DCIT CEN CIR 1, MUMBAI V. DOSTI ASSOCIATES, MUMBAI

ITA 3675/MUM/2010

• Counselvise Citation: 367519914 RSA 2010
• Duration Of Justice: 1 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 07-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B SENTHIL KUMAR
• Assessee Lawyers: RUCH NOWATHEY; CO Y K VED; NATVARLAL VEPARI
• Keywords: Search and seizure
• Section: 142(1); 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI P.M. JAGTAP (AM) AND SMT. ASHA VIJAYARA GHAVAN (JM) ITA NO. 3675/MUM/2010 ASSESSMENT YEAR- 2003-04 DY. COMMISSION OF INCOME - TAX CENTRAL CIRCLE-1, 9 TH FLOOR OLD CGO BLDG, ANNEXE, M.K. ROAD, MUMBAI VS. M/S. DOSTI ASSOCIATES LAWRENCE & MAYO HOUSE, 1 ST FLR, 276 DR. D. N. ROAD, MUMBAI-400 001 PAN NO: AACFD1616P (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI DR. B. SENTHIL KUMAR RESPONDENT BY: SHRI NATVARLAL VEPARI & CO. (Y.K. VED & RUCH NOWATHEY) O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER DA TED 16.02.2010 PASSED BY THE LD. CIT(A)-36 FOR THE ASSE SSMENT YEAR 2003-04. 2. THERE WAS A SEARCH AND SEIZURE ACTION ON THE GRO UP KNOWN AS DOSTI GROUP ON 12.09.2006. SINCE THE APPELLANT WAS A PAR T OF THE GROUP, NOTICE U/S. 153C WAS ISSUED AND SERVED ON THE APPELLANT. THE AP PELLANT FILED THE RETURN OF INCOME IN RESPONSE TO THE SAID NOTICE ON 13.09.2007 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION U/S.80 IB OF RS.12,17,25,055/-. SUBSEQUENTLY NOTICES U/S.143(2) AND 142(1) WERE ISSUED AND SERVED ON THE APPELLANT. 3. THE APPELLANT IS IN THE BUSINESS OF DEVELOPMENT OF PROPERTIES. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS COMPLET ED THE PROJECT CALLED DOSTI 2 ESTATE AT SURVEY NO.1/41 AND 1A/141, METROPOLITAN SPRING COMPOUND, SHAIKH MISTRY ROAD, ANTOP HILL, WADALA (EAST), MUMB AI400 037 AND RECOGNIZED THE PROFITS FROM THIS PROJECT. FURTHER, DETAILS IN CONNECTION WITH CLAIM U/S.80-IB(10) WERE SUBMITTED BEFORE A.O. 4. IT WAS STATED THAT ALL THE CONDITIONS PRESCRIBED FOR CLAIMING DEDUCTION U/S.80IB(10) OF THE ACT WERE FULFILLED BY THE APPEL LANT MAKING IT ELIGIBLE TO CLAIM THE DEDUCTION. 5. THE CASE WAS SELECTED FOR SCRUTINY AND AN ORDER U/S.143(3) WAS PASSED ON 29.03.2006 DETERMINING THE TOTAL INCOME AT RS.66 ,57,500/-. DURING THE COURSE OF PROCEEDINGS U/S.143(3), THE THEN ASSESSIN G OFFICER NOTICED THAT THE APPELLANT HAD CONSTRUCTED COMMERCIAL UNITS AND SOLD AS SHOPS. PROFIT FROM THIS ACTIVITY WAS INCLUDED IN THE TOTAL PROFIT WHICH CLA IMED EXEMPT U/S.80IB(10). THE AO EXCLUDED THE PROFIT FROM SALE OF COMMERCIAL UNITS FROM THE TOTAL PROFITS HOLDING THAT THE SAME WAS NOT ELIGIBLE FOR DEDUCTIO N. THE ASSESSING OFFICER RESTRICTED THE CLAIM U/S. 80IB(10) FROM RS.12,17,25 ,055/- TO RS.11,49,20,266/- BY DENYING THE SAID DEDUCTION ON PROFIT FROM SALE OF TDR AND COMMERCIAL UNITS. THE CIT(A)-XXVII, MUMBAI BY H IS ORDER DATED 21.11.2007 ALLOWED THE APPELLANTS CLAIM OF DEDUCTI ON IN RESPECT OF PROFIT FROM SALE OF COMMERCIAL UNITS BUT CONFIRMED THE ASSESSIN G OFFICERS STAND REJECTING THE DEDUCTION IN RESPECT OF PROFIT FROM SALE OF TDR . 6. THE AO IN THE PROCEEDINGS CONSEQUENT TO THE SEAR CH REQUESTED THE APPELLANT AS TO WHY ITS CLAIM FOR DEDUCTION U/S.80I B(10) SHOULD NOT BE REJECTED FOLLOWING ITAT MUMBAIS DECISION IN THE CASE OF M/S . LAUKIK DEVELOPERS. THE SUBMISSION OF THE APPELLANT WAS CONSIDERED BY THE A O AND FOLLOWING THE TRIBUNALS DECISION IN THE CASE OF M/S. LAUKIK DEVE LOPERS REJECTED THE CLAIM OF DEDUCTION OF THE APPELLANT U/S.80IB(10). 3 7. ON APPEAL, THE A.R. OF THE ASSESSEE SUBMITTED TH AT THE ISSUE IS COVERED BY THE DECISION OF SPECIAL BENCH IN THE CASE OF BRA HMA ASSOCIATES V/S. JCIT 119 ITD 255. 8. THE LD. CIT(A) HELD AS FOLLOWS: THIS LETTER CLEARLY MENTIONS THAT THE BUILDINGS AR E PROVIDED FOR RESIDENTIAL PURPOSES AND AS PER THE PROVISIONS IN DEVELOPMENT C ONTROL REGULATIONS 1991, SHOPS HAVE BEEN PERMITTED ON THE GROUND FLOOR IN BOTH THE BUILDINGS. THEREFORE, THERE IS NO DOUBT THAT THE BU ILDINGS ARE FORMING PART OF THE HOUSING PROJECT WHICH HAS BEEN DEVELOPED AND CONSTRUCTED IN ACCORDANCE WITH THE PLAN AS APPROVED BY THE MUNICIP AL AUTHORITY. THE TOTAL BUILT UP AREA OF THE PROJECT IS 81,794/- OUT OF WHI CH RESIDENTIAL UNITS COVER 75,680/- SQ.FT. LEAVING THE COMMERCIAL USAGE AREA O F 6114 SQ.FT. THEREFORE, THE TOTAL AREA MEANT FOR THE COMMERCIAL USAGE IS ON LY 7.47% OF THE TOTAL BUILT-UP AREA. THEREFORE, IT CAN BE SEEN FROM THE A BOVE THAT THE BUILDING DEVELOPMENT BY THE APPELLANT ON WHICH THE CLAIM U/S .80IB(10) HAS BEEN MADE WERE A PART OF THE RESIDENTIAL PROJECT IN WHIC H SHOPS ON THE GROUND FLOOR WERE PERMITTED AS PER THE DEVELOPMENT CONTROL REGULATIONS AND THE COMMERCIAL AREA IN THIS PROJECT DID NOT EXCEED THE 10% LIMIT AS LAID DOWN BY THE HONBLE SPECIAL BENCH OF THE ITAT, PUNE AND THE CASE OF BRAHMA ASSOCIATES. THEREFORE, THE CLAIM OF THE APPELLANT R EGARDING DEDUCTION U/S. 80IB(10) IS ALLOWED. 9. AGGRIEVED THE REVENUE IS IN APPEAL AND HAS RAISE D THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) ERRED IN HOLDING THAT THE DEDUCTION U/S.80IB(10) OF THE ACT, AS APPLICABLE PRIOR TO 1 ST APRIL, 2005, IS ADMISSIBLE IN CASE OF A HOUSING PROJECT COMPRISING RESIDENTIAL HOUSING UNITS AND C OMMERCIAL ESTABLISHMENTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) ERRED IN HOLDING THAT THE RESIDENTIAL PROJECTS, HAV ING COMMERCIAL AREA UPTO 10% OF THE PROJECT, IS ELIGIBLE FOR THE CLAIM OF DEDUCTION FOR ENTIRE PROJECT U/S.80IB(10) OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) ERRED IN HOLDING THAT THE LIMIT ON COMMERCIAL USE O F BUILT UP AREA AS PRESCRIBED BY CLAUSE (A) OF SECTION 80IB (10) OF TH E ACT HAS NO RETROSPECTIVE APPLICATION, AND IT APPLIES ONLY W.E. F. THE ASSESSMENT YEAR. 4. THE APPELLANT CRAVES TO LEAVE TO ADD, TO AMEND AND / OR TO ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. 4 5. THE APPELLANT, THEREFORE, PRAYS THAT ON THE GROUNDS STATED ABOVE, THE ORDER OF THE CIT(A)-36, MUMBAI MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 10. WE FIND THAT THE ISSUE IS COVERED BY THE DECISI ON OF SPECIAL BENCH OF PUNE TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES V/S. JCIT 119 ITD 255 HAS DECIDED AS UNDER :- A) THE DEDUCTION UNDER SECTION 80IB(10) AS APPLICABLE PRIOR TO 1 ST APRIL, 2005, SUBJECT TO AND IN THE LIGHT OF THE OBSERVATIO NS MADE IN THE PRECEDING PARAGRAPHS, IS ADMISSIBLE IN CASE OF A H OUSING PROJECT COMPRISING RESIDENTIAL HOUSING UNITS AND COMMERCIAL ESTABLISHMENTS. IN CASE THE PROJECTS ARE APPROVED AS HOUSING PROJECTS BY THE LOCAL AUTHORITY, SUCH AN APPROVAL AS HOUSING PROJECT IS S UFFICIENT FOR THE PURPOSES OF ELIGIBILITY. IN ANY OTHER CASE, WHERE 9 0% OR MORE OF THE TOTAL BUILT UP AREA IS USED FOR DWELLING UNITS, IN ACCORD ANCE WITH THE SCHEME OF SECTION 80IB(10), THE BENEFIT OF DEDUCTION UNDER SECTION 80IB(10) WILL NOT BE DECLINED. IN CASE COMMERCIAL USE OF BUILT UP AREA IS MORE THAN 10% BUT THE RESIDENTIAL SEGMENT OF THE PROJECT SATI SFIES REQUIREMENTS OF SECTION 80IB(10) STANDALONE BASIS I.E. (I) THE SIZE OF THE PLOT, EXCLUDING PORTION UNDER COMMERCIAL UNIT, IS MORE THAN MINIMUM AREA OF ONE ACRE, (II) RESIDENTIAL UNITS BUILT ON SUCH AREA MUST SATI SFY CONDITION OF CLAUSE (C) OF THE PROVISION, AND (III) OTHER NECESSARY CON DITIONS ARE FULFILLED, AND WHERE INCOME FROM CONSTRUCTION OF RESIDENTIAL DWELL ING UNITS CAN BE WORKED OUT ON STANDALONE BASIS, DEDUCTION UNDER SEC TION 80IB(10) WILL BE AVAILABLE IN RESPECT OF RESIDENTIAL SEGMENT OF T HE PROJECT. B) THE DEDUCTION UNDER SECTION 80IB(10) IS AVAILABLE I N RESPECT OF PROFITS OF HOUSING PROJECT AS A WHOLE AND AS SUCH, IT IS NOT R ELEVANT AS TO WHAT IS THE PORTION OF PROFITS WHICH CAN BE SAID TO BE ATTR IBUTABLE TO RESIDENTIAL UNITS. THIS IS SUBJECT TO THE RIDER THAT IN CASE CO MMERCIAL USE OF BUILT UP AREA IN A PROJECT IS MORE THAN 10% AND, FOR THIS RE ASON THE PROJECT CANNOT BE SAID TO BE A PREDOMINANTLY HOUSING PROJEC T, BUT, IN TERMS OF OBSERVATION MADE IN PARAGRAPH 115 ABOVE, THE ASSESS EE IS ENTITLED TO DEDUCTION IN RESPECT OF RESIDENTIAL UNIT SEGMENT OF THE OVERALL PROJECT ON FULFILLMENT OF NECESSARY CONDITIONS, THE ENTITLEMEN T OF INCENTIVE DEDUCTION WILL BE CONFINED TO ONLY TO THE PROFITS T O THE RESIDENTIAL SEGMENT OF THE OVERALL PROJECT. 5 C) THE LIMIT ON COMMERCIAL USE OF BUILT UP AREA AS PRE SCRIBED BY CLAUSE (D) OF SECTION 80IB(10) HAS NO RETROSPECTIVE APPLICATIO N, AND IT APPLIES ONLY W.E.F. THE ASSESSMENT YEAR 2005-06. 11. RESPECTFULLY, FOLLOWING THE DECISION OF THE SPE CIAL BENCH (SUPRA), WE DISMISS THE DEPARTMENTAL APPEAL. 12. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED. ORDER PRONOUNCED ON THIS 27 TH DAY OF MAY, 2011 SD/- SD/- (P.M. JAGTAP) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIA L MEMBER MUMBAI, DATED 27 TH MAY , 2011 ROSHANI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI