TMI Blog2022 (3) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A). We confirm the order of CIT(A) on this point. Accordingly, grounds regarding issue of deduction u/s 80IB(10) raised in the departmental appeals for the Assessment Years 2009- 10 to 2011-12 stand dismissed. Disallowance of payment to sub-contractor - CIT disallowed the whole payment on the ground that the identity of the sub-contractors has not been proved - HELD THAT:- We find forced in the contention of the Learned Counsel for the assessee submitted that the payments are genuine and no disallowance should have been made. Regarding the bills, bank statements of the contractors found at the premises of the assesse, we find that some of the contractors were illiterate and the bills were given by them after part completion of the work, therefore, the blank letter heads and the vouchers were available at the premises of the assessee. Thus, the presence of these documents at the premises of the assessee should have not been considered as bogus payments as these contractors have the PAN and also operating their bank accounts which proved the identities. Therefore, the disallowance on this point was not justified. Regarding the disallowance of 10% from the other p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.No. Particulars of addition Amount 1 Disallowance of deduction claimed u/s 80IB(10) 3,33,72,475 2 Disallowance for the alleged bogus payments to sub-contractors sustained by the learned CIT(A) as per page 45 of her order 2,06,252 3 Disallowance for the alleged bogus payments to sub-contractors sustained by the learned CIT(A) as per page 52/53 of her order (10% of total payment amounting to ₹ 34,71,745) 3,47,174 (2) That on the facts in the circumstances of the case and in law, the learned lower authorities erred and not justified in not allowing the deduction, claimed at ₹ 3,33,72,475 u/s.80IB(lO), in proceedings u/s.153A, when the said deduction was already allowed by the Appellate Tribunal vide order dated 30.07.2015 in ITA No. 341 342/lnd/2012 against regular assessment. The said claim of the assessee of ₹ 3,33,72,475 be kindly allowed. (3) That on the facts in the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lB( 10), hence in such event, the same be kindly also allowed u/s.80IB(lO). (9) That on the facts in the circumstances of the case and in law, the levy of interest u/s. 234A, 234B 234C are wholly unlawful and contrary to the provisions of the Act, hence be cancelled. Likewise Assessment Year 2006-07 as above, the assessee has raised similar grounds of appeals for A.Y. 2007-08 to 2012-13 except difference of figures. Revenue has raised following grounds of appeal for A.Y. 2012-13 : 1.On facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition made by the AO of ₹ 5,91,675/- out of total addition of ₹ 16,25,739/- on account of disallowance of bogus sub-contractor expenses without appreciating the facts and evidences brought into light by the AO during Assessment Proceedings. 2.The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date, the appeal is finally heard for disposal Revenue has raised following grounds of appeal for A.Y. 2009-10: 1.On facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition made by the AO of ₹ 3,07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn u/s 153A Income (In Rs.) Additional income offered by the assessee (In Rs.) 2006-07 31/10/2006 Nil 12/08/2013 Nil Nil 2007-08 30/10/2007 Nil 31/01/2013 Nil Nil 2008-09 09/09/2008 Nil 31/01/2013 Nil Nil 2009-10 18/09/2009 87,97,950/- 31/01/2013 87,97,950/ Nil 2010-11 26/09/2010 73,67,450/- 31/01/2013 73,67,450/ - Nil 2011-12 27/09/2011 32,16,990/- 12/08/2013 32,16,990/ - Nil 4. From the perusal of grounds of appeals, we find that only two issues i.e. addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs, 79,65,722/- 3. 2008-09 ₹ 1,76,81,161/- 6. Before learned CIT(A), written submissions were filed by the assesse and reliance was also been placed on a plethora of judgments to support the assessee s case regarding claim of deduction u/s 80 IB (10) for A.Ys 2006-07, 2007-08 2008-09. However, the learned CIT(A) confirmed the action of the Assessing Officer observing as under: I have carefully considered the matrix and facts of the case as also the material placed on record and the various decisions cited by the learned AR. As may be seen from the foregoing discussion of facts, since the approved housing project could not be said to have been completed on or before the prescribed date i.e. 31.03.2008, as is the mandatory requirement. In the appellant case the certificate regarding completion of the project was not obtained prior to 31.03.2008 and was obtained on 05/07/2010. Therefore, the claim of the appellant for deduction u/s 80 IB (10) of the Act for assessment years 2006-07, 2007- 08 and 2008-09 was found to be incorrect. Since the appellant has not fulfilled the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity before the cut off date, cannot be applied in the case of assessee following the work in progress accounting method. In our opinion, the provision in the form of Section 80IB(10)(a), applies uniformly to all the assessees be it following work in progress accounting method or otherwise. The benefit of deduction under this provision can be availed by the assessee following the work in progress accounting method, provided he has complied with the stipulation of having produced completion certificate issued by the Local Authority before the cut off date, as may be applicable in his case. In other words, if the housing project was approved by the Local Authority before 1st April, 2004, he must submit completion certificate issued by the Authority having been issued before the 31st March, 2008. Whereas, in the case of housing project approved on or after 1st April, 2004, the assessee can avail of the benefit provided completion certificate issued by the Local Authority is within four years from the end of the financial year in which the concerned housing project was approved by the Local Authority. If this condition is not fulfilled, the assessee who maintains work in progress acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 18/09/2009 ₹ 87,97,950/- 2. 2010-11 26/09/2010 ₹ 73,67,450/- 3. 2011-12 27/09/2011 ₹ 32,16,990/- 4. 2012-13 02/09/2013 ₹ 31,97,500/- During the course of assessment proceedings, the assessee was required to prove with material evidence whether the housing projects of the assessee fulfilled the conditions u/s 80IB(10) of the IT Act regarding permission certificate, completion certificate. If the project was approved by the local authority before 01.04.2004 the completion certificate is to be obtained on or before 31.03.2008, if the project was approved on or after 01.04.2004 the completion certificate should be obtained within a period of four years from the end of financial year in which the project was approved and if the project was approved on or after 01.04.2005 the completion certificate is to be obtained within a period of five years form the end of the finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, I am of the view that the A.O was not justified in holding that the appellant Ossesse has committed default in furnishing inaccurate particulars of income by claiming deduction under section 80 IB (10) of the Act. In the appellant s case the facts show that he had fulfilled the conditions laid down in section 80 IB (10) of the Act, and preferred to make the claim of deduction under the section. The appellant has made claim of deduction u/s 80 IB (10) wherein, the permission certificate and completion certificate from the local authority have been obtained within cutoff date which is the most basis requirement to claim deduction u/s 80IB (10). 2.3 Therefore, taking into account the totality of the facts and circumstances and material placed on record. I am of the view that the A.O. was not justified in disallowing the deduction claimed by the appellant u/s 80IB (10) and the additions as mentioned below on this account are hereby deleted. S.No Assessment Year Amount of deduction withdrawn/disallowed 1. 2009-10 ₹ 3,07,98,520/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2960/L.P113/29 1584-1656-594 Date of TNCP Approval 03.05.2000 16.12.2004 17.05.2006 29.03.2007 30.09.2009 BMC Approval 1165-02091-0700 1163-01958- 0305 NC1163-02009-0306 NC6311-2244-42007 NC6311-953-112008 NC6113-903-82010 Date of BMC Approval 05.07.2000 13.06.2002 15.03.2005 07.03.2006 30.03.2007 10.11.2008 31.07.2010 Number of units 176 28 181 Commencing Year of the Project F.Y. 2000-01 2004-05 2005-06 Completion Year of the Project F.Y. (As per various proof submitted before lower authorities) 2007-08 2008-09 2010-11 Completion Certificate Obtained on 05.07.2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 12. We have heard both the sides. We have also considered the various case laws relied upon by both sides. One of the grounds on which the assessee has been denied deduction u/s 80IB is with regard to measurement of two units taken during the assessment proceedings for the assessment year 2004-05 wherein the definition of built up area by the Departmental Valuer has been taken by applying the provisions of section 80IB(14) of the Act. This appeal for the assessment year 2004-05 reached up to the level of ITAT wherein the Bench has concluded that the appellant has not built up the unit exceeding 1500 sq. ft. The built up area exceeded for the assessment year 2004- 05 was due to projection and mumtty. Various Courts have held that the definition of Built up Area in the newly inserted provisions of section 80IB(14)(a) shall be applicable w.e.f. 1.4.2005. Prior to this definition in the Income Tax Act w.e.f. 1.4.2005, the built up area has to be calculated as per the local municipal laws. The Built up Area has been defined in this provision as under :- 80IB(14)(a) built up area means the inner measurements of the residential unit at the floor level, incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then also if the provisions are applied retrospectively, the assessee would not be entitled to benefit of tax exemption. Such an interpretation not only would be absurd but also lead to disastrous consequences. Therefore, it cannot be the intention of the legislature while bringing the definition of built up area in the statute. We would like to mention that such beneficial provisions in the Act have been brought into to bring in investment and to encourage infra-structure development of middle income housing projects. If these amended provisions are made effective retrospectively then it will negate the object of the provision. If certain areas are not considered as part of built up area as per Municipal Act then the definition of built up area that is introduced in the Act at later stage shall not be substituted to the project approved prior to that date. It is a settled law that the Court has to harmonize the provision and interpret the same in a manner to achieve the object of legislature than to distress the said object. Therefore, in our considered view, the definition of Built up area as inserted by subsection (14)(a) to section 80IB of the Act by the Finance Act (No. 2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period stipulated. According to the assessee, 84 flats were within 1500 sq. ft. The material on record disclosed that a head room was constructed. The head room was not included in the sale deed. The local authority after construction of the building, inspected the building and granted the occupancy certificate. Therefore, the construction put up by the assessee prima facie could be said to be in accordance with the sanctioned plan. If after issue of the occupancy certificate and after sale of these residential flats, the owners of the flats on the top floor decided to put up a head room and engaged the very same contractor and the engineer may have put up identical structures, it could not be said that the assessee had put up the construction and thus contravened the requirement of section 80IB. The material on record did not disclose that the assessee put up the construction prior to the sale of those flats and excluded the construction in the sale deed with an intention of getting the benefit of section 80IB(10). In so far as balconies were concerned, prior to april 1, 2005 the area covered by them had to be excluded in calculating the built up area. As the housing project wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give permission for the occupation of the building erected or for the use of the part of the building re-erected; or (b) refuse such permission in case such erection, construction or re-construction is in contravention of any provision of this Act or any rule or byelaw made thereunder or any other enactment for the time being in force. (4) No person shall occupy or permit to be occupied any such building or use or permit to be used any part affected by the re-erection of such building (a) Until the permission referred to in clause (a) of subsection (3) has been granted in the manner prescribed by byelaws; (b) Unless the Commissioner has failed for fifteen days after the receipt of notice of completion to intimate his refusal to grant the said permission. 13. As per the above provisions, wherever a building is erected within one month of the completion of the work, the person was under obligation to deliver to the office of the Commissioner a notice in writing of such completion and submit all necessary facilities for inspection of such completed work. Thereafter within 7 days of the receipt of such notice from the person, the Commissioner shall depute an Officer to comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim to deduction under section 80IB(10) of the Income Tax Act, 1961 was denied inter alia on the ground that the assessee had violated the conditions stipulated under section 80IB(10) inasmuch as it had not obtained the completion certificate for the project from the competent authority within four years as stipulated in Explanation (ii). The Commissioner (Appeals) upheld the assessment order. The Tribunal held that the assessee was expected to complete the project in accordance with the approved plan at a particular point of time and the assessee was not expected to do or to fulfill the conditions which were not in existence at the relevant point of time or made compulsory by amendment in the Act from the future date. Since the assessee was to complete the projection on or before March 31, 2009 and a request was duly made with the competent authority on November 5, 2008 mentioning that the project had been completed and the completion certificate may be issued and if the certificate was not issued by the competent authority the assessee should not be penalized therefore unless and until some contrary facts were brought on record evidencing that the assessee contravened the conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons that were imposed in the newly substituted section 80- IB(10) that were absent in the said section prior to its amendment. One such condition inserted w.e.f. 1st April, 2005 was clause (d) that put a restriction on the quantum of commercial area that could be included in a housing project in order to entitle the assessee to claim the deduction as set out in the said section. It cannot be said that the legislature intended to give any retrospectivety to cl. (d) of s. 80IB(10). This is more so because it is clearly a condition that relates to time when the housing project is approved by the local authority. It decides, subject to its own rules and regulations, what quantum of commercial area is to be included in the said project. It is on this basis that building plans are approved by the local authority and construction is commenced and completed. It is very difficult, if not impossible to change the building plans and/or after construction midway. In order to comply with cl. (d) of s. 80IB(10). It would be highly unfair to require an assessee to comply with s. 80IB(10)(d) who has got his housing project approved by the local authority before 31st March, 2005 and has either comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x in the A.Y. 2005-06. In contrast, if the same assessee had followed the work-in-progress method of accounting, he would have been entitled to the deduction under section 80-IB(10) upto the A.Y. 2004-05, and denied the same from A.Y. 2005-06 and thereafter. It could never have been the intention of the Legislature that the deduction under section 80-IB(10) available to a particular assessee would be determined on the basis of the accounting method followed. This would lead to startling results. Therefore, there is no hesitation in holding that section 80IB(10B) is prospective in nature and can have no application to a housing project that is approved before 31st March, 2005. As the deduction sought to be claimed under section 80-IB(10) is inseparably linked with the date of approval of the housing project, it would make no difference if the construction of the said project was completed on or after 1st April , 2005 or that the profits were offered to tax after 1st April, 2005 i.e. in A.Y.2005-06 or thereafter. The Tribunal was right in allowing the assessee company a deduction u/s 80IB(10) for the assessment year 2006-07 wherein the commercial area built by the assessee exceeded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant 32ssesse has committed default in furnishing inaccurate particular of income by claiming deduction u/s 80IB(10) of the Act. In the appellant s case the facts show that he had fulfilled the conditions laid down in section 80IB(10) of the Act, and preferred to make the claim of deduction under section. The appellant has made claim of deduction u/s 80IB(10) wherein, the permission certificate and completion certificate from the local authority have been obtained within cutoff date which is the most basis requirement to claim deduction u/s 80IB(10). 16. We have considered rival contentions and gone through the material available on record. We find that the Revenue could not controvert the factual findings recorded by the learned CIT(A) by bringing any contrary material on record. We find that the Ld. CIT(A) rightly allowed the deduction u/s 80-IB(10) on the ground that the completion certificate was obtained by the assessee within the prescribed time and all other conditions were satisfied and as such, the assessee is entitled to the said deduction. Thus, we do not find any reason to interfere with the findings of the learned CIT(A). Therefore, we confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10 5,24,825/- 2010-11 41,01,033/- 2011-12 1,38,515/- 2012-13 9,68,322/- total ₹ 79,44,712/- ii. Sub-contractors in whose name bank bills/cash memo/vouchers were seized amounting to ₹ 1,03,20,473/- spread over to A.Y.2007- 08, 2008-09, 2010-11 2011-12: A.Y. Amount/payment to subcontractors 2007-08 2,12,594/- 2008-09 12,66,841/- 2010-11 5,15,830/- 2011-12 83,25,208/- total 1,03,20,473/- iii. Sub-contractors with PAN and other details amounting to ₹ 5,47,90,021/- A.Y. Amount/payment to subcontractors 2006-07 34,71,745/- 2007-08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been made. Regarding the bills, bank statements of the contractors found at the premises of the assesse, learned Counsel for the assessee submitted that some of the contractors are illiterate and the bills are given by them after part completion of the work. Therefore the blank letter heads and the vouchers were available at the premises of the assessee. The presence of these documents at the premises of the assessee does not lead to the conclusion that they are bogus and the payments are not genuine. These contractors have the PAN and also operating their bank accounts. Thus, the identities are proved. Thus, learned Counsel for the assessee submitted that the disallowances deserve to be deleted. Regarding the disallowance of 10% from the other payments, learned Counsel for the assessee submitted that no disallowance is called for since the contractors have genuinely worked and the TDS is made from the payments. The Assessing Officer disallowed these payments on the ground that the source of the expenditure is not satisfactorily explained. However, this is not an undisclosed expenditure but the amount is debited in the books of the assessee and the source is clearly proved and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch in the case of Agrawal Technical Education in IT(SS)A Nos.83 to 89 81/Ind/2020 and the Indore Bench vide order dated 17.1.2022 decided the issue in favour of the assesse. The relevant portion of the order dated 17.1.2022 (supra) is reproduced hereunder: 12. Ground no.3 is with regard to confirmation of additions of ₹ 2,49,92,539/- A 29,98,146/- for the Assessment Years 2011-12 20123-13, respectively, for payments made to sub-contractors. Facts, in brief, are that the Assessing Officer during the course of assessment proceedings required the assessee to furnish complete details of subcontractor debited in P/L account along with complete name, address, copy of ITR, Identity poof and bank statement. The assessee in reply on 15.12.2013 submitted relevant details of the sub-contractors and contended that the society is running a college imparting engineering education and for this purpose, it has constructed the building of college, hostel mess etc. for which the assessee had to purchase material and construct the building with the help of various contractors and sub-contractors. However, the Assessing Officer after considering reply of the assessee did not fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had purchased material and constructed the building with the help of various contractors and sub-contractors. The direct cost for construction comprises of mainly of two things i.e. material cost and labour cost. Therefore, learned CIT(A) was not justified in granting part relief. 15. On the other hand, ld. CIT-DR vehemently argued and relied on the order of the learned CIT(A). 16. We have considered rival contentions and gone through the material available on record. We find that it was explained that every contractors worked for the construction of the building of the Society. We find that the papers were found from the business premises of Agrawal Construction Co and not from the office premises of the assessee society. However, the A.O. referred to the statements of various persons and several documents of various sub-contractors found from the business premises of Agarwal Construction Co., 250, Sagar Plaza, M.P. Nagar, Bhopal. We find that the Assessing Officer failed to appreciate the fact that the said premises do not belong to assessee and no part of its activities were functioning at that place as each of the educational institution has its own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable to the total cost of the building. Learned CIT(A) granted part relief but failed to consider the fact that normally the percentage of labour cost to the total construction cost is between 20% to 30% and in the instant case it is 16.4 % as is evident from the page 39 of impugned order. A certificate from a Chartered Engineer to this effect was also filed. Thus, we find that the labour percentage is less than the normal prescribed percentage. We further find that it was explained that the petty contractors who had done the small work had been paid by the cheque and after completion of the work they left the site and were not approachable/traceable and as such could not be produced. However, their work cannot be denied since the work for which the payment has been made is in existence. Under these circumstances the addition cannot be sustained. So far as the disallowance of payments to the subcontractors whose bill book were found at the premises of M/s Agrawal Construction is concerned, we find that the same cannot be disallowed, firstly, the bill book, bank statements and the PAN application copies were found at the premises of M/s Agrawal Construction Co and they were kept in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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