Tribunal upholds CIT(A)'s decision on profit addition, confirms deduction eligibility

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the addition towards profit on the sale of 20 flats and confirming the assessee's eligibility for deduction u/s 80IB(10) of the Act. The Tribunal found the transfer of flats via the unregistered MOU dated 08.10.2009 to be genuine, allowing the firm to claim the deduction for the entire profit derived from the housing project, including the transfer of flats to partners.

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Issues Involved:

1. Deletion of addition towards profit on sale of 20 flats not disclosed in the P&L account.
2. Consideration of unregistered MOU dated 08.10.2009 as genuine.
3. Eligibility for deduction u/s 80IB(10) of the Income-tax Act, 1961.

Detailed Analysis:

1. Deletion of Addition Towards Profit on Sale of 20 Flats Not Disclosed in the P&L Account:

The revenue challenged the deletion of the addition made by the AO towards profit on the sale of 20 flats, which were not disclosed in the P&L account. The AO noticed that the assessee transferred 20 flats to its partners via an unregistered MOU dated 08.10.2009 without any supporting evidence like payment of service tax. The AO assessed the sale value of these 20 flats in the hands of the firm, resulting in a profit of Rs. 6,94,87,778/-. The CIT(A), however, accepted the transfer as genuine and directed the AO to exclude the sale proceeds from the business income, considering the firm was eligible for 100% deduction u/s 80IB(10) of the Act. The Tribunal upheld the CIT(A)'s decision, noting that the firm could claim the deduction for the entire profit derived from the housing project, including the transfer of flats to partners.

2. Consideration of Unregistered MOU Dated 08.10.2009 as Genuine:

The AO disbelieved the transfer of 20 flats via the unregistered MOU dated 08.10.2009 due to the absence of corroborative evidence, such as payment of service tax. The CIT(A) observed that the non-payment of service tax was due to the IT Department's attachment of the property, which prevented the assessee from making the payment. The CIT(A) also noted that the transfer of the first batch of 26 flats via a similar MOU was accepted as genuine. The Tribunal agreed with the CIT(A) that the non-payment of service tax, in this case, was not a sufficient reason to disbelieve the transfer, especially since the partners had offered the sale proceeds of these flats in their individual returns.

3. Eligibility for Deduction u/s 80IB(10) of the Income-tax Act, 1961:

The AO denied the deduction claimed u/s 80IB(10) on the grounds that the assessee was merely a land contributor and not a developer. However, the CIT(A) followed the decision of the ITAT in the assessee's own case for earlier years, which was upheld by the Hon'ble Jurisdictional High Court of Madras, confirming the assessee's eligibility for the deduction. The Tribunal noted that since the assessee was eligible for 100% deduction u/s 80IB(10) for the profit derived from the housing project, any profit from the transfer of 20 flats to partners would also be eligible for this deduction. Therefore, the Tribunal upheld the CIT(A)'s decision to allow the deduction and dismissed the revenue's appeal.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the addition towards profit on the sale of 20 flats and confirming the assessee's eligibility for deduction u/s 80IB(10) of the Act. The Tribunal noted that the transfer of flats via the unregistered MOU dated 08.10.2009 was genuine and that the firm could claim the deduction for the entire profit derived from the housing project, including the transfer of flats to partners.

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