Jayant Hari Mulay, Pune V. Deputy Commissioner of Income-Tax, Circle -2, , Pune

ITA 508/PUN/2023

AI Insights

The case involves Jayant Hari Mulay, a promoter and builder, who appealed against the order of the CIT(A) confirming the disallowance of Rs.12.00 lakh claimed as a deduction for compensation paid to a landlord. The compensation was part of a total of Rs.37.00 lakh agreed upon for the delay in handing over possession of constructed flats, which was initially due in 2013-14 but completed in 2017. The AO disallowed the claim based on the interpretation of section 18 of the Real Estate Regulatory Authority (RERA), 2016, which pertains to compensation to flat owners, not land sellers. The tribunal found inconsistencies in the assessee's claims regarding the nature of the compensation and remitted the matter back to the AO for further examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124150 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-06-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 27-04-2023
• Laws Referred To: Income-tax Act, 1961, Real Estate Regulatory Authority (RERA), 2016
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT आयकर अपील सं. /ITA No.508/PUN/2023 नधा रण वष / Assessment Year : 2018-19 Jayant Hari Mulay, Bellevista S.No.40-9, Bhonde Colony, Erandwane, Pune 411 004 Maharashtra PAN : AAXPM1901D Vs. DCIT, Circle-2, Pune Appellant Respondent आदेश / ORDER PER R.S. SYAL, VP: This appeal by the assessee is directed against the order dated 01-03-2023 passed by the CIT(A) in National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2018-19. 2. The only issue raised in this appeal is against the confirmation of disallowance of Rs.12.00 lakh towards the amount paid to the landlord as compensation. 3. Pithily put, the facts of the case are that the assessee is a Promoter and Builder who had purchased certain piece of land for Assessee by Shri Sharad A. Shah Revenue by Shri Gurmel Singh Date of hearing 07-06-2023 Date of pronouncement 07-06-2023 ITA No.508/PUN/2023 Jayant Hari Mulay 2 construction of flats. Pursuant to the agreement, the assessee was to hand over certain constructed flats to the seller of the land. A sum of Rs.12.00 lakh was claimed as deduction in respect of `Compensation paid to the Tenant’. The Assessing Officer (AO) called upon the assessee to explain the reasons for such deduction. The assessee explained that the project was supposed to be completed by 2013-14, however, it was actually completed on 28-07-2017. After negotiating with the landlord, the assessee agreed to pay a sum of Rs.37.00 lakh as compensation towards non-completion and handing over the possession. Out of such Rs.37.00 lakh, a sum of Rs.25.00 lakh was paid in earlier years and capitalised as work-in-progress. The remaining amount of compensation was paid during the year under consideration. The AO did not agree with the assessee’s submission on noticing section 18 of Real Estate Regulatory Authority (RERA), 2016, which talks for providing compensation to the flat owners and not to the seller of the land. He, therefore, did not accept the assessee’s claim, which came to be affirmed in the first appeal. 4. I have heard the rival submissions and perusing the relevant material on record. The case of the assessee is that compensation of Rs.37.00 lakh was paid to the seller of the land not towards purchase of the land but towards the delay in handing over the possession of the ITA No.508/PUN/2023 Jayant Hari Mulay 3 built up area, as was stipulated to be. The ld. AR further submitted that a sum of Rs.25.00 lakh was claimed as part of work-in-progress in earlier years, which was not disturbed by the AO. In order to justify the payment made during the year, the assessee relied on an agreement with Mrs. Shobha Srikrushna Sawant, to whom such compensation was paid. It can be seen that there is some conflict between the stand taken by the assessee at the time of filing the return and that before the AO during the course of assessment proceedings. At the initial stage, the assessee claimed such compensation to have been paid to Tenant, whereas, during the course of assessment proceedings, the assessee claimed it as compensation to the seller. In support of the contention, the ld. AR relied on the above referred agreement of Sale cum Development made on 05-12-2008, which has been placed on record to support the contention that the payment so made was compensation to the owner of the flats for delay in handing over of the possession. Since this is an additional evidence which was not there before the authorities below, I am of the considered opinion that it would be just and fair if the impugned order is set aside and the matter is remitted to the AO for verifying the relevant clauses of the agreement. If the payment is found to be compensation to the owner of the flats for delay in handing over of the possession, such amount should be ITA No.508/PUN/2023 Jayant Hari Mulay 4 treated as a part of work-in-progress. In the otherwise scenario, the AO will decide the nature of payment as per law after affording reasonable opportunity of hearing to the assessee. 5. In the result, the appeal is allowed for statistical purposes. Order pronounced in the Open Court on 07 th June, 2023. Sd/- (R.S.SYAL) VICE PRESIDENT पुणे Pune; िदनांक Dated : 07 th June, 2023 सतीश आदेश की ितिलिप अ ेिषत/Copy of the Order is forwarded to : 1. अपीलाथ / The Appellant; 2. थ / The Respondent 3. 4. 5. The Pr.CIT concerned DR, ITAT, ‘SMC’ Bench, Pune गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune ITA No.508/PUN/2023 Jayant Hari Mulay 5 Date 1. Draft dictated on 07-06-2023 Sr.PS 2. Draft placed before author 07-06-2023 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *