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2015 (10) TMI 935 - ITAT BANGALORE

2015 (10) TMI 935 - ITAT BANGALORE - TMI - Disallownace of layout formation expenses - AO noticed that the assessee sold a property to Kammagondanahalli Sri Maruti Seva Samithi from which the assessee reduced the cost of acquisition, layout formation expenses and labour charges - only reason given by the AO and CIT(A) in making disallowance was that the sale deed was registered even before the expenditure was incurred and the Assessee as on the date of incurring the expenditure was not owner of .....

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of the agreement to sale deed. It is binding on the assessee. Moreover, the payment of ₹ 1,04,25,000/- was withheld by the purchaser for completion of the layout formation. Only on completion of the layout formation expenditure, the assessee was able to recover the above said amount on 28/2/2008. The Assessing Officer was not right in holding that the right and interest on the property had been already transferred before such expenditure. There is no dispute that such expenses were incurr .....

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at the cheque was issued under special circumstances and business exigencies, in fact, the assessee had contravened the provisions of sec. 40A(3) of the Act. - Decided against assessee. - ITA No.467/Bang/2014 - Dated:- 4-9-2015 - SHRI N.V VASUDEVAN, JUDICIAL MEMBER AND SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Appellant Mrs. Kamakshi, Advocate For The Respondent Dr. PK Srihari, Addl. CIT ORDER PER SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER This appeal by the assessee is against the order of t .....

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t that is challenged in this appeal is the disallowance of Lay out formation expenses of ₹ 21,86,375 and another sum of ₹ 20,00,000 u/s.40A(3) of the Income Tax Act, 1961 (Act). 3. Aggrieved, by the aforesaid additions the assessee filed an appeal before CIT(A). The learned CIT(A) dismissed the appeal of the assessee. Hence this appeal by the Assessee before the Tribunal. 4. The main issue in this case is: a) Disallownace of layout formation expenses of ₹ 21,86,375. The AO had .....

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the terms of the agreement between the Assessee and Kammagondanahalli Sri Maruti Seva Samithi, the Assessee has to bear all expenses of formation of lay-out. The price agreed between the parties was inclusive of those expenses. The assessee made a representation that the above expenditure had to be made as part of contract and further pointed out that since the lay-out was not formed by laying road and providing other amenities as per the contract, the vendor had withheld the payment of ₹ .....

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e deduction of expenditure. The CIT(A) confirmed the order of the AO. b) Disallowance u/s 40A(3): ₹ 20,00,000/- 7. The AO noted that a payment was made to Shri Chandre Gowda for purchase of materials towards layout formation, through a bearer open cheque of ₹ 20,00,000/-. The Assessing Officer disallowed the expenses as this contravenes the provisions of sec. 40A(3) of the Act and accordingly brought to tax. The same was confirmed by the CIT(A). 8. Aggrieved, by the order of the CIT( .....

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15 feet compound walls including foundation with size stones on the southern part of the property as the adjacent property is a rain water fed Big Lake and 10 feet wall on other sides, Digging of 2 borewells and construction of 2 borewells Sheds, Laying of water pipeline and construction of culverts, construction of entry gate with iron grills measuring 15 feet x 7 feet. ii. The sale deed has to be registered before 30th Nov, 2007. iii. The vendee has the right to hold payment of the sale consi .....

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and buyer. The seller is bound to comply with the terms of the agreement. The conditions specified in the agreement to sale are mandatory and is a subsisting contract between the seller and the buyer and the seller is bound to comply with the terms of the agreement. The seller could not complete the work as specified in clause 4 of the agreement to sale before the sale is complete as he was not enough funds to complete the work and the buyer has not paid the consideration of sale to the seller .....

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er the property as specified in clause 4 of the agreement to sale, both the buyer and the seller have mutually came to an understanding and agreed that the sale deed be registered to comply the terms in clause 4 of the agreement to sale so that the seller will get the full consideration and could complete the pending work after the sale deed is executed. Accordingly the sale deed was executed and the buyer has paid the consideration and the seller has completed the work as specified in clause 4 .....

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e terms of the agreement for sale with Kammagondanahalli Sri Maruti Seva Samithi. Though there is a reference to absence of evidence to substantiate the incurring of expenditure by the Assessee, it is clear from the order of the AO that the required bills and evidence was filed by the Assessee before the AO. The only reason given by the AO and CIT(A) was that the sale deed was registered even before the expenditure was incurred and the Assessee as on the date of incurring the expenditure was not .....

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lause 4 of the agreement to sale deed. It is binding on the assessee. Moreover, the payment of ₹ 1,04,25,000/- was withheld by the purchaser for completion of the layout formation. Only on completion of the layout formation expenditure, the assessee was able to recover the above said amount on 28/2/2008. The Assessing Officer was not right in holding that the right and interest on the property had been already transferred before such expenditure. There is no dispute that such expenses were .....

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