2017 (10) TMI 922 - AT - Income Tax

Appeal allowed for business income deduction under Section 80-IB(10)

Laxmi Shelters Versus The ITO, Ward 8 (3), Surat

Laxmi Shelters Versus The ITO, Ward 8 (3), Surat - Tmi Issues Involved:1. Deduction under Section 80-IB(10) of the Income Tax Act, 1961.2. Treatment of income disclosed during the survey as 'Income from Other Sources.'3. Charging of interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Deduction under Section 80-IB(10) of the Income Tax Act, 1961:The primary issue in this case was whether the assessee was entitled to a deduction under Section 80-IB(10) on Rs. 1,01,00,000 disclosed during the survey, which was claimed to be part of the business income. The assessee argued that this amount was earned from the business of developing and constructing housing projects and thus should be eligible for the deduction. The CIT(A) denied this claim, stating that the amount was received as 'on money' and was not part of the registered sale agreements, thus treating it as 'Income from Other Sources.' The Tribunal, however, found that the amount was indeed part of the business income earned from the Laxmi Residency project, which was eligible for deduction under Section 80-IB(10). The Tribunal relied on judicial pronouncements, including the case of CIT vs. Sheth Developer Pvt. Ltd., where it was held that undisclosed income received in the course of business activity as a builder is eligible for deduction under Section 80-IB(10).2. Treatment of Income Disclosed During the Survey as 'Income from Other Sources':The CIT(A) had treated the Rs. 1,01,00,000 disclosed during the survey as 'Income from Other Sources' under Section 56 of the Act, arguing that the 'on money' received was not accounted for in the regular books of accounts and was not part of the registered sale agreements. The Tribunal disagreed, noting that the statement recorded during the survey indicated that the amount was received as 'on money' for the booking of flats in the Laxmi Residency project. The Tribunal emphasized that the declared amount was business income and not income from other sources, as it was earned from the project eligible for deduction under Section 80-IB(10).3. Charging of Interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961:The assessee also contested the charging of interest under Sections 234A, 234B, and 234C. The CIT(A) upheld the charging of interest, stating it was mandatory as per the provisions of the Act. The Tribunal did not provide a separate analysis on this issue, implicitly upholding the CIT(A)'s decision regarding the interest charges.Conclusion:The Tribunal allowed the appeal of the assessee, concluding that the Rs. 1,01,00,000 disclosed during the survey was part of the business income from the Laxmi Residency project and was eligible for deduction under Section 80-IB(10) of the Income Tax Act, 1961. The Tribunal found that the CIT(A) had erred in treating this amount as 'Income from Other Sources.' The charging of interest under Sections 234A, 234B, and 234C was upheld as mandatory by the CIT(A) and implicitly by the Tribunal. The appeal was pronounced in favor of the assessee on 11-04-2017.