JOHAR HASSAN ZOJWALLA PROP M/S. SAB REALTY, MUMBAI V. ADDL CIT RG-3, MUMBAI

ITA 5404/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8947 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 21-10-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 28-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Assessee Lawyers: SUBODH L RATNAPARKHI
• Keywords: Business income
• Section: 80IB; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J,MUMBAI BEFORE SHRI S.V. MEHROTRA (AM) & SMT. ASHA VIJAYARAGHAVAN (JM) I.T.A.NO.5404/MUM/2008 (A.Y. 2005-06) MR. JOHAR HASSAN ZOJWALLA, PROP: M/S. SAB REALTY, BINDU TOWER, GR.FLOOR, SANTOSHI MATA RD., OPP. LOURDES HIGH SCHOOL, KALYAN (W). PAN: AAAPZ5650K VS. ADDL. COMMR. OF INCOME-TAX, RANGE-3, 2 ND FLOOR, RANI MANSION, MURBAD RD., KALYAN (W). APPELLANT RESPONDENT APPELLANT BY SHRI SUBODH L. RATNAPARKHI. RESPONDENT BY SHRI SU MEET KUMAR. O R D E R PER S.V. MEHROTRA, AM : THIS APPEAL BY THE ASSESSEE FOR THE ASSTT. YEAR 20 05-06 IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, THANE, CONFIRMING ADDITION O F RS.59,75,060/- BY HOLDING THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S .80IB(10) IN RESPECT OF PROFIT DERIVED FROM THE HOUSING PROJECT ANAND REGENCY P HASE II AT CHIKANGHAR, KALYAN (W). 2. THE ASSESSEE-INDIVIDUAL, IN THE RELEVANT ASSESSM ENT YEAR, WAS ENGAGED IN CONSTRUCTION BUSINESS IN THE NAME & STYLE OF M/S. S AB REALTY OF A PROJECT NAMED ANANT REGENCY, PHASE-II, NR. CHIKANGHAR, SANTOSHI MATA ROAD, NR. JAIN SOCIETY AT KALYAN (W), MAHARASHTRA. THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.10,22,070/- DERIVED FROM SALARY , HOUSE PROPERTY, BUSINESS AND INCOME FROM OTHER SOURCES. THE BUSINESS INCOME SHOWN IN THE COMPUTATION ITA 5404/MUM/08 2 OF INCOME COMPRISED OF NET PROFIT OF M/S. SAB REALT Y OF RS.59,75,060/- WHICH WAS CLAIMED AS EXEMPT U/S.80IB(10) OF THE ACT. THE AO NOTED THAT THE PROJECT UNDER CONSTRUCTION COMPRISED OF THREE BUILDINGS NAMED AS BUILDING NO.1 (A-WING), BUILDING NO.2 (B-WING) AND BUILDING NO. 3 (C-WING). BUILDINGS NO.1 & 2 COMPRISED OF ONLY FLATS, WHILE BUILDING NO. 3 COMP RISED OF TWO IDENTICAL BUNGALOWS. THE AO NOTED THAT DURING THE YEAR UNDER CONSIDERATION, I.E. ASSTT. YEAR 2005-06, THE ASSESSEE HAD COMPLETED BUILDING N O. 1 (I.E. A-WING) OF THE PROJECT ANANT REGENCY, PHASE-II, FOR WHICH PERMI SSION WAS SOUGHT FROM THE KALYAN DOMBIVLI MUNICIPAL CORPORATION, KALYAN (HERE INAFTER REFERRED TO AS KDMC, KALYAN) ON 23-05-2002 AND THE LAST PLAN WAS PASSED BY KDMC, KALYAN, ON 06- 06-2006. THE AO FURTHER OBSERVED THAT AFTER THE ISS UE OF SHOW CAUSE LETTER ON 05-12-2007, THE ASSESSEE HAD SUBMITTED ANOTHER APPR OVAL FROM KDMC, KALYAN, DATED 17-12-2007. THUS, HE FOUND THAT DURING THE YE AR UNDER CONSIDERATION, BUILDING NO.2 (I.E. B-WING) WAS UNDER CONSTRUCTION AND FOR BUILDING NO. 3 (I.E. C- WING), THE CONSTRUCTION HAD NOT YET STARTED AS ITS APPROVAL WAS OBTAINED AFTER ASSTT. YEAR 2005-06. THUS, HE CONCLUDED THAT THE PR OJECT ANANT REGENCY, PHASE- II, WAS NOT COMPLETE ON 31-03-2005 AND ONLY ONE BU ILDING WAS COMPLETE IN RESPECT OF WHICH INCOME HAS BEEN COMPUTED. THE AO R EQUIRED THE ASSESSEE TO EXPLAIN AS TO HOW THE REQUIREMENTS OF SEC. 80IB HAV E BEEN MET SO AS TO CLAIM DEDUCTION UNDER THAT SECTION. THE ASSESSEE, IN HIS REPLY, STATED AS UNDER : YOUR GOOD SELF HAVE ASK THE HOW THE CONDITION OF S ECTION 80IB(10) OF THE INCOME-TAX ACT, 1961, HAS BEEN COMPLIED WIT H TO CLAIM THE DEDUCTION. IN HIS REGARD, WE WOULD LIKE TO HUMBLY SUBMIT THAT YOUR ASSESSEE HAS FULFILLED ALL THE CONDITIONS LAID DOWN IN SECTI ON 80IB(10) OF THE INCOME-TAX ACT, 1961. THE FIRST CONDITION WAS THAT THE PROJECT SHOULD COM MENCE AFTER 1 ST DAY OF OCTOBER 1998 AND THE APPROVAL OF THE PROJECT SHOULD BE TAKEN ON OR BEFORE THE SAID DATE (THE SAID DATE HAS BEEN AMENDED FROM TIME TO TIME AND NOW I.E. A.Y. 2005-06, THE PERMISS ION OF THE SAID ITA 5404/MUM/08 3 DATE HAS BEEN AMENDED UP TILL 31 ST MARCH, 2007) FROM THE LOCAL AUTHORITY. THE ASSESSEE UNDER CONSIDERATION HAS STA RTED ITS ACTIVITIES AFTER THE SAID DATE AND HAS TAKEN PERMISSION FROM THE LOCAL AUTHORITY. SECOND CONDITION IS THAT THE SIZE OF THE PLOT OF LA ND SHOULD BE MINIMUM ONE ACRE. IN YOUR ASSESSEES CASE EVEN THIS CONDITION HAS BEEN SATISFIED. THIRDLY, THE CONDITION EXPLAINED WAS THAT THE RESID ENTIAL UNITS OF THE PROJECT SHOULD HAVE BEEN AN AREA OF 1000 SQ. FT. IT THE RESIDENTIAL UNITS ARE CONSTRUCTED IN MUMBAI OR DELHI OR ANY OR OR WITHIN TWENTY- FIVE KILOMETERS FROM HE MUNICIPAL LIMITS OF THESE C ITIES AND 1500 SQ. FT. FOR ANY OTHER PLACE. ALL THE CONDITIONS HAVE BEEN SATISFIED AND DEDUCTIO N UNDER SECTION 80-IB OF THE ACT, 1961 WAS CLAIMED. THE AO RECORDED THE STATEMENT OF SHRI DILIP TAMBDAY , THE ASSESSEES ARCHITECT, AND ON THE BASIS OF INFORMATION OBTAINED FROM KDMC, KALYAN, EXAMINED THE ASSESSEES CLAIM FOR DEDUCTION U/S.80IB(10). THE ST ATEMENT DATED 26-11-2007 HAS BEEN REPRODUCED FROM PAGES 3 TO 6 AND THE STATE MENT DATED 05-12-2007 HAS BEEN REPRODUCED FROM PAGES 6 TO 8 OF THE ASSESSMENT ORDER. ON THE BASIS OF THE STATEMENT OF SHRI DILIP TAMBDAY AND THE ASSESSEES SUBMISSIONS, THE AO CONCLUDED THAT THE ASSESSEE DID NOT SATISFY THE CON DITIONS LAID DOWN U/S.80IB(10) OF THE I.T. ACT FOR THE FOLLOWING REASONS : I) MINIMUM AREA OF ONE ACRE OF PLOT : THE AO NOTED THAT AS PER SEC. 80IB(10)(B) THE PROJE CT SHOULD BE ON THE SIZE OF PLOT OF LAND WHICH HAS A MINIMUM AREA OF 1 ACRE. HE NOTED THAT AS PER THE PLAN SUBMITTED BY THE ASSESSEE AND HIS ARCHITECT AND PLA NS OBTAINED FROM KDMC, KALYAN, IT IS SEEN THAT THE TOTAL AREA OF ORIGINAL PLOT WAS 5,100 SQ. MTS. HOWEVER, 1186 SQ. MTS. OF LAND, WHICH WAS PART OF THE ORIGIN AL PLOT, HAD TO BE SURRENDERED TO KDMC, KALYAN, FOR A 18 MTS. WIDE D.P. ROAD AND T HE REMAINING AREA LEFT FOR THE PROJECT WAS 3914 SQ. MTS., WHICH WAS LESS THAN 1 ACRE. THUS, THE AREA OF THE PLOT ON WHICH THE PROJECT STANDS AND THE AREA AROUN D WHICH THE ASSESSEE OR ITA 5404/MUM/08 4 HOUSING SOCIETY CAN CONSTRUCT BOUNDARY WALL AND TH E AREA OF PLOT OF LAND WHICH IS IN ASSESSEES POSSESSION FOR THE PURPOSE OF CONSTRU CTION REMAINS 3914 SQ. MTS., WHICH IS LESS THAN 1 ACRE. THEREFORE, DEDUCTION U/S .80IB(10) IS NOT ALLOWABLE . II) MAXIMUM BUILT-UP AREA OF THE RESIDENTIAL UNIT S OF 1500 SQ.FT. : THE AO OBSERVED THAT IN VIEW OF THE REQUIREMENTS O F SEC. 80IB(10)(C), THE ASSESSEES PROJECT BEING MORE THAN 25 KMS. AWAY FRO M THE LOCAL LIMITS OF MUMBAI, BUILT-UP AREA OF 1500 SQ. FT. IS ALLOWED. H E POINTED OUT THAT BUILT-UP AREA, AS COMMONLY UNDERSTOOD OR AS ADOPTED BY BUILD ERS OR MUNICIPAL CORPORATIONS, IS DIFFERENT FROM THE BUILT-UP AREA FOR THE PURPOSE OF SEC. 80IB(10) AS DEFINED IN SEC. 80IB(14) OF THE ACT WHICH READS AS UNDER : (14)FOR THE PURPOSES OF THIS SEC TION, -- (A) BUILT-UP AREA MEANS THE INNER MEASUREMENTS OF THE RESIDENTIAL UNIT AT THE FLOOR LEVEL, INCLUDING THE PROJECTIONS AND BALCONIES, AS INCREASED BY THE THICKNESS OF THE WAL LS BUT DOES NOT INCLUDE THE COMMON AREAS SHARED WITH OTHER RESI DENTIAL UNITS. HE, THEREFORE, POINTED OUT THAT BALCONIES, PROJECTI ONS, TERRACES AND OTHER EXCLUSIVE AREAS NOT SHARED WITH ANY OTHER RESIDENTI AL UNITS ARE TO BE INCLUDED IN BUILT-UP AREA AS PER THE REQUIREMENTS OF SEC. 80IB (10). HE POINTED OUT THAT FROM THE BUILDING PLANS SUBMITTED BY THE ASSESSEE B EFORE THE KDMC, KALYAN, AND SANCTIONED BY IT, THE BUILT-UP AREA OF TWO UNITS, I .E. BUNGALOWS IN BUILDING NO.3, IS MORE THAN 1500 SQ. FT. AS DETAILED BELOW:- THE CALCULATION SUBMITTED BY THE ARCHITECT WAS AS UNDER : S.NO. PARTICULAR AREA IN SQ.MTRS . 1 BUILT UP AREA OF GROUND FLOOR 133.48 2 BALCONY AREA ON GROUND FLOOR 4.5 ITA 5404/MUM/08 5 3 CUPBOARD AREA 2.88 4 STAIR CASE AREA 14.64 5 BUILT UP AREA OF FIRST FLOOR 103 .29 6 BALCONY AREA ON FIRST FLOOR 7.92 7 CUPBOARD AREA 2.88 8 TOTAL BUILT UP AREA OF BULDG. NO.3 UNIT NO.1 & 2 269.59 9 BUILT UP AREA OF UNIT NO.1 134 X 10.764 = 1451 SQ.FT. 134.79 10 BUILT UP AREA OF UNIT NO.2 134.79 X 10.764 = 1451 SQ.FT. 134.79 HOWEVER, THE AO POINTED THAT THE FOLLOWING AREAS HA VE NOT BEEN INCLUDED IN THE ABOVE CALCULATION : 1. AREA OF FOYER 78.15 SQ.FT. 2. AREA OF TWO TERRACES ON EACH UNIT 319.47 SQ.FT. 3. EXCLUSIVE OPEN AREA WITH EACH UNIT 1040.66 SQ.FT. THE AO CONCLUDED THAT THE TOTAL BUILT UP AREA WAS A S UNDER : 1. AREA OF EACH UNIT AS ABOVE 1451.00 SQ.FT. 2. AREA OF FOYER 78.15 SQ. FT. 3. AREA OF TWO TERRACES ON EACH UNIT 319.47 SQ. FT. 4. EXCLUSIVE OPEN AREA WITH EACH UNIT 1040.77 SQ.FT. 2889.2 SQ.FT. ========== THEREFORE, HE CONCLUDED THAT THE TOTAL AREA OF UNIT BEING MORE THAN THE PERMISSIBLE AREA, THE PROJECT DOES NOT QUALIFY FOR DEDUCTION U/S.80IB(10) OF THE I.T. ACT. III) PROJECT TO BE COMPLETED BEFORE 31 ST MARCH, 2008: THE AO REFERRED TO SEC. 80IB(10)(A)(I) AND POINTED OUT THAT THE PROJECT APPROVED BY THE LOCAL AUTHORITY BEFORE 1-4-2004 HAD TO BE CO MPLETED BY 31-3-2008. HE ITA 5404/MUM/08 6 NOTED THAT AS PER LETTER DATED 29-9-2006 OF THE SEC RETARY OF ANANT HOUSING CORPORATION LTD. (I.E. BUILDING NO.1, ANANT REGENCY , PHASE-II) TO THE KDMC, KALYAN, THERE WAS A STAY ON FURTHER CONSTRUCTION OF BUILDING NO.3 AS THE MATTER WAS WITH MRTP. SINCE THE MATTER HAD NOT BEEN DISPOS ED OF, THE STAY CONTINUED. HE FURTHER NOTED THAT AS PER ANSWER TO QUESTION NO. 11 OF THE STATEMENT DATED 26-11-2007 U/S.131 OF THE I.T. ACT, THE ARCHITECT FOR THE PROJECT, SHRI DILIP TAMBDAY, HAD STATED THAT EVEN IF THE WORK WAS RESU MED, THE PROJECT WOULD NOT BE COMPLETED IN LESS THAN 6 MONTHS TIME. THE AO, TH EREFORE, POINTED OUT THAT THE PROJECT COULD NOT BE COMPLETED BEFORE 31-3-2008. IN VIEW OF ABOVE CONCLUSIONS, THE AO WROTE ANOTHER LETTER DATED 5-12- 2007 TO THE ASSESSEE ALONG WITH COPIES OF STATEMENT S OF SHRI DILIP TAMBDAY, ARCHITECT, AND REQUIRED THE ASSESSEE TO EXPLAIN AND SHOW CAUSE AS TO WHY THE DEDUCTION OF RS.59,75,060/- SHOULD NOT BE DISALLOWE D. THE ASSESSEE THROUGH HIS ADVOCATE SUBMITTED A LETTER DATED 17-12-2007 WHICH HAS BEEN REPRODUCED AT PAGES 11 TO 13 OF THE ASSESSMENT ORDER. AFTER CONSI DERING THIS REPLY, THE AO FINALLY CONCLUDED AS UNDER : I) MINIMUM AREA OF ONE ACRE OF THE PLOT : THIS REQUIREMENT IS NOT FULFILLED BECAUSE THE AREA OF PLOT OF LAND SURRENDERED FOR PUBLIC USE OR COMMON USE TO THE LOCAL AUTHORITY CAN NOT BE SAID TO BE PART OF THE PROJECT. HE POINTED OUT THAT NOT THE GROSS AREA OF 5100 SQ. MTS. BUT ONLY THE REMAINING NET AREA OF LAND IN POSSESSION OF BUILDER COULD BE CONSIDERED AS AN AREA OF PLOT OF LAND ON WHICH THE PROJECT IS CONSTR UCTED. HE POINTED OUT THAT IN RESPECT OF SURRENDERED LAND, THE ASSESSEE WOULD BE ENTITLED TO FSI RIGHTS ONLY. THUS, IN SUM AND SUBSTANCE, THE AO CONCLUDED THAT THE NET AREA OF LAND ON WHICH CONSTRUCTION CAN BE MADE IS THE AREA CONTEMPL ATED UNDER SECTION 80IB(10) AND NOT THE FSI USED IN THE PROJECT. HE AL SO POINTED OUT THAT KDMC ITA 5404/MUM/08 7 ITSELF HAS MENTIONED AT POINT NO.3 OF THE SANCTION THAT THE SANCTIONED AREA IS 3914 SQ. MTS. THE AO ALSO REFERRED TO CBDTS CIRCU LAR NO. 5 OF 2005 WHEREIN IT WAS POINTED OUT THAT THE AREA LIMIT OF THE PLOT HAS TO BE CONSTRUED WITH REFERENCE TO THE AREA OF THE SITE ON WHICH THE HOUSING PROJEC T IS CONSTRUCTED AND NOT WITH REFERENCE TO THE DEMARCATION OF LAND LAID DOWN BY T HE LAND DEVELOPMENT AUTHORITY. HE, THEREFORE, CONCLUDED THAT THE HOUSIN G PROJECT ANANT REGENCY PHASE-II, KALYAN, WAS CONSTRUCTED ON AN AREA OF 391 4 SQ. MTS. II) MAXIMUM BUILT-UP AREA OF THE RESIDENTIAL UNIT S OF 1500 SQ.FT. : IN THIS REGARD, THE ASSESSEE HAD FILED A REVISED PL AN TO THE KDMC, KALYAN, FOR APPROVAL WHICH WAS SUBSEQUENTLY APPROVED ON 17-12-2 007 WHEREBY FOYER HAD BEEN REMOVED AND TERRACE AREA HAD BEEN SHOWN AS SLA NTING AND NOT AS FLAT TERRACE. THE AO POINTED OUT THAT EVEN IF THESE TWO AREA WERE REMOVED, STILL EACH UNIT HAD 1500 SQ.FT. THEREFORE, THIS CONDITION WAS NOT SATISFIED. III) PROJECT TO BE COMPLETED BEFORE 31-3-2008: IN THIS REGARD, THE AO POINTED OUT THAT COPY OF MRT P COURT HAD NOT BEEN PRODUCED BY THE ASSESSEE BEFORE HIM. THEREFORE, AN INSPECTOR WAS DEPUTED TO MAKE FIELD ENQUIRY WHO SUBMITTED HIS REPORT THAT TH ERE IS NO FURTHER PROGRESS IN THE CONSTRUCTION IN BUILDING NO. 3 AND THE SAME IS LYING AS IT IS AT THE FIRST SLAB OF THE RCC STAGE. FURTHER, IN VIEW OF THE STATEMENT OF ARCHITECT ALSO, IT WOULD TAKE AT LEAST 6 MONTHS TO COMPLETE THE CONSTRUCTION OF B UILDING NO. 3 EVEN IF CONSTRUCTION RESUMED IMMEDIATELY. HE, THEREFORE, DI SALLOWED THE CLAIM U/S.80IB(10). 3. BEFORE THE LD. CIT(A), DETAILED SUBMISSIONS WERE MADE VIDE WRITTEN SUBMISSION DATED 3-3-2008 AS REPRODUCED IN PARA 4 O F HIS ORDER, ON WHICH THE LD. CIT(A) HAS CALLED FOR A REMAND REPORT. THE AO, VIDE HIS LETTER DATED 4-4-2008, ITA 5404/MUM/08 8 SUBMITTED HIS REPLY WHICH HAS BEEN REPRODUCED AT PA GE 5 OF HIS ORDER. COPY OF REMAND REPORT WAS FURNISHED TO THE A.R. OF THE ASSE SSEE AND THE REPLY OF A.R. OF THE ASSESSEE DATED 1-5-2008 IS CONTAINED AT PARA 6 OF HIS ORDER. IN THIS REPLY, THE ASSESSEE POINTED OUT THAT HE HAD COMPLETED THE CONS TRUCTION OF BUILDING NO. 1 ON 28-2-2005 AND THAT OF BUILDING NO. 2 ON 15-9-2006. HOWEVER, THE TWO ROW HOUSES KNOWN AS BUILDING NO.3, THOUGH COMMENCED, WE RE NOT COMPLETED PRIOR TO 31-3-2008. IT WAS, THEREFORE, SUBMITTED THAT THE AS SESSEE MAY BE HELD TO BE ELIGIBLE FOR THE BENEFIT OF DEDUCTION U/S.80IB(10) TO THE EXTENT OF PROFIT DERIVED IN RESPECT OF THE TWO BUILDINGS, BEING BUILDING NOS.1 AND 2, COMPLETED BY THE ASSESSEE PRIOR TO 31-3-2008 IN COMPLIANCE WITH THE TERMS OF THE PROVISIONS OF SEC. 80IB(10). THE LD. CIT(A), HOWEVER, CONFIRMED T HE ORDER OF AO FOR THE FOLLOWING REASONS : 1. THE PROJECT HAS BEEN CONSTRUCTED ON A PLOT THE SIZE OF WHICH IS LESS THAN 1 ACRE IN AREA. 2. THE PROJECT HAS NOT BEEN COMPLETED BEFORE 31-3- 2008. HOWEVER, HE DID NOT ACCEPT THE AOS CONTENTION THAT THE BUILD UP AREA OF EACH RESIDENTIAL UNIT WAS MORE THAN 1500 SQ. FT. HE POIN TED OUT THAT THE FOYER AREA AND THE OPEN AREA CANNOT BE CONSIDERED FOR DECIDING THE BUILT UP AREA OF THE UNIT. HE ACCEPTED THE ASSESSEES CONTENTION IN RESPECT TH AT THE BUILT UP AREA OF EACH UNIT WAS 1451 SQ. FT. ONLY. HOWEVER, SINCE THE TWO CONDITIONS HAD NOT BEEN FULFILLED, HE CONFIRMED THE AOS ACTION. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFOR E US THAT AS FAR AS THE AOS OBJECTION, AS CONFIRMED BY THE CIT(A), IN REG ARD TO MINIMUM AREA OF PLOT BEING LESS THAN 1 ACRE IS CONCERNED, THE SAME IS NO T LEGALLY CORRECT BECAUSE THE AREA SURRENDERED BY THE ASSESSEE TO KDMC, KALYAN, F OR DP ROAD COULD NOT BE EXCLUDED. IN THIS REGARD, THE LD. COUNSEL RELIED ON THE DECISION OF ITAT, MUMBAI ITA 5404/MUM/08 9 BENCH, IN THE CASE OF M/S. UMIYA ENTERPRISES IN IT A NO.2750/MUM/09 DATED 8-2- 2010 WHEREIN THE TRIBUNAL HAS HELD THAT EXCLUSION I S ONLY FOR THE PURPOSE OF D.P. ROAD WHICH DOES NOT REDUCE THE SIZE OF THE PLOT AS A WHOLE. HE ALSO REFERRED TO CBDTS CIRCULAR NO.5 OF 2005 DATED 15-7-2005 CONTAI NED AT PAGES 48 TO 50 OF THE PAPER BOOK WHEREIN AT PAGE 49 IT HAS BEEN OBSERVED AS UNDER : THIS SECTION DOES NOT SPECIFICALLY PROVIDE AREA LI MIT FOR THE GARDEN, THE DEVELOPMENT PLAN ROADS, INTERNAL MEANS OF ACCESS, E TC. IN THE HOUSING PROJECT. THEREFORE, THE SAME SHOULD CONFORM TO THE PROJECT PLAN APPROVED BY THE LOCAL AUTHORITY IN ACCORDANCE WITH THE REGUL ATIONS IN FORCE. ALSO THE AREA LIMIT OF THE PLOT HAS TO BE CONSTRUED WITH REF ERENCE TO THE AREA OF THE SITE ON WHICH THE HOUSING PROJECT IS CONSTRUCTED AN D NOT WITH REFERENCE TO THE DEMARCATION OF LAND DOWN BY HE LAND DEVELOPMENT AUTHORITY. THE LD. COUNSEL FURTHER REFERRED TO PAGE NO. 56 OF THE PAPER BOOK WHEREIN THE SANCTIONED PLAN IS CONTAINED AND POINTED OUT THAT T HE AREA OF THE PLOT WAS 5100 SQ. MTS., FOR WHICH THERE IS NO DISPUTE. AS REGARDS HE SECOND REASON FOR SUSTAINING THE DISALLOWANCE BY THE CIT(A) ON THE GR OUND THAT THE PROJECT HAD NOT BEEN COMPLETED BEFORE 31-3-2008, THE LD. COUNSEL SU BMITTED THAT SINCE LITIGATION WAS GOING ON IN REGARD TO 3RD BUILDING, THE PROJECT COULD NOT BE COMPLETED. HE, THEREFORE, SUBMITTED THAT THE THIRD BUILDING MAY BE EXCLUDED AND PRO RATA DEDUCTION MAY BE ALLOWED. IN THIS REGARD, THE LD. C OUNSEL RELIED ON THE FOLLOWING DECISIONS : 1. BENGAL AMBUJA HOUSING DEVELOPMENT LTD. VS. DCIT IN ITA NO.1595/KOL/2005 DATED 24-3-2006 (ITAT, C-BE NCH,KOLKATA). 2. DCIT VS. BRIGADE ENTEPRISES (P) LTD. 119 TTJ(BANGALORE) 269 (2008). 3. ITO VS. AIR DEVELOPERS 123 TTJ (NAG) 959 (2009)/25 DTR 287. 4. ACIT VS. SHETH DEVELOPERS (P) LTD. 33 SO 277 (MUM.). 5. G.V. CORPORATION VS. ITO 38 SOT 174 (MUM.). ITA 5404/MUM/08 10 5. THE LD. D.R. SUBMITTED THAT AS PER SEC. 80IB(10) (B) THE PROJECT SHOULD HAVE BEEN CONSTRUCTED ON THE SIZE OF PLOT OF LAND W HICH HAS A MINIMUM AREA OF 1 ACRE. HE SUBMITTED THAT THE LAND SURRENDERED TO KDM C, KALYAN, COULD NOT BE TREATED AS PART OF LAND ON WHICH CONSTRUCTION HAD B EEN MADE AND, THEREFORE, THIS CONDITION HAD NOT BEEN FULFILLED. HE FURTHER POINTE D OUT THAT ADMITTEDLY BUILDING NO.3 WAS NOT COMPLETED BY 31-3-2008 WHICH WAS THE D EAD-LINE FOR COMPLETION OF THE PROJECT AND, THEREFORE, SINCE THE PROJECT AS SU CH WAS NOT COMPLETED BEFORE THE CUT-OFF DATE, DEDUCTION UNDER SEC. 80IB(10) C OULD NOT BE ALLOWED AS THE BASIC CONDITION CANNOT BE WAIVED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD OF THE CASE. THE MAIN ISSUE IS REGARDING FULFILMENT OF CON DITIONS LAID DOWN U/S.80IB(10) FOR CLAIMING DEDUCTION IN RESPECT OF PROFITS AND GA INS DERIVED BY AN UNDERTAKING CARRYING ON BUSINESS OF DEVELOPING AND BUILDING HOU SING PROJECT APPROVED BEFORE 31-3-2007. THE FIRST REASON FOR DENIAL OF DEDUCTION WAS ON THE GROUND THAT THE PLOT AREA ON WHICH CONSTRUCTION HAS BEEN MADE IS LE SS THAN 1 ACRE. IN THIS REGARD, IT IS NOT DISPUTED THAT 1186 SQ. MS. OF LAND WAS SU RRENDERED FOR DP ROAD LEAVING BEHIND 3914 SQ. MTS. NET AREA FOR THE PROJECT. WE F IND THAT THIS ISSUE IS COVERED BY THE DECISION OF ITAT IN THE CASE OF M/S. UMIYA E NTERPRISES VS. ITO IN ITA NO.2750/MUM/09 DATED 08-2-2010 WHEREIN IT HAS BEEN HELD AS UNDER : THIS ANNEXURE IS A MAP SHOWING THE DETAILS OF THE SITE PLANS, PLAN OF THE RESIDENTIAL UNITS TO BE BUILT BY THE ASSESSE E ETC. IT ALSO CONTAINS AN AREA STATEMENT WHICH SHOWS THAT THE ARE A OF THE PLOT IS 4600 SQ. METRES. IT FURTHER SHOWS THAT THERE IS A D EDUCTION 656.75 SQ. METRES FOR ROAD SET BACK. THIS DEDUCTION IS THE REAFTER SET OFF BY AN ADDITION OF EQUIVALENT AREA ALLOWED BY MNP. THE NET AREA OF THE PLOT AFTER THE DEDUCTION OF THE AREA FOR ROAD SET B ACK HAS BEEN SHOWN AT 3943.25 SQ. METRES. THEREAFTER THERE IS A DEDUCTION OF 591.409 SQ. METRES FOR RECREATION OPEN SPACE AND 41 1 SQ. METRES FOR INTERNAL ROAD. THE NET PLOT AREA IS THEN SHOWN AT 2940.76 SQ. METRES. THE AREA OF 656.75 SQ. METRES, WHICH WAS EA RLIER DEDUCTED FOR ROAD SET BACK, IS ADDED AND THE TOTAL AREA PLOT IS SHOWN AT 3597.51 SQ. METRES. IT WILL BE SEEN THAT THE TOTAL PLOT AREA HAS BEEN WORKED OUT BY THE MNP AT 3597.51 SQ. METRES ONLY AF TER DEDUCTING ITA 5404/MUM/08 11 591.49 SQ. METRES FOR RECREATION OPEN SPACE. THE RE CREATION OPEN SPACE IS HOWEVER PART OF THE PLOT AND THOUGH FOR TH E PURPOSE OF MUNICIPAL REGULATIONS, A PORTION OF THE PLOT HAS TO BE RESERVED AS A RECREATION AREA BUT FOR THE PURPOSE OF CLAUSE (B) O F SECTION 80IB(10), THE RECREATION AREA HAS ALSO TO BE CONSID ERED AS PART OF THE PLOT ONLY. THERE IS NO CONDITION IN THE CLAUSE THAT RECREATION AREA HAS TO BE EXCLUDED WHILE EXAMINING WHETHER THE PLOT IS OF THE SIZE OF ONE ACRE OR LESS. IF THE RECREATION AREA OF 591.49 SQ. METRES IS ADDED TO THE TOTAL PLOT AREA OF 3597.91 SQ. METRES, IT GIVES AN AREA OF 4189 SQ. METRES WHICH IS THE SIZE OF THE PLOT. T HE TOTAL PLOT AREA HAS BEEN ARRIVED AT BY MNP 3597.51 ONLY FOR THE PUR POSE OF CALCULATING THE PERMISSIBLE FSI. THE PERMISSIBLE FS I AS PER COLUMN 9 OF THE AREA STATEMENT IS ONE, WHICH MEANS THAT THE ASSESSEE CAN BUILD 3597.91 SQ. METRES IN THE SAID PLOT. HOWEVER, FOR THE PURPOSE OF CLAUSE (B) OF SECTION 80IB(10), THE PLOT AREA HA S BEEN TAKEN AT 4189 SQ. METRES, IF NOT AT 4600 SQ. METRES, EVEN ON THIS BASIS, THE SIZE OF THE PLOT IS MORE THAN ONE ACRE. IN OUR OPIN ION, THE CIT(A) COMMITTED AN ERROR IN SIMPLY EXCLUDING 656.75 SQ. M ETRES FROM THE AREA OF 4600 SQ. METRES WITHOUT APPRECIATING THAT T HE EXCLUSION IS ONLY FOR THE PURPOSE OF D.P. ROAD WHICH DOES NOT RE DUCE THE SIZE OF THE PLOT AS A WHOLE. WE ARE THEREFORE SATISFIED THA T THERE IS NO VIOLATION OF THE CONDITIONS PRESCRIBED BY CLAUSE (B ). IN THE PRESENT CASE, WE FIND THAT AT PAGE 56 OF THE PAPER BOOK THERE IS A STATEMENT OF AREA, AS PER WHICH AREA OF PLOT IS 510 0 SQ. MTS., OUT OF WHICH 1186 SQ. MTS. OF LAND HAD BEEN DEDUCTED FOR DP ROAD, LEA VING BEHIND 3914 SQ. MTS. AS PER THE DECISION OF TRIBUNAL IN THE CASE OF M/S. UM IYA ENTERPRISES NOTED ABOVE, THIS AREA SURRENDERED FOR DP ROAD COULD NOT BE EXCL UDED FOR DETERMINING THE SIZE OF THE PLOT AS CONTEMPLATED U/S.80IB(10)(B). THEREF ORE, THIS OBJECTION DOES NOT SURVIVE. THE SECOND REASON FOR DENIAL OF DEDUCTION WAS ON TH E GROUND THAT SIZE OF INDIVIDUAL UNITS OF BUILDING NO.3 WAS MORE THAN 150 0 SQ. FTS. THIS OBJECTION HAS NOT BEEN SUSTAINED BY LD. CIT(APPEALS) AND DEPARTME NT HAS NOT CHALLENGED THESE FINDINGS. THEREFORE, THIS OBJECTION DOES NOT SURVIV E. THE THIRD REASON FOR DENIAL OF DEDUCTION WAS ON THE GROUND THAT PROJECT WAS NOT COMPLETED BEFORE 31-3-2008 AS PER THE REQUI REMENTS OF SEC. 809IB(10)(A)(I). FROM THE FACTS NOTED EARLIER AND A LSO AS ADMITTED BY THE ITA 5404/MUM/08 12 ASSESSEE BEFORE THE LD. CIT(A), THERE IS NO DISPUTE THAT BUILDING NO. 3 COULD NOT BE COMPLETED BEFORE 31-3-2008 ON ACCOUNT OF LITIGAT ION GOING ON WITH RESPECT TO THE SAME. THE ASSESSEES CLAIM IS THAT PROPORTIONAT E DEDUCTION SHOULD BE ALLOWED IN VIEW OF VARIOUS DECISIONS RELIED UPON BY THE ASS ESSEE, WHEREAS THE DEPARTMENTS CONTENTION IS THAT SINCE THE VERY BASI C CONDITION HAS NOT BEEN FULFILLED, THEREFORE, THE DEDUCTION CANNOT BE ALLOW ED. WE WILL FIRST CONSIDER THE FACTS OF VARIOUS DECISIONS RELIED UPON BY THE LD. C OUNSEL. 6.1 IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMEN T LTD.(SUPRA), THE FACTS WERE THAT THE HOUSING PROJECT CONSISTED OF 261 RESI DENTIAL UNITS AND THE INDIVIDUAL FLAT SIZE VARIED BETWEEN 800 SQ.FT. TO 3000 SQ.FT. AND THE TOTAL BUILT UP AREA OF THIS HOUSING PROJECT WAS 346599 SQ. FT. THIS PROJEC T CONTAINED 150 RESIDENTIAL UNITS WITH A BUILT UP AREA OF INDIVIDUAL UNIT OF LE SS THAN 1500 SQ. FT. AGGREGATING TO 169500 SQ. FT. THE REMAINING BUILT UP AREA OF 18 7593 SQ. FT. WAS CONSUMED BY OTHER RESIDENTIAL UNITS WHEREIN THE SIZE OF INDIVID UAL UNIT EXCEEDED 1500 SQ. FT. OF BUILT UP AREA. UNDER THESE CIRCUMSTANCES, THE ASSES SEE HAD CLAIMED DEDUCTION U/S.80IB(10) WITH REFERENCE TO THE PROFIT ATTRIBUTA BLE TO THE BUILT UP AREA WHICH WAS OCCUPIED BY RESIDENTIAL UNITS HAVING INDIVIDUAL FLAT SIZE OF LESS THAN 1500 SQ. FT. THE AO REJECTED THE CLAIM OF THE ASSESSEE U/S. 80IB(10), INTER ALIA, OBSERVING THAT AS PER THE TERMS OF SEC. 80IB(10), ALL THE UNI TS COMPRISED IN THE HOUSING PROJECT SHOULD HAVE HAD INDIVIDUAL FLAT SIZE OF LES S THAN 1500 SQ.FT. IN THE BACKDROP OF THESE FACTS, THE TRIBUNAL OBSERVED THAT THE PROVISIONS LAID DOWN IN SEC. 80IB(10) DO NOT SPEAK REGARDING SUCH DENIAL OF DEDUCTION IN CASE OF PROFIT FROM A HOUSING COMPLEX CONTAINING BOTH THE SMALLER AND LARGE RESIDENTIAL UNITS AND SINCE THE ASSESSEE HAD CLAIMED ONLY DEDUCTION ON ACCOUNT OF SMALLER QUALIFYING UNITS BY FULFILLING ALL THE CONDITIONS AS LAID DOWN U/S.80IB(10), THE DENIAL OF CLAIM BY THE AO WAS NOT JUSTIFIED. ITA 5404/MUM/08 13 6.2 IN THE CASE OF BRIGADE ENTERPRISES (P) LTD. (S UPRA), THE FACTS WERE THAT THE ASSESSEE FORMED A SINGLE PROJECT BY NAME BRIGADE M ILLENNIUM COMPRISING A TOTAL AREA OF 22 ACRES AND 19 GUNTAS IN SURVEY NOS.44, 45 AND 51/1 OF BANGALORE SOUTH TALUK. THIS MACRO PROJECT COMPRISED CERTAIN H OUSING BLOCKS, COMMUNITY HALL ETC. AS ITS MICRO COMPONENTS. IT COMPRISED, AM ONG OTHER THINGS, 5 RESIDENTIAL BLOCKS BY NAME MAYFLOWER, CASSIA, MAGNOLIA, JACARAN DA AND LABURNUM. APPROVAL HAD BEEN OBTAINED FROM BDA ON 24-5-2002. THE ASSESS EE TOOK TWO BLOCKS SEPARATELY, VIZ., MAYFLOWER AND CASSIA, AND CLAIMED THE BENEFIT OF DEDUCTION U/S.80IB OF THE ACT IN RESPECT OF THE SAID TWO BLOC KS, CLAIMING THEM TO BE SEPARATE PROJECTS, AS ONLY THE SAID TWO BLOCKS COUL D FULFIL THE REQUIREMENTS PRESCRIBED U/S.80IB OF THE ACT. THE AO, HOWEVER, DE NIED THE CLAIM OF DEDUCTION U/S.80IB TREATING BRIGADE MILLENNIUM AS ONLY ONE P ROJECT. THE TRIBUNAL, AFTER CONSIDERING THE FACTS, OBSERVED THAT THE USE OF THE WORDS RESIDENTIAL UNITS MEANS THAT DEDUCTION SHOULD BE COMPUTED UNITWISE. T HEREFORE, IF A PARTICULAR UNIT SATISFIES THE CONDITIONS OF SEC.80IB, THE ASSESSEE IS ENTITLED FOR DEDUCTION. THEREFORE, THE TRIBUNAL UPHELD THE ORDER OF LD. CIT (A) IN ALLOWING DEDUCTION U/S.80IB(10) IN RESPECT OF TWO BLOCKS AS CLAIMED BY THE ASSESSEE. 6.3 IN THE CASE OF ITO VS. AIR DEVELOPERS (SUPRA) A LSO, INTER ALIA, THE DISPUTE WAS THAT SINCE THE BUILT UP AREA OF SOME OF THE RE SIDENTIAL UNITS WAS MORE THAN 1500 SQ. FT., DEDUCTION U/S.80IB(10) WAS NOT ALLOW ED. THE TRIBUNAL, FOLLOWING THE DECISION IN BENGAL AMBUJA HOUSING DEVELOPMENT LTD. (SUPRA) ALSO, HELD THAT PROPORTIONATE DEDUCTION IS TO BE ALLOWED. 6.4 IN THE CASE OF SHETH DEVELOPERS (SUPRA) ALSO, S IMILAR VIEW WAS TAKEN AND IT WAS HELD THAT EVEN WHERE SOME OF THE UNITS IN A HOU SING COMPLEX EXCEED THE AREA LIMIT, RELIEF HAS TO BE GIVEN ON A PRO RATA BA SIS. ITA 5404/MUM/08 14 6.5 IN THE CASE OF G.V. CORPORATION VS. ITO (SUPRA) , THE ASSESSEE, AT THE REQUEST OF PURCHASERS, JOINED SOME OF ITS FLAT/RESI DENTIAL UNITS, AS A RESULT OF WHICH BUILT UP AREA OF THOSE FLATS EXCEEDED 1,000 S Q. FT. DEDUCTION WAS DENIED U/S.80IB(10) ON THE GROUND THAT THE AFORESAID ACT O F THE ASSESSEE RESULTED IN VIOLATION OF THE PROVISIONS OF SEC. 80IB(10)(C). TH E TRIBUNAL, FOLLOWING THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF BRAH MA ASSOCIATES VS. JT. CIT (2009) 119 ITD 255, HELD THAT DEDUCTION COULD NOT B E TOTALLY DENIED AND IT WOULD BE ELIGIBLE FOR PROPORTIONATE DEDUCTION. 7. IN ALL THE ABOVE DECISIONS, DEDUCTION U/S.80IB W AS DENIED AS SOME OF THE RESIDENTIAL UNITS EXCEEDED THE LIMIT OF 1500 SQ. FT . AS LAID DOWN U/S.80IB(10)(C). HOWEVER, IN THE PRESENT CASE, THE DEDUCTION HAS BEE N DENIED, INTER ALIA, ON THE GROUND THAT THE PROJECT COULD NOT BE COMPLETED BEFO RE 31-3-2008. IT IS NOT DISPUTED THAT THIS CONDITION HAS NOT BEEN FULFILLED . NOW, IN THE LIGHT OF THE AFORESAID DECISIONS, WE HAVE TO CONSIDER WHAT WOULD BE THE CONSEQUENCES OF THE PROJECT BEING NOT COMPLETED BY 31-3-2008. THIS IS T HE BASIC CONDITION FOR ALLOWABILITY OF DEDUCTION U/S.80IB. WE FIND CONSIDE RABLE FORCE IN THE SUBMISSION OF LD. DR. HOWEVER, SINCE THIS CONDITION COULD NOT BE COMPLIED WITH BECAUSE OF STAY BEING GRANTED BY MRTP COURT, FAULT CANNOT BE F OUND WITH THE ASSESSEE. IF SUCH A CONTINGENCY EMERGES, WHICH MAKES THE COMPLIA NCE WITH THE PROVISIONS IMPOSSIBLE, THEN THE BENEFIT BESTOWED ON AN ASSESSE E CAN NOT BE COMPLETELY DENIED. WE MAY CLARIFY THAT IT IS ONLY IN SUCH EXCE PTIONAL CIRCUMSTANCES THAT THE DEDUCTION CANNOT COMPLETELY BE DENIED BUT THIS CANN OT BE EXTENDED TO SUCH SITUATIONS WHERE THE PROJECT IS NOT COMPLETED ON AC COUNT OF REASONS WITHIN THE CONTROL OF ASSESSEE. IN THE CASE OF BRIGADE ENTERPR ISES (P) LTD. (SUPRA), THE TRIBUNAL OBSERVED THAT THE USE OF WORDS RESIDENTIA L UNITS MEANS THAT DEDUCTION SHOULD BE COMPUTED UNITWISE. THEREFORE, IF A PARTI CULAR UNIT FULFILS THE CONDITIONS ITA 5404/MUM/08 15 OF SEC. 80IB, THE ASSESSEE IS ENTITLED FOR DEDUCTIO N SUBJECT TO FULFILLMENT OF OTHER STATUTORY REQUIREMENT. IN THE PRESENT CASE WE FIND THAT THERE IS NO DISPUTE THAT BUILDINGS A & B HAVE COMPLIED WITH THE CONDITIONS CONTEMPLATED U/S.80IB BUT THE PROJECT AS SUCH COULD NOT BE TREATED AS COMPLET ED WITHIN THE STIPULATED PERIOD. THEREFORE, IN VIEW OF THE PRINCIPLES LAID D OWN IN THE AFORESAID DECISIONS, WE ARE OF THE OPINION THAT ON ACCOUNT OF ASSESSEE B EING INCAPACITATED IN COMPLETING THE PROJECT WITHIN THE STIPULATED PERIOD , PROPORTIONATE DEDUCTION U/S.80IB SHOULD BE ALLOWED IN THE RATIO OF AREA COM PLETED TO SANCTIONED AREA. WE MAY CLARIFY THAT FOR THE PURPOSE OF SANCTIONED AREA , THE SIZE OF PLOT IS TO BE TAKEN AT 5100 SQ. FT. IN THE RESULT, THIS GROUND IS PARTL Y ALLOWED. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 12TH DAY OF JANUARY, 2 011. SD/- SD/- (SMT. ASHA VIJAYARAGHAVAN) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI:12 TH JANUARY , 2011. NG: COPY TO : 1.ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-I,THANE. 4 CIT,CITY-I,THANE. 5.DR,J BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA 5404/MUM/08 16 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 3/11/2010 SR.PS/ 2 DRAFT PLACED BEFORE AUTHOR 20/12/2010 SR.PS/ 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 03-01-2011 JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 06-01-2011 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 06-01-2011 SR.PS/ 6 KEPT FOR PRONOUNCEMENT ON -01-2011 SR.PS/ 7 FILE SENT TO THE BENCH CLERK -01-2011 SR.PS / 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO AR 10 DATE OF DISPATCH OF ORDER