ITO, Bangalore V. M/s. Mahaveer Calyx, Bangalore

ITA 153/BANG/2011

• Counselvise Citation: 15321114 RSA 2011
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 18-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBUSTHA
• Assessee Lawyers: V SRINIVASAN
• Section: 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO.153 & 998/BANG/2011 (ASSESSMENT YEARS : 2007-08 & 2008-09) INCOME TAX OFFICER, WARD 4(3), BANGALORE. . APPELLANT. VS. M/S. MAHAVEER CALYX, NO.1, 24 TH MAIN, MAHAVEER TOWERS, J.P. NAGAR, 6 TH PHASE, BANGALORE-560 078. .. RESPONDENT. PAN AAOFM 2460J APPELLANT BY : SHRI S.K. AMBUSTHA. RESPONDENT BY : SHRI V. SRINIVASAN. DATE OF HEARING : 22.082012. DATE OF PRONOUNCEMENT : 31.08.2012. O R D E R PER SHRI JASON P. BOAZ : THESE TWO APPEALS BY REVENUE ARE DIRE CTED AGAINST THE SEPARATE ORDERS OF THE COMMISSIONE R OF INCOME TAX (APPEALS)-II, BANGALORE DT.10.11.2011 FOR THE ASSESSMENT YEAR 2007-08 AND DT.8.8.2011 FOR ASSESSMENT YEAR 2008-09. SINCE COM MON ISSUES ARE INVOLVED, THEY ARE HEARD TOGETHER AND DISPOSED OFF BY WAY OF THIS COMMON ORD ER. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UND ER : 2.1 THE ASSESSEE IS A PARTNERSHIP FIRM DEVELOPI NG RESIDENTIAL FLATS. THE ASSESSEE HAD PLANNED TO BUILD 180 FLATS AND IT HAD OBTAINED PLAN SANCTION F OR CONSTRUCTION OF THE SAID HOUSING PROJECT IN SURVEY NO.45, KATHA NO.114 IN NAYANAPPANAHALLI VILL AGE, BEGUR HOBLI, BANGALORE. IT HAD CLAIMED 2 ITA NOS.153 & 998/BANG/11 DEDUCTION UNDER SECTION 80 IB OF THE INCOME TAX ACT , 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT') IN RESPECT OF THE SALE OF FLATS FOR BOTH ASSESSMENT YE ARS UNDER CONSIDERATION AT 100% OF THE PROFITS. 2.2 DURING THE COURSE OF ASSESSMENT PROCEEDING S FOR BOTH ASSESSMENT YEARS, THE ASSESSING OFFICER FOUND THAT THE SANCTIONED PLAN FOR CONSTRUCTION OF THE HOUSING PROJECT SHOWED THAT THE ASSESSEE WAS TO BUILD THE FOLLOWING AREA : BASEMENT 92,565.00 SQ. FT. GROUND FLOOR 45,937.10 SQ. FT. FIRST FLOOR 45,937.10 SQ. FT. SECOND FLOOR 45,937.10 SQ. FT. THIRD FLOOR 45,937.10 SQ. FT. TOTAL : 1,83,748.40 SQ. FT. HOWEVER, THE ASSESSING OFFICER NOTICED FROM THE DAT A OF SALE DEEDS EXECUTED BY THE ASSESSEE, THAT THE BUILT UP AREA SOLD BY THE ASSESSEE IN RESPECT O F 180 FLATS TOTALED 1,91,346 SQ. FT. AFTER ADDING 18.5% TOWARDS COMMON AREA, THE ASSESSING OFFICER FO UND THAT THE TOTAL BUILT UP AREA COMES TO 2,26,851.60 SQ. FT. IN THIS VIEW OF THE MATTER, TH E ASSESSING OFFICER HELD THAT AS THE ASSESSEE HAD G OT THE PROJECT APPROVED FOR CONSTRUCTION OF 1,83,748.4 0 SQ. FT. AS THE TOTAL BUILT UP AREA (I.E. THE TOTA L OF FLATS BUILT ON THE GROUND, FIRST, SECOND AND THIRD FLOORS) WHEREAS, IT HAD CONSTRUCTED 2,26,851.60 SQ. FT. THIS MEANT THAT THE PROJECT AS CONSTRUCTED BY THE A SSESSEE DID NOT HAVE THE APPROVAL OF THE LOCAL AUTHORITY. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAD COMPLIED WITH ALL THE CONDITIONS MENTIONED UNDER SECTION 80 IB OF THE ACT, EXCEPT TH E CONDITION WITH REGARD TO THE BUILT UP AREA AS THE PROJECT AS CONSTRUCTED BY THE ASSESSEE DID NOT HAVE THE APPROVAL OF THE LOCAL AUTHORITY. THE ASSESSING OFFICER, THEREFORE, HELD THAT THE ASSESSE E WAS NOT ENTITLED TO ANY DEDUCTION UNDER SECTION 80 IB OF THE ACT AND COMPLETED THE ASSESSMENT ACCOR DINGLY BY AN ORDER UNDER SECTION 143(3) OF THE ACT ON 29.12.2009 FOR ASSESSMENT YEAR 2007-08 AND B Y ORDER UNDER SECTION 144 OF THE ACT ON 30.12.2010 FOR ASSESSMENT YEAR 2008-09. 3 ITA NOS.153 & 998/BANG/11 2.3 THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT(A) AGAINST BOTH THE ORDERS OF ASSESSMENT FOR ASSESSMENT YEAR 2007-08 DT.29.12.2009 AND 2008- 09 DT.30.12.2010. BEFORE THE LEARNED CIT(A), THE ASSESSEE CONTENDED THAT THE CONDITIONS OF SECTI ON 80 IB(10) OF THE ACT WERE FULFILLED AND THAT EACH APARTMENT CONSTRUCTED WAS LESS THAN 1500 SQ. F T. IT WAS SUBMITTED BY THE ASSESSEE THAT NO UNAUTHORIZED UNITS ON FLOORS WERE CONSTRUCTED BY IT BUT THAT THERE WERE CERTAIN EXCESS AREA CONSTRUCTED BY IT WHICH HAD NOT VIOLATED THE CONDIT ION RELATING TO THE BUILT UP AREA OF 1500 SQ. FT. IN OTHER WORDS, IT WAS CONTENDED BY THE ASSESSEE THAT THE APPROVAL FOR A HOUSING PROJECT WAS RELEVANT FOR ONLY TWO ISSUES VIZ. I) TO FIND OUT THE DATE OF APPROVAL AND THUS THE TIME LIMIT FOR COMPLETION OF THE HOUSING PROJECT AND II) TO DETERMINE WHETHER THE PROJECT IS APPROVED BY THE LOCAL AUTHORITY AS A HOUSING PROJECT. ON THE ISSUE OF COMPLETION OF THE PROJECT, IT WAS S UBMITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE HAD OBTAINED AN OCCUPANCY CERTIFICATE BUT HAD NOT MADE PAYMENT OF THE COMPOUNDING FEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSE SSEE HAD NOT OBTAINED A COMPLETION CERTIFICATE AND THIS WAS A VIOLATION OF THE PROVISIONS OF SECTI ON 80 IB OF THE ACT. THE ASSESSEE, HOWEVER, CONTENDED BEFORE THE LEARNED CIT(A) THAT THE COMPLE TION OF THE HOUSING PROJECT WAS A FACT AND THE NON-PAYMENT OF THE COMPOUNDING FEE WOULD NOT RESULT IN THE DENIAL OF EXEMPTION AND IT COULD NOT BE SAID THAT THE ASSESSEE HAD CONSTRUCTED A PROJECT WH ICH WAS NOT APPROVED. THE LEARNED CIT(A), THEREAFTER DISPOSED OFF THE APPEAL FOR ASSESSMENT Y EAR 2007-08 HOLDING THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80 IB OF THE AC T FOR ASSESSMENT YEAR 2007-08. THIS VIEW OF THE LEARNED CIT(A), THAT THE ASSESSEE WAS ENTITLED FOR DEDUCTION UNDER SECTION 80 IB OF THE ACT WAS FOLLOWED FOR THE ASSESSMENT YEAR 2008-09 WHEREIN TH E FINDING OF THE LEARNED CIT(A) WAS AS UNDER : 4.10 THE SAME ISSUE CAME UP FOR CONSIDERATION IN THE APPEAL BEFORE MY PREDECESSOR IN THE APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 20 07-08 WHO HAS, IN HIS ORDER ITA NO.160/W-4(3)/CIT(A)II/09-10 DATED 10.11.2010, DISC USSED THIS ISSUE AT LENGTH. THE FACTS 4 ITA NOS.153 & 998/BANG/11 REMAIN THE SAME OTHER THAN THAT THE COMPOUNDING FEE AS CLAIMED TO HAVE BEEN PAID BY THE APPELLANT HAS ACTUALLY NOT BEEN PAID. MY PREDE CESSOR HAS EXAMINED THE ISSUE IN DEPTH IN ORDER REFERRED TO ABOVE AND HELD AS UNDER : 3.6 HOWEVER, ACCORDING TO THE ASSESSING OFFICER, SINCE THE APPELLANT HAS BUILT THE FLATS IN EXCESS OF THE APPROVED PLANS, THE PROJECT OF THE AP PELLANT IS HELD TO BE NOT APPROVED ONE IN AS MUCH AS WHAT HAS BEEN APPROVED IS NOT BUILT. 3.7 AT THE TIME OF APPEAL HEARING, THE APPELLAN T ARGUED THAT, AT THE RELEVANT POINT OF TIME, THE BYE LAW OF THE LOCAL AUTHORITY PERMITTED A CERTAIN FLOOR AREA RATIO (IN SHORT FAR) THAT COULD BE CONSTRUCTED BY THE APPELLANT AND BASE D ON THE THEN PREVAILING FAR, THE APPELLANT, SUBMITTED THE PLAN AND OBTAINED THE PLAN APPROVAL. 3.8 THIS ASPECT OF THE MATTER BECOMES CLEAR FROM T HE FOLLOWING CLARIFICATION GIVEN BY THE CBDT IN CIRCULAR F.NO.205/3/2001/IT A-I DATED 4.5.2 001 BEING A LETTER ADDRESSED TO THE MAHARASHTRA CHAMBER OF HOUSING INDUSTRIES, WHICH HA S BEEN REFERRED TO BY THE HON'BLE ITAT IN THE CASE OF M/S. BRAHMA ASSOCIATES (2009) 3 15 ITR (AT) 268 (PUNE) (SB)/122 'TOTAL TURNOVER') 433 (PUNE) (SB). THE RELEVANT PO RTION OF THE CLARIFICATION EXTRACTED IN ORDER OF THE HON'BLE ITAT REFERRED TO ABOVE IS AS U NDER : WITH REGARD TO YOUR QUERY REGARDING THE DEFINITION OF HOUSING PROJECT IT IS CLARIFIED THAT ANY PROJECT WHICH HAS BEEN APPROVED BY A LOCAL AUTH ORITY AS A HOUSING PROJECT SHOULD BE CONSIDERED ADEQUATE FOR THE PURPOSE OF S.10(23G) AN D 80-IB(10) 3.9 THE APPELLANT FURTHER STATED THAT AT THE TI ME OF CONSTRUCTION OF THE PROJECT THE APPELLANT HAD PUT UP CERTAIN ADDITIONAL CONSTRUCTIO N IN SUCH A MANNER THAT THERE WERE NO UNAUTHORIZED UNITS OR FLOORS BUT ONLY SOME ADDITION AL AREA IN EACH OF THE APARTMENTS THAT WERE CONSTRUCTED BY THE APPELLANT. EVEN CONSIDERIN G THE EXCESS AREA CONSTRUCTED BY THE APPELLANT IN EACH APARTMENT. THE APPELLANT HAD NO T VIOLATED THE CONDITION RELATING TO THE BUILT-UP AREA, WHICH IS LESS THAN 1500 SQ FT AND T HIS ASPECT OF THE MATTER HAS BEEN VERIFIED BY THE ASSESSING OFFICER AND THERE IS NO DISPUTE ON THIS ISSUE. 4. I HAVE CAREFULLY CONSIDERED THE APPELLANTS SU BMISSIONS AND ALSO PERUSED THE RECORDS AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE LEGAL POSITION. 4.1 UNDER THE EXISTING PROVISIONS CONTAINED IN SUB-SECTION (10) OF SECTION 80-IB, A DEDUCTION EQUAL TO ONE HUNDRED PER CENT OF THE PROF ITS OF AN UNDERTAKING ENGAGED IN DEVELOPING AND BUILDING HOUSING PROJECTS IS ALLOWED IF THE HOUSING PROJECT IS APPROVED BY A LOCAL AUTHORITY BEFORE MARCH, 2007. THE DEDUCTION IS SUBJECT TO THE CONDITIONS THAT THE UNDERTAKING SHOULD HAVE COMMENCED THE DEVELOPMENT O F THE HOUSING PROJECT ON OR AFTER 1.10.1998. THE PROJECT SHOULD BE ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE AND THE RESIDENTIAL UNIT SHOULD HAVE MA XIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED IN DELHI OR MUMBAI AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT OTHER PLACES. 4.2 SECTION 80-IB(10), BEING A BENEFICIAL PROV ISION OF TAX INCENTIVE, SHOULD BE INTERPRETED LIBERALLY SO AS TO CONFER THE BENEFIT O N THE SO CALLED DEVELOPER CUM BUILDER. LAW S FAIRLY SETTLED IN THIS REGARD BY A NUMBER OF DECISIONS OF THE APEX COURT REFERRED TO BY IT AT (I), (II), (III), (IV) OF PAGE 291 OF 315 ITR OF HON'BLE ITAT, PUNE SPECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES. (I) PETRON ENGINEERING CONSTRUCTION (P) LTD. V. CB DT (1989) 175 ITR 523 (SC) LIBERAL INTERPRETATION OF AN INCENTIVE PROVISION CAN BE RES ORTED TO ONLY WHEN IT IS POSSIBLE WITHOUT IMPARING THE LEGISLATIVE REQUIREMENT AND THE SPIRIT OF THE PROVISION. WHERE THE 5 ITA NOS.153 & 998/BANG/11 PHRASEOLOGY OF A PARTICULAR PROVISION TAKES WITHIN ITS SWEEP THE TRANSACTIONS WHICH ARE TAXABLE, IT IS NOT FOR THE COURTS TO STRAIN AND STR ESS THE LANGUAGE SO AS TO ENABLE THE TAX PAYER TO ESCAPE THE TAX. (II) PANDIAN CHEMICALS LTD. V. CIT (2003) 262 ITR 278(SC) RULES OF INTERPRETATION WOULD COME INTO PLAY ONLY IF THERE IS ANY DOUBT WITH REGA RD TO THE EXPRESS LANGUAGE USED IN THE PROVISION. WHERE THE WORDS ARE UNEQUIVOCAL, THERE IS NO SCOPE FOR IMPORTING THE RULE OF LIBERAL INTERPRETATION OF AN INCENTIVE PROVISION. (III) CIT V. N.C. BUDHARAJA & CO. & ANR.ETC. ETC. (1993) 204 ITR 412 (SC) LIBERAL INTERPRETATION OF AN INCENTIVE PROVISION SHOULD NOT DO VIOLENCE TO PLAIN LANGUAGE. THE OBJECT OF AN ENACTMENT SHOULD BE GATHERED FROM A RE ASONABLE INTERPRETATION OF THE LANGUAGE USED THEREIN. (IV) IPCA LABORATORY LTD V. DY. CIT (2004) 266 ITR 521 (SC) ANY INTERPRETATION HAS TO BE AS PER WORDING OF THE PROVISION INCLUDING INCENTIVE PROVISION. IF THE WORDINGS OF THE PROVISION ARE CLEAR, THEN THE BENEFITS, WHICH ARE N OT AVAILABLE UNDER THE PROVISION, CANNOT BE CONFERRED BY IGNORING OR MISINTERPRETING THE WOR DS IN THE PROVISION. 4.3 I AM, THEREFORE, OF THE CONSIDERED VIEW TH AT THE TAX INCENTIVE BYWAY OF DEDUCTION UNDER SECTION 80-IB(10) IS PREDOMINANTLY FOR THE PU RPOSE OF AUGMENTING AFFORDABLE DWELLING UNITS AND IT MUST BE INTERPRETED IN THAT L IGHT. WHEN A LOCAL AUTHORITY APPROVES A PROJECT AS HOUSING PROJECT, THERE IS APPARENTLY NO DIFFICULTY. AS LONG AS THE LOCAL AUTHORITY APPROVES THE PROJECT AS A HOUSING PROJECT, IT IS IM MATERIAL AS TO WHAT IS THE QUANTUM OF USE OF BUILT UP AREA FOR BUILDING PURPOSES. THIS I S SO INTER ALIA FOR THE REASON THAT THE CBDT VIDE LETTER DATED 4.5.2001 (SUPRA) CLARIFIED T HIS ISSUE. 4.4 THE HON'BLE ITAT, MUMBAI BENCH A IN THE C ASE OF HARSHAD P. DOSHI V. ACIT (2010) 37 SOT 9 (MUM) (URO) HELD AS UNDER : BOTH THE ASSESSING OFFICER AS WELL AS THE COMMISSI ONER (APPEALS) HAD FOUNDED THEIR ORDERS ON THE PREMISE THAT THE EXPRESSION HOUSE M EANS A RESIDENTIAL ACCOMMODATION ONLY. UNDER THE HEAD CHAPTER IV-C INCOME FROM H OUSE PROPERTY CHARGE OF TAX IS IN RESPECT OF HOUSE PROPERTY THAT MAY BE RESIDENTIAL H OUSE, A SHOP, AN OFFICE BUILDING, FACTORY PREMISES, GODOWN, WAREHOUSE, ETC. THE CBDT VIDE ITS CLARIFICATION F.NO.205/3/2001/IT A-II DATED 4.5.2001 HAS CLARIFIE D THAT ANY PROJECT WHICH HAS BEEN APPROVED BY A LOCAL AUTHORITY AS A HOUSING PROJECT SHOULD BE CONSIDERED ADEQUATE FOR THE PURPOSE OF SECTIONS 10(23G) AND 80-IB(10). DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FURNISHED CERTIFICATE OF MUNICIPAL CORPORATION TO THE EFFECT THAT THE PROJECTS UNDERTAKEN HAD BEEN APPROVED AS HOUSING P ROJECT. 4.5 IN VIEW OF THE ABOVE DISCUSSIONS, IT WAS HE LD IN THE CASE CITED ABOVE THAT THERE WAS NO JUSTIFICATION IN REDUCING THE DEDUCTION CLAIMED BY THE ASSESSEE BY THE SUM OF RS.44,43,100/- 4.11 I AM IN AGREEMENT WITH THE DECISION OF MY P REDECESSOR ON THIS ISSUE. ACCORDINGLY, IN THE PRESENT CASE ALSO, THE PROJECT, WHICH HAS BE EN APPROVED BY THE LOCAL AUTHORITY AS A HOUSING PROJECT, SHOULD BE CONSIDERED ADEQUATE FO R THE PURPOSE OF SECTION 80-IB(10) FOLLOWING THE CBDTS CIRCULAR DATED 4.5.2001 AND TH E DECISION OF THE ITAT, MUMBAI GIVEN THAT ALL OTHER CONDITIONS HAVE BEEN MET. THE ASSESS ING OFFICERS DISCLOSURE IN HIS REMAND REPORT REGARDING THE NON-PAYMENT OF COMPOUNDING FEE FOR REGULARISATION OF THE EXCESS AREA CONSTRUCTED BY THE APPELLANT FOR THE DISALLOWA NCE OF THE DEDUCTION. 80-IB(10) WOULD 6 ITA NOS.153 & 998/BANG/11 NOT IN ITSELF ALTER THE DECISION IN TOTALITY AS WHA T IS RELEVANT IS THAT THE CONDITIONS LAID DOWN IN SECTION 80-IB(10) IN SUBSTANCE ARE MET AS D ISCUSSED ABOVE. MOREOVER, IT IS FOR THE BBMP TO LOOK INTO THE VIOLATION, IF ANY, OF THE APP ROVED PLAN. IN MY OPINION, MERELY THIS DISCREPANCY WILL NOT DISENTITLE THE APPELLANT OF TH E DEDUCTION OTHERWISE ALLOWABLE UNDER SECTION 80IB(10). I HOLD THAT ON FACTS AND CIRCUMS TANCES OF THE CASE, AS DECIDED IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE APPELLAN T IS ENTITLED TO DEDUCTION UNDER SECTION 80IB(10). THE ASSESSING OFFICER IS, THEREF ORE, DIRECTED TO ALLOW DEDUCTION OF THE SUM OF RS.1,83,44,410/- AS CLAIMED BY THE APPELLANT . ACCORDINGLY, THE LEARNED CIT(A) DISPOSED THE TWO AP PEALS FOR ASSESSMENT YEARS 2007-08 AND 2008-09 ALLOWING THE ASSESSEE THE DEDUCTION CLAIMED UNDER S ECTION 80 IB OF THE ACT. 3.0 AGGRIEVED BY THE ORDERS OF THE LEARNED CIT (A), REVENUE IS IN APPEAL BEFORE US. IN IDENTICAL GROUNDS RAISED FOR BOTH YEARS UNDER CONSIDERATION, REVENUE HAS CONTENDED AS UNDER : 1. THE ORDER OF THE CIT(A) IS OPPOSED TO THE FAC TS OF THE CASE. 2. THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE AS SESSING OFFICER TO ALLOW DEDUCTION OF RS.82,61,350 UNDER SECTION 80-IB(10) OF THE INCOME TAX ACT, 1961. 3. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HAS NOT OBTAINED THE OCCUPANCY CERTIFICATE FROM THE LOCAL MUNICIPAL AUTHORITY WHICH IS ONE OF THE REQUISITE FOR CLAIMING DEDUCTION UNDER SECTION 80 IB(10) OF T HE INCOME TAX ACT, 1961. 4. THE LEARNED CIT(A) HAS FAILED TO NOTICE THAT T HE ASSESSEE HAS DEVIATED FROM THE APPROVED SANCTIONED PLAN WHICH INITIALLY ALLOWED H IM TO CONSTRUCT BUILT UP AREA OF 1,83,748 SQ FT AS AGAINST WHICH THE ASSESSEE HAS CO NSTRUCTED AN AREA OF 2,26,851 SQ FT WHICH IS IN EXCESS THAN APPROVED SANCTIONED AREA. 5. THE LEARNED CIT(A) HAS FAILED TO NOTICE THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS LAID DOWN BY THE CBDT FOR AVAILING EXEMP TION / DEDUCTION UNDER SECTION 80 IB (10) OF THE INCOME TAX ACT, 1961. 6. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING THE APPEAL, THE ORDER OF THE LEARNED CIT(A) MAYBE SET A SIDE AND THAT THE ORDER OF THE ASSESSING OFFICER MAY BE RESTORED. 4.0 THE GROUNDS OF APPEAL RAISED AT S.NOS.1 AND 6 ARE GENERAL IN NATURE AND THEREFORE DO NOT WARRANT ANY ADJUDICATION THEREON. 5.1 THE GROUNDS OF APPEAL AT S.NOS.2 TO 5 ALL RELATE TO THE SINGLE ISSUE OF DEDUCTION UNDER SECTION 80 IB OF THE ACT CLAIMED BY THE ASSESSEE AND GRANTE D TO IT BY THE LEARNED CIT(A) FOR BOTH ASSESSMENT YEARS 2007-08 AND 2008-09. 7 ITA NOS.153 & 998/BANG/11 5.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE SU BMITTED THAT THE LEARNED CIT(A) ERRED IN APPLYING THE DECISION OF THE SPECIAL BENCH OF THE ITAT, PUNE IN THE CASE OF BRAHMA ASSOCIATES REPORTED IN 315 ITR 291, WHILE GRANTING RELIEF TO THE ASSESSEE. IT WAS CONTENDED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT WHILE THE APPROVAL OF THE PLAN FOR CONSTRUCTION OF A PROJECT IS A PRIMARY REQUISIT E FOR COMMENCING A HOUSING PROJECT, THE OCCUPANCY CER TIFICATE FROM THE LOCAL AUTHORITY AFTER COMPLETION IS ALSO A NECESSITY. IT WAS ARGUED THAT WHEN THE CONSTRUCTION IN THE HOUSING PROJECT IS NO T IN ACCORDANCE WITH THE APPROVED PLAN, THE SAME BECO MES ILLEGAL AND THEREFORE THE QUESTION OF GRANTING DEDUCTION UNDER SECTION 80 IB OF THE ACT D OES NOT ARISE. THE LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE DECISION OF THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF JOLLY POLYMERS REPORTED IN 347 ITR 87 FOR THE PROPO SITION THAT DEDUCTION CANNOT BE GIVEN TO AN INDUSTRIAL UNDERTAKING WITHOUT A FACTORY LICENCE. IT WAS CONTENDED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE LEARNED CIT(A) ERRED IN HOL DING THAT NON-PAYMENT OF COMPOUNDING FEE WOULD NOT ALTER THE DECISION AND THEREFORE, HE PLEADED TH AT THE ORDERS OF THE LEARNED CIT(A) REQUIRE TO BE SET ASIDE AND THOSE OF THE ASSESSING OFFICER RESTOR ED. 5.3 PER CONTRA, THE LEARNED COUNSEL FOR THE ASSESS EE SUPPORTED THE ORDERS OF THE LEARNED CIT(A) THAT THE ASSESSEE HAS COMPLIED WITH ALL THE CONDITIONS U NDER SECTION 80 IB (10) OF THE ACT AND THE MERE FACT THAT THE ASSESSEE HAD CONSTRUCTED AN AREA LITT LE LARGER THAN THE SANCTIONED PLAN WOULD NOT MEAN THAT THE HOUSING PROJECT CONSTRUCTED BY THE ASSESSE E IS NOT APPROVED. 5.4.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. FROM THE FINDINGS RECORDED BY THE AUTHO RITIES BELOW, IT IS SEEN THAT THE ASSESSEE OBTAINED A SANCTIONED PLAN ON 31.10.2008 FOR CONSTRUCTION OF A BASEMENT OF 92,565 SQ FT AND GROUND, FIRST, SECOND AND THIRD FLOORS AMOUNTING TO 1,83,748.40 SQ . FT. IT IS ALSO SEEN THAT THE AREA CONSTRUCTED AN D SOLD AS PER THE SALE DEEDS, THE ASSESSING OFFICER FOUND THAT THE BUILT UP AREA AFTER CONSTRUCTION WAS 8 ITA NOS.153 & 998/BANG/11 1,91,436 SQ. FT. AND AFTER INCREASING BY THE COMMON AREA AT 18.5% THE BUILT UP AREA COMES TO 2,26,851.60 SQ. FT. THE BASIC CRUX OF THE DISPUTE BETWEEN THE ASSESSEE AND REVENUE REVOLVES AROUND THIS ASPECT OF THE MATTER. 5.4.2 IT HAS BEEN CONTENDED BY THE ASSESSEE BE FORE THE AUTHORITIES BELOW THAT THE APPROVED PLAN MENTIONS THE BUILT UP AREA BEING PLINTH AREA OF THE FLATS AND DOES NOT COVER THE BALCONIES OF EACH FLA T, CORRIDORS, LIFT AREA ROOM, OVERHEAD TANK, SUMP TANK , SECURITY ROOMS, STAIR CASE AND STAIR CASE HEAD ROOM, WHICH AREA IS IN ADDITION TO THE AREA ARRIVED AT FROM THE SANCTIONED PLAN. WHAT THE ASSESSEE HAS CONVEYED IN THE SALE DEEDS IS THE TOTAL AREA CO NSTRUCTED INCLUDING THE AFORESAID AREA, WHICH IS NO T REFLECTED IN THE SANCTIONED PLAN. THAT APART, THE CONTENTION OF THE ASSESSEE HAS BEEN THAT THE APPROVAL OF THE LOCAL AUTHORITY FOR THE HOUSING PRO JECT IS SECURED AND THAT IS SUFFICIENT FOR GRANT OF DEDUCTION UNDER SECTION 80 IB OF THE ACT. IN THIS CONTEXT, IT IS RELEVANT TO REFER TO THE CLARIFICATI ON OF THE CBDT IN A LETTER VIDE F.NO.205/3/2001/ITA-II DT .4.5.2001 ADDRESSED TO THE MAHARASHTRA CHAMBER OF HOUSING INDUSTRY, WHICH HAS BEEN REPRODUCED BY T HE LEARNED CIT(A) AT PARA 3.8 OF HER ORDER FOR ASSESSMENT YEAR 2008-09 IN WHICH IT HAS BEEN STATED THAT APPROVAL OF ANY PROJECT AS A HOUSING PROJECT BY THE LOCAL AUTHORITY WOULD BE ADEQUATE FO R THE PURPOSES OF SECTION 80 IB OF THE ACT. ALTHOUGH, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS CONTENDED THAT AFORESAID CLARIFICATIONS WERE GIVEN IN THE CONTEXT OF THE COMMERCIAL AREAS BEING CONSTRUCTED ALONG WITH THE HOUSING PROJECT, WE ARE OF THE VIEW THAT THE SCOPE CANNOT BE CONSIDERED TO BE RESTRICTED TO THAT CIRCUMSTANCE ALONE. THIS IS DUE TO THE FACT THAT THE DEFINITION OF A HOUSING PROJECT IS NOT GIVEN UNDER THE ACT AND THEREFORE T HE VIEW OF THE CBDT THAT A HOUSING PROJECT IS ONE WHIC H IS APPROVED BY A LOCAL AUTHORITY REQUIRES TO BE GIVEN FULL EFFECT TO. THEREFORE, IT CANNOT BE CONS TRUED THAT WHAT THE ASSESSEE HAS CONSTRUCTED IS NOT A HOUSING PROJECT. 9 ITA NOS.153 & 998/BANG/11 5.4.3 COMING TO THE CRUCIAL QUESTION AS TO WHET HER THE HOUSING PROJECT CONSTRUCTED BY THE ASSESSEE IS AN APPROVED HOUSING PROJECT OR NOT, WE DO NOT FI ND THE VIEW OF THE ASSESSING OFFICER THAT THE PROJECT SHOULD BE CONSIDERED AS UNAPPROVED BECAUSE OF EXCESS CONSTRUCTION PUT UP BY THE ASSESSEE TO BE ON SOUND FOOTING. THIS IS BECAUSE THE MUNICI PAL AUTHORITIES ARE VESTED WITH THE POWER TO LOOK INTO THE VIOLATIONS, IF ANY, OF THE APPROVED/SANCTI ONED PLAN. THE ASSESSING OFFICER WHILE EXAMINING THE ISSUE OF GRANTING OF DEDUCTION UNDER SECTION 80 IB OF THE ACT HAS TO SATISFY HIMSELF WITH REGARD T O THE FOLLOWING CONDITIONS MENTIONED IN SECTION 80 IB (10) : (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEV ELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1 ST DAY OF OCTOBER, 1998; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND, W HICH HAS A MINIMUM AREA OF ONE ACRE; (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT UP ARE A OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF D ELHI OR MUMBAI OR WITHIN 25 KMS FROM THE MUNICIPAL LIMITS OF THOSE CITIES OR ONE THOUSAND FIVE HUNDRED SQ. FT. AT ANY OTHER PLACES. (D) THE BUILT UP AREA OF THE SHOPS AND OTHER COMME RCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED 5% OF THE AGGREGATE BUILT U P AREA OF THE HOUSING PROJECT OR 2000 SQ. FT. WHICHEVER IS LESS. 5.4.4 FROM AN APPLICATION OF THE AFORESAID CON DITIONS TO THE FACTS OF THE ASSESSEES CASE, IT BECOMES CLEAR THAT THE ASSESSEE HAS FULFILLED THE C ONDITIONS MENTIONED IN SECTION 80 IB OF THE ACT. THE JUDGMENT OF THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF JOLLY POLYMERS (SUPRA) RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS REND ERED IN A CASE WHERE THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80 IB OF THE ACT IN RESPECT OF A FACTORY WITHOUT EVEN OBTAINING A FACTORY LICENCE. IN THAT CONTEXT, THE HON'BLE COURT HELD T HAT THE COMMENCEMENT OF THE INDUSTRIAL ACTIVITY MUST BE LAWFUL AND ANY MANUFACTURING ACTIVITY WHICH IS FUNDAMENTALLY UNLAWFUL AND IS PROHIBITED BY 10 ITA NOS.153 & 998/BANG/11 LAW AND AGAINST PUBLIC POLICY WOULD NOT BE COVERED BY THE PROVISIONS. IT HAS ALSO BEEN HELD BY THE HON'BLE HIGH COURT THAT MERE BREACH OF SOME TECHNIC AL PROVISIONS OR REQUIREMENT WOULD NOT IPSO FACT DISQUALIFY AN ASSESSEE FROM CLAIMING DEDUCTION UNDER SECTION 80 IB OF THE ACT. WITH DUE RESPECT, WE ARE OF THE VIEW THAT THE SAID JUDGMENT WOULD THE REFORE NOT BE APPLICABLE TO THE FACTS OF THE ASSESSEES CASE AS THE ASSESSEE HAS OBTAINED APPROV AL OF THE CONCERNED LOCAL AUTHORITIES FOR CONSTRUCTION OF A HOUSING PROJECT. THE FACT THAT T HE COMPOUNDING FEE HAS NOT YET BEEN PAID WOULD NOT MEAN THAT THE HOUSING PROJECT CONSTRUCTED BY TH E ASSESSEE IS UNLAWFUL AND THUS AN VIOLATION OF THE PROVISIONS OF SECTION 80 IB OF THE ACT. 5.4.5 WE ARE OF THE VIEW THAT THE LEARNED CIT(A ) HAS RIGHTLY PLACED RELIANCE ON THE DECISIONS OF T HE HON'BLE APEX COURT IN THE CASES OF PETRON ENGINEERI NG CONSTRUCTION (P) LTD. REPORTED IN 175 ITR 523, PANDIAN CHEMICALS LTD. REPORTED IN 262 ITR 278, N.C . BUDHARAJA & CO. REPORTED IN 204 ITR 412, IPCA LABORATORIES LTD. REPORTED IN 266 ITR 521 TO ARRIVE AT THE VIEW THAT THE TAX INCENTIVE BY WAY OF DEDUCTION. 80 IB OF THE ACT IS PREDOMINANTLY FOR TH E PURPOSE OF AUGMENTING AFFORDABLE DWELLING AND OUGHT TO BE INTERPRETED IN THAT LIGHT. IN THIS VIE W OF THE MATTER, THE INCENTIVE PROVISIONS MUST BE CONSTRUED IN A MANNER WHICH ADVANCES THE OBJECT AND INTENTION OF LEGISLATURE. THE FACT THAT THE ASSESSEE HAS OBTAINED APPROVAL FOR THE HOUSING PROJ ECT CANNOT BE LOST SIGHT OF. AS FOR THE EXCESS ARE A CONSTRUCTED, AS RIGHTLY HELD BY THE LEARNED CIT(A), IT IS FOR THE BBMP TO LOOK INTO THE VIOLATIONS IF ANY IN THE CONSTRUCTION OF THE HOUSING PROJECT. THAT H OWEVER DOES NOT AUTHORIZE THE ASSESSING OFFICER TO HOLD THAT THE ASSESSEE HAS NOT GOT APPROVAL FOR THE HOUSING PROJECT OR THAT THE CONDITIONS LAID DOWN IN SECTION 80 IB (10) STATED VIOLATED. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSE D ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE OR DERS OF THE LEARNED CIT(A) FOR BOTH ASSESSMENT YEARS 2007-08 AND 2008-09 GRANTING THE ASSESSEE DED UCTION UNDER SECTION 80 IB OF THE ACT IS IN 11 ITA NOS.153 & 998/BANG/11 ACCORDANCE WITH LAW AND ON A PROPER APPRECIATION OF THE FACTS OF THE INSTANT CASE OF THE ASSESSEE AND THEREFORE FINDING NO NEED FOR INTERFERENCE THEREIN, CONFIRM THE ORDERS OF THE LEARNED CIT(A). 6. IN THE RESULT, THE REVENUES APPEAL ARE DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 1.08.2012. SD/- SD/- (N.V. VASUDEVAN) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER BANGALORE, DATED: 31.8.2012. *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - A BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R SR. PRIVATE SECRETARY, ITAT, BANGALORE