Income Tax, Issue Update

Pro-rata deduction of profits and gains from business of an industrial undertaking under section 80-IB: When all conditions are not fulfilled

Case: Vishal Constructions vs. ITO, Pune ITAT

The issue delves on Pro-rata deduction of profits and gains from business of an industrial undertaking under section 80-IB, when all conditions are not fulfilled.

Pune ITAT placed reliance on the decision of Hon’ble High Court of Bombay in the case of Paul Brothers, wherein it was held that where there was no change in the facts which were in existence during the initial assessment year, the claim of exemption could not be withdrawn. The Assessee was entitled to claim deduction under Section 80-IB(10) of the Act on pro-rata basis by following the rule of consistency. See Facts & Key Points.

Facts

  • The Assessee was a firm engaged in the business of Builder and Developer and carried on a housing project at Talegaon. The said housing project was on the plot area of 1.55 hectare i.e. 15,500 square meter. The sanctioned built up area was 9,455.19 square meter and amenity was 2,225.58 square meter as on 31-03-2013.
  • According to Assessing Officer the Assessee fulfilled all the conditions except condition of provisions of section 80-IB(10)(d) of the Act and held the built up area of shops and commercial establishment was exceeded by 5,000 square feet. The Assessee contended that the amenity building was separate and different from residential housing building.
  • However, the Assessing Officer was of the view that though the building was different and separate but it was part and parcel of housing project as per sanctioned plan and thereby, denied deduction under Section 80-IB(10) of the Act to an extent of Rs.70.59 lakhs.
  • Aggrieved by the same, the Assessee appealed further contending that the deduction under Section 80-IB(10) of the Act could not be disallowed against the consistency followed by the Revenue in earlier years in the facts and circumstances of the case.

Key points

  • In the present facts of the case, on perusal of Form No. 10CCB for previous years it was found that the claim of pro-rata deduction for shops and other commercial establishments was allowed by the revenue in earlier years. Further, the revenue did not bring on record any finding contrary to the said fact.
  • Thus, the revenue consistently allowed the deduction under Section 80-IB(10) of the Act from the date of initial assessment year on pro-rata basis and there was no reason shown by the revenue for denial of such deduction in the year under consideration.
  • Further, the Tribunal placed reliance on the decision of Hon’ble High Court of Bombay in the case of Paul Brothers, wherein it was held that where there was no change in the facts which were in existence during the initial assessment year, the claim of exemption could not be withdrawn. In the present case also, the fact remained undisputed that there was no change in the facts of the case as compared to earlier years.
  • Therefore, following the said decision on the principle of consistency to the present case as the revenue could not bring on record there was change in the facts of the case in the year under consideration compared to the facts of earlier years in Assessee’s own case, the Assessee was entitled to claim deduction under Section 80-IB(10) of the Act on pro-rata basis by following the rule of consistency.

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