M/s Kura Homes Pvt. Ltd., Secunderabad V. ITO, Hyderabad

ITA 216/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66302 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PHANI RAJU
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Additional evidence
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 216/HYD/2010 ASSESSMENT YEAR 2006-07 M/S. KURA HOMES PVT. LTD. SECUNDERABAD PAN: AACCK 0192 L VS. INCOME TAX OFFICER WARD-2(1) HYDERABAD ASSESSEE RESPONDENT ASSESSEE BY: SRI V. SIVA KUMAR RESPONDENT BY: SRI PHANI RAJU DATE OF HEARING: 3 1 .0 7 .2012 DATE OF PRONOUNCEMENT: 21.09.2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-III, HYDERABAD DATED 30.11.2009 FOR ASSESSME NT YEAR 2006-07. 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD TO D ISALLOWANCE OF DEDUCTION U/S. 80IB(10) OF THE INCOME-TAX ACT, 1961 ON THE REASON THAT THERE IS NO COMPLETION CERTIFICATE IN RESPECT OF HO USING PROJECT CARRIED ON BY THE ASSESSEE. 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE COM PANY IS A BUILDER AND ENGAGED IN CONSTRUCTION OF FLATS. FOR THE A.Y. 2006-07, IT HAS FILED THE RETURN OF INCOME ON 30/11/2006 SHOWING AN INCOM E OF RS. 7,47,150. DURING SCRUTINY OF THE RETURN/ THE ASSES SING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 7.3 CRORES FROM DEVELOPMENT AND SALE OF FLATS, IN ADDITION TO OTHER INCOME OF RS 4.38 LAKHS, ON WHICH IT HAS SHOWN PROFIT OF RS. 98,13,12 5 AND THE SAME WAS CLAIMED AS DEDUCTION U/S. 80IB(10) OF THE ACT. EXP LAINING SUCH CLAIM OF THE DEDUCTION, THE ASSESSEE HAS SUBMITTED THAT I T HAS TAKEN UP A VENTURE AT M.G. ROAD/ SECUNDERABAD ON DEVELOPMENT B ASIS AND CONSTRUCTED A RESIDENTIAL COMPLEX ON LAND OF 5,500 SQ. YARDS. THE I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 2 SANCTIONED PLAN FOR THE PROJECT WAS OBTAINED IN SEP TEMBER, 1999 AND EACH FLAT WAS LESS THAN 1500 SQ. FT. IT WAS SUBMITT ED THAT THE CONSTRUCTION WAS COMPLETED DURING FY 2005-06. IT WA S FURTHER SUBMITTED THAT TOTAL 95 FLATS WERE CONSTRUCTED AND AS PER DEVELOPMENT AGREEMENT 60% THEREOF I.E. 58 FLATS HAVE COME TO TH E SHARE OF THE BUILDER. STATING THAT THE FLATS WERE COMPLETED AND HANDED OVER DURING 2004-05 AND 2005-06, THE ASSESSEE SUBMITTED THAT TH E EXEMPTION U/S. 80IB(10) WAS CLAIMED IN BOTH THE YEARS. 4. THE ASSESSEE FURTHER SUBMITTED THAT IN RESPECT OF S AID VENTURE, LAND OWNERS ARE SRI KARAN SINGH AND FIVE OTHER PERS ONS HAVE SOLD THE LAND TO M/S. LABHAM ESTATES PVT. LTD. FOR A CONSIDE RATION AND HAVE GIVEN GPA WITHOUT RECEIVING ENTIRE SALE CONSIDERATI ON. LATER, THEY HAVE ENTERED INTO DEVELOPMENT AGREEMENT WITH M/S. LABHAM ESTATES PVT. LTD., FOR CONSTRUCTION OF THE COMPLEX. SINCE M/S. LABHAM ESTATES PVT. LTD. COULD NOT PAY THE AGREED SALE CONSIDERATION TO THE LAND OWNERS, THEY WERE FORCED TO PAY AN AMOUNT OF RS. 1, 88,47,438 TO THEM ON BEHALF OF THE SAID CONCERN AND RECOVERED THE SAM E BY SELLING THE SHARE OF FLATS OF M/S. LABHAM ESTATES PVT. LTD. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FROM V ERIFICATION OF THE DEVELOPMENT AGREEMENT-CUM-DEED OF APPOINTMEN T OF ATTORNEY, WHICH WAS EXECUTED ON 07/07/2000 BETWEEN SRI KARAN SINGH AND THE FIVE OTHERS AS 'LAND OWNERS', M/S, LABHAM ESTATES P VT. LTD., SHOWN AS 'CONSENTING PARTY' AND M/S. KURA HOMES PVT. LTD., SHOWN AS BUILDER, THE ASSESSING OFFICER NOTICED THAT AS PER CLAUSE IV OF THE SAID DEED THE PROPOSED RESIDENTIAL COMPLEX HAS TO BE CON STRUCTED IN ACCORDANCE WITH THE PLAN SANCTIONED BY THE MUNICIPA L CORPORATION, HYDERABAD (MCH IN SHORT). FROM THE SAID DEED, THE ASSESSING OFFICER NOTICED THAT THE PLAN WAS APPROVED BY MUNICIPAL COR PORATION OF HYDERABAD VIDE PERMIT BEARING NUMBER 16/4/235/TP 7/SDE/97 DATED 07/09/1999 FOR CONSTRUCTION OF 80 FLATS. THE SAID APPROVAL WHICH WAS GIVEN IN THE NAMES OF SRI KARAN SINGH AND SRI B HANWARILAL, GPA HOLDER, IS SUBJECT TO CONDITIONS, VIZ., (A) THAT A FIT FOR OCCUPANCY I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 3 CERTIFICATE SHOULD BE OBTAINED FROM MCH BEFORE THE BUILDING IS PUT TO ACTUAL USE; (B) THAT THE CONSTRUCTION SHOULD BE MADE STRICTLY IN ACCORDANCE WITH THE SANCTIONED PLAN; IF ANY MODIFIC ATIONS ARE NECESSARY, THEN PRIOR APPROVAL SHOULD BE OBTAINED; (C) THAT THE BUILDER AND ARCHITECT SHOULD CONSTRUCT THE BUILDING IN ACCO RDANCE WITH THE APPROVED BUILDING PLAN, FAILING WHICH LIABLE FOR LE GAL ACTION AS PER UNDERTAKING 21/07/1999. FROM THE COPY OF THE APPROVED PLAN FURNISHED BY THE ASSESSEE, THE AO FURTHER NOTICED T HAT SUCH PLAN APPROVAL WAS ACCORDED AS PER DIRECTIONS OF THE HON BLE HIGH COURT IN WP NO. 26505/98 DATED 17/06/1999. FROM THE NOTINGS ON THE REVERSE SIDE OF THE PLAN APPROVAL, THE ASSESSING OFFICER FU RTHER OBSERVED THAT THERE WAS ANOTHER PLAN PRIOR TO THIS PLAN AND AS PE R TOWN PLANNING FILE NO. 235/TP7/SD/97 THE APPLICATION WAS MADE IN THE Y EAR 1997 ITSELF. SINCE THE ASSESSEE HAS CONSTRUCTED 95 FLATS, WHEN S ANCTION WAS GIVEN BY MCH FOR CONSTRUCTION OF ONLY 80 FLATS, THE ASSESSIN G OFFICER OBSERVED THAT THE ASSESSEE HAS VIOLATED SUCH APPROVED PLAN. 6. SHE NOTED THAT THE CONDITION THAT THE PROJECT HAS T O BE APPROVED BY A LOCAL AUTHORITY, IS LAID DOWN TO ENSURE THAT S UCH PROJECT IS CARRIED ON IN ACCORDANCE WITH THE TERMS AND CONDITIONS LAID DOWN BY THE GOVERNMENT / CONCERNED LOCAL AUTHORITY. SHE FURTHER NOTED THAT, IN CASE ANY ALTERATION / DEVIATIONS ARE TO BE MADE AS PER D EMAND OF THE CUSTOMERS OR FOR BUSINESS NECESSITY, THEN ASSESSEE CAN APPROACH THE AUTHORITY CONCERNED WITH A REVISED PLAN. BUT, IN T HIS CASE, THE ASSESSEE HAS NOT OPTED TO GO FOR A REVISED PLAN. ACCORDING TO HER, AS THE ASSESSEE IS CLAIMING THE ENTIRE PROFIT FROM SUCH CO MPLEX, DEDUCTION U/S. 80-IB, THE ASSESSEE HAS TO ENSURE THAT THE PRO JECT IS CARRIED ON AS PER THE CONDITIONS LAID DOWN BY MCH. FURTHER, REFER RING TO THE PROVISIONS OF EXPLANATION (II) TO CLAUSE (A) OF SEC TION 80IB(10), SHE NOTED THAT THE ASSESSEE IS REQUIRED TO FURNISH THE COMPLETION CERTIFICATE FROM THE LOCAL AUTHORITY FOR THE PURPOSE OF CLAIMIN G DEDUCTION U/S. 80IB(10) OF THE ACT. HOWEVER, IN RESPONSE TO QUERY RAISED BY HER IN THIS REGARD, THE ASSESSEE HAS SUBMITTED THAT IT WILL NOT BE POSSIBLE TO OBTAIN A COMPLETION CERTIFICATE FROM THE LOCAL AUTHORITY A ND THE SAME IS A VERY I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 4 LONG DRAWN PROCESS. IN VIEW OF CERTAIN DIFFERENCES GENERALLY EXISTING IN THE ACTUAL CONSTRUCTION OF THE PROJECT WHEN COMPARED TO THE APPROVED PLAN. IT WAS SUBMITTED THAT THE ABOVE PRO JECT WAS COMPLETED BEFORE 31/03/2006. FURNISHING SOME COPIES OF NOTICE S ISSUED FOR PROPERTY TAX ASSESSMENT, THE ASSESSEE , HAS STATED THAT, FROM THE SAME IT SHOWS THAT THE PROJECT WAS COMPLETED BEFORE 31/03/2 006. IT WAS FURTHER SUBMITTED THAT THE DEFAULT ON PART OF THE A SSESSEE IN NOT OBTAINING THE COMPLETION CERTIFICATE IS ONLY OF TEC HNICAL NATURE. 7. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER FURTHER NOTICED THAT THE ASSESSEE HAS CONSTRUCTED 2 2 FLATS, HAVING BUILT- UP AREA EXCEEDING 1,500 SQ. FT. EACH. SHE NOTED TH AT THE BUILT-UP AREA IN RESPECT OF SUCH FLATS GOES UP TO 1,950 SQ. FT. IN RESPONSE TO QUERY RAISED BY THE ASSESSING OFFICER FOR EXCEEDING THE LIMIT OF BUILT-UP AREA IN RESPECT OF EACH FLAT, AS PER PROVISIONS OF CLAUSE(C ) OF SEC. 80IB(10), THE ASSESSEE HAS SUBMITTED THAT THE SAID AREA AS SHOWN IN SALE DEED, INCLUDES COMMON AREAS. HOWEVER, THE ASSESSING OFFIC ER DID NOT ACCEPT SUCH SUBMISSIONS OF THE ASSESSEE AND NOTED THAT THE SALE DEED DOES NOT GIVE BIFURCATION OF BUILT-UP AREA OR COMMON AREA. AFTER CONSIDERING THE FACTS OF THE CASE AND OBSERVING THAT THE ASSESSEE H AS NOT TAKEN THE APPROVAL OF THE HOUSING PROJECT, IT HAS VIOLATED TH E SANCTIONED PLAN APPROVED BY THE LOCAL AUTHORITY AND HAS NOT OBTAINE D COMPLETION CERTIFICATE IN RESPECT OF SUCH HOUSING PROJECT FROM THE LOCAL AUTHORITY AND FURTHER CONSTRUCTED 22 RESIDENTIAL UNITS HAVING BUILT-UP AREA EACH EXCEEDING 1500 SQ. FT., THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB(10) OF THE ACT . ACCORDINGLY, SHE DISALLOWED THE CLAIM OF THE ASSESSEE FOR SUCH DEDUC TION MADE AT RS. 98,13,125. ON APPEAL THE CIT(A) CONFIRMED THE ORDE R OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS IN APPEAL B EFORE US. 8. BEFORE US, THE LEARNED AR SUBMITTED THAT THE ASSESS EE HAS DEVELOPED A HOUSING PROJECT AND AS SUCH IT IS ENTIT LED FOR DEDUCTION U/S. 80IB(10) OF THE ACT. THE OBJECT OF PROVISIONS OF S ECTION 80IB IS TO I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 5 PROVIDE TAX BENEFIT TO THE PERSON UNDERTAKING INVES TMENT RISK IN DEVELOPING RESIDENTIAL PROJECTS. DEVELOPMENT AGREE MENT ENTERED BY THE ASSESSEE CLEARLY ESTABLISHES THAT THE ASSESSEE COMPANY IS THE DEVELOPER AND BUILDER AND NOT A MERE CONTRACTOR. F URTHER HE SUBMITTED THAT THE CIT(A) ON ONE HAND GIVING A FINDING THAT T HE ASSESSEE IS NOT A DEVELOPER AND ONLY A CONTRACTOR AND ON THE OTHER, G AVE A FINDING THAT THE ASSESSEE DEVELOPED AND BUILT HOUSING PROJECT VI DE PERMIT DATED 7.9.1999, AFTER THAT HE HAS GIVEN A FINDING THAT TH E ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 80IB ON THE REASON THAT THE ASSESSEE HAS NOT PRODUCED COMPLETION CERTIFICATE AND CONSTRUCTED 95 FLATS AS AGAINST 80 FLATS SANCTIONED BY THE MUNICIPAL CORPORATION OF HY DERABAD (MCH). HE SUBMITTED THAT THE FINDINGS OF THE CIT(A) ARE SE LF CONTRARY. ACCORDING TO THE AR, THE CIT(A) WRONGLY REFERRED TO EXPLANATION (II) BELOW SECTION 80IB(10) WHICH STIPULATES THAT DATE O F COMPLETION SHALL BE TAKEN TO BE THE DATE ON WHICH COMPLETION CERTIFI CATE IS ISSUED BY THE LOCAL AUTHORITY. 9. THE AR SUBMITTED THAT THE CIT(A) REFERRED TO EXPLAN ATION (II) BELOW SEC. 80IB(10) WHICH STIPULATES THAT DATE OF C OMPLETION SHALL BE TAKEN TO BE THE DATE ON WHICH COMPLETION CERTIFICAT E IS ISSUED BY THE LOCAL AUTHORITY. HE HELD THAT OBTAINING SUCH COMPLE TION CERTIFICATE IS MANDATORY. THE CIT(A) REFERRED TO THE NOTICES ISSUE D BY THE MUNICIPAL AUTHORITY TO THE VARIOUS FLAT OWNERS IN THE RESIDEN TIAL COMPLEX AND HELD THAT NOTICES CANNOT BE EQUATED WITH COMPLETION CERT IFICATE. THE CIT(A) ALSO HELD THAT THE ASSESSEE HAS NOT EVEN TAKEN PROP ER AND APPROPRIATE STEPS FOR OBTAINING OCCUPANCY CERTIFICATE INCLUDING INTIMATION TO CONCERNED AUTHORITY UNDER RULE 13.1.2 OF BUILDING B YE LAWS, 1981. 10. THE AR SUBMITTED THAT THE ASSESSEE HAS PRODUCED BEF ORE THE CIT(A) COPIES OF THE LETTER DATED 4-1-2006 FILED BY THE ASSESSEE BEFORE THE MUNICIPAL AUTHORITIES INTIMATING ABOUT COMPLETI ON OF THE BUILDING ACCOMPANIED BY FORM OF COMPLETION CERTIFICATE AND R EQUESTING FOR ISSUE OF COMPLETION CERTIFICATE. A COPY OF THE SAME IS PL ACED AT PAGES 1 AND 2 OF THE PAPER BOOK FILED BY THE ASSESSEE. THE AR SUB MITTED THAT THE I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 6 CIT(A) HAS BRUSHED ASIDE THE SAME BY OBSERVING THAT THE COMPLETION CERTIFICATE WAS NOT SIGNED BY THE LICENSED ARCHITEC T AND THAT THE ASSESSEE HAS NOT INFORMED THE CONCERNED AUTHORITY. 11. THE AR ALSO SUBMITTED THAT THE CIT(A) HAS NOT APPRE CIATED THAT THE REQUIREMENT OF COMPLETION CERTIFICATE AND THE D ATE OF COMPLETION WAS NOT STIPULATED IN THE LAW AS IT EXISTED WHEN TH E ASSESSEE OBTAINED APPROVAL FOR THE HOUSING PROJECT. THE AR RELIED ON THE DECISION OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL IN THE CASE O F HIRANANDANI AKRUTI JV V. DCIT (39 SOT 498) (MUM). IN THIS CASE THE ASSESSEE SUBMITTED A PROPOSAL FOR SLUM REHABILITATION AND PE RMISSION FOR CARRYING OUT DEVELOPMENT WAS ACCORDED ON 17-11-2003 AND THE PROJECT WAS COMPLETED IN THE ASST. YEAR 2006-07. ASSESSEE, FOLLOWING PROJECT COMPLETION METHOD OF ACCOUNTING, CLAIMED DEDUCTION UNDER SECTION 80IB(10) FROM GROSS TOTAL INCOME ACCRUED FROM PROJE CT. THE ASSESSING OFFICER DENIED THE DEDUCTION BECAUSE AS PER PROVISI ONS OF SECTION 80IB(10)(D) AS APPLICABLE WITH EFFECT FROM 1-4-2005 , LIMIT FOR HAVING COMMERCIAL SPACE IN HOUSING PROJECTS WAS 5 PER CENT OF TOTAL BUILT-UP AREA OR 2000 SQ. FT., WHICHEVER WAS LESS AND IN THE CASE OF THE ASSESSEE, TOTAL BUILT-UP AREA OF COMMERCIAL SPACE IN HOUSING PROJECT EXCEEDED 2,000 SQ. FT. THE TRIBUNAL HELD THAT IN VIEW OF DEC ISION IN SAROJ SALES ORGANISATION V. ITO 115 TTJ 485 (MUM), LAW AS IT EX ISTED IN ASSESSMENT YEAR 2004-05, WHEN ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND PERMISSION FOR CARRYING OUT DEVE LOPMENT WAS ACCORDED, WAS TO BE APPLIED. A COPY OF THE ORDER O F THE TRIBUNAL IN THE CASE OF HIRANANDANI AKRUTI (SUPRA) IS PLACED ON REC ORD. 12. APART FROM THE ABOVE, THE AR ALSO SUBMITTED NOTWITH STANDING THE ABSENCE OF REQUIREMENT UNDER SEC. 80IB(10), IT HAS FILED ITS APPLICATION FOR COMPLETION CERTIFICATE ON 4-1-2006. IN THIS CONNECTION THE AR INVITED ATTENTION OF THE BENCH TO SECTION 45 5 OF THE HYDERABAD MUNICIPAL CORPORATION ACT WHICH STIPULATE S THAT EVERY PERSON, AFTER COMPLETION OF ERECTION OF A BUILDING, SHOULD SEND TO THE COMMISSIONER A NOTICE IN WRITING OF SUCH COMPLETION AND ACCOMPANIED I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 7 BY A CERTIFICATE SPECIFIED IN THE BYE-LAWS AND AFFO RD FACILITIES FOR INSPECTION OF THE BUILDING AND APPLY FOR PERMISSION TO OCCUPY THE BUILDING. THE SAID RULE STIPULATES THAT THE BUILDING CAN BE OCCUPIED EITHER AFTER THE RELEVANT PERMISSION IS RE CEIVED OR IF WITHIN 21 DAYS AFTER RECEIPT OF THE NOTICE THE COMMISSIONER F AILS TO INTIMATE REFUSAL OF HIS PERMISSION. THE ASSESSEE CANNOT BE FAULTED FOR INACTION ON THE PART OF THE MUNICIPAL AUTHORITIES. 13. AS REGARDS THE DEVIATION FROM THE MUNICIPAL APPROVA L PLAN, THE AR SUBMITTED THAT THE PARAMETERS FOR ISSUANCE OF OC CUPANCY CERTIFICATE TAKEN INTO ACCOUNT ARE (I) NUMBER OF FLOORS, (II) E XTENT OF SETBACKS, (III) PARKING SPACE PROVISION AND (IV) ABUTTING ROAD WIDT H. ALSO THE MUNICIPAL ADMISSION AND URBAN DEVELOPMENT DEPARTMEN T HAS ISSUED CLARIFICATIONS AS PER WHICH, WITHIN THE BUIL DING, IT IS FOR THE BUILDER/ARCHITECT WHO HAS THE FREEDOM TO DESIGN THE INSIDE AREAS AS PER THEIR CHOICE. COPIES OF THE LETTER NO. R-230/TPS/G HMC/ HO/2011/1118 DATED 30-5-2011 ISSUED BY THE GREATER HYDERABAD MUNICIPAL CORPORATION, HYDERABAD AND COPY OF MEMO N O. 6349/M/2006- 6 DATED 5-9-2006 ISSUED BY THE MA&UD DE PT., OF GOVT. OF AP ARE PLACED ON RECORD AS ADDITIONAL EVIDENCE. 14. THE AR SUBMITTED THAT THE PLAN APPROVED BY THE MUNI CIPAL AUTHORITIES REMAINS INTACT. THE MUNICIPAL CORPORATI ON HAS INSPECTED AND ASSESSED ALL THE FLATS IN THE HOUSING COMPLEX. THE ASSESSEE HAS FILED BEFORE THE ASSESSING OFFICER AS WELL AS THE CIT(A), COPIES OF SEVERAL NOTICES OF HOUSE TAX ASSESSMENT PERTAINING TO EACH OF THE THREE BLOCKS OF THE RESIDENTIAL COMPLEX ISSUED IN THE MONTH OF F EBRUARY, 2006 BY THE MUNICIPAL AUTHORITIES. IN THESE CIRCUMSTANCES, TH E AR SUBMITTED THAT THE ASSESSEE HAS FULFILLED ALL THE CONDITIONS FOR B EING ELIGIBLE FOR DEDUCTION UNDER SEC. 80IB(10) VIZ., THE HOUSING PRO JECT WAS APPROVED BY LOCAL AUTHORITY, THE CONSTRUCTION WAS COMMENCED AFTER 1-10-1998, THE SIZE OF THE PLOT IS MORE THAN ONE ACRE AND THE ASSESSEE COMPLETED CONSTRUCTION WAS COMPLETED WELL BEFORE 31 -3-2006. CLAUSES (I) AND (II) OF THE EXPLANATION BELOW SEC. 80IB(10) HAVE BEEN INTRODUCED I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 8 W.E.F. 1-4-2005. AS PER THE RATIO LAID DOWN IN THE ABOVE MENTIONED CASE, THE LEARNED CIT(A)'S ORDER IS LIABLE TO BE SE T ASIDE BECAUSE THE ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF SEC. 8 0IB(10) AS IT EXISTED BEFORE THE INSERTION OF THE EXPLANATION. TH E AR ALSO RELIED ON THE ORDERS OF THE TRIBUNAL IN THE CASE OF NAMAHA ES TATES, HYDERABAD IN ITA NO. 797/H/2006 DATED 29-2-2008 WHEREIN THE TRIB UNAL ALLOWED DEDUCTION U/S. 80IB(10) IN A CASE WHERE THE ASSESSE E DEVIATED FROM THE APPROVED PLAN BY CONVERTING TWO ADJACENT FLATS INTO ONE AND THE AREA EXCEEDED 1500 SQ. FT. A COPY OF THE SAID ORDER IS PLACED ON RECORD. THE AR SUBMITTED THAT THE ASSESSING OFFICER STATED THAT AS PER THE DETAILS FURNISHED BY THE ASSESSEE ALONG WITH ITS LETTER DAT ED 23.12.2008 (VIDE PAGES 13 AND 14 OF THE PAPER BOOK), THE AREA OF 22 FLATS EXCEEDS 1500 SQ. FT. THE ASSESSEE CLARIFIED BEFORE THE ASSESSING OF FICER THAT THE SAID AREA INCLUDES COMMON AREAS. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE STATING THAT THE AREA IS NOT VERIFIABLE FROM THE APPROVED PLAN OR THE SALE DEEDS. 15. IN APPEAL, THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT THE ASSESSING OFFICER HAS NOT APPRECIATED THAT AREAS OF FLATS ARE QUOTED BY INCLUDING COMMON AREAS OCCUPIED LIKE STAIR CASES, C ORRIDORS, LIFTS, GYMNASIUM, SWIMMING POOL, TOT-LOT, WATER TANKS, ETC . THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE OB TAINED NECESSARY INFORMATION IF SHE HAD ANY DOUBT ABOUT THE VERACITY OF THE INFORMATION SUBMITTED BY THE ASSESSEE. THE REJECTION WITHOUT AN Y VERIFICATION IS ARBITRARY AND UNJUSTIFIED. IN THIS CONNECTION THE ASSESSEE SUBMITTED THAT CONSEQUENT UPON A DISPUTE RAISED BY ONE OF THE PURCHASERS, THE STATE CONSUMER REDRESSAL FORUM , A.P, HYDERABAD APP OINTED AN ADVOCATE COMMISSIONER WHO MADE ACTUAL MEASUREMENT A ND FURNISHED HIS REPORT STATING THAT IN RESPECT OF FLAT C-206, T HE ACTUAL PLINTH AREA IS 1228.115 SQ. FT AND THE COMMON AREA RELATABLE TO TH E SAID FLAT WAS 655.67 SQ. FT. THIS IS EVIDENCE OF THE FACT THAT T HE BUILT UP AREA HAS NOT BEEN EXCEEDED IN RESPECT OF THE FLATS BUILT BY THE ASSESSEE. THE ASSESSEE SUBMITTED BEFORE THE CIT (APPEALS) THAT ASSESSING O FFICER ERRED IN HOLDING THAT THE ASSESSEE VIOLATED THE NORM OF BUIL T-UP AREA. THE CIT I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 9 (APPEALS) NOTICED THE SUBMISSIONS MADE BY THE ASSES SEE BUT DID NOT GIVE ANY SPECIFIC FINDING THEREON. THE AR SUBMITTE D THAT ON THE STRENGTH OF THE EVIDENCE SUBMITTED BY THE ASSESSEE, IT CAN BE SEEN THAT THE BUILT UP AREA OF THE FLATS AS SUBMITTED BY THE ASSESSEE OUGHT NOT TO HAVE BEEN DOUBTED. HOWEVER, THE AR SUBMITTED THAT T HE ASSESSEE IS PREPARED TO DEMONSTRATE BY PHYSICAL MEASUREMENT THA T THE BUILT-UP AREA OF THE FLATS IS WITHIN THE LIMITS LAID DOWN BY SEC. 80IB(10). 16. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT U/ S. 80IB(10) THE ASSESSEE IS ENTITLED FOR DEDUCTION ONLY WHEN A PROJECT EXECUTED BY IT HAS BEEN APPROVED AS A HOUSING PROJECT BY LOCAL AUT HORITY CONCERNED. ACCORDING TO THE DR THOUGH THE PERMISSION WAS GRAN TED BY THE MCH IN SEPTEMBER, 1999 VIDE PERMISSION DATED 7.9.1999 T HE SAME WAS NOT FOR ANY HOUSING PROJECT BUT FOR CONSTRUCTION OF THR EE BLOCKS VIZ., A, B AND C CONSISTING OF STILT PARKING + 5 UPPER FLOORS WHICH CONSISTS OF 80 FLATS. ACCORDING TO THE DR THE SANCTION IS NOT FOR HOUSING PROJECT. HE SUBMITTED THAT THE ASSESSEE IS NOT ENGAGED IN DEVEL OPING AND BUILDING HOUSING PROJECTS AND ONLY CONSTRUCTING RESIDENTIAL COMPLEX AS A CONTRACTOR. A DEVELOPER IS A PERSON WHO DESIGNS AN D CREATES NEW PROJECTS AND WHO CONCEIVES THE PROJECT. HE SUBMITT ED THAT IN THIS CASE THE PROJECT WAS DESIGNED BY THE OWNER OF THE LAND S RI KARAN SINGH AND OTHERS AND SRI H. BHANWARILAL JAIN, GPA HOLDER. 17. THE DR FURTHER SUBMITTED THAT THE ASSESSEE CAME INT O PICTURE VIDE THE DEVELOPMENT AGREEMENT-CUM-DEED APPOINTMENT OF ATTORNEY, EXECUTED ON 07/07/2000, MUCH AFTER THE DATE OF 07/0 9/1999, WHEN THE PROJECT WAS SANCTIONED/ APPROVED BY THE MCH AUTHORI TIES, BASED ON THE PLANS/DRAWINGS SUBMITTED BY SRI KARAN SINGH AND OTHERS AND SRI H. BHANWARLAL JAIN, GPA HOLDER. AS SEEN FROM THE SA ID DEVELOPMENT AGREEMENT CUM DEED OF APPOINTMENT OF ATTORNEY, M/S. KURA HOMES PVT. LTD., I.E. THE ASSESSEE, HAS BEEN ROPED IN BY SRI KARAN SINGH AND OTHERS AND M/S. LABHAM ESTATES PVT. LTD., FOR THE P URPOSE OF THE CONSTRUCTION OF THE SAID RESIDENTIAL COMPLEX, IN AC CORDANCE WITH THE PERMISSION AND SANCTIONS OBTAINED FROM MCH VIDE PER MIT BEARING I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 10 NUMBER 1164/4/235/TP7/SDE/97 DATED 07/09/1999. FUR THER, IN TERMS OF PROVISIONS OF CLAUSE VII(1) AT PAGE 10 OF THE SAID AGREEMENT DATED 07/07/2000, OWNERS OF THE LAND ALONG WITH THE 'CONSENTING PARTY' I.E. M/S. LABHAM ESTATES PVT. LTD., SHALL BE ENTITL ED FOR 40% OF THE BUILT-UP AREA ON EACH FLOOR AND THE ASSESSEE WOULD BE ENTITLED TO 60% OF THE BUILT-UP AREA. THUS, IT CLEARLY SHOWS THAT THE ASSESSEE WAS ROPED IN BY THE OWNERS OF THE LAND AND M/S. LABHAM ESTATES P VT. LTD., FOR CONSTRUCTING THE SAID RESIDENTIAL COMPLEX. SINCE, I T WAS NOT THE DEVELOPER OF THE SAID PROJECT, IT IS NOT ENTITLED F OR DEDUCTION U/S. 80IB(10) OF THE ACT. 18. THE DR SUBMITTED THAT, WITHOUT PREJUDICE TO THE ABO VE, EVEN IF IT IS ACCEPTED, THOUGH NOT ADMITTED, THAT THE ASSESSEE HAS DEVELOPED AND BUILT A HOUSING PROJECT AS PER THE SANCTIONS OBTAIN ED FROM MCH VIDE PERMIT BEARING NUMBER 1164/4/235/TP7/SDE/97 DATED 0 7/09/1999, THEN ALSO IT CANNOT BE ALLOWED DEDUCTION U/S. 80IB( 10) OF THE ACT, SINCE IT HAS FAILED TO FURNISH ANY COMPLETION CERTIFICATE IN RESPECT OF SUCH PROJECT FROM THE CONCERNED LOCAL AUTHORITY AND FURT HER IT HAS MADE CONSTRUCTION OF 95 FLATS, IN UTTER VIOLATION OF THE SAID SANCTION OBTAINED FROM THE MCH FOR CONSTRUCTION OF ONLY 80 NUMBER OF FLATS. 19. THE DR SUBMITTED THAT FOR THE PURPOSE OF ALLOWANCE OF DEDUCTION U/S. 80IB(10), NOT ONLY THE PROJECT HAS T O BE APPROVED BY THE LOCAL AUTHORITY, BUT ALSO THE CONSTRUCTION THEREOF HAS TO BE COMPLETED WITHIN 4 YEARS FROM THE END OF THE FINANCIAL YEAR, IN WHICH THE PROJECT IS APPROVED BY THE LOCAL AUTHORITY. IN CLAUSE (II) BE LOW THE EXPLANATION TO SEC. 80IB(10)(A), IT IS STIPULATED THAT THE DATE OF COMPLETION OF CONSTRUCTION OF THE HOUSING PROJECT SHALL BE TAKEN TO BE THE DATE ON WHICH COMPLETION CERTIFICATE IN RESPECT OF SUCH HOU SING PROJECT IS ISSUED BY THE LOCAL AUTHORITY. THUS, FOR ALLOWANCE OF DED UCTION U/S, 80IB(10) OF THE ACT, OBTAINING A COMPLETION CERTIFICATE FROM THE LOCAL AUTHORITY CONCERNED IS MANDATORY. IN THIS CONTEXT, REFERENCE MAY ALSO BE MADE TO THE CONTENTS OF THE PARAS 25.1 & 25.2 OF DEPARTMENTA L CIRCULAR NO. 5 OF 2005, DATED 15 TH JULY, 2005, GIVING CLARIFICATION IN THE CONTEXT OF I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 11 EXTENSION OF TIME LIMIT FOR APPROVAL OF HOUSING PRO JECTS FOR THE PURPOSE OF TAX HOLIDAY U/S. 80IB AND ALLOWING DEDUCTION FOR REDEVELOPMENT OR RECONSTRUCTION OF EXISTING BUILDINGS IN SLUM AREAS (THE FINANCE [NO.2] ACT, 2004), APPEARING AT PAGE 1739-40 OF CHATURVEDI & PITHISARIA'S INCOME TAX LAW, FIFTH EDITION, VOLUME 10, WHICH ARE AS UNDER: '25.1. THIS TAX INCENTIVE AS PROVIDED TO INCREASE T HE STOCK OF HOUSES FOR LOWER AND MIDDLE INCOME GROUPS. KEEPI NG IN VIEW THE FACT THAT THERE IS STILL A HUGE SHORTAG E OF HOUSES, THE TIME LIMIT FOR OBTAINING APPROVAL FROM THE LOCAL AUTHORITY HAS BEEN EXTENDED FROM 31 ST MARCH, 2005 TO 31 ST MARCH, 2007. HOWEVER, A TIME LIMIT HAS BEEN INTRODUCED FOR COMPLETION OF THE HOUSING PROJECT, W HERE DEVELOPMENT AND CONSTRUCTION HAS COMMENCED OR COMMENCES ON OR AFTER 1 ST OCTOBER, 1998. SUCH HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY BEFORE 1 ST APRIL, 2004, HAS TO BE COMPLETED ON OR BEFORE 31 ST MARCH, 2008, AND THE HOUSING PROJECT APPROVED ON OR AFTER 1 ST APRIL, 2004, SHOULD BE COMPLETED WITHIN FOUR YEARS FROM TH E END OF THE FINANCIAL YEAR IN WHICH THE PROJECT IS A PPROVED BY THE LOCAL AUTHORITY. FOR THIS PURPOSE THE DATE OF APPROVAL SHALL BE THE DATE ON, WHICH THE BUILDING P LAN IS FIRST APPROVED BY THE LOCAL AUTHORITY AND THE DATE OF COMPLETION OF THE HOUSING PROJECT, SHALL BE THE DAT E ON WHICH THE COMPLETION CERTIFICATE IS ISSUED BY SUCH AUTHORITY. IT HAS ALSO BEEN PROVIDED THAT THE BUIL T UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMEN TS INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED F IVE PERCENT OF THE AGGREGATE 'BUILT UP AREA' OF THE HOU SING PROJECT OR 2000 SQ. FT., WHICHEVER IS LESS. THE EXP RESSION BUILT UP AREA HAS ALSO BEEN DEFINED FOR THIS PURPOS E. 25.2. THIS SECTION DOES NOT SPECIFICALLY PROVIDE AR EA LIMIT FOR THE GARDEN, THE DEVELOPMENT PLAN ROADS, INTERNA L MEANS OF ACCESS ETC., IN THE HOUSING PROJECT. THERE FORE, THE SAME SHOULD CONFORM TO THE PROJECT PLAN APPROVE D BY THE LOCAL AUTHORITY IN ACCORDANCE WITH THE REGULATI ONS IN FORCE. ALSO THE AREA LIMIT OF THE PLOT HAS TO BE CO NSTRUED WITH REFERENCE TO THE AREA OF THE SITE ON WHICH THE HOUSING PROJECT IS CONSTRUCTED AND NOT WITH REFEREN CE TO THE DEMARCATION OF LAND DONE BY THE LAND DEVELOPMEN T AUTHORITY.' 20. THE DR SUBMITTED THAT FROM THE ABOVE PROVISIONS, IT MAY BE SEEN THAT FOR ALLOWANCE OF DEDUCTION U/S. 80IB(10), THE ASSESSEE HAS TO OBTAIN COMPLETION CERTIFICATE IN RESPECT OF SUCH HO USING PROJECT FROM I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 12 THE CONCERNED LOCAL AUTHORITY. FURTHER, DRAWING SUP PORT FROM THE PROVISIONS OF PARA 25.2 OF THE ABOVE CIRCULAR, THE DR SUBMITTED THAT FOR ALLOWANCE OF DEDUCTION U/S. 80IB, CONSTRUCTION OF T HE PROJECT SHOULD CONFORM TO THE PROJECT PLAN AS APPROVED BY THE LOCA L AUTHORITY. HAVING REGARD TO THE PROVISIONS CONTAINED IN SEC. 80IB( 1 0) AND SINCE IN THE INSTANT CASE, THE ASSESSEE HAS VIOLATED THE PROJECT PLAN APPROVED BY MCH BY CONSTRUCTING 95 FLATS AND FURTHER HAS FAILED TO OBTAIN ANY COMPLETION CERTIFICATE IN RESPECT OF THE SAID RESID ENTIAL COMPLEX, IT CANNOT BE ALLOWED DEDUCTION U/S. 80IB(10). 21. THE DR SUBMITTED THAT IN SUPPORT OF ITS CLAIM FOR A LLOWANCE OF DEDUCTION U/S. 80IB(10), THE ASSESSEE HAS REFERRED TO THE DECISIONS OF THE TRIBUNAL IN THE CASE OF DCIT VS. ANSAL PROPERT IES & INDUSTRIES LTD., (22 SOT 45) (DEL.). AS SEEN FROM THE SAID DECISION , THE DEDUCTION U/S. 80IB(10) WAS ALLOWED IN THAT CASE ON THE BASIS OF T HE OCCUPATION, CERTIFICATE, ISSUED BY DIRECTOR, COUNTRY & TOWN PLAN NING AND NOC GRANTED BY THE FIRE STATION OFFICER WHICH WERE PROD UCED BEFORE THE APPELLATE AUTHORITY. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH ANY OCCUPATION CERTIFICATE FRO M THE CONCERNED AUTHORITIES. THUS, THE SAID DECISION WOULD BE OF L ITTLE HELP TO THE CASE OF THE ASSESSEE. 22. THE DR SUBMITTED THAT IN SUPPORT OF ITS CLAIM FOR A LLOWANCE OF DEDUCTION U/S. 80IB(10), THE ASSESSEE HAS REFERRED TO THE NOTICES ISSUED BY CONCERNED MUNICIPAL AUTHORITY IN RESPECT OF SOME FLATS FOR PROPERTY TAX ASSESSMENT. IN THIS CONTEST, THE DR SUBMITTED THAT SUCH NOTICE ISSUED CANNOT BE EQUATED WITH COMPLETION CERTIFICAT E IN RESPECT OF SUCH RESIDENTIAL COMPLEX. FURTHER, THE ASSESSEE HAS NOT EVEN TAKEN PROPER AND APPROPRIATE STEPS FOR OBTAINING OCCUPANCY CERTI FICATE FROM THE MCH. APART FROM THE FACT THAT THE ALLEGED COMPLETIO N CERTIFICATE PREPARED BY IT AND SUBMITTED TO MCH, IS NOT SIGNED BY A LICENSED ARCHITECT, THE ASSESSEE HAS ALSO NOT INFORMED THE C ONCERNED AUTHORITY BEFORE OCCUPYING THE SAID RESIDENTIAL COMPLEX, AS R EQUIRED U/S. 13.1.2, OF THE MUNICIPAL CORPORATION BUILDING BYE-LAWS, 19 81. I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 13 23. THE DR SUBMITTED THAT, IN VIEW OF THE FOREGOING ARG UMENTS, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 80IB(10 ) OF THE ACT. THEREFORE, THE CIT(A) WAS JUSTIFIED IN DISALLOWING THE CLAIM OF DEDUCTION FOR AN AMOUNT OF RS. 98,13,125/ MADE U/S. 80IB(10), IN THE ASSESSMENT ORDER. 24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL ON RECORD INCLUDING WRITTEN SUBMISSION BY THE AR. AS PER PR OVISIONS OF SECTION 80IB(10) INCOME-TAX ACT, 1961 AN UNDERTAKING WHICH DEVELOPS AND BUILDS HOUSING PROJECTS APPROVED BEFORE 31.3.2007 B Y A LOCAL AUTHORITY IS ELIGIBLE FOR DEDUCTION U/S. 80IB(10) SUBJECT TO THE FOLLOWING CONDITIONS: I) IN A CASE WHERE THE HOUSING PROJECT HAS BEEN APPROV ED BY THE LOCAL AUTHORITY BEFORE 01-04-2004, THE CONSTRUCTION SHOULD BE COMPLETED ON OR BEFORE 31-03-2008. IN A CASE WHE RE THE APPROVAL FROM LOCAL AUTHORITY IS OBTAINED ON OR AFT ER 01-04- 2004, THE CONSTRUCTION SHOULD BE COMPLETED WITHIN 4 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOU SING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. II) THE HOUSING PROJECT IS CONSTRUCTED ON A PLOT OF LAN D WHICH HAS A MINIMUM AREA OF 1 ACRE. III) THE RESIDENTIAL UNITS CONSTRUCTED IN THE HOUSING PR OJECT HAVE A MAXIMUM BUILT UP AREA OF 1500 SQ. FT. WHERE SUCH UNITS ARE SITUATED IN PLACES OTHER THAN DELHI OR MUMBAI. IV) THE BUILT-UP AREA OF SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECTS DOE S NOT EXCEED 5% OF THE AGGREGATE BUILT-UP AREA OF THE HOU SING PROJECT OR 2000 SQ. FT., WHICHEVER IS LESS. 25. THE MAIN CONTENTION OF THE DR IS THAT THE ASSESSEE IS NOT A DEVELOPER AND ONLY CARRIED ON THE WORK OF CONTRACTO R AND BUILD THE RESIDENTIAL COMPLEX. BUT THE QUESTION IS THAT WHO IS DEVELOPING THE PROJECT. CERTAIN IT IS NOT THE LANDLORD. ADMITTED LY, IN THIS CASE, THE LANDLORD APPROACHED THE ASSESSEE AND JOINTLY EVOLVE D A SCHEME FOR DEVELOPMENT AND THE ASSESSEE EXECUTED THE WORK OF D EVELOPMENT. THERE IS AN APPROVED PLAN SANCTIONED VIDE PERMISSIO N DATED 7.9.1999 I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 14 FOR CONSTRUCTION OF 80 FLATS. AGAINST THE CONSTRUC TION OF 80 FLATS, THE ASSESSEE HAD DEVELOPED 95 FLATS. HAVING JOINTLY DE CIDED UPON THE SCHEME OF DEVELOPMENT OF THE PROJECT, EVEN IF THE B UILDING PLAN IS IN THE NAME OF THE LANDLORD, IT DOES NOT DISPUTE THE FACT THAT THE ASSESSEE HAS BEEN ENGAGED AS A BUILDER BY CONTROLLING AND DIRECT ING THE WORK OF BUILDING CONSTRUCTION. IF A PERSON WHEN HIS JOB WO ULD BE MERELY CONSTRUCTING THE BUILDING AS PER THE DESIGN PROVIDE D BY THE LANDLORD AND HANDOVER THE CONSTRUCTED BUILDING TO THE LANDLO RD, IT IS ONLY A CONTRACTOR. HIS JOB WILL NOT INCLUDE DESIGNING THE PROJECT AND INCURRING EXPENDITURE ON ITS OWN. IN THE PRESENT CASE, THE A SSESSEE AS A DEVELOPER CONSTRUCTED THE PROPOSED COMPLEX AT ITS SOLE COST A ND EXPENSES TOWARDS WHICH AMOUNT IT SHALL NOT CLAIM ANY SET OFF FROM TH E OWNER AND THE DEVELOPER /ASSESSEE IS ENTITLED FOR 60% OF THE BUIL T UP AREA IN EACH FLOOR AND IT IS ENTITLED TO ENTER INTO AGREEMENT OF SALE WITH THIRD PARTIES AS IT MAY DEEM IT FIT AND PROPER, THE AREA OF PROPOSED CO MPLEX ALLOTTED TO THE SHARE OF THE DEVELOPER INCLUDING THE DEVELOPER' S PROPORTIONATE SHARE IN THE SCHEDULED PREMISES COMPRISING OF THE P ROPORTIONATE BUILT UP AREA IN EACH FLOOR OF THE PROPOSED PROJECT ALONG WITH THE COMMENSURATE UNDIVIDED SHARE IN THE ENTIRE SCHEDULE D PREMISES IN THE MANNER ENUMERATED IN THE DEVELOPMENT AGREEMENT AS S CHEDULE II PLAN. THIS FACT SHOWS THAT THE ASSESSEE HAS BEEN E NGAGED AS A BUILDER AND NOT AS A CONTRACTOR. THE ASSESSEE AS A BUILDER HAS CONTROLLED AND CONSTRUCTED THE WORK OF BUILDING CONSTRUCTION. IF THE ASSESSEE ONLY A CONTRACTOR, ITS JOB WOULD BE MERELY CONSTRUCTING TH E BUILDING AS PER THE DESIGN AND PLANS PROVIDED BY THE OWNER AND HANDOVER THE CONSTRUCTED BUILDING TO THE OWNER AND IT HAS NOTHING TO DO WITH DESIGNING AND SELLING OF THE PROJECT AND IT WILL NOT GET ANY SHAR E IN THE CONSTRUCTED AREA. IN THE PRESENT CASE, THE ASSESSEE HAVING RIG HT TO 60% IN THE CONSTRUCTED AREA AND ALSO A SHARE IN THE UNDIVIDED PROPERTY, CANNOT BE CALLED A MERE CONTRACTOR. BEING SO, THE ARGUMENT TH AT THE ASSESSEE IS A CONTRACTOR AND NOT A DEVELOPER, CANNOT BE VALID. T HE ONLY THING WE HAVE TO SEE IS THAT THE CLAIM OF DEDUCTION U/S. 80I B(10) IS TO BE GRANTED TO THE ASSESSEE TO THE EXTENT OF ITS SHARE AND THER E CANNOT BE DOUBLE I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 15 DEDUCTION. IN OUR OPINION, ON THIS COUNT THE ASSE SSEE IS ENTITLED FOR DEDUCTION U/S. 80IB(10) OF THE ACT AS THE ASSESSEE INVESTED ITS OWN MONEY AND CARRIED ON THE PROJECT. 26. NOW THE OTHER OBJECTION OF THE DEPARTMENT IS THAT T HE ASSESSEE HAS NOT PRODUCED THE COMPLETION CERTIFICATE. THE A SSESSEE IS FOLLOWING PERCENTAGE COMPLETION METHOD. THIS METHOD IS RECOG NISED BY THE INCOME-TAX ACT FOR DISCLOSING THE PROFIT IN THE CAS E OF A BUILDER. THE PURPOSE OF GRANTING DEDUCTION U/S. 80IB(10) IS TO P ROMOTE HOUSING PROJECTS. IF WE ACCEPT THE PROPOSITION OF THE DEPA RTMENT THAT THE DEDUCTION U/S. 80IB(10) HAS TO BE GRANTED ONLY A TA X PAYER WHO FOLLOWS ONLY 'PROJECT COMPLETION METHOD' IT LEADS TO AN ABS OLUTE SITUATION AS THE DEVELOPER WHO IS FOLLOWING PERCENTAGE COMPLETIO N METHOD IS NOT ENTITLED FOR DEDUCTION U/S. 80IB(10) OF THE ACT THO UGH ALL OTHER REQUIREMENTS OF THE SECTION BEING FULFILLED. IT WO ULD TANTAMOUNT TO DENIAL OF VALID EXEMPTION FOR WHICH AN ASSESSEE IS ENTITLED. NO ONE CAN PASS SUCH A ANOMALOUS DICTUM WHILE DEALING WITH A L EGAL PROBLEM. THE TRIBUNAL BEING FINAL FACT FINDING AUTHORITY SHALL K EEP IN MIND AN OVERALL SITUATION, FACTUAL AS WELL AS LEGAL, SO THEREUPON B RINGS A DICTUM OUGHT TO BE LEGALLY SUSTAINABLE IN THE EYES OF LAW. IN THE PRESENT SITUATION, THE REVENUE IS TAXING THE PROFIT ON PERCENTAGE COMPLETI ON METHOD BUT SUGGESTING TO GRANT DEDUCTION ONLY ON COMPLETION OF THE PROJECT. IF THE STAND OF THE REVENUE IS ACCEPTED THEN ONLY ON COMPL ETION OF PROJECT AN ASSESSEE WOULD BE ENTITLED FOR DEDUCTION U/S. 80IB( 10), THEN UNDISPUTEDLY AN ANOMALY SHALL ARISE AS TO HOW AND W HEN THE TAX SHOULD BE CHARGED. THIS IS NOT THE SCHEME OF THE ACT, TO FIRST TAX AN INCOME IN A PARTICULAR YEAR AND GRANT DEDUCTION ON THAT VERY IN COME IN A DIFFERENT LATER YEAR I.E., ON COMPLETION OF THE PROJECT AS WA S CANVASSED BY THE DEPARTMENT. THE ACCEPTED PRINCIPLE IS THAT THE YEA R OF THE ASSESSMENT OF INCOME AND CONNECTED DEDUCTION SHALL FALL IN THE SAME ASSESSMENT YEAR. IF THE REVENUE IS TAXING THE PROFIT IN THE YEAR UNDER CONSIDERATION ON THE GROUND THAT THE ASSESSEE IS AD OPTING 'PERCENTAGE COMPLETION METHOD' THEN THE NATURAL COROLLARY SHOUL D BE THAT THE CONNECTED DEDUCTION OUGHT TO BE GRANTED SIMULTANEOU SLY IN THIS YEAR OR I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 16 THE OTHER METHOD OF COMPUTATION IS THAT THE REVENUE MUST NOT TAX THE PROFIT OF THE PROJECT YEARLY ON THE BASIS OF 'PERCE NTAGE COMPLETION METHOD' BUT TAX THE ENTIRE PROFIT ON COMPLETION OF THE PROJECT BY APPLYING 'PROJECT COMPLETION METHOD'. 27. FURTHER, IN THE PRESENT CASE THE ASSESSEES PROJECT IS APPROVED BY LOCAL AUTHORITY PRIOR TO 1.4.2004 AND THERE IS NO D ISPUTE REGARDING THIS. HOWEVER, ONE OF THE DISPUTE FOR DENYING DEDUCTION U /S. 80IB(10) IS THAT THERE IS NO COMPLETION CERTIFICATE FURNISHED BY THE ASSESSEE FOR WHICH ITS CLAIM WAS DENIED. THE MEANING OF DATE OF COMPLETI ON HAS BEEN GIVEN IN EXPLANATION (II) TO CLAUSE (A) TO SECTION 80IB(1 0). DATE OF COMPLETION OF CONSTRUCTION WOULD MEAN DATE ON WHICH COMPLETION CERTIFICATE IN RESPECT OF HOUSING PROJECT WAS ISSUE D BY THE LOCAL AUTHORITY. TO GRANT DEDUCTION U/S. 80IB(10) IT IS MANDATORY TO FURNISH THE COMPLETION CERTIFICATE OF THE HOUSING PROJECT B UT THE PERSISTENT QUESTION HERE IS WHETHER FOR GIVING BENEFIT OF DEDU CTION U/S. 80IB(10), WHERE AN ASSESSEE IS FOLLOWING THE PERCENTAGE COMPL ETION METHOD IS IT NECESSARY TO OBTAIN SUCH COMPLETION CERTIFICATE FOR EACH YEAR OF ASSESSEES CLAIM OR IT IS SUFFICIENT THAT CERTIFICA TE IS OBTAINED ON THE COMPLETION OF THE HOUSING PROJECT AS A WHOLE. STIP ULATION FOR OBTAINING COMPLETION CERTIFICATE SHOULD NOT BE SO INTERPRETED TO MEAN THAT AN ASSESSEE CAN CLAIM EXEMPTION U/S. 80IB(10) ONLY IN THE YEAR OF COMPLETION OF WHOLE OF THE HOUSING PROJECT, EVEN WH ERE THE PROJECT STRETCHES OVER A NUMBER OF YEARS AND ASSESSEE RETUR NS ITS INCOME BASED ON PERCENTAGE COMPLETION METHOD. IT WOULD ONLY MEA N THAT THE ASSESSEE HAS TO OBTAIN SUCH CERTIFICATE ON COMPLETI ON OF THE HOUSING PROJECT, LEAST IT WOULD LOSE THE DEDUCTION ALREADY GRANTED U/S. 80IB(10) FOR THE EARLIER YEARS IF IT IS NOT SO PRODUCED. AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO VS. CIT (1 96 ITR 188) (SC) A PROVISION IN THE TAXING STATUTES GRANTING INCENTIVE S FOR PROMOTING GROWTH AND DEVELOPMENT OF THE NATION SHOULD BE CONS TRUED LIBERALLY. WHEN SUCH LIBERAL INTERPRETATION IS TO BE GIVEN, TH E RESTRICTION PLACED IN SUCH PROVISION GRANTING THE INCENTIVES ALSO HAS TO BE CONSIDERED SO AS TO ADVANCE THE OBJECTIVES OF THE PROVISIONS AND NOT TO FRUSTRATE. CLAUSE (A) I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 17 OF SECTION 80IB(10) SPECIFIES THAT THE DEVELOPMENT AND CONSTRUCTION OF THE PROJECT HAS TO START BEFORE 1.4.2004 AND THE PR OJECT HAS TO BE COMPLETED WITHIN FOUR YEARS FROM THE END OF THE FIN ANCIAL YEAR IN WHICH APPROVAL FOR PROJECT WAS RECEIVED FROM THE LOCAL AU THORITY. THUS, A PROJECT CAN HAVE A SPAN OF NOT MORE THAN 4 YEARS FR OM THE END OF THE FINANCIAL YEAR IT HAS RECEIVED APPROVAL. EXPLANATI ON UNDER CLAUSE (A) ONLY SPECIFIED HOW TO RECKON THE DAY OF APPROVAL AN D DATE OF COMPLETION. IT WOULD NOT MEAN THAT THE ASSESSEE CA N HAVE THE BENEFIT OF SECTION 80IB(10) ONLY IN THE YEAR OF COMPLETION OF THE PROJECT, ESPECIALLY SO, FOR AN ASSESSEE NOT FOLLOWING PROJEC T COMPLETION METHOD FOR ACCOUNTING ITS INCOME. IF OTHERWISE INTERPRET ED, IT WOULD BE EQUIVALENT TO FORCING AN ASSESSEE TO FOLLOW A PARTI CULAR METHOD OF ACCOUNTING, WHICH WOULD NEVER HAVE BEEN THE INTENTI ON OF LEGISLATION. INTENTION WOULD ONLY HAVE BEEN THAT FOR THE PROJECT AS A WHOLE, THERE SHOULD BE CERTIFICATION FROM THE RELEVANT AUTHORITY PROVING THE COMMENCEMENT AND COMPLETION, AND NOT THAT A COMPLET ION CERTIFICATE SHOULD BE THERE IN EVERY YEAR OF THE PROJECT SPAN. THE CERTIFICATIONS ARE FOR ENSURING THAT THE PROJECT SPAN DOES NOT EXCEED THE PRESCRIBED PERIOD AND NOTHING MORE. OF COURSE IF SUCH PERIOD E XCEEDED THE PRESCRIBED LIMIT, REVENUE WOULD BE WELL WITHIN ITS RIGHTS TO WITHDRAW THE CLAIMS ALREADY ALLOWED, FOLLOWING THE PROCEDURE PRESCRIBED UNDER THE ACT. THUS, THE ASSESSING OFFICER NEED NOT INSIS T ON THE COMPLETION CERTIFICATE IN THIS ASSESSMENT YEAR, THIS IS THE RI GHT MEANING OF THE STATUTE. THIS VIEW HAS ALSO BEEN TAKEN BY CBDT IN ITS INSTRUCTION NO. 4 OF 2009 DT. 30.6.2009, PARAS 2 TO 4 OF WHICH ARE RE PRODUCED HEREUNDER: '2. CLARIFICATIONS HAVE BEEN SOUGHT BY VARIOUS CHIE F CITS ON THE ISSUE WHETHER THE DEDUCTION UNDER S. 80IB(10 ) WOULD BE AVAILABLE ON A YEAR-TO-YEAR BASIS WHERE AN ASSESSEE IS SHOWING PROFIT ON PARTIAL COMPLETION OR IF IT WOULD BE AVAILABLE ONLY IN THE YEAR OF COMPLETION O F THE PROJECT UNDER S. 80-IB(10). 3. THE ABOVE ISSUE HAS BEEN CONSIDERED BY THE BOARD AND IT IS CLARIFIED AS UNDER : I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 18 (A) THE DEDUCTION CAN BE CLAIMED ON A YEAR-TO-YEAR BASI S WHERE THE ASSESSEE IS SHOWING PROFIT FROM PARTIAL COMPLETION OF THE PROJECT IN EVERY YEAR. (B) IN CASE IT IS LATE AND IT IS FOUND THAT THE CONDITI ON OF COMPLETING THE PROJECT WITHIN THE SPECIFIED TIME-LI MIT OF 4 YEARS AS STATED IN S. 80-IB(10) HAS NOT BEEN SATISFIED, THE DEDUCTION GRANTED TO THE ASSESSEE IN THE EARLIER YEARS SHOULD BE WITHDRAWN. 4. THE ABOVE INSTRUCTION WILL OVERRIDE EARLIER CLAR IFICATION ON THIS ISSUE CONTAINED IN MEMBER (R.)S D.O. LETTE R NO. 58/MISC/2008/CIT (IT & CT), DT. 29TH APRIL, 2008 AND MEMBER (IT)S D.O. LETTER NO. 279/MISC/46/ 2008-ITJ DT. 2ND MAY, 2008.' 28. IN VIEW OF THE FOREGOING DISCUSSION, WE DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S. 80IB(10) OF THE ACT IN THE LIGHT OF THE ORDER OF THE TRIBUNAL IN ITA NOS. 797 & 813/HYD/06 I N THE CASE OF M/S. NAMAHA ESTATES DATED 29.2.2008 WHEREIN THE TRIBUNAL HELD AS FOLLOWS: '8. WE HEARD THE RIVAL CONTENTIONS. FIRST LET US A DDRESS THE MAIN CONTENTION OF THE ASSESSEE THAT TWO RESIDENTIA L UNITS WERE COMBINED INTO ONE SINGLE UNIT AS PER THE REQUIREMEN T OF THE PROSPECTIVE BUYER. WE FIND FROM THE ASSESSMENT ORD ER THAT THE ASSESSEE HAS COMBINED ALL THE POSSIBLE TWO UNITS IN TO ONE RESIDENTIAL UNIT AND EACH OF SUCH FLAT HAS BEEN SOL D TO A SINGLE BUYER ONLY. SO THE CLAIM OF THE ASSESSEE STATED AB OVE DOES NOT APPEAR TO BE CORRECT. FROM THE BEGINNING, IT APPEA RS THAT THE INTENTION OF THE ASSESSEE IS TO SELL THEM AS A SING LE RESIDENTIAL UNIT ONLY. THIS INTENTION IS REINFORCED FURTHER WI TH THE NUMBERING SYSTEM ADOPTED. AS NOTICED BY THE ASSESS ING OFFICER, THE ASSESSEE INSTEAD OF NUMBERING THE FLAT S IN A FLOOR CHRONOLOGICALLY, HE HAS NUMBERED THE TWO ADJACENT F LATS WHICH ARE PROPOSED TO BE COMBINED, AS FOR EXAMINE 1A AND 1B, INSTEAD OF BEING NUMBERED AS 1 AND 2. THOUGH THE P ROJECT PLAN WAS PREPARED TO SUIT THE REQUIREMENT OF CONDITIONS PRESCRIBED UNDER SECTION 80IB, ONE OF THE CONDITION PRESCRIBIN G MAXIMUM AREA OF EACH FLAT HAS BEEN VIOLATED AT THE TIME OF CONSTRUCTION OF CERTAIN GROUP OF THE FLATS. 9. THE NEXT QUESTION THEN ARISES IS REGARDING THE CALCULATION OF BUILT UP AREA. THE ASSESSING OFFICER ALSO INCLUDING THE PROPORTIONATE SHARE OF COMMON AREA IN THE SIZE OF EACH FLAT. WHEN THE WORDS ARE NOT DEFINED IN THE AC T, IT SHOULD BE UNDERSTOOD IN THE SAME WAY IT IS UNDERSTOOD IN T HE COMMON PARLANCE. AS THE COMMON AREA IS NOT EARMARKED FOR THE EXCLUSIVE USE OF ANY PARTICULAR FLAT OWNER AND IT I S COMMONLY I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 19 ENJOYED BY ALL THE FLAT OWNERS, THE BUILT UP AREA I S NORMALLY MEANT AS PLINTH AREA OF EACH FLAT ONLY BY EXCLUDING THE COMMON AREA FROM IT. THE FINANCE ACT (NO. 2) OF 2004 INSER TED THE DEFINITION OF 'BUILT UP AREA' TO CLARIFY THIS POSIT ION. THOUGH THE LEARNED DR ARGUES THAT THIS DEFINITION IS APPLICABL E FROM 1.4.2005 ONLY, YET BY ADOPTING THE COMMON PARLANCE AND TEST OF EXCLUSIVE RIGHT AS STATED ABOVE AND CLARIFICATION O R THE TERM 'BUILT UP AREA' BY THE FINANCE ACT REFERRED SUPRA, WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE PR OPORTIONATE COMMON AREA SHOULD BE EXCLUDED FROM THE CALCULATION OR FLAT SIZE. ACCORDINGLY WE CONFIRM THE ORDER OF LEARNED C IT(A).. 10. THE NEXT QUESTION THAT ARISE IS WHETHER THE AS SESSEE IS ENTITLED TO NIL DEDUCTION OR FULL DEDUCTION OR PROP ORTIONATE DEDUCTION U/S 80IB OF THE ACT. AS THE SIZE OF SOME OF THE FLATS HAS EXCEEDED THE PRESCRIBED SIZE LIMIT. THIS MATTER HAS BEEN EXAMINED IN DETAIL BY THE 'A' BENCH OF THIS ITAT I N THE CASE OR DCIT VS. SAKET ENGINEERS (P) LTD. SUPRA, AND IT HAS BEEN HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80 IB IN RESPECT OF THOSE FLATS WHOSE SIZE IS WITHIN THE PRESCRIBED LIM ITS. WE ALSO CONCUR WITH THE ABOVE SAID DECISION AND ACCORDINGLY UPHOLD THE ORDER OF LEARNED CIT(A).' THEREFORE, THIS GROUND OF THE ASSESSEE IS ALLOWED. 29. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD TO NO N ADJUDICATION OF SPECIFIC GROUND TAKEN BY THE ASSESS EE WITH REGARD TO WORK-IN-PROGRESS RELATED TO MAREDPALLY PROJECT CRED ITED TO THE PROFIT AND LOSS A/C. DID NOT RESULT IN ENHANCEMENT OF PROF IT DERIVED FROM ELIGIBLE UNDERTAKING (GROUND NO. 8). THE ASSESSIN G OFFICER NOTICED THAT WORK-IN-PROGRESS RELATING TO WEST MAREDPALLY S ITE AMOUNTING TO RS. 31.45 LAKHS WAS CREDITED TO P&L ACCOUNT. SHE HEL D THAT THE PROFIT DERIVED FROM THIS PROJECT WAS NOT ELIGIBLE FOR DEDU CTION U/S. 80IB. THE AR SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED DEDU CTION U/S 80IB IN RESPECT OF THE MAREDPALLY PROJECT FOR THE ASSESSMEN T YEAR 2006-07. THE AMOUNT OF RS. 31.45 LAKHS, EVEN AS ADMITTED BY THE ASSESSING OFFICER, RELATES TO THE WORK-IN-PROGRESS IN RESPECT OF WHICH CORRESPONDING AMOUNT OF EXPENDITURE HAS BEEN BOOKED BY THE ASSESSEE IN THE P&L ACCOUNT. HE SUBMITTED THAT THE ASSESSING OFFICER MAY BE DIRECTED NOT TO REDUCE THE ELIGIBLE DEDUCTION U/S. 80IB BY TAKING INTO ACCOUNT THE WORK-IN-PROGRESS RELATING TO MAREDPALLY SITE SINCE THE QUANTIFICATION OF THE WORK-IN-PROGRESS HAS NOT AFFE CTED THE DEDUCTION I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 20 CLAIMED BY THE ASSESSEE U/S. 80IB(10). WE HAVE H EARD THE PARTIES. AS THE CIT(A) NOT ADJUDICATED THIS GROUND, WE REMIT TH IS ISSUE TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 30. THE NEXT GROUND IS THAT THE CIT(A) ERRED IN HOLDING THAT 'OTHER INCOME' CREDITED TO PROFIT AND LOSS A/C. WHICH CONS TITUTES LARGELY OF DIVIDEND ON CHIT AND RENT OF VACANT FLAT DID NOT CO NSTITUTE INCOME DERIVED FROM THE HOUSING PROJECT. 31. THE LEARNED AR SUBMITTED THAT AN AMOUNT OF RS. 4,38 ,085 WAS CREDITED TO THE PROFIT AND LOSS A/C. TOWARDS RENT O F VACANT FLAT, DIVIDEND ON CHITS, SCRAP SALES, DISCOUNT ON MATERIAL, INTERE ST ON DEPOSITS. IN OUR OPINION, CHIT DIVIDEND, SCRAP SALES AND DISCOUNT ON MATERIALS ARE TO BE CONSIDERED AS INCOME FROM BUSINESS ELIGIBLE FOR DED UCTION U/S. 80IB(10) OF THE ACT IN VIEW OF THE JUDGEMENT OF JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KOVUR TEXTILES LTD. (1 36 ITR 61) (AP) AND THE DECISION OF CUTTACK BENCH OF THIS TRIBUNAL IN T HE CASE OF MAXCARE LABORATORIES LTD. (273 ITR (AT) 1) (CUTTACK). HOWE VER, THE OTHER INCOME I.E., RENT ON VACANT FLAT, INTEREST ON DEPOS IT CANNOT BE CONSIDERED AS INCOME FROM BUSINESS AND THE SAME HAS TO BE CONSIDERED AS INCOME FROM HOUSE PROPERTY/INCOME FROM OTHER SOU RCES, RESPECTIVELY. THIS GROUND IS PARTLY ALLOWED. 32. IN THE RESULT, ASSESSEE'S APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER, 2012. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 21 ST SEPTEMBER, 2012 TPRAO I.T.A. NO. 216/HYD/2010 M/S. KURA HOMES PVT. LTD. ==================== 21 COPY FORWARDED TO: 1. M/S. KURA HOMES PVT. LTD., PLOT NO. 19 & 20, WAHAB NAGAR, SIKH VILLAGE, SECUNDERABAD 2. INCOME TAX OFFICER, WARD - 2(1), 8 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD. 3. THE CIT(A) - I II , HYDERABAD. 4. THE CIT - II, HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD