Appeal Details
Counselvise Citation
[2015] 121 COUNSELVISE.COM (IT) 2215 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 1 month(s) 21 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
17-08-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
28-10-2013
Assessment Year
2007-2008
Appeal Filed On
26-06-2012
Judgement Text
] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KS IQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , !' # BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM / ITA NO.143/PN/2007 $ % % / ASSESSMENT YEAR : 2003-04 DY.CIT, AHMEDNAGAR CIRCLE, AHMEDNAGAR . / APPELLANT V/S SHRI SHARAD M. MUTHA, 85, MANIK NAGAR, NAGAR PUNE ROAD, AHMEDNAGAR 414 001 PAN NO. AFVPM3565Q . / RESPONDENT / ITA NOS.1102 TO 1105/PN/2011 $ % % / ASSESSMENT YEARS : 2002-03, 2004-05 TO 2006-07 ITO, WARD-1, AHMEDNAGAR . / APPELLANT V/S SHRI SHARAD M. MUTHA, 85, MANIK NAGAR, NAGAR PUNE ROAD, AHMEDNAGAR 414 001 PAN NO. AFVPM3565Q . / RESPONDENT / ITA NO.1430/PN/2012 $ % % / ASSESSMENT YEAR : 2007-08 ITO, WARD-4, AHMEDNAGAR . / APPELLANT V/S SHRI SHARAD MUTHA HOUSING DEVELOPMENT LTD., 85, MANIK NAGAR, STATION ROAD, AHMEDNAGAR 414 001 PAN NO. AAGCS9254D . / RESPONDENT 2 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 / ASSESSEE BY : SHRI SUNIL GANOO / DEPARTMENT BY : SHRI . RAJESH DAMOR SINGH & / ORDER PER R.K. PANDA, AM : ITA NOS. 1102 TO 1105/PN/2011 FILED BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 20-01-2011 OF THE C IT(A)-I, RELATING TO ASSESSMENT YEARS 2002-03 AND 2004-05 TO 2006-07 RES PECTIVELY. ITA NO.143/PN/2007 FILED BY THE REVENUE IS DIRECTED AGAINST TH E ORDER DATED 29-11-2006 OF THE CIT(A)-I, RELATING TO ASSESSMENT YEAR 2003-04. ITA NO.1430/PN/2012 FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 27-12-2011 OF THE CIT(A)-I, PUNE RELATING TO ASSES SMENT YEAR 2007-08. FOR THE SAKE OF CONVENIENCE ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE UP ITA NO.143/PN/2007 FOR A.Y. 2003-04 IN THE CASE OF SHRI SHARAD M. MUTHA AS THE LEAD CASE. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND FILED HIS RE TURN OF INCOME ON 28-11-2003 DECLARING LOSS OF RS.7,22,583/-. THE A SSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION, ESTATE AGENT/ DEALER, MANGAL KARYALAYA, CONSULTANT ETC. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE, DURING THE YEAR, HAS SHOWN NET PROFIT FROM UMA ROW HOUSING SCHEME AT PLOT NO.1 05, SOLAPUR AT RS.2,17,27,975/- AND FORM UMA ROW HOUSING SCHEM E AT PLOT NO.117, SOLAPUR AT RS.1,05,00,000/-. THE ASSESSEE FILED S EPARATE PROFIT AND LOSS ACCOUNTS AND OTHER DETAILS FOR THESE TWO PROJECTS ALONG / DATE OF HEARING : 18.05.2015 !' / DATE OF PRONOUNCEMENT:17.08.2015 3 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 WITH THE RETURN OF INCOME. THE TOTAL PROFIT OF RS.3,22,27,975 /- IS CLAIMED BY THE ASSESSEE AS DEDUCTION U/S.80IB(10). THE AO THEREFORE ASKED THE ASSESSEE TO JUSTIFY THE CLAIM OF DEDUCTION MADE U/S.80IB (10). 3. IT WAS SUBMITTED BY THE ASSESSEE THAT (I) THE AREA OF LAND IS ABOVE ONE ACRE (II) THE COMMENCEMENT OF THE PROJECT IS AFTER 30- 09-1998 (III) THE BUILT UP AREA OF EACH RESIDENTIAL UNIT IS MUCH BELOW THA N 1500 SQ.FT., I.E. EVEN NOT MORE THAN 500 SQ.FT. AND (IV) THE PROJEC T IS SANCTIONED BY SOLAPUR MUNICIPAL CORPORATION ON 14-06-1999. 4. IT WAS SUBMITTED THAT INITIAL AGREEMENT OF LEASE AND AGR EEMENT OF CONSTRUCTION EXECUTED BY SHRI SHARAD MUTHA AND UMA DE VELOPMENT CONSTRUCTION COMPANY WERE IMPOUNDED AND TO SATISFY LOCA L CUSTOMERS AND TO END THE LITIGATION IN CONSUMER COURT THE ASSESSE E STARTED EXECUTING SALE DEED OF ROW HOUSES IN APRIL 1999. IT WAS ARGUED THAT HE IS WORKING IN THE FIELD OF LOW COST HOUSING FOR LAST 25 YEARS AND HAS CONSTRUCTED MORE THAN 5000 HOUSES ADMEASURING 250 TO 600 SQ.FT. EACH. TO PROVIDE SHELTER TO THE LOWER AND MIDDLE INCOME G ROUP IS THE INTENTION OF THE SECTION 80IB(10). 5. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION G IVEN BY THE ASSESSEE. HE OBSERVED FROM THE VARIOUS DETAILS FURNIS HED BY THE ASSESSEE THAT SOLAPUR SPINNING AND WEAVING MILLS CO. LTD. (CO MMONLY KNOWN AS JUNI MILL) WAS INDEBTED TO THE BANK OF BARODA, ST ATE OF MAHARASHTRA AND UNION OF INDIA. BANK OF BARODA FILED S SU IT IN THE HIGH COURT OF JUDICATURE AT BOMBAY. DURING THE PENDENC Y OF THE SUIT COURT RECEIVER WAS APPOINTED FOR PROPERTIES OF THE SAID J UNI MILL BY THE ORDER OF THE HONBLE HIGH COURT ON 07-08-1964. AUCTION WAS ORDERED TO BE MADE OF THE PROPERTIES OF THE JUNI MILL ESPECIALLY LANDS W HICH WERE PUT TO AUCTION IN LOTS. THE BIDDERS DID NOT QUOTE THE PR OPER PRICE EVEN 4 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 SATISFYING THE DECRETAL AMOUNT AND THEREFORE THE SAID AM OUNT WAS SO MEAGER AND NOMINAL THAT IT COULD NOT HAVE EVEN SATISFIED T HE CLAIMS OF THE WORKERS AND OTHERS. ON THIS BACKGROUND THE WORKE RS OF THE SAID JUNI MILL DECIDED TO FORM SAMITI FOR RECOVERY OF THEIR DUES. SAMITI WAS FORMED AND NAMED AS JUNI MILL BEKAR KAMGAR WARASDAR ANI JANHIT SANGHARSHA SAMITI. THE SAID SAMITI WAS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT AS WELL AS THE BOMBAY PUBLIC TRUST ACT A ND AS SUCH IT HAS GOT LEGAL STATUS AND ENTITY FOR PARTICIPATION IN THE A UCTION SALE. THE SAID SAMITI OBJECTED THE MEAGER BIDS PUTFORTH BY THE VAR IOUS BIDDERS AND GAVE ITS OWN BIDS FOR LOT NO.1 TO 5 BY ORDER DATED 04-10-1989 AND 18-10-1989. 6. THE SAID SAMITI COLLECTED THE AMOUNT OF AUCTION PRICE FR OM THE RESIDENTS OF SOLAPUR AND IT HAD PROMISED THE PERSONS OR MEMBERS WHO HAD DEPOSITED THE INITIAL AMOUNT WITH THE SAID SAMITI THAT THE SAID PERSONS WILL BE GIVEN PLOTS. UNFORTUNATELY, THE SAID SAMITI CO ULD NOT DEPOSIT THE WHOLE AMOUNT OF AUCTION PRICE EVEN THOUGH E XTENSIONS WERE GIVEN BY THE HONBLE HIGH COURT FROM TIME TO TIME TO THE SAID SANGHARSH SAMITI TO DEPOSIT THE REMAINING AUCTION PRICE. A S A RESULT OF THIS, COURT RECEIVER HAD INFORMED THE FORFEITURE OF THE AMO UNT INITIALLY DEPOSITED BY THE SAMITI. ON THIS FORFEITURE, NUMBER OF REPRE SENTATIONS, THE NEWS ITEMS WERE PUBLISHED IN LOCAL NEWS PAPERS AND TH E CITIZENS OF SOLAPUR FELT THAT THE FORMATION OF THE SAID SANGHARSH SAMIT I WAS A TOTAL FAILURE. ON THIS BACK GROUND, THE ASSESSEE SHRI SHARAD M UTHA CAME IN THE PICTURE AND THE OFFICE BEARERS AND MEMBERS OF THE SA ID SANGHARSH SAMITI REQUESTED HIM TO GO THROUGH THE WHOLE MATTER AS WELL AS TO FIND OUT SOME SOLUTION FOR THE SAID DIFFICULTIES SO THAT THE CONT RIBUTORS OF THE SAMITI COULD GET A PLOT OF 1000 SQ.FT. IN ALL THERE WERE ABOU T 1100 PERSONS WHO HAD CONTRIBUTED FOR DEPOSITING INITIAL AUCTION P RICE. 5 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 THEREAFTER THERE WAS AGREEMENT BETWEEN SANGHARSH SAM ITI AND SHRI SHARAD M. MUTHA BY WHICH SHRI SHARAD M. MUTHA AGREED T O ARRANGE AND PAY THE AUCTION PRICE AND COMPLY WITH THE ORDERS OF THE COU RT. HE FURTHER AGREED THAT HE WILL ALLOT DEVELOPED PLOTS TO EACH O F THE PERSONS WHO HAD CONTRIBUTED INITIALLY FOR DEPOSITING THE INITIAL AUCTION PRICE. 7. THEREAFTER DUE TO CONSISTENT PURSUANCE OF SHRI SHARA D MUTHA, THE HONBLE HIGH COURT PASSED AN ORDER ON 15-4-1996 A ND DECIDED TO RECONSIDER THE MATTER AND AS SUCH REMANDED THE MATTE R BACK FOR RECONSIDERATION. THE HONBLE HIGH COURT PASSED AN ORDER ALLOWING THE SAID SANGHARSH SAMITI TO PAY THE BALANCE AUCTION PRICE BU T WITH INTEREST @15% PER ANNUM ON THE SAID BALANCE AMOUNT DUE . THE SAMITI WAS ALSO CALLED UPON TO FURNISH A BANK GUARANTEE AS AGRE ED IN THE AGREEMENT. SHRI SHARAD M. MUTHA COMPLIED WITH THE ORDER OF THE HIGH COURT AND ARRANGED THE DEPOSIT OF THE ENTIRE AUCTION PRICE. THEREAFTER, THE SAMITI APPOINTED SHRI SHARAD MUTHA AS ITS NOMINEE AN D WAS REQUESTED TO TAKE POSSESSION OF THE AUCTIONED PLOT. THE SAMITI AND SHRI SHARAD MUTHA BOTH DECIDED THAT THE SALE CERTIFICATE OF T HE HONBLE HIGH COURT WAS TO BE OBTAINED IN THE NAME OF UMA COOPERATIVE HOUSING SOCIETY LTD. SOLAPUR AND ACCORDINGLY A REVIEW PETITION WAS FILED AND THE HONBLE HIGH COURT WAS PLEASED TO ORDER THAT THE SALE C ERTIFICATE BE ISSUED IN FAOVUR OF UMA COOPERATIVE HOUSING SOCIETY LTD. SO LAPUR. THE SALE CERTIFICATES WERE ACCORDINGLY EXECUTED IN THE NAME O F UMA COOPERATIVE HOUSING SOCIETY LTD. SOLAPUR. HOWEVER, THE PO SSESSION OF THE LANDS WERE ACTUALLY HANDED OVER TO SHRI SHARAD MUT HA ON BEHALF OF UMA COOPERATIVE HOUSING SOCIETY LTD. 8. ON 07-08-1998, UMA COOPERATIVE HOUSING SOCIETY LTD. EN TERED INTO AN AGREEMENT WITH SHRI SHARAD M. MUTHA. AS PER THIS AGREEMENT 6 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 WITH A VIEW TO GET THE PLOTS DEVELOPED, TO ALLOT PLOTS TO THE INITIAL MEMBERS AND WITH A VIEW TO REPAY THE AMOUNT INVESTED B Y SHARAD M. MUTHA IN MAKING THE PAYMENTS FOR LAND UMA COOPERATIVE HO USING SOCIETY LTD. APPOINTED SHRI SHARAD M. MUTHA AS ITS SOLE SELLING AGENT OR THE NOMINEE. AS PER THIS AGREEMENT, (1) THE IRREVOCABLE AUTHORITY WAS GIVEN TO SHRI SHARAD MUTHA TO DEVELOP THE LAND, (2) TO ALLOT APPROXIMATELY 1100 PLOTS TO INITIAL SUBSCRIBERS, (3) TO FIND CU STOMERS FOR ENTIRE REMAINING LAND, (4) TO RECEIVE CONSIDERATION FROM THE P ROSPECTIVE MEMBERS OF VARIOUS PLOTS AND GET IT ADJUSTED TO THE AMOUNTS DUE T O SHRI SHARAD MUTHA FORM THE SOCIETY, (5) SOCIETY WILL NOT BE LIABLE FO R ANY EXPENDITURE OR ANY LOSS IN DEVELOPING THE LAND AND SELLING IT ; NEITHER IT WILL CLAIM ANY SHARE OF PROFIT FROM THE TRANSACTIONS AND (6) SO CIETY WILL ACCEPT THE PROSPECTIVE BUYERS OF THE PLOTS AS ITS MEMBERS. 9. FURTHER, VIDE PARA 17 OF THE AGREEMENT IT WAS MADE CLE AR THAT THIS AGREEMENT IS NEITHER PARTNERSHIP AGREEMENT NOR IT IS DEV ELOPMENT AGREEMENT OR AGREEMENT TO SELL ANY OF THE PLOT. THE SO LE SELLING AGENT SHALL BE ENTITLED MERELY TO SELECT THE PROSPECTIVE LESSEE FOR VARIOUS PLOTS AND FINALISE THE CONSIDERATION PRICE FOR AND ON BEHALF OF TH E OWNER SOCIETY AS THE AGENT OF SOCIETY. THUS, THE ASSESSEE GOT POSSESSION OF THE LANDS, GOT THE LAY OUT SANCTIONED FOR THE LAND AND ALLOTTED APPROXIMATELY 1100 PLOTS TO THE INITIAL MEMBERS OF THE SA NGHARSHA SAMITI. ON THE REMAINING PLOTS THE ASSESSEE STARTED CONS TRUCTION OF ROW HOUSES. THE DEDUCTION U/S.80IB(10) IS CLAIMED ON THE P ROFITS EARNED BY THE ASSESSEE FROM THESE ROW HOUSES CONSTRU CTED ON PLOT NOS. 105 AND 117. 10. IN THIS BACKGROUND, THE AO PROCEEDED TO DECIDE THE ALLOWABILITY OF DEDUCTION U/S.80IB(10) CLAIMED BY THE ASSESSEE. FROM A S AMPLE COPY 7 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 OF THE AGREEMENT TO LEASE ENTERED INTO BY UMA COOPERAT IVE HOUSING SOCIETY LTD., WITH SHRI A.A.M. KALADGI ON 21-09-1998, THE AO NOTED THA T THE ASSESSEE IS THE SOLE SELLING AGENT OF UMA COOPERATIVE HOUSING SOCIETY LTD. THE AO NOTED THAT THE CONSIDERATION FOR T HE PLOT IS RS.48,000/-. OUT OF THIS CONSIDERATION, RS.47,000/- HAVE BEE N PAID BY SHRI KALADGI ON 11-11-1997. THE LESSEE HAS HANDED OVER POSSESSION OF SAID PLOT FOR CONSTRUCTION TO SHRI SHARAD MUTHA. THE CON STRUCTION AGREEMENT IS FOR RS.2,02,000/- AND IT IS ENTERED SIMULTANEO USLY. HOWEVER, SHRI KALADGI PAID RS.28,000/- ON 11-11-1997 AND 1 0-01- 1998 FOR CONSTRUCTION. THE LAY OUT FOR THE LAND WAS SANC TIONED ON 04- 08-1997 VIDE LETTER NO.97/176 DATED 04-08-1997 FROM ASS ISTANT DIRECTOR, TOWN PLANNING, SOLAPUR MUNICIPAL CORPORATION. FROM THE ABOVE, THE AO OBSERVED THAT THE PROJECT WAS SANCTIONE D PRIOR TO 01-10- 1998 AND THE ASSESSEE COMMENCED WORK PRIOR TO 01-10- 1998. THEREFORE, THE CONDITION OF COMMENCING THE WORK AFTER 01- 10-1998 IS NOT FULFILLED. 11. SO FAR AS THE SECOND CONDITION IS CONCERNED, I.E. THE MIN IMUM AREA OF THE PROJECT SHOULD BE ONE ACRE, THE AO NOTED T HAT ALTHOUGH THE LAND AREA POSSESSED BY THE ASSESSEE AS PER THE LAYOUT IS MORE THAN ONE ACRE, HOWEVER, IT CANNOT BE SAID THAT THIS IS A PROJECT E SPECIALLY WHEN INDIVIDUAL LESSEE HANDED OVER HIS PLOT FOR CONSTRUCTION TO THE ASSESSEE. FOR THE ABOVE PURPOSE HE REFERRED TO THE FOLLOWING EXTRA CT FROM THE ABOVE AGREEMENT TO LEASE DATED 21-09-1998 WHICH READS AS UND ER : AND WHEREAS LESSOR SOCIETY HAS OBTAINED BUILDING PERMISSION FROM SOLAPUR MUNICIPAL CORPORATION FOR C ONSTRUCTION OF ROW BUNGALOWS ON THE FINAL PLOT, MORE PARTICULARLY WRIT TEN IN SCHEDULE B HEREUNDER. AND WHEREAS LESSEE HAS ENTERED IN THIS AGREEMENT TO LEASE TO ACQUIRE THE PLOT MORE PARTICULARLY DESCRIBED IN SCHE ULE B WRITTEN HEREUNDER. THE LESSEE HAS ALSO AGREED TO GET CONSTRUC TION DONE ON THE 8 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 SAID PLOT FROM M/S. UMA DEVELOPMENT & CONSTRUCTION CO MPANY, PARTY OF THE THIRD PART AS PER BUILDING PLAN SANCTION ED BY A.D.T.P. SOLAPUR MUNICIPAL CORPORATION FOR THE LESSOR SOCIET Y. THE LESSEE HAS DIRECTED CONFIRMING PARTY (I.E. SHRI SHARAD M. MUTH A THE ASSESSEE) TO HAND OVER POSSESSION OF THE SAID PLOT TO PARTY OF THE TH IRD PART (SHRI MUTHA.. THE ASSESSEE) FOR CONSTRUCTION & DEVELOPMENT. 12. THE AO OBSERVED THAT THIS AGREEMENT IS DATED 21-09 -1998. IT IS CLEARLY MENTIONED THAT THE BUILDING PLAN GOT APPROVED FOR THE SOCIETY FROM ASSISTANT DIRECTOR, TOWN PLANNING, SOLAPUR MUNICIPAL CORPORATION. THE PAYMENT OF RS.28,000/- HAS BEEN RECEIVED BY THE ASSESSEE ON 11-11-1997 AND 10-01-1998. THIS ALSO CLEAR LY INDICATES THAT THE CONSTRUCTION WAS STARTED PRIOR TO 01-10-1998 . HE FURTHER OBSERVED FROM THE AGREEMENT THAT EVERY PLOT HOLDER ENT ERED INTO A SEPARATE CONTRACT FOR CONSTRUCTION WITH THE ASSESSEE. U NDER THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE PROJECT IS OF O NE ACRE AND ABOVE. THE PLOT AREA IS MERELY OF 1000 SQ.FT. HOWEVER, TH E SOCIETY HAS ALSO NOT TRANSFERRED THE DEVELOPMENT RIGHTS TO THE ASSE SSEE. THE ASSESSEE HAS BEEN GIVEN RIGHTS TO DEVELOP THE PLOT, TO FIN D THE PROSPECTIVE LESSEES, TO FINALISE THE CONSIDERATION AND TO RE CEIVE IT AS REFUND OF HIS INVESTMENT. IN VIEW OF THE ABOVE REASONS, THE AO HELD THAT THE SECOND CONDITION IS ALSO NOT FULFILLED. 13. THE AO FURTHER NOTED THAT PLOT NOS. 31 & 32 WERE S OLD ON 12-02-2002 AND PLOT NOS. 81 AND 82 ON 01-01-2002. ON THESE PLOTS NO CONSTRUCTION HAS BEEN DONE BY THE ASSESSEE. THEREFORE , HE HELD THAT THIS IS NOT A PROJECT BUT IS AN ISOLATED CONTRACT FOR CO NSTRUCTION OF INDIVIDUAL PLOTS ALLOTTED TO THE MEMBERS. SIMILARLY FOR PLOT NO .117 HE NOTED THAT THE CONDITION OF THE AREA IS NOT FULFILLED AS EVER Y LESSEE HAS ENTERED INTO A SEPARATE CONTRACT WITH THE ASSESSEE TO GET HIS ROW HOUSE CONSTRUCTED. THEREFORE, IT CAN BE SAID THAT THE ASSESS EE WORKED AS A CONTRACTOR FOR CONSTRUCTING THE ROW HOUSES AND NOT AS A DEVELOPER 9 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 HAVING A PROJECT AREA OF ACRE OR MORE. IN VIEW OF THE A BOVE REASONS THE AO DENIED THE CLAIM OF DEDUCTION MADE U/S.80IB(10) IN RESPE CT OF THE PROJECT UMA ROW HOUSING SCHEME ON PLOT NO.105 AT RS.2,17 ,27,975/- AND UMA ROW HOUSING SCHEME ON PLOT NO.117 AT RS.1,05,00,000/-. 14. BEFORE CIT(A) IT WAS SUBMITTED THAT THE ASSESSEE HAS DEVELOPED AND BUILT RESIDENTIAL HOUSING PROJECT AT FINAL PLOT NOS. 105 AND 117 OUT OF CTS NO.472, TP SCHEME NO.4, MURARJI PETH, SOLAPUR ON LAND AREA ADMEASURING AREA 27912 SQ.MTRS (I.E. 6.98 ACRES) AND 49874 SQ. MTRS (I.E., 12.47 ACRES) RESPECTIVELY. IT WAS SUBMITTED THAT THE DATE OF COMMENCEMENT OF DEVELOPMENT AND CONSTRUCTION IN RESPECT OF HOSING PLOT NO.L105 AND 117 WAS 14-06-1999 AND 26-09-2000 RES PECTIVELY AS PER BUILDING PERMISSION LETTER NO.38 DATED 14-06-1999 AND LETTER NO.936 DATED 26-09-2000 RESPECTIVELY ISSUED BY SOLAPUR MUNICIPAL CORPORATION WHICH IS THE LOCAL AUTHORITY FOR GRANTING PERM ISSION FOR DEVELOPMENT AND CONSTRUCTION OF THE PROJECT. IT WAS SU BMITTED THAT SOLAPUR MUNICIPAL CORPORATION HAS ALSO ISSUED THE SANCTIONE D PLAN IN RESPECT OF PLOT NOS. 105 AND 117 ON 14-06-1999 AND 26- 09-2000 RESPECTIVELY. THE HOUSING PROJECT IN RESPECT OF PLOT NO.1 05 WAS COMPLETED VIDE COMPLETION CERTIFICATE NO.222 AND 261 DATED 03-03- 2003. THE COMPLETION CERTIFICATE DATED 27-03-2006 ISSUED BY THE SOLAPUR MUNICIPAL CORPORATION STATING THAT THE HOUSING PRO JECT WAS COMMENCED AFTER 01-10-1998 WAS ALSO BROUGHT TO THE NO TICE OF THE CIT(A). THE ASSESSEE SUBMITTED THAT THE PROJECT IS EXC LUSIVELY A RESIDENTIAL HOUSING PROJECT AND THERE ARE NO SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS AND THE AREA OF EACH FLAT RANGES BETWEEN 268 SQ. FT. MINIMUM AND 780 SQ.FT. MAXIMUM OF 868 SQ.FT. IN PLOT NO.105. THUS, THE AREA OF NONE OF THE FLATS EXCEED 1500 SQ.FT. IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEE HAS FULFILLED ALL THE CONDITIONS, 10 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 I.E. THE AREA OF THE PLOT IN WHICH THE HOUSING PROJECT HAS BEEN CONSTRUCTED IS MORE THAN ONE ACRE AND EACH RESIDENTIAL HOUSE IS LESS THAN 1500 SQ.FT. 15. AS REGARDS THE FINDING OF THE AO THAT COMMENCEMENT O F WORK BEGAN PRIOR TO 01-10-1998 IS CONCERNED IT WAS SUBMITTED THAT THE AO IS FACTUALLY INCORRECT. THE ASSESSEE SUBMITTED THE FOLLOWING E XPLANATION WHICH HAS BEEN INCORPORATED BY THE CIT(A) AT PAGE 7 TO 9 OF HIS ORDER AND WHICH READS AS UNDER : A) NOTE ON COMMENCEMENT OF WORK AS EXPLAINED EARLIER THE DATE OF COMMENCEMENT OF DEV ELOPMENT AND CONSTRUCTION OF THE ABOVE SAID HOUSING PROJECT IN RESPE CT OF PLOT NO. 105 AND IN RESPECT OF NO. 117 WAS 14/06/99 & 26/09/2000 RESPEC TIVELY AS PER BUILDING PERMISSION LETTER NO. 38 DTD 14/06/1999 AND LETTER NO.936 DTD.26/09/2000 RESPECTIVELY ISSUED BY SOLAPUR MUNICIPA L CORPORATION, SOLAPUR (I.E. LOCAL AUTHORITY). THE SOLAPUR MUNICIPAL CORPORATION HAS ALSO ISSUED THE S ANCTIONED PLAN IN RESPECT OF PLOT NO. 105 AND 117 ON 14/06/99 AND 26/0 9/2000 RESPECTIVELY. XEROX OF SANCTIONED PLAN IS ENCLOSED HEREWITH. FURTHER THE SOLAPUR MUNICIPAL CORPORATION HAS ISSUED THE CERTIFICATE VIDE THEIR LETTER NO.533/1 & 533/2 DTD.27/03/2006. FURTHER PRIOR TO MY ABOVE SAID DEVELOPMENT AGREEMENT ; THERE WAS A AGREEMENT BETWEEN THE UMA CO-OP HSG SOC. LTD. AND TH E PARTNERSHIP FIRM M/S. UMA DEVELOPMENT & CONSTRUCTION CO. AND SAID BOTH PARTIES HAVE EXECUTED THE AGREEMENT WITH MR KALADGI. HOWEVER THE M/S. UMA DEVELOPMENT & CONSTRUCTION CO COULD NOT CARRY OUT TH E CONSTRUCTION WORK DUE TO FINANCIAL AND OTHER CONSTRAINTS. LATER ON THE UMA CO-OP HSG SOC. LTD AS A OWNER AND M/S. UMA DEVELOPMENT & CONSTRUCTION CO . AS CONSENTING PARTY HAS EXECUTED THE ABOVE SAID DEVELOPMENT AGREEME NT FOR DEVELOPMENT RIGHTS VIDE DEVELOPMENT AGREEMENT DTD.30/11/1998. TH IS DEVELOPMENT AGREEMENT ALONG WITH OTHER SUPPORTING DOCUMENTS HAS AL READY BEEN SUBMITTED ALONG WITH LETTER DTD.27/03/2006. AFTER OBTAINING THE DEVELOPMENT RIGHTS, THE APPELLAN T HAS OBTAINED THE BUILDING PERMISSION FOR DEVELOPMENT AND CONSTRUCTION O F ROW HOUSE VIDE BUILDING PERMISSION LETTER NO. 38 DTD 14/06/1999 AND LETTER NO.936 DTD.26/09/2000 IN RESPECT OF PLOT NO.105 & 117 RESPEC TIVELY ISSUED BY SOLAPUR MUNICIPAL CORPORATION, SOLAPUR (I.E. LOCAL AUTHORITY). THUS YOUR SHALL APPRECIATE THAT, THE PLOTTING LAYOUT OF UMA DE VELOPMENT & CONSTRUCTION CO. MENTIONED IN ASSESSMENT ORDER DO NOT HA VE ANY RELEVANCE WITH FIRST BUILDING PERMISSION TAKEN BY THE APPELLANT FOR DEVELOPMENT AND CONSTRUCTION OF ROW HOUSE. 11 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 I WISH TO DRAW YOUR KIND ATTENTION TO THE FACT THAT, THE EXPENDITURE IN RESPECT OF DEVELOPMENT AND CONSTRUCTION OF ROW HOUSE O N ABOVE SAID PLOT REFLECTED IN THE AUDITED REGULAR BOOKS OF ACCOUNTS ON LY AFTER 01/10/1998. THE UMA CO-OP HSG SOC LTD HAS THE OBTAINED THE POSSESSION OF PLOT NO. 105 & 117 ALONG WITH OTHER LANDS ON 08-05-1998 FROM COUR T RECEIVER HIGH COURT, MUMBAI. LATER ON FINALLY UMA CO-OP HSG SOC LT D HAS EXECUTED THE DEVELOPMENT RIGHTS IN RESPECT OF PLOT NO. 105 & 117 I N FAVOUR THE APPELLANT SHRI SHARAD MANSUKHLAL MUTHA VIDE DEVELOPMENT AGREEM ENT DTD.30/11/1998. XEROX OF DEVELOPMENT AGREEMENT IS EN CLOSED HEREWITH. FURTHER I WISH TO DRAW YOUR KIND ATTENTION TO THE FA CT THAT, THE FINDINGS OF THE AO IN RESPECT OF COMMENCEMENT OF WORK AFTER 01-1 0-1998 IS NOT BONAFIDE AND BASED ON WRONG BELIEF THAT, THE PLAN HA S BEEN SANCTIONED ON 04-08-1997 AS REFERRED IN PARA I OF ASSESSMENT ORDER PAG E NO.5 INSPITE OF THE FACT THAT, UMA CO OP HSG SOC LTD HAS OBTAINED THE POSSESSION OF ABOVE SAID LAND FROM COURT RECEIVER HIGH COURT, MUMBAI ON 08-05-1998 AS EXPLAINED IN ABOVE STATEMENT OF FACTS AND SUBSEQUENTLY UMA CO-OP HSG SOC LTD HAS EXECUTED THE DEVELOPMENT AGREEMENT ALONG WIT H POWER OF ATTORNEY IN FAVOUR OF APPELLANT SHRI SHARAD M MUTHA ON 30/11 /1998 AND THE SOLAPUR MUNICIPAL CORPORATION HAS SANCTIONED THE BUILDING PE RMISSION PLAN ON DTD.14-06-1999 & 20-09-2000 RESPECTIVELY. ON VERIFICATION OF THE ABOVE SAID FACTS, YOUR HONOUR SHALL APPRECIATE THAT, THE SALES CERTIFICATE AND POSSESSION OF THE LAND BY THE O WNER UMA CO-OP HSG SOC LTD FROM HON. MUMBAI HIGH COURT AND THEIR COURT RECEIVER ON 08-05- 1998 ITSELF AND SUBSEQUENTLY DEVELOPMENT AGREEMENT BET WEEN THE SOCIETY AND APPELLANT ON 30/11/1998, THE CONTENTION OF THE AO IN RESPECT OF SANCTIONED OF PLAN ON 04/08/1997 IS WRONG AND NOT BON AFIDE AND CONSEQUENTLY CONCLUSION OF AO IN RESPECT OF NON FULFI LLMENT OF CONDITION OF COMMENCING OF WORK AFTER 01/10/1998 IS WRONG AND DO NOT HAVE ANY LOCO STANDI AND THEREFORE THE DISALLOWANCE OF DEDUCTION U/ S.80IB(10) BY AO ON THIS GROUND IS NOT JUSTIFIED AND TENABLE. FURTHER THE APPELLANT WISH TO DRAWN YOUR KIND ATTENT ION TO THE DATES OF SANCTION OF LAY OUT BY SMC ON 14/06/1999 AND NA PER MISSION ON 21-08- 2001 MENTIONED IN THE REGISTERED SALE DEED OF MR. KA LADGI VIDE DOCUMENT NO.3406 DTD 20-07-2003 AND ALSO CORROBORATE THAT, TH E COMMENCEMENT CERTIFICATE OF SMC AND ACTUAL COMMENCEMENT OF DEVEL OPMENT & CONSTRUCTION HAS COMMENCED AFTER 01/1 0/1 998. THE APPELLANT HAS ENCLOSED HEREWITH XEROX OF AFFIDAVI T DTD. 30TH AUGUST 2006 MADE BY THE MR KALADGI AFFIRMING THE FACT THAT , HE HAS PURCHASED THE RH NO. 28 IN FINAL PLOT NO. 105 AND SMC HAS SANCTIONE D THE PLAN VIDE BUILDING PERMISSION NO. SSNR/NS/99/38 DTD. 14/06/1999 . THE SEARCH AND TITLE REPORT OF THE ADVOCATE SHRI VIJAY BHASKAR MARA THE DTD. 15/10/1999 ALSO HIGHLIGHTS THAT THE DEVELOPMENT AND CONSTRUCTION WORK HAS COMMENCED AFTER 01/10/1998. LOOKING TO THE ABOVE FACTS AND CIRCUMSTANCES, YOUR HON OUR SHALL APPRECIATE THAT, THE APPELLANT HAS ALREADY COMPLIED TO THE CON DITION OF COMMENCEMENT OF WORK AFTER 01/1 0/1 998 AND THUS THE FINDINGS OF T HE ACIT IS WRONG AND NOT JUSTIFIED. 12 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 B) NOTE ON SIZE OF PLOT/LAND AS EXPLAINED EARLIER THE LAND AREA OF THE FINAL PLOT NO. 105 & 117 IS 27912 SQ.MTR (I.E.6.98 ACRES) & 49874 SQ.MTR (I.E. 12.47 ACRES) RESPECTIVELY AS MENTIONED IN THE DEVELOPMENT AGREEMENT AND SANCTIONE D PLAN. XEROX OF DEVELOPMENT AGREEMENT AND SANCTIONED PLAN IS ENCLOSED HEREWITH FOR YOUR KIND PERUSAL. THE APPELLANT WISH TO DRAWN YOUR KIND ATTENTION TO T HE FACT THAT, SOLAPUR MUNICIPAL CORPORATION HAS ISSUED THE CERTIFICATE STATIN G THE LAND AREA OF 27912 SQ.MTR (I.E.6.98 ACRES) & 49874 SQ.MTR (I.E. 1 2.47 ACRES) IN RESPECT OF PLOT NO.105 & 117 RESPECTIVELY VIDE THEIR LETTER NO . 533/1 & 533/2 DTD. 27/03/2006 AND THE SAID CERTIFICATES CORROBORATE THE FACT THAT, THE SIZE OF PLOT/LAND IN RESPECT OF ABOVE SAID PROJECT IS MUCH MOR E THAN THE CONDITIONAL AREA OF MINIMUM OF ONE ACRES. THE ACIT HAS WRONGLY CONSIDERED THE AGREEMENT BETWEEN UMA COOP HSG SOC LTD AND M/S UMA DEVELOPMENT & CONSTRUCTION CO AND MR KALADGI AND WRONGLY CONCLUDED THAT; THE AREA OF LAND IS NOT MORE THAN ONE ACRE IN SPITE OF THE FACT THAT THE SANCTION LAYOUT, BUILDING PERMI SSION ETC. IS FOR MORE THAN ONE ACRE. THE APPELLANT WISH TO DRAW YOUR KIND ATTENTION TO TH E NA ORDER DTD. 21/04/2001 ISSUED BY THE COLLECTORATE, SOLAPUR WISH AL SO CORROBORATE THE FACT THAT, THE SIZE OF LAND/PLOT IS MORE THAN ONE ACR E. XEROX OF NA ORDER IS ENCLOSED FOR YOUR KIND PERUSAL. THE SEARCH AND TITLE REPORT ISSUED BY THE ADVOCATE MR V B MARATHE AND ORDER OF THE HON. MUMBAI HIGH COURT AND ENCLOSED DEV ELOPMENT AGREEMENT ALSO CORROBORATE THE FACT THAT, THE AREA/SIZE OF THE LAND/PLOT IS MUCH HIGHER THAN THE CONDITIONAL MINIMUM AREA OF ONE ACRE. LOOKING TO THE ABOVE FACTS AND CIRCUMSTANCES, YOUR HON OUR SHALL APPRECIATE THAT, THE APPELLANT HAS ALREADY COMPLIED TO THE COND ITION OF MINIMUM AREA/SIZE OF PLOT/LAND OF MORE THAN ONE ACRE AND THU S THE FINDINGS OF THE ACIT IS NOT BONAFIDE AND NOT TENABLE. 16. IT WAS ARGUED THAT ALTHOUGH THESE DETAILS WERE FURNIS HED BEFORE THE AO INCLUDING THE COMPLETION CERTIFICATE, HOWEVER, THE AO IGNORED ALL THESE DETAILS AND CONCLUDED THAT THE TWO PROJECTS IN RE SPECT OF WHICH CLAIM OF DEDUCTION U/S.80IB(10) HAS BEEN MADE WERE STARTED BEFORE 01- 10-1998 AND THE AREA IS LESS THAN ONE ACRE. IT WAS AR GUED THAT THE AGREEMENT DATED 21-09-1998 WITH SHRI KALADGI RELIED ON BY THE AO IS NOT RELEVANT BECAUSE TILL THAT TIME THE ASSESSEE HAD NO RIGHT TO DEVELOP THE PROPERTY WHICH WAS OBTAINED BY THE DEVELOPMENT AGR EEMENT DATED 30-11-1998. IT WAS SUBMITTED THAT EARLIER SHRI KALADGI HA D ALREADY 13 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 ENTERED INTO TWO SEPARATE AGREEMENTS WITH UMA DEVELOPM ENT AND CONSTRUCTION COMPANY FOR ALLOTMENT AND CONSTRUCTION OF H OUSES. IT WAS ARGUED THAT BOTH THE AGREEMENTS WERE EXECUTED B EFORE COMMENCEMENT OF CONSTRUCTION WORK CONSEQUENT TO TRANS FER AND ASSIGNMENT OF DEVELOPMENT RIGHTS BY THE SOCIETY AND UMA DEVELOPMENT AND CONSTRUCTION COMPANY IN FAVOUR OF THE ASSESSEE. IT WAS SUBMITTED THAT SEPARATE AGREEMENTS ENTERED INTO BY THE ASSESSE E WITH PURCHASERS OF HOUSES IS NOT RELEVANT FOR THE PURPOSE OF COMPUTING AR EA FOR GRANT OF DEDUCTION U/S.80IB(10) OF THE I.T. ACT BECAUSE WHAT IS TO BE ASCERTAINED FOR THE PURPOSE OF DEDUCTION U/S.80IB(10) IS THE AREA OF E NTIRE PROJECT AND NOT OF ONE HOUSE. THE ASSESSEE ALSO SUBMITTED TWO CERTIFICATES ISSUED BY SOLAPUR MUNICIPAL CORPORATION VIDE LETTER NO.533/1 AND 533/2 DATED 27-03-2006 WHICH HIGHLIGHTS THE COMMENCEMEN T AND COMPLETION OF HOUSING PROJECTS SITUATED AT FINAL PLOT NOS. 105 AND 117. 17. THE CIT(A) HAS REPRODUCED THE SAID CERTIFICATES ISSUED BY SOLAPUR MUNICIPAL CORPORATION WHICH READ AS UNDER : NO.533/1 SOLAPUR DATED 27.03.2006 THIS IS TO CERTIFY THAT, SHRI.SHARAD M. MUTHA OF AHME DNAGAR THE DEVELOPER/POA OF UMA CO-OP. HOUSING SOCIETY LTD. OF SOLAPUR HAS SUBMITTED THE BUILDING PLAN OF RESIDENTIAL HOUSING SCH EME ON LAND LOCATED AT FINAL PLOT NO. 105, T.P. SCHEME NO.4, MURARJI PA TH, SOLAPUR. TOTAL LAND AREA ADMEASURING 27912 SQ.MTR. HAVING TOTAL NUMBER OF ROW HOUSES 180 AND BUILT UP AREA OF ROW HOUSE ADMEASURING MINIMUM OF 37.67 SQ.MTR. TO MAXIMUM BUILT UP AREA OF 80.63 SQ.MTR. AS PER SANCTION ED PLAN. FURTHER, IT IS CERTIFIED THAT, SOLAPUR MUNICIPAL COR PORATION HAS ISSUED THE FIRST BUILDING PERMISSION FOR COMMENCEMENT OF CONSTRUCT ION OF ROW HOUSES, VIDE LETTER NO. 38, DT. 14/06/99. AFTER COMPL ETION OF CONSTRUCTION OF ROW HOUSES, SOLAPUR MUNICIPAL CORPORATION HAS ALSO ISSUED THE COMPLETION CERTIFICATE IN RESPECT OF ABOVE SAID ROW HOUSES SUCH AS C OMPLETION CERTIFICATE NO.222 DT. 23/01/2003, A/O.267 DT. 29/0 3/2003. THIS CERTIFICATE HAS BEEN ISSUED ON THE REQUEST OF SHRI. SHARAD M. MUTHA.' NO.533/2 SOLAPUR DATED 27.03.2006 THIS IS TO CERTIFY THAT, SHRI.SHARAD M. MUTHA OF AHME DNAGAR THE DEVELOPER/POA OF UMA CO-OP. HOUSING SOCIETY LTD. OF SOLAPUR HAS 14 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 SUBMITTED THE BUILDING PLAN OF RESIDENTIAL HOUSING SCH EME ON LAND LOCATED AT FINAL PLOT NO.117, T.P. SCHEME NO.4, MURARJI PET H, SOTAPUR. TOTAL LAND AREA ADMEASURING 49874 SQ.MTR. HAVING TOTAL NUMBER OF ROW HOUSES 152 AND BUILT UP AREA OF ROW HOUSE ADMEASURING MINIMUM OF 24.87 SQ.MTR. TO MAXIMUM BUILT UP AREA OF 65.26 SQ.MTR. AS PER SANCTION ED PLAN. FURTHER, IT IS CERTIFIED THAT, SOLAPUR MUNICIPAL COR PORATION HAS ISSUED THE FIRST BUILDING PERMISSION FOR COMMENCEMENT OF CONSTRUCT ION OF ROW HOUSES, VIDE BUILDING PERMISSION LETTER NO.936, DT. 26/ 09/2000 FOR THE ABOVE SAID HOUSING SCHEME. AFTER COMPLETION OF CONSTRU CTION OF ROW HOUSES, SOLAPUR MUNICIPAL CORPORATION HAS ALSO ISSUED THE COMPLETION CERTIFICATE IN RESPECT OF ABOVE SAID ROW HOUSES SUCH AS C OMPLETION CERTIFICATE NO.245 & 246 DT. 03/03/2003, NO.260 DT. 29/03/2003. THIS CERTIFICATE HAS BEEN ISSUED ON THE REQUEST OF SHRI. SHARAD M. MUTHA.' 18. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) ALLOWED THE CLAIM OF DEDUCTION U/S.80IB(10) MADE BY THE ASS ESSEE BY OBSERVING AS UNDER : 2.6 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE MATERIALS ON RECORD. THE TWO SCHEMES, INCOM E FROM WHICH IS SUBJECT MATTER OF DEDUCTION U/S.80IB(10) OF THE INCOM E TAX ACT, 1961 WHICH HAS BEEN REFUSED BY THE ASSESSING OFFICER AND BECAUSE OF W HICH THE APPELLANT IS IN APPEAL BEFORE THIS OFFICE, EXIST ON FI NAL PLOT NOS.105 AND 117, SOLAPUR. A PERUSAL OF THE RECORD SHOWS THAT THESE PLOTS ARE PART OF CTS NO.472, T.P. SCHEME NO.4, MURARJI PETH, SOLAPUR. A PERUSAL OF THE RECORD SHOWS THAT HON. HIGH COURT OF JUDICATURE AT MUMBAI PA SSED ORDER IN FOLLOWING CASE ON 22.04.1998 : 'REVIEW PETITION (LODGING) NO. 1 OF 1998 IN COMPANY APPLICATION NO. 343 OF 1996, I.C. NO. 34 OF 1963, IN CHAMBER SU MMONS NO. 952 OF 1993 IN SUIT NO.156 OF 1963: JUNI MILL BAKAR KAMAGAR WARADAR AND ... PETITIONER /ORIGINAL APPLICANTS JANHIT SANGHARAH SAMITI VERSUS THE BANK OF BARODA & ORS. ......RESPONDENTS' AS PER PARA 7 OF THIS ORDER, THE HON. HIGH COURT DIR ECTED FOR ISSUE OF CERTIFICATE OF SALE IN FAVOUR OF UMA SAHAKARI GRIHA NIRMAN SANSTHA MARYADIT. THIS PARAGRAPH OF HON. HIGH COURT'S ORDER IS REPRODUCE D AS UNDER: 'CERTIFICATE OF SALE BE ISSUED IN FAVOUR OF UMA SAHAK ARI GRIHA NIRMAN SANSTHA MARIYADIT. THE COURT RECEIVER IS PRESENT IN C OURT AND WILL MAKE NOTE OF THE ORDER. AMENDMENT TO BE MADE ACCORD INGLY. REVIEW PETITION MADE ABSOLUTE IN TERMS OF PRAYER (1) ALSO. PE TITION STANDS DISPOSED OF ACCORDINGLY.' 15 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 IN CONSEQUENCE OF THIS ORDER, CERTIFICATE OF SALE IS ISSU ED ON 29.08.1998 BY THE COURT RECEIVER MS.A.RODRIQUEX AND THE DISCUSSION OF THE PROPERTY IN RESPECT OF WHICH THIS SALE CERTIFICATE IS ISSUED IS CONTAI NED ON THE SALE CERTIFICATE DATED 29.08.1998 AND IS REPRODUCED AS UND ER: 'THE PLOT IS SITUATED WITH THE SHOLAPUR MUNICIPAL COR PORATION LIMITS AND HAS ITS FRONTAGE ON HIRAJ ROAD. THE AGRICULTURAL LAND BEARS SURVEY NOS.472, 473-1, 473-2, 474, 475, 477 AND 478-2 . THE LAND 'ADMEASURES 37 ACRES AND 21 GUNTHAS OR 16,34,589 SQ.FT. EXCLUDING PLOT NOS.106, WHICH WAS HANDED OVER TO SHOLAPUR MUNIC IPAL CORPORATION. DATED THIS 29 TH DAY OF AUGUST 1998' FROM THE AFORESAID SALE CERTIFICATE DATED 29.08.1998 IN RESPECT OF S.NO.472 WHICH COMPRISES OF FINAL PLOT NO.105 AND 117, IT IS CL EAR THAT SALE CERTIFICATE WAS ISSUED ONLY ON 29.08.1998. THIS SALE CERTIFICATE IS I N FAVOUR OF 'JUNI MILL BAKAR KAMAGAR WARADAR AND JANHIT SANGHARAH SAMITI'. THEREAFTER ON 30.11.1998, A DEVELOPMENT AGREEMENT WAS EXECUTED BET WEEN FOLLOWING PARTIES : (1) UMA CO-OPERATIVE HOUSING SOCIETY LIMITED, CALL ED AS THE 'OWNER SOCIETY' OF THE FIRST PART AND (2) SHRI. SHARAD MANSUKHLAL MUTHA, CALLED AS 'DEVELOPER' OF THE SECOND PART AND (3) SHRI. ATUI SUBHAS MUNOT, CALLED AS 'CONSENTING PARTY' OF THE THIRD PART IN THE DEVELOPMENT AGREEMENT. THIS DEVELOPMENT AGREEMENT IS IN RESPECT OF PLOT NOS. 1 TO 5 AS DETAILED IN THE SCHEDULE. THIS SCHEDULE AS CONTAINED IN THE DEVEL OPMENT AGREEMENT DT. 30.11.1998 IS REPRODUCED AS UNDER: F.P. NO. TPS NO. FP NO. AREA SQ.M. BOUNDARIES EAST SOUTH WEST NORTH 1 IV 125/P 56000.00 ROAD FP 128 125P ROAD 2 IV 126 992.00 CANAL RLY LINE RLY LINE ROAD 2 III 83 56395.35 FP82 RLY LINE ROAD ROAD 3 IV 105 27912.00 CANAL NALA ROAD FP104 3 IV 107 11235.00 FP106 NALA ROAD FP 101 3 IV 108 21074.00 FP 107 NALA ROAD FO 101 3 IV 114 9944.00 FP115 ROAD FP113 NALA 3 IV 116 100006.00 ROAD ROAD FP115 NALA 3 IV 117 49874.00 CANAL CANAL ROAD NALA 3 IV 118 1536.00 ROAD CANAL FP119 ROAD 4 IV 120 57565.00 CANAL RLY LINE NALA FP 119 5 II 10PART 12568.00 FP 10 PART CANAL NALA FP10PART 16 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 FROM THE ABOVE, IT WOULD BE SEEN THAT FINAL PLOT NOS. 105 AND 117 ON WHICH THE APPELLANT HAS DEVELOPED HOUSING PROJECTS APPEAR IN THE AFORESAID SCHEDULE. THUS, IT IS CLEAR THAT THE APPELLANT GOT DE VELOPMENT RIGHT IN RESPECT OF PLOT NO.105 AND 117 VIDE DEVELOPMENT AGRE EMENT DATED 30.11.1998. AS PER CERTIFICATE NO.533/1 OF SOLAPUR M UNICIPAL CORPORATION, THE TOTAL AREA OF PLOT NO.105 IS ADMEASURING 27912 SQ. MTR AND AS PER CERTIFICATE NO.533/2 OF SOLAPUR MUNICIPAL CORPORATI ON, THE TOTAL AREA OF PLOT NO.117 IS ADMEASURING 49874 SQ.MTR. AS PER THESE CERTIFI CATES, IN RESPECT OF PLOT NO.105, THE FIRST BUILDING PERMISSION FOR COMMENC EMENT OF CONSTRUCTION OF ROW HOUSES WAS ISSUED VIDE LETTER NO.38 D ATED 14.06.1999 AND COMPLETION CERTIFICATE IN RESPECT OF THE ROW HOU SES SITUATED AT PLOT NO. 105 WAS ALSO ISSUED LATER. SIMILARLY, IN RESPECT OF PLOT NO. 117, THE BUILDING PERMISSION FOR COMMENCEMENT OF CONSTRUCTION OF ROW HOU SES WAS ISSUED ON 26.09.2000 AND COMPLETION CERTIFICATE WAS ISSUED MUCH LATER. IN VIEW OF THE ABOVE, IT IS HELD THAT THE CONCLUSION OF THE ASSESSING OF FICER THAT THE DEVELOPMENT OF THE TWO PROJECTS SITUATED ON FINAL PL OT NOS. 105 AND 117, T.P.SCHEME NO.4, MURARJI PETH, SOLAPUR COMMENCED BE FORE 01.10.1998 IS FACTUALLY INCORRECT. SIMILARLY, THE CONCLUSION ABOUT THE AREA BEING LESS THAN ONE ACRE IS ALSO FACTUALLY INCORRECT. 2.6.1 FROM THE FOREGOING DISCUSSION, IT IS CLEAR THAT THE APPELLANT HAS COMMENCED DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON FINAL PLOT NOS. 105 AND 117 AFTER THE 1 ST DAY OF OCTOBER, 1998 AND THE PROJECT IS ON THE SIZE OF PLOT OF LAND WHICH IS MORE THAN ONE ACRE AS IS CLEAR FROM THE CERTIFICATES OF SOLPAUR MUNICIPAL CORPORATION. 2.6.2 IN VIEW OF THE ABOVE AND IN VIEW OF THE SUBMISSI ONS OF THE APPELLANT WHICH HAVE BEEN DISCUSSED HERE-IN-BEFORE, IT IS HELD TH AT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DENYING DEDUCTION TO THE APPELLANT IN RESPECT OF PROFIT OF RS.2,17,27,975/- FROM PROJECT ON PLOT NO. 105 AND IN RESPECT OF PROFIT OF RS.1,05,00,000/- FROM PROJECT ON PLOT NO.1 17. IN CONCLUSION, IT IS HELD THAT IN RESPECT OF BOTH THE PROJECTS SITUATED AT FINAL PLOT NOS. 105 AND 117, THE APPELLANT IS ENTITLED TO DEDUCTION U/S.80IB( 10) OF THE INCOME TAX ACT, 1961 AND ACCORDINGLY DEDUCTION U/S.80IB(10) OF THE INCOME TAX ACT, 1961 IS GRANTED TO THE APPELLANT THE 1 ST GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE APPELLANT. 19. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LD.CIT(A) ERRED IN HOLDING THAT THE ASSESSEE CO MMENCED CONSTRUCTION AFTER 01-10-98, THUS FULFILLING THE COND ITION U/S.80IB(10)(A) OF THE I.T. ACT. 2. THE LD.CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE LAYOUT OF THE PLOTS WAS SANCTIONED ON 04-08-1997 BY ASSTT. DIRECTOR, TOWN PLANNING, SOLAPUR MUNICIPAL CORPORATION AND AS SUCH DEVELOPMENT OF THE PROJECT COMMENCED PRIOR TO 01-10-98. 3. THE LD.CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH UMA SAHAKARI CO. OP. SOCIETY ON 21-09- 98 FOR DEVELOPMENT AND CONSTRUCTION OF THE SAID PLOT OF LAND. 17 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 4. THE LD.CIT(A) ERRED IN HOLDING THAT THE ASSESSEES P ROJECT WAS ON A PLOT OF LAND ADMEASURING MORE THAN AN ACRE, THUS FULF ILLING THE CONDITION U/S. 80IB(10)(B). 5. THE LD.CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAD ENTERED INTO SEPARATE AGREEMENTS WITH INDIVIDUAL PLOT OWNERS AND THE SIZE OF EACH PLOT WAS 1000 SQ.FT. ONLY. AS SUCH THE REQ UIREMENT OF 80IB(10)(B) WAS NOT FULFILLED. 6. THE ORDER OF THE CIT(A) BE VACATED AND THAT OF T HE A.O. BE RESTORED. 7. THE APPELLANT CRAVES LEAD TO ADD, ALTER OR AMEND THE GROUNDS OF APPEAL. 20. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY OPPOSE D THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE LD.CIT(A) HAS NOT PROP ERLY GONE THROUGH THE DETAILS AND ALLOWED THE CLAIM OF DEDUCTION MAD E BY THE ASSESSEE U/S.80IB(10). REFERRING TO PARA 10.5 AND 10.6 OF THE ORDER OF THE AO THE LD. DEPARTMENTAL REPRESENTATIVE DREW THE A TTENTION OF THE BENCH TO THE FINDINGS GIVEN BY THE AO ACCORDING TO WHICH ON PLOT NOS. 31 & 32 WHICH ARE SOLD ON 12-02-2002 AND ON PLOT NOS. 8 1 & 82 SOLD ON 01-01-2002 NO CONSTRUCTION WAS DONE BY THE ASSESS EE. THEREFORE, IT CANNOT BE SAID THAT IT IS A PROJECT AND IT IS AN ISOLATED CONTRACT FOR CONSTRUCTION ON INDIVIDUAL PLOTS ALLOTTED TO THE MEMBERS. HE SUBMITTED THAT THE AO HAS GIVEN A FINDING THAT THE COMMENCEMENT O F WORK HAS STARTED PRIOR TO 01-10-1998 AND THE SIZE OF PLOT IS LESS THAN ONE ACRE . 21. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THERE IS A DIFFERENCE BETWEEN THE LAYOUT PLAN AND BUILDING PLAN. HE SUBMITTED T HAT THE AO HAS WRONGLY CONSIDERED THE LAYOUT PLAN WHICH WAS SANCTIO NED PRIOR TO 01-10-1998 AS THE BUILDING PLAN. THE CIT(A) AFTER CORRECTL Y APPRECIATING THE FACTS HELD THAT THE BUILDING PLAN HAS BEE N SANCTIONED ONLY AFTER 01-10-1998. REFERRING TO THE DECISION OF THE P UNE BENCH OF THE TRIBUNAL IN THE CASE OF RAHUL CONSTRUCTION COMPANY VS . ITO 18 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 REPORTED IN 32 CCH 292 HE SUBMITTED THAT THE TRIBUNAL I N THE SAID DECISION HELD THAT FOR THE ELIGIBILITY OF DEDUCTION PROVIDED U/ S.80IB(10) OF THE ACT, THE DATE ON WHICH THE BUILDING PLAN OF SUCH HO USING PROJECT HAS BEEN FIRSTLY APPROVED BY THE LOCAL AUTHORITY WILL BE T REATED AS APPROVAL IN RESPECT OF THE HOUSING PROJECT. COMPLETE CON STRUCTION OF SUCH BUILDING PLAN FIRST APPROVED BY THE LOCAL AUTHORITY WILL B E TAKEN AS THE DATE OF COMPLETION WHEN COMPLETION CERTIFICATE HAS BEE N ISSUED BY THE LOCAL AUTHORITY. IT HAS FURTHER BEEN HELD IN THE SAID DECISION THAT APPROVAL OF THE HOUSING PROJECT AND APPROVAL OF BUILDING PLA N ARE TWO DIFFERENT CONCEPTS. RELYING ON THE DECISION OF THE BANGALOR E BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. BRIGADE ENTERPRISES R EPORTED IN 119 TTJ 269 (BANGALORE) AND THE DECISION OF THE MUMBAI BEN CH OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANISATION VS. ITO RE PORTED IN 115 TTJ 485 (MUMBAI) THE TRIBUNAL HAS HELD THAT PLAN FOR DEVE LOPMENT IS ONLY A WORK ORDER AND NOT FINAL PLAN SANCTIONED BY THE LO CAL AUTHORITY. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE ING IN ORDER BE UPHELD AND THE GROUND RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 22. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A ) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO C ONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE AO DENIED THE CLAIM OF DEDUCTION U/S.80IB(10) OF THE ACT ON TH E GROUND THAT THE PROJECT ON WHICH THE ASSESSEE HAS CLAIMED DE DUCTION U/S.80IB(10) WAS SANCTIONED PRIOR TO 01-10-1998 AND THE ASSESSEE HAS COMMENCED WORK PRIOR TO 01-10-1998. THEREFORE, THE CON DITION OF COMMENCING THE WORK AFTER 01-10-1998 IS NOT FULFILLED. THE A O FURTHER NOTED THAT THE MINIMUM AREA OF THE PROJECT WHICH SHOULD BE ONE ACRE IS ALSO NOT FULFILLED. THE SAME WAS BASED ON A SAMPLE COPY OF T HE 19 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 AGREEMENT TO LEASE ENTERED INTO BY UMA COOPERATIVE HOU SING SOCIETY LTD WITH SHRI A.A.M. KALADGI ON 21-09-1998 ACCORDING TO WH ICH THE CONSIDERATION FOR THE PLOT IS RS.48,000/- OUT OF WHICH AN AM OUNT OF RS.47,000/- HAS BEEN PAID BY SHRI KALADGI ON 11-11-1997. SIMILARLY, THE AGREEMENT FOR CONSTRUCTION IS ALSO RS.2,02,000/- WHICH HAS BEEN ENTERED INTO SIMULTANEOUSLY. FURTHER, EVERY PLOT HOLDER HAS ENTERED INTO SEPARATE CONTRACT FOR CONSTRUCTION WITH THE ASSESS EE. THEREFORE, THE PLOT AREA IS MERELY OF 1,000 SQ.FT AND IT CANNOT BE SA ID THAT THE PROJECT IS OF ONE ACRE AND ABOVE. ACCORDING TO THE AO THE SOCIETY HAS ALSO NOT TRANSFERRED THE DEVELOPMENT RIGHTS TO THE ASS ESSEE. HE HAS BEEN GIVEN RIGHTS TO DEVELOP THE PLOTS, TO FIND OUT THE PROS PECTIVE LESSEES AND TO FINALISE THE CONSIDERATION AND TO RECEIVE IT AS REFUN D OF HIS INVESTMENT. THE OTHER REASON GIVEN BY THE AO IS THAT P LOT NOS. 31 & 32 SOLD ON 12-02-2002 AND PLOT NOS. 81 & 82 SOLD ON 01-01-2002 DOES N OT HAVE ANY CONSTRUCTION. THEREFORE, THIS IS NOT A PROJECT B UT IS AN ISOLATED CONTRACT FOR CONSTRUCTION OF INDIVIDUAL PLOTS ALLOTTED TO THE MEMBERS. 23. WE FIND THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS COMMENCED DEVELOPMENT A ND CONSTRUCTION OF THE HOUSING PROJECT ON FINAL PLOT NOS. 105 AND 117 AFTER IST DAY OF OCTOBER 1998 AND THE PROJECT IS ON THE SIZ E OF PLOT OF LAND WHICH IS MORE THAN ONE ACRE. WHILE DOING SO, HE RELIED ON T HE CERTIFICATES ISSUED BY SOLAPUR MUNICIPAL CORPORATION. IT IS THE SUBMISSION OF THE REVENUE THAT THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS COMMENCED CONSTRUCTION AFTER 01 -10-1998 AND THAT THE SIZE OF THE PLOT IS MORE THAN ONE ACRE. IT IS T HE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE LAYOUT PLAN IS DIFFERENT FROM THE BUILDING PLAN AND THAT THE AREA OF THE PROJECT IS MORE THAN ONE ACR E. 20 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 24. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, WE FIND THE ASSESSEE HAS DEVELOPED AND BUILT RESIDENTIAL HOUSING PROJE CT AT FINAL PLOT NOS. 105 AND 117 ON LAND AREA OF 27912 SQ.MTRS AND 49874 SQ.MTRS RESPECTIVELY. AS PER THE CERTIFICATE ISSUED BY S OLAPUR MUNICIPAL CORPORATION DATED 27-03-2006, A COPY OF WHICH IS PLACED AT PAGE 521 OF THE PAPER BOOK, WE FIND THE ASSESSEE HAS SUBMITTED THE BUILDING PLAN OF RESIDENTIAL HOUSING SCHEME OF LAND LOCATED AT FINAL PLOT OF 10 5, TP SCHEME NO.4, MURARJI PETH, SOLAPUR. THE TOTAL AREA ADME ASURING 27912 SQ.MTRS IS FOR CONSTRUCTION OF 180 ROW HOUSES AND THE FIRST BUILDING PERMISSION FOR COMMENCEMENT OF CONSTRUCTION OF ROW HOUSES WAS ISSUED VIDE LR.NO.38 DATED 14-06-1999. SIMILARLY, FROM T HE CERTIFICATE ISSUED BY SOLAPUR MUNICIPAL CORPORATION DATED 2 7-03-2006, WE FIND THE CORPORATION HAS CERTIFIED THAT THE ASSESSEE S UBMITTED THE BUILDING PLAN OF RESIDENTIAL HOUSING SCHEME OF LAND LOCATED A T FINAL PLOT OF 117, TP SCHEME NO.4, MURARJI PETH, SOLAPUR ON A LAND ARE A OF 49874 SQ.MTRS FOR CONSTRUCTION OF 152 ROW HOUSES AND THE CORP ORATION HAS ISSUED THE BUILDING PERMISSION FOR COMMENCEMENT OF CONSTRU CTION OF ROW HOUSES VIDE BUILDING PERMISSION LR. NO. 936 DATED 26-0 9-2000. WE FIND VIDE LETTER DATED 27-03-2006 ADDRESSED TO THE A O, A COPY OF WHICH IS PLACED AT PAGE 75 OF THE PAPER BOOK, THE ASSESS EE HAS GIVEN DETAILS BEFORE THE AO JUSTIFYING ITS CLAIM FOR DEDUCTION U/S.8 0IB(10). FROM THE CERTIFICATE ISSUED BY SOLAPUR MUNICIPAL CORPORATION , SOLAPUR WE FIND THE SOLAPUR MUNICIPAL CORPORATION HAS ALSO ISSUED T HE COMPLETION CERTIFICATE VIDE COMPLETION CERTIFICATE NOS. 222 DA TED 23-01- 2003 AND 261 DATED 29-03-2003 FOR COMPLETION OF CONSTR UCTION OF ROW HOUSES ON PLOT NO.105. SIMILARLY, THE COMPLETION CERTIFICATE N OS. 245 AND 246 DATED 03-03-2003 AND COMPLETION CERTIFICATE NO. 2 60, 262, AND 263 DATED 29-03-2003 WERE ISSUED AGAINST CONSTRUCTION OF ROW HOUSES 21 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 ON PLOT NO.117. FURTHER, THE LD. DEPARTMENTAL REPRESENT ATIVE COULD NOT CONTROVERT THE SUBMISSION OF THE ASSESSEE BEFORE CI T(A) THAT THE EXPENDITURE IN RESPECT OF DEVELOPMENT AND CONSTRUCTION O F ROW HOUSES ON ABOVE PLOTS HAS BEEN REFLECTED IN THE AUDITED ACCOUNT S ONLY AFTER 01-10-1998. 25. THE PUNE BENCHES OF THE TRIBUNAL ARE CONSISTENTLY TAKING THE VIEW THAT LAYOUT PLAN IS DIFFERENT FROM BUILDING PLAN. WE FIND THE PUN E BENCH OF THE TRIBUNAL IN THE CASE OF RAHUL CONSTRUCTION COMPANY VS. ITO REPORTED IN 51 SOT 192 AFTER CONSIDERING THE DECISION OF T HE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. BRIGADE ENTE RPRISES PVT. LTD. (SUPRA) HAS HELD THAT APPROVAL OF THE HOUSING PROJECT AND APPROVAL OF BUILDING PLAN ARE TWO DIFFERENT CONCEPTS. IT WAS OBSERVE D THAT PLAN FOR DEVELOPMENT IS ONLY A WORK ORDER AND NOT FINAL PLAN SA NCTIONED BY THE LOCAL AUTHORITY. 26. THE FINDING GIVEN BY THE LD.CIT(A) THAT THE SALE CERTIFICAT E WAS ISSUED ONLY ON 29-08-1998 IN FAVOUR OF JUNI MILL BEKAR KAMG AR WARASDAR ANI JANHIT SANGHARSHA SAMITI AND THEREAFTER ON 30-11-1998 DEVELOPMENT AGREEMENT WAS EXECUTED BETWEEN UMA COOPE RATIVE HOUSING SOCIETY CALLED AS THE OWNER SOCIETY OF THE FIRST PA RT, SHRI SHARAD M. MUTHA, DEVELOPER OF THE SECOND PART AND SHRI A TUL S. MUNOT, CONSENTING PARTY OF THE THIRD PART IN THE DEVELOPMENT AG REEMENT COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENT ATIVE. FURTHER, THE FINDING GIVEN BY THE CIT(A) THAT THE ASSESSEE GOT DEV ELOPMENT RIGHT IN RESPECT OF PLOT NOS. 105 AND 117 VIDE DEVELOPMENT AGRE EMENT DATED 30-11-1998 AND AS PER THE CERTIFICATE ISSUED BY SOLAPUR MUNICIPAL CORPORATION VIDE CERTIFICATE NO.533/1 STATING THAT THE ARE A OF PLOT 105 IS 27912 SQ. MTRS AND AS PER CERTIFICATE NO.533/2 THE TOT AL AREA OF PLOT 22 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 NO.117 IS 49874 SQ.MTRS ALSO COULD NOT BE CONTROVERED BY THE LD. DEPARTMENTAL REPRESENTATIVE. SINCE ON THE BASIS OF THE C ERTIFICATES ISSUED BY THE SOLAPUR MUNICIPAL CORPORATION THE LD.CIT(A) CA ME TO THE CONCLUSION THAT ASSESSEE HAS COMMENCED DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT AFTER 01-10-1998 AN D THE PLOT AREA IS MORE THAN ONE ACRE AS PER THE CERTIFICATES ISSUED BY THE SOLAPUR MUNICIPAL CORPORATION, THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE TO NEGATE THE FINDINGS GIVEN BY T HE CIT(A), WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ALLOWING THE CLAIM OF DED UCTION U/S.80IB(10) MADE BY THE ASSESSEE. IN VIEW OF THE ABOVE AND IN VIEW OF THE DETAILED DISCUSSION BY THE LD.CIT(A) ALLOWING THE CLAIM O F DEDUCTION U/S.80IB(10) MADE BY THE ASSESSEE, WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, THE ORDER OF THE LD.CIT(A) IS UPHELD AND THE G ROUNDS RAISED BY THE REVENUE ARE DISMISSED. ITA NO.1103/PN/2011 (A.Y. 2004-05) : 27. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 31-10-2004 DECLARING TOTAL INCOME OF RS.1,57,694 /- AFTER CLAIMING DEDUCTION OF RS.45 LAKHS U/S.80IB(10) IN RESPECT OF TH E HOUSING PROJECT AT SOLAPUR. THE AO DENIED THE BENEFIT OF DEDUCTION U/S.80IB(10) ON THE GROUND THAT THE COMMERCIAL AREA IN TH E SAID PROJECT BEING 5889 SQ.FT. IS MUCH MORE THAN THE MAXIMUM PRESCRIBED COMMERCIAL AREA OF 2000 SQ.FT. AND THE ASSESSEE HAS NOT O BTAINED THE COMPLETION CERTIFICATE BEFORE 31-03-2008. THE AO FURTHER D ISALLOWED RS.5,92,487/- BEING EXCESS DEPRECIATION AND RS.27,500/- ON ACCOUNT OF DIVIDEND RECEIVED FROM CORPORATION BANK. 28. THE ASSESSEE DID NOT CHALLENGE THE DISALLOWANCE OF DEP RECIATION AND ADDITION ON ACCOUNT OF DIVIDEND. SO FAR AS THE DISALLOWA NCE 23 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 U/S.80IB(10) IS CONCERNED THE LD.CIT(A) ALLOWED THE CLAIM OF TH E ASSESSEE MADE U/S.80IB(10) BY OBSERVING AS UNDER : 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE LAW AS ARE APPARENT FROM RECORD IN RESPECT OF GROUNDS UNDER CONSI DERATION. BOTH THE ASSESSING OFFICER AND THE APPELLANT AGREE THAT THE FACT S OF THE CASE ON THE ABOVE ISSUE IS SIMILAR IN ALL RESPECT TO A.Y. 2005-06. I HAVE PERUSED THE MATERIALS RELEVANT TO THE ISSUE. FROM THE PERUSAL OF T HE ABOVE, IT IS CLEAR THAT THE APPELLANT HAS RAISED THE GROUNDS OF APPEAL RELATIN G TO DEDUCTION U/S 80IB(10). THIS DEDUCTION RELATES TO ROW HOUSE PROJECT MADE BY APPELLANT IN F.P. NO. 117 OF JUNI MILL COMPOUND, SOLAPUR AND THI S DEDUCTION ON THIS PROJECT HAS BEEN CLAIMED SINCE A.Y. 2003-04. THE DEDU CTION HAS BEEN DISALLOWED SINCE INCEPTION. MY LEARNED PREDECESSOR ALLO WED IT IN A.Y. 2003- 04. SIMILAR APPEAL WAS ALLOWED IN A.Y. 2005-06 ALSO AFTER DETAILED DISCUSSIONS. AFTER PLACING RELIANCE ON THE APPELLATE O RDERS OF A.Y. 2003-04 AND 2005-06, WHEREIN THE INVOLVED ISSUES HAVE BEEN DISC USSED IN DETAIL, THE APPEAL REFERRED TO ABOVE IS ALLOWED IN THIS YEAR ALSO . AS THE FACTS AND CIRCUMSTANCES AS WELL AS THE LAW ARE EXACTLY SAME, THE A BOVE REFERRED GROUNDS ARE TREATED AS DECIDED ACCORDINGLY. THEREFO RE, GROUNDS NO. 1 TO 4 ARE TREATED AS ALLOWED. 29. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LD.CIT(A) GROSSLY ERRED IN DELETING THE ADDIT ION ON ACCOUNT OF THE CESSATION OF A LIABILITY ACQUIRED ON ACCOUNT OF F INANCING A TRADING ASSET MORE SO WHEN THE TRADING ASSET WAS RELEASED FROM MORTGAG E ONLY ON ACCOUNT OF CESSATION OF LIABILITY. 2. THE LD.CIT(A) GROSSLY ERRED IN CONSIDERING THE CESSAT ION OF LIABILITY ON A MORTGAGED ASSETS AS CESSATION OF CAPITAL LIABILITY E SPECIALLY WHEN THE ASSET WAS PART OF STOCK-IN-TRADE ON THE SALE OF WHICH DE DUCTION U/S.80IB(10) OF THE ACT WAS CLAIMED. 30. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUN DS DO NOT EMANATE FROM THE ORDER OF THE CIT(A). THE AO IN THE BODY OF THE ASSESSMENT ORDER HAS DISALLOWED ONLY AN AMOUNT OF RS.45 LAKHS ON ACCOUNT OF DEDUCTION CLAIMED U/S.80IB(10), RS.5,92,487/- ON ACCOUNT OF EXCESS DEPRECIATION AND RS.27,500/- ON ACCOUNT OF DIVIDE ND RECEIVED FROM THE CORPORATION BANK. THERE IS NO SUCH DISALLOWANCE ON ACCOUNT OF CESSATION OF LIABILITY AND THERE IS NO DISCUSSION BY THE CI T(A) ON THIS 24 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 ISSUE. THEREFORE, THE GROUNDS RAISED BY THE REVENUE BEIN G INFRUCTUOUS ARE DISMISSED. 31. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO.1105/PN/2011 (A.Y. 2006-07) : 32. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 30-10-2006 DECLARING TOTAL INCOME OF RS.2,83,590 /- AFTER CLAIMING DEDUCTION OF RS.45 LAKHS U/S.80IB(10) IN RESPECT OF TH E HOUSING PROJECT AT SOLAPUR. THE AO DENIED THE BENEFIT OF DEDUCTION U/S.80IB(10) ON THE GROUND THAT THE COMMERCIAL AREA IN TH E SAID PROJECT BEING 5875 SQ.FT. IS MUCH MORE THAN THE MAXIMUM PRESCRIBED COMMERCIAL AREA OF 2000 SQ.FT. AND THE ASSESSEE HAS NOT O BTAINED THE COMPLETION CERTIFICATE BEFORE 31-03-2008. THE AO FURTHER D ISALLOWED RS.1,10,000/- OUT OF VARIOUS EXPENSES ON ESTIMATE BASIS FO R WANT OF SUPPORTING VOUCHERS. 33. THE ASSESSEE DID NOT CHALLENGE THE DISALLOWANCE OF EXP ENSES. SO FAR AS THE DISALLOWANCE U/S.80IB(10) IS CONCERNED THE LD.CI T(A) ALLOWED THE CLAIM OF THE ASSESSEE MADE U/S.80IB(10) BY OBSERVING AS UNDER : 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE LAW AS ARE APPARENT FROM RECORD IN RESPECT OF GROUND UNDER CONSI DERATION. BOTH THE ASSESSING OFFICER AND THE APPELLANT AGREE THAT THE FACT S DF THE CASE ON THE ABOVE ISSUE IS SIMILAR IN ALL RESPECT TO A.Y. 2005-06. I HAVE PERUSED THE MATERIALS RELEVANT TO THE ISSUE. FROM THE PERUSAL OF TH E ABOVE, IT IS CLEAR THAT THE APPELLANT HAS RAISED THE GROUNDS OF APPEAL RELATIN G TO DEDUCTION U/S 80IB(10). THIS DEDUCTION RELATES TO ROW HOUSE PROJECT MADE BY APPELLANT IN P.P. NO. 117 OF JUNI MILL COMPOUND, SOLAPUR AND THI S DEDUCTION ON THIS PROJECT HAS BEEN CLAIMED SINCE A.Y. 2003-04. THE DEDU CTION HAS BEEN DISALLOWED SINCE INCEPTION. MY LEARNED PREDECESSOR ALLO WED IT IN A.Y. 2003- 04. SIMILAR APPEAL WAS ALLOWED IN A.Y. 2005-06 ALSO AFTER DETAILED DISCUSSIONS. AFTER PLACING RELIANCE ON THE APPELLATE OR DERS OF A.Y. 2003-04 AND 2005-06, WHEREIN THE INVOLVED ISSUES HAVE BEEN DISC USSED IN DETAIL, THE APPEAL REFERRED TO ABOVE IS ALLOWED IN THIS YEAR ALSO . AS THE FACTS AND CIRCUMSTANCES AS WELL AS THE LAW ARE EXACTLY SAME, THE A BOVE REFERRED GROUNDS ARE TREATED AS DECIDED ACCORDINGLY. THEREFORE , GROUNDS NO. 1 AND 2 ARE TREATED AS ALLOWED. 25 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 34. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US IN THE FOLLOWING GROUNDS : 1. THE LD.CIT(A) GROSSLY ERRED IN DELETING THE ADDIT ION ON ACCOUNT OF THE CESSATION OF A LIABILITY ACQUIRED ON ACCOUNT OF F INANCING A TRADING ASSET MORE SO WHEN THE TRADING ASSET WAS RELEASED FROM MORTGAG E ONLY ON ACCOUNT OF CESSATION OF LIABILITY. 2. THE LD.CIT(A) GROSSLY ERRED IN CONSIDERING THE CESSAT ION OF LIABILITY ON A MORTGAGED ASSETS AS CESSATION OF CAPITAL LIABILITY E SPECIALLY WHEN THE ASSET WAS PART OF STOCK-IN-TRADE ON THE SALE OF WHICH DE DUCTION U/S.80IB(10) OF THE ACT WAS CLAIMED. 35. FROM THE ABOVE GROUNDS OF APPEAL FILED BY THE REVENU E, WE FIND THE ABOVE GROUNDS DO NOT EMANATE FROM THE ORDER OF TH E CIT(A) OR THE ORDER OF THE AO. THERE IS NO SUCH DISALLOWANCE ON ACCOU NT OF CESSATION OF LIABILITY AS MENTIONED IN THE GROUNDS OF APPEAL. THEREFORE , THE GROUNDS RAISED BY THE REVENUE IN OUR OPINION ARE INFRUCTU OUS. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 36. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. GROUNDS IN ITA NO.1430/PN/2012 (A.Y. 2007-08) : 37. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A)-I, PUNE HAS ERRED IN ALLOWING THE CLAIM UNDER SECTION 80IB(10) OF THE INCOME-TAX ACT IN SPITE OF THE PART COMPLETION CERTI FICATE ISSUED BY THE SOLAPUR MUNICIPAL CORPORATION; THE FINAL COMPLETION CERTIFICATE NOT HAVING BEEN SUBMITTED BY 31-03-2008. 2. THE LEARNED CIT(A)-I, PUNE HAS FAILED TO CONSIDER THAT THE CERTIFICATE SUBMITTED IS IN GENERAL WHICH FAILS TO PROVIDE BASIC IN FORMATION SUCH AS HOUSE NO., DATE OF COMMENCEMENT AREA ETC., WITH RESPE CT TO WHICH THE COMPLETION CERTIFICATE IS ISSUED. 3. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD. CIT (APPEALS) MAY BE V ACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4 THE APPELLANT CRAVES TO ADD, AMEND, ALTER OR DELE TE ANY OF THE ABOVE GROUND OF APPEAL DURING THE COURSE OF APPELLATE PROC EEDINGS BEFORE THE HON'BLE TRIBUNAL; 26 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 38. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE COM PANY FILED THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 31 -10-2007 DECLARING TOTAL INCOME OF RS.91,779/- AFTER CLAIMING DEDUCTION OF RS.97,68,001/- U/S.80IB(10). DURING THE IMPUGNED ASSESSMENT YEAR THE COMPANY HAS COME INTO EXISTENCE AND THE BUSINESS, W HICH WAS EARLIER CARRIED ON BY SHRI SHARAD M. MUTHA IN HIS INDIVIDUAL C APACITY, WAS TAKEN OVER BY THE ASSESSEE COMPANY AS A GOING CO NCERN. THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION H AS DEVELOPED THE PROJECT OF UMA COOPERATIVE HOUSING SOCIETY AT SOLAPUR. THIS PRO JECT KNOWN AS UMA ROW HOUSING PROJECT WAS BEING DEVELOPED O N SOME OF THE SUB PLOTS OF FINAL PLOT NO.117 OF TP SCHEME NO.4 AT SOLAP UR. THE CLAIM U/S.80IB(10) WAS DISALLOWED BY THE AO FOR THE IMPUGNED ASSESSMENT YEAR ON THE GROUND THAT (1) THE PROJECT W AS NOT COMPLETED BEFORE 31-03-2008, (2) THE RESIDENTIAL PROJECT INCLUDED COM MERCIAL AREA OF 545.78 SQ.MTRS. I.E. 5889 SQ.FT. WHICH WAS MORE THAN THE P ERMISSIBLE COMMERCIAL CONSTRUCTION AREA UPTO 2000 SQ.FT. AS PER THE AMENDED PROVISIONS OF SECTION 80IB(10) OF THE ACT. FURTHER, THE ASS ESSEE HAS CONSTRUCTED ONLY 161 ROW HOUSES OUT OF 167 ROW HOUSE S SANCTIONED. THE ARGUMENT OF THE ASSESSEE BEFORE THE AO WAS THAT A LTHOUGH THE ROW HOUSES WERE COMPLETED BEFORE 31-03-2008 AND THE APPLICA TION FOR THE COMPLETION CERTIFICATES WERE ALSO FILED BY THE ASSESSEE BEFO RE 31-03-2008, HOWEVER, THE SOLAPUR MUNICIPAL CORPORATION ISSU ED COMPLETION CERTIFICATE IN RESPECT OF SOME OF THE HOUSES IN J ANUARY 2009. IT WAS ARGUED THAT THE DELAY IN ISSUING THE COMPLETION CE RTIFICATE BY THE CORPORATION IS NOT ATTRIBUTABLE TO THE ASSESSEE. DOCUM ENTARY EVIDENCES WERE PRODUCED BEFORE THE AO TO SHOW THAT THE ROW HOU SES WERE NOT ONLY CONSTRUCTED BEFORE 31-03-2008 BUT THE POSSESSION OF TH E RESPECTIVE ROW HOUSES WERE ALSO GIVEN TO THE MEMBERS BEFORE 31-03-200 8 WITH ALL THE 27 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 FACILITIES INCLUDING LIGHT, WATER, DRAINAGE, INTERNAL ROADS AND SO ON WAS ALSO REJECTED BY THE AO. HOWEVER, THE AO REJECTED THE ABOVE ARGUMENT OF THE ASSESSEE ON THE GROUND THAT COMPLETION CERTIFICATE HAS NOT BEEN OBTAINED BY THE ASSESSEE BEFORE 31-03-2008. HE ACCORD INGLY DISALLOWED THE CLAIM OF DEDUCTION U/S.80IB(10) 39. IN APPEAL THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESS EE BY OBSERVING AS UNDER : 3.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE LAW AS ARE APPARENT FROM THE RECORDS. THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND HAS CLAIMED DEDUCTION U/S.80I B(10) OF RS.97,68,001/- ON UMANAGARI ROW HOUSE PROJECT CONSTRUC TED ON THE JUNI MILL LAND OF SOLAPUR. THIS PROJECT WAS EARLIER CARRI ED OUT BY SHRI SHARAD MUTHA IN HIS INDIVIDUAL CAPACITY AND THE DEDUCTIONS C LAIMED U/S.80IB(10) FROM THIS PROJECT IN A.Y. 2003-04 TO A.Y. 2006-07, W ERE ALSO DISALLOWED BY THE ASSESSING OFFICER IN ASSESSMENTS MADE FOR THE RESPECTIVE ASSESSMENT YEARS. THESE DEDUCTIONS HOWEVER, HAS BEEN ALLOWED BY M Y PREDECESSOR IN A.Y. 2003-04 AND FOLLOWING THE SAME AND AFTER CONSIDE RING THE MATERIALS PLACED ON RECORD THE SAME WERE ALSO ALLOWED BY ME IN A.Y. 2004-05 TO A.Y. 2006-07. THE APPELLANT HAS CLAIMED THAT THE SAME PROJ ECT HAS NOW BEEN TAKEN OVER BY THE APPELLANT COMPANY AND THE SAME DED UCTION HAS BEEN CLAIMED ON THE SAME PROJECT IN THIS ASSESSMENT YEAR ALSO. THE ASSESSING OFFICER ALSO HAS ACCEPTED THAT THE DEDUCTION U/S 80IB( 10) CLAIMED IN THIS ASSESSMENT YEAR RELATES TO THE SAME PROJECT. THE ASSESSING OF FICER, HOWEVER, HAS RELIED UPON HIS FINDING GIVEN IN EARLIER YEARS FOR THIS PROJECT IN THE CASE OF SHRI SHARAD MUTHA, IN A.Y. 2003-04 TO A. Y. 2006-07, FOR MAKING THIS DISALLOWANCE AND THE SAME CAN BE SEEN FROM THE RE LEVANT PORTION OF THE ASSESSMENT ORDER QUOTED ABOVE. THIS MATTER HAS BEEN EXAMI NED AND IT CAN BE SEEN THAT THE FACTS AND THE LAW ON THIS ISSUE ARE SA ME AND THEREFORE, THE DECISION TAKEN BY MY PREDECESSOR AS WELL AS THE UNDERSIG NED ON THE ABOVE ISSUE IS REQUIRED TO BE FOLLOWED IN THIS YEAR ALSO. CONSI DERING THE SAME, AS WELL AS THE FACT THAT THE MILIEU IN WHICH THE ABOVE DECISIONS WERE TAKEN BY ME AS WELL AS MY PREDECESSOR HAS BEEN FURTHER LIBERALIZE D BY THE SUPERIOR COURTS AND THEREFORE, NOW IN CONSIDERATION OF THE REC ENT JUDGMENTS PASSED BY THE JURISDICTIONAL TRIBUNAL AND THE HIGH COURT AL SO NO CHANGE IS REQUIRED IN THE FINDING GIVEN IN EARLIER ASSESSMENT YEARS. THE HO N'BLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES HAS CLEARLY UPHEL D THAT THE RESTRICTION OF 2000 SQ.FT. OR 5% OF THE COMMERCIAL AR EA BROUGHT IN THE STATUTE W.E.F. A.Y. 2005-06 IS ONLY PROSPECTIVE IN NAT URE AND IT CANNOT BE APPLIED IN EARLIER ASSESSMENT YEARS. IT HAS BEEN HELD TH AT SUCH LIMIT ON THE COMMERCIAL AREA IN EARLIER ASSESSMENT YEARS WILL BE GOVE RNED BY THE LOCAL DEVELOPMENT RULES AS NO SUCH RESTRICTION APPEARS IN THE INCOME TAX PROVISIONS. THE HON'BLE ITAT, PUNE IN THE CASE OF OPEL SHELTERS PVT. LTD. AND D.S. KULKARNI & ASSOCIATES HAVE HELD THAT THE LAW AS WA S EXISTING ON THE DATE OF FIRST APPROVAL OF THE PROJECT (COMMENCEMENT CERTI FICATE) WILL APPLY AND ON SUCH INTERPRETATION IT HAS BEEN HELD THAT IF THE P ROJECTS ARE APPROVED BEFORE 31-03-2005, THE DEDUCTION IN A.Y. 2005-06 ON WARDS WILL ALSO BE GOVERNED BY THE LAW AS WAS EXISTING AT THE TIME OF TH E FIRST APPROVAL. WHAT 28 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 CONSTITUTES A PROJECT HAS FURTHER BEEN ELABORATED BY I TAT, PUNE IN THE CASE OF APOORVA PROPERTIES, PUNE ETC. FOR THE AFORESAID DISCUSSIONS MADE HEREINABOVE, THE GROUNDS OF APPEAL REFERRED TO ABOVE RELATING TO CLAIM OF DEDUCTION U/S.80IB(10) HAS TO BE ALLOWED. GROUNDS NO. 1 TO 6 ARE ALLOWED. 40. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 41. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A). SO FAR AS THE DISALLOWANCE U/S.80IB (10) ON ACCOUNT OF NON-COMPLETION OF THE PROJECT BEFORE 31-03-20 08 IS CONCERNED, WE FIND THE ASSESSEE HAS APPLIED TO SOLAPUR MU NICIPAL CORPORATION FOR ISSUE OF COMPLETION CERTIFICATE BEFORE 31-03- 2008. THE ASSESSEE HAS ALSO FURNISHED ADEQUATE DETAILS BEFORE THE A O THAT THE ROW HOUSES WERE NOT ONLY CONSTRUCTED BEFORE 31-03-2008 B UT THE POSSESSION OF THE ROW HOUSES WERE ALSO GIVEN TO THE MEMBERS BEFORE 31-03-2008 WITH ALL THE FACILITIES INCLUDING LIGHT, WATER, DRAINAGE, INTERNAL ROA DS AND SO ON. 42. WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. SATISH BORA AND ASSOCIATED VS. ACIT VIDE ITA NOS.713 AND 714/P N/2010 ORDER DATED 07-11-2011 HAS OBSERVED AS UNDER : 19. FOR A READY REFERENCE OUR ABOVE FINDINGS ARE SUM MARISED AS UNDER: 1. IN THE CASE OF PMC, THE COMPLETION CERTIFICATE IN PRESCRIBED FORM ISSUED BY THE LICENSED ARCHITECT ETC. WHO HAS SUPERVISED THE C ONSTRUCTION IS FURNISHED WITH FOUR SETS OF COMPLETION PLAN UNDER RULE 7.6 OF THE DC RULES OF THE PMC. THEREAFTER PMC IS REQUIRED TO RETURN ONE OF THE SETS DULY CERTIFIED AS COMPLETION PLAN TO THE OWNER ALONG WITH THE ISSUE OF FULL OCCUPANCY CERTIFICATE AFTER INSPECTION OF THE WORK U NDER RULE 7.7 OF THE DC RULES. SINCE EXPLANATION (II) TO SECTION 80IB(10)(A) OF THE I.T. ACT REQUIRES COMPLETION CERTIFICATE ISSUED BY THE LOCAL AUTHORITY TO BE TAKEN AS THE DATE OF COMPLETION OF THE CONSTRUCTION, A GENERAL UNDERSTA NDING IN OUR VIEW IS THAT A COMPLETION CERTIFICATE WHICH IS ISSUED BY THE L OCAL AUTHORITY AFTER CONDUCTING INSPECTIONS OF CONSTRUCTION BY IT. IN CASE OF PMC, IT IS ONLY OCCUPANCY CERTIFICATE WHICH IS ISSUED ALONGWITH CERTIF IED COMPLETION PLAN AFTER INSPECTION OF THE CONSTRUCTION BY IT, WE HAVE T REATED THE DATE OF ISSUANCE OF SUCH OCCUPANCY CERTIFICATE ALONGWITH CERTI FIED COMPLETION PLAN 29 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 AS THE DATE OF COMPLETION CERTIFICATE OF THE CONSTRUC TION FOR THE REQUIREMENT OF EXPLANATION (II) TO SECTION 80IB(10)(A) OF THE I .T. ACT. 2. SINCE INFACT PMC DO NOT ISSUE OCCUPANCY CERTIFICAT E GENERALLY IN TIME AND WITH THIS UNDERSTANDING THE LEGISLATURE HAVE ALSO INTRO DUCED A DEEMING PROVISION OF 21 DAYS TO PUT CONSTRAINT UPON PMC, WE A FTER DETAILED DELIBERATION IN PRECEDING PARAGRAPHS HAVE COME TO A CONCLUSION THAT IN CASE OF SMALL OBJECTIONS OF PMC RAISED AFTER EXPIRY OF DEE MING PERIOD OF 21 DAYS UNDER RULE 7.7 OF DC RULES UNDER PMC, THE DATE WHEN THE APPLICANT ACQUIRED DEEMING SANCTION WILL BE TREATED AS THE DATE OF COMPLETION (OCCUPANCY) CERTIFICATE TO MEET OUT THE REQUIREMENT OF EXPLANATION (II) TO SECTION 80IB (10)(A) OF THE ACT. 43. THE PUNE BENCHES OF THE TRIBUNAL ARE CONSISTENTLY TAKING THE VIEW THAT IF THE ASSESSEE HAS DONE WHATEVER POSSIBLE ON ITS P ART FOR ISSUE OF COMPLETION CERTIFICATE, IN THAT CASE THE DELAY IN ISSUE OF COM PLETION CERTIFICATE BY PMC CANNOT BE ATTRIBUTABLE TO THE ASSESSE E FOR NO FAULT ON THE PART OF THE ASSESSEE. ACCORDINGLY, WHEN THE ASSESS EES HAVE COMPLETED THE PROJECTS AND APPLIED FOR THE COMPLETION CE RTIFICATE, DEDUCTION U/S.80IB(10) HAVE BEEN GRANTED TO THE ASSESS EES EVEN THOUGH SUCH COMPLETION CERTIFICATES HAVE NOT BEEN ISSUED AND THE PMC HAS NOT RAISED ANY OBJECTION FOR ANY DEVIATION FROM THE SANCTIONED PLAN. SINCE IN THE INSTANT CASE, THE ASSESSEE HAS COMPLETED CONSTRU CTION OF 161 ROW HOUSES AND HAS OBTAINED PART COMPLETION CERTIFICATE FOR SO ME OF THE ROW HOUSES BEFORE 31-03-2008 AND FOR THE BALANCE ROW HOUSE S, APPLICATION HAS ALREADY BEEN FILED BEFORE PMC FOR ISSUE OF COMPLETION CE RTIFICATE AFTER FULFILLING OTHER CONDITIONS, THEREFORE, THE AO IN OUR OPINIO N IS NOT JUSTIFIED IN DENYING THE DEDUCTION U/S.80IB(10) OF THE I.T. A CT ON THE GROUND THAT COMPLETION CERTIFICATE HAS NOT BEEN OBTAINED BY THE ASSESSEE. 44. AS REGARDS THE OBJECTION OF THE AO THAT OUT OF 167 ROW HOUSES THE ASSESSEE HAS CONSTRUCTED 161 ROW HOUSES, WE FIND THE A SSESSEE HAS NOT CLAIMED BENEFIT OF DEDUCTION U/S.80IB(10) IN RESPECT OF ROW H OUSES THOSE WERE NOT CONSTRUCTED BY IT. IN ANY CASE THE PU NE BENCHES OF THE 30 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 TRIBUNAL ARE ALLOWING PROPORTIONATE DEDUCTION U/S.80IB(10) IN RESPECT OF THAT PART OF THE PROJECT WHICH HAS BEEN COMPLETED IF O THER CONDITIONS ARE SATISFIED. SINCE THE ASSESSEE IN THE INSTANT CASE HAS CLAIMED DEDUCTION U/S.80IB(10) IN RESPECT OF 161 ROW HOUSES OUT OF 167 ROW HOUSES, THEREFORE, THE AO IS NOT JUSTIFIED IN DENYING THE B ENEFIT OF DEDUCTION U/S.80IB(10) FOR THE ENTIRE PROJECT. 45. SO FAR AS THE OBJECTION OF THE AO THAT THE COMMERCIA L AREA HAS EXCEEDED 5% OF THE TOTAL BUILT UP AREA OR 2000 SQ.FT. WHICH EVER IS LESS, WE FIND THE LD.CIT(A) FOLLOWING THE DECISION OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES REPORTED IN 333 ITR 289 REJECTED THE ABOVE OBJECTION. THE LD. DEPARTMENTAL REP RESENTATIVE COULD NOT BRING OUT ANY MATERIAL SO AS TO TAKE A CONTRA RY VIEW AGAINST THE DECISION OF THE HONBLE BOMBAY HIGH COURT ACCORDING T O WHICH THE COMMERCIAL AREA BROUGHT IN THE STATUTE W.E.F. A.Y. 2005-06 IS ONLY PROSPECTIVE IN NATURE AND IT CANNOT BE APPLIED TO PROJEC TS SANCTIONED PRIOR TO THAT. THE PUNE BENCH OF THE TRIBUNAL IN THE CA SE OF OPEL SHELTERS (P) LTD. & D.S. KULKARNI ASSOCIATES (SUPRA) HAS HELD T HAT THE LAW AS WAS EXISTING ON THE DATE OF FIRST APPROVAL OF THE P ROJECT (COMMENCEMENT CERTIFICATE) WILL APPLY AND ON SUCH INTERPRETA TION IT HAS BEEN HELD THAT IF THE PROJECTS ARE APPROVED BEFORE 31- 03-2005, THE DEDUCTION IN A.Y. 2005-06 AND ONWARDS WILL ALSO BE GOVERNED BY THE LAW AS WAS EXISTING AT THE TIME OF FIRST APPROVAL. SINCE IN THE INSTANT CASE THE PROJECT HAS BEEN SANCTIONED ON 25-06-1999 AND TH E CLAUSE RELATING TO COMMERCIAL AREA WAS NOT EXISTING AT THAT TIME, THEREFOR E, IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT CITED (SUPRA) AND THE DECISIONS OF THE PUNE BENCH OF THE TRIBUNAL CITED (SUPRA) TH E AO IS NOT JUSTIFIED IN DENYING THE BENEFIT OF DEDUCTION U/S.80IB(10) MER ELY BECAUSE THE COMMERCIAL AREA IN THE HOUSING PROJECT IS 58 89 SQ.FT. BEING 31 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 MORE THAN 2000 SQ.FT. IN VIEW OF THE ABOVE AND IN VIEW O F THE DETAILED REASONING GIVEN BY THE LD.CIT(A) WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, THE ORDER OF THE CIT(A) IS UPHELD AND THE GRO UNDS RAISED BY THE REVENUE ARE DISMISSED. ITA NO.1104/PN/2011 (A.Y. 2005-06) : 46. GROUNDS OF APPEAL NO.1 & 2 BY THE REVENUE READ AS UNDER : 1. THE LD.CIT(A) GROSSLY ERRED IN DELETING THE ADDIT ION ON ACCOUNT OF THE CESSATION OF A LIABILITY ACQUIRED ON ACCOUNT OF F INANCING A TRADING ASSET MORE SO WHEN THE TRADING ASSET WAS RELEASED FROM MORTGAG E ONLY ON ACCOUNT OF CESSATION OF LIABILITY. 2. THE LD.CIT(A) GROSSLY ERRED IN CONSIDERING THE CESSAT ION OF LIABILITY ON A MORTGAGED ASSETS AS CESSATION OF CAPITAL LIABILITY E SPECIALLY WHEN THE ASSET WAS PART OF STOCK-IN-TRADE ON THE SALE OF WHICH DE DUCTION U/S.80IB(10) OF THE ACT WAS CLAIMED. 47. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE FILE D THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 31-10-2005 DECLARING NIL INCOME AND AGRICULTURAL INCOME OF RS.15,000/-. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS THE AO VERIFIED THE DETAILS OF THE BALANCE SHEET OF SHRI SHARAD M. MUTHA, INDIVIDUAL AND NOTED THAT HE HAS CREDITED RS.1.50 CRORES TO CAPITAL ACCOUNT AS AMOUNT OF SETTLEMENT . FROM THE DETAILS FURNISHED BY THE ASSESSEE THE AO NOTED THAT THE ASSESSEE HAS OBTAINED LOAN OF RS.3 CRORES ON 13-12-1997 FROM M/S. EXCE LLENT CONSTRUCTION PVT. LTD. WHICH HAS BEEN UTILIZED BY THE ASSE SSEE FOR PURCHASE OF LAND AT SOLAPUR. IT WAS EXPLAINED BY THE AS SESSEE THAT AFTER REPAYMENT OF RS.30 LAKHS HE WAS UNABLE TO REPAY THE BA LANCE AMOUNT OF RS.2.70 CRORES AS SCHEDULED AND THERE HAS BEEN A SET TLEMENT AT RS.1.20 CRORES BETWEEN THE ASSESSEE AND THE MORTGAGEE . THIS SETTLEMENT HAS BEEN DECIDED BY EXECUTING THE DEED OF R ELEASE AND RECONVEYANCE OF MORTGAGED PROPERTY ON 20-10-2001. A S SUCH THE ASSESSEE GOT REMISSION IN LOAN OF RS.1.50 CRORES. THE AO ASKED THE 32 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 ASSESSEE TO EXPLAIN AS TO WHY THIS REMISSION OF RS.1.50 CRO RES HAS BEEN EFFECTED IN THE CAPITAL ACCOUNT DURING THE YEAR UNDER CO NSIDERATION INSTEAD OF EFFECTING THE SAME IN F.Y. 2001-02, I.E. A.Y. 2002-03 AND WHY IT SHOULD NOT BE BROUGHT TO TAX U/S.41(1) OF THE I.T. ACT. 48. FROM THE DETAILS FURNISHED BY THE ASSESSEE THE AO N OTED THAT THE ASSESSEE HAS CONSTRUCTED A HOUSING PROJECT ON THE LAN D PURCHASED OUT OF THE ABOVE LOAN AND THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80IB(10) ON THE SAME PROJECT. FURTHER, THE ASSESSEE HAS ALSO DEBITED THE VALUE OF LOAN TO THE PROFIT AND LOSS ACCOUNT IN THE FORM OF WORK IN PROGRESS. THEREFORE, ACCORDING TO THE AO THE BENEFIT IS OBTAINED IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OF LOAN OF RS.1.50 CRORES. THE AO WAS OF THE OPINION THAT THE VALUE OF THE BENEFIT ACCRUED T O THE ASSESSEE IS DEEMED TO BE THE PROFIT AND GAINS OF BUSINESS WHICH OTH ERWISE WOULD NOT HAVE BEEN ASSESSEES INCOME. THEREFORE, ACCORDING T O THE AO AS PER THE PROVISIONS OF SECTION 41(1), THE VALUE OF THE BENEFIT OBT AINED BY THE ASSESSEE IN THE FORM OF DEBITING THE VALUE OF LOAN AS WORK IN PROGRESS TO THE PROFIT AND LOSS ACCOUNT IS CHARGEABLE TO INCOME TAX. HE THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY RS.1.50 CRORES SHOULD NOT BE ADDED U/S.41(1) OF THE I.T. ACT TO THE TOTAL INCOME. 49. THE ASSESSEE REPLIED THAT THERE IS NO REMISSION AS T HE MATTER IS PENDING BEFORE THE CIVIL COURT, AHMEDNAGAR VIDE CIVIL SUIT NO.116/2002. UNLESS THE MATTER IS DECIDED IT CANNOT BE S AID THAT THERE IS REMISSION. IT WAS FURTHER ARGUED THAT THE SOCALLED REM ISSION IS IN THE F.Y. 2001-02 RELATING TO A.Y. 2002-03 BECAUSE THE SETTLEME NT WAS ARRIVED AT ON 20-10-2001. ENTRY PASSED IN F.Y. 2004-05 CANNOT BE SAID TO BE THE BASIS FOR ADDITION PARTICULARLY WHEN THE MATTER IS PENDING BEFORE THE CIVIL COURT, AHMEDNAGAR. THE ASSESSEE FILED THE DETAILS OF 33 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 REMISSION AMOUNT OF RS.1.50 CRORES ALONG WITH A COPY OF DE ED OF RELEASE AND RECONVEYANCE OF MORTGAGE OF PROPERTY DAT ED 20-10-2001 EXECUTED BY POWER OF ATTORNEY HOLDER ON BEHALF OF EXCE LLENT CONSTRUCTION PVT. LTD. IN FAVOUR OF SHRI SHARAD S. MUTHA AN D HIS FAMILY MEMBERS. THE ASSESSEE FURTHER ARGUED THAT THE SAID AM OUNT IS NOT TAXABLE BECAUSE THE SAME IS A CAPITAL RECEIPT AS NO ALLO WANCE OR DEDUCTION IS CLAIMED OR ALLOWED TO THE ASSESSEE IN RESPECT OF THE SAID LAND. 50. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM, IT IS CLEAR THAT THE ASSE SSEE HAS GOT REMISSION OF RS.1.50 CRORES IN LOAN WHICH HAS BEEN CREDITED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. FURTHER, ASS ESSEE HAS ALSO ADMITTED THAT THE AMOUNT OF INTEREST CAPITALIZED EARLIER HA S BEEN REVERSED IN F.Y. 2002-03 DUE TO SETTLEMENT. THUS, ON ONE HAND, ASSESSEE IS STATING THAT THE REMISSION IN LOAN IS A CAPITAL RECEIPT, HENCE NOT TAXABLE AND AT THE SAME TIME, INTEREST PAYABLE HAS B EEN REVERSED IN THE F.Y. 2002-03. THE AO FURTHER NOTED THAT WHEN THE IS SUE WAS SUBJUDICE AND PENDING BEFORE THE HONBLE CIVIL COURT, AHM EDNAGAR, IT IS NOT UNDERSTOOD AS TO HOW THE ASSESSEE HAS REVERSED THE ENTRY OF INTEREST IN THE A.Y. 2002-03 AS WELL AS CREDITED THE REMISSION IN LOAN OF RS.1.50 CRORES TO THE CAPITAL ACCOUNT IN F.Y. 2004-05. HE, THEREFO RE, WAS OF THE OPINION THAT THE ASSESSEE IS TRYING TO AVOID TAX ON LOAN BY SHOWING THE REMISSION OF LOAN AS CAPITAL RECEIPT. FURTHER, THE ASSESSE E HAS DEBITED THE VALUE OF LAND PURCHASED ON RS.3 CRORES TO THE PROFIT AND LOSS ACCOUNT IN THE FORM OF WIP. REJECTING THE VARIOUS EXPLANA TIONS GIVEN BY THE ASSESSEE THE AO TAXED THE AMOUNT OF RS.1.50 CRORES U/S.41(1) OF THE I.T. ACT FOR THE IMPUGNED ASSESSMENT YEAR. SINCE ACCORD ING TO THE AO THE ASSESSEE SHOULD HAVE EFFECTED THIS ENTRY IN A.Y. 2002- 03 INSTEAD OF 34 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 EFFECTING THE SAME IN THE IMPUGNED ASSESSMENT YEAR, THE AO REOPENED THE ASSESSMENT FOR A.Y. 2002-03 AND BROUGHT TO TAX THE SAME U/S.41(1) ON PROTECTIVE BASIS. 51. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSESSE E WAS IN NEED OF FINANCE FOR EXECUTING THE DEAL ENTERED INTO BY HIM FOR RU NNING A CONSTRUCTION PROJECT AT SOLAPUR ON JUNI MILL LAND TAKEN BY HIM IN AN AUCTION/ SETTLEMENT CARRIED OUT UNDER SUPERVISION OF THE HON'BLE MUMBAI HIGH COURT. THE ASSESSEE APPROACHED EXCELLENT CON STRUCTIONS PVT. LTD. MUMBAI (THROUGH ITS DIRECTOR MR. RAMCHAND BULCHAN D), AND AT THE TERMS AND CONDITIONS AGREED, A LOAN OF RS.3 CRORES WAS ARRANGED FROM INDUSIND BANK, PUNE. M/S EXCELLENT CONSTRUCTIONS PVT. LTD. WAS A GUARANTOR. THE GUARANTOR, M/S EXCELLENT CONSTRUCTIONS PV T. LTD. GOT CERTAIN PROPERTIES OF THE ASSESSEE AND HIS FAMILY MEMBER S SITUATED AT AHMEDNAGAR MORTGAGED FOR THE ABOVE SECURITY OF HIS LIABILIT Y. SUBSEQUENTLY, THE SOLAPUR LAND WAS ALSO GIVEN AS ADDITIONA L MORTGAGE. THE ASSESSEE COULD RETURN RS.30 LAKHS OUT OF THE ABOVE LOAN UPTO 19.11.1998 , AND THEREFORE, THE INDUSIND BANK INVOKED THE GUARANTEE AND RECOVERED RS.3,86,91,400.41 FROM THE DEPOSITS OF EXCELLEN T CONSTRUCTIONS PVT. LTD. ON OR ABOUT 30.6.1999 (AS PER THE ORDER PASSED BY CIVIL JUDGE, AHMEDNAGAR IN SPECIAL CIVIL SUIT NO. 116/2003). IT WAS CONTENDED THAT THE PAYMENTS COULD NOT BE MADE DUE TO FINANCIAL DIFFICULTIES AND ALSO BECAUSE THE SAID PROJECT COULD NOT TAK E OFF AS ENVISAGED. IN VIEW OF THE SAID RECOVERY MADE BY THE IND USIND BANK FROM M/S EXCELLENT CONSTRUCTIONS PVT. LTD. FOR NON-PERFORMANCE OF THE TERMS OF THE LOAN, M/S EXCELLENT CONSTRUCTIONS PVT. LTD. FILED A SPECIAL SUIT NO. 147/2001 AGAINST THE MORTGAGERS WHO HAD MORTGAGED TH EIR PROPERTY FOR THE GUARANTEE OF THE ABOVE LOAN. EXCELLENT CONSTRUCTIONS PVT. LTD. HAD EXECUTED A POWER OF ATTORNEY ON 30-03-2001 IN FAVOUR O F SHRI GAUTAM 35 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 ROYE TO TAKE NECESSARY STEPS FOR RECOVERY ETC. IT WAS ARGUED THAT SHRI GAUTAM ROYE, IN TURN, FURTHER EXECUTED POWER OF ATTORNEY IN FAVOUR OF MR. ZARIP KHAN WALLI KHAN OF M/S EXCELLENT CONSTRUCTIONS P VT. LTD. ON 18.08.2001. IT WAS SUBMITTED THAT THE MATTER WAS DISCUS SED WITH THE POWER OF ATTORNEY HOLDERS OF THE COMPANY EXCELLENT CONST RUCTIONS PVT. LTD. AND A DEED OF RELEASE AND RECONVEYANCE WAS EXECUT ED BETWEEN THE ASSESSEE AND EXCELLENT CONSTRUCTIONS PVT. LTD., THROUGH T HE POWER OF ATTORNEY HOLDERS, AFTER SETTLEMENT OF THE TOTAL CLAIM, AS P ER WHICH THE ASSESSEE FURTHER PAID RS. 1,20,00,000 AND THE REMAINING SUM WAS WAIVED. THE ASSESSEE ARGUED THAT THE ENTRIES WERE ACCO RDINGLY MADE IN THE BOOKS. HOWEVER, EXCELLENT CONSTRUCTIONS PVT. LTD. DID NOT ACCEPT THE SETTLEMENT EXECUTED BY THE POWER OF ATTORNEY HOLDE RS AND ISSUED A NOTICE TO THE ASSESSEE AND OTHERS TO REPAY THE MORTG AGED AMOUNT WITH ALL OTHER DUES. THEREAFTER, ON 22.8.2002 A SUIT NO. 116/2002 WAS ALSO FILED BY EXCELLENT CONSTRUCTIONS PVT. LTD. CHALLENGING THE VALID ITY OF DEED OF RELEASE AND RECONVEYANCE DATED 20.10.2001 AND ALSO TO CLAIM A SUM OF RS : 32,48,27,000 IN THIS SUIT. IT WAS CLAIMED THAT A FRAUD WAS COMMITTED BY THE ASSESSEE IN GETTING A POWER OF ATTORNE Y (POA) ISSUED IN FAVOUR OF MR. ZARIP KHAN WHO IN TURN EXECUTED THE DEED OF RELEASE. HENCE, THE PLAINTS HAD MADE MR. ZARIP KHAN ALSO A RESPOND ENT. THE CIVIL COURT AS PER THE ORDER DATED 27.8.2002 HAS ADMITTE D THE PETITION AND GRANTED INTERIM RELIEF TO THE PLAINTIFF. AS PER THIS ORDER , DEFENDANT NO. 1 TO 4, WHICH INCLUDES THE ASSESSEE AND HIS FAMILY MEMB ERS, WHO ARE THE MORTGAGERS OF THE PROPERTY, WERE RESTRAINED BY WAY OF AD-INTERIM INJUNCTION FROM ALIENATING THE SUIT PROPERTY, UNTIL FURTHER OR DERS AND THE E.P. WAS ALLOWED. UNDER THESE CIRCUMSTANCES, THE ASSE SSING OFFICER IS NOT JUSTIFIED IN TREATING THE REMISSION OF LOAN OF RS.1.5 CRO RES MADE IN THE CAPITAL ACCOUNT AS TAXABLE U/S.41(1). 36 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 52. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION. WHILE DOING SO, HE OBSERVED THAT THE MAIN PURPOSE OF THE SECTION IS TO BRING TO CHARGE CERTAIN RE CEIPTS AS INCOME UNDER THE HEAD BUSINESS AND PROFESSION IN CERTAIN CIRCUMS TANCES WHICH INCLUDE RECOUPMENT IN LATER YEARS OF LOSS OR EXPENDITURE ALLOWED IN EARLIER YEARS. AS PER THIS PROVISION THE REVENUE CAN BE SEEN TO TAKE BACK A BENEFIT EARLIER GRANTED IF SUBSEQUENT EVENTS SHOW THAT THE SAME WAS NOT REQUIRED TO BE SO ALLOWED. ACCORDING TO LD.CIT(A ) THE VARIOUS COURTS HAVE GENERALLY HELD THAT THIS PROVISION CAN APPLY IF THE FOLLOWING CONDITIONS ARE SATISFIED : (A) AN ALLOWANCE OF DEDUCTION HAS BEEN MADE IN RESPECT OF ANY LOSS, EXPENDITURE OR TRADING LIABILITY IN THE PAST WHILE MAKING THE ASSESSMENT OF AN ASSESSEE. (B) ANY AMOUNT IS OBTAINED IN RESPECT OF SUCH LOSS OR EXPENDITURE OR ANY BENEFIT IS OBTAINED IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF. (C) SUCH AMOUNT OR BENEFIT IS OBTAINED BY THE ASSESSEE OR THE SUCCESSOR IN BUSINESS W.E.F. 1.4.1993. (D) SUCH AMOUNT OF BENEFIT IS OBTAINED IN SUBSEQUENT YEAR. (E) THERE COULD BE LIABILITY EVEN IN THE CASE OF SUCCESSOR W.E.F. 1,4.1993 AND IN THE EVENT OF UNILATERAL ACT FROM 1.4.1997. 53. HE OBSERVED THAT THE CLAIM OF THE ASSESSEE THAT TH E AMOUNT CREDITED IN CAPITAL ACCOUNT IS NOT COVERED U/S.41(1) AS IT WAS NOT ALLOWED AS LOSS OR EXPENDITURE IN THE PAST CANNOT BE ACC EPTED. THE ASSESSING OFFICER IS RIGHT IN COMING TO THE CONCLUSION THAT T HE LOAN WAS TAKEN FOR PURCHASING THE SOLAPUR LAND, WHICH CONSTITUTES HIS STOCK IN TRADE/WORK IN PROGRESS AND HENCE THE PRIMARY CONDITION CAN BE SEEN AS SATISFIED. HE, HOWEVER, HELD THAT THE SAME CANNOT BE TAXED IN THIS YEAR AS THE LIABILITY CANNOT BE CONSIDERED TO HAVE CEASED OR G OT REMITTED IN THE FACTS OF THE CASE. HE ACCORDINGLY DIRECTED THE AO N OT TO TREAT THE 37 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 AMOUNT OF RS.1.5 CRORES AS INCOME OF THE ASSESSEE FOR THIS ASSESSMENT YEAR. HE, HOWEVER, DIRECTED THE AO TO TREAT THE SAME IN THE YEAR IN WHICH THE CONDITIONS U/S.41(1) ARE FOUND TO BE SATISFIED IN T HE LIGHT OF HIS DISCUSSION. THE RELEVANT DISCUSSIONS AT PARA 4.13 TO P ARA 4.15 OF CIT(A)S ORDER READ AS UNDER : 4.13. THE ABOVE MADE SUBMISSION OF THE APPELLANT WAS E XAMINED. THE APPELLANT CAN BE SEEN TO BE ARGUING THAT THEIR CASE I S NOT COVERED BY EXPLANATION 1 AS THE SETTLEMENT WAS BILATERAL WHICH WA S NOT HONOURED BY THE OTHER PARTY. THE DISPUTE IS PENDING IN A COURT O F LAW AND HENCE S.S. 41(1) WOULD NOT APPLY. IT IS CORRECT THAT THE AMOUNT IN DISPUTE IS A TRADE LIABILITY AND THE LAW AS PROPOUNDED IN VARIOUS JUDGMENTS OF SUPR EME COURT AND HIGH COURT QUOTED EARLIER SAYS THAT IN ALL CASES WHERE THE ISSUE INVOLVED IS A TRADE LIABILITY CESSATION OR REMISSION OF THE SAME IS TO BE EXAMINED. ACCORDING TO ESTABLISHED PRINCIPLE IT IS A MUST TO ARRI VE AT THE CONCLUSION THAT THE REMISSION OR CESSATION HAS REACHED FINALITY. TH E APPELLANT HAS BEEN CLAIMING THAT THE FINALITY HAS NOT BEEN ARRIVED, AND THEREFORE, S.S.41(1) CANNOT BE APPLIED. IN THAT CONTEXT, IT WAS ALSO ARGUE D THAT THE REQUIREMENT OF LAW THAT THE CESSATION OR REMISSION SHOULD BE COMPLE TE AND IRREVOCABLE FOR S.S. 41(1) TO BE APPLIED, CANNOT BE EVEN CONSIDERE D TO HAVE BEEN WAIVED BY EXPLANATION 1 BECAUSE AS PER A.R. THE DELHI HIGH C OURT HAS HELD IN THE CASE OF JAY ENGINEERING WORKS LTD. THAT THE CONCEPT O F EXPLANATION 1 ALWAYS EXISTED IN THE STATUTE AS PER THE INTERPRETATION OF T HE SUPREME COURT. AFTER CAREFULLY CONSIDERING THE FACTS OF THE CASE, I FIND TH AT THE FACT REMAINS THAT THE APPELLANT ARRANGED LOAN FROM INDUSIND BANK OF RS. 3 CRORE THROUGH M/S EXCELLENT CONSTRUCTIONS PVT. LTD. AND COULD RETURN ON LY RS.30 LAKHS. THE BANK RECOVERED THE LOAN WITH INTEREST FROM THE GUARA NTOR M/S EXCELLENT CONSTRUCTIONS PVT. LTD. M/S EXCELLENT CONSTRUCTIONS PVT. LTD. IN TURN INVOKED PROCEEDING FOR RECOVERY THROUGH MR. ROYE. MR. ROYE IN TURN APPOINTED MR. ZARIP KHAN, WHO HAS EXECUTED A SETTLEMENT ON 20.10.20 01 AND EXECUTED A DEED OF RELEASE AND RECONVEYANCE. M/S EXCELLENT CONSTR UCTIONS PVT. LTD. OBJECTED TO THIS AND ISSUED A NOTICE ON 8.5.2002 AND FILED A CIVIL SUIT NO. 116/2002 ON 22.8.2002 WHEREIN THE APPELLANT AND HIS FAMILY MEMBER INCLUDING MR. ZARIP KHAN WAS MADE A RESPONDENT AND I T WAS CLAIMED THAT A FRAUD WAS COMMITTED ON M/S EXCELLENT CONSTRUCTIONS PVT. LTD. IN GETTING THE POA ISSUED IN THE NAME OF SHRI ZARIP KHAN AND IN GETT ING THE DEED OF RELEASE EXECUTED THROUGH HIM. A COMPENSATION OF RS.32,48,27,0 00 HAS BEEN CLAIMED. THE CIVIL COURT HAS ADMITTED THE PETITION A ND ISSUED AD-INTERIM INJUCTION AGAINST RESPONDENTS FROM ALIENATING THE MORT GAGED PROPERTY. THROUGH THIS SUIT PRAYER HAS ALSO BEEN MADE FOR RECOVER Y OF DUES CLAIMED AS WELL AS FOR DECLARATION OF DEED OF RELEASE AS NULL AND VOID ALONG WITH CERTAIN OTHER RELIEFS. HENCE IT IS CLEAR THAT THE MATTER IS IN DISPUTE. THE ASSESSING OFFICER ALSO IS NOT OF THE VIEW THAT DISPUTE IS INCORRE CT. IT HAS ONLY BEEN ARGUED THAT THE AMOUNT SHOULD BE TAXED U/S 41(1) AS AP PELLANT HAS HIMSELF SHOWN THE REMISSION IN HIS BOOKS. IT HAS ALSO BEEN STATED B Y THE ASSESSING OFFICER THAT THE APPELLANT CAN CLAIM RELIEF IN THE YEAR IN WHICH THE DECISION IS ADVERSELY GIVEN. I DO NOT FIND THE ABOVE DIRECTIONS T O HAVE THE MANDATE OF LAW. UNDISPUTEDLY THE AMOUNT IN QUESTION IS 'LOAN' WH ICH IS NOT A REVENUE RECEIPT IN NORMAL CIRCUMSTANCE. IT CAN PARTAKE THAT CHARACTER BY FICTION OF LAW AS AVAILABLE U/S 41(1). HENCE IT CAN BE BROUGHT T O TAX ONLY IF IT CAN BE FOUND TO BE COVERED BY THE SAID PROVISION. AS DISCUSSED A LREADY THE RECEIPT 38 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 IS COVERED BY LIMB (B) OF S.S.41(1), WHERE THE COURTS H AVE BEEN UNANIMOUS THAT THE CESSATION OR REMISSION SHOULD BE ABSOLUTE. VERY STRICT RULE OF INTERPRETATION WAS APPLIED BY THE COURTS FOR THESE CON DITIONS. THIS LEAD TO A SITUATION WHEREIN THE AMOUNTS WHICH HAD BECOME BARRED BY LIMITATION OR WHERE THERE WERE NO LIKELIHOOD OF LIABILITY BEING R ECOVERED ALSO ESCAPED ASSESSMENT AS COURTS HELD THAT THE CESSATION/ REMISSION SHOU LD BE ABSOLUTE FOR WHICH BILATERAL/ MULTILATERAL CONSENT OF OTHER P ARTY WAS CONSIDERED ESSENTIAL. THIS NECESSITATED THE INTRODUCTION OF EXPLANA TION 1 AS PER CIRCULAR NO. 762. THEREFORE, NOW THIS REQUIREMENT CAN BE SEEN TO HAVE BEEN DILUTED MARGINALLY BY EXPLANATION 1, WHEREIN IT HAS BEEN STAT ED THAT THE COMPLIANCE CAN BE CONSIDERED AS COMPLETE IF A PARTY UNILATERALLY MAKES ENTRY OF WRITE OFF IN HIS BOOKS. THE APPELLANT OBJECTS TO THIS INTERPR ETATION BUT THE FACT REMAINS THAT THE ABOVE EXPLANATION HAS BEEN EXPRESSLY B ROUGHT ON STATUTE W.E.F. 1.4.1997 AND THEREFORE, ITS IMPLICATION MUST B E CONSIDERED IN THE YEARS IN WHICH IT IS APPLICABLE. THERE CANNOT BE ANY DISPUTE TO THE FACT THAT THE CASE OF THE APPLICANT IS FOR AN A.Y. WHICH FALLS AFTER THE INTRODUCTION OF THIS EXPLANATION. IN VIEW OF THE SAME IT CAN BE CONSID ERED RELEVANT TO EXAMINE THE SAME AS WITHOUT IT THE CASE OF THE APPLIC ANT IS CLEARLY OUTSIDE THE MISCHIEF OF S.S. 41(1). IN MY CONSIDERED OPINION, T HE COURTS HAVE BEEN VERY STRICT IN THE INTERPRETATION OF THE REQUIREMENT FOR APPLYING SEC. 41(1) IN CASES OF TRADE LIABILITIES WHERE LIMB (B) IS TO BE A PPLIED. APPLYING THE SAID REQUIREMENT CLEARLY SHOWS THAT THE CASE OF THE APPELL ANT CANNOT BE CONSIDERED TO BE COVERED U/S 41(1) UNLESS IT COULD BE SA ID THAT EXPLANATION 1 IS APPLICABLE. EXPLANATION 1 HAS ALREADY BEEN QUOTE D EARLIER AND BY READING THE SAME IT CAN BE SEEN THAT THE SAME IS TO BE APPLIED WHERE THE CESSATION OR REMISSION IS TAKING PLACE IN THE BOOKS OF TH E APPELLANT EVEN UNILATERALLY. THE IMPORT OF THIS EXPLANATION HAS BEEN EXPLAINED BY CBDT IN CIRCULAR NO. 762 DATED 18.2.1998. 4.14. EXPLANATION 1 HAS BEEN INTRODUCED W.E.F. 1.4.1 997. THE APPELLANT CLAIMS THAT THEIR CASE IS NOT COVERED BY THE SAID EXPL ANATION FOR THE REASONS ALREADY MENTIONED. HOWEVER, IT WAS DECIDED TO EXAMIN E THE IMPLICATION IN THE LIGHT OF DISCUSSION AVAILABLE IN THE BOOK 'PRINCIP LES OF STATUTORY INTERPRETATION' WRITTEN BY JUSTICE G.P. SINGH AT PAG E 212 UNDER THE HEADING 'EXPLANATION': . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.15. THE ASSESSING OFFICER HAS NOT DISCUSSED THE APPLICABI LITY OF THIS EXPLANATION IN THE FACTS OF THE CASE. ON BEING CONFRO NTED, THE AUTHORISED REPRESENTATIVE HAS CONTENDED THAT THIS EXPLANATION IS N OT APPLICABLE AS THE ENTRY WAS AS PER BILATERAL AGREEMENT WHICH HAS FALLEN IN DISPUTE. FROM THE PERUSAL OF MAIN SUBMISSION IT CAN BE SEEN THAT THE APPE LLANT HAS ALSO CONTENDED THAT THE WRITING OFF WAS DONE BY MISTAKE AN D IT DOES NOT REFLECT THE CORRECT STATE OF AFFAIRS AND FOR THIS THE APPELLAN T SHOULD NOT BE PENALIZED. WHEN THIS ASPECT IS FURTHER ANALYZED, IT I S OBSERVED THAT THE 'DEED OF RELEASE' WAS EXECUTED ON 20.10.2001, THE CASE S WERE FILED BY CREDITORS AGAINST APPELLANT AND OTHERS AT AROUND THE SA ME TIME BUT THE ENTRY IN BOOKS WERE MADE IN A.Y.2005-06. THEREFORE, IT WAS CONSIDERED NECESSARY TO EXAMINE THE PURPOSE AND THE REASON FOR MAK ING THIS ENTRY IN BOOKS OF THE APPELLANT IN THIS YEAR. NO CLEAR CUT ANSW ER HAS BEEN GIVEN. IT HAS ONLY BEEN ARGUED IN THEIR SUBMISSION QUOTED ABOVE T HAT THE APPELLANT MIGHT HAVE MADE A MISTAKE AND FOR THAT ALONE THE AMO UNT CANNOT BE MADE TAXABLE U/S 41(1). IT IS FURTHER NOTED THAT THE DEED OF RELEASE WAS EXECUTED IN A.Y.2002-03 BUT THE ENTRY WAS NOT PASSED IN THAT YE AR. THIS ENTRY WAS 39 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 PASSED IN A.Y. 2005-06. THE ASSESSING OFFICER HAS ASSESSED THE AMOUNT ON SUBSTANTIVE BASIS IN THIS ASSESSMENT YEAR AND ON PROTECTIVE BASIS IN A.Y. 2002-03. IN MY VIEW THE ONLY PLAUSIBLE REASON, THOUGH NOT ADMITTED EXPLICITLY COULD BE TO SUPPORT THEIR DEFENSE IN THE C IVIL SUIT. IN THE SUBMISSION IT HAS ONLY BEEN ADMITTED AS MISTAKE OR TO GIV E EXPRESSION TO THE DISPUTED DEED. WHATEVER MAY BE THE REASON, IT IS AN UN DISPUTED FACT THAT THE AMOUNT SHOWN CREDITED IN CAPITAL ACCOUNT IS NOT ONLY LACKING A POSITIVE CONSENT OF THE OTHER PARTY BUT THE OTHER PARTY IS CLA IMING A HUGE SUM AS COMPENSATION. IN THAT FACT OF THE CASE IT IS REQUIRED TO BE CONSIDERED WHETHER IT CAN BE HELD THAT THE WRITING OFF IS UNILA TERAL AND CAN BRING THE CASE OF THE APPELLANT WITHIN THE MISCHIEF OF S.S. 41(1 ), BY VIRTUE OF OPERATION OF EXPLANATION 1. FROM THE PERUSAL OF THE PRINCIPLE OF INTERPRETATION RELATING TO EXPLANATION QUOTED EARLIER, IT CAN BE SEEN THAT T HE OBJECT OF EXPLANATION CAN BE VARIOUS BUT IF THE SAME IS APPLIED TO THE PROVI SION UNDER CONSIDERATION IT IS NOT DIFFICULT TO ARRIVE AT THE CO NCLUSION THAT THE EXPLANATION IS APPLICABLE TO ENTIRE S.S. 41(1) AND H AS BEEN INTRODUCED 'TO PROVIDE AN ADDITIONAL SUPPORT TO THE DOMINANT OBJECT OF THE ACT IN ORDER TO MAKE IT MEANINGFUL AND PURPOSEFUL. IN THIS CONTEXT, OTHER OBJECTS DISCUSSED IN THE ABOVE PARA ARE ALSO RELEVANT AND CAN BE KEPT IN MIND WHILE DECIDING THE CASE OF THE APPELLANT. IT HAS ALSO BEEN DISCUSSED E ARLIER THAT THE PURPOSE OF THIS EXPLANATION WAS DECLARED BY THE CBDT I N CIRCULAR NO. 762 DATED 18.2.1998. THE RELEVANT PORTION OF THE CIRCUL AR HAS BEEN QUOTED AT PARA 4.4 OF THIS ORDER. THIS CIRCULAR THEREFORE HAS TO BE CONSIDERED MANDATORILY WHILE APPLYING THE EXPLANATION IN THE C ONTEXT OF S.S. 41(1). IT HAS BEEN STATED IN THIS CIRCULAR THAT 'IT WAS FOUND THA T A NUMBER OF ASSESSES WAS ESCAPING TAX LIABILITY UNDER THIS SUB SECTION IN REG ARD TO THE CREDIT OF TRADING LIABILITIES TO PROFIT AND LOSS ACCOUNT, EVEN W HEN THE RECOVERY OF THE DEBT HAD BECOME BARRED BY LIMITATION OR WHEN THERE WAS NO LIKELIHOOD OF THE LIABILITY BEING ENFORCED AGAINST THEM. THIS WAS AN ACCOUNT OF THE FACT THAT SOME COURTS HELD THAT THE LIABILITY CAN REMIT OR CEASED ONLY BY A BILATERAL OR MULTILATERAL ACT BETWEEN THE CREDITORS ON ONE SIDE AND THE DEBTOR ON THE OTHER AND NOT BY A UNILATERAL ACT. BY AN AMENDMENT OF THE EXPRESSION 'LOSS OR EXPENDITURE OR SOME BENEFIT IN RESP ECT OF ANY TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, OCC URRING IN THIS SUB SECTION, HAS BEEN DEFINED TO INCLUDE THE REMISSION OR C ESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY THE FIRST MENTIONED PERSON UNDER CLAUSE (A) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE (B) OF THIS SUB SECTIO N BY WAY OF WRITING OFF SUCH LIABILITY IN HIS ACCOUNTS.' THEREFORE , IF THE OBJECT FOR WHICH THIS EXPLANATION, AS DECLARED IN THE ABOVE CIRCULAR, WAS INTRODUCED, IS CONSIDERED IN THE LIGHT OF THE IMPORTANT JUDICIAL PR ONOUNCEMENTS DISCUSSED IN THE EARLIER PARAGRAPHS, IT IS NOT DIFFICULT TO FIN D THAT THE EXPLANATION HAS BEEN INTRODUCED TO COVER CASES WHERE THE LIABILITY HA S ACTUALLY CEASED OR GOT REMITTED BY THE OPERATION OF LAW OF LIMITATION AND FACTS SHOWS THAT THERE IS NO CHANCE OF ANY CLAIM BEING MADE, AND IF THE DEBTO RS IN THAT CASE WRITES OFF THE AMOUNTS IN THEIR BOOKS UNILATERALLY. THE WORD 'UN ILATERAL' IS NOT DEFINED. THE DICTIONARY MEANING SAYS 'ONE SIDED'. THE CIRCULAR SAYS THAT THE PURPOSE IS TO COVER CASES WHERE RECOVERY IS BARRED BY LAW AND T HERE IS NO LIKELIHOOD OF ANY CLAIM FOR RECOVERY BEING MADE. IN THAT VIEW, THE CASE OF APPELLANT LOOKS NOT COVERED BY THIS EXPLANATION. THE LAW OF INT ERPRETATION QUOTED ABOVE FURTHER SAYS THAT THE EXPLANATION CANNOT CHANGE THE ENACTMENT OR TAKE AWAY A STATUTORY RIGHT ETC. IN THAT VIEW OF THE MATTER ALSO THIS EXPLANATION CANNOT BE CONSIDERED TO MAKE A DISPUTED E NTRY TAXABLE ONLY BECAUSE SUCH AN ENTRY HAS BEEN PASSED BY AN APPELLANT. T HEREFORE, IN THE LIGHT OF THE ABOVE, I DO NOT FIND THAT EXPLANATION 1 CAN BE CONSIDERED AS APPLICABLE. THE APPELLANT ALSO HAS ARGUED THAT THE E XPLANATION IS NOT APPLICABLE BECAUSE THE ENTRY IN THE BOOKS WAS NOT MADE UNILATERALLY UNDER 40 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 THE BELIEF THAT THE LIABILITY HAS CEASED BUT WAS MADE TO GIVE EXPRESSION OF A BILATERAL AGREEMENT WHICH FELL IN DISPUTE. THE APPEL LANT ALSO HAS ARGUED THAT THIS ENTRY WAS BY MISTAKE AND THEY SHOULD NOT BE PENALI ZED FOR THE SAID LAPSE. THESE ARGUMENTS ALSO HAVE SOME ELEMENTS OF RELEVAN CE FROM THE POINT OF VIEW OF AN IMPORTANT CONCEPT OF TAXATION W HICH SAYS THAT THE ASSESSING OFFICER HAS THE RESPONSIBILITY AND THE DUTY TO O NLY TAX THE REAL INCOME AND NOT THE INCOME WHICH HAS NOT ACCRUED OR A RISEN. THERE IS NO DISPUTE TO THE FACT THAT THE DISPUTE ABOUT THE SETTLEM ENT OF LOAN IS LYING IN THE COURT AND THE CASE OF THE PLAINTIFF HAS NOT ONLY BEEN ADMITTED BUT AN INTERIM ORDER HAS BEEN PASSED AGAINST THE APPELLANT. IN SUCH VIEW OF THE MATTER THE ACTION OF THE APPELLANT TO CREDIT THE AM OUNT IN THE CAPITAL ACCOUNT HAS NO VALUE. CIRCULAR ISSUED TO CLARIFY THE L AW ALSO SAYS SO. MORE SO WHEN IT IS CLAIMED THAT THIS HAS BEEN DONE BY MISTAKE. IN THE PRESENT CASE WHEN THE MATTER IS UNDISPUTEDLY IN DISPUTE, BRINGING T HE S.S.41(1) IN OPERATION IN RESPECT OF AN ENTRY WHICH OTHERWISE IS NO T TAXABLE, CANNOT BE HELD TO BE CORRECT IN VIEW OF THE INTERPRETATIONS GI VEN BY VARIOUS COURTS AND DISCUSSIONS MADE ABOVE. THEREFORE, GROUND NO. 2 WHICH W AS RELATING TO THE TAXABILITY OF THE AMOUNT IS TREATED AS DISMISSED AND GRO UND NO. 3 WHICH IS WHETHER THE AMOUNT OF RS.1.5 CRORES HAS BEEN REMITTED OR NOT IS ALLOWED. IN OTHER WORDS, IT IS HELD THAT THE NATURE OF THE RECEIP T IS SUCH THAT IT CAN BE BROUGHT TO TAX IF OTHER CONDITIONS ARE SATISFIED BUT T HE LIABILITY CANNOT BE CONSIDERED TO HAVE CEASED OR GOT REMITTED IN THE FAC TS OF THE CASE. THEREFORE, THE ASSESSING OFFICER IS .DIRECTED TO NOT TREAT THE AMOU NT OF RS.1.5 CRORES AS INCOME OF THE APPELLANT IN THIS ASSESSMENT YEAR U/S 41(1) . HOWEVER, HE WILL BE FREE TO TAX THE AMOUNT IN THE YEAR IN WHICH THE CONDITIONS ARE FOUND SATISFIED IN THE LIGHT OF THE DISCUSSIONS MADE/ HEREABOVE . 54. AGGRIEVED WITH SUCH ORDER OF CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 55. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY OPPOSE D THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE HIMSELF HAS CREDITED AN AMOUNT OF RS.1.50 CRORES IN HIS CAPITAL ACCOUNT AS AMOUNT OF SETTLEMENT FROM SHRI RAMCHAND BULCHAND OF M/S. EXCELLENT CONSTRUCTION PVT. LTD. AND TREATED THE SAME AS A CAPITA L RECEIPT. HE SUBMITTED THAT ALTHOUGH THE CIT(A) HELD THAT IT IS A TRADI NG RECEIPT, HOWEVER, THE CIT(A) HELD THAT SINCE THE MATTER IS PENDING BEFORE THE COURT AND HAS NOT ATTAINED FINALITY, BRINGING THE PROVISIONS OF SECTION 41(1) IN OPERATION IN RESPECT OF AN ENTRY WHICH OTHERWISE IS NOT TAXABLE, CANNOT BE HELD TO BE CORRECT. HE SUBMITTED THAT THE A SSESSEE EVEN HAS REVERSED THE INTEREST CAPITALISED EARLIER IN A.Y. 2003-04 ALT HOUGH THE MATTER WAS PENDING BEFORE THE CIVIL COURT, AHMEDNAGAR. R EFERRING TO 41 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF AEY GEE BROTHERS VS. ITO REPORTED IN 34 SOT 519 HE SUBMITTED T HAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT REMISSION OR CES SION OF ANY LIABILITY BY UNILATERAL ACT OF ASSESSEE BY WAY OF WRITING OFF ITS LIABILITY IN ITS ACCOUNTS WILL AMOUNT TO OBTAINING A BENEFIT FOR PURPOSE OF SECTION 41(1) AND SAID ACT OF ASSESSEE BY ITSELF WOULD BE SUFFICIENT T O ATTRACT PROVISIONS OF EXPLANATION 1 TO SECTION 41(1). IT WAS ACCORD INGLY HELD THAT WHERE ASSESSEE COMPANY HAD NOT ONLY WRITTEN OFF LIA BILITY IN ITS BOOKS OF ACCOUNT BUT ALSO OFFERED AMOUNT OF SUCH LIABILITY AS ITS INCOME IN RETURN ON THE GROUND THAT SAME HAD SEIZED TO EXIST, IN SUCH A SITUATION EVEN THOUGH SUIT WAS FILED BY CONCERNED CREDITOR AGAINST ASSESSEE TO RECOVER THE SAID LIABILITY AT A SUBSEQUENT ST AGE, YET LIABILITY WRITTEN OFF WAS HELD TO BE LIABLE TO BE ADDED TO TOTAL INCOM E OF ASSESSEE U/S.41(1) OF THE I.T. ACT. HE ACCORDINGLY SUBMITTED THAT IN VIEW OF THE ABOVE DECISION, THE AMOUNT WHICH HAS BEEN WRITTEN OFF BY T HE ASSESSEE BY CREDITING THE SAME TO THE CAPITAL ACCOUNT HAS TO BE TAXED IN A.Y. 2002-03 ITSELF. 56. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND STRONGLY SUPPORTED THE ORDER OF THE CIT(A). HE SUBMITTED THAT TH E REVENUE IS CHALLENGING THE APPEAL ON THE GROUND THAT THE ASSESSEE IN AN UNILATERAL ACT HAS CREDITED THE CESSATION OF LIABILITY TO THE CAPITAL ACCOUNT AND THEREFORE EXPLANATION 1 TO SECTION 41(1) IS ATTRACTED. HOW EVER, IN THE INSTANT CASE IT CANNOT BE CALLED AS AN UNILATERAL ACT. IT WAS AN OUTCOME OF A COMPROMISE SINCE A FRAUD CAME TO NOTICE WHEN THE CR EDITOR FILED A SUIT. HE SUBMITTED THAT FRAUD VITIATES THE CONTRACT, THER EFORE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, NO ADDITION U/S.41(1) O F THE I.T. ACT CAN BE MADE ON THE BASIS OF THE UNILATERAL ACT ON TH E PART OF THE ASSESSEE. 42 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 57. SO FAR AS THE DECISION OF THE MUMBAI BENCH OF THE TRIBU NAL RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE IS CONCERNED HE SUBMITTED THAT THE FACTS IN THAT CASE ARE DISTINGUISHABLE AND NOT A PPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THAT CASE WITHOUT ANY PR OVOCATION FROM THE OTHER PARTY THE ASSESSEE UNILATERALLY WROTE OFF THE AMOU NT. HOWEVER, IN THE INSTANT CASE IT IS NOT AN UNILATERAL ACT BUT BECAUSE OF THE FRAUD ON THE ASSESSEE THAT THE ASSESSEE WROTE OFF THE AMOUNT AND CREDITED THE SAME TO THE CAPITAL ACCOUNT OF THE ASSESSEE. THEREFORE, THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CAS E. SINCE THE ORDER OF THE CIT(A) IS BASED ON VARIOUS DECISIONS AND IS A REASONED ONE HE SUBMITTED THAT THE SAME SHOULD BE UPHELD AND THE GR OUNDS RAISED BY THE REVENUE SHOULD BE DISMISSED. 58. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A ) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO C ONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE ASSESSEE HAS CREDITED AN AMOUNT OF RS.1.50 CRORES IN HIS CAPITAL ACCOUNT DUE TO REMISSION OF LOAN BEING AMOUNT OF SETTLEMEN T FROM SHRI RAMCHAND BULCHAND OF M/S. EXCELLENT CONSTRUCTION PVT. LTD. IN A.Y. 2005-06. THE ASSESSEE HAD TAKEN A LOAN OF RS.3 CRORES ON 13-12-1997 FROM M/S. EXCELLENT CONSTRUCTION PVT. LTD. WHICH WAS UTILIZED BY HIM FOR PURCHASING THE LAND AT SOLAPUR. THE ASSESSEE REPAID ONLY RS.30 LAKHS TO THE CREDITOR AND THE AMOUNT OF RS.2,70,00,000/- R EMAINED OUTSTANDING WHICH WAS FINALLY SETTLED AT RS.1.20 CRORES, THU S RESULTING INTO REMISSION OF LOAN OF RS.1.50 CRORES. THE AO HELD THE SA ME AS TAXABLE U/S.41(1) OF THE I.T. ACT. WE FIND IN APPEAL THE L D.CIT(A) HELD THAT ALTHOUGH THE AMOUNT IN DISPUTE IS A TRADING LIABILITY, HO WEVER, IT IS 43 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 A MUST TO ARRIVE AT THE CONCLUSION THAT THE REMISSION OR CESSATION HAS REACHED FINALITY. HE HELD THAT DISPUTE ABOUT THE SETTLEMEN T OF THE LOAN IS LYING IN THE COURT AND THE CASE OF THE PLAINTIFF HAS NOT ONLY BEEN ADMITTED BUT AN INTERIM ORDER HAS BEEN PASSED AGAINST T HE ASSESSEE. THEREFORE, THE ACTION OF THE ASSESSEE CREDITING THE AMOUN T IN THE CAPITAL ACCOUNT HAS NO VALUE. FURTHER, HE ALSO ACCEPTED THE CO NTENTION OF THE ASSESSEE THAT THE SAME WAS DONE IN MISTAKE. HE ACCORD INGLY HELD THAT WHEN THE MATTER IS UNDISPUTEDLY IN DISPUTE, BRINGING THE P ROVISIONS OF SECTION 41(1) IN OPERATION IN RESPECT OF AN ENTRY WHICH OTH ERWISE IS NOT TAXABLE CANNOT BE HELD TO BE CORRECT IN VIEW OF THE INTER PRETATION GIVEN BY VARIOUS COURTS. HE ACCORDINGLY HELD THAT THE NATURE OF THE RECEIPT IS SUCH THAT IT CAN BE BROUGHT TO TAX ONLY IF OTHER CONDIT IONS ARE SATISFIED BUT THE LIABILITY CANNOT BE CONSIDERED TO HAVE SEIZED OR G OT REMITTED IN THE FACTS OF THE CASE. 59. IT IS THE ARGUMENT OF THE LD. DEPARTMENTAL REPRESENT ATIVE THAT REMISSION OR CESSATION OF ANY LIABILITY BY UNILATERAL ACT OF AS SESSEE BY WAY OF WRITING OFF ITS LIABILITY IN ITS ACCOUNTS WILL AMOUNT TO OBT AINING A BENEFIT FOR PURPOSE OF SECTION 41(1) AND SAID ACT OF ASSESSE E BY ITSELF WOULD BE SUFFICIENT TO ATTRACT PROVISIONS OF EXPLANATION 1 TO SECTION 41(1). SINCE THE ASSESSEE COMPANY IN THE INSTANT CASE HA D WRITTEN OFF THE LIABILITY IN ITS BOOKS OF ACCOUNT AND CREDITED THE SAME TO THE CAPITAL ACCOUNT ON THE GROUND THAT SAME HAD SEIZED TO EXIST IN VIEW OF THE SETTLEMENT AGREEMENT/COMPROMISE DEED, THEREFORE, UNDER S UCH A SITUATION EVEN THOUGH THE MATTER IS PENDING BEFORE THE C OURT DUE TO SUIT FILED BY THE CONCERNED CREDITOR AGAINST THE ASSESSEE TO RECOVER THE SAID LIABILITY AT A SUBSEQUENT STAGE, SUCH LIABILITY WRITTEN OFF WOULD BE LIABLE TO BE ADDED TO TOTAL INCOME OF THE ASSESSEE U/S.41(1) OF THE I.T. ACT. 44 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 60. WE FIND MERIT IN THE ABOVE ARGUMENTS OF THE LD. DEPART MENTAL REPRESENTATIVE. AS PER PARA 5.3 OF THE ASSESSMENT ORDE R, WE FIND THE AO HAS GIVEN A FINDING THAT THOUGH THE MATTER IS SUBJUDIC E BEFORE CIVIL COURT, STILL ASSESSEE HIMSELF HAS CLAIMED REMISSION IN LOAN OF RS .1.50 CRORES IN F.Y. 2004-05 BY PASSING NECESSARY ENTRIES IN HIS BOOKS. THE ASSESSEE ALSO FURNISHED A DEED OF CONVEYANCE AND RECONV EYANCE DATED 20-10-2001 AS EVIDENCE TOWARDS REMISSION IN LOAN. THE AS SESSEE HAS ALREADY TAKEN BENEFIT BY DEBITING THE VALUE OF LAND PURCHAS ED OF RS.3 CRORES TO HIS PROFIT AND LOSS ACCOUNT IN THE FORM OF WORK- IN-PROGRESS. IN THE BALANCE SHEET OF A.Y. 2003-04, THE ASSESSEE HIMSELF HA S REDUCED THE AMOUNT OF RS.2,65,06,671/- ON ACCOUNT OF INTEREST WAIV ED BY EXCELLENT CONSTRUCTION PVT. LTD. THE LD. COUNSEL FOR THE A SSESSEE COULD NOT CONTROVERT THE ABOVE FACTUAL FINDINGS GIVEN BY THE AO . THEREFORE, IT IS NOT AN UNILATERAL ACT ON THE PART OF THE ASSESSEE BUT DUE TO A SETTLEMENT BETWEEN THE ASSESSEE AND EXCELLENT CONSTRUC TION PVT. LTD. WHICH WAS DECIDED BY EXECUTING THE DEED OF RELEASE AND R ECONVEYANCE OF MORTGAGED PROPERTY ON 20-10-2001. THEREFORE, THE QUES TION THAT ARISES IS AS TO WHETHER UNDER THE FACTS AND CIRCUMSTANCES OF T HE CASE THE EXPLANATION 1 TO PROVISIONS OF SECTION 41(1) ARE APPLICABLE OR NOT. 61. WE FIND THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE O F AEY GEE BROTHERS (SUPRA) HAD AN OCCASION TO DECIDE SUCH AN ISSUE . IN THAT CASE, THE ASSESSEE DURING A.Y. 2004-05 HAD WRITTEN OFF CERTAIN A MOUNT OF LIABILITY WHICH WAS PAYABLE TO ONE T AND OFFERED THE AMOUN T OF SUCH LIABILITY AS ITS INCOME U/S.41(1). THE AO ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. ON APPEAL THE ASSESSEE RAISED A N ADDITIONAL GROUND CHALLENGING THE AMOUNT OF ADDITION MADE BY THE AO ON THE GROUND THAT THE SAID AMOUNT REPRESENTING CREDIT BALAN CE WRITTEN OFF IN THE CASE OF T WAS NOT CHARGEABLE TO TAX IN ITS HANDS U/S.41(1) AS THE 45 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 SAID PARTY HAD FILED A SUIT AGAINST THE ASSESSEE BEFORE TH E HONBLE HIGH COURT FOR RECOVERY OF THE SAID AMOUNT AND THAT THE SA ID LIABILITY HAD NOT SEIZED TO EXIST AS PRESUMED BY THE AO AND THE ADDITION MADE BY HIM ON THE BASIS OF SUCH PRESUMPTION U/S.41(1) WAS NOT JUSTIFIED. T HE CIT(A) REJECTING THE CONTENTION OF THE ASSESSEE CONFIRMED THE A DDITION MADE BY THE AO. ON FURTHER APPEAL, THE TRIBUNAL DECIDED THE ISSUE AGAINST THE ASSESSEE BY OBSERVING AS UNDER : 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PE RUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE AMOUNT OF LIABILITY IN QUESTION IN RESPECT OF TISCO WRITTEN BACK BY THE ASSESSEE -COMPANY IN ITS ACCOUNTS WAS TREATED BY THE AUTHORITIES BELOW AS ITS INC OME BY APPLYING THE PROVISIONS OF SECTION 41(1). THERE IS NO DISPUTE THA T THE SUCH LIABILITY REPRESENTED THE TRADING LIABILITY OF THE ASSESSEE AND AS DECLARED BY THE ASSESSEE ITSELF IN THE RETURN OF INCOME, THERE WAS REMISSIO N OR RECESSION OF THE SAID LIABILITY DURING THE YEAR UNDER CONSIDERATIO N. THE SAID LIABILITY ACCORDINGLY WAS WRITTEN OFF BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AND THE AMOUNT THEREOF WAS ALSO OFFERED BY IT AS INCOME UN DER SECTION 41(1). THEREAFTER, THE ISSUE WAS RAISED BY THE ASSESSEE BY WAY OF ADDITIONAL GROUND DURING THE COURSE OF APPELLATE PROCEEDINGS BEF ORE THE LD. CIT(A) DISPUTING THE CHARGEABILITY OF THE SAID AMOUNT TO TAX UNDER SECTION 41(1) ON THE GROUND THAT THE SUIT FOR RECOVERY AGAINST IT W AS FILED BY THE CONCERNED PARTY IN THE COURT. ACCORDING TO THE ASSESSEE , THE SAID EVENT TAKEN PLACE SUBSEQUENTLY WAS SUFFICIENT TO SHOW THE LIAB ILITY IN QUESTION HAD NOT CEASED TO EXIST DURING THE YEAR UNDER CONSIDER ATION DESPITE THE SAME HAVING BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE IN THIS REGARD BEFORE T HE LD. CIT(A) AS WELL AS BEFORE US IS THAT THERE BEING NO CESSION OF THE LIABI LITY IN QUESTION AS WAS EVIDENT FROM THE SUIT FOR RECOVERY SUBSEQUENTLY FIL ED BY THE CONCERNED CREDITOR, THERE WAS NO BENEFIT IN RESPECT O F SUCH LIABILITY WHICH COULD BE SAID TO BE OBTAINED BY THE ASSESSEE WARRANTING THE APPLICATION OF PROVISIONS OF SECTION 41(1). IN SUPPORT OF THIS CONTENTI ON, HE HAS RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SUGAULI SUGAR WORKS (P.) LTD. (SUPRA). 16. IT IS NO DOUBT TRUE THAT IT WAS HELD BY THE HON'B LE SUPREME COURT IN THE AFORESAID CASE THAT OBTAINING BENEFIT BY THE ASSESSEE BY VIRTUE OF REMISSION OR CESSION OF LIABILITY IS A CONDITION PRECEDE NT FOR THE APPLICATION OF SECTION 41(1) AND THE MERE FACT THAT ASSESSEE HAS MADE AN ENTRY OF TRANSFERRING ITS ACCOUNTS UNILATERALLY WILL N OT ENABLE THE DEPARTMENT TO SAY THAT SECTION 41(1) WOULD APPLY. IT IS, HOWEVER, OBSERVED THAT THE ASSESSMENT IS INVOLVED IN THE SAID CASE BEFORE TH E HON'BLE SUPREME COURT WAS 1965-66 AND EXPLANATION 1 TO SECTION 41(1) INSERTED BY THE FINANCE ACT NO. 2, 1996 WITH EFFECT FROM 1-4 -1997 ON WHICH RELIANCE HAS BEEN STRONGLY PLACED BY THE LEARNED D.R. , WAS NOT APPLICABLE. THE SAID EXPLANATION READS AS UNDER : 46 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 EXPLANATION 1. FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESSION 'L OSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF SHALL INCLUDE THE REMISSION OR CESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY THE FIRST MENTIONED PERSON UNDER CLAUSE (A) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE (B) OR THAT SUB- SECTION BY WAY OF WRITING OFF SUCH LIABILITY IN HIS AC COUNTS. 17. A PERUSAL OF THE AFORESAID EXPLANATION CLEARLY SHOWS THAT THE OBTAINING OF BENEFIT AS ENVISAGED BY THE EXPRESSION 'LOSS ON EXPEND ITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY W AY OF REMISSION OR CESSION THEREOF' IS DEFINED TO INCLUDE REMISSION OR CESSIO N OF LIABILITY BY UNILATERAL ACT OF THE ASSESSEE BY WAY OF WRITTEN OFF IT S LIABILITY IN ITS ACCOUNTS. IT, THEREFORE, FOLLOWS THAT REMISSION OR CESSIO N OF ANY LIABILITY BY UNILATERAL ACT OF THE ASSESSEE BY WAY OF WRITING OFF IT S LIABILITY IN ITS ACCOUNTS WILL AMOUNT TO OBTAINING OF THE BENEFIT FOR THE PURPOSE OF SECTION 41(1) AND THE ACT OF THE ASSESSEE TO WRITE OFF SUCH LIAB ILITY UNILATERALLY IN ITS ACCOUNTS BY ITSELF WOULD BE SUFFICIENT TO ATTRACT T HE SAID PROVISIONS AS PER EXPLANATION 1. IN THE PRESENT CASE, THE ASSESSEE-COMPANY HAS NOT ONLY WRITTEN OFF THE LIABILITY IN QUESTION IN ITS BOOKS OF ACCOUNT BUT ALSO OFFERED THE AMOUNT OF SUCH LIABILITY AS ITS INCOME IN THE RETU RN ON THE GROUND THAT THE SAME HAS CEASED TO EXIST. IN THE CIRCUMSTANCES, EVEN IF IT IS ASSUMED THAT THE SUBSEQUENT EVENT IN THE FORM OF SUIT FILED B Y THE CONCERNED CREDITOR AGAINST THE ASSESSEE TO RECOVER THE SAID LIABIL ITY WAS SUFFICIENT TO SHOW THAT THE WRITING OFF OF THE LIABILITY IN ITS BOO KS OF ACCOUNT BY THE ASSESSEE TREATING THE SAME AS CEASED TO EXIST WAS A UNILATE RAL ACT, THE PROVISIONS OF SECTION 41(1) WERE CLEARLY ATTRACTED AS P ER EXPLANATION 1 BELOW SECTION 41(1). THIS BEING SO, WE ARE OF THE VIEW THAT THE SAID LIAB ILITY WRITTEN OFF BY THE ASSESSEE WAS LIABLE TO BE ADDED TO T HE TOTAL INCOME UNDER SECTION 41(1) AND THE LD. CIT(A) WAS FULLY JUSTI FIED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ISSUE TO TH E TOTAL INCOME OF THE ASSESSEE. THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE IS THEREFORE UPHELD DISMISSING GROUND NO. 4 OF ASSESSEE'S AP PEAL. (EMPHASIS SUPPLIED BY US) 62. SINCE THE FACTS OF THE INSTANT CASE ARE SIMILAR TO THA T OF DECISION CITED (SUPRA), THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECIS ION, WE HOLD THAT THE AMOUNT OF RS.1.50 CORES, WHICH HAS BEEN CRE DITED BY THE ASSESSEE TO ITS CAPITAL ACCOUNT DURING F.Y. 2004-05 IS LIAB LE TO BE BROUGHT TO TAX U/S.41(1) IN A.Y. 2005-06 EVEN THOUGH THE MATTER IS PENDING BEFORE THE COURT, IN VIEW OF EXPLANATION 1 U/S.41(1). FURTHER, THE ASSESSEE IS ALSO NOT ENTITLED TO GET ANY BENEFIT OF D EDUCTION U/S.80IB(10) ON THIS AMOUNT SINCE THE SAME IS NOT DERIVED FROM THE HOUSING PROJECT. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND UPHELD THE ACTION OF THE AO IN BRINGING THE TAX THE ABOVE AMOUNT FOR A.Y. 2005-06. SINCE THE ASSESSEE HAS CREDITED THE AMOUNT TO HIS CAP ITAL 47 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 ACCOUNT IN A.Y. 2005-06, THEREFORE, THE SAME SHOULD BE BRO UGHT TO TAX ONLY IN A.Y. 2005-06 ALTHOUGH THE SETTLEMENT WAS ARRIVED AT IN A.Y. 2002-03. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS R AISED BY THE REVENUE ARE ACCORDINGLY ALLOWED. 63. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS UNDER : 3. THE LD.CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF THE 80IB(10) OF THE ACT INSPITE OF THE FACT THAT THE COMPLETION CERTIFIC ATE ISSUED BY THE SOLAPUR MUNICIPAL CORPORATION ON 04-12-2009 IS A CERTIFICATE IN GENERAL WHICH FAILS TO PROVIDE BASIC INFORMATION SUCH AS HOUSE NO., DATE OF COMMENCEMENT, AREA ETC. WITH RESPECT TO WHICH THE COMPLETION CERTI FICATE IS ISSUED. 64. AFTER HEARING BOTH THE SIDES, WE FIND THE AO IN THE INS TANT CASE DISALLOWED THE CLAIM OF DEDUCTION U/S.80IB(10) ON THE GROUND THAT THE COMMERCIAL AREA OF 5889 SQ.FT. IN THE PROJECT EXCEEDS 5% O F THE BUILT UP AREA OF THE PROJECT OR 2000 SQ.FT. WHICHEVER IS LESS . TH E EXPLANATION OF THE ASSESSEE THAT THE COMMERCIAL AREA IS OUTSIDE THE P ROJECT FOR WHICH NO DEDUCTION U/S.80IB(10) IS CLAIMED AND THAT THE COMMERCIAL PROJEC T IS ALTOGETHER DIFFERENT FOR WHICH SEPARATE BOOKS OF ACCOUNTS MAINTAINED AND SEPARATE PROFIT AND LOSS ACCOUNT AND BALANCE SHEETS ARE PREPARED AND NO DEDUCTION FOR THE SAME IS CLAIMED WAS REJECTED BY THE AO. FOLLOWING THE ORDER FOR A.Y. 2003-04 IN ASSESSEES CASE A ND REJECTING VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE, THE AO DISALLOW ED THE CLAIM OF DEDUCTION U/S.80IB(10). HE ALSO REJECTED THE CLAIM OF P ROPORTIONATE DEDUCTION MADE BY THE ASSESSEE. 65. BEFORE CIT(A) IT WAS SUBMITTED THAT THE COMMERCIAL AREA IS THE PART OF THE MULTI STORIED BUILDING PROJECT SEPARATELY LOCAT ED IN THE SAME F.P.NO. 117 FOR WHICH SEPARATE PERMISSION WAS TAKEN VIDE OR DER NO. 466 DATED 23.7.2003, AND NO DEDUCTION HAS BEEN CLAIMED ON THIS PART OF THE DEVELOPMENT WORK. IT WAS ARGUED THAT EVEN THE B OOKS OF ACCOUNTS HAVE BEEN MAINTAINED SEPARATELY AND THE IDENTITY OF THE PROJECT ON 48 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 WHICH DEDUCTION U/S 80IB(10) HAS BEEN CLAIMED AND THOSE O N WHICH NO DEDUCTION HAS BEEN CLAIMED HAS BEEN SEPARATELY MAINTAINE D. IT WAS ACCORDINGLY CLAIMED THAT THE FINDING OF THE ASSESSING OFFICER IS BASED ON ERRONEOUS FACTS AND THEREFORE, REQUIRES TO BE REJECTED. 66. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND VARIOUS EVIDENCES SUBMITTED BEFORE HIM, THE LD.CIT(A) ALLOWED THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE. THE FOLLOWING OBSERVATION OF THE LD.CIT(A) WHILE ALLOWING THE CLAIM OF DEDUCTION U/S.80IB(10) IS RELEVANT: ON CAREFUL CONSIDERATION OF THE FACTS AND THE EVIDEN CES PRODUCED, IT IS APPARENT THAT THE ASSESSING OFFICER HAS ERRED IN CONCLU DING THAT THE COMMERCIAL AREA, FOR WHICH PERMISSION WAS TAKEN VIDE O RDER NO. 466 DATED 23.7.2003, IS PART OF THE ROW HOUSE PROJECT. THE CONST RUCTION OF ROW HOUSING PROJECT HAD LINKAGE TO PRIOR TO THE PERIOD O F COMING INTO THE PICTURE BY APPELLANT AS DEVELOPER IN 'INDIVIDUAL' CAPACITY. THIS IS CLEAR FROM THE HISTORY NARRATED ABOVE. A DEVELOPER WHO HAS A BIG PIE CE OF LAND CANNOT BE DEBARRED FROM USING IT FOR DIFFERENT PURPOSES SO LONG, THE FACTS SHOW THAT THE CONDITIONS REQUIRED FOR THE RESIDENTIAL PROJECT O N WHICH DEDUCTION U/S. 80IB HAS BEEN CLAIMED COMPLY TO THE CONDITIONS STIPULA TED IN THE SECTION. A PROJECT IS AN UNDERTAKING, WHOSE MEANING IN THE CONTE XT OF S. 80IB(10) HAS BEEN ANALYSED IN MANY JUDGMENTS INCLUDING SAROJ SALES CORPORATION, BRAHMA ASSOCIATES AND OTHERS ETC. AS PER THIS THE MEANING THAT EMERGES IS THAT THE UNDERTAKING OF RESIDENTIAL DWELLING UNITS SHO ULD TOGETHER COMPLY TO THE CONDITIONS PRESCRIBED IN THE SECTION. THE APPELLAN T HAS A BIG CHUNK OF LAND OF MORE THAT 12 ACRES, WHOSE LAYOUT PLAN HAS BEEN FIRST APPROVED AS DESCRIBED ABOVE, ALLOCATING THE AREAS FOR WTP ROAD, A REAS UNDER D.P. RESERVATIONS VIZ. POLICE STATION, VEGETABLE MARKET ET C., AND AREA AVAILABLE FOR PLOTTING. THE AREA AVAILABLE FOR PLOTTING HAS BEEN F URTHER MARKED AND DEMARCATED FOR INTERNAL ROADS, OPEN SPACE AND SUB-PLOT S. OUT OF THESE SUBPLOTS, THE APPELLANT HAS USED IT FOR ROW HOUSING PROJ ECT, MULTISTORIED PROJECT ETC. IT IS CLEARLY SHOWN THAT APPROXIMATELY 162 SUB PLOTS, ADMEASURING 12,911 SQ.MTS. WERE USED FOR CONSTRUCTING R OW HOUSES AND 22 SUB-PLOTS WERE USED FOR DEVELOPING MULTISTORIED COMPLEX . CONSTRUCTION ORDER NO. 466 DATED 23.7.2003 REFERRED TO BY ASSESSING OFFICER ALSO ADMITTEDLY MENTIONS THAT THIS PROJECT WAS FOR SUB-PLOT S NO. 5 TO 14, 24 TO 31 AND 33 TO 36 ADMEASURING APPROXIMATELY 6016.12 SQ.MTS. THUS IT IS CLEAR THAT THE SITE PLAN APPROVAL IS NOT THE APPROVAL OF R OW HOUSING PROJECT. IT WAS ONLY FOR LAYOUT AND SUB-PLOTTING. ROW HOUSING PROJ ECT WAS SEPARATELY ENVISAGED FOR WHICH CONSTRUCTION APPROVAL AS PER DETAI LED UNITWISE PLANS OF ROW HOUSES ON DIFFERENT SUB-PLOTS WERE TAKEN STARTING FR OM 2000 AS MENTIONED BY MY PREDECESSOR IN A.Y. 2003-04 AND ALSO SHOWN BY APPELLANT IN HIS SUBMISSIONS. IN SUCH ORDER DATED 26.9. 2000 PERMISSION TO BUILT 96 UNITS WAS TAKEN FOR THE FIRST TIME ON RESPECTI VE SUBPLOTS. THIS WAS FOLLOWED BY OTHER ORDERS FOR REMAINING UNITS. IN SUCH VIEW OF THE MATTER, THE AVAILABLE MATERIALS SHOW THAT THE ASSESSING OFFICER G OT CONFUSED WITH THE SITE PLAN AS PROJECT PLAN. THEREFORE, IT HAS TO BE SEEN THAT THE COMMERCIAL PROJECT, APPROVED VIDE CONSTRUCTION ORDER NO. 466 ON DIFFERENT 49 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 SET OF SUBPLOTS WERE NOT PART OF THE ROW HOUSING PROJE CT. THEREFORE, IN THE FACTS OF THE CASE, AS THE COMMERCIAL AREA WAS NOT FOUN D TO BE PART OF THE RESIDENTIAL ROW HOUSE PROJECT ON WHICH DEDUCTION WAS C LAIMED, IT WILL BE INCORRECT TO DEBAR THE ASSESSEE FROM THE BENEFIT WHICH IS AVAILABLE TO HIM. IT IS IMPORTANT TO POINT OUT HERE THAT THE APPELLANT HA S DEVELOPED 161 ROW HOUSES ON A PIECE OF F.P. NO. 117 DIVIDED INTO SUBPLOT S AS THE UNITS ARE ROW HOUSES AND NOT FLATS AND THE TOTAL AREA OF THE ABOVE R OW HOUSE PROJECT IS CLEARLY MORE THAN ONE ACRE AND EACH OF THE UNIT COM PRISES OF LESS THAN 1000 SQ.FTS. THE ASSESSING OFFICER HAS ALSO NOT FOUND ANY FAULT IN THIS. THEREFORE, IT IS CLEAR THAT THE APPELLANT IN DEVELOPING THE PRO JECT OF THE ROW HOUSE HAS FULFILLED THE PURPOSES FOR WHICH THIS DEDUCTION WAS MAD E AVAILABLE IN THE STATUTE AND THEREFORE, THE OBJECTION OF THE ASSESSING OF FICER IN RESPECT OF VIOLATION OF SEC. 80IB FOR INCLUDING MORE THAN 2000 SQ.FTS. OF COMMERCIAL AREA, BEING INCORRECT, WAS FOUND TO BE NOT ENTERTAIN ABLE. THIS OBJECTION OF THE ASSESSING OFFICER IS THEREFORE HELD TO BE INCORRECT. EVEN IF, IT IS CONSIDERED THAT THE ENTIRE F.P. NO. 117 SHOULD BE CON SIDERED AS ONE PROJECT, THEN ALSO THE DECISION OF SAROJ SALES CORPORATION VS. I TO (2008) 115 TTJ (MUMBAI) 485 AND THE DECISION OF ITAT, 'A' BENCH, PU NE GIVEN IN THE CASE OF APOORVA PROPERTIES AND ESTATE PVT. LTD. VS. DCIT, CIRC LE 1(1), A.Y. 2005-06 IN ITA NO. 1550/PN/2008 DATED 21.8.2009, SUPPORTS THE CLAIM OF APPELLANT BECAUSE HERE THE ROW HOUSING PROJECTS AND MULTISTORIED PROJECTS WERE SEPARATELY APPROVED AS DESCRIBED ABOVE AND NO COMMERCI AL SPACE IS INCLUDED IN ROW HOUSING PROJECT. THEREFORE, THIS OBJ ECTION IS HELD INCORRECT. 67. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 68. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A ) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO C ONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE AO DISALLOWED THE BENEFIT OF DEDUCTION OF RS.41 LAKHS CLAIMED U/ S.80IB(10) ON THE GROUND THAT THE COMMERCIAL AREA IN THE HOUSING P ROJECT CONSTRUCTED BY THE ASSESSEE BEING 5889 SQ.FT. IS MUCH MO RE THAN THE MAXIMUM REQUIRED COMMERCIAL AREA OF 2000 SQ.FT. FOR CLAIMING DEDUCTION U/S.80IB10). THE AO HAS NOT DISALLOWED THE CLA IM FOR NON SUBMISSION OF THE COMPLETION CERTIFICATE. THEREFORE, THE GROU ND RAISED BY THE ASSESSEE THAT THE CIT(A) ERRED IN ALLOWING THE CLAIM OF 80IB(10) DEDUCTION IN RESPECT OF THE FACT THAT THE COMPLETION CERT IFICATE ISSUED BY SOLAPUR MUNICIPAL CORPORATION ON 04-12-2009 IS A CERTIFICATE IN GENERAL 50 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 WHICH FAILS TO PROVIDE BASIC INFORMATION SUCH AS HOUSE NUMBE R, DATE OF COMMENCEMENT, AREA ETC. WITH RESPECT TO WHICH THE COMPLE TION CERTIFICATE IS ISSUED BECOME INFRUCTUOUS. BE THAT IT MAY BE , WE HAVE ALREADY HELD AT PARA 41 TO 44 OF THIS ORDER THAT THE AS SESSEE HAS COMPLETED 161 ROW HOUSES AND HAS HANDED OVER THE POS SESSION TO THE HOUSE OWNERS. THE PART COMPLETION CERTIFICATE WAS OBTAIN ED PRIOR TO 31- 03-2008 AND FOR THE REMAINING ROW HOUSES THE ASSESSEE HAS APPLIED TO PMC FOR ISSUE OF COMPLETION CERTIFICATE BEFORE 31-03-2008. U NDER THESE CIRCUMSTANCES, IT HAS BEEN HELD THAT THE AO IS NOT JUSTIFIE D IN DENYING THE BENEFIT OF DEDUCTION U/S.80IB(10) FOR THE ENTIRE PROJECT , THEREFORE, THE GROUND RAISED BY THE REVENUE ON THIS ISSUE FAILS. 69. SO FAR AS THE ISSUE ON WHICH THE AO HAS DENIED THE B ENEFIT OF DEDUCTION U/S.8)IB(10) IS DUE TO CONSTRUCTION OF COMMERCIAL AREA OF 5889 SQ.FT. WHICH IS MORE THAN 2000 SQ.FT, THIS ISSUE IS DECIDE D IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES AND THE DECISION OF THE PU NE BENCH OF THE TRIBUNAL IN THE CASE OF OPEL SHELTERS PVT. LTD., & D.S. K ULKARNI ASSOCIATES (SUPRA) ACCORDING TO WHICH THE COMMERCIAL AREA BROUGHT IN THE STATUTE W.E.F. A.Y. 2005-06 IS ONLY PROSPECTIVE IN NATUR E AND IT CANNOT BE APPLIED TO PROJECTS SANCTIONED PRIOR TO THAT DATE. SINCE IN THE INSTANT CASE THE PROJECT HAS BEEN SANCTIONED ON 25-0 6-1999, THEREFORE, IN VIEW OF THE DECISIONS OF THE HONBLE HIGH COURT AND PUNE BENCH OF THE TRIBUNAL CITED (SUPRA) AND IN VIEW OF THE DETAILED REASON ING GIVEN BY THE LD.CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSE SSEE, WE FIND NO INFIRMITY IN HIS ORDER. ACCORDINGLY, THE SAME IS UPHELD A ND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 51 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 GROUNDS IN ITA NO.1102/PN/2011 (A.Y. 2002-03) : 70. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. THE LD.CIT(A) GROSSLY ERRED IN DELETING THE ADDIT ION ON ACCOUNT OF THE CESSATION OF A LIABILITY ACQUIRED ON ACCOUNT OF F INANCING A TRADING ASSET MORE SO WHEN THE TRADING ASSET WAS RELEASED FROM MORTGAG E ONLY ON ACCOUNT OF CESSATION OF LIABILITY. 2. THE LD.CIT(A) GROSSLY ERRED IN CONSIDERING THE CESSAT ION OF LIABILITY ON A MORTGAGED ASSETS AS CESSATION OF CAPITAL LIABILITY E SPECIALLY WHEN THE ASSET WAS PART OF STOCK-IN-TRADE ON THE SALE OF WHICH DE DUCTION U/S.80IB(10) OF THE ACT WAS CLAIMED. 71. FACTS IN BRIEF ARE THAT THE AO MADE ADDITION OF RS.1.50 CRORES TO THE TOTAL INCOME OF THE ASSESSEE U/S.41(1) BEING REMISSION O F RS.1.50 CRORES EFFECTED IN THE CAPITAL ACCOUNT IN A.Y. 2005-06 ON SUBSTANTIVE BASIS AND AN AMOUNT OF RS.1.50 CRORES IN A.Y. 2002-03 ON P ROTECTIVE BASIS. WHILE DECIDING THE ISSUE IN A.Y. 2005-06, WE HAVE ALRE ADY HELD AT PARA NOS.58 TO 62 OF THIS ORDER THAT THE AMOUNT IS TAXABLE ONLY IN A.Y. 2005-06, AND NO ADDITION CAN BE MADE IN A.Y. 2002-03 S INCE THE ASSESSEE HAS CREDITED THE AMOUNT ONLY IN F.Y. 2004-05 IN HIS CAPITAL ACCOUNT. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENU E ARE DISMISSED. 72. IN THE RESULT, ITA NO.1104/PN/2011 FILED BY THE REVENU E IS PARTLY ALLOWED AND THE OTHER APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17-08-2015. SD/- SD/- ( SUSHMA CHOWLA ) ( R.K. PANDA ) / JUDICIAL MEMBER ' / ACCOUNTANT MEMBER IQ.KS PUNE ; #$% DATED : 17 TH AUGUST, 2015. LRH'K 52 ITA NO.143/PN/2007, ITA NOS.1102 TO 1105/PN/2011, & ITA NO.1430/PN/2012 &'()*+,+) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' ' ( ( ) -I, IQ.KS / THE CIT(A)-I, PUNE 4. ' ' ( -I, IQ.KS / THE CIT-I, PUNE 5. +,- . , ' .' , IQ.KS / DR, ITAT, A PUNE; 6. -0 1 / GUARD FILE. &$ / BY ORDER , + //TRUE C //TRUE COPY// 23 4 .5 / SR. PRIVATE SECRETARY ' .', IQ.KS / ITAT, PUNE
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