ITO, Ward-9(3), Pune, Raigad V. M/s. Kalbhor Gawade Builders, Pune

ITA 386/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9908 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 06-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINITA MENON
• Keywords: Business income; Tax effect
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K.PANDA, ACCOUNTANT MEMBER. ITA.NO.386/PN/2011 (ASSTT. YEAR : 2007-08) ITO, WARD-9(3), PUNE. .. APPELLANT VS. KALBHOR GAWADE BUILDERS, SARYODAYA COMPLEX, KALBHOR NAGAR, CHINCHWAD, PUNE. .. RESPONDENT PAN: AAGFK5780M ASSESSEE BY : SHRI SUNIL GANOO DEPARTMENT BY : SMT. VINITA MENON DATE OF HEARING : 18.10.2012 DATE OF PRONOUNCEMENT : 30.10.2012 ORDER PER SHAILENDRA KUMAR YADAV, JM : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) ON FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THE TOTAL I NCOME DETERMINED BY THE ASSESSING OFFICER AFTER DISALLOWA NCE OF EXPENDITURE AS PER SEC.40(A)(IA) OF THE I.T. ACT AS PROFIT DERIVED FROM DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJEC T ELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE I.T. ACT, WHEN TH E TOTAL INCOME UNDER THE HEAD INCOME FROM BUSINESS IS COM PUTED AS PER PROVISIONS OF INCOME TAX ACT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE P ROFIT DERIVED IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDI NG HOUSING PROJECT ELIGIBLE FOR DEDUCTION U/S. 80IB(10) INCLU DES ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE AS PER PR OVISIONS OF SEC. 40(A)(IA) OF THE I.T.ACT. 2 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE AD DITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE AS PER SEC. 40(A)(IA) OF THE I.T. ACT I S ELIGIBLE PROFIT FROM HOUSING PROJECT U/S.80IB(10) OF THE I.T. ACT W HEN THE PROVISIONS OF I.T. LAW DOES NOT PROVIDE ANY DEDUCTI ON ON EXPENDITURE TWICELY OF THE SAME NATURE AND ACCOUNT IN TWO DIFFERENT ASSESSMENT YEARS AND UNDER DIFFERENT PROV ISIONS OF LAW I.E., FIRSTLY IN THE A.Y. UNDER APPEAL U/S.80IB (10) AND SECONDLY, IN THE A.Y. IN WHICH A SUM HAS BEEN DEDUC TED AND PAID TO GOVERNMENT A/C AS LAID DOWN IN SEC. 40(A)(I A) OF THE I.T.ACT. 4. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE AO BE RESTORED. 2. THE ASSESSEE IS A PARTNERSHIP FIRM HAVING TWO PA RTNERS, ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOP MENT. FOR A.Y. 2006-07 THE ASSESSEE FILED RETURN OF INCOME ON 31.1 0.2006 DECLARING NIL INCOME. THE ASSESSING OFFICER THEREA FTER VIDE ORDER DATED 15.12.2009 ASSESSED ASSESSEES TOTAL INCOME A T RS.35,58,894/-. AGGRIEVED BY THE SAID ORDER, ASSES SEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, WHEREI N THE CIT(A) ON PERUSAL OF THE ASSESSMENT ORDER, STATEMENT OF FACTS AND DETAILED WRITTEN SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AS WELL AS EXPLANATION PROVIDED ON BEHALF OF THE ASSESSEE, OBS ERVED THAT ISSUE INVOLVED FOR THE YEAR UNDER CONSIDERATION IN THIS A PPEAL ARE SAME AS IN RESPECT OF A.Y. 2006-07 AND FOLLOWING THE SAME, APPEAL WAS ALLOWED. ON ENQUIRY FROM BENCH IT WAS POINTED OUT THAT IN A.Y. 2006-07 THE CIT(A) HAS DECIDED THE SIMILAR ISSUE BY OBSERVING AS UNDER: 7. I HAVE GIVEN CAREFUL CONSIDERATION TO THE CONTE NTS OF THE ASSESSMENT ORDER AND TO THE SUBMISSIONS OF THE LEAR NED AR OF THE APPELLANT AND HAVE ALSO CAREFULLY PERUSED THE R ELEVANT PROVISIONS OF LAW. THE GENERAL CONDITIONS FOR CLAI MING DEDUCTION UNDER SECTION 80IB ARE AS FOLLOWS: (I) THE APPELLANT HAS A GROSS TOTAL INCOME FOR THE YE AR (II) SUCH GROSS TOTAL INCOME INCLUDES PROFITS AND GAINS FROM BUSINESS (III) SUCH PROFITS AND GAINS ARE DERIVED FROM BUSINESS (IV) SUCH BUSINESS FROM WHICH THE PROFITS AND GAINS ARE DERIVED IS ONE OF THE ELIGIBLE BUSINESSES SPECIFIED UNDER THE SECTION 3 (V) THE DEDUCTION UNDER SECTION 80IB IS ALLOWED IN COMPUTING THE TOTAL INCOME OF THE APPELLANT. 8. IN ADDITION, SUB-SECTION (10) OF SECTION 80IB SP ECIFIES THE FOLLOWING FURTHER CONDITIONS FOR CLAIMING EXEMPTION UNDER THAT SUBSECTION. (VI) THE ASSESSEE MUST BE AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BY A LOCAL AUTHO RITY. (VII) THE AMOUNT IN RESPECT OF WHICH DEDUCTION IS BEING CLAIMED SHOULD BE PROFITS WHICH ARE DERIVED FROM SUCH HOUSING PROJECT. (VIII) THE SPECIFIC CONDITIONS MENTIONED UNDER SECTION 80IB(10(A) TO (D) SHOULD BE MET. 9. IN THE INSTANT CASE, FROM THE ADMITTED FACTS, IT IS SEEN THAT THERE IS NO DISPUTE AS REGARDS THE CONDITIONS LISTED AT (I), (II), (IV), (V), (VI) AND (VIII). THE SHORT POINT FOR CONSIDERATION, THEREFORE, IS WHETHER OR NOT THE AMOUNT DISALLOWED BY THE AO UNDER SECTION 40(A)(IA) WAS A PART OF PROFITS DERIV ED FROM THE ELIGIBLE HOUSING PROJECT. IT MAY BE MENTIONED HERE THAT THE APPELLANT IS NOT DISPUTING THE ADDITION MADE UNDER SECTION 40(A)(IA). THEIR CONTENTION IS ONLY THAT HAVING MA DE THE ADDITION, THE AO SHOULD HAVE ALLOWED DEDUCTION UNDE R SECTION 80IB(10) IN RESPECT OF SUCH AMOUNT WHICH HAS BEEN D ISALLOWED UNDER SECTION 40(A)(IA) ALSO. TO EXAMINE THE MERIT OF THIS CLAIM IT IS NECESSARY, IN MY VIEW, TO EXAMINE THE LANGUAG E OF THE PROVISION UNDER WHICH THE ADDITION WAS MADE, NAMELY , SECTION 40(A)(IA). THE LANGUAGE OF THE SAID PROVISION AS I T STOOD AT THE RELEVANT TIME IS REPRODUCED BELOW: AMOUNTS NOT DEDUCTIBLE. 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER T HE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, - (A) IN THE CASE OF ANY ASSESSEE (I) .... (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT A NY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED O R, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVI OUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY O F THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 20 0. 4 PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCTED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSEQUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCR IBED UNDER SUB-SECTION (1) OF SECTION 200, SUCH SUM SHAL L BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF T HE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. EXPLANATION FOR THE PURPOSES OF THIS SUB-CLAUSE, - (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECTION 194H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB- SECTION (1) OF SECTION 9; (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME MEANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J ; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLANATION III TO SECTION 194C; (V) RENT SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) TO THE EXPLANATION TO SECTION 194-I; (VI) ROYALTY SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9; 10. UPON A PLAIN READING OF THE PROVISION, IT IS CL EAR THAT UPON VIOLATION OF THE CONDITIONS SPECIFIED UNDER CL AUSE (IA) THE IMPLICATION UNDER SECTION 40(A) WOULD BE THAT THE S AID AMOUNT WILL NOT BE DEDUCTED IN COMPUTING INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON. IN OTHER WORDS, THE SAME WILL FORM A PART OF PROFITS AND GAINS OF BUSINESS OR PROFESSION OF THE APPELLANT, WHICH WIL L BE INCLUDED ALONG WITH INCOME UNDER ALL THE OTHER HEAD S IN THE ASSESSEES GROSS TOTAL INCOME. IN THE INSTANT CASE , THEREFORE, ONCE THE SAID AMOUNT OF RS.5,24,191/- WAS DISALLOWE D UNDER SECTION 40(A)(IA), THE SAME CONSTITUTED A PART AND PARCEL OF THE APPELLANTS PROFITS AND GAINS FROM THE BUSINESS, WHICH, IN TURN, WOULD COMPRISE A PART OF ITS GROSS TOTAL INC OME AND WOULD BE ELIGIBLE FOR DEDUCTION IN ACCORDANCE WITH AND TO THE EXTENT SPECIFIED BY SECTION 80IB. THE APPELLANT HA S FURTHER SUBMITTED THAT DURING THE RELEVANT PREVIOUS YEAR TH E APPELLANT HAD NO INCOME OTHER THAN THE INCOME FROM THE ELIGIB LE BUSINESS. THIS FACT HAS NOT BEEN DISPUTED BY THE A O. THAT BEING THE CASE, IN MY VIEW, THERE WAS NO OTHER SOUR CE FROM WHICH THE AMOUNT DISALLOWED IN COMPUTING PROFITS AN D GAINS OF BUSINESS WAS DERIVED. ACCORDINGLY THE APPELLA NT WAS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IB(10) IN RESPECT OF THIS AMOUNT TOO. I DO NOT FIND ANY SUPPORT FOR THE CONTENTION OF THE LEARNED AO THAT DUE TO DISALLOWANCE UNDER SE CTION 40, BUSINESS INCOME INCREASES BUT PROFIT DERIVED FROM D EVELOPING AND BUILDING THE PROJECT REMAINS THE SAME. IN THE PRESENT CASE, AS ALREADY STATED, THE APPELLANT HAD NO BUSIN ESS INCOME 5 OTHER THAN THE INCOME FROM THE ELIGIBLE BUSINESS. UNDER THE CIRCUMSTANCES, IF IT IS TO BE HELD THAT THE INCOME REPRESENTING THE AMOUNT OF ADDITION MADE ON ACCOUNT OF DISALLOWA NCE UNDER SECTION 40 IS NOT DERIVED FROM THE ELIGIBLE B USINESS THEN WHAT OTHER ACTIVITY WAS THE SAID INCOME DERIVED FRO M? IN ORDER TO HAVE AN INCOME THERE MUST BE A SOURCE. AS SUCH, ANY ADDITION MADE TO THE BUSINESS INCOME WENT TO INCREA SE THE BUSINESS PROFIT BUT SUCH BUSINESS PROFIT BEING FULL Y EXEMPT UNDER THE PROVISIONS OF SECTION 80IB(10), THE ADDIT IONAL AMOUNT TOO WAS ELIGIBLE TO CLAIM DEDUCTION AND COUL D NOT BE TAXED SEPARATELY IN THE APPELLANTS HANDS AS AN INC OME WITHOUT ANY SOURCE. 11. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED A ND THE ADDITION MADE IS HEREBY DELETED. 3. FURTHER, IT WAS POINTED OUT THAT REVENUE HAS NOT PREFERRED APPEAL FOR THE REASON THAT TAX EFFECT WAS LESS. IN THIS BACKGROUND, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT AP PEAL OF REVENUE BE DISMISSED. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE ARE NOT INCLINED TO INTERFERE WITH THE F INDING OF THE CIT(A) BECAUSE ON ACCOUNT OF VIOLATION OF CONDITIONS PRESC RIBED UNDER CLAUSE (IA) THE IMPLICATION U/S.40(A) WOULD BE THAT THE SAID AMOUNT WILL NOT BE DEDUCTED IN COMPUTING INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. T HE SAME WILL FORM PART OF PROFITS AND GAINS OF BUSINESS OR PROFESSION OF THE ASSESSEE WHICH COULD BE INCLUDED ALONG WITH INCOME UNDER ALL THE OTHER HEADS IN THE ASSESSEES GROSS TOTAL INCOME. ONCE T HE SAID AMOUNT IN QUESTION WAS DISALLOWED U/S. 40(A)(IA), THE SAME CONSTITUTED A PART AND PARCEL OF THE ASSESSEES PROFITS AND GAINS FROM THE BUSINESS, WHICH IN TURN WOULD COMPRISE A PART OF IT S GROSS TOTAL INCOME AND WOULD BE ELIGIBLE FOR DEDUCTION IN ACCOR DANCE WITH AND TO THE EXTENT SPECIFIED BY SECTION 80IB. IN CASE T HERE IS NO OTHER INCOME FROM WHICH AMOUNT COULD BE DISALLOWED IN COM PUTING PROFIT AND GAINS OF BUSINESS WAS DERIVED. ACCORDINGLY ASS ESSEE WAS ELIGIBLE TO CLAIM DEDUCTION U/S.80IB IN RESPECT OF THIS AMOUNT. IN THIS BACKGROUND THE CIT(A) HELD THAT INCOME REPRESE NTING THE 6 AMOUNTS OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE U/S. 40(A)(IA) IS NOT DERIVED FROM ELIGIBLE BUSINESS THEN WHAT OTH ER ACTIVITY WAS THE SAID INCOME DERIVED FROM. IN ORDER TO HAVE AN INCOME THERE MUST BE A SOURCE. AS SUCH ANY ADDITION MADE TO THE BUSINESS INCOME WENT TO INCREASE THE BUSINESS PROFIT BUT SUC H BUSINESS PROFIT BEING FULLY EXEMPT UNDER THE PROVISIONS OF S ECTION 80IB(10), THE ADDITIONAL AMOUNT TOO WAS ELIGIBLE TO CLAIM DED UCTION AND COULD NOT BE TAXED SEPARATELY HELD BY THE CIT(A). THIS R EASONED FACTUAL FINDING NEED NO INTERFERENCE FROM OUR SIDE. WE UPH OLD THE SAME. 5. AS A RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF OCTOBER, 2012. SD/- SD/- ( R.K.PANDA ) ( SHAILENDRA KUMAR YAD AV ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 30 TH OCTOBER, 2012 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE ITO, WARD-9(3), PUNE. 3. THE CIT(A)-V, PUNE. 4. THE CIT-V, PUNE. 5. THE DR B BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.