received by the assessee as security deposit as per Development Agreement dated 25-03-2008 entered into among the assessee, UAHPL and RIL.

Reliance has been placed upon the judgment in the case of CIT v. Dhanrajgirji Raja Narasingirji [1973 (3) TMI 6 - SUPREME Court], wherein it has been held that department cannot dictate circumstances in which the expenditure is to be incurred - Payment made by the assessee to Asipac which is admittedly not a related party of the assessee, is expenditure wholly and exclusively for the purpose of business of the assessee.

Disallowance on the basis of cash payments of amount of Rs. 1,84,60,000/- AO has made addition of Rs.1,84,60,000/- on the basis of entries of the cash deposits in the bank accounts of Shri Kalyan Sahai and Shri Kalicharan Yadav and their family members - Two persons in their retracted statements stated that cash deposits in their bank accounts as also in the bank accounts of their family members was consisted of agricultural income, gifts from other family members and sale of land to Shri Babu Lal and others – Held that:- Reliance has been placed on the judgment of Hon'ble Gujarat High Court in the case of Laxmanbhai S Patel vs. CIT,[ 2008 (7) TMI 544 - GUJRAT HIGH COURT], wherein it has been held that legal effect of the statement behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving an opportunity of cross examination and the additions if made, the same is required to be deleted on the ground of violation of principles of natural justice.

In view of the facts, AO is not justified to make the said addition of Rs. 1,84,60,000/- merely on the basis of the statements of Shri Kalyan Sahai and Shri Kalicharan Yadav dated 28-01- 2009 wherein they stated that they received Rs. 20-25 lacs in cash as token money for sale of their land, without giving copies of the statements to the assessee and without giving an opportunity to confront those persons on whose statements, an addition was made. Therefore, there is a violation of principles of natural justice - Decided in favor of Assessee.

Amount received as security deposit not to be considered as consideration for sale - Held that:- Provision of Section 53A of the Transfer of Property Act cannot be made applicable to the land under consideration as undisputedly the said land is stock in trade of the assessee and not a capital asset - Permission has been given to the developer for the limited purpose of development of the project and not with the intention to transfer of land - The above facts are fortified in the light of clause of the development agreement which gives an option to the developer to purchase the land if they want @ Rs. 3.50 crores per acre.

It is a fact that assessee received a security deposit of an amount of Rs. 39,55,95,900/- and not the proportionate amount of Rs. 41,94,75,000/- - Security deposit received by the assessee cannot be considered as sale consideration for transfer of land in the assessment year under consideration – Hence, confirmed the order of the ld. CIT(A) in deleting the sum of Rs. 52.74 crores - Also delete the balance addition of Rs. 29.95 crores sustained by ld. CIT(A).

Reimbursement of amount paid for the expenses of employees of Asipac company - whether TDS u/s 194J is liable to be deducted as professional charge – Held that:- Provision of Section 194J of the Act for deduction of TDS are not applicable on such payments. Therefore, the assessee was not required to deduct TDS – Hence, disallowance made by the AO as per Section 40(a)(ia) of the Act is not justifiable.