TaxTMI 
TaxTMI 
2011 (12) TMI 757
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....ses in ratio of turnover of a project to the total turnover of the company for 80IB deduction. 3) The CIT(A) has erred in holding "percentage of completion method" for allocating overhead expenses for claiming 80IB deduction. 4) The CIT(A) has erred in allowing 80IB deduction in respect of profit on sale and development of land. 3.2 Brief facts in relation to the above grounds are as follows:- The assessee is a company. It is engaged in the business of development of real estate and execution of construction contracts. Return of income for the asst. year 2006-07 was filed on 29.11.2006 declaring an income of Rs. 54,18,32,997/- after claiming deduction u/s 80IB(10) of the Act amounting to Rs. 56,80,76,159/-. The assessment was completed on 24/12/2008 fixing the total income at Rs. 70,65,43,646/-. The AO, while completing the assessment, recomputed the deduction u/s 80IB of the Act and restricted the same to Rs. 40,33,65,510/- instead of Rs. 54,18,32,997/- claimed by the assessee. The deduction u/s 80IB of the Act was reduced mainly on account of two reasons, viz. - (i) difference in the method of allocation of general overhead expenses and (....
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.... concluded that the allocation of the overhead expenses of the year on the basis of turnover is a fair method to arrive at the true profits derived from the 80IB project and is more reasonable than the cost basis as the revenue recognized on the basis of percentage of completion is a good indicator of level of activity. This view is also supported by the ITAT, Delhi Bench in the case of Food Specialities Ltd. v ACIT (54 ITD 352). 4.3 The difference in the method of allocation of the overhead expenses resulted in a reduction of the profits from the project and the consequent deduction claimed u/s 80IB(10) of the Act in respect of the various projects as under:- Sl. No. Name of the Project Expenses allocated by the appellant (Rs.) Expenses allocated by the AO (Rs.) Difference in the allocable expenses (Rs.) 1. Sobha Dahlia 1,89,56,067/- 2,99,58,722/- 1,10,02,655/- 2. Sobha Hibiscus 1,39,95,236/- 1,91,05,669/- 51,10,433/- 3. Sobha Iris 2,98,07,045/- 5,19,96,902/- 2,21,89,857/- 4. Sobha Mayflower 1,90,66,198/- 2,96,64,140/- 1,05,97,942 5. Sobha Primrose 1,42,52,889/- 2,12,65,291/- ....
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....- Sobha Innercity Technopolis 3. Sobha Primrose 41,47,715/- Sobha Innercity Technopolis 4. Sobha Rose 2,32,56,408/- Sobha Technocity 5. Sobha Daisy 96,30,639/- Sobha Innercity Technopolis Total 9,37,05,963/- The reason by the AO for the exclusion of the profit on the sale of land in computing deduction u/s 80IB are mentioned at 4.1 of the impugned order of the CIT(A). 5.1 On further appeal before the first appellate authority, the CIT(A), following the order of the Tribunal in assessee's own case for the asst. year 2005-06, decided the matter in favour of the assessee. The CIT(A) directed the AO that the profits derived by the assessee by way of sale of undivided interest in land should not be excluded while computing deduction u/s 80IB of the Act. 5.2 The revenue being aggrieved is in appeal before us. 5.3 The learned counsel for the assessee submitted that the issue in question is covered by the order of the Tribunal in assessee's own case for the asst. year 2005-06 in favour of the assessee (ITA No.965/Bang/2009 dated 31.5.2010). 5.4 The learned DR was unable to controvert the submi....
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....ame forward to deny the claim of the assessee. The AO's stand that deduction u/s 80IB (10) of the Act was availed only for building a housing project and not for the development of land was rather misconceived. As a matter of fact, the AO had failed to see that the assessee had not developed any land, but, constructed a housing project and that there cannot be a development or a building of a housing project without any land. As could be seen from the commencement Certificate of the BDA [P.151 of PB-AR], no doubt that the certificate was issued in the name of H.R. Chandrashekar, C/o Sobha Developers Pvt. Ltd. No.E-106, Sunrise Chambers, 22, Ulsoor, Bangalore.42. The goes to clear the air that since the said Chandrashekar was the original owner of the said land as per the revenue records and as per the rules, the commencement certificate for construction could be issued to a person whose name was finding a place in the records at the relevant time of issuing such certificate. Accordingly, the said certificate was obtained in the name of Chandrashekar. Had Chandrashekar himself been an inclination to venture a construction project on his own, he would not have gone with the address o....
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....action 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". 5.6 The facts being identical, following the coordinate bench decision of the Tribunal for the asst. year 2005-06, we hold that the order of the CIT(A) requires no interference, since it is in accordance with law. Hence, ground no.4 mentioned a....
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....the expenditure in relation to income not includable in total income works out to 1.25175 millions which is 0.5% of the average of value of investment (500.70/2 * 0.5% = Rs. 12,51,750/-). (Addition = Rs. 12,51,750/-)". 8.3 On further appeal, the CIT(A), followed the judgement of the Hon'ble Punjab and Haryana High Court in the case of CIT v Hero Cycles Ltd. (2010) 323 ITR 518 and allowed the appeal of the assessee. The CIT(A) held, "In the instant case, in the absence of any such finding or evidence of any expenditure having been actually incurred to earn the exempt income, I am of the opinion that the disallowance of Rs. 12,5`,750/- is not permissible". 8.4 The revenue being aggrieved is in appeal before us, 8.5 The learned DR relied on the judgement of the Hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. v DCIT 328 ITR 81 and contended that the matter should be remitted back to the AO so that he can determine whether the assessee has incurred any expenditure, (direct or indirect), in relation to earning of exempted income. It was submitted that in the instant case, the Assessing Officer applied Rule 8D without examining whether the expenditure is a....