2023 (11) TMI 941 - AT - Income Tax

Allowability of Brokerage expenses - AO disallowed the claim of brokerage paid by the assessee for enabling it to lease part of the SEZ premises to three parties - Assessee provided names and addresses of the parties along with invoices. However, AO was not satisfied - HELD THAT - As decided in the case of M/s. Candor Gurgaon Two Developers and Projects Pvt. Ltd 2023 (7) TMI 400 - ITAT DELHI invoices produced by appellant mentions details of the premises let out and the party to whom the lease was made. The copies of lease deed have also been placed on record. Ld. Tax Authorities have fallen in error in want of more evidences. When assessee is engaged in the business of rental of the properties then engaging brokers for procurement of the tenants is a common practice and the expenses of brokerage thus, have to be considered to have been incurred in ordinary course of business.Decided in favour of the assessee. Deduction u/s 80-IAB - AO disallowed deduction on car parking income, income from health club, income from food court and interest income. Ld. CIT (A) confirmed the disallowance - HELD THAT - Notification of the Government of India dated 27th October 2006, certain operations were listed to be used by the Board of Approval while approving authorised operations in the SEZ. This list included parking, club house, shopping arcade, convention centre, etc. As decided in the case of M/s. Candor Gurgaon Two Developers and Projects Pvt. Ltd. 2023 (7) TMI 400 - ITAT DELHI has allowed 80-IAB deduction in similar circumstances by holding that the issue is covered in favour of the assessee by case of Meghalaya Steels Ltd. 2016 (3) TMI 375 - SUPREME COURT . In the same order ITAT has allowed deduction towards section 80-IAB towards car parking rental in favour of the assessee. We find that the above instances are assessee s group cases and cover the issue in favour of the assessee. Accordingly, we hold that assessee is entitled to deduction u/s 80-IAB towards car parking income, income from health club, income from food court and interest income. This issue is decided in favour of the assessee.

Summary

Issues involved:
The issues in this case involve the disallowance of brokerage expenses under section 37 of the Income Tax Act, 1961, denial of deduction under section 80-IAB for various sources of income, non-adjudication of penalty proceedings under section 271(1)(c), and disallowance of interest liability on share application money.

Disallowance of Brokerage Expenses:
The Assessing Officer disallowed the claim of brokerage paid by the assessee for leasing part of the SEZ premises to three parties, amounting to Rs. 1,58,22,131. The assessee provided names, addresses, and invoices, but the AO required additional documentary evidence. The disallowance was upheld by the CIT (Appeals). However, the ITAT in a related case decided in favor of the assessee, stating that engaging brokers for tenant procurement is common in rental business, and the expenses should be considered ordinary. The ITAT found this case applicable and decided in favor of the assessee.

Denial of Deduction under Section 80-IAB:
The AO disallowed the 80-IAB deduction on income from car parking, health club, food court, and interest income. The CIT (Appeals) upheld the disallowance. The assessee argued that these income sources are linked to its main activities, supported by a government notification listing approved operations in the SEZ. Referring to a previous ITAT decision in the assessee's group cases, the ITAT found that the activities were covered by the notification and allowed the deduction under 80-IAB. Citing a Supreme Court judgment, the ITAT held that the assessee is entitled to the deduction for car parking income, health club income, food court income, and interest income.

Penalty Proceedings under Section 271(1)(c):
The assessee raised a ground regarding the initiation of penalty proceedings under section 271(1)(c) without discussing the merits. However, the issue was not pressed by the assessee's counsel, and hence, was dismissed as not pressed.

Disallowance of Interest Liability on Share Application Money:
The CIT (Appeals) upheld the disallowance of interest liability on share application money shown under other current liability. The assessee prayed for the deletion of this disallowance, but this issue was not further elaborated upon in the judgment.

In conclusion, the ITAT Delhi partially allowed the assessee's appeal concerning the disallowance of brokerage expenses and denial of deduction under section 80-IAB. The ITAT ruled in favor of the assessee based on previous decisions and relevant legal provisions. The penalty proceedings issue was dismissed, and the disallowance of interest liability on share application money was not discussed further in the judgment.