DCIT CEN CIR 1(2), MUMBAI vs. PURVANKARA PROJECTS LTD, BANGALORE

Both the appeals preferred by the Revenue are directed against the orders passed by the learned CIT(A)-47, Mumbai and they relate to A.Y. 2010- 11 and 2011-12. Since the issues urged in both these appeals are identical in nature, we heard these appeals together and they are being disposed of by this common order, for the sake of convenience.

2 M/s. Purvankara Projects Ltd.

(b) Whether the learned CIT(A) was justified in holding that deduction u/s. 80IB(10) OF THE Act should be allowed on the profit from eligible units without setting off of loss incurred by other units.

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Officer placed reliance in this regard on the decision rendered by Chennai bench of the ITAT in the case of DCIT Vs. Macro Marvel Projects Ltd., wherein the Tribunal has expressed the following view :- "Where an assessee carries on various activities, even though centralized account is maintained, so long as there is no interlacing, interconnection, or interdependence of various units, various such activities have to be treated as separate and distinct as held by Hon'ble Apex Court in the case of Waterfall Estates Ltd. v. CIT 119961 219 ITR 563. Thus, if an assessee had different units resulting in positive gross total income, each of the units has to be considered separately for working out deduction coming under Part C falling in Chapter VI-A of the Act, provided assessee had maintained separate accounts - and there was no interlacing and interdependence."

It was further held in Para 14 of the above order as under —

"14. The position of law, as summarized by Hon'ble jurisdictional High Court takes us to the question whether the assessee here was having different industrial undertakings or units which were not to be considered parts of the same homogenous activity of construction. In each of the decisions relied on by the assessee, adjustment of loss of one unit with profit of other unit, while computing the deduction available under Part C of Chapter VI-A, was held to be not warranted for a reason that the units were independent of each other. In the case of Dewan Kraft Systems Pvt. Ltd.(supra) before Hon'ble Delhi High Court, one of the units was in Himachal Pradesh while other units were in Delhi and NOIDA. In the case of Synco Industries Ltd. (supra), one was a Steering Unit and the other was Axle Unit. In the case of Canara Workshops (P.) Ltd. (supra), one of the units was manufacturing automobile parts, whereas, the other was alloy steel. In the case of Visakha Industries Ltd. (supra) decided by Hon'ble Andhra Pradesh High Court, set off attempted was between the asbestos division and spinning division. Thus, in all the cases relied on by the assessee, the units were having different activities. Here, on the other hand, assessee admittedly was having only one homogenous business activity that was construction and selling of flats. No doubt, it was having five projects, but the question is whether each of the projects were forming part and parcel of one unit or part of one industrial undertaking. There is no claim for the assessee that each of these projects were separate and there was no interlacing, interconnection or interdependence. Assessee was only doing housing project development which is a homogenous business and vis-à-vis the five projects, there was no demarcation

4 M/s. Purvankara Projects Ltd. of identity, in such a manner that each of the project could be considered as independent units. Section 80-IB(10) of the Act clearly specifies that deduction under that sub-section is to be given to an undertaking developing and building housing projects. There is nothing in this sub-section which would require each of the housing projects to be considered by itself as independent undertaking while working out the deduction. No doubt, if an assessee is able to show that each of its projects were independent with no interlacing, interconnection or interdependence, then it might be able to canvass a claim for deduction under Section 80-IB(10) of the Act. Here, there is nothing on record to show that each of the projects was independent, with no interlacing, interconnection or interdependence of various units. The business was a homogenous one. Therefore, in our opinion, all these projects together had to be considered as a single unit for the purpose of working out deduction under Section 80IB(10) of the Act and the methodology adopted by the assessee in the revised computation filed by it, cannot accepted. In the result, this question is answered in favour of the Revenue.”

4. The Assessing Officer held that the assessee has not maintained separate accounts for various projects and the assessee has not been able to show that there is no interlacing or interdependence between various units so that each of the units can be categorized as separate undertaking. Accordingly he took the view that income of the assessee for the purpose of deduction u/s. 80IB(10) of the Act should be arrived at by clubbing profits and losses of all the projects. Accordingly he computed the income and allowed deduction u/s. 80IB(10) of the Act which resulted into disallowance of ` 19.61 cores out of the deduction claimed by the assessee.

5 M/s. Purvankara Projects Ltd. and also Krupa Chatons Manufacturing Company Pvt. Ltd. Vs. DCIT, dated 11.1.2014 (Mumbai ITAT). Aggrieved by the decision rendered by the learned CIT(A), the Revenue has preferred these appeals before us.

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