ABHISHEK ENTERPRISES, NAVI MUMBAI V. ITO WD 15(3)(4), MUMBAI

CO 33/MUM/2012

• Counselvise Citation: [2014] 123 COUNSELVISE.COM (IT) 0071 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 13-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Assessee Lawyers: SUBODH RATNAPARKHI
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./I.T.A. NO. 4095/M/2011 ( AY: 2006 - 2007 ) ./I.T.A. NO. 4468/M/2011 ( AY: 2006 - 2007 ) ITO - 15(3)(4), R.NO.15, MARTUMADIR, TARDEO, MUMBAI 400 008. / VS. ABHISHEK ENTERPRISES, 66, MAHAVIR CENTRE, PLOT NO.77, SECTOR 17, VASHI, NAVI MUMBAI - 400 703. ./ PAN : AAJFA8641E ( / APPELLANT) .. ( / RESPONDENT ) C.O.NO.33/M/2012 (AY 2006 - 07) (ARISING OUT OF ITA NO.4095/M/2011) ABHISHEK ENTERPRISES, 66, MAHAVIR CENTRE, PLOT NO.77, SECTOR 17, VASHI, NAVI MUMBAI - 400 703. / VS. ITO - 15(3)(4), R.NO.15, MARTUMADIR, TARDEO, MUMBAI 400 008. ./ PAN : AAJFA8641E ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI SUBODH RATNAPARKHI / REVENUE BY : SMT. S. PADMAJA / DATE OF HEARING : 27.10.2014 / DATE OF PRONOUNCEMENT : 31 .10.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE 3 APPEALS UNDER CONSIDERATION. OUT OF THEM, TWO APPEALS (ITA NO.4095 & 4468/M/2011) ARE FILED BY THE REVENUE AND THE C.O.NO.33/M/2012 IS FILED BY THE ASSESSEE INVOLVING THE ASSESSMENT YEAR 2006 - 2007. ITA NO.4095/M/2011 RELATES TO QUANTUM APPEAL AND ITA NO.4468/M/2011 RELATES TO THE PENALTIES U/S 271(1)(C) OF THE ACT, WHICH IN TURN RELATES TO THE QUANTUM APPEAL 2 MENTIONED ABOVE. SINCE, THE ISSUES RAISED IN ALL THE THREE APPEALS ARE CONNECTED, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJ UDICATION IS GIVEN IN THE FOLLOWING PARAS OF THIS ORDER. ITA NO.4095/M/2011 (AY: 2006 - 2007) (BY REVENUE) 2. THIS APPEAL FILED BY THE REVENUE ON 18.5.2011 IS AGAINST THE ORDER OF THE CIT (A) - XV, MUMBAI. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB(10) OF RS. 9,43,70,691/ - EVEN THOUGH THE BUILT UP AREA OF RESIDENTIAL UNITS, AFTER C ONSIDERING THE BALCONY AND PROJECTIONS, IS IN EXCESS OF 1000 SQ FT RESULTING IN VIOLATION OF SECTION 80IB(10)(C) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN HOLDING THAT THE MEANING OF BUILT UP A REA, SO AS TO INCLUDE THE PROJECTIONS AND BALCONIES, CONTAINED IN 80IB(14)(A), INSERTED BY THE FINANCE (NO.2) ACT, 2004 IS PROSPECTIVE IN NATURE AND IS NOT APPLICABLE TO THE PROJECT OF THE ASSESSEE, WHICH WAS APPROVED PRIOR TO 1.4.2005, WHILE THE SAME IS D ECLARATORY AND CLARIFICATORY IN NATURE AND APPLIES TO THE PROJECT OF THE ASSESSEE. 3. AT THE OUTSET, SHRI S UBODH RATNAPARKHI, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE GROUNDS AND MENTIONED THAT THE LEGAL ISSUE RAISED IN THE GROUND N O.2 RELATES TO WHETHER THE AMENDMENT BROUGHT IN TO THE EXPRESSION BUILT UP AREA BY THE FINANCE (NO.2) ACT, 2004 IS PROSPECTIVE IN NATURE AND IS APPLICABLE TO THE PROJECTS OF THE ASSESSEE WHICH WERE APPROVED PRIOR TO 1.4.2005. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE, THEREFORE, THE CONCLUSIONS DRAWN BY THE CIT (A) IN THE IMPUGNED ORDER DO NOT CALL FOR ANY INTERFERENCE. IN THIS REGARD, LD COUSEL FILED A COPY OF THE JUDGMENT OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ANRIYA PROJECT MANAGEMENT SERVICES (P) LTD [2012] 21 TAXMANN.COM 140 (KAR.) AND ALSO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. HAPPY HOME ENTERPRISES VIDE ITA NO.201 OF 2012, D ATED 19.9.2014 IN SUPPORT OF HIS CONTENTION THAT THE AMENDED PROVISIONS DO NOT APPLY TO THE PROJECTS APPROVED PRIOR TO THE AMENDMENT. THE SAID DEFINITION PROVIDED IN SECTION 80IB(14)(A) OF THE ACT. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE READ OUT PA RAS 22 AND 23 OF THE CITED JUDGMENT 3 IN THE CASE OF M/S. HAPPY HOME ENTERPRISES (SUPRA). LD COUNSEL ALSO BROUGHT OUR ATTENTION TO PARAS 39 AND 40 OF THE SAME ORDER, WHICH ARE RELEVANT FOR THE PROPOSITION THAT THE HONBLE BOMBAY HIGH COURT HAS FOLLOWED THE CITED JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF ANRIYA PROJECT MANAGEMENT SERVICES (P) LTD (SUPRA), AND MENTIONED THAT THE SAID AMENDMENT IS NOT RETROSPECTIVE AND THE SAID RATIO OF THE KARNATAKA HIGH COURT IS EVENTUALLY APPROVED BY THE H ONBLE SUPREME COURT AS DISCUSSED IN PARA 40 OF THE SAID ORDER OF THE HONBLE BOMBAY HIGH COURT. RELEVANT PARAS 22, 23 AND 40 OF THE HIGH COURTS JUDGMENT READ AS UNDER: 22. IT WOULD BE IMPORTANT TO NOTE ANOTHER AMENDMENT THAT WAS BROUGHT ABOUT BY FINANC E (NO.2) ACT, 2004 TO SUB - SECTION (14) OF SECTION 80IB W.E.F 1 ST APRIL, 2005. SECTION 80IB(14) WAS ALSO AMENDED BY THE SAME FINANCE (NO.2) ACT, 2004, AND FOR THE FIRST TIME UNDER CLAUSE (A) THEREOF, THE WORDS BUILT - UP AREA WERE DEFINED. SECTION 80IB(14)(A) READS THUS: - (14) FOR THE PURPOSES OF THIS SECTION, - (A) BUILT - UP AREA MEANS THE INNER MEASUREMENTS OF THE RESIDENTIAL UNIT AT THE FLOOR LEVEL, INCLUDING THE PROJECTI ONS AND BALCONIES, AS INCREASED BY THE THICKNESS OF THE WALLS BUT DOES NOT INCLUDE THE COMMON AREAS SHARES WITH OTHER RESIDENTIAL UNITS; 23. PRIOR TO INSERTION OF SECTION 80IB(14)(A), IN MANY OF THE RULES AND REGULATIONS OF THE LOCAL AUTHORITY APPROVING THE HOUSING PROJECT , BUILT - UP AREA DID NOT INCLUDE PROJECTIONS AND BALCONIES. PROBABLY, TAKING ADVANTAGE OF THIS FACT, BUILDERS PROVIDED LARGE BALCONIES AND PROJECTIONS MAKING THE RESIDENTIAL UNITS FAR BIGGER THAN AS ST IPULATED IN SECTION 80IB(10), AND YET CLAIMED THE DEDUCTION UNDER THE SAID PROVISION. TO PLUG THIS LACUNA, CLAUSE (A) WAS INSERTED IN SECTION 80IB(14) DEFINING THE WORDS BUILT - UP AREA TO MEAN THE INNER MEASUREMENTS OF THE RESIDENTIAL UNIT AT THE FLOOR L EVEL, INCLUDING THE PROJECTIONS AND BALCONIES, AS INCREASED BY THE THICKNESS OF THE WALLS, BUT DID NOT INCLUDE THE COMMON AREAS SHARED WITH OTHER RESIDENTIAL UNITS. THE REASON WE ARE REFERRING TO THIS PROVISION IS BECAUSE IT TOO WAS BROUGHT FOR THE FIRST TIME W.E.F. 1 ST APRIL, 2005 AND THE KARNATAKA HIGH COURT HAD THE OCCASION TO CONSIDER WHETHER IT WOULD APPLY TO HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY BEFORE 31 ST MARCH, 2005. WE HAVE RELIED UPON THE REASONING OF THE JUDGMENT OF THE KARNATAKA HI GH COURT FOR COMING TO THE FINDINGS THAT WE HAVE, IN THIS JUDGMENT. 40IT WOULD NOT BE OUT OF PLACE TO MENTION THAT THE SAID JUDGMENT OF THE KARNATAKA HIGH COURT WAS CHALLENGED BEFORE THE SUPREME COURT AND THE SPECIAL LEAVE PETITION AGAINST THE SAME WAS DISMISSED ON 7 TH JANUARY, 2013. 4 . AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE SAID EXTRACTS MENTIONED ABOVE, WE FIND THE PROJECT IN QUESTION (MAHAVIR AMRUT HOUSING) COMMENCED ON 16.4.2004 (PAGE 9 AND 10 OF THE PAPER BOOK ARE RELEVANT) AND THEREFORE, THE SAID PROJECT IS APPROVED PRIOR TO THE AMENDMENT BROUGHT IN BY THE FINANCE (NO.2) ACT, 2004. CONSIDERING THE SAME, THE LEGAL ISSUE RAISED BY THE REVENUE HAS TO BE DECIDED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSES S EE. WE ORDER ACCORDINGLY . 4 THE OTHER ISSUES RAISED BY THE REVENUE HAVE TO BE DISMISSED CONSIDERING THE ABOVE CONCLUSIONS DRAWN BY U S IN FAVOUR OF THE ASSESSEE. THEREFORE, THE ORDER OF THE CIT (A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 4468 /M/2011 (AY: 2006 - 2007) (B Y REVENUE) 6. THIS APPEAL FILED BY THE REVENUE ON 3.6.2011 IS AGAINST THE ORDER OF THE CIT (A) 28, MUMBAI DATED 28.3.2011. THIS APPEAL RELATES TO THE PENALTY PROCEEDINGS IN CONNECTIN WITH THE ADDITIONS MADE FOR THE AY 2006 - 2007 DENYING THE BENEFIT OF DEDU CTION U/S 80IB(1) OF THE ACT. THE PENALTY IN QUESTION IS EXAMINED TO BE IN CONNECTION WITH THE DENIAL OF DEDUCTI ON IN RESPECT OF THE PROFITS OF THE HOUSING PROJECT NAMED MAHAVIR AMRUT HOUSING. IT IS THE FINDING OF THE CIT (A) THAT THE DENIAL OF DEDUCTIO N IS NOT SUSTAINABLE CONSIDERING THE AMENDMENT PROVISIONS BROUGHT IN BY THE FINANCE (NO.2) ACT, 2004 RELATING TO THE DEFINITION OF THE BUILT - UP AREA. SINCE, THE QUANTUM OF ADDITION IS DELETED, THIS BEING THE PENALTY MATTER RELATED TO THE SAID QUANTUM AP PEAL STANDS DISMISSED. ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. C. O. NO.33/M/2012 (AY 2006 - 07) (ARISING OUT OF ITA NO.4095/M/2011) (BY ASSESSEE) 8. THIS CROSS OBJECTION FILED BY THE ASSESSEE ON 13.3.2012 IS AGAINST THE ORDER OF THE CIT (A) - XV, MUMBAI, DATED 16.12.2008. 9. THE ONLY ISSUE RAISED IN THIS CROSS OBJECTION RELATES TO THE DENIAL OF DEDUCTION U/S 80IB (10) OF THE ACT IN RESPECT OF INTEREST RE CEIPTS EARNED BY THE ASSESSEE ON TEMPORARY DEPOSITING OF THE EXCESS FUNDS WITH THE INSTITUTIONS. BEFORE US, WITHOUT CONCEDING, THE ASSESSEE RELIED ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRATHAM DEVELOPERS [2013] 355 ITR 5 07 (GUJ). HE ALSO RELIED ON THE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF CIT VS. LOK HOLDINGS [2009] 308 ITR 5 356 (BOM). HE IS OF THE OPINION THAT THE INTEREST INCOME, SINCE RELATED TO THE HOUSING PROJECT, IS ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. 10. ON THE OTHER HAND, LD DR DISTINGUISHED THE SAID JUDGMENTS BY STATING THAT THE JUDGMENT IN THE CASE OF CIT VS. LOK HOLDINGS (SUPRA) WAS NOT DELIVERED IN THE CONTEXT OF DEDUCTION U/S 80IB(10) OF THE ACT. REFERRING THE GUJARAT HIGH COURT JUDGMENT IN THE CASE OF CIT VS. PRATHAM DEVELOPERS (SUPRA), WAS GIVEN IN THE CONTEXT OF ENTERPRISE OR UNDERTAKING ENGAGED IN THE DEVELOPMENT OF THE SPECIAL ECONOMIC ZONE (SEZ). FURTHER, LD DR BROUGHT OUR ATTENTION TO THE HIGH COURT OF JAMMU AND KASHMIR IN THE CASE OF ASIAN C EMENT INDUSTRIES VS. ITAT [2012] 28 TAXMANN.COM 290 (J&K) AND MENTIONED THAT INTEREST INCOME ON FDRS CANNOT BE REGARDED AS INCOME FLOWING FROM BUSINESS ACTIVITY OF INDUSTRIAL UNDERTAKING AND THEREFORE, DEDUCTION U/S 80IB OF THE ACT IS NOT AVAILABLE. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED JUDGMENTS OF THE HIGHER JUDICIARY. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE SAID DECISIONS CITED BY BOTH THE PARTIES, WE ARE OF THE OPINION T HAT THE DECISION TAKEN BY THE CIT (A) IN PARAS 4, 4.1 AND 4.2 IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE INTEREST RECEIPT EARNED BY THE ASSESSEE CANNOT BE REGARDED AS THE PROFITS DERIVED FROM THE HOUSING PROJECT OF THE ASSESSEE. ACCORDINGLY, CROSS OBJECTION RAISED BY THE ASSESSEE STANDS DISMISSED. 12. IN THE RESULT, CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. 13. CONCLUSIVELY, TWO APPEALS FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOU NCED IN THE OPEN COUR T ON 3 1 S T OCTOBER, 2014. S D / - S D / - ( SANJAY GARG ) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 3 1 /10/2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 6 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI