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2022 (8) TMI 432 - AT - Income TaxAllowable business expenses u/s 37(1) - site encroachment charges, land owners’ payment etc. - DR submitted that impugned payments were not the liability of the assessee and the sale agreement was done with respect to already encroached property - HELD THAT:- There was continuous litigation at various fronts which led SVC wanting to cancel the deal. Since M/s SVC incurred eviction charges, it sought reimbursement of the same from the assessee and accordingly, the expenditure has been debited as work-in-progress with corresponding credit to M/s SVC. It could also be seen that the payments were made by SVC through banking channel and acknowledgment / receipts from evictees were placed before Ld. AO. The details of payment so made were furnished to lower authorities. The assessee was also able to produce two of the evictees who confirmed having received the eviction charges. Merely because the evictees did not have PAN or not assessed to tax, the same would not jeopardize the claim of the assessee. M/s SVC responded to notice u/s 133(6) and confirmed the payments. There is nothing adverse on record except for mere allegation that the transaction appeared to be collusive one and the bona-fides of the transactions were doubtful. There is no concrete material to substantiate this conclusion. It could also be seen that the assessee was into the business of real estate development and such expenditure would fulfill the test laid down u/s 37(1) and it could very well be said that the expenditure was incurred for business purposes of the assessee Thus the claim as made by the assessee was allowable as business expenditure. To dispel the concern of the Ld. DR that the same amount could have been claimed as expenditure by M/s SVC, we direct Ld. AO to verify the fact that the aforesaid expenditure was never claimed by M/s SVC. If so, the expenditure would be allowable to the assessee. The same would be allowed to be capitalized and proportionate expenses as claimed by the assessee would be allowed.
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