ITO WD 2(1), THANE V. CHHEDA HOUSING, THANE

ITA 5885/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9406 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 04-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: SUBODH RATNAPARKHI
• Section: 143(3); 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO. 5884/MUM/2013 (A.Y.2003-04) ITA NO. 5885/MUM/2013 (A.Y.2004-05) INCOME TAX OFFICER WARD 2(3), ROOM NO.13, B WING, 6 TH FLOOR, ASHAR IT PARK , WAGLE INDL. ESTATE, NEAR AMBIKA NAGAR THANE (W) (APPELLANT ) VS. M/S. CHHEDA HOU SING 366, PUBLIC-104, SHANTI NAGAR SECTOR-1, MIRA ROAD(E), THANE. GIR NO./PAN : AABFC 9831 G (RESPONDENT) APPELLANT BY : SHRI NEIL PHILIP RESPONDENT BY : SHRI SUBODH RATNAPARKHI DATE OF HEARIN G : 18 /02/2015 DATE OF PRONOUNCEMENT : 25 /02/2015 ORDER PER CHANDRA POOJARI, A.M: THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST D IFFERENT ORDERS OF CIT(A) BOTH DATED 18/07/2013 FOR THE ASSESSMENT YEAR 200 3-04 AND 2004-05. THE ISSUE IN BOTH THE APPEALS IS COMMON IN NATURE, HENCE THESE T WO APPEALS ARE CLUBBED TOGETHER, HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE COMMON GROUNDS IN THESE TWO APPEALS ARE WITH REGARD TO DELETING THE DISALLOWANCE MADE BY AO UNDER SECTION 80IB(10) OF T HE ACT. THOUGH THE ASSESSEE PROJECT COULD NOT BE TREATED AS HOUSING PROJECT S INCE IT CONSISTED OF COMMERCIAL AREA 2 ITA NO.5884 & 5885/M/13 AS PART OF THE SAID PROJECT. THE FACTS OF THE CASE RELEVANT TO THE ISSUE AS NARRATED IN ASSESSMENT YEAR 2003-04 IS AS FOLLOWS :- 2.1 THE ASSESSEE FILED ITS RETURN OF INCOME ORIGIN ALLY ON 27/11/2003 SHOWING NET PROFIT AT RS. 24,66,508/- FROM THE HOUSING PROJECT. THE ASSES SEE BIFURCATED THE NET PROFIT PERTAINING TO THE FLATS AND SHOPS AND WORKED OUT A NET PROFIT OF RS. 17,86,162/- DERIVED FROM THE SALE OF FLATS AND CLAIMED DEDUCTIO N U/S. 80IB(10) TO THIS EXTENT. THE A.O. AFTER SCRUTINY O F THE CASE OF ASSESSEE PASSED AN ORDER U/S. 143(3) ON 28/02/2005 BY ALLOWING DEDUCTION CLAIMED U/S. 80IB(10) AT RS. 17,10,598/- BY PARTIALLY MODIFYING THE SAME DUE TO PROPORTIONATELY MORE PROFIT FROM SH OPS AND OTHER INCOMES. SUBSEQUENTLY, THE AO NOTICED THAT HOUSING PROJECT O F THE ASSESSEE WAS NOT PURELY A HOUSING PROJECT AS IT CONTAINED COMMERCIAL PORTION ALSO AND HENCE HE WAS OF THE VIEW THAT THE DEDUCTION U/S.80IB(10) WAS ERRONEOUSLY ALL OWED VIDE ORDER DT. 28/02/2005. THUS, HE ISSUED NOTICE U/S. 148 ON 24/01/2008. IN O RDER TO COMPLETE THE PROCEEDINGS U/S. 148, THE A.O. ISSUED VARIOUS NOTICES AND CALLE D FOR THE DETAILS. IN RESPONSE TO THE NOTICES ISSUED, THE ASSESSEE HAS SUBMITTED THAT DUR ING THE YEAR UNDER CONSIDERATION THE TOTAL INCOME OF THE PROJECT WAS BIFURCATED BETWEEN PROFIT FROM FLATS AND SHOPS, RESPECTIVELY, AT RS.17,86,162/- AND RS.6,85,760/- A ND THE DEDUCTION HAD BEEN CLAIMED ONLY ON THE PROFIT DERIVED FROM SALE OF FLATS. IT W AS FURTHER SUBMITTED THAT THERE IS NO RESTRICTION ON THE CONSTRUCTION OF SHOPS AS PER THE PROVISIONS OF ACT PRIOR TO AMENDMENT WITH EFFECT FROM A.Y. 2005- 06. THE ASSESSEE RELIED UPON THE DECISION OF HON'BLE ITAT, MUMBAI DT. 02/01/2007 IN THE CASE OF SHRI. HARSHAD P. DOSHI, A.Y. 2002-03 WHEREIN 100% DEDUCTION U/S. 80IB(10) WAS ALLOWED SINCE THE PROJECT WAS APPROVED BY LOCAL AUTHORITY AS A HOUSING PROJECT EVEN THOUGH IT COMPR ISED OF SOME SHOPS. IT WAS ALSO SUBMITTED BEFORE THE A.O. THAT THE PROJECT OF ASSES SEE HAS BEEN APPROVED AS A HOUSING PROJECT WHICH INCLUDES CERTAIN SHOPS, BY THE LOCAL AUTHORITY I.E. MIRA BHAYANDER MUNICIPAL CORPORATION. SINCE THERE WAS NO DISPUTE R EGARDING OTHER CONDITIONS PRESCRIBED U/S. 80IB(10), IT WAS PLEADED THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION U/S. 80IB(10) WHICH WAS ALLOWED BY THE A.O. AT THE TIME OF ORIGINAL ASSESSMENT ORDER AFTER DUE INQUIRY AND VERIFICATION. 3 ITA NO.5884 & 5885/M/13 2.2 AFTER CONSIDERING THE SUBMISSION OF THE ASSESS EE, THE A.O. POINTED OUT THAT THE AREA OF SHOPS SOLD WAS MORE THAN 2,000 SQ.FT. AND A S PER THE AMENDED PROVISIONS OF SECTION 80IB(10) W.E.F. 01/04/2005, THE BUILT UP AR EA OF SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS IN A HOUSING PROJECT SHOULD NOT EXCE ED 5% OF THE AGGREGATE BUILT UP AREA OF THE PROJECT OR 2,000 SQ,FT, WHICHEVER IS LE SS. HOWEVER, IN THE INSTANT CASE THE AREA OF THE SHOPS CONSTRUCTED AND SOLD IS MORE THAN 2,000 SQ.FT. AND HENCE THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S. 80 I B(10). THE A.O. ALSO NOTICED THAT SINCE THE BUILT UP AREA OF SHOPS CONSTRUCTED EXCEED ED 2,000 SQ.FT., THE ASSESSEE HAS WITHDRAWN CLAIM MADE U/S. 80 I B(10) IN A.Y. 2005-06. 2.3. FURTHER, HE OBSERVED THAT THE WORD 'HOUSING PROJECT' HAS NOT BEEN DEFINED EITHER IN THE INCOME-TAX ACT OR THE DEVELOPMENT CON TROL RULES OF THE LOCAL AUTHORITY. THEREFORE, FOR THE PURPOSES OF DEDUCTION U/S. 80 I B(10), THE LEGISLATIVE INTENTION SHOULD BE CONSIDERED WHICH CERTAINLY WAS TO PROMOTE RESIDE NTIAL HOUSING FOR THE PEOPLE. SINCE THIS BASIC CONDITION WAS NOT FULFILLED BY THE ASSES SEE, THE DEDUCTION U/S. 801B(10) CANNOT BE ALLOWED. THE A.O. WHILE DISALLOWING DEDUC TION U/S. 801B(10) HAS ALSO RELIED UPON THE DECISION OF THE HON'BLE ITAT, MUMBAI IN TH E CASE OF M/S. LAUKIK DEVELOPERS CONTAINED IN ITA NO. 532/M/06 (A.Y. 2002-03) WHEREIN DISALLOWANCE MA DE U/S. 80 I B(10) ON THE GROUND OF COMMERCIAL AREA WAS UPHELD. IT WAS ALSO HELD IN THAT CASE THAT THERE IS NO PROVISION FOR PROPORTIONATE DEDUCTION U/S. 80 I B(10). REFERRING TO THE AMENDMENTS BROUGHT IN WITH EFFECT FROM 01/04/2005 SPECIFYING T HE LIMITS OF COMMERCIAL AREA, THE A.O. FURTHER HELD THAT PRIOR TO THIS AMENDMENT A HO USING PROJECT CONSTRUCTING RESIDENTIAL BUILDING ONLY WILL BE CONSIDERED FOR THE PURPOSES O F DEDUCTION U/S. 80 I B(10). SINCE THE CASE OF ASSESSEE IS FOR A.Y. 2003-04, THE AMENDED P ROVISIONS PERMITTING COMMERCIAL AREA ARE NOT APPLICABLE. ACCORDINGLY, THE DEDUCTION CLAIMED BY THE ASSESSEE WAS DISALLOWED AND THE TOTAL NET PROFIT OF RS . 24,66,508/- WAS ASSESSED FOR THE TAXATION PURPOSES. 4 ITA NO.5884 & 5885/M/13 3. HOWEVER, THE CIT(A) PLACED RELIANCE ON THE JUDGM ENT OF DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES VS. JCIT (BOM). (333 ITR 289) AND OBSERVED THAT THERE WAS NO RESTRICTION ON THE C OMMERCIAL PORTION IN THE HOUSING PROJECT IF THE PROJECT WAS APPROVED BY LOCAL AUTHOR ITY PRIOR TO 1/4/2005. SINCE THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2003-04, THE AMENDED PROVISIONS OF SECTION 80IB(10) ARE NOT APPLICABLE IN THE CASE OF THE ASSE SSEE AND HENCE, THE ASSESSEE SHALL BE ENTITLED TO CLAIM PROPORTIONATE DEDUCTION UNDER SECTION 80IB(10) RELATING TO THE RESIDENTIAL PORTION OF THE HOUSING PROJECT AND THE CIT(A) DIRECTED THE AO TO ALLOW DEDUCTION UNDER SECTION 80IB(10) OF THE ACT. AGAIN THE REVENUE IS IN APPEAL BEFORE US FOR BOTH YEARS. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN OUR OPINION THE ISSUE IS SQUARELY COVERED BY THE DECISI ON OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES (333 ITR 289) SUPRA, WHEREIN IT WAS HELD AS UNDER :- 30 IN THE RESULT, THE QUESTIONS RAISED IN THE APPE AL ARE ANSWERED THUS;- (A) UPTO 31.3.2005 (SUBJECT TO FULFILLING OTHER CONDITI ONS), DEDUCTION UNDER SECTION 801B(10) IS ALLOWABLE TO HOUSING PROJECTS A PPROVED BY THE LOCAL AUTHORITY HAVING RESIDENTIAL UNITS WITH COMMERCIAL USER TO THE EXTENT PERMITTED UNDER THE DC RULES/REGULATIONS FRAMED BY THE RESPECTIVE LOCAL AUTHORITY. (B) IN SUCH A CASE, WHERE THE COMMERCIAL USER PERMITTE D BY THE LOCAL AUTHORITY IS WITHIN THE LIMITS PRESCRIBED UNDER THE DC RULES /REGULATION, THE DEDUCTION UNDER SECTION 80IB(10) UPTO 31.3.2005 WOULD BE ALLOWABLE IRRESPECTIVE OF THE FACT THAT THE PROJECT IS APPROV ED AS 'HOUSING PROJECT' OR 'RESIDENTIAL PLUS COMMERCIAL'. (C) IN THE ABSENCE OF ANY PROVISIONS UNDER THE INCOME TAX ACT, THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT UPTO 31.3.2005 DE DUCTION UNDER SECTION 80IB(10) WOULD BE ALLOWABLE TO THE PROJECTS APPROVE D BY THE LOCAL AUTHORITY HAVING RESIDENTIAL BUILDING WITH COMM ERCIAL USER UPTO 10% OF THE TOTAL BUILT-UP AREA OF THE PLOT. (D) SINCE DEDUCTIONS UNDER SECTION 80 I B(10) IS ON THE PROFITS DERIVED FROM THE HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORIT Y AS A WHOLE, THE TRIBUNAL WAS NOT JUSTIFIED IN RESTRICTING SECTION 8 0 IB (10) DEDUCTION ONLY TO A PART OF THE PROJECT. HOWEVER, IN THE PRESENT CASE , SINCE THE ASSESSEE HAS ACCEPTED THE DECISION OF THE TRIBUNAL IN ALLOWI NG SECTION 80 IB(10) DEDUCTION TO A PART OF THE PROJECT, WE DO NOT DISTU RB THE FINDINGS OF THE TRIBUNAL IN THAT BEHALF. 5 ITA NO.5884 & 5885/M/13 (E) CLAUSE (D) INSERTED TO SECTION 801B(10) WITH EFFEC T FROM 1.4.2005 IS PROSPECTIVE AND NOT RETROSPECTIVE AND HENCE CANNOT BE APPLIED FOR THE PERIOD PRIOR TO 1.4.2005. 4.1 FURTHER SAME VIEW WAS TAKEN BY HON'BLE BOMBAY H IGH COURT IN THE CASE OF CIT VS. HAPPY HOME ENTERPRISES (271 CTR 524) (BOM.); [20 14] 51 TAXMANN.COM 281(BOMBAY) WHEREIN IT WAS HELD THAT : THE ESSENTIAL QUESTION THAT IS REQUIRED TO BE DECI DED IS WHETHER SECTION 80-IB(10)(D) WHICH WAS BROUGHT INTO FORCE WITH EFFECT FROM 1-4-2 005 WOULD APPLY TO PROJECTS THAT WERE APPROVED BY THE LOCAL AUTHORITY PRIOR TO IT BEING B ROUGHT ON THE STATUTE BOOK. OR TO PUT IT DIFFERENTIALLY, THE ESSENTIAL QUESTION IS WHETHER T HE SAID CLAUSE HAS TO BE COMPLIED WITH BY AN ASSESSEE WHO OFFERS HIS PROFITS TO TAX I N ASSESSMENT YEAR 2005-06 OR THEREAFTER, EVEN THOUGH HIS HOUSING PROJECT WAS ACC ORDED APPROVAL BY THE LOCAL AUTHORITY BEFORE 3 1-3-2005. [PARA 33] THE PROVISIONS OF SECTION 80-I13(10) WERE SUBSTANTI ALLY AMENDED BY WAY OF THE FINANCE (NO. 2) ACT, 2004 WITH EFFECT FROM 1-4-2005 . AS CAN BE NOTED FROM THE AMENDED PROVISIONS, THERE WERE SEVERAL CONDITIONS T HAT WERE IMPOSED IN THE NEWLY SUBSTITUTED SECTION 80-I13(10) THAT WERE ABSENT IN THE SAID SECTION PRIOR TO ITS AMENDMENT. ONE SUCH CONDITION INSERTED WITH EFFECT FROM 1-4-2005 WAS CLAUSE (D) THAT PUT A RESTRICTION ON THE QUANTUM OF COMMERCIAL AREA THAT COULD BE INCLUDED IN A HOUSING PROJECT IN ORDER TO ENTITLE THE ASSESSEE TO CLAIM THE DEDUCTION AS SET OUT IN THE SAID SECTION. IT IS PERTINENT TO NOTE THAT IN THE A PPEALS, IT IS AN ADMITTED FACT THAT THE HOUSING PROJECTS WERE APPROVED PRIOR TO 31-3-2005. IT CANNOT BE THOUGHT THAT THE LEGISLATURE INTENDED TO GIVE ANY RETROSPECTIVITY TO CLAUSE (D) OF SECTION 80-I13(10). THIS MORE SO BECAUSE IT IS CLEARLY A CONDITION THAT RELATES TO AND/OR IS LINKED WITH THE APPROVAL AND CONSTRUCTION OF THE HOUSING PROJECT. I T WOULD BE HIGHLY UNFAIR TO REQUIRE AN ASSESSEE TO COMPLY WITH SECTION 80-IB(10)(D) WHO HA S GOT HIS HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY, BEFORE 3 1-3-2005 AND HAS EITHER COMPLETED THE SAME BEFORE THE SAID DATE OR EVEN SHORTLY THEREAFTER, ME RELY BECAUSE THE ASSESSEE HAS OFFERED ITS PROFITS TO TAX IN ASSESSMENT YEAR 2005- 06 OR THEREAFTER. THIS, COULD NEVER HAVE BEEN THE INTENTION OF THE LEGISLATURE. IN FACT , IT WOULD RUN COUNTER TO THE VERY OBJECT FOR WHICH THESE PROVISIONS WERE INTRODUCED, NAMELY TO TACKLE THE SHORTAGE OF HOUSING IN THE COUNTRY AND ENCOURAGE INVESTMENT THEREIN BY PRI VATE PLAYERS. IT IS THEREFORE CLEAR THAT CLAUSE (D) OF SUB-SECTION (10) OF SECTION 80-L B CANNOT HAVE ANY APPLICATION TO HOUSING PROJECTS THAT ARE APPROVED BEFORE 3 1-3-200 5. 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 OPERATES ONLY PROSPECTIVE LY I.E. FOR HOUSING PROJECTS APPROVED AFTER 1-4-2005. THIS IS NOTWITHSTANDING TH E FACT THAT THE PROFITS WERE OFFERED TO TAX BY THE ASSESSEE FOR THE ASSESSMENT Y EAR 2005-06 OR THEREAFTER. [PARA 35] THUS, CLAUSE (D) OF SECTION 80-IB(10) IS PROSPECTIV E IN NATURE AND WOULD NOT APPLY TO HOUSING PROJECTS APPROVED PRIOR TO 31-3-2005. [PARA 42] IN VIEW OF DISCUSSION AND FINDINGS, BOTH SUBSTANTIA L QUESTIONS OF LAW RAISED IN THESE 6 ITA NO.5884 & 5885/M/13 APPEALS IS ANSWERED IN THE AFFIRMATIVE, THAT IS IN FAVOUR OF THE ASSESSEES AND AGAINST THE REVENUE. [PARA 50] 4.2 RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS OF T HE HON'BLE BOMBAY HIGH COURT WE INCLINE TO DISMISS THE GROUND TAKEN BY THE REVEN UE IN BOTH THE APPEALS. 5. IN THE RESULT, REVENUE APPEAL IN ITA NO.5884/13 AND 5885/13 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/02/2015 !' # $%& 25/02/2015 ! ' SD/- SD/- ( . . / I.P. BANSAL) ( / CHANDRA POOJARI ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; $% DATED 25/02/2015 . % . ./JV, SR. PS )*+ )*+ )*+ )*+ ,+'* ,+'* ,+'* ,+'* / COPY OF THE ORDER FORWARDED TO : 1 . -. / THE APPELLANT 2. )/-. / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. +1' )*% , , / DR, ITAT, MUMBAI 6. '2 3 / GUARD FILE. % % % % / BY ORDER, /+* )* //TRUE COPY// 4 44 4 / 5 5 5 5 6 6 6 6 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI.