M/s. J.K.Builders, Pune V. ITO, Ward 8(2), Akurdi, Pune, Pune

ITA 112/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9798 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 27-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 25-01-2011
• Court: TRIBUNAL
• Department Lawyers: VINITA MENON
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 396/PN/2009 AND 112/PN/2011 (ASSESSMENT YEAR: 2005-06 & 2006-07) M/S. J.K. BUILDERS S.NO. 122/1+2+3 DWARKADHEESH RESIDENCE, PIMPLE SAUDAGAR, PIMPRI PUNE-411 027 PAN AAEFJ 8403 A .. APPELLANT VS. I.T.O. WARD 8(2) PUNE RESPONDENT APPELLANT BY : SHRI SUNIL GANOO RESPONDENT BY : SMT. VINITA MENON DATE OF HEARING: 21-11-2012 DATE OF PRONOUNCEMENT: 23-11-2012 ORDER PER G.S. PANNU, A.M.: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST SEPARATE ORDERS OF THE COMMISSIONER OF INCOME-TAX ( APPEALS)-III & V PUNE DATED 30-12-2008 AND 28-6-2010 WHICH, IN TURN , HAVE ARISEN FROM ORDERS DATED 26-12-2007 AND 29-12-2008 PASSED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCO ME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT Y EAR 2005-06 AND 2006-07 RESPECTIVELY. SINCE THE ISSUE INVOLVED IN BOTH THESE APPEALS IS COMMON, THEY WERE HEARD TOGETHER AND AR E BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAK E OF CONVENIENCE AND BREVITY. 2. IN BOTH THE APPEALS, THE ONLY ISSUE RELATES TO T HE ASSESSEES CLAIM FOR DEDUCTION U/S 80-IB(10) OF THE ACT, WHICH HAS BEEN DENIED BY THE INCOME-TAX AUTHORITIES. SINCE IT WAS THE COM MON POINT BETWEEN THE PARTIES THAT THE FACTS AND CIRCUMSTANCE S LEADING TO DENIAL OF DEDUCTION U/S 80-IB(10) IN THE TWO ASSESS MENT YEARS STAND 2 ITA NO. 396/PN/09 AND AND 112/PN/2011 J.K. BUILDERS A.Y. 2005-6 & 2006-07 ON A SIMILAR FOOTING, WE MAY REFER TO THE APPEAL FOR A.Y. 2005-06 IN ORDER TO APPRECIATE THE CONTROVERSY. 3. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F BUILDERS AND DEVELOPERS. FOR A.Y. 2005-06 IT FILED ITS RETU RN OF INCOME DECLARING TOTAL INCOME OF RS. NIL WHICH, INTER ALIA , INCLUDED A CLAIM OF DEDUCTION U/S 80-IB(10) AMOUNTING TO RS. 32,10,3 47/-. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAD UNDERTAKEN D EVELOPMENT OF A HOUSING PROJECT VIZ. DWARKADHEESH GARDEN. THE PR OFIT DECLARED IN RESPECT OF THE SAID PROJECT ON THE BASIS OF METHOD OF ACCOUNTING EMPLOYED WAS RS. 32,10,347/- WHICH WAS CONSIDERED A S EXEMPT U/S 80-IB(10) OF THE ACT. THE ASSESSING OFFICER HOWEVE R, DENIED THE CLAIM OF DEDUCTION ON THE GROUND THAT THREE UNITS O F ROW HOUSES CONSTRUCTED BY THE ASSESSEE WERE OF A BUILT UP AREA OF MORE THAN 1500 SQ.FT. THE DETAILS OF SUCH THREE UNITS VIZ. R OW HOUSE NO. 1, 8 AND 17 AND THE COMPUTATION OF BUILT UP AREA HAS BEE N TABULATED BY THE ASSESSING OFFICER IN PARA 5 OF THE ASSESSMENT O RDER. THE ASSESSEE SUBMITTED THAT THE BUILT UP AREA AS CALCUL ATED BY THE ASSESSING OFFICER WAS WRONG, INASMUCH AS, CALCULATI ON OF BUILT UP AREA AS DONE BY THE ASSESSING OFFICER BY INCLUDING AREAS COVERED BY TERRACE AND CANOPY WHICH WAS NOT CORRECT IN SO FAR AS THE IMPUGNED PROJECT WAS CONCERNED. THE ASSESSING OFFICER AND T HEREAFTER, THE CIT(A) HAS DENIED THE ASSESSEES CLAIM. IN PARA 3. 5 OF THE ORDER OF THE CIT(A) IT IS STATED THAT HAVING REGARD TO THE D EFINITION OF EXPRESSION BUILT UP AREA CONTAINED IN SEC. 80-IB( 14)(A) OF THE ACT, THE AREA OF CANOPY/TERRACE HAS TO BE INCLUDED IN TH E COMPUTATION OF BUILT UP AREA. AGAINST SUCH A DECISION OF THE CIT( A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT INVOKING OF SECTION 80-IB(14)(A) BY THE LOWER AUTHO RITIES FOR THE 3 ITA NO. 396/PN/09 AND AND 112/PN/2011 J.K. BUILDERS A.Y. 2005-6 & 2006-07 PURPOSES OF ASCERTAINING THE BUILT UP AREA WAS WRON G, INASMUCH AS, THE SAID PROVISION WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004 WITH EFFECT FROM 1-4-2005. IN THE PRESENT CASE, THE PRO JECT IN QUESTION HAS BEEN APPROVED BY THE MUNICIPAL AUTHORITIES MUCH BEFORE 1-4- 2005 AND THEREFORE, THE EXPRESSION BUILT UP AREA AS EXPLAINED IN SEC. 80-IB(14)(A) IS NOT TO BE APPLIED IN THE PRESE NT CASE. IN SUPPORT, IT WAS SUBMITTED THAT SIMILAR POINT HAS BE EN CONSIDERED AND ADJUDICATED IN FAVOUR OF THE ASSESSEE BY PUNE BENCH OF THE TRIBUNAL IN THE CASE OF G.K. BUILDERS IN ITA NO. 1077 AND 10 78//PN/2010 FOR A.Y. 2005-06 AND 2006-07 VIDE ORDER DATED 30-7-2012 . IT IS FURTHER POINTED OUT THAT SUBSEQUENT TO DECISION OF THE TRIB UNAL IN THE CASE OF G.K. BUILDERS (SUPRA), HONBLE GUJARAT HIGH COURT I N THE CASE OF MANAN CORPORATION VS. ASSTT. CIT CIR. 5 IN INCOME-T AX APPEAL NO. 1053 OF 2011 DATED 3-9-2012 HAS AFFIRMED A SIMILAR PROPOSITION. IT WAS THUS CANVASSED THAT FOLLOWING THE FORESAID PREC EDENT, THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80- IB(10) OF THE ACT IN RESPECT TO PROFITS FROM THE PROJECT DWARKADEESH G ARDEN. 5. ON THE OTHER HAND, THE LEARNED DR APPEARING FOR THE REVENUE HAS POINTED OUT THAT AFTER INCLUDING THE AREA OF TE RRACE AND CANOPY, THE BUILT UP AREA OF THE THREE ROW HOUSES IN QUESTI ON EXCEEDED THE LIMITS PRESCRIBED IN SEC. 80IB(10)(C) OF THE ACT AN D THEREFORE, THE LOWER AUTHORITIES WERE JUSTIFIED IN DENYING THE ASS ESSEES CLAIM FOR DEDUCTION U/S 80-IB(10) OF THE ACT. IT WAS ALSO PO INTED OUT THAT DEFINITION OF EXPRESSION BUILT UP AREA INSERTED I N THE STATUTE BY WAY OF SECTION 80IB(14)(A) W.E.F. 1-4-2005 WAS EXPLANAT ORY IN NATURE AND THEREFORE, IT SHOULD APPLY TO THE ASSESSMENT YEAR U NDER CONSIDERATION ALSO. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE ASSESSEES CLAIM FOR DEDUCTION U/S 80-IB(10) OF THE ACT HAS BEEN 4 ITA NO. 396/PN/09 AND AND 112/PN/2011 J.K. BUILDERS A.Y. 2005-6 & 2006-07 DENIED ON A SINGULAR POINT, VIZ. ON ACCOUNT OF SUB- CLAUSE (C) OF SECTION 80-IB(10) OF THE ACT. SUB-CLAUSE (C) OF SE CTION 80-IB(10) OF THE ACT REQUIRED THAT IN ORDER TO BE ELIGIBLE FOR DEDUCTION, BUILT UP AREA OF RESIDENTIAL UNITS IN CITIES OTHER THAN DEL HI OR BOMBAY SHALL NOT EXCEED 1500 SQ.FT. AS PER THE REVENUE THREE RES IDENTIAL UNITS CONTAINED IN THE HOUSING PROJECT UNDERTAKEN BY THE ASSESSEE VIZ. DWARKADHEESH GARDEN, HAD A BUILT UP AREA EXCEEDING 1500 SQ.FT. AS PER THE ASSESSING OFFICER, BUILT UP AREA OF ROW HOU SE NOS. 1, 8 AND 17 WAS 1524 SQ.FT., 1669 SQ.FT. AND 1608 SQ.FT. RES PECTIVELY AFTER INCLUDING AREAS OF TERRACE/CANOPY OF 318 SQ.FT., 27 9 SQ.FT. AND 207 SQ.FT. RESPECTIVELY. SINCE THE THREE UNITS VIOLATE D THE CONDITION PRESCRIBED IN SUB-CLAUSE (C) OF SECTION 80-IB(10) O F THE ACT DEDUCTION FOR THE ENTIRE PROJECT WAS DENIED. IN COMING TO SU CH COMPUTATION OF BUILT UP AREA, THE REVENUE HAS RELIED UPON SUB-CLAU SE (A) OF SECTION 80-IB(14)(A) WHICH EXPLAINS THE EXPRESSION BUILT U P AREA TO MEAN THE INNER MEASUREMENT OF THE RESIDENTIAL UNITS AT T HE FLOOR LEVEL INCLUDING THE PROJECTIONS AND BALCONIES AS INCREASE D BY THE THICKNESS OF WALLS BUT EXCLUDING THE COMMON AREAS S HARED WITH OTHER RESIDENTIAL UNITS. NO DOUBT, ON AN APPLICATION OF SUCH A DEFINITION OF BUILT UP AREA, THE CASE SET UP BY THE REVENUE IS PO TENT. SO HOWEVER, IN THE PRESENT CASE, THE ISSUE IS AS TO WH ETHER SUCH DEFINITION OF THE BUILT-UP AREA INSERTED BY THE FIN ANCE (NO. 2) ACT, 2004 W.E.F. 1-4-2005 IS APPLICABLE OR NOT. OSTENSI BLY, PRIOR TO 1-4- 2005, THERE WAS NO SUCH DEFINITION OF THE EXPRESSIO N BUILT UP AREA IN THE STATUTE AND LOGICALLY, ONE HAD TO CONSIDER THE BUILT UP AREA AS PER LOCAL MUNICIPAL DEVELOPMENT CONTROL RULES FOLLO WED BY THE APPROVING AUTHORITIES WHICH IN THE PRESENT CASE IS PIMPRI CHINCHWAD MUNICIPAL CORPORATION (PCMS) . IN THE CASE BEFORE US, THE PROJECT OF THE ASSESSEE HAS OSTENSIBLY COMMENCED PRIOR TO INTR ODUCTION OF SEC. 80-IB(14)(A) OF THE ACT AND THEREFORE, THE AMENDMEN T WHICH HAS COME INTO EFFECT BY WAY OF SEC. 80-IB(14)(A) OF THE ACT W.E.F. 1-4- 5 ITA NO. 396/PN/09 AND AND 112/PN/2011 J.K. BUILDERS A.Y. 2005-6 & 2006-07 2005 WOULD NOT AFFECT SUCH A PROJECT. THE AFORESAI D PROPOSITION IS IN LINE WITH PRECEDENT BY WAY OF DECISION OF PUNE BENC H OF THE TRIBUNAL IN THE CASE OF G.K. BUILDERS (SUPRA). IN THE CASE O F G.K. BUILDERS (SUPRA) THE AFORESAID PROPOSITION WAS AFFIRMED FOLL OWING THE EARLIER DECISIONS OF THE TRIBUNAL IN THE CASE OF TUSHAR DEV ELOPERS IN ITA NO. 165/PN/2007 AND 94/PN/2007 FOR A.Y. 2003-04 AND 2004-05 VIDE ORDER DATED 31-5-2011 AND HAWARE CONSTRUCTIONS (P) LTD. VS. ITO (2011) 64 DTR (MUM) 251. THE FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL IN THE CASE OF G.K. BUILDERS (SUPRA) I S RELEVANT:- AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MATE RIAL ON RECORD, WE ARE NOT INCLINED TO CONCUR WITH THE F INDING OF THE CIT(A). THE DEDUCTION UNDER QUESTION HAS BE EN REJECTED BY THE AO AND CONFIRMED BY THE CIT(A) ON T HE GROUND THAT IT EXCEEDED THE PRESCRIBED LIMIT WITH R ESPECT TO ROW HOUSE NO. 36. ACCORDINGLY, THE WHOLE PROJEC T WAS REJECTED. THE AO HAS REACHED TO THE CONCLUSION AFTER INCLUDING THE TERRACE AREA OF 108 SQ.FT. IN BRAHMA BUILDERS (SUPRA) WHETHER THE TERRACE IN BUILT UP AR EA COMES ONLY W.E.F 1-4-2005 BECAUSE THE DECISION IS INTRODUCTION IN THE SECTION W.E.F. THE SAID DATE. FOR THE PERIOD PRIOR TO 1-4-2005, NO SUCH DEFINITION WAS ON THE STATUTE AND HENCE, THE BUILT UP AREA HAS TO BE CONSIDERED AS PER THE DC RULE OF THE SANCTIONING AUTHORITY. THE DC RULES DO NOT INCLUDE TERRACE IN THE BUILT UP AREA. SO THE AMENDMENT WHICH HAS COME IN T HIS REGARD W.E.F. 1-4-2005 WILL NOT AFFECT THE PROJECTS WHICH HAVE COMMENCEMENT PRIOR TO 1-4-2005. THIS ISSUE HA S BEEN DECIDED FOLLOWING TUSHAR DEVELOPERS IN ITA N O. 165/PN/2007 AND 94/PN/2007 IN FAVOUR OF ASSESSEE AN D IN HAWARE CONSTRUCTIONS (P) LTD. SIMILAR VIEW HAS BEEN TAKEN WHEREBY IT WAS HELD THAT TUSHAR DEVELOPERS IS NOT INCLUDIBLE IN BUILT UP AREA OF THE FLAT PRIOR TO 1- 4-2005 AND HENCE FOR THE PROJECT COMMENCED BEFORE 1-4-2005 , TERRACE IS NOT INCLUDIBLE IN THE BUILT UP AREA. IN VIEW OF THIS, ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80-IB( 10) AS CLAIMED. 7. FOLLOWING THE AFORESAID OBSERVATIONS, WE THEREFO RE, HOLD THAT SINCE THE PROJECT OF THE ASSESSEE COMMENCED PRIOR T O 1-4-2005 THE DEFINITION OF BUILT UP AREA AS PROVIDED IN SEC. 8 0-IB(14)(A) CANNOT BE APPLIED IN THIS CASE SO AS TO EVALUATE THE CONDITIO N PRESCRIBED IN SUB-CLAUSE (C) OF SECTION 80IB(10) OF THE ACT. UND ER THESE CIRCUMSTANCES, THE LIMIT OF BUILT UP AREA PRESCRI BED IN SUB-CLAUSE (C) OF SECTION 80-IB(10) OF THE ACT HAS TO BE UNDERSTOO D ON THE BASIS OF 6 ITA NO. 396/PN/09 AND AND 112/PN/2011 J.K. BUILDERS A.Y. 2005-6 & 2006-07 LOCAL DEVELOPMENT RULES WHICH DOES NOT INCLUDE TERR ACE/CANOPY. IF THE AREAS COVERED BY THE TERRACE/CANOPY ARE EXCLUDE D, THE BUILT UP AREA OF THE THREE ROW HOUSES IN QUESTION DOES NOT E XCEED THE LIMIT OF 1500 SQ.FT. PRESCRIBED IN SEC. 80-IB(10)(C) OF T HE ACT. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S 80-IB( 10) OF THE ACT AS CLAIMED BY THE ASSESSEE AND THE ASSESSEE SUCCEEDS I N ITS APPEAL FOR A.Y. 2005-06. . 8. AS FAR AS APPEAL FOR A.Y. 2006-07 IS CONCERNED, THE FACTS AND CIRCUMSTANCES OF THIS CASE ARE IN PARI MATERIA WITH THOSE FOR A.Y. 2005-06 AND THEREFORE, OUR FINDINGS GIVEN IN ITA NO 396/PN/09 FOR A.Y. 2005-06 SHALL APPLY MUTATIS MUTANDIS TO THE APPEAL VIDE ITA NO 112/PN/11 FOR A.Y. 2006-07. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 23 RD NOVEMBER 2012. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 23 RD NOVEMBER 2012 ANKAM COPY TO:- 1. ASSESSEE 2. DEPARTMENT 3. THE CIT (A)-III PUNE 4. THE CIT- III PUNE 5. THE DEPARTMENTAL REPRESENTATIVE, B BENCH, I.T. A.T., PUNE. BY ORDER //TRUE COPY// SR. P.S. I.T.A.T., PUNE