ITO WD 2(3), KALYAN V. RAJANI DEVELOPERS, AMBERNATH

ITA 591/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3617 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-05-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 30-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUPINDER BRAR
• Assessee Lawyers: MADHAV M MANDGAONKAR

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . , . ! , '# ' $ BEFORE SHRI I.P. BANSAL, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NO. 590,591& 592/MUM/2012 ( % % % % & & & & / ASSESSMENT YEARS : 2005-06, 2007-08 &2008-09 INCOME TAX OFFICER, WARD 2(3), 2 ND FLOOR, RANI MANSION, MURBAD ROAD, KALYAN (W)- 421 301 % % % % / VS. M/S. RAJNI DEVELOPERS, PLOT NO.26, PRASHANT BUILDING, DALALS OFFICE, SURYODAYA SOCIETY, NEAR CHILE HOSPITAL, AMBERNATH EAST- 421 501 DIST. THANE,MAHARASHTRA. ' '# ./ ( ./ PAN/GIR NO. : AAGFR 9160C ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ') , ' / APPELLANT BY: SHRI RUPINDER BRAR *+') - , ' / RESPONDENT BY : SHRI MADHAV M.MANDGAONKAR % - .# / DATE OF HEARING : 14/05/2013 / & - .# / DATE OF PRONOUNCEMENT : 14/05/2013 '0 / O R D E R PER I.P.BANSAL,J.M: THESE APPEALS ARE FILED BY THE REVENUE. THEY ARE DIRECTED AGAINST THREE SEPARATE ORDERS PASSED BY LD. CIT(A)-II, THANE. FO R ASSESSMENT YEAR 2005-06, THE DATE OF ORDER IS 21/10/2011 AND FOR ASSESSMEN T YEARS 2007-08 AND 2008- 09 THE ORDERS ARE DATED 31/10/2011. GROUNDS OF APP EAL IN ALL THESE APPEALS ARE IDENTICAL EXCEPT DIFFERENCE IN FIGURES. FOR THE SA KE OF CONVENIENCE THE GROUNDS OF APPEAL FOR A.Y 2005-06 ARE REPRODUCED BELOW: ./I.T.A. NO.590 TO 592/MUM/2012 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED CIT(A)-II, THANE ERRED IN ALLOWING THE ASSE SSEES CLAIM OF RS.16,16,250/- U/S. 80 IB(10) OF THE I.T. ACT, 1961 . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A)-II, THANE ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD VIOLATED THE PROVISIONS OF CLAUSE (C) OF 80 IB(10) BY CONSTRUCT ING RESIDENTIAL UNITS COMPRISING OF AREA EXCEEDING 1500 SQ. FT. THE FIGURES FOR OTHER ASSESSMENT YEARS ARE AS UNDE R: (1) ASSESSMENT YEAR 2007-08 - RS.10,28,603/- (2) ASSESSMENT YEAR 2008-09 - RS.2,97,01,190/- 2. IT WAS THE COMMON CONTENTION OF BOTH THE PARTIES THAT THE FACTS RELATING TO REJECTION OF CLAIM OF THE ASSESSEE UNDER SECTION 80 IB(10) OF THE INCOME TAX ACT,1961 (THE ACT) ARE SAME FOR ALL THE YEARS. ALL THESE APPEALS WERE ARGUED TOGETHER BY BOTH THE PARTIES. LD. CIT(A) WHILE DEC IDING THE ISSUE IN FAVOUR OF ASSESSEE IN RESPECT OF A.Y 2007-08 AND 2008-09 HAS ALSO FOLLOWED HIS ORDER FOR A.Y 2005-06. IT IS IN THESE CIRCUMSTANCES, FOR THE SAKE OF CONVENIENCE, WE DISPOSE OF ALL THESE APPEALS BY THIS CONSOLIDATED O RDER. 3. THE ASSESSEE FIRM IS ENGAGED IN THE LAND BUILD ING AND CONSTRUCTION ACTIVITY. THE ASSESSEE CARRIED OUT THE CONSTRUCTI ON AND DEVELOPMENT IN RESPECT OF RESIDENTIAL CUM COMMERCIAL PROJECT CALLED VASAN T VIHAR GARDENS AT GUT NO.56, BHAVANI CHOWK, AMBERNATH (E) AND IT IS ON SU CH PROJECT THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB(10) OF THE ACT . DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y 2005-06 IT CAME TO T HE NOTICE OF AO THAT THREE ROW HOUSES ADMEASURING 1075 SQ.FT., 1095 SQ.FT. AND 1075 SQ.FT. WERE SOLD BY THE ASSESSEE ON 2/5/2003 VIDE THREE DIFFERENT AGREE MENTS WERE ONE UNIT, THE AREA OF WHICH CAME TO 3375 SQ.FT. DURING THE COURS E OF SURVEY PROCEEDINGS ALSO IT WAS ADMITTED BY THE ASSESSEE THAT AREA OF THREE RO W HOUSES SOLD BY THE ASSESSEE EXCEEDED THE LIMIT OF 1500 SQ.FT. THEREFO RE, IT WAS INFERRED BY THE AO THAT ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80 IB(10) OF THE ACT AS IT DID NOT FULFILL ONE OF THE CONDITIONS LAID DOWN IN SECTION 80 IB(10). SO FAR AS IT RELATES TO OTHER CONDITIONS, A REPLY WAS FILED BY T HE ASSESSEE VIDE LETTER DATED 18/12/2007, ACCORDING TO WHICH IT WAS CLAIMED THAT ASSESSEE IS ELIGIBLE FOR ./I.T.A. NO.590 TO 592/MUM/2012 3 DEDUCTION UNDER SECTION 80 IB(10). THE CONTENTS OF THE SAID LETTER HAVE BEEN SUMMARIZED BY THE AO IN THE ASSESSMENT ORDER IN PAR A-11, WHICH READ AS UNDER: 11. THEREAFTER THE ASSESSEE FIRM HAS SUBMITTED A LETTER DT. 18.12.2007, STATING THAT PROFITS FROM HOUSING PROJECT ARE ELIGIBLE FOR DEDUCTION U/S. 80IB(10) FOR THE FOLLOWING REASONS: 1. THE PROJECT IS ON A PLOT OF LAND ADMEASURING 9900 S Q.MTS. COPY OF 7/12 EXTRACTS AND SANCTION3D PLAN LAYOUT FOR THE PLOT IS SEPARATE LY FILED ON RECORD. 2. COPIES OF PLANS SANCTIONED BY THE LOCAL AUTHORITY O N 23/03/2001, 26/08/2004, 17/09/2004 AND 30/01/2006 ARE SEPARATELY FILED. 3. COPIES OF INDIVIDUAL BUILDING COMPLETION CERTIFICA TES ISSUED BY THE LOCAL AUTHORITY ON 25/05/2004,17/09/2004, 02/02/2005, 22/ 09/2005, 02/05/2006 AND 25/04/2007 ARE SEPARATELY FILED ON R ECORD. 4. THE AREA OF ALL THE RESIDENTIAL UNITS EXCEPT FOR ON E UNIT IS WITHIN THE LIMITS PRESCRIBED U/S. 80IB(10) AS PER THE PLANS SANCTIONE D BY THE LOCAL AUTHORITY. HOWEVER, AO RELYING ON THE INSTANCE OF ROW HOUSES N O.1, 2& 3, WHERE AREA EXCEEDED THE LIMIT OF 1500 SQ.FT. HAS DENIED THE DE DUCTION TO THE ASSESSEE AND HAS ESTIMATED THE INCOME OF THE ASSESSEE ON THE BAS IS OF TOTAL CONSIDERATION RECEIVED BY TAKING 8% NET PROFIT. IT IS IN THIS M ANNER THE ASSESSEE HAS BEEN ASSESSED AT AN INCOME OF RS.16,16,250/- IN RESPECT OF ASSESSMENT YEAR 2005-06. SIMILARLY, IN RESPECT OF A.Y 2007-08 THE INCOME HAS BEEN ASSESSED AT RS.10,28,603/-. WHILE ASSESSING THE INCOME IN RESP ECT OF A.Y 2008-09 PROFIT SHOWN BY THE ASSESSEE ON THIS PROJECT AND AFTER RED UCING THE INCOME ASSESSED IN RESPECT OF A.Y 2005-06 AND 2007-08 THE INCOME HAS B EEN ASSESSED AT RS.2,72,86,355/- BY REJECTING THE CLAIM MADE UNDER SECTION 80 IB(10) OF THE ACT. 4. BEFORE LD. CIT(A) THE ASSESSEE OBJECTED TO THE A PPLICATION OF NET PROFIT RATE AND IT WAS SUBMITTED THAT ACCOUNTS OF THE ASSESSEE HAVE BEEN PREPARED ACCORDING TO ACCOUNTING STANDARD -7 AND ASSESSEE ADOPTED PRO JECT COMPLETION METHOD, THEREFORE, NET PROFIT RATE COULD NOT BE APPLIED. S O FAR AS IT RELATES TO REJECTION OF CLAIM UNDER SECTION 80 IB(10) IT WAS SUBMITTED THA T THREE SEPARATE AGREEMENTS WERE ENTERED WITH THE PURCHASERS ON 2/5/2003 FOR TH E SALE OF THREE ROW HOUSES AND THEREAFTER FOR THEIR OWN CONVENIENCE THEY APPR OACHED THE ARCHITECT OF THE HOUSING PROJECT FOR CONVERTING THOSE THREE ROW HO USES TO A SINGLE UNIT, WHICH WAS DONE AT THEIR REQUEST. SUCH SINGLE UNIT ALSO F INDS MENTION IN THE FOURTH REVISED SANCTIONED PLAN APPROVED ON 30/01/2006. TH EREAFTER, THE ASSESSEE FIRM ./I.T.A. NO.590 TO 592/MUM/2012 4 ENTERED INTO AN AGREEMENT FOR THE SALE OF THESE ROW HOUSES ADMEASURING AN AREA OF 3375 SQ. FT. AND AGREEMENT WAS REGISTERED ON 7/1 0/2003 AND POSSESSION OF THE UNIT WAS HANDED OVER ON 20/07/2004. IT WAS SUBMITT ED THAT DEDUCTION CANNOT BE DENIED TO THE ASSESSEE ONLY DUE TO THE REASON T HAT ONE OF THE FLATS IN THE HOUSING PROJECT OF THE ASSESSEE EXCEEDED THE PRESCR IBED LIMIT OF 1500 SQ.FT. IT WAS SUBMITTED THAT AO HIMSELF HAS BROUGHT DOWN THE FACT IN ASSESSMENT ORDER THAT THREE ROW HOUSES WERE SOLD TO THREE PERSONS A S PER THREE SEPARATE AGREEMENT AND THEREAFTER, THESE PERSONS APPROACHED THE ARCHITECT FOR CONVERTING THESE ROW HOUSES INTO A SINGLE UNIT AND THE SAME WA S ALSO REFLECTED IN THE FOURTH REVISED SANCTIONED PLAN APPROVED ON 30/1/2006. EAC H UNIT INDIVIDUALLY DID NOT EXCEED 1500 SQ.FT. LIMIT. WHEN THESE WERE SOLD EAC H OF THEM WERE HAVING CONSTRUCTION AREA OF LESS THAN 1500 SQ.FT. THESE U NITS WERE CONVERTED INTO ONE UNIT ONLY AFTER WHEN THEY WERE SOLD BY THE ASSESSEE FIRM INDIVIDUALLY TO THREE DIFFERENT PERSONS. THEREFORE, THERE IS NO VIOLATIO N OF ANY OF THE CONDITIONS LAID DOWN UNDER SECTION 80 IB(10). THE STATEMENT OF PAR TNER SUBMITTED DURING THE SURVEY DOES NOT HAVE EVIDENTIARY VALUE AS IT IS A FACTUAL AND LEGAL MATTER THAT WHETHER OR NOT ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IB(10). REFERENCE WAS MADE TO SEVERAL DECISIONS TO CONVEY T HAT THE DEDUCTION CANNOT BE DENIED IN ITS ENTIRETY ON ACCOUNT OF VIOLATION OF ONE OF THE CONDITIONS THAT CERTAIN HOUSES EXCEED THE LIMIT OF CONSTRUCTION AREA OF 150 0 SQ.FT. 6. THE SECOND ISSUE ON WHICH THE DEDUCTION WAS DENI ED BY THE AO REGARDING NON-FILING OF THE AUDIT REPORT IN FORM 10CCCB ALONG WITH THE RETURN. HOWEVER, THE SAME WAS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS ARGUED THAT THE FILING OF PRESCRIBED FORM IS ONLY PROCEDUR AL AND DIRECTORY IN NATURE AND CANNOT BE MADE THE BASIS FOR DENYING THE DEDUCTION IF THE SAME IS FILED EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. REFER ENCE WAS MADE TO THE DECISION OF J& K HIGH COURT IN THE CASE OF CIT VS. TREHAN ENTERPRISES (2001) 248 ITR 333(J&K), WHEREIN FILING OF AUDIT REPORT EVEN BEFORE LD. CIT(A) WAS HELD TO BE AS A COMPLIANCE FOR FILING THE PRESCRIBED FORM AND IT HAS BEEN HELD BY LD. CIT(A) THAT DEDUCTION ALSO CANNOT BE DISALLOWED ON THIS GR OUND. ./I.T.A. NO.590 TO 592/MUM/2012 5 7. IN RESPECT OF DEDUCTION UNDER SECTION 80 IB(10) IT HAS BEEN HELD BY LD. CIT(A) THAT ON SINGLE INSTANCE OF SALE OF THREE ROW HOUSES THE AREA OF WHICH DOES EXCEED THE LIMIT OF 1500 SQ. FT., THE ASSESSEE CAN NOT BE DENIED FOR DEDUCTION UNDER SECTION 80 IB (10) IN ITS ENTIRETY AND THE AS SESSEE IS ENTITLED TO GET DEDUCTION UNDER SECTION 80 IB(10) ON PRO-RATA BASIS ON ACCOUNT OF VARIOUS JUDICIAL PRONOUNCEMENTS. IT IS IN THIS MANNER LD . CIT(A) HAS GRANTED THE RELIEF TO THE ASSESSEE. THE DEPARTMENT IS AGGRIEVED BY S UCH DECISION OF LD. CIT(A) AND HAS FILED AFOREMENTIONED APPEALS. 