2022 (7) TMI 1203 - AT - Income Tax

Tribunal allows deduction under section 80IB(10) for assessment years 2007-08 and 2008-09

Reddy Structures [P] Ltd. Versus The Deputy Commissioner of Income Tax, Circle 5 [1] [1], Bengaluru.

Reddy Structures [P] Ltd. Versus The Deputy Commissioner of Income Tax, Circle 5 [1] [1], Bengaluru. - TMI Issues Involved:1. Denial of deduction under section 80IB(10) of the Income Tax Act.2. Validity of reopening assessments under section 147.Detailed Analysis:1. Denial of Deduction under Section 80IB(10):The primary issue revolves around the denial of deduction under section 80IB(10) of the Income Tax Act, which pertains to profits derived from developing and building housing projects. The assessee, a real-estate development company, claimed this deduction for the assessment years 2007-08 and 2008-09. The deduction was initially claimed on profits from flats bought from landowners and sold to third parties.For the assessment year 2007-08, the assessee filed a return declaring a total income of Rs.44,83,661 after claiming a deduction under section 80IA(10). However, a survey conducted on 29/09/2007 revealed discrepancies in the deduction claim related to the project 'Mahavir Springs'. Consequently, the assessee withdrew the deduction claim of Rs.1,52,02,456 for this project and the assessment was completed with various additions, including the denial of the 80IB(10) deduction.A subsequent survey on 14.12.2012 led to the reopening of the assessment under section 147. The Assessing Officer (AO) observed that the assessee paid Rs.6,01,50,875 for 28 flats earmarked for landowners and sold 22 flats for Rs.5,63,80,183, resulting in a profit of Rs.91,19,417. The AO denied the deduction under section 80IB(10), treating these transactions as trading activities.On appeal, the CIT(A) upheld the AO's decision, leading to further appeal by the assessee. The assessee argued that the payments to landowners were part of the overall project cost and that the profits from these transactions should be eligible for deduction under section 80IB(10). The Tribunal agreed with the assessee, emphasizing that the profits derived from the sale of flats earmarked for landowners were part of the overall housing project profits and eligible for deduction.2. Validity of Reopening Assessments under Section 147:The assessee challenged the reopening of assessments under section 147, arguing it was beyond the four-year limit and lacked the necessary failure to disclose material facts. The Tribunal noted that the original assessment under section 143(3) had already addressed the discrepancies related to the project 'Mahavir Springs'. The reopening was based on the same issues previously considered, making the reopening invalid.The Tribunal concluded that the assessee had fully disclosed all necessary facts during the original assessment, and the reopening under section 147 was not justified. Consequently, the Tribunal allowed the appeals for both assessment years, granting the deduction under section 80IB(10) for the profits derived from the sale of flats earmarked for landowners.Conclusion:The Tribunal ruled in favor of the assessee, allowing the deduction under section 80IB(10) for both assessment years 2007-08 and 2008-09. The reopening of assessments under section 147 was deemed invalid due to full disclosure of material facts by the assessee during the original assessment. The appeals were allowed, and the assessee was entitled to the claimed deductions.