Income-tax Officer, V. M/s. Rane Associates, Pune

ITA 126/PUN/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7472 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 28-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO. 1 26 /P U N/20 1 5 / ASSESSMENT YEAR: 20 1 0 - 11 THE INCOME TAX OFFICER , WARD 3(1), PUNE . / APPELLANT VS. M/S. RANE ASSOCIATES, 201/1324, ANANT CHAMBERS,, OPP. RUPEE CO - OP. BANK, J.M. ROAD, PUNE 411005 . / RESPONDENT PAN: AAA FL6980A . / CO NO. 4 2 /P U N/201 6 / ASSESSMENT YEAR : 20 1 0 - 11 (OUT OF ITA NO.1 26 /P U N/201 5 ) M/S. RANE ASSOCIATES, 201/1324, ANANT CHAMBERS,, OPP. RUPEE CO - OP. BANK, J.M. ROAD, PUNE 411005 / CROSS OBJECT OR PAN: AAAFL6980A VS. THE INCOME TAX OFFICER, WARD 3(1), PUNE . / RESPONDENT ASSESSEE BY : SHRI S.N. PURANIK REVENUE BY : SHRI ANIL CHAWARE / DATE OF HEARING : 22 . 1 2 .201 6 / DATE OF PRONOUNCEMENT: 06 . 0 1 .201 7 ITA NO . 1 26 / PN /201 5 CO NO.4 2 /PN/2016 M/S. RANE ASSOCIATES 2 / ORDER / ORDER PER SUSHMA CHOWLA, JM: T H E APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT( A ) - I I, PUNE , DATED 1 4 . 11 .201 4 RELATING TO ASSESSMENT YEAR 20 1 0 - 11 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS AGAINST THE APPEAL OF REVENUE. ASSESSEE HAS ALSO FILED CROSS OBJECTIONS AGAINST THE APPEAL OF REVENUE. 2. THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISP OSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE REVENUE IN ITA NO.1 26 /PN/2015 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - APPEAL: - 1 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING DEDUCTION U/S.80IB(10) OF INCOME TAX ACT, 1961 OF RS. 1,92,90,442/ - . 2 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE PROJECT 'VANSHAJ PRESTIGE' HAD COMMENCED CONSTRUCTION MUCH BEFORE THE AMENDMENT TO SECTION 80IB(14)(A) AND THEREFORE IT IS NOT POSSIBLE FOR THE ASSESSEE TO COMPLY WITH THE DEFINITION OF BUILT UP AREA. 3 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IB(10) WITHOUT THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IB(10) WITHOUT APPRECIATING THAT AS PER THE PROVISIONS OF SECTION 80IB(14)(A) OF THE ACT, 'BUILT UP' AREA IS TO BE CALCULATED TAKING INTO ACCOUNT ALL THE PROJECTIONS AND BALCONIES AND AS SUCH THE FLATS ON THE FIRST FLOOR OF BUILDING B EXCEEDED THE BUILT UP AREA OF 1500 SQ.FT. MAKING THE ASSESSEE INELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT . 4 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IB(10) IGNORING THE FINDINGS GIVEN IN THE ASSESSMENT ORDER WHICH WAS BASED ON FACTS AND WHICH WAS ALSO BASED ON THE REPORT OF THE GOVT. APPROVED VALUER. ITA NO . 1 26 / PN /201 5 CO NO.4 2 /PN/2016 M/S. RANE ASSOCIATES 3 4. THE ASSESSEE IN CO NO.4 2 /PN/2016 HAS RAISED THE FOLLOWING GROUNDS OF OBJECTIONS: - 1. CROSS OBJECTOR PRAYS TO CONFIRM THE ORDER PASSED BY CIT(APPEALS) AS BUILT UP AREA OF THE SAID FOUR FLATS IS LESS THAN 1,500 SQ.FT. EACH, AS OPEN TO S KY TERRACE IS NOT TO BE CONSIDERED IN BUILT - UP AREA, NOR IS IT FOR EXCLUSIVE USE OF UNIT HOLDER. 2. WITHOUT PREJUDICE TO ABOVE GROUND OF CROSS OBJECTION NO.1, IF FOR ANY REASON IT IS HELD THAT BUILT - UP AREA OF ANY OF THE FOUR FLATS EXCEED 1,500 SQ.FT., IN THAT EVENT, TAXABILITY MAY BE RESTRICTED ONLY TO THE PROFIT IN RESPECT OF SUCH UNIT / FLAT SOLD DURING THE YEAR WHICH IS INCLUDED IN THE PROFIT AS PER PROFIT AND LOSS ACCOUNT. 5. THE ISSUE ARISING IN THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. 6. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AS TO THE OPEN TERRACE BEING COMMON AREA IS NOT TO BE INCLUDED AS PART OF BUILT UP AREA OF THE FLATS. HE FURTHER POINTED OUT THAT IN CASE THE ASSESSEE SUCCEEDS ON THIS ISSUE, THEN THE CROSS OBJECTIONS FILED BY THE ASSESSE E WOULD BECOME INFRUCTUOUS ; OTHERWISE THE ASSESSEE CLAIMS PRORATA DEDUCTION UNDER SECTION 80IB(10) OF THE ACT IN RESPECT OF SUCH UNITS WHERE THE BUILT UP AREA WAS ABOUT 1500 SQ.FT. 7. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED AS DEVELOPE R AND BUILDER AND HAD CARRIED OUT THE DEVELOPMENT OF PROJECT VANSHAJ PRESTIGE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IB(10) OF THE ACT AT RS.1,92,90,442/ - . THE ASSESSING OFFICER NOTED THAT THE ASSESSEE WAS NOT ELIGIBLE FOR CLAIMING THE SAID DEDUCTION IN ASSESSMENT YEAR 2009 - 10, SINCE THE AREA OF CERTAIN FLATS EXCEEDED 1500 SQ.FT. BUILT UP AREA. THE ITA NO . 1 26 / PN /201 5 CO NO.4 2 /PN/2016 M/S. RANE ASSOCIATES 4 EXPLANATION OF ASSESSEE IN THIS REGARD WAS THAT THE BUILT UP AREA OF EACH OF THE FLAT WAS WITHIN THE LIMIT OF 1500 SQ.FT. AND THE AREA OF OPEN TERRACE COULD NOT BE PART OF BUILT UP AREA OF THE UNITS. IT WAS FURTHER EXPLAINED BY THE ASSESSEE THAT THERE WAS DIFFERENCE BETWEEN TERRACE AND BALCONY, WHERE TERRACE WAS OPEN TO SKY AND WAS COMMON TO ALL THE RESIDENTS . THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT PROCEEDINGS FOR THE CAPTIONED ASSESSMENT YEAR NOTED THAT THE CIT(A) IN THE PRECEDING YEAR HAD DELETED THE ADDITION FOLLOWING THE DECISION OF PUNE BENCH OF TRIBUNAL AND ALSO OBSERVING THAT THE TERM BUILT UP WAS NOT DEFINED IN THE ACT PRIOR TO THE AMENDMENT BROUGHT IN BY THE FINANCE (NO.2) ACT, 2004 W.E.F. 01.04.2005. THE ASSESSING OFFICER REJECTED THE CLAIM OF ASSESSEE AND NOTED THAT AS PER THE REPORT OF VALUER, FLAT NOS.B - 101, B - 102, B - 103 AND B - 104 WE RE HAVING BUILT UP AREA OF MORE THAN 1500 SQ.FT. IT WAS ALSO THE FINDING OF ASSESSING OFFICER THAT THE BUILT UP AREA WAS MORE THAN THE LIMIT SPECIFIED UNDER SECTION 80IB(10) OF THE ACT WAS FOUND IN RESPECT OF BUILDING B ONLY AND NOT BUILDING A1 AND A2. H E ALSO FURTHER POINTED OUT THAT BUILDING B WAS NEVER PART OF THE PLAN, WHICH WAS SANCTIONED PRIOR TO 01.04.2005. SINCE THE COMMENCEMENT CERTIFICATE IN RESPECT OF BUILDING B WAS DATED 28.07.2005, THE FINAL APPROVAL OF THE SAID BUILDING WAS BY THE PMC ON 02 .11.2007 , WHICH WAS AFTER AMENDMENT . IN VIEW THEREOF, SINCE THE BUILT UP AREA OF FLATS WAS MORE THAN 1500 SQ.FT., THE ASSESSING OFFICER DENIED THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT IN RESPECT OF COMPLETE PROFITS OF BUSINESS. 8. IN APPE AL, THE CIT(A) ALLOWED THE CLAIM OF ASSESSEE FOLLOWING HIS OWN ORDER FOR EARLIER YEAR I.E. ASSESSMENT YEAR 2009 - 10. HE FURTHER RELIED ON THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN NARESH T. WADHWANI VS. DCIT IN ITA NOS.18, 19 & 20/PN/2013 , RELAT ING TO ASSESSMENT YEARS 2007 - 08, 2008 - 09 AND ITA NO . 1 26 / PN /201 5 CO NO.4 2 /PN/2016 M/S. RANE ASSOCIATES 5 2009 - 10, ORDER DATED 28.10.2014 . THE ASSESSEE WAS HELD TO BE ELIGIBLE TO CLAIM THE DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. 9. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN THIS REGARD. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LIMITED ISSUE WHICH ARISES BEFORE US IS AS TO WHETHER THE AMENDED DEFINITION OF BUILT UP AREA INCLUDES THE AREA OF OPEN TERRACE OR NOT. THE DISPUTE ARISING IN THE PRESENT APPEAL IS AGAINST THE ORDER OF ASSESSING OFFICER, WHEREIN IN RESPECT OF FOUR FLATS I.E. 101 TO 104 IN BUILDING B , T HE VALUER HAD POINTED OUT THAT THE BUILT UP AREA OF THE FLATS EXCEEDED 1500 SQ.FT. BY INCLUDING THE AREA OF OPEN TERRACE AND CONSEQUENTLY, DENIAL OF DEDUCTION CLA IMED UNDER SECTION 80IB(10) OF THE ACT. THE PROJECT WAS APPROVED PRIOR TO 31.03.2005, WHEREAS THE DEFINITION OF BUILT UP AREA IN SECTION 80IB(10) OF THE ACT WAS INSERTED W.E.F. 01.04.2005. HOWEVER, THE ASSESSING 80IB(10) OF THE ACT WAS INSERTED W.E.F. 01.04.2005. HOWEVER, THE ASSESSING OFFICER HAS POINTED OUT THAT THE PROJECT I N RESPECT OF BUILDING B WAS SANCTIONED AFTER 01.04.2005 . N OT ONLY SANCTION IT WAS PUT UP FOR CONSIDERATION AFTER 01.04.2005. IN CASE THE PROJECT IS SO APPROVED AFTER 01.04.2005 THOUGH BUILDINGS A1 AND A2 OF THE SAME PROJECT WERE APPROVED PRIOR TO 01.04.2 005 , IT CANNOT BE SAID THAT BUILDING B IS ALSO APPROVED PRIOR TO 01.04.2005 . ONCE ANY PART OF THE PROJECT IS APPROVED THEREAFTER, THEN THE AMENDED PROVISIONS OF SECTION WOULD APPLY AND ACCORDINGLY, THE ASSESSEE HAS TO FULFILL THE CONDITIONS LAID DOWN IN T HE STATUTE. 11. NOW, COMING TO THE ISSUE RAISED BEFORE US AS TO WHETHER OPEN TERRACE IS TO BE INCLUDED AS PART OF BUILT UP AREA OF THE FLATS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS STRESSED BEFORE US THAT THE OPEN TERRACE IS COMMON TO DIFFERENT FLAT OWNERS AND IS OPEN TO SKY AND HENCE, IS NOT INCLUDABLE IN THE BUILT UP AREA OF THE FLAT WHICH HAS BEEN SOLD BY THE ASSESSEE. THE LEARNED ITA NO . 1 26 / PN /201 5 CO NO.4 2 /PN/2016 M/S. RANE ASSOCIATES 6 AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS ALSO DRAWN DISTINCTION BETWEEN BALCONY AND COMMON TER RACE. WE FIND MERIT IN THE PLEA OF ASSESSEE AND HOLD THAT OPEN TERRACE IS NOT TO BE INCLUDED AS BUILT UP AREA OF THE FLAT IN ORDER TO WORK OUT WHETHER THE SAID FLAT HAS STIPULATED BUILT UP AREA OR HAS EXCEEDED THE LIMIT PROVIDED IN THE ACT. 12. THE HON BLE BOMBAY HIGH COURT IN COMMONWEALTH DEVELOPERS CD FOUNTAINHEAD VS. ACIT (2014) 267 CTR (BOM) 297 HAS HELD THAT OPEN TERRACE CANNOT FORM PART OF BUILT UP AREA. THE HONBLE BOMBAY HIGH COURT IN TURN, RELIED ON THE RATIO LAID DOWN BY THE HONBLE MADRAS HI GH COURT IN CIT VS. MAHALAKSHMI HOUSING (2012) 83 CCH 258 CHENHC . THE PUNE BENCH OF TRIBUNAL ALSO IN NARESH T. WADHWANI VS. DCIT (SUPRA) HAD HELD THAT OPEN TERRACE WAS NOT PART OF BUILT UP AREA. 13. THE ISSUE ARISING BEFORE US IS SQUARELY COVERED BY TH E RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN COMMONWEALTH DEVELOPERS CD FOUNTAINHEAD VS. ACIT (SUPRA) AND BY THE HONBLE MADRAS HIGH COURT IN CIT VS. MAHALAKSHMI HOUSING (SUPRA) AND ALSO BY THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN NARE SH T. WADHWANI VS. DCIT (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT OPEN TERRACE IS NOT TO BE INCLUDED AS PART OF BUILT UP AREA OF FLAT WHILE APPLYING THE PROVISIONS OF SECTION 80IB(10) OF THE ACT. IN VIEW THEREOF, WHERE THE BUILT UP AREA OF UNITS WITHOUT OPEN TERRACE IS WITHIN LIMIT OF 1500 SQ.FT., THEN THE ASSESSEE IS ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. ACCORDINGLY, WE HOLD SO. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE SAID STAND OF ASSESSE E AND COMPUTE THE DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. IN ANY CASE, IF SOME OF THE FLATS EXCEED THE BUILT UP AREA AS PROVIDED IN THE ACT, THE ASSESSEE IS ENTITLED TO PRORATA DEDUCTION IN RESPECT OF PROFITS ARISING O N SALE OF FLATS ITA NO . 1 26 / PN /201 5 CO NO.4 2 /PN/2016 M/S. RANE ASSOCIATES 7 WHICH COMPLY WIT H THE PROVISIONS OF THE ACT AND THE BUILT UP AREA IS 1500 SQ.FT. OR LESS. THUS, THE ASSESSEE IS ENTITLED TO PRORATA DEDUCTION IN THIS REGARD. WE HOLD SO. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DECIDED AS INDICATED ABOVE. 1 4 . THE ASSESSEE IN CR OSS OBJECTIONS HAS RAISED THE ISSUE OF PRORATA DEDUCTION, WHICH WE HAVE ALREADY ALLOWED AND HENCE, THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALLOWED. IN CASE THE DEDUCTION IS ALLOWED IN FULL TO THE ASSESSEE, THEN THE CROSS OBJECTIONS WOULD BECOME INFRUCTUOUS. 1 5 . IN THE RESULT, BOTH THE APPEAL OF REVENUE AND CROSS OBJECTIONS OF ASSESSEE ARE DECIDED AS INDICATED ABOVE. ORDER PRONOUNCED ON THIS 6 TH DAY OF JANUARY , 201 7 . S D/ - SD/ - ( R.K. PANDA ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 6 TH JANUARY , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE C I T (A) - I I , PUNE ; 4. / THE C I T - I I , PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE