Assistant Commissioner of Income-tax, Circle -3, Pune V. Hemraj Shankarlal Mundada, Pune

ITA 1762/PUN/2018

AI Insights

The case revolves around the dispute concerning the eligibility of the respondent-assessee, Hemraj Shankarlal Mundada, for claiming deductions under section 80IB(10) of the Income Tax Act, 1961, for a housing project named 'ALCOVE'. The Assessing Officer denied the claim on grounds that the project did not meet the statutory completion deadlines and other conditions specified under the section. The CIT(A) later reversed this decision, allowing the deduction on a proportionate basis for the units that were completed and sold before the deadline. However, the Tribunal, upon reviewing the facts and legal provisions, reinstated the Assessing Officer's decision, emphasizing the strict compliance required with the conditions of section 80IB(10).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137068 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-11-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 15-11-2018
• Other Referred Cases: Viswas Promoters Pvt. Ltd. vs. CIT, CIT vs. B. M. And Brothers, Runwal Multi Housing Pvt. Ltd. vs. ACIT, CIT vs. Brahma Associates
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1762/PUN/2018 िनधाᭅरण वषᭅ / Assessment Year : 2012-13 ACIT, Circle-3, Pune. Vs. Hemraj Shankarlal Mundada, Plot No.1, Sr. No.16, Parvati Chambers, Sangam Press Road, Kothrud, Pune- 411038. PAN : AAXPM1636P Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the Revenue directed against the order of ld. Commissioner of Income Tax (Appeals)- 3, Pune [‘the CIT(A)’] dated 20.08.2018 for the assessment years 2012-13. 2. The Revenue raised the following grounds of appeal :- “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 33,74,41,473/- made on account of disallowance of claim of deduction u/s. 80IB(10) of the Act as the assessee has not fulfilled the condition of completing the project before 31.03.2012 as prescribed in section 80IB(10). 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the deduction u/s. 80IB(10) of the Act to the housing project "Alcove" approved on 26.03.2007 and was still incomplete on 31.03.2012 in violation of section 80IB(10) which requires the entire project to be completed before 31.03.2012. Revenue by : Shri Ganesh Bare Assessee by : Shri Krishna V. Gujarathi Date of hearing : 24.11.2022 Date of pronouncement : 13.01.2023 ITA No.1762/PUN/2018 2 3. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the claim u/s. 80IB(10) of the Act on partial completion of the housing project holding that the assessee was entitled to claim deduction u/s. 80IB(10) in respect of eligible units without appreciating the facts that the housing project was approved by local authority on 26.03.2007 for 8 buildings namely buildings A, B, C, D, E, F, G, & H and that the completion certificate for building B, C, D, E, F, G, H was granted by the Pune Municipal Corporation on 30.03.2012. However, on site visit at the relevant period of time revealed that building A was still not complete and buildings B, C, & D were partly complete. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that if the conditions set in section 80IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project. 5. The appellant prays to be allowed to add, amend, modify, rectify, delete or raise any grounds of appeal during the course of appellate proceedings.” 3. Briefly, the facts of the case are that the respondent-assessee is an individual engaged in the business of constructions, builders and promoters of land. The Return of Income for the assessment year 2012-13 was filed on 30.09.2012 declaring total income of Rs.56,30,070/- and the same was revised on 01.02.2013 at total income of Rs.1,49,11,308/- after claiming exemption u/s 80IB(10) of the Income Tax Act, 1961 (‘the Act’) of Rs.33,74,41,473/-. Against the said return of income, the assessment was completed by the Dy. Commissioner of Income Tax, Circle-3, Pune (‘the Assessing Officer’) vide order dated 23.03.2015 passed u/s 143(3) of the Act at a total income of Rs.35,23,52,781/-. While doing so, the Assessing Officer had denied the claim for exemption u/s ITA No.1762/PUN/2018 3 80IB(10) on the ground that the respondent-assessee had violated the conditions stipulated under the provisions of clause (e) and (f) to section 80IB(10) of the Act and also the completion certificate in respect of building A was not produced and the building A was not completed within the stipulated time. The factual background of the case is as under : The respondent-assessee had executed housing project, namely, “ALCOVE” consisted of buildings A, B, C, D, E, F, G & H at Survey No.100(part) & Survey No.101(part), Pimple Saudagar, Pune. The Pimpri Chinchwad Municipal Corporation (PCMC) gave the commencement certificated on 26.03.2007. During the course of assessment proceedings, the Assessing Officer visited the site and found that the respondent-assessee had violated the conditions prescribed under clause (e) and (f) of sub-section (10) of section 80IB of the Act. The Assessing Officer also found that the buildings E, F, G & H were completed by January, 2012 and buildings B, C, E & D were completed partly upto floor no.9, 10 & 11 respectively by 31.03.2012. No completion certificate in respect of building “A: was produced during the visit to the site by the Assessing Officer. 4. Based on the above observations, the Assessing Officer concluded that the respondent-assessee is not entitled to claim for ITA No.1762/PUN/2018 4 exemption under the provisions of sub-section (10) to section 80IB of the Act and also rejected the contention of the appellant that it is entitled to proportionate deduction. Accordingly, the Assessing Officer completed the assessment by disallowing the claim for deduction of Rs.33,74,41,473/-. 5. Being aggrieved by the above assessment order, an appeal was filed before the ld. CIT(A) contending that the PCMC authorities had granted completion certificate on 31.03.2012 with reference to two applications made by the assessee dated 11.01.2012 and 20.03.2012. The respondent-assessee applied for occupation certificate for buildings E, F, G & H on 11.01.2012 and for buildings B, C, E & D on 20.03.2012. It is an admitted fact that the building A was not completed and the buildings B, C, E & D were partly completed, however, proportionate deduction in respect of projects completed before 31.03.2012 was granted placing reliance on the decision of the Hon’ble Madras High Court in the case of Viswas Promoters Pvt. Ltd. vs. CIT, 81 DTR 68 (Madras), the decision of the Hon’ble Gujarat High Court in the case of CIT vs. B. M. And Brothers, 86 CCH 194 (Gujarat), the decision of the Co- ordinate Bench of this Tribunal in the case of Runwal Multi Housing Pvt. Ltd. vs. ACIT (ITA No.1015, 1016 & 1017/PUN/2011) and also the decision of the Hon’ble Bombay ITA No.1762/PUN/2018 5 High Court in the case of CIT vs. Brahma Associates, 333 ITR 289 (Bombay). The respondent-assessee also filed additional evidence i.e. copies of various agreements executed between the respondent- assessee and the purchasers of the flats. The ld. CIT(A) had called for the remand report from the Assessing Officer on the additional evidence filed by the respondent-assessee relating to the residential units allotted to sellers by the respondent-assessee under the provisions of clause (e) and (f) of section 80IB(10) of the Act. The ld. CIT(A) placing reliance on several decisions as well as the Co- ordinate Bench of this Tribunal in the case of Runwal Multihousing Pvt. Ltd. vs. ACIT in ITA Nos.1015, 1016 & 1017/PUN/2011 dated 21.112012 and Padmavati Developers vs. DCIT in ITA Nos.1691 to 1694/PUN/2012 dated 29.05.2015 directed the Assessing Officer to allow the deduction u/s 80IB(10) on proportionate basis in respect of all eligible units, even if the entire project had not been completed. Further, the ld. CIT(A) gave a finding that the entire sale receipts recorded in the books of accounts pertained to flats for which the completion as well as occupation certificates were obtained and, therefore, directed the Assessing Officer to allow deduction u/s 80IB(10) of Rs.33,74,41,473/-. 6. As regards, violation of provisions of clause (e) and (f) of section 80IB(10), the ld. CIT(A) considering the additional evidence ITA No.1762/PUN/2018 6 filed in respect of 16 flats sold in contravention of clause (e) and (f) of section 80IB(10) and based on the remand report of the Assessing Officer, concluded that in respect of 16 flats which are alleged to have been sold in violation of the provisions of clause (e) and (f) of section 80IB(10), 10 flats have not been sold to relatives in contravention of the provisions of clause (e) and (f) to section 80IB(10) and in respect of balance 6 flats which have allegedly been sold in contravention of clause (e) and (f) to section 80IB(10) in considering that the flats were sold before the amendment came into force and, therefore, placing reliance on the judicial precedents held that the provisions of clause (e) and (f) to section 80IB(10) have no application to the facts of the present case. However, the ld. CIT(A) also dismissed the additional ground of appeal seeking deduction of additional amount of Rs.28,62,554/- saying that the claim was not made in the return of income. 7. Being aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us in the present appeal. 8. The ld. CIT-DR taking us through the findings of the Assessing Officer submits that the buildings E, F, G & H were completed as on 31.03.2012, even buildings A, B, C & D were not completed by the 31.03.2012. He further submits the fact that the respondent-assessee could not produce the completion certificate ITA No.1762/PUN/2018 7 issued by the Municipal Corporation during the visit made by the Assessing Officer establishes that the there was no completion certificate as on 31.03.2012. Thus, he submits that the necessary conditions precedent for availing the deduction u/s 80IB(10) were not fulfilled and the ld. CIT(A) ought not to have directed the Assessing Officer to allow the deduction u/s 80IB(10), inasmuch as, without satisfying himself that the buildings were completed as on 31.03.2012, as well as without satisfying himself that necessary eligible conditions as prescribed under the said provisions of the Act stood satisfied. He further submits that the principle of proportionate basis cannot be applied in a case where the housing project had not satisfied the eligibility conditions prescribed under the said provisions of the Act. 9. On the other hand, ld. AR submits that the deduction was claimed only in respect of the eligible units sold and completed before 31.03.2012 placing reliance on the plethora of following decisions :- (i) CIT vs. Brahma Associates, 333 ITR 289 (Bom.-HC). (ii) Manjeera Projects vs. ACIT (ITA Nos.1554/Hyd/2018, 1599/Hyd/2019 and 15/Hyd/2020). (iii) Mahaveer Enterprises vs. PCIT (ITA No.920/Mum/2016). (iv) M/s Nagarjuna Homes vs. ITO (ITA No.722/Hyd/2009). (v) DCIT vs. M/s Om Associates (ITA No.1031/PUN/2016). (vi) Runwal Multihousing Pvt. Ltd. vs. ACIT (ITA Nos.1015, 1016 and 1017/PUN/2011). ITA No.1762/PUN/2018 8 (vii) ACIT vs. Shri Subash F. Bafna D. (ITA No.319/PUN/2013) (viii) Shambhu Properties vs. ITO (ITA No.671/PUN/2018). (ix) Padmavati Developers vs. DCIT (ITA Nos.1691 to 1694/PUN/2012). (x) ITO vs. M/s. Kirti Construction Ayodhya Township (ITA Nos.1686/Ahd/2013, 1325/Ahd/2011, 485/Ahd/2012, 288/Ahd/2012, 2331/Ahd/2012 and 2434/Ahd/2012). 10. The ld. AR submits that the assessee is entitled for deduction in respect of the units which were completed before 31.03.2012. He further submits that as on 31.03.2012 the completion certificates were issued by the Municipal Corporation. He also submits that the possessions of all the buildings/units were handed-over to the purchasers before 31.03.2012. He also filed copies of possession letters placed at page no.51 to 57 of the Paper Book. 11. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the eligibility of the respondent-assessee for deduction derived from the business of execution of housing project under the provisions of section 80IB(10) of the Act. Before, we delving to the facts of the case, it is necessary to refer the relevant provisions of the Act. The object behind enactment of provisions of section 80IB(10) is to provide 100% of deduction of profits derived by undertaking for development of building and housing project. The provisions of ITA No.1762/PUN/2018 9 section 80IB(10) as stood the relevant point of time i.e. during the assessment year 2012-13 reads as under :- “Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. 80-IB. (1) .......... .......... (10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,— (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,— (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004 but not later than the 31st day of March, 2005, within four years from the end of the financial year in which the housing project is approved by the local authority; (iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority. Explanation.—For the purposes of this clause,— (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a ITA No.1762/PUN/2018 10 scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed three per cent of the aggregate built-up area of the housing project or five thousand square feet, whichever is higher; (e) not more than one residential unit in the housing project is allotted to any person not being an individual; and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:— (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta, (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government). 12. From perusal of the above provisions of the Act, it would be clear that in order to claim the benefit of deduction u/s 80IB(10) an assessee has to satisfy the following conditions :- “(a) The project has to be approved by the local authority before 31-3-2007. (b) The project is constructed on a plot of land having a minimum area of one acre. ITA No.1762/PUN/2018 11 (c) The built-up area of each residential unit should not exceed 11,500 sq. ft. in the cities of Delhi and Mumbai (including areas falling within 25 Kms. Of Municipal limits of these cities) and 1,500/- sq. ft. in other places. (d) The built up area of the shops and other commercial establishments included in the housing project should not exceed 5% of the total built up area of the housing project or 2,000 sq. ft. whichever is less. (e) The project has to be completed within four years from the end of the financial year in which the project is approved by the local authority.” 13. In the present case, the respondent-assessee sought the approval of building plan, housing project and land admeasuring 25,340 sq.mtrs. to construct 8 buildings and the said approval was granted on 29.03.2007. The housing project was required to be completed on or before 31.03.2012 in order to avail the benefit of deduction u/s 80IB(10) of the Act. However, in the present case, admittedly, the position of the building A was totally incomplete as on 31.03.2012 and the buildings B, C & D were completed partly upto floor no.9, 10 & 11 respectively, which clearly indicates that the housing project of buildings A, B, C and D were not completed upto 31.03.2012. It is the case of the respondent-assessee is that in respect of construction of buildings B, C and D was completed upto floor no.9, 10 & 11 respectively as on 31.03.2012 and completion certificate was obtained from the local authorities. The Assessing Officer, during the course of assessment proceedings, observed that the respondent-assessee had sold 16 flats in contravention of ITA No.1762/PUN/2018 12 provisions of clause (e) and (f) of section 80IB(10) of the Act. In the background of the above observation, the Assessing Officer concluded that the respondent-assessee was not entitled to claim for deduction u/s 80IB(10) of the Act. However, on appeal before the ld. CIT(A), the ld. CIT(A) reversed the findings of the Assessing Officer on account of entire sale proceeds shown in the Profit & Loss Account in respect of only completed units. This finding of the ld. CIT(A) is under challenge before us. We have carefully gone through the order of the ld. CIT(A) and find that the ld. CIT(A) had ignored the fact that the buildings B, C & D were not completed as on 31.03.2012, which is the cut of date for claiming deduction u/s 80IB(10) of the Act. It is beyond anybody imagination as to how the Municipal Authority had issued completion certificate in respect of buildings B, C & D even without knowing the fact that the construction was not completed as on 31.03.2012. No provision under the Municipal Corporation Act of Maharashtra Government was shown to us, which empowers the local authorities to issue completion certificate even without completion of construction of the entire building. Thus, the ld. CIT(A) had grossly fell in error in allowing the deduction in respect of buildings B, C & D overlooking the plain provisions of the Act and without examining case in detail. ITA No.1762/PUN/2018 13 14. As regards to the eligibility of deduction in respect of buildings E, F, G & H, we are unable to discern from the order of the ld. CIT(A) that the ld. CIT(A) had satisfied himself as to the fulfilment of conditions precedent for availing deduction u/s 80IB(10) of the Act enumerated in the earlier paragraphs of this order. It is settled principle of law that if exemption is available on complying with certain conditions precedent under the respective Statute, those conditions have to be strictly complied with as held by the Hon’ble Supreme Court in the case of CIT vs. Dilip Kumar (2018) 9 SCC 1 (FB)(SC). In the background of the above settled legal principle, we examined the facts of the present case and on perusal of the assessment order as well as impugned order, we are unable to discern that the ld. CIT(A) had satisfied himself that the respondent-assessee had fulfilled the necessary conditions precedent for availing the deduction u/s 80IB(10) of the Act. Therefore, we are of the considered opinion that the order of the ld. CIT(A) suffers from voice of perversity and it is bereft of factual discussion on facts of the case and also failed to construe the provisions of relevant section in accordance with settled legal principles discussed above. Ordinarily, we would have remanded the matter back to the file of the Assessing Officer to examine the allowability of deduction u/s 80IB(10) in respect of buildings E, F, G & H, but ITA No.1762/PUN/2018 14 even before us the respondent-assessee had not led any material on record before us satisfying the conditions precedent for availing benefit u/s 80IB(10) in respect of buildings B, C & D, therefore, keeping in view the well settled principle, that remand cannot be made in order to improve case of either party to the litigation. Accordingly, we decline to do so. Thus, the grounds of appeal filed by the Revenue stand allowed. 15. In the result, the appeal filed by the Revenue stands allowed. Order pronounced on this 13 th day of January, 2023. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 13 th January, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-3, Pune. 4. The Pr. CIT-2, Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.