ACIT, CHENNAI vs. CASA GRANDE PVT LTD., CHENNAI

आदेश / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER The appeal by the Revenue and Cross Objection by the

assessee are directed against the order of the Commissioner of

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Income-tax (Appeals)-I, Chennai for the assessment year 2010-2011

vide order dated 26.05.2014.

‘’2.1 The learned Commissioner of Income Tax (Appeals) has erred in directing the Assessing Officer to allow the entire claim of ₹10,59,37,589/- under section 80IB(10) of the I.T. Act which was disallowed by the Assessing Officer on the ground that certain expenditure debited in 80IB units were less and the expenditure debited in non 80IB units were more, so as to gain more deduction from 80IB and reduce the taxable profits from the non 80IB units. 2.2 The learned Commissioner of Income Tax (Appeals) ought to have appreciated the reworking of expenditure made by the Assessing Officer between 80IB and non 80IB units’’.

grounds:-

‘’2. The assessee ought to have appreciated that the appeal lacks maintainability in the light of the fact that there was no application of mind and discretion was properly exercised by the CIT. 3. The assessee ought to have appreciated the decision of the ITAT ( which in the case of Sri Varadaraja Textiles reported in 9 ITD 469 (Mad) been accepted by the Revenue) in support of the contention of the respondent , viz ‘’Section 253(2) of the Act provides that the Commissioner may, if he objects to any order passed by the Commissioner (Appeals) direct the ITO to file an appeal to the Tribunal against the order. But, this does not mean that every order of the Commissioner of Income Tax (Appeals) which interferes with the assessment made by the ITO can be objected to. The objection must be reasonable and rational cannot be made without regard to the correctness of the order appealed against. The power itself is a discretionary power and is coupled with the duty to act fairly. The

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exercise of this power is also a matter of review by the Tribunal because an administrative Tribunal is duty bound to determine whether the power of the Commissioner has been exercised in a manner that complies with certain implied legal requirement. De Smith’s Judicial Review of Administrative Action in at page 323 states that in some context it may be confined to the question whether the competent authority has keep within the four corners of the Act and whether it has acted in good faith, but usually they will persue their inquiry further and will consider whether the repository of a discretion although acting in good faith has abused its power by exercising it for an inadmissible purpose or an irrelevant grounds or without regard to relevant consideration or with gross unreasonable . We find the following statement of law on this point: The emphasis that the court have recently placed on an implied duty to exercise discretionary powers fairly must normally be understood to mean a duty to adopt a fair procedure. Bu there is no doubt that the ideal of fairness is also a substantive principle. It is implicit in the concept of a judicial discretion, and it includes a duty to be impartial and not to discriminate on unacceptable grounds or to delay the making of a decision to the prejudice of fundamental rights. 4. The learned AO ought to have appreciated that the computation of relief u/s.80IB (10) is based on facts namely, (i) That the respondent maintained seperate books (ii) That the books were not rejected bythe appellant. (iii) Method of accounting was not rejected in terms of section 145 of the Act. (iv) That the appellant faield to appreciate that the project ws nearing completetion and hence no outflow of funds required. (v) That the respondent has reservoir of funds in its hand in the light of realiationof sale price and opening balance of reserves. (vi) The 80IB project was not mingled with regular projects in the light of separate infrastructure. 5. The order of the Commissioner of Income Tax (Appeals) has been based on analysis of above facts and thus requires no tinkering on facts.

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assessee filed a condonation petition for condoning a delay of 148

days. It was stated that delay was due to circumstances beyond the

assessee’s control. The assessee placed reliance on the judgment in

the case of Dehri Rohtas Light Railway vs. District Board Bhojpur and

Ors 1992 SCR (2) 155, 1992 SCC (2) 598 and also placed reliance on

the judgment of Ram Nath Sahu & Ors. Vs. Gobardhan Sao & Ors.

2002(3) SCC 195. We have gone through the petition. The assessee

has not explained the exact reason for delay in filing the Cross

Objection. The reason advanced by the assessee is general in nature.

The assessee justified the delay only with reference to the affidavit

filed by the Director and it cannot be said that there is any good and

sufficient reason to condone the delay. It clearly shows that the delay

was due to the negligence and inaction on the part of the assessee.

The assessee could have very well avoided the delay by the exercise of

due care and attention. Being so, there is no sufficient and good

reason for the delay of 122 days and even the number of days of delay

mentioned in affidavit is also incorrect. Therefore, we declined to

condone the delay and thus the Cross Objection filed by the assessee

is dismissed.

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that the Assessing Officer has found that certain expenditure debited

in accounts of unit entitled for deduction u/s.80IB is less, where as

such expenditure debited in accounts of unit not entitled for deduction

u/s.80IB was more, so as to gain more deduction u/s 80IB and reduce

the taxable profits from the non-80IB unit. Accordingly, the Assessing

Officer reworked the profits of unit entitled for deduction u/s.80IB and

non-80IB units on pro-rata basis with reference to ‘’increase in

inventory ratio’’ (80IB unit 63.5% and non 80IB unit -36.5%). After

reallocating the expenditure between 80IB unit and non 80IB units,

the Assessing Officer restricted the eligible deduction u/s.80IB (10) to

�8,97,33,422/- against the claim of �10,59,37,589/- made by the

assessee. Aggrieved, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals).

ld. Authorised Representative for assessee has objected for such

reallocation of expenditure on the basis of incremental inventory ratio,

stating that the company was maintaining separate accounts for 80lB

and non 80lB units which were audited by the qualified chartered

accountants and the allocation of expenditure was on actuarial basis.

The ld. Authorised Representative for assessee has further argued

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that the reworking of the expenditure by the Assessing Officer without

rejecting the books of account of the assessee was not permissible

under law. It was submitted before the Commissioner of Income Tax

(Appeals) that the assessee was running six other projects in addition

to the 80IB project. With regard to apportionment of interest, the Id.

AR has submitted that since 80IB unit has got more surplus funds as

the project was nearing completion and advances towards flats were

being received on their registration, the company was having surfeit of

funds over liabilities and has put them in its other non 80IB units. The

Commissioner of Income Tax (Appeals) further observed that in the

assessment order that the Assessing Officer has hand-picked some of

the heads of expenditure for reworking out of several heads of

expenditure debited to the P&L account. The Assessing Officer has

picked up those heads which were found to have been debited at a

lower amount in 80IB units and more in non 80lB units to justify such

theory that the assessee has deliberately hiked up the expenditure in

non 80IB units so as to reduce the taxable profits and claim more

deduction benefits from the 80lB unit. The expenditure like

construction expenses, sales and general expenses which were

shown other way round were not touched, since they were convincing

to the Assessing Officer This theory of the Assessing Officer cannot be

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accepted. It was beyond anybody's imaqination that the assessee will

deliberately hike up the expenditure of non 80lB units under some

heads and not others. If the AO is logical then, not being satisfied with

the accounts, he should have rejected the books first and estimated

the entire expenditure between the 80IB unit and non 80IB units on

some scientific basis. Reallocating the expenditure on certain

presumption and choosing only a few head where the expenditure

debited in 80IB units is more, was not warranted. The Assessing

Officer should have refrained from such reallocation when separate set

of account s were maintained and subjected to audit which fact was

not disputed by him. The Commissioner of Income Tax (Appeals) has

not found any merit in such reallocation of expenditure between 80IB

and non 80IB units on mere conjecture and rejected the reworking of

the eligible 80IB deduction by the Assessing Officer. Aggrieved, the

Revenue preferred an appeal before us.

record. The Commissioner of Income Tax (Appeals) deleted the

addition made by the Assessing Officer without any basis. The facts

brought on record by the Assessing Officer suggest that the assessee

lowered the profits of the units not enjoying deduction u/s.80IB, so as

to reduce the liability of tax. It is appropriate to remit the issue back

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to the file of the Assessing Officer with a direction to examine the

details furnished by the assessee with regard to all expenses including

interest, finance charges, depreciation and other general

administrative expenses on the basis of incremental inventory of work

in progress from earlier assessment year to this assessment year, after

giving due credit to the inflow of funds, if any in both units. The

Assessing Officer shall independently examine the issue after proper

enquiry. With these observations, we are remitting the issue back to

the file of the Assessing Officer for fresh consideration.

No.2187/Mds/2014 is partly allowed for statistical purposes and the

Cross Objection No.12/Mds/2015 of the assessee is dismissed.

Order pronounced on Friday, the 28th day of August, 2015, at Chennai.

Sd/- Sd/- (च�ला नागे�� �साद ) (चं� पूजार� ) (CHALLA NAGENDRA PRASAD) (CHANDRA POOJARI) �या�यक सद�य/ JUDICIAL MEMBER लेखा सद�य/ ACCOUNTANT MEMBER चे�नई/Chennai. �दनांक/Dated:28.08.2015. KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2.��यथ�/ Respondent 3. आयकर आयु�त (अपील)/CIT(A) 4. आयकर आयु�त/CIT 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.

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