DCIT 15(3), MUMBAI V. ARCADE BHOOMI ENTERPRISES, MUMBAI

ITA 366/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54898 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 14-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.A NO.366/ MUM/2010 ASSESSMENT YEAR: 2006-07 DCIT, 15(3) .. APPELLANT MATRU MANDIR, 1 ST FLOOR, TARDEO ROAD, MUMBAI. VS ARCADE BHOOMI ENTERPRISES .. RESPONDEN T OPP. CHILDREN ACADEMY SCHOOL, ATMARAM SAWANT ROAD, ASHOK NAGAR, KANDIVALI(E), MUMBAI. PA NO.AAAJA 0533 A APPEARANCES: USHA NAIR, FOR THE APPELLANT VIJAY MEHTA , FOR THE RESPONDENT DATE OF HEARING : 3.8.2011 DATE OF PRONOUNCEMENT : 12 -08-2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF CIT(A)S ORDER DATED 13 TH NOVEMBER, 2009, IN THE MATTER OF ASSESSMENT UNDER SECTION I.T.A NO.366/ MUM/2010 ASSESSMENT YEAR: 2006-07 2 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESS MENT YEAR 2006-07 ON THE FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD CIT(A) ERRED IN LAW IN ALLOWING THE CLAIM OF DEDUCTION U/S .80IB(10) OF THE I.T.ACT IN RESPECT OF THE PROFITS DERIVED FROM THE HOUSING PRO JECT INSPITE OF FACT THAT SUCH PROJECT HAS FAILED TO SATISFY THE CONDITIONS STIPUL ATED IN CLAUSE (B) BELOW THE PROVISIONS OF SEC.80IB(10) OF THE INCOME TAX ACT, 1 961 WHICH REQUIRE THAT THE PLOT AREA ON WHICH THE HOUSING PROJECT IS CONSTRUCT ED SHOULD NOT BE LESS THAN ONE ACRE AND IN THE CASE OF THE ASSESSEE, THE SAID PLOT OF LAND WAS FOUND TO BE LESS THAN AN ACRE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD CIT(A) ERRED IN LAW IN ALLOWING THE CLAIM OF DEDUCTION U/S .80IB(10) OF THE I.T.ACT IN RESPECT OF THE PROFITS DERIVED FROM THE HOUSING PRO JECT IGNORING THE FACT THAT SUCH HOUSING PROJECT FAILED TO SATISFY THE CONDITIO NS STIPULATED IN CLAUSE (C) BELOW THE PROVISIONS OF SECTION 80IB(10) OF THE I.T .ACT, 1961 WHICH REQUIRE THAT THE BUILT UP AREA OF INDIVIDUAL FLAT OF THE HO USING PROJECT SHOULD NOT EXCEED 1000 SQUARE FEET AND IN CASE OF THE ASSESSEE , THE FLATS WERE FOUND OF BUILT UP AREA ADMEASURING MORE THAN 1000 SQ.FT AS T HE ASSESSEE HAD COMBINED SMALLER DWELLING UNITS AND SOLD THE SAME A S ONE LARGE UNITS TO MANY A FLAT BUYERS. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN LAW IN ALLOWING THE CLAIM OF DEDUCTION U/S .80IB(10) OF THE I.T.ACT IN RESPECT OF THE PROFITS DERIVED FROM THE HOUSING PRO JECT OVERLOOKING THE FACT THAT SUCH HOUSING PROJECT HAS FAILED TO SATISFY BOT H THE CONDITIONS STIPULATED IN CLAUSE (B) AND CLAUSE (C) BELOW THE PROVISIONS OF S EC.80IB(10) OF THE INCOME TAX ACT, 1961 DISREGARDING THE CLINCHING EVIDENCES GATHERED DURING THE COURSE OF SURVEY PROCEEDINGS U/S.133A CONDUCTED AT THE BUS INESS PREMISES OF THE ASSESSEE WHICH CLEARLY PROVE ASSESSEES FAILURE TO SATISFY THE RELEVANT CONDITIONS STIPULATED IN CLAUSES(B) AND (C) BELOW P ROVISIONS OF SECTION 80IB(10) OF THE INCOME TAX ACT, 1961. 2. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE A S FOLLOWS. THE ASSESSEE IS AN ASSOCIATION OF PERSONS CARRIED ON BUSINESS AS BUI LDERS AND DEVELOPERS. THE ASSESSEE ACQUIRED DEVELOPMENT RIGHTS FOR THE PLOT B EARING NO.CTS NO.58 SITUATED AT VILLAGE WADHAN (MALAD), TALUKA, BORIVALI, NOW KNOWN AS KANDIVALI(E) ADMEASURING 5008.3 SQ.MTRS VIDE AGREEMENT DATED 29. 11.2003 AND ALSO PLOT BEARING NO.59 ADMEASURING 2402.7 SQ.MTRS. THE AMALGAMATION OF BOTH THE PLOTS WAS APPROVED ALONGWITH THE PLAN. ACCORDINGLY, THE ASSE SSEE DEVELOPED TWO PROJECTS ON I.T.A NO.366/ MUM/2010 ASSESSMENT YEAR: 2006-07 3 THESE PROPERTIES. ONE OF THE HOUSING PROJECT DEVEL OPED BY THE ASSESSEE, KNOWN BY THE NAME OF BHOOMI ARKADE, WAS CLAIMED TO BE ELI GIBLE FOR DEDUCTION U/S.80IB(10) OF ` .6,06,34,943. HOWEVER, IN THE COURSE OF A SURVEY S UBSEQUENTLY CONDUCTED ON THE ASSESSEE, IT WAS NOTICED THAT SOME OF THE RESIDENTIAL UNITS HAD AREA EXCEEDING 1,000 SQ. FT. INASMUCH AS IT WAS FOUND TH AT THE ASSESSEE HAD SOLD THE FLAT BY TWO SEPARATE AGREEMENTS TO THE MEMBERS OF THE SAME FAMILY, THOUGH, AS SUCH, SUCH PAIRS OF FLATS SOLD SEPARATELY WOULD BE VIEWED ONLY AS ONE UNIT. ON THE BASIS OF THESE FINDINGS, AS ALSO THE ADMISSION MADE BY THE ASSESSE E IN SURVEY PROCEEDINGS, THE STAND TAKEN BY THE ASSESSING OFFICER WAS THAT IN OR DER TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(10), THE TOTAL AREA OF RESIDENTI AL UNIT SHOULD NOT EXCEED 1,000 SQ.FT BUT AS THESE PAIRS OF FLATS COULD BE VIEWED ONLY AS ONE UNIT AND THE AREA OF SUCH UNITS EXCEEDS 1,000 SQ.FT, THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10). ACCORDINGLY, THE ASSESSEE WAS DECLINED THE DEDUCTIO N U/S.80IB(10). AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FI RST APPELLATE AUTHORITY. THE CIT(A), INTER ALIA, OBSERVED THAT THE ASSESSEE HAS FULFILLED ALL THE CONDITIONS PROVIDED UNDER SECTION 80IB(10) OF THE ACT AND, ACCORDINGLY, DIRECTED THE AO TO ALLOW THE CLAIM OF DEDUCTION OF ` .6,06,34,943 UNDER SECTION 80IB(10) OF THE ACT. TH E ASSESSING OFFICER IS NOT SATISFIED AND IS IN FURTHER APPEAL B EFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE A PPLICABLE LEGAL POSITION. 4. WE FIND THAT VIDE ORDER DATED 29 TH JULY, 2011 BY A COORDINATE BENCH, SPEAKING THROUGH ONE OF US ( I.E. THE ACCOUNTANT MEMBER) ON THE SAME SET OF FACTS, IN THE CASE OF EMGEEN HOLDINGS P.LTD . (NOW WINDSOR REALTY P. LTD.), VS DCIT, IN I.T.A NOS.3594 & 3595/ MUM/2009 AND I.T.A NOS.3647 & 3648 / MUM/2009, INTER ALIA, OBSERVED AS FOLLOWS: 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. I.T.A NO.366/ MUM/2010 ASSESSMENT YEAR: 2006-07 4 7. WE FIND THAT THE DEDUCTION U/S.80IB(10) HAS BEEN DECLINED BY THE ASSESSING OFFICER ON THE GROUND THAT SIZE OF THE RESIDENTIAL UNIT WAS IN EXCESS OF 1,000 SQ.FT WHICH, IN TURN, PROCEEDS ON THE BASIS THAT THE FLATS SOLD TO THE FAMILY MEMBERS ADMITTEDLY BY SEPARATE AGREEMENTS, SHOULD BE TREATED AS ONE UNIT. WE ARE UNABLE TO APPROVE THIS APPROACH. WE HAVE NOTED THAT THE S IZE OF EACH FLAT, AS EVIDENT FROM BUILDING PLAN AS DULY APPROVED BY MUNCIPAL AUTH ORITIES WAS LESS THAN 1,000 SQ.FT. WE HAVE ALSO NOTED THAT IT IS NOT EVEN REVE NUES CASE THAT EACH OF FLAT ON STANDALONE BASIS WAS NOT A RESIDENTIAL UNIT. EVEN I F FLATS WERE CONSTRUCTED OR PLANNED IN SUCH A WAY THAT TWO FLATS COULD INDEED BE MERGED INTO ONE LARGER UNIT, AS LONG EACH FLAT WAS AN INDEPENDENT RESIDENTIAL UN IT, DEDUCTION U/S.80IB(10) COULD NOT BE DECLINED. IT IS IMPORTANT TO BEAR IN M IND THE FACT THAT WHAT SECTION 80IB(10) REFERS TO IS RESIDENTIAL UNIT AND, IN TH E ABSENCE OF ANYTHING TO THE CONTRARY IN THE INCOME TAX ACT, THE EXPRESSION RES IDENTIAL UNITS MUST HAVE THE SAME CONNOTATIONS AS ASSIGNED TO IT BY LOCAL AUTHOR ITIES GRANTING APPROVAL TO THE PROJECT . THE LOCAL AUTHORITY HAS APPROVED THE BUILDING PLAN W ITH RESIDENTIAL UNITS OF LESS THAN 1,000 SQ.FT, AND GRANTED COMPLETION CE RTIFICATE AS SUCH. THAT LEAVES NO AMBIGUITY ABOUT THE FACTUAL POSITION . WE HAVE FURTHER NOTED THAT THE PROHIBITION AGAINST SALE OF MORE THAN ONE FLAT IN A HOUSING PRO JECT TO MEMBERS OF A FAMILY HAS BEEN INSERTED SPECIFICALLY WITH EFFECT FROM 1 ST APRIL, 2010, AND, IN OUR HUMBLE UNDERSTANDING, THIS AMENDMENT IN LAW CAN ONLY BE TRE ATED AS PROSPECTIVE IN EFFECT. WHAT IS, THEREFORE, CLEAR IS THAT SO FAR A S PRE-AMENDMENT POSITION IS CONCERNED , AS LONG A RESIDENTIAL UNIT HAS LESS THA N SPECIFIED AREA, IS AS PER THE DULY APPROVED PLANS AND IS CAPABLE OF BEING USED FOR RESID ENTIAL PURPOSES ON STANDALONE BASIS, DEDUCTION U/S.80IB(10) CANNOT BE D ECLINED IN RESPECT OF THE SAME MERELY BECAUSE THE END USER, BY BUYING MORE THAN ONE SUCH UNIT IN THE NAME OF FAMILY MEMBERS, HAS MERGED THESE RESIDENTIA L UNITS INTO A LARGER RESIDENTIAL UNIT OF A SIZE WHICH IS IN EXCESS OF SP ECIFIED SIZE. THAT PRECISELY IS THE CASE BEFORE US. WHILE ON THE SUBJECT, IT IS USEFUL TO TAKE NOTE OF LEGISLATIVE AMENDMENT BY THE VIRTUE OF WHICH LEGISLATURE PUT CE RTAIN RESTRICTIONS ON SALE OF RESIDENTIAL UNITS TO CERTAIN FAMILY MEMBERS OF A PER SON WHO HAS BEEN SOLD A RESIDENTIAL UNIT IN THE HOUSING PROJECT. SECTION 8 0IB(10) NOW PROVIDES AN ADDITIONAL ELIGIBILITY CONDITION THAT IN A CASE WHER E A RESIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO ANY PERSON BEING AN I NDIVIDUAL, NO OTHER RESIDENTIAL UNIT IN SUCH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSON, NAMELY (I) THE INDIVIDUAL OR THE SPOUSE, OR THE MINOR CHILDREN OF SUCH INDIVIDUAL, (II) THE HUF IN WHICH SUCH INDIVIDUAL IS A KARTA (III) ANY PERS ON REPRESENTING SUCH INDIVIDUAL, THE SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL, OR THE HUF IN WHICH SUCH INDIVIDUAL IS A KARTA. THE EXPLANATION MEMORANDUM EXPLAINED THE LEGISLATIVE AMENDMENT AS FOLLOWS: (314 ITR(ST) 203) FURTHER, THE OBJECT OF THE TAX BENEFIT FOR HOUSING PROJECTS IS TO BUILD HOUSING STOCK FOR LOW AND MIDDLE INCOME HOUSEHOLDS. THIS HA S BEEN ENSURED BY LIMITING THE SIZE OF THE RESIDENTIAL UNIT. HOWEVER, THIS IS BEING CIRCUMVENTED BY THE DEVELOPER BY ENTERING INTO AGREEMENT TO SELL MULTIP LE ADJACENT UNITS TO A SINGLE BUYERS. ACCORDINGLY, IT IS PROPOSED TO INSERT NEW C LAUSES IN THE SAID SUB-SECTION TO PROVIDE THAT THE UNDERTAKING WHICH DEVELOPS AND BUILDS THE HOUSING PROJECT I.T.A NO.366/ MUM/2010 ASSESSMENT YEAR: 2006-07 5 SHALL NOT BE ALLOWED TO ALLOT MORE THAN ONE RESIDENT IAL UNIT IN THE HOUSING PROJECT TO THE SAME PERSON, NOT BEING AN INDIVIDUAL, AND WHERE THE PERSON IS AN INDIVIDUAL, NO OTHER RESIDENTIAL UNIT IN SUCH HOUSI NG PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSON:- (I) SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL; (II) THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA; (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL, THE SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDIVIDED FAMILY IN WH ICH SUCH INDIVIDUAL IS THE KARTA. THIS AMENDMENT WILL TAKE EFFECT FROM THE 1 ST APRIL, 2010 AND SHALL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2010-2011 AND SUBSEQUENT YEARS. 8. IT IS THUS CLEAR THAT THE AFORESAID AMENDMENT HA S BEEN BROUGHT WITH PROSPECTIVE EFFECT I.E. FROM 1 ST DAY OF APRIL, 2010, AND THERE IS NO INDICATION WHATSOEVER TO SUGGEST THAT THESE RESTRICTIONS NEED TO BE APPLIED WITH RETROSPECTIVE E FFECT. THE AMENDMENT SEEKS TO PLUG A LOOPHOLE BUT RESTRICTS THE REMEDY WITH EFF ECT FROM 1 ST DAY OF APRIL, 2010, I.E. AY 2010-2011. THE LAW IS VERY CLEAR THAT UNLE SS PROVIDED IN THE STATUTE, THE LAW IS ALWAYS PRESUMED TO BE PROSPECTIVE IN NATURE. IT WILL, THEREFORE, BE CONTRARY TO THE SCHEME OF LAW TO PROCEED ON THE BASI S THAT WHEREVER ADJACENT RESIDENTIAL UNITS ARE SOLD TO FAMILY MEMBERS, ALL TH ESE RESIDENTIAL UNITS ARE TO BE CONSIDERED AS ONE UNIT. IF LAW PERMITTED SO, THERE WAS NO NEED OF THE INSERTION OF CLAUSE (F) TO SECTION U/S 80IB(10). IT WILL BE UNRE ASONABLE TO PROCEED ON THE BASIS THAT LEGISLATIVE AMENDMENT WAS INFRUCTUOUS OR UNCALLED FOR PARTICULARLY AS THE AMENDMENT IS NOT EVEN STATED TO BE FOR REMO VAL OF DOUBTS. ON THE CONTRARY, THIS AMENDMENT SHOWS THAT NO SUCH ELIGIBIL ITY CONDITIONS COULD BE READ INTO PRE-AMENDMENT LEGAL POSITION. 9. AS REGARDS THE AOS STAND THAT THE ASSESSEE HIM SELF HAS OFFERED THE DEDUCTION U/S.80IB(10) IN RESPECT OF THESE UNITS DU RING THE COURSE OF SURVEY PROCEEDINGS, IT IS ONLY ELEMENTARY THAT NEITHER STA TEMENT RECORDED U/S.133A HAS AN EVIDENTIARY VALUE, NOR A LEGAL CLAIM CAN BE DECLI NED ONLY BECAUSE ASSESSEE, AT SOME STAGE, DECIDED TO GIVE UP THE SAME. IN VIEW OF THESE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, ARE OF THE C ONSIDERED VIEW THAT THE DEDUCTION U/S.80IB(10) OUGHT TO HAVE BEEN ALLOWED TO THE ASSESSEE ENTIRELY. TO THIS EXTENT, WE MODIFY THE ORDER OF THE CIT(A) AND ALLOW FURTHER RELIEF TO THE ASSESSEE. 5. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN IN THE CASE OF EMGEEN HOLDINGS P.LTD. (NOW WINDSOR REALTY P. LTD.), VS DCIT. .(SUPRA). I.T.A NO.366/ MUM/2010 ASSESSMENT YEAR: 2006-07 6 ACCORDINGLY, WE UPHOLD THE GRIEVANCE OF THE ASSEES SEE AND REJECT THE GRIEVANCE RAISED BY THE ASSESSING OFFICER. 6. IN THE RESULT, APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST, 2011 SD/- (VIJAY PAL RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 12 TH AUGUST, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),26, MUMBAI 4. COMMISSIONER OF INCOME TAX,CITY 15 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH A MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI