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M/s. Modi Shelters Pvt. Ltd., Hyderabad Versus Dy. Commissioner of Income-tax, Circle 16 (2) , Hyderabad and M/s. Modi Shelters Pvt. Ltd., Hyderabad Versus Income Tax Officer, Ward 16 (1) , Hyderabad and Vica-Versa

2016 (3) TMI 320 - ITAT HYDERABAD

Denial of the claims for relief under S.80IB(10) - built up area of each residential unit exceeded 1,500 sq. ft. - Held that:- Built-up area includes portico and balcony also and in this case it exceeds 1500 sq. ft. per residential unit. Accordingly the assessee is dis entitled for the benefit u/s. 80IB of the Act - Decided against assessee

Disallowance in terms of S.14A - claim of the assessees that there is no income earned by the assessee which did not form part of the total income .....

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nterest relatable to such loans cannot be attributed to the investments yielding interest-free income. The observation of the CIT(A) that unless nexus between the borrowals made by an assessee and the investments yielding exempt income made by the assessee is established, no disallowance under S.14A read with Rule 8D can be made is in consonance with the settled position of law laid down inter-alia in CIT V/s. SBI DHFL Ltd. (2015 (11) TMI 399 - BOMBAY HIGH COURT ) and CIT V/s. Hero Cycles Ltd. ( .....

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1785/Hyd/2013, 1565/Hyd/2013, 1786/Hyd/2013 - Dated:- 29-1-2016 - SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri S.Rama Rao For The Department : Shri Konda Ramesh ORDER Per Bench : There are five appeals concerning two assessees in this bunch. Three of them are filed by the assessees and two of them are filed by the Revenue. The appeals for the assessment years 2009-10 and 2010-11 in respect of M/s. Modi Shelters Pvt. Ltd., as well as the appeal .....

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ith regard to denial of the claims for relief under S.80IB(10) of the Income Tax Act, 1961, on the ground that the built up area of each residential unit exceeded 1,500 sq. ft. 3. Facts of the case in brief, as taken from the appeal folder for assessment year 2009-10 in respect of ITA No.1566/Hyd/2013( M/s. Modi Shelters Private Limited), are that the assessee company engaged in the business of real estate development has filed its return of income for the assessment year 2009-10 on 26.9.2009 ad .....

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rofits for the 80IB projects, as also Form No.10CCB furnished by the assessee, it was noticed that the assessee had executed the following projects during the year- Sl.No. Name of the Project Area No. 1. Emerald Park Annojiguda 148 2. Emerald Park Annexe Annojiguda 104 3. Palm Springs Phase ii Kompally 63 The residential units in the above projects are independent residential units/bungalows, which are duplexes surrounded by a compound wall and each residential unit, inter alia, consisted of a p .....

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of 1,500 sq. ft, as against the condition stipulated under S.80IB(10) that the residential unit has a built up area not exceeding 1000 sq. ft, where a such unit is situated within the cities of Delhi or Mumbai or within 25 Kms of the municipal limits of these cities and 1,500 sq. ft. at any other place. In this view of the matter and considering the detailed examination of this aspect done during the course of scrutiny assessment proceedings for the assessment year 2008-09, the Assessing Officer .....

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of the assessee s detailed explanation, in the light of the case-laws on this aspect, including the decisions of the Tribunal in similar matters as well as in the case of one of the two appellant-assessees before us, viz. M/s. Modi Builders & Realtors Pvt. Ltd., the Assessing Officer concluded that the three projects noted above do not qualify for deduction under S.80IB(10) of the Act, and accordingly, disallowed the claim of the assessee for deduction of ₹ 1,97,83,163 under S.80IB(10 .....

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0), assessees have preferred these appeals before us. 8. We have heard the parties and perused the material on record, including the paper-books filed by the assessee. We have also gone through the written submissions filed by the assessee. The condition stipulated in the Act so as to make an assessee eligible for relief under S.80IB(10), is that in the residential projects constructed, the residential unit has a built up area not exceeding 1000 sq. ft, where such unit is situated within the cit .....

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458/Hyd/2011, following the earlier decision of the Tribunal in the case of Modi Builders & Realtors Pvt. Ltd. in ITA No.1541/Hyd/2010 for assessment year 2007-08 vide order dated 31.3.2011, confirmed the disallowance made for the assessment year 2008-09. Relevant portion of the order of this Tribunal in the cases of these very assessees dated 22.3.2012 is extracted belowITA 2. The first common ground in these appeals is with regard to allowability of deduction u/s. 80IB(10) of the Income-ta .....

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s per clause (a) of subsection (14) of section 80IB of the Income-tax Act, 1961. As per this clause the definition of builtup area is as follows: 80IB(14)[(a) - built-up area means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units;] 12. The above definition was introduced by Finance (No. 2) Act, 2004. This amendment starts .....

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uld exceed 1500 sq. ft. per unit. As per the definition as stated in section 80IB(14)(a) built-up area includes projection and balcony. Accepted rules of interpretation for and inclusive definition as elucidated by the Hon ble Supreme Court in the case of CIT vs. Tajmahal Hotel (1973) CTR (SC) 480; AIR 1972 (SC) 168 is that if the word include is used in an interpretative clause, it must be construed as apprehending not only such as it signifies to its nature and merit, but also things which the .....

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kness of walls and does not include common area shared with others. This definition gives the enlarged meaning of built-up area which includes balcony and projection. After inclusion of balcony and projection if the total area of built-up area exceeds 1500 sq, ft. in this case the assessee is not entitled for deduction u/s. 80IB of the Act. The learned counsel for the assessee placed reliance on the judgement of Supreme Court in the case of Bajaj Tempo, 196 ITR 188 wherein it was held that a pro .....

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logically follow. In our opinion, the legislative expedience adopted to achieve that objective in the provision requires to be given effect on it is own language. There is no ambiguity in clause (a) of subsection (14) of section 80IB of the Act. As there is no ambiguity in the statutory language, resort to interpretation process to unfold the legislative intent becomes impermissible. The supposed intention of the legislature cannot then be appealed to whittle down statutory language which is oth .....

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to be reiterated that the object of interpretation of a statute is to discover the intention of Parliament as expressed in the Act. The dominant purpose in construing a statute is to ascertain the intention of the Legislature as expressed in the statute, considering it as a whole and in its context. That intention, and, therefore, the meaning of the statute, is primarily to be sought in the words used in the statute itself, which must, if they are plain and unambiguous, be applied as they stand .....

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the ground relating to 80IB(10) of the Act. . In the absence of any decision to the contrary brought to our notice by the Revenue, consistent with the view taken by the coordinate benches of this Tribunal in similar matters, including in the cases of the assessees herein as well, we find no infirmity in the impugned orders of the Revenue authorities on this issue. Even though learned counsel for the assessee reiterated the stand of the assessee and pleaded that car parking area and first floor t .....

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eals of the assessees are dismissed. Revenue s Appeals: 10. In the appeals of the Revenue, the only common effective grievance is against the action of the CIT(A) in deleting the disallowances in terms of S.14A of the Act made by the Assessing Officer. 11. Facts in brief relating to this issue, in so far as ITA No.1784/Hyd/2013(M/s. Modi Shelters Pvt. Ltd.) is concerned, are that the Assessing Officer during the course of assessment proceedings noted that the assessee s investments in partnershi .....

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ssessee has earned interest of ₹ 14.73 lakhs during the previous year 2008-09, and the net interest expenditure incurred by the assessee was to the extent of ₹ 39.14 lakhs. The Assessing Officer noted in this context that while computing the total income under Chapter IV of the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income. In this view of the matter, the Assessing Officer calle .....

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income and such income should not form part of the total income under the Act. If either of those conditions is absent, the section 14A will have no applicability. In this connection it is pertinent to note that there are investments made by the assessee during the year. Further, the assessee has taken loans towards which interest expenditure has been incurred. The investments made are of such a nature that the income there from would not have formed part of total income taxable in the hands of .....

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in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed. Rule 8D of the Income-tax Rules, 1962 (hereinafter referred to as the Rules ) lays down the method of calculating the expenditure incurred in relation to income which does not form part of total income. Further, as it can be seen from rule 8D of the rules, no evidence is required to be examined to see that the expenditure has been actually incurred in relati .....

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place that all investments in equity shares of associate company, Modi Builders & Realtors P. Ltd. are not made during the current financial year and most of the investments are accumulated over a period of time from financial year 2006-07 to 2008-09, with the total amounting to ₹ 27,95,00,250 including the investment of ₹ 2.35 crores made during the financial year 2008-09 relevant to assessment year under consideration. As against this, it was noted that the net surplus funds av .....

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assessee that there was no income whatsoever claimed as exempt and whatever interest income was earned by the assessee, the same was offered to tax under business income, and consequently, there is no scope for making any disallowance in terms of S.14A of the Act. Similarly, from a comparative statement of funds borrowed for past two years furnished by the assessee, the CIT(A) noted that there are no new borrowals during financial year 2008-09 and in fact loans taken from Axis Bank of ₹ 3 .....

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ed for earning exempt income. The relevant observations of the CIT(A) in para 7.1 of the impugned order read as follows- 7.1 From the above, it is clear that the appellant does not have any income which does not form part of the total income nor has the appellant made such a claim and also the investments had been made by appellant from its own funds and no part of borrowed funds had been used for purpose of making investment any time during the previous year. In view of the above and also relyi .....

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form part of the total income, deleted the disallowance made by the Assessing Officer in terms of S.14A of the Act. 13. In the other two revenue appeals also, except for the amounts involved facts are identical, and the CIT(A), after detailed examination of the relevant factual aspects of the matter, held in the first place that the assessee did not have any income which did not form part of the total income, nor has the assessee made such a claim and the investments had been made by the assesse .....

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