2013 (9) TMI 528 - AT - Income Tax

Disallowance of deduction u/s 80IB(10) of the Income Tax Act - Non-furnishing of completion certificate of the Housing Project Held that - There was no requirement for furnishing a completion certificate from the municipal authority. In that view of the matter, the claim of deduction u/s 80IB(10) cannot be denied for not submitting the completion certificate from the local authority. Similarly, it is not a requirement under the Statute that the undertaking must be owner of the land for claiming deduction u/s 80IB(10). However, it is a fact that the Assessing Officer has rejected the claim of deduction u/s 80IB(10) by alleging that the assessee has not furnished any information or evidence with regard to the housing project and whether the conditions for claiming deduction u/s 80IB(10) have been fulfilled. The Assessing Officer had further alleged that the assessee had not submitted and not obtained auditor's certificate in Form No. 10CCB - Remitted the matter back to the file of the Assessing Officer who shall consider the claim of deduction u/s 80IB(10) afresh after affording a reasonable opportunity of being heard to the assessee. It is open for the assessee to produce all the information and evidence in support of its claim of deduction u/s 80IB(10). The Assessing Officer shall consider all the information and evidences that may be produced by the assessee and decide the issue. Determination of the income from house property by applying the rate of 7% on the investment of the assessee subject to cost inflation index Held that - The Tribunal in its order dated 23rd October, 2009 for the previous assessment years, directed the Assessing Officer to recompute the income from house property by following the return on investment method, applying the rate of 7% on the assessee's investment in the property as enhanced by applying the cost inflation index applied for the respective years to arrive at the ALV for the relevant assessment year. The facts being identical, since the CIT(A) has followed the direction of the Income-tax Appellate Tribunal while directing the Assessing Officer to recompute the income from house property - The order of the CIT(A) on this issue is sustained. Disallowance of 10% expenditure claimed by assessee Held that - When the assessee has not submitted the details called for by the Assessing Officer, he was left with no option but to disallow part of the expenses on ad-hoc basis - Considering the totality of the facts and circumstances, disallowance of 5% of the expenditure under both the heads i.e. under head construction expenses and administrative expenses, would serve the purpose Decided against the assessee.

Summary

Issues Involved:
1. Disallowance of deduction claimed under Section 80IB(10) of the Income Tax Act.
2. Determination of income from house property.
3. Disallowance of 10% of the expenditure claimed by the assessee.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction Claimed Under Section 80IB(10) of the Income Tax Act:

The primary issue in the appeals was the disallowance of deduction under Section 80IB(10) of the Income Tax Act. The assessee, a private limited company engaged in the construction of residential complexes, claimed deductions for a housing project named "Manasa Sarover Heights-II." The Assessing Officer (AO) disallowed the deduction, citing non-fulfillment of preconditions, specifically the failure to submit a completion certificate from the local authority and Form No. 10CCB from the auditor. The CIT(A) upheld the AO's decision, emphasizing the necessity of the completion certificate to ensure compliance with local laws and regulations.

The assessee argued that the project met all preconditions, including land area and unit size, and that municipal tax assessments of individual flat owners indicated project completion. The assessee contended that the requirement for a completion certificate should not be interpreted strictly and that other evidence should suffice. However, the tribunal concluded that the statutory language of Section 80IB(10) was clear and unambiguous, mandating the submission of a completion certificate from the local authority to claim the deduction. The tribunal upheld the CIT(A)'s decision, denying the deduction due to the absence of the completion certificate.

2. Determination of Income from House Property:

For the assessment year 2006-07, the AO determined the income from house property at Rs. 2,10,39,214/-, based on the property's potential rental value, rather than the disclosed income of Rs. 5,95,000/-. The CIT(A) ruled that the AO could not make fresh additions in proceedings under Section 153A if the same addition was made in the original assessment under Section 143(3). The tribunal agreed with the CIT(A), stating that the addition made in the original assessment could not be added again in the assessment under Section 153A. The tribunal dismissed the ground raised by the assessee, affirming the CIT(A)'s decision.

3. Disallowance of 10% of the Expenditure Claimed by the Assessee:

The AO disallowed 10% of the construction and administrative expenses claimed by the assessee, amounting to Rs. 18,61,251/-, due to the assessee's failure to furnish supporting evidence. The CIT(A) deleted the addition, noting that the AO's disallowance was hypothetical and not based on specific discrepancies. The tribunal partially agreed with the AO, stating that in the absence of supporting evidence, an ad-hoc disallowance was justified. The tribunal reduced the disallowance to 5% of the expenditure under both heads, partially allowing the ground raised by the department.

Conclusion:

The tribunal dismissed the appeals filed by the assessee regarding the disallowance of deduction under Section 80IB(10) and upheld the CIT(A)'s decision on the determination of income from house property. However, it partially allowed the department's appeal on the disallowance of expenditure, reducing the disallowance to 5%. The tribunal remitted the matter back to the AO for fresh determination of the claim of deduction under Section 80IB(10) for the assessment years 2003-04 and 2004-05, directing the AO to consider all relevant information and evidence.