Ramesh Rajan Construction P. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 3137/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7446 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 11-11-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Principle of natural justice

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . . . , !'. . # $ % , ' () BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.3137/MDS/2016 * +* /ASSESSMENT YEAR: 2010-11 M/S.RAMESH RAJAN CONSTRUCTION P. LTD., NO.87, G.N.CHETTY ROAD, T. NAGAR, CHENNAI-600 017. VS. THE ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-V(3), CHENNAI-600 034. [PAN: AACCR 7887 H ] ( ,- /APPELLANT) ( ./,- /RESPONDENT) ,- 0 1 / APPELLANT BY : MR.S.SRIDHAR, ADVOCATE ./,- 0 1 /RESPONDENT BY : MR.SHIVA SRINIVAS, JCIT # 0 2' /DATE OF HEARING : 30.01.2017 34+ 0 2' /DATE OF PRONOUNCEMENT : 22.03.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 30.06.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 3, CHENNAI, IN ITA NO.41/2013-14/CIT(A)-3 FOR THE AY 2010-11 AND RAISE D THE FOLLOWING GROUNDS: ITA NO.3137/MDS/2016 :- 2 -: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-3, CHENNAI DATED 30.06.2016 IN I.T.A.NO.41/CIT(A)-2/2013-14 FOR THE ABOVE MENTI ONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE . 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALLOWA NCE OF THE CLAIM FOR DEDUCTION U/S.80 LB (10) OF THE ACT ON THE WRONG PRESUMPTION OF THE SALE/ALLOTMENT OF TWO FLATS TO ONE PERSON SO AS TO DENY THE FULL DEDUCTION CLAIMED ON THE FURTHER PRESUMPTION OF THE NON- COMPLIANCE OF ONE OF THE CONDITIONS PRESCRIBED IN T HE SAID SECTION WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE REF ERENCE TO THE AMENDED PROVISIONS NAMELY EXPLANATIONS (F) IN THE SAID SECTION BY THE FINANCE NO.2 ACT 2009 INSERTED WITH EFFECT FROM 01.04.2010 WAS WRONGLY MADE AND OUGHT T O HAVE APPRECIATED THAT THE SALE OF TWO FLATS TO ONE SINGLE PERSON WAS HAPPENED PRIO R TO THE INSERTION OF THE SAID CONDITION WHICH SHOULD BE APPLIED PROSPECTIVELY AND NOT RETROSPECTIVELY. 4. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE EVI DENCE FILED IN SUPPORT ON 21.09.2015 IN THIS REGARD WERE COMPLETELY OVERLOOKED IN RECORD ING FINDINGS ERRONEOUSLY AND OUGHT TO HAVE APPRECIATED THAT EVEN THE PRESUMPTION OF TH E SALE OF TWO FLATS TO A SINGLE PERSON IN THE ELIGIBLE HOUSING PROJECT WAS FACTUALL Y DISPUTED IN THE NOTES OF ARGUMENTS FILED ON 06.02.2015 THEREBY VITIATING FINDINGS RECO RDED IN RELATION THERETO. 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE DIS TINCTION ATTEMPTED TO OVERTHROW THE DECISION OF THE JURISDICTIONAL BENCH OF THE INCOME TAX APPELLATE TRIBUNAL DATED 19.05.2016 WAS NOT CORRECT AND WHOLLY UNJUSTIFIED. 6. THE CIT (APPEALS) FAILED TO APPRECIATE THAT IN ANY EVENT THE PLEA FOR PROPORTIONATE GRANT OF SUCH DEDUCTION ALTERNATIVELY CLAIMED WAS W RONGLY NOT CONSIDERED THEREBY VITIATING IN DECISION RENDERED IN REJECTING THE CLA IM OF SUCH DEDUCTION FULLY IN THE COMPUTATION OF TAXABLE TOTAL INCOME. 7. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALLOWA NCE OF DEPRECIATION ON THE NEW MOTOR CAR IN THE COMPUTATION OF TAXABLE TOTAL INCOM E WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 8. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THERE W AS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPUGNED ORDER AND ANY ORDER P ASSED IN VIOLATION OF THE PRINCIPLES NATURAL JUSTICE WOULD BE NULLITY IN LAW. 9. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUN DS/ARGUMENTS AT THE TIME OF HEARING. 2.0 GROUND NOS.1 & 9 ARE GENERAL IN NATURE WHICH DO NO T REQUIRE SPECIFIC ADJUDICATION. 3.0 GROUND NOS.2 TO 6 ARE RELATED TO THE DEDUCTION U/ S.80 IB (10) OF INCOME TAX ACT (IN SHORT THE ACT). DURING THE AS SESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS CLAIMED THE DEDU CTION OF RS.5,86,13,568/- U/S.80 IB (10) OF THE ACT. THE AS SESSEE SOLD TWO FLATS TO SHRI M.GANDHI AND SHRI SHIVAKUMAR IN VIOLATION OF S UB CLAUSE (F) OF ITA NO.3137/MDS/2016 :- 3 -: EXPLANATION TO SEC.80 IB (10) OF THE ACT. THEREFOR E, THE AO HELD THAT THE ASSESSEE DID NOT SATISFY THE CONDITIONS FOR ALLOWIN G THE DEDUCTION U/S.80 IB 8(10) OF THE INCOME TAX ACT AND ACCORDINGLY, DISALL OWED THE SUM OF RS.5,86,13,568/- AND ADDED BACK TO THE INCOME. 3.1 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WEN T ON APPEAL BEFORE THE LD.CIT(A) WHO CONFIRMED THE ADDITION MAD E BY THE AO AND HENCE THE ASSESSEE FILED APPEAL BEFORE THIS TRIBUNA L. 3.2 APPEARING FOR THE ASSESSEE, THE LD.AR SUBMITTED TH AT THE ASSESSEE HAS SOLD TWO FLATS TO MR. N.SURESH KUMAR. FIRST UNI T IN BASHYAM NAVARATNA IN BLOCK NO.2, 1 ST FLOOR, FLAT NO.G WAS ALLOTTED ON 30.08.2008 VIDE S ALE DEED DATED 30.08.2008 AS WELL AS CONSTRUCTION AGREE MENT ON EVEN DATE. THE UDS FOR THE SAID UNIT WAS REGISTERED IN FAVOUR OF SHRI N. SURESH KUMAR ON 24.09.2008. THE SECOND UNIT IN BASHYAM NAVARATNA IN BL OCK NO.4, 1 ST FLOOR, FLAT NO.A WAS ALLOTTED ON 12.11.2008 VIDE AGREEMENT FOR SALE DATED 12.11.2008. THE UDS FOR THE SAID UNIT WAS REGISTERE D IN FAVOUR OF SHRI N. SURESH KUMAR ON 14.11.2008. 3.3 SIMILARLY, IN THE CASE OF MR.MADHUKAR GANDHI SALE WAS RELATED TO THE AY 2008-09 AND FLATS WERE REGISTERED IN PREVIOU S YEAR RELATING TO THE AY 2008-09 FOR WHICH THE ASSESSMENT WAS COMPLETED A ND ACCEPTED BY THE DEPARTMENT. MR.MADHUKAR GANDHI HAS RETAINED ONE FL AT IN BLOCK NO.7, 4 TH ITA NO.3137/MDS/2016 :- 4 -: FLOOR, FLAT NO.3 AND CANCELLED OTHER FLAT IN FLAT N O.6, BLOCK NO.7, 4 TH FLOOR. AS A RESULT, THE FLAT SOLD TO MR.MADHUKAR GANDHI WA S ONLY ONE FLAT AND THE ASSESSMENT PROCEEDINGS FOR THE AY WERE COMPLETED AN D ALLOWED THE DEDUCTION U/S.80 IB. THE LD.AR OF THE ASSESSEE ARG UED THAT THE PROVISIONS OF SUB-CLAUSE (E) & (F) OF EXPLANATION T O SECTION 80 IB (10) WAS INTRODUCED BY THE FINANCE ACT 2009 W.E.F. 01.04 .2010 AND THE SAME IS NOT APPLICABLE FOR THE FLATS SOLD PRIOR TO THE E FFECTIVE DATE. THE LD.AR ARGUED THAT IN THE INSTANT CASE, THE FLATS WERE SOL D IN 2008 AND REGISTERED IN FAVOUR OF THE BENEFICIARIES IN 2008 BEFORE INTRO DUCTION OF SUB-CLAUSE (E) & (F) OF EXPLANATION TO SUB-SEC.10 OF SECTION 80 IB OF THE ACT AND HENCE, THE SAME IS NOT APPLICABLE IN THE CASE OF THE ASSES SEE AND THE AO ERRED IN DISALLOWING THE DEDUCTION CLAIMED BY THE ASSESSEE. ON THE OTHER HAND, THE LD.DR RELIED ON THE LOWER AUTHORITIES ORDERS. 4.0 WE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. THE ASSESSEE HAS ALLOTTED TWO FLATS TO SHRI N. SUR ESH KUMAR IN RESIDENTIAL BLOCK OF BASHYAM NAVARATNA IN BLOCK-4 & BLOCK NO.2 IN THE PREVIOUS YEAR 2008-09 RELATING TO THE AY 2009-10. IN THE SAME MANNER, TWO FLATS WERE ALLOTTED FROM THE HOUSING PROJECT TO SHRI MADHUKAR GANDHI IN BLOCK NO.7, FLAT NO.3 AND FLAT NO.6. AS PER THE PROVISIONS OF EXPLANATION TO SEC.80 IB (10) IN SUB CLAUSES (E) AN D (F), THE ASSESSEE WILL BE DISENTITLED TO THE DEDUCTION U/S.80 IB (10), IF THE ASSESSEE ALLOTS MORE THAN ONE FLAT TO THE INDIVIDUAL OR HIS SPOUSE, CHIL DREN OR SUCH INDIVIDUAL OR ITA NO.3137/MDS/2016 :- 5 -: HUF OR ANY OTHER PERSON REPRESENTING SUCH INDIVIDUA L, THE SPOUSE OR THE MANNER OF SUCH INDIVIDUAL OR HUF. THIS AMENDMENT I S APPLICABLE FROM 01.04.2010 I.E. RELEVANT THE AY 2010-11. NOW, THE QUESTION IS WHETHER THE EXPLANATION PLACING RESTRICTIONS ON THE ALLOTME NT OF THE FLATS IS APPLICABLE TO THE ASSESSEE OR NOT. NO DOUBT, THE A MENDMENT IS EFFECTIVE FROM 01.04.2010 AND THE EVEN AY 2010-11 IS ALSO COV ERED UNDER THE EXPLANATION. HOWEVER, AMENDMENT WAS MADE BY FINANC E ACT 2009 WITH EFFECT FROM 01/04/2010 I.E. AFTER ALLOTMENT OF THE FLATS BY THE ASSESSEE TO MR.N.SURESH KUMAR AND SHRI MADHUKAR GANDHI. THE FL ATS WERE ALLOTTED AND REGISTERED IN FAVOUR OF BOTH THE INDIVIDUALS BE FORE THE AMENDMENT CAME INTO FORCE. THEREFORE, WE ARE OF THE CONSIDER ED PINION THAT SUB- CLAUSE (E) AND (F) OF EXPLANATION OF SEC.80 IB (10) IS NOT APPLICABLE IN THE ASSESSEES CASE. THE ASSESSEE RELIED ON THE DISCUS SION OF THIS TRIBUNAL ITAT B BENCH, CHENNAI IN THE CASE OF ACIT V. M/S. ELEGANT ESTATES IN ITA NOS.224 & 225/MDS/2016 & CO NOS.51 & 52/MDS/2016 ON SIMILAR ISSUE WHICH WAS HELD IN FAVOUR OF THE ASSESSEE. FOR READ Y REFERENCE, WE EXTRACT THE RELEVANT PARAGRAPHS OF THE DECISION OF THE HON BLE ITAT AS UNDER: WE HAVE CONSIDERED THAT RIVAL SUBMISSIONS ON EITHE R SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE CLAIM OF DEDUCTIO N U/S. 80 IB (10) OF THE ACT WAS REJECTED BY THE AO FOR BOTH THE AYS ON THE GROUND THAT FLAT N OS. 403 AND 404 WERE SOLD TO THE SAME PERSONS, NAMELY, SMT. LATHA RAMACHNDRAN AND SHRI K. RAMACHANDRAN. THE VERY SAME ISSUE, NAMELY, SALE OF FLATS TO SMT. LATHA RAMACHAN DRAN AND SHRI K. RAMACHANDRAN CAME BEFORE THIS TRIBUNAL FOR ASSESSMENT YEAR 2010-11 IN ITA NO.2902/MDS/2014. THIS TRIBUNAL FOUND THAT SECTION 80 IB (10)(F) INTRODUCED BY FINA NCE ACT, 2009 WAS WITH EFFECT FROM 01.04.2010 AND IT APPLIES PROSPECTIVELY. THEREFORE, IT CANNOT BE APPLIED FOR ASSESSMENT YEAR 2010-11 AND ACCORDINGLY, ALLOWED THE CLAIM OF THE ASSESSEE. 4.1 IN THE INSTANT CASE, THE SALE WAS MADE IN 2008 AND CONSTRUCTION AGREEMENT WAS ENTERED IN 2008 AND UDS WAS REGISTERE D IN 2008, ALL THE ITA NO.3137/MDS/2016 :- 6 -: FORMALITIES WERE COMPLETED DURING THE FY 2008-09 RE LEVANT TO THE AY 2009-10. THEREFORE, WE HOLD THAT THE SUB CLAUSE (E ) AND (F) OF EXPLANATION TO SEC.80 IB (10) IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE AND THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S.80 I B (10). ACCORDINGLY, WE DELETE THE ADDITION MADE BY THE AO AND SET ASIDE TH E ORDER OF THE LOWER AUTHORITIES. GROUND NOS.2 TO 6 OF THE ASSESSEE ARE ALLOWED. 5.0 GROUND NOS.7 & 8 ARE RELATED TO THE DISALLOWANC E OF DEPRECIATION. THE AO DISALLOWED THE DEPRECIATION ON MOTOR CARS. THE ASSESSEE CLAIMED OPENING WDV OF RS.44,45,157/- AND MADE ADDI TION DURING THE YEAR FOR AN AMOUNT OF RS.18,94,118/-. THE TOTAL DE PRECIATION CLAIMED BY THE ASSESSEE WAS RS.31,69,638/- @50% ON NEW MOTOR C AR. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED EVID ENCE FOR PURCHASE OF AUDI CAR FOR A SUM OF RS.42,44,847/- AND DID NOT FU RNISH EVIDENCE FOR THE RUNNING THE VEHICLES ON HIRE. NO EVIDENCE WAS FURN ISHED BY THE ASSESSEE TO SHOW THAT THE VEHICLES ARE RUNNING ON HIRE. HEN CE, THE AO DISALLOWED 50% OF DEPRECIATION CLAIMED BY THE ASSESSEE ON VEHI CLES AND RESTRICTED THE DEPRECIATION ON MOTOR CARS TO 15%. 6.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WEN T ON APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) CONFIRMED TH E ADDITION MADE BY THE AO. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. THE LD.AR ARGUED THAT THE AO OUGHT HAVE ALLOWED THE DEPRECIATION CLAIMED AND THE LD.DR SUPPORTED ORDERS OF LOWER AUTHORITIES. ITA NO.3137/MDS/2016 :- 7 -: 7.0 WE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. DURING THE ASSESSMENT PROCEEDINGS, THE AO ASKED TH E ASSESSEE TO PRODUCE DETAILS FOR VERIFICATION OF ADDITION TO ASS ETS AS WELL AS THE EVIDENCE FOR RUNNING THEM ON HIRE. THE ASSESSEE DI D NOT PRODUCE THE DETAILS CALLED FOR BY THE AO. THE LD.CIT(A) CONFIR MED THE ORDER PLACING RELIANCE ON THE FINDINGS OF THE AO. THE LD.AR DID NOT FURNISH ANY EVIDENCE TO PROVE THAT THE FINDINGS OF THE AO IS ERRONEOUS B EFORE US. THEREFORE, WE DO NOT FIND ANY ERROR IN THE ORDERS OF THE LOWER AU THORITIES AND THE ORDER OF THE LD.CIT(A) IS CONFIRMED AND THE GROUND NOS.7 & 8 ARE DISMISSED. 9.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( !' . . # $ % ) (D.S.SUNDER SINGH) ' /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 22 ND MARCH, 2017. TLN 0 .2$6 76+2 /COPY TO: 1. ,- /APPELLANT 4. # 82 /CIT 2. ./,- /RESPONDENT 5. 69 .2 /DR 3. # 82 ( ) /CIT(A) 6. '* < /GF