9911796707
TMI Blog2024 (1) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... nd perused the record. The Ld. Representatives have fundamentally relied upon the orders of Ld. Tax Authorities in their favour. As a matter of fact, the assessee is engaged in the business of conceiving, designing, developing, setting up and maintaining integrated technology parks and related services. 2.1 In ITA No.2135/Del/2022 & CO No.103/Del/2023 (AY : 2016-17), the relevant facts are that during the year relevant to assessment year 2016-17, the assessee has sold 4th, 5th, and 6th floor of tower C 28 & 29, Sector 62, Noida, for aggregate sale consideration of Rs. 40,89,55,000/-. Circle rate of these properties was Rs. 63,41,22,000/-. The Ld. AO has made the addition of differential amount u/s 50C on the ground that sale consideration is less than circle rate. The assessee has objected to the same by stating that fair market value is less than circle rate. Therefore, the Ld. AO made the reference u/s 50C(2) to the Ld. DVO on 12/11/2018 who did not send the valuation report till the finalization of assessment order. The ld. AO was not convinced with the claim of the assessee that section 50C is not applicable in case of leased properties and made the addition. This addition was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought on record any income from the loan advanced to M/s Logix Infrabuild (P) Ltd. even in the succeeding years during the appellate proceedings. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of Rs. 12,49,16,473/- u/s 37 when the assessee failed to brought on record any business income/output from it even during the appellate proceedings. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance of Rs. 57,32,076/- to Rs. 42,99,057/- on account of travelling expenses when the Ld. CIT(A) himself mentioned that the assessee failed to establish any link of these expenses with the business of the assessee company. 7. The appellant craves, leave or reserving the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 2.6 The assessee has raised the following cross objection for AY 2016-17: "i) Ld. CIT(A) grossly erred on fact as well as in law in restricting the disallowance of Rs. 7,76,00,845/- made by Ld. AO u/s 36(1)(iii) to the extent of Rs. 13,57,125/- on account of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant craves, leave or reserving the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 3.3 The grounds of Cross Objection filed by the assessee read as under:- "i) Ld. C1T(A) grossly erred on fact as well as in law in restricting the disallowance of Rs. 20,00,68,101/- made by Ld. AO u/s 36(1)(iii) to the extent of Rs. 13,57,125/- on account of advance of Rs. 1,15,00,000/- outstanding from Sh. Vikram Nath failing to appreciate that the advance outstanding from Sh. Vikram Nath was a business advance. ii) Ld. CIT(A) grossly erred on fact as well as in law in restricting the disallowance of Rs. 35,23,703/- made by Ld. AO on account of traveling expenses to the extent of Rs. 8,80,925/- being 25% of total expenses on ad hoc basis without appreciating the said traveling expenses were incurred for the business of the appellant. iii) The appellant craves leave to add, alter, modify and withdraw any ground of appeal before or during the appellate proceedings." 4. In regard to the first issue, Grounds No.1 to 3 in AY 2016-17, it comes up that the ld.CIT(A) has made the deletion primarily following the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of the assessment order, the AO has stated that the entire advance of Rs. 228.30 crore as having been given to M/s Logix Infrabuild was not entirely funded through borrowed funds. It has been stated by the AO that out of Rs. 228.30 crores of advance given, the Appellant had surplus funds to the extent of Rs. 78.3 crores which form part of the total funding of Rs. 228.30 crores. It was seen that as on 31/03/2016, the appellant had aggregate liabilities of Rs. 527.24 crores, out of which the paid up capital and free reserves are Rs. 233.55 Crore. Further, in Table 9 on page 20 of the assessment order, the AO has stated that appellant was having a sum of Rs. 78.30 crore as total interest free source (excluding the borrowing). Considering the above, it will not be correct to conclude that entire loan given to M/s Logix Infrabuild was out of borrowed capital." 6. It came up during the argument that presently the project is going on and loan is standing. We find no merit in the argument of the ld. DR that unless some revenue is shown from the project, the assessee cannot justify the loan and the interest expenditure was rightly disallowed. We are of the considered view that when busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have exercised his powers to enquire the matter himself or given opportunity to assessee to provide the link of such expenses with the business of the assessee. In the light of the aforesaid, we are of the considered view that the ad hoc disallowance by the ld. CIT(A) was not justified and the issue is required to be restored to the file of the AO to give an opportunity to the assessee to provide necessary evidences of procuring business by the visits of its employees/directors and, thereupon, the ld. AO shall decide the issue afresh. Thus, the ground No.6 for AY 2016-17 and 3 in AY 2017-18 is allowed for statistical purposes and the cross objection No.(ii) of the assessee in that regard stand dismissed. 9. Coming to ground No.(i) of the cross objections in both the AY, it comes up that disallowance arises out of the examination of loans and advances related party. Ld. AO had examined the advances to M/s Logix Infrabuild Pvt. Ltd. only. The ld.CIT(A) has concluded that the advance to M/s Logix Infrabuild Pvt. Ltd. is business advance and we have also sustained that above. However, Ld. CIT(A) then observed in para 10.14 in AY2016-17 as follows, which is also verbatim as para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s excessive and unreasonable without assigning any appropriate basis or reason. The AO has not brought any material on record to establish that the salary is on higher side. Accordingly, the disallowance of Rs. 54,00,000/- made by the AO on account of 30% of the salary paid to Sh. Shakti Nath is hereby deleted. Accordingly, Ground no. 4 is allowed." 11. We are of the considered view that ad hoc disallowance cannot be made u/s 40A(2)(a) of the Act, without a finding of the A.O as to what as per him, is the fair market value. Even if it is assumed that the payment made is excessive and unreasonable, such arbitrary and baseless, adhoc disallowances cannot be upheld. The ld. AO was supposed to give a factual analysis of the evidences to establish that the expenditure is excessive or unreasonable having regard to the fair market value of the services of Shri Shakti Nath. On the one hand, the ld. AO observed that the assessee has not filed any evidences justifying the payment and, on the other hand, he allowed 70% of the remuneration. This itself is arbitrary and the ld.CIT(A) has rightly deleted the same. Thus, this ground of the Revenue has no substance. 12. As a consequence of above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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