2017 (7) TMI 1308 - AT - Income Tax

Court upholds Commissioner's decision allowing land development expenses as necessary for clear title. Revenue's appeal dismissed.

The Asst. Commissioner of Income – Tax, Circle-2, Erode Versus M/s. B. Rangaswamy Naidu – Orchards Pvt. Ltd. (Now amalgamated with M/s. Gestione Consulting – India Pvt. Ltd.) AND Vice-Versa

The Court upheld the Commissioner of Income Tax (Appeals) decision, dismissing the Revenue's appeals and the Assessee's Cross-Objections. The Court found ... Expenditures for securing the title of the land - AO disallowed the said expenditure holding that the land was already the assessee company property would not suffice in so far as having possession of the immovable property is one thing but having a clear title more so an unencumbered title in respect of the said immovable property is what increases the value of the property - HELD THAT:- The expenditure incurred by the assessee is clearly for extinguishing third party rights and clearing of getting proper and clear title of the immovable property. This being so, as the Revenue has not been able to dislodge any of the findings of the facts as arrived at by the Ld.CIT(A), we find no good reason to interfere with the order of the Ld.CIT(A). In these circumstances, the appeal filed by the Revenue stands dismissed. Issues Involved:- Appeal filed by Revenue against Order of Commissioner of Income Tax (Appeals) for AY 2012-13 and AY 2013-14.- Cross-Objections filed by the assessee in response to Revenue's appeals.Analysis:1. Identical Issues in Appeals:- Both appeals pertain to the same assessee and involve similar issues, hence heard together.2. Revenue's Submission:- Assessee, a domestic real estate company, acquired land but faced title deed defects in transactions.- Entered agreement with M/s.GCIPL to acquire land for Rs. 8.5 Cr, paid Rs. 3.00 Cr to clear encumbrance with Smt.P.Thillaikarasi.- Paid Rs. 2.75 Cr each to Mr.Vikram Mohan, Mr.K.Rajesh, and Smt.Srivalli for title clearance.- Claimed expenses for land development, disputed by Revenue as not allowable.- Contested CIT(A)'s decision allowing claimed expenses as development costs.3. Assessee's Defense:- Land was primary asset with title defects, failed sale attempts until M/s.GCIPL's takeover.- Paid to clear encumbrances, bring out existing shareholders, and obtain original title deed.- Expenses incurred to secure clear title for profitable sale, not challenged by Revenue.- CIT(A) recognized necessity of expenditures for title protection and profit realization.4. Judgment and Rationale:- CIT(A) found genuineness of payments, acknowledged liability incurred to protect land title.- Expenditures aimed at securing clear, unencumbered title for profitable sale.- Revenue failed to disprove CIT(A)'s findings, leading to dismissal of Revenue's appeal.- Assessee chose not to press Cross-Objections supporting CIT(A)'s order, resulting in their dismissal.5. Conclusion:- Revenue's appeals and Assessee's Cross-Objections dismissed, upholding CIT(A)'s decision.- Orders pronounced on July 13, 2017, at Chennai.