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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI D. KARUNAKARA RAO
सुनवाई की तायीख / Date of Hearing : 02.08.2016 घोषणा की तायीख /Date of Pronouncement : 23.09.2016 आदेश / O R D E R PER D. KARUNAKARA RAO, AM:
This appeal filed by the assessee on 24.1.2008 is against the order of the CIT (A)-IV, Mumbai dated 19.11.2007 for the assessment year 2004-2005. In this appeal, assessee raised the following grounds which read as under:- “1. Denial of deduction u/s 80IB(10) in respect of profits derived by giving the flats on leave and license basis. 1.1. The CIT (A) erred in confirming the action of the AO in denying deduction of Rs. 25,45,576/- under section 80IB (10) of the Act being profit element contained in license fees in respect of flats given on leave and license basis allegedly on the ground that the profits derived by giving flats on leave and license basis do not qualify for deduction u/s 80IB(10) of the Act and that is only the profits derived by selling flats which qualify for deduction u/s 80IB(10) of the Act.”
2. The only issue raised in this appeal relates to the proper head of income for taxing rental income earned from the flats and held as stock-in-trade by the assessee who is a developer and builder. It is the claim of the assessee that the same constitutes profits derived from the housing project for the purpose of claim of deduction u/s 80IB(10) of the Act. It is the case of the Revenue that such income does not constitute eligible profit for the purpose of deduction u/s 80IB(10) of the Act as the same is derived from the housing project.
Before us, Shri J.D. Mistry, Ld Counsel for the assessee brought our attention to the relevant provisions of Act and also an order of the Tribunal in the case of M/s. AHCL-PEL vs. ITO in (2005-06) and others, dated 29.10.2014 and submitted that such income constitutes eligible income for the purpose of deduction u/s 80IB(10) of the Act. In this regard, he brought our attention to paras 3 to 7 of the said Tribunal‟s order.
After hearing both the parties and on perusal of the cited decision of the Tribunal in the case of M/s. AHCL-PEL (supra), wherein one of us (AM) is a party to the said order, we find, the facts as well as the conclusions drawn by the Tribunal will help the assessee. Considering the importance of the said paras for the sake of completeness of this order, the same are extracted as under:-
“3. At the outset, Shri Mayur Kisnadwala, Ld Counsel for the assessee mentioned that the assessee is a builder and engaged in the business of development of housing project which is allowable for deduction u/s 80IB of the Act. There is no dispute about the project and the allowability of deduction of profits relatable to the sale proceeds of the flats of the said housing project. The only dispute relates to the allowability of deduction u/s 80IB of the Act in respect of the rental income earned by the assessee in respect of certain unsold flats held as stock-in-trade. It is the case of the assessee that some of the flats which are left unsold were let out under „leave and license system‟ and the said income being directed connected to the flats, which is integral part of the housing project is also allowable for deduction u/s 80IB of the Act. He relied on various decisions in support of the same.
4. On the other hand, Revenue Officers are of the opinion that such receipts are not allowable profits and denied the claim of deduction.
Before us, ld Counsel for the assessee submitted that there is no dispute on the facts and the dispute is only with regard to the definition of eligible profits whether it includes rental income earned by the assessee from the unsold part of the housing project. Bringing our attention to various decision placed before us, Ld Counsel for the assessee mentioned that the scrap sales are held to be eligible profits. He also mentioned that the interest payments received by the assessee from the debtors, relating to the sale proceeds, were also found eligible for claim of deduction u/s 80IB of the Act. In support of his argument, Ld Counsel for the assessee relied on the decision of ITAT, Hyderabad in the case of ACIT vs. Biotech Medicals (P) Ltd [2009] 119 ITD 143 (Hyd). Further, Ld Counsel also relied on the decision of the ITAT Mumbai Bench in the case of Tata Infomedia Ltd vs. ACIT [2009] 116 ITD 426 (Mum), which is delivered in the context of deduction u/s 80Q of the Act, wherein it was held that advertisement income constitutes eligible profits. In this case, the income is earned on sale of yellow pages. Drawing parallal to the above instances, Ld Counsel for the assessee submitted that the rental receipts earned out the unsold flats of the housing project should be held eligible for deduction. Further, Ld Counsel for the assessee brought our attention to the judgment of the Hon‟ble Supreme Court in the case of Liberty India vs. CIT [2009] 317 ITR 218 (SC) for the proposition that the income with first degree nexus should be considered as eligible income for the purpose of claim of deduction uj/s 80IB of the Act.
On the other hand, Ld DR relied on the orders of the Revenue Authorities.