M/s. Reddy Structures (Private) Limited, Bangalore V. Deputy Commissioner Of Income Tax, Circle - 5(1)(1), Bangalore

ITA 1305/BANG/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8836 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 06-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return
• Section: 263; 133A; 80IB; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESEIDENT AND SHRI PADMAVATHY S, ACCOUNTANT MEMBER ITA No.1305/Bang/2019 Assessment year : 2010-11 Reddy Structures [P] Ltd., No.133/1, ‘The Residency’, Residency Road, Bengaluru – 560 032. PAN: AACCR 6953L Vs. The Deputy Commissioner of Income Tax, Circle 5[1][1], Bengaluru. ASSESSEE RESPONDENT Assessee by : Shri Narendra Sharma, Advocate Respondent by : Shri Sankar Ganesh, Jt.CIT(DR)(ITAT), Bengaluru. Date of hearing : 01.09.2022 Date of Pronouncement : 09.09.2022 O R D E R Per Padmavathy S., Accountant Member This appeal by the assessee is against the order of the CIT(Appeals)-5, Bengaluru dated 29.03.2019 for the assessment year 2010-11. 2. The assessee raised 6 grounds. Ground No.1, 2, 5 & 6 are general in nature and does not warrant separate adjudication. The ld AR did not press for Ground No.4 during the course of hearing and hence the same is dismissed as not pressed. The only issue arising out ITA No.1305/Bang/2019 Page 2 of 8 of this appeal is regarding deduction under section 80-IB [10] of the Act even in respect of the apartments purchased from landowners which the assessee is contending by raising Ground 3 which reads as follows. 3. The learned Commissioner of Income-tax [Appeals] is not justified in confirming the disallowance made by the learned assessing officer under section 80-IB[10] of the Act amounting to Rs. 2,02,31,525/- on the facts and circumstances of the case. 3.1. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the entire sale proceeds received by the assessee from sale of apartment in the 80-IB compliant project being developed by the assessee contributed to the profits from the eligible housing project and consequently the assessee is entitled to deduction under section 80-IB [10] of the Act even in respect of the apartments purchased from landowners and sold by the assessee, on the facts and circumstance' of the case. 3. The assessee is a limited company that carries on the business of real estate development, especially the building and developing of residential apartments. It originally filed its return of income on 28/09/2010 declaring a total income of Rs. NIL after claiming deduction u/s 80IB of Rs.6.76,56,621/- and had ultimately calculated tax on book profit of Rs. 6,71,42,990/-. Subsequently, the assessee company filed a revised return of income on 06/01/2011 declaring total income of Rs. NIL after claiming deduction u/s 80IB of Rs. 11,04,20,090/- which was restricted to the gross total income of Rs. 9,59,83,298/-. In the revised return, the assessee had calculated tax on Book Profit of Rs. 9,52,80,560/-. The assessee’s case was selected for scrutiny and the assessment proceedings were completed by order of assessment passed u/s. 143[3] of the Act dated 26/03/2012, making ITA No.1305/Bang/2019 Page 3 of 8 certain disallowances and additions determined at Rs. 11,47,270/-. The said order of assessment has since become final in as much as no appeal has been filed by the assessee against the said order of assessment. 4. There was a survey u/s. 133A of the Act in the premises of the assessee company on 14/12/2012 and in course of the survey, there was no income representing any concealed income or escaped income for the relevant assessment year found. However, after the completion of the survey operations, there was a notice u/s. 263 of the Act was issued to the assessee by the Commissioner of Income-tax proposing to set-aside the order of assessment passed u/s. 143[3] of the Act and in course of the said proceedings u/s. 263 of the Act, the CIT called upon the assessee to furnish certain details and clarifications. The assessee furnished the details called for and thereafter the CIT passed an order u/s 263 of the Act dated 27/03/2014, by which, he has set-aside the assessment order passed u/s. 143[3] of the Act, dated 26/03/2012 and directed the AO to re-do the assessment. In the aforesaid order passed u/s. 263 of the Act, the CIT gave directions to the AO to verify the claim u/s 80IB in respect of the flats that had gone to the share of the land owners, which was purchased by the assessee and sold. He also directed to verify the difference in cost between the registered value of the property and the actual amount debited in the books as purchase of land. The aforesaid order passed u/s. 263 of the Act has become final as the same was not challenged in appeal before the ITAT. ITA No.1305/Bang/2019 Page 4 of 8 5. During the proceedings u/s.143(3) r.w.s. 263, the AO has firstly, examined the claim of deduction u/s. 80IB[10] of the Act in respect of certain apartments that were purchased from the landowners share of built-up area in the projects developed by the assessee, which were later sold by it. The A.O. found that the assessee had during the year purchased 45 flats for a consideration of Rs. 10,45,75,000/- and had sold 20 flats for a consideration of Rs. 6,48,06,210/-and has computed the profit on sale of these flats at Rs.1,83,28,440/-. He has also noted that the assessee had claimed expenses of Rs. 19,03,085/- on the sale of these flats. The AO has taken the view that the profit earned on the aforesaid transaction is not eligible for deduction u/s. 80IB[10] of the Act and therefore, he made an addition of Rs, 2,02,31,525/- [Rs. 1,83,28,440+ Rs. 19,03,085] as the extent of deduction not allowable u/s. 80IB[10] of the Act. The AO also made an addition of Rs. 55,57,995/- towards cost excess claimed by the assessee on purchase of land. Accordingly, the AO concluded the assessment proceedings by the impugned order passed u/s 143[3] rws 263 of the Act dated 25/03/2015, making the following additions/disallowances to the returned income:- [a] Denying the claim of deduction u/s,80IB[10] Rs. 2,02,31,525/- [b] Addition in respect of land purchases Rs. 55,57,995/- 6. The assessee preferred appeal before the CIT(Appeals). The CIT(Appeals) confirmed the order of the AO. Aggrieved, the assessee is in appeal before the Tribunal. ITA No.1305/Bang/2019 Page 5 of 8 7. Before us the ld AR made written submissions in support of claim of deduction u/s.80IB(10) the relevant extract which is given below - The assessee has developed a housing project, which is eligible to deduction u/s. 80IB[10] of the Act. In respect of the said housing project, the assessee had secured the land for purposes of development under the joint development agreements. In terms of the joint development agreement, the assessee was required to deliver certain flats to the landowners. Some of the landowners approached the assessee and re- negotiated the terms stating that they wanted money instead of the apartments. The assessee thereupon agreed to purchase the said flats and has paid consideration to the landowners. The consideration paid by the assessee is nothing but the amounts paid for purchase of the land and forms part of the overall cost of the project being developed by the assessee. The payments made to landowners are towards purchase of landowners share of built-up area in the eligible project developed by the assessee and according to the provisions of section 80(IB)(10) of the Act, the assessee is entitled to the deduction u/s. 80IB(10) on the profits derived from ‘such housing projects’, where the provision is not restricted to the share of developers alone. Thus there can be no question of any piecemeal consideration of the so-called profits from the sale of these flats and the same forms part of the profits from the business of development of the housing project, which is eligible for deduction u/s. 80IB[10] of the Act. The aforesaid transaction cannot be regarded as a separate transaction entered into by the assessee to deny the deduction claimed by the assessee. Without prejudice to the above, even if it is assumed that the payments made by the assessee are to purchase the flats from the landowners, even then, these payments are made towards purchase of the landowner's share of the built-up area in the eligible project developed by the assessee. None of the landowners have claimed the deduction u/s. 80IB[10] of the Act and hence, the assessee is entitled to claim the same having regard to the parity of the decision of the Hon'ble High Court of Karnataka in the case ITA No.1305/Bang/2019 Page 6 of 8 of M/s. PRAMOD & OTHERS in ITA NO.231 of 2010 dated 29/02/2012. Hence, the denial of the deduction is unwarranted and the resultant addition made deserves to be deleted. 8. The ld AR also submitted that the issue regarding deduction u/s 80IB(10) of the Act is considered by the coordinate bench of this Tribunal in the assessee’s own case for AYs 2007-08 & 2008-09 (ITA Nos.1302 & 1303/Bang/2019 dated 17.6.2022) where the Hon’ble Tribunal has allowed the claim in favour of the assessee. 9. The ld. DR relied on the orders of the lower authorities. 10. We have considered the rival submissions and perused the material on record. We notice that this Tribunal in the assessee’s own case for AYs 2007-08 & 2008-09 (supra) had dealt with similar issue of deduction u/s. 80IB(10) of the Act and decided the issue in favour of the assessee. The relevant observations of the Tribunal are as under:- 13. The assessee has entered into agreements whereby the land owners wanted the assessee to sell the flats that were to be allotted to them as per the terms mentioned therein the consideration is paid towards the land, the super built up area which is the land owner’s out of 37% of the undivided right as per the original agreement entered into with the assessee. Thus the argument of the ld AR that the consideration paid by the assessee to the landowners is nothing but due amounts paid for purchase of the land which forms part of the overall cost of the project developed by the assessee has merits. Further as per the provisions of section 80IB(10), the profit derived from ‘such housing project’ is eligible for deduction which need to be considered in total, subject to other conditions mentioned in the said section. The ld AR brought to our attention the decision of the Karnataka High Court in the case of CIT Vs Shravanee Constructions (ITA No.421/422 of 2009) where the Hon’ble Court has held that:- ITA No.1305/Bang/2019 Page 7 of 8 “9. In that view of the matter, the contention of the revenue that the assessee did not undertake any developmental or building activity and therefore, he cannot individually claim the benefit has no substance. That is not the requirement of law. Keeping in mind, the object with which this provision is introduced when all persons who have made investments in this housing project which is for the benefit of middle and lower class people and, when they have complied with all the conditions prescribed under the aforesaid provision, both of them are entitled to hundred percent benefit of tax deduction as provided under the said provision. In that view of the matter, we do not see any merit in these appeals. The substantial question of law is answered in favour of the assessee and against the revenue. Accordingly, the appeals are dismissed.” 14. A plain reading of section 80-IB(10) evidently makes it clear that deduction is available in a case where an undertaking develops and builds a housing project on the profits derived from such housing project. In the given case the profit from the sale of flats earmarked for the land owners is also derived by the assessee from the development and building of the housing project. In view of the above discussion we are of the considered view that the assessee is entitled claim deduction u/s.80IB(10) on the profits derived from sale 22 flats earmarked for the land owners. The appeal is allowed in favour of the assessee.” 11. Respectfully following the above decision of the Hon’ble Tribunal, on identical facts, we hold that the assessee is entitled to claim deduction u/s. 80IB(10) of the Act. 12. In the result, the appeal is partly allowed in favour of the assessee. Pronounced in the open court on this 9 th day of September, 2022. Sd/- Sd/- ( N V VASUDEVAN ) ( PADMAVATHY S ) VICE PRESIDENT ACCOUNTANT MEMBER Bangalore, Dated, the 9 th September, 2022. ITA No.1305/Bang/2019 Page 8 of 8 /Desai S Murthy / Copy to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.