ITO 15(2)(3), MUMBAI V. DHARTI ENTERPRISES, MUMBAI

ITA 6246/MUM/2010

• Counselvise Citation: 624619914 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 18-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: VIJAY C KOTHARI
• Section: 80IB; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE HONBLE PRESIDENT SHRI G.E.VEERABHADRAPPA AND SHRI D.K.AGARWAL (JM) ITA NO.6246/MUM/2010 (ASSESSMENT YEAR:2007-08) INCOME TAX OFFICER 15(2)(3), ROOM NO.121, 1 ST FLOOR, MATRU MANDIR, TARDEO ROAD, GRANT ROAD, MUMBAI-400007. M/S DHARTI ENTERPRISES, 1-101, PRUTHVI CLASSIQUE, MODY PARK, IRANI WADI, ROAD, NO.3, KANDIVALI (W), MUMBAI-400067. PAN: AAEFD2719F APPELLANT V/S RESPONDENT DATE OF HEARING : 5.1.2012 DATE OF PRONOUNCEMENT : 18.1.2012 APPELLANT BY : SHRI C.G.K.NAIR RESPONDENT BY : SHRI VIJAY C.KOTHARI O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 10.6.2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS ENGAGED AS A BUILDER AND DEVELOPE R ITA NO.6246/MUM/2010 (ASSESSMENT YEAR:2007-08) 2 AND IS IN THE BUSINESS OF CONSTRUCTION. IT FILED R ETURN DECLARING TOTAL INCOME AT RS.NIL AFTER CLAIMING DEDUCTION U/S 80IB(10) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE AO ON GOING THROUGH THE COMPUTATIO N OF TOTAL INCOME OBSERVED THAT PROFIT OF THE PROJ ECT AS PER PROFIT AND LOSS ACCOUNT IS RS.51,34,648/- AND TO THIS THE ASSESSEE HAS ADDED THE AMOUNT OF TDS DEPOSITED LATER THAN DUE DATE RS.13,35,990/- AND T DS NOT DEPOSITED AS PER TAX AUDIT REPORT RS.81,81,030/ - AGGREGATING TO RS.95,17,020/- AND THUS ON THE GROS S TOTAL INCOME RS.1,46,51,668/-, THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB(10) OF THE ACT RS.1,46,51,668/-. ON BEING ASKED AS TO WHY DEDUCTIO N U/S 80IB(10) ON THE AMOUNT OF RS.95,17,020/- SHOUL D NOT BE DISALLOWED, IT WAS INTERALIA SUBMITTED BY THE ASSESSEE THAT NO DISALLOWANCE U/S 40(A)(IA) IS CA LLED FOR AND EVEN IF OTHERWISE DISALLOWANCE U/S (40)(A) (IA) IS MADE, THE ASSESSEE IS LIABLE FOR DEDUCTION UNDE R CHAPTER VIA OF THE ACT ON THE ENTIRE AMOUNT OF PROF IT DERIVED FROM THE HOUSING PROJECT AS COMPUTED UNDER THE ACT WHICH IS INCLUDED IN THE GROSS TOTAL INCO ME OF THE ASSESSEE. HOWEVER, THE AO AFTER CONSIDERING TH E ITA NO.6246/MUM/2010 (ASSESSMENT YEAR:2007-08) 3 RELEVANT PROVISIONS OF ACT AND THE DECISION OF THE HONBLE SUPREME COURT IN OF LIBERTY INDIA V/S CIT (2009) 317 ITR 218 (SC) HELD THAT THE ASSESSEE HAS WRONGLY CLAIMED THE DEDUCTION U/S 80IB(10) ON THE AMOUNT OF RS.95,17,020/- WHICH IS NOT A PROFIT OF T HE ELIGIBLE ENTERPRISE BUT HAS TO BE TAXED BECAUSE OF VIOLATION OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND ACCORDINGLY DISALLOWED THE CLAIM OF DEDUCTI ON U/S 80IB(10) ON THE AMOUNT OF RS.95,17,020/- AND THEREBY AFTER ALLOWING DEDUCTION U/S 80IB(10) RS.51,34,648/- COMPLETED THE ASSESSMENT AT AN INCOME OF RS.95,17,020/- VIDE ORDER DATED 14.12.200 9 PASSED U/S 143 (3) OF THE ACT. 3. ON APPEAL, THE LD. CIT(A), WHILE APPLYING THE RATIO OF THE DECISION IN PLASTIBLENDS INDIA LIMITE D V/S ACIT (2009) 318 ITR 352 (BOM)(FB) OBSERVED THAT GENUINENESS OF ALL THE EXPENDITURES HAVE NOT BEEN DOUBTED BY THE AO AND THE APPELLANT DERIVED INCOME FROM AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT, THEREFORE EVEN AFTER DISALLOWANCE OF EXPENDITURE ON ACCOUNT OF NON-DEDUCTION OF TDS AN D NON-DEPOSIT OF TDS CONSEQUENTIAL INCREASE IN PROF IT CANNOT BE PRESUMED TO BE NON-PROFIT FROM HOUSING ITA NO.6246/MUM/2010 (ASSESSMENT YEAR:2007-08) 4 PROJECT AND ACCORDINGLY WHILE DISTINGUISHING THE DECISION IN THE CASE OF LIBERTY INDIA (SUPRA) HELD THAT THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S 80IB(10 ) OF THE ACT ON ENHANCED PROFIT BY DISALLOWING THE EXPENDITURE OF RS.95,17,020/- WITH A DIRECTION TO AO TO CONSIDER THE CLAIM OF DEDUCTION OF ALLOWABILIT Y OF DEDUCTION U/S 80IB(10) IN SUBSEQUENT YEAR IF SAME IS HAVING CONSEQUENTIAL EFFECT IN THIS YEAR OR THE ASSESSMENT YEAR 2007-08. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS OF APPEAL : I . ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND LAW, THE LEARNED CIT(A) ERRED IN ALLOWING DEDUCTION U/S 80IB OF THE IT ACT TO THE ASSESSEE ON DISALLOWANCES MADE U/S 40(A)(IA) OF THE IT ACT IGNORING THE FACT THAT THESE ALLOWANCES DO NOT REPRESENT THE PROFITS DERIVED FROM ELIGIBLE BUSINESS OF THE INDUSTRIAL UNDERTAKING. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW THE LD. CIT(A) FAILED TO APPRECIATE THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA V/S CIT(317 ITR 238) IS SQUARELY APPLICABLE IN THE INSTANT CASE. III. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) HAS ERRED IN APPLYING THE BOMBAY HIGH COURT DECISION IN THE CASE OF PLASTIBENDS INDIA LTD. V/S CIT(318 ITR 352)IN FAVOUR OF THE ASSESSEE IGNORING THAT ONLY THE PROFITS HAVING DIRECT NEXUS WITH THE INDUSTRIAL ITA NO.6246/MUM/2010 (ASSESSMENT YEAR:2007-08) 5 UNDERTAKING ITSELF ARE ELIGIBLE FOR DEDUCTION U/S 80IB 5. AT THE TIME OF HEARING, THE LD. DR WHILE RELYIN G ON THE ORDER OF THE AO ALSO RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF ITO V/S MILLENIUM WRI TING PRODUCTS (P.) LTD. 47 SOT 238(2011); 13 TAXMAN 32 (KOLKATA) AND M/S KASHMIR TUBS V/S ITO IN ITA NO.145 (ASR)2005 (AY:2001-02) DATED 7.12.2007. HE, THEREFORE SUBMITS THAT THE ORDER PASSED BY TH E AO BE RESTORED. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITS THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE CASE OF (A) ACIT V/S SRI LAKSHMI BUILDERS AND VICE-VERSA IN ITA NO.244/VIZAG/2008 AND IN ITA NO.323/VIZAG/2010 (AY:2005-06) DATED 22.11.2010, (B) S.B.BUILDERS & DEVELOPERS V/S ITO IN ITA NO.1245/MUM/2009 (AY- 2006-07) DATED 14.5.2010 AND ( C ) ITO V/S M/S SHRI GANESH DEVELOPERS AND BUILDERS IN ITA NO.4328/DEL/2009 (AY:2006-07) DATED 11.3.2011. HE FURTHER SUBMITS THAT THE DECISIONS RELIED ON BY T HE LD. DR IN MILLENIUM WRITING PRODUCTS (P.) LTD.(SUP RA), ITA NO.6246/MUM/2010 (ASSESSMENT YEAR:2007-08) 6 THE TRIBUNAL HAS REMITTED THE MATTER BACK TO THE AO AND THE OTHER DECISIONS IN THE CASE OF M/S KASHMIR TUBS (SUPRA), THE TRIBUNAL IN THE CASE, OF S.B.BUILDERS & DEVELOPERS (SUPRA) WHILE DECIDING TH E ISSUE IN FAVOUR OF THE ASSESSEE HAS DISTINGUISHED T HE SAID DECISION IN PARAGRAPH 18 OF ITS ORDER, THEREFO RE, BOTH THE DECISIONS RELIED ON BY THE LD. DR ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE, THEREFORE, SUBMITS THAT THE ORDE R PASSED BY THE LD. CIT(A) BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT TH E AO HAS MADE ADDITION OF RS.13,35,990/- OF TDS DEPOSITED LATER THAN DUE DATE AND RS.81,81,030/- OF TDS NOT DEPOSITED AS PER TAX AUDIT REPORT AGGREGAT ING TO RS.95,17,020/- UNDER THE HEAD INCOME FROM BUSINESS AND THUS HE COMPUTED THE ASSESSEES INCOM E FROM BUSINESS AT RS.1,46,51,668/-. HOWEVER, WHILE ALLOWING THE DEDUCTION U/S 80IB (10), HE HAS CONSIDERED THE PROFIT DERIVED BY THE ASSESSEE FROM THE HOUSING PROJECT AT RS.51,34,648/- AND ALLOWED DEDUCTION TO THE EXTENT OF RS.51,34,646/- AND DID NOT ITA NO.6246/MUM/2010 (ASSESSMENT YEAR:2007-08) 7 ALLOW ANY DEDUCTION U/S 80IB(10) IN RESPECT OF ADDITION MADE OF RS.95,17,020/- UNDER THE HEAD INCOME FROM BUSINESS. HOWEVER, ON APPEAL, THE LD. CIT(A) HAS ALLOWED THE DEDUCTION U/S 80IB(10) ON TH E DISALLOWANCE OF RS.95,17,020/-. 8. IN S.B.BUILDERS & DEVELOPERS (SUPRA), THE AO FOUND THAT CERTAIN PAYMENTS RELATING TO COST OF CONSTRUCTION, RCC CONSULTANCY, ARCHITECTS FEES, COMMISSION AND PROFESSIONAL CHARGES AGGREGATING TO RA.4,50,12,485/-THE ASSESSEE HAD NOT DEDUCTED TAX IN TIME THOUGH IT WAS REQUIRED TO DO SO AND THEREFO RE THEY CANNOT BE ALLOWED AS DEDUCTION AS STIPULATED UNDER SECTION 40(A)(IA). THEREFORE, WHILE COMPUTI NG THE INCOME FROM THE BUSINESS, HE DISALLOWED AND ADDED BACK THE AFORESAID AMOUNT TO THE NET PROFIT IN THE PROFIT AND LOSS ACCOUNT AND ARRIVED AT GROSS TO TAL INCOME OF RS.8,26,90,888/-. HOWEVER, WHILE ALLOWI NG THE DEDUCTION U/S 80IB(10), HE ALLOWED DEDUCTION ONLY OF RS.3,76,78,403/- AND ARRIVED AT A TOTAL INCOME OF RS.4,50,12,485/- ON WHICH THE TAX WAS CHARGED. ON APPEAL, THE LD. CIT(A) UPHELD THE AC TION OF THE AO. ON FURTHER APPEAL, THE TRIBUNAL AFTER CONSIDERING THE RELEVANT PROVISIONS OF ACT AND VAR IOUS ITA NO.6246/MUM/2010 (ASSESSMENT YEAR:2007-08) 8 DECISIONS INCLUDING THE DECISION OF THE HONBLE SUPREME COURT RELIED ON BY THE AO IN LIBERTY INDIA (SUPRA) AND THE DECISION OF THE TRIBUNAL RELIED ON BY THE LD. DR IN M/S KASHMIR TUBS (SUPRA) HELD THAT T HE ASSESSEE WOULD BE ENTITLED TO THE DEDUCTION IN RESPECT OF THE PROFITS OF RS.8,26,90,888/- COMPUTE D AS PROFIT OF THE HOUSING PROJECT FOR THE ASSESSMEN T YEAR UNDER CONSIDERATION. 9. IN M/S SHRI GANESH DEVELOPERS AND BUILDERS (SUPRA), IT HAS BEEN HELD BY THE TRIBUNAL VIDE PARAGRAPH 4 AS UNDER : 4.IN THE LIGHT OF THIS VIEW TAKEN BY THE LD. CIT(A), IT IS CLEAR THAT DISALLOWANCE OF RS.7,23,081/- U/S 40(A)(IA) HAS BEEN UPHELD BY THE LD. CIT(A), BUT AT THE SAME TIME, HE DIRECTED THE AO TO ALLOW DEDUCTION U/S 80IB(10) OF THE ACT ON THIS AMOUNT, IF THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB(10) OF THE ACT, WE THEREFORE, REJECT THIS GROUND FILED BY THE REVENUE.. 10. IN SRI LAKSHMI BUILDERS (SUPRA) ON THE ISSUE O F DISALLOWANCE OF DEDUCTION U/S 80IB(10) ON THE AMOUN T DISALLOWED U/S 40(A)(IA) IT HAS BEEN HELD BY THE TRIBUNAL THAT THE DISALLOWANCE SO MADE CAN ONLY BE TREATED AS THE INCOME DERIVED FROM THE IMPUGNED BUSINESS ACTIVITY, WHEN THE INCOME AFTER MAKING THE ITA NO.6246/MUM/2010 (ASSESSMENT YEAR:2007-08) 9 SAID DISALLOWANCE IS SUBJECTED TO TAX AS THE BUSINE SS PROFIT. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN HOLDI NG THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80I B AS ELIGIBLE ON THE AMOUNT DISALLOWED U/S 40(A)(IA). 11. IN MILLENIUM WRITING PRODUCTS (P.) LTD.(SUPRA) , IT HAS BEEN OBSERVED AND HELD IN PARAGRAPH 7(B) OF THE ORDER AS UNDER : 7(B) IN RESPECT OF DISALLOWANCE OF CONTRACT PAYMENTS UNDER SECTION 194C OF THE ACT, REASON BEING THE TDS DEDUCTED IS NOT DEPOSITED BEFORE THE EXPIRY OF TIME PRESCRIBED UNDER SECTION 200(1) OF THE ACT, THEREBY, ASSESSING OFFICER DISALLOWED BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. WE FIND THAT THESE CONTRACT PAYMENTS ARE PART OF PROFIT AND LOSS ACCOUNT AND EXPENDITURE IS DISALLOWED BY ASSESSING OFFICER IN THE ABSENCE OF NON-DEPOSIT OF TDS WITHIN THE DUE DATE. FIRST OF ALL, IT IS TO BE MENTIONED THAT NEITHER THE ASSESSING OFFICER NOR CIT(A) HAS DISCUSSED WHY THIS ITEM IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTI ON 80IB OR WHY IT IS ELIGIBLE. BUT SEEING DATES OF PAYMENTS OF TDS, IT SEEMS THAT THESE ARE PAID WITHIN DUE DATE OF FILING OF RETURN OF INCOME, THE ASSESSEE EVEN OTHERWISE IS ELIGIBLE FOR DEDUCTION AND THE ASSESSING OFFICER CANNOT INVOKE THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR MAKING DISALLOWANCE, WE ARE OF THE VIEW THAT, LET THE ASSESSING OFFICER CONSIDER THIS ISSUE IN THE LIGHT OF THE ALLOWANCE OF DEDUCTION OF THIS EXPENDITURE AS THE ASSESSEE HAS MADE PAYMENT OF THIS TDS WITHIN THE DUE DATE OF FILING OF RETURN OF INCOME AND IN CASE, THE ASSESSEE IS NOT ALLOWED DEDUCTION OF THIS EXPENDITURE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, HE WILL GO INTO THE ELIGIBILITY OF DEDUCTION UNDER SECTION ITA NO.6246/MUM/2010 (ASSESSMENT YEAR:2007-08) 10 80IB OF THE ACT. HENCE, THIS ISSUE OF THE REVENUES APPEAL IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. 12. SINCE, THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE AO TO EXAMINE AS TO WHY THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB ON THE DISALLOWANC E MADE BY THE AO U/S 40(A)(IA), THEREFORE, THE DECIS ION RELIED ON BY THE LD.DR IS NOT APPLICABLE TO THE FAC TS OF THE ASSESSEES CASE. 13. BY APPLYING THE RATIO OF THE DECISIONS AS MENTIONED IN PARAGRAPHS 8 TO 10 OF THIS ORDER T O THE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT SINCE THE AO HAS TREATED THE DISALLOWANCE U/S 40(A)(IA) RS.95,17,020/- AS INCOME FROM BUSINESS AND IT IS NOT THE CASE OF THE REVENUE THAT THE INCO ME DERIVED BY THE ASSESSEE IS OTHER THAN THE BUSINES S INCOME FROM DEVELOPING AND BUILDING HOUSING PROJEC T, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB(10) IN RESPECT OF TOTAL PROFITS INCLUDING THE PROFITS OF RS.95,17,020/- COMPUTED AS BUSINESS PROFITS OF THE HOUSING PROJECT FOR THE YEA R UNDER APPEAL. ACCORDINGLY, THE ORDER PASSED BY THE LD. CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. THE GRO UNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED. ITA NO.6246/MUM/2010 (ASSESSMENT YEAR:2007-08) 11 14. IN THE RESULT, THE REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JAN.,2012. SD SD (G.E.VEERABHADRAPPA) (D.K.AGARWAL) PRESIDENT JUDICIAL MEMBER MUMBAI, DATED 18 TH JANUARY,2012. SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI