2019 (1) TMI 1926 - AT - Income Tax

Deduction u/s 80IB(10) denied - No ownership to land - permission from the Nagar Nigam not valid - when the permission was not validly issued, therefore completion certificate for the same would also not be validly given, therefore, the A.O. disallowed the claim of deduction - as per AO Assessee is not undertaking development and construction of housing projects. The assessee is not owner of the land of which project is claimed to have been undertaken - HELD THAT - As in the case of CIT Vs. Radhe Developers 2011 (12) TMI 248 - GUJARAT HIGH COURT wherein the Hon'ble High Court was of the view that the ownership of the land is not sine-qua-non for claiming deduction u/s 80IB(10) of the Act. Therefore, in our considered view, this objection of the A.O. is contrary to the judicial pronouncements cannot be sustained. A.O s objection that the assessee is merely acting as a contractor to the customer to whom land is independently sold and there after construction is being done as per agreement. This issue was examined by the Tribunal in original proceedings, wherein it has been decided in favour of the assessee. There is no change into facts and circumstances. Hence, this objection is also not sustained. No valid permission - A.O. of the view that when the permission from the Nagar Nigam is not valid since same has been taken before acquiring the land, since we have not sustained the objection of the A.O. that ownership of land on which project is claimed to have been undertaken, we therefore, do not find any merit into this objection of the A.O. This objection is also not sustainable. Hence, same is rejected. Disallowance u/s 14A - contention of the assessee is that the judicial pronouncement wherein it has been held that if the assessee has not earned exempt income in a particular accounting year, the resort to section 14A of the Act cannot be adopted - HELD THAT - Admittedly, the assessee had not pressed ground against invoking the provisions of section 14A of the Act. In the ordinary circumstances, the assessee would have not been given an opportunity, but in the present case where the judicial pronouncement came later to the assessee s withdrawal of the ground, we deem it proper in the interest of justice that atleast an opportunity by the Ld. CIT(A) should be given. We therefore restore this ground of cross objection to the file of the Ld. CIT(A) for decision afresh. The cross objection filed by the assessee is allowed for statistical purposes.

Summary

Issues:
1. Deletion of addition under section 80IB(10) of the Income Tax Act, 1961.
2. Disallowance of expenditure under section 14A of the Income Tax Act, 1961.

Deletion of Addition under Section 80IB(10):
The case involved two appeals by the revenue and a cross objection by the assessee against orders of the CIT(A) regarding assessment years 2007-08 & 2010-11. The revenue challenged the deletion of an addition of ?65,41,636 under section 80IB(10) of the Act. The A.O. disallowed the deduction claiming the assessee was not entitled to it. However, the CIT(A) deleted the addition, stating the assessee was eligible for the deduction. The revenue contended that the permission for the project was invalid as it was obtained before acquiring the land. The Tribunal disagreed, citing judicial precedents and upheld the CIT(A)'s decision, ruling in favor of the assessee.

Disallowance of Expenditure under Section 14A:
The cross objection by the assessee challenged the disallowance of expenditure under section 14A of the Act amounting to ?64,96,645. The A.O. invoked section 14A based on the investments made by the assessee in group companies. The assessee withdrew the ground against disallowance before the CIT(A), but later argued that the law had developed subsequently, and disallowance cannot be made if there is no exempt income. The Tribunal considered this argument, noting that while the ground was withdrawn, the subsequent legal development warranted a fresh consideration. Therefore, the cross objection was allowed for statistical purposes, and the matter was remanded to the CIT(A) for a fresh decision.

In conclusion, the Tribunal dismissed the revenue's appeals and allowed the assessee's cross objection for statistical purposes. The judgment addressed the issues of deduction under section 80IB(10) and the disallowance of expenditure under section 14A, providing detailed analysis and legal reasoning for each issue, ultimately upholding the CIT(A)'s decision in one case and remanding the other for reconsideration.