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Income Tax Appellate Tribunal, “C” Bench, Mumbai
Before: Shri B.R. Baskaran (AM) & Shri Pawan Singh (JM)
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.
Issues urged by the Revenue are:- (a) Whether the learned CIT(A) was justified in directing the Assessing Officer to allow deduction u/s. 80IB(10) of the Act on pro rata basis.
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.
The assessee-company is a builder and developer. The assessee claimed deduction u/s. 80IB(10) of the Act in respect of the projects executed by it. In respect of project named ‘Purva Riviera’, the Assessing Officer noticed that the built up area of some of the flats has exceeded the prescribed limit of 1500 square feet. Hence the Assessing Officer, by placing reliance on the decision rendered by Mumbai ‘C’ Bench of the ITAT in the case of M/s. Laukik Developers (105 ITD 657) disallowed the claim u/s. 80IB(10) on the above said project.
The Assessing Officer further noticed that the assessee has claimed deduction u/s. 80IB(10) in respect of each of the projects separately. Accordingly the assessee did not set off loss arising in some of the projects against the profit arising in other projects. The Assessing Officer noticed that deduction u/s. 80IB(10) is allowable to an “undertaking” developing and building housing projects. The AO took the view that the assessee was doing housing project development as homogenous business activities. He further observed that the business of an assessee can be classified into several undertakings only when a unit could be capable of being classified as independent unit distinct from other business activity carried on by the assessee. The Assessing Officer also took the view that each of the undertaking should be carrying on different type of business activity with greater degree of independence. The Assessing Officer also gave an example that a company may have one undertaking carrying on steel business and another undertaking may be carrying on housing projects. Accordingly, the Assessing Officer took the view that the assessee has been carrying on homogenous business activity consisting of various housing projects as part of the same undertaking. Accordingly he took the view that the claim of the assessee that each of the housing project was separate undertaking cannot be accepted. The Assessing
3 M/s. Purvankara Projects Ltd.
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.
The learned CIT(A), by following the decision rendered by the Tribunal in assessee’s own case in A.Y. 2004-05 to 2008-09 held that deduction u/s. 80IB(10) shall be allowed on proportionate basis in respect of units whose built-up area does not exceed 1500 square feet. He further held that deduction u/s.80IB(10) of the Act shall be allowed in respect of each of the projects. In this regard he placed reliance on the decision rendered in the case of Meera Cottons and Synthetics Mills Pvt. Ltd. Vs. ACIT (2009) 29 SOT 177
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.
We heard the parties and perused the record. The first issue relates to the allowing deduction u/s 80IB(10) of the Act on prorata basis in respect of residential units having built up area of less than 1500 Sq.ft. We notice that this issue has been decided in favour of the assessee by the co-ordinate bench in the assessee’s own case relating to AY 2004-05 to 2008-09 in to 4351/Mum/2010 and also in ITA No.658/Mum/2012 relating to AY 2009- 10. Hence we do not find any reason to interfere with the order passed by Ld CIT(A) on this issue, since the same is in accordance with the view taken by the Tribunal.
The next issue relates to the aggregation of profits and losses of all projects. We notice that the Ld CIT(A) has decided this issue under the legal principle that the deduction u/s 80IB(10) has to be allowed in respect of each of the undertaking separately. However, we have noticed that the assessing officer has taken all the projects as belonging to one undertaking and accordingly aggregated the profits and losses of all projects. We notice that the Ld CIT(A) has not addressed the view point of the AO.
We have earlier noticed that the AO has observed that the assessee has not maintained separate accounts for each of the projects and further stated that the assessee has not shown that the assessee was not able to establish that there was no interlacing or interdependence between various projects. The Ld A.R, during the course of hearing, disputed the above said observations of the AO. He submitted that the assessee has been maintaining separate accounts for each of the projects. He further submitted that each of the projects should be taken as separate undertakings as held in the case of Viswas Promoters (214 Taxmann 525)(Mad) and CIT Vs. Vandana Properties (2013)(353 ITR 36)(Bom).
6 M/s. Purvankara Projects Ltd.
We heard Ld D.R. We notice that the AO has treated all the projects as belonging to one undertaking on the reasoning that no separate accounts have been maintained and further the assessee was not able to show that there was no interlacing and interdependence. The Ld A.R submitted that the above said observations are against the facts available with the assessee, meaning thereby, these factual aspects require verification at the end of the AO. Accordingly we set aside the order passed by Ld CIT(A) on this issue in both the years under consideration and restore the same to the file of the AO with the direction to find out factual aspects by examining the books of accounts, materials, information and explanations of the assessee and decide the issue in accordance with the decision rendered in the case of Viswas Promoters (supra) and Vandana Properties (supra).
In the result, both the appeals of the revenue are treated as partly allowed for statistical purposes.