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2019 (11) TMI 1745 - AT - Income TaxDisallowance of deduction u/s 80IB(10) - taxation of the net income as proper assessment year after granting set-off of matching expenses - Netting of Expenses – Year of Taxation of Net Profits - HELD THAT:- Regarding the year of completion of the CH, it is born out of the records that the club house (CH) is completed in the assessment year 2014-15. By this time, the assessee incurred the expenditure on the club house construction. In principle, the ‘project completion method’ of accounting is followed by the assessee in respect of Midori Project and the same is accepted by the Revenue. Following the same, the relevant income of the Club House is taxable in the year of completion i.e. 2014-15 only. In this regard, both the assessee and the Revenue have erred in dealing with the issue of year of taxation of profits of this club house project in accordance with general law in force. While the assessee erred in including the subscription as a part of the eligible income for the purpose of section 80IB(10) in the return of income and thereby inflating the claim of deduction to that extent; the Revenue failed to adhere to the principles of accounting and taxed the entire amount as a taxable income. In our view, the decision of both the Revenue as well as the assessee requires substantially modification considering the project completion method of accounting followed by the assessee and the said method stands undisturbed by the Revenue. As such, the expenditure is incurred in assessment year 2014-15 and we do not have the details of net profit on this CH project. Correctness of expenditure is not examined. Therefore, we are of the opinion, the matter should revisit to the file of the Assessing Officer with the following directions :- Directions : (a) The club house construction project has to be recognised as a continuation of the “Midori Phase-1” the project as it has the genesis in the Midori Phase-I project originally. Per se, it is only a part of the housing project as the finances for the Club House is raised from the flat buyers only. The profits of the CH is a taxable ones as per the Affidavit. (b) The accounting methods followed by the assessee in respect of Midori Phase-I should be equal applicable to the ‘club house’ construction as well and the year of taxation of the relevant profits is ideally the assessment year 2014-15 only. Assessing Officer needs to consider it in the remand proceedings. (c) The completion certificate of the Club House issued by the local authority becomes relevant. Assessee claims the CH is completed in the year 2014-15 but no completion certificate is filed before us. (d) AO is also required to examine the genuineness of the expenditure claim of Rs.78,10,182/- in the relevant assessment year. The profits of the Club House has to be examined and quantified with the due process of law. The details relating to the assessment for assessment year 2014-15 are not filed before us. (e) For any other reason, AO decides to not follow the “principle of matching expenses” qua project completion method for this Club House project, the profits of this project may be divided among three assessment years i.e. A.Y. 2012-13, 2013-14 and 2014-15 on ‘proportionate’ basis by applying the ‘principle of matching’ qua the subscription received from the flat buyers. (f) AO shall grant reasonable opportunity of being heard to the assessee in deciding the issue. The Assessing Officer is required to pass a speaking order on this issue considering the relevant law in course. Thus, the relevant alternative grounds 4 & 5 raised by the assessee on this issue are allowed as above. Applicability of section 115JC - Project Approval in 2007 - HELD THAT:- From the above, we find the assessee is caught unaware legally by the new law brought into statute for the assessment year 2013-14. Thus, we find it is unfair to apply the new section 115JC of the Act to the assessee’s project approved in 2007. Considering the decision M/s. S.K. Ventures [2019 (3) TMI 1990 - ITAT MUMBAI] the commonality of the facts of both the cases and the legal submissions of the AR above, we find it is settled legal issue on the matter at the level of the Tribunal and the provision of section 115JC need to be applied prospectively only and not to the projects approved in 2007 as in the present case. No other contrary case is brought to our notice by the Revenue for taking any contrary view by us. Accordingly, the additional ground and other related grounds are allowed. Prospective application of the provisions of section 115JC qua the date of approval for the first time of the project which is much earlier to the introduction of the provisions of section 115JC - Solitary housing project ever undertaken by the assessee during its life time. With this fact, if assessee what to pay the AMT tax, the same remains refundable to the assessee at the end of the permitted period. With the absence enabling provisions for such refund of AMT credit, the deduction provisions of section 80IB(10) of the Act becomes inapplicable to the eligible project of the assessee. Without going to these arguments, we find it appropriate to grant relief to the assessee on legal ground i.e. prospective application of the provisions of section 115JC qua the date of approval for the first time of the project which is much earlier to the introduction of the provisions of section 115JC.
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