Grandeur Homes Private Limited,, Hyderabad v. ACIT, Circle-2(3),, Hyderabad

ITA 13/HYD/2013 | 2008-2009
Pronouncement Date: 31-07-2014 | Result: Allowed

Appeal Details

RSA Number 1322514 RSA 2013
Bench Hyderabad
Appeal Number ITA 13/HYD/2013
Duration Of Justice 1 year(s) 6 month(s) 27 day(s)
Appellant Grandeur Homes Private Limited,, Hyderabad
Respondent ACIT, Circle-2(3),, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 31-07-2014
Assessment Year 2008-2009
Appeal Filed On 04-01-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA.NO.13/HYD/2013 ASSESSMENT YEAR 2008-2009 GRANDEUR HOMES P. LTD. SECUNDERABAD 500 003 PAN AACCG-7612-F VS. ACIT CIRCLE 2(3) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE MR. S. RAMA RAO FOR REVENUE MR. R. MOHAN REDDY DATE OF HEARING 25.06.2014 DATE OF PRONOUNCEMENT 31.07.2014 ORDER PER B. RAMAKOTAIAH A.M. 1. THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-III HYDERABAD DATED 17.10.2012 FOR THE ASSESSMENT YEAR 2008-2009. 2. ASSESSEE HAS RAISED 8 GROUNDS. GROUNDS NO. 1 AN D 8 ARE GENERAL IN NATURE. GROUND NO.7 IS ABOUT LEVY OF INTEREST UNDER SECTION 234B WHICH IS CONSEQUENTIAL IN NATURE . GROUNDS NO. 2 AND 3 PERTAIN TO ISSUE OF ESTIMATION OF INCOM E AT 8% ON THE ADVANCES RECEIVED BY THE ASSESSEE DURING THE YE AR. GROUND NO.4 PERTAIN TO THE ISSUE OF NON GRANTING OF DEDUCT ION UNDER SECTION 80IB(10) OF THE I.T. ACT. GROUNDS NO. 5 AND 6 PERTAIN TO BRINGING TO TAX INTEREST INCOME SEPARATELY AND NOT ALLOWING INTEREST PAYMENTS AS AN ALTERNATE CONTENTION. 2 ITA.NO.13/HYD/2013 GRANDEUR HOMES P. LTD. SECUNDERABAD 3. BRIEFLY STATED ASSESSEE IS A COMPANY IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. IT FILED RETUR N OF INCOME DECLARING LOSS OF RS.73 80 725/- (SHOWN WRONGLY AS POSITIVE INCOME BY THE LD. CIT(A) IN HIS ORDER). IN THE COUR SE OF ASSESSMENT PROCEEDINGS A.O. NOTICED THAT ASSESSEE HAS UNDERTAKEN TWO PROJECTS VIZ. SPLENDOUR PROJECT AND EMERALD HEIGHTS PROJECT DURING THE YEAR. HE ALSO NOTICED TH AT ASSESSEE HAS NOT OFFERED ANY INCOME AS THE ASSESSEE WAS FOLL OWING THE PERCENTAGE COMPLETION OF PROJECT METHOD IN ESTIMATI NG THE INCOME. A.O. FURTHER NOTICED THAT ASSESSEE HAS COMP LETED 13.06% OF SPLENDOUR PROJECT WHEREAS 4.28% WAS COMPL ETED IN EMERALD HEIGHTS PROJECT. A.O. NOTICED THAT ASSESSEE HAS RECEIVED ADVANCES TO THE TUNE OF RS.12 10 75 481/- IN THE SPLENDOUR PROJECT AND RS.6 03 60 507/- IN EMERALD H EIGHTS PROJECT. A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSE SSEE WHY INCOME SHOULD NOT BE ESTIMATED. ASSESSEE OBJECTED S TATING THAT IT HAS NOT COMPLETED SUBSTANTIAL PORTION OF EITHER OF PROJECTS AND THEREFORE ESTIMATION OF INCOME IS NOT CORRECT. IT FURTHER SUBMITTED THAT ASSESSEE IS CONSISTENTLY FOLLOWING M ETHOD OF ACCOUNTING IN THE BOOKS OF ACCOUNTS AS PRESCRIBED U NDER COMPANY LAW. THEREFORE REJECTION OF BOOKS OF ACCOU NTS IS NOT APPROPRIATE. IN THE ALTERNATE ASSESSEE ALSO SUBMIT TED THAT ITS PROJECT IS COVERED BY THE PROVISIONS OF SECTION 80I B AND IN CASE OF ANY INCOME BEING ESTIMATED ASSESSEE WANTED DEDU CTION UNDER SECTION 80IB (10) ON THE INCOME. AO CONSIDERI NG THAT INCOME IS REQUIRED TO BE ESTIMATED AS THE ASSESSEE HAS RECEIVED SUBSTANTIAL ADVANCES REJECTED THE BOOKS OF ACCOUNTS AND INVOKED THE PROVISIONS OF SECTION 145 OF IT ACT ESTIMATED THE INCOME AT 8% ON ADVANCES RECEIVED FROM CUSTOMER S IN 3 ITA.NO.13/HYD/2013 GRANDEUR HOMES P. LTD. SECUNDERABAD RESPECT OF TWO PROJECTS AS MENTIONED ABOVE. THEREBY AO DETERMINED THE INCOME AT RS.1 45 14 879/-. 4. WITH REFERENCE TO THE OTHER INCOME SHOWN IN TH E P & L ACCOUNT ASSESSEE SUBMITTED THAT RECEIPTS ARE B USINESS RECEIPTS AND THEREFORE NO SEPARATE ADDITION IS REQ UIRED IN CASE OF ESTIMATION. HOWEVER A.O. BROUGHT TO TAX THE OTH ER INCOME AT RS.39 40 006/- TO TAX THEREBY DETERMINING TOTAL INCOME AT RS.1 84 73 830/-. 5. BEFORE THE LD. CIT(A) ASSESSEE CONTESTED EACH OF THE ISSUES IN DETAIL. LD. CIT(A) REJECTED THE ASSES SEES CONTENTION OF REJECTION OF BOOKS OF ACCOUNTS AS UND ER : 5.2. I HAVE CONSIDERED CAREFULLY THE FACTS AND EVIDENCE. THERE IS NO DOUBT ABOUT THE FACT THAT THE APPELLANT IS ENTITLED TO FOLLOW A METHOD OF ACCOUNT ING WHICH BEST SUITS ITS OPERATIONS AS LONG AS THE METH OD IS LEGAL AND CONSISTENT. IN THE CURRENT CASE THE ASSES SING OFFICER HAS NOT CHALLENGED THE METHOD OF ACCOUNTING BUT FROM THE APPELLANT'S OWN METHOD OF ACCOUNTING HE HA S RAISED A QUERY REGARDING RECOGNITION OF REVENUE AND INCOME. THEREFORE THE APPELLANT'S ARGUMENT PERTAIN ING TO METHOD OF ACCOUNTING BEING QUESTIONED IS INCORRE CT. 5.3. IT IS A SETTLED LAW THAT THE BOOKS AND SUPPORTING DOCUMENTS OF ANY ASSESSEE ARE MUST TO PROVIDE AN ACCURATE PICTURE OF ITS FINANCIAL AFFAIR S. IF BY LOOKING AT THE BOOKS THE OFFICER CANNOT OBTAIN ACC URATE INFORMATION ON THE FINANCIAL AFFAIRS THEN REJECTIO N OF BOOKS IS IN ORDER. IN THE CURRENT CASE; I FIND THAT THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE BOOKS AS THEY DID NOT PROVIDE ANY ACCURATE INFORMATION ON THE INC OME EARNED AND THE EXACT FINANCIAL AFFAIRS OF THE APPEL LANT. 5.3. NOTWITHSTANDING THE REJECTION OF THE BOOKS I T IS CLEAR THAT THE APPELLANT IS FOLLOWING THE PERCENTAG E COMPLETION METHOD. AS PER THIS METHOD REVENUE PROPORTIONATE TO BE AMOUNT OF WORK COMPLETED IS RECOGNISED EVERY YEAR. THE APPELLANT HAS STATED THA T IT 4 ITA.NO.13/HYD/2013 GRANDEUR HOMES P. LTD. SECUNDERABAD DID NOT DO SO BECAUSE 30% OF THE WORK HAD NOT YET BEEN COMPLETED. NEITHER IN THE ACCOUNTING STANDARD AND NOR IN THE STATUTORY GUIDELINES IS IT ENSHRINED THAT REVENUE IS TO BE RECOGNISED ONLY AFTER 30% OF THE W ORK IS COMPLETED. THIS IS CLEARLY THE APPELLANT'S OWN INTERPRETATION HAVING NO BASIS IN THE STATUTE. I FI ND THAT THE ASSESSING OFFICER'S ESTIMATION AT 8% OF THE ADVANCES RECEIVED IS REASONABLE AND DOES NOT NEED T O BE INTERFERED WITH. ACCORDINGLY BOTH THE GROUNDS A RE DECIDED IN FAVOUR OF THE REVENUE. 6. ON THE ISSUE OF DEDUCTION UNDER SECTION 80IB(10 ) LD. CIT(A) REJECTED THE CONTENTION BY STATING AS UN DER M: 6.1. I HAVE SEEN CAREFULLY THE FACTS AND EVIDENCE. THERE WAS NO OCCASION FOR THE ASSESSING OFFICER TO EXAMINE THE CLAIM U/S 80IB( 10) BECAUSE THE APPELLANT HAS NOT DISCLOSED ANY INCOME. THEREFORE THE CLAIM WAS NOT IN QUESTION AT ALL. I ALSO FIND THAT THE APPELLANT HAD NOT DEMONSTRATED TO THE ASSESSING OFFICER THAT EACH AND EVERY CONDITION AS SPECIFIED IN THE AFOREMENTIONED SECTION HAD BEEN SATISFIED. EVEN DUR ING APPEAL PROCEEDINGS THE APPELLANT HAS NOT PROVIDED ALL DETAILS REGARDING SATISFACTION OF THE CONDITIONS LA ID DOWN IN SECTION 8018(10). THEREFORE I SEE NO REASO N HOW THE SAME CAN BE GRANTED. ACCORDINGLY THIS ISSU E IS DECIDED IN FAVOUR OF REVENUE. 7. ON THE ISSUE OF INTEREST INCOME TAXED AS INCOME FROM OTHER SOURCES LD. CIT(A) REJECTED THE CONTENTI ON BY STATING AS UNDER : 7.2. ON LOOKING AT THE FACTS I FIND THAT THERE I S NO AMBIGUITY AT ALL IN WHAT HAS BEEN WRITTEN BY THE ASSESSING OFFICER. HE HAS CLEARLY STATED THAT HE IS ONLY ESTIMATING INCOME FROM CONSTRUCTION ACTIVITY. THE ASSESSMENT ORDER BRINGS OUT THE FACT I.E. INCOME FR OM CONSTRUCTION WHICH HAS NOT BEEN DISCLOSED AS PER TH E PERCENTAGE COMPLETION METHOD. THERE IS NO REFERENCE TO INCOME FROM OTHER SOURCES. THEREFORE I FIND THAT T HERE IS NO MERIT IN THE GROUND OF THE APPELLANT AND INTERES T INCOME IS NOT TO BE TELESCOPED WITH BUSINESS INCOME 5 ITA.NO.13/HYD/2013 GRANDEUR HOMES P. LTD. SECUNDERABAD ESTIMATED. THIS GROUND OF APPEAL IS DECIDED IN FAVO UR OF REVENUE. 8. CONTESTING THE ABOVE OBSERVATIONS/FINDINGS OF T HE LD. CIT(A) LD. COUNSEL REFERRED TO THE PAPER BOOK PLACED ON RECORD WHEREIN ASSESSEES PROJECT COST DETAILS WERE PLACED. IT WAS SUBMITTED THAT THERE WAS NO DISPUTE WITH REFERE NCE TO THE PERCENTAGE OF WORKING COMPLETED AS DETERMINED BY TH E A.O. IT IS THE SUBMISSION THAT SUBSTANTIAL PART OF THE PROJ ECTS WERE NOT COMPLETED. THEREFORE IN THE ACCOUNTING POLICIES BE ING FOLLOWED BY THE ASSESSEE AS PER THE ACCOUNTING STANDARDS PRE SCRIBED BY THE COMPANIES (ACCOUNTING STANDARDS) RULES 2006 AN D GUIDELINES OF INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA THERE IS NO NEED TO ESTIMATE ANY INCOME IN THE IMPUGNED A SSESSMENT YEAR. IT WAS SUBMITTED THAT A.O. HAS WRONGLY INVOKE D THE PROVISIONS OF SECTION 145 AND THAT TOO ESTIMATED TH E INCOME ON ADVANCES RECEIVED WHEN ASSESSEE HAS NOT EVEN SPENT MONEY ON THE PROJECT. HE REFERRED TO THE DETAILS EXTRACTED B Y THE A.O. IN THE ORDER ON THE RATIO OF WORK COMPLETED. IT WAS SU BMITTED THAT ASSESSEE HAS ANNOUNCED THE PROJECT AND RECEIVED ADV ANCES TO AN EXTENT OF RS.12.11 CRORES FROM THE CUSTOMERS WH EREAS AMOUNTS SPENT ON THE PROJECT WAS ONLY RS.96.86 LAKH S. LIKEWISE UNDER EMERALD PROJECT OUT OF RS.6.04 CROR ES RECEIVED ASSESSEE HAS SPENT ONLY RS.48.28 LAKHS. IT WAS SUBM ITTED THAT WITHOUT EVEN STARTING THE PROJECT AND SPENDING SUBS TANTIAL AMOUNT OF THE MONEY ON THE PROJECT PROFITS CANNOT BE ESTIMATED SIMPLY ON ADVANCES RECEIVED. HE RELIED ON THE PRINCIPLES LAID DOWN BY VARIOUS DECISIONS OF ITAT A ND HIGH COURT AND MORE SO ON THE REVENUE RECOGNITION. HE P LACED ON RECORD THE COORDINATE BENCH DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF LINGTEC CONSTRUCTORS L.P. VS. ITO 15 6 TTJ 76 6 ITA.NO.13/HYD/2013 GRANDEUR HOMES P. LTD. SECUNDERABAD (MUM.) ON THE METHOD OF ESTIMATING INCOME ON PERCEN TAGE COMPLETION METHOD. FURTHER HE ALSO SUBMITTED THAT BOTH A.O. AND LD. CIT(A) DID NOT CONSIDER THE ASSESSEES ALTE RNATE CLAIM OF DEDUCTION UNDER SECTION 80IB WHICH WAS ENTITLED. HE REFERRED TO THE ORDERS OF A.O. IN LATER TWO YEARS IN NOT ONLY ACCEPTING THE BOOK RESULTS BUT ALSO ALLOWING THE DE DUCTION UNDER SECTION 80IB. FURTHER WITH REFERENCE TO THE INCOME UNDER OTHER SOURCES BEING SEPARATELY BROUGHT TO T AX IT WAS SUBMITTED THAT THESE ARE NOTHING BUT BUSINESS PROFI TS AND THESE ARE SET OFF TO THE OTHER ADMINISTRATIVE EXPEN DITURE WHICH WAS NOT CAPITALIZED TO THE PROJECT. THEREFORE THE LOSS IN THE YEAR SHOULD BE ALLOWED AS SUCH. 9. LEARNED D.R. HOWEVER SUPPORTED THE ORDERS OF T HE A.O. AND LD. CIT(A) AND SUBMITTED THAT SINCE ASSESS EE HAS RECEIVED SUBSTANTIAL ADVANCES THE SAME WAS CORRECTL Y ESTIMATED. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE PAPER BOOKS PLACED ON RECORD INCLUDING THE ORDERS OF A.O. IN THE LATER YEARS. AS SEEN FROM THE ORDER FOR A.Y. 2009- 10 A.O. ACCEPTED THE BOOK RESULTS AND ALSO ALLOWED 80IB AND HE HAS GIVEN DETAILED REASONING IN PARA-2 OF THE OR DER HOW THE ASSESSEE WAS ELIGIBLE FOR THE DEDUCTION- ANALYSED P OINT WISE ON THE APPROVALS BY THE LOCAL AUTHORITY DATE OF COMPL ETION OF THE PROJECT SIZE OF PLOT AND BUILT-UP AREA AND ALSO BU ILT-UP AREA OF SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS. AFTER AN ALYSING EACH OF THE ISSUE A.O. ALLOWED DEDUCTION UNDER SECT ION 80IB ON THE INCOME SHOWN IN THE P & L ACCOUNT EXCEPT ON TH E INTEREST ON FIXED DEPOSITS WHICH WAS NOT ELIGIBLE FOR DEDUCT ION UNDER SECTION 80IB. THERE WAS DETERMINATION OF TOTAL INCO ME AT 7 ITA.NO.13/HYD/2013 GRANDEUR HOMES P. LTD. SECUNDERABAD RS.1 58 72 969/- UNDER THE NORMAL COMPUTATION BEFOR E ALLOWING DEDUCTION. OTHER INCOME WAS BROUGHT TO TAX SEPARATELY. THIS ORDER SEEMS TO HAVE BEEN ACCEPTED BY THE ASSESSEE AS THE BOOK PROFIT DECLARED AND MAT TAX PA ID THEREON WAS MORE THAN THE NORMAL INCOME COMPUTED ABOVE. 10.1. LIKEWISE IN A.Y. 2010-11 A.O. EXAMINED THE RETURN OF THE ASSESSEE WHEREIN TOTAL INCOME WAS ADM ITTED AT RS.43 85 750/- AFTER ALLOWING THE DEDUCTION UNDER SECTION 80IB. AS SEEN FROM THE ORDER OF THE A.O. THERE IS A PROFIT UNDER THE BUSINESS AT RS.96 54 110/- AND DEDUCTION UNDER CHAPTER- VIA WAS ALLOWED AT RS.52 68 366/-. IN VIEW OF THIS SINCE A.O. IN LATER YEARS HAS ACCEPTED THE BOOK RESULTS WITHOU T REJECTING THE SAME WE DO NOT UNDERSTAND HOW THE A.O. COULD R EJECT THE BOOKS OF ACCOUNTS IN THE VERY FIRST YEAR IN WHICH A SSESSEE HAS STARTED THE PROJECT. IT IS ALSO UNFORTUNATE THAT TH E LD. CIT(A) NEITHER EXAMINED THE ISSUES UNDER PERCENTAGE COMPLE TION METHOD NOR EXAMINED THE ALTERNATE CLAIM OF 80IB INS PITE OF SPECIFIC REQUEST ON THE ISSUES. WE ARE UNABLE TO UN DERSTAND THE BASIS FOR WHICH A.O. RESORTED TO THE ESTIMATION OF INCOMES ON THE ADVANCES RECEIVED WHEN ASSESSEES PROJECTS W ERE JUST STARTED AND INVESTMENT THEREON WAS AT 13.86% AND 4. 08% OUT OF THE TOTAL ESTIMATED COST. WE ARE UNABLE TO UNDER STAND HOW ON THE PERCENTAGE COMPLETION METHOD THE A.O. COULD ARRIVE AT SOME PROFITS WHEN PROJECT WAS NOT EVEN SUBSTANTIALL Y STARTED. AS SEEN FROM THE ADVANCES RECEIVED AND AMOUNTS INVE STED IN THE PROJECT THE ADVANCES RECEIVED ARE MUCH MORE AS THE ASSESSEES PROJECTS COMMAND RESPECT IN THE MARKET A ND CUSTOMERS SIMPLY PAID ADVANCES ONCE PROJECT WAS ANN OUNCED. IN VIEW OF THIS ESTIMATION OF INCOME ON ADVANCES C ANNOT BE SUSTAINED CONSIDERING THE FACT THAT ASSESSEE BOOK RESULTS AS 8 ITA.NO.13/HYD/2013 GRANDEUR HOMES P. LTD. SECUNDERABAD SUCH WERE ACCEPTED IN LATER TWO YEARS WITHOUT RESOR TING TO ESTIMATION ON ADVANCES TO BE CONSISTENT WITH FIRST YEARS METHOD FOLLOWED BY THE A.O. 10.2 THIS ISSUE OF ESTIMATING INCOME ON PERCEN TAGE COMPLETION METHOD WAS ELABORATELY DISCUSSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF LIN GTEC CONSTRUCTORS LP VS. ITO (2013) 156 TTJ 76 (MUM.) W HEREIN IT WAS HELD AS UNDER : . UNDER PROVISIONS OF AS-7 PERCENTAGE OF COMPLETI ON METHOD HAS BEEN ACCEPTED AS ONE OF THE METHODS FOR RECOGNI ZING REVENUE ON CONSTRUCTION CONTRACTS. UNDER THIS METHO D AMOUNT AND REVENUE RECOGNIZED IS DETERMINED BY REFE RRING TO STAGE OF COMPLETION OF CONTRACT ACTIVITY AT END OF EACH ACCOUNTING PERIOD. UNDER THIS METHOD THERE IS A PE RIODIC RECOGNITION OF INCOME IN ORDER TO REFLECT PROFITS A ND REVENUE RECOGNIZED ON BASIS OF STAGE OF COMPLETION OF CONTR ACT. STAGE OF COMPLETION IS MEASURED UNDER THIS METHOD BY TAKI NG INTO CONSIDERATION PROPORTION OF COST INCURRED TO DATE W HICH BEARS ESTIMATED TOTAL COST OF THE CONTRACT. THIS METHOD O F ACCOUNTING HAS ALSO BEEN RECOGNIZED BY THE HON'BLE SUPREME COURT IN BILAHARI INVESTMENT P. LTD. (SUPRA ). THEREFORE IT CANNOT BE HELD THAT AS-7 IS AGAINST P ROVISIONS OF LAW OR PROFITS CANNOT BE DETERMINED FOR PURPOSE OF TAXABILITY. UNDER A CONTRACT PROJECT IS SPREAD FOR SEVERAL YEARS AND ACTUAL PROFIT CAN ONLY BE DETERMINED AFTE R COMPLETION OF PROJECT HOWEVER AS-7 PROVIDES THAT REVENUE CAN BE RECOGNIZED ON BASIS OF ACTUAL WORK DONE AND PROPORTIONATE COST ESTIMATED ON SUCH A PROJECT. THU S NO INFIRMITY IN METHOD OF ACCOUNTING I.E. PERCENTAGE OF COMPLETION METHOD ADOPTED BY ASSESSEE FOR RECOGNIZI NG REVENUE. BASIS GIVEN BY AO TO REJECT ACCOUNTING STA NDARD OR BOOKS OF ACCOUNT CANNOT BE UPHELD. 10.3. ASSESSEE HAVING CONSISTENTLY FOLLOWED PERCEN TAGE COMPLETION METHOD AS PER THE ACCOUNTING STANDARDS A ND ADMITTEDLY COMPLETED THE PROJECT IN THE LATER YEARS NO ADDITION COULD BE MADE ON THE ADVANCES RECEIVED DURING THE Y EAR. 9 ITA.NO.13/HYD/2013 GRANDEUR HOMES P. LTD. SECUNDERABAD THEREFORE WE ARE NOT IN AGREEMENT WITH THE ACTION OF THE A.O./CIT(A). THEREFORE WE MODIFY THE SAME AND DIRE CT THE A.O. TO ACCEPT BOOK RESULTS AS SUCH. 11. CONSEQUENTLY AS THERE IS NO INCOME TO BE CONSIDERED IN THE YEAR ASSESSEES ALTERNATE CLAIM OF DEDUCTION UNDER SECTION 80IB EVEN THOUGH VALID BECOMES ACAD EMIC IN NATURE. WE ARE OF THE OPINION THAT A.O. SHOULD HAVE VERIFIED THE ASPECT OF 80IB WHEN ASSESSEE MADE A REQUEST TO CONSIDER THE CLAIM AS A.O. WAS REJECTING THE BOOKS AND ESTIM ATING THE INCOME. THIS WAS NOT DONE AND THE ENTIRE ESTIMATION WAS BROUGHT TO TAX PUTTING ASSESSEE TO INCONVENIENCE. E VEN THE ALTERNATE CLAIM WAS MADE BEFORE THE LD. CIT(A) AND HE ALSO REJECTED THE SAME WITHOUT APPLYING HIS MIND. AT LE AST THE OFFICER IN THE RANK OF CIT SHOULD HAVE APPLIED HIS MIND TO THE ISSUE BEING A JUDICIAL AUTHORITY RATHER THAN REJEC TING ON FLIMSY GROUNDS AND SUPPORTING THE ACTION OF AO. EVEN LATER YEARS ORDER BY AOS SHOULD HAVE BEEN CONSIDERED BY LD.CIT( A). BE THAT AS IT MAY SINCE WE ARE NOT IN AGREEMENT WITH THE ESTIMATION OF INCOME THE ISSUE OF 80IB BECOMES ACA DEMIC IN NATURE. 12. CONSIDERING THE ACTION OF BRINGING TO TAX INCO ME UNDER OTHER SOURCES WE NOTICED THAT ASSESSEE HAS SHOWN INCOME OF RS.39 40 006/- AS OTHER INCOME IN THE P & L ACCOUNT. SCHEDULE-L TO THE BOOKS OF ACCOUNTS SHOWS THAT THE INCOME IS BY WAY OF INTEREST ON FIXED DEPOSITS. IN LATER YEARS THIS INCOME WAS TREATED AS INCOME FROM OTHER SOURC ES AND DEDUCTION UNDER SECTION 80IB WAS NOT ALLOWED. HOWEV ER IN THIS YEAR THERE IS NO PROFITS FROM PROJECTS SO NO C LAIM UNDER 80IB. THIS INTEREST RECEIVED WAS NOT ELIGIBLE FOR D EDUCTION U/S 10 ITA.NO.13/HYD/2013 GRANDEUR HOMES P. LTD. SECUNDERABAD 80IB BUT SET OFF TO THE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY IN THE BUSINESS TO THE EXTENT NOT CAPITALIS ED. SINCE ASSESSEE HAS SPENT VARIOUS AMOUNTS OTHER THAN PROJE CT RELATED EXPENDITURE THESE EXPENDITURE IN THE P & L ACCOUNT GETS SET OFF AS A LOSS FROM BUSINESS TO THE INCOME FROM OTH ER SOURCES. THEREFORE A.O. IS DIRECTED TO ALLOW THE LOSS AS CL AIMED. IT WAS ALSO SET OFF IN THE LATER YEAR BY THE ORDER OF THE A.O. IN A.Y. 2009-2010. IN VIEW OF THIS EVEN THOUGH ASSESSEES CONTENTIONS ARE THAT ONLY NET INCOME CAN BE TAXED SINCE THE LOSSES IN BUSINESS GETS SET OFF TO THE GROSS INTEREST INCOME THERE IS NO NEED TO GIVE SPECIFIC DIRECTIONS ON THE ISSUE. A.O. IS DIRECTED TO ACCEPT THE RETURNED LOSS AS SUCH. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS CONSI DERED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.07.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD DATED 31 ST JULY 2014 VBP/- COPY TO 1. GRANDEUR HOMES P. LTD. SECUNDERABAD. C/O. SRI S. RAMA RAO ADVOCATE FLAT NO.102 SHRIYAS ELEGANCE H.NO.3-6-643 ST. NO.9 HIMAYATNAGAR HYDERABAD 500 029. 2. ACIT CIRCLE 2(3) HYDERABAD 3. CIT(A)-III HYDERABAD 4. CIT-II HYDERABAD 5. D.R. A BENCH ITAT HYDERABAD.