DCIT, CHENNAI V. M/s. Macro Marvel Projects Ltd., CHENNAI

ITA 1686/CHNY/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52132 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: MDS C O N; T BANUSEKAR C A ITA NOS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER I.T.A. NOS. 1684 & 1686/MDS/2010 (ASSESSMENT YEARS : 2001-02 & 2006-07) THE D.C.I.T, COMPANY CIRCLE IV(1), CHENNAI 600 034. (APPELLANT) V. M/S MACRO MARVEL PROJECTS LTD GLENDEN PLACE 813, POONAMALLEE HIGH ROAD KILPAUK, CHENNAI 600 010. PAN : AACCM 8816 D (RESPONDENT) C.O. NOS. 116 & 118/MDS/2011 (A/O I.T.A. NOS. 1684 & 1686/MDS/2010 ASSESSMENT YEARS : 2001-02 & 2006-07) M/S MACRO MARVEL PROJECTS LTD GLENDEN PLACE 813, POONAMALLEE HIGH ROAD KILPAUK, CHENNAI 600 010. PAN : AACCM 8816 D (CROSS OBJECTOR) V. THE D.C.I.T, COMPANY CIRCLE IV(1), CHENNAI 600 034. (RESPONDENT) REVENUE BY : SHRI K.E.B RENGARAJAN JR. STANDING COUNSEL ASSESSEE BY : SHRI T. BANUSEKAR, C.A. ITA. NOS. 1684 & 1686/MDS/10 C.O. NOS. 116 & 118/MDS/11 2 DATE OF HEARING : 7.12.2011 DATE OF PRONOUNCEMENT : .12.2011 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE REVENUE AND CROSS OB JECTIONS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)- V CHENNAI DATED 1.07.2010 FOR ASSESSMENT YEARS 2001-02 AND 20 06-07. 2. THE REVENUE HAS FILED THE FOLLOWING COMMON GROUN DS OF APPEAL: 2.1 THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION AS CLAIMED BY THE ASSESSE E U/S 80IB(10) OF THE I.T. ACT, 1961 IN RESPECT OF HOUS ING PROJECT. 2.2 THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THA T THE ASSESSEE HAVING BUILT FLATS IN THE PROJECT EXCEEDING 1500 SQ FT IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. ITA. NOS. 1684 & 1686/MDS/10 C.O. NOS. 116 & 118/MDS/11 3 2.3 THE LEARNED CIT(A) HAS FOLLOWED THE DECISIONS O F THE ITAT CHENNAI IN THE CASE OF JAIN HOUSING AND CONSTRUCTIONS LTD [ITA NO. 1912/MDS/2007 AND ARUN EXCELLO FOUNDATION 108 TTJ 1 2.4 IT IS SUBMITTED THAT THE DECISIONS OF THE ITAT R ELIED UPON BY THE LD. CIT(A) IN THE HAVE NOT BECOME FINAL AND APPEAL BEFORE THE HON'BLE HIGH COURT OF MADRAS HAVE BEEN FILED BY THE DEPARTMENT. 2.5 HAVING REGARD TO THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S VISWAS PROMOTERS P. LTD IN ITA NO. 1912/MDS/2007 AND THE SUBSEQUENT DECISION OF THE HIGH COURT IN THE CASE OF VISHWAS PROMOTERS VS. ITAT [226 CTR 638], THE LD. CIT(A) OUGHT TO HAVE UPHELD THE A CTION OF THE ASSESSING OFFICER. 3. IN BOTH THE APPEALS OF THE REVENUE, THE SOLE ISS UE INVOLVED IS THAT WHERE THE ASSESSEE WAS HAVING BUILT FLATS IN T HE PROJECT EXCEEDING 1500 SQ. FT. WAS ELIGIBLE FOR DEDUCTION U /S 80IB(10) OF THE ACT OR NOT? ITA. NOS. 1684 & 1686/MDS/10 C.O. NOS. 116 & 118/MDS/11 4 4. THE LD. CIT(A) IN HIS ORDER HAS HELD AS UNDER: 3. THE MAIN ISSUE IN THE CASE IS, THE CLAIM OF DED UCTION U/S 80-IB(10) AND WHETHER THE ASSESSEE WAS ELIGIBLE FOR THE SAME. THE ASSESSEE HAS UNDERTAKEN CONSTRUCTION OF HO USING UNITS UNDER VARIOUS PROJECTS AND HAS CLAIMED DEDUCTION U/S 80-IB(10) IN RESPECT OF ITS PROJECT NAMED WOOD CREE K COUNTY. THE ASSESSING OFFICER HAS REJECTED THIS CLAIM AS SO ME OF THE UNITS IN THE PROJECT EXCEEDED THE MAXIMUM PRESCRIBED LIMIT OF 1500 SQ FT. THE ASSESSEE RELIED ON THE DECISION OF THE KOLKATA BENCH OF THE HON'BLE INCOME TAX APPELLATE T RIBUNAL IN BENGAL AMBUJA HOUSING DEVELOPMENT LTD V DCLT AND VICE VERSA IN ITA NO. 1595 / KOL / 2005 AND ITA NO. 1735 / KOL / 2005 (UNREPORTED), WHERE THE HON'BLE BENCH HAD ALLOW ED PRO- RATA DEDUCTION U/S 80-IB(1 0) ON QUALIFYING UNITS AND H AD HELD THAT, SECTION 80-IB(10) DID NOT ENVISAGE DENIAL OF DEDUCTION IN CASE OF PROFIT FROM A HOUSING COMPLEX CONTAINING BOT H THE SMALLER AND LARGE RESIDENTIAL UNITS. THE HON'BLE BEN CH HAD FURTHER HELD THAT, THE DENIAL OF CLAIM ON SUCH GROUND WOULD BE A RATHER RESTRICTED AND NARROW INTERPRETATION OF PROVISIONS OF CLAUSE (C) OF SECTION 80-IB(10). THE AD IGNORED T HIS DECISION AS IT WAS THEN STILL PENDING IN HIGHER FORUM. THE AB OVE DECISION HAS BEEN CONFIRMED BY THE CALCUTTA HIGH COU RT IN AN UNREPORTED DECISION IN ITA NO. 458/2006. ITA. NOS. 1684 & 1686/MDS/10 C.O. NOS. 116 & 118/MDS/11 5 3.1 THE ASSESSEE ALSO RELIED ON THE DECISION OF THE CHENNAI BENCH OF HON'BLE INCOME TAX APPELLATE TRIBUNAL IN AR UN EXCELO FOUNDATION PVT LTD. (2007) 108 TTJ 71 (CHENNA I), WHERE THE CHENNAI BENCH HAD HELD THAT, EVEN WHERE S OME PORTION OF THE CONSTRUCTION WAS OF COMMERCIAL NATURE, DEDUCTION WOULD STILL BE ALLOWABLE ON PRO-RATA BASIS IN RESPECT OF THE PROFITS RELATABLE TO RESIDENTIAL UNIT S. 3.2 TO EXAMINE THE ASSESSEE'S CASE ON MERITS, SECT ION 80- IB(10) LAYS DOWN THE FOLLOWING CONDITIONS, VIZ. A) THE UNDERTAKING HAS COMMENCED DEVELOPMENT AND CONSTRUCTION AFTER 1.10.1998 B) THE PLOT ON WHICH THE PROJECT IS LOCATED HAS A MINI MUM AREA OF ONE ACRE C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT UP AREA OF 1500 SQ FT (IN AREAS OTHER THAN DELHI/ MUMBAI) 3.3 I HAVE CONSIDERED THE SUBMISSION. THE ASSESSEE H AS SATISFIED THE FIRST TWO CONDITIONS AND AS REGARDS T HE THIRD CONDITION, IT IS OBSERVED THAT, A SUBSTANTIAL NUMBER OF THE RESIDENTIAL UNITS CONSTRUCTED SATISFY THE MAXIMUM LIMI T OF BUILT UP AREA OF 1500 SQ FT. THE ASSESSEE HAS CLAIME D ITA. NOS. 1684 & 1686/MDS/10 C.O. NOS. 116 & 118/MDS/11 6 DEDUCTION ONLY IN RESPECT OF THE SMALLER RESIDENTIAL UNITS. FOLLOWING THE REASONING GIVEN BY THE HON'BLE KOLKAT A BENCH OF THE INCOME TAX APPELLATE TRIBUNAL IN BENGAL AMBUJA H OUSING DEVELOPMENT LTD V DCIT AND VICE VERSA(SUPRA) CONFIR MED BY THE CALCUTTA HIGH COURT, MERELY BECAUSE SOME OF THE UNI TS EXCEED THE MAXIMUM LIMIT, IT WOULD BE A NARROW AND RESTRICTED INTERPRETATION TO DENY THE DEDUCTION TO T HE ENTIRE PROJECT. AS OBSERVED BY THE HON'BLE KOLKATA BENCH O F THE INCOME TAX APPELLATE TRIBUNAL, SECTION 80-IB(10) ) H AS BEEN ENACTED WITH A VIEW TO PROVIDE INCENTIVE FOR BUSINES SMEN TO UNDERTAKE CONSTRUCTION OF SMALLER RESIDENTIAL UNITS A ND THE DEDUCTION IS INTENDED TO BE RESTRICTED TO THE PROFIT DERIVED FROM THE CONSTRUCTION OF SMALLER UNITS AND NOT FROM L ARGER RESIDENTIAL UNITS. THE ASSESSEE HAS ONLY CLAIMED DED UCTION IN RESPECT OF SMALLER UNITS, WHEREVER THE TOTAL AREA D OES NOT EXCEED 1500 SQ FT ON PRO-RATA BASIS. RESPECTFULLY FO LLOWING THE DECISION OF HON'BLE JURISDICTIONAL ITAT, CHENNAI BENCH IN THE CASE OF ARUN EXCELLO FOUNDATION P LTD (2007) 108 TTJ 71, THE DEDUCTION CLAIMED BY THE ASSESSEE IS TO BE ALLOW ED. THE APPELLANT SUCCEEDS ON THIS GROUND. THE AO IS DIRECTED TO DELETE THE DEDUCTION. ITA. NOS. 1684 & 1686/MDS/10 C.O. NOS. 116 & 118/MDS/11 7 5. THE LD. D.R. SHRI K.E.B RENGARAJAN RELIED ON THE GROUNDS OF APPEAL AND SUBMITTED THAT AS THE REVENUE HAS NOT AC CEPTED THE DECISION OF THE TRIBUNAL IN THE CASE OF ARUN EXCELL O FOUNDATION [SUPRA], THEREFORE, THE REVENUE HAS FILED THE PRESE NT APPEALS TO KEEP THE ISSUE ALIVE. HE FURTHER SUBMITTED THAT HA VING REGARD TO THE DECISION OF THE HON'BLE JURISDICTIONAL MADRAS H IGH COURT IN THE CASE OF VISHWAS PROMOTERS VS. ITAT [SUPRA], WHERE I T HAS BEEN HELD THAT THE DECISION OF ONE HIGH COURT IS NOT BINDING PRECEDENT FOR TRIBUNALS OUTSIDE ITS OWN TERRITORIAL JURISDICTION, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF THE ASSESSING OF FICER. 6. AT THE TIME OF HEARING, THE LD. A.R. SHRI T. BAN USEKAR FILED COPY OF THIRD MEMBER DECISION OF THE CHENNAI A BE NCH OF THE TRIBUNAL IN THE CASE OF SANGHVI & DOSHI ENTERPRISE VS. ITO REPORTED IN [2011] 131 ITD 151 [CHENNAI [TM] AND SUBMITTED T HAT THE ISSUE AT HAND IS COVERED IN FAVOUR OF THE ASSESSEE WHEREIN I T HAS BEEN HELD AS UNDER: ITA. NOS. 1684 & 1686/MDS/10 C.O. NOS. 116 & 118/MDS/11 8 THE OBJECT OF THE PROVISION AS MENTIONED EARLIER A S DISCUSSED AT LENGTH IN THE SPECIAL BENCH ORDER, IS TO AUGMENT AFFORDABLE DWELLING UNITS. CAN IT BE SAID THAT BY HAVING ONLY VERY INSIGNIFICANT NUMBER OF FLATS EXCEEDING 1500 SQ FT H AS THE ASSESSEE FAILED TO AUGMENT AFFORDABLE DWELLING UNITS . THE REPLY TO THIS QUESTION HAS TO BE IN THE NEGATIVE. H OWEVER, AS OBSERVED IN PARAGRAPH 94 OF THE SPECIAL BENCH ORDER , WE HAVE TO DRAW UP SOME LAKSHMAN REKHA NONETHELESS SO AS TO ENSURE THAT THE BASIC CHARACTER OF THE PROJECT CONTINUES TO REMAIN IN HARMONY WITH THE OBJECT OF THE TAX INCENTIVE I.E. A UGMENTING AFFORDABLE DWELLING UNITS. FURTHER, IT NEEDS TO BE EMPHATICALLY STATED THAT PRO RATA DEDUCTION HAS TO BE RULED OUT BECAUSE IF THAT IS PERMITTED, SOME ASSESSEE MAY C ONSTRUCT SUBSTANTIAL NUMBER OF FLATS EXCEEDING 1500 SQ FT. AND MAY CLAIM DEDUCTION WITHOUT SERVING THE PURPOSE OF THE LEGISLATION. LIKEWISE, THE FLATS WHICH EXCEED 1500 SQ FT. ALSO HAVE TO BE LEFT OUT OF THE PURVIEW OF THE DEDUCTION. ON THE OTHER HAND, IN THE PRESENT CASE, IF THE DEDUCTION TO HIM WILL SERVE THE PURPOSE OF THE LEGISLATION. THEREFORE, WE HAVE DRAWN THE LIMIT OF 10 PERCENT AND HAVE ALSO HELD TH AT IF IT EXCEEDS THE LIMIT OF 10 PERCENT THEN THE ASSESSEE W ILL LOSE ENTIRE DEDUCTION. THIS EXPLAINS OUR DIRECTION GIVEN IN PARAGRAPHS 25 AND 26. THEREFORE, THE ORDER OF THE LD. CIT(A) SHOULD BE CO NFIRMED. ITA. NOS. 1684 & 1686/MDS/10 C.O. NOS. 116 & 118/MDS/11 9 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ISSUE UNDER CONS IDERATION STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THIS TRIBUNAL IN THE CASE OF ARUN EXCELLO FOUNDATION [SUPRA], THE DE CISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF ACIT VS. BENGAL AMBUJA HOUSING DEVELOPMENT LTD [SUPRA] AND ALSO THE THIRD MEMBER D ECISION OF THE CHENNAI BENCH OF THE TRIBUNAL SANGHVI & DOSHI ENTER PRISE VS. ITO [SUPRA]. THE REVENUE COULD NOT POINT OUT ANY DISTIN GUISHABLE FACTS IN THE INSTANT CASE FROM THE FACTS WHICH WERE THERE IN THE ABOVE THREE DECISIONS. THE LD. D.R. COULD NOT BRING ANY MATERIAL BEFORE US TO SHOW THAT THE DECISION OF THIS TRIBUNAL IN THE C ASE OF ARUN EXCELLO FOUNDATION [SUPRA] WAS REVERSED OR MODIFIED BY ANY HIGHER AUTHORITY. FURTHER, NO DOUBT THE DECISION OF NON JURISDICTIONAL HIGH COURT IS NOT BINDING BUT NEVERT HELESS THE SAME HAS A PERSUASIVE VALUE AND SHOULD BE GIVEN DUE RESP ECT AND WITHOUT ANY GOOD REASON, THE SAME SHOULD NOT BE DISCARDED, ESPECIALLY WHEN THERE IS NO CONTRARY DECISION OF ANY OTHER HIGH COU RT. WE FIND THAT THE REVENUE COULD NOT POINT OUT ANY GOOD REASON AS TO WHY THE ITA. NOS. 1684 & 1686/MDS/10 C.O. NOS. 116 & 118/MDS/11 10 ABOVE DECISION OF THE HON'BLE CALCUTTA HIGH COURT O R THE THIRD MEMBER DECISION OF THE CHENNAI BENCH OF THE TRIBUNA L SHOULD NOT BE FOLLOWED BY US IN THE INSTANT CASE. THE REVENUE HA S ALSO BROUGHT NO MATERIAL BEFORE US TO DISPUTE THE FINDING OF THE LD . CIT(A) THAT THE ASSESSEE HAS SATISFIED THE FIRST AND SECOND CONDI TION AND WITH REGARD TO THE THIRD CONDITION, THE ASSESSEE HAS CON STRUCTED SUBSTANTIAL NUMBER OF RESIDENTIAL UNITS SATISFYING THE MAXIMUM LIMIT OF BUILT UP AREA OF 1500 SQ FT. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). IT IS CONFIRMED. GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 8. THE CROSS-OBJECTIONS FILED BY THE ASSESSEE WERE NOT PRESSED BY THE LD. A.R. OF THE ASSESSEE. AN ENDORSEMENT TO TH IS EFFECT HAS BEEN RECORDED IN THE CROSS OBJECTIONS MEMO FILED BY HIM. IN VIEW OF THIS, THE CROSS OBJECTIONS ARE DISMISSED AS NOT PRESSED. ITA. NOS. 1684 & 1686/MDS/10 C.O. NOS. 116 & 118/MDS/11 11 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A S WELL AS THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 09 TH DECEMBER, 2011. SD/- SD/- (HARI OM MARATHA) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 09 TH DECEMBER, 2011. VL COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A), CHENNAI (4) CIT, CHENNAI (5) D.R. (6) GUARD FILE