VIDHI BUILDERS,THANE vs. DCIT 6(1), THANE

In this appeal, the assessee is aggrieved for addition of Rs.11,81,100/- u/s.80IB(10) of the I.T.Act.

I have considered rival contentions and found that in the first round of appeal, the CIT(A) deleted the addition of Rs.11,81,100/- after having the following observations :- “5.3 Ground of appeal No.3 This ground of appeal relates to the addition of Rs.11,81,800/- on account of adoption of GP rate at 23.04% on the WIP of „Amrut Dham‟ project. On perusal of the facts of this case, I find that the AO had computed the NP of the project Vidhi Complex @ 23.04%, after making disallowance of Rs.19,58,399/- by invoking the provisions of section 40(a)(ia) of the IT Act. Before disallowance u/s.40(a)(ia) and before debit of interest and remuneration to the partners in the accounts of the project Amrut Dham, the net profit of Amrut Dham project was Rs.7,16,218/- which was 10.34% of the WIP. The NP of Vidhi Complex was Rs.14,98,757/- which was 9.9% of the WIP of Rs.1,50,00,000/-. Thus, the appellant had 2 disclosed almost similar net profit for both the projects. The appellant had debited the interest and remuneration to partners only in the project called Amrut Dham which can be said as irrational. The appellant should have debited the interest and the remuneration proportionately to both the projects. The AO‟s action in taking the net profit of Amrut Dham project @23.04% without brining any defect in the books of accounts and without rejecting the book results of the appellant does not appeal to be legally sustainable. The AO has not given any reason, let apart, convincing reasons and evidences, to reject the book results and to estimate the net income of Amrut Dham project. As such, action of the AO is erroneous and against the established legal principles. The appellant has disclosed almost similar net profits in both the projects before debit of interest and remuneration to partners and before disallowance made u/s.40(a)(ia) of the I.T.Act. In view of the facts mentioned above, the addition of Rs.11,81,100/- is hereby deleted. The ground of appeal

No.3, is therefore, allowed.” Against the above order of CIT(A), dated 27-11-2008, the revenue was not in appeal, but the assessee has filed appeal before the Tribunal against rejection of claim of deduction u/s.80IB amounting to Rs.34,57,156/-. By the order dated 8th April, 2011, the Tribunal have allowed the appeal with the following observations :- “7. In view of the decision of the Tribunal referred above we are of the view that the order of CIT(A) on this issue has to be reversed. We direct accordingly. The CIT(A) has also made passive remark that the project has not been sanctioned by the KDMC. This is not correct and the required approval had been filed before us and had also been filed before the AO and the AO has also made reference to the same in his order. We therefore, hold that the assessee would be entitled to deduction under section 10IB(1) of the Act subject to the verification of the existence of commercial area in the project Vidhi Complex. The fact that the commercial complex exists in the Amurt Dham Project would not be relevant for denying the claiming of the assessee for deduction under section 80IB(10) of the Act for the Project Vidhi Complex. With the aforesaid observation we set aside the order of the CIT(A) and direct the AO to allow the claim for deduction under section 80IB(10) of the Act after verifying the commercial area in the project Vidhi Complex. For statistical purposes appeal of the assessee is treated as allowed.”