Aakar Associates, Baroda V. The Income tax Officer, Ward-2(3), Baroda

ITA 2903/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6771 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 31-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAWANSI
• Assessee Lawyers: M K PATEL
• Section: 80IB; 143(2); 131; 263

Judgement Text

IN THE INCOME TAX APPELLATE T RIBUNAL AHMEDABAD BENCH ' D ' BEFORE S HRI MUKUL SHRAWAT ,J M & SHRI A N PAHUJA , AM ITA NO. 2903 / AHD/ 200 8 (ASSESSMENT YEAR: - 2005 - 06 ) M/S AAKAR ASSOCIATES, 23, SAHITYA BUNGALOW, BEHIND TAKSH COMPLEX, VASNA ROAD, BARODA V/S INCOME - T AX OFFICER, WARD - 2(3),BARODA PAN: AAIFA 5085 H [ APPELLANT ] [ RESPONDENT ] A SSESSEE BY : - SHRI M K PATEL, AR RE VENUE BY: - SHRI G S SO U RYAWANSI, DR O R D E R A N PAHUJA : THIS APPEAL BY ASSESSEE AGAINST AN ORDER DATED 27 - 06 - 2008 OF THE L D . C IT (APPEA LS) - II, BARODA , FOR THE ASSESSMENT YEAR 2005 - 06, RAIS ES THE FOLLOWING GROUNDS: - [1] THAT THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - II, BARODA HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 8 0IB OF THE ACT. [2] THAT THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - II, BARODA HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITION AT CLAUSE (C) OF SECTION 80IB OF THE ACT. [3] THAT ON FACTS AND IN LAW, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - II, HAS GRIEVOUSLY ERRED IN REJECTING THE ALTERNATE ARGUMENT REGARDING PROPORTIONATE DEDUCTION ALLOWABLE IN RESPECT OF EACH RESIDENTIAL UNIT AS ENVISAGED BY THE ACT. [4] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND ANY OF THE GROUNDS OF APPEAL . 2. ADVERTING FIRST TO GROUND NOS.1 TO 3 IN THE APPEAL, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING GROSS TOTAL INCOME OF RS.29,78,820/ - FILED ON 29 - 8 - 2005 BY T HE ASSESSEE , C ARRYING ON THE BUSINESS OF HOUSING PROJECT , WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ON 14 - 8 - 2006.DURING THE COURSE OF ITA N O.2 903/AHD/2008 2 ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER [ AO IN SHORT] NOTICED THAT THE ASSESSEE CLAIMED DEDUCTION OF RS.29,78,820/ - U/S. 80 - IB (10) OF THE ACT. THE ASSESSEE SOLD A BUNGALOW N O.54 - 55 SAUNDARYA TO KOIKLA J. VORA AND OTHERS BUILT ON A PLOT ADMEASURING 221.66 SQ. MTRS. T HE BUILT UP AREA ADMEASURED 263.76 SQ. MTS. IN RESPONSE TO SUMMONS U/S.131 OF THE ACT DATED 12 - 10 - 2007 SHRI MEHUL J.VORA, S UBMITTED THAT B UNGALOW N O.54 - 55 WAS OWNED BY 3 CO - OWNERS NAMELY KOKILABEN J. VORA, MEHUL J. VORA AND DR. NIMISHA M. VORA. SINCE THE BUILT UP AREA OF THE SAID UN IT EXCEEDED 1500 SQ. FT ., THE A.O. ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY CLAIM FOR DEDUCTION U/S. 80IB (10) BE NOT DISALLOWED. IN RESPONSE , THE ASSESSEE SUBMITTED VIDE HIS LETTER DATED 17 - 12 - 2007 THAT BOTH THE UNITS WERE SEPARATE FROM EACH OTHER A S PER THE PLAN OF MUNICIPAL CORPORATION, RAJA CHITHI, PLINTH CHECKING CERTIFICATE AND COMPLETION CERTIFICATE AND NOT A SINGLE UNIT WITHIN THE MEANING OF SECTION 80IB(10) OF THE ACT. ALTERNATIVELY, THE ASSESSEE PLEADED THAT THE DISALLOWANCE MAY BE MADE WITH REFERENCE TO THE PROFITS OF SALE OF UNITS CONSTRUCTED ON THE PLOT 54 - 55 PROPORTIONATELY . INTER ALIA, THE ASSESSEE RELIED ON THE DECISION OF ITAT IN THE CASE OF ACIT VS. BENGAL AMBUJA HOUSING DEVELOPMENT LTD.. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION S OF THE ASSESSEE ON THE GROUND THAT UNIT BUILT - UP ON THE PLOT N O.54 AND 55 WAS A SINGLE UNIT AND NOT SEPARATE AND ONLY ONE SALE DEED WAS EXECUTED FOR S A LE OF THE SAID UNIT. MOREOVER, THE AMENITIES FOR THE SAID UNIT LIKE KITCHEN, DRAWING ROOM, LIVING ROOM , DINING ROOM, PARKING, ENTRANCE ETC. WERE FOR A SINGLE UNIT ALONE. ACCORDINGLY , WHILE DISTINGUISHING THE DECISION OF THE I.T.A.T. IN BENGAL AMBUJA HOUSING DEVELOPMENT LTD. (S UPRA) , THE A.O. DENIED THE CLAIM FOR DEDUCTION U/S. 80IB(10) ON THE GROUND THAT TH E ASSESSEE DID NOT FULFILL THE STIPULATED CONDITIONS MENTIONED IN THE SAID PROVISION. 2.1 THE AO , INTER ALIA , OBSERVED THAT: - I. T HE ASSESSEE WAS NOT THE OWNER OF THE LAND ON WHICH CONSTRUCTION ACTIVITIES WERE CARRIED OUT/PROJECT WAS BUILT UP. II. T HE ASSESSEE HA D NOT TAKEN THE APPROVAL OF THE HOUSING PROJECT FROM THE LOCAL AUTHORITY. THE SAME WAS TAKEN BY THE OTHER PERSON WHO WE RE ENTIRE LY A SEPARATE ENTITY IN THE EYES OF LAW. ITA N O.2 903/AHD/2008 3 III. T HE LAND OW NERS HAVE SOLD THE PIECES OF LAND TO UNIT HOLDERS DIRECTLY AND ASSESSEE HAD ACTED MERELY AS A CONFIRMING PARTY. IV. THE A SSESSEE FIRM ACTED MERELY AS A CONTRACTOR AS IT HAS ENTERED INTO CONSTRUCTION AGREEMENT WITH THE UNIT HOLDERS. V. T HE ASSESSEE FIRM NEVER SOLD THE UNITS THE UNIT HOLDERS AS THERE WAS NO REGISTERED DOCUMENT IN RESPECT THEREOF. 2.2 SINCE THE ASSESSEE WAS NOT THE OWNER OF THE LAND ON WHICH PROJECT WAS SET UP NOR PART OF THE HOUSING PROJECT WAS IN THE NAME OF THE ASSESSEE, THE A.O. DISALLOWED THE ENTIRE CLAIM OF RS.29,78,820/ - FOR DEDUCTION U/S 80IB(10) OF THE ACT . THE AO FURTHER CONCLUDED THAT THE ASSESSEE EARNED PROFIT ON SALE OF UNUTILIZED FSI ON WHICH IT WAS NOT ENTITLED TO DEDUCTION U/S. 80IB(10) OF THE AC T. THE TOTAL PROFITS ATTRIBUTABLE TO THE SALE OF UNUTILIZED FSI AS PER PARAGRAPH 11.8 OF THE ASSESSMENT ORDER WORKED OUT TO RS.4,24,935/ - . 3. ON APPEAL, THE L D. CIT(A) FOLLOWING THE DECISION OF ITAT IN THE CAS E OF RADHE DEVELOPERS & OTHERS IN ITA NO.2482/AHD/2006 ALLOWED THE CLAIM OF THE ASSESSEE IN THE FOLLOWING TERMS: - 2.2. IT IS CONTENDED BY THE COUNSEL THAT SIMILAR ISSUE CAME UP BEFORE THE HON'BLE ITAT, AHMEDABAD, IN ITA NO.2482/AHD./2006 IN THE CASE OF M/S. RADHE DEVELOPERS & OTHERS. TH E ITAT, AHMEDABAD HELD THAT FOR THE PURPOSE OF CLAIMING DEDUCTION U/S.80IB(10) OF THE ACT, IT IS NOT NECESSARY FOR THE ASSESSEE TO OWN THE LAND. SINCE SUCH CONDITION IS NOT MENTIONED IN THE SECTION IT WOULD NOT BE CORRECT TO DENY DEDUCTION ON THIS GROUND. THE COUNSEL HAS REQUESTED TO DELETE THE ADDITIONS MADE AND ALLOW DEDUCTIONS U/S.80IB(10) AND IN RESPECT OF UNUTILIZED FSI. THE APPELLANT REFERRED RELEVANT PARAS OF THE ORDER OF ITAT. '28. THE CONTENTION OF REVENUE AUTHORITY THAT TO CLAIM DEDUCTION U/S 80I B(10), THERE IS A CONDITION PRECEDENT THAT THE ASSESSEE MUST BE OWNER OF THE LAND ON WHICH HOUSING PROJECT IS CONSTRUCTED HAS NO FORCE WE DO NOT FIND ANY SUCH CONDITION AS APPEARING IN THE PROVISION OF THE SECTION EXTRACTED ABOVE. A PLAIN READING OF SUBSEC TION (10) OF SEC. 80IB REVEALS AND MAKES IT EVIDENT THAT THERE MUST BE AN UNDERTAKING DEVELOPING AND BUILDING A HOUSING PROJECT AS APPROVED ITA N O.2 903/AHD/2008 4 BY A LOCAL AUTHORITY. IT DOES NOT HAVE ANY FURTHER CONDITION THAT SUCH DEVELOPMENT AND BUILDING OF THE HOUSING PROJE CT SHOULD ALSO BE ON A LAND OWNED BY AN ASSESSEE UNDERTAKING. IT MIGHT BE TRUE THAT THE LAND BELONGS TO THE PERSONS WHO HAS ENTERED INTO AN AGREEMENT WIT THE ASSESSEE TO DEVELOP AND BUILD HOUSING PROJECT BUT ON A PERUSAL OF THE AGREEMENT AS NARRATED ABOVE, IT IS EVIDENT THAT THE DEVELOPMENT AND BUILDING WORK HAS BEEN CARRIED OUT BY THE ASSESSEE IN PURSUANCE OF A TRIPARTITE AGREEMENT AND IT IS NOT BY THE LAND OWNERS. THEREFORE, THE MERE FACT THAT THE LAND - OWNER AND THE UNDERTAKING DEVELOPING AND BUILDING HOU SING PROJECT, ARE TWO DIFFERENT ENTITIES WOULD NOT MAKE ANY DIFFERENCE. THE DEDUCTION WOULD BE ELIGIBLE TO THE PERSON WHO IS DEVELOPING AND BUILDING HOUSING PROJECT AND NOT TO THE MERE OWNER THEREOF. 29. IT IS ALSO THE CASE OF THE REVENUE THAT THE ASSESSE E WAS A MERE CONTRACTOR DEVELOPING AND BUILDING HOUSING PROJECT AND THEREFORE, IT COULD NOT BE A DEVELOPER. WE FAIL TO UNDERSTAND AS TO HOW SUCH A SITUATION COULD EMERGE. A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON IS NO DOUBT A CONTRACTOR. HAV ING ENTERED INTO AGREEMENTS WITH LANDOWNERS FOR DEVELOPMENT AND BUILDING THE HOUSING PROJECT, WAS OBVIOUSLY A CONTRACTOR BUT IT DOES NOT DEROGATE THE ASSESSEE FOR BEING A DEVELOPER, AS WELL. THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM DEVELOPER. AS STATED ABOVE IT IS THE UNDERTAKING THAT DEVELOPS OR BUILDS THE HOUSING PROJECT THAT IS ENTITLED TO DEDUCTION IRRESPECTIVE OF THE FACT WHETHER THAT IT IS THE OWNER OR NOT OR WHETHER IT IS THE CONTRACTOR THEREOF THE REQUIREMENT FOR CLAIMING DED UCTION IS THAT SUCH AN UNDERTAKING MU S T DEVELOP AND BUILD HOUSING PROJECT, BE IT ON THEIR OWN LAND OR ON THE LAND OF OTHERS AND FOR WHICH A TRIPARTITE AGREEMENT HAS BEEN ENTERED INTO FOR DEVELOPMENT AND BUILDING HOUSING PROJECT; OR BE THE ASSESSEE A CONTRA CTOR FOR DEVELOPING AND BUILDING HOUSING PROJECT OR AN OWNER OF THE LAND. '45. THEREFORE, LOOK AT FROM ANY ANGLE, WE ARE OF THE CONSIDERED OPINION, THAT TO CLAIM DEDUCTION FOR DEVELOPING AND BUILDING HOUSIN G PROJECT, IT IS NOT NECESSARY THAT ASSESSEE MUST BE AN OWNER OF THE LAND AND IT ITA N O.2 903/AHD/2008 5 WOULD BE SUFFICIENT IF HE WAS AN UNDERTAKING DEVELOPS AND BUILD HOUSING PROJECT. THE ASSESSEE IS ALSO THE OWNER OF THE PROJECT, THOUGH THE TITLE DOES NOT VEST IN IT.' 2.2.1. FURTHER, IN RESPECT OF UNUTILIZED FSI, THE HON. ITAT, AHMEDABAD, HAS OBSERVED HAS FOLLOWS: '63. A QUESTION HAS ALSO BEEN RAISED BY THE REVENUE THAT THE PROFIT EARNED BY THE ASSESSEE ARE NOT FOR DEVELOPING AND BUILDING HOUSING PROJECT ALONE BUT FOR THE SAL E OF EXTRA FSI, WHICH HAS NOT BEEN UTILIZED FOR DEVELOPING AND BUILDING HOUSING PROJECT. ON A PERUSAL OF THE PROVISIONS OF SEC. 80IB(10). WE FIND THAT IT IS NOT MANDATORY REQUIREMENT TO FULLY UTILIZE PERMISSIBLE FSI; THERE IS NO CONDITION AS TO FSI UNDER T HE SCHEME OF THE PROVISIONS OF SEC. 80IB(10) OF THE ACT; THERE IS NO QUESTION OF SELLING UNUSED FSI TO THE INDIVIDUAL BUYER FOR EACH PROJECT AND ALSO THERE IS NO QUESTION OF CALCULATING THE PROFITABILITY ON FSI AS THE SAME HAS NOT BEEN CONTEMPLATED U/S 80I B(10) OF THE ACT ON VERIFICATION OF THE SALE DEED EXECUTED IN FAVOUR OF BUYERS OF THE RESIDENTIAL HOUSES, IT IS CLEAR THAT THE ASSESSEE HAD MADE THIS SALE DEED FOR SALE OF PLOT OF LAND. FURTHER, ON VERIFICATION OF DEVELOPMENT AGREEMENT WITH THE LAND OWNER, WE FIND THAT HERE ALSO THE REFERENCE IS WITH RESPECT TO LAND AREA ONLY. IN BOTH THE - DOCUMENTS ASSESSEE HAD NOT ACQUIRED RIGHTS AND HAS NOT RELINQUISHED RIGHTS WITH REFERENCE TO FSI. FURTHER, ON VERIFICATION OF APPROVED MAP FOR EACH UNIT IS WITH REFERENCE TO BUILT UP AREA ONLY. UNDER THE CIRCUMSTANCES, THE ASSESSEE HAS NEVER DEALT WITH FSI, BOTH IN TERMS OF ACQUIRING RIGHTS IN THE LAND AND FOR RELINQUISHMENT OF SUCH RIGHTS IN THE LAND. THE CALCULATION GIVEN IN APPROVED PLAN IS OF MAXIMUM PERMISSIBLE FSI AN D BY GIVING SUCH CALCULATION IT IS NOT MADE MANDATORY BY ANY PROVISIONS OF ANY ACT TO MAKE CONSTRUCTION TO THE FULLEST EXTENT OF MAXIMUM PERMISSIBLE FSI. THE UTILIZATION OF FSI BY THE BUILDER DEVELOPER DEPENDS ON MANY FACTORS LIKE SITUATION OF PLOT, THE TY PE OF LOCALITY, AND THE TYPE OF BUYERS' AFFORDABILITY. IT IS THE MARKET FORCE, WHICH DETERMINES THE AVERAGE SIZE OF THE RESIDENTIAL UNIT - A COMMERCIAL DECISION, WHICH PREVAILS FOR THE PURPOSE OF CARRYING OUT THE BUSINESS AND FOR MAKING RESIDENTIAL UNITS A ND NOT THE PERMISSIBLE MAXIMUM FSI. IT WOULD ALSO BE IMPOSSIBLE TO CONSTRUCT ITA N O.2 903/AHD/2008 6 ANY HOUSING UNIT AS PER THE PROVISIONS OF SEC. 80IB(10) BY UTILIZING THE MAXIMUM FSI. 64. THE AO STATES FURTHER THAT IN THE APPROVED LAY OUT PLAN, THE LOCAL AUTHORITY HAD PERMITT ED TO BUILD RESIDENTIAL UNIT OF LESSER AREA THAN THE MAXIMUM PERMISSIBLE BUILT UP AREA ON THE LAND AND THEREFORE THE ASSESSEE HAD CARRIED OUT ONLY PARTIAL CONSTRUCTION OF THE AVAILABLE FSI VIS - A - VIS THE ENTIRE PLOT OF LAND AVAILABLE FOR DEVELOPMENT WITH TH E ASSESSEE. WE FIND THAT THE APPROVED FSI IN REGARD TO THE UNITS CONSTRUCTED HAS BEEN FULLY UTILIZED FULLY UTILIZED AS PER THE APPROVED PLAN OF THE LOCAL AUTHORITY, NAMELY THE FSI IS FULLY UTILIZED, THE FSI ACTUALLY PASSED AND PERMITTED BY THE AUTHORITIES FOR EACH PROJECT. 65. THE AO OBSERVES ASSESSEE HAS SOLD UNUTILIZED FSI WITHOUT INVOLVING ANY PROCESS OF DEVELOPMENT AND CONSTRUCTION, WHICH IS THE PRIMARY CRITERION REQUIRED TO BE SATISFIED FOR THE PURPOSE OF THE CLAIM OF DEDUCTION UNDER SECTION 80IB OF T HE ACT HAVE NO FORCE; THAT THE ASSES SEES HAVE CLAIMED DEDUCTION UNDER SECTION 80IB OF THE ACT FOR THE PROFIT DERIVED DURING THE YEAR UNDER CONSIDERATION FROM THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION OF A HOUSING PROJECT WHICH THOUGH INCLUDES PROFIT EA RNED FROM SALES OF UNUTILIZED FSI OF THE HOUSING PROJECT ALSO AND THAT THE OTHER PART OF UNUTILIZED FSI RELATING TO THE APPROVED UNITS HAVE NOT BEEN CONSTRUCTED OR DEVELOPED BUT BEING SOLD DIRECTLY, ALTHOUGH AS A UNRESTRICTIVE BUNDLE OF RIGHTS ATTACHED WIT H THE SALE OF LAND PLOT. AS AFORESAID, THERE IS NO REQUIREMENT AS TO THE FSI UNDER THE SCHEME OF PROVISIONS OF SEC. 80IB(1). IN ANY CASE THE ASSESSEE HAS NOT SOLD FSI OF PLOT, EVEN IF THE UNUTILIZED FSI RIGHTS ARE AVAILABLE WITH THE ASSESSEE, IT IS THE ONL Y WAY LEFT OUT OF UTILIZING SUCH UNUTILIZED FSI IS TO MAKE CONSTRUCTION ON TOP OF THE GROUND FLOOR, WHICH IS ALREADY BEING SOLD TO PROSPECTIVE BUYERS. WITH THIS SO CALLED UNUTILIZED SI RIGHTS, IF THE ASSESSEE WISHES TO MAKE FURTHER CONSTRUCTION THAN IT WIL L PRACTICALLY IMPOSSIBLE AS THE ASSESSEE IS LEFT WITH NO EASEMENT RIGHTS FOR MAKING CONSTRUCTION OR ACCESS TO GO ON TOP OF THE GROUND FLOOR AS THE GROUND LEVEL RIGHTS ARE ALREADY SOLD TO PROSPECTIVE CUSTOMER. IN THIS SITUATION IT WOULD BE PRACTICALLY ITA N O.2 903/AHD/2008 7 IMPOS SIBLE TO MAKE EITHER CONSTRUCTION OR TO GIVE ACCESS FOR CONSTRUCTION MADE. THUS, THE CONCEPT OF ELEMENT OF UNUTILIZED FSI SOLD IS IMAGINARY AND BASED ON SURMISES AND CONJUNCTURES. 2.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE ID. COUNSEL AND FACTS OF THE CASE AND THE RECENT DECISION OF HON'BLE ITAT, AHMEDABAD, IN THE CASE OF M/S. RADHE DEVELOPERS & OTHER VIDE ORDER IN ITA NO. 2482/AHD/2006 DATED 29.06 . 2007. THE FACTS AND CIRCUMSTANCES OF THE APPELLANT ARE IDENTICAL TO THE CASES DECIDED BY HON'BLE ITAT, AH MEDABAD. ALSO AL L THE PLEAS RAISED BY THE ASSESSING OFFICER HAVE BEEN EFFECTIVELY DEALT WITH AND DISCUSSED IN THE SAID ORDER AND THEREAFTER HON'BLE ITAT HAS ALLOWED THE DEDUCTION UNDER SECTION 80IB(10). RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE ITAT, THE DEDUCTION UNDER SECTION 80IB(10) IS HELD TO BE ALLOWABLE ON THE ISSUE OF OWNERSHIP. 2.3.1. CONSIDERING THE DISCUSSION ABOVE, THE OTHER GROUND OF APPEAL REGARDING DEDUCTION ON UNUTILIZED FSI HAS ALSO BEEN COVERED BY THE AFORESAID DECISION OF ITAT, AHM EDABAD, ADDITION MADE BY ASSESSING OFFICER CANNOT BE SUSTAINED. 3. IN THE THIRD AND FOURTH GROUNDS OF APPEAL, IT IS ARGUED BY THE APPELLANT THAT THE ASSESSING OFFICER ERRED IN OBSERVING THAT THE APPELLANT IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S.80IB(10) O F THE ACT ON THE GROUND THAT THE APPELLANT HAS CONSTRUCTED SOME UNITS WITH BUILT UP AREA OF MORE THAN 1500 SQ. FT. 3.1. THE ASSESSING OFFICER NOTICED FROM THE RECORD THAT THE ASSESSEE HAS SOLD BUNGALOW NO.54 AND 55 OF 'SAUNDARYA' TO KOKILA VORA AND OTHER S. THE TOTAL PLOT AREA OF THE LAND IS ADMEASURING 221.66 SQ. MT. THE CONSTRUCTION AREA IS ADMEASURING 263.76 SQ. MT. ON THE ABOVE PLOT OF LAND. THUS, THE TOTAL BUILT UP AREA IN THE SAID PLOTS WAS IN EXCESS OF 1500 SQ. FT. WHICH IS IN EXCESS OF PRESCRIBED L IMIT AS PER SECTION 80IB OF THE ACT. IT WAS SUBMITTED THAT BOTH THE UNITS ARE SEPARATE FROM EACH OTHER AS PER THE PLAN APPROVED BY MUNICIPAL CORPORATION. FURTHER, THE SALE DEED ARE SEPARATELY MENTIONED. THE ASSESSING OFFICER FOUND THAT THE OWNER OF THE PLO T NOS.54 AND 55 HAS CATEGORICALLY STATED IN THE STATEMENT RECORDED U/S.131 THAT THEY ARE LIVING IN THE ABOVE PROPERTY AND IT IS A SINGLE UNIT AND NOT TWO SEPARATE UNITS AS CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER STATED THAT THE ASSESSEE'S CONTENTION IS NOT TENABLE KEEPING IN VIEW OF THE PROVISIONS OF SECTION 80I(10)(C) OF THE I. T. ACT. 3.2. IT IS CONTENDED BY THE APPELLANT THAT IN APPROVED PLAN PLOT NO.54 AND 55 ARE APPROVED SEPARATELY AND BUILT UP AREA OF EACH PLOT DOES NOT EXCEED 1500 SQ. FT. BOTH ARE SEPARATE UNITS AND NOT A SINGLE UNITS WITHIN THE MEANING OF SECTION 80IB(10) AND NO DISALLOWANCE COULD HAVE MADE ON THIS COUNT. ITA N O.2 903/AHD/2008 8 IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO THE ABOVE, IT IS CONTENDED THAT IF BOTH THE PLOTS ARE TREA TED AS A SINGLE UNIT, THEN, THE DISALLOWANCE OF CLAIM U/S.80IB(L) OF THE ACT, IS REQUIRED TO BE RESTRICTED TO THE PROPORTIONATE PROFIT ATTRIBUTABLE TO THE SAID UNITS ONLY AND DISALLOWANCE OF PROFIT ATTRIBUTABLE TO THE OTHER UNITS IS UNCALLED FOR. APPELLAN T RELIED ON THE FOLLOWING DECISIONS : 1. BENGAL AMBUJA HOUSING DEVELOPMENT LTD. VS ACIT IN ITA NO.L595/KOL/2005 2. SAROJ SALES ORGANISATION 115 T TJ 484 (ITAT, MUMBAI) 3.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUNSEL AND FACTS OF THE CASE. FROM THE INQUIRIES CONDUCTED AND STATEMENT OF BUYERS RECORDED BY THE ASSESSING OFFICER, IT IS ESTABLISHED THAT UNIT NO.54 AND 55 IN THE PROJECT ARE ONE UNIT ONLY AND THE SAME EXCEEDS 1500 SQ. FT. THEREFORE, IT IS NOT IN DISPUTE THAT ALL THE UNIT S CONSTRUCTED BY THE APPELLANT DO NOT FULFILL THE CRITERIA. THEREFORE, THE ALTERNATIVE ARGUMENT OF THE APPELLANT IS ONLY DISCUSSED IN DETAIL. THE DEDUCTION U/S.80IB(10) IS ALLOWABLE ON FULFILLMENT OF CERTAIN CONDITIONS AS MENTIONED IN THE SAID PROVISION. '80IB(10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31ST DAY OF MARCH, 2007 BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFIT DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF, - (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998 AND COMPLETES SUCH CONSTRUCTION - (I) IN A CASE WHERE A HOUSING PROJE CT HAS BEEN APPROVED BY THE LOCAL AUTHORITY BEFORE THE 1ST DAY OF APRIL, 2004 ON OR BEFORE THE 31ST DAY OF MARCH, 2008; (II) IN A CASE WHERE A HOUSING PROJECT HAS BEEN, OR, IS APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRIL, 2004, WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. EXPLANATION : FOR THE PURPOSE OF THIS CLAUSE, ....... (I) (II) (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HA A MINIMUM AREA OF ONE ACRE ....... PROVIDED THAT...... ITA N O.2 903/AHD/2008 9 (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT - UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITIES OF DELHI OR MUMBAI OR WITHIN TWENTY - FIVE KILOMETERS FROM THE MUNICIPAL LIMITS OF TH ESE CITIES AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE ; AND (D) THE BUILT - UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIVE PER CENT OF THE AGGREGATE BUILT - UP AREA OF HOUSIN G PROJECT OR TWO THOUSAND SQUARE FEET, WHICHEVER IS LESS,]' FROM THE ABOVE, IT IS CLEAR THAT ONLY THOSE UNDERTAKINGS DEVELOPING PROJECTS FULFILLING THE FOLLOWING CONDITIONS ARE ELIGIBLE FOR DEDUCTION U/S.80IB(10) : 1. UNDERTAKING SHOULD DEVELOP AND BUILD HOUSING PROJECTS 2. SUCH HOUSING PROJECT SHOULD BE APPROVED BEFORE 31ST MARCH 2007 3. THE UNDERTAKING HAS COMMENCED DEVELOPMENT AND CONSTRUCTION OF SUCH HOUSING PROJECT AFTER 1ST OCTOBER 1998 4. THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WITH MINIMUM ON E ACRE AREA 5. THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT UP AREA OF 1500 SQ. FT, IN CITIES OTHER THAN DELHI AND MUMBAI. 6. BUILT UP AREA OF SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS DOES RIOT EXCEED 5% OF TOTAL BUILT UP AREA OF HOUSING PROJECT OR 2000 SQ. F T. WHICHEVER IS LESS (WITH EFFECT FROM 1.4.2005). THE DEDUCTION UNDER THIS PROVISION IS ALLOWABLE ONLY IN RESPECT OF THOSE PROJECTS WHICH FULFILLS ALL THE CONDITIONS CUMULATIVELY. AS PER THIS PROJECT SHOULD HAVE MINIMUM AREA OF ONE ACRE AND THE RESIDENTIA L UNIT SHOULD NOT HAVE MAXIMUM BUILT UP AREA OF 1500 SQ. FT. IF THE HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY DOES NOT FULFILL ANY OF THE CONDITION PRECEDENT TO SUCH DEDUCTION, THE ENTIRE PROJECT GOES OUT OF THE PURVIEW OF SECTION 80IB(10). IN THE CA SE OF THE APPELLANT THE PROJECT COMPLETED BY THE APPELLANT HAD TWO UNITS ABOVE 1500 SQ. FT. THEREFORE, THE CONDITION (C) U/S.80IB(10) IS NOT FULFILLED. IN MY CONSIDERED VIEW WHICH IS ALSO SUPPORTED BY THE DECISION OF BOMBAY ITAT IN THE CASE OF LAUKIK DEVE LOPERS REPORTED IN 108 TTJ 364 THAT IF THE CONDITION PRECEDENT TO THE ELIGIBILITY OF DEDUCTION IS NOT FULFILLED, DEDUCTION CANNOT BE ALLOWED FOR THE WHOLE PROJECT. THERE IS NO QUESTION OF ALLOWING DEDUCTION FOR PROPORTIONATE CONSTRUCTION WHICH ARE BELOW 15 00 SQ. FT. COMING TO THE DECISION OF IT AT, CALCUTTA, IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD., A COPY OF THE SAME WAS SUBMITTED BY THE APPELLANT. NO DOUBT THE HOUSING PROJECT IN THAT CASE HAD LARGE NUMBER OF UNITS WITH BUILT UP AREA MORE THA N 1500 SQ, FT. THE CONCLUSION REACHED BY THE TRIBUNAL IS BASED ON THE REASONING THAT THE PROVISION SHOULD BE ITA N O.2 903/AHD/2008 10 INTERPRETED LIBERALLY IN VIEW OF APEX COURT DECISION IN THE CASE OF BAJAJ TEMPO LTD., IT IS MENTIONED THAT PROVISIONS LAID DOWN IN SECTION 80IB(10) DOES NOT SPEAK REGARDING DENIAL OF DEDUCTION IN CASE OF PROFIT FROM A HOUSING COMPLEX CONTAINING BOTH SMALLER AND LARGE RESIDENTIAL UNIT AND SINCE ASSESSEE CLAIM DEDUCTION ONLY IN RESPECT OF SMALLER UNITS, THE DENIAL OF CLAIM ON ACCOUNT OF RESTRICTED AND NARROW INTERPRETATION OF PROVISIONS OF CLAUSE (C) OF SECTION 80IB(10) WAS NOT APPROVED. IN THE AFORESAID DECISION, THE DEDUCTION WAS ALLOWED WITH RESPECT TO SMALLER UNITS PROPORTIONATELY BY TAKING LIBERAL INTERPRETATION AS AGAINST THE STRICT INTERPRETATIO N. AS MENTIONED IN DECISION OF LAUKIK DEVELOPERS THAT BEFORE ALLOWING ANY DEDUCTION, THE CONDITIONS PRECEDENT TO THE ELIGIBILITY HAS TO BE SATISFIED. THE CONDITIONS MENTIONED IN SECTION 80IB(10) ARE WITH RESPECT TO HOUSING PROJECT APPROVED WHICH FULFILLS T HE CRITERIA AS MENTIONED IN THE SAID SECTION. THE ELIGIBILITY IS DECIDED IN RESPECT OF THE PROJECT AND NOT IN RESPECT OF RESIDENTIAL UNIT. THERE IS NO PROVISION OF PROPORTIONATE DEDUCTION. EITHER 100% PROFIT FROM THE HOUSING PROJECT IS DEDUCTIBLE OR THE SA ME IS NOT DEDUCTIBLE AT ALL. IT IS CLEARLY BLACK AND WHITE. APPELLANT'S PROJECT DID NOT FULFILL THE CONDITION MENTIONED IN CLAUSE (C) AND HENCE NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10). THE INTERPRETATION THAT WHAT IS MENTIONED IN CLAUSE (C) IS RESIDENTIAL UNIT AND NOT UNITS AND THEREFORE ALL UNITS NEED NOT BE LESS THAN 1500 SQ. FT. IS NOT A CORRECT INTERPRETATION. WHEN THE MAXIMUM BUILT UP AREA IS DEFINED TO MAKE THE PROJECT ELIGIBLE, THE REFERENCE HAS TO BE FOR A SINGULAR UNIT BECAUSE IF THE SAME IS PLURAL , 1500 SQUARE FEET WILL NOT RELEVANT. THE INTENTION OF THE LEGISLATURE WAS TO DEVELOP LOW INCOME GROUP HOUSING AND THEREFORE THE MAXIMUM BUILT UP AREA OF EACH UNIT IN SUCH PROJECT HAS BEEN PRESCRIBED. ANY PROJECT IN VIOLATION OF SUCH CONDITION CANNOT BECOM E ELIGIBLE FOR SUCH DEDUCTION. U/S. 80IB(10) WHAT IS TO BE SEEN IS WHETHER THE PROJECT UNDERTAKEN BY THE ENTITY IS ELIGIBLE OR NOT, THE PROJECT BECOME ELIGIBLE ONLY IF ALL THE CONDITIONS PRECEDENT THERETO ARE SATISFIED. BY NOT FULFILLING A SINGLE CONDITION THE PROJECT GOES OUT OF ELIGIBILITY. THEREFORE, WHILE DECIDING THE ELIGIBILITY OF ANY PROJECT FOR BENEFICIAL PROVISIONS, THE INTERPRETATION HAS TO BE STRICTLY LEGAL AND NOT LIBERAL. THE INTERPRETATION GIVEN BY THE ASSESSING OFFICER IS NOT RESTRICTED OR NA RROW. THE RULE OF LIBERAL INTERPRETATION OF AN INCENTIVE PROVISION CANNOT HOLD GOOD WHEN IT IMPAIRS THE LEGISLATIVE REQUIREMENT AND SPIRIT OF PROVISION. THESE ARE THE SUPREME COURT'S DECISIONS RELEVANT ON THIS ISSUE 1. IPCA LABORATORIES VS DCIT 266 ITR 52 1 (SC) 2. PANDIAN CHEMICALS LTD., VS CIT 262 ITR 278 (SC) 3. CIT VS N C BUDDHIRAJ & CO, 204 ITR 412 (SC) THESE DECISIONS CLEARLY LAID DOWN THAT WHEN THE PROVISION IS CLEAR, THE WORD CANNOT BE IGNORED OR MISINTERPRETED TO CONFER AN UNINTENDED BENEFIT. WHEN APPELLANT DOES NOT FULFILL THE REQUIREMENT OF CLAUSE (C) IN RESPECT OF SOME UNITS, THE PROJECT BECOME INELIGIBLE. THERE IS NO SCOPE FOR DIVIDING THE PROJECT AS ELIGIBLE PART AND INELIGIBLE PART. THE DENIAL OF DEDUCTION IN CASE OF RESIDENTIAL UNIT ABOVE 15 00 SQ. FT, IS CLEARLY IN - BUILT IN THE SECTION ITA N O.2 903/AHD/2008 11 ITSELF WHERE CERTAIN PRECONDITION ARE MENTIONED BEFORE ALLOWING DEDUCTION. THEREFORE, WITH DUE RESPECT TO THE DECISION OF HON. CALCUTTA ITAT, THE SAME IS NOT IN CONFORMITY WITH THE CLEAR PROVISION OF SECTION 80 IB(10) AND HON. SUPREME COURT DECISIONS REFERRED ABOVE. APPELLANT ALSO REFERRED DECISION OF MUMBAI ITAT, E BENCH IN THE CASE OF SAROJ SALES ORGANISATION REPORTED IN 115 TTJ 485. THE SAID DECISION IS NOT APPLICABLE SINCE IN THAT CASE THE BLOCK OF FLATS EXC EEDING 1,000 SQ. FT. WAS SEPARATE AND THE SEPARATE PERMISSION FROM MUNICIPALITY WAS RECEIVED IN RESPECT OF THAT BLOCK. HOWEVER, IN THE CASE OF APPELLANT THE UNIT EXCEEDING 1,500 SQ. FT. AREA IS THERE IN THE SAME BLOCK, HENCE THE PROJECT IS NOT ELIGIBLE FOR DEDUCTION. THE SAID DECISION DOES NOT HELP THE APPELLANT. I HOLD THAT BY NOT FULFILLING THE CONDITIONS MENTIONED IN CLAUSE (C), IN RESPECT OF SOME RESIDENTIAL UNITS, THE PROJECT APPROVED BY LOCAL AUTHORITY BEING DEVELOPED BY THE APPELLANT IS NOT ELIGIBLE FOR THE DEDUCTION AND THEREFORE THE DEDUCTION U/S.80IB(10) REJECTED BY THE ASSESSING OFFICER ON THIS ISSUE IS CONFIRMED . 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDING S OF THE L D. CIT (A). THE LD. AR ON BEHALF OF THE A SSESSEE WHILE CARRYING US THROUGH THE IMPUGNED ORDER CONTENDED THAT MERELY BECAUSE AREA OF A UNIT IN THE PROJECT EXCEEDED 1500SQ.FT. , ENTIRE CLAIM FOR DEDUCTION COULD NOT BE DISALLOWED. INTER ALIA, THE LD. AR RELIED ON THE DECISIONS OF THE I.T.A.T. IN T HE CASE OF ITO VS. AIR DEVELOPERS (NAG.) (2009) 123 TTJ (NAG.) 959, G.V. CORPORATION V. ITO , 38 SOT 174 (MUM.), SJR BUILDERS VS. ACIT (2010) 3 ITR (TRIB.) 569 (BANGALORE), DCIT VS. BRIGADE ENTERPRISE (P) LTD., (2008) 119 TTJ (BANG.) 269 AND ARUN EXCELLO FOUNDATIONS (P) LTD. VS. ACIT (2007) 108 TTJ (CHENNAI) 71 AS ALSO THE DECISION DATED 5 - 1 - 2007 OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD. I N I.T. APPEAL NO.458 OF 2006 . HOWEVER, A COPY OF THE SAID DECISION W AS NOT PLACED BEFORE US. ON THE OTHER HAND THE LD. D.R SUPPORTED THE FINDING OF THE L D. C.I.T.(A). TO A QUERY BY THE BENCH, BOTH THE PARTIES REPLIED THAT THE REVENUE IS NOT IN APPEAL AGAINST THE FINDINGS OF THE LD. CIT(A) BASED ON DECISION DATED 29.06.20 07 IN THE CASE OF M/S. RADHE DEVELOPERS & OTHER IN ITA NO. 2482/AHD/2006. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. ADMITTEDLY, THE REVENUE IS NOT IN APPEAL BEFORE US AGAINST THE FINDINGS OF THE LD. CIT(A) BASED ON DECISION DATED 29.06.2007 IN ITA N O.2 903/AHD/2008 12 THE CASE OF M/S. RADHE DEVELOPERS & OTHER IN ITA NO. 2482/AHD/2006 , REPORTED IN 113 TTJ 300(AHMEDABAD) . THE ONLY ISSUE BEFORE US IN THIS APPEAL IS AS TO WH E THER THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB(10) OF THE ACT EVEN WHEN THE AREA OF ONE OF THE UNITS IN THE HOUSING PROJECT EXCEEDED 1500 SQ. FT. WE FIND THAT IN THE CASE OF G.V. CORPORATION (SUPRA) , THE ASSESSEE JOINED SOME OF ITS FLATS/RESIDENTIAL UNITS AS A RESULT OF WHICH B UILT - UP AREA OF THOSE FLATS EXCEEDED 1,000 SQ. FT. . IN THESE CIRCUMSTANCES, THE BENCH RELIED ON DECISION OF THE SPECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES VS. JT. CIT [2009] 119 ITD 255(MUMBAI SB) AND CONCLUDED AS UNDER: 13. EVEN ASSUMIN G FOR THE SAKE OF ARGUMENT THAT THERE WAS A VIOLATION OF THE CONDITION (C) PRESCRIBED BY SECTION 80 - IB(10), THE RESULT THEREOF WOULD NOT BE DENIAL OF THE CLAIM FOR DEDUCTION AS HAS BEEN HELD BY THE SPECIAL BENCH (PUNE) IN THE CASE OF BRAHMA ASSOCIATES V. J T. CIT [2009] 119ITD 255. IN THIS CASE, IT WAS FOUND THAT A SMALL PART OF THE BUILDING WAS BUILT FOR COMMERCIAL USE. THE CONDITION THAT THE ENTIRE BUILDING SHOULD HAVE BEEN BUILT FOR RESIDENTIAL USE WAS, THUS, NOT SATISFIED. HOWEVER, THE PORTION USED FOR C OMMERCIAL PURPOSES WAS MINIMAL AND LESS THAN 10 PER CENT OF THE TOTAL BUILT - UP AREA. IN SUCH CIRCUMSTANCES, THE TRIBUNAL HELD THAT THE DEDUCTION UNDER SECTION 80 - IB( 10) CANNOT BE TOTALLY DENIED AND IF IT IS FOUND THAT EVEN IF THE COMMERCIAL USE EXCEEDS 10 PER CENT, BUT THE RESIDENTIAL SEGMENT OF THE PROJECT SATISFIES ALL THE REQUIREMENTS OF SUB - SECTION (10) ON STAND ALONE BASIS AND THE INCOME FROM THE CONSTRUCTION OF THE RESIDENTIAL UNITS CAN BE ASCERTAINED ON A STAND ALONE BASIS, THE DEDUCTION WOULD BE AV AILABLE IN RESPECT OF THE RESIDENTIAL SEGMENT OF THE PROJECT. APPLYING, WITH RESPECT, THE RATIO LAID DOWN IN THE SPECIAL BENCH CASE, WE FIND THAT IN THE PRESENT CASE THE VIOLATION, IF ANY, OF CONDITION (C) OF SUB - SECTION (10) IS MUCH LESS THAN 10 PER CENT, SAY AROUND 6.5 PER CENT TO 7 PER CENT ONLY, AND, THEREFORE, THE DEDUCTION FOR THE PROFITS ARISING FROM THE HOUSING PROJECT CANNOT BE DENIED. THE EXTENT OF VIOLATION, IF AT ALL THERE IS A VIOLATION, IS SO LESS THAT IT WOULD BE INAPPROPRIATE TO DENY THE DED UCTION TOTALLY. THE SPECIAL BENCH HAS FURTHER HELD THAT EVEN IF THE COMMERCIAL USER OF THE BUILT - UP AREA OF THE BUILDING EXCEEDS 10 PER CENT, THE ASSESSEE WOULD STILL GET THE PROPOR TIONATE DEDUCTION, I.E., THE DEDUCTION WOULD BE CONFINED ONLY TO THE PROFI TS OF THE RESIDENTIAL SEGMENT OF THE OVERALL PROFIT. THEREFORE, EVEN IF THE ASSESSEE CANNOT BE GIVEN THE ENTIRE DEDUCTION UNDER SECTION 80 - IB, IT SHOULD BE ELIGIBLE FOR THE PROPORTIONATE DEDUCTION AS ENVISAGED BY THE SPECIAL BENCH. IT HAS BEEN BROUGHT TO O UR NOTICE BY THE ASSESSEE THAT THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF A RUN EXCELLO FOUNDATIONS (P.) LTD. V. ASSTT. OT[2007] 108 TTJ (CHENNAI) 71 AND THE BANGALORE BENCH OF THE TRIBUNAL IN DY. CIT V. BRIGADE ENTERPRISES (P.) LTD. [2009] 28 SOT 7 URO) HAVE HELD THAT EVEN WHERE THE VIOLATION EXCEEDS THE LIMIT OF 10 PER CENT, THE ENTIRE DEDUCTION CANNOT BE DENIED BUT THE SAME SHOULD BE ALLOWED PROPORTIONATELY. IN THIS VIEW OF THE MATTER ALSO ITA N O.2 903/AHD/2008 13 THE GRANT OF DEDUCTION BY THE ASSESSING OFFICER IN THE PRE SENT CASE CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 14. THERE IS ONE MORE ASPECT OF THE MATTER WHICH IS THAT THE ASSESSING OFFICER HAS CONSIDERED THE ALLEGED VIOLATIONS OF CLAUSE (C) OF SUB - SECTION (10) AS NOT MATERIAL AND AFFECTING THE MERITS OF THE ASSESSEE'S CLAIM AND THIS IS EVIDENT FROM THE FACT THAT HE HAS HIMSELF NOT DENIED THE DEDUCTION DESPITE THE FACT THAT HE CONDUCTED ENQUIRIES UNDER SECTION 131 OF THE ACT IN SOME CASES TO FIND OUT WHY THE RESIDENTIAL UNITS WERE MORE THAN 1,000 SQ.FT. OF BUILT - UP AREA. APPARENTLY, THE ASSESSING OFFICER HAS TAKEN THE SAME VIEW WHICH THE SPECIAL BENCH OF THE TRIBUNAL (PUNE) (SUPRA) AS WELL AS THE CHENNAI AND BANGALORE BENCHES TOOK IN THE CASES CITED ABOVE. EVEN WHILE PROPOSING ACTIO N UNDER SECTION 263 OF THE ACT TO THE CIT, THE ASSESSING OFFICER HAS NOT REFERRED TO ANY VIOLATION OF THE CONDITION THAT THE RESIDEN TIAL UNIT SHOULD NOT BE MORE THAN 1,000 SQ.FT OF BUILT - UP AREA. THUS, THE ASSESSING OFFICER SEEMS TO HAVE TAKEN A PLAUSIBLE VIEW OF THE PROVISIONS OF LAW AND THE CONSEQUENCES OF THE VIOLATION, A VIEW WHICH HAS ALSO APPEALED TO THE SPECIAL BENCH OF THE TRIBUNAL AND TWO OTHER BENCHES. IT IS NOW WELL - SETTLED THAT NO ACTION CAN BE TAKEN UNDER SECTION 263 ON THE FOOTING THAT THE AS SESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE MERELY BECAUSE THE ASSESSING OFFICER ADOPTED ONE OF THE SEVERAL PLAUSIBLE VIEWS THAT CAN BE REASONABLY TAKEN. REFERENCE IN THIS CONNECTION MAY BE MADE TO THE JUDGMENTS OF THE SUPREM E COURT IN THE CASES OF MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83 AND CIT V. MAX INDIA LTD. [2007] 295 ITR 2822 WHERE THIS ASPECT HAS BEEN HIGHLIGHTED. IN THESE, CIRCUMSTANCES, IT IS NOT POSSIBLE TO UPHOLD THE VIEW TAKEN BY THE CIT THAT THE ASSE SSEE HAVING VIOLATED ONE OF THE CONDITIONS OF SUB - SECTION (10), IS NOT ELIGIBLE FOR THE DEDUCTION THEREUNDER. 5.1 THE ITAT BANGALORE BENCH IN THE CASE OF DCIT VS. BRIGADE ENTERPRISES (P) LTD., 119 TTJ(BANG) 269 HELD THAT THE USE OF WORDS R ESIDENTIAL UNIT IN CLAUSE (C) OF SEC. 80IB(10) OF THE ACT MEANS THAT DEDUCTION SHOULD BE COMPUTED UNIT WISE. W HILE FOLLOWING THE DECISION OF CHENNAI BENCH IN ARUN EXCELLO FOUNDATIONS (P) LTD., VS. ACIT ,108TTJ(CHENNAI) 71 AND OF CALCUTTA BENCH IN THE CASE OF ACIT VS. BEN GAL AMBUJA HOUSING DEVELOPMENT LTD., 39D BCAJ 546 A S ALSO OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANISATION VS. ITO (2008) 115 TTJ (MUMBAI) 485 , THE BANGALORE BENCH CONCLUDED AS UNDER : - 6. THE CARDINAL RULE F OR INTERPRETATION OF ANY PROVISION RELATING TO EXEMPTION, ALLOWANCE, DEDUCTION, REBATE OR RELIEF IS THAT THEY SHOULD BE INTERPRETED LIBERALLY AND BROADLY SO AS TO ADVANCE THE OBJECT SOUGHT TO BE ACHIEVED AND NOT FRUSTRATE IT. ITA N O.2 903/AHD/2008 14 6.1 IN THE CASE OF UNION OF I NDIA & ORS. VS. WOOD PAPERS LTD. & ANR. AIR 1991 SC 2049 THE SUPREME COURT, IN THE CONTEXT OF INTERPRETING EXEMPTION PROVISIONS HELD AS UNDER : 'LITERALLY EXEMPTION IS FREEDOM FROM LIABILITY, TAX OR DUTY. FISCALLY IT MAY ASSUME VARYING SHAPES, SPECIALLY IN A GROWING ECONOMY. FOR INSTANCE TAX HOLIDAY TO NEW UNITS, CONCESSIONAL RATE OF TAX TO GOODS OR PERSONS FOR LIMITED PERIOD OR WITH THE SPECIFIC OBJECTIVE ETC. THAT IS WHY ITS CONSTRUCTION, UNLIKE CHARGING PROVISION, HAS TO BE TESTED ON DIFFERENT TOUCHSTO NE. IN FACT, AN EXEMPTION PROVISION IS LIKE AN EXCEPTION AND ON NORMAL PRINCIPLE OF CONSTRUCTION OR INTERPRETATION OF STATUTES IT IS CONSTRUED STRICTLY EITHER BECAUSE OF LEGISLATIVE INTENTION OR ON ECONOMIC JUSTIFICATION OF INEQUITABLE BURDEN OR PROGRESSIV E APPROACH OF FISCAL PROVISIONS INTENDED TO AUGMENT STATE REVENUE. BUT ONCE EXCEPTION OR EXEMPTION BECOMES APPLICABLE NO RULE OR PRINCIPLE REQUIRES IT TO BE CONSTRUED STRICTLY. TRULY, SPEAKING LIBERAL AND STRICT CONSTRUCTION OF AN EXEMPTION PROVISION ARE T O BE INVOKED AT DIFFERENT STAGES OF INTERPRETING IT. WHEN THE QUESTION IS WHETHER A SUBJECT FALLS IN THE NOTIFICATION OR IN THE EXEMPTION CLAUSE THEN IT BEING IN NATURE OF EXCEPTION IS TO BE CONSTRUED STRICTLY AND AGAINST THE SUBJECT BUT ONCE AMBIGUITY OR DOUBT ABOUT APPLICABILITY IS LIFTED AND THE SUBJECT FALLS IN THE NOTIFICATION THEN FULL PLAY SHOULD BE GIVEN TO IT AND IT CALLS FOR A WIDER AND LIBERAL CONSTRUCTION.' 6.2 IN CIT VS. GWALIOR RAYON SILK MANUFACTURING CO. LTD. (1992) 104 CTR (SC) 243 : AIR 1 992 SC 1782, THE SUPREME COURT OBSERVED AS UNDER : 'THE CONTEXTUAL MEANING HAS TO BE ASCERTAINED AND GIVEN EFFECT TO. A PROVISION FOR DEDUCTION, EXEMPTION OR RELIEF SHOULD BE CONSTRUED REASONABLY AND IN FAVOUR OF THE ASSESSEE.' 6.3 IN THE CASE OF BQ J QJ T EMPO LTD. VS. CIT (1992) 104 CTR (SC) 116 : (1992) 196 ITR 188 (SC), APPROVING DECISIONS OF BOMBAY HIGH COURT R EPORTED IN CAPSULATION SERVICES (P) LTD. VS. CIT (1973) 91 ITR 566 (BOM) AND PUNJAB AND HARYANA HIGH COURT IN PHAGOO MAL SANT RAM VS. CIT (1969) 74 ITR 734 (P&H), THE APEX COURT HELD : 'A PROVISION IN A TAXING STATUTE GRANTING INCENTIVES FOR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE CONSTRUED LIBERALLY; AND SINCE A PROVISION FOR PROMOTING ECONOMIC GROWTH HAS TO BE INTERPRETED LIBERALLY, THE RESTR ICTION ITA N O.2 903/AHD/2008 15 ON IT TOO HAS TO - BE CONSTRUED SO AS TO ADVANCE THE OBJECTIVE OF THE PROVISION AND NOT TO FRUSTRATE IT.' THIS WOULD THUS MEAN WHERE THERE IS PARTIAL OR NOMINAL NON - COMPLIANCE OF THE REQUIREMENTS OF LAW THERE SHOULD NOT BE A COMPLETE DISALLOWANCE OF DEDUCTIONS. THE DISALLOWANCE, IF ANY, WILL HAVE TO BE RESTRICTED TO THE EXTENT OF NON - COMP LI ANCE OF THE PROVISIONS. THIS RULE OF PROPORTIONALITY IS WELL - FOUNDED IN THE INCOME - TAX LAW AND IS RECOGNIZED UNDER VARIOUS PROVISIONS OF THE ACT. 6.4 THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF ARUN EXCELLO FOUNDATIONS (P9 LTD. VS. ASSTT. CIT (2007) - 108 TTJ (CHENNAI) 71 HELD AS FOLLOWS: 'THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS ALREADY RAISED ALTERNATIVE PLEA IN THIS REGARD THAT THE DEDUCTION UNDER S. 80 - IB(1O) ON THE RESIDENTIAL UNITS CONSTRUCTED BY THE ASSESSEE BE GIVEN ON PRO RATA BASIS. HERE, 'WE AGREE WITH THE PLEA TAKEN BY THE ASSESSEE AND ACCORDINGLY, WE DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE ON THE RESIDENTIAL UNITS CONSTRUCT ED ON PRO RATA BASIS.' 6.5 THE KOLKATA BENCH OF THE TRIBUNAL, IN THE CASE OF ASSTT. CIT VS. BENGAL AMBUJA HOUSING DEVELOPMENT LTD. (2007) 39 - D BCAJ 546, WAS FACED WITH A CASE INVOLVING A PROJECT CONSISTING OF 26 RESIDENTIAL UNITS WHEREIN THE INDIVIDUAL FL AT SIZES VARIED BETWEEN 800 TO 3,000 SQ. FT. DEDUCTION UNDER S. 80 - IB(10) WAS CLAIMED WITH REFERENCE TO PROFIT ATTRIBUTABLE TO THE BUILT - UP AREA, WHICH WAS OCCUPIED BY THE RESIDENTIAL UNITS HAVING INDIVIDUAL FLAT SIZE OF LESS THAN 1,500 SQ. FT. THE TRIBUNA L, UPHOLDING THE ORDER OF THE CIT(A) NOTED THAT THE PROVISIONS OF S. 80 - IB(10) DO NOT PROVIDE FOR DENIAL OF DEDUCTION, IF A HOUSING COMPLEX CONTAINS BOTH THE SMALLER AND LARGER RESIDENTIAL UNITS. IT CONCLUDED THAT PROFITS ATTRIBUTABLE TO ELIGIBLE RESIDENTI AL UNITS ARE ENTITLED FOR DEDUCTION IN SPITE OF THE FACT THAT OTHER RESIDENTIAL UNITS ARE GREATER THAN 1,500 SQ. FT. BUILT - UP AREA. 6.6 THE MUMBAI BENCH OF THE TRIBUNAL, IN THE CASE OF SAROJ SALES ORGANI Z ATION US. /TO (2008) 115 TTJ (MUMBAI) 485 GRANTED D EDUCTION FOR TWO BLOCKS COMPRISING OF 9 WINGS OUT OF TOTAL 11 WINGS ON THE GROUND THAT EACH SUCH BLOCK COMPLIED WITH THE CONDITIONS OF S. 80 - IB(10). THE TRIBUNAL HELD AS UNDER : 'IN OUR VIEW, COMBINING THESE TWO PROJECTS INTO ONE WILL LEAD TO A RESULT WHI CH MANIFESTLY WILL BE UNJUST AND ABSURD AND DEFEAT THE VERY PROVISIONS OF DEDUCTION SECTIONS. UNLESS THERE IS A CLEAR INTENTION OF THE LEGISLATURE THE REVENUE CANNOT BE PERMITTED TO DO SO. AFTER ALL THE ASSESSEES HAVE OBTAINED ITA N O.2 903/AHD/2008 16 DIFFERENT COMMENCEMENT CERTIF ICATES AND STARTED ON DIFFERENT PERIOD OF TIME. THEY ARE SEPARATE BY TIME, SPACE AND STATUTORY APPROVALS AND EVEN IN DESIGNS, MAINTENANCE OF SEPARATE BOOKS OF ACCOUNT. THE REVENUE IN OUR VIEW, IS NOT RIGHT IN TREATING BOTH THE PROJECTS AS ONE AND INTEGRATE D WITHOUT THE FACTS WARRANTING FOR SUCH CONCLUSION.' 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DEDUCTION UNDER S. 80 - IB(10) IS AVAILABLE IN RESPECT OF BOTH THE BLOCKS AND THE LEARNED CIT(A) WAS JUSTIFIED IN UPHOLDING THE CLAIM OF THE ASSES SEE. IT IS ORDERED ACCORDINGLY. 5.2 SIMILARLY, IN THE CASE OF SJR BUILDERS VS. ACIT,[2010] 3 ITR(TRIB) 569(BANGALORE), THE ITAT FOLLOWING THEIR OWN DECISION IN BRIGADE ENTERPRISES(SUPRA) THE CASE BEFORE THE BANGALORE BENCH OF I.T.A. T., CONCLUDED AS UNDER: - 12 .. THE ASSESSEE S REPRESENTATIVE FURTHER RELIED ON THE DECISION OF THE CHENNAI TRIBUNAL IN THE CASE OF ARUN EXCELLO FOUNDATIONS P. LTD. V. ACIT (2007) 108 TTJ (71, AND SUBMITTED THAT DEDUCTION UNDER SECTION 80IB(10) ON T HE RESIDENTIAL UNITS CONSTRUCTED BE GIVEN ON PRO RATA BASIS. THE ABOVE PROPOSITION WAS ACCEPTED BY THE TRIBUNAL IN THIS CASE. AGAIN THE ASSESSEE'S REPRESENTATIVE REFERRED TO THE DECISION OF THE KOLKATA BENCH OF THE TRIBUNAL IN BENGAL AMBUJA HOUSING DEVELOP MENT LTD., IN I. T. A. 1735/KOL/2005, WHEREIN THE TRIBUNAL WAS SEIZED OF A CASE INVOLVING A PROJECT CONSISTING OF 261 RESIDENTIAL UNITS WHEREIN THE INDIVIDUAL UNIT SIZES VARIED BETWEEN 800 SQ.FT TO 3000 SQ.FT DEDUCTION UNDER SECTION 80 - 18(10) WAS CLAIMED W ITH REFERENCE TO PROFIT ATTRIBUTABLE TO THE BUILT - UP AREA, WHICH WAS OCCUPIED BY THE RESIDENTIAL UNITS HAVING INDIVIDUAL FLAT SIZE OF LESS THAN 1500 SQ.FT THE ASSESSEE'S REPRESENTATIVE FURTHER SUBMITTED THAT IN THE CASE OF THE ASSESSEE IF THERE IS 10 PER C ENT, EXCESS AS FAR AS A FLAT IS CONCERNED, IT SHOULD BE CONSI DERED AS IN CONFORMITY WITH THE STIPULATIONS CONTAINED IN SECTION 80 - 16(10) (C) BECAUSE SUCH VIOLATION IS NOMINAL AND IT COULD BE DISCARDED. FOR THE ABOVE PROPOSITION, HE REFERRED TO THE DECISIO N OF THE BANGALORE BENCH IN THE CASE OF C I T (DEPUTY) V. BRIGADE ENTERPRISES [2008] 119 TTJ (BANG) 269, PARTI CULARLY, PAGE 7, WHEREIN AT PARAGRAPH 5.1, THE TRIBUNAL HELD THAT THE WORD 'RESIDENTIAL UNIT' USED IN THE SECTION SHOULD MEAN THAT THE UNIT SHOULD BE TAKEN INDEPENDENTLY AND ON THAT BASIS PROPORTIONATE DEDUCTION SHOULD BE ALLOWED. THE SPECIAL BENCH OF THE TRIBUNAL, PUNE, IN THE CASE OF BRAHMA ASSOCIATES V. JOINT CIT IN I. T. A. 1417/PN/06, DATED APRIL 6, 2009 [2009] 315 ITR (AT) 268, HELD THAT PROPOR TIONATE DEDUCTION SHOULD BE GIVEN WITH REGARD TO THE FLATS WHICH SATISFIES THE CONDITION IN CLAUSE (C) OF SECTION 80 - IB(10), IN THE LIGHT OF THE DISCUSSION THAT MEZZANINE FLOOR, COMMON AREA, ETC., SHOULD BE EXCLUDED WHILE CALCULATING 1500 SQ.FT . ITA N O.2 903/AHD/2008 17 5.21 ACCORDINGLY, THE BENCH CONCLUDED THAT THE APPEAL BY THE ASSESSEE IS TO BE ALLOWED TO THE EXTENT OF THE FLATS , THE BUILT UP AREA OF THE FLAT IS NOT MORE THAN 1500 SQ. FT. THE BENCH ALSO AGREED WITH THE SUBMISSION OF THE REPRESENTATIVE FOR THE ASSESSEE THAT WHILE CONSIDERING THE BUILT UP ARE OF 1500 SQ. FT. FOR THE PURPOSE OF EXEMPTION UNDER SECTION 80 - IB(10), THE MEZZANINE FLOOR AND COMMON AREAS ARE TO BE EXCLUDED. AS REGARDS THE PENTHOUSES , THE BUILT UP AREA OF WHICH WAS MORE THAN 1500 SQ. FT., THE IT AT HELD THAT THE SE MAY BE EXCLUDED FOR EXEMPTION . IT WAS FURTHER OBSERVED IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES V. JCIT (2009) 315 ITR (AT) 268 (PUNE) THAT MERELY BECAUSE SOME FLATS WE RE LARGER THAN 1500 SQ. FT. , THE ASSESSEE W OULD NOT LOSE THE BENEFIT IN ITS ENTIRETY. ONLY WITH REFERENCE TO THE FLATS WHICH HA D MORE THAN THE PRESCRIBED AREA, THE ASSESSEE W OULD LOSE THE BENEFIT , THE BENCH HELD . 5.3 WE FURTHER FIND THAT VIEW TAKEN IN THE DECISION IN THE CASE OF LAUKIK DEVELOPERS REPORTED IN 108 TTJ 364, RELIED UPON BY THE LD. CIT(A) DID NOT FIND FAVOUR OF THE SPECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES . 5.4 THE NAGPUR BENCH OF THE ITAT IN THE CASE OF ITO VS. AIR DEVELOPERS ,123TTJ(NAG.)959 WH ILE DISTINGUISHING THE AFORESAID DECISION IN THE CASE OF LAUKIK DEVELOPERS (SUPRA) RELIED UPON DECISION DATED 5.1.2007 OF THE CALCUTTA HIGH COURT IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD. IN ITA NO. 458 OF 2006 AND CONCLUDED THAT IF AN ASSESS EE HAS DEVELOPED A HOUSING PROJECT ,WHEREIN THE MAJORITY OF RESIDENTIAL UNITS HAVE A BUILT UP AREA OF LESS THAN 1500 SQ. FT. I.E THE LIMIT PRESCRIBED BY SEC. 80IB(10) OF THE ACT AND ONLY A FEW RESIDENTIAL UNITS ARE EXCEEDING THE BUILT UP AREA OF 1500 SQ. FT., THERE WOULD BE NO JUSTIFICATION TO DISALLOW THE ENTIRE DEDUCTION U/S 80IB(10) OF THE ACT. THE BENCH HELD THAT IT WOULD BE FAIR AND REASONABLE TO ALLOW DEDUCTION ON PROPORTIONATE BASIS I.E. ON THE PROFIT DERIVED FROM CONSTRUCTION OF THE RESIDENTIAL UNITS WHICH HAVE A BUILT UP AREA OF LESS THAN 1500 SQ. FT. 5.5 IN THE LIGHT OF THE VIEW TAKEN IN THE AFORESAID DECISIONS , ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY CONTRARY DECISION, WE HAVE NO HESITATION ITA N O.2 903/AHD/2008 18 IN ALLOWING THE CLAIM OF TH E ASSESSEE FOR DEDUCTION U/S. 80 - IB (10) OF THE ACT ON PROPORTIONATE BASIS I.E. ON THE PROFIT DERIVED FROM CONSTRUCTION OF THE RESIDENTIAL UNITS WHICH HAVE A BUILT UP AREA OF LESS THAN 1500 SQ. FT.. ACCORDINGLY, THE AO IS DIRECTED TO ALLOW THE CLAIM F OR DEDUCTION U/S 80IB(10) OF THE ACT ON THE PROFIT DERIVED FROM CONSTRUCTION OF THE RESIDENTIAL UNITS WHICH HAVE A BUILT UP AREA OF LESS THAN 1500 SQ. FT.. THE UNITS WITH BUILT AREA EXCEEDING 1500 SQ. FT. WOULD NOT BE ELIGIBLE FOR DEDUCTION U/S 80IB(10 ) OF THE ACT. SUBJECT TO THESE DIRECTIONS, GROUND NOS.1 TO 3 IN THE APPEAL ARE ALLOWED TO THE EXTENT INDICATED HEREINBEFORE. 6. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.4 IN THE APPEAL, ACCORDINGLY, THIS GRO UND IS DISMISSED. 7. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US 8. IN THE RESULT, APPEAL IS PARTLY ALLOWED. O RDER PRONOUNCED IN THE COURT TODAY ON 4 - 0 5 - 20 1 1 SD/ - SD/ - ( MUKUL SHRAWAT ) JUDICIAL MEMBER ( A N PAHUJA ) ACCOUNTANT MEMBER DATE D : 4 - 0 5 - 20 1 1 COPY OF THE ORDER FORWARDED TO: 1. M/S AAKAR ASSOCIATES, 23, SAHITYA BUNGALOW, BEHIND TAKSH COMPLEX, VASNA ROAD, BARODA 2. THE ITO, WARD - 2(3), BARODA 3. CIT CONCERNED 4. CIT(A) - II, BARODA 5. DR, ITAT, AHMEDABAD BENCH - D , AHMEDABAD 6. GUARD FILE BY ORDER D EPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABA D