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2016 (3) TMI 1304 - AT - Income TaxAddition made u/s 40A(3) on account of cash payment towards purchase of land - Held that:- where a Developer had made payments to farmers in cash at the time of purchase of land through a registered sale deed executed before Sub Registrar, the component of cash payment was held as admissible and the invocation of the provisions of section 40A(3) was found to be unjust - reliance is placed on ITAT, Raipur Bench in the case of ACIT vs. R.P. Real Estate Pvt. Ltd. [2015 (7) TMI 1283 - ITAT RAIPUR] - thus it was unjust to invoke the provisions of section 40A(3) - we hereby reverse the findings of the authorities below and direct to delete the addition - Decided in favor of assessee. Whether the expenditure incurred by the assessee for development of land is to be included for the purpose of valuation of closing stock of land - Held that:- method adopted by the assessee was average purchase price - assessee has furnished the calculation of the valuation stock and before the AO he has admitted that at best a difference in stock of ₹ 2,31,360/- could be assessed. This offer of the assessee has duly been recorded in the assessment order - we therefore, hold that after considering the submissions as well as the method of valuation, at best, a sum of ₹ 2,31,360/- could be upheld by CIT(A), instead of granting the total relief - thus AO is directed to compute the addition accordingly - allowed for statistical purposes. Disallowance made u/s 40A(3) - Held that:- the expenditure was towards purchase of uniform and payment to staff. Each payment was described by the assessee - CIT(A) has examined the expenditure incurred and thereupon arrived at a conclusion that the payments although were in cash but petty in nature - On that basis he has held that the provisions of section 40A(3) were wrongly invoked - Decided in favor of assessee. Disallowance of expenditure incurred by partners - Held that:- the expenses was incurred for the purpose of travel, pooja expenses, office expenses etc. CIT(A) has held that considering the nature of the business as well as the scale of the business, the expenditure in question was related to the business activities of the assessee - thus CIT(A) has rightly granted relief after considering the nature of expenditure - Decided in favor of assessee. Disallowance of expenditure - Travelling for marketing - Held that:- CIT(A) has allowed the claim by assigning the reason that in real estate business travelling is required. However, the said reasoning is general in nature as against that the AO had made specific observation that some of the expenditure were connected with the business but personal in nature - thus we hereby uphold the addition to the extent of ₹ 25,000/- and for rest of the amount the relief granted by learned CIT(A). Disallowance u/s 40a(2)(b) - Held that:- the first onus is on the AO to place on record his satisfaction that the expenditure was in excess of the fair market value. In this case no such attempt had been made by the AO - assessee’s explanation was that the payment of commission was an ascertained liability of the assessee, hence in the interest of business the commission was paid even if the post dated cheques have been received from the customers at the time of booking of the plot - hence the decision of payment of commission appears to be a business decision of the assessee. Moreover, the AO was not justified to invoke the provisions of section 40A(2)(b) in the absence of any evidence to compare the fair market value - Decided against the revenue.
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