The Income Tax Appellate Tribunal, Kolkata denied the deduction on Marketing & Sales expenses to real estate developer, citing absence of specific ICDS.
Facts
Assessee is engaged in the business of real estate, primarily in the development of residential as well as commercial complexes. Return of income was filed on 30/10/2019 which was subsequently revised on 30/6/2020, reporting total income of Rs.11,17,38,170/- computed under the normal provisions of the Act since tax payable on the book profit under section 115JB of the Act was less than the tax payable under the normal provisions of the Act.
Return of the assessee was processed by Centralized Processing Centre, Bengaluru (CPC), for which intimation u/s 143(1) of the Act was issued on 7/10/2020. In the return so processed, adjustments aggregating to Rs. 18,35,758/- were made to the total income returned by the assessee. This amount comprised Rs. 4,20,000/- towards disallowance u/s 40(a)(ia) of the Act and Rs. 14,15,758/- u/s 43B of the Act. Further, there was an adjustment made in the book profit computed u/s 115JB of the Act, by which the book profit was increased by an amount of Rs.1,62,91,689/-.
Decision
The two member bench of Rajpal Yadav, Vice President and Girish Agrawal, Accountant Member found that, CIT(A) has merely given directions to the AO to verify the records and based on his verification of the records, he may consider the additions / disallowances to be made.
The bench noted that approach adopted by the CIT(A) is not in accordance with the provisions of section 250 of the Act which prescribes the procedure in appeal to be complied with by the CIT(A). Further, section 251 adequately empowers the CIT(A) to exercise his powers while disposing the appeal.
The bench held that disallowance made u/s 40(a)(ia) and 43B of the Act is not warranted.
The Tribunal noted that section 145 and 145A of the Act provides for computation of income under the head ‘profits and gains from business or profession’ and ‘income from other sources’ by applying the ‘Income Computation and Disclosure Standards (ICDS)’. Since no specific ICDS has been notified for real estate developers, revenue and cost recognition is governed by the applicable accounting standards and Ind.
It was held by the bench that the claim of deduction made by the assessee towards marketing and sales expenses relating to project Avidipta-II are not allowable in the year under consideration while computing the total income under the provisions of the Act.
Case title: Bengal Peerless Housing Development Company Limited v/s Deputy Commissioner of Income Tax
Citation: ITA No. 317/Kol/2022
