Arunachal Logistics Private Limited, Hyderabad V. Dy.CIT., Circle-1(1), Hyderabad, Hyderabad

ITA 1556/HYD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6352 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 08-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Gift; Business expenditure; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA.NO.1556/HYD/2014 ASSESSMENT YEAR 2010-2011 ARUNACHAL LOGISTICS P. LTD., HYDERABAD 500 073 PAN AAGCS1855C VS. DCIT, CIRCLE - 1(1) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO FOR REVENUE : SHRI K.J. RAO DATE OF HEARING : 21.06.2016 DATE OF PRONOUNCEMENT : 06 .0 7 .2016 ORDER PER PRADIP KUMAR KEDIA, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE LD. CIT(A)-II, HYDERABAD DATED 16. 07.2014 FOR THE A.Y. 2010-2011. THE SOLITARY ISSUE ARISING IN T HE PRESENT APPEAL IS DISALLOWANCE OF RS.1,50,00,000 CLAIMED AS REVENUE EXPENDITURE BY THE ASSESSEE TOWARDS BUSINESS PROMOT ION EXPENSES. 2. BRIEFLY STATED, THE ASSESSEE IS IN THE BUSINESS OF LOGISTICS AND REAL ESTATE DEVELOPMENT. IT FILED ITS RETURN OF INCOME FOR A.Y. 2010-2011 DECLARING TOTAL INCOME OF RS.3,8 2,01,623. THE A.O. ON VERIFICATION OF THE BOOKS OF ACCOUNT NOTICE D THAT THE ASSESSEE HAS PAID THE AFORESAID AMOUNT OF RS.1,50,0 0,000 TO 2 ITA.NO.1556/HYD/2014 ARUNACHAL LOGISTICS P. LTD., HYDERABAD. M/S. NIVEE PROPERTY DEVELOPERS P. LTD., (IN SHORT NPDPL) BY WAY OF JOURNAL ENTRY ON 31.03.2010 FROM ITS INVESTM ENT ACCOUNT TOWARDS ITS SHARE OF BUSINESS PROMOTION EXPENSES AS PER THE MEMORANDUM OF UNDERSTANDING (IN SHORT MOU) DATED 23.12.2009. THE A.O. OBSERVED THAT THE AMOUNT IS PA ID AS UPFRONT FEE AND NO DETAILS WERE FURNISHED REGARDING UTILISATION OF THE AMOUNT FOR WHICH IT WAS MEANT TO BE SPENT. MORE OVER, THE PROPERTY DEVELOPMENT HAS ALSO NOT COMMENCED AND THE REFORE, THE QUESTION OF SPENDING SUCH HUGE AMOUNT TOWARDS M ARKETING EXPENSES LIKE ADVERTISEMENTS, SALES PROMOTION, GIFT SCHEMES, SALES INCENTIVES, PARTICIPATION IN PROPERTY EXHIBIT ION, HOARDINGS, PRINTING OF PROJECT BROACHERS ETC., DOES NOT ARISE. TAKING NOTE OF THE JOURNAL ENTRY PASSED TOWARDS PURPORTED PAYMENT ON 31.03.2010, THE A.O. OBSERVED THAT IT ONLY IMPLIES THAT A PART OF THE INVESTMENT WAS ARTIFICIALLY DIVERTED TOWARDS RE VENUE EXPENDITURE. HE ACCORDINGLY, PROCEEDED TO DISALLOW THE EXPENDITURE OF RS.1.50 CRORES CLAIMED TOWARDS BUSIN ESS PROMOTION EXPENSES. 3. AGGRIEVED BY THE ORDER OF THE A.O. ASSESSEE FIL ED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) , ASSESSEE REITERATED ITS SUBMISSIONS MADE BEFORE THE A.O. AND ALSO REFERRED TO THE MOU DATED 23.12.2009 WITH NPDPL TO DEVELOP R EAL ESTATE PROJECT CALLED UNITED VILLAS LOCATED AT TELLAPUR (V), RAMCHANDRAPURAM (M), HYDERABAD. IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE ASSESSEE HAS AL READY INVESTED AN AMOUNT OF RS.18.40 CRORES UP TO 23.12.2009 I.E., DATE OF MOU. AS PER THE MOU PROFIT DERIVED FROM THE PROJECT IS AGREED TO BE EQUALLY SHARED BETWEEN THE ASSESSEE AND NPDPL. T HE 3 ITA.NO.1556/HYD/2014 ARUNACHAL LOGISTICS P. LTD., HYDERABAD. ASSESSEE SUBMITTED THAT AS PER CLAUSE-3 OF MOU, ASS ESSEE IS REQUIRED TO MAKE UPFRONT PAYMENT OF RS.1.50 CRORES TO NPDPL TOWARDS ITS SHARE OF COMMITMENT OF BUSINESS PROMOTI ON EXPENSES. IN PURSUANCE THEREOF, AMOUNT OF RS.1.50 C RORES WAS PAID TOWARDS BUSINESS PROMOTION AND MARKETING EXPEN SES TO PROMOTE BUSINESS FOR MUTUAL BENEFIT OF THE PARTIES AND MORE PARTICULARLY THE FINANCIAL COMMITMENT WAS MET TO EX HIBIT ITS COMMITMENT TO THE PROJECT. THE ASSESSEE CONTENDED B EFORE THE CIT(A) THAT THE A.O. IS NOT CORRECT IN STATING THAT THE PROPERTY DEVELOPMENT HAS NOT STARTED. THE INITIAL DEVELOPMEN T EXPENDITURE SUCH AS LAND USE CONVERSION, ADVERTISEM ENT COST, ARCHITECT FEES AND SITE PREPARATION EXPENSES WERE I NCURRED BY NPDPL DURING THE F.YS. 2007-08 TO 2009-10. THE SANC TION OF HMDA FOR CONSTRUCTING THE BUILDING WAS GRANTED ON 2 5.09.2012. THE DELAY IN IMPLEMENTING THE PROJECT WAS DUE TO BA D REAL ESTATE MARKET IN THE LIGHT OF TELANGANA AGITATION IN 2012. IT WAS FURTHER CONTENDED ON BEHALF OF THE ASSESSEE BEFORE THE CIT( A) THAT THE A.O. IS NOT CORRECT IN STATING THAT THE PAYMENT WAS MADE BY WAY OF JOURNAL ENTRY ON 31.03.2010. ASSESSEE MADE TOTAL INVESTMENT OF RS.18,39,52,980 SINCE 2007 TILL THE DATE OF MOU I.E. 23.12.2009. OUT OF PAYMENT MADE FOR THE LAST SEVERA L YEARS, THE JOURNAL ENTRY WAS PASSED ON THE DATE OF THE MOU TOW ARDS BUSINESS PROMOTION EXPENSES OF RS.1.50 CRORES. ASSE SSEE FURTHER CONTENDED THAT ON THE IMPUGNED UPFRONT PAYMENT OF R S.1.50 CRORES, TDS OF RS. 3 LAKHS AS APPLICABLE @ 2% WAS A LSO DEDUCTED. ALL THE INVESTMENTS OVER A PERIOD OF SEVE RAL YEARS WERE MADE THROUGH THE ACCOUNT PAYEE CHEQUES. THE TOTAL O F SUCH INVESTMENT WAS RS.18,39,52,980 AS ON 23.12.2009 I.E ., DATE OF THE MOU. AS THE INVESTMENTS WERE MADE THROUGH ACCOU NT PAYEE 4 ITA.NO.1556/HYD/2014 ARUNACHAL LOGISTICS P. LTD., HYDERABAD. CHEQUES, THE PAYMENT OF RS.1.50 CRORES IS TO BE DEE MED AS PAYMENT THROUGH ACCOUNT PAYEE CHEQUE. IT IS FURTHER CASE OF THE ASSESSEE BEFORE THE CIT(A) THAT THE ASSESSEE HAD UN DERTAKEN REAL ESTATE BUSINESS WITH NPDPL IN EARLIER YEARS ALSO AN D REPORTED INCOME OUT OF SUCH REAL ESTATE BUSINESS FOR F.YS. 2 004-05 AND 2005-06. HENCE, IT IS NOT THE FIRST TIME THAT THE A SSESSEE HAS ENTERED INTO REAL ESTATE BUSINESS WITH NPDPL. THE C IT(A) NOTICED THAT THE ASSESSEE AND THE NPDPL ARE INTER-CONNECTED AND SISTER CONCERNS HAVING COMMON SHAREHOLDING. THE CIT(A) OBS ERVED THAT IN THE ACCOUNTS MAINTAINED BY NPDPL FOR THE ASSESSE E, THE ENTRY OF RS.1.50 CRORES WAS NOT FOUND TO BE REFLECTED AS ON 31.03.2010. THE CIT(A) REFERRED TO CLAUSE-3 OF THE IMPUGNED MOU AND OBSERVED THAT IN WHAT MANNER THE AMOUNT OF RS.1.50 CRORES WAS TO BE PAID WAS NOT MENTIONED IN THE MOU AT ALL. THE CIT(A) FURTHER OBSERVED THAT AS SUBMITTED BY THE ASSESSEE HIMSELF, THE PROJECT HAD STARTED IN 2007. THE ASSESSEE HAD BEEN MAKING ADVANCES TO NPDPL SINCE 2007. HOWEVER, THERE SEEMS TO BE NO FORMAL AGREEMENT BETWEEN THE ASSESSEE AND NPDPL THA T ADVANCES WERE ATTRIBUTABLE TO DEVELOPMENT PROJECT. THE PERMISSION FOR CONVERTING THE LAND FROM AGRICULTURE TO NON- AGRICULTURE PURPOSE WAS GRANTED BY THE APPROPRIATE AUTHORITY ON 12.06.2007. BUILDING PERMISSION WAS GRANTED BY HMDA ON 25.09.2012. MUCH PRIOR TO THE OBTAINING OF BUILDING PERMISSION, THE ASSESSEE CLAIMS THAT HE HAS INCURRED RS.1.50 CR ORES TOWARDS ITS SHARE FOR BUSINESS PROMOTION EXPENSES AND MARKE TING EXPENSES. THE ASSESSEE ON FACTS COULD NOT ADDUCE AN Y EVIDENCE AS TO WHETHER THE AMOUNT PAID TO NPDPL WAS ACTUALLY USED FOR INTENDED PURPOSE OR NOT. THE CIT(A) AS PER PARA 3.4 .6 OF ITS ORDER 5 ITA.NO.1556/HYD/2014 ARUNACHAL LOGISTICS P. LTD., HYDERABAD. CONFIRMED THE ACTION OF THE A.O. ON THE REASONS AS REPRODUCED HEREUNDER : 3.4.6 THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.1.5 CRORES IS CONFIRMED FOR THE FOLLOWING REASON S : (A) WHEN THE BUILDING PERMISSION WAS OBTAINED IN SEPTEMBER, 2012, THE NECESSITY TO PAY RS.1.5 CRORES IN 2009 ITSELF, THERE WAS NO NECESSITY TO PAY AMOUNT TOWARDS BUSINESS PROMOTION EXPENSES AND MARKETING EXPENSES SUCH AS ADVERTISEMENT, SALES PROMOTION, GI FTS, SALES INCENTIVES, PARTICIPATION IN PROPERTY EXHIBIT IONS, HOARDINGS, PRINTING OF PROJECT BROCHURES. (B) THE APPELLANT FAILED TO SUBMIT THE DETAILS WHETHER THIS RS.1.5 CRORES WAS SPENT FOR INTENDED PURPOSES OR NO T. ON THE OTHER HAND, THE APPELLANT EXPLAINED THAT OUT OF RS.1.5 CRORES, AMOUNT SPENT BY NPDPL DURING F.Y.2010-11 WA S RS.7,71,369/- (TOWARDS CONSULTANCY CHARGES, PROJECT MAINTENANCE AND TRANSPORTATION) AND AMOUNT SPENT IN 2012 TO 2014 WAS RS.6,06,642/- (TOWARDS ELECTRICAL, CONSULTANCY ETC.). SO THERE WAS ACTUALLY NO NECESSI TY TO INCUR THIS EXPENDITURE. EVEN ON THE DATE OF PASSING THIS APPEAL ORDER THE AMOUNT WAS NOT SPENT. (C) THE PROJECT IS STILL ON AND NOT COMPLETED AS ON THE DATE. (D) ALL THE EVIDENCE ON RECORD SUGGEST THAT THE JOURNAL ENTRY ON THE LAST DATE OF ACCOUNTING YEAR OF RS.1.5 CRORE S WAS MADE ONLY TO REDUCE THE PROFITS IN THE LAST MINUTE. (E) AS PER THE INFORMATION SUBMITTED BY THE APPELLANT, THERE ARE TWO ACCOUNTS OF ARUNACHALA LOGISTICS PVT. LTD. IN THE BOOKS OF NPDPL. THESE ARE (I) GENERAL LEDGER ACCOUNT (II) PROJECT INVESTMENT ACCOUNT. AS PER THE INFORMATION SUBMITTED BY THE APPELLANT, IN GENERAL LEDGER ACCOUNT, THERE WAS AN ACCUMULATED BALANCE OF RS.17,40,90,000/ - AS ON 6 ITA.NO.1556/HYD/2014 ARUNACHAL LOGISTICS P. LTD., HYDERABAD. 31.03.2010. THIS BALANCE WAS ACCUMULATED OVER A PERIOD OF TIME FROM 2007 TO 2010. AS PER THIS ACCOUNT, NPDPL PAID THE FOLLOWING AMOUNTS TO THE APPELLANT. DATE AMOUNT 01.01.2010 RS. 2,70,000 04.01.2010 RS.102,50,000 04.01.2010 RS. 31,50,000 AS PER THE INVESTMENT ACCOUNT THE APPELLANT PAID RS.1.5 CRORES FROM 04.01.2010 TO 09.03.2010 AS MENTIONED AT PARAGRAPH 3.4.3. IN SUMMARY, IT IS EVIDENT THAT THE AMOUNT OF RS.1.5 CRORES PAID WAS O UT OF INVESTMENT ACCOUNT ONLY. 3.4.7. KEEPING IN VIEW THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE APPELLANT DIVERTED AN AMOUNT OF RS.1.50 CRORES FROM ITS INVESTMENT ACCOUNT AND PAID THE SAME TO NPDPL AS RE VENUE EXPENDITURE, IN ORDER TO REDUCE ITS PROFITS FOR A.Y .2010-11. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFIC ER IS CONFIRMED. 4. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESS EE IS BEFORE THE TRIBUNAL FOR REDRESSAL OF GRIEVANCE AS P ER GROUNDS OF APPEAL NOTED HEREIN. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, HYDERABA D AND THE COMMISSIONER OF INCOME TAX (APPEALS)-II, HYDERABAD ERRED IN DISALLOWING THE BUSINESS PROMOTION OF EXPENSES OF RS.1.50 CRORES PAID TO M/S . NIVEE PROPERTY DEVELOPERS P. LTD., HYDERABAD WITHOU T CONSIDERING THE FACTS OF THE CASE. 3. THE DEPUTY COMMISSIONER OF INCOME TAX, HYDERABA D AND THE COMMISSIONER OF INCOME TAX (APPEALS)-II, HYDERABAD ERRED IN HOLDING THAT THE INVESTMENT OF RS.1.50 CRORES WAS DIVERTED BY THE APPELLANT TOWARD S REVENUE EXPENDITURE TO REDUCE ITS PROFITS FOR THE A .Y. 2010-2011. 7 ITA.NO.1556/HYD/2014 ARUNACHAL LOGISTICS P. LTD., HYDERABAD. 5. THE LD. A.R. FOR THE ASSESSEE MR. S. RAMA RAO SUBMITTED THAT THE IMPUGNED AMOUNT OF RS.1.50 CROR ES TOWARDS SALES PROMOTION WAS MADE AS PER A WRITTEN MOU. THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUE IN THE FIRST PLAC E AND THEREFORE, OBLIGATION ARISEN BY WAY OF MOU FOR INCU RRING SALES PROMOTION EXPENDITURE WAS MET BY APPROPRIATING THE AFORESAID AMOUNT BY WAY OF A JOURNAL ENTRY. HE SUBMITTED THAT ONCE THE BOOK ENTRY HAS BEEN PASSED IN DISCHARGE OF ITS OBLI GATION WHICH ARE REVENUE EXPENDITURE BY NATURE, IT CAN BE NOBODY S CASE THAT THE PAYMENT HAS NOT BEEN MADE. THE ASSESSEE HAVING INCURRED THE REVENUE EXPENDITURE CANNOT SEEK ITS RETRIEVAL I N THE EVENT OF WINDING UP OF THE PROJECT. THE AMOUNT INCURRED HAS GONE IRRETRIEVABLY AS A BUSINESS LOSS FOR WHICH THE ASSE SSEE IS LEFT WITH NO REMEDY. THE LD. A.R. HEAVILY RELIED UPON THE MOU , COPY WHICH HAS BEEN PLACED ON RECORD AT PAGE NOS. 55 TO 58 OF THE PAPER BOOK. THE LD. A.R. ADVERTED OUR ATTENTION TO CLAUSE-3 OF THE MOU WHEREIN THE FACT OF INVESTMENT OF RS.18,39, 52,980 TOWARDS THE PROJECT IS RECORDED. HE THEREAFTER, REF ERRED TO OTHER CLAUSES WHEREBY THE ASSESSEE INTER ALIA, WAS UNDER CONTRACTUAL OBLIGATION TO INCUR SALES AND BUSINESS PROMOTION EX PENSES AND MARKETING EXPENSES SUCH AS ADVERTISEMENT, SALES PRO MOTION, GIFT SCHEMES, SALES INCENTIVES, PARTICIPATION IN PROPERT Y EXHIBITION, HOARDINGS, PRINTING OF PROJECT BROACHERS ETC., TO T HE EXTENT OF RS.1.50 CRORES. HE SUBMITTED THAT PURSUANT TO THE B USINESS CONTRACT, THE EXPENDITURE HAS BEEN INCURRED AND RIG HTLY CLAIMED AS REVENUE EXPENDITURE IN THE HANDS OF THE ASSESSEE . THE LD. A.R. REFERRED TO PAGE-64 OF THE PAPER BOOK AND SUBM ITTED THAT THE PROJECT HAD KICK STARTED EARLIER AND THE PERMIS SION WAS ACCORDED FOR CONVERSION OF THE AGRICULTURAL LAND IN TO NON- 8 ITA.NO.1556/HYD/2014 ARUNACHAL LOGISTICS P. LTD., HYDERABAD. AGRICULTURAL PURPOSE BY THE APPROPRIATE AUTHORITY I N THE F.Y. 2007-08. THE LD. A.R. ALSO REFERRED TO THE LEDGER A CCOUNT EXTRACTS WHEREIN PAYMENTS SHOWN TO HAVE BEEN MADE F ROM 2007 ONWARDS TO THE NPDPL IS DULY REFLECTED. THE RELEVAN T JOURNAL ENTRIES TOWARDS APPROPRIATION OF AMOUNT IN KEEPING WITH OBLIGATIONS CAST UPON THE ASSESSEE AS PER MOU WAS A LSO ADVERTED. THE LD. A.R. ACCORDINGLY CONTENDED THAT T HE A.O. AS WELL AS THE CIT(A) HAS MISDIRECTED ITSELF ON FACTS AND IN LAW IN REJECTING THE BONAFIDE CLAIM OF BUSINESS PROMOTION EXPENSES AND PLEADED FOR ITS REVERSAL. 6. THE LD. D.R., ON THE OTHER HAND, STRONGLY RELIE D UPON THE ORDERS OF THE A.O. AS WELL AS THE CIT(A) AND SU BMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE HAVE BEEN O BJECTIVELY ANALYSED BY THE CIT(A) WHICH CANNOT BE FAULTED. LD. D.R. SUBMITTED THAT BOTH THE COMPANIES ARE SISTER CONCER NS MANNED BY CLOSE RELATIVES. THE PAYMENT HAS BEEN MADE BY TH E ASSESSEE TO NPDPL AS WELL AS RECEIVED OVER NUMBER OF YEARS. THE PAYMENT MADE IS IN THE NATURE OF ADVANCE. THE AMOUNT OF RS.18,39,52,980 WAS MADE PRIOR TO EVEN ENTERING OF THE MOU. COUPLED WITH THIS, THE ASSESSEE HAS FAILED TO DEMON STRATE THE ACTUAL EXPENDITURE INCURRED FOR WHICH PURPOSE THE A MOUNT WAS PURPORTEDLY SPENT. LD. D.R. FURTHER STRESSED THAT I N THESE FACTS AND CIRCUMSTANCES OF THE CASE WHERE THE JOURNAL ENT RY HAS MERELY PASSED ON THE LAST DAY OF THE FINANCIAL YEAR AS AN AFTERTHOUGHT TO CLAIM REVENUE EXPENDITURE WHEN THE PROJECT ITSELF HAS NOT STARTED, THERE IS NO JUSTIFICATION IN THE G ROUNDS RAISED BY THE ASSESSEE. HE THEREFORE, SUBMITTED THAT NO INTER FERENCE WITH THE ORDER OF THE CIT(A) IS CALLED FOR. 9 ITA.NO.1556/HYD/2014 ARUNACHAL LOGISTICS P. LTD., HYDERABAD. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND MAT ERIAL/ DOCUMENTS REFERRED TO US IN THE COURSE OF HEARING. THE ASSESSEE HAS CLAIMED RS.1.50 CRORES AS BUSINESS EXPENDITURE PURPORTEDLY INCURRED TOWARDS BUSINESS AND SALES PROMOTION EXPEN SES IN AN INCOMPLETE BUILDING PROJECT. THE A.O. HAS DISPUTED THE ALLOWABILITY OF THE AFORESAID EXPENDITURE CLAIMED B Y THE ASSESSEE. IN ORDER TO DECIDE THE ISSUE, WE HAVE GONE THROUGH THE MOU EXECUTED BETWEEN THE ASSESSEE AND ITS SISTER CONCER N NAMELY NPDPL. WE NOTE THAT THE MOU IS DATED 23 RD DECEMBER, 2009 WHEREIN IT IS RECORDED THAT AN INVESTMENT OF RS.18, 39,52,980 MADE TILL THE DATE OF EXECUTION OF THE MOU HAS BEEN TAKEN COGNIZANCE TOWARDS PROJECT. IT MEANS THE ADVANCE GI VEN TO NPDPL EARLIER HAS BEEN RECOGNIZED AS MADE TOWARDS DEVELOPMENT OF RESIDENTIAL PROJECT. WHEN WE SEE THE MANNER IN WHICH THE AFORESAID PAYMENT OF RS.18,39,52,980 HAS BEEN MADE WITH REFERENCE TO THE LEDGER EXTRACTS SUBMITTED BY THE ASSESSEE, WE FIND THAT THERE ARE LARGE NUMBER OF TRANSACTIONS OF PAYMENTS AND RECEIPTS BOTH SINCE APRIL 2007. IT IS SELF EVID ENT FROM THE LEDGER ACCOUNT THAT THE PAYMENTS HAVE BEEN EXCHANGE D INTER SE BY BOTH THE PARTIES FREQUENTLY AS AN OPEN MUTUAL AN D CURRENT ACCOUNT. THE MANNER IN WHICH THE TRANSACTIONS HAS B EEN EXECUTED IN A REGULAR INTERVAL OVER A PERIOD OF TIM E CLEARLY GIVES AN IMPRESSION THAT THESE PAYMENTS WERE MADE AS WELL AS RECEIVED BACK AS A PART OF ACCOMMODATION TO THE SIS TER CONCERN. THE CIT(A) HAS DEMONSTRATED IN ITS ORDER THAT THE B UILDING PERMISSION WAS GRANTED BY THE HMDA ON 25.09.2012 I. E., MUCH LATER TO THE MOU GIVING RAISE TO THE PURPORTED OBLI GATION OF SALES 10 ITA.NO.1556/HYD/2014 ARUNACHAL LOGISTICS P. LTD., HYDERABAD. PROMOTION EXPENSES. WE DO NOT FIND ANY ANSWER TO TH E PURPORT OF INCURRING SUCH HUGE EXPENSES AS CLAIMED AT THE STAG E WHEN THE PROJECT ITSELF IS YET TO MAKE ANY SERIOUS HEADWAY. THE FACTS DO NOT COINCIDE. THE ASSESSEE COULD NOT SUPPORT THE NE ED FOR SUCH EXORBITANT EXPENDITURE AT THE STAGE WHEN NO PERMISS ION FOR CONSTRUCTION WAS AVAILABLE AT ITS DISPOSAL. SOME ME AGER EXPENDITURE OF RS.7.7 LAKHS AND RS.6.06 LAKHS HAVE BEEN STATED TO BE ACTUALLY INCURRED IN THE SUBSEQUENT YEARS. IN THE CIRCUMSTANCES, A MERE JOURNAL ENTRY AND MOU WITH SI STER CONCERN TO CONVERT ADVANCE ALREADY LYING WITH THE S ISTER CONCERN INTO REVENUE EXPENDITURE OF THIS MAGNITUDE IS HIGHL Y UNPALATABLE. WE FIND OURSELVES IN COMPLETE AGREEMEN T WITH THE OBSERVATIONS AND FINDINGS OF THE CIT(A) FOR DISMISS AL OF THE CLAIM OF THE ASSESSEE. THE ASSESSEE HAS NEITHER DEMONSTRA TED THE NECESSITY TO INCUR THIS EXPENDITURE TO ESTABLISH BO NAFIDE NOR HAS DEMONSTRATED THE ACTUAL EXPENDITURE INCURRED. NOTWI THSTANDING, THE AFORESAID CLAIM IN THE NATURE OF REVENUE EXPEND ITURE WHEN THE PROJECT ITSELF HAS APPARENTLY NOT COMMENCED CAN NOT BE APPROVED. ACCORDINGLY, WE FIND NO MERIT IN THE APPE AL OF THE ASSESSEE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH JULY, 2016. SD/- SD/- (D. MANMOHAN) (PRADIP KUMAR KEDIA) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED 06 TH JULY, 2016. VBP/- 11 ITA.NO.1556/HYD/2014 ARUNACHAL LOGISTICS P. LTD., HYDERABAD. COPY TO 1. ARUNACHAL LOGISTICS P. LTD., 8 - 2 - 1/1/3, AVTAR NIVAS, SRINAGAR COLONY MAIN ROAD, HYDERABAD-500073. 3. THE DCIT, CIRCLE - 1(1), HYDERABAD. 4. CIT(A) - II , HYDERABAD . 5. CIT - I , HYDERABAD . 5. D.R. ITAT B BENCH, HYDERABAD. 6. GUARD FILE