Cecon Builders, Hyderabad V. ACIT, Circle -10(1), Hyderabad, Hyderabad

ITA 106/HYD/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3041 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 29-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.106/HYD/2015 ASSESSMENT YEAR 2010-2011 CECON BUILDERS HYDERABAD. PAN AAOFM3021H VS. ACIT, CIRCLE - 10(1) HYDERABAD. (APPELLANT) (RESPONDENT) ITA.NO.124/HYD/2015 ASSESSMENT YEAR 2010-2011 ACIT, CIRCLE - 10(1) HYDERABAD. VS. CECON BUILDERS HYDERABAD. PAN AAOFM3021H (CROSS OBJECTOR) (RESPONDENT) FOR ASSESSEE : MR. A. SRINIVAS FOR REVENUE : MR. M. SITARAM DATE OF HEARING : 23.12.2015 DATE OF PRONOUNCEMENT : 10 .02.2016 ORDER PER SMT. P. MADHAVI DEVI, J.M. THE APPEALS ARE FOR THE A.Y. 2010-2011. ITA.NO.106/HYD/2015 IS THE APPEAL OF THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) IN RESTRICTING THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB OF THE I.T. ACT AND ITA.NO.124/HYD/2015 IS FILED BY THE RE VENUE AGAINST THE ORDER OF THE LD. CIT(A) IN HOLDING THAT 2 ITA.NO.106/H/2015 & ITA.NO.124/H/2015 CECON BUILDERS, HYDERABAD. ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB(10) OF THE I.T. ACT EVEN THOUGH THE SECOND PERMISSION WAS TAKEN BY THE ASSESSEE BEYOND THE PRESCRIBED DUE DATE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM CARRYING ON BUSINESS AS BUILDERS AND RURAL ESTATE DEVELOPERS, HAD TAKEN-UP DEVELOPMENT OF A HOUSING PROJECT AT HYDERABAD WHICH IS NAMED AS LA GARDENIA. IT FILED ITS RETURN OF INCOME FOR THE A. Y. 2010- 2011 ADMITTING INCOME AT RS. NIL AFTER CLAIMING DEDUCTION UNDER SECTION 80IB(10) OF THE ACT AT RS.38,00,719. DURING THE ASSESSMENT PROCEEDINGS UND ER SECTION 143(3) OF THE I.T. ACT, THE A.O. CALLED FOR VARIOUS DETAILS TO VERIFY THE GENUINENESS AND ALLOWABILITY OF THE DEDUCTION CLAIMED UNDER SECTION 80IB(10) OF THE ACT . THE ASSESSEE FILED THE REQUIRED DETAILS AND ON SCRUTINI ZING THE SAID INFORMATION, THE A.O. OBSERVED THAT THE FIRM H AS TAKEN-UP DEVELOPMENT OF HOUSING PROJECT OVER A LAND OF 01 ACRE 9 GUNTAS SITUATED AT D.NO.1-42/G, PRAGATHI NAGAR ENCLAVE, MIYAPUR, HYDERABAD AND THAT THE DEDUCTION UNDER SECTION 80IB CLAIMED IS FOR THIS PROJECT. HE OBSERVED THAT THE FORMAL SANCTIONS FROM THE MUNICIP AL AUTHORITIES WERE OBTAINED ON 13.07.2007 IN THE NAME OF THE LAND OWNERS I.E., R. SAI RANI AND OTHERS AND TH E PROJECT WAS COMPLETED DURING THE PERIOD 2010-11. HE OBSERVED THAT THE ASSESSEE HAD MADE A TURNOVER OF RS.5,14,45,000 AND DECLARED A PROFIT OF RS.37,80,53 9 FROM THE SAME. HE OBSERVED THAT THE LAND OWNERS HAD OBTA INED THE PLAN APPROVAL FOR THE CONSTRUCTION OF CELLAR, S TILT AND 3 ITA.NO.106/H/2015 & ITA.NO.124/H/2015 CECON BUILDERS, HYDERABAD. NINE FLOORS AND 9,673 SQ. MTS. OF CONSTRUCTED AREA WITH 12 FLATS PER FLOOR AND A TOTAL OF 108 RESIDENTIAL UNIT S. HE OBSERVED THAT AS PER THE DEVELOPMENT AGREEMENT WITH THE LAND OWNERS, THE ASSESSEE FIRM HAD AGREED TO GIVE 4 1% OF THE CONSTRUCTED AREA (INCLUSIVE OF COMMON AREAS) AN D ONE CAR PARKING PER FLAT TO THE LAND OWNERS. THE A.O. F URTHER OBSERVED THAT AS PER THE INITIAL MUNICIPAL PLAN, TH E ASSESSEE OBTAINED PERMISSION ONLY FOR THE DEVELOPME NT OF CELLAR, STILT PLUS 9 UPPER FLOORS WITH A TOTAL CONS TRUCTED AREA OF 9763.76 SQ. MTS. WHEREAS, THE ASSESSEE FIRM CONSTRUCTED 16307.60 SQ. MTS. AND CLAIMED DEDUCTION FOR THE ENTIRE CONSTRUCTED AREA. HE OBSERVED THAT THE A SSESSEE IS ELIGIBLE FOR DEDUCTION ONLY IN RESPECT OF THE CO NSTRUCTED AREA OF 9763.76 SQ. MTS AND IS ELIGIBLE FOR DEDUCTI ON OF RS.19,29,146 ONLY UNDER SECTION 80IB OF THE INCOME TAX ACT. FROM THE DOCUMENTS RELATING TO THE PERMISSION OF THE PROJECT, THE A.O. OBSERVED THAT THE PERMISSION WAS NOT IN THE NAME OF THE ASSESSEE FIRM BUT WAS IN THE NAME O F LAND OWNERS WHEREAS, THE PROVISION OF SECTION 80IB(10) S PEAKS ABOUT THE GRANT OF PERMISSION AND APPLICABILITY OF EXEMPTION ONLY TO THE FIRM FOR WHICH THE MUNICIPAL PERMISSION IS GRANTED FOR. HE OBSERVED THAT THE ASS ESSEE FIRM HAS SATISFIED ALL THE CONDITIONS REQUIRED UNDE R SECTION 80IB(10) OF THE ACT FOR ALLOWING THE DEDUCT ION UNDER SECTION 80IB EXCEPT FOR OBTAINING THE PLAN AP PROVAL FROM THE LOCAL AUTHORITY IN THE NAME OF THE LAND OW NERS AND ALSO IN NOT SUBMITTING THE COMPLETION CERTIFICA TE FROM THE LOCAL AUTHORITY. FURTHER, THE A.O. ALSO HELD TH AT ASSESSEE HAS VIOLATED THE MUNICIPAL PLAN BY CONSTRU CTING 4 ITA.NO.106/H/2015 & ITA.NO.124/H/2015 CECON BUILDERS, HYDERABAD. 16037.60 SQ. MTS AND FURTHER THAT THE MUNICIPAL CORPORATION HAS GRANTED SECOND APPROVAL IN FAVOUR O F THE ASSESSEE FIRM ONLY ON 26.08.2010. THUS, HE OBSERVED THAT THE APPROVAL TAKEN BY THE ASSESSEE FIRM IS BEYOND T HE SCHEDULED DATE AS THE PROVISION OF SECTION 80IB(10) WAS APPLICABLE ONLY TO THE HOUSING PROJECT APPROVED UP TO 31.03.2008. FURTHER, DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE THE BOOKS OF ACCOUNT, BILLS AND VOUCHERS ETC., BUT THE ASSESS EE DID NOT PRODUCE THE SAME. IN VIEW OF THE ABOVE REASONS, THE A.O. DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTIO N 80IB(10) OF THE ACT AND PROCEEDED TO ESTIMATE THE I NCOME OF THE ASSESSEE AT 12.5% OF THE TOTAL TURNOVER. AGG RIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A) WHO HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UN DER SECTION 80IB(10) OF THE ACT BUT RESTRICTED IT TO TH E CONSTRUCTED AREA OF 9763.76 SQ. MTS ON PROPORTIONAT E BASIS. AS REGARDS THE ESTIMATION OF INCOME, LD. CIT (A) FOLLOWED HIS OWN ORDER IN THE ASSESSEES CASE FOR A .Y. 2009-10, WHEREIN IT WAS HELD THAT IT WAS NOT PROVED THAT BOOKS OF ACCOUNT WERE NOT PRODUCED BY THE ASSESSEE OR SUCH BOOKS ARE NOT RELIABLE AND THAT FOR THIS ASSES SMENT YEAR ALSO, THERE IS NO BASIS FOR THE ESTIMATION OF INCOME. HE ACCORDINGLY DELETED THE ADDITION MADE BY THE A.O . AGAINST THE ORDER OF THE LD. CIT(A), BOTH THE ASSES SEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A.O. HIMSELF HAS OBSERVED THAT THE ASSESSE E HAS 5 ITA.NO.106/H/2015 & ITA.NO.124/H/2015 CECON BUILDERS, HYDERABAD. FULFILLED ALL THE CONDITIONS PRESCRIBED UNDER SECTI ON 80IB(10) OF THE I.T. ACT EXCEPT FOR THE OBTAINING M UNICIPAL PERMISSION FOR CONSTRUCTION OF THE BUILDING IN ITS NAME. HE HAS SUBMITTED THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2009-1 0 IN ITA.NO.550/HYD/2013 AND ITA.NO.590/HYD/2013 DATED 07.03.2014, WHILE CONSIDERING THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IB(10) FOR THE VERY SAME PROJECT AND BY FOLLOWING THE DECISION OF THE COORDI NATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. RADHE DEVELOPERS & OTHERS 23 SOT 42, HELD THAT FOR THE PU RPOSE OF DEDUCTION UNDER SECTION 80IB(10), THE CONSTRUCTI ON PERMISSION IN THE NAME OF THE DEVELOPER ONLY IS NOT REQUIRED BUT WHAT IS REQUIRED IS THE PERMISSION FOR THE PROJECT, ON WHICH THERE IS NO DISPUTE IN THE CASE B EFORE US. A COPY OF THE SAID ORDER IS FILED BEFORE US. A S REGARDS THE AREA CONSTRUCTED BY THE ASSESSEE IN ACCORDANCE WITH THE APPROVAL OF THE GHMC AND WHETHER THE ASSESSEE W AS ELIGIBLE FOR 80IB(10) DEDUCTION EVEN FOR THE EXCESS OF THE CONSTRUCTED AREA, THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE TRIBUNAL AT PARA-7 OF ITS ORDER IN ASSESSEES OWN CASE FOR THE A.Y. 2009-2010 HAS CONSIDERED THE ISSUE AT LENGTH ALONG WITH THE ISSUE OF ESTIMATION OF INCOME AND HAS REMANDED BOTH THE ISSU ES TO THE FILE OF THE A.O. FOR RE-CONSIDERATION. 4. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6 ITA.NO.106/H/2015 & ITA.NO.124/H/2015 CECON BUILDERS, HYDERABAD. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT ALL THESE ISSUES H AD ARISEN IN THE ASSESSEES OWN CASE IN THE EARLIER ASSESSMENT YEAR, I.E., A.Y. 2009-10 AND THIS TRIBUN AL HAS UPHELD THE ORDER OF THE LD. CIT(A) IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB(10) AS THE PERMISSION WAS OBTAINED FOR THE PROJECT AND IT WAS NOT REALLY IMPORTANT THAT THE PERMISSION WAS IN THE NAME OF THE LAND OWNERS. AS REGARDS THE EXCESS OF THE CONSTRUCTED AREA AND THE ALLOWABILITY OF THE DEDUCT ION ON THE ENTIRE BUILDING AND ALSO ON THE ESTIMATION OF I NCOME, WE FIND THAT FOR THE YEAR UNDER CONSIDERATION ALSO, THE ISSUE NEEDS RE-CONSIDERATION BY THE A.O. ON SIMILAR LINES AS IN THE EARLIER ASSESSMENT YEAR. THE RELEVANT PAR AGRAPH IS REPRODUCED HEREUNDER FOR READY REFERENCE. 7. EVEN THOUGH PRINCIPLES CONSIDERED THEREIN DO APPLY TO THE PRESENT FACTS, WHAT WE ARE UNABLE TO D ECIDE IS WHETHER THE SAME WILL APPLY TO THE ASSESSEE. AS SEEN FROM THE PERMISSION GRANTED BY THE GHMC THE ORIGINA L SANCTIONED PLAN WAS FOR CELLAR, STILT + 9 FLOORS CO NSISTING OF 9763.76 SQ. METERS. THE REVISED PLAN WAS ALSO STATE D TO BE CELLAR, STILT + 9 FLOORS + PENT HOUSE. WE ARE UN ABLE TO UNDERSTAND WHETHER ADDITION OF ONLY PENT HOUSE WILL INCREASE THE SPACE OF BUILT UP AREA BY 6543.84 SQ. METERS OR THERE ARE ANY OTHER INCREASE IN THE AREA OF ADDI TIONAL BUILDINGS CONSTRUCTED. SINCE THE PLANS ARE NOT PLAC ED ON RECORD, WE ARE UNABLE TO GIVE ANY FINDING ON THIS. MOREOVER, THE BPS SCHEME WAS APPLICABLE ONLY TO THE APPLICATIONS MADE ON OR BEFORE 31-03-08. THE PLANS WERE APPROVED ONLY IN JULY 2007. PAYMENTS FOR PENALTY WE RE MADE LATER AS CAN BE SEEN FROM COPY OF APPROVAL PLA CED ON RECORD. SINCE REVISED PLANS WERE NOT PLACED ON R ECORD WE ARE UNABLE TO DECIDE ISSUE ONLY ON LEGAL PRINCIP LES. THE A.O. IS DIRECTED TO EXAMINE THE ORIGINAL PLANS, REV ISED PLANS AND EXAMINE WHETHER THE DEDUCTION UNDER 80IB IS ELIGIBLE FOR REVISED PLAN. IN CASE OF AREA OF FLATS HAVE 7 ITA.NO.106/H/2015 & ITA.NO.124/H/2015 CECON BUILDERS, HYDERABAD. CHANGED, TO VERIFY WHETHER THE CONSTRUCTED APARTMEN TS ARE WITHIN THE NORMS PRESCRIBED UNDER SECTION 80IB( 10). NEEDLESS TO SAY THAT BALCONIES AND COMMON AREAS ARE NOT TO BE CONSIDERED AS PART OF FLAT AREA AS PER THE DECISIONS OF THE COORDINATE BENCH ON THE ISSUE. HOWEVER, THE PENT HOUSE CONSTRUCTED AND THE ADDITIONAL SPACE FOR WHIC H REVISED PLANS WERE TAKEN SHOULD BE EXAMINED WHETHER THE PROJECT ITSELF IS ELIGIBLE FOR 80IB (10), ON WH ICH THERE IS NO FINDING FROM THE A.O. OR BY THE CIT(A) IN THE OR DERS. NOT ONLY THAT AS SEEN FROM THE P & L ACCOUNT ASSESSEE I S STILL CARRYING CLOSING STOCK OF MORE THAN RS. 4 CRORES, W HEREAS SALES DURING THE YEAR WAS RS.6.24 CRORES. WHETHER ASSESSEE HAS CONTINUED TO CLAIM 80IB(10) IN LATER Y EAR ALSO ON THE BALANCE OF CONSTRUCTED AREA REQUIRED TO BE EXAMINED, KEEPING IN MIND THE METHOD OF ACCOUNTING FOLLOWED. AS AO ESTIMATED INCOME FOR NON PRODUCTION OF BOOKS OF ACCOUNT, WE ARE OF THE OPINION THAT THESE ASPECTS ALSO REQUIRE EXAMINATION. FOR THESE PURPOSES, WE AR E OF THE OPINION THAT THE ISSUE IN ASSESSEES GROUNDS RE QUIRE RE-EXAMINATION BY AO. THEREFORE, SINCE THE ISSUES A RE RESTORED TO THE FILE OF THE A.O., HE SHOULD EXAMINE THE BOOKS OF ACCOUNTS IN ORDER TO DETERMINE THE EXTENT OF PROFITS DISCLOSED BY THE ASSESSEE. NEEDLESS TO SAY THAT ASSESSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY OF BE ING HEARD. 5.1. IN VIEW OF THE SAME, WE REMAND BOTH ASSESSEES AS WELL AS REVENUES APPEAL TO THE FILE OF THE A.O. FOR RECONSIDERATION. 6. IN THE RESULT, APPEAL OF THE ASSESSEE AND APPEAL OF THE REVENUE ARE ALLOWED FOR STATISTICAL P URPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10.02.2016. SD/- SD/- (S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 10 TH FEBRUARY, 2016 VBP/- 8 ITA.NO.106/H/2015 & ITA.NO.124/H/2015 CECON BUILDERS, HYDERABAD. COPY TO : 1. CECON BUILDERS, 1 - 10 - 74, TECHNOPOLIS, SUITE T - 201, BEGUMPET, HYDERABAD. 2. THE ACIT, CIRCLE - 10(1), HYDERABAD. 3. CIT(A) - VI, 6A, I.T. TOWERS, A.C. GUARDS, HYDERABAD 500 004. 4. CIT - V, HYDERABAD 5. D.R. ITAT A BENCH, HYDERABAD. 6 . 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