2011 (6) TMI 1038 - AT - Income Tax

Summary

Issues Involved:

1. Disallowance of deduction under Section 80IB(10) for Gawanpada Project.
2. Addition as deemed dividend under Section 2(22)(e).
3. Disallowance of deduction under Section 80IA(4)(iii) for industrial park projects.
4. Disallowance of deduction under Section 80IB(10) for Ashram Chawl Project.
5. Addition of alleged undisclosed sales.

Detailed Analysis:

1. Disallowance of Deduction under Section 80IB(10) for Gawanpada Project:

The assessee, engaged in real estate development, claimed deductions under Section 80IB(10) for the Gawanpada project. The AO disallowed the deduction, noting that the commercial space exceeded 2000 sq. ft., violating Section 80IB(10) conditions. The CIT(A) upheld this, focusing on the area of the plot being less than one acre. However, the Tribunal found that the project's approval dated before 31.03.2005 meant the conditions of Section 80IB(10) regarding commercial area were not applicable. Additionally, the Tribunal noted that the total plot area should be considered, not just the portion eligible for deduction. The matter was remanded to the CIT(A) for fresh adjudication considering CBDT Instruction dated 03.08.2010.

2. Addition as Deemed Dividend under Section 2(22)(e):

The AO added Rs. 13,34,412 as deemed dividend, noting the assessee held 24% shares in City Gold Management Services Pvt. Ltd., which had accumulated profits. The CIT(A) upheld the addition, rejecting the argument that transactions were inter-corporate deposits or current account transactions. The Tribunal, referencing its decision for the previous year, held that financial transactions between sister concerns, driven by commercial expediency, do not qualify as loans or advances under Section 2(22)(e). Hence, the addition was deleted.

3. Disallowance of Deduction under Section 80IA(4)(iii) for Industrial Park Projects:

The AO disallowed the deduction, arguing the CBDT notification was issued in 2006, applicable from AY 2007-08. The CIT(A) allowed the deduction, noting the approval from the Ministry of Commerce dated 31.12.2004, and that the CBDT notification did not specify a cut-off date. The Tribunal upheld the CIT(A)'s decision, confirming the deduction was valid from the date the industrial units were located in the park, which was before the relevant assessment year.

4. Disallowance of Deduction under Section 80IB(10) for Ashram Chawl Project:

The AO disallowed the deduction, stating the project plot size was less than one acre. The CIT(A) upheld this, considering only the eligible component of the project. The Tribunal, referencing its decision for previous years, held that the total plot area should be considered, not just the eligible portion. Thus, the deduction was allowed.

5. Addition of Alleged Undisclosed Sales:

The AO added Rs. 18,11,484 as undisclosed sales, based on brokerage bills indicating a higher sale consideration than recorded in the books. The CIT(A) upheld the addition, rejecting the typographical error claim. The Tribunal found no merit in the assessee's argument and upheld the CIT(A)'s decision.

Additional Grounds:

The Tribunal noted that the AO had accepted the claim for Maya Nagar Project in an order passed under Section 154, making the related additional ground infructuous. For the Ashram Chawl Project, the additional ground was remanded to the CIT(A) for fresh adjudication.

Conclusion:

The appeals filed by the assessee were partly allowed for statistical purposes, and the appeals filed by the revenue were dismissed. The Tribunal provided detailed directions for fresh adjudication on specific issues, ensuring compliance with legal provisions and CBDT instructions.