×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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07-06-2019, Chhaya Valmik Nikhade, Section 2(22)(e), 80IB(10), Tribunal Pune
The cross appeals filed by assessee and Revenue are against the order of CIT(A)-II, Nashik, dated 24.07.2014 relating to assessment year 2010-11 against order passed under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).
2. The cross appeals filed by assessee and Revenue were heard together and are being disposed of by this con olidated order for the sake of convenience.
3. The assessee in ITA No.1743/PUN/2014 has raised the following grounds of appeal:-
1 On the facts and in law, the ld. CIT(Appeals) has erred in confirming the addition of Rs.20,00,000/- on account of compensation paid to Shri Balu Kadal .
2 On the facts and in law, the ld. CIT(Appeals) has erred in confirming the addition of Rs.20,00,000/- ignoring that the said compensation expenditure has been proved in view of Notarized document filed with the A.O.
3 On the facts and in law, the ld. CIT(Appeals) has erred in confirming the addition to the extent of Rs.3,60,750/- on account of land development expenses incurred in the course of business and recorded in the audited books of accounts.
4 On the facts and in law, the ld. CIT(Appeals) has erred in confirming the addition to the extent of Rs.56,21,900/- on account of disallowance of depreciation on flat at Pune used for business purpose.
5 On the facts and in law, the ld. CIT(Appeals) has erred in confirming the addition to the extent of Rs.69,093/- on account of disallowance of depreciation on flat at Mumbai used for business purpose.
6 On the facts and in law, the ld. CIT(Appeals) has erred in confirming the addition to the extent of Rs.9,00,000/- on account of alleged unexplained advance received against land from Shri Prashant Hire.
7 On the facts and in law, the ld. CIT(Appeals) has erred in confirming the addition to the extent of Rs.3,63,455/- on account of disallowance of deduction u/s.80IB(10) of the Act.
8 On the facts and in law, the ld. CIT(Appeals) has erred in confirming the addition to the extent of Rs.1,26,000/- on account of deemed income from flats at Pune and Mumbai used for business purpose.
9 Your appellant craves, leave to add, alter, delete above or any other ground/s of appeal.”
3.1 The assessee has also raised the following additional ground of appeal :
On facts and in law,
1. The assessee submits that while computing the ‘accumulated profits’ for the purpose of section 2(22)(e), the current year profits of the lender company have to be excluded and in the instant case, the balance of accumulated profits of the lender company M/s. Ninad Builders, Contractors and Land Developers Pvt. Ltd., at the start of the year was Rs.Nil and therefore, no addition u/s.2(22)(e) was justified in the hands of the assessee in the year under consideration.”
4. The Revenue in ITA No.1804PUN/2014 has raised the following grounds of appeal:-
1. The Learned CIT(A)-II, Nashik has erred by allowing deduction u/s.80IB on proportionate completion basis inspite of the fact that the project was incomplete before due date of completion and does not qualify for deduction u/s.80IB.
2. The Learned CIT(A)-II, Nashik has erred on facts and on law in interpreting provisions of section 80IB(10) of Income Tax Act, 1961. As per provisions of section 80IB, the deduction is allowable on profit derived from a housing project and not on profit from residential unit.
3. The Learned CIT(A)-II, Nashik has erred in law and on facts inconsidering the income of Late Valmik Raghunath Nikhade, Nashik u/s.2(22)(e) of the Income Tax Act, 1961 without considering the provisions laid down within that specific section and its applicability.
4. Hence, it is prayed that order of the Learned CIT(A) may be set aside and that of the assessing officer, may be restored.
5. The appellant craves the right to alter or modify any grounds or add a new ground.”
5. The grounds of appeal No.3 to 8 raised by the assessee are not pressed and hence, the same are dismissed as ‘not pressed’.
6. Coming to the issue raised vide Ground Nos. 1 and 2 is against the addition of Rs.20,00,000/- being compensation paid to Shri Balu Nivruti Kadali.
7. Briefly, in the facts of the case, the assessee was an individual engaged in the business of building and developing housing projects, manufacturing and selling of transformers under the name and style of “PVN Transformers”. The assessee had expired on 06-05-2010. The return of income was filed by the legal heir, i.e. his wife by declaring total income of Rs.39,86,430/-. The Assessing Officer noted that the assessee had debi ed a sum of Rs.20,00,000/- to the profit and loss account. In reply, the assessee pointed out that the said payment was made to Shri Balu Nivruti Kadali as compensation for acquiring right for approach road to get access to the assessee’s plot. In support, copy of Sathekhat dated 24-01-2010 and ledger extract of the payment made was furnished before the Assessing Officer. The Assessing Officer noted that the total payment was made in cash. In this regard, the assessee explained that the said person was an Adivasi residing at Chandsi Village and since the village was not served by any bank and he was not having any bank account, the entire payment was made in cash to him, In the agreement dated 24-01-2010 also, this fact was mentioned that the said person had no bank account. The Assessing Officer in order to verify the identity of the person and the genuineness of the transaction issued summons u/s.131 of the Act. However, the said summons could not be served on the ground that Shri Balu Nivruti Kadali was not residing in the village Chandsi, Nashik. It was also noted that he was not residing in the village since last 10 years though he had some