M/s Kumar Company., Pune V. Addl CIT Rg- 5 Pune, Pune

ITA 1651/PUN/2012

• Counselvise Citation: 165124514 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 08-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Depreciation
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NOS.1651 & 1652/PN/2012 (ASSESSMENT YEARS : 2006-07 & 2007-08) M/S KUMAR COMPANY, KUMAR CAPITAL, 1 ST FLOOR, 2413, EAST STREET, PUNE 411 001. PAN : AABFK6106A . APPELLANT VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE- 5, PUNE. . RESPONDENT ASSESSEE BY : MR. RAJAN VORA DEPARTMENT BY : MR. S. P. WALIMBE DATE OF HEARING : 12-03-2014 DATE OF PRONOUNCEMENT : 30-04-2014 ORDER PER G. S. PANNU, AM THESE TWO APPEALS BY THE ASSESSEE ARE FOR TWO DIFFE RENT ASSESSMENT YEARS 2006-07 AND 2007-08 AND SINCE THEY INVOLVE CE RTAIN COMMON ISSUES, THEREFORE, THEY HAVE BEEN CLUBBED AND HEARD TOGETHE R AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE A ND BREVITY. 2. FIRST, WE SHALL TAKE-UP THE APPEAL OF THE ASSESS EE FOR ASSESSMENT YEAR 2006-07 WHICH IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 30.03.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 17.12.2008 PASSED BY THE ASSESSING OFFI CER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 3. IN THE ASSESSMENT YEAR 2006-07, THE GROUNDS OF A PPEAL RAISED BY THE ASSESSEE READ AS UNDER :- APPORTIONMENT OF INTEREST EXPENSES TO PROJECTS ELIG IBLE FOR DEDUCTION UNDER SECTION 80-1B(10) OF THE ACT ITA NOS.1651 & 1652/PN/2012 A.YS. : 2006-07 & 2007-08 1. ERRED IN UPHOLDING THE ACTION OF THE LEARNED ASS ESSING OFFICER ('AO') IN APPORTIONING INTEREST TOWARDS ELIGIBLE 80-1B(10) PR OJECTS; 2. SHOULD HAVE APPRECIATED THAT THERE WAS SUFFICIEN T INTEREST FREE FUNDS AVAILABLE FOR PROJECTS WHICH ARE ELIGIBLE FOR DEDUC TION UNDER SECTION 80-1B(10) OF THE ACT AND HENCE INTEREST APPORTIONMENT TO SUCH PROJECT WAS NOT JUSTIFIED; APPORTIONMENT OF DEPRECIATION TO PROJECTS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-1B(10) OF THE ACT 3. ERRED IN APPORTIONING DEPRECIATION TOWARDS THE P ROJECT WHICH ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-1B(10) OF T HE ACT; 4. SHOULD HAVE APPRECIATED THAT THE EXPENDITURE WIT H RESPECT TO DEPRECIATION WERE NOT INCURRED ON SEPARATE PROJECTS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-1B(10) OF THE ACT; 5. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN APPORTIONING DEPRECIATION IN THE RATIO OF TOTAL WORK-IN-PROGRESS ('WIP') (ACCUMU LATED WIP TILL DATE) AS AGAINST APPORTIONMENT IN THE RATIO OF INCREMENTAL W IP INCURRED DURING THE YEAR; 4. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESSED THE AFORESTATED GROUNDS OF APPEAL NOS. 3 TO 5 DEALING WITH APPORTIONMENT OF DEPRECIATION TO PROJECTS ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT AND THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 5. THE OTHER REMAINING GROUNDS OF APPEAL, NAMELY, 1 AND 2 PRIMARILY RELATE TO THE COMPUTATION OF DEDUCTION CLAIMED BY T HE ASSESSEE U/S 80-IB(10) OF THE ACT IN RELATION TO ITS HOUSING PROJECT. THE FACTS RELATING TO THE CONTROVERSY CAN BE SUMMARIZED AS FOLLOWS. ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN DEVELOPMENT OF REAL ESTATE PROJ ECTS AND FOR THE ASSESSMENT YEAR 2006-07 IF FILED A RETURN OF INCOME , WHICH INTER-ALIA, CONTAINED A CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT AMOUNTING TO RS.4,74,32,065/- IN RELATION TO THREE OF ITS HOUSIN G PROJECT. NOTABLY, THE ASSESSEE WAS ALSO UNDERTAKING PROJECTS WHICH WERE N OT ELIGIBLE FOR THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT. DURING THE A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND FROM THE CONSOLIDATED PROFI T & LOSS ACCOUNT THAT ASSESSEE HAD DEBITED INTEREST EXPENDITURE AMOUNTING TO RS.1,69,25,345/- IN ENTIRETY AGAINST THE PROFIT FROM NON 80IB(10) PROJE CTS WITHOUT APPORTIONING ANY PORTION OF SUCH EXPENDITURE AGAINST THE PROFITS FRO M 80IB(10) PROJECTS. THE ITA NOS.1651 & 1652/PN/2012 A.YS. : 2006-07 & 2007-08 ASSESSING OFFICER SHOW-CAUSED THE ASSESSEE ON THIS ISSUE AND AFTER CONSIDERING THE SUBMISSIONS PUT-FORTH, CONCLUDED TH AT THE INTEREST EXPENDITURE OF RS.1,69,25,345/- WAS NOT INCURRED EXCLUSIVELY IN RELATION TO THE NON 80IB(10) PROJECTS AND THE INTEREST BEARING FUNDS WERE ACTUAL LY A PART OF COMMON POOL FUNDS, WHICH WERE BEING USED BY THE ASSESSEE FOR VA RIOUS BUSINESS ACTIVITIES, INCLUDING FOR EXPENSES RELATING TO THE 80IB(10) PRO JECTS. THUS, AS PER THE ASSESSING OFFICER, THE INTEREST EXPENDITURE WAS REQ UIRED TO BE APPORTIONED AGAINST PROFITS ARISING FROM BOTH TYPE OF PROJECTS, VIZ. 80IB(10) PROJECTS AS WELL AS NON 80IB(10) PROJECTS. THE ASSESSING OFFICER AP PORTIONED THE INTEREST EXPENDITURE BETWEEN 80IB(10) PROJECTS AND NON 80IB( 10) PROJECTS IN THE RESPECTIVE PROFIT RATIO WHICH RESULTED IN REDUCTION OF PROFITS OF 80IB(10) PROJECTS BY A SUM OF RS.1,07,83,895/-. THE AFORESAID ASSESS MENT WAS CARRIED IN APPEAL BEFORE THE CIT(A) WHO VIDE HIS ORDER DATED 2 9.11.2009 DISMISSED THE PLEAS OF THE ASSESSEE AND UPHELD THE STAND OF THE A SSESSING OFFICER. THE ENTIRE ISSUE WAS THEREAFTER CARRIED IN APPEAL BEFOR E THE TRIBUNAL AND VIDE ITS ORDER DATED 04.01.2012 IN ITA NO.563/PN/2010, THE T RIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE CIT(A) FOR ADJUDICAT ION DE NOVO . PURSUANT TO SUCH DIRECTIONS OF THE TRIBUNAL, THE IMPUGNED ORDER HAS BEEN PASSED BY THE CIT(A). 6. BEFORE THE CIT(A), THE ASSERTIONS OF THE ASSESSE E WERE THAT THE 80IB(10) PROJECTS WERE HAVING SURPLUS FUNDS PRIMARI LY ON ACCOUNT OF ADVANCES RECEIVED FROM THE CUSTOMERS AND ON THE OTHER HAND T HERE WAS DEFICIT IN THE FUNDS OF NON-ELIGIBLE 80IB(10) PROJECTS AND THEREFO RE THE INTEREST BEARING FUNDS WERE UTILIZED EXCLUSIVELY IN THE NON-80IB(10) PROJE CTS; AND, THUS, AS PER ASSESSEE APPORTIONMENT OF INTEREST EXPENDITURE TO 8 0IB(10) PROJECTS WAS NOT JUSTIFIED. THE ASSESSEE FURNISHED BEFORE THE ASSES SING OFFICER THE TOTAL WORK- IN-PROGRESS OF 80IB(10) AND NON 80IB(10) PROJECTS, INCLUDING THE ADDITIONS MADE TO THE WORK-IN-PROGRESS IN THE RESPECTIVE PROJ ECTS DURING THE YEAR UNDER CONSIDERATION. ON THE BASIS OF THE AFORESAID, ASSE SSEE ASSERTED THAT IT HAS MAINLY EXECUTED NON-ELIGIBLE 80IB(10) PROJECTS DURI NG THE YEAR UNDER ITA NOS.1651 & 1652/PN/2012 A.YS. : 2006-07 & 2007-08 CONSIDERATION. THE TOTAL NON-ELIGIBLE 80IB(10) PRO JECTS BEING THIRTEEN AS COMPARED TO FOUR 80IB(10) PROJECTS. SECONDLY, ASSE SSEE POINTED OUT THAT THE FUNDS UTILIZED IN NON 80IB(10) PROJECTS WAS 3.4.2 T IMES HIGHER THAN FUNDS UTILIZED IN 80IB(10) PROJECTS AND ACCORDINGLY IT WA S SUBMITTED THAT THERE WAS REQUIREMENT OF FUNDS IN NON 80IB(10) PROJECTS. IT WAS ALSO POINTED OUT THAT THE INCREASE IN WORK-IN-PROGRESS DURING THE YEAR IN THE CASE OF 80IB(10) PROJECTS WAS MUCH LESS THAN COMPARED TO THE INCREASE IN WORK -IN-PROGRESS IN CASE OF NON 80IB(10) PROJECTS. THIRDLY, IT WAS POINTED OUT THAT AFTER COMPARING THE TOTAL WORK-IN-PROGRESS AND TOTAL CUSTOMER ADVANCES IN CAS E OF 80IB(10) PROJECTS IT WAS EVIDENT THAT THERE WERE SURPLUS FUNDS AVAILABLE IN THESE PROJECTS THROUGHOUT THE YEAR WHEREAS IN CASE OF NON 80IB(10) PROJECTS, THERE WAS DEFICIT THROUGHOUT THE YEAR. THE AFORESAID WAS SOU GHT TO BE SUPPORTED BY THE FUND FLOW POSITION AS ON 31 ST MARCH, 2006 DIVIDED AMONGST 80IB(10) PROJECTS AND NON 80IB(10) PROJECTS. 7. THE CIT(A) HAS NOT ACCEPTED THE PLEA OF THE ASSE SSEE THAT NO INTEREST EXPENDITURE IS LIABLE TO BE APPORTIONED AGAINST PRO FITS OF THE 80IB(10) PROJECTS. THE CIT(A) HAS OBSERVED THAT THE BUSINESS OF EXECUT ION OF PROJECTS CARRIED OUT BY THE APPELLANT IS COMPOSITE AND IN THE ABSENCE OF ANY NEXUS BETWEEN THE BORROWED FUNDS AND THEIR EXCLUSIVE UTILIZATION IN N ON-80IB(10) PROJECTS, THE INTEREST EXPENDITURE WAS REQUIRED TO BE APPORTIONED AMONGST ALL THE PROJECTS, I.E. NON 80IB(10) AS WELL AS 80IB(10) PROJECTS. TH E CONCLUSION OF THE CIT(A) ON THIS ASPECT IS AS UNDER :- THE APPELLANT HAS BORROWED ON INTEREST SUBSTANTIAL FUNDS WHICH ARE USED AS WORKING CAPITAL FOR EXECUTION OF VARIOU S CONSTRUCTION PROJECTS. SUCH INTEREST EXPENDITURE IS TREATED AS 'PERIOD COS T' AND DEBITED TO THE COMMON PROFIT & LOSS ACCOUNT AND NOT AS DIRECT COST OF A PARTICULAR PROJECT. THE LOANS WERE AVAILED AND UTILIZED FOR ALL THE PRO JECTS AND THE FUNDS WERE MIXED UP AND AS ADMITTED BY THE APPELLANT ITSELF IT WAS NOT POSSIBLE TO IDENTIFY AND ALLOCATE THE INTEREST COST TO A PARTICULAR PROJ ECT. THERE WAS INTERLACING AND INTER-MINGLING OF FUNDS EVEN THOUGH THE PROJECTS AR E GEOGRAPHICALLY LOCATED AT DIFFERENT SITES. AS WHEN THERE IS REQUIREMENT OF FU NDS FOR EXECUTION OF A PARTICULAR PROJECT WHETHER 80IB(10) PROJECT OR NON 80(IB)(10) PROJECT, THE FUNDS ARE DRAWN FROM THE COMMON POOL OF FUNDS, WHICH ARE BEING USED BY THE APPELLANT FOR VARIOUS ACTIVITIES. IN SUCH A SITUATI ON, THE CLAIM OF THE APPELLANT ITA NOS.1651 & 1652/PN/2012 A.YS. : 2006-07 & 2007-08 THAT BORROWED FUNDS WERE NOT UTILIZED FOR 80IB (10) PROJECTS AND THEREFORE, THERE CANNOT BE ANY APPORTIONMENT OF INTEREST EXPEN DITURE TO 80IB(10) PROJECTS, IS NOT TENABLE. WHEN THE BUSINESS OF EXEC UTION OF PROJECTS CARRIED OUT BY THE APPELLANT IS COMPOSITE AND WHEN THE APPELLAN T IS NOT ABLE ESTABLISH THE NEXUS OR ONE-TO-ONE LINKAGE BETWEEN THE BORROWED FU NDS AND THEIR UTILIZATION IN THE NON 80IB(10)PROJECTS, THE FINANCE COST IS RE QUIRED TO BE APPORTIONED AMONG ALL THE PROJECTS. 8. AFTER HOLDING THAT THE INTEREST EXPENDITURE WAS REQUIRED TO BE APPORTIONED AMONG ALL THE PROJECTS, THE CIT(A) CONS IDERED THE NEXT GRIEVANCE OF THE ASSESSEE WHEREBY THE BASIS OF APPORTIONMENT ADOPTED BY THE ASSESSING OFFICER WAS SOUGHT TO BE ASSAILED. THE A SSESSING OFFICER HAD APPORTIONED THE INTEREST EXPENDITURE IN THE RATIO O F PROFITS OF 80IB(10) PROJECTS AND NON 80IB(10) PROJECTS. THE CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE THAT THE ASSESSING OFFICER WAS WRONG IN THIS REGARD AND HE UPHELD THE METHOD OF APPORTIONMENT CANVASSED BY THE ASSESSEE WHICH WAS O N THE BASIS OF THE RATIO OF TOTAL WORK-IN-PROGRESS OF THE RESPECTIVE PROJECT S. IN PARA 7.2.1 OF HIS ORDER THE CIT(A) HAS TABULATED THE APPORTIONMENT OF INTER EST ON THE BASIS OF THE TOTAL WORK-IN-PROGRESS WORKED OUT BY THE ASSESSEE. THE C IT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY THE CORRECTNESS OF THE WORKING DONE BY THE ASSESSEE BY MAKING THE FOLLOWING DISCUSSION WHICH I S RELEVANT :- THE ASSESSING OFFICER IS ACCORDINGLY, DIRECTED TO V ERIFY THE CORRECTNESS OF THE ADDITIONS TO WORK-IN-PROGRESS SH OWN IN THE RESPECTIVE YEARS AND THE TOTAL WORK-IN-PROGRESS AS ON 31/03/2006 AND 31/03/2007 FILED BY THE APPELLANT VIS-A-VIS THE STATEMENTS OF ACCOUNTS FILE D WITH THE RETURN OF INCOME FOR THESE YEARS. ON DUE VERIFICATION, IF IT IS FOUN D THAT THE DETAILS OF WORK-IN- PROGRESS FILED BY THE APPELLANT ARE IN AGREEMENT WI TH THE STATEMENTS OF ACCOUNTS FILED WITH THE RETURN OF INCOME, THE INTER EST EXPENDITURE, DEPRECIATION AND ADMINISTRATIVE EXPENSES SHALL BE APPORTIONED ON THE BASIS OF THE TOTAL WORK-IN-PROGRESS INCLUDING LAND COST OF 80IB(10) AND NON 80IB(10) PROJECTS AS ON 31/03/2006 AND 31/03/2007. THUS, THE APPORTIONME NT OF THE EXPENDITURE IN QUESTION SHALL BE MADE IN THE RATIO OF TOTAL W-I-P OF THE PROJECTS INCLUDING LAND COST AS AGAINST IN THE RATIO OF PROFITS OF THE PROJ ECTS APPLIED BY THE ASSESSING OFFICER. SUBJECT TO THESE DIRECTIONS, THE GROUNDS O F APPEAL RAISED BY THE APPELLANT IN THE APPEALS FOR BOTH THE ASSESSMENT YE ARS UNDER CONSIDERATION ARE PARTLY ALLOWED. 9. AGAINST THE AFORESAID ORDER OF THE CIT(A) ASSESS EE IS IN APPEAL BEFORE US. AT THE TIME OF HEARING, THE LEARNED COUNSEL FO R THE ASSESSEE POINTED OUT THAT THE ASSESSEE WAS MAINTAINING PROJECT-WISE ACCO UNTS, INCLUDING THE DETAILS ITA NOS.1651 & 1652/PN/2012 A.YS. : 2006-07 & 2007-08 OF DIRECT EXPENSES AND INCOMES SO AS TO ARRIVE AT P ROJECT-WISE PROFITS; AND, ACCORDING TO HIM, MANNER OF ACCOUNTS MAINTENANCE AL SO GAVE PROJECT-WISE DETAILS OF DEBTORS/CREDITORS, ADVANCES FROM FLAT-HO LDERS, ETC. IT WAS POINTED OUT THAT IN VIEW OF THE AVAILABILITY OF SUCH DETAILED A CCOUNTING FOR EACH PROJECT, ASSESSEE WAS ABLE TO ESTABLISH THAT IN THE CASE OF 80IB(10) PROJECTS THERE WAS A SURPLUS FUND POSITION THROUGHOUT THE YEAR ON ACCO UNT OF RECEIPTS ON ACCOUNT OF CUSTOMER ADVANCES AND THEREFORE ONLY NON-INTERES T BEARINGS FUNDS WERE UTILIZED TOWARDS EXPENDITURE ON EXECUTION OF SUCH P ROJECTS. IT WAS ALSO CONTENDED THAT THOUGH THE ASSESSEE IS NOT AGGRIEVED WITH THE BASIS OF APPORTIONMENT OF INTEREST DECIDED BY THE CIT(A), SO HOWEVER, AS PER THE ASSESSEE THE SPECIFIC ADVANCES RECEIVED FROM CUSTOM ERS FOR THE 80IB(10) PROJECTS WERE AVAILABLE FOR SPENDING IN THE RESPECT IVE PROJECTS AND THE UTILIZATION OF INTEREST BEARING FUNDS FOR SUCH PROJ ECTS WOULD ONLY BE FOR THE SHORTFALL, IF ANY. THE LEARNED COUNSEL SUBMITTED T HAT ASSESSEE WOULD SATISFIED IF THE DIRECTIONS OF THE CIT(A) ARE MODIFIED TO THE EXTENT OF REQUIRING THE ASSESSING OFFICER TO CONSIDER THE AVAILABILITY OF S UCH ADVANCES WHILE CONSIDERING ALLOCATION OF INTEREST ON COMMON BORROW INGS. 10. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE CASE OF THE REVENUE. 11. HAVING CONSIDERED THE RIVAL POSITIONS, IT IS AP PARENT THAT THE STAND OF THE ASSESSEE IS THAT 80IB(10) PROJECTS HAVE SURPLUS BY WAY OF ADVANCES FROM CUSTOMERS AND THAT THERE WAS NO NECESSITY OF ALLOCA TING ANY INTEREST EXPENDITURE ON SUCH PROJECTS BECAUSE THE INTEREST-B EARING FUNDS WERE NOT REQUIRED FOR THE SAME. THE AFORESAID CONTENTION OF THE ASSESSEE HAS NOT BEEN ACCEPTED BY THE CIT(A). IN PARA 7.1.1 OF HIS ORDER , THE CIT(A) HAS NOTICED THAT ASSESSEES ASSERTIONS THAT FOR THE ASSESSMET YEAR 2 006-07 THERE WAS A SURPLUS IN 80IB(10) PROJECTS CONSIDERING THE RECEIP TS FROM CUSTOMERS AND THE ADDITIONS TO THE WORK-IN-PROGRESS MADE DURING THE Y EAR; SO HOWEVER, HE NOTED ITA NOS.1651 & 1652/PN/2012 A.YS. : 2006-07 & 2007-08 THAT FOR THE ASSESSMENT YEAR 2007-08 THE CUSTOMER R ECEIPTS WERE LESS THAN THE ADDITIONS MADE TO THE WORK-IN-PROGRESS SUGGESTING T HAT THERE WAS DEFICIT IN THAT YEAR. FOR THE AFORESAID REASON, THE CIT(A) CO NCLUDED THAT THE SURPLUS OR DEFICIT OF FUNDS IN CASE OF 80IB(10) PROJECTS WAS N OT CONSTANT EVERY YEAR AND THAT IT WOULD VARY DEPENDING ON THE REQUIREMENT OF FUNDS AND THE RECEIPTS FROM THE CUSTOMERS. THE AFORESAID FACTUAL MATRIX IS NOT DISPUTED. MOREOVER, A NOTE WAS FURNISHED IN THE COURSE OF THE HEARING FROM WHI CH IT TRANSPIRES THAT THE ADVANCES AND FUNDS RECEIVED BY THE ASSESSEE ARE DEP OSITED IN A COMMON BANK ACCOUNT OPENED FOR ADMINISTRATIVE CONVENIENCE. IT WAS ALSO STATED IN THE SAID NOTE THAT THROUGH THE SAID BANK ACCOUNT, THE P ROJECT-WISE BORROWED FUNDS AND INTEREST CANNOT BE IDENTIFIED. 12. FOR THE AFORESAID REASONS, THE CIT(A) HAS REACH ED TO A FACTUAL FINDING THAT LOAN FUNDS AVAILABLE WERE UTILIZED FOR ALL THE PROJECTS AND THE FUNDS WERE MIXED UP IN A COMMON BANK AND AS ADMITTED BY THE AS SESSEE, IT WAS NOT POSSIBLE TO IDENTIFY AND ALLOCATE THE INTEREST COST TO ANY PARTICULAR PROJECT. UNDER SUCH FACTUAL SCENARIO, IN OUR VIEW, IT WOULD NOT BE PROPER TO ACCEPT THE PLEA OF THE ASSESSEE THAT NO INTEREST EXPENDITURE I S TO BE APPORTIONED AGAINST THE PROFITS OF 80IB(10) PROJECTS. THE STAND OF THE CIT(A) ON THIS ASPECT IS HEREBY AFFIRMED IN-PRINCIPLE. 13. HOWEVER, AT THE TIME OF HEARING, THE LEARNED CO UNSEL VEHEMENTLY POINTED OUT THAT THE NECESSITY OF BORROWED FUNDS BE ING USED IN A PARTICULAR PROJECT IS TO BE EXAMINED AS TO WHETHER A SURPLUS O R DEFICIT EXISTED IN THAT PROJECT, WHICH COULD BE EXAMINED ON THE BASIS OF TH E FUNDS-FLOW STATEMENT. IN OUR CONSIDERED OPINION, THE SAID PLEA CASTS AN ONUS ENTIRELY ON THE ASSESSEE TO DEMONSTRATE THE ACTUAL UTILIZATION OF INTEREST-B EARING FUNDS FOR A PARTICULAR PROJECT, WHICH THE ASSESSEE ADMITS THAT THE UTILIZA TION PROJECT-WISE BORROWED FUNDS AND INTEREST CANNOT BE IDENTIFIED FROM THE EX AMINATION OF THE COMMON BANK ACCOUNT. ITA NOS.1651 & 1652/PN/2012 A.YS. : 2006-07 & 2007-08 14. THUS, WE FIND NO FORCE IN THE PLEA OF THE ASSES SEE AND ACCORDINGLY THE ORDER OF THE CIT(A) IS HEREBY AFFIRMED AND THE ASSE SSEE FAILS. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A SSESSMENT YEAR 2006-07 IS DISMISSED. 16. IN SO FAR AS THE APPEAL FOR ASSESSMENT YEAR 200 7-08 THE ASSESSEE HAS RAISED THE FOLLOWING SUBSTANTIVE GROUNDS OF APPEAL :- APPORTIONMENT OF INTEREST EXPENSES TO PROJECTS ELIG IBLE FOR DEDUCTION UNDER SECTION 80-1B(10) OF THE ACT 1. ERRED IN UPHOLDING THE ACTION OF THE LEARNED ASS ESSING OFFICER ('AO') IN APPORTIONING INTEREST TOWARDS ELIGIBLE 80-1B(10) PR OJECTS; 2. SHOULD HAVE APPRECIATED THAT THERE WAS SUFFICIEN T INTEREST FREE FUNDS AVAILABLE FOR PROJECTS WHICH ARE ELIGIBLE FOR DEDUC TION UNDER SECTION 80-1B(10) OF THE ACT AND HENCE INTEREST APPORTIONMENT TO SUCH PROJECT WAS NOT JUSTIFIED; APPORTIONMENT OF DEPRECIATION AND MISCELLANEOUS EXP ENSES TO PROJECTS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-1B(10) OF T HE ACT 3. ERRED IN APPORTIONING DEPRECIATION AND MISCELLAN EOUS EXPENSES TOWARDS PROJECT WHICH ARE ELIGIBLE FOR DEDUCTION UN DER SECTION 80-1B(10) OF THE ACT; 4. SHOULD HAVE APPRECIATED THAT EXPENDITURE WITH RE SPECT TO DEPRECIATION AND MISCELLANEOUS EXPENSES WERE NOT INCURRED ON SEP ARATE PROJECTS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-1B(10) OF THE ACT; 5. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN APPORTIONING DEPRECIATION AND MISCELLANEOUS EXPENSES IN THE RATIO OF TOTAL WO RK-IN-PROGRESS ('WIP') (ACCUMULATED WIP TILL DATE) AS AGAINST APPORTIONMEN T IN THE RATIO OF INCREMENTAL WIP INCURRED DURING THE YEAR; DISALLOWANCE UNDER SECTION 80-1B(10) IN RESPECT OF HOUSING PROJECT- 'KUMAR PADMALAYA' 6. ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTIO N UNDER SECTION 80- 1B(10) OF THE ACT OF RS.1,01,94,782/- IN RESPECT OF A HOUSING PROJECT - 'KUMAR PADMALAYA'; 7. SHOULD HAVE APPRECIATED THAT DEDUCTION UNDER SEC TION 80-1B(10) OF THE ACT, IS AVAILABLE, IF HOUSING PROJECT ON STANDALONE BASIS SATISFY ALL THE CONDITIONS OF THE SECTION 80-IB(10) OF THE ACT, THE DEDUCTION IS TO BE ALLOWED. 17. IN THIS APPEAL ALSO ASSESSEE HAS NOT PRESSED GR OUNDS OF APPEAL NOS.3, 4 AND 5 RELATING TO APPORTIONMENT OF DEPRECIATION A ND MISCELLANEOUS EXPENSES TO PROJECTS ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT AND THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED. ITA NOS.1651 & 1652/PN/2012 A.YS. : 2006-07 & 2007-08 18. GROUNDS OF APPEAL NOS.1 AND 2 ARE SIMILAR TO TH E GROUNDS OF APPEAL NOS.1 AND 2 ADJUDICATED BY US IN THE ASSESSEES APP EAL FOR ASSESSMENT YEAR 2006-07 AND FOLLOWING THE SAME, THE SAID GROUNDS OF APPEAL ARE DISMISSED. 19. RESULTANTLY, BOTH THE APPEALS OF THE ASSESSEE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 30 TH APRIL, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE