DCIT 10(3), MUMBAI V. HAWARE CONSTRUCTION P.L TD, NAVI MUMBAI

ITA 245/MUM/2014

• Counselvise Citation: 24519914 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 09-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G M DOSS
• Assessee Lawyers: S K MUTSADDI; J D MISTRI
• Section: 80IB

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.245/MUM/2014 ASSESSMENT YEAR: 2010-11 DY. COMMISSIONER OF INCOME TAX-10(3), ROOM NO.451, 4 TH FLOOR, AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI-400020 / VS. M/S HAWARE CONSTRUCTION PVT. LTD. 416, VARDHMAN MARKET, SECTOR-17, VASHI, NAVI MUMBAI ( / REVENUE) ( !'# $ /ASSESSEE) P.A. NO. AABCH3858F / REVENUE BY SHRI G.M.DOSS !'# $ / ASSESSEE BY SHRI J.D. MISTRI & SHRI S.K. MUTSADDI % & ' $ ( / DATE OF HEARING : 16/06/2015 ' $ ( / DATE OF ORDER: 01/07/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 04/10/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 2 DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S 80IB(10) OF THE INCOME TAX ACT, 1961 (HEREINAFTER T HE ACT), WITHOUT APPRECIATING THE FACT THAT THE PROJECT OF T HE ASSESSEE RECEIVED APPROVAL ON 10/10/2003 I.E. PRIOR TO 01/04 /2005 AND THE AMENDMENT WAS INTRODUCED BY THE FINANCE ACT , 2004 WITH RESPECT TO 5% COMMERCIAL AREA IGNORING TH E CONDITION THAT THE FLAT SHOULD BE LESS THAN 100 SQ. FT. AND THE AREA OF TWO FLATS CANNOT BE COMBINED EVEN THOUG H THESE WERE SOLD TO THE SAME PERSON. 2. DURING HEARING OF THIS APPEAL, SHRI G.M. DOSS, LD. DR, DEFENDED THE CONCLUSION ARRIVED AT IN THE ASSES SMENT ORDER. ON THE OTHER HAND, SHRI J.D. MISTRY, LD. COU NSEL FOR THE ASSESSEE DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER BY CONTENDING THAT THE IMPUGNED ISSU E IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL (ITA NO.686/MUM/2010) FOR AY 2006-07 FOR W HICH THE LD. COUNSEL INVITED OUR ATTENTION TO PARA 14, 2 9, 30 AND 32 OF THE AFORESAID ORDER OF THE TRIBUNAL, THEREFOR E, FOR READY REFERENCE WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION:- 14. THE GROUNDS OF APPEAL NO. 1 I) & 1 II) BY THE ASSESSEE READ AS UNDER :- 1. ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS), (CIT(A)) HAS ERRED IN : I) NOT GRANTING DEDUCTION OF RS.7,21,60,252/- AS C LAIMED BY THE APPELLANT U/S.80IB(10) OF THE INCOME TAX ACT (ITA), IN RESPECT OF THE PROJECTS COMPRISING OF GULMOHAR & SPLENDOUR CONSTRU CTED AT PLOT NO.: 52/20 & 56/20, SECTOR 20, KHARGHAR, NAVI MUMBA I. M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 3 II) NOT APPRECIATING THAT SECTION 80-IB(10) OF THE ITA IS AN INCENTIVE PROVISION FOR ECONOMIC GROWTH AND HAS TO BE INTERPR ETED LIBERALLY. IN DOING SO, THE AO AS WELL AS CIT(A) HAVE NOT FOLL OWED THE PRINCIPLES IN THIS REGARD AS LAID DOWN BY THE APEX COURT IN BAJAJ TEMPO VS. CIT 196 ITR 188 (SC). 14.1 FACTS OF THE CASE, IN BRIEF, ARE THAT FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE FILED ITS RETURN OF I NCOME SHOWING PROFIT FROM THEIR PROJECT GULMOHAR AND SPLENDOR WHICH HAS BEEN CONSTRUCTED AT PLOT NO.52/20 AND 56/20, SECTOR -20, KHARGAR, NAVI MUMBAI. THE ENTIRE PROFITS EARNED BY THE ASSESSEE AMOUNTING TO RS.7,21,60,252/- ON THIS PROJECT HAS B EEN CLAIMED AS EXEMPT U/S.80IB(10) OF THE I.T. ACT, 1961. 15. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO FURNISH THE DETAILS OF THE PROJECT UNDE RTAKEN /COMPLETED AND EXPLAIN AS TO HOW THE CONDITIONS LAI D DOWN U/S. 80IB(10) OF THE I.T. ACT, 1961 WERE SATISFIED SO AS TO JUSTIFY THE CLAIM OF DEDUCTION U/S.80IB. FROM THE VARIOUS DETAI LS FURNISHED BY THE ASSESSEE FROM TIME TO TIME, THE AO NOTED THA T THE PROJECT COMMENCED ON 10.10.2003 AND THE ASSESSEE COMPANY RE CEIVED APPROVAL/COMMENCEMENT CERTIFICATE ON 29.03.2006 FRO M CIDCO. THE ASSESSEE RECEIVED PART OCCUPANCY CERTIFICATE ON 29.09.2006 WHEREIN IT HAS BEEN INDICATED THE RESIDENTIAL CONST RUCTED AREA AT 4605.208 SQ MTR. (UNITS 126) AND COMMERCIAL CONSTRU CTED AREA AT 682.216 SQ. MTR (UNITS 45). FROM THE APPROVAL PLAN SUBMITTED BY THE ASSESSEE, THE AO NOTED THE FOLLOWING :- TOTAL PLOT AREA - 15599.98 SQ. MTR. PERMISSIBLE BUA - 23399.97 SQ. MTR. PERMISSIBLE COMMERCIAL AREA - 460.939 SQ.MTR. M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 4 15.1 FROM THE APPROVAL LETTER GIVEN BY CIDCO, THE A O NOTED THAT THE ASSESSEE WAS SUPPOSED TO BUILT THE MAXIMUM COMM ERCIAL AREA FOR CONSTRUCTION AT 15%. HOWEVER, THE ASSESSEE IN THE INSTANT CASE HAS CONSTRUCTED TOTAL COMMERCIAL AREA OF 682.216 SQ MTR. OUT OF 5287.424 SQ. MTR. OF PROJECT COMPLETED AS PER PART OCCUPANCY CERTIFICATE ISSUED BY CIDCO VIDE ITS LETT ER BEARING NO. CIDCO/BP/ATPO/1338 DATED 29.09.2006. THUS THE COMME RCIAL AREA CONSTRUCTED BY THE ASSESSEE WORKS OUT TO 6.75% . ACCORDING TO THE AO THE AMENDMENT OF THE FINANCE ACT, 2004 PE GS THE MAXIMUM PERMISSIBLE COMMERCIAL AREA TO BE AT 5% OF TOTAL PROJECT AREA OR 2000 SQ. FT. WHICHEVER IS LESS. SIN CE THE COMMERCIAL AREA CONSTRUCTED BY THE ASSESSEE AT 682. 216 SQ. MTRS IS MORE THAN 2000 SQ. FT. AND MORE THAN 5% OF THE T OTAL PROJECT AREA THEREFORE, THE AO WAS OF THE OPINION THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S. 80 IB(10) OF THE ACT. 16. AS REGARDS THE CONDITION THAT THE RESIDENTIAL U NIT HAS A MAXIMUM BUILT UP AREA OF ONE THOUSAND SQUARE FEET, THE AO NOTED THAT SOME OF THE PURCHASERS HAVE BOUGHT ADJACENT FL ATS AND THE SUM TOTAL OF THESE FLATS EXCEED 1000 SQ. FT. RELYIN G ON A COUPLE OF DECISIONS, THE AO WAS OF THE OPINION THAT THE ADJAC ENT HOUSES CONSTITUTE A SINGLE HOUSE FOR THE PURPOSE OF INCOM E FROM HOUSE PROPERTY. SINCE SOME OF THE PURCHASERS HAVE PURCHA SED TWO OR MORE SUCH FLATS WHICH ARE ADJACENT TO EACH OTHER AN D THE TOTAL AREA EXCEEDS 1000 SQ. FT. THE AO WAS OF THE OPINION THAT THE CONDITIONS PRESCRIBED U/S.80IB(10) ARE NOT FULFILLE D. SINCE THE ASSESSEE FAILED TO COMPLY WITH THE SPECIFIC CONDITI ONS LAID DOWN IN SUB-CLAUSE (A) AND (C) OF SECTION 80IB(10), THE ASS ESSING OFFICER, RELYING ON A COUPLE OF DECISIONS, HELD THAT THE ASS ESSEE IS NOT ENTITLED TO CLAIM THE DEDUCTION U/S. 80IB(10) AMOUN TING TO RS.7,07,88,251/-. THE AO FURTHER NOTED THAT AS PER THE PROVISION M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 5 OF SECTION 80IB(10), THE PROJECT SHOULD BE A HOUSIN G PROJECT ONLY. SINCE THIS PROJECT IS APPROVED BY THE LOCAL AUTHORI TY I.E. CIDCO AS RESIDENTIAL CUM COMMERCIAL PROJECT, THE PROFIT OF T HE SAME IS NOT ENTITLED TO DEDUCTION U/S. 80IB(10). REJECTING THE VARIOUS EXPLANATION GIVEN BY THE ASSESSEE AND RELYING ON A COUPLE OF DECISIONS THE AO REJECTED THE CLAIM MADE U/S. 80IB( 10) OF THE I.T. ACT. 17. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT WHE N THE PROJECT WAS APPROVED ON 10.10.2003, THE RESTRICTIVE CONDITI ONS TO COMMERCIAL AREA WERE NOT THERE IN THE STATUTE BOOK AND THE CONDITIONS AS SPELT BY A.O. WAS BROUGHT OUT BY THE FINANCE ACT NO.2 OF 2004. AS REGARDS, THE OBJECTIONS OF THE AO THAT TWO FLATS WERE SOLD TO THE SAME PERSON AND HENCE THE AREA OF THE TWO FLATS COMBINED TOGETHER EXCEED 1,000 SQ. FT. AND, THEREFO RE, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80 IB(10), IT WA S SUBMITTED THAT THE ASSESSEE HAD NOT SOLD THE TWO UNITS AS ONE CONS OLIDATED UNIT AFTER JOINING THE SAME, THEREFORE, THE BENEFIT OF D EDUCTION U/S.80IB(10) CANNOT BE DENIED TO THE ASSESSEE. AS R EGARDS, THE OBSERVATIONS OF THE AO THAT THE AREA OF SOME FLATS ARE EXCEEDING 1000 SQ. FT, IT WAS SUBMITTED THAT THE SAME IS DUE TO WRONG INCLUSION OF OPEN TERRACE AREA IN THE BUILT UP AREA . IT WAS SUBMITTED THAT THE DEFINITION OF BUILT UP AREA WA S BROUGHT TO THE STATUTE BOOK BY THE FINANCE ACT 2004 W.E.F. 01. 04.2005 I.E. A.Y. 2005-06. BEFORE THAT, OPEN TERRACE AREA WAS NOT TO BE INCLUDED IN THE BUILT UP AREA. IT WAS ALSO SUBMITTED THAT CID CO AUTHORITIES APPROVED THE PROJECT PRIOR TO THE AMENDMENT OF FINA NCE ACT, 2004 WHICH INCLUDED BALCONIES AND TERRACES. THE DEC ISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES REPORTED IN 122 TTJ 443 WAS ALSO BOUGHT TO THE NOTI CE OF THE LD. CIT(A). IT WAS ACCORDINGLY SUBMITTED THAT THE ASSES SEE IS ENTITLED M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 6 TO CLAIM THE BENEFIT OF DEDUCTION U/S. 80IB(10) AMO UNTING TO RS.7,07,88,251/-. 18. HOWEVER THE LD. CIT(A) WAS NOT CONVINCED WITH T HE ARGUMENTS ADVANCED BEFORE HIM. HE OBSERVED THAT THE RE IS NO SUCH FINDING GIVEN BY THE SPECIAL BENCH OF THE TRIB UNAL IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) WITH REFERENCE TO THE PROJECTS WHICH WERE APPROVED ON 10.10.2003. THE DECISION IN THE SAID CASE RELATES TO THE COMMERCIAL AREA BEFORE AMENDMENT WHI CH HAS BEEN ALLOWED FROM 5% TO 10%. SINCE THE CASE OF THE ASSESSEE RELATES TO THE POST AMENDMENT PERIOD I.E. A.Y. 2006 -07, THEREFORE, IT IS NOT COVERED BY THE DECISION OF THE SPECIAL BE NCH OF THE TRIBUNAL. AS REGARDS THE OBJECTION TO THE TREATMENT OF TWO FLATS SOLD TO SAME PERSON AS SINGLE UNIT AND, THEREFORE, THE AREA EXCEEDS 1000 SQ. FT, HE NOTED THAT THE PURCHASER OF THE PRO PERTY IS A SINGLE PERSON AND HE HAS PURCHASED MORE THAN 1,000 SQ. FT. UNIT AND HENCE THIS ARGUMENT OF THE ASSESSEE CANNOT BE ACCEP TED. AS REGARDS THE SUBMISSION OF THE ASSESSEE THAT OPEN TE RRACE ARE TO BE EXCLUDED FROM THE BUILT UP AREA, THE LD. CIT(A) W AS OF THE VIEW THAT THE AMENDED PROVISION IS APPLICABLE FOR A.Y. 2 005-06 AND ONWARDS AND SHALL APPLY TO THE ASSESSEE AS WELL AND HENCE THE AO WAS RIGHT IN INCLUDING THE TERRACES IN THE BUILT U P AREA WHICH CLEARLY FALLS UNDER THE DEFINITION OF BUILT UP AREA AS PROVIDED U/S. 80IB (14)(A). RELYING ON A COUPLE OF DECISIONS, THE LD. CIT(A) WAS OF THE OPINION THAT TAXING STATUTES HAVE TO BE STRI CTLY CONSTRUED AND NOTHING CAN BE READ IN IT. SINCE THE ASSESSEE I N THE INSTANT CASE HAS NOT FULFILLED THE CONDITIONS MENTIONED IN SECTION 80IB(10), THE LD. CIT(A) REJECTED THE VARIOUS ARGUM ENTS ADVANCED BEFORE HIM AND UPHELD THE ACTION OF THE AO . M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 7 19. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E ASSESSEE IS IN APPEAL BEFORE US. 20. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT VARIOUS SUBMISSIONS GIVEN BEFORE THE LD. CIT(A) ALONG WITH THE COPIES OF AGREEMENTS WERE NOT CONSIDERED BY HIM PROPERLY. HE SUBMITTED THAT THE PROVISIONS OF SECTION 80IB(10)(D) RESTRICT ING THE BUILT UP AREA OF SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS I NCLUDED IN THE HOUSING PROJECT AT 5% OR 2,000 SQ. FT. WAS BROU GHT TO THE STATUTE BOOK BY THE FINANCE ACT NO.2 W.E.F 01.04.20 05. PRIOR TO ITS SUBSTITUTION THE SECTION GRANTING 100% DEDUCTION OF INCOME ARISING FROM HOUSING PROJECTS DID NOT CONTAIN ANY R ESTRICTION ON THE AREA OF SHOPPING COMPLEX INCLUDED IN THE HOUSIN G PROJECTS THAT WERE APPROVED PRIOR TO 31.03.2005. SINCE IN TH E INSTANT CASE THE HOUSING PROJECT NAMELY NISARG PROJECT WAS APP ROVED ON 10.10.2003 I.E. PRIOR TO 31.03.2005, THEREFORE, THE RE IS NO RESTRICTION OF AREA OF SHOPPING COMPLEX. THE LD. CO UNSEL FOR THE ASSESSEE ALSO RELIED ON THE DECISION OF THE TRIBUNA L IN THE CASE OF SAROJ SALES ORGANISATION VS. ITO REPORTED IN 115 TT J 485, ACIT VS. SHETH DEVELOPERS REPORTED IN 33 SOT 277 AND HIRANAN ADANI AKRUTI JV VS. DCIT REPORTED IN 39 SOT 498. 21. AS REGARDS THE OBJECTION OF THE REVENUE THAT TW O OR MORE FLATS HAVE BEEN SOLD TO THE SAME PERSON AND, THEREFORE TH E BUILT UP AREA OF THE UNIT EXCEEDS 1,000 SQ. FT, THE LD. COUN SEL FOR THE ASSESSEE SUBMITTED THAT THE AREA OF THESE FLATS CAN NOT BE COMBINED TOGETHER SINCE THE ASSESSEE HAS SOLD THESE TWO FLATS IN SEPARATE AGREEMENTS. THE FLATS WERE APPROVED BY THE CIDCO AS TWO SEPARATE FLATS. HE SUBMITTED THAT THERE IS NO E VIDENCE WITH THE AO THAT THE ASSESSEE HAS SOLD THESE TWO FLATS A S A SINGLE FLAT AFTER COMBINING THE TOTAL AREA TOGETHER. HE SUBMITT ED THAT THE M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 8 REVENUE HAS NOT VERIFIED EVEN TILL TODAY AS TO WHET HER THESE FLATS ARE USED AS ONE FLAT OR TWO FLATS. HE SUBMITTED THA T THE ASSESSEE IS NOT RESPONSIBLE IF AFTER PURCHASING THESE TWO FLATS SEPARATELY, THESE ARE USED BY THE PURCHASER AS ONE FLAT. REFERR ING TO THE VARIOUS PAGES OF THE PAPER BOOK, THE LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT IN MOST OF THE CASES THE BUILT UP AR EA OF EACH FLAT IS LESS THAN 1,000 SQ. FT. EVEN AFTER INCLUDING THE TE RRACE AREA. HE SUBMITTED THAT AREA OF NONE OF THE FLATS EXCEEDS 1, 000 SQ.FT, IF THE TERRACE AREA IS EXCLUDED. HE SUBMITTED THAT IN THE COMMON PARLANCE, TERRACE IS NOT TO BE ACCOUNTED FOR IN THE BUILT UP AREA. EVEN AS PER CIDCO RULES, TERRACE AREA IS NOT INCLUD ED IN THE BUILT UP AREA AND THEREBY, NOT ACCOUNTED FOR IN THE FSI. HE SUBMITTED THAT THE DEFINITION OF BUILT UP AREA IS INTRODUCE D BY THE FINANCE ACT, 2004 BY INTRODUCING SUB-SECTION 14(A) IN SECTI ON 80-IB W.E.F. 01.04.2005 AND, THEREFORE, THE SAME IS NOT APPLICAB LE TO THE PROJECTS APPROVED AND COMMENCED BEFORE 01.04.2005. REFERRING TO THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS. SHETH DEVELOPERS REPORTED IN 33 SOT 277, HE SUBMITTED THA T IT HAS BEEN HELD THAT PRIOR TO 01.04.2005, BALCONY WOULD NOT FO RM PART OF THE BUILT UP AREA. THE DEFINITION OF BUILT UP AREA IN TRODUCED BY THE FINANCE ACT, 2005 WAS MANIFESTLY PROSPECTIVE. IT HA S FURTHER BEEN HELD IN THE SAID DECISION THAT WHERE, ANY UNIT EXCL UDING THE BALCONY AREA, WAS OF MORE THAN 1000 SQ. FT., THE AS SESSEE WAS ENTITLED TO THE DEDUCTION U/S.80IB(10) ON PRO-RATA BASIS, IN RESPECT OF THE FLATS OF 1000 SQ. FT. OR LESS AND TH E DEDUCTION CANNOT BE DENIED. 22. THE LD. DR ON THE OTHER HAND, RELIED ON THE ORD ER OF THE LD. CIT(A). M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 9 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE LD. CIT (A) AND THE PAPER BOOK FILED BEFORE US. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. FROM THE BODY OF THE ASS ESSMENT ORDER, WE FIND THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR HAS SHOWN THE SALES DETAILS FOR THE YEAR ENDING 31.03.2 006 WHICH IS AS UNDER : KHARGHAR NODE A) GULMOHAR SALE OF FLATS/SHOPS RS.4,55,67,937/- OTHER CHARGES RS. 37,54,920/- EXTRA AMENITIES RS. 33,832/- RS.4,92,73,211/- B) SPLENDOR SALE OF FLATS / SHOPS RS.9,78,11,526/- OTHER CHARGES RS.1,10,21,647/- EXTRA AMENITIES RS.1,38,535/- RS.10,88,28,637/- TOTAL RS.15,81,0 1,848/- 24. WE FIND FROM THE BODY OF THE ASSESSMENT ORDER THAT THE PROJECT COMMENCED ON 10.10.2003 AND THE ASSESSEE CO MPANY RECEIVED APPROVAL/COMMENCEMENT CERTIFICATE ON 29.03 .2006 FROM CIDCO. WE FIND THE AO DENIED THE BENEFIT OF DEDUCTI ON U/S.80IB(10) FOR THE FOLLOWING REASONS:- 1. THE COMMERCIAL AREA IN THE HOUSING PROJECT BEING 682.216 SQUARE METERS EXCEEDS 5% OF THE TOTAL PROJECT AREA OR 2000 SQ. FT. 2. SOME OF THE PURCHASERS HAVE PURCHASED ADJACENT F LATS, THE SUM TOTAL OF THESE FLATS EXCEEDS 1000 SQ. FT. THEREFORE , THE SAME IS NOT ENTITLED TO THE BENEFIT OF DEDUCTION U/S.80IB(10). FOR THIS PURPOSE, HE TOOK THE EXAMPLE OF ALEYOMANA EDICULA WHO HAS PU RCHASED THE FLAT NO. G-102 & G-103. SIMILARLY NEW CITY EDUCATIO N TRUST HAS PURCHASED THE FLAT NO. H-101, H-102, H- 104, H-105 & H-106, THE TOTAL OF WHICH COMES TO 4321 SQ.FT. M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 10 3. MAJORITY OF FLATS SOLD IN PROJECT SPLENDOR 52/20 AND SPLENDOR 56/20 WERE EXCEEDING AREA OF 1000 SQ. FT. INCLUDING BALCONY AND TERRACE, AS ACCORDING TO THE AO BALCONY AND TERRACE AREA HAS TO BE EXCLUDED FOR THE PURPOSE OF CALCULATING THE AREA OF 1000 SQ. FT. 25. WE FIND THE LD. CIT(A) WHILE DECIDING THE ISSUE REJECTED THE VARIOUS DECISIONS CITED BEFORE HIM HAD CONFIRME D THE ACTION OF THE AO. 26. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT BALCONY AND TERRACE AREA HAS TO BE EXCLUDED FOR THE PURPOSE OF CALCULATION OF THE CARPET AREA OF 1000 SQ. FT. SIMI LARLY SINCE THE ASSESSEE HAS SOLD EACH FLAT UNDER SEPARATE AGREEMEN TS, AND THE ASSESSEE HAS NOT SOLD TWO FLATS BY COMBINING THEM T OGETHER AS ONE FLAT TO ONE PARTY, THEREFORE, THE AREA OF TWO FLATS OR MORE THAN TWO SHOULD NOT BE COMBINED EVEN THOUGH THESE FLATS WERE SOLD TO ONE PERSON. SIMILARLY IT IS THE SUBMISSION OF THE LD. C OUNSEL FOR THE ASSESSEE THAT WHEN THE APPROVAL IS OBTAINED PRIOR T O 31.03.2005, THE CONDITION OF SHOPPING AREA NOT EXCEEDING 5% OF BUILT UP AREA OR 2000 SQ. FT WHICHEVER IS LESS, AS INTRODUCED BY THE SUBSEQUENT AMENDMENT ARE NOT APPLICABLE IN RESPECT OF PROJECTS APPROVED AND COMMENCED BEFORE 01.04.2005. 27. WE FIND MERIT IN THE ABOVE SUBMISSIONS OF THE L D. COUNSEL FOR THE ASSESSEE. AS REGARDS THE ALLEGATION OF THE REVE NUE THAT THE COMMERCIAL AREA IN THE PROJECT IS MORE THAN 5%, WE FIND THE ISSUE NOW HAS BEEN SETTLED IN VIEW OF THE VARIOUS DECISIO NS OF THE CO- ORDINATE BENCHES OF THE TRIBUNAL, INCLUDING THE DEC ISION IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) WHICH HAS BEEN UP HELD BY THE HON'BLE BOMBAY HIGH COURT. M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 11 28. WE FIND THE CO-ORDINATE BENCH OF THE TRIBUNAL I N THE CASE OF SHRI GIRDHARILAL K. LULLA WHERE ONE OF US (THE ACCO UNTANT MEMBER) IS A PARTY VIDE ITA NO : 4207/MUM/2009 ORDE R DATED 30.05.2011 HAS HELD AS UNDER :- WE HAVE CONSIDERED THE RIVAL SUBMISSION MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF A.O. AND THE CIT(A) AND THE PAPE R BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VAR IOUS DECISIONS CITED BEFORE US. WE FIND THE A.O. DENIED THE BENEFIT OF DEDUCTION U/S 80IB(10) OF THE ACT ON THE GROUND THAT THE COMMERCIAL AREAS IN THE PROJECT IS 3399 SQ. FT. WHICH IS WELL ABOVE 2000 SQ. FT. OR 5% OF THE PROJECT WHICH IS ONE OF THE PRECONDITIONS FOR CLAIMING DEDUCTION U/S 80IB (10) OF THE ACT. WE FIND THE CONDITION OF 2000 S Q.FT. OR 5% OF THE PROJECT WAS BROUGHT TO THE STATUTE BY THE FINANCE (NO. 2) ACT, 2004 W.E.F. 1.4.2005. PRIOR TO THIS INSERTION, THERE WAS N O SUCH CONDITION. WE FIND THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF HIRANANDANI AKRUTI JV (SUPRA) AT PARA NO. 26 & 27 HAS OBSERVED AS UNDER:- 26. THERE IS TRUTH IN THE PLEA OF HARDSHIP PUT FOR TH ON BEHALF OF THE ASSESSEE. LET US ASSUME AN ASSESSEE APPLIES AND OBT AINS APPROVAL OF A LOCAL AUTHORITY FOR BUILDING A HOUSING PROJECT IN THE PREVIOUS YEAR RELEVANT TO AY 02-03. AS PER THE LAW AS IT STOOD IN THE PREVIOUS YEAR RELEVANT TO AY 02-03 UPTO 04-05, THERE WAS NO TIME LIMIT WITHIN WHICH THE CONSTRUCTION HAS TO BE COMPLETED OR ANY R ESTRICTION REGARDING COMMERCIAL AREA THAT CAN BE BUILT IN A HO USING PROJECT. LET US ASSUME THAT THE ASSESSEE COMPLIES WITH ALL T HE CONDITIONS FOR ALLOWING RELIEF U/S.80-IB(10) I.E., IT IS APPROVED AS A HOUSING PROJECT BY THE LOCAL AUTHORITY BUT THE AREA OF COMMERCIAL S PACE AS APPROVED BY THE LOCAL AUTHORITY IS MORE THAN 2000 SQ.FT. THE ASSESSEE COMMENCES THE PROJECT BUT IS ABLE TO COMPLETE ONLY IN THE PREVIOUS YEAR RELEVANT TO AY 05-06. AS PER THE CHANGE IN LAW FROM AY 05-06 WITH REGARD TO THE AREA OF COMMERCIAL SPACE IN A HO USING PROJECT THE ASSESSEE WOULD LOOSE HIS ELIGIBILITY TO CLAIM D EDUCTION. IN SUCH CASES THERE IS DEFINITELY GRAVE HARDSHIP TO THE ASS ESSEE. THE INTERPRETATION SOUGHT TO BE CANVASSED BY THE LEARNE D D.R. WILL ALSO M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 12 LEAD TO ABSURD SITUATION. LET US ASSUME AN ASSESSEE OBTAINS APPROVAL OF A HOUSING PROJECT PRIOR TO 1-4- 2005 SA Y IN PREVIOUS YEAR RELEVANT TO AY 02-03. HE BUILDS COMMERCIAL SPA CE IN EXCESS OF 2000 SQ.FT. IN THE HOUSING PROJECT. HE FOLLOWS PERC ENTAGE COMPLETION METHOD OF ACCOUNTING AND OFFERS PROFITS IN AY 02-03 TO 04-05, CLAIMS EXEMPTION U/S.80-IB(10) AND IS ALLOWED EXEMPTION. O N THE SAME PROJECT IN AY 05-06, THE ASSESSEE WOULD NOT GET THE BENEFIT OF SEC.80- IB(10). WE THEREFORE FIND NO GROUNDS TO TAKE A VIEW DIFFERENT FROM THE ONE TAKEN BY THE CO-ORDINATE BENCH OF THE TRIBU NAL IN THE CASE OF SAROJ SALES ORGANIZATION (SUPRA). 27. WE ARE OF THE VIEW THAT WE ARE NOT SUPPLYING AN Y WORDS TO THE STATUTE BUT ARE ONLY HOLDING THAT THE LAW AS IT EXI STED IN THE A.Y.04- 05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLU M REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11.2003 AND WHEN THE ASSESSEE COMMENCED DEVEL OPMENT IS TO BE APPLIED. THEREFORE THE SUBMISSIONS OF THE LEARNE D D.R. IN THIS REGARD CANNOT BE ACCEPTED. WE ARE OF THE VIEW THAT THE LEGISLATURE WOULD NOT HAVE INTENDED TO TAKE AWAY A VESTED RIGHT WITHOUT CLEAR WORDS TO THAT EFFECT IN THE PROVISIONS OF SEC.80-IB (10) AS AMENDED BY THE FINANCE ACT, 2005, W.E.F. 1-4-2005. WE THERE FORE HOLD FOLLOWING THE DECISION IN THE CASE OF SAROJ SALES O RGANISATION (SUPRA) THAT THE LAW AS IT EXISTED IN THE A.Y.04-05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17 .11.2003 AND WHEN THE ASSESSEE COMMENCED DEVELOPMENT IS TO BE AP PLIED. 29. SINCE IN THE INSTANT CASE, THE PROJECT UNDISPUTED LY WAS APPROVED BEFORE 1.4.2005 THEREFORE THE PROVISIONS OF THE OLD LAW WILL APPLY. THEREFORE,, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE BEING IN CONSONANCE WITH THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IS UPHELD. SO FAR AS THE ORDER OF THE LD. C IT(A) RESTRICTING THE DEDUCTION ON ACCOUNT OF COMMERCIAL COMPONENT IS CON CERNED, WE FIND THE ISSUE NOW STANDS DECIDED IN FAVOUR OF THE ASSESSE E BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F BRAHMA ASSOCIATES (SUPRA) WHERE THE DECISION OF SPECIAL BE NCH OF THE M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 13 TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) HAS BEEN UPHELD ACCORDING TO WHICH THE PROJECT HAVING COMMERCIAL AREA U PTO 10% OF THE PROJECT IS ELIGIBLE FOR DEDUCTION U/S 80IB(10) O F THE ACT. SINCE ADMITTEDLY THE COMMERCIAL AREA IN THE INSTANT CASE IS LESS THAN 10% OF THE BUILT UP AREA, THEREFORE, THE ASSESSEE IS ENTI TLED TO THE DEDUCTION U/S 80IB(10) AND THE LD. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE DEDUCTION. IN THIS VIEW OF THE MATTER, THE GROUND RAIS ED BY THE REVENUE IS DISMISSED AND THE GROUND RAISED BY THE ASSE SSEE IN THE C.O. IS ALLOWED. 29. SINCE THE APPROVAL IN THE INSTANT CASE WAS OBT AINED ON 10.10.2003 I.E. PRIOR TO 01.04.2005, THEREFORE, IN VIEW OF THE DECISION CITED ABOVE AND IN VIEW OF THE CONSISTENT DECISIONS OF THE CO-ORDINATE BENCHES OF THE TRIBUNAL IN VARIOUS OTHE R CASES (COPIES OF WHICH ARE PLACED IN THE PAPER BOOK) WE H OLD THAT THE AMENDMENT AS INTRODUCED BY THE FINANCE ACT, 2004 W. E.F. 01.04.2005 I.E. A.Y. 2005-06, IS NOT APPLICABLE TO ASSESSEES CASE. THEREFORE, THE ASSESSEE CANNOT BE DENIED THE BENEFI T OF DEDUCTION U/S.80IB(10) FOR THE COMMERCIAL AREA EXCEEDING 5% O F THE BUILT UP AREA OR 2000 SQ. FT. WHICHEVER IS LESS. 30. AS REGARDS THE SECOND OBJECTION OF THE REVENUE THAT THE ASSESSEE HAS SOLD TWO OR MORE THAN TWO FLATS TO ONE PARTY, THE COMBINED AREA OF WHICH IS MORE THAN 1000 SQ. FT, WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AREA OF TWO FLATS SHOULD NOT BE COMBINED EVEN THOUGH THE TW O FLATS WERE SOLD TO ONE PERSON BECAUSE (A) THE BUILT UP AREA OF EACH FLAT AS APPROVED BY CIDCO IS LESS THAN 1000 SQ. FT AS PER T HE APPROVED PLAN AND OCCUPANCY CERTIFICATE RECEIVED. (B) THE AS SESSEE HAS SOLD EACH FLAT UNDER SEPARATE AGREEMENTS. (C) THE ASSESS EE HAS NOT SOLD TWO FLATS BY COMBINING THESE TOGETHER AS ONE FLAT T O ONE PARTY AND D) THERE IS NO EVIDENCE WITH THE DEPARTMENT THAT TH E ASSESSEE HAS M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 14 SOLD AFTER COMBINING THE TWO FLATS TOGETHER AND SOL D TO ONE PARTY. FURTHER THERE IS NO EVIDENCE ON RECORD TO SUGGEST T HAT THE ASSESSEE ITSELF HAS ADVERTISED THAT THE FLATS WERE OF MORE THAN OF 1000 SQ. FTS AND THAT MERELY TO GET THE BENEFIT OF DEDUCTION U/S.80IB(10) HE DREW THE PLAN IN SUCH A MANNER THAT EACH RESIDENTIAL UNIT WAS SHOWN AS NOT MORE THAN 1000 SQ . FT OF BUILT UP AREA. IT IS ALSO NOT THE CASE OF THE REVENUE THA T EACH FLAT IN THE HOUSING PROJECT UNDERTAKEN BY THE ASSESSEE COULD NO T HAVE BEEN USED AS AN INDEPENDENT OR AS A SELF CONTAINED RESID ENTIAL UNIT NOT EXCEEDING 1000 SQ. FT OF BUILT UP AREA AND THERE WO ULD BE A COMPLETE HABITABLE RESIDENTIAL UNIT ONLY IF TWO OR MORE FLATS ARE JOINED WITH EACH OTHER WHICH WOULD ULTIMATELY EXCEE D 1000 SQ. FT. OF BUILT UP AREA. THEREFORE, MERELY BECAUSE SOME OF THE PURCHASERS HAVE PURCHASED MORE THAN ONE FLAT AND CO MBINED THE SAME, THE SAME IN OUR OPINION, WILL NOT DISENTITLE THE ASSESSEE TO CLAIM THE DEDUCTION U/S. 80IB(10). 31. FURTHER THE CONDITION THAT NOT MORE THAN ONE RE SIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO ANY PERSON NO T BEING AN INDIVIDUAL HAS BEEN INSERTED BY THE FINANCE (NO.2) ACT, 2009 W.E.F. 01.04.2010. THEREFORE, THE ALLEGATION OF THE REVENU E IS ALSO NOT APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR. 32. NOW COMING TO THE THIRD ALLEGATION OF THE REVEN UE THAT THE BUILT UP AREA OF SOME OF THE FLATS IS MORE THAN 100 0 SQ. FT, WE FIND THE ASSESSEE HAS ALREADY SUBMITTED THE CHART WHICH GIVES THE BUILT UP AREA AS ANALYZED BY THE AO. IT IS THE CASE OF TH E REVENUE THAT IF THE TERRACE AREA IS INCLUDED, THE TOTAL BUILT UP AR EA IN SOME OF THE CASES EXCEEDS 1000 SQ. FT. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE DEFINITION OF BUILT UP A REA AS GIVEN IN SUB SECTION 14(A) OF SECTION 80IB IS INSERTED BY TH E FINANCE M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 15 (NO.2) ACT, 2004 W.E.F. 01.04.2005 AND, THEREFORE, THE SAME IS APPLICABLE ONLY IN RESPECT OF THE PROJECTS APPROVED AFTER 01.04.2005. WE FIND MERIT IN THE ABOVE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. THE COORDINATE BENCHES OF THE TRIBUNAL ARE TAKING THE CONSISTENT VIEW THAT WHEN THE ASSESS EE SUBMITS THE PROPOSAL FOR CARRYING OUT THE DEVELOPMENT OF A HOUS ING PROJECT, THEN WHATEVER LAW IS THERE ON THAT DAY, THAT WOULD REGULATE THE RIGHTS OF THE ASSESSEE. IN THE INSTANT CASE, UNDISP UTEDLY THE PROJECT WAS APPROVED ON 10.10.2003 I.E. PRIOR TO 01.04.2005 , THEREFORE, WE ARE OF THE OPINION, THAT THE REVENUE AUTHORITIES ARE NOT JUSTIFIED IN INCLUDING THE BALCONY/TERRACE IN THE B UILT UP AREA SO AS TO DENY THE BENEFIT OF DEDUCTION U/S. 80IB(10). FURTHER THE ASSESSEE HAS GIVEN THE CHART, COPY OF WHICH IS PLAC ED AT PG. NO. 165, ACCORDING TO WHICH THE AO IN SOME OF THE CASES HAS ADOPTED THE WRONG FIGURE, ALTHOUGH THE BUILT UP AREA INCLUD ING THE BALCONY PUT TOGETHER DOES NOT EXCEED 1000 SQ. FT. 32.1 IT HAS BEEN HELD IN VARIOUS DECISIONS THAT IF SOME OF THE FLATS IN A HOUSING PROJECT EXCEED THE PERMISSIBLE LIMIT, THAN THE BENEFIT OF DEDUCTION U/S.80IB(10) HAS TO BE GRANTED ON PRO- RATE BASIS AND THE ASSESSEE CANNOT BE DENIED THE EXEMPTION. HO WEVER, SINCE THE AREA OF NONE OF THE FLATS EXCEEDS 1000 SQ. FT. AFTER EXCLUDING THE BALCONY/TERRACE, THE ASSESSEE, IN OUR OPINION, HAS NOT VIOLATED THIS CONDITION. 33. CONSIDERING THE TOTALITY OF THE FACTS OF THE CA SE AND IN VIEW OF THE DECISIONS CITED ABOVE, WE DO NOT FIND ANY REASO N WHY THE ASSESSEE SHALL NOT BE GRANTED THE BENEFIT OF DEDUCT ION U/S. 80IB(10). WE THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO GRANT THE BENEFIT OF DEDUCTION U/S .80IB(10). THE GROUNDS OF APPEAL NO. 1(I) AND 1(II) BY THE ASSESSE E ARE ALLOWED. M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 16 2.1. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL AND T HE CONCLUSION/FACTUAL FINDING RECORDED IN THE ORDER OF THE TRIBUNAL, IF KEPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT THE TRIBUNAL HAS ALREADY DELIBERATED UPON THE ISSUE AND FOUND THAT AS PER THE OCCUPANCY CERTIFICATE, ISSUED BY CIDCO, LETTER BEARING NUMBER CIDCO/BP/ATPO/1338 DATED 29/09/2006, CONSTRUCTED TOTAL COMMERCIAL AREA OF 682.216 SQ. MT. OUT OF 5287.424 SQ. MTS. OF THE PRO JECT, THUS, THE SAME WORKS OUT TO 6.75%. AS PER THE LD. ASSESSING OFFICER, SINCE, THE COMMERCIAL ARE IS MORE THAN 5% OF THE TOTAL PROJECT, THEREFORE, THE ASSESSEE IS NOT ENTIT LE TO DEDUCTION U/S 80IB(10) OF THE ACT. SO FAR AS, THE CONTENTION WITH RESPECT TO MAXIMUM B UILT UP AREA OF 1,000 SQ. FT. IS CONCERNED, THIS ISSUE H AS BEEN DEALT WITH IN PARA 16 OF THE ORDER OF THE TRIBUNAL. THE PROJECT WAS APPROVED ON 10 TH OCTOBER 2003, THEREFORE, THE RESTRICTIVE CONDITION WAS NOT ON THE STATUTE BOOK H AS BEEN DEALT WITH IN PARA 17 OF THE ORDER OF THE TRIBUNAL. FINALLY, THE TRIBUNAL CONSIDERING THE OBSERVATION MADE IN TH E ASSESSMENT ORDER AS WEEL AS THE FINDING CONTAINED I N THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS DEALT WITH THE OBJECTIONS AT PAGE 39 (PARA-14), PAG E-50 (PARA-29), PARA 30 & 30 AND FINALLY DECIDED IN FAVO UR OF THE ASSESSEE. NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE BY THE REVENUE, THUS, FOLLOWING THE AFORESAID ORDER OF THE M/S HAWARE CONSTRUCTION PVT. LTD ITA NO.245/MUM/2014 17 TRIBUNAL, FOR AY 2006-07, WE UPHELD THE ORDER OF TH E LD. COMMISSIONER OF INCOME TAX (APPEALS). FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON16/06/2015. SD/ - (RAJENDRA) SD/ - (JOGINDER SINGH) ' # / ACCOUNTANT MEMBER $ # / JUDICIAL MEMBER MUMBAI; * DATED : 01/07/2015 F{X~{T? P.S/. .. !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. 2 2 3$ ( ,- ) / THE CIT, MUMBAI. P4. 2 2 3$ / CIT(A)- , MUMBAI 5. 560$ ! , 2 ,-(,! 7 , / DR, ITAT, MUMBAI 6. 8'9 / GUARD FILE. ! / BY ORDER, 15-$0$ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI