ACIT Central Cir.-1(1), Pune V. Shri Ghanshyam J. Sukhawani(HUF), Pune

ITA 1059/PUN/2009

• Counselvise Citation: 105924514 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER ITA NO. 1059/PN/2009 (ASSTT. YEAR: 2005-06) THE ASSTT. COMMISSIONER OF INCOME - TAX ... APPELLANT CENTRAL CIR 1(1), PUNE V. SHRI. GHANSHYAM J. SUKHWANI (HUF) RESPONDENT PROP VIKRAM CONSTRUCTION 32,SUKHWANI CHAMBER PIMPRI, PUNE-411 017 PAN : AABHS 9560 G APPELLANT BY : MS. ANN KAPTHUAMA RESPONDENT BY : NONE DATE OF HEARING :17.8.11 DATE OF PRONOUNCEMENT: .10.11 ORDER PER I.C. SUDHIR, JM THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER O N THE FOLLOWING GROUNDS : REVISIONAL ORDER PASSED U/S. 263 OF THE ACT ON THE FOLLOWING GROUNDS : 1. THE LD.CIT (A) HAS ERRED IN ALLOWING DEDUCTION OF RS.62,35,245/- U/S. 80IB(10) OF THE I.T. ACT, 1961. 2. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80IB(10) OF THE ACT ON THE PROFI T WITHOUT APPRECIATING THAT THE PROJECT CONSISTS OF COMMERCIAL AREA AND RESIDEN TIAL AREA. 3. THE LEARNED CIT(A) HAS FAILED TO APPRECIATING T HE FACT THAT ACT DOES NOT PERMIT FOR DEDUCTION TO BE ALLOWED IN RESPECT O F VIOLATION MADE WHILE AVAILING THE DEDUCTION U/S. 80IB (10). 4. THE LD CIT (A) HAS FAILED IN APPRECIATING THE FA CT THAT THE A.O HAS CLEARLY ESTABLISHED THAT THE ASSESSEE HAS VIOLATED THE CONDITIONS PRESCRIBED UNDER SECTION 80IB (10) OF THE ACT. AND THUS NOT E LIGIBLE FOR DEDUCTION U/S. 80IB (10) OF THE ACT. 5. IN PARTICULAR ASSESSMENT YEAR LAW AS ON 1 ST APRIL OF RELEVANT YEAR IS APPLICABLE ACCORDINGLY AS ON 01/04/2005 AS PER PROV ISION OF SECTION 80IB(10) IF IN A PROJECT COMMERCIAL BUILT UP AREA IS MORE TH AN 2000 SQ.FT. THEN ITA . NO 1059/PN/2009 SHRI GHANSHYAM SUKHWANI (HUF). A.Y. 2005-06 PAGE OF 7 2 DEDUCTION U/S. 80IB (10) IS NOT AVAILABLE. IN PRES ENT CASE ADMITTEDLY COMMERCIAL AREA IS 2815 SQ. FT. HENCE CIT (A) HAS ERRED IN ALLOWING DEDUCTION U/S. 80IB(10). 6. THE LD. CIT(A) HAS ERRED ON RELYING ON DECISION OF ITAT SPECIAL BENCH IN CASE OF BRAMHA ASSOCIATES VS. JCIT IN APPEAL NO. 1417/PN/06 WHICH WAS RELEVANT FOR A.Y. 2003-04 AND NOT A.Y. 2005-06. 2. THE RELEVANT FACTS ARE THAT OUT OF ONGOING 3 PRO JECTS, THE ASSESSEE, A BUILDER CLAIMED SECTION 80IB (10) DEDUCTION ON THE PROJECT VIKRAM RESIDENCY. THE A.O. DENIED THE CLAIMED DEDUCTION U/S. 80IB (10) OF THE ACT ON THE PROFIT EARNED ON THE PROJECT MAINLY ON THE BASIS THAT FIRSTLY, THE HOUSI NG PROJECT OF THE ASSESSEE HAS BEEN APPROVED PRIOR TO 1.4.2004, HENCE THERE IS NO SCOPE FOR COMMERCIAL SPACE AND SECONDLY, THE ASSESSEES HOUSING PROJECT HAS SHOPS ADMEASURING 2815.22 SQ.FT., HENCE NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S,. 80 IB (10) OF THE ACT. THE A.O HAS FURTHER MENTIONED THAT IN CASE DURING THE APPELLATE PROCEEDINGS, IT IS HELD THAT ASSESSEES PROJECT VIKRAM RESIDENCY IS ELIGIBLE FOR DEDUCTION U/S. 80IB(10), THE EXPENDITURE CAN BE ALLOWED IN A PRORATA WAY, SO THA T THE TRUE INCOME OF THE RESIDENCY PROJECT IS ONLY EXEMPTED. THE LD CIT(A) HAS, HOWEVER, ALLOWED THE CLAIMED DEDUCTION ON THE BASIS THAT THE PROJECT FRO M WHICH THE PROFIT IS SHOWN WAS APPROVED AS HOUSING PROJECT BY PIMPRI CHINCHWAD MUN ICIPAL CORPORATION (PCMC) AND COMMERCIAL AREA DOES NOT EXCEED 10% OF THE TOTAL CO NSTRUCTION IN VIEW OF THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF BRAMHA ASSOCIATES VS. JCIT, ITA NO. 1417/PN/2006. 3. IN SUPPORT OF THE GROUNDS, THE LD. D.R. HAS BASI CALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. SHE SUBMITTED FURTHER THAT THE A MENDED PROVISIONS OF SECTION 80IB(10) OF THE ACT WAS VERY MUCH IN OPERATION DURI NG THE A.Y. UNDER CONSIDERATION. HENCE, THE A.O WAS JUSTIFIED IN DENYING THE CLAIME D DEDUCTION FOLLOWING THE AMENDED PROVISION AS PER WHICH, THE MAXIMUM COMMERC IAL AREA PERMISSIBLE IN ANY RESIDENTIAL PROJECT SHOULD BE 5% OF THE TOTAL BUIL T UP AREA OR 2000 SQ. FT. WHICHEVER ITA . NO 1059/PN/2009 SHRI GHANSHYAM SUKHWANI (HUF). A.Y. 2005-06 PAGE OF 7 3 IS LOWER. IN THE CASE OF THE ASSESSEE, THE COMMERC IAL AREA IS TO THE EXTENT OF 2815 SQ.FT. WHICH IS IN EXCESS OF THE PERMISSIBLE LIMIT FOR THE COMMERCIAL AREA. 4. THE ISSUE INVOLVED IN THE GROUNDS IS AS TO WHETH ER THE ASSESSEE WAS ELIGIBLE FOR CLAIMING DEDUCTION U/S. 80IB(10) OF THE ACT ON THE PROFITS EARNED ON THE PROJECT DURING THE YEAR. THE UNDISPUTED MATERIAL FACTS OF THE PRESENT CASE ARE THAT (A) THE ASSESSEE HAD COMMENCED DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT AFTER 1 ST OCTOBER 1998; (2) THE PROJECT IS ON THE SIZE OF PLO T OF LAND WHICH IS MORE THAN 1 ACRE, AND (C) ALL RESIDENTIAL UNITS ARE LESS THAN 1 500 SQ.FT. OF BUILT UP AREA. IT HAS ALSO NOT BEEN DISPUTED THAT THE ASSESSEE COMMENCED THE PROJECT ON 19.10.2000 AS PER THE APPROVAL BY PCMC. THE PCMC APPROVED THE P ROJECT AS HOUSING PROJECT. THE RELEVANT FACTS ARE THAT THE BUILDING PROJECT WA S CONSTRUCTED ON THE PLOT OF LAND ADMEASURING ABOUT 13900 SQ. MTS. IT CONSISTS 9 SHOPS ADMEASURING ABOUT 261.54 SQ.MTS. OF THE TOTAL PROJECT AREA. THE SPECIAL BE NCH OF THE TRIBUNAL IN THE CASE OF BRAMHA ASSOCIATES (SUPRA), APPROVED BY THE HONBLE JURISDICTIONAL HIGH COURT (IN ITA NO. 1194 OF 2010 DATED 22.2.2011) HAS HELD THAT AMENDMENT IN SECTION 80IB(10) WHEREBY CLAUSE (D) INSERTED THEREIN, RESTR ICTING THE CONSTRUCTION OF COMMERCIAL AREA APPLICABLE W.E.F. 1.4.2005 IS PROS PECTIVE IN APPLICATION, AND HOUSING PROJECT INCLUDES RESIDENTIAL AS WELL AS COM MERCIAL AREA. THE SPECIAL BENCH HELD FURTHER THAT IN ABSENCE OF ANY SUCH PRESCRIBED LIMIT OF COMMERCIAL AREA IN A HOUSING PROJECT BEFORE THE AMENDMENT OF THE PROVIS IONS U/S. 80IB(10) BY INSERTION OF CLAUSE (D) THEREIN, 10% OF THE TOTAL BUILT UP AR EA WOULD BE ALLOWED FOR COMMERCIAL CONSTRUCTION. THE HONBLE HIGH COURT, H OWEVER, DID NOT APPROVE SUCH TYPE OF RESTRICTION PRESCRIBED BY THE SPECIAL BENC H AND WAS PLEASED TO HOLD THAT THERE IS NO SUCH RESTRICTION IN THE PROVISIONS OF SECTION 80 IB(10) OF THE ACT. IN OTHER WORDS, BEFORE COMING INTO OPERATION OF THE AM ENDED PROVISION OF SECTION 80 IB (10)(D), RESTRICTION OF 10% OF THE CONSTRUCTION OF COMMERCIAL AREA OF THE BUILT UP AREA IS NOT PROPER. VIDE PARA NO. 30 OF THE DECISI ON, THE HONBLE HIGH COURT AS SUMMARIZED ITS FINDING AS UNDER : ITA . NO 1059/PN/2009 SHRI GHANSHYAM SUKHWANI (HUF). A.Y. 2005-06 PAGE OF 7 4 30. IN THE RESULT, THE QUESTIONS RAISED IN THE APP EAL ARE ANSWERED THUS :- A) UPTO 31/3/2005 (SUBJECT TO FULFILLING OTHER COND ITIONS), DEDUCTION UNDER SECTION 80IB(10) IS ALLOWABLE TO HO USING PROJECTS APPROVED BY THE LOCAL AUTHORITY HAVING RES IDENTIAL UNITS WITH COMMERCIAL USER TO THE EXTENT PERMITTED UNDER THE DC RULES / REGULATIONS FRAMED BY THE RESPECTIVE LOCAL AUTHORITY. B) IN SUCH A CASE, WHERE THE COMMERCIAL USER PERMIT TED BY THE LOCAL AUTHORITY IS WITHIN THE LIMITS PRESCRIBED UNDER THE DC RULES / REGULATION, THE DEDUCTION UNDER SECTION 80I B(10) UPTO 31/3/2005 WOULD BE ALLOWABLE IRRESPECTIVE OF THE FA CT THAT THE PROJECT IS APPROVED AS HOUSING PROJECT OR RESIDE NTIAL PLUS COMMERCIAL. C) IN THE ABSENCE OF ANY PROVISIONS UNDER THE INCOM E TAX ACT, THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT UPTO 31/3/2005 DEDUCTION UNDER SECTION 80IB(10) WOULD BE ALLOWABLE TO THE PROJECTS APPROVED BY THE LOCAL AUTHORITY HAVING RES IDENTIAL BUILDING WITH COMMERCIAL USER UPTO 10% OF THE TOTAL BUILT-UP AREA OF THE PLOT. D) SINCE DEDUCTIONS UNDER SECTION 80IB(10) IS ON TH E PROFITS DERIVED FROM THE HOUSING PROJECTS APPROVED BY THE L OCAL AUTHORITY AS A WHOLE, THE TRIBUNAL WAS NOT JUSTIFIE D IN RESTRICTING SECTION 80IB(10) DEDUCTION ONLY TO A PART OF THE PR OJECT. HOWEVER, IN THE PRESENT CASE, SINCE THE ASSESSEE HA S ACCEPTED THE DECISION OF THE TRIBUNAL IN ALLOWING SECTION 80 IB(10) DEDUCTION TO A PART OF THE PROJECT, WE DO NOT DISTU RB THE FINDINGS OF THE TRIBUNAL IN THAT BEHALF. E) CLAUSE (D) INSERTED TO SECTION 80IB(10) WITH EFF ECT FROM 1/4/2005 IS PROSPECTIVE AND NOT RETROSPECTIVE AND H ENCE CANNOT BE APPLIED FOR THE PERIOD PRIOR TO 1/4/2005. ITA . NO 1059/PN/2009 SHRI GHANSHYAM SUKHWANI (HUF). A.Y. 2005-06 PAGE OF 7 5 WE THUS DO NOT FIND SUBSTANCE IN THE OBJECTION RAI SED BY THE A.O THAT HOUSING PROJECT IS RESTRICTED TO RESIDENTIAL PROJECT ONLY F OR CLAIMING DEDUCTION U/S. 80 IB(10) OF THE ACT. AS TO WHETHER THE AMENDED PROVISIONS OF SECTION 80 IB (10)(D) ARE APPLICABLE IN THE A.Y. 2005-06 UNDER CONSIDERATION TO THE PROJECT,, THE PUNE BENCH OF THE TRIBUNAL HAS DECIDED AN IDENTICAL ISSUE IN THE CASE OF OPEL SHELTERS PVT. LTD. VS. ACIT AND OTHERS, ITA NOS. 219 & 17/PN/2009 (A.Y . 2005-06), ORDER DATED 31.5.2011 HOLDING THAT INCOME-TAX LAW IN EXISTENCE AS ON THE DATE OF APPROVAL OF THE PROJECT APPROVED BY THE LOCAL AUTHORITY WILL BE APP LICABLE FOR CLAIMING DEDUCTION U/S. 80 IB(10) OF THE ACT AS THE ASSESSEE CANNOT BE EXPE CTED TO COMPLETE THE PROJECT AS PER THE PROVISIONS OF THE INCOME TAX ACT WHICH WAS NOT IN OPERATION WHEN THE PROJECT WAS APPROVED AND STARTED BUT CAME IN EXISTE NCE MUCH AFTER THE STARTING OF THE PROJECT. RELEVANT PARA NOS. 19 & 20 THEREOF AR E BEING REPRODUCED HEREUNDER FOR A READY REFERENCE : 19. WE, THUS, FIND THAT THE ISSUES RAISED IN THE PRESENT APPEALS ARE FULLY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF HIRANAN DANI AKRUTI J.V V/S. DCIT (SUPRA). RESPECTFULLY FOLLOWIG THE SAID DECISION IN THE CASE OF HIRANANDANI AKRUTI J.V. (SUPRA), WE DECIDE THE ISSUES IN FAVOUR OF THE ASSESSEES THAT A HOUSING PROJECT WILL ALSO CONSIST OF COMMERCIAL AREA TO A PERMISSIBLE LIMIT, AS SETTLED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BRAMHA ASSOCA TES (SUPRA) (NOW UPHELD BY THE HONBLE BOMBAY HIGH COURT) AS APPLICABLE UPTO A.Y. 2004-05. AND SECONDLY, THE LAW AS IT EXIS TED IN THE ASSESSMENT YEAR WHEN THE ASSESSEE SUBMITTED ITS PRO POSAL OF THE PROJECT AND PERMISSION FOR THE SAME WAS ACCORDED TO AND WHEN THE ASSESSEE COMMENCED THE PROJECT IS TO BE APPLIED. I N THE PRESENT CASE, UNDISPUTEDLY THE ASSESSEES HAD STARTED THE PR OJECT IN THE YEAR 2001 WHEN SUB-CLAUSE (D) TO SECTION 80IB(10) WAS N OT IN EXISTENCE, HENCE IT CANNOT BE APPLIED ON SUCH PROJE CTS AS HELD BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF HIR NANDANI AKRUTI J.V. (SUPRA). IN THIS REGARD, WE ALSO FIND STRENGT H FROM THIS PLEA OF THE LD. A.R. WHICH WAS ALSO RAISED BEFORE IN THE C ASE OF HIRANANDANI AKRUTI J.V. THAT IF THE ASSESSEE HAD FO LLOWED WIP (WORK-IN-PROGRESS) METHOD, THE INCOME FROM THE PROJ ECT WOULD ITA . NO 1059/PN/2009 SHRI GHANSHYAM SUKHWANI (HUF). A.Y. 2005-06 PAGE OF 7 6 HAVE BEEN TAXABLE IN THE EARLIER YEARS AS THE PROJ ECT WAS COMPLETED EARLIER TO THE AMENDMENT AND IN THAT CASE , AS PER THE OLD PROVISION THE ASSESSEE WOULD HAVE BEEN ELIGIBLE FOR THE DEDUCTION. BUT, JUST BECAUSE THE ASSESSEE HAS FOLL OWED THE PROJECT COMPLETION METHOD, IN THESE CASES, THE DEDUCTION I S BEING DENIED BECAUSE IT FALLS IN A.Y. 2005-06. IN OUR VIEW THE N EWLY INSERTED CLAUSE (D) TO SECTION 80IB(10) WILL NOT APPLY ON TH E PROJECTS APPROVED UPTO 31.3.05 SINCE IN THOSE PROJECTS ASSES SEES ARE REQUIRED TO CONSTRUCT WHAT HAS BEEN APPROVED. THE ONLY FISSIBLE COMPLIANCE IS REQUIRED TO BE MET AS PER THE HARMONI OUS INTERPRETATION OF SECTION 80IB(10) AS AMENDED IS T O COMPLETE SUCH PROJECTS (APPROVED BEFORE 1.4.2004) ON OR BEFORE 31 .3.2008. IN THE CASES BEFORE US THE PROJECTS HAVE BEEN COMPLETE D WELL BEFORE THIS DATE. PUTTING OF SUCH CONDITION OF TIME LIMIT IS WELL UNDERSTOOD. SINCE THE LEGISLATURE INTENDED THE COMPLETION OF PR OJECTS WITHIN A TIME FRAME TO AVOID INCONVENIENCE TO THE BENEFICIAR IES I.E. THE BUYERS. IN THIS REGARD THE LEGISLATURE HAS CATEGOR ISED THE TIME LIMIT FOR THE PROJECTS APPROVED ON DIFFERENT PERIOD BEFOR E 31.3.2007 BUT REQUIREMENT REMAINED THE SAME THAT PROJECTS WOULD B E APPROVED BY THE LOCAL AUTHORITY. COMPLIANCE OF THE REQUIREM ENT PROVIDED IN CLAUSE (D) TO THE SECTION IS POSSIBLE ONLY IN THOSE PROJECTS WHICH HAVE BEEN STARTED ON OR AFTER 1.4.2005 AS BY THEN T HOSE ASSESSEES WERE ALL AWARE ABOUT THE PROVISIONS LAID DOWN IN CL AUSE (D). IN THE PRESENT CASE, THE PROJECT IN QUESTION WAS AP PROVED BY THE LOCAL AUTHORITY I.E. PCMC ON 19.10.2000. THERE IS NO DISPUTE THAT THE P ROJECT WAS COMPLETED AS PER THE APPROVED PLAN BY THE PCMC OR THAT THE PROJECT WAS N OT COMPLETED WITHIN THE PRESCRIBED TIME LIMIT. THE AMENDED PROVISION U/S. 8 0 IB (10)(D) HAS COME INTO OPERATION W.E.F. 1.4.2005, THUS ADMITTEDLY, IT WAS NOT IN EXISTENCE ON 19.10.2000 WHEN THE PROJECT WAS APPROVED BY THE PCMC AND COMME NCED. HENCE, THE AMENDED PROVISION CANNOT BE APPLIED IN THE CASE OF THE ASSESSEE. THE PCMC HAD APPROVED THE PROJECT AS HOUSING PROJECT. BEFORE TH E LOWER AUTHORITY, THE ASSESSEE HAS REFERRED CBDTS REPLY TO THE QUERY RAISED BY MA HARASHTRA CHAMBER OF HOUSING ITA . NO 1059/PN/2009 SHRI GHANSHYAM SUKHWANI (HUF). A.Y. 2005-06 PAGE OF 7 7 INDUSTRY WHEREIN CBDT VIDE LETTER DATED 4 TH MAY 2001 TO MAHARASHTRA CHAMBER OF HOUSING INDUSTRY STATED THAT ANY PROJECT WHICH IS A PPROVED BY A LOCAL AUTHORITY AS A HOUSING PROJECT SHOULD BE CONSIDERED ADEQUATE FOR T HE PURPOSE OF SECTION 10(23G) AND 80 IB (10) OF THE ACT. UNDER THESE CIRCUMSTANC ES, WE ARE OF THE VIEW THAT THE LD CIT(A) HAS RIGHTLY HELD THAT THE ASSESSEE WAS EL IGIBLE FOR CLAIMING THE DEDUCTION U/S. 80 IB (10) OF THE ACT IN INCOME EARNED ON THE PROJECT DURING THE YEAR UNDER CONSIDERATION. WE THUS UPHOLD THIS FINDING OF THE LD CIT(A). A.O. IN THE ASSESSMENT ORDER HAS OBSERVED THAT THE ASSESSEE HAS NOT ALLOCATED THE EXPENDITURE INCURRED ON THE ELIGIBLE PROJECT SEPARATELY WHILE COMPUTING THE PROFIT EARNED ON THE PROJECT. WE THUS MAKE AMENDMENT TO THE FIRST APPEL LATE ORDER TO THIS LIMITED EXTENT THAT WHILE ALLOWING THE CLAIMED DEDUCTION, THE A.O WILL EXAMINE AND ENSURE THAT IN CASE OF COMMON EXPENDITURE SHOWN TO HAVE INCURRED O N ELIGIBLE AND NOT ELIGIBLE PROJECTS, THE EXPENDITURE SHOULD BE ALLOWED ON A PR ORATA BASIS. THE ISSUE RAISED IN THE GROUNDS IS THUS DECIDED ACCORDINGLY IN FAVOUR O F THE ASSESSEE. THE GROUNDS ARE THUS REJECTED. 5. IN RESULT, APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 14TH OCTOBER 2011. SD/- SD/- ( G.S. PANNU ) ACCOUNTANT MEMBER (I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 14TH OCTOBER, 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (CENTRAL), PUNE 4. THE CIT(A) I, PUNE 5. THE D.R., B BENCH, ITAT PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE