M/S. J.R. CONSTRUCTION CO.,,BARODA vs. THE INCOME TAX OFFICER, WARD-3(1),, BARODA

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ITA 3292/AHD/2014Status: DisposedITAT Ahmedabad12 March 2025AY 2010-11Bench: DR. BRR KUMAR (Vice President), MS. SUCHITRA KAMBLE (Judicial Member)7 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal dismissed the ground related to Section 80IB(10) deduction, as it was decided against the assessee in a prior assessment year's case. The ground related to Section 40(a)(ia) was partly allowed, with directions to the Assessing Officer to verify the TDS non-deduction based on a CBDT circular.

What were the facts?

The assessee, a construction firm, claimed deduction under Section 80IB(10) for profit from housing projects and disallowed disallowance for non-deduction of TDS on interest expenditure. The Assessing Officer disallowed a portion of the 80IB(10) deduction and the full amount claimed under Section 40(a)(ia). The CIT(A) upheld these disallowances.

What were the issues?

Whether disallowance of deduction under Section 80IB(10) for profit from unutilised FSI is justified, and whether disallowance under Section 40(a)(ia) for non-deduction of TDS on interest expenditure is correct.

Which sections of the Income-tax Act were involved?

Section 80IB(10),Section 40(a)(ia),Section 143(1),Section 143(2),Section 142(1),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH, AHMEDABAD

Before: DR. BRR KUMAR & Ms. SUCHITRA KAMBLE

For Appellant: Shri Rushin Patel, AR on behalf of Manish J. Shah, AR
For Respondent: Shri B.P. Srivastav, Sr. DR
Hearing: 04.03.2025Pronounced: 12.03.2025

PER SUCHITRA KAMBLE, JUDICIAL MEMBER:

1.

This appeal is filed by the Assessee against order dated 15.09.2014 passed by the CIT(A)-II, Baroda for the Assessment Year 2010-11.

2.

The assessee has raised the following grounds of appeal:

“1. On the facts and circumstances of the case, the learned CIT(Appeals) has erred in confirming disallowance of deduction u/s.80IB(10) of the Income Tax Act for Rs.1,21,48,860/- being profit on account of unutilised FSI.

2. The learned CIT(Appeals) has erred in confirming the disallowance u/s.40(a)(ia) of the Income Tax for Rs.1,06,014/- on account of non- deduction of TDS from interest expenditure. 2.1 Your appellant submits that it is part and parcel of profits of the business and therefore should be allowed as deduction while computing deduction u/s.80IB(10) of the I.T. Act. It is submitted that it be so held now.”

Assessment Year: 2010-11 M/s. J.R. Construction Co. vs. ITO Page 2 of 4 3. The assessee firm is a partnership firm engaged in the business of development and construction of Housing Projects. During the year under consideration, the assessee firm has continued construction of ‘Karishma Park’ and ‘Rajlaxmi Society’ at Baroda. The assessee firm filed its return of income on 29.09.2010 declaring total income of Rs. Nil after claiming deduction under Section 80IB(10) of the Income Tax Act, 1961 amounting to Rs.1,21,48,860/-. The return of income was processed under Section 143(1) of the Act on 19.04.2011 accepting the returned income. the case was selected for scrutiny and notice under Section 143(2) of the Act was issued on 25.08.2011 and served upon the assessee. Further notice under Section 143(2) and Section 142(1) of the Act alongwith detailed questionnaire was issued on 31.07.2012. In response to the said notices, the Ld. AR of the assessee submitted the required details alongwith copy of return of income, tax audit report and audited Balance Sheet and Profit & Loss account. After verifying the same, the Assessing Officer observed that the profit relatable to sale of unutilised land vis-a-viz utilised FSI sold was not considered for inclusion in assessee’s total income on account of inadmissibility of the claim of deduction under Section 80IB of the Act. After taking cognisance of the assessee’s reply and the submissions alongwith the details, the Assessing Officer made addition/disallowance in respect of deduction under Section 80IB(10) of the Act to the extent of Rs.60,34,293/-. The Assessing Officer vide Assessment Order under Section 143(3) of the Act dated 08.03.2013 determined the total income of Rs.60,34,200/- after disallowing the claim of deduction under Section 80IB(10) of the Act of Rs.1,21,48,860/- and Rs.1,06,014/- under Section 40(a)(ia) of the Act.

4.

Being aggrieved by the Assessment Order, the assessee filed appeal before the CITA). The CIT(A) dismissed the appeal of the assessee.

5.

As regards ground no.1, the Ld. AR submitted that the said issue related to disallowance of deduction under Section 80IB(10) of the Act being profit on account of unutilised FSI the same is covered against the assessee in assessee’s own case by the Hon’ble Gujrat High Court being Tax Appeal No.173/2012, order dated 05.03.2018, for Assessment Year 2004-05. As regards the disallowance under Section 40(a)(ia) of the Act for Rs.1,06,014/- on account of the non-deduction of TDS from interest expenditure, the Ld. AR submitted that as per the Circular No.37/2016, Assessment Year: 2010-11 M/s. J.R. Construction Co. vs. ITO Page 3 of 4 the Board has accepted the settled position that the disallowances made under Section 40(a)(ia) of the Act related to the business activity against which Chapter VI- A deduction has been claimed and in such scenario if the loan is related to the Bank loan and paid then no TDS has to be deducted. This needs verification and the Revenue is required to take cognisance of the Circular No.37/2016 issued by the CBDT.

6.

The Ld. DR relied upon the jurisdictional High Court decision for ground no.1, and for ground no.2, relied upon the Assessment Order and the order of the CIT(A).

7.

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that ground no.1 is categorically decided against the assessee in Assessment Year 2004-05 in assessee’s own case by the Jurisdictional High Court and hence ground no.1 & 2.1 is dismissed.

7.1 As regards ground no.2, related to disallowance under Section 40(a)(ia) of the Act for Rs.1,06,014/- on account of non-deduction of TDS from interest expenditure, if the same is paid back to Bank, there is no need to deduct TDS from interest expenditure. Therefore, the Assessing Officer is directed to verify the same in consonance with the CBDT Circular No.37/2016 dated 02.11.2016 and decide the same. Thus, ground no.2 is partly allowed for statistical purpose.

8.

In the result, appeal of the assessee is partly allowed.

Order pronounced in the open Court on this 12th March, 2025.

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