ITO, Nashik V. J.K.ASSOCIATES, Nashik

ITA 1552/PUN/2013

• Counselvise Citation: 155224514 RSA 2013
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 05-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Scheme of amalgamation
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1552/PN/2013 (ASSESSMENT YEAR : 2010-11) ITO, WARD-1(3), NASHIK .. APPELLANT VS. J.K. ASSOCIATES, N-42/JE-2/17/6, SAVTANAGAR, CIDCO, NASHIK 422008 PAN NO.AADFJ4462G .. RESPONDENT ASSESSEE BY : NONE (WRITTEN SUBMISSION FILED) REVENUE BY : SHRI RAJESH DAMOR DATE OF HEARING : 20-08-2014 DATE OF PRONOUNCEMENT : 25-08-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 13-05-2013 OF THE CIT(A)-I, NASHIK RELATING T O ASSESSMENT YEAR 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM CARRYING ON THE BUSINESS OF CIVIL CONSTRUCTION OF FLATS & ROW HOUSES. THE ASSESSEE FILED ITS RETURN OF INCOME ON 23-09-2010 DECLARING TOTAL INCOME OF RS.3,61,020/-. THE ASSES SING OFFICER DETERMINED THE INCOME OF THE ASSESSEE AT RS.41,02,0 60/- BY MAKING DISALLOWANCE OF RS.37,41,576/-. IN THE PREVIOUS YE AR RELEVANT TO A.Y. 2010-11 THE ASSESSEE HAS CONTINUED THE CONSTRUCTION OF PROJECT NAMELY 2 JANAK NAGARI ROW HOUSE AND ALSO SOLD ONE PLOT OF LAND DURING THE YEAR UNDER APPEAL. THE PROJECT NAMELY JANAK NAGAR I IS AN ELIGIBLE PROJECT FOR DEDUCTION U/S. 80IB(10) OF THE ACT. DUR ING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DISCLOSED NET PROFI T FROM THE ELIGIBLE PROJECT AT RS, 56,65,775/- WHICH COMES TO 46.93% OF GROSS TURNOVER. THE A.O. AFTER VERIFICATION OF FULFILLMENT OF THE C ONDITION FOR ELIGIBILITY OF THE DEDUCTION U/S. 80IB(10) OF THE A CT RESTRICTED THE DEDUCTION CLAIMED U/S. 80IB(10) OF THE ACT AT 15%, WHICH HAS RESULTED IN DISALLOWANCE OF DEDUCTION U/S. 80IB(10) OF THE ACT AMOUNTING TO RS. 37,41,576/-. 3. IN APPEAL THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE , THE ASSESSMENT ORDER AND THE POSITION OF LAW ON THE ISSUE. THE A.O. HAS GIVEN THE FOLLOWING REASONS FOR IMPUGNED DISALLOWANCE AT PARA NO. 07 OF HIS ORDER:- '07. ON PERUSAL OF P & L ACCOUNT FOR THE YEAR UNDER CONSIDERATION, IT IS NOTICED THAT THE ASSESSEE HAS DEBITED VARIOUS EXPENSES REL ATED TO ITS BUSINESS BUT THE EXPENSES WHICH THE ELIGIBLE BUSINESS WOULD HAVE MANDATORILY INCURRED HAVE NOT BEEN CLAIMED BY ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT. THE FIRM HAS DECREASED THE COST OF SALE S OR PROJECT CONSIDERABLY AND INFLATING THE PROFITS WHICH ARE ELIG IBLE FOR DEDUCTION UNDER SECTION 80IB(10) OF THE I.T.ACT. IT IS INTERESTI NG TO NOTE THAT THE ASSESSEE EVEN HAS NOT GIVEN INTEREST ON CAPITAL AND REMUN ERATION TO THE PARTNERS, AS THESE ARE TAXABLE IN THE HANDS OF PA RTNERS. IN PLACE OF INTEREST AND REMUNERATION TO THE PARTNERS, THE ASSESSEE F IRM HAS ALLOWED WITHDRAWAL OF CAPITAL FROM THE FIRM BY THE PARTNERS, WHICH HAS BEEN DIRECTLY CREDITED TO THEIR CAPITAL ACCOUNT THEREBY AVOIDING TAX LIABILITY IN THEIR HANDS. THE PLACE OF BUSINESS OF THE ASSESSEE AND THE CONSTITUTION OF THE FIRMS WHICH PARTNERS ARE INTER ESTED IS THE SAME AND ALSO THE PERSONS MANAGING AND GETTING BENEFITS FROM ASSESSEE FIRM ARE SAME. THEREFORE IT CAN BE READILY INFERRED THAT THE EXPENSES WHICH WERE RIGHTLY BORNE BY THE ASSESSEE ARE NOT DEBITE D IN THE PROFIT AND LOSS ACCOUNT OF ASSESSEE AND ARE DIVERTED TO DIFFEREN T PROJECT IN WHICH THE PARTNERS OF ASSESSEE FIRM ARE BENEFICIALLY INT ERESTED. THIS FACT IS EVIDENT FROM THE CAPITAL ACCOUNT OF THE PART NERS IN THE BOOKS OF ASSESSEE FIRM, THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE, P ROFIT AND LOSS ACCOUNT ETC.' 3 ON THE BASIS OF ABOVE FINDING, THE A.O. RESTRICTED TH E DEDUCTION U/S. 80IB(10) AT 15%. ON CAREFUL ANALYSIS OF THE REASONING GIVEN BY THE A.O. FOR DISALLOWING THE PART OF THE DEDUCTION, IT IS SEEN THAT THE A.O. HAS DOUBTED THE HIGHER NET PROFIT RATE DISCLOSED BY THE APPELLANT AND HE HAS PROCEEDED ON THE BASIS OF ASSUMPTION THAT EITHER THE A PPELLANT HAS NOT DEBITED CERTAIN EXPENSES TO ITS PROFIT AND LOSS ACCOUN T OR THE SAME ARE DIVERTED TO DIFFERENT PROJECTS IN WHICH THE PARTNERS OF THE FIRM ARE BENEFICIALLY INTERESTED. HOWEVER, THE A.O. HAS NOT ADDUCED ANY IOTA OF EVIDENCE OR EVEN POINTED OUT ANY NATURE OF THE MAND ATORY EXPENSES WHICH ARE NOT DEBITED TO PROFIT AND LOSS ACCOUNT. FUR THER, THE A.O. HAS NOT POINTED OUT ANY INSTANCE OF EXPENSES OF THE APPELL ANT WHICH IS DIVERTED TO ANY ASSOCIATE CONCERN. THE SAID REMARKS ARE PUT BY THE A.O. IN CASUAL AND GENERAL MANNER PARTICULARLY WHEN THE A PPELLANT HAS PRODUCED BOOKS OF ACCOUNT AND ALSO ALL BILLS AND VOUCH ERS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS ALSO PERTINENT THA T THE A.O. HAS NEITHER POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOU NT OF THE ASSESSEE FIRM NOR THE SAID BOOKS OF ACCOUNT ARE REJECTED BY HI M. THE A.O. HAS ALSO NOT DOUBTED THE REASONABILITY OF THE EXPENSES SHOWN. T HE TOTAL EXPENSES INCURRED ON THE PROJECT ARE ALSO REASONABLE. T HE EXPLANATION OFFERED BY THE ID A.R. OF THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS WITH REFERENCE TO HIGHER PROFITS IN THE E LIGIBLE PROJECT IS ALSO NOT REJECTED BY THE A.O. IN FACT, THE REASONS STAT ED BY THE APPELLANT FOR HIGHER RATE OF NET PROFIT OF THE ELIGIBLE PROJE CT ARE ALSO REASONABLE. IT APPEARS THAT THE A.O. HAS DOUBTED THE HIGHER PROFIT O F THE ELIGIBLE PROJECT OF THE APPELLANT MAINLY BECAUSE THE APPELLAN T HAS NOT DEBITED THE INTEREST ON CAPITAL TO PARTNERS AS WELL AS ALSO N OT PAID REMUNERATION TO THE PARTNERS. THE A.O. IS ABSOLUTELY NOT JUSTIFIED IN DRAWING SUCH ADVERSE INFERENCE WHEN PAYMENT OF INTEREST ON CAPITAL AS WELL AS REMUNERATION TO PARTNERS IS NOT MANDATORY AND, FURTHE R, NATURALLY THE PROFITS OF THE BUSINESS SHALL BE WITHDRAWN BY THE PARTNE RS. HENCE, THE BASIS GIVEN BY A.O. FOR RESTRICTING THE NET PROFIT OF ELIGIBLE PROJECT IS ARBITRARY AND BASED ON SURMISES AND HAS NO LEGS TO STAND. THE DECISION OF HON. TRIBUNAL IN THE CASE OF ACIT, VS MANGALMURTI CONSTRUCTIONS (ITA NO. 796/PN/2006), ALSO SUPPORTS THE APPELLANT'S CASE WHEREIN THERE ARE INSTANCES OF SIMILAR CASES WHEREIN THE NET PRO FIT FROM THE ELIGIBLE BUSINESS U/S. 80IB(10) UPTO 50% DISCLOSED HAS BEE N ACCEPTED. THEREFORE, CONSIDERING THE ABOVE FACTS AND THE LEGAL POSITION, THE A.O. IS DIRECTED TO ALLOW DEDUCTION U/S. 80IB(10) OF RS.56,65 ,775/- AS CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME. THE IMPUG NED DISALLOWANCE OF RS. 37,41,576/- IS, THUS, DELETED. THIS GROUND OF APPEAL IS ALLOWED, 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, NASHIK WAS JUSTIFIED IN DELETING THE DISA LLOWANCE OF RS. 37,41,576/-, IN SPITE OF THE FACT THAT ASSESSEE HAS INFLA TED THE ELIGIBLE PROFIT WHICH WERE DEDUCTIBLE U/S 80IB(10) OF THE ACT BY NOT DEBITING THE EXPENSES FROM PROFIT AND LOSS ACCOUNT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A)-I, NASHIK WAS JUSTIFIED IN ACCEPTING ASSESSEE'S CLAIM THAT ELIGIBLE PROFIT WHICH IS @ 46.93% OF TURN OVER AS REA SONABLE? 4 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A)-I, NASHIK MAY PLEASE BE CANCELLED AND THE ORDER OF ASSESSING OFFIC ER MAY PLEASE BE RESTORED. 4. THE APPELLANT PRAYS LEAVE TO ADD, ALTER, CLARIF Y, AMEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN THE OCCASIO N DEMANDS. 5. WE HAVE HEARD THE RIVAL ARGUMENTS ADVANCED BY TH E LD. DEPARTMENTAL REPRESENTATIVE, PERUSED THE MATERIAL O N RECORD AND THE WRITTEN SUBMISSION FILED BY THE ASSESSEE. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY 2 PRECEDING ASSESSMENT YEARS. WE FIND THE TRIBUNAL I N ITA NO.327/PN/2012 ORDER DATED 29-07-2013 FOR A.Y. 2008 -09 HAS DISMISSED THE APPEAL FILED BY THE REVENUE BY OBSERV ING AS UNDER ; 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSAL T HE MATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS MADE T HE IMPUGNED DISALLOWANCE VIDE PARA 7 AND 8 OF HIS ORDER BY OBSERVI NG AS UNDER:- 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, THE ASSESSMENT ORDER, THE RIVAL SUBMISSIONS AND THE POSITION OF LAW ON THE ISSUE. THE A.O. HAS GIVEN THE FOLLOWING REASONS FOR IMPUGNED DISAL LOWANCE AT PARA NO. 07 & 08 OF HIS ORDER:- 07. ' DEDUCTION U/S. 80IB(10) OF THE ACT IS ALLOWED AFTER THE NECESSARY PARAMETERS OR CONDITIONS ARE SATISFIED BY ASSESSEE. WHILE ALLOWING THE DEDUCTION IT IS NECESSARY TO VERIFY THE APPLICABILITY OF SECTION 80IB(13) TO THE CASE OF ASSESSEE. SECTION 80IB(13 ) IN TURN IMPORTS THE APPLICABILITY OF SECTION 80IA(10) OF THE ACT. SECTION 0IA(10) OF THE ACT MANDATES THAT WHEN THE ASSESSING OFFICER FEEL S THAT THE COURSE OF BUSINESS BETWEEN THE ASSESSEE CARRYING ON ELIGIB LE BUSINESS AND ANY OTHER PERSON IS SO ARRANGED THAT THE ASSESSEE PROD UCES MORE THAN ORDINARY PROFITS, THE ASSESSING OFFICER SHALL TAKE T HE REASONABLE PROFITS THAT WOULD HAVE BEEN DERIVED FROM ELIGIBLE BUSINESS. 08. IN THE INSTANT CASE FROM THE FACTS DISCUSSED IN ABOV E PARA 04 TO 06 IT IS QUITE CLEAR THAT THE EXPENSES WHICH THE ELIG IBLE BUSINESS WOULD HAVE MANDATORILY INCURRED HAVE NOT BEEN CLAIMED BY ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT. THE FIRM HAS DECREASED THE COST OF SALES OR PROJECT CONSIDERABLY AND INFLATING THE PROFITS WHICH NEGLIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. IT IS IN TERESTING TO NOTE THAT THE ASSESSEE EVEN HAS NOT GIVEN INTEREST ON CAPITAL AND REMUNERATION TO PARTNERS, AS THESE ARE TAXABLE IN THE HANDS OF PARTNERS, ASSESSEE FIRM HAS ALLOWED WITHDRAWAL OF CAPITAL FROM THE FIRM BY THE PARTNERS, WHICH HAS BEEN DIRECTLY CREDITED TO THEIR C APITAL ACCOUNT THEREBY AVOIDING TAX LIABILITY IN THEIR HANDS. THE P LACE OF BUSINESS OF THE ASSESSEE AND THE CONSTITUTION OF FIRMS WHICH PARTNERS ARE INTERESTED IS THE SAME AND ALSO PARTNERS MANAGING AND GETTING BENEFI TS FROM 5 ASSESSEE FIRM ARE THE SAME. THEREFORE IT CAN BE READILY INFERRED THAT THE EXPENSES WHICH WERE RIGHTLY BORNE BY ASSESSEE ARE NOT DEB ITED IN THE PROFIT AND LOSS ACCOUNT OF ASSESSEE AND ARE DIVERTED TO D IFFERENT PROJECT IN WHICH THE PARTNERS OF ASSESSEE FIRM ARE BENEFICIARY I NTERESTED. THIS FACT IS EVIDENT FROM THE CAPITAL ACCOUNT OF THE PART NERS IN THE BOOKS OF ACCOUNTS OF ASSESSEE FIRM, THE PROFIT AND LOSS ACCOUNT ET C OF BOTH THE PROJECT, THE N.P. RATIOS OF ASSESSEES IN THE SAME LINE OF BUSINESS AS THAT OF ASSESSEE ETC. IN VIEW OF THESE FACTS PROVISIONS OF SEC. 8 0-IB(10) AND 80-IA(10) OF THE ACT ARE APPLIED TO THE CASE OF THE ASSESSEE. 5. ON THE BASIS OF THE ABOVE FINDINGS, THE ASSESSING OFFI CER RESTRICTED THE DEDUCTION U/S 80-IB(10) AT 19% I.E. TH E NET PROFIT RATE OF THE ASSESSEE IN ANOTHER PROJECT NAMELY SHIV PARVTI APART MENT. THE REASONING GIVEN BY THE ASSESSING OFFICER FOR DISALLOWING THE PART OF DEDUCTION, THE ASSESSING OFFICER HAS DOUBTED THE HIGHER NET PROFIT RATE DISALLOWED BY THE ASSESSEE AND HE HAS PROCEEDED ON THE B ASIS OF ASSUMPTION THAT EITHER THE ASSESSEE HAS NOT DEBITED CERTAI N EXPENSES TO ITS PROFIT AND LOSS ACCOUNT AND THE SAME ARE DIVERTED TO DIFFERENT PROJECTS IN WHICH THE PARTNERS OF THE FIRM ARE BENEFI CIALLY INTERESTED. THE ASSESSING OFFICER HAS NOT ADDUCED ANY IOTA OF EVIDEN CE OR EVEN POINTED OUT ANY NATURE OF THE EXPENSES WHICH ARE NOT DEBITED TO PROFIT AND LOSS ACCOUNT. FURTHER, THE ASSESSING OFFICER HAS NOT POINTED OUT ANY INSTANCE OF EXPENSES OF THE ASSESSEE WHICH IS DIVERTED TO ANY ASSOCIATE CONCERN. THE SAME REMARKS ARE PUT BY THE ASSESSI NG OFFICER IN CASUAL AND GENERAL MANNER WHEN THE ASSESSEE HAS PRODUC ED BOOKS OF ACCOUNTS AND ALSO BILLS AND VOUCHERS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS WORTH MENTIONING THAT THE ASSESSING OF FICER HAS NEITHER POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOU NT OF THE ASSESSEE FIRM NOR THE SAID BOOKS OF ACCOUNTS ARE REJECTED BY HI M. THE ASSESSING OFFICER HAS NOT DOUBTED THE REASONABILITY OF T HE EXPENSES SHOWN. THE EXPLANATION OFFERED ON BEHALF OF THE ASSESSE E DURING THE ASSESSMENT PROCEEDINGS WITH REFERENCE TO HIGHER PROFITS I N THE ELIGIBLE PROJECT I.E. JANAK NAGARI ROW HOUSE AS COMPARED WITH THE PROFITABILITY IN THE CASE OF ANOTHER PROJECT NAMELY SHIV PARVATI APAR TMENT WAS ALSO NOT REJECTED BY THE ASSESSING OFFICER. THE EXPLANATION OF FERED BY THE ASSESSEE IN RESPECT OF REASONS FOR DIFFERENCE IN THE NET P ROFIT RATE IN BOTH THE PROJECTS APPEARED TO BE REASONABLE. THE ASSE SSING OFFICER HAS ALSO MADE REFERENCE TO PROVISIONS OF SEC. 80-IB(13) OF THE ACT WHICH IN TURN HAS REFERENCE TO THE SUB-SECTION (5) AND (7) T O (12) OF SEC. 80-IA OF THE ACT. THE RELEVANT PROVISIONS ARE ENUMERATED A S UNDER: '80-IA. [DEDUCTIONS IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS ENTERPRISES ENGAGED IN INFRASTRUCTURE DEVE LOPMENT, ETC. (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WH ICH THE PROVISIONS OF SUB-SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETE RMINING THE QUANTUM OF DEDUCTION UNDER THAT SUBSECTION FOR THE ASSE SSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR AN Y SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WE RE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMEN T YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETE RMINATION IS TO BE MADE. (6).. 6 (7) THE DEDUCTION] UNDER SUB-SECTION (1) FROM PROFITS AND GAINS DERIVED FROM AN UNDERTAKING] SHALL NOT BE ADMISSIBLE UNLESS THE ACCOUNTS OF THE UNDERTAKING] FOR THE PREVIOUS YEAR RELEVANT TO THE A SSESSMENT YEAR FOR WHICH THE DEDUCTION IS CLAIMED HAVE BEEN AUDITED BY AN ACCOUNTANT, AS DEFINED IN THE EXPLANATION BELOW SUB- SECTION (2) OF SECTION 288, AND THE ASSESSEE FURNISHES, ALONG WITH HIS RETURN OF INCOME, T HE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND VERI FIED BY SUCH ACCOUNTANT. (8) WHERE ANY GOODS OR SERVICES HELD FOR THE PURPOSES O F THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE, OR WHERE ANY GOODS OR SERVICES] HELD FOR THE PU RPOSES OF ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE ARE TRANSFERR ED TO THE ELIGIBLE BUSINESS AND, IN EITHER CASE, THE CONSIDERATION , IF ANY, FOR SUCH TRANSFER AS RECORDED IN THE ACCOUNTS OF THE ELIGI BLE BUSINESS DOES NOT CORRESPOND TO THE MARKET VALUE OF SUCH GOODS O R SERVICES AS ON THE DATE OF THE TRANSFER, THEN, FOR THE PURPOSES OF T HE DEDUCTION UNDER THIS SECTION, THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSI NESS SHALL BE COMPUTED AS IF THE TRANSFER, IN EITHER CASE, HAD BEEN MADE AT THE MARKET VALUE OF SUCH GOODS OR SER VICES AS ON THAT DATE : PROVIDED THAT WHERE, IN THE OPINION OF THE ASSESSING OF FICER, THE COMPUTATION OF THE PROFITS AND GAINS OF THE ELIGIBLE BUSINESS IN THE MANNER HEREINBEFORE SPECIFIED PRESENTS EXCEPTIONAL DIF FICULTIES, THE ASSESSING OFFICER MAY COMPUTE SUCH PROFITS AND GAINS ON S UCH REASONABLE BASIS AS HE MAY DEEM FIT. EXPLANATION.FOR THE PURPOSES OF THIS SUB-SECTION, 'MARK ET VALUE', IN RELATION TO ANY GOODS OR SERVICES, MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD ORDINARILY FETCH IN THE OPEN MARKET. (9) WHERE ANY AMOUNT OF PROFITS AND GAINS OF AN UNDE RTAKING OR OF AN ENTERPRISE IN THE CASE OF AN ASSESSEE IS CLAIMED AND AL LOWED UNDER THIS SECTION FOR ANY ASSESSMENT YEAR, DEDUCTION TO THE E XTENT OF SUCH PROFITS AND GAINS SHALL NOT BE ALLOWED UNDER ANY OTHER PROVISIONS OF THIS CHAPTER UNDER THE HEADING 'C DEDUCTIONS IN RESPECT O F CERTAIN INCOMES', AND SHALL IN NO CASE EXCEED THE PROFITS AND G AINS OF SUCH ELIGIBLE BUSINESS OF UNDERTAKING OR ENTERPRISE, AS THE C ASE MAY BE. (10) WHERE IT APPEARS TO THE ASSESSING OFFICER THAT, OW ING TO THE CLOSE CONNECTION BETWEEN THE ASSESSEE CARRYING ON THE ELIGIBL E BUSINESS TO WHICH THIS SECTION APPLIES AND ANY OTHER PERSON, OR FOR ANY OTHER REASON, THE COURSE OF BUSINESS BETWEEN THEM IS SO ARRANGED THAT THE BUSINESS TRANSACTED BETWEEN THEM PRODUCES TO THE ASSESSEE MO RE THAN THE ORDINARY PROFITS WHICH MIGHT BE EXPECTED TO ARISE IN SUCH ELIGIBLE BUSINESS, THE ASSESSING OFFICER SHALL, IN COMPUTING THE PR OFITS AND GAINS OF SUCH ELIGIBLE BUSINESS FOR THE PURPOSES OF THE DEDUCTI ON UNDER THIS SECTION, TAKE THE AMOUNT OF PROFITS AS MAY BE REASONABL Y DEEMED TO HAVE BEEN DERIVED THEREFROM. (11) THE CENTRAL GOVERNMENT MAY, AFTER MAKING SUCH INQUIRY AS IT MAY THINK FIT, DIRECT, BY NOTIFICATION IN THE OFFI CIAL GAZETTE, THAT THE EXEMPTION CONFERRED BY THIS SECTION SHALL NOT APPLY TO ANY CLASS OF INDUSTRIAL UNDERTAKING OR ENTERPRISE WITH EFFECT FROM SUCH DATE AS IT MAY SPECIFY IN THE NOTIFICATION. 7 (12) WHERE ANY UNDERTAKING OF AN INDIAN COMPANY WH ICH IS ENTITLED TO THE DEDUCTION UNDER THIS SECTION IS TRANSFERRED, BE FORE THE EXPIRY OF THE PERIOD SPECIFIED IN THIS SECTION, TO ANOTHER INDIA N COMPANY IN A SCHEME OF AMALGAMATION OR DEMERGER (A) NO DEDUCTION SHALL BE ADMISSIBLE UNDER THIS SECTION TO THE AMALGAMATING OR THE DEMERGED COMPANY FOR THE PREVIO US YEAR IN WHICH THE AMALGAMATION OR THE DEMERGER TAKES PLACE; AND TH E PROVISIONS OF THIS SECTION SHALL, AS FAR AS MAY BE, APPLY TO THE AMAL GAMATED OR THE RESULTING COMPANY AS THEY WOULD HAVE APPLIED TO THE A MALGAMATING OR THE DEMERGED COMPANY IF THE AMALGAMATION OR DEMERGE R HAD NOT TAKEN PLACE.' THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SUB-SEC . (10) OF SEC. 80-IA ONLY, THE APPLICABILITY OF ALL THE SUB-SECTIONS 80-IA AS REFERRED TO IN SUB-SECTION (13) OF SECTION 80-IB EXAMINED AS UNDER . A. THE SUB-SECTION (5) OF SECTION 80IA SPEAKS OF COMP UTATION OF TOTAL INCOME OF THE UNDERTAKING AS IF THE SAID UNDERT AKING WAS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND ALSO ALL SUBSEQUENT YEAR. IN THE PRESENT CASE THE INCOME OF THE ELIGIBLE UNDERTAKING IS CALCUL ATED SEPARATELY AS IF THE SAID UNDERTAKING WAS THE ONLY SOURCE OF INCOME DUR ING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND ALSO AL L SUBSEQUENT YEAR BECAUSE IN THE PRESENT CASE THERE IS NO CHANGE IN THE INCOME FROM THE ELIGIBLE UNDERTAKING EVEN AFTER CONSIDERING SUB-SE CTION (5) OF SECTION 80-IA. B. THE SUB-SECTION (7) OF SECTION 80IA PUTS THE CONDI TION OF GETTING THE BOOKS OF ACCOUNTS AUDITED BY AN ACCOUNTANT, AS DEF INED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288, AND FURNISHING REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM. IN THE PRESENT C ASE THE APPELLANT HAS GOT ITS BOOKS OF ACCOUNTS AUDITED AS PER PROVISIONS OF AW AND ALSO FURNISHED THE REPORT OF THE AUDITORS IN PRESCRIBED FOR M NO. 10CCB. C. THE SUB-SECTION (8) OF SECTION 80IA IS APPLICABLE W HEN THERE IS TRANSFER OF GOODS OR SERVICES TO OTHER BUSINESS UNDERTAKIN G FROM ELIGIBLE UNDERTAKING AND VICE VERSA, HOWEVER IN THE PRESENT CASE, UNDISPUTEDLY, THERE IS NO SUCH TRANSFER OF ANY GOODS O R SERVICES TO OR FROM ANOTHER BUSINESS CARRIED ON BY THE ASSESSEE. D. THE SUB-SECTION (9) OF SECTION 80IA IS APPLICABLE W HERE THE DEDUCTION IN RESPECT OF PROFIT FROM THE UNDERTAKING IS ALREADY CLAIMED UNDER SECTION 80IA IN ANY ASSESSMENT YEAR THEN THE DEDUC TION TO THAT EXTENT SHALL NOT BE ALLOWED UNDER OTHER PROVISIONS OF CHAPTER VIA UNDER THE HEADING 'C - DEDUCTIONS IN RESPECT OF CERTAIN INCOMES', HOWEVER IN THE PRESENT CASE THE APPELLANT HAS NOT CLAI MED ANY SUCH DOUBLE DEDUCTION IN RESPECT OF THE INCOME OF THE UND ERTAKING. E. THE SUB-SECTION (10) OF SECTION 80IA IS APPLICABLE WHERE THERE IS ANY TRANSACTION BETWEEN THE ASSESSEE AND OTHER CONCER N HAVING CLOSE CONNECTION WITH THE ASSESSEE, WHEREBY THE INCOME OF THE ASSESSEE FROM ELIGIBLE UNDERTAKING IS MORE DISCLOSED, HOWE VER IN THE PRESENT CASE IT IS A MATTER OF FACT THAT THERE IS NO AN Y TRANSACTION AT ALL ENTERED BY THE ASSESSEE WITH ANY ASSOCIATE OR CLOSE CONNEC TED CONCERN EXCEPT PAYMENT OF INTEREST OF RS. 6,252/- TO THE PERSO N SPECIFIED IN SECTION 40A(2)(B) OF THE ACT. 8 F. THE SUB-SECTION (11) OF SECTION 80IA SPEAKS ABOUT SPE CIFIC DENIAL OF DEDUCTION BY CENTRAL GOVERNMENT BY NOTIFICATION IN OFFICIAL GAZETTE, HOWEVER IN THE PRESENT .CASE NO ANY SUCH NOTIFICATION IS EVER ISSUED BY CENTRAL GOVERNMENT WHICH WOULD RESULT IN SUCH DENIAL OF DEDUCTION TO THE APPELLANT. 6. FROM THE ABOVE, IT IS FOUND THAT THE CLAIM OF THE ASSESSEE U/S 80-IB(10) IS NOT HIT BY ANY OF THE SPECIFIED CLAUSE OF SEC. 80-IA AS REFERRED TO IN SECTION 80-IB(13) OF THE ACT. HENCE, THE ASSESSING OFFICERS ACTION IN THIS REGARD WAS CONTRARY TO THE F ACTS ON RECORD. THE ASSESSEE HAS FULFILLED ALL THE CONDITIONS FOR DEDUCTION U /S 80-IB(10) OF THE ACT AND ITS DENIAL TO THE ASSESSEE WAS NOT JUSTIFIED. THE VARIATION IS NOT JUSTIFIED FOR MAKING THE DISALLOWANCE OF DEDUCTIO N. THIS REASONS FINDING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE WHO HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER M AINLY ON THE COMPARISON OF THE NET PROFIT. MOREOVER, THE ASSESSING O FFICER HAS NOT BROUGHT ON RECORD TO NEGATE THE CLAIM OF THE ASSESSEE I N ITS FACTS AND CIRCUMSTANCES. ACCORDINGLY, THE ORDER OF THE CIT(A) IS UPHELD. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. 5.1 SIMILARLY, THE TRIBUNAL VIDE ITA NO.990/PN/2012 ORDER DATED 12-09-2012 FOR A.Y. 2009-10 HAS ALSO DISMISSED THE APPEAL FILED BY THE REVENUE BY OBSERVING AS UNDER : 5. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND PERUS ING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS BASED HIS ADDITION MAINLY ON THE BASIS OF REPORT OF SHRI MAHEND RA C. SHIRSAT, WHO HAS ESTIMATED THE COST OF CONSTRUCTION IN F.Y. 2008-09 AT RS. 683/- PER SQ.FT. THE SECOND REASON STATED BY THE ASSESSING OFFICE R IN SUPPORT OF THE DISALLOWANCE IS THAT THE ASSESSEE HAS NOT MA INTAINED THE QUANTITY DETAILS OF SAND, STEEL, CEMENT, MURUM, TILES, GRITS, WOOD, KADDAPA, MARBLE, GLASS FABRICATION, PLUMBING MATERIAL , TAPS, SINKS, WASH BASIN, COMMODES AND BOULDERS. THE ASSESSING OFFICER WAS OF THE VIEW THE ASSESSEE HAS TO PROVE THE EXPENDITURE BOOKED TO JUSTI FY THAT THE SAID EXPENDITURE IS SUFFICIENT FOR CONSTRUCTING THE ROW HO USES. IN THE ABSENCE OF THE ABOVE DETAILS, THE ASSESSING OFFICER WAS O F THE OPINION THAT THE ASSESSEE HAS UNDERSTATED THE EXPENDITURE ACTUAL LY REQUIRED FOR CONSTRUCTION AS STATED BY THE ASSESSING OFFICER. THE THIRD REASON STATED BY THE ASSESSING OFFICER IS THAT ONE SHRI GANESH SAKHARAM AHIRE, WHO IS ASSESSED TO TAX WITH ITO WARD 1(1), NASHIK, HAS UNDERTAKE N PROJECT COVERED BY SECTION 80IB(10) OF THE ACT AND HAS DECLAR ED PROFIT FOR A.Y.2009-10 AT 13.08%. 6. THE FIRST REASON FOR DISALLOWANCE OF DEDUCTION U/S. 80IB(10) OF THE ACT IS BASED ON THE REPORT OF THE CONSULTING ENGIN EER. IN THE ABSENCE OF PROVISION IN THE ACT FOR REFERENCE, THE ASSESSING OF FICER WAS NOT JUSTIFIED FOR SEEKING OPINION FROM SAID ENGINEER. THE ASSESSING OFFICER HAS NOT MADE ANY REFERENCE TO THE DEPARTMENTAL VALUE R. THEREFORE, REFERENCE MADE TO SHRI MAHENDRA CHANDRABHAN SHIRSAT BY WAY OF A SIMPLE LETTER DATED 25/11/2011 TO BE UNAUTHORIZED AN D WAS NOT IN ACCORDANCE WITH LAW AS FOUND BY THE CIT(A). MOREOVE R, THE CONSULTING ENGINEER HAS SUBMITTED GENERAL ESTIMATE OF C OST PER SQ.FT. 9 REQUIRED FOR CONSTRUCTION. THE SAID ESTIMATE COULD NOT BE ADOPTED AS THE SAME IS NOT BASED ON ACTUAL INSPECTION OF THE CON STRUCTION CARRIED OUT BY THE ASSESSEE. ACCORDING TO US, CIT(A) WAS JUSTIFIE D TO HOLD THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING DISALLOWANC E ON THIS REASONING. 7. THE SECOND REASON STATED BY THE ASSESSING OFFICER IS THA T THE ASSESSEE HAS NOT MAINTAINED QUANTITATIVE DETAILS OF SAND, STEEL, CEMENT ETC. REQUIRED FOR CONSTRUCTION. THE ASSESSING OFFICER WA S THEREFORE OF THE OPINION THAT THE ASSESSEE HAS NOT PROVED THE EXPEN DITURE ACTUALLY REQUIRED FOR CONSTRUCTION WAS NOT UNDERSTATED AND HAS SH OWN EXCESSIVE PROFIT. IN THIS REGARD THE STAND OF THE ASSESSEE HAS BEEN THAT THE MATERIAL WAS PURCHASED AS AND WHEN REQUIRED ON SITES AND IMMEDIATELY UTILIZED FOR CONSTRUCTION. SO, THERE IS NO NEED TO M AINTAIN SUCH RECORD AND IT IS ALSO NOT A TRADE PRACTICE TO MAINTAIN SUCH R ECORD. IN THIS REGARD, IT WAS POINTED OUT ON BEHALF OF THE ASSESSEE T HAT THERE IS NO LEGAL REQUIREMENT TO MAINTAIN SUCH QUANTITATIVE RECO RD OF RAW MATERIAL, WHICH IS IMMEDIATELY USED IN CONSTRUCTION AFTER PURCHA SE. THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS AND THE SAME A RE AUDITED. THE AUDITOR HAS NOT POINTED OUT ANY DISCREPANCY AND H AS CERTIFIED THE BOOK RESULTS TO BE TRUE AND FAIR. MOREOVER, THE ASSESSIN G OFFICER HAS NOT REJECTED THE BOOK RESULTS AND THE BOOKS OF ACCOUNT S U/S. 145 OF THE ACT, WHILE ESTIMATING PROFIT AT MUCH LOWER FIGURE CO MPARED TO THE PROFIT AS PER AUDITED BOOKS OF ACCOUNTS. IN VIEW OF THE ABOVE FACTS THE CIT(A) WAS JUSTIFIED IN HOLDING THAT THE ASSESSING OFFICER WAS NO T JUSTIFIED IN DISALLOWING PART DEDUCTION U/S. 80IB(10) OF THE ACT O N THIS REASONING. 8. THE THIRD REASON STATED BY THE ASSESSING OFFICER IS TH AT ONE SHRI GANESH SAKHARAM AHIRE, WHO WAS ASSESSED TO TAX WITH ITO W ARD 1(1), NASHIK, HAD UNDERTAKEN PROJECT COVERED BY SECTION 80I B(10) OF THE ACT AND HAS DECLARED PROFIT FOR A.Y.2009-10 AT 13.08%. I N THIS REGARD, IT HAS BEEN POINTED OUT ON BEHALF OF THE ASSESSEE THAT THE DEP ARTMENT HAS ACCEPTED PROFIT PERCENTAGE OF CONSTRUCTION BUSINESS @ 40% TO 50% IN THE CASES WHERE DEDUCTION HAS BEEN CLAIMED U/S. 80IB(10 ) OF THE ACT AND REFERRED TO IN THE DECISION OF HON'BLE ITAT, PUN E IN THE CASE OF ACIT VS. MANGALMURTI CONSTRUCTION (ITA NO. 796/PN/2006. TH E CIT(A) HAS ALSO OBSERVED THAT THE PERCENTAGE OF PROFIT CANNOT RE MAIN IDENTICAL AND IS BOUND TO BE DIFFERENT IN RESPECT OF DIFFERENT HOU SING PROJECTS DEPENDING UPON THE MARKET CONDITIONS, LOCATION, COST OF THE LAND INCURRED ETC. IN THE CASE OF SHRI GANESH SAKHARAM AH IRE THE NET PROFIT WAS DECLARED @ 13.08% OF THE TOTAL TURNOVER. THE ASSESSI NG OFFICER HAS COLLECTED FINANCIAL DETAILS OF THE THIRD PARTY AND U SED THE SAME AGAINST THE ASSESSEE WITHOUT AFFORDING THE ASSESSEE TO CROSS EXAMINE THE SAID PARTY AS WELL AS FINANCIAL STATEMENTS AND TO OFFER EXP LANATION IN THIS REGARD SO AS TO BRING ON RECORD, HOW THE FACTS OF TH E CASE OF THE PARTY RELIED ON BY THE ASSESSING OFFICER ARE DIFFERENT FROM T HE FACTS OF THE CASE OF THE ASSESSEE. THE RESULT OF THE THIRD PARTY CANNOT B E USED AGAINST THE ASSESSEE ADVERSELY WITHOUT PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE, WHICH IS VIOLATION OF PRINCIPLES OF NATURAL JUST ICE. THE CIT(A) WAS JUSTIFIED IN REJECTING THIS REASON OF THE ASSESSING OFF ICER AS WELL. MOREOVER, VARIOUS REASONS IN SUPPORT OF THE HIGHER PERC ENTAGE OF PROFIT EARNED BY THE ASSESSEE WERE BROUGHT TO THE KNOWLEDGE OF THE CIT(A). ACCORDING TO THE ASSESSEE, THE LAND ON WHICH THE PROJEC T WAS CONSTRUCTED WAS PURCHASED AS AGRICULTURAL LAND AND THEN CONVERTED INTO NON-AGRICULTURE AND THEREFORE, USED FOR THE HOUSING P ROJECT AND HENCE THE LAND COST IS ON LOWER SIDE. THE LAND COST IS A MA JOR COST OF ANY HOUSING PROJECT AND THE PRICES OF THE LAND HAVE INCRE ASED RAPIDLY AT THE RELEVANT POINT OF TIME WHICH RESULTED INTO HIGHER PR OFIT PERCENTAGE OF THE HOUSING PROJECTS OF THE ASSESSEE. APART FROM THIS, TH E ASSESSING 10 OFFICER WAS NOT JUSTIFIED AS THE ASSESSEE HAS FULFILLED ALL THE CONDITIONS SPECIFIED IN SECTION 80-IB(10) OF THE ACT TO AVAIL TH E DEDUCTION UNDER THE SAID SECTION. FURTHER, THERE IS NO PROVISION IN THE INCOME-TAX TO DISALLOW PART OF THE DEDUCTION U/S 80-IB(10) OF THE A CT AS DONE BY THE ASSESSING OFFICER. IN THE FACTS AND CIRCUMSTANCES, THE CI T(A) WAS JUSTIFIED IN DELETING PART DISALLOWANCE OF DEDUCTION U/S 80-IB(10) OF THE ACT TO THE EXTENT OF RS.63,14,430/-. THE REASONED FI NDING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. THE SAME IS UPHELD. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. 5.2 SINCE DURING THE IMPUGNED ASSESSMENT YEAR THE A SSESSEE HAS CONTINUED THE CONSTRUCTION OF THE SAME PROJECT WHIC H IS OTHERWISE ELIGIBLE FOR CLAIMING DEDUCTION U/S.80IB(10) OF THE I.T. ACT AND SINCE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY 2 PRECEDING ASSESSMENT YEARS HAS UPHELD THE ORDER OF THE LD.CIT (A) IN DELETING THE DISALLOWANCE MADE BY THE AO AND THE DEPARTMENT HAS NOT PREFERRED ANY APPEAL AGAINST THE ORDER OF THE TRIBUNAL (AS STATED BY THE ASSESSEE IN ITS WRITTEN SUBMISSION AND NOT CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE), THEREFORE, WE DO NOT FIND ANY INFI RMITY IN THE ORDER OF THE CIT(A) DELETING THE DISALLOWANCE MADE BY THE AS SESSING OFFICER FOR THIS YEAR ALSO. WE ACCORDINGLY UPHOLD THE SAME AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON 25-08-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 25 TH AUGUST, 2014 SATISH 11 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-I, NASHIK 4. THE CIT-I, NASHIK 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE