9911796707
TMI Blog2012 (5) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... be reduced from the returned income in the light of the decision of the Hon'ble Supreme Court in the case of Goetze (India) Limited v/s CIT [2006] 284 ITR 323 (which decision is binding only on the Assessing Officers and not on Appellate Authorities). 3. Alternatively and without prejudice to Ground No. 1, the learned CIT(A) should have treated the income returned by the assessee under the Industrial Park Scheme by following its regular method of recognition of revenue as income deductible u/s 80-IA(4)(iii) of the I.T. Act, 1961." 2. The Assessee is a company. It is engaged in the business of Hotel, builders and real estate developers. Under the provisions of Sec.80-IA (4)(iii) Income Tax Act, 1961 (the Act), where the gross total income of an assessee includes any profits and gains derived by an undertaking from developing, developing and operating or maintaining and operating an industrial park or special economic zone notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006 a deduction of an amount equal to hundred per cent of profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the project as set out in this scheme was 31.03.2006. According to assessee in order to get the benefit available u/s 801A(4)(iii) of Income Tax Act, 1961 (the Act), in respect of the Industrial Park Scheme, the assessee deployed all manpower and means at its disposal and managed to substantially complete the project by end of December, 2005 applied to the CBDT on 06.01.06 for notifying the project as required under rule 18C of I.T. Rules, 1962. In the subsequent period, it continued its efforts to complete the project by 31.03.2006 and was successful in its efforts, as the aforesaid project was completed on 30.03.2006. The CBDT, after due enquiries notified the project on 12.07.2006 under rule 18C since all 33 units which were to be constructed under the Industrial Park Scheme were ready. The approval was to operate for the accounting period 31.03.06 and onwards. 4. During the previous year relevant to A.Y 2004-05 the assessee offered profit on 8OIA project of Rs.5,98,42,184/- at 30% of sales of Rs.19,36,40,480/-. In assessment year 2005-06 the assessee offered profit on 80 IA project of Rs.7, 03,07,952/- at 30% of sales of Rs. 23,43,59,840/-. When the assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or deduction is available only when all the units specified in the approval of the prescribed authority is obtained. The Assessee pointed out that though as per Note-N to the notes to accounts the Assessee was following project method completion yet for the following reason a percentage of the sales of the units in both the P.Y relevant to AY 04-05 & 05-06 was shown as income. The relevant portion of Note-N to the notes to Accounts is as follows: "(v) (i) In respect of the construction business, the Company is following the 'Building Project Completion' method of accounting for accrual of income. Under this method, revenue accrues only when the building project is completed and sold. Cost incurred and advance sales proceeds received are accumulated during the course of construction of the building project but revenue is not accrued until the building project is completed. (ii) Company is developing Industrial Park at CTS No. 1406 A/10(Pt) Malad (West). In respect of this project the company follows project completion method, wherein cost incurred and advance sales proceeds received are accumulated during course of construction of the Project. Percentage of sales is shown as profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98,42,184 7,03,82,952 41,06,47,011 In terms of area, the figures of area of completed units and total area to be constructed are as under:- Accounting Year Assessment Year Sale Proceeds (Rs.) No. of Units Area (Sq. ft) % 2003-04 2004-05 193,640,480 2 106,800 12.37 2004-05 2005-06 234,359,840 7 126,580 27.05 2005-06 2006-07 1,368,823,370 24 628,345 99.88 2006-07 2007-08 2,516,800 1,000 9. The Assessee submitted that a look at the above tables would show that the project could be said to have been substantially completed only in the accounting period relevant to A.Y. 2006-07. The Assessee argued that the income offered from the Industrial Park Scheme as a percentage of sales for A.Y. 2004- 05 & 05-06 was not includible for those assessment years because, the first year in which income from Industrial Park has accrued is during the accounting period relevant to A.Y. 2006-07. The Assessee argued that unless an item of income offered to tax is legally assessable in the year in which it is offered, the assessing authority cannot tax it even if it is returned by mistake or under a misapprehension by the assessee. It was submitted that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06 as all conditions stipulated has been fulfilled and notification has been received. 11. The CIT(A) did not agree with the submissions made on behalf of the Assessee. He was of the view that the Assessee rightly offered profits to tax in AY 04-05 & 05-06 and that too in consonance with the principles of recognition of revenue and the Assessee cannot take the plea that because of a subsequent event i.e. the completion of the development work in the Industrial Park on 31.3.2006, it can withdraw the profits in defiance of the basic principles of recognition of revenue. Further he also held that if at all, the assessee wanted to withdraw the profits, it could have done so by filing a revised return. In this regard, the CIT(A) referred to the decision of the Hon'ble Supreme Court in the case Goetze (India) Ltd vs CIT (2006) 284 ITR 323 wherein it was held that a relief if omitted to be sought has to be claimed only by filing a revised return and that this requirement cannot be circumvented by claiming the relief in any other form. He also held that the accounts of a particular year are complete and irreversible for the year the moment they are closed. This being so, the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention was drawn to the fact that for the A.Y. 2006-07, the appellant had claimed deduction in respect of profit earned from the entire project after deducting the profit offered to tax for the A.Ys.2004-05 & 2005- 06. Premised on this, submission was made to now allow the deductions u/s.8OIA(4)(iii) for the A.Ys. 2004-05 a 2005-06, which had been earlier rejected by me vide my order dated 21.1.2009 for these years. Prayer was made to rectify the orders for these two years based on Instruction No.4/2009 dated 30.6.2009 issued by the CBDT. Alternatively, prayer was made to include the incomes offered in the A.Y.2004-05 and 2005-06 as part of income of the project for A.Y.2006-07. 2.5 I have considered the above submissions of the appellant. Looking into the provisions of section 80IA(4)(iii), the fundamental scheme and architecture of ITA and the principles of accounting and recognition o revenue, I am unable to admit either of the prayers made by the appellant. To this end, so far as the prayer for rectification of my order for the A.Y.2004-05 & 05-06 is concerned, I do not find any enabling provision in the ITA to modify these orders. As I see, CIT(A) does not have the powers to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the stated position in the return of income has to be made through a revised return. This is the position of Law. As regards this, the Hon'ble Supreme Court in its decision in the case Goetze (India) Ltd vs CIT (2006) 284 ITR 323 has categorically held that a relief if omitted to be sought has to be claimed only by filing a revised return and that this requirement cannot be circumvented by claiming the relief in any other form. This establishes the position that apart from filing a revised return, there is no enabling statutory provision to change the stated position in the return. The modification requested is thus not feasible because there is no enabling provision with the CIT(A) to implement it and also because it has not been claimed in the desired manner. This is also not possible from the perspective of accounting policies. As I note, recognition of revenue is too fundamental to be left flexible to the dictates to the subsequent events. The accounts of a particular year are complete and irreversible for the year the moment they are closed. This being so, the accounts could not have been disturbed. The ITA also does not permit any tinkering with the accounts except unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction was that the housing project should have commenced construction on or after 1.10.1998 and completed the construction within 4 years from the financial year in which the housing project is approved by the local authority. The question arose whether the deduction can be claimed by Assessees who follow percentage completion method of accounting by showing part of the profits or the deduction would be available only in the year of completion of the project u/s.80-IB(10) of the Act. The CBDT clarified on the above issue as follows: "(a) The deduction can be claimed on a year to year basis where the assessee is showing profit from partial completion of the project in every year.' (b) In case it is late, found that the condition of completing the project within the specified time limit of 4 years as started in section 80- 1B(10) has not been satisfied, the deduction granted to the assessee in the earlier years is should be withdrawn. 4. The above Instruction will override earlier clarification on this issue contained in Member(R)'s D.O. letter No. 58/Misc./2008/CIT(IT & CT) dated 29.04.2008 and Member (IT)'s D.O. letter No. 279/Misc./46/08-ITJ dated 2.5.2008. 5. This may kind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stance of the situation and decide the matter in such a manner that neither the revenue is put to some unreasonable loss nor the assessee is subjected to any unreasonable hardship. The facts of the case before the Hon'ble Punjab & Haryana High Court were that during the accounting year ending March 31, 1965, the assessee, which maintained its accounts on the mercantile system, was called upon by the Government to supply a particular quantity of wheat within a specified period. The Government did not lift the entire quantity of wheat during the stipulated period. The assessee was made to supply the balance quantity of wheat at a time when the price of wheat had risen in the open market. The assessee's representations to the Government that it should be paid the price on the basis of the market value of the wheat which was supplied during the extended period were turned down and the assessee filed a suit which was decreed on July 18, 1969, by the trial court in a suit. Since the State Government had filed an appeal against the judgment of the trial court, the assessee kept the receipts and expenditure relating to the transaction in a suspense account during the accounting year 1969- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and certified by the management) (a) Construction Project ii. Work in Progress 80 IA 645,289,965 394,292,408 SCHEDULE 'H'' As at 31/3/05 (Rs.) As at 31/3/04 (Rs.) Current Liabilities and Provisions: (A) Current Liabilities: Sundry Creditors - 80IA 37,450,352 20,915,069 It was emphasized that the Assessee was in fact following project completion method of accounting in respect of profits from developing industrial park and the reason for declaring income at 30% of the sales made in AY 04-05 and 05-06 was by way of abundant caution and a likelihood of the Assessee not complying with the conditions for grant of deduction u/s.80-IA(4)(iii) of the Act. 19. On the observations of the CIT(A) that there was no revised return of income filed by the Assessee, the learned counsel relied on the decision of the Hon'ble Delhi High Court in the case of Jai parabolic Springs 306 ITR 42 (Delhi) and contended that the appellate authorities under the Act, were free to consider a claim made by an Assessee even in the absence of a revised return of income and that the requirement for filing a revised return of income as laid down by the Hon'ble Supreme Court in the case of Goetz India Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution whose purpose is promotion of an object of general public utility, would be able to carry on any business, even though such business is held under trust or legal obligation to apply its income wholly to the charitable purpose or is carried on by the trust or institution for the purpose of earning profit to be utilised exclusively for feeding the charitable purpose. If any such business is carried on, the purpose of the trust or institution would cease to be charitable and not only the income from such business but the entire income of the trust or institution from whatever source derived, would lose the tax exemption. The result would be that no trust or institution established for promotion of an object of general public utility would be able to engage in business for fear that it might lose the tax exemption altogether and a major source of income for promoting objects of general public utility would be dried up. It is difficult to believe that the legislature could have intended to bring about a result so drastic in its consequence. If the intention of the legislature were to prohibit a trust or institution established for the promotion of an object of general public ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax in AY 04-05 and 05-06. The details of construction and profits from the industrial park for the various assessment years is as follows: Particulars A.Y.2004-05 A.Y.2005-06 A.Y.2006-07 Sales 19,36,40,480 23,43,59,840 136,88,23,370 Closing W.I.P 39,26,21,561 64,52,89,965 157,65,23,893 Profit (30%) 5,80,92,144 7,03,07,952 41,06,47,011 Other Income 17,50,040 57,000 - Income shown in P & L A/c 5,98,42,184 7,03,82,952 41,06,47,011 In terms of area, the figures of area of completed units and total area to be constructed are as under:- Accounting Year Assessment Year Sale Proceeds (Rs.) No. of Units Area (Sq. ft) % 2003-04 2004-05 193,640,480 2 106,800 12.37 2004-05 2005-06 234,359,840 7 126,580 27.05 2005-06 2006-07 1,368,823,370 24 628,345 99.88 2006-07 2007-08 2,516,800 1,000 23. The notification by the CBDT enabling Assessee to get deduction u/s.80-IA(4)(iii) of the Act was received on 12.7.2006. As on that date the assessment proceedings for AY 04-05 and 05-06 were pending before the AO. The Assessee had addressed letters to the AO in those assessment proceedings requesting the AO to allow the Assessee to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see about his rights. On the above submission, the CIT(A) held that the claim of the Assessee was based on subsequent events and therefore the same could not be considered by the AO. 24. The request of the Assessee for considering the entire profit from the project in AY 06-07 was also rejected by the Revenue for the very same reasons as were given for rejecting the withdrawal of income offered from the project for AY 04-05 and 05-06 in the order of the CIT(A) which is impugned in these appeals. It is not in dispute that a part of the income from developing the industrial park which was offered to tax in AY 06-07 and on which deduction u/s.80-IA(4)(iii) of the Act was claimed was allowed by the CIT(A) in that year and that order, we have been informed by the learned counsel for the Assessee has been accepted by the Revenue and no appeal filed by the Revenue before the Tribunal. Thus the Assessee has complied with the conditions necessary for grant of deduction u/s.80-IA(4)(iii) of the Act, as on the last date of the previous year relevant to AY 06-07. 25. From the reasons assigned by the revenue authorities for rejecting the claim of the Assessee for deduction u/s.80-IA(4)(iii) o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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