9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (11) TMI 1745 - AT - Income TaxDisallowance of deduction u/s 80IB(10) - taxation of the net income as proper assessment year after granting set-off of matching expenses - Netting of Expenses Year of Taxation of Net Profits - HELD THAT - Regarding the year of completion of the CH it is born out of the records that the club house (CH) is completed in the assessment year 2014-15. By this time the assessee incurred the expenditure on the club house construction. In principle the project completion method of accounting is followed by the assessee in respect of Midori Project and the same is accepted by the Revenue. Following the same the relevant income of the Club House is taxable in the year of completion i.e. 2014-15 only. In this regard both the assessee and the Revenue have erred in dealing with the issue of year of taxation of profits of this club house project in accordance with general law in force. While the assessee erred in including the subscription as a part of the eligible income for the purpose of section 80IB(10) in the return of income and thereby inflating the claim of deduction to that extent; the Revenue failed to adhere to the principles of accounting and taxed the entire amount as a taxable income. In our view the decision of both the Revenue as well as the assessee requires substantially modification considering the project completion method of accounting followed by the assessee and the said method stands undisturbed by the Revenue. As such the expenditure is incurred in assessment year 2014-15 and we do not have the details of net profit on this CH project. Correctness of expenditure is not examined. Therefore we are of the opinion the matter should revisit to the file of the Assessing Officer with the following directions - Directions (a) The club house construction project has to be recognised as a continuation of the Midori Phase-1 the project as it has the genesis in the Midori Phase-I project originally. Per se it is only a part of the housing project as the finances for the Club House is raised from the flat buyers only. The profits of the CH is a taxable ones as per the Affidavit. (b) The accounting methods followed by the assessee in respect of Midori Phase-I should be equal applicable to the club house construction as well and the year of taxation of the relevant profits is ideally the assessment year 2014-15 only. Assessing Officer needs to consider it in the remand proceedings. (c) The completion certificate of the Club House issued by the local authority becomes relevant. Assessee claims the CH is completed in the year 2014-15 but no completion certificate is filed before us. (d) AO is also required to examine the genuineness of the expenditure claim of Rs.78, 10, 182/- in the relevant assessment year. The profits of the Club House has to be examined and quantified with the due process of law. The details relating to the assessment for assessment year 2014-15 are not filed before us. (e) For any other reason AO decides to not follow the principle of matching expenses qua project completion method for this Club House project the profits of this project may be divided among three assessment years i.e. A.Y. 2012-13 2013-14 and 2014-15 on proportionate basis by applying the principle of matching qua the subscription received from the flat buyers. (f) AO shall grant reasonable opportunity of being heard to the assessee in deciding the issue. The Assessing Officer is required to pass a speaking order on this issue considering the relevant law in course. Thus the relevant alternative grounds 4 5 raised by the assessee on this issue are allowed as above. Applicability of section 115JC - Project Approval in 2007 - HELD THAT - From the above we find the assessee is caught unaware legally by the new law brought into statute for the assessment year 2013-14. Thus we find it is unfair to apply the new section 115JC of the Act to the assessee s project approved in 2007. Considering the decision M/s. S.K. Ventures 2019 (3) TMI 1990 - ITAT MUMBAI the commonality of the facts of both the cases and the legal submissions of the AR above we find it is settled legal issue on the matter at the level of the Tribunal and the provision of section 115JC need to be applied prospectively only and not to the projects approved in 2007 as in the present case. No other contrary case is brought to our notice by the Revenue for taking any contrary view by us. Accordingly the additional ground and other related grounds are allowed. Prospective application of the provisions of section 115JC qua the date of approval for the first time of the project which is much earlier to the introduction of the provisions of section 115JC - Solitary housing project ever undertaken by the assessee during its life time. With this fact if assessee what to pay the AMT tax the same remains refundable to the assessee at the end of the permitted period. With the absence enabling provisions for such refund of AMT credit the deduction provisions of section 80IB(10) of the Act becomes inapplicable to the eligible project of the assessee. Without going to these arguments we find it appropriate to grant relief to the assessee on legal ground i.e. prospective application of the provisions of section 115JC qua the date of approval for the first time of the project which is much earlier to the introduction of the provisions of section 115JC.
Issues involved:
1. Condonation of Delay 2. Deduction under Section 80IB(10) for Club House Collections 3. Taxation of Club House Collections 4. Applicability of Section 115JC (Alternate Minimum Tax) Issue-wise Detailed Analysis: 1. Condonation of Delay: The assessee's appeals were filed with a delay of one day. The delay was deemed unintentional. Considering the smallness of the delay, the Tribunal condoned the delay and proceeded to adjudicate the appeals. 2. Deduction under Section 80IB(10) for Club House Collections: The assessee, a builder, claimed deductions under Section 80IB(10) for club house collections, arguing that these were part of the housing project "Midori Phase-I." The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] denied the deductions, stating that the club house was not part of the original housing project. The CIT(A) confirmed the AO's decision, emphasizing that the club house collections were not eligible for deduction under Section 80IB(10). 3. Taxation of Club House Collections: The AO treated the club house collections as taxable income without allowing deductions for expenses incurred on the club house construction. The assessee argued for netting the expenses against the collections and taxing only the net income. The Tribunal noted that the club house was completed in the assessment year 2014-15, and the project completion method was followed. Therefore, the net profit from the club house should be taxed in the year of completion (2014-15). The Tribunal directed the AO to re-examine the genuineness of the expenses and quantify the net profit accordingly. 4. Applicability of Section 115JC (Alternate Minimum Tax): The assessee contended that the provisions of Section 115JC, introduced by the Finance Act, 2012, should not apply to their project approved in 2007. The Tribunal referred to the decision in the case of M/s. S.K. Ventures vs. ITO, which held that Section 115JC applies prospectively to projects approved on or after 1.4.2013. The Tribunal agreed, stating that applying Section 115JC retrospectively would be unfair and contrary to established legal principles. Consequently, the Tribunal allowed the assessee's appeal on this ground. Separate Judgments: The Tribunal delivered a composite order for both assessment years (2012-13 and 2013-14), addressing the issues collectively. The Tribunal's directions and decisions applied to both years, ensuring consistency in the adjudication process. Conclusion: The Tribunal partly allowed the assessee's appeals, directing the AO to re-examine the expenses related to the club house collections and confirming that Section 115JC should not apply retrospectively to the assessee's project. The Tribunal emphasized the importance of adhering to established accounting principles and legal precedents in the adjudication process.
|
