M/s. Breitling Properties Pvt. Ltd., Pune V. Dy. CIT, Circle 1(1), Pune

ITA 511/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93806 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 15-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Cost of acquisition; Commercial expediency
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.511/PN/2013 (ASSESSMENT YEAR : 2009-10) M/S. BREITLING PROPERTIES PVT. LTD., FLAT NO.4, MADHUSUDAN, B-79, CHOTANI MARG, KALYANI NAGAR, PUNE 411014 .. APPELLANT PAN NO.AACCR1724R VS. DCIT, CIRCLE-1(1), PUNE .. RESPONDENT APPELLANT BY : SHRI KISHOR PHADKE DEPARTMENT BY : SHRI B.C. MALAKAR DATE OF HEARING : 02-06-2015 DATE OF PRONOUNCEMENT : 17-06-2015 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16-11-2012 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT YEAR 2009-10. 2. THE ONLY GROUND RAISED BY THE ASSESSEE READS AS UNDER : THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG THE ADDITION OF RS.1,11,00,000/- MADE BY LD. AO TO THE TAXABLE IN COME OF THE APPELLANT, ON ACCOUNT OF ROAD ACCESS EXPENDITURE CHAR GED TO THE SISTER CONCERN BY WAY OF DEBIT NOTE. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF PROPER TY DEALING AND DEVELOPMENT OF LAND. IT FILED ITS RETURN OF INCOME ON 24-09-2009 DECLARING TOTAL INCOME OF RS.98,75,400/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFIC ER NOTED THAT AS AGAINST SALE PROCEEDS OF RS.23,31,00,000/- T HE ASSESSEE HAS SHOWN THE SAME AT RS.22,20,00,000/- AFTER 2 REDUCING AN AMOUNT OF RS.1,11,00,000/-. HE THEREFORE ASKED THE ASSESSEE TO JUSTIFY AND EXPLAIN REGARDING SUCH REDU CTION. IT WAS EXPLAINED BY THE ASSESSEE THAT IT HAS ACQUIRED LAND OF ABOUT 63,460 SQ.MTRS FROM WAGHMARE FAMILY FOR THE PURPOSE OF SE TTING UP SEZ IN HINJEWADI AT TOTAL COST OF RS.22,11,46,210/- WHICH INCLUDES ALL INCIDENTAL EXPENDITURE. SINCE THIS LAND WAS INSUFFICIENT TO DEVELOP SEZ HE TRANSFERRED THE SAID LAND TO INDO GLOBAL INFOTECH CITY PVT. LTD. (IN SHORT IGICPL) WHICH IS A GROUP COMPANY FOR A CONSIDERATION OF RS.23,31,00,000/- VIDE REGISTERED SALE DEED ON 28-08-2008. THIS SALE IS BOOKED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AT RS.23,31,00,000/- ON 2 9-08- 2008. ON THE SAME DAY, VIDE A JOURNAL ENTRY THE ASSES SEE HAS REDUCED RS.1,11,00,000/- FROM THE AFORESAID AMOUNT. IT WA S FURTHER SUBMITTED THAT WHEN THE ASSESSEE SOLD THE SAID LAND THERE WAS NO APPROACH ROAD TO THIS LAND. THE ASSESSEE HAD AN UNDERSTANDING WITH IGICPL TO PROVIDE AN APPROACH ROAD FOR THE LAND, THEREFORE, VIDE JOURNAL ENTRY HE REDUCED THE AMOUNT. 3.1 HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH TH E EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT A PERUSAL OF THE AGREEMENT SHOWS THAT NOWHERE IT HAS BEEN MENTIONE D THAT IT IS THE RESPONSIBILITY OF ASSESSEE COMPANY TO PROVIDE APPROACH/ACCESS ROAD TO THE LAND SOLD BY IT TO IGICPL. THERE IS NO DOCUMENTARY EVIDENCE SUGGESTING THAT THERE WAS A LIABILITY ON THE ASSESSEE TO PROVIDE ACCESS ROAD TO THE LAND. THE RE IS ALSO NO EVIDENCE SUGGESTING THE WORKING OF SUCH EXPENDITURE TO T HE TUNE OF RS.1,11,00,000/-. THE ASSESSING OFFICER FURTHER NOTED THA T A SURVEY WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE AND DURING SUCH SURVEY NO SUCH DOCUMENT REGARDING THIS LIABILIT Y OF ASSESSEE WAS FOUND. THEREFORE, HE HELD THAT IT IS NOT CLEA R AS TO 3 HOW THE ASSESSEE HAS ARRIVED AT SUCH AN AMOUNT OF LIABILIT Y. THE SUBMISSION OF THE ASSESSEE THAT IT WAS A MUTUAL UNDERSTA NDING BETWEEN THE ASSESSEE COMPANY AND IGICPL WAS NOT ACC EPTED BY THE ASSESSING OFFICER. 4. REFERRING TO THE PROVISIONS OF SECTION 37(1) THE ASSESSIN G OFFICER HELD THAT IN ORDER TO CLAIM THE EXPENDITURE AS DEDU CTIBLE U/S.37(1) OF THE I.T. ACT THE EXPENDITURE MUST BE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS CARRIED ON B Y THE ASSESSEE. REFERRING TO THE DECISION OF HONBLE SUPREME CO URT IN THE CASE OF INDIAN MOLASSES COMPANY PVT. LTD. VS. CIT REP ORTED IN 37 ITR 66 HE SUBMITTED THAT CONSIDERING THE TERMS OF SALE IN THE REGISTERED SALE DEED THE ASSESSING OFFICER CAME TO T HE CONCLUSION THAT THIS IS NOT AN ALLOWABLE EXPENDITURE IN THE HANDS OF THE ASSESSEE SINCE THERE WAS NO LIABILITY ON THE ASSESSEE TO INCUR SUCH AN EXPENDITURE. HE OBSERVED TH AT THE TRANSACTION OF DEBITING SALE BY RS.1,11,00,000/- IN BOOKS OF ACCOUNT AND REDUCING THE SALE CONSIDERATION IS NOT A GEN UINE TRANSACTION BUT IS DONE WITH A VIEW TO REDUCE SALES CONS IDERATION AND ACCORDINGLY TO REDUCE TAXABLE BUSINESS PROFITS. HE ACCORDINGLY DISALLOWED THE CLAIM OF EXPENDITURE OF RS.1,11,00,000/- OUT OF THE SALE OF RS.23,31,00,000/- AND ADDE D THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5. BEFORE CIT(A) THE ASSESSEE MORE OR LESS REITERATED THE SAME ARGUMENTS AS MADE BEFORE THE ASSESSING OFFICER. IT WAS SUBMITTED THAT THE TRANSFER TO IGICPL WAS RECORDED AT RS.23,31,00,000/- ON 28-08-2008 AT A MODEST MARK UP OF T HE PURCHASE COST OF RS.21.50 CRORES EVEN AFTER ADJUSTMENT OF RS.1,11,00,000/-. THE NET CONSIDERATION REMAINS AT RS.22.20 CRORES WHICH IS MUCH MORE THAN THE MARKET VALUE OF RS.1 0.73 4 CRORES AS ON 28-08-2008. THIS ITSELF PROVE THE BONAFIDES OF THE TRANSACTION. IT WAS ARGUED THAT AS PER THE DEBIT NOTE DATED 29- 08-2008 THE LIABILITY OF THE APPROACH ROAD WAS DETERMINED AT RS.2,80,80,000/- OUT OF WHICH THE SHARE OF THE ASSESSEE WA S DETERMINED APPROXIMATELY AT 40% OF THE ABOVE AMOUNT WH ICH WAS ROUNDED OFF TO RS.1,11,00,000/-. IT WAS SUBMITTED THAT THE TOTAL ROAD ACCESS COST WAS ESTIMATED BY IGICPL AND CH ARGED ON ESTIMATE BASIS IN THE EXPECTATION THAT LAND ACCESS SHOUL D BE PROCURED BY IGICPL. HOWEVER, IGICPL HAS BEEN ABLE TO ENTER INTO LEASE AGREEMENT WITH SOME OWNERS OF LAND BEARING SUR VEY NO.256 AMOUNTING TO APPROXIMATELY RS.60 LAKHS TILL DATE. IT WAS ARGUED THAT THOUGH THE AGREEMENT WITH IGICPL DID NOT MENTION THE DEBIT NOTE ON ACCOUNT OF ROAD DEVELOPMENT, THE NATU RE OF THE TRANSACTION WAS OF COMMERCIAL EXPEDIENT IN NATURE. FOR TH E ABOVE PROPOSITION THE DECISION OF HONBLE MADRAS HIGH COU RT IN THE CASE OF CIT VS. ASSOCIATED ELECTRICAL AGENTS REPORTED IN 135 TAXMANN 12 WAS RELIED UPON. IT WAS FURTHER ARGUED THAT IGICPL HAS ALREADY REDUCED LAND COST IN ITS BOOKS BY RS.1,11,00,00 0/-, THEREFORE, DISALLOWANCE IN THE CASE OF THE ASSESSEE WILL LEAD TO DOUBLE TAXATION. IT WAS FURTHER ARGUED THAT THE ASPECT OF NON GENUINENESS OF THE EXPENDITURE IS NOT PROVED. FURTHER, LIA BILITY NEED NOT ALWAYS BE A CONTRACTUAL ONE. ON THE BASIS O F UNDERSTANDING BETWEEN THE TWO PARTIES, BOTH SIDES HAVE PASSED NECESSARY ACCOUNTING ENTRIES. THE AUDITORS HAVE ALSO DU LY DISCLOSED THE NECESSARY FACTS IN NOTE NO.4 OF SCHEDULE F O F THE REPORT. IT WAS ACCORDINGLY ARGUED THAT THE ADDITION MA DE BY THE ASSESSING OFFICER SHOULD BE DELETED. 6. HOWEVER, THE CIT(A) WAS NOT CONVINCED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ADDITION MADE BY THE 5 ASSESSING OFFICER. WHILE DOING SO, SHE OBSERVED THAT THE SA LE DEED VALUE WAS FIXED BY WAY OF MUTUAL CONSENT BETWEEN THE TWO PARTIES. NEITHER THE PURCHASE DEED OF THE LAND IN QUESTIO N BY THE ASSESSEE NOR THE SUBSEQUENT SALE DEED CARRY ANY MENTION OF PROVISION OF ROAD ACCESS BY THE ASSESSEE. SHE FURTHER NO TED FROM THE FIRST AND SECOND SCHEDULE OF THE SALE DEED THAT THE LAND HAS BEEN TRANSFERRED TOGETHER WITH ALL PRIVILEGES, EASEMENT S AND APPURTENANCES AND TOGETHER WITH ALL AND SINGULAR YARDS , AREAS, COMPOUNDS, DITCHES, FENCES, TREES, DRAIN WAYS, PATHS, PASSAG ES, COMMON GULLIES ETC. THUS, THE LAND HAS BEEN TRANSFERRED ON AS IS WHERE IS BASIS WITHOUT ANY SPECIFIC PROVISION FOR PROVIDING THE ACCESS ROAD. FURTHER, THE STAMP DUTY OF RS.93,24,000/- AS WELL AS PENALTY OF RS.11,18,880/- HAS BEEN PAID ON 21-06-2011 BY IGICPL. SIMILARLY, THE COST OF ROAD COST IF REQUIRED UNDER SEZ ACT WOULD BE THE SOLE RESPONSIBILITY OF IGICPL. FURTHER, I GICPL HAS MORE OR LESS ABANDONED PLANS OF DEVELOPING THE SEZ. THEREFORE, IT CANNOT BE SAID TO BE A CONTRACTUAL OBLIGATION ON THE PART OF THE ASSESSEE. SHE FURTHER OBSERVED THAT AS PE R THE WORKING IN THE DEBIT NOTE DATED 29-08-2008, 40% OF THE COST OF LAND PLUS ROAD DEVELOPMENT COST HAS BEEN DEBITED TO THE ASSESSEES ACCOUNT. THERE IS NO JUSTIFIABLE REASON FURNISH ED FOR SUCH APPORTIONMENT. ACCORDING TO THE LD. CIT(A) THIS APPORTIONMENT WOULD BE UNDERSTANDABLE IF THE ASSESSEE WA S 40% PARTNER IN THE SPV, AND NOT IN THE FACTS AND CIRCUMS TANCES OF THIS CASE WHERE ASSESSEE IS CONTENDING THAT THE LIABILIT Y FOR SUCH EXPENDITURE VESTS ON HIM. SHE OBSERVED THAT EVEN TILL DATE IGICPL HAS NOT BEEN ABLE TO SUCCESSFULLY BUILD OR DEVELOP AN APPROACH ROAD. IT HAS, DESPITE BEST EFFORTS, BEEN ABLE T O ONLY LEASE SOME LANDS FOR GETTING SOME KIND OF ACCESS TO THE P ROPERTY AND INCURRED AN EXPENDITURE OF ABOUT RS.60 LAKHS TILL DATE. 6 THEREFORE, EVEN OTHERWISE, THE EXPENDITURE CLAIMED TO HAVE BEEN REDUCED FROM THE SALE CONSIDERATION, RS.1.11 CRORES IS ONLY A CONTINGENT AND NOT ACTUAL LIABILITY. IN FACT, IT IS SEEN THAT ON THE BASIS OF A REQUEST BY IGICPL FOR WITHDRAWAL OF FORMAL APPRO VAL FOR SETTING UP SECTOR SPECIFIC SEZ FOR IT/ITES AT HINJEWAD I, THE SEZ BOARD OF APPROVAL VIDE ITS 43 RD MEETING HELD ON 18-11-2010 APPROVED THIS REQUEST. CONSEQUENTLY, THE ISSUE OF PRO VIDING APPROACH ROAD FOR SEZ BECOMES MERELY ACADEMIC. THE ARGUMENT THAT DISALLOWANCE BY ASSESSING OFFICER HAS LED TO DOUBLE TAXATION SINCE IGICPL HAS ALREADY REDUCED LAND CO ST IN ITS BOOKS BY AN EQUIVALENT AMOUNT IS ALSO INCORRECT ARGUM ENT SINCE THE SALE DEED VALUE IS RECORDED IN THE DEED AT RS.2 3.31 CRORES AND THERE CAN BE NO REASON TO DEVIATE FROM THA T FIGURE BY ANY OF THE TWO SIDES. 7. SO FAR AS THE ARGUMENT OF THE ASSESSEE BEFORE HER T HAT THE EXPENDITURE SHOULD BE ALLOWED IN VIEW OF COMMERCIAL EXPEDIENC Y EVEN THOUGH THE SALE AGREEMENT WITH IGICPL DATED 28- 08-2008 DID NOT CONTAIN ANY CLAUSE WITH REGARD TO THE DEBIT NOTE ON ACCOUNT OF ROAD DEVELOPMENT, SHE OBSERVED THAT A PERUS AL OF THE DEVELOPMENT AGREEMENT AS WELL AS THE GENERAL POWER OF AT TORNEY IN FAVOUR OF THE ASSESSEE SHOW THAT AS POWER OF ATTORNE Y HOLDER THE ASSESSEE BEING DEVELOPER HAS NOT BEEN SPECIFICALLY AUTHORISED OR DELEGATED THE TASK OF IDENTIFYING AS WELL AS PROVIDING AN Y APPROACH ROAD. FURTHER, THE PROPERTY IN QUESTION STOOD TRANSFERRED ON AS IS WHERE IS BASIS TO THE PREDECESSOR . AFTER GOING THROUGH THE MEMORANDUM AND ARTICLES OF ASSOCIATION THE LD.CIT(A) FURTHER OBSERVED THAT THE ASSESSEE DID NOT INTE ND TO ESTABLISH A SEZ. THE PURPOSE BEHIND PURCHASE OF PLOTS IN HINJEWADI WAS TO CONSTRUCT BUILDINGS, OFFICES AND HOUSING 7 COMPLEXES, WHICH IT LATER ABANDONED AND INSTEAD TRANSFERRE D TO ITS SISTER CONCERN. IN VIEW OF THE ABOVE SHE ALSO DISMISS ED THE ARGUMENT RELATING TO COMMERCIAL EXPEDIENCY. 8. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 9. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGED THE ORDER OF THE CIT(A). HE SUBMITTED THAT IT WAS A GENUINE TRANSACTION. SINCE THE ASSESSEE WAS UNABLE TO COMPLETE THE SEZ IT TRANSFERRED THE LAND TO THE SISTER CONCERN IGICPL. S INCE THERE WAS NO APPROACH ROAD THE ASSESSEE AGREED FOR BEARING A PART OF THE APPROACH ROAD WHICH WAS DETERMINED AT RS.1.10 LAKHS. ON THE BASIS OF THE DEBIT NOTE RAISED BY IGICPL THE ASSESS EE HAS REDUCED THE COST FROM THE SALE CONSIDERATION AND THE AM OUNT IS PAYABLE TO IGICPL. HE SUBMITTED THAT JUST BECAUSE THE DEBIT NOTE WAS NOT REGISTERED IT CANNOT BE REJECTED. HE SUB MITTED THAT THE AMOUNT OF RS.1.10 CRORES HAS NOT ENTERED INTO THE COFFERS OF THE ASSESSEE. FURTHER, THE CIT(A) WITHOUT APPRECIATING TH E FACTS OF THE CASE REJECTED THE CLAIM OF THE ASSESSEE THAT THE DEBIT NOTE ALSO BECOMES A PART OF THE CONTRACT. 10. SO FAR AS THE DECISION RELIED ON BY THE ASSESSING OFFICE R IS CONCERNED, HE SUBMITTED THAT THE SAID DECISION IS NOT APP LICABLE TO THE FACTS OF THE PRESENT CASE. REFERRING TO THE DEC ISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF ASSOCIATED ELEC TRICAL AGENCIES (SUPRA) HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT PAYMENTS MADE HAVING REG ARD TO COMMERCIAL EXPEDIENCY NEED NOT NECESSARILY HAVE THEIR OR IGIN IN CONTRACTUAL OBLIGATIONS. IF AN ASSESSEE CARRYING ON BUSIN ESS FINDS THAT IT IS COMMERCIALLY EXPEDIENT TO INCUR CERTAIN 8 EXPENDITURE DIRECTLY OR INDIRECTLY, IT WOULD BE OPEN TO SU CH AN ASSESSEE TO DO SO NOTWITHSTANDING THE FACT THAT A FORM AL DEED DOES NOT PRECEDE THE INCURRING OF SUCH EXPENDITURE. THE REFORE, WHEN THE EXPENDITURE WAS INCURRED INDIRECTLY TO FACILITATE CARRYING ON OF BUSINESS OR TO PRESERVE THEIR EXISTING SOU RCE OF INCOME WITH A VIEW TO SAFEGUARDING BUSINESS AND ALSO INCREA SING THEIR PROFIT IN FUTURE, SUCH AN EXPENDITURE IS AN ALLOWABLE DEDUCTION. HE ACCORDINGLY SUBMITTED THAT THE AMOUNT OF RS.1,11,00,000/- SHOULD BE ALLOWED AS DEDUCTION. 11. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED T HAT A SURVEY WAS CONDUCTED IN THIS CASE U/S.133A OF THE ACT ON 24-03- 2009 WHERE THE ASSESSEE HAD OFFERED AN AMOUNT OF RS.1 C RORE AS ADDITIONAL INCOME ON ACCOUNT OF PROVISION WRITTEN BACK. TH E AUDIT REPORT IS DATED 31-04-2009. DURING THE COURSE OF SURVEY NO SUCH DOCUMENT RELATING TO SUCH LIABILITY OF THE ASSESSEE WAS FOUND. THE SALE DEED DOES NOT CONTAIN ANY OBLIGATION ON THE PART OF THE ASSESSEE EITHER TO BEAR A PART OF THE COST TOWA RDS THE APPROACH ROAD NOR WAS THERE ANY AGREEMENT TO THIS E FFECT PRIOR TO THE SALE DEED. THE ASSESSEE HAS TRANSFERRED THE LAN D ON AS IS WHERE IS BASIS. HERE, THE TRANSACTION IS BETWEEN THE 2 RELATED CONCERNS. ALL THESE THINGS CLEARLY STATE THAT THE SO CA LLED DEBIT NOTE IS JUST A SELF-SERVING DOCUMENT AND CANNOT BE ALLOW ED AS AN EXPENDITURE IN THE HANDS OF THE ASSESSEE. IT CANNOT BE DEDUCTED FROM THE SALE CONSIDERATION. HE SUBMITTED THAT THE CASE DECISION RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IS DISTINGUIS HABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE UP HELD AND THE GROUND RAISE BY THE ASSESSEE BE DISMISSED. 9 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND TH E CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HA VE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE VIDE SALE DEED NO.6547/2008 DATED 28-08-2008 TRANSFERRED THE LAND TO IGICPL FOR A TOTAL CONSIDERATION OF RS.23.31 CRORES. WE FIND THE ASSESSEE VIDE JOURNAL ENTRY DATED 29-08-2008 REDUCED SUCH SALE CONSIDERATION BY RS.1.11 CRORES TO RS.22.20 CRORES THAT D UE TO ITS INABILITY TO PROVIDE ACCESS ROAD TO THE LAND. WE FIND TH E ASSESSING OFFICER DISALLOWED SUCH REDUCTION OF RS.1.11 CRORES AND MADE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE ON THE GROUND THAT NONE OF THE AGREEMENTS RELATING TO SALE AND PURCHASE OF LAND MENTION THIS SPECIFIC LIABILITY ON THE PART OF THE ASSESSEE. NO DOCUMENTARY PROOF EVIDENCING SUCH LIABILITY WA S PRODUCED BEFORE HIM NOR ANY WORKING WAS GIVEN AS TO HOW THE LIABILITY WAS ARRIVED AT. FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF INDIAN MOLASSES COMPANY PVT. LTD., (SUPRA). WE FIND THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER. 13. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESS EE THAT MERELY BECAUSE DEBIT NOTE WAS NOT REGISTERED THE AMOUNT OF RS.1.11 CRORES WHICH HAS NOT BEEN RECEIVED BY THE ASSES SEE CANNOT BE ADDED TO THE TOTAL INCOME. IT IS ALSO THE CAS E OF THE LD. COUNSEL FOR THE ASSESSEE THAT THIS DEBIT NOTE BECOME S A PART OF THE CONTRACT. FROM THE COPY OF THE CONVEYANCE DEE D, WE FIND THE TOTAL CONSIDERATION HAS BEEN DETERMINED AT RS.23.31 LA KHS. THE LEDGER ACCOUNT OF INDO GLOBAL INFOTECH CITY PVT. LTD., TO 10 IGICPL IN THE BOOKS OF THE ASSESSEE SHOWS THAT THE AS SESSEE HAS STARTED PAYING HIM MONEY FROM DECEMBER 2007. THE FIRST INSTALMENT OF RS.1.50 LAKHS WAS PAID ON 14-12-2007, THE NEX T PAYMENT OF RS.1 CRORE PAID ON 17-12-2007, RS.60 LAKHS ON 19- 12-2007, RS.90 LAKHS ON 11-01-2008 AND SO ON. NO DOCUMENTARY EVIDENCE WAS PRODUCED BY THE ASSESSEE FRO M DECEMBER 2007 ONWARDS TILL 29-08-2008 THAT ASSESSEE HA S TO BEAR A PART OF THE EXPENDITURE TOWARDS APPROACH ROAD. NO DOCUMENT WAS FOUND DURING THE COURSE OF SURVEY REGARDIN G THE LIABILITY OF THE ASSESSEE FOR SUCH DEBIT NOTE OR THE LIABILITY O N THE PART OF THE ASSESSEE FOR SUCH APPROACH ROAD. UNDER TH ESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) HOLDING THAT THE AMOUNT OF RS.1.11 CRORES CANNOT BE REDUCED FROM THE SALE CONSIDERATION OF RS.23.31 LAKHS. IN V IEW OF THE ABOVE AND IN VIEW OF THE DETAILED REASONINGS GIVEN B Y THE CIT(A) WE FIND NO INFIRMITY IN THE SAME. 14. SO FAR AS THE DECISION OF THE HONBLE MADRAS HIGH COU RT IN THE CASE OF ASSOCIATED ELECTRICAL AGENCIES (SUPRA) RELIED O N BY THE LD. COUNSEL FOR THE ASSESSEE IS CONCERNED, WE FIND THE SAME IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN TH AT CASE, TWO ASSESSEES WERE AGENTS OF A COMPANY, WHICH MANUFACTU RED TELEVISION SETS. AS PER THE ASSESSEES, 70 PER CENT OF TH E PRODUCTION OF THE COMPANY WAS MARKETED THROUGH THEM. T HE COMPANY WAS PROMOTED BY PERSONS WHOSE RELATIVES WERE PARTNERS IN THE ASSESSEE-FIRMS. HOWEVER, THE MAJORITY OF T HE SHARES IN THE COMPANY WERE NOT HELD BY THOSE PROMOTER S. SUBSTANTIAL PART WAS HELD BY THE PUBLIC SECTOR COMPANIES AND A LARGE PART BY PRIVATE SHAREHOLDERS AND ABOUT 26 PER CE NT BY THE PROMOTERS. THE MANAGING DIRECTOR OF THE COMPANY BELONGED TO 11 THE PROMOTERS GROUP. THE ASSESSEES, FOLLOWING MERCANTILE SY STEM OF ACCOUNTING, CLAIMED CERTAIN SUMS TOWARDS ADVERTISEMENT EXPENSES AND TOWARDS THE DIFFERENCE IN PRICE OF THE TV SE TS AS ALLOWABLE EXPENDITURE AND ALSO PRODUCED BEFORE THE ASSESS ING OFFICER THE DEBIT NOTES ISSUED BY THE COMPANY. THEY ALSO PRODUCED BEFORE THE ASSESSING OFFICER A LETTER FROM THE SA ID COMPANY WHICH WAS SIGNED BY THE MANAGING DIRECTOR OF SAID COMPANY. THE CAPTION OF SAID LETTER WAS 'SHARING OF MARKE TING EXPENSES AND REVISION OF PRICE FOR THE YEAR 1991-92' AND SAID LETTER RECORDED THE FACTS THAT THE TELEVISION MARKET WAS IN A RECESSIONARY TREND; THAT SALES AND MARGIN WERE UNDER GR EAT STRAINS AND THAT THE ASSESSEES HAD APPRECIATED THAT IT WOULD NOT BE APPROPRIATE TO CUT DOWN THE ADVERTISING AND MARKETIN G EXPENSES IN VIEW OF THE COMPETITION GETTING TOUGHER IN THE DECLINING MARKET AND, ACCORDINGLY, THE ASSESSEES HAD AGRE ED HAVING REGARD TO THE PAST MUTUAL BENEFITS THAT THEY HAD OBTAINED FROM THE COMPANY TO SHARE THE FINANCIAL STRAIN THAT THE COMPANY WAS FACING. THE MANNER IN WHICH THAT STRAIN WAS TO BE SHA RED AS SET OUT IN THAT LETTER WAS THAT THE ASSESSEES WOULD SH ARE 50 PER CENT OF THE ADVERTISEMENT EXPENSES AND THE COMPANY ITSELF WOULD MEET THE BALANCE 50 PER CENT. THE LETTER ALSO RECORDED THE AGREEMENT REACHED EARLIER WITH THE ASSESSEES THAT THE ASSESSEES WOULD PAY AN ADDITIONAL PRICE FOR TV SETS. THE ASSESSING O FFICER, WHILE ACCEPTING THAT THE ASSESSEES MAINTAINED THEIR BOOK S ON MERCANTILE SYSTEM, WAS, NEVERTHELESS, OF THE VIEW THAT THA T WAS A POST-ACCOUNTING EXERCISE UNDERTAKEN SOLELY FOR THE PURP OSE OF REDUCING THE TAXABLE PROFIT OF THE ASSESSEES AND THAT T HE LETTER ISSUED BY THE COMPANY WAS NOT CAPABLE OF BEING REGARDED AS AN AGREEMENT UNDER WHICH AN ENFORCEABLE LIABILITY WAS CAST ON THE ASSESSEES. HE, THEREFORE, DISALLOWED THE SUMS. ON APPEAL, THE 12 COMMISSIONER UPHELD THE VIEW OF THE ASSESSING OFFICER. ON FURTHER APPEAL, THE TRIBUNAL HELD THAT THE EXPENSES CLAIMED BY THE ASSESSEES WERE ALLOWABLE, AS THEY WERE INCURRED INDIRE CTLY TO FACILITATE THE CARRYING ON OF THE BUSINESS OR TO PRESERVE THEIR EXISTING SOURCE OF INCOME WITH A VIEW TO SAFEGUARD THE BUS INESS AND ALSO INCREASE THEIR PROFITS IN FUTURE. UNDER SUCH CIRCUMSTANCES THE HONBLE HIGH COURT UPHELD THE ORDER O F THE TRIBUNAL. 15. HOWEVER, IN THE INSTANT CASE THERE IS NO PAST MUTUA L BENEFIT. THIS IS ONLY A ONE TIME SALE. THERE IS NO CONTINUI TY OF SALE TO THE SISTER CONCERN SO AS TO FACILITATE THE CARRYIN G ON OF THE BUSINESS OR TO PRESERVE THEIR EXISTING SOURCE OF INCOME W ITH A VIEW TO SAFEGUARD THE BUSINESS AND ALSO INCREASE PROFITS IN FUTURE. 16. AS ALREADY OBSERVED EARLIER NEITHER THERE IS AN AGRE EMENT FOR BEARING THE PART OF THE COST OF THE APPROACH ROAD N OR ANYTHING MENTIONED IN THE SALE DEED ABOUT INCURRING OF AN Y EXPENDITURE TOWARDS THE APPROACH ROAD. THE SALE WAS ON AS IS WHERE IS BASIS WITHOUT ANY SPECIFIC PROVISION FOR PROVIDING TH E ACCESS ROAD. THE SCHEDULE IN THE SALE DEED ALSO MENTIONS THE LAND HAS BEEN TRANSFERRED TOGETHER WITH ALL PRIVILEGES, EASEMENTS AND APPURTENANCES AND TOGETHER WITH ALL AN D SINGULAR YARDS, AREAS, COMPOUNDS, DITCHES, FENCES, TREES, DRA IN WAYS, PATHS, PASSAGES, COMMON GULLIES ETC. THEREFORE, THE JOURNAL ENTRY PASSED BY THE ASSESSEE REDUCING AN AMO UNT OF RS.1,11,00,000/- IN OUR OPINION IS ONLY TO REDUCE THE TAXAB LE INCOME WITHOUT ANY ENFORCEABLE LIABILITY ON THE PART OF THE ASSESSEE. THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSES SEE THAT THE OTHER SIDE HAS ALSO REDUCED THE PURCHASE PRICE BY EQUIVALENT 13 AMOUNT IS IMMATERIAL UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. SINCE THE SALE DEED MENTIONS THE SALE PRICE OF RS.23,31,00,000/- AND THERE IS NO SUCH OBLIGATION ON THE PA RT OF THE ASSESSEE TO BEAR ANY PART OF THE EXPENDITURE TOWA RDS THE APPROACH ROAD AS PER THE SALE DEED OR AS PER ANY AGR EEMENT, PRIOR TO THE SALE, THEREFORE, THE SAME IN OUR OPINION CANN OT BE ALLOWED AS A DEDUCTION FROM THE SALE PRICE. EVEN IF THE A SSESSEE BEARS A PART OF SUCH EXPENDITURE, IT WILL BE OUT OF ITS OW N CAPITAL AND CANNOT BE AN ALLOWABLE EXPENDITURE IN THE HANDS OF T HE ASSESSEE. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A), WE FIND NO INFIRMITY IN HER ORDER. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RA ISED BY THE ASSESSEE IS DISMISSED. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 17-06-2015. SD/- SD/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE DATED: 17 TH JUNE, 2015 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-I, PUNE 4. CIT-I, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE