2018 (11) TMI 550 - AT - Income Tax

Deduction u/s. 80IB(10) - addition on account of reduction of sales - Held that - The assessee at the time of refund of amount instead of debiting the amount to P L account reduce the same from the sales consideration. This fact has not been disputed by the Revenue. Only contention raised by the Department is that the refund of amount was in respect of sales made in assessment year 2009-10. We find that as per books of assessee, reverse entry has been passed by the assessee on 31- 03-2010 i.e. in the period relevant to the assessment year 2010-11. It is an undisputed fact that the amount of ₹ 1,10,00,000/- has been offered to tax in assessment year 2009-10. Now that the assessee has refunded the said amount, the assessee is entitled to claim the same on account of reduction of sale. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals) in deleting the addition. Accordingly, ground No. 1 raised in the appeal is dismissed. Addition on account of receipts allegedly not eligible for deduction u/s. 80IB - Held that - The assessee has developed a housing project Green Meadows and claimed deduction u/s. 80IB on the said project. During the course of assessment proceedings the Assessing Officer observed that certain receipts viz. amount received on account of area difference, electricity charges, extra amenities, extra work, legal charges, society charges and parking charges have no direct nexus with the profits of housing project. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals) in allowing deduction u/s. 80IB(10) on the aforesaid receipts. The receipts are in-extricably linked to development of the housing project. Allowing of deduction u/s. 80IB(10) on pro-rata basis - Held that - Despite the fact two residential units were having built up area exceeding 1500 sq. ft. Commissioner of Income Tax (Appeals) has disallowed proportionate deduction u/s. 80IB(10) on the said flats. Allowability of pro-rata deduction u/s. 80IB(10) on eligible residential units is no more res integra. No infirmity in the action of Commissioner of Income Tax (Appeals) in allowing proportionate deduction. Accordingly, ground No. 3 raised in the appeal by the Revenue is dismissed. Allowance of liquidated damages - delay in handing over the possession - Held that - The final settlement between the parties took place on 10-01-2010 i.e. in the period relevant to the assessment year 2010-11. Since, the amount got crystallized in the period relevant to the assessment year under appeal, the assessee rightly claimed the same as expenditure in assessment year 2010-11. In the backdrop of these facts the Commissioner of Income Tax (Appeals) allowed assessee‟s claim of liquidated damages. The facts have not been disputed by the Revenue. There is no reason to interfere with the well reasoned findings of the Commissioner of Income Tax (Appeals).

Issues Involved:
1. Reduction in Sales
2. Receipts not related to Section 80IB(10) deduction
3. Deduction under Section 80IB(10)
4. Liquidated Damages

Detailed Analysis:

1. Reduction in Sales:
The Revenue contended that the reduction of ?1,10,00,000/- from sales for the assessment year 2010-11 was not allowable since the refund pertained to sales made in the assessment year 2009-10. The Tribunal noted that the assessee had refunded the amount for modifications that were initially recorded in the previous year. Since the refund was reflected in the books for the assessment year 2010-11, the Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision to delete the addition, finding no infirmity in the order. The Tribunal emphasized that the refund was correctly recorded in the period relevant to the assessment year 2010-11.

2. Receipts not related to Section 80IB(10) deduction:
The Revenue argued that receipts amounting to ?25,62,908/- from parking charges, society charges, legal charges, electricity charges, and extra amenities charges were not directly related to the profits of the housing project and thus not eligible for deduction under Section 80IB(10). The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision, which stated that these receipts were inextricably linked to the development of the housing project and thus qualified for deduction under Section 80IB(10). The Tribunal found no infirmity in this reasoning, noting that the receipts were generated during the development of the housing project and could not be seen in isolation.

3. Deduction under Section 80IB(10):
The Revenue challenged the allowance of deduction under Section 80IB(10) despite two residential units exceeding the 1500 sq. ft. limit. The Tribunal noted that the Commissioner of Income Tax (Appeals) had disallowed proportionate deduction for the units exceeding the limit, in line with the decision of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Hsg. Dev. Ltd. vs. DCIT. The Tribunal found no infirmity in this proportionate allowance, affirming the Commissioner of Income Tax (Appeals)'s decision.

4. Liquidated Damages:
The Revenue disputed the allowance of ?1,32,19,200/- as liquidated damages, arguing that the expenditure did not pertain to the assessment year 2010-11. The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision, noting that the settlement between the assessee and M/s. National Reality Ltd. crystallized on 10-01-2010, making the expenditure relevant to the assessment year 2010-11. The Tribunal found no reason to interfere with the well-reasoned findings of the Commissioner of Income Tax (Appeals).

Conclusion:
The appeal by the Revenue was dismissed, and the Cross Objections raised by the assessee were dismissed as not pressed. The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decisions on all contested issues, affirming the deletion of additions and the allowance of deductions as claimed by the assessee.

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