TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 986
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short) passed u/s 143(3) of the Income-tax Act, 1961 (hereafter referred to as 'the Act'). Further details of the orders of the lower authorities are as under :- ITA No. & Assessment Year Appeal No. & Date of order of the CIT(A) AO who passed the assessment order & Date of order 3154/Del/2019 2015-15 10227/17-18, dated 22.02.2019 Addl. CIT, Spl. Range-2, New Delhi, date: 26.12.2017 4598/Del/2019 2015-16 - Do - - Do - 8377/Del/2019 2016-17 10149/18-19 Dated 05.09.2019 Addl. CIT, Spl. Range-2, New Delhi, date: 13.12.2018 3155/Del/2019 2015-16 10227/17-18 dated 22.02.2019 Addl.CIT, spl. Range-2, New Delhi, dated 28.12.2017 4597/Del/2019 2015-16 10227/17-18 dated 22.02.2019 Addl.CIT, Special Range-2, New Delhi, dated 28.12.2017 6847/Del/2019 2016-17 10143/18-19 Dated 28.05.2019 Addl.CIT, Special Range-2, New Delhi, dated 29.11.2018 3211/Del/2019 2015-16 10226/17-18, dated 22.02.2019 Addl.CIT, Special Range-2, New Delhi, dated 28.12.2017 6664/Del/2019 2016-17 10206/18-19 Dated 28.05.2019 Addl.CIT, Special Range-2, New D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appeal of department and entity No.(ii) in AY 2015-16 arising by appeal of department and in AY 2016-17 by assessee's appeal. The issue arises out of the assessee's payment of brokerage fees which were disallowed by the ld. AO. The ld. AR has pointed out that the assessee are engaged in the business of developing commercial real estate property in India and is primarily involved in developing and leasing of investment property in information technology/information technology enabled services in the Special Economic Zone. The ld. AR has submitted that since the assessee is engaged in the business of rental of properties, accordingly, the assessee engaged brokers for procurement of the tenants in the ordinary course of business. The details of disputed brokerage fees paid is as follows :- Entity AY / ITA No. Name of the Party Amount of Brokerage Evidence Submitted Paperbook Reference Entity 1 2015-16 Departmental Appeal since allowed by CIT(A) CBRE South Asia Pvt. Ltd. 4,46,72,992 Copy of Invoices Copy of leave agreements Copy of lease agreements Page 213-216 of PB Page 217-316 of PB Page 217-316 of PB Jones Lang Lasalle Property C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....similar source of income has been considered in case of entity No.(ii) for AY 2010-11 bearing ITA No.4032/Del/2015, order dated 30.09.2022. Similar relief has been granted in case of entities No.(ii) and (iii) in the order dated 14th June, 2023 in ITA No.8377/Del/2019 for AY 2016-17 and in case of entity No.(i) by order dated 01.05.2024 vide ITA No.8377 (supra). The ld. DR could not point out any distinguishing fact. Consequently, these additions deserves to be deleted. Accordingly, the corresponding grounds in case of the three entities for respective years mentioned aforesaid stand allowed. 7. Issue No.4: This issue is common to the three entities in appeal for AY 2015-16. The issue arises out of disallowance of settlement fee paid for termination of service contract by these assessee with certain parties which were providing services in the nature of project management, operation and maintenance, etc. The ld. AR has provided a brief synopsis of the relevant agreements and parties and the nature of services. The same is reproduced below :- S. No Entity AY/ITA No. Name of the Party Date of Agreement Nature of services 1 Entity 1 2015-16 (3154/DEL/2019....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Settlement Agreement Settlement Fee 1,10,89,219 Unitech Limited Settlement Agreement Settlement Fee 5,19,99,900 Total 63,98,17,463 2 Entity 2 2015-16 (3155/DEL/2019) Unitech Limited Services Agreement Management / Service Fee 40,00,00,000 QNS Facility Management Private Limited Settlement Agreement Settlement Fee 50,40,03,161 Unitech Limited Settlement Agreement Settlement Fee 8,00,00,000 Total 98,40,03,161 3 Entity 3 2015-16 (3211/DEL/2019) Unitech Limited Services Agreement Management / Service Fee 19,00,00,000 QNS Facility Management Private Limited Settlement Agreement Settlement Fee 27,07,12,150 Elixir Hospitality Management Limited Settlement Agreement Settlement Fee 43,60,118 Unitech Limited Settlement Agreement Settlement Fee 3,80,00,000 Total 50,30,72,268 9. The ld. AR has referred to the copy of project management consultancy service agreement entered between entity No. (iii) and Unitech Ltd., copy of which is available at pages 83 to 103 of the paper book of entity No. (iii) for AY 2015-16 in ITA No.3211/Del/2019. The copy of s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ature of services which Unitech companies were providing and for convenience the services referred in Annexure A to the Project Management Consultant Appointment Agreement dated 14.12.2006 are reproduced. Services to be performed by the Project Management Consultant shall include: (i) . Consultant Instruction and Monitoring: a. assistance with the appointment of Other Consultants; b. establishing the responsibilities of the Other Consultants and using best endeavours to ensure that the responsibilities of and information production by Other Consultants are clearly stated and expressly conveyed to each of them; c. determining, in consultation and with the approval of the Project Company, the limit of the authority of any of the Other Consultants to issue instructions without obtaining the Project Company's and/or the Project Management Consultant's prior approval; d. instructing Other Consultants, contractors and other professional advisors in connection with the development process; and e. monitoring the performance of the Other Consultants of their obligations to the Project Company. (ii) Brief, Design....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and Financial Management: a. using best endeavours to ensure that the Other Consultants are providing adequate and timely information for the preparation of tender documentation; b. obtaining the Project Company's prior written authorisation for costs of variations when limit of authority is exceeded beyond 10% as compared to the cost budgeted; c. find out and verify, in conjunction with Other Consultants, fees for statutory approvals and authorise the payment with the Project Company's approval; d. review, verify and recommend Other Consultants' applications for payment provisional on the Project Company's approval; e. review, verify and recommend all other invoices related to the development of the Project, provisional on the Project Company's approval; and ƒ. ensuring within reasonable and best endeavours that Other Consultants prepare final account and agree settlement provisional on the Project Company's approval. (viii) Cash Flow: a. review, verify and recommend payments to the Other Consultants; and b. authorise any other payments due and check against cash flow. Not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it by third parties (including Other Consultants), and providing reasonable assistance to the Project Company with the conduct of any claims by the Project Company against any Other Consultant or other third party, including without limitation, co- ordinating and advising on the appointment of any legal advisers, and preparing and/or assembling documentation necessary for the conduct of any claim; and c. taking reasonable steps, having regard to the circumstances of the loss, to make prompt recommendations on ways to reduce any loss suffered, or to be suffered, by the Project Company as a result of any breach of an agreement by, or the negligence or wilful default of any Other Consultant to the extent that the Project Management Consultant becomes aware of such a breach. (xii) Building Management, Commissioning and Maintenance: a. liaise with Other Consultants to arrange handover to the Project Company of the completed Project; b. liaise with the Project Company and Other Consultants on commissioning. Obtain maintenance manuals, test certificates, warranties, operating instructions, 'as-built' drawings and 'as-installed' diagrams ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the paper book, we find that the services which were being performed under the Project Management Consultant Appointment Agreement were not merely the services of providing manpower, but, in fact, the whole SEZ Development Plan was to be executed by Unitech Ltd. and Unitech Hi-Tech Structures Ltd. by this agreement dated 14.12.2006. Clause 7.1 provided that Unitech Ltd. as Project Management Consultant (PMC) was to be paid fee at the rate of 5% of the total Cost. Now as the project SEZ was to run over a period with constructions activity on continuous basis then certainly PMC would loose revenue on the transfer of services to the Brookfield Unitech Hi-tech Structures Ltd. Pertinent to mention is that as developer the assessee along with Unitech Developer and Project Ltd. were supposed to construct IT buildings and the project was to be implemented and operated in terms of Special Economic Zone Act, 2005. We find that consequent to this payment of compensation only Unitech Ltd. had agreed to undertake all necessary steps to ensure the transfer of these services of asset management with the objective of ultimately transitioning the operation management of the project to the new serv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce in this regard can be placed on the following decisions:- (i) CIT vs. Motor Industries Co. Ltd. [1997] 93 TAXMAN 157 (KAR.); (ii) CIT vs. Ashok Leyland Ltd. [1972] 86 ITR 549 (SC); (iii) CIT vs. De Luxe Film Distributors Ltd. [1978] 114 ITR 434 (CAL.); and (iv) Life Insurance Corporation of India vs. CIT [1979] 119 ITR 900 (Bombay) 10.4 In the light of the aforesaid, we are inclined to decide this issue in favour of the assessee. 11. Issue No.5: The issue arises out of the determination of issue No.4 above for which the assessee has claimed that even if the settlement fee is considered to be not an allowable expense, the assessee companies are eligible for deduction u/s 80IAB and actually for AY 2015-16 these entities had not claimed deduction u/s 80IAB on account of operating loss and the disallowances of expenses if sustained would result in operating profits for which the assessee will be entitled for benefit of section 80IAB. In this context, the ld. AR has submitted on a without prejudice basis that in the event that the impugned appeal of Entity 1, Entity 2 and Entity 3 for AY 2015-16 in ITA 3154/DEL/2019; ITA 3155/DEL/2019 and 321....