KANAKIA SPACES P.LTD ( FORMERLY KNOWN AS M.S, KANAKIA CONSTRUCTIONS P. LTD), MUMBAI V. ACIT (OSD)-1 CEN RG-7, MUMBAI

ITA 4153/MUM/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1407 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 21-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A : MUMBAI BEFORE SHRI D.MANMOHAN, (VP) AND SHRI R.K. PANDA , (AM) ITA NO.4153/MUM/2010 ASSESSMENT YEAR :2005-06 M/S. KANAKIA SPACES PVT. LTD. (FORMERLY KNOWN AS M/S. KANAKIA CONSTRUCTIONS PVT. LTD.) ATTRIUM 215, 10 TH FLOOR ANDHERI-KURLA ROAD NEXT TO MARRIOT COURTYARD ANDHERI (E) MUMBAI-400 059. ..( APPELLANT ) P.A. NO. (AAACK 2629 J) VS. ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-23 AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. ..( RESPONDENT ) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI P .C. MAURYA O R D E R PER R.K. PANDA (AM). THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 15.4.2010 OF THE CIT(A)-40, MUMBAI RELATING T O ASSESSMENT YEAR 2005-06. 2.1 THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THE LD. CIT(A)-40 ERRED IN LAW AND ON FACTS IN NOT GRANTING DEDUCTION UNDER SECTION 80IB(10) OF THE IN COME TAX ACT, 1961 OF RS.60,48,577/- IN RESPECT OF DISCO VERY PROJECT. ITA NO.4153/M/10 AY:05-06 2 2. THE LD. CIT(A)-40 ERRED IN LAW AND ON FACTS IN STATING THAT THE APPELLANT RELIANCE ON DECISION OF THE HONBLE ITAT IN THE CASE OF SAROJ SLAES ORGANISATION VS. ITO IS MISPLACED. 3. THE LD. CIT(A)-40 ERRED IN LAW AND ON FACTS IN N OT FOLLOWING THE UNREPORTED DECISION OF THE HONBLE ITA T IN THE CASE OF ITO VS. PATHARE & ASSOCIATES (ITA NO.993/MUM/2009). 2. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE HA D CLAIMED DEDUCTION UNDER SECTION 80IB(10) OF THE INCOME TAX ACT, 1961(THE ACT) ON PROFITS OF THE DISCOVERY PROJECT COMPRISING SALE OF 15 SHOPS COVERING AN AREA OF 3246 SQ. FEET OUT OF OPENING STOCK OF 22 SHOPS COVERING AN AREA OF 4477 SQ. FT. THE ASSESSING OFFICER N OTED THAT SINCE THE AREA OF COMMERCIAL ESTABLISHMENTS IN THE PROJECT EXC EEDED 2000 SQ. FT., THE ASSESSEE WAS NOT ENTITLED TO THE DEDUCTION A ND ACCORDINGLY, HE ASKED THE ASSESSEE TO JUSTIFY THE CLAIM. IN RESPONSE, THE ASSESSEE SUBMITTED THAT IT HAD COMPLIED WITH ALL THE CONDITIONS OF SEC. 80IB(10) WITH THE SOLE EXCEPTION OF THE CONDITION ON THE AREA O F COMMERCIAL ESTABLISHMENTS AS INSERTED IN THE INCOME TAX ACT W.E.F. 1.4.2005. REFERENCE WAS ALSO MADE TO THE FACT THAT FOR ASSESSMENT YEA R 2004- 05, THE DEDUCTION HAS BEEN GRANTED BY THE CIT(A) ON T HE PROJECT AS THERE WAS NO SPECIFIC LIMIT ON THE AREA OF COMMERCIAL EST ABLISHMENT PRIOR TO THE AMENDMENT. IT WAS ARGUED THAT SINCE THE ASSESSEES PROJECT HAD BEEN STARTED AND COMPLETED BEFORE THE AMEN DMENT IN SECTION 80IB(10), THE RESTRICTION ON THE AREA OF CONSTRUCT ION OF COMMERCIAL ESTABLISHMENT WOULD NOT BE APPLICABLE TO IT S CASE. IT WAS ALSO ARGUED THAT UNLESS THE LAW IS MADE SPECIFICALLY RETRO SPECTIVE, IT CANNOT BE APPLIED FOR EARLIER YEARS. THE FOLLOWING D ECISIONS WERE ALSO RELIED UPON: 1) VARAS INTERNATIONAL PVT. LTD. 283 ITR 484(SC), ITA NO.4153/M/10 AY:05-06 3 2) SHREE SNEHAVALI TEXTILES PVT. LTD. 259 ITR 77(MAD.), 3) KERALA LAMPS LTD. 261 ITR 721(KER.), 4) SHAH SIDIQUE & SONS 166 ITR 102 (SC), 5) GOVINDDAS VS. ITO 103 ITR 123(SC) AND 6) HARSHAD P. DOSHI VS. ACIT 109 TTJ 335(MUM.) 2.1 THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY TH E ASSESSING OFFICER. ACCORDING TO HIM, THERE IS NO AMBIGUITY IN THE PROVISIONS OF SEC. 80IB(10). HE HELD THAT SINCE THE AREA OF THE COMMERCIAL ESTABLISHMENT IN THE DISCOVERY PROJECT WAS MOR E THAN 2000 SQ.FT., THE ASSESSEE IS INELIGIBLE FOR DEDUCTION UNDE R SECTION 80IB(10) OF THE ACT. HE ACCORDINGLY DISALLOWED DEDUCTION OF RS.66,48,577/-. 3. BEFORE THE CIT(A) THE ASSESSEE RELIED ON THE DECISION OF THE TRIBUNAL IN ITS OWN CASE FOR THE ASSESSMENT YEAR 2003-04 W HEREIN THE CLAIM OF THE ASSESSEE WAS ALLOWED. THE DECISION OF THE TR IBUNAL IN THE CASE OF SAROJ SALES ORGANISATION VS. ITO (115 TTJ 485) W AS ALSO RELIED UPON. HOWEVER THE CIT(A) DISTINGUISHED THE DECISIONS CIT ED BEFORE HIM AND UPHELD THE ACTION OF THE ASSESSING OFFICER. WHI LE DOING SO, HE NOTED THAT SINCE THE AREA OF THE COMMERCIAL ESTABLISHMEN T IN THE DISCOVERY PROJECT IS MORE THAT 2000 SQ.FT, THE ASSESSING OFF ICER WAS JUSTIFIED IN DENYING DEDUCTION UNDER SECTION 80IB(10) O F THE ACT. HE ACCORDINGLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. A GGRIEVED BY SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PR OJECT WAS COMPLETED IN THE ASSESSMENT YEAR 2004-05 AND THE PROVISIO NS OF SEC.80IB (10)(D) WERE INSERTED W.E.F. 1.4.2005 RELEVAN T TO ASSESSMENT ITA NO.4153/M/10 AY:05-06 4 YEAR 2005-06 AND ONWARDS. HE SUBMITTED THAT THE TOTAL COMMERCIAL AREA OF THE PROJECT IS 7607 SQ. FT. REFERRING TO THE DECISIONS OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANIZATION(115 T TJ 484), HIRANANDANI AKRUTI JV VS. DCIT (39 SOT 498)(MUM.), TH E ORDER OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S. PATHARE & ASSOCIATES IN ITA NO.993/MUM/2009 ORDER DATED 17.12.2009 FOR THE ASSESSME NT YEAR 2005-06 AND IN THE CASE OF ITO VS. M/S. ABHINAV ASSOCIATE S IN ITA NO.5623/MUM/2009 ORDER DATED 7.4.2011 FOR THE ASSESSMEN T YEAR 2005-06, HE SUBMITTED THAT THE ISSUE STANDS COVERED I N FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. REFERRING TO THE DECISI ON IN HIRANANDANI AKRUTI JV (SUPRA), HE SUBMITTED THAT THE T RIBUNAL HAS CONSIDERED THE HARDSHIPS FACED BY VARIOUS ASSESSEES DUE TO TH E AMENDMENT WHERE PROJECTS WERE APPROVED PRIOR TO THE A MENDMENT. HE SUBMITTED THAT IN THE CASE OF THE ASSESSEE IT IS IMPOSSIBI LITY SINCE THE PROJECT HAS ALREADY BEEN COMPLETED PRIOR TO THE AM ENDMENT. FURTHER THE DECISION OF THE TRIBUNAL IN THE CASE OF SA ROJ SALES ORGANISATION (SUPRA), HAS BEEN UPHELD BY THE HONBLE HIG H COURT SINCE THE APPEAL FILED BY THE REVENUE HAS BEEN DISMISSED. H E SUBMITTED THAT THE CIT(A) HAS WRONGLY INTERPRETED THE DECISION OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANISATION(SUPRA). HE ACCORDING LY SUBMITTED THAT IN VIEW OF THE CONSISTENT DECISIONS OF THE CO-ORDIA NTE BENCHES OF THE TRIBUNAL, THE ORDER OF THE CIT(A) SHOULD BE SET A SIDE AND THE GROUND RAISED BY THE ASSESSEE SHOULD BE ALLOWED. 5. THE LD. DR ON THE OTHER HAND STRONGLY RELIED ON T HE ORDER OF THE CIT(A). HE SUBMITTED THAT SUB SEC.(D) OF SEC. 80IB(10) WAS NOT THERE PRIOR TO ASSESSMENT YEAR 2005-06. SINCE THE PROJECT SHOULD BE A RESIDENTIAL PROJECT DEDUCTION UNDER SECTION 80IB(10) WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER IN VIEW OF COMMERCIAL ITA NO.4153/M/10 AY:05-06 5 ESTABLISHMENT OF 7600 SQ.FT. IN THE PROJECT. HE ALSO RE LIED ON THE DECISION OF THE TRIBUNAL REPORTED IN 105 ITD 657. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE T O THE FACT THAT THE CONSTRUCTION OF HOUSING PROJECT KNOWN AS DISCOVERY PROJ ECT HAVING AGGREGATE 1,27,736 SQ.FT. GOT COMPLETED IN ASSESSMENT YE AR 2004-05 AS PER PARA-7 OF THE ASSESSMENT ORDER. WE FIND THAT THE ASSESSING OFFICER DENIED THE BENEFIT OF THE DEDUCTION UNDER SECTI ON 80IB(10) OF THE ACT ON THE GROUND THAT THE COMMERCIAL AREA OF 7607 SQ.FT. IS MORE THAN 2000 SQ.FT. THEREFORE, THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 80IB(10) SINCE IT EXCEEDS 5% OF THE TOTAL AREA. W E FIND THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST T HE REVENUE BY THE CONSISTENT DECISIONS OF THE CO-ORDINATE BE NCHES OF THE TRIBUNAL. WE FIND THE CO-ORDINATE BENCHES OF THE TRIB UNAL FOLLOWING THE DECISION IN THE CASE OF SAROJ SALES ORGANISATION (SUPR A), ARE TAKING THE CONSISTENT VIEW THAT IF THE HOUSING PROJECTS WERE APP ROVED BEFORE 31.3.2005 THE CONDITION PUT BY CLAUSE (D) TO SECTION 80I B(10) WOULD NOT BE APPLICABLE. WE FIND THE DECISION OF THE TRIBUN AL IN THE CASE OF SAROJ SALES ORGANIZATION(SUPRA), HAS BEEN UP HELD BY T HE HONBLE BOMBAY HIGH COURT IN APPEAL NO.854, 855 AND 1058 OF 2008 ORDER DATED 22.2.2011 WHEREIN THE FOLLOWING QUESTION RAISED BY THE REVENUE WAS HELD AGAINST THE REVENUE. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ITAT WAS RIGHT IN ACCEPTING THE ASSESSE ES CLAIM UNDER SECTION 80IB(10) OF THE INCOME TAX ACT, 1961 IN RESPECT OF THE PROFIT DERIVED FROM SALE OF SHOP HOLDING THAT NOWHERE THERE IS ANY CONTEMPLATION FOR RESTRIC TING THE BENEFIT ONLY TO RESIDENTIAL UNITS AND NOT TO TH E SHOPS ETC. EVEN THOUGH SECTION 80IB(10) REFERS ONLY TO ITA NO.4153/M/10 AY:05-06 6 RESIDENTIAL UNITS AND THE AMENDMENT INCLUDING SUB-C LAUSE (D) IN RESPECT OF SHOPS AND COMMERCIAL ESTABLISHMEN TS WAS INTRODUCED IN THE SAID SECTION WITH EFFECT FROM 1 ST APRIL, 2005 I.E. FROM ASSESSMENT YEAR 2005-06 AND H AS NO RETROSPECTIVE APPLICATION. 6.1 RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AND THE DECISIONS OF THE CO-ORDINATE BENCHES OF THE TRIBUNAL, WE HOLD THAT THE CIT(A) WAS NOT JUSTIFIED I N REJECTING THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) ON ACCOUNT OF COMMERCIAL AREA OF MORE THAN 2000 SQ.FT. WE, THEREFORE, SET ASID E THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM UNDER SECTION 80IB(10) AS MADE BY THE ASSESSEE. THE GROUNDS RAI SED BY THE ASSESSEE ARE, THEREFORE, ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.6.2011. SD/- SD/- (D. MANMOHAN) (R.K. PANDA ) VICE PRESIDENT ACCOUNTANT M EMBER MUMBAI, DATED: 30.6.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.