FAIRFIELD LAND DEVELOPERS PVT. LTD., Jaipur V. ITO, Jaipur

ITA 59/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4917 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 20-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI D DHK
• Keywords: Capital asset
• Section: 40A(3)

Judgement Text

- VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 59/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 M/S. FAIRFIELD LAND DEVELOPERS (P) LTD. D-177A, KANTI CHAND ROAD, BANI PARK, JAIPUR CUKE VS. THE ITO WARD- 3 (2) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAACF 9773C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI ANIL SHARMA, CA JKTLO DH VKSJ LS@ REVENUE BY: SMT. POONAM RAI, DCIT-DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 24/10/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 15/11/2016 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A)- 1, JAIPUR DATED 24-11-2015 FOR THE ASSES SMENT YEAR 2012-13 RAISING THEREIN FOLLOWING GROUND OF APPEAL. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWA NCE OF RS. 37,00,000/- MADE U/S 40A(3) OF I.T. ACT, 1961 TOWAR DS ITA NO. 59/JP/2016 FAIRFIELD LAND DEVELOPERS (P) LTD. VS. ITO , WARD- 3 (2), JAIPUR 2 MAKING CASH PAYMENT FOR PURCHASE OF LAND AS CAPITAL ASSETS, HOLDING THE SAME AS PURCHASE OF STOCK IN TRADE. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS. NIL ON 23-03-2 013 WHICH WAS PROCESSED U/S 143(1) OF THE ACT. THE CASE OF THE AS SESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) WAS ISSUED ON 6-08-2 013 WHICH WAS DULY SERVED UPON THE ASSESSEE. THE LD. AR OF THE ASSESSE E APPEARED BEFORE THE AO AND FILED THE WRITTEN REPLY DATED 30-08-2013, 29 -12-2014, 12-01- 2015 & 19-02-2015 AND DISCUSSED THE CASE WITH THE A O. THE AO OBSERVED THAT THE ASSESSEE COMPANY IS ENGAGED IN TH E BUSINESS OF REAL ESTATE BUT DURING THE YEAR UNDER CONSIDERATION THER E WAS NO BUSINESS ACTIVITY CARRIED OUT. THE REQUISITE DETAILS FILED W ERE EXAMINED AND RECORDS PRODUCED WERE PUT TO TEST CHECK. THE AO OBSERVED TH AT THE DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN CA SH PURCHASES OF RS. 37.00 LACS FROM FOLLOWING PERSONS. NAME OF SELLER ADDRESS OF PROPERTY AMOUNT SHRI RAMGOPAL VILLAGE DAULATPURA, TEHSIL AMER, JAIPUR RS. 34,00,000 SHRI GYANENDRA RUNTHALA PLOT NO. 150, CENTRAL COLONY, MAHAPURA RS. 3,00,000 ITA NO. 59/JP/2016 FAIRFIELD LAND DEVELOPERS (P) LTD. VS. ITO , WARD- 3 (2), JAIPUR 3 THE AO NOTED THAT THE ABOVE LAND WAS SHOWN AS FIXED ASSETS BY THE ASSESSEE ALONGWITH OTHER LAND OF RS.1,15,75,800/-. THE AO ON EXAMINATION OF THE MOA OF THE ASSESSEE OBSERVED THA T THE MAIN OBJECT OF THE ASSESSEE IS TO DEAL IN BUSINESS OF IMMOVABLE PR OPERTY SUCH AS LAND AND BUILDING. THEREFORE, THE AO VIDE LETTER DATED 16-02 -2015 ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE LAND PURCHASED SH OULD NOT BE TREATED AS STOCK IN TRADE. THE ASSESSEE VIDE ITS LETTER DATED 19-02-2015 FILED THE REPLY BEFORE THE AO AS UNDER:- 3.4 .. 1.. (A) THE MAIN OBJECT OF THE ASSESSEE COMPANY IS RE AL ESTATE BUSINESS BUT THE COMPANY HAS NOT STARTED ANY BUSINESS ACTIVITY SINCE THE INCORPORATION WHICH CAN BE VERIF IED FROM THE DIRECTORS REPORT DATED 03-09-2012. THE COPY OF DIRECTORS REPORT IS ENCLOSED HEREWITH. (B) THE ASSESSEE COMPANY HAS MADE INVESTMENT IN THE LANDS, WHICH WERE SHOWN AS FIXED ASSETS IN AUDI TED BALANCE SHEET OF THE ASSESSEE COMPANY, AUDITED BY A QUALIFIED CHARTERED ACCOUNTANT. MERELY BECAUSE THE NAME OF THE ASSESSEE COMPANY IS M/S. FAIRFIELD LAND DEVELOPERS PRIVATE L TD., IT DOES NOT IMPLY THAT EVERY LAND PURCHASED BY IT WAS DONE WITH THE INTENTION OF THE BUSINESS OF SALE AND PURCHASE OF PROPERTIES. ITA NO. 59/JP/2016 FAIRFIELD LAND DEVELOPERS (P) LTD. VS. ITO , WARD- 3 (2), JAIPUR 4 (D) EVEN IF LAND IS PURCHASED, THERE IS NO BAR IN HOLDING IT AS FIXED ASSETS INSTEAD OF STOCK IN TRAD E. WHAT IS TO BE SEEN IS THE INTENTION OF THE PERSON HOLDING T HE LAND. (E) THEREFORE, IN THE INSTANT CASE OF THE ASSESSEE COMPANY THE ABOVE INVESTMENT OF LAND DOES NOT AMOUN T TO STOCK IN TRADE. IN VIEW OF THE ABOVE, IT IS CRYSTAL CLEAR THE ASSES SEE COMPANY HAS MADE INVESTMENT IN THE LANDS AS FIXED A SSETS AND NOT FOR THE PURPOSE OF BUSINESS, THEREFORE, THE ABOVE LAND CANNOT BE TREATED AS STOCK IN TRADE. THE AO EXAMINED THE REPLY FILED BY THE ASSESSEE B UT IT WAS NOT ACCEPTABLE TO HIM. THE AO FURTHER NOTED THAT THE CO MPANY WAS FORMED WITH THE MAIN OBJECT TO DEAL IN THE BUSINESS OF REA L ESTATE, HENCE THE PURCHASE OF LAND CANNOT BE TERMED AS INVESTMENT. SE CONDLY, THE ASSESSEE COMPANY WAS PURCHASING LAND ON REGULAR BASIS AS THE FOLLOWING LANDS WERE ALSO PURCHASED DURING EARLIER YEARS. LAND AMOUNT 1.LAND AT KHERWADI (BADRI) RS. 9,00,000 2. LAND AT KHERWADI (DANE RAM) RS. 19,50,000 3. LAND AT KHERWADI(HANUMAN RS. 1,34,000 4. LAND AND BUILDING AT D-136B RS. 40,28,000 5.SHOP NO. 51, SUBHASH NAGAR RS. 45,63,400 THE AO THUS NOTED THAT THE ASSESSEE COMPANY HAD NOT FILED ITS WEALTH TAX RETURN THOUGH IT WAS HAVING TAXABLE WEALTH. THE AO THUS CAME TO THE ITA NO. 59/JP/2016 FAIRFIELD LAND DEVELOPERS (P) LTD. VS. ITO , WARD- 3 (2), JAIPUR 5 CONCLUSION THAT THE REPLY OF THE ASSESSEE WAS NOT F OUND ACCEPTABLE TO HIM BECAUSE OF THE REASON THAT THE LAND IN QUESTION IS STOCK IN TRADE AND THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT ARE AP PLICABLE IN THIS CASE. ACCORDINGLY, THE AO MADE DISALLOWANCE OF RS. 37.00 LACS IN THE CASE OF THE ASSESSEE. 2.2 AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFO RE THE LD. CIT(A) WHO HAD CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER:- (I) I HAVE CAREFULLY PERUSED THE SUBMISSIONS OF T HE APPELLANT AND THE MATERIAL PLACED ON RECORD. THE FA CTS OF THE CASE ARE THAT THE APPELLANT WAS INCORPORATED ON 28- 02-2006 WITH THE MAIN OBJECT, AS PER ITS MOA, AS UNDER:- 1. TO DEAL IN IMMOVABLE PROPERTIES SUCH AS LAND AND BUILDINGS AND TO PURCHASE, ACQUIRE, TAKE ON LEA SE OR IN EXCHANGE OR IN ANY OTHER LAWFUL MANNER IN INDIA OR ABROAD ANY AREA, LAND INCLUDING AGRICULTURE LAND, PLOT, BU ILDINGS, STRUCTURES, FACTORIES, FARM HOUSE AND ESTATES, REAL ESTATES OR INTEREST THEREIN AND ANY RIGHTS OVER OR CONNECTED W ITH THEM AND TO DEVELOP THE SAME FOR SALE ON INSTALMENTS OR OTHERWISE, IMPROVING, DECORATING, FURNISHING, MAINTAINING AND PLAZAS, SHOPPING MALLS, COMPLEXES, AMUSEMENT PARK, FLATS, G ARDENS, HOUSE, SHOPS SHOWROOM AND TOWNSHIPS AND TO EQUIP TH EM OR ANY PART THEREOF WITH ALL OR ANY AMENITIES OR CONVE NIENCES THEREON AND BY CONSOLIDATING OR CONNECTING OR SUBDI VIDING PROPERTIES AND LEASING OR DISPOSING OF THE SAME AND TO MANGE SUCH LAND AND BUILDINGS. 2. TO CARRY ON THE BUSINESS AS COLONIZERS, DEVELOPERS TO ACT AS CIVIL ENGINEERS, MANAGERS, ADV ISERS, CONSULTANTS, PLANNERS, ARCHITECTS, DESIGNERS, BUILD ING EXPERTS, PROMOTERS, CONTRACTORS, SUB-CONTRACTORS OF GOVERNME NT, SEMI ITA NO. 59/JP/2016 FAIRFIELD LAND DEVELOPERS (P) LTD. VS. ITO , WARD- 3 (2), JAIPUR 6 GOVERNMENT, GENERAL CONTRACTORS IN THE FILED OF REA L ESTATE IN INDIA OR ABROAD. (II) DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT COMPANY PURCHASE A PIECE OF LAND FOR A SU M OF RS. 37 LAC AND THE ENTIRE PAYMENTS WERE MADE IN CASH. T HE AO INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND MADE ADDITION OF RS. 37 LACS TO THE INCOME OF THE A PPELLANT. (III) DURING THE APPELLATE PROCEEDINGS, IT WAS THE ONLY CONTENTION OF THE APPELLANT THAT IT HAS NOT ST ARTED ITS BUSINESS AND THE LAND PURCHASED IS ITS FIXED ASSETS , AS IS EVIDENT FROM ITS FINANCIAL STATEMENTS AND SINCE IT HAS NOT CLAIMED ANY EXPENDITURE ON PURCHASE OF THE SAID LAN D, THEREFORE, NO DISALLOWANCE CAN BE MADE U/S 40A(3) O F THE ACT. (IV TO VIII).. (XI) DURING THE APPELLATE PROCEEDINGS, THE AR FILE D A COPY OF ORDER OF HON'BLE ITAT IN THE CASE OF ITO VS. NEON PROPERTIES (P) LTD. IN ITA NO. 1172/DEL/2011 T O SUPPORT ITS CLAIM. THE FACTS OF THE CASE ARE DISTIN GUISHABLE FROM THE FACTS OF IN INSTANT CASE UNDER CONSIDERAT ION AS IN THAT CASE ONE OF THE ANCILLARY OBJECT TO HOLD LAND FOR AGRICULTURAL ACTIVITIES AND THE APPELLANT WAS SHOWI NG AGRICULTURAL INCOME THEREON WHEREAS IN THE INSTANT CASE UNDER CONSIDERATION, NO INCOME WAS SHOWN BY THE APPELLANT ON ACCOUNT OF AGRICULTURE OPERATIONS. (XII) IN VIEW OF THE ABOVE DISCUSSION, THEREFORE, I T IS HELD THAT THE AO WAS JUSTIFIED IN TREATING THE PURC HASE OF LAND UNDER CONSIDERATION AS STOCK IN TRADE AND NOT AS FIXED ASSETS AS CLAIMED BY THE APPELLANT. THEREFORE, ACTI ON OF THE AO IN DISALLOWING A SUM OF RS. 37.00 LACS U/S 40A(3 ) OF THE ACT IS JUSTIFIED AND THUS THE ADDITION MADE THEREOF IS SUSTAINED. ITA NO. 59/JP/2016 FAIRFIELD LAND DEVELOPERS (P) LTD. VS. ITO , WARD- 3 (2), JAIPUR 7 2.3 THE LD. AR OF THE ASSESSEE DURING THE COURSE OF HEARING PRAYED THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE D ISALLOWANCE OF RS. 37.00 LACS MADE BY THE AO U/S 40A(3) OF THE I.T. ACT. THE LD. AR OF THE ASSESSEE FILED THE WRITTEN SUBMISSION WHICH HAS BEE N TAKEN INTO CONSIDERATION AS UNDER:- THE HUMBLE APPELLANT IN RESPECT OF SOLITARY GROUND NO.1 OF APPEAL MOST RESPECTFULLY BAG TO SUBMIT: BRIEF FACTS: 1. THE ASSESSEE IS A PVT. LTD COMPANY INCORPORATED ON 28.02.2006 WITH THE MAIN OBJECT OF CARRYING ON THE BUSINESS OF REAL ESTATE AS CONTAINED IN ITS MOA.(PB NO.21-41) 2. THE ASSESSEE HAS NO BUSINESS ACTIVITY SINCE ITS INCORPORATION EXCEPT PURCHASE OF CERTAIN LANDS IN EARLIER YEARS AND DURI NG THE RELEVANT PREVIOUS YEAR. 3.THE ASSESSEE HAVING NO OPERATING INCOME AND EXPEN DITURE AS PER AUDITED PROFIT &LOSS ACCOUNT HAS FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. NIL.(PB NO. 7-8-) 4. THE LANDS PURCHASED IN EARLIER YEARS AND DURING THE RELEVANT PREVIOUS YEAR HAVE BEEN CAPITALIZED AND SHOWN AS FIXED ASSET S IN THE BOOKS OF ACCOUNTS AND AUDITED BALANCE SHEET OF THE ASSESSEE.( PB NO.1 8). 5. THE AO OBSERVED FROM THE DETAILS FILED DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR HAS MADE CASH PAYMENT OF RS.3700000/- FOR PURCHASED OF LAND COMPRISING ONE AGRICULTURE LAND FOR RS.3400000/- AND OTHER LAND OF RS.300000/-.(PAGE NO.2 OF THE ASSESSMENT ORDER.) 6. THE AO FOR THE SIMPLE REASON THAT THE ASSESSEE C OMPANY HAS BEEN FORMED WITH MAIN OBJECT OF REAL ESTATE BUSINESS HEL D THE ABOVE SAID PURCHASE OF LANDS AS PURCHASE OF STOCK IN TRADE. ITA NO. 59/JP/2016 FAIRFIELD LAND DEVELOPERS (P) LTD. VS. ITO , WARD- 3 (2), JAIPUR 8 7. THE AO IGNORING THE AUDITED PROFIT & LOSS ACCOU NT CONTAINING NO INCOME AND EXPENDITURE DRAWN HIS OWN TRADING & PROFIT & LOSS ACCOUNT SHOWING THE RELEVANT PURCHASE OF LAND AS PURCHASE OF TRADING GOODS AND NET LOSS OF RS.6861/-(PAGE NO.8 AND 9 OF THE AS SESSMENT ORDER.) 7. THE AO FURTHER INVOKING THE PROVISIONS OF SECTIO N 40A(3) OF IT ACT 1961, DISALLOWED THE SAME AND ADDED TO NET LOSS OF RS.6861/- AS COMPUTED BY THE AO RESULTING IN ASSESSED INCOME OF RS.3693140/- AGAINST DECLARED INCOME OF RS.NIL. LEGAL SUBMISSION : 1. AS PER AUDITED PROFIT & LOSS ACCOUNT THE ASSESSE E HAS NO INCOME OR EXPENDITURE DURING THE RELEVANT PREVIOUS YEAR.( PB NO.15) 2. THE RELEVANT PURCHASE OF LAND OF RS.3700000/- HA S NOT BEEN CLAIMED AS EXPENDITURE EITHER BY WAY OF PURCHASE OF STOCK I N TRADE OR OTHERWISE. 3. THEREFORE QUESTION OF ANY DISALLOWANCE IN RESPEC T OF THE SAME U/S 40A(3) OR OTHERWISE DOES NOT ARISE. 4. THE AUDITED BALANCE SHEET AND PROFIT & LOSS ACCO UNT OF THE COMPANY HAVE BEEN DRAWN UP AND RETURNED INCOME OF R S. NIL HAS BEEN COMPUTED AND DECLARED IN ACCORDANCE WITH MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE AS PROVIDED U/S 145(1) OF IT ACT 1961. 5. THE AO HAS NOT RECORDED ANY FINDING AS REQUIRE D U/S 145(3) THAT: (I) EITHER THE BOOKS OF ACCOUNTS OF THE ASSESSEE A RE NOT CORRECT OR COMPLETE OR (II) METHOD OF ACCOUNTING OR PRESCRIBED ACCOUNT ING STANDARDS HAVE NOT BEEN REGULARLY FOLLOWED. 6. THEREFORE IT IS NOT OPEN FOR THE AO TO IGNORE TH E AUDITED PROFIT & LOSS ACCOUNT AND TO DRAW HIS OWN PROFIT & LOSS ACC OUNT, JUST FOR MAKING RELEVANT DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. ON MERITS: ITA NO. 59/JP/2016 FAIRFIELD LAND DEVELOPERS (P) LTD. VS. ITO , WARD- 3 (2), JAIPUR 9 8. ALTHOUGH THE COMPANY HAS BEEN FORMED WITH THE MAIN OBJECT OF CARRYING THE REAL ESTATE BUSINESS, HOWEVER AS EVIDE NT FROM THE AUDITED FINANCIAL STATEMENTS OF THE COMPANY, IT HAS NOT STA RTED ACTIVITY SINCE INCORPORATION EXCEPT PURCHASE OF CERTAIN LANDS. 9. THE COMPANY HAS NOT UNDERTAKEN ANY ACTIVITY OF C ONVERSION, DEVELOPMENT AND DIVISION OF THE LAND PURCHASED DURI NG THE RELEVANT PREVIOUS YEAR OR IN EARLIER YEARS. 10. THE COMPANY DURING THE PREOPERATIVE PERIOD HAS PURCHASED CERTAIN LANDS IN EARLIER YEARS AND DURING THE RELEV ANT PREVIOUS YEAR AS CAPITAL ASSETS TO TAKE BENEFIT OF PRICE RISING OVER LAPSE O F TIME. 11. THE INTENTION OF THE ASSESSEE TO HOLD THE RELEV ANT LAND AS CAPITAL ASSETS IS SELF EVIDENT FROM THE AUDITED BALANCE SHE ET OF THE ASSESSEE WHEREIN THE RELEVANT LAND HAS BEEN SHOWN AS FIXED ASSETS. 12. THE MERE FACT THAT THE ASSESSEE COMPANY HAS BEE N FORMED WITH THE MAIN OBJECT OF CARRYING ON REAL ESTATE BUSINESS, DO ES NOT IMPLY THAT THE COMPANY CANNOT PURCHASE ANY LAND AS FIXED/CAPITAL A SSETS AND EVERY LAND PURCHASED BY THE COMPANY HAS CHARACTER OF STOCK IN TRADE. 13. EVEN WHEN THE COMPANY HAS ITS MAIN OBJECT OF C ARRYING ON THE REAL ESTATE BUSINESS, THERE IS NO BAR IN PURCHASING AND HOLDING A LAND AS CAPITAL/ FIXED ASSETS. 14. EVEN WHEN THE ASSESSEE HAS NOT FILED ITS WEALT H TAX RETURNS, IF APPLICABLE, THE SAME DO NOT CHANGE THE NATURE AND C HARACTER OF THE RELEVANT LAND PURCHASED DURING THE RELEVANT PREVIOUS YEAR OR IN EARLIER YEARS. 15. THE RELEVANT LAND HAS BEEN PURCHASED AS FIXED/C APITAL ASSETS WHICH DOES NOT AMOUNT TO ANY EXPENDITURE FOR THE PURPOSE OF DISALLOWANCES U/S 40A(3) OF THE I.T. ACT, 1961 16. THE AO BY MAKING HIS OWN PROFIT & LOSS ACCOUNT AND SHOWING THE RELEVANT PURCHASE OF LAND AS STOCK IN TRADE HAS DRAWN A EXTRA ORDINARY INFERENCE IN CASE OF THE ASSESSEE, JUST TO INVOKE T HE PROVISIONS OF SECTION 40A(3) OF THE ACT. ITA NO. 59/JP/2016 FAIRFIELD LAND DEVELOPERS (P) LTD. VS. ITO , WARD- 3 (2), JAIPUR 10 17. THE AO HAS NOT DOUBTED THE GENUINENESS OF THE P AYMENT AND REGISTRATION OF THE SALE DEED AND SOURCE OF THE CAS H PAYMENT WHICH HAVE BEEN FULLY EXPLAINED. 18. THEREFORE THE AO IS NOT JUSTIFIED IN MAKING THE RELEVANT DISALLOWANCE OF RS.3700000/- JUST ON TECHNICAL GROU NDS BY FORCEFULLY INVOKING THE PROVISIONS OF SECTION 40A(3) WHICH ARE NOT APPL ICABLE IN CASE OF THE ASSESSEE. 19. EVEN WHEN THE RELEVANT LAND HAS BEEN PURCHASED WITH BORROWED FUNDS FROM DIRECTORS AND PURCHASE OF LAND AS FIXED ASSETS DO NOT FOUND PLACE IN MAIN OBJECTS/OTHER OBJECTS INCIDENTAL TO ATTAINM ENT OF MAIN OBJECTS, DO NOT CHANGE THE NATURE AND CHARACTER OF THE RELEVANT LAN D. 20. THE MAIN OBJECT CLAUSE AS CONTAINED IN MOA OF T HE COMPANY IS NOT AN EXHAUSTIVE LIST OF PERMISSIBLE ACTIVITIES TO BE UNDERTAKEN BY THE COMPANY, IT IS THE MAIN OBJECT WHICH IS TO BE PURSUED BY UNDERT AKING A LOT OF ACTIVITIES EITHER WHETHER LISTED IN OTHER OBJECTS INCIDENTAL T O ATTAINMENT OF MAIN OBJECTS OR NOT. 21. EVEN WHEN THE RELEVANT PURCHASE OF LAND IS ASSU MED TO BE ULTRA VIRES OF THE MOA, THE SAME CANNOT CHANGE THE NATURE AND CHARACTER OF THE LAND PURCHASED DURING THE RELEVANT PREVIOUS YEAR OR IN E ARLIER YEARS. 22. THE INTERESTED FREE AND LONG TERM FUNDS BORROWE D FROM DIRECTORS HAVE BEEN UTILIZED FOR PURCHASE OF THE LAND WHICH D O NOT CHANGE THE NATURE AND CHARACTER OF THE RELEVANT LAND. 23. THIS HON. BENCH VIDE LATEST DECISION DATED 31.0 3.2016, UNDER THE IDENTICAL FACTS IN THE CASE OF ACIT V. FOCAL POINT BUILDERS AND PROMOTERS PVT. LTD. ITA NO.759/JP/12, HAS DELETED THE SIMILAR DISA LLOWANCE MADE U/S 40A(3) OF THE ACT. 24. THEREFORE, YOUR HONOUR IS REQUESTED TO DELETE T HE RELEVANT DISALLOWANCE OF RS.370000/-AND CORRESPONDING ADDITI ON OF RS.3693140/-MADE TO RETURNED INCOME. 2.4 THE LD. DR RELIED ON THE ORDERS OF THE AUTHORIT IES BELOW. ITA NO. 59/JP/2016 FAIRFIELD LAND DEVELOPERS (P) LTD. VS. ITO , WARD- 3 (2), JAIPUR 11 2.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM FIXED ASSETS CHART OF THE COMPANY FROM AUDITED ACCOUNTS PLACED AT PAGE 18 OF THE PAPE R BOOK OF THE ASSESSEE THAT AS ON 31 ST MARCH 2012 ASSESSEE COMPANY HAS CREDITED THE TANGI BLE ASSETS BY AN AMOUNT OF RS. 36,30,983/- WHICH IS SH OWN AS INVESTMENT IN THE LAND. I HAVE ALSO GONE THROUGH THE MEMORANDUM AND ARTICLES OF ASSOCIATION WHEREIN THE MAIN OBJECTS TO BE PURSUED BY THE COMPANY ON ITS INCORPORATION WAS AS UNDER:- TO MANAGE LAND BUILDINGS, TO DEAL IN REAL AND PE RSONAL PROPERTY, TO INVEST AND DEAL WITH THE MONEY OF THE COMPANY NOT IMMEDIATELY REQUIRED TO IN SUCH A MANNER AS THE COM PANY MAY DEEM FIT. IT ALSO INCLUDES ACQUIRE ANY MOVABLE AND IMMOVABLE PROPERTY. I HAVE ALSO PERUSED THE PROVISION OF SECTION 40A(3) OF THE ACT WHICH IS MENTIONED AS UNDER:- SECTION 40A(3) -WHERE THE ASSESSEE INCURS ANY EXPEN DITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENT S MADE TO A PERSON IN A DAY, OTHERWISE THAN BY ACCOUNT PAYEE CH EQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. THIS SECTION MAKES IT CLEAR THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. THE ACCOUNTS OF THE ASSESSEE SHOWS THAT THE ASSESSEE ITA NO. 59/JP/2016 FAIRFIELD LAND DEVELOPERS (P) LTD. VS. ITO , WARD- 3 (2), JAIPUR 12 HAS NOT CLAIMED ANY SUCH EXPENDITURE IN ITS PROFIT AND LOSS ACCOUNT. THEREFORE, THERE CANNOT BE ANY DISALLOWANCE OF SUCH EXPENDITURE BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE AC T. THE LD. AR OF THE ASSESSEE HAS ALSO RELIED ON THE DECISION OF COORDIN ATE BENCH OF ITAT JAIPUR IN THE CASE OF ACIT, ALWAR VS. M/S. FOCAL PO INT BUILDERS & PROMOTERS (P) LTD. (ITA NO. 759/JP/2012 DATED 31-03 -2016) WHEREIN THE COORDINATE BENCH DECIDED SUCH ISSUE AS UNDER:- 7.1 WE HAVE PERUSED THE WRITTEN SUBMISSIONS AND ALSO GONE THROUGH THE ORDERS PASSED BY THE AUTHORITIES BELOW AND HAVE ALSO NOTED DOWN THE ARGUMENTS OF THE REVENUE. WHILE ADJUDICATING T HE FIRST ISSUE, WE HAVE HELD THAT THE INVESTMENT MADE BY THE ASSESSEE WAS NOT IN THE NATURE OF ADVENTURE AND IN THE NATURE OF TRADE AND HAVE ALSO HELD THAT THE SALE AND PURCHASE OF LAND IN INVESTMENT PORTFOLIO OF THE ASSESSEE. SINCE IT WAS MERELY AN INVESTMENT PORTFOLIO, THEREFORE, THE ACTIVITIES OF THE ASSESSE E WAS NOT IN THE NATURE OF ADVENTURE OF TRADE. HOWEVER THE PURCHASE OF LAND W AS AN INVESTMENT AND WAS NOT STOCK IN TRADE. THE CASH PAYMENT MADE BY THE AS SESSEE EXCEEDING RS. 20,000/- HAVE DULY BEEN EXPLAINED BY THE ASSESSEE. THE AO HAS NEITHER DOUBTED THE TRANSACTION NOR IT HAS DOUBTED EVEN TH E REGISTRATION OF SALE DEED NOR IT HAS DOUBTED THE AMOUNT. SINCE THE AO HAS NO T DOUBTED ANY OF THE ABOVE AND FURTHER THE LAND PURCHASE WAS IN THE NATURE OF INVESTMENT AND, THEREFORE, FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO (SUPRA) AND ALSO FOLLOW ING THE HONBLE JURISDICTIONAL HIGH COURT IN THE MATTER OF SMT. HAR SHILA CHORDIA VS. ITO, 298 ITR 349 (RAJ.) WHICH WAS RELIED UPON BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE MATTER OF GURDAS GARG VS. CIT, 63 TAXM ANN.COM 289 (P&H) WHEREBY IT HAS BEEN HELD THAT THE RIGOUR OF SECTION 40A(3) ARE NOT ATTRACTED. IN THE LIGHT OF THE ABOVE, THE GROUND OF THE REVENUE I S BOUND TO FAIL AND IS HERE BY DISMISSED. IN VIEW OF THE ABOVE FACTUAL AND LEGAL POSITION AND AFTER CONSIDERING THE DECISION OF COORDINATE BENCH OF ITAT JAIPUR IN THE CASE OF ACIT VS. M/S. FOCAL POINT BUILDERS & PROMOTERS (P) LTD. WHER E THE SIMILAR FACTS ITA NO. 59/JP/2016 FAIRFIELD LAND DEVELOPERS (P) LTD. VS. ITO , WARD- 3 (2), JAIPUR 13 AND CIRCUMSTANCES WERE INVOLVED, THE ADDITION OF R S. 37.00 LACS CONFIRMED BY THE LD. CIT(A) U/S 40A(3) OF THE ACT COULD NOT BE SUSTAINED. THE APPEAL OF THE ASSESSEE IS ALLOWED. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 /1 1/2016. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 15 /11/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. FAIRFIELD LAND DEVELOPERS (P) L TD. , JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 3 (2), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 59/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR