Tribunal upholds CIT(A)'s decision on interest expenses allocation under section 80-IB(10), partially allows deduction for housing project

The Tribunal dismissed the Miscellaneous Application challenging the allocation of interest expenses under section 80-IB(10), upholding the CIT(A)'s decision. However, the Tribunal partially allowed another application to reconsider the disallowance of deduction under section 80-IB(10) for the housing project "Kumar Padmalaya," which had not been addressed in the original order. The final decision was made on 22-05-2015.

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Issues Involved:
1. Allocation of interest while working out eligible profits for deduction under section 80-IB(10) of the Act.
2. Grant of deduction under section 80-IB(10) of the Act in respect of the housing project "Kumar Padmalaya."

Issue-wise Detailed Analysis:

1. Allocation of Interest for Deduction under Section 80-IB(10):

The assessee filed Miscellaneous Applications to recall the Tribunal's order dated 30.04.2014 for assessment years 2006-07 and 2007-08, arguing that there was an error in the allocation of interest while computing eligible profits for deduction under section 80-IB(10) of the Act. The assessee contended that the Assessing Officer wrongly apportioned interest expense between eligible and non-eligible 80-IB(10) projects, reducing the profits from eligible projects and consequently recomputing the deduction under section 80-IB(10).

The CIT(A) rejected the assessee's argument, stating that the business was composite, and borrowed funds were used as working capital for various projects. As there was no one-to-one linkage between borrowed funds and their deployment in non-eligible projects, the interest expenditure was treated as a period cost and debited to the common profit & loss account.

The Tribunal, after considering the submissions, upheld the CIT(A)'s decision. The Tribunal noted that the onus was on the assessee to demonstrate the actual utilization of interest-bearing funds for specific projects, which the assessee failed to do. The Tribunal found no apparent mistake in its order, stating that the assessee's request amounted to a review of its own order, which is not permissible by law. Consequently, the Miscellaneous Application (MA No.75/PN/2014) filed by the assessee was dismissed.

2. Grant of Deduction under Section 80-IB(10) for "Kumar Padmalaya":

In MA No.76/PN/2014, the assessee requested the Tribunal to recall its order and adjudicate the ground related to the disallowance of deduction under section 80-IB(10) for the housing project "Kumar Padmalaya," which had inadvertently remained unadjudicated.

The Tribunal acknowledged that the specific grounds regarding the disallowance of Rs. 1,01,94,782/- under section 80-IB(10) for "Kumar Padmalaya" were not addressed in the original order. The Tribunal agreed to recall the order for the limited purpose of adjudicating these grounds.

Conclusion:

The Tribunal dismissed the Miscellaneous Application (MA No.75/PN/2014) concerning the allocation of interest expenses, affirming the CIT(A)'s decision. However, it partly allowed MA No.76/PN/2014, agreeing to recall the order to adjudicate the unaddressed grounds related to the deduction under section 80-IB(10) for the housing project "Kumar Padmalaya." The final pronouncement was made in the open court on 22-05-2015.

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