ACIT, V. M/s Prasanna Developers,

ITA 1016/BANG/2013

• Counselvise Citation: 101621114 RSA 2013
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 21-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAMBIRAJAN PILLAI J
• Assessee Lawyers: MRS SHEETAL BORKAR
• Section: 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI , JUDICIAL MEMBER A ND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NO. 1016 / BANG/20 13 (ASSESSMENT YEAR: 20 1 0 - 11 ) ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), BANGALORE. APPELLANT VS. M/S.PRASANNA DEVELOPERS, CITY POINT, KODAIALBAIL, MANGALORE. RESPONDENT APPELLANT BY: SHRI NAMBIRAJAN PILLAI, JCIT(DR) RESPONDENT BY: MRS.SHEETAL BORKAR, ADVOCATE. DATE OF HEARING : 14/05/2015 DATE OF PRONOUNCEMENT: 26 /05/2015 O R D E R PER SMT.P.MADHAVI DEVI, JM: THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A), MYSORE, DATED 14/03/2013 DELETIN G THE DISALLOWANCE OF DEDUCTION MADE BY THE ASSESSING OFFICER (AO) U/S 80 - I B(10) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - FIRM, WHICH IS ENGAGED IN THE BUSINESS OF REAL ESTATE, CONSTRUCTION OF ITA NO . 1016 /BANG/20 1 3 M/S.PRASANNA DEVELOPERS PAGE 2 OF 5 RESIDENTIAL/BUSINESS COMPLEXES AND EXECUTIO N OF HOUSING PROJECTS, HAD FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR CLAIMING PROFITS DERIVED FROM A PROJECT CALLED MAHARAJA HEIGHTS AS EXEMPT U/S 80 - IB(10) OF THE ACT. A SURVEY WAS CONDUCTED ON THE GROUP ON 14/3/2012 AND CERTAIN INCRI MINATING EVIDENCE W AS FOUND AND IMPOUNDED. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE ASSESSING OFFICER (AO) OBSERVED THAT THE ASSESSEE - FIRM HAD EXECUTED ONE PROJECT NAMED MAHARAJA HEIGHTS DURING THE RELEVANT PREVIOUS YEAR AND THAT THE SAID PROJECT CONSISTED OF 66 FLATS/APARTMENTS WITH DIFFERENT DIMENSIONS AS MENTIONED IN THE DEED OF DECLARATION TO BE EXECUTED AS PER THE KARNATAKA APARTMENT OWNERSHIP ACT, 1972. OBSERVING THAT THE PROFITS MADE FROM THE ABOVE PROJECT AMOUNTING TO RS.13,16 ,14,188/ - HAVE BEEN CLAIMED AS DEDUCTION U/S 80 - IB(10) OF THE ACT , THE AO OBSERVED FROM THE DIMENSIONS OF VARIOUS APARTMENTS AND THE DEED OF DECLARATION, THAT OUT OF THE TOTAL 66 FLATS/APARTMENTS, 12 FLATS BEARING REGISTERED FLAT NOS.101 TO 104, 1101 TO 11 04 AND 1601 TO 1604 WERE OF THE DIMENSION OF 1498 SQ.FT. OR MORE ALONG WITH PRIVATE TERRACE. HE OBSERVED THAT THE PRIVATE TERRACES WERE NOT INCLUDED FOR CALCULATING THE MAXIMUM BUILT UP AREA. OBSERVING THAT THESE PRIVATE TERRACES WERE FOR EXCLUSIVE US E OF THESE FLAT OWNERS, THE AO OBSERVED THAT THE BUILT UP AREA OF THESE FLATS EXCEEDED 1500 SQ.FT. AND THEREFORE THERE WAS VIOLATION OF THE PROVISIONS OF 80 - IB(10). HE FURTHER RECORDED A STATEMENT OF THE ITA NO . 1016 /BANG/20 1 3 M/S.PRASANNA DEVELOPERS PAGE 3 OF 5 TOWN PLANNING OFFICER OF THE MANGALORE CITY CORPORATI ON U/S 131 OF THE ACT UNDER OATH TO VERIFY AS TO THE PART OF THE BUILT - UP AREA. THEREAFTER, SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AS TO WHY DEDUCTION UNDER SECTION 80 - IB(10) SHOULD NOT BE DENIED. THE ASSESSEE SUBMITTED THAT THE AREA MARKED AS PRIVAT E TERRACE WAS NOT TO BE INCLUDED FOR CALCULATING THE MAXIMUM BUILT UP AREA AS THIS WAS NOT A BALCONY OR PROJECTION AS DEFINED UNDER SUB SECTION (4) OF SEC. 80 - IB(10) BUT IT WAS A TERRACE AND THEREFORE IT SHOULD NOT BE INCLUDED IN THE BUILT - UP AREA. THE AS SESSEE ALSO PLACED RELIANCE UPON THE JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RAGHAVENDRA CONSTRUCTION (208 TAXMAN 366). THE AO WAS, HOWEVER, NOT CONVINCED WITH THE ASSESSEE S CONTENTION AND HELD THAT PROPORTIONATE DISALLOW ANCE IS TO BE MADE. HE, ACCORDINGLY, DISALLOWED A SUM OF RS.2,39,29,852/ - AND BROUGHT IT TO TAX. 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE SAME AND THE REVENUE IS IN APPEAL BEFORE US. 4. LEARNED DEPA RTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE ASSESSEE HAD CONSTRUCTED THE APARTMENT AND THAT IN RESPECT OF 12 FLATS, THE EXCLUSIVE RIGHT OF PRIVATE TERRACE WAS GIVEN TO THE RESPECTIVE FLAT OWNERS AND THEREFORE , ACCORDING TO HIM, THE AREA O F TERRACE IS ALSO TO BE CONSIDERED AS THE BUILT - UP AREA OF THE FLAT AND SINCE THE BUILT UP ITA NO . 1016 /BANG/20 1 3 M/S.PRASANNA DEVELOPERS PAGE 4 OF 5 AREA ALONG WITH SUCH TERRACE EXCEEDED 1500 SQ.FT., PRO RATA DISALLOWANCE WAS RIGHTLY MADE BY THE AO. IN SUPPORT OF HIS CONTENTIONS, HE PLACED RELIANC E UPON THE RECITALS TO THIS EFFECT IN THE COPIES OF THE SALE DEED S FILED BY THE ASSESSEE AT PAGES 1 TO 34 OF THE PAPER BOOK WHEREIN THE EXCLUSIVE USE OF THE PRIVATE TERRACE IS ALLOTTED TO THE RESPECTIVE FLAT OWNERS. LEARNED COUNSEL FOR THE ASSESSEE, ON TH E OTHER HAND, SUPPORTED THE ORDER OF THE CIT(A) AND HAS PLACED RELIANCE UPON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GOPALAN ENTERPRISES IN INCOME - TAX APPEAL NO.28/2010228 OF 2010 DATED 29/02/2012 AND THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF NARESH T.WADHWANI IN ITA NO.18 TO 20/PN/2013 DATED 28/10/2014. COPIES OF THE ABOVE ORDERS ARE FILED BEFORE US. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ONLY DISPUTE IS WITH REGARD TO THE INCLUDIBILITY OF THE OPEN TERRACE IN THE BUILT UP AREA OF THE FLATS WHICH HAD THE EXCLUSIVE APPROACH AND RIGHT TO USE SUCH OPEN TERRACE. WE FIND THAT THIS ISSUE HAS BEEN CONSIDERED AT LENGTH BY THE PUNE BENCH OF THIS TRIBUNAL IN THE CASE OF NARESH T.WADHWANI (CITED SUPRA) WHEREIN, BY FOLLOWING THE JUDGMENT OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF CEEBROS HOTELS PVT. LTD. VS. DCIT, TAX CASE NO.581 OF 2008 DATED 19/10/2012, IT WAS HELD THAT FLATS LOCATED ON 7 TH FLOOR WHICH HAD THE ADVAN TAGE OF EXCLUSIVE OPEN TERRACE CANNOT BE CONSIDERED TO HAVE EXCEEDED 1500 SQ.FT. AND WOULD NOT BE INCLUDED IN THE CALCULATION OF BUILT ITA NO . 1016 /BANG/20 1 3 M/S.PRASANNA DEVELOPERS PAGE 5 OF 5 UP AREA FOR THE PURPOSE OF EXAMINING THE CONDITIONS PRESCRIBED IN CLAUSE (C) OF SEC. 80 - IB(10) OF THE ACT. IT WAS FURTHE R CONSIDERED THAT THE HON BLE MADRAS HIGH COURT HAS AFFIRMED THIS VIEW IN A SUBSEQUENT DECISION IN THE CASE OF CIT VS. SANGHVI & DOSHI ENTERPRISES (2013) 255 CTR 156 (MAD.). FURTHER THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF GOPALAN ENTERPRISES ( CITED SUPRA) IN SIMILAR CIRCUMSTANCES, HAS HELD THAT PRIVATE TERRACE PORTION CANNOT BE TAKEN INTO CONSIDERATION FOR CALCULATING THE BUILT - UP AREA AND HAS TO BE EXCLUDED. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) WHICH IS IN CONS ONANCE WITH THE DECISIONS CITED SUPRA. 6. IN THE RESULT, THE REVENUE S APPEAL IS DISMI SSED. PRON OUNCED IN THE OPEN COURT ON 26 TH MAY , 201 5 . SD/ - SD/ - (JASON P BOAZ ) ( SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER EKSRINIVASULU COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE T RIBUNAL BANGALORE