DCIT RG 9(1), MUMBAI V. EKTA HOUSING P. LTD, MUMBAI

ITA 3649/MUM/2009

• Counselvise Citation: 364919914 RSA 2009
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 12-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 04-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS KUSUM INGOLE
• Assessee Lawyers: S C TIWARI
• Keywords: Wrong claim
• Section: 148; 143(3); 133A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO. 3649/MUM./2009 (ASSESSMENT YEAR : 2004-05 ) DATE OF HEARING: 12.5.2011 DY. COMMISSIONER OF INCOME TAX RANGE-4(1), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. APPELLANT V/S M/S. EKTA HOUSING PVT. LTD. 401, HALLMARK BUSINESS PLAZA NR. GURUNANAK HOSPITAL, KALANAGAR BANDRA (E), MUMBAI 400 057 PAN AAACE2460K .... RESPONDENT REVENUE BY : MRS. KUSUM INGOLE ASSESSEE BY : MR. S.C. TIWARI O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL PREFERRED BY THE REVENUE, IS DIRECTED A GAINST THE IMPUGNED ORDER DATED 31 ST MARCH 2009, PASSED BY THE COMMISSIONER (APPEALS)-IX, MUMBAI, FOR ASSESSMENT YEAR 2004-05. 2. THE BRIEF FACTS, AS BROUGHT OUT BY THE COMMISSIONER (APPEALS) IN HIS ORDER VIDE PARAS-2.2 TO 2.4, ARE EXTRACTED BELOW:- 2 .2 THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3 ) ON 28.11.2005 DETERMINING THE TOTAL INCOME OF ` 2,83,36,485. THE DEDUCTION UNDER SECTION 80IB(10) IN RESPECT OF EKTA WOOD PROJECT, BORIVALI (E), MUMBAI, WAS ALLOWED AT ` 9,97,85,870 AS AGAINST THE CLAIM OF THE ASSESSEE AT ` 10,03,63,370 AFTER REDUCING ` 5,77,500 EKTA HOUSING PVT. LTD. ITA NO. 3649/MUM./2009 2 BEING OTHER INCOME BY WAY OF RECEIPT OF LEGAL CHARG ES. SUBSEQUENTLY, A SURVEY ACTION WAS CARRIED OUT BY THE DDIT (INV.) UN IT-IV(3) ON 27.9.2006, IN THE CASE OF THE ASSESSEE. DURING THE COURSE OF SURVEY, IT WAS FOUND THAT THERE WERE SOME FLATS IN THE HOUSING PROJECT DEVELOPED BY THE ASSESSEE WHICH WERE OF AN AREA EXCEEDING 100 0 SQ.FT. (BUILT UP). IT WAS ALSO FOUND THAT THE ASSESSEE HAD SOLD T HE FLATS BY TWO SEPARATE AGREEMENTS TO THE SAME FAMILY MEMBERS BUT IN EFFECT, THE FLAT WAS ONE ONLY. THE SAID FLATS WERE SOLD BY TWO SEPARATE AGREEMENTS AND THUS THE AREA OF EACH AGREEMENT WAS SHOWN AS LE SS THAN 1000 SQ.FT. FOR CLAIMING DEDUCTION UNDER SECTION 80IB(10 ), ONE OF THE CONDITION IS THAT THE RESIDENTIAL UNIT IN THE HOUSI NG PROJECT SHOULD HAVE AN AREA NOT EXCEEDING 1000 SQ.FT. THUS, IT WAS FOUN D THAT THE ASSESSEE HAD VIOLATED THE CONDITIONS OF SECTION 80IB(10). AC CORDINGLY, NOTICE UNDER SECTION 148 R.W.S. 147 WAS ISSUED ON 1.2.2007 . THE REASONS FOR RE-OPENING WAS RECORDED AS UNDER:- THE SCRUTINY ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 28.11.2005 AND THE TOTAL INCOME WAS ASSESSED AT ` 2,83,36,485 ALLOWING DEDUCTION CLAIMED UNDER SECTION 80IB(10) OF THE ACT OF ` 10,03,63,270. IN THIS CASE, SURVEY ACTION UNDER SECTION 133 WAS COND UCTED ON 27.9.2006 BY DDIT, UNIT-IV(3), MUMBAI, AND THE C RUX OF THE SURVEY REPORT IS THAT M/S. EKTA HOUSING P. LTD., IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB AS TH E ASSESSEE HAS CONCEALED MATERIAL FACTS RELATING TO T HE PROJECTS AND WRONGLY CLAIMED DEDUCTION UNDER SECTIO N 80IB. 2.3 THE ASSESSEE REVISED ITS RETURN OF INCOME ON 9. 3.2005. SUBSEQUENTLY, THE ASSESSEE FILED AN APPLICATION BEF ORE HONBLE SETTLEMENT COMMISSION ON 29.3.2007. IN THE SAID APP LICATION, PROPORTIONATE DEDUCTION CLAIMED U/S 80IB(10) BEING 24% OF THE TOTAL DEDUCTION WAS OFFERED AS INCOME BY WITHDRAWING THE DEDUCTION TO THAT EXTENT. IT WAS CLAIMED BY THE APPELLANT THAT EVEN T HOUGH ALL THE FLATS WERE HAVING BUILT-UP AREA OF LESS THAN 1000 SQ.FT. AS PER THE PLANS APPROVED BY THE BMC, HOWEVER, TO BYE PEACE AND GET THE CASE SETTLED BEFORE THE HONBLE SETTLEMENT COMMISSION, THE ASSES SEE HAD WITHDRAWN THE PROPORTIONATE DEDUCTION ATTRIBUTABLE TO THE LARGER FLATS. THE CASE WAS ADMITTED BEFORE THE HONBLE SETTLEMENT COMMISSION AND THE ASSESSEE PAID THE TAX WITH INTEREST. IN THE SAI D APPLICATION, ADHOC INCOME OF ` 5 LACS WAS ALSO DECLARED AND THE PROPORTIONATE DED UCTION WITHDRAWN OF ` 24214242 WAS ALSO OFFERED. THE FINAL ORDER WAS NOT PASSED BY THE HONBLE SETTLEMENT COMMISSION TILL 31 .3.2008 AND ACCORDINGLY, AS PER THE PROVISIONS OF SECTION 245HA OF THE ACT, THE SETTLEMENT APPLICATION STOOD ABATED AND THE PROCEED INGS BEFORE THE A.O. WERE REVIEWED. 2.4 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED BY THE ASSESSEE THAT THE TOTAL BUILT-UP AREA OF ALL THE FLATS OF THE HOUSING PROJECT IS 160849 SQ.FT. AND THE BUILT UP A REA OF FLATS ARE 38016 SQ.FT. WHICH COMES TO 23.64% OF THE TOTAL ARE A OF THE PROJECT. THE LAND AREA OF THE PLOT IS 6010 SQ.MT. THE PROPOR TIONATE LAND AREA FOR REMAINING FLAT AREA IS 4568 SQ.MT. (76%) OF 601 0 SQ.MT. ONE ACRE EKTA HOUSING PVT. LTD. ITA NO. 3649/MUM./2009 3 = 4046 SQ.MT. AND THEREFORE THE PROPORTIONATE LAND AREA FOR REMAINING 76% UNITS IS MORE THAN ONE ACRE. IN VIEW OF THESE F ACTS AND RELYING ON THE HONBLE KOLKATA ITAT DECISION IN THE CASE OF BE NGAL AMBUJA HOUSING DEVELOPMENT LTD. V/S DCIT (ORDER DATED 24.3 .2006 ITA NO.1595/KOL/2005), THE ASSESSEE CLAIMED THAT IT IS ENTITLED TO THE PROPORTIONATE DEDUCTION BEING 76% OF THE TOTAL PROFIT OF THE PROJECT. RELIANCE IS ALSO PLACED ON THE HONBLE KOLKATA HIGH COURT JUDGMENT WHEREIN DECISION OF HONBLE ITAT WAS UPHELD. THE A. O. HOWEVER, REJECTED THE APPELLANTS PLEA SINCE HE IS OF THE VI EW THAT SECTION 80IB(10) DOES NOT LAY DOWN BY THEORY OF PROPORTIONA TE DEDUCTION. ACCORDING TO THE A.O. ONE OF THE CONDITIONS OF SECT ION 80IB(10) WAS VIOLATED AND THEREFORE THE WHOLE OF THE PROFIT OF T HE SAID HOUSING PROJECT WAS HELD AS NOT ELIGIBLE FOR DEDUCTION UNDE R SECTION 80IB(10) AND ACCORDINGLY THE DEDUCTION ALLOWED EARLIER WAS W ITHDRAWN. 3. THE FIRST APPELLATE AUTHORITY FOLLOWED THE DECISION OF KOLKATA BENCH OF THE TRIBUNAL IN BENGAL AMBUJA HOUSING DEVELOPMENT L TD. V/S DCIT, ITA NO.1595/KOL./2005, ORDER DATED 24 TH MARCH 2006, AND HELD AS FOLLOWS:- 2.8 . THIS RULE OF PROPORTIONATELY IS WELL FOUNDE D IN THE INCOME- TAX LAW AND IS RECOGNIZED UNDER VARIOUS PROVISIONS OF THE ACT. THE HONBLE ITAT CHENNAI IN THE CASE OF ARUN EXCELLO FO UNDATIONS PVT. LTD. V/S ACIT, (2007) 108 TTJ 71 (CHENNAI), HAS ALSO UPH ELD THE PRO-RATA DEDUCTION ON ELIGIBLE RESIDENTIAL UNITS. THUS, RESP ECTFULLY FOLLOWING THE ABOVE JUDGMENTS OF THE VARIOUS ITAT AND COURTS AND PARTICULARLY THE JURISDICTIONAL ITAT IN THE CASE OF SAROJ SALES ORGA NIZATION (SUPRA) I HOLD THAT ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IB ON PRO- RATA BASIS. THE A.O. IS THEREFORE DIRECTED TO ALLOW THE DEDUCTION UNDER SECTION 80IB(10) ON PRO-RATA BASIS AS DISCUSSED ABO VE. THIS GROUND OF APPEAL IS ALLOWED. 7. AGGRIEVED, THE REVENUE IS IN APPEAL RAISING FOLLOWI NG GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN ALLOWING DEDUCTION UNDE R SECTION 80IB(10) OF THE ACT TO THE ASSESSEE ON PRO-RATA BASIS ON THE QUALIFYING UNITS WHICH SATISFIED THE CONDITIONS LAID DOWN UNDER SECT ION 80IB(10) WITHOUT APPRECIATING THAT THE CONDITIONS LAID DOWN UNDER SECTION 80IB(10) WERE NOT SATISFIED AS SECTION 80IB(10) DOE S NOT PERMIT FOR THE ALLOWANCE OF PROPORTIONATE DEDUCTION. 2. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN ALLOWING DEDUCTION UNDER SECTION 80IB(10) OF THE ACT TO THE ASSESSEE ON PRO-RATA BAS IS WITHOUT APPRECIATING THAT DURING THE COURSE OF SURVEY OPERA TION SOME OF THE RESIDENTIAL FLATS HAVING BUILT UP AREA EXCEEDING 10 000 SQ.FT. WERE SOLD BY TWO SEPARATE AGREEMENTS TO THE SAME FAMILY MEMBE RS VIOLATING THE CONDITIONS LAID DOWN UNDER SECTION 80IB(10) OF THE ACT. EKTA HOUSING PVT. LTD. ITA NO. 3649/MUM./2009 4 8. LEARNED DEPARTMENTAL REPRESENTATIVE, MRS. KUSUM ING OLE, FILED A COPY OF SURVEY REPORT UNDER SECTION 133A OF THE ACT DATE D 4 TH DECEMBER 2006, AND SUBMITS THAT THE SURVEY HAS TAKEN PLACE IN THE ASSESSEES PREMISE ON 27 TH SEPTEMBER 2006 AND THE ASSESSING OFFICER HAS PROVE N THAT THE ASSESSEE HAD CONSTRUCTED THREE BED ROOM FLATS WHICH HAS BUIL T UP AREA OF MORE THAN 1,000 SQ.FT. SHE POINTS OUT THAT THE MATERIAL GATHE RED DURING THE SURVEY CONCLUSIVELY PROVED THAT THE ASSESSEE HAD FLATS ADM EASURING 1,350 SQ.FT. IN EACH FLOOR IN B, C, D AND F WINGS AND THAT THE BROCHURE PUBLISHED BY THE BUILDERS ALSO TALKS ABOUT ` 1,350 PER SQ.FT. SHE POINTS OUT THAT IN RESPECT TO THE QUESTION, MR. ASHOK MOHANANI AGREED THAT IN THE BROCHURE OF EKTA WOODS, THREE BED ROOM FLAT WAS @ ` 1,350 SQ.FT. POST SURVEY, HOWEVER, MR. ASHOK MOHANANI, SUBMITTED A NEW BROCHURE. SHE FURTH ER POINTS OUT THAT THE ADVERTISEMENTS, ARTICLES IN NEWSPAPERS AND MAGAZINE S, SHOW THAT THE ASSESSEE WANTED TO SELL THREE BED ROOM FLATS. SHE D REW THE ATTENTION OF THE BENCH TO THE FACT THAT VARIOUS AGREEMENTS WERE EXEC UTED FOR PURCHASE OF THREE BED ROOM FLATS ADMEASURING 1,350 SQ.FT. THESE AGREEMENTS, AS PER THE LEARNED DEPARTMENTAL REPRESENTATIVE, CLEARLY DEMONS TRATE THAT THE THREE BED ROOM FLATS HAVE BEEN NOT ONLY BUILT UP SPECIFIC ALLY FOR BEING SOLD AS SUCH BUT ALSO AGREEMENTS FOR SELLING HAS BEEN SEPARATELY ENTERED AND THAT EACH OF THESE THREE BED ROOM FLATS HAD A BUILT UP AREA IN E XCESS OF 1,000 SQ.FT. SHE FURTHER POINTS OUT THAT THE ASSESSEE TO COVER UP TH IS ISSUE, HAS ENTERED INTO A DEED OF RECTIFICATION WHICH WAS SPECIFIC TO AN AM ENDMENT MADE IN THE BOMBAY MUNICIPAL CORPORATION APPROVED PLAN SO AS TO DIVIDE THREE BED ROOM FLAT INTO TWO PARTS I.E., ONE TWO BED ROOM FLATS AN D ONE STUDIO APARTMENT. SHE FILED A COPY OF A CERTIFICATE GIVEN BY THE ARCH ITECT WHERE A STUDIO APARTMENT ADJOINING THE TWO BED ROOM APARTMENT WAS SEPARATELY DISCLOSED SO AS TO SATISFY THE CONDITION THAT EACH FLAT HAS A N AREA WHICH DOES NOT EXCEED 1,000 SQ.FT. PER UNIT. SHE TOOK THIS BENCH T O THE PROVISIONS OF SECTION 80IB(10) AND CONTENDS THAT THE PROVISIONS ARE CUMUL ATIVE AND IF ANY ONE OF THE PROVISIONS IS VIOLATED, THEN THE ASSESSING OFFI CER SHOULD DISALLOW THE ENTIRE CLAIM FOR DEDUCTION. REFERRING TO THE VARIOU S CASE LAWS RELIED UPON BY EKTA HOUSING PVT. LTD. ITA NO. 3649/MUM./2009 5 THE LEARNED COUNSEL, THE LEARNED DEPARTMENTAL REPRE SENTATIVE RELIED ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN BRAHMA ASS OCIATES, INCOME TAX APPEAL NO.1194 OF 2010, JUDGMENT DATED 22 ND FEBRUARY 2011, AND SUBMITS THAT IN THIS JUDGMENT, THE HONBLE HIGH COURT HAS H ELD THAT PROPORTIONATE DISALLOWANCE IS NOT PERMITTED UNDER THE SCHEME OF T HE ACT. REFERRING TO THE BOARD CIRCULAR RELIED UPON BY THE LEARNED COUNSEL, THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDS THAT THE AMENDMENTS MADE BY THE FINANCE ACT, 2009, AND CIRCULAR NO.5 OF 2010 DATED 3 RD JUNE 2010, IS NOT RELEVANT AS IT IS APPLICABLE TO INDEPENDENT SALES MADE TO THE SAME PA RTY OF ADJOINING FLATS. SHE SUBMITS THAT, IN THIS CASE, THE SURVEY PROVED T HAT THIS IS A SINGLE FLAT AND THE ASSESSEE SOUGHT TO CHANGE THE DOCUMENTS IN SUCH A MANNER SO AS TO MAKE IT APPEAR THAT THESE ARE TWO SEPARATE FLATS, W HICH ARE ADJOINING TO EACH OTHER AND THAT THERE WERE TWO SEPARATE SALE DE EDS. REFERRING TO THE VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE, SHE POINTS OUT THAT IN NONE OF THESE CASE LAWS, THE JUDGMENT OF HON'BLE BOMBAY HIG H COURT IN BRAHMA ASSOCIATES (SUPRA) WAS CONSIDERED. 9. LEARNED COUNSEL, ON THE OTHER HAND, CONTROVERTED TH E SUBMISSIONS MADE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE AND POINTS OUT THAT THE SHORT POINT FOR CONSIDERATION IN THIS APPEAL IS WHE THER THE ASSESSEE IS ENTITLED TO PROPORTIONATE DEDUCTION UNDER SECTION 8 0IB(10), IN CASE THE CONDITION THAT THE RESIDENTIAL UNIT SHOULD NOT BE O F MORE THAN 1,000 SQ.FT. BUILT UP AREA, HAS BEEN VIOLATED IN SOME FLATS. ACC ORDING TO LEARNED COUNSEL, THE ISSUE STANDS COVERED BY A NUMBER OF DECISIONS O F TRIBUNAL, WHICH ARE LISTED BELOW:- I) ITO V/S AIR DEVELOPERS, 25 DTR 287 (NAG.); II) DCIT V/S BRIGADE ENTERPRISES PVT. LTD., 14 DTR 371 (BANG.); III) ACIT V/S SHETH DEVELOPERS P. LTD., 33 SOT 277 (MUM.); IV) BENGAL AMBUJA HOUSING DEVELOPMENT LTD. V/S DCIT ; V) ARPANNA DEVELOPMENT CORP. V/S ITO; VI) SJR BUILDERS V/S ACIT, 3 ITR 569 (MUM.); VII) G.V. CORP. V/S ITO, 43 DTR 329 (MUM.); AND VIII) CIT V/S BRAHMA ASSOCIATES, JUDGMENT DATED 22. 2.2011 (BOM.). EKTA HOUSING PVT. LTD. ITA NO. 3649/MUM./2009 6 10. HE FURTHER RELIED UPON THE CBDT CIRCULAR AND SUBMIT S THAT WHEN TWO FLATS ADJOINING TO EACH OTHER ARE SOLD INDEPENDENTL Y BY WAY OF SEPARATE SALE DEED TO THE SAME PARTY, THEN THE RESTRICTION ON CLA IM OF DEDUCTION UNDER SECTION 80IB(10) WAS MADE APPLICABLE ONLY FROM 19 TH AUGUST 2009. IT IS HIS CASE THAT THE ASSESSEE, IN HIS LETTERS DATED 8 TH NOVEMBER 2006, 24 TH FEBRUARY 2007, 26 TH FEBRUARY 2007 AND 8 TH OCTOBER 2008, HAS BEEN CONSISTENTLY PLEADING THAT THE DEPARTMENT AND THAT IT DEMONSTRATED THAT THE FLATS ARE INDEPENDENT FLATS AND WERE ADJOINING EACH OTHER AND WERE SOLD BY SEPARATE SALE DEED AND THAT, IN SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT THE BUILT-UP AREA OF ANY SINGLE FLAT WAS ABOVE 1,00 0 SQ.FT.. HE SUBMITS THAT DESPITE THE STRENGTH ON MERITS, THE ASSESSEE, FOR T HE PURPOSE OF PURCHASING PEACE, HAS OFFERED TO TAX INCOME ON A PROPORTIONATE BASIS DEPENDING UPON THE NUMBER OF UNITS AND AREA WHICH, ACCORDING TO AS SESSING OFFICER, VIOLATE THE PROVISIONS OF SECTION 80IB(10). HE SUBMITS THAT THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IS NOT ON THIS ISSUE AND THE DECI SION OF CO-ORDINATE BENCH OF THIS TRIBUNAL APPLIES. HE ALSO RELIED ON THE CBD T CIRCULAR NO.5/2010 DATED 3 RD JUNE 2010 AND SUBMITS THAT THE AMENDMENTS TO FINAN CE ACT, 2009, WILL BE APPLICABLE FROM 19 TH AUGUST 2009. 11. RIVAL CONTENTIONS HEARD. ON CAREFUL CONSIDERATION O F THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITE D BEFORE US, WE HOLD AS FOLLOWS:- I) THE CONTROVERSY CAN BE BROUGHT OUT BY EXTRACTING PA RA-6 FROM THE ASSESSMENT ORDER, WHICH READS AS UNDER:- 6. THE SUBMISSIONS OF THE ASSESSEE HAVE BEEN DULY C ONSIDERED. THE SAME ARE NOT ACCEPTABLE AS SECTION 80IB(10) DOE S NOT LAY DOWN THE THEORY OF PROPORTIONATE DEDUCTION. IF THE ASSES SEE SATISFIES ALL THE CONDITIONS OF THE SAID SECTION THEN ONLY THE DEDUCT ION IS ALLOWABLE. IF ONE OF THE CONDITIONS IS NOT SATISFIED THE ASSESSEE CANNOT BE GRANTED THE DEDUCTION. THE ASSESSEES SUBMISSION THAT AREA OF EACH FLAT IS BELOW 1,000 SQ.FT. (BUILT-UP) AND PURCHASERS MIGHT HAVE COMBINED THE ADJOINING FLAT IS NOT A CORRECT FACT. THIS HAS BEEN DISPROVED BEYOND DOUBT FROM THE MATERIAL IMPOUNDED IN THE COURSE OF SURVEY ACTION EKTA HOUSING PVT. LTD. ITA NO. 3649/MUM./2009 7 UNDER SECTION 133A AND POST SURVEY PROCEEDINGS. THI S GETS FURTHER SUPPORTED BY THE ASSESSEES APPLICATION BEFORE ITSC . SINCE THE ASSESSEES HOUSING PROJECT UNDISPUTEDLY INCLUDES SO ME RESIDENTIAL UNITS, WHICH ARE OF AN AREA EXCEEDING 1,000 SQ.FT. (BUILT-UP), ONE OF THE CONDITIONS OF SECTION 80IB(10) STANDS VIOLATED AND THEREFORE, THE WHOLE OF THE PROFIT OF THE HOUSING PROJECT IS NOT E LIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10). ACCORDINGLY, THE DEDUCTION UNDER SECTION 80IB(10) ALLOWED EARLIER IS HEREBY WITHDRAWN. SINCE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND CONC EALED THE PARTICULARS OF INCOME, THE PENALTY PROCEEDINGS ARE INITIATED UNDER SECTION 27(1)(C) FOR WRONG CLAIM OF DEDUCTION UNDER SECTION 80IB(10). II) THE ISSUE AS TO WHETHER, SOME OF THE RESIDENTIAL UN ITS IN THE ASSESSEES PROJECT EXCEEDING THE BUILT UP AREA OF 1,000 SQ.FT. OR NOT, NEED NOT BE ADJUDICATED BY US AS NO DEDUCTION UNDER SECTION 80I B(10) IS CLAIMED ON INCOME DERIVED FROM THE UNITS BY THE ASSESSEE. THE SHORT POINT FOR OUR ADJUDICATION IS, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE ASSESSEE IS ENTITLED TO PROPORTIONATE DEDUCTION UND ER SECTION 80IB(10). III) THE NAGPUR BENCH OF THIS TRIBUNAL IN AIR DEVELOPERS (SUPRA), HELD AS FOLLOWS:- THEREFORE, A.O. IS DIRECTED TO DETERMINE THE BUILT- UP AREA OF THE RESIDENTIAL UNITS BY APPLYING THE DEVELOPMENT CONTR OL REGULATION, 2000, AND TO ALLOW PROPORTIONATE DEDUCTION UNDER SE CTION 80IB(10) IF HE FINDS THAT THE BUILT-UP AREA OF SOME OF THE RESI DENTIAL UNITS EXCEEDS 1,500 SQ.FT. IV) BANGALORE BENCH OF THIS TRIBUNAL IN DCIT V/S BRIGAD E ENTERPRISES PVT. LTD., HAS HELD AS UNDER:- THEREFORE, IF A PARTICULAR UNIT SATISFIES THE CONDI TION OF SECTION 80IB, THE ASSESSEE IS ENTITLED FOR DEDUCTION AND IT SHOULD BE DENIED IN RESPECT OF THOSE UNITS ONLY WHICH DO NOT SATISFY TH E CONDITIONS AGAIN, THE ACCOUNTING PRINCIPLES WOULD ALSO MANDATE RECOGN ITION OF PROFITS FROM EACH UNIT SEPARATELY. V) MUMBAI G BENCH OF THIS TRIBUNAL IN SHETH DEVELPER S PVT. LTD. (SUPRA), HAS HELD AS FOLLOWS:- AS REGARDS THE A PROJECT ASSESSEE IS ELIGIBLE FOR R ELIEF ON PRORATA BASIS IN RESPECT OF THE FLATS WHICH DID NOT HAVE A BUILT-UP AREA EKTA HOUSING PVT. LTD. ITA NO. 3649/MUM./2009 8 EXCEEDING 1,000 SQ.FT. QUANTUM OF DEDUCTION IN RE SPECT OF THE FLATS WHICH HAVE BUILT-UP AREA LESS THAN 1,000 SQ.FT., HA S TO BE WORKED OUT ON PRO-RATA BASIS A.O. ACCORDINGLY DIRECTED TO VE RIFY THE CLAIM OF THE ASSESSEE AND ALLOW THE DEDUCTION ON PRO-RATA BASIS IN RESPECT OF FLATS IN A PROJECT. VI) KOLKATA C BENCH OF THIS TRIBUNAL IN BENGAL AMBUJA HOUSING DEVELOPMENT LTD. V/S DCIT, ITA NO.1595/KOL./2005, V IDE ORDER DATED 24 TH MARCH 2006, HELD AS UNDER:- IT IS APPARENT FROM THE PERUSAL OF SECTION 80IB(10) THAT THIS SECTION HAS BEEN ENACTED WITH A VIEW TO PROVIDE INCENTIVE F OR BUSINESSMEN TO UNDERTAKE CONSTRUCTION OF RESIDENTIAL ACCOMMODATION FOR SMALLER RESIDENTIAL UNITS AND THE DEDUCTION IS INTENDED TO BE RESTRICTED TO THE PROFIT DERIVED FROM THE CONSTRUCTION OF SMALLER UNI TS AND NOT FROM LARGER RESIDENTIAL UNITS. THOUGH THE A.O. HAS DENIE D THE CLAIM OF THE ASSESSEE OBSERVING THAT LARGER UNITS WERE ALSO CONS TRUCTED BY THE ASSESSEE, AT THE SAME TIME, IT IS SMALLER RESIDENTI AL UNITS WHICH WERE FULFILLING ALL THE CONDITIONS AS CONTAINED IN SECTI ON 80IB(10) AND THE SAME HAS NOT BEEN DISPUTED BY THE A.O. ALSO. WE HAV E ALSO NOTED DOWN THE FACT THAT EVEN THE PROVISION AS LAID DOWN IN SECTION 80IB(10) DOES NOT SPEAK REGARDING SUCH DENIAL OF DEDUCTION I N CASE OF PROFIT FROM A HOUSING COMPLEX CONTAINING BOTH THE SMALLER AND LARGE RESIDENTIAL UNITS AND SINCE THE ASSESSEE HAS ONLY C LAIMED DEDUCTION ON ACCOUNT OF SMALLER QUALIFYING UNITS BY FULFILLING A LL THE CONDITIONS AS LAID DOWN UNDER SECTION 80IB(10), THE DENIAL OF CLAIM BY THE ASSESSEE IS ON ACCOUNT OF RATHER RESTRICTED AND NARROW INTERPRETAT ION OF PROVISIONS OF CLAUSE (C) OF SECTION 80IB(10) WHILE COMING TO SUCH CONCLUSION, WE ALSO FIND SUPPORT FROM THE ORDER OF THE HON'BLE SUP REME COURT IN CASE OF BAJAJ TEMPO LTD. (SUPRA) WHEREIN IT WAS HELD THA T PROVISIONS SHOULD BE INTERPRETED LIBERALLY AND SINCE IN THE PRESENT C ASE ALSO, THE ASSESSEE BY CLAIMING PRO-RATA INCOME ON QUALIFYING UNITS HAS COMPLIED WITH CLAIM OF THE ASSESSEE WAS RIGHTLY ALLOWED BY T HE LEARNED CIT(A) BY REVERSING THE ORDER OF THE A.O. VI) BANGALORE A BENCH OF THIS TRIBUNAL IN SJR BUILDERS (SUPRA), HELD THAT MERELY BECAUSE SOME FLATS ARE LARGER THAN 1,500 SQ .FT., THE ASSESSEE WILL NOT LOSE THE BENEFIT IN ITS ENTIRETY BUT ONLY WITH REFERENCE TO THE FLATS WHICH HAS MORE THAN PESCRIBED BUILT UP AREA, THE ASSESSEE WILL LOSE THE BENEFIT. VII) THUS, DIFFERENT BENCHES OF THE TRIBUNAL HAVE TAKEN A VIEW THAT, IN CASE, SOME RESIDENTIAL HOUSE HAVE A BUILT UP AREA I N EXCESS OF 1,000 SQ.FT., THE ASSESSEE WOULD NOT LOSE THE TOTAL EXEMPTION UND ER SECTION 80IB(10) IN EKTA HOUSING PVT. LTD. ITA NO. 3649/MUM./2009 9 ITS ENTIRETY BUT WILL ONLY LOSE THE PROPORTIONATE EXEMPTION, UNDER SECTION 80IB(10). VIII) WE NOW EXAMINE THE APPLICABILITY OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN BRAHMA ASSOCIATES (SUPRA) TO T HE FACTS OF THIS CASE. ON A CAREFUL READING OF THIS JUDGMENT, WE FIND THAT NOWHERE IT IS STATED THAT PROPORTIONATE DEDUCTION SHOULD NOT BE ALLOWED, IN C ASE CERTAIN RESIDENTIAL UNITS HAD BUILT UP AREA IN EXCESS OF PRESCRIBED LIM IT OF 1,000 SQ.FT. IN FACT, THIS ISSUE WAS NOT BEFORE THE HON'BLE JURISDICTIONA L HIGH COURT. THE QUESTIONS BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT WERE D IFFERENT AND, HENCE THE JUDGMENT CANNOT BE SAID TO BE ON THIS ISSUE. THE ON LY ISSUE BEFORE THE HIGH COURT IS WHEN THERE IS A COMMERCIAL ELEMENT IN A RE SIDENTIAL PROJECT, WILL THE ASSESSEE BE DENIED THE ENTIRE EXEMPTION. IN THIS CA SE, THE HONBLE HIGH COURT HAS OBSERVED THAT WHEN THE LOCAL AUTHORITY AP PROVED A PLAN AS A HOUSING PROJECT OR A RESIDENTIAL CUM COMMERCIAL PRO JECT, THE ASSESSEE WOULD BE ENTITLED TO CLAIM FOR DEDUCTION UNDER SECTION 80 IB(10) EVEN IF THE PROJECT HAD COMMERCIAL ELEMENT IN EXCESS OF 10% . AT PARAS-27 AND 28, THE COURT OBSERVED AS FOLLOWS:- 27. THE QUESTION THEN TO BE CONSIDERED IS, WHETHER THE SPECIAL BENCH OF THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE PROJECTS HAVING COMMERCIAL AREA UPTO 10% OF THE BUILT-UP AREA OF TH E PLOT ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10) ON THE ENTIRE PROJECT UPTO 1.4.2005. ONCE THE BASIC ARGUMENT OF THE REVENUE TH AT THE HOUSING PROJECTS WITH COMMERCIAL USER ARE NOT ENTITLED TO S ECTION 80IB(10) DEDUCTION IS REJECTED, THEN IN THE ABSENCE OF ANY R ESTRICTION IMPOSED UNDER THE ACT, IT WAS NOT OPEN TO THE TRIBUNAL TO H OLD THAT THE PROJECTS APPROVED BY THE LOCAL AUTHORITIES HAVING RESIDENTIA L BUILDINGS WITH COMMERCIAL USER UPTO 10% OF THE PLOT AREA WOULD ALO NE BE ENTITLED TO DEDUCTION UNDER SECTION 80IB(10). AS NOTED EARLIER, RESTRICTION REGARDING COMMERCIAL USER HAS BEEN IMPOSED FOR THE FIRST TIME BY INTRODUCING CLAUSE (D) TO SECTION 80IB(10) WITH EFF ECT FROM 1.4.2005. THEREFORE, IT WAS NOT OPEN TO THE TRIBUNAL TO HOLD THAT PRIOR TO 1.4.2005, PROJECTS HAVING COMMERCIAL USER UPTO 10% OF THE PLOT AREA ALONE WOULD BE ELIGIBLE FOR SECTION 80IB(10) DEDUCT ION. 28. IN THE PRESENT CASE, THOUGH THE COMMERCIAL USER IS MORE THAN 10% OF THE PLOT AREA, THE TRIBUNAL HAS ALLOWED SECT ION 80IB(10) DEDUCTION IN RESPECT OF 15 RESIDENTIAL BUILDINGS ON THE GROUND THAT THE PROFITS FROM THESE EXCLUSIVELY RESIDENTIAL BUILDING S COULD BE DETERMINED ON STAND ALONG BASIS. IN OUR OPINION, THAT WOULD NO T BE PROPER, BECAUSE SECTION 80IB(10) ALLOWS DEDUCTION TO THE EN TIRE PROJECT EKTA HOUSING PVT. LTD. ITA NO. 3649/MUM./2009 10 APPROVED BY THE LOCAL AUTHORITY AND NOT TO A PART O F THE PROJECT. IF THE CONDITIONS SET OUT IN SECTION 80IB(10) ARE SATISFIE D, THEN DEDUCTION IS ALLOWABLE ON THE ENTIRE PROJECT APPROVED BY THE LOC AL AUTHORITY AND THERE IS NO QUESTION OF ALLOWING DEDUCTION TO A PAR T OF THE PROJECT. IN THE PRESENT CASE, THE COMMERCIAL USER IS ALLOWED IN ACCORDANCE WITH THE DC RULES AND HENCE THE ASSESSEE WAS ENTITLED TO SECTION 80IB(10) DEDUCTION ON THE ENTIRE PROJECT APPROVED BY THE LOC AL AUTHORITY. HOWEVER, THE ASSESSEE HAS NOT CHALLENGED THE DECISI ON OF THE TRIBUNAL IN RESTRICTING THE DEDUCTION TO A PART OF THE PROJE CT. THEREFORE, WHILE HOLDING THAT IN LAW, THE ASSESSEE WAS ENTITLED TO S ECTION 80IB(10) DEDUCTION ON THE PROFITS OF THE ENTIRE PROJECT, IN THE FACTS OF THE PRESENT CASE, SINCE THE ASSESSEE HAS NOT CHALLENGED THE DECISION OF THE TRIBUNAL, WE ARE NOT INCLINED TO DISTURB THE DECISI ON OF THE TRIBUNAL IN RESTRICTING THE SECTION 80IB(10) DEDUCTION ONLY IN RESPECT OF THE PROFITS DERIVED FROM 15 RESIDENTIAL BUILDINGS. IX) THUS, IT COULD BE SEEN THAT THE HONBLE HIGH COURT DO NOT APPROVE THE FINDINGS OF THE TRIBUNAL THAT A RESIDENTIAL BUILDIN G WITH COMMERCIAL USER UP TO 10% OF THE PLOT AREA WOULD ALONE BE ENTITLED TO DED UCTION UNDER SECTION 80IB(10). THE ISSUE THAT, IN CASE WHERE CERTAIN RES IDENTIAL UNITS ARE OF A BUILT UP AREA IN EXCESS OF THE PRESCRIBED LIMIT OF 1,000 SQ.FT. IN RESIDENTIAL PROJECT, THIS WOULD RESULT IN THE ENTIRE EXEMPTION BEING LOS T, OR WHETHER THE ASSESSEE WOULD BE ENTITLED TO A PROPORTIONATE DEDUCTION WAS NOT BEFORE THE HIGH COURT. THUS, IN OUR OPINION, THE DECISION OF HONBL E JURISDICTIONAL HIGH COURT IN BRAHMA ASSOCIATES (SUPRA), DOES NOT COME TO THE RESCUE OF THE REVENUE. X) ON THE OTHER HAND, ALL THE DECISIONS OF THE CO-ORDI NATE BENCHS OF THE TRIBUNAL CITED BEFORE US ARE IN FAVOUR OF THE ASSES SEE. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE FOLLOWING FINDING OF THE CO MMISSIONER (APPEALS), VIDE PARA-2.8 OF HIS ORDER:- 2.8 THE APPELLANTS CLAIM IS SUPPORTED BY THE DECI SION OF HONBLE MUMBAI ITAT IN CASE OF M/S. SAROJ SALES ORGANISATIO N ITA NO.4008/ MUM./2007 ORDER 24.1.2008, WHEREIN ON IDENTICAL FAC TS THE HONBLE ITAT FOLLOWING THE HON'BLE SUPREME COURT DECISION I N THE CASE OF BAJAJ TEMPO LTD. REPORTED IN 196 ITR 188 HAS OBSERVED THA T THE PROVISIONS SHOULD BE INTERPRETED LIBERALLY. FURTHER, FOLLOWING THE HONBLE ITAT DECISION IN THE CASE OF BENGAL AMBUJA HOUSING DEVEL OPMENT LTD. KOLKATA, THE HONBLE MUMBAI ITAT ALLOWED THE ASSESS EES CLAIM ON PRO- RATA BASIS ON QUALIFYING UNITS WHICH SATISFIED THE CONDITIONS LAID DOWN BY SECTION 80IB(10). THE HONBLE ITAT KILKATA IN TH E CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD. V/S DCIT (ITA NO.15 95/KOL./2005, A.Y. 2002-03, BENCH C, ORDER DATED 24.3.2006 (200 7) 39 D BCAJ EKTA HOUSING PVT. LTD. ITA NO. 3649/MUM./2009 11 546) HAS HELD THA TEVEN IF THE UNITS CONSTRUCTED AR E BOTH SMALLER AND LARGER UNITS WITH REFERENCE TO THE STIPULATED AREA, THE PROFIT DERIVED FROM THE CONSTRUCTION OF THE SMALLER UNITS I.E., WI THIN THE STIPULATED AREA OF 1,000 SQ.FT. BUILT-UP AREA OUGHT TO BE ALLO WED AS DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. THE ABOVE DECISI ON IS APPROVED BY THE HONBLE KOLKATA HIGH COURT AS REFERRED IN THE D ECISION OF ACIT V/S SHREE BALAJI DEVELOPERS (ITA NO.2592/MUM./2006, A.Y . 2004-05, BENCH C ORDER DATED 21.10.2008) WHEREIN THE THEOR Y OF PRO-RATA DEDUCTION IS APPROVED AND HELD THE DEDUCTION UNDER SECTION 80IB ON PRO-RATA BASIS MEETS THE OBJECTIVES OF THE PROVISIO NS OF SECTION 80IB. THE HONBLE ITAT BANGALORE BENCH IN THE CASE OF DCI T V/S BRIGADE ENTERPRISES PVT. LTD. [24 DTR 371 BANGALORE (2008)] HAS HELD THAT THE DISALLOWANCE IF ANY WILL HAVE TO BE RESTRICTED TO T HE EXTENT OF NON- COMPLIANCE OF THE PROVISIONS. THIS RULE OF PROPORTI ONATELY 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 FOUNDATION PVT. LTD. V/S ACIT (2007) 108 TT J 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 ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IB ON PRO-RATA BASIS. THE A.O. IS THEREFORE, DIRECTED TO ALLOW THE DEDUCTION UNDER SECTION 80IB( 10) ON PRO-RATA BASIS AS DISCUSSED ABOVE. THIS GROUND OF APPEAL IS ALLOWED. 12. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY 2011 SD/- N.V. VASUDEVAN JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 20 TH MAY 2011 COPY TO : (1) THE ASSESSEE (2) THE RESPONDENT (3) THE CIT(A), MUMBAI, CONCERNED (4) THE CIT, MUMBAI CITY CONCERNED (5) THE DR, J BENCH, ITAT, MUMBAI TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI