DCIT CEN CIR 2(3), MUMBAI V. REHAB HOUSING P. LTD, MUMBAI

ITA 360/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0255 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 14-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINITA J MENON
• Assessee Lawyers: DILIP LAKHANI
• Keywords: Maximum Marginal Rate; Earning of tax free income
• Section: 143(3); 153A; 14A; 80IB; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 7498 / MUM/20 1 4 ( ASSESSMENT YEAR : 2011 - 12 ) REHAB HOUSING PVT. LTD., GITANEEL ARCADE, 5 TH FLOOR, 85, HILL ROAD, BANDRA (W), MUMBAI 40 0 050 VS. DCIT CC - 9, MUMBAI PAN/GIR NO. AABCR6883Q APPELLANT ) .. RESPONDENT ) ITA NO. 360/ MUM/20 15 ( ASSESSMENT YEAR : 2011 - 12 ) DCIT CC - 2(3), MUMBAI VS. REHAB HOUSING PVT. LTD., GITANEEL ARCADE, 5 TH FLOOR, 85, HILL ROAD, BANDRA (W) , MUMBAI 400 050 PAN/GIR NO. AABCR6883Q APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI DILIP LAKHANI REVENUE BY MS. VINITA J MENON DATE OF HEARING 06 / 04 /201 7 DATE OF PRONOUNCEME NT 22 / 06 /201 7 / O R D E R PER R.C.SHAR MA (A.M) : THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) - 37 MUMBAI DATED 3/11/2014 FOR THE A.Y. 2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEA RD AND RECORD PERUSED. 3. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT AND DEVELOPMENT OF HOUSING PROJECT. IN THE COURSE OF ITA NO. 7498/MUM/2014 & 360/MUM/2015 REHAB HOUSING PVT. LTD., 2 SCRUTINY ASSESSMENT, AO MADE DISALLOWANCE OF RS.11,51,315/ - U/S.14A R.W.R 8D. 4. AT THE O UTSET , LEARNED AR PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING YEAR 2010 - 11 WHEREIN SIMILAR DISALLOWANCE SO MADE BY AO WAS RESTRICTED BY ESTABLISHING THE PROPORTION TO THE DIVIDEND INCOME QUA DIVIDEND YIELD ING INVESTMENT. PRECISE OBSERVATION OF TRIBUNAL WAS AS UNDER: - REGARDING THE DISALLOWANCE MADE UNDER CLAUSE (III) OF THE RULE 8D(2), LD COUNSEL FOR THE ASSESSEE RELIED ON VARIOUS LEGAL PROPOSITIONS. IN THIS REGARD, HE BR O UGHT OUR ATTENTION TO EACH AND EVE RY ACCOUNT OF THE PROFIT & LOSS ACCOUNT AND SUBMITTED THAT NONE OF THESE EXPENSES ARE DIRECTLY RELATABLE TO THE EARNING OF THE DIVIDEND INCOME. NOTWITHSTANDING THE SAID ARGUMENTS, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ORDER OF THE AO FOR THE EARLIER AY 2009 - 2010 AND DEMONSTRATED T HAT THE OFFICERS ACCEPTED THE ASSESSEE'S SUBMISSION OF RESTRICTING THE DISALLOWANCE TO THE AMOUNT OF RS. 4,89,8 3 4/ - U/S 14A OF THE ACT. IN THIS REGAR D, HE MENTIONED THAT T HE SAME AMOUNT WAS ARRIVED AT AFTER ESTAB LISHING THE PROPORTION TO THE DIVIDEND INC OME QUA DIVIDEND YIELDING INVESTMENT. IN THIS REGARD, HE BROUGHT OUR ATTENTION TO PAGE 44 OF THE PAPER BOOK TO DEMONSTRATE THAT NO EXPENDITURE WAS INCU RRED TOWARDS ADVISORS AND AGENTS. FURTHER, HE BROUGHT OUR ATTEN TION TO PAGE 30 OF THE PB , WHICH THE COMPUTATION OF DISALLOWANCE U/S 14A OF THE ACT APPLYING THE SIMILAR FORMULA OF PROPORTION BETWEEN THE EXEMPT INCOME VERSUS DIVIDEND YIELDING INVESTMENT. 5. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE SAID PAGE 30 OF THE P B , WE FIND THE DISALLOWANCE OF RS. 4,54,399/ - IS IN TUNE WITH THE DECISION OF THE AO FOR THE AY 2009 - 2010. NO SPECIFIC REASON IS BROUGHT OUR BEFORE US AS TO WHY THE SIMILAR FORMULA SHOULD NOT BE FOLLOWED FOR THIS YEAR ALSO INSTEAD OF MECHANICAL LY ADOPTING THE FORMULA LAID DOWN IN RULE 8D (2) OF THE RULES. CONSIDERING THE SAME, WE DIRECT THE AO TO FOLLOW THE METHOD ADOPTED BY HIM FOR THE EARLIER A.Y. 2009 - 10 AND RESTRICT THE DISALLOWANCE TO RS.4,54,400/ - (ROUNDED OF). ACCORDINGLY, GROUNDS RAISED B Y THE ASSESSEE ARE PARTLY ALLOWED. 5. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, WE DIRECT THE AO TO ITA NO. 7498/MUM/2014 & 360/MUM/2015 REHAB HOUSING PVT. LTD., 3 RE - COMPUTE THE DISALLOWANCE BY ESTABLISHING THE PROPORTION TO THE DIV IDEND INCOME QUA DIVIDEND YIELDING INVESTMENT. WE DIRECT ACCORDINGLY. 6. IN THE APPEAL FILED BY THE REVENUE, REVENUE IS AGGRIEVED BY THE ACTION OF CIT(A) FOR ALLOWING DEDUCTION U/S.80IB(10) OF THE IT ACT IN RESPECT OF RELEASE OF 5% OF ELIGIBLE TDR IN THE C URRENT YEAR. 7. WE HAVE CONSIDERED RIVAL CONTENTION S AND FOUND THAT ASSESSEE HAS CLAIMED DEDUCTION U/S.80IB (10) IN RESPECT OF RECEIPTS OF SALE OF TDR, THE P ROJECT IN RESPECT OF WHICH DEDUCTION WAS CLAIMED HAVE BEEN COMPLETED IN THE ASSESSMENT YEAR 2004 - 05 AND 2005 - 06 . I N THE ASSESSMENT SO FRAMED FOR TH ESE ASSESSMENT YEARS U/S.143(3), T HE AO OBSERVED THAT ASSESSEE IS ELIGIBLE FOR 80IA (1) DEDUCTION. HOWEVER, 5% OF TDR RELATING TO THESE PRODUCTS WERE NOT RELEASED BY MMRDA ON ACCOUNT OF ULCA IN THE SRA PROJEC T EXECUTED BY THE ASSESSEE . 5% WAS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE CIT(A) ALLOWED THE SAME AS ELIGIBLE FOR DEDUCTION US/.80IB(10) AFTER OBSERVING AS UNDER: - 4.3.1. GROUND OF APPEAL NO 5 IS IN RESPECT OF CLAIM U/S 80IB (10) . THE ASSESSING OFFICER HAS FOLLOWED THE EARLIER DECISION IN THE APPELLANT'S CASE TO DENY CLAIM U/S 80IB (10) IN THE CURRENT YEAR IN RESPECT OF RELEASE OF 5% OF ELIGIBLE TD R THIS YEAR THAT HAD BEEN WITHHELD ON ACCOUNT OF ULCA BY MMRDA IN THE SRA PROJECT EX ECUTED BY THE APPELLANT. A PROJECT UNDER SRA WAS GIVEN TO APPELLANT BY MMRDA IN OCTOBER 2002 WHICH WAS EXECUTED IN FY 2003 - 04 AND 2004 - 05. THE PROJECT DEVELOPED BY THE APPELLANT WAS PURSUANT TO MUMBAI URBAN TRANSPORT PROJECT FOR REHABILITATION OF SLUM DWEL LERS DISHOUSED FROM PUBLIC SITES. IT WAS' REQUIRED TO PROVIDE READY BUILT TENEMENTS OF PRESCRIBED SPECIFICATIONS AND HAND IT TO MMRDA FOR THIS PURPOSE WITHIN TIME BOUND SCHEDULE. THE COMPENSATION TO APPELLANT WAS PARTLY BY WAY OF ISSUE OF T D R APART FROM SO ME LUMPSUM AMOUNT I N CASH FOR EACH TENEMENT. THE TD R RECEIVED WAS SOLD FROM TIME TO TI ME AND APPELLANT HAD CLAIMED 80IB (10) DEDUCT ION ON SUCH INCOME. 5% OF THE TD R HAD BEEN WITHHELD BY MMRDA AS PER ULCA. ITA NO. 7498/MUM/2014 & 360/MUM/2015 REHAB HOUSING PVT. LTD., 4 SINCE ULCA WAS REPEALED, THE SAME WAS RELEASED TO TH E APPELLANT. THE HOUSING PROJECT APPROVED BEFORE 1/4/2004 HAS TO BE COMPLETED BEFORE 31/3/2008, A CONDITION WHICH HAS BEEN FULFILLED. THERE IS NO RESTRICTION ON CLAIMING 80 IB (10) DEDUCTION IN ANY YEAR IN WHICH INCOME HAS ARISEN. THE CLAIM IN THE PRESENT YE AR IS IN RESPECT OF INCOME ON THIS 5% OF T D R. THE APPELLANT ARGUED BEFORE ME THAT THE T D R RECEIVED AND SOLD IN THE CURRENT YEAR IS INTRINSICALLY CONNECTED TO THE SRA HOUSING PROJECT COMPLETED EARLIER AND HENCE MUST BE ALLOWED TO CLAIM DEDUCTION U/S 80 IB (10 ). THE APPELLAN T HAD CLAIMED DEDUCTION U/S 80IB (10) IN RESPECT OF 95% OF ELIGIBLE TD R RECEIVED EARLIER IN EARLIER ASSESSMENT YEARS WHICH HAD BEEN ALLOWED IN ASSESSMENTS U/S 143(3) BY A O IN THE ORIGINAL ASSESSMENTS. THOUGH THE DEDUCTION WAS DENIED IN THE AS SESSMENTS 'AFTER THE SEARCH ACTION, THE APPELLANT HAD SUCCEEDED IN I TS APPEAL BEFORE THE LD CIT(A). HENCE IT WAS PLEADED THAT THE DEDUCTION SHOULD BE ALLOWED. REGARDS THE APPEAL BEFORE ME, THERE IS NO DISPUTE THAT 4 .3.2. IT IS SEEN THAT ASSESSMENTS UNDER 143(3) WERE 2004 - 05 AND 2005 - 06 ON 17/3/2006 BY ACI T CIR 9(3) WHEREIN CLAIM U/S 80I B (10) WAS ALLOWED. A SEARCH ACTION U/ S 132 WAS CONDUCT ED ON 4 - 10 - 2006 AND SEARCH ACTION CONCLUDED ON 29 - 12 - 2006. ASSESSMENT ORDER U/S 153A RWS 143(3) WAS PASSED 2001 - 02 TO AY 2006 - 07 AND ULS 143(3) FOR AY 200 7 - 08 ON 30/12/2008 BY ACIT CENTRAL - 0 9, MUMBAI. IN THIS ASSESSMENT ORDER, BOOK RESULTS WERE REJECTED US/ 145(3) INCO M E FOR DIFFERENT YEARS WERE RECOMPUTED. FOR VARIOUS REASONS DISCUSSED IN DETAIL IN THE ASSESSMENT ORDER, THE CLAIM FOR DEDUCTION U/S 80LB(10) WERE DENIED. ISSUES RAISED WERE WHETHER APPELLANT COULD GET BENEFIT WHEN CONSTRUCTION WAS EXECUTED BY L& T LTD., WHETHER CONSTRUCTION OF SHOPS WAS PART OF THE SAME PROJECT AND THEREFORE THE PROJECT WAS NOT A HOUSING PR OJECT, AND WHETHER INCOME FROM SALE OF T D R ISSUED WILL BE ELIGIBLE FOR 80LB DEDUCTIONS. THE APPEAL AGAINST THE CONSOLIDATED ASSESSMENT ORDER WAS DISPOSED BY LD CIT(A) , CENTRAL VII, MUMBAI VIDE HIS ORDER DATED CIT(A)C - VII /ACIT - CC - 9/IT - 187 TO 190/08 - 09 DATE D 27 - 04 - 2009. IN THIS ORDER ALL THE ADDITIONS MADE BY ASSESSING OFFICER WAS DELETED. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS RELIED UPON THE FINDINGS AND VIEWS IN THE ASSESSMENT ORDER ULS 153A RWS 143(3) IN THIS CASE. HE HAS ALSO NOTED THE DECISION AND THE REASONING OF THE LD CIT(A) IN ACCEPTING THE GROUNDS RAISED IN APPEAL BEFORE HIM. HOWEVER, THE AO HAS MENTIONED THAT DEPARTMENT HAS FILED APPEAL AGAINST THE ORDER OF LD CIT(A) WHICH IS PENDING BEFORE THE HON'BLE LTAT MUM BAI BENCH. ON VERIFICATION, T HE LD A R HAS INFORMED THAT THE DEPARTMEN TAL APPEAL BEFORE ITAT IS STILL PENDING AND HAS NOT BEEN DECIDED. I NOTE THAT THE APPEAL HAS ITA NO. 7498/MUM/2014 & 360/MUM/2015 REHAB HOUSING PVT. LTD., 5 BEEN PENDING FOR OVER 5 YEARS AND IT WOULD NOT BE FAIR TO KEEP THIS APPEAL PENDING AWAITING THE FATE OF DEPARTMENTAL APPEA L. 4.3.3. AS REGARDS THE APPEAL BEFORE ME, THERE IS NO DISPUTE THAT THE INCOME FROM TDR IN RESPECT OF 5% OF ELIGIBILITY IS INTRINSICALLY LINKED WITH THE PROJECT EXECUTED IN RESPECT OF WHICH THE INCOME FROM TDR AT 95% OF ELIGIBILITY WAS CONSIDERED IN THE CLAIM FOR DEDUCTION U/S.80IB(10) IN THE EARLIER YEARS. IT IS ALSO NOT IN DISPUTE THAT THIS 5% TDR WAS RECEIVED ONLY NOW AND WAS NOT AVAILABLE EARLIER. THUS, THE ONLY QUESTIONS THAT REMAIN IS WHETHER THE PROJECT EXECUTED BY THE APPELLANT IS ENTITLED TO DEDU CTION U/S 80IB (10) AND WHETHER SALE OF T D R AND CONSEQUENT INCOME ARISING FROM IT IS ELIGIBLE FOR 80IB DEDUCTION. BOTH THESE ISSUES WERE CORE ISSUES ADJUDICATED BY THE LD CIT(A) - CENTRAL VII, MUMBAI AT LENGTH IN THE APPELLATE ORDE R (SUPRA). HAVING PERUSED TH E APPELLATE ORDER AS WELL AS THE ASSESSMENT ORDER, I AM IN AGREEMENT WITH THE FINDINGS AND DECISION OF LD CIT(A) - CENTRAL VII, MUMBAI. FACTS REMAINING SAME THE GROUND OF APPEAL NO 5 IS ALLOWED. THUS THE CLAIM OF DEDUCTION U/S 80 IB(10) IS ALLOWED. 8. WE HA VE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80IB(1 0 ) IN RESPECT OF THE PROJECTS UNDER CONSIDERATION AND DUE DEDUCTION HAVE ALREADY BEEN ALLOWED BY THE DEPARTMENT IN THE EARLIER YEARS. IN THE YE AR UNDER CONSIDERATION 5% OF ELIGIBLE TDR WHICH HAD BEEN ON ACCOUNT OF ULCA BY MMRDA IN THE SRA PROJECT WAS RELEASED. WE FOUND THAT THE PROJECT UNDER SRA WAS GIVEN TO THE ASSESSEE IN THE YEAR OCTOBER, 2002 AND WHICH WAS EX ECUT ED IN THE FINANCIAL YEAR S 2003 - 04 AND 2004 - 05. WITH REGARD TO RELEASE OF 5% AMOUNT OF THE TDR, THERE IS NOT DISPUTE THAT INCOME FROM TDR IS INTRINSICALLY LINKED WITH THE PROJECT EXECUTED IN RESPECT OF WHICH THE INCOME FROM TDR AT 9 5 % OF ELIGIBILITY WAS ALREADY CONSIDERED AND CLAIMED FO R DEDUCTION U/S. 80IB(10) AND WAS ALLOWED IN THE EARLIER YEARS. THERE IS ALSO NO DISPUTE THAT THE BALANCE AMOUNT OF 5% TDR WAS RECEIVED DURING THE YEAR UNDER CONSIDERATION WHICH IS ALSO ITA NO. 7498/MUM/2014 & 360/MUM/2015 REHAB HOUSING PVT. LTD., 6 ELIGIBLE FOR DEDUCTION U/S. 80IB(10). THE DETAIL HAVING RECORDED BY TH E LD. CIT(A) HAS NOT BEEN CONTROVERTED BY LD. DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) AND ALLOW DEDUCTION IN RESPECT OF 5% OF TDR RECEIVED DURING THE YEAR U/S. 80 - IB (10). 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES , WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 22 / 06 /2017 SD/ - ( RAVISH SOOD ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 22 / 06 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6 . GUARD FILE. //TRUE COPY//