DCIT 3(3)(1), MUMBAI V. S.D. CORPORATION P.LTD, MUMBAI

ITA 6395/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9196 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 31-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH RAJORE
• Assessee Lawyers: SE
• Keywords: Business income; Revised return
• Section: 143(3); 80IB

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 6395/MUM/2017 (ASSESSMENT YEAR 2010-11 ) DCIT-3(3)(1) ROOM NO. 609, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 VS. M/S S.D. CORPORATION PVT. LTD. ADMIN OFFICE, S.P. CENTRE, 41/44, MINOO DESAI MARG, COLABA, MUMBAI-400005 . PAN: AADCS4496C APPELLANT RESPONDE NT APPELLANT BY : SHRI SATISH RAJORE (SR. DR) RESPONDENT BY : SHRI DILIP LAKHANI (SR. ADVISOR OF DELOITE HASKINS AND SELL LLP) DATE OF HEARING : 13.06.2019 DATE OF PRONOUNCEMEN T : 24.06.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-8 [THE LD. CIT(A)], MUMBAI DAT ED 5 TH JULY 2017 FOR ASSESSMENT YEAR 2010-11. THE REVENUE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 'A. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF DEDUCTION U/S 80IB (10) AT RS. 61,29,65,439/- INSTEAD OF RS. 58,95,08,692/- CALCUL ATED BY THE AO, IGNORING THE PROVISIONS OF SECTION 80IB OF THE ACT WHICH STIPULA TES THAT INCOME UNDER A SECTION HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISION S OF THE ACT (BEFORE MAKING ANY DEDUCTION UNDER CHAPTER VIA) WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE? B. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF DEDUCTION U/S 80IB (10) AT RS. ITA NO 6395 MUM 2017-M/S S.D. CORPORATION PVT. LTD. 2 61,29,65,439/- INSTEAD OF RS. 58,95,08,692/- CALCUL ATED BY THE AO, VARIOUS COURTS IN THE CASE OF STERLING FOODS 237 ITR 53 (SC), PAND IAN CHEMICALS LTD. 262ITR 278 (SC), LIBERTY INDIA VS. COMMISSIONER OF INCOME TAX (2009) 183 TAXMAN 349 (SC), VELLORE ELECTRIC CORPN. LTD. VS COMMISSIONER OF INCOME TAX (1997) 93 TAXMAN 401, COMMISSIONER OF INCOME TAX VS. KOTHARI PRODUCTS LTD., (2008) 168 TAXMAN 236 (ALL.), LIBERTY SHOES LTD. VS. COMMISSIO NER OF INCOME TAX, CENTRAL CIRCLE, LUDHIANA, (2007) 158 TAXMAN 340 (PUNJAB & H ARYANA) HAVE HELD THAT INCOME FALLING THE PARAMETERS OF BEING INCIDENTAL T O BUSINESS, CAN FALL WITHIN THE SCOPE OF THE BUSINESS OF THE ASSESSEE, YET IT CANNO T BE SAID TO HAVE BEEN DERIVED FROM THE ELIGIBLE INDUSTRIAL UNDERTAKING OF THE ASS ESSEE, SO AS TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT? 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LTD. COMPANY ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT, FILED ITS RETURN OF INCOME ON 15.10.2010 DECLARING TOTAL INCOME OF RS. 65,17,4 14/- AFTER CLAIMING DEDUCTION UNDER SECTION 80IB(10) OF RS. 53,23,78,75 5/-. THE RETURN WAS REVISED ON 07.10.2011 DECLARING TOTAL INCOME AT RS. 98,90,404/- AND CLAIMED DEDUCTION UNDER SECTION 80IB OF RS. 61,29,65,438/. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLE TED UNDER SECTION 143(3) ON 28.03.2013. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT INITIALLY THE ASSESSEE CLAIMED DEDUCTION UNDER SECT ION 80IB(10) OF RS. 53,23,78,755/- IN THE ORIGINAL RETURN, WHEREAS IT H AS ENHANCED ITS CLAIM UNDER SECTION 80IB(10) TO RS. 61,29,65,438/-. THE ASSESSI NG OFFICER WAS OF THE VIEW THAT PRIMA FACIA , THE CLAIM OF THE ASSESSEE IS NOT ADMISSIBLE AS PE R THE PROVISION OF SECTION 80AB. THE ASSESSING OFFICER IS SUED SHOW CAUSE NOTICE TO THE ASSESSEE ON THE ISSUE AS TO WHY THE DEDUCTION U NDER SECTION 80IB SHOULD NOT BE RESTRICTED TO THE INCOME SHOWN UNDER THE HEA D INCOME FROM BUSINESS ITA NO 6395 MUM 2017-M/S S.D. CORPORATION PVT. LTD. 3 AND PROFESSION. THE ASSESSEE FILED ITS REPLY DATED 25.03.2013. IN THE REPLY THE ASSESSEE STATED THAT THEY ARE ENTITLED FOR DEDU CTION UNDER SECTION 80IB IN RESPECT OF HOUSING PROJECT. THE CONDITIONS OF SECTI ON 80IB ARE FULLY SATISFIED. THE ASSESSEE FURNISHED WORKING OF THE DEDUCTION UND ER SECTION 80IB(10). IT WAS FURTHER STATED THAT PROVISION OF SECTION 80AB W ILL NOT COMING THE WAY TO THE CLAIM OF SECTION 80IB AND CLAIM TO ALLOWED ON T HE GROSS TOTAL INCOME AND NOT TO BE RESTRICT TO THE BUSINESS INCOME. THE RE PLY OF ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER. THE ASSESSING OFFICE R CONCLUDED THAT THE PROFIT OF RS. 61,29,65,438/- FROM ELIGIBLE SRA PROJ ECT AND LOSS FROM NON- ELIGIBLE SOLD BUILDING OF RS. 2,34,56,746/-. AFTER SETTING OF SUCH LOSSES, THE INCOME OF ASSESSEE UNDER THE HEAD INCOME FROM BUSI NESS & PROFESSION REMAINS AT RS. 58,95,08,692/- ONLY AND THE ASSESSEE IS ELIGIBLE FOR DEDUCTION TO THAT EXTENT ONLY. IN CLAIMING DEDUCTION IN EXCES S OF ITS INCOME UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION THE ASSESS EE IGNORED THE PROVISIONS OF SECTION 80IB. THE ASSESSING OFFICER M ADE RELIANCE ON CASE LAW IN CIT VS STERLING FOODS (237 ITR 53 SC), PANDIAN CHEMICALS LTD. VS CIT (266 ITR 278 MAD), CIT VS. LIBERTY INDIA (183 TAXMA NN.COM 349), CIT VS. VELLORE ELECTRIC CORPORATION LTD. VS CIT (93 TAXMAN 401 SC), CIT VS. KOTHARI PRODUCTS LTD. (168 TAXMAN 236 ALL), CIT VS. LIBERTY SHOES LTD. (158 TAXMAN 340 SC). 3. ON APPEAL BEFORE THE LD. CIT(A), THE PLEA OF THE AS SESSEE WAS ACCEPTED AND THE ASSESSEE WAS ALLOWED DEDUCTION UNDER SECTION 80 IB(10) ON GROSS TOTAL ITA NO 6395 MUM 2017-M/S S.D. CORPORATION PVT. LTD. 4 INCOME. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE R EVENUE HAS FILED THE PRESENT APPEAL BEFORE THIS TRIBUNAL. 4. WE HAVE HEARD THE SUBMISSION OF LD. DEPARTMENTAL RE PRESENTATIVE (DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. D R FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LD. D R FURTHER SUBMITS THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80 IB (10) FOR ELIGIBLE BUSINESS ONLY. THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80(IB) IN EXCESS OF ITS ELIGIBLE BUSINESS AND THE ASSESSING O FFICER RIGHTLY DISALLOWED . IN SUPPORT OF HIS SUBMISSION, THE LD. DR RELIED UPON T HE DECISION OF CIT VS STERLING FOODS (SUPRA), PANDIAN CHEMICALS LTD. VS C IT (SUPRA), CIT VS. LIBERTY INDIA (SUPRA), CIT VS. VELLORE ELECTRIC COR PORATION LTD. VS CIT ( SUPRA), CIT VS. KOTHARI PRODUCTS LTD. (SUPRA), CIT VS. LIBERTY SHOES LTD. (SUPRA) 5. ON THE OTHER HAND, THE AR OF THE ASSESSEE SUPPORTED THE ORDER OF ASSESSING OFFICER. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT HONBLE SUPREME COURT IN CIT VS. CANARA WORKSHOPS (P.) LTD. [1986] 27 TAXMAN 262 (SC) HELD THAT DEDUCTION UNDER SECTION 80E IS TO BE ALLO WED ON PROFIT & GAINS EARNED BY INDUSTRY WITHOUT REDUCING SUCH PROFIT BY SETTING OF LOSS SUFFERED BY OTHER INDUSTRIES. FURTHER, THE HONBLE ANDHRA PRADE SH HIGH COURT IN CIT VS. VISAKHA INDUSTRIES LTD. (118 TAXMAN 777) HELD THAT DEDUCTION UNDER SECTION 80HH WITH REFERENCE TO PROFIT OF PARTICULAR UNIT, W ITHOUT SET OFF OF LOSS ON ITA NO 6395 MUM 2017-M/S S.D. CORPORATION PVT. LTD. 5 OTHER UNIT AND DEDUCTION CONTEMPLATED IS TO BE ALLO WED WITH REFERENCE TO PARTICULAR INDUSTRIAL UNDERTAKING AND NOT WITH REFE RENCE TO TOTAL INCOME OF THE ASSESSEE. THE LD AR FOR THE ASSESSEE FURTHER RELIED ON THE DECISION OF DELHI HIGH COURT IN MEERA COTTON & SYNTHETIC MILLS (P) LT D VS ACIT (29 SOT 177 MUMBAI TRI), PUNIT CONSTRUCRTION CO. VS CIT (92 TAXMANN.COM 28) (MUMBAI-TRIB), ACIT VS TATA METALICS LTD (81 TAXMAN N.COM 439) (MUMBAI TRIB) AND CIT VS SONA KOYO STEERING SYSTEMS LTD (18 9 TAXMAN 110 DELHI HIGH COURT). THE LD AR FOR THE ASSESSEE FILED THE C OPIES OF THE DECISION RELIED BY LD DR ( AS COPIES OF THE CASE LAW WAS NOT FILED BY HIM). THE LD AR FOR THE ASSESSEE FURTHER SUBMITS THAT NONE OF THE CASE LAWS RELIED BY ASSESSING OFFICER AND JUST REFERRED BY LD DR FOR THE REVENUE IS NOT A PPLICABLE ON THE ISSUE INVOLVE IN THE PRESENT CASE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE AL SO DELIBERATED ON VARIOUS CASE LAWS RELIED BY THE LOWER AUTHORITIES AND THE L D. REPRESENTATIVES OF THE PARTIES. DURING THE ASSESSMENT, THE ASSESSING OFFIC ER OBSERVED THAT INITIALLY THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IB ( 10) OF RS. 53,23,78,755/- WHEREAS IN THE REVISED RETURN THE ASSESSEE CLAIMED THE DEDUCTION UNDER SECTION 80IB AT RS. 61,29,65,438/-. THE ASSESSING O FFICER AFTER ISSUING SHOW CAUSE NOTICE THAT IN VIEW OF THE PROVISIONS OF SECT ION 80AB, THE CLAIM OF ASSESSEE IS NOT ADMISSIBLE. THE ASSESSEE FURNISHED THE FOLLOWING REVISED COMPUTATION; ITA NO 6395 MUM 2017-M/S S.D. CORPORATION PVT. LTD. 6 (1) NET INCOME FROM BUSINESS ELIGIBLE U/S 80IB(1) RS. 61,29,65,438/- (2) NET LOSS FROM BUSINESS NON ELIGIBLE U/S 80IB(10) ( RS.2,34,56,746/-) (3) INCOME FROM OTHER SOURCES RS.3,33,47,149/- GROSS TOTAL INCOME RS.62,28,55841 /- ALLOWABLE CLAIM U/S 80IB(10 ) RS. 61,29,65 438 /- 7. THE ASSESSING OFFICER RESTRICTED THE DEDUCTION UNDE R SECTION 80IB(10) TO RS. 58,95,08,692/- BY DEDUCTING THE LOSS OF RS. 2,34,56 ,746/- FROM NON ELIGIBLE BUSINESS. BEFORE THE LD. CIT(A), THE ASSESSEE URGE D THAT THE ASSESSEE EARNED INCOME FROM ELIGIBLE BUSINESS. THE ASSESSEE SUFFERE D LOSS IN THE BUSINESS WHICH IS INELIGIBLE FOR CLAIMING DEDUCTION. THE ASS ESSEE CLAIMED NET CHARGEABLE INCOME TO TAX UNDER THE HEAD PROFIT & GA IN FROM BUSINESS IS RS. 58,95,08,692/-. THE ASSESSEE ALSO EARNED INCOME OF RS. 3.33 CRORE FROM OTHER SOURCES. THUS, GROSS TOTAL INCOME OF ASSESS EE WAS RS. 62,28,55,841/-. THE ASSESSEE CLAIMED THAT ITS GROSS TOTAL INCOME IS MORE THAN THE CLAIM OF SECTION 80IB(10). THUS, THE ALLOWABILITY OF THE CLA IM UNDER SECTION 80IB SHOULD BE AT RS. 61,29,65,438/-. THE LD. CIT(A) AFT ER REFERRING THE PROVISIONS OF SECTION 80A, SECTION 80IB NOTED THAT THE OVERRUL ING PRINCIPLE OF DEDUCTION UNDER CHAPTER-VIA AS LAID DOWN IN SECTION 80 AS WEL L AS SECTION 80IB BOTH REFERS TO GROSS TOTAL INCOME, WHICH INCLUDES ALL TH E HEAD OF INCOME IN RESPECT OF ASSESSEE. THE DEDUCTION UNDER SECTION 80IB(1) HA S TO BE COMPUTED ON THE BASIS OF PROFIT OF ELIGIBLE UNIT AS IT IS THE ONLY BUSINESS OF ASSESSEE. THE ESSENCE OF SECTION 80AB IS THAT ELIGIBLE INCOME H AS TO BE CALCULATED AS PER THE PROVISIONS OF THE ACT. ITA NO 6395 MUM 2017-M/S S.D. CORPORATION PVT. LTD. 7 8. THE LD. CIT(A) ALSO RELIED UPON THE DECISION OF JUR ISDICTIONAL HIGH COURT IN ALBRIGHT MORARJI AND PANDIT LTD. (1999) 236 ITR 914 (BOM), WHEREIN IT WAS HELD THAT SECTION HAS PROVIDED THAT PROFIT & GAIN I N RESPECT OF WHICH DEDUCTION IS TO BE ALLOWED ARE THOSE WHICH ARE INCL UDED IN ASSESSEES GROSS TOTAL INCOME AND SINCE GROSS TOTAL INCOME IS DEFINED BY SECTION 80B(5) AS IT STOOD THEN TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, BEFORE MAKING ANY DEDUCTION UNDER CHAPTER VI-A OR UNDER SECTION 280-O , THE PROFITS AND GAIN DERIVED FROM AN INDUSTRIAL UNDERTAKING INCLUDED IN GROSS TOTAL INCOME WOULD, T HEREFORE, OBVIOUSLY BE THE PROFIT AND GAINS COMPUTED IN ACCORDANCE WITH THE PR OVISIONS OF THE ACT. 9. THE LD. CIT(A) FINALLY CONCLUDED THAT THE AMOUNT OF DEDUCTION UNDER SECTION 80IB(10) HAS TO BE COMPUTED BY FIRST ARRIVING AT PR OFIT/LOSS OF THE ELIGIBLE BUSINESS AS PER PROVISION OF THE ACT AND THEN REDUC ING THE AMOUNT FROM GROSS TOTAL INCOME WHICH INCLUDES ALL OTHER HEADS OF INCOME. IT WAS ALSO CONCLUDED THAT AS LONG AS GROSS TOTAL INCOME EXCE ED THE AMOUNT OF DEDUCTION CALCULATED AS PER THE ACT, THE SAME HAS T O BE ALLOWED. 10. THE HONBLE SUPREME COURT IN CIT VS. CANARA WORKSHO PS (P.) LTD. (SUPRA) ALSO HELD THAT DEDUCTION UNDER SECTION 80E IS TO BE ALLOWED FROM PROFITS AND GAINS AND BY INDUSTRY WITHOUT REDUCING SUCH PROFIT BY SETTING OF LOSS SUFFERED BY OTHER INDUSTRIES OWNED BY ASSESSEE. SIMILARLY, T HE HONBLE ANDHRA PRADESH HIGH COURT IN CIT VS. VISAKHA INDUSTRIES LT D. (SUPRA) HELD THAT DEDUCTION UNDER SECTION 80E IS TO BE ALLOWED FROM P ROFITS AND GAINS AND BY ITA NO 6395 MUM 2017-M/S S.D. CORPORATION PVT. LTD. 8 INDUSTRY WITHOUT REDUCING SUCH PROFIT BY SETTING OF LOSS SUFFERED BY OTHER INDUSTRIES OWNED BY ASSESSEE. DELHI HIGH COURT IN C IT VS DEWAN KRAFT SYSTEM (P) LTD ALSO TOOK THE SAME VIEW. THEREFORE, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). 11. THE CASE LAW RELIED BY ASSESSING OFFICER AND FURTHE R REFERRED BY LD. DR FOR THE REVENUE, WHICH WE HAVE MENTIONED IN PARA- 4 ABOVE, HAVE NO APPLICATION ON THE FACTS OF THE PRESENT CASE, AS THE SAME RELATES TO COMPUTATION OF INCOME DRIVES FROM THE UNDERTAKING. NO OTHER CONTRARY FACT S OR LAW IS BROUGHT TO OUR NOTICE, IN THE RESULT THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS REJECTED. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/06/2019. SD/- SD/- M. BALAGANESH, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 24.06.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI