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

ITA 2849/AHD/2010

• Counselvise Citation: 284920514 RSA 2010
• Duration Of Justice: 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 12-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K VOHRA
• Assessee Lawyers: S N L AGARWALA
• Keywords: Rule of consistency
• Section: 143(3); 80IB

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH . .. . . .. . , , , , !'# !'# !'# !'#, , , , $ $ $ $ %% % & %% % & %% % & %% % &, , , , ' ' ' ' ( # ( # ( # ( # BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KR. SHRAWAT, JUDICIAL MEMBER) ITA NO.1399, 1400 AND 2849/AHD/2010 [ASSTT. YEAR : 2005-2006, 2006-2007 AND 2007-2008] M/S.SATADHAR ENTERPRISES CHANDRALOK SHOPPING COMPLEX NR.CINE PARK MULTI COMPLEX VAPI SILVASSA ROAD CHANOD, VAPI PAN : AAPFS 8442 R /VS. ACIT, VAPI CIRCLE VAPI. ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) .& / 0 (/ ASSESSEE BY : SHRI S.N.L.AGARWALA ' / 0 (/ REVENUE BY : SHRI R.K. VOHRA DATE OF HEARING : 16 TH SEPTEMBER, 2011 DATE OF PRONOUNCEMENT : 30 TH SEPTEMBER, 2011 (2 / O R D E R PER BENCH : THESE THREE APPEALS HAVE BEEN FILED BY THE ASSESSEE ARISING FROM THE ORDER OF THE CIT(A), VALSAD DATED 11.12.20 09, 11.12.2009 AND 11.8.2010 FOR THE ABOVE ASSESSMENT YEARS. 2. AT THE OUTSET, THE LEARNED AR, SHRI S.N.L.AGARWA LA INFORMED THAT ASSTT.YEAR 2005-2006 IS LEAD THE ASSESSMENT YEAR WH ICH HAS TO BE FOLLOWED IN SUBSEQUENT ASSESSMENT YEARS ALSO. WE SHALL TAKE UP THE FACTS FROM THE RECORDS OF THE ASSTT.YEAR 2005-2006 AS HEREUNDER: 3. THE GROUNDS RAISED ARE REPRODUCED BELOW: 1. BECAUSE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N SUSTAINING THE DISALLOWANCE OF CLAIM OFT HE APPELLANT FIRM U/S .80IB(10) OF THE ACT. ITA NO.1399, 1400 AND 2849/AHD/2010 -2- 2. BECAUSE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N HOLDING THAT SINCE THE APPROVAL OF LOCAL AUTHORITY IS IN TH E NAME OF A PARTNER OF THE FIRM AND NOT IN THE NAME OF THE LINE ITSELF'. THE APPELLANT FIRM IS NOT ELIGIBLE FOR DEDUCTION U/S 80 113(10) OF THE ACT IGNORING THE FACT THAT: A. THE LAND ALONG WITH THE PROJECT WAS CONTRIBUTED BY THE PARTNER AS HIS CAPITAL CONTRIBUTION IN THE PART NERSHIP FIRM AND CAPITAL GAIN TAX WAS ASSESSED IN THE HANDS OF THE PARTNER BY THE DEPARTMENT. B. IN ANY CASE THE PROVISIONS OF SECTION 801B (10) NO WHERE LAYS DOWN A PRECONDITION THAT THE APPROVAL SH OULD HE IN THE NAME OF THE DEVELOPER. C. LD. CIT(A)-1. AHMEDABAD HAS ALREADY CONSIDERED THIS AND ALLOWED THE APPEAL FOR EARLIER YEARS ALLOW ING THE CLAIM OF SECTION 801B(10). 3. BECAUSE. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N HOLDING THAT THE APPELLANT FIRM HAS ALSO CONSTRUCTED COMMER CIAL UNIT ALONG WITH THE RESIDENTIAL UNITS IN THE PROJECT AND HENCE THE CLAIM U/S 801B (10) IS NOT ALLOWABLE IGNORING THE FACT TH AT THERE WAS NO SUCH RESTRICTION U/S 801B(10) WHEN THE PROJECT WAS APPROVED AND COMMENCED IN THE YEAR 2002. 4. BECAUSE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN FORMING A VIEW THAT THE PROJECT'S ELIGIBILITY FOR D EDUCTION U/S. 801B(10) HAS TO BE EVALUATED ON AN YEAR TO YEAR BAS IS IGNORING A. THE PRINCIPLE OF CONSISTENCY THAT A CONSISTENT VIEW ABOUT ELIGIBILITY FOR DEDUCTION FROM THE FIRST YEAR OF OP ERATION ITSELF IS TO BE CONSIDERED. B. THE SPECIFIC WORDINGS OF THE SECTION 80IB (10) WHIC H EXEMPTS THE PROFIT FROM TAX FOR THE 'HOUSING PROJECT' AS A WHOLE AND NOT ON YEAR TO YEAR BASIS. 5. BECAUSE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN REJECTING THE INCOME SHOWN BY THE APPELLANT FIRM AT RS.81,09, 036/- AND INSTEAD UPHOLDING THE ESTIMATION OF INCOME BY THE I D. AO TO THE TUNE OF RS.48,25,532/-. ITA NO.1399, 1400 AND 2849/AHD/2010 -3- 6. BECAUSE ID. CIT(A) HAS FURTHER ERRED IN NOT CONSIDE RING THE FACT THAT THE FIRST APPELLATE ORDERS IN THE PRECEDI NG TWO YEARS BEING AY 2003-04 AND AY 2004-05 WERE ALREADY ON REC ORD IN WHICH ALL THE SIMILAR ISSUES HAD ALREADY BEEN DEALT WITH IN DETAIL AND THE SAME COULD NOT HAVE BEEN IGNORED OR DIFFERE D WITH, WITHOUT ANY REASONABLE GROUND. 4. APROPOS GROUND NO.1 AND 2, FACTS IN BRIEF AS STA TED BY THE AO VIDE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 27-12-2007 WERE THAT THE ASSESSEE-FIRM IS IN THE BUSINESS OF CONSTRUCTION AN D DEVELOPMENT OF HOUSING PROJECT KNOWN AS CHANDRALOK. ADMITTED FACT IS TH AT THE SAID PROJECT WAS RESIDENTIAL-CUM-SHOPPING COMPLEX. FROM THE SIDE OF THE ASSESSEE, A RETURN OF NIL INCOME WAS DECLARED ON ACCOUNT OF CLAIM OF DE DUCTION UNDER SECTION 80IB(10) OF THE ACT. THE AO HAS MENTIONED THAT THE ISSUE IN RESPECT OF CLAIM OF DEDUCTION UNDER SECTION 80IB(10) OF THE ACT HAD ALREADY BEEN DECIDED IN THE PREVIOUS ASSESSMENT YEAR FOR A.Y.2003-2004 AND 2004 -05. HE HAS NOTED THAT ONE SHRI DHAMJIBHAI K. YADAV WAS GIVEN APPROVAL BY THE LOCAL AUTHORITY TO DEVELOP RESIDENCES AND SHOPS ON THE LAND VIDE APPRO VAL DATED 18-6-2001. IT HAS ALSO BEEN NOTED BY THE AO THAT THE SAID APPROVA L WAS GRANTED MUCH BEFORE THE ASSESSEE-FIRM CAME INTO EXISTENCE. BECAUSE OF THAT REASON, THE AO WAS OF THE VIEW THAT THE PROJECT DEVELOPED BY THE FIRM WAS NOT ENTITLED FOR THE BENEFIT AS PRESCRIBED UNDER INCOME TAX ACT. IT HAS ALSO BE EN OBJECTED BY THE AO THAT THE PROJECT IN QUESTION BEING COMMERCIAL-CUM-RESIDE NTIAL PROJECT, THEREFORE, NOT ENTITLED FOR THE DEDUCTION. AS PER THE AO, W.E.F. 1-4-2005 THE CONDITION OF COMMERCIAL ESTABLISHMENT HAS BEEN RELAXED TO THE EX TENT OF 5% OF THE TOTAL BUILT-UP AREA HENCE, DUE TO SAID AMENDMENT AS WELL, THE ASSESSEE IS NOT ENTITLED FOR THE DEDUCTION. 5. THIRD GROUND FOR REJECTION WAS THAT THE AREA OF SOME OF THE RESIDENTIAL UNITS HAD EXCEEDED 1500 SQ.FT. FINALLY, THE AO HAS WORKED OUT THE PROFIT BY APPLYING PERCENTAGE COMPLETION METHOD AS IT WAS A PPLIED FOR A.Y.2003-2004 AND 2004-2005. THE WORKING OF THE AO IS EXTRACTED AS UNDER: ITA NO.1399, 1400 AND 2849/AHD/2010 -4- WITHOUT PREJUDICE TO THE INCOME OFRS.81,09,036/- S HOWN BY YOU, YOU ARE INFORMED THAT YOUR INCOME WAS ASSESSED ON PERCE NTAGE COMPLETION METHOD FOR THE A.YRS.2003-04 AND 2004-05. FOR THE YEAR UNDER CONSIDERATION ALSO YOUR INCOME WILL BE COMPUTED 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 PER THE PROFIT AND LOSS ACCOUNT FOR THE YEAR, CONSTRUCTION EXPENSES HAVE BEEN SHOWN AT RS.1,31,69 ,998/-. THUS, DURING THE YEAR 20.11% OF TOTAL CONSTRUCTION COST H AS BEEN INCURRED. TO ARRIVE AT WIP OF THE CURRENT YEAR, PROPORTIONATE LA ND COST OF RS.17,42,29/- (20.11% OF RS.86,62,500) IS ADDED. T HUS WIP FOR THE YEAR WORKS OUT TO RS.1,49,12,027/-. THE PROJECTED SALE CONSIDERATION IS CLAIMED AT RS.9,81,60,750/-. THUS, PROJECTED PROF IT OF THE PROJECTS WORKS OUT TO RS.2,40,00,750 (9,81,60,750-7,41,60,00 0). THE PERCENTAGE OF PROFIT WORKS OUT TO 32.36% OVER THE COST (2,40,0 0,750/7,41,60,000) BY APPLYING THE SAME RATIO, PROFIT FOR THE CURRENT YEA R WORKS OUT TO RS.48,25,532/- (32.36% OF RS.1,49,12,027). ACCORDINGLY, THE ASSESSMENT WAS MADE ON THE TOTAL I NCOME OF RS.48,25,532/-. THE SAME WAS CHALLENGED BEFORE THE LEARNED CIT(A). 6. AS FAR AS THE QUESTION OF CLAIM OF DEDUCTION UND ER SECTION 80IB IS CONCERNED, THE LEARNED CIT(A) WAS OF THE VIEW THAT THE PROJECT IN QUESTION WAS RESIDENTIAL-CUM-SHOPPING COMPLEX THEREFORE NOT ENTI TLED FOR THE DEDUCTION UNDER SECTION 80IB OF THE ACT. THE LEARNED CIT(A) WAS ALSO OF THE VIEW THAT APPROVAL WAS GRANTED IN THE NAME OF THE PARTNER THE REFORE THE ASSESSEE IS ALSO NOT ENTITLED FOR THE DEDUCTION. THE LEARNED CIT(A) HAS ALSO HELD THAT THE RESIDENTIAL UNITS HAVE EXCEEDED THE PRESCRIBED AREA OF 1500 SQ.FT. THEREFORE, THE ASSESSEE ALSO NOT ENTITLED FOR THE DEDUCTION. SINC E THE ASSESSEES PLEA WAS REJECTED, THEREFORE, SECOND APPEAL HAS BEEN FILED. 7. FROM THE SIDE OF THE ASSESSEE, THE LEARNED AR AP PEARED AND PLACED AN ORDER OF THE TRIBUNAL DECIDED IN ASSESSEES OWN CAS E FOR A.Y.2003-2004 AND 2004-05 BY ITAT A BENCH OF AHMEDABAD BEARING ITA NO.2354/AHD/2009 & OTHERS DATED 27-5-2011. HE HAS PLEADED THAT THE ISSUE AS ARISEN IN THIS GROUND IS COVERED BY THIS DECISION. FROM THE SIDE OF THE REVENUE LEARNED DR ITA NO.1399, 1400 AND 2849/AHD/2010 -5- ARGUED THAT OBJECT OF THE ENACTMENT WAS TO PROMOTE RESIDENTIAL CONSTRUCTION. AS FAR AS THIS PROJECT IS CONCERNED, THE AO HAS RE CORDED THAT THE NUMBER OF SHOPS HAVE BEEN APPROVED AND CONSTRUCTED IN THIS PR OJECT. THE VERY PURPOSE OF THE ENACTMENT HAS BEEN DEFEATED IF A DEDUCTION IS G RANTED FOR A COMMERCIAL PROJECT. HE HAS ALSO PLEADED THAT THE PURPOSE OF T HE ENACTMENT WAS TO PROMOTE SMALL RESIDENTIAL UNITS SO THAT THE SOCIETY AT LARG E GET THE BENEFIT. HE HAS PLEADED TO CONFIRM THE ORDER OF THE CIT(A). 8. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT ON IDENTICAL FACTS ONCE A VIEW HAS ALREADY BEEN TAK EN BY RESPECTED CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN IMMEDIATELY PRECEDI NG TWO ASSESSMENT YEARS THEREFORE, JUDICIAL PROPRIETY REQUIRES TO FOLLOW TH AT THE ORDER OF THE TRIBUNAL DATED 27-5-2011 (SUPRA). VIDE PARA-11, IT WAS HELD THAT THE ISSUE OF A PROJECT HAVING RESIDENTIAL-CUM-COMMERCIAL HAS NOW TO BE DEC IDED AS PER THE GUIDELINES TAKEN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BRAHMA ASSOCIATES, 239 CTR 30 (BOM), THE TRIBUNAL HAS REST ORED THIS ISSUE BACK TO THE FILE OF THE AO FOR DE NOVO ADJUDICATION AS DECIDED BY THE HONBLE BOMBAY HIGH COURT. SINCE A VIEW HAS ALREADY BEEN TAKEN ON IDENTICAL FACTS, THEREFORE, FOR THE YEARS UNDER CONSIDERATION, WE DEEM IT FIT T O RESTORE THIS PART OF THE GROUND BACK TO THE FILE OF THE AO SO THAT HE CAN VE RIFY THE FACTS OF THE CASE AND RE-DECIDE ACCORDINGLY. 9. AS FAR AS THE ISSUE OF APPROVAL IN THE NAME OF O NE OF THE PARTNER OF THE FIRM WAS CONCERNED, THE TRIBUNAL HAS PLACED RELIANC E ON RADHE DEVELOPERS, 23 SOT 420 (AHD) AND ACIT VS. C. RAJINI, 9 TAXMAN 115 (CHENNAI-ITAT, BENCH A) AS APPEARED IN PARA-10 OF THE ORDER. SINCE A VIEW HAS BEEN TAKEN IN FAVOUR OF THE ASSESSEE, THEREFORE, THE SAME SHALL BE APPLI ED FOR THE YEAR UNDER CONSIDERATION AS WELL. THIS PART OF THE GROUND GOE S IN FAVOUR OF THE ASSESSEE. 10. AS FAR AS THE QUESTION OF UNITS HAVING AREA MOR E THAN 1500 SQ.FT.IS CONCERNED VIDE-9, THE TRIBUNAL HAS NOTED A FINDING ON THE FACTS THAT UNITS HAD ITA NO.1399, 1400 AND 2849/AHD/2010 -6- EXCEEDED THE PRESCRIBED AREA. IT WAS MENTIONED THA T IN THE CASE OF BRIGADE ENTERPRISE P. LTD.(2009 ) 25(1) ITCL 300 (BANG) AND IN THE CASE OF DELHI IRON & STEEL CO. LTD., 43 ITAT INDIA 694 (DEL) AND IT WA S HELD THAT THE PROFIT FROM SALE OF UNIT HAVING AREA MORE THAN 1500 SQ.FT. ARE NOT ELIGIBLE FOR THE BENEFIT OF DEDUCTION. HOWEVER, THE LEARNED AR HAS STATED WITH FULL SENSE OF RESPONSIBILITY THAT NO VERIFICATION FOR THE YEAR UN DER CONSIDERATION HAS BEEN CARRIED OUT BY THE AO IN RESPECT OF THE AREA OF EA CH RESIDENTIAL UNIT. HE HAS ALSO REFERRED TO THE ORDER OF THE AO GIVING EFFECT OF THE ORDER OF THE CIT(A) FOR A.Y.2004-2005 DATED 3-3-2011 WHEREIN THE DEDUCTION WAS GRANTED UNDER SECTION 80IB AFTER DUE VERIFICATION OF THE AREA OF EACH UNIT. HE HAS THEREFORE PLEADED THAT THE ISSUE REQUIRES RE-ADJUDICATION IN THE LIGHT OF THE DECISION TAKEN BY THE AO FOR A.Y.2004-2005. WE ARE OF THE VIEW TH AT NO PREJUDICE WOULD BE CAUSED TO THE EITHER SIDE IF THE MATTER GOES BACK TO THE AO FOR VERIFYING THE FACT ABOUT THE AREA OF UNIT. ACCORDINGLY, WE RESTO RE THIS GROUND BACK TO THE SIDE OF THE AO FOR FRESH ADJUDICATION AS PER THE DIRECTI ON STATED HEREINABOVE. ACCORDINGLY, GROUND NO.1 TO 4 ARE PARTLY ALLOWED AS PER THE DIRECTIONS. 11. APROPOS GROUND NOS.5 AND 6, THE AO FOLLOWED THE ACCOUNTING STANDARD (AS-7) AND ADOPTED PERCENTAGE COMPLETION METHOD THE LEARNED CIT(A) WAS ALSO OF THE VIEW THAT THE AS-7 IS TO BE APPLIED FOR WORKING THE PROFIT OF THE ASSESSEE. HOWEVER, THIS ISSUE HAS AL SO BEEN CONSIDERED BY THE TRIBUNAL VIDE ITA NO.2357/AHD/2009 & OTHERS (SUPRA) AND WHILE DECIDING THE REVENUES APPEAL, IT WAS HELD THAT THE PROJECT COM PLETION METHOD IS A VALID METHOD OF ACCOUNTING. IN THIS REGARD, ONE MORE FAC T HAS BEEN BROUGHT TO OUR NOTICE THAT IN A.Y.2004-2005, THE ASSESSEE HAS CHAN GED THE METHOD OF ACCOUNTING FROM PROJECT COMPLETION METHOD TO PER CENTAGE COMPLETE METHOD. BECAUSE OF THE CHANGE IN THE METHOD OF ACC OUNTING, WE DEEM IT PROPER FIRST TO ASCERTAIN WHAT METHOD HAS BEEN CONS ISTENTLY FOLLOWED BY THE ASSESSEE AS FAR AS THESE THREE YEARS ARE CONCERNED. AFTER ASCERTAINING THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, THE AO IS DIRECTED TO RE- ITA NO.1399, 1400 AND 2849/AHD/2010 -7- COMPUTE THE PROFIT IN THE LIGHT OF THE OBSERVATIONS MADE IN PARA-5 OF THE ITAT ORDER IN ITA NO.2357/AHD/2009 & ORS. IN VIEW OF TH IS GROUND NO.5 AND 6 ARE ALLOWED FOR STATISTICAL PURPOSE. 12. IN THE RESULT, ALL THE THREE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT THE DATE MENTIONED O N THE FIRST PAGE OF THIS ORDER. SD/- SD/- ( . .. . . .. . G.D. AGARWAL) !'# !'# !'# !'# /VICE-PRESIDENT ( %% % & %% % & %% % & %% % & /MUKUL KR. SHRAWAT ) ' ' ' ' /JUDICIAL MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD