The ACIT, Vapi Circle, Vapi V. M/s. Satadhar Enterprises, Vapi

ITA 2354/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6521 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 07-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Revenue expenditure
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 13/05/2011 DRAFTED ON: 16 /05/2011 APPEAL(S) / CO(S) BY SL. NO(S). ITA NO(S) / CO NO(S) ASST. YEAR(S) APPELLANT (S) RESPONDENT(S) 1. 2354/AHD/2009 2003-04 ASST.CIT VAPI CIRCLE, VAPI M/S.SATADHAR ENTERPRISES CHANDRALOK SHOPPING COMPLEX NR.CINE PARK MULTI- COMPLEX VAPI SALVASSA ROAD CHANOD, VAPI PAN : AAPFS 8442 R 2. 2357/AHD/2009 2004-05 -DO- -DO- 3. CO NO.196/AHD/09 (O/O. ITA 2354/A/09) 2003-04 ASSESSEE REVENUE 4. CO NO.197/AHD/09 (O/O. ITA 2357/A/09) 2004-05 ASSESSEE REVENUE REVENUE BY : SHRI S.A. BOHRA, SR. D.R. ASSESSEE BY : SHRI S.N.L.AGARWAL O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : FOR BOTH THE YEARS, REVENUE IS IN APPEAL AND THE A SSESSEE HAS FILED CROSS OBJECTIONS ARISING FROM THE ORDERS OF THE LEA RNED CIT(APPEALS)-II, AHMEDABAD DATED 23/04/2009. ITA NOS.2354 & 2357/AHD/2009(BY REVENUE) & CO NOS.196 & 197/AHD/2009 (BY ASSESSEE) ASST.YEARS 2003-04 & 2004-05 - 2 - 2. FIRST, WE SHALL TAKE UP THE REVENUES APPEAL AND THE SUBSTANTIVE GROUND IS GROUND NO.1; REPRODUCED FROM THE LEAD ASSESSMENT YEAR 2003-04 AS UNDER:- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.28,84,378/- MADE BY THE AO BY ADOPTING THE PERCENTAGE COMPLETION METHOD INSTEAD OF PROJECT COMPLETION M ETHOD DECLARED BY THE ASSESSEE, WITHOUT CONSIDERING THE F ACT THAT EVERY ASSESSEE, ENGAGED IN THE CONSTRUCTION BUSINESS HAS TO FOLLOW PERCENTAGE COMPLETION METHOD, AS PER AS-7 [REVISED ]. 2.1. GROUND NO.1 FOR A.Y. 2004-05 AS UNDER:- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF RS.41,95,486/- MADE BY THE AO BY ADOPTING THE PERC ENTAGE COMPLETION METHOD AND DENYING THE DEDUCTION U/S.80 IB(10) OF THE ACT. 2.2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ORDER PASSED U/S.143(3) OF THE I.T.ACT DATED 29/03/2006 FOR ASSE SSMENT YEAR 2003-04 AND DATED 26/12/2006 FOR ASSESSMENT YEAR 2004-05 WE RE THAT THE ASSESSEE-FIRM IS IN THE CONSTRUCTION BUSINESS AND U NDERTAKEN A PROJECT CHANDRALOK. AS PER THE GROUNDS OF APPEAL OF THE REVENUE, THE ASSESSEES METHOD OF ACCOUNTING, I.E. PROJECT COMP LETION METHOD WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS ADOPTED THE PERCENTAGE COMPLETION METHOD AND FOR ASSESSMENT YEAR 2003-04 COMPUTED THE IMPUGNED PROFIT AS PER TH E FOLLOWING WORKING: ITA NOS.2354 & 2357/AHD/2009(BY REVENUE) & CO NOS.196 & 197/AHD/2009 (BY ASSESSEE) ASST.YEARS 2003-04 & 2004-05 - 3 - 7.2. WORK-IN-PROGRESS HAS BEEN SHOWN AS RS.82,98, 343.27 WHICH INCLUDES EXPENSES OF EARLIER YEAR RELATED TO THIS P ROJECT. AS MENTIONED IN PAGE NO.7 OF IMPOUNDED FILE BF-13, TOT AL PROJECT COST IS ESTIMATED AT RS.7,41,60,000/- (INCLUDING LAND CO ST OF RS.86,62,500/-) SO ESTIMATED COST OF CONSTRUCTION I S RS.7,41,60,000/- MINUS RS.86,62,500/- = RS.6,54,97, 500/-, SO PERCENTAGE OF WORK COMPLETED IS 12.67% WHEREAS PAYMENT MADE TO CONTRACTOR SHRI KAMLESH D. YADAV OF RS.16,50,000 /- IS AROUND 16% OF TOTAL ESTIMATED PAYMENT PAYABLE TO HIM FOR W HOLE PROJECT. AS THE ASSESSEE WAS ASKED TO SUBMIT VIDE LETTER DAT ED 10.2.2006, AN ARCHITECT / ENGINEER CERTIFICATE REGARDING WORK-IN- PROGRESS, BUT TILL DATE NO SUCH DETAILS HAVE BEEN FURNISHED. IN VIEW OF THE ABOVE, I AM FORCED TO CONSIDER AND ESTIMATE THAT ABOUT 15% OF PROJECT IS COMPLETED AND AS PER IMPOUNDED BOOKS OF ACCOUNT AND DOCUMENTS, LARGE NUMBER OF SALES BOOKING HAVE BEEN DONE BY THE ASSESSEE, BUT NO INCOME HAS BEEN OFFERED. 7.3. ON PAGE 92 OF BF-11, PROJECT COST OF RS.713.63 LAKHS (INCLUDING LAND COST) HAS BEEN TAKEN AND RECEIPTS H AVE BEEN ESTIMATED AT RS.929.55 LAKHS, WHICH GIVES PROFIT MA RGIN OF RS.215.92 LAKHS ON PROJECT COST OF RS.713.63 LAKHS I.E. 30% OF PROJECT COST. IN VIEW OF THE ABOVE, AS COST TILL D ATE OF CONSTRUCTION COST OF RS.82,98,343.27 AND 15% OF LAND COST OF RS. 87,85,000/- WHICH COMES TO RS.96,14,593.27. PROFIT IS ESTIMAT ED AT 30% OF RS.96,14,593.27 AT RS.28,84,378/- AND SAME IS TREAT ED AS INCOME OF ASSESSEE FROM THE PROJECT FOR THE YEAR. I AM SA TISFIED THAT THE ASSESSEE HAS CONCEALED INCOME AND THE PARTICULARS O F INCOME. HENCE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT ARE INITIATED. 3. SINCE WE HAVE TAKEN UP BOTH THE APPEALS TOGETHER , THEREFORE, IT IS WORTH TO MENTION THAT FOR ASSESSMENT YEAR 2004-05, THE ASSESSEE HAS CHANGED THE METHOD OF ACCOUNTING FROM PROJECT COMP LETION METHOD TO PERCENTAGE COMPLETION METHOD AND ACCOUNTED THE PROFIT ACCORDINGLY. HOWEVER, THE ASSESSING OFFICER HAS CO MPUTED THE PROFIT AS PER THE FOLLOWING CALCULATION:- ITA NOS.2354 & 2357/AHD/2009(BY REVENUE) & CO NOS.196 & 197/AHD/2009 (BY ASSESSEE) ASST.YEARS 2003-04 & 2004-05 - 4 - C] WITHOUT PREJUDICE TO INCOME OF RS.1,25,03,04 0/- SHOWN BY YOU, YOU ARE INFORMED THAT YOU INCOME WAS ASSESSED ON PERCENTAGE COMPLETION METHOD FOR THE ASSESSMENT YEAR 2003-04. FOR THE YEAR UNDER CONSIDERATION ALSO YOUR INCOME WILL BE COMPUT ED ON SIMILAR LINE. AS EVIDENT THE TOTAL COST OF THE PROJECT IS RS.7,41,60,000/- (INCLUDING LAND COST OF RS.86,62,500/-). AS EVID ENT FROM THE PROFIT AND LOSS ACCOUNT, IN THE CURRENT YEAR CONSTR UCTION EXPENSES ARE SHOWN AT 1,13,66,645/-. THUS DURING THE YEAR 17.35% OF TOTAL CONSTRUCTION COST HAS BEEN INCURRED. TO ARRIVE AT WIP OF THE CURRENT YEAR, PROPORTIONATE LAND COST OF RS.15,02,9 43/- [17.35% OF 86,62,500/-] IS ADDED. THUS THE WIP FOR THE YEAR I S 12869588/-. THE PROJECTED SALE CONSIDERATION IS RS.9,81,60,750/ - THUS PROJECTED PROFIT OF THE PROJECT IS AT RS.2,40,00,750/- WHICH IS 32.36% OVER THE COST. BY APPLYING THE SAME RATIO, PROFIT FOR T HE CURRENT YEAR IS AT RS.41,95,486/-. YOU ARE REQUESTED TO SHOW CAU SE AS TO WHY RS.41,95,486/- SHOULD NOT BE ASSESSED AS YOUR INCOM E FROM BUSINESS FOR THE YEAR UNDER CONSIDERATION. 4. THE ABOVE ADDITIONS WERE CHALLENGED BEFORE THE L D.CIT(A) WHO HAS FOLLOWED THE DECISION OF HON'BLE GAUHATI HIGH C OURT IN THE CASE OF MKB (ASIA) PVT. LTD. VS. CIT REPORTED AT [2007]294 ITR 655 (GAUHATI) AND DECISION OF HON'BLE SUPREME COURT IN THE CASE O F CIT VS. BILAHARI INVESTMENT PVT.LTD. REPORTED AT [2008]299 ITR 01(SU PREME COURT) AND HELD THAT THE PROJECT FOR ASSESSMENT YEAR 2003-04 W AS AT THE NASCENT STAGE, THEREFORE, NO ADDITION SHOULD HAVE BEEN MADE BY SUBSTITUTING THE PROJECT COMPLETION METHOD TO PERCENTAGE COMPLETI ON METHOD. WHILE DECIDING THE APPEAL FOR ASSESSMENT YEAR 2003-04 IT WAS INFORMED THAT THE ASSESSEE HAS CHANGED ITS ACCOUNTING SYSTEM AND ADOPTED PERCENTAGE COMPLETION METHOD FROM ASSESSMENT YEAR 2004-05. THE LD.CIT(A) HAS ACCEPTED THE METHOD OF ACCOUNTING AS DISCLOSED BY THE ASSESSEE AND ALSO NOTED IN HIS ORDER THAT IN ASSESSEES OWN CASE FOR ASSESSMENT ITA NOS.2354 & 2357/AHD/2009(BY REVENUE) & CO NOS.196 & 197/AHD/2009 (BY ASSESSEE) ASST.YEARS 2003-04 & 2004-05 - 5 - YEAR 2002-03 THE CONTENTION OF THE ASSESSEE WAS ACC EPTED BY THE LD.CIT(A)-III, SURAT, THEREFORE, HELD THAT A CONSISTENT APPROACH IN THE JUDICIAL MATTER SHOULD BE TAKEN HENCE, THE ADDITION WAS DELETED . FOR ASSESSMENT YEAR 2004-05 SINCE THE ASSESSEE HAS CHAN GED ITS METHOD OF ACCOUNTING AND DISCLOSED AN INCOME OF RS.1,25,03,04 0/-, WHEREAS THE ASSESSING OFFICER HAS ESTIMATED THE INCOME BY ADOPT ING 30% COMPLETION FOLLOWING THE PERCENTAGE COMPLETION METHOD ASSESS ED THE INCOME AT RS.41,95,486/- HELD THAT THE INCOME AS DISCLOSED BY THE ASSESSEE SHOULD BE THE INCOME FOR THE YEAR, HOWEVER, DIRECTED TO AL LOW DEDUCTION U/S.80IB (10) OF THE I.T.ACT. THE QUESTION OF ALLOWABILITY OF DEDUCTION U/S.80- IB(10) OF THE I.T.ACT SHALL BE DEALT WITH BY US IN THE LATER PART OF THIS JUDGEMENT. TO PLACE THE FACTS STRAIGHT, IN THE PA ST, THE LEARNED CIT(APPEALS) HAS DISMISSED THE APPEAL IN LIMINE FOR WANT OF PROSECUTION, HOWEVER, THAT WAS SET ASIDE AND THE MATTER WAS REST ORED BACK BY THE RESPECTED CO-ORDINATE BENCH A ITAT AHMEDABAD IN I TA NO.3121/AHD/2007 FOR ASSESSMENT YEAR 2003-04 DATED 28/09/2007 WITH THE DIRECTION TO PASS A SPEAKING ORDER. BEING AGGR IEVED, FOR BOTH THE YEARS, NOW THE REVENUE IS IN APPEALS BEFORE US. 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A ND CAREFUL APPRECIATION OF THE FACTS OF THE CASE, THE ISSUE A S RAKED UP BY THE REVENUE FOR ASSESSMENT YEAR 2003-04 APPEARS TO BE C OVERED BY FEW PRECEDENTS. FOR AY 2003-04, THE ISSUE IS THAT OUT OF THE TWO ME THODS; I.E. PERCENTAGE COMPLETION METHOD AND PROJECT CO MPLETION METHOD WHICH ONE IS APPROPRIATE AND TO BE FOLLOWED TO DEDUCE THE ITA NOS.2354 & 2357/AHD/2009(BY REVENUE) & CO NOS.196 & 197/AHD/2009 (BY ASSESSEE) ASST.YEARS 2003-04 & 2004-05 - 6 - CORRECT INCOME OF A BUILDER. IN A LATEST DECISION, ITAT C BENCH IN THE CASE OF KISHANDHAM DEVELOPERS PVT.LTD. BEARING ITA NO.3754/AHD/2008 FOR A.Y. 1998-99, DATED 28/02/2011 HAS HELD THAT BOTH THE METHODS ARE RECOGNIZED METHODS. HOWEVER, IT IS ALSO TO BE NOTED THAT DUE TO CERTAIN AMENDMENT IN AS-7 AS ISSU ED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS A PROFIT CAN BE RECOGNIZED ON COMPLETION OF 20% WORK. THIS CHANGE IN AS-7 HAS BEEN BROUGHT TO OUR NOTICE BY THE LD.AR AS MENTIONED BY ITAT DELHI IN THE CASE OF DCIT VS. LURGI INDIA CO.LTD. REPORTED AT [2008] 302 ITR 67(A.T.)[DEL.]. HOWEV ER, A CONSISTENT VIEW HAS REGULARLY BEEN TAKEN BY THE HON'BLE COURTS THAT THE ASSESSING OFFICER HAS NO OPTION TO MEDDLE IN THE ACCOUNTS MAINTAINED IN A PARTICULAR MANNER BY THE ASSESSEE IF THE METHOD ADOPTED IS NOT FOUND DEFECTIVE. FOR THIS PROPOSITION CASE LAWS CITED IS THE DECISIO N OF HON'BLE GAUHATI HIGH COURT IN THE CASE OF CIT VS. DOOM DOOMA INDIA LTD. REPORTED AT [1993] 200 ITR 496 (GAUHATI). IN AN ANOTHER DECISI ON, THE HON'BLE GAUHATI HIGH COURT IN THE CASE OF MKB (ASIA) PVT. L TD. VS. CIT REPORTED AT [2007]294 ITR 655 (GAUHATI) HAS ALSO OP INED THAT AN ASSESSEE HAD AN OPTION TO ADOPT ANY RECOGNIZED METHOD OF ACC OUNTING FOR ITS BUSINESS AND THE INCOME SHOULD BE COMPUTED IN ACCOR DANCE WITH SUCH REGULARLY MAINTAINED ACCOUNTING SYSTEM. IN ADDITI ON TO THE ABOVE PRECEDENTS, THERE IS A LANDMARK DECISION OF HON'BLE SUPREME COURT PRONOUNCED IN THE CASE OF CIT VS. BILAHARI INVESTME NT PVT.LTD. REPORTED AT [2008]299 ITR 01(SC) WHICH SAYS THAT RECOGNITIO N OF INCOME IS ATTAINABLE BY SEVERAL METHODS OF ACCOUNTING. IT WOU LD BE NOTED THAT THE SAME RESULT COULD BE ATTAINED BY ANYONE OF THE ACC OUNTING METHODS. COMPLETED CONTRACT METHOD IS ONE SUCH METHOD. SIM ILARLY, PERCENTAGE ITA NOS.2354 & 2357/AHD/2009(BY REVENUE) & CO NOS.196 & 197/AHD/2009 (BY ASSESSEE) ASST.YEARS 2003-04 & 2004-05 - 7 - OF COMPLETION METHOD IS ANOTHER SUCH METHOD. THERE WAS NO FINDING RECORDED BY THE ASSESSING OFFICER THAT THE COMPLETE D CONTRACT METHOD DISTORTS THE PROFITS OF PROFITS OF A PARTICULAR YEA R. THE ASSESSEE HAS FOLLOWED THE SAME METHOD OF ACCOUNTING AND BY THE E XERCISE OF CHANGE OF METHOD FROM PROJECT COMPLETION METHOD TO PERCENT AGE COMPLETION METHOD IT WOULD BE REVENUE NEUTRAL. THE COURT HAS OPINED THAT IT IS ONLY IN THOSE CASES WHERE THE DEPARTMENT RECORDS A FINDING THAT THE METHOD ADOPTED BY THE ASSESSEE RESULTS IN DISTORTIO N OF PROFITS THEN CAN INSIST ON SUBSTITUTION OF THE EXISTING METHOD. IT WAS CONCLUDED THAT THE ENTIRE EXERCISE ARISING OUT OF CHANGE OF METHOD FRO M COMPLETED CONTRACT METHOD TO DEFERRED REVENUE EXPENDITURE WAS NOTHING BUT REVENUE NEUTRAL AND THERE WAS NO NEED TO INTERFERE. IN TH E PRESENT SET OF FACTS AND CIRCUMSTANCES OF THE CASE THERE WAS NOTHING ON RECO RD TO INDICATE THAT THE ASSESSING OFFICER HAD FOUND ANY DEFECT OR FALLACY I N THE METHOD OF ACCOUNTING OF THE ASSESSEE. WE, THEREFORE, REVERSE THE VIEW TAKEN BY THE ASSESSING OFFICER AND UPHELD THE VIEW OF THE FIRST APPELLATE AUTHORITY. BEFORE WE PART WITH ITS WORTH TO PLACE ON RECORD TH AT LD.AR MR. S.N.L. AGARWAL HAS PLACED AN ORDER OF LEARNED CIT(APPEALS )-III, SURAT DATED 11/10/2006 FOR ASSESSMENT YEAR 2003-04 WHEREIN IT W AS HELD THAT THE PROJECT COMPLETION METHOD WAS A VALID METHOD OF A CCOUNTING TILL 2003- 04. IT WAS ALSO HELD THAT THE ASSESSING OFFICER HA D NOT FOUND ANY DEFECT IN THE BOOKS OF ACCOUNT NOR REJECTED THE BOOKS OF A CCOUNT FOR THAT ASSESSMENT YEAR. IT WAS ALSO HELD THAT ACTION OF T HE ASSESSING OFFICER TO ESTIMATE 10% OF WORK-IN-PROGRESS AS APPLICANTS INCOME WAS INCORRECT. THE ADDITION WAS DELETED. THE LD. LEAR NED AUTHORISED REPRESENTATIVE HAS INFORMED THAT THOUGH AGAINST THE SAID ORDER, ITA NOS.2354 & 2357/AHD/2009(BY REVENUE) & CO NOS.196 & 197/AHD/2009 (BY ASSESSEE) ASST.YEARS 2003-04 & 2004-05 - 8 - REVENUE DEPARTMENT HAS PREFERRED AN APPEAL BEFORE I TAT AND THAT APPEAL WAS DECIDED ON 31/05/2010 IN ITA NO.51/AHD/2 007 A BENCH BUT SURPRISINGLY OTHER ISSUES WERE RAKED UP BUT NO GROUND WAS RAISED BY THE REVENUE AGAINST THE SAID DELETION AND THE OBSERVATION ON THE SAID ISSUE OF LD.CIT(A). IT HAS ALSO BEEN PLEADED THAT THE FIRST APPELLATE AUTHORITY WHILE DECIDING THE APPEAL FOR T HE YEAR UNDER CONSIDERATION ASSESSMENT YEAR 2003-04 HAS FOLLOWED THE PRINCIPAL OF CONSISTENCY IN JUDICIAL MATTERS AND ADOPTED THE IDE NTICAL VIEW AS IT WAS EARLIER TAKEN IN ASSESSMENT YEAR 2002-03. ACCORDI NG TO US, THIS ARGUMENT OF LD.AR HAS ITS OWN VALUE, HENCE, WE FIND NO FALLACY IN THE VIEW TAKEN BY THE LEARNED CIT(APPEALS), THEREFORE, APPROVE THE SAME. RESULTANTLY, THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 6. REVENUE HAS ALSO RAISED AN ANOTHER GROUND FOR BOTH THE YEARS, REPRODUCED BELOW:- REPRODUCED FROM A.YS. 2003-04: 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S.80IB(10) WITHOUT CONSIDERING THE FACT THAT ASSESSEE FAILED T O FULFILL THE CONDITIONS LAID DOWN U/S.80IB(10) OF THE ACT. 7. AT THE OUTSET, IT WAS INFORMED THAT AS FAR AS THE ASSESSMENT YEAR 2003-04 IS CONCERNED, THIS GROUND WAS INCORRECTLY R AISED BY THE REVENUE. IT IS TRUE THAT FOR ASSESSMENT YEAR 2003-04 THE LEA RNED CIT(APPEALS) HAS DELETED THE ADDITION AND DIRECTED TO FOLLOW THE PERCENTAGE ITA NOS.2354 & 2357/AHD/2009(BY REVENUE) & CO NOS.196 & 197/AHD/2009 (BY ASSESSEE) ASST.YEARS 2003-04 & 2004-05 - 9 - COMPLETION METHOD, THEREFORE IN THE ABSENCE OF AN Y INCOME TO BE TAXED IN THE HANDS OF THE ASSESSEE, THERE WAS NO REQUIREM ENT OF GRANT OF DEDUCTION U/S.80IB(10) OF THE I.T.ACT. THE LD.AR H AS MADE A STATEMENT THAT THE ISSUE OF ELIGIBILITY OF EXEMPTION U/S.80I B OF THE I.T.ACT WAS NOT UNDER CONSIDERATION BEFORE THE LEARNED CIT(APPEALS) . THEREFORE, IT WAS WRONG ON THE PART OF THE REVENUE DEPARTMENT TO RAIS E THIS ISSUE AS FAR AS THE ASSESSMENT YEAR 2003-04 IS CONCERNED. THE SAI D STATEMENT OF LD.AR APPEARS TO BE CORRECT, HENCE, FOR ASSESSMENT YEAR 2003-04 THIS GROUND IS REJECTED BEING NOT ARISEN FROM THE ORDER OF THE FIRST APPELLATE AUTHORITY . 8. FOR ASSESSMENT YEAR 2004-05, LD.CIT(A) H AS DECIDED THE ISSUE PARTLY IN ASSESSEES FAVOUR AS PER THE FOLLOWING OB SERVATION: 4. I HAVE CONSIDERED THE FACTS AND THE SUBMISSIONS OF THE APPELLANT. MY OBSERVATIONS AND FINDINGS ARE AS UND ER: (A) THE LAND IN QUESTION WAS ORIGINALLY IN THE NAM E OF SHRI DAMJIBHAI K.YADAV WHO IS THE PARTNER IN THE FIRM. THE SAID LAND WAS CONTRIBUTED IN THE FIRM AS CAPITAL CONTRIBUTION . HENCE THE LAND BELONGS TO THE FIRM. THE SALE AGREEMENT WITH THE BOOKING HOLDERS HAS BEEN ENTERED INTO BY THE APPELLANT FIRM . EVEN THE PROFIT FROM THE PROJECT HAS BEEN ASSESSED BY THE AO IN THE HANDS OF THE APPELLANT FIRM. HENCE, DEDUCTION CANNOT BE DEN IED ON THE BASIS THAT LAND WAS IN THE NAME OF PARTNER. (B) AS REGARDS THE ISSUE THAT SOME UNITS ARE MORE THAN 1500 SQ.FT., I AGREE WITH THE APPELLANTS VIEW THAT DEDUCTION WI LL BE ALLOWED ON PROFITS FROM SALE OF UNITS HAVING AREA BELOW 1500 S Q. FT. AND DEDUCTION WILL NOT BE ALLOWED ON PROFITS FROM SALE OF UNITS HAVING AREA MORE THAN 1500 SQ.FT. THIS VIEW FINDS SUPPORT WITH THE ITA NOS.2354 & 2357/AHD/2009(BY REVENUE) & CO NOS.196 & 197/AHD/2009 (BY ASSESSEE) ASST.YEARS 2003-04 & 2004-05 - 10 - DECISION OF THE HONBLE BANGALORE BENCH OF ITAT AND DELHI BENCH OF ITAT AS ALSO KOLKATA BENCH OF ITAT AS RELIED ON BY THE APPELLANT (BRIGADE ENTERPRISE PVT.LTD. [2009] 25(1) ITCL 300 (BANG.) AND DELHI IRON & STEEL CO.LTD. [2008] 43 IT AT INDIA 694 (DEL.) AND THE DECISION OF HON'BLE KOLKATA BENCH OF ITAT IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD. VS. DCIT (ITA NO.1595/KOL/2005 FOR ASSESSMENT YEAR 2002-03). THE A.O. IS DIRECTED TO DISALLOW THE CLAIM U/S.80IB (10) ON THE PROFIT EARNED ON SUCH UNITS WHICH HAVE MORE THAN 15 00 SQ.FT. BUILT UP AREA, AND ALLOW THE CLAIM U/S.80IB(10) ON THE PR OFIT EARNED ON UNITS HAVING AREA LESS THAN 1500 SQ.FT. (C) AS REGARDS THE OBJECTION OF THE AO THAT CLAIM U/S.80IB(10) IN THE AUDIT REPORT IS NOT MENTIONED, IT WAS SUBMITTED THAT SUCH CLAIM IS MENTIONED IN FORM 3 CD BUT ALSO IN THE NOTES TO AUDIT REPORT AS ALSO MANDATORY REPORT U/S.10CCB IS ALSO FURNISHED. HENCE, IN MY VIEW DEDUCTION CANNOT BE DENIED ON THIS ACCOUNT. (D) COMING TO THE LAST OBJECTION OF THE AO THAT T HE COMMERCIAL UNITS HAVE BEEN CONSTRUCTED, I AGREE WITH THE APPEL LANTS VIEW THAT THE PROJECT IS APPROVED AS A HOUSING PROJECT PRIOR TO AMENDMENT U/S.80IB(10) W.E.F. 1.4.2005. THE AMENDMENT TO SA ID PROVISION IS PROSPECTIVE IN NATURE AS IT CREATES FURTHER DISABIL ITY IN THE CLAIM OF THE EXEMPTION PROVISION. THE DECISIONS CITED BY TH E APPELLANT HAS ABOVE ARE DIRECTLY APPLICABLE TO THIS POINT. HONB LE SUPREME COURT IN THE CASE OF P.R. PRABHAKAR (284 ITR 548)(S C) HAS HELD THAT THE EXEMPTION PROVISIONS HAVE TO BE CONSIDERED LIBERALLY SO AS TO ADVANCE THE OBJECT AND NOT TO DEFEAT THE SAME. HENCE RESPECTFULLY FOLLOWING THE SAME, I DIRECT THE AO TO ALLOW THE CLAIM OF THE APPELLANT U/S.80IB(10) ON THE PROFIT EARNED FROM SALE OF RESIDENTIAL UNITS., AND DISALLOW THE DEDUCTION U/S. 80IB(10) ON THE PROFIT EARNED FROM SALE OF COMMERCIAL UNITS. 9. AS FAR AS THE REVENUES APPEAL IS CONCERNED, THERE ARE THREE ISSUES WHICH EMERGED FROM THE ORDER OF THE LEARNED CIT(APPEALS). THE ITA NOS.2354 & 2357/AHD/2009(BY REVENUE) & CO NOS.196 & 197/AHD/2009 (BY ASSESSEE) ASST.YEARS 2003-04 & 2004-05 - 11 - FIRST ONE IS ABOUT AREA OF UNITS HAVING MORE THAN 1500 SQ.FT. FOLLOWING THE DECISION OF BRIGADE ENTERPRISE PVT.LTD. [2009] 25(1) ITCL 300(BANG.) AND OF DELHI IRON & STEEL CO.LTD. [2008] 43 ITAT INDIA 694 (DEL.), THE LEARNED CIT(APPEALS) HELD THAT THE DEDU CTION IS NOT TO BE ALLOWED ON PROFITS FROM SALE OF UNITS HAVING AREA M ORE THAN 1500 SQ.FT. WE FIND NO FALLACY IN THE SAID VIEW OF THE LD.CIT(A ) ESPECIALLY WHEN HE HAS FOLLOWED FEW DECISIONS OF THE HIGHER JUDICIAL F ORUM. EVEN BEFORE US NO OTHER DECISION OF THE TRIBUNAL IS CITED, THEREFO RE, THIS PART OF THE GROUND GOES IN FAVOUR OF THE REVENUE. 10. THE NEXT ISSUE OF THE GROUND IS ABOUT OWNERSHIP OF THE LAND, HOWEVER, IT WAS FOUND AND THE FACTS WERE RECORDED T HAT THE LAND IN QUESTION WAS ORIGINALLY IN THE NAME OF ONE OF THE PARTNERS FIRM BUT LATER ON THE SAID LAND WAS CONTRIBUTED AS CAPITAL C ONTRIBUTION IN THE FIRM. THE LEARNED CIT(APPEALS) HAS GIVEN A FINDING THA T THE LAND BELONGED TO THE FIRM THEREAFTER AND ALL THE SALE AG REEMENTS WERE ENTERED INTO BY THE FIRM IN FAVOUR OF THE BOOKING HOLDERS. FOR THIS LEGAL PROPOSITION, RELIANCE IS PLACED ON RADHE DEVELOPERS VS. ITO [2008] 23 SOT 420 (AHD) AND OF ACIT VS. C.RAJINI [2011] 9 TAX MAN 115 (CHENNAI ITAT, BENCH A). 11. THE THIRD ISSUE IS ABOUT THE ALLOWABILITY OF DEDUCTION U/S.80IB(10) OF THE I.T.ACT WHEN THE PROJECT IS A RESIDENTIAL-CUM- COMMERCIAL PROJECT. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT CERT AIN COMMERCIAL UNITS HAVE ALSO BEEN CONSTRUCTED BY THIS DEVELOPER. THE ITA NOS.2354 & 2357/AHD/2009(BY REVENUE) & CO NOS.196 & 197/AHD/2009 (BY ASSESSEE) ASST.YEARS 2003-04 & 2004-05 - 12 - LEARNED CIT(APPEALS) HAS DIRECTED THE ASSESSING OFF ICER TO ALLOW THE BENEFIT ON THE PROFIT EARNED FROM SALE OF RESIDENTI AL UNITS AND DISALLOW THE PROFIT EARNED FROM THE SALE OF COMMERCIAL UNITS. H OWEVER, THIS ISSUE NOW STOOD SETTLED BY A DECISION OF THE HON'BLE BOMBAY H IGH COURT IN THE CASE OF M/S. CIT-II, PUNE VS. M/S.BRAHMA ASSOCIATES (IT APPEAL NO.1194 OF 2010) DATED 22/02/2011. THIS PART OF THE ISSUE IS T HEREFORE TO BE DECIDED BY THE A.O. AS PER THE OBSERVATION OF THE HONBLE CO URT. WE DIRECT ACCORDINGLY. 12. IN VIEW OF THE ABOVE DISCUSSION, WE THEREFORE, DIRECT THE ASSESSING OFFICER TO FOLLOW THE GUIDELINES AS ENUNCIATED HERE INABOVE. WITH THE RESULT, THIS GROUND OF THE REVENUE IS TREATED AS PARTLY ALL OWED. B) ASSESSEES CO NOS.196 & 197/AHD/2009 FOR AYS. 2003- 04 & 2004-05 RESPECTIVELY. 13. FOR ASSESSMENT YEAR 2003-04 & 2004-05 CROSS OB JECTION IS IN RESPECT OF CLAIM OF DEDUCTION U/S.80IB(10) OF THE I .T.ACT. A VIEW HAS ALREADY BEEN EXPRESSED IN RESPECT OF ALL THE THREE LIMBS OF THE RELIEF CLAIMED AND IN THE LIKE MANNER, WE HEREBY DIRECT TO ALLOW THE CLAIM AS PER THE DISCUSSION MADE HEREINABOVE. WITH THE RESU LT, THIS PART OF THE CROSS OBJECTION IS PARTLY ALLOWED THAT TOO FOR STATISTICAL PURPOSE ONL Y 14. FOR ASSESSMENT YEAR 2003-04, THE ASSESSEE HA S ALSO RAISED AN ANOTHER CROSS OBJECTION IN RESPECT OF THE PROVISION S OF SECTION 40A(3) OF THE I.T.ACT PERTAINING TO THE DISALLOWANCE OF EXPEN SES OF RS.1,59,100/-. ITA NOS.2354 & 2357/AHD/2009(BY REVENUE) & CO NOS.196 & 197/AHD/2009 (BY ASSESSEE) ASST.YEARS 2003-04 & 2004-05 - 13 - THIS CROSS OBJECTION HAS NOT BEEN PRESSED BY THE LD .AR, HENCE, DISMISSED BEING NOT PRESSED. 15. IN THE RESULT, APPEALS FILED BY THE REVENUE AND THE CROSS OBJECTIONS OF THE ASSESSEE BOTH ARE PARTLY ALLOWED AS PER THE DIRECTIONS THAT TOO FOR STATISTICAL PURPOSE. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 27/ 05 /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..13.5.2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16.5.2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S27.5.2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27.5.2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER