V.R. CONSTRUCTION P.LTD, MUMBAI V. DCIT 8(3), MUMBAI

ITA 4912/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9973 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 05-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 15-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Keywords: Business income
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT AND SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.4912 /MUM/2015 (ASSESSMENT YEAR: 2011-12) M/S. V.R. CONSTRUCTION P . LT D. VS. D C I T - 8(3) 114, SHREEPAL INDL. ESTATE SV ROAD, JOGESHWARI (W) MUMBAI 400095 MUMBAI PAN AABCV3162 APPELLANT RESPONDENT ITA NO.5014 /MUM/2015 (ASSESSMENT YEAR: 2011-12) A C I T - 11(3)(2) VS. M/S. V.R. CONSTRUCTION P. LTD. ROOM NO. 427 AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400020 114, SHREEPAL INDAL. ESTATE S.V. ROAD, JOGESHWARI (W) MUMBAI 400095 PAN AABCV3162A APPELLANT RESPONDENT APPELLANT BY: SHRI MAHAVEER JAIN & SHRI PRATEEK JAIN RESPONDENT BY: SHRI T.A. KHAN DATE OF HEARING: 05.07.2017 DATE OF PRONOUNCEMENT: 10.07.2017 O R D E R PER BENCH THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND R EVENUE AGAINST THE ORDER OF THE CIT(A) 18, MUMBAI DATED 06.07.2015 FOR A.Y. 2011-12. 2. FIRST WE WILL TAKE UP REVENUES APPEAL IN ITA NO. 5 014/MUM/2015. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READS A S UNDER: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER ITA NOS. 4912&5014/MUM/2015 M/S. V.R. CONSTRUCTION P. LTD. 2 TO GRANT DEDUCTION U/SEC. 801B(10) ON PRO-RATA BASI S GIVEN THE FACT THAT NON-FULFILMENT OF A SINGLE PRE-CONDITION AS DETAILED IN CLAUSE (C) TO SEC. 801B(10), SHALL DIS-ENTITLE THE ASSESSEE FROM CLAIMING EXEMPTION UNDER SECTION 801B(10) OF THE IN COME TAX ACT, 1961.?' 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN IGNORING THE R ATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF PADMASU NDRA RAO (DECD.) & ORS VS STATE OF TAMIL NADU (2002) WHEREIN THE HON'BLE APEX COURT HAS HELD THAT THE COURT CANNOT READ ANYT HING INTO A STATUTORY PROVISION WHICH IS PLAIN AND UNAMBIGUOUS. ?' 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN IGNORING THE R ATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF BRITANN IA INDUSTRIES LTD. V/S CIT (2005) 278 1TR 546 (SC) WHEREIN THE HO NBLE APEX COURT HAS HELD THAT WHEN THE LANGUAGE OF A STATUTE IS CLEAR AND UNAMBIGUOUS, THE COURTS ARE TO INTERPRET THE SAME I N ITS LITERAL SENSE AND NOT TO GIVE A MEANING WHICH WOULD CAUSE V IOLENCE TO THE PROVISIONS OF THE STATUTE.?' 3. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE H AS CONSTRUCTED A HOUSING PROJECT NAMED BHOOMI ACRES AT THANE. THE PR OJECT GOT APPROVED AS HOUSING PROJECT ON 31.03.2007 AND WAS COMPLETED BY 31 ST MARCH, 2011. THE TOTAL BUILT UP AREA OF THE PROJECT IS 9900 SQ.M T. IT WAS HAVING ALL THE APPROVALS FROM MUNICIPAL CORPORATION AND STATE GOVE RNMENT AND WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10). THE NECESSARY CERTIFICATE UNDER FORM 10CCB WAS FILED ALONG WITH THE RETURN OF INCOME. THE PROFIT OF THE PROJECT HAS BEEN WORKED OUT BY THE ASSESSEE AS UNDER: - PARTICULARS AREA AMOUNT ( ` ) A TOTAL SALES (2BHK IN A D WINGS) TOTAL SALES (3 BHK IN D WINGS 80667 7868 27,76,61,393 2,91,93,100/- 88667 30,68,54,493/ - B TOTAL PROFIT [2 BHK] TOTAL PROFIT [3 BHK] 46,42,841/- C TOTAL BUSINESS PROFIT 4,88,01,826/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND IN REPLY TO THE SPECIFIC QUERY OF THE AO THE ASSESSEE SUBMITTED AS UNDER: - ITA NOS. 4912&5014/MUM/2015 M/S. V.R. CONSTRUCTION P. LTD. 3 (A) EACH RESIDENTIAL UNIT OF 2BHK IN A TO D WING ARE OF LESS THAN 1000 SQ.FT. AREA (B) IT IS NOT AN SRA PROJECT. (C) ASSESSEE HAVE CLAIMED 80IB DEDUCTION ONLY ON BUILDI NG IN WHICH FLATS WHICH ARE OF LESS THAN 1000 SQ.FT. AREA AND N OT CLAIMED DEDUCTION IN RESPECT OF 3 BHK FLATS OF D WING. VARIOUS COURTS INCLUDING MUMBAI ITAT HAD ALREADY TA KEN A VIEW THAT IN THE CASE THE RESIDENTIAL BUILDING CONSISTS OF FLATS OF MORE THAN 1000 SQ.FT AND LESS THAN 1000 SQ.FT., THE DEDUCTION UNDE R SECTION 80IB(10) SHOULD BE ALLOWED TO THE ASSESSEE ON PROPORTIONATE BASIS. IN SUPPORT OF ITS CONTENTION THAT IT IS ENTITLED TO CLAIM PROPORT IONATE DEDUCTION IN RESPECT OF UNITS NOT EXCEEDING 1000 SQ.FT. BUILT-UP AREA, THE ASSESSEE HAS PLACED RELIANCE ON VARIOUS DECISIONS OF THE ITA T. THE AO DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE AND HAD DISALLOWED THE DEDUCTION UNDER SECTION 80IB(10) ON THE GROUND THAT SOME FLATS EXCEEDING THE MAXIMUM AREA REQUIREMENT. 4. THE MATTER WAS CARRIED TO THE CIT(A) AND THE CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: - 3.2.1 IN VIEW OF THE DECISIONS CITED BY APPELLANT A S PER FOREGOING PARAGRAPH 3.2 OF THE ORDER, THE CONTENTION RAISED B Y THE APPELLANT IS LEGALLY TENABLE. THE CLAIM OF 'PROVISION FOR DEBT R EDEMPTION' AMOUNTING TO RS.7,40,00,000 THE DISALLOWANCE OF WHI CH HAS BEEN CONFIRMED BY ME ALREADY, SHOULD BE CONSIDERED FOR I NCLUSION AS ELIGIBLE PROFIT FOR PROPORTIONATE DEDUCTION U/S 801 B OF I.T. ACT. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE COMPUTA TION FURNISHED BY THE APPELLANT AND HE IS DIRECTED TO ALLOW PROPORTIO NATE DEDUCTION U/S 801B OF 1. T. ACT. 3.3 TO SUMMARIZE, THE ASSESSING OFFICER IS DIRECTED TO ALLOW PROPORTIONATE DEDUCTION U/S 801B OF I.T. ACT, AS PE R FOLLOWING FORMULA, AND FOR THIS PURPOSE, PROFIT OF THE PROJECT WILL IN CLUDE 'PROVISION FOR DEBT REDEMPTION' AMOUNTING TO RS.7,40,00,000 THE DI SALLOWANCE OF WHICH HAS BEEN SEPARATELY CONFIRMED BY ME ALREADY ( SUBJECT TO VERIFICATION OF COMPUTATION PROVIDED BY THE APPELLA NT): PROFIT OF THE PROJECT X AREA BUILT UP FOR FLATS BELOW 1000 SQ. F EET TOTAL BUILT UP AREA OF THE PROJECT FOR ALL RESIDENTIAL UNITS ITA NOS. 4912&5014/MUM/2015 M/S. V.R. CONSTRUCTION P. LTD. 4 5. WE HAVE HEARD THE RIVAL CONTENTIONS. DURING THE COU RSE OF HEARING THE LEARNED A.R. SUBMITTED THAT THE ISSUE IN CONTRO VERSY IS COVERED BY THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF VISWAS PROMOTERS LTD. VS. ACIT 29 TAXMAN 19 WHEREIN THE HIGH COURT H AS SET ASIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 6. THE LEARNED D.R. RELIED UPON THE DECISION OF VARIOU S TRIBUNALS BUT WHEN THERE IS A HIGH COURT JUDGEMENT WE ARE BOUND T O FOLLOW THE JUDGEMENT OF THE HON'BLE HIGH COURT. THEREFORE, WE ARE OF THE VIEW THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF THE HON'BLE MADRAS HIGH COURT WHICH READS AS UNDER: - ASESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 -LB (10) ON A PROPORTIONATE BASIS IN RESPECT OF THOSE BLOCKS WHIC H ARE OF LESS 1500 SQUARE FEET AREA IT IS HELD THAT THE TRIBUNAL IS NOT CORRECT IN ITS VIEW, THAT BY REASON OF THE UNITS BEING IN EXCESS OF 1500 SQ.FT., THE EN TIRE CLAIM OF THE ASSESSEE IN RESPECT OF THE TWO PROJECTS WOULD STAND REJECTED UNDER SECTION 80-IB(10). THUS, GOING BY THE DEFINITION OF 'HOUSING PROJECT' UNDER EXPLANATION TO SECTION 80HHBA AS TO THE CONSTRUCTION OF 'ANY BUILDING' AND THE WORDINGS IN SECTION 80-IB(10 ), THE QUESTION OF REJECTION IN ENTIRETY OF THE PROJECT ON ACCOUNT OF ANY ONE OF THE BLOCKS NOT COMPLYING WITH THE CONDITIONS, DOES NOT ARISE. EVEN IN THE CASE OF EACH ONE OF THE BLOCKS, WHEREVER THERE ARE FLATS WHICH SATISFIED THE CONDITIONS PARTICULARLY OF THE NATURE STATED UNDER SECTION 80-IB(10)(C), THE ASSESSEE WOULD BE ELIGIBL E FOR GRANT OF RELIEF UNDER SECTION 80-IB(10) ON A PROPORTIONATE B ASIS. THUS IT IS HELD THAT THE ASSESSEE IS ENTITLED TO SUCCEED BOTH ON THE PRINCIPLE OF PROPORTIONALITY AS WELL AS BY REASON OF THE CONSTRU CTION ON THE MEANING OF THE EXPRESSION 'HOUSING PROJECT' AS REFE RRING TO CONSTRUCTION OF ANY BUILDING AND THE WORDINGS IN SE CTION 80-IB(10). IN THE CIRCUMSTANCES, IT IS HELD THAT THE MERE FACT THAT ONE OF THE BLOCKS HAVE UNITS EXCEEDING BUILT-UP AREA OF 1500 S Q.FT. PER SE, WOULD NOT RESULT IN NULLIFYING THE CLAIM OF THE ASS ESSEE FOR THE ENTIRE PROJECTS CONSEQUENTLY, IN RESPECT OF EACH OF THE BL OCKS, THE ASSESSEE IS ENTITLED TO HAVE THE BENEFIT OF DEDUCTI ON IN RESPECT OF RESIDENTIAL UNITS SATISFYING THE REQUIREMENT UNDER SECTION 80-IB(10) (C). (PARA 14] IN THE LIGHT OF THE ABOVE REASONING, THE SUBSTANTIA L QUESTIONS OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AS TO THAT TH E ASSESSEE IS ITA NOS. 4912&5014/MUM/2015 M/S. V.R. CONSTRUCTION P. LTD. 5 ENTITLED TO THE CLAIM OF DEDUCTION IN RESPECT OF AL L THE BLOCKS FORMING PART OF THE PROJECTS CALLED AGRINI AND VAJRA, BUT T O THE EXTENT OF EACH OF THE BLOCKS SATISFYING THE CONDITIONS UNDER SECTI ON 80-IB(10) THE ASSESSEE WOULD BE ENTITLED TO THE RELIEF ON A PROPO RTIONATE BASIS. [PARA 15] IN THE RESULT THE APPEALS ARE ALLOWED. [PARA 16] RESPECTFULLY FOLLOWING THE SAME WE DISMISS THE APPE AL OF THE REVENUE. 7. THE FIRST GROUND RAISED BY THE ASSESSEE IN ITA NO. 4912/MUM/2015 IS WITH REGARD TO THE CONFIRMING THE DISALLOWANCE M ADE BY THE AO OF ` 2,12,000/- ON ACCOUNT OF DONATIONS WHICH WAS NEITHE R CLAIMED IN A.Y. 2011-12 AND NOR IN A.Y. 2008-09. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE HAS FILED DETAILS OR WORK-IN-PROGRESS (WIP).THE ASSESSEE HAS PROVIDED THE STATEMENT SHOWING ADDITION TO WIP YEAR-WISE FROM 2004-05 ONWA RDS. WHILE GIVING THE STATEMENT THE AO ASKED FOR THE RECEIPTS OF DONATION MADE IN F.Y. 2007-08. THE ASSESSEE COULD NOT FILE THE RECEIPTS AS THE REC EIPTS WERE TAKEN OUT OF THE OLD RECORDS. THE AO MADE THE ADDITION OF DONATI ON FOR A.Y. 2011-12 ON THE GROUND THAT THE DONATIONS OF ` 2,12,000/- DEBITED IN WIP ACCOUNT INI 2008-09 WAS ADDED BACK TO THE YEAR UNDER CONSIDERAT ION. 9. THE MATTER WAS CARRIED TO THE CIT(A) AND THE CIT(A) HAS DISMISSED THE APPEAL. 10. DURING THE COURSE OF HEARING THE LEARNED A.R. SUBMI TTED THAT THE ADDITION IS MADE ON ACCOUNT OF DONATION ON THE GROU ND THAT IT WAS CLAIMED IN THE RETURN OF INCOME BUT THE ASSESSEE HAS NEITHE R CLAIMED IN A.Y. 2010- 11 OR A.Y. 2008-09. THEREFORE THERE WAS NO REASON T O MAKE THIS ADDITION. DURING THE COURSE OF HEARING THE LEARNED A.R. SUBMI TTED THAT THE ASSESSEE HAS PROVIDED THE STATEMENT SHOWING THE ADDITION TO THE WIP YEAR-WISE FROM 2004-05 ONWARDS. WHILE RECORDING THE STATEMENT THE AO ASKED ABOUT THE DONATION RECEIPTS WHICH MADE IN F.Y. 2008-09. THE A O ADDED THE ADDITION TO THE TOTAL INCOME IN A.Y. 2011-12 ON THE GROUND T HAT THE DONATION WAS DEBITED IN WIP FOR A.Y. 2008-09. THE ASSESSEE SUBMI TTED THAT WHEN THE ITA NOS. 4912&5014/MUM/2015 M/S. V.R. CONSTRUCTION P. LTD. 6 DONATION WAS NEVER DEBITED TO PROFIT & LOSS ACCOUNT AND NEVER CLAIMED, THEREFORE IT CANNOT BE ALLOWABLE IN A.Y. 2011-12 OR 2008-09. THE LEARNED D.R. RELIED UPON THE ORDER OF THE REVENUE. 11. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND THAT D URING THE COURSE OF HEARING THE LEARNED A.R. SUBMITTED THE ASSESSEE HAS NEVER CLAIMED DONATION IN ITS RETURN OF INCOME IN A.Y. 2011-12 OR 2008-09. THEREFORE, WHEN THE ASSESSEE DID NOT CLAIM THE DONATION THERE IS NO QUESTION OF ADDITION OF ` 2,12,000/-. THEREFORE, WE ALLOW THE SAME. GROUND NO . 1 IS ALLOWED. 12. GROUND NO. 2 IS WITH REGARD TO CONFIRMATION OF THE DISALLOWANCE MADE BY THE AO OF INTEREST EXPENDITURE AMOUNTING TO ` 32,18,400/- WITHOUT APPRECIATING THE FACT THAT INVESTMENTS WERE MADE OUT OF OWN FUNDS AND BORROWED FUNDS WERE UTILIZED FOR THE PURPOSE OF BUSINESS. 13. DURING THE ASSESSMENT PROCEEDINGS THE AO HAS VERIFI ED THE DETAILS OF LOANS AND ADVANCES. IT WAS NOTED THAT THE ASSESSEE HAS NOT CHARGED INTEREST ON ADVANCE OF RS.5 CRORES TO AVAITA ESTATES AND DEV ELOPMENT P. LTD. AND RS.50,00,000/- TO PAREKH ENTERPRISES. DURING THE AS SESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE INTEREST ATTRIBUTABLE TO THIS INTEREST FREE ADVANCE SHOULD NOT BE DISALLOWED . THE ASSESSEE CONTENDED THAT OUT OF THE LOANS AND ADVANCED GIVEN ` 5,00,00,000/- REPRESENTS ADVANCE TO ADVAITA ESTATE & DEVELOPMENT P. LTD. IS A PART O F INVESTMENT IN THE COMPANY FOR THEIR PROJECT AND ` 50,00,000/- PAID TO PAREKH ENTERPRISES WAS ADVANCE FOR LAND UNDER NEGOTIATION. THESE AMOUNTS W ERE GIVEN TOTALLY COMMERCIAL ADVANCES TOWARDS ACQUISITION AND INVESTM ENT IN PROJECT AND NOT IN NATURE OF LOAN ON WHICH INTEREST CAN BE CHARGED. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS GIVEN THESE ADVANCES TOWARDS ACQUISITION OF INVESTMENT IN THE PROJECT BUT THEY ARE NOT IN THE NATURE OF LO AN. THE ASSESSEE COULD NOT PROVE THE NEXUS BETWEEN THE PROJECT UNDERTAKEN DURI NG THE YEAR. THE ASSESSEE HAS DIVERTED INTEREST FREE FUNDS FOR THE P URPOSE OF ADVANCE. THEREFORE, THE AO HAS DISALLOWED THE INTEREST @12% AND MADE THE ADDITION. THE CIT(A) CONFIRMED THE ADDITION. ITA NOS. 4912&5014/MUM/2015 M/S. V.R. CONSTRUCTION P. LTD. 7 14. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE FIND THAT THE AO HAD MADE DISALLOWANCE OF INTEREST ON THE GROUND THAT THE ASSESSEE COULD NOT PROVE THE NEXUS BETWEEN THE ADVANCE GIVEN TO ADVAITA ESTATE & DEVEL OPMENT P. LTD. AND THE PROJECT BHOOMI ACRES. SIMILARLY THE ADVANCE GIV EN TO PAREKH ENTERPRISES HAS NO NEXUS WITH THE BHOOMI ACRES PROJ ECT. THEREFORE THE INTEREST COST WAS DISALLOWED. WE FIND THAT THE AO A ND THE CIT(A) HAS NOT CONSIDERED WHETHER THE ASSESSEE HAS GIVEN THESE ADV ANCES TOWARDS PURCHASE OF PROPERTY OR LOANS HAVE BEEN GIVEN FOR T HE BHOOMI ACRES PROJECT OR NOT. THEREFORE, WE RESTORE THIS MATTER BACK TO T HE FILE OF THE AO AND THE AO IS DIRECTED TO VERIFY ALL THE FACTS WHETHER THES E LOANS ARE GIVEN FOR BUSINESS PURPOSES OR NOT AND DECIDE THE MATTER ACCO RDING TO LAW. 15. GROUND NO. 3 RELATING TO CLAIM OF CAPITAL LOSS ON S ALE OF PROPERTY WAS NOT PRESSED BY THE LEARNED A.R. THEREFORE THE SAME IS D ISMISSED AS NOT PRESSED. 16. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED WHILE THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JULY, 2017. SD/ - SD/ - (P.K. BANSAL) (D.T. GARASIA) VICE PRESIDENT JUDICIAL MEMBER MUMBAI, DATED: 10 TH JULY, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -18, MUMBAI 4. THE PR. CIT - 11, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.