TaxTMI 
TaxTMI 
2012 (11) TMI 620
X X X X Extracts X X X X
X X X X Extracts X X X X
....duction u/s. 80IB(10) of the Act pertaining to such income. It be held that the income is eligible for deduction u/s. 80IB(10) of the Act. It further be held that the income is not assessable in the AY: 2006-07. Just and proper relief be granted to the appellant on this score." 3. The facts reveal from the record are as under. The assessee is a builder and developer. The A.O has observed that the assessee was constructing and developing various projects like Sacred Heart Tower -1, Sacred Heart Tower-2, Hill View Residency, Devi Link-2, Devi Orchid & Empress Court and other projects. As observed by the A.O, the assessee has completed Devi Orchid, Empress Court, Sacred Heart Tower-2 during the previous year relevant to A.Y. 2006-07. The assessee has shown the sales of Sacred Heart Tower-2, Devi Link-2, Empress Tower -A, Silver gate and Devi Orchid during the year. In respect of the issue in controversy is concerned, there are two limbs. So far as the first limb is concerned, the A.O has reservation in allowing the deduction to the assessee u/s. 80 IB (10) in respect of the housing project undertaken by the assessee and the second limb is that the A.O brought to tax Rs.2,34,76,838/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see is more than 1 acre. The A.O. was not convinced with the explanation of the assessee. In his opinion, the housing project and the hospital project; those were two distinct & separate projects and maternity hospital was not the part of the housing project. As observed by the A.O, it is seen that the approval for the construction of the residential units is given with the stipulation that he should construct the hospital and hand over the same to PMC free of cost for the purpose of use as Maternity Hospital. The A.O, therefore, rejected the claim of the assessee u/s. 80 IB (10) on the reason that one of the conditions i.e. u/s. 80 IB (10)(b), is not complied. The assessee challenged the decision of the A.O before the Ld CIT(A) denying the benefit of Sec. 80 IB (10) to the assessessee without success. The Ld CIT(A) confirmed the view taken by the A.O. and also the reasons given for denying the deduction to the assessee for the violation of addition of the area of the plot. 6. So far as the second limb of the controversy is concerned, the A.O brought to tax the profit from housing project i.e. Devi Orchid declared by the assessee in the A.Y. 2007-08, in the A.Y. 2006-07. So far ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs of the authorities below and submitted that the area of the plot is to be considered which is available for the construction with the assessee. He submits that the area reserved for the hospital cannot be part of the plot of the land on which the housing project has been undertaken and the same has to be excluded. 8. In our opinion, the facts relevant to the issue are in narrow compass. We find that there is no dispute that the gross area of the plot is 84875 Sq.Mts. As per the D.C. Rules, the assessee was required to give area for the D.P. road, as well as for open space as per the Regulations. In addition to that, there was a reservation for the hospital project, that was to the extent of 25% of the FSI of the plot which works out 976 Sq. mts but, at the same time, the total area covered under the hospital building as noted by the A.O is 494 Sq. mts and the balance area is left with the assessee for his housing project. So far as the area of the D.P. and open space is concerned, the assessee is given the additional FSI to the extent of the area left. The said area is left as per the DC Rules, but while sanctioning the FSI, the total area of the plot is considered by the san....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction suggest two situations - (1) the option is with the assessee to claim deduction as per the completion of the project if he desires or after completion of the project and (2) in case the project is not completed within the time limit specified, then the deduction can be withdrawn. We fail to understand the logic of the A.O for bringing to tax the profits declared by the assessee from A.Y. 2007-08 to A.Y. 2006-07. In our opinion, such action of the A.O cannot be sustained. As per the copy of the Completion Certificate on record dated 28.2.2007, (page No. 32 of the compilation) the final completion Certificate is granted to the assessee in the F.Y. 2006-07 and partial completion was granted on 31.3.2006 (page No.31 of the compilation). We further find that the assessee is consistently following a particular method of accounting recognizing the profit which has not been rejected in past. We further find that the A.O has not rejected the method of accounting followed by the assessee in the A.Y. 2006-07. We, therefore, hold that there is no justification to bring to tax the part of profit from the housing project declared by the assessee in the A.Y. 2007-08 to the extent of Rs. 2,3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yments made to the labour contractors as provided u/s. 194C of the Act. Alternatively, the Ld. Counsel submits that disallowance can be restricted to the extent the payments outstanding as on the 31st March of the respective Financial Year. The Ld. Counsel has also relied on the decision of the Hon'ble Special Bench of ITAT, Visakhapatanam in the case of Merilyn Shipping and Transport Vs. ACIT, , Visakhapatanam, being ITA No. 477/Vizag/2008 dated 29 March 2012. We find force in the argument of the Ld. Counsel on alternate plea. We, accordingly, restore the ground No. 2 to the file of the A.O to sustain the disallowance to the extent of amount outstanding out of the 5 parties as on 31.3.2006 in the light of the principles laid down in the case of M/s. Merilyn Shipping and Transport v/s. ACIT (Supra). The A.O is directed to give the opportunity of being heard to the assessee and decide the issue afresh. Accordingly, Ground No. 2 is partly allowed. 13. The Ground No. 3 reads as under : "3. On the facts & circumstances prevailing in the case & as per provisions of law, it be held that the Assessing Officer has erred in holding part of the expenditure incurred pertaining to Windmi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s appeal for A.Y. 2007-08, being ITA NO. 1391/pn/2010. 17. Ground No. 1 reads as under : "1. On facts & circumstances prevailing in the case & as per provisions of law, it be held that the authorities below have erred in denying the claim of deduction u/s. 80IB(10) of the Act on income of the eligible project determined at Rs.2,34,76,838/-. It be held that the income is eligible for deduction u/s. 80IB(10) of the Act. Just and proper relief be granted to the appellant on this score." 18. We have heard the parties. In this year, on protective basis, the A.O brought to tax Rs. 2,34,76,838/- and also denied the deduction u/s. 80 KIB (10). While deciding assessee's appeal for A.Y. 2006-07, we have held that the assessee is entitled for the deduction u/s. 80 IB (10) and following our reasoning and finding for A.Y. 2006-07, we direct the A.O to allow the deduction to the assessee u/s. 80 IB(10) in respect of housing project as claimed. While deciding the assessee's appeal for A.Y. 2006-07, we have further held that the A.O was not justified in bringing to tax a sum of Rs.2,34,76,838/- out of the profit from the housing project which has been declared by the assessee in the A.Y. ....