Are architect fees and brokerage allowable expenditure under the Income Tax Act?

This Income Tax Appellate Tribunal case examines whether architect fees and brokerage payments can be claimed as deductible expenses. The assessee argued these costs were legitimate business expenditures. However, the Assessing Officer disallowed them, stating the project was incomplete during the relevant assessment year. The tribunal reviewed the facts to determine the allowability of these expenses under the Income Tax Act.

IN THE INCOME TAX APPELLATE TRIBUNAL , ‘D’ BENCH, CHENNAI

BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER

AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER
I.T.A.No.2190/Chny/2019
Assessment Year: 2013-14)

M/s. Shri Sai Varsha Enterprises
9, Trevelyan Basin Street,
Sowcarpet,
Chennai-600 079.
PAN: ABSFS 9527D
Appellant)

Vs 

The Deputy Commissioner of
Income Tax,
Non-Corporate Circle-14,
Chennai.
Respondent)

Appellant by : Mr. T.Banusekar, C.A.
Respondent by : Ms. R.Anita, JCIT

Date of hearing : 15.06.2021
Date of Pronouncement : 21.06.2021

 O R D E R

PER G.MANJUNATHA, AM:

 This appeal filed by the assessee is directed against order of the learned CIT(A)-7, Chennai dated 28.06.2019 and pertains to assessment year 2013-14.

2. The assessee has raised following grounds of appeal:-

1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the interests of the appellant and is opposed to the principles of natural justice, equity and fair play.

2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction. 

3. For that the Commissioner of Income Tax (Appeals) erred in upholding the disallowances of architect fees of Rs.2,00,000/- and brokerage of Rs.1,96,374/-.

4. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the architect fees and brokerage are allowable expenditure.

5. For that the Commissioner of Income Tax (Appeals) erred in upholding the disallowance of sales tax and service tax paid of Rs.15,37,1891- and Rs.21,36,892/- respectively.

6. For that the Commissioner of Income Tax (Appeals) failed to appreciate the fact that the collections from the customers were inclusive of taxes and were included in gross receipts. 

7. For that the Commissioner of Income Tax (Appeals) failed to appreciate the fact that the appellant had adopted compounded rate scheme in VAT.

8. For that the Commissioner of Income Tax (Appeals) failed to appreciate the evidences submitted by the appellant for the payment of sales tax and service tax.”

3. Brief facts of the case are that the assesse is a partnership firm engaged in the business of development of building and promotion of flats filed its return of income for assessment year 2013-14 on 30.09.2013 declaring total income of Rs.64,83,280/-. The case was taken up for assessment and during the course of assessment proceedings, the Assessing Officer noticed that the assessee has debited various  expenses including Architect fee, brokerage and land development expenses incurred in respect of Sri Perumbakkam project. However, said project was not completed for the year under consideration and hence, opined that expenditure debited into profit & loss account cannot be allowed as deduction. Therefore, said expenditure has been disallowed and added back to the total income of the assessee. Similarly, the Assessing Officer has noticed that the assessee has debited sales tax & service tax into profit & loss account and hence, opined that sales tax & service tax collected in respect of flats sold to customers is not deductible expenses and hence, disallowed said expenditure and added back to the total income of the assessee.

To know more in details find the attachment file