ACIT, CHENNAI vs. C.SUBBA REDDY (HUF), CHENNAI

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

According to the Ld. D.R., Section 80-IB(10) of the Act is applicable only in respect of housing project and not for commercial project.

Referring to the assessment order, the Ld. D.R. pointed out that the approval granted by the Chennai Metropolitan Development Authority is for construction of residential cum commercial construction. Therefore, the assessee is not eligible for deduction under Section 80-IB of the Act.

Since no part of the commercial building was allotted to the assessee, according to the Ld. counsel, the assessee is not claiming any deduction in respect of the commercial building which was allotted to the owner of the land, namely, M/s Shyamala Pictures and Hotels Pvt. Ltd. The Ld.counsel further submitted that the cost of the land, which was allotted to the assessee, in pursuance to the joint development agreement, was met by constructing the commercial building to the owner. Therefore, the assessee has not developed any commercial project. Merely because a composite approval was obtained from competent authority for construction of the building, it cannot be said that the assessee has developed a commercial project. Referring to the contention of the Ld. D.R. with regard to built-up area, the Ld.counsel submitted that built-up area does not include common area or the car park area. In fact, an identical issue came before this Tribunal in the assessee's own case for assessment year 2004- 05 and the CIT(Appeals) has followed this order of the Tribunal for assessment year 2004-05. The only objection of the Revenue in the grounds of appeal is that an appeal was filed before the High Court against the decision of this Tribunal for the assessment year 2004-05. Now the High Court by judgment dated 27.01.2015 in CIT v. Subba Reddy (HUF) has approved the order of the Tribunal. In view of this judgment of Madras High Court, according to the Ld. counsel, the CIT(Appeals) has rightly granted deduction under Section 80-IB(10) of the Act.

6. Referring to the disallowance made under Section 14A of the Act, the Ld.counsel for the assessee submitted that the assessee has declared the dividend income of `1,13,13,773/-. The assessee specifically claimed before the Assessing Officer that no expenditure was incurred for earning the dividend income. Hence there was no question of any disallowance. However, according to the Ld. counsel, the CIT(Appeals) restricted the disallowance to `3,24,195/-. Hence, no interference is called for.

7. We have considered the rival submissions on either side and perused the relevant material available on record. The first objection of the Revenue is that the assessee has constructed a residential cum commercial complex. Admittedly, it is a joint venture project and the land belongs to the land owner M/s Shyamala Pictures and Hotels Pvt. Ltd. As per the joint development agreement, the assessee was allotted the residential block. The cost of the land in which the residential project was developed by the assessee was met by constructing commercial building to the owner in the other block of the land. This is obvious from joint development agreement. In fact, the commercial building was retained by the land owner M/s Shyamala Pictures and Hotels Pvt. Ltd. No part of the commercial building was allotted to the assessee. Therefore, this Tribunal is of the considered opinion that as per the joint development agreement, when the assessee was given only the residential area, and the assessee is claiming deduction under Section 80-IB(10) of the Act only in respect of residential area, there is no reason to disallow the claim of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority on this issue.

8. Now coming to the built-up area, which exceeds 1500 sq.ft., admittedly, the Assessing Officer found that the common area and car park area have to be included in the built-up area. This was the subject matter of appeal before the High Court in the assessee's own case for assessment year 2004-05. The Madras High Court, after referring to the definition of “built-up area” which came into effect from 01.04.2005, found that there is no justification in including car park area in the definition of “built-up area” of residential unit for the purpose of determining the maximum built-up area. The Madras High Court has also found that the common area shared with other residential unit cannot be treated as part of built- up area. In view of this judgment of Madras High Court in the assessee's own case for assessment year 2004-05, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly followed the order of this Tribunal. Therefore, the order of the CIT(Appeals) is confirmed.

9. Now coming to the disallowance made by the Assessing Officer under Section 14A of the Act, the assessee is not maintaining any books of account. The assessee claims that no expenditure was incurred. The fact remains that the assessee invested in the mutual funds to the extent of `77.50 Crores and earned dividend income of `1,13,13,772/-. For making such huge investment, naturally the managerial expenses have to be incurred.

Therefore, the disallowance has to be computed in respect of the expenditure relatable to managerial expenses. Therefore, the CIT(Appeals) restricted the disallowance to `3,24,195/-. This Tribunal do not find any reason to interfere with the order of the CIT(Appeals). Accordingly, the order of the CIT(Appeals) is confirmed.

Order pronounced on 18th December, 2015 at Chennai.