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TMI Blog2012 (11) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... construction and sale of flats. Assessee claimed the entire income derived by it form the business of sale of flats as deduction under S.80IB of the Act, 1961. Authorised Representative for the assessee pleaded before the assessing officer that the assessee is eligible for deduction under S.80IB of the Act, as it has complied with the conditions laid down in the section, viz. (a) the extent of site is more than one acre; and (b) the assessee is in the process of constructing residential flats, plinth area of each flat not exceeding 1500 sq. ft. The assessing officer verified and found that the approval of the local authority was obtained on 18.10.1999 for the construction of the flats, and also the extent of area on which the flats are being constructed, exceeded 1 acre. Further, the assessing officer observed that the project is in progress stage as the assessee started construction of the flats. Further, he noted that the assessee is registering semi-finished flats or construction yet to be commenced flats and the amount received is being recognised as sale proceeds. It is also found that no flats were handed over to any customer, as the same were yet to be finished during the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction us. 80IB cannot be allowed as the assessee sold away the flats in semi-finished stage itself." 4. Aggrieved, the assessee preferred appeals before the CIT(A). The assessee submitted that it has not been laid down in the provisions of the Act that a completed flat alone could be considered for sale so as to enable the assessee to be eligible for deduction. While considering an incentive provision, the rule 'casus omissus' has to be followed, which suggests that there can be an inference upon a provision but not on any omission. Hence, the assessee objected to the inference drawn by the assessing officer. Further submissions of the assessee before the CIT(A) are as follows- "(2) The conditions laid down as per the provisions of the act are very much satisfied by the appellant to the effect that: (a) the undertaking commenced the development and construction of housing project with effect from 01.07.1989. (b) the date of approval is 18.10.1999 for phase-II undertaken by the appellant company (since phase-I was already completed by another company M/s. Satyam Homes Pvt. Ltd. before the incorporation of the appellant company). (c)&nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfilment of the conditions. (e) The appellant also submits that as per the rule of "casus omissus" there can be an inference only upon a provisions of the Act and not otherwise. (f) It was not the case of the Assessing officer that there was violation of the conditions laid down by the provisions of section 80IB of the Act, in terms of sub-section (10). There is no finding of the Assessing officer that the conditions laid down in the statute have not been fulfilled by the appellant, so as to deny the eligibility to deduction u/s. 80IB of the Act. 3. (a) The appellant in support of its submission, places relies upon the case law of Bajaj Tempo (SC) 196 ITR 188, wherein Hon'ble Supreme Court had an occasion to hold that incentive provisions should be interpreted liberally in favour of tax payer. A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restrictions on it too has to be construed so as to advance the objective of the provision and not to frustrate it. (b) the appellant also places reliance upon the case of Ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (c) has been violated. According to him, the assessee could claim deduction under S.80IB(10) on development, construction and sale of 'residential unit' and not by selling 'semi-finished structure'. He opined that semi-finished structure is not capable of residence and could not be termed as 'residential unit' and hence the conditions specified in clause (c) have been violated. The CIT(A) held in para 5.3 and 5.4 of the impugned order as follows- "5.3 As per facts narrated by the Assessing officer, the assessee seems to have sold the semi-finished construction to the individual owners and develops the property by virtue of a separate agreement entered into with such individual owners. Under such situation the assessee no longer remains a developer, but becomes a contractor to the individual owners and has to finish the unit as per the requirement and individual taste of the individual owners Accordingly, profits made by the assessee after sale of semi-finished units from further development of the unit could not be included in the profits eligible for deduction u/s. 80IB, since the assessee no longer remains a developer as mentioned in clause (a), b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction in some areas, it has been mentioned as follows: "....However, a time limit has been introduced for completion of housing project, where development and construction has commenced or commences on or after 1.10.1998. Such housing project approved by the local authorities before 1.4.2004 has to be completed on or before 31.3.2008 and the housing project approved on or after 1.4.2004 should be completed within four years from the end of financial year in which the project is approved by the local authority. ...." This above amendment takes effect from 1.4.2005 and applies in relation to assessment year 2005-06 and subsequent years. With respect to the assessment year 2003-04, the learned counsel for the assessee relied on the relevant portion of the Circular, which is reproduced hereunder- "47. Extension of the time limit for obtaining approval and removal of condition for completion of approved housing project for the purpose of tax holiday under section 80-IB "47.1 Under the existing provision of sub-section (10) of section 80-IB, a deduction equal to one hundred per cent of the profits of an undertaking engaged in developing and building housing projects is allowed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Bench of the Tribunal in the case of Nirupama K. Shah v. ITO [IT Appeal No. 348 (Mum) of 2010, dated 18.11.2011], wherein, in the context of the provisions of S.54F, it has been held that amounts paid for completion of flat purchased in semi-finished condition, pursuant to a tripartite agreement entered into by the assessee with the contractors and the builder forms part of cost of new house even though such agreement was entered prior to agreement for purchase of house. 12. The learned Departmental Representative supported the orders of the lower authorities and relied on the following case laws:- (a) Rajesh Surana v. CIT [2008] 306 ITR 368 (Raj.) (b) D.P. Mehta v. CIT [2001] 251 ITR 529 13. We have considered the rival submissions and perused the orders of the lower authorities. The circular of the CBDT dated 30.6.2009, relevant portion of which has been extracted hereinabove, makes it very clear that deduction under S.80IB(10) of the Act can be claimed on year to year basis, where the assessee is showing the profits from partial completion of the project in each year. In case it is found alter that the project was not completed within four years, the deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d promote growth of co-operative societies and consequently, a liberal construction must be given to the operation of that provision. And since ginning and pressing was incidental or ancillary to the activities mentioned in section 81(1), the assessee was entitled to exemption and the proviso did not stand in his way. In CIT v. Strawboard Manufacturing Co. Ltd. [1989] 177 ITR 431 (SC), it was held that the law providing for concession for tax purposes to encourage industrial activity should be liberally construed. The question before the court was whether strawboard could be said to fall within the expression 'paper and pulp' mentioned in the Schedule relevant to the respective assessment years. The court held that since the words 'paper and pulp' were mentioned in the Schedule, the intention was to refer to the paper and pulp industry and since the strawboard industry could be described as forming part of the paper and pulp industry, it was entitled to the benefit." 16. We may also refer to the ratio laid down by the Apex Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192, wherein it has been held that while interpreting the statutory provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et synchronized in the year of completion and therefore, estimate @ 8% is not justified and not supported by any material evidences. After considering the submissions of the assessee, the CIT(A) held as under:- "4.2 I have considered the submissions of the appellant. Even though the total profit will be properly computed for the project is completed in the intervening period some profit accrues to the assessee for which a reasonable method has to be followed to determine such profit. The appellant has adopted the rate of profit at 5% without any basis. The judicial consensus appears to be towards estimating net profit @ 8% to 10%. In respect of turnover of up to Rs. 40 lakhs net profit is presumed to be @ 8% u/s 44AD. Considering the totality of the circumstances, I do not find any objection in the method of estimate adopted by the AO and accordingly income has correctly been estimated by him @ 8%." 20. We have heard both the parties and perused the record as well as gone through the orders of the authorities below. We find that in this line of business, the Tribunal has been consistently holding that the profit to be estimated at 8% and, therefore, we do not find any reason to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... still spirituality to lead peaceful life, therefore, the expenditure incurred towards construction of temple is a part of the housing project, which is allowable as capital expenditure, as has been held by the Hon'ble Punjab & Haryana High Court in the case of Atlas Cycle Industries Ltd. v. CIT [1982] 134 ITR 458. We, therefore, set aside the order of the CIT(A) and allow the expenditure claim of the assessee of Rs. 3,92,000/- towards construction of temple as capital expenditure. Thus, this ground of appeal of the assessee is dismissed. 26. Ground No. 4 in AY 2004-05 is directed against the action of the CIT(A) in confirming the disallowance of an amount of Rs. 5,24,000/-expended towards cost of lift incurred by the assessee. 27. The AO had disallowed an amount of Rs. 5,24,000/- towards cost of lifts since the bill was raised on dated 23/03/2005 not related to the assessment year under consideration. Before the CIT(A), the submission of the assessee was that the payments were made in advance during the previous year relevant to AY under consideration. The CIT(A) observed that payments in advance could be made at various points of time but as long as it is not supported by bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was found that some of the expenditure was not supported by proper bills and they were booked to the profit and loss account by way of self-made vouchers. The AO held that the authenticity and correctness of some of the expenditure is at doubt. He, therefore, disallowed a sum of Rs. 3 lakhs from the expenditure incurred on raw material, Rs. 1 lakh from the land development expenses and Rs. 1,50,000/- from the construction labour account. Thus, the total expenditure comes to Rs. 5,50,000/-. On appeal, the CIT(A) following the similar disallowance made by the AO at Rs. 2.00 lakhs under the said three heads in AY 2006-07, restricted the disallowance to Rs. 2 lakhs. Aggrieved, the assessee is in appeal before us. 33. Before us, the learned counsel for the assessee contended that it is not proper to make the ad-hoc disallowance by the AO and restricting the same by the CIT(A) was also incorrect. Since the assessee did not dispute the fact that in the line of its business, it is not always possible to maintain proper bills and vouchers, certain amount of disallowance is called for. Therefore, the CIT(A) has rightly sustained the disallowance of Rs. 2,00,000/- in respect of raw mater ..... X X X X Extracts X X X X X X X X Extracts X X X X
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