TMI Blog2022 (3) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... l estate as it has taken lease of around 81 acres of land from Coromandel Fertilizers Ltd., vide lease dated 27.03.2008, which was notified under SEZ Act, 2005 as Special Economic Zone. This land was sub-leased to Silk Road Sugars Pvt. Ltd., for setting up of sugar refinery. The assessee received lease rental from SEZ and has offered to tax. As regards to the bifurcation of expenditure given by the assessee and the payment made by the assessee, we noted that the payment made to EID Parry India Ltd., being holding company should be considered u/s. 40A(2)(b) of the Act but no other payments as they are not related to the assessee. The assessee has made a payment of ₹ 1.2 crores to EID Parry India Ltd., as per the Business Advisory Agreement dated 04.11.2010 but these cannot be disallowed because these are paid according to agreement and actual services rendered and even the AO has not given any finding as regards to unreasonableness of the payment. Further, the only amount disallowed by AO of ₹ 20,38,461/- the CIT(A) has held only as falling under the provisions of section 40A(2)(b) of the Act which are not challenged by the assessee. Hence, we confirm the order of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the receipt shown for the current year and according to Revenue-Cost Matching Concept, the assessee can claim only those expenses which are related to the revenue recognized during the year. Further, according to AO, the expenses are relating to services rendered by the assessee to the sister concerns. Therefore, the AO capitalized these expenses and noted that the same should have been shown as capital-work-in-progress. Accordingly, he disallowed the expenses of ₹ 3,25,01,491/-. The AO also applied the provisions of section 40A of the Act. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) after considering the submissions of the assessee and the details filed before him in regard to expenses incurred by assessee on consultancy charges, legal and professional charges and marketing expenses viz-a-viz services rendered to alleged sister concerns, he noted that the AO has not brought out any basis for applying the provisions of section 40A(2)(b) of the Act and according to him the expenditure incurred by assessee is found not to be reasonable and once this is the position, the AO cannot disallow the same. For this, the CIT(A) recorded his finding in para 5.9 to 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that an amount of ₹ 3,04,63,030/- is incurred for the purpose of business and allowable u/s. 37 of Income Tax Act, 1961. Therefore, the AO is directed to delete the addition of ₹ 3,04,63,030/-. However, as I discussed in earlier paragraphs, I sustain the addition made by the AO of ₹ 20,38,461/- u/s. 40A(2)(b). The grounds are partly allowed. Aggrieved, now the Revenue is in appeal before the Tribunal. 4. Before us the ld. Senior DR heavily relied on the assessment order and stated that the AO has rightly applied the provisions of section 40A(2)(b) of the Act, as the assessee has paid unreasonable payments to its sister concerns on account of expenses incurred for consultancy charges, legal and professional charges and marketing expenses. She stated that the assessee is unable to file any detail before AO and could not substantiate the claim of expenses. Hence, she relied on the assessment order and asked before the Bench for the order of CIT(A) be reversed and matter can be remanded back to the file of AO for fresh adjudication. 5. Per contra, the ld. counsel for the assessee took us through the grounds raised by Revenue and stated that the Revenue has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance made by the AO u/s. 40A(2)(b) of the Act, as is clear from the Ground No. 2.1 raised by Revenue. Coming to merits of the case, we noted that the assessee has filed complete details of consultancy charges, legal and professional charges and marketing expenses to the tune of ₹ 3,25,01,491/- and the relevant details reads as under:- A. Consultancy Charges Party Amount Rs. Services Relationship with the appellant Mr.R.K. Dhawan 17,64,800 Marketing Third Party Service Provider Mr. Shamsuddin 10,46,715 Legal Third Party Service Provider R S Consultancy 1,13,250 Legal Third Party Service Provider P.S. Narayanaswamy 11,36,520 Advisory Third Party Service Provider V Ramabhoopathy 7,67,000 Consultancy Third Party Service Provider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e related projects and the assessee prior to launching of real estate project i.e., Centralis @ ABM Avenue , it is engaged in the business of real estate as it has taken lease of around 81 acres of land from Coromandel Fertilizers Ltd., vide lease dated 27.03.2008, which was notified under SEZ Act, 2005 as Special Economic Zone. This land was sub-leased to Silk Road Sugars Pvt. Ltd., for setting up of sugar refinery. The assessee received lease rental from SEZ and has offered to tax. The assessee has actually incurred an expenditure of ₹ 1,84,63,030/- to third party service providers out of the total expenditure of ₹ 3,25,01,491/-. As regards to the bifurcation of expenditure given by the assessee and the payment made by the assessee, we noted that the payment made to EID Parry India Ltd., being holding company should be considered u/s. 40A(2)(b) of the Act but no other payments as they are not related to the assessee. The assessee has made a payment of ₹ 1.2 crores to EID Parry India Ltd., as per the Business Advisory Agreement dated 04.11.2010 but these cannot be disallowed because these are paid according to agreement and actual services rendered and even the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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