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M/s Kumar Company Versus Addl. Commissioner of Income Tax,

2015 (5) TMI 1005 - ITAT PUNE

Rectification of mistake - allocation of interest while working out eligible profits for deduction under section 80-IB(10) - Held that:- Tribunal while deciding the issue has clearly mentioned that the onus was entirely on the assessee to demonstrate the actual utilization of interest-bearing funds for a particular project and the assessee admits that the utilization of projectwise borrowed funds and interest cannot be identified from the examination of the common bank account. Under these circu .....

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s devoid of any merit and therefore, is dismissed. - Decided against assessee - MA Nos.75 & 76/PN/2014 - Dated:- 22-5-2015 - Shri R.K. Panda, Accountant Member and Shri Vikas Awasthy, Judicial Member Appellant by : Shri Rajendra Agiwal Respondent by : Shri B. C. Malakar ORDER PER R.K.PANDA, AM : The assessee has filed two separate Miscellaneous Applications requesting the Tribunal to recall the common order of the Tribunal passed on 30.04.2014 for assessment years 2006-07 and 2007-08 arising out .....

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r section 80-IB(10) of the Act. He submitted that the Assessing Officer in the order passed under section 143(3) of the Act has apportioned interest expense of ₹ 1,69,25,345/- between eligible 80-IB(10) projects and non-eligible 80-IB(10) projects and reduced the profits from eligible projects and consequently recomputed deduction under section 80-IB(10) of the Act. 3. The CIT(A) rejected the ground of apportionment of entire interest towards non-eligible 80-IB(10) projects on the ground t .....

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tilized for all the projects and there was no one to one linkage between borrowed funds and their deployment in non-eligible 80-IB(10) projects. He submitted that during the course of hearing before the Tribunal, the assessee had submitted a note detailing out the manner of the preparation and maintenance of its books of account, which reads as under :- it is submitted that the Appellant maintains consolidated accounts. Further, the Appellant maintains project wise details of direct expenses and .....

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e Agreement with other party, separate set of books are maintained (refer Page 105 of the Factual Paper Book). During the years under consideration, the advances and funds received by the Appellant deposited in a common bank account opened by the Appellant for administrative convenience. Through the said bank account, the project-wise borrowed funds and interest cannot be identified. Therefore the Appellant once again reiterates its stand that necessity of borrowed funds whether surplus/ deficit .....

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) projects and as such no funds specifically have been borrowed for the purposes of these eligible projects. Further, the borrowed funds were neither taken for eligible projects nor utilized for the construction of such projects and therefore, the lower authorities have erred in apportioning interest expenses to the projects eligible for deduction under section 80-IB(10) of the Act. He submitted that the assessee has already discharged its onus regarding actual utilization of interest bearing fu .....

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ess and completeness of accounts. Further, it is not correct before the Tribunal to hold that the onus is entirely on the assessee to demonstrate the actual utilization of interest bearing funds which the assessee admits that utilization of project-wise borrowed funds and interest cannot be identified from the examination of common bank accounts. The Ld. Counsel for the assessee further submitted that various decisions were cited before the Tribunal at the time of hearing, however, these are not .....

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hat the Tribunal after considering the factual aspects and the submissions made by the Ld. Counsel for the assessee at the time of hearing has come to a finding which is against the assessee. Now, the assessee through this Miscellaneous Application requests the Tribunal to recall the order which amounts to review of its own order by the Tribunal which is not permissible in the law. He accordingly, submitted that the Miscellaneous Application filed by the assessee should be dismissed. 6. We have .....

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at the business of exclusion of projects carried out by the appellant is composite and in the absence of any nexus between the borrowed funds and their utilization in non 80IB(10) projects, the interest expenditure was required to be apportioned among all the projects i.e. non 80IB(10) as well as 80IB(10) projects. The conclusion of the CIT(A) on this aspect is as under :- The appellant has borrowed on interest substantial funds which are used as working capital for execution of various construc .....

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rent sites. As when there is requirement of funds for execution of a particular project whether 80IB(10) project or non 80(IB)(10) project, the funds are drawn from the common pool of funds, which are being used by the appellant for various activities. In such a situation, the claim of the appellant that borrowed funds were not utilized for 80IB (10) projects and therefore, there cannot be any apportionment of interest expenditure to 80IB(10) projects, is not tenable. When the business of execut .....

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ng Officer was sought to be assailed. The Assessing Officer had apportioned the interest expenditure in the ratio of profits of 80IB(10) projects and non 80IB(10) projects. The CIT(A) accepted the plea of the assessee that the Assessing Officer was wrong in this regard and he upheld the method of apportionment canvassed by the assessee which was on the basis of the ratio of total work-in-progress of such progress. In para 7.2.1 of his order the CIT(A) has tabulated the apportionment of interest .....

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with the return of income for these years. On due verification, if it is found that the details of work-in-progress filed by the appellant are in agreement with the statements of accounts filed with the return of income, the interest expenditure, depreciation and administrative expenses shall be apportioned on the basis of the total work-in-progress including land cost of 80IB(10) and non 80IB(10) projects as on 31/03/2006 and 31/03/2007. Thus, the apportionment of the expenditure in question sh .....

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ining project-wise details and account of direct expenses and income so as to arrive at project-wise profit and manner of account maintenance also reflects project-wise details of debtors/creditors advanced from flat-holders, etc.. It was pointed out that in view of the availability of such details accounts for each project, assessee was able to establish that in the case of 80IB(10) projects there was surplus of fund position throughout the year on account of receipt of customers advances and t .....

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sel submitted that assessee would satisfied if the directions of the CIT(A) are modify to that extent requiring the Assessing Officer to consider the availability of such advances while considering allocation of interest incurred on common borrowings. 10. On the other hand, the learned Departmental Representative has relied upon the orders of the authorities below in support of the case of the Revenue. 11. Having considered the rival positions and it is apparent that the stand of the assessee is .....

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d the additions to the work-in-progress made, so however, he noted that for the assessment year 2007-08 the customer receipts were less than the additions made to the work-inprogress suggesting that there was deficit in that year. For the aforesaid reason, the CIT(A) concluded that the surplus or deficit of funds in case of 80IB(10) projects was not consent every year and that it would vary depending on the requirement of funds and the receipts of customers. The aforesaid factual matrix is not d .....

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admitted by the assessee, it was not possible to identify and allocated the interest cost to any particular projects. Under such factual scenario, in our view, it would not be proper to accept the plea of the assessee that no interest expenditure is to be apportioned against the profits of 80IB(10) projects. The stand of the CIT(A) on this aspect is hereby affirmed in-principle. 13. However, at the time of hearing, the learned counsel vehemently pointed out that the necessity of borrowed as bein .....

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find no force in the plea of the assessee and accordingly the order of the CIT(A) is hereby affirmed and the assessee fails. 7. From the above, we find the Tribunal while deciding the issue has clearly mentioned that the onus was entirely on the assessee to demonstrate the actual utilization of interest-bearing funds for a particular project and the assessee admits that the utilization of projectwise borrowed funds and interest cannot be identified from the examination of the common bank account .....

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d by the assessee is devoid of any merit and therefore, is dismissed. MA No.76/PN/2014 : 8. The assessee through this Miscellaneous Application requests the Tribunal to re-call the order of the Tribunal and pass appropriate orders. 9. The first issue raised by the assessee in this Miscellaneous Application is regarding the allocation of interest while working out eligible profits for deduction under section 80-IB(10) of the Act. 10. After hearing both the sides, we find the above issue raised by .....

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Act in respect of housing project Kumar Padmalaya has remained to be adjudicated. 12. The Ld. Counsel for the assessee referring to the Miscellaneous Application submitted that although a specific ground had been taken before the Tribunal regarding the disallowance of deduction under section 80-IB(10) of the Act of ₹ 1,01,94,782/- in respect of the housing project Kumar Padmalaya , however, inadvertently the ground raised by the assessee on this issue remained to be adjudicated. He accordi .....

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