M/s. Raviraj Kothari Punjabi Associates, Pune V. ACIT, Cir.-4, Pune

ITA 223/PUN/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1989 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 25-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: V L JAIN
• Keywords: Business income
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER. ITA.NO.223/PN/2011 (ASSTT. YEAR : 2007-08) M/S. RAVIRAJ KOTHARI PUNJABI ASSOCIATES, S/O. SHAH KHANDELWAL JAIN & ASSOCIATES, CHARTERED ACCOUNTANTS, LEVEL 3, BUSINESS BAY, PLOT NO.84, WELLESLEY ROAD, NEAR RTO, PUNE 411001. .. APPELLANT PAN NO.AAFFR 1541N VS. ACIT, CIRCLE-4, PUNE. .. RESPONDENT ASSESSEE BY : SHRI V.L. JAIN RESPONDENT BY : SHRI S.K. SINGH DATE OF HEARING : 07-03-2013 DATE OF PRONOUNCEMENT : 22-03-2013 ORDER PER G.S. PANNU, AM : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F THE CIT(A) DATED 31-01-2011 WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER U/S.143(3) OF THE ACT DATED 31-12 -2009 PERTAINING TO A.Y. 2007-08. IN THIS APPEAL, THE ASSESSEE HAS RAI SED A SOLITARY ISSUE RELATING TO THE CLAIM OF DEDUCTION U/S.80IB(10) OF THE ACT AMOUNTING TO ` 18,42,022/- WITH RESPECT TO ITS PROJECT CITADEL, WHICH HAS BEEN DENIED. 2. IN BRIEF, THE FACTS ARE THAT THE ASSESSEE IS A P ARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF BUILDERS, PROMOTERS AND DEALERS IN REAL ESTATE. THE ASSESSEE FILED A RETURN OF INCOME ON 31-10-2007 DEC LARING TOTAL INCOME OF ` 1,36,360/-, WHICH INTERALIA INCLUDED CLAIMS OF DEDU CTION U/S.80IB(10) OF THE ACT FOR ITS 2 PROJECTS, I.E. FOR CITADEL IT W AS ` 18,42,022/- AND FOR CITADEL ENCLAVE PROJECT IT WAS ` 1,97,59,989/-. THE ASSESSING OFFICER 2 DENIED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 80IB(10) IN RELATION TO BOTH THE PROJECTS. THE CIT(A) HAS SINCE ALLOWED TH E CLAIM IN RELATION TO CITADEL ENCLAVE PROJECT I.E. FOR ` 1,97,59,989/- AND FOR THE OTHER PROJECT, I.E. CITADEL AMOUNTING TO ` 18,42,022/-, THE CLAIM HAS BEEN DENIED. AGAINST THE DENIAL OF ITS CLAIM U/S.80IB(10) FOR C ITADEL PROJECT AT ` 18,42,022/- THE ASSESSEE IS IN FURTHER APPEAL BEFOR E US. 3. THE CITADEL PROJECT OF THE ASSESSEE CONSISTED OF 7 RESIDENTIAL BUILDINGS AND 3 COMMERCIAL BUILDINGS (D, D1 AND D2) WHICH WAS DENIED CLAIM U/S.80IB(10) OF THE ACT IN THE INSTANT YEAR O N THE BASIS OF STAND OF THE REVENUE IN THE EARLIER YEARS. IN EARLIER YEARS THE CLAIM WAS DENIED U/S.80IB(10) ON ACCOUNT OF COMMERCIAL AREA IN THE P ROJECT EXCEEDING THE LIMITS PRESCRIBED IN SECTION 80IB(10)(D) OF THE ACT . THE CLAIM WAS ALSO DENIED ON THE BASIS OF SOME OF THE FLATS HAVING BUI LT-UP AREA EXCEEDING 1500 SQ.FT AFTER INCLUDING THE EXCLUSIVE TERRACE AR EA ATTACHED WITH THOSE FLATS. THE ASSESSING OFFICER REFERRED TO THE ORDER OF THE CIT(A) FOR ASSESSMENT YEARS 2003-04 AND FOR 2004-05 DATED 06-1 1-2006 AND 12-07- 2007 RESPECTIVELY ON THIS POINT AND ACCORDINGLY HE HELD THAT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ALSO, ASSESSEE DID NOT COMPLY WITH THE CONDITIONS CONTAINED IN CLAUSES (C) AND (D) OF SECT ION 80IB(10) R.W.S. 80IB(10) (14) OF THE ACT. THE CIT(A) HAS ALSO SUST AINED THE STAND OF THE ASSESSING OFFICER FOLLOWING THE DECISION OF THE CIT (A) IN THE ASSESSEES OWN CASE FOR THE A.Y. 2005-06 DATED 26-04-2010. IN THIS BACKGROUND, THE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE, US IT WAS A COMMON POINT BETWEEN THE PAR TIES THAT SO FAR AS THE OBJECTIONS OF THE REVENUE TOWARDS THE CLAIM OF DEDUCTION U/S.80IB(10) 3 IN RESPECT OF CITADEL PROJECT IS CONCERNED, SIMIL AR OBJECTIONS HAVE BEEN DEALT WITH BY THE TRIBUNAL IN THE ASSESSEES OWN CA SE FOR THE ASSESSMENT YEARS 2003-04 TO 2006-07 VIDE ITA NO.164 & 1438/PN/ 2007 AND ITA NO.751 & 280/PN/2010 DATED 23-11-2012. 5. THE RIVAL COUNSELS FAIRLY AGREED THAT SO FAR AS THE DECISION OF THE TRIBUNAL DATED 23-11-2012 (SUPRA) IS CONCERNED THE SAME COVERS THE CONTROVERSY IN FAVOUR OF THE ASSESSEE. FOR THE PUR POSES OF COMPLETENESS WE MAY REPRODUCE THE RELEVANT PORTION OF THE ORDER WHI CH IS AS UNDER : 3. IN SO FAR AS ASSESSMENT YEAR 2003-04 IS CONCERN ED, THE RELEVANT FACTS ARE THAT ASSESSEE DECLARED TOTAL SALES IN RELATION TO I TS PROJECT CITADEL AT RS. 13,97,83,157/- ON WHICH NET PROFIT IN THE PROFIT AN D LOSS ACCOUNT WAS SHOWN AT RS. 4,88,52,973/-. AFTER ADJUSTING THE BROUGHT FORW ARD LOSSES OF RS. 48,15,337/-, THE GROSS TOTAL INCOME WAS COMPUTED AT RS. 4,40,37, 636/- WHICH WAS CLAIMED AS EXEMPT U/S 80-IB(10) OF THE ACT. THE ASSESSEES CL AIM FOR SUCH DEDUCTION WAS DENIED BY THE ASSESSING OFFICER ON TWO COUNTS. FIR STLY, AS PER THE ASSESSING OFFICER, THE PROJECT IN QUESTION CONSISTED OF CONST RUCTED AREA FOR SHOPS AND COMMERCIAL ESTABLISHMENTS AND THEREFORE, ACCORDING TO HIM, IT WAS NOT A PURE HOUSING PROJECT WHICH WAS A REQUIREMENT OF SEC. 80- IB(10)(A) OF THE ACT. SECONDLY, AS PER THE ASSESSING OFFICER, THE BUILT UP AREA OF CERTAIN UNITS EXCEEDED THE LIMIT OF 1500 SQ.FT. PRESCRIBED IN CLA USE (C) OF SEC. 80-IB(10) AND THEREFORE, THE ENTIRE PROJECT WAS INELIGIBLE FOR DE DUCTION U/S 80-IB(10) OF THE ACT. THE AFORESAID TWIN OBJECTIONS HAVE ALSO BEEN AFFIRM ED BY THE CIT(A) AND AS A RESULT, THE ASSESSEE IS IN APPEAL BEFORE US. 4. IN SO FAR AS THE FIRST OBJECTION OF THE ASSESSIN G OFFICER IS CONCERNED, THE RELEVANT FACTS CAN BE UNDERSTOOD AS FOLLOWS: THE P ROJECT CITADEL CONSTRUCTED BY THE ASSESSEE WAS APPROVED BY THE PUNE MUNICIPAL CORPORATION (IN SHORT PMC) VIDE COMMENCEMENT CERTIFICATE DATED 16-7-2002 AND THE FINAL COMPLETION OF CONSTRUCTION CERTIFICATE WAS ISSUED BY THE PMC O N 22-2-2004. THE OTHER SALIENT FEATURES NOTED BY THE ASSESSING OFFICER WE RE THAT THE TOTAL BUILT UP AREA OF ALL THE SHOPS WAS 13,246.96 (1230.87 SQ. MTRS) W HILE THE TOTAL BUILT UP AREA OF ALL THE RESIDENTIAL FLATS WAS 1,99,299.79 SQ. FT. ( 18,493.94 SQ. MTRS). AS PER THE ASSESSING OFFICER, THE ASSESSEE HAD THUS CONSTRUCTE D COMMERCIAL AREA OF 13,248.96 SQ. FT. WHICH WAS 6.67% (APPROXIMATELY) O F THE TOTAL CONSTRUCTED AREA OF THE PROJECT. IN THIS BACKGROUND, THE ASSESSING OFFICER HELD THAT THE SAME WAS VIOLATIVE OF CLAUSE (D) OF SEC. 80-IB(10) OF THE AC T, INSERTED BY THE FINANCE (NO. 2) ACT, 2004 WITH EFFECT FROM 1-4-2005. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAD CONSTRUCTED COMMERCIAL AREA IN EXCESS OF 2000 SQ.FT. WHICH WAS THE LIMIT PRESCRIBED IN CLAUSE (D) OF SEC. 80-IB(10) OF THE ACT. ACCORDING TO THE REVENUE, THE AFORESAID FACTS ALSO SHOW THAT THE PRO JECT WAS NOT A PURE HOUSING PROJECT WHICH WAS THE REQUIREMENT FOR AVAILING DEDU CTION U/S 80-IB(10) OF THE ACT. 4 5. ON THIS ASPECT, THE LEARNED COUNSEL FOR THE ASSE SSEE HAS VEHEMENTLY POINTED OUT THAT RELIANCE PLACED BY THE REVENUE ON CLAUSE (D) OF SEC. 80-IB(10) OF THE ACT INSERTED BY WAY OF FINANCE (NO. 2) ACT, 2004 WAS MISPLACED, INASMUCH AS THE SAID AMENDMENT IS PROSPECTIVE IN NA TURE AND NOT RETROSPECTIVE. FURTHER, IT IS POINTED OUT THAT THE RESTRICTION ON THE AREA EAR-MARKED FOR COMMERCIAL PURPOSES IN A HOUSING PROJECT LAID DOWN IN CLAUSE (D) OF SEC. 80- IB(10) OF THE ACT WOULD NOT BE APPLICABLE TO THE PR OJECTS WHICH HAVE COMMENCED PRIOR TO 1-4-2005, INASMUCH AS THE LAW AS APPLICABL E AT THE TIME OF COMMENCEMENT OF THE PROJECT DID NOT CONTAIN SUCH A RESTRICTION. IT IS SUBMITTED THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF BRAHM A ASSOCIATES VS. JCIT 333 ITR 289 (BOM) CLEARLY LAID DOWN THAT SUCH AMEND ED PROVISION DID NOT OPERATE RETROSPECTIVELY AND THAT THE SAME WOULD BE APPLICABLE FROM 1-4-2005 PROSPECTIVELY. APART THEREFROM, RELIANCE HAS ALSO B EEN PLACED ON THE DECISIONS OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF OPEL SHEL TERS PVT. LTD. VS. ACIT (ITA NO. 219/PN/2009 FOR A.Y. 2005-06 VIDE ORDER DATED 3 1-5-2010, G.K. BUILDERS IN ITA NO. 1077 AND 1078//PN/2010 FOR A.Y. 2005-06 AND 2006-07 VIDE ORDER DATED 30-7-2012 AND BOMBAY BENCH OF THE TRIBUNAL I N THE CASE OF HIRANANDANI AKRUTI JV VS. DY. CIT (2010) 39 SOT 498 (MUMBAI). 6. ON THE OTHER HAND, THE LEARNED DR APPEARING FOR THE REVENUE HAS DEFENDED THE STAND OF THE REVENUE BY POINTING OUT T HAT PHRASEOLOGY OF SEC. 80- IB(10) CONTAINED AN EXPRESSION HOUSING PROJECT WH ICH WOULD INDICATE THAT A PROJECT INVOLVING COMMERCIAL AREA WOULD NOT FALL WI THIN THE SCOPE OF SEC. 80- IB(10) OF THE ACT EVEN IN THE ABSENCE OF CLAUSE (D) OF SECTION 80-IB(10) OF THE ACT. 7. ON THIS ASPECT, WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. ADMITTEDLY, THE ASSESSEE HAS COMMENCED DEVELOPMENT AND CONSTRUCTION OF ITS HOUSING PROJECT CITADEL IN TERMS OF APPROVAL GRAN TED BY THE PMC WHICH IS THE PRESCRIBED LOCAL AUTHORITY WITHIN THE MEANING OF SEC. 80(IB)(10) OF THE ACT. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE COMMENCED DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT AS PER THE COMM ENCEMENT CERTIFICATE ISSUED BY THE PMC DATED 16-7-2002. PERTINENTLY, IN PARA 2 .3 OF THE ORDER OF THE CIT(A), A REFERENCE HAS BEEN MADE TO A COMMUNICATIO N OBTAINED FROM THE ENGINEER, PMC DATED 6-12-2005 WHEREIN IT HAS BEEN S TATED THAT THE PROJECT IN QUESTION WAS APPROVED BY PMC AS A RESIDENTIAL-CUM-C OMMERCIAL PROJECT. FACTUALLY, IT IS ALSO CLEAR THAT OUT OF THE TOTAL C ONSTRUCTED AREA, AN AREA OF 13,248.96 SQ. FT. IS CONSISTING OF COMMERCIAL AREA WHICH IS APPROXIMATELY 6.7% OF THE TOTAL CONSTRUCTED AREA OF THE PROJECT. 8. AT THIS POINT, WE MAY REFER TO CLAUSE (D) TO SEC . 80-IB(10) OF THE ACT WHICH HAS BEEN INSERTED BY THE FINANCE (NO. 2) ACT, 2004 W.E.F. 1-4-2005 WHICH READS AS UNDER: THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCIA L ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIV E PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR T WO THOUSAND SQUARE FEET, WHICHEVER ISLES. 9. IN TERMS OF THE AFORESAID PROVISION, THE CASE OF THE REVENUE IS THAT THE SAME REFLECTS THE MEANING OF EXPRESSION HOUSING PR OJECT WHICH IS TO BE UNDERSTOOD AS A PURELY RESIDENTIAL PROJECT NOT INVO LVING ANY COMMERCIAL AREA. 5 SECONDLY, IT IS POINTED OUT THAT THE COMMERCIAL ARE A IN THE INSTANT CASE IS 13,248.96 SQ.FT. WHICH IS MORE THAN THE PERMISSIBLE AREA OF 2000 SQ.FT. OR 5% OF THE TOTAL BUILT-UP AREA WHICHEVER IS LESS AS PROVID ED IN CLAUSE (D) OF SEC. 80- IB(10) OF THE ACT. 10. IN OUR CONSIDERED OPINION, RELIANCE PLACED BY T HE REVENUE ON CLAUSE (D) TO SEC. 80-IB(10) OF THE ACT TO DEFEAT THE ASSESSEE S CLAIM FOR DEDUCTION IN THE PRESENT CASE IS QUITE MISPLACED. FIRSTLY, THE HON BLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) HAS LAID DOWN THA T THE SAID PROVISION IS PROSPECTIVE AND NOT RETROSPECTIVE IN NATURE AND THE REFORE, IT CANNOT BE APPLIED RETROSPECTIVELY. FURTHER, THE PLEA OF THE REVENUE THAT ONLY A PURE HOUSING PROJECT IS ELIGIBLE FOR DEDUCTION IS ALSO COMPLETEL Y MISPLACED HAVING REGARD TO THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF BRAHMA ASSOCIATES (SUPRA). IN THE CASE BEFORE THE HONBLE BOMBAY HIG H COURT, THE PROJECT CONSISTED OF 15 RESIDENTIAL BUILDINGS AND TWO COMME RCIAL BUILDINGS AND IT WAS NOTICED THAT LOCAL AUTHORITY HAD APPROVED THE PROJE CT AS RESIDENTIAL-CUM- COMMERCIAL. THE HONBLE BOMBAY HIGH COURT EXPLAINE D THAT SINCE EXPRESSION HOUSING PROJECT WAS NOT DEFINED UNDER THE ACT, IT S MEANING WOULD HAVE TO BE GATHERED FROM THE RULES AND REGULATIONS FRAMED BY T HE APPROVING LOCAL AUTHORITY. THE HONBLE HIGH COURT EXPLAINED THAT S INCE A LOCAL AUTHORITY COULD APPROVE THE PROJECT TO BE A HOUSING A PROJECT WITH OR WITHOUT COMMERCIAL USER, IT WAS THEREFORE, THE INTENT OF THE LEGISLATURE THAT D EDUCTION ENVISAGED U/S 80- IB(10) OF THE ACT WAS ALLOWABLE TO SUCH HOUSING PRO JECTS APPROVED BY THE LOCAL AUTHORITY WITHOUT OR WITH COMMERCIAL USER TO THE EX TENT PERMITTED BY THE RULES OF LOCAL AUTHORITY. THOUGH, THE ASSESSMENT YEAR BEFOR E THE HONBLE BOMBAY HIGH COURT WAS PRIOR TO 1-4-2005, IT CONSIDERED CLAUSE ( D) OF SEC. 80-IB(10) OF THE ACT AS INSERTED BY THE FINANCE (NO. 2) ACT, 2004 AND HE LD THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S 80-IB(10) OF THE ACT. IN THE INSTAN T CASE BEFORE US, THE PARITY OF REASONING LAID DOWN BY THE HONBLE BOMBAY HIGH COUR T IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) IS WHOLLY APPLICABLE. THE PROJE CT BEFORE US HAS BEEN APPROVED BY THE LOCAL AUTHORITY I.E. PMC AS A RESI DENTIAL-CUM-COMMERCIAL PROJECT AND THEREFORE, IT QUALIFIES TO BE SEEN IN THE SAME MANNER AS EXPLAINED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES (SUPRA). THEREFORE, THE AFORESAID OBJECTION RAISED BY THE RE VENUE TO DIS-ENTITLE THE ASSESSEE FROM CLAIMING OF DEDUCTION U/S 80-IB(10) O F THE ACT IS UNTENABLE. 11. NOW, WE MAY TAKE UP THE SECOND OBJECTION RAISED BY THE REVENUE WHEREBY, IT IS STATED THAT THE BUILT-UP AREA OF SOM E OF THE UNITS EXCEEDED 1500 SQ.FT., WHICH WAS THE LIMIT PRESCRIBED IN CLAUSE (C ) OF SEC. 80-IB(10) OF THE ACT. AS PER THE REVENUE, SINCE SOME OF THE UNITS VIOLATE D THE CONDITION PRESCRIBED IN CLAUSE (C) OF SEC. 80-IB(10), PROFITS FROM SUCH PRO JECT ARE INELIGIBLE FOR CLAIMING DEDUCTION U/S 80-IB(10) OF THE ACT. 12. ON THIS ASPECT, THE FACTS ARE THAT AFTER INCLUD ING THE AREA COVERED BY TERRACE AND BALCONIES, THE BUILT-UP AREA EXCEEDED 1 500 SQ.FT. ON THIS ASPECT, THE CIT(A) HAS HELD THAT EXPRESSION BUILT-UP AREA HAS BEEN EXPLAINED IN SECTION 80-IB(14)(A) OF THE ACT TO INCLUDE PROJECTIONS AND BALCONIES AND THEREFORE, THE STAND OF THE ASSESSING OFFICER TO THE EFFECT THAT S OME OF THE RESIDENTIAL UNITS VIOLATED THE CONDITIONS PRESCRIBED IN CLAUSE (C) OF SEC. 80-IB(10) OF THE ACT WAS IN ORDER. 6 13. IN THIS BACKGROUND, THE CLAIM OF THE ASSESSEE I S THAT THE PROJECT IN QUESTION COMMENCED PRIOR TO 1-4-2005 AND THEREFORE, THE DEFINITION OF BUILT-UP AREA PRESCRIBED IN SEC. 80-IB(14)(A) WOULD NOT APP LY AS THE SAID SECTION WAS INSERTED BY THE FINANCE (NO 2) ACT, 2004 W.E.F. 1- 4-2005. THE LEARNED COUNSEL RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS SUBMISSION:- I) ITO VS. PRIME PROPERTIES (ITA NO. 887, 888 & 889 /PN/2010 FOR A.Y. 2003-04 TO 2005-06) VIDE ORDER DATED 26-4-2012 II) HAWARE CONSTRUCTIONS (P) LTD. VS. ITO (2011) 64 DTR (MUM) 251. 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL SU BMISSIONS. THE ASSESSEES CLAIM FOR DEDUCTION U/S 80-IB(10) OF THE ACT HAS BEEN OBJECTED TO ON ACCOUNT OF SUB-CLAUSE (C) OF SECTION 80- IB(10) OF THE ACT. SUB-CLAUSE (C) OF SECTION 80-IB(10) OF THE ACT REQUIRED THAT IN O RDER TO BE ELIGIBLE FOR DEDUCTION, BUILT UP AREA OF RESIDENTIAL UNITS IN C ITIES OTHER THAN DELHI OR BOMBAY SHALL NOT EXCEED 1500 SQ.FT. AS PER THE REVE NUE FEW RESIDENTIAL UNITS CONTAINED IN THE HOUSING PROJECT UNDERTAKEN BY THE ASSESSEE HAD A BUILT UP AREA EXCEEDING 1500 SQ.FT. SINCE FEW UNITS VIOLATED THE CONDITION PRESCRIBED IN SUB- CLAUSE (C) OF SECTION 80-IB(10) OF THE ACT DEDUCTIO N FOR THE ENTIRE PROJECT WAS DENIED IN COMING TO SUCH COMPUTATION OF BUILT UP AR EA, THE REVENUE HAS RELIED UPON SUB-CLAUSE (A) OF SECTION 80-IB(14)(A) WHICH E XPLAINS THE EXPRESSION BUILT UP AREA TO MEAN THE INNER MEASUREMENT OF THE RESID ENTIAL UNITS AT THE FLOOR LEVEL INCLUDING THE PROJECTIONS AND BALCONIES AS INCREASE D BY THE THICKNESS OF WALLS BUT EXCLUDING THE COMMON AREAS SHARED WITH OTHER RE SIDENTIAL UNITS. NO DOUBT, ON AN APPLICATION OF SUCH A DEFINITION OF BUILT UP AREA, THE CASE SET UP BY THE REVENUE IS POTENT. SO HOWEVER, IN THE PRESENT CASE , THE ISSUE IS AS TO WHETHER SUCH DEFINITION OF THE BUILT-UP AREA INSERTED BY TH E FINANCE (NO. 2) ACT, 2004 W.E.F. 1-4-2005 IS APPLICABLE OR NOT. OSTENSIBLY, PRIOR TO 1-4-2005, THERE WAS NO SUCH DEFINITION OF THE EXPRESSION BUILT UP AREA I N THE STATUTE AND LOGICALLY, ONE HAD TO CONSIDER THE BUILT UP AREA AS PER LOCAL MUNI CIPAL DEVELOPMENT CONTROL RULES FOLLOWED BY THE APPROVING AUTHORITIES WHICH I N THE PRESENT CASE IS PUNE MUNICIPAL CORPORATION (PMC).IN THE CASE BEFORE US, THE PROJECT OF THE ASSESSEE HAS OSTENSIBLY COMMENCED PRIOR TO INTRODUCTION OF S EC. 80-IB(14)(A) OF THE ACT AND THEREFORE, THE AMENDMENT WHICH HAS COME INTO EF FECT BY WAY OF SEC. 80- IB(14)(A) OF THE ACT W.E.F. 1-4-2005 WOULD NOT AFFE CT SUCH A PROJECT. THE AFORESAID PROPOSITION IS IN LINE WITH PRECEDENT BY WAY OF DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF G.K. BUILDERS IN ITA NO. 1077 & 1078/PN/2010 FOR A.Y. 2005-06 & 2006-07 VIDE ORDER DATED 30-7-20 12. IN THE CASE OF G.K. BUILDERS (SUPRA) THE AFORESAID PROPOSITION WAS AFFI RMED FOLLOWING THE EARLIER DECISIONS OF THE TRIBUNAL IN THE CASE OF TUSHAR DEV ELOPERS IN ITA NO. 165/PN/2007 AND 94/PN/2007 FOR A.Y. 2003-04 AND 200 4-05 VIDE ORDER DATED 31-5-2011 AND HAWARE CONSTRUCTIONS (P) LTD. VS. ITO (2011) 64 DTR (MUM) 251. THE FOLLOWING DISCUSSION IN THE ORDER OF THE TRIBUNAL IN THE CASE OF G.K. BUILDERS (SUPRA) IS RELEVANT:- AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MATE RIAL ON RECORD, WE ARE NOT INCLINED TO CONCUR WITH THE FIND ING OF THE CIT(A). THE DEDUCTION UNDER QUESTION HAS BEEN REJE CTED BY THE AO AND CONFIRMED BY THE CIT(A) ON THE GROUND THAT I T EXCEEDED THE PRESCRIBED LIMIT WITH RESPECT TO ROW HOUSE NO. 36. ACCORDINGLY, THE WHOLE PROJECT WAS REJECTED. THE A O HAS REACHED TO THE CONCLUSION AFTER INCLUDING THE TERRA CE AREA OF 108 SQ.FT. IN BRAHMA BUILDERS (SUPRA) WHETHER THE TERR ACE IN BUILT UP AREA COMES ONLY W.E.F 1-4-2005 BECAUSE THE DECISION IS 7 INTRODUCTION IN THE SECTION W.E.F. THE SAID DATE. FOR THE PERIOD PRIOR TO 1-4-2005, NO SUCH DEFINITION WAS ON THE ST ATUTE AND HENCE, THE BUILT UP AREA HAS TO BE CONSIDERED AS PE R THE DC RULE OF THE SANCTIONING AUTHORITY. THE DC RULES DO NOT INCLUDE TERRACE IN THE BUILT UP AREA. SO THE AMENDMENT WHICH HAS CO ME IN THIS REGARD W.E.F. 1-4-2005 WILL NOT AFFECT THE PROJECTS WHICH HAVE COMMENCEMENT PRIOR TO 1-4-2005. THIS ISSUE HAS BEE N DECIDED FOLLOWING TUSHAR DEVELOPERS IN ITA NO. 165/PN/200 7 AND 94/PN/2007 IN FAVOUR OF ASSESSEE AND IN HAWARE CONS TRUCTIONS (P) LTD. SIMILAR VIEW HAS BEEN TAKEN WHEREBY IT WA S HELD THAT TUSHAR DEVELOPERS IS NOT INCLUDIBLE IN BUILT UP ARE A OF THE FLAT PRIOR TO 1-4-2005 AND HENCE FOR THE PROJECT COMMENC ED BEFORE 1- 4-2005, TERRACE IS NOT INCLUDIBLE IN THE BUILT UP A REA. IN VIEW OF THIS, ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80-IB( 10) AS CLAIMED. 15. FOLLOWING THE AFORESAID OBSERVATIONS, WE THEREF ORE, HOLD THAT SINCE THE PROJECT OF THE ASSESSEE COMMENCED PRIOR TO 1-4-2005 THE DEFINITION OF BUILT UP AREA AS PROVIDED IN SEC. 80-IB(14)(A) CANNOT BE AP PLIED IN THIS CASE SO AS TO EVALUATE THE CONDITION PRESCRIBED IN SUB-CLAUSE (C) OF SECTION 80IB(10) OF THE ACT. UNDER THESE CIRCUMSTANCES, THE LIMIT OF BUIL T UP AREA PRESCRIBED IN SUB- CLAUSE (C) OF SECTION 80-IB(10) OF THE ACT HAS TO B E UNDERSTOOD ON THE BASIS OF LOCAL DEVELOPMENT RULES WHICH DOES NOT INCLUDE TERR ACE/CANOPY. IF THE AREAS COVERED BY THE TERRACE/CANOPY ARE EXCLUDED, THE BUI LT UP AREA OF THE THREE ROW HOUSES IN QUESTION DOES NOT EXCEED THE LIMIT OF 150 0 SQ.FT. PRESCRIBED IN SEC. 80- IB(10)(C) OF THE ACT. IN THIS VIEW OF THE MATTER, THE AFORESAID OBJECTION RAISED BY THE REVENUE TO DIS-ENTITLE THE ASSESSEE FROM CLAIMI NG OF DEDUCTION U/S 80-IB(10) OF THE ACT IS UNTENABLE. IN VIEW OF THE AFORESAID D ISCUSSIONS, THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESS ING OFFICER TO ALLOW THE DEDUCTION U/S 80-IB(10) OF THE ACT AS CLAIMED BY TH E ASSESSEE AND THE ASSESSEE SUCCEEDS IN ITS APPEAL FOR A.Y. 2003-04. . 16. NOW, WE MAY COME TO THE APPEALS OF THE ASSESSEE FOR THE REMAINING ASSESSMENT YEARS OF 2004-05, 2005-06 AND 2006-07. IN THESE APPEALS ALSO, THE ISSUE PERTAINS TO DENIAL OF DEDUCTION U/S 80-IB(10) OF THE ACT IN RELATION TO PROFITS AND GAINS FROM THE PROJECT CITADEL. THE OBJECTION OF THE REVENUE TO ASSESSEES CLAIM FOR DEDUCTION U/S 80-IB(10) IN THE AFORESAID YEARS IS SIMILAR TO THAT OF THE ASSESSMENT YEAR 2003-04. SUCH OBJECTIO NS HAVE BEEN DEALT WITH BY US IN THE PRECEDING PARAGRAPHS WHILE DEALING WITH THE APPEAL FOR A.Y. 2003-04. OUR CONCLUSION IN ASSESSEES APPEAL FOR A.Y. 2003-0 4 WOULD SQUARELY APPLY TO THE SAID ASSESSMENT YEARS ALSO. HOWEVER, ONE OF THE ASPECTS WHICH REQUIRES A LITTLE DISCUSSION IS AS FOLLOWS: FOR THE EARLIER AS SESSMENT YEAR, THE OBJECTION OF THE REVENUE BASED ON CLAUSE (D) OF SEC. 80-IB(10) O F THE ACT HAS BEEN NEGATED BY US ON THE GROUND THAT SUCH AMENDMENT WAS MADE BY TH E FINANCE (NO. 2) ACT, 2004 W.E.F. 1-4-2005 AND WOULD NOT OPERATE RETROSPE CTIVELY. SINCE IN THE ASSESSMENT YEAR UNDER CONSIDERATION VIZ. 2005-06 AN D 2006-07, THE AFORESAID AMENDMENT IS ON THE STATUTE, THE CASE SET UP BY THE REVENUE IS THAT THE CLAIM FOR DEDUCTION BE GOVERNED ON THE BASIS OF SUCH AMENDMEN T. ON THIS ASPECT, THE POINT TO BE CONSIDERED IS AS TO WHETHER THE RESTRICTION OF COMMERCIAL AREA PRESCRIBED IN SEC. 80-IB(10)(D) OF THE ACT AS INSER TED BY THE FINANCE (NO. 2) ACT, 2004 W.E.F 1-4-2005 CAN BE MADE APPLICABLE TO A PRO JECT WHICH HAS BEEN APPROVED AND COMMENCED PRIOR TO 1-4-2005. SIMILAR CONTROVERSY HAS BEEN THE SUBJECT MATTER OF CONSIDERATION BY PUNE BENCH OF TH E TRIBUNAL IN THE CASE OF OPEL SHELTERS (SUPRA) AS ALSO IN THE CASE OF HIRANA NDANI AKRUTI JV (SUPRA). IN THE AFORESAID PRECEDENTS, IT HAS BEEN HELD THAT THE PROVISIONS OF SEC. 80- IB(10)(D) OF THE ACT, AS INSERTED BY THE FINANCE (N O. 2) ACT, 2004 W.E.F. 1-4- 2005, SHALL APPLY TO THE PROJECTS COMMENCING ON OR AFTER 1-4-2005. THE PRIMARY 8 REASON MADE OUT IS TO THE EFFECT THAT THE ASSESSEE HAVING COMMENCED ITS PROJECT PRIOR TO 1-4-2005 IN TERMS OF THE APPROVAL GRANTED BY A LOCAL AUTHORITY COULD NOT HAVE ENVISAGED THE LEGISLATIVE ACTION OF PUTTIN G THE RESTRICTION CONTAINED IN CLAUSE (D) OF SEC. 80-IB(10) OF THE ACT W.E.F. 1-4- 2005. IN THIS BACKGROUND OF THE MATTER, WE FIND THAT EVEN FOR A.Y. 2005-06 AND 2006 -07 THE OBJECTION OF THE REVENUE IS UNSUSTAINABLE. PERTINENTLY, THE PROJECT OF THE ASSESSEE IN QUESTION I.E. CITADEL COMMENCED DEVELOPMENT AND CONSTRUCTION PR IOR TO 1-4-2005 AND IN FACT STANDS COMPLETED ON 23-2-2004 AS NOTED BY THE CIT(A) IN PARA 2.1 OF THE IMPUGNED ORDER. THEREFORE, CLAUSE (D) TO SEC. 80IB (10) OF THE ACT INSERTED BY THE FINANCE (NO. 2) ACT, 2004 W.E.F. 1-4-2005 CANNO T BE INVOKED TO DIS-ENTITLE THE ASSESSEES CLAIM FOR DEDUCTION U/S 80-IB(10) OF THE ACT FOR A.Y. 2005-06 AND 2006-07 AS WELL. 17. ON THE SIMILAR PARITY OF REASONING, FURTHER OBJ ECTION OF THE REVENUE BASED ON BUILT-UP AREA INSERTED BY THE FINANCE (NO. 2) ACT, 2005 W.E.F. 1-4-2005 IN SECTION 80-IB(14)(A) WOULD ALSO NOT HINDER THE A SSESSEES CLAIM FOR DEDUCTION U/S 80-IB(10) FOR THE REASON THAT ITS PROJECT HAD C OMMENCED PRIOR TO 1-4-2005. THEREFORE, APPEALS FOR A.Y. 2005-06 AND 2006-07 ARE ALSO ALLOWED. 6. SO, HOWEVER, AT THE TIME OF HEARING THE LD.CIT D R APPEARING FOR THE REVENUE CONTENDED THAT THE TRIBUNAL HELD THAT THE R ESTRICTIONS ON PERMISSIBLE COMMERCIAL AREA AS PER SECTION 80IB(10) (D) OF THE ACT WAS INSERTED BY THE FINANCE (NO.2) ACT 2004 W.E.F.01-04 -2005 AND THAT SUCH AMENDMENT WAS PROSPECTIVE IN NATURE AND WOULD NOT A PPLY TO THE PROJECT IN QUESTION. THE LD. CIT DR SUBMITTED THAT IN THIS CO NTEXT THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. EVERES T HOME CONSTRUCTION (INDIA) (P) LTD. VIDE ITA NO.7021/MUM/2008 ORDER DA TED 12-09-2012 HAS TAKEN A CONTRARY VIEW TO HOLD THAT THE COMMERCIAL A REA LIMIT INTRODUCED BY THE FINANCE (NO.2) ACT 2004 W.E.F.01-04-2005 BY INS ERTION OF CLAUSE (D) SECTION 80IB(10) SHALL BE APPLICABLE TO EVALUATE TH E DEDUCTIONS CLAIMED BY THE ASSESSEE FROM THE A.Y. 2005-06 ONWARDS. 7. WE HAVE CAREFULLY CONSIDERED THE ARGUMENT SET UP BY THE LD. DEPARTMENTAL REPRESENTATIVE AND FIND THAT THERE IS NO REASON TO DEPART FROM THE POSITION DECIDED BY THE TRIBUNAL IN THE ASSESSE ES OWN CASE FOR THE ASSESSMENT YEARS 2003-04 TO 2006-07 VIDE ITS ORDER DATED 23-11-2012 9 (SUPRA). THE TRIBUNAL HAD CONCLUDED THAT THE AMEND MENT MADE BY THE FINANCE (NO.2) ACT 2004 W.E.F. 01-04-2005 BY INSERT ION OF CLAUSE (D) OF SECTION 80IB(10) WOULD NOT OPERATE RETROSPECTIVELY AND THAT IT WOULD BE PROSPECTIVE IN NATURE. ACCORDING TO THE TRIBUNAL, THE ASSESSEE HAD COMMENCED ITS PROJECT IN QUESTION PRIOR TO 01-04-20 05 IN TERMS OF THE APPROVAL GRANTED BY A LOCAL AUTHORITY AND THE SAID PROJECT ALSO STANDS COMPLETED ON 20-03-2004 AND THUS THE AMENDMENT MADE BY THE FINANCE (NO.2) ACT 2004 CANNOT BE INVOKED TO DIS-ENTITLE AS SESSEES CLAIM OF DEDUCTION U/S.80IB(10) FOR THE ASSESSMENT YEARS 200 5-06 AND 2006-07 AS WELL. THE AFORESAID CONCLUSION OF THE TRIBUNAL WAS ALSO BASED ON CERTAIN PRECEDENTS WHICH ARE AS UNDER : 1. OPEN SHELTERS PVT. LTD. VS. ACIT (ITA NO.219/PN/ 2010 FOR A.Y. 2005-06 ORDER DATED 31-05-2010 2. G.K. BUILDERS IN ITA NO.1077 AND 1078/PN/2010 FO R A.Y. 2005-06 AND 2006-07 ORDER DATED 30-07-2012 3. HIRANANDANI AKRUTI JV VS. DY. CIT REPORTED IN 3 9 SOT 498 (MUMBAI) THE TRIBUNAL ALSO CONSIDERED THE JUDGMENTS OF THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES (2011) 333 I TR 289 (BOM.) TO HOLD THAT AMENDMENTS IN QUESTION ARE TO BE SEEN AS PROSP ECTIVE IN NATURE. 8. APART FROM THE AFORESAID WE MAY ALSO NOTICE THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF MANAN COR PORATION VS. ACIT DATED 03-09-2012 WHEREIN THE BONE OF CONTENTION WAS THE APPLICABILITY OF THE REQUIREMENTS CONTAINED IN CLAUSE (D) OF SECTION 80IB(10) OF THE ACT. THE REVENUE HAD CANVASSED THAT THE PROVISION OF SEC TION 80IB(10)(D) OF THE ACT WAS APPLICABLE FROM 01-04-2005 AND WAS TO BE CO NSIDERED FOR A.Y. 2006-07 AS WELL, REGARDLESS OF THE DATE OF APPROVAL OF THE PROJECT IN QUESTION. THE HONBLE GUJARAT HIGH COURT, BY REFER RING TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) 10 AND ALSO THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M/S. ANRIYA PROJECT MANAGEMENT VIDE ITA NO. 138 OF 2010 DATED 29-02-2012 HELD THAT SUCH AN AMENDMENT WOULD NOT AP PLY TO A PROJECT WHICH IS APPROVED PRIOR TO 01-04-2005 AND THAT IN T HIS LIGHT THE PROSPECTIVE NATURE OF THE AMENDMENT, AS HELD BY THE HONBLE BOM BAY HIGH COURT, IS TO BE VIEWED. 9. PERTINENTLY IN THE CASE BEFORE HONBLE GUJARAT H IGH COURT THE CLAIM OF THE ASSESSEE WAS DENIED BY THE TRIBUNAL RELYING ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASS OCIATES (SUPRA) HOLDING THAT THE RESTRICTION SET OUT IN CLAUSE(D) O F SECTION 80IB(10) INSERTED BY FINANCE (NO.2) ACT 2004 W.E.F.01-04-2005 WAS TO BE APPLIED IN A.Y. 2006-07, REGARDLESS OF THE DATE OF APPROVAL OF THE PROJECT IN QUESTION. THE AFORESAID POSITION CANVASSED BY THE TRIBUNAL IN THE CASE OF MANAN CORPORATION (SUPRA) WAS NEGATED BY THE HONBLE GUJA RAT HIGH COURT ON THE BASIS OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF BRAHMA ASSOCIATES (SUPRA). THEREFORE, IN THIS MANN ER, THE RELIANCE NOW SOUGHT TO BE PLACED BY THE LD. CIT DR IN THE CASE OF EVEREST HOME CONSTRUCTION (INDIA) PVT. LTD. (SUPRA) THEREFORE IS NOT OF ANY HELP TO THE REVENUE. THUS, FOLLOWING THE PARITY OF REASONING LA ID DOWN IN THE ORDER OF THE TRIBUNAL DATED 23-11-2012 (SUPRA), IN ASSESSEE S OWN CASE, AND WHICH IS IN CONSONANCE WITH THE JUDGMENT OF THE HONBLE G UJARAT HIGH COURT IN THE OF MANAN CORPORATION (SUPRA), WHICH HAS REFERRE D TO AND RELIED UPON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF BRAHMA ASSOCIATES (SUPRA), WE THEREFORE FIND IT EXPEDIENT TO UPHOLD THE ASSESSEES CLAIM FOR DEDUCTION U/S.80IB(10) IN RELATION TO THE CITADEL PROJECT. IN THIS MANNER, THE CLAIM OF THE ASSESSEE IS ALLOWED. 11 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF MARCH, 2013. SD/- SD/- ( R.S.PADVEKAR ) ( G.S.PANNU ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, DATED THE 22 ND MARCH 2013. COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-II, PUNE. 4. THE CIT-II, PUNE. 5. THE DR B BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLAT E TRIBUNAL, PUNE.