M/s. Shreeji Corporation, Ahmedabad V. The Income tax Officer,Ward-9(1, Ahmedabad

ITA 2560/AHD/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1789 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 07-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIMALENDU VERMA
• Keywords: TDS
• Section: 143(3); 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : SMC BENCH : AHMEDABAD (BEFORE HONBLE SHR I T.K. SHARMA, J.M .) I.T.A. NO. 2560/AHD./2009 ASSESSMENT YEAR : 2006-2007 M/S. SHREEJI CORPORATION, AHMEDABAD -VS- THE I.T.O., WARD-9(1), AHMEDABAD (PAN : ABDFS 7256C) (APPELLANT) (RESPONDENT) APPELLANT BY : NONE (WRITTEN SUBMIS SION) RESPONDENT BY : SHRI VIMALENDU VERMA, D .R. O R D E R THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 23.07.2009 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XV, AH MEDABAD CONFIRMING THE DISALLOWANCE OF RS.35,000/- WHICH WAS MADE BY THE ASSESSING OFFI CER UNDER SECTION 40(A)(IA) OF THE I.T. ACT, 1961 FOR THE ASSESSMENT YEAR 2006-2007. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT ON LAND AREA EXCEEDING ONE ACRE. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED RETURN OF IN COME DECLARING TOTAL INCOME AT NIL ON 16.11.2006. THE ASSESSING OFFICER FRAMED THE ASSESS MENT UNDER SECTION 143(3) ON 04.04.2008 AT TOTAL INCOME OF RS.35,000/-. FOR THIS ASSESSMENT YE AR, THE ASSESSING OFFICER DISALLOWED RS.35,000/- UNDER SECTION 40(A)(IA) OF I.T. ACT, 19 61 ON THE GROUND THAT ASSESSEE FIRM HAS NOT DEDUCTED TDS TILL DATE ON PAYMENT OF RS.35,000/- MA DE TO ARCHITECT. 3. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS), IT WAS SUBMITTED THAT AS THE WORK WAS IN PROGRESS, NO INCOME HAS ACC RUED TO THE ASSESSEE AND RETURN OF INCOME AT NIL WAS FILED. IT WAS ALSO CONTENDED THAT WORK-IN-P ROGRESS OF EACH YEAR WOULD BE CARRIED FORWARD TILL THE TIME THE PROJECT IS FINALIZED AND FLATS AR E SOLD AND INCOME IS DETERMINED. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS) CONFIRMED THE DISALLOWANCE ON THE 2 ITA NO. 2560-AHD-2009 GROUND THAT IT IS WRONG TO SAY THAT THE ASSESSEE HA S NOT CLAIMED THE EXPENSES ONLY BECAUSE THESE EXPENSES WERE FINALLY CLAIMED WHEN THE FINAL SALE P ROCEEDS OF THE PROJECT WOULD BE ADJUSTED IN THE ASSESSMENT YEAR 2008-09. 4. AGGRIEVED WITH THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. ON THE DATE OF HEARING BEFORE THE TRIBUNAL, NONE APPEARED ON BEHALF OF THE ASSESSEE. ONLY WRITTEN SUBMISSIONS DATED 07.03.2011 WERE FILED WHE REIN IT WAS REQUESTED TO DECIDE THE APPEAL ON THE BELOW FACTS AND MERITS OF THE CASE. THE WRIT TEN SUBMISSIONS ARE REPRODUCED HEREUNDER: THE HONOURABLE MEMBERS MAY KINDLY NOTE THAT THE M OTHER OF A R. HAS EXPIRED AND HE HAS EXPRESSED HIS INABILITY TO CONDUCT THE HEARING ON OS/03/2011. HOWEVER, THE APPEAL HEARING MAY BE CONDUCTED ON MERITS ON THE FACTS TH AT THE ONLY SOURCE OF INCOME OF THE ASSESSEE IS FROM RESIDENTIAL HOUSING PROJECT THE P ROFIT FROM WHICH IS 100% TAX DEDUCTIBLE U/S.80IB(10) OF THE ACT. THE DEDUCTION OF THE ENTI RE INCOME FROM THE ONLY PROJECT IS ADMITTED BY THE LD. A.O. UNDER AN ORDER PASSED FOR AY 2008-09 DT.20/10/2010. IT IS THEREFORE SUBMITTED THAT THE DISALLOWANCE OF THE E XPENSE CLAIM ON ACCOUNT OF APPLICABILITY OF SEC.40(A)(IA) HAS RESULTED INTO THE REDUCTION I N THE COST OF THE WORK M-PROGRESS OF THE HOUSING PROJECT. THIS DISALLOWANCE INCREASES OR EN HANCES THE INCOME OF ELIGIBLE BUSINESS, THE INCOME IS DEDUCTIBLE @100%. THE SOURCE OF THE INCOME IS HOUSING PROJECT ONLY. THEREFORE, THE DISALLOWANCE OF EXPENSES UNDER THE PROVISIONS OF LAW DOES NOT RESULT INTO TAXABLE INCOME. MOREOVER, AS PER THE ACCOUNTING POLICY ADOPTED OF COMPLETION PROJECT METHOD, THE INCOME ACCRUE NOT IN THE YEAR UNDER APPEAL BUT IN THE YEAR WHEN THE PROJECT IS COMPLETED I.E. AY 2008-09 AND THEREFORE THERE DOES NOT ACCRU E ANY INCOME CHARGEABLE TO LAX FOR THE YEAR UNDER APPEAL. IT IS THEREFORE REQUESTED THAT THE HON. MEMBERS MA Y BE PLEASED TO CONDUCT THE HEARING ON MERITS. 6. ON THE OTHER HAND, SHRI VIMALENDU VERMA, D.R., A PPEARING ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS). 7. AFTER HEARING THE LD. D.R. AND CAREFULLY GOING T HROUGH THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE, I AM OF THE VIEW THAT IN THE ASSESSME NT YEAR UNDER APPEAL, NO DISALLOWANCE UNDER SECTION 40(A)(IA) IS CALLED FOR. IT IS PERTINENT TO NOTE THAT IN THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS NOT CLAIMED ARCHITECT FEE AMOUNTING TO RS.35,000/- AS EXPENDITURE. THE ASSESSEE HAS ALSO FILED THE COPY OF ASSESSMENT ORDER FOR THE ASS ESSMENT YEAR 2008-09 UNDER SECTION 143(3) 3 ITA NO. 2560-AHD-2009 DATED 20.10.2010 WHEREIN THE ASSESSING OFFICER ASSE SSED THE INCOME OF RESIDENTIAL PROJECT KNOWN AS SIGNATURE RESIDENCY AT RS.3,32,89,200/-. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ENTIRE INCOME IS EXEMPT UNDER CHAPTER VIA OF TH E I.T. ACT, 1961. THEREFORE, THE DISALLOWANCE OF RS.35,000/- UNDER SECTION 40(A)(IA) MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), IN THE IMPUGNED ORDER, IS DELETED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 .03.2011. SD/- (T.K. SHARMA) JUDICIAL MEMBER DATED : 25/03/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, 4) CIT CONCERNED, 5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S.