ACIT, CHENNAI V. C.Subba Reddy (HUF), CHENNAI

ITA 1733/CHNY/2013

• Counselvise Citation: 173321714 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI
• Assessee Lawyers: S SRIDHAR
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1733/MDS/2013 ( )( / ASSESSMENT YEAR : 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE I, CHENNAI - 600 034. V. M/S C. SUBBA REDDY (HUF), PROP: CEEBROS PROPERTY DEVELOPMENT, NO.19, III CROSS STREET, R.A. PURAM, CHENNAI - 600 028. PAN : AACHC 2523 G (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : DR. MILIND MADHUKAR BHUSARI, CIT -.+, / 0 / RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE 1 / 2% / DATE OF HEARING : 12.10.2015 3') / 2% / DATE OF PRONOUNCEMENT : 18.12.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VI, CHENNA I, DATED 26.04.2013 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2 I.T.A. NO.1733/MDS/13 2. DR. MILIND MADHUKAR BHUSARI, THE LD. DEPARTMENTA L REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') IN RESPECT OF CONSTRUCTION OF RESIDENTIAL CUM COMME RCIAL PROJECT. ACCORDING TO THE LD. D.R., SECTION 80-IB(10) OF THE ACT IS APPLICABLE ONLY IN RESPECT OF HOUSING PROJECT AND NOT FOR COMM ERCIAL PROJECT. REFERRING TO THE ASSESSMENT ORDER, THE LD. D.R. POI NTED OUT THAT THE APPROVAL GRANTED BY THE CHENNAI METROPOLITAN DEVELO PMENT AUTHORITY IS FOR CONSTRUCTION OF RESIDENTIAL CUM CO MMERCIAL CONSTRUCTION. THEREFORE, THE ASSESSEE IS NOT ELIGI BLE FOR DEDUCTION UNDER SECTION 80-IB OF THE ACT. 3. THE LD. D.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT INCLUDED THE COMMON AREA AND CAR PARK AREA SPECIFIC ALLY EARMARKED FOR PARTICULAR FLAT OWNERS IN THE BUILT-UP AREA. R EFERRING TO SECTION 80-IB OF THE ACT, THE LD. D.R. POINTED OUT THAT THE ASSESSEE CAN CLAIM DEDUCTION UNDER SECTION 80-IB IN RESPECT OF T HE CONSTRUCTIONS WHICH ARE LESS THAN 1500 SQ.FT. IF THE COMMON AREA AND CAR PARK AREA ALLOTTED TO A PARTICULAR INDIVIDUAL ARE TAKEN INTO ACCOUNT, THEN THE BUILT-UP AREA EXCEEDS THE LIMIT OF 1500 SQ.FT. FIXED UNDER THE ACT, 3 I.T.A. NO.1733/MDS/13 THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTI ON UNDER SECTION 80-IB(10) OF THE ACT. 4. THE LD. D.R. FURTHER POINTED OUT THAT THE ASSESS ING OFFICER MADE DISALLOWANCE UNDER SECTION 14A OF THE ACT R.W. RULE 8D OF THE INCOME-TAX RULES, 1962 AT ` 15,68,912/-. HOWEVER, THE CIT(APPEALS) RESTRICTED THE SAME AT ` 3,24,195/-. ACCORDING TO THE LD. D.R., THE ASSESSEE HAS MADE HUGE INVESTMENT IN VARIOUS MUTUAL FUNDS AND LIQUID CASH PLANS AND EARNED DIVID END INCOME TO THE EXTENT OF ` 1.13 CRORES. THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE AT ` 3,24,195/-. 5. ON THE CONTRARY, SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT NO DOUBT, THE BUILDING PLA N WAS APPROVED FOR RESIDENTIAL CUM COMMERCIAL PROJECT. ACCORDING TO THE LD. COUNSEL, IT IS A JOINT VENTURE PROJECT. THE ENTIRE COMMERCIAL BUILDING IN THE PROJECT BELONGS TO M/S SHYAMALA PICTURES AND HOTELS PVT. LTD. IN OTHER WORDS, THE LAND BELONGS TO M/S SHYAMALA PI CTURES AND HOTELS PVT. LTD. FOR THE PURPOSE OF COMPENSATING T HE LAND OWNER IN RESPECT OF THE SHARE ALLOTTED TO THE ASSESSEE, THE ENTIRE COMMERCIAL BUILDING WAS GIVEN TO THEM. M/S SHYAMALA PICTURES AND HOTELS PVT. LTD. RETAINED THE ENTIRE COMMERCIAL BUILDING AS THE IR OWN INVESTMENT 4 I.T.A. NO.1733/MDS/13 AND IT IS NOT SOLD TO THE PUBLIC. ACCORDING TO THE LD. COUNSEL, AS PER THE DEVELOPMENT AGREEMENT, THE LAND OWNER M/S SHYAM ALA PICTURES AND HOTELS PVT. LTD. IS ENTITLED TO SHARE OF THE BU ILDING AND THE ASSESSEE IS ENTITLED TO REMAINING LAND. THE ASSESS EE IS CLAIMING DEDUCTION ONLY IN RESPECT OF THE SHARE ALLOTTED TO THE ASSESSEE. SINCE NO PART OF THE COMMERCIAL BUILDING WAS ALLOTT ED TO THE ASSESSEE, ACCORDING TO THE LD. COUNSEL, THE ASSESSE E IS NOT CLAIMING ANY DEDUCTION IN RESPECT OF THE COMMERCIAL BUILDING WHICH WAS ALLOTTED TO THE OWNER OF THE LAND, NAMELY, M/S SHYAMALA PICTURES AND HOTELS PVT. LTD. THE LD.COUNSEL FURTH ER SUBMITTED THAT THE COST OF THE LAND, WHICH WAS ALLOTTED TO THE ASS ESSEE, IN PURSUANCE TO THE JOINT DEVELOPMENT AGREEMENT, WAS M ET BY CONSTRUCTING THE COMMERCIAL BUILDING TO THE OWNER. THEREFORE, THE ASSESSEE HAS NOT DEVELOPED ANY COMMERCIAL PROJECT. MERELY BECAUSE A COMPOSITE APPROVAL WAS OBTAINED FROM COMP ETENT AUTHORITY FOR CONSTRUCTION OF THE BUILDING, IT CANN OT BE SAID THAT THE ASSESSEE HAS DEVELOPED A COMMERCIAL PROJECT. REFER RING TO THE CONTENTION OF THE LD. D.R. WITH REGARD TO BUILT-UP AREA, THE LD.COUNSEL SUBMITTED THAT BUILT-UP AREA DOES NOT IN CLUDE COMMON AREA OR THE CAR PARK AREA. IN FACT, AN IDENTICAL I SSUE CAME BEFORE THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESS MENT YEAR 2004- 5 I.T.A. NO.1733/MDS/13 05 AND THE CIT(APPEALS) HAS FOLLOWED THIS ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2004-05. THE ONLY OBJECTION OF THE REVENUE IN THE GROUNDS OF APPEAL IS THAT AN APPEAL WAS FILED B EFORE THE HIGH COURT AGAINST THE DECISION OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2004-05. NOW THE HIGH COURT BY JUDGMENT DATED 27.0 1.2015 IN CIT V. SUBBA REDDY (HUF) HAS APPROVED THE ORDER OF THE TRIBUNAL. IN VIEW OF THIS JUDGMENT OF MADRAS HIGH COURT, ACCORDI NG TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY GRANTED DEDUC TION UNDER SECTION 80-IB(10) OF THE ACT. 6. REFERRING TO THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS DECLARED THE DIVIDEND INCOME OF ` 1,13,13,773/-. THE ASSESSEE SPECIFICALLY CLAIMED BEFORE THE ASSESSING OFFICER T HAT NO EXPENDITURE WAS INCURRED FOR EARNING THE DIVIDEND I NCOME. HENCE THERE WAS NO QUESTION OF ANY DISALLOWANCE. HOWEVER , ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) RESTRICTED THE DI SALLOWANCE TO ` 3,24,195/-. HENCE, NO INTERFERENCE IS CALLED FOR. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE FIRST OBJECTION OF THE REVENUE IS THAT THE ASSESSEE HAS C ONSTRUCTED A 6 I.T.A. NO.1733/MDS/13 RESIDENTIAL CUM COMMERCIAL COMPLEX. ADMITTEDLY, IT IS A JOINT VENTURE PROJECT AND THE LAND BELONGS TO THE LAND OW NER M/S SHYAMALA PICTURES AND HOTELS PVT. LTD. AS PER THE JOINT DEVELOPMENT AGREEMENT, THE ASSESSEE WAS ALLOTTED TH E RESIDENTIAL BLOCK. THE COST OF THE LAND IN WHICH THE RESIDENTI AL PROJECT WAS DEVELOPED BY THE ASSESSEE WAS MET BY CONSTRUCTING C OMMERCIAL BUILDING TO THE OWNER IN THE OTHER BLOCK OF THE LAN D. THIS IS OBVIOUS FROM JOINT DEVELOPMENT AGREEMENT. IN FACT, THE COM MERCIAL BUILDING WAS RETAINED BY THE LAND OWNER M/S SHYAMALA PICTURE S AND HOTELS PVT. LTD. NO PART OF THE COMMERCIAL BUILDING WAS A LLOTTED TO THE ASSESSEE. THEREFORE, THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT AS PER THE JOINT DEVELOPMENT AGREEMENT, WHEN THE AS SESSEE WAS GIVEN ONLY THE RESIDENTIAL AREA, AND THE ASSESSEE I S CLAIMING DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT ONLY I N RESPECT OF RESIDENTIAL AREA, THERE IS NO REASON TO DISALLOW TH E CLAIM OF THE ASSESSEE. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY ON THIS ISSUE. 8. NOW COMING TO THE BUILT-UP AREA, WHICH EXCEEDS 1 500 SQ.FT., ADMITTEDLY, THE ASSESSING OFFICER FOUND THAT THE CO MMON AREA AND CAR PARK AREA HAVE TO BE INCLUDED IN THE BUILT-UP A REA. THIS WAS THE 7 I.T.A. NO.1733/MDS/13 SUBJECT MATTER OF APPEAL BEFORE THE HIGH COURT IN T HE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2004-05. THE MADRAS H IGH COURT, AFTER REFERRING TO THE DEFINITION OF BUILT-UP AREA WHICH CAME INTO EFFECT FROM 01.04.2005, FOUND THAT THERE IS NO JUST IFICATION IN INCLUDING CAR PARK AREA IN THE DEFINITION OF BUILT -UP AREA OF RESIDENTIAL UNIT FOR THE PURPOSE OF DETERMINING THE MAXIMUM BUILT-UP AREA. THE MADRAS HIGH COURT HAS ALSO FOUND THAT TH E COMMON AREA SHARED WITH OTHER RESIDENTIAL UNIT CANNOT BE TREATE D AS PART OF BUILT- UP AREA. IN VIEW OF THIS JUDGMENT OF MADRAS HIGH C OURT IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2004-05, TH IS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY FOLLOWED THE ORDER OF THIS TRIBUNAL. THEREFORE, THE ORDER O F THE CIT(APPEALS) IS CONFIRMED. 9. NOW COMING TO THE DISALLOWANCE MADE BY THE ASSES SING OFFICER UNDER SECTION 14A OF THE ACT, THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT. THE ASSESSEE CLA IMS THAT NO EXPENDITURE WAS INCURRED. THE FACT REMAINS THAT TH E ASSESSEE INVESTED IN THE MUTUAL FUNDS TO THE EXTENT OF ` 77.50 CRORES AND EARNED DIVIDEND INCOME OF ` 1,13,13,772/-. FOR MAKING SUCH HUGE INVESTMENT, NATURALLY THE MANAGERIAL EXPENSES HAVE TO BE INCURRED. 8 I.T.A. NO.1733/MDS/13 THEREFORE, THE DISALLOWANCE HAS TO BE COMPUTED IN R ESPECT OF THE EXPENDITURE RELATABLE TO MANAGERIAL EXPENSES. THER EFORE, THE CIT(APPEALS) RESTRICTED THE DISALLOWANCE TO ` 3,24,195/-. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE CIT(APPEALS). ACCORDINGLY, THE ORDER OF THE CIT(AP PEALS) IS CONFIRMED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON 18 TH DECEMBER, 2015 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 18 TH DECEMBER, 2015. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-VI, CHENNAI 4. 1 92 /CIT-IV, CHENNAI 5. 7: -2 /DR 6. ( ; /GF.