M/S. J.R. CONSTRUCTION CO.,BARODA V. THE INCOME TAX OFFICER, WARD-3(1), BARODA

ITA 3292/AHD/2014

AI Insights

The case involves M/s. J.R. Construction Co., a partnership firm engaged in the development and construction of housing projects, which appealed against the order of the CIT(A)-II, Baroda. The primary issues in the appeal were the disallowance of deduction under Section 80IB(10) of the Income Tax Act for Rs.1,21,48,860, related to profits from unutilized FSI, and the disallowance under Section 40(a)(ia) for Rs.1,06,014 due to non-deduction of TDS from interest expenditure. The Tribunal upheld the disallowance related to unutilized FSI profits, referencing a prior decision by the Gujarat High Court. However, for the TDS issue, the Tribunal directed a re-examination in light of a relevant CBDT circular.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 34204 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Other Referred Cases: Tax Appeal No.173/2012
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B. P. SRIVASTAV
• Keywords: TDS
• Section: 143(3); 142(1); 143(2); 143(1); 40(a)(ia); 80IB

Judgement Text

"ITA No.3292/Ahd/2014 Assessment Year: 2010-11 M/s. J.R. Construction Co. vs. ITO Page 1 of 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.3292/Ahd/2014 Assessment Year: 2010-11 M/s. J.R. Construction Co., Talja Mangal’s Khadki, Near Padhrai Mata Temple, At: Padra, Dist. Baroda – 391 440 [PAN – AADFJ 7192 D] Vs. The Income Tax Officer, Ward – 3(1), Baroda – 390 007. (Appellant) (Respondent) Assessee by Shri Rushin Patel, AR on behalf of Manish J. Shah, AR Revenue by Shri B.P. Srivastav, Sr. DR Date of Hearing 04.03.2025 Date of Pronouncement 12.03.2025 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER: This appeal is filed by the Assessee against order dated 15.09.2014 passed by the CIT(A)-II, Baroda for the Assessment Year 2010-11. 2. The assessee has raised the following grounds of appeal: “1. On the facts and circumstances of the case, the learned CIT(Appeals) has erred in confirming disallowance of deduction u/s.80IB(10) of the Income Tax Act for Rs.1,21,48,860/- being profit on account of unutilised FSI. 2. The learned CIT(Appeals) has erred in confirming the disallowance u/s.40(a)(ia) of the Income Tax for Rs.1,06,014/- on account of non- deduction of TDS from interest expenditure. 2.1 Your appellant submits that it is part and parcel of profits of the business and therefore should be allowed as deduction while computing deduction u/s.80IB(10) of the I.T. Act. It is submitted that it be so held now.” ITA No.3292/Ahd/2014 Assessment Year: 2010-11 M/s. J.R. Construction Co. vs. ITO Page 2 of 4 3. The assessee firm is a partnership firm engaged in the business of development and construction of Housing Projects. During the year under consideration, the assessee firm has continued construction of ‘Karishma Park’ and ‘Rajlaxmi Society’ at Baroda. The assessee firm filed its return of income on 29.09.2010 declaring total income of Rs. Nil after claiming deduction under Section 80IB(10) of the Income Tax Act, 1961 amounting to Rs.1,21,48,860/-. The return of income was processed under Section 143(1) of the Act on 19.04.2011 accepting the returned income. the case was selected for scrutiny and notice under Section 143(2) of the Act was issued on 25.08.2011 and served upon the assessee. Further notice under Section 143(2) and Section 142(1) of the Act alongwith detailed questionnaire was issued on 31.07.2012. In response to the said notices, the Ld. AR of the assessee submitted the required details alongwith copy of return of income, tax audit report and audited Balance Sheet and Profit & Loss account. After verifying the same, the Assessing Officer observed that the profit relatable to sale of unutilised land vis-a-viz utilised FSI sold was not considered for inclusion in assessee’s total income on account of inadmissibility of the claim of deduction under Section 80IB of the Act. After taking cognisance of the assessee’s reply and the submissions alongwith the details, the Assessing Officer made addition/disallowance in respect of deduction under Section 80IB(10) of the Act to the extent of Rs.60,34,293/-. The Assessing Officer vide Assessment Order under Section 143(3) of the Act dated 08.03.2013 determined the total income of Rs.60,34,200/- after disallowing the claim of deduction under Section 80IB(10) of the Act of Rs.1,21,48,860/- and Rs.1,06,014/- under Section 40(a)(ia) of the Act. 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CITA). The CIT(A) dismissed the appeal of the assessee. 5. As regards ground no.1, the Ld. AR submitted that the said issue related to disallowance of deduction under Section 80IB(10) of the Act being profit on account of unutilised FSI the same is covered against the assessee in assessee’s own case by the Hon’ble Gujrat High Court being Tax Appeal No.173/2012, order dated 05.03.2018, for Assessment Year 2004-05. As regards the disallowance under Section 40(a)(ia) of the Act for Rs.1,06,014/- on account of the non-deduction of TDS from interest expenditure, the Ld. AR submitted that as per the Circular No.37/2016, ITA No.3292/Ahd/2014 Assessment Year: 2010-11 M/s. J.R. Construction Co. vs. ITO Page 3 of 4 the Board has accepted the settled position that the disallowances made under Section 40(a)(ia) of the Act related to the business activity against which Chapter VI- A deduction has been claimed and in such scenario if the loan is related to the Bank loan and paid then no TDS has to be deducted. This needs verification and the Revenue is required to take cognisance of the Circular No.37/2016 issued by the CBDT. 6. The Ld. DR relied upon the jurisdictional High Court decision for ground no.1, and for ground no.2, relied upon the Assessment Order and the order of the CIT(A). 7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that ground no.1 is categorically decided against the assessee in Assessment Year 2004-05 in assessee’s own case by the Jurisdictional High Court and hence ground no.1 & 2.1 is dismissed. 7.1 As regards ground no.2, related to disallowance under Section 40(a)(ia) of the Act for Rs.1,06,014/- on account of non-deduction of TDS from interest expenditure, if the same is paid back to Bank, there is no need to deduct TDS from interest expenditure. Therefore, the Assessing Officer is directed to verify the same in consonance with the CBDT Circular No.37/2016 dated 02.11.2016 and decide the same. Thus, ground no.2 is partly allowed for statistical purpose. 8. In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on this 12th March, 2025. Sd/- Sd/- (DR. BRR KUMAR) (SUCHITRA KAMBLE) Vice President Judicial Member Ahmedabad, the 12th March, 2025 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File ITA No.3292/Ahd/2014 Assessment Year: 2010-11 M/s. J.R. Construction Co. vs. ITO Page 4 of 4 By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad "