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2021 (5) TMI 922 - HC - Income TaxDeduction u/s 80IB(10) - when the assessee has not satisfied the requirements of the said provision and when the project was approved with a sanctioned built up area and the assessee has eventually constructed the area far in excess of what was approved - HELD THAT - On close scrutiny of the judgment rendered by this court in Brigade Enterprises Ltd. 2020 (9) TMI 1137 - KARNATAKA HIGH COURT and the facts involved in the said case, we are of the considered opinion that the substantial question of law involved in this appeal is squarely answered in the said case. Following the dictum in Brigade Enterprises, the substantial question of law raised in this appeal is answered against the Revenue and in favour of the assessee.
Issues involved:
1. Interpretation of Section 80IB(10) of the Income Tax Act for deduction eligibility. 2. Application of accounting standards for real estate developers. 3. Disallowance under Rule 8D(2)(II) and Section 14A of the Act. 4. Disallowance under Section 36(1)(iii) for advances to subsidiaries. Analysis: 1. The appeal addressed the interpretation of Section 80IB(10) of the Income Tax Act regarding the entitlement to deduction. The case involved a firm engaged in construction claiming the deduction for the assessment year 2010-11. The Assessing Officer denied the claim as the built-up area exceeded the approved plan, leading to the project not being considered approved. The Commissioner of Income Tax (Appeals) allowed the appeal, which was challenged by the revenue. The Tribunal allowed the deduction, which was contested by the revenue, arguing that the conditions of Section 80IB(10) were not met. The court referred to previous judgments and upheld the Tribunal's decision, dismissing the appeal. 2. The case also discussed the application of accounting standards for real estate developers. The Senior Counsel for the assessee cited previous judgments to support the contention that accounting Standard 7 was not applicable to real estate developers, advocating for following accounting standard 9 for project completion method. The court considered the arguments and upheld the Tribunal's decision based on the cited legal positions. 3. The judgment further delved into the disallowance under Rule 8D(2)(II) and Section 14A of the Act. The court referred to relevant legal provisions and previous decisions to analyze the issue. It highlighted the findings of the Commissioner of Income Tax (Appeals) and the tribunal, ultimately affirming the concurrent findings of fact and dismissing the appeal against the assessee. 4. Additionally, the case addressed the disallowance under Section 36(1)(iii) for advances to subsidiaries. The court referred to specific legal precedents and the findings of the Commissioner of Income Tax (Appeals) and the tribunal to support its decision. It concluded that the assessee's own funds exceeded the advances and deposits made, leading to the dismissal of the appeal against the assessee. In conclusion, the High Court of Karnataka, in a detailed judgment, addressed various issues related to income tax deductions, accounting standards for real estate developers, and specific disallowances under the Income Tax Act. The court relied on legal precedents, analyzed the facts of the case, and upheld the decisions of the lower authorities in favor of the assessee, ultimately dismissing the appeal brought by the revenue.
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