The Hon’ble Mr. Justice v. Srishananda

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU|DATED THIS THE I[ST|]DAY OF FEBRUARY, 2021. PRESENT THE HON’BLE MR. JUSTICE SATISH CHANDRA SHARMA| THE HON’BLE MR. JUSTICE V. SRISHANANDA| LT.A. NO.740 OF ZO1L8 BETWEEN: 1.PR, COMMISSIONER OF INCOME-TAX BENGALURU-4, B.M.1T.C. COMPLEX 80 FEET ROAD, KORAMANGALA, BENGALURU-560 095. 2DASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-4(3)(1), BENGALURU, BMTC COMPLEX, | 8OQ FEET ROAD, KORAMANGALA,BENGALURU-560 095.BENGALURU-560 095. ....s APPELLANTS (BY SRI SANMATHI E.I., ADVOCATE FOR|SRI JEEVAN J. NEERALGI, ADVOCATE)SRI JEEVAN J. NEERALGI, ADVOCATE) AND" M/S. S N BUILDERS & DEVELOPERS SNN AGORA, RAJ LAKE VIEWNO.3/61, 29 MAIN, BIM 2 STAGEN.S.PALYA MAIN ROADBANGALORE-560 O76. ~.. RESPONDENT THIS I.7T.A. IS FILED UNDER SEC. 2Z60-A OF INCOMTAX ACT 1961, ARISING OUT OF ORDER DATED 20.04.2018PASSED IN ITA NO.732/BANG/2017 FOR THE ASSESSMENTYEAR 2012-2013, PRAYING TO DECIDE THE FOREGOINGQUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OFLAW AS MAY BE FORMULATED BY THE HON BLE COURT ASDEEMED FIT AND ETC. THIS I.7T.A. COMING ON FOR ORDERS, THIS DAY, |V. SRISHANANDA. J.,DELIVERED THE FOLLOWING: JUDGMENT The Revenue is in appeal under Section 260-A of the)Income Tax Act, 1961 (hereinafter referred to as *the Act’fffor snort). The subject matter of the appeal pertains to theAssessment Year 2012-14.| 2. Though this appeal is listed for orders, the matter|is taken up for final hearing with the consent of the parties. 3. In the appeal Memorandum following substantial|questions of law are framed: (1) Whetner on the facts andcircumstances of the case, the Tribunalwas Justified in directing the AssessingOfficerto|allow.proportionatededuction under Section 801B(10) ofthe Act to the extent of profitsattributable to the units where the built up area is below 1500 Sq. Ft.even wnen no sucn apportionment isDreSCriDedundertheschemeOf|Section 801B(10)(C) of the Income-|Tax Act? (ii) Whether, on the facts andcircumstances of tne case, the Tribunalwas justified in law holding that theassessee Is entitied to claim deductionunder Section 801B(10) of the Act inrespect of profits derived from the saleof residential units where in built uparea is below 1500 Sg. Ft witnoutappreciatingthatdeductionunder.Section 801B(10) of the Act is projectbased ratner than unit and there Is noconcept of proportionate deductionunder Section 801B(10)(C) of theAct? 4. Heard Sri Sanmathi E.I. for Sri Jeevan J.Neeralgi,|learned counsel for the appellants - revenue. Perused tnerecords.| 5. Facts in brief for disposal of this appeal are as/|under: Tne assessee is a firm engaged in the business of real|estate and construction of apartments. For the AssessmentYear 2012-14, the assessee filed returns declaring theincome of Rs.6,67,79,950/- under the head business andother sources. In the said return, the assessee claimeddeduction in a sum of Rs.11,45,89,/86/- as deduction underSection 801B(10) of the Income Tax Act. The assessingOfficer, on examination of the eligibility criteria as isstipulated under Section 801B(10) of the Income Tax Actconcluded that the respondent did not fulfill the condition ‘C’laid down in the said provision and disallowed the deductionvide assessment order dated 10.3.2016 (Annexure-B) 6. Being aggrieved by the said assessment order,|assessee preferred an appeal before the Commissioner ofIncome Tax (Appeals). Tne Commissioner of Income Tax, bynis.orderdated24.12.2016,In TTA.No.2/9/ACIT-C-4(3)(1)/CIT(A)-4/2014-15, allowed the appeal and set asidethe assessment order,|Inter alla, holding that derivation of profit based on percentage completion metnod py theassessee is correct and assessee is entitied to proportionate deduction under Section 801B(10) of the Act in respect ofthe flats which conform to the limits prescribed under therelevant provisions of the Act. 6. Being aggrieved by the said assessment order,|assessee preferred an appeal before the Commissioner ofIncome Tax (Appeals). Tne Commissioner of Income Tax, bynis.orderdated24.12.2016,In TTA.No.2/9/ACIT-C-4(3)(1)/CIT(A)-4/2014-15, allowed the appeal and set asidethe assessment order,|Inter alla, holding that derivation of profit based on percentage completion metnod py theassessee is correct and assessee is entitied to proportionate deduction under Section 801B(10) of the Act in respect ofthe flats which conform to the limits prescribed under therelevant provisions of the Act. 7. The Revenue being aggrieved by the order passed|by the Commissioner of Income Tax (Appeals) approachedthe Income Tax Appellate Tribunal (hereinafter referred to as‘tne|Tribunal.for short). The Tribunal by Order dated.20.04.2018 dismissed the appeal of the Revenue by placingrellance on the order of this Court reported in |CIT Vs. SJRBUILDERS|in ITA No.32/2010 dated 19.03.2012 andconfirmed the order passed by the Commissioner and heldthat the assessee is eligible for deduction under Section80IB(10) of the Act proportionately. The present appeal isfiled by the Revenue against the order of the Tribunal witnthe substantial questions of law referred to supra. 8. Learned counsel for the revenue argued tnat the)Tribunal grossly erred in dismissing the appeal of theRevenue and confirming the order of the Commissionerwhereby the assessee has been granted the benefit ofproportionate deduction under Section 80IB(10) of the Act. It is further argued that the assessee is not entitled forproportionate deduction under Section 80IB(10) of the Act asthe provision do not envisage such deduction and one of theconditions whicn is required is a.cine qua nonfor claimingdeduction under Section 80IB(10) of the Act is that the totalDuilt up area of the residential units in the nousing projectshould not exceed 1500 square feet. 9. In the case on hand, assessee has failed to satisfy|tne said condition. It is also urged that the Tribunal erred innolding that the project completion metnod is a recognizedmethod of accounting without properly examining as towhnetner the assessee is entitled to project completionmethod in the absence of assessee placing regular books ofaccounts. It is also pointed out that the Tribunal nas placedrellance on tne decision rendered in |M/S. PRESTIGEESTATE PROJECTS PVT. LTD. Vs. DCIT... However, theaforesaid order of the Tribunal was the subject matter of theappeal before this Court in ITA No.84/2010 wherein thisCourt by order dated 05.05.2020 neid that the percentagecompletion method is applicable to the assessee and therefore, the assessee should nave followed the percentagecompletion method for the Assessment Year 2012-13 also. 10. Per contra, the learned counsel for the assessee|submitted that the substantial questions of law raised in theappeal memorandum is answered py this Court in ITANo.393/2014 passed on 7.1.2021 in respect of the very sameassessee for the year 2009-10, which has been made|availiable to this court. Tne learned Senior Counse!] furtnercontended that since the issue involved in the present appealis squarely covered by the judgment of this Court in ITANo.393/2014 and similar orders are required to be passed intne present appeal also. 11. We have carefully perused the order dated|7.1.2021 passed by the co-ordinate bench of this Court inITA No.393/2014 which pertains to the assessment year2009-10, wherein this court at paragraphs 6 & 7 nas neld asunder: "6. We have considereqd tne sSUDMISSIONmade on botn sides and nave perused the record.On close scrutiny of the juagment rendered by this Court [nBRIGADE ENTERPRISES LTD_, supra, Itis evident tnat tne first substantial question of law|involved in this appeal is no longer res integra.Therefore, the first substantial question of law Isanswered against the revenue and in favour of tneaASSECSSCC, 11. We have carefully perused the order dated|7.1.2021 passed by the co-ordinate bench of this Court inITA No.393/2014 which pertains to the assessment year2009-10, wherein this court at paragraphs 6 & 7 nas neld asunder: "6. We have considereqd tne sSUDMISSIONmade on botn sides and nave perused the record.On close scrutiny of the juagment rendered by this Court [nBRIGADE ENTERPRISES LTD_, supra, Itis evident tnat tne first substantial question of law|involved in this appeal is no longer res integra.Therefore, the first substantial question of law Isanswered against the revenue and in favour of tneaASSECSSCC, 7. Now we may deal witn the second|substantial question of law. The Tribunal relied|upon the decision in the case of 'PRESTIGEESTATES PROJECTS LTD. Vs. DCIT,rendered|by it and held that for the Assessment Year 2005-06 the Accounting Standard 7 was not applicable|tO|the|real|estate|aevelopers.Therefore,percentage completion method cannot be thrust|upon tne assessee and the assessee was right|followingthe|projectcompletionmetnodOf|accounting as per Accounting Standard 9. Tne’!aforesaid decision has been upheld by this Court inCIT Vs. PRESTIGE ESTATES|, supra. Besides It,once the first substantial question of law is'answered in favour of the assessee, the secondsubstantial question of law Is otherwise even!rendered academic. The Institute of Chertered|Accountants has issued @a clarification wherein Ithasbeen|clarifiedthatrevised AccountingStandard 7 is not applicable to the enterprisesundertaking construction activities. Therefore, tne second substantial question of law Is also answeredagainstthe|revenueandInfavourofthe|assessee. 12. For the reasons recorded in the said judgment,|since this appeal is for the assessment year 2012-13, we areof the considered opinion that the decision rendered in ITANo.393/2014 dated 7.1.2021 would be squarely applicable tothe present appeal also. In the light of the reasons recorded in the aforesaid|decision, the appeal fails and accordingly, it is dismissed. Sd/- JUDGE| Sd/-| JUDGE. PL*|