2020 (7) TMI 40 - AT - Income Tax

Land Development Expenses - AO proceeded to disallow 20% assessee could not produce the relevant details - HELD THAT - It is an undisputed fact that the assessee is in the real estate business and the expenses are on account of Land Development . It is also a fact that it is not the case of the Revenue that the expenses incurred by it under this head is bogus as is evident by the fact that AO has not disallowed the entire expenses but has only disallowed 20% of the expenses. Considering the totality of the aforesaid facts, we are of the view that the disallowance made by the AO at 20% is at a higher side. We are of the view that the interest of justice shall be met if the disallowance is restricted to 10% of the expenses. Deduction claim u/s 80G - AR s contention that the amount of donation has been made to SPYM through banking channels and has the relevant receipts but it could not be produced for verification before lower authorities - As further his prayer that an opportunity be granted to him to produce the same before the lower authorities - HELD THAT - Assessee s submission that the approval of the Trust u/s 80G continues and has not been withdrawn has not been controverted by Revenue. Considering the aforesaid submission and undertaking given by the AR, we are of the view that one more opportunity be granted to the assessee to produce the relevant evidence of giving the donation. We, therefore, direct the assessee to produce the necessary evidence before the AO. The AO is directed to verify the evidence furnished by the assessee and after its verification the claim of the assessee is found to be correct, the assessee be allowed the claim of the deduction in accordance with law. Thus ground of assessee is allowed for statistical purposes.

Summary

Issues:
1. Disallowance of Land Development Expenses
2. Disallowance of deduction claim u/s 80G

Issue 1: Disallowance of Land Development Expenses

The assessee, a real estate company, filed its return for A.Y. 2013-14 declaring total income of &8377; 13,67,710, which was later determined at &8377; 59,67,459 by the AO. The AO disallowed 20% of the Land Development Expenses claimed by the assessee, amounting to &8377; 19,17,251, due to lack of supporting evidence. The CIT(A) upheld this disallowance. The ITAT Hyderabad found that the disallowance at 20% was excessive and reduced it to 10% of the expenses, stating that the interest of justice would be met with this adjustment. The ground of appeal was partly allowed.

Issue 2: Disallowance of Deduction Claim u/s 80G

The AO denied the deduction claim u/s 80G of &8377; 26,82,500 made by the assessee, as supporting evidence for the donations was not produced. The CIT(A) upheld this decision, noting that the approval for the donations had expired. The ITAT Hyderabad considered the specific donation of &8377; 46,00,000 made to SPYM and directed the assessee to produce the necessary evidence before the AO for verification. The ITAT allowed the ground of the assessee for statistical purposes, granting an opportunity for the assessee to prove the genuineness of the donation. The appeal was allowed for statistical purposes.

This judgment by the ITAT Hyderabad involved the disallowance of Land Development Expenses and the deduction claim u/s 80G. The ITAT reduced the disallowance of Land Development Expenses from 20% to 10% as it was deemed excessive, and directed the assessee to produce evidence for the specific donation to SPYM to qualify for the deduction claim u/s 80G.