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2021 (4) TMI 785 - HC - Income TaxComputation of deduction u/s 80IB - Tribunal held that the allocation of common expenses in the ratio of turnover of a project should not be adopted but percentage of completion method should be adopted when computing the total turnover of the assessee for the purpose of computation of deduction u/s. 80IB - HELD THAT - As per tribunal there was no definite ratio laid down that the common overhead expenses have to be allocated on the basis of turnover as contested by the revenue. With due regards, we are of the firm view that the case law relied on by the Revenue to drive home its point is rather distinguishable and not directly applicable to the facts of the case on hand. In an overall consideration of the facts and circumstances of the issue, the Revenue has not brought out any concrete documentary evidence to justify its stand in excluding the difference in allocable expenses. We are, therefore, of the considered view that the exclusion of the difference in allocable expenses from the deduction as claimed by the assessee was misconceived and thus, exclusion of difference in allowable expenses is unjustified. Thus substantial question of law does not arise for our consideration which is evident from the findings recorded by the tribunal. Whether the Tribunal is correct in holding that the assessee would be entitled to claim deduction u/s.80IB(10) of the Act, despite the project Zircon having commercial shop establishment of more than 2000 sq. ft. and this project being part of the larger project Ultima , where number of flats measuring more than 1500 sq. ft. had been constructed contrary to section 80IB(10)? - HELD THAT - As the aforesaid substantial question of law has been answered by this court in 'COMMISSIONER OF INCOME TAX, BANGALORE, VS. BRIGADE ENTERPRISES LTD.', 2020 (9) TMI 1137 - KARNATAKA HIGH COURT . For the reasons assigned in the aforesaid decision, the second substantial question of law is answered against the revenue and in favour of the assessee. Profits derived by the assessee on the sale of land/undivided share to the purchasers of flats - Whether it is to be included in the profits for computing deduction u/s.80IB(10) of the Act when the land was owned by the sister concern transferring undivided share in favour of the purchasers of flats? - HELD THAT - From perusal of Section 2(47)(v) of the Act, it is evident that if the possession of any immovable property is handed over in part performance of the contract referred to in Section 53A of the Transfer of Property Act, 1882 the same would be a transfer within the meaning of Section 2(47) of the Act. In the instant case, the assessee has taken possession of the land in pursuance of an agreement executed between it and its sister concern and has paid consideration to its sister concern for purchase of the land. The assessee thereafter has constructed residential apartments on it and therefore, the land shall be deemed to have been transferred within the meaning of Section 2(47)(v) of the Act and is entitled to claim deduction under Section 80IB of the Act. In this connection, reference may be made to decision of the Supreme Court in 'PCIT VS. GREEN ASSOCIATES 2019 (4) TMI 224 - SC ORDER . The substantial question of law No.3 is answered against the revenue and in favour of the assessee.
Issues:
1. Allocation of common expenses for deduction u/s. 80IB of the Income Tax Act. 2. Eligibility of deduction u/s. 80IB(10) for a project with commercial shop establishment exceeding 2000 sq. ft. 3. Inclusion of profits from the sale of land in computing deduction u/s. 80IB(10). Issue 1: Allocation of Common Expenses for Deduction u/s. 80IB: The appeal involved a dispute regarding the method of allocating common expenses for the purpose of claiming deduction under Section 80IB of the Income Tax Act. The Revenue contended that the percentage of completion method should be applied for computing overhead expenses in proportion to the turnover. However, the Tribunal did not find concrete evidence to support the exclusion of allocable expenses. The High Court concurred with the Tribunal's finding, stating that the Revenue failed to justify the exclusion of the difference in allocable expenses, leading to the dismissal of the appeal. Issue 2: Eligibility of Deduction u/s. 80IB(10) for Project Specifications: The second issue revolved around the eligibility of claiming deduction under Section 80IB(10) for a project named "Zircon" with a commercial shop exceeding 2000 sq. ft. and being part of a larger project named "Ultima." The Tribunal had allowed the assessee's claim for deduction under Section 80IB. The High Court referred to a previous decision and ruled in favor of the assessee, stating that the second substantial question of law was answered against the Revenue and in favor of the assessee. Issue 3: Inclusion of Profits from Sale of Land for Deduction u/s. 80IB(10): The final issue pertained to the inclusion of profits derived from the sale of land in computing the deduction under Section 80IB(10) of the Act. The assessee had taken possession of the land from its sister concern, constructed residential apartments, and paid consideration for the land. The High Court held that as per Section 2(47)(v) of the Act, the possession of immovable property in part performance of a contract constitutes a transfer. Citing a Supreme Court decision, the Court ruled in favor of the assessee, stating that the land was deemed transferred within the Act's meaning. Consequently, the third substantial question of law was answered against the Revenue and in favor of the assessee. In conclusion, the High Court found no merit in the appeal and dismissed it, upholding the Tribunal's decision in favor of the assessee.
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