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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI [CAMP: MADURAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) – 1, Tiruchirapalli, dated 20.05.2015 and pertains to assessment year 2011-12.
Shri S. Renga Rajan, the Ld. Departmental Representative, submitted that the only issue arises for consideration is with regard to disallowance of `39,66,750/- under Section 40A(3) of the Income- tax Act, 1961 (in short "the Act"). According to the Ld. D.R., the assessee has transferred his stocks to a firm known as Priya Promoters in which the assessee and his wife Smt. Jean Fleming Rose are partners. The book value of the stock transferred was `7,56,04,064/-. This was accounted as purchase in the firm’s books. It is seen from the day book and ledger produced by the assessee that the assessee has incurred an expenditure on the project to the extent of `39,66,750/- towards development expenses on various occasions. The expenditure incurred was more than the limit prescribed under Section 40A(3) of the Act. Therefore, the Assessing Officer disallowed the same while computing taxable income. The Ld. D.R. further pointed out that the assessee using the firm as colourable device, avoided taxation on this expenditure.
Hence, according to the Ld. D.R., the CIT(Appeals) is not justified in allowing the claim of the assessee.
On the contrary, Shri S. Sridhar, the Ld. counsel for the assessee, submitted that disallowance can be made only in case the assessee claims the same in computation of income. Since the assessee has not claimed the expenditure, there cannot be any disallowance at all. According to the Ld. counsel, the land development expenditure was incurred for removing the gravel.
The payment was actually in the nature of advance. The assessee has not claimed this as expenditure in the computation of income.
Therefore, according to the Ld. counsel, the CIT(Appeals) has rightly allowed the claim of the assessee.
We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer can disallow the claim of the assessee provided the same was claimed as deduction in the computation of income. In this case, it is not disputed that the assessee has not claimed the same as deduction. Therefore, as rightly observed by the CIT(Appeals), disallowance of an expenditure, which is not claimed in the computation of income, cannot be disallowed. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced on 20th April, 2017 at Chennai.