ITO 15(1)(3), MUMBAI V. PODDAR ASHISH DEVELOPRS, MUMBAI

ITA 4894/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92272 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-01-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 26-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Assessee Lawyers: B N RAO
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JM AND SHRI SANJAY ARORA , AM I.T.A. NO. 4894/MUM/2013 (ASSESSMENT YEAR: 2010 - 11) INCOME TAX OFFICER - 15(1)(3), ROOM NO. 108, MATRU MANDIR, 1 ST FLOOR, TARDEO ROAD, MUMBAI - 400 007 / VS. PODDAR ASHISH DEVELOPERS 5C, COURT CHAMBERS, 35, NEW MARINE LINES, MUMBAI - 400 020 PAN/GIR NO. AAAAP 4750 D ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SMT. PARMINDER RESPONDENT BY : SHRI B. N. RAO DATE OF HEARING : 21.01.2015 DATE OF PRONOUNCEMENT : 10 .0 4 .2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 26 , MUMBAI (CIT(A) FOR SHORT) DATED 29.04.2013 , PARTLY ALLOWING THE A SSE SSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2010 - 11 VIDE ORDER DATED 08.03.2013 . 2. AT THE VERY OUTSET, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), T HE ASSESSEES COUNSEL, THAT THE SUBJECT MATTER OF THE REVENUES APPEAL, I.E., IF THE ALLOWANCE OF DEDUCTION U/S.80 - IB(10) ON ITS PROJECT GARDEN ESTATE WAS ALLOWABLE ON A PROPORTIONATE BASIS OR NOT, I.E., EXCLUDING THE PROFIT ATTRIBUTABLE TO THE AREA COVE RED BY THE FLATS EXCEEDING THE UPPER LIMIT OF 1000 SQ. FT. , AS PRESCRIBED U/S.80 - IB(10)(C) OF THE ACT, STANDS COVERED SQUARELY IN ITS FAVOUR BY THE DECISION BY THE T RIBUNAL IN ITS OWN FAVOUR FOR THE SUBSEQUENT YEARS, BEING A.YS. 2009 - 10 AND 2010 - 11, PLACIN G ON RECORD COPIES 2 ITA NO. 4894/MUM/2013 (A.Y. 2010 - 11) ITO VS. PODDAR ASHISH DEVELOPERS THEREOF. REFERENCE WA S ALSO MADE BY HIM TO THE RELEVANT PARAS OF THE SAID ORDERS. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) NOT OBJECTING THERETO, I.E., OF THE ISSUE UNDER APPEAL BEING OSTENSIBLY COVERED IN ITS FAVOUR BY THE ORDERS BY THE TRIBUNAL FOR THE IMMEDIATELY SUCCEEDING YEARS, THE HEARING WAS CLOSED AT THIS STAGE. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD, INCLUDING THE ORDERS BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE TWO IMMEDIATELY SUCCEEDING YEA RS. THE HOUSING PROJECT GARDEN ESTATE , COMPRISING 191 (1 BHK, 2 BHK AND 3 BHK) FLATS , WAS COMPLETED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2009 - 10. ON THE BASIS OF A SURVEY CARRIED U/S. 133A BY THE D EPARTMENT ON 11.03.2008, IT WAS DISC OVERED THAT 18 (1 BHK) FLATS WERE CONVERTED INTO 9 ( NINE ) DUPLEX FLATS, THE AREA OF EACH OF WHICH EXCEEDED 1000 SQ. FT., THEREBY VIOLATING ONE OF THE ESSENTIAL CONDITIONS FOR A PROJECT TO BE AN ELIGIBLE HOUSING PROJECT U/S.80 - IB(10), THE ENTIRE CLAIM UNDER WHICH WOULD THEREFORE STAND TO BE DISALLOWED. T HE LD. CIT(A) , I N APPEAL , FOLLOWING HIS ORDER FOR A.Y. 2009 - 10 , ALLOWED PROPORTIONATE DEDUCTION, I.E., EXCLUDING THE AREA COVERED BY THE NINE DUPLEX FLATS, LEADING TO CROSS APPEALS BOTH BY THE ASSESSEE AND TH E REVENUE . THE TRIBUNAL , FOR A.Y. 2009 - 10 (VIDE ORDER DATED 02.01.2015 IN ITA NO.4239/MUM/2013) , AFTER A FACTUAL EXAMINATION OF THE CASE , FOUND THAT THERE WAS IN FACT NO VIOLATION OF SECTION 80 - IB(10 ) (C) IN - AS - MUCH AS ALL THE FLATS, INCLUDING THE 18 (1 BHK ) FLATS UNDER REFERENCE , DID NOT VIOLATE THE CONDITION OF THE BUILT - UP AREA EXCEEDING 1000 SQ. FT., SO THAT THE HOUSING PROJECT GARDEN ESTATE, WHICH WAS SPREAD OVER TWO WINGS, A & B , WITH 96 AND 95 FLATS RESPECTIVELY , WAS AN ELIGIBLE PROJECT , I.E., IN IT S ENTIRETY . D EDUCTION, ACCORDINGLY, WAS TO BE ALLOWED ON THE ENTIRE PROFITS OF THE SAID PROJECT. THE ASSESSEES APPEAL FOR THE CURRENT YEAR, WHICH PERHAPS CAME TO BE HEARD AND DISPOSED OF BY THE TRIBUNAL O N IT BEING NOT BROUGHT TO IT S NOTICE THAT THE REVEN UE WAS ALSO IN APPEAL , AND WHICH WAS IN FACT OUTSTANDING FOR DISPOSAL AT THE RELEVANT TIME, ALSO ALLOWED THE SAME FOLLOWING THE ORDER BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2009 - 10. THE REVENUES APPEAL , RAISING THE FOLLOWING GROUNDS, IMPUGNS THE ASSESSEES CLAIM ON THE GROUND THAT IN TERMS 3 ITA NO. 4894/MUM/2013 (A.Y. 2010 - 11) ITO VS. PODDAR ASHISH DEVELOPERS OF THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CIT VS. BRAHMA ASSOCIATES [2011] 333 ITR 289 (BOM) , AN ELIGIBLE HOUSING PROJECT U/S.80 - IB(10) IS ONE AS APPROVED BY THE LOCAL AUTHORITY AND , TH EREFORE, A SINGLE PROJECT : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O. TO ALLOW DEDUCTION U/S.80 - IB(10) OF THE I.T. ACT, ON PRORATE BASIS RELYING ON THE JUDGMENT OF HONBLE ITAT, MUMBAI IN THE CASE OF M/S. EKTA HOUSING PVT. LTD. AND FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. BRAHMA ASSOCIATES (333 ITR 289). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECT ING THE A.O. TO ALLOW PRO - RAT A DEDUCTION U/.80 - IB(10) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS VIOLATED ONE OF THE BASI C CONDITIONAL A TIES OF 80 - IB(10) OF THE ACT. CLEARLY, IN TERMS OF THE SAID DECISION, A PROJECT IS EITHER ELIGIBLE AS A WHOLE , OR NOT, AND THERE WAS THEREFORE NO SCOPE FOR ALLOWANCE OF DEDUCTION ON A PROPORTIONATE BASIS. THIS ASPECT HAS BEEN DISCUSSED AND EXPLAINED AT LENGTH BY THE TRIBUNAL IN ASST. CIT VS. EKTA SANKALP DEVELOPERS (IN ITA NOS. 3316 & 3318/MUM/2012 DATED 12.09.201 4) , TO WHICH IN FACT REFERENCE WAS ALSO MADE DURING HEARING. SO HOWEVER, IN VIEW OF THE DECISION BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2009 - 10 , THERE HAS BEEN NO VIOLATION OF SECTION 80 - IB(10) , AND THE ASSESSEE HA D SOLD 18 (1 BHK) FLATS (OUT OF THE TOTAL 24 (1 BHK) FLATS IN THE RELEVANT PROJECT), AND NOT 9 DUPLEX FLATS ; THE CONVERSION THERETO BEING MADE AT THE INST A NCE OF THE BUYERS. T HE TRIBUNAL , IN EKTA SANKALP DEVELOPERS ( SUPRA ), EVEN AS CLARIFIED BY THE BENCH DURING HEARING , HELD THAT DES PITE THE APPLICABILITY OF THE RATIO OF THE DECISION IN THE CASE OF BRAHMA ASSOCIATES (SUPRA), SO THAT IN ITS VIEW A PRO - RATA DEDUCTION COULD NOT BE ALLOWED , AND A VIOLATION OF ANY OF THE CONDITIONS OF SECTION 80 - IB(10) WOULD OPERATE TO DISENTITLE THE CLAI M FOR DEDUCTION THERE - UNDER, FURTHER OPINED THAT THE CONDITION U/S.80IB(10)(C) IS NOT QUA THE PROJECT BUT QUA EACH OF THE RESIDENTIAL UNITS COMPRISING I T , SO THAT ALL SUCH RESIDENTIAL UNITS AS HAVE VIOLATED THE SAID CONDITION WOULD STAND TO BE DISQUALIFIED , AND PROFITS ATTRIBUTABLE THERE TO EXCLUDED IN COMPUTING THE PROFITS ELIGIBLE FOR DEDUCTION U/S.80 - IB(10). THE SAID DECISION 4 ITA NO. 4894/MUM/2013 (A.Y. 2010 - 11) ITO VS. PODDAR ASHISH DEVELOPERS WOULD , HOWEVER, NOT APPLY AS THE TRIBUNAL, WHILE DECIDING THE CROSS APPEALS FOR A.Y. 2009 - 10 ( SUPRA ) , FOUND THAT THE RESIDENTIAL UN ITS WERE CONSTRUCTED BY THE BUILDER, AN ASSOCIATION OF PERSONS (AOP) CONSISTING OF THREE MEMBERS, AS PER THE APPROV ED PLAN , AND THAT 1 BHK FLATS (18) WERE CONVERTED INTO 9 DUPLEX FLATS AT THE INST A NCE OF THE FLAT BUYERS, OVER WHICH THE ASSESSEE AS A BUILDE R HAD NO CONTROL. THE CONVERSION BY THE FLAT BUYERS/OWNERS, DONE TO PROVIDE THEMSELVES A BETTER L I VING, T AKING ADVAN TAGE OF THE METHODS/DESIGN, THOUGH PROVIDED BY THE ASSESSEE, WHICH IS ONLY A MARKETING TOOL TO PROMOTE THE SALES OF 1 BHK FLATS , WOULD NOT A MOUNT TO CONSTRUCTION OF THE DUPLEX /ENHANCED FLATS BY THE DEVELOPER. THE ENTIRE PROFIT OF THE PROJECT, AS AGAINST A PROPORTIONATE DEDUCTION, CAME TO BE ALLOWED U/S. 80 - IB(10). SO, HOWEVER, CLAUSES (E) AND (F) HAVE SINCE, I.E., BY FINANCE (NO . 2) ACT, 2009, W.E.F. 01/4/2010, I.E., AY 2010 - 11 ONWARDS, BEEN ADDED TO S. 80 - IB(10). THE SAME PRESCRIBE CONDITIONS QUA THE ELIGIBILITY OF THE HOUSING PROJECT W.R.T. TO THE ALLOTMENT OF THE RESIDENTIAL UNITS IN THE HOUSING PROJECT. THAT IS, THE MANNER OF ALLOTMENT OF THE RESIDENTIAL UNITS IN AN OTHERWISE ELIGIBLE PROJECT IS ALSO MADE A CONDITION PRECEDENT FOR THE ELIGIBILITY OF THE PROJECT FOR THE PURPOSE OF DEDUCTIBILITY OF ITS PROFITS UNDER THE PROVISION. THIS IS APPARENTLY A LEGISLATIVE RESPONSE TO THE TENDENCY ON THE PARTS OF THE BUILDER - DEVELOPERS TO ALLOT MORE THAN ONE RESIDENTIAL UNIT IN THE PROJECT TO PERSONS, OR EVEN TO THEIR FAMILY MEMBERS IN CASE THE ALLOTEES ARE INDIVIDUAL, CIRCUMVENTING, IN EFFECT, THE PRESCRIPTION OF S. 80 - IB(10)(C), STIPULAT ING THE MAXIMUM AREA O F A RESIDENTIAL UNIT I N A HOUSING PROJECT. THE SAID CONDITION S, I.E., PER SS. 80 - IB(10)(E) & (F), ARE , IN CONTRADISTINCTION TO S. 80 - IB(10)(C), WITH REFERENCE TO A HOUSING PROJECT, SO THAT EVEN ONE SUCH ALLOTMENT, I.E., IN CONTRAVENT ION OF S. 80 - IB(10)(E) / (F), WOULD OUST THE RELEVANT HOUSING PROJECT AS AN ELIGIBLE PROJECT U/S. 80 - IB(10), NEUTRALIZING, IN EFFECT, THE BENEVOLENT ASPECT OF THE DECISION IN THE CASE OF EKTA SANKALP DEVELOPERS (SUPRA) . IN THE INSTANT CASE, EIGHTEEN FLATS HAVE ADMITTEDLY BEEN CONVERTED INTO NINE DUPLEX FLATS, IMPLYING AT LEAST NINE ALLOTMENTS TO THE SAME ALLOTEE /S, OR TO HIS FAMILY MEMBER, ATTRACTING THE RIGOR OF S. 80 - IB(10) (E)/ (F). TH IS ASPECT OUGHT TO HAVE, IN VIEW OF THE CHANGED LAW, PROVIDING FOR THE ELIGIBILITY OF THE PROJECT W.R.T. ALLOTMENT, BROUGHT TO OUR 5 ITA NO. 4894/MUM/2013 (A.Y. 2010 - 11) ITO VS. PODDAR ASHISH DEVELOPERS NOTICE, WHICH WE CONSIDER AS A SERIOUS FAILING , WHICH GETS IN FACT COMPOUNDED IN VIEW OF THE EARLIER LAPSE IN NOT CLARIFYING TO THE TRIBUNAL T HE FACT THAT THE REVENUE IS ALSO IN APPEAL, SO THAT TH E ASSESSEES APPEAL STOOD HEARD BY IT IN ISOLATION DESPITE IT BEING A CASE OF CROSS APPEALS, AND ON THE SAME ISSUE . SO MUCH SO THAT WE THINK THAT IT WAS A PROPER CASE FOR RECALL OF THE ASSESSEES APPEAL FOR BEING HEARD ALONG WITH THE INSTANT APPEAL, WHICH AGAIN HAS NOT BEEN ATTEMPTED BY THE REVENUE. IN FACT, THE RELEVANT FACTS CAME TO LIGHT ONLY ON PERUSING THE FILE; THE MATTER, AS AFORE - STATED, BEING CLOSED AS A SQUARELY COVERED MATTER, WHICH IT INDEED IS, I.E., QUA FACTS. THE PURVIEW OF AN APPELLATE AUTHO RITY , IT NEEDS TO BE APPRECIATED, IS TO ASCERTAIN THE CORRECT TAX LIABILITY BY ENABLING DETERMINATION OF THE CORRECT INCOME CHARGEABLE TO TAX, AND THE PARTIES ARE OBLIGED TO ASSIST THE COURT IN ARRIVING AT THE CORRECT DECISION (REFER: AHMEDABAD ELECTRICITY CO. LTD. V. CIT [1993] 199 ITR 351 (BOM)(FB)). THE LAW, IT IS TRITE LAW, AS IN FORCE ON THE FIRST DAY OF APRIL OF THE RELEVANT ASSESSMENT YEAR, IS TO APPLY (REFER, INTER ALIA, CIT VS. ISTHMIAN STEAMSHIP LINES [1981] 20 ITR 572 (SC); KARIMTHARUVI TEA ESTAT E LTD. V. STATE OF KERALA (1966) 60 ITR 262 (SC); AND RELIANCE JUTE & INDUSTRIES LTD. V. CIT (1979) 120 ITR 921 (SC)). THE CONSEQUENCE WOULD BE THAT PROFIT OF THE PROJECT GARDEN ESTATE SHALL NOT BE ELIGIBLE FOR DEDUCTION U/S. 80 - IB(10) FOR THE CURRENT YE AR ; IT BEING AGAIN TRITE THAT ONLY A CUMULATIVE SATISFACTION OF ALL THE QUALIFYING CONDITIONS WOULD RENDER A PROJECT AS AN ELIGIBLE PROJECT. THIS ASPECT OF THE MATTER, WHICH WE REGARD AS LEGAL IN VIEW OF THE ADMITTED FACTS, BEING FURTHER DETERMINED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE, AND WITH REFERENCE TO WHICH THE ASSESSEE PLEADS ITS FACTS AS IDENTICAL WITH THAT FOR TH E PRECEDING YEAR, EVEN AS STATED BY THE LD. CIT(A), HAVING NOT BEEN EITHER CONSIDERED DURING THE ASSESSMENT OR THE FIRST APPELLATE STAGE, OR EVEN BEFORE US, WE ONLY CONSIDER IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE LD. CIT(A) TO CONSIDER THE ELIGIBILITY OF THE SAID PROJECT, PARTICULARLY WITH REFERENCE TO THE AMENDED LAW, I.E., CLAUSES (E) AND (F) TO S. 80 - IB(10) , INSERTED WITH EFFECT FROM THE RELEVANT ASSESSMENT YEAR, DETERMINING THE SAID ISSUE AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO BOTH THE SIDES , IN ACCORDANCE WITH LAW. WE DECIDE ACCORDINGLY. 6 ITA NO. 4894/MUM/2013 (A.Y. 2010 - 11) ITO VS. PODDAR ASHISH DEVELOPERS 4. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 10 , 2015 SD/ - S D/ - ( JOGINDER SINGH ) (S ANJAY ARORA) J UDICIAL MEMBER A CCOUNT ANT MEMBER MUMBAI ; DATED : 10 . 0 4 .201 5 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI