DCIT CIR-4, V. Sri. SAMARTH DEVELOPERS, MUMBAI

ITA 3232/MUM/2008

• Counselvise Citation: 323219914 RSA 2008
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 05-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 09-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: ANIL J SATHE
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, J, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH(A .M ) ITA NO.3232/MUM/2008 (ASSESSMENT YEAR:2004-05) DY. COMMISSIONER OF INCOME TAX, CIRCLE-4, THANE, QUERESHI MANSION, 2 ND FLOOR, NAUPADA, THANE (W)-400602 M/S SAMARTH DEVELOPERS, 1,SHRIPAL SHOPPING CENTRE, SHRIPAL COMPLEX, CHHATRAPATI SHIVAJI ROAD, VIRAR (W), DIST.THANE PAN:AARFS8010P APPELLANT V/S RESPONDENT DATE OF HEARING : 5.9.2011 DATE OF PRONOUNCEMENT :9.9.2011 APPELLANT BY : SHRI S.K. SINGH. RESPONDENT BY : SHRI ANIL.J. SATHE O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 21.2.2008 PASSED BY THE LD. CIT(A)- II, THANE FOR THE ASSESSMENT YEAR 2004-05 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE FIRM IS ENGAGED IN THE BUSINESS AS BUILDER AND DE VELOPERS, FILED RETURN DECLARING TOTAL INCOME OF RS.58,710/ - AFTER CLAIMING DEDUCTION OF RS.51,35,751/- U/S 80IB(10) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE FIRM HAD CONSTRUCTED ANOTHER HOUSING PROJE CT ITA NO.3232/MUM/2008 (ASSESSMENT YEAR:2004-05) 2 SHIVRAJ AND SHIVTHAR. THE OPENING WORK-IN-PROGRE SS OF THESE TWO PROJECTS WAS RS.1,61,99,683/-. THE SALES IN RESPECT OF FLATS AND SHOPS AT SHIVRAJ IS RS.1,60,77 ,073/- AND IN RESPECT OF SALES OF FLATS AND SHOPS IN THE PROJ ECT SHIVTHAR IS RS.1,83,29,001/-. OUT OF THE TOTAL SA LES OF RS.2,69,09,974/- THE ASSESSEE HAD DECLARED NET PROF IT OF RS.51,35,750/- WHICH WORKS OUT TO 19.08%. THE CLOS ING STOCK IN RESPECT OF THESE TWO PROJECTS IS RS.1,13,07,456/ -. THE NET PROFIT OF RS.51,35,750/- IN RESPECT OF THIS PROJEC T IS CLAIMED BY THE ASSESSEE AS EXEMPT U/S 80IB(10) OF THE ACT. HE FURTHER OBSERVED THAT THE COMMENCEMENT CERTIFICATE FROM CIDCO AND THE COMPLETION CERTIFICATE AND GRANT OF OCCUPANCY CERTIFICATE IN RESPECT OF THESE TWO BUILD INGS HAS BEEN FILED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME. AS PER THE OCCUPANCY CERTIFICATE, THE PROJECT HAS B EEN APPROVED AS RESIDENTIAL WITH SHOPLINE BUILDINGS. AS PER THE OCCUPANCY CERTIFICATE, THE TOTAL BUILT UP AREA OF BUILDING TYPE-A. (GROUND + 4) INCLUDING SHOPS IS 2466.71 S Q.MTRS. WHICH WORKS OUT TO 26,541 SQ.FT. AND THE BUILDING TYPE-B (GROUND +4) IS 11,967 SQ.MTRS. WHICH WORKS OUT TO 11,940 SQ.FT. THE OCCUPANCY CERTIFICATE IS ISSUED IN RESPE CT OF 22 SHOPS AND 46 FLATS IN BUILDING TYPE-A AND 11 SHOP S AND 26 FLATS IN BUILDING TYPE-B. HE FURTHER OBSERVED T HAT THE NUMBER OF SHOPS CONSTRUCTED BY THE ASSESSEE FIRM IN ITA NO.3232/MUM/2008 (ASSESSMENT YEAR:2004-05) 3 BUILDING A TYPE SHIVRAJ AND BUILDING B TYPE SHIVTHAR IS 33 AND THE TOTAL BUILT UP AREA OF THESE 33 SHOPS WORKS OUT TO 11,172 SQ.FT. HE FURTHER OBSERVED THAT THE CONDI TION (C) U/S 80IB(10) OF THE ACT IS THAT THE RESIDENTIAL UNIT H AS 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 MU NICIPAL LIMITS OF THESE CITIES AND ONE THOUSAND AND FIVE HU NDRED SQUARE FEET AT ANY OTHER PLACE. ACCORDING TO THE AO, THE CONDITIONS LAID DOWN U/S 80IB(10) OF THE ACT RELEV ANT TO THE ASSESSMENT YEAR 2004-05 IS NOT FULFILLED BY THE AS SESSEE, HENCE THE AO DISALLOWED THE DEDUCTION OF RS.51,35 ,751/- CLAIMED BY THE ASSESSEE U/S 80IB(10) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE AO AFTER MAKING THE SO ME OTHER ADDITION COMPLETED THE ASSESSMENT AT AN INCOM E OF RS.52,44,640/- VIDE ORDER DATED 6.12.2006 PASSED U/S 143(3) OF THE ACT. 3. ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD. V/S DCIT IN ITA NO.1595/KOL/2005 AND 1735/KOL/2005, WHEREIN THE PRINCIPLE OF PRORATA DED UCTIONS IN RESPECT OF UNITS COMPLYING WITH THE CONDITIONS PRES CRIBED U/S 80IB(10) OF THE ACT HAS BEEN UPHELD BY THE CALCUTTA HIGH COURT VIDE ORDER NO. 458 OF 2006 DATED 27.3.2007, H AS ITA NO.3232/MUM/2008 (ASSESSMENT YEAR:2004-05) 4 DIRECTED THE AO TO ALLOW PROPORTIONATE DEDUCTION U /S 80IB OF THE ACT. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWIN G GROUNDS OF APPEAL : 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN THE LAW, THE HON. CIT(A)-II, THANE, ERRED I N ALLOWING DEDUCTION U/S 80IB, SINCE THE ASESEEE FIRM HAD CONSTRUCTED RESIDENTIAL-CUM-COMMERCIAL COMPLEX, THU S VIOLATING ONE OF THE PRECONDITIONS LAID DOWN U/S 8 0IB(10) (A) OF THE I.T.ACT, 1961; 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN THE LAW, THE HON. CIT(A)-II, THANE, ERRED I N ALLOWING THE PROPORTIONATE DEDUCTION U/S 80IB(10), OF THE I.T. ACT, 1961 (HERE THE RELIANCE IS PLACED ON THE ITAT, BENCH C. MUMBAIS ITAT NO. 532/M/06 DT. 10.07.200 6 IN THE CASE OF M/S LAUKIK DEVELOPERS V/S DCIT, CI RCLE- 3, THANE; 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN THE LAW, THE HON. CIT(A)-II, THANE, ERRED I N DETERMINING THE COMMERCIAL/SHOPPING AREA ON THE BA SIS OF EVIDENCE BY THE AO, THUS ACCEPTING THE CLAIM OF ASESEEE FIRM WITHOUT TAKING INTO CONSIDERATION THE FACTUAL POSITION OF THE CASE. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE HON. CIT(A)-II, THANE, BE CANCELLED AND THAT OF THE AO B E RESTORED 5. AT THE TIME OF HEARING, THE LD. DR SUPPORTS THE ORDER OF THE AO. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR TH E ASSESSEE SUBMITS THAT THIS ISSUE IS FULLY COVERED IN FAVOU R OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIO NAL HIGH ITA NO.3232/MUM/2008 (ASSESSMENT YEAR:2004-05) 5 COURT IN THE CASE OF CIT V/S BRAHMA ASSOCIATES (2 011) 333 ITR 289 (BOM.), THEREFORE, THE ORDER PASSED BY THE LD.CIT(A) BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUC H AS IT IS ALSO NOT IN DISPUTE THAT VIDE OCCUPANCY CERTIFICA TE DATED 1.4.2004, THE PROJECT HAS BEEN APPROVED AS RESIDENT IAL WITH SHOPLINE BUILDINGS. WE FIND MERIT IN THE PLEA OF T HE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ISSUE IS SQUARE LY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION CITED (SU PRA). 8. IN BRAHMA ASSOCIATES V/S JCIT (2009) 119 ITD 25 5 (PUNE) (SB) THE PUNE SPECIAL BENCH OF THE TRIBUNAL VIDE PARAGRAPH 120 APPEARING AT PAGES 331 AND 332 OF THE REPORT HAS HELD AS UNDER : 120. TO SUM UP, THE CONCLUSIONS ARRIVED AT BY THIS SPECIAL BENCH ARE AS FOLLOWS : (A) THE DEDUCTION UNDER S. 80-IB(10), AS APPLICABLE PRIOR TO 1ST APRIL, 2005, SUBJECT TO AND IN THE LIGHT OF THE OBSERVATIONS MADE IN THE PRECEDING PARAS, IS ADMISS IBLE IN CASE OF A HOUSING PROJECT COMPRISING RESIDEN TIAL HOUSING UNITS AND COMMERCIAL ESTABLISHMENTS. IN CAS E THESE PROJECTS ARE APPROVED AS HOUSING PROJECTS BY THE LOCAL AUTHORITY, SUCH AN APPROVAL AS HOUSING PROJEC T IS SUFFICIENT FOR THE PURPOSES OF ELIGIBILITY. IN ANY OTHER CASE, WHERE 90 PER CENT OR MORE OF THE TOTAL BUILT- UP AREA IS USED FOR DWELLING UNITS, IN ACCORDANCE WITH THE SCHEME OF S. 80-IB (10), THE BENEFIT OF DEDUCTION UNDER S. 80- ITA NO.3232/MUM/2008 (ASSESSMENT YEAR:2004-05) 6 IB(10) WILL NOT BE DECLINED. IN CASE COMMERCIAL USE OF BUILT-UP AREA IS MORE THAN 10 PER CENT BUT THE RESI DENTIAL SEGMENT OF THE PROJECT SATISFIES REQUIREMENTS OF S. 80- IB(10) ON STANDALONE BASIS, I.E. (I) THE SIZE OF TH E PLOT, EXCLUDING PORTION UNDER COMMERCIAL UNIT, IS MORE TH AN MINIMUM AREA OF ONE ACRE, (II) RESIDENTIAL UNITS BU ILT ON SUCH AREA MUST SATISFY CONDITION OF CL. (C) OF THE PROVISION, AND (III) OTHER NECESSARY CONDITIONS ARE FULFILLED, AND WHERE INCOME FROM CONSTRUCTION OF RESIDENTIAL DWELLING UNITS CAN BE WORKED OUT ON STANDALONE BASIS, DEDUCTION UNDER S. 80-IB(10) WILL BE AVAILABLE IN RESPECT OF RESIDENTIAL SEGMENT OF THE PROJECT. (B) THE DEDUCTION UNDER S. 80-IB(10) IS AVAILABLE I N RESPECT OF PROFITS OF HOUSING PROJECT AS A WHOLE, A ND, AS SUCH, IT IS NOT RELEVANT AS TO WHAT IS THE PORTION OF PROFITS WHICH CAN BE SAID TO BE ATTRIBUTABLE TO RESIDENTIAL UNITS. THIS IS SUBJECT TO THE RIDER THAT IN CASE COMMERCIA L USE OF BUILT-UP AREA IN A PROJECT IS MORE THAN 10 PER C ENT AND, FOR THIS REASON THE PROJECT CANNOT BE SAID TO BE A PREDOMINANTLY HOUSING PROJECT, BUT, IN TERMS OF OBSERVATIONS MADE IN PARA 115 ABOVE, THE ASSESSEE I S ENTITLED TO DEDUCTION IN RESPECT OF RESIDENTIAL UNI T SEGMENT OF THE OVERALL PROJECT ON FULFILLMENT OF NE CESSARY CONDITIONS, THE ENTITLEMENT OF INCENTIVE DEDUCTION WILL BE CONFINED TO ONLY TO THE PROFITS TO THE RESIDENTIAL SEGMENT OF THE OVERALL PROJECT. (C) THE LIMIT ON COMMERCIAL USE OF BUILT-UP AREA AS PRESCRIBED BY CL. (D) OF S. 80-IB(10) HAS NO RETROS PECTIVE APPLICATION, AND IT APPLIES ONLY W.E.F. THE ASST. Y R. 2005- 06. 9. ON FURTHER APPEAL BY THE REVENUE IN CIT V/S BR AHMA ASSOCIATES (2011) 333 ITR 289 (BOM), IT HAS BEEN OB SERVED AND HELD BY THE HONBLE JURISDICTIONAL HIGH COURT (PAGE 291 HEAD NOTE): THE ASSESSEE HAD UNDERTAKEN A CONSTRUCTION PROJECT AT PUNE UNDER THE LAYOUT APPROVED BY THE PUNE MUNICI PAL CORPORATION WHICH IS THE LOCAL AUTHORITY. THE PROJE CT CONSISTS OF FIFTEEN RESIDENTIAL BUILDINGS AND TWO COMMERCIAL BUILDINGS. THE LOCAL AUTHORITY HAD APPRO VED ITA NO.3232/MUM/2008 (ASSESSMENT YEAR:2004-05) 7 THE SAID PROJECT AS 'RESIDENTIAL PLUS COMMERCIAL'. THE PERCENTAGE OF THE COMMERCIAL AREA TO THE TOTAL AREA OF THE PLOT WAS 20.83 PERCENT. THE PROJECT COMMENCED O N AUGUST, 14, 2000 AND WAS COMPLETED ON OCTOBER, 3, 2005. THE ASSESSEE CLAIMED SPECIAL DEDUCTION IN RESPECT OF THE PROFITS. THE CLAIM WAS REJECTED BY THE AO AND THE COMMISSIONER (APPEALS). THE TRIBUNAL HE LD THAT WHERE THE PROJECT IS APPROVED AS RESIDENTIAL P LUS COMMERCIAL, THE DEDUCTION UNDER SECTION 80IB(10) W OULD BE ALLOWABLE ONLY IF THE TOTAL BUILT-UP AREA USED F OR RESIDENTIAL UNITS IN THE PROJECT IS 90 PER CENT OR MORE; WHERE THE COMMERCIAL USER WAS MORE THAN 10 PER CENT OF THE TOTAL BUILT UP AREA AND THE PROFITS OF THE RESI DENTIAL UNITS CAN BE WORKED OUT ON STAND ALONE BASIS, THEN DEDUCTION UNDER SECTION 80-IB(10) WOULD BE ALLOWABL E ONLY ON THE RESIDENTIAL UNITS. ON APPEAL TO THE HIG H COURT: HELD, THAT CLAUSE (D) INSERTED TO SECTION 80IB(10) WITH EFFECT FROM APRIL 1, 2005 IS PROSPECTIVE AND NOT RETROSPECTIVE AND HENCE CANNOT BE APPLIED TO THE PE RIOD PRIOR TO APRIL 1, 2005. SINCE DEDUCTIONS UNDER SEC TION 80IB(10) WERE ON THE PROFITS DERIVED FROM THE HOUS ING PROJECTS APPROVED BY THE LOCAL AUTHORITY AS A WHOLE , THE TRIBUNAL WAS NOT JUSTIFIED IN RESTRICTING SECTION 8 0IB(10) DEDUCTION ONLY TO A PART OF THE PROJECT. HOWEVER, I N THE PRESENT CASE, SINCE THE ASSESSEE HAS ACCEPTED THE DECISION OF THE TRIBUNAL IN ALLOWING SECTION 80IB(1 0) DEDUCTION TO A PART OF THE PROJECT, THE FINDING OF THE TRIBUNAL IN THAT BEHALF COULD NOT BE DISTURBED. 10. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BR OUGHT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING T HE ABOVE DECISIONS AND KEEPING IN VIEW THAT THE DECISION OF THE TRIBUNAL IN LAUKIK DEVELOPERS (SUPRA), HAS BEEN CO NSIDERED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE O F BRAHMA ASSOCIATES (SUPRA), AND ALSO BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S BRAHMA ASSOCIATES (SUPRA), WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) IN D IRECTING THE ITA NO.3232/MUM/2008 (ASSESSMENT YEAR:2004-05) 8 AO TO ALLOW PROPORTIONATE DEDUCTION U/S 80IB(10) O F THE ACT ON THE ASSESSEES CLAIM OF BUSINESS PROFITS DERIVED OUT OF THE SALE OF RESIDENTIAL COMPONENTS ONLY. THE GROUNDS T AKEN BY THE REVENUE ARE, THEREFORE, REJECTED. 11. IN THE RESULT, THE REVENUES APPEAL STANDS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9TH SEPT EMBER, 2011. SD SD (RAJENDRA SINGH) (D.K .AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 9TH SEPTEMBER, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI