2011 (6) TMI 793 - AT - Income Tax

Summary

Issues involved:
1. Computation of total taxable income for A.Y. 2007-08 based on e-return filed by the assessee.
2. Disallowance of additional development cost paid to the Municipal Corporation.
3. Disallowance of site development expenses, BMC expenses, and brokerage charges.

Issue 1: Computation of total taxable income for A.Y. 2007-08
- The assessee filed an e-return showing a loss of Rs. 23,11,275 for the Assessment Year 2007-08.
- The Assessing Officer (A.O.) considered the income as Nil and made additions for additional development cost, site development expenses, BMC expenses, and brokerage charges.
- The Ld. CIT(A) dismissed the appeal, stating that the columns showing loss in the return did not represent total income.
- The assessee argued that the Ld. CIT(A) overlooked the e-filing Acknowledgement where the total loss was clearly mentioned.
- The ITAT allowed the loss of Rs. 23,11,275 from the taxable income for A.Y. 2007-08.

Issue 2: Disallowance of additional development cost paid to the Municipal Corporation
- The A.O. disallowed Rs. 24,24,200 as additional development cost paid to BMC, considering it capital in nature.
- The Ld. CIT(A) upheld the disallowance, stating the payment was a penalty for unauthorized development and not a revenue expenditure.
- The assessee appealed, presenting the order of the Municipal Corporation which mentioned the penalty and enhanced fine for unauthorized work.
- The ITAT held that the expenditure was for saving the building from demolition, necessary for the business, and allowed the deduction as a permissible business expense.

Issue 3: Disallowance of site development expenses, BMC expenses, and brokerage charges
- The Ld. CIT(A) sustained the disallowance of site development expenses, BMC expenses, and brokerage charges due to lack of details and vouchers.
- The assessee argued that the expenses were shown in Work in Progress and should not be disallowed.
- The ITAT allowed these grounds of the assessee, finding that everything was accounted for in Work in Progress, hence no disallowance was warranted.

In conclusion, the ITAT Mumbai allowed the appeal filed by the assessee, permitting the deduction of the loss from taxable income, recognizing the additional development cost as a necessary business expense, and overturning the disallowance of site development expenses, BMC expenses, and brokerage charges.