2013 (11) TMI 71 - HC - Income Tax

Disallowance of deduction u/s 80IB of the Income Tax Act - whether Legal relationship between the assessee firm and the end users of the unit was that of work contract sale of tenements - Held that - Relying upon the case of Commissioner of Income Tax Versus Radhe Developers, reported in 2011 (12) TMI 248 - GUJARAT HIGH COURT , decided against the Revenue.

Summary

Issues:
1. Challenge to judgment of Income Tax Appellate Tribunal regarding disallowance under section 80IB(10).
2. Allowance of deduction under section 80IB(10) on profit derived from sale of unutilized FSI.
3. Allowance of deduction under section 80IB(10) on entire income, including disallowance under section 40(a)(ia).

Analysis:

1. The appellant-revenue challenged the judgment of the Income Tax Appellate Tribunal (ITA) regarding the disallowance under section 80IB(10) for the assessment year 2005-06. The appellant raised the issue of whether the legal relationship between the assessee firm and the end users of the unit constituted a "work contract." The Tribunal upheld the decision of the CIT(A) and deleted the disallowance under section 80IB(10). The High Court dismissed the appeal concerning this issue, citing a previous decision that was unfavorable to the revenue.

2. The next issue raised was the allowance of deduction under section 80IB(10) on the profit derived from the sale of unutilized FSI, which was questioned by the appellant. The High Court noted that a similar issue was raised in another case pending before the court. Consequently, the High Court admitted the present appeal specifically on this issue for further consideration along with the related appeals.

3. The final issue involved the allowance of deduction under section 80IB(10) on the entire income, including income from the disallowance under section 40(a)(ia). The appellant contended that the effect of the disallowance under section 40(a)(ia) should not impact the deduction under section 80IB(10). However, it was observed that this specific issue was not raised before the ITAT, and therefore, the tribunal did not consider it. As a result, the High Court dismissed the appeal concerning this issue due to lack of consideration by the tribunal.

In conclusion, the High Court dismissed the appeal on the first and third issues, citing precedent and lack of consideration by the tribunal, respectively. The second issue was admitted for further consideration along with related appeals.