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2014 (9) TMI 204 - AT - Income TaxPayment made to Bruhat Bangalore Mahanagara Palike disallowed – Sub-lease of property to sister concern - The assessee pointed out that the rents that it had paid to BBMP had to be allowed as a deduction while computing income from lease of the property u/s. 37(1) of the Act. – Held that:- The conclusions of the AO are also not correct for the reason that the rent paid by the Assessee to BMP would be higher only for the initial 5 years when the arrears of rent towards arrears of rent for the period from Nov. 2005 to March, 2008 is added to the originally agreed rent between the Assessee and BMP - the claim of the Assessee that after the expiry of the period for which the assessee had to pay the arrears of rent from Nov. 2005 to Apr. 2008 in 20 equal quarterly instalments, the amounts payable by it to BMP will be less than what the assessee would receive from the sub-tenant KPPL is correct - as per the terms of sub-lease with KPPL, the Assessee was entitled on a year on year basis, increase of 5% on the lease rentals - there is nothing on record to suggest that sub-leasing the property to KPPL did not make business sense. Relying upon CIT Vs. Walfort Share & Stock Brokers (P) Ltd. [2010 (7) TMI 15 - SUPREME COURT] - there is no basis for the AO to come to a conclusion that it was KPPL which was interested in the BMP Contract, but could not participate in the tendering process initiated by the BMP because KPPL was managed and owned substantially by Sri. D.K. Shivakumar, who was the Hon’ble Minister for Urban Development in the Government of Karnataka between the years 2002 and 2004 - the conclusions of the AO that the assessee was brought in as an intermediary only to win the contract and transfer it back to KPPL immediately and therefore the transaction in the books of the assessee has to be ignored and the losses claimed against it disallowed, cannot be sustained - The loss as claimed by the Assessee is to be allowed – Decided in favour of assessee.
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