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2013 (9) TMI 1090 - AT - Income TaxDeduction u/s 54G - Held that:- Explanation to Section 54G(1) of the Act has to be harmoniously interpreted so that it is in consonance with the needs of a developing city. Notification dated 26.12.2009 of Tamil Nadu Government, read along with the definition of "urban area" given in Section 6 A of Tamil Nadu Urban Land Tax Act, 1966 will clearly show that Chemmenchery was indeed within city limits. Assessee here was paying urban land tax for its Chemmenchery property right from 1998, based on determination of such urban land tax by Asst. Commissioner of Urban Land Tax. Thus, in our opinion, the first question has to be answered in favour of assessee. Chemmenchery Village in which the land sold by the assessee was located, fell within the scope of "urban area" mentioned in Section 54G of the Act. Assessing Officer himself has noted at para A(viii) of his order that assessee had indeed purchased a land at Venkateshpuram Village, Tiruvallur District in January, 2010 and claimed deduction under Section 54G on this purchase. Further, ld. CIT(Appeals) had in his order at para 6 clearly stated that claim of the assessee under Section 54G was with regard to shifting from Chemmenchery to Koppur Village, Tiruvallur District. This being so, we are unable to accept the argument of the learned D.R. that assessee had never put the claim before the Assessing Officer. We cannot say assessee's claim was for shifting its Chemmenchery unit to Puzal unit. Circumstantial evidence clearly show that assessee had established an industrial undertaking in Koppur Village. There can be no dispute that the object of enacting Section 54G was to de-urbanise and remove industries from populated area and promote industrialization in underdeveloped areas. Section 54G is a provision intended for promoting inclusive growth of the country. In such a situation, giving a very narrow interpretation to the said Section will defeat the very purpose thereof. We are thus of the opinion that the assessee was eligible for claiming exemption under Section 54G of the Act. Claim for expenditure incurred on construction of road - Held that:- When assessee adopted an unfair means to create evidence for the outgo, there is every possibility that it would have preferred an exaggerated claim. Obvious course in such a situation will be to send the matter back to the Assessing Officer for estimating the expenditure on roads based on a valuation report of an approved valuer. But, here the project had started in April, 2008 and would have significantly progressed by now. Temporary roads earlier laid, would no more be there and would have been replaced by pucca approaches and buildings. In such a situation, a remand for ascertaining the actual outgo may not serve any purpose. Hence to give a quietus to the issue, we are of the opinion that a disallowance of 25% on the total claim of ₹ 22,10,07,155/- will serve the ends of justice. We, therefore, set aside the orders of the authorities below on the issue and direct the A.O. to disallow ₹ 5,52,51,790/- out of the total claim of ₹ 22,10,07,155/- on roads, and allow the balance. Disallowance under Section 40(a)(i) - Held that:- When the assessee never effected any payment to M/s Gulf Spic Engineering (LLC), Dubai and had under their instruction given work orders to two Indian companies, and made payments directly to such Indian concerns, after deducting tax at source, we cannot say that assessee had failed to deduct tax at source. Assessee had effected deduction of tax as stipulated under Section 194C and remitted it to Government Account. This has not been disputed. There is no finding by any of the lower authorities that M/s Gulf Spic Engineering (LLC), Dubai had done any work for the assessee, for which assessee was obliged to make any payments. In any case, in such circumstances, assessee had reasonable grounds to have a bonafide belief that the payments effected to M/s Fairline Shipping Services Ltd. and M/s AMS Enterprises did not attract Section 195 of the Act. It could not be faulted for failure to deduct tax at source as mentioned in Section 195 of the Act, since the work was done only by M/s Fairline Shipping Services Ltd. and M/s AMS Enterprises and not by M/s Gulf Spic Engineering (LLC), Dubai. We are, therefore, of the opinion that assessee could not be held liable for any failure for non-deduction of tax at source. Disallowance under Section 40(a)(i) of the Act therefore stands deleted
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