The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has struck down over Rs. 4 crore in tax additions made by the revenue authorities, citing misinterpretation of a development agreement in a real estate transaction.

The bench of T.R. Senthil Kumar (Judicial Member) and Narendra Prasad Sinha, Accountant Member has observed that the Assessing Officer failed to consider a supplementary agreement allowing the firm to carry out additional work for individual plot owners. The firm had received Rs. 4.97 crore as development income and incurred matching expenses, leaving a net income of Rs. 46 lakh.

The case concerned a partnership firm involved in land development, which had entered into agreements with a non-trading corporation (RNTC) for the purchase and development of land parcels. The Assessing Officer had disallowed ₹1.52 crore in material costs and ₹2.40 crore in plot development expenses, arguing that such costs were contractually the liability of RNTC and not the developer.

The Tribunal upheld the disallowance of ₹30.30 lakh in commission expenses. It ruled that the payments were unjustified since the land had already been sold to RNTC, and any commission on further plot sales was the buyer’s responsibility, not the seller’s. Claims of the amount being a discount for bulk purchases were also rejected as inconsistent with contractual terms.

The bench found the transactions to be substantiated and revenue-neutral, thereby dismissing the disallowances as unfounded.

Case Details

Case Title: M/s. Pushparaj Corporation Versus ACIT

Case No.: ITA No.1457/Ahd/2018

Date: 26.06.2025

Counsel For Appellant: Mehul K. Patel, AR

Counsel For Respondent: Hargovind Singh, Sr. DR