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2010 (9) TMI 677 - AT - Income TaxDeduction u/s 80IB(10) - Referring to the Circular issued by the CBDT copy of which is available at page 85 of the paper book in Instruction No.4 dated 30.6.2009 the learned representative submitted that the assessee can claim deduction on year to year basis where the assessee is showing profit from partial completion of the project for every year - No doubt the assessee acquired large extent of land for the purpose of executing a housing project u/s 80IB(10) of the Income-tax Act provides for deduction in respect of housing project - As rightly claimed by the learned representative for the assessee assessee can claim deduction under SECTION80IB on year to year basis in view of the Circular of the CBDT dated 30.6.2009 even though the assessee proposes to construct on the entire extent of land and paid the development charges and in as much as the assessee completed the project in respect of one block in our opinion the assessee is eligible for deduction under SECTION80IB(10) of the Act - Decided in the favour of the assessee The contention of the assessee is that Accounting Standard 7 is not applicable and therefore the deduction shall be given on the entire amount - In case the assessee has not earned any profit the question of grant of deduction under SECTION80IB(10) does not arise for consideration - If any profit is not included in the total income then the deduction u/section 80IB(10) does not arise for consideration - Tribunal after considering the provisions of SECTION145 of the Act and Accounting Standard- 7 found that profit has to be ascertained year after year and in respect of the construction business - Accordingly the same is confirmed and the grounds of the assessee in this appeal are rejected
Issues Involved:
1. Deduction under Section 80IB(10) of the Income-tax Act. 2. Area of each housing unit constructed. 3. Non-deduction of tax under Section 194C of the Act. 4. Applicability of Accounting Standard 7 for computing deduction under Section 80IB(10). Issue-wise Detailed Analysis: 1. Deduction under Section 80IB(10) of the Income-tax Act: The primary issue in the Revenue's appeal (ITA No.822/Hyd/09) was whether the assessee was eligible for deduction under Section 80IB(10) for the construction of only one block of residential apartments during the assessment year 2005-06. The Department argued that the deduction should be allowed only upon the completion of the entire project. They cited the Madras High Court decision in Visvas Promoters (P) Ltd. and the Bangalore Tribunal decision in DCIT V. Brigade Enterprises P. Ltd. to support their position. Conversely, the assessee contended that they had obtained permission only for two blocks and completed one block within the assessment year. They referred to the CBDT Circular dated 30.6.2009, which allows for year-to-year deductions based on partial project completion. The Tribunal agreed with the assessee, stating that the project was completed for the blocks for which permission was obtained, and upheld the CIT(A)'s order allowing the deduction under Section 80IB(10). 2. Area of Each Housing Unit Constructed: The Revenue raised concerns about the area of the housing units, questioning whether any units exceeded 1500 sq. ft. The Tribunal found that all units were below 1500 sq. ft. and noted that even if some units exceeded this size, the assessee would still be eligible for deduction for units under 1500 sq. ft. The Tribunal upheld the CIT(A)'s order on this aspect, finding no infirmity. 3. Non-deduction of Tax under Section 194C of the Act: The Revenue also argued that the assessee failed to deduct tax under Section 194C for advertisement charges paid to M/s Wide Reach Advertising P. Ltd. The Tribunal found that the payment did not fall under Section 194C as it was for newspaper advertisements, which do not require TDS. The Tribunal upheld the CIT(A)'s order, rejecting the Revenue's ground. 4. Applicability of Accounting Standard 7 for Computing Deduction under Section 80IB(10): In the assessee's appeal (ITA No.722/Hyd/09), the issue was whether Accounting Standard 7, which was not notified under Section 145 of the Income-tax Act, should be applied for computing deductions under Section 80IB(10). The assessee argued that only Accounting Standard 2 was notified and thus applicable. The Tribunal, however, upheld the CIT(A)'s application of Accounting Standard 7, referencing the Tribunal's decision in Bhagyanagar Constructions P. Ltd., which supports year-to-year profit calculation for construction businesses. The Tribunal confirmed that deductions should be based on the profit included in the total income for the assessment year, rejecting the assessee's grounds. Conclusion: Both the Revenue's appeal (ITA No.822/Hyd/09) and the assessee's appeal (ITA No.722/Hyd/09) were dismissed. The Tribunal upheld the CIT(A)'s orders, confirming the deduction under Section 80IB(10) on a year-to-year basis for completed blocks, the eligibility of units below 1500 sq. ft., and the non-requirement of TDS for newspaper advertisements. The Tribunal also confirmed the use of Accounting Standard 7 for profit calculation in the context of Section 80IB(10) deductions.
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