VASANJI U. CHHEDA, NAVI MUMBAI V. ITO 15(3)(4), MUMBAI

ITA 1633/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3489 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 28-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 1633/MUM/2013 (ASSESSMENT YEAR : 2007-08) VISANJI U. CHHEDA, PROP. M/S. SONAL DEVELOPERS, C-4, BIG SPLASH, SECTOR -17, VASHI NAVI MUMBAI. PAN: AFIPC2413A ... APPELLANT VS. INCOME TAX OFFICER-15(3)(4) MUMBAI. .... RESPOND ENT ASSESSEE BY : MS. RITI KA AGARWAL REVENUE BY : SHRI JA VED AKHTAR DATE OF HEARING : 23/02/2016 DATE OF PRONOUNCEMENT : 29/02/2016 ORDER PER JASON P. BOAZ, A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(APPEALS) -26 MUMBAI DATED 30/01/2013 FOR ASSESS MENT YEAR 2007- 08. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2 ITA NO. 1633/MUM/2013 (ASSESSMENT YEAR : 2007-08) 2.1 THE ASSESSEE, PROP: SONAL DEVELOPERS, ENGAGED I N BUSINESS AS BUILDER AND DEVELOPER, FILED HIS RETURN OF INCOME F OR ASSESSMENT YEAR 2007-08 ON 22/10/2007 DECLARING TOTAL INCOME OF RS. 2,81,953/- AFTER CLAIMING DEDUCTION OF RS.2,52,97,456/- UNDER SECTIO N 80IB(10) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT). THE RET URN WAS PROCESSED UNDER SECTION 143(3) OF THE ACT AND THE CASE WAS TA KEN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) O F THE ACT VIDE ORDER DATED 14/12/2009, WHEREIN THE INCOME OF THE A SSESSEE WAS DETERMINED AT RS.2,64,05,160/- IN VIEW OF THE FOLLO WING ADDITIONS/DISALLOWANCES:- (I) DISALLOWANCE OF DEDUCTION U/S.80IB(10) - RS.2, 52,97,456/- (II) DISALLOWANCE OF COMPENSATION - RS. 8,85,7 50/- 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESS MENT YEAR 2007- 08 DATED 14/12/2009, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE CIT(APPEALS) -26, MUMBAI. THE CIT(APPEALS) DISPOSE D OFF THE ASSESSEES APPEAL VIDE ORDER DATED 30/11/2010 ALLOWING THE ASS ESSEE PARTIAL RELIEF. IN THIS ORDER THE CIT(APPEALS) ALLOWED THE ASSESSEE S CLAIM FOR DEDUCTION UNDER SECTION 80IB(10) OF THE ACT TO THE EXTENT OF RS.2,55,90,033/-. IN THE ORDER PASSED UNDER SECTIO N 143(3) R.W.S. 250 OF THE ACT BY THE ASSESSING OFFICER ON 5/01/2011 TO GI VE EFFECT TO THE AFORESAID ORDER OF THE CIT(APPEALS), THE ASSESSING OFFICER ALLOWED THE ASSESSEE DEDUCTION UNDER SECTION 10B(10) OF THE ACT TO THE EXTENT OF RS.2,52,97,456/-. 2.3 AGGRIEVED BY THE ORDER DATED 5/1/2011 PASSED BY THE ASSESSING OFFICER IN RESPECT OF GIVING EFFECT TO THE AFORESAI D ORDER OF THE 3 ITA NO. 1633/MUM/2013 (ASSESSMENT YEAR : 2007-08) CIT(APPEALS), THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(APPEALS)- 26, MUMBAI CHALLENGING THE ASSESSING OFFICERS ACTI ON IN RESTRICTING THE GRANT OF DEDUCTION UNDER SECTION 80IB(10) OF THE AC T TO RS.2,52,97,456/- AS AGAINST RS.2,64,65,160/-, WHICH WAS DETERMINED A S THE ASSSESSEES BUSINESS INCOME IN THE AFORESAID ORDER DATED 5/1/20 11. THE CIT(APPEALS) DISPOSED OFF THE ASSESSEES APPEAL VID E THE IMPUGNED ORDER DATED 30/1/2013 ALLOWING THE ASSESSEE PARTIAL RELIEF BY DIRECTING THE ASSESSING OFFICER TO ALLOW THE ASSESSEE DEDUCTI ON UNDER SECTION 80(IB)(10) OF THE ACT TO THE EXTENT OF RS.2,55,90,0 33/- AS DETERMINED BY THE EARLIER ORDER OF THE CIT(APPEALS) DATED 30/11/2 011 AND NOT TO THE EXTENT OF THE ASSESSEES CLAIM THAT IT BE ALLOWED T O THE EXTENT OF BUSINESS INCOME WHICH WAS DETERMINED AT RS.2,64,65, 160/- BY THE ASSESSING OFFICERS ORDER DATED 5/01/2011. 3.1 AGGRIEVED BY THE ORDER OF THE CIT(APPEALS)-26, MUMBAI DATED 30/01/2013 FOR ASSESSMENT YEAR 2007-08, THE ASSESSE E HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS:- 1. BECAUSE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE CLAIM OF 100% TAX EXEMPTION TO RS. 2,55,90,033/- INSTEAD OF RS.264,65,160/- BEING INCOME DETERMINED BY THE ASSESSING OFFICER IN ORIGINAL ASSESSMENT ORDER. 2. BECAUSE, THE LD. CIT(A) HAS FAILED TO: I. PROPERLY OBSERVE THE FINDING AND DIRECTION ISSUE D BY THE LD. CIT(A) IN HIS APPEAL ORDER FOR AY 2007-08; II. TO DEAL WITH THE SUBMISSIONS FILED BY THE APPEL LANT; III. FOLLOW THE JUDGMENT PASSED BY THE JURISDICTION AL ITAT ON THE SAME ISSUE WHICH IS A BINDING PRECEDENCE ON THE LOW ER AUTHORITIES. 4 ITA NO. 1633/MUM/2013 (ASSESSMENT YEAR : 2007-08) 3.2 BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSES SEE WAS HEARD IN SUPPORT OF THE GROUNDS RAISED. IT WAS CONTENDED TH AT THE CIT(APPEALS) HAD ERRED IN RESTRICTING THE ASSESSEES CLAIM FOR D EDUCTION UNDER SECTION 80 IB(10) OF THE ACT TO RS.2,55,90,033/- INSTEAD OF THE ENHANCED BUSINESS INCOME OF RS.2,64,65,160/- AS DETERMINED B Y THE ASSESSING OFFICER IN THE ORDER OF ASSESSMENT. IT WAS ALLEGE D THAT THE ASSESSEES SUBMISSIONS IN THIS REGARD, IN RESPECT OF THE ISSUE OF ENHANCED DEDUCTION UNDER SECTION 80 IB(10) OF THE ACT AND CA SE LAWS FILED, WERE BRUSHED ASIDE AND NOT ADDRESSED IN THE IMPUGNED OR DER AND THIS IS AMPLY CLEAR WHEN THE SAME IS PERUSED. IN SUPPORT O F THE ASSESSEES CLAIM FOR BEING ALLOWED ENHANCED DEDUCTION UNDER SE CTION 80 IB(10) OF THE ACT TO THE EXTENT OF THE ENHANCED ASSESSED INC OME DETERMINED BY THE ORDER OF ASSESSMENT, THE ASSESSEE PLACED RELIA NCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- (I) MEHA MEDICURE IN ITA NO.3420/MUM/2011 DATED 2 /3/2012. (II) S.B. BUILDERS & DEVELOPERS (2011) 50 DTR (MUMB AI) (TRIBUNAL) 299. (III)JITSAN ENTERPRISES IN ITA NO.1652/AHD/2009 DA TED 13/04/2010 (IV) RAJKUMAR EXPORTS (P) LTD.(2009) 30(II) ITCL 47 4 (CHEN- TRIBUNAL) 3.3 THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE IMPUGNED ORDER OF THE CIT(APPEALS). 3.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIAL ON RECORD INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED AND PLACED RELIANCE. FROM THE DETAILS ON RECORD IT IS NOT DISPUTED THAT THE ASSESSEE IS ENTITLED TO BE ALLOWED DEDUCTION UNDER SECTION 80 IB(10) IN RESPECT OF ITS 5 ITA NO. 1633/MUM/2013 (ASSESSMENT YEAR : 2007-08) BUSINESS INCOME DERIVED FROM ITS BUILDING, CONSTRU CTION AND DEVELOPMENT ACTIVITIES FROM THE EARLIER ASSESSMENT YEAR 2006-07 ITSELF. WE FIND FROM A PERUSAL OF THE DECISION OF THE CO-OR DINATE BENCH IN THE CASE OF M/S. MEHA MEDICURE IN ITA NO.3420/MUM/2011 DATED 02/03/2012 THAT THE ASSESSEE WOULD BE ENTITLED TO E NHANCED DEDUCTION UNDER SECTION 80 IB(10) OF THE ACT TO THE EXTENT TH E ASSESSED BUSINESS INCOME OF THE ASSESSEE IS ENHANCED BY VIRTUE OF DI SALLOWANCES THAT GO TO ENHANCE ITS PROFITS AND WOULD BE ELIGIBLE FOR FU LL DEDUCTION UNDER SECTION 80 IB(10) OF THE ACT, WHICH PROVIDES FOR DE DUCTION FROM THE PROFITS AND GAINS FROM THE ELIGIBLE BUSINESS. IN THE AFORESAID ORDER, THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS RENDERED THE FOLLOWING FINDING IN THIS REGARD AT PARA 5 & 6 THEREOF, WHICH ARE EXTRAC TED HEREUNDER:- 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMEN TS RELIED UPON BY THE LEARNED AR. IT IS UNDISPUTED FACT THAT THE APPELLA NT IS AN UNDERTAKING AND IS ENGAGED IN THE MANUFACTURING OF ARTICLE SPECIFIED I N FOURTEENTH SCHEDULE AND IN A SPECIFIED CATEGORY OF STATES FOR WHICH IT IS E LIGIBLE FOR DEDUCTION U/S.80IC. SUCH AN EXEMPTION HAS BEEN ALLOWED IN THE EARLIER Y EARS BY THE ASSESSING OFFICER HIMSELF I.E. FOR THE ASSESSMENT YEAR 2005-0 6 AND 2006-07. SUB- SECTION 3 OF SECTION 80IC CATEGORICALLY PROVIDES TH AT THE DEDUCTION WOULD BE AVAILABLE FOR 100% OF SUCH PROFITS AND GAINS FOR 10 ASSESSMENT YEARS IF THE PROFITS AND GAINS HAVE BEEN DERIVED FROM SUCH BUSIN ESS ACTIVITIES. IN THIS CASE, THE DISALLOWANCE HAVE BEEN MADE ON ACCOUNT OF NON DEDUCTION OF TDS ON THE ITEMS WHICH ARE DIRECTLY ATTRIBUTABLE/RELATE D TO THE BUSINESS OF THE APPELLANT, WHICH IS APPARENT FROM THE HEADS OF EXPE NSES UNDER WHICH THESE DISALLOWANCES HAVE BEEN MADE. INCOME DERIVED FROM SUCH ELIGIBLE BUSINESS MUST BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 30 TO 43D AS HAS BEEN PROVIDED UNDER SECTION 29. SECTION 40 IS A NON-OBSTANTE CLAUSE WHICH PLACES EMBARGO ON THE ALLOWABILITY OF EXPENS ES / EXPENDITURE FROM SECTION 30 TO 38. THEREFORE, ANY DISALLOWANCE U/S. 40(A)(IA) WILL GO TO ENHANCE THE PROFIT OF THE ASSESSEE FROM THE ELIGIBL E BUSINESS. THIS PREPOSITION OF LAW IS NOW SQUARELY COVERED BY THE D ECISION OF THE ITAT, MUMBAI E BENCH IN THE CASE OF S.B. BUILDERS & DEVELOPERS V. ITO (SUPRA) WHEREIN IT WAS OBSERVED AND HELD AS UNDER : HELD : UNDER SECTION 80AB THE INCOME THAT IS DERIV ED FROM THE ELIGIBLE BUSINESS MUST BE COMPUTED IN ACCORDANCE WI TH THE PROVISIONS 6 ITA NO. 1633/MUM/2013 (ASSESSMENT YEAR : 2007-08) OF SECTIONS 30 TO 43D, AS PROVIDED IN SECTION 29. S ECTION 29 PROVIDES THAT THE INCOME CHARGEABLE TO TAX UNDER THE HEAD P ROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTIONS 30 TO 43D. UNQUESTIONABLY, S ECTION 40(A)(IA) IS A SECTION FALLING BETWEEN SECTIONS 30 TO 43D AND TH EREFORE EFFECT MUST BE GIVEN TO THE SAME IN COMPUTING THE PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINESS, WHICH IN THIS CASE IS A HOUSING PROJECT. IT FOLLOWS THAT IF THE ASSESSEE HAS NOT DEDUCTED TAX F ROM ANY PAYMENT WHICH IT WAS REQUIRED TO OR HAS FAILED TO DEPOSIT T HE TAX WITHIN THE PRESCRIBED TIME-LIMIT, IT CANNOT CLAIM ANY DEDUCTIO N IN RESPECT OF THE PAYMENT WHILE COMPUTING THE PROFITS DERIVED FROM TH E ELIGIBLE BUSINESS. THE PAYMENT HAS TO BE DISALLOWED AND ADDE D BACK TO THE PROFITS, THEREBY SWELLING THE SAME. THE RESULTANT F IGURE OF PROFITS, ENHANCED BY THE AMOUNT OF DISALLOWANCE, WOULD BE EL IGIBLE FOR THE DEDUCTION U/S.80-IB(10). THE PROFITS AND GAINS OF THE ELIGIBLE BUSINESS, FOR THE PURPOSE OF THE SECTIONS FALLING U NDER THE HEADING C- DEDUCTIONS IN RESPECT OF CERTAIN INCOMES, HAVE TO BE COMPUTED IN ACCORDANCE WITH THE COMPUTATION PROVISIONS OF SS. 3 0 TO 43D AS MANDATED BY S.29. THEREFORE, IT HARDLY MATTERS WHE THER WHILE COMPUTING THE PROFITS IN ACCORDANCE WITH THE ABOVE SECTIONS, AN AMOUNT IS ALLOWED AS A DEDUCTION OR IS DISALLOWED A ND ADDED BACK TO THE PROFITS SINCE COMPUTATION WOULD INCLUDE BOTH ALLOWING A DEDUCTION AND DISALLOWING OR RESTRICTING A DEDUCTIO N IN ACCORDANCE WITH THE STATUTORY PROVISIONS. SECTION 40(A)(IA) A UTHORISES THE DISALLOWANCE OF THE DEDUCTION IF THE TAX HAS NOT BE EN DEDUCTED AND PAID IN TIME. IT IS PART OF THE PROVISIONS FOR COM PUTATION OF THE PROFITS. SEC.80AB ADVISEDLY USES THE EXPRESSION THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCORDANCE WIT H THE PROVISIONS OF THIS ACT.. THE SECTION WOULD HAVE BEEN DIFFERE NTLY WORDED IF THE CONTENTION OF THE REVENUE IS TO BE ACCEPTED. ONE W OULD BE IGNORING THE MANDATE OF S.80AB R/W S. 29 IT ONE ACCEPTS THE STAND OF THE REVENUE. THERE IS NO AUTHORITY GIVEN BY THESE SECT IONS TO IGNORE THE EFFECT OF S.40(A)(IA). THOSE SECTIONS DO NOT SAY T HAT THE ASSESSEE WILL BE ALLOWED ALL THE DEDUCTIONS FROM THE PROFITS, BUT WHEN IT COMES TO DISALLOWING CERTAIN CLAIMS TO EXPENDITURE SOMEHOW, THOSE PROVISIONS WILL HAVE TO BE IGNORED. WHILE GIVING EFFECT TO TH E COMPUTATION PROVISIONS CONTAINED IN SS. 30 TO 43D ONE SHOULD NO T BE BOGGED DOWN BY THE THEORY THAT THE DISALLOWED EXPENDITURE CANNO T BE CONSIDERED AS PROFITS DERIVED FROM THE HOUSING PROJECT OR AS OPERATIONAL PROFITS. 5.1 SIMILARLY IN THE CASE OF M/S. JITSAN ENTERPRISES V. ITO (SUPRA) , THE ITAT AFTER RELYING ON VARIOUS JUDGMENTS HAS HELD TH AT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S.80IB ON THE AMOUNT DISALL OWED U/S.40(A)(IA) WHILE WORKING OUT THE ELIGIBLE PROFITS OF THE INDUSTRIAL UNDERTAKING. LIKEWISE THE 7 ITA NO. 1633/MUM/2013 (ASSESSMENT YEAR : 2007-08) OTHER TWO DECISIONS RELIED UPON BY THE LEARNED AR A LSO SUPPORT THE CASE OF THE APPELLANT. 6. IN VIEW OF THE AFORESAID PREPOSITION OF LAW AND RATIO LAID DOWN BY THE VARIOUS COURTS, WE HOLD THAT DISALLOWANCE OF `RS.7, 38,038/- MADE U/S.40(A)(IA) BY THE ASSESSING OFFICER WILL GO TO E NHANCE THE PROFIT WHICH WOULD AGAIN BE ELIGIBLE FOR FULL DEDUCTION U/S.80IC AS IT PROVIDES FOR 100% DEDUCTION FROM THE PROFITS AND GAINS FROM THE ELIGI BLE BUSINESS. 3.4.2 FOLLOWING THE AFORESAID DECISION OF THE TRIBU NAL IN THE CASE OF MEHA MEDICURE IN ITA NO.3420/MUM/2011 DATED 02/03/2 012, WE HOLD AND DIRECT THAT THE ASSESSEE WOULD BE ENTITLED TO D EDUCTION UNDER SECTION 80 IB(10) OF THE ACT TO THE EXTENT OF THE A SSESSEES ASSESSED BUSINESS INCOME OF RS.2,64,65,160/-, DETERMINED IN THE ORDER OF ASSESSMENT DATED 14/12/2009 FOR ASSESSMENT YEAR 200 7-08 AND WHICH HAS BEEN ENHANCED THERETO BY VIRTUE OF THE DISALLOW ANCE OF COMPENSATION OF RS.8,85,750/-, WHICH WOULD GO TO EN HANCE THE PROFITS OF THE ASSESSEES ELIGIBLE BUSINESS. IT IS ORDERE D ACCORDINGLY. CONSEQUENTLY, THE ASSESSEES GROUNDS RAISED AT S.NO S. 1 & 3 ARE ALLOWED. 4. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSM ENT YEAR 2007-08 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/02/2016 SD/- SD/- (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 29/02/2016 VM , SR. PS 8 ITA NO. 1633/MUM/2013 (ASSESSMENT YEAR : 2007-08) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI