TaxTMI 
TaxTMI 
2013 (6) TMI 622
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....f plot No.B-234 to company 1,300,000 31.03.2001 Amount paid to Ved Jaie & Shalini Uppal for surrender of plot 25,000 Total 2,102,000 3. The Assessing Officer observed that the assessee had paid the amount of Rs. 21,02,000/- during the year to four persons, on account of surrender back of plots by them; that the assessee was engaged in the business of sale and purchase of plots/land and these plots constituted the assessee's stock in trade; that any amount paid by the assessee for surrender of plots would enhance the stock in trade by an equivalent amount, but these expenses could not be allowed as revenue expenses; that thus, the assessee company re-purchased these plots from the allottees and had paid purchase consideration, which had been claimed as compensation; that the assessee had not paid any compensation to the allottees, but it had re-purchased these plots, as the allottees had surrendered their rights therein; that therefore, the compensation paid could not be said to be a business expenditure; that rather, it was an investment in purchase of stock in trade, naming it as compensation, so as to give the colour of genuine business expenditure;....
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....od or work certified method. These facts have not been brought on record before us from either of the side. We, therefore, in the interest of the justice and fair play to both the parties set aside the order of the Commissioner of Income Tax (Appeals) and restore this issue to the file of the Commissioner of Income Tax (Appeals) with the direction that the Commissioner of Income tax (Appeals) to re- examine this issue afresh in the light of the various case law cited before us, method of accounting followed by the assessee, method of valuation of the closing stock consistently followed by the assessee and also verify the fact whether such expenditure has been allowed to the assessee in the earlier years or not after giving the proper and sufficient opportunity to the assessee. The assessee is also free to adduce all the necessary evidence on which he may rely before the Commissioner of Income Tax (Appeals). Thus the appeal of the Revenue is allowed for statistical purposes." 6. By virtue of the order dated 28.03.2012, which is the order presently under appeal, the claim of compensation as a business expenditure was again allowed by the Ld. CIT (A). 7. The Ld. DR has contended....
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.... Amar Raj Computers vs. ACIT', 91 ITD 280 (Hyd), a revenue expenditure, income relatable to which will arise for a number of years, must be allowed in its entirety in the year in which it is incurred, even though it is written off by the assessee in the books of account over a period of years; that the assessee did not make any purchase of any capital asset during the year; that therefore, the payment in question was nothing other than a revenue expenditure allowable as a business expenditure for the year. 9. We have heard the parties and have perused the material on record. The issue to be decided is as to whether the Ld. CIT (A) has correctly held the compensation charges claimed by the assessee as revenue expenditure and whether the Ld. CIT (A) has, consequently, correctly deleted the addition made by the Assessing Officer. 10. The assessee private limited company, during the year, was dealing in real estate transactions, purchasing agricultural land, developing it into saleable plots of farm land and selling them. The assessee made payment of Rs 21,02,000/- to four parties and claimed it as compensation expenses, allowable as business expenses. The Assessing Officer concl....
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....to the assessee in the earlier years. As is available from the order, this was done to determine as to whether the expenses would form part of the assessee's stock in trade or not. The objection of the Ld. DR in this regard is, therefore, devoid of merit and is rejected as such. 13. The payment of interest for the amount of advance which kept lying with the assessee for a number of years, we find, is entirely justified. The sales may not have fructified for reasons best known to the parties. These reasons may be varied. However, the fact remains that the amount of advance was with the assessee company and once it was decided to be returned, it had, by necessity, to be accompanied with due interest thereon. That this interest is exorbitant or not due, is not the case of the department. Further, since it was not interest per se, but the interest accompanying the original amount of advance, this was the reason why it was not termed as interest while debiting it in the Profit & Loss Account by the assessee. The nomenclature accorded to any payment, by itself, is not determinative of the character of such payment. It is the real nature of the payment and not the heading used, which i....
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....0 3,75,000 [u/s 143 (1)(a)] 2000-2001 2,46,638 2,46,638 [u/s 143 (1)(a)] 2001-2002 21,02,000 --- Disputed before CIT (Appeals) who had allowed it but has been restored by Tribunal to be decided afresh For A.Y.s 1995-96 to 1998-99, the allowance was, as evident from the above chart, in scrutiny assessment. 17. The Ld. CIT (A) further found that in the assessee's books of account, no land stock, qua which the assessee claimed to have paid compensation, stood shown as sold. 18. Thus, the transaction entered into by the assessee, shown as payment of compensation and claimed as a revenue expenditure, cannot be said to be a mere camouflage or subterfuge designed by the assessee. The assessee had received advance amounts against the booking of plots. These amounts kept lying with the assessee for over a decade. However, the deals could not finalise and the plots remained under the ownership and possession of the assessee company only. The payment was only a part payment, which was returned by the assessee along with the proportionate interest thereon. This payment of interest is not only payment due to the depositor, but it is also paym....
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....correct. I further find that the appellant itself has shown the income from sale of aforesaid land and had shown the income without including the aforesaid sum as cost of the land sold and thus it has shown the income and therefore there is also no loss of revenue." ................................................................................................ .................................................................................................. "E) On the basis of above and for the reasons under mentioned I hold the compensation paid as revenue expenditure:- (i) The space surrendered by various proposed buyers was never sold or possession handed over to them and as such the question of repurchasing the same is totally a misconception and as against the facts on record. (ii) The showing of the amounts received by the payees from the appellant as capital or revenue account is not relevant factor for deciding the issue as the same transaction can have different effect on the various persons keeping in view the nature of their businesses. None of the recipients of the compensation was in the business of real estate whereas appellant was in the business of r....