Income Tax Appellate Tribunal - Mumbai
Asst Cit 11(3)(2), Mumbai vs V.R. Construction P.Ltd, Mumbai on 10 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
"F" Bench, Mumbai
Before Shri P K Bansal, Vice President
and Shri D.T. Garasia, Judicial Member
ITA No.4912 /Mum/2015
(Assessment Year: 2011-12)
M/s. V.R. Construction P. Ltd. D C I T - 8(3)
114, Shreepal Indl. Estate Mumbai
Vs.
SV Road, Jogeshwari (W)
Mumbai 400095
PAN - AABCV3162
Appellant Respondent
ITA No.5014 /Mum/2015
(Assessment Year: 2011-12)
A C I T - 11(3)(2) M/s. V.R. Construction P. Ltd.
Room No. 427 114, Shreepal Indal. Estate
Vs.
Aayakar Bhavan S.V. Road, Jogeshwari (W)
M.K. Road, Mumbai 400020 Mumbai 400095
PAN - AABCV3162A
Appellant Respondent
Appellant by: Shri Mahaveer Jain &
Shri Prateek Jain
Respondent by: Shri T.A. Khan
Date of Hearing: 05.07.2017
Date of Pronouncement: 10.07.2017
ORDER
Per Bench These are cross appeals filed by the assessee and Revenue against the order of the CIT(A) 18, Mumbai dated 06.07.2015 for A.Y. 2011-12.
2. First we will take up Revenue's appeal in ITA No. 5014/Mum/2015. The grounds of appeal raised by the Revenue reads as under: -
"1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in directing the assessing officer ITA Nos. 4912&5014/Mum/2015 M/s. V.R. Construction P. Ltd.
to grant deduction u/sec. 801B(10) on pro-rata basis given the fact that non-fulfilment of a single pre-condition as detailed in clause (c) to Sec. 801B(10), shall dis-entitle the assessee from claiming exemption under section 801B(10) of the Income Tax Act, 1961.?"
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in ignoring the ratio laid down by the Hon'ble Supreme Court in the case of Padmasundra Rao (Decd.) & Ors Vs State of Tamil Nadu (2002) wherein the Hon'ble Apex Court has held that the Court cannot read anything into a statutory provision which is plain and unambiguous.?"
3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in ignoring the ratio laid down by the Hon'ble Supreme Court in the case of Britannia Industries Ltd. V/s CIT (2005) 278 1TR 546 (SC) wherein the Honble Apex Court has held that when the language of a statute is clear and unambiguous, the Courts are to interpret the same in its literal sense and not to give a meaning which would cause violence to the provisions of the statute.?"
3. The short facts of the case are that the assessee has constructed a housing project named Bhoomi Acres at Thane. The project got approved as housing project on 31.03.2007 and was completed by 31st March, 2011. The total built up area of the project is 9900 sq.mt. It was having all the approvals from Municipal Corporation and State Government and was eligible for deduction under section 80IB(10). The necessary certificate under Form 10CCB was filed along with the return of income. The profit of the project has been worked out by the assessee as under: -
Particulars Area Amount (`)
A Total sales (2BHK in A-D Wings) 80667 27,76,61,393
Total sales (3 BHK in D Wings 7868 2,91,93,100/-
88667 30,68,54,493/-
B Total Profit [2 BHK] 46,42,841/-
Total Profit [3 BHK]
C TOTAL Business Profit 4,88,01,826/-
During the course of assessment proceedings and in reply to the specific query of the AO the assessee submitted as under: -2
ITA Nos. 4912&5014/Mum/2015 M/s. V.R. Construction P. Ltd.
(a) Each residential unit of 2BHK in A to D Wing are of less than 1000 sq.ft. area
(b) It is not an SRA project.
(c) Assessee have claimed 80IB deduction only on building in which flats which are of less than 1000 sq.ft. area and not claimed deduction in respect of 3 BHK flats of D Wing.
Various courts including Mumbai ITAT had already taken a view that in the case the residential building consists of flats of more than 1000 sq.ft and less than 1000 sq.ft., the deduction under section 80IB(10) should be allowed to the assessee on proportionate basis. In support of its contention that it is entitled to claim proportionate deduction in respect of units not exceeding 1000 sq.ft. built-up area, the assessee has placed reliance on various decisions of the ITAT. The AO did not agree with the contentions of the assessee and had disallowed the deduction under section 80IB(10) on the ground that some flats exceeding the maximum area requirement.
4. The matter was carried to the CIT(A) and the CIT(A) has allowed the claim by observing as under: -
3.2.1 In view of the decisions cited by appellant as per foregoing paragraph 3.2 of the order, the contention raised by the appellant is legally tenable. The claim of 'Provision for Debt Redemption' amounting to Rs.7,40,00,000 the disallowance of which has been confirmed by me already, should be considered for inclusion as eligible profit for proportionate deduction u/s 801B of I.T. Act. The Assessing Officer is directed to verify the computation furnished by the appellant and he is directed to allow proportionate deduction u/s 801B of 1. T. Act.
3.3 To summarize, the Assessing officer is directed to allow proportionate deduction u/s 801B of I.T. Act, as per following formula, and for this purpose, Profit of the project will include 'Provision for Debt Redemption' amounting to Rs.7,40,00,000 the disallowance of which has been separately confirmed by me already (subject to verification of computation provided by the appellant):
Profit of the project x Area Built up for flats below 1000 sq. feet Total Built up area of the project for all residential units"3
ITA Nos. 4912&5014/Mum/2015 M/s. V.R. Construction P. Ltd.
5. We have heard the rival contentions. During the course of hearing the learned A.R. submitted that the issue in controversy is covered by the decision of the Hon'ble Madras High Court in the case of Viswas Promoters Ltd. vs. ACIT 29 Taxman 19 wherein the High Court has set aside this issue in favour of the assessee.
6. The learned D.R. relied upon the decision of various Tribunals but when there is a High Court judgement we are bound to follow the judgement of the Hon'ble High Court. Therefore, we are of the view that the issue in controversy is covered by the decision of the Hon'ble Madras High Court which reads as under: -
"Asessee is eligible for deduction under section 80-lB (10) on a proportionate basis in respect of those blocks which are of less 1500 square feet area • It is held that the Tribunal is not correct in its view, that by reason of the Units being in excess of 1500 sq.ft., the entire claim of the assessee in respect of the two projects would stand rejected under section 80-IB(10). Thus, going by the definition of 'housing project' under Explanation to section 80HHBA as to the construction of 'any building' and the wordings in section 80-IB(10), the question of rejection in entirety of the project on account of any one of the blocks not complying with the conditions, does not arise. Even in the case of each one of the blocks, wherever there are flats which satisfied the conditions particularly of the nature stated under section 80-IB(10)(c), the assessee would be eligible for grant of relief under section 80-IB(10) on a proportionate basis. Thus it is held that the assessee is entitled to succeed both on the principle of proportionality as well as by reason of the construction on the meaning of the expression 'housing project' as referring to construction of any building and the wordings in section 80-IB(10). In the circumstances, it is held that the mere fact that one of the blocks have units exceeding built-up area of 1500 sq.ft. per se, would not result in nullifying the claim of the assessee for the entire projects Consequently, in respect of each of the blocks, the assessee is entitled to have the benefit of deduction in respect of residential units satisfying the requirement under section 80-IB(10)
(c). (Para 14] • In the light of the above reasoning, the substantial questions of law is answered in favour of the assessee as to that the assessee is 4 ITA Nos. 4912&5014/Mum/2015 M/s. V.R. Construction P. Ltd.
entitled to the claim of deduction in respect of all the blocks forming part of the projects called Agrini and Vajra, but to the extent of each of the blocks satisfying the conditions under section 80-IB(10) the assessee would be entitled to the relief on a proportionate basis. [Para 15] • In the result the appeals are allowed. [Para 16]"
Respectfully following the same we dismiss the appeal of the Revenue.
7. The first ground raised by the assessee in ITA No. 4912/Mum/2015 is with regard to the confirming the disallowance made by the AO of `2,12,000/- on account of donations which was neither claimed in A.Y. 2011-12 and nor in A.Y. 2008-09.
8. During the course of assessment proceedings the assessee has filed details or Work-In-Progress (WIP).The assessee has provided the statement showing addition to WIP year-wise from 2004-05 onwards. While giving the statement the AO asked for the receipts of donation made in F.Y. 2007-08. The assessee could not file the receipts as the receipts were taken out of the old records. The AO made the addition of donation for A.Y. 2011-12 on the ground that the donations of `2,12,000/- debited in WIP account ini 2008-09 was added back to the year under consideration.
9. The matter was carried to the CIT(A) and the CIT(A) has dismissed the appeal.
10. During the course of hearing the learned A.R. submitted that the addition is made on account of donation on the ground that it was claimed in the return of income but the assessee has neither claimed in A.Y. 2010- 11 or A.Y. 2008-09. Therefore there was no reason to make this addition. During the course of hearing the learned A.R. submitted that the assessee has provided the statement showing the addition to the WIP year-wise from 2004-05 onwards. While recording the statement the AO asked about the donation receipts which made in F.Y. 2008-09. The AO added the addition to the total income in A.Y. 2011-12 on the ground that the donation was debited in WIP for A.Y. 2008-09. The assessee submitted that when the 5 ITA Nos. 4912&5014/Mum/2015 M/s. V.R. Construction P. Ltd.
donation was never debited to Profit & Loss Account and never claimed, therefore it cannot be allowable in A.Y. 2011-12 or 2008-09. The learned D.R. relied upon the order of the Revenue.
11. We have heard the rival contentions. We find that during the course of hearing the learned A.R. submitted the assessee has never claimed donation in its return of income in A.Y. 2011-12 or 2008-09. Therefore, when the assessee did not claim the donation there is no question of addition of `2,12,000/-. Therefore, we allow the same. Ground No. 1 is allowed.
12. Ground No. 2 is with regard to confirmation of the disallowance made by the AO of interest expenditure amounting to `32,18,400/- without appreciating the fact that investments were made out of own funds and borrowed funds were utilized for the purpose of business.
13. During the assessment proceedings the AO has verified the details of loans and advances. It was noted that the assessee has not charged interest on advance of Rs.5 crores to Avaita Estates and Development P. Ltd. and Rs.50,00,000/- to Parekh Enterprises. During the assessment proceedings the assessee was asked to show cause as to why the interest attributable to this interest free advance should not be disallowed. The assessee contended that out of the loans and advanced given `5,00,00,000/- represents advance to Advaita Estate & Development P. Ltd. is a part of investment in the company for their project and `50,00,000/- paid to Parekh Enterprises was advance for land under negotiation. These amounts were given totally commercial advances towards acquisition and investment in project and not in nature of loan on which interest can be charged. The AO was of the view that the assessee has given these advances towards acquisition of investment in the project but they are not in the nature of loan. The assessee could not prove the nexus between the project undertaken during the year. The assessee has diverted interest free funds for the purpose of advance. Therefore, the AO has disallowed the interest @12% and made the addition. The CIT(A) confirmed the addition.
6ITA Nos. 4912&5014/Mum/2015 M/s. V.R. Construction P. Ltd.
14. We heard the rival submissions and gone through the orders of the tax authorities below. We find that the AO had made disallowance of interest on the ground that the assessee could not prove the nexus between the advance given to Advaita Estate & Development P. Ltd. and the project Bhoomi Acres. Similarly the advance given to Parekh Enterprises has no nexus with the Bhoomi Acres project. Therefore the interest cost was disallowed. We find that the AO and the CIT(A) has not considered whether the assessee has given these advances towards purchase of property or loans have been given for the Bhoomi Acres project or not. Therefore, we restore this matter back to the file of the AO and the AO is directed to verify all the facts whether these loans are given for business purposes or not and decide the matter according to law.
15. Ground No. 3 relating to claim of capital loss on sale of property was not pressed by the learned A.R. Therefore the same is dismissed as not pressed.
16. In the result, appeal filed by the Revenue is dismissed while the assessee is partly allowed.
Order pronounced in the open court on 10th July, 2017.
Sd/- Sd/-
(P.K. Bansal) (D.T. Garasia)
Vice President Judicial Member
Mumbai, Dated: 10th July, 2017
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A) -18, Mumbai
4. The Pr. CIT - 11, Mumbai
5. The DR, "F" Bench, ITAT, Mumbai
By Order
//True Copy//
Assistant Registrar
ITAT, Mumbai Benches, Mumbai
n.p.
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