TMI Blog2016 (8) TMI 1586X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to the assessee is dismissed. Disallowance u/s. 14A r.w. Rule 8D - HELD THAT:- Assessee has earned exempt income from share of profit from the partnership firm and dividend. The disallowance has been made by the AO u/s. 14A read with Rule 8D. The Hon'ble Jurisdictional High Court in the case of Godrej and Boyce Mfg. Co. Ltd [ 2010 (8) TMI 77 - BOMBAY HIGH COURT] has held that Rule 8D would apply from assessment year 2008-09. Some reasonable disallowance has to be estimated u/s. 14A for earning income exempt from tax. The Commissioner of Income Tax (Appeals) has restricted the disallowance to 10% of the exempt income - The assessee has accepted the same. We do not find any infirmity in the order of CIT (Appeals). Accordingly, the issue raised by the Department against restricting the disallowance u/s. 14A to 10% of the exempt income is devoid of any merit. Accordingly, this ground of appeal of the Revenue is dismissed. Depreciation on Motor Cars - AO disallowed the claim of depreciation on motor cars on the ground that twin conditions for claiming depreciation u/s. 32 assets should be used for the purpose of business and assets should be owned by the assessee, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file of Assessing Officer to ascertain the financial position of the assessee at the time of giving advances. In case own interest free funds of the assessee are sufficient to cover the advances at the time of making such advances, no disallowance should be made in view of the decision of Hon'ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Reliance Power Utility Ltd [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] Accordingly, ground No. 3 raised in the appeal of the assessee for assessment year 2007-08 is allowed for statistical purpose. - ITA Nos. 1190 & 1191/PN/2013 And ITA Nos. 1271 & 1272/PN/2013 - - - Dated:- 12-8-2016 - Before Shri R.K. Panda, AM And Shri Vikas Awasthy, JM For the Assessee : Shri Nikhil Pathak. For the Revenue : Shri K.K. Mishra. ORDER PER VIKAS AWASTHY, JM : These appeals by the Department and the assessee are directed against the order of Commissioner of Income Tax (Appeals)-III, Pune dated 28-03-2013 common for the assessment years 2007-08 and 2008-09. Since, the issues raised by the Department in its appeals for the impugned assessment years and in the cross appeals by the assessee for both the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the issuance of commencement certificate in April, 1998 the RCC framework up to the ground floor was also completed till September, 1998. The ld. DR contended that as per the provisions of section 80IB(10), the housing project is eligible to claim deduction only if the undertaking has commenced construction or development and construction of the housing project on or after 01-10-1998. The facts on record clearly show that the assessee had commenced the housing project much prior to 01-10-1998, therefore, the housing project Kumar Puram is not eligible for deduction u/s. 80IB(10). The ld. DR vehemently defended the findings of Assessing Officer and prayed for reversing the order of Commissioner of Income Tax (Appeals). 3.2 Shri Nikhil Pathak appearing on behalf of the assessee submitted that the assessee had developed commercial complex Business Court and residential project Kumar Puram on independent plots. Both the plots are separated by land which does not belong to the assessee. The ld. AR contended that similar disallowance was made in respect of project Kumar Puram by the Assessing Officer in assessment year 2001-02. The matter travelled up to the Tribunal. The Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constructed commercial area in excess of 2000 sq.ft. or 5% of the built up area whichever is less, as discussed in preceding paras of this order. In this regard, stand of the assessee has been that the project Business Court is constructed on plot No.5 which is an independent plot. It was specifically pointed out from the layout plan that plots Nos.5 and 6 are not even adjoining plots. They are separate as shown in the cite plan submitted on behalf of the assessee. In this background, it was submitted Business Court is not part of project Kumar Puram and hence, CIT(A) was not justified in holding that assessee has constructed commercial project Kumar Puram. The assessee has filed the factual situation with regard to the layout of project Kumar Puram wherein Kumar Puram project is on Plot No.6 while Business Court is on Plot No.5 on plot No.411 and they are not adjoining plots. In this situation, it is not justified on the part of the CIT(A) to mix two issues of two plots which are distantly located. The third objection of the Revenue has been that expenditure has been incurred on items of Iron and steel, securities charges, labour charges, labour contractor charges in F.Y. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Kumar Puram Project but it pertains to Business Court . In view of above, the CIT(A) was not justified in observing that project has commenced prior to 01.10.1998 by relying on the certificate from M/s.Pundalik Pundalik who is the architect of Business Court . At page 37, the CIT(A) has observed that commencement certificate was issued on 10.03.2000 and according to him, it was revised certificate. It is revised commencement certificate and project Kumar Puram is different identity. Factually, entire land on plot No.411 as stated above was already divided into various plots which was purchased by various parties so it was not justified on part of the Revenue to hold that all construction on the total land was one project. This view is supported by the decisions in the cases of M/s.Rahul Constructions (supra), M/s.Aditya Developers (supra) and Vandana Properties (supra) and Mudit Madanlal Gupta vs. ACIT 51 DTR 217 (Bom) and Brigade Enterprises (P) Ltd. 119 TTJ 269 (Bang.). In view of above, we hold that assessee is entitled for deduction u/s.80IB(10) with regard to Kumar Puram project constructed on plot No.6 of original plot No.411. 3.4 A perusal of the order of Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that Rule 8D would apply from assessment year 2008-09. However, some reasonable disallowance has to be estimated u/s. 14A for earning income exempt from tax. The Commissioner of Income Tax (Appeals) has restricted the disallowance to 10% of the exempt income i.e. ₹ 80,94,240/-. The assessee has accepted the same. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals). Accordingly, the issue raised by the Department against restricting the disallowance u/s. 14A to 10% of the exempt income is devoid of any merit. Accordingly, this ground of appeal of the Revenue is dismissed. Depreciation on Motor Cars : 5. The assessee has claimed depreciation of ₹ 5,29,627/- on motor cars registered in the name of Directors. The Assessing Officer disallowed the claim of depreciation on motor cars on the ground that twin conditions for claiming deprecation u/s. 32 i.e. : (i) the assets should be used for the purpose of business; and (ii) the assets should be owned by the assessee, are not satisfied. In the present case the asset i.e. the motor cars are registered in the name of individual Directors of the company and not the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said case was the assessee company. The Assessing Officer disallowed the claim of depreciation. In first appeal, the Commissioner of Income Tax (Appeals) upheld the findings of Assessing Officer. The assessee carried the matter in second appeal before the Tribunal. The Tribunal decided the issue in favour of the assessee by holding as under : 9. We have heard the rival contentions and perused the record. The assessee for the year under consideration had claimed depreciation on vehicles which were registered in the name of one of its Directors. The cost of the said vehicles were admittedly borne by the assessee company out of its own funds and the said vehicles were reflected as assets of the assessee company in the list of fixed assets as on the end of the year. The expenditure of running and repairs of the said vehicles has been borne by the assessee company. The said vehicles were being used by the assessee company for its business, the explanation of the assessee for registering the same in the name of the Directors of the assessee company was that there was saving in the registration cost. But merely because the vehicles were registered in the name of the Directors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Shree Panchganga Agro Impex Pvt. Ltd. (supra). The CIT(A) had denied the claim of depreciation on vehicles, in turn, reliance was placed on the ratio laid down by the Mumbai Bench of the Tribunal in Edwise Consultants Pvt. Ltd. vs. Addl.CIT (supra). We find no merit in the said reliance placed upon by the CIT(A) especially in circumstances where similar issue of allowance of depreciation on vehicles which were registered in the name of the Directors of the assessee company and claim of depreciation in the hands of the company itself, the Mumbai Bench of the Tribunal had allowed the claim of the assessee. In this regard, we find support from the ratio laid down by the Mumbai Bench in M/s Orbit Marketing Pvt. Ltd. vs. ITO (supra) and Navjeevan Synthetics Pvt. Ltd. vs. ACIT (supra). In view of the issue being settled in favour of the assessee by series of decisions of Pune Bench of the Tribunal and Mumbai Bench of the Tribunal, we reverse the order of the CIT(A) and direct the Assessing Officer to allow the assessee s claim of depreciation of Rs.7,04,516/- on vehicles owned by the assessee company, which were registered in the name of the Directors of the assessee company. The g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of the Board held that the assessee has complied with all the conditions laid down under the Industrial Park Scheme, 2008 and thus, the assessee is eligible to claim deduction u/s. 80IA(4)(iii) of the Act. 6.2 The ld. DR defending the findings of Assessing Officer submitted that the assessee has not complied with the conditions laid down under the Scheme for setting up of Industrial Park. The Industrial Park set up by the assessee has not come into operation before due date i.e. 31-03-2006 as per the Industrial Park Scheme, 2002 (hereinafter referred to as the (IPS, 2002 ). Further, according to the Scheme the assessee should have minimum 30 IT/ITES units in the Industrial Park developed under the Scheme. The assessee has sold substantial part of the project to two companies only i.e. Poonawalla Group and Milestone Group. Therefore, the assessee is not eligible to claim deduction u/s. 80IA(4)(iii) of the Act. The ld. DR contended that if at all the assessee is found to be eligible for claiming deduction u/s. 80IA(4)(iii) the same should be allowed in the assessment year after the date of notification declaring the project as industrial park and not in the assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uent scheme. The subsequent scheme i.e. Industrial Park Scheme, 2008 (IPS, 2008) was notified in the official gazette of Government of India on 08-01-2008. In the latter scheme the procedure for seeking approval for setting up an industrial park was much simplified. The assessee made an application for notifying the industrial park developed by the assessee on 11-09-2008 under IPS, 2008. The CBDT vide notification dated 9th July, 2010 notified the assessee s project under IPS, 2008 Scheme. As per the Government notification the date of commencement of industrial park developed by the assessee was 31-03-2010. In the industrial park developed by the assessee, three separate buildings were constructed in respect of which completion certificates from the Pune Municipal Corporation were obtained on different dates, which are as under : Bldg. No. Date of Certificate B1 1st Floor 18/11/2006 2nd Floor 10/11/2006 3rd to 7th Floor 09/11/2006 B2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income Tax (Appeals) gave categoric finding that no industrial unit in the park developed by the assessee has allocable area of more than 25%. The assessee filed a list of all the IT/ITES companies along with the area under lease or sale agreement before the Commissioner of Income Tax (Appeals). 6.5 The Commissioner of Income Tax (Appeals) examined the claim of deduction u/s. 80IA(4)(iii) of assessee thread bare. The First Appellate Authority separately discussed the provisions of section 80IA(4)(iii), IPS 2002 and IPS 2008 viz-a-viz the claim of assessee and the conditions to be complied with for being eligible to claim the benefit of deduction u/s. 80IA(4)(iii). The Commissioner of Income Tax (Appeals) in a very detailed and well reasoned order has met with each and every objection raised by Assessing Officer in disallowing the claim of deduction u/s. 80IA(4) of the assessee. The ld. DR has not been able to controvert the findings of the Commissioner of Income Tax (Appeals). We concur with the findings of Commissioner of Income Tax (Appeals) on this issue. For the sake of brevity we are not reproducing the detailed findings of the Commissioner of Income Tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Industrial Park is to be understood as 09.05.2007 which falls beyond the previous year relevant to the assessment year under consideration. On this basis, it is said that the Industrial Park of the assessee was not complete as on 31.03.2007, and thus deduction u/s 80-IA of the Act could not be allowed for assessment year 2007-08. 50. It is to be appreciated that clause 2(f) of the Scheme defining the expression date of commencement is relevant in the context of condition (1) of clause 4 of the Scheme which prescribes the criteria for approval of an Industrial Park. Condition (1) of clause 4 of the Scheme prescribes that an undertaking shall be considered for notification under clause (iii) of sub-section (4) of section 80-IA of the Act if the date of commencement of the Industrial Park is on or after 01.04.2006 and not later than 31.03.2009. In this case, date of commencement of 09.05.2007 determined in accordance with clause 2(f) of the Scheme fulfills the condition (1) of clause 4 of the Scheme. Pertinently, the meaning of the expression date of commencement contained in clause 2(f) of the Scheme is to be understood in the context of the Scheme. The question is as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efits of section 80- IA(4)(iii) of the Act. There is no dispute that the undertaking of the assessee is notified by the Central Government in accordance with the IPS, 2008 for the purposes of clause (iii) of section 80-IA(4) of the Act. Moreover, the eligibility conditions prescribed in rule 18C of the Rules, which we have reproduced in the earlier paras and which is relevant for the year under consideration, belies the stand of the Revenue. The opening sentence in sub-rule (1) of rule 18C of the Rules says that the undertaking shall begin to develop; develop and operate; and, maintain and operate . The aforesaid wordings show that the Industrial Park in question is eligible for the benefit of section 80-IA(4)(iii) of the Act in the instant year also. Quite clearly, an undertaking which begins to develop is also eligible for the benefit of section 80-IA(4)(iii) of the Act. In this case, in the instant assessment year, assessee has developed and sold 21 units out of the total 30 units envisaged in the approval and it has obtained the completion certificate on 09.05.2007 after completing the balance units. The units sold by the assessee have yielded profits during the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion without putting the park to use for minimum 30 industrial units in accordance with the Scheme approved but it does not envisage that the location of minimum 30 industrial units be seen for every assessment year for which the claim is lodged, moreso, when the profits are declared by an assessee based on its normal method of income recognition. It may be pointed out that the provisions of section 80-IA(4)(iii) of the Act itself envisages deduction in case of an undertaking which develops, develops and operates or maintains and operates an Industrial Park for the period beginning on the 1st April, 2006 and ending on or before 31st March, 2009. Similarly, the scheme also envisages that the date of commencement of an Industrial park should be on or after 01.04.2006 but not later than 31.03.2009. Where the projects involve a period of gestation in its construction, the period of development may extend beyond one assessment year. Therefore, assessee would be eligible to claim deduction with respect to the profits from Industrial Park over multiple assessment years so long as the dates prescribed in the Act as well as in the Scheme for development of the Industrial Park are adhered to. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A Nos.1828 1829/Mum/2009 dated 24.02.2012 pertaining to assessment years 2004-05 and 2005-06. The aforesaid decision was relied upon by the assessee in the course of hearing. In the case before the Mumbai Bench of the Tribunal, assessee had claimed deduction u/s 80-IA(4)(iii) of the Act in respect of profits from development of an Industrial Park. The claim was disputed by the Revenue for assessment years 2004-05 and 2005-06. The objection of the Revenue was that the notification issued by the Central Government notifying the Industrial Park was dated 12.07.2006. It was also the case of the Revenue that as on the last day of the relevant assessment years i.e. 2004-05 and 2005- 06, all the 33 units approved in the Scheme were not developed in the Industrial Park. As per the Revenue, the notification was also issued by the Central Government on 12.07.2006, which was posterior to the assessment years 2004-05 and 2005-06. The claim of the assessee was that it was following percentage completion method of accounting and was offering income on the basis of the percentage of construction completed. Thus, the profits from the industrial Park were also offered for assessment years 2004-05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or claiming such deduction was that the housing project should have commenced construction on or after 1.10.1998 and completed the construction within 4 years from the financial year in which the housing project is approved by the local authority. The question arose whether the deduction can be claimed by Assessees who follow percentage completion method of accounting by showing part of the profits or the deduction would be available only in the year of completion of the project u/s.80-IB(10) of the Act. The CBDT clarified that deduction can be claimed on a year to year basis where the Assessee is showing profit from partial completion of the project every year. It further clarified that if the condition for completion of the project within the specified time limit is not satisfied, the deduction granted to an Assessee in earlier years can be withdrawn. We are of the view that there is no reason why similar benefit should not be extended to Assessee claiming benefit u/s.80-IA(4)(iii) of the Act when the conditions for grant of deduction were satisfied by the Assessee even before the AO passed the order of assessment. The facts of the present case justify considering the plea of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-fact, if the stand of the Revenue is to be accepted, what would happen is that assessee s claim for deduction u/s 80-IA(4)(iii) of the Act shall be denied in the instant year and in the subsequent years also assessee would not be able to claim the benefit because the impugned profits would not have been accounted for by the assessee in the subsequent years. That would mean that the assessee would never get the benefit of section 80-IA(4)(iii) of the Act qua the impugned profits derived from the development of the Industrial Park merely because of the method of accounting followed. In-fact, the Mumbai Bench of the Tribunal in the case of Ferani Hotels Pvt. Ltd. (supra) observed that the Revenue deserves to be satisfied that the conditions for grant of deduction are fulfilled on the last day of the previous year, so however, if the subsequent events after the last date of the previous year show that the conditions for grant of deduction are fulfilled, then the Assessing Officer ought to take cognizance of the same and allow the claim of the assessee. Following the aforesaid parity of reasoning, in our view, in the present case too it is undeniable that assessee has complied with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar Urban Development Ltd. 72,81,57,841 Business 2 Pune Mumbai Realty Pvt. Ltd. 65,55,18,600 Share application money 3 River View Properties Pvt. Ltd. 21,31,32,000 Share application money 4 Mr. Rajesh Tiwari 1,00,00,000 No reason given TOTAL 160,68,08,441 The contention of the assessee is that the advances have been given to the aforesaid parties for business purpose and for strategic investment. The ld. AR contended that the assessee has given advances to Kumar Urban Development Ltd. for acquisition of land and development. Both, the assessee and Kumar Urban Development Ltd. are in same line of business and Kumar Urban Development Ltd. is holding company of the assessee. In respect of advances to Pune Mumbai Realty Pvt. Ltd. and River View Properties Pvt. Ltd., the ld. AR contended that the amount has been advanced as share application money for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. In so far as advances to Mr. Rajesh Tiwari is concerned no explanations whatsoever has been furnished by the assessee and no business expediency has been shown. The ld. AR of the assessee has contended that the assessee is having own interest free funds sufficient to cover the investments as per the balance sheet as on 31-03-2008. However, it is not evident from the records as to whether the assessee was having sufficient own interest free funds for making investment at the time of giving advances. The authorities below have not verified this fact which is material for adjudicating the issue. Thus, in view of the absence of vital information, we are of the considered view that this issue needs a revisit to the file of Assessing Officer to ascertain the financial position of the assessee at the time of giving advances. In case own interest free funds of the assessee are sufficient to cover the advances at the time of making such advances, no disallowance should be made in view of the decision of Hon'ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Reliance Power Utility Ltd. (supra). Accordingly, ground No. 3 raised in the appeal of the assessee fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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