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2016 (11) TMI 601 - AT - Income TaxReopening of assessment - disallowance of the cost of the roads and fees paid to HUDA - Held that:- We do not find any reason to disallow the expenditure, when assessee’s project on 1/4th land is using those lands developed by ‘land owning companies’ as well as other companies. The total cost incurred by them was reimbursed by assessee to an extent of 25% which is same as that of land given for development to assessee. We do not find any merit in the order of the AO and CIT(A) in disallowing the expenditure by reading in between the lines of the agreement. The agreement specifically provides for bearing the cost of roads and development fee payable to HUDA and so assessee reimbursed the cost and also fees paid to HUDA. The Ld. CIT(A) allowed the cost of fees of HUDA paid directly by assessee, but did not allow the amount of fee reimbursed to the ‘land owning companies’ on the reason that they paid the HUDA fees much earlier to the incorporation of assessee- company. In fact, assessee-company was floated for completing the project which was approved in various individual companies and agreements specifically provide for the cost to be borne by assessee-company. Accordingly, it has made debit entries in the Books of Account, crediting those companies to an extent of 25% of the amount of cost on roads and the HUDA fees paid. Considering the agreements and the entries in the Books of Account, we are of the opinion that this expenditure is allowable as part of project cost. We are also not sure how the expenditure debited to project cost could be disallowed and brought to tax when the project is not complete and assessee was estimating a proportionate income to the extent of the project completed. In view of that, we are not in a position to approve the orders of the AO even on the merits of the additions made. - Decided in favour of assessee
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