M/S. JIVESH DEVELOPERS & PROPERTIES PVT. LTD, MUMBAI V. THE DY CIT CEN CIR 24 & 26, MUMBAI

ITA 575/MUM/2008

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2678 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: J
• Next Hearing Date: 18-12-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 24-01-2008
• Court: TRIBUNAL
• Department Lawyers: SUJIT BANGAR SR
• Assessee Lawyers: J D MISTRY MR YOGESH THAR
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 575/M/2008 (ASSESSMENT YEAR :2004 - 2005 ) JIVESH DEVELOPERS & PROPERTIES P LTD., SAMIR COMPLEX, FIRST FLOOR, ST. ANDREWS ROAD, BANDRA (W), MUMBAI 400050. / VS. DCIT, CIRCLE 24 & 26, MUMBAI. ./ PAN : AAACJ9768M ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI J.D. MISTRY; MR. YOGESH THAR & MR. NISHANT THAKKAR / RESPONDENT BY : SHRI SUJIT BANGAR, SR. AR / DATE OF HEARING : 02.08 .2016 / DATE OF PRONOUNCEMENT : 23 .09 .2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 24.1.2008 IS AGAINST THE ORDER OF THE CIT (A) - IV, MUMBAI DATED 19.11.2007 FOR THE ASSESSMENT YEAR 2004 - 2005. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. DENIAL OF DEDUCTION U/S 80IB(10) IN RESPECT OF PROFITS DERIVED BY GIVING THE FLATS ON LEAVE AND LICENSE BASIS. 1.1. THE CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN DENYING DEDUCTION OF RS. 25,45,576/ - UNDER SECTION 80IB (10) OF THE ACT BEING PROFIT ELEM ENT CONTAINED IN LICENSE FEES IN RESPECT OF FLATS GIVEN ON LEAVE AND LICENSE BASIS ALLEGEDLY ON THE GROUND THAT THE PROFITS DERIVED BY GIVING FLATS ON LEAVE AND LICENSE BASIS DO NOT QUALIFY FOR DEDUCTION U/S 80IB(10) OF THE ACT AND THAT IS ONLY THE PROFITS DERIVED BY SELLING FLATS WHICH QUALIFY FOR DEDUCTION U/S 80IB(10) OF THE ACT. 2. THE ONLY ISSUE RAISED IN THIS APPEAL RELATES TO THE PROPER HEAD OF INCOME FOR TAXING RENTAL INCOME EARNED FROM THE FLATS AND HELD AS STOCK - IN - TRADE BY THE ASSESSEE WHO IS A DEVELOPER AND BUILDER. IT IS THE CLAIM OF THE ASSESSEE THAT THE SAME CONSTITUTES PROFITS DERIVED FROM THE HOUSING PROJECT FOR THE PURPOSE OF CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT. IT IS THE CASE OF THE REVENUE THAT SUCH INCOME DOES NOT CONSTITUTE EL IGIBLE PROFIT FOR THE PURPOSE OF DEDUCTION U/S 80IB(10) OF THE ACT AS THE SAME IS DERIVED FROM THE HOUSING PROJECT. 2 3. BEFORE US, SHRI J.D. MISTRY, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE RELEVANT PROVISIONS OF ACT AND ALSO AN ORDER OF TH E TRIBUNAL IN THE CASE OF M/S. AHCL - PEL VS. ITO IN ITA NO. 2168/M/2009 (2005 - 06) AND OTHERS, DATED 29.10.2014 AND SUBMITTED THAT SUCH INCOME CONSTITUTES ELIGIBLE INCOME FOR THE PURPOSE OF DEDUCTION U/S 80IB(10) OF THE ACT. IN THIS REGARD, HE BROUGHT OUR A TTENTION TO PARAS 3 TO 7 OF THE SAID TRIBUNALS ORDER. 4. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE CITED DECISION OF THE TRIBUNAL IN THE CASE OF M/S. AHCL - PEL (SUPRA), WHEREIN ONE OF US (AM) IS A PARTY TO THE SAID ORDER, WE FIND, THE FACTS AS W ELL AS THE CONCLUSIONS DRAWN BY THE TRIBUNAL WILL HELP THE ASSESSEE. CONSIDERING THE IMPORTANCE OF THE SAID PARAS FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAME ARE EXTRACTED AS UNDER: - 3. AT THE OUTSET, SHRI MAYUR KISNADWALA, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE IS A BUILDER AND ENGAGED IN THE BUSINESS OF DEVELOPMENT OF HOUSING PROJECT WHICH IS ALLOWABLE FOR DEDUCTION U/S 80IB OF THE ACT. THERE IS NO DISPUTE ABOUT THE PR OJECT AND THE ALLOWABILITY OF DEDUCTION OF PROFITS RELATABLE TO THE SALE PROCEEDS OF THE FLATS OF THE SAID HOUSING PROJECT. THE ONLY DISPUTE RELATES TO THE ALLOWABILITY OF DEDUCTION U/S 80IB OF THE ACT IN RESPECT OF THE RENTAL INCOME EARNED BY THE ASSESSE E IN RESPECT OF CERTAIN UNSOLD FLATS HELD AS STOCK - IN - TRADE. IT IS THE CASE OF THE ASSESSEE THAT SOME OF THE FLATS WHICH ARE LEFT UNSOLD WERE LET OUT UNDER LEAVE AND LICENSE SYSTEM AND THE SAID INCOME BEING DIRECTED CONNECTED TO THE FLATS, WHICH IS INTE GRAL PART OF THE HOUSING PROJECT IS ALSO ALLOWABLE FOR DEDUCTION U/S 80IB OF THE ACT. HE RELIED ON VARIOUS DECISIONS IN SUPPORT OF THE SAME. 4. ON THE OTHER HAND, REVENUE OFFICERS ARE OF THE OPINION THAT SUCH RECEIPTS ARE NOT ALLOWABLE PROFITS AND DENIE D THE CLAIM OF DEDUCTION. 5. BEFORE US, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO DISPUTE ON THE FACTS AND THE DISPUTE IS ONLY WITH REGARD TO THE DEFINITION OF ELIGIBLE PROFITS WHETHER IT INCLUDES RENTAL INCOME EARNED BY THE ASSESSEE FROM THE UNSOLD PART OF THE HOUSING PROJECT. BRINGING OUR ATTENTION TO VARIOUS DECISION PLACED BEFORE US, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE SCRAP SALES ARE HELD TO BE ELIGIBLE PROFITS. HE ALSO MENTIONED THAT THE INTEREST PAYMENTS RECEIVED BY THE ASS ESSEE FROM THE DEBTORS, RELATING TO THE SALE PROCEEDS, WERE ALSO FOUND ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IB OF THE ACT. IN SUPPORT OF HIS ARGUMENT, LD COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF ITAT, HYDERABAD IN THE CASE OF ACIT VS. BIOTECH M EDICALS (P) LTD [2009] 119 ITD 143 (HYD). FURTHER, LD COUNSEL ALSO RELIED ON THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF TATA INFOMEDIA LTD VS. ACIT [2009] 116 ITD 426 (MUM), WHICH IS DELIVERED IN THE CONTEXT OF DEDUCTION U/S 80Q OF THE ACT, WHER EIN IT WAS HELD THAT ADVERTISEMENT INCOME CONSTITUTES ELIGIBLE PROFITS. IN THIS CASE, THE INCOME IS EARNED ON SALE OF YELLOW PAGES. DRAWING PARALLAL TO THE ABOVE INSTANCES, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RENTAL RECEIPTS EARNED OUT THE UNS OLD FLATS OF THE HOUSING PROJECT SHOULD BE HELD ELIGIBLE FOR DEDUCTION. FURTHER, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT [2009] 317 ITR 218 (SC) FOR THE PROPOSITIO N THAT THE INCOME WITH FIRST DEGREE NEXUS SHOULD BE CONSIDERED AS ELIGIBLE INCOME FOR THE PURPOSE OF CLAIM OF DEDUCTION UJ/S 80IB OF THE ACT. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 3 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS CITED DECISIONS OF THE TRIBUNAL AND THE HIGHER JUDICIARY. ON HEARING BOTH THE PARTIES, WE FIND, THE SAID PROPOSITIONS MENTIONED ABOVE ARE HELPFUL FOR DECIDING THE ISSUE ON HAND. CONSIDERING THE FA CT THAT THE UNSOLD FLATS, BEING STOCK - IN - TRADE OF THE HOUSING PROJECT, BEING THE IMMEDIATE SOURCE OF THE IMPUGNED RENTAL INCOME, WE FIND DIRECT NEXUS OF THE SAID INCOME TO THE HOUSING PROJECT ON HAND. THEREFORE, THE SAID INCOME IS DERIVED FROM THE HOUSING PROJECT, MAKING THE INCOME ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. THEREFORE, THE CONCLUSIONS DRAWN BY THE CIT (A) ARE NOT SUSTAINABLE IN LAW. ACCORDINGLY, WE REVERSE THE ORDER OF THE CIT (A) ON THIS ISSUE AND ALLOW THE GROUND NO.1 IN ALL THE TH REE APPEALS. 5. CONSIDERING THE ABOVE, WE ARE OF THE OPINION, THE GROUNDS RAISED BY THE ASSESSEE SHOULD BE ALLOWED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. WE ORDER ACCORDINGLY. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUN CED IN THE OPEN COURT ON 2 3 R D SEPTEMBER, 2016. S D / - S D / - ( MAHAVIR SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 2 3 .9 .2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI