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Facts
The revenue filed appeals against the order of the Ld.CIT(A) regarding denial of exemption under Section 11 of the Income Tax Act, 1961, and the taxation of surplus income at Maximum Marginal Rate (MMR). The assessee filed cross-objections challenging the search proceedings and the disallowance of certain expenses under Section 40A(3).
Held
The Tribunal held that denial of exemption under Section 11 should be restricted only to the part of income that violates Section 13(1)(c) and not the entire income. The disallowance under Section 40A(3) was also restricted. The cross-objections regarding the validity of the search were dismissed, but the issue regarding the purchase of agricultural land was partly allowed.
Key Issues
The primary issues were whether the denial of exemption under Section 11 should apply to the entire income or only the violating portion, and the validity of disallowances made under Section 40A(3).
Sections Cited
143(3), 153A, 250, 11, 13, 13(1)(c), 13(1)(d), 40A(3), 132, 132(1), 132(2), 164, 164(2), 46A, 80G, 12A, 10, 10(23C), 11(4A), 11(5)
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S.R.RAGHUNATHA
per acre which works out to Rs.24.00 lakhs should be adopted as the average purchase price.
On this issue, we find that the ld.CIT(A) has adopted the average purchase price after considering the on-money payment at Rs.8,25,000/- in place of the documented value for purchase of 98.33 acres.
We also find that the factors/difficulties involved in establishing an agricultural college by the assessee, particularly with respect to the acquisition of around 100 acres, cannot be simply brushed aside. In this regard, we cannot close our eyes to the unfortunate practice of payment of on-money in the real estate sector in our country and none can deny this factual situation and more so in the case of acquiring agricultural lands in village. This is all the more so, when an assessee is forced to acquire contiguous lands to an extent of around 100 acres.
1. :-40-: ITA. Nos.:234, 235, 236 & 237/Chny/2025 & CO Nos.59, 60,61 & 62/Chny/2025 54. In these circumstances, the quantification of on-money payment is the only aspect to be decided on this issue raised by the assessee. While, the ld.CIT(A), has adopted the average rate per acre of Rs.8,25,000/- as on-money payment, the ld.AR contends that the average rate per acre is to be adopted at Rs.24,00,000/- and on-money be quantified for the 98.33 acres, on such a basis.
We find that the average rate of purchase considered by the ld.CIT(A) is based on the purchase price of the land at Rs.8.25 Lakhs per acre for the A.Y.2016-17. Therefore, it is undisputed fact that there is on-money paid for purchase of agricultural land from the farmers. However, the assessee has furnished a registered sale deed for purchase of agricultural land at immediate vicinity of the agricultural lands at Rs.24.01 Lakhs per acre by paying Rs.9.25 crores for 38.51 acres during the A.Y.2021-22. In this peculiar circumstances of the present case, we can reasonably estimate the on-money could have been paid by the assessee for purchase of balance land of 59.82 acres out of 98.33 acres totally purchased by allocating incremental growth in the rate per acre from Rs.8.25 lakhs in the A.Y. 2016-17 to Rs.24.01 lakhs per acre in the A.Y.2021-22. Hence, the total incremental rate per acre is Rs.15,75,000/- for a span of 5 years, i.e. Rs.3,15,000/- per acre per year. Therefore, in order to meet the ends of justice, we are of the considered view that the estimated cost of land acquired including on-money payments made by the assessee shall be considered as detailed below:
:-41-: ITA. Nos.:234, 235, 236 & 237/Chny/2025 & CO Nos.59, 60,61 & 62/Chny/2025 A.Y. Extent of Land Rate per acre in Purchase Value in Acquired Rs. Rs. 2016-17 0.40 8,25,000/- 3,30,000/- 2017-18 7.49 11,40,000/- 85,38,600/- 2018-19 14.89 14,55,000/- 2,16,64,950/- 2019-20 36.00 17,70,000/- 6,37,20,000/- 2020-21 1.04 20,85,000/- 21,68,400/- 2021-22 38.51 24,01,973/- 9,25,00,000/- TOTAL 98.33 18,89,21,950/-
In light of the above discussion, we direct the Assessing Officer that the on-money payment from suppressed fee receipt in cash be quantified by adopting the average price as per the table (supra).
In view of the foregoing, we decide this ground of cross-objection of the assessee as partly allowed.
In the result, the appeals of the revenue are dismissed and the cross- objections of the assessee for the AYs 2016-17 to 2018-19 and 2020-21 are partly allowed.
Order pronounced in the open court on 17th November, 2025 at Chennai.