ASST CIT CIR 21(3), MUMBAI V. SUNCITY HOUSING, MUMBAI

ITA 5183/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3332 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 12-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Retrospective amendment; Revised return
• Section: 143(3); 133A; 80IB; 131

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 5183/MUM/2014 ( / ASSESSMENT YEAR : 2010-11) ASSTT. COMMISSIONER OF INCOME TAX CIR. 21(3), ROOM NO. 501, BLDG., 5 TH FLOOR, C-11, PRATYAKSH KAR BHAVAN, BKC, BANDRA (E), MUMBAI 400 051. / V. M/S SUNCITY HOUSING, D-101, PRASHANT APRTS., OPP. IIT MAIN GATE, POWAI, MUMBAI 400 007 ./ PAN : AAPFS4720G ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY SHRI RITESH MISRA , DR ASSESSEE BY : NONE / DATE OF HEARING : 02-03-2016 / DATE OF PRONOUNCEMENT : 30-05-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE REVENUE, BEING ITA NO. 51 83/MUM/2014, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 12-05-20 14 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 32, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2010-11, THE APPE LLATE PROCEEDINGS BEFORE ITA 5183/MUM/2014 2 THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDE R DATED 26-03-2013 PASSED BY THE LEARNED ASSESSING OFFICER (HEREINAFTE R CALLED THE AO) U/S 143(3) OF THE INCOME TAX ACT,1961 (HEREINAFTER CALL ED THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING RELIEF OUT OF DEDUCTION U/S, 801B(10) IGNORING THAT THE ASSESSEE HAS VIOLATED THE CONDITION THAT THE HOUSING UNITS SHALL NOT EXCEED 1000 SQ.FT AREA BY CONSTRUCTION OF FLATS OF MORE THAN THE AREA PRESCRIBED.' 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) HAS ERRED IN ALLOWING RELIEF OUT OF DEDUCTION U/S 801B(10) IGNORING THAT THE AREA OF THE FLATS SHOULD NOT BE MORE T HAN 1000 SQ.FT. AND IF ANY OF THE ELIGIBILITY CONDITION IS NOT FULFILL ED, DEDUCTION U/S 801B(10) IS NOT AVAILABLE SINCE THE DEDUCTION IS ELIG IBLE ON THE PROJECT AND NOT ON INDIVIDUAL RESIDENTIAL UNIT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) HAS FAILED TO APPRECIATE THAT THERE IS NO MENTI ON IN THE INCOME TAX ACT THAT THE ASSESSEE MAY BE ALLOWED DEDUCTION ON P ROPORTIONATE BASIS. 4. THE APPELLANT PRAYS THAT THE ORDER OF LD.CIT(A) ON TH E ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER BE RESTORED.' 3. AT THE TIME OF HEARING BEFORE US, NONE APPEARED ON BEHALF OF THE ASSESSEE-FIRM. THEREFORE, WE PROCEED TO DISPOSE OF THE APPEAL AFTER HEARING THE LEARNED D.R. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E-FIRM IS ENGAGED IN `THE BUSINESS OF DEVELOPMENT OF HOUSING PROJECTS UNDER T HE NAMES OF PLUTO, NEPTUNE , MARS AND JUPITER . ITA 5183/MUM/2014 3 5. THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT O F RS. 4,07,22,231/- INCLUDING DEDUCTION OF RS. 3,35,12,657/- IN RESPECT OF NEPTUNE PROJECT WAS FILED BY THE ASSESSEE-FIRM IN THE RETURN OF INCOME FILED WITH THE REVENUE . 6. A SURVEY ACTION WAS CONDUCTED BY THE REVENUE U/S 133A OF THE ACT ON 27 TH OCTOBER, 2010 AT THE BUSINESS PREMISES OF THE ASSES SEE-FIRM . THE STATEMENT OF SHRI PRASHANT SHARMA, PARTNER OF THE FIRM AND SH RI MANISH S. KARNAVAT, SALES MANAGER WERE RECORDED. 7. IT WAS OBSERVED DURING THE COURSE OF SURVEY ACTI ON ON 27.10.2010 THAT IN THE PROJECT NEPTUNE, 47 FLATS WERE HAVING BUILT U P AREA OF 1260 SQ. FT. I.E. MORE THAN THE PRESCRIBED LIMIT OF 1000 SQ. FT. LAID DOWN IN SECTION 80-IB(10) OF THE ACT. DURING THE COURSE OF SURVEY ACTION U/S 133 A OF THE ACT ON 27.10.2010, THE FOLLOWING STATEMENTS WERE MADE WHER EBY IT WAS ADMITTED BY SHRI MANISH S. KARNAVAT, SALES MANAGER THAT 47 FLAT S WERE HAVING AREA OF 1260 SQUARE FEET:- Q NO. 10: NOW, I AM SHOWING YOU A LIST OF FLATS I N NEPTUNE. AS PER THIS LIST, THE TOTAL NO. OF FLATS ARE 150. HOWE VER, AS PER YOUR STATEMENT THE TOTAL FLATS IN NEPTUNE IS 100. PLEASE EXPLAIN THE DIFFERENCE? ANS. YOUR ATTENTION IS DRAWN TO THE 3BHK FLATS HAVI NG AREA OF 1260 SQ.FT. IN RESPECT OF THESE 3BHK FLATS, SUNCITY HOUSING HAS ENTERED INTO 2 AGREEMENTS FOR DIFFERENT AREAS VIZ. 890 SQ.FT. AND 370 SQ.FT. AS SUCH, THE TOTAL NO. OF ACTUAL FLATS A RE ONLY 100 BUT DUE TO 2 AGREEMENTS FOR EACH 3 BHK FLATS, THE TOTAL NO. OF FLATS IS AT 150. Q.NO.11. WHAT IS THE CARPET AREA AND BUILT UP AREA FOR THESE 3BHK FLATS AT NEPTUNE? ANS. CARPET AREA IS 84.31 SQ.MTR. (59.55. SQ.MTR + 24.76 SQ.MTR.). BUILT UP/SALEABLE AREA IS AFTER LOADING 39%. ON CAR PET AREA BEING ITA 5183/MUM/2014 4 117. 05 SQ.MTR. AS SUCH, BUILT UP/SALEABLE AREA COM ES TO APPROX. 1260 SQ.FT. FOR 3BHK FLAT AT NEPTUNE. DURING THE COURSE OF SURVEY U/S 133A OF THE ACT ON 27 TH OCTOBER, 2010, STATEMENT OF SHRI PRASHANT SHARMA , PARTNER OF THE ASSESSEE FIRM WAS ALSO RECORDED U/S 131 OF THE ACT AND HE ADMITTED TO WITH DRAW THE CLAIM OF DEDUCTION U/S 80IB(10) IN RESPECT OF 47 FLATS ON TH E BASIS OF THE FACT THAT THESE 47 FLATS HAVE AREA OF MORE THAN 1000 SQUARE F EET , ACCORDING TO SHRI PRASHANT SHARMA WORKS OUT TO RS. 8.26 CRORES. THE RELEVANT PART OF THE STATEMENT OF SHRI PRASHANT SHAMRA ADMITTED WITHDRAW ING OF DEDUCTION U/S 80IB(10) OF THE ACT , RECORDED U/S. 131 OF THE ACT ON 27 TH OCTOBER, 2010 DURING THE COURSE OF SURVEY ARE AS UNDER:- Q. NO. 7: YOUR ATTENTION IS DRAWN TO Q. NO. 7, 10 & 11 OF THE STATEMENT OF SHRI MANISH S. KARNAWAT, SALES MANAGER OF M/S. SUNCITY HOUSING WHEREIN IT HAS BEEN STATED THAT THE RE ARE 50 FLATS OF 3 BHK IN NEPTUNE HAVING BUILT UP AREA OF 1 260 SQ.FT. EACH. YOU ARE REQUIRED TO EXPLAIN, HOW DEDUCTION U/ S.80IB IS ALLOWABLE IN RESPECT OF NEPTUNE PROJECT. ANS: 1 AGREE WITH THE STATEMENT OF SHRI MANISH S. K ARNAWAT WHO IS THE SALES MANAGER OF M/S SUNCITY HOUSING. HOWEVE R, I WANT TO CLARIFY THAT THE AREAS IN THE 3 BHK & 2 BHK ARE SUP ER BUILT UP AREA, WHICH INCLUDES COMMON AREAS OF STAIRCASE AND COMMON PASSAGES OUTSIDE THE FLAT. CONSIDERING ALL THESE TH INGS, THE BUILT UP AREA IN 3 BHK IS ON BORDER LINE OF THE SATISFYIN G CONDITION OF SECTION 80IB(L0). BUT ON THE PRESUMPTION THAT THESE 3BHK FLATS ARE HAVING BUILT UP AREA IS LESS 1000 SQ.FT. WE HAV E CLAIMED DEDUCTION ON THE ENTIRE PROFIT OF NEPTUNE PROJECT D URING THE COURSE OF SURVEY, WHEN THIS MATTER WAS POINTED OUT THAT THE MEASUREMENT OF THE 3BHK FLATS IS MORE THAN 1000 SQ. FT., HENCE WE ARE CONSIDERING TO WITHDRAW OUR CLAIM OF DEDUCTI ON U/S. 80IB(10) ON PROPORTIONATE BASIS OF THE FLATS HAVING BUILT UP AREA OF MORE THAN 1000 SQ.FT. AND LESS THAN 1000 SQ.FT. WE ARE DOING SO RELYING ON JUDGMENTS OF TRIBUNAL WHEREIN PROPORT IONATE DEDUCTION U/S 80IB(10) WAS ALLOWED IN RESPECT OF EL IGIBLE FLATS. IN THIS CONNECTION, I AM GIVING HEREWITH THE DETAILS O F FLATS HAVING BUILT AREA OF MORE THAN 1000 SQ.FT. ITA 5183/MUM/2014 5 47 FLATS HAVING AREA OF 1260 SQ.FT. = 47 X 1260 SQ. FT. = 59220 SQ.FT. (55. 49%) 50 FLATS HAVING AREA OF 950 SQ.FT. = 50 X 950 SQ.FT . = 47500 SQ.FT.(44.51%) 106720 SQ.FTS. IN THIS PROPORTION OF FLATS HAVING AREA MORE THAN 1 000 SQ.FTS. AND AREA HAVING LESS THAN 1000 SQ.FTS. I AM WITHDRAWING THE DEDUCTION CLAIMED U/S. 801B(10) WHICH WAS CLAIMED F OR AYS 2009-10 & 2010-11 FOR THE PROJECT NEPTUNE. THE TOTAL INCOME SHOWN IN PROJECT NEPTUNE IN A.Y.20 09-10 IS RS.11,54,52,219/- AND INCOME FOR A.Y. 2010-11 IS RS . 3,35,12,657/- TOTALING OF RS.14,89,64,876/- WHICH W AS CLAIMED AS DEDUCTION U/S 80IB (10). NOW I APPREHEND THAT 5 5.49% OF THE TOTAL BUILT UP AREA OF THE PROJECT IS NOT ELIGIBLE FOR DEDUCTION U/S. 80LB(L0). HENCE, IN THIS PROPORTIONATE, I HEREBY ST ATE THAT THE CLAIMED DEDUCTION U/S.80LB(10) WILL BE WITHDRAWN WH ICH COMES TO RS.8,26,60,609/- AND NECESSARY TAXES WILL BE PAI D AND REVISE RETURN WILL BE FILED. THIS FIGURE IS SUBJECT TO FUR NISHING OF CORRECT DETAILS REGARDING THE RECEIPTS OF AMOUNT WITH RESPE CT TO THE 3BHK FLATS IN THE A.YS.2009-10 & 2010-11. THE WITHDRAWAL OF DEDUCTION U/S. 80IB AS STATED ABOVE IS MADE WITH A VIEW TO PU RCHASE PEACE AND AVOID LITIGATION. THEREFORE, 1 REQUEST THE AUTH ORITIES TO TAKE LENIENT VIEW ON THE IMPOSITION OF PENALTY AND OTHER CONSEQUENCES. 3.3 IN THE STATEMENT, SHRI PRASHANT SHARMA HAS FURT HER RECONFIRMED THE WITHDRAWAL OF DEDUCTION U/S.80IB (1 0) AS UNDER:- Q. NO. 10: DO YOU WANT TO SAY ANYTHING ELSE. ANS: YES; I ONCE AGAIN CONFIRM ABOUT THE WITHDRAWAL OF DEDUCTION U/S 80IB(10) TO THE EXTENT OF RS. 8,26,60,609/- FOR A.YS.2009-10 & 2010-11 SUBJECT TO FILING OF CORRECT DETAILS. NEC ESSARY TAXES WILL BE PAID AND RETURN OF INCOME FOR ABOVE TWO YEARS WI LL BE REVISED. A SURVEY ACTION U/S 133A OF THE ACT WAS AGAIN CARRI ED OUT ON 20 TH JANUARY, 2012 IN THE BUSINESS PREMISES OF THE ASSESSEE FIRM WHEREBY STATEMENT OF SHRI PRASHANT SHARMA, PARTNER OF THE ASSESSEE FIRM WAS R ECORDED IN ADDITION TO THE STATEMENT OF SHRI RAMAKRISHNAN IYER, PURCHASER OF FLAT NO. 204 & 205 IN ITA 5183/MUM/2014 6 NEPTUNE TOWER AND OTHER PURCHASERS STATEMENT WERE ALSO RECORDED IN THE COURSE OF SURVEY ACTION WHEREBY THE BUYER SHRI RAMA KRISHNAN IYER IN HIS STATEMENT STATED THAT HE HAD PURCHASED TWO FLATS I. E. FLAT NO. 204 & 205 BY TWO SEPARATE AGREEMENTS BUT THAT HE HAD BEEN HANDED OVER ONE UNIT OF AREA 1260 SQ.FT. BY THE BUILDER HAVING A SINGLE ENTRANCE AND HE HAD NOT MADE ANY STRUCTURAL CHANGES IN THE FLAT. THE SAME STATEMENT WAS GIVEN BY THE OTHER PURCHASERS OF THE FLAT ALSO I.E. SHRI PRAVIN SHANKA RLAL JAISWAL, SH. RAJESH KAPOOR AND SHRI AVINASH SHETTY. IN THE STATEMENT RE CORDED ON 20 TH JANURAY, 2012, SHRI PRASHANT SHARMA, PARTNER OF THE ASSESSEE FIRM STATED THAT THE ASSESSEE FIRM WAS CLAIMING PROPORTIONATE DEDUCTION U/S 80IB(10) OF THE ACT IN RESPECT OF THE FLATS HAVING BUILT UP AREA LESS THAN 1000 SQ. FT. IN NEPTUNE PROJECT BASED ON LEGAL OPINION. THE SAID STATEMENT OF SHRI PRASHANT SHARMA ARE AS UNDER:- Q. NO. 11: AS PER INCOME TAX ACT THERE IS NO SUCH PROVISION OF PROPORTIONATE DEDUCTION U/S. 80IB(10), THEN UNDER W HICH PROVISION OF THE ACT YOU ARE CLAIMING THE SAME? . ANS. EVEN THOUGH THERE MAY NOT BE ANY PROVISION IN THE I.T. ACT FOR PROPORTIONATE DEDUCTION U/S. 80IB (10) AS EXPLA INED BY YOU, HOWEVER AS PER THE LEGAL OPINION & SOME DECISIONS I N FAVOUR OF PROPORTIONATE DEDUCTION FROM JURISDICTIONAL APPELLA TE TRIBUNAL & HIGH COURT , IN ANTICIPATION OF GETTING BENEFIT OF THE SUBJECT JUDGMENT WE ARE CLAIMING PROPORTIONATE DEDUCTION UN DER SECTION 80IB(10) OF THE I.T.ACT. SHRI PRASHANT SHARMA ALSO STATED THAT THE ASSESSEE FIRM HAS WITHDRAWN DEDUCTION U/S 80IB(10) OF THE ACT RS. 2,07,77,847/- FOR THE ASSESSMENT YEAR 2010-11 IN RESPECT OF THE NEPTUNE PROJECT. HOWEVER , THE AO OBSERVED THAT THE ASSESSEE HAS NOT FILED A REVISED RETURN TILL DA TE FOR THE ASSESSMENT YEAR 2010-11 TO WITHDRAW THE CLAIM OF DEDUCTION U/S 80IB (10) OF THE ACT IN RESPECT OF FLATS HAVING AREA OF MORE THAN 1000 SQ. FT. AREA IN NEPTUNE PROJECT. SHRI PRASHANT SHARMA STATED THAT EVEN IN THE ASSESS MENT YEAR 2009-10 , THE ITA 5183/MUM/2014 7 ASSESSEE FIRM DID NOT FILE A REVISED RETURN TO WITH DRAW THE CLAIM OF DEDUCTION U/S 80IB(10) OF THE ACT IN RESPECT OF FLATS HAVING AREA OF MORE THAN 1000 SQ. FT. IN PROJECT NEPTUNE. THE STATEMENT OF SHRI PRAS HANT SHARMA WAS RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASS ESSMENT YEAR 2009-10 WHEREIN HE STATED THAT BASED ON THE DECISION OF ITA T, THEY HAVE GOT LEGAL OPINION THAT THE NEPTUNE PROJECT IS ENTITLED FOR 10 0% DEDUCTION U/S 80IB(10) AND, HENCE, THE ASSESSEE WAS RETRACTING FROM THE ST ATEMENT RECORDED IN THE COURSE OF SURVEY CARRIED ON 27 TH OCTOBER, 2010 AND NOT FILING A REVISED RETURN TO WITHDRAW THE CLAIM OF DEDUCTION U/S 80IB (10) OF THE ACT WITH RESPECT TO THE FLATS HAVING ARE MORE THAN AREA OF 1000 SQ. FT. . IN VIEW OF THIS IN THE ASSESSMENT YEAR 2009-10, THE ENTIRE CLAIM OF DEDUC TION U/S 80IB (10) OF THE ACT WAS DISALLOWED IN RESPECT OF NEPTUNE PROJECT ON THE GROUND THAT NEPTUNE PROJECT DID NOT FULFILL THE REQUIREMENT OF SECTION 80IB (10) THAT IS BUILT UP AREA OF SOME OF THE FLATS WERE NOT LESS THAN 1000 SQ. FT . AND ALSO THE SIZE OF PLOT OF LAND AFTER EXCLUDING THE AREA OF THE 47 FLATS EXCEE DING 1000 SQ. FT. WOULD BE LESS THAN 1 ACRE. THE LEARNED CIT(A) FOR THE ASSESS MENT YEAR 2009-10 WHILE ADJUDICATING FIRST APPEAL HELD THAT THE ASSESSEE FI RM WAS ENTITLED TO PROPORTIONATE DEDUCTION U/S 80IB (10) OF THE ACT I N RESPECT OF FLATS WHOSE AREA DID NOT EXCEED 1000 SQ. FT. . IT WAS ALSO HELD BY THE LEARNED CIT(A) THAT FOR COMPUTING THE AREA OF THE PLOT OF LAND FOR THE PROJECT IT IS THE TOTAL AREA OF THE PROJECT OF 8.98 ACRES FOR ALL THE BUILDINGS IN THE LAYOUT WHICH HAS TO BE CONSIDERED AND NOT THE AREA OF LAND ON NOTIONAL BAS IS FOR THE NEPTUNE BUILDING ONLY. HOWEVER, THE ABOVE DECISION OF THE LEARNED CIT (A) FOR THE ASSESSMENT YEAR 2009-10 WAS NOT ACCEPTED BY THE REV ENUE AND ACCORDINGLY APPEAL WAS FILED BEFORE THE TRIBUNAL AGAINST THE OR DER OF THE LEARNED CIT(A). 8. THE AO AFTER CONSIDERING THE FACTS OBSERVED THAT THE OBJECTIVE OF THE TAX BENEFIT FOR HOUSING PROJECT IS TO BUILD HOUSING STO CK FOR LOW AND MIDDLE INCOME RESIDENTIAL HOUSES. HOWEVER, THIS IS CIRCUM VENTED BY THE DEVELOPERS BY ENTERING INTO AGREEMENT TO SELL MULTIPLE ADJACEN T UNITS TO A SINGLE BUYER, ITA 5183/MUM/2014 8 THEREFORE NEW CLAUSES (E) & (F) HAS BEEN INSERTED B Y THE FINANCE ACT, 2009 IN SECTION 80IB (10) OF THE ACT W.E.F. THE ASSESSMENT YEAR 2010-11 WHEREBY THE HOUSING PROJECT WILL NOT BE ALLOWED TO ALLOT MORE T HAN ONE RESIDENTIAL UNIT IN THE HOUSING PROJECT TO THE SAME PERSON, NOT BEING A N INDIVIDUAL, AND IN THE CASE OF INDIVIDUAL, NO OTHER RESIDENTIAL UNIT IN SU CH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSONS:- (I) THE INDIVIDUAL OR SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL; (II) THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA; (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL, THE SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA. IT WAS OBSERVED THE AO THAT IN THE PROJECT NEPTUNE BUILDING MORE THAN ONE UNIT HAS BEEN SOLD TO SAME INDIVIDUAL DURING THE PR EVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2010-11 FOR WHICH THE DETAILS ARE A S UNDER;- SR. NO. NAME OF THE PARTY FLAT NO. BUILT UP AREA (IN SQ. FT.) AGREEMENT VALUE (IN RS.) 1 ASHA RANI SARAN B/701 769 35,60,000/- ASHA RANI SARAN B/706 319 14,80,000/- 2 TRESA PAUL B/901 769 53,68,250/- TRESA PAUL B/906 319 22,31,750/- 3 SHALINI LAKSHMAN RAO B/1001 769 53,68,250/- SHALINI LAKSHMAN RAO B/1006 319 22,31,750/- 4 PRAKASH RAMDAS ASHAR B/2501 769 61,06,400/- PRAKASH RAMDAS ASHAR B/2506 319 25,38,600/- 5 AKASH N. RAJPAL B/2503 821 60,20,000/- AKASH N. RAJPAL B/2504 769 53,36,000/- ITA 5183/MUM/2014 9 THE AO HELD THAT THE NEPTUNE BUILDING DOES NOT FULF ILL THE CONDITIONS LAID DOWN IN SECTION 80IB(10) OF THE ACT , NAMELY. A. THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF MUMBAI. B. WHERE A RESIDENTIAL UNIT IS ALLOTTED TO AN INDIVIDU AL , NO OTHER UNIT IN THE HOUSING PROJECT SHOULD BE ALLOTTED TO THE INDIV IDUAL OR THE SPOUSE OF THE INDIVIDUAL OR THE MINOR CHILDREN OF S UCH INDIVIDUAL. IT IS AN UNDISPUTED FACT THAT 47 FLATS IN THE NEPT UNE BUILDING ARE HAVING BUILT UP AREA OF MORE THAN 1000 SQ. FT. AND MORE THAN ONE UNIT HAS BEEN ALLOTTED TO THE SAME PERSON DURING THE PREVIOUS YEAR RELEVANT T O THE ASSESSMENT YEAR 2010-11, HENCE, THE ASSESSEE FIRM IS NOT ENTITLED F OR DEDUCTION U/S 80IB (10) OF THE ACT AND THE ASSESSEE FIRMS CLAIM OF DEDUCTI ON OF RS. 3,35,12,657/- IN RESPECT OF PROFITS OF NEPTUNE BUILDING WAS DISALLOW ED BY THE A.O. AND DEDUCTION U/S 80IB (10) OF THE ACT WAS ALLOWED ONLY IN RESPECT OF JUPITOR AND PLUTO BUILDING RELYING ON THE DECISION OF ITAT, C HENNAI DECISION IN THE CASE OF ACIT V. VISWAS PROMOTERS PRIVATE LIMITED (2010) 5 ITR(TRIB.) 449(CHENNAI) , VIDE ASSESSMENT ORDERS DATED 26-03-2013 PASSED BY T HE AO U/S 143(3) OF THE ACT . 9. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 26-03-2 013 PASSED BY THE AO U/S 143(3) OF THE ACT , THE ASSESSEE FIRM FILED ITS FIRST APPEAL BEFORE THE LEARNED CIT(A). 10. BEFORE THE LEARNED CIT(A), THE ASSESSEE FIRM SU BMITTED THAT THE ASSESSEE FIRM HAS CONSTRUCTED PROJECT NEPTUNE AND THERE WERE TOTAL 150 FLATS WHICH ARE COMPRISED OF 144 SALEABLE FLATS AND 6 REF UGE FLATS AS PER THE FOLLOWING APPROVED PLAN: ITA 5183/MUM/2014 10 NUMBER OF FLATS AREA 50 950 SQ. FT. 47 890 SQ. FT. 47 370 SQ. FT. 144 THE ASSESSEE FIRM SUBMITTED THAT OUT OF THE ABOVE, 50 FLATS HAVING AREA LESS THAN 1000 SQ. FT. HAS BEEN ALLOWED DEDUCTION U/S 80 IB(10) OF THE ACT BY THE LEARNED CIT(A) VIDE HIS APPELLATE ORDERS DATED 23 RD MAY, 2012 FOR ASSESSMENT YEAR 2009-10 . THE ASSESSEE FIRM SUBMITTED THAT DUR ING THE YEAR UNDER CONSIDERATION, THE ASSESSEE FIRM HAS SOLD 14 FLATS OF VARIOUS AREAS AMOUNTING TO RS. 5,86,55,000/- , AND THAT OUT OF WHICH 10 FLA TS AMOUNTING TO RS. 4,02,41,000/- WERE SOLD TO PERSONS SPECIFIED IN CLA USE (E) & (F) OF SECTION 80IB(10) OF THE ACT AND HENCE THE ASSESSEE FIRM WAS NOT ENTITLED TO THE DEDUCTION IN RESPECT OF THOSE FLATS. THE ASSESSEE FIRM FURTHER SUBMITTED THAT IN RESPECT OF FOUR FLATS SOLD TO VARIOUS INDIVIDUAL S, THE REQUIREMENT OF SECTION 80IB(10) WERE FULFILLED AND THEREFORE THE ASSESSE F IRM WAS ENTITLED TO DEDUCTION U/S 80IB(10) IN RESPECT OF THESE FOUR FLA TS. IN SUPPORT, THE ASSESSEE FIRM RELIED UPON THE FOLLOWING DECISIONS TO CONTEND THAT IF THE APPROVED PROJECT CONSISTS OF ELIGIBLE AND NON-ELIGIBLE FLATS , DEDUCTION U/S. 80IB OF THE ACT HAS TO BE RESTRICTED TO THE FLATS HAVING AREA L ESS THAN 1000 SQUARE FEET:- A) ITO V. AIR DEVELOPERS, (25 DTR 287 (NAG.) ) B) DCIT V. BRIGADE ENTERPRISES PVT. LTD., (14 DTR 371(BANG.)) C) ACIT V. SHETH DEVELOPERS P. LTD., (33 SOT 277 (MUM.)) D) BENGAL AMBUJA HOUSING DEVELOPMENT LTD. V DCIT ITA NO 1595/ KOL/ 2005 E) ARPANNA DEVELOPMENT CORP. V. ITO F) SJR BUILDERS V. ACIT,(3 ITR 569 (MUM.) ITA 5183/MUM/2014 11 G) G.V. CORPN. V. ITO, 43 DTR 329 (MUM.) H) CI'T V. BRAHMA ASSOCIATES, JUDGMENT DATED 22.2.2 011 (BORN.). I) EKTA HOUSING PVT, LTD. V. DCIT'(ITA NO. 3649/MU M./2009) J) AAKAR ASSOCIATES V. ITO (ITA NO 2903/AHD/2008). K) ACIT V. GHP ENTERPRISES (ITA NO 6746/MUM/2007) L) ARUN EXCELLO FOUNDATION PVT. LTD. V. ACIT (200 7) 108 TTJ 71 (CHENNAI) THUS, THE ASSESSEE FIRM SUBMITTED THAT DEDUCTIONS U /S 80IB(10) OF THE ACT BE ALLOWED IN RESPECT OF THE 4 FLATS SOLD WHERE THE AR EA WAS LESS THAN 1000 SQUARE FEET. THE LEARNED CIT(A) OBSERVED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SIMILAR TO THE ISSUE INVOLVED IN APPEAL FOR THE ASSESSMENT YEA R 2009-10 IN ASSESSEE FIRMS OWN CASE WHICH WAS DECIDED BY HIS PREDECESSO R LEARNED CIT(A). THE RELEVANT FINDINGS OF THE PREDECESSOR LEARNED CIT(A) IN AN APPEAL FOR ASSESSMENT YEAR 2009-10 IS REPRODUCED BELOW:- I HAVE CONSIDERED THE ARGUMENT OF LD. AR AND PERUS ED THE ASSTT. ORDER. ON FACTS AS MENTIONED IN ASSTT. ORDER AND T HAT NARRATED BY LD. AR, IT NEEDS TO BE FIRST EXAMINED: A) WHETHER THE 47 FLATS WITH SALEABLE AREA OF 370 S Q. FT. WERE INDEPENDENTLY CAPABLE OF BEING USED AS A RESIDENTIA L UNIT WITHOUT AMALGAMATION TO THE OTHER FLATS ? B) WHETHER THE AMALGAMATION WAS DONE BY CONTRACTORS AT THE INSTANCE OF CUSTOMERS WITHOUT INVOLVEMENT OR CONSEN T OF DEVELOPER? C) WHETHER THE BUILT UP AREA OF THE 47 FLATS OF 1 260 SQ FT SALEABLE AREA IS LESS THEM 1000 SQ FT. IT IS NOTED FROM THE COPY OF THE APPROVED PLAN THAT IN THE WING B THE SO CALLED 1 BEDROOM FLAT OF 370 SQ.FT (L BHK) H AS ONLY ONE ITA 5183/MUM/2014 12 LIVING ROOM AND 1 KITCHEN BUT NO BEDROOM AND HENCE IT CANNOT BE TERMED IN COMMERCIAL PARLANCE AS A 1 BHK FLAT. IT W AS ONLY AFTER AMALGAMATION THAT 3 BHK FLAT OF 1260 SQ FT WAS MADE AS AN INDEPENDENT RESIDENTIAL UNIT. THE FLATS OF 370 SQ.F T IS ONLY ON PAPER DESIGN BUT PRACTICALLY NEVER EXISTED PHYSICAL LY. THOUGH A CONTRACT FOR SALE CAN BE REGISTERED FOR ANY IMMOVAB LE PROPERTY OR ANY TYPE OF BUILT UP AREA, IF IT IS APPROVED BY LOC AL AUTHORITY BUT FOR CLAIMING DEDUCTION UNDER THE PROVISIONS OF 80IB (10), IT HAS TO BE NECESSARILY A RESIDENTIAL UNIT ONLY. SIMILARLY A SEPARATE ELECTRICITY CONNECTION CAN BE TAKEN FOR ANY PLACE I NCLUDING A SHOP, GARAGE, TEMPORARY HUTMENTS BUT THAT DOES NOT BY ITSELF MEAN THAT ANY PLACE WHERE SUCH CONNECTION IS THERE, HAS TO BE TREATED AS INDEPENDENT RESIDENTIAL UNIT. THEREFORE THE CONTENTION OF APPELLANT THAT 47 FLATS WITH 370 SQ. FT. AREA WE RE INDEPENDENT RESIDENTIAL UNITS IS NOT TENABLE, EVEN IF ON PAPER THE APPELLANT HAS SOLD IT BY WAY OF SEPARATE AGREEMENTS OR HAD TWO SE PARATE METERS. THE CONTENTION THAT NO APPLICATION FOR MERGER OF FL ATS HAVE BEEN MADE WITH BMC AND HENCE ON RECORDS THEY REMAIN TWO SEPARATE FLATS, CANNOT BE SEEN DE HORS THE REALITY WHICH WOU LD DEFEATS THE INTENT AND PURPOSE OF THE ACT. THE DEDUCTION U/S 80 IB(10) IS TO PROMOTE AFFORDABLE HOUSING AND IT IS WITH THIS INTE NTION ONLY THE SIZE OF FLAT HAS BEEN RESTRICTED. BUT TAKING APPROV AL OF SMALLER FLATS ONLY ON PAPER BUT IN PRACTICE MAKING A LARGE FLATS MORE THAN 1000 SQ FT, IS AGAINST THE VERY PURPOSE OF THE ACT AND HENCE TO TREAT THE FLATS AS SMALL UNITS OF 370 SQ FT AND 890 SQ FT AS TWO DIFFERENT UNITS WHEN PHYSICALLY AS WELL AS BY DESIG N IT HAS BEEN FOUND THAT THEY NEVER EXISTED INDEPENDENTLY AS SEPA RATE UNITS ON ALL FLOORS, WILL DEFEAT THE INTENT OF THE STATUTE. HENCE A LIBERAL APPROACH NEEDS TO BE AVOIDED ON FACTS AND CIRCUMSTA NCES OF THE CASE AS HELD BY SUPREME COURT AND HIGH COURTS IN SE VERAL DECISIONS. MOREOVER ASSESSEE'S INACTION TO TAKE REM EDIAL STEPS FOR APPLICATION OF MERGER OF FLATS TO BMC CANNOT BE REW ARDED WHEN THE ASSESSEE HAS VIOLATED BY AMALGAMATING THE FLATS AND CONSTRUCTING THE FLATS IN VIOLATION OF THE APPROVED PLAN APPROVED BY BMC. THE COMPLICITY OF APPELLANT IS DISCERNIBLE FROM THE FACT THAT IN ITS OWN PAMPHLET PRINTED FOR GIVING INFORMA TION FOR THE PROSPECTIVE CUSTOMERS, THE APPELLANT HAD ITSELF SHO WN THE TWO FLATS OF 890 AND 370 SQFT AS SINGLE UNIT OF 1260 SQ FT ON ALL FLOORS. THE CONTENTION THAT THE SAID FLATS HAVE BEEN AMALGA MATED BY THE CONTRACTOR AT THE INSTANCE CUSTOMERS IS ALSO BELIED BY THE VERY FACT THAT AS PER THE BMC RULES, THE POSSESSION OF F LATS CANNOT BE GIVEN TO CUSTOMERS TILL OCCUPATION CERTIFICATE IS O BTAINED FROM BMC AND TILL SUCH TIME IT IS THE RESPONSIBILITY OF THE DEVELOPER TO ENSURE THAT THE APPROVED BUILDING IS CONSTRUCTED AN D MAINTAINED ITA 5183/MUM/2014 13 IN THE MANNER AS PER APPROVED PLANS. MOREOVER THE C ONTRACTOR WHO CONSTRUCTED ON BEHALF OF THE APPELLANT CANNOT S TEP INTO SHOES OF DEVELOPER AND HE HAS NO RIGHT TO ENTERTAIN THE R EQUEST OF CUSTOMERS WITHOUT TAKING APPROVAL OR CONSENT OF THE DEVELOPER. SINCE ALL THE 47 FLATS OF 370 AND 47 FLATS OF 890 H AVE BEEN CONVERTED INTO 47 FLATS OF 1260 SQ FT. ON ALL THE F LOORS FURTHER SHOWS THAT IT WAS NOT IN NATURAL COURSE THAT SOME C USTOMERS JOINED THE FLATS RATHER IT WAS A PREMEDITATED DESIG N TO AMALGAMATE THE FLATS AND SELL THEM AS 3BHK FLATS. H AD IT BEEN AN ARRANGEMENT BETWEEN CUSTOMER AND CONTRACTOR, THEN T HERE WAS NO NEED FOR THE DEVELOPER TO HAVE PRE-PRINTED SUCH BROCHURES/PAMPHLETS SHOWING FLATS OF 1260 SQ FT. IT IS NOT A CASE OF SOME CAUSAL ALTERATION DONE WITHOUT PERMISSION O F BMC; RATHER IT IS WITH A PREDESIGNED INTENTION TO MAKE LARGER F LATS. HENCE IT CANNOT BE SAID THAT THE FLATS IN QUESTION WERE ACTU ALLY TWO INDEPENDENT RESIDENTIAL UNITS AND THE CONTENTION TH AT THE DEVELOPER HAD NO ROLE IN AMALGAMATION OF FLATS IS N OT CORRECT. THE ANOTHER ARGUMENT OF LD AR THAT THE BUILT UP ARE A OF THOSE 47 AMALGAMATED OF SALEABLE AREA OF 1260 SQ FT , IS LESS THAN 1000 SQ FT HAS BEEN CONSIDERED. THE COPY OF AGREEME NTS ENCLOSED BY LD AR SUGGEST THAT THE TOTAL CARPET AREA OF THE AMALGAMATED FLAT IS 907 SQ FT AND LD. AR HAS BEEN ENHANCED THE SAME FURTHER BY 10% TO ARRIVE AT BUILT UP AREA OF 997 SQ FT. HOW EVER, THE LD AR HAS COMPUTED THE BUILT UP AREA BY ENHANCING THE CAR PET AREA, @ 10% ON ADHOC BASIS ONLY TO ARRIVE AT THE BUILT UP A REA OF FLATS AT 997 SQ FT. THE RATIO OF CARPET TO BUILT UP AREA VAR IES FROM 10-15% DEPENDING UPON THE DESIGN OF THE BUILDING. HENCE TH E CALCULATION OF BUILT UP AREA BY INCREASING CARPET AREA ON ADHOC BASIS BY 10% IS NOT THE CONCLUSIVE BASIS TO HOLD THAT THE BUILT UP AREA IS LESS THAN 1000 SQ. FT. THAT TOO WHEN EVEN AS PER APPELLA NTS CALCULATION, THE MARGIN IS OF ONLY 3 SQ. FT. HENCE UNLESS THERE IS A SCIENTIFIC WORKING OF BUILT UP AREA ON TECHNICAL PA RAMETERS, SUCH ADHOC WORKING OF BUILT UP AREA CANNOT BE ACCEPTED A S GOSPEL TRUTH. HENCE THE ARGUMENT THAT THE BUILT UP AREA OF THE FLATS EVEN AFTER AMALGAMATION REMAINED BELOW 1000 SQ FT CANNOT BE ACCEPTED. THUS IT IS CLEAR THAT OUT OF THE TOTAL 15 0 FLATS OF NEPTUNE BUILDING, 47 FLATS OF 1260 SQ FT. OF AREA A RE MORE THAN 1000 SQ FT. IN BUILT UP AREA AND HENCE THE APPELLAN T IS NOT ELIGIBLE FOR DEDUCTION IN RESPECT OF PROFITS IN RESPECT OF S UCH 47 FLATS IN NEPTUNE BUILDING. 3.4. NOW THE NEXT QUESTION WHICH NEEDS TO BE EXAMIN ED IS THAT: ITA 5183/MUM/2014 14 A) IF IT IS TAKEN THAT THE 47 FLATS EACH WITH AREA OF 1260 SQ FT ARE NOT OF ELIGIBLE SIZE, THEN, CAN THERE BE A PROPORTIONATE DEDUCTION IN RESPECT OF THE REMAININ G FLATS WHICH ARE NEITHER AMALGAMATED NOR EXCEED THE LIMIT OF 1000 SQ FT AND. B) WHETHER AFTER EXCLUDING THE AREA OF 47 AMALGAMA TED FLATS, THE OTHER CONDITIONS OF 80IB(10) ARE FULFILL ED PARTICULARLY THE SIZE OF PLOT OF LAND OF THE PROJEC T BEING NOT LESS THAN 1 ACRE? PERUSAL OF THE PLETHORA OF DECISIONS OF ITAT RELIED UPON BY THE LD. AR AS ABOVE, IT IS NOTED THAT THE ITATS HAVE HELD I N THOSE DECISIONS THAT PROPORTIONATE DEDUCTION HAS TO BE AL LOWED IN RESPECT OF ELIGIBLE FLATS AFTER EXCLUDING THE PROFI TS OF NON ELIGIBLE FLATS PROVIDED THAT THE ASSESSEE FULFILLS THE OTHER CONDITIONS SUCH AS THE AREA OF PLOT OF LAND BEING MORE THAN 1 ACRE. THE ITAT KOLKATA DECISION IN CASE OF BENGAL AMBUJA HOUSING D EVELOPMENT LTD HAS ALSO BEEN APPROVED BY KOLKATA HIGH COURT ON 5/1/2007. SIMILARLY DEPARTMENTS APPEAL AGAINST THE ITAT MUMBA I DECISION IN CASE OF GHP ENTERPRISES IN (ITA NO 6746/MUM/200 7) WHEREIN PROPORTIONATE DEDUCTION WAS ALLOWED BY ITAT HAS BEE N DISMISSED BY BOMBAY HIGH COURT IN APPEAL NO 6952,6957,6958,69 59 OF 2010. THE ONLY, CONDITIONS TO BE SEEN WHILE ALLOWIN G PROPORTIONATE DEDUCTION IS THAT AFTER EXCLUDING THE NON ELIGIBLE UNITS, WHETHER THE PROJECT STILL FULFILS THE OTHER CONDITIONS NAMELY THE SIZE OF PLOT OF LAND BEING NOT LESS THAN 1 ACRE . FROM THE APPROVED PLANS IT IS NOTED THAT THE PLOT OF LAND FO R WHICH THE LAYOUT FOR ALL BUILDING I.E. MARS, VENUS, SUNDLE, J UPITER, NEPTUNE & PLUTO ARE CONSTRUCTED IS OF 36,365 SQ MTS ON WHIC H APPELLANT HAS CONSTRUCTED VARIOUS BUILDINGS NAMELY MERCURY, S UNDLE, VENUS, NEPTUNE & PLUTO ON THE SAID PLOT FROM TIME T O TIME. IT HAS BEEN CONTENDED BY THE LD AR THAT ALL THE BUILDINGS ARE PART OF ONE COMMON LAYOUT ON A SINGLE PLOT OF LAND WHICH IS OF 36,365 SQ MTS WITH NO SPECIFIC AREA OF LAND' ALLOCATED TO EAC H BUILDING INDIVIDUALLY AND ALL THE LAND UNDER COMMON AMENITIE S SUCH AS INTERNAL ROADS, OPEN AREA, CLUB HOUSE, AMENITIES AR EA ETC. ARE COMMON TO ALL THE BUILDINGS. THERE IS NO-BOUNDARY W ALL SEGREGATING ONE BUILDING FROM OTHER. THE TOTAL PLOT OF LAND OF PROJECT IS 9.8 ACRES WHICH DEMARCATION AS CTS NO 40 /1 & 40/3 AS PER THE MUNICIPAL RECORDS. THE PLOT OF LAND FOR NEPTUNE BUILDING IS NOT SEPARATELY DEMARCATED IN THE MUNICI PAL RECORDS ITA 5183/MUM/2014 15 NOR IS THERE ANY PHYSICAL DEMARCATION OF LAND FOR N EPTUNE BUILDING BY THE APPELLANT FROM OTHER BUILDINGS OF T HE PROJECT, WHICH ARE ALSO CONSTRUCTED ON THE SAME PLOT OF LAND . IT IS FURTHER CONTENDED THAT THE DEVELOPMENT RIGHTS WAS OBTAINED BY APPELLANT FOR TOTAL PLOT OF 8.98 ACRES BY SINGLE AGREEMENT AN D THE SAID PLOT HAS ALSO NOT BEEN SUBDIVIDED IN SUB-PLOTS FOR VARIO US BUILDINGS OF THE PROJECT. THE DEDUCTION IN RESPECT OF OTHER BUIL DINGS SUCH AS VENUS, JUPITER AND PLUTO CONSTRUCTED BY APPELLANT O N THE SAME PLOT OF LAND HAS BEEN ALLOWED TO THE APPELLANT IN E ARLIER YEARS AND THIS YEAR. IT IS CONTENDED THAT UNDER THIS SITUATIO N, IT WOULD NOT BE PROPER TO LOOK INTO THE AREA OF LAND ON NOTIONAL BASIS FOR NEPTUNE BUILDING ON STANDALONE BASIS; RATHER IT IS THE TOTAL AREA OF LAND WHICH HAS TO BE CONSIDERED FOR ASCERTAINING THE ELIGIBLE LIMIT OF AREA PLOT OF LAND FOR THE PROJECT. IN SUPP ORT OF THE ARGUMENT, THE LD AR HAS PRODUCED THE COPY OF THE IT AT MUMBAI DECISION IN CASE OF AKRUTI CITY IN ITA NO . 4869 TO 4872/MUM/2009 WHEREIN THE ITAT HAS HELD THAT FOR PU RPOSE OF ASCERTAINING THE SIZE OF THE PLOT OF LAND IT IS THE TOTAL AREA OF PLOT IN A LAYOUT WHICH NEEDS TO BE CONSIDERED AND NOT TH E AREA OF PLOT ON NOTIONAL BASIS. I HAVE GONE THOUGH THE ABOVE DEC ISION RELIED BY THE LD AR. THE RATIO OF THE DECISION SQUARELY APPLI ED TO THE APPELLANT. IN FACT, THE APPELLANT CASE IS ON BETTER FOOTINGS THAN THE CASE OF AKRUTI CITY (SUPRA) BECAUSE IN THE LATT ER CASE, ON THE SAME PLOT OF LAND THERE WERE TWO DIFFERENT PROJECTS BUT ONLY ONE PROJECT WAS ELIGIBLE RESIDENTIAL PROJECT AND THE OT HER PROJECT WAS INELIGIBLE 100% COMMERCIAL PROJECT AND IF THE AREA ON NOTIONAL BASIS FOR COMMERCIAL AREA WAS EXCLUDED, THE REMAINI NG PLOT OF LAND FOR RESIDENTIAL PROJECT FELL SHORT OF 1 ACRE B UT STILL FOR THE PURPOSE OF ASCERTAINING THE SIZE OF PLOT OF LAND OF RESIDENTIAL PROJECT, THE ITAT HELD THAT IT IS THE TOTAL AREA OF PLOT WHICH NEEDS TO BE CONSIDERED AND NOT THE AREA OF LAND UNDER RES IDENTIAL PROJECT. WHEREAS IN CASE OF APPELLANT THERE IS NO S UCH NON-ELIGIBLE PROJECT EXCEPT THAT SOME FLATS IN NEPTUNE BUILDING ARE MORE THAN 1000 SQ FT. THE DEDUCTION IN RESPECT OF OTHER BUILD INGS SUCH AS VENUS; JUPITER AND' PLUTO CONSTRUCTED BY APPELLANT ON THE SAME PLOT OF LAND HAS BEEN ALLOWED BY AO TO THE APPELLAN T IN EARLIER YEARS AND THIS YEAR. HENCE FOR COMPUTING THE AREA O F THE PLOT OF LAND OF THE PROJECT, IT IS THE TOTAL PLOT AREA OF P ROJECT OF 8.98 ACRES FOR ALL BUILDINGS IN THE LAYOUT, WHICH HAS TO BE CO NSIDERED AND NOT THE AREA OF LAND ON NOTIONAL BASIS FOR THE NEPTUNE BUILDING ONLY IN VIEW OF THE DECISION OF ITAT MUMBAI IN AKRUTI CI TY LTD (SUPRA). NOTWITHSTANDING THIS, EVEN IF THE AREA UNDER 47 FLA TS IN NEPTUNE BUILDING EXCEEDING THE LIMIT OF 1000 SQ FT WHICH CO MES TO 59,220 SQ FT (AS MENTIONED IN ASSTT ORDER ALSO) IS EXCLUDE D, THEN ALSO ITA 5183/MUM/2014 16 AGAINST THE TOTAL CONSTRUCTED AREA ON THE ENTIRE PL OT OF LAND OF 8.98 ACRES FOR ALL BUILDINGS OF THE PROJECT OF 4,32 ,820 SQ FT, ONLY' 59,220 SQ FT FAILS INTO NON ELIGIBLE USE WHICH IS O NLY 13.68%. THUS, EVEN IF 13.68% OF THE AREA OF PLOT OF LAND OF 36,365 SQ MTS (8.98 ACRES] IS EXCLUDED (THOUGH NOT REQUIRED IN VI EW OF ITAT DECISION IN CASE OF AKRUTI CITY), STILL THE REMAINI NG AREA OF PLOT OF LAND OF PROJECT IS AT 31,390 SQ MTS (86.4% OF 36365 ) WHICH IS EQUIVALENT TO 7.75 ACRES. ACCORDINGLY EVEN IF THE A REA UNDER CONSTRUCTION OF INELIGIBLE FLATS IS EXCLUDED, THEN ALSO THE PLOT OF LAND OF THE PROJECT UNDER ELIGIBLE USE REMAINS AT 7 .75 ACRES AGAINST THE ACTUAL PLOT OF LAND SIZE OF 8.98 ACRES. 3.5. IN VIEW OF THE FINDINGS IN PARA 3.3 AND 3.4 AB OVE, THE APPELLANT IS THUS ENTITLED FOR THE PROPORTIONATE DE DUCTION OF PROFITS IN RESPECT OF FLATS WHOSE SIZE DOES NOT EXC EED 1000 SQ FT AS ALL OTHER CONDITIONS ARE FULFILLED. FROM THE ASSTT ORDER IT IS NOTED THAT THE AO HAS FOUND 44.51 % OF CONSTRUCTED AREA O F NEPTUNE BUILDING TO BE COVERED BY FLATS BELOW 1000 SQ FT. A CCORDINGLY THE APPELLANT' SHALL BE ENTITLED FOR PROPORTIONATE DEDU CTION U/S 80IB(10) IN RESPECT OF 44.51% OF PROFITS EARNED BY APPELLANT DURING THE YEAR FROM SALE OF FLATS OF NEPTUNE BUILD ING. IT IS NOTED THAT FOR AY 2009-10 THE TOTAL PROFIT EARNED FROM SA LE OF FLATS IN NEPTUNE BUILDING IS RS 11,54,52,219 OUT OF WHICH ON LY RS 5,13,87,782 (BEING 44.51% OF RS 11,54,52,219) IS EL IGIBLE FOR DEDUCTION U/ S 80IB(10). THE LD AR VIDE HIS ALTERNA TE ARGUMENTS HAS ALSO REQUESTED TO AT LEAST ALLOW THE PROPORTION ATE DEDUCTION @ 44.51% OF TOTAL PROFITS OF NEPTUNE BUILDING. ACCOR DINGLY, THE DISALLOWANCE MADE BY A.O. U/S 80IB(10) IN RESPECT O F PROFITS OF NEPTUNE BUILDING IS RESTRICTED TO RS. 6,40,64,437/- ONLY (11,54,52,219 5,13,87,782). THE LEARNED CIT(A) ACCORDINGLY HELD THAT THE FACTS IN THE YEAR UNDER CONSIDERATION ARE SIMILAR, DIRECTED THE A.O. TO ALL OW PROPORTIONATE DEDUCTION U/S 80IB (10) OF THE ACT IN RESPECT OF FOUR FLATS S OLD TO VARIOUS PERSONS , OTHER THAN THE PERSONS SPECIFIED IN CLAUSES (E) & (F) OF SECTION 80IB(10) AND WHERE AREA OF EACH FLAT SOLD IS LESS THAN 1000 SQ. FT. , VIDE APPELLATE ORDERS OF THE LEARNED CIT(A) DATED 12-05-2014. 11. AGGRIEVED BY THE ORDERS OF THE LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. ITA 5183/MUM/2014 17 12. THE LEARNED D.R. RELIED ON THE ORDERS OF THE A. O. AND SUBMITTED THAT THE TRIBUNAL HAS ALLOWED THE APPEAL OF THE ASSESSEE FIR M FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO. 3936/MUM/2012 VIDE ORDERS DATED 17.09.2014 , WHILE REVENUE APPEAL IN ITA NO. 4877/MUM/2012 HAS BEEN DI SMISSED AS INFRUCTUOUS .NONE APPEARED FOR THE ASSESSEE FIRM B EFORE THE TRIBUNAL WHEN THE APPEAL WAS CALLED FOR HEARING. 13. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE MATERIAL ON RECORD WE HAVE OBSERVED THAT THE TRIBUNAL IN ITA NO . 3936/MUM2012 FOR THE ASSESSMENT YEAR 2009-10 DATED 17.09.2014 HAS ALLOWE D THE APPEAL OF THE ASSESSEE FIRM , WHILE REVENUE APPEAL IN ITA NO. 487 7/MUM/2012 VIDE ORDERS DATED 17.09.2014 HAS BEEN DISMISSED AS INFRUCTUOUS . THE AFORE-STATED DECISION(S) OF THE TRIBUNAL ARE REPRODUCED HERE-UND ER:- 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE LD. REPRESENTATIVES OF THE PARTIES. EXCEPT THE ADVERTISEMENT/PAMPHLET IN QUESTION, THE REVENUE HAS NOT PRODUCED ANY EVIDENCE ON THE FILE THAT THE FLATS IN QUESTION HAVE BEEN ADJOINED BY THE ASSESSEE TO MAKE IT A UNI T. ON THE OTHER HAND, THE ASSESSEE HAS PRODUCED THE DOCUMENTS , WHICH FORMS PART OF THE OFFICIAL RECORDS, NAMELY APPROVED PLAN BY THE BMC, THE COMMENCEMENT CERTIFICATE DATED 27.06.05, T HE OCCUPANCY CERTIFICATE DATED 30.03.09 ETC. TO SHOW T HAT THE FLATS WERE CONSTRUCTED AS PER THE APPROVED PLAN AND FURTH ER THAT THE OCCUPANCY CERTIFICATE WAS GIVEN BY THE LOCAL AUTHOR ITY AFTER VERIFICATION OF THE FACT THAT THE PROJECT WAS CONST RUCTED AS PER THE APPROVED PLAN. FURTHER, THE SEPARATE SALE DEED S WERE ITA 5183/MUM/2014 18 EXECUTED FOR EACH OF THE FLATS AND SEPARATE ELECTRI CITY CONNECTIONS WERE OBTAINED FOR EACH OF THE FLATS. T HE ASSESSEE HAS NOT SOLD THE SAID FLATS AS A SINGLE UNIT BUT AS SEPARATE UNITS TO THE PURCHASERS. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAD VIOLATED ANY OF THE PROVISIONS OF SECTION 80IB(10) OF THE ACT AT THE TIME OR BEFORE THE SALE OF FLATS IN QUESTION. EVEN IF WE ASSUME THAT END USERS MIGHT H AVE JOINED THE TWO FLATS ON A FLOOR SO AS TO MAKE IT ONE UNIT, THEN NO FAULT CAN BE ATTRIBUTED ON THE PART OF THE ASSESSEE IN TH IS RESPECT. TO BE MORE CLEAR, WE REPRODUCE THE PROVISIONS OF SE CTION 80IB(10) OF THE ACT AS HEREIN UNDER: SECTION 80-IB(10) (10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDE RTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31ST DAY OF MARCH, 2008 BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PR OFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUS ING PROJECT IF, (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES D EVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998 AND COMPLETES SUCH CONSTRUCTION, (I) IN A CASE WHERE A HOUSING PROJECT HAS BEEN A PPROVED BY THE LOCAL AUTHORITY BEFORE THE 1ST DAY OF APRIL, 2004, ON OR BEFORE THE 31ST DAY OF MARCH, 2008; (II) IN A CASE WHERE A HOUSING PROJECT HAS BEEN, O R, IS APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRIL, 2004, [ BUT NOT LATER THAN THE 31ST DAY OF MARCH, 2005]WITHIN FOUR YEARS FROM THE END OF TH E FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. [(III) IN A CASE WHERE A HOUSING PROJECT HAS BEEN APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRIL, 2005, WITHIN FIVE YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPR OVED BY THE LOCAL AUTHORITY] EXPLANATION.FOR THE PURPOSES OF THIS CLA USE, (I) IN A CASE WHERE THE APPROVAL IN RESPECT OF T HE HOUSING PROJECT IS OBTAINED MORE THAN ONCE, SUCH HOUSING PROJECT SHALL BE DEEME D TO HAVE BEEN APPROVED ON THE DATE ON WHICH THE BUILDING PLAN OF SUCH HOUS ING PROJECT IS FIRST APPROVED BY THE LOCAL AUTHORITY; ITA 5183/MUM/2014 19 (II) THE DATE OF COMPLETION OF CONSTRUCTION OF THE HOUSING PROJECT SHALL BE TAKEN TO BE THE DATE ON WHICH THE COMPLETION CERTIFICATE IN RESPECT OF SUCH HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND W HICH HAS A MINIMUM AREA OF ONE ACRE: PROVIDED THAT NOTHING CONTAINED IN CLAUSE (A) OR CL AUSE (B) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACCORDANCE WITH A SC HEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMENT OF EXISTING BUILDINGS IN AREAS DECLARED TO BE SLUM ARE AS UNDER ANY LAW FOR THE TIME BEING IN FORCE AND SUCH SCHEME IS NOTIFIED BY THE B OARD IN THIS BEHALF; (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP A REA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY-FIVE KILOMETERS FROM THE MUNICIPAL LI MITS OF THESE CITIES AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE; [***] (D) THE BUILT-UP AREA OF THE SHOPS AND OTHER COMME RCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED [THREE] PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR [FIVE THOUSAND SQUAR E FEET, WHICHEVER IS HIGHER];] (E) NOT MORE THAN ONE RESIDENTIAL UNIT IN THE HOUSI NG PROJECT IS ALLOTTED TO ANY PERSON NOT BEING AN INDIVIDUAL; AND (F) IN A CASE WHERE A RESIDENTIAL UNIT IN THE HO USING PROJECT IS ALLOTTED TO A PERSON BEING AN INDIVIDUAL, NO OTHER RESIDENTIAL UN IT IN SUCH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSONS, NAMELY: (I) THE INDIVIDUAL OR THE SPOUSE OR THE MINOR CHI LDREN OF SUCH INDIVIDUAL, (II) THE HINDU UNDIVIDED FAMILY IN WHICH SUCH IND IVIDUAL IS THE KARTA, (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL, TH E SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA. [EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL APPLY TO ANY UN DERTAKING WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT).] 8. A PERUSAL OF THE ABOVE REPRODUCED PROVISIONS OF SECTION 80IB(10) REVEALS THAT THE REQUIREMENT OF LAW IS THA T THE PROJECT MUST BE APPROVED BY THE LOCAL AUTHORITY. SO FAR AS , THE POINT OF DISPUTE BEFORE US IS CONCERNED, AS PER THE CLAUSE C ABOVE, THE RESIDENTIAL UNIT SHOULD HAVE A MAXIMUM BUILT UP ARE A OF 1000 SQ. FT. FOR THE PROJECT WHICH IS SITUATED WITHIN TH E CITY OF MUMBAI. IT IS NOT THE CASE OF THE REVENUE THAT THE PROJECT WAS ITA 5183/MUM/2014 20 NOT APPROVED BY THE LOCAL AUTHORITY I.E. BMC. IT I S ALSO NOT THE CASE OF THE REVENUE THAT THE FLATS WERE NOT CONSTRU CTED AS PER THE APPROVED PLAN OR THAT THE TWO SEPARATE FLATS HA D BUILT UP AREA OF MORE THAN 1000 SQ. FT. THE CASE OF THE REV ENUE IS THAT THE FLATS WERE LATER ON JOINED TO MAKE IT A ONE UNI T. AFTER THE COMPLETION OF THE PROJECT, THE BMC HAD GIVEN THE OC CUPANCY CERTIFICATE TO THE ASSESSEE WHICH SHOWS THAT THE FL ATS WERE CONSTRUCTED BY THE ASSESSEE AS PER THE APPROVED PLA N AND THEREAFTER SOLD AS SEPARATE UNITS. EVEN SEPARATE E LECTRIC CONNECTIONS WERE OBTAINED BY THE USERS/PURCHASERS F OR THE SAID 94 FLATS. THERE WAS NO PROVISION AT THAT TIME IN THE ACT THAT MORE THAN ONE FLAT COULD NOT HAVE BEEN PURCHAS ED BY AN INDIVIDUAL OR THAT THE INDIVIDUAL AFTER PURCHASING THE FLAT COULD NOT JOIN THE TWO FLATS, SO FAR SO THE PROVISIONS OF SECTION 80IB(10) ARE CONCERNED. UNDER SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT ANY VIOLATION WAS COMMITTED BY THE ASSESSEE OF THE PROVISIONS OF SECTION 80IB(10) AS WERE IN OPERATION DURING THE RELEVANT PERIOD. WE MAY NOTE THAT TO PLUG SUCH A L OOPHOLE, CLAUSE (E) HAS BEEN INSERTED IN THE SECTION 80IB(10 ) BY FINANCE ACT OF 2009 W.E.F. 01.04.09. THE EFFECT OF THE SAI D CLAUSE IS PROSPECTIVE I.E. FROM 01.04.10. IF THE SAID CLAUSE WAS TO BE APPLIED RETROSPECTIVELY, THE LEGISLATURE WOULD HAVE POINTED IT SO IN CLEAR TERMS, BUT HAS NOT BEEN DONE SO. THE REAS ON MAY BE THAT BECAUSE OF THE INSERTION OF THE SAID CLAUSE (E ), THE RIGHTS ONCE ACCRUED TO THE CONCERNED BUILDERS/DEVELOPERS U NDER THE ITA 5183/MUM/2014 21 OLD PROVISIONS, COULD NOT HAVE BEEN TAKEN AWAY BY A PPLYING THE SAID CLAUSE (E) RETROSPECTIVELY. HENCE, THOUGH THE LOOPHOLE HAS BEEN PLUGGED BY THE INSERTION OF CLAUSE (E) W.E.F. 01.04.10, BUT THE FACT REMAINS THAT BEFORE THE INSERTION OF CLAUS E (E), THE LAW IN OPERATION AT THAT TIME WILL BE APPLICABLE AND IF THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IB(10) AS PER THE PREVALENT LAW DURING THE ASSESSMENT YEAR IN QUESTIO N, THE SAME CANNOT BE DENIED TO THE ASSESSEE BY APPLYING T HE PROVISIONS WHICH HAVE PROSPECTIVE EFFECT. WHEN FAC ED WITH ALMOST SIMILAR FACTS AND CIRCUMSTANCES, THE CO-ORDI NATE BENCH OF THE TRIBUNAL, IN THE CASE OF EMGEEN HOLDINGS PV T. LTD. ITA NOS.3594 & 3595/M/2009 DECIDED ON 29.07.11, HAS OBSERVED AS UNDER: 7. WE FIND THAT THE DEDUCTION U/S.801B(10) HAS BEE N DECLINED BY THE ASSESSING OFFICER ON THE GROUND THAT SIZE OF THE RE SIDENTIAL UNIT WAS IN EXCESS OF 1,000 SQ.FT WHICH, IN TURN, PROCEEDS ON THE BASIS T HAT THE FLATS SOLD TO THE FAMILY MEMBERS ADMITTEDLY BY SEPARATE AGREEMENTS, SHOULD B E TREATED AS ONE UNIT. WE ARE UNABLE TO APPROVE THIS APPROACH. WE HAVE NOTED THAT THE SIZE OF EACH FLAT, AS EVIDENT FROM BUILDING PLAN AS DULY APPROVED BY MUNC IPAL AUTHORITIES WAS LESS THAN 1,000 SQ.FT. WE HAVE ALSO NOTED THAT IT IS NOT EVEN REVENUE'S CASE THAT EACH OF FLAT ON STANDALONE BASIS WAS NOT A RESIDENTIAL U NIT. EVEN IF FLATS WERE CONSTRUCTED OR PLANNED IN SUCH A WAY THAT TWO FLATS COULD INDEED BE MERGED INTO ONE LARGER UNIT, AS LONG EACH FLAT WAS AN INDEPENDE NT RESIDENTIAL UNIT, DEDUCTION U/S.801B(10) COULD NOT BE DECLINED. IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT WHAT SECTION 80IB(10) REFERS TO IS 'RESIDENTIAL UNI T' AND, IN THE ABSENCE OF ANYTHING TO THE CONTRARY IN THE INCOME TAX ACT, THE EXPRESSION 'RESIDENTIAL UNITS' MUST HAVE THE SAME CONNOTATIONS AS ASSIGNED TO IT B Y LOCAL AUTHORITIES GRANTING APPROVAL TO THE PROJECT. THE LOCAL AUTHORITY HAS AP PROVED THE BUILDING PLAN WITH RESIDENTIAL UNITS OF LESS THAN 1,000 SQ.FT, AND GRA NTED COMPLETION CERTIFICATE AS SUCH. THAT LEAVES NO AMBIGUITY ABOUT THE FACTUAL PO SITION. WE HAVE FURTHER NOTED THAT THE PROHIBITION AGAINST SALE OF MORE THAN ONE FLAT IN A HOUSING PROJECT TO MEMBERS OF A FAMILY HAS BEEN INSERTED SPECIFICALLY WITH EFFECT FROM 1ST APRIL, 2010, AND, IN OUR HUMBLE UNDERSTANDING, THIS AMENDM ENT IN LAW CAN ONLY BE TREATED AS PROSPECTIVE IN EFFECT. WHAT IS, THEREFOR E, CLEAR IS THAT SO FAR AS PRE- AMENDMENT POSITION IS CONCERNED, AS LONG A RESIDENT IAL UNIT HAS LESS THAN SPECIFIED AREA, IS AS PER THE DULY APPROVED PLANS A ND IS CAPABLE OF BEING USED FOR RESIDENTIAL PURPOSES ON STANDALONE BASIS, DEDUCTION U/S.80IB10) CANNOT BE ITA 5183/MUM/2014 22 DECLINED IN RESPECT OF THE SAME MERELY BECAUSE THE END USER, BY BUYING MORE THAN ONE SUCH UNIT IN THE NAME OF FAMILY MEMBERS, H AS MERGED THESE RESIDENTIAL UNITS INTO A LARGER RESIDENTIAL UNIT OF A SIZE WHIC H IS IN EXCESS OF SPECIFIED SIZE. THAT PRECISELY IS THE CASE BEFORE US. WHILE ON THE SUBJECT, IT IS USEFUL TO TAKE NOTE OF LEGISLATIVE AMENDMENT BY THE VIRTUE OF WHICH LEG ISLATURE PUT CERTAIN RESTRICTIONS ON SALE OF RESIDENTIAL UNITS TO CERTAIN FAMILY MEMB ERS OF A PERSON WHO HAS BEEN SOLD A RESIDENTIAL UNIT IN THE HOUSING PROJECT. SEC TION 80IB(10) NOW PROVIDES AN ADDITIONAL ELIGIBILITY CONDITION THAT IN A CASE WHE RE A RESIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO ANY PERSON BEING AN INDIVIDUAL, NO OTHER RESIDENTIAL UNIT IN SUCH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSON, NAMELY (I) THE INDIVIDUAL OR THE SPOUSE, OR THE MINOR CHILDREN OF SUCH INDIVIDUAL, (II) THE HUF IN WHICH SUCH INDIVIDUAL IS A KARTA' (III) ANY PERS ON REPRESENTING SUCH INDIVIDUAL, THE SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL, OR THE HUF IN WHICH SUCH INDIVIDUAL IS A KARTA. THE EXPLANATION MEMORANDUM E XPLAINED THE LEGISLATIVE AMENDMENT AS FOLLOWS: (314 ITR(ST) 203) 'FURTHER, THE OBJECT OF THE TAX BENEFIT FOR HOUSING PROJECTS IS TO BUILD HOUSING STOCK FOR LOW AND MIDDLE INCOME HOUSEHOLDS. THIS HA S BEEN ENSURED BY LIMITING THE SIZE OF THE RESIDENTIAL UNIT. HOWEVER, THIS IS BEING CIRCUMVENTED BY THE DEVELOPER BY ENTERING INTO AGREEMENT TO SELL MULTIP LE ADJACENT UNITS TO A SINGLE BUYERS. ACCORDINGLY, IT IS PROPOSED TO INSERT NEW C LAUSES IN THE SAID SUB-SECTION TO PROVIDE THAT THE UNDERTAKING WHICH DEVELOPS AND BUILDS THE HOUSING PROJECT SHALL NOT BE ALLOWED TO ALLOT MORE THAN ONE RESIDEN TIAL UNIT IN THE HOUSING PROJECT TO THE SAME PERSON, NOT BEING AN INDIVIDUAL, AND WH ERE THE PERSON IS AN INDIVIDUAL, NO OTHER RESIDENTIAL UNIT IN SUCH HOUSI NG PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSON:- (I) SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL; (II) THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA; (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL, THE SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDIVIDED FAMILY IN WH ICH SUCH INDIVIDUAL IS THE KARTA. THIS AMENDMENT WILL TAKE EFFECT FROM THE 1ST APRIL, 2010 AND SHALL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2010-2011 AND SUBSEQUENT YEARS.' 8. IT IS THUS CLEAR THAT THE AFORESAID AMENDMENT HA S BEEN BROUGHT WITH PROSPECTIVE EFFECT I.E. FROM 1ST DAY OF APRIL, 2010 , AND THERE IS NO INDICATION WHATSOEVER TO SUGGEST THAT THESE RESTRICTIONS NEED TO BE APPLIED WITH RETROSPECTIVE EFFECT. THE AMENDMENT SEEKS TO PLUG A LOOPHOLE BUT RESTRICTS THE REMEDY WITH EFFECT FROM 1ST DAY OF APRIL, 2010, I.E . AY 2010-2011. THE LAW IS VERY CLEAR THAT UNLESS PROVIDED IN THE STATUTE, THE LAW IS ALWAYS PRESUMED TO BE PROSPECTIVE IN NATURE. IT WILL, THEREFORE, BE CONTR ARY TO THE SCHEME OF LAW TO PROCEED ON THE BASIS THAT WHEREVER ADJACENT RESIDEN TIAL UNITS ARE SOLD TO FAMILY MEMBERS, ALL THESE RESIDENTIAL UNITS ARE TO BE CONS IDERED AS ONE UNIT. IF LAW PERMITTED SO, THERE WAS NO NEED OF THE INSERTION OF CLAUSE (F) TO SECTION U/S 80IB(10). IT WILL BE UNREASONABLE TO PROCEED ON THE BASIS THAT LEGISLATIVE AMENDMENT WAS INFRUCTUOUS OR UNCALLED FOR -PARTICUL ARLY AS THE AMENDMENT IS NOT EVEN STATED TO BE 'FOR REMOVAL OF DOUBTS'. ON T HE CONTRARY, THIS AMENDMENT SHOWS THAT NO SUCH ELIGIBILITY CONDITIONS COULD BE READ INTO PRE- AMENDMENT LEGAL POSITION. ITA 5183/MUM/2014 23 9. AS REGARDS THE AO'S STAND THAT THE ASSESSEE HIMS ELF HAS OFFERED THE DEDUCTION U/S.80IB(10) IN RESPECT OF THESE UNITS DU RING THE COURSE OF SURVEY PROCEEDINGS, IT IS ONLY ELEMENTARY THAT NEITHER STA TEMENT RECORDED U/S.133A HAS AN EVIDENTIARY VALUE, NOR A LEGAL CLAIM CAN BE DECL INED ONLY BECAUSE ASS ESSEE, AT SOME STAGE, DECIDED TO GIVE UP THE SAME. IN VIEW OF THESE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, ARE OF THE CO NSIDERED VIEW THAT THE DEDUCTION U/S.801B(10) OUGHT TO HAVE BEEN ALLOWED T O THE ASSESSEE ENTIRELY. TO THIS EXTENT, WE MODIFY THE ORDER OF THE CIT(A) AND ALLOW FURTHER RELIEF TO THE ASSESSEE. 10. AS WE HAVE HELD THE ADMISSIBILITY OF DEDUCTION U/S.801B(10) IN RESPECT OF ENTIRE PROJECT, REVENUE'S GRIEVANCE AGAINST PART IAL RELIEF GRANTED TO THE ASSESSEE IS INFRUCTUOUS AND ACADEMIC, WE, ACCORDING LY, DISMISS THE SAME. GRIEVANCES AGAINST REOPENING OF ASSESSMENT, IN THE ABSENCE OF SPECIFIC ARGUMENTS IN SUPPORT OF THE SAME, ARE TREATED AS AB ANDONED AND, AS SUCH, DISMISSED. 8.1. THE FACTS OF THE PRESENT CASE ARE SQUARELY COV ERED WITH THE ABOVE DECISION OF THE TRIBUNAL. 8.2. SO FAR SO, THE SECOND CONTENTION OF THE ASSESS EE THAT EVEN OTHERWISE THE BUILT UP AREA CALCULATED BY THE STAMP DUTY AUTHORITIES COMES TO L ESS THAN 1000 SQ. FT. EVEN WHEN THE FLATS ARE ASSUMED TO BE JOINED, WE FIND THAT THE RE VENUE HAS NOT PRODUCED ANY EVIDENCE TO PROVE THAT WHAT WERE THE ACTUAL DIM ENSIONS OF THE FLATS IN QUESTION, NO MEASUREMENT ETC. HAS BEEN PRODUCED ON THE FILE. THE REVENUE HAS SIMPLY RELIED UPON THE BROACHER/PAMPHLET OF THE ASSESSEE. THE ASSESSEE HAS BEEN FAIR ENOUGH TO SUBMIT TO THE REVE NUE AUTHORITY THAT THE SAME WAS AN ADVERTISEMENT GIMMICK OF THE ASSESSEE T O ATTRACT THE CUSTOMERS. AS OBSERVED ABOVE, EVEN IF THE ASSESSEE HAD ADOPTED THIS GIMMICK TO ATTRACT THE CUSTOMERS AND FURTHER TO GIV E THEM THE IDEA TO ADJOIN THE FLATS IN QUESTION, WHILE REMAINING WITHI N THE FOUR CORNERS OF THE PROVISIONS OF SECTION 80IB(10), CAN NOT BE SAID TO HAVE COMMITTED ANY VIOLATIONS OF THE PREVALENT PROVISIONS DURING THE P ERIOD. FINDING A LOOPHOLE IN THE PROVISIONS AND SUGGESTING THE PROSP ECTIVE BUYERS THAT THEY ITA 5183/MUM/2014 24 CAN JOIN THE FLATS TOGETHER IN ITSELF CANNOT BE SAI D TO BE A VIOLATION OF THE PROVISIONS OF SECTION 80IB(10) ON THE PART OF THE A SSESSEE. IN COMMON PARLANCE EVERY BUSINESSMAN, ASSESSEE ETC. TRIES TO GET MAXIMUM BENEFIT AND TO AVOID THE TAX BUT WITHOUT VIOLATING THE PROV ISIONS OF THE STATUTES. MOREOVER, THE PROVISIONS OF SECTION 80IB(10) ARE FO R BENEFICIAL PURPOSE, INTENDED TO PROMOTE THE CONSTRUCTION OF RESIDENTIAL HOUSES AND HENCE REQUIRE LIBERAL INTERPRETATION. WHILE INTERPRETATI NG THE SAID PROVISIONS, THE SAME CANNOT BE EXTENDED TO ARRIVE AT THE CONCLUSION S WHICH OTHERWISE ARE NOT DECIPHERABLE FROM THE PLAIN READING OF THE SECT ION SO AS TO RESTRICT THE SCOPE AND DENY THE BENEFITS, WHICH OTHERWISE, ARE A VAILABLE TO THE ASSESSEE. WE ARE IN AGREEMENT WITH THE VIEW OF THE CO-ORDINAT E BENCH OF THE TRIBUNAL IN THE CASE OF EMGEEN HOLDINGS PVT. LTD. (SUPRA) THAT SO FAR AS THE PRE- AMENDED POSITION IS CONCERNED, AS LONG A RESIDENTIA L UNIT HAS LESS THAN SPECIFIED AREA, IS AS PER THE DULY APPROVED PLANS A ND IS CAPABLE OF BEING USED FOR RESIDENTIAL PURPOSES ON STANDALONE BASIS, DEDUCTION U/S.80IB(10) CANNOT BE DECLINED IN RESPECT OF THE SAME MERELY BE CAUSE THE END USER, BY BUYING MORE THAN ONE SUCH UNIT IN THE NAME OF FAMIL Y MEMBERS, HAS MERGED THESE RESIDENTIAL UNITS INTO A LARGER RESIDE NTIAL UNIT OF A SIZE WHICH IS IN EXCESS OF SPECIFIED SIZE. 10. IN VIEW OF OUR ABOVE OBSERVATIONS AND ALSO BEIN G IN AGREEMENT WITH THE DECISION OF THE TRIBUNAL CITED SUPRA, WE HOLD T HAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IB(10) OF THE ACT IN RESPECT OF THE 94 FLATS IN QUESTION. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS THUS ALL OWED . ITA NO. 4877/M/2012: 1.1 THE REVENUE THROUGH ITS GROUNDS OF APPEAL HAS RAISE D THE ISSUE ITA 5183/MUM/2014 25 RELATING TO THE ALLOWABILITY OF DEDUCTION UNDER SEC TION 80IB(10) BY THE LD. CIT(A) ON PROPORTIONATE BASIS IN RESPECT OF THE FLATS WHICH WERE FOUND HAVING AREA LESS THAN 1000 SQ. FT. BY THE REV ENUE AUTHORITIES. 1.2 SINCE WE HAVE ALREADY ALLOWED THE ADMISSIBILITY OF DEDUCTION UNDER SECTION 80IB(10) IN RESPECT OF ALL THE FLATS IN QUE STION, HENCE IN VIEW OF OUR FINDING GIVEN ABOVE , THE APPEAL OF THE REVENUE HAS TO BECOME INFRUCTUOUS AND THE SAME IS ACCORDINGLY DISMISSED 1.3 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED AND THAT OF THE REVENUE IS HEREBY DISMISSED. IT HAS ALSO BEEN OBSERVED THAT THE ASSESSEE FIRM HA S SOLD 10 FLATS WHEREBY THERE IS A NON-COMPLIANCE OF PROVISIONS OF CLAUSE ( E) & (F) OF SECTION 80IB (10) OF THE ACT , WHICH NEWLY INTRODUCES CLAUSES (E) & ( F) OF SECTION 80IB (10) OF THE ACT ARE DULY APPLICABLE FOR THE ASSESSMENT YEAR 201 0-11 UNDER CONSIDERATION IN THIS APPEAL, WHEREBY DEDUCTION U/S 80IB(10) OF THE ACT HAS BEEN BEEN DISALLOWED BY THE LEARNED CIT(A) WITH RESPECT TO TE N FLATS SOLD INFRINGING THE ABOVE CLAUSES. THE ASSESSEE FIRM, HOWEVER, WITH RE SPECT TO FOUR FLATS IS ENTITLED FOR PROPORTIONATE DEDUCTION U/S 80IB(10) O F THE ACT IN RESPECT OF FOUR FLATS SOLD TO VARIOUS PERSONS , OTHER THAN THE PERS ONS SPECIFIED IN CLAUSES (E) AND (F) OF SECTION 80IB(10) AND WHERE AREA OF EACH FLAT SOLD IS LESS THAN 1000 SQUARE FEET, IN ACCORDANCE WITH THE TERMS INDICATED BY THE TRIBUNAL IN ITS ORDERS IN ITA NO.3936/MUM/2012 AND ITA NO. 4877/MUM /2012 DATED 17.09.2014 AS ISSUE IS SQUARELY COVERED WITH THE RA TIO OF LAW LAID DOWN BY THE TRIBUNAL IN AFORE-STATED DECISION(S) WHICH WE RESPE CTFULLY FOLLOW WITH RESPECT TO FOUR FLATS AS PER TERMS INDICATED ABOVE , WHILE DEDUCTIONS U/S 80IB(10) OF THE ACT IS DISALLOWED WITH RESPECT TO TEN FLATS AS THERE IS NON-COMPLIANCE OF ITA 5183/MUM/2014 26 PROVISIONS OF SECTION 80(IB) OF THE ACT CLAUSES (E) AND (F) AS APPLICABLE TO THE INSTANT ASSESSMENT YEAR 2010-11. 14. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO. 5183/MUM/2014 FOR THE ASSESSMENT YEAR 2010-11 IS HE REBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MAY , 2016. # $% &' 30-05-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 30-05-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI