ITO 23(3)(3), MUMBAI V. SONASHA ENTERPRISES, MUMBAI

ITA 4912/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55714 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 24-10-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 14-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR K SHIVRAMAJAY R SINGH
• Keywords: Maximum Marginal Rate
• Section: 80IB

Judgement Text

1 M/S SONASHA ENTERPRISES IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI B RAMAKOTAIAH, AM & SHRI VIJAY PAL RAO , JM ITA NOS. 4911 & 4912/MUM/2010 (ASST YEARS 2007-08 & 08-09 ) THE INCOME TAX OFFICER WARD 23(3)(3), MUMBAI VS M/S SONASHA ENTERPRISES 101 MARATHON HOUSE LALA DEVI DAYAL ROAD MULUND (W), MUMBAI (APPELLANT) (RESPONDENT) PAN NO. ABBFS7104H ASSESSEE BY DR K SHIVRAM/AJAY R SINGH REVENUE BY SH SATBIA SINGH DT.OF HEARING 24 TH OCT 2011 DT OF PRONOUNCEMENT 31 ST , OCT 2011 PER VIJAY PAL RAO, JM THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST S EPARATE ORDERS BOTH DATED 22.3.2010 OF THE CIT(A) FOR THE AYS 2007-08 AND 2008-09 RESPECTIVELY. 2 THE REVENUE HAS RAISED THE FOLLOWING COMMON GROUN DS IN THESE APPEALS: 1.ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN ALLOWING THE CLAIM OF DEDUCTION U/S. 801B( 10) O F THE I.T. ACT. 1961 MADE BY THE ASSESSEE EVEN THOUGH THE ASSESSING OFFICER REJECT ED THE CLAIM OF SUCH DEDUCTION ON THE GROUNDS: I THAT THE BUILD UP AREA OF THE 68 SHOPS INCLUDED I N THE HOUSING PROJECT OF TENEMENTS EXCEEDED 5% OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT. THEREBY CONTRAVENING THE PROVISIONS OF SEC. 801B(10)(D) OF THE ACT. II) THAT THE ASSESSEE WAS A CONTRACTOR AND NOT A BU ILDER AND III) THAT THE ASSESSEE HAS SOLD TDR AND THE SAME BE ING MOVABLE ASSET, THE PROVISIONS OF SEC 801B (10) OF THE ACT DID NOT A PPLY BEING APPLICABLE LO THE HOUSING PROJECTS ONLY. 2 M/S SONASHA ENTERPRISES 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ID CIT(A) ERRED IN APPRECIATING THAT THE ASSESSEE HAS NOT JUSTIFIED AND SUBSTANTIATED THE PAYMENT TO THE ABOVE PERSONS WITH ANY DOCUMENTARY EV IDENCE. 3 THE ASSESSEE IS A FIRM ENGAGING IN THE BUSINESS O F BUILDER AND DEVELOPER. THE ASSESSEE HAS DEVELOPED THE HOUSING PROJECT UNDER SR A SCHEME AS SECTIONED BY MMRDA. THE ASSESSEE CLAIMED DEDUCTION U/S 80IB(10) FOR THE AYS UNDER CONSIDERATION. THE ASSESSING OFFICER DENIED THE CLA IM OF THE ASSESSEE MAINLY ON TWO GROUNDS VIZ THAT THE ASSESSEE IS HAVING COMMERCIAL ESTABLISHMENT IN THE PROJECT WHICH IS MORE THAN 5% AS PROVIDED UNDER CLAUSE (D) OF SEC. 80IB(10) AND SECONDLY, THE ASSESSEE IS A CONTRACTOR AND NOT A BUILDER WHO HAS SOLD TRANSFER OF DEVELOPMENT RIGHT (TDR) WHICH IS A MOVEABLE ASSET AND THE PROV ISIONS OF THE SECTION DOES NOT APPLY. 3.1 ON APPEAL, THE CIT(A) ISSUED A REMAND ORDER AND AFTER CONSIDERING THE REMAND REPORT OF THE ASSESSING OFFICER, ALLOWED THE CLAIM OF THE ASSESSEE VIDE THE IMPUGNED ORDER. 4 BEFORE US, THE LD DR HAS SUBMITTED THAT THE ASSES SEE HAS SOLD TDR UNDER THE SRA SCHEME AND THEREFORE, AS PER THE FIRST PROVISO TO SEC. 80IB(10) THE SCHEME OF SRA SHALL BE NOTIFIED BY THE GOVERNMENT OF INDIA. HE HA S SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED ANY RECORD TO SHOW THAT THE SAID SCHE ME HAS BEEN NOTIFIED BY THE GOVT OF INDIA. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE RECEIVED TDR AGAINST THE DEVELOPMENT OF THE PROJECT UNDER CONSIDERATION FROM MMRDA AND THE INCOME OF THE ASSESSEE IS NOT DIRECTLY FROM THE DEVELOPMENT O F THE PROJECT BUT BY SALE OF TDR, WHICH IS NOT ENTITLED FOR DEDUCTION U/S 80IB(10) OF THE ACT. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS CONSTRUCTED 68 SHOPS IN THE H OUSING PROJECT WHICH EXCEEDS THE PRESCRIBED LIMIT OF 5%. EVEN THE COMMERCIAL AREA IN THE PROJECT EXCEEDS 10% OF THE TOTAL CONSTRUCTED AREE OF THE PROJECT; THEREFORE, T HE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION. HE HAS FURTHER CONTENDED THAT THE HOUSI NG PROJECT WAS SANCTIONED AFTER 3 M/S SONASHA ENTERPRISES 31.3.2005; THEREFORE, THE AMENDED PROVISIONS OF SEC . 80IB(10) IS APPLICABLE. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER . 4.1 ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HA S SUBMITTED THAT THE HOUSING PROJECT WAS APPROVED ON 11.5.2004 WHICH IS PRIOR T O 31.3.2005 AND THEREFORE, THE SAME IS GOVERNED BY THE UN-AMENDED PROVISIONS OF SE C. 80IB(10) AND CLAUSE (D) OF SEC. 80I B IS NOT APPLICABLE, AS THE PROJECT WAS AP PROVED PRIOR TO 1.4.2005. HE HAS FURTHER SUBMITTED THAT THE HONBLE HIGH COURT, IN T HE CASE OF COMMISSIONER OF INCOME-TAX V. BRAHMA ASSOCIATES REPORTED IN 333 IT R 289 HAS UPHELD THE ORDER OF THE TRIBUNAL ON THE POINT OF PROSPECTIVE AMENDMENT BY WHICH THE CLAUSE (D) OF SEC. 80IB(10) IS INSERTED AND NOT RETROSPECTIVE. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT SOLD OUT THE COMMERCIAL ESTABLISHMENTS IN T HE PROJECT AND ALL THE SHOPS WERE BUILT AS PER THE INSTRUCTIONS AND REQUIREMENT OF MM RDA FOR WHICH THE ASSESSEE DID NOT RECEIVE ANY CONSIDERATION. THE ASSESSEE HAS RE CEIVED TDR ONLY IN RESPECT OF THE RESIDENTIAL PART OF THE PROJECT. THEREFORE, THE CON SIDERATION RECEIVED BY THE ASSESSEE IN THE FORM OF TDR, WHICH WAS SOLD BY THE ASSESSEE AND ACCORDINGLY, THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IB(1). 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERUS ED THE RELEVANT MATERIAL ON RECORD. THE FIRST OBJECTION RAISED BY THE LD DR THAT THE SRA SCHEME WAS NOT NOTIFIED BY CBDT, IT HAS TO BE SEEN THAT THIS OBJEC TION HAS NOT BEEN RAISED BY THE ASSESSING OFFICER EITHER WHILE PASSING THE ASSESSME NT ORDER OR DURING THE REMAND REPORT. FURTHER, WE NOTE THAT THE ASSESSEE NEVER S OUGHT ANY RELAXATION IN THE CONDITIONS UNDER CLAUSE (A) OR (B) OF SEC. 80IB(10 ) BY VIRTUE OF FIRST PROVISO THEREFORE, WHEN THE ASSESSEE HAS NOT CLAIMED ANY BENEFIT UNDER THE PROVISO, THE QUESTION OF THE SCHEME OF SRA, AS NOTIFIED OR NOT, DOES NOT AR ISE. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE OBJECTION RAISED BY THE LD DR. 4 M/S SONASHA ENTERPRISES 5.1 AS REGARDS THE OBJECTION REGARDING THE COMMERCI AL ESTABLISHMENT IS CONCERNED, AS PER REMAND REPORT, THE ASSESSING OFFI CER HAS ACCEPTED THE FACT THAT THE PROJECT WAS APPROVED VIDE AGREEMENT DT 11.5.200 4; THEREFORE, THE PRE- AMENDMENT OF PROVISION OF SEC. 80IB(10) ARE APPLICA BLE. ACCORDINGLY, IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH IN THE CASE OF BRAHMA ASSOCIATES (SUPRA), THERE IS NO BAR OF COMMERCIAL ESTABLISHMENT IN THE HOUSING P ROJECT FOR AVAILING DEDUCTION U/S 80IB(10) PRIOR TO THE INSERTION OF CLAUSE (D) W .R.F 1.4.2005. THE HONBLE HIGH COURT IN PARA 33 HAS OBSERVED AS UNDER: IN THE ABSENCE OF ANY PROVISIONS UNDER THE INCOME-TA X ACT, THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT UP TO MARCH 31, 2005 DEDUCTION UNDER SECTION 80- IB(10) WOULD BE ALLOWABLE TO PROJECTS APPROVED BY TH E LOCAL AUTHORITY HAVING RESIDENTIAL BUILDING WITH COMMERCIAL USER UP TO 10 P ER CENT. OF THE TOTAL BUILT- UP AREA OF THE PLOT. THEREFORE, WHEN THE PROJECT WAS APPROVED PRIOR TO 1 .4.2005 THEN, THERE IS NO BAR FOR ALLOWING DEDUCTION U/S 80IB ONCE THE RESIDENTIAL PR OJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITIES. 5.2 AS REGARD THE LAST CONTENTION OF THE REVENUE IS THAT THE ASSESSEE IS NOT A BUILDER AND THE INCOME RECEIVED BY SALE OF TDR AN D NOT BY SALE OF HOUSING PROJECT IS CONCERNED, WE FIND THAT THERE IS NO DISPUTE ABOU T THE FACT THAT THE ASSESSEE RECEIVED THE TDR AS A CONSIDERATION AGAINST THE DEV ELOPMENT OF THE PROJECT IN QUESTION. WE FURTHER NOTE THAT THE TDR WAS RECEIVE D ONLY FOR RESIDENTIAL PORTION OF THE HOUSING PROJECT AND NOT FOR THE COMMERCIAL ESTA BLISHMENT. THUS, WHEN THE TDR RECEIVED BY THE ASSESSEE WAS IMMEDIATELY SOLD AND T HE SALE CONSIDERATION WAS SHOWN AS RECEIPT FROM THE HOUSING PROJECT, THEN, TH ERE IS NO OTHER ELEMENT IN THE SAID RECEIPT AGAINST THE SALE OF TDR OTHER THAN THE INCO ME FROM HOUSING PROJECT. 5.3 IT IS NOT THE CASE OF THE REVENUE THAT THE ASSE SSEE SOLD THE TDR AFTER APPRECIATION OF THE VALUE AND THEREFORE, THE ENTIRE AMOUNT CANNOT BE TREATED AS 5 M/S SONASHA ENTERPRISES SALE CONSIDERATION OF THE HOUSING PROJECT. THE ASS ESSEE HAS GIVEN THE DETAILS OF THE RECEIPTS OF TDR AND SALE OF THE TDR AS IN THE SAME YEAR AND IMMEDIATELY AFTER RECEIVING FROM THE MMDRA. THEREFORE, THERE IS NO E LEMENT OF ANY APPRECIATION IN THE VALUE IN THE SALE CONSIDERATION. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY REASON TO INTERFERE WI TH THE ORDER OF THE LD CIT(A) FOR BOTH THE AYS. 6 IN THE RESULT, THE APPEALS FILED BY THE REVENUE A RE DISMISSED. ORDER PRONOUNCED ON THE 31 ST , DAY OF OCT 2011. SD/ SD/ ( B RAMAKOTAIAH ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 31 ST , OCT2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI