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TMI Blog2016 (11) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... owance. Circular No. 8 of 2014 rather clarifies the reason as to why the share of profits of a partnership firm is exempt from tax in the hands of partner. The interpretation drawn by the learned counsel for excluding share of partnership firm from scope of section 14A is not sustainable. We do not find any infirmity in the order of Commissioner of Income-tax (Appeals) in upholding the disallowance made by the Assessing Officer. Addition u/s 69 - Held that:- Addition has been made on the basis of the CIB information received. As per the contentions of the learned counsel for the assessee, the assessee neither owns the property mentioned in the information received from CIB nor has it sold any such property during the period relevant to the assessment year 2011-12. The learned counsel has also placed on record the letters from the office of the Sub-Registrar, Karveer, Kolhapur, in support of his contentions. We are of the view that this issue needs a revisit to the Assessing Officer for verification. The Assessing Officer after verification of records and the letters placed on record by the learned counsel from the office of the Sub- Registrar, Kolhapur, shall decide this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of the assessee, submitted that the authorities below have erred in disallowing the deduction under section 80-IB(10) claimed by the assessee. The restriction of built-up area of commercial establishment in the housing project was inserted by the Finance (No. 2) Act, 2004, with effect from April 1, 2005. The building plan of the project Bhakti Pooja Nagar was approved by the Kolhapur Municipal Corporation prior to the amendment. Therefore, the amended provisions of the section would not apply on the project developed by the assessee. The learned counsel for the assessee submitted that disallowance under section 80-IB(10) for similar reasons was made during the assessment years 2005-06 to 2009-10. The matter travelled up to the Tribunal. The Tribunal in Asst. CIT v. Paras Bhomraj Oswal (I. T. A. Nos. 561 to 565/ PN/2013 for the assessment years 2005-06 to 2009-10 decided on November 29, 2013) held that the assessee is eligible to claim deduction under section 80-IB(10) and the restriction of commercial area inserted by the Finance (No. 2) Act, 2004, with effect from April 1, 2005, would not apply in the case of the assessee. The learned counsel contended that with regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and February 25, 2014, from the Office of the Assistant Registrar, Karveer, Kolhapur. The learned counsel for the assessee prayed for setting aside the impugned order and allowing the appeal of the assessee. 4. Shri P. L. Kureel, representing the Department, vehemently supported the findings of the Commissioner of Income-tax (Appeals) and prayed for dismissing the appeal of the assessee. The learned Departmental representative fairly admitted that the issue relating to disallowance of deduction under section 80-IB(10) has been adjudicated by the Tribunal in the assessee's own case during the preceding assessment years. The learned Departmental representative further contended that the issue relating to built-up area of residential units C-5, D-5 and 19 bungalows may be remitted back to the Assessing Officer, in accordance with the order of the Tribunal. In respect of disallowance of deduction under section 14A read with rule 8D the learned Departmental representative submitted that the authorities below have rightly made disallowance on the exempt income earned by the assessee. The share of profit from partnership firm is tax-free income in the hands of the assessee and, thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted relief to the assessee after calling remand report. The Department carried the matter in appeal before the Tribunal. The Tribunal held that the limit specifying the built-up area of shops and commercial establishment in the housing project was inserted by the Finance (No. 2) Act, 2004, with effect from April 1, 2005. Since the project was approved prior to the insertion of amendment, the amended provisions of section would not apply on the assessee. The relevant extract of the findings of the Tribunal are as under : 2.9 Regarding denial of deduction under section 80-IB(10) on account of construction and sale of commercial space admeasuring 6701.43 square feet in the project sanctioned prior to April 1, 2005, as stated above, the project was approved by the competent authority before April 1, 2005, meaning thereby that project was an approved housing project as per the local Development Control Rules. On the date on which the Legislature introduced 100 per cent. deduction under the Income-tax Act, 1961, on the profits derived from housing projects approved by a local authority, it was known that the local authorities could approve the projects as housing projects with com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10) with effect from April 1, 2005, would be allowable where such commercial user does not exceed five per cent. of the aggregate built-up area of the housing project or two thousand square feet, whichever is lower. By the Finance Act, 2010, clause (d) is amended to the effect that the commercial user should not exceed three per cent of the aggregate built-up area of the housing project or five thousand square feet, whichever is higher. The expression included in clause (d) makes it amply clear that commercial user is an integral part of a housing project. Thus, by inserting clause (d) to section 80-IB(10) the Legislature has made it clear that though housing projects approved by the local authorities with commercial user to the extent permissible under the Development Control Rules/Regulations were entitled to section80-IB(10) deduction, with effect from April 1, 2005, such deduction would be subject to the restriction set out in clause (d) of section 80-IB(10). Therefore, the argument of the Revenue that with effect from April 1, 2005, the Legislature for the first time allowed section 80-IB(10) deduction to housing projects having commercial user cannot be accepted.' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the assessee has reference of the Supreme Court in the case of CIT v. Gold Coin Health Food P. Ltd. [2008] 304 ITR 308 (SC), CIT v. TVS Lean Logistics Ltd. [2007] 293 ITR 432 (Mad), and National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [2003] 260 ITR 548 (SC) ; AIR 2003 SC 1329, wherein on the point of retrospective date was held that criteria to hold this amendment retrospective was absent as there was no explicit retrospective specific wording expressing retrospectivity and even if it is assumed for the sake of arguments that the same is to be read by implication the same does not appear to be reasonable but, in fact emerges to be harsh and unreasonable when it comes to implementation. Thus, the amendment with respective built-up area discussed above was found substantive amendment and not clarificatory one. Accordingly, the same has no retrospective effect. 3.1 Without prejudice to the above, the main limb on which deduction was denied was for the reason that area of verandah was not excluded or exempt under section 78(3) of the bye-laws of the Kolhapur Municipal Corporation. The Commissioner of Income-tax (Appeals) follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing similar, so following the same reasoning, we partly allowed the Revenue's appeal as indicated above. 7. Since, the issue in present appeal relates the same project and the reasons for denying the benefit of deduction under section 80-IB(10) are identical, respectfully following the decision of the co-ordinate Bench we hold that the assessee is eligible to claim deduction under section 80-IB(10) dehors the area of commercial establishment. In so far as the built-up area of residential units C-5, D-5 and 19 bungalows is concerned the issue is set aside to the Assessing Officer to decide the issue in line with the directions given by the co-ordinate Bench of the Tribunal while adjudicating the appeals in the preceding assessment years. Accordingly, ground Nos. 1 and 2 raised by the assessee in his appeal are partly accepted in the aforesaid terms. 8. Ground No. 3 raised by the assessee in appeal is with respect to disallowance of deduction under section 14A read with rule 8D in respect of share of profit received by the assessee from partnership firm. The assessee has received tax-free income of ₹ 49,79,071 from M/s. Tirupati Pooja Construction where the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come. 3. It is clarified that 'total income' of the firm for sub-section (2A) of section 10 of the Act, as interpreted contextually, includes income which is exempt or deductible under various provisions of the Act. It is, therefore, further clarified that the income of a firm is to be taxed in the hands of the firm only and the same can under no circumstances be taxed in the hands of its partners. Accordingly, the entire profit credited to the partners' accounts in the firm would be exempt from tax in the hands of such partners, even if the income chargeable to tax becomes nil in the hands of the firm on account of any exemption or deduction as per the provisions of the Act. 4. This may be brought to the notice of all concerned. A perusal of circular would show that the interpretation drawn by the learned counsel for excluding share of partnership firm from scope of section 14A is not sustainable. We do not find any infirmity in the order of Commissioner of Income-tax (Appeals) in upholding the disallowance made by the Assessing Officer. Accordingly, ground No. 3 raised by the assessee in its appeal is dismissed. 9. Ground No. 4 of the appeal raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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