IDEAL RELATORS, VASAI V. ITO, WARD 4(1), THANE

ITA 5799/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88260 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2005-2006
• Appeal Filed On: 26-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACCHIDANAND DUBEY
• Assessee Lawyers: SUBODH RATNAPARAKHI
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI N. K. BILLAIYA ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 5799/MUM/2013 ASSESSMENT YEAR: 2005-06 M/S. IDEAL RELATORS MARBHAT, TAMTALAO, VASAI (W), DIST. THANE 401 201 PAN:-AABFI 2230 B VS. ITO WD 4(1) ASHAR I.T. PAR, 6 TH FLOOR, B WING, ROOM NO. 22, ROAD NO. 16Z, WAGLE INDUSTRIAL ESTATE, THANE 400 604 (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI SUBODH RATNAPARAKHI REVENUE BY : SH RI SACCHIDANAND DUBEY DATE OF HEARING : 10 .02.2015 DATE OF ORDER : 13 .02.2015 O R D E R PER AMIT SHUKLA, JM: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSE E, AGAINST ORDER DATED 17.07.2013 FOR THE A.Y. 2005-06, PASSED BY LD . CIT(A)-2, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143 (3) OF THE INCOME-TAX ACT. IN THE GROUNDS OF APPEAL THE ASSESS EE HAS RAISED FOLLOWING GROUNDS:- THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANC E OF DEDUCTION U/S 80IB (10) OF THE I.T. ACT 1961 AMOUNTING TO RS. 21,71,646/-, IN RESPECT OF PROFIT FROM THE HOUSING PROJECT IDEA L GRAND MANOR AT VILLAGE GODDEO, BHAYANDER, DIST. THANE FRO THE R EASON THAT COMMERCIAL ESTABLISHMENTS OF 2014.52 SQ. FEET AREA EXISTED IN THE SAID HOUSING PROJECT. ITA NO. 5799/MUM/2013 ASSESSMENT YEAR: 2005-06 2 THE LD. CIT(A) ERRED IN NOT FOLLOWING THE BINDING D ECISION OF THE HON. BOMBAY HIGH COURT IN T CASE OF CIT VS. BRAHMA ASSOCIATES, 333 ITR 289 (2011) (BOM) AS PER WHICH THE APPELLANT WAS FULLY ENTITLED FOR DEDUCTION U/S 80IB (10) OF THE I.T. AC T 1961. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A P ARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER. D URING THE YEAR THE ASSESSEE AS UNDERTAKEN A PROJECT, GRAND MANOR IDEAL PARK, CONSISTING OF SIX WINGS AND TWO ROW HOUSES. THE PROJECT CONSIST O F GROUND + 4 FLOORS SITUATED AT VILLAGE GODDEO, BHAYANDER. THE PROJECT WAS APPROVED BY MIRA BHAYANDAR MUNICIPAL CORPORATION VIDE COMMENCEM ENT CERTIFICATE DATED 04.02.2003. THE ASSESSEE HAS CLAIMED EXEMPTIO N OF ITS PROFIT OF RS.21,71,646/- ON ACCOUNT OF EXEMPTION U/S 80IB(10) . IN THE FIRST GROUND OF PROCEEDINGS, THE ISSUE OF DISALLOWANCE OF DEDUCTION U/S 80IB(10) HAD REACHED TO THE STAGE OF ITAT, WHEREIN THE TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH IN LINE OF THE DECISION OF THE SPECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES VS. JCIT REPORTED IN (2009) 119 ITD 255 (PUNE)(SB). IN THE SET ASIDE PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT TH E DECISION OF THE SPECIAL BENCH HAS NOT REACHED FINALITY AS THE DEP ARTMENT HAS PREFERRED ON APPEAL BEFORE THE HONBLE HIGH COURT. HE DEPUTED INCOME TAX INSPECTOR (ITI) FOR INSPECTION AND RECEIVED INFORMA TION THAT IN THE 6 BUILDINGS CONSTRUCTED BY THE ASSESSEE, THERE ARE 22 NUMBER OF SHOPS HAVING A TOTAL AREA OF 3640 SQ. FT. AND THEREFORE, HE WAS OF THE OPINION THAT ASSESSEES PROJECT CANNOT BE HELD TO THE HOUSI NG PROJECT, BECAUSE THE TOTAL AREA OF SHOPS EXCEEDED THE PERMISSIBLE LI MIT OF 2000 SQ. FT. ACCORDINGLY, HE DISALLOWED THE CLAIM OF DEDUCTION U /S 80IB(10) OF RS.21,71,646/- ITA NO. 5799/MUM/2013 ASSESSMENT YEAR: 2005-06 3 3. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED TH AT THE SAID HOUSING PROJECT WAS APPROVED BY MIRA BHAYANDER MUNI CIPAL CORPORATION ON 04.02.2003 TO BE DEVELOPED BY THE ASSESSEE IN TH E FOLLOWING MANNER:- AREA OF RESIDENTIAL UNITS 4551.37 SQ. MTRS AREA OF SHOPS 188.80 SQ. MTRS TOTAL 4740.17 SQ. MTRS THUS, IT WAS SUBMITTED THAT THE COMMERCIAL UNIT WAS ONLY 3.98% OF THE TOTAL PROJECT AREAS. IT WAS ALSO POINTED OUT THAT T HE DECISION OF SPECIAL BENCH HAS NOW BEEN SETTLED BY THE HONBLE BOMBAY HI GH COURT IN THE CASE OF CIT VS. BRAHMA ASSOCIATES (2011) 333 ITR 298 (BOM). HOWEVER, THE LD. CIT(A) HELD THAT THE DIRECTION OF THE TRIBU NAL WAS TO FOLLOW THE DECISION OF SPECIAL BENCH. IN THE SAID DECISION, TH E ITAT HAS CLARIFIED THAT CLAUSE (D) OF U/S 80IB(10) HAS NO RETROSPECTIV E APPLICATION AS IT APPLIED ONLY W.E.F. A.Y. 2005-06. SINCE THE AMENDED PROVISION IN THIS REGARD RELATING TO MAXIMUM PERMISSIBLE LIMIT OF 20 00 SQ. FT. ON 5% OF THE TOTAL AREA WHICHEVER IS LESS, IS APPLICABLE FRO M 01.04.2005 I.E. A.Y. 2005-06. ACCORDINGLY, HE CONFIRMED THE ORDER OF THE AO. 4. BEFORE US, LEARNED COUNSEL SUBMITTED THAT, THIS ISSUE IS NOT ONLY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COUR T IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) BUT ALSO BY THE LATEST HI GH COURT DECISION IN THE CASE OF CIT VS. HAPPY HOME ENTERPRISES REPORTED IN (2014) 5 1 TAXMAN.COM 281 (BOM) WHEREIN IT WAS HELD THAT AMENDMENT TO U/S 80IB(10) RELATING TO RESTRICTION OF THE COMMERCIAL AREAS WAS PROSPECTIVE IN NATURE AND WOULD NOT APPLY TO HOUSING PROJECTS W HICH ARE APPROVED PRIOR TO 31.03.2005. HERE-IN-THIS CASE, ADMITTEDLY THE HOUSING PROJECT WAS APPROVED MUCH PRIOR TO 31.03.2005 I.E. ON 04.02 .2003. THEREFORE, ITA NO. 5799/MUM/2013 ASSESSMENT YEAR: 2005-06 4 THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF T HE HONBLE JURISDICTIONAL HIGH COURT. 5. LD. DR ALSO ADMITTED THAT ON THE FACTS OF THE PR ESENT CASE THE ISSUE INVOLVED IS SQUARELY COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER. THE SOLE GROUN D FOR THE ACCEPTING THE CLAIM OF DEDUCTION U/S 80IB (10) RAISED BY THE LD. CIT(A) WAS ON THE INTERPRETATION OF SPECIAL BENCH DECISION THAT CLAUS E D OF SUB SECTION 10 OF SECTION 80IB GIVING THE LIMIT OF THE COMMERCIAL AREA HAS BEEN BROUGHT INTO FORCE W.E.F. 01.04.2005 AND THE ASSESSEES CAS E BEING FOR A.Y. 2005-06 AND THEREFORE, ASSESSEES CASE IS SQUARELY HIT BY THE LIMITATION PROVIDED IN THE SAID CLAUSE. IN THIS CASE IT IS AN ADMITTED FACT THAT THE APPROVAL OF THE HOUSING PROJECT BY THE MUNICIPAL CO RPORATION WAS OBTAINED ON 04.02.2003 I.E. MUCH PRIOR TO 31.03.200 5. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HA PPY HOME ENTERPRISING (SUPRA) HAS HELD THAT THE AMENDMENT BROUGHT W.E.F. 01.04.2005 PUTTING RESTRICTION OF QUANTUM OF COMMERCIAL AREA THAT COUL D BE INCLUDED IN THE HOUSING PROJECT, IS PROSPECTIVE IN NATURE AND WILL NOT APPLY TO HOUSING PROJECTS THAT WERE APPROVED BEFORE 31.03.2005. THE RELEVANT REASONING GIVEN BY THE HONBLE HIGH COURT IN THIS REGARD IS A S UNDER:- 35. HOWEVER, THE PROVISIONS OF SECTION 80-IB(10) WE RE SUBSTANTIALLY AMENDED BY WAY OF FINANCE (NO.2) ACT, 2004 W.E.F. 1ST APRIL, 2005. AS CAN BE NOTED FROM THE AMENDED P ROVISIONS, THERE WERE SEVERAL CONDITIONS THAT WERE IMPOSED IN THE NEWLY SUBSTITUTED SECTION 80-IB(10) THAT WERE ABSENT IN T HE SAID SECTION PRIOR TO ITS AMENDMENT. ONE SUCH CONDITION INSERTED W.E.F. 1ST APRIL, 2005 WAS CLAUSE (D) THAT PUT A RESTRICTION O N THE QUANTUM OF COMMERCIAL AREA THAT COULD BE INCLUDED IN A HOUS ING PROJECT IN ORDER TO ENTITLE THE ASSESSEE TO CLAIM THE DEDUCTIO N AS SET OUT IN ITA NO. 5799/MUM/2013 ASSESSMENT YEAR: 2005-06 5 THE SAID SECTION. IT IS PERTINENT TO NOTE THAT IN T HE APPEALS BEFORE US, IT IS AN ADMITTED FACT THAT THE HOUSING PROJECT S WERE APPROVED PRIOR TO 31ST MARCH, 2005. IN ITXA NO.308 OF 2012, IN FACT, THE PROJECT WAS EVEN COMPLETED PRIOR TO 31 ST MARCH, 2005 AN ONLY THE PROFITS WERE OFFERED TO TAX IN A.Y. 2005-06. WE DO NOT THINK THAT THE LEGISLATURE INTENDED TO GIVE ANY RETROSPECTIVIT Y TO CLAUSE (D) OF SECTION 80-IB(10) THIS MORE SO BECAUSE IT IS CLE ARLY A CONDITION THAT RELATES TO AND/OR IS LINKED WITH THE APPROVAL AND CONSTRUCTION OF THE HOUSING PROJECT. AT THE TIME WHEN THE HOUSIN G PROJECT IS APPROVED BY THE LOCAL AUTHORITY, IT DECIDES, SUBJEC T TO ITS OWN RULES AND REGULATIONS, WHAT QUANTUM OF COMMERCIAL A REA IS TO BE INCLUDED IN THE SAID PROJECT. IT IS ON THIS BASIS T HAT BUILDING PLANS ARE APPROVED BY THE LOCAL AUTHORITY AND CONSTRUCTIO N IS COMMENCED AND COMPLETED. IT IS VERY DIFFICULT, IF N OT IMPOSSIBLE TO CHANGE THE BUILDING PLANS AND/OR ALTER CONSTRUCTION MIDWAY, IN ORDER TO COMPLY WITH CLAUSE (D) OF SECTION 80-IB(10 ). IT WOULD BE HIGHLY UNFAIR TO REQUIRE AN ASSESSEE TO COMPLY WIT H SECTION 80- IB(10)(D) WHO HAS GOT HIS HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY, BEFORE 31 ST MARCH 2005 AND HAS EITHER COMPLETED THE SAME BEFORE THE SAID DATE OR EVEN SHORTLY THEREAFTE R, MERELY BECAUSE THE ASSESSEE HAS OFFERED ITS PROFITS TO TAX IN A.Y. 2005- 06 OR THEREAFTER. REQUIRING THE ASSESSEE Y WITH THE CONDITION SET OUT IN CAUSE (D) OF SUB-SECTION (10) OF SECTION 80- IB MERELY BECAUSE HE HAS OFFERED HIS PROFITS TO TAX IN A.Y. 2 005-06 OR THEREAFTER, EVEN THOUGH HIS HOUSING PROJECT WAS APP ROVED BEFORE 31 ST MARCH 2005, WOULD BE REQUIRING THE ASSESSEE TO VIR TUALLY DO A HUMANLY IMPOSSIBLE TASK. THIS, IN OUR OPINION, COUL D NEVER HAVE BEEN THE INTENTION OF THE LEGISLATURE. IN FACT, TO OUR MIND, IT WOULD RUN COUNTER TO THE VERY OBJECT FOR WHICH THES E PROVISIONS WERE INTRODUCED, NAMELY TO TACKLE THE SHORTAGE OF H OUSING IN THE COUNTRY AND ENCOURAGE INVESTMENT THEREIN BY PRIVATE PLAYERS. IT IS THEREFORE CLEAR THAT CLAUSE (D) OF SUB-SECTION ( 10) OF SECTION 80-IB CANNOT HAVE ANY APPLICATION TO HOUSING PROJEC TS THAT ARE APPROVED BEFORE 31 ST MARCH, 2005. THE SAID CLAUSE (D) BEING INEXTRICABLY LINKED TO THE DATE OF APPROVAL OF THE HOUSING PROJECT, IT WILL HAVE TO BE HELD THAT THE SAID CLAUSE OPERAT ES ONLY PROSPECTIVELY I.E. FOR HOUSING PROJECTS APPROVED AF TER 1ST APRIL, 2005. THIS IS NOTWITHSTANDING THE FACT THAT THE PRO FITS WERE OFFERED TO TAX BY THE ASSESSEE FOR THE AY. 2005-06 OR THEREAFTER. 36. THERE IS YET ANOTHER REASON FOR COMING TO THE A FORESAID CONCLUSION. TAKE A SCENARIO WHERE AN ASSESSEE FOLLO WING THE PROJECT COMPLETION METHOD OF ACCOUNTING, HAS COMPLE TED THE HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY COM PLYING WITH ALL THE CONDITIONS AS SET OUT IN SECTION 80-IB(10) AS I T STOOD PRIOR TO ITA NO. 5799/MUM/2013 ASSESSMENT YEAR: 2005-06 6 1 ST APRIL, 2005. IF WE WERE TO ACCEPT THE ARGUMENT OF THE REVENUE, THEN IN THAT EVENT, DESPITE HAVING COMPLET ED THE ENTIRE CONSTRUCTION PRIOR TO 1 ST APRIL, 2005 AND COMPLYING WITH ALL THE CONDITIONS OF SECTION 80-IB(10) AS IT STOOD THEN, T HE ASSESSEE WOULD BE DISENTITLED TO THE ENTIRE DEDUCTION CLAIME D IN RESPECT OF SUCH HOUSING PROJECT MERELY BECAUSE HE OFFERED HIS PROFITS TO TAX IN THE AY. 2005-06. IN CONTRAST, IF THE SAME ASSESS EE HAD FOLLOWED THE WORK-IN-PROGRESS METHOD OF ACCOUNTING, HE WOULD HAVE BEEN ENTITLED TO THE DEDUCTION UNDER SECTION 8 0-IB(10) UPTO THE AY. 2004-05, AND DENIED THE SAME FROM AY. 2005- 06 AND THEREAFTER. IT COULD NEVER HAVE BEEN THE INTENTION OF THE LEGISLATURE THAT THE DEDUCTION UNDER SECTION 80-IB( 10) AVAILABLE TO A PARTICULAR ASSESSEE WOULD BE DETERMINED ON THE BASIS OF THE ACCOUNTING METHOD FOLLOWED. THIS, TO OUR MIND AND A S RIGHTLY SUBMITTED BY MR MISTRY WOULD LEAD TO STARTLING RESU LTS. WE THEREFORE HAVE NO HESITATION IN HOLDING THAT SECTIO N 80-IB(10)(D) IS PROSPECTIVE IN NATURE AND CAN HAVE NO APPLICATIO N TO A HOUSING PROJECT THAT IS APPROVED BEFORE 31ST MARCH, 2005. A S THE DEDUCTION SOUGHT TO BE CLAIMED UNDER SECTION 80-IB( 10) IS INSEPARABLY LINKED WITH THE DATE OF APPROVAL OF THE HOUSING PROJECT, IT WOULD MAKE NO DIFFERENCE IF THE CONSTRU CTION OF THE SAID PROJECT WAS COMPLETED ON OR AFTER 1 ST APRIL, 2005 OR THAT THE PROFITS WERE OFFERED TO TAX AFTER 1ST APRIL, 2005 I .E. IN AY. 2005-06 OR THEREAFTER. WE THEREFORE FIND NO SUBSTANCE IN TH E ARGUMENT OF THE REVENUE THAT NOTWITHSTANDING THE FACT THAT THE HOUSING PROJECT WAS APPROVED PRIOR TO 31 ST MARCH 2005, IF THE CONSTRUCTION WAS COMPLETED ON OR AFTER 1 ST APRIL, 2005 OR IF THE PROFITS ARE BROUGHT TO TAX IN THE A.Y. 2005-06 OR THEREAFTER, T HE SAID HOUSING PROJECT WOULD HAVE TO COMPLY WITH THE PROVISIONS OF CLAUSE (D) OF SECTION 80-IB(10). TO OUR MIND, WE DO NOT THINK THA T THE CONDITION/RESTRICTION LAID DOWN IN CLAUSE (D) OF SE CTION 80-IB(10) HAS TO BE REVISITED AND/OR LOOKED AT AND COMPLIED W ITH IN THE ASSESSMENT YEAR IN WHICH THE PROFITS ARE OFFERED TO TAX BY THE ASSESSEE. WHEN THE ASSESSEE CLAIMS A DEDUCTION UNDE R SECTION 80- IB(10), THE ASSESSEE IS REQUIRED TO COMPLY WITH SUCH A CONDITION ONLY IF IT IS ON THE STATUTE-BOOK ON THE DATE OF THE APPROVAL OF THE HOUSING PROJECT AND IT HAS NOTHING TO DO WITH THE YEAR IN WHICH THE PROFITS ARE BROUGHT TO TAX BY THE ASSESSEE. WE HAVE COME TO THIS CONCLUSION ONLY BECAUSE WE FMD TH AT CLAUSE (D) OF SECTION 80-IB(10) IS INEXTRICABLY LINKED TO THE DATE OF THE APPROVAL OF THE HOUSING PROJECT AND THE SUBSEQUENT DEVELOPMENT/CONSTRUCTION OF THE SAME, AND HAS NOTHI NG TO DO WITH THE PROFITS DERIVED THERE FROM. WE MAY HASTEN TO ADD THAT IF A PARTICULAR CONDITION IS NOT INSEPARABLY LINKED TO THE DATE OF ITA NO. 5799/MUM/2013 ASSESSMENT YEAR: 2005-06 7 APPROVAL OF THE HOUSING PROJECT, DIFFERENT CONSIDER ATIONS WOULD ARISE. HOWEVER, WE ARE NOT CALLED UPON TO DECIDE AN Y SUCH CONDITION AND HENCE WE ARE NOT LAYING DOWN ANY GENE RAL PROPOSITION OF LAW, SAVE AND EXCEPT THAT CLAUSE (D) OF SECTION 80- IB(10) BEING A CONDITION LINKED TO THE DATE OF THE APPROVAL OF THE HOUSING PROJECT, WOULD NOT APPLY TO ANY HOUSING PRO JECT THAT WAS APPROVED PRIOR TO 31 ST MARCH, 2005 IRRESPECTIVE OF THE FACT THAT THE PROFITS OF THE SAID HOUSING PROJECT ARE BROUGHT TO TAX AFTER THE SAID PROVISION WAS BROUGHT INTO FORCE. THUS, RESPECTIVELY FOLLOWING DECISION OF HONBLE HI GH COURT WE HOLD THAT ASSESSEE IS LIABLE FOR DEDUCTION U/S 80IB FOR THE AMOUNT OF RS.21,71,646/-. ACCORDINGLY, GROUND RAISED BY THE A SSESSEE IS ALLOWED. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF FEBRUARY, 2015. SD/- SD/- (N.K. BILLAIYA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 13.02.2015 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR I BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.