Elegant Estates, CHENNAI V. ITO, CHENNAI

ITA 2902/CHNY/2014

• Counselvise Citation: 290221714 RSA 2014
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 26-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAMOD NANGIA IRS
• Assessee Lawyers: R SIVARAMAN
• Section: 143(3); 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . . , ! BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER ./ I.T.A. NO.2902/MDS/2014 ( / ASSESSMENT YEAR : 2010-2011) M/S. ELEGANT STATES, NO.1B/3, FIRST MAIN ROAD, GANDHI NAGAR, ADYAR, CHENNAI 600 020 [PAN: AACFE1274G] ( '# /APPELLANT) VS THE INCOME TAX OFFICER, BUSINESS WARD III (3) CHENNAI 600 034. ( $%'# /RESPONDENT) / APPELLANT BY : SHRI. R. SIVARAMAN, ADVOCATE. / RESPONDENT BY : SHRI. PRAMOD NANGIA, IRS, CIT. /DATE OF HEARING : 25.02.2015 !' /DATE OF PRONOUNCEMENT : 27.02.2015 & / O R D E R PER S.S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSME NT YEAR 2010-2011; EMANATES FROM ORDER DATED 07.10.2014 PASSED BY THE COMMISSIONER OF INCOME TAX(A)-V, CHENNAI, IN ITA NO.11/13-14(A)-V, SUSTAINING I.T.A.NO.2902/MDS/2014. :- 2 -: SECTION 80IB(10) DEDUCTIONS DISALLOWANCE/ADDITION OF F8,28,54,876/-, IN PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961 [IN SHORT THE ACT]. 2. THE ASSESSEE/ FIRM IS ENGAGED IN THE BUSINESS OF R EAL ESTATE DEVELOPMENT INCLUDING SALE OF FLATS AND CIVIL CONST RUCTION. IT HAD FILED ITS RETURN ON 15.10.2010 DECLARING NIL INCOME W ITH CLAIM OF SECTION 80IB(10) ADDITION OF F8,28,54,876/-. THE SAME WAS SUMMARILY PROCESSED. 3. THE ASSESSING OFFICER TOOK UP SCRUTINY. THE ASSE SSEE HAD CLAIMED DEDUCTION PERTAINING TO ITS SIXTY FOUR FLAT S CONSTRUCTED IN PROJECT ELEGANT ESTATE-PALMERE GARDENS. IT HAD B EEN RECOGNIZING THE SALES ONLY AFTER DEVELOPING AND HANDING OVER OF FLA TS. THE ASSESSEE HAD SOLD TWO ADJOINING FLATS NO.403 AND 404 MEASURI NG 1653 AND 1572 SQ.FEET TO SHRI AND SMT K. RAMACHANDRAN. THE AS SESSING OFFICER VIEWED IT AS A VIOLATION OF CLAUSE (F) OF THE RELEV ANT PROVISION READING AS UNDER:- (F) IN A CASE WHERE A RESIDENTIAL UNIT IN THE HOU SING PROJECT IS ALLOTTED TO A PERSON BEING AN INDIVIDUAL, NO OTHER RESIDENTIAL UNIT IN SUCH HOUSING PROJECT IS ALLOTTED TO ANY PERSONS NAM ELY; (I) THE INDIVIDUAL OR THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL, (II) THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA, I.T.A.NO.2902/MDS/2014. :- 3 -: (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL, THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HIN DU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS A THE KARTA; THE ASSESSING AUTHORITY ACTED ACCORDINGLY AND TREAT ED THE ASSESSEES ACTION OF ALLOTTING TWO RESIDENTIAL UNI TS TO A COUPLE AS VIOLATION OF THE STATUTORY PROVISION EXTRACTED H EREINABOVE. THIS RESULTED IN IMPUGNED DISALLOWANCE/ ADDITION IN AS SESSMENT ORDER DATED 20.03.2013. 4. THE ASSESSEE PREFERRED AN APPEAL. IT WOULD INTER-A LIA RAISE TWO FOLDED SUBSTANTIVE GROUNDS I.E. CLAIM OF DEDUCTION U/S. 80IB(10) ON MERITS WITH ALTERNATIVE PROPORTIONATE RELIEF; IF TH E FORMER PLEA FAILS. THE LOWER APPELLATE AUTHORITY HAS REJECTED BOTH THE SE PLEAS AND AFFIRMED THE ASSESSING OFFICERS ACTION. IT OBSERVE S IN PARA 5.1 THAT FLATS NO.403 AND 404 EXCEEDED THRESHOLD LIMIT OF 15 00 SQ.FEET AS PER SECTION 80IB(10) (C) OF THE ACT. THIS LEAVES THE AS SESSEE AGGRIEVED. 5. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE REL EVANT FINDINGS. ADMITTED FACTUAL POSITION IS THAT ASSESSE E HAS SOLD TWO RESIDENTIAL UNITS JOINTLY TO SHRI AND SMT. K. RAMAC HANDRAN ON 16 TH AND 17 TH JULY, 2008 I.E. MUCH BEFORE THE RELEVANT PREVIOUS YEAR. MEANING I.T.A.NO.2902/MDS/2014. :- 4 -: THEREBY THAT THE RESIDENTIAL UNITS WITH ALL RIGHTS AND TITLE STOOD TRANSFERRED MUCH BEFORE INSERTION OF CLAUSE (F) IN SECTION 80 IB(10) BY THE FINANCE ACT, 2009 W.E.F. 01.04.2010 HAVING PROS PECTIVE EFFECT ONLY. THE ASSESSEE HAS RECOGNIZED THE SAID RECEIPTS IN THE RELEVANT PREVIOUS YEAR AS PER ITS SYSTEM OF ACCOUNTING REGUL ARLY FOLLOWED. WE FIND THAT A CO-ORDINATE BENCH OF THE TRIBUNAL IN EMGEEN HOLDINGS (P) LTD VS. DCIT (2011) 47 SOT 98 (MUMBAI) HAS HELD THA T THIS AMENDMENT WOULD ONLY HAVE PROSPECTIVE EFFECT. IT I S AN UNDISPUTED FACT THAT THE ASSESSEES RESIDENTIAL UNITS STOOD TR ANSFERRED TO THE AFORESAID VENDEES WELL BEFORE THE AMENDMENT. THIS M AKES US TO OBSERVE THAT ITS ACT OF MERELY RECOGNIZING THE SAID RECEIPTS IN SUBSEQUENT ASSESSMENT YEARS WOULD NOT TURN THE CLOC K BACK TO THE YEAR 2008 (SUPRA). WE REITERATE THAT SECTION 80IB( 10) IS A DEDUCTION PROVISION TO BE LIBERALLY CONSTRUED. THEREFORE, TH E ASSESSEE SUCCEEDS SO FAR AS APPLICATION OF CLAUSE (F) OF SECTION 80I B(10) IS CONCERNED. 6. NOW, WE COME TO OTHER CIT(A)S FINDING THAT ASSESS EE FLATS NO.403 AND 404 MEASURE MORE THAN 1500 SQ.FEET I.E. 1653 AND 1572 SQ.FEET RESPECTIVELY. THE ASSESSEE FAILS TO REBUT T HIS FACTUAL POSITION. SECTION 80IB(10)(C) PRESCRIBES MEASUREMENT OF A RES IDENTIAL UNIT TO BE UPTO 1500 SQ.FEET ONLY. WE FIND THAT THE LANGUAGE USED IN THIS SPECIFIC I.T.A.NO.2902/MDS/2014. :- 5 -: CLAUSE REFERS THE RESIDENTIAL UNIT. IN OTHER WORDS , THIS EXPRESSION DOES NOT BAR A DEDUCTION CLAIM ALTOGETHER IF SOME OF THE UNITS SOLD EXCEED THE SPECIFIED DIMENSIONS. WE OBSERVE THAT IN SUCH A CASE, THE CONSEQUENTIAL DISALLOWANCE HAS TO BE PROPORTIONATE ONLY. IT HAS TO BE RESTRICTED TO PROFITS DERIVED FROM THE RESIDENTIAL UNITS VIOLATING SECTION 80IB(10)(C). CASE LAW CIT VS. ARUN EXCELLO FOUNDAT IONS (P) LTD (2013) 212 TAXMAN 342 (MAD) IS ALSO QUOTED IN SUPPO RT. THE ASSESSING AUTHORITY IS ACCORDINGLY DIRECTED TO MAKE PROPORTIONATE DISALLOWANCE AND PASS ITS CONSEQUENTIAL ORDER. 7. THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 27TH OF FEBRUARY 2015, AT CHENNAI. SD/- SD/- ( . ) (A.MOHAN ALANKAMONY) / ACCOUNTANT MEMBER ( . . ) (S.S. GODARA) / JUDICIAL MEMBER #$ /CHENNAI. %& /DATED:27.02.2015. KV &' () *) /COPY TO: 1. + APPELLANT 2. / RESPONDENT 3. , ( )/CIT(A) 4. , /CIT 5. )-. / /DR 6. .0 1 /GF.