Gajanand Corporation, Ahmedabad V. The Income tax Officer,Ward-9(2), Ahmedabad

ITA 214/AHD/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57074 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 17-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y C SURTI
• Assessee Lawyers: M G PATEL
• Section: 80IB

Judgement Text

ITA NO.214/AHD/2008 ASSESSMENT YEAR 2004-05 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AH MEDABAD. (BEFORE SHRI G.C.GUPTA, VICE PRESIDENT & SHRI B.R.B ASKARAN AM) ITA NO.214/AHD/2008 (AS SESSMENT YEARR 2004-05) M/S. GAJANAND CORPORATION, NEW DEVBHUMI SOCIETY, OPP. TIRUPATI SOCIETY, NR. GST CROSSING, RANIP, AHMEDABAD. (APPELLANT) VS. INCOME TAX OFFICER, WARD 9 (2), AHMEDABAD. (RESPONDENT) PAN: AACFG 5722 B APPELLANT BY : MR. M.G. PATEL. RESPONDENT BY : MR. Y.C. SURTI DATE OF HEARING : 25-01-2012. DATE OF PRONOUNCEMENT : 31-01-2012. ( (( ( )/ )/)/ )/ ORDER PER: SHRI B.R.BASKARAN, A.M. THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 14.12.2007 PASSED BY LD CIT(A)-XV, AHMEDABAD AND IT RELATES TO THE ASSESSMENT YEAR 2004-05. 2. THE GROUNDS RAISED BY THE ASSESSEE GIVE RISE TO THE FOLLOWING THREE ISSUES:- (A) DISALLOWANCE OF CLAIM OF DEDUCTION MADE U/S 80 IB. (B) DISALLOWANCE OF EXPENSES RS.32,95,552/- (C) DISALLOWANCE OF IMPACT FEE RS.5,09,450/- ITA NO.214/AHD/2008 ASSESSMENT YEAR 2004-05 2 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING AND CONSTRUCT ION OF HOUSING PROJECTS. IT ENTERED INTO AN AGREEMENT WITH DEVBHOOMI OWNERS ASSOCIATION (NTC) FOR CONSTRUCTION OF RESIDENTIAL TENEMENTS ON A LAND ADMEASURING 5298 SQ. METERS LOCATED AT VILLAGE RANIP, AHMEDABAD. THE AS SESSEE CLAIMED DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF PROFIT DERIVED FROM THE CONSTRUCTION, BUT THE SAME WAS DISALLOWED BY THE AO . IN ADDITION THERETO, THE AO ALSO DISALLOWED EXPENDITURE OF RS.33,81,314/ - AND ALSO THE IMPACT FEE OF RS.5,02,440/-. IN THE APPEAL FILED BEFORE L D CIT(A), THE FIRST APPELLATE AUTHORITY CONFIRMED THE DISALLOWANCE OF DEDUCTION U /S 80IB AND IMPACT FEE AND GRANTED SMALL RELIEF IN RESPECT OF EXPENDITURE DISALLOWANCE. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80IB OF THE ACT. THE FACTS RELATING TO THE SAME AR E STATED IN BRIEF. THE ASSESSEE OBTAINED PERMISSION FROM THE PRESCRIBED AU THORITY AUDA FOR CONSTRUCTION OF 28 UNITS VIDE ITS PROCEEDINGS NO. P RM/12/11/99/4783/25-4- 2000. HOWEVER THE ASSESSEE CONSTRUCTED 34 UNITS. F OR THE 6 UNITS CONSTRUCTED OVER AND ABOVE THE APPROVED PLAN, THE A SSESSEE PAID IMPACT FEE OF RS.5,02,440/-, WHICH WAS PENAL IN NATURE, VI DE AUDA LETTER DATED 04- 2-2003 TOWARDS UNAUTHORIZED CONSTRUCTION OF 6 UNITS . THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S 80IB FOR THE FOLLOWING R EASONS:- (A) THERE IS UNATHORISED CONSTRUCTION OF 6 UNITS. THE ORIGINAL APPROVAL WAS ONLY FOR 28 UNITS. UNDER SECTION 80IB , PARTIAL DEDUCTION FOT 28 UNITS CANNOT BE GIVEN. (B) ON THE DATE OF ENTERING INTO THE AGREEMENT WI TH M/S DEVBHOOMI OWNERS ASSOCIATION (NTC), THEY ARE NOT OWNERS OF TH E LAND. ITA NO.214/AHD/2008 ASSESSMENT YEAR 2004-05 3 THE LD CIT(A) ALSO CONFIRMED THE SAID DISALLOWANCE. 5. BEFORE US, THE LD A.R SUBMITTED THAT THE UNA UTHORIZED CONSTRUCTION OF 6 UNITS HAS BEEN REGULARIZED BY THE APPROPRIATE AUTHO RITY AUDA ON PAYMENT OF IMPACT FEE. IN THIS REGARD, HE INVITED OUR ATTE NTION TO THE REGULARISATION CERTIFICATE DATED 13-8-2001 ISSUED BY AUDA, WHICH I S PLACED IN PAGE 38 OF THE PAPER BOOK FILED BY THE ASSESSEE. WE FIND MERI T IN THE SAID CONTENTION OF THE ASSESSEE. THOUGH THE ORIGINAL PLAN WAS OBTAINED FOR CONSTRUCTING 28 UNITS, THE ADDITIONAL UNAUTHORIZED CONSTRUCTION OF 6 UNITS GOT REGULARIZED ON PAYMENT OF IMPACT FEE. IN THAT CASE, IN OUR VIEW, THE ADDITIONAL 6 UNITS SHALL ALSO BE DEEMED TO HAVE BEEN APPROVED. THE NE XT OBJECTION OF THE AO IS WITH REGARD TO THE OWNERSHIP OF LAND. ON A CARE FUL PERUSAL OF THE PROVISIONS OF SEC. 80IB(10), WE NOTICE THAT THE SAI D PROVISIONS NOWHERE STATE THAT THE ASSESSEE SHOULD BE OWNER OF THE LAND NOR I S THERE ANY MENTION ABOUT THE LAND AT ALL. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND MERIT IN THE SAID OBJECTION OF THE AO ALSO. IN VIEW OF THE ABOVE, WE REVERSE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW DED UCTION U/S 80IB OF THE ACT. 6. THE NEXT ISSUE RELATES TO THE DISALLOWANCE O F RS.33,81,314/- WHICH WAS REDUCED TO RS.32,95,552/- BY THE LD CIT(A). THE AO NOTICED THAT THE ASSESSEE HAS COMPLETED THE PROJECT BY 19-02-2003. HOWEVER, IN THE PROFIT AND LOSS ACCOUNT OF THE YEAR UNDER CONSIDERATION, T HE ASSESSEE HAD CLAIMED A SUM OF RS.33,81,614/-. ACCORDINGLY, THE AO TOOK TH E VIEW THAT THE ASSESSEE HAS INCURRED EXPENDITURE AFTER THE COMPLETION OF TH E PROJECT AND HENCE DISALLOWED THE SAID CLAIM. THE LD CIT(A) GRANTED S MALL RELIEF AND CONFIRMED THE SAID ADDITION. ITA NO.214/AHD/2008 ASSESSMENT YEAR 2004-05 4 7. HOWEVER, IT WAS STATED THAT THE ASSESSEE DID NOT INCUR ANY EXPENDITURE AFTER THE COMPLETION OF THE PROJECT. IN ACCORDANCE WITH THE ACCOUNTING SYSTEM, IT ACCOUNTED FOR THE IMPUGNED AMOUNT OF RS. 33,81,614/- AS WORK IN PROGRESS IN ITS PROFIT AND LOSS ACCOUNT FOR THE YEA R ENDING ON 31.3.2004. THE SAID WORK-IN PROGRESS WAS BROUGHT FORWARD TO TH E YEAR UNDER CONSIDERATION AND ACCORDINGLY CLAIMED AS EXPENDITUR E. WE FIND MERIT IN THE SAID EXPLANATIONS OF THE ASSESSEE, WHICH IS IN ACCO RDANCE WITH THE ACCOUNTING PRINCIPLES FOLLOWED BY IT. WE NOTICE THAT THE TAX A UTHORITIES HAVE MADE THIS ADDITION WITHOUT APPRECIATING THE ACCOUNTING PRINCI PLES RELATING TO THE CONSTRUCTION CONTRACTS. IN VIEW OF THE FOREGOING, WE ARE OF THE VIEW THAT THE ASSESSEE HAS CLAIMED THE IMPUGNED EXPENDITURE OF RS .33,81,614/- IN ACCORDANCE WITH THE ACCOUNTING PRINCIPLES AND HENCE NO DISALLOWANCE IS CALLED FOR. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE IMPUGNED ADDITION. 8. THE NEXT ISSUE PERTAINS TO THE DISALLOWANCE OF IMPACT FEE OF RS.5,02,440/-. SINCE THE SAID PAYMENT IS PENAL NAT URE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT (A) IN CONFIRMI NG THE SAID ADDITION. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 31-01-2012 SD/- SD/- (G.C.GUPTA) (B.R.BASKARAN) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. DATED: 31-01-2012 ITA NO.214/AHD/2008 ASSESSMENT YEAR 2004-05 5 S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-V, BARODA. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 25 - 01 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 25 / 01 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 25 - 01 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 31 - 01-2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 31 - 01 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31 - 01 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..S