TaxTMI 
TaxTMI 
2015 (2) TMI 940
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....asons:- The assessee declared income from housing project 'Sobha Daffodil'. The land on which this project was carried out by the assessee belonged to another sister company of the assessee, M/s. Sobha Inner City Techno Qualis Pvt. Ltd. ["STP" for short]. STP purchased the land from the owners and has an arrangement with the assessee for development to be carried out over the land by the assessee. STP as owner of the land wholly conveys share of undivided interest in the land over which the project 'Sobha Daffodil' was developed by the assessee and sold to the prospective purchasers of flats from the assessee. The consideration payable by the purchasers of the flat from the assessee for the undivided share of land would be appropriated to STP and the assessee. The assessee had shown a sum of Rs. 1,55,18,769 being profit on sale and development of land in respect of the project 'Sobha Daffodil'. According to the AO, development of the land is carried out by the sister company and not by the assessee. According to the AO, assessee was only a builder of the project and it cannot treat the profit on sale and development of land as part of the profits derived from developing the housing....
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....osite transaction for sale of an apartment as sale of apartment culminates the ownership of the undivided interest in land to be transferred to the buyer. The developer classifies the profit as on sale of land purely for the purpose of accounting entries passed in his/its books of account, however, the fact remains that the profit derived by the developer was from the development of the housing project only and nothing else. 19.4. In an overall consideration of the facts and circumstances of the issue, the entire profit earned by a developer was part and parcel of the over all profits derived from the housing project. We are, therefore, of the considered view that the exclusion of the profit on the sale of land on a sole ground that the assessee had shown the profits separately and the same would not relate to the assessee was misconceived and, thus, exclusion of the profit on sale of land was rather unjustified. It is ordered accordingly." 8. Following the aforesaid decision, we uphold the order of the CIT(Appeals) and dismiss the grievance projected by the revenue in ground No.2 in this regard. 9. The other part of the deduction allowed u/s. 80IB(10) of the Act by the CIT(A) v....
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....05-06 giving out the detailed reasons for setting aside the assessment order on this same issue. Hence we request your Honour not to disturb the system of allocation of Corporate overheads to the various projects as already worked out by us." 11. The AO, however, did not agree with the aforesaid submissions made by the assessee. He found that the following were the total COH, total sales and sales in respect income from projects which are eligible for deduction u/s. 80IB(10) of the Act:- Total COH 470,014,859 Total Sales 14,363,430,000 Total Sales for 80IB Projects 480,37,75,886 12. The AO found that the basis of allocation of COH by the assessee was at 3.27% i.e., the ratio of total overhead expenses to the total turnover. He also observed that turnover of the assessee has increased to Rs. 1442.981 crores in AY 2008-09 from Rs. 1194.749 crores in AY 2007- 08. The AO has thereafter observed as follows:- "4.10 The assessee has allocated the common overhead expenses at 3.27% which is very low compared to the turnover of the assessee. The allocation should be atleast 4% on the reasons discussed as above. Therefore, the percentage of allocation is increased by 0.73% (i....
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.... at 4% as against 3.27% adopted by the assessee. The AO's conclusion is that allocation of COH at 3.27% is very low compared to the turnover of assessee. He has also given no basis for adopting 4%. As rightly observed by the CIT(Appeals), the AO has proceeded on surmises that assessee was increasing the profits of 80IB(10) units and decreasing the profits of non-80IB units to gain tax advantage. There is no basis whatsoever for this assumption of the AO. There is no dispute also that allocation of COH based on turnover will result in distortion of profits of 80IB(10) units and non-80IB(10) units. In such circumstances, we are of the view that order of the CIT(Appeals) does not call for any interference. Accordingly, ground No.2 raised by the revenue is dismissed. 18. Grounds No.3 & 4 can be dealt with together. The facts material for adjudication of aforesaid grounds of appeal are as follows. For the AY 2008-09, total income of the assessee was ultimately determined by applying the provisions of section 115JB of the Act. Tax payable under the normal provisions of the I.T. Act, 1961 was less than the tax computed u/s. 115JB of the Act and therefore total income and tax payable by t....
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....here has been an error in the computation of income u/s. 115JB of the Act in the revised return of income. It is submitted that while computing the income u/s. 115JB of the Act, we have not deducted a sum of Rs. 6,63,79,683/- being the share of a profits from a partnership firm M/s. Sobha City. It is submitted that the share income of firm is exempt u/s. 10[2A] of the Act and also deductible while computing book profit in terms of explanation [1] sub-clause [ii] to Section 115JB of the Act. We request that the book profit may be correctly determined while concluding the assessment. We request your honour that the income u/s. 1 15JB of the Act, may kindly be considered after excluding that Share of profit as discussed above." The assessee's contention is not acceptable. As seen from the assessee's reply it has not claimed the deduction of Rs. 6,63,79,683/- being the share of profit from a partner ship firm M/s Shoba City neither in the revised return of income filed on 18.03.2009. As per case law Goetze (India) Ltd Vs. CIT (2006) 157 Taxman 1 (SC). The assessing Authority has no power to entertain a claim made by the assessee, after filing original return, otherwise than filing r....
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....d to it which is provided in explanation 1(f) of Sec.115JB. Hence, the AO's extension of these provisions to the amount disallowed u/s. 14A is not within the scheme of the legal provisions and the same is therefore, directed to be deleted." "12. Before me the AR stated that the above decision only lays down a broad proposition that the AO cannot entertain claims which are not contained in a valid return of income before him. He also relied upon the CBDT's Circular No, 14 of 1955 dt. 11.4.1955 wherein it was expressed that the AOs are expected to educate the assessee and allow claims that are legitimately due to the assessee, even when such a claim is not made. I am convinced by the arguments of the AR. In fact, in the decision in the case of Goetze India (supra) the Apex Court has also clarified that the view taken does not impinge upon the power of the CIT(Appeals) to admit the additional ground. Since the appellant's share in the firm's profit is exempt u/s. 10(2A) and deductible while computing book profit, the AO is directed to exclude the same while computing the book profit. This ground, therefore, subclause (iii) i.e succeeds." 23. Aggrieved by the order of CIT(Appeals), r....
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....laim in the return of income, it was incumbent on the part of the AO to compute the book profits in accordance with the mandate laid down in section 115JB of the Act. 27. The ld. DR in his rejoinder submitted that u/s. 115JB(4) of the Act, computation of book profits has to be supported by a report of auditor in the prescribed form and that such a report of the auditor did not contain exclusion of the sum in question from the book profits. The ld. DR also submitted that revised computation of book profits u/s. 115JB by the assessee was not supported by a certificate of the auditor. 28. In reply to the aforesaid contentions, the ld. counsel for the assessee submitted that requirement of section 115JB(4) is only procedural and therefore not mandatory. It was also his submission that the report is not conclusive in the matter. According to him, it is not fair to deny the Assessee a relief purely on technicalities, when otherwise, the Assessee was entitled to the same. In this regard, ld. counsel placed reliance on the decision of ITAT, Bangalore Bench decision in the case of Sri Lakhan Singh v. ACIT, ITA No.1025/Bang/2011 for the AY 2007-08, wherein the Tribunal had after making a r....
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....t clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the appellate authorities. 10.8 A Division Bench of the Hon'ble Delhi High Court in the case of Commissioner of Income-tax v. Jai Parabolic Springs Limited (2008) reported in 306 ITR 42 had distinguished the Hon'ble Apex Court judgement in the case of Goetze (India) Ltd. (Supra). The Hon'ble Delhi High Court, in paragraph 17 of the judgment held that the Supreme Court dismissed the appeal making it clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the Tribunal. In paragraph 19, the Hon'ble High Court held that there was no prohibition on the powers of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and for the just decision of the case." 29. We have given a very careful consideration to the rival submissions. The relevant provisions of Sec.115JB(2) and Explanation thereto need to be seen. The said provisions read thus: "Sec.115JB: Special provision for pay....
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....financial year or part of such financial year falling within the relevant previous year. Explanation [1].-For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by- (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves, by whatever name called [, other than a reserve specified under section 33AC]; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidiary companies; or (e) the amount or amounts of dividends paid or proposed ; or (f) the amount or amounts of expenditure relatable to any income to which section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply; or (g) the amount of depreciation, (h) the amount of deferred tax and the provision therefor, (i) the amount or amounts set aside as provision for diminution in the value of any asset, (j) the amount standing in revaluation reserve relating to revalued asset ....
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....ection 12 apply, if any such amount is credited to the profit and loss account. 32. On the issue of reducing/excluding the share of profits from the profit as per the P&L account, in view of clause (ii) to Expanation (1) to section 115JB(2) of the Act, viz., the amount of income to which any of the provisions of section 10, we are of the opinion that the contentions put forth by the assessee are acceptable. In this regard, we are also of the view that decision rendered by the Bangalore Bench of the Tribunal referred to by the ld. counsel for the assessee clearly supports the stand taken by the assessee. We, therefore, concur with the view of the CIT(Appeals) on this issue and find no merit in ground No.4 raised by the revenue. 33. As far as ground No.3 is concerned, viz., the addition to the net profit as per profit and loss account expenditure incurred in earning income which does not form part of the total income under the Act, u/s.10 of the Act, it is seen that the quantum of expenditure disallowed by the AO by invoking the provisions of Sec.14A of the Act while computing total income under the normal provisions of the Act has not been challenged by the Assessee and the said d....