V.B. Patil, Kolhapur V. Income-tax Officer, Ward - 2(2), Kolhapur

ITA 1624/PUN/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9572 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-12-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 23-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Keywords: Business income
• Section: 80IB; 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . / ITA NO.1624/PUN/2017 / ASSESSMENT YEAR : 2009-10 V.B PATIL E-WARD, STATION ROAD, KOLHAPUR-416 001 PAN : AIPPP9376B .... / APPELLANT / V/S. THE INCOME TAX OFFICER, WARD 2(2), KOLHAPUR. / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI M.K. VERMA / DATE OF HEARING : 13.12.2018 ! / DATE OF PRONOUNCEMENT : 17.12.2018 / ORDER PER R.S. SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE CIT (APPEALS)-2, KOLHAPUR ON 24.04.2017 IN RELATION TO THE ASSESSMENT YEAR 2009-10. 2 ITA NO. 1624/PUN/2017 A.Y.2009-2010 2. THE ONLY ISSUE RAISED IN THE APPEAL IS AGAINST T HE CONFIRMATION OF DISALLOWANCE OF DEDUCTION U/S. 80IB (10) OF THE INC OME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) AMOUNTING TO RS.3 9,02,966/-. 3. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSES SEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS AS A BUILDER AND DEVELOPER, APART FROM EARNING RENTAL INCOME. AT THE MATERIAL TIME, HE HAD TWO ONG OING HOUSING PROJECTS, VIZ., AYODHYA PARK & AYODHYA TOWERS. INCO ME FROM ALL OTHER SOURCES INCLUDING INCOME FROM THE PROJECT `VASANT P LAZA WAS RECORDED BY THE ASSESSEE UNDER THE `HEAD OFFICE ACCOUNT. D EDUCTION U/S. 80IB(10) OF THE ACT WAS CLAIMED WITH RESPECT TO `AY ODHYA PARK PROJECT INCOME OF RS.39,02,967/-. THE ASSESSING OFFICER NOT ED THAT THE COMMERCIAL AREA OF THE ELIGIBLE PROJECT WAS 8.46% O F TOTAL BUILT-UP AREA. ON CONFRONTING, THE ASSESSEE STATED THAT CLAUSE (D ) TO SECTION 80IB (10) WAS INSERTED BY THE FINANCE ACT, 2004 AND AS THE PR OJECT WAS APPROVED PRIOR TO THAT DATE, THIS CLAUSE WOULD NOT APPLY TO THE PROJECT. THE AO ALSO FOUND SOME INFIRMITY WITH RESPECT TO THE COMPL ETION DATE AS CERTIFIED BY THE ARCHITECT. HE INVOKED THE PROVISIO NS OF SECTION 80AB R.W.S. 80B(5) OF THE ACT AND HELD THE ASSESSEE TO B E NOT ELIGIBLE FOR DEDUCTION ON THE GROUND THAT THERE WAS A LOSS IN RE SPECT OF NON-ELIGIBLE UNIT AT RS.24,10,697/- AND THE OVERALL `BUSINESS IN COME WAS A LOSS OF RS.96,000/-. THAT IS HOW, HE COMPUTED GROSS TOTAL INCOME OF THE ASSESSEE AT RS.42,66,678/-. AFTER ALLOWING DEDUCTIO N U/SS.80C AND 80G OF THE ACT, THE ASSESSING OFFICER COMPUTED TOTA L INCOME OF ASSESSEE AT RS.41,62,930/-. THE ASSESSEE ASSAILED THE ACTION OF THE ASSESSING 3 ITA NO. 1624/PUN/2017 A.Y.2009-2010 OFFICER IN NOT ALLOWING DEDUCTION U/S. 80IB(10) OF THE ACT BEFORE THE LD. CIT(APPEALS), WHO DISMISSED THE ASSESSING OFFICERS ACTION IN NOT CONSIDERING THE ELEMENT OF COMMERCIAL PREMISES IN T HE ELIGIBLE PROJECT IN MAKING THE ASSESSEE INELIGIBLE FOR DEDUCTION U/S .80IB(10) OF THE ACT. HE ALSO REJECTED THE ASSESSING OFFICERS POINT OF V IEW ON THE QUESTION OF COMPLETION OF THE PROJECT. HE HELD THAT, IN PRINCIP LE, THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S. 80IB(10) OF THE ACT. HO WEVER, HE CONCURRED WITH THE ASSESSING OFFICERS VIEW POINT ON THE APPL ICABILITY OF SECTION 80AB OF THE ACT. SINCE THE INCOME UNDER HEAD `PROFI TS AND GAINS OF BUSINESS OR PROFESSION WAS A LOSS OF RS.96,000/-, THE LD. CIT(A) HELD THAT PROVISIONS OF SECTION 80AB WERE ATTRACTED AND HENCE, THERE WAS NO WARRANT FOR GRANTING DEDUCTION U/S.80IB OF THE ACT. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LD. CIT(A) IN NOT ALLOWING ITS CLAIM OF DEDUCTION U/S.80IB(10) OF THE ACT. 4. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE LEVANT MATERIAL AVAILABLE ON RECORD. NO CROSS-APPEAL FILED BY REVEN UE HAS BEEN BROUGHT TO MY NOTICE. IN THAT VIEW OF THE MATTER, THE DECIS ION OF LD. CIT(A) IN REJECTING THE VIEW POINT OF THE AO ON CERTAIN ISSUE S AND ENTITLING THE ASSESSEE, IN PRINCIPLE, TO DEDUCTION U/S.80IB(10) GETS AUTOMATICALLY AFFIRMED. 5. NOW COMING TO THE DENIAL OF DEDUCTION ON THE BAS IS OF NEGATIVE INCOME UNDER THE HEAD `PROFITS AND GAINS OF BUSINES S OR PROFESSION, IT IS 4 ITA NO. 1624/PUN/2017 A.Y.2009-2010 FIRSTLY IMPORTANT TO NOTE THE COMPUTATION OF NEGATI VE INCOME DONE BY AUTHORITIES, WHICH IS AS UNDER:- 6. IT IS MANIFEST FROM THE ABOVE TABLE, REPRODU CED FROM THE ASSESSMENT ORDER, THAT THERE IS A PROFIT FROM THE E LIGIBLE PROJECT AND LOSS IN THE NON-ELIGIBLE PROJECT. APART FROM THAT, THERE IS INTEREST ON LOAN OF RS.21.09 LAC, WHICH HAS BEEN ALLOWED AS DEDUCTION U NDER THIS HEAD IN THE COMPUTATION OF `BUSINESS INCOME DETERMINING A LOSS OF RS.96,000/-. BEFORE SWITCHING OVER TO THE MAIN CONTROVERSY, IT I S PERTINENT TO MENTION THAT THE ASSESSEE INITIALLY CLAIMED THAT INTEREST O F RS.21,09,465/- WAS DEDUCTIBLE UNDER THE HEAD `INCOME FROM HOUSE PROPER TY. HOWEVER, THE LD. AR FAIRLY ACCEPTED THAT SUCH INTEREST SHOULD BE ALLOWED AS DEDUCTION UNDER THE HEAD OF `BUSINESS INCOME AS HAS BEEN DON E BY THE AUTHORITIES BELOW. I WILL DEAL WITH DEDUCTION OF IN TEREST IN LATER PART OF THE ORDER. 7. NOW I TURN TO THE MAIN CONTROVERSY OF NO DED UCTION HAVING BEEN ALLOWED BY THE AUTHORITIES U/S 80IB(10) OF THE ACT BECAUSE OF `LOSS SR. NO. PARTICULARS AMOUNTS (RS.) 1 PROFIT FROM ELIGIBLE UNIT I.E. AYODHA PARK PROJECT 39,02,966 2 LOSS OF NON-ELIGIBLE UNIT I.E. HEAD OFFICE (24,10,697) 3 PROFIT FROM NON-ELIGIBLE UNIT I.E AYODHYA TOWERS 5,21,196 20,13,465 LESS : INTEREST ON LOAN 21,09,465 TOTAL BUSINESS INCOME/(LOSS) (96,000) 5 ITA NO. 1624/PUN/2017 A.Y.2009-2010 UNDER THE `BUSINESS INCOME. IN ORDER TO APPRECIAT E THE VIEW POINT OF THE AUTHORITIES BELOW, IT IS PERTINENT TO NOTE THE MANDATE OF SECTION 80AB, INVOKED BY THE AO, WHICH IS AS UNDER: 80AB. WHERE ANY DEDUCTION IS REQUIRED TO BE MADE O R ALLOWED UNDER ANY SECTION INCLUDED IN THIS CHAPTER UNDER THE HEADING C-DEDUCTIONS IN RESPECT OF CERTAIN INC OMES IN RESPECT OF ANY INCOME OF THE NATURE SPECIFIED IN T HAT SECTION WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE, THEN, NOTWITHSTANDING ANYTHING CONTAINED IN THAT SE CTION, FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT S ECTION, THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT (BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER) SHALL ALONE BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE WHICH IS DERIVE D OR RECEIVED BY THE ASSESSEE AND WHICH IS INCLUDED IN HIS GROSS TOTAL INCOME . 8. THE ASSESSING OFFICER ALSO INVOKED THE PROVISIO NS OF SECTION 80B(5) OF THE ACT WHICH DEFINES GROSS TOTAL INCOME TO ME AN `THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER. ON A CONJOINT RE ADING OF SECTIONS 80AB AND 80B(5) OF THE ACT, IT BECOMES OVERT THAT T HE AMOUNT OF DEDUCTION UNDER CHAPTER VIA-C SHALL BE ALLOWED WITH REFERENCE TO THE `INCOME OF THAT NATURE , THAT IS, THE ELIGIBLE IN COME, ONLY TO THE EXTENT OF ITS INCLUSION IN THE GROSS TOTAL INCOME OF THE A SSESSEE. IN OTHER WORDS, IF THE AMOUNT OF GROSS TOTAL INCOME IS RS.200/- AND THE AMOUNT OF ELIGIBLE INCOME U/S.80IB(10) IS RS.100/-, FULL AMOU NT OF RS.100/- WILL BE CONSIDERED FOR THE PURPOSE OF GRANTING DEDUCTION. P ER CONTRA, IF THE ELIGIBLE INCOME IS SAY RS.100/-, BUT THE GROSS TOTA L INCOME OF THE ASSESSEE IS RS.80/-, THE DEDUCTION SHALL BE RESTRIC TED TO THE EXTENT OF THE GROSS TOTAL INCOME OF RS. 80/-. IT IS NOT BORNE OUT FROM THE LANGUAGE OF 6 ITA NO. 1624/PUN/2017 A.Y.2009-2010 SECTION 80AB THAT `BUSINESS INCOME SHOULD BE CONSI DERED RATHER THAN `INCOME OF THAT NATURE OR THE ELIGIBLE INCOME. IN MY CONSIDERED OPINION, IT IS THE INCOME OF THE ELIGIBLE PROJECTS ALONE WHI CH SHOULD BE CONSIDERED ON STANDALONE BASIS, RATHER THAN THE INCOME UNDER T HE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION, FOR THE PURPOSES OF GRANTING DEDUCTION, ALBEIT WITH THE OVERALL CEILING OF THE GROSS TOTAL INCOME. 9. ADVERTING TO THE FACTS OF THE INSTANT CASE, IT I S SEEN THAT THE ASSESSEE FILED RETURN DECLARING TOTAL INCOME OF RS. 2,59,960/-. THIS AMOUNT CAME AFTER CLAIMING DEDUCTION, INTER ALIA, UNDER SECTION 80IB(10) OF THE ACT. GROSS TOTAL INCOME OF THE ASSESSEE AS P ER THE COMPUTATION DONE BY THE ASSESSING OFFICER IS RS.42,66,678/-. TH E ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IB(10) FOR A SUM OF RS.39, 02,966/- IN RESPECT OF THE ELIGIBLE PROJECT ALONE. SINCE THE AMOUNT OF ELIGIBLE INCOME, AS CLAIMED BY THE ASSESSEE, IS LESS THAN THE AMOUNT OF GROSS TOTAL INCOME, THE PROVISIONS OF SECTION 80AB DO NOT APPLY ADVERSE LY TO SUCH A SITUATION. THE ASSESSING OFFICER AS WELL AS THE LD. CIT (APPEALS) HAVE CONFINED THEMSELVES TO THE `BUSINESS INCOME, WHICH IS A LOSS OF RS.96,000/-, SO AS TO MAKE THE ASSESSEE INELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT. IT HAS BEEN NOTED ABOVE TH AT THE ASSESSEE WAS ENGAGED IN MULTIPLE PROJECTS AT THE MATERIAL TIME, BUT THE ONLY PROJECT ELIGIBLE FOR DEDUCTION U/S.80IB(10) IS AYODHYA PAR K, INCOME FROM WHICH WAS SHOWN AT RS.39,02,966/-. ADMITTEDLY, THE ASSESSEE ALSO INCURRED LOSS IN NON-ELIGIBLE PROJECTS AND THE NET RESULT, AFTER REDUCING THE AMOUNT OF INTEREST ON LOAN, IS A TOTAL BUSINESS LOSS OF RS.96,000/-. 7 ITA NO. 1624/PUN/2017 A.Y.2009-2010 THE COURSE OF ACTION ADOPTED BY THE AUTHORITIES BEL OW IN CONSIDERING LOSS FROM NON-ELIGIBLE PROJECTS ALSO FOR CALCULATIN G THE AMOUNT OF DEDUCTION U/S 80IB(10) IN RESPECT OF PROFIT FROM EL IGIBLE PROJECT, IS NOT IN ACCORDANCE WITH LAW. I, THEREFORE, OVERTURN THE IM PUGNED ORDER ON THIS SCORE IN CONSIDERING LOSS FROM NON-ELIGIBLE PROJECT S AS WELL AND EVENTUALLY TOTAL BUSINESS LOSS OF RS.96,000/- FOR M AKING THE ASSESSEE AS INELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT IN RESPECT OF THE ELIGIBLE PROJECT. 10. NOW, I TURN TO INTEREST ON LOAN AMOUNTING TO R S.21,09,465/-. IT HAS BEEN NOTED ABOVE THAT THE LD. AR ADMITTED, AND RIGHTLY SO, THAT SUCH INTEREST SHOULD BE CONSIDERED UNDER THE HEAD `PROFI TS AND GAINS OF BUSINESS OR PROFESSION. ONCE SUCH AN INTEREST IS T O BE CONSIDERED IN THE COMPUTATION OF `BUSINESS INCOME, THE NEXT QUESTION IS THAT HOW MUCH OF IT PERTAINS TO THE ELIGIBLE PROJECT. IT IS THE N ET INCOME FROM `AYODHYA PARK PROJECT, AFTER DEDUCTION OF THE WHOLE OR PART OF SUCH INTEREST, AS IS RELATABLE TO IT, THAT WILL QUALIFY FOR DEDUCTION U /S 80IB(10) OF THE ACT. ON BEING QUESTIONED ON THIS ISSUE, THE LD. AR REQUESTE D THAT THIS ASPECT MAY BE SENT BACK TO THE ASSESSING OFFICER FOR A FRE SH DETERMINATION IN THE LIGHT OF ALL THE FACTUAL DETAILS. NO OBJECTION WAS TAKEN BY THE LD. DR TO THIS PROPOSAL. IN VIEW OF THESE FACTS, I SET-ASI DE THE IMPUGNED ORDER AND REMIT THIS ASPECT TO THE FILE OF ASSESSING OFFI CER FOR EXAMINING THE AMOUNT OF INTEREST ON LOAN RELATING TO `AYODHAYA PA RK PROJECT OUT OF TOTAL INTEREST OF RS.21,09,465/-. THE AMOUNT SO DET ERMINED, IF ANY, IS DIRECTED TO BE REDUCED FROM THE INCOME OF THE ELIGI BLE PROJECT AS 8 ITA NO. 1624/PUN/2017 A.Y.2009-2010 COMPUTED BY THE ASSESSEE AT RS.39,02,966/- AND THE REMAINING AMOUNT WILL BE CONSIDERED AS ELIGIBLE FOR DEDUCTION U/S.80 IB(10) OF THE ACT. I ORDER ACCORDINGLY. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 17 TH DAY OF DECEMBER, 2018 . SD/- R.S. SYAL /VICE-PRESIDENT ' / PUNE; #$ / DATED : 17 TH DECEMBER, 2018. SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-2, KOLHAPUR. 4. THE PR. CIT-2, KOLHAPUR. 5. &'( ) , ) , - * + , , ' / DR, ITAT, SMC BENCH, PUNE. 6. (- ./ / GUARD FILE. // TRUE COPY // $'0 / BY ORDER, 1 ), / PRIVATE SECRETARY ) , ' / ITAT, PUNE. 9 ITA NO. 1624/PUN/2017 A.Y.2009-2010 * DATE 1 DRAFT DICTATED ON 13 .12.2018 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 17 .12.2018 SR. PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR. PS/PS 7 DATE OF UPLOADING OF ORDER SR. PS/PS 8 FILE SENT TO BENCH CLERK SR. PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER