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2016 (11) TMI 1120
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....ome by Rs. 9,37,37,531/- being the share of profit of one of the members of the appellant AOP viz M/s Sanand Properties Pvt Ltd (SPPL) erroneously, holding that it is a case of diversion of sales or revenue and not a case of application of revenue or sales. The reduction of Rs. 9,37,37,531/-needs to be cancelled and returned business Income and consequential claim u/s 80IB (10) on that amount needs to be accepted. 2) On the facts and circumstances of the case and in law, the Learned CIT(A) erred in confirming the addition of Rs. 30,34,472/- being the interest on FDR made out of funds meant exclusively for the proposed society holding that no mutual organization is in existence during the previous year. Addition confirmed without appreciating the fact that the appellant never be said to have derived profits from contributions made by the members to the fund which could only be spent for their benefit or returned to the members is bad in law and the same needs to be deleted." 3. Ground 1: In this ground, the assessee has challenged the action of the Ld. CIT(A) in confirming the action of AO in reducing the business income by Rs. 9.37 crores being the share of profit of one of t....
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....d amounts received from the Purchasers of the housing units (representing the gross sale proceeds of the Units inclusive of the value of land) SPPL shall be entitled to, as its share of revenue/income, an amount comprising of 35% of such Receipts. It is hereby agreed and understood between the parties hereto, that SPPL may actually withdraw such share of revenue/ income to which i t is ent it led as per the understanding between the parties, from time to time. Out of the balance (65% of the aforesaid Receipts representing the gross sale proceeds), all required and relevant expenditure for the purposes of the business of the AOP shall be met with and whatever net balance remains thereafter, shall be determined as the share of revenue/income of RKC. RKC will be at liberty to actually withdraw its share of revenue/income as worked out hereinabove, from time to time. The above arrangement of sharing of revenue and income is restricted to the present housing project developed by AOP on land admeasuring 31026.90 sq. mtrs (approx. 7.76 acres) on Plot No, 72, Yerawada TPS and bearing S. No, 210 (Part) situated at village Yerawada, Taluka Haveli, Dist. Pune. However for any other proj....
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....uently set aside by ITAT and thus, the claim of the assessee has been impliedly accepted by the ITAT. Ld. CIT(A) did not follow the order of ITAT for A.Y. 2007-08 on the ground that it was a case of order u/s 263 and thus, assessee cannot have benefit of the same in these proceedings and thus, action of the Assessing Officer was confirmed. 9. Aggrieved, assessee filed appeal before the Tribunal. 10. During the course of hearing before us it has been demonstrated by the Ld. Counsel that this issue had been threadbare discussed and clarified by the Tribunal in preceding years as well as by Hon'ble High Court and thus, this issue is no more res integra. 11. We have gone through the orders passed by the Tribunal and High Court in earlier years and we shall deal with them one by one hereunder: 11.1 It is noted by us that in A.Y. 2007-08, this issue was raised for the first time by the CIT by passing order u/s 263. The matter reached before the Tribunal and the Tribunal decided this issue in favour of the assessee by its order dt 12-10-2012 reported in 141 ITD 133. It is noted by us that the Tribunal not only quashed the order u/s 263 but also discussed and adjudicated the is....
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....quantum will be gross receipts from the project reduced by expenses incurred on the project. It is not even the case of Ld. CIT that assessee AOP is not entitled the benefit of deduction under section 80-lB (10). The only objection of the Ld.CIT is that distribution of revenue in the account of the assessee is inappropriate and by this manner assessee has been benefited by larger in place of smaller deduction available to it. In our opinion such observations of Ld. CIT are incorrect, firstly, on the ground that even distribution of revenue in the books of account of the assessee cannot be said to be contrary to the purpose and intent described in clause-7 of the agreement. Secondly, the allowability or otherwise of deduction under section 80-IB( 10) is dependent upon the manner in which the profit has been distributed among members of AOP but it depend upon the fulfillment of the conditions laid down in that section and also the deduction is available to an undertaking and the individual constituent of an undertaking, 5.6 We have also not found any force in the submission Ld. D.R that 35% share allocable to SPPL was in the nature of overriding title. Clause-7 of the agreement wh....
