ACIT Non Corporate Circle 11, CHENNAI V. Fomra Developers, CHENNAI

ITA 2517/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5199 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 17-04-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 17-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D ANAND
• Keywords: Source of fund

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , , # BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER / I .T.A. NO: 2517/CHNY/2017 / ASSESSMENT YEAR : 2014-15 ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 11, 2 ND FLOOR, BSNL BUILDING, TOWER II, 16 GREAMS ROAD, CHENNAI 600 006. VS. M/S. FOMRA DEVELOPERS, NO. 123, GOVINDAPPA NAICKEN STREET, CHENNAI 600 001. [PAN: AAAFF 6215E] ( / APPELLANT) ( / RESPONDENT ) ASSESSEE BY : SHRI. CLEMENT RAMESH KUMAR, ADDL. CIT REVENUE BY : SHRI. D. ANAND, ADVOCATE % /DATE OF HEARING : 14.06.2018 % /DATE OF PRONOUNCEMENT : 14.06.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -13, CHENNAI I N ITA NO 177/CIT(A)- 13/14-15 DATED 28.08.2017 FOR ASSESSMENT YEAR 2014- 15. :-2-: ITA NO. 2517/CHNY/2017 2. THE ASSESSEE FIRM, FOMRA DEVELOPER, IS ENGAGED IN THE BUSINESS OF BUYING AND SELLING OF LAND AND DEVELOPMENT OF LAND BY CONSTRUCTING THE FLATS. IT HAS DEVELOPED A PROJECT NAMED FOMRA TRIBHUVAN AT NOLAMBUR VILLAGE, SHAKTHI NAGAR, CHENNAI 600 097 HAVING 94 FLATS. THE PROJECT GOT ITS APPROVAL ON 29 TH MARCH, 2007 FROM LOCAL AUTHORITY. THE ASSESSEE HA S FOLLOWED PROJECT COMPLETION METHOD OF ACCOUNTING FOR TAXATIO N PURPOSE. IN THE ASSESSMENT YEAR 2014-15, THE ASSESSEE CLAIMED DEDUC TION U/S. 80IB(10) ON THE PROJECT FOMRA TRIBHUVAN. WHILE MAKING THE AS SESSMENT FOR ASSESSMENT YEAR 2014-15, THE ASSESSING OFFICER DISALLOWED THE DEDUCTION CLAIMED U/S. 80IB(10) FOR TWO FLATS INVOKING SUB-CLAUSE E' & F TO SECTION 80IB(10). AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT (A). THE CIT(A) ALLOWED THIS APPEAL. 3. AGGRIEVED, THE REVENUE FILED THIS APPEAL WITH TH E FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO FACTS AND CIRCUMSTANCES OF THE CASE. 2.THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE A.O . TO ALLOW THE CLAIM OF DEDUCTION U/S.801B(10) BY HOLDING THAT THE ASSESSEE HAS NOT VIOLATED THE CONDITION U/S.801B(10)(F) OF THE ACT. 3.THE LD CIT(A) HAS ERRED IN NOT CONSIDERING THE DE CISION OF THE BANGALORE BENCH OF THE ITAT IN SRI.SYED ALEEMULLAH VS DCIT, B ANGALORE, IN ITA NO.389/BANG/2016 (ASST.YEAR 2011-12) WHICH IS IDENT ICAL ON FACTS AND ENDORSES THE REASONING OF THE ASSESSING OFFICER. 4. THE LD CIT(A) HAS FAILED TO APPRECIATE THAT PAYM ENT OF SUBSTANTIAL CONSIDERATION, REGISTRATION OF DOCUMENTS AND POSSESS ION TOOK PLACE MUCH AFTER THE CUT OF DATE I.E. 19M8.2009 AND HENCE DATE OF ALLOTME NT WAS SUBSEQUENT TO THIS DATE. :-3-: ITA NO. 2517/CHNY/2017 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IS PRAYED THAT THE ORDER OF THE LEARNED CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4. THE LD. DR CANVASSED THE CASE ON THE LINES OF TH E ORDER OF THE ASSESSING OFFICER AND ON LINES OF THE GROUNDS OF AP PEAL. PER CONTRA, THE LD. AR SUPPORTED THE ORDER OF THE CIT(A) AND FILED A CO PY OF THE RELEVANT PORTION OF EXPLANATORY CIRCULAR FOR FINANCE (NO.2) ACT, 200 9 AND THE GIST OF THE TRANSACTION OF THE IMPUGNED FLATS TO SHOW THAT THE IMPUGNED FINANCIAL TRANSACTION WERE COMPLETED BEFORE MARCH, 2010. FUR THER, THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER ALLOWED DEDUCT ION U/S. 80IB(10) WITH RESPECT TO 91 FLATS IN THE SAME PROJECT DURING THE ASSESSMENT YEAR 2012-13, HE HAS ALLOWED SUCH DEDUCTION WITH RESPECT TO ONE F LAT DURING THE ASSESSMENT YEAR 2013-14. HOWEVER, DISALLOWED THE DEDUCTION CL AIMED FOR THIS ASSESSMENT YEAR IN THE REMAINING TWO FLATS WHICH WERE ALLOTTED TO THE PARTIES DURING APRIL, 2007 BY RECEIPT OF SUBSTANTIAL AMOUNTS AS ON 31.03. 2009 ETC. 5. WE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL. THE RELEVANT PORTION OF THE ORDER OF THE CIT(A) IS EXTRACTED AS UNDER: THERE IS NO DISPUTE THAT RESIDENTIAL UNIT IN THE P ROJECT FOMRA TRIBUVAN WAS ALLOTTED TO INDIVIDUALS AND THEREFORE CLAUSE (E) TO SECTION 80-IB(10) NOT ATTRACTED. IT IS UNDISPUTED THAT TWO RESIDENTIAL UNIT IN THE P ROJECT FOMRA TRIBUVAN NAMELY FLAT NO.A4A WAS ALLOTTED TO MRS. SHOBANA JAM AND FLAT NO.A4B TO ASHIANA FOUNDATION OF WHICH THE HUSBAND OF MRS. SHOBANA JAM NA MELY MR. SUDHIR MEHTA IS THE PROPRIETOR. IT IS UNDISPUTED THAT TWO RESIDENTIAL UNIT IN THE P ROJECT FOMRA TRIBUVAN NAMELY A2B & C2B WERE ALLOTTED TO MR.BHAVESH AND HI S SISTER-IN-LAW MRS.DEEPIKA. IT IS UNDISPUTED THAT THREE RESIDENTIAL UNIT IN THE PROJECT FOMRA TRIBUVAN WERE :-4-: ITA NO. 2517/CHNY/2017 SOLD TO MR.VISHWANATHAN (F4A), MR.VIVEKANANADHAN (F 3A) AND MR.HEMAKUMAR (C1D). MR.VISHWANATHAN AND MR.VIVEKANANADHAN ARE OW N BROTHERS AND MR.HEMAKUMAR IS THE BROTHER IN LAW. A PERUSAL OF LEDGER EXTRACT OF MRS.SHOBANA JAM AND MR.SUDHIR MEHTA (HUSBAND & WIFE) IN THE APPELLANT BOOKS AND A FURTHER PERUSAL OF THE BUILDERS AGREEMENT DATED 26.01.2008 & 27.07.2008 ENTERED BET WEEN THE APPELLANT AND THE SAID PARTIES WOULD REVEAL THAT THE SAID FLATS WERE A LLOTTED TO THEM MUCH PRIOR TO 19.08.2009 AS EARLY AS 26.01.2008 & 27.07.2008 AND THEREFORE SUB-CLAUSE (F) TO SECTION 80-IB(10) IS UNDISPUTEDLY NOT APPLICABLE AN D THEREFORE DISALLOWANCE OF 80- IB(10) IN THE ABOVE COUNT IS TOTALLY UNJUSTIFIED AND INVALID. A PERUSAL OF LEDGER EXTRACT OF MR.BHAVESH AND HIS S ISTER-IN-LAW MRS.DEEPIKA IN THE APPELLANT BOOKS AND A FURTHER PERUSAL OF THE BUILDERS AGREEMENT DATED 25.06.2008 & 11.02.2008 ENTERED BETWEEN THE APPELLA NT AND THE SAID PARTIES WOULD REVEAL THAT THE SAID FLATS WERE ALLOTTED TO THEM MUC H PRIOR TO 19.08.2009 AS EARLY AS 25.06.2008 & 11.02.2008 AND THEREFORE SUB-CLAUSE (1) TO SECTLOFI 80-IB(10) IS UNCLISPUTEDLY NOT APPLICABLE AND THEREFORE DISALLOW ANCE OF 80-IB(10) IN THE ABOVE COUNT IS TOTALLY UNJUSTIFIED AND INVALID FURTHER THE SAID PARTIES WOULD NOT FALL EVEN UNDER RELATIONSHIP DEFINED IN SUB-CLAUSE (F) OF SECTI ON 80-IB(10) AND IT IS ERRONEOUS FINDING THAT MR.BHAVESH REPRESENTS MRS.DEEPIKA ONLY BECAUSE THE SOURCE OF FUNDS ARE FROM A COMMON SOURCE OF INCOME. A PERUSAL OF LEDGER EXTRACT OF MR.VISHWANATHAN (F4A ), MR.VIVEKANANADHAN (F3A) AND MR.HEMAKUMAR (CID). IN THE APPELLANT BOOK S AND A FURTHER PERUSAL OF THE BUILDERS AGREEMENT DATED 14.01.2008, 25.01.2008 & 3 0.01.2008 ENTERED BETWEEN THE APPELLANT AND THE SAID PARTIES WOULD REVEAL THA T THE SAID FLATS WERE ALLOTTED TO THEM MUCH PRIOR TO 19.08.2009 AS EARLY AS 14.01.200 8, 25.01.2008 & 30.01.2008 AND THEREFORE SUB-CLAUSE (F) TO SECTION 80-IB(10) IS UNDISPUTEDLY NOT APPLICABLE AND THEREFORE DISALLOWANCE OF 80-IB(10) IN THE ABOVE COU NT IS TOTALLY UNJUSTIFIED AND INVALID FURTHER THE SAID PARTIES WOULD NOT FALL EVEN UNDER RELATIONSHIP DEFINED IN SUB-CLAUSE (I) OF SECTION 80-18(10) CONSIDERING THE ABOVE FACTUAL ASPECTS AND UNCONTROV ERTED SECTION SUB CLAUSE (E) & (F) OF SECTION 801B(10) IS UNAMBIGUOUS AND READS AS FOLLOWS THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDERTAKI NG DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31ST D AY OF MARCH, [2008] BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFITS D ERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING P ROJECT IF, (E) NOT MORE THAN ONE RESIDENTIAL UNIT IN THE HOUSI NG PROJECT IS ALLOTTED TO ANY PERSON NOT BEING AN INDIVIDUAL; AND (F) IN A CASE WHERE A RESIDENTIAL UNIT IN THE HOUSIN G PROJECT IS ALLOTTED TO A PERSON AN INDIVIDUAL, NO OTHER RESIDENTIAL UNIT IN SUCH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSONS, NAMELY: (I) THE INDIV IDUAL OR THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL, (II) THE HINDU UN DIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA, (III) ANY PERSON REPRESENT ING SUCH INDIVIDUAL, THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDIVIDED FAMILY M WHICH SUCH INDIVIDUAL IS THE KARTA.]. THE AMENDMENT TO SEC 801B(10) INTRODUCING CLAUSE (E ) & (1) TO SECTION 80- IB( 10) ONLY W.E.F 1.4.2010 AND FURTHER IT IS EQUALL Y UNDISPUTED THAT AS PER CIRCULAR 5 OF 2010 DATED 3.06.2010 EXPLANATORY NOTES TO THE P ROVISIONS OF THE FINANCE :-5-: ITA NO. 2517/CHNY/2017 (NO.2) ACT, 2009 , A COPY OF WHICH IS ENCLOSED THE RESTRICTIONS REGARDING ALLOTMENT OF RESIDENTIAL UNITS SHALL NOT APPLY IN RESPECT OF A LLOTMENTS MADE BEFORE 19.08.2009 AND WILL APPLY ONLY IN RELATION TO A.Y.2010-I1 ONWA RDS. THUS THE AMENDMENT WHICH IS SPECIFICALLY PROSPECTIVE I.E. 1 1OIO AND NOT RET ROSPECTIVE HENCE ASSESSEE HAS NOT VIOLATED SEC 801B(10)(E) AND SEC 801B(10)(F) THEREFOR E THE ASSESSEE IS ELIGIBLE FOR CLAIM OF DEDUCTION U/S SEC 801B(10) FOR RS.1,18,97, 973/-.THE AO IS DIRECTED TO ALLOW CLAIM OF DEDUCTION U / S SEC 801B( 10) FOR RS. 1,18,97,973/-. THE APPELLANT THEREFORE SUCCEEDS IN APPEAL HENCE THE GROUND OF APPE AL ON THIS ISSUE IS ACCORDINGLY ALLOWED. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. FROM THE ABOVE, IT IS CLEAR THAT THE CIT(A) HAS VER IFIED THE IMPUGNED TRANSACTIONS AND FOUND THAT THE IMPUGNED TRANSACTI ONS HAPPENED PRIOR TO 19.08.2009 AND DEDUCTION CLAIMED IS IN ACCORDANCE W ITH THE BOARD CIRCULAR 5 OF 2010 DATED 03.06.2010. THE REVENUE IS NOT ABLE TO ASSAIL THE FINDINGS RECORDED BY THE CIT(A) AND HENCE ITS APPEAL IS DISM ISSED. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 2018 AT CHENNAI. SD/- ( ) (GEORGE MATHAN) ! ' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, * /DATED: 14 TH JUNE, 2018 JPV %-./0/ /COPY TO: 1. 1 / APPELLANT 2. -31 /RESPONDENT 3. 4 ) ( /CIT(A) 4. 4 /CIT 5. /- /DR 6. /GF