Gupta Arun Ramsharan, V. ACIT Cir 9,

ITA 435/PUN/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7648 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 15-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A S SINGH
• Assessee Lawyers: V K GUJARATHI
• Keywords: Opportunity of being heard; Retrospective amendment; Set aside
• Section: 80IB; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 435 /PN/200 9 ( ASSTT. YEAR : 200 4 - 05 ) GUPTA ARUN RAMSHARAN, 312/27, PCNTDA, NIGDI, PUNE 411044 PAN : NOT AVAILABLE .. APPELLANT V. ACIT, CIR 9, PUNE . RESPONDENT APPELLANT BY : SHRI V.K. GUJARATHI RESPONDENT BY : SHRI A.S. SINGH ORDER PER I.C. SUDHIR J M THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE IN THE APPEAL : 1) THE HONOURABLE C IT(APPEALS) III, PUNE PASSED APPEAL ORDER E X - PARTE WITHOUT GIVING THE PROPER OPPORTUNITY OF HEARING TO THE APPELLANT. THE APPELLANT HEREBY PRAYS THAT THE ORDER MAY PLEASE BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. 2) ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE AND IN LAW, THE HONOURABLE COMMISSIONER OF INCOME TAX (APPEAL ) III PUNE ERRED IN CONFIRMING THE DISALLOWANCE OF THE DEDUCTION OF RS. 40,90,615/ - CLAIMED UNDER SECTION 80IB(10) OF INCOME TAX ACT 1961 WITHOUT APPRECIATING THE FACTS OF THE CASE IN PROPER PROSPECTIVE. THE APPELLANT PRAYS THAT THE CLAIM OF DEDUCTION MAY PLEASE BE GRANTED. GROUND NO. 1 2. AT THE TIME OF HEARING OF THE APPEAL, THE LD. A.R. SUBMITTED THAT THE ASSESSEE DOES NOT WISH TO PRESS GROUND NO. 1. THE GROUND NO. 1 IS, ACCORDINGLY, REJECTED AS NOT PRESSED. ITA NO 435 /PN/200 9 GUPTA ARUN RAMSHARAN.. A.Y. 2004 - 05 PAGE OF 7 2 GROUND NO. 2 3. AT THE OUTSET OF HEARING, THE LD. A.R. SUBMITTED THAT THE ISSUE RAISED IN THE GROUND IS FULLY COVERED BY THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BRA H MA ASSOCIATES V/S. JC IT & OTHERS, 119 ITD 255 (SB)(PUNE), (ITA NO. 1417/PN/2006 AND OTHERS, A.Y. 2003 - 04), ORDER DT. 6 TH APRIL 2009. HE ALSO POINTED OUT THAT TOTAL AREA OF THE PLOT B IS 1.059 ACRE WHEREIN BUILT UP RESIDENTIAL AREA IS 96.11% AND COMMERCIAL IS 3.89% OF THE TOTAL AREA. 4. THE LD. D.R., ON THE OTHER HAND, TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BRA H MA ASSOCIATES V /S. JCIT (SUPRA), WE FIND THAT THE ISSUE RAISED IN GROUND NO. 2 BEFORE US IS FULLY COVERED BY THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BRAMHA ASSOCIATES (SUPRA). THE RELEVANT FACTS IN THE PRESENT CASE ARE THAT THE A.O DISALLOWED THE AS SESSEES CLAIM OF DEDUCTION U/S. 80IB (10) ON THE GROUND OF INCLUSION OF COMMERCIAL AREA IN THE HOUSING PROJECT. THE A.O, DID NOT ALLOW EVEN PROPORTIONATE DEDUCTION IN RESPECT OF THE FLAT SOLD DURING THE YEAR. THE ASSESSEE IS A PROMOTER AND DEVELOPER, CARRYING ON THE BUSINESS OF BUILDING CONSTRUCTION SCHEME BY NAME ARUN PARK AT DATTANAGAR, THERGAON. UNDER THIS PROJECT, ONE SCHEME WAS COMMERCIAL COMPLEX AND THE OTHER SCHEME WAS A RESIDENTIAL COMPLEX. THE ASSESSEE CLAIMED DEDUCTION U/S. 80IB(10) OF RS . 40,90,614/ - AND RS. 1,75,35,572/ - IN RESPECT OF THE PROFITS EARNED FROM THE SCHEME RESDENTIAL COMPLEX IN A.Y. 2004 - 05 AND A.Y. 2005 - 06 RESPECTIVELY. ITA NO 435 /PN/200 9 GUPTA ARUN RAMSHARAN.. A.Y. 2004 - 05 PAGE OF 7 3 WE ARE CONCERNED WITH A.Y. 2004 - 05 UNDER CONSIDERATION. THE A.O ON GOING THROUGH THE PLAN AND DETAILS SUBMITTED BY THE ASSESSEE, NOTICED THAT THE RESIDENTIAL COMPLEX INCLUDED SOME COMMERCIAL AREA ALSO. HE, ACCORDINGLY, OBSERVED THAT THE RESIDENTIAL COMPLEX WAS ACTUALLY NOT A RESIDENTIAL PROJECT, BUT A RESIDENTIAL AND COMMERCIAL PROJECT. HE, ACCORDINGLY, DISALLOWED ASSESSEES CLAIM OF DEDUCTION U/S. 80IB (10). THE A.O. FURTHER NOTED THAT THE LOCAL AUTHORITY APPROVED THE BUILDING PLANS IN RESPECT OF COMMERCIAL COMPLEX ON PLOT - A AND RESIDENTIAL COMPLEX ON PLOT - B ON 13.8.2004 AND HAD GIVEN ONE COMMON COMMEN CEMENT CERTIFICATE FOR BOTH THE PLOTS. THEREFORE, ACCORDING TO HIM, PLOT A & PLOT B CONSTITUTED ONE SINGLE PROJECT HAVING TOTAL COMMERCIAL AREA OF 7523 SQ.FT. THE A.O HELD THAT COMMERCIAL AREA OF THE PROJECT EXCEEDED THE LIMIT PRESCRIBED UNDER THE PROVISIONS OF 80IB(10) AND THE SAME HAS VIOLATED THE CONDITION NECESSARY FOR ALLOWING DEDUCTION U/S. 80IB(10). 6. THUS, THE ABOVE ACTION OF THE A.O WAS QUESTIONED BEFORE THE LD CIT(A) MAINLY ON THE GROUND THAT THE AMENDMENT BROUGHT IN BY FINANCE ACT, 20 04 IN SECTION 80IB(10) WAS NOT APPLICABLE RETROSPECTIVELY IN RESPECT OF HOUSING PROJECT, THE BUILDING PLAN OF WHICH WAS SANCTIONED BEFORE 31 ST MARCH 2004 AND SECONDLY, THE TERM HOUSING PROJECT WAS NOT DEFINED BEFORE 31 ST MARCH 2004. IN ALTERNATIVE, IT WAS ALSO ARGUED THAT THE SHOPPING AREA OF THE PROJECT WAS LESS THAN 5% OF THE AGGREGATE BUILT - UP AREA OF THE PROJECT. IT WAS ALSO ARGUED THAT PLOT A AND PLOT B ARE PROPERLY SUB - DIVIDED BY THE CONCERNED AUTHORITY AND EVEN THOUGH, THE LOCAL AUTHORITY HAS GIVEN ONE COMMEN COMMENCEMENT CERTIFICATE, IT IS CLEAR FROM THE BUILDING PLANS THAT BOTH THE PROJECTS ARE SEPARATE. ITA NO 435 /PN/200 9 GUPTA ARUN RAMSHARAN.. A.Y. 2004 - 05 PAGE OF 7 4 7. THE LD CIT(A) DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE. HE HELD THAT AMBIGUITY ON ACCOUNT OF DIFFERENT INTERPRETATION MADE BY VARIOUS FORUMS WITH REGARD TO THE TERM HOUSING PROJECT HAS BEEN WIPED OUT BY AMENDING SUB - SECTION 10 OF SECTION 80IB WHICH LAYS DOWN THAT HOUSING PROJECT IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB(10) IF THE BUILT UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT EXCEEDS FIVE PERCENT OF THE AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQ.FT. WHICHEVER IS LESS. THE AMENDMENT HAS BEEN BROUGHT ON STATUTE BY FINANCE ACT, 2004 W.E.F. 1.4.2005. THE LD CIT(A) HELD THAT SINCE THE AMENDMENT IN THE SECTION W.E.F. 1.4.2005 IS CLARIFICATORY IN NATURE, HENCE IT IS APPLICABLE WITH RETROSPECTIVE EFFECT. IN THIS REGARD, HE TOOK SUPPORT OF SEVERAL DECISIONS OF HONBLE COURTS. HE, ACCORDINGLY, UPHELD THE ACTION OF THE A.O IN NOT ALLOWING THE CLAIMED DEDUCTION. THE LD CIT(A) HAS ALSO UPHELD THE ACTION OF THE A.O IN NOT ALLOWING THE DEDUCTION ON ACCOUNT OF THE FACT THAT PROJECT IS NOT ON A PLOT OF LAND WHICH HAS MINIMUM AREA OF ONE ACRE, HENCE NECESSAR Y CONDITION FOR ELIGIBILITY OF DEDUCTION IS NOT FULFILLED. AN IDENTIAL ISSUE UNDER SIMILAR RELEVANT FACTS WAS RAISED BEFORE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BRA H MA ASSOCIATES V/S. JCIT (SUPRA) WHEREIN DECISION HAS BEEN SUMMARIZED IN PARA N O. 130 OF THE ORDER. FOR A READY REFERENCE, PARA NO. 130 IS BEING REPRODUCED HEREUNDER : 130. TO SUM UP, THE CONCLUSIONS ARRIVED AT BY THIS SPECIAL BENCH ARE AS FOLLOWS : (A) THE DEDUCTION UNDER SECTION 80 IB (10), AS APPLICABLE PRIOR TO 1 ST APRIL 200 5, SUBJECT TO AND IN THE LIGHT OF THE OBSERVATIONS MADE IN THE PRECEDING PARAGRAPHS, IS ADMISSIBLE IN CASE OF A HOUSING PROJECT COMPRISING RESIDENTIAL HOUSING UNITS AND COMMERCIAL ESTABLISHMENTS. ITA NO 435 /PN/200 9 GUPTA ARUN RAMSHARAN.. A.Y. 2004 - 05 PAGE OF 7 5 IN CASE THESE PROJECTS ARE APPROVED AS HOUSING PROJECTS BY THE LOCAL AUTHORITY, SUCH AN APPROVAL AS HOUSING PROJECT IS SUFFICIENT FOR THE PURPOSES OF ELIGIBILITY. IN ANY OTHER CASE, WHERE 90% OR MORE OF THE TOTAL BUILT UP AREA IS USED FOR DWELLING UNITS, IN ACCORDANCE WITH THE SCHEME OF SECTION 80 IB(10), THE BENEFIT OF DEDUCTION UNDER SECTION 80 IB(10), WILL NOT BE DECLINED. IN CASE COMMERCIAL USE OF BUILT UP AREA IS MORE THAN 10% BUT THE RESIDENTIA L SEGMENT OF THE PROJECT SATISFIES REQUIREMENTS OF SECTION 80 IB(10) ON 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 SATISFY CONDITION OF CLAUSE (C) OF THE PROVISION, AND (III) OTHER NECESSARY CONDITIONS ARE FULFILLED, AND WHERE INCOME FROM CONSTRUCTION OF RESIDENTIAL DWELLING UNITS CAN BE WORKED OUT ON STANDALONE BASIS, DEDUCTION UNDER SECTION 80 IB (10) WILL BE AVAILABLE IN RESPECT OF RESIDENTIAL SEGMENT OF THE PROJECT. (B) THE DEDUCTION UNDER SECTION 80IB(10) IS AVAILABLE IN RESPECT OF PROFITS OF HOUSING PROJECT AS A WHOLE, AND, AS SUCH, IT IS NOT RELEVANT AS TO WHAT IS THE PORTION OF PROFITS WHICH CAN BE SAID TO BE ATTRIBUTABLE TO RESIDENTIAL UNITS. THIS IS SUBJECT TO THE RIDER THAT IN CASE COMMERCIAL USE OF BUILT UP AREA IN A PROJ ECT IS MORE THAN 10% AND, FOR THIS REASON THE PROJECT CAN NOT BE SAID TO BE A PREDOMINANTLY HOUSING PROJECT, BUT, IN TERMS OF OBSERVATIONS MADE IN PARAGRAPH 115 ABOVE, THE ASSESSEE IS ENTITLED TO DEDUCTION IN RESPECT OF RESIDENTIAL UNIT SEGMENT OF THE OVE RALL PROJECT ON FULFILLMENT OF NECESSARY CONDITIONS, THE ENTITLEMENT OF INCENTIVE DEDUCTION WILL BE CONFINED TO ONLY TO THE PROFITS TO THE RESIDENTIAL SEGMENT OF THE OVERALL PROJECT. (C) THE LIMIT ON COMMERCIAL USE OF BUILT UP AREA AS PRESCRIBED BY CLAU SE (D) OF SECTION 80 IB (10) HAS NO RETROSPECTIVE APPLICATION, AND IT APPLIES ONLY W.E.F. THE ASSESSMENT YEAR 2005 - 06. ITA NO 435 /PN/200 9 GUPTA ARUN RAMSHARAN.. A.Y. 2004 - 05 PAGE OF 7 6 8. WE THUS RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BRAHMA ASSOCITATES V/S. JCTI , HOLD THAT THE DEDUCTION U/S. 80 IB(10) AS APPLICABLE PRIOR TO 1.4.2005, SUBJECT TO AND IN THE LIGHT OF THE OBSERVATIONS MADE IN THE DECISION OF THE SPECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) IS ADMISSIBLE IN CASE OF A HOUSING PROJECT C OMPRISING RESIDENTIAL HOUSING UNIT AND COMMERCIAL ESTABLISHMENTS, AND CONSEQUENTLY, THE LIMIT ON COMMERCIAL USE OF BUILT UP AR EA AS PRESCRIBED BY CLAUSE (D) OF SECTION 80 IB (10) HAS NO RETROSPECTIVE APPLICATION AND IT APPLIES ONLY W.E.F. A.Y. 2005 - 06. W E, THUS, SET ASIDE THE MATTER TO THE FILE OF LD CIT(A) TO DECIDE THE ISSUE RAISED IN GROUND NO. 2 UNDER CONSIDERATION IN VIEW OF THE DECISION OF SPECIAL BENCH IN THIS REGARD IN THE CASE OF BRAHMA ASSOCIATES V/S. JCIT (SUPRA) AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE PARTIES. THE GROUND IS THUS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 21ST JANUARY 201 1 . SD/ - SD/ - ( D. KARUNA KARA RAO ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE , DATED THE 21ST JANUARY , 20 1 1 US COPY OF THE ORDER IS FORWARDED TO : 1. THE A PPELLANT 2. THE RESPONDENT 3. THE CIT V , PUNE 4. THE CIT(A) - I I I , PUNE 5. THE D.R. B BENCH, PUNE ITA NO 435 /PN/200 9 GUPTA ARUN RAMSHARAN.. A.Y. 2004 - 05 PAGE OF 7 7 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE