M/S. SU-SAMPADA, Indore V. THE ITO 3(2), Indore

ITA 113/IND/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4333 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 25-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: V K JHANVAR
• Keywords: Business income; Opportunity of being heard
• Section: 80IB; 6; 10; 2; 11

Judgement Text

ITA NOS.113/IND/2015 & 138/IND/2015 SU SAMPADA 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JM & SHRI O.P. MEENA, AM ITA NO.113/IND/2015 A.Y.2010-11 SU SAMPADA INDORE PAN AAUFS 5259B ::: APPELLANT VS INCOME TAX OFFICER 3(2) INDORE ::: RESPONDENT ITA NO. 138/IND/2015 A.Y.2010-11 INCOME TAX OFFICER 5(1) INDORE ::: APPELLANT VS SU SAMPADA INDORE ::: RESPONDENT ASSESSEE BY SHRI PRAKASH JAIN & SHRI V.K. JHANVAR RESPONDENT BY SHRI MOHD. JAVED DATE OF HEARING 27.7.2016 DATE OF PRONOUNCEMENT 27 . 7 .2016 ITA NOS.113/IND/2015 & 138/IND/2015 SU SAMPADA 2 O R D E R PER SHRI D.T. GARASIA, JM THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL AGAINST THE ORDER OF THE LEARNED CIT(A)-I, INDORE, DAT ED 29.10.2014. ITA NO.113/IND/2015 2. GROUND NO. 1 OF THE ASSESSEES APPEAL IS GENERAL IN NATURE AND AS SUCH REQUIRES NO ADJUDICATION AND AS SUCH IT IS DISMISSED. 3. GROUND NO. 2 OF THE ASSESSEES APPEAL READS AS UNDER :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN UPHOLDING THE A.O. ACTI ON IN TREATMENT OF GROSS AMOUNT OF INTEREST RECEIVED OF RS.4,49,225/- ON SHORT TERM DEPOSITS IS LIABLE TO B E ASSESSED AS INCOME OF THE APPELLANT UNDER THE HEAD INCOME FROM OTHER SOURCES BY DISTINGUISHING THE DECISION OF HON'BLE ITAT, INDORE BENCH, INDORE, IN THE APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 2008- 09. ITA NOS.113/IND/2015 & 138/IND/2015 SU SAMPADA 3 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION OF MULTI-STOREYED BUILDING, ROW HOUSES ETC. THE ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD OF ACCOUNTING FOR THE LAST SO MANY YEARS. THE ASSESSING OFFICER HAS NOT ACCEPTED THE SAME AND ESTIMATED THE NET PROFIT @ 8% OF SALE CONSIDERATION. HOWEVER THE CIT(A) ACCEPTED THE PROJECT COMPLETION METHOD OF ACCOUNTING ON THE BASIS OF ORDERS OF EARLIER YEARS PASSED BY HIM, WHI CH WERE CONFIRMED BY THE TRIBUNAL. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE RECEIVED INTEREST OF RS.4,49,225/- FROM MORYA FINANCE CORPORAT ION AS PER INTEREST ACCOUNT WHICH WAS NOT OFFERED AS INCOME . THE ASSESSING OFFICER ASSESSED THE INTEREST INCOME O F RS.4,49,225/- UNDER THE HEAD INCOME FROM OTHER SOUR CES. ITA NOS.113/IND/2015 & 138/IND/2015 SU SAMPADA 4 ON APPEAL, THE LEARNED CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER. NOW THE ASSESSEE IS IN APPEAL BEFOR E THE TRIBUNAL. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AN IDENTICAL ISSUE HAD COME UP BEFORE IT AT, INDORE BENCH, INDORE, IN THE ASSESSEES OWN CASE IN I TA NOS.446/IND/2013 AND CO NO. 80/IND/2013 ORDER DATED 30.4.2014 AND ITA NOS. 370/IND/2014, 319/IND/2014 AND CO NO.39/IND/2014 ORDER DATED 1.12.2015 WHEREIN THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. 7. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH THE SIDES. WE FIND THAT THE INDO RE BENCH OF THE TRIBUNAL HAD AN OCCASION TO DECIDE IDENTIC AL ISSUE IN THE CASE OF THE ASSESSEE IN ITA NOS.446/IND /2013 AND CO NO. 80/IND/2013 (A.Y.2008-09) AND ITA NOS. ITA NOS.113/IND/2015 & 138/IND/2015 SU SAMPADA 5 370/IND/2014, 319/IND/2014 AND CO NO.39/IND/2014 (A.Y. 2009-10). VIDE ORDER DATED 30.4.2014 IN ITA NO.446/IND/2013 AND CO NO.80/IND/2014 THE TRIBUNAL OBSERVED AS UNDER :- 4 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION OF HOUSING PROJECT. DURING THE COURSE OF ITS BUSINESS, ADVANCES WERE RECEIVED FROM THE CUSTOMERS AGAINST BOOKING OF FLATS. THE FUNDS NOT SO IMMEDIAT ELY REQUIRED IN BUSINESS WAS TEMPORARILY INVESTED TO RE DUCE THE INTEREST COST OF BUSINESS. THE INTEREST INCOME SO EARNED WAS NETTED AGAINST THE INTEREST EXPENSE INCU RRED ON THE FUNDS BORROWED FOR THE PURPOSE OF VERY SAME BUSINESS. KEEPING IN VIEW THE NATURE OF ASSESSEES BUSINESS IN WHICH ADVANCES WERE RECEIVED AGAINST BOOKING OF FLATS, THE INTEREST INCOME EARNED ON TEM PORARY ADVANCE ESSENTIALLY PARTAKE THE SAME NATURE OF INCO ME UNDER THE HEAD OF BUSINESS AND PROFESSION. HERE, ASSESSEE IS NOT ASKING TO TREAT THE INTEREST INCOME AS DERIVED FROM INDUSTRIAL UNDERTAKING SO AS TO ALLOW ANY EXEMPTION AVAILABLE TO THAT INDUSTRIAL UNDERTAKING. HERE, SIMPLY THE QUESTION IS RELATING TO NATURE OF INCOME RECEIVED. SINCE ADVANCE RECEIVED FROM CUSTOMERS WAS IN REGULAR COURSE OF BUSINESS INTEREST EARNED ON SHORT TERM DEPOSIT OF SUCH FUNDS ALSO PARTAKES THE SAME CHARAC TER AS BUSINESS INCOME. THUS, THE NET INTEREST EXPENDITURE WAS DEBITED TO THE WORK IN PROGRESS. SINCE NO PROJECT W AS COMPLETED DURING THE YEAR, NET INTEREST EXPENDITURE SO DEBITED IN WORK IN PROGRESS WAS SHOWN IN THE BALANC E SHEET. CONSEQUENT TO PROJECT COMPLETION METHOD ADOP TED ITA NOS.113/IND/2015 & 138/IND/2015 SU SAMPADA 6 BY THE ASSESSEE, INTEREST WAS EARNED WAS SET OFF AG AINST THE INTEREST PAID. BY CONSIDERING THE DECISION OF B OMBAY HIGH COURT WHICH WAS ON THE SIMILAR FACTS, THE LD. CIT(A) DELETED THE ADDITION. IN THE CASE OF LOK HOLDINGS ( SUPRA), THE HON'BLE BOMBAY HIGH COURT OBSERVED THAT WHERE T HE ASSESSEE FIRM WAS ENGAGED IN CONSTRUCTION BUSINESS AND RECEIVED MONIES FROM THE PURCHASERS OF FLATS WHICH IT DEPOSITED WITH THE BANK, THE INTEREST INCOME EARNE D ON SUCH DEPOSIT SPRANG FROM THE BUSINESS ACTIVITIES OF THE ASSESSEE AND NOT OUT OF ANY INDEPENDENT ACTIVITY. I T WAS HELD THAT INTEREST INCOME RECEIVED BY THE ASSESSEE WAS ASSESSABLE AS BUSINESS INCOME AND NOT UNDER THE HEA D INCOME FROM OTHER SOURCES. RESPECTFULLY FOLLOWING THE DECISION OF BOMBAY HIGH COURT, WHICH IS ON THE EXAC TLY SIMILAR FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING NETTING OF INTEREST INCOME. FOLLOWING THE ABOVE DECISION OF THE ITAT, INDORE BEN CH, INDORE, THE ORDERS OF THE AUTHORITIES BELOW ARE SET AS IDE WITH THE DIRECTION TO THE ASSESSING OFFICER NOT TO TREAT THE GROSS AMOUNT OF INTEREST RECEIVED ON SHORT TERM DEP OSITS AS LIABLE TO BE ASSESSED AS THE INCOME OF THE ASSESSEE UND ER THE HEAD INCOME FROM OTHER SOURCES. THIS GROUND OF THE ASSESSEE IS THUS ALLOWED. ITA NOS.113/IND/2015 & 138/IND/2015 SU SAMPADA 7 9. GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE READS AS UNDER :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN ALLOWING DEDUCTION OF RS.50 ,000/- U/S 40(B) ON ACCOUNT OF PARTNERS REMUNERATION WITHO UT APPRECIATING THE FACT THAT BY FINANCE ACT 2009 W.E. F. 1.4.2010 IN THE CASE OF LOSS, REMUNERATION TO THE PARTNERS IS ALLOWABLE TO THE EXTENT OF RS.1,50,000/ -. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TH AT AS PER THE FINANCE ACT, 2009 WITH EFFECT FROM 1.4.2010, THE REMUNERATION PAID TO PARTNERS IS ALLOWABLE TO THE EXTENT OF RS.1,50,000/-. ON THE OTHER HAND, THE LEARNED DR RELI ED UPON THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD BOTH THE SIDES. FINANCE ACT, 2009 READ S AS UNDER :- AMOUNTS NOT DEDUCTIBLE. 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38 , THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', (B) IN THE CASE OF ANY FIRM ASSESSABLE AS SUCH, ITA NOS.113/IND/2015 & 138/IND/2015 SU SAMPADA 8 (I) ANY PAYMENT OF SALARY, BONUS, COMMISSION OR R EMUNERATION, BY WHATEVER NAME CALLED (HEREINAFTER REFERRED TO AS 'REMUNERATION') TO ANY PARTNER WHO IS NOT A WORKING PARTNER; OR (II) ANY PAYMENT OF REMUNERATION TO ANY PARTNER WH O IS A WORKING PARTNER, OR OF INTEREST TO ANY PARTNER, WHICH, IN EITHER CASE, IS NOT AUTHO RISED BY, OR IS NOT IN ACCORDANCE WITH, THE TERMS OF THE PARTNERSHIP DEED; OR (III) ANY PAYMENT OF REMUNERATION TO ANY PARTNER WH O IS A WORKING PARTNER, OR OF INTEREST TO ANY PARTNER, WHICH, IN EITHER CASE, IS AUTHORISE D BY, AND IS IN ACCORDANCE WITH, THE TERMS OF THE PARTNERSHIP DEED, BUT WHICH RELATE S TO ANY PERIOD (FALLING PRIOR TO THE DATE OF SUCH PARTNERSHIP DEED) FOR WHICH SUCH P AYMENT WAS NOT AUTHORISED BY, OR IS NOT IN ACCORDANCE WITH, ANY EARLIER PARTNERSH IP DEED, SO, HOWEVER, THAT THE PERIOD OF AUTHORISATION FOR SUCH PAYMENT BY ANY EAR LIER PARTNERSHIP DEED DOES NOT COVER ANY PERIOD PRIOR TO THE DATE OF SUCH EARLIER PARTNERSHIP DEED; OR (IV) ANY PAYMENT OF INTEREST TO ANY PARTNER WHICH IS AUTHORISED BY, AND IS IN ACCORDANCE WITH, THE TERMS OF THE PARTNERSHIP DEED AND RELATES TO ANY PERIOD FALLING AFTER THE DATE OF SUCH PARTNERSHIP DEED IN SO FAR AS SUCH AMO UNT EXCEEDS THE AMOUNT CALCULATED AT THE RATE OF TWELVE PER CENT SIMPLE IN TEREST PER ANNUM; OR (V) ANY PAYMENT OF REMUNERATION TO ANY PARTNER WHO IS A WORKING PARTNER, WHICH IS AUTHORISED BY, AND IS IN ACCORDANCE WITH, THE TERMS OF THE PARTNERSHIP DEED AND RELATES TO ANY PERIOD FALLING AFTER THE DATE OF SUC H PARTNERSHIP DEED IN SO FAR AS THE AMOUNT OF SUCH PAYMENT TO ALL THE PARTNERS DURING T HE PREVIOUS YEAR EXCEEDS THE AGGREGATE AMOUNT COMPUTED AS HEREUNDER : (A) ON THE FIRST RS. 3,00,000 OF THE BOOK-PROFIT OR IN CASE OF A LOSS RS. 1,50,000 OR AT THE RATE OF 90 PER CENT OF THE BOOK-PROFIT, WHICH-EVER IS MORE; (B) ON THE BALANCE OF THE BOOK-PROFIT AT THE RATE OF 60 PER CENT : FROM A BARE READING OF SECTION 40(B) IT BECOMES CRYSTAL CLEAR THAT ANY PAYMENT OF REMUNERATION TO ANY PARTNER SHALL BE ALLOWABLE TO THE EXTENT OF RS.1,50,000/- IN C ASE OF A LOSS ALSO. WE, THEREFORE, ALLOW THIS GROUND OF APPEAL. ITA NOS.113/IND/2015 & 138/IND/2015 SU SAMPADA 9 ITA NO. 138/IND/2015 10. IN THIS APPEAL THE REVENUE HAS TAKEN THE FOLLOWING GROUND OF APPEAL :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN 1) DELETING THE CLAIM OF DEDUCTION U/S 80IB(10) AS THE ASSESSEE HAD NOT FULFILLED CONDITIONS PRESCRIBED FOR DEDUCTION U/S 80IB(10). 11. BEFORE US, THE LEARNED DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 12. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION U/S 80IB(10) OF THE ACT AND AS SUCH THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING TH E SAME. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORDE R OF THE ASSESSING OFFICER. 13. WE HAVE HEARD BOTH THE SIDES. WE FIND THAT WHILE DEALING WITH THE ISSUE OF DEDUCTION U/S 80IB(10), TH E ITA NOS.113/IND/2015 & 138/IND/2015 SU SAMPADA 10 ASSESSING OFFICER HAS HIMSELF MENTIONED THOUGH THE ASSESSEE HAS ONLY MENTIONED IT IN THE NOTE APPENDED IN THE COMPUTATION OF INCOME AND HAS NOT CLAIMED ANY DEDUC TION U/S 80IB AS HE HAS NOT WORKED OUT ANY PROFIT UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION, THIS POINT IS NOT RELEVANT AT PRESENT. THEREAFTER, THE A.O. HAS, BY REJECTING THE ASSESSEES PROJECT COMPLETION METHOD OF ACCOUNTIN G, ESTIMATED THE NET PROFIT @ 8% OF SALE CONSIDERATION OF RS.4.49 CRORES. THEREFORE, THE ABOVE FINDING OF THE ASSESSING OFFICER IS CONTRARY IN ITSELF. WE, THEREFO RE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO VERI FY THE CLAIM OF THE ASSESSEE AND IF IT IS FOUND THAT THE ASSESS EE DID NOT CLAIM ANY DEDUCTION U/S 80IB(10) OF THE ACT, NO DISALLOWANCE IS CALLED FOR. NEEDLESS TO MENTION THAT ITA NOS.113/IND/2015 & 138/IND/2015 SU SAMPADA 11 ADEQUATE OPPORTUNITY OF BEING HEARD BE AFFORDED TO THE ASSESSEE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES WHEREAS THE REVENUES APPEAL STANDS DISMISSED. PRONOUNCED IN OPEN COURT ON 16TH AUGUST, 2016 SD/- SD/- (O.P. MEENA) (D.T. G ARASIA) ACCOUNTANTMEMBER JUDICIAL MEMB ER 16 TH AUGUST, 2016 DN/-