Case Law Details
Kalyan Constructions Vs ITO (ITAT Hyderabad)
Provisions of Section 40A(3) mention that where an assessee incurs any expenditure in respect of which payments were made to a person otherwise than by way of crossed cheque or account payee cheque, no deduction shall be allowed in respect of such expenditure. It is humbly submitted that when the assessee himself has not claimed any expenditure and when the assessee treated the amount as capital expenditure, there is no requirement for making any such disallowance. The provision of sec. 40A(3) has application only to the revenue expenditure debited to the Profit and Loss account where such expenditure is claimed. In the case of the assessee, no such claim was made in the P&L A/c and also the assessee has not capitalized the full value as per agreement of sale, but, capitalized only the amount as per registered sale deed, therefore, there is no question of making any disallowance.
We notice that assessee has purchased the land at Haripuri colony with the registered value of Rs. 58 lakhs, but, he has entered in to agreement of sale for Rs. 2.08 crores. He paid the registered value by cheque and balance in cash. In the reassessment, the AO disallowed the payment in cash u/s 40A(3). In our considered view, section 40A(3) can be invoked only when the assessee claims the payment in cash as business expenditure or treated as stock or capitalized the same in order to claim depreciation in the future. We notice that the assessee has not claimed the payment of Rs. 1 .50 crores as expenditure or capitalized the same in the value of the land. The assessee has submitted copy of the ledger “land at Saroor Nagar”, as per which, assessee has debited the value as per registered document and further development expenditure in that project. It has not charged the cash payment of Rs. 1 .50 crores to the said land at Saroor Nagar. This fact was also confirmed by the AO in his submission which was submitted by ld. DR before us. This submission is extracted in para 7. It clearly shows that assessee has not capitalized the above cash payment in fixed assets. Therefore, assessee cannot claim any expenditure or even convert the same as business assets or stock in trade, the cash payment of Rs. 1 .50 crores is not part of value of land. Hence, it cannot be a part of future business expenditure. Therefore, the contention of the revenue authorities is not correct to say that assessee has converted the land in the subsequent year amounts to claim of expenditure in the subsequent AY, as the value of Rs. 1.50 crore is not part of land in first place. Hence, the disallowance u/s 40A(3) is accordingly deleted.
FULL TEXT OF THE ITAT JUDGMENT
This appeal filed by the assessee is directed against the order dated 05/1 0/20 1 6 of CIT(A) – 4, Hyderabad for AY 2009-10.
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