DCIT CIR 15(1), MUMBAI V. FORTALEZA DEVELOPERS, MUMBAI

ITA 4327/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62272 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 11-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 26-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI F BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI RAJENDRA SINGH, AM & SHRI VIJAY PAL RA O, JM ITA NO. 4327/MUM/2010 (ASST YEAR 2007-08) THE DY COMMR OF INCOME TAX CIRCLE 15(1), MUMBAI VS M/S FORTALEZA DEVELOPERS 601 COMMERCE HOUSE 140 NAGINDAS MASTER ROAD FORT, MUMBAI 23 (APPELLANT ) (RESPONDENT) PAN NO. AAAJF0056B ASSESSEE BY SHRI VIJAY MEHTA REVENUE BY SHRI M RAJAN DT.OF HEARING 11 TH APRIL 2012 DT OF PRONOUNCEMENT 25 TH , APRIL 2012 ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.3.2010 OF THE CIT(A) FOR THE ASSESSMENT YEAR 2007-08. 2 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 01 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS IN LAW, THE LD. CIT(A) ERRED IN DIRECTING ASSESSING OFFICER TO DELETE THE ADDITION MADE OF RS.4,43,366/- TOWARDS RECEIPTS NOT SHOWN IGNORING M ATERIAL FACTS AVAILABLE ON RECORD. 02 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LD. CIT(A) ERRED IN DIRECTING ASSESSING OFFICER TO GRA NT DEDUCTION U/S. 801B (10) OF THE INCOME TAX ACT, 1961 WITHOUT CONSIDERING THE FA CTS THAT AREA OF SOME OF THE FLATS EXCEEDS 1500 SQUARE FEET SECTION 8OLB(10) (10)(C) DISENTITLING THE ASSESSEE TO CLAIM DEDUCTION U/S. 801B (10). 03 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LD. CIT(A) ERRED IN LAW TO ALLOW DEDUCTION U/S.801B(10) IGNORING THE FACT THAT ONLY ONE COMBINED PROJECT WAS APPROVED WHICH WAS CONVENI ENTLY DIVIDED LATER ON, INTO TWO SEPARATE PROJECTS THAT IS RESIDENTIAL PROJECT AND COMMERCIAL PROJECT TO BE RUN BY THE ASSESSEE AND MIS. R. K. AS SOCIATES (SISTER CONCERN OF M/S FORTALEZA DEVELOPERS ITA NO. 4327/MUM/2010 (ASST YEAR 2007-08) 2 THE ASSESSEE) RESPECTIVELY IN ORDER TO CIRCUMVENT T HE PROVISIONS OF 80(IB(10)(D) TO CLAIM DEDUCTION U/S 8OLB(10) WHICH OTHERWISE DIS QUALIFIES THE ASSESSEE TO CLAIM DEDUCTION U/S 801 B(10). 3 FIRST WE WILL TAKE UPON THE GROUND NO.2 REGARDIN G THE DISALLOWING THE CLAIM ON THE GROUND THAT SOME OF THE FLATS HAVE EXCEEDS 1500 SQ.FT AREA IN CONTRAVENTION OF PROVISIONS OF SEC. 80IB(10(E). 4 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF T HE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD DR HAS REL IED UPON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE AREA OF THE FLATS SH OWN IN THE SALE AGREEMENT IS MORE THAN 1500 SQ.FT; THEREFORE, THERE IS A VIOLATION OF SEC.80IB (10), 4.1 ON THE OTHER HAND, THE LD AR OF THE OF THE ASS ESSEE HAS POINTED OUT THAT THERE IS NO DISPUTE REGARDING THE BUILT UP AREA OF THE FLATS IS LESS THAN 1500 SQ.FT AND THE ASSESSING OFFICER HAS TAKEN INTO CONSIDERATION THE SALEABLE AREA AND NOT THE BUILT UP AREA. HE HAS REFERRED THE IMPUGNED ORDER OF THE CIT(A) AND SUBMITTED THAT THE CIT(A) HAS REPRODUCED ALL THE DETAILS OF THE AR EA OF EACH AND EVERY FLATS AT PAGES 12 & 13 OF THE IMPUGNED ORDER, WHICH CLEARL Y SHOWS THAT THE AREA OF THE FLAT IS LESS THAN 1500 SQ.FT. 4.2 AFTER CONSIDERING THE RIVAL CONTENTION AND PERU SAL OF RECORDS, WE FIND THAT THE THERE IS NO DISPUTE ON THE POINT THAT THE FLATS CON STRUCTED AS PER THE SANCTIONED PLAN HAVING LESS THAN 1500 SQ.FT AREA. THEREFORE, THE B UILT UP AREA OF THE FLATS IN THE PROJECT IS NOT DISPUTED AS IT IS LESS THAN 1500 SQ. FT. HOWEVER, THE ASSESSEE HAS RECEIVED THE CONSIDERATION IN SOME OF THE FLATS FOR MORE THAN 1500 SQ.FT AREA WHICH INCLUDES BUILT UP AREA PLUS THE COMMON AREA AND MAY BE CALLED AS SUPER BUILT UP AREA. IT IS PERTINENT TO NOTE THAT WHEN THE PROJEC T HAS BEEN SANCTIONED AND THE COMPLETION CERTIFICATE HAS BEEN ISSUED AS PER THE S ANCTIONED PLANT WHICH IS FOR THE M/S FORTALEZA DEVELOPERS ITA NO. 4327/MUM/2010 (ASST YEAR 2007-08) 3 RESIDENTIAL FLATS HAVING LESS THAN 1500 SQ.FT, THEN EVEN IF THE ASSESSEE HAS RECEIVED THE CONSIDERATION FOR MORE THAN 1500 SQ.FT IN SOME OF T HE FLATS, WHICH WOULD NOT CONSTITUTE VIOLATION OF CONDITIONS AS PRESCRIBED U/ S 80IB(10)( C) BECAUSE THE BUILT UP AREA IS LESS THAN 1500 SQ.FT. THE CIT(A) HAS GIVEN THE DETAILS OF THE FLATS IN QUESTION AT PAGE 12 & 13 AS UNDER: COPA CABNA A AND C FLAT REFERRED IN IMPOUNDED PAPERS BUILD UP AREA OF FLATS INCLUDING CARPET AREA, THICKNESS OF WALLS AND ENCLOSED BALCONY (IN SQ.MT) BUILD UP AREA (IN SQ.FTS) 1001 94.88 1021.28 1002 94.87 1021.18 BONITA, AND EVORA 102 132.81 1429.57 103 132.81 1429.57 201 132.33 1424.40 202 132.81 1429.57 203 132.63 1427.63 301 132.34 1424.51 302 132.81 1429.57 303 132.81 1429.57 401 132.84 1424.51 402 132.84 1429.57 403 132.63 1427.63 501 132.34 1424.51 502 132.81 1429.57 503 132.81 1429.57 601 132.34 1424.51 602 132.81 1429.57 603 132.63 1427.63 701 132.34 1424.51 702 132.81 1429.57 703 132.81 1429.57 801 132.34 1424.51 802 132.81 1429.57 803 132.63 1427.63 901 132.34 1424.51 902 132.81 1429.57 903 132.81 1429.47 RIOGRANDE AND SALVAVIDA 102 128.99 1388.45 103 128.94 1387.91 201 129.47 1393.62 M/S FORTALEZA DEVELOPERS ITA NO. 4327/MUM/2010 (ASST YEAR 2007-08) 4 202 129,02 1388.77 203 129.02 1388.77 301 129.47 1393.62 302 129.03 1388.88 303 129.02 1388.77 401 129.47 1393.62 402 129.02 1388.77 403 129.02 1388.77 501 129.47 1393.62 502 129.03 1388.88 503 129.03 1388.88 601 129.47 1393.62 602 129.02 1388.77 603 129.02 1388.77 701 129.47 1393.62 702 129.03 1388.88 703 129.02 1388.77 801 129.47 1393.62 802 129.03 1388.88 803 129.02 1388.77 901 129.47 1393.62 902 129.03 1388.88 903 129.02 1388.77 4.3 THIS FACTUAL ASPECT HAS NOT BEEN DISPUTED BEFOR E US. THEREFORE, WHEN EACH OF THE FLATS HAVE BEEN CONSTRUCTED AS PER THE BUILD ING PLAN DULY APPROVED BY THE LOCAL AUTHORITIES AND ALSO COMPLETED AS PER THE COM PLETION CERTIFICATE, WHEREIN THE BUILT UP AREA OF EACH FLATS HAS BEEN SHOWN LESS TH AN 1500 SQ.FT, THEN RECEIVING THE CONSIDERATION BY THE ASSESSEE FOR MORE THAN 1500 AQ .FT SHOWING AS SALEABLE AREA OF THE FLATS WOULD NOT ENHANCE THE BUILT UP AREA OF TH E FLATS/RESIDENTIAL UNITS AS PER THE SANCTIONED PLANT AND COMPLETION CERTIFICATE. 4.4 IN VIEW OF THE ABOVE DISCUSSION AS WELL AS IN T HE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A), QUA THIS ISSUE. M/S FORTALEZA DEVELOPERS ITA NO. 4327/MUM/2010 (ASST YEAR 2007-08) 5 5 GROUND NO.3 IS REGARDING DISALLOWANCE OF DEDUCTIO N U/S 80IB(10) ON THE GROUND THAT THE ASSESSEE IS HAVING COMMERCIAL PROJE CT IN CONTRAVENTION OF PROVISIONS OF SEC. 80IB(10)(D). 5.1 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFF ICER HAS CONSIDERED THE RESIDENTIAL FLAT AND COMMERCIAL PROJECT AS ONE INTEGRATED PROJE CT AND THEREBY HELD THAT THE AREA OF COMMERCIAL ESTABLISHMENT IN THE PROJECT I S MORE THAN THE LIMIT PRESCRIBED U/S 80IB(10)(D). 5.2 ON APPEAL, THE CIT(A) HELD THAT THE RESIDENTIAL AND COMMERCIAL PROJECTS ARE TOTALLY INDEPENDENT; THEREFORE, THE CLAIM CANNOT BE DISALLOWED. 6 WE FIND THAT THE LAYOUT PLAN OF THE ENTIRE BUILD ING, WHICH WAS REDEVELOPED BY THE ASSESSEE AND ASSESSEES SISTER CONCERN M/S R KASSOCIATES WAS APPROVED BY THE PUNE MUNICIPAL CORPORATION (PMC) BY ONE APPROVA L ORDER AND SUBSEQUENTLY TWO SEPARATE PROJECTS FOR RESIDENTIAL AND COMMERCI AL WAS SANCTIONED BY THE PMC. THEREFORE, THE ASSESSING OFFICER TOOK THE ENTIRE PR OJECT AS ONE AS THE LAYOUT OF THE DEVELOPMENT OF THE BUILDING WAS APPROVED BY THE PMC BY ONE APPROVAL. WITHOUT GOING INTO THE CONTROVERSY, WHETHER THE RESIDENTIA L OR COMMERCIAL PROJECT ARE TWO SEPARATE PROJECTS OR PARTS OF ONCE PROJECT, WE ARE OF THE VIEW THAT AS PER THE PRE- AMENDED PROVISIONS OF SEC. 80IB(10), THERE IS NO SU CH CONDITION OF COMMERCIAL AREA IN THE PROJECT; THEREFORE, ONCE A PROJECT HAS BEEN APPROVED PRIOR TO 1.4.2005 BY THE MUNICIPAL AUTHORITIES, THEN IN THE ABSENCE OF A NY SUCH CONDITION IN THE PROVISIONS OF SEC. 80IB(10) AS EXITS AT THE RELEVANT POINT OF TIME, THE SUBSEQUENT AMENDMENT W.E.F 1.4.2005 CANNOT BE APPLIED WITH RETROSPECTIVE EFFECT. WHEN THE AMENDMENT M/S FORTALEZA DEVELOPERS ITA NO. 4327/MUM/2010 (ASST YEAR 2007-08) 6 ITSELF TAKES EFFECT FROM 1.4.2005, THEN IT CANNOT B E PRESUMED TO BE APPLIED FROM RETROSPECTIVE EFFECT. OUR VIEW HAS BEEN SUPPORTED B Y THE DECISION OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANISATION VS ITO REPORTE D IN 115 TTJ 485(MUM). 6.1 EVEN OTHERWISE, THE LAW ON THE POINT IS VERY CL EAR THAT UNLESS PROVIDED IN THE STATUTE, THE LAW IS ALWAYS PRESUMED TO BE PROSPECTI VE IN NATURE. THE CIT(A) HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH OF THE T RIBUNAL IN THE CASE OF COMMISSIONER OF INCOME-TAX V. BRAHMA ASSOCIATES, WH ICH HAS BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN 333 ITR 289(BO M). THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD IN PARA 33 AS UNDER: IN THE RESULT, THE QUESTIONS RAISED IN THE APPEAL A RE ANSWERED THUS : (A) UP TO MARCH 31, 2005 (SUBJECT TO FULFILLING OTH ER CONDITIONS), DEDUCTION UNDER SECTION 80-IB(10) IS ALLOWABLE TO HOUSING PROJE CTS APPROVED BY THE LOCAL AUTHORITY HAVING RESIDENTIAL UNITS WITH COMME RCIAL USER TO THE EXTENT PERMITTED UNDER THE DEVELOPMENT CONTROL RULES/ REGULA TIONS FRAMED BY THE RESPECTIVE LOCAL AUTHORITY. (B) IN SUCH A CASE, WHERE THE COMMERCIAL USER PERMITT ED BY THE LOCAL AUTHORITY IS WITHIN THE LIMITS PRESCRIBED UNDER THE D EVELOPMENT CONTROL RULES/REGULATION, THE DEDUCTION UNDER SECTION 80-IB (10) UP TO MARCH 31, 2005 WOULD BE ALLOWABLE IRRESPECTIVE OF THE FACT THAT TH E PROJECT IS APPROVED AS 'HOUSING PROJECT' OR 'RESIDENTIAL PLUS COMMERCIAL'. (C) IN THE ABSENCE OF ANY PROVISIONS UNDER THE INCOME-T AX ACT, THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT UP TO MARCH 31, 2 005 DEDUCTION UNDER SECTION 80-IB(10) WOULD BE ALLOWABLE TO PROJECTS APPROVED B Y THE LOCAL AUTHORITY HAVING RESIDENTIAL BUILDING WITH COMMERCIAL USER UP TO 10 PER CENT. OF THE TOTAL BUILT-UP AREA OF THE PLOT. (D) SINCE THE DEDUCTION UNDER SECTION 80-IB(10) IS O N THE PROFITS DERIVED FROM THE HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITY AS A WHOLE, THE TRIBUNAL WAS NOT JUSTIFIED IN RESTRICTING THE SECTION 80-IB(1 0) DEDUCTION ONLY TO A PART OF THE PROJECT. HOWEVER, IN THE PRESENT CASE, SINCE TH E ASSESSEE HAS ACCEPTED THE DECISION OF THE TRIBUNAL IN ALLOWING SECTION 80 -IB(10) DEDUCTION TO A PART OF THE PROJECT, WE DO NOT DISTURB THE FINDINGS OF T HE TRIBUNAL IN THAT BEHALF. M/S FORTALEZA DEVELOPERS ITA NO. 4327/MUM/2010 (ASST YEAR 2007-08) 7 (E) CLAUSE (D) INSERTED TO SECTION 80-IB(10) WITH E FFECT FROM APRIL 1, 2005 IS PROSPECTIVE AND NOT RETROSPECTIVE AND HENCE CANNOT BE APPLIED FOR THE PERIOD PRIOR TO APRIL 1, 2005. 6.2 THEREFORE, AS PER THE PRE-MENDED PROVISIONS OF SEC 80IB(10), ONCE THE PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITIES, THEN IN THE ABSENCE OF ANY SUCH CONDITION OF COMMERCIAL AREA IN THE PROVISIONS OF SEC. 80IB(10), DEDUCTION CANNOT BE DENIED ON THIS POINT. HENCE, WE DO FIND ANY REAS ON TO INTERFERE WITH THE IMPUGNED ORDER OF THE CIT(A), QUA THIS ISSUE. 7 NOW, WE TURN TO GROUND NO.1 REGARDING DISALLOWANC E OF ADDITION OF RS. 4,33,366/-. 7.1 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. IN VIEW OF OUR FIN DING THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IB(10), THE ISSUE OF ADDITION HAS B ECOME INFRUCTUOUS AS IT BECOME REVENUE NEUTRAL. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE ALSO. 8 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 25 TH , DAY OF APRIL 2012 SD/ SD/- ( RAJENDRA SINGH ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 25 TH , APRIL 2012 RAJ* M/S FORTALEZA DEVELOPERS ITA NO. 4327/MUM/2010 (ASST YEAR 2007-08) 8 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI