2015 (10) TMI 935

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....e for the asst. year 2008-09 on 29.9.2008 declaring the total income at Rs. 42,19,716/-. Initially return of income was processed u/s 143(1) and subsequently, the assessment completed u/s 143(3) by determining the total income at Rs. 84,06,090/-. Two additions made by the AO in the order of assessment that is challenged in this appeal is the disallowance of Lay out formation expenses of Rs. 21,86,375 and another sum of Rs. 20,00,000 u/s.40A(3) of the Income Tax Act, 1961 (Act). 3. Aggrieved, by the aforesaid additions the assessee filed an appeal before CIT(A). The learned CIT(A) dismissed the appeal of the assessee. Hence this appeal by the Assessee before the Tribunal. 4. The main issue in this case is: a) Disallownace of layout ....

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....he assessee was not entitled to the deduction of expenditure. The CIT(A) confirmed the order of the AO. b) Disallowance u/s 40A(3): Rs. 20,00,000/- 7. The AO noted that a payment was made to Shri Chandre Gowda for purchase of materials towards layout formation, through a bearer open cheque of Rs. 20,00,000/-. The Assessing Officer disallowed the expenses as this contravenes the provisions of sec. 40A(3) of the Act and accordingly brought to tax. The same was confirmed by the CIT(A). 8. Aggrieved, by the order of the CIT(A) the assessee has filed the present appeal. 9. During the course of hearing, Learned AR submitted that the assessee had entered into agreement to sell on 15.2.2007 with the vendor. As per Clause 4 of the agreem....

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....buyer and the seller is bound to comply with the terms of the agreement. The seller could not complete the work as specified in clause 4 of the agreement to sale before the sale is complete as he was not enough funds to complete the work and the buyer has not paid the consideration of sale to the seller since the seller has not completed the work as specified in clause 4 of the agreement to sell. The seller could not raise so much money and hence could not complete the work as specified in clause- 4 of the Agreement. The buyer was insisting for immediate registration of the property as specified in clause 4 of the agreement to sell and has requested the seller to complete the pending work as in clause 4 and register the property. Since the ....

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.... Assessee as on the date of incurring the expenditure was not owner of the property. In our view the approach adopted by the Revenue authorities are unsustainable in law. But for incurring of the aforesaid expenditure the Assessee would not have been able to realize the sale consideration. It was part and parcel of the agreement that the Assessee has to incur these expenses. We are of the view that even though the expenditure incurred after the execution of the deed by the assessee, there existed a commitment in relation to such sale by plain reading of clause '4' of the agreement to sale deed. It is binding on the assessee. Moreover, the payment of Rs. 1,04,25,000/- was withheld by the purchaser for completion of the layout formation. Only....