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2023 (12) TMI 94
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....ement entered with M/s Emtelle India private limited is an allowable expenditure. ii. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in not appreciating the fact that the assessee has not received any consideration from M/s Emtelle India private limited, therefore, there is no valid agreement for sale between the assessee and M/s Emtelle India private limited iii. On the facts and circumstances of the case and in law, the learned CIT (A) erred in not appreciating the fact that assessee has sold this property to M/s Casme industrial park development (India) private limited, vide agreement dated 12/8/2016 wherein it was clearly stated that the vendor is the absolute owner of the said land and the sale is free from all or any encumbrances and no other person or persons has have any right, title, interest, claim or demand of any nature, therefore, M/s Emtelle India private limited has no right in the said land whatsoever, therefore, the claim of compensation is not allowable. 03. Short dispute in this appeal is that whether the party to whom compensation paid by assessee is allowable as deductible expenditure in real estate ....
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....t and setting up of industries would have enabled converting the surrounding agricultural land owned by the assessee into non-agricultural land, which would have fetched better sale price for other properties, assessee agreed with the party. However, as the purchasing party was not a developer of land and stated that it would purchase land only if it could obtain the investors and lenders for the project, otherwise, it will not have any purpose of buying such a huge land. Assessee was also asked to enter into terms in writing so that the buyer could be able to approach investors as well as institutions and banks for lending of the project. It also gave 3 post dated cheques to the assessee payable over a period of 3 years. This was just to show the investors and lenders that the land purchase has been tied up subject to arrangement of the finance. The agreement was entered into on 4/1/2016 without handing over possession to that party. Thus, the essence of the agreement with Emtelle was that there was an agreement at agreed price without possession where consideration was to be paid by post dated cheques. 06. Later on assessee, despite agreement with Emtelle, due to sudden rise i....
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....our of that company and therefore, in absence of such right compensation paid by assessee to that company is not allowable as deductible expenditure, ii. when assessee sold property to other buyers, there was no mention of the pre-existing right of this company to the compensation is paid, therefore, assessee contended before them that there is no previous right of anybody in that property, thus, assessee has made a contradictory statement, iii. AO issued notices under section 133 (6) to the bankers of that company for which the post-dated cheques were issued, it was found that those cheques were issued to that company after the date of the agreement, somewhere in March 2017. Accordingly, for these reasons the compensation paid by the assessee to Emtelle India private limited was disallowed. Accordingly assessment order under section 143 (3) was passed on 30/12/2019 assessing the total income of the assessee at Rs. 183,911,496/- against the returned income of Rs. 23,955,760/-. 010. On appeal before the learned CIT - A, assessee explained the nature of the transaction entered into of sale and compensation paid, what is the nature of the business of the assess....
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....January 2016 on behalf of that company had already left the organization in February 2017, so it could not have been an afterthought v. Agreement dated 4 January 2016 has been executed on stamp paper dated 13 October 2015 and therefore, it cannot be afterthought, vi. in the annual accounts of the assessee for the year ended on 31/3/2016 the assessee has disclosed the above transaction in the notes on accounts, therefore also it cannot be an afterthought. vii. Buyer company is a public limited company which has also disclosed the above transaction in its annual accounts, viii. both the companies i.e. assessee as well as to whom compensation is paid are not at all related parties, either under The companies Act or Under The Income Tax Act ix. transaction has the commercial reasons and does not have any other consideration, x. the claim of the learned assessing officer that the recipient company has huge carry forward of losses is incorrect as for assessment year 2017 -18, that company has started showing the positive income, xi. as the recipient company has issued only the post dated cheques for the reasons stated above, ....
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....assessee is allowable as expenditure. 014. We have carefully considered the rival contention and perused the orders of the lower authorities. Briefly stated the fact shows that assessee is a company that is engaged in the business of real estate. During the year assessee has sold the plot of land for Rs. 775,150,266/-, in other expenses the assessee has debited a compensation charges of Rs. 159,955,736/-. As in the beginning of the year the assessee was holding the inventory of plot of land at Rs. 980,715,311, the Project expenditure and the changes in the inventory of the work in progress was Rs. 591,615,402/- and accordingly profit from the real estate were disclosed at Rs. 24,011,587/-. 015. Notes on accounts at serial number 2.18 onwards states that:- "2.18 in the state of Gujarat, a non-agriculturist cannot purchase agricultural land unless such land is being converted from agricultural land status to non-agricultural land. The management had made their best efforts for such conversion and able to convert 146,003 and 96 m² of agricultural land since 2011 however 11,63,132 m² of land is still pending for conversion because of pending litigation is, reve....
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....as been charged to profit and loss account under review." 016. Thus the profitability on sale of plot of land of Rs. 77,51,50,266/-, if the other project expenditure written off during the year of Rs. 442,627,870/- is excluded, the profit thereon is Rs. 47.30 crores even after payment of the above compensation. This income is offered for taxation by the assessee. 017. Assessee in its annual accounts for 31 March 2016 [Earlier year] also at note number 2 - 17 has disclosed that the company had entered into an understanding for sale without possession with the above company of entire non-agricultural land. The assessee is able to get much better prices from other buyers and therefore for the purpose of commercial prudence the management is in process of cancelling the said understanding by arriving at amicable compromised compensation/damages for such cancellation. Thus, in the annual accounts for 31 March 2016 the assessee has already disclosed that there was an agreement pre-existing with the company to whom the compensation is paid. For the year ended on 31st of March 2016, the compensation was not finalized. Thus, it does not make any difference whether the sales deed to th....
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....s to be registered agreement. Had postdated cheques been deposited by the assessee, were dishonored, then in that case the agreement did not have any evidentiary value. However, that eventually has not happened. 020. The issue is whether the agreement made is an afterthought; the claim of the AO is that the post dated cheques issued by that company to the assessee were not at all issued by the bankers to that company when the agreement was entered into, therefore, that company could have issued those post dated cheques to the assessee. The assessee is explained that that check number 3639, 3640 and 3641 were issued to the assessee on 17 October 2015, which is before the date of signing of the agreement of January 4, 2016. This was substantiated by the certificate obtained from the bank. Assessee also obtained the bank statement of that company before the learned CIT - A for this proposition. Assessee also obtained the confirmation from the recipient of the compensation and the signatory of the cheque. The signatory of the cheque was not in the job with the company in 2017 onwards. Though it is argued that as the signatory of the cheque has already left the job with Emtelle, why ....