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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S.SUNDER SINGH
आदेश / O R D E R
PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the Order dated 30.06.2016 of Commissioner of Income Tax (Appeals)-3, Chennai, in for the AY 2010-11 and raised the following grounds:
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The order of The Commissioner of Income Tax (Appeals)-3, Chennai dated 30.06.2016 in I.T.A.No.41/CIT(A)-2/2013-14 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.
The CIT (Appeals) erred in sustaining the disallowance of the claim for deduction u/s.80 lB (10) of the Act on the wrong presumption of the sale/allotment of two flats to one person so as to deny the full deduction claimed on the further presumption of the non- compliance of one of the conditions prescribed in the said section without assigning proper reasons and justification.
The CIT (Appeals) failed to appreciate that the reference to the amended provisions namely explanations (f) in the said section by the Finance No.2 Act 2009 inserted with effect from 01.04.2010 was wrongly made and ought to have appreciated that the sale of two flats to one single person was happened prior to the insertion of the said condition which should be applied prospectively and not retrospectively.
The CIT (Appeals) failed to appreciate that the evidence filed in support on 21.09.2015 in this regard were completely overlooked in recording findings erroneously and ought to have appreciated that even the presumption of the sale of two flats to a single person in the eligible housing project was factually disputed in the notes of arguments filed on 06.02.2015 thereby vitiating findings recorded in relation thereto.
The CIT (Appeals) failed to appreciate that the distinction attempted to overthrow the decision of the jurisdictional bench of the Income Tax Appellate Tribunal dated 19.05.2016 was not correct and wholly unjustified.
The CIT (Appeals) failed to appreciate that in any event the plea for proportionate grant of such deduction alternatively claimed was wrongly not considered thereby vitiating in decision rendered in rejecting the claim of such deduction fully in the computation of taxable total income.
The CIT (Appeals) erred in sustaining the disallowance of depreciation on the new motor car in the computation of taxable total income without assigning proper reasons and justification.
The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the Impugned Order and any order passed in violation of the principles natural justice would be nullity in law.
The Appellant craves leave to file additional grounds/arguments at the time of hearing.
2.0 Ground Nos.1 & 9 are general in nature which do not require specific adjudication.
3.0 Ground Nos.2 to 6 are related to the deduction u/s.80 IB (10) of Income Tax Act (in short ‘the Act’). During the assessment proceedings, the AO found that the assessee has claimed the deduction of Rs.5,86,13,568/- u/s.80 IB (10) of the Act. The assessee sold two flats to Shri M.Gandhi and Shri Shivakumar in violation of sub clause (f) of ITA No.3137/Mds/2016 :- 3 -: explanation to Sec.80 IB (10) of the Act. Therefore, the AO held that the assessee did not satisfy the conditions for allowing the deduction u/s.80 IB 8(10) of the Income Tax Act and accordingly, disallowed the sum of Rs.5,86,13,568/- and added back to the income.
3.1 Aggrieved by the order of the AO, the assessee went on appeal before the Ld.CIT(A) who confirmed the addition made by the AO and hence the assessee filed appeal before this Tribunal.
3.2 Appearing for the assessee, the Ld.AR submitted that the assessee has sold two flats to Mr. N.Suresh Kumar. First unit in Bashyam Navaratna in Block No.2, 1st Floor, Flat No.G was allotted on 30.08.2008 vide Sale Deed dated 30.08.2008 as well as construction agreement on even date.
The UDS for the said unit was registered in favour of Shri N. Suresh Kumar on 24.09.2008. The second unit in Bashyam Navaratna in Block No.4, 1st Floor, Flat No.A was allotted on 12.11.2008 vide agreement for Sale dated 12.11.2008. The UDS for the said unit was registered in favour of Shri N.
Suresh Kumar on 14.11.2008.
3.3 Similarly, in the case of Mr.Madhukar Gandhi sale was related to the AY 2008-09 and flats were registered in previous year relating to the AY 2008-09 for which the assessment was completed and accepted by the Department. Mr.Madhukar Gandhi has retained one Flat in Block No.7, 4th
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Floor, Flat No.3 and cancelled other Flat in Flat No.6, Block No.7, 4th Floor.
As a result, the Flat sold to Mr.Madhukar Gandhi was only one Flat and the assessment proceedings for the AY were completed and allowed the deduction u/s.80 IB. The Ld.AR of the assessee argued that the provisions of Sub-clause (e) & (f) of Explanation to section 80 IB (10) was introduced by the Finance Act 2009 w.e.f. 01.04.2010 and the same is not applicable for the flats sold prior to the effective date. The Ld.AR argued that in the instant case, the Flats were sold in 2008 and registered in favour of the beneficiaries in 2008 before introduction of Sub-clause (e)
& (f) of Explanation to Sub-Sec.10 of section 80 IB of the Act and hence, the same is not applicable in the case of the assessee and the AO erred in disallowing the deduction claimed by the assessee. On the other hand, the Ld.DR relied on the lower authorities orders.
4.0 We heard both the parties and perused the material placed before us.
The assessee has allotted two Flats to Shri N. Suresh Kumar in residential block of Bashyam Navaratna in Block-4 & Block No.2 in the previous year 2008-09 relating to the AY 2009-10. In the same manner, two Flats were allotted from the housing project to Shri Madhukar Gandhi in Block No.7, Flat No.3 and Flat No.6. As per the provisions of Explanation to Sec.80 IB (10) in sub clauses (e) and (f), the assessee will be disentitled to the deduction u/s.80 IB (10), if the assessee allots more than one Flat to the individual or his spouse, children or such individual or ITA No.3137/Mds/2016 :- 5 -:
HUF or any other person representing such individual, the spouse or the manner of such individual or HUF. This amendment is applicable from 01.04.2010 i.e. relevant the AY 2010-11. Now, the question is whether the Explanation placing restrictions on the allotment of the Flats is applicable to the assessee or not. No doubt, the amendment is effective from 01.04.2010 and the even AY 2010-11 is also covered under the explanation. However, amendment was made by finance act 2009 with effect from 01/04/2010 i.e. after allotment of the Flats by the assessee to Mr.N.Suresh Kumar and Shri Madhukar Gandhi. The Flats were allotted and registered in favour of both the individuals before the amendment came into force. Therefore, we are of the considered pinion that sub- clause (e) and (f) of Explanation of Sec.80 IB (10) is not applicable in the assessee’s case. The assessee relied on the discussion of this Tribunal ITAT ‘B’ Bench, Chennai in the case of ACIT v. M/s.Elegant Estates in & 225/Mds/2016 & CO Nos.51 & 52/Mds/2016 on similar issue which was held in favour of the assessee. For ready reference, we extract the relevant paragraphs of the decision of the Hon’ble ITAT as under:
“we have considered that rival submissions on either side and perused the relevant material available on record. The claim of deduction u/s. 80 IB (10) of the Act was rejected by the AO for both the AYs on the ground that flat Nos. 403 and 404 were sold to the same persons, namely, Smt. Latha Ramachndran and Shri K. Ramachandran. The very same issue, namely, sale of flats to Smt. Latha Ramachandran and Shri K. Ramachandran came before this Tribunal for assessment year 2010-11 in ITA No.2902/Mds/2014. This Tribunal found that section 80 IB (10)(f) introduced by Finance Act, 2009 was with effect from 01.04.2010 and it applies prospectively. Therefore, it cannot be applied for assessment year 2010-11 and accordingly, allowed the claim of the assessee”.
4.1 In the instant case, the sale was made in 2008 and construction agreement was entered in 2008 and UDS was registered in 2008, all the ITA No.3137/Mds/2016 :- 6 -: formalities were completed during the FY 2008-09 relevant to the AY 2009-10. Therefore, we hold that the sub clause (e) and (f) of Explanation to Sec.80 IB (10) is not applicable in the case of the assessee and the assessee is entitled for deduction u/s.80 IB (10). Accordingly, we delete the addition made by the AO and set aside the order of the lower authorities. Ground Nos.2 to 6 of the assessee are allowed.
5.0 Ground Nos.7 & 8 are related to the disallowance of depreciation.
The AO disallowed the depreciation on motor cars. The assessee claimed opening WDV of Rs.44,45,157/- and made addition during the year for an amount of Rs.18,94,118/-. The total depreciation claimed by the assessee was Rs.31,69,638/- @50% on new motor car. During the assessment proceedings, the assessee furnished evidence for purchase of Audi Car for a sum of Rs.42,44,847/- and did not furnish evidence for the running the vehicles on hire. No evidence was furnished by the assessee to show that the vehicles are running on hire. Hence, the AO disallowed 50% of depreciation claimed by the assessee on vehicles and restricted the depreciation on motor cars to 15%.
6.0 Aggrieved by the order of the AO, the assessee went on appeal before the Ld.CIT(A) and the Ld.CIT(A) confirmed the addition made by the AO. Hence the assessee is in appeal before us. The Ld.AR argued that the AO ought have allowed the depreciation claimed and the Ld.DR supported orders of lower authorities.
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7.0 We heard both the parties and perused the material placed on record. During the assessment proceedings, the AO asked the assessee to produce details for verification of addition to assets as well as the evidence for running them on hire. The assessee did not produce the details called for by the AO. The Ld.CIT(A) confirmed the order placing reliance on the findings of the AO. The Ld.AR did not furnish any evidence to prove that the findings of the AO is erroneous before us. Therefore, we do not find any error in the orders of the lower authorities and the order of the Ld.CIT(A) is confirmed and the Ground Nos.7 & 8 are dismissed. 9.0 In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Open Court on 22nd March, 2017, at Chennai.