2015 (1) TMI 1238 - AT - Income Tax

Denial of deduction under section 80IB(10) - Held that - We hold that the pre-amended provisions of section 80IB(10) of the Act are to be applied to the project undertaken by the assessee where the approval for the commencement of construction was given before 01.04.2005. As per the additional evidence furnished by the assessee which has been admitted by us the Commencement Certificate was issued by the Grampanchayat on 05.02.2003 i.e. approved before 01.04.2004 and construction had to be completed on or before 31.03.2008. The assessee has filed the Completion Certificate dated 21.07.2006 at pages 66 and 67 of the Paper Book under which it has been certified that the said project has been completed as on the date of certificate i.e. within stipulated date provided under the Act. The project having been approved by the competent authority and having been completed by the assessee in line with the approval given by the competent authority merely because the commercial area of the said project was about 4000 sq. ft. does not dis-entitles the assessee from the claim of deduction under section 80IB(10) of the Act. Accordingly we direct the Assessing Officer to allow the said deduction to the assessee. We find merit in the claim of the assessee that it had commenced construction only after obtaining approval from the local authority hence the assessee is eligible to the claim of deduction under section 80IB(10) of the Act. Further merely because in the audit report relating to assessment year 2006-07 the year of project was mentioned as first year does not change the factum that the assessee had already claimed the deduction under section 80IB(10) of the Act.The assessee had in Form No.10CCB filed for assessment year 2005- 06 has also mentioned that the year of start of project was first year.In view thereof there is no merit in denial of deduction under section 80IB(10) of the Act. - Decided in favour of assessee Disallowance under section 40(a)(ia) - Held that - We find merit in the plea of the assessee that where a person is eligible to the claim of deduction under section 80IB(10) of the Act then such deduction is allowable on the profits of the business which have been computed in the hands of the assessee. In the facts of the present case the Assessing Officer while computing the profits of the business had made certain additions on account of disallowance under section 40(a)(ia) of the Act for non-deduction of tax at source. The said addition has been added to the profits declared by the assessee and consequently the profits of the business have increased.The said increased profits are the eligible profits of the business. Since the assessee is entitled to the claim of deduction under section 80IB(10) of the Act as held by us in the paras hereinabove on its profits from the business such deduction under section 80IB(10) of the Act is also allowable on the enhanced profits of the business which are the profits eligible for the claim of deduction under section 80IB(10) of the Act. Accordingly we allow the additional ground of appeal raised by the assessee in this regard.- Decided in favour of assessee Additional income offered pursuant to the survey proceedings - enhancement of income - Held that - The assessee had offered an expenditure of Rs. 3, 73, 000/- as an additional income being unaccounted expenditure and the said additional income was added in the hands of the assessee. The learned Authorized Representative for the assessee fairly admitted that the assessee is not eligible for claim of deduction under section 80IB(10) of the Act on such additional income - Decided against assessee. Addition made on account of extra work done - Assessing Officer had estimated the profits @ 8% of third party receipts - Held that - The learned Authorized Representative for the assessee pointed out that the said receipts on account of extra work were part of its project and were not to be taxed separately. Even if the said income was taxed in the hands of the assessee then the assessee is entitled to the claim of deduction under section 80IB(10) of the Act on such enhanced profits. We direct the Assessing Officer to allow the deduction under section 80IB(10) of the Act on such enhancement of profits - Decided in favour of assessee

Summary

Issues Involved:
1. Denial of deduction under section 80IB(10) of the Income Tax Act, 1961.
2. Disallowance under section 40(a)(ia) of the Income Tax Act, 1961.
3. Enhancement of income due to additional income offered pursuant to survey proceedings.
4. Addition made on account of extra work done.

Issue-Wise Detailed Analysis:

1. Denial of Deduction under Section 80IB(10):
The primary issue was the denial of deduction under section 80IB(10) of the Act. The assessee, a builder, had claimed this deduction for two projects, Apeksha Complex and Mateswari Complex. The Assessing Officer (AO) denied the deduction for several reasons, including the non-submission of Form No.10CCB, non-furnishing of the commencement certificate from the local authority, and the presence of commercial area exceeding 2000 sq. ft.

The Tribunal noted that the assessee had furnished Form No.10CCB during the appellate proceedings and that the appellate proceedings are a continuation of the assessment proceedings. Therefore, the Tribunal held that the assessee had complied with the provisions of the Act by furnishing the Audit Report, enabling the claim of deduction under section 80IB(10).

Regarding the commencement certificate, the Tribunal accepted additional evidence showing that the Grampanchayat had given permission for construction on 05.02.2003, and the project was completed by 21.07.2006. Hence, the Tribunal found no merit in the denial of deduction on this ground.

On the issue of commercial area, the Tribunal held that the pre-amended provisions of section 80IB(10) applied, which did not limit commercial usage. Therefore, the presence of 4000 sq. ft. of commercial area did not disqualify the project from claiming the deduction.

2. Disallowance under Section 40(a)(ia):
The assessee argued that any increase in profits due to disallowance under section 40(a)(ia) should also be eligible for deduction under section 80IB(10). The Tribunal agreed, stating that the enhanced profits due to disallowance are eligible for deduction under section 80IB(10), thus allowing the additional ground of appeal raised by the assessee.

3. Enhancement of Income Due to Additional Income Offered Pursuant to Survey Proceedings:
The assessee admitted that it was not eligible for a deduction under section 80IB(10) on additional income of Rs. 3,73,000/- offered during survey proceedings as unaccounted expenditure. The Tribunal dismissed this ground of appeal.

4. Addition Made on Account of Extra Work Done:
The AO had estimated profits at 8% of third-party receipts for extra work done. The Tribunal directed that even if this income was taxed, the assessee was entitled to claim a deduction under section 80IB(10) on such enhanced profits. Therefore, this ground of appeal was allowed.

Conclusion:
The Tribunal allowed the appeal of the assessee and partly allowed the cross-objections of the Revenue, while dismissing the Revenue's appeal. The Tribunal directed the AO to allow the deduction under section 80IB(10) of the Act and made specific rulings on the disallowances and enhancements in the hands of the assessee.