Asst. Commissioner of Income tax Cir. 2(1), Panaji V. Regal Builders (Goa) P. Ltd, Goa

ITA 273/PAN/2013

• Counselvise Citation: 27324114 RSA 2013
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONAL L SONKAVDE LD
• Assessee Lawyers: DR VARDHAMAN L JAIN
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 273/PNJ/2013 : (ASST. YEAR : 2009 - 10) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), PANAJI, GOA (APPELLANT) VS. M/S. REGAL BUILDERS (GOA) (P) LTD., SEA SHELL ARCADE, 1 ST FLOOR, OPP. CANDOLIM PANCHAYAT, MUROD WADDO, CANDOLIM, GOA - 403 515. PAN : AADCR0615G (RESPONDENT) ASSESSEE BY : DR. VARDHAMAN L. JAIN, CA REVENUE BY : SMT. SONAL L. SONKAVDE, LD. DR DATE OF HEARING : 24/03/2014 DATE OF PRONOUNCEMENT : 04 /0 4 /2014 O R D E R PER P.K. BANSAL 1. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), PANAJI DT. 19.7.2013 FOR THE A.Y. 2009 - 10 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. THE LD CIT(A) ERRED IN ALLOWING DEDUCTION U/S 80IB IN THE PROJECT WHEREIN THE SALE O F RESIDENTIAL UNITS VIOLATES THE PROVISION OF SECTION 80IB(10)(C) AND 80IB(10)(F) OF INCOME TAX ACT 1961. 2. THE LD CIT(A) ERRED IN ALLOWING DEDUCTION U/S 80IB ON PROJECT IN WHICH THE PLAN WAS APPROVED IN THE NAME OF DIRECTOR OF THE COMPANY AND NOT IN NAM E OF ASSESSEE COMPANY. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND SALE OF RESIDENTIAL UNITS. THE ASSESSEE HAS EXECUTED DURING THE IMPUGNED ASSESSMENT YEAR TWO PROJECTS VIZ. REGAL PARK - I, II AND III AGAINST WHICH THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB(10) TOTALLING TO RS.3,19,72,193/ - - REGAL PARK - I RS.15,00,000/ - , REGAL PARK - II 2 ITA NO. 273/PNJ/2013 (ASST. YEAR : 2009 - 10) RS.73,83,714/ - AND REG AL PARK - III RS.2,30,88,479/ - . REGAL PARK II AND III WERE APPROVED AS A SINGLE PROJECT WHILE REGAL PARK I WAS APPROVED AS ONE PROJECT. THE AO DID NOT ALLOW THE DEDUCTION TO THE ASSESSEE AS THE AO NOTED THAT THE ASSESSEE HAS SOLD MORE THAN ONE FLAT T O THE SAME FAMILY MEMBERS AND THUS THERE IS VIOLATION OF CLAUSE (F) OF SEC. 80IB(10) AND HE ALSO NOTED THAT THE TWO FLATS, BEING SEPARATE UNITS, WERE CONVERTED TO BIGGER UNIT BY JOINING THEM AND THEREFORE HE TOOK THE VIEW THAT THE AREA OF THESE FOUR FLATS EXCEEDED 1500 SQ. FT. NOT ONLY THIS, THE AO NOTED THAT THE PLANS WERE NOT APPROVED IN THE NAME OF THE ASSESSEE COMPANY BUT IN THE NAME OF THE DIRECTOR. THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). CIT(A), AFTER GOING THROUGH THE SUBMISSION OF THE ASSESSEE AS WELL AS THE FOLLOWING CASE LAWS ON THIS ISSUE VIZ., I) CIT VS. VANDANA PROPERTIES (BOM.) II) ACIT VS. DRUTI CONSTRUCTIONS (PUNE) ITA NO. 1031/PN/2011 III) G.V. CORPORATION VS. ITO (MUM) 43 DTR 329 IV) M/S. OM TRINETRI BUILDERS VS. ITO (MUM), ITA NO. 7147/MUM/2010 V) EMG EE HOLDING PVT. LTD. VS. DCIT (MUM) 12 TAXMANN.COM 468 VI) CIT VS. RADHE DEVELOPERS (GUJ.) 341 ITR 403 VII) DZK DEVELOPERS VS. CIT (CUTTACK) 130 TTJ 57 VIII) HAWARE CONSTRUCTIONS PVT. LTD. VS. ITO (MUM) 64 DTR 251 IX) SANGHVE & DOSHI ENTERPRISES VS. ITO (141 TTJ 1) (CHENNAI) X) CIT VS. ANRIYA PROJECT MANAGEMENT SERVICE PVT. LTD. (KAR) XI) MANAN CORPORATION VS. ACIT (GUJ) 78 DTR 205 DIRECTED THE AO TO ALLOW THE DEDUCTION TO THE ASSESSEE U/S 80IB(10) BY OBSERVING AS UNDER : 6. I HAVE GONE THROUGH THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE CONTENTS OF THE SUBMISSION OF THE LEARNED AR OF THE APPELLANT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON INQUIRY, THE A.O. FOUND THAT ON MANY OCCASIONS, MORE THAN ONE RESIDENTIAL UNIT WAS SOLD TO MORE THAN ONE PERSON FROM THE SAME FAMILY. THESE UNITS WERE SUBSEQUENTLY COMBINED TOGETHER AND NOW THE AREA OF COMBINED UNIT 3 ITA NO. 273/PNJ/2013 (ASST. YEAR : 2009 - 10) BECAME LARGER THAN 1,500 SQ.FT. THE A.O. OBSERVED THAT WHERE TWO FLATS ARE CONVERTED INTO SINGLE FLAT DURING CONS TRUCTION, IT VIOLATES THE PROVISIONS OF SECTION 80IB REGARDING THE AREA LIMITS OF THE FLATS. THE AR OF THE APPELLANT STRONGLY CONTENDED THAT THE APPELLANT HAS NOT VIOLATED ANY PROVISIONS WHICH IS REQUIRED FOR ALLOW - ABILITY OF DEDUCTION U/S 80IB(10). THE UN DISPUTED FACTS NARRATED BY HIM ARE SUMMARIZED AS UNDER: I. THE FLAT NOS MENTIONED BY THE A.O. IN REGAL PARK I WERE APPROVED AS INDEPENDENT UNITS. II. THEY WERE SOLD AS INDEPENDENT UNITS UNDER SEPARATE AGREEMENTS. III. THEY HAVE DIFFERENT AND INDEPENDENT ELECTRICITY CORRECTIONS. IV. THEY ARE SEPARATELY AND INDEPENDENTLY ASSESSED TO HOUSE TAXES. V. FACTS ARE EXACTLY IDENTICAL IN RESPECT OF REGAL PARK - II AS WELL. VI. IT WERE THE FLAT OWNERS, WHO SUBSEQUENTLY, MERGED THE TWO FLATS INTO ONE, VII. THE BUILDER NEITHER HAS A SAY NOR ANY CON TROL ON MERGING OF TWO DIFFERENT UNITS INTO ONE AND AS SUCH NO ROLE TO PLAY IN THIS. ON THE BASIS OF THESE FACTS, THE AR CONTENDED THAT THE FLATS WERE INDEPENDENTLY SANCTIONED, COMPLETED AND SOLD AS INDEPENDENT UNITS AND THEREBY, ALL THE PROVISIONS ENVISA GED U/S 80IB(10) HAVE BEEN COMPLIED WITH. THE APPELLANT ALSO CONTENDED THAT HE CAN NOT BE HELD RESPONSIBLE, OR BE PENALIZED FOR SOMETHING, WHICH HAPPENS SUBSEQUENTLY AND WHICH IS BEYOND HIS CONTROL. THE LEARNED COUNSEL PLACED RELIANCE ON MANY CASES, WHEREI N SIMILAR FACTS WERE APPRECIATED BY THE JUDICIAL AUTHORITIES AND NO ADVERSE VIEW WAS TAKEN AND DEDUCTION WAS ALLOWED. SOME OF SUCH CASES RELIED UPON ARE: I. CIT V/S VANDANA PROPERTIES (BOM) II. ACIT V/S KRUTI CONSTRUCTIONS (PUNE) III.G.V. CORPORATION V/S ITO (MUM) 43 DTR 329 IV. OM TRINETRI BUILDERS V/S ITO(MUM) ITANO.7147/MUM/2010 V. EMGEE HODINGS PVT. LTD.V/S DCIT (MUM) 12 TAXMAN. COM 468. IN VIEW OF THE ABOVE MENTIONED FACTS AND PLACING RELIANCE ON THE JUDICIAL PRONOUNCEMENTS, MENTIONED ABOVE AND I N VIEW OF THE DECISION IN THE CASE OF CIT V/S RADHE DEVELOPERS (GUJ) 341 ITR 403, REGARDING OWNERSHIP OF THE LAND AND APPROVAL ISSUE, IN MY OPINION, THE APPELLANT COMPANY HAS COMPLIED WITH ALL THE REQUIREMENTS TO AVAIL THE BENEFIT OF DEDUCTION U/S 80IB (10 ). THE A.O. IS DIRECTED TO ALLOW THE DEDUCTION U/S 80IB(10) AMOUNTING TO RS.3,19,72,193/ - ACCORDINGLY. THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. 2 . 1 THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF THE AO. 2.2 T HE LD. AR RELIED ON THE ORDER OF CIT(A) AND SUBMITTED BEFORE US THE COPIES OF APPROVED PLAN, HOUSE TAX RECEIPT, OCCUPANCY CERTIFICATE, ELECTRICITY BILL 4 ITA NO. 273/PNJ/2013 (ASST. YEAR : 2009 - 10) IN RESPECT OF UNITS WHICH WERE JOINT TO PROVE THAT EACH OF THE UNIT WAS AN INDEPENDENT UNIT AND THE ASSESSEE HAS SOLD AND ALLOTTED THEM A S AN INDEPENDENT UNIT AND AREA OF EACH UNIT IS LESS THAN 1500 SQ. FT. EVEN CONFIRMATION S W ERE ALSO FILED THAT THE BUYER IS IN POSSESSION OF TWO SEPARATE APARTMENTS AND AFTER TAKING THE POSSESSION THEY MADE SOME INTERNAL AND EXTERNAL CHANGES IN THE APARTME NT LAYOUT AND OPENED A DOOR JOINING THE TWO APARTMENTS TOGETHER. ONE OF THE CONFIRMATIONS IS AVAILABLE AT PG. 28 OF THE PAPER BOOK. THE LD. AR BEFORE US ALSO POINTED OUT THAT CLAUSE (F) HAS BEEN INSERTED INTO THE STATUTE W.E.F. 1.4.2010 AND SINCE THE ASSESSMENT YEAR INVOLVED IS A.Y 2009 - 10 , SAME IS NOT APPLICABLE DURING THE IMPUGNED ASSESSMENT YEAR AND ASSESSEE COULD HAVE ALLOTTED MORE THAN 2 UNITS TO THE INTENDING BUYER ALONGWITH HIS FAMILY MEMBERS. IT WAS ALSO CONTENDED THAT THE DIRECTOR WAS DULY AU THORISED ON BEHALF OF THE COMPANY AND ACCORDINGLY, THE DIRECTOR HAS ACTED ON BEHALF OF THE COMPANY. IT IS NOT THE CASE OF THE REVENUE THAT THE PERMISSION WAS IN THE NAME OF THIRD PERSON. DIRECTOR WAS REPRESENTING THE COMPANY AND ALL THE EXPENSES ETC., WH ATEVER HAS BEEN INCURRED, THEY HAVE DULY BEEN BOOKED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY. 2.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE CASE LAWS ON WHICH THE LD. AR HAS RELIED, A COPY OF WHICH HAS BEEN FILED BEFORE US IN THE PAPER BOOK AS WELL AS DURING THE COURSE OF HEARING BY WAY OF COMPILATION. IN OUR OPINION, THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN CIT VS. ARUN EXCELLO FOUNDATIONS (P) LTD., 86 DTR 99 IS NOT APPLICABLE AS THE FACTS INVOLVED IN THAT CASE RELATE TO THE COMMERCIAL AS WELL AS RESIDENTIAL UNITS. WE HAVE ALSO GONE THROUGH THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF VISWAS PROMOTERS PVT. LTD. V S. ACIT, 81 DTR 68. IN THIS DECISION, WE NOTED THAT THE HON'BLE MADRAS HIGH COURT HAS HELD AS UNDER : HOUSING PROJECTS CONSIDERED HEREIN U/S. 80IB REFERS TO ANY BUILDING OTHER THAN ROAD, BRIDGE OR OTHER STRUCTURE. THUS, GOING BY THE DEFINITION OF HOUS ING PROJECT 5 ITA NO. 273/PNJ/2013 (ASST. YEAR : 2009 - 10) TO MEAN THE CONSTRUCTION OF ANY BUILDING AND THE DEDUCTION U/S. 80IB OF THE ACT IS HUNDRED PER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR FROM SUCH HOUSING PROJECT COMPLYING WITH THE CONDITION, EACH BLOC K IN THE LARGER PROJECT BY NAME AGRINI AND VAJRA, HAS TO BE TAKEN AS AN INDEPENDENT BUILDING AND HENCE A HOUSING PROJECT, FOR THE PURPOSE OF CONSIDERING A CLAIM OF DEDUCTION. (PARA 13) THUS, GOING BY THE DEFINITION OF HOUSING PROJECT UNDER EXPLANATION TO S. 80HHBA OF THE ACT AS REFERRED TO ABOVE AS THE CONSTRUCTION OF ANY BUILDING AND THE WORDINGS IN S. 80IB(10) OF THE ACT, THE QUESTION OF REJECTION IN ENTIRETY OF THE PROJECT ON ACCO UNT OF ANY ONE OF THE BLOCKS NOT COMPLYING WITH THE CONDITIONS, DOES NOT ARISE. ASSESSEE IS ENTITLED TO SUCCEED BOTH ON THE PRINCIPLE OF PROPORTIONALITY AS WELL AS BY REASON OF THE CONSTRUCTION ON THE MEANING OF THE EXPRESSION HOUSING PROJECT AS REFERRIN G TO CONSTRUCTION OF ANY BUILDING AND THE WORDINGS IN S. 80IB(10) OF THE ACT. IN THE CIRCUMSTANCES, WE HOLD THAT THE MERE FACT THAT ONE OF THE BLOCKS HAVE UNITS EXCEEDING BUILT - UP AREA OF 1500 SQ. FT, PER SE, WOULD NOT RESULT IN NULLIFYING THE CLAIM OF TH E ASSESSEE FOR THE ENTIRE PROJECTS. CONSEQUENTLY, IN RESPECT OF EACH OF THE BLOCKS, THE ASSESSEE IS ENTITLED TO HAVE THE BENEFIT OF DEDUCTION IN RESPECT OF RESIDENTIAL UNITS SATISFYING THE REQUIREMENT U/S 80IB(10)(C) OF THE ACT. CIT VS. BRAHMA ASSOCIATES (2011) 333 ITR 289 AND CIT VS. VANDANA PROPERTIES (2012) 206 TAXMAN 584., RELIED. (PARA 1 4 ) WE NOTED THAT IN THE CASE OF THE ASSESSEE, CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT EACH OF THE UNIT SOLD BY THE ASSESSEE IS AN INDEPENDENT UNIT. THE ASSESSE E HAS ALLOTTED EACH OF THE UNIT INDEPENDENTLY AND AREA OF EACH OF THE FLATS, IF TWO FLATS ARE NOT TAKEN TOGETHER, DOES NOT EXCEED 1500 SQ.FT. EACH OF THE UNIT IS SEPARATELY ASSESSED TO HOUSE TAX. THERE ARE INDEPENDENT ELECTRICITY CONNECTIONS. IF THE PUR CHASER HAS MERGED THE UNITS, WE DO AGREE THE ASSESSEE DOES NOT HAVE ANY CONTROL. THE LD. DR EVEN THOUGH VEHEMENTLY CONTENDED, BUT COULD NOT ADDUCE ANY EVIDENCE OR MATERIAL WHICH MAY PROVE THAT EACH OF THE UNIT IS NOT SEPARATELY ALLOTTED BY THE ASSESSEE, A S NOT BEING SEPARATELY ASSESSED TO HOUSE TAX AND DOES NOT HAVE INDEPENDENT ELECTRICITY CONNECTION. ON THIS BASIS ITSELF, WE CONFIRM THE FINDING OF CIT(A) THAT THERE IS NO VIOLATION OF CONDITION (C) OF SEC. 80IB. WE ALSO NOTED THAT CLAUSE (E) AND (F) HAS BEEN INSERTED IN SEC. 80IB(10) W.E.F. 1.4.2010. THE ASSESSMENT YEAR INVOLVED IS A.Y. 2009 - 10. THIS 6 ITA NO. 273/PNJ/2013 (ASST. YEAR : 2009 - 10) CLAUSE RELATING TO ALLOTMENT OF TWO OR MORE UNITS TO A SINGLE INDIVIDUAL OR HIS FAMILY MEMBERS WAS NOT THERE IN A.Y. 2009 - 10. THUS, IT CANNOT BE SAID THAT THERE IS VIOLATION OF CLAUSE (F) SO THAT THE ASSESSEE MAY BE DIS - ENTITLED FOR DEDUCTION U/S 80IB(10). IN VIEW OF THIS, WE REJECT GROUND NO. 1 TAKEN BY THE REVENUE. 2.3.1 SO FAR AS GROUND NO. 2 , THAT THE PERMISSION IS IN THE NAME OF THE DIRECTOR, THE LD. D R EVEN THOUGH RELIED ON THE ORDER OF THE AO BUT COULD NOT BRING ANY COGENT MATERIAL OR EVIDENCE TO OUR KNOWLEDGE WHICH MAY PROVE THAT THE DIRECTOR WAS NOT REPRESENTING THE COMPANY WHEN THE PERM ISSION WAS SOUGHT AND IS GIVEN IN THE NAME OF THE DIRECTOR. IT IS ALSO NOT DENIED THAT THE ASSESSEE HAS CARRIED OUT THE PROJECT AT ITS OWN RISK, NOT AS A CONTRACTOR BUT AS A DEVELOPER. IN VIEW OF THIS FACT, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALL ED FOR IN THE ORDER OF CIT(A) AND CIT(A) HAS RIGHTLY ALLOWED THE GROUND OF THE ASSESSEE ALLOWING RELIEF U/S 80IB(10). 3. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 4. ORDER PRONOUNCED IN THE OPEN COURT ON 04 /0 4 /2014. SD/ - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 0 4 /0 4 / 201 4 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER