Modi Builders & Realtors (P) Ltd, Hyderabad V. ACIT, Hyderabad

ITA 1541/HYD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9690 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 10-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Assessee Lawyers: C P RAMASWAMI
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT & SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I.T.A. NO. 1541/HYD/2010 (ASSESSMENT YEAR 2007-08) M/S. MODI BUILDERS & REALTORS (P) LTD., SECUNDERABAD PAN: AACCM2490D VS. ASST. CIT CIRCLE 16(2) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI C.P. RAMASWAMI RESPONDENT BY: SHRI K.V.N. CHARYA O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-V, HYDERABAD DATED 21.10.2010 F OR THE ASSESSMENT YEAR 2007-08. 2. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WIT H REGARD TO DENIAL OF DEDUCTION U/S. 80IB IN RESPECT OF SUNSHINE PROJECT AND GREENWOODS PROJECT. 3. FURTHER THOUGH THE ASSESSEE RAISED GROUND NO. 4 IN HIS APPEAL THAT THE CIT(A) FAILED TO ADMIT THE ADDI TIONAL GROUND ON MERIT AND FAILED TO APPRECIATE THAT GROSS INCOME WAS BROUGHT TO TAX WITHOUT NETTING OFF OF THE CORRE SPONDING EXPENDITURE. THIS GROUND IS NOT PRESSED BEFORE US AND THE SAME IS DISMISSED AS NOT PRESSED. I.T.A. NO. 1541/HYD/2010 M/S. MODI BUILDERS & REALTORS (P) LTD. ============================ 2 4. BRIEF FACTS OF THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE IS A REAL ESTATE DEVELOPER AND THERE IS ON LY ONE ISSUE IN APPEAL THAT RELATES TO THE WITHDRAWAL OF D EDUCTION U/S. 80IB OF THE INCOME-TAX ACT. FOR A.Y. 2007-08 THE ASSESSEE CLAIMED DEDUCTION OF RS. 1,75,08,544 U/S. 80IB WITH RESPECT TO THE FOLLOWING THREE HOUSING PROJECT S: (A) GARDENIA PROJECT (B) SUNSHINE PROJECT (C) GREENWOODS PROJECT 5. THE ASSESSEE COMPANY CLAIMED THE ABOVE PROJECTS TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) AN D THEREFORE, INCLUDED AN AMOUNT OF RS. 83,76,681 AS THE ESTIMATED PROFIT @ 20% ON ADVANCES AND INSTALMENTS RECEIVED FROM CUSTOMERS AND CLAIMED THIS AMOUNT AS DEDUCTION U/S. 80IB. THE ASSESSING OFFICER NOTICED DURING THE ASSESSMENT PROCEEDINGS THAT FOR PROFITS TO BECO ME ELIGIBLE FOR DEDUCTION U/S. 80IB, IT MUST FULFIL TH E CONDITIONS SPECIFIED IN THAT SECTION AND ONE OF THE IMPORTANT CONDITION IS THAT THE RESIDENTIAL UNIT SH OULD HAVE A MAXIMUM BUILT UP AREA OF 1500 SQ. FT. AT PLACES O THER THAN DELHI OR MUMBAI AND LESS THAN 1000 SQ. FT. IF THE PROJECT IS SITUATED WITHIN 25 KM FROM THE MUNICIPAL LIMITS OF THESE CITIES. I.T.A. NO. 1541/HYD/2010 M/S. MODI BUILDERS & REALTORS (P) LTD. ============================ 3 6. ACCORDING TO THE ASSESSING OFFICER THE AREA OF EACH FLAT OF THE PROJECTS SUNSHINE AND GREENWOODS EXCEED ED 1500 SQ. FT. ACCORDINGLY DEDUCTION U/S. 80IB IN RE SPECT OF THESE PROJECTS WAS DISALLOWED. THE ASSESSEE MADE A CONTENTION BEFORE THE LOWER AUTHORITIES THAT PORTIC O AND OPEN TERRACE ATTACHED TO EACH FLAT ARE TO BE EXCLUD ED FROM BUILT-UP AREA. THE ARGUMENT OF THE ASSESSEE WAS NO T ACCEPTED BY THE LOWER AUTHORITIES. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT BUILT-UP AREA IN A HOUSE IS ABSOLUTE AND NOT SUBJECT TO INTERPRETATION BY ANYONE. ACCORDING TO HIM BUILT-UP AREA IS AN AREA COVERED BY THE BUILDING ABOVE THE PLINTH LEVEL ENCLOSED WITH A WALL ALL AROUND WITH D OORS, WINDOWS AND ROOF AND USED FOR HABITATION PURPOSE. ACCORDING TO HIM PORTICO AND OPEN TERRACE/BALCONY A RE NOT USED FOR HABITATION PURPOSE AND IT CANNOT BE PART O F BUILT- UP AREA. BALCONY OR PROJECTION IS NOT COVERED BY S LAB. IT IS JUST THE ROOF OF THE FLOOR BELOW. THE PORTICO OR P ARKING AREA IS NOT HABITABLE AND USED FOR PARKING PURPOSES AND IT CANNOT BE PART OF BUILT-UP AREA. HE DREW OUR ATTEN TION TO THE MEANING OF BUILT-UP AREA AS MENTIONED IN MUNICI PAL BYE-LAWS, NATIONAL BUILDING CODE AND INDIAN STANDAR D CODE (PAGE 72). THE LEARNED COUNSEL FOR THE ASSESSEE SU BMITTED I.T.A. NO. 1541/HYD/2010 M/S. MODI BUILDERS & REALTORS (P) LTD. ============================ 4 THAT COMPUTATION OF BUILT-UP AREA IS IN ACCORDANCE WITH THE ABOVE NORMS. HE FILED A PHOTOCOPY OF BUILDING PLAN AND PHOTOS OF EACH FLAT AS WELL THOSE ARE AVAILABLE ON RECORD. HE DREW OUR ATTENTION TO THE PROVISIONS OF SECTION 80IB(14)(A) OF THE INCOME-TAX ACT, 1961 WHICH READ AS FOLLOWS: 80IB(14)(A): BUILT-UP AREA MEANS THE INNER MEASUREMENTS OF THE RESIDENTIAL UNIT AT THE FLOOR LEVEL, INCLUDING THE PROJECTIONS AND BALCONIES, AS INCREASED BY THE THICKNESS OF THE WALLS BUT DOES NOT INCLUDE THE COMMON AREAS SHARED WITH OTHER RESIDENTIAL UNITS; 8. ACCORDING TO HIM AS PER BUILDING PLAN AS WELL AS FR OM THE CERTIFICATE OF CHARTERED ENGINEER, THE CALCULAT ION OF BUILT-UP AREA OF EACH FLAT IS LESS THAN 1500 SQ. FT . AND IN CONFORMITY WITH SECTION 80IB(10(C) OF THE ACT AND T HE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80IB. FURT HER HE FILED A COPY OF SALE DEED EXECUTED FOR THE SALE OF THE BUILDING WHEREIN THE BUILT-UP AREA IS MENTIONED INC LUDING PORTICO AND TERRACE WHICH IS LESS THAN 1500 SQ. FT. AND THE AREA WHICH WAS NOT SOLD AS BUILT-UP AREA CANNOT BE CONSIDERED AS BUILT-UP AREA FOR THE PURPOSES OF INC OME-TAX. HE SUBMITTED THAT RESIDENTIAL UNIT HAS NOT BEEN D EFINED UNDER THE INCOME-TAX ACT. IT IS, THEREFORE, TO BE UNDERSTOOD IN A SENSE, WHICH IS COMMON UNDERSTOOD. HE DREW OU R ATTENTION TO THE MEANING OF BUILT-UP AREA IN THE WE BSTER DICTIONARY. I.T.A. NO. 1541/HYD/2010 M/S. MODI BUILDERS & REALTORS (P) LTD. ============================ 5 9. HE SUBMITTED THAT THE DEFINITION OF BUILT-UP AREA U /S. 80IB(14)(A) DOES NOT PROVIDE THAT LAND OR FLAT AREA IS ALSO TO BE INCLUDED IN THE MEASUREMENT OF BUILT-UP AREA. I N A MULTI-STOREYED APARTMENT FLAT IS SOLD ALONG WITH A PROPORTIONATE SHARE OF LAND BUT SUCH SHARE OF LAND IS NOT TAKEN INTO CONSIDERATION WHILE COMPUTING THE BUILT- UP AREA OF THE FLAT. SIMILARLY, THE LAND ON WHICH THE BUNG ALOW IS CONSTRUCTED CANNOT BE TAKEN AS PART O BUILT-UP AREA . THE BUILDINGS ARE CONSTRUCTED ON A LAND AND FOR THIS PU RPOSE LAND ALWAYS REMAINS AS APPURTENANT BUT CANNOT BE CONSIDERED AS BUILT-UP AREA. BUILT-UP AREA IS NOTH ING BUT CONSTRUCTED AREA. THE ENTIRE AREA APPURTENANT TO T HE BUILDING WITH A COMPOUND WALL CANNOT, THEREFORE, CONSTITUTE AS BUILT-UP AREA. FURTHER HE SUBMITTED THAT IN A MULTI-STOREYED BUILDING THE TERRACE IS IN TOP FLOOR WHICH IS OPEN TO SKY AND IS NOT HABITABLE. THE TERRACE AREA CANNOT FORM PART OF THE RESIDENTIAL UNIT. SIMILARLY, OPEN TERRACE PROVIDED FOR A BUNGALOW CANNOT FORM PART OF THE RES IDENTIAL UNIT. HE SUBMITTED THAT THIS CAN ALSO BE UNDERSTOO D BY WAY OF EXAMPLE OF PENTHOUSE. PENTHOUSE IS ON A TER RACE COVERING CERTAIN PORTION OF TERRACE. WHILE COMPUTI NG BUILT- UP AREA OF THE PENTHOUSE, THE OPEN TERRACE AREA SURROUNDING THE PENTHOUSE IS NOT MEASURED. ON THE SAME LOGIC PORTICO AND OPEN TERRACE ARE TO BE EXCLUDED W HILE I.T.A. NO. 1541/HYD/2010 M/S. MODI BUILDERS & REALTORS (P) LTD. ============================ 6 COMPUTING BUILT-UP AREA OF THE BUILDING. ACCORDING TO HIM BUILT-UP AREA DOES NOT INCLUDE PARKING AREA AS IT I S NOT PART OF THE USABLE BUILT-UP AREA. SIMILAR IS THE POSITI ON IN MUNICIPAL LAWS AND OTHER STANDARDS AND CODES. IN V IEW OF THIS, HE SUBMITTED THAT PORTICO AND BALCONY CANNOT FORM PART OF RESIDENTIAL UNIT AND AS SUCH THE ASSESSEE R IGHTLY EXCLUDED THE PORTICO AND OPEN TERRACE. 10. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 11. WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE MAIN CONTENTION HEREIN IS WITH REGARD TO INCLUSION OF PORTICO AND BALCONY FOR THE PURPOSE OF DETERMINING THE BUILT-UP AREA AS PER CLA USE (A) OF SUBSECTION (14) OF SECTION 80IB OF THE INCOME-TA X ACT, 1961. AS PER THIS CLAUSE THE DEFINITION OF BUILT-U P AREA IS AS FOLLOWS: 80IB(14)[(A) BUILT-UP AREA MEANS THE INNER MEASUREMENTS OF THE RESIDENTIAL UNIT AT THE FLOOR LEVEL, INCLUDING THE PROJECTIONS AND BALCONIES, AS INCREASED BY THE THICKNESS OF THE WALLS BUT DOES NOT INCLUDE THE COMMON AREAS SHARED WITH OTHER RESIDENTIAL UNITS;] 12. THE ABOVE DEFINITION WAS INTRODUCED BY FINANCE (NO. 2) ACT, 2004. THIS AMENDMENT STARTS WITH INNER MEASUREMENT OF RESIDENTIAL UNIT. EVEN AS PER COMM ON PARLANCE BUILT-UP AREA IS THE CARPET AREA COVERED B Y THICKNESS OF WALL + BALCONY + PORTICO (PROJECTION). THUS, I.T.A. NO. 1541/HYD/2010 M/S. MODI BUILDERS & REALTORS (P) LTD. ============================ 7 WHETHER IT IS THE INNER MEASUREMENT OR OUTER MEASUR EMENT ONE THING IS AMPLY CLEAR THAT, IT SHOULD BE ACTUAL MEASUREMENT NOT ANY ESTIMATE. THE DISPUTE HEREIN IS WITH REGARD INCLUSION OF PORTICO AND BALCONY FOR MEASURI NG THE BUILT-UP AREA OF EACH RESIDENTIAL UNIT. IF THE POR TICO AND BALCONY AREA IS ADDED, THE BUILT-UP AREA WOULD EXCE ED 1500 SQ. FT. PER UNIT. AS PER THE DEFINITION AS STATED IN SECTION 80IB(14)(A) BUILT-UP AREA INCLUDES PROJECTION AND B ALCONY. ACCEPTED RULES OF INTERPRETATION FOR AND INCLUSIVE DEFINITION AS ELUCIDATED BY THE HONBLE SUPREME COURT IN THE C ASE OF CIT VS. TAJMAHAL HOTEL (1973) CTR (SC) 480; AIR 197 2 (SC) 168 IS THAT IF THE WORD INCLUDE IS USED IN AN INT ERPRETATIVE CLAUSE, IT MUST BE CONSTRUED AS APPREHENDING NOT ON LY SUCH AS IT SIGNIFIES TO ITS NATURE AND MERIT, BUT A LSO THINGS WHICH THE INTERPRETATIVE CLAUSE DECLARES WHAT THEY SHALL INCLUDE. SO NORMAL MEANING OF BUILT-UP AREA, BUT F OR THE DEFINITION INCLUDE PROJECTION AND BALCONY, WOULD DE FINITELY EXCLUDE THE LATER. THEREFORE, THERE CAN BE NO DOUB T THAT PRIOR TO THE INTRODUCTION OF THE DEFINITION AFORESA ID CLAUSE BUILT-UP AREA WOULD NOT INCLUDE PROJECTIONS AND BAL CONY AS NORMALLY UNDERSTOOD. HOWEVER, AFTER THE ENACTMENT ITSELF CLEARLY SPECIFIES THAT BUILT-UP AREA INCLUDES BOTH PROJECTIONS AND BALCONIES AS INCREASED BY THE THICK NESS OF WALLS AND DOES NOT INCLUDE COMMON AREA SHARED WITH I.T.A. NO. 1541/HYD/2010 M/S. MODI BUILDERS & REALTORS (P) LTD. ============================ 8 OTHERS. THIS DEFINITION GIVES THE ENLARGED MEANING OF BUILT- UP AREA WHICH INCLUDES BALCONY AND PROJECTION. AFT ER INCLUSION OF BALCONY AND PROJECTION IF THE TOTAL AR EA OF BUILT- UP AREA EXCEEDS 1500 SQ, FT. IN THIS CASE THE ASSES SEE IS NOT ENTITLED FOR DEDUCTION U/S. 80IB OF THE ACT. THE L EARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE JUD GEMENT OF SUPREME COURT IN THE CASE OF BAJAJ TEMPO, 196 IT R 188 WHEREIN IT WAS HELD THAT A PROVISION IN A TAXING STATUTE GRANTING INCENTIVES FOR PROMOTING GROWTH AND DEVELO PMENT SHOULD BE CONSTRUED LIBERALLY; AND SINCE A PROVISIO N FOR PROMOTING ECONOMIC GROWTH HAS TO BE INTERPRETED LIB ERALLY, THE RESTRICTION ON IT TOO HAS TO BE CONSTRUED SO AS TO ADVANCE THE OBJECTIVE OF THE PROVISION AND NOT TO FRUSTRATE IT. IN OUR OPINION THIS CASE LAW HAS NO APPLICATION TO THE FAC TS OF THE ASSESSEES CASE. THE ARGUMENT OF THE LEARNED COUNS EL FOR THE ASSESSEE IS GOOD IN PART BUT THE INFERENCE DOES NOT LOGICALLY FOLLOW. IN OUR OPINION, THE LEGISLATIVE EXPEDIENCE ADOPTED TO ACHIEVE THAT OBJECTIVE IN THE PROVISION REQUIRES TO BE GIVEN EFFECT ON IT IS OWN LANGUAGE. THERE IS NO AMBIGUITY IN CLAUSE (A) OF SUBSECTION (14) OF SECTI ON 80IB OF THE ACT. AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO INTERPRETATION PROCESS TO UNFOL D THE LEGISLATIVE INTENT BECOMES IMPERMISSIBLE. THE SUP POSED INTENTION OF THE LEGISLATURE CANNOT THEN BE APPEALE D TO I.T.A. NO. 1541/HYD/2010 M/S. MODI BUILDERS & REALTORS (P) LTD. ============================ 9 WHITTLE DOWN STATUTORY LANGUAGE WHICH IS OTHERWISE UNAMBIGUOUS. IF THE INTENDMENT IS NOT IN THE WORDS USED, IT IS NOWHERE ELSE. THE NEED FOR INTERPRETATION AR ISES WHEN THE WORDS USED IN THE STATUTE ARE ON THEIR OWN TERM S AMBIVALENT AND DO NOT MANIFEST THE INTENTION OF THE LEGISLATURE. THE WORDS IN THE STATUTE MUST, PRIMA FACIE, BE GIVEN THEIR ORDINARY MEANINGS. WHERE THE GRAMMATIC AL CONSTRUCTION IS CLEAR, MANIFEST AND WITHOUT DOUBT, THAT CONSTRUCTION OUGHT TO PREVAIL UNLESS THERE ARE SOME STRONG AND OBVIOUS REASONS TO THE CONTRARY. IT HAS TO BE REITERATED THAT THE OBJECT OF INTERPRETATION OF A STATUTE IS T O DISCOVER THE INTENTION OF PARLIAMENT AS EXPRESSED IN THE ACT . THE DOMINANT PURPOSE IN CONSTRUING A STATUTE IS TO ASCE RTAIN THE INTENTION OF THE LEGISLATURE AS EXPRESSED IN TH E STATUTE, CONSIDERING IT AS A WHOLE AND IN ITS CONTEXT. THAT INTENTION, AND, THEREFORE, THE MEANING OF THE STATU TE, IS PRIMARILY TO BE SOUGHT IN THE WORDS USED IN THE STA TUTE ITSELF, WHICH MUST, IF THEY ARE PLAIN AND UNAMBIGUO US, BE APPLIED AS THEY STAND. 13. BEING SO, WE CANNOT ADOPT MEANING AS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE. IN OUR OPINI ON, BUILT- UP AREA INCLUDES PORTICO AND BALCONY ALSO AND IN TH IS CASE IT EXCEEDS 1500 SQ. FT. PER RESIDENTIAL UNIT. ACCO RDINGLY THE I.T.A. NO. 1541/HYD/2010 M/S. MODI BUILDERS & REALTORS (P) LTD. ============================ 10 ASSESSEE IS DISENTITLED FOR THE BENEFIT U/S. 80IB O F THE ACT. THE ORDER OF THE CIT(A) IS UPHELD ON THIS ISSUE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2011. SD/- (G.C. GUPTA) VICE PRESIDENT SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 31 ST MARCH, 2011 TPRAO COPY FORWARDED TO: 1. M/S. MODI BUILDERS & REALTORS (P) LTD., C/O. DR. C. P. RAMASWAMI, ADVOCATE, FLAT NOS. 102 & 303, GITANJALI APTS., PLOT NO. 108, SRINAGAR COLONY, HYDERABAD-73. 2. THE ASST. CIT, CIRCLE 16(2), HYDERABAD. 3. THE CIT(A)-V, HYDERABAD 4 THE CIT-IV, HYDERABAD 5. THE DR A BENCH, ITAT, HYDERABAD