2014 (2) TMI 468 - HC - Income Tax

Stay of demand - Calim of deduction u/s 80IB(10) of the Act Held that - There is a strong prima facie case that the case of the petitioner for deduction under section 80IB(10) of the Act is governed by the decision of this Court in the case of Commissioner of Income-tax Versus Radhe Developers 2011 (12) TMI 248 - GUJARAT HIGH COURT it would be gross inconvenience would be caused to the petitioner if pending the appeal, the petitioner is required to deposit 50% of the tax demand - Thus, the communication dated October 30, 2013 of the Commissioner (Appeals) is quashed - There shall be complete stay of the tax demand against the petitioner pending the appeal - the observations are prima facie and the appeal shall be decided independently thus, in addition to disallowing deduction u/s 80IB(10) of the Act Decided in favour of Assessee.

Summary

Issues:
1. Claim of deduction under section 80IB(10) of the Income Tax Act, 1961 for a partnership firm engaged in housing development.
2. Dispute regarding ownership of lands for housing projects.
3. Relevance of agreement between the petitioner and landowner in claiming deductions.
4. Rejection of claim under section 80IB(10) by the Assessing Officer and initiation of penalty proceedings.
5. Challenge of the decision before the Commissioner (Appeals) and grant of conditional stay against tax demand.
6. Petition for unconditional stay pending appeal citing reliance on previous court decisions.
7. Prima facie case analysis based on the decision in the case of Radhe Developers.
8. Quashing of the Commissioner (Appeals) communication and grant of complete stay on tax demand pending appeal.
9. Disallowance of interest by the Assessing Officer in addition to deduction under section 80IB(10).

Analysis:
1. The judgment pertains to a partnership firm engaged in housing development seeking deduction under section 80IB(10) of the Income Tax Act, 1961 for the assessment year 2009-10. The primary dispute arose from the ownership of lands on which the housing projects were being developed. The petitioner's claim was based on an agreement with the landowner and the assumption of full responsibility and risk in developing the projects, citing a previous court decision in support of their position.

2. The Assessing Officer rejected the deduction claim under section 80IB(10) and initiated penalty proceedings under section 271(1)(c) of the Act. The petitioner appealed to the Commissioner (Appeals) and requested a stay against the tax demand, which was partially granted on the condition of depositing 50% of the existing demand. The petitioner then filed a petition seeking unconditional stay pending the appeal, arguing that the Assessing Officer erred in disallowing the deduction and that the condition imposed would cause undue hardship.

3. The High Court analyzed the case, noting that the petitioner's claim was solely based on a previous court decision regarding similar circumstances. The Assessing Officer did not raise substantial objections apart from challenging the applicability of the previous decision. The Court found a strong prima facie case in favor of the petitioner, considering the precedent set by the earlier court decision and the dismissal of the appeal by the Supreme Court. The Court concluded that requiring the petitioner to deposit 50% of the tax demand pending appeal would cause significant inconvenience.

4. Consequently, the Court quashed the Commissioner (Appeals) communication and granted a complete stay on the tax demand pending the appeal. The judgment emphasized that the observations made were prima facie and that the appeal would be decided independently. Additionally, the Court noted a minor disallowance of interest by the Assessing Officer, which was considered insignificant compared to the overall disallowances. The petition was disposed of with no order as to costs, providing relief to the petitioner in the matter of deduction under section 80IB(10) and the associated tax demand.