2013 (4) TMI 892 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of deduction u/s 80-IB(10) for the housing project "Shri Vijaya Rengam."
2. Addition of unaccounted cash receipts for specific services and extra work.

Summary:

Issue 1: Disallowance of deduction u/s 80-IB(10) for the housing project "Shri Vijaya Rengam"

2. The assessee's grievance concerns the disallowance of its claim for deduction u/s 80-IB(10) for the housing project "Shri Vijaya Rengam" for the assessment years 2004-05 to 2007-08.

4. The Assessing Officer (A.O.) denied the deduction on the grounds that the assessee was not the owner of the land, acted merely as a contractor, and one of the flats exceeded 1500 sq.ft. Additionally, the built-up area of the commercial portion was 3719 sq.ft., violating sub-clauses (c) and (d) of Section 80-IB(10).

5. The CIT(Appeals) upheld the A.O.'s decision, stating that the benefit u/s 80-IB(10) was available only to a landowner who was also a developer.

6. The assessee argued that it was developing the housing project, deploying its resources, and finding buyers, and ownership of the land was not necessary for claiming the deduction. Reliance was placed on the decision of the Hon'ble jurisdictional High Court in CIT v. Sanghvi and Doshi Enterprise.

7. Regarding the flat exceeding 1500 sq.ft., the assessee contended that the measurement included car parking space, which should not be considered part of the built-up residential area. For the commercial area exceeding 2000 sq.ft., the assessee argued that there was no restriction on commercial area when the project started, and the restriction was introduced only from 1.4.2005.

9. The Tribunal noted that the assessee was the developer of the project, and the A.O.'s refusal to follow the Tribunal's decision in Radhe Developers v. ITO was inappropriate. The Tribunal held that there is no requirement for the developer to be the landowner to claim deduction u/s 80-IB(10).

10. The A.O. himself found that the flat's built-up area was less than 1500 sq.ft. when excluding the car parking area, thus not violating clause (c) of Section 80-IB(10).

11. The Tribunal observed that the commercial area of 2567 sq.ft. was only 3.81% of the total plinth area, and prior to 1.4.2005, there was no restriction on commercial area in a housing project. The Tribunal relied on the decision in Arun Excello Foundations Pvt. Ltd. and held that setting apart 3.81% for commercial space does not deprive the assessee of the deduction u/s 80-IB(10).

12. The Tribunal concluded that the substituted sub-section (10) of Section 80-IB, effective from 1.4.2005, applies only to projects initiated after that date. The assessee's project, having started before this date, should be governed by the earlier law.

13. The Tribunal directed the A.O. to grant the deduction claimed u/s 80-IB(10) for the project "Shri Vijaya Rengam" for the assessment years 2004-05 to 2007-08.

Issue 2: Addition of unaccounted cash receipts for specific services and extra work

15. The Revenue's appeals for the assessment years 2002-03, 2004-05, 2006-07, 2007-08, and 2008-09 involved additions for unaccounted cash receipts for specific services and extra work.

16. During the search proceedings, booking forms for the project "Sri Lambodara" revealed various amounts collected from customers under different heads, including extra work.

17. The assessee provided similar details for other projects during post-search proceedings, showing amounts collected for extra work and other services.

18. The A.O. added the total unaccounted receipts of Rs. 2,79,83,146/- to the assessee's income, as these were not reflected in the regular books of accounts.

19. The CIT(Appeals) found that the assessee had collected specific sums for specific services and provided affidavits from customers. The CIT(Appeals) held that collections for specific services could not be considered income and scaled down the addition for extra work to 8% of the receipts.

22. The Revenue argued that the assessee did not produce proof of expenses incurred from the collections and that the CIT(Appeals) gave relief without corroborating evidence.

23. The assessee contended that the collections were for statutory payments and extra work, supported by affidavits from flat owners, and these were not part of the regular income.

24. The Tribunal found that the assessee had produced records showing payments made from the service charges received and affidavits from flat owners. The CIT(Appeals) was justified in not adding the service charges as income.

25. Regarding extra work, the Tribunal held that considering the entire amount as income was unfair, and the CIT(Appeals) was justified in estimating 8% of the receipts as income.

27. The Tribunal dismissed the Revenue's appeals for all the years.

28. In conclusion, the assessee's appeals were allowed, and the Revenue's appeals were dismissed.

Order pronounced on 11th April 2013, at Chennai.