IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “F”, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA No.8569/M/2010 Assessment Year: 2007-08 M/s. United Developers, ITO 21(3)(2), 71/5, Opp. Mukund Iron & Mumbai. Steel, Vs. L.B.S. Marg, Naupada, Kurla (West), Mumbai – 400 070. PAN: AABFU 5293N (Appellant) (Respondent) Assessee by Revenue by : Shri Jayant R. Bhatt, A.R. : Shri N. Padmanaban, D.R. Date of Hearing Date of Pronouncement : 30.12.2014 : 14.01.2015 ORDER Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 30.09.2010 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2007-08. The assessee has taken the following grounds of appeal: 1. The Learned CIT (Appeal) erred in retaining the Income of Appellant at Rs.23,29,571/- as against the returned Income of Rs. Nil. Because without prejudice in any view of the matter, the disallowances are highly excessive and contrary to the provisions of law and natural justice. 2. The Learned CIT (Appeal) erred in not allowing deduction u/s.80IB(10) for Rs.16,72,591/- which is unjust; absurd and defeat the very provision of deduction sections. 3. The learned CIT (Appeal) erred in confirming the addition of labour charges of Rs.6,56,980/- u/s. 40(a) (ia) of Income Tax Act, 1961 as the provision of said 2 ITA No.8569/M/2010 M/s. United Developers section are not applicable in the present case. 4. Reasons assigned by the CIT (Appeal) in making the above additions are wrong, contrary to the provisions of law & against the natural justice. 5. The Appellant prays to delete the addition of Rs.23,29,571/ - which is not in accordance with the law. 6. The Appellant prays to keep the demand in abeyance till the disposal of the appeal. 7. The Appellant further prays to allow it to add, alter and / or amend any or all of the aforesaid Grounds of Appeal at or before the time of hearing.” 2. A perusal of the above grounds of appeal reveals that the effective issues raised by the assessee are regarding the disallowance of deduction of Rs.16,72,591/- under section 80IB(10) of the Income Tax Act and the addition of labour charges of Rs.6,56,980/- under section 40(a)(ia) of the Act for non deduction of TDS. First we take up the issue relating to disallowance under section 80IB(10) of the Act. 3. The assessee firm is engaged in the business as developers. During the year under consideration, the assessee earned the income of Rs.16,72,591/from development of housing project under the slum rehabilitation scheme of the state government and claimed deduction under section 80IB(10) in respect of profits from the said project. The Assessing Officer (hereinafter referred to as the AO) noted that although the project was under slum rehabilitation scheme of the state government but the area of the plot upon which project was constructed was 2074.700 sq. meters only which was less than 1 acre. The AO observed that the condition of limit of area of 1 acre was relaxed only in case of projects which were approved by the central/state government and such scheme was duly notified by the Board. However, the assessee could not produce the notification. assessee. The AO therefore disallowed the claim of the 3 4. ITA No.8569/M/2010 M/s. United Developers Before the Ld. CIT(A), the assessee produced notification dated 03.08.10. The Ld. CIT(A), after going through the notification, observed that though the Board had notified the scheme but the said notification could not be applied in the case of assessee since the notification was effective from date of its publication i.e. 03.08.10 whereas the assessment year under consideration was A.Y.2007-08. He held that the said notification could not be applied retrospectively and therefore denied the deduction. 5. Before us, the Ld. A.R. has produced corrigendum dated 05.01.11 to the said notification dated 03.08.10 vide which the CBDT has clarified that the notification dated 03.08.10 shall be deemed to apply to projects approved by a local authority under the scheme on or after the 1st day of April 2004 and before 31st day of March 2008 and thereby making the income arising from such projects eligible for deduction under section 80IB(10) from the assessment year 2005-06 onwards. The Ld. A.R. of the assessee has further submitted that this notification was not available at the time of decision of the appeal by the Ld. CIT(A). 5.1 The Ld. D.R. has not disputed the issuance of corrigendum by the CBDT. In the light of the said corrigendum issued by the CBDT, the project of the assessee being approved and developed under the slum rehabilitation scheme after 01.04.2005 is eligible for deduction under section 80IB(10). Hence, in view of the above developed circumstances, it is held that the assessee is eligible to deduction under section 80IB(10) of the scheme. 6. The second issue raised by the assessee is regarding the addition made on account of disallowance under section 40(a)(ia). 6.1 At the outset, the Ld. A.R. has stated that the profits from the project are eligible for deduction under section 80IB(10) of the Act. He has further ITA No.8569/M/2010 M/s. United Developers 4 submitted that any disallowance of expenditure made under section 40(a)(ia) will result into enhancement of net profit which otherwise is eligible for deduction under section 80IB(10). Hence, no additions can be made into the taxable income of the assessee. He has, in this respect, relied upon the decision of the Pune Bench of the Tribunal in the case of “DCIT vs. Magarpatta Township Development & Construction Co.” [2013] 32 taxmann.com 63 (Pune – Trib.). 7. We have gone through the said decision. We find that the co-ordinate bench of the Tribunal, while relying upon the decision of the Hon’ble Jurisdictional Bombay High Court rendered in the case of “CIT vs. Gem Plus Jewellery India Ltd. [2011] 194 Taxman 192 (Bom.), has held that the assessee is entitled for the deduction on the corresponding enhanced income after statutory disallowances. Respectively following the said decision, it is held that after statutory disallowance under section 40(a)(ia) the enhanced income, if otherwise eligible, will also be eligible for deduction under section 80IB(10) of the Act. 8. In view of the above observations, the appeal of the assessee is hereby allowed. Order pronounced in the open court on 14.01.2015. Sd/(D. Karunakara Rao) ACCOUNTANT MEMBER Mumbai, Dated: 14.01.2015 * Kishore, Sr. P.S. Sd/(Sanjay Garg) JUDICIAL MEMBER ITA No.8569/M/2010 M/s. United Developers 5 Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [ By Order Dy/Asstt. Registrar, ITAT, Mumbai.