Commercial reality governs parking land cost deduction where adjoining plot was permanently used to meet mall approval obligations.

The cost of an adjoining plot used permanently as parking for a shopping mall was allowable as a business deduction where the mall was approved only on the basis of adequate parking under the sanctioned plan and municipal norms. When the originally sanctioned parking area was taken for the metro project, the assessee dedicated the adjacent land to satisfy its project obligation and the parking commitments linked to the sale arrangements with buyers. Commercial reality prevailed over the absence of a separate legal transfer, so the land cost was treated as part of the project and business outlay. The disallowance was held unsustainable and the deduction was allowed.

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Issues: Whether the cost of an adjacent plot used permanently as parking space for the mall's shop and office owners was allowable as a business deduction.

Analysis: The assessee had obtained approval to construct the shopping mall subject to provision of adequate parking as per the sanctioned plan and municipal norms. When the originally sanctioned parking area was acquired for the metro project, the assessee provided an adjoining plot for parking and demonstrated its actual use for that purpose. The mere fact that title in the land remained with the assessee and no separate legal transfer was made did not outweigh the commercial reality that the plot had been dedicated to discharge the assessee's obligation arising from the approved project and the sale arrangements with buyers. The cost of that land therefore formed part of the project/business outlay incurred to provide the required parking facility.

Conclusion: The disallowance was not sustainable and the cost of the plot used for parking was deductible; the issue was decided in favour of the assessee.

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