ACIT, Pune V. M/s Brahma Builders, Pune

ITA 1003/PUN/2010

• Counselvise Citation: 100324514 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 12-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Opportunity of being heard
• Section: 143(3); 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES, A PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, J.M. AND SHRI G.S. PANNU, A.M. I.T.A. NO. 647 AND 649/PN/2009 A.Y. 2004-05 & 2005-06 BRAHMA BUILDERS 250/251 M.G. ROAD, PUNE-411 001 PAN AADFB 8649 M .. APPELLANT VS. DY. CIT CIR. 2, PUNE AND ASSTT. CIT RANGE 4, PUNE RESPONDENT ITA NO. 1003/PN/2010 FOR A.Y. 2003-04 ASSTT. CIT CIR. 4, PUNE APPELLANT VS. M/S BRAHMA BUILDERS 250/251 M.G. ROAD, PUNE-411 001 PAN AADFB 8649 M RESPONDENT ASSESSEE BY : S.SHRI SUNIL P ATHAK AND NIKHIL PATHAK DEPARTMENT BY : SHRI HARESHWAR SHARMA DATE OF HEARING : 20-3-2012 DATE OF PRONOUNCEMENT: 15-5-2012 ORDER PER SHAILENDRA KUMAR YADAV, JM ALL THESE APPEALS PERTAIN TO THE SAME ASSESSEE. SO THEY WERE HEARD TOGETHER AND ARE BEING DECIDED BY T HIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 647/PN/2009 FOR A.Y. 2004-05 2. THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST T HE ORDER OF THE CITII PUNE, DATED 25-3-2009 PASSED U/S 263 OF THE ACT. THE ASSESSEE HAS FILED RETURN OF INCOME ON 1-11-2004 DECLARING INCOME OF RS. ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 2 1,44,89,860/-. THE ASSESSING OFFICER HAS PASSED AN ORDER U/S 143(3) OF THE ACT ON 21-12-2006 AND ASSESSED INCOME AT RS. 1,52,77,530/-. THE ASSESSIN G OFFICER HAS ALLOWED DEDUCTION U/S 80-IB(10) OF THE ACT AMOUNTING TO RS. 29,67,171/- IN RESPECT OF BRAHMA AANGAN PROJECT. THE CIT ON GOING THROUGH THE MATERIAL ON RECORD, FOUND THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80-IB(10) IN RESPECT OF BRAHMA AANGAN PROJECT FOR THE FOLLOWING REASONS. (A) THE PROJECT BRAHMA AANGAN WAS APPROVED BY THE PMC VIDE COMMENCEMENT CERTIFICATE NO. 6894 DT. 31-5-2003, AS A RESIDENTIAL CUM COMMERCIAL PROJECT, WHEREAS ONLY RESIDENTIAL PROJECT IS ELIGIBLE FOR THE CLAIM OF DEDUCTION U/S 80-IB(10) AND NOT RESIDENTIAL CUM COMMERCIAL PROJECT. (B) THE PROJECT BRAHMA AANGAN CONSISTS OF 702.216 SQ. MTRS I.E. 7562.85 SQ.FT. COMMERCIAL BUILT UP AREA. AS PER INTRODUCTION OF CLAUSE (D) OF SECTION 80-IB(10) VIDE FINANCE ACT (NO. 2) W.E.F. 1 - 4-2005, THE PERMISSIBLE COMMERCIAL AREA IN THE ELIGIBLE PROJECT IS 5% OF THE AGGREGATE BUILT UP AREA OF THE PROJECT OR 2000 SQ.FT. WHICHEVER IS LESS. THE LAST COMMENCEMENT CERTIFICATE (NO. 0261/05 DATED 20-4-2005 WAS OBTAINED MUCH AFTER THE INTRODUCTION OF THE CLAUSE (D) IN SECTION 80-IB(10). (C) IN B4 AND B5 BUILDINGS, DUPLEX FLATS (FLATS ON 6 TH AND 7 TH FLOOR ARE INTERNALLY CONNECTED WITH STAIRCASE) ARE HAVING BUILT UP AREA OF 1595 SQ.FT. THUS THE AREA OF THE RESIDENTIAL UNIT IN THE PROJEC T BRAHMA AANGAN EXCEEDS 1500 SQ.FT. AND THUS THERE IS VIOLATION TO THE REQUIREMENT OF CLAUSE (C) TO SECTION 80-IB(10). (D) ALONG WITH THE RETURN OF INCOME ASSESSEE HAVE ENCLOSED TRADING ACCOUNTS OF THE INDIVIDUAL PROJECTS, HOWEVER, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF 80-IB(10) PROJECT HAS NOT BEEN PROVIDED SEPARATELY. RULE 18BBB(2) OF THE I.T. RULES 1962 ENVISAGES THAT FORM NO. 10CCB SHOULD BE ACCOMPANIED BY PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE UNDERTAKING OR ENTERPRISE AS IF THE UNDERTAKING OR ENTERPRISE IS A DISTINCT ENTITY. THUS, THERE IS VIOLATION TO THE REQUIREMENT TO RULE 18BBB(2) OF THE I.T. RULES 1962. ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 3 3. ACCORDING TO CIT THE ORDER OF THE ASSESSING OFFI CER PASSED U/S 143(3) DT. 21-12-2006 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND REQUIRED REVISION/MODIFICATION/SETTING ASIDE ON ABOVE ISSUES AND ACCORDINGLY SHOW CAUSE NOTICE U/S 263 DT. 22-12 - 2008 WAS ISSUED AND SERVED ON THE ASSESSEE WHEREBY ASSESSEE WAS ASKED TO GIVE ITS SUBMISSIONS ON THE ISSUES. IN RESPONSE TO NOTICE, THE LEARNED AR FOR THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS VIDE LE TTER DATED 9-2-1999 AS DETAILED ON PAGE 3 TO 12 OF THE ORDER OF THE CIT. 4. AFTER CONSIDERING THE WRITTEN SUBMISSIONS FILED ON BEHALF OF THE ASSESSEE AND MATERIAL ON RECORD, THE CIT FOUND THAT THE ASSESSEE HAS NOT FILED ANY BALANCE SHEET AND PROFIT AND LOSS ACCOUNT PERTAINING TO BRAHMA AANGAN PROJECT, AN UNDERTAKING WHICH IS TO BE CONSIDERED AS SEPARATE AND DISTINCT ENTITY AS PE R RULE 18BBB(2) OF THE I.T. RULES 1962 FOR THE PURPOS E OF CLAIM OF DEDUCTION U/S 80-IB OF THE ACT. THE FO RM NO. 10CCB FILED ALONG WITH THE RETURN OF INCOME ALS O DOES NOT CONTAIN ANY BALANCE SHEET, PROFIT AND LOSS ACCOUNT. THE REPORT IN FORM NO. 10CCB WAS ALSO PREPARED IN A VERY CASUAL MANNER WITHOUT GIVING ANY MAJOR DETAILS. IN VIEW OF THE ABOVE, THE CIT OBSERV ED THAT FORM NO. 10CCB WAS PREPARED IN A ROUTINE MANNER WITHOUT GIVING BASIC DETAILS LIKE DATE OF CERTIFICATE, QUANTUM OF DEDUCTION, PLOT SIZE, DATE OF COMPLETION OF PROJECT, ETC., ABOVE ALL BASIC ENCLOS URES LIKE BALANCE SHEET, PROFIT AND LOSS ACCOUNT OF BRAH MA AANGAN WERE ALSO NOT FILED. HOWEVER, THE RETURN OF INCOME WAS ACCOMPANIED WITH TRADING ACCOUNTS OF VARIOUS PROJECTS AND ACTIVITIES. FURTHER, FROM SUC H GROSS PROFITS OF VARIOUS PROJECTS, ASSESSEE HAS RED UCED, ON PROPORTIONATE BASIS EXPENSES OF PROFIT AND LOSS ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 4 ACCOUNT, SO AS TO ARRIVE AT NET PROFITS OF VARIOUS PROJECTS INCLUDING BRAHMA AANGAN PROJECT. THUS, ON E OF THE CONDITIONS LAID DOWN IN SECTION 80-B(10) R.W .R. RULE 18BBB(2) WAS NOT SATISFIED, SO ASSESSEE WAS NO T ENTITLED FOR DEDUCTION U/S 80-IB(10) OF THE ACT. THE ASSESSING OFFICER HAS ALLOWED SUCH DEDUCTION WITHOU T GOING TO THE ABOVE ASPECTS SO ON THIS SINGLE ISSUE ITSELF, THE ORDER OF THE ASSESSING OFFICER WAS ERRO NEOUS IN LAW. 4.1 THE CIT FURTHER OBSERVED THAT BRAHMA AANGAN PROJECT WAS A RESIDENTIAL CUM COMMERCIAL PROJECT, A S IT COMPRISED MORE THAN 2000 SQ.FT. OF COMMERCIAL AREA. SECTION 80-IB(10) NOWHERE DEFINES WHAT IS A HOUSING PROJECT. IT IS ONLY FROM A.Y. 2005-06, THE CONCEPT OF AREA OF COMMERCIAL UNIT IN HOUSING PROJECT WAS INTRODUCED BY WAY OF CLAUSE (D) TO SECTION 80-IB(10 ), ACCORDING TO WHICH, COMMERCIAL AREA SHOULD NOT BE MORE THAN 5% OF BUILT UP AREA OF THE PROJECT OR 200 0 SQ.FT. WHICHEVER IS LESS. IN OTHER WORDS, AS PER T HE ASSESSEE, IN EARLIER YEAR WHEREVER A HOUSING PROJEC T IS APPROVED BY LOCAL AUTHORITY AND IS AS PER DC RULES THEN SAME SHOULD BE CONSIDERED AS A HOUSING PROJECT . ACCORDING TO DC RULES, CONVENIENCE SHOPPING UNITS WERE ALLOWED IN HOUSING PROJECT PROVIDED IT FULFILL S THE CONDITIONS LAID DOWN BY THEM. IN THE PRESENT CASE, THE PROJECT CONSISTS OF 1 TO A6 (SIX BUILDINGS), B1 TO B8 (EIGHT BUILDINGS) AND A8 BUILDING. THUS, ALL THESE BUILDINGS TOGETHER ARE A HOUSING PROJECT. BUILDING B (KNOWN AS C TYPE BUILDING) IS A COMMERCIAL BUILDING , COMPRISING OF17 SHOPS ON GROUND FLOOR, 20 OFFICES O N 1 ST FLOOR, WITH AGGREGATE AREA OF 702.216 SQ. MTRS WHICH IS 3.58% OF TOTAL BUILT UP AREA OF PROJECT. AS PER DC RULES, ASSESSEE HAS TO PROVIDE 2% OF TOTAL AREA FOR CONVENIENCE SHOPPING, IF MORE COMMERCIAL AREA IS CONSTRUCTED THEN AS PER ASSESSEE, PROJECT CONTINUES TO ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 5 BE A HOUSING PROJECT, WHICH WAS NOT CORRECT. ACCORDING TO CIT, SUCH PROJECT CANNOT BE CONSIDERED AS HOUSING PROJECT ENTITLED FOR DEDUCTION U/S 80-IB(10 ) AS THIS SECTION IS MAINLY INTRODUCED TO PROMOTE LOW CO ST RESIDENTIAL UNITS. FURTHER, AS PER AMENDED PROVISI ON OF CLAUSE (D) TO SECTION 80IB(10), COMMERCIAL AREA MORE THAN 2000 SQ.FT. IS NOT PERMISSIBLE, THOUGH THIS CL AUSE IS INTRODUCED W.E.F. 1-4-2005, BUT BEING CLARIFICAT ORY IN NATURE, IT APPLIES TO EARLIER YEARS AS WELL. 4.2 FURTHER, ASSESSEES PROJECT ALSO INCLUDED DUPLE X FLATS IN B4 AND B5 BUILDINGS HAVING BUILT UP AREA EXCEEDING 1500 SQ.FT. AS PER ASSESSEE, TERRACE CAN NOT BE INCLUDED IN BUILT UP AREA PRIOR TO A.Y. 2005-06, AS PROVISIONS OF SECTION 80IB(10)(A) WERE INTRODUCED W .E.F. 1-4-2005. SO, ACCORDING TO THE CIT IT IS CLARIFICA TORY IN NATURE AND APPLIES TO EARLIER YEARS ALSO. IN VI EW OF THE ABOVE, THE CIT HELD THAT ASSESSEES PROJECT HAS VIOLATED TWO IMPORTANT CONDITIONS DISCUSSED ABOVE, AND HENCE THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTI ON U/S 80-IB(10) OF THE ACT. THUS, THE ASSESSING OFFI CER HAS PASSED AN ORDER WITHOUT CONSIDERING OR EXAMININ G THE REQUIREMENTS OF RULE 18BBB(2) OF THE I.T. RULES AND OTHER PROVISIONS OF SECTION 80-IB(10) OF THE AC T. 4.3 THE CIT FURTHER OBSERVED AS DISCUSSED ABOVE THA T THE ASSESSING OFFICER HAS COMPLETELY LOST SIGHT OF PROVISIONS OF SECTION 80-IB(13) R.W.S. 80IA(7) AND RULE 8BBB(2) OF THE RULES AND OTHER PROVISIONS OF SECTIO N 80-IB(10) DISCUSSED ABOVE. THE PRESCRIBED FORM NO. 10CCB WHICH WAS INCOMPLETE CANNOT BE SAID AS VERIFIED BY ACCOUNTANT WHICH IS ONE OF THE IMPORTAN T REQUIREMENTS OF SECTION 80IA(7) F THE ACT. IN THIS CASE THE ASSESSING OFFICER HAS MECHANICALLY ACCEPTED AS IF FORM NO. 10CCB IS CORRECTLY FILED ALONG WITH ENCLOSURES AND PROJECT SATISFIED THE CONDITIONS LAI D ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 6 DOWN IN SECTION 80IB(10). IT IS BECAUSE OF NON- CONSIDERATION OF RELEVANT PROVISIONS OF LAW AND RUL E. IT IS BECAUSE OF ERRONEOUS ORDER OF THE ASSESSING OFFI CER THE REVENUE IS LOSING TAX LIABILITY PAYABLE BY A PE RSON, AS A RESULT, THE ORDER OF THE ASSESSING OFFICER WAS PREJUDICIAL TO THE INTEREST OF REVENUE. IN VIEW OF THE ABOVE, THE ASSESSMENT ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT O F ISSUE OF CLAIM OF DEDUCTION 80-IB(10) THE ASSESSING OFFICER WAS DIRECTED TO WITHDRAW SUCH CLAIM OF RS. 29,67,171/- IN RESPECT OF BRAHMA AANGAN PROJECT. T HE SAME HAS BEEN OPPOSED BEFORE US. 5. THE ASSESSEE HAS SUBMITTED THAT THE ORDER U/S 263 BE DECLARED BAD IN LAW AS THE ASSESSMENT ORDER U/S 143(3) WHICH IS SOUGHT TO BE REVISED BY THE ORD ER OF THE CIT U/S 263 IS NEITHER ERRONEOUS NOR PREJUDI CIAL TO THE INTEREST OF THE REVENUE. 5.1 THE CIT ERRED IN HOLDING THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE DEDUCTION U/S 80-IB(10) I N RESPECT OF BRAHMA AANGAN PROJECT ON THE FOLLOWING GROUNDS: (A) THE FORM NO. 10CCB FILED BY THE ASSESSEE WAS INCOMPLETE AND THE ASSESSEE HAD NOT GIVEN VARIOUS DETAILS AS ASKED FOR IN THE SAID FORM AND ACCORDINGLY, THE ASSESSEE HAD NOT SATISFIED ONE OF THE CONDITIONS LAID DOWN IN SECTION 80IB(10) R.W.R. 18BBB(2). (B) THE BRAHMA AANGAN PROJECT CONSISTED OF COMMERCIAL AREA AND THEREFORE, THE PROJECT WAS NOT A HOUSING PROJECT. (C) THE BUILT UP AREA OF CERTAIN FLATS IN BUILDING NO. B4 AND B5 EXCEEDED 1500 SQ.FT. AND ACCORDINGLY, THE ASSESSEE HAD NOT COMPLIED WITH CONDITION LAID DOWN IN SECTION 80IB(10) AND THEREFORE, THE DEDUCTION WAS NOT ALLOWABLE. 5.2 THE CIT ERRED IN HOLDING THAT THE ASSESSEE HAD FILED INCOMPLETE FORM NO. 10CCB WITHOUT APPRECIATIN G ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 7 THAT ALL THE DETAILS WERE DULY SUBMITTED BY THE AUD ITOR IN THE FORM NO. 10CCB AND ACCORDINGLY, THERE WAS NO REASON TO DISALLOW THE DEDUCTION ON THIS GROUND. 5.3 THE CIT ERRED IN DISALLOWING THE DEDUCTION ON T HE GROUND THAT THE ASSESSEE HAD CONSTRUCTED COMMERCIAL AREA OF 7555 SQ.FT. WITHOUT APPRECIATING THAT THE AMENDMENT INTRODUCED W.E.F. 1-4-2005 WAS NOT APPLICABLE TO THE CURRENT YEAR AND WAS APPLICABLE O NLY TO THE PROJECTS WHICH HAD STARTED AFTER THE INSERTI ON OF THE AMENDMENT. 5.4 THE CIT FAILED TO APPRECIATE THAT THE ISSUE INVOLVED REGARDING ALLOWABILITY OF DEDUCTION IN RES PECT OF A PROJECT WHICH INCLUDED CERTAIN COMMERCIAL AREA WAS A DEBATABLE ONE AND TWO OPINIONS WERE CLEARLY POSSIBLE AND THEREFORE, REVISION U/S 263 WAS NOT PERMISSIBLE. 5.5 THE CIT ERRED IN DENYING THE DEDUCTION ON THE GROUND THAT THE BUILT UP AREA OF CERTAIN RESIDENTIA L UNITS EXCEEDED 1500 SQ.FT. WITHOUT APPRECIATING THA T THE BUILT UP AREA OF ALL THE UNITS WAS BELOW 1500 S Q.FT. AND HENCE THERE WAS NO REASON TO DISALLOW THE DEDUCTION. 5.6 THE CIT ERRED IN HOLDING THAT THE AREA COVERED BY TERRACE WAS ALSO INCLUDIBLE IN THE BUILT UP AREA WITHOUT APPRECIATING THAT THE TERRACE AREA DID NOT FORM PART OF BUILT UP AREA AND HENCE, THE SAME OUGHT TO BE EXCLUDED. 5.7 THE CIT ERRED IN HOLDING THAT THE DEFINITION OF BUILT UP AREA INTRODUCED W.E.F. 1-4-2005 WAS CLARIFICATORY IN NATURE WITHOUT APPRECIATING THAT T HE SAME WAS APPLICABLE ONLY FROM A.Y. 2005-06 AND THAT ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 8 TOO ONLY IN RESPECT OF THE PROJECTS STARTED AFTER T HE INSERTION OF THE AMENDMENT. 5.8 ACCORDINGLY, THE ORDER OF THE CIT BE SET ASIDE. 6. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORDER OF THE CIT AND SUBMITTED THAT THE ORDER OF TH E ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST REVENUE BECAUSE FORM NO. 10CCB FILED ALONG WITH THE RETURN OF INCOME DID NOT CONTAIN ANY DETAI LS; THE CONDITIONS LAID DOWN IN SECTION 80-IB(10) R.W.R . RULE 18BBB(2) ARE NOT SATISFIED, SO THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80-IB(10) OF THE ACT; BRAHMA AANGAN PROJECT IS A RESIDENTIAL CUM COMMERCIAL PROJECT AS IT COMPRISED MORE THAN 2000 SQ.FT. OF COMMERCIAL AREA. AS PER AMENDED PROVISIO NS OF CLAUSE (D) TO SECTION 80-IB(10), COMMERCIAL AREA MORE THAN 2000 SQ.FT. WAS NOT PERMISSIBLE, THOUGH T HIS CLAUSE IS INTRODUCED W.E.F. 1-4-2005, BUT BEING CLARIFICATORY IN NATURE, IT APPLIES TO EARLIER YEAR S ALSO. THERE WERE OTHER ERRORS IN THE ORDER OF ASSESSING OFFICER PASSED U/S. 80IB(10) OF THE ACT. IN VIEW O F THE ABOVE, THE CIT WAS JUSTIFIED IN SETTING ASIDE THE O RDER OF THE ASSESSING OFFICER AND DIRECTING HIM TO WITHD RAW THE CLAIM IN RESPECT OF BRAHMA AANGAN PROJECT. THE SAME SHOULD BE UPHELD. 7. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE C IT IN HIS ORDER U/S 263 HAS DISALLOWED THE CLAIM U/S 8 0- IB(10) IN RESPECT OF BRAHMA AANGAN PROJECT WHICH WA S ORIGINALLY ALLOWED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED U/S 143(3) ON 21-12-2006. THE CIT HAS GIVEN FOUR REASONS IN THE ORDER U/S 263 FOR HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO TH E DEDUCTION U/S 80-IB(10) WHICH ARE AS UNDER: ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 9 (A) THE CIT HAS HELD THAT THE PROJECT BRAHMA AANGAN CONSISTS 7562 SQ.FT. COMMERCIAL AREA AND THEREFORE, IT IS NOT A RESIDENTIAL PROJECT. THE DEDUCTION U/S 80IB(10) IS ALLOWABLE ONLY IF THE PROJECT IS COMPLETELY RESIDENTIAL PROJECT. (B) EVEN, THE AMENDMENT U/S 80-IB(10) INTRODUCED IN THE FORM OF SUB-CLAUSE (D) W.E.F. 1-4-2005 HAS LIMITED THE AREA FOR COMMERCIAL USE TO THE EXTENT OF 5% OF THE TOTAL BUILT UP AREA OF 2000 SQFT. WHICHEVER IS LESS. THE LAST COMMENCEMENT CERTIFICATE OF THE PROJECT WAS OBTAINED ON 20-4-2005 AND THEREFORE, THERE IS A VIOLATION OF CLAUSE (D). (C) IN BUILDING B4 AND B5 THE DUPLEX FLATS ARE HAVING THE BUILT UP AREA OF 1595 SQ.FT. EACH. THUS, THE BUILT UP AREA CONDITION MENTIONED IN SUB-CLAUSE (C) OF 80IB(10) THAT THE FLAT SHOULD BE BELOW 1500 SQ.FT. BUILT UP AREA, IS VIOLATED. THIS AREA IS CALCULATED AFTER INCLUDING THE TERRACE (BUILT UP AREA 1330 SQ.FT. AND TERRACE 265 SQ.FT). (D) ALONG WITH THE RETURN, THE ASSESSEE HAS NOT SUBMITTED SEPARATE P & L ACCOUNT AND BALANCE SHEET FOR THE PROJECT. SECONDLY, THE FORM NO. 10CCB (AUDIT REPORT) IS NOT ATTACHED WITH THE P & L ACCOUNT AND BALANCE SHEET OF THE PROJECT AND IT IS BLANK IN VARIOUS COLUMNS WHICH ARE PERTAINING TO THE DEDUCTION U/S 80- IB(10) OF THE ACT. 7.1 ON ACCOUNT OF THE ABOVE MENTIONED REASON, THE CIT HELD THAT THE ASSESSEE IS NOT ENTITLED FOR DEDU CTION U/S 80IB(10) OF THE ACT AS THE VARIOUS CONDITIONS MENTIONED IN THE SECTION ARE VIOLATED. ACCORDING TO THE ASSESSEE, THE ORDER OF THE CIT IS BAD IN LAW AS THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE REVENUE. ON MERITS, THE RELIEF IS ALLOWABLE TO THE ASSESSEE U/S 80- IB(10) AS NONE OF THE CONDITIONS IN THE SECTION IS VIOLATED. WE FIND THAT THE ASSESSMENT ORDER PLACED AT PAGES 17 TO 20 OF THE PAPER BOOK REVEALS THAT THE ASSESSING OFFICER HAS ALLOWED THE DEDUCTION U/S 80IB(10) IN RESPECT OF BRAHMA AANGAN PROJECT BY MAKING ENQUIRIES. THE ASSESSING OFFICER HAS MADE T HE DISALLOWANCE OF DEDUCTION ON THE INTEREST CLAIMED B Y ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 10 THE ASSESSEE IN PARA 4.1 OF THE ASSESSMENT ORDER WHICH IS MATTER OF RECORD. THE CIT WAS NOT JUSTIFI ED IN HOLDING THAT THE RELIEF WAS ALLOWED WITHOUT PROPER INQUIRIES. 7.2 ACCORDING TO THE CIT IS THAT THE PROJECT CONS ISTS OF SOME COMMERCIAL PORTION AND THE DEDUCTION IS ALLOWABLE ONLY TO A PURELY RESIDENTIAL PROJECT. IN THIS REGARD, THE STAND OF THE ASSESSEE HAS BEEN THAT THE DEDUCTION IS ALLOWABLE TO A HOUSING PROJECT AND NOT A COMMERCIAL PROJECT. THIS ISSUE HAS BEEN SETTLED BY THE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES (2011) 333 ITR 289 WHEREIN IT HAS BEEN HELD THAT IN CASE PROJECT IS HAVING SOME COMMERCIAL AREA, IT DOE S NOT MEAN THAT IT IS NOT A HOUSING PROJECT. SECONDL Y, IT WAS POINTED OUT ON BEHALF OF THE ASSESSEE THAT THE PROJECT HAD COMMENCED MUCH BEFORE 1-4-2005 FROM WHICH DATE THE SUB CLAUSE (D) OF SECTION 80-IB(10) WAS INTRODUCED. ON PAGE 59, THE ASSESSEE HAS GIVEN DETAILS OF THE COMMENCEMENT CERTIFICATES WHICH REVE ALS THAT THE PROJECT COMMENCED ON 17-3-2001 AND THE LAS T REVISED COMMENCEMENT CERTIFICATE WAS DATED 31-5- 2003. THE ASSESSEE HAD NO OCCASION TO COMPLY WITH THE NEW CONDITION INTRODUCED W.E.F. 1-4-2005 THAT T HE COMMERCIAL PORTION SHOULD NOT EXCEED 2000 SQ.FT. AN D HENCE IT WAS NOT APPLICABLE IN RESPECT OF THE PROJE CTS WHICH HAVE COMMENCED PRIOR TO 1-4-2005. THIS PROPOSITION IS SUPPORTED BY VARIOUS DECISIONS GIVEN BY THE ITAT INCLUDING THE DECISION IN THE CASE OF OPEL SHELTERS PVT. LTD., AND D.S. KULKARNI DEVELOPERS IN ITA NO. 219/PN/2009 AND 17/PN/2009 FOR A.Y. 2005-06 DATED 31-5-2010. SECONDLY, THE ASSESSMENT YEAR INVOLVED IN THE PRESENT APPEAL IS 2004-05 AND THEREFORE, THE QUESTION OF APPLICABILITY OF THE SUB - CLAUSE (D) OF SECTION 80-IB(10) OF THE ACT DOES NOT ARISE IN VIEW OF THE DECISION OF BOMBAY HIGH COURT IN THE ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 11 CASE OF BRAHMA ASSOCIATES (SUPRA). ACCORDINGLY THE CIT WAS NOT JUSTIFY TO INVOKE PROVISIONS OF SECTIO N 263 ON THIS ACCOUNT. 7.3 WITH REGARDS TO AREA OF THE FLAT THAT WE FIND T HAT THE CIT HAS INITIALLY TAKEN A STAND THAT THE BUILT UP AREA OF THE DUPLEX FLATS ON 6 TH AND 7 TH FLOORS EXCEED 1500 SQ.FT. EACH. HE STATED THAT THE BUILT UP AREA INCLUDING THE TERRACE IS 1595 SQ.FT. IN BUILDING NO . B4 AND B5. THIS IS ARRIVED AT BY CONSIDERING THE BUIL T UP AREA AT 1330 SQ.FT. AND TERRACE OF 265 SQ.FT. FOR E ACH FLAT AND THEREFORE, HE HELD THAT THE DEDUCTION IS N OT ALLOWABLE TO BRAHMA AANGAN PROJECT AS THE BUILT UP AREA OF A FEW FLATS EXCEEDED 1500 SQ.FT. EACH. IN THIS CONTEXT, IT WAS THE STAND OF THE ASSESSEE THAT THE BUILT UP AREA WAS WRONGLY CALCULATED AND IN A SEPARATE PAPER BOOK CONTAINING 6 PAGES, THE ASSESSEE HAS GIV EN DETAILED WORKING OF THE BUILT UP AREA AS PER THE DEFINITION IN THE ACT. ACCORDINGLY THE TOTAL AREA WAS WORKED OUT TO 1212.93 SQ. FT AND TERRACE OF 281.93 SQ.FT. THUS THE TOTAL IS LESS THAN 1500 SQ.FT. HEN CE THE OBJECTION OF THE CIT IS MISPLACED. 7.4 ALTERNATIVE ARGUMENT ON BEHALF OF THE ASSESSEE WAS THAT THE QUESTION OF INCLUDING THE TERRACE IN T HE BUILT UP AREA COMES UP ONLY W.E.F. 1-4-2005, BECAUS E THE DEFINITION IS INTRODUCED IN THE SECTION WITH EF FECT FROM THAT DATE. FOR THE PERIOD PRIOR TO 1-4-2005 NO SUCH DEFINITION WAS ON THE STATUTE AND HENCE THE BU ILT UP AREA HAS TO BE CONSIDERED AS PER THE DC RULES OF THE SANCTIONING AUTHORITY. IN THIS REGARD, IT WAS SUBMITTED THAT THE DC RULES DO NOT INCLUDE TERRACE IN THE BUILT UP AREA, THE DEFINITION OF BUILT UP AREA AND THAT THE AREA COVERED IMMEDIATELY PLINTH LEVEL OF T HE BUILDING OR THE EXTERNAL AREA OF ANY UPPER FLOOR WHICHEVER IS MORE IS THE BUILT UP AREA. AS THE TER RACE ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 12 IS OPEN TO SKY, IT IS NOT INCLUDIBLE IN THE BUILT U P AREA AND THAT IS WHY IT IS EXCLUDED BY THE ASSESSEES ARCHITECT FROM THE BUILT UP AREA. THE VIEW THAT THE AMENDED DEFINITION OF BUILT UP AREA THAT THE TERRAC E IS INCLUDED W.E.F. 1-4-2005 IS NOT APPLICABLE FOR THE EARLIER YEARS AS HELD BY THE ITAT PUNE BENCH IN THE CASE OF TUSHAR DEVELOPERS IN ITA NO. 165/PN/2007 AND 94/PN/2007 FOR A.Y. 2003-04 AND 2004-05 DATED 31-5-2011, WHEREIN IT HAS BEEN HELD AS UNDER: SO FAR AS THE ISSUE OF APPLICATION OF DEFINITION O F BUILT UP AREA AS BROUGHT ON THE STATUTE BY FINANCE ACT (2004) VIDE SUB-SECTION 14 TO SECTION 80-IB OF THE ACT WE.F. 1-4-2005 IS CONCERNED, WE RESPECTFULLY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BRAHMA ASSOCIATES (SUPRA) HOLD THAT THE AMENDED PROVISION IS STATED TO COME W.E.F. 1-4-2005 IS HAVING PROSPECTIVE EFFECT ONLY. WE ARE HOWEVER, OF THE VIEW THAT IN ABSENCE OF SUCH DEFINITION BEFORE 1-4-2005 IN SECTION 80-IB, THE DEFINITION BUILT UP AREA AS PER THE LOCAL LAW I.E. IS RELATED PROVISIO NS AVAILABLE WITH THE LOCAL MUNICIPAL CORPORATION WILL BE HELPFUL TO DECIDE THE ISSUE, AS TO WHETHER TERRACE AREA AND GARDEN EXCLUSIVE DOMAIN OF THE FLAT/ROW HOUSE OWNERS WILL BE INCLUDED IN THE AREA OF THE FLAT WHILE EXAMINING AS TO WHETHER THE SAME IS WELL WITHIN THE PRESCRIBED AREA OF THE FLAT/ROW HOUSE I.E. 1500 SQ.FT. AS PER SECTION 80-IB(10) AS PREVAILING DURING THE YEAR UNDER CONSIDERATION. WE, THUS, SET ASIDE THE MATTER ON THE ISSUE FOR FRESH CONSIDERATION TO THE AO TO DECIDE THE SAME AS PER OUR ABOVE FINDING IN THIS REGARD AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN VIEW OF ABOVE DISCUSSION THE CIT WAS NOT JUSTIF IED TO INVOKE PROVISIONS U/S.263 OF ACT. MOREOVER, TH E ITAT MUMBAI BENCH IN THE CASE OF HAWARE CONSTRUCTIONS (P) LTD. VS. ITO (2011) 64 DTR (MUMBA I) 251 HAS ALSO TAKEN A VIEW THAT THE TERRACE IS NOT INCLUDIBLE IN THE BUILT UP AREA OF THE FLAT PRIOR T O 1-4- 2005 AND HENCE FOR THE PROJECTS COMMENCED PRIOR TO 1- 4-2005, TERRACE IS NOT INCLUDIBLE IN THE BUILT UP A REA. IN VIEW OF THE ABOVE, THE DECISION OF THE CIT ON TH IS ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 13 ACCOUNT DOES NOT JUSTIFY THE INVOKING OF PROVISIONS U/S. 263 OF THE ACT. 7.5 WITHOUT PREJUDICE TO ABOVE THE CIT IS NOT JUS TIFIED IN HOLDING THAT THE ENTIRE PROJECT BRAHMA AANGAN IS NOT ENTITLED TO THE DEDUCTION JUST BECAUSE 4 DUPLEX FLATS IN B4 AND B5 BUILDINGS ARE HAVING THE BUILT UP AREA EXCEEDING 1500 SQ.FT. THE ITAT THIRD MEMBER IN THE CASE OF SANGHVI & DOSHI ENTERPRISES VS. ITO (2011) 60 DTR (CHENNAI) (TM)(TRIB) 306 HAS HELD THA T ONLY THE FLATS EXCEEDING THE LIMIT OF BUILT UP AREA CAN BE EXCLUDED AND THE DEDUCTION SHOULD BE ALLOWED ON THE BALANCE FLATS WHICH ARE WITHIN THE LIMITS OF BU ILT UP AREA MENTIONED IN THE SECTION. SIMILAR VIEW IS ALSO TAKEN BY ITAT KOLKATA BENCH IN THE CASE OF BENGAL AMBUJA CEMENT. IN VIEW OF THIS ALTERNATE CONTENTI ON, CIT WAS NOT JUSTIFY TO INVOKE PROVISIONS OF 263 OF THE ACT ON THIS ACCOUNT. 7.6 OTHER ISSUE IS THAT THE ASSESSEE HAS SUBMITTED THE AUDIT REPORT WHICH IS BLANK IN RESPECT OF THE COLUMNS RELATING TO THE DEDUCTION U/S 80-IB(10). T HE CIT MENTIONED THAT THE AUDITOR HAS NOT ATTACHED THE P & L ACCOUNT AND THE BALANCE SHEET OF THE BRAHMA AANGAN PROJECT ALONG WITH THE AUDIT REPORT AND HENC E THE DEDUCTION U/S 80IB(10) WAS WRONGLY ALLOWED BY T HE ASSESSING OFFICER. IN THE NOTICE U/S 263, THE CIT H AS NO WHERE MENTIONED THE ABOVE REASON THAT THE AUDIT REPORT WAS BLANK. THE STAND OF THE ASSESSEE IS THA T NO OPPORTUNITY OF HEARING WAS GIVEN BY THE CIT ON A PARTICULAR ISSUE SO HE IS NOT JUSTIFIED IN REVISING THE ORDER ON THAT ISSUE. THIS STAND OF ASSESSEE IS SUPPORTED BY THE DECISION OF DELHI HIGH COURT IN TH E CASE OF CONTIMETERS ELECTRICALS (P) LTD. (2009) (31 7 ITR 249 (DEL) WHEREIN TRIBUNALS ORDER WAS UPHELD BY OBSERVING THAT THE TRIBUNAL HAD ARRIVED AT THE CORR ECT ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 14 CONCLUSION THAT THE REQUIREMENT OF FILING THE AUDIT REPORT ALONG WITH THE RETURN WAS NOT MANDATORY BUT DIRECTORY AND THAT IF THE AUDIT REPORT WAS FILED AT ANY TIME BEFORE THE FRAMING OF THE ASSESSMENT, THE REQUIREMENT OF SECTION 80-IA(7) WOULD BE MET. THE TRIBUNAL WAS ALSO HELD RIGHT IN HOLDING THAT THE COMMISSIONER DID NOT EVEN CALL FOR ANY EXPLANATION OF THE ASSESSEE AND THE ISSUE OF FULFILLMENT OF THE CONDITIONS OF SECTION 80-IA HAD NOT BEEN PART OF TH E SHOW-CAUSE NOTICE. THEREFORE, IT COULD NOT FORM TH E BASIS FOR REVISION OF THE ASSESSMENT ORDER UNDER SECTION 263. WITHOUT PREJUDICE TO ABOVE ARGUMENT RAISED ON BEHALF OF ASSESSEE THE LD.AR SUBMITTED TH AT IN SET ASIDE PROCEEDING THE ASSESSING OFFICER HAS N OT ADDRESSED THE ISSUE WHICH HAS NOT BEEN DISPUTED ON BEHALF OF REVENUE. IN VIEW OF THIS, THIS ISSUE DOE S ACADEMIC. 8. IN VIEW OF ABOVE LEGAL AND FACTUAL DISCUSSION OR DER OF THE CIT IS SET ASIDE. 9. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 1003/PN/2010 FOR A.Y. 2003-04 (DEPARTMENTS APPEAL) 10. THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A)-II PUNE DATED 28-4-2010 ON FOLLOWING GROUNDS. 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) GROSSLY ERRED IN ALLOWING THE DEDUCTION U/S.80IB(10) OF THE I.T.ACT 1961 BY FOLLOWING THE DECISION OF ITAT ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 15 SPECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES AND OTHERS INSTEAD OF CONFIRMING THE DISALLOWANCE MADE IN THE ASSESSMENT ON THIS ISSUE. 3. THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE DEDUCTION UNDER SECTION 80 IB(10), AS APPLICABLE PRIOR TO 1 ST APRIL 2005, IS ADMISSIBLE IN THE CASE OF A HOUSING PROJECT COMPRISING RESIDENTIAL HOUSING UNIT AND COMMERCIAL ESTABLISHMENTS. 4. THE LEARNED CIT(APPEALS) ERRED IN FAILING TO APPRECIATE THE LETTER AND SPIRIT OF SECTION 80 IB(10) PRIOR TO ITS SUBSTITUTION BY THE FINANCE (NO.2) ACT, 2004 W.E.F. 01/04/2005 WHICH HAD AVOWEDLY BEEN BROUGHT INTO THE STATUTE TO PROMOTE HOUSING AS A PRIORITY AREA AND WHICH (THE UN-AMENDED SECTION) DID NEITHER CONTEMPLATE, NOR PROVIDE FOR, ANY COMMERCIAL SPACE OR AREA WHATSOEVER AS CONSTITUTING A PART OF A HOUSING PROJECT AND CONTRARY TO THIS THE ASSESSEES PROJECT BRAHMA ANGAN CONSISTS OF COMMERCIAL AREA OF 7562.85 SQ.FT. 5. THE LEARNED CIT(APPEALS) ERRED IN HOLDING THE ASSESSEE AS ELIGIBLE FOR DEDUCTION U/S.80-IB(10) WHEN THE ASSESSEES PROJECT BRAHMA ANGAN HAD BEEN APPROVED AS A RESIDENTIAL-CUM-COMMERCIAL PROJECT, AND NOT AS A HOUSING PROJECT PER SE. 6. THE LEARNED CIT(APPEALS) ERRED IN DECIDING THE APPEAL WITHOUT APPLYING THE PROVISIONS OF SECTION 80-IB(10) AS APPLICABLE TO THE RELEVANT ASSESSMENT YEAR (I.E. A.Y.2003-04) AND BY READING INTO THE SECTION QUALIFICATIONS (SUCH AS UTILIZATIO N OF UPTO 10% OF THE BUILT UP AREA FOR COMMERCIAL USE) WHICH DID NOT EXIST IN THE SECTION AT ALL. 7. THE LEARNED CIT(APPEALS) ERRED IN INTRODUCING NEW CONDITIONS PERTAINING TO COMMERCIAL CONSTRUCTION IN RESIDENTIAL PROJECT EVEN THOUGH A PLAIN READING OF SUB-SECTION (5) OF SECTION 80IB(10) WHICH CONTAINS THE CONDITIONS FOR SUCH ALLOWANCE DOES NOT LEAVE ANY SCOPE FOR SUCH INTERPRETATION. 8. THE LEARNED CIT(APPEALS) ERRED IN PROCEEDING ON THE BASIS OF AN ASSUMPTION THAT THE PUNE MUNICIPAL CORPORATION DOES NOT PERMIT/ SANCTION RESIDENTIAL HOUSING PROJECT UNLESS CONVENIENCE SHOPPING IS PROVIDED, WHEREAS SUCH PROVISION IS NOT MANDATORY IN AN ABSOLUTE SENSE, UNDER THE RELEVANT RULES OF THE PUNE MUNICIPAL CORPORATION. ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 16 9. THE LEARNED CIT(APPEALS) ERRED IN ACCEPTING ASSESSEES PLEA THAT THE AREA COVERED BY TERRACE ENCLOSED TO CERTAIN FLATS DOES NOT FORM PART OF BUILT-UP AREA AND OUGHT TO EXCLUDED WHILE WORKING OUT THE BUILT UP AREA OF SUCH FLATS. 10. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LEARNED CIT (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 11. THE ASSESSEE CLAIMED DEDUCTION U/S 80-IB(10) OF THE ACT AMOUNTING TO RS. 1,90,19,493/- IN RESPECT O F BRAHMA AANGAN PROJECT. THE ASSESSING OFFICER DISALLOWED THE DEDUCTION ON THE GROUND THAT THE COMMERCIAL AREA CONSTRUCTED WAS 7555 SQ.FT. AND THEREFORE, IT WAS NOT A HOUSING PROJECT. THE SECOND ISSUE ON WHICH THE DEDUCTION WAS DISALLOWED WAS THA T THE BUILT UP AREA OF CERTAIN FLATS IN BUILDING B4 A ND B5 EXCEEDED 1500 SQ.FT. AS PER THE DEFINITION OF BUILT UP AREA GIVEN IN SECTION 80IB(14) AND THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE DEDUCTION. ON APPEAL, THE CIT(A) HELD THAT THE PROJECT BRAHMA AANGAN WAS APPROVED BY COMMENCEMENT CERTIFICATE DATED 17-3-2001 AND HENCE IN VIEW OF THE SPECIAL BENCH DECISION IN THE CASE OF BRAHMA ASSOCIATES, (2009) 122 TTJ 433 (SB) (PUNE) THE CONTENTION OF TH E ASSESSING OFFICER THAT SINCE THERE WAS COMMERCIAL AREA, IT WAS NOT A HOUSING PROJECT, WAS NOT ACCEPTE D. THE CIT(A) ACCORDINGLY DIRECTED THE ASSESSING OFFIC ER TO ALLOW THE DEDUCTION CLAIMED U/S 80IB(10) OF THE ACT. SAME HAS BEEN OPPOSED BEFORE US BY THE REVENUE. 12. THE LEARNED DR SUBMITTED THAT THE CIT(A) ERRED IN ALLOWING THE DEDUCTION U/S 80-IB(10) OF THE ACT BY FOLLOWING THE DECISION OF ITAT SPECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES AND OTHERS (SUPRA). THE LEARNED DR ALSO SUBMITTED THAT THE CIT(A) ALSO ERRE D ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 17 IN HOLDING THAT THE DEDUCTION U/S 80IB(10) AS APPLICABLE PRIOR TO 1-4-2005 IS ADMISSIBLE IN THE C ASE OF A HOUSING PROJECT COMPRISING RESIDENTIAL HOUSING UNIT AND COMMERCIAL ESTABLISHMENTS. FURTHER, IT WA S SUBMITTED THAT THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB(10) WHE N THE ASSESSEES PROJECT BRAHMA AANGAN HAD BEEN APPROVED AS A RESIDENTIAL CUM COMMERCIAL PROJECT A ND NOT AS A HOUSING PROJECT PER SE. IT WAS SUBMITTED THAT THE CIT(A) ERRED IN DECIDING THE APPEAL WITHOUT APPLYING THE PROVISIONS OF SEC. 80-IB(10) AS WAS APPLICABLE TO THE RELEVANT ASSESSMENT AND IN INTRODUCING NEW CONDITIONS PERTAINING TO COMMERCIAL CONSTRUCTION IN RESIDENTIAL PROJECT. THE LEARNED D R FURTHER SUBMITTED THAT THE CIT(A) ERRED IN PROCEEDI NG ON THE BASIS OF AN ASSUMPTION THAT THE PUNE MUNICIP AL CORPORATION DOES NOT PERMIT/SANCTION RESIDENTIAL HOUSING PROJECT UNLESS CONVENIENCE SHOPPING IS PROVIDED. THE CIT(A) FURTHER ERRED IN ACCEPTING ASSESSEES PLEA THAT THE AREA COVERED BY TERRACE ENCLOSED TO CERTAIN FLATS DOES NOT FORM PART OF BUI LT UP AREA AND OUGHT TO BE EXCLUDED WHILE WORKING OUT THE BUILT UP AREA OF SUCH FLATS. THE LEARNED DR THEREF ORE, PLEADED THAT THE ORDER OF THE CIT(A) BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, THE LEARNED AR FOR THE ASSESSEE SUBMITTED THA T THE ASSESSEE GAVE VARIOUS DATES OF DIFFERENT COMMENCEMENT CERTIFICATES OBTAINED IN RESPECT OF TH E PROJECT WHICH SHOWED THAT THE FIRST COMMENCEMENT CERTIFICATE WHEN THE BUILDING PLANS WERE APPROVED W AS DATED 17-3-2001. WE FIND THAT THE ASSESSEE HAS AL SO GIVEN A LIST OF THE COMPLETION CERTIFICATES WITH RE GARDS TO VARIOUS RESIDENTIAL BUILDINGS ENVISAGED IN THE BUILDING PLAN APPROVAL DATED 17-3-2001. THE CONSTRUCTED PORTION OF THE RESIDENTIAL AND COMMERCI AL BUILT UP AREA IN THE BRAHMA AANGAN PROJECT SHOWED ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 18 THAT THE PERCENTAGE OF THE COMMERCIAL BUILT UP AREA WAS AT 702.216 SQ. MTRS WHICH WAS 3.58% OF THE TOTA L BUILT UP AREA. THE ISSUE RAISED HERE IS COVERED BY THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CA SE OF BRAHMA ASSOCIATES AND OTHERS (SUPRA) WHICH HAS BEEN CONFIRMED BY HONBLE BOMBAY HIGH COURT. FURTHERMORE THE INTRODUCTION OF DEFINITION OF BUIL T UP AREA IN SECTION 80-IB (14) WAS W.E.F. 1-4-2005 AN D NOT RETROSPECTIVE IN NATURE. 13. IN VIEW OF ABOVE IT IS UNDISPUTED THAT THE PROJ ECT HAD STARTED PRIOR TO 1-4-2005 THE DEFINITION OF BUI LT UP AREA AS GIVEN IN SECTION 80IB(14) IS NOT APPLICABLE AND THE BUILT UP AREA AS PER THE DC RULES OF PMC WAS LE SS THAN 1500 SQ.FT. THE ASSESSING OFFICER HAS INCLUD ED THE AREA COVERED BY THE TERRACE IN THE BUILT UP ARE A. THE TERRACE IS NOT INCLUDIBLE IN THE BUILT UP AREA COMPUTED AS PER DC RULES. ACCORDINGLY, THE BUILT U P AREA OF THE FLAT IS LESS THAN 1500 SQ.FT. AND THERE FORE, THE CIT(A) WAS JUSTIFIED IN ALLOWING THE DEDUCTION AS CLAIMED BY THE ASSESSEE. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED ON BOTH ACCOUNT. ITA NO. 649/PN/2009 FOR A.Y. 2005-06 (ASSESSEES APPEAL) 15. ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL. 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION OF RS.9,28,026/- U/S. 80IB(10) CLAIMED IN RESPECT OF BRAHMA ANGAN PROJECT ONLY ON THE GROUND THAT THE SAID PROJECT CONSISTED OF LITTLE COMMERCIAL AREA AND THEREFORE, THE SAID PROJECT WAS NOT A HOUSING PROJECT ELIGIBLE FOR DEDUCTION U/S.80IB(10). ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 19 1.1] THE LEARNED CIT(A) ERRED IN HOLDING THE AMENDMENT RESTRICTING THE COMMERCIAL AREA INCLUDIBLE IN THE HOUSING PROJECT WAS APPLICABLE FROM A.Y.2005-06 ALTHOUGH THE PROJECT WAS STARTED BEFORE THE INSERTION OF THE AMENDMENT AND THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE DEDUCTION IN RESPECT OF THE PROFITS OF BRAHMA ANGAN PROJECT FOR THIS YEAR. 1.2] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT A. SIMPLY BECAUSE THE PROJECT BRAHMA ANGAN CONSISTED OF COMMERCIAL AREA OF 7555 SQ.FT, THE SAME WAS STILL A HOUSING PROJECT AND ELIGIBLE FOR DEDUCTION U/S.80IB(10). B. THE PROJECT BRAHMA ANGAN WAS STARTED IN F.Y.2000-01 I.E. MUCH PRIOR TO THE INSERTION OF THE AMENDMENT RESTRICTING THE TOTAL COMMERCIAL AREA AND THEREFORE, SINCE THE PROJECT WAS STARTED PRIOR TO THE AMENDMENT, THERE WAS NO RESTRICTION ON THE COMMERCIAL AREA INCLUDIBLE IN THE HOUSING PROJECT. C. THE AMENDMENT RESTRICTING THE TOTAL COMMERCIAL AREA IN THE HOUSING PROJECT WAS NOT RETROSPECTIVE AND WAS APPLICABLE ONLY TO THE PROJECTS WHICH HAD COMMENCED CONSTRUCTION AFTER THE INSERTION OF THE AMENDMENT AND ACCORDINGLY, THERE WAS NO REASON TO DENY THE DEDUCTION IN RESPECT OF THE PROFITS FOR THIS YEAR. 2] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION OF RS.9,37,92,482/- U/S. 80IB(10) CLAIMED IN RESPECT OF BRAHMA MAJESTIC PROJECT ONLY ON THE GROUND THAT THE SAID PROJECT CONSISTED OF LITTLE COMMERCIAL AREA AND THEREFORE, THE SAID PROJECT WAS NOT A HOUSING PROJECT ELIGIBLE FOR DEDUCTION U/S.80IB(10). 2.1] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AMENDMENT RESTRICTING THE COMMERCIAL AREA INCLUDIBLE IN THE HOUSING PROJECT WAS APPLICABLE FROM A.Y. 2005-06 AND ALTHOUGH THE PROJECT WAS STARTED BEFORE THE INSERTION OF THE AMENDMENT AND THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO CLAIM ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 20 THE DEDUCTION IN RESPECT OF THE PROFITS OF BRAHMA MAJESTIC PROJECT FOR THIS YEAR. A. SIMPLY BECAUSE THE PROJECT BRAHMA MAJESTIC CONSISTED OF COMMERCIAL AREA OF 38,065 SQ.FT, THE SAME WAS STILL A HOUSING PROJECT AND ELIGIBLE FOR DEDUCTION U/S.80IB(10). B. THE PROJECT BRAHMA MAJESTIC WAS STARTED IN F.Y.2003-04 I.E. MUCH PRIOR TO THE INSERTION OF THE AMENDMENT RESTRICTING THE TOTAL COMMERCIAL AREA AND THEREFORE, SINCE THE PROJECT WAS STARTED PRIOR TO THE AMENDMENT, THERE WAS NO RESTRICTION ON THE COMMERCIAL AREA INCLUDIBLE IN THE HOUSING PROJECT. C. THE AMENDMENT RESTRICTING THE TOTAL COMMERCIAL AREA IN THE HOUSING PROJECT WAS NOT RETROSPECTIVE AND WAS APPLICABLE ONLY TO THE PROJECTS WHICH HAD COMMENCED CONSTRUCTION AFTER THE INSERTION OF THE AMENDMENT AND ACCORDINGLY, THERE WAS NO REASON TO DENY THE DEDUCTION IN RESPECT OF THE PROFITS FOR THIS YEAR. 3] THE ASSESSEE SUBMITS THAT THE COMMERCIAL AREA CONSTRUCTED BY THE ASSESSEE IN THE ABOVE REFERRED PROJECTS WAS LESSER THAN 10% OF THE TOTAL BUILT UP AREA AND THEREFORE, THE DEDUCTION U/S. 80IB (10) WAS ALLOWABLE IN VIEW OF THE SPECIAL BENCH ITAT DECISION IN THE CASE OF BRAHMA ASSOCIATES. 4] WITHOUT PREJUDICE, THE ASSESSEE PRAYS FOR THE DEDUCTION U/S. 80IB (10) IN RESPECT OF THE PROFITS FROM THE RESIDENTIAL PORTION OF THE ABOVE TWO PROJECTS. 5] THE APPELLANT CRAVE LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 16. WE FIND THAT APPEAL HAS BEEN FILED BY THE ASSE SSEE AGAINST THE ORDER OF THE CIT()-II PUNE DATED 25-3-2 009 FOR A.Y. 2005-06 ON THE POINT OF CONFIRMATION OF DISALLOWANCE OF DEDUCTION OF RS. 9,28,026/- U/S 80- IB(10) OF THE ACT IN RESPECT OF BRAHMA AANGAN PROJE CT ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 21 ON THE GROUND THAT THE SAID PROJECT CONSISTED OF LI TTLE COMMERCIAL AREA AND THEREFORE THE SAID PROJECT WAS NOT A HOUSING PROJECT ELIGIBLE FOR DEDUCTION U/S 80IB(1 0) OF THE ACT. THE ASSESSING OFFICER NOTICED THAT THE PRO JECT WAS APPROVED AS RESIDENTIAL CUM COMMERCIAL PROJECT. FURTHER, OUT OF TOTAL BUILT UP AREA OF THE PROJECT OF 19695.696 PER SQ. MTRS, 702.216 SQ. MTRS (3.58%) WA S THE COMMERCIAL OR NON-RESIDENTIAL AREA. THEREFORE, THIS VIOLATED THE RESTRICTION OF 2000 SQ.FT. OF COMMERCI AL AREA IN A HOUSING PROJECT WHICH WAS INTRODUCED AS SECTION 80-IB(10)(D) BY THE FINANCE ACT 2004 W.E.F. 1- 4-2005. STAND ON BEHALF OF THE ASSESSEE WAS THAT T HIS PROJECT WAS APPROVED PRIOR TO THIS AMENDMENT AND THEREFORE, THE IMPOSITION OF THIS CONDITION WAS SUBSEQUENT TO THE BUILDING PLAN HAVING BEEN APPROVE D BY THE PMC. THE ASSESSING OFFICER HELD THAT ACTUAL BUILDING COMMENCEMENT CERTIFICATE WAS OBTAINED ON 20-4-2005 WHICH WAS AFTER INTRODUCTION OF CLAUSE (D ) OF SEC. 80IB(10) OF THE ACT. THE ASSESSING OFFICER ALS O STATED THAT MC PERMITS ONLY CONVENIENCE SHOPS IN RESIDENTIAL PROJECT BUT NOT OFFICES AND THESE SHOPS WERE TO HAVE AREAS LESS THAN 2000 SQ. MTRS. THE ASSESSING OFFICER FURTHER STATED THAT THERE WERE AMENDMENT IN THE BUILDING PLANS AND THE ASSESSEE WA S ALREADY AWARE OF AMENDMENT AND HENCE IT SHOULD HAVE TAKEN NECESSARY STEPS FOR ALTERATIONS FOR AVAILING THE BENEFIT OF SEC. 80IB(10) OF THE ACT. IN VIEW OF TH E FACT THAT THE COMMERCIAL AREA ALSO INCLUDED OFFICES ETC. AND WAS 9% OF THE TOTAL BUILT UP AREA, DEDUCTION U/S 80 -IB OF THE ACT WAS NOT ALLOWED TO THE ASSESSEE. MATTER WAS CARRIED IN APPEAL BEFORE THE CIT(A) WHO HAS CONFIRM ED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. TH E SAME HAS BEEN CHALLENGED BEFORE US BY THE ASSESSEE. 17. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE PROJECT BRAHMA AANGAN WAS STARTED VIDE ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 22 COMMENCEMENT CERTIFICATE DATED 17-3-2001 I.E. PRIOR TO 1-4-2005. IT WAS SUBMITTED THAT THE PLAN WAS REVALIDATED BECAUSE FOUR YEARS HAD LAPSED FROM THE ORIGINAL SANCTIONED PLAN. THIS DOES NOT MEAN THAT T HE PROJECT IS SANCTIONED IN APRIL 2005. SINCE THE PRO JECT WAS STARTED PRIOR TO 1-4-2005, THE LIMIT PRESCRIBED U/S 80IB(10) OF THE COMMERCIAL AREA WAS NOT APPLICABLE. SIMILARLY, IN RESPECT OF PROJECT BRAHMA MAJESTIC, T HE PLAN WAS SANCTIONED ON 27-6-2003 I.E. MUCH BEFORE 1 - 4-2005. HENCE, EVEN THOUGH THE PROJECT CONSISTS OF COMMERCIAL AREA MORE THAN THE LIMIT SPECIFIED IN TH E SECTION, THE SAID LIMIT IS NOT APPLICABLE AS THE PR OJECT WAS STARTED PRIOR TO 1-4-2005. THE LEARNED AR THEREFORE SUBMITTED THAT THE ORDER OF THE CIT(A) BE VACATED THE CLAIM OF THE ASSESSEE BE ALLOWED. 18. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE RAISED I N THIS APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF OPEN SHELTERS PVT. LTD. AND D.S. KULKAR NI DEVELOPERS (SUPRA), WHEREIN IT HAS BEEN HELD THAT I F THE PROJECT IS STARTED PRIOR TO 1-4-2005 THE LIMIT OF 2000 SQ.FT. OR 5% WHICHEVER IS LOWER IS NOT APPLICA BLE AND THE DEDUCTION IS TO BE ALLOWED TO THE ENTIRE PROJECT. ASSESSING OFFICER WAS NOT JUSTIFIED TO TA KE DATE OF COMMENCEMENT AS 20/04/2005 WHICH WAS DATE OF REVALIDATION. SO BRAHMA AANGAN PROJECT ALREADY COMMENCED ON 17/03/2001 I.E. PRIOR TO 01/04/2005. SIMILARLY IN RESPECT OF BRAHMA MAJESTIC PLAN WAS SANCTIONED ON 27/06/2003 I.E. MUCH BEFORE 01/04/2005. RESPECTFULLY FOLLOWING THE SAID DECISI ON, WE DIRECT THE AUTHORITIES BELOW TO ALLOW DEDUCTION U/S 80-IB(10) OF THE ACT ON ACCOUNT OF BOTH THESE PROJE CTS. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS ALLOW ED. ITA NO. 647, 1103 AND 649/PN/2009 BRAHMA BUILDERS A.Y. 2003-04, 2005-06 23 19. IN THE RESULT, BOTH THESE APPEALS OF ASSESSEE ARE ALLOWED, WHILE APPEAL OF THE REVENUE IS DISMISSED. DECISION IS PRONOUNCED IN THE OPEN COURT ON 15 TH MAY, 2012. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 15 TH MAY, 2012. ANKAM/ASHWINI COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-(A) II PUNE 4. THE CIT II PUNE 5. THE D.R, ITAT PUNE BENCH, PUNE 6. GUARD FILE BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL