DCIT, Central Circle-20, V. Ansal Housing & Construction Ltd.,

ITA 2774/DEL/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8365 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-06-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 07-06-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S MEENA
• Keywords: Revised return
• Section: 43B; 80IB; 139(5); 80HH; 264

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C: NEW DELHI BEFORE SHRI D.R. SINGH, JUDICIAL MEMBER AND SHRI DEEPAK R. SHAH, ACCOUNTANT MEMBER I.T.A.NOS.2773 & 2774/DEL/2004 ASSESSMENT YEAR : 1999-2000 & 2000-01 DY. COMMISSIONER OF INCOME-TAX, M/S. ANSAL HOUS ING & CONSTRUCTION CENTRAL CIRCLE-20, NEW DELHI. VS. LTD., 115 ANSAL BHAWAN, 16, K.G. MARG, NEW DELHI. C.O. NO.50/DE/2007 (IN ITA NO.2773/DEL/2004) ASSESSMENT YEAR : 1999-2000 M/S. ANSAL HOUSING & CONSTRUCTION DY. COMMISSI ONER OF INCOME-TAX, LTD., UGF-15, INDRAPRAKASH BLDG., VS. CENTRAL C IRCLE-20, NEW DELHI. 21, BARAKHAMBA ROAD, NEW DELHI. (APPELLANTS) (RESPONDENTS) DEPARTMENT BY : SHRI R.S. MEENA, CIT -DR. ASSESSEE BY : S/SHRI AJAY VOHRA, ADVOCATE & GAURAV JAIN, CA. O R D E R PER BENCH THESE TWO APPEALS BY THE REVENUE FOR THE ASSESSMENT YEARS 1999- 2000 AND 2000-01 ARE DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, DATED 12 TH MARCH, 2004 AND 19 TH MARCH, 2004. THE 2 ASSESSEE FILED CROSS OBJECTION AGAINST REVENUES A PPEAL FOR ASSESSMENT YEAR 1999-2000. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS BEFORE US:- ITA NO.2773/DEL/2004 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,72,87,740/- MADE BY THE A.O. ON ACCOUNT OF NOTIONAL ANNUAL LETT ING VALUE IN RESPECT OF UNSOLD FLATS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO IGNORE THE ADDITION OF RS.26,92,173/- ON ACCOUNT OF STAMP DUTY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW DEDUCTION OF RS.4,38,73,120/- U/S 80IA(4F) AFTER DUE VERIFICATIO N. IT IS A BELATED RETURN AND THE LD. CIT(A) HAS NOT DISCUSSED THE ISSUE WHILE DIRECTING THE A.O. TO ALLOW THE DEDUCTION. ITA NO.2774/DEL/2004 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,17,73,665/- MADE BY THE A.O. ON ACCOUNT OF NOTIONAL ANNUAL LETT ING VALUE IN RESPECT OF UNSOLD FLATS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO IGNORE RS.1,05,70,934/- SHOWN AS INCOME BY THE ASSESSEE IN ITS RETURN OF INCOME ON THE GROUND THAT THE DEPTT. SHOULD FOLL OW A CONSISTENT APPROACH OF RELYING UPON THE AUDITED ACC OUNTS OF THE ASSESSEE FOR WORKING OUT THE PROFITABILITY OF NEEL PADAM-1 PROJECT EVEN WHEN THE ASSESSEE IS CHALLENGING THE D EPARTMENTS STAND IN APPEALS. THE LD. CIT(A) HAS ALSO ERRED IN DIRECTING THE A.O. TO ALLOW THIS CLAIM OF THE ASSESSEE MADE AFTER THE LAST DATE 3 OF FILING OF REVISED RETURN ALLOWED AS PER THE I.T. ACT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3. AT THE TIME OF HEARING BOTH THE COUNSELS AGREED THAT GROUND NO.1 IN APPEAL FOR BOTH THE YEARS REGARDING INCLUSION OF NO TIONAL ANNUAL LETTING VALUE OF UNSOLD FLATS/SPACE ETC. HELD IN STOCK-IN-TRADE I S DECIDED IN FAVOUR OF THE ASSESSEE BY VARIOUS ORDERS OF TRIBUNAL FOR ASSESSME NT YEAR 1988-89 TO 1998-99. THE TRIBUNAL HAVE CONSISTENTLY HELD THAT SINCE UNSOLD FLATS WHICH WERE VACANT WERE HELD BY THE ASSESSEE AS STOCK-IN-T RADE AND HENCE NOTIONAL ANNUAL LETTING VALUE CANNOT BE ADDED UNDER SECTION 22 OF THE ACT. FOLLOWING THE ORDERS OF THE TRIBUNAL, WE HOLD THAT THERE IS N O GROUND FOR ADDITION ON ACCOUNT OF NOTIONAL ANNUAL LETTING VALUE IN RESPECT OF UNSOLD FLATS. 4. AS REGARDS GROUND NO.2 FOR BOTH THE YEARS, WE FI ND THAT IDENTICAL ISSUE AROSE BEFORE THE TRIBUNAL IN APPEALS BY THE ASSESSE E FOR ASSESSMENT YEAR 1994-95 TO 1998-99 IN ITA NOS.1204, 668/DEL OF 199 8, 2200, 4839/DEL OF 2000 AND 4575/DEL OF 2003. THE TRIBUNAL VIDE ITS O RDER 11 TH APRIL, 2008 HELD AS UNDER:- 10. THE NEXT ISSUE IN REGARD TO THE DENIAL OF THE CLAIM OF DEDUCTION ON ACCOUNT OF PROPORTIONATE DEDUCTION OF PERCENTAGE SALES WORKED OUT ON PERCENTAGE COMPLETION METHOD AN D IGNORING THE CONSISTENT METHOD OF ACCOUNTING FOLLO WED BY THE ASSESSEE. IN REGARD TO THIS ISSUE, SHRI VOHRA EXPL AINING THE FACTS SUBMITTED AS UNDER: 10.1 THE APPELLANT IS ENGAGED IN THE BUSINESS OF RE AL ESTATE DEVELOPMENT AND CONSTRUCTION AND HAS BEEN FOLLOWIN G 4 PERCENTAGE OF COMPLETION METHOD IN ACCORDANCE WITH ACCOUNTING STANDARD 7 RELATING TO ACCOUNTING ON CON STRUCTION CONTRACTS ISSUED BY THE INSTITUTE OF CHARTERED ACCO UNTANT OF INDIA, TO RECOGNIZE INCOME AND EXPENSES. IN ACCOR DANCE WITH THIS METHOD, TOTAL COST OF THE PROJECT IS ESTIMATED BY TAKING INTO ACCOUNT THE TOTAL EXPENDITURE TO BE INCURRED BY THE COMPANY. THE PERCENTAGE OF EXPENDITURE INCURRED UNTIL THE E ND OF THE RELEVANT FINANCIAL YEAR TO THE TOTAL ESTIMATED CON STRUCTION COST IS DETERMINED AND APPLIED TO THE SALE VALUE OF THE LAND SOLD UPTO THE END OF THAT YEAR. HOWEVER, REVENUE IS RECOGNIZ ED ONLY IF THE AFORESAID PERCENTAGE OF EXPENDITURE INCURRED TO TH E TOTAL ESTIMATED CONSTRUCTION COST EXCEEDS 30%. IN CASE, THE SAID PERCENTAGE EXCEEDS 90%, THE REVENUE IS RECOGNIZED O N 100% BASIS ON THE ASSUMPTION THAT THE PROJECT HAS BEEN 1 00% COMPLETED. THE DIFFERENCE BETWEEN THE PERCENTAGE S ALE VALUE OF THE LAND AS COMPUTED ABOVE AND THE EXPENDITURE INCU RRED UNTIL THE END OF THE RELEVANT FINANCIAL YEAR IS RECOGNIZE D AS PROFIT OR LOSS IN THE BOOKS OF ACCOUNT AS WELL AS THE SAME IS TAKEN FOR THE PURPOSES OF ACT. THE APPELLANT COMPANY ACQUIRED A LAND IN GHAZIABAD FOR A PROJECT CALLED NEELPADAM I PROJEC T ON LEASE IN FINANCIAL YEAR 1989-90. WITH RESPECT TO SAID PR OJECT, IT WAS DISPUTED BY THE GHAZIABAD STAMP AUTHORITY THAT THE APPELLANT COMPANY WAS LIABLE TO A STAMP DUTY OF RS.38,27,960/ - WAS ALSO IMPOSED UPON THE APPELLANT BY THE SAID AUTHORITY. IN AGGREGATE, TOTAL DEMAND OF RS.1,14,83,880/- WAS RAISED UPON TH E APPELLANT BY THE ORDER DATED 24.04.1991, WHICH WAS DISPUTED B Y THE APPELLANT BEFORE THE ALLAHABAD HIGH COURT. SIMILAR LY, WITH RESPECT TO PROJECT AHIANA AT LUCKNOW, A DEMAND OF ADDITIONAL STAMP DUTY AGGREGATING TO RS.78,03,198/- WAS RAISED UPON THE APPELLANT BY THE ORDER OF LUCKNOW DEVELOPMENT AUTHO RITY, DATED 01.07.92. THE APPELLANT DID NOT RECOGNIZED THE AFORESAID ADDI TIONAL DEMAND OF STAMP DUTY, AMOUNTING TO RS.1,14,83,880/- AND 78,03,198/- IN THE BOOKS OF ACCOUNT, BUT CONSIDERE D THE SAME WHILE ESTIMATING THE TOTAL CONSTRUCTION COST OF THE PROJECT WHILE COMPUTING PROFIT FOR THE PURPOSES OF ACT IN THE RE TURN OF INCOME SINCE ASSESSMENT YEAR 1993-94. THE APPELLA NT INCLUDED THE AFORESAID ADDITIONAL DEMAND OF STAMP DUTY IN TH E ESTIMATE PROJECT COST FOR THE PURPOSES OF THE ACT, WHICH STO OD DISPUTED 5 BEFORE THE HIGHER AUTHORITY, RELYING UPON THE DECIS ION OF ALLAHABAD HIGH COURT IN THE CASE OF SWEDESHI COTTON MILL CO. LTD. : 125 ITR 33 AND DECISION OF SUPREME COURT IN THE CASE OF KEDAR NATH JUTE MANUFACTURING CO. LTD. : 82 ITR 363 . THE DIFFERENCE OF RS.10,76,196/- AROSE IN THE PROFIT W ITH RESPECT TO AFORESAID PROJECTS IN THE BOOKS OF ACCOUNT AND THE PROFIT COMPUTED FOR THE PURPOSE OF THE ACT. (DETAIL AT P AGE 8 OF PAPERBOOK), WHICH WAS CLAIMED AS DEDUCTION IN THE R ETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR. THE ASSES SING OFFICER DID NOT ALLOWED THE AFORESAID DEDUCTION BY FOLLOWIN G THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 1993-94. THE COMMISSIONER OF INCOME-TAX (APPEALS) DID NOT ALLOW THE AFORESAID DEDUCTION ON THE GROUND THAT THE LIABILIT Y TOWARDS STAMP DUTY WAS COVERED BY THE PROVISIONS OF SECTION 43B OF THE ACT AND WAS THUS ALLOWABLE ONLY ON PAYMENT BASIS. THE AFORESAID METHOD OF COMPUTING PROFIT FOR THE PURPOS ES OF ACT AND DEDUCTION SO CLAIMED FOR THE AFORESAID TWO PROJ ECTS WAS UPHELD BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IN THE ASSESSMENT YEARS 1993-94 AND 1994-95. IN THE ASSES SMENT ORDER FOR THE ASSESSMENT YEAR 1993-94, THE AFORESAI D CLAIM OF DEDUCTION MADE FOR BOTH THE PROJECTS WAS NOT ALLOWE D BY THE ASSESSING OFFICER. ON APPEAL, THE COMMISSIONER OF INCOME- TAX (APPEALS) ALLOWED THE CLAIM OF DEDUCTION FOR B OTH THE IMPUGNED PROJECTS, COMPUTED ON THE BASIS OF INCLUSI ON OF COST OF STAMP DUTY DISPUTED BEFORE THE APPELLATE AUTHORI TIES IN THE ESTIMATED COST OF CONSTRUCTION TO ARRIVE AT PROFITS FROM SALE ON PERCENTAGE OF COMPLETION METHOD, FOR THE PURPOSES OF THE ACT. FOR THE NEELPADAM-I, PROJECT, THE COMMISSIONER OF I NCOME-TAX (APPEALS), HOWEVER, HELD THAT THE CLAIM OF ADDITION AL STAMP DUTY WAS ALLOWABLE WHILE COMPUTING PROFIT FOR THE P URPOSES OF THE ACT BUT OBSERVED THAT SINCE THE DEMAND HAS AROS E IN THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 1992-93, ONLY PROPORTIONATE CLAIM WAS ALLOWABLE IN THE ASSESSMENT YEAR 1993- 94. WITH SUCH FINDINGS, THE MATTER WAS RESTORED TO THE FILE OF ASSESSING OFFICER. WHILE GRANTING APPEAL EFFECT TO THE AFORESAID ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS), THE ASSESSING OFFICER, VIDE ORDER DATED 24.8.1998, ALLOWED THE CL AIM OF DEDUCTION FOR THE ASHIANA PROJECT AND FOR NEELPADA M KUNJ I WORKED OUT THE PROPORTIONATE DEDUCTION ALLOWABLE FO R ASSESSMENT YEAR 1993-94 AND 1992-93. THE PROPORTIO NATE 6 DEDUCTION FOR THE ASSESSMENT YEAR 1993-94 WAS ALLOW ED BUT THE PROPORTIONATE CLAIM FOR THE ASSESSMENT YEAR 1992-93 WAS DISALLOWED ON THE GROUND THAT SAME WAS NOT CLAIMED BY THE APPELLANT ITSELF IN THE RETURN OF INCOME. SIMILAR CLAIMS OF DEDUCTION DISALLOWED IN THE ASSESSMENT ORDER FOR TH E ASSESSMENT YEAR 1994-95 WERE ALLOWED BY THE COMMISSIONER OF IN COME-TAX (APPEALS), WHILE FOLLOWING THE ORDER FOR ASSESSMENT YEAR 1993- 94. THE DEPARTMENT HAS ACCEPTED THE FINDING OF THE COMMISSIONER OF INCOME-TAX (APPEALS) FOR THE ASSESS MENT YEARS 1993-94 AND 1994-95, AS NO APPEAL WAS FILED W ITH RESPECT TO IMPUGNED ISSUE IN THOSE YEARS. ON APPEAL BEING FILED BY THE APPELLANT AGAINST THE FINDING OF THE COMMISSIONER O F INCOME- TAX (APPEALS) FOR PROPORTIONATE CLAIM OF DEDUCTION WITH RESPECT TO NEELPADAM-I PROJECT IN THE ASSESSMENT YEAR 1993 -94, THE TRIBUNAL HAS VIDE ORDER DATED 30.11.2007 HAS UPHELD THAT TOTAL DEDUCTION WAS ADMISSIBLE IN THE ASSESSMENT YEAR 199 3-94. IN VIEW OF THE ABOVE, ON GROUNDS OF CONSISTENCY ITS ELF THE IMPUGNED DISALLOWANCE MADE BY THE ASSESSING OFFICER IS LIABLE TO BE DELETED. RELIANCE, IN THIS REGARD, IS PLACE D ON FOLLOWING DECISIONS: 1. RADHASOAMI SATSANG V. CIT : 193 ITR 321 (S C) 2. DIT (E) V. APPAREL EXPORT PROMOTION COUNCIL: 244 IT R 734 (DEL.) 3. CIT VS. NEO POLYPACK (P) LTD. 245 ITR 492 (DEL.) 4. CIT VS. A.R.J. SECURITY PRINTERS : 264 ITR 276 (DEL .) AS REGARDS, THE APPLICABILITY OF SECTION 43B OF THE ACT IN THE IMPUGNED ADJUSTMENT OF COST OF DUTY IN THE ESTIMATE D COST OF CONSTRUCTION OF THE PROJECT ALLEGED BY THE CIT(A), IT IS SUBMITTED AS UNDER: THE LIABILITY ARISING BY WAY OF ADDITIONAL STAMP DU TY DISPUTED BEFORE HIGHER AUTHORITIES IS ONLY INCLUDED IN THE E STIMATED TOTAL CONSTRUCTION COST OF THE PROJECT TO BE TAKEN IN THE DENOMINATOR, WHILE COMPUTING PERCENTAGE OF PROJECT COMPLETION. THE AFORESAID PERCENTAGE OF PROJECT COMPLETION IS APPL IED TO THE ESTIMATED SALE VALUE OF THE LAND TO ARRIVE AT SALES FOR THE RELEVANT FINANCIAL YEAR. FROM THE AFORESAID ESTIMATED SALES VALUE FOR THE 7 FINANCIAL YEAR, THE EXPENSES ACTUALLY INCURRED TILL DATE ARE REDUCED TO COMPUTE PROFITS OF THE PROJECT FOR THAT YEAR. THE DEDUCTION FOR EXPENSES DO NOT INCLUDE COST OF ESTIM ATED STAMP DUTY AND, THEREFORE, NO DEDUCTION IS CLAIMED BY THE APPELLANT IN VIOLATION OF PROVISIONS OF SECTION 43B OF THE ACT. PROVISIONS OF SECTION 43B DO NOT HAVE ANY APPLICABILITY ON THE IM PUGNED ESTIMATION AND COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN APPLYING PROVISIONS OF THAT SECTION. 10.1 THE LD. DEPARTMENTAL REPRESENTATIVE ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF THE ASSES SING OFFICER AND COMMISSIONER OF INCOME-TAX (APPEALS). IT WAS HIS SUBMISSION THAT THE ISSUE AS TO WHETHER THERE WAS C LAIM FOR EXPENDITURE AND WHETHER THE SAME WAS LIABLE TO BE DISALLOWED UNDER THE PROVISIONS OF SECTION 43B WOULD HAVE TO BE CONSIDERED AFRESH BY THE ASSESSING OFFICER IN SO FA R AS THESE ISSUES AS SUBMITTED BY THE LD. AR WAS NOT AVAILABL E BEFORE THE ASSESSING OFFICER. 10.2 SINCE THE ASSESSEE IS FOLLOWING PERCENTAGE COM PLETION METHOD FOR RECOGNIZING INCOME, THE ASSESSEE WAS JUS TIFIED IN TAKING INTO ACCOUNT THE PROBABLE STAMP DUTY PAYABLE PURSUANT TO THE DEMAND RAISED BY THE GHAZIABAD STAMP AUTHORITY. THIS METHOD WAS BEING FOLLOWED SINCE EARLIER YEARS AND A CCEPTED AS SUCH. HOWEVER, TO ARRIVE AT A CORRECT AMOUNT OF DE DUCTION PERMISSIBLE, THE MATTER IS RESTORED BACK TO THE FIL E OF AO. THE AO SHALL CONSIDER THE ISSUE AS CONSIDERED FOR ASSTT . YEARS 1992-93, 1993-94 AND 1994-95 AS PER THE DIRECTIONS OF LEARNED CIT(A). ON THE BASIS OF THE DIRECTION CONTAINED IN EARLIER YEARS APPELLATE ORDER, WHICH HAVE ATTAINED FINALITY, THE AO SHALL DETERMINE THE DEDUCTION PERMISSIBLE TO THE ASSESSEE FOR THIS YEAR ALSO. ACCORDINGLY, THE MATTER IS RESTORED BACK TO T HE FILE OF AO. ACCORDINGLY, THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO BE DECIDED AFRESH AS PER THE DIRECTIONS OF THE TRIBUNA L FOR EARLIER YEARS. 5. AS REGARDS GROUND NO.3 IN APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 1999-2000, THE FACTS ARE THAT THE ASSESSEE FILED OR IGINAL RETURN OF INCOME ON 8 30 TH DECEMBER, 1999. IN THE SAID RETURN CLAIM FOR DEDU CTION UNDER SECTION 80IA(4) WAS NOT CLAIMED. THE ASSESSEE FILED REVISE D RETURN ON 27 TH DECEMBER, 2001, WHICH IS BEYOND THE TIME LIMIT PRES CRIBED UNDER SECTION 139(5) OF THE ACT. IN THE SAID RETURN THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IA(4). THE ASSESSING OFFICER HELD THAT S INCE NO DEDUCTION WAS CLAIMED IN ORIGINAL RETURN AND THE CLAIM IS MADE IN REVISED RETURN, WHICH IS BEYOND THE TIME LIMIT, THE DEDUCTION IS NOT ALLOWED . 6. THE LEARNED CIT(A) HELD THAT THE ASSESSING OFFIC ER WAS WRONG IN NOT CONSIDERING THE APPELLANTS CLAIM ON MERIT. HE ACC ORDINGLY DIRECTED THE ASSESSING OFFICER TO GO THROUGH THE DETAILS FILED A ND ALLOW DEDUCTION UNDER SECTION 80IA(4) AFTER DUE VERIFICATION. 7. THE LEARNED DR SHRI R.S. MEENA SUBMITTED THAT SI NCE THE RETURN WAS FILED BEYOND THE LIMITATION PRESCRIBED, THE CLAIM C OULD NOT BE ENTERTAINED BY THE CIT(A). RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD., 284 ITR 323. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI AJAY V OHRA SUBMITTED THAT THE CLAIM WAS MADE DURING THE COURSE OF ASSESSMENT ITSELF THOUGH BELATEDLY. IF AN ASSESSEE IS ENTITLED TO CERTAIN CLAIM, THE AS SESSING OFFICER IS BOUND TO CONSIDER THE SAME FOR COMPUTATION OF CORRECT INCOME . RELIANCE WAS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. JAI 9 PARABOLIC SPRINGS LTD., 2008-TIOL-218-HC-DEL-IT IN ITA NO.798/2007 DATED 7 TH APRIL, 2008. IN THE SAID CASE THE HONBLE DELHI HIGH COURT CONSI DERING THE DECISION OF HON`BLE SUPREME COURT IN THE CASE OF GO ETZE (INDIA) LTD. (SUPRA) HELD THAT THERE IS NO PROHIBITION ON THE POWERS OF THE TRIBUNAL TO ENTERTAIN AN ADDITIONAL GROUND WHICH ACCORDING TO THE TRIBUNAL A RISES IN THE MATTER AND FOR THE JUST DECISION OF THE CASE. SHRI VOHRA ALSO RELIED UPON THE DECISION OF ITAT, D ELHI IN THE CASE OF JCIT VS. HERO HONDA FINLEASE LTD. IN ITA NO.99/DEL/ 2001 DATED 5 TH MARCH, 2008. IN THE SAID CASE THERE WAS DIFFERENCE OF OPI NION BETWEEN THE MEMBERS OF THE TRIBUNAL. THE THIRD MEMBER AGREED WITH THE VIEW OF THE ACCOUNTANT MEMBER TO HOLD THAT A CLAIM FOR SPECIAL DEDUCTION W AS MADE BY THE ASSESSEE NOT IN HIS RETURN BUT IN THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSING OFFICER IS REQUIRED TO ENTERTAIN THE CLAIM. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THOUGH THE CLAIM WAS NOT MADE IN THE ORIGIN RETURN AND THE REV ISED RETURN WAS FILED BELATEDLY, YET THE CLAIM WAS MADE IN THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF. WHEN A CLAIM IS MADE PRIOR TO COMPLETION O F ASSESSMENT PROCEEDINGS, THE SAME IS REQUIRED TO BE LOOKED INTO FOR CORRECT COMPUTATION OF INCOME. IT IS NOT ONLY THE RIGHT OF THE ASSESSEE BU T A DUTY OF THE ASSESSING 10 OFFICER TO CONSIDER THE CLAIM AND ALLOW THE SAME AS PER LAW. THEREFORE, IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF JAI PARABOLIC SPRINGS LTD. (SUPRA) AS ALSO BY THE ITAT DELHI IN THE CASE OF HERO HONDA FINLEASE LTD. (SUPRA), WE HOLD THAT THE LEARN ED CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO EXAMINE THE C LAIM AND ALLOW THE SAME IN ACCORDANCE WITH LAW. C.O. NO.50/DEL/2007 10. IN THE CROSS OBJECTION THE ASSESSEE HAS RAISED A GROUND THAT THE CLAIM UNDER SECTION 80IA(4) WAS LAWFULLY MADE. IN THE DE CISION IN THE CASE OF GOETZE INDIA LTD. (SUPRA), THE HONBLE SUPREME COUR T HAS HELD THAT THE DECISION WAS LIMITED TO THE POWER OF THE ASSESSING OFFICER TO ENTERTAIN CLAIM FOR DEDUCTION OTHERWISE THAN BY REVISED RETURN, AND DID NOT IMPINGE ON THE POWER OF TRIBUNAL TO ENTERTAIN SUCH ADDITIONAL GROU ND. SINCE IN THE APPEAL OF REVENUE WE HAVE UPHELD THE ACTION OF THE LEARNED CIT(A) TO DIRECT THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSES SEE FOR DEDUCTION UNDER SECTION 80IA(4), THE EFFECT IS THAT THIS GROUND IS TREATED AS ALLOWED. 11. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUND I N THE CROSS OBJECTION FOR DEDUCTION UNDER SECTION 35D OF THE ACT IN RESPECT O F THE PRELIMINARY EXPENSES. 11 12. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED THAT IDENTICAL ISSUE AROSE IN APPEALS BY T HE ASSESSEE FOR ASSESSMENT YEARS 1994-95 TO 1998-99. THE TRIBUNAL IN THE SAID ORDER HAVE HELD THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 35D. THE TRIBUNAL HELD AS UNDER:- 4.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S NOTICED THAT AS PER THE PROVISIONS OF SECTION 35D(I)(I), I F THE BUSINESS IS ALREADY COMMENCED AND AN EXPENDITURE IS INCURRED WI TH REGARD TO THE PUBLIC ISSUE THEN THE DEDUCTION IS ALLOWED O NLY IF THE EXPENDITURE IS IN CONNECTION WITH THE EXPANSION OF THE INDUSTRIAL UNDERTAKING OR SET UP OF A NEW INDUSTRIAL UNIT . IN THE PRESENT CASE IT IS NOT IN DISPUTE THAT THE ASSESSEE IS AN E XISTING COMPANY AND THE PUBLIC ISSUE IN QUESTION WAS BY THE ASSESSE E NOT BEFORE THE COMMENCEMENT OF ITS BUSINESS. THE QUESTION FOR CONSIDERATION IS AS TO WHETHER THE ASSESSEE CAN BE HELD TO BE AN INDUSTRIAL UNDERTAKING AND WHETHER IT COULD BE SAID THAT THE PUBLIC ISSUE BY THE ASSESSEE WAS IN CONNECTION WITH THE EXPANSION OF THE ASSESSEES EXISTING BUSINESS. THE TERM INDUSTRIAL UNDERTAKING HAS NOT BEEN DEFINED UNDER S ECTION 35D. THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION OF BUILDING. THE TERM INDUSTRIAL UNDERTAKING HAS BEEN DEFINED FOR TH E PURPOSE OF SECTION 10(15) IN THE EXPLANATION (1) TO SECTION 10 (15). CONSTRUCTION OF BUILDINGS IS NOT CONSIDERED AS PART OF THE ACTIVITY, WHICH MAKES THE UNDERTAKING AN INDUSTRIAL UNDERTAKING. THE TERM INDUSTRIAL UNDERTAKING NECE SSARILY INVOLVES THE ACTIVITY OF MANUFACTURING OR PROCESSIN G. THE HONBLE SUPREME COURT IN THE CASE OF N.C. BUDHIRAJA REPORTED IN 204 ITR 412 HAS SPECIFICALLY HELD THAT THE CONS TRUCTION OF DAM IS NOT A MANUFACTURE OR PRODUCTION OF AN ARTIC LE WITHIN THE MEANING OF SECTION 80 HH(2)(1). PROVISIONS OF SECT ION 80HH REQUIRES THE ASSESSEE TO BE INDUSTRIAL UNDERTAKING WHICH IS MANUFACTURING OR PRODUCING ARTICLES OR THINGS AS PE R THE CONDITIONS SPECIFIED THEREIN. IT IS FURTHER NOTICE D THAT THE PROVISIONS OF SECTION 80IB (10) PROVIDES FOR DEDUCT ION OF AN UNDERTAKING DEVELOPING OR BUILDING HOUSING PROJECTS AS PER 12 CONDITIONS SPECIFIED THEREIN. WHAT IS EVIDENT IS THAT THE LEGISLATURE IN ITS WISDOM IN SECTION 80IB PROVIDES FOR CERTAIN DEDUCTIONS IN REGARD TO CERTAIN INDUSTRIAL UNDERTAK INGS, WHICH FULFILLED CERTAIN CONDITIONS, BUT WHEN IT CAME TO D EVELOPING OR BUILDING HOUSING PROJECTS THE LEGISLATURE HAS USED THE WORD UNDERTAKING AND NOT INDUSTRIAL UNDERTAKING. THIS A LSO GOES TO SHOW THAT AN UNDERTAKING WHICH IS DOING THE BUSINES S OF CONSTRUCTION OF BUILDINGS CANNOT BE HELD TO BE AN I NDUSTRIAL UNDERTAKING. IN THE CIRCUMSTANCES IT CANNOT BE HEL D THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF DEDUCTIONS U NDER SECTION 35D AS THE ASSESSEE IS NOT AN INDUSTRIAL UNDERTAKIN G PER SE. IN THE CIRCUMSTANCE, THIS ISSUE IS HELD AGAINST THE AS SESSEE. 4.6 LEARNED COUNSEL FOR ASSESSEE HAS PLACED RELIANC E ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BA NGALORE WATER SUPPLY CO. VS A. RAJAPPA (AIR 1978 SC 548). IN THE SAID CASE, HONBLE SUPREME COURT HAS CONSIDERED THE MEANING OF WORD INDUSTRY AS DEFINED IN INDUSTRIAL DISPUTE S ACT, 1947. SECTION 2(J) DEFINES INDUSTRY UNDER INDUSTRIAL DI SPUTES ACT, 1947 AS UNDER: INDUSTRY MEANS ANY BUSINESS, TRADE, UNDERTAKING, MANUFACTURE OF CALLING OF EMPLOYERS AND INCLUDES ANY CALLING, SERVICE, EMPLOYMENT, HANDICRAFT, OR INDUSTRIAL OCCUPATION OR A VOCATION OF WORKMEN. CONSIDERING THE DEFINITION OF WORD INDUSTRY, HON BLE SUPREME COURT HELD AS UNDER: INDUSTRY AS DEFINED IN SECTION 2(J) HAS A WIDE IMPORT. WHERE THERE IS (I) SYSTEMATIC ACTIVITY, (I I) ORGANIZED BY COOPERATION BETWEEN EMPLOYER AND EMPLOYEE (THE DIRECT AND SUBSTANTIAL ELEMENT IS CHIMERICAL), (III) FOR THE PRODUCTION AND/OR DISTRIBUTION OF GOODS AND SERVICES CALCULATED TO SATISFY HUMAN WANTS AND WISHES (NOT SPIRITUAL OR RELIGIOUS BUT INCLUSIVE OF MATERIAL THINGS OR SERVICES GEARED TO CELESTIAL BLISS E.G. MAKING, ON A 13 LARGE SCALE, PRASAD OR GOOD), PRIMA FACIE, THERE IS AN INDUSTRY: IN THAT ENTERPRISE. ABSENCE OF PROFIT MOTIVE OR GAINFUL OBJECTIVE IS IRRELEVANT, BE THE VENTURE IN THE PUBLIC, JOINT, PRIVATE OR OTHER SECTOR. THE TRUE FOCUS IS FUNCTIONAL AND THE DECISIVE TEST IS THE NATURE OF THE ACTIVITY WITH SPECIAL EMPHASIS ON THE EMPLOYER-EMPLOYEE RELATIONS. IF THE ORGANIZATION IS A TRADE OR BUSINESS IT DOES NOT CEASE TO BE ONE BECAUSE OF PHILANTHROPY ANIMATING THE UNDERTAKING. ALTHOUGH SECTION 2(J) USES WORDS OF THE WIDEST AMPLITUDE IN ITS TWO LIMBS, THEIR MEANING CANNOT BE MAGNIFIED TO OVER REACH ITSELF. UNDERTAKING MUST SUFFER A CONTEXTUAL AND ASSOCIATIONAL SHRINKAGE AS EXPLAINED IN AIR 1953 SC 58, SO ALSO, SERVICE, CALLING AND THE LIKE. THI S YIELDS THE INFERENCE THAT ALL ORGANIZED ACTIVITY POSSESSING THE TRIPLE ELEMENTS ABOVE MENTIONED, ALTHOUGH NOT TRADE OR BUSINESS, MAY STILL BE INDUSTRY PROVIDED THE NATURE OF THE ACTIVITY VIZ. , THE EMPLOYER-EMPLOYEE BASIS, BEARS RESEMBLANCE TO WHAT IS FOUND IN TRADE OR BUSINESS. THIS TAKES INTO THE FOLD OF INDUSTRY UNDERTAKINGS, CALLINGS AND SERVICES ADVENTURES ANALOGOUS TO THE CARRYING ON OF TRADE OR BUSINESS. ALL FEATURES, OTHER THAN THE METHODOLOGY OF CARRYING ON THE ACTIVITY VIZ., IN ORGANIZING THE COOPERATION BETWEEN EMPLOYER AND EMPLOYEE, MAY BE DISSIMILAR. IT DOES NOT MATTER, I F ON THE EMPLOYMENT TERMS THERE IS ANALOGY. APPLICATION OF THESE GUIDELINES SHOULD NOT STOP SHORT OF THEIR LOGICAL REACH BY INVOCATION OF CREED S, CULTS OR INNER SENSE OF INCONGRUITY OR OUTER SENSE OF MOTIVATION FOR OR RESULTANT OF THE ECONOMIC 14 OPERATIONS. THE IDEOLOGY OF THE ACT BEING INDUSTRIAL PEACE, REGULATION AND RESOLUTION OF INDUSTRIAL DISPUTES BETWEEN EMPLOYER AND WORKMEN, THE RANGE OF THIS STATUTORY IDEOLOGY MUST INFORM THE REACH OF THE STATUTORY DEFINITION. NOTHING LESS, NOTHING MORE. ON THE BASIS OF THE ABOVE DECISION, IT IS CONTENDED THAT THE ASSESSEE SHOULD ALSO BE TREATED AS INDUSTRIAL UNDER TAKING AS IT IS UNDERTAKING CONSTRUCTION OF VARIOUS HOUSING AND CO MMERCIAL PROJECTS. WE ARE UNABLE TO ACCEPT THE CONTENTION. F IRSTLY, FOR THE PURPOSE OF SECTION 35D, WE HAVE TO DETERMINE WHETHE R THE ASSESSEE IS AN INDUSTRIAL UNDERTAKING OR AN INDU STRIAL UNIT OR NOT. SINCE THE ACT DO NOT DEFINE THE WORDS INDUST RIAL UNDERTAKING OR INDUSTRIAL UNIT EITHER IN THE DEF INITION CLAUSE OR FOR THE PURPOSE OF SECTION 35D, REFERENCE CAN BE MADE AT THE FIRST INSTANCE ONLY IF SUCH WORDS ARE DEFINED FOR T HE PURPOSE OF ANY OTHER SECTION IN THE INCOME-TAX ACT. IF YES, T HEN THE SAID WORDS CAN BE INTERPRETED ON THE BASIS OF DEFINITION GIVEN FOR THE PURPOSE OF OTHER SECTIONS AND IF SUCH WORDS ARE NOT DEFINED FOR THE PURPOSE OF ANY OTHER SECTION, THE SAME HAS TO B E INTERPRETED IN A NATURAL AND GRAMMATICAL WAY OR AS USED IN COMM ON PARLANCE MEANING. IT WILL BE CONTRARY TO PRINCIPLE OF INTERPRETATION OR STATUTES TO IMPORT THE DEFINITION AND MEANING ASSIGNED TO IT OF SOME WORD DEFINED IN SOME OTHER A CT AND THAT TOO FOR DIFFERENT CONTEXT AND ACT TO APPLY THEM IN THE SCHEME OF INCOME-TAX ACT. IF THE WORDS INDUSTRIAL UNDERTAK ING OR INDUSTRIAL UNIT AS USED IN SUB CLAUSE (II) OF SUB SECTION (1) OF SECTION 35D ARE INTERPRETED IN ITS NATURAL AND GRAM MATICAL MANNER, IT WILL BE A PRE REQUISITE THAT THE UNDERTA KING OR UNIT SHALL BE CARRYING ON SOME INDUSTRIAL ACTIVITIES. T HE WORDS USED IN SECTION 35D(1)(II) ARE NOT UNDERTAKING OR UNI T. BY FINANCE BILL, 2008, THE WORDS INDUSTRIAL UNDERTAKI NG OR INDUSTRIAL UNIT ARE NOW PROPOSED TO BE SUBSTITUTE D AS UNDERTAKING OR UNIT. THE AMENDMENT PROPOSED IS ONLY PROSPECTIVE IN NATURE. IF THAT BE THE CASE, THE EA RLIER INTENTION TO GRANT BENEFIT U/S 35D WAS ALWAYS TO AN INDUSTRIAL U NDERTAKING OR AN INDUSTRIAL UNIT. SINCE THE ASSESSEE DO NOT FIT I NTO THE CRITERIA OF BEING CONSIDERED AS INDUSTRIAL UNDERTAKING OR INDUSTRIAL 15 UNIT UNDER THE COMMON PARLANCE MEANING, THE ASSESS EE IS NOT ENTITLED TO SECTION 35D OF THE ACT. FOLLOWING THE DECISION OF THE TRIBUNAL (SUPRA), THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION UNDER SECTION 35D OF THE ACT. 13. IN THE RESULT, THE APPEALS OF THE REVENUE ARE D ISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2009. SD/- SD/- (D.R. SINGH) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 ST JULY, 2009. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.