2018 (9) TMI 1896 - AT - Income Tax

Disallowance u/s 14A r.w. Rule 8D - HELD THAT - The issue is squarely covered by the Hon ble jurisdictional High Court s judgment in the case of CIT Vs Corrtech Energy Pvt Ltd . 2014 (3) TMI 856 - GUJARAT HIGH COURT inasmuch as the disallowance u/s 14A cannot exceed the exempt income. This is precisely what the CIT(A) has held. In view of the matter and in view of the decision of the learned CIT(A) which is clearly in accordance with the law laid down by the Hon ble jurisdictional High Court (supra) we see no reasons to interfere in the matter. Disallowance of deduction u/s 80-IB(10) - assessee has received towards charges collected from the customers for AEC AUDA legal charges etc.- AO was of the view that these receipts are not eligible for being included in the profits eligible for deduction u/s 80-IB(10) - HELD THAT - Whatever details have been given by the assessee with regard to AUDA charges electricity connection charges and legal charges etc. nowhere these facts have been verified by the lower authorities and the computation of Asmakam project has not been elaborately discussed by the lower authorities. Therefore we are of the considered view that this matter needs further examination; therefore we remit this issue back to the file of the Assessing Officer for examination afresh and call for all details pertaining to Asmakam project and thereafter will decide the matter on merits.

Summary

Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act.
2. Disallowance of deduction under Section 80-IB(10) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Disallowance under Section 14A of the Income Tax Act:
The Assessing Officer (AO) challenged the correctness of the CIT(A)'s order, which deleted the addition of Rs. 3,00,814 made on account of disallowance under Section 14A read with Rule 8D of the Income Tax Rules. Both parties agreed that the issue was covered by the jurisdictional High Court's judgment in CIT Vs Corrtech Energy Pvt Ltd, which held that disallowance under Section 14A cannot exceed the exempt income. The CIT(A)'s decision was in line with this legal precedent. Consequently, the tribunal saw no reason to interfere and dismissed ground no. 1.

2. Disallowance of deduction under Section 80-IB(10) of the Income Tax Act:
The AO disallowed a deduction of Rs. 1,58,94,590 claimed under Section 80-IB(10), arguing that charges collected from customers for AEC, AUDA, and legal fees were not part of the income eligible for deduction. The CIT(A) reversed the AO's decision, noting that these charges were integral to the sale consideration and were recovered from customers as per the sale deed clauses. The CIT(A) cited several judgments, including those from the Hon'ble Kolkata Tribunal and the Hon'ble Gujarat High Court, which supported the inclusion of such charges in the eligible income for deduction under Section 80-IB(10).

The CIT(A) observed that these charges were essential for the development and completion of the housing project and were recovered from customers as per the agreement. Therefore, they were considered part and parcel of the housing project, making them eligible for deduction under Section 80-IB(10).

However, the tribunal noted that the lower authorities had not verified the details related to AUDA charges, electricity connection charges, and legal charges, nor had they elaborately discussed the computation of the Asmakam project. Thus, the tribunal remitted the issue back to the AO for further examination and a fresh decision on merits.

Conclusion:
The appeal was partly allowed for statistical purposes, with ground no. 1 dismissed and ground nos. 2 and 3 remitted back to the AO for further examination. This judgment was pronounced in the open court on 25th September 2018.