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2022 (7) TMI 1308 - HC - Income TaxDisallowance of compensation paid by the appellant and claimed as business expenditure - whether there was nexus between the compensation paid by the assessee to Shri. Mahesh Bhoopathi with the 'NLI project '? - HELD THAT:- In CIT Vs. Dalmia Cement (Bharat) Ltd [2001 (9) TMI 48 - DELHI HIGH COURT] it is held that once it is established that there is nexus between the expenditure and the purpose of business, the Revenue cannot cannot justifiably claim to put itself in the armchair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximise its profit. The tax authorities must not look at the matter from their viewpoint but that of a prudent businessman. Whether there was nexus between the compensation paid to Shri. Mahesh Bhoopathi and the construction agreement? - The answer must be in the affirmative firstly, because, in para 3 of the JDA cancellation agreement, it is stated that M/s. ITC had approached the parties to the said cancellation agreement. Thus, assessee, Shri.Mahesh Bhoopathi and ITC were considering the proposal for construction of multi-storied residential Complex. Secondly because, in the Sale deed dated April 1, 2006 executed by Sunrise Realty, assessee is one of the confirming parties. Thirdly, because, the Construction Agreement has been entered into between ITC and the assessee on April 1, 2006, and on the very same day, Sunrise Realty has sold the property to M/s. ITC Ltd. Unless the Construction Agreement was finalized earlier, it would not have been possible to execute the same on the date of purchase of the property. Fourthly because, Shri. Mahesh Bhoopathi had sold his property, which was subject matter of JDA in favour of Sunrise Realty. Shri. Aravind contended that the sale is in the name of individual in the name of Shri. Raghunath Vishwanath Deshpande. Shri. Shankar's reply to this contention is, Sunrise Realty was owned by Deshpande family. Further, fifthly because, the Revenue has allowed the expenditure for the A.Y. 2007-08. We are of the considered view that there was nexus between the cancellation of JDA and execution of Construction Agreement. Hence, following the authority in S.A. Builders [2006 (12) TMI 82 - SUPREME COURT] we are of the view that this appeal merits consideration and it is accordingly allowed.
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