HC allows collaboration Expense: AO cannot decide reasonable amount of expense

CCIT Vs Vishnu Apartments Pvt. Ltd. (Delhi High Court)

Delhi High Court Upholds Tribunal’s Decision on Collaboration Agreement Expenses

The Delhi High Court, in the case of CCIT vs. Vishnu Apartments Pvt. Ltd., has upheld the decision of the Income Tax Appellate Tribunal (ITAT) regarding the assessment year 2010-11. The appeal by the revenue sought to challenge the Tribunal’s order, specifically contesting the deletion of an addition amounting to Rs. 47.07 crores made by the Assessing Officer (AO).

Background: The dispute arose from a collaboration agreement dated 06.09.2004 between the respondent/assessee and MGF Development Ltd. regarding an integrated hotel project in Jaipur. The project included the construction of a mall and a hotel named Hotel Fortune Select Metropolitan. The AO made an addition of Rs.47.07 crores, contending that the collaboration agreement represented a sham transaction.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, and this decision was confirmed by the Tribunal. The revenue, dissatisfied with the outcome, approached the Delhi High Court.

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