2012 (9) TMI 1076 - HC - Income Tax

Addition on account of Land Survey expenditure - difference in valuation of land by treating the same as unexplained investment

Summary

Issues:
1. Disallowance of PF contribution under section 36(1)(va)
2. Disallowance of Land Survey expenditure
3. Addition of unexplained investment due to difference in land valuation

Analysis:
1. The first issue pertains to the disallowance of PF contribution under section 36(1)(va). The Tribunal deleted the disallowance of Rs. 46,964, which was challenged by the Revenue. The Court noted the small tax implication and decided not to consider the question further without delving into the merits.

2. Moving on to the second issue, concerning the disallowance of Rs. 57,04,000 made on account of Land Survey expenditure. The Appellate Commissioner had reversed the Assessing Officer's order, but the Tribunal, considering a previous decision of the Gujarat High Court, upheld the deletion of the disallowance. The High Court had previously ruled that conducting land surveys for assessing suitability for windmills was a revenue expenditure for a business involved in purchasing land for such purposes.

3. The final issue revolves around the addition of Rs. 34,09,400 due to a difference in land valuation, treated as unexplained investment by the Assessing Officer. The CIT (Appeals) had deleted this addition, which was later confirmed by the Tribunal. The Tribunal emphasized that section 50C of the Income Tax Act applies to sellers, not purchasers. Section 50C deems the stamp duty valuation as the full value of consideration for the seller, not the purchaser. Therefore, the Tribunal's decision to uphold the CIT (Appeals) view that the Assessing Officer wrongly applied stamp duty valuation for determining the actual consideration was deemed correct.

In conclusion, the Court dismissed the Tax Appeal, upholding the decisions regarding the Land Survey expenditure and the difference in land valuation, emphasizing the application of section 50C in determining the full value of consideration in such cases.