Tribunal ruling: Revenue appeal partially allowed, non-compete fee upheld, ad-hoc disallowance dismissed, leveling expenses reversed.

The Tribunal partially allowed the revenue's appeal, restoring the issue of loss on the sale of land for verification, upholding the non-compete fee as an allowable expense, dismissing the revenue's appeal on the percentage of ad-hoc disallowance, and reversing the CIT(A)'s decision on leveling and fencing expenses.

---

---

Issues Involved:
1. Allowability of claim of loss on sale of land.
2. Allowability of non-compete fee as an expense.
3. Restriction of disallowance of expenses on a presumptive basis.
4. Allowability of leveling and fencing expenses.

Issue-wise Detailed Analysis:

1. Allowability of Claim of Loss on Sale of Land:
The assessee entered into an agreement to purchase land on 31/10/2008 for Rs. 7,05,38,500/-. The agreement was executed with five persons on non-judicial stamp paper worth Rs. 100/-. A token advance of Rs. 7 Lakhs was paid. Subsequently, the assessee entered into an agreement to sell the land to M/s. A One Agerco Pvt. Ltd. for Rs. 3,50,00,000/-, claiming a loss of Rs. 3,55,37,500/-. The Assessing Officer (AO) noted several discrepancies, including the lack of signatures from all parties, nominal advance payments, and the land not being registered in the assessee's name. The AO concluded that the loss claim was fabricated to offset profits from other transactions. The CIT(A) allowed the claim, but the Tribunal found the documents self-serving and restored the issue to the CIT(A) for verification of payments and applicability of Section 40A(3) of the Act.

2. Allowability of Non-Compete Fee as an Expense:
The assessee claimed to have paid Rs. 1,51,00,000/- to M/s. Mittal Corporation Ltd. as a non-compete fee to prevent interference in a land sale transaction. The AO verified the transaction through a commission and confirmed that the amount was received by M/s. Mittal Corporation Ltd. and offered to tax. The CIT(A) allowed the claim, and the Tribunal upheld this decision, noting no infirmity as the payment was genuine and taxed at the recipient's end.

3. Restriction of Disallowance of Expenses on a Presumptive Basis:
The AO made an ad-hoc disallowance of 1/3rd of the expenses, while the CIT(A) restricted it to 10%. The Tribunal found no reason to interfere with the CIT(A)'s decision, as the Departmental Representative did not controvert the findings.

4. Allowability of Leveling and Fencing Expenses:
The AO disallowed Rs. 57,27,558/- out of Rs. 82,66,742/- claimed for leveling and fencing expenses due to lack of supporting documents. The CIT(A) allowed the expenses except for Rs. 2,10,474/- paid in cash or by credit card. The Tribunal reversed the CIT(A)'s decision, upholding the AO's disallowance due to insufficient evidence.

Conclusion:
The Tribunal allowed the revenue's appeal in part, restoring the issue of loss on sale of land to the CIT(A) for verification, upholding the non-compete fee as an allowable expense, dismissing the revenue's appeal on the percentage of ad-hoc disallowance, and reversing the CIT(A)'s decision on leveling and fencing expenses.

---