The Income Tax Appellate Tribunal (ITAT), Delhi Bench deleted the disallowance made on account of parking space provided to shop owners/office owners of the mall.
The assessee, M/s. Crown International is a partnership firm engaged in the business of real estate and renting of properties. The total income of the assessee comprises income from business and profession. Assessee has filed its return of income declaring income of Rs.71,531,420. The case of the assessee was selected for limited scrutiny to examine mismatch in profit before tax as per profit and loss account and schedule BP, high interest expenditure against capital shown in the working progress et cetera.
The assessee submitted that the cost of parking space for shops already sold cannot be carried on in work in progress but has to be charged to the profit and loss account and therefore the value of this land has not been carried in work in progress at the end of the year. Assessee also stated that due to the agreement the assessee is not in position to sell the land as on the date.
The AO construed the above explanation of the assessee holding that land is considered as a non-depreciable asset, the assessee is in fact utilizing a capital asset for his business purpose. It was held that the title of the land has not been transferred at all and still lies with the assessee thus as long as the rights of the land lie with the assessee its value cannot be considered zero. Therefore the land in question is still capital in nature as the expenses cannot be booked in the profit and loss account and therefore he disallowed the same.
The coram of Bhavnesh Saini and Prasahant Maharishi noted that the assessee has met its obligation by providing a plot of land to be used as a parking space by the shop owners and therefore the assessee is entitled to claim deduction of the cost of land given for parking space. Even after the passing of almost a decade, the assessee has not sold that plot of land, which was used as a parking space by the shop owners. Even if it would be sold at any later point of time by the assessee, as the assessee is a legal owner, the necessary profit is required to be charged to tax.
The ITAT observed that assessee would be income of the assessee as the assessee has already taken the cost of the plot as a deduction under section 37 (1) or under section 28 of the income tax act. By providing the plot of land the assessee has incurred a cost of the project for providing the parking space to the shop owners, which was a commercial obligation on the assessee, the above cost is required to be granted as deduction to the assessee.
The tribunal while reversing the order of the lower authority directed the assessing officer to delete disallowance of Rs. 3,79,09,943 on account of parking space provided to shop owners/office owners of the mall.
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