Judgment on 80IB
IN THE INCOME TAX APPELLATE TRIBUNAL: ‘A’ BENCH: MUMBAI
Before: S/Shri K.C. Singhal, J M & V. K. Gupta, A M.
ITS No. 5520?Mum/2005
Asstt. Year: 2002-03
Income Tax Officer – 14(3)3,
Nariman Point, Mumbai- 400021
Shri Vimalchand M. Dhoka,
PAN No. A E M P D 1868 D
Date of Hearing : 9-5-2008
Date of Pronouncement: 19-5-2008
Appellant by : Shri Sanjay Agarwal, Sr. AR>
Respondent by : Shri Vimal Punmiya
Per V. K. Gupta, A M.:
This appeal, filed by the Revenue, arises out of the Order of the CIT (A), Mumbai, dated 24th June, 2005, for the AY 2002-03.
2.We have heard both the sides and have also perused the material on record. In this appeal, the Revenue is aggrieved by the decision of the Learned CIT(A) in directing the AO to allow deduction to the assessee u/s 80-IB of the Act in respect of Lonavala project.
3.The facts, in brief, are that the assessee is engaged in Textile and Construction. In respect of construction business, the assessee claimed deduction u/s 80-IB(10) at Rs. 62,21,131/- in respect of Virar & Lonavala Projects. The AO noted that the land for Lonavala Project had been purchased in 1996 and as on 31st March, 1998, certain expenses were shown as Work-in-Progress and the assessee had also constructed the wall, hence this project had commenced before 1st October, 1998, and, therefore, in terms of the provisions of Section 80-IB(10)(a), the assessee was not entitled for deduction thereon. Hence, he rejected the claim of the assessee amounting to Rs. 3,32,369/-. The assessee carried the matter into appeal before the Learned CIT (A) wherein it was contended that no construction work actually took place and the wall was merely constructed to prevent the entry of trespassers. It was also submitted that the plan, originally submitted, expired after the validity period of one year, hence, revised plan was submitted which was approved by the concerned Statutory Authorities and thereafter construction work started after 1-10-98. The assessee also submitted that it was an agricultural land and the conversion of land use was permitted only on 30-9-2000. It was also submitted that the expenses shown in the Balance Sheet, were of the administrative nature and not of construction activity. The CIT (A) agreed with the assessee and directed the AO to grant deduction to the assessee as claimed by it. The relevant findings of the CIT (A) are as under:
“2.2 The argument of the appellant and the facts of the case have been considered. The AO disallowed the deduction claimed u/s 80IBof the Act for the reason that the land was purchased in the year 1996 for Rs. 5.5 Lakhs and the work in progress as on 31.03.98 is shown at Rs. 10,17,615.0 for Lonavala Project. The A. O. therefore, asked the appellant to explain why the deduction u/s. 80IB (10) should not be disallowed as the work in the project started prior to 01.10.98. The A. O. has not accepted the explanation of the appellant in which it has been claimed that the work in progress, contains the expenditure on architect fee, Lonavala plot filling expenses, land escape & elevation and other office expenses. It also includes expenses on boundary wall. The A.O. therefore, come to the conclusion that the project had started prior to 01-10-98. However, there is force in the argument of the appellant that the expenses incurred on architect fee, landscape and elevation on filling the plot are the expenses which was necessary for submitting the plan for the project. It cannot be taken as commencement of the project. The plea of the appellant is further supported by the fact the the permission for conversion of the land from agricultural use to non-agricultural was issued on 28.06.01 and also the commencement certificates were issued by the relevant authority only on 30.09.2000. Hence, before getting the order for conversion and commencement certificate the construction activity cannot be started. Considering the claim of the appellant regarding the permission for confession of land from agricultural use to non-agricultural was obtained on 28.06.01 and also the commencement certificate issued by the authority on 30.09.2000 the claim of the appellant that the commencement of the project was after 01.10.98 is quite justified. Hence, the deduction u/s. 80-IB (10) of the Act is allowable to the appellant. The A. O. is therefore, directed to swallow the deduction u/s. 80IB of Rs. 3,32,369/- which has been disallowed in respect of the Lonavala Project.”
4.The Ld. Departmental Representative contended that the assessee had commenced construction before specified date, hence, the claim of the assessee was rightly rejected by the Assessing Officer. He further placed strong reliance on the order of the Assessing Officer.
5.The Ld. AR, on the other hand, contended that the tax effect involved in this appeal , was less than Rs. 2 Lakhs, hence, for this reason alone, the Revenue’s appeal was liable to be dismissed. The Ld. Counsel contended that even on merits also, the assessee’s claim wax examined by the CIT (A) in detail and only after, he allowed the same, hence, the same was liable to be sustained the Ld. AR further contended that on identical facts, the Tribunal in the case of Nirmiti Construction Vs. DCIT as reported in 95 TTJ held that the project was to be treated as commenced after 1-10-1998.
6.We have considered the submissions made by both the sides, material on record and orders of the authorities below. It is seen that the assessee purchased the agricultural land prior to 1-10-98 and submitted Plan for construction of the Housing Project and for the change of land use, hence, administrative/other land development expenses were incurred prior to the statutory approvals, which, admittedly, has been received afar 1-10-98, cannot result into commencement of the project before 1-10-98. We also find that the CIT (A) has examined the issue in detail and we are in agreement with the findings of the Learned CIT (A), hence, we confirm the same.
7.In the result, the appeal, filed by the Revenue, stands dismissed.
Order pronounced in the Open Court on 19-5-2008.
(K. C. Singhal) (V. K. Gupta)
Judicial Member Accountant Member
Copy forwarded to:
5.DR, ITAT, Mumbai.