ADDL CIT 15(1), MUMBAI V. KHYYATI FINANCIAL SERVICES, MUMBAI

ITA 5498/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62293 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 06-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS USHA NAIR
• Keywords: Retrospective amendment
• Section: 80IB; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 5498/MUM/2010 ASSESSMENT YEAR : 2006-07 ADDITIONAL COMMISSIONER OF INCOME-TAX-15(1)(2), APPELLANT MATRU MANDIR, R.NO. 116, MUMBAI 400 007. VS. KHAYTI FINANCIAL SERVICES, RESPONDENT 3, NARAYAN BLDG., 23, L.N. ROAD, DADAR (E), MUMBAI 400 014 (PAN AAGFK0729A) APPELLANT BY : MRS. USHA NAIR RESPONDENT BY : MR. VIJAY MEHTA DATE OF HEARING : 27/03/2012 DATE OF PRONOUNCEMENT : 13/04/201 2 ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-26, MUMBAI, PASSED ON 16/04/2010 FOR THE ASS ESSMENT YEAR 2006-07. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND L AW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE DEDUCTION U/S 80IB(1) OF RS. 4,96,27,406/- IGNORING THE FACTS THAT THE ASSESSEE FIRM SOLD THREE FLATS IN E WING EACH HAVING THE BUILT UP AREA OF MORE THAN 1000 SQ.FT. I.E. 1092 SQ.FT. IN CONTRAVENTION OF THE PRO VISIONS OF SECTION 80IB(1)(C). 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND LAW LD. CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE SHOP AREA INCLUDED ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 2 IN THE HOUSING PROJECT EXCEEDED LIMIT OF BUILT UP A REA OF 2000 SQ.FT. WHICH CONTRAVENES THE STIPULATION OF SECTION 80IB(10(D) FOR INSTANT ASSESSMENT DISENTITLING THE ASSESSEE FROM T HE CLAIM OF DEDUCTION U/S 80IB(10). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND LAW THE LD. CIT(A) ERRED IN LAW IN ALLOWING THE DEDUCTI ON U/S 80IB(1) OF RS. 4,96,27,406/- ON THE BASIS OF THE FACTS THAT THE PLAN WAS APPROVED BEFORE 01/04/2005 AND THE AMENDED PROVISIO N OF SECTION 80IB(10(D) ARE NOT APPLICABLE WITHOUT ANY L EGAL MANDATE, AS THE PROVISION OF SECTION 80IB(10)(D) INSERTED BY FINANCE ACT, 2004 W.E.F. 01/04/05 HAS NO RETROSPECTIVE EFFECT AN D APPLIES ONLY W.E.F. 01/04/05 RELEVANT TO AY 2005-06 AND ONW ARDS WHICH HAS BINDING EFFECT IN THIS ISSUE. 3. THE FACTS RELATING TO GROUND NOS. 2 & 3 ARE THAT THE AO HAD DISALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE REASONS MENTIONED IN THE ASSESSMENT ORDER FOR AY 2005-06. AFTER EXAMI NING THE DETAILS OF SALE OF FLATS FURNISHED BY THE ASSESSEE, THE AO HEL D THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION OF CLAIM U/S 80IB(1) AS ACCORDING TO HIM RELEVANT PROVISION OF LAW U/S 80IB(10)(D) IS TO BE APPLIED IN THE YEAR IN WHICH PROFIT IS EARNED AND NOT YEAR IN WHICH THE PROJECT WAS STARTED. HE FURTHER HELD THAT THE PROFITS ARISEN AN D BEING TAXED AT COMPLETION OR NEAR COMPLETION STAGE OF THE PROJECT AND LAW APPLICABLE TO SUCH PROFIT WHICH EXISTS AT COMPLETION STAGE AND NOT THE ONE WHICH EXISTS AT CONCEPTUALIZATION STAGE. BESIDES, WHEN A BUILDER IS CONSTRUCTING LARGE NUMBER OF SHOPS IN HOUSING PROJE CT THEY ARE TAKING CALCULATED LIST AS EVEN THE LAW EXISTING PRIOR TO 0 1/04/2005 ALLOWED CLAIM OF DEDUCTION ONLY ON THE HOUSING PROJECT AND NOT ON THE RESIDENTIAL-CUM-COMMERCIAL PROJECT. ACCORDING TO TH E AO, LAW UNDER SECTION 80IB(1)(D) HAS TO BE APPLIED PROSPECTIVELY AND NOT RETROSPECTIVELY. WITH THE ABOVE REASONINGS, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF TH E AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 3 4. BEFORE THE CIT(A), THE LEARNED AR OF THE ASSESSE E ARGUED THAT THE AO HAD ERRED IN NOT ACCEPTING THE DECISION OF T HE CIT(A) WHO HAD PASSED A VERY SPEAKING ORDER CONSIDERING THE FULL F ACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE EVIDENCE O N RECORD AND RELEVANT CASE LAWS COVERING SUCH ISSUES. IT WAS CON TENDED THAT THE AO HAD DISALLOWED THE CLAIM OF THE ASSESSEE MERELY FOR THE SAKE OF DISALLOWING THE CLAIM TAKING THE SUPPORT OF THE ARG UMENTS ONLY AND THEREBY DISRESPECTING THE PRACTICAL ASPECT OF THE M ATTER, EVIDENCE ON RECORD, GENUINENESS OF THE CLAIM, APPLICABILITY OF PROVISION OF LAW, DECISION OF HONBLE ITAT AND VARIOUS HIGH COURTS. T HE AR OF THE ASSESSEE FILED A DETAILED WRITTEN SUBMISSIONS WHICH WERE EXTRACTED BY THE CIT(A) IN HIS ORDER AT PAGES 7 TO 19. AFTER CON SIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) EXAMINED TH E ISSUE ELABORATELY AND HELD AS UNDER:- 6. I HAVE CIRCUMSPECTED THE ENTIRE SPECTRUM OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAS CONSIDERED THE RI VAL SUBMISSION OF LD. AR, FINDING OF THE ASSESSING OFFICER AND PERUSE D THE EVIDENCE ON RECORD, CAREFULLY. LD. AO HAS ERRED IN MENTIONING T HAT LD. CIT(A) WHILE PASSING THE APPELLATE ORDER IN THE APPELLANTS OWN CASE NO. CIT(A)- XV/IT-12211TO15(1)(2)/2007-08 DATED 18.3.2008 HAD N OT SEEN AND EXAMINED THE VITAL ORDER NO. B/C/8637-BS/AP DATED 2 9.1.2004 THROUGH WHICH APPROVAL OF PLAN OF SHOPS DATED 06.11 .2003 ISSUED IN THE NAME OF LIFPL WAS CANCELLED. IT IS ALSO WRONG O N THE PART OF LD. AO TO MENTION THAT LD. CIT(A) HAD NOT PERUSED THE APPL ICATION NO. 9998 DATED 17.12.2003 SUBMITTED BY THE APPELLANT TO THE LOCAL AUTHORITY FOR SEEKING APPROVAL FOR CONSTRUCTION OF BOTH THE SHOPS AND FLATS. IT IS ALSO WRONG ON THE PART OF LD. AO TO MAKE BASELESS REMARK S AGAINST THE THEN CIT(A) THAT HIS APPELLATE ORDER WAS FACTUALLY ERRON EOUS. IT CAN BE SEEN FROM THE APPELLATE ORDER THAT THE THEN LD. CIT(A) H AS REFERRED THE ORDER NO. B/C/8637-BS-AP DATED 29.01.2004 TWO TIMES AT PA GE NO.2 AND THEREAFTER AT PAGE NO. 12 OF THE APPELLATE ORDER DA TED 18.3.2008, LD. CIT(A) HAS CONSIDERED THIS IOD WITH THE SET OF APPR OVED PLAN AND ALSO HAS REFERRED THE COMMENCEMENT CERTIFICATE DATED 06. 02.2004 AND HAS SPECIFICALLY REPRODUCED THE RELEVANT PARAGRAPH OF T HE CERTIFICATE, THEREFORE, THE CONTENTION AND ARGUMENT OF LD. AO AG AINST THE FINDING AND DECISION OF THE THEN LD. CIT(A) IS PATENTLY WRO NG. APPARENTLY THERE IS NO DEFICIENCY AS HAS BEEN PRESUMED BY THE ASSESS ING OFFICER WHILE MAKING SUCH OBSERVATION. THE LD. CIT(A) IN. THE ORD ER DATED 18.3.2008 HAS CATEGORICALLY FOUND OUT THAT THERE WERE TWO IND EPENDENT PROJECTS CARRIED OUT BY TWO SEPARATE ASSESSEES WHOSE INCOME WERE ACCEPTED BY TWO INDEPENDENT ASSESSING OFFICERS. HERE IT BECOMES IMPERATIVE TO REPRODUCE THE FINDING OF LD. CIT(A) FOR A.Y. 2005-0 6, WHICH IS S UNDER :- ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 4 5.4 I HAVE CIRCUMSPECTED THE MATERIAL EVIDENCE AVA ILABLE ON RECORD. I FIND THAT THERE ARE ENOUGH DOCUMENTARY EV IDENCES ON RECORD TO SAY THAT HOUSING COMPLEX AND SHOPPING COM PLEX, THOUGH THEY ARE PART OF SAME BUILDING, WERE CONSTRU CTED BY TWO CONCERNS. VIZ, THE APPELLANT-FIRM AND LIFPL. I FIND THAT DEVELOPMENT RIGHTS FOR RESIDENTIAL AND SHOPPING COM PLEX WERE SEPARATELY ACQUIRED BY THE APPELLANT-FIRM AND LIFPL IN PURSUANCE OF SEPARATE DEVELOPING AGREEMENTS ENTERED WITH THE OWNER OF THE LAND. THE ENTIRE FUNDS FOR DEVELOPMENT OF SHOPPING COMPLEX AND RESIDENTIAL HOUSES WERE BROUGHT BY THE TWO CONCERNS SEPARATELY FROM THEIR RESPECTIVE SOURCES. THERE WAS NO INTERLACING OR INTERMINGLING OF THE FUNDS BETWEEN T HE APPELLANT AND LIFPL. I FIND THAT EVEN-THOUGH THE TWO CONCERNS ARE A SISTER CONCERNS, BUT NEVERTHELESS, THEY ARE DIFFERENT ENTI TIES OUT OF WHICH ONE IS LEGAL ENTITY INFORM OF LIFPL. BOTH THE CONCERNS SOLD THEIR RESPECTIVE CONSTRUCTED SHOPS AND RESIDENTIAL HOUSES TO DIFFERENT BUYERS AND RECEIVED THE CONSIDERATION ACC ORDINGLY. ONE CAN ALSO NOT LOSE SIGHT OF THE FACT HIGHLIGHTED BY THE APPELLANT THAT THE PROVISION OF SEC. 801B(10)(D) INSERTED BY FINANCE ACT, 2004, W.E.F 1-4-2005 PUTTING SOME THRESHOLD CAP ON THE CONSTRUCTION OR SHOP AND COMMERCIAL ESTABLISHMENT I NCLUDED IN THE HOUSING PROJECT HAS STILL TO TAKE ITS BIRTH ON THE STATUTE BOOK WHEN THE ENTIRE PROJECT WAS BIFURCATED INTO THE SHO PPING COMPLEX AND HOUSING COMPLEX TO BE CONSTRUCTED BY TWO DFFERE NT CONCERNS, AS RESULT OF DEVELOPMENT AGREEMENTS ENTERED INTO. I T MAY ALSO BE MENTIONED THAT INVOKING PROVISIONS OF SEC.801B (1 0 ) (D) WAS ONE OF THE MAIN GROUND ON WHICH THE DEDUCTION U/S.801B( 10) WAS DENIED. THEREFORE, I DONT SEE ANY REASON AS TO HOW THE APPELLANT INVOLVED INTO DEVISING COLOURABLE OR DUB IOUS MEANS IN ADVANCE TO CIRCUMVENT THE PROVISION OF SEC.801B(10) (D). HENCE, THE DELIBERATION OF THE AO ON THIS ACCOUNT APPEARS TO BE FAR- FETCHED AND UNFOUNDED, ON THE GROUND THAT THE CONCE PTUALIZATION OF PROJECT ITSELF ADVANCED BEFORE THE PROVISION U/S .801B(10)(D) TOOK ITS BIRTH ON THE STATUTE BOOK. 5.4.1 THE AO HAS ALSO PLACED LOT OF RELIANCE ON THE LETTER WRITTEN BY BMC IN RESPONSE TO QUERY RAISED BY THE AO WHICH WAS ADDRESSED TO THE AO HIMSELF THE AO HAS STATED THAT BMC HAS DISAPPROVED THE ARTIFICIAL BIFURCATION OF SHOPPING COMPLEX AND RESIDENTIAL COMPLEX, HOLDING THE PROJECT UNDER THE SINGLE COMPOSITE PROJECT. I HAVE PERUSED CONTENT OF SUCH LETTER. I FIND THAT THIS LETTER MENTIONS ABOUT THE APPLICATION FLI ED BY THE APPELLANT FIRM AND L1FPL FOR OBTAINING NECESSARY AP PROVAL FOR THE PROJECT. THIS LETTER ALSO GIVES REFERENCE ABOUT THE COPY OF J.O.D. DT. 6-11-2003 WITH SET OF APPROVED PLAN FOR GROUND FLOOR SHOPPING ONLY DATED 6-11-2003 AND COMMENCEMENT CERT IFICATE DI 13-11-2003 ISSUED IN THE NAME OF LIFPL. FURTHER, IT ALSO MENTIONS ABOUT THE COPY OF I.O.D. DI. 29-1-2004 WIT H SET OF APPROVED PLAN DT 29-1 -2004 AND COMMENCEMENT CERTIF ICATE DI. 6-2- 2004 ISSUED IN THE NAME OF APPELLANTS FIRM. A T LAST, THE LETTER GIVES THE FOLLOWING REMARK. ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 5 IN THE INSTANT CASE, THE SHOPS WERE APPROVED AND CONSTRUCTED BY LAKSHADEEP INVESTMENT & FINANCE P. L TD. SUBSEQUENTLY, HE AMENDED PLAN AND REVISED I.O.D. WA S ISSUED IN NAME OF KHYATI FINANCIAL SERVICES ON 29-1 -2004 DUE TO CHANGE OF OWNERSHIP. THE SAID BUILDING IS AP PROVED UNDER THE FILE NO.CHE/8637/BP (WS)/AP AS HOUSING PROJECT ITS SHOPS ON THE GROUNDFLOOR (EMPHASIS SUP PLIED) 5.4.2 FROM THE PERUSAL OF THE CONTENT OF THE ABOVE LETTER, I FIND THAT THE BMC HAS ACCEPTED THE CONSTRUCTION OF SHOPP ING COMPLEX AND RESIDENTIAL FLATS IN PRINCIPLE BY TWO DIFFERENT CONCERNS AND IT WAS BEEN COMBINED TOGETHER ONLY FOR THEIR RECORD BE ING THE SHOPPING COMPLEX AND RESIDENTIAL FLATS GOT CONSTRUC TED ON THE SAME LAND. THE LETTER WRITTEN BY BMC IN MY OPINION, NO WAY ESTABLISHES THAT BOTH THE SHOPPING COMPLEX AND RESI DENTIAL FLATS WERE CONSTRUCTED BY THE SAME PERSON, I.E. THE APPEL LANT-FIRM. IN FACT, IT WAS NONE OF THE CONCERN OF BMC TO LOOK INT O AS TO WHO CONSTRUCTS WHICH PART OF THE PROJECT EXCEPT TO PLAC E INTO THEIR RECORD REGARDING THE PLAN OF PROJECT AS WHOLE SITUA TED ON A PARTICULAR PIECE OF LAND. THE BMC, AFTER TAKING REC OGNISITION OF ALL THESE FACTS GAVE A COMBINED I.O.D. AND C.C. WHI CH IS COMMON FOR BOTH. BUT THAT ITSELF DOES NOT DISSOLVE OR DILU TE THE HARD FACT THAT SHOPPING COMPLEX AND RESIDENTIAL COMPLEX WERE CONSTRUCTED BY IWO SEPARATE CONCERNS AND THE APPELLANTS PROJEC T WAS ESSENTIALLY A HOUSING PROJECT. 5.4.3 HERE, MY ATTENTION HAS ALSO BEEN DRAWN TO THE CLARIFICATION ISSUED BY CBDT VIDE LETTER DATED 4TH MAY, 2001 (F.NO.205/3/2001/ITA.II) WHICH READS AS UNDER: THE UNDERSIGNED IS DIRECTED TO REFER TO YOUR LETTE R NO.MCIII.RSA:M:388/19799/3 DATED, 1ST JANUARY, 2001 AND TO STATE THAT THE ADDITIONAL HOUSING PROJECT ON EXISTI NG HOUSING PROJECT SITE CAN QUALIFY AS INFRASTRUCTURE FACILITY UNDER SECTION 10(23G) AND 801B (1 0) PROVIDED II IS TAKEN UP BY A SEPARATE UNDERTAKING HAVING SEPARATE BOOKS OF ACCOUNTS, SO A S TO ENSURE THAT CORRECT PROFITS CAN BE ASCERTAINED FOR THE PUR POSE OF SECTION 801B AND ALSO TO IDENUFY RECEIPTS AND REPAYMENTS OF LONG TERM FINANCES UNDER THE PROVISIONS OF SECTION 10(23G), S EPARATELY FINANCING ARRANGEMENTS AND ALSO, F IT SEPARATELY FU LFILLS ALL OTHER STATUTORY CONDITIONS LISTED IN SECTIONS 1O(23G) AND 801B(10). WITH REGARD TO YOUR QUERY REGARDING THE DEFINITION OF HOUSING PROJECT IT IS CLARIFIED THAT ANY PROJECT WHICH HAS BEEN APPROVED BY A LOCAL AUTHORITY AS A HOUSING PROJECT SHOULD BE CONSIDERED ADEQUATE FOR THE PURPO SE OF SECTION 1O(23G) AND 801B(1O). (UNDERLINING SUPPLIED EXTRA) THE ABOVE CLARIFICATION ISSUED BY CBDT IS SUFFICE E NOUGH TO SAY THAT ADDITIONAL HOUSING PROJECT ON EXISTING HOUSING PROJECT SITE CAN ALSO QUA FLFY UNDER SECTION 801B (1 0). THUS, T HE CBDT ITSELF APPROVES OF TWO PROJECTS ON COMMON LAND AND EXISTEN CE OF TWO SEPARATE UNDERTAKINGS. THE PRESENT CASE, IS NO WAY DIFFERENT ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 6 THAN SITUATION CONTEMPLATED IN THE CBDTS CLARFICAT ION. THEREFORE, THERE IS NO TABOO TO HAVE IWO PROJECTS O N THE SAME PIECE OF LAND UNDERTAKEN BY TWO SEPARATE CONCERNS. THE VIEW EXPRESSED BY THE CBDT ALSO BINDS THE AU AND THE AU CANNOT AFFORD TO HAVE DFFERENT VIEW. 5.4.4 1 HAVE ALSO CONSIDERED THE LEGAL CLAIM OF THE AU REGARDING THE APPLICABILITY OF RATIO DECIDENDI ON THE CASE OF MAC DOWELL & CO. V. CTO 154 JTR 148 (SC). I FIND THAT THERE MAY BE SOME TAX PLANNING INVOLVED IN THIS CASE IN ORDER TO CONSOLID ATE THE CLAIM OF DEDUCTION MADE U/S 8OIB (1 0) BUT IT CANNOT BE S AID THAT APPELLANT HAS ADOPTED ANY COLOURABLE OR DUBIOUS DE VICES TO REDUCE THE TAX LIABILITY. THERE ARE GOOD DOCUMENTAR Y MATERIAL EVIDENCES WHICH SUPPORTS TO THE CLAIM OF THE APPELL ANT THAT THE SHOPPING COMPLEX AND RESIDENTIAL COMPLEX WERE CONST RUCTED BY TWO DIFFERENT CONCERNS. SUCH HARD DOCUMENTARY EVIDE NCES CANNOT BE BRUSHED ASIDE TO LIGHTLY TO APPLY THE RATIO OF T HE MC DOWELLS CASE AS REFERRED (SUPRA). IN THIS CONNECTION, THERE ARE PLETHORA OFJUDICIAL PRECIDENS ON THE APPLICABILITY OF THE RA TIO OF MCDOWELLS CASE WHICH DOES NOT SUPPORT THE A. 0. S VIEW. THE FOLLOWING PRECEDENTS ARE WORTH MENTIONING: (I) AN INTERESTING DECISION AS TO THE IMPACT OF THE JUDGEMENT OF THE SUPREME COURT IN MC.DOWELL & CO. V. CTO (1985) 154 ITR 148 HAS BEEN RENDERED BY THE GUJARAT HIGH COURT IN BANYAN AND BERRY V. CIT (1996) 222 ITR 831 (GUJ.) IT WAS A CAS E OF DISSOLUTION OF A FIRM CONSEQUENT ON TAKEOVER OF THE BUSINESS OF SUCH FIRM AS A GOING CONCERN BY THE COMPANY. THE FI RST APPELLATE AUTHORITY WHILE UPHOLDING THE ASSESSMENT ORDER SOUG HT TO FIND SUPPORT FROM MCDOWELLS CASE (1985) 154 ITR 148 AS IN HIS VIEW DISSOLUTION WAS PROMPTED BY THE INTENTION TO AVOID TAX ON FURTHER AMOUNTS RECEIVABLE AFTER DISSOLUTION, IT WAS HELD B Y HON. HIGH COURT THAT SINCE THERE WAS NO OTHER BUSINESS OR ACT IVITY OF THE FIRM EXCEPT FOR PENDING RECOVERY ON DISPUTED CLAIM, DISSOLUTION CANNOT ALSO BE LIGHTLY DESCRIBED AS A DEVICE TO AVO ID TAX AND THERE IS NOTHING UNUSUAL IN SUCH AN ARRANGEMENT. (II) IT ALSO RELIED ON THE VIEW OF A SUBSEQUENT DEC ISION OF THE SUPREME COURT IN CWT V. ARVIND NAROTTAM (1988) 173 ITR 479, WHERE IT WAS HELD THAT THE LEGAL CONSEQUENCES OF A TRANSACTION CANNOT BE IGNORED WHERE THE LANGUAGE OF THE DOCUMEN T IS PLAIN AND CREATES LEGAL RIGHTS OR LIABILITY. IT WAS OBSER VED BY SABYASACHI MUKHARJI J. AS HE THEN WAS IN A SEPARATE CONCURRING JUDGMENT IN CWT V. ARVIND NAROTTAM (1988) 173 ITR 4 79 AT PAGE 487 AS UNDER. ... WHERE THE TRUE EFFECT ON THE CONSTRUCTION OF T HE DEEDS IS CLEAR, AS IN THIS CASE, THE APPEAL TO DISCOURAGE TA X AVOIDANCE IS NOT A RELEVANT CONSIDERATION. BUT SINCE IT WAS MADE , IT HAS TO BE NOTED AND REJECTED. (II) MCDOWELL & CO. LTD. V. CIT (1985) 154 ITR 148 (SC) HAS BEEN BEDROCK OF REVENUE TO QUESTION EVERY TRANSACTION RE SULTING IN TAX ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 7 SAVING. IN THIS DECISION, CHINNAPPA REDDY J. HAD CA TEGORICALLY EXPRESSED THE VIEW THAT WESTMINSTER PRINCIPLE, WHIC H CONCEDED THE RIGHT TO TAX PLANNING, WAS A GHOST WHICH WAS EX ERCISED EVEN IN ENGLAND, WHERE IT WAS BORN. THOUGH THIS DECISION WAS EXPLAINED IN A LATER DECISION AS APPLICABLE ONLY TO ARTFICIAL DEVICES, THE SUPREME COURT IN (101 V. AZADI BACHAO ANDOLAN (2003) 263 ITR 706 (SC) HAD GONE. FURTHER AND FOUND THAT THE JUDGMENT IN MCDOWELLS CASE HAS TO BE UNDERSTOOD AS THE ONE SET OUT BY JUSTICE RANGNATH MISRA IN THE SAME CASE AND THAT WESTMINSTER PRINCIPLE IS STILL ALIVE AND KICKING IN ENGLAND. A NUMBER OF SUBSEQUENT DECISIONS ON THE SUBJECT, THE OBSERVATION OF SHAH J. IN CIT V. A. RAMAN AND CO. (1968) 67 ITR 1] (SC) AND THE WESTMINSTER PRINCIPLE WERE HELD TO BE STILL GOO D LAW. (IV) A CHANGE IN METHOD OF ACCOUNTING REDUCING TAX LIABILITIES FOR THE YEAR WAS QUESTIONED BY REVENUE AS HIT BY TAX AV OIDANCE FOLLOWING THE RATIONALE OF MCDOWELL & CO. LTD. V. C TO (1985) 154 ITR 148 (SC) IN HELA HOLDINGS PVT. LTD. V.. CIT (20 03) 263 ITR 129 (CAL.), WHERE THE HIGH COURT ELABORATELY REVIEW ED THE RULING DECISIONS ON THE SUBJECT AND CAME TO A CONCLUSION T HAT THE TRIBUNAL WAS NOT JUST/IED IN ASSUMING THAT THE COND ITIONS NECESSATY FOR SUCH CHANGE ARE NOT SATISFIED. (V) THE BOMBAY HIGH COURT IN CIT V. MRS. SANTA P. S HIRKE (2006) 281 ITR 373 (BORN) FELT, THAT THE EXTREME VIEW OF C HINNAPPA REDDY I, IN THE JUDGEMENT IN MCDOWELL & COS CASE ( SUPRA) SHOULD BE UNDERSTOOD IN THE LIGHT OF THE MAJORITY V IEW, WHICH WAS THAT OF RANGANATH MISHRA J., WHO HAD FAULTED ON LY COLOURABLE DEVICES AND A RESORT TO DUBIOUS METHO DS , BECAUSE THEY CANNOT BE PART OF LEGITIMATE TAX PLANN ING. THE HIGH COURT ALSO POINTED OUT THAT HIS WAS THE VIEW TAKEN IN UNION OF INDIA V. AZADI BACHAO ANDOLAN (2003) 263 ITR 706 (S C). EVEN OTHERWISE, THE LATER DECISION OF THE SUPREME COURT IN AZADI. BACHAO ANDOLANS CASE (SUPRA) WATERS DOWN THE RATIO OF THE DECISION IN MCDOWELL & COS CASE (SUPRA) WITH REFER ENCE TO THE MAJORITY JUDGEMENT. IN THIS WAY, IN THE LIGHT OF THE ABOVE JUDICIAL PRE CEDENTS, I FIND THAT THE RATIO OF THE MCDOWELLS CASE AS REFERRED S UPRA IS NOT APPLICABLE ON THE FACT OF THE PRESENT CASE AS THERE IS NO DELIBERATE COLOURABLE & DUBIOUS DESIGN TO DEFRAUD T HE REVENUE. IN VIEW OF FORGOING DISCUSSION, I HOLD THAT THE HOU SING PROJECT COMPLETED BY THE APPELLANT-FIRM HAS TO BE DELINKED FROM SHOPPING COMPLEX CONSTRUCTED BY LJFPL FOR THE PURPO SE OF COMPUTING DEDUCTION U/S.801B(10). AS A LOGICAL CORO LLARY OF THIS FINDING, NEEDLESS TO SAY THAT THE APPELLANTS CASE CANNOT BE HIT BY 801B(1O)(D), WHICH IS APPLICABLE FROM A.Y.2005-0 6 AS THERE IS NO SHOPPING OR COMMERCIAL ESTABLISHMENT INDEED IN T HE PROJECT UNDERTAKEN BY THE APPELLANT-FIRM . THUS, THE FACTUAL ASPECTS OF THE CASE HAS ALREADY B EEN CONSIDERED AND DECIDED IN FAVOUR OF THE APPELLANT N EVERTHELESS, IT IS ALSO PERTINENT TO RE-LOOK INTO IT SO THAT NOT HING IS LEFT OUT OF ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 8 CONSIDERATION. AS REGARDS, CONTENTION OF THE AO THA T 3 FLATS NO. E-104, E-201 & E-501 ARE HAVING BUILT UP AREA MORE THAN 1000 SQ.FT., IT IS FOUND THAT FER, FACT REVEALS THAT AC TUAL BUILT UP AREA OF INDIVIDUAL FLATS IS ONLY 913 SQ.FT AND THE SIZE PRESUMED TO BE 1092 SQ.FT. IS SUPER BUILT UP AREA WHICH IS NORMALL Y A SALEABLE AREA THEREFORE, FINDING OF LD. AO IS BASED ON INCOR RECT FACTS REGARDING VIOLATION OF CONDITION PRESCRIBED UNDER S ECTION 801B(10)(C). FURTHER, I DO NOT SEE ANY MERIT IN THE ARGUMENT OF LD. AO, 10 ADJACENT FLATS WERE SOLD TO THE RELATED BUYERS. APPELLANT CAN SELL INDIVIDUAL FLATS TO ONE PERSON O R MANY PERSONS, WHICH MAKES NO DIFFERENCE SO FAR AS LEGAL OBLIGATION IS CONCERNED. THE ONLY POINT FOR CONSIDERATION IS! MAY BE AS TO WHETHER BUILT UP AREA OF INDIVIDUAL DWELLING UNIT E XCEEDS THE PRESCRIBED LIMIT OR AGAINST THE LAY OUT PLAN. HERE, IN THIS CASE, NO SUCH EVIDENCE HAS BEEN ON RECORD BY THE LD. AO T O CONSIDER ABOUT ANY SORT OF VIOLATION OF PROVISION OF LAW. AS REGARDS THE REPLY TO BE FILED BY RAGHVENDRA BETGIRI, IT IS OBVI OUS FACT THAT ON BEHALF OF THIS PERSON MR. VINAYA BETGITI HAS FILED REPLY TO THE ASSESSING OFFICER AS MR. RAGHVENDRA BETGIRI WAS NRI STAYING IN SCOTLAND AND AS PER ADMISSION OF PURCHASER OR OCCUP ANT OF FLAT NO. 501, HE HAS GOT REMOVED COMMON WALL OF TWO FLAT S, THEREFORE, FOR SUCH DEED, APPELLANT CANNOT BE HELD RESPONSIBLE . AS REGARDS OTHER TWO FLAT OWNERS REPLY, IT CAN BE SEEN THAT I T IS NOT THE CASE OF THE ASSESSING OFFICER TO PRESUME THAT THEIR REPL IES ARE NOT PROPER. WHEN DIRECT ENQUIRY WAS MADE BY THE ASSESSI NG OFFICER BY ISSUE OF NOTICE U/S. 133(6) IN RESPECT OF FLAT N O. 601, 602, IT WAS THE RESPONSIBILITY OF THE AO TO MAKE FURTHER EN QUIRY OR INVESTIGATION BUT IT IS FOUND FROM THE RECORD AND P AGE NO. 43 OF THE PAPER BOOK THAT NOTICES WERE SERVED UPON THESE PERSONS ON 10.12.2008 AND REPLY WAS EXPECTED TO BE FILED NEXT DAY ON 11.12.2008 REVEALS THE DEFICIENCY ON THE PART OF TH E ASSESSING OFFICER AND NOT ON THE PART OF THE APPELLANT. THERE FORE, IT CANNOT BE PRESUMED THAT THEIR REPLY WAS NOT PROPER. ON THE CONTRARY, THE REPLY OF THESE PERSONS ALSO STRENGTHENS THE STA ND OF THE APPELLANT. , 6.1 AS REGARDS THE APPLICABILITY OF LAW U/S. 801B(1 0)(D) IT IS WORTHWHILE TO MENTION THAT IN PLETHORA OF JUDGEMENT , IT HAS BEEN DECIDED THAT LAW UNDER THIS PROVISION WILL BE APPLI CABLE FOR THE PROJECT COMMENCED AFTER 1.4.2005 AND NOT FOR THE PR OJECT WHO HAVE ALREADY COMMENCED THE PROJECT PRIOR TO THE AME NDMENT OF PROVISION VIDE: > HARSHAD P. DOSHI BY OUR JURISDICTIONAL HON BLE I TAT, MUMBAI BENCH A ITA NO.2305/M2006 DATED 28. 02.2007; > MIS. SAROJ ORGANIZATION VS. ITO WARD 25(2)(3) FOR THE A. Y.2005-06 ITA NO. 4008/M/2007 DATED 24.01.2008; > ARUN EXCELLO FOUNDATIONS PVT. LTD. VS. ACIT ITA N O. 2090 & 2091/MAD/2006 DATED 16.02.2007; > HON BLE ITAT, MUMBAI, BENCH C IN THE CASE OF P OONAM GRUH NIRMAN ITA NO. 491 1/MUM/2007 DATED 26.03.2008; > BRA HMA ASSOCIATES VS JCIT DATED 06 04 2009 ITA N O 1417 6.2 THE DECISION OF M/S SAROJ SALES ORGANIZATION VS . ITO ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 9 25(2)(3) ITA NO. 40081M/2007 DATED 24.01.2008 CLEAR LY LAYS DOWN THE PRINCIPLES THAT LAW U/S 801B (10) (CLAUSE (D) HAS GOT PROSPECTIVE EFFECT AND IT SHOULD NOT BE PRESUMED TO BE APPLICABLE FOR THE PROJECT WHICH WERE APPROVED PRIOR TO ENACTM ENT OF THIS LAW WHICH IS NOW APPLICABLE FROM 01.04.2005 AND NOT BEFORE THAT THEREFORE, CLAIM OF DEDUCTION IS TO BE ALLOWED BEING GENUINE AND LEGAL CLAIM DULY SUPPORTED BY THE DECISION OF H ONBLE JURISDICTIONAL ITAT. 6.3 THE SAME ISSUE HAD COME FOR THE CONSIDERATION OF MY PREDECESSOR LD. CIT(A)26 (EARLIER XV), OF THIS CHAR GE IN THE CASE OF M/S PNK CORPORATION, APPEAL NO. CIT(A)-XV/IT- 5/ACIT15(3)/2008-09 DATED 25.07.2008 IN WHICH THE W ORTHY LD. CIT(A) HAS HELD AS UNDER: FROM THE PLAIN READING OF PROVISIONS SEE. 801B(10) , APPLICABLE BEFORE 1 -4-2005 AND AFTER 1-4-2005, IFIND THAT THE AMENDED PROVISIONS INSERTED BY FINANCE ACT, 2004 W.E.F 1-4- 2005 HAVE SOME ADDITIONAL CONDITIONS WHICH WERE NOT AVAILABLE IN THE PRE- AMENDED PROVISION APPLICABLE BEFORE 1-4-2005. THE F IRST POINT WHICH IS TO BE NOTED THAT THE POST AMENDED PROVISIO N OF SEC.801B(10) APPLIES IN RESPECT OF HOUSING PROJECT APPROVED BEFORE 31-3-200 7 WHEREAS PRE-AMENDED PROVISIONS OF SEC. 801B(L 0) IS APPLICABLE FOR HOUSING PROJECT APPROVE D BEFORE 31-3- 2005. IN THIS WAY, THE PRE-AMENDED PROVISIONS OF SE C. 801B (1 0) AND POST AMENDED PROVISIONS OF SEC.801B(]0) HAVE HO T OVERLAPPING DOMAIN. THE POST AMENDED PROVISIONS OF SEC.801B (1 0) HAS BEEN LOADED WITH SOME ADDITIONAL CONDITIONS IN SEC.801B(10)(A) IN RESPECT OF COMPLETION OF HOUSING PROJECT AND SECTION 801B(10)(D) CAPPING THE EXTENT OF SHOPPING AND COMMERCIAL ESTABLISHMENT TO BE INCLUDED IN HOUSING PROJECTS. THE ADDITIONAL CONDITIONS GIVEN IN RESPECT OF COMPL ETION OF HOUSING PROJECT HAVE STIPULATED SOME REASONABLE TIM E INTERVAL GRANTED TO COMPLETE THE PROJECT. THIS CONDITION AS SUCH DOES NOT ADVERSELY AFFECT THE CLAIM OF DEDUCTION AVAILABLE I N RESPECT OF THE HOUSING PROJECTS, WHICH HAVE BEEN APPROVED BEFO RE 01-04- 2005. AS SUCH, IT DOES NOT BRING ANY HINDRANCE IN O PERATION OF PRE-AMENDED PROVISIONS OF SEC.801B (1 0). THE POST AMENDED PROVISIONS OF SEC.801B (1 0) HAS ENSHRINED ANOTHER ADDITIONAL CONDITION IN CLAUSE (D) OF SEC.801B (1 0) WHICH BRI NGS SOME THRESHOLD LIMITS FOR SHOPPING AND COMMERCIAL ESTABL ISHMENT TO BE INCLUDED IN A HOUSING PROJECT. THIS PARTICULAR ADD ITIONAL CONDITION BRINGS SOME ANOMALY, F IT IS APPLIED STRI CTLY FOR A. Y.2005-06 AND ONWARDS IN CASES WHERE THE HOUSING PR OJECT GOT APPROVED BEFORE 01-04-2005. FOR EXAMPLE, IF THE HOU SING PROJECT GETS APPROVAL BEFORE 3 1-3-2003 AND IT DERIVES SOME PROFIT FOR THE A. Y. 2004-05, IT IS ENTITLED FOR DEDUCTION U/S . 801(10) FOR THE A Y 2004-05, EVEN THOUGH THE HOUSING PROJECT HAS IN CLUDED SOME SHOPPING AND COMMERCIAL ESTABLISHMENTS. BUT, THE SA ME HOUSING PROJECT MAY NOT GET DEDUCTION U/S.801B(10) ON DERIV ING CERTAIN PROFIT FOR A. 12005-06 AFTER PRIMA-FADE APPLICABILI TY OF THE POST AMENDED PROVISIONS OF SEC. 801B (10) (D) IN CASE TH E BUILT-UP- ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 10 AREA OF SHOPPING COMPLEX AND COMMERCIAL ESTABLISHME NT EXCEEDS 5% OF AGGREGATE AREA OF BUILT-UP-AREA OF PROJECT OR 2000 SQ.FT. WHICHEVER IS LESS. IN THIS WAY, IT MAY BE SEEN THAT A HOUSING PROJECT WHICH HAS BEEN APPROVED BEFORE 1-4-2005 MAY GET DISQUAFLFICATION OF SEC.801B (1 0) (D), IF THIS PAR TICULAR PROVISION IS APPLIED W.E.F A. 12005-06. HERE, IT IS IMPORTANT TO NOTE THAT PRIMARY CONDITION OF APPLICATION OF SEC. 801B(] 0) IS WITH REFERENCE TO THE DATE OF APPROVAL OF HOUSING PROJEC T. THEREFORE, THE QUESTION MAY ARISE AS TO WHETHER THE POST-AMEND ED PROVISIONS OF SEC.801B(10)(D) ARE TO BE APPLICABLE WITH REFERENCE TO ASSESSMENT YEAR OR THE DATE OF THE APPROVAL OF H OUSING PROJECT. IT IS WELL ACCEPTED PRINCZPLES OFJURISPRUD ENCE THAT EVERY LEGISLATION IS TO BE REGARDED AS PROSPECTIVE F IT A MENDS SUBSTANTIVE LAW. THE LEGISLATURE SHOULD CLEARLY SPE CI)5 ITS INTENTION TO APPLY THE LAW RETROSPECTIVELY, F IT IS LIKELY TO AFFECT THE VESTED RIGHTS TO THE CITIZENS CREATED BY EARLIE R. THE CONDITIONS U/S.801B(10)(D) REQUIRE TO BE TESTED AT THE TIME THE PROJECT WAS CONCEPTUALIZED. A VESTED RIGHT CREATED BY EARLIER LEGISLATION CANNOT BE SNATCHED AWAY OR DIVESTED UNL ESS THERE IS CLEAR- CUT RETROSPECTIVE AMENDMENT TO DO SO. A HARM ONIOUS DOCTRINE OF INTERPRETATION IS TO BE ADOPTED TO HARM ONIZE THE OPERATION OF THE PROVISIONS OF SEC. 801B (1 0). THE EXPRESSION USED IN A STATUTE ORDINARILY BE UNDERSTOOD IN THE S ENSE IN WHICH IT IS BEST HARMONIOUS TO THE OBJECT OF A STATUTE AN D WHICH EFFECTUATES THE OBJECT OF LEGISLATURE [SARKAR (BB) V. CIT (1981) 132 JTR 150 (CAL.); CIT V. SUPERINTENDING ENGINEER, UPPER SILERU (1985) 152 ITR 753 (AP) CIT V. ASSOCIATED FINANCE CO. LTD. (1992) 195 ITR 742 (CAL.)]. THIS IS THE HARMONIOUS CONSTRUCTION OF INTERPRETATION OF A FISCAL STATUTE. AN ASSESSEE WHO GOT HIS HOUSING PROJECT APPROVED BEFORE 1 -4-2005 HAD NO IN KLING REGARDING THE ADDITIONAL CONDITION WHICH HAS BEEN I MPOSED BY POST AMENDED PROVISIONS OF SEC.801B (1 0) (D). LOOK ING TO THE FACT THAT ONCE THE PLAN GETS APPROVED CANNOT BE ALT ERED IN ORDER TO SATISJ5 SUCH ADDITIONAL CONDITION AND, IF THE P OST AMENDED PROVISION OF SEC. 801B(1 0) (D) IS MADE APPLICABLE FOR THE A Y 2005-06 IN SUCH CASES, THE ASSESSEE WILL LOOSE THE DEDUCTION U/S. 801B(1 0) FOR NO FAULT ON THEIR PART. A TAX PA YER IS NOT BE SUPPOSED TO FORESIGHT OR ANTICIPATE ABOUT ANY CONDI TION TO BE IMPOSED IN FUTURE AND ACCORDINGLY READJUST HIS AFFA IR TO SUIT THE CLAIM OF DEDUCTION. FURTHER, IT IS ALSO NOT POSSIBL E TO ALTER OR MOD JFY THE APPROVED PLAN SUBSTANTIALLY AFTER CONSTRUCT ION HAS STARTED. IN FACT, IF THE PROVISIONS OF SEC. 801B (1 0) (D) IS INTERPRETED IN SUCH A MANNER TO BE APPLICABLE STRIC TLY W. E.F A. Y. 2 005-06, IT MAY BE A CASE OF PROMISSORY ESTOPPEL, WHICH MAY NOT BE THE INTENTION OF LEGISLATURE. THE CONCEPT OF PROMISSORY ESTOPPEL HAS BEEN ACCEPTED BY HON. SUPREME COURT IN THE CASE OF MOTILAL PADAMPAT SUGAR MILLS CO. LTD. V. STATE OF U P. 118 ITR 326 (SC) TO MITIGATE THE RIGORS OF STRICT LAW IN TH E INTEREST OF JUSTICE TO AN INDIVIDUAL. HERE, A LIMITED POINT IS TO EMPHASIZE THAT THE PROVISION IS TO BE INTERPRETED TO AVOID TH E CASE OF PROMISSORY ESTOPPEL. THEREFORE, I AM OF THE OPINION THAT THE POST- AMENDED PROVISIONS OF SEC.801B(10)(D) SHOULD BE MAD E ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 11 APPLICABLE WITH REFERENCE TO THE DATE OF THE APPROV AL OF HOUSING PROJECT, I.E. IF THE APPROVAL OF HOUSING PROJECT HA S BEEN MADE ON OR AFTER 1-4-2005, THIS PARTICULAR CONDITION SHOULD BE APPLIED IN RESPECT OF ANY PROFIT DERIVED FROM SUCH PROJECTS WI THOUT HAVING ANY REFERENCE TO THE ASSESSMENT YEAR. SUCH VIEW ALS O GETS SUPPORT FROM THE DECISION OF SAROJ SALES ORGANISATI ON. THE FINDING GIVEN BY ITAT IN PARA 13 OF THE ORDER, WHIC H READS AS UNDER: AS REGARDS THE OBJECTION OF THE AU THAT THE PERMIS SIBLE SHOPPING AREA OF HOUSING PROJECT EXCEED 5%, THE ASSESSEE IS SNOT ENTITLED TO RELIEF UNDER SECTION 801B(10). WE ARE OF THE VIE W THAT THE HOUSING PROJECT WERE APPROVED BEFORE 31.03.2005 AND FOR SUCH PROJECT. WHICH WERE SO APPROVED, THERE WAS NO STIPU LATION AS TO THE SHOPPING COMPLEX AREA IS PERMISSIBLE IN THE PRO JECT. AS ALREADY STATED EARLIER THAT THE AMENDMENTS WERE SUB SEQUENTLY MADE WHILE EXTENDING THE DEDUCTION, IN OUR VIEW IS CLEARLY NOT IN ACCORDANCE WITH LAW. IT MAY BE SEEN THAT HON. ITAT HAS GIVEN A FINDING T HAT IF THE HOUSING PROJECT WERE APPROVED BEFORE 3 1-03-2005, T HERE WAS NO STIPULATION AS TO THE SHOPPING COMPLEX AREA IS PERM ISSIBLE IN THE PROJECT. IN OTHER WORDS, IN RESPECT OF HOUSING PROJ ECTS APPROVED BEFORE 3 1-03-2005, THE CONVENIENT SHOPPING HAS B EEN ACCEPTED U/S. 801B(1 0) IF THE HOUSING PROJECT IS SO APPROVE D. IN THE PRESENT CASE, THE MBMC APPROVED THE PLAN OF THE APP ELLANT AS HOUSING PROJECT WITH SHOPS AT THE GROUND FLOOR. HEN CE I HOLD THE POST-AMENDED PROVISIONS OF SECTION 801B(10)(D) IS N OT APPLICABLE IN CASES WHERE THE HOUSING PROJECT GOT APPROVED BEF ORE 31.03.2005. SINCE IN THE PRESENT CASE, HOUSING PROJ ECT GOT APPROVED BEFORE 31.03.2005 (I.E. 19.07.2003), THE M ISCHIEF OF PROVISIONS OF SEC. 801B(10)(D) IS NOT APPLICABLE. 6.4 IT IS PERTINENT TO MENTION THAT IN THE CASE OF BRAHMA ASSOCIATES VS. JCIT ITA NO. 1417 SPI. BENCH (PUNE) HAS ALSO APPROVED THE DECISION OF MIS SAROJ SALES ORGANIZATI ON VS. ITO WARD 25(2)(3) ITA NO. 4008/M/2007, THE SAME FINDING HAS ALSO BEEN GIVEN BY THE LD. CIT(A) 25 IN THE CASE OF MS K INJAL ASSOCIATES IN ORDER NO. CIT(A)XXV/ITO 25(1)(1)/ITA 290/08-09 DATED 12.08.2009. FURTHER, IN THE CASE OF MIS HAPPY HOME ENTERPRISES, THE LI CIT(A) 27 HAS GIVEN THE SAME FI NDING AND DECISION OVER THE SAME ISSUE RELATED WITH APPLICABI LITY OF CLAUSE (D) OF SECTION 801B(10). IT IS RELEVANT TO MENTION THAT THE HONBLE PUNE SPI. BENCH HAS GIVEN CATEGORICAL FINDING IN TH E CASE OF BRABMA ASSOCIATES VS. JCIT IN ITA NO. 1417/PN12006 (A.Y.2003-04) DATED 06.04.2009, WHEREIN THE HONBLE MEMBERS HAVE HELD AS UNDER: SO FAR AS ASSESSMENT YEARS PRIOR TO A. Y. 2005-06 ARE CONCERNED APPROVAL BY THE LOCAL AUTHORITIES FOR THE HOUSING PROJECT CONSTITUTES ADMISSIBLE MATERIAL TO COME TO THE CONCLUSION THE HOUSING PROJECT IS ELIGIBLE FOR DEDUCTION U/S 8 01B (1 0)- WHAT WAS BROUGHT INTO EFFECT BY INSERTION OF CL. (D) IN SECTION 801B(I0) ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 12 VIDE FINANCE ACT, 2004, WAS A RESTRICTION ON USE OF BUILT-UP AREA FOR COMMERCIAL PURPOSES THIS INDICATES THAT THERE WAS NO SUCH LIMIT IN FORCE FOR THE EARLIER YEARS RESTRICTION OF 5% IS APPLICABLE ONLY WITH PROSPECTIVE EFFECT AND THERE I S NO JUSTIFICATION TO PRESUME THAT SUCH A LIMIT OR PROHI BITION WAS IN PLACE IN THE EARLIER YEARS AS WELL ON THE COMMERCIA L USE OF AREA- IT WOULD BE REASONABLE TO GRANT BENEFIT OF INCENTIV E PROVISION TO PROJECTS IN WHICH BUILT-UP AREA FOR COMMERCIAL PURP OSES DOES NOT EXCEED 10% OF TOTAL AREA WHERE APPROXIMATELY 90% OR MORE OF THE TOTAL AREA IS UTILIZED FOR BUILDING DWELLING WH ERE THE PROJECT HAS BEEN PASSED AS RESIDENTIAL-COMMERCIAL PROJECTS - WHERE THE TOTAL BUILT-UP COMMERCIAL AREA IS MORE THAN 10% OF TOTAL AREA, SUCH PROJECTS NORMALLY SHOULD NOT GET BENEFIT OF DE DUCTION UNLESS THE UNDERTAKING CAN SHOW THAT THE INCOME FROM CONST RUCTION OF RESIDENTIAL DWELLING UNITS CAN BE WORKED OUT SEPARA TELY AND EVEN AFTER EXCLUDING THE COMMERCIAL USE OF PLOT, TH E PROJECT SATISFIES ALL THE REQUIREMENTS OF SECTION 801B (1 0 ) ON STANDALONE BASIS. THEREFORE, THE ISSUE REGARDING APPLICABILITY OF PRO VISION OF LAW UNDER CLAUSE (D) OF SUB-SECTION 10 OF SECTION 801B OF I.T. ACT, IS RELEVANT FOR THE HOUSING PROJECT APPROVED AFTER 01. 04.2005 AND IT CANNOT BE PRESUMED TO BE DECISIVE AS APPLICABLE FOR THE OLD HOUSING PROJECT APPROVED MUCH EARLIER THAN AMENDED PROVISION OF LAW PROSPECTIVELY. FURTHER, THE ARGUMENTS OF THE LD.AR IS WORTH ACCEPTABLE THAT JUDICIAL CONSISTENCY HAS TO B E MAINTAINED HENCE IT WOULD BE UNJUSTIFIABLE ON THE PART OF SUCC ESSOR APPELLATE AUTHORITY TO INTERPRET THE APPLICABILITY OF LAW WITH DIFFERENT APPROACH OR ON THE BASIS OF STRANGE-LOGIC , SPECIALLY WHEN FACTS ARE IDENTICAL AND THERE NO PERVERSITY OF INTERPRETATIVE-UNDERSTANDING OF THE SAME SET OF FAC TS. 6.. 5 FURTHER, THE ARGUMENT OR REASONING OF THE LD. ASSESSING OFFICER BASED ON THE DECISION OF HONBLE ITAT IN THE CASE O F LAUKIK DEVELOPERS VS. DCIT, CIRCLE 3, THANE (W) 105 LTD 657, (MUM), I T IS PERTINENT TO MENTION THAT DECISION OF THIS CASE HAS BEEN OVER-RU LED BY THE HONBLE PUNE, SPI. BENCH IN THE CASE OF BRAHMA ASSOCIATES V S. JCIT (SUPRA) IN THE FOLLOWING WORDS :- IF WE ARE TO APPLY THE RATION OF LAUKIK DEVELOPERS DECISION (SUPRA), THE MOMENT ANY PART OF BUILT UP AREA IS US ED FOR COMMERCIAL PURPOSE, THE ELIGIBILITY FOR DEDUCTION U /S 801(10) WILL BE LOST. IT LEADS TO AN ABSURD SITUATION THAT NO HO USING PROJECT CAN BE ELIGIBLE FOR DEDUCTION U/S 801B(10)AT ALL, B ECAUSE UNLESS THE PROJECT IS APPROVED BY THE LOCAL AUTHORITY, IT IS NOT ELIGIBLE FOR DEDUCTION U/S 801B (1 0), BUT ONE OF THE CONDITIONS OF APPROVAL OF THE PROJECT, I.E. MANDATORY PROVISION FOR CONVEN IENCE SHOPPING, IS SUCH THAT SOME ELEMENT OF COMMERCIAL USE OF BUIL T UP AREA IS INEVITABLE, AND THIS COMMERCIAL USE, PER SE, IS HEL D TO BE REASON ENOUGH TO RENDER ASSESSEE INELIGIBLE FOR DEDUCTION U/S 801B (1 0). THIS IS A VICIOUS CYCLE OF CIRCULAR LOGIC AND I T IS INHERENTLY IMPOSSIBLE FOR AN ASSESSEE TO COME OUT OF IT ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 13 6.6 THUS, ALL THESE DECISIONS AS WELL AS THE SET OF FACTS FAVOUR APPELLANT. WHILE GOING THROUGH THE ASSESSMENT ORDER AND EVALUATING THE EVIDENCES ON RECORD, I FIND THAT LD. AO HAS DIS ALLOWED THE CLAIM OF THE APPELLANT ON NOT VERY CONVINCING AND SOLID GROU NDS. IT IS VERY APPARENT FROM THE RECORD ITSELF THAT APPELLANT HAS CONSTRUCTED THE RESIDENTIAL FLATS AS PER APPROVED PLAN BY THE BMC A ND THERE IS NO EVIDENCE ON RECORD TO SUGGEST THAT APPELLANT HAS TI NKERED THE CONSTRUCTION PLAN IN ANY WAY DEVIATING FROM PLAN/MA P. IT IS ALSO VERIFIABLE FROM THE RECORD THAT THERE IS SEPARATE D EVELOPMENT AGREEMENT AND IS UNDISPUTED FACT THAT APPELLANT HAS ENTERED I NTO SALE AGREEMENT IN RESPECT OF INDIVIDUAL FLATS AND POSSESSION HAS B EEN GIVEN BY THE APPELLANT IN RESPECT OF EACH AND EVERY FLAT SEPARAT ELY AND INDEPENDENTLY. FURTHER, EACH FLAT HAS OWNED ELECTRI C METER, INDEPENDENT KITCHEN, DRAWING ROOM, DINING ROOM AND ONE PASSAGE THEREFORE, THERE +IS NO DEVIATION OF ANY NATURE FRO M APPROVED LAY OUT PLAN BY BMC. FURTHER AREAS OF FLAT FROM INCOME-TAX ACT POINT OF VIEW IS 913 SQ.FT AND NOT 1092 SQ.FT. AND TWO OR MORE FLATS SOLD TO THE SAME FAMILY OR RELATED PERSONS OF THE CUSTOMER CANNOT BE MADE BASIS FOR DISALLOWANCE OF SUCH CLAIM AS THERE IS LEGAL BAR ON IT. THEREFORE, CONSIDERING THE VARIOUS DECISION OF HONBLE JURISDI CTIONAL ITAT, VARIOUS COURTS AND RESPECTFULLY FOLLOWING THE DECISION OF P REDECESSOR LD. CIT(A) IN THE APPELLANTS OWN CASE FOR AY 2005-06 IN ORDER NO. CIT(A)-XV/IT- 122/ITO 15(1)(2)/2007-08 DATED 18/03/2008 AND AFTER RECONSIDERING THE FACTS OF THE CASE, I REACH TO THE CONCLUSION TH AT APPELLANT IS ENTITLED FOR DEDUCTION U/S 80IB(1) OF THE ACT. LD. AO IS, TH EREFORE, DIRECTED TO ALLOW THE CLAIM OF RS. 4,96,27,406/-. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE I S IN APPEAL BEFORE US. 5. THE LEARNED DR HAS RELIED UPON THE ORDER OF THE AO WHILE THE LEARNED COUNSEL FOR THE ASESSSEE RELIED UPON THE O RDER OF THE CIT(A) AND CANVASSED THAT THE ISSUE IS COVERED BY THE DECI SION OF THE CO- ORDINATE BENCH OF TRIBUNAL IN ASESSSEES OWN CASE F OR AY 2005-06, APPEAL FILED BY THE REVENUE, IN ITA NO. 3750/MUM/20 08 VIDE ORDER DATED 25 TH JUNE, 2010. A COPY OF THE SAID ORDER IS AVAILABLE ON RECORD. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES, PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF T HE AUTHORITIES BELOW. THE COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE CONSIDERED THE ISSUE AND ALLOWED THE CLAIM OF THE ASSESSEE IN AY ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 14 2005-06 (SUPRA) AND THE RELEVANT PORTION OF THE ORD ER IS EXTRACTED BELOW: 11. AGGRIEVED THE REVENUE IS IN APPEAL. THE FACTS A RE THAT THE ASSESSEE HAD EXECUTED A HOUSING PROJECT FOR WHICH THE APPROV AL OF THE LOCAL AUTHORITY WAS OBTAINED. THE NECESSARY APPROVAL FOR THE PROJECTS S GIVEN BY MUNICIPAL CORPORATION OF GREATER MUMBAI ON 29.1 .2004 IN THE NAME OF APPELLANT. THE COMMENCEMENT CERTIFICATE WAS ISSUED ON 6.2.2004 IN THE NAME OF THE ASSESSEE. THE ASSESSEE HAS ALREADY RECEIVED THE OCCUPANCY CERTIFICATE IN RESPECT OF WI NG A,B & C. ON 13.9.2005 & WING F G & H ON 26.9,2006. AS REGARD TO THE E WING STILL 1 TO 12 FLOORS THE APPELLANT HAS APPLIED FOR OCCUPA NCY CERTIFICATE ON 18.1.2008 AFTER HAVING COMPLETED THE BUILDING WHICH IS THE LAST & FINAL WING OF THE BUILDING. THE ARCHITECT HAS CERTIFIED T HE COMPLETION OF THE BUILDING AND HAS APPLIED FOR THE COMPLETION CERTIFI CATE ON 18.1.08. IN THE CIRCUMSTANCES THE ASSESSEE CLAIMED RELIEF U/S 8 01B(1) IN RESPECT OF PROFITS ACCRUING FROM THE HOUSING PROJECT FOR THE Y EAR. THE AC HAS REJECTED THE CLAIM PUTTING FORWARD VARIOUS OBJECTIO NS. ALL THE OBJECTIONS OF THE AC HAS BEEN MET AND ANSWERED BY THE CIT(A). 12. THE FIRST OBJECTION IS THAT THE LOCAL AUTHORITY HAD GIVEN A SINGLE COMMENCEMENT CERTIFICATE FOR HOUSING AND COMMERCIAL PROJECT IN THE NAME OF THE ASSESSEE. AS THE COMMERCIAL AREA IS MOR E THAN THE PERMITTED PERCENTAGE OF THE TOTAL BUILT UP AREA UND ER SUB CLAUSE (D), ASSESSEE IS NOT ENTITLED TO CLAIM RELIEF U/S 80 LB (10). WE FIND FROM THE RECORDS THAT THE OWNERS OF THE PLOT OF LAND, HAD GR ANTED DEVELOPMENT RIGHTS FOR HOUSING TO THE ASSESSEE AND THE DEVELOPM ENT RIGHTS FOR THE COMMERCIAL AREA TO M/S. LAKSHADEEP INVESTMENT & FIN ANCE P.LTD. THE CONSIDERATIONS TO BE PAID BY THE APPELLANT AND LIFP L WERE FIXED AT RS. 11 .56 CRORE & 2 CRORE RESPECTIVELY IN LIEU OF DEVE LOPMENT RIGHTS RECEIVED BY THEM, THUS THE S UNDERTAKING IS ONLY F OR BUILDING THE HOUSING PROJECT AND THE IS IN NO WAY CONNECTED IN B UILDING OL THE COMMERCIAL AREA. AS FOUND AS A FACT BY THE CIT(A), THE HOUSING PROJECT WAS BEING CARRIED OUT BY THE ASSESSEE AND THE CONST RUCTION OF THE COMMERCIAL AREAS ARE BEING CARRIED OUT BY ANOTHER E NTITY. THE CIT(A) FOUND IT AS A FACT THAT COMMENCEMENT CERTIFICATE WA S ISSUED SEPARATELY FOR THE HOUSING PROJECT AND FOR THE CONSTRUCTION OF COMMERCIAL AREA. FURTHER THE BMC IN THEIR LETTER HAS CLARIFIED AS UN DER:- IN THE INSTANT CASE, THE SHOPS WERE APPROVED AND C ONSTRUCTED BY LAKSHADEEP INVESTMENT & FINANCE P. LTD. SUBSEQUE NTLY, HE AMENDED PLAN AND REVISED IOD WAS ISSUED IN NAME OF KHYATI FINANCIAL SERVICES ON 29.1.2004 DUE TO CHANGE OF OW NERSHIP. THE SAID BUILDING I.S APPROVED UNDER THE FILE NO.CPIE/8 637/BP(WS,) AP AS HOUSING PROJECT ITS SHOPS ON THE GROUND FLOOR . THUS THE BMC HAD ALSO RECOGNISED THAT THE OWNERSHIP OF THE TWO PROJECTS ARE DIFFERENT, IN. THE CIRCUMSTANCES THE C LAIM OF RELIEF U/S 80LB(10) BY THE ASSESSEE SHOULD BE CONSIDERED O NLY FOR THE HOUSING PROJECT AND THE CONSTRUCTION OF COMMERCIAL PROJECT IS A SEPARATE UNDERTAKING. PROFITS FROM THE CONSTRUCTION OF ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 15 COMMERCIAL AREAS WAS OFFERED AND ASSESSED IN THE HA NDS OF THE COMPANY. CBDT HAS ALSO ISSUED A CLARIFICATION VIDE LETTER DATED 4 MAY 2001 (F.NO. 205/3/2001/ITA 11) WHICH READS AS UNDER: THE UNDERSIGNED IS DIRECTED TO REFER TO YOUR LETTE R NO.MCIJLRSA IN.388/19799/3 DATED 1ST JANUARY 2001 AND TO STATE THAT THE ADDITIONAL HOUSING PROJECT ON EXISTING HOUSING PROJECT SITE CAN QUALIFY AS INFRAS TRUCTURE FACILITY UNDER SECTION 10(23G) AND 801(10) PROVIDED IT IS TAKEN UP BY A SEPARATE UNDERTAKING HAVING SEPARATE BOOKS OF ACCOUNTS SO AS TO ENSURE THAT CORRECT PROF ITS CAN BE ASCERTAINED FOR THE PURPOSE OF SECTION 801B AND ALSO TO IDENTIFY RECEIPTS AND REPAYMENTS OF LONG TERM FINAN CES UNDER THE PROVISIONS OF SEC 10(23G). SEPARATELY FIN ANCING ARRANGEMENTS AND ALSO F IT SEPARATELY FULFILS ALL O THER STATUTORY CONDITIONS LISTED IN SECTIONS L023G) AND 801B(L0). WITH REGARD TO YOUR QUERY REGARDING THE DEFINITION OF HOUSING PROJECT IT IS CLARIFIED THAT ANY PROJECT WHICH HAS BEEN APPROVED BY A LOCAL AUTHORITY AS A HOUSINQ PROJECT SHOULD BE CONSIDERED ADEQUATE FOR T HE PURPOSE OF SEC 10(23G) AND 801(10). 14. THE ITAT, MUMBAI BENCH IN THE CASE OF SAROJ SAL ES ORGANISATION VS. ITO (115 TTJ 485 (MUM.) HAS HELD THAT WHEN TWO PROJECTS WERE SEPARATE AND DISTINCT, THE FACT THAT ONE PROJECT WA S INELIGIBLE FOR DEDUCTION U/S 801B(1O) WOULD NOT BAR THE ASSESSEE FROM CLAIMING RELIEF UNDER THAT SECTION IN RESPECT OF THE OTHER D ISTINCT PROJECT. THEY HAVE ALSO HELD THAT THE REQUIREMENT THAT BUILT UP A REA OR SHOPS AND COMMERCIAL ESTABLISHMENT INCLUDED IN THE PROJECT SH OULD NOT EXCEED 5% OF THE AGGREGATE BUILT UP AREA OF THE HOUSING PROJE CT WAS APPLICABLE TO PROJECTS APPROVED AFTER 1.4.2004 AND HENCE WOULD NO T BE APPLICABLE TO PROJECTS APPROVED EARLIER. IN THAT CASE THE TRIBUNA L HAS ALSO HELD THAT OCCUPATION CERTIFICATE ISSUED SHOULD BE CONSIDERED AS COMPLIANCE WITH THE REQUIREMENT THAT CONSTRUCTION HAS BEEN COMPLETE D. 15. HENCE WE HOLD THAT THE HOUSING PROJECT OF THE A SSESSEE IS DIFFERENT AND DISTINCT FROM THE PROJECT FOR BUILDING COMMERCI AL AREA BY OTHER ENTITY. HOUSING PROJECT DOES NOT INCLUDE CONSTRUCTI ON OF THE COMMERCIAL ESTABLISHMENT CARRIED OUT BY ANOTHER ENTITY IN THAT AREA. THEREFORE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80 LB (10) FOR THE HOUSING PROJECT CANNOT BE DENIED BECAUSE THE COMMERCIAL PRO JECT WAS CARRIED OUT BY A SISTER CONCERN I: THE SAME AREA. 16. THE NEXT ISSUE TO BE CONSIDERED IS WHETHER THE SUB-CLAUSE (D) OF SEC 801B(10) INSERTED BY FINANCE ACT, 2001 W.CF.I.4.200 5 WOULD HE APPLICABLE TO THE PRESENT CASE. SUB CLAUSE (D) INTR ODUCED WITH EFFECT FROM 1.4,2005 REQUIRED THE AREA OF COMMERCIAL ESTAB LISHMENT INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED 5% OF THE TOTAL BUILT UP AREA OF THE HOUSING PROJECT. BY THE AMENDMENT INTRODUCED BY FINANCE ACT (NO 2), 2004 WITH EFFECT FROM 1.4.2005, PROVISIONS OF S EC 80 LB WERE AMENDED. FURTHER RESTRICTIONS ON COMPLETION OF PROJ ECT AS WELL AS ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 16 MAXIMUM BUILT AREA OF COMMERCIAL ESTABLISHMENTS WER E IMPOSED. IN THIS VIEW OF THE MATTER, THE AMENDMENTS ARE NOT CL ARIFICATORY IN NATURE AND HENCE WOULD APPLY ONLY TO PROJECTS APPROVED AFT ER 1.4.2004 AND NOT TO THE HOUSING OJECT OF THE ASSESSEE, WHICH WAS APPROVED PRIOR TO 1.4.2004. HOWEVER AS WE HAVE FOUND THAT CONSTRUCTIO N OF COMMERCIAL ESTABLISHMENTS WAS DONE BY ANOTHER ENTITY AND IS NO T PART OF THE HOUSING PROJECT OF THE ASSESSEE, THIS QUESTION BECO MES ACADEMIC. 17. THE NEXT ISSUE IS REGARDING COMPLETION OF THE P ROJECT BEFORE 31.3.2008 AS REQUIRED U/S 801B (A)(I). SUB SEC (A) OF SEC 80 LB (10), REQUIRES THAT AN UNDERTAKING WHICH UNDERTAKES A HOU SING PROJECT WHICH HAS BEEN APPROVED BY THE LOCAL AUTHORITY BEFORE 1.4 .2004 SHOULD COMPLETE CONSTRUCTION BEFORE 31ST DAY MARCH 2008, T HE SECTION DOES NOT REQUIRE THE COMPLETION CERTIFICATE TO BE OBTAIN ED BEFORE THAT DATE. IT IS WELL KNOWN THAT EVEN AFTER COMPLETION OF A BUILD ING IT WILL TAKE SOME TIME TO OBTAIN THE COMPLETION CERTIFICATE FROM THE LOCAL AUTHORITY WHO MAY INSPECT THE BUILDING BEFORE GIVING THE CERTIFIC ATE. IT DOES NOT MEAN THAT CONSTRUCTION IS NOT OVER. IN THE PRESENT CASE THE ASSESSEE HAS ALREADY RECEIVED THE OCCUPANCY CERTIFICATE IN RESPE CT OF WING A,B &. C. ON 13.9.2005 & WING F G & H ON 26.9,2006. AS REGARD TO THE E WING STILL 1 TO 12 FLOORS THE APPELLANT HAS APPLIED FOR OCCUPANCY CERTIFICATE ON 18.1.2008 AFTER HAVING COMPLETED THE BUILDING WH ICH IS THE LAST & FINAL WING OF THE BUILDING. IT WAS ALSO SUBMITTED T HAT CONSTRUCTION WORK IS NOW COMPLETED AND APPLICATION FOR COMPLETION CER TIFICATE HAS BEEN MADE BY THE ARCHITECT VIDE HIS LETTER DATED 18.1.20 08 WHICH IS ON RECORD, THUS THE ASSESSEE HAS COMPLETED THE CONSTRU CTION PRIOR TO 31.3 2008 (ARCHITECT HAS ALSO CERTIFIED IT) AND HAS APPL IED FOR COMPLETION CERTIFICATE BEFORE 3 1.3.2008 AND THE PROOF FOR THE SAME HAS BEEN PRODUCED BEFORE US AT PAGE 118 OF THE PAPER HOOK. I N THE CIRCUMSTANCES, WE REMIT THE ISSUE TO THE FILE OF TH E AO TO ASCERTAIN AS TO WHETHER THE ASSESSEE HAS COMPLETED CONSTRUCTION PRIOR TO 31.3.2008 AFTER PERUSING THE LETTER FROM MUNICIPAL CORPN. OF GREATER MUMBAI AT PAGE 118 OF THE PAPER BOOK. THE AO ON THE BASIS OF THE FACTS ON RECORDS SHALL DECIDE WHETHER THE CONDITION REGARDIN G COMPLETION OF THE PROJECT AS PER THE REQUIREMENTS OF CLAUSE (A) OF SU B SEC 80IB(10) ARE SATISFIED AND GIVE RELIEF TO THE ASSESSEE. 18. THE NEXT ISSUE IS WHETHER THE PROFITS OFFERED B Y THE ASSESSEE FROM THE HOUSING PROJECT IS ENTITLED TO RELIEF U/S 80IB (10), WHEN THE COMPLETION OF THE PROJECT IS AT A LATER DATE. WHEN AN ASSESSEE FOLLOWS PERCENTAGE COMPLETION METHOD OF OFFERING PROFITS IN RESPECT OF A HOUSING PROJECT, THE PROFITS OFFERED IN RESPECT PARTIALLY C OMPLETED PROJECT ON PERCENTAGE COMPLETION METHOD IS ALSO AN ACCEPTED ME THOD OF ASCERTAIN THE PROFITS OF TH PROJECT. IT IS ALSO PROFIT DERIVE D FROM PROJECT TO WHICH SEC 80 LB (10) APPLIES. IF PROJECT IS TO BE COMPLET ED BEFORE THE RELIEF U/S 801B(10) IS TO BE GRANTED, THEN MOST OF THE PROFITS OF THE PROJECTS WHICH WOULD HAVE BEEN OFFERED IN THE EARLIER YEARS WOULD NOT HE ENTITLED O RELIEF U/S 801B(1Q). THIS WILL MAKE THE SECTION UNW ORKABLE. HAVING ACCEPTED THE PERCENTAGE COMPLETION METHOD OF DETERM INING THE PROFITS, II. WILL NOT BE CORRECT TO HOLD THAT SUCH PROFITS B EFORE THE COMPLETION OF THE LOU SING PROJECT, WHICH OTHERWISE SATISFIES ALL THE CONDITIONS OF SEC ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 17 80 IB(10), THOUGH ASSESSED AS PROFITS FROM THE HOUS ING PROJECT WILL NOT BE ENTITLED TO DEDUCTION U/S 80LB (10). THEREFORE P ROFITS FROM THE HOUSING PROJECT ASSESSED ON A YEAR TO YEAR PROJECT WILL BE ENTITLED TO DEDUCTION U/S 80LB (10), IF IT OTHERWISE DOES NOT C ONTRAVENE THE PROVISIONS/ REQUIREMENTS OF THAT SECTION. WE FIND T HAT THE CBDT HAS SISO CLARIFIED VIDE THEIR INSTRUCTION NO 4 OF 2009 DATED 30.6.2009 THAT RELIEF U/S 801B (10) CAN BE ALLOWED ON A YEAR TO YE AR BASIS WHERE THE ASSESSEE IS SHOWING PROFITS ON PARTIAL COMPLETION O F THE PROJECT. IF AT THE END OF THE PERIOD THE ASSESSEE IS FOUND NOT TO HAVE COMPLIED WITH THE PROVISIONS OF THE SECTION SUCH AS FAILURE TO CO MPLETE THE PROJECT WITHIN THE PERMITTED TIME, THEN THE RELIEF ANTED FO R EARLIER YEARS CAN BE WITHDRAWN. IN THE CIRCUMSTANCES WE AGREE WITH THE C IT(A) THAT RELIEF U/S 80IB(10) CANNOT BE DENIED IN THE CASE OF THE AS SESSEE MERELY BECAUSE COMPLETION OF THE PROJECT IS A CONTINGENT H APPENING IN THE FUTURE. IN THE CIRCUMSTANCES THE PROFITS OFFERED BY THE ASSESSEE FOR THE YEAR FROM THE HOUSING PROJECTS, UNDER PERCENTAGE CO MPLETION METHOD OF ACCOUNTING, IS THE PROFITS DERIVED FROM AN ELIGIBLE PROJECT AND IS ENTITLED TO DEDUCTION U/S 80LB. 7. SINCE THE ISSUE UNDER CONSIDERATION IS MATERIALL Y IDENTICAL TO THAT OF AY 2005-06, RESPECTFULLY FOLLOWING THE DECI SION OF THE TRIBUNAL IN THAT YEAR, WE UPHOLD THE ORDER OF THE CIT(A) IN ALLOWING THE ASSESSEES CLAIM OF DEDUCTION U/S 80IB(10) OF RS. 4 ,96,27,406/-. THUS, THE GROUNDS NO. 2 & 3 RAISED BY THE REVENUE A RE DISMISSED. 8. IN SO FAR AS GROUND NO. 1 IS CONCERNED, THE AO H AS OBSERVED THAT THE FOLLOWING FLATS BUILT BY THE ASSESSEE EXCE EDS MORE THAN 1000 SQ. FT. AND THE DETAILS OF THE SAME ARE AS UNDER:- 1. E-104 1092 SQ.F.T 2. E-201 - 1092 SQ.FT. 3. E-501 - 1092 SQ.FT. 9. THE AO HAS OBSERVED THAT THE ABOVE FLATS IN E BL OCK ARE BIGGER THAN 1000 SQ.FT. EACH, WHICH IS BEYOND THE ALLOWABL E LIMIT PERMITTED U/S 80IB(10) OF THE ACT. FOR THIS REASON, THE CLAI M OF THE DEDUCTION US/ 80IB(10) WAS DISALLOWED BY THE AO.. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEF ORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE AO HAS TAKEN THE SUPER BUILT UP AREA IN STEAD OF BUILT UP AREA. THE LEARNED CIT(A) AFTER C ONSIDERING THE ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 18 SUBMISSIONS OF THE ASSESSEE AND ALSO PAPER BOOK FIL ED BY THE ASSESSEE, HELD AS UNDER:- 1. THE REFERENCE OF THE AREA OF FLATS NO. E-104, E- 201, & E-501 WAS IN RESPECT OF SUPER BUILT UP AREA. AS PER THE A GREEMENTS THE CARPET AREA IS 780 SQ.FT. ONLY. BUA IS WORKED OUT S EPARATELY AND SUPER BUILT UP IS ALSO WORKED OUT AND THE SAME ALON G WITH THE DETAILS OF SALE OF FLATS WITH AGREEMENT VALUE, AREA ETC. MODIFIED TO INCLUDE BUILT UP AREA IS ENCLOSED AT PAGE 45 TO 56 OF THE PAPER BOOK. ON PERUSAL OF THE SAME IT CAN BE APPRECIATED THAT THE BUA COMES TO ONLY 913 SQ.FT. AND SBUA IS 1092 SQ.FT. AS SESSEE FULFILLS THE CONDITION OF BUILT UP AREA AS REQUIRED BY THE S ECTION HENCE, CANNOT BE ANY CONFUSION OF THE FACTS. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 10. THE LEARNED DR HAS SUPPORTED THE ORDER OF THE A O. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBM ITTED THAT, THE BUILT UP AREA OF THE ABOVE DISPUTED FLATS 780 SQ.FT . AND AS PER THE SECTION 80IB(14) BUILT UP AREA MEANS THE INNER MEAS UREMENT OF THE RESIDENTIAL UNIT AT THE FLOOR LEVEL INCLUDING THE P ROJECTIONS AND BALCONIES AS INCREASED BY THE THICKNESS OF THE WALL S BUT DOES NOT INCLUDE THE COMMON AREAS SHARED WITH OTHER RESIDENT IAL UNITS. HE FURTHER SUBMITTED THAT THE AO HAS WRONGLY TAKEN SUP ER BUILT UP AREA INSTEAD OF TAKING BUILT UP AREA FOR THE PURPOSE OF DEDUCTION U/S 80IB(10). 11. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECOR D AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE CI T(A) AFTER CONSIDERING THE PAPER BOOK FILED BY THE ASSESSEE GA VE A SPECIFIC FINDING THAT AS PER THE AGREEMENT, THE CARPET AREA OF THE THREE FLATS 780 SQ.FT. ONLY. HE FURTHER GAVE A FINDING THAT BUI LT UP AREA AND SUPER BUILT UP AREA WORKED OUT SEPARATELY BY THE ASSESSE E. ON PERUSAL OF THE DETAILS OF SALE OF FLATS WITH AGREEMENT VALUE, THE BUILT UP AREA ITA NO. 5498/MUM/10 M/S KHAYTI FINANCIAL SERVICES. 19 COMES ONLY 913 SQ.FT. AND SUPER BUILT UP AREA COMES TO 1092 SQ.FT. THEREFORE, THE ASSESSEE FULFILLED THE CONDITIONS OF THE BUILT UP AREA AS REQUIRED BY SECTION 80IB(10) AND ALLOWED THE CLAIM OF THE ASSESSEE. THE LEARNED DR SIMPLY SUPPORTED THE ORDER OF THE AO AND NOTHING WAS BROUGHT ON RECORD TO CONTRADICT THE ABOVE FINDINGS GIVEN BY THE CIT(A). WE, THEREFORE, FIND NO INFIRMITY IN THE ORD ER OF THE CIT(A) AND UPHOLD THE SAME, DISMISSING THE GROUND RAISED BY TH E REVENUE. 12.. IN THE RESULT, APPEAL OF THE REVENUE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON 13/04/2012. SD/- SD/- (G.E. VEERABHADRAPPA) ( V. DURGA RAO) PRESIDENT JUDICIAL MEMBER MUMBAI, DATED: 13 TH APRIL, 2012 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, A BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.