ACIT CIR 1, THANE V. AMARSING N THAKUR, THANE

ITA 2036/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54826 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARSHASRTHI NAIR
• Assessee Lawyers: MALAY H SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI. PRAMOD KUMAR (A.M.) AND SHRI. VIJAY PA L RAO (J.M) ITA NO.2036/MUM/2010 ASSESSMENT YEAR : 2006-2007 A.C.I.T. CIR-1, VARDAN BLDG. LOWER GR. FLR., WAGLE INDUSTRIAL ESTATE, MIDC, THANE VS. AMARSINGH N. THAKUR SHOP NO.5, M.V. APARTMENT, BHAKTI MANDIR ROAD, THANE. PAN AAPPT4837R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARSHASRTHI NAIR. RESPONDENT BY : SHRI MALAY H. SHAH O R D E R PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25.11.2009 OF CIT(A)-II, MUMBAI FOR THE A.Y.2006-07 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS IN THIS APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE HONBLE CIT(A) ERRED IN ALLOWIN G THE DEDUCTION U/S.80IB(10) SINCE THE ASSESSEE HAD CONST RUCTED RESIDENTIAL-CUM-COMMERCIAL COMPLEX THUS VIOLATING O NE OF THE PRECONDITIONS LAID DOWN U/S.80IB(10)(A) OF THE I.T. ACT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE HONBLE CIT(A) WAS JUSTIFIED IN HOLDING THAT THE DEDUCTION U/S.80IB(1), AS APPLICABLE PRIOR TO 1 ST APRIL, 2005, IS ADMISSIBLE IN CASE OF A HOUSING PROJECT COMPRI SING RESIDENTIAL HOUSING UNITS AND COMMERCIAL ESTABLISHM ENTS. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE HONBLE CIT(A) WAS JUSTIFIED IN HOLD ING THAT THE RESIDENTIAL PROJECTS HAVING COMMERCIAL AREA UPTO 10 % OF THE PROJECT IS ELIGIBLE FOR THE CLAIM OF DEDUCTION FOR ENTIRE PROFITS OR PROJECT U/S.80IB(1). 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE HONBLE CIT(A) ERRED IN ALLOWIN G THE DEDUCTION U/S.80IB(1) RELYING ON THE DECISION OF SP ECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES IN ITA NO.1417/PN/ 06 & ITA NO.2036/MUM/2010 ASSESSMENT YEAR : 2006-2007 2 OTHERS WHICH HAS NOT BEEN ACCEPTED BY THE DEPTT. AN D THE DEPTT. HAS GONE IN FURTHER APPEAL TO HIGH COURT. 3. THE ONLY ISSUE ARISES IN THIS APPEAL IS WHETHER HOUSING PROJECT IN QUESTION HAVING COMMERCIAL ESTABLISHMENT IS ENTITLE D FOR A DEDUCTION U/S.80IB OR NOT. THE ASSESSEE HAS CONSTRUCTED TH E HOUSING PROJECT NAMELY GREEN ACRES PHASE-I AND GREEN ACRES PHASE-II EACH HAVING COMMERCIAL AREA TO THE EXTENT OF 4590 AND 3980 SQ.FTS. RESPECT IVELY. THE ASSESSING OFFICER DENIED THE DEDUCTION U/S.80IB IN RESPECT OF THESE PROJECTS INTER-ALIA ON THE GROUND THAT CONDITIONS PRESCRIBED U/S.80IB(1 0) HAS BEEN VIOLATED BECAUSE THE COMMERCIAL AREA IN THIS PROJECTS EXCEED S THE PRESCRIBED LIMIT OF 2000 SQ.FTS. ON APPEAL, THE LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF SPECIAL BENCH OF TRIBU NAL IN THE CASE OF BRAHMA ASSOCIATES V.S J.C.I.T. [2009] 30 SOT 155. 4. WE HAVE HEARD THE LEARNED DR AS WELL AS LEARNED AR AND CONSIDERED THE RELEVANT RECORD. AT THE OUT SET, WE NOTE THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF SPECIAL B ENCH OF PUNE BENCH OF TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES VS. JCIT (SUPRA), WHEREIN THIS TRIBUNAL HAS HELD THAT AMENDMENT BROUGHT INTO EFFEC T BY INSERTING THE CLAUSE (D) BY FINANCE ACT, 2004 IS NOT APPLICABLE O N THE PROJECT WHICH ARE APPROVED BEFORE THE SAID AMENDMENT. THE RELEVANT P ART OF THE SPECIAL BENCH IS REPRODUCED AS UNDER: THUS, ON THE DATE ON WHICH THE LEGISLATURE INTRODUC ED 100 PER CENT. DEDUCTION UNDER THE INCOME-TAX ACT, 1961 ON THE PRO FITS DERIVED FROM HOUSING PROJECTS APPROVED BY A LOCAL AUTHORITY, IT WAS KNOWN THAT LOCAL AUTHORITIES COULD APPROVE PROJECTS AS HOUSING PROJE CTS WITH COMMERCIAL USER TO THE EXTENT PERMITTED UNDER THE DC RULES FRA MED BY THE RESPECTIVE LOCAL AUTHORITY. IN OTHER WORDS, IT WAS KNOWN THAT LOCAL AUTHORITIES COULD APPROVE A HOUSING PROJECT WITHOUT OR WITH COMMERCIA L USER TO THE EXTENT PERMITTED UNDER THE DEVELOPMENT CONTROL RULES. IF T HE LEGISLATURE INTENDED TO RESTRICT THE BENEFIT OF DEDUCTION ONLY TO PROJECTS APPROVED EXCLUSIVELY FOR RESIDENTIAL PURPOSES, THEN IT WOULD HAVE STATED SO. HOWEVER, THE LEGISLATURE HAS PROVIDED THAT SECTION 80-IB(10) DEDUCTION IS AVAILABLE TO ALL HOUSING PROJECTS APPROVED BY A LO CAL AUTHORITY. SINCE LOCAL AUTHORITIES COULD APPROVE A PROJECT TO BE A HOUSIN G PROJECT WITH OR WITHOUT THE COMMERCIAL USER, IT IS EVIDENT THAT TH E LEGISLATURE INTENDED TO ALLOW SECTION 80-IB(10) DEDUCTION TO ALL HOUSING P ROJECTS APPROVED BY A LOCAL AUTHORITY WITHOUT OR WITH COMMERCIAL USER TO THE EXTENT PERMITTED UNDER THE DEVELOPMENT CONTROL RULES. ITA NO.2036/MUM/2010 ASSESSMENT YEAR : 2006-2007 3 IT IS NOT IN DISPUTE THAT WHERE A PROJECT IS APPROV ED AS A HOUSING PROJECT WITHOUT OR WITH COMMERCIAL USER TO THE EXTENT PERMI TTED UNDER THE RULES/ REGULATIONS, THEN, DEDUCTION UNDER SECTION 80-IB(10 ) WOULD BE ALLOWABLE. IN OTHER WORDS, IF A PROJECT COULD BE APPROVED AS A HOUSING PROJECT HAVING RESIDENTIAL UNITS WITH PERMISSIBLE COMMERCIAL USER, THEN IT IS NOT OPEN TO THE INCOME-TAX AUTHORITIES TO CONTEND THAT THE EXPR ESSION 'HOUSING PROJECT' IN SECTION 80-IB(10) IS APPLICABLE TO PROJ ECTS HAVING ONLY RESIDENTIAL UNITS. ONCE IT IS HELD THAT LOCAL AUTHORITIES COULD APPROV E A PROJECT TO BE HOUSING PROJECT WITHOUT OR WITH THE COMMERCIAL USER TO THE EXTENT PERMITTED UNDER THE DC RULES, THEN THE PROJECT APPROVED WITH THE PERMISSIBLE COMMERCIAL USER WOULD BE ELIGIBLE FOR SECTION 80-IB (10) DEDUCTION IRRESPECTIVE OF THE FACT THAT THE PROJECT IS APPRO VED AS 'HOUSING PROJECT' OR APPROVED AS 'RESIDENTIAL PLUS COMMERCIAL'. IN OTHE R WORDS, WHERE A PROJECT FULFILLS THE CRITERIA FOR BEING APPROVED A S A HOUSING PROJECT, THEN DEDUCTION CANNOT BE DENIED UNDER SECTION 80-IB(10) MERELY BECAUSE THE PROJECT IS APPROVED AS 'RESIDENTIAL PLUS COMMERCIA L'. FORM THE FACT THAT THE DEDUCTION UNDER SECTION 80-I B(10) PRIOR TO APRIL 1, 2005 WAS ALLOWABLE ON THE PROFITS DERIVED FROM HOUS ING PROJECTS CONSTRUCTED DURING THE SPECIFIED PERIOD, ON A SPECI FIED SIZE OF THE PLOT WITH RESIDENTIAL UNITS OF THE SPECIFIED SIZE, IT CANNOT BE INFERRED THAT THE DEDUCTION UNDER SECTION 80-IB(10) WAS ALLOWABLE TO HOUSING PROJECTS HAVING RESIDENTIAL UNITS ONLY, BECAUSE, RESTRICTIO N ON THE SIZE OF THE RESIDENTIAL UNIT IS WITH A VIEW TO MAKE AVAILABLE A LARGE NUMBER OF AFFORDABLE HOUSES TO THE COMMON MAN AND NOT WITH A VIEW TO DENY COMMERCIAL USER IN RESIDENTIAL BUILDINGS. IN OTHER WORDS, THE RESTRICTION UNDER SECTION 80-IB(10) REGARDING THE SIZE OF THE RESIDENTIAL UNIT WOULD IN NO WAY CURTAIL THE POWERS OF THE LOCAL AUTHORITY T O APPROVE A PROJECT WITH COMMERCIAL USER TO THE EXTENT PERMITTED UNDER THE D EVELOPMENT CONTROL RULES/REGULATIONS. THEREFORE, THE ARGUMENT OF THE REVENUE THAT THE RESTRICTION ON THE SIZE OF THE RESIDENTIAL UNIT IN SECTION 80-IB(10) AS IT STOOD PRIOR TO APRIL 1, 2005 IS SUGGESTIVE OF THE FACT T HAT THE DEDUCTION IS RESTRICTED TO HOUSING PROJECTS APPROVED FOR RESIDE NTIAL UNITS ONLY CANNOT BE ACCEPTED. THE ABOVE CONCLUSION IS FURTHER FORTIFIED BY CLAUSE (D) OF SECTION 80-IB(10) INSERTED WITH EFFECT FROM APRIL 1, 2005. CLAUSE (D) OF SECTION 80-IB(10) INSERTED WITH EFFECT FROM APRIL 1, 2005 PROVIDES TH AT EVEN THOUGH SHOPS AND COMMERCIAL ESTABLISHMENTS ARE INCLUDED IN THE H OUSING PROJECT, DEDUCTION UNDER SECTION 80-IB(10) WITH EFFECT FROM APRIL 1, 2005 WOULD BE ALLOWABLE WHERE SUCH COMMERCIAL USER DOES NOT EXCEE D FIVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET WHICHEVER IS LOWER. BY THE FINANCE ACT, 2010, CLAUSE (D) IS AMENDED TO THE EFFECT THAT THE COMMERCIAL USER SHOULD NOT EXCEED THREE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR FIVE THOUSAND SQUARE FEET WHICHEVER IS HIGHER. THE EXPRESSION 'INCLUDED ' IN CLAUSE (D) MAKES IT AMPLY CLEAR THAT COMMERCIAL USER IS AN INTEGRAL PAR T OF A HOUSING PROJECT. THUS, BY INSERTING CLAUSE (D) TO SECTION 80-IB(10) THE LEGISLATURE HAS MADE IT CLEAR THAT THOUGH HOUSING PROJECTS APPROVED BY T HE LOCAL AUTHORITIES WITH COMMERCIAL USER TO THE EXTENT PERMISSIBLE UNDER THE DEVELOPMENT CONTROL RULES/REGULATION WERE ENTITLED TO SECTION 80-IB(10) DEDUCTION, WITH EFFECT FROM APRIL 1, 2005 SUCH DEDUCTION WOULD BE SUBJECT TO THE RESTRICTION SET ITA NO.2036/MUM/2010 ASSESSMENT YEAR : 2006-2007 4 OUT IN CLAUSE (D) OF SECTION 80-IB(10). THEREFORE, THE ARGUMENT OF THE REVENUE THAT WITH EFFECT FROM APRIL 1, 2005 THE LEG ISLATURE FOR THE FIRST TIME ALLOWED SECTION 80-IB(10) DEDUCTION TO HOUSIN G PROJECTS HAVING COMMERCIAL USER CANNOT BE ACCEPTED. 5. WE FURTHER NOTE THAT DECISION OF SPECIAL BENCH I N HE CASE OF BRAHMA ASSOCIATES UPHELD BY THE HONBLE JURISDICTIONAL HIG H COURT IN 333 ITR 289. THE HONBLE JURISDICTIONAL HIGH COURT HAS OBSERVED THAT EVEN PRIOR TO THE AMENDMENT, THE PROJECT HAVING MORE THAN 10% OF THE COMMERCIAL AREA BUT APPROVED BY THE LOCAL AUTHORITIES AS PER THE BY-LAW S IS ELIGIBLE FOR DEDUCTION U/S.80IB. PARA 24 OF THE ORDER IS REPRODUCED AS U NDER: 24. THE FACT THAT THE DEDUCTION U/S.80IB(10) PRIOR TO 01.04.2005 WAS ALLOWABLE ON THE PROFITS DERIVED FRO M THE HOUSING PROJECTS CONSTRUCTED DURING THE SPECIFIED P ERIOD, ON A SPECIFIED SIZE OF THE PLOT WITH RESIDENTIAL UNITS O F THE SPECIFIED SIZE, IT CANNOT BE INFERRED THAT THE DEDUCTION U/S. 80IB(10) WAS ALLOWABLE TO HOUSING PROJECTS HAVING RESIDENTIAL UN ITS ONLY, BECAUSE, RESTRICTION ON THE SIZE OF THE RESIDENTIAL UNIT IS WITH A VIEW TO MAKE AVAILABLE LARGE NUMBER OF AFFORDABLE H OUSES TO THE COMMON MAN AND NOT WITH A VIEW TO DENY COMMERCI AL USER IN RESIDENTIAL BUILDINGS. IN OTHER WORDS, THE RESTR ICTION U/S.80IB(10) REGARDING THE SIZE OF THE RESIDENTIAL UNIT WOULD IN NO WAY CURTAIL THE POWERS OF THE LOCAL AUTHORITY TO APPROVE A PROJECT WITH COMMERCIAL USER TO THE EXTENT PERMITTE D UNDER DC RULES/REGULATIONS. THEREFORE, THE ARGUMENT OF THE REVENUE THAT THE RESTRICTION ON THE SIZE OF THE RESIDENTIAL UNIT IN SECTION 80IB(10) AS IT STOOD PRIOR TO 01.04.2005 IS SUGGEST IVE OF THE FACT THAT THE DEDUCTION IS RESTRICTED TO HOUSING PROJECT S APPROVED FOR RESIDENTIAL UNITS ONLY CANNOT BE ACCEPTED. 6. IN VIEW OF THE DECISION OF HONBLE JURISDICTIONA L HIGH COURT WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER WAS PRONOUNCED ON THIS 11 TH DAY OF AUGUST, 2011 IN OPEN COURT. SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) SD/- (VIJAY PAL RAO) (JUDICIAL MEMBER) MUMBAI, DATED 11.08.2011 ITA NO.2036/MUM/2010 ASSESSMENT YEAR : 2006-2007 5 JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUM BAI 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH , MUM BAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI