Income Tax Appellate Tribunal - Bangalore
M/S Pooja Reality Pvt. Ltd.,, vs Assessee on 29 July, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH : BANGALORE
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER
AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER
ITA No.137/Bang/2013
Assessment year : 2009-10
M/s. Pooja Realtors Pvt. Ltd., Vs. The Income Tax Officer,
# 212, Richmond Towers, Ward 12(1),
25, Richmond Road, Bangalore.
Bangalore - 560 025.
PAN: AABCP 2799P
APPELLANT RESPONDENT
Appellant by : Shri S. Venkatesan, CA
Respondent by : Shri K.R. Narayana, Jt. CIT(DR)
Date of hearing : 30.05.2016
Date of Pronouncement : 29.07.2016
ORDER
Per Sunil Kumar Yadav, Judicial Member
This is an appeal preferred by the assessee against the order of the CIT(Appeals)-III, Bangalore dated 19.10.2012 for the assessment year 2009-10 inter alia on the following grounds:-
"1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.ITA No.137/Bang/2013 Page 2 of 8
2. The learned CIT[A] is not justified in confirming the action of the learned A.O. in not granting deduction u/s.80IB of the Act, on the ground that the return of income was not filed within the due date for filing the return u/s.139[1] of the Act, without appreciating the fact there was no income liable to tax warranting for filing the return u/s.139[1] of the Act and the return was filed validly u/s.139[4] of the Act and therefore, the due date should be taken as the due date to file the valid return u/s.139[4] of the Act and there is no justification for invoking the provisions of Section 80AC of the Act, to deny the legitimate claim u/s.80IB of the Act.
3. Without prejudice to the above, the provisions of Section 80AC of the Act are only directory and not mandatory and should be construed so as to advance the intention of the legislature to grant the incentive u/s.80IB of the Act and therefore, Section 80IB of the Act should have been liberally construed so long the return is filed validly u/s.139[4] of the Act and Section 80AC of the Act should not be pressed to set at naught the intention of legislature in granting the exemption.
4. Without prejudice to the above, the appellant's income is from a joint venture and such income is liable for assessment in the hands of the appellant and another company who jointly developed the venture and such enterprise or venture consisting of appellant or other alone is liable for assessment either as AOP or BOI having regard to the ratio of the decision of the Hon'ble Supreme Court in the case of MEERA & CO., reported in 224 ITR 635 and such income is chargeable in its hands and not in the hands of the appellant, such share of income attributable to appellant after the grant of deduction u/s.80OB of the Act, is entitled to rebate in view of provisions to section 86 of the Act and at any rate there is no liability to tax.
5. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 234-A, 234-B and 234-C of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled.
6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant ITA No.137/Bang/2013 Page 3 of 8 may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs."
2. During the course of hearing, the ld. counsel for the assessee has moved an application with a request for admission of the following additional ground:-
"1. The authorities below have erred in assessing the income from the joint development under the agreement dated 18/03/2004 for the assessment year under appeal, even though the income from joint development agreement does not relate to the previous year relevant to the assessment year under appeal having regard to the ratio of the decision of the Hon'ble Karnataka High Court in the case of Dr. T.K.Dayalu reported in 60 DTR 403, which was noticed by the Hon'ble CIT [Appeals]."
3. The ld. counsel for the assessee submitted that the authorities below have erred in assessing income from joint development agreement dated 18.3.2014 for the assessment year under appeal, even though the income from joint development agreement does not relate to previous year relevant to assessment year under appeal, having regard to the ratio of the decision of the Hon'ble Karnataka High Court in the case of Dr. T.K.Dayalu reported in 60 DTR 403, which was noticed by the CIT [Appeals].
4. The request for admission of additional grounds is strongly opposed by the ld. DR with the submission that the appellant right from the stage of filing of the return of income till the appeal before the CIT(Appeals), had admitted that it is involved in the business of development of housing ITA No.137/Bang/2013 Page 4 of 8 projects, accordingly it has claimed deduction u/s. 80IB(10) of the Act. But now through this additional ground, the assessee has tried to claim that the income is assessable as capital gain, not as business income, for which detailed investigation is called for and such type of additional ground cannot be admitted in the light of the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT, 229 ITR 383 (SC).
5. It was further contended that the assessee is developing residential housing project and claimed deduction u/s. 80IB(10). The AO disallowed deduction u/s. 80IB(10) after recording the fact that the assessee has not filed return of income within the time laid down u/s. 139(1) of the Act, following the provisions of section 80AC. Now the assessee has sought relief on the ground that the provisions of section 80AC are only directory and not mandatory. Therefore, the return filed u/s. 139(4) is in time and assessee is entitled to deduction u/s. 80IB(10) of the Act.
6. The ld. DR submitted that this issue is squarely covered by the order of the Tribunal in the case of ITO v. Dr. K. Balaraman in ITA No.1689/Bang/2013 dated 17.10.2014 and also the order of the Rajkot Special Bench in the case of Saffire Garments v. ITO, 140 ITD 6 (Rajkot)(SB) as well as the order of the Bangalore Bench of the Tribunal in the case of Avasarala Technologies Ltd. v. DCIT, ITA No.951 to 954/Bng/2011 dated 8.3.2013.
ITA No.137/Bang/2013Page 5 of 8
7. The contention of the revenue was strongly refuted by the ld. Counsel for the assessee with the submission that assessee has been contending that he has entered into joint development agreement since beginning, but it was not taken into account by the AO. Since all evidences are available in this regard, the additional ground should be admitted and adjudicated at the threshold.
8. So far as the provisions of section 80AC are concerned, the ld. counsel for the assessee submitted that this provision is directory and not mandatory and if the assessee has filed return u/s. 139(4) claiming deduction u/s. 80IB of the act, the deduction should be allowed, if the assessee meets the other requirements of law.
9. Having carefully examined the orders of authorities below and documents placed on record, we find that the assessee has filed return of income claiming deduction u/s. 80IB of the Act which was disallowed by the AO on the ground that the return was not filed before the due date prescribed u/s. 139(1) of the Act in the light of provisions of section 80AC of the Act.
10. It is also evident from the assessment order that the assessee is engaged in the business of real estate developers and builders and it has claimed deduction u/s. 80IB of the Act and deduction u/s. 80IB of the Act can only be claimed, when the assessee offers its income on the construction of the project. But it was disallowed by the AO and before the ITA No.137/Bang/2013 Page 6 of 8 CIT(Appeals) the assessee has reiterated its contentions. Nowhere the assessee has made out a case that it entered into joint development agreement with the third party and it has earned capital gain. Therefore, the additional ground raised by the assessee cannot be admitted at this stage as it requires verification of facts. Moreover, through this additional ground the assessee has taken a stand contrary to the stand earlier taken.
11. So far as the appeal on merits is concerned, we find that the assessee has claimed deduction u/s. 80IB of the Act, but it was denied on the ground that the return was not filed before the due date prescribed u/s 139(1) of the Act. The provisions of section 80AC are very clear that if the return is not filed before the due date specified under sub-section (1) of section 139 of the Act, no deduction u/s. 80IB can be allowed to the assessee. The contention of the assessee that the provisions of section 80AC is directory and not mandatory was examined by the Tribunal in the case of ITO v. Dr. K. Balaraman (supra) and the Tribunal has conclusively held that the provisions of section 80AC were mandatory and not only directory. The relevant observations of the Tribunal are extracted hereunder for the sake of reference:-
"06. The Special Bench examined the whole scheme of the Act. The Special Bench found that One consequence of failure to file return of income on or before the due date u/s.139(1) of the Act was levy of interest u/s.234A of the Act as per which, the assessee is liable to pay interest on the tax payable by him after reducing advance tax and TDS/TCS if any paid by him apart from some other reductions and such interest is payable from the ITA No.137/Bang/2013 Page 7 of 8 date immediately following the due date for filing return of income and is payable up to the date on which such return of income was furnished by the assessee. Payment of interest u/s.234A of the Act was a consequence for failure to file return of before the due date u/s. 139(1) and the same is mandatory. The Special Bench held that the provisions of the proviso to Section 10A(1A) is nothing but a consequence of failure of the assessee to file the return of income within the due date prescribed u/s 139(1) of the Income tax Act, 1961. For such a failure of the assessee to file his return of income within the due date prescribed u/s 139(1) of the Income tax Act, 1961, this is also only of the mandatory consequence. The Special Bench accordingly held that provisions of the proviso to section 10A(lA) are mandatory and not directory, thus deduction u/s 10A(lA) could not be allowed to an assessee who fails to furnish a return of income on or before the due date specified u/s 139(1). The decisions rendered by the division bench of Tribunal on which the CIT(A) placed reliance are no longer good law in view of the later decision of the Special Bench referred to above.
07. The learned DR also brought to our notice the decision rendered by the ITAT Bangalore Bench in the case of Avasarala Technologies Ltd. Vs. DCIT ITA No.951 to 954/Bng/2011 order dated 8.3.2013, wherein in the context of deduction u/s.80-IB(10) of the Act, the decision of the Special Bench in the case of Saffire Garment (supra) was followed and it was held that the provisions of Sec.80AC of the Act were mandatory and not directory, thus deduction u/s 80-IB(10) of the Act could not be allowed to an assessee who fails to furnish a return of income on or before the due date specified u/s 139(1).
08. The ld. counsel for the Assessee however reiterated his submission that provisions of Sec.80AC have to be construed as directory and that the provisions of Sec.80IB(10) of the Act are beneficial provisions and need to be interpreted liberally to further the object of the section.
09. We are of the view that in the light of the aforesaid decision of the Special Bench in the case of Saffire Garments (supra) and Avasarala Technologies Ltd.(supra), the plea raised on behalf of the Assessee cannot be accepted. Accordingly, we hold that provisions of Sec.80AC of the Act were mandatory and not directory, thus deduction U/S 80-IB(10) of the Act could not ITA No.137/Bang/2013 Page 8 of 8 be allowed to an assessee who fails to furnish a return of income on or before the due date specified u/s 139(1) of the Act. We therefore reverse the order of CIT(A) and restore the order of the AO. The appeal of the Revenue is accordingly allowed."
12. Since the impugned issue is covered by the aforesaid judgments, the deduction u/s. 80IB of the Act cannot be allowed as the claim of the assessee is hit by the provisions of section 80AC of the Act. Therefore, we confirm the order of the CIT(Appeals) in this regard.
13. In the result, the appeal of the assessee is dismissed. Pronounced in the open court on this 29th day of July, 2016.
Sd/- Sd/-
( A.K. GARODIA ) (SUNIL KUMAR YADAV )
Accountant Member Judicial Member
Bangalore,
Dated, the 29th July, 2016.
/D S/
Copy to:
1. Appellant 2. Respondent 3. CIT 4. CIT(A)
5. DR, ITAT, Bangalore. 6. Guard file
By order
Assistant Registrar,
ITAT, Bangalore.