8. AFTER NARRATING THE FACTS, THE LD. DR RELIED UP ON THE ORDER PASSED BY THE A.O. 9. ON THE OTHER HAND LD. A.R APART FROM RELYING UPO N THE ORDER PASSED BY LD. CIT(A) ALSO PLACED RELIANCE ON THE RECENT DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VISWAS PROMOTERS (P) LTD. VS. ACIT, 255 CTR(MAD) 149, WHEREIN IT HAS BEEN HELD THAT GOING BY THE DEFINITION OF H OUSING PROJECT UNDER EXPLANATION TO SECTION 80HHBA AS THE CONSTRUCTION OF ANY BUILDING AND WORDS IN SECTION 80IB(10), THE QUESTION OF REJECTION IN ENTIRETY OF THE PROJECT ON ACCOUNT OF ANY ONE OF THE BLOCK NOT COMPLYING WITH THE CONDITIONS, DOES NOT ARISE; IN RESPECT OF EACH OF THE BLOCK THE ASSESSEE IS E NTITLED TO HAVE THE BENEFIT OF DEDUCTION IN RESPECT OF RESIDENTIAL UNITS SATISFYIN G THE REQUIREMENT OF BUILT UP AREA OF 1500 SQ.FT. UNDER SECTION 80IB(10)(C). IT WAS SUBMITTED THAT WHILE HOLDING SO HONBLE MADRAS HIGH COURT HAS ALSO CONSIDERED TH E DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BRAMHA ASS OCIATES, 333 ITR 289 (BOM). 10. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTEN TIONS HAVE CAREFULLY BEEN CONSIDERED. FACTS IN DETAILS HAVE ALREADY BEEN MEN TIONED. THE ONLY GRIEVANCE OF THE REVENUE IN THE PRESENT APPEALS IS THE ACCEPTANC E OF THE CLAIM OF THE ASSESSEE BY LD. CIT(A) UNDER SECTION 80IB(10) OF THE ACT. T HE REVENUE IS SUPPORTING THE ORDER OF THE AO ON THE BASIS THAT THE AREA OF THRE E ROW HOUSES SOLD BY THE ASSESSEE EXCEEDED THE LIMIT OF 1500 SQ.FT. LD. CI T(A) HAS HELD THAT ASSESSEE IS ENTITLED FOR DEDUCTION ON PRO-RATE BASIS MEANING THEREBY TO EXCLUDE THOSE THREE ./I.T.A. NO.590 TO 592/MUM/2012 6 ROW HOUSES FROM THE PURVIEW OF DEDUCTION UNDER SECT ION 80 IB(10) AND ALLOW THE DEDUCTION ON THE OTHER UNITS.. IT IS NOT THE CASE OF REVENUE THAT ASSESSEE HAS NOT FULFILLED ALL OTHER CONDITIONS LAID DOWN IN SECTION 80IB(10) AS THE ASSESSEE HAD SUBMITTED BEFORE THE AO THAT IT IS ELIGIBLE FOR D EDUCTION UNDER SECTION 80 IB(10) AS ALL OTHER CONDITIONS ARE FULFILLED. THE AO HAS ALSO NOT REJECTED THE CLAIM OF THE ASSESSEE ON ANY OTHER GROUND. IN VIEW OF ALL T HESE FACTS, WE ARE OF THE OPINION THAT THERE IS NO INFIRMITY IN THE ORDER PASSED BY L D. CIT(A) VIDE WHICH THE ASSESSEE HAS BEEN HELD TO BE ENTITLED FOR DEDUCTION UNDER SECTION 80 IB(10) ON PRO-RATA BASIS. WE DECLINE TO INTERFERE AND DISMIS S ALL THE APPEALS FILED BY THE REVENUE. P11. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE ARE DISMISSED. 1 .2 - 3 #1 - . 45 ORDER PRONOUNCED IN THE OPEN COURT ON 14/05/2013 . '0 - & #' 3 6%2 14/05/2013 - 7 SD/- SD/- ( SANJAY ARORA) (I.P.BANSAL) /ACCOUNTANT MEMBER '# /JUDICIAL MEMBER MUMBAI; 6% DATED 14/05/2013 . % . .VM , SR. PS '0 '0 '0 '0 - -- - *.89 *.89 *.89 *.89 :'9&. :'9&. :'9&. :'9&. / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. 9<7 *.% , , / DR, ITAT, MUMBAI 6. 7= > / GUARD FILE. '0% '0% '0% '0% / BY ORDER, +9. *. //TRUE COPY// ? ?? ? / 4 4 4 4 (DY./ASSTT. 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