M/s Salarpuria Properties Pvt Ltd., Kolkata V. A.C.I.T.,CC-3(2), Kolkata

ITA 2492/KOL/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2235 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 24-11-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Earning of tax free income; Source of fund; Additional evidence; Bad and doubtful debts; TDS; Rule 8D
• Section: 68; 37; 143(3); 142(1); 14A; 40(a)(ia); 80IB; 37(1); 80G; 143(1); 250; 80IA; 251; 48; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA [Virtual Court] (Before Sri Sanjay Garg, Judicial Member & Sri Manish Borad, Accountant Member) I.T.A. No.: 2492/Kol/2019 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd.........................................Appellant [PAN: AAGCS 8492 P] Vs. ACIT, CC-3(2), Kolkata..........................................................Respondent I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 ACIT, CC-3(2), Kolkata.............................................................Appellant Vs. M/s. Salarpuria Properties Pvt. Ltd......................................Respondent [PAN: AAGCS 8492 P] Appearances by: Sh. Siddharth Jhajharia & Sh. Sujoy Sen, A/R, appeared on behalf of the Assessee. Divid Z. Chawngthu, CIT(D/R), appeared on behalf of the Revenue. Date of concluding the hearing : February 23 rd , 2022 Date of pronouncing the order : May 17 th , 2022 ORDER Per Manish Borad, Accountant Member: The above captioned cross appeals pertaining to the Assessment Year (in short “AY”) 2011-12 are directed against the Common Order of the Ld. Commissioner of Income Tax (Appeals)-6, Kolkata [in short ld. “CIT(A)”], dated 21.10.2019 which is arising out of the Common Assessment Order u/s. 143(3) of the Income-Tax Act, 1961 (in short the “Act”) dated 31.03.2014 framed by the DCIT, Circle-1, Kolkata. 2. Brief facts of the case as culled out from the records are that the assessee is a private limited company engaged in the business of the development and construction. Income of Rs.1,50,00,160/- declared in e- I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 2 of 29 return filed on 30.09.2011. Case selected for scrutiny through CASS followed by serving of notices u/s 143(1) & 142(1) of the Act. During the course of assessment proceedings ld. Assessing Officer (in short ld. “AO”) noticed that the assessee is carrying out a number of construction projects simultaneously out of which for some projects deduction u/s 80IA & 80IB of the Act has been claimed. Various other details were called for to examine the claim made for deduction u/s 80IA of the Act, disallowance u/s 14A of the Act, interest expenditure and interest free advances, unsecured loans, application of the provisions of Section 68 & Section 40(a)(ia) of the Act, interest on service tax and TDS and miscellaneous other issues. After considering the submissions of the assessee ld. AO assessed the income at Rs.55,13,56,730/- after making following additions to the gross total income of the assessee of Rs.47,96,15,068/- shown by the assessee in the computation of income in the following manner: PARTICULARS AMOUNT (RS.) Gross Total Income as per computation RS.47,96,15,068/- Add: As per above discussion 1. Disallowance u/s 14A (refer para 5) Rs. 1,02,66,118/- 2. Interest free Advances (refer para 6) Rs. 1,00,89,940/- 3. Capital Suspension Account (refer para 7) Rs. 17,90,15,000/- 4. Expenses u/s 40(a)(ia) (refer para 8) Rs. 2,25,77,027/- 5. Penal Interest u/s 37 (refer para 9) Rs. 12,92,185/- 6. Fixed Asset w/off (refer para 10) Rs. 40,31,051/- 7. Sundry balances w/off (refer para 11) Rs. 1,27,29,297/- Gross Total Assessed Income Rs. 71,96,15,686/- Less Deduction under sec 80G Rs. 7,89,482/- Deduction under sec 80IA (refer para 4) Rs. 16,74,69,472/- Total Assessed Income Rs. 55,13,56,730/- 3. Aggrieved, the assessee preferred appeal before the ld. CIT(A). Various details were filed along with filing of additional evidences. Remand report was called for and the same was duly received and rejoinder to the same were also filed by the assessee which were duly considered by the ld. CIT(A) after making detailed discussion as appearing in the impugned order. The assessee’s appeal was partly allowed. Aggrieved, both the assessee and the Revenue have cross appeal before this Tribunal raising the following grounds: 4.1. Grounds raised by the assessee: I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 3 of 29 “1. For that in view of the facts and in the circumstances, the AO is wholly unjustified in disallowing interest of Rs.12,92,185/- on TDS & TCS and such interest being of compensatory in nature and not penal in nature since there is separate provision for imposing penalty in such case and hence such interest being compensatory is fully allowable and in view of the facts and in the circumstances the Ld. CIT(A) is wholly unjustified in confirming the said action of the AO and in view of the facts and in the circumstances such disallowance made may kindly be deleted. 2. For that in view of the facts and in the circumstances, the AO is wholly unjustified in not allowing deduction / exemption u/s 80IA(4)(iii) for Rs. 13,58,03,793/- in respect of the Industrial Park namely, “Salarpuria Touchstone” and in view of the facts and in the circumstances the Ld. CIT(A) is wholly unjustified in confirming the said action of the AO and in view of the facts and in the circumstances it may be held that deduction/exemption is fully allowable u/s 80IA(4)(iii) in respect of such Industrial Park. 3. For that your petitioner craves the right to put additional grounds and/or to alter/amend/modify the present grounds at the time of hearing.” 4.2. Grounds raised by the Revenue: “1. On the facts and circumstances of the case, the Ld CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding disallowance of Rs.1,02,66,118/-u/s.14A r.w. Rule 8D (Rs. 60,03,465/- under Rule 8D(2)(ii) and Rs.42,62,653/- under Rule 8D(2)(iii). 2. On the facts and circumstances of the case, the Ld CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding addition of Rs.1,00,89,940/- out of interest debited/paid by the assessee. 3. On the facts and circumstances of the case, the Ld CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding addition of Rs.17,90,15,000/- by invoking the provision of Sec.68 of the Act. 4. On the facts and circumstances of the case, the Ld CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding addition of Rs.12,92,185/- being interest on service tax. 5. On the facts and circumstances of the case, the Ld CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding disallowance of the claim for bad debts and sundry balances written off amounting to Rs.1,27,29,297/-. 6. On the facts and circumstances of the case, the Ld CIT(A) is not justified in law as well as on facts by allowing the appeal of the assessee regarding granting deduction u/s.80IB(10) in respect of the projects namely "Salarpuria Sanctity" and "Salarpuria Serenity. 7. That the Department craves leave to add, modify or alter any of the grounds of appeal and/or adduce additional evidence at the time of hearing of the case.” 5. We will first take up the assessee’s appeal. I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 4 of 29 Ground No. 1: 5.1. Through this ground the assessee has challenged the issue of disallowance of interest on TDS and TCS at Rs.13,486/- and penalty of sales tax at Rs. 34,352/-. On perusal of the impugned order, we find that out of the disallowance of Rs.12,92,185/- made by ld. AO, substantial relief has been given by ld. CIT(A) and the effective disallowance sustained by the ld. CIT(A) is Rs.37,838/- and for the remaining amount Revenue is in appeal before us raising ground no. 4. After hearing both the parties and considering the submissions made by the assessee before the lower authorities, we find that ld. AO made disallowance on interest of Rs.12,92,185/- on account of the following: a) Interest on service tax - Rs.12,43,982/- b) Interest on VAT - Rs.365/- c) Interest on TDS & TCS - Rs.13,486/- d) Penalty on sales tax - Rs.34,352/- Total - Rs.12,92,185/- Out of the above four amounts, we find that the ld. CIT(A) has rightly allowed the interest on service tax and interest on VAT at Rs.12,43,982/- & Rs.365/- by respectfully following the ratio laid down by the Hon’ble Supreme Court in the case of Lachmandas Mathuradas vs. Commissioner of Income-tax reported in [2002] 254 ITR 799 (SC) and in the case of Mahalakshmi Sugar Mills Co. vs. Commissioner of Income-tax reported in [1980] 123 ITR 429 (SC) holding that such interest paid on service tax and VAT are compensatory in nature and not in the nature of penalty and, therefore, disallowance of such interest cannot be made u/s 37(1) of the Act. As far as the remaining amount is concerned, we find that ld. CIT(A) has confirmed the disallowance for interest on TDS of Rs.13,486/- and penalty on sales tax of Rs.34,352/-. During the course of hearing, ld. Counsel for the assessee requested for not pressing the disallowance of penalty on sales tax at Rs.34,352/- and, therefore, the said disallowance is confirmed. Remaining amount is interest on TDS & TCS at Rs.13,486/-. On going through the finding of the ld. CIT(A), I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 5 of 29 we find no reason to interfere into the finding disallowing the claim of interest paid on TDS & TCS at Rs.13,486/-. Thus, ground no. 1 raised by the assessee is dismissed. Ground No. 2: 5.2. Through ground no. 2 assessee has raised the issue of denial of deduction u/s 80IA(4)(iii) of the Act at Rs. 13,58,03,793/-. At the outset, ld. Counsel for the assessee submitted that the said deduction was claimed for the profits arising from industrial park namely Salarpuria Touchstone which has been confirmed by the ld. CIT(A) for want of notification to be issued by Central Board of Direct Taxes (in short “CBDT”). The issue of CBDT not issuing notification for the said industrial park is already subjudice before the Hon’ble Calcutta High Court and the decision is awaited. 5.3. We, therefore, looking to the fact that since as on date the said industrial park is not eligible for deduction u/s 80IA(4)(iii) of the Act for want of being noticed by CBDT, the ld. CIT(A) has rightly denied the claim, however, presently the matter is subjudice before the Hon’ble Calcutta High Court and whenever the judgment is passed by the Hon’ble Court and if held in favour of the assessee then the assessee shall be eligible to put forth the claim before the Revenue authorities to allow the deduction u/s 80IA(4)(iii) of the Act, else the finding of the ld. CIT(A) will remain confirmed. Thus ground no. 2 of the assessee’s appeal is dismissed. 6. In the result, the assessee’s appeal is dismissed. 7. Now we take up Revenue’s appeal. Ground No. 1: 7.1. Through this ground, the Revenue has challenged the finding of the ld. CIT(A) deleting the disallowance u/s 14A of the Act at Rs. 1,02,66,118/-. At the outset, ld. Counsel for the assessee submitted that Ld. CIT(A) deleted the said disallowance on observing that the assessee has not earned any exempt income during the year and, therefore, in view of the settled judicial precedence no disallowance is called for. I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 6 of 29 7.2. We have heard rival contentions and perused the records placed before us. The alleged disallowance u/s 14A of the Act comprises of interest disallowance at Rs. 60,03,465/- & Rs. 42,62,653/- being 0.5% of the average value of investment. We find that ld. CIT(A) deleted the disallowance following the judgment of Hon’ble Delhi High Court in the case of Cheminvest Ltd. vs. Commissioner of Income Tax-IV, reported in IT Appeal No. 749 of 2014 dated 02.09.2015 on finding that no exempt income has been earned by the assessee during the year. As far as interest disallowance is concerned, we however, find that the assessee possessed share capital of Rs. 4.61 Cr and reserve and surplus of Rs. 373.00 Cr. The interest free funds of Rs. 377.61 Cr are sufficient to cover up the average investments of approx 85.25 Cr. Since there is no specific finding of ld. AO that interest bearing funds have been applied for making investment in investments fetching exempt income, in view of the ratio laid down by the Hon’ble High Court of Bombay in the case of Commissioner of Income-tax vs. Reliance Utilities & Power Ltd. [2009] 313 ITR 340 (Bombay), we are of the view that interest disallowance u/s 14A of the Act at Rs.60,03,465/- is uncalled for. We also find that the requirement of sub- Section (2) of Section 14A of the Act is not fulfilled by the ld. AO as there is no specific finding that why he was not satisfied with the correctness of the claim of the assessee of having not incurred any expenditure for earning exempt income. Thus, under these given facts and the settled judicial precedence, no disallowance u/s 14A of the Act was called for by the ld. AO. Thus, ground no. 1 raised by the Revenue is dismissed. Ground No. 2: 7.3. Through this ground, the Revenue has challenged the finding of the ld. CIT(A) deleting the disallowance of interest paid/debited at Rs.1,00,89,940/. 7.4. Brief facts relating to this issue are that the assessee debited total interest of Rs. 3,38,18,940/-. Ld. AO based on the observation that the assessee had advanced interest free loans to its subsidiary companies namely (i) M/s. Sabitrimata Realtors Pvt. Ltd. (ii) M/s. Beetle Real Estates Pvt. Ltd. I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 7 of 29 and (iii) M/s. Christmas Realtors Pvt. Ltd. came to a conclusion that interest of Rs. 1,00,89,940/- deserves to be deleted. The assessee succeeded before the ld. CIT(A) challenging this disallowance. Before us, ld. CIT(D/R) has supported the observation of ld. AO. 7.5. Per contra, ld. Counsel for the assessee relied on the finding of the ld. CIT(A) and also submitted that the assessee company has sufficient share capital and reserves and surplus brought forward from earlier years to cover up the interest free funds advanced to its subsidiaries. 7.6. We have heard rival contentions and perused the papers on record placed before us. We find that ld. AO has rightly observed that the assessee had given interest free loans and advances to its subsidiaries as enumerated above. The facts remain undisputed that the total outstanding from the alleged three subsidiaries as on 31.03.2011 was only Rs. 4,21,910/- and as on 31.03.2010 share capital of the company was 4.61 Cr. approx and reserves and surplus of Rs. 373.00 Cr., total Rs. 377.61 Cr. which were brought forward to FY 2010-11 and they are more than sufficient to cover up the interest free advances given to the assessee subsidiaries and this fact in itself shows that the disallowance of interest expenditure was uncalled for. Also, the calculation of disallowance of interest made by the ld. AO does not reach here and there as on one hand ld. AO observes that the company should have earned interest to the extent of Rs. 23.68 Cr. whereas it has shown interest income of Rs. 1.74 Cr. approx. Then, ld. AO observes that the assessee has claimed interest expenditure of Rs. 3,35,18,436/- and then added interest on notional basis firstly disallowing a sum of Rs. 1,74,24,937/- and then giving relief of Rs. 60,03,465/- (being already disallowed u/s 14A of the Act) and computes the disallowance at Rs. 1,00,89,940/-. Ld. AO has nowhere given reference to the amount of interest free advances given to the alleged subsidiary companies and the apportionment of interest-bearing funds being applied to interest free loans and advances. 7.7. We, therefore, under the given facts and circumstances of the case, where the assessee had sufficient interest free funds in the form of share I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 8 of 29 capital and accumulated reserve and surplus to explain the interest free advances given to its subsidiary companies, we do not find any infirmity in the finding of the ld. CIT(A) deleting disallowance of interest expenditure of Rs. 1,00,89,940/-. Hence, ground no. 2 raised by the Revenue is dismissed. Ground No. 3: 7.8. Through this ground, the Revenue has challenged the finding of ld. CIT(A) deleting the addition made by the ld. AO for unexplained cash credit u/s 68 of the Act of Rs. 17,90,15,000/-. 7.9. Brief facts relating to the issue are that during the year under appeal share application money of Rs. 17,90,15,000/- was received from following four companies: a) M/s. Satern Griha Nirman Pvt. Ltd. – Rs. 13,60,00,000/- b) M/s. Onkareswar Realtors Pvt. Ltd. – Rs. 7,00,000/- c) M/s. Salarpuria Griha Nirman Pvt. Ltd. – Rs. 25,000/- d) M/s. Suruchi Properties Pvt. Ltd. – Rs. 4,22,90,000/- Total – Rs.17,90,15,000/- 7.10. During the course of assessment proceedings the assessee filed a letter dated 28.03.2014 seeking two weeks’ time to prepare the material required by the ld. AO. Since the assessment was getting time barred on 31.03.2014, ld. AO, due to lack of relevant material on record and after referring to judicial pronouncements made the addition u/s 68 of the Act at Rs. 17,90,15,000/- for unexplained share application money. 7.11. Aggrieved, the assessee preferred an appeal before the ld. CIT(A) and filed the details to prove the identity and creditworthiness of the alleged companies and the genuineness of the transaction of the share application money received by the assessee company. Ld. CIT(A) called for the remand report, after going through the same asked the assessee to file a rejoinder and the same was done. Ld. CIT(A), after going through the detailed documents filed in case of each of the companies which included the memorandum of assessment, certificate of incorporation, copy of income tax return for AY I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 9 of 29 2011-12, copy of assessment order u/s 143(3) of the Act for AY 2011-12, copy of audited financial statement, confirmation of bank account, and annual report filed with Registrar of Companies, was satisfied by the submissions of the assessee. Ld. CIT(A) also noted all the alleged companies which have given application money to the assessee are group companies only and they are not unknown companies. Ld. CIT(A) accordingly, deleted the impugned addition after being satisfied that provision of Section 68 of the Act are not applicable on the alleged transaction of share application money of Rs. 17,90,15,000/- and deleted the addition made by the ld. AO. 7.12. Before us, ld. D/R vehemently argued supporting the order of the ld. AO. 7.13. Per contra, ld. Counsel for the assessee supported the detailed finding of the ld. CIT(A) and also placed reliance on the following decisions: i) CIT, Kol – III v. M/s Dataware Pvt. Ltd. in ITAT No. 263 of 2011 dt. 21.9.2011. ii) VSP Steel Pvt. Ltd. (formerly M/s Tikmani Metal Pvt. Ltd.) [in ITA No. 741/K/2014, the Kolkata Tribunal.] iii) ITO v. Wiz-Tech Solutions Pvt. Ltd. in ITA No. 1162/Kol/2015 dt. 14.6.2018. iv) ITO v. Wearit Global Ltd. [ITA 55/ Kol/2020 dt. 13.4.2021]. v) ITO v. Balaji Infra Solutions (P) Ltd. [ITA 4704/Del/2017 dt. 13.4.2021] vi) ITO v. Arizona Ventures Pvt. Ltd. [ITA No. 1428/Del/2016 dt. 26.3.2021] vii) ITO v. M/s Angel Cement Pvt. Ltd. [ITA 5974/Del/ 2017 dt. 18.3.2021] 7.14. We have heard rival contentions and perused the records placed before us. The Revenue has challenged the action of the ld. CIT(A) deleting the addition of Rs. 17,90,15,000/- made by the ld. AO u/s 68 of the Act. We find that ld. CIT(A) has deleted the addition after considering the documents filed by the assessee, remand report issued from the ld. AO, rejoinder filed by the assessee, detailed documents explaining the genuineness of the transaction, identity & creditworthiness of the share applicants and also considering that all the four companies are group concerns of the assessee group, deleted the addition observing as follows: I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 10 of 29 “8.1 The AO in the assessment order has contended and observed that during the year, the appellant had received Share Application Money to the extent of Rs. 17,90,15,000/- and in such respect the AO had issued notice asking the appellant to prove the genuinity of such Share Application Money. The AO has further mentioned that the appellant furnished a letter seeking more time in the matter and since such details were not furnished before the AO till 31.3.2014 and the assessment proceedings were getting time barred and hence he had to make the addition for the entire amount. The appellant on its part submitted that the relevant details in such respect were furnished before the AO on 31.3.2014 itself and hence the contention of the AO is bad in law. The matter was remanded to the AO and the AO in his remand report submitted as follows: “The appellant has received Share Application Money from the following group companies. a) SaternGrihaNirman Pvt. Ltd. Rs. 13,60,00,000/- b) Onkeshwar Realtors Pvt. Ltd. Rs. 7,00,000/- c) Salarpuria GrihaNirman Pvt. Ltd. Rs. 25,000/- d) Suruchi Properties Pvt. Ltd. Rs. 4,22,90,000/- Total: Rs. 17,90,15,000/- The AO in his remand report has further submitted that as per the requirement of sec. 68, all the three ingredients i.e. identity, creditworthiness and genuinity has to be established and all three are missing in the case of the impugned Share Application Money so received and hence the addition needs to be confirmed. The appellant on its part referred the various details filed during the assessment proceeding as well as the remand proceedings and hence submitted that all the 3 ingredients i.e. identity, creditworthiness and genuinity is established. Appellant claimed that the following details /particulars have been submitted before the AO: A. Satern Griha Nirman Pvt. Ltd. (Pages 126 to 197 of the paper book). i) Memorandum of Association and Certification of Incorporation. ii) Copy of IT return for the A.Y. 2011-12. iii) Copy of Assessment order u/s 143(3) for A.Y. 2011-12. iv) Copy of Audited Accounts for the year ended 31.3.2011 relevant to A.Y. 2011- 12. v) Copy of ledger accounts for the Share Application Money so received. vi) Copy of bank account of M/s. Satern Griha Nirman Pvt. Ltd. reflecting the source of fund for the application so made. vii) Copy of Annual Report filed in ROC of M/s. Satern Griha Nirman Pvt. Ltd. B. Onkeshwar Realtors Pvt. Ltd. (Pages 198 to 250 of the paper book). i) Memorandum of Association and Certification of Incorporation. I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 11 of 29 ii) Copy of IT return for the A.Y. 2011-12. iii) Copy of Assessment order u/s 143(3) for A.Y. 2011-12. iv) Copy of Audited Accounts for the year ended 31.3.2011 relevant to A.Y. 2011- 12. v) Copy of ledger accounts for the Share Application Money so received. vi) Copy of Annual Report filed in ROC. C. Salarpuria GrihaNirman Pvt. Ltd. (Pages 251 to 316 of the paper book). i) Memorandum of Association and Certification of Incorporation. ii) Copy of IT return for the A.Y. 2011-12. iii) Copy of Assessment order u/s 143(3) for A.Y. 2011-12. iv) Copy of ledger accounts for the Share Application Money so received. v) Copy of bank account for the source of the application so made in the appellant company. vi) Copy of Audited Accounts for the year ended 31.3.2011 relevant to A.Y. 2011- 12. vii) Copy of Annual Report filed in ROC. D. Suruchi Properties Pvt. Ltd. (Pages 317 to 360 of the paper book). i) Memorandum of Association and Certification of Incorporation. ii) Copy of IT return for the A.Y. 2011-12. iii) Copy of Assessment order u/s 143(3) for A.Y. 2011-12. iv) Copy of ledger accounts for the Share Application Money so received. v) Copy of bank account for the source of the application so made in the appellant company. vi) Copy of Audited Accounts for the year ended 31.3.2011 relevant to A.Y. 2011- 12. vii) Copy of Annual Report filed in ROC. 8.2 The appellant has brought further certain facts on record and which are worth mentioning. In the case of M/s Salarpuria Properties Private Ltd., the appellant assessee’s profit is at Rs. 66.52 corre, Rs. 35.64 crore, Rs. 108.88 crore and Rs. 48.47 crores respectively in the years ended 31.3.2008, 31.3.2009, 31.3.2010 & 31.3.2011. In the background of the same, the appellant has contended that the appellant company is worth investing and it is not a paper company as such. As regards the applicant where from the appellant has received the Share Application Money, the appellant has brought to my attention the audited accounts of M/s Satern Griha I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 12 of 29 Nirman Pvt. Ltd. which had reserve & surplus of Rs. 40.12 crores and had net profit of Rs. 36.64 crores and Rs. 6.53 cores in the year ended 31.3.2010 & 31.3.2011 respectively. Further, the appellant has also brought to my notice the audited accounts of M/s Salarpuria Griha Nirman Pvt. Ltd. that it had reserve & surplus to the extent of Rs. 24.90 crores and had net profit of Rs. 6.96 crores and Rs. 12.82 crores in the years ended 31.3.2010 & 31.3.2011 respectively. Similarly, the appellant has brought to my attention the audited accounts of Suruchi Properties Pvt. Ltd. which had received deposits on account of development of project to the tune of Rs. 37.36 crores and out of which the said company had already spent Rs. 32.832 crores towards the project and the balance was remaining with it. Similarly, the audited accounts of Onkeshwar Realtors Pvt Ltd. (at page 225 of paper book) wherein it can be observed that the said company had also substantial net worth. The appellant has also submitted the bank statements of all the share applicant companies wherein the source of fund so placed at appellant company have been duly reflected and as such the appellant has contended that the source of source of such Share Application Money has also been duly explained. In the background of the above, I find that the Identity of the said companies is without any doubt since in all these companies the assessment has also been made by the Income-tax Department and the creditworthiness of the aforesaid companies has also been satisfied and as regards the genuinity of the transactions it is seen that the AO himself has mentioned in the remand report that these are “group companies” and as such it has to be believed that the group companies have pledged their fund with the appellant assessee company and as such all the three ingredients i.e. identity, creditworthiness and genuinity of the transactions have been proved by the appellant beyond doubt. Hence, I do not find any substance in the addition so made by the AO and in such respect, I would like to place reliance on the following judgments: a) Crystal Net worth Pvt. Ltd. v. CIT (2013) 353 ITR 171 (Cal). b) CIT v. Roseberrey Mercantile Pvt Ltd. (ITA No. 241 of 2010 dt. 10.1.2011-Calcutta High Court). c) Leonard Commercial Pvt. Ltd. (ITA No. 114 of 2011 dt. 13.6.2011-Calcutta High Court). I would also like to refer the judgment of the Honble Supreme Court in the case of PC IT v. NRA Iron & Steel Pvt. Ltd. (2019) 103 taxmann.com 48 (SC) wherein Hon'ble Apex Court passed a decision in favour of revenue confirming the addition made towards cash credit (i.e. Share Capital) and having gone through the judgment, I find that in that case the AO had made extensive enquiries and from that it is found that some of the investor companies were non-existent. Such judgment doesn’t apply in appellant’s case and in this case the AO himself has referred to such companies as “group company" only and further the assessment orders have also been placed before me and existence of such companies carrying substantial business operation is proved. Since the PAN details, bank account statements, audited financial statements, income-tax acknowledgements and assessment orders have been placed before the AO in the remand proceedings and as well as before me, I find that all the three conditions as required u/s 68 of the IT Act, i.e. identity, creditworthiness and genuinity of the transactions have been proved by the appellant and the onus shifted to the AO to disprove the material so placed before him. The AO did not & make any attempt to examine such material and hence I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 13 of 29 I find the addition in such respect cannot be sustained and hence the addition in such respect is deleted.” 7.15. The above finding of the ld. CIT(A) remained uncontroverted by the ld. D/R and the established fact remains that the assessee has furnished sufficient documents including the income tax return, audited financial statement, assessment order u/s 143(3) of the Act for AY 2011-12, Bank accounts of the share applicants and the annual report filed with the Registrar of Companies in case of all the alleged cash creditors which in our view were sufficient to prove the identity and creditworthiness of the cash credit companies and the genuineness of the transaction entered between the assessee and the group companies. Ld. D/R could not controvert the fact that the assessee company is showing the net profit of Rs. 66.25 Cr, Rs. 35.64 Cr, Rs. 108.88 Cr and Rs. 48.47 Cr respectively for the financial years ending on 31.03.2008, 31.03.2009, 31.03.2010 & 31.03.2011 which means that the assessee company is worth investing. Similarly, the share applicants being part of the assessee group are also having sufficient funds to invest in the assessee company. Thus, under the given facts and circumstances of the case and the various decisions referred to by the ld. CIT(A) and also in view of the ratio laid down in the cases of i) M/s Dataware Pvt. Ltd. (supra), ii) VSP Steel Pvt. Ltd. (supra), iii) Wiz-Tech Solutions Pvt. Ltd. (supra), iv) Wearit Global Ltd. (supra), v) Balaji Infra Solutions (P) Ltd. (supra), vi) Arizona Ventures Pvt. Ltd. (supra), vii) M/s Angel Cement Pvt. Ltd. (supra) which are squarely applicable on the facts and issue raised before us favouring the assessee and thus, find no infirmity in the finding of the ld. CIT(A) deleting the impugned addition made u/s 68 of the Act. Thus, ground no. 3 raised by the Revenue is dismissed. Ground No. 4: 7.16. Through this ground, Revenue has challenged the issue of addition made for interest paid on service tax at Rs. 12,43,982/- and the interest on VAT at Rs. 365/- totalling to Rs. 12,44,347/-. We find that in ground no. 1 raised by the assessee in ITA No. 2492/Kol/2019, we have already examined this issue and confirmed the finding of the ld. CIT(A) deleting the impugned disallowance in view of the judgment of Hon’ble Supreme Court in the case of I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 14 of 29 Lachmandas Mathuradas (supra) and also finding that the interest paid on delayed deposit of service tax and VAT as compensatory in nature and, therefore, eligible as expenditure u/s 37(1) of the Act. Thus, since the alleged amount is not penal in nature, we confirm the finding of the ld. CIT(A). Thus, ground no. 4 raised by the Revenue is dismissed. Ground no. 5: 7.17. Through this ground, Revenue has challenged the finding of the ld. CIT(A) deleting the disallowance made by the ld. AO for the claim of bad debts as balance written off Rs. 1,27,29,297/-. 7.18. Brief facts relating to the issue are that the assessee has debited a sum of Rs. 1,27,29,297/- as balance written off. Necessary documents could not be filed before the ld. AO as the assessment was getting time barred. When the matter was carried before the ld. CIT(A) submissions were duly supported by the documentary evidences. Remand report was called for and the assessee has filed a rejoinder. Ld. CIT(A) observed that the alleged disallowance included stock written off at Rs. 73,55,162/- and sundry debtors written off at Rs. 53,74,135/-. Ld. CIT(A) allowed the claim of the assessee observing that the stock written off pertains to assets of SEZ project which were abandoned during the year due to change of Govt. policy and was in a nature of business loss. As regards the sundry debtors written off the same were found to be the sales made in the past and the amount was not realizable which were offered as revenue in a preceding year and has been claimed as bad debts. 7.19. Now Revenue is in appeal before the Tribunal. Ld. D/R supported the order of the ld. AO. 7.20. Per contra, ld. Counsel for the assessee has relied on the finding of the ld. CIT(A) and decisions referred therein. 7.21. We have heard rival contentions and perused the records placed before us. Through ground no. 5, the Revenue has raised the issue of sundry balances written off is at Rs. 2,78,927.09. We find that ld. CIT(A) has rightly observed that the stock written off at Rs. 73,55,162.22 is a business loss as I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 15 of 29 the stock written off for the assets pertaining to SEZ project which were abandoned during the year due to change of Govt. policy and secondly sundry debtors were written off as bad debts in view of the ratio laid down by the Hon’ble apex Court in the case of CIT v. TRF Ltd. 323 ITR 500 (SC). The finding of the ld. CIT(A) on this issue is reproduced as follows: “I find that the addition is in respect of bad debt and sundry balances written off and in such respect the appellant drew my attention towards page 475 of the paper book. I find that such expenditure consists of 2 items i.e. i) Stock written off - Rs.73,55,162.22 ii) Sundry balances written off - Rs. 53,74,135.37 Total: Rs. 1,27,29,297.59. As regards stock written off or Rs. 73,55,162.22, the appellant has submitted that the same pertains to assets of SEZ Project which had been abandoned during the year due to change in policy of the Govt, and since the project has been abandoned the appellant had claimed it as business loss u/s 28(1) and has relied upon the judgment of - a) Binani Cement Ltd. v. CIT (2015) 380 ITR 116 (Kol). b) CIT v. Britania Industries Ltd. (2015) 376 ITR 299 (Kol). As regards the balance sum of Rs. 53,74,135.37, the appellant has contended ha these were sundry debtors and hence the same has been written off on account of being not realizable. I have gone through the material so placed before me and I find that as regards the sum of Rs. 73,55,162.22 since the impugned sum pertains to abandonment of business and hence following the judgment of Hon'ble Calcutta High Court in the case of Binani Cement (supra), the said sum is allowable. As regards the write off of Rs. 53,74,135.37, I find that the impugned sum pertains to sales and rental income so offered by the appellant in preceding years and which has claimed to be un-realisable and the same has been written off and hence following the judgment of Hon’ble Supreme court in the case of CIT v. TRF Ltd. 323 ITR 500 (SC) the said sum is held as allowable. Hence this ground of the appellant is allowable.” 7.22. From the above finding and the ratio laid down by the Hon’ble jurisdictional High Court in the case of a) Binani Cement Ltd. (supra) & b) Britannia Industries Ltd. (supra), we find no infirmity in the finding of the ld. CIT(A) allowing the claim of the assessee writing off the stock of Rs. 73,55,162.22 being in the nature of business loss. We also find no infirmity in the finding of the ld. CIT(A) allowing the claim of bad debts of Rs. 53,74,135.37 as these were the sales/rental made in the past offered as revenue but being not realizable has been claimed as bad debts in the regular I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 16 of 29 books of account and this claim has been rightly made in view of the ratio laid down by the Hon’ble Supreme Court in the case of TRF Ltd. (Supra). Thus, we confirm the finding of the ld. CIT(A) and dismiss the ground no. 5 raised by the Revenue. Ground No. 6: 7.23. Through this ground, Revenue has raised the issue regarding deduction u/s 80IB(10) of the Act in respect of projects namely “Salarpuria Serenity” and “Salarpuria Sanctity”. Facts in brief relating to the issue are that the assessee has claimed deduction u/s 80IA Act of Rs. 12.93 Cr against the profits earned from the Salarpuria Sanctity and deduction of Rs. 3.13 Cr u/s 80IB(10) of the Act on the profits from Salarpuria Serenity. During the assessment proceedings ld. AO asked the assessee through show cause notice dated 24.03.2014 to furnish the following basic evidences required for the claim of deduction u/s 80IB(10) of the Act: a) Evidence with regard to the area on which the project has been constructed b) Evidence with regard to the size of the flats constructed. c) Possession Letters provided to the various flat owners evidencing transfer of possession and ownership. d) Copy of registered deeds of the various flats sold. e) Affidavit / undertaking that the conditions of section 80IB(10) (e) and (f) have been met. To arrive at the conclusion, what are the documents and evidences that have been relied on. 7.24. The assessee could not file the details before the last date of the hearing as the assessment was getting time barred on 31.03.2014. Ld. AO accordingly denied the claim u/s 80IB(10) of the Act observing as follows: “4B(2). The claim made by the assessee as discussed above seems to be unsupported by evidences when we see the overall structure of these projects. For example, With regard to the Salarpuria Serenity where claim u/s 80IB is made, it seen that the project has been approved only in 28.01.2008.From the details submitted, it is seen that substantial expenditure of Rs.37 Crs (approx) has been incurred from 2004-05 onwards towards the project by the time the sanction was I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 17 of 29 obtained. It has been explained that the amounts represent land and land improvement cost. Assessee has been asked to provide the breakup of the cost incurred for land and land improvement with detailed evidences which has not been furnished. The assessee has agreed that the construction work has commenced only after obtaining the project sanction in January 2008. It is seen from facts that the project was completed and handed over within one year from obtaining project sanction. It is difficult to imagine that a huge project with total cost of Rs. 60 Crs approx, was constructed, completed and handed over in one year, which is not practically_ possible with the current trends and technology prevailing in the construction industry in the year in which the project was completed. In absence of the various details, it seems that the entire fact pattern has been set to obtain the deduction u/s 80IB whereas practically, the same is not possible to execute in reality. 4B(3). Further on specific query on how the assessee is fulfilling the conditions stipulated under section 80IB(10) the assessee has provided certain cryptic details on a perusal of which it appears that two adjacent flat nos. A 1202 and A1203 were sold to Sri Atul Gupta and Smt. Rupali Gupta having same residential address. The assessee has not reverted when asked during assessment proceedings the relationship between the two purchasers and whether these sales contravene the provisions of section 80IB(10) of the Act. Since this fact has not been clarified, there is an overwhelming suspicion that the provisions of section 80IB(10) have been contravened since both the purchasers are presumed to be inter related as defined under the section. Hence, on this count also, the claim under section 80IB(10) is liable to be disallowed to the assessee. 4B(4).Considering above facts, the claim made by the assessee made by the assessee u/s 80IB for both the projects as discussed above is not allowed in the absence basic details and explanations required to examine the claim.” 7.25. Aggrieved the assessee preferred appeal before the ld. CIT(A). The assessee filed various details including the proof of various approvals necessary for claiming the deduction. Ld. CIT(A) after considering the same and also in view of the settle judicial precedence gave relief to the assessee. 7.26. Aggrieved, the Revenue preferred appeal before this Tribunal. Ld. D/R made detailed submissions referring to the finding of the ld. AO stating that firstly the assessee has not filed relevant documents before the ld. AO and secondly also stated that the assessee has not fulfilled all the conditions necessary for claiming the deduction u/s 80IB(10) of the Act. 7.27. Per contra, ld. Counsel for the assessee heavily relied on the order of the ld. CIT(A) and also referred to the following written submissions placed on record referred therein: I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 18 of 29 “I. The appellant had claimed deduction u/s 80IB(10) in respect of “Salarpuria Serenity”. a) In respect of the project “Salarpuria Serenity”, the AO merely mentioned that the appellant has failed to produce evidences in respect of completion of the project. In the same breath, the AO mentions that sales have also been made to various customers. The AO then mentions that the onus to prove the project has been completed within A.Y 2008-09 is on the assessee and which has allegedly not been discharged. It is quite surprising to observe that all the details in respect of initiation of the project along with the completion of the project were duly furnished in proceedings u/s 143(3) before the AO as well as in remand proceedings. The details in such respect are re-iterated as follows: Sl. No. Particulars Salarpuria Serenity 1 2 3 1 Area of Land 4.00 acre 2 Local authority which had approved the Housing Project Bangalore Development Authority (in short BDA) 3 Plan Approval Dare 30.03.2007(Commencem ent Certificate dt 31.12.2007) 4 Project completion date 08.12.2009 (Architect Completion Certificate with Occupancy Certificate) 5 Built-up area of each flat (Residential unit) Less than 1500 Sq. Ft b) Besides it is quite surprising to note that the AO himself has accepted the sales pertaining to such project and the profit in respect of such project has also been accepted and has been considered in the taxable income so assessed by AO during the years concerned. However as regards of the deduction u/s 80IB(10), the AO has objection on unverified allegations. The AO has merely mentioned that the onus of proving the completion of the project has not been discharged by the appellant whereas the fact is other way round and it is the AO who has alleged non completion of the project. The AO has not conducted any enquiry on his own and merely on assumption that the project cannot be completed within such a short time and hence the allegation and the disallowance of deduction u/s 80IB(10). The entire action of the AO has no basis and the appellant is fully entitled for deduction u/s 80IB(10) since it has completed all the conditions so specified in such provision. c) Since the factum of “sales” has been accepted by the revenue and profit thereon has been accepted and considered in taxable income of appellant, revenue cannot deny the completion of project and consequent deduction u/s 80iB(10) on such residential projects CIT(A) has right allowed the claim of the appellant. II. In respect of the residential project “Salarpuria Sanctity”, revenue denied such deduction u/s 80IB(10) on alleged violation of clause (e) & (f) of such section whereas Ld. CIT(A) allowed such deduction on rest of the project except the two flats which were purchased by husband and wife and hence condition of clause (e) & (f) to Sec. 80IB(10) was not satisfied to such extent only. The AO has merely I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 19 of 29 mentioned that 2 adjacent flats bearing Nos. A1202 and A1203 of such Housing Project were sold to one Sri Atul Gupta and his spouse Smt. Rupali Gupta. Hence, the conditions so specified in sec. 80IB(10), clause ‘e’ & ‘f’ have been violated allegedly and hence the appellant is not entitled for such deduction u/s 80IB(10). A. In such respect, it may kindly be appreciated that the said clause ‘e’ & ‘f’ were inserted in the Statute w.e.f. 1.4.2010 whereas such residential projects were completed much prior to such date and advances from the customers were received prior to such date only. The advances from Sri Atul Gupta and his spouse Smt. Rupali Gupta were also received prior to such clause ‘e’ & ‘f’ having been inserted in the Statute and as such the appellant cannot be held responsible in any manner for having any alleged violation nor it can be disentitled for such deduction since all other conditions remained satisfied and as such the appellant becomes entitled to such deduction u/s 80IB(10). B. Without prejudice Ld. CIT(A) rightly allowed claim of appellant in allowing proportionate deduction on such residential project. In this respect, your attention is drawn specifically to the recent judgment of Jurisdictional High Court in CIT v. Martin Burn Ltd. (ITAT No. 94/2013, GA No. 1219/2013 dt. 19.7.2018, Calcutta High Court) wherein in the case of builder deduction was claimed u/s 80IB(10) for a residential project. Some residential units for such housing projects were exceeding prescribed built-up area of 1500 Sq.ft. in and as such revenue held it as violation of the condition of sec. 80IB(10). In spite of the same, the Hon’ble Jurisdictional High Court held that the provision of sec. 80IB(10) is for incentive of the housing project and as such the appellant having satisfied all other conditions it is entitled to deduction u/s 80IB(10) on the residential units which do not exceed such prescribed area and as such the Hon’ble Jurisdictional High Court affirmed the decision of Hon’ble Jurisdictional Tribunal allowing proportionate deduction to the assessee in such case. To support such contention regarding proportionate deduction u/s 80IB(10) reliance is placed on following judgments as well : Bombay High Court - HIGH COURT OF BOMBAY ITAT MUMBAI BENCH 'C' Om Swami Smaran Developers (P.) Ltd. v. Income-tax Officer, Ward- 8 (2) (4), Mumbai [2018] 90 taxmann.com 267 (Mumbai - Trib.) Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings (Housing project) - Assessment year 2011-12 - Assessee, a developer, had developed a housing project and claimed deduction under section 80-IB(10) - Assessing Officer disallowed same on grounds that assessee had allotted three flats to a single person, thus, violated conditions of section 80-IB(10)(f) which provides that more than one residential unit in a housing project cannot be sold to one person/individual - Whether merely because assessee had violated conditions of section 80-IB(10)(f) in respect of three flats, deduction under section 80-IB(10) could not be disallowed for entire housing project and, assessee was entitled to deduction proportionately in respect of Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings (Housing project) - Assessment year 2011- 12 - Assessee, a developer, had developed a housing project and claimed deduction under section 80-IB(10) - Assessing Officer disallowed same on grounds that assessee had allotted three flats to a single person, thus, violated conditions of I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 20 of 29 section 80-IB(10)(f) which provides that more than one residential unit in a housing project cannot be sold to one person/individual - Whether merely because assessee had violated conditions of section 80-IB(10)(f) in respect of three flats, deduction under section 80-IB(10) could not be disallowed for entire housing project and, assessee was entitled to deduction proportionately in respect of flats which fulfilled all conditions of section 80-IB(10) - Held, yes [Para 8] [In favour of assessee] 2. Calcutta High Court and Kolkata ITAT – The Income Tax Appellate Tribunal in Bengal Ambuja Housing Development Ltd v DCIT and Vice Versa(supra) confirmed by the Calcutta High Court [Referred in M/s Macro Marvel Projects Ltd Chennai Tribunal -, ACCOUNTANT MEMBER I.T.A. Nos. 1684 & 1686/Mds/2010 – date of order 09 th December, 2011] The assessee has claimed deduction only in respect of the smaller residential units. Following the reasoning given by the Hon'ble Kolkata Bench of the Income Tax Appellate Tribunal in Bengal Ambuja Housing Development Ltd v DCIT and Vice Versa(supra) confirmed by the Calcutta High Court, merely because some of the units exceed the maximum limit, it would be a narrow and restricted interpretation to deny the deduction to the entire project. As observed by the Hon'ble Kolkata Bench of the Income Tax Appellate Tribunal, Section 80-IB(10) ) has been enacted with a view to provide incentive for businessmen to undertake construction of smaller residential units and the deduction is intended to be restricted to the profit derived from the construction of smaller units and not from larger residential units. The assessee has only claimed deduction in respect of smaller units, wherever the total area does not exceed 1500 sqft on pro-rata basis. Respectfully following the decision of Hon'ble Jurisdictional ITAT, Chennai Bench in the case of Arun Excello Foundation P Ltd (2007) 108 TTJ 71, the deduction claimed by the assessee is to be allowed. The appellant succeeds on this ground. The AO is directed to delete the deduction.” 3. HIGH COURT OF BOMBAY – Devashri Nirman LLP. v. Assistant Commissioner of Income Tax, Panaji, Goa Bom./(2020) 429 ITR 597 (Bom.) Where assessee developer exceeded area of 1500 square feet of eight residential units in two housing projects which was in breach of conditions contained in sub- clause (c) of section 80-IB(10), denial of deduction under section 80-IB(10) would be limited only in respect of said eight flats and assessee would be entitled to benefit of deduction under section 80-IB(10)proportionately in respect of other residential units having built up area of less than or equal to 1,500 square feet 4. HIGH COURT OF BOMBAY Models Construction (P.) Ltd. v. Deputy Commissioner of Income-tax, Central Circle, Panaji, Goa [2020] 429 ITR 605 (Bombay) Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings (Housing Project) - Assessment years 2010-11, 2011-12 and 2012-13 - Whether pro rata deductions can be granted under section 80-IB(10) - Held, yes - Whether where Assessing Officer disallowed deduction to assessee in respect of its housing project 'Model Legacy' on ground of breach of provisions of section 80-IB(10)(e) in respect of 5 of residential units in said project, which otherwise comprised of a total of 352 residential units, Commissioner (Appeals) was justified in holding that assessee was entitled to pro rata deductions under section 80-IB(10) - Held, yes [Paras 4 and 5] [In favour of assessee] I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 21 of 29 5. HIGH COURT OF KARNATAKA Commissioner of Income Tax, Bangalorev. S. N. Builders & Developers 279 Taxman 347 (Karnataka)/[2021] 431 ITR 241 (Karnataka) Where assessee developer exceeded area of 1500 square feet of 26 flats in a housing project, assessee would be entitled to benefit of deduction under section 80-IB(10) proportionately in respect of other flats having built up area of up to 1,500 square feet 6. IN THE ITAT DELHI BENCH ‘A’ - Additional Commissioner of Income-tax, Range- 1, Ghaziabad v. Shipra Estate Ltd.[2010] 35 SOT 256 (Delhi) Section 80-IA, read with section 80-IB, of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings, etc., after certain dates/infrastructure undertaking - Assessment years 1999-2000 to 2002-03 - Assessee was a limited company engaged in buildings construction activities - During relevant assessment years, assessee-company in joint venture with Ghaziabad Development Authority was engaged in business of development and construction of houses of different categories - Assessee-company undertook commencement of construction of ‘S’ complex which was further sub-divided into six projects - Assessee’s case was that development and construction of four projects of ‘S’ complex were commenced after 1-10-1998 and, therefore, it was entitled to benefit of tax holiday relief available under section 80-IA(4F)/80-IB(10) - Assessing Officer rejected assessee’s claim on following grounds: assessee had purchased land on which proposed construction was to be done prior to 1-10-1998; development authority had sanctioned plan of construction prior to 1-10-1998; assessee had advertised for booking of flats prior to insertion of section 80-IA, i.e., 1-10-1998, and assessee had undertaken earth filling activity of land so purchased for undertaking construction of project prior to 1-10-1998 - Whether purchase of land and approval of construction plan by development authority might not necessarily lead to inference that development and construction of projects had commenced prior to 1-10-1998 - Held, yes - Whether, further, merely getting booking money in advance in respect of housing project whose development and construction were started after 1-10-1998 would not disentitle assessee to benefit of deduction under section 80-IA(4F)/80-IB(10), insofar as crucial condition was commencement of development and construction of housing project and not receipt of booking amount in advance - Held, yes - Whether mere act of levelling earth does not amount to construction of housing project within meaning of section 80-IA(4F) and, therefore, said act of assessee could not snatch its deduction which was otherwise available to assessee - Held, yes - Whether in view of aforesaid and having regard to other relevant facts, such as, written construction contracts were entered into by assessee with contractors after specified date, i.e., 1-10-1998 and work orders in case of all four projects were subsequent to 1-10-1998, there was no reason to assume that commencement of development and construction of housing project were prior to 1-10-1998 for purpose of declining claim of deduction under section 80-IA(4F)/80-IB(10) - Held, yes - Whether, therefore, Assessing Officer was not justified in rejecting assessee’s claim - Held, yes 7. SUPREME COURT Principal Commissioner of Income-tax Shreenath Buildcon (SC)/[2019] 267 Taxman 115 (SC) [SLP allowed] Where High Court upheld Tribunal's order allowing assessee's claim for deduction under section 80-IB by taking a view that simply because out of several units I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 22 of 29 included in housing project, only in one of them, constructed area exceeded upper limit; that too, by a small margin, deduction claimed could not be denied in respect of entire housing project, (SLP filed against said order was to be dismissed) 8. Calcutta High Court Commissioner Of Income Tax vs Martin Burn Ltd. ITAT 94 of 2013 GA 1219 of 2013 date of order 19 July, 2018 Section 80-IB(10) of the Act refers to projects and, at the first blush, the Revenue's contention appeals. However, a closer scrutiny of such provision reveals that there are several conditions that have to be complied with before the benefit of deduction under such provision can be availed of by an assessee. Clause (c) is one of several such conditions. In such a situation, when an assessee complies with the other conditions and substantially complies with the condition in clause (c), the assessee may be justified in claiming deduction for the proportionate profit of the project referable to the residential units upto the ceiling limit indicated in the provision. Since the deduction which has been permitted by the order impugned passed by the Appellate Tribunal does not cover the proportionate profit pertaining to the residential units exceeding 1500 sq.ft. in area, the reasoning of the Tribunal that a liberal construction of the provision should be made to give such benefit that the assessee may be entitled to, does not call for any interference. ITAT No. 94 of 2013 and GA No. 1219 of 2013 are disposed of without interfering with the order under appeal. There will be no order as to costs. C. Without prejudice to the above, the appellant also places reliance upon the following judgments wherein proportionate deduction u/s 80IB(10) was allowed to the assessee concerned therein on the remaining flats which were not hit by clause ‘e’ & ‘f” of sec. 80IB(10). Such judgments are as follows: i) Om Swami Smaran Pvt. Ltd. v. ITO (2018) 90 taxmann.com 267 (Mumbai AT) ii) DCIT v. Mandovi Builders (ITA No.1734 and 1735 /Bang/2013 dt. 22.2.2015 [affirmed in CIT v. Mandavi Builders (2020) 275 Taxman 519 (Karrn.)] D. Without prejudice, it has to be appreciated that Hon’ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT (1993) 196 ITR 188 (SC) had categorically observed that the provision in a taxing Statute granting incentives for promoting growth and development should be construed liberally and since a provision for promoting economic growth has to be interpreted liberally the restriction has to be construed so as to advance the objective of the provision in Statute. Applying this maxim, it may be appreciated that the legislature has prescribed the condition by using express in separate which the only condition which the assesse is unable to satisfy so as to two adjacent flats sold to spouses so as to qualify in respect of profits derived from housing project for remaining project. Hence in this case the appellant has complied with all the conditions in and separate for balance project hence a liberal view is warranted in the matter The AO is not justified in rejecting the claim for deduction u/s 80IB(10) in toto. In this connection, your attention is also drawn to the following judgments as well: 1. Bajaj Tempo Ltd. v. Commissioner of Income-tax (1993) 196 ITR 188 (SC) Adopting literal construction in such cases would have resulted in defeating the very purpose of section 15C. Therefore, it became necessary to resort to a construction which is reasonable and purposive to make the provision meaningful. I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 23 of 29 Initial exercise, therefore, should be to find out if the undertaking was new. Once this test is satisfied, then clause (i) should be applied reasonably and liberally in keeping with the spirit of section 15C(1) 2. Commissioner of Income-tax, LTU v. Texas Instruments India (P.) Ltd. (Karn.) If there is a benefit conferred by legislation, the said benefit being legislative's object, there would be a presumption that such a legislation would operate with retrospective effect by giving a purposive construction. Thus, the clarificatory amendment of the year 2018 can also be said to apply retrospectively for the benefit of the assessee even though the revenue contends that there was no provision in the year 2007 permitting the assessee to avail the benefit of deduction when the employee works for a period of 300 days in consecutive years. 3. Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calcutta (2021) 431 ITR 1 (SC) “.....20. We now come to the judgment of this Court in Citizen Cooperative Society Ltd. (supra). This judgment was concerned with an assessee who was established initially as a mutually aided cooperative credit society, having been registered under section 5 of the Andhra Pradesh Mutually Aided Cooperative Societies Act, 1995. As operations of the assessee began to spread over States outside the State of Andhra Pradesh, the assessee got registered under the Multi-State Cooperative Societies Act, 2002 as well. The question that the Court posed to itself was as to whether the appellant was barred from claiming deduction in view of Section 80P(4) of the Income-tax Act - see paragraph 5. After setting out the findings of fact in that case, and the income tax authorities concurrent holding that the society is carrying on banking business and for all practical purposes acts like a co-operative bank, this Court then held as follows: "18. We may mention at the outset that there cannot be any dispute to the proposition that section 80-P of the Act is a benevolent provision which is enacted by Parliament in order to encourage and promote growth of cooperative sector in the economic life of the country. It was done pursuant to the declared policy of the Government. Therefore, such a provision has to be read liberally, reasonably and in favour of the assessee (see Bajaj Tempo Ltd. v. CIT [1992] 3 SCC 78]). It is also trite that such a provision has to be construed as to effectuate the object of the legislature and not to defeat it (see CIT v. Mahindra and Mahindra Ltd. [1983] 4 SCC 392. Therefore, it hardly needs to be emphasised that all those cooperative societies which fall within the purview of section 80-P of the Act are entitled to deduction in respect of any income referred to in sub-section (2) thereof. Clause (a) of sub-section (2) gives exemption of whole of the amount of profits and gains of business attributable to any one or more of such activities which are mentioned in sub-section (2)...........” Hence Ld. CIT(A) was right in following the judgment of Jurisdictional High Court in allowance of proportionate deduction u/s 80IB(10) [except those 2 flats which didn’t comply with requirement of clause (e) & (f) to sec. 80IB(10)] and has rightly construed the said provision that such provision is intended for promotion of housing sector and incentivizes the housing sector and a liberal view needs to be invoked particularly in the spirit of judgment by Hon’ble Supreme Court in Mavilayi Service Co-operative Bank Ltd. (supra) and also the judgment of Co-ordinate benches at Mumbai & Bangalore (affirmed by Karnataka High Court) wherein proportionate I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 24 of 29 deduction was granted u/s 80IB(10) despite such clauses (e) and (f) were not satisfied fully. Hence it may be considered accordingly and Ld. CIT (A) view may be upheld accordingly.” 7.28. We have heard rival contentions and perused the record placed before us and gone through the decisions relied by the ld. Counsel for the assessee. The issue raised by the Revenue before us is that ld. CIT(A) erred in allowing the claim of deduction u/s 80IB(10) of the Act for the income generated from Salarpuria Serenity and Salarpuria Sanctity. Before us, ld. Counsel for the assessee submitted that as far as the claim for Salarpuria Serenity is concerned, ld. AO denied the same only for want of proof of completion certificate of the project and also was not satisfied with the fact that how can the project be completed in such a short span of time. Ld. Counsel for the assessee invited our attention about the commencement certificate dated 31.12.2007 and project completion certificate showing that the project was completed on 08.12.2009 and since the assessee has fulfilled all the required conditions, ld. CIT(A) has rightly allowed the claim. 7.29. As far as another project Salarpuria Sanctity is concerned, ld. AO denied the total claim made for this project observing that the assessee has violated the conditions provided in Clause “e” & “f” of Section 80IB(10) of the Act. As per Clause “e” of Section 80IB(10) of the Act not more than one residential unit in the housing project is allotted to any person not being an individual and as per Clause “f” of Section 80IB(10) of the Act if a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to the spouse or the minor children of such individual, or the Hindu undivided family in which such individual is the karta, or any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. Ld. AO on observing that two flats were purchased by husband and wife in the residential projects Salarpuria Sanctity, held that the assessee is not entitled to deduction u/s 80IB(10) of the Act. 7.30. We, further, find that ld. CIT(A) on examining the facts of the case, constituting the judicial precedence, was satisfied with the project completion I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 25 of 29 certificate of Salarpuria Serenity project and also allowing the proportionate claim u/s 80IB(10) of the Act made for Salarpuria Sanctity, thereby denying the deduction for the proportionate profit earned on sale of two units sold by husband and wife and allowing the remaining deduction observing as follows: “Such grounds are in respect of deduction u/s.80IB(10) in residential project namely 'Salarpuria Sanctity' & ‘Salarpuria Serenity’. The AO has denied such deduction u/s 80IB(10) for Rs. 12.93 crores and Rs. 3.13 crores respectively. In respect of ‘Salarpuria Sanctity’ AO disallowed deduction on the ground that the assessee has not complied with the condition stipulated in section 80IB(10) particularly clause (e) and clause (f). The AO in its order has given a finding that the assessee had sold flat in the said residential project to Mr. Atul Gupta and his spouse Mrs. Rupali Gupta (husband & wife). The AO having given such finding has observed and concluded that the appellant becomes ineligible for the deduction u/s.80IB(10).The appellant in its submission has not denied such observation of the AO. However, the appellant has submitted that barring such two residential units wherein the appellant was hit by the condition of clause (e) and clause (f), the balance of the residential project remains eligible for such deduction u/s.80IB(10). The appellant has relied upon the judgement of Kolkata High Court in the case of CIT vs Bengal Ambuja Housing Development Ltd. (ITA No.453 of 2006 dated 05.01.2017) wherein the Hon'ble Court had approved the allowance of proportionate deduction even if any of the condition of section 80IB(10) which is not fully complied with. In the said case i.e. Bengal Ambuja (Supra) the question before the Court was as to whether the assessee is eligible for deduction u/s.80IB(10) when some of the residential units in the residential project exceed the prescribed limit of 1500 sq.ft. Hon'ble Court held that the assessee remains eligible only on residential unit which were below the limit of 1500 sq.ft, and thus approved the proportionate allowance of deduction even if some conditions- prescribed in section 801B(10) were not fulfilled. In the present case, the AO has given the finding that except these two residential units purchased by Mr. Atul Gupta and Mrs. Rupali Gupta no other flats were sold in violation of clause (e) and clause (f) of section 80IB(10).Hence following the principle so settled by Hon’ble Calcutta High Court, the assessee is eligible to deduction u/s.801B(10) on the rest of the residential unit m such project. Hence the appellant is entitled to deduction 80IB(10) on the rest of the housing unit in such project. Hence the appellant gets part relief in the matter. In respect of Salarpuria Serenity, it is seen that the AO had disallowed the deduction on the ground that the project was approved on 31.12.2007 and the same has been completed on 8.12.2009. The AO has expressed his disbelief that within one year of the sanction of the project, the project has been completed which as per the AO seems impossible. The appellant in its submission has contended that the AO has merely expressed his disbelief without even conducting any enquiry in such respect and has submitted that it is with the advent of technology in construction technology the project is completed within such a short span of time. Further, the appellant has submitted that the AO accepted the sales and the expenditure made in respect of such project and the profit was considered in the Profit & Loss account for the purposes of assessment as well. However the corresponding profit for the purpose of deduction u/s 80IB(10) has been disallowed on such un-reasonable ground. I find substance in the argument of the appellant and I find that if the sales I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 26 of 29 have not been doubted neither the expenditure have been doubted by the AO, there does not arise any reason / occasion to disallow the deduction. The appellant submitted the copy of completion certificate which sufficiently proves that the project had been completed on 8.12.2009 and there does not arise any occasion to doubt the same. Hence the appellant is entitled for deduction u/s 80IB(10) on the residential project, named Salarpuria Serenity and the AO is directed accordingly. Hence appellant gets relief accordingly.” 7.31. From going through the above finding and also the judgments referred by the ld. Counsel for the assessee we find that as far as the claim u/s 80IB(10) of the Act for the project Salarpuria Serenity is concerned, we find that the assessee has furnished the completion certificate for the project as per which the project was completed on 08.12.2009. Approval for the project was granted on 31.12.2007. Ld. AO without doubting the genuineness of the completion certificate filed by the assessee expressed his disbelief that how can the project be completed within one year. We completely disagree with such observation of the ld. AO because the completion certificate has been granted by the local authority and that cannot be doubted by the ld. AO as far as the claim of deduction u/s 80IB(10) of the Act. In case, ld. AO found something fishy or is not satisfied with the genuineness of the certificate then there are other legal remedies available under the various other acts including filing a police complaint or approach the local Court. But, in the instant case ld. AO doubted the genuineness of the completion certificate and merely raised doubt for the period in which the project has completed. Ld. AO has not doubted the sales made by the assessee and has taxed the profits on such sales. On one hand ld. AO has accepted that the assessee has sold the flats and has accepted the revenue figures and further has taxed the profits earned on such sales and on the other hand is doubting the actual construction done for the completion of the project. Thus, under the given facts and circumstances since the assessee has fulfilled all the conditions necessary for claiming deduction u/s 80IB(10) of the Act for the profits earned from “Salarpuria Serenity” project, ld. CIT(A) has rightly allowed the same and thus hold that ld. AO has not justified in rejecting the assessee’s claim u/s 80IB(10) of the Act at Rs. 3.13 Cr. I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 27 of 29 7.32. Now, as regards the other project “Salarpuria Sanctity” is concerned it remains an uncontroverted fact that two flats were sold to husband and wife and thus there was a violation of one of the conditions necessary for claiming deduction u/s 80IB(10) of the Act. Even though the assessee has claimed that both the flats were adjacent to each other and that the Clause “e” & “f” of Section 80IB(10) of the Act was inserted w.e.f. 01.04.2010 whereas the said project was completed prior to such date and advance from the customers were received prior to such date only. But the fact remains is that the profits for the year under appeal from this project includes the profit from sales of flats of husband and wife. Now the issue is that whether for this default was ld. AO justified in rejecting the total claim of deduction u/s 80IB(10) of the Act for the “Salarpuria Sanctity” project even though all the other conditions were fulfilled for the remaining units sold by the assessee. We find that his issue has come up before Hon’ble Courts on multiple occasions. In one of the recent judgments of the Hon’ble jurisdiction High Court in the case of Commissioner of Income Tax vs. Martin Burn Ltd. ITAT 94 of 2013 GA 1219 of 2013 has dealt with the similar issue holding as follows: “Section 80IB(10) of the Act refers to projects and, at the first blush, the Revenue's contention appeals. However, a closer scrutiny of such provision reveals that there are several conditions that have to be complied with before the benefit of deduction under such provision can be availed of by an assessee. Clause (c) is one of several such conditions. In such a situation, when an assessee complies with the other conditions and substantially complies with the condition in clause (c), the assessee may be justified in claiming deduction for the proportionate profit of the project referable to the residential units up to the ceiling limit indicated in the provision. Since the deduction which has been permitted by the order impugned passed by the Appellate Tribunal does not cover the proportionate profit pertaining to the residential units exceeding 1500 sq.ft. in area, the reasoning of the Tribunal that a liberal construction of the provision should be made to give such benefit that the assessee may be entitled to, does not call for any interference. ITAT No. 94 of 2013 and GA No. 1219 of 2013 are disposed of without interfering with the order under appeal. There will be no order as to costs.” 7.33. In the case of Principal Commissioner of Income-tax Shreenath Buildcon (SC)/[2019] 267 Taxman 115 (SC) Hon’ble apex Court rejected the SLP filed by the Revenue thereby confirming the view taken by the Hon’ble High Court upholding the Tribunal’s order allowing assessee’s claim for deduction u/s 80IB(10) of the Act by taking a view that simply because out of several units I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 28 of 29 included in housing project only one of them, constructed area exceeded the upper limit that too by a small margin, deduction claimed cannot be denied in respect of entire housing project. 7.34. Hon’ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT (1993) 196 ITR 188 (SC) had categorically observed that the provision in a taxing Statute granting incentives for promoting growth and development should be construed liberally and since a provision for promoting economic growth has to be interpreted liberally the restriction has to be construed so as to advance the objective of the provision in Statute. Applying this maxim, it may be appreciated that the legislature has prescribed the condition by using express in separate which the only condition which the assessee is unable to satisfy so as to two adjacent flats sold to spouses so as to qualify in respect of profits derived from housing project for remaining project. Hence in this case the appellant has complied with all the conditions in and separate for balance project hence a liberal view is warranted in the matter The AO is not justified in rejecting the claim for deduction u/s 80IB(10) in toto. 7.35. Considering the ratios laid down by the Hon’ble Courts in the above referred judgments, decision of ld. CIT(A) and the written submission given by the ld. Counsel for the assessee we find that deduction u/s 80IB(10) of the Act are given for housing projects in a manner of granting incentive to the developers and builders to take up such projects so as to fulfil the housing needs of the citizen of our country. It includes planning of such housing projects, earmarking of the project land, taking various approvals from the local authority for the construction, arrangement of funds to construct the projects, getting the completion certificate and then finally selling the same. Though all the conditions are very important to be fulfilled for claiming deduction but approval of the project and completion certificate of the project are most essential and as far as the other conditions are concerned if there is a violation akin to the residential units then the deduction should not be denied for the total project but should be restricted only to the profits earned from sale of such units which are in violation of the conditions provided u/s 80IB(10) of the Act. We, therefore, respectfully following the decisions referred I.T.A. No.: 2492/Kol/2019 I.T.A. No.: 67/Kol/2020 Assessment Year: 2011-12 M/s. Salarpuria Properties Pvt. Ltd. Page 29 of 29 herein above find no infirmity in the finding of the ld. CIT(A) in allowing the proportionate deduction u/s 80IB(10) of the Act for the gains from “Salarpuria Sanctity” (except for those two flats which did not comply to the requirement of Clause “e” & “f” of Section 80IB(10) of the Act). Therefore, we confirm the finding of the ld. CIT(A) allowing 100% deduction u/s 80IB(10) of the Act for “Salarpuria Sanctity” (100%) and proportionate deduction u/s 80IB(10) of the Act for “Salarpuria Serenity”. Accordingly, ground no. 6 raised by the Revenue is dismissed. 8. In the result, the appeal filed by the assessee is dismissed and the appeal filed by the Revenue is dismissed. Kolkata, the 17 th May, 2022. Sd/- Sd/- [Sanjay Garg] [Manish Borad] Judicial Member Accountant Member Dated: 17.05.2022 Bidhan (P.S.) Copy of the order forwarded to: 1. M/s. Salarpuria Properties Pvt. Ltd., C/o. M/s. Salarpuria Jajodia & Co., 3 rd Floor, 7, Chittaranjan Avenue, Kolkata-700 072. 2. ACIT, CC-3(2), Kolkata. 3. CIT(A)-6, Kolkata. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. True copy By order Assistant Registrar ITAT, Kolkata Benches Kolkata