Appeal partly allowed for tax verification, expenses upheld, disallowance under Section 40(a)(ia)

The Tribunal partly allowed the revenue's appeal for statistical purposes to verify tax payment by the payee company for professional expenses. It upheld the CIT(A)'s deletions regarding internal development cost expenses and disallowance under Section 40(a)(ia). The order was pronounced on 04.09.2015.

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Issues Involved:
1. Deletion of disallowance of Rs. 43,26,000 on account of legal and professional expenses.
2. Deletion of disallowance of Rs. 80,53,743 on account of internal development cost expenses.
3. Deletion of addition of Rs. 10,00,000 on account of disallowance under Section 40(a)(ia) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

Ground No. 1: Deletion of Disallowance of Rs. 43,26,000 on Account of Legal and Professional Expenses
The revenue contested the deletion of disallowance of Rs. 43,26,000 for legal and professional expenses by the CIT(A). The Assessing Officer (AO) had disallowed this amount, arguing that the assessee could not demonstrate the benefits derived from paying this fee to M/s DLF Home Developers Ltd., the holding company. The CIT(A) deleted the disallowance, noting that the amount had been offered to tax by the payee company, and both companies paid taxes at the same rate, negating any tax evasion or income diversion. The Tribunal upheld the CIT(A)'s view, referencing the Supreme Court's decision in Ashish Plastic Industries vs ACIT, which supports extending benefits to the assessee if the payee has paid the tax. However, the Tribunal directed the AO to verify whether M/s DLF Home Developers Ltd. had paid tax on the receipts, thus partly allowing the revenue's ground for statistical purposes.

Ground No. 2: Deletion of Disallowance of Rs. 80,53,743 on Account of Internal Development Cost Expenses
The revenue challenged the deletion of disallowance of Rs. 80,53,743 for internal development cost (IDC) expenses. The AO had disallowed this amount due to a lack of supporting evidence. The CIT(A) deleted the disallowance, reasoning that the IDC was a part of the cost and had to be allowed as a cost of the project for working out the true profit and loss account. The Tribunal noted that similar claims had been allowed for the assessee's group company in previous years and subsequent assessment years. The Tribunal emphasized the rule of consistency and upheld the CIT(A)'s decision, dismissing the revenue's ground as devoid of merit.

Ground No. 3: Deletion of Addition of Rs. 10,00,000 on Account of Disallowance under Section 40(a)(ia) of the Income Tax Act, 1961
The revenue contested the deletion of an addition of Rs. 10,00,000 made by the AO under Section 40(a)(ia). The AO had disallowed the amount, arguing that the assessee had not disallowed the brokerage amount correctly. The CIT(A) deleted the disallowance, noting that the brokerage expenses of Rs. 1,05,90,431 had been claimed in the profit and loss account and disallowed in the computation of income due to non-payment of TDS. The Tribunal agreed with the CIT(A), confirming that the further addition of Rs. 10,00,000 was unjustified and dismissing the revenue's ground.

Conclusion:
The Tribunal partly allowed the revenue's appeal for statistical purposes regarding the verification of tax payment by the payee company for the professional expenses. It dismissed the revenue's grounds concerning the internal development cost expenses and the addition under Section 40(a)(ia), upholding the CIT(A)'s deletions. The order was pronounced in the open court on 04.09.2015.

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