TaxTMI 
TaxTMI 
2016 (6) TMI 206
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....iate the scheme of sec.80-IB(7A) r.w.s. 80-IB (14)(da) and rule 18DDB of the I.T. Rules. He further failed to appreciate that commercial shops is a mandatory requirement for building, owning and operating a multiplex theatre. 2. The learned Commissioner of Income Tax (Appeals) erred on facts and in law in restricting deduction u/s 80-IB(7A) to Rs. 31,09,491 (with reference to profits of Rs. 62,18,983) as against Rs. 60,14,734 (with reference to profits of Rs. 1,20,29,467) claimed by the assessee. 3. Without prejudice to Ground No.1 & 2, a) The learned Commissioner of Income Tax (Appeals) erred on facts and in law in not allowing the expenses including depreciation on car etc. not considered by the A O while calculating the deduction u/s 80IB(7A). b) The learned Commissioner of Income Tax (Appeals) erred on facts and in law in not allowing the depreciation on machinery such as air conditioners etc. from the alleged income from Big Bazar. 4. The learned Commissioner of Income Tax (Appeals) erred on facts and in law in upholding disallowance of cost of improvement to the extent of Rs. 67,02,224 in respect of short term capital gains on sale of plots. 5. The learned Commi....
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.... in staff cost by Rs. 11 lakhs and there was reduction in work-in-progress of building shown on account of damages to the building at Rs. 23 lakhs. The Assessing Officer noted that in the concern Adinath Developers, the assessee had claimed deduction of Rs. 23 lakhs in work-in-progress, which was capital loss. The assessee was show caused to explain the same. In reply, the assessee pointed out that the building was constructed in assessment year 2001-02 and due to designing defects, cracks developed in the roof as well as walls and the flats could not be sold and were shown as work-in-progress. During the year under consideration, since the realizable value of flats were lower, the assessee obtained valuation certificate from the Architect and closing value of work-in-progress was declared at Rs. 3,95,000/- as against opening work-inprogress of Rs. 26,95,000/-. The assessee declared net loss of Rs. 23 lakhs. It was further pointed out by the learned Authorized Representative for the assessee that the said flats were sold during the financial year 2010-11 for Rs. 6,51,000/- and profit on sale was offered to tax in the relevant year. The assessee further pointed out that the said bui....
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....t the assessee had claimed deduction on account of bank interest and charges of Rs. 28,55,330/- and depreciation of Rs. 27,34,312/-, against the rent receipts. The Assessing Officer further observed that the bank interest and depreciation pertain to the entire building i.e. Multiplex at first floor and the portion let out on basement and ground floors. Since the assessee was in receipt of rent from let out property and was not carrying out any activity of the nature of trade or commerce, as per the Assessing Officer, the income was required to be assessed as income from house property and assessee's claim of various expenses as per the Profit & Loss Account was not admissible. The Assessing Officer held that the said rent received from Big Bazaar is to be assessed as income from house property and admissible deduction under section 24 of the Act were computed and income from house property was calculated at Rs. 53,03,032/-. Further, the Assessing Officer took note of depreciation chart filed by the assessee and noted that 25% of the assets excluding figures were utilized for Big Bazaar and 75% of assets were used for first floor portion i.e. Multiplex of the building. Consequently,....
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.... the cost of improvement of two plots sold by the assessee during the year, against which it had declared short term capital gains of Rs. 21,65,791/-. The Assessing Officer noted that while computing the short term capital gains, the assessee had declared cost of improvement in respect of plot No.1 at Rs. 65,52,239/- and in respect of plot No.2 at Rs. 29,06,400/- i.e. total of Rs. 94,58,639/-. During the course of assessment proceedings, the assessee was asked to furnish the details and it was pointed out that the said expenditure was incurred to raise plinth level of plot of land in order to be marketable. The amount was claimed to be spent on purchasing Murum and leveling the land. The assessee furnished the details of expenses along with addresses of the suppliers. The assessee later on furnished names of persons and the amount paid to them for Murum filling, leveling and fencing work in order to verify the genuineness of expenses. The statements of two persons were recorded during the course of assessment proceedings. The assessee was asked to produce three persons. However, the assessee could not produce the said three persons and the Assessing Officer noted that the payments ....
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.... of additional evidence as the assessee was not prevented by sufficient cause from producing same before the Assessing Officer. The CIT(A) vide para 14 at page 5 observed that from the above facts it appears that since there was not enough time before the appellant to produce details and the persons for recording statements before the Assessing Officer, the additional evidences are to be entertained by undersigned. However, the CIT(A) allowed relief of only Rs. 3,91,755/- in respect of payments made to the Municipal Corporation and regarding the balance amount, the CIT(A) agreed with the Assessing Officer that the expenses were un-substantiated and therefore, not allowed. The CIT(A) also upheld the order of Assessing Officer in disallowing the loss of Rs. 23 lakhs as capital loss. 9. The assessee is in appeal against the order of CIT(A). 10. The learned Authorized Representative for the assessee after taking us through the factual aspects of the case, pointed out that this was the fourth year of claim of deduction under section 80IB(7A) of the Act. The learned Authorized Representative for the assessee fairly admitted that in all the earlier years, the said claim was allowed by i....
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.... Authorized Representative for the assessee placed reliance on the following decisions:- i) M/s. Shreeji Exhibitors Vs. ACIT in ITA No.640/M/2014 and M/s. Shreeji Enterprises Vs. ACIT in ITA No.2196/M/2013, relating to assessment year 2009-10, order dated 14.08.2015; ii) DCIT Vs. Magarpatta Township Development & Construction Co. in ITA No.822/PN/2011 and CO No.04/PN/2012, relating to assessment year 2007-08, order dated 18.09.2012; and iii) M/s. Mudhol Land Holding Vs. CIT in ITA No.987/PN/2013, relating to assessment year 2008-09, order dated 28.08.2014. 11. With respect to ground of appeal No.3, the learned Authorized Representative for the assessee stated that the same was an alternate ground of appeal to grounds of appeal No.1 and 2, wherein the CIT(A) had not allowed the expenses including depreciation on car while calculating deduction under section 80IB(7A) of the Act. Further plea was raised on account of depreciation on machinery such as air-conditioners, etc. against income received from Big Bazaar. 12. The learned Departmental Representative for the Revenue pointed out that when a person is carrying on his business, then he accounts for the risk. However, when t....
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.... (7A) The amount of deduction in the case of any multiplex theatre shall be- (a) fifty per cent of the profits and gains derived, from the business of building, owning and operating a multiplex theatre, for a period of five consecutive years beginning from the initial assessment year in any place : Provided that nothing contained in this clause shall apply to a multiplex theatre located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee or a cantonment board or by any other name) of Chennai, Delhi, Mumbai or Kolkata; (b) the deduction under clause (a) shall be allowable only if- (i) such multiplex theatre is constructed at any time during the period beginning on the 1st day of April, 2002 and ending on the 31st day of March, 2005; (ii) the business of the multiplex theatre is not formed by the splitting up, or the reconstruction, of a business already in existence or by the transfer to a new business of any building or of any machinery or of plant previously used for any purpose; (iii) the assessee furnishes alongwith the return of income, the report of an audit in such form and containing ....
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....ustrial undertakings are provided. As per sub-section (1) to section 80IB of the Act, where the gross total income of an assessee includes any profits and gains derived from any business referred to in subsection (3) to section 11B of the Act, then, in accordance with and subject to provisions of said section, deduction would be allowed in computing total income of the assessee, equal to such percentage and for such number of years as specified in the section. Under sub-section 7A, it is provided that in respect of deduction in the case of any multiplex theatre, amount shall be 50% of the profits and gains derived from the business of building, owning and operating a multiplex theatre for a period of five consecutive years beginning from initial assessment year, in any place. It is further provided that nothing contained in this clause shall apply to multiplex theatre located at a place within municipal jurisdiction of Chennai, Delhi, Mumbai or Calcutta. As per sub-clause (b) to section 80IB(7A) of the Act, the deduction under clause (a) shall be allowable only if such multiplex theatre is constructed at any time during the time beginning the first day of April, 2002. Further, it i....
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.... the Rules prescribed thereunder i.e. Rule 18DB, it transpires that deduction from the eligible profits and gains of business of multiplex theatre are allowable to the assessee, where the profits and gains are derived from the business of building, owning and operating a multiplex theatre. The term used in section 80IB(7A) of the Act is derived from, which is wider in connotation and in relation to the business of building, owning and operating a multiplex theatre. The term 'multiplex theatre' means a building having at least three cinema theatres and at least three commercial shops. Where the assessee is engaged in the business of multiplex theatre means a building of prescribed area comprising of cinema theatres and the commercial shops as prescribed under Rule 18DB of the Rules. Under section 80IB(14)(c) of the Act, initial assessment year in respect of each of the undertaking is specified and vide clause (5), it is provided that in case of multiplex theatre, the initial assessment year will be relevant to the year in which cinema hall being part of multiplex theatre starts operations on a commercial basis. In other words, the Act recognizes the running of cinema hall to be a di....
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....wherein in the facts of the said case, the assessee was engaged in construction business and had developed township under the name and style of Magarpatta City Project. The assessee had constructed and let out the park i.e. Cyber City and income received from letting out the same was offered as income from business. The claim of the assessee was that in Magarpatta City Project, the development of information technology park was approved under section 80IA of the Act and was bonded area under the Software Technology Park of India (STPI) norms and had various amenities to its. Further, huge investments were made in installation of many specialized amenities / equipments like transformers for the IT Park, special power sub-stations, CCTV, fibre satellite connectivity, radio microwave cell phone boosters, restaurants, etc. which were provided to IT companies. The income from licence agreement i.e. software companies to whom the IT Park premises had been let out was claimed to be continuous / systematic activity which was in the nature of complex commercial activity and the assessee claimed that it was assessable as business income. The Tribunal after taking note of various judicial pro....
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.... comfort of shopping to them. These facilities can not be said to be basic/normal facilities required for occupation of the premises. The cost of common facilities has been embedded in the lease rentals whereas the assessee is also receiving substantial income for providing amenities/facilities to the occupants/tenants. The assessee‟s activity thus can not be said to be mere letting of the building owned by it but its activity is a business activity of construction of mall, maintaining it, leasing the shops/ area for the purpose of commercial exploitation of the asset, arrange and provide the facilities and amenities not only to the occupants/lessees but also to provide and maintain facilities and amenities in the common areas for the attraction, convenience and comfort of the customers/visitors. In our view, as per the modern day trends of retail business and customer preferences, not only the quantum of rent/income from the multiplex but also the very letting of the premises depends upon the provisions of facilities and amenities provided taking into consideration not only the need and requirements of the business entities/occupants but also the comfort zone of the customer....
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....ovided in the Schedule attached to the Agreement, which reads as under:- "LIST OF ASSETS The Asset Owner has already provided to the Pantaloon the List of Asset which is given below; a. Lighting in the common areas, viz., outside the said building; b. 100% power back up with dedicated DG Sets with KVA as per requirements and specifications of PRIL, operating costs of which will be borne by PRIL; c. Fire fighting systems, if required as per local municipal regulations; d. Benefits of all warranties and other benefits, which may be available to purchasers of DG sets, and / or all the above items shall be passed on to PRI; e. Benefits of Annual Maintenance Contracts for maintenance of all the above equipments; f. Electrical fittings, wiring as per PRIL's specifications; g. Overhead water tanks; h. Cooling system has provided as approved by PRIL." 23. The case of the assessee before us is that all these assets were provided as per specifications of Pantaloon and for their needs. It was further stressed by the learned Authorized Representative for the assessee that in case these assets are not used by Pantaloon, then the same may not be used by the next lesse....
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....led consolidated financial statements for the two activities does not distinguish the title of the assessee from claim made by it under section 80IB(1) of the Act. Accordi ngly, we direct the Assessing Officer to allow the claim of assessee. The grounds of appeal No.1 and 2 raised by the assessee are thus, allowed. 25. The ground of appeal No.3 being alternative to grounds of appeal No.1 and 2, is thus, dismissed. 26. Now, coming to the issue raised in ground of appeal No.4 in respect of the disallowance of cost of improvement on sale of plots which was declared as short term capital gains on sale of two plots, one plot was near multiplex theatre and the second plot was in the city. While declaring income from short term capital gains, the assessee had declared cost of improvement in respect of plot No.1 at Rs. 65,52,239/- and in respect of plot No.2, at Rs. 29,06,400/-. The assessee claimed that the said amount was spent on purchasing Murum and leveling the land, in respect of which details were furnished before the Assessing Officer i.e. name of person from whom Murum was purchased and also the amounts spent on leveling and fencing. The payments were made through cash / bearer ....
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....ay of entries in the books of account before the Assessing Officer, who shall afford reasonable opportunity of hearing to the assessee and look into the merits of claim of assessee. It may be clarified here that the Assessing Officer in the first round had already allowed 25% as allowable in the hands of assessee and the CIT(A) has further allowed Rs. 3,91,755/-, against which the Revenue is not in appeal. Hence, the same stands explained and allowed in the hands of assessee. In respect of balance, the Assessing Officer shall decide after affording reasonable opportunity of hearing to the assessee. The ground of appeal No.4 raised by the assessee is thus, allowed for statistical purposes. 31. Now, coming to the last ground of appeal No.5 i.e. in respect of revaluation of closing stock by the assessee. 32. The assessee had re-worked the realizable value of closing stock of certain flats which remained to be unsold and claimed business loss of Rs. 23 lakhs. The case of the assessee before us was that the revaluation of stock was on the basis of report of registered valuer. In respect of certain flats, which could not be sold by the assessee for period of time, the said building was....