2016 (3) TMI 251 - AT - Income Tax

Tribunal grants deduction claim under Section 80IB(10) for A.Y. 2007-08 and 2008-09

The Tribunal partially allowed the appeal for A.Y. 2007-08, confirming an addition of Rs. 16,83,194 based on estimated profit percentage and allowing the ... Estimation of NP - Additions at 12% of the receipt - Held that:- In the present case, we are therefore of the view that the net profit of 5.55% for the year under consideration also cannot be considered for working out the average profits because, it is after considering the land leveling expenses of ₹ 24.24 lacs which is also disputed by the Revenue. In such a situation, when the books of accounts are rejected, then for estimating the profits, for the reasons stated hereinabove, we are of the view that the average profits should be determined but after excluding the net profit for the impugned year and if that is considered, the average profit (after excluding the year under consideration is worked out), the average net profits works out to 12.79% and against which ld. CIT(A) has estimated the net profits from Kailash Developers at 12%, which in own view in the present facts, is at not much variance with the average profits of 12.79%. In such a situation, we are of the view that no interference to the order of ld. CIT(A) in estimating the net profits @ 12% of the Revenue from Kailash Developers is called for - Decided against assessee Denial of deduction u/s.80IB(10) - Non obtaining completion certificate within a period of 4 years - Held that:- When the housing project was approved on 10.03.2004 by the competent authority, condition for obtaining completion certificate within a period of 4 years from the date of approval being eligible for deduction u/s.80IB(10) of the Act was not applicable and therefore assessee was eligible for deduction u/s.80IB(10) of the Act - See ITO vs. Saket Corporation [2015 (6) TMI 460 - GUJARAT HIGH COURT ] - Decided against revenue Issues Involved:1. Addition of income based on estimated profit percentage.2. Disallowance of deduction under Section 80IB(10) of the Income Tax Act.Issue-wise Detailed Analysis:1. Addition of Income Based on Estimated Profit Percentage:The Assessee, a proprietor of Yograj Developers and Kailash Developers, filed returns for A.Y. 2007-08 and A.Y. 2008-09. The Assessing Officer (A.O.) noticed discrepancies in the net profit percentages of two projects: Yuvraj Park and Kailash Developers. The A.O. observed that the net profit for Yuvraj Park was 48.32% while for Kailash Developers it was only 5.5%. The A.O. suspected that expenses were diverted from Yuvraj Park to Kailash Developers to reduce taxable profits and proposed an estimated profit of 25% for Kailash Developers, leading to an addition of Rs. 32,36,911/-.The CIT(A) partially upheld the A.O.'s decision but reduced the estimated profit to 12%, resulting in a confirmed addition of Rs. 16,83,194/-. The Tribunal agreed with the CIT(A), noting that the Assessee failed to produce books of accounts or vouchers for expenses and could not justify the land leveling expenses. The Tribunal concluded that the average net profit should be 12%, aligning closely with the average profit of 12.79% excluding the disputed year.2. Disallowance of Deduction Under Section 80IB(10):The A.O. denied the Assessee's claim for deduction under Section 80IB(10) for Rs. 8,67,417/- on the grounds that the Assessee was not the owner of the land and had merely acted as a contractor. The CIT(A) upheld this decision, emphasizing that the Assessee did not have the necessary Building Use (BU) permission from local authorities, which is a requirement under Section 80IB(10).On appeal, the Tribunal referred to the Hon'ble Gujarat High Court's decision in CIT v. Radhe Developers, which clarified that ownership of land is not a prerequisite for claiming deduction under Section 80IB(10). The Tribunal noted that the Assessee had control over the project and bore the risk, qualifying as a 'developer' rather than a 'contractor.' Additionally, the Tribunal found that the original project approval date was 28.03.2003, predating the statutory requirement for BU permission introduced on 01.04.2005. Citing the Gujarat High Court's decision in ITO vs. Saket Corporation, the Tribunal allowed the Assessee's claim for deduction under Section 80IB(10).Conclusion:- For A.Y. 2007-08: The Tribunal upheld the CIT(A)'s decision to estimate the net profit at 12% and allowed the Assessee's claim for deduction under Section 80IB(10).- For A.Y. 2008-09: The Tribunal allowed the Assessee's claim for deduction under Section 80IB(10), consistent with its findings for A.Y. 2007-08.Final Order:The appeal for A.Y. 2007-08 was partly allowed, and the appeal for A.Y. 2008-09 was fully allowed. The Tribunal's decision was pronounced in Open Court on 29-02-2016.