ANIK DEVELOPMENT CORPN., MUMBAI V. ACIT CC-10, MUMBAI

ITA 2406/MUM/2010

• Counselvise Citation: 240619914 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 26-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS REENA JHA TRIPATHI
• Keywords: Revision of order; Maximum Marginal Rate
• Section: 143(3); 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, A , MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND R.K.PANDA (A.M ) ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) ANIK DEVELOPMENT CORPORATION, REHMAN BLDG., 2 ND FLOOR, 24, VEER NARIMAN ROAD, FORT, MUMBAI-400001 PAN: AACFA1461F ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 10, 8 TH FLOOR, CGO BUILDING, M.K.ROAD, MUMBAI-400020 APPELLANT V/S RESPONDENT DATE OF HEARING : 28.7.2011 DATE OF PRONOUNCEMENT : 30.8.2011 APPELLANT BY : SHRI PRAK ASH JOTWANI RESPONDENT BY : MRS.REENA J HA TRIPATHI O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22.2.2010 PASSED BY THE LEA RNED COMMISSIONER OF INCOME TAX (A) FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE FIRM IS ENGAGED IN REAL ESTATE DEVELOPMENT, FILED RETURN DECLARING INCOME OF RS.32,68,640/-. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE AO FROM THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET FILED ALONG WITH THE RETU RN OF INCOME NOTED THAT DURING THE YEAR THE ASSESSEE HAS SHOWN ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 2 SALE OF FLATS AMOUNTING TO RS.1,49,77,274/- AND AF TER DEDUCTING THE CONSTRUCTION DEVELOPMENT AND OTHER EX PENSES, IT HAS DECLARED THE NET PROFIT OF RS.67,53,375/- WH ICH INCLUDED DIVIDEND INCOME OF RS.11,62,212/- AND MIS C. INCOME OF RS.32,68,639/-. THUS, THE NET BUSINESS I NCOME WAS WORKED OUT TO RS.23,22,524/- ON WHICH THE ASS ESSEE HAS CLAIMED 100% DEDUCTION UNDER SECTION 80IB(10) O F THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE AO F URTHER NOTED THAT WITH REGARD TO THE MMRDA PROJECT, AN OP EN ENQUIRY WAS CONDUCTED BY THE INVESTIGATION WING OF THE DEPARTMENT. IT WAS GATHERED THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT DATED 19.8.2003 WITH MMRDA TO CONSTRUCT 11 BUILDINGS WITH 1715 REHABILITATION TE NEMENTS ON THE LAND AREA OF 20357 + 13982.60 SQ. MTS. THE FI RST PLAN WAS APPROVED BY THE MMRDA ON 1.9.2003 AND THE AME NDED PLAN WAS APPROVED BY MMRDA ON 13.3.2004. THE CONSTRUCTION OF THESE BUILDINGS WERE COMPLETED IN T HE MONTH OF AUGUST, 2005 AND OCCUPATION CERTIFICATES WERE A LSO ISSUED BY THE MMRDA IN THE MONTH OF AUGUST, 2005. ACCOR DING TO THE AO SINCE THE OCCUPATION CERTIFICATES FOR THE E NTIRE PROJECT WAS ISSUED IN FINANCIAL YEAR 2005-06, THERE FORE, THE PROJECT WAS CONSIDERED TO BE COMPLETED IN THIS YEA R WHICH IS RELEVANT FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N. IT WAS FURTHER NOTED BY THE AO THAT THE ASSESSEE HAS CONS TRUCTED ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 3 COMMERCIAL/SHOPPING UNITS IN THE SAME PROJECTS. AS PER THE INFORMATION, THE ASSESSEE HAS CONSTRUCTED 108 COMM ERCIAL UNITS HAVING BUILT UP AREA OF 4097 SQ. MTS. THE A O FURTHER NOTED THAT THE SHOPS WERE CONSTRUCTED BY THE ASSES SEE BEFORE HANDING OVER THE POSSESSION TO MMRDA. THUS , ACCORDING TO THE AO COMMERCIAL CONSTRUCTION IN THE PROJECT EXCEEDS THE PRESCRIBED LIMIT OF 2000 SQ. FT, THEREF ORE PROFIT FROM THESE PROJECTS IS NOT ENTITLED TO DEDUCTION UN DER SECTION 80IB(10) OF THE ACT. ACCORDINGLY, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE ENTIRE INCOME FROM THE PRO JECTS AMOUNTING TO RS.29,60,96,499/- SHOULD NOT BE TAXED IN THE YEAR UNDER CONSIDERATION. IN RESPONSE, THE ASSESSE E FILED WRITTEN SUBMISSIONS DATED 18.12.2008 INTERALIA STAT ING THAT THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING PROJ ECT COMPLETION METHOD SINCE ITS INCEPTION WHEREBY RELY ING ON JUDGMENT OF CHAMPION CONSTRUCTION IT DECLARES ITS INCOME WHEN 80% OF THE WORK IS COMPLETED. THIS METHOD HAS BEEN ACCEPTED BY THE DEPARTMENT FOR THE SO MANY YEARS. HENCE BASED ON THE METHOD OF ACCOUNTING CONSISTENTLY FOL LOWED BY THE ASSESSEE AND ACCEPTED BY THE DEPARTMENT THE I NCOME FROM THIS PROJECT CANNOT BE TAXED IN THE ASSESSMEN T YEAR 2006-07. REGARDING THE CONSTRUCTION OF 108 COMMERC IAL UNITS, IT WAS SUBMITTED BY THE ASSESSEE THAT THE PR OJECT HAD BEEN HANDED OVER TO THE MMRDA AS A HOUSING PROJECT WITH ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 4 RESIDENTIAL UNITS ONLY AND THERE WERE NO COMMERCI AL ESTABLISHMENTS WHICH IS EVIDENT FROM THE OCCUPATION CERTIFICATES ALREADY SUBMITTED. IT WAS FURTHER S UBMITTED THAT SINCE THE PROJECT HAS ALREADY BEEN APPROVED BEFORE 1.4.2005, THEREFORE, FOLLOWING THE DECISION OF THE MUMBAI BEN CH OF THE TRIBUNAL IN SAROJ SALES ORGANIZATION V/S ITO, (115 TTJ 485) THE ASSESSEE IS ENTITLED TO THE DEDUCTION UNDER SE CTION 80IB(10) OF THE ACT. 3. HOWEVER, THE AO WAS OF THE VIEW THAT THE PROJECT WAS ALREADY COMPLETED IN THE FINANCIAL YEAR 2005-06 RE LEVANT TO THE ASSESSMENT YEAR 2006-07, THEREFORE ASSESSEE OU GHT TO HAVE OFFERED THE INCOME FROM THIS PROJECT AMOUNTI NG TO RS.29,60,96,499/- AS INCOME FOR THE ASSESSMENT YEA R UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2006-07. WITH R EGARD TO THE DEDUCTION UNDER SECTION 80IB(10), THE AO WHILE RELYING ON THE DECISION OF THE TRIBUNAL IN M/S LAUKIK DEVEL OPERS V/S DCIT IN ITA NO.532/MUM/2006 DATED 10.7.2006 HAS H ELD THAT THE ASSESSEE IS NOT ENTITLED FOR EVEN PROPORTI ONATE DEDUCTION BECAUSE ALL THE CONDITIONS MENTIONED UNDE R THE PROVISIONS OF SECTION 80IB(10) ARE NOT FULFILLED A ND HENCE HE DENIED THE DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. 4. WITH REGARD TO THE CLAIM OF DEDUCTION UNDER SEC TION 80IB(10) ON PHASE II, BHAKTI PARK, WADALA PROJECT , THE AO ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 5 OBSERVED THAT AN AREA OF 8821.20 SQ.FT HAS BEEN DEVOTED TO SHOPS WHICH EXCEED THE PRESCRIBED LIMIT OF 2000 SQ. FT ( SHOP AREA AS MEASURED BY DEPARTMENTAL VALUATION OF FICER VIDE REPORT DATED 25.2.2005). THE AO FURTHER OBSE RVED THAT THIS PROJECT WAS COMPLETED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2004-05, EVEN THE BENEFIT OF 2000 SQ. FT. IS NOT PERMISSIBLE BECAUSE THE PROVISIONS OF 2000 SQ. FT CAME INTO EXISTENCE W.E.F. 1.4.2005 ONLY AND PRIOR TO T HAT NO COMMERCIAL CONSTRUCTION WAS ALLOWED IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S LAUKIK DEVELOPE RS (SUPRA). ACCORDINGLY, THE ASSESSEE WAS ASKED TO SHOW CAUSE A S TO WHY THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) S HOULD NOT BE DISALLOWED. IN RESPONSE, IT WAS INTERALIA SUBMI TTED BY THE ASSESSEE THAT THE PROJECT IN THE ASSESSEES CASE IT SELF ONLY HOUSING PROJECT AND THE LIMIT OF 5% OR 2000 SQ.F T WILL NOT APPLY TO THE ASSESSEES CASE AS THE PROJECT WAS COM PLETED PRIOR TO 1.4.2005. IT IS IMPORTANT THAT THE DECIS ION IN THE CASE OF M/S LAUKIK DEVELOPERS (SUPRA) IS DISTINGUIS HABLE AND IN VIEW OF THE DECISION IN SAROJ SALES ORGANIZATION (SUPRA) THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTIO N 80IB(10). HOWEVER, THE AO FOR THE SAME REASONS AS IN THE CAS E OF THE MMRDA PROJECT (SUPRA) WAS OF THE VIEW THAT THE ASSE SSEE HAS CONSTRUCTED COMMERCIAL UNITS WHICH IS EXCEEDING THE PRESCRIBED LIMIT AND KEEPING IN VIEW THE ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 6 DECISION OF THE TRIBUNAL IN THE CASE OF M/S LAUKIK DEVELOPERS(SUPRA) HELD THAT THE ASSESSEE IS NOT ENT ITLED TO DEDUCTION UNDER SECTION 80IB(10) OF THE ACT FROM T HIS PROJECT AMOUNTING TO RS.23,22,524/-. ACCORDINGLY THE AO AFTER DISALLOWING THE DEDUCTION UNDER SECTION 80IB(10) ON BOTH PROJECTS, THE AO DETERMINED THE ASSESSEES INCOME A T RS.30,16,87,660/- VIDE ORDER DATED 23.12.2008 PASS ED UNDER SECTION 143(3) OF THE ACT. 5. ON APPEAL, BEFORE THE LEARNED COMMISSIONER OF IN COME TAX (A), THE ASSESSEE CHALLENGED THE INCLUSION OF I NCOME OF MMRDA PROJECT FOR THE YEAR UNDER CONSIDERATION AS A GAINST THE INCOME DECLARED BY THE ASSESSEE IN THE ASSESSM ENT YEAR 2007-08 AND DENIAL OF DEDUCTION UNDER SECTION 80IB( 10) ON MMRDA PROJECT AND BHAKTI PARK, WADALA PROJECT. THE LEARNED COMMISSIONER OF INCOME TAX (A) REMANDED TH E MATTER TO THE AO FOR HIS REPORT. THE AO IN THE RE MAND REPORT WHILE DISTINGUISHING THE DECISION OF THE SPECIAL BE NCH OF THE TRIBUNAL IN M/S BRAHMA ASSOCIATES V/S JCIT (2009) 1 19 ITD 255 (PUNE) RELIED ON BY THE LEARNED COUNSEL FOR T HE ASSESSEE REITERATED THE SAME REASONS AS MENTIONED IN THE ASSESSMENT ORDER AND ALSO RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S LAUKIK DEVELOPERS(SUPRA ) AND HELD THAT IN VIEW OF THE FINDINGS GIVEN IN THE CASE OF M/S ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 7 LAUKIK DEVELOPERS(SUPRA), THE ASSESSEE IS NOT ENTI TLED TO DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. ON R ECEIPT OF THE REMAND REPORT THE LEARNED COMMISSIONER OF INCOM E TAX (A) IN PARAGRAPH 2.2.4 OF HIS ORDER HAS OBSERVED AS UNDER : 2.2.4 LD.AR WAS GIVEN COPY OF REMAND REPORT ON 13.11.2009 AND THEREAFTER HE WAS HEARD ON 29.1.200 9, 5.2.2009, 19.2.2009 AND 22.2.2009. FINALLY HE HAS SUBMITTED HIS WRITTEN SUBMISSIONS VIDE LETTER DATED 22.2.2010 WHICH IS REPRODUCED HEREUNDER : IN CONTINUATION TO SEVERAL HEARING AND SUBMISSION HAD AND MADE WITH YOU ON THE VARIOUS GROUNDS, I MAKE T HE FOLLOWING BRIEF SUBMISSIONS FOR SUMMING UP : IN THE SAID APPEAL WITH REGARD MMRDA PROJECT, 2 GRO UNDS ARE RAISED, ONE ON ASSESSING PROJECT IN AY 2006-07 THAN IN AY 2007-08, WHERE IT HAS BEEN DECLARED AND THE O THER IS DENIAL OF 80IB(10) DEDUCTION GROUND NO.3 IS ON LY WITH REGARD TO 80IB(10) WITH RESPECT TO WADALA PRO JECT. BY AN AGREEMENT DATED 19.8.2007 (COPY AT PAGE 37) T HE APPELLANT HAD AN AGREEMENT TO CONSTRUCT 1756 RESIDENTIAL UNITS OF AREA OF 225 SQ.FT. OF CARPET AREA (PAGE 44 PARA 4). THE PLOT AREA ON WHICH IT WAS T O CONSTRUCT WAS OVER 1 ACRE. THIS CONSTRUCTION WAS UN DER THE SRA SCHEME. COPY OF THE PLAN IS AT PAGE 109 OF PB. THE CONSTRUCTION OF HOUSING PROJECT WAS APPROV ED BEFORE 31.3.2005. THUS 11 BUILDINGS HAVING AREA OF 429869.18 SQ. FT HAD TO BE CONSTRUCTED FOR MMRDA AN D 4 BUILDINGS OF 405645 SQ. FT. TO BE SOLD BY THE APPE LLANT. THIS WHOLE PROJECT OF 15 BUILDINGS WAS APPROVED AS A SINGE PROJECT TO MMRDA (PAGE 119 OF PB). BY 31.3.2006, THE APPELLANT HAD COMPLETED 11 BUILDI NGS FOR MMRDA WHICH WERE HANDED OVER TO THEM IN JULY 2006. THE OTHER 4 BUILDINGS WERE COMPLETED IN THE SUBSEQUENT YEAR I.E. AY 2007-08 AND HENCE IN AY 20 07- 08, THE PROJECT WAS SHOWN AS COMPLETE AND PROFIT DECLARED THEREIN. THE AREA OF MMRDA PROJECT IS APPROX. 51.5% OF THE TOTAL PROJECT. DURING THE YEA R, THE APPELLANTS PROJECT WAS NOT EVEN SUBSTANTIALLY COMP LETE AS HELD IN CHAMPION CONSTRUCTION CO. AND HENCE TH ERE WAS NO REASON FOR THE AO TO SHIFT THE PROFITS TO T HIS YEAR ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 8 IN PLACE OF AY 2007-08. THE AO HAS NOT GIVEN ANY COGENT REASON AS TO WHY IT WOULD NOT ACCEPT THEORY OF SUBSTANTIVE COMPLETION AS ADOPTED IN CHAMPION CONSTRUCTION CO. IN VIEW THEREOF, THE AO IS WRONG IN ASSESSING THE PROFIT OF MMRDA DURING THE YEAR AND THE SAME NEEDS TO BE DELETED. IN THE EVENT, THE PROJEC T IS HELD TO BE COMPLETE IN THIS YEAR, THEN THE APPELLAN T IS ENTITLED FOR 80IB(10) DEDUCTION FOR THE FOLLOWING REASONS : 1. THE AO ASSESSED ONLY MMRDA PROJECT DURING THE YEAR I.E. OF 11 BUILDINGS. THE OTHER 4 BUILDIN GS HAVE BEEN ASSESSED IN AY 2007-08. THERE IS NO COMMERCIAL CONSTRUCTION IN MMRDA BUILDINGS. IF THERE IS COMMERCIAL CONSTRUCTION, IT IS ONLY IN THE 4 BUILDINGS ASSESSED IN AY 2007-08. THUS THE AO CANNOT DENY 80IB(10) AS THERE IS NO COMMERCIAL CONSTRUCTION. 2. WITHOUT PREJUDICE, IF THE AO CONSIDERS THAT PROJ ECT OF 11 + 4 BUILDINGS IS ONE PROJECT, THEN RESIDENTI AL BUILDINGS (4 IN NUMBER ) AND COMMERCIAL UNITS HAVE BEEN TAXED IN AY 2007-08. THEY HAVE NOT BEEN TAXED PROTECTIVELY IN AY 2006-07. THUS THE ACT OF THE AO IN TAXING 11 BUILDINGS OF MMRDA IN THIS YEAR IS NOT JUSTIFIED. 3. CBDT INSTRUCTION NO.4/2009 DATED 30.6.2009 HAS STATED THAT 80IB(10) CAN BE CLAIMED ON A YEAR TO YEAR BASIS. THUS ON MMRDA PROJECT WHICH IS ONLY RESIDENTIAL 80IB(10) SHOULD BE ALLOWED. 4. SINCE THE PROJECT WAS COMMENCED PRIOR TO 31.3.2005 THE LAW AS IT STOOD THEN WOULD APPLY. TH IS VIEW HAS BEEN UPHELD IN THE CASE OF HARSHA P. DOSHI, MUMBAI TRIBUNAL REPORTED IN.IF THAT IS SO THEN EVEN IF IT IS CONSIDERED THAT COMMERCIAL CONSTRUCTION IS PART OF THE PROJECT, THEN SINCE THE COMMERCIAL AREA CONSTRUCTED IS LESS THAN 5%, (AS ACCEPTED BY THE AO IN HIS REMAND REPORT) THE DECISION OF SPECIAL BENCH IN CASE OF BRAHMA ASSOCIATES WOULD HOLD GOOD AND BENEFIT OF 80IB(10) CANNOT BE DENIED. THE SPECIAL BENCH ALSO HELD THAT IF ON A STAND ALONE BASIS, IF THE APPELLANT CAN PRO VE THAT THE RESIDENTIAL AREA CONSTRUCTED IS ON A LAND OVER 1 ACRE, THEN 80IB (10) SHOULD BE GRANTED AND ALSO HELD THAT IF CONSTRUCTION OF COMMERCIAL AREA I S ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 9 LESS THAN 10% THE DEDUCTION UNDER SECTION 80IB(10) IS ALLOWABLE. 5. IN THE CASE OF B.K.PATEL ENTERPRISES REPORTED IN (2009) 125 TTJ 974 (PUNE), IT HAS BEEN HELD THAT 80IB(10) IS ELIGIBLE EVEN IF THE APPELLANT IS ADOPT ING PERCENTAGE COMPLETION METHOD. 6. THE AO HAS RELIED ON MUMBAI TRIBUNAL DECISION IN THE CASE OF LAUKIK DEVELOPERS, WHICH HAS BEEN OVERRULED BY SPECIAL BENCH DECISION IN THE CASE OF BRAHMA ASSOCIATES REPORTED IN 119 ITD 255 (PUNE) 7. THE DECISION UNDER SECTION 80IB(10) IS A BENEFICIAL DEDUCTION. IN THE CASE OF VANDANA PROP . IN ITA NO. 125/M/2007 (MUM) DECIDED ON 29.4.2009 AND AIR DEVELOPERS IN ITA NO.447/NAG/2007 DECIDED ON 21.5.2008, IT HAS BEEN HELD THAT WHERE A MAJORITY OF RESIDENTIAL UNITS HAVE BUILT UP AREA OF LESS THAN 1500 SQ. FT AND FEW ARE EXCEEDING THE BUILT UP AREA, THERE WOULD BE NO JUSTIFICATION TO DISALLOW THE ENTIRE DEDUCTION UNDER SECTION 80IB(10 ). IN VIEW THEREOF, I SUBMIT THAT THERE IS NO REASON TO DENY DEDUCTION UNDER SECTION 80IB(10) AND THE SAME SHOULD BE ALLOWED 6. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, TH E LEARNED COMMISSIONER OF INCOME TAX (A) ON THE ISSU E OF ASSESSABILITY OF THE INCOME OF MMRDA PROJECT ASSE SSED IN THE YEAR UNDER CONSIDERATION AS AGAINST DECLARED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2007-08, OBSERVED THAT IT IS NOT IN DISPUTE THAT MMRDA PROJECT WAS COMPLETED IN THE MONTH OF AUGUST, 2005 AND OCCUPATION CERTIFICATES W ERE ISSUED BY MMRDA IN THE MONTH OF AUGUST, 2005 AND HELD THAT IN VIEW OF THE EXPLANATION BELOW SUB-SECTION 10(A)(II) OF SECTION 80IB THE MMRDA PROJECT HAS TO BE TREATED A S ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 10 COMPLETED IN FINANCIAL YEAR 2005-06 RELEVANT TO THE ASSESSMENT YEAR 2006-07 AND HENCE THE AO WAS JUSTI FIED IN CHARGING THE SUM OF RS.29,60,96,499/- AS INCOME OF THE MMRDA PROJECT IN THE YEAR UNDER CONSIDERATION. ON THE ISSUE OF ALLOWABILITY OF DEDUCTION UNDER SECTION 80 IB(10), THE LEARNED COMMISSIONER OF INCOME TAX (A) HELD THAT T HE PROVISION GOVERNING THE CLAIM OF DEDUCTION UNDER SE CTION 80IB(10) DOES NOT PERMIT THE BUILT UP AREA MORE THA N 2000 SQ. FT OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHM ENTS, HENCE THE AO HAS RIGHTLY DISALLOWED THE DEDUCTION UNDER SECTION 80IB(10) IN RESPECT OF MMRDA PROJECT AND BHAKTI PARK PROJECT, WADALA AND ACCORDINGLY, DISMISSED TH E APPEAL. 7. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A), THE ASSESSEE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AN DIN THE CIRCUMSTANCES OF THE CASE AND IN LAW :- 1A) THE LEARNED CIT(A) ERRED IN NOT ACCEPTING PROJE CT COMPLETION METHOD OF ACCOUNTING AND ERRED IN FOLLOW ING AOS VIEW THAT MMRDA PROJECT GOT COMPLETED IN AY 2006-07, THOUGH THE SAME GOT COMPLETED IN AY 2007-0 8 AND WAS ALSO DECLARED IN THAT YEAR. B) THE LEARNED CIT(A) ERRED IN NOT GIVING A FINDING THAT WHEN PROJECT WAS COMPLETED ONLY TO THE EXTENT OF 51.5%, THE SAME CANNOT BE TREATED AS COMPLETE OR SUBSTANTIALLY COMPLETE IN AY 2006-07 IN VIEW OF CHAMPION CONSTRUCTION COMPANYS CASE. ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 11 C) THE LEARNED CIT(A) ERRED IN RELYING UPON EXPLANATION TO SUB-SEC 10(A)(II) OF SECTION 80IB F OR ASSESSING METHOD OF ACCOUNTING THOUGH THE EXPLANAT ION IS FOR THE PURPOSE OF SECTION 80IB(10) AND WHEN TH E CIT(A) AND AO ARE DENYING 80IB(10), THEN THE EXPLANATION CANNOT GET INVOKED. 2A) THE LEARNED CIT(A) ERRED IN NOT GRANTING DEDUCTION UNDER SECTION 80IB(10) TO THE APPELLANT O N MMRDA PROJECT AND BHAKTI PARK, CHEMBUR. B) THE LEARNED CIT(A) ERRED IN DENYING DEDUCTION UNDER SECTION 80IB (10) ON THE GROUND THAT COMMERCI AL AREA IN EXCESS OF 2000 SQ. FT WAS CONSTRUCTED BY TH E APPELLANT AND HENCE THERE WAS VIOLATION OF SECTION 80IB(10)(D) WHILE NOT CONSTRUING THE FACT THAT PROJ ECT HAD COMMENCED PRIOR TO THE INTRODUCTION OF SUB-SEC.(D) AND HENCE THE SUB-SECTION WAS NOT APPLICABLE TO THE APPELLANT. C) THE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE SPECIAL BENCH DECISION IN THE CASE OF BRAHMA ASSOCIATES GRANTING BENEFIT FOR COMMERCIAL AREA AS PART OF A HOUSING PROJECT. D) THE LEARNED CIT(A) ERRED IN NOT GRANTING 80IB(10) ON THE MMRDA PROJECT WHICH COMPRISED OF RESIDENTIAL BUILDINGS ONLY AND THE COMMERCIAL ARE A, IF ANY, WAS TAXED IN AY 2007-08 8. AT THE TIME OF HEARING, BOTH THE PARTIES HAVE AG REED THAT IN VIEW OF THE RECENT DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S BR AHMA ASSOCIATES (2011) (333 ITR 289) (BOM), THE ASSESSEE IS ENTITLED TO THE DEDUCTION UNDER SECTION 80IB(10) O N BOTH THE PROJECTS I.E. MMRDA PROJECT AND BHAKTI PARK PROJEC T, CHEMBUR, THEREFORE, THE ISSUE MAY BE DECIDED ACCORD INGLY. ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 12 9. ON THE ISSUE OF TAXABILITY OF INCOME OF MMRDA PROJECT IN THE YEAR UNDER CONSIDERATION AS AGAINST SHOWN IN THE ASSESSMENT YEAR 2007-08 BY THE ASSESSEE, THE LEARNE D COUNSEL FOR THE ASSESSEE SUBMITS THAT SINCE THE AS SESSEE IS ENTITLED TO THE DEDUCTION UNDER SECTION 80IB(10) ON THE ABOVE PROJECTS ALSO, THEREFORE, HE HAS NO OBJECTION IF TH E INCOME OF THE MMRDA PROJECT IS ASSESSED IN THE YEAR UNDER CONSIDERATION SUBJECT TO THE ALLOWANCE OF DEDUCTION UNDER SECTION 80IB(10) WHICH WAS NOT OBJECTED TO BY THE LEANED D.R. THE LEARNED COUNSEL FOR THE ASSESSEE HAS AL SO PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE ASS ESSEES OWN CASE FOR THE ASSESSMENT YEARS 2004-05 AND 2005 -06, WHEREIN THE TRIBUNAL FOLLOWING THE DECISION OF TH E SPECIAL BENCH OF THE TRIBUNAL IN BRAHMA ASSOCIATES (SUPRA) HAS VACATED THE REVISION ORDERS PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF TH E ACT. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE FURT HER FIND THAT IT IS ALSO NOT IN DISPUTE THAT BOTH THE HOUSING PRO JECTS I.E. MMRDA AND BHAKTI PARK, CHEMBUR WERE APPROVED BY TH E LOCAL AUTHORITY AS A WHOLE PRIOR TO 1.4.2005. WE F URTHER FIND ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 13 THAT IT IS ALSO NOT IN DISPUTE THAT MMRDA PROJECT WAS COMPLETED IN THE MONTH OF AUGUST, 2005 AND OCCUPAT ION CERTIFICATES WERE ISSUED BY THE MMRDA IN THE MONTH OF AUGUST, 2005. THIS BEING SO AND IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE LEARNED C OUNSEL FOR THE ASSESSEE WE ARE OF THE VIEW THAT THE REVENUE AUTHORITIES WERE JUSTIFIED IN ASSESSING THE INCOME OF THE MMRDA PROJECT IN THE ASSESSMENT YEAR UNDER CONSIDER ATION I.E. 2006-07 AS AGAINST THE INCOME SHOWN BY THE ASS ESSEE FOR THE ASSESSMENT YEAR 2007-08. WE FURTHER FIND THAT THE DEDUCTION UNDER SECTION 80IB(10) WAS DENIED BY THE REVENUE AUTHORITIES ON THE GROUND THAT ACCORDING TO THE REL EVANT CLAUSE (D) OF SUB-SECTION 10 OF SECTION 80IB THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMEN TS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIV E PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJE CT OR TWO THOUSAND SQUARE FEET, WHICHEVER IS LESS. HOWEVER, WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE BY THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN BRAHMA ASSOCIATE (SUPRA) WHEREIN THE PUNE SPECIAL BENCH OF THE TRIBUNAL VIDE PARAGRAPH 120 APPEARING AT PAGES 331 AND 332 OF THE REPORT HAS HELD AS UNDER : 120. TO SUM UP, THE CONCLUSIONS ARRIVED AT BY THIS SPECIAL BENCH ARE AS FOLLOWS : ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 14 (A) THE DEDUCTION UNDER S. 80-IB(10), AS APPLICABLE PRIOR TO 1ST APRIL, 2005, SUBJECT TO AND IN THE LIGHT OF THE OBSERVATIONS MADE IN THE PRECEDING PARAS, IS ADMISS IBLE IN CASE OF A HOUSING PROJECT COMPRISING RESIDEN TIAL HOUSING UNITS AND COMMERCIAL ESTABLISHMENTS. IN CAS E THESE PROJECTS ARE APPROVED AS HOUSING PROJECTS BY THE LOCAL AUTHORITY, SUCH AN APPROVAL AS HOUSING PROJEC T IS SUFFICIENT FOR THE PURPOSES OF ELIGIBILITY. IN ANY OTHER CASE, WHERE 90 PER CENT OR MORE OF THE TOTAL BUILT- UP AREA IS USED FOR DWELLING UNITS, IN ACCORDANCE WITH THE SCHEME OF S. 80-IB (10), THE BENEFIT OF DEDUCTION UNDER S. 80- IB(10) WILL NOT BE DECLINED. IN CASE COMMERCIAL USE OF BUILT-UP AREA IS MORE THAN 10 PER CENT BUT THE RESI DENTIAL SEGMENT OF THE PROJECT SATISFIES REQUIREMENTS OF S. 80- IB(10) ON STANDALONE BASIS, I.E. (I) THE SIZE OF TH E PLOT, EXCLUDING PORTION UNDER COMMERCIAL UNIT, IS MORE TH AN MINIMUM AREA OF ONE ACRE, (II) RESIDENTIAL UNITS BU ILT ON SUCH AREA MUST SATISFY CONDITION OF CL. (C) OF THE PROVISION, AND (III) OTHER NECESSARY CONDITIONS ARE FULFILLED, AND WHERE INCOME FROM CONSTRUCTION OF RESIDENTIAL DWELLING UNITS CAN BE WORKED OUT ON STANDALONE BASIS, DEDUCTION UNDER S. 80-IB(10) WILL BE AVAILABLE IN RESPECT OF RESIDENTIAL SEGMENT OF THE PROJECT. (B) THE DEDUCTION UNDER S. 80-IB(10) IS AVAILABLE I N RESPECT OF PROFITS OF HOUSING PROJECT AS A WHOLE, A ND, AS SUCH, IT IS NOT RELEVANT AS TO WHAT IS THE PORTION OF PROFITS WHICH CAN BE SAID TO BE ATTRIBUTABLE TO RESIDENTIAL UNITS. THIS IS SUBJECT TO THE RIDER THAT IN CASE COMMERCIA L USE OF BUILT-UP AREA IN A PROJECT IS MORE THAN 10 PER C ENT AND, FOR THIS REASON THE PROJECT CANNOT BE SAID TO BE A PREDOMINANTLY HOUSING PROJECT, BUT, IN TERMS OF OBSERVATIONS MADE IN PARA 115 ABOVE, THE ASSESSEE I S ENTITLED TO DEDUCTION IN RESPECT OF RESIDENTIAL UNI T SEGMENT OF THE OVERALL PROJECT ON FULFILLMENT OF NE CESSARY CONDITIONS, THE ENTITLEMENT OF INCENTIVE DEDUCTION WILL BE CONFINED TO ONLY TO THE PROFITS TO THE RESIDENTIAL SEGMENT OF THE OVERALL PROJECT. (C) THE LIMIT ON COMMERCIAL USE OF BUILT-UP AREA AS PRESCRIBED BY CL. (D) OF S. 80-IB(10) HAS NO RETROS PECTIVE APPLICATION, AND IT APPLIES ONLY W.E.F. THE ASST. Y R. 2005- 06. 11. ON FURTHER APPEAL BY THE REVENUE IN CIT V/S B RAHMA ASSOCIATES (2011) 333 ITR 289 (BOM), IT HAS BEEN OB SERVED ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 15 AND HELD BY THE HONBLE JURISDICTIONAL HIGH COURT (PAGE 291 HEAD NOTE): THE ASSESSEE HAD UNDERTAKEN A CONSTRUCTION PROJECT AT PUNE UNDER THE LAYOUT APPROVED BY THE PUNE MUNICI PAL CORPORATION WHICH IS THE LOCAL AUTHORITY. THE PROJE CT CONSISTS OF FIFTEEN RESIDENTIAL BUILDINGS AND TWO COMMERCIAL BUILDINGS. THE LOCAL AUTHORITY HAD APPRO VED THE SAID PROJECT AS 'RESIDENTIAL PLUS COMMERCIAL'. THE PERCENTAGE OF THE COMMERCIAL AREA TO THE TOTAL AREA OF THE PLOT WAS 20.83 PERCENT. THE PROJECT COMMENCED O N AUGUST, 14, 2000 AND WAS COMPLETED ON OCTOBER, 3, 2005. THE ASSESSEE CLAIMED SPECIAL DEDUCTION IN RESPECT OF THE PROFITS. THE CLAIM WAS REJECTED BY THE AO AND THE COMMISSIONER (APPEALS). THE TRIBUNAL HE LD THAT WHERE THE PROJECT IS APPROVED AS RESIDENTIAL P LUS COMMERCIAL, THE DEDUCTION UNDER SECTION 80IB(10) W OULD BE ALLOWABLE ONLY IF THE TOTAL BUILT-UP AREA USED F OR RESIDENTIAL UNITS IN THE PROJECT IS 90 PER CENT OR MORE; WHERE THE COMMERCIAL USER WAS MORE THAN 10 PER CENT OF THE TOTAL BUILT UP AREA AND THE PROFITS OF THE RESI DENTIAL UNITS CAN BE WORKED OUT ON STAND ALONE BASIS, THEN DEDUCTION UNDER SECTION 80-IB(10) WOULD BE ALLOWABL E ONLY ON THE RESIDENTIAL UNITS. ON APPEAL TO THE HIG H COURT: HELD, THAT CLAUSE (D) INSERTED TO SECTION 80IB(10) WITH EFFECT FROM APRIL 1, 2005 IS PROSPECTIVE AND NOT RETROSPECTIVE AND HENCE CANNOT BE APPLIED TO THE PE RIOD PRIOR TO APRIL 1, 2005. SINCE DEDUCTIONS UNDER SEC TION 80IB(10) WERE ON THE PROFITS DERIVED FROM THE HOUS ING PROJECTS APPROVED BY THE LOCAL AUTHORITY AS A WHOLE , THE TRIBUNAL WAS NOT JUSTIFIED IN RESTRICTING SECTION 8 0IB(10) DEDUCTION ONLY TO A PART OF THE PROJECT. HOWEVER, I N THE PRESENT CASE, SINCE THE ASSESSEE HAS ACCEPTED THE DECISION OF THE TRIBUNAL IN ALLOWING SECTION 80IB(1 0) DEDUCTION TO A PART OF THE PROJECT, THE FINDING OF THE TRIBUNAL IN THAT BEHALF COULD NOT BE DISTURBED. 12. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BR OUGHT ON ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 16 RECORD BY THE REVENUE, WE RESPECTFULLY THE ABOVE D ECISIONS AND KEEPING IN VIEW THAT THE DECISION OF THE TRIB UNAL IN LAUKIK DEVELOPERS (SUPRA), HAS BEEN CONSIDERED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BRAHM A ASSOCIATES (SUPRA), AND ALSO BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S BRAHMA ASSOCIATES (SUPRA), WE ARE OF THE VIEW THAT THE REVENUE AUTHORITIES WERE NOT JUST IFIED IN NOT FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN BRAHMA ASSOCIATES (SUPRA) AND IN DENYING THE CLAIM OF THE ASSESSEE. IN THIS VIEW OF THE MATTER, WE RESPECTFUL LY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN BRAHMA ASSOCIATES (SUPRA) HOLD THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION UNDER SECTION 80IB(10) OF THE ACT AS UNDISPUTEDLY THE DEDUCTION UNDER SECTION 80IB(10) I S ON THE PROFIT DERIVED FROM HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY AS A WHOLE. THE ORDER PASSED BY THE AO AND THE LEARNED COMMISSIONER OF INCOME TAX (A) IN DISALLOWI NG THE CLAIM OF THE ASSESSEE IS REVERSED AND CONSEQUENTLY , THE CLAIM OF THE ASSESSEE OF DEDUCTION UNDER SECTION 8 0IB(10) ON BOTH PROJECTS I.E MMRDA AND BHAKTI PARK PROJECTS IS ALLOWED. THE GROUNDS TAKEN BY THE ASSESSEE ARE THE REFORE PARTLY ALLOWED. ITA NO.2406/MUM/2010 (ASSESSMENT YEAR:2006-07) 17 13. IN THE RESULT, THE ASSESSEES APPEAL STANDS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH AUGUST, 2011. SD SD (R.K.PANDA) (D.K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30TH AUGUST, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI