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2023 (12) TMI 94 - AT - Income TaxAllowable business expenditure - compensation paid by the assessee for the closure of agreement - as per AO company to whom the compensation has been paid did not have any right and therefore compensation paid by the assessee is not allowable - Whether agreement executed between the assessee and the company was not an afterthought and not a sham agreement between related parties? - whether the party to whom compensation paid by assessee is allowable as deductible expenditure in real estate development business of assessee or not? - HELD THAT:- The claim of the assessee is allowable if it is connected with the business of the assessee and payment is proved. There is no dispute with respect to the payment. There is also no dispute that same land for which compensation is paid has been sold, profit thereof is offered for taxation as business income. It is not the case of revenue that expenses of compensation incurred by assessee is not allowable as deductible expenses. Only reason for disallowance is that it is an afterthought and claim is not genuine. Allegation of ld AO is that agreement between assessee and Emtelle was an afterthought. Assessee has shown the annual accounts, agreement, claim of payment, certificate of banker, business justification, disclosure of compensation in annual accounts of recipient company shows that it is not an afterthought. Hence, we confirm appellate order of ld CIT (A). Thus, all the grounds in appeal of ld AO are dismissed.
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