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2023 (4) TMI 225 - AT - Income TaxDeduction u/s 80-IB(10) - principle of consistency - HELD THAT - As decided in Maps Enzymes Limited 2019 (8) TMI 1061 - GUJARAT HIGH COURT when the department thought fit to grant the deduction for four consecutive years, there was no reason to raise any objection with regard to admissibility of such deduction under Section 80JJA in the fifth and the final assessment year 2008-09. Assessee cannot be denied the benefit of the exemption claimed u/s 80IB (10) of the Act as deduction was allowed by the revenue in the initial assessment year. Accordingly, we do not find any merit in the appeal filed by the Revenue. Hence, the ground of appeal of the revenue is hereby dismissed. Deduction u/s 80IB(10) - not allocating the common expenses to the eligible and non-eligible units based on the turnover which has resulted higher amount of deduction to the assessee - HELD THAT - We note that there is a defect in adopting the basis of allocating the common expenses between eligible and non-eligible projects on turnover ground. It is for the reason that, there can be a situation where the sale of a particular project is of negligible value in a particular year whereas the cost of construction has already been incurred by the assessee. In that eventuality, the financial positions of the assessee will represent distorted position if the common expenses are allocated based on turnover. Thus, assessee has rightly adopted the basis of allocating the common expenses based on the area of construction of eligible and non-eligible projects. Hence, no merit in the ground of appeal raised by the revenue. Thus, the ground of appeal of the revenue is hereby dismissed. Alternate addition made by the AO - AO allocated the common expenses between the sales of all the projects and working progress shown of all the projects being eligible and non-eligible projects and made the addition - HELD THAT - There is no dispute to the fact that the Revenue in the earlier year has not allocated any common expenses incurred by the assessee on projects in the ratio of the units sold and the units shown as work in progress. Accordingly, we are of the view that the principle of consistency has to be adopted as held by the Hon ble Supreme Court in the case of Excel Industries 2013 (10) TMI 324 - SUPREME COURT . In the long run, there will not be any impact on the income of the assessee. It is for the reason that if any addition is made to the work-in-progress shown at the end of the financial year which will certainly enhance the income of the year in dispute but this closing work in progress will become the opening work-in-progress in the subsequent year and the profit of the subsequent year will be reduced by the same amount of addition made in the year under consideration - we direct the AO to delete the addition made by him. Decided in favour of assessee.
Issues Involved:
1. Deletion of disallowance of deduction under section 80IB(10) of the Income Tax Act, 1961. 2. Allocation of common expenses between eligible and non-eligible units. 3. Alternative addition made by the AO. 4. Deletion of addition based on the order of the earlier year. Issue-wise Detailed Analysis: 1. Deletion of Disallowance of Deduction under Section 80IB(10): The Revenue challenged the deletion of disallowance of deduction under section 80IB(10) amounting to Rs. 4,54,86,974/-. The assessee, a real estate developer, claimed the deduction for its project "Vedika E-Series," asserting compliance with section 80IB(10) conditions. The AO disallowed the deduction, arguing that the project was first approved by Kudasan Gram Panchayat on 16-03-2005 and not completed within the stipulated time. The CIT(A) found that the first approval was granted by GUDA on 06-02-2008, and the project was completed by 30-03-2012, thus within the prescribed time. The ITAT upheld the CIT(A)'s decision, emphasizing consistency and the absence of any negative remarks from the AO regarding the Panchayat's approval. 2. Allocation of Common Expenses: The Revenue contested the CIT(A)'s decision to not allocate common expenses based on turnover, resulting in a higher deduction under section 80IB(10). The AO had observed a discrepancy in the allocation of common expenses between eligible and non-eligible projects. The CIT(A) noted that the assessee consistently allocated expenses based on saleable area, a method accepted by the Revenue in previous and subsequent years. The ITAT upheld this method, citing the principle of consistency and the Supreme Court's ruling in CIT vs. Excel Industries Ltd. 3. Alternative Addition Made by the AO: The AO alternatively suggested that common expenses should be apportioned between sales and work-in-progress (WIP). This resulted in an addition of Rs. 4,51,16,680/-. The CIT(A) rejected this approach, stating it disregarded accepted accounting principles and the percentage of completion method (PCOM) followed by the assessee. The ITAT agreed, emphasizing the principle of consistency and noting that such apportionment would not impact the overall income in the long run. 4. Deletion of Addition Based on the Order of the Earlier Year: The Revenue challenged the deletion of an addition of Rs. 11,41,532/- related to expenses incurred in the assessment year 2009-10. The AO disallowed the claim, citing non-acceptance of the CIT(A)'s earlier decision and cash expenditure. The CIT(A) followed the ITAT's earlier orders allowing the deduction. The ITAT upheld the CIT(A)'s decision, noting no contrary judgment or reversal by a higher forum. Conclusion: The ITAT dismissed both appeals filed by the Revenue, affirming the CIT(A)'s decisions on all issues. The judgments emphasized consistency in accounting methods, adherence to legal provisions, and the principle of not withholding deductions allowed in initial assessment years.
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