TaxTMI 
TaxTMI 
2020 (12) TMI 218
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....antum of profits from the project of the appellant at Rs. 24,00,000/- and not accepting the actual profits earned to the tune of Rs. 39,51,627/- as being the profit earned by the appellant from its project eligible for deduction u/s 80IB of the Act. (3).It is, therefore, prayed that the ld. A.O. be directed to allow the claim of the appellant for deduction u/s. 80IB of the Act to the tune of Rs. 39,51,627/- and also to accept the quantum of profits of Rs. 39,51,627/- as being earned by the appellant from its project eligible for deduction u/s.80IB of the Act. (4).The Appellant prays for granting such other relief as may be deemed just and proper by your Honours considering the factual and legal aspects of the case of the appellant. (5).The Appellant craves leave to add, amend, alter, delete, substitute or modify any or all of the Grounds of Grounds of Appeal." 2.Additional grounds of appeal raised by the assessee are as follows: "1.The appellant submits that on the facts and circumstances of the case and as per law, there was no justification for disturbing the income earned from project for the purpose of grant of relief u/s.80IB(10) of the A....
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.... have carefully perused all the grounds raised by the assessee. Most of the grounds raised by the assessee are either academic in nature or contentious in nature, as explained above. However, to meet the end of justice, we confine ourselves to the core of the controversy and solitary grievance of the assessee. With this background, we have identified the solitary grievance of the assessee and thus we summarize and concise the ground raised by the assessee as follows: "The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the rejection of the claim of the appellant for the deduction u/s 80IB of the Act to the tune of Rs. 15,62,791/-." 4. The facts of the issue under consideration, which can be stated quite shortly, are as follows: The assessee principally derives income from building and construction of housing project. In the instant assessment year, the assessee has claimed deduction under section 80IB(10) of the I.T.Act, 1961. The assessee has furnished relevant details such as books of accounts, audit report, Form No.10CCB and other information, as required, before the assessing officer. The assessing officer had gone through th....
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....not been fulfilled. As per Rule 18BBB of the I.T.Rules, ...Form of audit report for claiming deduction under section 80-I or 80-IA or 56[80-IB or section 80-IC]. 18BBB.(1) The report of the audit of the accounts of an assessee, which is required to be furnished under sub-section (7) of section 80-IA or sub-section (7) of section 80-I, except in the cases of multiplex theatres as defined in sub-section (7A) of section 80-IB or convention centres as defined in sub-section (7B) of section 80-IB 57 [or hospitals in rural areas as defined in sub-section (11B) of section 80-IB], shall be in Form No. 10CCB. (2) A separate report is to be furnished by each undertaking or enterprise of the assessee claiming deduction under section 80-I or 80-IA or 80-IB 57[or 80-IC] and shall be accompanied by the Profit and Loss Account and Balance Sheet of the undertaking or enterprise as if the undertaking or the enterprise were a distinct entity. ......... (4) In any other case, the from shall be accompanied by a copy of the agreement, approval or permission, as the case may be, to carry on the activity signed or issued by the Central Government or t....
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....e to explain the case for rise in profitability; the reasonable profitability of the concern is determined at the, average profit (Gross profit) rate of the concerns which prevailed during 2 preceding years. So accordingly, the ordinary profits of the assessee concern that may be allowable is worked out as under: A.Y. Rate of Profit in Vipul Park Bunglow Project Average 'Ordinary ' Profit A.Y. 2007-08 23.39% 16.02% A.Y. 2008-09 8.64% A.Y. 2009-10 62.30% 62.30% 11.There has been adequate indications and evidence that the assessee concern has transferred bunglows from the claimed eligible business at inflated prices with a view to increasing the profits of the business in the year of transfer and has designed to derive high deduction u/s. 80IB(10). The intention of the Legislature as per section 80IA(9), has been to disallow any such move, for it requires determination of profits of the eligible business on the basis of the transfer being made at market value only which result in 'ordinary' and 'normal' profits of the concern. 12.Hence, in light of the facts that the profit eligible for deduction u/section 80IB(10) is liable ....
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....f 10CCB report. As the appellant has obtained form No.10CCB within the prescribed date, the requirement of 10CCB within the prescribed date, the requirement of 80IB is fulfilled. Therefore, the appellant is eligible for benefit of section 80IB. Accordingly, this ground of appeal is allowed subject to decision in the next para. 7.However, on (II)nd issue- profit estimation, the Ld.CIT(A) denied the deduction u/s 80IB(10) at Rs. 15,62,791/-, that is, the disallowance to the extent of Rs. 15,62,791/- was sustained. On (II)nd issue, the findings of the ld CIT(A) are as follows: : "Decision: 5.3 I have considered the assessment order and the submissions of the appellant The appellant during the year has shown of profit of 62.30 % from the Bungalo Project which is eligible for 80IB deduction. The profit in the preceding two years were 8.64% and 23.39 % respectively. The appellant had two more projects in the name New Bungalow project and Land Project. The expenditure in New Bungalow project during the year, shown as work in progress is Rs. 86,40,026/. There is no expenditure in construction shown in the eligible project. The appellant has computed cost of plot so as ....
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....s where the assessee for any reason arranges the business in such a way that it produces more than ordinary profit in eligible business. Appellant has not shown any expenditure in cost of construction of eligible project, but shown Rs. 86,40,026/- in New Bungalow Project, without showing any income there. Therefore, the Assessing Officer was justified in invoking section 80IA(10) in the given circumstances. As regards arguments of appellant that the Assessing Officer cannot estimate the profit without rejecting the books of accounts the argument is not tenable as section 80 IA(10) itself empowers the Assessing Officer to take the amount of profits as may be reasonable deemed to have been derived. The Assessing Officer needs to reject the book of account for estimating the profit to be included in total income not in the case of computing the profit and gain of eligible business for the purpose of deduction under section 80IB, which has been expressly provided in the statute. The case laws relies, therefore, are also not relevant for the purpose of estimation u/s 80IA(10)/80IB(10). Estimation of Profit: The Assessing Officer for the purpose of computing el....
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.... in appeal before us only for addition sustained by ld CIT(A) to the tune of Rs. 15,62,791/-, (out of the addition made by Assessing officer at Rs. 28,76,770/-, as mentioned in para 7 of this order. That is, assessee is praying before the Bench that addition sustained by ld CIT(A) to the tune of Rs. 15,62,791/- may be deleted. 10. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld.CIT(A) and other materials brought on record. Before us, ld.Counsel for the assessee has just reiterated the submissions made before the ld.CIT(A).On the other hand, the Learned Departmental Representative (DR) for the Revenue has reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and is not being repeated for the sake of brevity. The main question before us is that whether ld Assessing officer and ld CIT(A) are right in estimating the average profit for the purpose of partly denial of deduction under section 80IB(10) of the Act? The Assessing officer was of the vi....
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.... Act. The Assessing Officer was of the view that assessee has deliberately shown higher profit in the A.Y. 2009-10 to get more deduction u/s.80IB(10) of the Act, so as to minimize the tax burden in the years to come. Therefore, the Assessing Officer determined the normal average profit @16.02% by taking two previous years` average profit i.e. for A.Y. 2007-08 and A.Y. 2008-09 (23.39% + 8.64% / 2). This way, the Assessing Officer worked out excess profit shown in the 80IB(10) project @46.28% (in terms of percentage) and worked out the unreasonable profit in terms of quantum at Rs. 28,76,770/-. The Assessing Officer has done this over and above the entire disallowance of deduction u/s.80IB(10) at Rs. 39,69,791/-. The disallowance of unreasonable profit at Rs. 28,76,770/- has not been added to the total income of the assessee, as it was computed by Assessing Officer, without prejudice to entire disallowance of deduction u/s.80IB(10) at Rs. 39,62,791/-. To estimate the average profit, the opening stock plays an important role in assessee`s case, as the profit earned by the assessee is because of selling the opening stock, as explained above. We note that Assessing officer worked ....
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....ther methods or mode of performance are impliedly and necessarily forbidden. The aforesaid settled legal proposition is based on a legal maxim 'Expressio unius est exclusion alteris', meaning thereby that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner and following of other course is not permissible. (Nazir Ahmed v. King Emperor AIR 1936 PC 253; Ram Phal Kundu v. Kamal Sharma [2004] 2 SCC 759 and Indian Bank's Association v. Devkala Consultancy Service AIR 2004 SC 2615). Similar view has been expressed in the Orissa Rural Housing Development Corpn. Ltd, 343 ITR 316(Orissa). Hence, average estimated profit computed by the Assessing Officer is bad in law. 12.It may also be noted that Ld.CIT(A) has further re-estimate the average profit of the assessee @ of 38.4%, as against the average profit @16.02% estimated by Assessing Officer. The Assessing Officer took two years profit i.e. 2007-08 and 2008-09 (profit @23.39% and @8.64% respectively) to find out the average profit @16.02% [(23.39% + 8.64%)/2]. However, Ld.CIT(A) took four years profits, i.e. A.Y. 2007-08 @23.39%, A.Y. 2008-09 @ 8.6....
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....ted that the requirement of submitting auditor's certificate in form No.10CCB along with the return of income is an absolute. The Assessing Officer, in none of 142(1) issued, has called for report in form 10CCB during the assessment proceeding. The Assessing Officer has not issued any show cause to disallow the claim of 80IB in want of 10CCB report. As the appellant has obtained form No.10CCB within the prescribed date, the requirement of 80IB is fulfilled. Therefore, the appellant is eligible for benefit of section 80IB. Accordingly, this ground of appeal is allowed subject to decision in the next para." Thus, it is abundantly clear from the order of Ld.CIT(A) that assessee filed copy of form No.10CCB. The assessee also filed audit report in form no.3CD and claimed deduction u/s.80IB of Rs. 39,51,627/- in respect of development and building of project, therefore, Ld.CIT(A) held that since assessee had fulfilled the requirement of section 80IB of the Act, hence, the assessee is entitled for deduction u/s.80IB of the Act and therefore Ld.CIT(A) deleted the disallowance of deduction u/s.80IB of the Act at Rs. 39,62,791/-. However, at the same time, we note that Ld.CIT(A) made s....
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....ny other business carried on by the assessee are transferred to the eligible business. If the consideration for such transfer does not correspond to the market value of such goods or services then assessing officer for the purpose of deduction under section 80IA, the profit and gains of such eligible business shall be computed, as if, the transfer had been made at the market value of such goods/services. Therefore, the purpose of sub-section 8 of section 80IA is to compute the market value of such goods/services. The proviso to sub-section 8 of section 80IA directs the Assessing Officer to compute such profits and gains on such reasonable basis as the Assessing Officer may think fit. Therefore, sub-section 8 section 80IA talks about determination of market value of such goods and services which do not apply to the assessee's case under consideration. Thus, we note that the Assessing Officer has incorrectly invoked the power mentioned in section 80IA(8) to restrict the relief of the assessee under section 80IB(10) of the Act. There is no provision under section 80IB(10) that empowers the Assessing Officer to ascertain market value of goods or services on transfer of eligibl....