The DCIT, Circle-3(1), Visakhapatnam v. M/s Sri Lakshmi Builders, Visakhapatnam

ITA NO 258 OF 2010 SRI LAKSHMI BUILDERS VISAKHAPATN AM PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.258/VIZAG/2010 ASSESSMENT YEAR: 2006-07 DY. COMMISSIONER OF INCOME TAX CIRCLE-3(1) VISAKHAPATNAM VS. SRI LAKSHMI BUILDERS VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO: AAUFS 3966 R APPELLANT BY: SHRI D.S.SUNDER SINGH SR. DR RESPONDENT BY: SHRI G.V.N. HARI CA ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 29.01.2010 PASSED BY LEARNED CIT (A) VISAKHAPATNAM AND IT RELATES TO THE ASSESSMENT YEAR 2006-07. 2. IN THIS APPEAL THE REVENUE IS ASSAILING THE DECI SION OF THE LEARNED CIT (A) IN RESPECT OF THE FOLLOWING ISSUES: A) DEDUCTION UNDER SECTION 80IB OF THE ACT B) TREATMENT OF INTEREST RECEIVED FROM BANK C) TREATMENT OF DISALLOWANCE MADE UNDER SECTION 40( A)(IA) VIS- -VIS SECTION 80IB 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN B RIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF RESIDENT IAL APARTMENTS. THE ASSESSEE CLAIMED DEDUCTION U/S 80IB(10) OF THE ACT I N ITS RETURN OF INCOME ON THE INTEREST RECEIVED ON BANK DEPOSITS. HOWEVER THE AO TREATED THE INTEREST RECEIVED ON BANK DEPOSIT AS INCOME FROM OT HER SOURCES AND ACCORDINGLY DENIED DEDUCTION U/S 80IB OF THE ACT ON IT. THE AO ALSO DISALLOWED A SUM OF RS.1.15 LAKHS U/S 40(A)(IA) OF THE ACT. ON THE SAID DISALLOWANCE ALSO THE AO DENIED DEDUCTION U/S 80IB( 10) OF THE ACT. THE ITA NO 258 OF 2010 SRI LAKSHMI BUILDERS VISAKHAPATN AM PAGE 2 OF 3 ASSESSING OFFICER DID NOT ALLOW DEDUCTION UNDER SEC TION 80IB IN RESPECT OF PROFITS ALSO ON THE GROUND THAT THE PROJECT HAS NOT BEEN COMPLETED. IN THE APPEAL FILED BY THE ASSESSEE THE LEARNED CIT (A) A LLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB AND DIREC TED THE ASSESSING OFFICER TO FOLLOW THE DECISION OF THE TRIBUNAL IN T HE ASSESSEES OWN CASE IN RESPECT OF OTHER TWO ISSUES. HENCE THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE FIRST ISSUE RELATES TO THE DENIAL OF D EDUCTION UNDER SECTION 80IB(10) OF THE ACT. THE ASSESSING OFFICER DISALLOW ED THE CLAIM UNDER SECTION 80IB ON THE GROUND THAT THE SAID DEDUCTION C AN BE ALLOWED ONLY AFTER THE COMPLETION OF THE ENTIRE PROJECT AND FURT HER ON SUBMISSION OF COMPLETION CERTIFICATE FROM THE LOCAL AUTHORITY. AC CORDING TO THE ASSESSING OFFICER DEDUCTION UNDER SECTION 80IB IS NOT AVAILABL E ON PARTIAL COMPLETION OF THE PROJECT. HOWEVER THE LEARNED CIT (A) ALLOWE D THE CLAIM OF THE ASSESSEE BY FOLLOWING INSTRUCTION NO.4 OF 2009 DATE D 30.6.2009 WHEREIN THE CBDT HAS CLARIFIED THAT THE DEDUCTION UNDER SECTION 80IB CAN BE CLAIMED ON YEAR TO YEAR BASIS. THE RELEVANT PORTIONS OF THE SA ID CIRCULAR ARE EXTRACTED BELOW: 2. CLARIFICATIONS HAVE BEEN SOUGHT BY VARIOUS CCSI T ON THE ISSUE WHETHER THE DEDUCTION UNDER S.80-IB(10) WOULD BE AVAILABLE ON A YEAR TO YEAR BASIS WHERE AN ASSESSEE IS SHOWING PROFIT ON PARTIAL COMPLETION OR IF IT WOULD BE AVAI LABLE ONLY IN THE YEAR OF COMPLETION OF THE PROJECT UNDER S.80-IB( 10). 3. THE ABOVE ISSUE HAS BEEN CONSIDERED BY THE BOARD AND IT IS CLARIFIED AS UNDER: (A) THE DEDUCTION CAN BE CLAIMED ON A YEAR TO YEAR BASIS WHERE THE ASSESSEE IS SHOWING PROFIT FROM PARTIAL C OMPLETION OF THE PROJECT IN EVERY YEAR. (B) IN CASE IT IS LATE FOUND THAT THE CONDITION OF COMPLETING THE PROJECT WITHIN THE SPECIFIED TIME LIMIT OF 4 YEARS AS STARTED IN SECTION 80-IB(10) HAS NOT BEEN SATISFIED THE DEDUCT ION GRANTED TO THE ASSESSEE IN THE EARLIER YEARS IS SH OULD BE WITHDRAWN. 4. THE ABOVE INSTRUCTION WILL OVERRIDE EARLIER CLA RIFICATION ON THIS ISSUE CONTAINED IN MEMBER (R)S D.O LETTER NO. 58/MISC. ITA NO 258 OF 2010 SRI LAKSHMI BUILDERS VISAKHAPATN AM PAGE 3 OF 3 /2008/CIT(IT&CT) DATED 29.04.2008 AND MEMBER (IT)S D.O LETTER NO.279/MISC./46/08-ITJ DATED 2.5.2008. WE NOTICE THAT THE LEARNED CIT (A) HAS FOLLOWED THE ABOVE SAID INSTRUCTION OF THE CBDT IN DECIDING THE ISSUE. BEFORE US THE R EVENUE DID NOT PLACE ANY MATERIAL TO SHOW THAT THE SAID INSTRUCTION OF CBDT IS NOT APPLICABLE TO THE FACTS OF THE CASE. HENCE WE DO NOT FIND ANY INFIRMI TY IN THE DECISION OF THE LEARNED CIT (A) ON THIS ISSUE. 5. IN RESPECT OF OTHER TWO ISSUES WE NOTICE THAT TH E CIT (A) HAS DIRECTED THE ASSESSING OFFICER TO FOLLOW THE ORDER OF ITAT PASSED IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 . SINCE THE DIRECTION HAS BEEN GIVEN TO FOLLOW THE DECISION OF THE ITAT WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON 2 ND FEBRUARY 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUN TANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 02-02-2011 COPY TO 1 THE D.C.I.T. CIRCLE-3(1) VISAKHAPATNAM 2 3. 4 M/S. SRI LAKSHMI BUILDERS 1-1-82 NEW VENKOJIPALEM VISAKHAPATNAM THE CIT(A)-I VISAKHAPATNAM THE CIT-1 VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM