Essae Suhagraja Private Limited Vs DCIT (ITAT Bangalore)
AO Cannot Blow Hot & Cold—TDR Allowed; Penalty Deleted; Interest Disallowance Gone-
Contradictory Stand by AO on TDR Cost—ITAT Directs Allowance; Penalty u/s 270A Deleted; Interest Disallowance u/s 36(1)(iii) Also Reversed
AY 2018-19 – TDR Cost of ₹5.45 Cr
Assessee claimed cost of Transferable Development Rights (TDR) as business expenditure.
AO disallowed it in reassessment holding:
- No sale of flats in FY 2017-18 → TDR must be capitalised into WIP
- Deduction allowable only when flats are sold
However, in AY 2020-21 assessment, the same AO held that TDR pertains to AY 2018-19 & disallowed it as prior-period expenditure.
Thus, assessee was denied deduction in both years.
Tribunal held:
- AO “cannot blow hot & cold”—once AO states TDR belongs to AY 2018-19, he must allow it in AY 2018-19.
- TDR cost is undisputedly incurred for business.
Held: AO directed to allow full TDR deduction of ₹5.45 crore in AY 2018-19.
Appeal partly allowed.
AY 2021-22 – Penalty u/s 270A on Keyman Insurance Premium
AO disallowed ₹46.46 lakh (investment portion of Keyman policy premium) & levied 200% penalty u/s 270A alleging misreporting.
Tribunal held:
- Allowability of Keyman premium is a debatable issue with judicial support (e.g., Shri Nidhi Corporation, P&H HC rulings).
- Penalty cannot be levied where the underlying issue is debatable.
- AO failed to specify under which limb of s.270A penalty applied—contrary to Delhi HC in GE Capital US Holdings (2024).
Held: Penalty of ₹23,38,610 deleted.
