TMI Blog2010 (3) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... ount under the head business procurement and development charges. During the course of assessment proceedings it was explained that said amount was paid to one Mr. Prabhakar Reddy who was working on behalf of M/s. Tirupati Traders. It was further explained that assessee and 2 other parties had submitted tenders for procuring work of earth-removing from Gujarat Mineral Development Corporation (GMDC). The tender quoted by the assessee was third lowest. The first lowest party namely J.P. Fabricator withdrew on account of not having adequate plant and machinery for work. Tirupati Traders being second lowest withdrew from the contest by accepting a sum of ₹ 10 lacs from the assessee. A letter was filed by Mr. Prabhakar Reddy on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence in respect of its claim that payment has been made for business purposes. Thus, holding that expenditure was not incurred for business purposes claim was disallowed. 3. The Ld. CIT(A) confirmed the disallowance on the ground that it is not a liability actually existing at the time when the amount was paid to Mr. Prabhakar Reddy. It is not a legal liability and it was not incurred for business purposes. Further, by purchasing the rival bidder by not participating in public auction, the assessee acted against the public interest and public welfare. The Ld. CIT (A) relied on the decision of Bangalore Arrack Ltd., (1993) 201 ITR- 25 (Kar.). 4. Against this learned A.R. for the assessee submitted that expenditure incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case of the appellant and therefore, the payment of amount of ₹ 10 lac to the rival bidder is not held to be an expenditure incurred for the purpose of business of the appellant. Therefore, the appeal on this point is hereby rejected. 7. We are also of the same view that payment if at all is made by the assesssee to Mr. Prabhakar Reddy in connection with procuring tender from GMDC then it was for procuring a source of income and hence was a capital expenditure. The payment was made once for all with a view to bring into existence an asset or advantage or for bringing into existence a source of income. Further any expenditure incurred for the initial out-lay or for extension of business would be capital in nature. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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