BHUMIRAJ HOMES LTD, NAVI MUMBAI V. DCIT RG 10(3), MUMBAI

ITA 506/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49049 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 22-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH BEFORE SHRI R.V.EASWAR, PRESIDENT & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NO.506/MUM/2009 A.Y 2005-06 BHUMIRAJ HOMES LIMITED, D/5-6, BIG SPLASH, SECTOR 17, VASH, NAVI MUMBAI 400 703. PAN: AABCB 6735 H VS. DY. COMMISSIONER OF INCOME TAX, RANGE 10(3), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRADIP KAPASI. RESPONDENT BY : SHRI SURENDRA KUMAR. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED, O UT OF WHICH GROUND NO.3 WAS NOT PRESSED AND, THEREFORE, THE SAM E IS DISMISSED AS NOT PRESSED. THROUGH GROUND NOS.1 & 2 THE ONLY DISP UTE RAISED IS REGARDING DENIAL OF DEDUCTION U/S.80IB(10) AMOUNTIN G TO ` `` ` .24,42,380/- 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT ASSE SSEE COMPANY WAS ENGAGED IN THE BUSINESS OF BUILDERS AND LAND DE VELOPERS AND DURING THE ASSESSMENT YEAR MADE A CLAIM FOR DEDUCTI ON U/S.80IB(10) FOR A SUM OF ` `` ` .24,42,380/-. IT WAS MAINLY ARGUED THAT ASSESSEES PROJECT WAS DULY APPROVED BY THE MUNICIPAL AUTHORIT IES WITH PERMISSIBLE COMMERCIAL AREA. IT WAS ARGUED THAT COM MERCIAL AREA COULD NOT BE DE-LINKED FROM THE HOUSING PROJECT AND, THER EFORE, ASSESSEE WAS ENTITLED TO DEDUCTION U/S.80IB(10). AFTER CONSIDERI NG THE SUBMISSION, AO OBSERVED THAT THE DEDUCTION IS IN RESPECT OF BH UMIRAJ RETREAT AND SALES WERE OUT OF THE CLOSING STOCK OF THIS PROJECT . HE ALSO FOUND THAT 2 OUT OF THE TOTAL AREA OF 108576 SQ.FTS. ONLY 97162 SQ.FTS. WAS RESIDENTIAL AREA AND BALANCE 11414 SQ.FTS. WAS COMM ERCIAL AREA AND THUS, COMMERCIAL AREA WORKED OUT AT 10.51%. HE NOTE D THAT VARIOUS CONDITIONS HAVE BEEN PRESCRIBED U/S.80IB(10) FOR AL LOWANCE OF DEDUCTION AND SUB-COLLABORATION.(D) OF CL.(III) OF SEC.80IB(10) WAS AMENDED W.E.F. 1-4-2005 BY PROVIDING THAT DEDUCTION WOULD BE ALLOWED IF THE COMMERCIAL AREA DOES NOT EXCEED 5% O F THE AGGREGATE BUILT UP AREA OR 2000 SQ.FTS., WHICHEVER IS LOWER. SINCE THE COMMERCIAL AREA IN THE CASE OF THE ASSESSEE WAS MORE, THEREFOR E, AMENDED RULE WAS APPLICABLE AND, ACCORDINGLY, THE AO DENIED THE DEDUCTION. 3. BEFORE THE CIT[A] IT WAS MAINLY SUBMITTED THAT C OMMERCIAL AREA OF 10.51% WAS WITHIN THE PERMISSIBLE LIMIT OF 15% A LLOWED BY THE MUNICIPAL AUTHORITIES AND, THEREFORE, IT WAS ESSENT IALLY A RESIDENTIAL PROJECT. REFERENCE WAS ALSO MADE TO THE CLARIFICATI ON OF THE BOARD VIDE LETTER DATED 4-5-2001 WHEREIN IT WAS CLARIFIED THAT ANY PROJECT WHICH HAS BEEN APPROVED BY THE LOCAL AUTHORITY AS A HOUSI NG PROJECT SHOULD BE CONSIDERED ADEQUATE FOR THE PURPOSE OF SEC.80IB( 10). RELIANCE WAS ALSO PLACED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF HARSHAD P. DOSHI,I.T.A.NO.2305/MUM/06. IT WAS ALSO ARGUED THAT RESTRICTION OF 5% WHICH WAS BROUGHT ON BY FINANCE (NO.2) ACT, 2004, W .E.F. 1-4-2005, WAS NOT APPLICABLE BECAUSE THE PROJECT WAS APPROVED PRIOR TO 1-4- 2004. THE LD. CIT[A] AFTER EXAMINING THE SUBMISSION S REPRODUCED THE RELEVANT PROVISION OF SEC.80IB(10) AND REFERRED TO THE NOTES ON CLAUSES TO THE FINANCE NO.2 ACT AS WELL AS MEMORANDUM EXPLA INING THE PROVISION, NOTED THAT SUB-CL.(D) OF CL.(III) OF SEC .80IB(10) THROUGH WHICH 3 COMMERCIAL AREA WAS RESTRICTED TO 5% OR 2000 SQ.FTS . OF THE AGGREGATE AREA WHICHEVER WAS LOWER, WAS EFFECTIVE FROM A.Y 20 05-06 AND, ACCORDINGLY, HE CONFIRMED THE ACTION OF THE AO. 4. BEFORE US, LD.COUNSEL OF THE ASSESSEE SUBMITTED THAT THE HOUSING PROJECT OF THE ASSESSEE WAS APPROVED AS RES IDENTIAL-CUM- COMMERCIAL PROJECT VIDE CERTIFICATE DATED 27-3-2001 AND THE COPY OF THE SAME IS AVAILABLE AT PAGE-1 OF THE PAPER BOOK. THE PROJECT WAS COMPLETED ON 31-3-2003 AND COPY OF THE OCCUPANCY CE RTIFICATE IS AT PAGE 6 OF THE PAPER BOOK. THUS, IT IS CLEAR THAT TH IS PROJECT WAS COMPLETED MUCH BEFORE THE AMENDMENT CAME IN SEC.80I B[10][D]. HE THEN REFERRED TO THE ORDER OF THE TRIBUNAL FOR THE A.Y 2004-05 IN I.T.A.NO.2170/M/2009, COPY OF WHICH IS AVAILABLE AS ANNEXURE II OF THE DOCUMENT WHEREIN DEDUCTION U/S.80IB[10]. WAS HELD T O BE ALLOWABLE FOR THIS PROJECT OF THE ASSESSEE IN A.Y 2004-05 FOL LOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V S. BRAHMA ASSOCIATES, I.T.A.NO.1194 OF 2010, COPY OF WHICH IS AVAILABLE AS ANNEXURE I OF THE PAPER BOOK. HE FURTHER ARGUED THA T THE HONBLE HIGH COURT HAS CLEARLY HELD THAT THE TRIBUNAL WAS NOT JU STIFIED IN HOLDING THAT UPTO 31-3-2005 DEDUCTION WOULD BE ALLOWABLE TO THE PROJECT APPROVED BY THE LOCAL AUTHORITIES WHEREIN COMMERCIAL AREA WA S ONLY UPTO 10% OF THE BUILT UP AREA WHICH CLEARLY MEANS THAT IF THE P ROJECT IS APPROVED BY THE LOCAL AUTHORITY EVEN WITH THE HIGHER COMMERCIAL AREA, EVEN THEN DEDUCTION WAS ALLOWABLE. 5. AS FAR AS THE ISSUE THAT A NEWLY AMENDED PROVISI ON OF SEC.80IB[10] WOULD NOT BE APPLICABLE TO THE PROJECT S ALREADY APPROVED 4 IS CONCERNED, THE SAME HAS BEEN DECIDED BY VARIOUS BENCHES OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE AMENDED PROVISION WAS NOT APPLICABLE IF THE PROJECT WAS COM PLETED PRIOR TO THE AMENDMENT. IN THIS REGARD HE REFERRED TO THE FOLLOW ING DECISIONS OF THE TRIBUNAL A) SAROJ SALES ORGANISATION, 115 TTJ 485 (MUM) (ANN.II I) B) HIRANANDANI AKRUTI JV,, 39 SOT 498 (MUM) (ANN IV) C) M/S PATHARE & ASSOCUIATES, I.T.A.NO.883/MUM/2009 OR DER DATED 17-12-2009 D) M/S H.D.ENTERPRISES, I.T.A.NO.5712/MUM/2008 ORDER D ATED 06-08-2009 E) M/S PRAMUKH ENTERPRISES, I.T.A.NO.6055/MUM/2009 ORD ER DATED 26-11-2010 (ANN.V) 6. ON THE OTHER HAND, LD.DR SUPPORTED THE ORDER OF THE CIT(A). 7. WE HAVE CONSIDERED THE RIVAL CAREFULLY AND FIND THAT BASICALLY TWO DISPUTES ARE INVOLVED. THE FIRST DISPUTE IS WHE THER DEDUCTION U/S.80IB[10] CAN BE ALLOWED EVEN IN CASES WHERE THE COMMERCIAL AREA IS MORE THAN 10%. THIS ISSUE NOW STANDS CONCLUDED I N FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BRAMHA ASSOCIATES [SUPRA]. IN THIS CASE THE CONCLUSIONS HAVE BEEN SUMMARIZED AT PARA 30 WHICH READ AS UNDER: 30. IN THE RESULT, THE QUESTIONS RAISED IN THE APPE AL ARE ANSWERED THUS:- A) UPTO 31/3/2005 (SUBJECT TO FULFILLING OTHER COND ITIONS), DEDUCTION UNDER SECTION 80IB(10) IS ALLOWABLE TO HO USING PROJECTS APPROVED BY THE LOCAL AUTHORITY HAVING RES IDENTIAL UNITS WITH COMMERCIAL USER TO THE EXTENT PERMITTED UNDER THE DC RULES / REGULATIONS FRAMED BY THE RESPECTIVE LOCAL AUTHOR ITY. B) IN SUCH A CASE, WHERE THE COMMERCIAL USER PERMIT TED BY THE LOCAL AUTHORITY IS WITHIN THE LIMITS PRESCRIBED UND ER THE DC RULES /REGULATION, THE DEDUCTION UNDER SECTION 80IB(10) U PTO 31/3/2005 WOULD BE ALLOWABLE IRRESPECTIVE OF THE FA CT THAT THE 5 PROJECT IS APPROVED AS 'HOUSING PROJECT' OR 'RESIDE NTIAL PLUS COMMERCIAL'. C) IN THE ABSENCE OF ANY PROVISIONS UNDER THE INCOM E TAX ACT, THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT UPTO 31/3/2005 DEDUCTION UNDER SECTION 80IB(10) WOULD BE ALLOWABLE TO THE PROJECTS APPROVED BY THE LOCAL AUTHORITY HAVING RES IDENTIAL BUILDING WITH COMMERCIAL USER UPTO 10% OF THE TOTAL BUILT-UP AREA OF THE PLOT. D) SINCE DEDUCTIONS UNDER SECTION 80IB(10) IS ON TH E PROFITS DERIVED FROM THE HOUSING PROJECTS APPROVED BY THE L OCAL AUTHORITY AS A WHOLE, THE TRIBUNAL WAS NOT JUSTIFIED IN RESTR ICTING SECTION 80IB(10) DEDUCTION ONLY TO A PART OF THE PROJECT. H OWEVER, IN THE PRESENT CASE, SINCE THE ASSESSEE HAS ACCEPTED THE D ECISION OF THE TRIBUNAL IN ALLOWING SECTION 80IB(10) DEDUCTION TO A PART OF THE PROJECT, WE DO NOT DISTURB THE FINDINGS OF THE TRIB UNAL IN THAT BEHALF. E) CLAUSE (D) INSERTED TO SECTION 80IB(10) WITH EFF ECT FROM 1/4/2005 IS PROSPECTIVE AND NOT RETROSPECTIVE AND H ENCE CANNOT BE APPLIED FOR THE PERIOD PRIOR TO 1/4/2005. FROM THE ABOVE, IT IS CLEAR THAT IF THE PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY EVEN WITH HIGHER PERCENTAGE OF COMM ERCIAL AREA, THEN DEDUCTION U/S.80IB[10] HAS TO BE ALLOWED ON THE WHO LE OF THE PROJECT. IN ANY CASE, FURTHER SIMILAR VIEW WAS TAKEN IN ASSE SSEES OWN CASE FOR THE A.Y 2004-05 IN I.T.A.NO.2170/M/09. 8. THE SECOND DISPUTE IS WHETHER THE AMENDED PROVIS IONS OF SEC.80IB[10] W.E.F. 1-4-2005, COULD BE APPLIED TO T HE PROJECTS WHICH HAVE BEEN APPROVED BEFORE THE AMENDMENT. THIS ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE CASE OF SA ROJ SALES ORGANISATION VS. ITO [SUPRA]. THE RELEVANT PORTION OF THE HEAD-NOTE READS AS UNDER: FURTHER, THE HOUSING PROJECT HAVING BEEN APPROVED BEFORE 31 ST MARCH, 2005, THE CONDITION OF SHOPPING AREA NOT EXCEEDING 5 PER CENT OF BUILT- UP AREA AS INTRODUCED BY SUBSEQUENT AMENDMENT AND A PPLICABLE IN RESPECT OF PROJECTS APPROVED BEFORE 31 ST MARCH, 2007, DID NOT APPLY. 6 SIMILARLY IN THE CASE OF HIRANANDANI AKRUTI JV VS. DY.CIT [SUPRA]IT WAS OBSERVED AS UNDER: DEDUCTION UNDER S.80IB(10) ALLOWABILITY ASSESS EE DEVELOPER OF BUILDING PROJECT SUBMITTED ITS PROPOSAL FOR SLUM RE HABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT ACCOR DING TO THE AO, AS THE PROVISIONS OF S. 80IB(10)(D) AS APPLICABLE W.E. F. 1 ST APRIL, 2005, THE LIMIT FOR HAVING COMMERCIAL SPACE IN THE HOUSING PR OJECTS IS 5 PER CENT OF THE TOTAL BUILT-UP AREA OR 2,000 SQ.F.T. WHICHEV ER IS LESS ASSESSEE WAS DENIED DEDUCTION S. 80IB(10) ON THE GROUND THAT HE HAD EXCEEDED THE SPACE AND NUMBER OF UNIT CRITERIA ASSESSEE CO NTENDING THAT CONDITIONS UNDER S. 80IB(10) REQUIRES TO BE TESTED AT THE TIME THE PROJECT WAS CONCEPTUALIZED AND IF THE CONDITIONS S TOOD FULFILLED AT THE TIME OF COMMENCEMENT OF THE PROJECT, THE CONDITIONS SHOULD BE TAKEN TO HAVE BEEN COMPLIED WITH SLUM REHABILITATION SC HEMES INVOLVE PROVIDING ALTERNATE ACCOMMODATION TO SLUM DWELLERS, WHO ARE DISPLACED FROM THEIR EXISTING PLACE THEREFORE, TH EY HAVE TO BE TREATED AS HOUSING PROJECT LAW AS IT EXISTED IN THE ASST. YR. 2004-05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITA TION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACC ORDED ON 17 TH NOV., 2003 AND WHEN THE ASSESSEE COMMENCED DEVELOPM ENT IS TO BE APPLIED. SIMILARLY VIEW HAS BEEN TAKEN IN THE OTHER CASES CI TED BY THE ASSESSEE AND NO CONTRARY DECISION HAS BEEN BROUGHT TO OUR NO TICE BY THE REVENUE. THEREFORE, FOLLOWING THESE DECISIONS WE HO LD THAT IN THE CASE BEFORE US SINCE THE PROJECT HAS BEEN APPROVED ON 27 3-2001 AND WAS COMPLETED ON 16-1-2003 [DATE OF COMPLETION CERTIFIC ATE 31-3-2003], THEREFORE, THE AMENDED PROVISIONS ARE NOT APPLICABL E. ACCORDINGLY, ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IB[10]. WE , ACCORDINGLY, DIRECT THE AO TO ALLOW DEDUCTION U/S.80IB[10]. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 0/5/2011. SD/- SD/- (R.V.EASWAR) (T.R.SOOD) PRESIDENT ACCOUNTANT MEMBER MUMBAI: 20/5/2011.