TaxTMI 
TaxTMI 
2014 (1) TMI 1297
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....rect in upholding that interest @ 11% p.a. received by the assessee from Government of Maharashtra is assessable to tax in the year of receipt." In addition to above, the Revenue has also raised the following ground of appeal in its appeal for A.Y. 2005-06: "Whether on the facts and in the circumstances of the case the CIT(A) was correct in upholding that preoperative expenses and compensation at Rs. 62,22,513/- and Rs. 1,92,44,540/- respectively, is allowable expenses u/s 37(1) of the Act." 3. The brief facts of the case are that the assessee is a partnership firm consisting of eight partners engaged in the business of Developers and Builders. The partnership firm was formed on 20-11-2000. The assessee entered into an agreement with Aurangabad Zilla Utpadak Sahakari soot Girnee Maryadit, Garkheda, Aurangabad for purchase of land and accordingly, the assessee made payment of Rs. 7,81,00,000/- towards proposed purchase of land. The proposed transaction of land purchase could not be materialized and the possession of the said land was not given to the assessee as per the agreed terms. Being aggrieved by the same, the assessee filed Writ Petition in the Hon'ble Jurisdictional....
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....e of business receipts. Further, the CIT(A) was also not justified in holding that interest @ 11% p.a. received by the assessee from Government of Maharashtra, is assessable to tax in the year of receipt. On the other hand, the learned Authorised representative supported the order of the CIT(A) and contended that the interest @ 11% p.a. received by the assessee from the Government of Maharashtra as per the direction of the Hon'ble Supreme Court was the business receipt and the same has rightly been held to be assessable to tax in the year of receipt. 3.2. After going through the rival submissions and perusing the material on record, we find that the assessee is a partnership firm consisting of eight partners engaged in the business of Developers and Builders. The assessee entered into an agreement with Aurangabad Zilla Kapus Utpadak Sahakari Soot Girnee Maryadit Garkhede, Aurangabad for purchase of land and accordingly the assessee made a payment of Rs. 7,81,00,000/- towards purchase of the land. The proposed transaction of land purchase could not be materialized and the possession of the said land was not given to the assessee as per agreed terms. The said act of refusal of pos....
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....paid by the assessee. In this background, the Assessing Officer concluded that the amount received by the assessee is not compensation but interest liable to tax on accrual basis under the head "income from other sources". The stand of the assessee has been that the assessee could not start its activities due to major obstacles and consequently has suffered huge losses. The assessee claimed that the assessee had contested for possession of land and not for any compensation. The Hon'ble Supreme Court has awarded compensation/loss of profit calculated at 11% p.a. on the amount paid towards purchase of land. The stand of the assessee was that the Assessing Officer was not justified in considering the income on notional basis and making addition in AY. 2001-02. We find that undisputedly the assessee firm made the payment of Rs. 7,81,00,000/- in the course of purchase of land. Prior to the same, assessee firm was brought into existence for business activities. The intention of the assessee was to develop the land which could not be materialized because the Government of Maharashtra denied to sell the land to the assessee though there was no breach of terms and conditions on the part of ....
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....Y. 2005-06 as claimed by the assessee after considering allowable deductions under the Income- tax Act, 1961. In the light of above facts, the CIT(A) was justified in directing the Assessing Officer to delete the addition of Rs. 17,45,046/- for A.Y. 2001-02. For similar reasons, with regards to the additions made by the Assessing Officer of Rs. 83,65,069/-, Rs. 37,99,675/- for A.Y. 2002-03 and 2003-04 the CIT(A) was justified in directing the Assessing Officer to delete the same. 5. As regards the disallowance of pre-operative expenses of Rs. 62,22,514/- the Assessing Officer noted that the assessee has capitalized expenses for years together on account of interest and pre-operative expenses and has claimed the expenses against the entire receipts in order to avoid tax incidences. The Assessing Officer has concluded that the said expenses are not the expenditure laid out or extended wholly and exclusively for the purposes of making or earning such income. The matter was carried in appeal before the first appellate authority and raised various contentions. The CIT(A) after considering the facts of the case and submissions made on behalf of the assessee observed that the assessee ....