D.S. Kulkarni Developers Ltd., Pune V. ACIT Circle 1(2), Pune

ITA 1428/PUN/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9763 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-06-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 07-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH DUBE
• Assessee Lawyers: SUNIL PATHAK NIKHIL PATHAK
• Keywords: Retrospective amendment
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NOS. 1428 & 1429/PN/08 (ASSTT. YEAR: 2004-05 & 2005-06) D.S. KULKARNI DEVELOPERS LTD., .. A PPELLANT 1187/60 JANGLI MAHARAJ ROAD, SHIVAJINAGAR, PUNE 411 005 VS. ASSTT. COMMISSIONER OF INCOME-TAX .. RESPONDENT CIR 1(2), PUNE APPELLANT BY: S/SHRI SUNIL PATHAK/NIKHIL PATHAK RESPONDENT BY: SHRI MUKESH DUBE DATE OF HEARING : 12.06.2012 DATE OF PRONOUNCEMENT : .08.2012 ORDER PER G.S. PANNU, AM THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST A COMBINED ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)I, PUNE DATED 06.08.2008 WHICH, IN TURN, HAS ARISEN FROM THE RESPECTIVE ORDERS OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT), PERTAINING TO THE ASSESSMENT YEAR 2004-05 AND 2005-06. 2. IN BOTH THESE APPEALS, THE COMMON DISPUTE RELATE S TO THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80-IB(10) OF T HE ACT. THE APPELLANT BEFORE US IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF C OMPANIES ACT, 1956 AND, INTER ALIA , ENGAGED IN THE BUSINESS OF UNDERTAKING OF DEVELOP MENT AND BUILDING OF HOUSING PROJECTS. THE ASSESSEE COMPANY CLAIMED DEDUCTIONS F OR THE CAPTIONED ASSESSMENT YEARS UNDER SECTION 80-IB(10) OF THE ACT IN RESPECT OF THE PROFITS DERIVED FROM UNDERTAKING OF DEVELOPMENT AND BUILDING OF HOUSING PROJECTS. THE DEDUCTIONS HAVE BEEN DENIED BY THE INCOME-TAX AUTHORITIES PRIMARILY FOR THE REASON THAT THE PROJECTS UNDERTAKEN BY THE ASSESSEE DO NOT FULFILL THE CONDI TIONS PRESCRIBED UNDER SECTION 80- ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 2 IB(10) OF THE ACT. THE FACTS AND CIRCUMSTANCES IN T HE TWO ASSESSMENT YEARS ARE QUITE SIMILAR AND, THEREFORE, WE DEEM IT FIT AND PR OPER TO TAKE UP FOR DETAILED DISCUSSION THE ISSUES ARISING IN THE ASSESSMENT YEA R 2004-05 INITIALLY. 3. FOR THE ASSESSMENT YEAR 2004-05, THE ASSESSEE CO MPANY FILED ITS RETURN OF INCOME DECLARING AN INCOME OF RS 20,01,590/- WHICH, INTER ALIA, INCLUDED A CLAIM OF DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT OF THE ACT AMOUNTING TO RS 1,51,13,133/- IN RELATION TO THE PROFITS FROM THE H OUSING PROJECT. THE ASSESSEE CLAIMED SUCH DEDUCTION IN RELATION TO TWO OF ITS PR OJECTS, NAMELY, DSK VISHWA III AMOUNTING TO RS 1,11,66,314/- AND DSK FRANGIPANI AM OUNTING TO RS 39,46,818/-. THE CLAIM OF THE ASSESSEE THAT PROFITS FROM BOTH TH E TWO HOUSING PROJECTS WERE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IB(10) OF T HE ACT WAS REJECTED BY THE ASSESSING OFFICER AND THE TOTAL INCOME IN THE ASSES SMENT FINALIZED UNDER SECTION 143(3) OF THE ACT DATED 29.12.2006 WAS DETERMINED A T RS 1,71,14,720/-. THE APPEAL OF THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME-T AX (APPEALS) ALSO MET WITH THE SAME FATE AND ACCORDINGLY, ASSESSEE IS IN APPEAL BE FORE US. 4. IN THE ABOVE BACKGROUND, THE RIVAL PARTIES HAVE MADE THEIR SUBMISSIONS. THE ASSESSEE HAS FILED VOLUMINOUS PAPER BOOK CONTAINING DETAILS OF THE TWO PROJECTS AND ALSO COPIES OF CATALOGUES, ETC., TO SUPPORT ITS PLEA THAT THE OBJECTIONS RAISED BY THE REVENUE ARE UNTENABLE. 5. IN THIS BACKGROUND, WE MAY NOW TAKE UP FOR DISCU SSION THE OBJECTIONS RAISED BY THE REVENUE AND THE RESPECTIVE STAND OF THE ASSE SSEE. IN SO FAR AS DSK VISHWA III PROJECT IS CONCERNED, THE DETAILS THEREOF HAVE BEEN NOTED BY THE ASSESSING OFFICER AT PAGE 12 OF THE ASSESSMENT ORDER AS WELL AS THE S ALIENT FEATURES HAVE ALSO BEEN TABULATED AT PAGE 1 OF THE PAPER BOOK. THE SAID PRO JECT IS STATED TO BE ON AN AREA OF 171050 SQ.MTS AND CONSISTED OF RESIDENTIAL BUILDING S AND A PORTION WAS ALSO EARMARKED FOR SHOPS. THE PROJECT CONSISTED OF PHAS E I, PHASE II AND PHASE III (VARUN & PAWAN), AND AS PER THE DETAILS NOTED BY TH E ASSESSING OFFICER PHASE I, AND II WERE ALREADY CONSTRUCTED AND SOLD OUT. THE PROJ ECT DSK VISHWA PHASE III UNDER CONSIDERATION CONSISTED OF 436 FLATS AND 32 SHOPS, THE TOTAL COMMERCIAL AREA BEING 6132 SQ.FT. AS NOTED BY THE ASSESSING OFFICER. THE PROJECT IS STATED TO HAVE ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 3 COMMENCED ON 13.10.2000 AS NOTED BY THE ASSESSING O FFICER IN TERMS OF COMMENCEMENT CERTIFICATE NO.DPD/7386/NEW MERGED DHA YARI + KIRKATWADI ISSUED BY THE PUNE MUNICIPAL AUTHORITY. THE FIRST AND THE FOREMOST PLEA OF THE ASSESSING OFFICER IS THAT AS THE PROJECT IN QUESTION CONSISTE D OF AREA FOR SHOPS AND COMMERCIAL ESTABLISHMENTS AND, THEREFORE, IT COULD NOT BE CONS IDERED AS A PURE HOUSING PROJECT SO AS TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80 -IB(10) OF THE ACT. ON THIS ASPECT, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS NOT ON LY CONCURRED WITH THE ASSESSING OFFICER, BUT ALSO FURTHER NOTICED THAT EV EN IN TERMS OF CLAUSE (D) TO SECTION 80-IB(10) OF THE ACT, THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION ENVISAGED IN THE SAID SECTION, INASMUCH AS THE BUILT-UP AREA OF SHOP S AND COMMERCIAL ESTABLISHMENTS INCLUDED IN THE PROJECT WAS 6132 SQ.FT. WHICH EXCEE DED THE LIMITS PRESCRIBED THEREIN. IN VIEW OF THE AFORESAID REASONS, THE REVENUE HAS C ONTENDED THAT THE ASSESSEE IS INELIGIBLE FOR THE CLAIM OF DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT IN RELATION TO DSK VISHWA III PROJECT. 6. ON THE ABOVE ASPECT, THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT REFERENCE MADE TO CLAUSE (D) OF SECTION 80-IB(10) O F THE ACT BY THE REVENUE IN ORDER TO DIS-ENTITLE THE ASSESSEE IS MISPLACED, INASMUCH AS THE SAID AMENDMENT IS PLACED IN SECTION 80-IB(10) OF THE ACT WITH EFFECT FROM 1. 4.2005 BY WAY OF FINANCE (NO.2) ACT, 2004. THE PLEA RAISED IS THAT PRIOR TO ITS SUB STITUTION, SECTION 80IB(10) OF THE ACT DID NOT PROVIDE FOR ANY RESTRICTION ON THE AREA EAR MARKED FOR COMMERCIAL PURPOSES IN A HOUSING PROJECT. THE LEGISLATURE HAS IMPOSED THE CEILING OF 2000 SQ.FT. OR 5% OF THE TOTAL AREA WHICHEVER IS LESS IN RELATION TO COM MERCIAL AREA ONLY BY THE FINANCE (NO.2) ACT, 2004 AND IT HAS BEEN VEHEMENTLY POINTED OUT THAT SUCH RESTRICTION CANNOT BE APPLICABLE TO THE PROJECTS WHICH HAVE COMMENCED PRIOR TO THE ASSESSMENT YEAR 2005-06, INASMUCH AS THE LAW AS APPLICABLE AT THE T IME OF COMMENCEMENT OF SUCH PROJECT DID NOT CONTAIN SUCH A RESTRICTION. THEREFO RE, IT IS SOUGHT TO BE MADE OUT THAT THE CONDITION PRESCRIBING FOR A RESTRICTION ON COMM ERCIAL AREA HAS BEEN WRONGLY INVOKED BY THE AUTHORITIES IN THE PRESENT CASE AND IN FACT, IT HAS BEEN CANVASSED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V BRAHMA ASSOCIATES 333 ITR 289 (BOM) HAS UPHELD THE PROPOSITION THAT SUCH AMEN DED PROVISIONS CANNOT BE ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 4 APPLIED WITH RETROSPECTIVE EFFECT AND THAT THE SAME WOULD BE APPLICABLE WITH EFFECT FROM 1.4.2005 ALONE AND CANNOT BE APPLIED FOR THE P ERIOD PRIOR TO 1.4.2005. THE LEARNED COUNSEL FURTHER POINTED OUT THAT THE CASE OF BRAHMA ASSOCIATES (SUPRA) INVOLVED ASSESSMENT YEAR 2003-04 AND THE PROJECT TH EREIN INVOLVED COMMERCIAL AREA AND IN THIS BACKGROUND, IT WAS HELD THAT A HOUSING PROJECT COULD BE CONSISTING OF RESIDENTIAL AS WELL AS COMMERCIAL PORTION AND THAT IT WAS NOT NECESSARY THAT THE PROJECT BE PURELY A RESIDENTIAL PROJECT AS THE RES TRICTION ON THE COMMERCIAL AREA CAME UP ONLY WITH EFFECT FROM 1.4.2005. IT WAS THUS HELD BY THE HONBLE HIGH CURT THAT PRIOR TO 1.4.2005, THE ENTIRE PROFITS OF THE P ROJECT WERE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT AS LONG AS THE P ROJECT QUALIFIES TO BE CALLED A HOUSING PROJECT HAVING REGARD TO APPROVAL ACCORDED BY THE CONCERNED LOCAL AUTHORITY. IN THIS CONTEXT, IT IS SOUGHT TO BE MADE OUT THAT T HE PROJECT OF THE ASSESSEE HAS BEEN ACCORDED SANCTION BY THE LOCAL AUTHORITY AS A RESID ENTIAL CUM COMMERCIAL COMPLEX AND THEREFORE THE DEDUCTION IS ALLOWABLE TO THE A SSESSEE. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS DEFENDED THE STAND OF THE REVENUE BY POINTING OUT THAT THE P HRASEOLOGY OF SECTION 80-IB(10) OF THE ACT SHOWS THAT THE DEDUCTION IS AVAILABLE ONLY IN RELATION TO PROFITS IN CASE OF AN UNDERTAKING DEVELOPING AND BUILDING A HOUSING P ROJECT. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, IT IS INCONCEIVABLE TH AT THE TERM HOUSING PROJECT WOULD ALSO INCLUDE COMMERCIAL AREA AND, THEREFORE, HAVING REGARD TO THE UNDERSTANDING OF THE EXPRESSION HOUSING PROJECT, THE PRESENCE OF THE COMMERCIAL AREA IN THE INSTANT PROJECT WOULD DIS-ENTITLE THE ASSESSEE FROM DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT, EVEN IF THE AMENDMENT TO SEC. 80IB(10)(D) OF THE ACT IS HELD TO BE PROSPECTIVE IN NATURE. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL PLEAS WI TH REGARD TO THE PRESENCE OF COMMERCIAL AREA IN THE HOUSING PROJECT DSK VISHWA P ROJECT III CARRIED OUT BY THE ASSESSEE. ADMITTEDLY, THE ASSESSEE HAS COMMENCED DE VELOPMENT AND CONSTRUCTION OF THE DSK VISHWA PROJECT III PROJECT IN TERMS OF T HE APPROVAL BY THE PUNE MUNICIPAL CORPORATION, WHICH IS THE PRESCRIBED LOCAL AUTHOR ITY IN THIS CASE WITHIN THE MEANING OF SECTION 80-IB(10) OF THE ACT. THE PROJECT CONSIS TED OF 436 RESIDENTIAL FLATS AND 13 ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 5 SHOPS, ENTAILING COMMERCIAL AREA OF 6132 SQ. FT. IT IS NOT DISPUTED THAT THE LOCAL AUTHORITY HAD APPROVED THE PROJECT AS RESIDENTIAL-C UM-COMMERCIAL. IT HAS ALSO BEEN SOUGHT TO BE POINTED OUT BY THE APPELLANT, AS IS A LSO EMERGING FROM PAGE 1 OF THE PAPER BOOK, THAT THE PROPORTION OF THE COMMERCIAL A REA TO THE TOTAL AREA OF THE PROJECT WAS LESS THAN 2%. IT IS ALSO NOT IN DISPUTE THAT THE PROJECT COMMENCED ON 13.10.2000 AS NOTED BY THE ASSESSING OFFICER AT PAG E 12 OF THE ASSESSMENT ORDER AND THAT THE SAME WAS ALSO COMPLETED PRIOR TO 31.3. 2005 AND TO BE PRECISE THE DATE OF COMPLETION OF THE PROJECT HAS BEEN STATED AS 31. 12.2004, AS EVIDENT FROM PAGE 1 OF THE PAPER BOOK FILED BEFORE US. 9. NOW, WE MAY REFER TO CLAUSE (D) TO SECTION 80-IB (10) OF THE ACT, WHICH HAS BEEN INSERTED BY THE FINANCE (NO 2) ACT, 2004 WITH EFFECT FROM 1.4.2005 WHICH READS AS UNDER: (D) THE BUILT-UP AREA OF THE SHOPS AND OTHER COM MERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIVE PER CENT OF TH E AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET, WHICHEVER IS L ESS. IN TERMS THEREOF, THE CASE OF THE REVENUE IS THAT F IRSTLY THE SAID AMENDMENT, THOUGH APPLICABLE FROM 1.4.2005 SEEKS TO SHOW THAT THE MEA NING OF THE EXPRESSION HOUSING PROJECT HAS TO BE UNDERSTOOD AS A PURELY RESIDENT IAL PROJECT NOT INVOLVING ANY COMMERCIAL AREA. SECONDLY, IT IS POINTED OUT THE CO MMERCIAL AREA IN THE CASE OF THE ASSESSEE IS 6132 SQ.FT WHICH IS MORE THAN THE PERMI SSIBLE AREA OF 2000 SQ.FT OR 5% WHICHEVER IS LESS, PRESCRIBED IN CLAUSE (D) TO SECT ION 80-IB(10) OF THE ACT. 10. IN OUR CONSIDERED OPINION, THE RELIANCE BY THE REVENUE ON THE PROVISIONS OF CLAUSE (D) TO SECTION 80-IB(10) OF THE ACT IN THE P RESENT CASE IS QUITE MISPLACED,, INASMUCH AS THE SAID PROVISION HAS BEEN HELD TO BE PROSPECTIVE AND NOT RETROSPECTIVE IN NATURE BY THE HONBLE HIGH COURT I N THE CASE OF BRAHMA ASSOCIATES (SUPRA) AND, THEREFORE, IT CANNOT BE APPLIED FOR TH E PERIOD PRIOR TO 1.4.2005. IN SO FAR AS THE PLEA THAT FOR PERIOD PRIOR TO 1.4.2005 ONLY A PURE HOUSING PROJECT IS ELIGIBLE FOR DEDUCTION, IN OUR VIEW, THE SAID PLEA IS ALSO MISPL ACED. THE HONBLE BOMBAY HIGH COURT NOTICED THAT THE EXPRESSION HOUSING PROJECT HAS NOT BEEN DEFINED UNDER THE ACT. SO, HOWEVER, HAVING REGARD TO THE FACT THAT TH E PHRASEOLOGY OF SECTION 80-IB(10) OF THE ACT REFERS TO HOUSING PROJECT AS APPROVED BY LOCAL AUTHORITIES, THEREFORE AS ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 6 PER THE HONBLE HIGH COURT, A PROJECT WOULD QUALIF Y TO BE CALLED A HOUSING PROJECT ON THE BASIS OF THE MEANING GATHERED FROM THE RULES AN D REGULATIONS FRAMED BY THE APPROVING LOCAL AUTHORITY. THE HONBLE HIGH COURT HELD THAT SINCE A LOCAL AUTHORITY COULD APPROVE A PROJECT TO BE A HOUSING PROJECT WIT H OR WITHOUT COMMERCIAL USER, IT WAS THEREFORE THE INTENT OF THE LEGISLATURE THAT DE DUCTION ENVISAGED UNDER SECTION 80-IB(10) OF THE ACT IS ALLOWABLE TO ALL HOUSING PR OJECTS APPROVED BY A LOCAL AUTHORITY WITHOUT OR WITH COMMERCIAL USER TO THE EXTENT PERM ITTED BY THE RULES OF THE LOCAL AUTHORITY. THE PROJECT BEFORE THE HONBLE HIGH COU RT CONSISTED OF FIFTEEN RESIDENTIAL BUILDINGS AND TWO COMMERCIAL BUILDINGS, AND LOCAL A UTHORITY HAD APPROVED THE PROJECT AS RESIDENTIAL CUM COMMERCIAL. THE ASSESS MENT YEAR BEFORE THE HONBLE HIGH COURT WAS PRIOR TO 1.4.2005, AND AFTER CONSID ERING CLAUSE (D) TO SECTION 80- IB(10) OF THE ACT AS INSERTED BY THE FINANCE (NO. 2) ACT, 2004 AND WHICH HAS ALSO BEEN RELIED BY THE REVENUE BEFORE US, THE HONBLE HIGH COURT DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND HELD THE ASSESSEE ELIGIB LE FOR DEDUCTION U/S. 80IB(10) OF THE ACT. THE ASSESSMENT YEAR BEFORE US IS ALSO PRIO R TO 1.4.2005 AND, IN OUR VIEW, HAVING REGARD TO THE FACT THAT IN THE INSTANT CASE THE PROJECT IN QUESTION HAS BEEN APPROVED BY THE LOCAL AUTHORITY AS A RESIDENTIAL CU M COMMERCIAL PROJECT, THEREFORE, THE SAME QUALIFIES TO BE SEEN IN THE SAME MANNER AS SEEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) . THEREFORE, IN THIS VIEW OF THE MATTER, THE PLEA OF THE REVENUE FOR THE ASSESSMENT YEAR 2004-05 IS UNTENABLE. 11. NOW, WE MAY DEAL WITH THE REVENUES AFORESAID O BJECTION WITH REGARD TO THE DSK VISHWA PROJECT III FOR THE A.Y. 2005-06. AS PE R THE REVENUE, CLAUSE (D) OF SEC. 80 IB (10) IS INSERTED W.E.F. 1.4.2005 PRESCR IBING RESTRICTION ON THE PRESENCE OF COMMERCIAL AREA IN A HOUSING PROJECT, AND AS THE CO MMERCIAL AREA IN THIS CASE, BEING 6232 SQ.FT., EXCEEDS THE RESTRICTION CONTAI NED IN 80 IB (10)(D), THEREFORE, FOR A.Y. 2005-06, THE DEDUCTION IS NOT ALLOWABLE. IN T HIS CONTEXT, THE ISSUE IS AS TO WHETHER THE RESTRICTION CONTAINED IN SEC. 80 IB (1 0)(D), INSERTED BY THE FINANCE (NO.2) ACT, 2004 W.E.F. 1.4.2005, CAN BE MADE APPL ICABLE TO A PROJECT WHEREIN THE CONSTRUCTION COMMENCED PRIOR TO 1.4.2005. IT HAS B EEN POINTED OUT THAT SIMILAR CONTROVERSY WAS A SUBJECT MATTER OF CONSIDERATION BY PUNE BENCH OF THE TRIBUNAL IN ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 7 THE CASE OF OPEL SHELTERS PVT. LTD. (ITA NO. 219/PN /09 DATED 31.5.2011). THE TRIBUNAL CONSIDERED AN EARLIER DECISION OF THE MUMB AI BENCH OF THE TRIBUNAL IN THE CASE OF HIRANANDANI AKRUTI JV VS. DCIT, ITA NO. 541 6/MUM/2009 DATED 30-3-2010 RELATING TO A.Y. 2006-07 AND HELD THAT THE AMENDED SEC. 80 IB (10)(D) WOULD APPLY ONLY TO PROJECTS COMMENCING AFTER 1.4.2005. THE PR IMARY REASON MADE OUT IS TO THE EFFECT THAT WHEN THE PROJECT COMMENCED, THE ASSESSE E COULD NOT HAVE ENVISAGED THAT THE LEGISLATURE WOULD PUT SUCH A RESTRICTION I N FUTURE. AS PER THE TRIBUNAL, RESTRICTION INSERTED IN THE STATUTE BY FINANCE (NO. 2) ACT 2004, W.E.F. 01.4.2005 IN TERMS OF CLAUSE (D) TO SEC. 80 IB (10) CANNOT BE APPLIED TO THE PROJECTS WHICH HAVE COMMENCED PRIOR TO 01.4.2005. IN OUR CONSIDERED O PINION, THE AFORESAID PROPOSITION LAID DOWN BY THE TRIBUNAL SQUARELY COVERS THE CONTR OVERSY BEFORE US. IN THE CASE BEFORE US, THE PROJECT IN QUESTION HAS COMMENCED PR IOR TO 01.4.2005 AND ALSO STANDS COMPLETED ON 31.12.2004 I.E. PRIOR TO 31.3.2 005, AND IN THIS VIEW OF THE MATTER, THE NEWLY INSERTED CLAUSE (D) TO SEC. 80 I B (10) CANNOT BE INVOKED TO DIS- ENTITLE THE ASSESSEE FROM THE CLAIM OF DEDUCTION U /S. 80 IB (10) OF THE ACT FOR THE A.Y. 2005-06. THEREFORE, IN SO FAR AS THE PROJECT DSK VISHWA PHASE III IS CONCERNED, THE OBJECTIONS MADE OUT BY THE REVENUE F OR THE A.YS. 2004-05 AND 2005-06 IN ORDER TO DENY THE CLAIM OF DEDUCTION U/S . 80 IB (10) ARE UNFOUNDED AND DESERVE TO BE NEGATED. WE HOLD SO. 12. NOW WE MAY TAKE UP FOR DISCUSSION THE OBJECTIO NS RAISED BY THE REVENUE WITH REGARD TO THE ASSESSEES CLAIM FOR DEDUCTION C LAIMED IN RELATION TO PROFITS OF THE OTHER PROJECT, NAMELY, DSK FRANGIPANI. IN THE A. Y. 2004-05, THE ASSESSEE CLAIMED DEDUCTION IN RELATION TO PROJECT DSK FRANGIPANI A MOUNTING TO RS.39,46,818/-. IN SO FAR AS THE DETAILS OF THE PROJECT ARE CONCERNED, TH E SAME HAS BEEN NOTED BY THE ASSESSING OFICER AT PAGE 14 OF THE ASSESSMENT ORDER AND THE SALIENT FEATURES HAVE ALSO BEEN TABULATED BY THE ASSESSEE AT PAGE 2 OF TH E PAPER BOOK. THE SOLITARY OBJECTION OF THE ASSESSING OFFICER IS THAT THE FLA TS CONSTRUCTED BY THE ASSESSEE DO NOT CONFORM TO THE CONDITION PRESCRIBED IN CLAUSE ( C) TO SEC. 80 IB (10) OF THE ACT. AS PER ASSESSING OFFICER BUILT- UP AREA OF THE FL ATS EXCEEDED THE LIMIT PRESCRIBED IN CLAUSE (C ) TO SEC. 80 IB (10) OF THE ACT IN AS MUC H AS THE BUILT UP AREA OF INDIVIDUAL ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 8 RESIDENTIAL UNITS EXCEEDED 1500 SQ. FT. IN COMING TO SUCH CONCLUSION, THE ASSESSING OFFICER HAS DIFFERRED WITH ASSESSEE ON THREE COUNT S. FIRSTLY, AS PER ASSESSING OFFICER, THE AREA COVERED BY BALCONIES AND TERRACES WAS INCLUDIBLE WHILE CALCULATING THE BUILT- UP AREA OF THE RESIDENTIAL UNITS. SECO NDLY, AS PER THE ASSESSING OFFICER, THE AREA COVERED BY THE CAR PARKING PROVIDED TO OCC UPIER OF EACH TENEMENT WAS ALSO INCLUDIBLE FOR THE PURPOSE OF CALCULATING BUILT- UP AREA OF A RESIDENTIAL UNIT. THIRDLY, AS PER THE ASSESSING OFFICER, THE ASSESSEE HAD COM BINED FOUR FLATS IN EACH WING INTO TWO DUPLEX FLAT ON 11 TH FLOOR AND THE AREA OF SUCH COMBINED FLATS HAVE TO BE CONSIDERED. ACCORDINGLY, THE ASSESSING OFFICER HAS CONSIDERED THE BUILT-UP AREA OF SUCH FLATS BY COMBINING THE TWO FLATS IN TERMS OF W HICH THE BUILT-UP AREA EXCEEDED 1500 SQ. FT. FOR THE ABOVE THREE REASONS, AS PER T HE ASSESSING OFFICER, THE RESIDENTIAL UNITS OF THE ASSESSEE DID NOT MEET WITH THE REQUIREMENTS OF CLAUSE (C ) TO SEC. 80 IB (10) OF THE ACT AND, THEREFORE, DEDUCTIO N U/S. 80 IB (10) WAS DENIED IN RELATION TO THE PROJECT DSK FRANGIPANI. THE STAND OF THE ASSESSING OFFICER HAS BEEN AFFIRMED BY THE CIT(A), AGAINST WHICH, THE ASSESSEE IS IN APPEAL BEFORE US. 13. BEFORE US, THE LD COUNSEL FOR THE ASSESSEE REFE RRED TO PAGES 13 TO 21 OF THE PAPER BOOK WHEREIN IS PLACED THE DETAILS OF BUILT UP AREA OF EACH AND EVERY FLAT IN THE PROJECT DSK FRANGIPANI. IT IS SOUGHT TO BE EXP LAINED THAT IN SO FAR AS THE FLATS UPTO THE 10 TH FLOOR ARE CONCERNED, THE OBJECTIONS RELATE TO THE INCLUSION OF BALCONIES AND TERRACE AND CAR PARKING AREAS FOR THE PURPOSE OF CALCULATING BUILT -UP AREA OF THE INDIVIDUAL RESIDENTIAL UNITS. ONLY IN RELATION TO THE FLATS ON THE 11 TH FLOOR, THE OBJECTION RELATED TO CALCULATING THE BUILT UP AREA AFTER COMB INING TWO FLATS EACH. 14. IN THIS CONTEXT, THE LD COUNSEL POINTED OUT THA T THE PROJECT OF THE ASSESSEE COMMENCED PRIOR TO 01..4.2005 AND THE DEFINITION OF THE BUILT UP AREA INCLUDING THE AREA OF BALCONIES AND THE TERRACE WAS INSERTED BY F INANCE (NO.2) ACT 2004 ONLY W.E.F. 01.4.2005 AND THEREFORE, FOR THE PURPOSE OF PRESENT CLAIM, SUCH AREAS CANNOT BE INCLUDIBLE FOR CALCULATING BUILT- UP AREA. I N THIS CONNECTION, RELIANCE HAS BEEN PLACED ON THE DECISION OF THE MUMBAI BENCH OF THE T RIBUNAL IN THE CASE OF HAWARE CONSTRUCTION (P) LTD. VS. ITO, 64 DTR (MUMBAI) (TRI B) 251 AND ALSO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRIME PROPERTIES (ITA NOS. ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 9 887/PN/2010 & OTHERS) DATED 26.4.2012. IT HAS BEEN FURTHER SUBMITTED THAT PRIOR TO 01.4.2005, THE BUILT- UP AREA HAD TO BE CALCULATE D AS PER THE RELEVANT DEVELOPMENT CONTROL RULES OF THE LOCAL AUTHORITY AND ON THAT BA SIS, THE AREA OF BALCONIES AND TERRACE ARE NOT INCLUDIBLE, AND, FOR THIS PROPOSITI ON RELIANCE HAS BEEN PLACED ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF BRAHMA BUILDERS, ITA NO. 647 AND 649/PN/2009 RELATED TO A.YS. 2004-05 & 2005-06, ORDER DATED 15 TH MAY, 2012. IN THIS MATTER, BY REFERRING TO THE DETAILS PLACED IN PAGES 13 TO 21, IT IS SOUGHT TO BE MADE OUT THAT AFTER EXCLUDING THE AREA OF BALCONIES AND OPEN TERRACE, THE BUILT UP AREA OF THE RESIDENTIAL UNITS UPTO 10 TH FLOOR DO NOT EXCEED 1500 SQ. FT. 15. EVEN WITH REGARD TO THE INCLUSION OF AREA OF CA R PARKING, THE LD COUNSEL FOR THE ASSESSEE REFERRED TO THE DEFINITION OF BUILT- UP AREA AS CONTAINED IN CLAUSE 2.13 OF THE DEVELOPMENT CONTROL RULES, PUNE, TO JUSTIFY THAT THE SAME IS NOT INCLUDIBLE WHILE CALCULATING BUILT- UP AREA OF A UNIT. 16. WITH REGARD TO THE FLATS ON THE 11 TH FLOOR IN EACH WING WHICH HAVE BEEN COMBINED, THE ASSESSEE SUBMITTED THAT SUCH FLATS AR E CONSIDERED AS SEPARATE FLATS BY THE MUNICIPAL AUTHORITY, AND THEREFORE, THEIR BUILT- UP AREA HAS TO BE CONSIDERED INDIVIDUALLY AND NOT AFTER COMBINING THE SAME. THE LD. COUNSEL POINTED OUT THAT EVEN IF THE PLEA OF THE ASSESSING OFFICER IS TO BE UPHELD, THE DEDUCTION U/S. 80 IB (10) BE GRANTED IN RESPECT OF THE FLATS UPTO THE 10 TH FLOOR AND IT BE DENIED ONLY IN RELATION TO THE COMBINED FLAT ON THE 11 TH FLOOR AND THEREFORE, THE CLAIM OF DEDUCTION CANNOT BE NOT DENIED IN ENTIRETY. FOR THE AFORESAI D PROPOSITION, RELIANCE HAS BEEN PLACED ON THE FOLLOWING DECISIONS : (1) M/S. EKTA HOUSING PVT. LTD., ITA NO. 3649/MUM/2 009, ORDER DATED 20 TH MAY 2011 (2) SANGHAVI & JOSHI, 139 ITD 151, CHENNAI ( TM) (3) BENGAL HOUSING DEVELOPMENT LTD. VS. DCIT, ITA NO. 1595/KOL/2005 DATED 24.3.2006 ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 10 17. ON THE OTHER HAND, THE LD. D.R. APPEARING FOR T HE REVENUE HAS CONTESTED THE PLEA OF THE ASSESSEE BY POINTING OUT THAT THE ASSES SEE IS NOT ENTITLED TO A PROPORTIONATE DEDUCTION, IN AS MUCH AS THE PROJECT, AS A WHOLE, HAS TO BE CONSIDERED AND IF THE CONDITION IS NOT FULLY COMPLI ED WITH, THE DEDUCTION SHALL BE DENIED ON THE ENTIRE PROJECT. 18. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. IN THIS CONNECTION, THE FIRST AND FOREMOST ISSUE IS WITH REGARD TO THE MEAN ING OF THE EXPRESSION BUILT UP AREA FOR THE PURPOSES OF CLAUSE (C ) TO SEC. 80 I B(10) OF THE ACT. SEC. 80 IB (14)(A) WAS INSERTED BY THE FINANCE (NO.2) ACT, 2004 W.E.F. 01.4.2005 PRESCRIBING THE DEFINITION OF THE EXPRESSION BUILT UP AREA. IN T ERMS OF THE SAID DEFINITION, THE BUILT UP AREA INTER ALIA, INCLUDES THE AREA OF PROJECTIONS A ND BALCONIES. THE MOOT POINT IS AS TO WHETHER THE SUCH DEFINITION IS APPLICABLE IN RE SPECT OF THE PROJECT IN QUESTION BEFORE US. ADMITTEDLY, IT IS EMERGING FROM THE ORD ERS OF THE AUTHORITIES BELOW THAT THE PROJECT DSK FRANGIPANI COMMENCED ON 12.12.2003 I.E. PRIOR TO THE 01.4.2005. THEREFORE, REVENUE AUTHORITIES ARE NOT JUSTIFIED IN INCLUDING THE BALCONIES/OPEN TERRACES IN THE CALCULATION OF BUILT-UP AREA AND THE DEFINITION OF BUILT-UP AREAIN TERMS OF SEC. 80 IB (14)(A) OF THE ACT CANNOT BE A PPLIED TO PROJECTS COMMENCED PRIOR TO 1.4.2005.. THE AFORESAID PROPOSITION IS I N LINE WITH THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF HAWARE CONSTRUCTIONS (SUPRA) AS ALSO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN T HE CASE OF PRIME PROPERTIES (SUPRA). NOW COMING TO THE ISSUE OF INCLUSION OF A REA OF CAR PARKING, THE ASSESSING OFFICER HAS INCLUDED THE SAME IN THE CALCULATION OF BUILT- UP AREA AND SUCH AREA HAS BEEN CONSIDERED BY HIM AT 300 SQ.FT. FOR EACH OF TH E RESIDENTIAL UNITS. AS NOTED BY US EARLIER, THE DEFINITION OF BUILT- UP AREA CONTAI NED IN SEC. 80 IB (14)(A) OF THE ACT IS NOT APPLICABLE IN THE PRESENT CASE, BEING A PROJECT HAVING COMMENCED PRIOR TO 01.4.2005, AND THEREFORE FOR SUCH LIKE PROJECTS, I T WOULD BE IN FITNESS OF THE THINGS THAT THE EXPRESSION BUILT UP AREA IS UNDERSTOOD AS PER THE DEVELOPMENT CONTROL RULES OF THE LOCAL AUTHORITY, WHICH HAS APPROVED SU CH A PROJECT. IN THIS CONNECTION, CLAUSE 2.13 OF THE DEVELOPMENT CONTROL RULES, PUNE, DEFINES BUILT-UP AREA AS UNDER : ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 11 2.13 BUILT-UP AREA AREA COVERED IMMEDIATELY ABOVE THE PLINTH LEVEL BY THE BUILDING OR EXTERNAL AREA OF ANY UPPER FLOOR WH ICHEVER IS MORE EXCEPTING THE AREAS COVERED BY RULE NO. 15.4.2 OSTENSIBLY, A PERUSAL OF ABOVE DEFINITION SHOWS THA T AN AREA COVERED BY RULE 15.4.2 IS NOT INCLUDIBLE IN THE MEANING OF BUILT UP AREA . THE EXTRACT OF RULE 15.4.2, HAS BEEN PLACED IN THE PAPER BOOK AT PAGE 36, AND IT R EFLECTS THAT A MULTI STORIED STILT FLOORING SPACE CONSTRUCTED UNDER A BUILDING IS ALL OWED TO BE USED AS A PARKING SUBJECT TO HEIGHT RESTRICTIONS. IN TERMS THEREOF, IT IS SOUGHT TO BE MADE OUT THAT THE AREA OF CAR PARKING IS SPECIFICALLY EXCLUDIBLE WHIL E CALCULATING BUILT- UP AREA AS PER THE DEVELOPMENT CONTROL RULES AND THEREFORE, THE AS SESSING OFFICER WAS WRONG IN CONSIDERING SUCH AREA FOR THE PURPOSE OF COMPUTING BUILT- UP AREA OF THE RESIDENTIAL UNITS. A BARE PERUSAL OF THE DEVELOPMENT CONTROL RULES, IN OUR VIEW, SUPPORTS THE ASSERTIONS PUT FORTH BY THE ASSESSEE AND THEREFORE , THE AREA OF CAR PARKING IS NOT TO BE INCLUDIBLE FOR THE PURPOSES OF COMPUTING BUILT- UP AREA OF RESIDENTIAL UNITS IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 19. NOW, WE MAY TAKE UP FOR CONSIDERATION THE THIRD OBJECTION OF THE REVENUE WITH REGARD TO THE FOUR FLATS IN EACH WING WHICH HA VE BEEN COMBINED INTO TWO DUPLEX FLATS ON 11 TH FLOOR WHEREBY UPON COMBINING THE TWO FLATS, THE AR EA EXCEEDED THE LIMIT OF 1500 SQ.FT. IN THIS CONNECTION, WE FIND THAT TH E ASSESSING OFFICER HAS CONCLUDED, AFTER CARRYING OUT A SURVEY THAT TWO ADJOINING FLA TS WERE COMBINED INTO ONE UNIT IN AS MUCH AS THERE WAS NO SEPARATE KITCHEN. THOUGH, TH E ASSESSEE HAS CANVASSED THAT THE TWO FLATS ARE CONSIDERED SEPARATE FLATS BY THE MUNICIPAL AUTHORITIES, HOWEVER, THE ASSESSING OFFICER HAS ASSERTED THAT THE TWO FLATS HAVE BEEN COMBINED BY THE ASSESSEE AND THEREAFTER SOLD. THE AFORESAID FACTUA L FINDING OF THE ASSESSING OFFICER HAS NOT BEEN DISPROVED BY THE ASSESSEE AND THERE IS NO MATERIAL TO SUGGEST THAT THE FLATS HAVE BEEN COMBINED BY THE PURCHASERS. THEREF ORE, IN OUR CONSIDERED OPINION, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE BUILT- UP AREA OF THE FLATS HAVE TO BE CONSIDERED AFTER COMBINING THE TWO FLATS EACH. IF IT IS SO DONE, CLEARLY, THE BUILT- UP AREA OF THE COMBINED RESI DENTIAL UNITS ON THE 11 TH FLOOR, ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 12 EXCEEDS THE PRESCRIBED LIMIT OF 1500 SQ. FT., THERE BY, NOT ADHERING TO THE CONDITIONS PRESCRIBED IN SEC. 80 IB (10)(C ) OF THE ACT. 20. IN THIS BACKGROUND, THE ALTERNATIVE PLEA OF THE ASSESSEE SPRINGS UP. THE PLEA IS THAT THE DEDUCTION U/S. 80 IB (10) BE DENIED ONL Y WITH RESPECT TO THE UNITS WHICH DO NOT CONFORM TO THE CONDITION CONTAINED IN SEC. 80 I B (10)(C ) AND FOR THE BALANCE ELIGIBLE RESIDENTIAL UNITS, THE DEDUCTION SHOULD BE ALLOWED. THE REVENUE HAS OPPOSED THE SAID PLEA ON THE GROUND THAT THE ASSES SEE IS NOT ENTITLED TO A PROPORTIONATE DEDUCTION U/S. 80 IB (10) OF THE ACT . 21. ON THIS ASPECT, WE FIND THAT THE MUMBAI BENCH O F THE TRIBUNAL IN THE CASE OF M/S. EKTA HOUSING PVT. LTD. (SUPRA) HAS UPHELD THE PLEA OF THE ASSESSEE FOR A PROPORTIONATE DEDUCTION U/S. 80 IB (10) OF THE ACT WHERE SOME OF THE RESIDENTIAL UNITS IN THE PROJECT VIOLATED THE CONDITION CONTAINED IN SEC. 80 IB (10)(C ) OF THE ACT. THE MUMBAI BENCH AFTER NOTICING THE PRECEDENTS IN THE C ASE OF I) ITO V/S AIR DEVELOPERS, 25 DTR 287 (NAG.); II) DCIT V/S BRIGADE ENTERPRISES PVT. LTD., 14 DTR 371 (BANG.); III) ACIT V/S SHETH DEVELOPERS P. LTD., 33 SOT 277 (MUM.); IV) BENGAL AMBUJA HOUSING DEVELOPMENT LTD. V/S DCI T; V) SJR BUILDERS V/S ACIT, 3 ITR 569 (MUM.) HELD THAT THE ASSESSEE WOULD NOT LOOSE THE EXEMPT ION U/S. 80 IB (10) IN ENTIRETY WHERE SOME OF THE RESIDENTIAL UNITS WINGS HAD A BUILT- UP AREA IN EXCESS OF THE LIMIT PRESCRIBED IN CLAUSE (C ) OF SEC. 80 IB (10) BUT, IT WOULD BE ENTITLED TO PROPORTIONATE DEDUCTION U/S. 80 IB (10) OF THE ACT WITH REGARD TO THE PROFITS EARNED ON THE ELIGIBLE UNITS.. PARTICULARLY, THE TRIBUNAL ALSO CONSIDERED THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASS OCIATES (SUPRA) AND HELD THAT THE SAME DOES NOT ENVISAGE DENIAL OF PROPORTIONATE DEDUCTION IN SUCH CIRCUMSTANCES. THE RELEVANT DISCUSSION, AS CONTAIN ED IN PARAGRAPHS 8 & 9 OF THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S EKTA HOUSI NG PVT. LTD. READS AS UNDER : VIII) WE NOW EXAMINE THE APPLICABILITY OF THE DECI SION OF THE HONBLE BOMBAY HIGH COURT IN BRAHMA ASSOCIATES (SUPRA) TO T HE FACTS OF THIS CASE. ON A CAREFUL READING OF THIS JUDGMENT, WE FIND THAT NOWHERE IT IS STATED THAT PROPORTIONATE DEDUCTION SHOULD NOT BE ALLOWED, IN CASE CERTAIN RESIDENTIAL ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 13 UNITS HAD BUILT UP AREA IN EXCESS OF PRESCRIBED LI MIT OF 1,000 SQ.FT. IN FACT, THIS ISSUE WAS NOT BEFORE THE HONBLE JURISDICTIONAL HI GH COURT. THE QUESTIONS BEFORE THE HONBLE JURISDICTIONAL HIGH COURT WERE DIFFERENT AND, HENCE THE JUDGMENT CANNOT BE SAID TO BE ON THIS ISSUE. THE O NLY ISSUE BEFORE THE HIGH COURT IS WHEN THERE IS A COMMERCIAL ELEMENT IN A RE SIDENTIAL PROJECT, WILL BE ASSESSEE BE DENIED THE ENTIRE EXEMPTION. IN THIS CA SE, THE HONBLE HIGH COURT HAS OBSERVED THAT WHEN THE LOCAL AUTHORITY AP PROVED A PLAN AS A HOUSING PROJECT OR A RESIDENTIAL CUM COMMERCIAL PRO JECT, THE ASSESSEE WOULD BE ENTITLED TO CLAIM FOR DEDUCTION UNDER SECTION 80 IB(10) EVEN IF THE PROJECT HAD COMMERCIAL ELEMENT IN EXCESS OF 10%. AT PARAS- 27 AND 28, THE COURT OBSERVED AS FOLLOWS :- 27. THE QUESTION THEN TO BE CONSIDERED IS, WHETHER THE SPECIAL BENCH OF THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE PROJECTS HAVING COMMERCIAL AREA UPTO 10% OF THE BUILT-UP AREA OF TH E PLOT ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) ON THE ENTIRE PROJECT UPTO 1.4.2005. ONCE THE BASIC ARGUMENT OF THE REVENUE T HAT THE HOUSING PROJECTS WITH COMMERCIAL USER ARE NOT ENTITLED TO S ECTION 80IB(10) DEDUCTION IS REJECTED, THEN IN THE ABSENCE OF ANY RESTRICTION IMPOSED UNDER THE ACT, IT WAS NOT OPEN TO THE TRIBUNAL TO H OLD THAT THE PROJECTS APPROVED BY THE LOCAL AUTHORITIES HAVING RESIDENTI AL BUILDINGS WITH COMMERCIAL USER UPTO 10% OF THE PLOT AREA WOULD ALO NE BE ENTITLED TO DEDUCTION UNDER SECTION 80IB(10). AS NOTED EARLIER, RESTRICTION REGARDING COMMERCIAL USER HAS BEEN IMPOSED FOR THE FIRST TIME BY INTRODUCING CLAUSE (D) TO SECTION 80IB (10) WITH E FFECT FROM 1.4.2005. THEREFORE, IT WAS NOT OPEN TO THE TRIBUNAL TO HOLD THAT PRIOR TO 1.4.2005, PROJECTS HAVING COMMERCIAL USER UPTO10% O F THE PLOT AREA ALONE WOULD BE ELIGIBLE FOR SECTION 80IB(10) DEDUCT ION. 28. IN THE PRESENT CASE, THOUGH THE COMMERCIAL USER IS MORE THAN 10% OF THE PLOT AREA, THE TRIBUNAL HAS ALLOWED SECT ION 80IB(10) DEDUCTION IN RESPECT OF 15 RESIDENTIAL BUILDINGS O N THE GROUND THAT THE PROFITS FROM THESE EXCLUSIVELY RESIDENTIAL BUILDING S COULD BE DETERMINED ON STAND ALONG BASIS. IN OUR OPINION, THAT WOULD N OT BE PROPER, BECAUSE SECTION 80IB(10) ALLOWS DEDUCTION TO THE EN TIRE PROJECT APPROVED BY THE LOCAL AUTHORITY AND NOT TO A PART O F THE PROJECT. IF THE CONDITIONS SET OUT IN SECTION 80IB(10) ARE SATISFIE D, THEN DEDUCTION IS ALLOWABLE ON THE ENTIRE PROJECT APPROVED BY THE LOC AL AUTHORITY AND THERE IS NO QUESTION OF ALLOWING DEDUCTION TO A PA RT OF THE PROJECT. IN THE PRESENT CASE, THE COMMERCIAL USER IS ALLOWED IN ACCORDANCE WITH THE DC RULES AND HENCE THE ASSESSEE WAS ENTITLED TO SECTION 80IB(10) DEDUCTION ON THE ENTIRE PROJECT APPROVED BY THE LOC AL AUTHORITY. HOWEVER, THE ASSESSEE HAS NOT CHALLENGED THE DECISI ON OF THE TRIBUNAL IN RESTRICTING THE DEDUCTION TO A PART OF THE PROJE CT. THEREFORE, WHILE HOLDING THAT IN LAW, THE ASSESSEE WAS ENTITLED TO S ECTION 80IB(10) DEDUCTION ON THE PROFITS OF THE ENTIRE PROJECT, IN THE FACTS OF THE PRESENT CASE, SINCE THE ASSESSEE HAS NOT CHALLENGED THE DEC ISION OF THE TRIBUNAL, WE ARE NOT INCLINED TO DISTURB TO DISTURB THE DECISION OF THE TRIBUNAL IN RESTRICTING THE SECTION 80IB(10) DEDUC TION ONLY IN RESPECT OF THE PROFITS DERIVED FROM 15 RESIDENTIAL BUILDINGS. IX) THUS, IT COULD BE SEEN THAT THE HONBLE HIGH COURT DO NOT APPROVE THE FINDINGS OF THE TRIBUNAL THAT A RESIDENTIAL BUILDIN G WITH COMMERCIAL USER UP TO ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 14 10% OF THE PLOT AREA WOULD ALONE BE ENTITLED TO DED UCTION UNDER SECTION 80IB(10). THE ISSUE THAT, IN CASE WHERE CERTAIN RE SIDENTIAL UNITS ARE OF A BUILT UP AREA IN EXCESS OF THE PRESCRIBED LIMIT OF 1,000 SQ.FT. IN RESIDENTIAL PROJECT, THIS WOULD RESULT IN THE ENTIRE EXEMPTION BEING LOS T, OR WHETHER THE ASSESSEE WOULD BE ENTITLED TO A PROPORTIONATE DEDUCTION WAS NOT BEFORE THE HIGH COURT. THUS, IN OUR OPINION, THE DECISION OF HONBLE JURIS DICTIONAL HIGH COURT IN BRAHMA ASSOCIATES (SUPRA) DOES NOT COME TO THE RESC UE OF THE REVENUE. 22. FOLLOWING THE AFORESAID PRECEDENT, WE, THEREFOR E, HOLD THAT MERELY BECAUSE THE ASSESSEE HAS VIOLATED THE CONDITION U/S. 80 IB( 10)(C ) IN RELATION TO THE FLATS ON THE 11 TH FLOOR, THE DEDUCTION U/S. 80 IB(10) CANNOT BE DENI ED IN ITS ENTIRETY, BUT, THE DENIAL SHALL BE LIMITED TO THE PROFITS IN RESPECT O F THE FLATS ON THE 11 TH FLOOR ALONE. FOR THE BALANCE OF THE RESIDENTIAL UNITS, THE PLEA OF T HE ASSESSEE FOR DEDUCTION U/S. 80 IB(10) OF THE ACT IS JUSTIFIED, AND THE ASSESSEE SU CCEEDS ON THIS ASPECT. 23. WITH REGARD TO THE PROJECT DSK FRANGIPANI FOR T HE A.Y. 2005-06 ALSO, THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. IN THIS YEAR ALSO , IN OUR CONSIDERED OPINION, OUR DECISION IN THE AFORESAID PARAGRAPH FULLY APPLIES. THOUGH IN A.Y. 2005-06, THE DEFINITION OF BUILT-UP AREA AS PER SECTION 80 IB (14)(A) WAS ON STATUTE, BUT, ADMITTEDLY, ASSESSEES PROJECT WAS APPROVED AND COM MENCED PRIOR TO 1.4.2005, THEREFORE, THE CALCULATION OF BUILT- UP AREA SH ALL NOT BE GOVERNED BY SUCH DEFINITION. THEREFORE, FOR THE A.Y. 2005-06 ALSO, THE PROJECT DSK FRANGIPANI IS ELIGIBLE FOR DEDUCTION U/S. 80 IB(10), ALBEIT ON A PROPORTIONAT E BASIS IN RESPECT OF THE FLATS WHOSE BUILT UP AREA DOES NOT SUCCEED 1500 SQ.FT. AS PRESCRIBED U/S. 80 IB (10)(C ) OF THE ACT. IN THIS VIEW OF THE MATTER, THE ORDER OF THE CIT(A) FOR BOTH THE YEARS IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RE-C OMPUTE THE DEDUCTION ALLOWABLE TO THE ASSESSEE U/S. 80 IB (10) OF THE ACT IN TERMS OF OUR ABOVE DISCUSSIONS. RESULTANTLY, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. 24. IN THE RESULT, ASSESSEES APPEALS ARE PARTLY AL LOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 08TH AUGUST 2012. SD/- SD/- ( R.S. PADVEKAR ) JUDICIAL MEMBER ( G.S. PANNU ) ACCOUNTANT MEMBER PUNE, DATED THE 8TH AUGUST, 2012 ITAS NO.1428 & 1429/PN/2008 D.S. KULKARNI DEVELOPERS LTD. .A.YS. 2004-05 & 2005-06 PAGE OF 15 15 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT I, PUNE 4. THE CIT(A)-I, PUNE 5. THE D.R. B BENCH, PUNE 6. GUARD FILE /- TRUE COPY-/ BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE