ITO 27(2)(3), NAVI MUMBAI V. MEGH DEVELOPERS, MUMBAI

ITA 2886/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8545 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 14-05-2015
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.2886/MUM/2015 (ASSESSMENT YEAR: 2010-11) INCOME TAX OFFICER 27(2)(3), MUMBAI VS M/S MEGH DEVLOPERS 1 ST FLOOR, NAVDURGA APARTMENTS OGADBHAI LANE, MG ROAD GHATKOPAR (E), MUMBAI-77 PAN : AANFM5539M (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SUMAN KUMAR RESPONDENT BY SHRI K GOPAL / MS. NEHA PARANJAPE SHRI PARAS SAVLA DATE OF HEARING : 12-01-2017 DATE OF ORDER : 06 -02-2017 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-25, MUMBAI [HE REINAFTER CALLED CIT(A)] DATED 26-02-2015 PASSED AGAINST THE ASSESSM ENT ORDER OF THE AO U/S 142(3) OF THE ACT DATED 26-03-2013 FOR AY. 2010 -11 ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING DEDUCTION U/S 8013(10) OF THE ACT, WITHOUT APPRECIATING THE FACT THAT THE PRO JECT IS NOT ELIGIBLE FOR DEDUCTION U/S 801B (10) OF THE ACT, 2 I.T.A. NO.2886/MUM/2015 2. ON THE FACT AND THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD C I T (A) FAILED TO APPRECIATE THE PROVISIONS OF SE CTION 801B (10) OF THE ACT WHICH ARE VERY CATEGORICAL THAT IT IS THE DATE OF APPROVAL OF THE HOUSING PROJECT AND NOT THE COMMENC EMENT. 3 THE APPELLANT PRAYS THAT THE ORDER OF THE LD CIT (A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE SOLITARY ISSUE RAISED IN THIS APPEAL IS WITH RE GARD TO ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S 80IB(10) ON THE HOUSING PROJECT DEVELOPED BY IT. 3. THE BRIEF BACKGROUND IS THAT DURING THE YEAR ASSESS EE WAS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF THE HOUSING PROJECT, VIZ. PLATINUM LAWNS AT THANE. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS IT WAS HELD BY THE AO THAT THE ASSESSEE DID NOT COMPLETE THE HOUSING P ROJECT WITHIN THE STIPULATED PERIOD OF 5 YEARS AND, THEREFORE, HE DEN IED THE BENEFIT OF DEDUCTION U/S 80IB(10). IT WAS NOTED BY HIM THAT T HE THANE MUNICIPAL CORPORATION SANCTIONED / APPROVED THE PROJECT ON 28 -03-2006. AS PER PROVISIONS OF SECTION 80IB(10)(A)(III), THE PROJECT WAS TO BE COMPLETED WITHIN A PERIOD OF 5 YEARS FROM THE END OF THE FINANCIAL Y EAR IN WHICH HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. THUS, AS PER AO, THE HOUSING PROJECT SHOULD HAVE BEEN COMPLETED WITHIN 5 YEARS F ROM 31-03-2006 I.E. UPTO 31-03-2011. AS PER THE AO, THE OCCUPATION CER TIFICATE OF THE ENTIRE PROJECT WAS OBTAINED ON 30 TH MARCH, 2012. THUS, AS PER AO, THIS PROJECT WAS NOT COMPLETED WITHIN THE TIME, THEREFORE, ASSES SEE WAS NOT ELIGIBLE FOR BENEFIT OF DEDUCTION U/S 80IB(10) AND, THUS, THE DE DUCTION WAS DENIED TO THE ASSESSEE BY THE AO IN THE ASSESSMENT ORDER PASS ED BY HIM. 4. DURING THE APPELLATE PROCEEDINGS BEFORE LD. CIT(A) , IT WAS SUBMITTED BY 3 I.T.A. NO.2886/MUM/2015 THE ASSESSEE THAT THE AO HAS TAKEN INTO CONSIDERATI ON INCORRECT DATE OF APPROVAL BY THE LOCAL AUTHORITY AND THAT IS HOW HE FELL INTO AN ERROR IN COMPUTING THE PERIOD OF 5 YEARS AND CONSEQUENTLY, S TIPULATED DATE OF COMPLETION HAS ALSO BEEN COMPUTED WRONGLY BY THE AO . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IT WAS FOUND BY THE LD. CIT(A) THAT THE ACTUAL DATE OF APPROVAL BY THANE MUNICIPAL CORPORAT ION IS 05-10-2006 AND IF 5 YEARS PERIOD IS COMPUTED FROM THE END OF THE SAID FINANCIAL YEAR, I.E. FROM 31-03-2007, THEN THE STIPULATED DATE OF COMPLE TION WOULD BE 31-03- 2012. SINCE THE ASSESSEE HAS COMPLETED THE PROJECT BEFORE THE SAID DATE OF 31-03-2012, THE ASSESSEE WOULD BE ELIGIBLE TO CLAIM THE BENEFIT OF DEDUCTION U/S 80IB(10). RELEVANT PART OF ORDER OF LD. CIT(A) IS REPRODUCED BELOW:_ 3.6. I HAVE GONE THROUGH THE ORDER OF AO AS WELL A S THE SUBMISSION MADE BY THE APPELLANT. THE APPELLANT HAS BEEN DENIED THE DEDUCTION UNDER SECTION 80IB(10 ) ON THE GROUND THAT ACCORDING TO AO THE ASSESSEE HAD ACQUIRED SANCTION OF DEVELOPMENT PERMISSION VIDE VP NO.2005/146 TMC/TDD/208 DATED 28TH MARCH 2006, WHEREAS ACCORDING TO ASSESSEE THE PLAN WAS GO T APPROVED ONLY WHEN THE ASSESSEE HAD RECEIVED SANCTION OF DEVELOPMENT COMMENCEMENT CERTIFICATE AS PER VP NO.2005/146 TMC/TDD/208 DATED 5THOCTOBER, 2006. ACCORDING TO AO, THE DATE O F APPROVAL IS THE DATE WHEN SANCTION OF DEVELOPMENT PERMISSION WAS RECEIVED AS PER APPROVAL DATED 28-03 - 2006 AS STATED ABOVE. IN THIS REGARD, IT IS SUBMITT ED BY ASSESSEE THAT THE AFORESAID PERMISSION SPECIFIES TH E VARIOUS CONDITIONS TO BE FULFILLED AND ONLY AFTER T HAT THE ASSESSEE COULD CARRY ON SUCH CONSTRUCTION AFTER OBTAINING THE SANCTION FOR DEVELOPMENT CERTIFICATE. THE ASSESSEE HAS PRODUCED A LETTER DATED 23-06-2011 FROM EXECUTIVE ENGINEER, TOWN PLANNING DEPARTMENT, THANE MUNICIPAL CORPORATION, THANE (TMC) WHICH CLAR IFIES THAT THE PLANS SUBMITTED BY THE DEVELOPER CAN BE SA ID 4 I.T.A. NO.2886/MUM/2015 TO BE APPROVED ONLY WHEN THE DEVELOPER RECEIVES THE DEVELOPMENT PERMISSION AS WELL AS COMMENCEMENT CERTIFICATE. IT IS ALSO CLARIFIED THAT AS PER REGUL ATION 3 PART II OF DEVELOPMENT CONTRACT REGULATION, 1994, U NLESS DEVELOPMENT PERMISSION AND COMMENCEMENT CERTIFICATE FROM THE MUNICIPAL COMMISSIONER ARE OBTAINED, THE DEVELOPMENT PERMISSION IS ONLY A FIRST STEP IN THE PROCESS OF APPROVAL, AND IT CANNOT BE SAID THAT ON GETTING THE DEVELOPMENT PERMISSION PROJECT/PLAN CAN BE SAID TO HAVE BEEN APPROVED. THE TMC IN THE INSTANT CASE HAS IN ITS CONCLUDING PARA HAS CATEGORICALLY STATED THAT T HE AFORESAID PROJECT WAS SAID TO BE APPROVED ON 05-10- 2006 I.E. THE DATE ON WHICH THE COMMENCEMENT CERTIFICATE WAS GRANTED: ' IN THE INSTANT CASE SINCE DEVELOPMENT PE RMISSION HAS BEEN GRANTED SUBJECT TO FULFILLMENT OF VARIOUS BASIC CONDITIONS LIKE PERMISSION FOR USE OF SAID PLOT FOR NON- AGRICULTURAL PURPOSE ETC. WITHOUT OBTAINING PERMISS ION FOR NON-AGRICULTURAL USE AND FULFILLING THE CONDITIONS SPECIFIED IN DEVELOPMENT PERMISSION DEVELOPED IS NOT ALLOWED TO CARRY ANY DEVELOPMENT ACTIVITIES. HENCE DATE OF OBTAINING COMMENCEMENT CERTIFICATE I.E. 05-10-2006 IS THE DATE ON WHICH PLANS ARE SAID TO BE APPROVED FOR COM MENCE OF WORK.' IN VIEW OF THIS STATEMENT OF THE APPROVIN G AUTHORITY, I FIND FORCE IN THE ARGUMENT OF THE ASSE SSEE THAT THE PLANS WERE APPROVED ON 05-10-2006 AS AGAIN ST 28-03-2006 TAKEN BY THE AO. 3.7. THE ASSESSEE HAS ALSO RELIED ON THE DECISION O F HON'BLE ITAT, MUMBAI IN THE CASE OF ASHA KASHIPRASA D RINGSHIA PANDURANG SADAN ITA NO.2901(MUM) OF 2011 WHICH SUPPORTS THE CLAIM OF ASSESSEE THAT PLAN IS S AID TO BE APPROVED WHEN COMMENCEMENT CERTIFICATE IS RECEIVED. IT IS ALSO RELEVANT TO NOTE THAT IN ASSES SEE'S OWN CASE FOR ASSESSMENT YEAR 2009-10 I.E. IN THE IMMEDIATELY PRECEDING PREVIOUS YEAR, THE ASSESSEE W AS GRANTED THE BENEFIT OF DEDUCTION U/S.80113(10) AFTE R SCRUTINY. IN VIEW OF THE AFORESAID FACTS, AND RELYI NG ON THE DECISION OF HON'BLE ITAT, MUMBAI, I AM OF THE CONSIDERED OPINION THAT ASSESSEE'S PROJECT WAS APPR OVED ON 05-10-2006. ACCORDINGLY, THE ASSESSEE IS ELIGIBL E FOR 5 I.T.A. NO.2886/MUM/2015 DEDUCTION UNDER SECTION 801B(10) OF THE ACT. ASSESS ING OFFICER IS THEREFORE, DIRECTED TO ALLOW DEDUCTION U/S.801B(10) OF THE ACT OF RS.67,00,857/-. 5. DURING THE COURSE OF HEARING BEFORE US, IT WAS STAT ED AT THE OUTSET BY LD. COUNSEL OF THE ASSESSEE THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE IN VIEW OF JUDGMENTS OF THE TRIBUNAL WHICH HAD BEEN RELIED UPON BY THE LD. CIT(A). IN ADDITION TO THAT HE ALSO REL IED UPON THE JUDGMENT OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF S.B. DE VELOPERS VS ITO ITA NO.1767/MUM/2013. PER CONTRA, THE LD. DR FAIRLY STA TED THAT AS ON DATE THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE. 6. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES AND THE JUDGMENTS RELIED UPON BEFORE US. DURING TH E COURSE OF HEARING, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED BEFORE US THE CHRONOLOGY OF EVENTS WHICH ARE RELEVANT TO DECIDE THE ISSUE BEFORE US, W HICH ARE AS BELOW: DATES & EVENTS : SR.NO. DATE EVENT 1. - THE APPELLANT IS A PARTNERSHIP FIRM, ENGAGED I N THE BUSINESS OF DEVELOPMENT HOUSING PROJECTS. DURING THE YEAR UNDER CONSIDERATION APPELLANT DEVELOPED A PROJECT PLATINUM LAWNS, KASAR VADAVALI, THANE (WEST) AND CLAIMED DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. 2. 10.10.2005 THE APPELLANT PREFERRED AN APPLICATIO N BEFORE THANE MUNICIPAL CORPORATION FOR SEEKING PERMISSION FOR DEVELOPMENT OF THE SAID PROJECT. 3. 28.03.2006 IN REPLY TO THE SAID APPLICATION THE APPELLANT WAS GRANTED WITH DEVELOPMENT PERMISSION OF THE SAID BY THANE MUNICIPAL CORPORATION VIDE V.P. NO.2005/146/TMC/TDD.208. THE PERMISSION WAS GRANTED WITH SUBJECT TO THE CERTAIN CONDITIONS WHICH WERE TO BE FULFILLED BEFORE RECEIVING 6 I.T.A. NO.2886/MUM/2015 APPROVAL / SANCTION FOR ACTUAL CONSTRUCTION OF PROJECT. 4 01.04.2006 THE APPELLANT MADE APPLICATION BEFORE THE COLLECTOR FOR SEEKING PERMISSION TO CONVERT ITS AGRICULTURE LAND INTO NON AGRICULTURE LAND IN ORDER TO FULFILL THE CONDITIONS LAID IN THE ABOVE PERMISSION LETTER. 5 05.08.2006 THE COLLECTOR HAS GRANTED PERMISSION F OR USING THE SAID LAND FOR NON-AGRICULTURAL PURPOSES. 6. 05.10.2006 AFTER FULFILLING ALL THE REQUIRED CON DITIONS APPELLANT OBTAINED COMMENCEMENT CERTIFICATE THAT IS ACTUAL APPROVAL FOR CONSTRUCTION OF THE SAI D PROJECT. 7. 23.06.2011 THE APPELLANT RECEIVED A LETTER FROM THANE MUNICIPAL CORPORATION EXPLAINING THAT DEVELOPMENT PERMISSION BY ITSELF CANNOT BE CONSIDERED AS APPROVAL OF BUILDING PLANS FOR CONSTRUCTION AS SUCH PERMISSION IS SUBJECT TO THE PERSON FULFILLING THE REQUIREMENT WITH THE VARIOUS CONDITIONS LISTED THEREIN. 8. 30.12.2012 FINAL OCCUPATION CERTIFICATE WAS RECE IVED. 7. AS PER AO, THE DATE OF APPROVAL BY THE LOCAL AUTHOR ITY IS 28-03-2006 WHEREAS AS PER ASSESSEE THE ACTUAL DATE OF APPROVAL IS 05-10-2006, WHEN ASSESSEE OBTAINED COMMENCEMENT CERTIFICATE AFTER FU LFILLING ALL THE CONDITIONS. ACCORDING TO ASSESSEE, THIS IS ACTUAL APPROVAL FOR STARTING CONSTRUCTION OF THE PROJECT. BEFORE THE COMMENCEME NT CERTIFICATE WAS ISSUED, VARIOUS OTHER LEGAL FORMALITIES WERE YET TO BE EXECUTED ON THE PART OF THE ASSESSEE AND ALL THE APPROVALS GIVEN BY THE RESPECTIVE AUTHORITIES WERE INTERIM AND TENTATIVE/PROVISIONAL APPROVALS AN D THESE WERE SUBJECT TO VARIOUS IFS AND BUTS. ASSESSEE WAS NOT ENTITLED TO COMMENCE CONSTRUCTION OF THE PROJECT BEFORE OBTAINING THE COMMENCEMENT CE RTIFICATE FOR CONSTRUCTION OF THE PROJECT. THE ASSESSEE HAS ALSO FILED ALL THE APPROVAL LETTERS ISSUED BY VARIOUS AUTHORITIES FROM TIME TO TIME. WE HAVE GONE 7 I.T.A. NO.2886/MUM/2015 THROUGH ALL THE DOCUMENTARY EVIDENCES BROUGHT BEFOR E US. IT IS NOTED THAT THANE MUNICIPAL CORPORATION ISSUED PERMISSION LETTE R DATED 28-03-2006 GRANTING DEVELOPMENT PERMISSION TO THE ASSESSEE SUB JECT TO VARIOUS CONDITIONS AND APPROACHED OTHER AUTHORITIES FROM WH OM APPLICABLE PERMISSION / APPROVAL WAS REQUIRED. AFTER CARRYING OUT ALL THE REQUISITE CONDITIONS AND AFTER OBTAINING REQUISITE APPROVALS / PERMISSIONS FROM OTHER CONCERNED AUTHORITIES, ASSESSEE AGAIN APPROACHED TH ANE MUNICIPAL CORPORATION FOR ALLOWING THE ASSESSEE TO COMMENCE T HE CONSTRUCTION OF THE PROJECT. THEREAFTER, AFTER EXAMINING THE SATISFACT ORY COMPLIANCE OF ALL THE CONDITIONS AND APPROVAL LETTERS GRANTED BY OTHER CO NCERNED AUTHORITIES, FINALLY THANE MUNICIPAL CORPORATION GRANTED COMMENC EMENT CERTIFICATE DATED 05-10-12006 GIVING PERMISSION TO THE ASSESSEE TO START THE CONSTRUCTION OF THE PROJECT. IT IS NOTED BY US THA T IT WAS CLARIFIED BY THANE MUNICIPAL CORPORATION VIDE ITS LETTER DATED 23-06-2 011 THAT AS PER SECTION 3 OF DEVELOPMENT CONTROL REGULATIONS, 1994, NO DEVELO PMENT CAN BE CARRIED OUT BY THE ASSESSEE UNLESS DEVELOPMENT PERMISSION A S WELL AS COMMENCEMENT CERTIFICATE ARE OBTAINED BY THE DEVELO PER. IT WAS ALSO CLARIFIED THAT BOTH THE APPROVALS ARE REQUIRED BEFO RE ASSESSEE COULD START CONSTRUCTION OF THE PROJECT. AFTER GOING THROUGH A LL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE CONCUR WITH THE VIEW TAKEN BY LD. CIT(A) THAT ASSESSEE WAS AUTHORISED TO START CONSTRUCTION OF TH E PROJECT ONLY ON ISSUANCE OF COMMENCEMENT CERTIFICATE BY THE LOCAL A UTHORITY, I.E. ON 05-10- 2006. THEREFORE, IT IS ACTUAL APPROVAL LETTER, AS IS ENVISAGED U/S 80IB(10)((A)(III) OF THE ACT. WE FIND THAT THE FIN DINGS RECORDED BY LD. CIT(A) ARE WELL REASONED AND IN ACCORDANCE WITH LAW AND FA CTS IN THIS CASE. IT IS FURTHER NOTED BY US THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENTS OF THE TRIBUNAL AS HAVE BEEN REFE RRED TO BY LD. CIT(A) 8 I.T.A. NO.2886/MUM/2015 AND ALSO RELIED UPON BY THE LD. COUNSEL BEFORE US, WHEREIN IT HAS BEEN HELD THAT DATE OF APPROVAL AS ENVISAGED IN SECTION 80IB( 10)((A)(III) WOULD BE THE DATE WHEN ASSESSEE WOULD BE ENTITLED TO COMMENCE TH E CONSTRUCTION OF THE PROJECT AS PER LOCAL LAW APPLICABLE. THUS, IN VIEW OF THE AFORESAID DISCUSSION AND FACTS OF THE CASE, THE DECISION TAKE N BY THE LD. CIT(A) IS HEREBY UPHELD. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS HEREB Y DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF THE HEARING. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 6 TH FEBRUARY, 2017 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , B-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES