DCIT, CHENNAI V. Rajarathnam Construction (P) Ltd., CHENNAI

ITA 1062/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77374 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAMOD NANGIA
• Assessee Lawyers: A S SRIRAMAN
• Section: 80IB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NOS. 1062, 1063 & 1064/MDS/2013 ASSESSMENT YEARS : 2006-07, 2007-08 & 2008-09 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE III(4), 3 RD FLOOR, 108/46, MAHATMA GANDHI ROAD, CHENNAI ( !% /APPELLANT) VS M/S.RAJARATHNAM CONSTRUCTION (P) LTD., NO.20, ANDERSON STREET, AYYANAVARAM, CHENNAI-23 [PAN: AACCR 0215 M] ( &'!% /RESPONDENT) REVENUE BY : MR. PRAMOD NANGIA, CIT ASSESSEE BY : MR. A.S. SRIRAMAN, ADVOCATE / DATE OF HEARING : 22-05-2014 / DATE OF PRONOUNCEMENT : 07-07-2014 #( / O R D E R PER VIKAS AWASTHY, J.M: THE APPEALS HAVE BEEN FILED BY THE REVENUE FOR THE THREE ASSESSMENT YEARS (AYS) 2006-07, 2007-08 & 2008-09 A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, CHENNAI, DATED 29-01-2013, COMMON FOR ALL THE THREE AYS. TH E ONLY ISSUE I.T.A. NOS. 1062, 1063 & 1064/MDS/13 2 RAISED IN APPEALS IS, ALLOWING OF DEDUCTION U/S.80I B OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT ), TO THE ASSESSEE ON PRO-RATA BASIS. 2. THE FACTS AS EMANATING FROM THE RECORDS ARE: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUC TION AND SALE OF APARTMENTS. A SURVEY U/S.133A OF THE ACT WAS CO NDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE NO.20, ANDERSON S TREET, AYANAVARAM, CHENNAI, ITS BRANCH OFFICE AT SIRUVALLU R ROAD, PERAMBUR, COMPANYS GODOWN AT MADHAVARAM AND SITE O FFICE AT PRINCE GARDENIA, CHENNAI. SIMULTANEOUSLY, SEARCH O PERATIONS WERE CARRIED AT THE RESIDENCE OF THE MANAGING DIREC TOR OF THE COMPANY SHRI A.ANTHONY RAJARATHINAM ON 27-02-2008. NOTICE U/S.153C OF THE ACT WAS ISSUED TO THE ASSESSEE ON 2 2-07-2009. IN PURSUANCE TO THE NOTICES FOR THE AYS UNDER CONSIDER ATION, THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE RESPECT IVE AYS. IN THE RETURN, THE ASSESSEE CLAIMED DEDUCTION U/S.80IB(10) . THE ASSESSING OFFICER HELD THAT THE ASSESSEE DOES NOT F ULFILL ALL THE CONDITIONS, AS LAID DOWN IN SECTION 80IB FOR CLAIMI NG DEDUCTION, THEREFORE, THE ASSESSEE IS NOT ELIGIBLE TO CLAIM TH E SAME. AS PER THE PROVISIONS OF SECTION 80IB, THE COMMERCIAL AREA IN RESPECT OF I.T.A. NOS. 1062, 1063 & 1064/MDS/13 3 PROJECT SHOULD NOT EXCEED 2000 SQ. FT. HOWEVER, IN RESPECT OF PROJECT RC-WESTMINISTER, THE COMMERCIAL AREA IS 3 906 SQ. FT., WHICH IS IN EXCESS OF THE STIPULATED MAXIMUM COMMER CIAL AREA. THE ASSESSING OFFICER IN ALL THE THREE AYS UNDER CO NSIDERATION, DENIED THE BENEFIT OF DEDUCTION U/S.80IB TO THE ASS ESSEE. AGGRIEVED BY THE ASSESSMENT ORDERS, THE ASSESSEE PR EFERRED APPEALS BEFORE THE CIT(APPEALS). THE CIT(APPEALS) VIDE IMPUGNED ORDER HELD THAT THE ASSESSEE IS ENTITLED T O RELIEF ON PRO- RATA BASIS. THE CIT(APPEALS) PARTLY ALLOWED THE AP PEALS OF THE ASSESSEE. NOW, THE REVENUE HAS COME IN APPEAL BEFORE THE TRIB UNAL ASSAILING THE FINDINGS OF THE CIT(APPEALS). 3. SHRI PRAMOD NANGIA, APPEARING ON BEHALF OF THE R EVENUE SUBMITTED THAT THE CIT(APPEALS) WHILE PARTLY ALLOWI NG THE APPEALS OF THE ASSESSEE HAS FOLLOWED THE DECISION OF THE HO N'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BRAHMA ASSOCIATES REPORTED AS 333 ITR 289 (BOM) AND CIT VS. VANDANA PROPERTIES REPORTED AS 206 TAXMAN 584. BOTH THE DECISIONS HAVE BEEN CHALLENGED BY THE DEPARTMENT IN SLP BEFORE THE HON'BLE SUPREME COURT O F INDIA. I.T.A. NOS. 1062, 1063 & 1064/MDS/13 4 THUS, THE ISSUE HAS NOT ATTAINED FINALITY. THE LD. DR FURTHER SUBMITTED THAT THE CIT(APPEALS) HAS ERRED IN ALLOWI NG DEDUCTION U/S.80IB TO THE ASSESSEE ON PRO-RATA BASIS. 4. ON THE OTHER HAND, SHRI A.S.SRIRAMAN, ADVOCATE A PPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ENTIRE HOUSING PROJECT HAS BEEN CONSTRUCTED AS PER THE APPROVED PLANS. TH E ONLY VIOLATION AS ALLEGED BY THE DEPARTMENT IS EXCESSIVE COVERAGE OF COMMERCIAL AREA. AS PER THE PROVISIONS OF SECTION 80IB, THE MAXIMUM AREA TO BE UTILIZED FOR COMMERCIAL PURPOSE IN HOUSING PROJECT IS 2000 SQ. FT. IN CASE OF ASSESSEE, THERE HAS BEEN MARGINAL EXCESSIVE USE OF THE AREA I.E., 3906 SQ. F T. MOREOVER, THE SAID AREA IS USED AS CRCHE, FOR THE BENEFIT OF ALL THE RESIDENTS OF RESIDENTIAL COMPLEX. THUS, THERE MAY BE A TECHNICA L EXCESSIVE USE OF AREA TOWARDS COMMERCIAL ESTABLISHMENTS BUT IN AC TUAL, THE AREA IS TO BE USED FOR COMMON PURPOSES OF THE RESIDENTS AND NOT FOR SETTING UP ANY COMMERCIAL ESTABLISHMENT. THE LD.CO UNSEL FOR THE ASSESSEE IN ORDER TO FURTHER STRENGTHEN HIS SUBMISS IONS AND IN FURTHER SUPPORT OF THE ORDER OF CIT(APPEALS), RELIE D ON THE JUDGMENTS OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ARUN EXCELLO FOUNDATIONS P. LTD. REPORTED AS 86 DTR I.T.A. NOS. 1062, 1063 & 1064/MDS/13 5 (MAD) 99 & VISWAS PROMOTERS PRIVATE LTD. VS. ACIT REPORTED AS 81 DTR (MAD) 68. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW, AS WELL AS THE JUDGMENTS ON WHICH THE LD.COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE. T HE ASSESSING OFFICER HAS DENIED THE BENEFIT OF DEDUCTION U/S.80I B(10) CLAIMED BY THE ASSESSEE IN RESPECT OF HOUSING PROJECT RC-WEST MINISTER. TO BE ELIGIBLE FOR CLAIMING DEDUCTION IN RESPECT OF HOUSING PROJECTS, THE ASSESSEE HAS TO FULFILL CONDITIONS AS LAID DOWN IN SUB- SECTION (10) OF SECTION 80IB. IT IS NOT DISPUTED T HAT THE ASSESSEE HAS FULFILLED THE CONDITIONS RELATING TO MINIMUM AR EA OF PLOT SIZE, THE COMMENCING AND COMPLETION OF THE PROJECT AND TH E MAXIMUM BUILT-UP AREA IN RESPECT OF RESIDENTIAL UNITS. THE ONLY CONDITION WHICH THE ASSESSEE HAS FAILED TO FULFILL IS WITH RE SPECT TO THE MAXIMUM LIMIT OF COMMERCIAL AREA IN A HOUSING PROJE CT I.E., 2000 SQ. FT. IN HOUSING PROJECT UNDER CONSIDERATION, T HE AREA ALLOCATED FOR COMMERCIAL PURPOSE IS 3906 SQ. FT. AS PER THE CONTENTIONS OF THE ASSESSEE, THE AREA ALLEGEDLY MARKED AS COMMERCI AL AREA, IS IN FACT A COMMON AREA TO BE USED AS CRCHE BY THE RESI DENTS OF THE I.T.A. NOS. 1062, 1063 & 1064/MDS/13 6 HOUSING PROJECT. THE AREA IS NOT FOR THE BENEFIT O F GENERAL PUBLIC BUT FOR THE EXCLUSIVE USE OF THE FLAT OWNERS ALONE. DURING THE COURSE OF MAKING SUBMISSIONS, LD.COUNSEL HAS PLACED RELIANCE ON THE DECISION OF THE JUDGMENT OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. ARUN EXCELLO FOUNDATIONS P. LTD., (SUPRA) WHEREIN THE HONBLE COURT HAS HELD THAT, WHERE THER E IS A PARTIAL COMPLIANCE, DEDUCTION U/S.80IB(10) IS ALLOWABLE ON PRO-RATA BASIS WHERE BOTH COMMERCIAL AND RESIDENTIAL HOUSES HAVE B EEN BUILT. IN THE CASE OF VISWAS PROMOTERS PRIVATE LTD., VS. ACIT (SUPRA), THE HON'BLE JURISDICTIONAL HIGH COURT BY PLACING RELIANC E ON THE DECISIONS RENDERED IN THE CASE OF CIT VS. BRAHMA ASSOCIATES (SUPRA) AND CIT VS. VANDANA PROPERTIES (SUPRA) CONCLUDED THAT, WITHIN A COMPOSITE HOUSING PROJECT, WHERE THERE ARE ELIGIBLE AND INELIGIBLE UNITS, THE ASSESSEE CAN CLAIM DEDUCTION IN RESPECT OF ELIGIBLE UNITS IN THE PROJECT. THE ASSESSEE IS ENT ITLED TO CLAIM PROPORTIONATE RELIEF IN THE UNIT TO THE EXTENT OF T HE BUILT-UP AREA. 6. IN VIEW OF THE LAW LAID DOWN BY THE HONBLE MADR AS HIGH COURT, WE FIND THAT THE CIT(APPEALS) IS WELL JUSTIF IED IN GRANTING PROPORTIONATE RELIEF TO THE ASSESSEE. THE CIT(APPE ALS) HAS RIGHTLY HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S .80IB ON THE ENTIRE PROJECT EXCEPT THE PROFIT ELEMENT IN RESPECT OF AREA OF 1906 I.T.A. NOS. 1062, 1063 & 1064/MDS/13 7 SQ. FT., WHICH EXCEEDS THE MAXIMUM STATUTORY LIMIT OF 2000 SQ. FT., THAT COULD BE USED FOR COMMERCIAL PURPOSE U/S.80IB( 10). THERE IS NO ERROR IN THE FINDINGS OF CIT(APPEALS), THE APPEA LS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 07 TH JULY, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( ! ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) / VICE PRESIDENT / JUDICIAL MEMBER /CHENNAI, /DATED: 07 TH JULY, 2014 TNMM !'#$ %&$ /COPY TO: 1. %'#() /APPELLANT 2. !*() /RESPONDENT 3. + (%'#) /CIT(A) 4. + /CIT 5. $./' !01 /DR 6. /23 4# /GF