ACIT, CIRCLE-33, KOLKATA, KOLKATA vs. M/S ASHIANA AMAR DEVELOPERS, KOLKATA

First we shall take up the appeal of the Revenue for A.Y. 2013-14 being , which is directed against the order of ld. CIT(Appeals)-9, Kolkata dated 30.09.2016.

The common issue involved in Grounds No. 1 & 3 of this appeal relates to the deletion by the ld. CIT(Appeals) of the disallowance made by the Assessing Officer on account of assessee’s claim for deduction under section 80IB of the Income Tax Act, 1961.

The assessee in the present case is a partnership firm, which is engaged in the business of Developing and Building Housing Projects. The return of income for the year under consideration was filed by it on 18.09.2013 declaring total income of Rs.8,47,58,700/- after claiming deduction of Rs.3,53,44,355/- under section 80IB of the Income Tax Act, 1961. The deduction was claimed by the assessee in respect of housing project undertaken under the name and style as “ASHIANA AMARBAGH’ in Jodhpur, Rajasthan. Since the similar deduction as claimed by the assessee under section 80IB in respect of the same project was disallowed in the earlier years, the assessee during the course of assessment proceedings was required by the Assessing Officer to explain as to why the deduction claimed by it under section 80IB during the year under consideration should not be disallowed. In reply, reliance was placed by the assessee on the decision of the ld. CIT(Appeals) rendered in its own case for A.Y. 2012-13 vide order dated 21.08.2015, wherein the disallowance made by the assessee on account of deduction under section 80IB was deleted by the ld. CIT(Appeals). The Assessing Officer, however, found that the said decision of the ld. CIT(Appeals) for A.Y. 2012-13 was challenged by the Department by filing an appeal before the Tribunal and the matter was pending. He, therefore, disallowed the claim of the assessee for deduction under section 80IB amounting to Rs.3,53,54,355/- in the assessment completed under section 143(3) vide an order dated 15.03.2016.

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. (Assessment Year: 2013-2014) & (Assessment Year: 2014-2015) M/s. Ashiana Amar Developers CIT(Appeals) and following the decision of his predecessor in assessee’s own case for A.Y. 2012-13 rendered vide an order dated 21.08.2015, the ld. CIT(Appeals) deleted the disallowance made by the Assessing Officer on account of assessee’s claim for deduction under section 80IB.

We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. As agreed by the ld. Representatives of both the sides, this issue relating to assesee’s claim for deduction under section 80IB as involved in the year under consideration is squarely covered in favour of the assessee by the orders of the Tribunal passed in assessee’s own case for A.Y. 2010-11 and 2012- 13. Copies of the said orders are placed on record and a perusal of the same shows that a similar issue relating to the assessee’s claim for deduction under section 80IB in respect of profit from the Housing Project at Jodhpur namely “ASHIANA AMARBAGH’ was decided by the Tribunal in favour of the assessee for A.Y. 2010-11 vide its order dated 22.01.2016 passed in ITA No. 12/KOL/2014. The said decision of the Tribunal rendered in A.Y. 2010-11 was subsequently followed by the Tribunal to decide the similar issue in favour of the assessee for A.Y. 2012-13 vide its order dated October 06, 2017 passed in ITA No. 1307/KOL/2015. Since the material facts relevant to this issue as involved in the year under consideration are similar to A.Ys 2010-11 and 2012-13, we respectfully follow the orders of the Tribunal for the said years and uphold the impugned order of the ld. CIT(Appeals) allowing the claim of the assessee for deduction under section 80IB. Grounds No. 1 & 3 of the Revenue’s appeal for A.Y. 2013-14 are accordingly dismissed.

In Ground No. 2, the revenue has challenged the action of the ld. CIT(Appeals) in deleting the addition of Rs.1,11,70,519/- made by the Assessing Officer on account of cost of development.

The assessee had incurred substantial development cost in respect of its Housing Project “ASHIANA AMARBAGH’ undertaken in Jodhpur, Rajasthan and the said cost was allocated by the assessee to the different phases of the Project. During the course of assessment proceedings, the assessee was required by the Assessing Officer to explain the basis of such allocation. In reply, it was submitted by the assessee that the entire project was supposed to take 4 to 5 years to complete and, therefore, the development cost of the Project was likely to be increased from time to time. It was submitted that the development cost thus was not a fixed expenditure and the quantum of the same was being assessed on completion of each Phase. It was submitted that after completion of each Phase, the total development cost was considered by taking the development cost actually incurred till date plus the amount of development cost to be incurred to complete the remaining project. It was submitted that such total development cost accordingly was apportioned and charged to the each Phase of project completed and the balance amount was carried forward for the remaining Phases. This basis adopted by the assessee for allocation of the development cost to different Phases was not found acceptable by the Assessing Officer. According to him, the total development cost of Rs.14,76,01,755/- was required to be allocated to the different Phases on the basis of saleable area and since Phase-V and phase-VI completed by the assessee during the year under consideration comprised of 2,18,931 sq.ft. out of the total saleable area of 5,93,876 sq.ft. of the total project, proportionate development cost of Rs.5,50,66,373/- was required to be allocated to Phase-V and Phase-VI. Since the assessee was allocated development cost of Rs.6,62,36,892/- to Phases-V and VI, the difference of Rs.1,11,70,519/- representing excess development cost allocated by the assessee was disallowed by the Assessing Officer.

The disallowance of Rs.1,11,70,519/- made by the Assessing Officer on account of the alleged excess allocation of development cost was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted the said disallowance made by the Assessing Officer for the following reasons given in his impugned order:- “It is seen that the appellant was eligible for deduction u/s 80-IB till 31/03/2012 i.e AY 2012-13. During this year, the receipts are for construction completed before 31/03/2012, which is eligible for deduction u/s 80IB and remaining receipts are for ongoing construction after 31/03/2012 which is not eligible for deduction us 80IB. This has led AO to believe that more development cost is attributable to the receipts for which no deduction u/s 80IB is allowable. However, there is no basis for such belief. The appellant has submitted before the AO as well as during appellate proceedings that he has been attributing development costs on the basis of a formula which is same for periods for which he is entitled to deduction u/s 80lB & other period when his income is fully taxable without any deduction u/s 80IB. The AO has not found out any deviation from this formula for two periods when the income is exempt and when taxable. Therefore, there is no reason to interfere with the development cost attributed. Additionally, it is seen that the comparison done by the AO of year wise attribution of development cost is faulty because the development cost attributed for this AY i.e 2013-14, Rs.4,95,15,098/- also includes the development cost for subsequent AY i.e 2014-15”.

We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. Although the ld. D.R. has relied on the working of allocation of development cost as made by the Assessing Officer in the assessment order in support of the Revenue’s case on this issue, he has not been able to point out any mistake or infirmity on the basis of allocation of development cost adopted by the assessee. It is observed that even the Assessing Officer in his assessment order did not pinpoint any defect or deficiency in such basis or method adopted by the assessee. As contended on behalf of the assessee before the ld. CIT(Appeals) as well as before the Tribunal, the (Assessment Year: 2013-2014) & (Assessment Year: 2014-2015) M/s. Ashiana Amar Developers same basis or method was adopted by the assessee for allocating the development cost even in the earlier years and the same was accepted by the Assessing Officer. Keeping in view all these facts of the case, we find no infirmity in the impugned order of the ld. CIT(Appeals) accepting the basis or method adopted by the assessee consistently for allocation of development cost of different Phases of the Project and deleting the disallowance made by the Assessing Officer on this issue. The same is, therefore, upheld dismissing Ground No. 2 of the Revenue’s appeal.

Now we shall take up the Revenue’s appeal for A.Y. 2014-15 being which is directed against the order of the ld. CIT(Appeals)-9, Kolkata dated 30.03.2017.

It is observed that the solitary issue involved in this appeal of the Revenue relating to the deletion by the ld. CIT(Appeals) of the disallowance made by the Assessing Officer on account of development cost is similar to the one involved in Ground No. 2 of the Revenue’s appeal for A.Y. 2013-14, which has been decided by us in the foregoing portion of this order. As all the material facts relevant to this issue as involved in A.Y. 2014-15 as well as the arguments of the ld. Representatives of both the sides are similar to that of A.Y. 2013-14, we follow our conclusion drawn in A.Y. 2013-14 and uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer on account of development cost.

In the result, both the appeals of the Revenue are dismissed. Order pronounced in the open Court on May 01, 2019.