EMGEEN HOLDINGS P. LTD ( NOW WINDSOR REALTY P. LTD, MUMBAI V. DCIT RG 9(1), MUMBAI

ITA 332/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48760 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 11-05-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 13-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHIMA GUPTA
• Section: 133A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, E BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER I.T.A NO.332/ MUM/2010 ASSESSMENT YEAR: 2003-04 EMGEEN HOLDINGS P.LTD. .. APPELLANT (NOW WINDSOR REALTY P.LTD.) DWARKA 57, TAGORE ROAD, SANTACRUZ(W), MUMBAI PA NO.AAACE 1883 E VS DCIT, RANGE 9(1) ,. RESPONDEN T AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: VINAY SINHA, FOR THE APPELLANT ASHIMA GUPTA, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT IS AGGRIEVED BY THE CIT(A)S ORDER DATED 13.11.2009 CONFIRMING THE APPEAL EFFECT ORDER PASSED BY THE AO TO GIVE EFFECT TO DIRECTIONS OF THE CIT(A)-9 VIDE ORDER DAT ED 30.3.2009. THE ASSESSMENT YEAR INVOLVED IS 2003-04. 2. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE L IKE THIS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOP MENT OF PROPERTIES. IN THE ORIGINAL ASSESSMENT, THE AO DECLINED THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80-IB(10) ON ACCOUNT OF VIOLATION OF THE CO NDITIONS AS SPECIFIED IN THE SAID I .T.A NO.332/ MUM/2010 EMGEEN HOLDINGS P.LTD 2 SECTION. THE MATTER TRAVELED IN APPEAL BEFORE THE CIT(A)-9 AND VIDE ORDER DATED 30.3.2009, THE CIT(A), INTER ALIA, DIRECTED THE AO AS FOLLOWS: THE APPELLANTS CLAIM IS SUPPORTED BY THE DECISIO N OF HONBLE MUMBAI ITAT IN THE CASE OF M/S. SAROJ SALES CORPORA TION ITA NO.4008/M/07 ORDER DT.24.1.2008 WHEREIN ON IDENTICA L FACTS THE HONBLE ITAT FOLLOWING THE HONBLE SUPREME COURT DE CISION IN CASE OF BAJAJ TEMPO LTD REPORTED IN 196 ITR 188 HAS OBSERVE D THAT THE PROVISIONS SHOULD BE INTERPRETED LIBERALLY. FURTHE R, FOLLOWING THE HONBLE ITAT DECISION IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD KOLKATA, THE HONBLE MUMBAI ITAT AL LOWED THE ASSESSEES CLAIM ON PRORATE BASIS ON QUALIFYING UNI TS WHICH SPECIFIED THE CONDITIONS LAID DOWN BY SECTION 80IB(10). THE HONBLE ITAT KOLKATA IN THE CASE OF BENGAL AMBUJA HOUSING DEVELO PMENT LTD, KOLKATA, THE HONBLE MUMBAI ITAT ALLOWED THE ASSESS EES CLAIM ON PRO-RATA BASIS ON QUALIFYING UNITS WHICH SPECIFIED THE CONDITIONS LAID DOWN BY SECTION 80IB(10). THE HONBLE ITAT, KOLKAT A IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD VS DCIT(ITA NO.1595/KOL/2005, A.Y. 2002-03, BENCH-C ORDER DATED 24.3.2006(2007) 39 D BCAJ 546 HAS HELD THAT EVEN IF THE UNITS CONSTRUED ARE BOTH SMALLER AND LARGER UNITS WITH RE FERENCE TO THE STIPULATED AREA OF 1000 SQ.FT BUILT-UP AREA OUGHT T O BE ALLOWED AS DEDUCTION U/S.80IB(10) OF THE ACT. THE ABOVE DECIS ION IS APPROVED BY THE HONBLE KOLKATA HIGH COURT AS REFERRED IN THE D ECISION OF ACIT VS SHREE BALAJI DEVELOPERS (ITA NO.2592/MUM/2006, A.Y. 2004-05, BENCH C ORDER DT.21.10.2008 WHEREIN THE THEORY OF PRO-RATA DEDUCTION IS APPROVED AND HELD THE DEDUCTION U/S.80 IB ON PRO-RATA BASIS MEETS THE OBJECTIVES OF THE PROVISIONS OF SEC TION 80IB. THE HONBLE ITAT BANGALORE BENCH IN THE CASE OF DCIT VS BRIGADE ENTERPRISES PVT LTD (24 DTR 371 BANGALORE (2008) HA S HELD THAT THE DISALLOWANCE IF ANY WILL HAVE TO BE RESTRICTED TO T HE EXTENT OF NON- COMPLIANCE OF THE PROVISIONS. THIS RULE OF PROPORT IONATELY IS WELL FOUNDED IN THE INCOME TAX LAW AND IS RECOGNIZED UND ER VARIOUS PROVISIONS OF THE ACT. THE HONBLE ITAT CHENNAI IN THE CASE OF ARUN EXCELLO FOUNDATIONS PVT LTD V. ACIT (2007) 108 TTJ 71(CHENNAI) HAS ALSO UPHELD THE PRO-RATA DEDUCTION ON ELIGIBLE RESI DENTIAL UNITS. THUS, RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS OF THE V ARIOUS ITAT AND COURTS AND PARTICULARLY THE JURISDICTIONAL ITAT IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA), I HOLD THAT ASSSESSEE I S ENTITLED FOR DEDUCTION U/S.80IB ON PRO-RATA BASIS. THE AO IS TH EREFORE DIRECTED TO ALLOW THE DEDUCTION U/S.80IB(10) SUBJECT TO VERIFIC ATION OF THE AREA- WISE CALCULATION DONE DURING THE COURSE OF SURVEY O PERATION. THIS GROUND OF APPEAL IS PARTLY ALLOWED. I .T.A NO.332/ MUM/2010 EMGEEN HOLDINGS P.LTD 3 3. IN EFFECT THUS, THE DIRECTION OF THE CIT(A) WAS THAT EVEN THOUGH THE ASSESSEE MAY HAVE CONSTRUCTED SOME FLATS WHICH ARE INELIGIBL E FOR DEDUCTION UNDER SECTION 80IB(10), THE ASSESSEE HAS TO BE ALLOWED DEDUCTION U/S.80IB(10) IN RESPECT OF REMAINING FLATS I.E. ELIGIBLE FLATS ON PRO-RATA BAS IS. 4. WHILE GIVING EFFECT TO THIS DIRECTION, THE AO DI D NOT VERIFY THE AREA-WISE CALCULATION DONE DURING THE COURSE OF SURVEY OPERAT ION, EVEN THOUGH HE WAS SPECIFICALLY DIRECTED TO DO SO, AND PROCEEDED TO RE -COMPUTE THE DEDUCTION U/S.80IB(10) BY TAKING INTO ACCOUNT THE STATEMENT M ADE BY THE ASSESSEE DURING THE COURSE OF SURVEY U/S.133A. WHILE DOING SO, THE AO OBSERVED AS FOLLOWS: THE LD CIT(A) VIDE ITS ORDER NO.CIT(A)IX/DY.9(1)/ I.T. 462/2008-09, DT.30.3.2009 HAS DIRECTED TO ALLOW THE DEDUCTION U/ S.80IB(10) SUBJECT TO VERIFICATION OF THE AREA-WISE CALCULATION DONE DURI NG THE COURSE OF SURVEY OPERATION. IN VIEW OF THE ABOVE DIRECTIONS GIVEN B Y THE LD CIT(A), THE TOTAL INCOME OF THE ASSESSEE IS RE-COMPUTED AS UNDER: DURING THE COURSE OF SURVEY PROCEEDINGS THE ASSESSE E AGREED TO OFFER THE INCOME BY WITHDRAWING THE DEDUCTION U/S.80IB(10) ON PRO-RATA BASIS ON SALE OF AREA OF 59898 SQ.FT AS THE AREA OF THESE FLATS I S MORE THAN 1000 SQ.FT. (BUILT- UP) OUT OF THE TOTAL AREA OF 116278 SQ.FT FOR A.Y. 2003-04 & 2004-05, WHICH COMES TO 51.25%. IN THE ORIGINAL ASSESSMENT ORDER FOR A.Y. 2003-04, THE DEDUCTION U/S.80IB(10) WAS ALLOWED AMOUNTING TO ` .6,54,82,573. THUS, AMOUNT OF DEDUCTION U/S.80IB(10) WITHDRAWN BY THE A SSESSEE FOR A.Y. 2003- 04 WILL COME TO ` .3,37,36,621 (51.52% OF ` .6,54,82,573). IN VIEW OF THE ABOVE TOTAL INCOME OF THE ASSESSEE IS REVISED AS UN DER: ASSESSED INCOME AS PER ORDER U/S.143(3) R.W.S.147 D T.17.12.08 : 6,83,48,200 LESS: RELIEF ALLOWED BY CIT(A) AS PER ORIGINAL ASSESSMENT U/S.143(3) DEDUCTION U/S.80IB(10) ALLOWED. ` .6,54,82,573 LESS DURING SURVEY U/S.133A, ASSESSEE HAS WITHDRAWN THE DEDUCTION U/S.80IB(10) ON PRO-RATA BASIS. ` .3,37,36,621 RS.3,17,45,952 RELIEF ALLOWED BY CIT(A) U/S.80IB(10) R S. 3,17,45,952 REVISED TOTAL INCOME RS.3,66,0 2,248 I .T.A NO.332/ MUM/2010 EMGEEN HOLDINGS P.LTD 4 5. THE ASSESSEE WAS AGGRIEVED THAT THE AO DID NOT V ERIFY THE AREA-WISE CALCULATION AND SIMPLY PROCEEDED ON THE BASIS OF DECLARATION MADE D URING THE SURVEY PROCEEDINGS. HE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT SUCCESS. THE CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE EVEN THOUGH HE NOTED TH AT THE DIRECTIONS CONTAINED IN THE ORDER OF THE CIT(A) WAS TO GRANT EXEMPTION SUBJECT TO VER IFICATION OF AREA-WISE CALCULATION DONE DURING THE COURSE OF SURVEY OPERATION, HE WAS OF THE VIEW THAT THE AO HAVING GRANTED RELIEF ON THE BASIS OF AREA-WISE DONE DURING THE CO URSE OF SURVEY OPERATION, NO INTERFERENCE IS CALLED FOR. THE ASSESSEE IS NOT SATISFIED AND I S IN FURTHER APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE. 7. A PLAIN READING OF THE DIRECTIONS CONTAINED BY T HE CIT(A) IN HIS ORDER DATED 30.3.2009 CLEARLY INDICATES THAT THE AO WAS REQUIRE D TO VERIFY THE AREA-WISE CALCULATION DONE DURING THE COURSE OF SURVEY OPERAT ION. THE AO CLEARLY PROCEEDED TO TAKE THE DECLARATION MADE DURING SURVEY PROCEEDI NGS AS GOSPEL TRUTH AND DID NOT BOTHER TO VERIFY THE SAME. IN APPEAL, THE CIT(A) H AS CONFIRMED THIS ACTION OF THE AO WITHOUT ADDRESSING HIMSELF TO THE QUESTION AS TO WH ETHER OR NOT THE VERIFICATION OF AREA-WISE CALCULATION HAS BEEN DONE. THIS APPROACH , IN OUR OPINION, IS A VERY SUPERFICIAL WAY OF LOOKING AT THINGS. ONCE THE CIT (A) IN THE ORIGINAL QUANTUM PROCEEDINGS SPECIFICALLY DIRECTED THE AO THAT DEDUC TION U/S.80IB(10) HAS TO BE ALLOWED SUBJECT TO VERIFICATION OF AREA-WISE CALCU LATION DONE DURING THE COURSE OF SURVEY OPERATION, IT IS NOT OPEN TO THE AO TO PROC EED TO ADOPT THE CALCULATION MADE DURING SURVEY OPERATION WITHOUT FURTHER VERIFICATIO N. WE, THEREFORE, DEEM IT FIT AND PROPER TO REMIT THE MATTER BACK TO THE FILE OF THE AO WITH SPECIFIC DIRECTION TO VERIFY THE AREA-WISE CALCULATION OF ALL INELIGIBLE FLATS A ND ALLOW DEDUCTION U/S.80IB(10) ON PRO-RATA BASIS IN RESPECT OF FLATS WHICH ARE FOUND TO BE ELIGIBLE FOR DEDUCTION IRRESPECTIVE WHATEVER STATEMENT MAY HAVE MADE BY TH E ASSESSEE DURING THE SURVEY OPERATION. IT IS ONLY ELEMENTARY THAT THE STATEMEN TS MADE IN THE COURSE OF SURVEY PROCEEDINGS UNDER SECTION 133A HAVE NO EVIDENTIARY VALUE AND WHEN THE ASSESSEE CAN DEMONSTRATE THAT THE STATEMENT SO MADE IS AT VA RIANCE WITH ACTUAL FACTS, SUCH I .T.A NO.332/ MUM/2010 EMGEEN HOLDINGS P.LTD 5 STATEMENT CANNOT, BY ANY STRETCH OF LOGIC, BE USED AGAINST THE ASSESSEE. IN OTHER WORDS, THEREFORE, WHAT NEEDS TO BE SEEN IS AS TO WH ICH ARE THE FLATS WHICH ARE ELIGIBLE FOR DEDUCTION U/S.80IB(10) AND TO ALLOW DEDUCTION I N RESPECT OF THOSE FLATS ON PRO- RATA BASIS. THE AREA-WISE CALCULATION OF FLAT SIZE , WHICH IS BASIS FOR ASCERTAINING ELIGIBLE FOR DEDUCTION, NEEDS TO BE VERIFIED AND TH E ASSESSING OFFICER MUST DO SO WHILE GIVING EFFECT TO THE ORDER. ` WITH THESE DIRE CTIONS, THE MATTER IS REMITTED TO THE FILE OF THE AO. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 11 TH MAY 2011. SD/- (V. DURGA RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 11 TH MAY, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),19, MUMBAI 4. COMMISSIONER OF INCOME TAX, V , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI