The ACIT, Mehsana Circle, Mehsana V. Tirupati Sarjan Ltd., Visnagar

ITA 2177/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6115 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: S V AGRAWAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.2177/AHD/2008 A. Y.: 2005-06 THE A. C. I. T., MEHSANA CIRCLE, 2 ND FLOOR, APOLLO ENCLAVE, HIGHWAY, MEHSANA VS TIRUPATI SARJAN LTD., 5 M. K. PATEL MARKET, KANSA CHAR RASTA, VISNAGAR, PA NO. AAACT 7015 (APPELLANT) (RESPONDENT) APPELLANT BY SMT. NEETA SHAH, DR RESPONDENT BY SHRI S. V. AGRAWAL, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORDER OF THE LEARNED CIT(A), GANDHINAGAR DA TED 28-03-2008 FOR ASSESSMENT YEAR 2005-06, CHALLENGING THE DELETION O F ADDITION OF RS.5,76,735/- MADE BY THE AO ON ACCOUNT OF DISALLOW ANCE OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 80 IB (10) OF THE IT AC T. 2. AS PER THE ASSESSMENT ORDER, THE AO HAS RESTRICT ED THE ASSESSEES CLAIM OF DEDUCTION U/S 80 IB (10) OF THE IT ACT TO 87.38% OF THE CLAIM OF RS.45,70,004/- (I.E. AT RS.39,93,269/-), BEING THE RATIO OF SALES ELIGIBLE FOR DEDUCTION U/S 80 IB OF THE IT ACT TO THE TOTAL SALES OF THE COMPANY. ACCORDING TO THE ASSESSEE THE ACTION OF THE AO IN G IVING PROPORTIONATE DEDUCTION IS PATENTLY WRONG BECAUSE SECTION 80 IB ( 10) OF THE IT ACT PROVIDES 100% DEDUCTION IN RESPECT OF AGGREGATE PRO FITS DERIVED FROM A BUSINESS PROJECT FULFILLING THE CONDITIONS LAID DOW N. THE DEDUCTION IS ELIGIBLE IRRESPECTIVE OF THE NATURE OF CONSTRUCTION ACTIVITIES IN RELATION TO OTHER THAN PROJECT ELIGIBLE FOR DEDUCTION U/S 80 IB OF THE IT ACT AND THIS SECTION NOWHERE PRESCRIBES A PROPORTIONATE BASIS. F URTHER, THE AO HAS AGREED IN THE ASSESSMENT ORDER THAT CONDITIONS SPEC IFIED U/S 80 IB OF THE ITA NO.2177/AHD/2008 ACIT, MEHSANA VS TIRUPATI SARJAN LTD., VISNAGAR 2 IT ACT HAVE BEEN SATISFIED IN THE CASE OF THE ASSES SEE. IT WAS SUBMITTED THAT THE CLAIM OF THE PROFIT WAS MADE BY THE ASSESS EE ON THE BASIS OF SEPARATE BOOKS OF ACCOUNT MAINTAINED BY EVERY BRANC H AND EVERY SITE. THE ASSESSEE HAS ADOPTED ACCOUNTING STANDARD I.E. P ERCENTAGE COMPLETION METHOD FOR BOOKING PROFIT OF CONSTRUCTIO N ACTIVITIES SINCE ITS INCEPTION. THERE IS NO VARIATION IN THE ACCOUNTING SYSTEM. THEREFORE, THE ASSESSEE IS ENTITLED FOR DEDUCTION. IT WAS FURTHER SUBMITTED THAT THE LEARNED CIT(A) REVERSED THE ORDER OF THE AO IN ASSE SSMENT YEAR 2003-04 VIDE ORDER DATED 07-12-2005 AND ADDITIONS HAVE BEEN DELETED. THE TRIBUNAL HAS ALSO DISMISSED THE APPEAL OF THE REVEN UE. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND MATERIAL ON RECORD ALLOWED THE APPEAL OF THE ASSESSEE AND DIREC TED THE AO TO GRANT FULL DEDUCTION U/S 80 IB (10) OF THE IT ACT. THE FI NDINGS OF THE LEARNED CIT(A) IN PARA 2.6 AND 2.6.1 ARE REPRODUCED AS UNDE R: 2.6 THE MATTER HAS BEEN GIVEN DUE CONSIDERATION. KEEPING IN VIEW THE DECISION OF THE CIT(A) IN THE P RECEDING YEAR AND AFTER DETAILED VERIFICATION OF THE SYSTEM ADOPTED BY THE APPELLANT TO WORK OUT THE PROFIT, I WILL HOLD T HAT THE DISALLOWANCE MADE IS UNCALLED FOR. THE APPELLANT IS COMPUTING PROFITS IN A PARTICULAR MANNER, WHICH HAVE NOT BEEN CHALLENGED AT ANY STAGE. NO DEFECTS HAS BEEN POINTE D OUT IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT, WHICH ARE SITE-WISE, THE SYSTEM OF ALLOCATION OF OVERHEADS IS CONSISTENT AND STANDARDIZE, THEREFORE THE PROFIT WORKED OUT BY THE APPELLANT FROM EACH SITE IS WHAT BECOMES ELIGIBLE P ROFITS FOR DEDUCTION U/S 80 IB(10). THESE ARE THE PROFIT WHICH WOULD HAVE BEEN OTHERWISE TAXABLE HAD THE APPELLANT NOT B EEN ELIGIBLE FOR DEDUCTION U/S. 80 IB(10). THERE IS NO SCOPE OF FURTHER MODIFYING THESE PROFITS. AS STATED EARLIER, HAVING NOT OBJECTED TO THE METHOD OF ACCOUNTING FOLLOWED BY TH E APPELLANT, WHICH ARE BASED ON INCREMENTAL WORK IN P ROGRESS, THE PROFITS CANNOT NOW BE COMPUTED BY REFERENCE TO THE SALES OF EACH PROJECT. 2.6.1 THEREFORE THE RESTRICTION OF THE DEDUCTION A T RS.39,93,269/- IS UNJUSTIFIED. THE ASSESSING OFFICE R MAY GRANT THE FULL DEDUCTION AT RS.45,70,004/-. ITA NO.2177/AHD/2008 ACIT, MEHSANA VS TIRUPATI SARJAN LTD., VISNAGAR 3 3. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET SUBMITTED THAT THE DEPARTMENTAL APPEAL IN ASSESSMENT YEAR 2003-04 HAS BEEN DISMISSED BY THE TRIBUNAL IN ITA NO.652/AHD/2006 VIDE ORDER D ATED 23-04-2010. COPY OF THE ORDER IS PLACED ON RECORD. THE LEARNED DR CONCEDED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE E ARLIER ORDER OF THE TRIBUNAL (SUPRA). 4. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT DEPARTMENTAL APPEAL HAS NO MERIT AND THE SAME IS LI ABLE TO BE DISMISSED. ITAT AHMEDABAD BENCH IN THE CASE OF THE SAME ASSESS EE IN ASSESSMENT YEA 2003-04 IN ITA NO.652/AHD/2006 VIDE ORDER DATED 23-04-2010 (SUPRA) DISMISSED THE DEPARTMENTAL APPEAL ON IDENTI CAL GROUND. FINDINGS OF THE TRIBUNAL IN PARA 13 ARE REPRODUCED WHICH REA D AS UNDER: 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE ASSESSMENT ORDER, THE A SSESSING OFFICER HAS WORKED OUT THE DEDUCTION U/S. 80-IB OF THE I. T. ACT, 1961, I.E. THE PROPORTION WHICH IS THE ELIGIBL E CONSTRUCTION TURNOVER BEARS WITH THE TOTAL TURNOVER WHICH ACCORD ING TO ASSESSING OFFICER IS 41%. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOT GIVEN ANY REASON FOR APPL YING THE SAID FORMULA WHEN ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT AND NO DEFECTS/DISCREPANCY IS POINTED OU T BY THE ASSESSING OFFICER. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE LEARNED CIT(APPEALS) HAS GIVEN COGENT REASON FOR HO LDING THAT ASSESSEE IS ENTITLED TO DEDUCTION OF RS.20,23,065/- U/S. 80-IB OF THE I. T. ACT, 1961 AS DEDUCTION IN THE RETURN O F INCOME. WE, THEREFORE, INCLINE TO UPHOLD THE ORDER OF THE LEARN ED CIT(APPEALS). THEREFORE, THIS GROUND OF APPEAL OF T HE REVENUE IS DISMISSED. 5. CONSIDERING THE ABOVE, WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY EARLIER ORDER OF THE TRIBUNAL. B Y FOLLOWING THE SAME, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. ITA NO.2177/AHD/2008 ACIT, MEHSANA VS TIRUPATI SARJAN LTD., VISNAGAR 4 6. AS A RESULT, THE DEPARTMENTAL APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 04-06-2010 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 04-06-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD