COMMISSIONER OF INCOME-TAX Vs. SHRIRAM BUILCONS LTD

JUDGEMENT

(1.) Heard Mr. Anand Parchure, learned Counsel for the appellant, and Shri C.J. Thakar, learned Counsel for the respondent.

(2.) All these four appeals under Section 260A of the Income Tax Act, 1961 , have been preferred by the Revenue against the common order dated August 24, 2005, passed by the Income Tax Appellate Tribunal, Nagpur Bench, Nagpur ("the ITAT" for short), disposing of Income Tax Appeal Nos. 200/Nag/2002, 107/Nag/2003, 108/Nag/2003 and 201/Nag/2002.

(3.) The respondent in the above appeals is the successor of M/s Shriram Builcons (hereinafter referred to as "the assessee") who was the civil contractor and builder. On August 4, 1996, the assessee entered into a development agreement with Bharat Kheta and others for development of business complex on their land situated on Kingsway Civil Lines, Nagpur. As per the said agreement, the assessee was given development rights to construct multistoreyed commercial complex at their cost as per the sanctioned plan. The consideration agreed to be paid by the assessee to Khetas was Rs. 3.81 crores for which post-dated cheques were given. There were 21 tenants in the said premises. It was the responsibility of the assessee to get them vacated at their cost. The project was to be completed within four years. Mr. Kheta and others agreed to transfer directly the proportionate share in land to respective purchasers of shop and offices, etc., as may be nominated by the assessee. With a view to complete the project in time the assessee negotiated with the tenants and got them vacated by paying compensation. During the assessment year 1997-98 the settlement was arrived at with some tenants for which compensation of Rs. 38 lakhs was paid while in the assessment year 1998-99 compensation of Rs. 79,84,987 was paid. The assessee claimed deduction of the said amount in its profit and loss account for the assessment years 1997-98 and 1998-99 respectively. The deduction so claimed was allowed by the Assessing Officer in scrutiny assessment under Section 143(3) for the said two years. Similar expenses paid in earlier years were also allowed by the Department. The amounts paid to the tenants were allowed in the respective years as revenue expenditure and such expenditure was never treated as one relating to stock-in-trade or work-in-progress.