TaxTMI 
TaxTMI 
TaxTMI 
2022 (5) TMI 1171
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.... declared in e-return filed on 30.09.2011. Case selected for scrutiny through CASS followed by serving of notices u/s 143(1) & 142(1) of the Act. During the course of assessment proceedings ld. Assessing Officer (in short ld. "AO") noticed that the assessee is carrying out a number of construction projects simultaneously out of which for some projects deduction u/s 80IA & 80IB of the Act has been claimed. Various other details were called for to examine the claim made for deduction u/s 80IA of the Act, disallowance u/s 14A of the Act, interest expenditure and interest free advances, unsecured loans, application of the provisions of Section 68 & Section 40(a)(ia) of the Act, interest on service tax and TDS and miscellaneous other issues. After considering the submissions of the assessee ld. AO assessed the income at Rs.55,13,56,730/- after making following additions to the gross total income of the assessee of Rs.47,96,15,068/- shown by the assessee in the computation of income in the following manner: PARTICULARS AMOUNT (RS.) Gross Total Income as per computation RS.47,96,15,068/- Add: As per above discussion 1. Disallowance u/s 14A (refer para 5) Rs. 1,02,66,1....
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...." 4.2. Grounds raised by the Revenue: "1. On the facts and circumstances of the case, the Ld CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding disallowance of Rs.1,02,66,118/-u/s.14A r.w. Rule 8D (Rs. 60,03,465/- under Rule 8D(2)(ii) and Rs.42,62,653/- under Rule 8D(2)(iii). 2. On the facts and circumstances of the case, the Ld CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding addition of Rs.1,00,89,940/- out of interest debited/paid by the assessee. 3. On the facts and circumstances of the case, the Ld CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding addition of Rs.17,90,15,000/- by invoking the provision of Sec.68 of the Act. 4. On the facts and circumstances of the case, the Ld CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding addition of Rs.12,92,185/- being interest on service tax. 5. On the facts and circumstances of the case, the Ld CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding disallowance of the claim for bad de....
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...., therefore, the said disallowance is confirmed. Remaining amount is interest on TDS & TCS at Rs.13,486/-. On going through the finding of the ld. CIT(A), we find no reason to interfere into the finding disallowing the claim of interest paid on TDS & TCS at Rs.13,486/-. Thus, ground no. 1 raised by the assessee is dismissed. Ground No. 2: 5.2. Through ground no. 2 assessee has raised the issue of denial of deduction u/s 80IA(4)(iii) of the Act at Rs. 13,58,03,793/-. At the outset, ld. Counsel for the assessee submitted that the said deduction was claimed for the profits arising from industrial park namely Salarpuria Touchstone which has been confirmed by the ld. CIT(A) for want of notification to be issued by Central Board of Direct Taxes (in short "CBDT"). The issue of CBDT not issuing notification for the said industrial park is already subjudice before the Hon'ble Calcutta High Court and the decision is awaited. 5.3. We, therefore, looking to the fact that since as on date the said industrial park is not eligible for deduction u/s 80IA(4)(iii) of the Act for want of being noticed by CBDT, the ld. CIT(A) has rightly denied the claim, however, presently the matter is subjudice ....
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.... incurred any expenditure for earning exempt income. Thus, under these given facts and the settled judicial precedence, no disallowance u/s 14A of the Act was called for by the ld. AO. Thus, ground no. 1 raised by the Revenue is dismissed. Ground No. 2: 7.3. Through this ground, the Revenue has challenged the finding of the ld. CIT(A) deleting the disallowance of interest paid/debited at Rs.1,00,89,940/. 7.4. Brief facts relating to this issue are that the assessee debited total interest of Rs. 3,38,18,940/-. Ld. AO based on the observation that the assessee had advanced interest free loans to its subsidiary companies namely (i) M/s. Sabitrimata Realtors Pvt. Ltd. (ii) M/s. Beetle Real Estates Pvt. Ltd. and (iii) M/s. Christmas Realtors Pvt. Ltd. came to a conclusion that interest of Rs. 1,00,89,940/- deserves to be deleted. The assessee succeeded before the ld. CIT(A) challenging this disallowance. Before us, ld. CIT(D/R) has supported the observation of ld. AO. 7.5. Per contra, ld. Counsel for the assessee relied on the finding of the ld. CIT(A) and also submitted that the assessee company has sufficient share capital and reserves and surplus brought forward from earlier year....
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.... received from following four companies: a) M/s. Satern Griha Nirman Pvt. Ltd. - Rs. 13,60,00,000/- b) M/s. Onkareswar Realtors Pvt. Ltd. - Rs. 7,00,000/- c) M/s. Salarpuria Griha Nirman Pvt. Ltd. - Rs. 25,000/- d) M/s. Suruchi Properties Pvt. Ltd. - Rs. 4,22,90,000/- Total - Rs.17,90,15,000/- 7.10. During the course of assessment proceedings the assessee filed a letter dated 28.03.2014 seeking two weeks' time to prepare the material required by the ld. AO. Since the assessment was getting time barred on 31.03.2014, ld. AO, due to lack of relevant material on record and after referring to judicial pronouncements made the addition u/s 68 of the Act at Rs. 17,90,15,000/- for unexplained share application money. 7.11. Aggrieved, the assessee preferred an appeal before the ld. CIT(A) and filed the details to prove the identity and creditworthiness of the alleged companies and the genuineness of the transaction of the share application money received by the assessee company. Ld. CIT(A) called for the remand report, after going through the same asked the assessee to file a rejoinder and the same was done. Ld. CIT(A), after going through the detailed documents filed in case of....
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..... 17,90,15,000/- and in such respect the AO had issued notice asking the appellant to prove the genuinity of such Share Application Money. The AO has further mentioned that the appellant furnished a letter seeking more time in the matter and since such details were not furnished before the AO till 31.3.2014 and the assessment proceedings were getting time barred and hence he had to make the addition for the entire amount. The appellant on its part submitted that the relevant details in such respect were furnished before the AO on 31.3.2014 itself and hence the contention of the AO is bad in law. The matter was remanded to the AO and the AO in his remand report submitted as follows: "The appellant has received Share Application Money from the following group companies. a) SaternGrihaNirman Pvt. Ltd. Rs. 13,60,00,000/- b) Onkeshwar Realtors Pvt. Ltd. Rs. 7,00,000/- c) Salarpuria GrihaNirman Pvt. Ltd. Rs. 25,000/- d) Suruchi Properties Pvt. Ltd. Rs. 4,22,90,000/- Total: Rs. 17,90,15,000/- The AO in his remand report has further submitted that as per the requirement of sec. 68, all the three ingredients i.e. identity, creditworthiness and genuinity has to be established a....
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....py of bank account for the source of the application so made in the appellant company. vi) Copy of Audited Accounts for the year ended 31.3.2011 relevant to A.Y. 2011-12. vii) Copy of Annual Report filed in ROC. 8.2 The appellant has brought further certain facts on record and which are worth mentioning. In the case of M/s Salarpuria Properties Private Ltd., the appellant assessee's profit is at Rs. 66.52 corre, Rs. 35.64 crore, Rs. 108.88 crore and Rs. 48.47 crores respectively in the years ended 31.3.2008, 31.3.2009, 31.3.2010 & 31.3.2011. In the background of the same, the appellant has contended that the appellant company is worth investing and it is not a paper company as such. As regards the applicant where from the appellant has received the Share Application Money, the appellant has brought to my attention the audited accounts of M/s Satern Griha Nirman Pvt. Ltd. which had reserve & surplus of Rs. 40.12 crores and had net profit of Rs. 36.64 crores and Rs. 6.53 cores in the year ended 31.3.2010 & 31.3.2011 respectively. Further, the appellant has also brought to my notice the audited accounts of M/s Salarpuria Griha Nirman Pvt. Ltd. that it had reserve & surplus to ....
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....e AO had made extensive enquiries and from that it is found that some of the investor companies were non-existent. Such judgment doesn't apply in appellant's case and in this case the AO himself has referred to such companies as "group company" only and further the assessment orders have also been placed before me and existence of such companies carrying substantial business operation is proved. Since the PAN details, bank account statements, audited financial statements, income-tax acknowledgements and assessment orders have been placed before the AO in the remand proceedings and as well as before me, I find that all the three conditions as required u/s 68 of the IT Act, i.e. identity, creditworthiness and genuinity of the transactions have been proved by the appellant and the onus shifted to the AO to disprove the material so placed before him. The AO did not & make any attempt to examine such material and hence I find the addition in such respect cannot be sustained and hence the addition in such respect is deleted." 7.15. The above finding of the ld. CIT(A) remained uncontroverted by the ld. D/R and the established fact remains that the assessee has furnished sufficient docume....
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....venue is dismissed. Ground no. 5: 7.17. Through this ground, Revenue has challenged the finding of the ld. CIT(A) deleting the disallowance made by the ld. AO for the claim of bad debts as balance written off Rs. 1,27,29,297/-. 7.18. Brief facts relating to the issue are that the assessee has debited a sum of Rs. 1,27,29,297/- as balance written off. Necessary documents could not be filed before the ld. AO as the assessment was getting time barred. When the matter was carried before the ld. CIT(A) submissions were duly supported by the documentary evidences. Remand report was called for and the assessee has filed a rejoinder. Ld. CIT(A) observed that the alleged disallowance included stock written off at Rs. 73,55,162/- and sundry debtors written off at Rs. 53,74,135/-. Ld. CIT(A) allowed the claim of the assessee observing that the stock written off pertains to assets of SEZ project which were abandoned during the year due to change of Govt. policy and was in a nature of business loss. As regards the sundry debtors written off the same were found to be the sales made in the past and the amount was not realizable which were offered as revenue in a preceding year and has been cla....
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....ble and the same has been written off and hence following the judgment of Hon'ble Supreme court in the case of CIT v. TRF Ltd. 323 ITR 500 (SC) the said sum is held as allowable. Hence this ground of the appellant is allowable." 7.22. From the above finding and the ratio laid down by the Hon'ble jurisdictional High Court in the case of a) Binani Cement Ltd. (supra) & b) Britannia Industries Ltd. (supra), we find no infirmity in the finding of the ld. CIT(A) allowing the claim of the assessee writing off the stock of Rs. 73,55,162.22 being in the nature of business loss. We also find no infirmity in the finding of the ld. CIT(A) allowing the claim of bad debts of Rs. 53,74,135.37 as these were the sales/rental made in the past offered as revenue but being not realizable has been claimed as bad debts in the regular books of account and this claim has been rightly made in view of the ratio laid down by the Hon'ble Supreme Court in the case of TRF Ltd. (Supra). Thus, we confirm the finding of the ld. CIT(A) and dismiss the ground no. 5 raised by the Revenue. Ground No. 6: 7.23. Through this ground, Revenue has raised the issue regarding deduction u/s 80IB(10) of the Act in respect o....
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....t trends and technology prevailing in the construction industry in the year in which the project was completed. In absence of the various details, it seems that the entire fact pattern has been set to obtain the deduction u/s 80IB whereas practically, the same is not possible to execute in reality. 4B(3). Further on specific query on how the assessee is fulfilling the conditions stipulated under section 80IB(10) the assessee has provided certain cryptic details on a perusal of which it appears that two adjacent flat nos. A 1202 and A1203 were sold to Sri Atul Gupta and Smt. Rupali Gupta having same residential address. The assessee has not reverted when asked during assessment proceedings the relationship between the two purchasers and whether these sales contravene the provisions of section 80IB(10) of the Act. Since this fact has not been clarified, there is an overwhelming suspicion that the provisions of section 80IB(10) have been contravened since both the purchasers are presumed to be inter related as defined under the section. Hence, on this count also, the claim under section 80IB(10) is liable to be disallowed to the assessee. 4B(4).Considering above facts, the claim m....
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....in respect of such project has also been accepted and has been considered in the taxable income so assessed by AO during the years concerned. However as regards of the deduction u/s 80IB(10), the AO has objection on unverified allegations. The AO has merely mentioned that the onus of proving the completion of the project has not been discharged by the appellant whereas the fact is other way round and it is the AO who has alleged non completion of the project. The AO has not conducted any enquiry on his own and merely on assumption that the project cannot be completed within such a short time and hence the allegation and the disallowance of deduction u/s 80IB(10). The entire action of the AO has no basis and the appellant is fully entitled for deduction u/s 80IB(10) since it has completed all the conditions so specified in such provision. c) Since the factum of "sales" has been accepted by the revenue and profit thereon has been accepted and considered in taxable income of appellant, revenue cannot deny the completion of project and consequent deduction u/s 80iB(10) on such residential projects CIT(A) has right allowed the claim of the appellant. II. In respect of the residentia....
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....sdictional Tribunal allowing proportionate deduction to the assessee in such case. To support such contention regarding proportionate deduction u/s 80IB(10) reliance is placed on following judgments as well : Bombay High Court - HIGH COURT OF BOMBAY ITAT MUMBAI BENCH 'C' Om Swami Smaran Developers (P.) Ltd. v. Income-tax Officer, Ward- 8 (2) (4), Mumbai [2018] 90 taxmann.com 267 (Mumbai - Trib.) Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings (Housing project) - Assessment year 2011-12 - Assessee, a developer, had developed a housing project and claimed deduction under section 80-IB(10) - Assessing Officer disallowed same on grounds that assessee had allotted three flats to a single person, thus, violated conditions of section 80-IB(10)(f) which provides that more than one residential unit in a housing project cannot be sold to one person/individual - Whether merely because assessee had violated conditions of section 80-IB(10)(f) in respect of three flats, deduction under section 80-IB(10) could not be disallowed for entire housing project and, assessee was entit....
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....ion P Ltd (2007) 108 TTJ 71, the deduction claimed by the assessee is to be allowed. The appellant succeeds on this ground. The AO is directed to delete the deduction." 3. HIGH COURT OF BOMBAY - Devashri Nirman LLP. v. Assistant Commissioner of Income Tax, Panaji, Goa Bom./(2020) 429 ITR 597 (Bom.) Where assessee developer exceeded area of 1500 square feet of eight residential units in two housing projects which was in breach of conditions contained in sub-clause (c) of section 80-IB(10), denial of deduction under section 80-IB(10) would be limited only in respect of said eight flats and assessee would be entitled to benefit of deduction under section 80-IB(10)proportionately in respect of other residential units having built up area of less than or equal to 1,500 square feet 4. HIGH COURT OF BOMBAY Models Construction (P.) Ltd. v. Deputy Commissioner of Income-tax, Central Circle, Panaji, Goa [2020] 429 ITR 605 (Bombay) Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings (Housing Project) - Assessment years 2010-11, 2011-12 and 2012-13 - Whether pro rata deductions can be....
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....er purchase of land and approval of construction plan by development authority might not necessarily lead to inference that development and construction of projects had commenced prior to 1-10-1998 - Held, yes - Whether, further, merely getting booking money in advance in respect of housing project whose development and construction were started after 1-10-1998 would not disentitle assessee to benefit of deduction under section 80-IA(4F)/80-IB(10), insofar as crucial condition was commencement of development and construction of housing project and not receipt of booking amount in advance - Held, yes - Whether mere act of levelling earth does not amount to construction of housing project within meaning of section 80-IA(4F) and, therefore, said act of assessee could not snatch its deduction which was otherwise available to assessee - Held, yes - Whether in view of aforesaid and having regard to other relevant facts, such as, written construction contracts were entered into by assessee with contractors after specified date, i.e., 1-10-1998 and work orders in case of all four projects were subsequent to 1-10-1998, there was no reason to assume that commencement of development and const....
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.... judgments are as follows: i) Om Swami Smaran Pvt. Ltd. v. ITO (2018) 90 taxmann.com 267 (Mumbai AT) ii) DCIT v. Mandovi Builders (ITA No.1734 and 1735 /Bang/2013 dt. 22.2.2015 [affirmed in CIT v. Mandavi Builders (2020) 275 Taxman 519 (Karrn.)] D. Without prejudice, it has to be appreciated that Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT (1993) 196 ITR 188 (SC) had categorically observed that the provision in a taxing Statute granting incentives for promoting growth and development should be construed liberally and since a provision for promoting economic growth has to be interpreted liberally the restriction has to be construed so as to advance the objective of the provision in Statute. Applying this maxim, it may be appreciated that the legislature has prescribed the condition by using express in separate which the only condition which the assesse is unable to satisfy so as to two adjacent flats sold to spouses so as to qualify in respect of profits derived from housing project for remaining project. Hence in this case the appellant has complied with all the conditions in and separate for balance project hence a liberal view is warranted in the matter The....
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....mention at the outset that there cannot be any dispute to the proposition that section 80-P of the Act is a benevolent provision which is enacted by Parliament in order to encourage and promote growth of cooperative sector in the economic life of the country. It was done pursuant to the declared policy of the Government. Therefore, such a provision has to be read liberally, reasonably and in favour of the assessee (see Bajaj Tempo Ltd. v. CIT [1992] 3 SCC 78]). It is also trite that such a provision has to be construed as to effectuate the object of the legislature and not to defeat it (see CIT v. Mahindra and Mahindra Ltd. [1983] 4 SCC 392. Therefore, it hardly needs to be emphasised that all those cooperative societies which fall within the purview of section 80-P of the Act are entitled to deduction in respect of any income referred to in sub-section (2) thereof. Clause (a) of sub-section (2) gives exemption of whole of the amount of profits and gains of business attributable to any one or more of such activities which are mentioned in sub-section (2)..........." Hence Ld. CIT(A) was right in following the judgment of Jurisdictional High Court in allowance of proportionate ded....
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.... karta, or any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. Ld. AO on observing that two flats were purchased by husband and wife in the residential projects Salarpuria Sanctity, held that the assessee is not entitled to deduction u/s 80IB(10) of the Act. 7.30. We, further, find that ld. CIT(A) on examining the facts of the case, constituting the judicial precedence, was satisfied with the project completion certificate of Salarpuria Serenity project and also allowing the proportionate claim u/s 80IB(10) of the Act made for Salarpuria Sanctity, thereby denying the deduction for the proportionate profit earned on sale of two units sold by husband and wife and allowing the remaining deduction observing as follows: "Such grounds are in respect of deduction u/s.80IB(10) in residential project namely 'Salarpuria Sanctity' & 'Salarpuria Serenity'. The AO has denied such deduction u/s 80IB(10) for Rs. 12.93 crores and Rs. 3.13 crores respectively. In respect of 'Salarpuria Sanctity' AO disallowed deduction on the ground that the assessee has not complied with the c....
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.... completed which as per the AO seems impossible. The appellant in its submission has contended that the AO has merely expressed his disbelief without even conducting any enquiry in such respect and has submitted that it is with the advent of technology in construction technology the project is completed within such a short span of time. Further, the appellant has submitted that the AO accepted the sales and the expenditure made in respect of such project and the profit was considered in the Profit & Loss account for the purposes of assessment as well. However the corresponding profit for the purpose of deduction u/s 80IB(10) has been disallowed on such un-reasonable ground. I find substance in the argument of the appellant and I find that if the sales have not been doubted neither the expenditure have been doubted by the AO, there does not arise any reason / occasion to disallow the deduction. The appellant submitted the copy of completion certificate which sufficiently proves that the project had been completed on 8.12.2009 and there does not arise any occasion to doubt the same. Hence the appellant is entitled for deduction u/s 80IB(10) on the residential project, named Salarpuri....
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...."e" & "f" of Section 80IB(10) of the Act was inserted w.e.f. 01.04.2010 whereas the said project was completed prior to such date and advance from the customers were received prior to such date only. But the fact remains is that the profits for the year under appeal from this project includes the profit from sales of flats of husband and wife. Now the issue is that whether for this default was ld. AO justified in rejecting the total claim of deduction u/s 80IB(10) of the Act for the "Salarpuria Sanctity" project even though all the other conditions were fulfilled for the remaining units sold by the assessee. We find that his issue has come up before Hon'ble Courts on multiple occasions. In one of the recent judgments of the Hon'ble jurisdiction High Court in the case of Commissioner of Income Tax vs. Martin Burn Ltd. ITAT 94 of 2013 GA 1219 of 2013 has dealt with the similar issue holding as follows: "Section 80IB(10) of the Act refers to projects and, at the first blush, the Revenue's contention appeals. However, a closer scrutiny of such provision reveals that there are several conditions that have to be complied with before the benefit of deduction under such provision can....