Case Law Details
Beau Jhelum Traders and Developers Pvt Ltd Vs ACIT (ITAT Bangalore)
ITAT Bangalore held that the compensation paid for delay in handing over of possession of the property is the liability that arose in the course of business of assessee and hence allowable as business expenditure.
Facts- The assessee is a private limited company and said to be engaged in the business of construction of commercial building for the purposes of sale and letting out. For the year under consideration, it had filed return of income declaring total income of Rs.5,91,38,960/-. The return was selected for scrutiny and statutory notices were issued to the assessee.
AO noted that the assessee had claimed project expenses amounting to Rs.20,09,00,560/-. In the breakup of the expenses the AO noted that the assessee had paid a sum of Rs.2 crores as compensation. AO was of the opinion that the compensation cannot be considered as project cost as it is directly linked to buy back of built up area of the assessee, which is attributable directly to cost of capital. AO arrived at such conclusion as assessee had shown brought back built up space as capital assets. AO opined that as the 75% of project is capital asset, the amount paid acquiring the asset should have been capitalized as cost for capital asset. He thus, disallowed the sum of Rs.2 crores being compensation for buying back of built up space.
CIT(A) upheld the action of AO. Being aggrieved, the present appeal is filed.
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