9911796707
TMI Blog2023 (9) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... and on facts to confirm the addition of Rs. 17,52,252/- on account of negative cash balance treated as unexplained cash credit u/s 68 of the Act. 3. The Learned CIT(A) has erred in law and on facts to confirm the addition of Rs. 33,24,796/- u/s 22 of the act towards computed ALV @ 5% on closing stock of finished flats though the assessee has allotted the flats/bungalows/units to purchaser and amount of consideration is received as advance which is shown in the balance sheet as "Advance from customer" in view of the 'agreement of sale'. 4. The Learned CIT(A) has erred in law and on facts to confirm the addition of Rs. 12,33,712/- u/s 40(a)(ia) of the Act. 5. The Learned CIT(A) has erred in law and on facts to confirm the addition of Rs. 6,07,48,187/- u/s 801B of the Act [a] where out of the Eleven blocks, Eight blocks were completed within five years as per completion certificate issued by the competent authority and for remaining three blocks [block E, F and G), not claimed any deductions u/s 80IB of the act. Therefore, no reason to disallow to claim deduction. [b] in respect of area of commercial establishment included in the Housing Project where there were no d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. For the Assessment Year 2013-14, the assessee filed its Return of Income on 28-09- 2013 declaring income of Rs. 50,00,379/-. The return was taken up for scrutiny assessment, after detailed enquiry, the Assessing Officer made the following disallowances/additions: (a) Disallowance of Prior Period Expenses of Rs. 25,64,380/- (b) Addition on account of Negative Cash Balance of Rs. 17,52,252/- (c) Over statement of loss of Rs. 5,00,000/- (d) Addition u/s. 22-ALV of finished stock of Rs. 53,19,672/-. (e) Disallowance u/s. 40(a)(ia) of Rs. 36,49,865/-. (f) Difference in cost of construction of Rs. 1,13,62,412/- (g) Deduction u/s. 80IB(10) of Rs. 2,15,18,887/-. (i) Addition on account of revaluation of land u/s. 115JB of Rs. 5,56,29,995/-. 5. Aggrieved against the same, the assessee filed an appeal before Ld. CIT(A). The Ld. CIT(A) dealt with each disallowance/addition observing as follows: 6. Disallowance of prior period expenses: A sum of Rs. 25,64,398/- was disallowed and added to the total income of the assessee company on account of prior period expenses on the basis of Special Auditor Report. The assessee submitted the details of expenses amounting to Rs. 21, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether prior period expenses - quantified and paid during current year would be allowed as business expenditure in relevant assessment year even though assessee was following mercantile system of accounting - Held, yes [Para 3] [In favour of assessee] ii. [1995] 80 Taxman 61 (Gujarat) Saurashtra Cement & Chemical Industries Ltd. v. Commissioner of Income-tax Section 37(1), read with section 145, of the Income-tax Act, 1961- Business expenditure - Year in which deductible - Whether, where any liability though relating to earlier years, depends upon making a demand and its acceptance by assessee and has been actually claimed and paid in later previous years, such a liability can be disallowed as deduction merely on basis that accounts were maintained on mercantile system and that it related to a transaction of previous year - Held, no iii. [2010] 194 TAXMAN 158 (DELHI) Commissioner of Income-tax v. Jagatjit Industries Ltd. Section 37(1), read with section 145, of the Income-tax Act, 1961- Business expenditure Year in which deductible Whether if a particular accounting system has been followed and accepted and there is no acceptable reason to differ with same, doctrine of consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly Rs. 35,03,000/- was adopted while working out the profits on such sales. Accordingly a sum of Rs. 5,00,000/- was proposed to be added by the AO. Before the AO assessee pleaded that out of the sum of Rs. 40,03,000/- sales worth Rs. 5,00,000/- was recognized in the earlier year's income, hence, the profits are worked out by taking the sale of the current year amounting to Rs. 35,03,000/- correctly and enclosed the computation of income of A.Y. 2008-09 in support of its claim. However AO was not convinced and he added the sum of Rs. 5,00,000/- to the total income. 8.1. The Ld. CIT(A) after considering the material records and held that he do not find any reason why this sum of Rs. 5,00,00/- should again be added in the total income, accordingly the addition amounting to Rs. 5,00,000/- made by the AO is deleted. 8.2. The Ld. D.R. could not submit any contra evidence on the above findings of the Ld CIT [A]. Thus the ground no. 2 raised by the Revenue is devoid of merits and hereby dismissed. 9. Addition u/s. 22 - ALV of finished stock at Rs. 53,19,672: The AO noticed that assessee has the following finished stock of unsold flats in various buildings. (i) Takshashila Colonia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 33,24,796/-. Thus, appellant gets a relief of Rs. 19,94,876/-. Ground of appeal No. 4 is partly allowed. 10. Aggrieved against the same, both the Assessee and the Revenue are in appeal before us. The Ld. Counsel for the assessee submitted that the unsold property of various project to the extent Rs. 9,49,94,152/- have been constructed and completed in all respect and the assessee has obtained BU permission from the Competent Authority. The amount standing in the balance sheet as work in progress is the amount for which sale deed is yet to be executed. However the assessee has allotted the same flats/ bungalows or units to the Purchases and substantial amount of consideration received as advance, which is shown in balance sheet under the group of current liabilities as "Advance from Customer". The customers/purchasers have applied for the housing loan and bank/financial institution has sanctioned their home loan on the base of allotment letter issued to the customers and disbursed the amount to the company. The sale deed was executed in the subsequent year due to delay on the part of the customers. Since the nature of business of the company is to develop, build and construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racter of the stock, and any income derived from the stock, would be 'income' from the business, and not income from the property. If the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the 'business' and the business stocks, which may include movable and immovable, would be taken to be 'stock-in-trade', and any income derived from such stocks cannot be termed as 'income from property'." 10.1. Ld CIT DR appearing for the Revenue heavily relied on the judgement of the Delhi High Court in the case of Ansal Housing Finance & Leasing Co Ltd. [cited supra] and pleaded to sustain the addition made by the AO. 10.2. We have heard the rival submissions and perused the relevant materials on record. On the above issue, we come across judgements both in favour of the assessee and the Revenue. The judgements in Suresh Amichand Shah and Neha Builders (P.) Ltd. (cited supra) are in favour of the assessee and from Jurisdictional High Court of Gujarat, whereas the judgement in Ansal Housing Finance & Leasing Co. Ltd.'s case (supra) is in favour of the Revenue from Delhi High Court. The Hon'ble Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the property, for the period up to one year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to nil." Thus, in order to give relief to Real Estate Developers, section 23 has been amended w.e.f. AY 2018-19 (FY 2017-18). By this amendment, it is provided that if the assessee is holding any house property as his stock-in-trade which is not let out for the whole or part of the year, the annual value of such property will be considered as Nil for a period up to one year from the end of the financial year in which a completion certificate is obtained from the competent authority. 10.6. In view of the above amendment to section 23, in the instant case, the assessee is a builder and developer. The issue of taxability is with regard to unsold flats relating to the A.Y. 2013-14. In view of the insertion of sub-section (5) in section 23 by the Finance Act, 2017, w.e.f. 01.04.2018 narrated hereinbefore, we hereby delete the addition made on account of ALV. 10.7. As we have allowed the Ground No. 3 in favour of the assessee, consequently the Ground No.3 raised by the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee claimed deduction u/s. 80IB of the Act amounting to Rs. 6,07,48,187/- being the income of residential/commercial projects constructed by it. In the SAR the auditors pointed out that the assessee has not fulfilled the conditions stipulated in section 80IB of the Act and hence, is not eligible for deduction so claimed. Briefly, the assessee claimed deduction u/s. 80IB on the income of following three housing projects: (a) Takshshila Coloneal: As per the auditors the construction of this project has not been completed within the time limit of 5 years prescribed in section 80(IB) of the Act. (b) Takshshila Habitat: In this project the auditors have found out that the commercial construction is more that the prescribed limit of 3% of the aggregate built-up area of the housing project. (c) Takshshila Residency: As per the auditors assessee has sold units to more than one person of a family which is not allowed as per section 80(IB) of the Act. This condition is also violated in the other projects mentioned above. 13.1. On being show caused assessee submitted before the AO that in Takshshila Colonial Project only three blocks namely E.F & G could not be completed within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .a. Project has not been completed within the time limit of 5 years prescribed in section 80(IB) 5.b.Commercial construction is more that the prescribed limit of 3% of the aggregate built-up area of the housing project 5.c. Sold units to more than one person of a family which is not allowed as per section 80(IB) of the Act 14.1. Regarding Takshshila Coloneal project was not completed within the time limit of 5 years prescribed in section 80(IB) of the Act. This issue was considered by this very same Bench of this Tribunal in ITA No.1401/Ahd//2019 vide order dated 23-08-2023 and held as follows: "... 7. The solitary issue in this appeal is confirmation of addition of Rs. 31,64,266/- on account of denying deduction u/s. 80IB(10) of the Act on the ground that the housing projects were not completed by the assessee within five years period. 7.1. The Brief facts of the case is that the assessee developed 11 Blocks of residential housing projects under the scheme of Takshashila Colonial starting with Block Nos. C to Q. The assessee obtained separate planning permission for construction of residential building from the local authority namely Ahmedabad Municipal Corporation (AMC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajachitthi) issued by Ahmedabad Municipal Corporation (AMC) and Building Usage permission certificate issued by the AMC for Block Nos. C, D, L, M, N, O, P & Q. Thus the Ld. Counsel for the assessee submitted the Lower Authorities failed to consider that separate building planning permission obtained by the assessee for each Block as separate housing project and completed the same less than five years period and therefore eligible for claim of deduction u/s. 80IB(10) of the Act. The Ld. Counsel further submitted that the assessee has not claimed deduction u/s. 80IB(10) for Block Nos. E, F & G and the Lower Authorities are not correct in denying the deduction u/s. 80IB(10) of the Act for the remaining Blocks of the housing project. 10.1. In this connection, the Ld. Counsel relied upon Hon'ble Madras High Court Judgment in the case of Viswas Promoters (P.) Ltd. Vs. ACIT [2013] 29 taxmann.com 19 (Madras) and Hyderabad Tribunal decision in the case of Vertex Homes (P.) Ltd. Vs. DCIT [2015] 62 taxmann.com 285 (Hyderabad-Trib.) 10.2. Per contra, the Ld. D.R. appearing for the Revenue supported the order passed by the Lower Authorities and pleaded to uphold the same. 11. We have give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is a specific provision which deals with deduction in respect of profits and gains from industrial undertakings or enterprises engaged in the development of infrastructural facilities such as roads, bridges and other structure as regards the grant of deduction in respect of development and construction of a housing project. Section 80IB is a specific provision in respect of profits and gains from undertakings engaged in developing and constructing housing projects other than infrastructure development undertakings. Thus, housing projects considered herein under Section 80IB refers to any building other than road, bridge or other structure. Thus, going by the definition of "housing project" to mean the construction of "any building" and the deduction under Section 80IB of the Act is hundred per cent of the profits derived in the previous year relevant to the assessment year from such housing project complying with the condition, each block in the larger project by name "Agrini" and "Vajra", has to be taken as an independent building and hence a housing project, for the purpose of considering a claim of deduction. Section 80IB(10) begins by stating: "(10) The amount of deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose for which provision has been brought into the statute. Moreover, as far as Ld. CIT(A)'s observation that the housing project should have been completed by 31/03/2011, we do not find the same to be acceptable. As assessee's housing project has been approved after 1st April, 2005, the stipulated period within which assessee has to complete the project is five years. Assessee having completed blocks A, B & F within five years from the date of approval, in our view, it is eligible to claim deduction u/s 80IB(10) in respect of blocks A, B & F." 11.3. Respectfully following the above judicial precedents and separate planning permission obtained by the assessee for each Block separately and after construction obtained separate Building Usage permission from the Local Authority within 5 years period, therefore the assessee cannot be denied the claim of exemption u/s. 80IB(10) of the Act. Thus the order passed by the Lower Authorities on this issue is hereby set aside and the Assessing Officer is directed to allow the claim of deduction u/s. 80IB(10) of the Act amounting to Rs. 31,64,266/-. Thus the ground raised by the Assessee is hereby allowed. 12. In the result, the appeal filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und raised by the assessee is hereby allowed and the disallowance made by the AO is hereby deleted. 14.5. Assessee sold units to more than one person of a family which is not allowed as per section 80(IB) of the Act. This issue is also considered by the co-ordinate Benches of the Tribunal in the following cases as follows: 3. [2018] 90 taxmann.com 267 (Mumbai Trib.) Om Swami Smaran Developers (P.) Ltd. v. income-tax Officer, Ward- 8 (2) (4), Mumbai Section 80-IB of the Income-tax Act, 1961- Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings (Housing project) Assessment year 2011-12-Assessee, a developer, had developed a housing project and claimed deduction under section 80-1B(10) - Assessing Officer disallowed same on grounds that assessee had allotted three flats a single person, thus, violated conditions of section 80-1B(10)(f) which provides that more than one residential unit in a housing project cannot be sold to one person/individual - Whether merely because assessee had violated conditions of section 80-1B(10)(f) in respect of three flats, deduction under section 80-IB(10) could not be disallowed for entire ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that for the purpose of determination of cost of the construction cost of the project is estimated in advance and hence the cost in earlier year was on estimation basis which cannot be compared with the actual cost for this year. It was the contention of the assessee that this fact was also recorded by the Auditors in the SAR, however, the AO was not convinced and adopted the cost at Rs. 18,173/- and worked out the difference of Rs. 1,13,62,412/- and added the same to the profits under the normal provision of the Act as well as to the book profits computed as per section 115JB of the Act. 15.1. The Ld CIT[A] after careful consideration of the findings of the Auditors and the AO as well as after considering the reply of the assessee held that the Auditors have arrived at the cost of construction on the basis of what was debited in earlier years and have not found any false expense or any part of the cost debited in the books of accounts of the current year despite the extensive special audit carried out. When the accounts of the assessee are subjected to special audit disallowance or addition cannot be made without impeaching the entries in the books of accounts or without any i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
