Income Tax Appellate Tribunal - Pune
Nyati Builders Pvt. Ltd., Pune vs Assessee on 14 May, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES "A", PUNE
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA No.619/PN/2011
(Assessment Year : 2006-07)
Nyati Builders Pvt. Ltd.
Nyati Commerce House
Road No.6, Kalyani Nagar
Pune - 411 006
PAN : AAACN6418N .... Appellant
Vs.
Dy. Commissioner of Income Tax
Circle - 2, Pune .... Respondent
Appellant by : Mr. Vipin Gujrati
Respondent by : Mr. Mukesh Verma
Date of hearing : 14-05-2013
Date of pronouncement : 25-06-2013
ORDER
PER G. S. PANNU, AM
The captioned appeal by the assessee is directed against an order of the Commissioner of Income Tax-II, Pune (in short "the Commissioner) dated 30.03.2011 passed under Section 263 of the Income Tax Act, 1961 (in short "the Act") holding that the assessment order passed by the Assessing Officer under Section 143(3) of the Act dated 21.04.2008 for the assessment year 2006-07 was erroneous in so far as it was prejudicial to the interest of the Revenue within the meaning of Section 263 of the Act. Primarily, the Commissioner has set-aside the assessment order dated 21.04.2008 (supra) on the issue relating to assessee's eligibility for claiming deduction under Section 80-IB(10) of the Act and without prejudice to the same, he has also directed the Assessing Officer to re-compute the deduction allowable to the assessee under Section 80-IB(10) of the Act after re-working the element of indirect expenses, interest and depreciation in respect to two projects namely, 'Nyati Meadows' & 'Nyati Garden'.
2 ITA No.619/PN/2011
Nyati Builders Pvt. Ltd.
A.Y. 2006-07
2. In brief, the facts are that the appellant is a company incorporated under the provisions of the Companies Act, 1956 and is inter-alia engaged in the business of building, construction and real estate development and dealing in lands. For the assessment year 2006-07 it filed a return of income declaring total income at Rs.9,16,86,210/-, wherein deduction under Section 80-IB(10) of the Act was claimed in relation to two projects namely, Nyati Meadows - Rs.4,90,53,069/- and Nyati Garden - Rs.43,98,779/- out of the several projects being undertaken by the assessee in and around Pune. The Assessing Officer completed the assessment under Section 143(3) of the Act determining the total income at Rs.9,20,86,210/- after making an addition of Rs.4,00,000/- on account of unverifiable personal element included in expenses. Ostensibly, assessee's claim for deduction under Section 80-IB(10) of the Act as made in the return of income and accompanied by the prescribed audit report in Form No.10CCB, at Rs.5,34,51,848/- with respect to two projects of 'Nyati Meadows' & 'Nyati Garden' was accepted as such.
3. Subsequently, the Commissioner has invoked his revisionary power under Section 263 of the Act after examination of the assessment records whereby the action of the Assessing Officer in allowing the deduction under Section 80-IB(10) of the Act was stated to be infirm. After considering the submissions of the assessee, the Commissioner has found it fit to set-aside the assessment order qua the action of the Assessing Officer in allowing deduction to the assessee under Section 80-IB(10) of the Act. The aforesaid action of the Commissioner is in challenge before us, and the assessee has filed a voluminous Paper Book wherein is placed copies of statement of facts, submissions made before the Commissioner and also to the Assessing Officer during the assessment proceedings under Section 143(3) of the Act, and other relevant documents. In the subsequent paras, we shall refer to the material in the Paper Book, to which our attention was drawn in the course of hearing. 3 ITA No.619/PN/2011
Nyati Builders Pvt. Ltd.
A.Y. 2006-07
4. On the other hand, the learned CIT(DR) appearing for the Revenue has primarily reiterated the reasoning advanced by the Commissioner in support of the case of the Revenue. We have heard the rival submissions and perused the relevant record.
5. The first and foremost point raised by the Commissioner to establish that the assessment order dated 21.04.2008 (supra) was erroneous within the meaning of Section 263 of the Act is with regard to assessee's eligibility for deduction under Section 80-IB(10) of the Act in relation 'Nyati Meadows' projects. As per the Commissioner, the assessee was not entitled to the deduction under Section 80-IB(10) in relation to 'Nyati Meadows' projects in view of the violation of the provisions of Section 80-IB (2) of the Act. According to the Commissioner, assessee is to be understood as an 'industrial undertaking', which was required to fulfill the conditions mentioned in clauses
(i) to (iv) of Sub-section (2) of Section 80-IB of the Act. In particular, the Commissioner has emphasized that clause (i) of Sub-section (2) of Section 80-IB of the Act disentitles the assessee for the claim of deduction under Section 80-IB(10) of the Act in relation to the 'Nyati Meadows' project. Clause
(i) of Sub-section (2) of Section 80-IB of the Act requires that an 'industrial undertaking' should not have been formed by splitting up or re-construction of a business already in existence. According to the Commissioner, the project 'Nyati Meadows' undertaken at Survey Nos. 10/1 and 9/2, Wadgaon Sheri, Pune was earlier started by a partnership firm namely, M/s Oasis Developers constituted by three partners in 1998 and assessee company was admitted as a partner at a later stage that in January 2000. The said firm was subsequently dissolved in October, 2000 and all the assets and liabilities of the firm were taken over by the assessee company. The assessee company further acquired the adjoining plots of land and amalgamated the same and the amalgamated plot was subdivided into three plots namely, A, B & C. On this basis, the charge made by the Commissioner is that the 'industrial 4 ITA No.619/PN/2011 Nyati Builders Pvt. Ltd.
A.Y. 2006-07 undertaking'. i.e. 'Nyati Meadows' project was started by the splitting up/re- construction of a business already in existence namely, M/s Oasis Developers, which is violative of clause (i) of Sub-section (2) of Section 80-IB of the Act. As per the Commissioner, the aforesaid violation disentitles the assessee from the deduction under Section 80-IB(10) of the Act in relation to the 'Nyati Meadows', project.
6. The stand of the assessee before the Commissioner as well as before us is to the effect that neither in law and nor on facts the aforesaid stand of the Commissioner is justified to deny the claim of deduction under Section 80-IB(10) of the Act in relation to the 'Nyati Medows' project. As per the assessee, the view taken by the Commissioner that section 80-IB(2) of the Act applied to assessee claiming under Section 80-IB(10) of the Act in respect of housing project is untenable and in support of the said proposition reliance has been placed on the following decisions :- (i) Parth Construction vs. ITO (2008) 23 SOT 368 (Mumbai) and (ii) G.V. Corporation vs. ITO (2010) 38 SOT 174 (Mumbai). In the aforesaid cases, according to the learned counsel similar situation has been considered and it has been held that Section 80-IB(2) does not control Section 80-IB(10) of the Act which is in relation to housing projects. Apart therefrom it has also been argued that the construction of a building or of flats, etc. does not amount to 'manufacture' or 'production' as held by the Hon'ble Calcutta High Court in the case of CIT vs. Sunidhi Properties 230 ITR 157 (Cal) and therefore, the Section 80-IB(2) of the Act is inapplicable in situations involving Section 80-IB(10) of the Act.
7. On the other hand, the learned CIT(DR) appearing for the Revenue has pointed out that there is no specific exclusion in Section 80-IB(10) of the Act to say that the provisions of Sub-section (2) of Section 80-IB of the Act are not applicable and referred to the wording of Sub-section (2) of Section 80-IB of the Act to point out that the said section is made applicable only to the 5 ITA No.619/PN/2011 Nyati Builders Pvt. Ltd.
A.Y. 2006-07 'industrial undertaking' which fulfills the conditions prescribed thereunder, and in the present case the project 'Nyati Meadows' of the assessee does not comply with Section 80-IB(2)(i) of the Act.
8. We have carefully considered the rival submissions. On this aspect, in the case of Parth Construction (supra) the Mumbai Bench of the Tribunal came to a conclusion that the nature of deduction under Section 80-IB(10) of the Act is independent of the provisions of Sub-section (2) of Section 80-IB of the Act and the condition of the assessee company being an 'industrial undertaking' manufacturing or producing any article or thing is not applicable to the claim of deduction under Section 80-IB(10) of the Act, in case of an assessee, developing and building housing project subject to fulfillment of the conditions prescribed in Section 80-IB(10) of the Act. In-fact, it is seen that the decision of the Parth Construction (supra) was subsequently followed by another Mumbai Bench of the Tribunal in the case of Shreejee Ratna Corp. vs. ITO (ITA No. 3106/Mum./2007 dated 10.02.2009). In view of the aforesaid, it is, therefore, not possible to uphold the view taken by the Commissioner that an assessee claiming deduction under Sub-section (10) of Section 80-IB is also governed by Sub-section (2) of Section 80-IB of the Act. Even, otherwise, in our considered opinion, for claiming deduction under Section 80-IB(10) in relation to development of a housing project an assessee is not required to fulfill the conditions prescribed in Sub-section (2) of Section 80-IB of the Act. We say so for the reason that in the very scheme of Section 80-IB, the aforesaid proposition is evident. Section 80-IB has several sub-sections which specifically require the assessee claiming deduction thereunder that it should not be formed by re-construction or splitting up of existing business and in our considered opinion, if Sub-section (2) and the conditions mentioned therein are to govern an assessee claiming deduction under the other sub-sections, including Sub-section (10), then the legislature would not have provided specifically in some of the sub-sections that the business should not have 6 ITA No.619/PN/2011 Nyati Builders Pvt. Ltd.
A.Y. 2006-07 been formed by the splitting up or re-construction of an existing business or by the transfer on any building or machinery previously used for any purposes. A gainful reference in this regard can be made to Sub-sections (7), (7A) and (7B) which relate to deductions in the case of any hotel, multiplex theatre and convention centre respectively. Clause (c)(i), clause (c)(ii), clause (b)(i), clause
(b)(ii) and clause (b)(iii) of Sub-sections (7), (7A) and (7B) respectively contain conditions that the deduction is available in respect of hotel or multiplex theatre or convention centre respectively only if the business is not formed by splitting up or re-construction of a business already in existence, etc. We are only trying to emphasise that wherever the legislature deemed it fit, the conditions enumerated in Sub-section (2) of Section 80-IB has been specifically made applicable by providing the same in the relevant sub- sections of Section 80-IB of the Act and in the absence of such a mandate in Sub-section (10) of Section 80-IB, it cannot be understood that the conditions prescribed in Sub-section (2) of Section 80-IB are relevant to evaluate claim of an assessee for deduction under Section 80-IB(10) of the Act in relation to developing and building housing projects. In our considered opinion, the aforesaid point made out by the Commissioner is untenable and is hereby set- aside.
9. Apart from the legal position, the learned counsel also factually asserted that there was no splitting up or re-construction of business in the present case. In this context, the learned counsel pointed out that on the dissolution of the firm, assessee had taken over the assets and liabilities of the partnership firm, M/s Oasis Developers by way of a Dissolution deed dated 12.10.2000. The erstwhile partnership firm had merely entered into development agreement with various land owners and paid a fraction of the total consideration and it was only after the dissolution of the firm, assessee entered into supplementary agreements with the land owners on 19.10.2000, which were duly registered by paying requisite stamp duty. The land owners 7 ITA No.619/PN/2011 Nyati Builders Pvt. Ltd.
A.Y. 2006-07 also executed a registered power of attorney in favour of the assessee. The assessee made substantial payments as consideration to the said owners and undertook the entire obligations of developing and constructing the housing project. The assessee acquired further adjoining plots and amalgamated the same and there was further sub-division into smaller plots. The applications for layout sanction and building plan sanction was also done by the assessee through its Architect, Shri Shirish Dasnurkar. It has also been pointed out that the assessee obtained the first 'Commencement Certificates' from the Pune Municipal Corporation (PMC) in December, 2000 which was much after the dissolution of the firm and it was the assessee who employed Architects, and invested its capital for undertaking construction and development of the project. Factually, according to the learned counsel, assessee virtually undertook a project which was not in existence at the time of the erstwhile firm.
10. The learned CIT(DR) has not controverted factual matrix so brought out by the assessee, copies of the relevant material have also been placed on record. In the Paper Book filed, assessee has furnished the registered agreement with the land owners executed on 19.10.2000 at pages 180 to 202. Similarly, the details of payment made by the assessee to the land owners has also been placed in the Paper Book. The aforesaid, in our view, factually does not justify the assertion of the Commissioner that the undertaking of the assessee qua the 'Nyati Meadows' project was formed by splitting up or re-construction of a business already in existence by way of M/s Oasis Developers.
11. In the result, on the aspect of the violation of Section 80-IB(2) of the Act, in law and on facts also, we find no substance in the stand of the Commissioner which is hereby set-aside.
8 ITA No.619/PN/2011
Nyati Builders Pvt. Ltd.
A.Y. 2006-07
12. The second point made out by the Commissioner with regard to the project 'Nyati Meadows' that the 'Commencement Certificate' and 'Completion Certificate' issued by the PMC contained names of other persons and are not issued in the name of assessee company. On this basis, it is sought to be made out by the Commissioner that the project 'Nyati Meadows' cannot be said to be a project undertaken by the assessee and as per him, assessee is not entitled to deduction under Section 80-IB(10) of the Act on this score also.
13. On this aspect, the learned counsel for the assessee submitted that the stand of the Commissioner is untenable inasmuch as it is not at all necessary for an assessee to claim deduction under Section 80-IB(10) of the Act to be the owner of the land in question. In this connection, it has been asserted that the provisions of Section 80-IB(10) of the Act do not mandate that the 'Commencement Certificate' and the 'Completion Certificate' issued by the local authority should be in the name of the assessee claiming the deduction. In this regard, reliance has been placed on the following judgements : (i) CIT vs. Radhe Developers 204 Taxman 543 (Gujarat), (ii) Essem Capital Markets Limited vs. ITO ((Mum.), ITA No. 6814/Mum./2006 dated 25.02.2011, (iii) Amaltas Associates vs. ITO 142 TTJ 849 (Ahd.), and, (iv) KZK Developers vs. CIT 130 TTJ 157 (Cuttak).
14. On this aspect, the Hon'ble Gujarat High Court in the case of Radhe Developers (supra) was considering an assessee's claim for deduction under Section 80-IB(10) of the Act which was sought to be negated by the Revenue on the ground that assessee was not the owner of the land and approvals of the local authority as well as the permission to develop and commence construction were not in the name of the assessee. The Hon'ble High Court did not approve the objection of the Revenue and held that the assessee was eligible for benefit under Section 80-IB(10) of the Act even where the title of the lands had not passed on to the assessee or the development permissions 9 ITA No.619/PN/2011 Nyati Builders Pvt. Ltd.
A.Y. 2006-07 were obtained in the name of original land owners and not of the assessee. Similarly, the Mumbai Bench of the Tribunal in the case of Essem Capital Markets Limited (supra) noted that even where the title of the property was not in the name of the assessee and the commencement certificate was also in name of original owner, having regard to the business realities, the assessee cannot be deprived of deduction under Section 80-IB(10) of the Act inasmuch as it was the assessee who had actually developed and constructed the housing project.
15. In the present case, the learned counsel has taken us through the Paper Book wherein is placed the 'Commencement Certificate' and also the 'Completion Certificate' issued by the local authority mainly at pages 85 to 93 of the Paper Book. A perusal of the aforesaid shows that the approvals/completion certificates are in the name of Managing Director of the assessee company or its appointed Architect, Shri Shirish Dasnurkar or the name of the persons being original land owners. At page 203 of the Paper Book, assessee has furnished a certificate by the Architect, Shri Shirish Dasnurkar certifying that he was appointed by the assessee company to submit building plan, layout plan and to obtain permission to construct and also to obtain commencement and completion certificates from the PMC. The permissions accorded by PMC contain the name of the Architect appointed on behalf of the assessee and in any case there is no dispute to the fact that the permissions are in relation to the development of land on which assessee has undertaken the impugned housing project. Assessee acquired the development rights of land, developed housing project consisting of residential flats, incurred expenses, undertook all risks involved and received the sale consideration from the buyers after completion of the housing project in its own rights, therefore deduction under Section 80-IB(10) of the Act could not be denied on the ground that the permissions and/or approvals by the local authority were in the name of either the original land owners or the name of 10 ITA No.619/PN/2011 Nyati Builders Pvt. Ltd.
A.Y. 2006-07 the Architect. In-fact, it is noticed that the some of the approvals are also in the name of Mr. Nitin Nyati, who is the Managing Director of the assessee company and the Architect, Shri Shirish Dasnurkar, who have acted on behalf of the assessee company. Moreover, the infirmity sought to be pointed out by the Commissioner is not at all mandated in Section 80-IB(10) of the Act and therefore, in our considered opinion, the charge made by the Commissioner is without merit.
16. Therefore, in so far as the stand of the Commissioner that the assessee's 'Nyati Meadows' project is not entitled for deduction under Section 80-IB(10) of the Act is concerned, the same is hereby held to be without merit having regard to the aforesaid discussion.
17. Further as per the Commissioner, the quantification of deduction under Section 80-IB(10) of the Act made in the assessment order dated 21.04.2008 (supra) was erroneous and prejudicial to the interest of the Revenue within the meaning of Section 263 of the Act. As per the Commissioner while arriving at the eligible profits under Section 80-IB(10) of the Act for the two projects in question, the manner in which the total administrative indirect expenses of Rs.2,30,25,230/- has been allocated has resulted in excess claim of deduction under Section 80-IB(10) of the Act. During the year under consideration, assessee incurred total indirect administrative expenses to the tune of Rs.2,30,25,230/- and Rs.23,20,253/- each was allocated to the two projects namely, 'Nyati Meadows' & 'Nyati Garden' to calculate their respective profits eligible for benefit of Section 80-IB(10) of the Act. The assessee contended that there was total 14 projects on hand, out of which the administrative expenses have been allocated on 10 projects at 10% to each project instead of 14 projects. The assessee explained that the four projects were such, which were either completed before the commencement of the year or the same were not actively pursued during the year, and therefore, they were not 11 ITA No.619/PN/2011 Nyati Builders Pvt. Ltd.
A.Y. 2006-07 considered for allocation of the indirect administrative expenses. Therefore, 10% of the expenses on each of the 10 projects was allocated to compute the profitability of respective projects The Commissioner in his order has directed the Assessing Officer to allocate the indirect expenses in the ratio of the sales of the projects and thereby re-compute the deduction under Section 80-IB(10) on the profits of the two projects namely 'Nyati Meadows' & 'Nyati Garden'.
18. On this aspect, the learned counsel for the assessee submitted that the assessee had explained before the Assessing Officer the manner of allocation of indirect expenses, and a copy of its submissions is placed at pages 71 to 78 of the Paper Book. The learned counsel also explained that the issue raised by the Commissioner was a subjective matter and even in the course of the proceedings before the Commissioner, assessee had made three alternative workings for allocation of indirect expenses to the two projects. The alternative
(a) was on the basis of total direct expenses incurred on various projects; alternative (b) was on the basis of receipt against each project; and, alternative (c) was on the basis of sale effected by respective projects. The learned counsel pointed out that while as far as alternatives (a) & (b) are concerned, the expenses allocable to the two projects in question were coming lower than the amounts allocated in the assessment order, whereas on the basis of alternative (c) the administrative expenses allocable would work out to be higher, which would result in reduced deduction under Section 80-IB(10) of Rs. 1,47,361/- only. On this basis it is sought to be made out that there is no error in the order of the Assessing Officer who has approved the allocation of expenses made by the assessee after due application of mind.
19. On the other hand, the learned CIT(DR) has contended that the Commissioner has noticed that allocation of administrative expenditure was made by the assessee on an adhoc basis and therefore the direction of the 12 ITA No.619/PN/2011 Nyati Builders Pvt. Ltd.
A.Y. 2006-07 Commissioner to allocate the same on the basis of respective sales effected by the project is justified.
20. We have carefully considered the rival submissions. At the outset, we may notice that Section 263 of the Act does not envisage a situation where the Commissioner substitutes his own judgement in place of that of the Assessing Officer without establishing that the decision of the Assessing Officer was erroneous in law. In so far as the present issue relating to the allocation of indirect expenditure to Section 80-IB(10) eligible projects is concerned, there is no hard and fast rule prescribed for the same. The assessee brought to the notice of the Assessing Officer, as is revealed from the written submissions addressed to the Assessing Officer placed at pages 71 to 78 of the Paper Book, that there were 14 projects in hand out of which 10 projects were actively pursued during the year and only 2 projects were eligible for 80-IB(10) benefit. The assessee allocated the indirect administrative expenses equally i.e. 10% on the 10 actively pursued projects whether or not any sales were effected by the projects. The Commissioner has sought to differ with the aforesaid allocation and instead according to him the indirect expenses should be allocated on the basis of sales effected by the respective projects. The learned counsel, at the time of hearing referred to page 305 of the Paper Book wherein is placed balance-sheet for preceding year 31.03.2001 where in relation to a project in which no sale was effected, the assessee allocated a portion of indirect expenditure, based on the same methodology. The aforesaid aspect has been sought to be pointed out to justify that assessee has carried out the above said allocation uniformly and not an adhoc basis. Without going into the merits of the rival basis of allocation canvassed, in our view, what the Commissioner has attempted is only substituting his own judgement in place of that of the Assessing Officer, without establishing any error. We say so for the reason that while finalizing the assessment, Assessing Officer examined the issue and applied his mind to the manner of 13 ITA No.619/PN/2011 Nyati Builders Pvt. Ltd.
A.Y. 2006-07 allocation of indirect expenses. Of course, such a discussion is not emerging in the assessment order but the details submitted by the assessee to the Assessing Officer placed at pages 71 to 78 of the Paper Book were before the Assessing Officer and seek to justify the manner of allocation. Be that as it may, merely because the Commissioner devised an approach which would result in a higher assessment of income, is not enough to justify invoking of Section 263 of the Act, unless it is pointed out that there was an error within the meaning of Section 263 of the Act either in law or on facts in the assessment order. We are presently concerned with the issue which inherently involves a subjective assessment, i.e. allocation of indirect expenditure. Therefore, unless the subjectivity emerging from the assessment order is found to be grossly unfair or bereft of reasonableness, it is not open for the Commissioner to invoke Section 263 of the Act. In coming to the aforesaid conclusion, we are guided by the parity of reasoning laid down by the Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom.). Therefore, on this aspect also we are not in an agreement with the Commissioner for invoking Section 263 of the Act and the assessee has to succeed.
21. The last issue raised by the Commissioner is with regard to the allocation of interest expenditure and depreciation on general and common assets for allocation to the respective projects in order to quantify the profits eligible for the purposes of Section 80-IB(10) of the Act. On this aspect, the first point made out by the assessee was that the issue of depreciation on general assets installed in the administrative offices, was not contained in the show-cause notice issued under Section 263 of the Act and therefore, the Commissioner has proceeded to adjudicate the issue without jurisdiction. At the time of hearing, the learned counsel fairly conceded that though the same was not raised in the show-cause notice issued originally, however in the course of the proceedings, the Commissioner confronted the assessee on this 14 ITA No.619/PN/2011 Nyati Builders Pvt. Ltd.
A.Y. 2006-07 aspect and also allowed opportunity to the assessee to make out its case. Considering the aforesaid, we find no error on the part of the Commissioner in examining the same in the impugned proceedings.
22. With regard to the interest expenditure, the Commissioner has directed the Assessing Officer to allocate the interest expenditure on the basis of the loans directly utilized for the respective projects and for interest on other loans raised for general purposes, the Commissioner directed that the interest thereof be allocated amongst the various projects on the basis of sales.
23. In our considered opinion, after considering the rival stands, the directions of the Commissioner require modification. No doubt the Commissioner is correct in directing the Assessing Officer to examine the eligible profits for 80-IB(10) projects by considering the relatable interest expenditure. The assessee has incurred interest expenditure to the tune of Rs.1,04,73,519/- and no expenditure was allocated to the 80-IB(10) projects. The case of the assessee is that it had also received interest income to the tune of Rs.1,25,30,316/- and therefore no expenditure remained to be allocated to the respective projects. The assessee also pointed out before the Commissioner that there was no specific loan for the 80-IB(10) projects and also the fact that it had received advances from customers in relation to the sale of flats in 80-IB(10) projects which was more that the amount invested in work-in-progress of the respective projects, and thus no loan funds were used in such projects. The Commissioner, on the other hand, observed that the interest income earned by the assessee was out of surplus funds, which was assessable under the head 'other sources' and it had no link to the project undertaken and thus such interest income would not off-set the expenditure by way of interest on loans.
15 ITA No.619/PN/2011
Nyati Builders Pvt. Ltd.
A.Y. 2006-07
24. The plea of the assessee, in our view, deserves to be examined as to whether or not any interest expenditure has been incurred in relation to the 80-IB(10) projects. Even in the course of hearing before us, the learned counsel submitted to the proposition that interest expenditure, if allocable, should be allocated on the basis of actual utilization of the corresponding loans and not on the basis of the sales effected by the respective projects as directed by the Commissioner. On the aforesaid aspect we are in agreement with the assessee and accordingly modify the directions of the Commissioner. The Assessing Officer shall examine the utilization of the interest bearing loans raised and on that basis allocate the interest expenditure to the 80-IB(10) projects, if any, of the amount of loan that has been utilized for such projects. The assessee shall also be allowed an opportunity to demonstrate as to whether or not the interest income earned to the tune of Rs.1,25,30,316/- has a nexus with the interest expenditure claimed of Rs. 1,04,75,190/-. Therefore, while upholding the action of the Commissioner in principle, we direct the Assessing Officer to carry out the verification exercise as directed above and recompute the profits of projects 'Nyati Meadows' & 'Nyati Garden' for the purposes of Section 80-IB(10) of the Act, if warranted on facts.
25. Lastly, with regard to the depreciation on vehicles, furniture & fixture and office equipments installed in the administrative office, learned counsel fairly submitted that such depreciation was not allocated to the 80-IB(10) projects. The same, in our view, deserves to be allocated in order to compute the eligible profits for the 80-IB(10) projects. On this aspect, the order of the Commissioner is upheld.
26. In the result, the order of the Commissioner is modified as above and assessee partly succeeds.
16 ITA No.619/PN/2011
Nyati Builders Pvt. Ltd.
A.Y. 2006-07
27. Resultantly, appeal of the assessee is partly allowed.
Order pronounced in the open Court on 25 th June, 2013.
Sd/- Sd/-
(R.S. PADVEKAR) (G.S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, Dated: 25 th June, 2013
Sujeet
Copy of the order is forwarded to: -
1) The Assessee;
2) The Department;
3) The CIT-II, Pune;
4) The DR, "A" Bench, I.T.A.T., Pune;
5) Guard File.
By Order
//True Copy//
Sr. Private Secretary
I.T.A.T., Pune