TMI Blog2022 (8) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... ments. There is nothing adverse on record except for mere allegation that the transaction appeared to be collusive one and the bona-fides of the transactions were doubtful. There is no concrete material to substantiate this conclusion. It could also be seen that the assessee was into the business of real estate development and such expenditure would fulfill the test laid down u/s 37(1) and it could very well be said that the expenditure was incurred for business purposes of the assessee Thus the claim as made by the assessee was allowable as business expenditure. To dispel the concern of the Ld. DR that the same amount could have been claimed as expenditure by M/s SVC, we direct Ld. AO to verify the fact that the aforesaid expenditure was never claimed by M/s SVC. If so, the expenditure would be allowable to the assessee. The same would be allowed to be capitalized and proportionate expenses as claimed by the assessee would be allowed. - ITA No. 2287/Chny/2017 - - - Dated:- 6-7-2022 - Hon ble Shri Mahavir Singh, Vice President And Hon ble Shri Manoj Kumar Aggarwal, AM For the Appellant : Shri. S. Sridhar (Advocate) Ld. AR For the Respondent : Shri. G. Johnson (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. The Appellant craves leave to file additional grounds/arguments at the time of hearing. As evident, the sole subject matter of appeal is deduction of expenditure of Rs.811.75 Lacs. 2. The Ld. AR advanced arguments assailing the orders of lower authorities and filed written submissions. The Ld. AR, inter-alia, submitted that impugned expenditure was incurred for business purposes and the same was allowable u/s 37(1). The Ld. Sr. DR, on the other hand, controverted the arguments of Ld. AR and justified the disallowance. The Ld. DR submitted that impugned payments were not the liability of the assessee and the sale agreement was done with respect to already encroached property. Having heard rival submissions and after due consideration of orders of lower authorities, our adjudication would be as under. Assessment Proceedings 3.1 The assessee being resident corporate assessee is stated to be engaged in the business of real estate, promotion, development and construction of residential, commercial, individual complexes and other allied activities. During assessment proceedings, it transpired that the assessee reflected revenue of Rs.412.96 Lacs on sale of constructe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sheet was reduced by Rs.811.75 Lacs and proportionate work-inprogress expenses were also reworked on the basis of which Ld. AO arrived at taxable income of Rs.50.84 Lacs. Appellate Proceedings 4.1 During appellate proceedings, the assessee submitted that the property so purchased was an encroached property. The assessee could remove only a part of encroachers. In the meantime, the assessee could find a buyer of the property i.e., SVC who was ready to buy the property with the remaining encroachers. The intended purchaser incurred a sum of Rs.811.75 Lacs in evicting the encroachers which was duly evidenced by copy of receipts from encroachers. The bank statement of SVC highlighting the aforesaid payment was also enclosed. 4.2 Subsequently, due to continuous litigation at various fronts, SVC was not willing to proceed further in the transaction and debited assessee s account with Rs.811.75 Lacs being the amount spent by them in evicting the encroachers. Accordingly, these expenses were debited to project account with corresponding credit to SVC. The assessee also pointed out that the two encroachers were presented before Ld. AO and both of them accepted receipts of amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was confirmed against which the assessee is in further appeal before us. Our findings and Adjudication 5. Upon careful consideration of material facts, it could be gathered that the assessee was engaged in the business of real estate development. It is undisputed fact that the property was an encroached property and the assessee was able to clear some of the encroachers by himself by paying some amount which were claimed as well as allowed in earlier years as noted by Ld. AO in the assessment order. Since the assessee was not able to fully clear the encroachments and the property was under litigation, it entered into three sale agreements with SVC on 18.03.2011. The consideration was fixed at Rs.1750 Lacs. However, due to continuous litigation, SVC wanted to cancel the proposed deal and sought reimbursement of eviction charges spent by it in clearing the encroachments. The same has been capitalized by the assessee as work-in-progress as Project development expenditure and a proportion of the same has been claimed as per accrual of income since the assessee has effected 6607.38 Square Feet sale of land for consideration of Rs.412.96 Lacs. 6. The intended purchaser i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X
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