Income-tax Officer, V. Shri Krishna Gajanan Kesarkar, Sindhudurg

ITA 246/PUN/2014

• Counselvise Citation: 24624514 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 07-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 246/PN/2014 (ASSESSMENT YEAR : 2010-11) ITO, WARD-2(3), KUDAL .. APPELLANT VS. SHRI KRISHNA GAJANAN KESARKAR, A/P. KALMATH, TAL : KANKAVLI, DIST : SINDHUDURG PAN NO.ABTPK5317L .. RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI CHANDIP SINGH DATE OF HEARING : 27-04-2015 DATE OF PRONOUNCEMENT : 30-04-2015 ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 28-11-2013 OF THE CIT(A), KOLHAPUR RELA TING TO ASSESSMENT YEAR 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF BUILDER AND C ONTRACTOR. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS CLAIMED DEDUCTION OF RS.83,03,841/- U/S. 80IB(10) OF THE AC T. THIS WAS THE PROFIT AND GAINS FROM UNDERTAKING, DEVELOPING A ND BUILDING OF HOUSING PROJECT 'KRISHNA NAGARI' A/P JANAVLI, KANKA VLI. THE ASSESSEE PURCHASED PLOT AT S.NO. 1831 SITUATED AT J ANAVALI, TEHSIL- KANKAVLI, DIST. SINDHUDURG, ADMEASURING 1-5 8-0 GUNTHAS 2 (3.9 ACRES). LAYOUT PLAN FOR 36 PLOTS WAS APPROVED BY SDO. KANKAVLI AND NON-AGRICULTURAL USE ORDER WAS ISSUED BY SDO, KANKAVLI FOR 35 PLOTS FOR CONSTRUCTION OF BUNGALOWS / ROW HOUSES. COMMENCEMENT CERTIFICATE WAS ISSUED BY GRAM PANCHAYAT ON 02-02-2006. A REFERENCE MADE BY THE AS SESSING OFFICER TO THE DEPARTMENTAL VALUATION CELL WHO REPO RTED THAT THE SCHEME STANDS INCOMPLETE SINCE OUT OF THE ABOVE PRO JECT, AS MANY AS 06 PLOTS WERE KEPT OPEN, WITHOUT ANY CONSTRUCTIO N. THE COMMENCEMENT CERTIFICATE ISSUED BY THE GRAM PANCHAY AT WAS IN RESPECT OF 52 BUNGALOWS / BUILDINGS ON 36 PLOTS. H OWEVER, CONSTRUCTION WAS COMPLETED IN RESPECT OF 30 PLOTS O NLY. THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN WHY THE DEDUCTI ON SHALL NOT BE DISALLOWED. IT WAS SUBMITTED THAT THE ASSESSEE H AD COMPLETED 43 RESIDENTIAL UNITS ON 31 PLOTS AND HANDED OVER TH E POSSESSION OF THE SAME TO VARIOUS PERSONS. THE ASSESSEE ALSO FURN ISHED DETAILED STATEMENT SHOWING PLOT NUMBER, AREA OF UNIT, NAME O F BUYERS, DATE OF AGREEMENT AND SALE CONSIDERATION. IT WAS SU BMITTED THAT THE ASSESSEE HAS COMPLIED WITH ALL THE CONDITIONS S PECIFIED UNDER SECTION 80IB(10) AS AREA OF EACH UNIT WAS LESS THAN 1500 SQ.FT. HOWEVER, DUE TO SEVERE ECONOMIC RECESSION IN THE RE AL ESTATE, THERE WAS NO BUYER IN RESPECT OF 04 PLOTS (NOS. 26, 27, 28 AND 29) AND IT DID NOT MAKE ANY COMMERCIAL SENSE TO CONSTRU CT ANY RESIDENTIAL UNIT WHICH MAY NOT CATER TO THE REQUIRE MENTS OF PROSPECTIVE BUYERS. UNDER THE CIRCUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE, THE ASSESSEE COULD NOT CARRY OUT A NY CONSTRUCTION OF THESE PLOTS. IT WAS FURTHER SUBMITTED THAT EACH BUNGALOW / ROW 3 HOUSE IS A UNIT IN ITSELF AND IS A HOUSING PROJECT FOR THE PURPOSE OF SECTION 80IB(10), THEREFORE, THE DEDUCTION SHOULD N OT BE DISALLOWED. RELYING ON VARIOUS CASE DECISIONS THE ASSESSEE SUBMITTED THAT NO DISALLOWANCE U/S.80IB(10) SHOULD BE MADE. 3. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE. DISTINGUISHING THE VARIOUS DECISIONS CITED BEFORE HIM AND OBSERVING THAT THE ASSESSEE HAS NOT COMPLETED THE PROJECT WITHIN THE STIPULATED PERIOD, THE AO DISALL OWED THE CLAIM OF DEDUCTION U/S.80IB(10) AMOUNTING TO RS.83,03,841 /- CLAIMED BY THE ASSESSEE. 4. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE AR EA OF EACH BUILDING WAS LESS THAN 1500 SQ.FT. AND ALL THE BUIL DINGS WERE COMPLETED WITHIN THE PERIOD SPECIFIED U/S.80IB(10) OF THE ACT. THE VARIOUS SUBMISSIONS MADE BEFORE THE AO WERE ALS O BROUGHT TO THE NOTICE OF THE CIT(A). IT WAS ACCORDINGLY AR GUED THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF DEDU CTION U/S.80IB(10). 5. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DIRECTED THE AO TO DELETE THE DISALLOWANC E BY OBSERVING AS UNDER: 6. HAVING GONE THROUGH THE SUBMISSIONS OF THE APPELLA NT AND THE ASSESSMENT ORDER I FIND THAT THE APPELLANT FULF ILLS ALL THE CONDITIONS SPECIFIED UNDER SECTION 80IB(10). EXCEPT IN RESPECT OF 04 PLOTS THE APPELLANT HAD DULY COMPLETED THE PROJEC T WITHIN STIPULATED TIME AFTER OBTAINING NECESSARY CLEARANCES F ROM SDO AND GRAM PANCHAYAT. IT WAS DUE TO COMMERCIAL EXPEDIE NCY THAT CONSTRUCTION WAS NOT DONE ON 04 PLOTS DUE TO LACK OF DEMAND. THESE PLOTS ARE VACANT EVEN NOW. AS PER THE DECISION BY ITAT, MUMBAI IN THE CASE OF MUDHIT MADANLAL GUPTA V/S ACIT (2011) 4 51 DTR 217 IT WAS HELD THAT WHERE OUT OF 04 BUILDING S 'A', 'B', 'C' AND 'D', THE APPELLANT HAD COMPLETED BUILDINGS 'A', 'B' AND 'C' BUT COULD NOT COMPLETE BUILDING 'D', THE TRIBUNAL REJEC TED ASSESSING OFFICER'S ACTION OF DISALLOWING DEDUCTION UNDER SECTIO N 80IB(10) HOLDING THAT RESIDENTIAL UNITS ARE INDEPENDENT UNITS A ND HAVE TO BE TREATED AS SEPARATE HOUSING PROJECTS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IB(10). SIMILAR DECISION WA S GIVEN BY HONOURABLE ITAT, PUNE, BENCH 'B' IN THE CASE OF BHUJ BAL CONSTRUCTION IN ITA NO. 1486/PN/209, 282/PN/2010 AND 620/PN/2012. IN THE APPELLANT'S CASE ALSO WHERE OUT OF 36 PLOTS CONSTRUCTION WAS COMPLETED IN 30 PLOTS, THE APPELLANT IS DULY ELIGIBLE FOR DEDUCTION UNDER SEDITION 80IB(10). THER EFORE, DISALLOWANCE IS DELETED AND APPELLANT'S GROUND IS ALLOW ED. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. IN FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW , THE HON'BLE CIT(A) IS NOT JUSTIFIED IN ALLOWING THE ASSESSEE 'S CLAIM OF DEDUCTION UNDER SECTION 80IB (10) OF THE ACT, WHEN T HE ASSESSEE DOES NOT FULFILL THE PROVISION OF SEC. 80IB(10)(A)(III ) OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE CIT(A) IS NOT JUSTIFIED IN ACCEPTING THE ASSESSEE'S CL AIM TO ALLOW THE DEDUCTION, WHEN THE PROVISIONS OF SEC. 80IB( 10) OF THE ACT, CATEGORICALLY SPEAKS OF DEDUCTION FOR ENTIRE PRO FITS DERIVED FROM SUCH HOUSING PROJECTS, SUBJECT TO FULFILLMENT OF ALL THE CONDITIONS PRESCRIBED U/S.80IB(10)(A) TO 80IB(10)(F) O F THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE CIT(A) IS NOT JUSTIFIED IN ACCEPTING THE ASSESSEE'S C LAIM IGNORING THAT THE NECESSARY CONDITION OF COMPLETION O F PROJECT BEFORE THE DUE DATE, AS ENVISAGED UNDER EXPLANATION ( II) TO SECTION 80IB(10)(A) OF THE INCOME TAX ACT, 1961, HAS NOT BEEN SATISFIED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE CIT(A) HAS FAILED TO APPRECIATE THAT THE CERTIFI CATE DATED 29- 01-2013 ISSUED BY SARPANCH, JANAWALI GRAMPANCHAYAT IS FOR COMPLETION OF ONLY 43 BUNGALOWS/ ROW HOUSES ON 31 PLOT S AND NOT IN RESPECT OF COMPLETE PROJECT CONSISTING OF 52 B UNGALOWS / ROW HOUSE ON 36 PLOTS APPROVED BY SUB-DIVISIONAL OFFIC ER KANKAVLI ON 20-06-2005, AND AS PER COMMENCEMENT CER TIFICATE ISSUED BY GRAM PANCHAYAT ON 02-02-2006. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS), KOLHAPUR BE VACATED AND THAT O F THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, RAISE, ANY OF THE ABOVE, OR ANY OTHER GROUNDS RAISED. 5 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. IN THE INSTANT CASE, THERE IS NO DISPUTE TO THE FACT THAT OUT OF 3 6 PLOTS ON WHICH 52 BUNGALOWS/BUILDINGS WERE SANCTIONED FOR CONSTRUC TION, THE ASSESSEE HAS COMPLETED CONSTRUCTION OF 43 BUILDINGS IN RESPECT OF 30 PLOTS AND ONLY 6 PLOTS HAVE BEEN KEPT OPEN ON WH ICH NO CONSTRUCTION HAS COMMENCED. WE FIND THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION U/S.80IB(10) ON T HE GROUND THAT THE ASSESSEE HAS NOT COMPLETED THE CONSTRUCTIO N OF ALL THE 52 BUILDINGS IN RESPECT OF THE 36 PLOTS. IT IS THE CO NTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT HE IS ENTITLED TO PRO PORTIONATE DEDUCTION IN RESPECT OF THE BUILDINGS COMPLETED PRI OR TO THE SPECIFIED DATE WHICH OTHERWISE FULFIL ALL OTHER CON DITIONS LAID DOWN U/S.80IB(10) OF THE I.T. ACT. IN THE INSTANT CASE, IT IS AN ADMITTED FACT THAT THE AREA OF THE PROJECT IS MORE THAN 1 ACRE, THE AREA OF EACH UNIT IS LESS THAN 1500 SQ.FT. AND THE ASSESSEE ACCORDING TO THE REVENUE HAS VIOLATED ONE OF THE C ONDITIONS, I.E. COMPLETED CONSTRUCTION IN RESPECT OF 30 PLOTS OUT O F 36 PLOTS FOR WHICH THE PERMISSION WAS OBTAINED. THE PUNE BENCHE S OF THE TRIBUNAL ARE CONSISTENTLY TAKING THE VIEW THAT ASSE SSEE IS ENTITLED TO PROPORTIONATE DEDUCTION IN RESPECT OF THE FLATS/ HOUSES COMPLETED BEFORE THE PRESCRIBED TIME LIMIT FOR THE PROJECT WHICH OTHERWISE FULFILS THE OTHER CONDITIONS LAID DOWN IN PROVISIONS OF SECTION 80IB(10) OF THE I.T. ACT. WE THEREFORE ARE OF THE 6 CONSIDERED OPINION THAT ASSESSEE IS ENTITLED TO PRO PORTIONATE DEDUCTION IN RESPECT OF THE FLATS/BUNGALOWS CONSTRU CTED BY IT THE CONSTRUCTION OF WHICH WAS COMPLETE BEFORE THE SPECI FIED DATE. SINCE IN THE INSTANT CASE THE ASSESSEE HAS COMPLETE D CONSTRUCTION ONLY ON 30 PLOTS AND NO ACTIVITY HAS TAKEN PLACE IN RESPECT OF THE REMAINING 6 PLOTS, THEREFORE, OUT OF THE 36 PLOTS T HE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S.80IB(10) IN RESPECT OF THE FLATS/BUNGALOWS CONSTRUCTED ON 30 PLOTS. THE LD.CI T(A) WHILE ALLOWING THE CLAIM OF DEDUCTION U/S.80IB(10) OF THE I.T. ACT HAS RELIED UPON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF MADANLAL GUPTA (SUPRA) AND THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF BHUJBAL CONSTR UCTION (SUPRA). NO CONTRARY MATERIAL WAS BROUGHT TO OUR N OTICE BY LD. DEPARTMENTAL REPRESENTATIVE AGAINST THE ORDER OF TH E TRIBUNAL. UNDER THESE CIRCUMSTANCES, THE CIT(A) SHOULD HAVE A LLOWED ONLY PROPORTIONATE DEDUCTION U/S.80IB(10) OF THE I.T. AC T. HOWEVER, HE HAS ALLOWED DEDUCTION U/S.80IB(10) OF THE ACT IN STEAD OF PROPORTIONATE DEDUCTION. THE ORDER OF THE CIT(A) I S ACCORDINGLY MODIFIED TO THIS EXTENT. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30-04-2015. SD/- SD/- (SUSHMA CHOWLA) (R.K. PA NDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 30 TH APRIL, 2015 SATISH 7 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE