I.T.O. 25(1)(2), MUMBAI V. M/S. POONAM DEVELOPERS, MUMBAI

ITA 5654/MUM/2009

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9423 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 20-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Opportunity of cross examination; Competent authority
• Section: 131; 37

Judgement Text

, , , , , ,, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI . . , ! '# , $ BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.5654/MUM/2009 ASSESSMENT YEAR: 2006-07 THE ITO - 25(1)(2), C-11, 2 ND FLOOR, PRATYAKSH KAR BHAVAN, BANDRA KUARLA COMPLEX, BANDRA(E), MUMBAI-51 / VS. M/S POONAM DEVELOPERS, A-9 ARIHANT APARTMENT, L.T. ROAD, DAHISAR(EAST), MUMBAI-4000068 ( '# / REVENUE) ( ()* /ASSESSEE) P.A. NO.AAFFB1939G '# + , + , + , + , / REVENUE BY SHRI NEIL PHILIP - DR ()* + , + , + , + , / // / ASSESSEE BY): SHRI SASHI TULSIYAN + *-! / / / / DATE OF HEARING : 20/01/2015 ./0 + *-! / DATE OF PRONOUNCEMENT : 20/01/2015 DATE OF ORDER : '1 '1 '1 '1 + *-! / 23/01/2015 '1 '1 '1 '1 / / / / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) : THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 12/08/2009 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI . THE FIRST GROUND PERTAINS TO DIRECTION TO THE LD. ASSES SING OFFICER TO ALLOW DEDUCTION U/S 80IB(10) OF THE INCO ME TAX ACT, 1961(HEREINAFTER THE ACT). M/S POONAM DEVELOPERS , . 2 2. THE CRUX OF ARGUMENT ADVANCED BY SHRI NEIL PHILI P, LD. DR, IS THAT FLATS WERE AMALGAMATED BY THE BUILDER/CONTRACTOR/SIGHT SUPERVISOR, DIRECTLY OR INDIRECTLY AT THE BEHEST OF THE ASSESSEE, LEADING T O EXCEEDING THE LIMIT OF 1,000 SQ.FT., MAKING THE ASS ESSEE INELIGIBLE FOR CLAIMING DEDUCTION U/S 80IB(10) OF T HE ACT. OUR ATTENTION WAS INVITED TO PAGE 15 OF THE ASSESSMENT ORDER AND ALSO PAGE-12 (PARA-6.1) OF THE IMPUGNED ORDER. 2.1. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASS ESSEE, SHRI SASHI TULSIYAN CONTENDED THAT SEPARATE AGREEMENTS FOR THE FLATS WERE ENTERED INTO BETWEEN THE PARTIES, SEPARATE STAMP DUTY/REGISTRATION CHARGES W ERE PAID, THUS, THERE IS NO QUESTION OF AMALGAMATION BY THE ASSESSEE. IT WAS ALSO CONTENDED THAT MAINTENANCE B ILLS WERE PAID SEPARATELY BY THE EACH FLAT OWNERS, POSSESSION OF INDIVIDUAL FLATS WAS GIVEN INDIVIDUAL LY TO THE RESPECTIVE OWNERS OF THE FLATS BEFORE OCCUPANCY . IT WAS STRONGLY ASSERTED THAT ON 13/01/2006, THE FLATS WERE INSPECTED INDIVIDUALLY BY THE LOCAL AUTHORITIES/COMPETENT AUTHORITIES AND AFTER FULLY SATISFYING THAT CONSTRUCTION WAS DONE BY THE ASSESS EE AS PER THE APPROVED PLAN/SANCTIONED PLAN ITSELF, COMPLETION CERTIFICATE WAS ISSUED. ONCE THE CONSTRUCTED FLATS ARE HANDED OVER TO THE RESPECTIVE OWNERS, THE JOB OF THE ASSESSEE IS OVER AND IF ANY AMALGAMATION, IS MADE BY THEM/FLAT OWNERS AT A LATE R STAGE, THE ASSESSEE IS NOT RESPONSIBLE, BECAUSE, TH ERE WAS NO CONTRAVENTION OF THE ACT/SANCTION PLAN, IN A NY MANNER, BY THE ASSESSEE. THE LD. COUNSEL PLACED M/S POONAM DEVELOPERS , . 3 RELIANCE UPON THE FOLLOWING DECISIONS BY CONTENDING THAT THE FACTS ARE IDENTICAL IN ALL THE CASES:- I. JCIT VS M/S SUNCITY HOUSINGS(ITA NO.4877/ MUM/2012) (MUMBAI ITAT) II. EMGEEN HOLDINGS PVT. LTD. VS DCIT (2011) 47 SOT 98 (ITAT MUMBAI) III. DCIT VS MAGAR PATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION COMPANY 141 ITD 682 (PUNE TRIBUNAL) IV. HAWARE CONSTRUCTION PVT. LTD. VS ITO 64 DTR 251 V. ACIT VS M/S MIRAZ ENTERPRISES (ITA NO.960 AND 961/MUM/2007)(MUMBAI ITAT) VI. CIT VS RADHE DEVELOPERS (ORDER DATED 13/12/2011)(GUJARAT HIGH COURT) 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT S, IN BRIEF, ARE THAT THE ASSESSEE IS IN THE BUSINESS OF BUILDING/CONSTRUCTION AND DEVELOPING HOUSING PROJEC TS DECLARED NIL INCOME IN ITS RETURN FILED ON 30/10/ 2006, WHICH WAS ACCOMPANIED BY AUDIT REPORT U/S 44AB OF THE ACT IN FORM NO.3CB AND 3CD, ALONG WITH AUDITED ACCOUNT, 10CCB CERTIFICATE DATED 28/10/2006, CERTIFICATE OF THE ARCHITECT DATED 26/10/2006, PROF IT AND LOSS ACCOUNT ALONGWITH BALANCE SHEET. THE ASSESSEE CONSTRUCTED A SEVEN STORY BUILDING HAVING BUILT UP AREA OF DIFFERENT DIMENSIONS RANGING FROM 340.50 SQ.FT. TO 657 SQ. FT. ETC. AS PER THE ASSESSING OFFICER, SEVE N RESIDENTIAL UNITS WERE FOUND EXCEEDING THE LIMIT PRESCRIBED IN SUB CLAUSE (C) TO SUB SECTION (B) OF SECTION 80IB(10) OF THE ACT. THE RETURN WAS PROCESSED U/S M/S POONAM DEVELOPERS , . 4 143(1) OF THE ACT ON 12/09/2007. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY, THUS, NOTICE U/ S 143(2) OF THE ACT WAS SERVED UPON THE ASSESSEE TO W HICH THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME. THE ASSESSEE CLAIMED NET PROFIT OF RS.1,73,21,132/- ON THE TOTAL SALE PROCEEDS OF RS.6,50,62,900/- AS EXEMPT U/S 80IB(10) OF THE ACT. IN RESPONSE TO LETTER DATED 18/11/2008, ISSUED BY THE ASSESSING OFFICER, TO SUBSTANTIATE ITS CLAIM U/S 80 IB(10) OF THE ACT, THE ASSESSEE RESPONDED THROUGH LETTER D ATED 27/11/2008 ASSERTING THAT THE ASSESSEE COMPLIED WIT H ALL THE CONDITIONS LAID DOWN IN SUB-CLAUSES (A) TO (C) TO SECTION 80IB(10) OF THE ACT. ADMITTEDLY, THE ASSES SEE SUBMITTED THE STATEMENT OF THE SALES OF THE FLATS ALONGWITH THE NAMES OF THE FLAT OWNERS, BUILT UP AR EA, AGREEMENT VALUE, AMOUNT RECEIVED BY THE ASSESSEE. THE LD. ASSESSING OFFICER FOUND THAT SEVEN FLAT/UNIT WE RE AMALGAMATED AND THUS THE AREA OF THOSE FLATS EXCEED ED THE MAXIMUM LIMIT OF 1,000 SQ. FT. STATEMENTS OF OWNERS OF SUCH FLATS WAS RECORDED ON OATH U/S 131 O F THE ACT. AS PER THE REVENUE, SOME OF THE PURCHASERS/FLAT OWNERS TENDERED IN THEIR STATEMENT THAT TWO UNITS WERE COMBINED TOGETHER. FINALLY, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSE E U/S 80IB(10) OF THE ACT. 2.3. THE AGGRIEVED ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) . THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ASKED THE REMAND REPORT FROM THE ASSESSING OFFICER. IN THE REMAND REPORT DATED 13/07/2009 WHICH IS REPRODUCED M/S POONAM DEVELOPERS , . 5 HEREUNDER (THIS REMAND REPORT IS BASED UPON CROSS EXAMINATION DONE BY THE ASSESSEE), THERE IS U TURN TO THE EARLIER STAND OF THE ASSESSING OFFICER :- I. DURING THE CROSS EXAMINATION IT WAS CLARIFIED THAT ACTUALLY THE FLAT OWNERS HAD TAKEN THE KEY OF THE FLAT BEFORE GETTING THE AMALGAMATION WORK DONE AND THE BUILDER INTERPRETED THE MEANING OF POSSESSION WHEN THEY GAVE KEYS TO THE FLAT OWNERS. II. ACCORDING TO THE A.O. OCCUPATION CERTIFICATE WAS RECEIVED ONLY ON 13.01.2006 AND, THEREFORE, THE APPELLANT COULD NOT GIVE THE OFFICIAL POSSESSION TO THE FLAT OWNERS BEFORE 13.01.2006 WHEREAS THE APPELLANT PHYSICALLY HANDED OVER THE FLAT TO THE PARTIES BEFORE 13.01.2006. III. EVEN THOUGH DURING THE COURSE OF CROSS- EXAMINATION THE FLAT OWNERS DEPOSED THAT THE AMALGAMATION WAS DONE THROUGH THE CONTRACTOR OR SITE ENGINEER, OR SITE SUPERVISOR, THE A.O. WAS OF THE OPINION THAT THE SAME WAS NOT POSSIBLE WITHOUT THE PERMISSION OF THE APPELLANT. IV. THE FLAT OWNERS DEPOSED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE BUILDER AGREED TO DO AMALGAMATION WORK AT THE TIME OF BOOKING BUT IN THE ABSENCE OF ANY WRITTEN LETTER THE FLAT OWNER S COULD NOT CONFRONT THE BUILDER AND THAT IS WHY THE BUILDER DENIED THAT THEY AGREED TO AMALGAMATE TWO FLATS INTO ONE, BUT VERBALLY THE APPELLANT MUST HAVE GIVEN ASSURANCE. M/S POONAM DEVELOPERS , . 6 V. THE FLAT OWNERS DURING THE CROSS-EXAMINATION CLARIFIED THAT THE AMALGAMATION WORK OF THE FLATS WAS DONE BY THE CONTRACTOR, SITE ENGINEER, SITE SUPERVISOR OF THE BUILDER ON THEIR REQUEST, EVEN THOUGH THEY EARLIER STATED THAT THE AMALGAMATION WORK WAS DONE BY THE APPELLANT. VI. WITHOUT PERMISSION OF THE APPELLANT THE SITE ENGINEER OR SUPERVISOR COULD NOT HAVE DONE THE AMALGAMATION WORK AND IT COULD NOT BE A COINCIDENCE THAT THE ALL THE 14 FLATS IN SEVEN FLOO RS WERE AMALGAMATED AND THIS SHOULD HAVE BEEN KNOWN TO THE APPELLANT EVEN WHEN THE PARTY/PURCHASER BOOKED THE FLAT. 2.4. FOR REACHING TO A FAIR CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS): 6.1. I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESENTATIVE, STAND TAKEN BY THE A.O. AND THE CASE RECORDS THE FIRST OBJECTION OF THE A.O WAS THAT THE APPELLANT FAILED TO FULFILL THE CONDITION LAID DOWN IN SECTION 8IB(10)(C) IN AS MUCH AS 7 FLATS CONSTRUCTED BY THE APPELLANT EXCEEDED THE BUILT UP A& 1000 SQ.FT. THE A.O. WAS OF THE VIEW THAT 2 FLATS WERE AMALGAMATED APPELLANT AS SEEN FROM THE SWORN STATEMENTS RECORDED FROM THE FLAT PURCHASERS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. BUT DURING THE COURSE OF CROSS EXAMINATION, THE FLAT OWNERS ACCEPTED THAT THEY HAD REQUESTED THE APPELLANT TO COMBINE THE BOTH FLATS IN WRITING BUT THE SAME WAS REJECTED BY THE APPELLANT IN WRITING. SAMPLE COPY OF LETTER ISSUED THE APPELLANT TO THE M/S POONAM DEVELOPERS , . 7 FLAT OWNERS 101 & 102 OF THE BUILDING NO. SP-77 IS REPRODUCED AS UNDER:- 'TO, MR. JOSEPH H. D'CRUZ & MR.. DIXY H.D. CRUZ 101/102, BLDG.NO.77, 'C' WING, SHUBHAM, . SHANTI PARK, . MITRA ROAD DEAR SIR, SUB: YOUR REQUEST FOR THE ALTERATION IN YOUR FLAT WE HAVE RECEIVED LETTER FROM YOU TO CARRY OUT ALTERATION IN YOUR FLAT. WE HAVE TO INFORM YOU THAT SINCE YOU HAVE ALREADY TAKEN POSSESSION OF THE SAID FLATS, THERE IS NO QUESTION OF OUR CARRYING OUT ALTERATION IN YOUR ABOVE MENTIONED FLA T. SECONDLY, YOU ARE REQUESTED NOT TO CARRY OUT ANY ALTERATIONS IN THE FLATS, IN CASE IF YOU STILL WISH TO CARRY OUT ANY ALTERATION IN JOUR FLAT KINDLY DO SO AFTER TAKING THE PERMISSION FROM THE CONCERTED LOCAL AUTHORITY, I.E. THE MIRA BHAYANDER MUNICIPAL CORPORATION. IN CASE, IF YOU FAIL TO DO SO YOU SHOULD BE HELD SOLELY RESPONSIBLE FOR THE SAME.' 6.2. IT IS FURTHER SEEN THAT SIMILAR LETTERS WERE ISSUED TO TH3 OTHER FLAT OWNERS POINTING OUT THAT ANY ALTERAT ION WAS TO BE DONE ONLY AFTER TAKING PERMISSION FROM TH E CONCERNED LOCAL AUTHORITY AND THESE LETTERS WERE FI LED BEFORE THE A.O, ALONGWITH REPLY DATED 22-12-2008. DURING THE COURSE OF CROSS EXAMINATION, THE A,O, HAS NOT DOUBTED THE GENUINENESS OF THESE LETTERS BY THE APPELLANT TO THE FLAT OWNERS AND THE FLAT OWNER S HAVE NOT DENIED THE RECEIPT OF SUCH LETTERS FROM THE APP ELLANT. IN THE CIRCUMSTANCES THE ABOVE 1ETTERS HAVE TO BE TAKE N ON FACE VALUE WHICH N 7 EA6S THAT THE APPELLANT DENIED TO CARRY OUT ANY ALTERATION AND ALSO WARNED THE FLAT OWNERS THAT ALTERATION COULD NOT BE DONE WITHOUT PERMISSION FROM THE CONCERNED LOCAL AUTHORITY. THE ABOVE LETTERS ARE VERY CLEAR AND CATEGORICAL AND THERE M/S POONAM DEVELOPERS , . 8 IS NO REASON TO DOUBT THAT THE APPELLANT CARRIED OU T THE ALTERATION. IN ANY CASE, DURING THE CROSS EXAMINATI ON NONE OF THE FLAT OWNERS ACCEPTED THAT THE APPELLANT CARRIED OUT THE ALTERATION. THE POINT RAISED BY THE A.O. IS THAT THE FLATS COULD NOT HAVE BEEN HANDED O VER BEFORE THE RECEIPT OF COMMENCEMENT CERTIFICATE FROM THE LOCAL AUTHORITY. BUT THE FLATS WERE ACTUALLY HANDED OVER TO FLAT OWNERS BEFORE THE RECEIPT OF COMMENCEMENT CERTIFICATE WHICH IS NOT DENIED BY THE FLAT OWNERS AND IN FACT THEY ACCEPTED THAT THE ALTERATIO N WAS DONE THROUGH THE SITE ENGINEERS AFTER TAKING POSSES SION OF THE FLATS FROM THE APPELLANT. MERELY BECAUSE ALL THE 14 FLATS ON ONE SIDE OF THE SAME BUILDING WERE AMALGAMATED BY THE PURCHASERS OF THE FLAT, THE APPELLANT CANNOT BE HELD RESPONSIBLE. BY NOTICING T HAT FEW PURCHASERS HAVE MERGED, ALL THE OTHERS ALSO MIG HT HAVE DONE IT. FURTHER THE PROPERTY TAX IS PAID SEPA RATELY FOR THE TWO AMALGAMATED FLATS AND SOCIETY IS ALSO CHARGING SEPARATE MAINTENANCE BILLS WHICH IS NOT DISPUTED BY THE A.O. IT IS TRUE THAT THERE WAS ONLY ONE ELECTRIC METER IN THE AMALGAMATED 'FLAT AS REPORTED BY THE WARD INSPECTOR BUT A.O. DID NOT PROBE THIS MATT ER FURTHER TO FIND OUT THE REASON FOR THE SAME EVEN WH EN THE CASE WAS REMANDED BACK TO HIM IT IS QUITE POSSIBLE THAT THE PURCHASERS HAVE SURRENDERED ONE ELECTRICITY METER AFTER AMALGAMATING THE FLAT FOR W HICH THE APPELLANT CANNOT BE HELD RESPONSIBLE. FURTHER A S CONTENDED BY THE REPRESENTATIVE THIS TYPE OF DRAW BACK IN SECTION 80LB(10) IS PROPOSED TO BE SET RIGHT WITH T HE PROPOSED AMENDMENT W.E. F. A.Y. 2010-11. THUS EVEN IF ADJOINING FLATS WERE SOLD TO MEMBERS OF THE SAME FAMILY, DEDUCTION U/S 80IB(10) CANNOT BE DENIE D TILL A.Y. 2009-10 I, THEREFORE ACCEPT THE PLEA OF T HE REPRESENTATIVE THAT IF THE PURCHASERS CARRIED OUT ALTERATION THEY HAVE TO FACE CONSEQUENCES FROM THE LOCAL AUTHORITY AND AS PER RECORDS THE APPELLANT HA S NOT CARRIED OUT THE ALTERATION AND IN FACT THE APPELLAN T WARNED THE FLAT OWNERS AGAINST CARRYING OUT ANY ALTERATION WITHOUT M/S POONAM DEVELOPERS , . 9 APPROVAL OF THE LOCAL AUTHORITY. THUS I FIND THAT THE A.O. WAS NOT CORRECT IN DENYING DEDUCTION U/S. 801(10) ON TH IS GROUND AND HE IS DIRECTED TO ALLOW THE SAME. 6.3 REGARDING THE OTHER OBJECTION OF THE A.O. THAT COMMENCEMENT CERTIFICATE WAS NOT IN THE NAME OF THE APPELLANT, I FIND THAT THE DECISION OF AHMEDBAD ITA T IN THE CASE OF RADHE DEVELOPERS & OTHERS IS EXACTLY ON THIS POINT. WHILE ARRIVING AT THE CONCLUSION THAT T HE COMMENCEMENT CERTIFICATE NEED NOT BE IN THE NAME OF DEVELOPER FOR CLAIMING DEDUCTION U/S 80IB(10), THE HONBLE AHMEDABAD ITAT RELIED ON THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF MYSORE MINERALS LTD. VS. CIT ( 239 ITR 775) AND THE DECISION OF HONBLE SUPREME COURT IN T HE CASE OF PODAR CEMENT (226 ITR 625). THE HONBLE AHMEDABAD ITAT HELD AS BELOW IN THE CASE OF RADHE DEVELOPERS V S. ITO. THEREFORE, LOOKING AT FROM ANY ANGLE, WE ARE OF THE CONSIDERED OPINION, THAT TO CLAIM DEDUCTION FOR DEVELOPING AND, BUILDING HOUSE PROJECT, IT IS NOT NECESSARY THAT ASSESSEE MUST BE AN OWNER OF THE LAND IT WOULD BE SUFFICIENT IF IT IS AN UNDERTAKING DEVELOPS AND BUILD HOUSING PROJECT. THE ASSESSEE IS ALSO THE OWNER OF THE PROJECT, THOUGH THE TITLE DOE S NOT VEST IN IT. WE MAY NOW BRIEFLY DISCUSS CERTAIN CASES REFERRED T O BY THE RESPECTIVE CONSUL AT THE TIME OF HEARING. IN THE CASE OF ARUN EXSCELLO FOUNDATIONS( P) LTD VS. ACIT 108 TTJ 71( CHENNAI),THE CONDITIONS MENTIONED IN THIS PROVISION HAS ELABORATELY BEEN DISCUSSED BY THE CHENNAI BENCH 'A' IN THE ABOVE CASE ( SUPRA) . THERE IS NO CONDITION AS REGARDS TO OWNERSHIP IN TH E PROVISIONS OF SECTION 80IB(10) OF THE ACT. THE SUPREME COURT IN THE CASE OF CIT V/S. VADILAL LAIUBHAI,86 ITR 02(S HAS OBSERVED THAT NOTHING MORE THAN WHAT IS STATED IN THE STATUTE CAN BE READ AND ADDED TO FIND OUT A MEANING OF THE PROVISION. AS THE REQUIREMENT OF OWNERSHIP IS N OT M/S POONAM DEVELOPERS , . 10 THERE IN THE SECTION 80IB(10), IT CANNOT BE READ IN TO IT FOR REJECTING THE CLAIM OF THE D EDUCTION.' 6.4. IN FACT THE AG. HIMSELF ACCEPTED THAT THE DECIS ION OF RADHE DEVELOPERS & OTHERS V/S. ITO (113 TTJ 300) IS APPLICABLE IN THE CASE OF THE APPELLANT BUT THE HEL D THAT THE SAME HAD NOT BECOME FINAL AND THEREFORE, HE MADE TH IS DISALLOWANCE. IN VIEW OF ABOVE DISCUSSION, I FIND T HAT THE COMMENCEMENT CERTIFICATE NEED NOT BE IN THE NAM E OF THE APPELLANT AND, THEREFORE, I DIRECT THE.. A.O. TO ALLOW DEDUCTION U/S. 80LB(10) OF THE I.T.ACT. 2.5. WE FIND THAT THE LD. FIRST APPELLATE AUTHORITY REACHED TO A PARTICULAR CONCLUSION BY REMANDING THE MATTER BACK TO THE ASSESSING OFFICER VIDE ORDER DAT ED 19/05/2009 FOR PROVIDING OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE AND THE ASSESSING OFFIC ER VIDE REPORT DATED 13/07/2009 SUBMITTED THE REMAND REPORT IN WHICH HE RECORDED THE STATEMENT OF FLAT O WNERS AND OPPORTUNITY OF CROSS EXAMINATION WAS GIVEN TO T HE ASSESSEE PURSUANT TO THE DIRECTION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). IN THE REMAN D REPORT SENT TO THE LD. COMMISSIONER OF INCOME TAX (APPEALS), IT HAS BEEN CLARIFIED THAT ACTUALLY THE FLAT OWNERS HAD TAKEN THE KEA OF THE FLAT BEFORE AMALGAMATION WORK. ACCORDING TO THE ASSESSING OFFIC ER, THE OCCUPATION CERTIFICATE WAS RECEIVED ON 13/01/20 06, THEREFORE, THE POSSESSION OF THE FLATS COULD NOT BE HANDED OVER TO THE FLAT OWNERS BEFORE 13/01/2006 WHEN THE POSSESSION WAS PHYSICALLY HANDED OVER TO T HE CONCERNED FLAT OWNERS. IT IS ALSO NOTED THAT DURING M/S POONAM DEVELOPERS , . 11 ASSESSMENT PROCEEDINGS, THE CASE OF THE DEPARTMENT/ ASSESSING OFFICER, DENYING DEDUCTION U/S 80IB(10) O F THE ACT WAS BROADLY BASED UPON THE STATEMENT RECORD ED BEHIND THE BACK OF THE ASSESSEE FROM SUCH FLAT OWNE RS. IT IS ALSO NOTED THAT THE REMAND REPORT WAS SUPPLIE D TO THE ASSESSEE AND THE ASSESSEE FILED ITS REPLY AS HA S BEEN REPRODUCED IN PARA-5 (PAGE-7 ONWARDS) OF THE IMPUGN ED ORDER. THE STAND OF THE ASSESSEE BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS THAT THE ASSESSEE DID NOT AMALGAMATE THE FLAT BUT IF ANY AMALGAMATION WAS DONE THAT WAS DONE BY THE FLAT OWNERS ITSELF, THAT TOO AFTER TAKING THE POSSESSION FROM THE ASSESSEE. IT IS ALSO NOTED THAT THE LOCAL AUTHO RITY GRANTED BUILDING COMPLETION CERTIFICATE, VERIFYING EACH UNIT, CERTIFYING THAT THE CONSTRUCTION WAS DONE BY THE ASSESSEE AS PER THE APPROVED PLAN FROM THE COMPETEN T AUTHORITY. IT IS ALSO NOTED THAT THE ASSESSEE REJE CTED THE REQUEST OF SOME OF THE FLAT OWNERS FOR AMALGAMATION VIDE LETTER DATED 20/05/2005, (FLAT NO.101 AND 102 AND OTHER FLATS) AS HAS BEEN MENTIONED IN PARA-8 OF THE ORDER IN APPEAL. IN PARA-9, THERE IS UNCONTROVERTE D FINDING THAT THE FLAT OWNERS OF FLAT NO.201/202, 401/402, 501/502, CLEARLY STATED THAT THE ALTERATIO N WAS MADE BY THE FLAT OWNERS AND NOT BY THE ASSESSEE BEFORE HANDING OVER THE POSSESSION. IN VIEW OF THE SE FACTS, IF ANY, AMALGAMATION/ALTERATION IS MADE BY T HE FLAT OWNERS AFTER TAKING POSSESSION OF THE FLATS TH EN THE ASSESSEE CANNOT BE MADE RESPONSIBLE FOR THE SAME AN D IF ANY CORRECTIVE MEASURES WAS REQUIRED, THAT COULD HAVE ONLY BE DONE BY THE MUNICIPAL CORPORATION AGAI NST M/S POONAM DEVELOPERS , . 12 THE FLAT OWNERS BUT CERTAINLY THE CLAIMED DEDUCTION U/S 80IB(10) OF THE ACT CANNOT BE DENIED TO THE ASSESSE E. 2.6. NOW WE ARE ANALYZING THE PROVISION OF THE ACT. SECTION 80IB(10) OF THE ACT. THE RELEVANT PROVISIO N IS REPRODUCED HEREUNDER:- (10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDE RTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BEFORE THE 31ST DAY OF MARCH, 2007 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 CO MMENCES DEVELOPMENT 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 BE EN APPROVED 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 BE EN, OR, IS APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRI L, 2004, WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WH ICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, (I) IN A CASE WHERE THE APPROVAL IN RESPECT OF THE HOUSING PROJECT IS OBTAINED MORE THAN ONCE, SUCH HOUSING PROJECT SHALL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE ON WHICH THE BUILDIN G PLAN OF SUCH HOUSING PROJECT IS FIRST APPROVED BY THE LOCAL AUTHORITY; (II) THE DATE OF COMPLETION OF CONSTRUCTION O F THE HOUSING PROJECT SHALL BE TAKEN TO BE THE DATE ON WHICH THE COMPLETI ON CERTIFICATE IN RESPECT OF SUCH HOUSING PROJECT IS ISSUED BY THE LO CAL AUTHORITY; (B ) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE: PROVIDED THAT NOTHING CONTAINED IN CLAUSE ( A) OR CLAUSE (B) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACCORDANC E WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNM ENT FOR RECONSTRUCTION OR REDEVELOPMENT OF EXISTING BUILDIN GS IN AREAS DECLARED TO BE SLUM AREAS UNDER ANY LAW FOR THE TIM E BEING IN FORCE AND SUCH SCHEME IS NOTIFIED BY THE BOARD IN THIS BE HALF; (C ) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY-FIVE KILOMETRES FR OM THE M/S POONAM DEVELOPERS , . 13 MUNICIPAL LIMITS OF THESE CITIES AND ONE THOUSAND A ND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE; AND (D ) THE BUILT-UP AREA OF THE SHOPS AND O THER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIV E PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR T WO THOUSAND SQUARE FEET, WHICHEVER IS LESS.] WE FIND THAT AS PER SUB-CLAUSE(C), THE RESIDENTIAL UNIT SHOULD HAVE MAXIMUM BUILT UP AREA OF 1,000 SQ. FT. THE COM PETENT AUTHORITY GRANTED APPROVAL TO THE ASSESSEE, CONSTR UCTION WAS DONE AS PER THE APPROVED PLAN, AS MENTIONED EARLIER , COMPLETION CERTIFICATE WAS GRANTED TO THE ASSESSEE AFTER VERIF YING EACH RESIDENTIAL UNIT TO BE CONSTRUCTED AS PER THE SANCT IONED PLAN AND THEREAFTER IMMEDIATELY THE POSSESSION WAS HANDED OV ER TO THE INDIVIDUAL FLAT OWNERS, THUS, THERE IS NO VIOLATION OF THE PROVISION OF THE ACT OTHERWISE THERE WAS NO QUESTION OF PROVI DING COMPLETION CERTIFICATE TO THE ASSESSEE. IN VIEW OF THESE FACTS, IF ANY, AMALGAMATION/ALTERATION IS MADE BY THE FLAT OW NERS AFTER TAKING THE POSSESSION OF THE FLATS, THE ASSESSEE CA NNOT BE HELD LIABLE FOR ANY SUCH CONTRAVENTION. 2.7. THE OBJECTION OF THE ASSESSING OFFICER REGARDI NG SELLING ADJOINING UNITES TO THE FAMILY MEMBERS HAS BEEN DEA LT WITH IN PARA 5.4 OF THE IMPUGNED ORDER. WE ARE IN AGREEMEN T WITH THE CONCLUSION OF THE LD. COMMISSIONER OF INCOME TAX (A PPEALS) THAT SO LONG CONSTRUCTION/DEVELOPMENT IS DONE BY THE ASS ESSEE AS PER APPROVED PLAN, APPROVED BY THE COMPETENT AUTHORITY, AND POSSESSION IS HANDED OVER TO THE INDIVIDUAL FLAT OW NERS THEN AT THE LATER STAGE, IF TWO UNITS ARE AMALGAMATED BY TH E FLAT OWNERS, THE ASSESSEE CANNOT BE HELD RESPONSIBLE. THE OBJEC TION OF THE ASSESSING OFFICER THAT COMMENCEMENT CERTIFICATES WA S NOT IN THE NAME OF THE ASSESSEE, THE REPLY DATED 23/12/2008 (O F THE M/S POONAM DEVELOPERS , . 14 ASSESSEE), TO THE ASSESSING OFFICER HAS BEEN DEALT WITH IN PARA- 5.5 OF THE IMPUGNED ORDER. EVEN THE ASSESSING OFFI CER ITSELF HAS ACCEPTED, ON THIS ISSUE, THE DECISION OF THE AHMEDA BAD BENCH OF THE TRIBUNAL IN THE CASE OF RADHE DEVELOPERS & ORS. VS ITO (113 TTJ 300). THE DECISIONS FROM HONBLE APEX COURT IN MYSORE MINERALS LTD. VS CIT (239 ITR 775) AND PODAR CEMENT S (226 ITR 625) WERE ALREADY RELIED UPON BY THE AHMEDABAD BENC H HOLDING THAT IT IS NOT NECESSARY THAT ASSESSEE MUST BE OWNE R OF THE LAND AND IT WOULD BE SUFFICIENT IF THE ASSESSEE DEVELOPS AND BUILDS HOUSING PROJECTS. IDENTICAL RATIO WAS LAID DOWN IN ARUN EXSCELLO FOUNDATION (P.) LTD. VS ACIT 108 TTJ 71 (CHENNAI). THE HONBLE APEX COURT IN CIT VS VADILAL LALUBHAI 86 ITR 02 (SC) OBSERVED THAT NOTHING MORE THEN WHAT IS STATED IN THE STATUT E CAN BE READ AND ADDED TO FIND OUT A MEANING OF THE PROVISION. A S THE REQUIREMENT OF OWNERSHIP IS NOT THERE IN SECTION 80 IB(1) OF THE ACT IT CANNOT BE READ INTO IT FOR REJECTING THE CLA IM OF DEDUCTION. 2.8. THE HONBLE GUJARAT HIGH COURT IN CIT VS TARNE TAR CORPORATION (2012) 26 TAXMAN.COM 180/210 TAXMAN. 206(MAG.)(GUJ.) HELD THAT ASSESSEE CANNOT BE DENIED BENEFIT OF DEDUCTION U/S 80IB(10) OF THE ACT MERELY ON THE GRO UND OF BELATED BUSINESS USE PERMISSION BY LOCAL AUTHORITY. IF THIS RATIO IS APPLIED TO THE FACTS OF THE PRESENT APPEAL, IT C AN BE SAID THAT WHEN THE ASSESSEE DEVELOPED/CONSTRUCTED AS PER THE SANCTIONED PLAN AND AFTER VERIFYING BY THE COMPETENT AUTHORITY THAT EVERY UNIT WAS AS PER APPROVED PLAN, THEREFORE, IF ANY, A MALGAMATION IS DONE BY THE FLAT OWNERS AFTER TAKING OVER THE POSSE SSION, THE ASSESSEE CANNOT BE HELD LIABLE, CONSEQUENTLY, THE C LAIMED DEDUCTION U/S 80IB(10) CANNOT BE DENIED TO THE ASSE SSEE. M/S POONAM DEVELOPERS , . 15 2.9. ON IDENTICAL FACT, THE MUMBAI BENCH OF THE TRI BUNAL IN THE CASE OF JCIT VS SUNCITY HOUSING (ITA NO.4877/MUM/20 12), VIDE ORDER DATED 17/09/2012(PAGE 219 OF THE PAPER BOOK), DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. SECTION 80IB(1 0) IS A BENEFICIAL SECTION, INTENDED TO PROMOTE CONSTRUCTIO N OF RESIDENTIAL HOUSES, HENCE REQUIRES LIBERAL INTERPRE TATION. WHILE INTERPRETING THE PROVISION, THE SAME CANNOT BE EXTE NDED TO ARRIVE AT THE CONCLUSION, WHICH OTHERWISE IS NOT DECIPHERA BLE FROM THE PLAIN READING OF THE SECTION SO AS TO RESTRICT THE SCOPE AND DENY THE BENEFIT, WHICH OTHERWISE, AVAILABLE TO THE ASSE SSEE. IDENTICAL IS THE RATIO IN THE CASE EMGEEN HOLDINGS PVT. LTD. VS DCIT (2011) 47 SOT 98 (MUMBAI TRIBUNAL). IN CIT VS MAGARPATTA TOWNSHIP DEVELOPMENT AND CONSTRUCTION COMPANY (141 ITD 682)( PUNE TRIBUNAL), ACIT VS MIRAJ ENTERPRISES (ITA NO.960 AN D 961/MUM/2007)(MUMBAI TRIBUNAL) AND HAWARE CONSTRUCT ION (P.) LTD. VS ITO (64 DTR 251) (MUMBAI BENCH) LAID D OWN IDENTICAL RATIO IN FAVOUR OF THE ASSESSEE. THE REVENUE HAS N OT BROUGHT ON RECORD ANY CONTRARY DECISION ON IDENTICAL FACTS. S INCE, THERE IS NO VIOLATION OF SECTION 80IB(10) OF THE ACT AND IN THE LIGHT OF THE VARIOUS DECISIONS, DISCUSSED HEREINABOVE, WE FIND N O INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INC OME TAX (APPEALS). 3. THE NEXT GROUND PERTAINS TO DELETING THE ADDITIO N OF RS.3,25,315/-, DEBITED UNDER THE HEAD PROVISION FO R MAINTENANCE AND SELLING EXPENSES. THE CRUX OF AR GUMENT ADVANCED ON BEHALF OF THE REVENUE, BY SHRI NEIL PHI LIP, LD. DR, IS THAT THE LD. FIRST APPELLATE AUTHORITY DID NOT APPR ECIATE THAT THE ASSESSEE DEBITED THESE EXPENSES UNDER THE HEAD PROV ISION AND AS M/S POONAM DEVELOPERS , . 16 RUNNING CONCERN AND COULD HAVE BEEN DEBITED AT THE TIME OF REQUIREMENT OR WHEN SUCH WORK IS CARRIED OUT BY THE ASSESSEE. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE , SHRI SASHI TULSIYAN DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE DEBITED RS.3,25,315/- UNDER THE NARRATION PROVISION FOR MAINTENANCE AND SELLING EXPENSES. IT IS NOTEW ORTHY THAT THE ASSESSEE VIDE COMMUNICATION DATED 23/12/2008, SUBMI TTED THE LEDGER COPY OF ITS ACCOUNTS BEFORE THE ASSESSING OF FICER, WHICH HAS BEEN DULY EXAMINED BY THE LD. COMMISSIONER OF I NCOME TAX (APPEALS). THE SAID LETTER HAS BEEN EXTRACTED IN PA RA 8.2 (PAGE-15 ONWARDS) OF THE IMPUGNED ORDER. IF THE LETTER IS A NALYZED, THE ASSESSEE WAS TO INCUR CERTAIN EXPENSES LIKE LEAKAGE , REPAIRING, GARDEN DEVELOPMENT, SOCIETY OFFICE CONSTRUCTION, ET C TILL THE FLATS ARE HANDED OVER TO THE OFFICER BEARER OF THE SOCIET Y/FLAT OWNERS. THESE EXPENSES WERE ACTUALLY INCURRED BY THE ASSESS EE TO MEET OUT THE AFOREMENTIONED REQUIREMENTS IN SUBSEQUENT YEARS. THE DETAILS OF EXPENSES WERE ALREADY FILED BEFORE THE A SSESSING OFFICER. THE ASSESSING OFFICER HAS ALSO NOT PINPOIN TED THAT THESE EXPENSES WERE NOT INCURRED, THUS, WE FIND NO INFIRM ITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) MORE SPECIFICALLY WHEN THE ASSESSEE IS FO LLOWING MERCANTILE SYSTEM OF ACCOUNTING AND INCURRING OF EX PENSES WERE DULY EXPLAINED WITH DETAILS VIDE LETTER DATED 23/12 /2008. THE RATIO LAID DOWN IN CALCUTTA COMPANY LTD. VS CIT (37 ITR 1)(SC), BHARAT EARTH MOVERS VS CIT (245 ITR 428)(SC), WHERE IN, THE AMOUNT WAS SET APART TO MEET OUT THE LIABILITY ON A CCOUNT OF M/S POONAM DEVELOPERS , . 17 LEAVE ENCASHMENT OF EMPLOYEES, IT WAS HELD TO BE DE DUCTABLE U/S 37 OF THE ACT. THE HONBLE JURISDICTIONAL HIGH COU RT IN TATA IRON & STEEL COMPANY LTD. VS ITO 101 ITR 292 (BOM.) WHER E THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUN TING HELD AS UNDER: HELD, THAT IT IS NOW WELL SETTLED THAT THE LIST OF ALLOWANCES AND DEDUCTIONS CONTAINED IN SECTIONS 30 TO 43A OF THE INCOME TAX ACT, 1961, IS NOT EXHAUSTIVE IN THE SENSE THAT AN ITEM OF LOSS OR EXPENDITURE INCID ENTAL TO BUSINESS MAY BE DEDUCTED IN COMPUTING PROFIT AND GAINS EVEN IF DOES NOT SPECIFICALLY FIND A PLACE WI THIN THOSE SECTIONS, PROVIDED IT IS AN ITEM WHICH IS ALL OWABLE AS A DEDUCTION ON ORDINARY COMMERCIAL PRINCIPLES. WHILE COMING TO THE AFORESAID CONCLUSION, THE HONB LE JURISDICTIONAL HIGH COURT DULY CONSIDERED THE DECIS ION FROM HONBLE APEX COURT IN METAL BOX COMPANY OF INDIA VS THEIR WORKMEN (1969) 73 ITR 53 (SC), BOMBAY DYEING AND MANUFACTURING LTD. VS CWT 93 ITR 603 (SC). MOREOVER THE OBSERVATION MADE BY THE HONBLE APEX COURT IN THE C ASE OF METAL BOX COMPANY (SUPRA) CONSIDERED AND APPLIED IN THREE JUDGMENTS OF HIGH COURTS NAMELY, MADHO MAHESH SUGAR MILLS (P. ) LTD. VS CIT (1973) 92 ITR 503 (ALL.), DELHI FLOUR MILLS COM PANY LTD. VS CIT (1974) 95 ITR 151 (DEL.) AND INDIA UNITED MILLS LTD. VS CIT (1975) 98 ITR 426 (BOM.). A PROPER REVIEW OF HONB LE APEX COURT DECISION WOULD SEEM TO INDICATE THAT PERMISSIBLE DE DUCTIONS ARE NOT RESTRICTED TO THOSE INDICATED IN SECTIONS 30 TO 37, THAT SUCH A PROVISION IS NOT FOR CONTINGENT LIABILITY BUT MUST BE PROPERLY REGARDED, IF SCIENTIFICALLY ESTIMATED, AS A PROVISI ON FOR A PRESENT M/S POONAM DEVELOPERS , . 18 LIABILITY WHICH IS ALLOWABLE IN THE CASE OF ASSESSE E WHICH KEEPS ITS ACCOUNT ON THE MERCANTILE SYSTEM. IN VIEW OF T HE CLEAR FACTS AND THE JUDICIAL PRONOUNCEMENTS DISCUSSED HEREINABO VE, WE AFFIRM THE CONCLUSION OF THE LD. COMMISSIONER OF IN COME TAX (APPEALS). FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 23/01/2015. '1 + ./0 2'3 23/01/2015 / + 9 SD/ - (N.K.BILLAIYA) SD/ - (JOGINDER SINGH) ! '# ! '# ! '# ! '# / ACCOUNTANT MEMBER '# '# '# '# / JUDICIAL MEMBER MUMBAI; 2' DATED : 23/01/201 5 F{X~{T? P.S/. .. '1 + :* ;0* '1 + :* ;0* '1 + :* ;0* '1 + :* ;0*/ COPY OF THE ORDER FORWARDED TO : 1. <= / THE APPELLANT 2. :><= / THE RESPONDENT. 3. ? ( ) / THE CIT, MUMBAI. 4. ? / CIT(A)- , MUMBAI 5. A9 :* , , / DR, ITAT, MUMBAI 6. 9B( C / GUARD FILE. '1 '1 '1 '1 / BY ORDER, >* :* //TRUE COPY// D DD D/ // /E ' E ' E ' E ' (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI