MEGA INFRAPROJECTS PVT. LTD.,NEW DELHI vs. ACIT, NEW DELHI

Brief facts of the case shows that assessee is a company, filed its return of income on 24/9/2011 declaring loss of ₹ 1 5649/–. Search and seizure operation was carried out at the various premises of the BPTP Ltd and its group concern and associated person on 7/12/2010 which was finally concluded on 5/2/2011. The case of the assessee was picked up for scrutiny. The assessment under section 143 (3) of the act was passed on 28/3/2013 wherein one of the disallowances, which is contested in this appeal of ₹ 1 230000/– was made under section 40A (3) of the income tax act. This is the only dispute in this appeal.

During the course of assessment proceedings the AO noticed that the assessee company has acquired various land from farmers and on perusal of the details of payment made by the assessee company for acquiring the land from farmers, it has been noted that assessee has made part payment of total sale consideration in cash of ₹ 1 230000/–. As the above sum was paid in cash, AO noted that it is in contravention of provisions of section 40A (3) of the act. The assessee explained that entire expenditure was incurred for the purchase of land which was reimbursed by Countrywide promoters private limited. The above expenditure has not been debited in the profit and loss account and no expenditure incurred on purchase in cash was debited or claimed by the assessee as deduction. It is the reimbursement of the cost for the purchase of land as per the collaboration agreement. The learned assessing officer rejected the contention of the assessee. He held that above payment has been made in contravention of the provisions of section 40A (3) and is not covered by the exceptions referred to in rule 6DD of the income tax rules 1962. He therefore disallowed 100 % of the above cash payment. 5. The assessee preferred an appeal before the learned CIT – A who also confirmed the above disallowance. 6. The learned authorised representative submitted that identical issue has been considered by the coordinate benches in the group concerns wherein it has been held that if the expenditure has not been debited to the profit and loss account but is reimbursed by the another company, there is no claim made by the assessee as an expenditure as none of these expenditure has entered into the profit and loss account, therefore the provisions of section 40A (3) of the income tax act does not apply to the same. The assessee submitted a list of such 29 orders passed by the coordinate benchs on identical facts and circumstances deleting the above disallowance. 7. The learned authorised representative reiterated the findings of the lower authorities.