IN THE INCOME TAX APPELLATE TRIBUNAL,

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
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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
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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
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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
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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.