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.... provided under the said clause before deduction of cost of the project. According to Mr. Mistri, after SPPL appropriates its share of 35 per cent proceeds, the balance 65 per cent would be used by the assessee to pay overall cost including cost of development and all the expenses for the project. Only thereafter the residual amount could be appropriated by RRK. Having considered the various submissions, we are clear that the contract between the two parties was self-explanatory and the interpretation placed by the assessee on clause (7) and claiming deduction under section 80-IB(10) is in order. The interpretation of one of the Assessing Officer could not have substituted the parties' interpretation of the relevant clause (7) of the Association of Persons' agreement with his own reasoning and that too, to the detriment of the assessee. The facts, in the present case also, reveal that the conclusions arrived at by the Tribunal, vide order dated October 12, 2012, are neither perverse nor giving rise to any error of law apparent on the face of the record. The issue cannot he reopened in the manner sought to be done in the present case and section 263 of the Act could not be res....
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.... mixed for the purpose of arriving at the taxable income and tax payable thereon. The Assessing Officer had become confused and that is why this whole litigation had taken place. With a view to find precise facts and truth in this regard, we analysed, with the assistance of both the parties, the computation of income and P&L account and work sheet of all the assessment years i.e. 2007-08, 2008-09, 2009-10, 2010-11 & 2011-12. It is noted by us that the cost of land has been made part of the work-in-progress and is accordingly apportioned on year to year basis depending upon the amount of difference between the opening balance of WIP and closing balance of WIP. The expenditure pertaining to cost of construction are provided for in the period to which they relate. For the sake of simplicity, one consolidated chart has been submitted by the Ld. Counsel which clarifies this issue threadbare. The working submitted in this chart is reproduced hereunder for the sake of ready reference: Sr. No. Particulars A.Y. 07-08 A.Y. 08-09 A.Y. 09-10 A.Y.10-11 A.Y. 11-12 1. Gross Receipts 44.66 42.50 17.06 27.47 24.44 2. Less : WIP (inclusive of land and ....
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....ped by it and, therefore, the aforesaid interest income was not income of the assessee at all, and therefore, the same was not taxable in its hands. The relevant part of assessee's submission is reproduced below: "We submit that the assessee is contractually obliged to follow the agreed terms. It is submitted that the amount kept deposited by the flat purchaser was only for their use for mutual use of the members of the common organization only. The assessee is an agent of the members for collection and keep the corpus as per the specific directions as mentioned above. The facts are that all flat purchasers will become members of the common object of maintenance and upkeep of the common fund for f inancing the cost of common object of maintenance and upkeep of the common amenities/ buildings for mutual interest and have no dealings or relations with any outside body. The concept and principal of mutuality has been elaborately examined by the Apex Court and followed in several decisions of High Courts and Tribunals. There are three conditions for applicability of the principle of mutuality, which are as follows:- a) Where a number of reasons combine together contribute to a ....
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....e buyers which were to be transferred to the Society along with amount of interest received thereon. Our attention was also drawn upon relevant provisions of Maharashtra Ownership Flats (Regulations and the Permission of Construction, Sale, Management & Transfer) Act, 1963 (hereinafter called, MOFA) and it was argued that the assessee was bound by these regulations and accordingly assessee was bound to keep these funds in fiduciary capacity to be handed over to the Society for maintenance of the building constructed by the assessee. During the course of hearing, Ld. Counsel submitted that though in the A.Ys 2012-13 & 2013-14 similar interest income was offered to tax by the assessee inadvertently, but he gave an undertaking at the bar on behalf of the assessee that in case this addition is deleted in the impugned year, then the assessee shall not seek any rectification in assessment years 2012-13 and 2013-14 in pursuance to order of the Tribunal. 17. Per contra, the Ld. DR relied upon the orders of the lower authorities and further submitted that these facts are still not available on records that whether the assessee has transferred this amount in totality to the Society or som....
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....which they were given and shall disburse the moneys for those purposes and shall on demand in writing by a Competent Authority, make full and true disclosure of all transactions in respect of that account." 20. It is further noted that section 13(1) & (2) of MOFA deal with offences of promoter and consequences on conviction, provide as under: "13. Offences by Promoters and consequences on conviction- (1) Any promoter who, without reasonable excuse, fails to comply with or contravenes, the provisions of sections 3, 4, 5 (save as provided in sub-section (2) of this section), 10 or 11 shall, on conviction be, punished with imprisonment for a term which may extend to three years or with fine, or with both. (2) Any promoter who commits criminal breach of trust of any amount advanced or deposited with him for the purposes mentioned in section 5 shall, on conviction, be punished with imprisonment for a term which may extend to five years, or with fine, or with both." 21. Thus, from the perusal of various clauses of the agreement entered with the buyers and strict provisions of MOFA, as reproduced above, we can conclude that assessee was bound to keep the amount of security ....
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....ny other law / judgment as may be applicable and also keeping in view applicability of the principles of mutuality. 23. The other apprehension raised by the Ld. DR was that in A.Ys. 2012-13 & 2013-14 the assessee has itself paid tax on the amount of interest on these deposits and therefore, position in these years should not be disturbed irrespective of the fact that whatever decision is taken by the Tribunal in the impugned year. In reply, the Ld. Counsel submitted that though the tax was paid in A.Ys. 2012-13 & 2013-14 by mistake and inadvertently, still the assessee hereby undertakes not to seek any kind of refund/ rectification in these two years. In this regard, the assessee also submitted an undertaking by way of its letter dt 20-07-2016, the relevant part of which is reproduced hereunder: "1 Kindly refer to the captioned matter that was heard before Your Honours on 20.07.2016 2. The assessee AOP had been collecting deposits as per the provisions of agreement executed with the buyers of the f lat towards corpus for maintenance, etc. till the formation of the society. The said amount which was held in fiduciary capacity by assessee AOP was kept in Fixed Deposit and in....
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....is partly allowed. 26. Now we shall take up revenue's appeal in ITA No. 7453/Mum/2014 for A.Y. 2010-11. The revenue has filed appeal on following grounds: "1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in allowing the deduction u/s. 801B(10). 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in allowing the claim of the assessee of deduction u/s.80IB(10) of Rs. 17,08,31,084/- without appreciating the fact that CIT(A) in the impugned order itself correctly interpreted clause 7 of the AOP agreement dated 29/04/2003 by detailed analysis by upholding the action of the AO of excluding the share of SPPL from the revenue of the assessee while computing business income of the assessee while dealing with ground no. 3 of the assessee. 26. Ground 1: In this ground, the Revenue has challenged the action of the Ld.CIT(A) in allowing deduction u/s 80IB(10). The brief facts are that the assessee has been claiming deduction u/s 80IB (10) as developer since AY 2007- 08. It is noted by us that in AYs 2007-08, 2008-09 and 2009-10, Ld. CIT(A) has allowed the deduction to the assessee and Revenue's appeals in th....
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....ecord. In view of our finding that the assessee is entitled for deduction u/s 80IB (10), the issue of addition has become infructuous as it become revenue neutral. Accordingly, we uphold the order of the CIT(A) on this issue also. 8. In the result, the appeal filed by the revenue is dismissed." 30. It is further noted that this issue reached before the Hon'ble Bombay High Court which was decided in favour of the Revenue by the Hon'ble High Court. The Revenue carried the matter before the Hon'ble Apex Court where it was decided as part of batch of appeals and is reported as CIT vs Sarkar Builders & Ors 375 ITR 392 (SC) wherein it has been inter alia held that where housing project was sanctioned before the amendment but has been completed after April 1, 2005, when the amended provisions came into operation, the assessee would be entitled to deduction u/s 80IB (10) and conditions mentioned in clause (d) would not apply. It has been stated that assessee's project was approved prior to the said date which has not been disputed by the Revenue. Thus, respectfully following the decisions of the Tribunal and judgement of the Hon'ble Bombay High Court in assessee's own case for earlie....