2016 (2) TMI 276 - HC - Income Tax

Addition on account of excess allotment of area while purchasing development rights from Hindustan Candle Manufacturing Co.Pvt.Ltd. - eligibility of sec 80IB - ITAT upholding the deletion the addition by CIT(A) - Held that - As both the CIT (Appeals) and the Tribunal, have in their orders, rendered a finding that the Respondent Assessee had fulfilled all conditions laid down in Section 80 IB(10) of the Act for housing project. Consequently, the entire profits from the housing project would be entitled to deduction thereunder. Thus, even if the amount of ₹ 1,32,000/- is added to the profits of the Respondent Assessee as contended by the Revenue it would have no impact on the tax payable as the entire profit including the addition made would be entitled to deduction under Section 80 IB(10) of the Act. In the above view, the response to question (C) as proposed by the Revenue in the facts of the present case would be academic. Accordingly, it does not give rise to any substantial question of law, thus not entertained.

Summary

Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal for AY 2007-08 under section 260A of the Income Tax Act 1961.
2. Interpretation of provisions of section 80 IB(10) of the Act regarding violation by the Assessee.
3. Upholding the order of CIT(A) regarding project completion method.
4. Deletion of addition of excess allotment of area to a company while purchasing development rights.

Analysis:
1. The Appeal by the Revenue challenges the common order dated 21st November 2012 passed by the Income Tax Appellate Tribunal for AYs 2005-06, 2006-07, and 2007-08, specifically focusing on the AY 2007-08. The questions of law raised by the Revenue for consideration include violations of section 80 IB(10) by the Assessee, project completion method, and excess area allotment to a company.

2. Regarding questions (A) and (B), the Revenue had previously raised similar issues for AYs 2005-06 and 2006-07, which were dismissed in earlier Appeals. The High Court, based on the previous order, found that these questions did not present substantial questions of law and hence were not entertained in the current Appeal.

3. For question (C), the Revenue contended that an amount should be added to the Assessee's profits due to excess area sale to a company. However, both the CIT (Appeals) and the Tribunal found that the Assessee complied with the conditions of Section 80 IB(10), making the profits from the housing project eligible for deduction. Even if the amount in question was added, it would not impact the tax payable as the entire profit, including the addition, would still be eligible for deduction under Section 80 IB(10), rendering the issue academic. Consequently, the High Court did not find this question to raise any substantial legal matter and thus did not entertain it.

4. Ultimately, the High Court dismissed the Appeal, stating that the questions regarding violations of section 80 IB(10) and project completion method were not substantial and had been previously addressed. The issue of excess area allotment did not impact the tax payable due to eligibility for deduction, making it an academic concern. No costs were awarded in the judgment.