ACIT 15(2), MUMBAI V. EKTA SANKALP DEVELOPERS, MUMBAI

ITA 4901/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92263 (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: E
• Next Hearing Date: 15-01-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 26-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: S C TIWARI
• Keywords: Business expenditure; Charitable institution

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH , JM AND SHRI SANJAY ARORA , AM I. T.A. NO. 4901/MUM/2013 ( ASSESSMENT YEAR: 2010 - 11 ) ASST. CIT - 15(2), MATRU MANDIR, ROOM NO. 113, GRANT ROAD (W), MUMBAI - 400 007 / VS. EKTA SANKALP DEVELOPERS 401, HALLMARK BUSINESS PLAZA, NEAR GURUNANAK HOSPITAL, KALANAGAR, BANDRA (E), MUMBAI - 400 051 PAN/GIR NO. AAAAE 2019 E ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI NEIL PHILIP RESPONDENT BY : SHRI S. C. TIWARI DATE OF HEARING : 15.01.2015 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 25.04.2013 , PARTLY ALLOWING THE A SSESSEES 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 31.10.2013. 2. AT THE VERY OUTSET , IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), THE ASSESSEES COUNSEL , THAT THE REVENUES APPEAL IS COVERED AGAINST IT BY THE DECISION BY THE T RIBUNAL IN THE ASSESSEES OWN CASE FOR THE EARLIER YEARS, PLACING ON RECORD ITS ORDERS FOR A.Y. 20 07 - 08 (IN ITA NO. 3276/MUM/2010 DATED 28.09.2012) AND A.YS. 2008 - 09 AND 2009 - 10 (IN ITA NOS. 3316 & 3318/MUM/2012 DATED 12.09.2014) ON RECORD. IN VIEW 2 ITA NO. 4901/MUM/2013 (A.Y. 2010 - 11) ASS T. CIT VS. EKTA SANKALP DEVELOPERS THEREOF, THE REVENUES APPEAL MERITS BEING DISMISSED. THE LD. DEPARTMENTAL REPRESENTATIVE (DR), ON BEING QUESTIONED BY THE BENCH , DID NOT OBJECT THERETO. THE HEARING WAS CLOSED AT THIS STAGE. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE, A BUILDER, CLAIMED DEDUCTION U/S.80 - IB(10) ON A HOUSING PROJECT BY THE NAME EKTA MEADO WS ON A PROPORTIONATE BASIS, I.E., AS ATTRIBUTABLE TO THE FLATS (RESIDENTIAL UNITS) SATISFYING THE CONDITION OF SECTION 80 - IB(10)(C), WHICH REPRESENTED ABOUT 65% OF THE TOTAL CONSTRUCTED (BUILT - UP) AREA (28,832 SQ. FT). THE PROPORTIONATE LAND WOULD ALSO E XCEED ONE ACRE, SATISFYING THE CONDITION OF SECTION 80 - IB(10)(B) , EVEN AS PROJECT HAD NO COMMERCIAL AREA, SO THAT THE STIPULATION WITH REGARD TO THE MAXIMUM COMMERCIAL AREA , AS SPECIFIED IN SECTION 80 - IB(10)(D) , WAS ALSO NOT VIOLATED. THE ASSESSING OFFICER (A.O.), HOWEVER, DID NOT ACCEPT THE A S SESSEES CLAIM ON THE GROUND THAT THE ENTIRETY OF THE PROJECT, I.E., AS APPROVED BY THE LOCAL AUTHORITY, IS TO BE CONSIDERED OR TAKEN INTO ACCOUNT, I.E., AS A SINGLE PROJECT. ACCORDINGLY, THE DEDUCTION COULD ONLY BE A LLOWED ON A C U M ULATIVE SATISFACTION OF ALL THE CONDITIONS BY THE HOUSING PROJECT , FOR IT TO BE REGARDED AS ELIGIBLE , AND WHICH THUS DOES NOT STAND SATISFIED IN THE INSTANT CASE IN VIEW OF SOME OF THE RESIDENTIAL UNITS ADMITTEDLY EXCEEDING THE STIPULATION W ITH REGARD TO THE MAXIMUM BUILT - UP AREA OF 1000 SQ. FT. THE PROJECT BEING LOCATED AT MUMBAI. T HE SAME BEING NOT SATISFIED, THERE WAS NO QUESTION OF ALLOWING DEDUCTION ON THE PROFIT ATTRIBUTABLE TO A PART OF THE PROJECT. ADJUDICATING THE ASSESSEES ASSES SMENTS FOR A.YS. 2008 - 09 AND 2009 - 10 (IN ITA NOS. 3316 & 3318/MUM/2012 DATED 12/9/2014) , T HE TRIBUNAL EXAMINED THE ISSUE AT LENGTH. IT NOTED THAT THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. BRAHMA ASSOCIATES [2011] 333 ITR 289 (BOM) , RELIED UPON BY TH E REVENUE BEFORE IT, HAD CLARIFIED THAT A HOUSING PROJECT U/S.80 - IB(10) , BEING NOT DEFINED THERE IN IN TERMS OF ITS QUALIFYING ATTRIBUTES, IS ONLY ONE AS APPROVED BY THE LOCAL AUTHORITY , AND WHICH THEREFORE IS A SINGLE PROJECT , SO THAT D EDUCTION U/S.80 - IB (1 0) , I.E., ASSUMING SATISFACTION OF ALL THE QUALIFYING CONDITIONS SPECIFIED THEREIN FOR AN ELIGIBLE HOUSING PROJECT, COULD ONLY BE QUA THE PROFITS 3 ITA NO. 4901/MUM/2013 (A.Y. 2010 - 11) ASS T. CIT VS. EKTA SANKALP DEVELOPERS OF THE ENTIRE SUCH PROJECT. A PART OF THE PROJECT CANNOT BY ITSELF CONSTITUTE AN ELIGIBLE PROJECT. PER CONTRA, DEDUCTION U/S. 80 - IB(10) COULD NOT BE ALLOWED ON THE PROFITS OF OR CORRESPONDING TO A PART OF THE PROJECT , BY CONSIDERING IT AS AN ELIGIBLE PROJECT , AS CLARIFIED BY THE HONBLE HIGH COURT, REPRODUCING THE RELEVANT PART THEREOF, WHICH WE LIKEWISE DO AS UND ER FOR READY REFERENCE: (REFER PARA 31 AT PGS. 302 - 303, ALSO CATCH NOTES AT PGS. 290 - 291) SECTION 80 - IB(10) ALLOWS DEDUCTION TO THE ENTIRE PROJECT APPROVED BY THE LOCAL AUTHORITY AND NOT TO A PART OF THE PROJECT. IF THE CONDITIONS SET OUT IN SECTION 80 - I B(10) ARE SATISFIED, THEN DEDUCTION IS ALLOWABLE ON THE ENTIRE PROJECT APPROVED BY THE LOCAL AUTHORITY AND THERE IS NO QUESTION OF ALLOWING DEDUCTION TO THE PART OF THE PROJECT . [EMPHASIS OURS] T HE TRIBUNAL IN THE ASSESSEES CASE FOR AY 2008 - 09 & 2009 - 10 SUPRA, HOWEVER, WAS OF THE VIEW THAT, EVEN SO, THE CONDITION PRESCRIBED BY S. 80 - IB(10)(C), ON A FAIR CONSTRUCTION, BEARS THE CONDITION WIT H REGARD TO THE RESIDENTIAL UNITS COMPRISING THE HOUSING PROJECT. THAT IS, IT APPLIES TO RESIDENTIAL UNITS OF A HOUSING PROJECT, BUT, CONVERSELY, NOT TO THE HOUSING PROJECT PER SE , SO THAT IT CANNOT BE SAID THAT ONLY A HOUSING PROJECT COMPRISING OR CONSIST ING ONLY OF SUCH ELIGIBLE UNITS WOULD BE AN ELIGIBLE HOUSING PROJECT, WHICH WORD , I.E., PROJECT , WAS CONSPICUOUSLY ABSENT IN CLAUSE (C). AS SUCH, S. 80 - IB(10)(C) REPRESENTS A CONDITION PRECEDENT QUA THE RESIDENTIAL UNIT COMPRISING THE HOUSING PROJECT AND NOT QUA THE PROJECT; ITS LANGUAGE NOT ADMITTING OF SUCH A VIEW. ACCORDINGLY, A PROJECT , SATISFYING ALL OTHER CONDITIONS OF S. 80 - IB(10) , WOULD BE ELIGIBLE FOR DEDUCTION U/S. 80 - IB(10) QUA THE PROFIT ATTRIBUTABLE TO THE RESIDENTIAL UNITS WHICH ARE S. 80 - IB (10)(C) COMPLIANT. 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, I.E., 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 DEDU CTIBILITY OF ITS PROFITS UNDER THE PROVISION. THIS IS APPARENTLY A LEGISLATIVE RESPONSE TO THE TENDENCY ON THE PART OF THE BUILDER - DEVELOPERS TO ALLOT MORE THAN ONE RESIDENTIAL UNIT IN A PROJECT TO PERSONS, OTHER THAN 4 ITA NO. 4901/MUM/2013 (A.Y. 2010 - 11) ASS T. CIT VS. EKTA SANKALP DEVELOPERS INDIVIDUALS, OR THE INDIVIDUALS AND/ OR THEIR FAMILY MEMBERS , CIRCUMVENTING, IN EFFECT, THE PRESCRIPTION OF S. 80 - IB(10)(C) , STIPULATING THE MAXIMUM AREA F OR A RESIDENTIAL UNIT IN AN ELIGIBLE HOUSING PROJECT. THE SAID CONDITION IS, IN CONTRADISTINCTION TO S. 80 - IB(10)(C), WITH REFERENCE TO A H OUSING PROJECT, SO THAT EVEN ONE SUCH ALLOTMENT, I.E., IN CONTRAVENTION OF S. 80 - IB(10)(E) OR S. 80 - IB(10)(F), WOULD FAIL THE RELEVANT HOUSING PROJECT AS AN ELIGIBLE PROJECT U/S. 80 - IB(10), NEUTRALIZING , IN EFFECT , THE BENEVOLENT ASPECT OF THE DECISION IN THE ASSESSEES CASE FOR AYS. 2008 - 09 & 2009 - 10. IN THE INSTANT CASE, THREE FLATS HAVE BEEN ADMITTEDLY ALLOTTED, ALB E IT FREE OF COST , TO A CHARITABLE TRUST. THE SAME S TANDS CONSIDERED BY THE REVENUE AS BEING NOT PURSUANT TO A NY BUSINESS PURPOSE AND, ACCO RDINGLY, NOT ADMISSIBLE AS A BUSINESS EXPENDITURE . THOUGH THAT ASPECT STANDS DECIDED, WITH THE ASSESSEE BEING NOT IN APPEAL, THE PARTIES , IN OUR VIEW, AND PARTICULARLY THE LD. DR, OUGHT TO HAVE, IN VIEW OF THE CHANGED LAW, PROVIDING FOR THE ELIGIBILITY OF THE PROJECT W.R.T. ALLOTMENT, BROUGHT THIS TO OUR NOTICE, WHICH WE CONSIDER AS A SERIOUS FAILING . THE PURVIEW OF AN APPELLATE AUTHORITY IS TO ASCERTAIN THE CORRECT TAX LIABILITY BY ENABLING DETERMINATION OF THE CORRECT INCOME CHARGEABLE TO TAX, AND THE PAR TIES 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 APP LY (REFER , INTER ALIA, CIT VS. ISTHMIAN STEAMSHIP LINES [1 981 ] 20 ITR 572 (SC); KARIMTHARUVI TEA ESTATE 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 PROFI T OF THE PROJECT EKTA MEADOWS SHALL NOT BE ELIGIBLE FOR DEDUCTION U/S. 80 - IB(10) FOR THE CURRENT YEAR, IT BEING AGAIN TRITE THAT IT IS ONLY THE CUMULATIVE SATISFACTION OF ALL THE QUALIFYING CONDITIONS THAT WOULD RENDER THE PROJECT AS AN ELIGIBLE PROJECT. THIS ASPECT OF THE MATTER , WHICH WE REGARD AS LEGAL, HAVING NOT BEEN EITHER CONSIDERED AT EITHER 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) T O 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 5 ITA NO. 4901/MUM/2013 (A.Y. 2010 - 11) ASS T. CIT VS. EKTA SANKALP DEVELOPERS YEAR, DETERMINING THE SAID ISSUE AFTER ALLOWING REASONABLE OPPORTUN ITY OF HEARING TO BOTH THE SIDES IN ACCORDANCE WITH LAW . WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE R EVENUE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OP EN COURT ON APRIL 10 , 201 5 SD/ - SD/ - ( JOGINDER SINGH ) (S ANJAY ARORA) J UDICIAL MEMBER A CCOUNTANT 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