ITO WD 1(3), THANE V. KASHISH PARK REALTORS, THANE

ITA 5177/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0599 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: misc
• Appeal Filed On: 07-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 142(1); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI B. R. BASKARAN , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 5177 / MUM/ 201 7 ( / ASSESSMENT YEAR: 20 13 - 14 ) ITO WARD 1(3), THANE ROOM NO. 10, B - WING, 6 TH FLOOR, ASHAR I.T. PARK, ROAD NO. 16 - Z,WAGLE INDUSTRIAL ESTATE, THANE . / VS. M/S. KASHISH PARK REALTORS L.G.P. COMPLEX, KASHISH PARK, L.B.S. MARG, NEAR MULUND CHECK NAKA, THANE (W) - 400604. ./ ./ PAN/GIR NO. : AAGFK 2620 J ( / APP ELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 31 . 10 .201 8 / DATE OF PRONOUNCEMENT : 30. 11 . 201 8 / O R D E R PER AMARJIT SINGH, J M: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 25 . 05 .201 1 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 1 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO T HE A.Y. 20 13 - 14 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - ' . 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE DEVELOPMENT RIGHTS ACQUIRED BY THE ASSESSEE F IRM WAS A COLLUSIVE TRANSACTION /ARRANGEMENT TO CLAIM UNJUSTIFIED DEDUCTION U/S80IB(10 ) OF THE INCOME TAX ACT, 1961. REVENUE BY : SHRI MANOJ KUMAR SINGH (DR) ASSESSEE BY: SHRI SUBODH RATNAPARKHI (AR) ITA NO. 5177 /M/2017 A.Y.20 13 - 14 2 2. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HON'BLE CI T(A) ERRED IN APPLICATION OF CBDT NOTIFICATION NO. 205/3/2001/ITA - II FT. 4/5/2001 BY TREATING ADDITIONAL HOUSING PROJECT CONSTRUCTED BY THE ASSESSEE BY CONSUMING TDR ON EXISTING HOUSING PROJECT SITE AS INFRASTRUCTURAL FACILITY U/S 801B(10). 3. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY GROUND OF APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN OF INCOME ON 01 . 10 .20 1 3 DECLARING TOTAL INCOME TO THE TUNE OF RS. NIL FOR THE A.Y.2013 - 14. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS A PARTNERSHIP FIRM CONSISTING OF TWO PARTNERS NAMELY KASHISH PARK REALTY PVT. LTD. AND SHRI SAURABH AGGARWAL SHARING PROFIT RATIO @ 25% AND 75% RESPECTIVELY ENGAGED IN THE BUSINESS OF CONSTRUCTION. THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT DECLARED TAX TO THE TUNE OF RS.1,05,94,383/ - AGAINST THE TOTAL SALES IN SUM OF RS.7,01,30,000/ - . THE TAX WAS CLAIMED AS EXEMPT UNDER CHAPTER VIA I.E . U/S 80IB(10) OF THE ACT AND SHOWED THE INCOME AT RS. NIL. THE EXEMPTION U/S 80IB(10) OF THE ACT WAS SUBJECTED TO COMPLIANCE OF VARIOUS CONDITIONS . ORIGINALLY THE ENTIRE PIECE OF LAND COVERING THE ABOVE S URVEY NOS. WAS OWNED BY M/S FGP LTD, [FORMERLY KNOWN AS FIBER GLASS PILKINGTON LTD.). THE SAID FGP LTD. SOLD AND ENTERED INTO VARIOUS DEVELOPMENT AGREEMENTS ON DIFFERENT DATES WITH 2 PARTIES VIZ, M/S KASHISH PARK REALITY PVT. LTD & M/S LADAM HOMES LTD. OF THE ABOVE M/S KASHISH PARK REALITY PVT. LTD. WAS ALSO PARTNER IN THE ASSESSEE FIRM. THANE MUNICIPAL CORPO RATION HAS SANCTIONED THE BULDINGS PLANS FOR THE AREA SOLD TO M/S KASHISH PARK REALITY PVT. LTD. & M/S LADAM HOMES LTD. THE SAID LAND HAD SOME RESERVAT IONS OF THANE MUNICIPAL CORPORATION AND ON ITA NO. 5177 /M/2017 A.Y.20 13 - 14 3 SURRENDER OF THE REQUISITE PIECE OF LAND . T HE ASSESSEE WAS ENTITLED TO TDR / FSI OF EQUIVALENT QUANTITY. FOLLOWING AGREEMENTS WHICH HAVE BEARING IN THE CASE OF ASSESSEE ARE ENUMERATED BELOW: - 1. SECOND SUPPLEMEN TARY AGREEMENT DATED 27/06/2001 - BETWEEN FGP LTD. & CHIEF PROMOTER OF KASHISH PARK CHS 2. FIRST SUPPLE MENTARY AGREEMENT 20/09/2000 - BETWEEN FGP LTD. & MR. SURYAVANSHI 3. FIRST SUPPLEMENTARY AGREEMENT DATED 03/06/2005 - BETWEEN FGP LTD. & ASSESSEE FI RM WITH KASHISH PARK REALITY PVT, LTD, & LADAM HOMES LTD. 4. AGREEMENT FOR SALE DATED 05/07/2000 - BETWEEN FGP LTD. & CHIEF PROMOTER OF THE KASHISH PARK CHS 5. AGREEMENT FOR SALE DATED 03/12/2003 - BETWEEN FGP LTD. & THE AS SESSEE FIRM KASHISH PARK REALTORS. M/S KASHISH PARK REALTORS PVT, LTD, & M/S LADAM HOMES LTD. CARRIED OUT THEIR OWN CONSTRUCTION ON THE PLOT OF LAND SOLD TO THEM. THEY CREATED COMMON FACILITIES AMENITIES AND UTILITIES. WITH THE FULL UTILIZATION OF THE FSI AS WAS SOLD TO THEM AND DULY SANCTIONED BY THANE MUNICIPAL CORPORATION, THERE WAS NO CHANCE OF FURTHER CONSTRUCTION BARRING OF COURSE THE ALLOTMENT OF TDR IF ANY BY THE TMC IN LIEU OF RESERVATION LANDS SURRENDERED TO TMC. ALL THE DETAILS OF THE AGREEMENT HAVE BEEN STATED SINCE T HEY ARE GERMANE TO THE ISSUE FOR THE YEAR UNDER REFERENCE. THE SAID FGP LTD. ENTERED INTO DEVELOPMENT AGREEMENT DATED 03.12.200 3 WITH THE ASSESSEE FI RM FOR THE CONSTRUCTION OF TDR F SI OF 9591 SQ. MTRS. THE FGP LTD SOLD THE S AID FS1 RIGHTS TO THE FIRM AT RS . 386,10 PER SQ. FT. TOTALING TO RS.4,09,43,549/ - VIDE THE ABOVE AGREEMENT. HOWEVER, SUBSEQUENTLY AS PER THE CLAIM ' THE ASSESSEE THE SAID CONSI DERATION WAS REVISED TO 3,59,43, 549/ - VIDE FIR ST SUPPLEMENTARY AGREEMENT DATED 07,01.2005. IT IS WORTH NOTING HE RE THAT BOTH THE ABOVE ITA NO. 5177 /M/2017 A.Y.20 13 - 14 4 REFERRED AGREEMENTS ARE UNREGIST ERED DOCUMENTS AND CONSIDERING THE INVOLVEMENT OF ONE OF THE PARTNERS OF THE FIRM . I T LEAVES SCOPE FOR DOUBT ABOUT THE LEGALITY OF THE DOCUMENT. IT IS FURTHER NOTICED THAT THE ASSESSEE FIRM HAD STARTE D MAKIN G PAYMENT MUCH BEFORE THE FIRM C AME IN TO EXISTENCE THROUGH ONE OF THE PARTNERS AND SAID EVEN WERE NOT COVERED OR INCORPORATED IN THE DEED OF THE PARTNERSHIP FIRM. HOW THERE CAN B E PAYMENTS TO THE LANDLORDS ON BEHALF OF THE NON - EXISTING FIRM. THE CON SIDERATION AS ARRIVED AT BY WAY FIRST SUPPLEMENTARY AGREEMENT WAS ALREADY COMPLETED BY TH E ASSESSEE FIRM BEFORE THE EXECUTION OF THE SUPPLEME NTARY AGREEMENT DATED 07.01.2005, WHICH SHOWS THAT THE CONSIDERATION WAS PRE - DECIDED AND THE CHANGED IN THE DOCUMEN TATIONS ARE MADE AS PER THE WHIMS AND FANCIES OF THE PARTIES TO THE DOCUMENT, SINCE ALL ARE THE UNREGISTERED DOCUMENTS. THE PAYMENTS MADE TO THE LANDLORDS M/S FGP LTD. PRIOR TO THE EXISTENCE OF THE FIRM WHEREAS UNDER: SR. NO. DATE AMOUNT FROM WHICH A/C PAYMENT MADE NAME OF THE BANK 1 06.10. 2003 9000000 KASHISH PARK REALTORS PVT. LTD. HDFC BANK THAN E BR. 2 17.11.2003 1100000 KASHISH PARK REALTORS PVT. LTD. HDFC BANK THAN E BR. 3 24.11.2003 1000000 KASHISH PARK REALTORS PVT. LTD. HDFC BANK THAN E BR. 4 03. 12.2003 51000 KASHISH PARK REALTORS PVT. LTD. HDFC BANK THAN E BR. WHEN CONFRONTED REGARDING ALL THE ABOVE PAYMENTS, THE ASSESSEE HAS NOT GIVEN SATISFACTORY EXPLANATION . PRIOR TO THE EXISTENCE OF THE FIRM, M/S ITA NO. 5177 /M/2017 A.Y.20 13 - 14 5 KASHISH PARK REALTORS PVT. LTD. (ONE OF THE PARTNERS OF THE ASSESSEE FIRM HAVING 64% SHARE) WERE THE ORIGINAL DEVE LOPERS OF THE LAND BELONGING TO FGP LTD. WHEN QUERIED ABOUT THE NEED FO R ESTABLISHING ASSESSEE FIRM, IT WAS EXPLAINED THAT THE M/S KASHISH PARK REALTORS PVT, LTD. WERE FACING CASH CRUNCH DUE TO UNSOLD FLATS AND IN FACT THEY WERE TRYING TO RAISE THE MONEY THROUGH BANK OR THROUGH PRIVATE EQUITY FUND AND THEY DID NOT WANT TO TAKE ADDITIONAL RISK AND HENCE T HE ASSESSEE PARTNERSHIP FIRM. BUT THIS WAS NOT REALITY SINCE THE ENTIRE PAYMENTS TO THE LANDLORDS M/S FGP LTD. WERE MADE BY THE M/S KASHISH PARK REALTORS PVT. LTD. PRIOR TO THE EXISTENCE OF THE FIRM AND LATER ON ALSO. M/S KASHISH PARK REALTORS PVT, LTD. B EING ORIGINAL DEVELOPERS HAD DEVELOPED CERTAIN PORTION OF THE PROPERTY AND THEY HAD ALSO ENJOYED DEDUCTION U/S 80IB ( 10 ) AND THERE WAS NO IOTA CLAIMING THE BENEFIT FOR THE NEW BUILDING SINCE THE DATE OF APPROVAL COULD HAVE GONE BACK TO FIRST DATE OF APPROVA L AND THEY WOULD NOT HAVE ENJOYED BENEFIT OF DEDUCTION U/S 80IB( 10) FOR CONSTRUCTING THE ABOVE TDR - FSI. AS ON DATE OF EXECUTION OF FIRST D EVELOPMENT AGREEMENT DATED 03.12 .2003 BETWEEN M/S FGP LTD. AND THE ASSESSEE, THE FGP LTD, HAD NOT RECEIVED THE DEVEL OPMENT RIGHT CERTIFICATE FOR THE TDR IN LIEU OF THE LANDS SURRENDERED AGAINST RESERVATIONS OF THE TMC . THE RATE PER SQ. FT. WAS AGREED IN FACT IN 2001 WHEN THERE WAS NEITHER GUARANTEE NOR ASSURANCE FOR THE ALLOTMENT OF TDR BY TMC. IN FACT LATER ON ALSO NO DEVELOPMENT CERTIFICATE WERE SEEN ON RECORD AND IT WAS ADMITTED BY THE ASSESSEE THAT NO SUCH DEVELOPMENT RIGHT CERTIFICATE WERE ISSUED BY THE TMC AUTHORITIES AND THEY JUST RECEIVED SANCTIONED AN D COMMENCEMENT CERTIFICATE FOR T HE PLANS PUT UP BY THE ARCHITE CT WHICH HAPPENED ONLY IN NOVEMBER 2006 AND THE RATE FOR THE TDR FSI IN 2006 WERE 1115 PER SQ. FT. ITA NO. 5177 /M/2017 A.Y.20 13 - 14 6 ON THE ABOVE BACKGROUND OF THE ALLOTMENT OF TDR IN 2006, IT IS SURPRISING TO NOTE THE FOLLOWING CLAUSE NO. E ON PAGE NO, 10 OF THE AGREEMENT DATED 03.12.2003 WHICH IS QUOTED BELOW ; 'IT IS AGREED BETWEEN PARTIES HERETO THAT THE DEVELOPER SHALL DEVELOP THE SAID FSI IN ACCORDANCE WITH APPROVALS ALREADY OBTAINED FROM THE TMC IN TERMS OF THE SAID AMENDED PLAN AND SUCH FURTHER APPROVAL AND REGULATIONS AS MAY BE APPL ICABLE. IT IS PERTINENT TO NOTE HERE THAT THIS WAS THE FIRST VENTURE FOR THE ASSESSEE FIRM AND THERE WAS NO CONCERN THEREFORE OF THE ASSESSEE FIRM OF THE PLANS ALREADY APPROVED. THE ABOVE CLAUSE DEFINITELY GOES TANGENT AGAINST THE SCHEME OF THE ASSESSEE OF CREATING THE SEPARATE FIRM FOR THE PURPOSE OF 80IB[10). FURTHER, THE SAID AGREEMENT ALSO ENVISAGES THE UTILIZATION OF THE TDR / FSI NOT ONLY IN PARTICULAR POCKETS BUT ALSO BY WAY OF ADDITIONAL CONSTRUCTION ON THE BUILDINGS CONSTRUCTED BY M/S KASHISH PARK REALTORS PVT. LTD. AND LADAM HOMES LTD. THE ABOVE UNDERSTANDING AND CONSENT BY PVT. LTD SPEAKS VOLUMES ABOUT NATURE OF PAPER ENTITY IN THE FORM OF THE ASSESSEE FIRM TO TAKE THE ADVANTAGE OF PROVISIONS . THIS IS FURTHER PROVED BY THE FACT THAT THE PAYMENTS TO LANDLORD MENTIONED HEREIN ABOVE WERE ALSO MADE BY M/S KASHISH PARK REALTY PVT, LTD. BEFORE FORMATION OF PARTNERSHIP FIRM AND THE SAME ALSO APPEARS TO HAVE NOT BEEN CREDITED TO CAPITAL A/C OF PRIVATE LT D IN THE BOOKS OF THE ASSESSES FIRM. IT IS ALSO SEEN THAT THE ASSESSEE FIRM HAS COMPLETED THE CONSTRUCTION OF THREE BLDGS. VIZ, MN - 6, MN - 7 & MN - 8 BASED ON THE PLAN SANCTIONED BY THE TMC AUTHORITY IN 2006. ON PHYSICAL VERIFICATION , IT IS SEEN THAT ALL THE 3 BUILDINGS ARE ADJACENT TO EACH OTHER AND ARE THE EX TENSION OF BLDG , NO, MN - 1 TO MN - 5 ALREADY BUILT BY M/S KASHISH PARK REALTORS PVT. LTD. AND A COOPERATIVE SOCIETY HAS BEEN FORMED IN 2010 ITA NO. 5177 /M/2017 A.Y.20 13 - 14 7 COVERING BLDGS, NO. MN - 1 TO MN - 10 AND L - 2 & L - 3. THE AMENITIES ARE ALSO SHARED BY ALL THE BUILDINGS. THIS SHOWS T HAT T HE 3 BLDG, MN - 6 TO MN - 8 ARE NOT THE BUILDINGS CONSTRUCTED ON SEPARATE PLOT OF LAND WITH CLEARLY DEMARCATED AREA AS REQUIRED BY SECTION 80IB(L0). IT IS FURTHER NOTED THAT TOTAL FSI CONSUMED BY THE 3 BLDGS. MN - 6 TO MN - 8 IS 43782 SQ. FT, WHICH IS ALSO LESS TH AN THE FSI EQUIVALENT TO 1 A CRE AMOUNTING TO 44500 SQ. FT. THE ASSESSEE HAS FAILED TO READ AND INTE RPRET THE PROVISION OF SECTION 8OIB(10 ) IN SO FAR AS WHAT SECTION SPEAKS IS REQUIREMENT OF LAND O F 1 ACRE AND WHEREAS THE ASSESSEE THROUGH DOCUMENT AND THROU GH SU BMISSION HAS BEEN HARPING ON THE FSI, THE ASSESSEE HAS ENTERED INTO A GREEMENT FOR THE PURCHASE OF TDR/ FSI IN THE YEAR 2003 (WHEN THERE WAS NEITHER COMMITMENT NOR EXPRESS COMMUNICATION FROM TMC REGARDING THE ALLOTMENT TDR) AT RS.386 PER SQ. FT. WHICH IS BASED ON AGREEMENT BETWEEN FGP LTD, AND M/S KASHISH PARK REALTY PVT. LTD IN THE YEAR 2001. HOW THE AGREEMENT, ENTERED INTO WITH THIRD PARTY THAT TOO IN 2001 COULD BE APPLICABLE TO THE DOCUMENT BETWEEN FGP LTD. AND ASSESSEE FIRM. THE RAT E OF LAND IN THE YEAR 2006 IN THAT AREA AS PER THE READY RECKONER DULY FORWARDED BY THE SUB - REGISTRAR HAS BEEN CONFIRMED THAT RS. 10,600/ - PER SQ. MTR. THIS SHOWS THAT TO SHOW MORE TAX FREE PROFITS THE ASSESSEE HAS RESORTED TO THE LOWER RATE FOR THE FSI. 4. THE ASSESSEE W AS CONFRONTED WITH THE SAID MATTER . A FTER GETTING THE REPLY , THE CLAIM OF THE ASSESSE U/S 80IA OF THE ACT WAS DENIED AND THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.1,05,94,380/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A) WHO ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ITA NO. 5177 /M/2017 A.Y.20 13 - 14 8 5 . WE HAVE HEARD THE ARGUMENT AND ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE CIT(A) HAS FAILED TO COMPLY THE CIRCULAR OF CBDT 205/3/2001/ITA - II FT. 4.5.2001 AND ALLOWED THE CLAIM OF THE ASSESSEE U/S 80IB(10) OF THE ACT WRONGLY , THEREFORE, THE FINDING OF THE CIT(A) IS WRONG AGAINST LAW AND FACTS AND IS LIABLE TO BE S ET ASIDE. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS REFUTED THE SAID CONTENTION AND ARGUED THAT THE CLAIM OF THE ASSESSEE HAS BEEN ALLOWED BY CIT(A) ON THE BASIS OF THE DECISION OF EARLIER YEAR FOR THE A.Y. 2010 - 11 TO 2012 - 13 D ECIDED BY CIT(A), THEREFORE, THE CLAIM OF THE ASSESSEE HAS RIGHTLY BEEN ALLOWED. BEFORE GOING FURTHER, WE DEEMED IT IS NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD: - 7. I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMISSIONS, OBSERVATIONS OF T HE AO IN ASSESSMENT ORDER AND THE FUELS OF THE CASE. THE ISSUE INVOLVED IN THIS CASE AND THE FACTS: CASE FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS OF THE EARLIER YEARS I ,E, 2010 - L1 TO A.Y, 2012 - 13. TH E CLAIM OF DEDUCTION U/S, 80IB(10) IS ALSO IN RESPECT OF THE SAME BUILDINGS I.E. MN - 6, MN - 7, MN - 8 AND TOWER 'A, WHICH IS THE SUBJECT MATTER OF PRESENT APPEAL AS THEY WERE IN THE EARLIER YEARS. THE ISSUE OF DEDUCTION U/S. 80IB(10) OF THE ACT WAS DISCUSSED IN DETAIL BY THE THEN CIT(A) - I THANE IN HIS ORDER DATED 15.07. 2014 FOR A.Y. 2010 - 11 AND THE SAME WAS ALLOWED. THE OBSERVATIONS OF THE CIT(A) - II, THANE ARE REPRODUCED AS UNDER - (A) ISSUE REGARDING GENUINENESS OF THE APPELLANT FIRM. IN RESPECT OF G ENUINE OF THE FIRM, THE A.O. HAS DEVOTED MO ST OF THE SPACE OF THE ASSESSMENT ORDER IN THIS REGARD, YET HE HAS PASSED THE ASSESSMENT ORDER IN THE CAPACITY OF FIRM WITHOUT DISTURBING THE ENTITY OF THE ASSESSEE. THIS ITSELF IS ENOUGH TO JUSTIFY THE CLAIM OF APPELLANT THAT THE FIRM HAS BEEN CREATED AS PER THE PROVISIONS OF LAW. NONETHELESS, I FIND THAT THE APPELLANT FIRM HAS BEEN CONSTITUTED BY A PARTNERSHIP DEED DT. 01.12 2003. COPY OF WHICH HAS BEEN FILED BEFORE THE - A.O. THE TERMS AND CONDITIONS ON WHICH PARTNERSHIP FIRM HAS BEEN CONSTITUTED, HAVE NO T BEEN DOUBTED BY THE A.O. HE ITA NO. 5177 /M/2017 A.Y.20 13 - 14 9 HAS ALSO NOT POINTED OUT ANY INFIRMITY IN THE CONSTITUTION OF THE FIRM. MOREOVER, THE APPELLANT FIRM HAS FILED THE INCOME TAX REFORM REGULARLY FIRM A.Y. 2005 - 06 ONWARDS AS IS EVIDENT FROM THE COPY OF ACKNOWLEDGEMENTS FOR FILIN G OF THE RETURNS SUBMITTED BY THE LD. A.R. ALONG WITH HIS REPLY DT. 08/07/2014. UNDISPUTEDLY, THE PARTNERSHIP FIRM HAS ENTERED INTO FIN AGREEMENT DT. 03.12.2003 - WITH M/S, FGP LTD. FAR ACQUISITION OF THE DEVELOPMENT RIGHTS OF FS1 TO THE TUNE OF 9851.81 SQ. MTRS. EQUIVALENT TO 1,06,043.898 SQ.FT. THIS FACT HAS BEEN VERY CLEARLY MENTIONED IN THE RELEVANT CLAUSES OF THE AGREEMENT FOR SALE DT. 03.12.2003 ENTERED INTO BETWEEN THE APPELLANT FIRM AND MS. FGP LTD. WHO WAS THE OWNER OF THE (AND ADMEASURING 58267.79 S Q. MTRS. THE DEVELOPMENT ACQUIRED BY THE APPELLANT FIRM FOR RS. 3,59,43,549/ - HAVE BEEN DULY IN THE BALANCE SHEETS FOR THE RES PECTIVE ASSESSMENT YEARS UNDER T HE HEAD PROGRESS '. THE TOTAL SALE CONSIDERATION HAS BEEN PAID BY MS. KASHISH PARK REALTY PVT. LTD A PARTNER OF THE APPELLANT FIRM TO THE EXTENT OF RS.1,11,00,000/ - PRIOR TO THE DATE OF CONSTITUTION OF THE FIRM AND BALANCE AMOUNT BY THE APPELLANT FIRM THE PURCHASE CONSIDERATION BY THE M/S. KASHISH PARK REALLY PVT. LTD. HAS BEEN SHOWN BY THE APPELLANT FI RM UNDER THE HEAD 'LIABILITY' IN THE OF M/S. KASHISH PARK REALTY PVT, LTD. NEITHER THE PROVISIONS OF PARTNERSHIP NOR THE PROVISIONS OF INCOME TAX ACT PROHIBITED SUCH TYPE OF TRANSACTIONS BY THE PARTNER S ON BEHALF OF THE FIRM. THUS, I AM OF THE CONSIDERED V IEW THAT THER E IS NOTHING ON RECORD TO DOUBT THE GENUINENESS OF THE APPELLANT FIRM AND ACCORDINGLY THE ARGUMENTS OF THE LD. A.R ON THIS ACCOUNT ARE FOUND ACCEPTABLE. (B) ACQUISITION OF DEVELOPMENT RIGHTS HELD BY AO AS COLLUSIVE TRANSACTIONS. ON PERUS AL OF T HE DOCUMENTARY EVIDENCE PLACED ON RECORD AND ALSO THE FACT BROUGHT ON THE RECORD BY THE A.O., IT IS NOTICED THAT THE LANDLORD, M/S. FGP LTD. WAS THE OWNER OF A LARGE PLOT OF LAND ADMEASURING 58258 SQ. MTRS. AT VILLAGE NAUPADA, NEAR MULUND CHECK NAKA , LBD MARG THANE. THE VENDOR JIRST GRANTED THE DEVELOPMENT RIGHTS OF 5805 SQ. MTRS. TO M/S. LADAM HOMES LTD VIDE AN AGREEMENT DT. 5.7.2000 US AMENDED BY SUBSEQUENT AGREEMENT FROM TIME TO TIME. THEREAFTER, THE DEVELOPMENT RIGHTS IN RESPECT OF ANOTHER 19 690 SQ. MTRS, OF THE LAND WERE GRANTED TO KASHISH PORK REALTY PVT. LTD VIDE AN AGREEMENT DT. 5.7.2000 AS AMENDED FROM TIME TO TIME. THE BALANCE AREA OF LAND OF 32773 ITA NO. 5177 /M/2017 A.Y.20 13 - 14 10 SQ.MTRS. REMAINED WITH M/S. FGP LTD. AND FOR WHICH THIS CONCERN WAS ENTITLED TO INTERNAL TDR OF 9851 SQ. MTRS. TO THE CONSUMED ON BALANCE LAND AREA AS A RESULT OF AGREEMENT DT, 03/12/2003, THE APPELLANT FIRM HAD ACQUIRED DEVELOPMENT RIGHTS OF THE TDR - FSI OF 9851 SQ. MTRS. WHICH HAVE BEEN CONSUMED BY THE APPELLANT FIRM IN THE BUILDINGS CONST RUCTED DURING THE YEAR UNDER CONSIDERATION AND IN THE SUBSEQUENT ASSESSMENT YEAR. IN FACT, IN THE YEAR UNDER CONSIDERATION THE APPELLANT FIRM HAS CONSTRUCTED THREE BUILDINGS NAMELY MN - 6, MN - 7 & MN - 8 CONSUMING AN AREA OF 4067.45 STY. MTRS. IN THE IMMEDIAT ELY SUCCEEDING YEAR, THE APPELLANT FIRM HAS CONSTRUCTED TOWERS ''A' & 'U' UTILIZING AREA OF 4885 SQ. MTRS. AS PER THE AGREEMENT DT. 27.6.2001 HAVE BEEN M/S FGP LTD AND M/S, KASHISH PARK REALTY PVT. LTD. WHICH IS ONE OF THE PARTNERS OF THE APPELLANT FIRM , M/S. KASHTIH PARK REALTY PVT. LTD WAS PROVIDED RIGHTS TO ACQUIRE THE TDR - FSI OF THE BALANCE LAND AT RS. 386. IQ PER SQ.FT. HOWEVER, M/S. KASHISH PARK REALTY PVT. LTD. SUBSEQUENTLY HAS DECIDED NOT TO ACQUIRE THE DEVELOPMENT RIGHTS BUT REQUESTED THE VEND OR TO TRANSFER THE SAME TO THE APPELLANT FIRM. SINCE M/$. KASHISH PARK REALLY PVT. LTD. FIND RIGHTS TO ACQUIRE THE BALANCE TDR - FSI AND ALSO MADE THE PAYMENTS TO THE EXTENT OF RS.1,10,00,000/ - BEFORE THE CONSTITUTION OF THE APPELLANT FIRM, THE A.O HAS TRE ATED THE ENTIRE TRANSACTION OF CONSTITUTION AND CLAIM OF DEDUCTION U/S. 801B(10) AS COLLUSIVE TRANSACTION. HOWEVER, I FIND THAT THE TRANSACTIONS HAVE BEEN ENTERED INTO IN A BY RESPECTIVE AGREEMENTS AND MERELY BECAUSE M/S. KASHISH PARK REALTY PVT. LT D. HA D RIGHTS TIT ACQUIRE THE TDR - FSI CANNOT RENDER THE TRANSACTION COLLUSIVE ONE. THE PAYMENT OF THE SALE CONSIDERATION PARTLY BY M/S, KASHISH PARK REALTY PVT. LTD. AND SUBSEQUENTLY GETTING CREDITS FOR THE SAME ON BECOMING A PARTNER IN THE APPELLANT PARTNERS HIP FIRM, CANNOT ALSO MAKE THE TRANSACTION AS A PA PER TRANSACTION. IN FACT THE AO HAS RAISED THE DOUBT ABOUT THE TRANSACTION UNDER PRESUMPTION THAT THE DEDUCTION N/S.80IB{10) WOULD NO! BE AVAILABLE TO M/S. KASHISH PARK REALTY PVT LTD , IF IT HAD CONSTRUCTE D HOUSING PROJECT ON THE BALANCE PORTION OF THE FSI AVAILABLE. THIS DOUBT OF THE A. O. WAS NOT BASED ON ANY LEGAL PROVISIONS OF LAW BECAUSE SHARE IS NO BAR ON CONSTRUCTING A FANNING PROJECT ON A LAND ON WHICH - SOME BUILDINGS LAW ALREADY BEEN CONSTRUCTED IN OTHER CONDITIONS OF SECTION 80IB(10) TIRE SATISFIED THE POSITION OF CLAIM OF DEDUCTION U/S. 80IB(10} UNDER SUCH CIRCUMSTANCES ALREADY CLARIFIED BY THE CBDT LONG HACK VIDE LETTER DT. 4.5.2001 WHEN A NOTIFICATION NO. ITA NO. 5177 /M/2017 A.Y.20 13 - 14 11 205/3/2001/ITA - II WAS ISSUED IN RESPONSE TO CLARIFICATION SOUGHT BY MAHARASHTRA CHAMBER OF HOUSING INDUSTRY. VIDE THIS NOTIFICATION, THE CBDT HAS CLARIFIED THAT THE ADDITIONAL HOUSING PROJECT BY CONSUMING TDR ON EXISTING HOUSING PROJECT SITES CAN QUALIFY AS INFRASTRUCTURE FACILITY U/S. 80IB(10) PROVIDED IT IF TAKEN UP BY A SEPARATE UNDERTAKING HAVING HOOKS OF ACCOUNT MAINTAINED IN SUCH MANNER TO ENSURE ASCERTAINMENT OF THE CORRECT PROFIT THE APPEL LANT FIRM VIDE IFS LETTER DT. 1 3/03/2013 HAS PAINTED OUT THIS CLARIFICATION TO THE A.O. ALSO. THEREFO RE, IN VIEW OF THE CLARIFICATION ISSUED BY THE CBDT WHICH IS HIGHEST AUTHORITY FOR ADMINISTRATION OF THE INCOME TAX LAWS, THE CONSTITUTION OF THE FIRM AND CONSTRUCTION OF THE HOUSING PROJECT ON TDR - FSI ACQUIRED JN REJPECT OF THE EXISTING HOUSING _PROJECT S ITE CANNOT BE CONSIDERED AS A COLLUSIVE DEVICE IN ORDER TO CLAIM DEDUCTION U/S 80IB(10). THIS POSITION OF LAW HAS ALSO BEEN EXPLAINED BY THE HONBLE JURISDICTIONS! HIGH COURT IN THE CASE OF CIT VS. M/S. VANDANA PROPERTIES, 206 TAXMAN 584 (2012). THE LD. A .R HAS VERY HEAVILY RELIED UPON THE DECISION OF HON' HIGH COURT IN THE CASE OF M/S. VANDANA PROPERTIES (SUPRA) ON THE GROUND (HAT THE FACT.': OF THE APPELLANT'S CASE ARE IDENTICAL. IN THE CASE OF M/S. VADANA PROPERTIES, THE BUILDINGS A, B, C & D WERE ALREA DY CONSTRUCTED ON A PLOT AREA OF 2.36 ACRES SITUATED AT KANDIVALI (W), MUMBAI, SUBSEQUENTLY, THE ASSESSES BECAME ENTITLED TO CONSTRUCT ON ADDITIONAL BUILDING 'E' ON THE AFORESAID PHI OF LAND WITH SEVERAL RESIDENTIAL UNITS. THE ASSESSES CLAIMED DEDUC TION U/ S. 80IB(10 ) ON THE PROFIT ARISING FROM ''E' BUILDING. AFTER CONSIDERING THE FACTS OF THE CASE, IT WAS HELD THAT WHEN THE BUILDINGS A.B.C & D WERE APPROVED, CONSTRUCTION OF 'E' BUILDING WAS NOT EVEN CONTEMPLATED AND THE SAME WAS APPROVED FOR CONSTRUCTION ON LY ON 11 TH OCTOBER, 2002 AS A RESULT OF ADDITIONAL BUILDING PERMITTED DUE TO CHANGE IN THE CEILING LIMIT OF THE LAND. THEREFORE, THE CONSTRUCTION OF BUILDING 'E' COULD NOT BE THE PART OF EARLIER PLAN FOR THE PURPOSE OF SECTION 80LB(10). IT IS THAT F ROM THE FALTER OF CBDT DT - 4 TH MAY.2001, IT IS CLEAR THAT FOR THE 80IB(10). IT IS NOT THE MANDATE OF SECTION THAT THE ON A VACANT LAND OF PLOT HAVING MINIMUM AREA OF ONE ACRE AND THAT HOUSING PROJECT HAS CONSTRUCTED ON A PLOT OF LEND HAVING MINIMUM AREA OF ONE AC RE BILL WITH EXISTING HOUSING PROJECTS, WOULD QUALIFY FOR SECTION 80IB(10) DEDUCTION. THEREFORE, IT IS DEAF THAT ON A PLOT OF LAND HAVING MINIMUM AREA OF ONE ACRE, THERE CAN BE ANY NUMBER OF HOUSING PROJECTS AND SO LONG AS THOSE HOUSING PROJECTS ARE APPROV ED BY THE LOCAL AUTHORITY THE CONDITIONS SET OUT IT/S. 80IB(10), THE DEDUCTION THERE UNDER CANNOT BE DENIED TO ALL THOSE HOUSING PROJECTS MERELY BECAUSE THE DECISION OF HON 'BIN ITA NO. 5177 /M/2017 A.Y.20 13 - 14 12 BOMBAY HIGH COURT CAME IN THE YEAR 2012, IT CANNOT HE SAID THAT (HE APPELLANT WAS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB(10) BECAUSE IT CANNOT HAVE ANTICIPATED THIS DECISION WAY BACK IN 2003. THEREFORE, 1 AM OF THE VIEW THAT THE OBSERVATIONS OF A O. IN THIS REGARD ARE BAYED ON SURMISES AND CONJECTURES. MOREOVER, THE HON.BLE HIGH COURT IN THE CASE OF M/S. VANDANA PROPERTIES (SUPRA) TO EXPLAINED LEGAL POSITION IN RESPECT OF THE DEDUCTION U/S. 80IB(W) AND HENCE, THE SAME WOULD BE APPLICABLE FOR ALL THE ASSESSMENT YEARS. IN VIEW OF THESE FACTS AND LEGAL POSITION, PARTICULARLY CLARIFIED BY THE CBDT AND FURTHER SUPPORTED BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT WHICH IS BINDING OK ME. I HOLD THAT THERE IS NO INFIRMITY IN ACQUIRING THE DEVELOPMENT RIGHTS OF PAN OF THE LAND FROM M/S. FGP LID AND CONSTRUCTING HOUSING PROJECTS FOR CLA IMING DEDUCTION U/S. 80IB(10). NEEDLESS TO MENTION. M/S. KASHISH PARK REALITY PVT. _LID WOULD HAVE ALSO BEEN ELIGIBLE FOR DEDUCTION U/S. 80IB(1&) IF THE SAID CONCERN HAD CONSTRUCTED THE HOUSING BUILDING ON BALANCE LAND WITH ADDITIONAL TDR - FSI IN VIEW OF TH E ABOVE DECISION. THUS, THE ARGUMENTS OF LD. A.R. ARE FOUND ACCEPTABLE ON THIS ACCOUNT. (C) ISSUE OF AREA OF PLOT LESS THAN ONE ACRE; THE A.O. HAS RAISED THE ISSUE THAT THE AREA OF THE PLOT ON WHICH THE APPELLANT FIRM HAS CONSTRUCTED A HOUSING PROJECT IS LESS THAN ONE ACRE. THIS OBSERVATION OF THE A.O. IS DEVOID OF ANY MERITS AS FROM THE DEVELOPMENT AGREEMENT DT. 3.12.2003 ITSELF IT IS CLEAR THAT THE APPELLANT FIRM HAS ACQUIRED DEVELOPMENT RIGHTS OF FSI TO THE TUNE OF 9851.81 SQ. MTRS. UNDISPUTEDLY, THE BUILDINGS OF THE HOUSING PROJECTS DEVELOPED BY THE APPELLANT FIRM HAVE BEEN CONSTRUCTED ON THE OPEN PLOT OF LAND AND NONE OF THE BUILDINGS HAS BEEN CONSTRUCTED ON SHE EXISTING BUILDINGS. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT FIRM HAS CONSTRUC TED BUILDINGS MN - 6, MN - 7 & MN - 8 COVERING TOTAL AREA OF 4067.46 SQ.MTRS. FURTHER, DURING THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR, THE APPELLANT FIRM HAS CONSTRICTED TOWERS 'A ' & 'B' ON IOTA! AREA OF 4885 SQ. MTRS. ON WHICH DEDUCTION IT U/S.80IB(JO) HAS ALSO BEEN CLAIMED. THUS THE TOTAL AREA COVERED UNDER HOUSING PROJECTS CONSTRUCTED BY THE APPELLANT FIRM WORKS OUT TO 8952.45 SQ. MTRS THESE FACTS ARE ALSO VERIFIABLE FROM THE PARA 9 OF THE ASSESSMENT ORDER WHERE A.O. HIMSELF HAS CONSIDERED TOTAL AREA AT 96 ,364 SQ. FTS. EQUIVALENT TO 8842.36 SQ.MTRS. FROM THE APPROVED LAY OUT PLAN DT. 29/3/2006, IT IS ALSO CLEAR THAT THE FSI UTILIZED IS 0.93 ONLY AND HENCE, THE PLOT AREA IS CERTAINLY MORE THAN THE BUILT UP AREA. HOWEVER, THE A.O. HAS ERRONEOUSLY CONSIDERE D THE AREA OF BUILDING CONSTRUCTED DURING THE YEAR ITA NO. 5177 /M/2017 A.Y.20 13 - 14 13 UNDER CONSIDERATION ONLY IGNORING THE AREA OF THE BUILDINGS CONSTRUCTED IN SUBSEQUENT ASSESSMENT YEAR. IN VIEW OF THIS FACTUAL POSITION DULY SUPPORTED FROM DOCUMENTARY EVIDENCES, IT IS CLEAR THAT THE LAND AREA UTILIZED UNDER THE HOUSING PROJECTS OF THE APPELLANT FIRM IS MORE THAN ONE ACRE 4,000 SQ. MTRS.). THUS. I HOLD THAT THE FINDINGS OF A.O. IN THIS REGARD ARE NOT CORRECT. 8, IN THE ASSESSMENT YEAR 2011 - 12, FOLLOWING THE ORDER OF THE CIT(A) - II, THANE, A S ABOVE, DEDUCTION U/S, 80IB(10) WAY ALLOWED TO THE APPELLANT BY ME VIDE APPEAL ORDER DATED 29.07.2015 AFTER MAKING THE FOLLOWING OBSERVATIONS - 13. THE FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS OF THE APPELLANT'S CASE F OR A.Y. 2010 - 11 IN FACT THE SAME PROJECT HAS BEEN CONTINUED DURING THE YEAR UNDER CONSIDERATION. AS THE FACTS OF THE CASE ARE IDENTICAL TO THE FACTS OF THE APPELLANT'S CASE FOR A.Y. 2010 - 11 AND THE SAME PROJECT IS CONTINUED DURING THE YEAR UNDER CONSIDERAT ION, THE ABOVE REPRODUCED DECISION MY PREDECESSOR IS EQUALLY APPLICABLE IN THE APPELLANT CASE FOR THE YEAR UNDER CONSIDERATION ALSO. THEREFORE, RELYING ON THE DECISION OF MY PREDECESSOR AS ABOVE, IT IS HELD THAT - 1. THE APPELLANT FIRM WAS A GENUINE FIRM FOR THE REASONS THAT A. THE ASSESSMENT ORDER HAD BEEN PASSED BY THE AO IN THE CASE OF THE APPELLANT IN THE STATUS OF A FIRM AND B. THE APPELLANT FIRM WAS DULY CONSTITUTED BY A PARTNERSHIP - DEED DATED 01.12.2003 AND NO DEFECT OR DISCREPANCY HAS BEEN P OINTED OUT BY THE AO IN THE PARTNERSHIP DEED 2. THE DEVELOPMENT RIGHTS ACQUIRED BY THE APPELLANT FIRM WAS NOT A COLLUSIVE TRANSACTION FOR THE REASONS - A. JUST BECAUSE M/S KASHISH PARK REALTORS PVT LTD . A PARTNER OF THE APPELLANT FIRM HAD INITIALLY IN TENDED TO PURCHASE THE TDR FROM THE LANDLORD AND HAD ALSO MADE A PAYMENT OF RS.1.10 CR TO THE LANDLORD BEFORE THE APPELLANT JINN WAS CONSTITUTED, DOES NOT IN ANY WAY LEAD TO THE CONCLUSION THAT THE TRANSACTION ENTERED INTO BY THE APPELLANT WITH THE LANDLOR D WAS A COLLUSIVE TRANSACTION. B. THE OBSERVATION OF THE AO THAT HAD M/S KASHISH PARK REALTORS PVT LTD DEVELOPED THE ADDITIONAL TDR - FSL THEN IT WOULD NOT HAVE BEEN ELIGIBLE FOR DEDUCTION U/S SOIB(IO) IS WITHOUT ANY LEGAL BASIS BECAUSE AS HELD BY THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF VANDANA PROPERTIES, EVEN THE ADDITIONAL BUILDING TIED ON THE SAME PLOT OF LAND WHERE OTHER BUILDINGS HAD ALREADY EXISTED WAS ELIGIBLE FOR THE DEDUCTION PROVIDED OTHER CONDITIONS WERE FULFILLED. ITA NO. 5177 /M/2017 A.Y.20 13 - 14 14 3. THE PROJECT HAD BEEN CONSTRUCTED ON A PLOT OF LAND OF MORE THAN ONE ACRE AS IS APPARENT FROM THE FACT THAT THE APPELLANT FIRM HAD ACQUIRED THE DEVELOPMENT RIGHTS OF FSI TO THE TUNE OF 9851 SQ. MTS. 14. THEREFORE, DEDUCTION U/ 80IB(10) WAS AVAILABLE TO THE APPELLANT AS NO VIOL ATION OF ANY OTHER CONDITIONS HAS BEEN POINTED OUT BY THE AO. 6. ON APPRAISAL OF THE ABOVE MENTIONED ORDER, WE NOTICED THAT THE CIT(A) HAS ALREADY ADJUDICATED THE MATTER OF CONTROVERSY WHILE DECIDING THE ISSUE IN THE A.Y. 2011 - 12 AND 20 12 - 13 IN WHICH TH E CLAIM OF THE PRECEDING YEAR HAS BEEN ALLOWED. THE DECISION OF THE CIT(A) FOR THE A.YS. 2011 - 12 & 2012 - 13 DATED 15.07.2014 NOWHERE CHANGED AND V ARIED BY THE ANY OTHER AUTHORITY. MOREOVER, THE MATTER OF CONTROVERSY HAS BEEN ADJUDICATED BY THE HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2010 - 11 IN ITA. NO. 6172/M/2014 DATED 09.03.2018 AND FOR THE A.Y 2011 - 12 IN ITA. NO.5061/M/2015 DATED 25.04.2018 IN WHICH THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE . TAKING INTO ACCOUNT OF ALL THE FACTS AND CIRCUMSTANCES AND BY HONORING THE DECISION OF THE HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2010 - 11 IN ITA. NO.6172/M/2014 DATED 09.03.2018 AND FOR THE A.Y 2011 - 12 IN ITA. NO.5061/M/2015 DATED 25.04.2018 , W E AFFIRM THE FINDING OF THE CIT(A) ON T HIS ISS UE AND DISMISSED THE APPEAL OF THE REVENUE. ITA NO. 5177 /M/2017 A.Y.20 13 - 14 15 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE D ISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 30. 11 . 2018 . SD/ - SD/ - ( B. R. BASKARAN ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 30. 11 . 2018 . VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI