The Delhi bench of the Income Tax Appellate Tribunal(ITAT) has held that a ‘Non-saleable area’ in real estate projects does not amount to suppression of closing stock and addition is not permissible.
Trehan Promoters and Builders Pvt. Ltd, the assessee was engaged in the business of purchase, construction, development and sale of commercial IT space at Gurgaon, Haryana. The assessee company filed its return declaring a total income of Rs. 98,15,610/- for the assessment year 2015-16, the case was selected for scrutiny, and accordingly statutory notices were issued.
An assessment order came to be passed on 28.12.2017 by making the addition of Rs. 4,40,57,000/- being suppression of closing stock and a sum of Rs. 11,66,454/- has been disallowed under section 37 of the Act.
On appeal, the CIT(A) deleted the addition of Rs. 4,40,57,000/- on account of suppression of stock and also deleted the disallowance of Rs. 7,09,000/- out of the total addition of Rs. 11,66,454/- made by the A.O u/s 37 of the Act.
It was submitted that the CIT(A) has committed an error in deleting the additions made on account of suppression of closing stock and also erred in deleting the disallowance made u/s 37 of the Income Tax Act and relied on the assessment order.
While making the addition on account of suppression of stock, the AO observed that the assessee had a closing stock of space of semi-finished land as also a package of land tagged as ‘non-saleable area’ for common facilities which quantified to 37.75 sq ft of area.
The CIT(A) after considering that the non-salable area comprises of pump room, generator room, chiller plant room etc. which are a requirement for real estate projects since the same are essential to facilitate the smooth operations and accessibility of the saleable area deleting the addition.
A Coram of Dr B R R Kumar, AM and Shri Yogesh Kumar U S, JM observed that the ‘non saleable area’ are a requirement for real estate projects, without such facilities/compositions smooth operation cannot be conducted.
As per the certificate of the architect, and tax audit reports, the bench observed that the assessee has duly demonstrated consistency in its accounting practice and its acceptance by the Assessing Officer as well. While dismissing the appeal of the revenue, the Tribunal upheld the findings of the CIT(A).
Shri R.S. Ahuja, CA appeared for the assessee and Shri Vivek Vardhan appeared for the revenue.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
