COMMONWEALTH DEVELOPERS PVT. LTD,FATORDA vs. ACIT, SPECIAL RANGE, PANAJI

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ITA 49/PAN/2022Status: DisposedITAT Panaji14 September 2023AY 2017-18Bench: SHRI R.S. SYAL (Vice President), SHRI S.S.VISWANETHRA RAVI (Judicial Member)4 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had provided party-wise details of brokerage payments, and the rate of brokerage paid was reasonable and consistent with previous years where similar deductions were allowed. Therefore, the disallowance was unjustified.

What were the facts?

The assessee, a real estate developer, claimed a deduction of Rs. 43,48,000/- for brokerage paid on the sale of flats. The Assessing Officer disallowed this deduction, stating the assessee failed to provide justification.

What were the issues?

Whether the disallowance of brokerage paid by the assessee was justified when party-wise details were provided and the rate was consistent with prior years.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PANAJI BENCH, PANAJI

Before: SHRI R.S. SYAL & SHRI S.S.VISWANETHRA RAVI

For Appellant: Shri Pramod Vaidhya

For Respondent: Shri P.S. Shivshankar

आदेश / ORDER

PER R.S.SYAL, VP :

This appeal by the assessee arises out of the order dated 21-04-2022 passed by the CIT(A) in National Faceless Appeal Centre (NFAC), Delhi in relation to the assessment year 2017-18.

The only issue raised in this appeal is against the confirmation of disallowance of Rs.43,48,000/- towards brokerage paid by the assessee on sale of flats.

Briefly stated, the facts of the case are that the assessee is engaged in the business of real estate development. It claimed deduction towards brokerage of Rs.43,48,000/-. On being called upon to furnish the necessary details in support of the brokerage, the assessee submitted party-wise detail of 23 persons to whom such brokerage was paid. The Assessing Officer (AO) made the disallowance of the entire brokerage on the ground that the assessee failed to furnish justification for the payment. The ld. CIT(A) affirmed the addition, against which the assessee has approached the Tribunal.

After considering the rival submissions and perusing the relevant material on record, it is seen that the assessee furnished necessary details of the persons to whom brokerage was paid totalling to Rs.43.48 lakh on sales of Rs.37,38,38,261/-, which comes to 1.16%. A chart has been placed on record showing the position of brokerage paid in earlier years. For the immediately preceding year, the assessee paid brokerage of Rs.27,90,000/- on turnover of Rs.11,25,00,000/-, which comes to 2.48%. The case for the immediately preceding A.Y. 2016-17 was taken up for scrutiny u/s.143(3) and the AO did not make any disallowance on this score.

A year prior, namely, A.Y. 2015-16, the assessee paid brokerage at the rate of 2.99% of the total sales, which was also allowed by the AO in the assessment u/s.143(3). For the A.Y. 2014-15, the assessee paid brokerage at 1.52%, which was also allowed by the AO u/s.143(3) of the Act. It, therefore, transpires that for all the earlier years, the assessee paid brokerage in the same manner as it paid for the year under consideration. Assessments for all the immediately preceding three years were taken up for scrutiny u/s.143(3) and deduction of brokerage was allowed. In the year under consideration, the assessee paid brokerage at 1.16% as against the immediately preceding assessment year at 2.48% and 2.99% a year prior. Thus, the brokerage paid during the year under consideration is quite reasonable vis-a-vis the earlier years. In our considered opinion, once the brokerage has been allowed in all the earlier years and the assessee furnished the details of the persons to whom the brokerage was paid, there was no reason on the part of the AO to disallow it on the ground that no justification was given for payment. We, therefore, overturn the impugned order and direct to delete the addition.

In the result, the appeal is allowed.

Order pronounced in the Open Court on 14th September, 2023.

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