Income Tax Appellate Tribunal - Pune
Pharande Developers, Pune vs Assessee on 20 June, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES "B", PUNE
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA No.715/PN/2009
(Assessment Year : 2005-06)
Pharande Developers
98/2, Guruvihar,
Pune Nashik Road, Bhosari,
Pune - 411 039
PAN : AAFFP3023R .... Appellant
Vs.
Income Tax Officer
Ward 8 (3), Akurdi .... Respondent
ITA No.175/PN/2011
(Assessment Year : 2006-07)
M/s Pharande Developers
98/2, Guruvihar,
Pune Nashik Road, Bhosari,
Pune - 411 039
PAN : AAFFP3023R .... Appellant
Vs.
Income Tax Officer
Ward 8 (1), Pune .... Respondent
Appellant by : Mr. Sunil Ganoo,
Mr. S.C. Bhatia &
Mr. Uday Bhatia
Respondent by : Mr. Santosh Kumar
Date of hearing : 20-06-2013
Date of pronouncement : 25-06-2013
ORDER
PER G. S. PANNU, AM
The captioned two appeals relate to the same assessee and involve a common question, therefore they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. 2 ITA No.715/PN/2009 ITA No.175/PN/2011
2. At the outset, learned counsel for the assessee submitted that the appeal filed by the assessee for assessment year 2006-07 vide ITA No.175/PN/2011 was delayed, the delay be condoned as the same was unintended and there was no intention to willfully overlook the prescribed provisions of law. In this connection, the learned counsel placed on record an affidavit dated 17.06.2013 executed by Remesh Babu Salian the then partner of the assessee firm wherein the reasons for the delay have been averred. In particular the following portion of the affidavit is relevant :-
"3. That in the month of September 2010, we decided to shift the accounts office of the said partnership firm to our registered office i.e. 98/2 Guruvihar, Tarangan Apartments, Bhosari, Pune 411 039.
4. That in the last week of September 2010 or thereabout, our tax consultant handed over to me the appellate order for the A.Y. 2006-07 passed by the learned CIT(A)-V, Pune in the case of our said partnership firm and advised that the further appeal was to be filed before the Income Tax Appellate Tribunal. However during that period since the shifting work of our accounts office was in progress, through oversight mistake and inadvertence, the Income Tax File of our said partnership firm was misplaced by me. Being not much educated, I did not realize the importance of the said file and unfortunately I completely failed to remember that the appeal was to be filed before the Income Tax Appellate Tribunal, Pune.
5. That on 4th February 2011, when our firm received a show cause notice from the office of the learned Income Tax Officer, Ward 8 (3) Pune regarding penalty proceedings u/s 271(1)(c) of the I.T. Act 1961 for the A.Y. 2006-07, we the partners were appraised by our tax consultants that the appeal against the appellate order for the A.Y. 2006-07 passed by the learned CIT(A)-V, Pune in the case of our said partnership firm has remained to be filed due to my fault.
6. I realized my serious mistake and immediately our partnership firm filed an appeal before the Hon. Income Tax Appellate Tribunal, Pune on 09.02.2011 with an application for condonation of delay of about 114 days in filing the said appeal.
7. Since due to my serious lapse and mistake our partnerships firm had been put to serious inconvenience and prejudice, I was feeling ashamed of myself and had immense guilty feeling as a result of which I voluntarily retired from the said partnership firm w.e.f. 01.04.2011.
8. That this affidavit is executed for filing the same before the Hon. Income Tax Appellate Tribunal, Pune in the matter of condonation of delay in filing the appeal for the A.Y. 2006-07. "
3. The learned counsel explained that it was for mere inadvertence, this appeal could not be filed in time and the primary reason for the same was the shifting of the office from one place to another during the relevant period. Nevertheless, the entire circumstances have been explained by the partner in 3 ITA No.715/PN/2009 ITA No.175/PN/2011 its affidavit and as per the learned counsel having regard to the judgement of the Hon'ble Supreme Court in the case of Collector of Land Acquisition vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC) the delay be condoned and the matter be adjudicated on merits.
4. On the other hand, the learned Departmental Representative appearing for the Revenue has submitted that it is a case of negligence on the part of the assessee and it is also not a case where the reasons for the delay can be said to be beyond control of the assessee. Therefore, according to him, assessee does not have sufficient cause for not filing the appeal in time before the Tribunal and the delay be not condoned.
5. We have carefully considered the rival submissions. The Hon'ble Supreme Court in the case of Mst. Katiji & Others (supra) had explained, in the context of the expression 'sufficient cause' that it refers to enabling the Courts to apply the law in a meaningful manner which serves the ends of justice. Pertinently, as per the Hon'ble Supreme Court, in situations where substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred and a liberal approach in such situations is also justified. In this background, we may now examine the present petition of the assessee for condonation of delay in filing of the appeal before the Tribunal. The delay in filing of the appeal is of 114 days. The assessee explained that it was in the month of September, 2010 that the order of the CIT(A) was handed over to it by the tax consultant and in the same month assessee also decided to shift its accounts office to another premises. Due to the shifting work of the accounts office and oversight by the concerned partner, it appears that the assessee could not file its appeal in time. It was only in February 2011 when assessee received a show-cause notice from the Assessing Officer regarding the penalty proceedings, the non-filing of appeal came to light and it is submitted that thereafter the appeal was immediately filed before the Tribunal on 09.02.2011. The concerned partner has also 4 ITA No.715/PN/2009 ITA No.175/PN/2011 averred the same on an affidavit. In our considered opinion, the facts of the case do not suggest that there was any mala-fide intention or that the reasons explained are only a device to cover any ulterior purpose. It may also be appreciated that there is no material to say that the reasons are lacking in bona-fide and in-fact it appears to be a bona-fide mistake or an inadvertence in not filing the appeal within the period of limitation. Accordingly, in the interest of justice, we condone the delay of 114 days in filing of the present appeal.
6. Now, we may take-up the two substantive disputes raised in the captioned appeals. In both the appeals, the primarily issue relates to the deduction claimed by the assessee under Section 80-IB(10) of the Act which has been denied by the income-tax authorities. In order to appreciate the controversy and the factual aspects, we may take-up for discussion, the appeal of the assessee in ITA No.715/PN/2009 for assessment year 2005-06. The appellant-assessee is firm engaged in the business of development of land, construction of building and sale thereof. For the assessment year 2005-06, assessee claimed deduction under Section 80-IB(10) of the Act amounting to Rs.65,26,760/- in relation to the profits derived from the development and construction of housing projects. The assessee had undertaken development and construction of two housing projects namely,
(i) 'Lakshdweep' and (ii) 'Samarth Nagari'. The Assessing Officer denied the benefit of deduction under Section 80-IB(10) of the Act in relation to the profits derived from both the projects and the same has since been upheld by the CIT(A) also. The plea of the assessee is that so far as the 'Lakshdweep' project is concerned the income-tax authorities have erred in rejecting the entire claim merely because two units exceeded the built-up area prescribed in clause (c) of Section 80-IB(10) of the Act. Even with regard to the 'Samarth Nagari' project it is submitted that the income-tax authorities have erred in holding that assessee did not comply with the condition prescribed in clause
(c) of Section 80-IB(10) of the Act having regard to the facts and 5 ITA No.715/PN/2009 ITA No.175/PN/2011 circumstances of the case. In order to appreciate the rival stands the following discussion is relevant. First, we take-up the claim of the assessee for deduction under Section 80-IB(10) of the Act with respect to the 'Lakshdweep' project. The housing project undertaken by the assessee was approved by the local authority on 23.10.2003. The claim of the Assessing Officer is that assessee sold two neighboring flats (i.e. Bunglow Nos. G1 & G2) to one family i.e. one each in the name of both the spouses. The Assessing Officer found that the two units i.e. Bunglow Nos. G1 & G2 individually admeasured 1286 sq.ft. and 508 sq.ft. respectively, and that the two were amalgamated into one Bunglow used by one family. Thus, the Assessing Officer concluded that there was only one Bunglow admeasuring 1794 sq.ft. i.e. 1286 sq.ft. + 508 sq.ft..
The Assessing Officer also noted that there was a projection of 116 sq.ft. in Bunglow G1 and 655 sq.ft. projection in Bunglow G2 and if the aforesaid areas were considered, the total built-up area of the amalgamated Bunglow aggregated to 1975 sq.ft.
7. The Assessing Officer noted that in terms of clause (c) of Section 80-IB(10) of the Act the built-up area of each residential unit in the cities other then Delhi and Mumbai is not to exceed 1500 sq.ft. in order to be eligible for benefit of Section 80-IB(10) of the Act. Since the built-up area of the amalgamated Bunglow exceeded 1500 sq.ft., it was violative of clause (c) of Section 80-IB(10) of the Act and accordingly the deduction under Section 80-IB(10) of the Act of the entire project was disallowed. The CIT(A) has also affirmed the stand of the Assessing Officer.
8. Before us, learned counsel for the assessee submitted that the Bunglow G1 & G2 were amalgamated into one Bunglow not by the assessee but by the customer. However, he fairly conceded that there was no evidence to substantiate the aforesaid position and therefore it may be taken that the amalgamated Bunglow namely G1 & G2 consisted of built-up are of 1794 sq.ft., which was in excess of the limit prescribed in clause (c) of Section 6 ITA No.715/PN/2009 ITA No.175/PN/2011 80-IB(10) of the Act. However, according to the learned counsel, the aforesaid violation in the built-up area of the amalgamated Bunglow G1 & G2 would not lead to wholesome denial of deduction under Section 80-IB(10) of the Act with respect to the 'Lakshdweep' project. It was pointed out that in such a situation deduction under Section 80-IB(10) of the Act be denied only with respect to the profits attributable to the units not complying with the condition contained in Section 80-IB(10)(c) of the Act and for the balance eligible units contained in the project, the deduction should be allowed. In other words, as per the assessee the deduction should be allowed in proportion to the eligible units contained in the project. In support of the aforesaid, reliance has been placed on the decision of the Pune Bench of the Tribunal in the case of D.S. Kulkarni Developers Ltd. vs. ACIT in ITA Nos. 1428 & 1429/PN/2008 dated 08.08.2012 and also the subsequent judgement of the Hon'ble Madras High Court in the case of Viswas Promoters (P) Ltd. (2013) 29 taxmann.com 19 (Madras).
9. On the other hand, the learned Departmental Representative has submitted that even if a single residential unit in a project violated the limit of built-up area prescribed in clause (c) of Section 80-IB(10) of the Act, the entire project becomes ineligible for deduction under Section 80-IB(10) of the Act.
10. On this aspect, we have considered the plea of the assessee in the light of the precedents. A similar situation has been considered by this Bench in the case of D.S. Kulkarni Developers Ltd. (supra) wherein the following discussion is relevant :-
"20. In this background, the alternative plea of the assessee springs up. The plea is that the deduction under Section 80-IB(10) be denied only with respect to the units which do not conform to the condition contained in Section 80-IB(10)(c) and for the balance eligible residential units, the deduction should be allowed. The Revenue has opposed the said plea on the ground that the assessee is not entitled to a proportionate deduction under Section 80-IB(10) of the Act.
21. On this aspect, we find that the Mumbai Bench of the Tribunal in the case of M/s Ekta Housing Pvt. Ltd., ITA No.3649/Mum/2009 dated 20.05.2011 has upheld the plea of the assessee for a proportionate deduction under Section 80-IB(10) of the Act where some of the residential units in the 7 ITA No.715/PN/2009 ITA No.175/PN/2011 project violated the condition contained in Section 80-IB(10)(c) of the Act. The Mumbai Bench after noticing the precedents in the case of --
i) ITO vs. Air Developers, 25 DTR 287 (Nag.);
ii) DCIT vs. Brigade Enterprises Pvt. Ltd., 14 DTR 371 (Bang.);
iii) ACIT vs. Sheth Developers P. Ltd., 33 SOT 277 (Mum.);
iv) Bengal Ambuja Housing Development Ltd. vs. DCIT;
v) SJR Builders vs. ACIT, 3 ITR 569 (Mum.)
held that the assessee would not loose the exemption under Section 80-IB(10) in entirety where some of the residential units wings had a 'built-up area' in excess of the limit prescribed in clause (c) of Section 80-IB(10) but, it would be entitled to proportionate deduction under Section 80-IB(10) of the Act with regard to the profits earned on the eligible units. Particularly, the Tribunal also considered the decision of the Hon'ble Bombay High Court in the case of Brahma Associates (supra) and held that the same does not envisage denial of proportionate deduction in such circumstances. The relevant discussion, as contained in paragraphs 8 and 9 of the order of the Tribunal in the case of M/s Ekta Housing Pvt. Ltd. (supra) reads as under : -
"viii) We now examine the applicability of the decision of the Hon'ble Bombay High Court in Brahma Associates (supra) to the facts of this case. On a careful reading of this judgement, we find that nowhere it is stated that proportionate deduction should be allowed, in case certain residential units had built-up area in excess of prescribed limit of 1,000 sq.ft.. In fact, this issue was not before the Hon'ble Jurisdictional High Court. The questions before the Hon'ble Jurisdictional High Court were different and, hence the judgement cannot be said to be on this issue. The only issue before the High Court is when there is a commercial element in a residential project, will be assessee be denied the entire exemption. In this case, the Hon'ble High Court has observed that when the local authority approved a plan as a housing project or a residential cum commercial project, the assessee would be entitled to claim for deduction under Section 80-IB(10) even if the project had commercial element in excess of 10%. At paras 27 and 28, the Court observed as follows :-
"27. The question then to be considered is, whether the Special Bench of the Tribunal was justified in holding that the projects having commercial area upto 10% of the built-up area of the plot are eligible for deduction under Section 80- IB(10) on the entire project upto 01.04.2005. Once the basic argument of the revenue that the housing projects with commercial user are not entitled to Section 80-IB(10) deduction is rejected, then in the absence of any restriction imposed under the Act, it was not open to the Tribunal to hold that the projects approved by the local authorities having residential buildings with commercial user upto 10% of the plot area would alone be entitled to deduction under Section 80-IB(10). As noted earlier, restriction regarding commercial user has been imposed for the first time by introducing clause (d) to Section 80-IB(10) with effect from 01.04.2005. Therefore, it was not open to the Tribunal to hold that prior to 01.04.2005, projects having commercial user upto 10% of the plot area alone would be eligible for Section 80-IB(10) deduction.
28. In the present case, though the commercial user is more than 10% of the plot area, the Tribunal has allowed Section 80-IB(10) deduction in respect of 15 residential 8 ITA No.715/PN/2009 ITA No.175/PN/2011 buildings on the ground that the profits from these exclusively residential buildings could be determined on stand along basis. In our opinion, that would not be proper, because Section 80- IB(10) allows deduction to the entire project approved by the local authority and not to a part of the project. If the conditions set out in Section 80-IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to part of the project. In the present case, the commercial user is allowed in accordance with the DC Rules and hence the assessee was entitled to Section 80-IB(10) deduction on the entire project approved by the local authority. However, the assessee has not challenged the decision of the Tribunal in restricting the deduction to a part of the project. Therefore, while holding that in law, the assessee was entitled to section 80-IB(10) deduction on the profits of the entire project, in the facts of the present case, since the assessee has not challenged the decision of the Tribunal, we are not inclined to disturb the decision of the Tribunal in restricting the section 80-IB(10) deduction only in respect of the profits derived from 15 residential buildings."
ix) Thus, it could be seen that the Hon'ble High Court do not approve the findings of the Tribunal that a residential building with commercial user up to 10% of the plot area would be entitled to deduction under section 80-IB(10). The issue that, in case where certain residential units are of a built-up area in excess of the prescribed limit of 1,000 sq.ft. in residential project, this would result in the entire exemption being lost, or whether the assessee would be entitled to a proportionate deduction was not before the High Court. Thus, in our opinion, the decision of Hon'ble Jurisdictional High Court in the case of Brahma Associates (supra) does not come to the rescue of the Revenue."
22. Following the aforesaid precedent, we, therefore, hold that merely because the assessee has violated the condition under Section 80- IB(10)(c) in relation to the flats on the 11th floor, the deduction under Section 80-IB(10) cannot be denied in its entirety, but, the denial shall be limited to the profits in respect of the flats on the 11th floor alone. For the balance of the residential units, the plea of the assessee for deduction under Section 80- IB(10) of the Act is justified, and the assessee succeeds on this aspect."
11. Following the aforesaid precedent, we hold that merely because assessee violated the condition prescribed under Section 80-IB(10)(c) of the Act in relation to the amalgamated Bunglow G1 & G2, the deduction under Section 80-IB(10) of the Act cannot be denied in its entirety. In other words, the denial of deduction shall be limited to the profits in respect of the amalgamated Bunglow G1 & G2 alone. For balance of the residential units, which complied with the requirements of clause (c) of Section 80-IB(10) of the Act, assessee shall be eligible for deduction. The Hon'ble Madras High Court in the case of Arun Excello Foundations (P) Ltd. vs. CIT (2013) 29 9 ITA No.715/PN/2009 ITA No.175/PN/2011 taxmann.com 149 (Madras) considered an argument on behalf of the Revenue, similar to what has been argued before us, to the effect that in the absence of any contemplation under Section 80-IB(10) of the Act for proportionate relief on partial compliance, section cannot be interpreted to granted pro rata relief. The aforesaid argument of the Revenue has been negated by the Hon'ble Madras High Court and therefore the claim of the assessee for proportionate deduction under Section 80-IB(10) of the Act cannot be denied.
12. Thus, on the aforesaid aspect, assessee succeeds and we direct the Assessing Officer to re-compute the deduction under Section 80-IB(10) of the Act in relation to the 'Lakshdweep' project by limiting the denial only to the profits in respect of Bunglow G1 & G2. For balance of the residential units, assessee shall be allowed deduction under Section 80-IB(10) of the Act.
13. Now, we may take-up the claim of the assessee for deduction in respect of 'Samarth Nagari' project. The Assessing Officer has discussed the objections in para 5.2 of the assessment order. As per the discussion, it transpires that the built-up area of two units exceeded 1500 sq.ft. after including the areas of Terrace and Canopy. As per the assessee, the built-up area of the two units was 1455 and 1440 sq.ft. whereas as per the Assessing Officer, the projections by way of terrace and canopy were includable in the expression 'built-up area' and after including the same the built-up area came to 1687 and 1683 sq.ft. Accordingly, the project 'Samarth Nagari' was also held to be ineligible for the claim of deduction under Section 80-IB(10) of the Act, which has also been sustained by the CIT(A).
14. On the aforesaid aspect, the learned counsel submitted that the Assessing Officer as well as the CIT(A) have understood the expression 'built- up area' on the basis of the definition contained in Section 80-IB(14)(a) of the Act. Section 80-IB(14)(a) of the Act defines 'built-up area' to mean the inner 10 ITA No.715/PN/2009 ITA No.175/PN/2011 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. Learned counsel submitted that the aforesaid definition of 'built-up area' was inserted by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005. According to the assessee, the said definition has included the area covered by projections and balconies in the expression 'built-up area' but the same should be applicable to only such projects which have been approved on or after 01.04.2005 i.e. the date from which such amendment has been inserted by the Finance (No.2) Act, 2004. The 'Samarth Nagari' project of the assessee has been approved by the local authority on 20.11.2002 and therefore it is prior to the amendment inserted by the Finance (No.2) Act, 2004. According to the learned counsel, for the purpose of present claim the built-up area would not include the area of canopy and balcony projections. It is submitted that similar situation was considered by the Pune Bench of the Tribunal in the case of D.S. Kulkarni Developers Ltd. (supra).
15. On the other hand, the learned Departmental Representative appearing for the Revenue submitted that the definition of built-up area contained in Section 80-IB(14)(a) of the Act is to be understood as clarificatory in nature and is applicable from assessment year 2005-06 onwards irrespective of the date of approval of the concerned project.
16. We have carefully considered the rival submissions. The solitary objection of the Assessing Officer with regard to the 'Samarth Nagari' project is that some of the flats constructed by the assessee do not comply with the condition prescribed in clause (c) of Section 80-IB(10) of the Act. As per the Assessing Officer, the built-up area of the few units exceeded the limit prescribed in clause (c) of Section 80-IB(10) of the Act. The Assessing Officer has differed with the assessee on the calculation of built-up area of such units. As per the Assessing Officer, the area covered by the terrace and canopy was 11 ITA No.715/PN/2009 ITA No.175/PN/2011 includible while calculating the built-up area of the residential units. The Assessing Officer as well as the CIT(A) have referred to the definition of 'built- up area' contained in Section 80-IB(14)(a) of the Act for the said purpose. Ostensibly, the definition of the expression 'built-up area' including the areas of projections and balconies was inserted by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005 whereas the project of the assessee commenced prior to 01.04.2005. In an earlier decision, the Pune Bench of the Tribunal in the case of D.S. Kulkarni Developers Ltd. (supra) relied upon the decision of the Mumbai Bench of the Tribunal in the case of Haware Construction (P) Ltd. vs. ITO, 64 DTR (Mumbai) (Trib) 251 and also the decision of the Pune Bench of the Tribunal in the case of Prime Properties (ITA Nos. 887/PN/2010 & Others) dated 26.04.2012 and it was held that prior to 01.04.2005, the expression 'built-up area' has to be understood in the context of the relevant Development Control Rules of the local authority. The insertion of the definition of the 'built- up area' in Section 80-IB(14)(a) by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005 was held to be prospective in nature and not applicable for the evaluating the claim of deduction under Section 80-IB(10) of the Act in relation to projects approved by the local authority prior to 01.04.2005. Following the aforesaid precedent, as in the present case the 'Samarth Nagari' project of the assessee has been approved by the local authority prior to 01.04.2005, the 'built-up area' of the units is required to be calculated as per the relevant Development Control Rules of the local authority and on that basis the area covered by canopy and balcony are not includible. In view of the aforesaid position, the objection of the Assessing Officer, in our view is untenable.
17. Accordingly, the order of the CIT(A) for assessment order 2005-06 is set-aside and the Assessing Officer is directed to re-compute the assessee's claim for deduction under Section 80-IB(10) on the aforesaid lines.
18. In so far as the appeal of the assessee for assessment year 2006-07 is concerned the dispute is similar to that considered by us while adjudicating the 12 ITA No.715/PN/2009 ITA No.175/PN/2011 appeal for the assessment year 2005-06 in the earlier paragraphs. Therefore, our decision in assessment year 2005-06 shall apply mutatis-mutandis in assessment year 2006-07 also.
19. Further, another issue has been raised in assessment year 2006-07 which is as follows. The Assessing Officer while determining the total income in the order passed under Section 143(3) of the Act noticed that claim of deduction under Section 80-IB(10) of the Act included a profit element of Rs.5,22,600/- which represented disallowance made under Section 40(a)(ia) of the Act due to non-payment/deduction of TDS during the year. According to the Assessing Officer, on such amount of disallowance, assessee was not entitled to deduction under Section 80-IB(10) of the Act. The CIT(A) has also upheld the stand of the Assessing Officer.
20. Before us, learned counsel for the assessee relied upon the judgement of the Hon'ble Gujarat High Court in the case of ITO vs. Keval Construction (2013) 33 taxmann.com 277 (Gujarat) wherein an identical claim of the assessee has been upheld. As per the learned counsel, the disallowance under Section 40(a)(ia) of the Act would qualify for deduction under Section 80-IB(10) of the Act as such disallowance merely increases the ultimate profits of the assessee from business.
21. On the other hand, the learned Departmental Representative has defended the order of the lower authorities and placed reliance on the same.
22. In our considered opinion, the stand of the assessee is fully covered by the judgement of the Hon'ble Gujarat High Court in the case of Keval Construction (supra). The following discussion in the order of the Hon'ble Gujarat High Court is worthy at notice :-
"Having heard counsel on both the question today in this appeal, we find no error in the Tribunal's ultimate conclusion. Even if a certain expenditure which was incurred by the assessee for the purpose of developing housing project was not allowable by virtue of section 40(a)(ia) of 13 ITA No.715/PN/2009 ITA No.175/PN/2011 the Act, since the assessee had not deducted the tax at source as required under law, it cannot be denied that such disallowance would ultimately go to increase the assessee's profit from the business of developing housing project. Whatever be the ultimate profit of assessee as computed even after making disallowance under section 40(a)(ia) of the Act, would qualify for deduction as provided under the law."
23. In the present case, the only source of profits declared by the assessee during the year is from undertaking development of its housing project 'Lakshdweep'. Therefore, even if the expenditure of Rs.5,22,600/- is found to be not allowable on account of Section 40(a)(ia) of the Act as assessee has not complied with the requirements of deducting/depositing the TDS, it cannot be denied that such disallowance ultimately increases the profits of the assessee derived from its housing project 'Lakshdweep'. According to the parity of reasoning laid down by the Hon'ble Gujarat High Court in the case of Keval Construction (supra) the aforesaid profit reflected by the disallowance under Section 40(a)(ia) of the Act, qualified for deduction under Section 80-IB(10) of the Act in the present case. Thus, on this aspect, assessee has to succeed.
24. In the result, appeals of the assessee for the assessment years 2005-06 and 2006-07 are allowed as above.
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(A)-III/V, Pune;
4) The CIT-III/V, Pune;
5) The DR, "B" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Sr. Private Secretary
I.T.A.T., Pune.