Astoria Leathers Chennai v. Ito Chennai

In The Income Tax Appellate Tribunal C Bench Chennai Before Shri Duvvuru Rl Reddy Judicial Member Shri S Jayaraman Account Ant Member I T A No S 2548 2549 2550 2551 2552 2553 Mds 2014 Assessment Year S 20 06 07 07 08 08 09 2009 10 M S Astoria Leathers No 78 Mount Road 3 Rd Floor Guindy Chennai 600 032 Pan A A D Fa 4770 A Vs The Income Tax Officer Business W Ard Iii 1 C Hennai Appellant Respondent I T A Nos 2673 2674 Mds 2014 Assessment Years 2008 09 2010 11 The Income Tax Officer Business Ward Iii 1 Chennai Vs M S Astoria Leathers No 78 Mount Road 3 Rd Floor Guindy Chennai 600 0 32 Appellant Respondent Appellant By Shri S Sridhar Advocate Respondent By Shri N Madhavan Addl Cit Date Of Hearing 25 10 201 7 Date Of P Ronouncement 27 1 2 201 7 O R D E R Per Bench The Appeals In I T A Nos 2548 2549 2550 2552 Mds 2014 Filed By The Assessee Are Directed Against The Common Order Of The Ld Commissioner Of Income Tax Appeals V C Hennai Da Ted 30 0 7 201 4 For The Assessment Year S 20 06 07 2007 08 2008 09 And 2009 10 Passed Under I T A No S 2548 2553 2673 2674 M 14 2 Section 143 3 R W S 147 Of The Income Tax Act 1961 Act In Short The Assessee Also Filed Appeals Against Penalty Order Passed Under Section 271 B Of The Act Fo R The Assessment Years 2008 09 And 2009 10 The Revenue Has Filed Appeals Against The Order Of The Ld Cit A For The Assessment Years 2008 09 And 2010 11 2 Brief Facts Of The Case Are That The Assessee Is Engaged In Export Of Finished Leather Products And Filed Its Return Of Income Admitting Loss In The Case Of The Assessee A Survey Under Section 133 A Of The Act Was Conducted At The Business Premises Of The Assessee On 15 06 2012 During The Course Of The Survey It Has Been Noticed By The Department That The Assessee Has Been Claiming Depreciation In Respect Of Non Existing Asset And Also Claimed Various Expenses Without Any Supporting Evidence In View Of The Above Fact The Department Was Of The Opinion That The Income Chargeable To Tax Has Escaped Assessment And Accordingly Notice Under Section 148 Of The Act Was Issued On 29 06 2012 Calling For Return Of Income Accordingly The Assessment Under Section 143 3 R W S 147 Of The Act Was Completed After Making Various Additions 2 1 The First Com Mon Ground Raised In The Appeals Of The Assessee For All The Assessment Years Reads As Under 2 The Cit A Erred In Assuming Jurisdiction U S 147 Of The Act And Consequently Erred Framing The Reassessment In Terms Of Section 143 3 Read With 147 Of The Act Without Assigning Proper Reasons And Justification I T A No S 2548 2553 2673 2674 M 14 3 2 2 It Is Evident From The Assessment Order That The Assessing Officer Has Passed The Assessment Under Section 143 3 R W Section 147 Of The Act Therefore The Assessee Cannot Say That The Ld Cit A Has Erred In Assuming Jurisdiction Under Section 147 Of The Act And Consequently Erred In Framing The Reassessment In Terms Of Section 143 3 R W S 147 Of The Act Thus The Ground Raised By The Assessee Is Misconceived And Not Maintainable Otherwise Also The Assessee Has Not Challenged The Reassessment Order Passed Under Section 143 3 R W S 147 Of The Act Before The Ld Cit A And Therefore The Assessee Cannot Challenge The Reassessment Order Passed Under Section 143 3 R W S 147 Of The Act Befor E The Tribunal Accordingly The Ground Raised By The Assessee Is Dismissed 3 The Next Common Ground Raised In All The Quantum Appeals Is That The Ld Cit A Has Erred In Sustaining The Disallowance Of Depreciation As Excess In The Computation Of Taxa Ble Income As Per The Profit And Loss Account Filed By The Assessee And Corresponding Depreciation Statement The Assessing Officer Noticed That The Assessee Firm Has Claimed Depreciation In Respect Of Factory Shed During The Course Of The Survey Certai N Books And Documents Were Impounded And As Per Impounded Materials Named Astoria B D Imp 1 At Page No 129 It Was Noticed That The Assessee Has Received Cash For Demolishing The Building And Tannery For 3 Lakhs On 05 02 2004 Thus As I T A No S 2548 2553 2673 2674 M 14 4 On 31 03 2006 Relevant To The Financial Year 2005 06 The Assessee Was Not In Possession Of Tannery Before The Assessing Officer The Assessee Has Submitted That The Above Amount Received Was Returned However The Asses See Has Not Provided Any Evidence For Its Submission Accordingly The Depreciation Claimed In Respect Of Tannery Was Disallowed In Respect Of All The Assessment Years And Added To The Total Income Of The Assessee In Addition To The Above In The Assessme Nt Year 2008 09 And 2009 10 The Assessee Has Also Claimed Depreciation On Motor Car Since The Assessee Has Not Produced Any Material Evidence To Substantiate Its Claims The Assessing Officer Made Disallowance On The Claim Of Depreciation On Motor Car An D Brought To Tax On Appeal Both The Claim Of Depreciation On Tannery As Well As Motor Car The Ld Cit A Confirmed The Disallowance Made Since The Assessee Could Not Substantiate The Claims With Any Material Evidence 3 1 We Have Heard Rival Contentio Ns Perused The Materials Available On Record And Gone Through The Orders Of Authorities Below With Regard To The Claim Of Depreciation On Tannery Factually The Same Was Not In Possession Of The Assessee Since Building And The Tannery Was Demolished For 3 Lakhs On 05 02 2004 Before Us The Assessee Could Not File Any Material Evidence Having Re Paid The Money Received By It For Demolishing The Building And Tannery Under These Facts And Circumstances We Find No Infirmity In The I T A No S 2548 2553 2673 2674 M 14 5 Order Passed By The Ld Cit A And Thus The Ground Raised By The Assessee On The Claim Of Depreciation On Tannery Stands Dismissed 3 2 Accordingly The Appeal Filed By The Assessee For The Assessment Year 2007 08 Stands Dismissed 3 3 With Regard To The Claim Of Depreciatio N On Toyota Innova Car Of 92 411 And 1 70 960 In The Assessment Years 2008 09 And 2009 10 Respectively Is Concerned In The Assessment Order It I S Mentioned As Newly Purchased But No Detail Is Emanating From The Assessment Order As To Why The Claim Of Depreciation Was De Nied For The Assessment Years 2008 09 And 2009 10 Except Reasonableness To The Business Activity It Is Not In Dispute That The Assessee Is Engaged In The Business Purchase Of Car Was Not In Dispute Its Usage Was Not Questioned By The Assessing Officer However Considering The Reasonableness To The Business Activity The Assessing Officer Has Denied The Claim Of Depreciation For Both The Assessment Years The Ld Cit A Has Simply Confirmed The Disallowance Made Whether The Business Of The Assessee Is Running In Loss Or Gain The Assessing Officer Cannot Question The Same Once The Assessee Is Engaged In The Business Activity Purchase Of Car Is Not In Dispute Its Usage Was Not Questioned By The Assessing Officer He Was Legally Incorrect To Deny The C Laim Of Depreciation For Both The Assessment Years Accordingly We Set Aside The Order Of The Ld Cit A And Direct The Assessing Officer To Allow The Claim Of I T A No S 2548 2553 2673 2674 M 14 6 Eligible Depreciation As Per Schedule Thus This Ground Of Appeal For Both The Assessment Year S Is Allowed 4 The Next Issue Raised By The Assessee In The Assessment Year 2006 07 Is With Regard To Confirmation Of Disallowance Of 21 44 516 Being Interest Paid To Sbi 4 1 While Examining The Profit And Loss Account The Assessing Officer N Oticed That The Assessee Has Paid Interest To Sbi Amounting To 21 44 516 Towards The Term Loan Taken For Final Settlement Since The Term Loan Was Taken To Acquire The Property Being Capital In Nature The Interest Paid Upon Was Disallowed By The Asse Ssing Officer On Appeal Before The Ld Cit A The Assessee Has Argued That The Term Loan Taken Was Not Related To The Acquisition Of Property And It Was Only For The Purpose Of Business And The Same Is Allowable Under Section 37 1 Of The Act As Business Expenditure And Alternatively In Terms Of Section 36 1 Iii Of The Act As Well However The Assessee Has Not Filed Any Evidence On Record To Show That The Bank Loan Was Utilized For The Purpose Of Business For Claiming As Business Expenses And Thus The Ld Cit A Dismissed The Ground Raised By The Assessee 4 2 We Have Heard Rival Contentions By Reiterating The Submissions As Made Before The Authorities Below The Ld Counsel For The Assessee Has I T A No S 2548 2553 2673 2674 M 14 7 Submitted That The Term Loan Was Taken For The Purpose Of Business But The Assessee Could Not File Any Evidence On Record To Show That The Bank Loan Was Utilized For The Purpose Of Business Therefore We Find No Infirmity In The Order Passed By The Ld Cit A And Accordingly The Ground Raised By The Asses See Is Dismissed Thus The Appeal Filed By The Assessee For The Assessment Year 2006 07 Stands Dismissed 5 The Next Ground Raised In The Appeal Of The Assessee For The Assessment Year 2008 09 Is With Regard To Confirmation Of Disallowance Of Business Promotion Expenses Amounting To 48 667 While Examining The Accounts Of The Assessee The Assessing Officer Noticed That The Assessee Has Claimed Business Promotion Expenses Amounting To 4 53 131 With Regard To Reasonableness Of The Above Expenses It Was The Submission Of The A Ssessee That The Above Expenditure Was Incurred On Account Of The Visit Of The Managing Directors To Foreign Countries For Marketing Purposes And The Expenses Are Met Out By Cheque Through Bank On Verification Of Ledger Account The Assessing Officer Noti Ced That The Assessee Has Paid Cash Payment On Three Occasions Totalling To 48 667 And Not Produced Any Evidence Substantiating The Necessity To Pay The Amount By Cash Accordingly The Assessing Officer Disallowed The Sum Of 48 667 And Brought To Tax On Appeal Since The Assessee Has Not Produced Any Material Evidence On Record To Claim The Above Expenditure In The Return Of I T A No S 2548 2553 2673 2674 M 14 8 Income Filed On 16 10 2010 Or Separately The Ld Cit A Dismissed The Ground Raised By The Assessee Before The Tribunal Also The Assessee Has Not Filed Any Cogent Evidence Substantiating The Necess Ity To Pay The Amount By Cash Thus The Ground Raised By The Assessee Is Dismissed 6 The Next Ground Raised By The Assessee Is With Regard To Confirmation Of Disallowance Of Vehicle Maintenance Expenditure Of 44 454 For The Assessment Year 2008 09 And 20 772 For The Assessment Year 2009 10 Since Depreciation Claim In Respect Of Toyota Innova Car Was Disallowed Correspondingly The Assessing Officer Disallow Ed The Vehicle Maintenance Expenses For Both The Assessment Years And The Ld Cit A Confirmed The Disallowances Since We Have Directed The Assessing Officer To Allow Eligible Depreciation On Toyota Innova Car Hereinabove At Para 3 3 The Assessing Officer Is Directed To Allow The Claim Of Vehicle Maintenance Expenses On Verification Of Bills Vouchers If Any Required Thus The Ground Raised For Both The Assessment Years Is Allowed 6 1 Accordingly The Appeal S Filed By The Assessee For The Assessment Year 2008 09 2009 10 Are Partly Allowed For Statistical Purposes 7 The Next Ground Raised In The Appeal Of The Assessee For The Assessment Year 2009 10 Is That The Ld Cit A Has Erred In Sustaining The Disallowance Of 3 24 731 Being The Commission Paid On The Application Of I T A No S 2548 2553 2673 2674 M 14 9 Section 40 A Ia Of The Act From The Profit And Loss Account The Assessing Officer Noticed That The Assessee Has Claimed Commission Payment Of 3 24 731 However The Assessee Has Not Deducted Tds For The Above Payment In View Of The Above As Per Provision Of Section 40 A Ia Of The Act The Assessing Officer Disallowed The Claim Of Expense Which Was Confirmed By The Ld Cit A 7 1 We Have Heard Rival Contentions In The Case Of Palam Gas Service V Cit In Civil Appeal No 5512 Of 2017 Dated 03 05 2017 The Hon Ble Supreme Court Has Held That Disallowance Under Section 40 A Ia Of The Act Has To Be Made On The Amounts Not Only Paid But Also Payable If Tds Was Not Deducted Thus The Ground Raised By The Assessee Is Dismissed 8 The Next Ground Raised In The Appeal Of The Assessee For The Assessment Year 2006 07 Is With Regard To Confirmation Of Disallowance Of 21 44 516 The Assessee Has Claimed Interest Paid To Sbi At 21 44 516 On Account Of Term Loan Taken For Final Settlement The Assessin G Officer Has Observed That The Term Loan Was Taken To Acquire The Property And Therefore The Interest Paid On It Is Not Allowable And Accordingly He Disallowed The Same On Appeal Before The Ld Cit A It Was The Submission Of The Assessee That The Loa N Taken Was For The Purpose Of Export Business And Not Related To The Acquisition Of Property Since The Assessee Could Not File Any Evidence On Record To Show That The Bank Loan I T A No S 2548 2553 2673 2674 M 14 10 Has Been Utilized For The Purpose Of Business For Claiming As Business Expens Es The Ld Cit A Confirmed The Disallowance Made By The Assessing Officer 8 1 On Being Aggrieved The Assessee Is In Appeal Before The Tribunal 8 2 We Have Heard The Rival Contentions While Examining The Profit And Loss Account The Assessing Offi Cer Noticed That The Major Amount Paid As Interest Was Towards The Term Loan Taken For Final Settlement The Said Term Loan Was Taken To Acquire The Property Since The Loan Was Taken For The Purchase Of The Capital Asset The Interest Paid Upon It Was Dis Allowed By The Assessing Officer Before The Ld Cit A The Assessee Has Argued That The Loan Taken Was For The Purpose Of Export Business And Not Related To The Acquisition Of Property However Since The Assessee Could Not File Any Evidence On Record To Show That The Bank Loan Has Been Utilized For The Purpose Of Business For Claiming As Business Expenses The Ld Cit A Confirmed The Disallowance Made By The Assessing Officer Before The Tribunal Also The Assessee Has Not Filed Any Evidence To Show Tha T The Term Loan Taken Was Not For The Purpose Of Acquiring Property And The Loan Amount Has Been Utilized For The Purpose Of Business Once The Assessee Has Not Proved That The Expenditure Was Incurred For Business Purpose The Said Expenditure Cannot Be C Laimed Under Section 37 1 Of The Act Thus We I T A No S 2548 2553 2673 2674 M 14 11 Find No Infirmity In The Order Passed By The Ld Cit A On This Issue Accordingly The Ground Raised By The Assessee Is Dismissed 9 The Next Ground S Raised In The Appeal Of The Assessee For The Assessme Nt Year 2009 10 Is With Regard To Confirmation Of Disallowance Of Project Expenses Amounting To 2 31 10 050 As Well As Confirmation Of Disallowance Of Interest Expenditure Of 31 00 374 In The Assessment Order The Assessing Officer Noticed That Th E Assessee Has Not Incurred Any Expenditure For Development Or Construction Of The Project The Expenditure Was Not Routed Through The Books Of Accounts Of The Assessee Firm Moreover The Assessing Officer Observed That The Project Expenses Of 2 31 10 0 50 Was Incurred By M S Kgeyes Residency Pvt Ltd The Builder But Claimed By The Assessee Since The Above Expenditure Was Not Routed Through The Books Of Accounts Of The Assessee The Assessing Officer Disallowed The Same Further With Regard To In Terest Payment Of 31 00 374 It Pertains To Interest Paid To M S Kgeyes Residency Pvt Ltd For The Loan Taken From Them The Interest Paid On The Loan Borrowed For The Purchase Of The Asset Can Be Claimed As A Deduction From The Income Of Such Asset Only In View Of Th E Decision Of The Hon Ble Supreme Court In The Case Of Rm Arunachalam 227 Itr 222 The Loan Was Taken From M S Kgeyes Residency Pvt Ltd To Repay The Loan Taken From The State Bank Of India To Facilitate The Assessee To Get Back The Ti T Le Deeds Mortgag Ed With I T A No S 2548 2553 2673 2674 M 14 12 State Bank Of India The Loan From State Bank Of India Was Taken For The Purchase Of The Property Therefore The Assessing Officer Disallowed The Claim Of Interest Payment Of 31 00 3 74 On Appeal The Ld Cit A Confirmed The Disallowance Made On Both Counts 9 1 On Being Aggrieved The Assessee Is In Appeal Before The Tribunal 9 2 We Have Heard The Rival Contentions During The Year Under Consideration The Assessee Has Not Admitted Any Receipts By Way Of Sale Of Flats However The Assessee Has Claimed A Sum Of 2 62 10 424 As A Loss Under The Head Rea L Estate Division I E Project Expenses Of 2 31 10 050 Interest Payment Of 31 00 3 74 9 3 In The A Ssessment Order The Assessing Officer Has Observed That T He Assessee Has Purchased The Land For 1 25 00 000 At P Allavaram From M S Malik Co As Per The Document No 1032 Of 2001 The Total Cost Including The Stamp Paper Registrations Etc As 1 48 34 592 This Was Reflected In The Return Of Income Filed By The Assessee And In The Balance Sheet As A Capital Asset The Assessee Has Also Explained The Sources For The Purchase Of This Property While Examining The Details Of The Property The Asses Sing Officer Noted That It Is A Small Shed With Two Acres Of Vacant Land As The Assessee Was Continuously Incurring Loss And The Borrowals From Sbi Leather Division Kilpauk Chennai Has Become Npa The I T A No S 2548 2553 2673 2674 M 14 13 Assessee Wanted To Sell The Vacant Land The Asses See Has Entered Into An Agreement With M S Kgeyes Residency Pvt Ltd On 23 01 2004 As Per The Agreement The Assessee Firm Is Entitled To 34 Of The Built Up Area And The Builder Is Entitled To 66 Of The Built Up Area Accordingly The Builder Has Deve Loped The Project Known As Kgeyes Astoria As Per Agreement The Assessee Firm Got 45 Constructed And Finished Flats Which Constitute 34 Of The Built Up Area Thus The Assessing Officer Of The Opinion That The Assessee Has Nothing To Incur Towards The Above Project And Accordingly Project Expenses Claimed By Assessee Disallowed By The Assessing Officer 9 4 On Verification Of The Details Furnished By The Assessee The Assessing Officer Has Observed That M S Kgeyes Residency Pvt Ltd The Developer Of The Land Has Obtained The Planning Permission And Completion Certificate Developed The Project And Incurred All The Expenditure And The Same Was Routed In The Books Of Account And Claimed Deduction Un Der Section 80 Ib 10 Of The Act 9 5 Bef Ore Us The Ld Counsel For The Assessee Has Vehemently Argued That As Per Agreement The Assessee Firm Is Entitled To 34 Of The Built Up Area And The Builder Is Entitled To 66 Of The Built Up Area Accordingly The Assessee Is Also Entitled To Claim The Project Expenses As Deduction As Per The Above Ratio However The Ld Dr Has Submitted That In The Present Case The Assessee Has Simply Entered Into An Agreement With M S Kgeyes I T A No S 2548 2553 2673 2674 M 14 14 Residency Pvt Ltd And Got 45 Constructed And Finished Flats Which Const Itute 34 Of The Built Up Area The Assessee Has Not Incurred Any Expenditure And T Herefore The Assessee Is Not Entitled Claim The Project Expenses 9 6 It Is An Undisputed Fact That The Builder 66 Share Holder Of The Project M S Kgeyes Residency Pvt Ltd Obtained The Planning Permission And Completion Certificate Developed The Project And Incurred All The Expenditure And The Same Was Routed In The Books Of Account And Claimed Deduction Under Section 80 Ib 10 Of The Act The Assessee Being 34 Share Holder Not Admitted Any Receipts By Way Of Sale Of Flats During The Year Under Consideration And W Hen There Was No Sale Of Flats No Profit Could Be Recognized For Claiming Allowance Of Deduction Under Section 80 Ib 10 Of The Act Since The Said Provision Says That The Amount Of Deduction Would Be Hundred Per Cent Of The Profits Derived In The Previous Year Relevant To The Assessment Year Under Consideration The Assessee Can Claim Deduction In View Of The Above Facts And Circumstances Since The Assessee Has Not Received Any Profit During The Relevant Assessment Year The Ground Raised By The Assessee Is Dismissed 9 7 With Regard To The Claim Of Interest Payment Of 31 00 374 The Assessee Has Taken Loan From M S Kgeyes Residency Pvt Ltd To Repay The Loan Taken From The State Bank Of India To Facilitate The Assessee To Get Back The Title Deeds Mortgaged With State Bank Of India In View Of The I T A No S 2548 2553 2673 2674 M 14 15 Above It Has To Be Termed As T He Loan From State Bank Of India Was Taken For The Purchase Of The Propert Y Therefore The Assessing Officer Disallowed The Claim Of Interest Payment Of 31 00 074 Admittedly In The Assessment Year Under Consideration The Assessee Has Not Admitted Any Income From The Property And Therefore The Assessee Cannot Claim Any Expenditure In Lieu Thereof Thus We Are Of The Considered Opinion That The Disa Llowance Made By The Assessing Officer Was Rightly Confirmed By The Ld Cit A And We Find No Infirmity In The Order Passed By The Ld Cit A Hence The Ground Raised By The Assessee Is Dismissed 10 The Assessee Also Preferred Appeals For The Assessm Ent Years 2008 09 And 2009 10 Against Levy Of Penalty Under Section 271 B Of The Act 10 1 The Assessee Filed Its Original Return Of Income On 18 07 2008 Admitting Total Loss Of 12 91 784 And Filed A Revised Return Of Income On 16 10 2010 Admitting Loss Of 12 47 490 The Revised Return Was Filed Based On The Report Prepared Under Section 44 Ab Of The Act On 07 07 2010 As Per The Provisions Of Section 44 Ab Of The Act The R Eport Under This Provision Should Have Been Filed Within The Due Date As Provide Under Section 139 Of The Act In This Case The Report Under Section 44 Ab Of The Act Was Prepared Only On 07 07 2010 Which Is Beyond The Date Prescribed Under The Act Accord Ingly Show Cause Notice Under Section 271 B Of The Act Dated 12 02 2013 Was Issued Vide His Reply Dated 26 02 2013 Before The I T A No S 2548 2553 2673 2674 M 14 16 Assessing Officer The Assessee Has Submitted That At The Time Of Filing The Original Return The Details Regarding Sale Of Undiv Ided Share Of Land And Flat Sales Were Not Received From The Builders And It Wa S Received Only After 31 03 2010 It Wa S Further Submitted That Their Auditors Have Informed The Assessee On Account Of The Details Furnished By The Builders That The Turnover For The Assessment Year 2008 09 Should Be Included In The Sale Of Flats And 44 Ab Report Should Be Filed It Wa S Also Submitted That After Getting The Accounts Audited Tax Audit Report Was Obtained On 07 07 2010 And Revised Return Of Income Was Filed On 16 07 2010 Further The Assessee Has Submitted That The Tax Audit Was Not Done Intentionally Within The Due Date And Requested To Drop The Proceedings 10 2 The Fact S And The Reply Of The Assessee Have Been Examined By The Assessing Officer The Assessee H As Closed Its Books Of Accounts On 31 03 2008 All The Sale Receipts Have Been Duly Credited In The Bank Account Of The Assessee The Assessee Must Be Aware That The Receipts On Account Of The Sale Of Flat Has Exceeded The Limit Prescribed Under The Act T O Prepare The Report U Nder Section 44 Ab Of The Act The Plea Of The Assessee Is That The Details From The Builder Were Not Received Within The Due Date And It Has Hindered The Prepa Ration Of The 44 Ab Report This Is Not Acceptable Since The Assessee Reali Zed The Sale Proceeds During The Financial Year 2007 08 Itself And Book S Of Accounts Were Closed On 31 03 2008 And I T A No S 2548 2553 2673 2674 M 14 17 Moreover He Failed To Prepare And File The 44 Ab Report The Assessing Officer Levied Penalty Of 98 866 Under Section 271 B Of The Act For Violating The Provision Of Sec 44 Ab Of The Act On Similar Facts And Circumstances For The Assessment Y Ear 2009 10 Also Penalty Under Section 271 B Of The Act Was Levied On Appeal The Ld Cit A Confirmed The Penalty Levied Under Section 271 B Of The Act 10 3 We Have Heard Rival Contentions T He Accounts Of The Assessee Stands Closed By The Year Ended On 31 03 2008 And 31 3 2009 For The Assessment Years 2008 09 And 2009 10 Respectively Similarly The Assessee Is Required To Get Prepared The 44 Ab Report On Or Before 30 09 2008 And 30 09 2009 For The Above Assessment Years Respectively And File The Same Bef Ore The Assessing Officer In This Case The Tax Audit Report Was Obtained Only On 07 07 2010 And 02 08 2010 For The Above Assessment Years Respectively The Assessing Officer Was Of The Opinion That When All The Sale Receipts Have Been Duly Credited In Th E Bank Account Of The Assessee By 31 03 2008 And 31 03 2009 The Tax Audit Report Should Have Been Obtained On Or Before 30 09 2008 And 30 09 2009 Since The Assessee Has Not Complied With The Statutory Requirements Under Section 44 Ab Of The Act We Are Of The Opinion That The Assessing Officer Has Validly Levied Penalty Under Section 271 B Of The Act For Both The Assessment Years Which Was Confirmed By The Ld Cit A Thus We Find No Reason To Interfere I T A No S 2548 2553 2673 2674 M 14 18 With The Order Of The Ld Cit A On This Issue And A Ccordingly Both The Appeal S Filed Against Levy Of Penalty Under Section 271 B Of The Act By The Assessee Are Dismissed I T A Nos 2673 2674 Mds 2014 A Y 2008 09 2010 11 Revenue S Appeals 11 The Only Effective Ground Raised In Both The Appeals Of The Revenue Is With Regard To Allowance Of Deduction Under Section 80 Ib 10 Of The Act Of 1 22 03 205 And 10 48 09 234 For The Assessment Years 2008 09 And 2010 11 Respectively 11 1 In The Assessment Year 2008 09 The Assessee Has Claimed De Duction Under Section 80 Ib 10 Of The Act At 1 22 03 205 On The Gross Receipts From Sale Of Six Flats Aggregating To 1 94 39 317 By Observing That The Joint Development Agreement With M S Kgeyes Residency Pvt Ltd Should Not Be Constructed As Jo Int Development Simplicitor Inasmuch As The Assessee Was Not Engaged In The Development Of The Housing Project The Assessing Officer Has Held That The Assessee Is Not Eligible For The Tax Holiday Benefits Envisaged In Section 80 Ib 10 Of The Act Further With Regard To Computation Of Long Term Capital Gains For The Sale Of Six Flats The Assessing Officer Rejected The Claim Of 1 15 00 374 Comprised Of The Loans And Other Components Including Interest Relating To The Flats Allotted To Their Share And Further The Claim For Further Deduction Aggregating To 18 46 744 Being The Amount Relatable To The Extra Work Carried Out I N The I T A No S 2548 2553 2673 2674 M 14 19 Flats Transferred And Subjected To The Capital Gains Computation Were Also Rejected Similarly For The Assessment Year 2010 11 Also Similar Claim Of Deduction Under Section 80 Ib 10 Of The Act Of The Assessee Was Disallowed 11 2 The Assessee Car Ried The Matter In Appeal Before The Ld Cit A After Considering The Submissions Of The Assessee And Also By Following The Decisions Of Various Benches Of The Tribunal The Ld Cit A Allowed The Ground And Held That The Assessee Is Eligible To Claim The Deduction Under Section 80 Ib 10 Of The Act For Both The Assessment Years 11 3 Aggrieved The Revenue Is In Appeal For Both The Assessment Years The Ld Dr Has Submitted That The Assessee Had Never Indulged In The Business Activity Of Development Cons Truction Of Housing Project And Has Only Exchanged The Capital Asset Existing In Its Books Of Accounts For A Consideration Of The Value Of 34 Of Built Up Area It Was Further Submitted That The Decision Of The Tribunal In The Case Of Sri Lakshmi Bricks In Dustries In Ita Nos 1644 To 1647 Mds 2012 Has Not Been Accepted By The Department And Appeal Has Been Preferred Before The Hon Ble Madras High Court And Pleaded That The Order Of The Ld Cit A Should Be Set Aside And Restored That Of The Assessing Officer On The Other Hand The Ld Counsel For The Assessee Has Strongly Supported The Orders Of The Ld Cit A I T A No S 2548 2553 2673 2674 M 14 20 11 4 We Have Heard Both The Sides Perused The Materials Available On Record And Gone Through The Orders Of The Authorities Below Including The Dec Ision Of The Tribunal In Various Case Law While Rejecting The Claim Of Deduction Under Section 80 Ib 10 Of The Act The Primary Observation Of The Assessing Officer Was That The Joint Development Agreement With M S Kgeyes Residency Pvt Ltd Should Not B E Constructed As Joint Development Simplicitor Inasmuch As The Assessee Was Not Engaged In The Development Of The Housing Project And Moreover The Assessee Had Not Shifted A Single Brick For The Construction And Without Incurring Expenditure In Relation Th Ereto The Theory Of Joint Development Would Fall To The Ground 11 5 However The Ld Cit A Has Observed In His Appellate Order That The Assessee Has Initially Invested A Sum Of 4 09 Crores To Develop The Land To Make It Fit For The Construction Of Th E Building He Also Observed That In The Year 2000 The Assessee Obtained An Amount Of 2 95 Crores From Sbi And Also 1 15 Crores From Icici Bank In 2007 For The Above Said Purpose Involving Investment Risk Subsequently The Assessee Entered Into An Ag Reement With M S Kgeyes Residency Pvt Ltd For The Construction And Development Of Residential Flats On The Land With The Above Financial Arrangement For Development Of Its Property Pooling Its Share Being The Land The Assessee Pursued Housing Project Which Has To Be Treated As Business Venture For The Year Under Consideration And For The Assessment I T A No S 2548 2553 2673 2674 M 14 21 Year 2010 11 The Above View Was Duly Fortified By The Decision Of The Tribunal In The Case Of Sri Lakshmi Brick Industries In I T A Nos 1644 To 1647 An D 1662 To 1665 Mds 2011 Dated 22 12 2012 Further Observations Of The Ld Cit A Are Reproduced As Under The Modalities Were Finalized And A Series Of Agreements Were Executed Between The Parties For The Smooth Execution Of The Housing Project It Cannot Be Said That The Assessee Did Not Undertake Any Risk I E Investment Contract Or Contributed Capital For The Construction Of The Building Project The Assessee Contributed The Developed Land Towards The Housing Project Thereafter The Assessee Post Poned The Benefits Arising From The Sale Of Land In The Form Of Flats To Be Constructed Thereon It Is An Admitted Fact That The Assessee Had Incurred Certain Expenses For The Sale Of Flats Falling Into Its Share Thus Both The Parties Were Entitled To The Ir Respective Shares In The Developed Property And Shall Have Absolute Discretion In Negotiating The Terms And Conditions For The Sale Lease Etc In Respect Of Their Respective Constructed Areas And Enter Into Agreements Of Sale Lease Etc With Prospe Ctive Purchasers Lessees Etc And To Collect The Consideration In Respect Thereof The Respective Parties Shall Be Entitled Liable To All Profits Gains Capital Appreciation And Benefits As Well As Costs Charges Levies Cesses Taxes Etc Arising Or Fl Owing From Or In Relation To The Sale Of Their Undivided Shares Rights And Interests In Land And Their Share Of Constructed Areas As Per Agreement A Perusal Of The Agreement Between The Parties Show That There Was Consensus Ad Idem Between The Assessee And M S Kgeyes Residency Pvt Ltd To Develop A Housing Project Without The Availability Of Land M S Kgeyes Residency Pvt Ltd May Not Have Been Able To Execute The Housing Project Similarly Without Capital And Expertise The Assessee May Not Have Be En Able To Fulfil Its Desire To Develop The Land Into A Residential Apartment Complex These Days It Is Not Uncommon To Have Such Projects Where The Land Is Pooled In By One Party And Capital And Necessary Expertise Is Contributed By Another In Some Of Th E Cases More Than Two Parties Joined Hands Together To Execute Such Capital Intensive Projects Moreover The Ar Of The Appellant Has Made A Statement At Par That The Co Venturer Of The Assessee I E M S Kgeyes Residency Pvt Ltd Has Claimed Benefit I T A No S 2548 2553 2673 2674 M 14 22 Unde R Section 8018 Qua Its Share Only The Assessing Officer Could Not Controvert The Statement Of The Ar Of The Appellant Thus The Assessee Has Been Treated As Builder And Developer Keeping In View Of The Facts Mentioned Above The Assessee Can Be Treated A S A Builder And Developer And Thus Would Be Entitled To Claim Benefit Under Section 80 Ib 11 6 In T He Above Case Of The Tribunal The Judgement Of The Hon Ble Karnataka High Court In The Case Of Cit V Shravanee Constructions Reported In Laws Kar 2012 2 50 Dated 28 02 2012 Has Been Followed And The Tribunal Has Held That The Assessing Officer Was Not Justified In Denying The Deduction Under Section 80 Ib 1 Of The Act In The Hands Of The Land Owner Under The Joint Development Agreement And Also Rejected The Version Of The Assessing Officer In Bring To Tax The Gross Receipts Under The Head Capital Gains 11 7 In The Present Case Also In The Assessment Order The Assessing Officer Has Computed The Long Term Capital Gains For The Sale Six Flats On The G Round That The Joint Development Agreement Should Not Be Construed As Joint Development Simplicitor Since The Assessee Was Not Engaged In The Development Of Housing Project And The Assessee Is Only A Land Owner By Following The Decision Of The Tribunal In The Case Of Sri Lakshmi Bricks Industries In Ita Nos 1644 To 1647 And 1662 To 1665 Mds 2011 Dated 22 12 2012 Wherein The Tribunal By Following The Decision Of The Hon Ble Karnataka High Court In The Case Cit V Shravanee Constructions Supra I T A No S 2548 2553 2673 2674 M 14 23 Emphasi Zed The Business Module And Had Approved The Claim Of Deduction Under Section 80 Ib 10 Of The Act In The Hands Of The Land Owner Under The Joint Development Agreement The Ld Cit A Has Held That The Assessee Should Be Treated As A Builder And Developer A Nd Thus Would Be Entitled To Claim The Benefit Under Section 80 Ib 10 Of The Act 11 8 The Ld Dr Could Not Controvert The Above Findings Of The Tribunal As Well As The Decision Of The Hon Ble Karnataka High Court In The Case Of Cit V Shravanee Constru Ctions Supra However T He Only Contention Raised By The Ld Dr That The Decision Of The Tribunal In The Case Of Sri Lakshmi Bricks Industries Supra Has Not Been Accepted By The Department And Preferred An Appeal Before The Hon Ble Madras High Court W E Are Of The View That It Is Binding On The Department To Follow The Decision Of The Tribunal Until And Unless The Decision Of The Tribunal Is Reversed Or Modified By The High Er Court Thus The Ground Raised In Both The Appeals By The Revenue Is Dismissed 11 9 With Regard To Allowance Of Deduction Under Section 80 Ib 10 Of The Act O N Carefully Perusing The Assessment Order Besides Failed To Examine And Brought On Record As To Whether The Assessee Has Incurred Any Expenditure Towards Land Development T He Assessing Officer Gave A Findings That The Assessee Has Not Incurred Any Expenditure Whereas After Examining The Records While Allowing The Claim Of The Assessee The Ld I T A No S 2548 2553 2673 2674 M 14 24 Cit A Has Given A Categorical Findings That The Assessee Has Invested A Sum Of 4 09 Crores To Develop The Land For The Construction Of Residential Flats The Above Facts Need Verification Secondly The Assessing Officer Has Given A Findings That M S Kgeyes Residency Pvt Ltd Developed The Project And Incurred All The Expenditur E And The Same Was Routed In The Books Of Account And Claimed Deduction Under Section 80 Ib 10 Of The Act While Holding So The Assessing Officer Has Not Given Any Findings As To What Extent The Developer Was Allowed To Claim 80 Ib 10 Deduction As To Whet Her On Its Share Of 66 Or 100 But Before The Ld Cit A The Ar Of The Assessee Has Submitted That The Developer M S Kgeyes Residency Pvt Ltd Has Claimed Benefit Under Section 80 Ib Of The Act Qua Its Share Only And Accordingly By Following Various Decisions The Ld Cit A Allowed The Deduction Claimed By The Assessee It Is Not Clear From The Materials Available On Record As To Whether The Developer M S Kgeyes Residency Pvt Ltd Was Allowed To Claim Deduction Of Profits From Its Share Of 66 Alon E And If It So Then The Assessee Should Be Allowed To Claim Deduction Of Similar Profits And Gains Of Its Share Of 34 Accordingly The Assessing Officer Is Directed To Verify The Above Facts From The Assessment Order Of The Developer M S Kgeyes Reside Ncy Pvt Ltd And Decide The Issue Afresh In Accordance With Law After Allowing An Opportunity Of Being Heard To The Assessee In Case The Assessee Has Incurred Any Expenditure Towards Land Development As Noticed By The Ld Cit A And The Developer M S K Geyes I T A No S 2548 2553 2673 2674 M 14 25 Residency Pvt Ltd Has Claimed Deduction Under Section 80 Ib 10 Of The Act Of Only Its Share Of 66 Then The Assessee Should Be Allowed To Claim Deduction Under Section 80 Ib 10 Of The Act Of Its Share Of 34 Thus The Ground Raised By The Revenue In Both The Assessment Years Is Allowed For Statistical Purposes 12 In The Result The Appeal S Filed By The Assessee In I T A Nos 2548 2549 Mds 2014 For A Y 2006 07 2007 08 And Appeals Filed Against Levy Of Penalty Under Section 271 B Of The Act In I T A Nos 2551 2553 Mds 2014 For A Y 2008 09 And 2009 10 Are Dismissed T He Appeal In I T A No 2550 Mds 2014 I T A No 2552 Mds 2014 For A Y 2008 09 And 2009 10 Filed By The Assessee Are Partly Allowed For Statistical Purposes The Appeals Filed By The Revenue In I T A Nos 2673 2674 Mds 2014 Are Partly Allowed For Statistical Purposes Order Pronounced On The 27 Th December 2017 At Chennai Sd Sd S Jayaraman Accountant Member Duvvuru Rl Reddy Judicial Member Chennai Date D The 27 1 2 201 7 V M Copy To 1 Appellant 2 Respondent 3 Cit A 4 Cit 5 Dr 6 Gf