M/s. Somani Bafna & Associates, Pune V. Addl. comm. of Income-tax, Pune

ITA 1024/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9714 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 11-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Opportunity of being heard; Question of law
• Section: 133A; 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 1024/PN/2011 (ASSESSMENT YEAR 2007-08) SOMANI BAFNA & ASSOCIATES, SOBA OPTIMA, 37/B, VADGAON BUDRUK, SINHAGAD ROAD, PUNE-411021. .. APPELLANT PAN NO.AAHFS 6879L VS. ACIT CIRCLE(5), PUNE. .. RESPONDENT ASSESSEE BY : SRI M.R. BHAGWAT DEPARTMENT BY : SRI S.K. SINGH DATE OF HEARING : 24-08-2012 DATE OF PRONOUNCEMENT : 28-08-2012 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 29-04- 2011 OF THE CIT(A)-III, PUNE RELATING TO THE ASSES SMENT YEAR 2007-08. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE AND CONSTRUCTION. DU RING THE YEAR UNDER CONSIDERATION THE ASSESSEE DERIVED PROFITS TO THE T UNE OF RS. 6,86,41,684/- ON SALE OF UNITS OF A RESIDENTIAL PROJECT DEVELOPED BY THEM NA MELY SHOBHAPURAM AT WARJE, PUNE AND CLAIMED DEDUCTION U/S.80IB(10) ON THE SAI D PROJECT. THE PROJECT WAS COMMENCED AS PER THE COMMENCEMENT CERTIFICATE DATED 19-09-2002 AND CONSISTS OF 6 BUILDINGS HAVING 164 RESIDENTIAL UNITS IN TOTAL. THE PROJECT WAS COMPLETED ON 05- 02-2007 AS PER THE COMPLETION CERTIFICATE ISSUED BY THE LOCAL AUTHORITY. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER REFERRED THE PROJECT TO A GOVERNMENT APPROVED VALUER FOR VER IFICATION. THE SAID VALUER VIDE HIS REPORT DATED 04-12-09 INSPECTED THE BUILDING AN D SUBMITTED THAT FLAT NOS. 3 AND 2 4 AS WELL AS FLAT NOS. 25 AND 26 IN A WING WERE C OMBINED INTO ONE FLAT AND THE BUILT UP AREA OF THE COMBINED FLATS EXCEEDED 1500 S Q.FT. SIMILARLY FLAT NOS. 141 AND 142 OF F WING WERE ALSO COMBINED INTO ONE FLA T AND THE BUILT UP AREA HAS EXCEEDED 1500 SQ.FT. SINCE SOME OF THE UNITS OF T HE PROJECTS WERE HAVING BUILT UP AREA OF MORE THAN 1500 SQ.FT., THEREFORE, THE AO WA S OF THE OPINION THAT THE ASSESSEE HAS CONTRAVENED ONE OF THE PROVISIONS OF S ECTION 80IB(10). 3.1 ON BEING QUESTIONED BY THE AO IT WAS SUBMITTED THAT ALL THE RESIDENTIAL UNITS IN THE PROJECT WERE HAVING LESS THAN 1500 SQ.FT. OF BUILT UP AREA WHICH IS EVIDENCED FROM THE SANCTIONED PLAN. IT WAS SUBMITTED THAT EA CH UNIT WAS SOLD SEPARATELY BY EXECUTING INDIVIDUAL SALE DEED AND SEPARATE POSSESS ION AGREEMENTS WERE EXECUTED IN RESPECT OF EACH UNIT BEFORE HANDING OVER THE POS SESSION. IT WAS FURTHER SUBMITTED THAT EACH UNIT WAS GIVEN SEPARATE ELECTRI CITY METER CONNECTION BY THE MSEDCL. AS REGARDS THE MERGING OF TWO UNITS INTO O NE SINGLE UNIT IT WAS CONTENDED THAT THE SAME WERE CARRIED OUT BY THE PUR CHASERS ON THEIR OWN AFTER THE POSSESSION OF THE UNITS WERE HANDED OVER TO THEM AN D THE ASSESSEE CANNOT BE HELD RESPONSIBLE FOR ANY MODIFICATION/ALTERNATIONS CARRI ED OUT BY THE PURCHASERS AFTER THE POSSESSION OF THE UNITS WERE HANDED OVER TO THEM. IT WAS ACCORDINGLY SUBMITTED THAT DEDUCTION U/S.80IB(10) SHOULD NOT BE DENIED. 4. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT IN THE PLAN SUBMITTED T O THE PUNE MUNICIPAL CORPORATION FLAT NOS. 141 AND 142 OF THE F WING W AS SHOWN AS SINGLE UNIT. IN ABSENCE OF ANY CORROBORATIVE EVIDENCE THE AO REJECT ED THE AFFIDAVIT GIVEN BY THE OWNER OF THE SAID TWO FLATS NAMELY SRI PRAVIN MORE THAT THE STRUCTURAL CHANGES WERE CARRIED OUT BY HIM. HE FURTHER OBSERVED THAT THE SAID PERSON IN HIS STATEMENT RECORDED BEFORE THE AO U/S.131 HAD ADMITTED THAT HE HAD TAKEN POSSESSION OF THE COMBINED FLATS. IN RESPECT OF THE OTHER FLATS ALSO WHICH WERE FOUND TO BE COMBINED, 3 I.E. FLAT NOS. 3 AND 4 AS WELL AS FLAT NOS. 25 AND 26 OF A WING THE ASSESSEE COULD NOT FURNISH ANY SATISFACTORY DOCUMENTARY EVIDENCE T O SHOW THAT THEY WERE COMBINED BY THE PURCHASERS THEMSELVES. IN VIEW OF THE ABOVE, THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE HAD VIOLATED ONE OF TH E CONDITION LAID DOWN IN SECTION 80IB(10) THAT THE BUILT UP AREA OF NONE OF THE FLAT S SHOULD EXCEED 1500 SQ.FT. HE THEREFORE DISALLOWED THE CLAIM OF DEDUCTION U/S.80I B(10) OF THE INCOME TAX ACT. 5. IN APPEAL THE LEARNED CIT (A) UPHELD THE ACTION OF THE AO. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN SUSTAINING THE DETERMINATION OF THE ASSESSEES TOTAL INCOME AT RS. 7,04,97,910/- AS AGAINST RS.18,56,229/- DISCLOSED IN THE RETURN OF INCOME BY THE ASSESSEE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE REJECTION OF THE ASSESSEE FIRMS CLAIM FOR DEDUCTIO N UNDER SECTION 80IB(10) OF THE INCOME TAX ACT 1961 AND THEREBY CONFIRMING AN ADDITION OF RS.6,86,41,684/- TO ASSESSEES TOTAL INCOME. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO THE ASSESSEE WHEN ALL THE FLAT S CONSTRUCTED BY IT WERE NOT VIOLATING THE PROVISIONS OF SECTION 80IB(10). 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT PROPERLY APPRECIATING THE EVIDENCE ON RECORD AND MISINTERPRE TED THE VARIOUS PROVISIONS OF SECTION 80IB(10) TO SUSTAIN THE REJECTION OF THE ASSESSEES CLAIM AND THE ADDITION OF RS. 6,86,41,684/- TO THE ASSESSEES TOTAL INCOME. 5. THE ADDITION OF RS. 6,86,41,684/- BE DELETED AND THE INCOME OF THE ASSESSEE BE REDUCED TO THAT EXTENT. 6. THE LEARNED COUNSEL FOR THE ASSESSEE MADE TWO FO LD SUBMISSIONS. IN THE FIRST PROPOSITION HE SUBMITTED THAT OUT OF THE 164 FLATS ONLY 6 FLATS HAVE BEEN COMBINED INTO 3 UNITS WHERE THE TOTAL BUILT UP AREA OF EACH COMBINED UNIT EXCEEDS 1500 SQ.FT. REITERATING THE SAME ARGUMENTS AS MADE BEFORE THE A O AND THE CIT(A) HE SUBMITTED THAT ALL THE 6 FLATS HAVE BEEN SOLD BY 6 SEPARATE SALE AGREEMENTS. SEPARATE POSSESSION LETTERS HAVE BEEN GIVEN TO THE PURCHASERS, SEPARATE ELECTRICITY METER FOR EACH OF THE FLAT ARE PROVIDED EVEN TILL T ODAY. THE ASSESSEE HAS CARRIED OUT THE WORK OF COMBINING THE TWO FLATS INTO ONE UNIT A T THE INSTANCE OF THE RESPECTIVE 4 PURCHASERS AND THEREFORE THE SAME SHOULD NOT BE HEL D AGAINST THE ASSESSEE SO AS TO DISENTITLE THE BENEFIT OF DEDUCTION U/S.80IB(10). FOR THIS PROPOSITION HE RELIED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF HAWARE CONSTRUCTIONS PVT. LTD. VS. ITO REPORTED IN 64 TDR 251. 7. COMING TO THE SECOND PROPOSITION THE LEARNED COU NSEL FOR THE ASSESSEE SUBMITTED THAT MERELY BECAUSE 6 FLATS HAVE BEEN COM BINED INTO 3 UNITS WHERE THE BUILT UP AREA OF EACH COMBINED UNIT EXCEEDS 1500 Q. FT., THE ASSESSEE CANNOT BE DENIED THE BENEFIT OF DEDUCTION FOR THE ENTIRE PROJ ECT. HE SUBMITTED THAT PROPORTIONATE DEDUCTION SHOULD BE GRANTED TO THE AS SESSEE U/S.80IB(10) ON ACCOUNT OF 158 FLATS WHERE THE ASSESSEE FULFILS THE CONDITI ONS LAID DOWN IN 80IB(10). FOR THIS PROPOSITION HE RELIED ON THE DECISION OF THE P UNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. TUSHAR DEVELOPERS VS. ITO VIDE ITA NO. 165/PN2007, ITA NO. 94/PN/2008 FOR A.YS. 2003-04 AND 2004-05 ORDER DATE D 30-07-12. 8. THE LEARNED DR ON THE OTHER HAND REFERRED TO PAG E 10 OF THE ORDER OF THE LEARNED CIT(A) AND DREW THE ATTENTION OF THE BENCH TO THE SCANNED MAP OF THE APPROVED PLAN AND SUBMITTED THAT UNIT NOS. 141 AND 142 HAS BEEN SHOWN AS COMBINED UNIT INITIALLY AND APPROVAL FOR THE BUILDI NG PLAN WAS ALSO OBTAINED SHOWING THE FLATS AS A COMBINED UNIT. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES REPORTED IN 333 ITR 289 AND THE DECISION OF THE TRIBUNAL IN THE CASE OF ACI T VS. VISWAS PROPERTIES REPORTED IN 126 ITD 263 HE SUBMITTED THAT THE DEDUC TION U/S.80IB(10) HAS TO BE ALLOWED ON THE PROFIT OF THE ENTIRE PROJECT OR NO D EDUCTION AT ALL. HOWEVER, NO PRO- RATA DEDUCTION CAN BE ALLOWED. 9. THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS REJO INDER SUBMITTED THAT THE DECISION OF THE HONBLE BOMBAY HIGH COURT AS WELL A S THE DECISION IN THE CASE OF 5 VISWAS PROPERTIES (SUPRA) HAVE BEEN CONSIDERED BY T HE TRIBUNAL IN THE CASE OF M/S. TUSHAR DEVELOPERS (SUPRA). 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT OUT OF THE 164 FLATS 6 FLATS HAVE BEEN COMBINED INTO 3 UNITS AND THEREFORE THE BUILT UP AREA OF EACH OF TH OSE 3 FLATS EXCEEDS 1500 SQ.FT. THE AO THEREFORE DENIED THE BENEFIT OF DEDUCTION U/ S.80IB(10). ACCORDING TO HIM THE BUILT UP AREA OF NONE OF THE FLAT SHOULD EXCEED 1500 SQ.FT. THE ABOVE FINDING OF THE AO HAS BEEN UPHELD BY THE CIT(A). IT IS THE SU BMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT ALTHOUGH 6 UNITS HAVE BEEN CO MBINED INTO 3 UNITS, THESE WERE COMBINED AT THE INSTANCE OF THE PURCHASERS, SEPARAT E SALE AGREEMENTS HAVE BEEN MADE FOR SALE OF EACH FLAT, SEPARATE POSSESSION LET TERS HAVE BEEN GIVEN AND SEPARATE ELECTRICITY METERS HAVE BEEN PROVIDED FOR EACH OF T HE 6 FLATS. THEREFORE, IN VIEW OF THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF HAWARE CONSTRUCTIONS PVT. LTD. (SUPRA) THE ASSESSEE IS ENT ITLED TO DEDUCTION U/S.80IB(10). HOWEVER, WE DO NOT FIND ANY SUBSTANCE IN THE ABOVE ARGUMENTS ADVANCED BY THE LEARNED COUNSEL FOR THE ASSESSEE. AS POINTED OUT B Y THE LEARNED CIT(A) AT PAGE 10 OF HIS ORDER, WE FIND FROM THE SCANNED IMPRESSION O F THE APPROVED PLAN THAT FLAT NOS. 141 AND 142 WERE INITIALLY DESIGNED AS ONE SIN GLE UNIT AND APPROVAL FOR THE BUILDING PLAN WAS ALSO OBTAINED SHOWING THE FLATS A S ONE COMBINED UNIT. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO ADMITTED DURI NG THE COURSE OF HEARING THAT THE REMAINING 4 FLATS WERE COMBINED INTO 2 FLATS BY THE BUILDER BY REMOVING THE COMMON WALL BETWEEN THE 2 FLATS. THEREFORE, FACTS IN THE INSTANT CASE ARE DIFFERENT FROM THE FACTS IN THE CASE OF HAWARE CONSTRUCTIONS PVT. LTD. (SUPRA) AND THEREFORE THE RATIO LAID DOWN BY THE TRIBUNAL IN THE SAID DEC ISION IS NOT APPLICABLE TO THE FACTS 6 OF THE PRESENT CASE. THEREFORE, THE ASSESSEE IS NO T ENTITLED TO DEDUCTION U/S.80IB(10) FOR THE PROFIT ON ACCOUNT OF SALE OF 1 64 FLATS. 11. IT IS THE ALTERNATE CONTENTION OF THE LEARNED C OUNSEL FOR THE ASSESSEE THAT PRO- RATA DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE IN VIEW OF THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S . TUSHAR DEVELOPERS. WE FIND SOME FORCE IN THE SAME. WE FIND THE COORDINATE BEN CH OF THE TRIBUNAL IN THE CASE OF M/S. TUSHAR DEVELOPERS (SUPRA) HAS HELD AS UNDER : 3. SO THE LIMITED ISSUE BEFORE US IS WITH REGARD TO ALLOWABILITY OF PRORATA CLAIM U/S.80IB(10) WITH REFERENCE TO THE RESIDENTIAL PORT ION OF THE HOUSING PROJECT. IN THIS REGARD, LD. AUTHORISED REPRESENTATIVE SUBMITTED THA T THIS ISSUE OF ALLOWABILITY OF PRORATA CLAIM U/S.80IB(10) WITH REFERENCE TO AREA OF RESIDE NTIAL UNIT OF HOUSING PROJECT HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY MUMBAI TRIBUNA L IN DCIT VS. EKTA HOUSING PVT. LTD., WHEREIN IT HAS BEEN HELD AS UNDER: 11. RIVAL CONTENTIONS HEARD. ON CAREFUL CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED BE FORE US, WE HOLD AS FOLLOWS:- I) THE CONTROVERSY CAN BE BROUGHT OUT BY EXTRACTING PARA-6 FROM THE ASSESSMENT ORDER, WHICH READS AS UNDER:- 6. THE SUBMISSIONS OF THE ASSESSEE HAVE BEEN DULY CONSIDERED. THE SAME ARE NOT ACCEPTABLE AS SECTION 80IB(10) DOES NO T LAY DOWN THE THEORY OF PROPORTIONATE DEDUCTION. IF THE ASSESSEE SATISFIES ALL THE CONDITIONS OF THE SAID SECTION THEN ONLY THE DEDUCT ION IS ALLOWABLE. IF ONE OF THE CONDITIONS IS NOT SATISFIED THE ASSESSEE CAN NOT BE GRANTED THE DEDUCTION. THE ASSESSEES SUBMISSION THAT AREA OF EACH FLAT IS BELOW 1,000 SQ.FT. (BUILT-UP) AND PURCHASERS MIGHT HAVE C OMBINED THE ADJOINING FLAT IS NOT A CORRECT FACT. THIS HAS BEEN DISPROVE D BEYOND DOUBT FROM THE MATERIAL IMPOUNDED IN THE COURSE OF SURVEY ACTION U NDER SECTION 133A AND POST SURVEY PROCEEDINGS. THIS GETS FURTHER SUPP ORTED BY THE ASSESSEES APPLICATION BEFORE ITSC. SINCE THE ASSE SSEES HOUING PROJECT UNDISPUTEDLY INCLUDES SOME RESIDENTIAL UNITS, WHICH ARE OF AN AREA EXCEEDING 1,000 SQ.FT. (BUILT-UP), ONE OF THE CONDI TIONS OF SECTION 80IB(10) STANDS VIOLATED AND THEREFORE, THE WHOLE OF THE PRO FIT OF THE HOUSING PROJECT IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10). ACCORDINGLY, THE DEDUCTION UNDER SECTION 80IB(10) ALLOWED EARLIE R IS HEREBY WITHDRAWN. SINCE THE ASSESSEE HAS FURNISHED INACCU RATE PARTICULARS OF INCOME AND CONCEALED THE PARTICULARS OF INCOME, THE PENALTY PROCEEDINGS ARE INITIATED UNDER SECTION 271(1)(C) FOR WRONG CLA IM OF DEDUCTION UNDER SECTION 80IB(10). II) THE ISSUE AS TO WHETHER, SOME OF THE RESIDENTIA L UNITS IN THE ASSESSEES PROJECT EXCEEDING THE BUILT UP AREA OF 1 ,000 SQ.FT. OR NOT, NEED NOT BE ADJUDICATED BY US AS NO DEDUCTION UNDER SECT ION 80IB(10) IS CLAIMED ON INCOME DERIVED FROM THE UNITS BY THE ASS ESSEE. THE SHORT POINT FOR OUR ADJUDICATION IS, ON THE FACTS AND CIR CUMSTANCES OF THE CASE, WHETHER THE ASSESSEE IS ENTITLED TO PROPORTIONATE D EDUCTION UNDER SECTION 80IB(10). 7 III) THE NAGPUR BENCH OF THIS TRIBUNAL IN AIR DEVEL OPERS (SUPRA), HELD AS FOLLOWS:- .....THEREFORE, A.O. IS DIRECTED TO DETERMINE THE BUILT-UP AREA OF THE RESIDENTIAL UNITS BY APPLYING THE DEVELOPMENT C ONTROL REGULATION, 2000, AND TO ALLOW PROPORTIONATE DEDUCT ION UNDER SECTION 80IB(10) IF HE FINDS THAT THE BUILT UP AREA OF SOME OF THE RESIDENTIAL UNITS EXCEEDS 1,500 SQ.FT. IV) BANGALORE BENCH OF THIS TRIBUNAL IN DCIT VS. BR IGADE ENTERPRISES PVT. LTD., HAS HELD AS UNDER:- ..... THEREFORE, IF A PARTICULAR UNIT SATISFIED TH E CONDITION OF SECTION 80IB, THE ASSESSEE IS ENTITLED FOR DEDUCTIO N AND IT SHOULD BE DENIED IN RESPECT OF THOSE UNITS ONLY WHICH DO N OT SATISFY THE CONDITIONS AGAIN, THE ACCOUNTING PRINCIPLES WOULD ALSO MANDATE RECOGNITION OF PROFITS FROM EACH UNIT SEPARATELY. V) MUMBAI G BENCH OF THIS TRIBUNAL IN SHETH DEVEL OPERS PVT. LTD. (SUPRA), HAS HELD AS FOLLOWS: .... AS REGARDS THE A PROJECT ASSESSEE IS ELIGIBLE FOR RELIEF ON PRORATA BASIS IN RESPECT OF THE FLATS WHICH DID NOT HAVE A BUILT-UP AREA EXCEEDING 1,000 SQ.FT. QUANTUM OF DEDUCTION IN RESPECT OF THE FLATS WHICH HAVE BUILT-UP AREA LESS THAN 1,000 SQ.FT., HAS TO BE WORKED OUT ON PRO-RATA BASIS A.O. ACCORDINGLY DIR ECTED TO VERIFY THE CLAIM OF THE ASSESSEE AND ALLOW THE DEDUCTION O N PRO-RATA BASIS IN RESPECT OF FLATS IN A PROJECT. VI) KOLKATA C BENCH OF THIS TRIBUNAL IN BENGAL AM BUJA HOUSING DEVELOPMENT LTD. VS. DCIT, ITA NO.1595/KOL./2005, V IDE ORDER DATED 24 TH MARCH 2006, HELD AS UNDER:- 'IT IS APPARENT FROM THE PERUSAL OF SECTION 8018(10 ) THAT THIS SECTION HAS BEEN ENACTED WITH A VIEW TO PROVIDE INC ENTIVE FOR BUSINESSMEN TO UNDERTAKE CONSTRUCTION OF RESIDENTIA L ACCOMMODATION FOR SMALLER RESIDENTIAL UNITS AND THE DEDUCTION IS INTENDED TO BE RESTRICTED TO THE PROFIT DERIVED FRO M THE CONSTRUCTION OF SMALLER UNITS AND NOT FROM LARGER R ESIDENTIAL UNITS. THOUGH THE A.O. HAS DENIED THE CLAIM OF THE ASSESSE E OBSERVING THAT LARGER UNITS WERE ALSO CONSTRUCTED BY THE ASSE SSEE, AT THE SAME TIME, IT IS SMALLER RESIDENTIAL UNITS WHICH WE RE FULFILLING ALL THE CONDITIONS AS CONTAINED IN SECTION 80IB(10) AND THE SAME HAS NOT BEEN DISPUTED BY THE A.O. ALSO. WE HAVE ALSO NO TED DOWN THE FACT THAT EVEN THE PROVISION AS LAID DOWN IN SECTIO N 80IB(10) DOES NOT SPEAK REGARDING SUCH DENIAL OF DEDUCTION IN CAS E OF PROFIT FROM A HOUSING COMPLEX CONTAINING BOTH THE SMALLER AND LARGE RESIDENTIAL UNITS AND SINCE THE ASSESSEE HAS ONLY C LAIMED DEDUCTION ON ACCOUNT OF SMALLER QUALIFYING UNITS BY FULFILLING ALL THE CONDITIONS AS LAID DOWN UNDER SECTION 80IB(10), THE DENIAL OF CLAIM BY THE ASSESSEE IS ON ACCOUNT OF RATHER RESTR ICTED AND NARROW INTERPRETATION OF PROVISIONS OF CLAUSE (C) O F SECTION 80/8(10) WHILE COMING TO SUCH CONCLUSION, WE ALSO F IND SUPPORT FROM THE ORDER OF THE HON'BLE SUPREME COURT IN CASE OF BAJAJ TEMPO LTD. (SUPRA) WHEREIN IT WAS HELD THAT PROVISI ONS SHOULD BE INTERPRETED LIBERALLY AND SINCE IN THE PRESENT CASE ALSO, THE ASSESSEE BY CLAIMING PRO-RATA INCOME ON QUALIFYING UNITS HAS COMPLIED WITH CLAIM OF THE ASSESSEE WAS RIGHTLY ALL OWED BY THE LEARNED CIT(A) BY REVERSING THE ORDER OF THE A.O. 8 VI) BANGALORE 'A' BENCH OF THIS TRIBUNAL IN SJR BUI LDERS (SUPRA), HELD THAT 'MERELY BECAUSE SOME FLATS ARE LARGER THAN 1,500 SQ .FT., THE ASSESSEE WILL NOT LOSE THE BENEFIT IN ITS ENTIRETY BUT ONLY WITH REFERENCE TO THE FLATS WHICH HAS MORE THAN PRESCRIBED BUILT UP AREA, THE A SSESSEE WILL LOSE THE BENEFIT. VII) THUS, DIFFERENT BENCHES OF THE TRIBUNAL HAVE TAKEN A VIEW THAT, IN CASE, SOME RESIDENTIAL HOUSE HAVE A BUILT UP AREA I N EXCESS OF 1,000 SQ.FT., THE ASSESSEE WOULD NOT LOSE THE TOTAL EXEMPTION UND ER SECTION 80IB(10) IN ITS ENTIRETY BUT WILL ONLY LOSE THE PROPORTIONAT E EXEMPTION, UNDER SECTION 80IB(10). VIII) WE NOW EXAMINE THE APPLICABILITY OF THE DECIS ION OF THE HON'BLE BOMBAY HIGH COURT IN BRAHMA ASSOCIATES (SUPRA) TO T HE FACTS OF THIS CASE. ON A CAREFUL READING OF THIS JUDGMENT, WE FIND THAT NOWHERE IT IS STATED THAT PROPORTIONATE DEDUCTION SHOULD NOT BE ALLOWED, IN CASE CERTAIN RESIDENTIAL UNITS HAD BUILT UP AREA IN EXCESS OF PR ESCRIBED LIMIT OF 1,000 SQ.FT. IN FACT, THIS ISSUE WAS NOT BEFORE THE HON' BLE JURISDICTIONAL HIGH COURT. THE QUESTIONS BEFORE THE HON'BLE JURISDICTI ONAL HIGH COURT WERE DIFFERENT AND, HENCE THE JUDGMENT CANNOT BE SAID TO BE ON THIS ISSUE. THE ONLY ISSUE BEFORE THE HIGH COURT IS WHEN THERE IS A COMMERCIAL ELEMENT IN A RESIDENTIAL PROJECT, WILL THE ASSESSEE BE DENIED THE ENTIRE EXEMPTION. IN THIS CASE, THE HON'BLE HIGH COURT HAS OBSERVED THAT WHEN THE LOCAL AUTHORITY APPROVED A PLAN AS A HOUSING PROJECT OR A RESIDENTIAL CUM COMMERCIAL PROJECT, THE ASSESSEE WOULD BE ENTITLED TO CLAIM FOR DEDUCTION UNDER SECTION 80IB(10) EVEN IF THE PROJEC T HAD COMMERCIAL ELEMENT IN EXCESS OF 10%. AT PARAS-27 AND 28, THE COURT OBSERVED AS FOLLOWS: '27. THE QUESTION THEN TO BE CONSIDERED IS, WHETHER THE SPECIAL BENCH OF THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE PROJECTS HAVING COMMERCIAL AREA UPTO 10% OF THE BUILT-UP ARE A OF THE PLOT ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) O N THE ENTIRE PROJECT UPTO 1.4.2005. ONCE THE BASIC ARGUMENT OF T HE REVENUE THAT THE HOUSING PROJECTS WITH COMMERCIAL USER ARE NOT ENTITLED TO SECTION 80IB(10) DEDUCTION IS REJECTED, THEN IN THE ABSENCE OF ANY RESTRICTION IMPOSED UNDER THE ACT, IT WAS NOT OPEN TO THE TRIBUNAL TO HOLD THAT THE PROJECTS APPROVED BY THE LOCAL AUT HORITIES HAVING RESIDENTIAL BUILDINGS WITH COMMERCIAL USER UPTO 10% OF THE PLOT AREA WOULD ALONE BE ENTITLED TO DEDUCTION UNDER SEC TION 80IB(L0). AS NOTED EARLIER, RESTRICTION REGARDING COMMERCIAL USER HAS BEEN IMPOSED FOR THE FIRST TIME BY INTRODUCING CLAUSE (D ) TO SECTION 80IB(10) WITH EFFECT FROM 1.4.2005. THEREFORE, IT WAS NOT OPEN TO THE TRIBUNAL TO HOLD THAT PRIOR TO 1.4.2005, PROJE CTS HAVING COMMERCIAL USER UPTO 10% OF THE PLOT AREA ALONE WOU LD BE ELIGIBLE FOR SECTION 801B(10) DEDUCTION. 28. IN THE PRESENT CASE, THOUGH THE COMMERCIAL USER IS MORE THAN 10% OF THE PLOT AREA, THE TRIBUNAL HAS ALLOWED SECT ION 80IB(10) DEDUCTION IN RESPECT OF 15 RESIDENTIAL BUILDINGS ON THE GROUND THAT THE PROFITS FROM THESE EXCLUSIVELY RESIDENTIAL BUIL DINGS COULD BE DETERMINED ON STAND ALONG BASIS. IN OUR OPINION, TH AT WOULD NOT BE PROPER, BECAUSE SECTION 80IB(10) ALLOWS DEDUCTIO N TO THE ENTIRE PROJECT APPROVED BY THE LOCAL AUTHORITY AND NOT TO A PART OF THE PROJECT. IF THE CONDITIONS SET OUT IN SECTION 8 0IB(10) ARE SATISFIED, THEN DEDUCTION IS ALLOWABLE ON THE ENTIR E PROJECT APPROVED BY THE LOCAL AUTHORITY AND THERE IS NO QUE STION OF ALLOWING DEDUCTION TO A PART OF THE PROJECT. IN TH E PRESENT CASE, 9 THE COMMERCIAL USER IS ALLOWED IN ACCORDANCE WITH T HE DC RULES AND HENCE THE ASSESSEE WAS ENTITLED TO SECTION 80IB (10) DEDUCTION ON THE ENTIRE PROJECT APPROVED BY THE LOC AL AUTHORITY. HOWEVER, THE ASSESSEE HAS NOT CHALLENGED THE DECISI ON OF THE TRIBUNAL IN RESTRICTING THE DEDUCTION TO A PART OF THE PROJECT. THEREFORE, WHILE HOLDING THAT IN LAW, THE ASSESSEE WAS ENTITLED TO SECTION 80IB(10) DEDUCTION ON THE PROFITS OF THE EN TIRE PROJECT, IN THE FACTS OF THE PRESENT CASE, SINCE THE ASSESSEE H AS NOT CHALLENGED THE DECISION OF THE TRIBUNAL, WE ARE NOT INCLINED TO DISTURB THE DECISION OF THE TRIBUNAL IN RESTRICTING THE SECTION 80IB(10) DEDUCTION ONLY IN RESPECT OF THE PROFITS D ERIVED FROM 15 RESIDENTIAL BUILDINGS. IX) THUS, IT COULD BE SEEN THAT THE HON'BLE HIGH CO URT DO NOT APPROVE THE FINDINGS OF THE TRIBUNAL THAT A RESIDENTIAL BUILDIN G WITH COMMERCIAL USER UP TO 10% OF THE PLOT AREA WOULD ALONE BE ENTITLED TO DEDUCTION UNDER SECTION 80IB(10). THE ISSUE THAT, IN CASE WHERE CER TAIN RESIDENTIAL UNITS ARE OF A BUILT UP AREA IN EXCESS OF THE PRESCRIBED LIMIT OF L,0OO SQ.FT. IN RESIDENTIAL PROJECT, THIS WOULD RESULT IN THE ENTIR E EXEMPTION BEING LOST, OR WHETHER THE ASSESSEE WOULD BE ENTITLED TO A PROP ORTIONATE DEDUCTION WAS NOT BEFORE THE HIGH COURT. THUS, IN OUR OPINION , THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN BRAHMA ASSOCIA TES (SUPRA), DOES NOT COME TO THE RESCUE OF THE REVENUE. X) ON THE OTHER HAND, ALL THE DECISIONS OF THE CO-O RDINATE BENCHES OF THE TRIBUNAL CITED BEFORE US ARE IN FAVOUR OF THE ASSES SEE. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE FOLLOWING FINDIN G OF THE COMMISSIONER (APPEALS), VIDE PARA-2.8 OF HIS ORDER: - '2.8 THE APPELLANT'S CLAIM IS SUPPORTED BY THE D ECISION OF HON'BLE MUMBAI ITAT IN CASE OF M/S. SAROJ SALES ORG ANISATION ITA NO.4008/MUM./2007 ORDER 24.1.2008, WHEREIN ON IDENT ICAL FACTS THE HON'BLE ITAT FOLLOWING THE HON'BLE SUPREME COUR T DECISION IN THE CASE OF BAJAJ TEMPO LTD., REPORTED IN 196 ITR 1 88 HAS OBSERVED THAT THE PROVISIONS SHOULD BE INTERPRETED LIBERALLY. FURTHER, FOLLOWING THE HON'BLE /TAT DECISION IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD. KOLKATA, THE HON'BL E MUMBAI ITAT ALLOWED THE ASSESSEE'S CLAIM ON PRORATA BASIS ON QUALIFYING UNITS WHICH SATISFIED THE CONDITIONS LAID DOWN BY S ECTION 80IB(10). THE HON'BLE ITAT KOLKATA IN THE CASE OF BENGAL AMBU JA HOUSING DEVELOPMENT LTD. VS DCIT (ITA NO.1595/KOL./2005, A. Y. 2002-03, BENCH 'C', ORDER DATED 24.3.2006 (2007) 39 D BCAJ 5 46) HAS HELD THAT EVEN IF THE UNITS CONSTRUCTED ARE BOTH SMALLER AND LARGER UNITS WITH REFERENCE TO THE STIPULATED AREA, THE PR OFIT DERIVED FROM THE CONSTRUCTION OF THE SMALLER UNITS I.E., WI THIN THE STIPULATED AREA OF 1,000 SQ.FT. BUILT-UP AREA OUGHT TO BE ALLOWED AS DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. THE AB OVE DECISION IS APPROVED BY THE HON'BLE KOLKATA HIGH COURT AS REFER RED IN THE DECISION OF ACIT VS SHREE BALAJI DEVELOPERS (ITA NO . 2592/MUM./2006, A.Y. 2004-05, BENCH C' ORDER DATED 21.10.2008) WHEREIN THE THEORY OF PRO-RATA DEDUCTIO N IS APPROVED AND HELD THE DEDUCTION UNDER SECTION 80IB ON PRO-RA TA BASIS MEETS THE OBJECTIVES OF THE PROVISIONS OF SECTION 8 0IB. THE HON'BLE ITAT BANGALORE BENCH IN THE CASE OF DCIT VS BRIGADE ENTERPRISES PVT. LTD. [24 DTR 371 BANGALORE (2008)] HAS HELD THAT THE DISALLOWANCE IF ANY WILL HAVE TO BE RESTRICTED TO THE EXTENT OF NON-COMPLIANCE OF THE PROVISIONS. THIS RULE OF PROP ORTIONATELY IS WELL FOUNDED IN THE INCOME TAX LAW AND IS RECOGNIZE D UNDER 10 VARIOUS PROVISIONS OF THE ACT. THE HON'BLE ITAT CHE NNAI IN THE CASE OF ARUN EXCELLO FOUNDATION PVT. LTD. VS ACIT ( 2007) 108 TTJ 71 (CHENNAI) HAS ALSO UPHELD THE PRO-RATA DEDUCTION ON ELIGIBLE RESIDENTIAL UNITS. THUS, RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS OF THE VARIOUS ITAT AND COURTS AND PARTICULARLY THE JURISDICTIONAL ITAT IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA ), I HOLD THAT ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80 IB ON PRO-RATA BASIS. THE A.O. IS THEREFORE, DIRECTED TO ALLOW THE DEDUCTION UNDER SECTION 8018(10) ON PRO-RATA BASIS AS DISCUSSED ABO VE. THIS GROUND OF APPEAL IS ALLOWED. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 3.1. IT WAS FURTHER SUBMITTED THAT SIMILARLY IN THE CASE OF SANGHVI DOSHI ENTERPRISES VS ITO (141 TTJ 1), IT WAS HELD AS UNDER: AS A MATTER OF FACT IT IS TO BE SEEN FROM THE ORDE R OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF VISWAS PROMOTORS (P) LTD., THAT THE TRIBUNAL HAS NOT EFFECTIVELY CONSIDERED THE ORDER OF THE CALCUTTA TR IBUNAL AND THE JUDGMENT OF THE CALCUTTA HIGH COURT. THEREFORE THE ARGUMENT THAT A LL THE EARLIER DECISIONS ON THE SUBJECT WERE CONSIDERED BY THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF VISWAS PROMOTRS (P) LTD., IS NOT A CORRECT STATEMEN T OF FACT. IT IS ALSO NOT CORRECT TO ARGUE THAT THE SAID ORDER OF THE TRIBUNAL CHENNA I BENCH IN THE CASE OF VISWAS PROMOTORS (P) LTD., HAS BEEN CONFIRMED BY THE MADRA S HIGH COURT. THE MADRAS HIGH COURT IN ITS WRIT ORDER HAS DEALT WITH ONLY TH E WRIT APPLICATION FILED BY THE ASSESSEE AGAINST THE ORDER OF THE TRIBUNAL DISMISSI NG THE MISCELLANEOUS PETITION FILED BY THE ASSESSEE. THE COURT HAS SPECIFICALLY MENTIONED THAT THE WRIT PETITION WAS MISCONCEIVED AND THEREFORE LIABLE TO BE DISMISS ED. THE RATIO LAID DOWN BY THE HIGH COURT IN THE SAID CASE WAS THAT WRIT PETIT ION AGAINST ORDER UNDER S. 254(2) CANNOT BE REJECTED ON THE GROUND OF AVAILABI LITY OF ALTERNATE REMEDY. THE MADRAS HIGH COURT HAS NOT CONSIDERED ANYTHING CONCE RNING THE MERIT OF THE ISSUE THAT WHETHER IN THE CIRCUMSTANCES STATED ABOV E THE ASSESSEE COULD CLAIM DEDUCTION UNDER S.80IB(10) OR NOT. THE COURT CLARI FIED THAT IT WAS STILL OPEN FOR THE ASSESSEE TO APPEAL AGAINST THE FINDING OF THE T RIBUNAL ON MERITS OF THE ISSUE IN APPEAL BEFORE THE HIGH COURT PERMITTED UNDER S.2 60A. THEREFORE IT IS PREMATURE TO HOLD THAT THE ORDER OF THE TRIBUNAL, C HENNAI BENCH IN THE CASE OF ASST. CIT VS. VISWAS PROMOTORS (P) LTD. HAS BEEN UP HELD BY THE JURISDICTIONAL HIGH COURT. WHERE THE JURISDICTIONAL HIGH COURT HAS DIS MISSED THE APPEAL AGAINST THE ORDER OF THE TRIBUNAL HOLDING THAT NO SUBSTANTIAL Q UESTION OF LAW ARISES, THE SAID DECISION OF THE HIGH COURT IS A DECISION ON MERITS CONFIRMING THE FINDINGS ARRIVED AT BY THE TRIBUNAL AND IT IS NOT POSSIBLE TO ARGUE THAT THE HIGH COURT HAS NOT CONSIDERED THE MERITS OF THE ISSUE DECIDED BY THE T RIBUNAL. AN APPEAL ALWAYS RAISES QUESTION ARISING OUT OF THE MERITS OF AN ISS UE. WHETHER HIGH COURT DISCUSSES A CASE IN VERY MANY WORDS OR DISMISSES TH E APPEAL SHORTLY STATING THAT NO QUESTION OF LAW ARISES, THE JUDICIAL RESULT IS T HE SAME THAT THE HIGH COURT HAS UPHELD THE REASONINGS AND FINDINGS GIVEN BY THE TRI BUNAL IN ITS ORDER. THE JUDGMENT OF THE CALCUTTA HIGH COURT RENDERED IN THE CASE OF CIT VS. BENGAL AMBUJA HOUSING DEV. LTD. IN IT APPEAL NO.458 OF 200 6, DT. 5 TH JAN., 2007 IS A JUDGMENT DIRECTLY ON THE ISSUE UPHOLDING THE VIEW O F THE CALCUTTA C BENCH OF THE TRIBUNAL THAT A PRORATA DEDUCTION IS PERMISSIBL E UNDER S.80IB(10). AS THERE IS NO DIRECT DECISION OF THE JURISDICTIONAL HIGH COURT STILL AVAILABLE ON THE SUBJECT, THE JUDGMENT OF THE CALCUTTA HIGH COURT MUST BE FOL LOWED. THE ASSESSEES ARE ENTITLED FOR DEDUCTION UNDER S.80IB(10) IN RESPECT OF FLATS HAVING BUILT-UP AREA NOT EXCEEDING 1,500 SQ.FT. AND NOT ENTITLED FOR DED UCTION IN RESPECT OF THOSE FLATS HAVING THEIR BUILT-UP AREA EXCEEDING 1,500 SQ.FT. CIT VS. BENGAL AMBUJA HOUSING DEVELOPMENT LTD. (IT APPEAL NO.458 OF 2006, DECIDED BY THE CALCUTTA HIGH COURT 11 ON 5 TH JAN., 2007) FOLLOWED: MEDICARE INVESTMENTS LTD. VS . JT.CIT (2007) 112 TTJ (DEL)(SB) 889 : (2008) 114ITD 34 (DEL)(SB) APPLIED; ASST. CIT VS. VISWAS PROMOTORS (P) LTD. (ITA NO.1912/MAD/2007, DT. 13 TH OCT., 2008) IMPLIEDLY OVERRULED; VISWAS PROMOTORS (P) LTD. VS. ITAT (2009) 226 CTR (MAD.) 6 38 : (2009) 30 DTR (MAD) 65 : (2010) 323 ITR 114 (MAD) DISTINGUISHED. 4. LOWER AUTHORITIES WERE NOT HAVING ADVANTAGE OF A BOVE LEGAL DECISION TO APPLY TO THE FACTS OF THE ASSESSEES CASE TO REACH A CONCLUS ION. SO IN THE INTEREST OF JUSTICE WE SET ASIDE THE ORDER OF THE CIT(A) ON THE ISSUE AND REST ORE THE SAME TO THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE SAME AS PER FACT AND LAW AFTER PROVIDING DUE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. 12. RESPECTFULLY FOLLOWING THE DECISION IN THE CASE OF TUSHAR DEVELOPERS (SUPRA) WE RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE IN THE LIGHT OF THE DECISION CITED ABOVE AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE AR E ACCORDINGLY PARTLY ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF AUGUST 2012 SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 28 TH AUGUST 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. ACIT, RANGE-5, PUNE 4. CCIT-II, PUNE, 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE