2016 (12) TMI 561 - HC - Income Tax

Computing the deduction u/s 80P(2)(a)(i) - Proportionate disallowance made u/s 43B - Held that - The Tribunal noted that the taxable income of about ₹ 94 lacs was mainly from capital gain, but that there were no facts available to ascertain how much money was borrowed for the purpose of acquiring the capital assets. It is, therefore, not possible to separately work out the amount of interest payable under Section 43B of the Act in respect of the income eligible for deduction under Section 80P(2)(a)(i) and income not so eligible. It is not that the authorities have refused the appellant the proportionate benefit of a deduction under Section 80P(2)(a)(i). What is done is that the Assessing Officer has been directed to restrict the disallowance of interest payable under Section 43B on a proportionate basis. The deduction is only to the extent specified in sub section (2) thereof.The order of remand in this regard cannot be faulted. It does not raise a substantial question of law. Income from sale of property - income from business and profession or capital gain - Held that - CIT (Appeals) and the Tribunal rightly upheld the assessment order for more than one reason. The appellant s objects, inter alia, are to grant loans to its members for constructing houses as well as to build housing complexes and to sell the units therein. All the authorities under the Act have found as a question of fact that the appellant had claimed expenses in respect of these projects which were later sold. The conclusion, therefore, that they constitute business assets cannot be said to be perverse or absurd. The Tribunal, therefore, rightly came to the conclusion that the appellant being in the business of construction and sale of properties income from selling the houses that were constructed must be treated to be income from business and profession.

Summary

Issues:
1. Appeal against order of Income Tax Appellate Tribunal.
2. Substantial questions of law raised by the appellant.
3. Consideration of questions (i), (vi), and (vii).
4. Decision against the appellant on questions (ii) and (iii).
5. Disallowance of expenses under Section 43B.
6. Challenge of computation by the Assessing Officer.
7. Order of remand not raising substantial question of law.
8. Upholding of assessment order by CIT (Appeals) and Tribunal.
9. Treatment of income from selling houses as income from business and profession.

Analysis:

1. The judgment deals with an appeal against the order of the Income Tax Appellate Tribunal, which dismissed the appellant's appeal against the Commissioner of Income Tax (Appeals) order for the assessment year 2009-2010.

2. The appellant raised several substantial questions of law, including the legality of orders, treatment of income from bank accounts, expenses under Section 43B, and classification of income as business income or capital gain.

3. Questions (i), (vi), and (vii) were deemed general and did not require consideration by the court.

4. The court decided against the appellant on questions (ii) and (iii) based on a previous judgment by a Division Bench of the same court.

5. Regarding question (iv), the Assessing Officer had disallowed certain expenses claimed by the appellant as business expenses under Section 43B. The CIT (Appeals) granted partial relief, directing a proportionate disallowance of interest payable under Section 43B.

6. The Tribunal noted the difficulty in separating interest payable for income eligible for deduction under Section 80P(2)(a)(i) and income not eligible, ultimately upholding the direction for a proportionate disallowance.

7. The appellant's challenge to the computation by the Assessing Officer was noted, with the court stating that any dispute in this regard should be separately challenged.

8. The court found the order of remand regarding the disallowance of expenses under Section 43B to be appropriate and not raising a substantial question of law.

9. Concerning question (v), the court upheld the assessment order, stating that the income from selling houses constructed by the appellant was rightly treated as income from business and profession due to the nature of the appellant's activities.

10. Ultimately, the court dismissed the appeal, concluding that it did not raise any substantial question of law based on the findings and decisions made throughout the judgment.