GURIKRIPA DEVELOPERS, MUMBAI V. ITO WD 1, MUMBAI

ITA 952/MUM/2011

• Counselvise Citation: 95219914 RSA 2011
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 17-09-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 02-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: SURESH N OTWANI
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 952/MUM/2011 ASSESSMENT YEAR : 2006-07 M/S. GURUKRIPA DEVELOPERS C/O SURESH N. OTWANI (ADVOCATE) 305, ADAMJI BUILDING, 3 RD FLOOR, 413, KATHA BAZAR, MUMBAI 400 009 PAN :AAAFG 6607 A VS. ITO WD (1) TRIFRED TOWER, 3 RD FLOOR, OPP KHANDA COLONY NEW PANVEL DIST- RAIGAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SURESH N. OTWANI RESPONDENT BY : SHRI O. P. SINGH DATE OF HEARING : 17.09.2013 DATE OF PRONOUNCEMENT : 30.09.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A) -1, MUMBAI DATED 15.11.2010 FOR THE ASSES SMENT YEAR 2006-07. 2. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS AGITA TED THE ACTION OF THE LD.CIT(A) CONFIRMING THE DISALLOWANCE OF PAYMENT OF INTEREST AMOUNTING TO RS.1,48,160/- MADE BY THE AO BY INVOKING SECTION 40 (A)(IA) OF THE INCOME TAX ACT. 3. BRIEFLY STATED, THE ASSESSEE, A FIRM ENGAGED IN THE BUSINESS OF BUILDING CONSTRUCTION WHILE DECLARING A TOTAL INCOME OF RS. NIL HAD HAD SHOWN THE INCOME I.E., PROFIT ON THE ADVANCES RECEIVED FOR THE AGREE MENTS EXECUTED UPTO 31.03.2006 TO THE EXTENT OF RS.3,00,46,720/- AND THE ESTIMATIO N OF PROFIT @ 10% THEREON I.E., ITA NO. 952/MUM/2011 M/S. GURUKRIPA DEVELOPERS ASSESSMENT YEAR : 2006-07 2 RS.30,04,672/-. THE SAID PROFIT WAS OFFERED TO TAX U/S 28 OF IT ACT, 1961 WITHOUT CHARGING ANY EXPENSES IN THE CHAPTER OF BUSINESS DE DUCTIONS SINCE ALL THE EXPENSES WERE CAPITALIZED TO THE COST OF PROJECT. HOWEVER, S INCE THE PROJECT IS ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF IT ACT, 1961 THE DEDUCTIO N TO THE EXTENT OF 100% U/S 80IB(10) WAS CLAIMED BY THE ASSESSEE AND THEREBY RE TURNED NIL INCOME. HOWEVER, IN THE ASSESSMENT FRAMED U/S 143(3), THE AO FOUND T HAT THE ASSESSEE HAD FOLLOWED PERCENTAGE COMPLETION METHOD TO HAVE PAID A SUM OF RS.1,48,160/- TOWARDS INTEREST WITHOUT DEDUCTION OF TAX AT SOURCE AND HELD THAT TH E PAYMENT WAS DISALLOWANCE U/S 40(A)(IA) FOR NON DEDUCTION OF TAX AT SOURCE AND AD DED TO THE RETURNED INCOME. 4. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO. ACCORDING TO THE LD.CIT(A), THE PROVISIONS OF SECTION 194 C REQUIRES THE TAX IS DEDUCTED ON INTEREST AT THE TIME OF PAYMENT OR CREDIT OF THE ACCOUNT, WHICH EVER IS EARLIER. SECTION 40(A)(IA) PROVIDES FOR DISALLOWANCE OF THE INTEREST, IF TAX I S NOT DEDUCTED OR AFTER DEDUCTION SUCH TAX IS NOT PAID INTO THE GOVERNMENT ACCOUNT WI THIN THE STIPULATED TIME, SUCH AMOUNT SHALL NOT BE ALLOWED AS DEDUCTION IN COMPUTA TION OF INCOME. THE ASSESSEE, HAVING DEBITED THE AMOUNT DURING THE AY UNDER CONSI DERATION, IT IS INCUMBENT UPON THE APPELLANT TO HAVE DEDUCTED TAX ON THE SAME. HAV ING FAILED TO DO SO, THE ASSESSEE HAS CLEARLY INVITED THE MISCHIEF OF SECTIO N 40(A)(IA). AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE US . 5. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD IT IS RELEVANT TO MENTION THAT THAT THE GUJARAT HIGH COURT IN THE CASE OF KEVEL CONSTRUCTIONS, 33 TAXMANN. COM 277 HAS HELD THAT THE ASSESSEE WAS ELI GIBLE FOR DEDUCTION U/S. 80IB(10) ON AN AMOUNT THAT WAS INCREASED BY DISALLO WANCE U/S. 40(A)(IA). THE PUNE BENCH OF THE TRIBUNAL IN CASES OF MAGARPATTA TOWNSH IP DEVELOPMENT, 32 TAXMANN. COM 63 AND KALPHOR GAWDE BUILDERS, 141 ITD 612 HAS ALSO UPHELD THE CLAIM OF THE ASSESSEE FOR A HIGHER DEDUCTION U/S. 80IB(10) ON TH E PROFITS DERIVED FROM HOUSING PROJECT DULY ENHANCED BY THE AMOUNT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. IN VIEW OF THE SAID PROPOSITION OF LAW, WE HOLD THAT T HE DISALLOWANCE OF RS.1,48,160/- MADE U/S 40(A)(IA) BY THE AO WHICH HAS BEEN CONFIRM ED BY THE LD.CIT(A) WILL ONLY RESULT IN ENHANCING THE PROFIT WHICH WOULD AGAIN BE ELIGIBLE FOR FULL DEDUCTION U/S ITA NO. 952/MUM/2011 M/S. GURUKRIPA DEVELOPERS ASSESSMENT YEAR : 2006-07 3 80IB(10) AS IT PROVIDES FOR 100% DEDUCTION FROM THE PROFITS AND GAINS FROM THE ELIGIBLE BUSINESS. WE DIRECT AND ORDER ACCORDINGLY. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.09.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR G BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.