ITO 12(3)4, MUMBAI V. VARDHAN BUILDERS, MUMBAI

ITA 4635/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101211 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 13-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY C KOTHARI
• Keywords: Retrospective amendment; Competent authority

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.4635/MUM/2013 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER-12(3)(4), ROOM NO.123, 1 ST FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S VARDHAN BUILDERS, 422, COMMERCE HOUSE, 140, NAGINDAS MASTER ROAD, MUMBAI-400023 ( / REVENUE) ( !' # /ASSESSEE) PAN. NO. AAAFV0694B / REVENUE BY SHRI CHANDIP SINGH -DR !' # / ASSESSEE BY SHRI VIJAY C KOTHARI $ % & # ' / DATE OF HEARING : 06/10/2015 & # ' / DATE OF ORDER: 28/10/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 14/03/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO A LLOWING DEDUCTION U/S 80IB(10) OF THE ACT WHEN THERE IS NO COMPLIANCE OF THE REQUIREMENT OF THE PROVISION OF T HE ACT IN M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 2 SOME FLATS, THE BUILT UP AREA WAS MORE THAN THE STI PULATED CONDITION OF 1,000 SQ. FT. 2. DURING HEARING, THE LD. DR, ADVANCED HIS ARGUMENTS WHICH ARE BROADLY IDENTICAL TO THE GROUND RAISED BY CONTENDING THAT AREA OF SOME OF THE FLATS IS MOR E THAN 1,000 SQ. FT. WHICH CAME TO LIGHT PURSUANT TO SURVE Y CARRIED OUT BY THE DEPARTMENT. OUR ATTENTION WAS INVITED T O PARA 11.6 (PAGE-26) OF THE IMPUGNED ORDER. 2.1. ON THE OTHER HAND, THE LD. COUNSEL FOR THE AS SESSEE , DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER BY CONTENDING THAT SURVEY WAS CARRIED OUT IN THE YEAR 2006, WHEN THE WORK WAS IN PROGRESS, WHEREIN, EVERYTHING WAS FOUND IN ORDER. IT WAS PLEADED THAT SECOND SURVEY WAS CARRIED OUT ON 01/12/2011, WHEN CERTAIN DISCREPANCI ES WERE POINTED OUT WITH RESPECT TO AREA OF FEW FLATS. IT WAS ASSERTED THAT THE ASSESSEE COMPLETED THE PROJECT ON 28/03/20 08 FOR WHICH COMPLETION/OCCUPANCY CERTIFICATE WAS ISSUED T O THE ASSESSEE BY THE COMPETENT AUTHORITY BY FURTHER CLAI MING THAT THE ENTIRE BUILDING WAS SOLD UP TO 2011, THEREFORE, IF ANY, MERGER OF FLATS WAS DONE BY THE OCCUPANTS THEMSELVE S, THE ASSESSEE CANNOT BE HELD LIABLE AS THE ASSESSEE WAS NOT HAVING ANY CONTROL OVER THE FLATS. RELIANCE WAS PLACED UPO N THE DECISION IN HAWARE CONSTRUCTION PVT. LTD. VS ITO 6 4 DTR 251 (MUM. TRIB.), EMGEEN HOLDINGS PVT. LTD. VS DCIT 47 SOT 98 (MUM. TRIB.) AND IN DCIT VS MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION COMPANY ITA NO.822/PN/20 11. IN REPLY, THE LD. DR, PLACED HEAVY RELIANCE UPON TH E M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 3 ADVERTISEMENT AND THE ADDITION MADE BY THE ASSESSIN G OFFICER. 2.2. WE ARE USEFULLY REPRODUCING HEREUNDER CERTAIN FINDINGS/CONCLUSIONS FROM THE DECISION FROM PUNE BE NCH OF THE TRIBUNAL IN THE CASE OF CIT VS MAGARPATTA TOWNS HIP & DEVELOPMENT CONSTRUCTION COMPANY (ITA NO.822/PN/201 1) ORDER DATED 18/09/2012 FOR READY REFERENCE AND ANAL YSIS: WE FIND THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. VANDANA PROPERTIES [ITA.NO.3633 OF 2009 WITH ITA.NO.4361/2010] HAS OBSERVED AS UNDER: 17. THE FIRST QUESTION TO BE CONSIDERED HEREIN IS, WHETHER, IN THE FACTS OF THE PRESENT CASE, CONSTRUCTION OF E BUILDING CONSTITUTES BUILDING A HOUSING PROJECT UNDER SECT ION 80IB(10) OF THE ACT. 18. THE EXPRESSION HOUSING PROJECT IS NEITHER DEF INED UNDER SECTION 2 OF THE ACT NOR UNDER SECTION 80IB(10) OF THE ACT. EVEN UNDER THE MUMBAI MUNICIPAL CORPORATION ACT, 19 88 AS ALSO UNDER THE DEVELOPMENT CONTROL REGULATIONS FOR GREATER MUMBAI, 1991, THE EXPRESSION HOUSING PROJECT IS N OT DEFINED. THEREFORE, THE EXPRESSION HOUSING PROJECT IN SECT ION 80IB(10) WOULD HAVE TO BE CONSTRUED AS COMMONLY UNDERSTOOD. 19. AS RIGHTLY CONTENDED BY MR.INAMDAR, LEARNED SEN IOR ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE AND MR .MISTRI, LEARNED SENIOR ADVOCATE AND MR.JOSHI, LEARNED ADVOC ATE APPEARING ON BEHALF OF THE INTERVENORS, THE EXPRESS ION HOUSING PROJECT IN COMMON PARLANCE WOULD MEAN CONSTRUCTING A BUILDING OR GROUP OF BUILDINGS CONSI STING OF SEVERAL RESIDENTIAL UNITS. IN FACT, THE EXPLANATION IN SECTION 80IB(10) SUPPORTS THE CONTENTION OF THE ASSESSEE TH AT THE APPROVAL GRANTED TO A BUILDING PLAN CONSTITUTES APP ROVAL GRANTED TO A HOUSING PROJECT. THEREFORE, IT IS CLEA R THAT M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 4 CONSTRUCTION OF EVEN ONE BUILDING WITH SEVERAL RESI DENTIAL UNITS OF THE SIZE NOT EXCEEDING 1000 SQUARE FEET (E BUI LDING IN THE PRESENT CASE) WOULD CONSTITUTE A HOUSING PROJECT UNDER SECTION 80IB(10) OF THE ACT. 22.1. WE FIND THAT THE PUNE BENCH IN THE CASE OF DC IT VS. ADITYA DEVELOPERS [ITA.NO.791 & 792/PN/2008] HAS OB SERVED AS UNDER: 6.1. LIKEWISE, IN THE CASE OF VANDANA PROPERTIES VS. ACIT (SUPRA), THE MUMBAI BENCH OF THE TRIBUNAL HAS DECID ED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THAT CASE, THE ASSESSEE HAD PLAN FOR 4 INDEPENDENT BUILDINGS A, B, C & D BUT, SO FAR AS E IS CONCERNED ONLY PLANNED WHEN THE STATUS OF THE SURPLUS LAND WAS CONVERTED AS WITHIN CEILING LIMIT AND THE ASSESSEE COULD GET ADDITIONAL FSI FOR LAUNCHING WIN G E, WING E WAS PLANNED AND CONSTRUCTION WAS COMMENCED AFTER 1ST OCTOBER 1998 AND BUILDING/WING E WAS AN INDEP ENDENT HOUSING PROJECT AS CONTEMPLATED U/S.80IB(10). THE T RIBUNAL HELD THAT THE CONCEPT OF HOUSING PROJECT DOES NOT M EAN THAT SHOULD BE THE GROUP OF BUILDINGS AND ONLY THEN SAME IS CALLED A HOUSING PROJECT. IT WAS FURTHER HELD THAT BUILD ING/WING E CANNOT BE PASSED WITH EARLIER BUILDINGS, I.E., A, B , C & D WHICH WORK WAS COMMENCED IN THE YEAR 1993 WHEREAS P LAN FOR WING E WAS APPROVED FOR ONLY ONCE IN THE YEAR 200 2. IT WAS HELD FURTHER THAT THE CONCLUSION DRAWN BY THE AUTHO RITIES BELOW THAT THE COMMENCEMENT OF WING E IS A CONTINUATION OF THE EXISTING PROJECT IS ERRONEOUS. 22.2. WE ALSO FIND THAT THE PUNE BENCH IN THE CASE OF RAHUL CONSTRUCTION CO. VS. ITO [ITA.NO.1250/PN/09 & 707/PN/2010] HAS OBSERVED AS UNDER: 10. IN VIEW OF ABOVE DISCUSSION, WE COME TO THE C ONCLUSION THAT FOR VERIFICATION OF ELIGIBILITY OF BENEFIT CLA IMED U/S. 80 IB (10) OF THE ACT BY THE ASSESSEE ON BUILDINGS A1 TO A5 IN ATUL NAGAR AND BUILDINGS B1 TO B6 IN RAHUL NISARG CO- OPERATIVE HOUSING SOCIETY LTD., THE ASSESSING AUTH ORITY HAS TO VERIFY AS TO WHEN THE BUILDING PLANS FOR THESE B UILDINGS WERE FIRSTLY APPROVED BY THE LOCAL AUTHORITY AND TAKING THE SAID DATE M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 5 OF APPROVAL A STARTING POINT, HE HAS TO VERIFY AS T O WHETHER THESE BUILDINGS WERE COMPLETED WITHIN THE PRESCRIBE D TIME LIMIT I.E. 31ST MARCH 2008 ON THE BASIS OF THE COMP LETION CERTIFICATE IN RESPECT OF SUCH HOUSING PROJECT ISSU ED BY THE PMC. WHEN WE EXAMINE THE FACTS OF THE PRESENT CASE UNDER THE ABOVE BACKGROUND, WE FIND THAT THE AUTHORITIES BELO W HAVE NOT DISPUTED THE FACT FURNISHED IN THIS REGARD BY THE A SSESSEE THAT UNDER THE PROJECT ATUL NAGAR CONSISTING OF BUILDI NGS A1 TO A5, THE FIRST BUILDING PLAN FOR A TYPE WAS APPROVED BY THE PMC ON 29.4.2003 VIDE COMMENCEMENT CERTIFICATE NO. 4269 (PAGE NO. 4 OF THE PAPER BOOK). HOWEVER, ACTUAL CON STRUCTION OF A TYPE BUILDING WAS EXECUTED AS PER THE REVISED PLAN VIDE NO. C.C. 4101/27/6/2003 (PAGE NO. 5 OF THE PAPER BO OK). THE SIZE OF THE PLOT ON WHICH THE A TYPE BUILDING I.E. A1 TO A6 HAVE BEEN CONSTRUCTED IS 1,39,466 SQ.FT. THE PROJECT A T YPE BUILDING I.E. A1 TO A5 CONSISTS OF 360 RESIDENTIAL UNITS AN D THE CONSTRUCTION HAS BEEN COMPLETED BETWEEN 10.1.2005 T O 31.8.2005 (PAGE NOS. 6 TO 9 OF PAPER BOOK). THE AUT HORITIES BELOW HAVE ALSO NOT DISPUTED THIS MATERIAL FACT THA T RESIDENTIAL UNITS HAS A MAXIMUM BUILT UP AREA OF 1500 SQ.FT. LI KEWISE, THESE MATERIAL FACTS THAT B GROUP BUILDINGS IN RAH UL NISARG COOPERATIVE HOUSING SOCIETY LTD., HAVE BEEN CONSTR UCTED ON LAND AREA OF 138203 SQ.FT., HAS NOT BEEN DENIED BY THE AUTHORITIES BELOW. THEY HAVE ALSO NOT DENIED THESE MATERIAL FACTS THAT THE FIRST BUILDING PLAN WAS SANCTIONED O N 29.4.2003 VIDE COMMENCEMENT CERTIFICATE NO. 4269 ISSUED BY TH E PMC (PAGE NO. 16 OF THE PAPER BOOK). THE OTHER MATERIAL FACTS LIKE ACTUAL CONSTRUCTION WAS EXECUTED AS PER THE REVISED PLAN SANCTION ON 20TH MARCH 2004 VIDE CC NO. 2225 (PAGE NO. 17), THE PROJECT CONSISTS OF 396 FLATS AND CONSTRUCTION OF THESE FLATS HAVE BEEN COMPLETED ON 14.7.2006 AS PER THE COMPLET ION CERTIFICATE ISSUED BY THE PMC (PAGE NOS. 13 TO 18 O F PAPER BOOK) ARE NOT IN DISPUTE. THE AUTHORITIES BELOW HAV E ALSO NOT DENIED THAT BUILT UP AREA OF EACH OF THESE FLATS DO ES NOT EXCEED 1500 SQ.FT. IT IS ALSO NOT IN DISPUTE THAT BOTH THE PROJECTS ARE ENTIRELY A RESIDENTIAL PROJECT AND THERE IS NO COMM ERCIAL AREA THEREIN. UNDER THE ABOVE CIRCUMSTANCES, WE ARE OF T HE VIEW M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 6 THAT THE ASSESSEE IS VERY MUCH ENTITLED TO THE CLAI MED DEDUCTION U/S. 80 IB (10) OF THE ACT ON THE BUILDIN GS A1 TO A5 IN ATUL NAGAR AND BUILDINGS B1 TO B6 IN RAHUL NI SARG COOPERATIVE HOUSING SOCIETY LTD. THE ISSUE IS THER EFORE DECIDED IN FAVOUR OF THE ASSESSEE. WE THUS WHILE SE TTING ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THE ISSUE, D IRECT THE A.O TO ALLOW THE CLAIMED DEDUCTION U/S. 80 IB(10) IN QU ESTION. THE RELATED GROUNDS ARE ACCORDINGLY ALLOWED. 11. IN RESULT, APPEAL IS ALLOWED. 22.3. WE FIND THAT ITAT MUMBAI BENCH IN THE CASE OF MUDHIT MADANLAL GUPTA VS. ACIT [51 DTR 271(MUM)(TRIB)] HAS OBSERVED AS UNDER: DEDUCTION UNDER S.80-IB INCOME FROM DEVELOPING AND BUILDING HOUSING PROJECT CONDITIONS PRECEDENT A SSESSEE ENGAGED IN CONSTRUCTION BUSINESS ENTERED INTO A JOI NT DEVELOPMENT AGREEMENT FOR CONSTRUCTION OF RESIDENTI AL FLATS TOTAL PLOT MEASURED APPROXIMATELY 7633.82SQ.MTRS. DEDUCTION WAS DENIED BY AO ON THE GROUNDS THAT (I) ASSESSEE HAD COMPLETED ONLY A, B AND C WINGS UPTO 31ST MARCH , 2008 AND D WING WAS NOT COMPLETED (II) TOTAL PROJECT ARE A WAS 1.88 ACRES AND SINCE ASSESSEES SHARE WAS ONLY 51 PER CE NT OF THE BUILT-UP AREA, THE PROJECT AREA WAS OF LESS THAN ON E ACRE AND (III) IN SOME OF THE FLATS UNITS AREA EXCEEDED 1000 SQ.FT. NOT JUSTIFIED CIT(A) WAS SATISFIED THAT EACH UNIT OF THE RESIDENTIAL FLAT IN ALL THE THREE WINGS WAS LESS THAN 1000 SQ.F T. AND SOME OF THOSE FLATS WERE LATER CONVERTED BY THE BUYERS BY J OINING THE SAME WHEREVER THE BUYERS HAD PURCHASES MORE THAN ON E UNIT AND SINCE REVENUE HAS NOT FILED ANY CROSS-OBJECTION AGAINST THIS FINDING, THE SAME HAS BECOME FINAL AND BINDING ON THE REVENUE INDEPENDENT UNITS ARE RESIDENTIAL UNITS A ND HAVE TO BE TREATED AS SEPARATE HOUSING PROJECTS FOR THE PUR POSE OF DEDUCTION UNDER S.80-IB(10) AS LONG AS THEY FULFIL THE OTHER CONDITIONS PRESCRIBED UNDER THE ACT THERE IS NO R EQUIREMENT THAT SUCH UNDERTAKING OF ASSESSEE SHOULD BE THE OWN ER OF SUCH LAND ASSESSEE IS A DEVELOPER OF THE WHOLE OF THE PROJECT AND, THEREFORE, THE SHARE COULD NOT BE ALLOCATED ONLY IN TERMS OF 51 M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 7 PER CENT OF THE LAND AREA BECAUSE THE WHOLE PROJECT IS DEVELOPED AND CONSTRUCTED BY THE ASSESSEE AND 49 PE R CENT SHARE IS GOING TO THE LAND OWNERS IN RESPECT OF THE LAND COST AREA UNDER THE PROJECT WAS ABOUT 7000 SQ.MTRS. WHIC H WAS MEANT FOR DEVELOPMENT AND WHICH IS MORE THAN ONE AC RE AND, THEREFORE, DEDUCTION CANNOT BE DENIED ON THIS GROUN D ASSESSEE WAS THEREFORE ENTITLED TO DEDUCTION UNDER S.80- IB(10). 22.4. WE FIND THAT ITAT BANGALORE BENCH IN THE CASE OF DY.CIT VS. BRIGADE ENTERPRISES (P) LTD. [119 TTJ 26 9 (BANG.)] HAS OBSERVED AS UNDER: DEDUCTION UNDER S.80-IB INCOME FROM DEVELOPING A ND BUILDING HOUSING PROJECT DIFFERENT UNITS OF A GRO UP PROJECT WHERE SOME OF THE RESIDENTIAL UNITS IN A BIGGER HOU SING PROJECT, TREATED INDEPENDENTLY, ARE ELIGIBLE FOR RE LIEF UNDER S.80-IB(10), RELIEF SHOULD BE GIVEN PRO RATA AND SH OULD NOT BE DENIED BY TREATING THE BIGGER PROJECT AS A SINGLE U NIT, MORE SO, WHEN ASSESSEE OBTAINED ALL SANCTIONS, PERMISSIONS A ND CERTIFICATES FOR SUCH ELIGIBLE UNITS SEPARATELY A SSESSEE UNDERTOOK A DEVELOPMENT PROJECT IN AN AREA OF 22 AC RES 19 GUNTAS CONSISTING OF 5 RESIDENTIAL BLOCKS, ROW HOUS ES, OAK TREE PLACE, A CLUB, A COMMUNITY CENTRE, A SCHOOL AND A P ARK AND CLAIMED DEDUCTION UNDER S.80-IB(10) IN RESPECT OF T WO RESIDENTIAL UNITS ONLY WHICH IF TAKEN SEPARATELY, W ERE ELIGIBLE FOR THE RELIEF AO TREATED THE ENTIRE PROJECT AS A SINGLE UNIT AND DENIED RELIEF UNDER S.80-IB IN ENTIRETY CIT(A ) ALLOWED RELIEF UNDER S.80-IB(10) TREATING THE SAID TWO UNIT S AS INDEPENDENT UNITS JUSTIFIED MATERIAL ON RECORD SHOWED THAT THE VARIOUS LOCAL AUTHORITIES DULY INSPECTED THE PL OT AND SANCTIONED PLAN FOR EACH OF THE BLOCKS SEPARATELY GROUP HOUSING APPROVAL WAS APPROVAL OF A MASTER PLAN AS A CONCEPT FURTHER, THE USE OF THE WORDS RESIDENTIAL UNIT IN CL.(C) OF S.80- IB(10) MEANS THAT DEDUCTION SHOULD BE COMPUTE D UNIT- WISE THEREFORE, IF A PARTICULAR UNIT SATISFIES TH E CONDITION OF S.80-IB, THE ASSESSEE IS ENTITLED FOR DEDUCTION AND IT SHOULD BE DENIED IN RESPECT OF THOSE UNITS ONLY WHICH DO NOT SATISFY THE M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 8 CONDITIONS AGAIN, THE ACCOUNTING PRINCIPLES WOULD ALSO MANDATE RECOGNITION OF PROFITS FROM EACH UNIT SEPAR ATELY. 23. AS REGARDS THE TWO FLATS COMBINED IN BUILDING I , IT IS SUBMITTED THAT THE FLATS ARE COMBINED BY THE CUSTOM ERS. THE ASSESSEE HAS RECEIVED COMPLETION CERTIFICATE INDEPE NDENTLY FOR THE TWO UNITS AND THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN CALCULATING THE BUILT UP AREA BY COMBI NING THE TWO UNITS. THE ASSESSEE SUBMITS THAT IF UNITS ARE COMBI NED BY THE CUSTOMERS, THE BUILT UP AREA SHOULD BE COMPUTED IND EPENDENTLY AND THE ASSESSEE CANNOT BE DENIED THE DEDUCTION. FO R THIS PROPOSITION, THE ASSESSEE PLACES RELIANCE ON THE FO LLOWING DECISIONS A. HAWARE CONSTRUCTIONS PVT. LTD. [64 DTR 251 (MUM) ] B. EMGEEN HOLDINGS P. LTD. VS. DCIT [ITA.NO.3594 & 3595/MUM/09] C. DCIT VS. ARCADE BHOOMI ENTERPRISES [ITA.NO.366/M UM/10] 23.1. WE FIND THAT THE ITAT MUMBAI BENCH IN THE CAS E OF HAWARE CONSTRUCTIONS (P) LTD. VS. ITO (2011) 64 DTR (MUM)(TRIB) 251, HAS HELD AS UNDER: DEDUCTION UNDER S. 80-IB - INCOME FROM DEVELOPING AND BUILDING HOUSING PROJECT-BUILT UP AREA EXCEEDING 1, 000 SQ. FT.- BUILT-UP AREA OF EACH FLAT AS APPROVED BY CIDCO IS LESS THAN 1,000 SQ. FT. AS PER THE APPROVED PLAN AND THE ASSE SSEE HAS SOLD EACH FLAT UNDER SEPARATE AGREEMENTS AND NOT SO LD TWO FLATS BY COMBINING THEM TOGETHER AS ONE FLAT TO ONE PARTY FURTHER, THERE IS NO EVIDENCE ON RECORD TO SUGGEST THAT THE ASSESSEE HAS DRAWN THE PLAN IN SUCH A MANNER THAT E ACH RESIDENTIAL UNIT IS SHOWN AS SMALLER THAN 1,000 SQ. FT. MERELY TO GET THE BENEFIT OF DEDUCTION UNDER S. 80-IB(10)-IT IS ALSO NOT THE CASE OF THE REVENUE THAT EACH FLAT IN THE HOUSI NG PROJECT COULD NOT HAVE BEEN USED AS AN INDEPENDENT OR AS A SELFCONTAINED RESIDENTIAL UNIT AND THAT THERE WOULD BE A COMPLETE HABITABLE RESIDENTIAL UNIT ONLY IF TWO OR MORE FLATS ARE JOINED TOGETHER-THEREFORE, MERELY BECAUSE SOME OF THE PURCHASERS HAVE PURCHASED MORE THAN ONE FLAT AND CO MBINED M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 9 THE SAME, ASSESSEE'S CLAIM FOR DEDUCTION UNDER S. 8 0-IB(10) CANNOT BE DISALLOWED-FURTHER, THE CONDITION THAT N OT MORE THAN ONE RESIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO ONE PERSON NOT BEING AN INDIVIDUAL HAS BEEN INSERTE D BY FINANCE (NO.2) ACT, 2009, W.E.F. 1ST APRIL, 2010, A ND HENCE, IT IS NOT APPLICABLE TO THE FACTS OF THE CASE. 23.2. WE FIND THAT THE ITAT MUMBAI BENCH IN THE CAS E OF EMGEEN HOLDINGS P. LTD. VS. DCIT IN ITA.NO.3594 & 3595/MUM/09, HAS OBSERVED AS UNDER: 7. WE FIND THAT THE DEDUCTION U/S.80IB(10) HAS BEE N DECLINED BY THE ASSESSING OFFICER ON THE GROUND THAT SIZE OF THE RESIDENTIAL UNIT WAS IN EXCESS OF 1,000 SQ.FT WHICH , IN TURN, PROCEEDS ON THE BASIS THAT THE FLATS SOLD TO THE FA MILY MEMBERS ADMITTEDLY BY SEPARATE AGREEMENTS, SHOULD BE TREATE D AS ONE UNIT. WE ARE UNABLE TO APPROVE THIS APPROACH. WE HA VE NOTED THAT THE SIZE OF EACH FLAT, AS EVIDENT FROM BUILDIN G PLAN AS DULY APPROVED BY MUNICIPAL AUTHORITIES WAS LESS THAN 1,0 00 SQ.FT. WE HAVE ALSO NOTED THAT IT IS NOT EVEN REVENUE'S CA SE THAT EACH OF FLAT ON STANDALONE BASIS WAS NOT A RESIDENTIAL U NIT. EVEN IF FLATS WERE CONSTRUCTED OR PLANNED IN SUCH A WAY THA T TWO FLATS COULD INDEED BE MERGED INTO ONE LARGER UNIT, AS LON G EACH FLAT WAS AN INDEPENDENT RESIDENTIAL UNIT, DEDUCTION U/S. 80IB(10) COULD NOT BE DECLINED IT IS IMPORTANT TO BEAR IN MI ND THE FACT THAT WHAT SECTION 80IB(10) REFERS TO IS 'RESIDENTIA L UNIT' AND, IN THE ABSENCE OF ANYTHING TO THE CONTRARY IN THE INCO ME TAX ACT, THE EXPRESSION 'RESIDENTIAL UNITS' MUST HAVE THE SA ME CONNOTATIONS AS ASSIGNED TO IT BY LOCAL AUTHORITIES GRANTING APPROVAL TO THE PROJECT. THE LOCAL AUTHORITY HAS AP PROVED THE BUILDING PLAN WITH RESIDENTIAL UNITS OF LESS THAN 1 ,000 SQ.FT, AND GRANTED COMPLETION CERTIFICATE AS SUCH. THAT LEAVES NO AMBIGUITY ABOUT THE FACTUAL POSITION. WE HAVE FURTH ER NOTED THAT THE PROHIBITION AGAINST SALE OF MORE THAN ONE FLAT IN ,A HOUSING PROJECT TO MEMBERS OF A FAMILY HAS BEEN INS ERTED SPECIFICALLY WITH EFFECT FROM 1ST APRIL 2010, AND, IN OUR HUMBLE UNDERSTANDING, THIS AMENDMENT IN LAW CAN ONLY BE TR EATED AS PROSPECTIVE IN EFFECT. WHAT IS, THEREFORE, CLEAR IS THAT SO FAR AS PRE-AMENDMENT POSITION IS CONCERNED, AS LONG A RESI DENTIAL M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 10 UNIT HAS LESS THAN SPECIFIED AREA, IS AS PER THE DU LY APPROVED PLANS AND IS CAPABLE OF BEING USED FOR RESIDENTIAL PURPOSES ON STANDALONE BASIS, DEDUCTION U/S.8018(10) CANNOT BE DECLINED IN RESPECT OF THE SAME MERELY BECAUSE THE END USER, BY BUYING MORE THAN ONE SUCH UNIT IN THE NAME OF FAMILY MEMBE RS, HAS MERGED THESE RESIDENTIAL UNITS INTO A LARGER RESIDE NTIAL UNIT OF A SIZE WHICH IS IN EXCESS OF SPECIFIED SIZE. THAT P RECISELY IS THE CASE BEFORE US. WHILE ON THE SUBJECT, IT IS USEFUL TO TAKE NOTE OF LEGISLATIVE AMENDMENT BY THE VIRTUE OF WHICH LEGISL ATURE PUT CERTAIN RESTRICTIONS ON SALE OF RESIDENTIAL UNITS T O CERTAIN FAMILY MEMBERS OF A PERSON WHO HAS BEEN SOLD A RESI DENTIAL UNIT IN THE HOUSING PROJECT. SECTION 80IB(10) NOW PROVIDES AN ADDITIONAL ELIGIBILITY CONDITION THAT IN A CASE WHE RE A RESIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO ANY PERSON BEING AN INDIVIDUAL NO OTHER RESIDENTIAL UNIT IN SU CH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSON, NAMELY (I) THE INDIVIDUAL OR THE SPOUSE, OR THE MINOR CHILDREN OF SUCH INDIVIDUAL (II) THE HUF IN WHICH SUCH INDIVIDUAL IS A KARTA (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL THE SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HUF IN WHICH SUC H INDIVIDUAL IS A KARTA. THE EXPLANATION MEMORANDUM E XPLAINED THE LEGISLATIVE AMENDMENT AS FOLLOWS: (314 ITR(ST) 203) 'FURTHER, THE OBJECT OF THE TAX BENEFIT FOR HOUSING PROJECTS IS TO BUILD HOUSING STOCK FOR LOW AND MIDDLE INCOME HOUSE HOLDS. THIS HAS BEEN ENSURED BY LIMITING THE SIZE OF THE R ESIDENTIAL UNIT. HOWEVER, THIS IS BEING CIRCUMVENTED BY THE DE VELOPER BY ENTERING INTO AGREEMENT TO SELL MULTIPLE ADJACENT U NITS TO A SINGLE BUYERS. ACCORDINGLY. IT IS PROPOSED TO INSER T NEW CLAUSES IN THE SAID SUB-SECTION TO PROVIDE THAT THE UNDERTA KING WHICH DEVELOPS AND BUILDS THE HOUSING PROJECT SHALL NOT B E ALLOWED TO ALLOT MORE THAN ONE RESIDENTIAL UNIT IN THE HOUSING PROJECT TO THE SAME PERSON, NOT BEING AN INDIVIDUAL AND WHERE THE PERSON IS AN INDIVIDUAL NO OTHER RESIDENTIAL UNIT IN SUCH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSON: - (I) SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL; M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 11 (II) THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIV IDUAL IS THE KARTA; (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL THE S POUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDI VIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA. THIS AMENDMENT WILL TAKE EFFECT FROM THE 1ST APRIL 2010 AND SHALL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT Y EAR 2010- 2011 AND SUBSEQUENT YEARS.' 8. IT IS THUS CLEAR THAT THE AFORESAID AMENDMENT HA S BEEN BROUGHT WITH PROSPECTIVE EFFECT I.E. FROM 1ST DAY O F APRIL 2010, AND THERE IS NO INDICATION WHATSOEVER TO SUGGEST TH AT THESE RESTRICTIONS NEED TO BE APPLIED WITH RETROSPECTIVE EFFECT. THE AMENDMENT SEEKS TO PLUG A LOOPHOLE BUT RESTRICTS TH E REMEDY WITH EFFECT FROM 1ST DAY OF APRIL 2010, I.E. AY 201 0-2011. THE LAW IS VERY CLEAR THAT UNLESS PROVIDED IN THE STATU TE, THE LAW IS ALWAYS PRESUMED TO BE PROSPECTIVE IN NATURE. IT WIL L THEREFORE, BE CONTRARY TO THE SCHEME OF LAW TO PROCEED ON THE BASIS THAT WHEREVER ADJACENT RESIDENTIAL UNITS ARE SOLD TO FAM ILY MEMBERS, ALL THESE RESIDENTIAL UNITS ARE TO BE CONS IDERED AS ONE UNIT. IF LAW PERMITTED SO, THERE WAS NO NEED OF THE INSERTION OF CLAUSE (F) TO SECTION U/S 80IB(10). IT WILL BE UNREASONABLE TO PROCEED ON THE BASIS THAT LEGISLATI VE AMENDMENT WAS INFRUCTUOUS OR UNCALLED FOR -PARTICUL ARLY AS THE AMENDMENT IS NOT EVEN STATED TO BE 'FOR REMOVAL OF DOUBTS'. ON THE CONTRARY, THIS AMENDMENT SHOWS THAT NO SUCH ELIGIBILITY CONDITIONS COULD BE READ INTO PRE-AMENDMENT LEGAL P OSITION. 9. AS REGARDS THE AO'S STAND THAT THE ASSESSEE HIMS ELF HAS OFFERED THE DEDUCTION U/S.80IB(10) IN RESPECT OF TH ESE UNITS DURING THE COURSE OF SURVEY PROCEEDINGS, IT IS ONLY ELEMENTARY THAT NEITHER STATEMENT RECORDED UJS.133A HAS AN EVI DENTIARY VALUE, NOR A LEGAL CLAIM CAN BE DECLINED ONLY BECAU SE ASSESSEE, AT SOME STAGE, DECIDED TO GIVE UP THE SAM E. IN VIEW OF THESE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, ARE OF THE CONSIDERED VIEW THAT THE DEDUCTION UJS.8 0IB(10) OUGHT TO HAVE BEEN ALLOWED TO THE ASSESSEE ENTIRELY . TO THIS M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 12 EXTENT, WE MODIFY THE ORDER OF THE CIT(A) AND ALLOW FURTHER RELIEF TO THE ASSESSEE. 23.3. WE FIND THAT THE ITAT MUMBAI BENCH IN THE CAS E OF ARCADE BHOOMI ENTERPRISES VS. DCIT IN ITA.NO.366/MUM/2010, HAS TAKEN SIMILAR VIEW. 24. IN VIEW OF ABOVE DISCUSSION, WE HOLD THAT CIT( A) WAS NOT JUSTIFIED IN HOLDING THAT FLATS IN BUILDING PRIME H AD BUILT UP AREA EXCEEDING 1500 SQ.FT., THE ENTIRE COSMOS PROJE CT DID NOT QUALIFY FOR DEDUCTION U/S.80IB(10) IN RESPECT OF IT S PROFITS. THERE IS NOTHING ON RECORD TO SUGGEST THAT ASSESSEE HAS CLAIMED DEDUCTION IN RESPECT OF BUILDING PRIME WHER EIN BUILT UP AREA OF ITS UNITS IS EXCEEDING 1500 SQ.FT. IN FA CT THERE WERE 25 BUILDINGS IN COSMOS PROJECT OUT OF WHICH EXCEPT BUILDING PRIME, ALL OTHER BUILDINGS SATISFY THE CONDITIONS O F BUILT UP AREA LIMIT OF 1500 SQ.FT. THEREFORE, DEDUCTION U/S. 80IB(10) SHOULD BE ALLOWED IN RESPECT OF PROFIT FROM SUCH BU ILDINGS. THIS VIEW IS FORTIFIED BY THE DECISIONS IN VANDANA PROPERTIES (SUPRA) AND ADITYA DEVELOPERS (SUPRA) DISCUSSED ABO VE. AS REGARDS TWO FLATS COMBINED TOGETHER, THE ALLEGATION IS THAT SOME UNITS WERE COMBINED INTO ONE, SO DEDUCTION U/S .80IB(10) SHOULD NOT BE ALLOWED. IN THIS REGARD, ASSESSEES S TAND HAS BEEN THAT ASSESSEE CONCEIVED THE FLATS AS INDEPENDE NT UNITS AND THESE WERE CONSTRUCTED AS INDEPENDENT UNITS. THERE IS NOTHING ON RECORD TO SUGGEST THAT ASSESSEE HIMSELF HAS JOIN ED THE ADJACENT FLATS. IN THIS SITUATION, ASSESSEE SHOULD NOT SUFFER FOR ITS NO FAULT IF PURCHASER JOIN THE ADJOINING FLATS. THIS VIEW IS FORTIFIED BY THE DECISION OF MUMBAI BENCH OF ITAT I N HAWARE CONSTRUCTIONS PVT. LTD. (SUPRA), EMGEEN HOLDINGS P. LTD. (SUPRA) AND ARCADE BHOOMI ENTERPRISES (SUPRA), ETC. , AS DISCUSSED ABOVE. IN VIEW OF ABOVE, WE HOLD THAT ASS ESSEE IS ENTITLED FOR DEDUCTION U/S.80IB(10) IN RESPECT OF E NTIRE PROFITS COMPUTED AFTER MAKING ADDITIONS/DISALLOWANCES IN RE SPECT OF COSMOS PROJECT CONSISTING OF 24 BUILDINGS EXCLUDING PRIME BUILDING. THE ASSESSING OFFICER IS DIRECTED ACCORDI NGLY. 2.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IF THE O BSERVATION M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 13 MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION M ADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY TH E LD. RESPECTIVE COUNSEL, AND THE CONCLUSION DRAWN IN THE AFOREMENTIONED CASES INCLUDING CITED FROM BOTH SIDE S, IF KEPT IN JUXTAPOSITION AND ANALYZED, THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT. THE ASSESSEE DECLARED NIL INCOME IN IT S RETURN FILED ON 29/09/2009, WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) ACCEPTIN G THE RETURNED INCOME. THE ASSESSEE FOLLOWS PROJECT COMPL ETION METHOD. THE CASE OF THE ASSESSEE WAS SELECTED FOR S CRUTINY, THEREFORE, REQUISITE NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE TO WHICH THE ASSESSEE ATTENDED THE PROCEED INGS AND FILED NECESSARY DETAILS/SUBMISSIONS (AS IS EVIDENT FROM PAGE 1 OF THE ASSESSMENT ORDER). THE WHOLE CASE OF THE DEPARTMENT IS DEMOLISHED BY THE OBSERVATION MADE IN THE ASSESSMENT ORDER ITSELF (PARA-3), WHEREIN, THE LD. ASSESSING OFFICER HIMSELF CONCLUDED THAT THE PROJECT WAS COMP LETED IN THE PRECEDING YEAR RELEVANT TO ASSESSMENT YEAR, WHE REAS, THE SECOND SURVEY WAS CONDUCTED ON 01/12/2011. IT IS P ERTINENT TO NOTE HERE THAT THE CONSTRUCTION STARTED ON 15/04 /2002 AND COMPLETED ON 28/03/2008, THE DATE WHEN AFTER EXAMINING THE FLATS, THE COMPETENT AUTHORITY ISSUED COMPLETION CERTIFICATE TO THE ASSESSEE CERTIFYING T HAT THE PROJECT WAS COMPLETED AS PER THE APPROVED PLAN. THE ASSESSEE SHOWED THE NET PROFIT OF RS.9.07 CRORES OU T OF THE TOTAL SALES. M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 14 2.4. THE OBSERVATION MADE BY THE ASSESSING OFFICER AND ALSO ARGUED BY THE LD. DR ARE THAT PURSUANT TO SECO ND SURVEY MADE ON 01/12/2011 BY THE INVESTIGATION WING, CERTA IN VIOLATION OF CONDITIONS FOR ELIGIBILITY OF DEDUCTIO N U/S 80IB(10) OF THE ACT WERE FOUND, WHEREIN, CERTAIN FLATS WERE FOUND EXCEEDING THE PRESCRIBED AREA OF 1,000 SQ. FT. NOW, QUESTION ARISES WHETHER THE ASSESSEE CAN BE HELD LIABLE FOR EXTENSION OF AREA IN THE ALLEGED FLATS AFTER THE SALE TO THE RESPECTIVE PURCHASERS. THE OBVIOUS REPLY IS NO BECAUSE THE PROJECT OF THE ASSESSEE WAS COMPLETED ON 28/03/2008 AFTER EXAM INING THE AREA OF EACH FLAT OF THE PROJECT BY THE COMPETE NT AUTHORITY AND ONLY THEN THE COMPLETION CERTIFICATE WAS ISSUED TO THE ASSESSEE. THE CASE OF THE ASSESSEE IS FURTHER FORTI FIED BY THE FACT THAT THE ASSESSEE STARTED CONSTRUCTION ON 15/0 4/2002 AND DURING SECOND SURVEY CARRIED OUT IN 2006, EVERY THING WAS FOUND IN ORDER. IT CAN BE SAID THE BASIC STRUCT URE OF THE FLATS MUST HAVE BEEN COMPLETED OR AT LEAST THE BASE SHOULD HAVE BEEN COMPLETED ABOVE PLINTH AREA, ON WHICH THE FURTHER CONSTRUCTION WOULD HAVE BEEN MADE. THERE IS NO ALL EGATION BY THE SURVEY TEAM (DURING FIRST SURVEY IN 2006) TH AT THE ASSESSEE WAS NOT CONSTRUCTING AS PER THE APPROVED P LAN. THE COMPLETION CERTIFICATE WAS ISSUED BY THE COMPETENT AUTHORITY AFTER EXAMINING WHETHER THE ASSESSEE HAS FULFILLED THE CONDITIONS STIPULATED IN THE ACT AND ALSO WHETHER CONSTRUCTION HAS BEEN COMPLETED AS PER THE SANCTION ED PLAN DATED 15/04/2002. IF, AT THE LATER STAGE, THE ALLOTTEES/OCCUPANTS OF THE FLATS MAKES ANY ADDITION , THE ASSESSEE CANNOT BE HELD LIABLE FOR THEIR OMISSIONS/ ACTS, IF M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 15 ANY. OUR VIEW IS FORTIFIED BY THE DECISION IN HAWAR E CONSTRUCTION PVT. LTD. VS ITO (2011) 64 DTR 251 (MU M), SANGHAVI & DOSHI ENTERPRISES VS ITO (2011) 60 DTR 4 06 (CHENNAI)(TM)(TRIB.), ITO VS AIR DEVELOPERS (ITA NO.447/NAG/2007) ORDER DATED 21/05/2008, M/S GLOBAL REALITY VS ITO (2012) 134 ITD 407 (INDORE), WHEREIN ONE OF US (JUDICIAL MEMBER) IS SIGNATORY TO THE ORDER, HOLDIN G THAT, ONCE THE ASSESSEE SOLD THE FLATS AND THE PURCHASER MERGES THE FLATS OR EXTENDS THE AREA, NO FAULT CAN BE FOUN D AGAINST THE ASSESSEE. IDENTICALLY, HONBLE JURISDICTIONAL H IGH COURT IN CIT VS VANDANA PROPERTIES, ORDER DATED 28/03/2012 D ECIDED IN FAVOUR OF THE ASSESSEE. IN THE CASE OF HAWARE C ONSTRUCTION PVT. LTD. VS ITO (SUPRA), WHEREIN, BUILT UP AREA EX CEEDED 1,000 SQ. FT., WHEREAS, AS PER APPROVAL BY CIDCO, T HE AREA WAS LESS THAN 1,000 SQ. FT. (AS PER APPROVED PLAN) AND LATER ON THE OCCUPANTS OF THE FLATS REJOINED TWO OR MORE FLATS, IT WAS HELD THAT ASSESSEE CANNOT BE PENALIZED, CONSEQU ENTLY, THE CLAIMED DEDUCTION U/S 80IB(10) OF THE ACT CANNO T BE DISALLOWED. WHILE COMING TO THIS CONCLUSION, THE BE NCH FOLLOWED THE DECISION IN GIRDHARILAL K. LULLA (ITA NO.4207/MUM/2009) ORDER DATED 30/05/2011. EVEN OTHERWISE, THE ASSESSEE IS FOLLOWING PROJECT COMPLE TION METHOD AND FULFILLED THE REQUIRED CONDITIONS BEFORE HANDING OVER THE COMPLETED PROJECT TO THE PURCHASERS/OCCUPA NTS. THE RATIO LAID DOWN IN EMGEEN HOLDINGS PVT. LTD. VS DCI T (2011) 47 SOT 98 (MUM.) ORDER DATED 29/07/2011 FURTHER SUP PORTS THE CASE OF THE ASSESSEE. M/S VARDHAN BUILDERS ITA NO.4635/MUM/2013 16 IN VIEW OF THE UNDISPUTED FACTS, AVAILABLE ON REC ORD AND THE JUDICIAL PRONOUNCEMENTS DISCUSSED HEREINABO VE, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD . COMMISSIONER OF INCOME TAX (APPEALS). HIS STAND IS AFFIRMED RESULTING INTO DISMISSAL OF APPEAL OF THE REVENUE. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 06/10/2015. SD/- SD/- ( R AMIT KOCHAR ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ) DATED : 28/10/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 1 1 $ 2# ( +, ) / THE CIT, MUMBAI. 4. 1 1 $ 2# / CIT(A)- , MUMBAI 5. 45 /# , 1 +,' + 6 , $ % / DR, ITAT, MUMBAI 6. 7! % / GUARD FILE. / BY ORDER, 04,# /# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI.