TMI Blog2015 (8) TMI 1414X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and Alishan Estates Pvt. Ltd. In lieu of the said agreement dtd. 10/07/2005 M/s. Alishan Estates Pvt. Ltd was to procure pre-specified land for purchase, to make all the necessary legal arrangements for such land and to find out suitable buyer for the said land and profit was to be shared between the assessee and M/s. Alishan Estates P.Ltd in ratio 25 : 75. The profit includes loss as well. Had there been a loss whether the AO would have treated the said transaction as a sham transaction, obviously the answer is No. Since joint venture has earned a profit and same was shared between the said two parties. Therefore, we are of the view that the transaction is completely in lieu of joint venture agreement. The AO is not j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Brief facts as emanating from the order of the AO, for the sake of convenience are reproduced herein below:- During the course of assessment proceedings, it was found that the assessee-company paid sum of ₹ 5,17,48,439/- to M/s. Alishan Estates Pvt. Ltd (a Kolkata based party) as compensation payment on the basis of the agreement dated 10 th July 2005. Important portion of this agreement is reproduced below:- (i) that Alishan estates Pvt. Ltd shall verify and check all the little document of land to ensure the authenticity of the title of the seller of land. (ii) That Alishan estates Pvt. Ltd shall contact to the seller of land and make all negotiations in relation to cost price of land with the sellers of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alized service. Arrangement of document for the purpose of transfer of land in the name of assessee is also a service provided by M/s. Alishan Estates Pvt. Ltd. Further, identifying the buyer and ensuring realization of highest possible value for the land also need technical and professional skill. Ensuring that profit on purchase and sale transaction of land would not fall below 90% of the cost of land needs over all good management skill, communication skill, technical and professional know-how. Thus, it is clear that the services provided by M/s. Alishan estates Pvt. Ltd is specialized one and accordingly while booking expenditure in its books with respect to this party, the assessee should have deducted tax at source. No payment was mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 5,17,48,439/- is not allowable for two distinct reasons- firstly under section 40(a)(ia) of Act and secondly, the transaction being a sham transaction. With the discussion in para 3.1 to 3.5 from the AO s order M/s. Alishan Estates Pvt. Ltd is a jamakharchi company This concern is used by the assessee to reduce its profit by ₹ 5,17,48,439/-. The claim of expenditure of ₹ 5,17,48,439/- is not allowable. Accordingly, the AO made the additions of ₹ 5,17,48,439/- to the income of the assessee. 5. The ld.CIT(A) has deleted the additions by holding that the AO has taken the decisions based on suspicion whereas the assessment made u/s. 143(3) of the Act should be based on legitimate material from which a rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as agreed between the assessee and M/s M/s. Alishan Estates Pvt. Ltd that the total profits arising out from the said joint venture project would be divided between M/s. Alishan Estates Pvt. Ltd and the assessee company in the ratio 75:25. There is no defect pointed out in the said agreement/contract by the AO. Therefore, he was not justified in treating the said amount as expenditure. There is no liability to deduct tax at source and no disallowance on this account could be made. Accordingly, he deleted the addition made by the AO by relying upon decisions of various courts of law. 7. The ld.DR has relied on the order of the AO. On the other hand, the ld. Counsel for the assessee has relied upon the submissions made before the ld.CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s earned a profit and same was shared between the said two parties. Therefore, we are of the view that the transaction is completely in lieu of joint venture agreement. The AO is not justified in treating the said payment made by the assessee to the joint venture partner, M/s. Alishan as an expenditure and no TDS is required to be deducted on the profit so shared between the said two joint venture partners. In the circumstances and facts of the present case the addition so made by the AO is without any basis and is purely on surmises and conjectures. The ld.CIT(A) has rightly deleted the addition made by the AO. We do not find any infirmity in the order of the ld.CIT(A). We uphold the same. The grounds raised by the revenue are dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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