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The Commissioner of Income Tax-15 Versus M/s. Fortaleza Developers

2015 (4) TMI 682 - BOMBAY HIGH COURT

Entitlement to deduction under section 80IB(10) - Review u/s 263 - Held that:- The contract between the two parties was self explanatory and the interpretation placed by the Assessee on clause 7 and claiming deduction under section 80IB(10) is in order. The interpretation of one of the Assessing Officer could not have substituted the parties interpretation of the relevant clause 7 of the AOP agreement with his own reasoning and that too to the detriment of the Assessee.

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peal does not raise any substantial question of law. The Appeal is, therefore, dismissed. - Decided against revenue. - Income Tax Appeal No. 1041 of 2013 - Dated:- 9-4-2015 - S. C. Dharmadhikari And A. K. Menon,JJ. For the Petitioner : Mr A R Malhotra For the Respondent Rep by: Mr J D Mistri, Sr. Counsel JUDGMENT (Per A. K. Menon, J.) By this Appeal, the following six questions of law are proposed by the Revenue: (a) Whether on the facts and in the circumstances of the case and in law, the Tribu .....

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ther on the facts and in the circumstances of the case and in law, the Tribunal was correct in accepting the calculation of eligible quantum of deduction under section 80IB(10) of the Act? (d) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in allowing deduction u/s. 80IB(10) of the Act on the share of M/s. Sanand Properties Pvt. Ltd. (one of the member of AOP) in view of clause 7 of AOP agreement dated 29th April, 2003? (e) Whether on the facts and .....

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₹ 4,13,610/- after claiming deduction of ₹ 14,54,47,283/under section 80IB(10) of the Income Tax Act, 1961. The Assessing Officer completed the assessment under section 143(3) and computed the total income at ₹ 14,63,04,860/- after disallowing deduction claimed under section 80IB(10). 3. The Assessee filed an Appeal before the Commissioner of Income Tax (Appeals) who held that the Assessee had fulfilled all the conditions laid down in section 80IB(10) and directed the Assessing .....

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ve 35% of the sale proceeds of the project and out of the balance 65%, all the expenditure of the AOP was to be met, after which the net balance constituted the share of income of RRK. 5. The notice under section 263 specified that the manner of allocation of revenue provided the Assessee with undue benefit by way of a higher claim of deduction under section 80IB(10) contrary to clause (7) of the AOP agreement. It was contended that the share of Revenue pertaining SPPL was not eligible for deduc .....

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ore, quashed the order passed by the CIT (Appeals). 7. In its order dated 12th October, 2012, the Appellate Tribunal dealt with the contents of the AOP agreement and in particular clause (7) of the agreement which is reproduced at page 7 of the order of the Appellate Tribunal. The relevant extract of clause (7) is reproduced below under the heading SHARING OF REVENUE AND INCOME:- "Out of the aforesaid amounts received from the purchasers of the housing units (representing the gross sale pro .....

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the purpose of the business of the AOP shall be met with and whatever net balance remains thereafter, shall be determined as the share of revenue/income of RKC. RKC will be at liberty to actually withdraw its share of revenue/income as worked out herein above from time to time." 8. After considering this clause, the Tribunal proceeded to reproduce the working of the profit and distribution between the two members of the AOP. The Tribunal, then, proceeded to consider the fact that the main c .....

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entitled as its share of revenue/income comprising of 35% of the receipts and from the balance 65%, all the expenses for the purpose of business of the AOP was to be met with and the the remaining amount would be the share of income of RRK. 9. Having considered the views of the Commissioner of Income Tax (Appeals) and in the light of material before it, the Tribunal concluded that the CIT's interpretation of clause (7) was incorrect. According to the Tribunal, the quantum of deduction under .....

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an eligible project and the fulfillment of the conditions laid down in the section and also the deductions available to an undertaking and not to the individual constituent of an undertaking. 10. The Tribunal was clearly of the view that the Commissioner of Income Tax had erred in his order. The learned CIT was debarred from exercising jurisdiction under section 263 since the subject matter of the Appeal was deduction under section 80IB(10). On the issue of merger, the Tribunal held that the pow .....

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section 263 and the issue of merger were invoked. In that case, the Assessee had sold its share of theatrical rights to one M/s. RGV Enterprises for ₹ 25 lakhs and on the showing of the Revenue, the Revisional Authority issued a show cause notice by invoking powers under section 263 of the Act because the Assessee which was engaged in the business of production and the financing and distribution of cinematographic films, had filed a return of income on 10th September, 2009 declaring income .....

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ncome from the production of the film, but this was a sum received as share application money from various persons. 12. The Assessing Officer did not accept this contention and considered income at ₹ 11,25,00,000/-. The Revisional Authority was aware of the fact that the Assessee had preferred an Appeal before the Commissioner of Income Tax (Appeals), the First Appellate Authority while dealing with the ground that the claim of the Assessee s cannot be sustained. In that case, the doctrine .....

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isallowance of deduction claimed under section 80IB(10) was justifiable and considered that the Respondent shall not entitled to claim benefits of said section 80IB(10) on account of the manner in which clause 7 of the AOP agreement has been worded. According to him, the manner in which the AOP agreement was worded by the Assessee, disentitled the Assessee to claim benefit of section 80IB(10). Mr. Mistri, on the other hand, faulted the reasoning of the Assessing Officer and supported the order o .....

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