2011 (7) TMI 1283 - AT - Income Tax

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Rejection of accounts under section 145(3) of the Income Tax Act.
3. Eligibility for deduction under section 80-IB(10) of the Income Tax Act.
4. Inclusion of CESC/Generator charges and extra work receipts in the Profit & Loss Account.
5. Compliance with the condition of individual unit size not exceeding 1500 sq. ft.
6. Completion certificate from the local authority.
7. Treatment of nomination charges.

Detailed Analysis:

1. Condonation of Delay:
The appeal was filed late by 3 days, which was not opposed by the assessee's representative. Therefore, the delay was condoned, and the appeal was considered on merit.

2. Rejection of Accounts under Section 145(3):
The Assessing Officer (AO) invoked section 145(3) of the Income Tax Act, rejecting the Profit & Loss (P/L) Account prepared by the assessee. The AO believed the accounts did not correctly disclose the income of the eligible undertaking. The CIT(A) found the AO's action unjustified, stating that the AO did not provide a show-cause notice before invoking section 145(3) and did not prove the accounts were incorrect or incomplete. The CIT(A) directed the AO to assess the income based on the accounts furnished by the assessee along with Form 10CCB.

3. Eligibility for Deduction under Section 80-IB(10):
The AO denied the deduction under section 80-IB(10) on multiple grounds, including the inclusion of certain receipts and the size of individual units. The CIT(A) held that the assessee was eligible for the deduction, as the housing project was completed within the stipulated time, and the receipts in question were integral to the housing project. The Tribunal upheld the CIT(A)'s decision, confirming the assessee's eligibility for the deduction.

4. Inclusion of CESC/Generator Charges and Extra Work Receipts:
The AO treated the receipts from CESC/Generator charges and extra work as not derived from the housing project and thus not eligible for deduction under section 80-IB(10). The CIT(A) found that these receipts were integral to the housing project and should be included in the P/L Account. The Tribunal agreed, stating that the provision of such services was part of the housing project and directed the AO to treat the receipts as part of the eligible project.

5. Compliance with the Condition of Individual Unit Size:
The AO denied the deduction on the grounds that the combined area of flats 7C and 7D exceeded 1500 sq. ft., violating section 80-IB(10)(c). The CIT(A) found that these were two separate flats sold through separate agreements and conveyance deeds. The Tribunal upheld this finding, stating that the assessee did not violate the conditions prescribed in section 80-IB(10).

6. Completion Certificate from the Local Authority:
The AO argued that the project was not completed within the stipulated time as the completion certificate was issued by the Kolkata Municipal Corporation (KMC) after the end of the financial year. The CIT(A) held that the project was completed within the stipulated time based on the Architect's certificate and the subsequent issuance of the completion certificate by KMC. The Tribunal agreed, stating that the completion certificate from KMC confirmed the project's completion within the required timeframe.

7. Treatment of Nomination Charges:
The AO included nomination charges of Rs. 4,49,000 as income, which was denied deduction under section 80-IB(10). The CIT(A) found that the nomination charges were refunded to the original buyer and did not constitute the assessee's income. The Tribunal upheld this finding, stating that the nomination charges were not the assessee's income and thus irrelevant for deduction under section 80-IB.

Conclusion:
The Tribunal upheld the CIT(A)'s decision on all issues, confirming the assessee's eligibility for deduction under section 80-IB(10) and rejecting the AO's grounds for denying the deduction. The appeal of the department was dismissed.