SATERN GRIHA NIRMAN PVT. LTD.,KOLKATA vs. I.T.O.,WARD-1(4), KOLKATA

The issue involved in Ground No. 1 of this appeal relates to the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of assessee’s claim for deduction under section 80IB(10) of the Income Tax Act, 1961 in respect of interest received amounting to Rs.11,10,810/- and other income amounting to Rs.6,36,746/-.

The assessee in the present case is a Company, which is engaged in the business of Builders and Property Developers. The return of income 1

I have heard the arguments of both the sides on this issue and also perused the relevant material available on record. As per the provisions of section 80IB(10), the income derived from the business of developing housing project is eligible for deduction and as held in the various judicial pronouncements, the expression “derived from” in section 80IB(10) envisages a direct or first degree connection of the income eligible for deduction with the corresponding business of the assessee of developing a housing project. It means the immediate source of the income should be the business of the assessee of developing a housing project in order to make it eligible for deduction under section 80IB(10). If this well settled test is applied in the present case, I find that the interest of Rs.11,10,810/- earned by the assessee during the year under consideration on Bank deposits etc. cannot be held to be eligible for

As regards the Ground No. 2 raised by the assessee in this appeal relating to its alternative claim that the disallowance of deduction under section 80IB(10) in respect of interest income should be restricted to net interest and not gross interest as done by the authorities below, I find that this alternative claim of the assessee is duly supported by the decision of the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Limted –vs.- CIT (343 ITR 89), wherein it was held in the context of assesee’s claim for deduction under section 80HHC that 90% of not the gross interest but only the net interest which had been included in the profits of business of the assessee, as computed under the head “profits and gains of business or profession” should be deducted for determining the profits of the business eligible for deduction. Keeping in view the said decision of the Hon’ble Supreme Court, I direct the

As regards the issue involved in Ground No. 3 relating to the disallowance of Rs.17,765/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 43B on account of ESI payable, it is observed that the ESI shown as payable amounting to Rs.17,765/- was disallowed by the Assessing Officer under section 43B of the Act as the assessee failed to produce any evidence to show that the same was deposited before furnishing its return of income for the year under consideration. Even at the time of hearing before the Tribunal, no such evidence has been brought on record on behalf of the assesee to show that the ESI payable amounting to Rs.17,765/- was paid before the due date of filing of the return of income for the year under consideration. I, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on this issue and upholding the same, I dismiss Ground No. 3 of the assessee’s appeal.

At the time of hearing before the Tribunal, the ld. Counsel for the assessee has not pressed Ground No. 4 involving the issue relating to the disallowance of Rs.13,811/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of interest on TDS and penalty on professional tax. The same is accordingly dismissed as not pressed.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on May 04, 2020. Sd/- (P.M. Jagtap) Vice-President) Kolkata, the 4th day of May, 2020