TMI Blog2022 (7) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximise its profit. The tax authorities must not look at the matter from their viewpoint but that of a prudent businessman. Whether there was nexus between the compensation paid to Shri. Mahesh Bhoopathi and the construction agreement? - The answer must be in the affirmative firstly, because, in para 3 of the JDA cancellation agreement, it is stated that M/s. ITC had approached the parties to the said cancellation agreement. Thus, assessee, Shri.Mahesh Bhoopathi and ITC were considering the proposal for construction of multi-storied residential Complex. Secondly because, in the Sale deed dated April 1, 2006 executed by Sun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following questions of law: 1. Whether the Tribunal is correct in law in upholding the disallowance by the assessing officer of compensation paid by the appellant and claimed as business expenditure of Rs. 4,48,69,595/- and Rs. 50,00,884/- for the assessment years 2008-09 and 2009-10 respectively, on the facts and circumstances of the case? 2. Whether the Tribunal was justified in law in holding that there was no nexus between the compensation paid by the appellant and the project under execution even when the assessing officer had accepted the claim of expenditure in the earlier assessment year 2007-08 on the facts and circumstances of the case? 3. Without prejudice, whether the Tribunal was justified in law in not holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one Shri. Mahesh Bhoopathi for development of land measuring 3 acres in Sy. No.1B, Block 30, 31 and 40 in Jakkur Plantation, Bengaluru. Later, assessee found a better business opportunity to develop land measuring about 5 acres and 29 guntas in Sy. No.1B consisting of eight blocks, which belonged to M/s. Sunrise Realty and Leisure Pvt. Ltd. Both these properties were in the same vicinity. Assessee entered into an MoU (Memorandum of Understanding) with M/s. Sunrise Realty, to purchase its land and paid an advance Sale consideration of Rs.One Crore. M/s. ITC Ltd., agreed to purchase the property belonging to M/s. Sunrise Realty. Assessee entered into an MoU dated June 16, 2005 with ITC agreeing to facilitate transfer of property belonging to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08-09 and 2009-10; assessee initially had entered into a JDA with Shri. Mahesh Bhoopathi. Since a better business opportunity was available to get the construction work in a larger area of 5 acres, assessee decided to cancel the JDA with Shri. Mahesh Bhopathi. He had initially, demanded Rs.8.5 Crores and finally agreed to receive Rs.6.7 Crores as compensation. assessee had facilitated transfer of land belonging to Sunrise Realty in favour of ITC and Shri. Mahesh Bhoopathi's land in favour of Sunrise Realty. 9. In substance, Shri. Shankar submitted that assessee had taken decision to cancel the JDA with Shri. Mahesh Bhoopathi as the assessee got a better business opportunity and paid compensation to Shri. Mahesh Bhoopathi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently reduced to Rs.6.70 Crores towards cancellation of the JDA. Perusal of the Compensation agreement shows that both Shri. Mahesh Bhoopathi and the assessee had approached ITC for participation in the project. The ITC had identified certain other immovable property to construction multi-storied residential complex. The relevant clause in the agreement reads as follows: C. The Parties have been approached by ITC Limited ( ITC ) for participation in a project involving the development of land and construction of a residential complex for their use. The Schedule Property being insufficient, ITC has identified certain other immovable property adjacent to the Schedule Property, for developing and constructing thereon a multistoried res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justifiably claim to put itself in the armchair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximise its profit. The tax authorities must not look at the matter from their viewpoint but that of a prudent businessman. 18. Thus, what is required to be examined is, whether there was nexus between the compensation paid to Shri. Mahesh Bhoopathi and the construction agreement. The answer must be in the affirmative firstly, because, in para 3 of the JDA cancellation agreement, it is stated that M/s. ITC had approached the parties to the said cancellation agreement. Thus, asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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