TaxTMI 
TaxTMI 
2018 (1) TMI 1503
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....sallowance out of leveling and fencing expenditure of Rs. 57.27 Lakhs, etc. 2.1 Aggrieved the assessee carried the matter in appeal. The ld. First Appellate Authority, granted part relief. The revenue filed this appeal disputing the findings of the ld. First Appellate Authority on the following grounds:- "1. Whether in facts and circumstances, Ld. CIT(A) was justified in allowing the loss from sale of Rs. 3,55,37,500/- despite the fact that the Land was not registered in the name of the assessee. 2. Whether in facts and circumstances, Ld. CIT(A) was justified in allowing the non-compete fee of Rs. 1,51,00,000/- as expense. 3. Whether in facts and circumstances, the Ld. CIT(A) was justified in restricting the disallowance of expense @ 10% amounting to Rs. 18,78,161/- was justified on presumptive basis. 4. Whether in facts and circumstances, that Ld. CIT(A) was justified in allowing the leveling and fencing expenses of Rs. 55,17,084/-" 3. We have heard Shri Soumyajit Dasgupta, ld. Senior Counsel, D/R, on behalf of the revenue and Shri Ankit Jalan, ld. Counsel on behalf of the assessee. On careful consideration of the facts and circumstances of the case, perusal of the pape....
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.... assessee company. Neither by any vendor nor any witness signed this possession letter. 8) An agreement to sale was also claimed to be executed on 24.03.09 on a non-judicial stamp of Rs. 100/- between the assessee company and one M/s. A One Agro Pvt. Ltd. New Delhi for a consideration of Rs. 3,50,00,000/-. 9) The said M/s. A One Agro Pvt. Ltd. paid a nominal sum of Rs. 1,00,000/- only in cash to the assessee against the so called sale consideration of Rs. 3,50,00,000/-. 10) There was a time gap of only 5 months in the so called purchase and sale agreements of land. 11) The assessee did not have any right over the said immovable property on the date of sale since the land was not registered with any sub registrar in the name of the assessee. 4. The assessee explained that it proposed to purchase land for a warehouse and intended to sell the same to TATA Reality. It was submitted that TATA Reality selected two sites, one of which was near the warehouse zone of Pataudi. The assessee claims that it was not able to acquire the land near Pataudi because the front of the land belonged to a Gram Panchayat and without this land there is no approach to the site. It also pleaded that....
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....e vendor serve any title to forfeit the earnest money being paid herein. Even if the plea of the assessee that he was forced to sale land due paid as the assessee could not get CLU permission, the assessee could have allowed the vendor to forfeit the said earnest money paid to the assessee. It is further noticed that even on date of rejection of CLU application the assessee had not entered into any agreement with M/s. A One Agro Pvt. Ltd. As a prudent business man the assessee could have allowed the vendor to forfeit the said amount of Rs. 9,00,000/- and there was no occasion to enter into further agreement for sale of land and that too at a loss of Rs. 3,55,50,000/-. It is also noticed on perusal of the agreement to sale with M/s. A One Agro Pvt. Ltd. that the said party was supposed to pay the balance amount of Rs. 3,49,00,000/- to the assessee at the time of registration. It is also noticed in clause-III of the said agreement to sale that the time period for this transaction was by 31.03.2009. It appears that in haste to prepare a self serving documents in order to claim loss, the assessee could not notice the following observation in the said documents. In Clause-I of the said ....
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.... same is added to the total income. Penalty proceedings u/s. 271(1)(c) read with explanation 1 and section 274 are initiated separately for furnishing inaccurate particulars of income. Without prejudice to the above discussion, if the claim of the assessee is allowed then the provisions of section 40A(3) will be attracted in respect of payment of Rs. 7 lakh in cash to the so called vendors of land." 5. On appeal the ld. First Appellate Authority, allowed the claim of the assessee by observing as follows:- "After going through the finding of the A.O. and written submission filed by the A.R. it is clear that the assessee company which is engaged in the business of purchase and sale of land does not hold land in a stock for a longer period of time simply because it engages the cash of the assessee company. Therefore, the assessee company as the A.R. has pointed out sold the land in Haryana even at the cost of suffering loss instead of holding it till the CLU (Change of Land Use) is obtained. The A.R. has further brought on record that-- In the case of Commissioner of Income Tax (Central) vs. M/s. Rockman Cycle industries Private limited, [ITR Nos. 169 and 170 of 1996], a very v....
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....he sale of land to other parties. Since these persons work in group and they are not at all owner of the land the signature of the each & every person in agreement to sale is not necessary. We are enclosing herewith the relevant page of the our cash book to prove that there was sufficient cash to pay Rs. 7,00,000/- to the vendors vide Annexure-6." 6.1 At best the assessee could have acquired certain rights against the intermediaries/brokers/land pooling agents. There is no purchase of land. Such agreements cannot form part of "stock-in-trade" of the assessee. These arguments at best give rise to certain claims for recovering of money. 6.2 Instead of forfeiting the amount of Rs. 7 Lakhs/-, paid to the intermediaries, the assessee claims to have entered into an agreement of sale of this unspecified land which is not purchased with one M/s. A One Agerco Pvt. Ltd. with a view to minimize its further loss. The assessee claims that this agreement with M/s. A One Agerco Pvt. Ltd., was entered into on 24/03/2009 for the sale of 6.41 Acres of land located at Tauru, District Gurgaon, Haryana for Rs. 3,50,00,000/-, thus incurring a loss of Rs. 7,05,37,500/-. The Assessing Officer, in our vi....
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....e entire money to the assessee and acquired the land in question. As the ld. CIT(A) failed to examine the applicability of Section 40A(3) of the Act. we direct him to do so. 6.3 In view of the above discussion, the issue is restored to the file of the ld. CIT(A) for fresh adjudication, in accordance with law. In the result, this ground of the revenue is allowed for statistical purposes. 7. Ground No. 2, is on the issue as to whether the ld. CIT(A) was right in allowing as an expense, the claim of the assessee on payment of non-compete fees of Rs. 1,51,00,000/-. 7.1 Facts in brief:- The assessee claims to have paid Rs. 1,51,00,000/- to M/s. Mittal Corporation Ltd., as they were showing certain lands for sale to M/s. Duet JKM Hotels (Indore), to whom the assessee had ultimately sold its land for an amount of Rs. 20 Crores. The Assessing Officer issued commission u/s. 131 (i)(d) of the Act, to the Assistant Commissioner of Income Tax, Circle-3(1), Indore and obtained a report dt. 21.12.2011, on this transaction. A sworn statement from Shri Mahendra Jain, CFO of M/s. Mittal Corporation Ltd., was recorded u/s. 131 of the Act on 15/12/2011 and 19.12.2011. M/s. Mittal Corporation Ltd....