TMI Blog2023 (4) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... , there can be a situation where the sale of a particular project is of negligible value in a particular year whereas the cost of construction has already been incurred by the assessee. In that eventuality, the financial positions of the assessee will represent distorted position if the common expenses are allocated based on turnover. Thus, assessee has rightly adopted the basis of allocating the common expenses based on the area of construction of eligible and non-eligible projects. Hence, no merit in the ground of appeal raised by the revenue. Thus, the ground of appeal of the revenue is hereby dismissed. Alternate addition made by the AO - AO allocated the common expenses between the sales of all the projects and working progress shown of all the projects being eligible and non-eligible projects and made the addition - HELD THAT:- There is no dispute to the fact that the Revenue in the earlier year has not allocated any common expenses incurred by the assessee on projects in the ratio of the units sold and the units shown as work in progress. Accordingly, we are of the view that the principle of consistency has to be adopted as held by the Hon ble Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar under consideration, the assessee was having five different housing projects. The assessee with respect to one project namely Vedika E-Series claimed that its profit is eligible for deduction under section 80IB(10) of the Act. As such, the assessee claimed deduction of Rs. 4,54,86,974/- being 100% of profit derived from such eligible project. The assessee submitted that the project Vedika E-Series met all the condition prescribed under section 80IB(10) of the Act. 4.1 However, the AO found that as per the provision of section 80IB(10) of the Act if a housing project is approved by the local authority during the period 1st April 2005 to 31st March 2008, then to avail the benefit of deduction, such project must be completed within 5 years form the end of the F.Y. in which the project was first approved by the local authority. In the case of the assesse, the construction permission for the project in dispute, was given by the Kudasan Gram Panchayat vide Raja Chitthi dated 16-03-2005 whereas the assessee claimed that plan was approved by Gandhi Nagar Urban Development Authority ( GUDA) as on 06-02-2008. As per the AO, the approval granted by the GUDA was representing the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Developer wherein the plots were developed and sold. The transaction of developing plots by Shri Paras Pandit proprietor of M/s Sheetal Developer and the development of the housing project are different and independent to each other. Even, the AO in his remand report has admitted that the 1st approval was granted by GUDA dated 6th February 2008 and the BU permission was obtained dated 30 March 2012 which is within the time prescribed under the provisions of law. However, the remand report of the AO was objected by the additional CIT who sought clarification about the 1st approval dated 16 March 2005 granted by Panchayat Kudasan. In the next remand report dated 23rd of March 2017, it was submitted that there was no record available for the 1st approval and therefore the relevant date for the approval of the impugned housing project was not ascertainable. 7.1 The learned CIT-A based on the remand report sought clarification from the GUDA vide letter dated 1 May 2017. In response to such letter, it was replied by the GUDA that the 1st approval for the project under consideration was granted vide letter dated 6th February 2008. In view of the above, the learned CIT-A allowed the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 1 May 2017 has categorically stated that the 1st approval for the housing project was granted as on 6th February 2008. The relevant contents of the letter read as under: Subject:Regarding information of Final Plot No.89, Original Plot No.89 of Town Planning Scheme No.03 (Kobra-Kudasan) of Revenue Survey No.529/A/Paiki of Mouje Kudasan. Ref: Letter No.CIT(A)-8/Misc./2017-18/55 dated 20/04/2017 of your Goodself. Respected Sir, It is submitted with regard to the above subject that Cedika E-Series Projects of M/s.Shital Infrastrucuture Pvt. Ltd. situated in Final Plot No.89, Original Plot No.89 of Town planning Scheme No.03 (Koba-Kudasan) of Revenue Survey No.529/A/Paiki of Mouje Kudasan has been approved by this office first on dated 06/022008 which may please be noted. Yours faithfully, Sd/- Illegible, Senior Town Planner, Gandhinagar Urban Development Authority, Gandhinagar 12.2 Without prejudice to the above, the AO in his remand report has not passed any negative remark with respect to the permission granted by the Panchayat Kudasan dated 16 March 2005 whether it was related to the housing project which is in dispute. 12.3 At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present facts. Further, we find that distinction which has been made in the impugned order of the Tribunal with regard to Dinshaw Frozen Foods Ltd. (supra) viz. that the assessment in that case has been completed under Section 143(3) of the Act in initial year and it is only in such cases that the Revenue be barred from denying the claim for deduction in the subsequent Assessment Years, unless the claim for deduction has been withdrawn in the initial year when deduction was claimed and allowed unlike an assessment which is completed under Section 143(1) of the Act. We have perused the decision of this Court in Dinshaw Frozen Food Ltd. Nagpur (supra) which in turn has followed the decision Paul Brothers (supra). We note that there is no finding in the two orders to the effect that the in the initial year the claim under Section 8OIA/IB of the Act was granted by virtue of an order passed under Section 143(3) of the Act. Nothing has been brought on record to indicate that there has been some change in manufacturing process from that existing when the claim was allowed in the initial year i.e. Assessment Year 1996-1997 and subject Assessments. The intent/object of the deduction under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nize the fact that the aforesaid decision in case of Rajesh jhaveri Stock Brokers (supra) was rendered in the context of reopening of assessments. As against that the decisions of this Court in Paul Brothers (supra) and Dinshaw Frozen Food Ltd. Nagpur (supra) were while dealing with deduction under Chapter VI-A of the Act. This Court in the above two cases has very categorically held that in absence of relief/deduction for the initial year being withdrawn, the relief under Chapter Vl-A of the Act (Section 801 A/801 B of the Act) in case of Dinshaw Frozen Food Ltd, Nagpur (supra) cannot be withheld for the subsequent years. The manner in which the relief has been granted in the initial Assessment Year is not determinative for withholding the relief in the subsequent Assessment Years. In-fact, in Paul Brothers (supra), our Court had occasion to observe the deduction allowed in the initial year i.e. Assessment Year, 1980-198] was without any discussion. (m) According to us, the decision of this Court in Paul Brothers (supra) and the Dinshaw Frozen Food Ltd. Nagpur (supra), conclude the issue in favour of the appellant Assessee and against the Revenue. (n) Thus, the substanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsecutive years commencing from the first year during which the undertaking begins to manufacture or produce articles, things or computer software, as the case may be. When the Revenue therefore, did not question the certification by the Director, Software Technology Park of India, in the initial year of the claim made by the assessee as well as in the subsequent years, it would not be open for the Revenue to pick one year out of a total of ten consecutive years for different treatment that too without offering any explanation for the same. We would refer to Gujarat High Court Judgement in case of Saurashtra Cement Chemical Industries Ltd. vs. Commissioner of Income Tax, Gujarat-V reported in 123 ITR 669 and a later judgement in Tax Appeal No. 1367 of 2010 dated 14.09.2011 in case of Commissioner of Income Tax vs. M/s. TJ.Agro Fertilizers Pvt. Ltd. 5. In the result, tax appeal is dismissed. 23. The Delhi High Court, in Commissioner of Income-Tax] vs. Rio Tinto India (P.) Ltd., reported in (2012) taxmann.com 259 (Delhi), observed as under: This Court is of the opinion that reasoning given by the AO in his order for the assessment year 1998-99 is clear and conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for deduction under the provisions of section 80IB (10) of the Act. As per the AO, the assessee has shown identical gross profit ratio for its eligible and noneligible projects i.e. 44.13% and 43.79% of the turnover whereas there was vast difference in the net profit declared by the assessee for its eligible and non-eligible projects i.e. 33.42% and 10.48% of the turnover which was mainly on account of improper allocation of common indirect expenses. As such, the assessee has allocated 81.20% of the common expenses being administrative, selling, finance and other expenses to the taxable projects whereas the assessee has allocated such common expenses to the tune of 21.80% to the eligible projects. It was submitted by the assessee that the common expenses have been allocated based on the saleable area of the eligible and non-eligible project i.e. 19% and 81% of the total common expenses. This method/ basis was also adopted in the earlier and later years which was accepted by the Revenue. According to the assessee, the expenses have to be incurred in relation to the size of the projects irrespective of the sales which is recognized over a period of the project. It was also contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of completion method (POCM) and the actual profit of the project can only be ascertained when the project is completed; the turnover on the basis of sales reflected in the earlier years before the final completion may not be a true indicator of the work carried out in the project as in some projects even after fully completing the project there may not be enough sales whereas in some projects not fully completed there may be more sales than the percentage of area constructed. I find that appellant has been following the method of allocation of common expense on the basis of saleable area of a particular project till the project is completed and BU permission is received which has been accepted in the earlier years by the Department also, I also find force in the arguments of the appellant that no part of finance cost can be attributed to the eligible project for the reasons that the realization of revenue of the eligible project is higher than the expense thereon. As mentioned earlier there is no prescribed method to allocate the common expenses and in the case at hand on the method deployed by the appellant to allocate the common expense on the basis of total saleable area consist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken. 18.1 Furthermore, we note that there is a defect in adopting the basis of allocating the common expenses between eligible and non-eligible projects on turnover ground. It is for the reason that, there can be a situation where the sale of a particular project is of negligible value in a particular ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales and the CWIP, there is increase of Rs, 5,16,54,280 in Closing WIP of the company. This increase will go to increase of profit of the company in P L account. Therefore Rs. 5,16,54,280 needs to be added to gross total income admitted. On account of allocation of common expenses the deduction u/s 80IB also gets increased by Rs.65,37,600 which is allowed from Gross Total income. The total income for the year is worked out as under: Gross total income as per working of the assessee 7,13,68,873 Add: Increase in revised CWIP 5,16,54,280 12,30,23,153 Revised working of 80IB deduction Deduction worked out by assessee 4,54,86,974 Add: increase in CWIP of 80IB project 65,37,600 5,20,24,574 Revised total income [before working other deductions] 12,30,23,153 Ch VI A deduction 5,20,24,574 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being followed according to the Accounting Standard(AS) - 7 and the Guidance Notes issued by Institute of Chartered Accountants of India (ICA ) in this regard. As per the AS-7 and Guidance Note, according to PCOM revenue is recognized when sales of 25% or more are received and the construction is carried out to this extent. The expenses relating to construction and directly attributable to a particular project is also recognized to the extent of sales by matching principle taken out from WIP. The finance cost, selling and administrative expenses and selling and marketing expense are not part of WIP as per PCOM according to AS-7, AS-16 and Guidance Notes. Para 17 of AS- 7 states as below: I7. Costs that may be attributable to contract activity in general and can be allocated to specific contracts include: (a) insurance; (b) costs of design and technical assistance that is not directly related to a specific contract; and (c) construction overheads. Such costs are allocated using methods that am systematic and rational and are applied, consistently to all costs having similar characteristics. The allocation is based on the normal level of construction activity. Construction ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess in the subsequent year and the profit of the subsequent year will be reduced by the same amount of addition made in the year under consideration. Accordingly, in the given facts and circumstances, we do not find any reason to interfere in the finding of the learned CIT-A. Hence, we direct the AO to delete the addition made by him. Thus, the ground of appeal of the revenue is hereby dismissed. 24.2 In the result the appeal filed by the revenue is hereby dismissed. Now Coming to the ITA No. 524/Ahd/2019 for A.Y. 2013-14. 25. The first issue raised by the Revenue is that the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of deduction u/s 80IB(10) of the Income Tax Act, 1961 of Rs. 2,95,62,785/- 26. At the outset, we note that the issues raised by the Revenue in its grounds of appeal for the A.Y 2013-14 are identical to the issues raised by the Revenue in ITA No. 523/Ahd/2018 for the assessment year 2012-13. Therefore, the findings given in 523/Ahd/2018 shall also be applicable for the year under consideration i.e. AY 2013- 14. The ground appeal of the Revenue for the assessment 2012-13 has been decided by us vide paragraph No. 12 of this order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- in the closing WIP of the corresponding scheme in the year of expenditure i.e. A.Y. 2009-10. Since, the assessee did not claim the said expenditure by way of addition in WIP in A.Y. 2009-10, the said expenditure cannot be claimed- As held in the assessment order of A.Y. 2009-10, the assessee failed to establish the genuineness of expenses. 8.6 Accordingly, the claim of expenditure of Rs. 11,41,532/- is hereby rejected and the same is added to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) are initiated for furnishing inaccurate particulars of income. 31. Aggrieved assessee carried the matter before the learned CIT-A who deleted the addition made by the AO by observing as under: 8.1 In the course of appellate proceedings, appellant furnished copies of the order of Hon'ble ITAT on this issue in ITA No.17/Ahd/2014 dated 14.06.2017 pertaining to A.Y.2010-11 and order in ITA No. 2310/Ahd/2015 dated 01.02.2018 pertaining to A.Y.2011-12 wherein the Hon'ble ITAT allowed the appeal of the appellant on this issue. Facts of the case continue to be same hence, respectfully following the decision of Hon'ble ITAT referred supra amounting to R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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