Tribunal allows Revenue's appeal on housing project deduction and contractor payment tax issue

The Tribunal partly allowed the Revenue's appeal in I.T.A. No. 1685/Mds/2010 regarding pro rata deduction under Section 80-IB(10) for housing projects, allowing deduction for units not exceeding 1500 sq. ft. The cross-objection of the assessee in C.O. No. 117/Mds/2011 was allowed for statistical purposes. Additionally, the Revenue's appeal in I.T.A. No. 116/Mds/2011 was allowed concerning the disallowance of payments made to contractors for non-deduction of tax at source under Section 40(a)(ia).

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Issues Involved:
1. Pro rata deduction under Section 80-IB(10) for housing projects.
2. Disallowance of payments made to contractors for non-deduction of tax at source under Section 40(a)(ia).
3. Section 154 rectification by CIT (Appeals).

Detailed Analysis:

1. Pro Rata Deduction under Section 80-IB(10) for Housing Projects:
The Revenue contested the CIT (Appeals)'s direction to allow pro rata deduction under Section 80-IB(10) for the assessee's housing projects, arguing that:
- Some flats exceeded 1500 sq. ft., and as per the Tribunal's decision in Asstt. CIT v. Viswas Promoters (P.) Ltd., such pro rata deduction could not be allowed.
- The deduction claim was made through a revised computation, which should not be considered based on the Supreme Court's decision in Goetz (India) Ltd. v. CIT.
- The CIT (Appeals) directed the computation of deduction considering each project separately, which was not in line with the Supreme Court's decision in IPCA Laboratory Ltd. v. Dy. CIT.

The Tribunal held that:
- The revised computation was valid as the assessee had made the claim in the original return and only revised the quantum during assessment proceedings. This did not constitute a fresh claim.
- Deduction under Section 80-IB(10) could be allowed for units with built-up areas not exceeding 1500 sq. ft., following the Third Member decision in Sanghvi & Doshi Enterprise v. ITO.
- All projects should be considered as a single unit for deduction purposes due to the homogenous nature of the business and lack of evidence showing the projects as independent units.

2. Disallowance of Payments Made to Contractors for Non-Deduction of Tax at Source under Section 40(a)(ia):
The assessee's cross-objection related to the disallowance of Rs. 1,96,89,532/- for non-deduction of tax at source on payments to M/s Macro Marvel Infrastructure Corporation Ltd. The assessee argued that:
- The expenditure was direct construction cost and should be considered under Section 28, not under Sections 30 to 38, thus not attracting Section 40(a)(ia).

The Tribunal noted:
- The Hyderabad Bench's decision in Teja Constructions v. Asstt. CIT, which stated Section 40(a)(ia) applies only to items under Sections 30 to 38, did not apply here as the books were not rejected.
- The matter was remitted to the Assessing Officer to verify if the amounts were payable at the end of the relevant year, following the Special Bench decision in Merilyn Shipping & Transport v. Addl. CIT.

3. Section 154 Rectification by CIT (Appeals):
The Revenue also appealed against the CIT (Appeals)'s rectification order directing the Assessing Officer to allow the deduction based on the revised computation. The Tribunal held:
- Since it had already decided that all projects should be considered as a single unit for deduction, the rectification order's basis was invalid.
- The Assessing Officer should recompute the deduction under Section 80-IB(10) considering all projects together, and the rectification order was unnecessary.

Conclusion:
- The appeal of the Revenue in I.T.A. No. 1685/Mds/2010 was partly allowed.
- The cross-objection of the assessee in C.O. No. 117/Mds/2011 was allowed for statistical purposes.
- The appeal of the Revenue in I.T.A. No. 116/Mds/2011 was allowed.

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