High Court Of Gujarat
ITO- Ward 5(1) vs. Keval Construction
Section : 80-IB, 40(a)(ia)
Akil Kureshi And Ms. Sonia Gokani, JJ.
Tax Appeal No. 443 Of 2012
December 10, 2012
ORAL ORDER
Akil Kureshi, J. – Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal (“the Tribunal for short) dated 13.1.2012. Following questions have been presented for our consideration :
(I) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the claim of deduction under section 80IB(10) of the Act and not appreciating the fact that the relationship between the assessee and the end user of the units was that of ‘works contract’?
(IIa) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in directing to allow the disallowance as deduction under section 80IB(10) of the Act, which is not permissible in law since this amount is not an income derived from a housing project but a disallowance made under section 40(a)(ia) of the Income Tax Act?
(IIb) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in directing to allow the disallowance as deduction under section 80IB(10) of the Act, since this amount is also not allowable in view of the fact that this would be allowable in this year of payment, which would lead to double deduction?”
2. Assessee is engaged in the business of developing housing projects. The claim of the assessee under section 80IB(10) of the Income Tax Act was rejected on the ground that assessee did not own the premises on which such project was developed. The Commissioner(Appeals) allowed the claim of the assessee upon which the Revenue approached the Tribunal. Tribunal by the impugned order accepted the claim relying on its earlier decision in case of M/s. Shakti Developers. It is this decision of the Tribunal which has given rise to question no.(I).
3. Decision of the Tribunal in case of M/s. Shakti Developers came up for consideration before this Court in case of CIT v. Radhe Developers [2012] 341 ITR 403/204 Taxman 543/17 taxmann.com 156 (Guj.). We upheld the Tribunal’s order making following observations :
“34. We have reproduced relevant terms of development agreements in both the sets of cases.
It can be seen from the terms and conditions that the assessee had taken full responsibilities for execution of the development projects. Under the agreements, the assessee had full authority to develop the land as per his discretion. The assessee could engage professional help for designing and architectural work. Assessee would enroll members and collect charges. Profit or loss which may result from execution of the project belonged entirely to the assessee. It can thus be seen that the assessee had developed the housing project. The fact that the assessee may not have owned the land would be of no consequence.”
4. During the course of the assessment, the Assessing Officer also disallowed the expenditure of sum of Rs. 10,93,134/- under section 40(a)(ia) of the Act on the ground that the assessee had failed to deduct the tax at source on payment of transportation charges. Assessee carried the matter in appeal. CIT(Appeals) confirmed the disallowance upon which the assessee approached the Tribunal. Before the Tribunal, assessee took two stands. He firstly contended that this was the first year of applicability of the provisions and therefore, out of ignorance, the deduction was not made. He secondly contended that in any case such disallowance should qualify for deduction under section 80IB(10) of the Act. The Tribunal allowed his appeal accepting the alternate contention and directed the Assessing Officer to grant deduction accordingly. This conclusion of the Tribunal has given rise to questions (IIa) and (IIb) noted above. Ideally since this question had arisen out of the assessee’s appeal, as contrasting the first question which had arisen out of Revenue’s appeal against Tribunal’s order, Revenue should have presented two separate appeals before us. We are however, not compelling for two separate appeals.
5. Having heard counsel on both the question today in this appeal, we find no error in the Tribunal’s ultimate conclusion. Even if a certain expenditure which was incurred by the assessee for the purpose of developing housing project was not allowable by virtue of section 40(a)(ia) of the Act, since the assessee had not deducted the tax at source as required under law, it cannot be denied that such disallowance would ultimately go to I increase the assessee’s profit from the business of developing housing project. Whatever be the ultimate profit of assessee as computed even after making disallowance under section 40(a)(ia) of the Act, would qualify for deduction as provided under the law.
6. No question of law therefore, arises. Tax Appeal is dismissed.
[Citation : 354 ITR 13]
