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2017 (4) TMI 408 - AT - Income TaxAddition u/s 40A(2)(a) - payment of higher compensation to the shareholders-directors - Held that:- While invoking provisions of Section 40A(2)(a), the AO has overlooked all the three ingredients of Section 40A(2)(a) and his order is silent about the concrete/convincing reasons for forming the opinion that payment of compensation to shareholders- directors is unreasonable having regard to the three stipulated conditions, The Assessing Officer also failed to appreciate that there cannot be same fair market value of tenancy rights surrendered at all times. The Assessing Officer has also not given proper consideration to the legitimate business needs and benefit aspect of the assessee. The AO has failed to appreciate that the shareholders-directors being in better position to know the benefit accruing to the assessee have in turn struck a better bargain with the assessee at relevant time as compared to the other tenants. The assessee has paid higher compensation to the shareholders-directors considering the legitimate business needs and the benefit derived by the assessee from such payment. It is also a matter of common knowledge that comparison can be made at all times with the like ones only. In the present case, there cannot be any comparison of shareholders-directors with the other tenants as the benefit accruing to the assessee from shareholders-directors is far more than the other tenants and they stand on different footing. We found that assessee has made payment to these two Directors. Since they were tenants holding tenancy right in respect of commercial shop and also holding possession of large area of land appurtenant thereto - behind the commercial shop, it was the sole and absolute responsibility of the indenting developers to settle with the tenants, provide the compensation to the tenants for vacating the premises. Since the amount was paid as a commercial consideration and nothing was brought on record by the AO to the effect that amount so paid was higher than the fair market value, the CIT(A) has deleted the same after recording detailed finding at para 1.5 of his appellate order. The finding so recorded by CIT(A) are as per material on record and do not require any interference on our part. - Decided against revenue Addition made by the AO on the plea that sale value of 2750 sq.ft was not offered by the assessee - Held that:- We found that detailed finding has been recorded by CIT(A) to the effect that assessee has surrendered 2750 sq.ft area and as disclosed in its books of accounts, the sum of ₹ 1,16,00,000/-, accordingly no addition was warranted. The detailed finding so recorded by CIT(A) are as per material on record, therefore, do not require any interference on our part. - Decided against revenue
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