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Alpine Estates, Secunderabad Versus Income Tax Officer, Ward-10 (4) , Hyderabad

2016 (9) TMI 603 - ITAT HYDERABAD

Exemption U/s 80IB computation - inclusion of items for the purpose of arriving at the profits for working out deduction U/s 80IB(10) - Held that:- For the interest on FDR in our view, the income arising out of such FDRs are not derived from the business of the housing development and therefore, the assessee is not enetitled for the benefit U/s 80IB of the Act. See Liberty India Vs CIT [2009 (8) TMI 63 - SUPREME COURT] - Forfeited amount and interest from customers - The amount was received .....

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xus of first degree with the business of the assessee there it comes with the definition of “income drawn” therefore the assesse is an eligible under Section 80IB of the Act. In our view, the forfeiture of the amount was an income flowing under the first degree of nexus with the eligible business. The forfeiture of the amount is result of the failure on the part of the customer to cancel the booking, which in our view, is an income directly drawn from the business of the assessee. However, we ar .....

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ew, the assessee for the purposes of smooth functioning and early completion of project was duty bound to provide housing facility, electricity and water connection at a place near to the work site of the assessee to its employees and if the assessee do not provided such facilities to its employees then the labours would be living in the remote area and for that purposes, the assessee would be required to pay the additional cost for accommodation and transport charges. Instead thereof, the asses .....

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ld A.O. as well as the ld CIT(A) are required to be uphold. - Appeal decided partly in favour of assessee - ITA No. 62/HYD/2016 - Dated:- 3-8-2016 - SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER For The Assessee: Shri S. Rama Rao (AR) For The Revenue: Shri K.E. Sunil Babu (D.R.) ORDER PER LALIET KUMAR, J.M. : This is the appeal filed by the assessee arises against the order dated 29/01/2016 passed by the ld. CIT(A)-6, Hyderabad for the A.Y. 2010-11 wherein the .....

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s.2,99,348 vi) Sundry balances written off - Rs. 588 2. The brief facts of the case are that the assessee is engaged in the business of real estate/developers/managers. It filed return of income for the year under consideration on 27/09/2010 declaring Nil income after claiming deduction U/s 80IB(10) for ₹ 2,03,37,343/-. The case was selected for scrutiny. The appellant firm has shown credit amount to the P&L account totaling to ₹ 12,62,856/-. The details of which is as under:- i) .....

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will be income from other sources. 3. Being aggrieved by the order of the ld A.O., the assessee carried the matter before the ld CIT(A). Before the ld CIT(A), it was contended that netting of the interest is to be done as the assessee has paid the interest and has also earned the interest. For that purposes, the assessee has calculated net interest was ₹ 22,47,658.24 as per the following table: Interest paid Interest paid to SBI CC account 23,28,880.00 Interest to bank OD 2,00,403.60 Inter .....

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s miscellaneous income. The ld CIT(A) after considering the arguments has held as under:- 06.0 The submission of the appellant and the facts of the case have been carefully considered. (i) FDR interest: Simply because the fixed deposit was given as security for the OD, any interest on FDR cannot be termed as profit derived from the eligible business. The FDR remains in the nature of investment which incidentally was used as a collateral security for OD. This security could have been any other in .....

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the same as part of profits for computation of deduction U/s 80IB(10) of the Act. (iii) Interest received from customers: This amount is received from buyers for delayed payments of installments. It carries the nomenclature of being part of sale proceeds. Just like discount given on sales forms part of the sale consideration as a negative sale consideration, interest received on delayed payments is a positive sale consideration. The Assessing officer is directed to include this amount in the Gro .....

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e said to be incidental to its business as it does not carry just degree of nexus with the eligible business. Therefore, the action of the Assessing officer in considering it as income from other sources calls for no interference. (v) Interest on NSC and sundry balances written off: The interest on NSC represents investment and is chargeable under the head Income from other sources . The Assessing officer had not given any details regarding sundry balances written off and the assessee has also n .....

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ness need and was an business income. In our view, the FDR, though, was deposited as security for issuance of the OD limit. In our view, the income arising out of such FDRs are not derived from the business of the housing development and therefore, the assessee is not enetitled for the benefit U/s 80IB of the Act. We draw our strength from the judgment of the Hon ble Supreme Court in the case of Liberty India Vs CIT 2009] 183 Taxman 349 (SC) wherein the Hon ble Court has held as under On analysi .....

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gainst "profits attributable to industrial undertaking Respectfully following the judgment of the Hon ble Supreme Curt, we hold that the FDR interest at ₹ 4,35,592 , ₹ 48,578 and ₹ 8,750/- were rightly sustained by the authorities below and the assessee was not entitled for exemption U/s 80IB of the Act on such income. Forfeited amount and interest from customers:- The amount was received by the appellant on cancellation booking in accordance with the clause 6.1 of the cha .....

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on of income drawn therefore the assesse is an eligible under Section 80IB of the Act. In our view, the forfeiture of the amount was an income flowing under the first degree of nexus with the eligible business. The forfeiture of the amount is result of the failure on the part of the customer to cancel the booking, which in our view, is an income directly drawn from the business of the assessee. However, we are remanding the matter to the file of the A.O. for the purposes of verification of the f .....

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