DCIT, Central Circle 1(1), Pune V. Sukhwani Buildcon, Pune

ITA 2078/PUN/2012

• Counselvise Citation: 207824514 RSA 2012
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 23-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: WALIMBE
• Assessee Lawyers: VIPIN GUJARATHI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS.2077 AND 2078/PN/2012 A.Y. 2006-07 & 2007-08 DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), PUNE APPELLANT VS. M/S. SUKHWANI BUILDCON 208/2A, NEAR SWAMINATHAN CLINIC, STATION ROAD, PIMPRI, PUNE PAN:AAEFS7989L RESPONDENT APPELLANT BY : SHRI WALIMB E RESPONDENT BY : SHRI VIP IN GUJARATHI DATE OF HEARING: 24.10.2013 DATE OF ORDER : 28.10.2013 ORDER PER SHAILENDRA KUMAR YADAV, JM BOTH THESE APPEALS PERTAIN TO SAME ASSESSEE FOR A. Y. 2006- 07 AND 2007-08 ON SAME ISSUE, SO THEY ARE BEING DIS POSED OF BY COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO.2077/PN/2012, THE REVENUE HAS RAISED T HE FOLLOWING GROUNDS: 1. THE LD CIT(A), PUNE GROSSLY ERRED IN HOLDING THAT T HE PROJECT OF THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S. 80IB(10) OF THE ACT WITHOUT APPRECIATING THE FACT T HAT THE COMMERCIAL AREA OF THE PROJECT EXCEEDED 2000 SQ. FT. AND, 2 THEREFORE, THE ASSESSEE WAS NOT ENTITLED FOR THE D EDUCTION U/S. 80IB(10) FOR THE A.Y. 2005-06 ONWARDS AS THE S AME IS VIOLATION OF CLAUSE (D) OF SECTION 80IB(10) OF THE ACT. 2. THE LD CIT(A), PUNE GROSSLY ERRED IN ACCEPTING THE ASSESSEE'S PLEA THAT THE DECISION OF THE HON'BLE BO MBAY HIGH COURT IN THE CASE OF BRAMHA ASSOCIATES (333 I TR 289), WILL BE APPLICABLE FOR THE A.Y. 2005-06 ONWARDS ALS O THROUGH THE SAME IS IN VIOLATION OF CLAUSE (D) OF T HE SECTION 80IB(10) OF THE ACT. 3. THE LD CIT(A), PUNE GROSSLY ERRED IN HOLDING TH AT THERE WAS NO VIOLATION OF THE PROVISIONS OF CLAU SE (C) OF SEC.80IB(10) BY THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT ONE OF THE THREE FLATS I.E. FLAT NO.17 IS SITU ATED ON FOURTH FLOOR AND IT HAS ACCESS FROM FLATS NO. 13 & 14 WHICH ARE SITUATED ON THE THIRD FLOOR. THIS NECESSARILY R EQUIRED ALTERATION IN THE BASIC RCC STRUCTURE OF THE BUILDI NG WHICH CAN BE MADE BY THE BUILDER (ASSESSEE) ITSELF AND NO T BY THE PURCHASER. 3. THE ISSUE RAISED BY REVENUE RELATES TO DENIAL OF DEDUCTION CLAIMED U/S. 80IB(10) OF RS.2,76,83,096/- IN RESPEC T OF PROJECT TULIPS. IT IS UNDISPUTED FACT THAT ASSESSEE HAS DE VELOPED TWO HOUSING PROJECTS WITH CAMPUS-I AND PROFIT FROM WHIC H WERE SHOWN IN ASSESSMENT YEAR UNDER CONSIDERATION AND DE DUCTION U/S. 80IB(10) WAS ALSO CLAIMED. THE DEDUCTION U/S. 80IB(10) ON THE PROFIT OF CAMPUS-I OF RS.8,81,52,599/- IS NOT I N DISPUTE. THE ASSESSING OFFICER FOUND THAT ALL CONDITIONS RELATIN G TO THIS PROJECT HAVE BEEN COMPLIED WITH, THEREFORE, HE ALLOWED THE DEDUCTION AS CLAIMED WHICH IS NOT BEFORE US. THE DEDUCTION U/S. 80IB(10) OF RS.2,76,83,096/-, ON PROFIT OF RESIDENTIAL PORTION OF HOUSING 3 PROJECT WAS NOT ALLOWED BY ASSESSING OFFICER AS IT WAS FOUND BY HIM THAT ASSESSEE HAS VIOLATED CONDITIONS RELATING TO ONE 1) CONSTRUCTION OF COMMERCIAL AREA IN EXCESS OF 5% OF BUILT UP OR 2000 SQ. FT. WHICHEVER IS LESS AS CONTENDED IN CLAUSE (D). 2) CONSTRUCTION OF RESIDENTIAL AREA IN EXCESS OF SIZE OF 1500 SQ. FT. IN AREA OTHER THAN THE LIGHT MINIMUM ETC. 3.1 THE ASSESSING OFFICER FOUND THAT ASSESSEE HAS V IOLATED PROVISIONS OF CLAUSE (D) FOR CONSTRUCTION OF COMMER CIAL AREA IN EXCESS OF 5% OF BUILT UP AREA 2000 SQ. FT. WHICHEVE R IS LOWER. ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS CONSTR UCTED 8801 SQ. FT. COMMERCIAL AREA WHICH IS IN VIOLATION OF CL AUSE (D) OF SECTION 80IB(1). THE ASSESSING OFFICER WAS OF THE VIEW THAT PRIOR TO INTRODUCTION OF CLAUSE (D) W.E.F. 01-04-2005 THE RE WAS NO CLAUSE AVAILABLE TO ALLOW ANY COMMERCIAL USER IN HO USING PROJECT ELIGIBLE FOR DEDUCTION U/S. 80IB(10). THEREFORE, A S PER OLD PROVISION THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTI ON IN TULIP PROJECT. ALTERNATIVELY, ASSESSING OFFICER CONVEYS THAT CLAUSE (D) BROUGHT IN THE SUBSTITUTE SECTION HAS TO BE ACCEPTE D AS CLARIFACTORY IN NATURE. 3.2 AS AGAINST THIS, CIT(A) WAS OF THE VIEW THAT AM ENDMENT BROUGHT IN CLAUSE (D) WAS SUBSTANTIVE PROVISION WHI CH COULD HAVE EFFECT ON PROJECT APPROVED PRIOR TO A.Y. 2005-06. HONBLE BOMBAY HIGH COURT IN THE CASE OF BHAHMA ASSOCIATES AND OTHERS (2011) 239 CTR (BOM) 30 HAS HELD THAT COMMER CIAL USER PERMITTED TO EXTENT UNDER THE DC RULES / REGULATION S FRAMED BY RESPECTIVE LOCAL AUTHORITY, IS PERMITTED UP TO 31-0 3-2005. IT HAS ALSO BEEN HELD THAT CLAUSE (D) INSERTED IN 80IB(10) W.E.F. 01-04- 2005 IS PROSPECTIVE AND NOT RETROSPECTIVE, HENCE, C OULD NOT BE APPLIED FOR PERIOD PRIOR 01-04-2005. ITAT, PUNE BE NCH IN CASE OF OPEL SHELTER PVT. LTD. VS. ACIT IN ITA NO.219/PN/20 09 (A.Y. 4 2005-06) AND D.S. KULKARNI & ASSOCIATES VS. ITO IN ITA NO.17/PN/2009 (A.Y. 2005-06) BY FOLLOWING BRAHMA AS SOCIATES AND OTHERS (SUPRA) HAS ALSO HELD THAT AMENDED PROVI SION WILL HAVE PROSPECTIVE APPLICATION. IN VIEW OF THE ABOVE , LEGAL POSITION IT IS SETTLED THAT CLAUSE (D) WILL NOT APPLY IF PRO JECT IS APPROVED PRIOR TO 01-04-2005. IN THE PRESENT CASE, IT IS AN ADMITTED POSITION THAT TULIP PROJECT WAS APPROVED AND COMMEN CED ON 19- 03-2003. IN VIEW OF THE ABOVE, THE OBJECTION OF AS SESSING OFFICER IN RESPECT OF CONSTRUCTION OF COMMERCIAL USER COULD NOT BE SUSTAINED. IT IS ALSO PERTINENT TO MENTION THAT AS SESSING OFFICER HIMSELF HAS ACCEPTED IN ASSESSMENT ORDER THAT COMME RCIAL AREA OF 8801 SQ. FT. IS WITHIN PERMISSIBLE LIMITS OF PCM C FOR HOUSING PROJECT CONSTRUCTED IN THE RESIDENTIAL ZONE. THERE FORE, COMMERCIAL USER CONSTRUCTED TULIP PROJECT WAS WITHI N THE NORMS OF PCMC FOR HOUSING PROJECT. ACCORDINGLY, ISSUE RA ISED IN GROUND NO.1 & 2 HAS RIGHTLY BEEN DECIDED IN FAVOUR OF ASSE SSEE BECAUSE CLAUSE (D) INSERTED IN THE PROVISIONS OF SECTION 80 IB(10) RESTRICTING COMMERCIAL AREA HAS PROSPECTIVE EFFECT FROM 01-04- 2005. WE UPHOLD THE SAME. 4. THE SECOND ISSUE RELATED TO THE FINDING GIVEN BY THE ASSESSING OFFICER FOR VIOLATION OF CLAUSE (C) ON TH E BASIS OF REPORT GIVEN BY WARD INSPECTOR. THE WARD INSPECTOR AFTER VISITING THE SITE ON DIRECTION OF ASSESSING OFFICER, INFORMED HI M THAT FLAT NO.13 & 14 OF THIRD FLOOR AND FLAT NO.17 OF FOURTH FLOOR OF TULIP PROJECT ARE COMBINED AND THE TOTAL AREA OF COMBINED AREA IS APPROXIMATELY 2500 SQ.FT. IN VIEW OF THE ABOVE, TH E ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD VIOLATED THE CONDITIONS PRESCRIBED IN CLAUSE (C) OF THE SECTION 80IB(10) OF I.T. ACT. AGREED TO ASSESSING OFFICER THREE FLATS COMBINED AND COMBI NED AREA IS IN EXCESS OF 1500 SQ. FT., IT WAS FOUND BY WARD INSPEC TOR THAT ALL THREE FLATS WERE OWNED BY DR. OOMER K. GEORGE AND H E MADE THE ENQUIRIES FROM THE NEIGHBOURS. IT WAS FOUND THAT C OMBINED FLATS 5 HAD ONLY ONE ENTRANCE. WHEN THIS FACT WAS CONFRONT ED TO THE ASSESSEE BY ASSESSING OFFICER WITH A SHOW CAUSE NOT ICE FOR DENIAL OF DEDUCTION ON THIS VIOLATION, ASSESSEE SUBMITTED THAT PROJECT TULIP HAD 87 FLATS AND THEY WERE CONSTRUCTED AND SO LD AS SUCH. AGREED TO ASSESSEE 87 ELECTRICITY METERS INSTALLED IN ADDITION TO EXECUTE SALE DEED FOR ALL FLATS SEPARATELY. ASSESS ING OFFICER DID NOT DISPUTE THAT 3 METERS WERE INSTALLED HOWEVER, H E FOUND THAT SAME TO BE NOT OF MUCH RELEVANCE. HE OBSERVED THAT FLATS SOLD BY ASSESSEE WERE SUCH WHICH COULD NOT BE COMBINED. IN VIEW OF THE ABOVE, ASSESSING OFFICER HELD THAT CLAUSE (C) IS VI OLATED FOR DEDUCTED CLAIM U/S. 80IB(10) FOR TULIP PROJECT, ACC ORDINGLY, HE DENIED THE SAME. 4.1 IN FIRST APPEAL, IT HAS BEEN STAND OF THE ASSES SEE THAT THREE FLATS WERE SOLD AS IT IS TO MR. OOMER K. GEORGE AS THREE FLATS THROUGH SEPARATE REGISTERED DOCUMENTS. IT HAS ALSO BEEN STATED THAT NO MODIFICATION WAS MADE BY ASSESSEE FOR ANY B UILDING PLAN. AS STATED ABOVE ALL THREE FLATS WERE SEPARATE ELECT RICITY METERS AND THEY ARE ASSESSED SEPARATELY BY PCMC FOR LEVYIN G MUNICIPAL TAX. THE INTERNAL CHANGES MADE BY PURCHASER TO JOIN THE FLATS HAS NOTHING TO DO WITH THE ASSESSEE FIRM. THEREFORE, N O DISADVANTAGE SHOULD BE CAUSED TO ASSESSEE FOR SOME THING DONE BY OTHER. THERE IS NO RESTRICTION OF ASSESSEE TO SELL MORE TH AN ONE FLAT TO ONE PURCHASER. 4.2 CIT(A) FOUND THAT UNDISPUTEDLY THREE FLATS WERE SOLD TO ONE PERSON MR. OOMER K. GEORGE, THERE WAS NO PROVISION AT RELEVANT POINT OF TIME MORE THAN ONE FLAT. THEREFORE, NO AD VERSE INFERENCE COULD BE DRAWN FOR THE SAME. ASSESSING OFFICER TRI ED TO INFER THAT THE ASSESSEE HAS EITHER FACILITATED OR PLAYED A KEY ROLE IN JOINING THE FLATS, THEREFORE IT RESULTED INTO VIOLATION OF CLAUSE (C). MATERIAL AS AVAILABLE ON RECORD REVEALS THAT THREE FLATS WER E SEPARATELY SOLD TO MR. OOMER K. GEORGE THROUGH SEPARATE DEEDS. THREE 6 ELECTRICITY CONNECTIONS WERE PROVIDED FOR RESPECTIV E FLATS AND EVEN MUNICIPAL AUTHORITIES RECOGNIZES THREE FLATS BY ASS ESSING THEM SEPARATELY FOR THE PURPOSE OF MUNICIPAL TAXES. THE RE IS APPARENTLY NOTHING ON RECORD THAT ASSESSEE HAS PLAY ED A ROLE IN SELLING THE FLATS IN COMBINED MANNER EVEN PURCHASER MR. OOMER K. GEORGE DURING APPEAL ALSO CONFIRMED THE FACT THA T THREE FLATS WERE JOINED BY HIM AND ASSESSEE HAS NOT PLAYED ANY ROLE IN THE SAME. IN VIEW OF THE ABOVE OBJECTION ON VIOLATION OF CLAUSE (C) AND IN VIEW OF THE MERGER OF THREE FLATS BY ONE MR. OOMER K. GEORGE WAS NOT ACCEPTED BY CIT(A) , ACCORDINGLY DIS ALLOWANCE OF CLAIM OF DEDUCTION U/S. 80IB(10) ON THIS GROUND WAS REJECTED AND CLAIM OF ASSESSEE WAS ALLOWED. THIS REASON OF FACT UAL LEGAL FINDING NEEDS NO INTERFERENCE FROM OUR SIDE. WE UP HELD THE SAME. 5. IN ITA NO.2078/PN/2012, THE REVENUE HAS RAISED T HE FOLLOWING GROUNDS: 1. THE LD CIT(A), PUNE GROSSLY ERRED IN HOLDING THAT T HE PROJECT OF THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S. 80IB(10) OF THE ACT WITHOUT APPRECIATING THE FACT T HAT THE COMMERCIAL AREA OF THE PROJECT EXCEEDED 2000 SQ. FT. AND, THEREFORE, THE ASSESSEE WAS NOT ENTITLED FOR THE D EDUCTION U/S. 80IB(10) FOR THE A.Y. 2005-06 ONWARDS AS THE S AME IS VIOLATION OF CLAUSE (D) OF SECTION 80IB(10) OF THE ACT. 2. THE LD CIT(A), PUNE GROSSLY ERRED IN ACCEPTING THE ASSESSEE'S PLEA THAT THE DECISION OF THE HON'BLE BO MBAY HIGH COURT IN THE CASE OF BRAMHA ASSOCIATES (333 I TR 289), WILL BE APPLICABLE FOR THE A.Y. 2005-06 ONWARDS ALS O THROUGH THE SAME IS IN VIOLATION OF CLAUSE (D) OF T HE SECTION 80IB(10) OF THE ACT. 3. THE LD CIT(A), PUNE GROSSLY ERRED IN HOLDING TH AT THERE WAS NO VIOLATION OF THE PROVISIONS OF CLAU SE (C) OF 7 SEC.80IB(10) BY THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT ONE OF THE THREE FLATS I.E. FLAT NO.17 IS SITU ATED ON FOURTH FLOOR AND IT HAS ACCESS FROM FLATS NO. 13 & 14 WHICH ARE SITUATED ON THE THIRD FLOOR. THIS NECESSARILY R EQUIRED ALTERATION IN THE BASIC RCC STRUCTURE OF THE BUILDI NG WHICH CAN BE MADE BY THE BUILDER (ASSESSEE) ITSELF AND NO T BY THE PURCHASER. 6. FIRST ISSUE IS WITH REGARD TO ELIGIBILITY FOR DE DUCTION U/S. 80IB(10) OF THE I.T. ACT ON ACCOUNT OF VIOLATION OF CLAUSE (D) ON ACCOUNT OF COMMERCIAL AREA IN VIOLATION OF PROVISIO N. THIS ISSUE HAS BEEN DISCUSSED AND DECIDED BY US IN A.Y. 2006-0 7 VIDE PARA NO.3 OF THIS ORDER. FACTS BEING SIMILAR, SO FOLLOW ING SAME REASONING, WE ARE NOT INCLINED TO INTERFERE IN THE FINDINGS OF CIT(A) WHO HAS ALLOWED THE CLAIM FOLLOWING THE RATI O OF BRAHMA ASSOCIATES (SUPRA), WE UPHOLD THE SAME. 6.1 NEXT ISSUE IS WITH REGARD TO VIOLATION OF PROVI SION OF CLAUSE (C) OF SECTION 80IB(10) ON THE GROUND THAT ITS UNIT HAS EXCESS OF 1500 SQ. FT. WE HAVE DISCUSSED AND DECIDED THIS IS SUE IN FAVOUR OF ASSESSEE VIDE PARA NO.4 OF THIS ORDER, BUT FACTS BEING SIMILAR, WE ARE NOT INCLINED TO INTERFERE IN THE FINDINGS OF CIT(A) WHO HAS HELD THAT THERE IS NO VIOLATION OF PROVISION OF CLA USE (C) OF SECTION 80IB(10). WE UPHOLD THE SAME. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THE DAY OF 28 TH OCTOBER 2013. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 28 TH OCTOBER 2013 GCVSR 8 COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-I, PUNE 4) THE CIT-I, PUNE 5) THE DR, B BENCH, I.T.A.T., PUNE. 6) GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE