M/s. ASHIRWAD DEVELOPERS, MUMBAI V. ITO - 25(1)(2), MUMBAI

ITA 3364/MUM/2007

• Counselvise Citation: 336419914 RSA 2007
• Duration Of Justice: 4 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 16-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.3364/MUM/2007 (ASSESSMENT YEAR: 2005-06) ASHIRWAD DEVELOPERS, 202, MAHAVIR DARSHAN, L.T. ROAD, NEAR RAILWAY CROSSING, DAHISAR (WEST), MUMBAI -400 068 ....... APPELLANT VS INCOME TAX OFFICER -25(1)(2), C-11, 2 ND FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA, MUMBAI ..... RESPONDENT ITA NO.4244/MUM/2007 (ASSESSMENT YEAR: 2005-06) INCOME TAX OFFICER -25(1)(2), C-11, 2 ND FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA, MUMBAI ....... APPELLANT VS ASHIRWAD DEVELOPERS, 202, MAHAVIR DARSHAN, L.T. ROAD, NEAR RAILWAY CROSSING, DAHISAR (WEST), MUMBAI -400 068 ..... RESPONDENT PAN: AAJFA 0834 B ASSESSEE BY: SHRI SHASHI TULSIYAN REVENUE BY: SHRI PAVAN VED O R D E R PER R.S. PADVEKAR, JM THESE TWO CROSS APPEALS ARE FILED, ONE BY THE ASSES SEE AND ANOTHER BY THE REVENUE CHALLENGING THE IMPUGNED ORD ER OF THE LD. CIT ITA 3364/MUM/2007 ITA 4244/MUM/2007 ASHIRWAD DEVELOPERS 2 (A)-25, MUMBAI DATED 20.3.2007 FOR THE A.Y. 2005-06 . WE FIRST TAKE- UP ASSESSEES APPEAL BEING ITA NO.3364/MUM/2007 FOR DISPOSAL. THE ASSESSEE HAS TAKEN THE FOLLOWING THREE GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (HERE INAFTER REFERRED TO AS CIT (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS 27,46,668/- ON PROPORTIONATE BAS IS ATTRIBUTABLE TO SHOPPING ARE OUT OF THE HOUSING PRO JECTS OUT OF THE TOTAL CLAIM OF RS 5,29,25,957/- FOR THE DEDU CTION U/S.80IB(10) MADE IN REGARD TO THE PROJECT CARRIED OUT IN THE NAME OF POONAM SAGAR COMPLEX AS AGAINST THE C LAIM OF 100% MADE BY THE APPELLANT IN RESPECT OF PROFITS ATTRIBUTABLE TO THE HOUSING PROJECTS AS CONTEMPLATE D U/S.80IB OF THE ACT. 2. THE LEARNED CIT (A) FAILED TO APPRECIATE AND OUG HT TO HAVE HELD THAT THE APPELLANT IS CARRYING OUT A HOUSING P ROJECT AS APPROVED BY A LOCAL AUTHORITY AND ALL THE CONDITION S PRESCRIBED UNDER THE PROVISIONS OF THE SECTION 80I B(10) IN RESPECT OF HOUSING PROJECT HAVE BEEN COMPLIED WITH. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT (A) ERRED IN APPROVING DISALLOWANCE OF EXPENSES AT RS 4,41,510/- OUT OF THE A TOTAL CLAIM OF RS 12,63,230/-. 2. BRIEFLY STATED, THE FACTS ARE AS UNDER. THE ASS ESSEE IS A BUILDER AND DEVELOPER. THE ASSESSEE HAS UNDERTAKEN A HOUSI NG PROJECT AT PENKARPADA, MIRA ROAD (E), THANE. IN THE SAID PROJ ECT THE ASSESSEE CONSTRUCTED 180 FLATS AND 24 SHOPS. THE ASSESSEE C LAIMED THE DEDUCTION U/S.80IB(10) OF RS 5,29,25,957/-. THE TO TAL BUILD- UP AREA OF THE COMMERCIAL SHOPS IN THE PROJECT WAS 4,087 SQ .FT. AS NOTED BY ITA 3364/MUM/2007 ITA 4244/MUM/2007 ASHIRWAD DEVELOPERS 3 THE A.O. THE COMMERCIAL BUILT-UP AREA IS MORE THAN 2000 SQ.FT. IN THE HOUSING PROJECT OF THE ASSESSEE. THE A.O. WAS OF T HE OPINION THAT THE FINANCE (2) ACT 2004 HAS INSERTED SUB-CLAUSE (D) TO SECTION 80IB(10) W.E.F. 1.4.2005 WHICH IS APPLICABLE FROM THE A.Y. 2 005-06 AND AS PER THE SAID AMENDMENT FROM THE A.Y. 2005-06, THE AREA OF THE COMMERCIAL SHOPPING IN THE HOUSING PROJECT SHOULD N OT BE MORE THAN 2000 SQ.FT. THE A.O., THEREFORE, DECLINED TO GIVE THE DEDUCTION CLAIMED BY THE ASSESSEE U/S.80IB(10) OF THE ACT. THE ASSES SEE CHALLENGED THE DISALLOWANCE OF THE DEDUCTION U/S.80IB(10) BEFORE T HE LD. CIT (A) AND THE LD. CIT (A) PARTLY ALLOWED THE CLAIM OF THE ASS ESSEE, SUSTAINING THE DISALLOWANCE TO THE EXTENT ATTRIBUTABLE TO THE COMM ERCIAL AREA, WHICH WAS WORKED OUT AT RS 27,51,533/- AND TO THAT EXTENT ON THE REASON OF HAVING SHOPPING AREA OF MORE THAN 2000 SQ.FT. THE D ISALLOWANCE OF THE DEDUCTION MADE BY THE A.O. WAS CONFIRMED. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBM ITS THAT NOW THIS ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. BRAHMA ASSOCIATES 313 ITR 289. WE HAVE ALSO HEARD THE LD. D.R. IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) THEIR LORDSHI PS HAVE HELD THAT THE AMENDMENT INTRODUCED TO SECTION 80IB(10), MAKIN G RESTRICTION ON THE AREA OF THE COMMERCIAL SHOPPING IS PROSPECTIVE AND NOT RETROSPECTIVE AND IF THE HOUSING PROJECT IS APPROVE D PRIOR TO 1.4.2005 THEN THE SAID RESTRICTION IS NOT APPLICABLE. MOREO VER, THE CONSISTENT VIEW HAS BEEN TAKEN BY THE OTHER CO-ORDINATE BENCHE S THAT IF PROJECT IS APPROVED PRIOR TO 1.4.2005, THEN THE RESTRICTION PU T ON THE BUILT-UP AREA OF THE COMMERCIAL SHOPPING IN ANY HOUSING PROJ ECT IS NOT APPLICABLE TO THE PROJECT APPROVED PRIOR TO 1.4.200 5. MOREOVER, NOWHERE IT IS DISPUTED BY BOTH THE AUTHORITIES BELO W THAT THE ASSESSEE PROJECT IS NOT APPROVED AS A HOUSING PROJECT BY THE LOCAL AUTHORITIES. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT ( A) AND HOLD THAT NO DEDUCTION CAN BE DISALLOWED ATTRIBUTABLE TO THE SHO PPING AREA IN ITA 3364/MUM/2007 ITA 4244/MUM/2007 ASHIRWAD DEVELOPERS 4 ASSESSEES HOUSING PROJECT. THE ADDITION SUSTAINED BY THE LD. CIT (A) IS ACCORDINGLY DELETED AND GROUND NO.1 & 2 ARE ALLO WED. 4. THE LD. COUNSEL SUBMITS THAT AS PER THE INSTRUCT ION OF THE ASSESSEE HE IS NOT PRESSING GROUND NO.3. AS GROUND NO.3 IS NOT PRESSED THE SAME IS DISMISSED AS NOT PRESSED. 5. NOW, WE TAKE-UP REVENUES APPEAL IN ITA 4244 OF 2007. THE REVENUE HAS TAKEN THE FOLLOWING TWO EFFECTIVE GROUN DS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS 5,01,74,424/- BY DISALL OWING THE ASSESSEES CLAIM OF DEDUCTION U/S.80IB OF THE I .T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS 8,21,720/- ON ACCOUNT O F PROVISION OF EXPENSES. 6. WE HAVE HEARD THE PARTIES. SO FAR AS GROUND NO. 1 IS CONCERNED, THE ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF BRAHMA ASSOCIATES (SUPRA). WHILE DECIDING ASSESSEE S GROUND BEING GROUND NO.1 & 2, WE HAVE GIVEN THE REASONS FOR ALLO WING THE CLAIM OF THE ASSESSEE. FOLLOWING OUR REASONS GIVEN IN ASSES SEES APPEAL, WE DISMISS GROUND NO.1 IN REVENUES APPEAL. 7. SO FAR AS GROUND NO.2 IS CONCERNED, WHICH IS IN RESPECT OF THE DISALLOWANCE OF THE PROVISION MADE TOWARDS EXPENSES . 8. IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS MADE THE PROVISION TO THE EXTENT OF RS 12,63,230/- UNDER THE NARRATION, ITA 3364/MUM/2007 ITA 4244/MUM/2007 ASHIRWAD DEVELOPERS 5 PROVISION FOR MAINTENANCE AND SELLING EXPENSES AN D THE SAME WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT, CLAIMING DE DUCTION. THE ASSESSEE CONTENDED THAT AFTER HANDING OVER THE POSS ESSION OF THE F;ATS TO THE CUSTOMERS, IT IS THE ASSESSEES RESPONSIBILI TY FOR NEXT THREE YEARS TO REPAIR THE BUILDING AT THE ASSESSEES COST FOR L IKELY LEAKAGE, CRACKS, WATER PROOFING ETC. THE A.O. WAS NOT IMPRESSED WIT H CONTENTION AND EXPLANATION OF THE ASSESSEE AND HE MADE THE DISALLO WANCE OF THE ENTIRE PROVISION AND MADE THE ADDITION TO THE INC OME OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE SAID ADDITION BEFORE TH E LD. CIT (A) AND LD. CIT (A) VERIFIED SUBSEQUENTLY HOW MUCH ACTUAL E XPENDITURE IS MADE BY THE ASSESSEE, AND TO THAT EXTENT ALLOWED DE DUCTION AND DELETED THE ADDITION AND AT THE SAME TIME SUSTAINED THE ADDITION TO THE EXTENT OF RS 4,41,510/-. THE REVENUE HAS CHALL ENGED THE ORDER OF THE LD. CIT (A). 09. WE HAVE HEARD THE PARTIES AND PERUSED THE REASO NS GIVEN BY BOTH THE AUTHORITIES BELOW. NOWHERE, THE A.O. HAS CONTROVERTED THE CONTENTION OF THE ASSESSEE THAT THERE WAS WARRANTY PERIOD FOR THE ASSESSEE EVEN AFTER GIVING THE POSSESSION TO THE BU YERS FOR THREE YEARS ASSESSEE IS RESPONSIBLE FOR MAKING GOOD ALL DEFECTS OR LEAKAGES IN CONSTRUCTION AND TO CARRY OUT THE REQUIRE MAINTENA NCE AND REPAIR WORK. WE FURTHER FIND THAT THE LD. CIT (A) VERIFIE D HOW MUCH ACTUAL EXPENDITURE IS INCURRED BY THE ASSESSEE AND ACCORDI NGLY ALLOWED THE SAME. IN OUR OPINION, THE ORDER OF THE LD. CIT (A) IS WELL FOUNDED WITH THE REASONS AND MOREOVER, THE PROVISION MADE TOWARD S EXPENDITURE IS ALLOWED TO THE EXTENT OF ACTUAL EXPENDITURE SUBSEQU ENTLY INCURRED BY THE ASSESSEE. IN OUR OPINION, NO INTERFERENCE IS C ALLED FOR IN THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. WE, ACCORDINGLY, CONFIRM THE SAME. 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED AND REVENUES APPEAL IS DISMISSED. ITA 3364/MUM/2007 ITA 4244/MUM/2007 ASHIRWAD DEVELOPERS 6 ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 0TH JUNE 2011. SD/- SD/- ( B. RAMAKOTAIAH ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 30TH JUNE 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)VII, MUMBAI. 4) THE CIT-7, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 3364/MUM/2007 ITA 4244/MUM/2007 ASHIRWAD DEVELOPERS 7 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 24.06.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 25.06.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER