TMI Blog2023 (3) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... see no reason to interfere with the decision of the CIT(Appeals). Professional and consultancy charges - disallowance is that whether the expenditure was incurred wholly and exclusively for the purpose of business? - HELD THAT:- On perusal of return of income filed by Mr.Sheetal, we notice that the said income of Rs.2 crore has been offered as Compensation received under the head Income from Other Sources and not as professional fees. As already stated the main ground on which the expenditure is disallowed by the AO and CIT(A) is that the assessee could not substantiate the claim in terms of commercial expediency to incur the expenditure and the nexus between the expenditure and the business. We therefore in the interest of justice remit the issue back to the CIT(A) to examine the issue afresh based on evidences that the assessee may submit in this regard. The assessee is directed to furnish the necessary documents to substantiate the claim and cooperate with the proceedings. Capital gains - AO during the course of assessment noticed that the assessee had entered into a joint development agreement (JDA) - Based on the various terms of the joint development agreement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have appreciated that the claim of the Appellant was liable to be allowed, in the alternative under Section 28 or 37 of the Act as business loss/expenditure. 4. The learned CIT (A) ought to have appreciated the explanation as offered by the Appellant with regard to the business expenditure under the head of professional and consultancy charges to the tune of Rs.2,00,00,000/- when the supporting evidence of payment is duly filed and explained the same completely. 5. The learned CIT (A) grossly erred in treating the property in transfer in respect of JDA as capital asset whereas the Appellant had all along treated the same as his stock-in-trade and accordingly the same does not come within the purview of definition of transfer under Section 2(47)(v) of the Act and hence adding the above as capital gain to the total income is unjust in the eye of law. 6. The learned CIT (A) wrongly confirmed the addition of Rs.4,85,831/- by invoking the provisions of Rule 8D(2)(iii) of the Rules. 7. The learned CIT (A) erred in relying on the decision of Bangalore Tribunal in the case of M/s.John Distilleries in ITA No.1429/Bang/2014 dt. 24.02.2016 (AY: 2011-12) which is not related t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been incurred has not been proved. Under the said circumstances of facts, claiming these as bad debts is factually incorrect. a) The claim that sum of Rs. 13,00,000/- was paid to Mr. Anbuvel Ranjan towards property advance is only a mere statement and is not supported by any documentary evidence. There is no document which evidences that the assessee has entered into land transaction deal with the said person and payment has been made of the said amount for the purpose of buying the land. As matter of fact, there is no disclosure of even the primary facts such as the identity of the person and his address of abode, time, date and year when the deal was struck, description of the property proposed to be purchased in terms of size and location of the land for which the said advance money is claimed to have been paid, agreement to sell etc. The transaction does not qualify to be taken or treated as revenue expenditure because the happening of such transactions have not been proved. Therefore this cannot be considered as business expenditure u/s 37. (b) With regard to the claim that Rs. 11,20,000/- has been given to Mr. Girish Ramakrishnan as salary advance going by the expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. For ready reference the relevant portion of the said subsection is reproduced below. In making any deduction for a bad debt or part thereof; the following provisions shall apply - no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lending which is carried on by the assessee. Under the said circumstances of facts, claiming these as bad debts is factually and legally incorrect and is hence the claim thereof as bad debts written off is rejected. The same i: added to the total income of the assessee. 8. The CIT(A) upheld the disallowance made by the AO. Before us, the ld. AR reiterated the submissions made before the lower authorities. The ld DR supported the order of the CIT(A). 9. We heard the parties and perused the material on record. We notice that the main ground on which the bad debts claimed by the assessee is disallowed by the AO is that the assessee did not produce any documentary evidences in support of the claim. We also notice that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with the director of M/s Kolte Patil Developers Limited and that Ms. Sheetal Ranka agreed to identify a party and brokered the deal with M/s Kolte Patil Developers Ltd. which resulted in the Joint Development Agreement appears to be just a mere narration in the absence of any documentary evidence. Generally speaking it is not in practice that a person employed in an establishment of trading in jewellery showroom will negotiate with another party for real estate business in the course of her work is not conceivable. In other words, the feasibility that Ms. Sheetal Ranka will discuss with the director of M/s. Kotle Patil Developers Ltd on behalf of the assessee during her work in the said establishment is very remote. (ii) Till date, the information about the educational qualifications of Ms. Sheetal Ranka has not been furnished, though the assessee was requested in the course of hearing and also vide letters dated 04.10.2013 and 03.01.2014 of this office. This is required to ascertain her capabilities of conducting a business deal and getting suitably rewarded. In the absence of this vital information, the credibility of the explanation given by the assessee is doubtful. The on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res Viz. one of Rs. 5 crores paid on 24.02.2010 to the assessee and another of Rs. 1 crore also paid to the assessee on 08.10.2010at the instance of the Supplementary Agreement. However the payment made to Ms. Sheetal Ranka is not mentioned. (vii) As can be seen from the above, M/s Kolte Patil Developers have paid to the assessee Rs. 5 Crores on 24.02.2010 which falls in the Financial Year 2009-10. This is reflected in the balance sheet under loans (Liability) of the assessee filed with the return of income for A. Y. 2010-11. According to the assessee he has met Ms.Sheetal Ranka during the Financial Year 2010-11 and requested her to identify a good developer for entering into joint development agreement. The above shows that the association of the assessee with M/S Kolte Patil Developers have already taken place way back most probably before February, 2010. This means that before Ms. Sheetal Ranka could introduce the assessee tb M/s Kolte Patil Developers, the two parties have already met and negotiation for the joint development was already in the pipeline. This is evident from the fact that caution money of Rs.5 crores have been paid on 24.02.2010 before the assessee could eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is claiming it as expenses under professional charges. (xii) It is also found from the travelling expenses details furnished by the assessee that no expenditure has been claimed for any travel made to Pune during the period 01.04.2010 to 03.04.2010 when the JDA was made. Hence it is skeptical as to whether the assessee met Ms. Sheetal Ranka in Pune in connection with the JDA as claimed. The above factors, coupled with the fact that there is not a single document to substantiate effectively the genuineness and audacity of the claim that such an expenditure has been wholly and exclusively incurred for the business of the assessee, the said amount of Rs.2 crores cannot be allowed as business expenses. Without establishing with documentary evidence any sort of linkage, one cannot attribute the payment made to Sheetal Ranka as having paid for the JDA. The onus is on the assessee to conclusively prove beyond doubt that it is an authentic business expenditure intricately connected to the Joint Development Agreement. In view of the deficiencies pointed out above, this amount of Rs.2,00,00,000/- is hereby disallowed as expenses in computing the income of the assessee and add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income declaring the professional charges received as part of the income for the AY 2011-12. Therefore, the ld AR submitted that the payment of professional charges is incurred wholly for the purpose of business and the lower authorities are not correct in disallowing the same. 14. We heard the parties and perused the material on record. We notice that the AO has disallowed the claim of the assessee based on analysing various facts as can be seen from the relevant observations extracted in the earlier part of this order. In order to claim deduction under section 37(1) the conditions to be satisfied are that an item of expenditure should not be an item of expenditure described in sections 30 to 36 and should not be described as capital expenditure or personal expenses of the assessee. It should be laid out or expended wholly and exclusively for the purpose of business or profession. Needless to mention, all the three conditions should be cumulatively satisfied. There is no dispute as to satisfaction of the first two conditions mentioned supra. The only dispute with regard to the impugned disallowance is that whether the expenditure was incurred wholly and exclusively for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the opinion that under the present Act, the Income Tax Officer has no option like the one he had under the 1922 Act. He can, and he must, tax the right person and the right person alone. By right person , we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression wrong person is obviously used as the opposite of the expression right person . Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income . This is so irrespective of the fact which course is more beneficial to the Revenue. In our opinion, the language of the relevant provisions of the present Act is quite clear and unambiguous. Section 183 shows that where the Parliament intended to provide an option, it provided so expressly. Where a person is taxed wrongfully, he is no doubt entitled to be relieved of it in accordance with law* but that is a different matter altogether. The person lawfully liable to be taxed can claim no immunity because the Assessing Officer [Income Tax Officer] has taxed the said income in the hands of another person contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a registered document from one Mr.Venkataswarny Muniyellappa and Munirajappa, all being the sons of Dodda Yamanna. Mr.Dharmesh Ranke had also obtained an order dated 13.2.2009 from the Tahasildar, K.R.Puram bearing No.024/08-09 permitting alienation of the Schedule Property. Sri.Dharmesh Ranka obtained confirmation from Bangalore Development Authority and KIADB that the property in question was not been notified for acquisition. Sri.Dharmesh Ranka with a view to develop the property for residential. purpose had obtained NOC from various statutory authorities such as Karnataka Telecom, Airport Authority, Karnataka Geospatial Data Center etc., and the property in question had fallen within the administrative control and jurisdiction of Bruhath Bangalore Mahanagara Palike and consequently all the taxes upto the dare 30.4.2009 had been remitted and the encumbrance certificates had also been obtained, Thereafter, Sri.Dharmesh Ranka has executed a registered General Power of Attorney dt.16.5.2007 in favour of his father, the appellant and through that registered GPA he authorized him to carry out the various procedures for the purpose of development of the Schedule Property. The said GPA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eline value of Rs.7,17,75,000 and the non-refundable deposit of Rs.1 crore as the full value of consideration. In this regard, it is important to peruse the terms of the JDA, the relevant clauses are extracted as under:- 3. LICENCE Upon execution and registration of this Agreement, the Owner hereby permits the Developers to enter into the Schedule Property under the Agreement with a right to construct on the Schedule Property and to do all such acts and deeds necessary for the completing the construction of the buildings in terms of the Agreement. It is specifically understood between the parties that the authority so granted under this clause is not being given or intended to be given by the Owner in part performance of any agreement as stipulated in Section 53A of the Transfer of Property Act or the Section 2(47)(v) of the Income Tax Act, 1961; 6. CONVEYANCE OF UNDIVIDED RIGHT IN LAND 6.1. The Owner hereby agrees and confirm that he shall proportionately convey to the Developer or its nominees or assigns 70 % of the undivided interest in the Schedule Property only after Developer proportionately delivering the possession of the Owner s built-up area along with occupa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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