Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI R.S. SYAL
आदेश / ORDER
PER R.S. SYAL, VP :
This appeal by the assessee arises out of the order passed by the CIT (Appeals)-2, Kolhapur on 24.04.2017 in relation to the assessment year 2009-10.
2 ITA No. 1624/PUN/2017 A.Y.2009-2010
The only issue raised in the appeal is against the confirmation of
disallowance of deduction u/s. 80IB (10) of the Income Tax Act, 1961
(hereinafter called as ‘the Act’) amounting to Rs.39,02,966/-.
The factual matrix of the case is that the assessee is an individual
engaged in the business as a builder and developer, apart from earning
rental income. At the material time, he had two ongoing housing
projects, viz., Ayodhya Park & Ayodhya Towers. Income from all other
sources including income from the project `Vasant Plaza’ was recorded
by the assessee under the `Head Office Account’. Deduction u/s.
80IB(10) of the Act was claimed with respect to `Ayodhya Park’ project
income of Rs.39,02,967/-. The Assessing Officer noted that the
commercial area of the eligible project was 8.46% of total built-up area.
On confronting, the assessee stated that clause (d) to Section 80IB (10)
was inserted by the Finance Act, 2004 and as the project was approved
prior to that date, this clause would not apply to the project. The AO
also found some infirmity with respect to the completion date as
certified by the architect. He invoked the provisions of section 80AB
r.w.s. 80B(5) of the Act and held the assessee to be not eligible for
deduction on the ground that there was a loss in respect of non-eligible
unit at Rs.24,10,697/- and the overall `Business income’ was a loss of
Rs.96,000/-. That is how, he computed gross total income of the
assessee at Rs.42,66,678/-. After allowing deduction u/ss.80C and
80G of the Act, the Assessing Officer computed total income of assessee
at Rs.41,62,930/-. The assessee assailed the action of the Assessing
3 ITA No. 1624/PUN/2017 A.Y.2009-2010
Officer in not allowing deduction u/s. 80IB(10) of the Act before the ld.
CIT(Appeals), who dismissed the Assessing Officer’s action in not
considering the element of commercial premises in the eligible project
in making the assessee ineligible for deduction u/s.80IB(10) of the Act.
He also rejected the Assessing Officer’s point of view on the question of
completion of the project. He held that, in principle, the assessee was
eligible for deduction u/s. 80IB(10) of the Act. However, he concurred
with the Assessing Officer’s view point on the applicability of section
80AB of the Act. Since the income under head `Profits and gains of
business or profession’ was a loss of Rs.96,000/-, the ld. CIT(A) held
that provisions of section 80AB were attracted and hence, there was no
warrant for granting deduction u/s.80IB of the Act. The assessee is
aggrieved by the decision of the ld. CIT(A) in not allowing its claim of
deduction u/s.80IB(10) of the Act.
I have heard both the parties and perused the relevant material
available on record. No cross-appeal filed by Revenue has been brought
to my notice. In that view of the matter, the decision of ld. CIT(A) in
rejecting the view point of the AO on certain issues and entitling the
assessee, in principle, to deduction u/s.80IB(10) gets automatically
affirmed.
Now coming to the denial of deduction on the basis of negative
income under the head `Profits and gains of business or profession’, it is
4 ITA No. 1624/PUN/2017 A.Y.2009-2010
firstly important to note the computation of negative income done by
authorities, which is as under:-
Sr. Particulars Amounts (Rs.) No. 1 Profit from eligible unit i.e. 39,02,966 Ayodha Park Project 2 Loss of non-eligible unit i.e. (24,10,697) Head Office 3 Profit from non-eligible unit 5,21,196 i.e Ayodhya Towers 20,13,465
Less : Interest on loan 21,09,465
Total business income/(loss) (96,000)
It is manifest from the above Table, reproduced from the
assessment order, that there is a profit from the eligible project and loss
in the non-eligible project. Apart from that, there is interest on loan of
Rs.21.09 lac, which has been allowed as deduction under this head in
the computation of `Business income’ determining a loss of Rs.96,000/-.
Before switching over to the main controversy, it is pertinent to mention
that the assessee initially claimed that interest of Rs.21,09,465/- was
deductible under the head `Income from house property’. However, the
ld. AR fairly accepted that such interest should be allowed as deduction
under the head of `Business income’ as has been done by the
authorities below. I will deal with deduction of interest in later part of
the order.
Now I turn to the main controversy of no deduction having been
allowed by the authorities u/s 80IB(10) of the Act because of `loss’
5 ITA No. 1624/PUN/2017 A.Y.2009-2010
under the `Business income’. In order to appreciate the view point of
the authorities below, it is pertinent to note the mandate of Section
80AB, invoked by the AO, which is as under:
“80AB. Where any deduction is required to be made or allowed under any section included in this Chapter under the heading “C-Deductions in respect of certain incomes” in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income.”
The Assessing Officer also invoked the provisions of section 80B(5)
of the Act which defines “gross total income” to mean `the total income
computed in accordance with the provisions of this Act, before making
any deduction under this Chapter’. On a conjoint reading of Sections
80AB and 80B(5) of the Act, it becomes overt that the amount of
deduction under Chapter VIA-C shall be allowed with reference to the
`income of that nature’ , that is, the eligible income, only to the extent
of its inclusion in the gross total income of the assessee. In other words,
if the amount of gross total income is Rs.200/- and the amount of
eligible income u/s.80IB(10) is Rs.100/-, full amount of Rs.100/- will be
considered for the purpose of granting deduction. Per contra, if the
eligible income is say Rs.100/-, but the gross total income of the
assessee is Rs.80/-, the deduction shall be restricted to the extent of the
gross total income of Rs. 80/-. It is not borne out from the language of
6 ITA No. 1624/PUN/2017 A.Y.2009-2010
section 80AB that `Business income’ should be considered rather than
`income of that nature’ or the eligible income. In my considered opinion,
it is the income of the eligible projects alone which should be considered
on standalone basis, rather than the income under the head `Profits and
gains of business or profession’, for the purposes of granting deduction,
albeit with the overall ceiling of the gross total income.
Adverting to the facts of the instant case, it is seen that the
assessee filed return declaring total income of Rs.2,59,960/-. This
amount came after claiming deduction, inter alia, under section 80IB(10)
of the Act. Gross total income of the assessee as per the computation
done by the Assessing Officer is Rs.42,66,678/-. The assessee has
claimed deduction u/s. 80IB(10) for a sum of Rs.39,02,966/- in respect
of the eligible project alone. Since the amount of eligible income, as
claimed by the assessee, is less than the amount of gross total income,
the provisions of section 80AB do not apply adversely to such a
situation. The Assessing Officer as well as the ld. CIT (Appeals) have
confined themselves to the `Business income’, which is a loss of
Rs.96,000/-, so as to make the assessee ineligible for deduction
u/s.80IB(10) of the Act. It has been noted above that the assessee was
engaged in multiple projects at the material time, but the only project
eligible for deduction u/s.80IB(10) is “Ayodhya Park”, income from
which was shown at Rs.39,02,966/-. Admittedly, the assessee also
incurred loss in non-eligible projects and the net result, after reducing
the amount of interest on loan, is a total business loss of Rs.96,000/-.
7 ITA No. 1624/PUN/2017 A.Y.2009-2010
The course of action adopted by the authorities below in considering
loss from non-eligible projects also for calculating the amount of
deduction u/s 80IB(10) in respect of profit from eligible project, is not in
accordance with law. I, therefore, overturn the impugned order on this
score in considering loss from non-eligible projects as well and
eventually total business loss of Rs.96,000/- for making the assessee as
ineligible for deduction u/s.80IB(10) of the Act in respect of the eligible
project.
Now, I turn to interest on loan amounting to Rs.21,09,465/-. It
has been noted above that the ld. AR admitted, and rightly so, that such
interest should be considered under the head `Profits and gains of
business or profession’. Once such an interest is to be considered in the
computation of `Business income’, the next question is that how much
of it pertains to the eligible project. It is the net income from `Ayodhya
Park’ project, after deduction of the whole or part of such interest, as is
relatable to it, that will qualify for deduction u/s 80IB(10) of the Act. On
being questioned on this issue, the ld. AR requested that this aspect
may be sent back to the Assessing Officer for a fresh determination in
the light of all the factual details. No objection was taken by the ld. DR
to this proposal. In view of these facts, I set-aside the impugned order
and remit this aspect to the file of Assessing Officer for examining the
amount of interest on loan relating to `Ayodhaya Park’ project out of
total interest of Rs.21,09,465/-. The amount so determined, if any, is
directed to be reduced from the income of the eligible project as
8 ITA No. 1624/PUN/2017 A.Y.2009-2010
computed by the assessee at Rs.39,02,966/- and the remaining amount will be considered as eligible for deduction u/s.80IB(10) of the Act. I order accordingly.
In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced on 17th day of December, 2018.
Sd/- R.S. SYAL उपा�य� /VICE-PRESIDENT
पुणे / Pune; �दनांक / Dated : 17th December, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :
अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-2, Kolhapur. 4. The Pr. CIT-2, Kolhapur. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.
9 ITA No. 1624/PUN/2017 A.Y.2009-2010
Date 1 Draft dictated on 13.12.2018 Sr. PS/PS 2 Draft placed before author 17.12.2018 Sr. PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order
*