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2016 (11) TMI 1040 - ITAT PUNE

2016 (11) TMI 1040 - ITAT PUNE - [2016] 50 ITR (Trib) 554 - Deduction u/s 80IB - Held that:- The assessee is eligible to claim deduction under section 80-IB(10) dehors the area of commercial establishment. In so far as the built-up area of residential units C-5, D-5 and 19 bungalows is concerned the issue is set aside to the Assessing Officer to decide the issue in line with the directions given by the co-ordinate Bench of the Tribunal while adjudicating the appeals in the preceding assessment y .....

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arning tax-free income. The Assessing Officer has rightly invoked the provisions of section 14A read with rule 8D for making such disallowance. Circular No. 8 of 2014 rather clarifies the reason as to why the share of profits of a partnership firm is exempt from tax in the hands of partner. The interpretation drawn by the learned counsel for excluding share of partnership firm from scope of section 14A is not sustainable. We do not find any infirmity in the order of Commissioner of Income-tax (A .....

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ub-Registrar, Karveer, Kolhapur, in support of his contentions. We are of the view that this issue needs a revisit to the Assessing Officer for verification. The Assessing Officer after verification of records and the letters placed on record by the learned counsel from the office of the Sub- Registrar, Kolhapur, shall decide this issue afresh, in accordance with law. - I. T. A. No. 1300/PN/2014 - Dated:- 12-8-2016 - Vikas Awasthy (Judicial Member) And Pradip Kumar Kedia (Accountant Member) For .....

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s return of income for the assessment year 2011-12 on September 26, 2011, declaring a taxable income of ₹ 24,27,815. The case of the assessee was selected for scrutiny and, accordingly, notice under section 143(2) was issued to the assessee on September 27, 2012. The assessee in its return of income had claimed deduction of ₹ 21,84,183 under section 80-IB(10) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") in respect of the housing project "Bhakti Po .....

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-5, D-5 and 19 bungalows exceeded the maximum permissible limit of 1,500 square feet. Apart from the above the Assessing Officer made disallowance of ₹ 19,79,526 under section 14A read with rule 8D on the share of profit received from partnership firm and disallowance of ₹ 6,90,172 under section 69 of the Act. Aggrieved by the assessment order dated January 20, 2014, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appe .....

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ffect from April 1, 2005. The building plan of the project "Bhakti Pooja Nagar" was approved by the Kolhapur Municipal Corporation prior to the amendment. Therefore, the amended provisions of the section would not apply on the project developed by the assessee. The learned counsel for the assessee submitted that disallowance under section 80-IB(10) for similar reasons was made during the assessment years 2005-06 to 2009-10. The matter travelled up to the Tribunal. The Tribunal in Asst. .....

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tated to be in excess of maximum permissible limit of 1,500 square feet, the Tribunal remitted the issue back to the Assessing Officer. The counsel placed a record of copy of the order of the co-ordinate Bench of the Tribunal in Asst. CIT v. Paras Bhomraj Oswal (I. T. A. Nos. 561 to 565/PN/ 2013) (supra). 3.1 The learned counsel for the assessee submitted that the authorities below have erred in making disallowance under section 14A read with rule 8D in respect of share of profit received by the .....

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e. Therefore, the provisions of section 14A read with rule 8D are not attracted. The learned counsel in support of his submissions placed reliance on Circular No. 8 of 2014, dated March 31, 2014 ([2014] 362 ITR (St.) 33 3.2 The learned counsel for the assessee further submitted that the Assessing Officer has made addition of ₹ 6,90,172 under section 69 of the Act on the ground that the assessee has sold some property to one Mrs. Sunita Kulkarni. The addition has been made on the basis of i .....

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red in the name of Mrs. Sunita Kulkarni, vide document No. 4907/2010. The learned counsel submitted that the assessee had never sold the said property or any other property during the period relevant to the assessment year under appeal. The learned counsel also placed on record a copy of letters dated February 10, 2014, and February 25, 2014, from the Office of the Assistant Registrar, Karveer, Kolhapur. The learned counsel for the assessee prayed for setting aside the impugned order and allowin .....

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contended that the issue relating to built-up area of residential units C-5, D-5 and 19 bungalows may be remitted back to the Assessing Officer, in accordance with the order of the Tribunal. In respect of disallowance of deduction under section 14A read with rule 8D the learned Departmental representative submitted that the authorities below have rightly made disallowance on the exempt income earned by the assessee. The share of profit from partnership firm is tax-free income in the hands of th .....

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ion 69 of the Act, the learned Departmental representative submitted that the addition was made on the basis of the CIB information. As per the information received the assessee had sold property CTSO, 2811/A, B-Ward, Kolhapur, vide registration No. 4907 to Mrs. Sunita Kulkarni for a consideration of ₹ 6,90,172. The details of the transaction were filed by the Office of the Joint Sub-Registrar, Karveer, Kolhapur. The Assessing Officer made addition on the specific information received from .....

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e 3 per cent. of the aggregate built-up area of the housing project or 5,000 square feet. The Assessing Officer in his order has observed that the built-up area of the commercial estab lishment in the housing project is 6701.43 square feet which is almost 5.39 per cent. of the total built-up area, and ii. The residential units C-5, D-5 and 19 bungalows have built-up area in excess of maximum permissible limit of 1,500 square feet." The learned counsel has drawn our attention to the order of .....

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r in appeal before the Tribunal. The Tribunal held that the limit specifying the built-up area of shops and commercial establishment in the housing project was inserted by the Finance (No. 2) Act, 2004, with effect from April 1, 2005. Since the project was approved prior to the insertion of amendment, the amended provisions of section would not apply on the assessee. The relevant extract of the findings of the Tribunal are as under : "2.9 Regarding denial of deduction under section 80-IB(10 .....

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ocal authority, it was known that the local authorities could approve the projects as housing projects with commercial user to the extent permitted under the Development Control Rules framed by the respective local authority. The local authority could approve a housing project without or with commercial use to the extent permitted under the Development Rules as held in CIT v. Brahma Associates [2011] 333 ITR 289 (Bom), wherein, the hon'ble Bombay High Court held as under (page 300) : 'It .....

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having only residential units . . . . . . the fact that the deduction under section 80-IB(10) prior to April 1, 2005, was allowable on the profits derived from the housing projects constructed during the specified period, on a specified size of the plot with residential units of the specified size, it cannot be inferred that the deduction under section 80-IB(10) was allowable to housing projects having residential units only, because, restriction on the size of the residential unit is with a vi .....

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ction 80-IB(10) as it stood prior to April 1, 2005, is suggestive of the fact that the deduction is restricted to housing projects approved for residential units only cannot be accepted. The above conclusion is further fortified by clause (d) of section80-IB(10) inserted with effect from April 1, 2005. Clause (d) of section 80-IB(10) inserted with effect from April 1, 2005, provides that even though shops and commercial establishments are included in the housing project, deduction under section .....

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es it amply clear that commercial user is an integral part of a housing project. Thus, by inserting clause (d) to section 80-IB(10) the Legislature has made it clear that though housing projects approved by the local authorities with commercial user to the extent permissible under the Development Control Rules/Regulations were entitled to section80-IB(10) deduction, with effect from April 1, 2005, such deduction would be subject to the restriction set out in clause (d) of section 80-IB(10). Ther .....

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benefit of deduction under section 80-IB(10) in respect of profits derived from approved project including profits from sale of commercial space. This factual legal background, need no interference from our side on this point. We uphold the same." 6. The Tribunal, while dealing with the issue relating to the built-up area of residential units C-5, D-5 and 19 bungalows, held as under : "3. In respect of other reason that 21 bungalows violated the requirement of residential unit being mo .....

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area' imposed for the first time with effect from April 1, 2005, cannot have retrospective application. The hon'ble Karnataka High Court in the case of CIT v. Anriya Project Management Services P. Ltd. reported in [2013] 353 ITR 12 (Karn) ; [2012] 21 taxmann.com 140 (Karn), wherein this provision was examined. The question was whether the definition of 'built-up area' inserted by the Finance (No. 2) Act, 2004, which became effective from April 1, 2005, is prospective or retrospec .....

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e hon'ble Gujarat High Court in the case of Manan Corporation v. Asst. CIT [2013] 356 ITR 44 (Guj) wherein the decision of the assessee has reference of the Supreme Court in the case of CIT v. Gold Coin Health Food P. Ltd. [2008] 304 ITR 308 (SC), CIT v. TVS Lean Logistics Ltd. [2007] 293 ITR 432 (Mad), and National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [2003] 260 ITR 548 (SC) ; AIR 2003 SC 1329, wherein on the point of retrospective date was held tha .....

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the same has no retrospective effect. 3.1 Without prejudice to the above, the main limb on which deduction was denied was for the reason that area of verandah was not excluded or exempt under section 78(3) of the bye-laws of the Kolhapur Municipal Corporation. The Commissioner of Income-tax (Appeals) following the decision of his predecessor, decided the issue in favour of the assessee with regard to 19 bungalows. With regard to bungalows C5 and D5 which admittedly are more than 1,500 square fee .....

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ant. The main issue concerns the definition of built-up area. There was no definition in the Act of the term "built-up area" for the year under appeal. The Finance (No. 2) Act of 2004 with effect from April 1, 2005, inserted the definition of built-up area at sub-section (14)(a) of section 80-IB. The "built-up area" was defined as under : Built-up area means the inner measurements of the residential unit at the floor level including the projections and balconies as increased .....

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s or by necessary implication that it is to operate retrospectively. The apex court has referred to its earlier decisions in the case of Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677 (SC), CIT v. Podar Cement P. Ltd. [1997] 226 ITR 625 (SC) and Brij Mohan Das Laxman Das v. CIT [1997] 223 ITR 825 (SC). The above judgment has cleared the controversy of whether a clarificatory amendment should be construed as being retrospective unless specified otherwise.' 3.2 Facts being similar, so follo .....

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following the decision of the co-ordinate Bench we hold that the assessee is eligible to claim deduction under section 80-IB(10) dehors the area of commercial establishment. In so far as the built-up area of residential units C-5, D-5 and 19 bungalows is concerned the issue is set aside to the Assessing Officer to decide the issue in line with the directions given by the co-ordinate Bench of the Tribunal while adjudicating the appeals in the preceding assessment years. Accordingly, ground Nos. .....

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f the partnership firm is not tax-free. Before distribution of profits, tax is paid on the income of partnership firm, therefore, no disallowance under section 14A should be made on the share of profit received from partnership firm. The learned counsel has placed reliance on the Circular No. 8 of 2014 to support his contentions that once the tax has been paid by the firm the same is not liable to be taxed in the hands of the partners of the assessee. Therefore, no disallowance should be made in .....

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invoked the provisions of section 14A read with rule 8D for making such disallowance. Circular No. 8 of 2014 rather clarifies the reason as to why the share of profits of a partnership firm is exempt from tax in the hands of partner. The same is reproduced hereinunder : "Section 10(2A) of the Income-tax Act, 1961 Firm Share of profits to partner of firm Clarification on interpretation of provisions of section 10(2A) in cases where income of firm is exempt Circular No. 8 of 2014 (F. No. 173 .....

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ed by the Finance Act, 1992, with effect from April 1, 1993 due to a change in the scheme of taxation of partnership firms. Since assessment year 1993-94, a firm is assessed as such and is liable to pay tax on its total income. A partner is not liable to tax once again on his share in the said total income. 3. It is clarified that 'total income' of the firm for sub-section (2A) of section 10 of the Act, as interpreted contextually, includes income which is exempt or deductible under vari .....

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