ITO, CHENNAI V. Shri B.Nagi Reddy, CHENNAI

ITA 845/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5193 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 02-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SRINIVAS
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation
• Section: 80IB

Judgement Text

IN THE INCOME - TAX APPELLATE TRIBUNAL CHENNAI B BENCH, CHENNAI. BEFORE SHRI.U.B.S. BEDI J.M. & SHRI. N.S. SAINI A.M. I.T.A. NO. 845 / MDS/201 0 ASSESSMENT YEAR: 200 7 - 0 8 THE INCOME TAX OFFICER , WARD I V (2), CHENNAI - 34 . VS. SHRI B. NAGI REDDY, DOOR NO.3 4, FLAT NO.B, 1 ST AVENUE, ASHOK NAGAR, CHENNAI 600 083. [PAN:A DNPR0059A ] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B. SRINIVAS ASSESSEE BY : SHRI S. SRIDHAR ORDER PER U.B.S. BEDI, J.M . TH IS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST THE OR DER PASSED BY THE LD. CIT(A) VIII , CHENNAI DATED 09 . 0 3 .2010 RELEVANT TO THE ASSESSMENT YEAR 200 7 - 0 8 , WHEREBY DELETION OF ADDITION MADE TOWARDS ADMINISTRATIVE AND OTHER EXPENSES ATTRIBUTABLE TO NUTECH INDIRA PROJECT IN RESPECT OF WHICH DEDUCTION UNDER SECT ION 80IB OF THE INCOME TAX ACT WAS CLAIMED HAS BEEN CHALLENGED RAISING VARIOUS GROUNDS INCLUDING GROUND NO.3, WHICH STATES THAT THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ACTION OF THE ASSESSING OFFICER IN ESTIMATING THE EXPENSES DRAWS SUPPORT FROM THE PROVISION S OF SECTION 80IB (13) R.W.S. 80IA(10). 2. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY EARLIER DECISION OF THE I.T.A. NO . 845 /MDS/1 0 2 TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESS MENT YEAR 2006 - 07 DECIDED BY THE B BENCH ITAT CHENNAI IN ITA NO. 1175/MDS/2009 DATED 08.01.2010, WHICH HAS BEEN FOLLOWED BY THE LD. CIT(A) TO GIVE THE RELIEF TO THE ASSESSEE. BY FILING A COPY OF THE TRIBUNAL S ORDER, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ISSUE BEING COVERED IN FAVOUR OF THE ASSESSEE, THE APPEAL OF THE REVENUE SHOULD BE DISMISSED. 3. THE LD. DR, THOUGH COULD NOT CONTROVERT THIS FACTUAL ASPECT THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE, YET HE WHILE FOLLOWING THE GR OUNDS RAISED IN THE MEMORANDUM OF APPEAL, HAS PLEADED FOR REVERSAL OF THE ORDER OF THE LD. CIT(A) AND RESTORING THAT OF THE ASSESSING OFFICER. 4. AFTER HEARING BOTH THE SIDES AND CONSIDERING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE RELATED TO ADDIT ION OF ` . 12,77,690 BEING PROPORTIONATE AMOUNT OF ADMINISTRATIVE EXPENSES TO THE INCOME SHOWN FROM ELIGIBLE PROFI T ENTITLED FOR DEDUCTION U/S 80I B OF THE INCOME TAX ACT, 1961. 4 .1 IN THE ASSESSMENT ORDER PASSED, THE AO SAYS THAT, OUT OF THE TOTAL EXPENSES C LAIMED FROM THE BUSINESS IN THE CONSOLIDATED P&L ACCOUNT OF ` . 8,49,06,617/ - , THE ASSESSEE HAS SHOWN ONLY AN AMOUNT OF ` . 1,49,23,496/ - TOWARDS ELIGIBLE PROJECT ON WHICH DEDUCTION U/S 80IB HAS BEEN CLAIMED WHEREAS THE RATIO OF INCOME FROM ELIGIBLE PROJECT TO THAT OF GROSS RECEIPTS WAS MORE THAN 50%. WHEN THIS WAS PUT TO THE ASSESSEE, THE ASSESSEE'S EXPLANATION WAS AS UNDER: 'WE SUBMIT THAT THE INCOME COMPUTED U/S 8018 IS AFTER TAKING ALL THE DIRECT AS WELL AS APPLICABLE INDIRECT EXPENSES. THE ONLY OMISSION CO ULD BE RELATING TO DEPRECIATION AND IN THE ABSENCE OF ANY INFORMATION I.T.A. NO . 845 /MDS/1 0 3 RELATING TO ANY SPECIFIC ASSET USED IN THE ELIGIBLE PROJECT, DEPRECIATION COULD NOT BE ALLOCATED ON A REASONABLE BASIS. HOWEVER, IT MAY BE SEEN THAT OUT OF THE TOTAL DEPRECIATION CLAIM O F ` . 7,04,96,433/ - RELATED TO THE WINDMILL, WHICH IS NOT RELATING TO THE MAIN BUSINESS OF PROPERTY DEVELOPMENTS. THE BALANCE AMOUNT OF ` . 6,35,955/ - ABOVE IS RELATING TO THE PROPERTY DEVELOPMENT BUSINESS. WE WISH TO STATE THAT THE ASSESSEE HAD VOLUNTARILY O FFERED RS 25,00,000 AS INCOME DURING THE SURVEY WITHOUT ANY MATERIAL BEING FOUND DURING THE SURVEY PROCEEDINGS. THE OFFER WAS MADE ONLY TO COVER SUCH OMISSIONS AND OVERLAPPING AS MAY BE SEEN FROM THE STATEMENT RECORDED. AS THE AMOUNT OFFERED IS FAR H I GHER THAN THE TOTAL DEPRECIATION OF ` . 6,35,955 RELATING TO THE PROPERTY DEVELOPMENT BUSINESS, NO DISALLOWANCE IS CALLED FOR. HAVING NOT ACCEPTED WITH THE EXPLAN A T I ON OF THE APPELLANT, THE AO WAS OF THE VIEW THAT, OUT OF THE TOTAL ADMINISTRATIVE EXPENSES, ONLY THE FOLLOW I NG EXPENSES WERE SHOWN IN THE P&L A/C OF ELIGIBLE PROJECT : (A) ELECTRICITY CHARGES ` . 5,63,561 (B) BROKERAGE 25,500 (C) BUSINESS PROMOTION EXPENSES 40,431 (D) PROFESSIONAL CHARGES 1,000 TOTAL ` . 6,39,392 IN THE ASSESSMENT ORDER , THE AO STATED THAT, FURTHER, DURING THE COURSE OF S URVEY, THE ASSESSEE HAS DEPOSED AS UNDER : 'I AM OFFERING A SUM OF RS 50 LAKHS AS ADDITIONAL INCOME TOWARDS COST OF IMPROVEMENT OF FLATS FOR THE FINANCIAL YEARS 2005 - 06 AND 2006 - 07.' THE AO CONCLUDED THAT FROM THE ABOVE, THE SUM OF RS 25 LAKHS WAS OFFERED AS ADDITIONAL INCOME TOWARDS IMPROVEMENT OF FLATS. THIS DOES NOT QUALIFY FOR THE UNDERSTATEMENT OF ADMINISTRATIVE EXPENSES. THE AO STATED THAT, DURIN G THE PRECEDING AY (I E) AY 2006 - 07, AVERAGE CLAIM OF SUCH I.T.A. NO . 845 /MDS/1 0 4 EXPENSES TOWARDS NON ELIGIBLE PROJECTS WAS WORKED OUT AT 4.62% OF THE TOTAL RECEIPTS AND THE BALANCE OF EXPENSES WAS ADDED AS RELATING TO ELIGIBLE PROJECT. SINCE THE ISSUE WITH REGARD TO THIS ADDITION HAS NOT REACHED FINALITY, THE AO WORKED OUT TH E ADMINISTRATION EXPENSES AT 4.62% OF GROSS RECEIPTS FROM NON ELIGIBLE PROJECTS AND DISALLOWED THE BALANCE AS RELATING TO ELIGIBLE PROJECTS. TOTAL RECEIPTS FROM NON ELIGIBLE PROJECTS ` . 17,73,70,511 4.62% OF THE ABOVE 81,94,517 TOTAL ADMINISTRATION E XPENSES CLAIMED INCLUDING DEPRECIATION OF RS 6,35,955 1,01,11,699 LESS: ADMINISTRATION EXPENSES RELATING TO NON - ELIGIBLE PROJECTS AS WORKED OUT ABOVE 81,94,517 ADMINISTRATION EXPENSES RELATING TO ELIGIBLE PROJECTS 19,17,182 LESS: EXPENSES ALREADY SH OWN IN ELIGIBLE PROJECTS 6,39,492 DISALLOWANCE TO BE MADE NOW ` . 12,77,690/ - THUS, THE AO DETERMINED THE TOTAL INCOME AT ` . 1,80,63,555 BY ADDING ` . 37,435 (DEPRECIATION) AND ` . 12,77,690 (ADMINISTRATIVE EXPENSES RELATING TO ELIGIBLE PROJECT). 5. SUCH ADDITION CAME TO BE DELETED WHILE FOLLOWING TRIBUNAL S DECISION IN THE CASE OF THE ASSESSEE FOR THE EARLIER ASSESSMENT YEAR BY THE LD. CIT(A) IN APPEAL AND THE LD. DR , BEFORE US COULD NOT PLACE ANY CONTRARY MATERIAL TO SHOW THAT SUCH CONCLUSION DRAWN BY T HE TRIBUNAL FOR THE EARLIER YEAR HAS BEEN REVERSED BY ANY HIGHER FORUM. SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE, THEREFORE, FOLLOWING THE TRIBUNAL ORDER FOR THE EARLIER YEAR IN ITA NO. 1175/MDS/2009 DATED 08.01.2010 , WE UPHOLD THE ORD ER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. I.T.A. NO . 845 /MDS/1 0 5 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT STANDS DISMISSED. O RDER PRONOUNCED SOON AFTER THE CONCLUSION OF HEARING ON 11 .05 .2011 . SD/ - SD/ - ( N.S. SAINI ) ACCOUNTANT MEMBER (U.B.S. BE DI) JUDICIAL MEMBER CHENNAI, DATED, THE. 11 . 0 5 .2011 VM/ - TO:THE ASSESSEE/A.O./CIT(A)/CIT/D.R .