2012 (9) TMI 1100 - AT - Income Tax

Tribunal decision on Section 80-IB(10) deduction eligibility & revenue's appeals

The tribunal partly allowed the revenue's appeal and fully allowed the assessee's appeal. It upheld the eligibility for deduction under Section 80-IB(10) ... Deduction u/s 80-IB(10) - Held that:- The stair case definitely comes under the common pool used by all the inhabitants, therefore, it cannot be included in the built up area. Even otherwise the Assessing Officer noted from the details submitted by the assessee that three types of flats were sold by the assessee and in the type “A” category the area is 1386.03 sq. ft., whereas in type “B” the total area is 1122.48 sq. ft., and in type “C” flat, the total area is 811.84 sq. ft. per flat. These details were submitted by the assessee vide letter dated 12-12-2008 before the ld. CIT(A) and earlier before the Assessing Officer. Such details have been reproduced at page 4 of the impugned order. There is a factual recording that stair case is common area between the two adjacent flats measuring 8.172 sq. mts. and if this area is reduced from the total area of the unit then certainly it comes below the prescribed limit of 1500 sq. ft. This being the first year of claiming deduction u/s 80-IB(10) of the Act, wherein the Assessing Officer himself noted that assessee’s 48 units of Type-A flats; 90 units of Type-B & Type-C units were under construction, the Assessing Officer himself computed the built up area by including the stair case area, therefore, it exceeded the prescribed limit. Such factual finding recorded in the impugned order was not controverted by the Revenue by bringing any positive material on record. In view of these facts we are of the considered opinion that the assessee is clearly entitled for such deduction. Therefore, we find no justification to interfere with the conclusion drawn in the impugned order, which is affirmed. Apportionment of expenses in the ratio of turn over to different units - no part of the head office expenses pertaining to management were debited to Krishna Lok Unit - Held that:- There is a categorical finding that the assessee company has not taken any loan secured or unsecured for Krishna Lok and the ledger print out of the current account maintained with Oriental Bank of Commerce and Punjab National Bank were furnished during assessment proceedings which clearly indicates that the total receipt from Krishna Lok project sale is utilized for the purpose of meeting expenses of Krishna Lok and none of the loans from Head Office were transferred to Krishna Lok. There is a further finding that there is no question of transfer any financial expenses to Krishna Lok and further the administrative and other expenses which include salary, bonus other perquisites, employees welfare and the rates and taxes, general expenses, newspaper and periodicals, legal and professional expenses, postage & telephone charges, power fuel and water charges, printing & stationery, vehicle repair & maintenance expenses etc. are incurred separately and debited separately to Krishna Lok restaurant and other projects. Such expenses are business specific and not commonly incurred. On careful scrutiny of allocated expenses, we find that the expenses in the nature of “audit fee” and “director remuneration” are for the assessee as a whole and not specific to the business. Consequently, the expenses of ₹ 33,660/- and ₹ 58,630 respectively are allocated to Krishna Project, therefore, addition to the extent of ₹ 2,92,290/- is sustained. The deletion of addition of balance expenses of ₹ 57,66,129/- is upheld. This ground is, therefore, allowed partly. Extra depreciation on computer peripherals/ accessories - Held that:- The assessee claimed ₹ 16,500/- to fixed assets in the block of computers and computer peripherals which as per the assessee are depreciable @ 60%, which was denied by the Assessing Officer . We find that the ld. CIT(A) considered the issue in a justified manner and deleted the addition of ₹ 7425/-. We find no justification to interfere with the same as nothing contrary was brought to our notice disallowance of deduction u/s 80-IB(10) - A.Y. 2007-08 - Held that:- As per sub-section (10) of Sec. 80-IB, the housing project which were approved before 31st day of March, 2008, the benefit will be hundred per cent subject to fulfillment of certain conditions. However, this condition was substituted by the Finance (No.2) Act of 2009 with effect from 1-4-2009, which has been further explained by sub-clause (ii) to the Explanation regarding completion certificate. However, since the approval was granted to the assessee on 1-4-2005, therefore, the assessee is not expected to fulfill the conditions which were not on the statute when such approval was granted to the assessee. Therefore, the appeal of the assessee deserves to be allowed. Issues Involved:1. Admission of additional evidence at the appellate stage.2. Eligibility for deduction under Section 80-IB(10) based on built-up area.3. Apportionment of expenses between different units.4. Depreciation on computer peripherals/accessories.5. Requirement of completion certificate for claiming deduction under Section 80-IB(10).Issue-wise Detailed Analysis:1. Admission of Additional Evidence at the Appellate Stage:The revenue contended that the first appellate authority erred in allowing additional evidence during the first appellate stage, contravening Rule 46A of the Rules. The revenue argued that the Assessing Officer (AO) was not given an opportunity to examine the additional evidence. However, the tribunal found no mention in the impugned order that additional documents were filed which were not presented before the AO. The tribunal noted that the CIT(A) has co-terminus power with the AO and can make inquiries or direct the AO to do so. The tribunal concluded that there was no violation of Rule 46A and dismissed this ground of the revenue.2. Eligibility for Deduction Under Section 80-IB(10) Based on Built-up Area:The revenue argued that the built-up area of Type 'A' flats exceeded 1500 sq. ft., making the assessee ineligible for deduction under Section 80-IB(10). The tribunal examined the sanction plan and found that the total built-up area, excluding common areas like staircases, was 1386.03 sq. ft., which is below the prescribed limit of 1500 sq. ft. The tribunal emphasized that common areas shared with other residential units should not be included in the built-up area. Consequently, the tribunal upheld the CIT(A)'s decision allowing the deduction and dismissed the revenue's ground.3. Apportionment of Expenses Between Different Units:The revenue contended that head office expenses were not properly apportioned to the Krishna Lok unit. The assessee argued that expenses were booked separately in audited books of accounts, and a detailed break-up was provided to the AO. The tribunal found that the expenses were indeed bifurcated, and the AO's contention was without basis. However, the tribunal sustained a minor addition of Rs. 2,92,290 for audit fees and director remuneration, which were deemed common expenses. The tribunal upheld the deletion of the remaining expenses and allowed this ground partly.4. Depreciation on Computer Peripherals/Accessories:The AO denied the assessee's claim of 60% depreciation on computer peripherals/accessories. The CIT(A) deleted the addition of Rs. 7,425, and the tribunal found no justification to interfere with this decision, as nothing contrary was brought to their notice. This ground was dismissed.5. Requirement of Completion Certificate for Claiming Deduction Under Section 80-IB(10):For A.Y. 2007-08, the assessee's primary issue was the disallowance of deduction under Section 80-IB(10) due to the non-issuance of a completion certificate. The assessee argued that the completion certificate was not issued due to reasons beyond their control and that the project was completed within the stipulated time. The tribunal noted that the approval for the project was granted before the amendment requiring a completion certificate and that substantial compliance with the conditions should suffice. Citing various judicial precedents, the tribunal concluded that the requirement of a completion certificate was directory and not mandatory. The tribunal allowed the assessee's appeal, emphasizing that the assessee should not be penalized for the delay in issuing the completion certificate by the authorities.Conclusion:The tribunal partly allowed the revenue's appeal and fully allowed the assessee's appeal, emphasizing the principles of substantial compliance and consistency in judicial decisions. The tribunal upheld the assessee's eligibility for deduction under Section 80-IB(10), considering the built-up area and the non-issuance of the completion certificate.