M/s. Aditya Durobuild Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 861/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6621 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 27-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 18-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BEDOBINA CHAUDHURI
• Assessee Lawyers: V K JAIN
• Section: 80IB; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-I : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO.861/DEL/2016 ASSESSMENT YEAR : 2009-10 ADITYA DUROBUILD PVT. LTD., A-14, LGF, KAILASH COLONY, NEW DELHI. PAN: AAECA9706A VS. DCIT, CENTRAL CIRCLE-7, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.K. JAIN, CA DEPARTMENT BY : MS BEDOBINA CHAUDHURI, SR. DR DATE OF HEARING : 27.02.2017 DATE OF PRONOUNCEMENT : 28.02.2017 ORDER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE CIT(A) ON 22.8.2013 IN RELATION TO TH E ASSESSMENT YEAR 2009-10. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST NOT ALLOWING DEDUCTION U/S 80IB IN RESPECT OF BANK INTE REST OF ITA NO.861/DEL/2016 2 RS.20,75,862/- WHICH WAS TREATED BY THE AO AS INCO ME FROM OTHER SOURCES. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED TH AT THE ASSESSEE RECEIVED INTEREST INCOME OF RS.20,75,862/- FROM FIXED DEPOSITS MADE WITH BANK, WHICH WAS NOT SHOWN SEPARA TELY, BUT, REDUCED FROM THE INTEREST EXPENDITURE. ON BEING CA LLED UPON TO EXPLAIN AS TO WHY THE INTEREST INCOME OF RS.20.7 5 LAC BE NOT TREATED AS INCOME FROM OTHER SOURCES AND, HENCE, INELIGIBLE FOR DEDUCTION U/S 80IB(10), THE ASSESSEE CONTENDED THAT IT IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND A TERM L OAN WAS OBTAINED FROM INDIAN BANK FOR THE PURPOSE OF CONSTR UCTION. THE ASSESSEE CLAIMED TO HAVE RECEIVED CERTAIN FUNDS FROM THE FLAT OWNERS. SINCE THESE AMOUNTS WERE NOT IMMEDIAT ELY REQUIRED AND TO SAVE THE INTEREST COST WHICH WAS TO BE INCURRED ON THE TERM LOAN, THE ASSESSEE CLAIMED TO HAVE DEPO SITED THE SAME IN FIXED DEPOSITS FOR SHORT PERIOD ON WHICH IN TEREST OF ITA NO.861/DEL/2016 3 RS.20.75 LAC WAS RECEIVED. NOT CONVINCED WITH THE A SSESSEES SUBMISSIONS, THE AO, APPLYING THE RATIO DECIDENDI OF THE DECISIONS AS DISCUSSED IN THE ASSESSMENT ORDER INCL UDING TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. VS. CIT 227 ITR 172 (SC) AND CIT VS. PANDIAN CHEMICALS LTD., 262 ITR 278 (SC), TREATED THE INTEREST INCOME FALLING UNDER INCOME FROM OTHER SOURCES. NO DEDUCTION WAS ALLOWED U/S 8 0IB(10) ON THIS AMOUNT. THE LD. CIT(A) AFFIRMED THE ACTION OF THE AO ON THIS COUNT. THE ASSESSEE IS AGGRIEVED AGAINST TH E DENIAL OF DEDUCTION ON SUCH INTEREST INCOME. 4. I HAVE HEARD THE PARTIES AND PERUSED THE RELEVAN T MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSEE HAS CLA IMED DEDUCTION U/S 80IB(10), INTER ALIA , ON THE AMOUNT OF INTEREST RECEIVED FROM FIXED DEPOSITS, BY MEANS OF NETTING I T AGAINST THE INTEREST EXPENDITURE. THE INTEREST WAS EARNED BY T HE ASSESSEE BY DEPOSITING FUNDS RECEIVED FROM FLAT OWNERS, WHIC H WERE NOT IMMEDIATELY REQUIRED. THE LD. AR, DISTINGUISHING TH E LANGUAGE ITA NO.861/DEL/2016 4 USED IN SECTION 80HH, RELIED ON SUB-SECTION (1) OF SECTION 80IB TO CONTEND THAT DEDUCTION IS AVAILABLE IN RESP ECT OF PROFITS AND GAINS DERIVED FROM ANY BUSINESS. THI S CONTENTION DOES NOT MERIT ACCEPTANCE. SUB-SECTION (1) OF SECTI ON 80IB PROVIDES THAT :`WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTIONS (3) TO (11), (11A) AND (11B) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGI BLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION , BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS O F AN AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASS ESSMENT YEARS AS SPECIFIED IN THIS SECTION. IT TRANSPIRES FROM THE MANDATE OF THE ABOVE PROVISION THAT DEDUCTION SHALL BE ALLOWED FROM SUB-SECTIONS (3) TO SUB-SECTIONS (11), (11A) A ND (11B) FROM THE ELIGIBLE BUSINESS. ONCE THE BUSINESS GET S COVERED IN ANY OF THE SUB-SECTIONS, NAMELY, (3) TO (11), (11A) AND (11B), THEN, THE AMOUNT OF DEDUCTION HAS TO BE COMPUTED AS PER THE ITA NO.861/DEL/2016 5 RELEVANT SUB-SECTION WHICH GOVERNS THE ELIGIBLE BUS INESS. SUB- SECTION (10) OF SECTION 80IB IS THE RELEVANT SECTIO N FOR THE ASSESSEE. THIS SUB-SECTION PROVIDES THAT: THE AMO UNT OF DEDUCTION IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31ST DAY OF MARCH, 2008 BY A LOCAL AUTHORITY SHALL BE HUNDRED P ER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF, .. IT IS APPARENT FROM THE LANGUAGE OF SU B- SECTION (10) THAT THE DEDUCTION IS AVAILABLE IN RES PECT OF THE PROFITS DERIVED FROM SUCH HOUSING PROJECT . IT IS VIVID ON A COMPARATIVE READING OF SUB-SECTIONS (1) AND (10) OF SECTION 80IB THAT WHEREAS SUB-SECTION (1) TALKS OF `BUSINES S ELIGIBLE FOR DEDUCTION AND PROVIDES THAT THE DEDUCTION SHALL BE ALLOWED ` IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION , SUB-SECTION (10) PROVIDES FOR THE QUANTUM OF DEDUCTION TO BE ALLOWED. THUS THE AMOUNT OF DEDUCTI ON HAS TO BE IN ACCORDANCE WITH AND SUBJECT TO THE PRESCRIPTION OF SUB- ITA NO.861/DEL/2016 6 SECTION (10). GOING BY THE INSTRUCTION OF SUB-SECTI ON (10) OF SECTION 80IB, IT IS PALPABLE THAT THE SAME IS AVAIL ABLE ONLY IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE ELIGIBLE HOUSING PROJECT . NEXUS BETWEEN THE AMOUNT OF PROFIT AND GAIN AND THE ELIGIBLE HOUSING PROJECT SHOULD BE DIRECT AND IMMED IATE BECAUSE OF THE USE OF THE EXPRESSION DERIVED FROM IN THE PROVISION. IF THE RELATION BETWEEN AN INCOME AND EL IGIBLE HOUSING PROJECT TURNS OUT TO BE SECONDARY, THE CLAI M OF DEDUCTION IS LOST. THE CONTENTION OF THE LD. AR THA T THE LANGUAGE OF SECTION 80HH, AS CONSIDERED IN CERTAIN DECISIONS TAKEN NOTE OF BY THE AO IS NOT APPLICABLE TO SECTIO N 80IB(1) IS NO DOUBT TRUE, BUT IT IS SUB-SECTION (10) WHICH MAK ES THE ELIGIBLE ENTERPRISE QUALIFY FOR THE AMOUNT OF DEDUC TION, WHOSE LANGUAGE TO THE EXTENT AS APPLICABLE, IS IDENTICAL TO THAT OF SECTION 80HH. 5. WHEN I ADVERT TO THE FACTS OF THE INSTANT CA SE, IT IS FOUND THAT INTEREST INCOME HAS NOT BEEN DERIVED FROM THE HOUSING PROJECT, BUT, FROM THE PARKING OF SURPLUS FUNDS IN THE BANK, ITA NO.861/DEL/2016 7 ALBEIT SUCH FUNDS WERE RECEIVED FROM CUSTOMERS. ERGO, RELATION BETWEEN THE INTEREST INCOME AND HOUSING PR OJECT SLIPS FROM DIRECT TO INDIRECT. THE HONBLE SUPREME COURT IN LIBERTY INDIA VS. CIT (2009) 317 ITR 218 (SC) HAS HELD THAT DEPB/DUTY DRAWBACK ARE INCENTIVES WHICH FLOW FROM T HE SCHEMES FRAMED BY CENTRAL GOVERNMENT OR FROM S. 75 OF THE CUSTOMS ACT, 1962, HENCE, INCENTIVES PROFITS ARE NO T PROFITS DERIVED FROM THE ELIGIBLE BUSINESS AND THEREFORE, D UTY DRAWBACK RECEIPT/DEPB BENEFITS DO NOT FORM PART OF NET PROFITS OF THE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF S . 80-IA OR 80-IB. NO DOUBT, IT IS A DEPB/DUTY DRAWBACK WHICH H AS BEEN DISCUSSED IN THE CASE OF LIBERTY INDIA (SUPRA) , BUT, THE DECISION IS BASED ON THE PREMISE OF THE LANGUAGE USED IN THE SECTION BEING PROFITS DERIVED FROM THE ELIGIBLE BUSINESS. EVEN THOUGH DUTY DRAWBACK RECEIPT/DEPB ARE IN THE NATURE OF `BU SINESS INCOME, BUT FALL SHORT OF `DERIVED FROM THE ELIGI BLE BUSINESS. IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COUR T, COVERING SECTION 80IB AS WELL WHICH IS UNDER CONSID ERATION, I ITA NO.861/DEL/2016 8 AM OF THE CONSIDERED OPINION THAT INTEREST EARNED F ROM FIXED DEPOSITS MADE WITH THE BANKS, THOUGH OUT OF BUSINES S FUNDS, CANNOT BE HELD AS DERIVED FROM HOUSING PROJECT SO A S TO QUALIFY FOR DEDUCTION U/S 80IB(10). RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT, I UPHOLD THE IMPUGNED ORDER. 6. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.02.201 7. SD/- [R.S. SYAL] ACCOUNTANT MEMBER DATED, 28 TH FEBRUARY, 2017. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.