2017 (11) TMI 914 - HC - Income Tax

Deductions u/s.80IB(10) - income computed as income from other sources - Held that - From the materials on record, it can be seen that the assessee s sole business of real estate development, in the material collected by the Revenue during survey on which the Revenue heavily relies, there was sufficient indication that the amount of ₹ 1.01 crores was the assessee s income from such business. In the statement of the partner of the firm, the disclosure to this effect that the diary impounded during the survey also recorded that such onmoney was received for booking of the flats of Laxmi Residency Project. The Commissioner brought in the angle of morality while rejecting the claim for deduction. The Tribunal, in our opinion, correctly reversed the decisions of the Revenue authorities. The Bombay High Court in case of Commissioner of Incometax, Central II v. Sheth Developers (P) Ltd. 2012 (8) TMI 159 - BOMBAY HIGH COURT had in somewhat similar background, held that the assessee s claim for deduction under section 80IB(10) of the Act could not be rejected. - Decided against revenue.

Summary

Issues:
- Appeal against the judgment of the Income Tax Appellate Tribunal regarding deductions u/s.80IB(10) under the Income Tax Act, 1961.
- Justification of the Tribunal's decision on deductions influenced by irrelevant factors and erroneous criteria.

Analysis:
1. The case involved an appeal by the Revenue against the Income Tax Appellate Tribunal's judgment regarding deductions under section 80IB(10) of the Income Tax Act, 1961. The questions raised for consideration were whether the Tribunal was justified in allowing deductions from income computed as income from other sources and if the claim of deduction under section 80IB(10) was influenced by irrelevant factors and erroneous criteria.

2. The issue pertained to the assessment year 2010-11, where the assessee, a real estate development firm, claimed deductions under section 80IB(10) on unaccounted income received from a project. The Assessing Officer added the unaccounted sum as income from other sources and disallowed the deductions as the firm failed to establish the source of the receipts.

3. The Commissioner of Income Tax (Appeals) upheld the decision, noting that the unaccounted receipts were not part of the registered sale agreement or regular books of accounts, and were rightly taxed as income from other sources. The Commissioner also emphasized the public policy aspect and the loss of revenue due to such practices.

4. The Tribunal ruled in favor of the assessee, highlighting that the unaccounted income was related to the firm's real estate development business. The Tribunal found the Revenue's rejection of the claim without basis and reversed the decisions of the Revenue authorities based on the materials collected during the survey.

5. The High Court upheld the Tribunal's decision, noting that the unaccounted income was linked to the firm's business activities. The Court emphasized that the Revenue's reliance on morality and public policy was not sufficient to reject the claim for deduction under section 80IB(10). Referring to a similar case, the Court stated that the claim for deduction could not be rejected solely based on morality grounds.

6. Ultimately, the Tax Appeal was dismissed, affirming the Tribunal's decision to allow the deductions under section 80IB(10) for the unaccounted income related to the firm's real estate development business. The High Court's judgment was influenced by the firm's business activities and the lack of concrete evidence to disallow the deductions.