9911796707
TMI Blog2023 (8) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia. Return of income was filed on 30.09.2013 declaring an income of Rs. 10,04,870/-. Assessment u/s 143(3) was made on 14.03.2016 determining total income at Rs. 3,01,59,810/-. In the assessment order, Assessing Officer disallowed the claim of 'surrender right fee' of Rs. 2,90,47,619/-. Ld. AO has held the expenditure claimed by the assessee is not allowable of the following counts : first that there is no obligation on the part of assessee to pay an amount of Rs. 2.9 crores and secondly the payment is prohibited by law as sharing of profits on sale of agricultural land is prohibited by law. 3. Ld. CIT(A) has deleted the addition with following relevant findings : "Decision I have carefully considered the submissions of the appellant and perused the material available on record. The contention of the appellant is that there was a contractual duty/ obligation incurred by it under the agreement dated 03.02.2006 to make available contiguous land, get the requisite approvals, obtain the zoning of land and to execute the sale deeds, etc. in favour of the buyer after undertaking the preceding activities. It is seen that this payment of compensation and refund of advance was in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (Rs. 2,90,47,619/-) and repayment of advances (Rs. 59,52,381/-). The copies of these letters / invoice are filed at page 69- 71 of the paper book. The title deeds of 2.5 acres of land was received back by the appellant and said land was sold by the appellant to Smt. Naina Lai Kidwai for Rs. 3.75 crores vide agreement dated 16.07.2012. For release of the title deeds and for compensation of breach of contract, appellant has paid Rs. 2,90,47,619/- and also refunded Rs. 59,52,381/- as advance received earlier. M/s Tricone Projects India Ltd. has raised a bill of Rs. 2,90,47,619/- for surrender of right fees of 2.5 acres of land at Niharpur, Indore which is filed at page 70 of the paper book. As a result, the total payment was made to M/s Tricone Projects India Ltd. of Rs. 3,50,00,000/- vide dated 12.07.2012 from appellant's bank account maintained with Induslnd Bank. It is also seen that in the very same bank, the sale proceeds of the 2.5 acres of land sold to Smt. Naina Lai Kidwai has been credited. The appellant has also filed confirmation of M/s Tricone Projects India Ltd. dated 19.01.2016 before the AO confirming the receipt of Rs. 2,90,47,619/- in the F.Y. 2012-13 and same has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Held that in the present case, the compensation paid by the assessee was on account of breach of contract which does not fall in the category of payment of penalty for breach of any law but would be a compensation for breach of contractual obligations. Accordingly, it would fall in the category of allowable deduction. " The facts of the appellant's case are identical with the above cited judicial pronouncement, therefore, the ratio of the said judgment is squarely applicable in the case of appellant. Hence, the compensation paid for breach of contractual obligation is an allowable expenditure and accordingly disallowance of Rs. 2,90,47,619/- is deleted. As regards the observation of the AO at page 5 of the assessment order that M/s Tricone Projects India Ltd. is 100% FDI company and they cannot enter into any such an agreement to create charge or to have right on profit on sale of such land, it is seen that the appellant had entered into an agreement with M/s Tricone Projects India Ltd. vide agreement dated 03.02.2006 whereby M/s Tricone Projects India Ltd. had agreed to buy 225 acres of approved land for development of township and in pursuant to the said agreement, appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Taking Bench across various provisions of the agreement between the assessee and Tricone Project India Ltd. (TPI) it was submitted that there was no obligation on the assessee to make any payment to TPI. It was submitted by Ld. DR that there was a negotiated settlement which does not arise out of the clause 5.2 of the agreement. Ld. DR also submitted that the assessee has made payment out of the profits earned from the sale of the agricultural land under the garb of surrender right fee transferred it. 6.1 Ld. AR however, supported the findings of Ld. CIT(A). 7. Appreciating the matter on record, it can be observed that on 03.02.2006 agreement was entered between the assessee with TPI wherein assessee had agreed to sale 175 acres of land at Nihalpur Mundi, Indore at village Datora. Assessee had transferred 150 acres of land by 06.09.2006 and further 32.01 acres of land by 21.11.2007. However, the remaining land as per the agreement could not be aggregated and there was other issue involving necessary permissions with regard to land which assessee was not able to get. The assessee then sent a proposal to TPI to take possession of the original title deeds of 2.5 acres of land w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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