Income Tax Appellate Tribunal - Hyderabad
Nagarjuna Constructions Co.,Limited, ... vs Department Of Income Tax on 29 August, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" : HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND
SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA.No.1023/Hyd/2010
Assessment Year 2005-2006
Nagarjuna Construction ACIT, C.C. 3
Company Limited, Hyderabad vs. Hyderabad.
PAN AAACN7335C
(Appellant) (Respondent)
ITA.No.1237, 1238 & 1239/Hyd/2010
Assessment Years - 2005-06, 2006-07 & 2007-08
ACIT, C.C. 3 Nagarjuna Construction
Hyderabad. vs. Company Limited,
Hyderabad
PAN AAACN7335C
(Appellant) (Respondent)
ITA.No.1024 & 1025/Hyd/2010
Assessment Years - 2006-07 & 2007-08
Nagarjuna Construction ACIT, C.C. 3
Company Limited, Hyderabad vs. Hyderabad.
PAN AAACN7335C
(Appellant) (Respondent)
For Assessee : Shri S.Rama Rao (A.R.)
For Revenue : Shri P.Somasekhar Reddy
Date of Hearing : 29.08.2013
Date of pronouncement : 23.10.2013
ORDER
PER SMT. ASHA VIJAYARAGHAVAN, J.M.
These are the cross-appeals filed by the assessee and revenue against the Order of the CIT(A)-V, Hyderabad for the assessment years 2005-06 to 2007-2008. Since common issues are involved, these appeals were clubbed and heard together and 2 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
are being disposed of by this consolidated order. First, we will take-up the appeal of the assessee ie., ITA.No.1023/Hyd/2010 for the assessment year 2005-2006. The grounds raised by the assessee in this appeal are as follows :
ITA.No.1023/Hyd/2010 - Assessment year 2005-2006 :
1. "On the facts and in the circumstances of the case the order of the learned CIT(A) erroneous in law and facts of the case.
2. The learned CIT(A) erred in law and facts of the case in confirming the Order of the Assessing Officer under section 143(3) of the Income Tax Act, 1961 to the extent the same is confirmed and the same is not in accordance with law and facts of the case.
3. On the facts and in the circumstances of the case the learned Commissioner of Income Tax erred in law and facts of the case in disallowing the deduction of the profits derived from the business of developing a new infrastructure facilities within the meaning of clause (a),
(b) and (c) of the Section 80IA(4)(i) of the Income Tax Act, 1961.
4. On the facts and in the circumstances of the case the learned Commissioner of Income Tax erred in law and facts of the case in considering the terrace area as part of the built-up area for the purpose of Section 80IB(10).
On the facts and in the circumstances of the case the learned Commissioner ought to have held that the terrace is part of the common area and not part of built up area for the purpose of deduction under section 80IB(10).
5. On the facts and in the circumstances of the case the learned Commissioner of Income Tax(Appeals) erred in law and facts of the case in confirming the disallowance expenses incurred by the appellant in the joint venture. On the facts and in the circumstances of the case the learned Commissioner ought to have appreciated that the Joint Venture is a Special Purpose Vehicle for the purpose of business of the appellant out of the business necessity and commercial expediency and the expenditure is deductible as business expenditure accordingly ought to have allowed the same as deduction.
6. Alternatively, on the facts and in the circumstances of the case the learned Commissioner of Income Tax 3 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
(Appeals) ought to have allowed the loss suffered by the appellant in the Special Purpose Vehicle as business loss or loss incidental in the carrying on business or as a final alternative ought to have allowed as current account debt written off.
7. The appellant crave leave to add to/delete/modify/alter/amend/substitute all or any of the grounds."
2. Grounds No. 1, 2 and 7 are general in nature and need not be adjudicated.
3. Ground No.3 is with regard to disallowance of deduction under section 80IA(4)(i) of the I.T. Act, 1961.
4. Brief facts of the case are that the assessee company derives income mainly from construction business. For the assessment year 2005-06, the assessee company filed its return of income on 30.10.2005 admitting total income of Rs.21,81,34,210/-. The Assessing Officer completed the assessment under section 143(3) of the Act determining the total income of the assessee company at Rs.46,92,89,175/- by making the following additions :
1. Disallowance of deduction u/s.80IA of Rs.15,97,05,231/-.
2. Disallowance of deduction u/s.80IB of Rs.1,71,67,000/-.
3. Disallowance of commission paid to Directors of Rs.1,50,58,000/-.
4. Disallowance of claim of loss of Unitech-NCC(JV) of Rs.5,74,29,604/-.
5. Disallowance of deduction u/s.80G of Rs.2,62,936/-.
6. Disallowance of depreciation of Rs.17,95,130/-.
5. With reference to the addition of Rs.15,97,05,231/- on account of disallowance of claim under sec. 80IA of the Act. In this regard, the Assessing Officer asked the assessee to produce details of infrastructure projects undertaken and to explain why the claim made under section 80IA of the Act needs to be allowed. The assessee gave a list of 21 projects. The Assessing 4 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
Officer held that the projects undertaken by the assessee were only in the nature of work contracts. Moreover, it was stated that the assessee was not operating the projects and it was not known as to the time period when the claim under section 80IA of the Act is supposed to begin.
6. During appeal proceedings before CIT(A), the assessee relied upon the decision of the Hon'ble ITAT, Mumbai in the case of M/s. Patel Engineering Limited Vs DCIT (2005) 94 ITO 411. It was argued by the assessee that even though the assessee is a civil contractor, yet under the Built and Transfer mode, it had undertaken development work and was thus eligible for the aforementioned deduction. The assessee argued that even though it had not utilized its own money in the projects and had been paid by the Government for the various works, yet it had developed infrastructure. Thereby, deduction under section 80lA of the Act was allowable. The assessee also distinguished between the developer and contractor and stated that it was a developer. In its written arguments, the assessee provided detailed analysis of Patel Engineering referred to above and gave the following reasons for its eligibility under section 80IA of the Act.
And to sum up, the assessee offer the following clarifications on the eligibility of the assessee under Section 80lA of the Income-tax Act, 1961.
1. The condition mentioned in main provisions of sub section (2) of Section 80lA regarding develops and begins to operate is not relevant in the context of infrastructure facilities of the nature mentioned in clause (a), clause (b) and clause (c) of Explanation to Section 80lA (4)(i) of the Income-tax Act, 1961 as the same are covered by the proviso to the said section wherein the words begins to develop or operate applies, accordingly the assessee is eligible to claim deduction from the date of commencement till the date of completion of development operation and maintenance as the case 5 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
may be.
2. As already explained the condition as to started or starts operating applies to the undertaking or enterprise to the extent covered by proviso to sub-section (2) of Section 80lA to the extent covered by the agreement it entered with the Central Government, State Government, Local Authority, Statutory Authority as the case may be;
3. As explained the infrastructure facilities developed facilitating a new and improved use and benefits derived there from is a new infrastructure facility being a road including a toll road, bridge or a rail system, a highway project including housing or other activities being integral part of the highway project, a water supply project, water treatment system, irrigation project, sanitation and sewerage system, or solid waste management system, a port, air port, inland water way, inland port.
4. For all the projects the deduction under Section 80lA is calculated as if the same is only the source of income of the assessee as provided in subsection (5) of Section 801A.
5. The prescribed form in Form 10CCS is only the certificate of the eligible profits and the same is accordingly given and enclosed to the return of income as required, and the same is also revised incorporating date of commencement.
6. As explained the Circular 14/2001 is the authoritative exposition of the law as amended by the Finance Act, 1999 and by subsequent amendments. Reference can also be made to ITAT order in Patel Engineering case in this regard and Bharat Udyog case and the order of the ITAT Jaipur Bench order in Metal infrastructure in this regard Copies of the said orders are enclosed for the benefit of ready reference.
In view of the above submissions and, the relevant facts and circumstances there is no infirmity in the claim of the assessee of the profits and gains derived from the eligible business of developing infrastructure facilities to the extent included in the gross total income and we make this humble request to consider the allowance of deduction under section 80IA accordingly.
7. The learned CIT(A) discussed the issue elaborately in his order at paras No. 5.2 to 5.6.2 about the eligibility of deduction under section 80IA and concluded as follows :
"5.7. From the above facts and circumstances, it is clear that the appellant was only executing works contract with various State Government agencies. The amounts were being paid by these agencies and the appellant was not building, operating and maintaining these contractual works as a 6 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
set of activities. Therefore, respectfully following the decisions of the Hon'ble ITAT, Mumbai, Third Member Bench in the case of M/s. B.T. Patil Belgaum Constructions (P) Ltd. vs. ACIT 1 ITR (AT) 703 (Mum.) (T.M.) and Hon'ble ITAT, Chennai decision in the case of ACIT vs. Indwell Linings (P) Ltd. 21 DTR 21 (Chen.) discussed above, it is clear that the deduction under section 80IA of the Act is not allowable to the appellant. Accordingly, the addition made by the Assessing Officer is held to be correctly made. This ground of appeal is decided in favour of the Revenue".
8. The learned Counsel, appearing on behalf of the assessee, submitted before us that the assessee during the previous year executed 22 infrastructure projects eligible for deduction u/s. 80IA(4) of the I.T. Act. The assessee further submitted that the details of such projects has been elaborated in statement filed in the paper book at page Nos. 2 to 6 and it can be seen from the details that in respect of all the abovementioned projects the following conditions are fulfilled.
9. The learned Counsel for the assessee has submitted the following facts before us.
a) The agreement was entered into with either the Government of India or the State Government or any authority established under the State or Central law.
b) The nature of the work mentioned at Column No.4 of the statement clearly indicate that they are defined as the infrastructure facilities within the meaning of Sec.80IA(4) of the I.T. Act.
c) The assessee while executing the projects takes possession of the land; after completion of the project development, hands over the possession of the land along with the infrastructure facility.
d) No material is supplied by the Government or any authority and all the material, labour, technical expertise and machinery required for the purpose of developing he infrastructure facility is supplied only by the assessee at his cost.
e) The assessee has to provide performance guarantee for the liquidity damages for any delay and also responsible for any 7 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
loss caused in the process of developing the infrastructure facility.
f) The assessee itself is responsible for providing the technical information, financial assistance, supply of machinery required and the material required for the development of infrastructure facility.
g) On completion of the project, the assessee had to maintain the facility for one year and during the said period any defect is to be corrected by the assessee at its own cost.
10. The learned Counsel submitted that from the above facts, it is clear that the conditions mentioned in the provisions u/s. 80IA(4) are all satisfied by the assessee and the assessee. The learned Counsel for the assessee relied on the decision in assessee's own case for the assessment years 2001-02 to 2004-05 vide consolidated order of Hon'ble ITAT Bench-B in ITAs.No.1312 & 1313/ Hyd/2008, 640 & 465/Hyd/2006 and 141/Hyd/2007 dated 27.8.2012.
11. The learned D.R. on the other hand, relied on the Order of the CIT(A) and relied on the decision of the Gujarath High Court in the case of Kotira Constructions Ltd., vs. Union of India and others reported in 352 ITR
513.
12. In the rejoinder, the learned Counsel for the assessee submitted that the said decision was rendered in the context of a Writ Petition field by the above mentioned company questioning the explanation inserted in sub section (13) of Section 80lA of the IT. Act retrospectively w.e.f. 01-04-2000. The Hon'ble Gujarat High Court has held that the deduction u/s. 80IA(4) is available only to those concerns which develop the infrastructure facility and do not apply to the persons 8 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
executing a mere works contract. The Hon'ble ITAT in the abovementioned cases including the case of the assessee herein held that the activity carried on by the assessee is development of infrastructure facility and not a mere works contract. Therefore, the decision of the High Court of Gujarat supports the claim of the assessee as the assessee is a developer developing the infrastructure facility land is eligible for deduction u/s 80IA(4) of the Act. Hence, the learned Counsel submitted that the decision relied upon by the learned DR has no application to the facts of the assessee's case and the assessee may be held as eligible for deduction u/s.80IA(4) of the I.T. Act.
13. We have heard both the parties and perused the material available on record. The learned Counsel for the assessee pleaded before us that the assessee's case is covered by the Order of the Coordinate Bench of the Tribunal in the case of KMC Constructions Ltd. vs. ACIT in ITA.No.996/Hyd/2003 dated 16.03.2012. In our opinion, the facts of each case is to be examined before application of the ratio laid down by any decision. Being so, we are of the opinion that it is the incumbent upon the assessee to prove that the assessee itself prepared the drawings, designs and specifications of the project so as to execute the same. If the drawings, designs and specifications given by the party to whom the assessee executed the project then, the assessee is not at liberty to change any modification, and if there are no variations in the plan, then the project said to be conceived not by the assessee but by the party who has given the contract to the assessee. Further, it is also 9 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
seen financial risk and commitment on the part of the assessee. If the finance is provided by the contractee, then there is no financial participation by the assessee. The security deposit offered by the assessee or retention of money cannot itself be considered as financial commitment. There should be a financial commitment in implementing the project itself by the assessee and invest its own funds in executing the project undertaken by the assessee. In otherwords, the assessee shall use his own men, material and machines rather than from contractee. In addition to this, assessee has to carry on other incidental activities like operation, maintenance of the project. Accordingly, we direct the Assessing Officer to see whether assessee carried on the above activities itself and executed the project and decide accordingly in accordance with law, after giving a reasonable opportunity of being heard to the assessee.
14. Ground No.4 is with regard to deduction u/s 80lB of the I.T. Act. The assessee during the previous year developed residential houses by obtaining necessary approvals from the local authorities. The issue involved in this ground is whether, for the purposes of working out the built up area of the residential house, the terrace area is included or not. The assessee humbly submits that the word "built up area" is defined by sub section (14) of the Sec.80IB of the I.T. Act which means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units. The Assessing 10 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
Officer is of the view that the terrace area is also to be included as a part of the built up area. The same view is expressed by the learned CIT (A) also.
15. It was submitted before us by the learned Counsel for the assessee in this appeal as follows:
(i) that while constructing the higher floors some of the terrace areas of the lower floors are left out without construction.
(ii) The said terrace area would not form part of the inner measurement of the residential unit.
(iii) The same is outer area and is not covered.
(iv) The terrace area would mean the terrace of the lower floor left without construction.
(v) It can neither be called as an inner area nor a projection nor balcony and, therefore, would not form pat of the built up area.
16. The learned D.R. on the other hand relied upon the Order of the CIT(A) and pointed out that the exact portions marked as terrace areas has to be verified.
17. We have heard both the parties and perused the material on record. The learned Counsel for the assessee, placed on record the decision of the Hon'ble Madras High Court in the case of CIT vs. Sangvi and Doshi Enterprises reported in 255 CTR 156 wherein it has been held that the terrace area shall not form part of the built up area and relied on this case. However, we find that in the case of M/s. Modi Builders & Realtors (P) Ltd. vs. ACIT, Hyderabad in ITA. No.1541/Hyd/2010 dated 31-03-2011 has dealt elaborately with this issue.
11ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
The relevant observations of the Co-ordinate Bench of this Tribunal are as follows :
"11. We have heard both the parties and also perused the material available on record. The main contention herein is with regard to inclusion of portico and balcony for the purpose of determining the built-up area as per clause (a) of subsection (14) of section 80IB of the Income-tax Act, 1961.
As per this clause the definition of built-up area is as follows:
"80IB(14)[(a) - "built-up area" means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units;]
12. The above definition was introduced by Finance (No. 2) Act, 2004. This amendment starts with "inner measurement of residential unit". Even as per common parlance built-up area is the carpet area covered by thickness of wall + balcony + portico (projection). Thus, whether it is the inner measurement or outer measurement one thing is amply clear that, it should be actual measurement not any estimate. The dispute herein is with regard inclusion of portico and balcony for measuring the built-up area of each residential unit. If the portico and balcony area is added, the built-up area would exceed 1500 sq. ft. per unit. As per the definition as stated in section 80IB(14)(a) built-up area includes projection and balcony. Accepted rules of interpretation for and inclusive definition as elucidated by the Hon'ble Supreme Court in the case of CIT vs. Tajmahal Hotel (1973) CTR (SC) 480; AIR 1972 (SC) 168 is that if the word "include" is used in an interpretative clause, it must be construed as apprehending not only such as it signifies to its nature and merit, but also things which the interpretative clause declares what they shall include. So normal meaning of built-up area, but for the definition include projection and balcony, would definitely exclude the later. Therefore, there can be no doubt that 12 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
prior to the introduction of the definition aforesaid clause built-up area would not include projections and balcony as normally understood. However, after the enactment itself clearly specifies that built-up area includes both projections and balconies as increased by the thickness of walls and does not include common area shared with others. This definition gives the enlarged meaning of built-up area which includes balcony and projection. After inclusion of balcony and projection if the total area of built-up area exceeds 1500 sq, ft. in this case the assessee is not entitled for deduction u/s. 80IB of the Act".
18. Hence, we remit the issue to the file of the Assessing Officer to determine the area in the light of the decision in the case of Modi Builders & Realtors (P) Ltd. (supra) and decide the same in accordance with law, after giving a reasonable opportunity of being hear to the assessee.
19. With respect to grounds No. 5 and 6, the learned Counsel for the assessee submitted a copy of the JV agreement entered into by the assessee with the Unitech Ltd and NCC Ltd. It is at pages 37 to 46 of the paper book filed on 27-08-2013. The JV was formed for carrying out the work of widening to 4-6 Lanes and strengthening of the existing 2 lane carriage way of the NH-5 in the State of Andhra Pradesh - Golden Quadrilateral Phase-Il packages AP-1 and AP-3. According to the agreement entered into as per Clause 6
(e), the JV shall not constitute a partnership and any liabilities of any sort whatsoever of one Joint Venturer would be liable against the other Joint Venturer. Therefore, the said JV can not be considered as a 13 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
partnership firm but is an AOP. The assessee herein is a member of the said Association. The loss from the AOP is to be determined in accordance with the provisions u/s.67A of the I.T. Act.
20. It was submitted that according to Sec.67A, the interest provided or loss of a member of an AOP shall be computed in accordance with the said section. The said loss or the profit shall form part of the gross total income of the member of the AOP. The provisions u/s. 86 of the I.T. Act, however, allow rebate to the extent of the taxed share from AOP included in the assessment of the member of the Association. These provisions clearly indicate that the loss or profit from an AOP shall form part of income of the assessee. Therefore, it was submitted that the Assessing Officer and CIT(A) are not justified in excluding the loss for the purpose of arriving at the total income of the assessee.
21. The learned D.R. on the other hand, relied upon the Order of the lower authorities and submitted that the assessee himself filed as partnership firm and prayed for confirmation of the order of the Assessing Officer.
22. We have heard both the parties and perused the material available on record. From the discussion of the various provisions of the Income Tax Act and in view of the Circular of CBDT it is clear that the Joint Venture of the assessee with Unitech was being assessed as partnership firm, and the apportionment of losses among the partners for set off and carry forward was not available in the new procedure for taxation of firms.
14ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
Under the new procedure for taxation of firms the share income of a partner in a firm is governed by the provision contained in clause (2A) of section 10 of the Act.
"The newly inserted clause (2A) of section 10 provides that in computing the total income of a previous year of a person being a partner of a firm which is separately assessed as such, his shares in the total income of the firm shall not be included for and from assessment year 1993-94."
23. The assessee has formed a Joint Venture for the purpose as given by it with Unitech Ltd. The Joint Venture is being separately assessed as such and the assessee has been claiming exemption u/s. 10(2A) for the share of profit derived from the said JV during the earlier assessment years. Only this year since there is a loss from the JV the assessee company has deducted this loss from its income claiming it to be expenses for the purpose of business. In view of the above discussion we find that the loss of JV Unitech-NCC at Rs.5,74,29,604/- cannot be included and set off from the business income of the assessee company. The same is therefore, disallowed and added back to the income of the assessee company. Accordingly, this ground is dismissed.
24. In the result, ITA.No.1023/Hyd/2010 of the assessee is partly allowed for statistical purposes.
ITA No.l237/Hyd/20l0 - Departmental appeal:
25. In this cross-appeal, the Revenue raised the 15 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
following three grounds :
"1. The decision of the CIT(A) is not acceptable with respect to deduction u/s.80IB of the I.T. Act, in view of the decision of the Kolkata Tribunal in the case of Bengal Ambuja Housing Developments Ltd. vs. CIT, in the light of the judgment of the Supreme Court in Padmasundara Rao (Decd.) & Ors. Vs. State of Tamil Nadu & Ors. (2002) 176 CTR (SC) 104, (2002) 255 ITR 147 (SC) and also other judgments.
2. The disallowance of commission paid to the Directors amounting to Rs.1,50,58,000/- is not acceptable in view of the decision of the Supreme Court in the case of M/s. Vijaya Laxmi Sugar Mills Ltd. vs. CIT (1991) 191 ITR 641 (SC), where it was held that should be direct nexus between the income and the expenses.
3. Any other ground that may be urged at the time of hearing."
26. Ground No.3 is general in nature which needs no separate adjudication.
27. Ground No.l is with regard to the deduction u/s.80IB of the I.T. Act. The assessee claimed such deduction in respect of the housing projects undertaken. The Assessing Officer found that some of the residential units of the housing project are of an area of more than 1500 sft. Therefore, the Assessing Officer was of the view that no deduction u/s.80IB is available .
28. On appeal before the CIT(A), the learned CIT(A) was of the view that deduction u/s.80IB(10) is 16 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
available in proportion to the number of units of the area of less than 1500 sft.
29. In the present appeal before us, the Department claimed that no deduction u/s.80IB(10) is available when some of the units are of the area of more than 1500 sft.
30. In this regard the Learned Counsel for the assessee, relied on the order of the learned CIT(A) besides relying on the following decisions:
a) The decision of the Hon'ble High Court of Calcutta in the case of ACIT vs. Bengal Ambuja Housing Development Ltd., in ITA.No.1735/ Kol/ 2005 (Cross appeal ITA No. 1595/Kol/2005) (BCAJ).
b) The order of the Hon'ble ITAT, Mumbai Bench-J in the case of Ekta Sankalp Developers vs. Assessee in ITA.No.3276/Mum/2010.
31. We have heard both the parties and perused the material available on record. We find that the decision in the case of Ekta Sankalp Developers, Mumbai vs. Addl. CIT 15(2) in ITA.No.3276/Mum/2010, A.Y. 2007- 2008 dated 28.09.2012 is squarely applicable to the facts of the present case and the relevant observations of the Tribunal are re-produced hereunder :
"48. I am only concerned of the binding effect of the judgment of the Hon'ble Calcutta High Court in the case of CIT vs. Bengal Ambuja Housing Development Ltd. In the light of the discussion made above, I am of the considered opinion that I should be lead by the judgment of the Hon'ble Calcutta High Court, which is a constitutional and a court of law. As 17 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
there is no direct decisionof the jurisdictional High Court still available on the subject, I finds it my duty to follow the judgment of the Hon'ble Calcutta High Court. I do not think it as a good judicial behaviour to dwell upon the technicalities of jurisdiction and ignore the judgment of a competent constitutional Court. So long as there is no decision by my jurisdictional High Court, I am immediately bound by the judgment of any other High Court available to me, directly on the subject. Therefore, I hold that the controversy placed before me as a Third Member is covered by the judgment of the Hon'ble Calcutta High Court rendered in the case of CIT vs. Bengal Ambuja Housing Development Ltd. in ITA.No.458 of 2006 dated 5.1.2007. In the light of the findings arrived at above, I agree with the view taken by the Hon'ble Vice-
President, where he has held that the assessees are entitled for deduction u/s. 80IB(10) in respect of flats having built- up area not exceeding 1500 sq. ft and not entitled for deduction in respect of those flats having their built-up area exceeding 1500 sq. ft."
32. Respectfully following the decision of the Coordinate Bench of the Tribunal in the case of Ekta Sankalp Developers (supra), we reject this ground of the revenue.
33. With respect deduction for 1% commission paid to Directors it is seen that the assessee company had paid Rs.75.29 lacs each to Shri AVS Raju, Chairman and Shri AAV Ranga Raju, M.D. as commission. The commission has been paid @ of 1% of profit calculated as per the Companies Act. The assessee was asked to justify his claim of commission 18 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
paid to the Directors. In reply, the assessee company has stated that Shri AVS Raju, is the non-executive Chairman and is advising the management of the company in all major policy matters. Similarly, Shri AAV Ranga Raju is one of the Chief Promoters of the Company and is actively involved in day-to-day operations of the company. The assessee company has also stated that the net profit of the company has increased steadily due to the contribution made by these two persons. The company has bagged several construction contracts as a direct result of the policy of the Government for construction of better infrastructural facilities as a whole. The increase in gross receipts and subsequent increase in net profit therefore can be attributed to his factor. The company has not been able to show that the Directors who have been given commission have contribution something special towards increasing the profits of the company. The decision of the Hon'ble Supreme Court in Swadesh Cotton Mills Co. Ltd. vs. CIT reported in 63 ITR 57 is relied upon for this purpose. The company claim of commission paid to the Directors therefore cannot be treated as incurred wholly and exclusively for the purpose of the assessees business. The entire commission paid at Rs.1,50,58,000/- is disallowed and added back to the income of the company.
34. During appeal proceedings before the CIT(A), the learned Counsel for the assessee stated that the commission was duly approved by the shareholders in the Annual General Meeting. It was further stated that Sri AAV. Ranga Raju is full time Managing Director of the Company and Chief Promoter of 19 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
the Company. Further, it is also stated that Sri AV.S. Raju, the then Chairman was also closely connected with the progress and day to day working of the Company. Before the learned CIT(A), the learned Counsel for the assessee contended that Sri A V S Raju, (then Chairman) and Sri A A V Ranga Raju, Managing Director are the chief promoters of the company and have been associated with the company right from the inception. The company has achieved very good progress under the able leadership of Sri A V S Raju and Sri A A V Ranga Raju. The growth achieved by the company during the years period i.e., 2001-02 to 2005-06 was as follows :
(Rs. In Million) Description 2001-02 2002-03 2003-04 2004-05 2005-06 Turnover 4415.40 4576050 7622.90 11912.32 18424.65 Profit after 132.10 183.90 315.70 572.71 1039.04 tax
35. It was further submitted by the learned Counsel for the assessee that the company has achieved substantial progress year-after-year both in terms of the turnover posted as well as the profits earned. The company has been able to diversify into new areas as a result of the policies drawn-up by the Board of Directors and in particular Sri A V S Raju, Chairman and Sri A A V Ranga Raju, Managing Director. The Company had also successfully issued GDRs to International Investors in December, 2005 and has raised valuable foreign currency of USD 120 million. They bear the largest amount of responsibility in the matter of taking all important decisions relating to the affairs of the company, its administration and business. It appears that any and every matter of importance is referred to them and their advice and decision In all such matters are of Vital consequence In guiding the affairs of the company and its smooth and efficient administration. It was further submitted by the learned Colunsel 20 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
for the assessee that the Directors are at the helm of the affairs of the company and remain mainly responsible for managing the affairs of the company and the company gets larger benefit from their advice, guidance, supervision and effective and efficient manner of discharge of their responsibility of properly managing the affairs of the company. The managing director has larger powers and greater responsibility in the matter of management of the affairs of the company. The benefit of their services derived by or accruing to the company can not be judged by considering the number of work put in or the kind of physical or hard labour done by them. The benefit has to be considered from the point of view of the company as a prudent man of business by applying one's mind to all the relevant facts and circumstances. The smooth and efficient working of the company is, undoubtedly, an important business need of the company and is one of the vital factors which enable the company to earn the profits. In this context, the learned Counsel for the assessee drawn our attention to the decision of the Hon'ble Supreme Court while upholding the principle laid down by the Calcutta High Court in CIT Vs. Edward Keventer (Private) Limited (1978) 115 ITR 149 has laid down the following propositions on the commission paid to the remuneration and commission paid to the Directors :
"It is a well laid principle that the only factors relevant for the purpose of judging whether the remuneration was excessive or unreasonable by which the provisions of section 10(4A) could be applied, the legitimate business needs of the company and the benefit derived by the company by making such expenditure and these two factors had to be viewed with the eye of the businessman himself and the Income Tax officer can not substitute his own views on these matters ignoring the viewpoint of the businessmen. He can not make a guess work relying on his instinct. He must say that the business of the company is such that it does not need a highly remunerated director or he may after an analysis of the work done by the director reach the conclusion. That the 21 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
company, does not derive benefits corresponding to the remuneration paid. The criteria laid down in the statute would not be a considered opinion but, dogmatic assertion.
36. The learned Counsel further submitted that in the instant case the Assessing Officer's observations on the policy of the Government and performance of the company cannot be accepted. The company can decide upon the remuneration policy within the provisions of the law and the Assessing Officer cannot question the same. The Assessing Officer relied on Supreme Court Judgment in Swadeshi Cotton Mills limited 63 ITR 57 wherein the commission is paid to the directors in addition to the commission paid to the Managing Agency. It is the Firm of Managing Agents managed the company and the tribunal gave a finding that the commission was paid to directors for extra commercial reasons as the whole affairs of the company were managed by the firm of Managing Agents and the directors who was additional remuneration were also directors in the Firm of Managing Agents and the firm is entitled to monthly remuneration and 10% Commission on net profits. This was allowed and what is disallowed is the additional commission paid to the directors. It is to be noted that the Managing Agency system was abolished and the corporate management is vested in the Board of Directors under the present company law and the decision relied upon by the Assessing Officer no longer relevant. Further it is to be appreciated that the commission paid to the Firm of Managing Agents is allowed and what is disallowed is the additional commission paid to the directors. Further, the following observations of the Allahabad High Court in Abbas Wazir (p) limited Vs. CIT (2003) 185 CTR 152 are also very much relevant in the instant case. The court held that :
"In our opinion whenever a claim is made by the 22 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
assessee before the ITO for allowing an expenditure as legitimate business expenditure, the approach of the ITO (or other IT authority) has to be that he has to look at the matter from the view point of a prudent businessman and not from his own view point, and then ascertain whether the said expenditure has been incurred for the purpose of commercial expediency or not. In other words, the ITO must try to put himself in the shoes of a prudent businessman and try to look at the matter from that point of view.
The House of Lords in Atherton Vs. British Insulated & Helsby Cables Limited (1925) 10 Tax Cases 155 held that in order to claim a business deduction it is enough to show that the money is expended not of necessity but voluntarily and on grounds of commercial expediency, and in order indirectly to facilitate the carrying on of the business. This enunciation of the law in the above decision has become classic.
emphasis, it was pointed out by the House of Lords in Morgan (Inspector of Taxes vs. Tate & Lyle Ltd. (1954) 26 ITR 195 should be accorded to the word 'indirectly' in this enunciation. This view has been followed by our Supreme Court in Eastern Investment Limited vs. CIT (1951) 20 ITR 1 and CIT vs. Chandulal Keshavial & Co."
36.1. The CIT(A) held that there is no reason or Assessing Officer to disallow the claim of Commission paid to Directors and deleted the addition.
37. Aggrieved, Revenue is in appeal before us and raised ground No.2 is with regard to the disallowance of commission paid to the Directors amounting to Rs.1,50,58,000/-.
38. During the course of hearing, Learned Counsel for the assessee, submitted that the learned 23 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
CIT(A) considered the fact that there is a consistent increase in the business activity of the assessee company from the year 2001-02 and onwards. The total turnover and the profits derived by the company increased substantially over a period of time which would be clear from the statement extracted by the learned CIT(A) at page 22 para 7.1 of his order. Further, the learned CIT(A) also observed that the Directors who are paid the commission provided effective leadership to substantially increase the business of the company and, therefore, the amount paid can not be disallowed. The CIT(A) further observed that the case of M/s. Swadedshi Mills relied on by the Assessing Officer is clearly distinguishable on facts. The learned Counsel for the assessee, submitted that the amount paid is for the purpose of business of the assessee and for the services rendered by the Directors. The Learned Counsel for the assessee further submitted that Sec.198 of the Companies Act provides that the remuneration to the Directors shall not be more than 10% of the profits of the company. The payment made to the Directors by the assessee during the impugned year amount to Rs. l,50,58,000/ - whereas, the total income of the company amounting to Rs.70,00,26,992/-. Therefore, the amount paid is within the limits mentioned in Sec.198 of the Companies Act. The learned Counsel for the assessee, in this regard relied on the following decisions :
a) The decision of the Hon'ble High Court of Allahabad in the case of Abbas Wazir (P) Ltd., vs CIT reported in 265 ITR 77.24
ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
b) The decision of the Hon'ble Supreme Court of India in the case of CIT vs. Walchand & Co. (P) Ltd., reported in 65 ITR 381.
c) The decision of the Hon'ble High Court of Madras in the case of Newton Studios Ltd. vs. CIT reported in 28 ITR 378 wherein it has been held that the reasonableness of the remuneration paid by assessee to his staff should be considered from the point of view of the businessman, and the revenue has no power to examine what they think was reasonable or to say what expenditure was necessary.
39. The learned D.R. on the other hand, relied on the Orders of the lower authorities.
40. We have heard both the parties and perused the material available on record. We are unable to decide the issue as the assessee has not brought any facts on record to show that the two Directors contributed to the working of the company. The entire issue depends on the nature of the service rendered by the Directors to find-out whether the expenditure is reasonable. Hence, we remit the issue to the file of the Assessing Officer to examine as to the service rendered by the Directors and contribution made by them for increase in business and thereafter, the Assessing Officer shall decide this issue in accordance with law.
41. In the result, ITA.No.1237/Hyd/2010 of the Revenue is partly allowed for statistical purposes.
ITA.No.1024/Hyd/2010 - A.Ys. 2006-07 (Assessee's Appeals).
42. In this appeal ITA.No.1024/Hyd/2010 grounds No.1, 2 and 5 are general in nature and it needs no adjudication.
43. In Ground No.3, grievance of the assessee is that the CIT(A) erred in disallowing deduction of profit derived from the 25 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
business of developing new infrastructure facilities within the meaning of clauses (a) (b) and (c) of section 80IA(4)(i) of the Income Tax ct, 1961.
44. On careful consideration of the matter, we find that we are considered this very issue in the context of assessee's appeal for assessment year 2005-06 i.e., ITA.No.1023/H/2010 vide para 13 hereinabove. For the detailed reasons given in this context, we remit the issue to the file of Assessing Officer for fresh consideration. Accordingly, this ground is allowed for statistical purposes.
45. The grievance of the assessee in ground No.4 is that the CIT(A) erred in considering the terrace area as part of the built-up area for the purpose of section 80IB (10). The contention of the assessee is that the terrace is part of the common area and not part of built-up area for the purpose of deduction under section 80IB(10).
46. On careful consideration of the matter, we find that we are considered this very issue in the context of assessee's appeal for assessment year 2005-06 i.e., ITA.No.1023/H/2010 vide paras No. 17 and 18 hereinabove. For the detailed reasons given in this context, we remit this issue to the file of the Assessing Officer to determine the terrace area in the light of the decision of the Coordinate Bench of this Tribunal in the case of M/s. Modi Builders & Realtors Ltd. (supra) and decide the same in accordance with law, after giving a reasonable opportunity of hearing to the assessee. This ground is accordingly allowed for statistical purposes.
47. The Additional Ground in ITA.No.1024/Hyd/2010 raised by the assessee is as follows :
26ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
"On the facts and in the circumstances of the case, the learned Assessing Officer erred in law and facts of the case in disallowing an amount of Rs.12,73,75,085/- being the deduction for the profits and gains derived from the eligible business of developing housing projects under section 80IB of the Income Tax Act, 1961. On the facts and in the circumstances of the case the learned Assessing Officer ought to have allowed the said deduction."
48. Through the abovementioned additional ground the assessee is claiming for deduction u/s. 80IB of the I.T. Act. The assessee undertook 4 different residential housing projects at Bangalore and claimed deduction u/s. 80IB of Rs.12,73,75,085/-. The Assessing Officer disallowed the said claim u/s. 80IB on two different grounds.
49. With regard to the housing project by name Nagarjuna Green Woods at Marthahalli, Bangalore, the Assessing Officer was of the view that some of the flats are of the area of more than 1500 sft and, therefore, the assessee is not entitled for deduction u/s. 80IB. With regard to other 3 projects, the Assessing Officer is of the view that the assessee did not complete the projects during the year under consideration and, therefore, deduction u/s. 80IB is not available.
50. The assessee filed Written Submissions and with regard to the three projects, it submitted as under:
"In respect of other housing projects for which the deduction has been claimed the Assessing Officer disallowed the claim stating that the housing projects were not completed during the previous 27 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
year relevant to the current Assessment Year. The Assessing Officer is of the view that the deduction is allowable only on the completion of the project and not on year on year basis. This issue has been clarified by the Central Board of Direct Taxes vide Instruction No.4/2009 accordingly deduction is to be allowed on year on year basis".
51. The learned CIT (A) while deciding the appeal, vide order in ITA.No.030/DC-16(1)/CIT(A)-V/2009-10 dated 01-07-2010 discussed the issue with reference to disallowance of deduction u/s. 80IB only on the ground that the built up area exceeded 1500 Sft. i.e. with reference to deduction u/s. 801B(10) for Nagarjuna Green Woods project. The learned CIT (A) did not decide the allowability of deduction u/s 801B(10) with regard to the other three projects. The assessee did not raise a ground of appeal in Form No.36. The assessee, therefore, raised vide letter dated 26-08-2013, the following addition ground.
'The learned Commissioner of Income-Tax (Appeals) erred in not directing the Assessing Officer to allow the deduction u/s. 80IB (10) of the I.T. Act in respect of three housing projects - RE- HSR Layout, RE-HSR Layout Extn., and RE-Kochi the income of which is allowable for deduction u/ s BOIB (10) of the Act."
52. With regard to the said additional ground, the assessee submitted a copy of Circular No.4 /2009 issued by the CBDT. The assessee humbly submits that 28 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
the details of the projects undertaken by the assessee and the date of completion of such projects along with the occupancy certificates issued by the appropriate authority were already submitted for perusal which are at Page Nos.1 to 6 of the paper book filed on 27-08- 2013. The details of the housing projects are reproduced hereunder :
RE-HSR RE-HSR RE- RE-KOCHI
LAYOUT LAYOUT MARTHAHALLI
EXTN.
Date of approval by 20-12-2003 12-01-2006 23-06-2004 05-02-2005
the Local authority
Due date of 31-03-2008 31-03-2010 31-03-2008 31-03-2009
completion for
claiming deduction
u/s. 80IB
Actual date of 30-04-2007 07-06-2008 29-12-2006 30-10-2008
completion of the
I
project as per the
Completion/occupancy
b
certificate issued y
the Competent
Authority
53. It was submitted that the Assessment Year 2006-07 is one of the four years for which the deduction u/ s 80IB is available. The projects were completed within the specified period allowed by Sec.80IB. There is no such requirement that for claiming the deduction in the intermediary year, the project should have been completed. The assessee in this regard relied on the Instruction No.4/2004 dated 30-06-2009 issued by the Board. A copy of the said instruction is also filed before the Tribunal for perusal. The assessee also relied on the decision of the Hon'ble ITAT, Hyderabad Bench-A, Hyderabad in ITA No.473/Hyd/2011 in the case of M/s. Keerthi Estates Pvt. Ltd., vs. DCIT dated 21-09-2012. It 29 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
was therefore submitted that since the disallowance has been made in the earlier or later years, the deduction under section 80IB(10) of the I.T. Act in respect of the three Housing Projects viz., RE-HSR Layout, RE-HSR Layout Extension, RE-Kochi are to be allowed.
54. We have heard both the parties. We admit the additional ground. Since the CIT(A) has not given a finding on this issue, we remit the issue to the file of CIT(A) for adjudication in accordance with law, after giving a reasonable opportunity of being heard to the assessee.
55. In the result, ITA.No.1024/Hyd/2010 for the assessment year 2006-07 of the assessee is partly allowed for statistical purposes.
ITA.No.1025/Hyd/2010-A.Y. 2007-2008 (Assessee's appeal)
56. In this appeal, the assessee has raised 5 grounds of appeal in all. Grounds No. 1, 2 and 5 are general in nature and therefore, it need not be adjudicated separately.
57. Now, we deal with ground No. 3 which is identical to that of the ground raised by the assessee in ITA.No.1023/Hyd/2010 assessment year 2005-2006 and ITA.No.1024/Hyd/2010 for the assessment year 2006-2007.
58. On careful consideration of the matter, we find that we are considered this very issue in the context of assessee's appeal for assessment year 2005-06 i.e., ITA.No.1023/H/2010 vide para 13 hereinabove. For the detailed reasons given in this context, we remit the issue to the file of Assessing Officer for 30 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
fresh consideration. Accordingly, this ground is allowed for statistical purposes.
59. Ground No.4 raised by the assessee for the assessment year 2007-2008 (ITA.No.1025/Hyd/2010) is with regard to deduction u/s.80IB of the I.T. Act. The assessee during the previous year developed residential house by obtaining necessary approvals from the local authorities. The issue involved in this ground is whether for the purposes of working- out the built-up area of the residential house, the terrace area is included or not. The learned Counsel for the assessee in its written submissions submitted that the word "built-up area" is defined by sub-section (14) of the section 80IB of the I.T. Act which means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units. The Assessing Officer is of the view that the terrace area is also to be included as a part of the built up area. The same view is expressed by the learned CIT(A) also. It is submitted that while constructing the higher floors some of the terrace areas of the lower floors are left out without construction. The said terrace area would not form part of the inner measurement of the residential unit. The same is outer area and is not covered. The terrace area would mean the terrace of the lower floor left without construction. It can neither be called as an inner area nor a projection nor balcony and, therefore, would not form part of the built-up area. The learned Counsel for the assessee relied on the decision of the Madras High Court in the case of CIT vs. Sangvi and Doshi Enterprises 255 CTR 156 wherein it is held by the Hon'ble Madras High Court that the terrace area shall not form part of the built-up area. Therefore, the learned Counsel for the assessee 31 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
pleaded that the Assessing Officer may be directed to work-out the deduction u/s. 80IB in respect of those units which are of the built-up area of less than 1500 sft without considering the terrace area.
60. The grievance of the assessee in ground No.4 is that the CIT(A) erred in considering the terrace area as part of the built-up area for the purpose of section 80IB (10). The contention of the assessee is that the terrace is part of the common area and not part of built-up area for the purpose of deduction under section 80IB(10).
61. On careful consideration of the matter, we find that we are considered this very issue in the context of assessee's appeal for assessment year 2005-06 i.e., ITA.No.1023/H/2010 vide paras No. 17 to 18 hereinabove. For the detailed reasons given in this context, we remit this issue to the file of the Assessing Officer to calculate the terrace area in the light of the decision of the Coordinate Bench of this Tribunal in the case of M/s. Modi Builders & Realtors Ltd. (supra) and decide the same in accordance with law, after giving a reasonable opportunity of hearing to the assessee. This ground is accordingly allowed for statistical purposes.
62. For the assessment year 2007-2008, the assessee raised the additional ground on 12.09.2012. It is with regard to Employees Stock Option Plan (ESOP) expenses. The Assessing Officer is of the view that the loss suffered on account of ESOP expenses are not allowable as a deduction. The assessee in this regard humbly submitted that the Special Bench of the Tribunal Bangalore Special Bench, Bangalore in ITA.368/Bang/2010 in the case of Biocon vs. DCIT dated 16.07.2013 held that the loss 32 ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
suffered on allotment of shares under Employees Stock Option Plan is an allowable deduction.
63. The learned D.R. on the other hand relied upon on the orders of the revenue authorities.
64. We have heard the rival submissions and perused the material available on record. We find that the additional ground has been dealt with the decision of Special Bench of the Tribunal in the case of Biocon vs. DCIT in ITA.No.368/ Bang/ 2010 dated 16.07.2013 (S.B.) (Bang.) and hence, we remit the issue to the file of Assessing Officer to decide in the light of the Special Bench decision of the Tribunal in the case of Biocon (supra) after giving an opportunity of being heard to the assessee.
65. In the result, ITA.No.1025/Hyd/2010 for the assessment year 2007-08 of the assessee is allowed for statistical purposes.
ITA.No. 1238 & 1239/Hyd/2010 - A.Ys. 2006-07 & 2007-08 (Revenue's Appeals) :
66. The first issue involved in ITA.No.1238/H/2010 and the only issue involved in ITA.No.1239/Hyd/2010 is with respect to deduction u/s. 80IB. The common effective ground of the Revenue in this behalf reads as under :
"The decision of the CIT(A) is not acceptable with respect to deduction u/s.80IB of the I.T. Act, in view of the decision of the Kolkata Tribunal in the case of Bengal Ambuja Housing Developments Ltd. vs. CIT, in the light of the judgment of the Supreme Court in Padmasundara Rao (Decd.) & Ors. Vs. State of Tamil Nadu & Ors. (2002) 176 CTR (SC) 104, (2002) 255 ITR 147 (SC) and also other judgments".33
ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
67. We have considered rival submissions and perused the material on record. We have considered this very issue in the context of the corresponding ground of the Revenue in its appeal ITA.No.1237/Hyd/2010 for the assessment year 2005-2006. For the detailed reasons given in that context in paras 27 to 32 hereinabove, we uphold the impugned orders of the CIT(A) and reject the ground of the Revenue for both these years.
68. The only other issue that survives for consideration in ITA.No.1238/Hyd/2010 for assessment year 2006-07 relates to disallowance of commission paid to the Directors amounting to Rs.4,76,72,000/- made by the Assessing Officer but deleted by the CIT(A) in the impugned order.
69. We considered the rival submissions in the issue and perused the material on record. We have considered this very issue in the context of the corresponding ground of the Revenue in its appeal ITA.No.1237/Hyd/2010 for the assessment year 2005-2006. For the detailed reasons given in that context in para 40 hereinabove, we remit the issue to the file of Assessing Officer for fresh consideration. Accordingly, this ground is allowed for statistical purposes.
70. In the result, both the appeals of the Revenue for the assessment years 2006-07 and 2007-08 being ITA.No.1238 & 1239/Hyd/2010 are partly allowed for statistical purposes.
34ITAs.No.1023 to 1025/Hyd/2010 & ITAs.No.1237 to 1239/Hyd/2010 Nagarjuna Construction Company Ltd.
71. To sum-up, ITA.No.1023/Hyd/2010 of the assessee is partly allowed for statistical purposes, ITA.No.1237/Hyd/2010 of the Revenue is partly allowed for statistical purposes, ITA.No.1024/Hyd/2010 of the assessee is partly allowed for statistical purposes, ITA.No.1025/Hyd/2010 of the assessee is allowed for statistical purposes and ITA.No. 1238 and 1239/Hyd/2010 of the revenue are partly allowed for statistical purposes.
Order pronounced in the open Court on 23.10.2013.
Sd/- Sd/- (CHANDRA POOJARI) (SMT. ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Date 23.10.2013 VBP/-
1. Nagarjuna Construction Company Limited, Hyderabad C/o. Samuel Nagadesi, C.A. 408, Sri Ramakrishna Towers, Besides Image Hospitals, Ameerpet, Hyderabad - 500 073.
2. ACIT, Central Circle-3, Hyderabad.
3. CIT(A)-V, Hyderabad.
4. CIT-IV, Hyderabad
5. D.R. ITAT 'A' Bench, Hyderabad.