The DCIT, Circle-1(3), Surat V. M/s. Jolly Developers, Surat

ITA 2178/AHD/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5832 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 22-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV
• Assessee Lawyers: MEHUL PATEL
• Keywords: Business income; Additional evidence; Set aside
• Section: 143(3); 40(b); 10AA; 80IB; 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, HON'BLE JUDICIAL MEMBER AND DR.SHRI ARJUN LAL SAINI, HON'BLE ACCOUNTANT MEMBER (VIRTUAL HEARING) . . ./ I.T.A NO.2178/AHD/2016 [ [ / ASSESSMENT YEAR: 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(3), SURAT. VS . M/S. JOLLY DEVELOPERS , F/15, JOLLY ARCADE, GHOD DOD ROAD, SURAT - 395001 [PAN: AAMFM 6400 E] / APPELLANT /RESPONDENT [ /ASSESSEE BY SHRI MEHUL PATEL - CA /REVENUE BY SHRI O.P.VAISHNAV CIT - DR / DATE OF HEARING: 21 . 0 4 .20 2 1 /PRONOUNCEMENT ON: 21 . 0 4 .202 1 /O R D E R PER PAWAN SINGH, JUDICIAL MEMEBER: 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD.COMMISSIONER OF INCOME TAX(APPEALS)-II, SURAT HEREINAFTER REFERRED AS LD.CIT(A) DATED 10.05.2016 FOR THE ASSESSMENT YEAR (AY) 2012-13. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF 80IB BY NOT APPRECIATING AND BY IGNORING THE FACTS THAT PARTNERSHIP DEED WAS ERRONEOUS AND NOT REGISTERED. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN ADMITTING THE EVIDENCE IN THE FORM OF THE NEW PARTNERSHIP DEED WHICH WAS ADDITIONAL EVIDENCE PRESENTED AT THE TIME OF FIRST APPELLATE PROCEEDINGS WHICH OUGHT TO HAVE BEEN SENT TO THE AO FOR EXAMINATION AND REPORT AS PER RULE 46A OF THE I. T. RULES. DCIT, CIRCLE-1(3), SURAT VS. M/S. JOLLY DEVELOPERS./ ITA NO.2178/AHD/2016 FOR A.Y. 2012-13 2 [3] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. [3] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM, ENGAGED IN DEVELOPMENT OF HOUSING PROJECT, FILED ITS RETURN OF INCOME FOR A.Y.2012-13 ON 29.09.2012 DECLARING TOTAL INCOME AS NIL. THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 30.03.2015. THE AO DURING THE ASSESSMENT NOTED THAT THE ASSESSEE FIRM IS ENGAGED IN THE DEVELOPMENT OF HOUSING PROJECT KNOWN AS JOLLY ENCLAVE LOCATED AT OLD RAJMAHAL CINEMA, SURAT. THE ASSESSEE CLAIMED TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. IT WAS FURTHER NOTED THAT THE ASSESSEE HAS SHOWN TOTAL SALES OF RS.12.02 CRORE AND AFTER CLAIMING DIRECT EXPENSES OF RS.7.64 CRORE THE ASSESSEE ARRIVED AT A NET PROFIT AT RS.4.38 CRORE. THE ASSESSEE CLAIMED DEDUCTION OF ENTIRE INCOME OF RS.4.38 CRORE UNDER SECTION 80IB(10) OF THE ACT. THE ASSESSING OFFICER(AO) ON THE BASIS OF SHARE CAPITAL OF PARTNER THE PARTNERSHIP DEED, DISALLOWED THE REMUNERATION TO ITS PARTNER AND INTEREST AND WORKED OUT THE DEDUCTION UNDER SECTION 80IB(10) OF THE ACT OF RS.1.39 CRORE IN THE FOLLOWING MANNER: PARTICULARS AMOUNT (IN RS.) INTEREST ON PARTNERS CAPITAL 7,56,09,993 ASSE SSEE 12% = DCIT, CIRCLE-1(3), SURAT VS. M/S. JOLLY DEVELOPERS./ ITA NO.2178/AHD/2016 FOR A.Y. 2012-13 3 90,73,199 PROFIT ELIGIBLE FOR REMUNERATION 4,38,17,825 90,73,199 = 3,47,44,626 REMUNERATION TO BE PROVIDED TO THE PARTNERS AS PER 40(B) 2,08,16,775 PROFIT ELIGIBLE FOR DEDUCTION U/S. 10AA IN CASE OF FIRM 4,38,17,825 (90,73,199+2,08,16,775/-) = 1,39,27,851 EXCESS DEDUCTION WITHDRAWN 4,38,17,825, - 1,39,27,851 = 2,98,89,974 ACCORDINGLY, THE EXCESS CLAIM ON ACCOUNT OF INTEREST AND REMUNERATION AMOUNTING TO RS.2,98,89,974/- IS WITHDRAWN AND ACCORDINGLY ELIGIBLE DEDUCTION U/S.80IB(10) AMOUNTING TO RS.1,39,27,851/- IS ALLOWED. 3. SUBJECT TO THE ABOVE, A TOTAL INCOME OF THE ASSESSEE IS COMPUTED AS UNDER: NET PROFIT AS PER PROFIT & LOSS A/C RS.4,38,17,825/- LESS: ELIGIBLE DEDUCTION U/S. 80IB(10) RS.1,39,27,851/- TOTAL INCOME RS.2,98,89,974/- TOTAL INCOME ROUNDED OFF U/S.288A RS.2,98,89,970/- 3. ON APPEAL BEFORE THE LD.CIT(A), THE ASSESSEE SUBMITTED THAT THE AO RESTRICTED THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT WITHOUT CONSIDERING AND APPRECIATING THE FACT. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION OF RS.1.39 CRORE ON ACCOUNT OF INTEREST TO PARTNERS AND REMUNERATION. THE ASSESSING OFFICER DISALLOWED THE DEDUCTION OF RS.2.98 CRORE ON ACCOUNT OF INTEREST TO PARTNERS AND PARTNERS REMUNERATION. IN THE PARTNERSHIP DEED 01.04.2006, NO PARTNER IS ELIGIBLE FOR INTEREST ON CAPITAL AS WELL AS REMUNERATION. THE COPY OF PARTNER DEED WAS ALSO PLACED ON RECORD. THE ASSESSEE FURTHER PLEADED THAT BEFORE MAKING DISALLOWANCE/RESTRICTING THE CLAIM OF ASSESSEE UNDER SECTION 80IB(10) OF THE ACT, THE AO HAS NOT GIVEN REASONABLE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE FACT. THE ASSESSEE FURTHER EXPLAINED THAT THE AO HAS RELIED UPON THE PARTNERSHIP DCIT, CIRCLE-1(3), SURAT VS. M/S. JOLLY DEVELOPERS./ ITA NO.2178/AHD/2016 FOR A.Y. 2012-13 4 DEED DATED ON 08.12.2005. THE ASSESSEE FURTHER CLAIMED THAT A SUPPLEMENTARY DEED WAS EXECUTED ON 01.04.2006 WHEREIN CLAUSE NO.6 & 7 WAS CHANGED AND ONE PARTNER WAS RETIRED AND ANOTHER WAS ADMITTED. THE LD.CIT(A) AFTER CONSIDERING THE CONTENTS OF PARTNERSHIP DEED DATED 01.04.2006 HELD THAT PARTNERSHIP DEED, THE PARTNERS OF ASSESSEE WERE NOT ELIGIBLE TO CLAIM INTEREST AS WELL AS REMUNERATION TO THE PARTNERS. THE AO HAS NOT CONSIDERED THE SECOND PARTNERSHIP DEED DATED 01.04.2006. THE LD.CIT(A) FURTHER HELD THAT IN SUBSEQUENT PARTNERSHIP DEED DATED 01.04.2006 THE PARTNERSHIP RESTRICT PAYMENT OF INTEREST TO PARTNERS ON THEIR CAPITAL AS WELL AS REMUNERATION TO PARTNERS. THIS WAS THE MAIN REASON FOR THE ASSESSEE FOR NOT CLAIMING BOTH THE EXPENSES AGAINST THE BUSINESS INCOME. THE A.O. CONSIDERED FIRST PARTNERSHIP DATED 08.12.2005 AND IGNORED THE SUPPLEMENTARY PARTNERSHIP DEED DATED 01.04.2006. THE LD. CIT(A) FURTHER HELD THAT THE A.O. IN ASSESSMENT YEARS I.E. IN A.Y. 2013-14, THE AO HIMSELF HAS MADE REFERENCE OF PARTNERSHIP DEED DATED 01.04.2006 [SECOND PARTNERSHIP DEED] IN THE ASSESSMENT ORDER DATED 11.03.2016 AND ACCEPTED THE SAME AND NO DISALLOWANCES ON THOSE ISSUES I.E. INTEREST AND REMUNERATION TO PARTNER WAS NOT MADE. ON THE BASIS OF AFORESAID OBSERVATION AND THE LD.CIT(A) ALLOWED THE ENTIRE CLAIM UNDER SECTION 80IB(10) OF THE ACT. AGGRIEVED DCIT, CIRCLE-1(3), SURAT VS. M/S. JOLLY DEVELOPERS./ ITA NO.2178/AHD/2016 FOR A.Y. 2012-13 5 BY THE ORDER OF LD.CIT(A), THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE SUBMISSION OF LD. CIT-DR FOR THE REVENUE AND LD. AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE. THE LD. CIT-DR FOR THE REVENUE SUPPORTED THE ORDER OF AO. HOWEVER, ON CONFRONTING THE FACT THAT AO HIMSELF ACCEPTED THE SIMILAR CLAIM SUBSEQUENT ASSESSMENT YEAR ON THE BASIS OF SECOND/SUPPLEMENTARY PARTNERSHIP DEED DATED 01.04.2006. THE LD. CIT-DR SUBMITS THAT THE PARTNERSHIP DEED DATED 01.04.2006 WAS NOT BROUGHT IN THE NOTICE OF AO. 5. ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE SUBMITS THAT THE AO BEFORE RESTRICTING THE CLAIM OF ASSESSEE UNDER SECTION 80IB(10) OF THE ACT HAS NOT GIVEN ANY SHOW CAUSE NOTICE OR OPPORTUNITY TO EXPLAIN THE FACTS. BEFORE THE LD.CIT(A), THE ASSESSEE EXPLAINED THE FACT THAT AS PER SUPPLEMENTARY/SECOND PARTNERSHIP DEED DATED 01.04.2006, THE PARTNERS ARE NOT ELIGIBLE FOR INTEREST AS WELL AS REMUNERATION. THE LD.CIT(A) APPRECIATED THE FACT AND ALLOWED FULL RELIEF TO THE ASSESSEE. THE LD.AR FURTHER SUBMITTED THAT IN SUBSEQUENT ASSESSMENT YEAR, THE SAME AO WHILE CONSIDERING THE PARTNERSHIP DEED DATED 01.04.2006 ALLOWED FULL RELIEF WITH REGARD TO DEDUCTION UNDER SECTION 80IB(10) OF THE ACT TO THE ASSESSEE. THE LD.AR SUBMITS THAT HE UNDERTAKE TO SEND THE COPY OF ASSESSMENT ORDER FOR A.Y. 2013-14 PASSED UNDER DCIT, CIRCLE-1(3), SURAT VS. M/S. JOLLY DEVELOPERS./ ITA NO.2178/AHD/2016 FOR A.Y. 2012-13 6 SECTION 143(3) OF THE ACT DATED 11.03.2016. TO SUPPORT HIS CONTENTION, THE LD.AR OF THE ASSESSEE ALSO RELIED UPON THE DECISION OF THE TRIBUNAL IN ALIDHARA TEXSPIN VS. ACIT IN 198/AHD/2016 DATED 03.05.2016, ORDER OF HON'BLE GUJARAT HIGH COURT IN PCIT VS. ALIDHARA TEXSPIN IN INCOME TAX APPEAL NO.265 OF 2016 [CONFIRMING THE ORDER OF TRIBUNAL] AND IN AL REZA FOOD VS. ITO IN INCOME TAX APPEAL NO.633/AHD/2014 DATED 13.03.2017. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF BOTH THE PARTIES AND PERUSED THE ORDER OF LOWER AUTHORITIES CAREFULLY. WE HAVE NOTED THAT THE AO RESTRICTED THE CLAIM OF ASSESSEE UNDER SECTION 80IB(10) OF THE ACT BY DISALLOWING REMUNERATION AND INTEREST TO THE PARTNER. BEFORE RESTRICTING / DISALLOWING CLAIM THE AO HAS NOT ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE. BEFORE THE LD.CIT(A), THE ASSESSEE EXPLAINED THAT THE AO HAS NOT CONSIDERED THE PARTNERSHIP DEED DATED 01.04.2006 WHEREIN THE PARTNERS ARE NOT ELIGIBLE FOR INTEREST AND REMUNERATION. THE LD.CIT(A) AFTER CONSIDERING THE CONTENTS OF PARTNERSHIP DEED DATED 01.04.2006 HELD THAT THE AO HIMSELF ACCEPTED THE CONTENTS OF SECOND PARTNERSHIP DATED 01.04.2006 AND ITS RELEVANT CAUSES AND NO SUCH DISALLOWANCE [INTEREST AND REMUNERATION] HAS BEEN MADE. WE HAVE PERUSED THE CONTENTS OF ASSESSMENT ORDER FOR A.Y. 2013-14 DATED 11.03.2016 PASSED UNDER SECTION 143(3) BY SAME DCIT, CIRCLE-1(3), SURAT VS. M/S. JOLLY DEVELOPERS./ ITA NO.2178/AHD/2016 FOR A.Y. 2012-13 7 ASSESSING OFFICER. WE FIND THAT THE OBSERVATION OF LD.CIT(A) THAT NO DISALLOWANCES IN SUBSEQUENT ASSESSMENT YEAR IS MADE BY AO, ARE CORRECT. THE HON'BLE JURISDICTIONAL HIGH COURT IN PCIT VS. AL REZA FOOD (SUPRA) HELD THAT MERE INCORPORATION OF INTEREST ON THE PARTNERS CAPITAL AND REMUNERATION DOES NOT SIGNIFY THAT SAME ARE MANDATORY IN NATURE. CONSIDERING THE AFORESAID FACTUAL AND LEGAL POSITION, WE AFFIRM THE ORDER OF LD.CIT(A). NO CONTRARY FACTS OR LAW IS BROUGHT TO OUR NOTICE TO TAKE THE OTHER VIEW. THUS, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 21 ST APRIL 2021 AT THE TIME OF HEARING OF APPEAL. SD/- SD/- (DR.ARJUN LAL SAINI) (PAWAN SINGH) ( /ACCOUNTANT MEMBER) ( /JUDICIAL MEMBER) / SURAT, DATED : 21 ST APRIL 2021 / #SGR COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT