ITO 25(2)(3), MUMBAI V. SHIVAM ENTERPRISES, MUMBAI

ITA 4765/MUM/2010

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9161 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Department
• Bench Allotted: F
• Next Hearing Date: 07-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 09-06-2010
• Court: TRIBUNAL
• Department Lawyers: IN CIRCUMSTANCES OF CA SE
• Section: 80IB; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 4765 /MUM/201 0 ASSESSMENT YEAR: - 2007 - 08 ITO 25(2) - 3, O/O ITO 25(2)(3), C - 11, R. NO. 105, PRATYAKSHKAR BHAVAN, BANDRA - KURLA COMPLEX, BANDRA (EAST) MUMBAI 400 051. VS.` M/S SHIVAM ENTERPRISES 604, VASANT SADAN, SAI BABA NAGAR, BORIVALI (W) MUMBAI 400 092. APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 29.03.2012 OF CIT(A) FOR THE A.Y. 2007 - 08. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT CLAIMED BY THE ASSESSEE, WITHOUT APPRECIATING THE FACT THAT THE ORIGI NAL COMMENCEMENT CERTIFICATE WAS ISSUED TO THE ASSESSEE ON 06.09.1991 I.E PRIOR TO 01 ST OCTOBER 1998. 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.10.2007 AND REVENUE BY SHRI VIVEK BATRA ASSESSEE BY SHRI K. SHIVARAM DATE OF HEARING 23.0 2 .2015 DATE OF PRONOUNCEMENT 25 .03.2015 M/S SHIVAM ENTERPRISES 2 | P A G E CLAI MED DEDUCTION U/S 80 - IB(10) OF RS. 63,80,690/ - . IN THE SCRUTINY ASSESSMENT PROCEEDINGS, THE AO HAS NOTED THAT THE FIRST DATE OF APPROVAL OF THE HOUSING PROJECT BY THE LOCAL AUTHORITY WAS 06.09.91 WHICH WAS AGAIN AMENDED ON 3.10.2005. ACCORDINGLY, THE AO QU ESTIONED THE ELIGIBILITY OF DEDUCTION U/S 80 - IB(10). THE ASSESSEE CONTENDED THAT THE PROJECT WAS APPROVED IN ACCORDANCE WITH THE PERMISSION GRANTED BY THE CIDCO VIDE COMMENCEMENT CERTIFICATE DATED 6.9.91 WHICH WAS REVALIDATED BY THE ORDER DATED 3.10.2005, THEREFORE, IT FULFILLED THE CONDITION THAT THE PROJECT HAS COMMENCED ON OR AFTER 1.10.1998. THE AO HELD THAT APPROVAL OF THE PROJECT IS PRIOR TO 1.10.1998 AND AS PER EXPLANATION 1 TO SECTION 80 - IB(10) , IF THE APPROVAL OF THE HOUSING PROJECT IS OBTAINED MOR E THAN ONCE SUCH HOUSING PROJECT WILL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE ON WHICH THE BUILDING PLAN OF THE HOUSING PLAN WAS FIRST APPROVED BY THE LOCAL AUTHORITY. THE AO ACCORDINGLY DISALLOWED THE DEDUCTION U/S 80 - IB(10) BY HOLDING THAT THE ASSESS EE IS NOT ENTITLED FOR DEDUCTION . 3. ON APPEAL, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING THAT THE HOUSING PROJECT WAS NOT COMMENCED BEFORE THE ORDER DATED 3.10.2005 AND, THEREFORE, THE APPROVAL DATED 6.9.1991 CANNOT BE TAKEN AS THE DATE OF COMMENCEMENT OF THE HOUSING PROJECT. 4. BEFORE US, THE LD. DR HAS SUBMITTED THAT COMMENCEMENT CERTIFICATE WAS ISSUED BY THE CIDCO ON 6.9.1991 WHICH IS PRIOR TO 1.10.1998. THEREFORE, THE PRIMARY CONDITION OF AVAILING THE DEDUCTION U/S 80IB - 10 IS NOT FULFILLED IN THE CASE OF THE ASSESSE E . THE AMENDMENT IN THE APPROVAL OF PLAN ON M/S SHIVAM ENTERPRISES 3 | P A G E 3.10.20 05 DOES NOT CHANGE THE DATE OF ORIGINAL COMMENCEMENT CERTIFICATE ISSUED ON 6.9.1991. THUS THE LD. DR HAS SUBMITTED THAT THE CIT(A) HAS APPLIED INCORRECT INTERPRETATION OF PROVISIONS OF ACT ON THE POINT OF COMMENCEMENT. THE ACTUAL DATE OF START OF WORK IS N OT RELEVANT BUT AS PER THE PROVISIONS THE DATE ON WHICH THE COMMENCEMENT CERTIFICATE WAS ISSUED BY THE LOCAL AUTHORITY IS RELEVANT AND DEEMED AS THE DATE OF COMMENCEMENT OF HOUSING PROJECT. HE HAS REFERRED THE EXPLANATION TO SECTION 80IB(10) AND SUBMITTED THAT THE REVALIDATION OF PLAN VIDE ORDER DATED 3.10.2005 IS ONLY AN AMENDMENT IN THE PLAN FIRST ANCTIONED BY THE LOCAL AUTHORITY IN THE YEAR 1991, THEREFORE, THE COMMENCEMENT IS ALSO IN THE YEAR 1991. 5. ON THE OTHER HAND, THE LD. AR HAS SUBMITTED T HAT TH E ORIGINAL APPROVAL IN THE CASE WAS OBTAINED FROM THE LOCAL AUTHORITY ON 6.9.1991 IN THE NAME OF ORIGINAL OWNER MR. RAKES H KUMAR WADHAWAN . THE ORIGINAL OWNER FILED THE APPEAL AGAINST THE APPROVAL DATED 6.9.1991 AND ACCORDINGLY FRESH COMMENCEMENT CERTIFICAT E DATED 3.10.200 5 WAS ISSUED. HE HAS FURTHER SUBMITTED THAT THE REVALIDATION ORDER DATED 3.10.2005 SUPERSEDES THE EARLIER COMMENCEMENT AND, THEREFORE, THE APPROVAL/COMMENCEMENT CERTIFICATE DATED 3.10.2005 WILL BE TREATED AS THE DATE OF COMMENCEMENT OF THE HOUSING PROJECT. THE ASSESSEE HAS COMPLETED THE HOUSING PROJECT COMPRISING OF FOUR BUILDINGS AND OBTAINED THE BUILDING PLAN CERTIFICATE BEFORE 31.03.2008, THEREFORE, ALL THE CONDITIONS INCLUDING THAT OF OBTAINING THE BUILDING COMPLETION CERTIFICATE WITHIN THE STIPULATED TIME LIMIT ARE DULY FULFILLED. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. VANDANA PROPERTIES 353 ITR 36 AND SUBMITTED THAT WHERE THE COMMENCEM ENT OF NEW BUILDING WAS M/S SHIVAM ENTERPRISES 4 | P A G E OBTAINED ON 3.10.2005, IT CANNOT BE SAID TO BE THE EXTENSION OF OLD PROJECT. HE HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF M/S SM CAPITAL MARKET LTD. VS. ITO AND SUBMITTED THAT THE ORIGINAL COMMENCEMENT CERTIFICATE RENEWED TIME TO TIME AND THE DATE OF COMMENCEMENT AND DEVELOPMENT OF BUILDING SHOULD BE CONSIDERED FOR THE PURPOSE OF FULFILLMENT OF CONDITION U/S 80 - IB(10) . HE HAS ALSO RELIED UPON THE FOLLOWING DECISIONS: - (I) ACIT VS. M/S SARKAR BUILDERS 4835/MUM/2007, DATED 23.10.2009. (II) ITO VS. M/S. KASTURI CONSTRUCTION 54 SOT 384 (MUM) (III) MANJU GUPTA (SMT.) (2012) 134 ITD 503 (MUM) (TRIB) 6. AS REGARDS THE COMPLETION /PARTIAL COMPLETION CERTIFICATE ISSUED BY THE LOCAL AUTHORITY, THE LD. AR HAS SUBMITTED THAT THERE ARE NUMBER OF BUILDINGS ON THE PLOT OF LAND AND THE COMPLETION CERTIFICATE OF EACH INDIVIDUAL BUILDING IS ISSUED SEPARATELY BY THE LOCAL AUTHORITY, THEREFORE, THERE IS NO DEFECT IN THE COMPLETION CERTIFICATE ISSUED IN RESPECT OF THE PARTICULAR BUILDINGS ON WHICH THE ASSESSEE HAS CLAIM ED DEDUCTION U/S 80 - IB(10) . 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE AO AS WELL AS CIT(A) HAS GIVEN MUCH EMPHASIS ON THE COMMENCEMENT CERTIFICATE ISSUED ON 6.9.1991 AND FURTHER ON 3.10.2005. IT IS PERTINENT TO NOTE THAT THE APPROVAL/COMMENCEMENT CERTIFICATE ISSUED BY THE LOCAL AUTHORITY IS RELEVANT ONLY TO T HE EXTENT OF THE CONDITION OF COMPLETION OF M/S SHIVAM ENTERPRISES 5 | P A G E THE PROJECT. FOR READY REFERENCE, WE QUOTE THE RELEVANT PROVISIONS OF SECTION 80 - IB(10) AS UNDER: - (10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BE FORE THE 31ST DAY OF MARCH, 2008 BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF, (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998 AND COMPLETES SUCH CONSTRUCTION, (I) IN A CASE WHERE A HOUSING PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY BEFORE THE 1ST DAY OF APRIL, 2004, ON OR BEFORE THE 31ST DAY OF MA RCH, 2008; (II) IN A CASE WHERE A HOUSING PROJECT HAS BEEN, OR, IS APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRIL, 2004 BUT NOT LATER THAN THE 31ST DAY OF MARCH, 2005, WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUS ING PROJECT IS APPROVED BY THE LOCAL AUTHORITY; (III) IN A CASE WHERE A HOUSING PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRIL, 2005, WITHIN FIVE YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS AP PROVED BY THE LOCAL AUTHORITY. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, (I) IN A CASE WHERE THE APPROVAL IN RESPECT OF THE HOUSING PROJECT IS OBTAINED MORE THAN ONCE, SUCH HOUSING PROJECT SHALL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE ON WHICH THE BUILDING PLAN OF SUCH HOUSING PROJECT IS FIRST APPROVED BY THE LOCAL AUTHORITY; (II) THE DATE OF COMPLETION OF CONSTRUCTION OF THE HOUSING PROJECT SHALL BE TAKEN TO BE THE DATE ON WHICH THE COMPLETION CERTIFICATE IN RESPECT OF SUCH HOUSING PROJECT IS ISSU ED BY THE LOCAL AUTHORITY; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE: PROVIDED THAT NOTHING CONTAINED IN CLAUSE (A) OR CLAUSE (B) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACCORDANCE WITH A SCHEME FRAMED B Y THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMENT OF EXISTING BUILDINGS IN AREAS DECLARED TO BE SLUM AREAS UNDER M/S SHIVAM ENTERPRISES 6 | P A G E ANY LAW FOR THE TIME BEING IN FORCE AND SUCH SCHEME IS NOTIFIED BY THE BOARD IN THIS BEHALF; (C) THE RESIDENTI AL UNIT HAS A MAXIMUM BUILT - UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY - FIVE KILOMETRES FROM THE MUNICIPAL LIMITS OF THESE CITIES AND ONE THOUSAND AND FIVE HUNDRED SQUARE F EET AT ANY OTHER PLACE; (D) THE BUILT - UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED THREE PER CENT OF THE AGGREGATE BUILT - UP AREA OF THE HOUSING PROJECT OR FIVE THOUSAND SQUARE FEET, WHICHEVER IS H IGHER; (E) NOT MORE THAN ONE RESIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO ANY PERSON NOT BEING AN INDIVIDUAL; AND (F) IN A CASE WHERE A RESIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO A PERSON BEING AN INDIVIDUAL, NO OTHER RESIDENTIAL UNIT IN SUCH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSONS, NAMELY: (I) THE INDIVIDUAL OR THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL, (II) THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA, (III) ANY PERSON REPRESENTI NG SUCH INDIVIDUAL, THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA. EXPLANATION. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT NOTHING CONTAINED IN THIS SUB - SECTION SHALL APPL Y TO ANY UNDERTAKING WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT). --------------------------- --------------------------- 8. AS PER CLAUSE A OF SECTION 80IB(10) , THE PRIMARY CONDITION OF AVAILING THE DEDUCTION U/S 80 - IB(10) IS THAT THE UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT ON OR AFTER 1.10.1998 . SUB - CLAUSE (I) TO (III) ENUMERATE THE DIFFERENT SITUATIONS AND M/S SHIVAM ENTERPRISES 7 | P A G E STIPUL ATES THE CONDITION FOR COMPLETION OF THE PROJECT AS PER THE RESPECTIVE DATE OF APPROVAL BY THE LOCAL AUTHORITY. THEREFORE, THE APPROVAL OF THE PROJECT BY THE LOCAL AUTHORITY IS RELEVANT ONLY FOR THE TIME SPAN WITHIN WHICH THE PROJECT HAS TO BE COMPLETED. IF A PROJECT IS APPROVED BY THE LOCAL AUTHORITY BEFORE 01.04.2004 IT HAS TO BE COMPLETED BEFORE 31.03.2008 TO AVAIL THE DEDUCTION U/S 80IB(10). SIMILARLY, IF THE PROJECT IS APPROVED BY THE LOCAL AUTHORITY ON OR AFTER 01.04.2004 BUT NOT LATER THAN 31.03.20 05, THEN IN ORDER TO AVAIL THE DEDUCTION U/S 80IB(10), THE PROJECT HAS TO BE COMPLETED WITHIN THE FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. THUS THE APPROVAL IS RELEVANT TO DETERMINED TH E TIME PERIOD WITHIN WHICH THE PROJECT IS REQUIRED TO BE COMPLETED WHEREAS THE COMMENCEMENT OF THE PROJECT IS A PRE CONDITION FOR ALL THE PROJECT IRRESPECTIVE OF DATE OF APPROVAL BY THE LOCAL AUTHORITY AND THE CONDITION OF COMPLETION IN ACCORDANCE WITH THE DATE OF APPROVAL. THE EXPLANATION TO CLAUSE (A) OF SECTION 80IB(10) IS ONLY IN RESPECT OF THE APPROVAL OF THE HOUSING PROJECT AND IT HAS NOTHING TO DO WITH THE COMMENCEMENT OF THE HOUSING PROJECT . FURTHER ONLY THE COMPLETION OF PROJECT WILL BE TAKEN ON T HE DATE WHEN THE COMPLETION CERTIFICATE IN RESPECT OF THE HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY. THE AUTHORITIES BELOW HAVE PROCEEDED WITH THE MATTER ON A WRONG PRESUMPTION AND INCORRECT BASIS. THE CONDITION FOR COMMENCEMENT IS A PRIMARY CONDIT ION AND IF THE PROJECT IS FOUND COMMENCED PRIOR TO 1.10.1998, IT WOULD NOT BE ENTI TLED FOR DEDUCTION U/S 80IB(10), A T THE THRESHOLD WITHOUT GOING INTO THE OTHER CONDITION PRESCRIBED UNDER THE OTHER CLAUSES OF SECTION 80IB(10). WE NOTE THAT THERE WAS SOME D ISPUTE AT THE TIME OF ORIGINAL APPROVAL GRANTED BY THE CIDCO ON 6.9.1991 ON THE POINT OF DEVELOPMENT CHARGES AS WELL AS THEATRE M/S SHIVAM ENTERPRISES 8 | P A G E AND SHOPS IN THE DEVELOPMENT PLAN . A CCORDINGLY, THE ORIGINAL OWNER OF THE LAND IN QUESTION C HALLENGED THE ACTION OF CIDCO REJECTING THE MODIFIED DEVELOPMENT PROPOSAL VIDE ORDER DATED 18.06.1998 BY FILING THE APPEAL U/S 47 OF THE MAHARASHTRA REGIONAL AND CITY PLANNING ACT 1966. THE APPEAL WAS DECIDED BY THE APPELLATE AUTHORITY ON 8.9.1999. IN PURSUANT TO THE ORDER OF APPELLAT E AUTHORITY, THE AMENDED APPROVAL CERTIFICATE DATED 3.10.2005 WAS ISSUED BY THE CIDCO. FROM PERUSAL OF THE ORDER DATED 8.9.1999, WE FIND THAT THERE WAS SOME CONSTRUCTION IN THE PROJECT PRIOR TO THE AMENDMENT PROPOSAL IN THE DEVELOPMENT PLAN PUT FORWARD BY THE OWNER OF THE LAND WHICH WAS REJECTED BY THE CID CO VIDE ORDER DATED 18.06.1998. T HEREFORE, THE COMMENCEMENT OF THE PROJECT HAS TO BE TAKEN INTO ACCOUNT AS PER THE ACTUAL CONSTRUCTION WORK STARTED IN RESPECT OF THE PROJECT AND NOT BY TAKING INTO CONSIDE RATION THE ORIGINAL SANCTION AND AMENDED SANCTION OF THE PLAN. SINCE THE ACTUAL WORK OF CONSTRUCTION AND DEVELOPMENT OF THE PROJECT HAS NOT BEEN EXAMINED BY THE AUTHORITIES BELOW, THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THIS ISS UE TO THE RECORD OF AO FOR PROPER VERIFICATION AND EXAMINATION OF THE FACT AND THEN DECIDE THE ISSUE AS PER LAW. THE ISSUE OF COMPLETION OF PROJECT WITHIN THE PRESCRIBED TIME LIMIT IS KEPT OPEN. 9 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUCNED IN THE OPEN COURT ON THIS 25 TH DAY OF MARCH 2015 SD/ - SD/ - ( N.K. BILLAIYA ) (VIJAY PAL RAO) ( ACCOUNTANT MEMBER ) (JUDICIAL MEMBER ) MUMBAI DATED 25 .03.2015 SKS SR. P.S, M/S SHIVAM ENTERPRISES 9 | P A G E COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI