2012 (12) TMI 55 - HC - Income Tax

High Court affirms Tribunal decisions in tax appeal, grants deduction under Sec 80IB, dismisses Revenue's appeal.

COMMISSIONER OF INCOME TAX-IV Versus MUKESH RAMPURSHOTTAM AGARWAL

COMMISSIONER OF INCOME TAX-IV Versus MUKESH RAMPURSHOTTAM AGARWAL - TMI Issues Involved:1. Deduction under Section 80IB of the Income Tax Act.2. Addition of payment received from Trilok Associates and Goyal Designs.Issue-wise Detailed Analysis:1. Deduction under Section 80IB of the Income Tax Act:The primary issue revolves around whether the assessee is entitled to claim deductions under Section 80IB of the Income Tax Act. The Assessing Officer initially disallowed the deduction on the grounds that the assessee did not fulfill certain conditions. However, the CIT(Appeals) allowed the claim, and the Tribunal upheld this decision, relying on earlier years' orders. The Tribunal concluded that the assessee, engaged in the business of supervision and construction of a building project, was entitled to the deduction even if the title of the land did not vest in him.The High Court referenced its own prior decisions, particularly in the case of M/s. Radhe Developers, where it was established that the assessee need not be the owner of the land to claim the deduction under Section 80IB(10). The Tribunal's judgment was based on two aspects: the assessee need not be the owner of the land for the deduction, and by virtue of the development agreement and the agreement to sell, the assessee had, for income tax purposes, become the owner of the land. The High Court noted that the assessee had total and complete control over the land and took full risk of executing the housing project, thereby satisfying the conditions for the deduction under Section 80IB(10).The High Court also discussed the applicability of the Explanation to Section 80IB(10), introduced with retrospective effect from 1.4.2001, and concluded that the assessee had acquired dominion over the land and developed the housing project at its own cost and risk, thus qualifying for the deduction. The Court dismissed the Revenue's reliance on the Supreme Court's decision in Faqir Chand Gulati vs. Uppal Agencies Private Limited and another, noting that the context of that decision was different.2. Addition of Payment Received from Trilok Associates and Goyal Designs:The second issue pertains to the addition made by the Assessing Officer of Rs.6,90,678/- as payments received from Trilok Associates and Goyal Designs. The Assessing Officer found that the assessee received payments totaling Rs.7,50,000/- but could not produce books of account due to their destruction by fire. Consequently, the Assessing Officer added the entire sum to the income of the respondent after reducing the profit.The CIT(Appeals) considered the amount spent on material and labor expenses and estimated the net profit at 8% under Section 44AD of the Act. The Tribunal upheld this decision, stating that the entire amount of receipt could not be treated as income in the absence of books of account. The Tribunal found the Assessing Officer's view unsustainable and dismissed the Revenue's appeal.The High Court found no infirmity in the concurrent findings of the CIT(Appeals) and the Tribunal, both of which were based on Section 44AD. The Court agreed that the total income could not be treated as the receipt in the absence of books of account and saw no cause for interference.Conclusion:The High Court dismissed the Tax Appeal, affirming the Tribunal's decisions on both issues. The assessee was entitled to the deduction under Section 80IB of the Income Tax Act, and the addition of payments received from Trilok Associates and Goyal Designs was correctly handled by estimating the net profit at 8%. The appeal was dismissed and disposed of accordingly.