TaxTMI 
TaxTMI 
2013 (10) TMI 1603
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.... and facts of the case. 2. The learned CIT (A) erred in law and facts of the case in confirming the Order of the Assessing Officer under section 143(3) of the Income Tax Act, 1961 to the extent the same is confirmed and the same is not in accordance with law and facts of the case. 3. On the facts and in the circumstances of the case the learned Commissioner of Income Tax erred in law and facts of the case in disallowing the deduction of the profits derived from the business of developing a new infrastructure facilities within the meaning of clause (a), (b) and (c) of the Section 80IA(4)(i) of the Income Tax Act, 1961. 4. On the facts and in the circumstances of the case the learned Commissioner of Income Tax erred in law and facts of the case in considering the terrace area as part of the built-up area for the purpose of Section 80IB(10). On the facts and in the circumstances of the case the learned Commissioner ought to have held that the terrace is part of the common area and not part of built up area for the purpose of deduction under section 80IB(10). 5. On the facts and in the circumstances of the case the learned Commissioner of Income Tax(....
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....e allowed. The assessee gave a list of 21 projects. The Assessing Officer held that the projects undertaken by the assessee were only in the nature of work contracts. Moreover, it was stated that the assessee was not operating the projects and it was not known as to the time period when the claim under section 80IA of the Act is supposed to begin. 6. During appeal proceedings before CIT(A), the assessee relied upon the decision of the Hon'ble ITAT, Mumbai in the case of M/s. Patel Engineering Limited Vs DCIT (2005) 94 ITO 411. It was argued by the assessee that even though the assessee is a civil contractor, yet under the Built and Transfer mode, it had undertaken development work and was thus eligible for the aforementioned deduction. The assessee argued that even though it had not utilized its own money in the projects and had been paid by the Government for the various works, yet it had developed infrastructure. Thereby, deduction under section 80lA of the Act was allowable. The assessee also distinguished between the developer and contractor and stated that it was a developer. In its written arguments, the assessee provided detailed analysis of Patel Engineering referred....
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....he order of the ITAT Jaipur Bench order in Metal infrastructure in this regard Copies of the said orders are enclosed for the benefit of ready reference. In view of the above submissions and, the relevant facts and circumstances there is no infirmity in the claim of the assessee of the profits and gains derived from the eligible business of developing infrastructure facilities to the extent included in the gross total income and we make this humble request to consider the allowance of deduction under section 80IA accordingly. 7. The learned CIT (A) discussed the issue elaborately in his order at paras No. 5.2 to 5.6.2 about the eligibility of deduction under section 80IA and concluded as follows : "5.7. From the above facts and circumstances, it is clear that the appellant was only executing works contract with various State Government agencies. The amounts were being paid by these agencies and the appellant was not building, operating and maintaining these contractual works as a set of activities. Therefore, respectfully following the decisions of the Hon'ble ITAT, Mumbai, Third Member Bench in the case of M/s. B.T. Patil Belgaum Constructions (P) Ltd. vs. ACIT 1 IT....
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....ned Counsel submitted that from the above facts, it is clear that the conditions mentioned in the provisions u/s. 80IA(4) are all satisfied by the assessee and the assessee. The learned Counsel for the assessee relied on the decision in assessee's own case for the assessment years 2001-02 to 2004-05 vide consolidated order of Hon'ble ITAT Bench-B in ITAs. No. 1312 & 1313/ Hyd/2008, 640 & 465/Hyd/2006 and 141/Hyd/2007 dated 27.8.2012. 11. The learned D.R. on the other hand, relied on the Order of the CIT (A) and relied on the decision of the Gujarath High Court in the case of Kotira Constructions Ltd., vs. Union of India and others reported in 352 ITR 513. 12. In the rejoinder, the learned Counsel for the assessee submitted that the said decision was rendered in the context of a Writ Petition field by the above mentioned company questioning the explanation inserted in sub section (13) of Section 80lA of the IT. Act retrospectively w.e.f. 01-04-2000. The Hon'ble Gujarat High Court has held that the deduction u/s. 80IA(4) is available only to those concerns which develop the infrastructure facility and do not apply to the persons executing a mere works contract. The Hon&....
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....e activities itself and executed the project and decide accordingly in accordance with law, after giving a reasonable opportunity of being heard to the assessee. 14. Ground No. 4 is with regard to deduction u/s 80lB of the I.T. Act. The assessee during the previous year developed residential houses by obtaining necessary approvals from the local authorities. The issue involved in this ground is whether, for the purposes of working out the built up area of the residential house, the terrace area is included or not. The assessee humbly submits that the word "built up area" is defined by sub section (14) of the Sec. 80IB of the I.T. Act which means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units. The Assessing Officer is of the view that the terrace area is also to be included as a part of the built up area. The same view is expressed by the learned CIT (A) also. 15. It was submitted before us by the learned Counsel for the assessee in this appeal as follows: (i) that while constructing the ....
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....f portico and balcony for measuring the built-up area of each residential unit. If the portico and balcony area is added, the built-up area would exceed 1500 sq. ft. per unit. As per the definition as stated in section 80IB(14)(a) built-up area includes projection and balcony. Accepted rules of interpretation for and inclusive definition as elucidated by the Hon'ble Supreme Court in the case of CIT vs. Tajmahal Hotel (1973) CTR (SC) 480; AIR 1972 (SC) 168 is that if the word "include" is used in an interpretative clause, it must be construed as apprehending not only such as it signifies to its nature and merit, but also things which the interpretative clause declares what they shall include. So normal meaning of built-up area, but for the definition include projection and balcony, would definitely exclude the later. Therefore, there can be no doubt that prior to the introduction of the definition aforesaid clause built-up area would not include projections and balcony as normally understood. However, after the enactment itself clearly specifies that built-up area includes both projections and balconies as increased by the thickness of walls and does not include common area shared w....
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....order of the Assessing Officer. 22. We have heard both the parties and perused the material available on record. From the discussion of the various provisions of the Income Tax Act and in view of the Circular of CBDT it is clear that the Joint Venture of the assessee with Unitech was being assessed as partnership firm, and the apportionment of losses among the partners for set off and carry forward was not available in the new procedure for taxation of firms. Under the new procedure for taxation of firms the share income of a partner in a firm is governed by the provision contained in clause (2A) of section 10 of the Act. "The newly inserted clause (2A) of section 10 provides that in computing the total income of a previous year of a person being a partner of a firm which is separately assessed as such, his shares in the total income of the firm shall not be included for and from assessment year 1993-94." 23. The assessee has formed a Joint Venture for the purpose as given by it with Unitech Ltd. The Joint Venture is being separately assessed as such and the assessee has been claiming exemption u/s. 10(2A) for the share of profit derived from the said JV during the e....
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....rned Counsel for the assessee, relied on the order of the learned CIT (A) besides relying on the following decisions: a) The decision of the Hon'ble High Court of Calcutta in the case of ACIT vs. Bengal Ambuja Housing Development Ltd., in ITA No. 1735/ Kol/ 2005 (Cross appeal ITA No. 1595/Kol/2005) (BCAJ). b) The order of the Hon'ble ITAT, Mumbai Bench-J in the case of Ekta Sankalp Developers vs. Assessee in ITA No. 3276/Mum/2010. 31. We have heard both the parties and perused the material available on record. We find that the decision in the case of Ekta Sankalp Developers, Mumbai vs. Addl. CIT 15(2) in ITA No. 3276/Mum/2010, A.Y. 2007- 2008 dated 28.09.2012 is squarely applicable to the facts of the present case and the relevant observations of the Tribunal are re-produced hereunder : "48. I am only concerned of the binding effect of the judgment of the Hon'ble Calcutta High Court in the case of CIT vs. Bengal Ambuja Housing Development Ltd. In the light of the discussion made above, I am of the considered opinion that I should be lead by the judgment of the Hon'ble Calcutta High Court, which is a constitutional and a court of law. As there i....
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....n able to show that the Directors who have been given commission have contribution something special towards increasing the profits of the company. The decision of the Hon'ble Supreme Court in Swadesh Cotton Mills Co. Ltd. vs. CIT reported in 63 ITR 57 is relied upon for this purpose. The company claim of commission paid to the Directors therefore cannot be treated as incurred wholly and exclusively for the purpose of the assessees business. The entire commission paid at Rs. 1,50,58,000/- is disallowed and added back to the income of the company. 34. During appeal proceedings before the CIT(A), the learned Counsel for the assessee stated that the commission was duly approved by the shareholders in the Annual General Meeting. It was further stated that Sri AAV. Ranga Raju is full time Managing Director of the Company and Chief Promoter of the Company. Further, it is also stated that Sri AV.S. Raju, the then Chairman was also closely connected with the progress and day to day working of the Company. Before the learned CIT(A), the learned Counsel for the assessee contended that Sri A V S Raju, (then Chairman) and Sri A A V Ranga Raju, Managing Director are the chief promoters ....
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.... company is, undoubtedly, an important business need of the company and is one of the vital factors which enable the company to earn the profits. In this context, the learned Counsel for the assessee drawn our attention to the decision of the Hon'ble Supreme Court while upholding the principle laid down by the Calcutta High Court in CIT Vs. Edward Keventer (Private) Limited (1978) 115 ITR 149 has laid down the following propositions on the commission paid to the remuneration and commission paid to the Directors : "It is a well laid principle that the only factors relevant for the purpose of judging whether the remuneration was excessive or unreasonable by which the provisions of section 10(4A) could be applied, the legitimate business needs of the company and the benefit derived by the company by making such expenditure and these two factors had to be viewed with the eye of the businessman himself and the Income Tax officer can not substitute his own views on these matters ignoring the viewpoint of the businessmen. He can not make a guess work relying on his instinct. He must say that the business of the company is such that it does not need a highly remunerated director o....
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....f a prudent businessman and try to look at the matter from that point of view. The House of Lords in Atherton Vs. British Insulated & Helsby Cables Limited (1925) 10 Tax Cases 155 held that in order to claim a business deduction it is enough to show that the money is expended not of necessity but voluntarily and on grounds of commercial expediency, and in order indirectly to facilitate the carrying on of the business. This enunciation of the law in the above decision has become classic. Emphasis, it was pointed out by the House of Lords in Morgan (Inspector of Taxes vs. Tate & Lyle Ltd. (1954) 26 ITR 195 should be accorded to the word 'indirectly' in this enunciation. This view has been followed by our Supreme Court in Eastern Investment Limited vs. CIT (1951) 20 ITR 1 and CIT vs. Chandulal Keshavial & Co." 36.1. The CIT (A) held that there is no reason or Assessing Officer to disallow the claim of Commission paid to Directors and deleted the addition. 37. Aggrieved, Revenue is in appeal before us and raised ground No. 2 is with regard to the disallowance of commission paid to the Directors amounting to Rs. 1,50,58,000/-. 38. During the course o....
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....he issue as the assessee has not brought any facts on record to show that the two Directors contributed to the working of the company. The entire issue depends on the nature of the service rendered by the Directors to find-out whether the expenditure is reasonable. Hence, we remit the issue to the file of the Assessing Officer to examine as to the service rendered by the Directors and contribution made by them for increase in business and thereafter, the Assessing Officer shall decide this issue in accordance with law. 41. In the result, ITA No. 1237/Hyd/2010 of the Revenue is partly allowed for statistical purposes. ITA No. 1024/Hyd/2010 - A.Ys. 2006-07 (Assessee's Appeals). 42. In this appeal ITA No. 1024/Hyd/2010 grounds No. 1, 2 and 5 are general in nature and it needs no adjudication. 43. In Ground No. 3, grievance of the assessee is that the CIT (A) erred in disallowing deduction of profit derived from the business of developing new infrastructure facilities within the meaning of clauses (a) (b) and (c) of section 80IA(4)(i) of the Income Tax ct, 1961. 44. On careful consideration of the matter, we find that we are considered this very issue in the co....
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.... the assessee is not entitled for deduction u/s. 80IB. With regard to other 3 projects, the Assessing Officer is of the view that the assessee did not complete the projects during the year under consideration and, therefore, deduction u/s. 80IB is not available. 50. The assessee filed Written Submissions and with regard to the three projects, it submitted as under: "In respect of other housing projects for which the deduction has been claimed the Assessing Officer disallowed the claim stating that the housing projects were not completed during the previous year relevant to the current Assessment Year. The Assessing Officer is of the view that the deduction is allowable only on the completion of the project and not on year on year basis. This issue has been clarified by the Central Board of Direct Taxes vide Instruction No. 4/2009 accordingly deduction is to be allowed on year on year basis". 51. The learned CIT (A) while deciding the appeal, vide order in ITA No. 030/DC-16(1)/CIT(A)-V/2009-10 dated 01-07-2010 discussed the issue with reference to disallowance of deduction u/s. 80IB only on the ground that the built up area exceeded 1500 Sft. i.e. with reference ....
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....the disallowance has been made in the earlier or later years, the deduction under section 80IB(10) of the I.T. Act in respect of the three Housing Projects viz., RE-HSR Layout, RE-HSR Layout Extension, RE-Kochi are to be allowed. 54. We have heard both the parties. We admit the additional ground. Since the CIT (A) has not given a finding on this issue, we remit the issue to the file of CIT (A) for adjudication in accordance with law, after giving a reasonable opportunity of being heard to the assessee. 55. In the result, ITA No. 1024/Hyd/2010 for the assessment year 2006-07 of the assessee is partly allowed for statistical purposes. ITA No. 1025/Hyd/2010-A.Y. 2007-2008 (Assessee's appeal) 56. In this appeal, the assessee has raised 5 grounds of appeal in all. Grounds No. 1, 2 and 5 are general in nature and therefore, it need not be adjudicated separately. 57. Now, we deal with ground No. 3 which is identical to that of the ground raised by the assessee in ITA No. 1023/Hyd/2010 assessment year 2005-2006 and ITA No. 1024/Hyd/2010 for the assessment year 2006-2007. 58. On careful consideration of the matter, we find that we are considered this very issue in the cont....
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.... erred in considering the terrace area as part of the built-up area for the purpose of section 80IB (10). The contention of the assessee is that the terrace is part of the common area and not part of built-up area for the purpose of deduction under section 80IB(10). 61. On careful consideration of the matter, we find that we are considered this very issue in the context of assessee's appeal for assessment year 2005-06 i.e., ITA No. 1023/H/2010 vide paras No. 17 to 18 hereinabove. For the detailed reasons given in this context, we remit this issue to the file of the Assessing Officer to calculate the terrace area in the light of the decision of the Coordinate Bench of this Tribunal in the case of M/s. Modi Builders & Realtors Ltd. (supra) and decide the same in accordance with law, after giving a reasonable opportunity of hearing to the assessee. This ground is accordingly allowed for statistical purposes. 62. For the assessment year 2007-2008, the assessee raised the additional ground on 12.09.2012. It is with regard to Employees Stock Option Plan (ESOP) expenses. The Assessing Officer is of the view that the loss suffered on account of ESOP expenses are not allowable as a de....