ADDL CIT RG 2, KALYAN V. GIRDHARILAL K LULLA, ULHASNAGAR

ITA 4207/MUM/2009

• Counselvise Citation: 420719914 RSA 2009
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 30-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND SONDE
• Assessee Lawyers: C G K NAIR
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI D. K. AGARWAL, J.M. AND SHRI R.K. PANDA, A.M. ITA NO.4207/MUM /2009 ASSESSMENT YEAR : 2006-07 ACIT CIRCLE -2, INCOME TAX OFFICE- CIRCLE -2, RANI MANSION, 2 ND FLOOR, MURBAD ROAD, KALYAN. VS. SHRI GIRDHARILAL K. LULLA, SHREE GANESH BUILDERS & OSHO DHARA DEVELOPERS, SHOP NO. 1, LADSON APARTMENTS, GOL MAIDAN, ULHASNAGAR 421 001. P.A. NO. AAJPL7607D (APPELLANT) (RESPONDENT) C.O. NO. 97/MUM /2010 ARISING OUT OF ITA NO. ITA NO. 4207/MUM/2009 ASSESSMENT YEAR : 2006-07 SHRI GIRDHARILAL K. LULLA, SHREE GANESH BUILDERS & OSHO DHARA DEVELOPERS, SHOP NO. 1, LADSON APARTMENTS, GOL MAIDAN, ULHASNAGAR 421 001. P.A. NO. AAJPL7607D VS. ACIT CIRCLE -2, INCOME TAX OFFICE- CIRCLE -2, RANI MANSION, 2 ND FLOOR, MURBAD ROAD, KALYAN. (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY : SHRI C.G.K. NAIR DEPARTMENT BY : SHRI ARVIND SONDE O R D E R PER R.K. PANDA. THIS APPEAL FILED BY THE REVENUE AND C.O. FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 15.04.2009 OF THE CIT(A)- II, THANE RELATING ITA 4207/M/09 & CO 97/M/10, SHRI GIRDHARILAL K. L ULLA 2 TO ASSESSMENT YEAR 2006-07. FOR THE SAKE OF CONVENI ENCE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER. ITA NO. 4207/MUM/2009 (BY REVENUE, A.Y. 2006-07) 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER:- WHETHER O N THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE HONBLE CIT(A)-II, THANE IN ALLOWING T HE BENEFIT OF DEDUCTION U/S 80IB(10) CLAIMED BY THE ASSESSEE IN R ESPECT OF PROJECT GANESH PLAZA II. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF RESIDENTIAL CUM COMMERC IAL COMPLEX UNDER THE PROPRIETARY FIRM SHRI GANESH BUILDERS. THE ASSESSEE IS CLAIMED TO BE FOLLOWING WORK IN PROGRESS METHOD. DURING THE IMPUGNED ASSES SMENT YEAR, THE ASSESSEE CLAIMED DEDUCTION U/S 80IB(10) FOR AN AMOU NT OF ` 86,87,698/- ON ACCOUNT OF INCOME FROM THE PROJECT GANESH PLAZA II. 2.2 THE A.O. NOTED THAT DURING THE SURVEY U/S 133 O F THE ACT ON 24.2.2006, IT WAS FOUND THAT THE PROJECT IN QUESTION HAS BEEN APPROVED AS RESIDENTIAL CUM HOUSING PROJECT AND THE COMMERCIAL AREA IS IN EXCESS OF 2000 SQ. FT. THE A.O., THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE CLAIM OF DEDUCTION U/S 80-IB(10) SHOULD NOT BE REJECTED SINC E CLAUSE (D) OF SECTION 80IB(10) HAS BEEN VIOLATED. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE, THE A.O. HELD THAT THE DEDUCTION U/S 80IB (10) CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE TO THE PROJECT GANESH PL AZA II SINCE THE COMMERCIAL AREAS IN THIS PROJECT IS 3399 SQ. FT. WH ICH IS WELL ABOVE 2000 SQ. FT. OR 5% OF THE PROJECT WHICH IS ONE OF THE PRE-CO NDITIONS FOR CLAIMING DEDUCTION U/S 80IB (10) OF THE ACT. 2.3 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT TH E PROJECT WAS APPROVED BY CIDCO ON 25.6.03 AS RESIDENTIAL AND COMMERCIAL BUIL DING. THE TOTAL AREA OF THE PLOT WORKS OUT TO 4320.27 SQ. MTS. THE PROJECT STANDS COMPLETED ON ITA 4207/M/09 & CO 97/M/10, SHRI GIRDHARILAL K. L ULLA 3 5.5.2005 AND 5.5.2006 (IN PART). IT WAS SUBMITTED THAT THE PROVISIONS OF SECTION 80IB(10) AS IT STOOD PRIOR TO 1.4.2005 WITH ALL CONDITIONS HAVE BEEN SATISFIED SINCE THE MAXIMUM BUILT UP AREA PER UNIT IS ALSO LESS THAN 1000 SQ. FT. IT WAS SUBMITTED THAT THE CONSTRUCTION OF SHOPS AND BUSINESS PREMISES TO THE EXTENT OF 11854 SQ. FTS AND RESIDENTIAL FLATS A T 1,31,261 SQ. FTS WAS AS PER APPROVED PLAN. IT WAS ALSO POINTED OUT THAT IN THE LEASE AGREEMENT EXECUTED BY THE LOCAL AUTHORITY I.E. CIDCO, THERE WAS A PRE- CONDITION THAT A MINIMUM OF 25% SHOULD BE CONSTRUCTED FOR COMMERCIAL OR BUSI NESS PURPOSE AS PROVIDED IN CLAUSE 3 IN THE AGREEMENT WHICH WAS SUB SEQUENTLY REDUCED TO 10% AS PER NOTIFICATION ISSUED BY URBAN DEVELOPMENT DEPARTMENT, MAHARASHTRA REGIONAL AND TOWN PLANNING ACT, 1966. R ELIANCE WAS PLACED ON THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE O F BRAHMA ASSOCIATES VS. JCIT (ITA NO. 4008/MUM/2007 ORDER DATED 6.4.2009. T HE DECISION OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANISATION VS . ITO REPORTED IN 3 DTR (MUM) WAS ALSO BROUGHT TO THE NOTICE OF THE LD. CIT (A). IT WAS ARGUED THAT THE LAW CAN PRESCRIBE ONLY SUCH CONDITIONS WHICH ARE CA PABLE OF BEING FULFILLED AND COMPLIED WITH. IT CANNOT COMPEL A PERSON TO DO A THING WHICH HE CANNOT DO OR PERFORM. 2.4 BASED ON THE VARIOUS ARGUMENTS ADVANCED BY THE ASSESSEE AND RELYING ON A COUPLE OF DECISIONS, THE LD. CIT(A) HELD THAT THE PROJECT I.E. SHREE GANESH PLAZA II CONSTRUCTED ON PLOT NO. 1,2,3, SECTION -1 , NEW PANVEL WAS APPROVED PRIOR TO 1.4.2005 AND ALL THE CONDITIONS LAID DOWN IN SECTION 80IB PRIOR TO 1.4.2005 ARE COMPLIED WITH. THE FACTS IN THE ASSESS EES CASE ARE SIMILAR TO THE FACTS OF THE CASE OF SAROJ SALES ORGANISATION (SUPR A). RELYING ON A COUPLE OF OTHER DECISIONS, HE ALLOWED THE CLAIM OF THE ASSESS EE U/S 80IB OF THE ACT TO THE EXTENT OF RESIDENTIAL UNITS COMPLYING WITH THE PROVISIONS OF SECTION 80IB(10)(C) OF THE ACT. HOWEVER, HE HELD THAT NO D EDUCTION IS PERMISSIBLE ON THE COMMERCIAL COMPONENT. SINCE COMMERCIAL COMPONEN TS ARE RESTRICTED TO THE EXTENT OF 2000 SQ. FT. OR 5% OF THE DEVELOPED A REA WHICHEVER IS LESS, THE SAME HAS TO BE ALLOWED FOR DEDUCTION FOR THE A.Y. 2 006-07. HE, ACCORDINGLY, DIRECTED THE A.O. TO ALLOW DEDUCTION ON THE PROFIT TO THE EXTENT OF PRESCRIPTION AS PER S.S. (D) OF SECTION 80IB(10) OF THE ACT. ITA 4207/M/09 & CO 97/M/10, SHRI GIRDHARILAL K. L ULLA 4 2.3 AGGRIEVED WITH SUCH PART RELIEF ALLOWED BY THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUND:- WHETHER O N THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE HONBLE CIT(A)-II, THANE IN ALLOWING T HE BENEFIT OF DEDUCTION U/S 80IB(10) CLAIMED BY THE ASSESSEE IN R ESPECT OF PROJECT GANESH PLAZA II. 2.4 THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND IN ITS C.O. FILED BEFORE US:- THE CIT(A) ERRED IN GIVING THE DIRECTION IN THE LAS T PARA OF THE ORDER AT PAGE 19 BY EXPRESSING THE OPINION THAT THE DEDUC TION ON PROFIT FROM COMMERCIAL AREAS TO THE EXTENT OF PRESCRIPTION AS PER CLAUSE (D) OF SECTION 80IB(10) OF THE IT ACT, 1961 MAY BE ALLOWED AS AGAINST THE DECISION WHICH WAS FOLLOWED BY CIT(A)-I I, THANE WHEREIN AS PER CLAUSE V OF THE DECISION FINDING WAS GIVEN WHEREIN COMMERCIAL BUILT UP AREA DOES NOT EXCEED 10% OF THE TOTAL AREA ARE ELIGIBLE FOR THE BENEFIT AS SUCH PROJECTS ARE PREDO MINANTLY RESIDENTIAL IN NATURE APPELLANTS CASE IS COVERED BY THIS FINDING BEING HAVING IDENTICAL FACTS. 5. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET , FILED A COPY OF THE DECISION OF THE TRIBUNAL IN THE CASE OF HIRANANDANI AKRUTI JV VS. DCIT IN ITA NO. 5416/MUM/09 DATED 30.3.2010 FOR A.Y. 2006-07. DRAWING ATTENTION OF THE BENCH TO PARA 26 & 27 OF THE DECISION OF THE TR IBUNAL, HE SUBMITTED THAT THE TRIBUNAL FOLLOWING THE DECISION IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA) HAS HELD THAT DEDUCTION U/S 80IB (10) SHALL BE ALLOWED ON THE BASIS OF THE LAW AS IT EXISTED PRIOR TO A.Y. 2005-06 WHEN TH E ASSESSEE SUBMITTED ITS PROPOSAL AND THE PERMISSION FOR CARRYING OUT THE DE VELOPMENT WAS ACCORDED AND WHEN THE ASSESSEE COMMENCED DEVELOPMENT. SINCE IN THE INSTANT CASE THE PROJECT WAS APPROVED PRIOR TO 1.4.2005 THEREFOR E THE OLD LAW WILL APPLY. SO FAR AS THE ISSUE OF COMMERCIAL AREA IS CONCERNED , THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PAGE 10 OF LD. CIT(A)S ORDER AND SUBMITTED THAT AS AGAINST THE TOTAL AREA OF 131261 SQ. FTS., THE TOTAL AREA OF SHOPS IS ONLY 11854 SQ. FTS. AND THEREFORE IS LESS THAN 10% OF THE BUILT UP AREA. REFERRING TO THE DECISION OF THE HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF BRAMHA ASSOCIATES REPORTED IN 333 ITR 289, HE SUBMITTED THAT THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CA SE OF BRAHMA ASSOCIATES ITA 4207/M/09 & CO 97/M/10, SHRI GIRDHARILAL K. L ULLA 5 (SUPRA) HAS BEEN UPHELD WHEREIN THE SPECIAL BENCH H AS HELD THAT PROJECTS HAVING COMMERCIAL AREA UPTO 10% OF THE BUILT UP ARE A ARE ENTITLED TO DEDUCTION U/S 80IB(10) OF THE ACT UPTO 1.4.2005. HE ACCORDINGLY SUBMITTED THAT THE REVENUES APPEAL SHOULD BE DISMISSED AND C .O. MAY BE ALLOWED. 3. THE LD. D.R., ON THE OTHER HAND, WHILE SUPPORTIN G THE ORDER OF THE A.O. FAIRLY CONCEDED TO THE ARGUMENTS AS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF A.O. AND THE CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. WE FIND THE A.O. DENIED THE BENEFIT OF DEDUCTIO N U/S 80IB(10) OF THE ACT ON THE GROUND THAT THE COMMERCIAL AREAS IN THE PROJ ECT IS 3399 SQ. FT. WHICH IS WELL ABOVE 2000 SQ. FT. OR 5% OF THE PROJECT WHICH IS ONE OF THE PRE-CONDITIONS FOR CLAIMING DEDUCTION U/S 80IB (10) OF THE ACT. WE FIND THE CONDITION OF 2000 SQ.FT. OR 5% OF THE PROJECT WAS BROUGHT TO THE STAT UTE BY THE FINANCE (NO.2) ACT, 2004 W.E.F. 1.4.2005. PRIOR TO THIS INSERTION, THERE WAS NO SUCH CONDITION. WE FIND THE CO-ORDINATE BENCH OF THE TRIBUNAL IN TH E CASE OF HIRANANDANI AKRUTI JV (SUPRA) AT PARA NO. 26 & 27 HAS OBSERVED AS UNDER:- 26. THERE IS TRUTH IN THE PLEA OF HARDSHIP PUT FOR TH ON BEHALF OF THE ASSESSEE. LET US ASSUME AN ASSESSEE APPLIES AND OBT AINS APPROVAL OF A LOCAL AUTHORITY FOR BUILDING A HOUSING PROJECT IN THE PREVIOUS YEAR RELEVANT TO AY 02-03. AS PER THE LAW AS IT STO OD IN THE PREVIOUS YEAR RELEVANT TO AY 02-03 UPTO 04-05, THERE WAS NO TIME LIMIT WITHIN WHICH THE CONSTRUCTION HAS TO BE COMPLETED O R ANY RESTRICTION REGARDING COMMERCIAL AREA THAT CAN BE B UILT IN A HOUSING PROJECT. LET US ASSUME THAT THE ASSESSEE CO MPLIES WITH ALL THE CONDITIONS FOR ALLOWING RELIEF U/S.80-IB(10) I. E., IT IS APPROVED AS A HOUSING PROJECT BY THE LOCAL AUTHORITY BUT THE AR EA OF COMMERCIAL SPACE AS APPROVED BY THE LOCAL AUTHORITY IS MORE TH AN 2000 SQ.FT. THE ASSESSEE COMMENCES THE PROJECT BUT IS ABLE TO C OMPLETE ONLY IN THE PREVIOUS YEAR RELEVANT TO AY 05-06. AS PER THE CHANGE IN LAW FROM AY 05-06 WITH REGARD TO THE AREA OF COMMERCIAL SPACE IN A HOUSING PROJECT THE ASSESSEE WOULD LOOSE HIS ELIGIB ILITY TO CLAIM DEDUCTION. IN SUCH CASES THERE IS DEFINITELY GRAVE HARDSHIP TO THE ASSESSEE. THE INTERPRETATION SOUGHT TO BE CANVASSED BY THE LEARNED D.R. WILL ALSO LEAD TO ABSURD SITUATION. LET US ASS UME AN ASSESSEE OBTAINS APPROVAL OF A HOUSING PROJECT PRIOR TO 1-4- 2005 SAY IN PREVIOUS YEAR RELEVANT TO AY 02-03. HE BUILDS COMME RCIAL SPACE IN ITA 4207/M/09 & CO 97/M/10, SHRI GIRDHARILAL K. L ULLA 6 EXCESS OF 2000 SQ.FT. IN THE HOUSING PROJECT. HE FO LLOWS PERCENTAGE COMPLETION METHOD OF ACCOUNTING AND OFFERS PROFITS IN AY 02-03 TO 04-05, CLAIMS EXEMPTION U/S.80-IB(10) AND IS ALLOWE D EXEMPTION. ON THE SAME PROJECT IN AY 05-06, THE ASSESSEE WOULD NOT GET THE BENEFIT OF SEC.80- HIRANANDANI AKRUTI JV 20 IB(10). WE THEREFORE FIND NO GROUNDS TO TAKE A VIEW DIFFERENT FROM THE O NE TAKEN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SA ROJ SALES ORGANIZATION (SUPRA). 27. WE ARE OF THE VIEW THAT WE ARE NOT SUPPLYING A NY WORDS TO THE STATUTE BUT ARE ONLY HOLDING THAT THE LAW AS IT EXISTED IN THE A.Y.04-05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11.2003 AND WHEN THE ASSESSEE CO MMENCED DEVELOPMENT IS TO BE APPLIED. THEREFORE THE SUBMISS IONS OF THE LEARNED D.R. IN THIS REGARD CANNOT BE ACCEPTED. WE ARE OF THE VIEW THAT THE LEGISLATURE WOULD NOT HAVE INTENDED TO TAK E AWAY A VESTED RIGHT WITHOUT CLEAR WORDS TO THAT EFFECT IN THE PRO VISIONS OF SEC.80- IB(10) AS AMENDED BY THE FINANCE ACT, 2005, W.E.F. 1-4-2005. WE THEREFORE HOLD FOLLOWING THE DECISION IN THE CASE O F SAROJ SALES ORGANISATION (SUPRA) THAT THE LAW AS IT EXISTED IN THE A.Y.04-05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM R EHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11.2003 AND WHEN THE ASSESSEE COMMENCED DEVEL OPMENT IS TO BE APPLIED. 4.1 SINCE IN THE INSTANT CASE, THE PROJECT UNDISPUT EDLY WAS APPROVED BEFORE 1.4.2005 THEREFORE THE PROVISIONS OF THE OLD LAW WI LL APPLY. THEREFORE,, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE BEING IN CONS ONANCE WITH THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IS UPHELD. S O FAR AS THE ORDER OF THE LD. CIT(A) RESTRICTING THE DEDUCTION ON ACCOUNT OF COMM ERCIAL COMPONENT IS CONCERNED, WE FIND THE ISSUE NOW STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) WHERE THE DECISION OF SPECIAL BE NCH OF THE TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) HAS BEEN UPHELD A CCORDING TO WHICH THE PROJECT HAVING COMMERCIAL AREA UPTO 10% OF THE PROJ ECT IS ELIGIBLE FOR DEDUCTION U/S 80IB(10) OF THE ACT. SINCE ADMITTEDLY THE COMMERCIAL AREA IN THE INSTANT CASE IS LESS THAN 10% OF THE BUILT UP A REA, THEREFORE, THE ASSESSEE IS ENTITLED TO THE DEDUCTION U/S 80IB(10) AND THE L D. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE DEDUCTION. IN THIS VIEW OF THE M ATTER, THE GROUND RAISED BY THE REVENUE IS DISMISSED AND THE GROUND RAISED BY T HE ASSESSEE IN THE C.O. IS ALLOWED. ITA 4207/M/09 & CO 97/M/10, SHRI GIRDHARILAL K. L ULLA 7 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D AND THE C.O. FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING I.E. ON 30.5.2011. SD/- (D. K. AGARWAL) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED : 30.5.2011. COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. (A) II, THANE 4. CIT -III, THANE 5. THE DR, G - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI R.K. ITA 4207/M/09 & CO 97/M/10, SHRI GIRDHARILAL K. L ULLA 8 DATE INITIALS DRAFT DICTATED ON 30.5.11 DRAFT PLACED BEFORE THE AUTHOR 30.5.11 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER AM/JM DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM APPROVED DRAFT COMES TO THE SR. PS KEPT FOR PRONOUNCEMENT ON. FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK DATE ON WHICH FILE GOES TO THE AR DATE OF DISPATCH