SILVER LAND DEVELOPERS, MUMBAI V. ITO 10(2)-4, MUMBAI

CO 195/MUM/2009

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7505 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 04-07-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 05-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHA SARATHI NAIK
• Assessee Lawyers: SUBODH L RATNAPARKHI
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I' BENCH, M UMBAI . , !'# $ $ $ $ $ . % . &'( , %) *+ % # BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA NO. 2506/MUM/2009 ( , , , , - - - - / ASSESSMENT YEAR : 2005-06 INCOME TAX OFFICER - 10(2)-4 M/S. SILVER LAND DEVE LOPERS P. LTD. ROOM NO. 431, 4TH FLOOR 13 SILVER HOUSE, VALLABH BA UG LANE AAYAKAR BHAVAN, M.K. ROAD / VS. GHATKOPAR (E), MUMBAI 400077 MUMBAI 400020 +. %) ./ PAN - AAGCS 9765 H ./ / APPELLANT 01./ / RESPONDENT 01#% . / CO NO. 195/MUM/2009 ( , , , , - - - - / ASSESSMENT YEAR : 2005-06 M/S. SILVER LAND DEVELOPERS P. LTD. INCOME TAX OFFI CER - 10(2)-4 13 SILVER HOUSE, VALLABH BAUG LANE ROOM NO. 431, 4T H FLOOR GHATKOPAR (E), MUMBAI 400077 / VS. AAYAKAR BHAVAN, M.K. ROAD +. %) ./ PAN - AAGCS 9765 H MUMBAI 400020 CROSS OBJECTOR APPELLANT IN APPEAL REVENUE BY : SHRI PARTHASARATHI NAIK ASSESSEE BY : SHRI SUBODH L. RATNAPARKHI 2 3) / DATE OF HEARING : 04.07.2012 4- 2 3) / DATE OF PRONOUNCEMENT : 11.07.2012 *%5 / O R D E R PER D. MANMOHAN, V.P. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 12.01.2009 PASSED BY THE CIT(A)-VI MUMBAI AND THEY PERTAIN TO A.Y. 2005-06. 2. THE ONLY ISSUE IN DISPUTE BEFORE US CONCERNS THE CL AIM OF DEDUCTION UNDER SECTION 80IB OF THE ACT. THE ASSESSEE COMPANY IS A BUILDER AND DEVELOPER. WE ARE CONCERNED HEREIN WITH THE RESIDEN TIAL PROJECT CONSTRUCTED AT KALYAN. FOR THE YEAR UNDER CONSIDERATION THE ASS ESSEE COMPANY CLAIMED ITA NO. 2506 & CO NO. 195/MUM/2009 M/S. SILVER LAND DEVELOPERS P. LTD. 2 DEDUCTION UNDER SECTION 80IB(1) OF THE ACT WHEREIN THE WHOLE AMOUNT OF PROFIT HAS BEEN CLAIMED AS EXEMPT INCOME. HOWEVER, THE AO PROCEEDED ON THE FOOTING THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS STIPULATED IN THE AFOREMENTIONED SECTION AND HENCE IT IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. A SURVEY ACTION WAS CARRIE D OUT ON 03.10.2006 AT THE PROJECT SITE AT KALYAN. IT HAS COME TO LIGHT TH AT THE ASSESSEE COMPANY NOT ONLY BUILT FLATS BUT ALSO CONSTRUCTED ROW HOUSE S, EACH ADMEASURING MORE THAN 1500 SQ.FT. IN ADDITION, THE ASSESSEE COM PANY HAD CONSTRUCTED FLATS IN SUCH A WAY THAT TWO FLATS ARE JOINED TOGET HER AND MADE INTO ONE FLAT AND SOLD TO SAME FAMILY, THOUGH UNDER DIFFERENT AGR EEMENTS. THE SURVEY PARTY EXAMINED THE OCCUPANTS OF THE FLAT AND FOUND THAT THERE WAS ONLY ONE ENTRY AND ONE KITCHEN FOR MORE THAN ONE FLAT AND TH E ENTIRE FAMILY WAS LIVING TOGETHER THOUGH THE AGREEMENTS WERE MADE IN THE NAM E OF TWO DIFFERENT MEMBERS OF THE SAME FAMILY. HE THEREUPON OBSERVED T HAT THE DISTANCE FROM THE LAST POINT OF THE MUNICIPAL CORPORATION OF GRAT ER MUMBAI, I.E. MULUND CHAKI NAKA, TO KALYAN WAS ONLY 23 KMS; IF THE DISTA NCE IS MORE THAN 25 KMS THEN THE ASSESSEE IS ENTITLED TO CONSTRUCT FLATS AD MEASURING MORE THAN 1000 SQ.FT. HAVING REGARD TO THE PERSONAL VERIFICATION T HE AO CONCLUDED THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTIO N 80IB OF THE ACT. 3. ON AN APPEAL FILED BY THE ASSESSEE THE LEARNED CIT( A) OBSERVED THAT THE AO HAVING PERSONALLY VERIFIED THE DISTANCE FROM THE LAST POINT OF THE MUNICIPAL CORPORATION LIMIT TO THE PROJECT SITE OF THE ASSESSEE AT KALYAN, APART FROM VERIFYING FROM THE PUBLIC WORKS DEPARTME NT AT THANE, THE DISTANCE MEASURED BY THE AO CANNOT BE DISPUTED IN W HICH EVENT THE ASSESSEE WOULD BE ELIGIBLE FOR DEDUCTION UNDER SECT ION 80IB OF THE ACT ONLY IF EACH FLAT/ROW HOUSE IS OF LESS THAN 1000 SQ.FT. WHE REAS IN THE INSTANT CASE THE BUILT UP AREA OF THE ROW HOUSE WAS 1500 SQ.FT. AND FLATS, HAVING JOINED TOGETHER, THE BUILT UP AREA WAS MORE THAN 1000 SQ.F T. HE FURTHER OBSERVED THAT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTI ON 80IB IN RESPECT OF A & B WINGS, WHICH ARE PART OF THE SAME PROJECT AND T HE FACT THAT THE PROJECT AREA IS MORE THAN ONE ACRE, IF ALL THE THREE WINGS ARE CONSIDERED TOGETHER, HAS NOT BEEN DENIED BY THE AO. THEREFORE, IN THE LI GHT OF VARIOUS DECISIONS OF THE ITAT, REFERRED TO BY THE LEARNED CIT(A), THE AO WAS DIRECTED TO ALLOW ITA NO. 2506 & CO NO. 195/MUM/2009 M/S. SILVER LAND DEVELOPERS P. LTD. 3 PROPORTIONATE DEDUCTION UNDER SECTION 80IB OF THE A CT ON RESIDENTIAL UNITS WHICH FULFILS THE CONDITIONS PRESCRIBED IN SECTION 80IB OF THE ACT. 4. IN PRINCIPLE THE REVENUE IS OF THE OPINION THAT ANY DEVIATION IN THE STIPULATION PRESCRIBED UNDER SECTION 80IB PROHIBITS THE ASSESSEE TO CLAIM DEDUCTION UNDER SECTION 80IB FOR THE ENTIRE PROJECT . THEREFORE, IT WAS CONTENDED THAT THE CIT(A) WAS NOT JUSTIFIED IN DIRE CTING THE AO TO ALLOW PROPORTIONATE DEDUCTION. THEREFORE, AN APPEAL WAS P REFERRED BY THE REVENUE. THE FOLLOWING GROUND WAS URGED: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING TO ALLOW THE DEDUCTION U/S80IB(1) ON THE RESIDENTIAL UNITS WHICH HAVE BUILT UP AREA O F 1000 SQ.FT. IN THE HOUSING PROJECT AND TO DISALLOW DEDUCTION ON THE PR OFIT FROM THE UNITS HAVING ABOVE 1000 SQ.FT. BUILT UP AREA ALTHOUGH THE PROVISION OF 80IB DOES NOT ALLOW DEDUCTION ON PRO RATA BASIS. 5. UPON RECEIVING THE MEMORANDUM OF APPEAL THE ASSESSE E FILED A CROSS OBJECTION WHEREIN IT WAS CONTENDED THAT THE MAXIMUM PERMISSIBLE BUILT UP AREA OF RESIDENTIAL UNITS AS PER SECTION 80IB(10)(A ) WOULD BE 1500 SQ.FT. AND NOT 1000 SQ.FT., SINCE THE PROJECT IS SITUATED AT K ALYAN, WHICH WAS MORE THAN 25 KMS FROM THE MUNICIPAL LIMITS OF THE CITY OF MU MBAI. 6. WE HAVE HEARD THE LEARNED COUNSEL FOR THE ASSESSEE AND THE LEARNED D.R. ON THE ISSUE. 7. BOTH THE PARTIES HAVE FILED MAPS DOWNLOADED FROM GO OGLE NETWORK TO SUPPORT THEIR STAND; THE CASE OF THE REVENUE WAS TH AT KALYAN IS BELOW 25 KMS FROM THE OUTER LIMITS OF THE MUNICIPAL CORPORA TION OF GREATER MUMBAI. ON THE OTHER HAND THE CASE OF THE ASSESSEE WAS THAT THE ORIGINAL SEVEN ISLANDS WERE CEDED BY THE PORTUGUESE TO THE ENGLISH IN 1661 AS DOWER OF QUEEN CATHERINE, WIFE OF CHARLS II AND WAS TAKEN PO SSESSION OF IN 1664; THE CONTINGUOUS ISLANDS OF COLABA, SATSETTE, ETC. WERE LATER CAME TO BE KNOWN AS PART OF CITY OF MUMBAI. AS PER THE MUNICIPAL CORP ORATION ACT, 1938 THE TERMS OF CITY OF MUMBAI, SUBURBS, EXTENDED SUB URBS OF MUMBAI AND CORPORATION OF GREATER MUMBAI (BRIHAN MUMBAI) HAV E DIFFERENT MEANINGS. SECTION 80IB(10) USES THE EXPRESSION CITY OF MUMBA I, WHICH EXPRESSION IS DIFFERENT FROM MUNICIPAL CORPORATION OF GREATER MU MBAI AND THE LIMIT OF ITA NO. 2506 & CO NO. 195/MUM/2009 M/S. SILVER LAND DEVELOPERS P. LTD. 4 CITY OF MUMBAI ENDS ON THE CENTRAL SIDE AT MULUND, I.E. CHUNNABHATTI, BETWEEN SION AND KURLA. THE EXPRESSION CITY OF MUMB AI HAS COME UP FOR CONSIDERATION BEFORE THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHRI MAVJI MULJI MERCHANT VS. STATE OF MAHARASHTRA [1993 ](3) BOM.C.R. 220. THE HON'BLE HIGH COURT DISCUSSED THIS ISSUE ELABORATELY AND BY ANALYSING THE DEFINITION CITY OF MUMBAI, THE PROJECT SITE CAN B E SAID TO BE BEYOND 25 KMS FROM THE MUNICIPAL LIMIT OF THE CITY OF MUMBAI IN WHICH EVENT THE MAXIMUM BUILT UP AREA ON WHICH EXEMPTION IS ALLOWAB LE IS UPTO 1500 SQ.FT. AND NOT 1000 SQ.FT. IF THE PRELIMINARY ISSUE IS DE CIDED IN FAVOUR OF ASSESSEE, THE SECONDARY ISSUE WILL HAVE NO SIGNIFICANCE. 8. THE LEARNED D.R., ON THE OTHER HAND, SUBMITTED THAT THE AO PERSONALLY EXAMINED THE DISTANCE. APART FROM THIS T HE ASSESSEE HAS ENTERED INTO TWO SEPARATE AGREEMENTS BUILT UP AREA OF EAC H FLAT IS LESS THAN 1000 SQ.FT. WHEREAS THE TOTAL BUILT UP AREA IS MORE THAN 1000 SQ.FT. AND IN SOME CASES IT IS MORE THAN 1500 SQ.FT. AND HENCE THE ASS ESSEE IS NOT ENTITLED TO CLAIM DEDUCTION ON THE WHOLE PROJECT. IF THE AREA I S UTILISED FOR THE PURPOSE OTHER THAN THE ONE WHICH IS PRESCRIBED UNDER SECTIO N 80IB IS TAKEN INTO CONSIDERATION, AND IS EXCLUDED, THE TOTAL AREA AVAI LABLE WITH THE ASSESSEE MAY BE LESS THAN ONE ACRE IN WHICH EVENT THE ASSESS EE MAY NOT FULFIL THE BASIC CONDITION TO CLAIM DEDUCTION UNDER SECTION 80 IB OF THE ACT. HE THUS STRONGLY SUPPORTED THE ORDER OF THE AO. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT THE AO HAS NOT TA KEN NOTICE OF THE DEFINITION GIVEN IN THE MUMBAI MUNICIPAL CORPORATION ACT WITH REGARD TO THE TOWN AND ISLAND OF BOMBAY AND EXTENDED BOMBAY AS MENTIONED I N PARTS I TO III AND MERELY PROCEEDED ON A BROADER UNDERSTANDING OF THE MEANING OF THE EXPRESSION MUNICIPAL CORPORATION OF GREATER BOMBAY . NEITHER THE AO NOR THE CIT(A) MADE DETAILED ENQUIRY OR OBTAINED CERTIF ICATES FROM THE MUNICIPAL CORPORATION OF GREATER MUMBAI OR THE OFFICE OF THE PWD OR FROM THE COLLECTORATE TO UNDERSTAND THE MEANING OF THE EXPRE SSION CITY OF MUMBAI USED IN SECTION 80IB(10) OF THE ACT. IN OUR CONSIDE RED OPINION, THE MEANING OF THE EXPRESSION CITY OF MUMBAI HAD TO BE CORREC TLY ANALYSED AS OTHERWISE ITA NO. 2506 & CO NO. 195/MUM/2009 M/S. SILVER LAND DEVELOPERS P. LTD. 5 IT IS NOT POSSIBLE TO MEASURE THE DISTANCE FROM THE MUNICIPAL LIMIT OF THE CITY OF MUMBAI. IN THE INTERESTS OF SUBSTANTIAL J USTICE WE, THEREFORE, SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFIC ER. HE IS DIRECTED TO RECONSIDER THE MATTER IN ACCORDANCE WITH LAW. NEEDL ESS TO OBSERVE THAT ALL THE ISSUES ARE LEFT OPEN BEFORE THE AO AND THE ASSE SSEE SHOULD BE GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD IF THE AO SEE KS TO MAKE USE OF ANY INFORMATION OBTAINED BY HIM BEHIND THE BACK OF THE ASSESSEE. THE ASSESSEE SHALL ALSO FURNISH RELEVANT DETAILS TO BUTTRESS HIS ARGUMENT. WITH THESE OBSERVATIONS THE ORDER PASSED BY THE LEARNED CIT(A) IS SET ASIDE AND THE AO IS DIRECTED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AS W ELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE ARE TREATED AS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JULY 2012. *%5 2 - ) % 6 7*8 11.07.2012 2 9 SD/- SD/- (N.K. BILLAIYA) (D. MANMOHAN) %) *+ / ACCOUNTANT MEMBER !'#/ VICE PRESIDENT MUMBAI ; 7* DATED : 11 TH JULY 2012 . , . ./ N.P., SR. PS *%5 *%5 *%5 *%5 2 22 2 0,3;< 0,3;< 0,3;< 0,3;< =% =% =% =%<-3 <-3<-3 <-3 / COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. > ( ) / THE CIT(A)- VI, 4. > / CIT - VI, 5.