TMI Blog2021 (3) TMI 735X X X X Extracts X X X X X X X X Extracts X X X X ..... htly treated as cost of the project as evidenced by the accounts which was certainly within the knowledge of the Assessing Officer and the Appellate Authority. The cost of the project includes the sum paid to Mr. D. Ramesh and the entire project has been sold out as reflected in the profit and loss account. Therefore, the Tribunal has certainly on erroneous assessment of facts, not allowed the amount paid to Mr.D.Ramesh as deduction, as cost towards the project. The Tribunal was certainly having no power to re-write the agreement and if the parties have modified the understanding by an agreement, the same should not have been ignored specially when the amount paid to Mr.D. Ramesh was certainly an expenditure, it should have been allowed as a deduction. - Decided against revenue. - I.T.A. NO. 136/2018 - - - Dated:- 18-2-2021 - HON BLE MR. JUSTICE SATISH CHANDRA SHARMA AND HON BLE MR. JUSTICE V. SRISHANANDA APPELLANT (BY SRI. A. SHANKAR, SENIOR ADVOCATE FOR SRI. M. LAVA, ADVOCATE) RESPONDENT (BY SRI. K.V. ARAVIND, ADVOCATE) JUDGMENT SATISH CHANDRA SHARMA . J., The present appeal is arising out of the order dated 28.09.2017 passed by the Income Tax Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tle the dispute with his sister and to withdraw the partition suit. The Assessing Officer did not take ₹ 65 Lakhs paid to Mr.D.Ramesh for the purpose of settling his dispute with his sister, as an expenditure towards the property. The appellant-Company being aggrieved by the additions made in the Order of Assessment of the Assessing Officer, preferred an appeal before the Commissioner of Income-Tax (Appeals)-4 and the Commissioner of Income-Tax has decided the appeal in favour of the assessee by order dated 04.03.2015. 4. The Department thereafter, preferred an appeal before the Appellate Tribunal and the Appellate Tribunal has upheld the order passed by the Assessing Officer by passing an order on 28.09.2017. Being aggrieved by the order passed by the Appellate Tribunal, the present appeal has been filed and this Court has admitted the appeal on the following substantial questions of law:- i) Whether the Tribunal was justified in law in holding that the Appellant is not eligible for deduction of ₹ 65,00,000/- under section 37 of the Act in respect of the expenditure incurred for removing encumbrance on the property held by the Appellant as stock in trade under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question was paid decided to transfer three flats of his share to the assessee company for ₹ 1,40,11,200/- and it was from this money paid to Shri.Ramesh, the amount in question of ₹ 65 lakhs was transferred to expenses account without any valid basis. 4. The Id. AR of assessee supported the order of CIT (A). He also submitted that he has already filed the written submissions as per which reliance has been placed on several judicial pronouncements in support of his contention for payments made to third parties to be in business and claimed as business expenses on account of business exigency and expediency, deduction is allowable u/s 37 of IT Act. He submitted that these written submissions should be considered to decide this issue. The judgments cited are as under. 1. CIT Vs. Deluxe Film Distributors Ltd., (114 ITR 434) (Call) 2. Dalmia Jain and Co. Ltd., Vs. CIT (81 ITR 754) (SC) 3. CIT Vs. Bhowrisankara Steam Ferry Co. (87 ITR 650) (AP) 4. DCIT Vs. B.Kumara Gowda (396 ITR 386) (Kar) He also submitted that the amount in question was paid to Shri Ramesh for settling dispute with his sister so the development work of the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s rightly treated as cost of the project as evidenced by the accounts which was certainly within the knowledge of the Assessing Officer and the Appellate Authority. The cost of the project includes the sum paid to Mr. D. Ramesh and the entire project has been sold out as reflected in the profit and loss account. Therefore, the Tribunal has certainly on erroneous assessment of facts, not allowed the amount paid to Mr.D.Ramesh as deduction, as cost towards the project. The Tribunal was certainly having no power to re-write the agreement and if the parties have modified the understanding by an agreement, the same should not have been ignored specially when the amount paid to Mr.D. Ramesh was certainly an expenditure, it should have been allowed as a deduction. 7. Learned counsel has placed reliance on the judgment of the Hon ble Supreme Court in the case of Dalmia Jain Co. Ltd. Vs. Commissioner of Income Tax reported in (1971)81 ITR 754 . In the aforesaid case, the assessee appointed by the Company was working as an agent of State Government in respect of limestone quarry and there was a suit against the Government suing for a specific performance of earlier agreement of lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said judgment, reads as under:- 15. As per the conditions of agreement of sale, the appellant-assessee has to hand over the cement factory in running condition; to renew the mining lease license and perfect various titles to the property and to purchase the remaining lands, for which the assessee has to incur expenditure. These expenditure are the expenditure incurred to perfect the title and other expenditure are the revenue expenditure. Hence, the assessee is entitled for deduction of the same. Though the assessee has not earned any income to perfect the title to the properties the expenditure incurred are allowable deductions against the balances written back of ₹ 34,01,644/-, which is assessable as business income. This Court in a judgment in (CIT Vs. Lawrence D souza (2011) 203 Taxman 200/15 taxmann.com 148 held that though the business was stopped in the year 1994, the expenses are incurred in connection with the business. This Court allowed the deduction holding that the expenses are continued to be incurred in connection with the business, until it is sold. The Tribunal denied the expenditure solely on the ground that the business activities are closed in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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