MAHANAGAR CONSTRUCTIONS P. LTD, MUMBAI V. ITO 8(2)(3), MUMBAI

ITA 5730/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1327 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 27-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR MISHRAS S RANA
• Assessee Lawyers: DHIRENDRA M SHAH
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, MUMBAI. BEFORE S/SHRI S.V.MEHROTRA, AM & VIJAY PAL RAO,JM I.T.A NO.5730/MUM/2009 ASSESSMENT YEAR: 2006-07 MAHANAGAR CONSTRUCTIONS P. LTD. V. THE I.T.O. 8(2) (3), A-604,-19, NAMRAH MILLAT NAGAR, AAYAKAR BHAVAN, M .K. ROAD, OSHIWARA, ANDHERI(W), MUMBAI-59. MUMBAI. PA NO.AADCM 7611 B (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI DHIRENDRA M SHAH RESPONDENT BY : SHRI ANIL KUMAR MISHRA/S.S.RANA O R D E R PER S.V.MEHROTRA, AM THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 27.8.2009 OF LD CIT (A)-VIII, MUMBAI FOR THE ASSESSMENT YEAR 200 6-07. GROUNDS RAISED BY THE ASSESSEE READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD CIT (A0 ERRED IN NOT ALLOWING DEDUCTION U/S.80-IB(10) OF THE ACT WHICH B E ALLOWED IN FULL. 2. THE LD CIT (A) ERRED IN STATING THAT THE CONDITI ON SIZE OF PLOT WAS NOT FULFILLED AND THAT THE REDEVELOPMENT SCHEME WAS NOT APPROVED. THE APPELLANT PRAYS THAT THESE DETAILS WERE FILED AND WAS PRODUCED AND THAT IT FULFILLS ALL THE CONDITIONS OF SECTION 80IB(10) INCLUDING CLAUSE (A) AND CLAUSE (B ) OF THE SECTION. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY, IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BUSINESS OF RECONSTRUCTION/REDEVELOP MENT OF DILAPIDATED BUILDINGS OF BMC TENANTED PROPERTY CONSTRUCTED PRIOR TO 1940 AND OCCUPIED BY TENANTS. IT HAD FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT NIL AND BOOK PROFIT U/S.115JB AT RS.23,22,505/-. THE ASSESSEE HAD CLAMED DEDUCTION U/S. 80-IB TO THE EXTENT OF RS.27,17,244/- AND, ACCORDINGLY, DECLARED INCOME AT NIL. THE ASSESSING OFFICER NOTICED THAT IN THE NOTES TO THE COMPUTATION OF INCOME, THE ASSESSEE HAD STATED THAT U/S.80IB(10) 2 FOR CARRYING OUT HOUSING PROJECT IN ACCORDANCE WITH SCHEME FRAMED BY THE GOVERNMENT OF MAHARASHTRA UNDER BMC RULES. HE REQUIRED THE ASSE SSEE TO SUBSTANTIATE ITS CLAIM FOR DEDUCTION U/S. 80IB(10) WITH DOCUMENTARY EVIDENCES. HE NOTED THAT THE ASSESSEE COULD NOT PRODUCE BUILDING COMPLETION CERTIFICATE WITH RE GARD TO PROJECT IN RESPECT OF WHICH IT HAD BEEN CLAIMING DEDUCTION U/S.80IB(10) OF THE ACT . THEREFORE, HE ISSUED NOTICE REQUIRING THE ASSESSEE TO FURNISH THE PROJECT COMPL ETION CERTIFICATE OF THE LOCAL AUTHORITY AND EXPLANATION ALONGWITH DETAILS OF DOCUMENTARY EV IDENCES FOR MAKING SUCH A CLAIM. THE ASSESSEE IN ITS REPLY STATED AS UNDER:- I) THEIR PROJECT WAS DULY SANCTIONED AND THE COMME NCEMENT CERTIFICATE WAS ISSUED ON 5.11.2003; II) THE PROJECT IS NOT THE SIZE OF 1 ACRE LAND, BUT THE PROJECT IS ELIGIBLE FOR DEDUCTION U/S.80-IB(10) BECAUSE IT WAS CARRIED OUT IN ACCORDA NCE WITH A SCHEME FRAMED BY THE STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELO PMENT OF EXISTING BUILDINGS; III) EACH RESIDENTIAL PROJECT IS SITUATED IN THE HE ART OF THE CITY IN BYCULLA WITH PIN CODE 400008 AND EACH RESIDENTIAL UNIT IS WITHIN 100 0 SQ.FT (I.E. 225 SQ.FT) IV) THE BUILT UP AREA OF THE SHOPS IS ONLY 550 SQ.F T AS AGAINST TOTAL BUILT UP AREA OF 34,034 SQ.FT I.E.NOT EXCEEDING 5% OF THE AGGREGATE BUILT UP AREA. THE ASSESSEE REFERRED TO THE PROVISO TO SECTION 80- IB(10)(B) AND CLAIMED THAT DEDUCTION WAS AVAILABLE ON PROFIT DERIVED FROM HOUSING PROJECT AS PER NOTIFICATION LETTER E.NO.2 05/3/2001 ITA II DATED 04.05.2001 OF MINISTRY OF FINANCE ISSUED TO MAHARASHTRA CHAMBER O F HOUSING INDUSTRY STATING THAT ANY PROJECT WHICH HAS BEEN APPROVED BY A LOCAL AUTHORIT Y AS A HOUSING PROJECT SHOULD BE CONSIDERED ADEQUATE FOR THE PURPOSE OF SECTION 80IB (10). 2.1 THE ASSESSING OFFICER AFTER DETAILED DISCUSSION REGARDING COMPLETION OF THE PROJECT, DENIED THE DEDUCTION U/S. 80IB(10) OBSERVI NG AT PARA 3.9 AS UNDER:- AS PER THE DETAILS FURNISHED BY THE ASSESSEE, THE A SSESSEE HAD UNDERTAKEN REDEVELOPMENT OF A PROPERTY AT AGRIPADA, MUMBAI, VI Z; BHANDARI CHAWL PLOT NO.52 AND 53 (PART), AGRIPADA, MUMBAI-4 00 011 UNDER REDEVELOPMENT SCHEME OF MUNICIPAL CORPORATION OF GR EATER MUMBAI. IN THE CASE OF THE ASSESSEE, THE PROJECT COMMENCEMENT CERTIFICATE ISSUED BY MCGB IN FORM A UNDER MAHARASHTRA REGIONAL & TOWN PLANNING ACT, 1966 IS DATED 5.11.2003. IN VIEW OF THE PROVISIONS OF CLAUSE (A) TO SECTION 80IB(10), THE ASSESSEE SHOULD HAVE COMPLETED THE HO USING PROJECT BEFORE 31.3.2008 AND SHOULD HAVE OBTAINED BUILDING COMPLET ION CERTIFICATE FROM THE LOCAL AUTHORITY, I.E. MCGM. HOWEVER, THE ASSES SEE HAD OBTAINED FULL OCCUPATION LETTER DATED 25.9.2006 ISSUED BY MCGM AN D BASED ON THE SAME THE ASSESSEE HAS BEEN MAKING CLAIM FOR DEDUCTI ON U/S. 80IB(10) OF THE I.T.ACT. THE CLAIM IS ALLOWABLE ONLY ON THE BA SIS OF BUILDING 3 COMPLETION CERTIFICATE AND NOT ON THE BASIS OF FULL OCCUPATION LETTER OF THE LOCAL AUTHORITY. THUS, THE ASSESSEE FAILED TO MEET THE REQUIREMENT OF CLAUSE (A) OF SECTION 80IB(10). AS REGARDS COMPLIA NCE OF CONDITIONS OF CLAUSE (B) OF SECTION 80IB(10), IN THE CASE OF THE ASSESSEE, THE PROJECT SIZE OF THE LAND IS ONLY 34,034 SQ.FT, WHICH IS LESS THA N 1 ACRE, I.E. 43,560 SQ.FT. THUS, THE ASSESSEE HAD FAILED ON BOTH THE ACCOUNTS, I.E. NON-FULFILLMENT OF CONDITIONS OF CLAUSE (A) AND CLAUSE(B) OF SECTION 8 0-IB(10). 3. LD CIT (A) DISMISSED THE ASSESSEES APPEAL OBSER VING THAT THOUGH THE BUILDING HAD BEEN COMPLETED BUT THE SECOND CONDITION WHICH R EQUIRED THAT THE PLOT OF LAND SHOULD BE MORE THAN 1 ACRE WAS NOT FULFILLED AS THE SIZE O F THE LAND WAS ONLY 34,034 SQ.FT, WHICH WAS LESS THAN THE CONDITION OF 1 ACRE. HE POINTED OUT THAT AS PER THE PROVISIONS OF THE ACT, THIS SCHEME SHOULD HAVE BEEN NOTIFIED BY THE CENTRA L BOARD OF DIRECT TAXES BUT THE ASSESSEE HAS NOT SUBMITTED ANY EVIDENCE TO PROVE TH AT THE SCHEME WAS NOTIFIED BY THE BOARD BEFORE THE AO AND BEFORE HIM. 4. LD COUNSEL FOR THE ASSESSEE REFERRED TO PROVISO TO CLAUSE(B) OF SUB-SECTION (10) OF SECTION 80IB, WHICH READS AS UNDER: (10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UNDE RTAKING DEVELOPING AND BUILDING HOUSE PROJECTS APPROVED BEFORE THE 31 ST DAY OF MARCH, 2007 BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING P ROJECT IF, (A). (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WH ICH 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 ACCORDANCE WITH A SC HEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMENT OF EXISTING BUILDINGS IN AREAS DECLARED TO BE SLUM ARE AS UNDER ANY LAW FOR THE TIME BEING IN FORCE AND SUCH SCHEME IS NOTIFIED BY THE B OARD IN THIS BEHALF. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS FAR A S ISSUE RELATING TO COMPLETION OF THE PROJECT IS CONCERNED, THE SAME HAS BEEN UPHELD BY L D CIT (A). HOWEVER, HE DENIED THE DEDUCTION ON THE GROUND THAT PROJECT SIZE OF THE LA ND WAS LESS THAN ONE ACRE AND, THEREFORE, THE PROJECT SHOULD HAVE BEEN COMPLETED W ITHIN THREE YEARS. LD COUNSEL SUBMITTED THAT THE SCHEME WAS UNDER THE REDEVELOPME NT OF SLUM REHABILITATION SCHEME AND, THEREFORE, AS PER THE PROVISO TO CLAUSE (B) OF SUB-SECTION (10) OF SECTION 80-IB, THE ASSESSEE WAS ENTITLED TO DEDUCTION. 4 5. LD D.R. REFERRED TO LD CIT (A)S ORDER AND POINT ED OUT THAT IN PARA 1.4 OF HIS ORDER, HE HAS CLEARLY STATED THAT THE ASSESSEE HAD NOT SUBMITTED ANY EVIDENCE TO PROVE THAT THE SCHEME WAS NOTIFIED BY THE BOARD. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORD OF THE CASE. FACTS ARE NOT DISPUTED. THE ONLY GROUND ON WHICH T HE ASSESSEE HAD BEEN DENIED DEDUCTION WAS THAT IT COULD NOT PRODUCE NECESSARY E VIDENCE TO PROVE THAT THE SCHEME WAS NOTIFIED BY THE BOARD. LD COUNSEL SUBMITTED THAT H E CAN PRODUCE NECESSARY EVIDENCE IN THIS REGARD AS THERE IS NO DISPUTE. WE, THEREFORE, AS AGREED BY BOTH THE SIDES, RESTORE THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FO R THE PURPOSE OF EXAMINING THE NECESSARY NOTIFICATION OF THE BOARD IN REGARD TO TH E SCHEME WITH REFERENCE TO WHICH, THE ASSESSEE HAD CARRIED OUT THE REDEVELOPMENT ACTIVITI ES. IN CASE THE ASSESSEE FULFILLS THE CONDITIONS AS LAID DOWN IN THE PROVISO TO CLAUSE (B ) OF SECTION 80IB(10), THEN, NO DISALLOWANCES IS CALLED FOR. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE STAN DS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ON 25 TH JUNE, 2010 SD/- (VIJAY PAL RAO) (JUDICIAL MEMBER) SD/- (S.V. MEHROTRA) (ACCOUNTANT MEMBER) MUMBAI, DATED 25 TH JUNE, 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-VIII, MUMB AI 4. COMMISSIONER OF INCOME TAX, VIII-, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH B, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI 5 DATE INITIALS 1. DRAFT DICTATED ON 28.4.2010 PS 2. DRAFT PLACED BEFORE AUTHOR 17.6.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER 6