M/s. Prakash Builders, Baroda V. The Income tax Officer,Ward-2(4), Baroda

ITA 710/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2223 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 25-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDAN SRDR
• Keywords: Business income; Business expenditure
• Section: 80IB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.710 & 3470/AHD/2008 & ITA NO.2267/AHD/2010 ASSESSMENT YEARS:2004-05, 2005-06 & 2007-08 DATE OF HEARING:82.11 DRAFTED:9.2.11 M/S. PRAKASH BUILDERS, 24, KADAM NAGAR, NIZAMPURA, BARODA PAN NO.AAHFP5601M PRAKASH BUILDERS, 20, NALINI PARK SOCIETY, B/H. SHREYAS SCHOOL, MANJALPUR, VADODARA V/S . V/S . INCOME TAX OFFICER, WARD-2(4), BARODA INCOME TAX OFFICER, WARD-2(4), BARODA (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI SAKAR SHARMA, AR REVENUE BY:- SHRI K. MADHUSUDAN, SR-DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THESE THREE APPEALS BY ASSESSEE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-II, BARODA, IN APPEAL NOS.CAB/II-501, 433 & 228/06-07/07-08/09-10 OF DIFFERENT DATES 09-0 1-2008,22-08-2008 & 23- 04-2010. THE ASSESSMENTS WERE FRAMED BY ITO WARD-2( 4), BARODA U/S143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT) VIDE ORDERS DATED 27-12-2006, 18-12-2007 & 23-12-2009 FOR ASSE SSMENT YEARS 2004-05, 2005-06 AND 2007-08 RESPECTIVELY. 2. THE FIRST COMMON ISSUE IN ALL THREE APPEALS OF A SSESSEE IS AS REGARD TO THE DISALLOWANCE OF CLAIM U/S.80IB(10) AND ALSO DIS ALLOWANCE OF DEDUCTION U/S.80IB(10) OF THE ACT OF UNUTILIZED FLOOR SPACE I NDEX (FSI FOR SHORT). THE ITA NO. 710, 3470/AHD/2008 & 2267/AHD/2010 A.YS04-05, 05-06 07-0 8 M/S. PRAKASH BUILDERS V. ITO WD-2(4), BRD PAGE 2 FACTS AND CIRCUMSTANCES OF THIS IS BEING EXACTLY ID ENTICAL EXCEPT AMOUNTS IN ALL THREE YEARS AND THE PROJECT UNDER WHICH THE DEDUCTI ON CLAIMED BY ASSESSEE U/S 80IB(10) OF THE ACT IS SAME, HENCE WE WILL TAKE UP THE FACTS AND DECIDE THE COMMON ISSUE FROM ITA NO.710/AHD/2008 FOR ASSESSMENT YEAR 2004-05. THE RELEVANT EFFECTIVE GROUND NO.1-3 , WHICH READ AS UNDER:- ITA NO.710/AHD/2008 (FOR A.Y. 2004-05) 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN DISALLOWING THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT OF RS.9,66,260.- 2. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE APPELLANT IS DEVELOP ING & BUILDING HOUSING PROJECTS BY FULFILLING THE REQUIREMENTS FOR CLAIMING DEDUCTION U/S.80IB(10) OF THE ACT. THOUGH THE PERMISSION BY T HE LOCAL AUTHORITY WAS GRANTED JOINTLY AS RESIDENTIAL-CUM-COMMERCIAL P ROJECT, THE APPELLANT DEVELOPED RESIDENTIAL PORTION OF THE PROP ERTY ONLY AND RIGHTFULLY CLAIMED DEDUCTION U/S.80IB(10) OF THE AC T. 3. THE LEARNED CIT(A) HAS FURTHER ERRED IN NOT CONS IDERING THE ALTERNATE GROUND RAISED AS TO DISALLOWANCE OF CLAIM OF DEDUCT ION U/S.80IB(10) OF THE ACT OF RS.3,70,641/- ON ACCOUNT OF UNUTILIZE D FSI (FLOOR SPACE INDEX) 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. LD. COUNSEL FOR THE ASSE SSEE STATED THAT THE ASSESSEE HAS REVISED THE PLAN AND ALSO APPROVED BY VADODARA MUNICIPAL CORPORATION ORIGINALLY VIDE DATED 30 TH DECEMBER, 2003 AND SUBSEQUENTLY THE REVISED PLAN WAS SANCTIONED VIDE DATED 21-06-2005. THE ASSESSEE STATED THAT IN THE REVISED PLANT THERE IS NO PERMISSION FOR CON STRUCTION OF COMMERCIAL AREA. THE RELEVANT REVISED PERMISSION DATED 21-06-2005, W HICH READS AS UNDER:- FREE ELGLISH TRANSLATION (FROM ORIGINAL IN GUJARATI LANGUAGE) CONSTRUCTION-20,000-1/2003-L/13 VADODARA MUNICIPAL CORPORATION LAY OUT WARD-L 82 2005-06 _______AND APPENDIX E FORM NO.-5 _____5.1 ______/RAJACHITTHI NO. [R/L -285/03-04] APPLICANT: SHRI VELJIBHAI M PATEL AND OTHERS MOHAN BHAI R PRAJAPATI, MAHENDRAKUMAR AMRUTLAL AND NARENDRAKUMAR AMRUTLAL ITA NO. 710, 3470/AHD/2008 & 2267/AHD/2010 A.YS04-05, 05-06 07-0 8 M/S. PRAKASH BUILDERS V. ITO WD-2(4), BRD PAGE 3 RESIDENT OF : SHREEJI TOWNSHIP AND___ NO._______ CITY SURVEY NO.__ ______ T.P.NO.________ _____ F.P. NO._________ ________ MOJE VILLAGE: DATSHWAR_______________232,233, 231/P IN NOTICE NO 24, DTD. 13/04/05 FOR CONSTRUCTION OF BUI LDIG, THE TYPE FOR CONSTRUCTION ACCORDING TO LAY OUT, IN RESPECT OF CONSTRUCTION / LAYOUT, ACCORDIN G TO RULE-3 OF CHAPTER 12 OF MUNICIPAL CORPORATION ACT AND AS PER SECTION 29(1), 29() (2), 2 9 (1)(3)34 AND SECTION 1(B) OF GUJARAT NAGAR AYOJAN AND____ 1969, THE APPLICANTS SEAT NO. ____CITY / REVENUE SURVEY NO._____ BY WHICH____ THE _____ AND THE LIMITS PRESCRIBED ACCORD ING TO MEASUREMENT OF LAY OUT AND AS PER RULE AND BYLAWS OF MUNICIPALA CORPORATION/ A CT AND IN RESPECT OF GUJARAT NAGAR AYOJAN AND ____ 1976, ___________________________________________________ _______________________ ____________ PERMISSIBLE LAY OUT PLAN AND BUILDING PL AN MAP, THE INDICATION WITH RED INK, A- UNIT GROUND FLOOR ONLY IS ENCLOSED HEREWITH, THE PERMI SSION IS GIVEN TO CONSTRUCT \ ONLY THESE PRESCRIBED UNITS. VUDA DEVELOPMENT CHARGES ARE PAID. CONDITIONS: 1) THE RESPONSIBILITY FOR MEASUREMENT, OWNERSHIP AND EASEMENT LIE WITH APPLICANT 2) APPLICANT HAS TO FOLLOW ALL CONDITIONS OF EARLIER R AJACHITTHI NO.I, 285/03-04, 3) N.A. PERMISSION HAS BEEN FURNISHED -C.D. HAS BEEN EARLIER VIDE RAJACHITTHI NO.1,285/03- 04. DATE: 21/06/2005 SD- SD- (CLERK) (NAYAB NAGAR DEVELOPMENT OFFICER) VADODARA MUNICI PALITY CORPORATION BY ORDER OF T.D.O. SHRI IN VIEW OF THIS, LD. COUNSEL FOR ASSESSEE STATED TH AT THERE IS REVISED CERTIFICATE OF ARCHITECT WHICH CLEARLY STATES THAT M/S. PRAKASH BUILDERS HAS DEVELOPED RESIDENTIAL PROJECT FOR 123 HOUSES AND THERE IS NO COMMERCIAL CONSTRUCTION DONE BY THIS DEVELOPER. THE RELEVANT CERTIFICATE RE ADS AS UNDER:- TO WHOM SOEVER IT MAY CONCERN THIS IS TO CERTIFY THAT M/S. PRAKASH BUILDER, 20-NA LINI PARK SOCIETY, B/H SHREYASH SCHOOOL, MANIJALPUR, VADODARA HAS DEVELOPE D HOUSING PROJECT ON R.S. NO.232, 233, 231 PALKI OF VILLAGE: DANTESHWAR, DABHOI WAGHODIA RING ROAD, VADODARS, UNDER THE NAME OF SH REEJI TOWNSHIP LAY OUT BUILDING PLANS ARE APPROVED BY THE LOCAL AU THORITY I.E. VADODARA MUNICIPAL CORPORATION. FIRST LAY OUT BUILDING PLAN WAS APPROVED WITH RESIDENTIAL & COMMERCIAL PERMISSION. THIS APPROVAL WAS RECEIVED ON 30 TH DEC03, WHILE RAJA CHITTHI NO.L-285. SUBSEQUENTLY THE SAME WAS REVISED ON 21 ST JUNE05 BY RAJA CHITTHI NO. L-82, AND THE COMMERCI AL PERMISSION WAS REVISED INTO RESIDENTIAL HOUSES BY T HE LOCAL AUTHORITY I.E. VADODARA MUNICIPAL CORPORATION. AS PER FIRST PERMISSION THERE WAS 114 RESIDENTIAL H OUSES AND 22 SHOPS WERE THERE, THIS WAS THE RESIDENTIAL AREA AND THERE WERE NO MARKET FOR THE COMMERCIAL PREMISES AND THEREFORE IT WAS REVISE D AND AS PER ITA NO. 710, 3470/AHD/2008 & 2267/AHD/2010 A.YS04-05, 05-06 07-0 8 M/S. PRAKASH BUILDERS V. ITO WD-2(4), BRD PAGE 4 REVISED PLAN TOTAL NO OF HOUSES WEERE123, COMMERCIA L ARE IS NEITHER CONSTRUCTED NOR IT IS SOLD OUT BECAUSE THE TOTAL PE RMISSION WAS FOR THE RESIDENTIAL HOUSE. COMPLETION CERTIFICATE WE HAVE RECEIVED IN THREE PA RTS AS UNDER:- SR. NO. DATE NO. OF HOUSE COMPLETED AS PER COMPLETION CERTIFICATE. 1 13 TH APRIL05 10 UNITS 2 12 TH SEPT.05 65 UNITS 3 4 TH SEPT.06 48 UNITS TOTAL 123 UNITS THUS M/S PRAKASH BUILDERS HAS DEVELOPED RESIDENTIAL PROJECT FOR 123 HOUSES AND THERE IS NO COMMERCIAL CONSTRUCTION DONE BY THIS PARTNERSHIP FIRM. THIS CERTIFICATE IS PREPARED ON THE BASIS OF APPROV AL OF LAY OUT BUILDING PAN AND COMPLETION CERTIFICATE GIVEN BY LOCAL AUTHO RITY I.E. VADODARA MUNICIPAL CORPORATION. ORIGINAL AND REVISED PERMISSION OF CONSTRUCTION FRO M LOCAL AUTHORITY WITH LAY OUT BUILDING PLAN & COMPLIATION CERTIFICATE IS ENCLOSED HEREWITH. IN VIEW OF THESE FACTS, LD. COUNSEL FOR THE ASSESSE E STATED THAT THE ASSESSING OFFICER OR CIT(A), NONE THE AUTHORITIES BELOW HAVE GONE INTO THESE REVISED DOCUMENTS AND ACCORDINGLY THE ENTIRE ASSESSMENTS FO R THREE YEARS REQUIRE RECONSIDERATION, HENCE, REQUESTED FOR SETTING ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER. 4. ON THE OTHER HAND LD. DR HAS NOT OBJECTED TO SET TING ASIDE OF THE CASE. 5. WE FIND FROM THE FACTS OF THE CASE THAT NONE OF THE AUTHORITIES BELOW HAVE GONE INTO THE ABOVE DOCUMENTS AND WITHOUT THAT THE ISSUE CANNOT BE DECIDED. ACCORDINGLY, THIS ISSUE IN ALL THE THREE Y EARS IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE AFRESH IN ACCORDANC E WITH THE PROVISIONS OF LAW. THIS ISSUE OF THREE APPEALS IS ALLOWED FOR STA TISTICAL PURPOSES. 6. THE NEXT ISSUE IN ITA NO.3470/AHD/2008 AND ITA NO.2267/AHD/2010 IS AS REGARDS TO DISALLOWANCE OF DEDUCTION U/S.80IB (10) ON THE DISALLOWANCE ITA NO. 710, 3470/AHD/2008 & 2267/AHD/2010 A.YS04-05, 05-06 07-0 8 M/S. PRAKASH BUILDERS V. ITO WD-2(4), BRD PAGE 5 MADE BY THE ASSESSING OFFICER ON THE AMOUNTS BY INV OKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 7. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE REFER RED TO THE TRIBUNALS DECISION IN THE CASE OF CHIRAG PLAST V. ITO IN ITA NO.2196/AHD/2009 FOR ASSESSMENT YEAR 2005-06 DATED18-09-2009, WHEREIN TH E TRIBUNAL HAS DECIDED THIS ISSUE VIDE PARA-6 , WHICH READS AS UNDER:- 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ELI GIBLE FOR DEDUCTION OF 100% OF THE PROFITS AND GAINS DERIVED FROM ITS INDU STRIAL UNDERTAKING. THE LEARNED ASSESSING OFFICER FOUND THAT A SUM OF R S.1,25,073/- IS NOT ALLOWABLE AS BUSINESS EXPENDITURE OF THE YEAR UNDER CONSIDERATION BECAUSE OF THE PROVISIONS OF SECTION 40(A)(IA) ARE THAT DEDUCTION IN RESPECT OF THIS BUSINESS EXPENDITURE WILL BE ALLOWE D TO THE ASSESSEE IN THE SUBSEQUENT YEAR WHEN TDS IN RESPECT OF THIS EXP ENDITURE IS DEPOSITED BY THE ASSESSEE. HOWEVER, THE LEARNED ASS ESSING OFFICER HAS TREATED THIS AMOUNT OF DISALLOWABLE EXPENDITURE AS INCOME FROM OTHER SOURCES AND THEREBY NOT ALLOWED DEDUCTION UND ER SECTION 80IB IN RESPECT OF THAT AMOUNT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO CONFIRMED THE ABOVE ACTION OF THE LE ARNED ASSESSING OFFICER ON THE GROUND THAT ALLOWANCE OF DEDUCTION U NDER SECTION 80IB IN THE YEAR WILL TANTAMOUNT TO DOUBLE DEDUCTION TO THE ASSESSEE. WE FIND THAT THE UNDISPUTED FACTS OF THE CASE ARE THAT BUSI NESS EXPENDITURE OF ELIGIBLE UNIT STANDS DISALLOW I THE YEAR UNDER CONS IDERATION DUE TO APPLICATION OF PROVISIONS OF SECTION 40(A)(IA). THU S, IN OTHER WORDS, THE SAID AMOUNT IS DEEMED AS EXPENDITURE NOT INCURRED B Y THE ASSESSEE FOR COMPUTING ITS BUSINESS INCOME. THUS, AS THE EXPENDI TURE OF ELIGIBLE UNIT STANDS DISALLOWED CONSEQUENTLY THE SAME RESULTS IN INCREASE OF THE PROFIT OF THE ELIGIBLE UNIT. THE DEDUCTION UNDER SE CTION 80IB IS ALLOWABLE IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE IN DUSTRIAL UNDERTAKING. SUCH PROFITS AND GAINS ARE TO BE COMPUTED IN ACCORD ANCE WITH THE PROVISIONS OF SECTION 28 TO 44AC WHICH INCLUDES SEC TION 40(A)(IA) ALSO. THEREFORE, ANY DISALLOWANCE OF BUSINESS EXPENDITURE OF THE ELIGIBLE UNIT WILL LOGICALLY RESULT IN ENHANCEMENT OF DEDUCTION A LLOWABLE UNDER SECTION 80IB OF THE ACT. THE FEAR EXPRESSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN OUR CONSIDERED OPINION IS U NFOUNDED AND BASELESS. DURING THE YEAR AS THE EXPENDITURE OF THE ELIGIBLE BUSINESS IS DISALLOWED THE ASSESSEES BUSINESS INCOME DERIVED F ROM THE ELIGIBLE BUSINESS OF THE INDUSTRIAL UNDERTAKING STANDS AT IN CREASED FIGURE AND THEREFORE, THE ASSESSEE WILL BE ELIGIBLE FOR DEDUCT ION OF ENHANCED AMOUNT UNDER SECTION 80IB OF THE ACT. HOWEVER, IN T HE SUBSEQUENT YEAR IN WHICH TDS IS PAID BY THE ASSESSEE, THE EXPENDITU RE WILL BE ALLOWED ITA NO. 710, 3470/AHD/2008 & 2267/AHD/2010 A.YS04-05, 05-06 07-0 8 M/S. PRAKASH BUILDERS V. ITO WD-2(4), BRD PAGE 6 AS DEDUCTION FROM THE ELIGIBLE PROFITS OF THE SUBSE QUENT YEAR AND THEREBY THE ELIGIBLE PROFIT OF THE INDUSTRIAL UNDER TAKING WILL BE REDUCED DIN THE SUBSEQUENT YEAR AND CONSEQUENTLY THE ASSESS EE WILL BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB AT THE REDUCED AMO UNT ONLY. THUS, THERE CANNOT BE A DOUBLE DEDUCTION TO THE ASSESSEE. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORI TIES AND DIRECT THE LEARNED ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80IB IN RESPECT OF ENTIRE PROFIT DERIVED FROM INDUSTRIAL UN DERTAKING, AFTER TAKING INTO CONSIDERATION THE PROVISIONS SUNDER SECTION 40 (A)(IA). THUS, THE GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 8. WE FIND THAT THE ASSESSING OFFICER HAS NOT DISCU SSED THIS ISSUE IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN THE CASE O F CHIRAG PLASTS (SUPRA) BECAUSE, THIS DECISION WAS NOT AVAILABLE BEFORE HIM AT THAT TIME. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DECIDE THIS ISSU E IN THE LIGHT OF THE ABOVE DECISION OF THIS TRIBUNAL (SUPRA). ACCORDINGLY, THI S COMMON ISSUE OF BOTH THE APPEALS OF THE ASSESSEE IS SET ASIDE TO THE FILE OF ASSESSING OFFICER AND ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, ALL THE THREE APPEALS OF THE ASSESSE E ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 08/02/2011 SD/- SD/- (D.C.AGRAWAL) (MAHAVIR SIN GH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 08/02/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD