ASST. CIT CC-30, MUMBAI V. ANIL KUMAR AGARWAL, MUMBAI

ITA 6604/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62212 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 12-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 09-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIWAS RAO
• Keywords: Search and seizure
• Section: 43B; 80IB; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI B. RAMAKOTAIAH (AM) & SHRI S.S. GODARA (JM) I.T.A. NOS.6331 TO 6333/MUM/2010 (A.YS. 2007-08, 2006-07 & 2005-06) SHRI ANILKUMAR AGARWAL, RNA CORPORATE PARK, 7 TH FLOOR, NEXT TO COLLECTORS OFFICE, KALANAGAR, BANDRA (E), MUMBAI-400 051. PAN: AABPA3657N. VS. ASST. COMMISSIONER OF INCOME-TAX, CENT. CIRCLE 30, MUMBAI. APPELLANT RESPONDENT I.T.A. NOS.6604 TO 6606/MUM/2010 (A.YS. 2005-06, 2006-07 & 2007-08) ASST. COMMR. OF INCOME-TAX, CENT. CIRCLE 30, MUMBAI. VS. SHRI ANILKUMAR AGARWAL, RNA CORPORATE PARK, 7 TH FLOOR, NEXT TO COLLECTORS OFFICE, KALANAGAR, BANDRA (E), MUMBAI-400 051. PAN: AABPA3657N. APPELLANT RESPONDENT ASSESSEE BY SHRI J P BAIRAGRA DEPARTMENT BY SHRI G OLI SRINIWAS RAO. DATE OF HEARING 12-04-2012 DATE OF PRONOUNCEMENT 20-04-2012 ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 2 O R D E R PER B. RAMAKOTAIAH, AM : THESE SIX CROSS APPEALS ARE BY ASSESSEE AND REVENUE FOR ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08. 2. IN ASSESSEES APPEALS, GROUND NOS.1 & 2 AND IN T HE REVENUES APPEAL GROUND NOS. 1(A) TO 1(F) ARE ON THE ISSUE OF DEDUCT ION U/S.80-IB(10) . IN ADDITION TO THE ABOVE ISSUE, THERE ARE ISSUES OF DI SALLOWANCE U/S.14A READ WITH 8D RAISED AS GROUND NO. 3 IN ASSESSEES APPEAL S, WHEREAS THE REVENUE IN GROUND NO. 1(G) IS CONTESTING THE ISSUE OF DISAL LOWANCE U/S. 43B FOR ASSESSMENT YEARS 2005-06 AND 2006-07. THE LD. COUNS EL FOR THE ASSESSEE PLACED ON RECORD VOLUMINOUS PAPER BOOK AND ALSO VAR IOUS CASE LAWS RELIED UPON BY HIM. 3. WE HAVE HEARD THE LD. COUNSEL FOR THE ASSESSEE A ND THE LD. CIT-DR IN DETAIL. 4. BRIEFLY STATED, THE ISSUE IN GROUND NOS.1 & 2 OF THE ASSESSEE AND GROUND NOS.1(A) TO 1(F) OF THE REVENUE IS WITH REFE RENCE TO DEDUCTION U/S.80- IB(10) IN RESPECT OF THE PROJECT RNA REGENCY IN A LL THE THREE YEARS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION & DEVELOPMENT OF APARTMENT BUILDING AND TRADING IN SHARES. IN THE YE ARS UNDER CONSIDERATION, THE ASSESSEE DECLARED INCOME AFTER CLAIMING DEDUCTI ON U/S.80-IB(10) IN RESPECT OF VARIOUS PROJECTS COMPLETED. OUT OF THIS, DEDUCTION U/S.80-IB(10) WAS CLAIMED IN RESPECT OF PROJECT RNA REGENCY (KAN DIVILI WEST), WHICH WAS APPROVED PRIOR TO 1-4-2005 AND COMPLETED IN ASSESSM ENT YEAR 2005-06 AND SUBSEQUENTLY UNSOLD FLATS WERE SOLD IN LATER TWO YE ARS. THERE WAS A SEARCH AND SEIZURE OPERATION ON 30-11-2007. IN THE COURSE OF SAID PROCEEDINGS, THE SALE REGISTER WAS NOTICED WHEREIN CERTAIN COMMERCIA L SHOPS WERE SOLD WHICH INDICATED THAT THE AREA OF COMMERCIAL USE WAS MORE THAN 2000 SQ. FT. PRESCRIBED FOR THE YEAR AND THE AO CONSIDERED THIS ASPECT IN DENYING 80- IB(10) DEDUCTION. ANOTHER ASPECT, WHICH WAS ALSO CO NSIDERED AND NOTICED DURING THE COURSE OF SEARCH, WAS THAT THERE ARE SIX UNITS WHICH WERE AVAILABLE AS TWIN UNITS WHICH EXCEEDED THE PRESCRIB ED LIMIT OF 1000 SQ. FT. IN THE COURSE OF SAID PROCEEDINGS, THE INVESTIGATION U NIT RECORDED STATEMENTS OF 5 OCCUPANTS OUT OF THE SIX TWIN UNITS AND THREE OF THEM REVEALED THAT THE ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 3 INTERNAL WALL BETWEEN THE TWO UNITS WAS DEMOLISHED BY THE BUILDER AT THE TIME OF POSSESSION OF THE FLAT. TWO TWIN UNIT OWNER S SUBMITTED THAT THEY THEMSELVES HAVE UNDERTAKEN BREAKING UP THE WALL. TH E AO, ON THE BASIS OF THE STATEMENTS RECORDED FROM THE PARTIES, CONSIDERE D THAT THE ASSESSEE HAD VIOLATED THE CONDITION OF CONSTRUCTING LESS 1000 SQ . FT. UNITS AS SOME OF THE UNITS WERE MORE THAN 1000 SQ. FT. ON THESE REASONS , AO DISALLOWED THE CLAIM OF SEC. 80-IB(10) IN ALL THE YEARS. THE CIT(A) EXAM INED THE CONTENTIONS WITH REFERENCE TO THE AREA OF COMMERCIAL USAGE AND GAVE A FINDING THAT IT IS LESS THAN 5000 SQ. FT, BUT SINCE THE PROJECTS WERE APPRO VED MUCH EARLIER TO THE AMENDMENT BROUGHT TO THE ACT, HE DIRECTED THE AO TO ALLOW THE DEDUCTION FOLLOWING VARIOUS CASE LAW ON THE ISSUE. EVEN THOUG H THIS ISSUE IS IN FAVOUR OF THE ASSESSEE BY THE CIT(A), THE ASSESSEE IS CONTEST ING IN GROUND NO.1 ON FACTS THAT THE COMMERCIAL AREA IS LESS THAN 2000 SQ. FT. WITH REFERENCE TO THE SECOND ISSUE RAISED BY AO OF SOME TWIN FLATS, IT W AS CONTENDED BEFORE THE CIT(A) (AS WELL AS BEFORE THE AO WHICH WAS NOT ACCE PTED) THAT THE ASSESSEE SOLD SINGLE UNITS WAY BACK IN 2004 AND THE POSSESSI ON HANDED OVER AS SINGLE UNITS TO DIFFERENT SELLERS, EVEN THOUGH RELATED, AN D FURTHER IN THE RECORDS OF THE MUNICIPAL CORPORATION, SOCIETY AND IN THE BANK WHICH ADVANCED LOANS, THESE ARE SHOWN AS SEPARATE UNITS AND NOT AS SINGLE UNITS AND, THEREFORE, THE ASSESSEE IS NOT RESPONSIBLE IF THE SELLERS JOINED T HE APARTMENTS. FURTHER, IT WAS SUBMITTED THAT OUT OF THE 5 STATEMENTS RECORDED , TWO OF THE OWNERS CATEGORICALLY STATED THAT THEY THEMSELVES MADE THE MODIFICATION OF JOINING THE APARTMENTS AND THE ASSESSEE WAS NOT INVOLVED IN IT AND THE AO DID NOT CONSIDER THIS STATEMENT. THE CIT(A) EXAMINED THIS I SSUE AND FOUND THAT TWO OUT OF THE FIVE OWNERS DID INDEED SUBMIT THAT THEY ONLY MADE THE MODIFICATION WITHOUT ANY AUTHORIZATION AND THE ASSE SSEE WAS NOT INVOLVED AT ALL. WITH REFERENCE TO THE BALANCE THREE, HE UPHELD THE DISALLOWANCES ON THE TWIN APARTMENTS, WHICH WERE STATED BY THE SAID PART IES THAT THAT THE BUILDER MADE THE MODIFICATION AND DIRECTED THE AO TO EXAMIN E THE OWNERS WITH REFERENCE TO THE 6 TH TWIN UNIT ABOUT THE MODIFICATION UNDERTAKEN. THE A O SEEMS TO HAVE EXAMINED AND FOUND THAT THE 6 TH UNIT WAS MODIFIED BY THE OWNERS THEMSELVES. AT PRESENT THE ISSUE WAS ABOUT T HREE TWIN UNITS THAT WERE SUPPOSED TO HAVE BEEN MODIFIED BY THE ASSESSEE BUILDER. EVEN THOUGH THE CIT (A) GAVE A FINDING, HE, HOWEVER, DIRECTED THE AO TO ALLOW DEDUCTION ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 4 U/S. 80-IB(10) PROPORTIONATELY ON THE REST OF THE UNITS EXCLUDING THE ABOVE THREE TWIN UNITS FOLLOWING THE DECISION OF ITAT IN THE CASE OF SHETH DEVELOPERS (33 SOT 277) (BOM). THE ASSESSEE IS CONT ESTING ON NOT ALLOWING THE DEDUCTION ON THE ABOVE THREE TWIN UNITS, WHEREA S THE REVENUE IS CONTESTING THE DIRECTION OF THE CIT(A) OF ALLOWING THE DEDUCTION U/S.80-IB(10) ON THE ENTIRE PROJECT ON THE REASON THAT THERE ARE VIOLATIONS TO THE PRESCRIBED NORMS. 5. BENEFIT OF DEDUCTION TO DEVELOPERS OF HOUSING PROJECTS WAS FIRST INTRODUCED BY THE FINANCE ACT, 1998 WITH EFFECT FRO M 1-4-1999 IN THE FORM OF SUB-SECTION (4F) TO SECTION 80-IA OF THE ACT. THOSE PROVISIONS READ AS FOLLOWS: 'THIS SECTION APPLIES TO AN UNDERTAKING ENGAGED IN DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED BY A LOCAL AUTHO RITY SUBJECT TO THE CONDITION THAT THE SIZE OF A PLOT OF LAND HAS A MINIMUM AREA OF ONE ACRE AND THE RESIDENTIAL UNIT HAS A MAXIMUM BUI LT-UP AREA NOT EXCEEDING ONE THOUSAND SQUARE FEET: PROVIDED THAT THE UNDERTAKING SUCH UNDERTAKING COMM ENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998 AND COMPLETES THE SAME BEF ORE 31ST DAY OF MARCH, 2001.' 5.1 BY THE FINANCE ACT, 1999 WITH EFFECT FROM 1-4 -2000, THE BENEFIT OF THE ABOVE DEDUCTION WAS AVAILABLE UNDER SECTION 80-IB(1 0). THE SAID PROVISIONS READ AS FOLLOWS: '(10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UND ERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED B Y A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF, (A)SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER, 1998 AND COMPLETES THE SAME BEFORE 31ST DAY OF MARCH, 2003; (B)THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHI CH HAS A MINIMUM AREA OF ONE ACRE; (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 FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE;' ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 5 5.2 BY THE FINANCE ACT, 2000 WITH EFFECT FROM 1-4-2001, THE WORDS 'BEFORE 31ST DAY OF MARCH, 2001' WERE INSERTED AFTER THE WO RDS 'HOUSING PROJECT APPROVED'. THUS, ALL CONDITIONS FOR GRANT OF DEDUCT ION REMAINED THE SAME EXCEPT THAT THE APPROVAL OF LOCAL AUTHORITY FOR THE DEVELOPMENT HAS TO BE OBTAINED BEFORE 31ST DAY OF MARCH, 2001. 5.3 FOR ASSESSMENT YEAR 2002-03, THE LAW APPLI CABLE WAS THAT THE CONDITION REGARDING COMPLETION OF THE PROJECT BEFOR E 31-3-2003 WAS DISPENSED WITH. 5.4 FOR ASSESSMENT YEARS 2003-04 AND 2004-05, THE LAW APPLICABLE WAS THAT ALL CONDITIONS REMAINED THE SAME EXCEPT THE CO NDITION REGARDING APPROVAL OF THE PROJECT BY THE LOCAL AUTHORITY WHIC H COULD BE BEFORE 31-3- 2005. ANOTHER IMPORTANT CHANGE WAS THAT THE PERIOD OF COMPLETION OF THE CONSTRUCTION ON OR BEFORE 31-3-2003 WAS DISPENSED W ITH AND THERE WAS NO TIME-LIMIT GIVEN FOR COMPLETION OF THE CONSTRUCTION . 5.5 BY THE FINANCE ACT, 2004 WITH EFFECT FROM 1 -4-2005, CLAUSE (D) TO SECTION 80-IB(10) WAS INTRODUCED WHICH PROVIDED THA T BUILT-UP AREA OF SHOPS OR OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED 5 PER CENT OF THE AGGREGATE BUILT-UP ARE A OF THE HOUSING PROJECT OR 2,000 SQ.FT., WHICHEVER IS LESS. THE PROVISION AS T HEY READ APPLICABLE FROM ASSESSMENT YEAR 2005-06 IS AS FOLLOWS: '(10) THE AMOUNT OF DEDUCTION IN THE CASE OF AN UND ERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED B Y A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO ANY ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF, ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 6 (A) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES D EVELOPMENT 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 BEEN APPR OVED 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 BEEN, OR , IS APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF A PRIL, 2004, WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEA R IN WHICH 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 HOUS ING PROJECT IS OBTAINED MORE THAN ONCE, SUCH HOUSING PR OJECT SHALL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE O N WHICH THE BUILDING PLAN OF SUCH HOUSING PROJECT IS FIRST APPROVED BY THE LOCAL AUTHORITY; (II) THE DATE OF COMPLETION OF CONSTRUCTION OF THE HOUSI NG PROJECT SHALL BE TAKEN TO BE THE DATE ON WHICH THE COMPLETION CERTIFICATE IN RESPECT OF SUCH HOUSING P ROJECT IS ISSUED BY THE LOCAL AUTHORITY : PROVIDED THAT NOTHING CONTAINED IN CLAUSE (A) OR CL AUSE (B) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACCORDANC E WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT FOR RECONSTRUCTION OR REDEVELOPMENT OF E XISTING BUILDINGS IN AREAS DECLARED TO BE SLUM AREAS UNDER ANY LAW FOR THE TIME BEING IN FORCE AND SUCH SCHEME IS NOTI FIED BY THE BOARD IN THIS BEHALF; (B) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WH ICH HAS A MINIMUM AREA OF ONE ACRE; (C) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP ARE A OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY -FIVE KILOMETRES FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE; (D) THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMER CIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET, WHICHEVER IS L ESS.' AS PER THE AMENDED LAW IN VIEW OF INSERTION OF CLAU SE (D ) THE BUILT-UP AREA OF SHOPS AND OTHER COMMERCIAL ESTABLI SHMENT INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED F IVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJE CT OR 2,000 SQ.FT., WHICHEVER IS LESS. ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 7 6. IT WAS THE CONTENTION OF THE ASSESSEE THAT THE W ORK ON THE HOUSING PROJECT RNA REGENCY HAS COMMENCED ON 6-7-1999 AND, THEREFORE, IT IS GOVERNED BY THE CONDITIONS LAID DOWN IN SEC. 80-IB( 10) PREVAILING AT THE RELEVANT TIME AND SUBSEQUENT CONDITION ON THE TOTAL COMMERCIAL AREA PERMISSIBLE AT 5% OR 2000 SQ. FT. W.E.F. 1-4-2005 W AS NOT APPLICABLE AND RELIED ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES WHICH WAS CONFIRMED BY HONBLE JU RISDICTIONAL HIGH COURT. IT WAS FAIRLY ADMITTED THAT THIS ISSUE OF HA VING COMMERCIAL AREA IN THE RESIDENTIAL PROJECTS BEFORE 1-4-2005 IS SQUARELY CO VERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASS OCIATES (333 ITR 289). 7. HOWEVER, IT WAS THE CONTENTION OF THE LD. COUNSE L FOR THE ASSESSEE THAT ON FACTS ALSO THE PROVISIONS, EVEN IF AMENDED, ARE NOT APPLICABLE AND REFERRED TO THE PERMISSIONS GRANTED BY THE MUNICIPAL AUTHORI TY FOR THE COMMERCIAL AREA. IT WAS HIS SUBMISSION THAT BUILDINGS 1 & 2 CO NSIST OF 480 RESIDENTIAL UNITS OF MORE THAN 3.59 LAKH SQ. FT. AND THE PERMIT TED COMMERCIAL AREA OF SHOPS ON GROUND FLOOR AND OFFICE ON FIRST FLOOR IS ONLY TO THE EXTENT OF 1778.21 SQ. FT. AND THERE IS NO CHANGE IN THE APPROVED PLAN S WITH REFERENCE TO THE AREA OF 1,778.21 SQ. FT. APPROVED BY THE MUNICIPAL AUTHORITIES. IT WAS HIS FURTHER SUBMISSION THAT THE ASSESSEE, EVEN THOUGH M ODIFIED THE PLANS WITHOUT APPROVAL TO THE EXTENT OF COMMERCIAL AREA, WHAT THE ASSESSEE HAS SOLD AS EVIDENT FROM THE REGISTER WAS ONLY 1,978 SQ . FT. OF 11 UNITS AND THE BALANCE WAS NOT SOLD. THE ASSESSEE RELIED ON THE DE CISION OF ITAT IN THE CASE OF VANDANA PROPERTIES, NOW AFFIRMED BY THE HONBLE BOMBAY HIGH COURT I.T.A NOS.3633 OF 2009 AND 4361 OF 2010 DATED 28-3-2012 W ITH REFERENCE TO THE DEFINITION OF HOUSING PROJECT AND THE AREA OF COM MERCIAL USAGE. IT WAS HIS ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 8 SUBMISSION THAT SINCE THE ASSESSEE GOT APPROVAL FOR 1,778.21 SQ.FT. AND SOLD ONLY 1,978 SQ. FT., THE UNAUTHORIZED CONSTRUCTION, IF ANY, CANNOT BE TREATED AS COMMERCIAL AREA AS THERE ARE NO APPROVALS AND, THE REFORE, THE COMMERCIAL AREA IS TO BE TAKEN AS LESS THAN 2000 SQ. FT. 8. ON THIS ISSUE, WE ARE OF THE OPINION THERE IS NO NEED TO GIVE ANY SPECIFIC FINDING ABOUT THE COMMERCIAL AREA BEING LE SS THAN 2000 SQ. FT. AS PER THE APPROVED PLANS, THE PERMITTED COMMERCIAL AREA W AS ONLY 1,778.21 SQ. FT. OUT OF THE TOTAL 3.59 LAKHS SQ. FT., WHICH IS LESS THAN 0.5%. THERE IS NO CHANGE IN APPROVED PLANS. ASSESSEE COULD ONLY SELL SOME SHOPS(6) AND FLATS(5) WHOSE BUILT UP AREA WAS ONLY 1978 SQ.FT. EVEN IF ONE WERE TO CONSIDER THE SQ. FT. DETERMINED BY THE CIT(A) AT 4,944, IT I S LESS THAN 2% OF THE ENTIRE CONSTRUCTED AREA IN THE HOUSING PROJECT. SINCE THE RESTRICTIONS PLACED WITH REFERENCE TO COMMERCIAL AREA ARE NOT APPLICABLE TO THE PROJECTS APPROVED PRIOR TO 1-4-2005, RESPECTFULLY FOLLOWING THE DECIS ION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) AND THE PRINCIPLES LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE O F VANDANA PROPERTIES (SUPRA), THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S .80-IB(10) AND ON THE REASON THAT COMMERCIAL AREA IS AVAILABLE IN THE HOU SING PROJECT, THE DEDUCTION U/S.80-IB(10) CANNOT BE DENIED. THE CIT( A)S ORDER ON THIS ISSUE IN GRANTING THE 80-IB(10) DEDUCTION IS ACCORDINGLY UPHELD. 9. COMING TO THE ISSUE OF TWIN UNITS, THE REASON FO R WHICH THE AO CONSIDERED THAT THE ASSESSEE CONSTRUCTED VIOLATING THE NORM OF 1000 SQ. APARTMENTS, THE ASSESSEE HAS SUBMITTED THAT OUT OF THE 480 UNITS SOLD BY THE ASSESSEE WAY BACK IN 2004-05, THERE ARE ONLY 6 TWIN UNITS FOUND BY THE INVESTIGATION UNIT AT THE TIME OF SEARCH IN NOVEMBE R, 2007. OUT OF THE 6 UNITS, TWO PERSONS AT THE ENQUIRY STAGE ITSELF AFFI RMED THAT COMBINING TWO ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 9 INDEPENDENT UNITS WAS DONE BY THEM AND THE ASSESSEE HAS NO ROLE IN THAT. THE 3 RD TWIN UNIT, WHICH WAS DIRECTED BY THE CIT(A) FOR EX AMINATION, WAS FOUND TO HAVE BEEN DONE BY THE OWNERS THEMSELVES AS PER THE FINDING GIVEN IN THE CONSEQUENTIAL ORDER BY THE AO. THUS, THE ISS UE IS ONLY WITH REFERENCE TO 3 TWIN UNITS I.E. 6 APARTMENTS OUT OF THE TOTAL 480 APARTMENTS CONSTRUCTED BY THE ASSESSEE. IN THESE THREE TWIN UNITS ALSO, TH E BASIS FOR REVENUE IS THE STATEMENT RECORDED FROM THE OWNERS THAT THE BUILDER HAS BROKEN THE JOINT WALL IN BETWEEN. HOWEVER, THE FACTS REMAINS THAT (A) THE APPELLANT HAS CONSTRUCTED ALL THE 480- FLAT S HAVING BUILT UP AREA OF LESS THAN 1000 SQ. FT. AND SOLD ACCORDINGLY; (B) EACH FLAT HAS BEEN SOLD SEPARATELY TO INDIVIDUA L PERSONS AND THEREBY SEPARATE AGREEMENTS ARE ENTERED INTO AN D THEY ARE REGISTERED SEPARATELY; (C) EVEN THE POSSESSION IS ALSO GIVEN TO EACH INDIV IDUAL PURCHASER SEPARATELY; (D) EVEN IN THE SOCIETY RECORDS, MAINTENANCE CHARGE S IS PAID SEPARATELY BY EACH FLAT AND SOCIETY IS RAISING BIL LS ON EACH FLAT SEPARATELY; (E) THE APPELLANT HAS NEITHER GOT ITS PLANT AMENDED IN RESPECT OF THESE TWIN FLATS AND THEY STAND AS SEPARATE UNIT S AS PER THE APPROVED PLAN, OC AND AS OF TODAY, IN THE R ECORDS OF THE BMC; (F) THE TREASURER OF THE SOCIETY HAS ALSO GIVEN A S TATEMENT THAT AS PER THEIR RECORDS, THESE FLATS ARE SEPARATE FLATS AND THEY ARE RAISING BILLS SEPARATELY AND THE OWNER S OF THE FLATS HAVE NOT TAKEN ANY PERMISSION FOR BREAKIN G THE WALL. (G) MERELY THE BREAKING OF THE COMMON WALL BETWEEN TWO FLATS AND MAKING ONE COMMON ENTRANCE FOR TWO FLATS DOES NOT INVOLVE STRUCTURAL CHANGES IN THE BEAM, PILLARS , PLUMBING, CHANGE IN THE ADDITIONAL FSI, ETC. FURTHE R, EVEN AFTER BREAKING OF ONE COMMON WALL, EACH UNIT IS SEP ARATE HAVING SEPARATE ROOMS, KITCHEN, BATHROOM, ETC. AND THEREBY, IT CANNOT BE SAID THAT THESE TWIN UNITS AR E ONE FLAT. ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 10 THEREFORE, AS FAR AS THE MUNICIPAL AUTHORITIES, SOC IETY AND ARCHITECTURAL DESIGNS ARE CONCERNED, THE UNITS CONSTRUCTED BY THE ASSESSEE ARE LESS THAN 1000 SQ. FT. EVEN THOUGH SOME OF THE UNITS WERE JOI NED BY INDIVIDUAL OWNERS FOR THEIR OWN RESIDENTIAL PURPOSES, WHETHER AT THE INSTANCE OF ASSESSEE OR NOT. THESE ISSUES WERE DECIDED BY THE FOLLOWING DEC ISIONS IN WHICH IT WAS HELD THAT THE ASSESSEE CANNOT BE DENIED THE DEDUCTI ON JUST BECAUSE SOME OF THE UNITS WERE MORE THAN THE PRESCRIBED LIMIT IN WH ICH THE ASSESSEE HAS NO ROLE TO PLAY : (I) G.V. CORPORATION V. ITO 133 TTJ (MUM) 178. (II) EMGEEN HOLDINGS P. LTD. VS. DCIT 47 SOT 98 (MUM). (III) HON. BOMBAY HIGH COURT DATED 28-3-2012 CONFIRMING T HE DECISION OF THE HON. TRIBUNAL IN THE CASE OF VANDA NA PROPERTIES, MUMBAI. (IV) SANGHVI & DOSHI ENTERPRISE V. ITO 141 TTJ (CHENNA I) (TM) 1. 10. SIMILAR ISSUE WAS DEALT WITH BY THE CO -ORDINATE BENCH OF TRIBUNAL IN HAWARE CONSTRUCTIONS PVT. LTD. IN I.T.A. NOS.560 1/MUM/2009, 686/MUM/2010 & 1547/MUM/2011. THE DECISION OF THE CO-ORDINATE BENCH VIDE PARA 30 ONWARDS IS AS UNDER : 30. AS REGARDS THE SECOND OBJECTION OF THE REVENUE THAT THE ASSESSEE HAS SOLD TWO OR MORE THAN TWO FLA TS TO ONE PARTY, THE COMBINED AREA OF WHICH IS MORE TH AN 1000 SQ. FT., WE FIND MERIT IN THE SUBMISSION OF TH E LD. COUNSEL FOR THE ASSESSEE THAT THE AREA OF TWO FLATS SHOULD NOT BE COMBINED EVEN THOUGH THE TWO FLATS WE RE SOLD TO ONE PERSON BECAUSE (A) THE BUILT UP AREA OF EACH FLAT AS APPROVED BY CIDCO IS LESS THAN 1000 SQ. FT. AS PER THE APPROVED PLAN AND OCCUPANCY CERTIFICATE RECEIVED. (B) THE ASSESSEE HAS SOLD EACH FLAT UNDE R SEPARATE AGREEMENTS. (C) THE ASSESSEE HAS NOT SOLD TWO FLATS BY COMBINING THESE TOGETHER AS ONE FLAT TO ON E PARTY AND (D) THERE IS NO EVIDENCE WITH THE DEPARTM ENT THAT THE ASSESSEE HAS SOLD AFTER COMBINING THE TWO FLATS TOGETHER AND SOLD TO ONE PARTY. FURTHER THERE IS NO ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 11 EVIDENCE ON RECORD TO SUGGEST THAT THE ASSESSEE ITS ELF HAS ADVERTISED THAT THE FLATS WERE OF MORE THAN OF 1000 SQ. FTS. AND THAT MERELY TO GET THE BENEFIT OF DEDU CTION U/S. 80IB(10) HE DREW THE PLAN IN SUCH A MANNER THA T EACH RESIDENTIAL UNIT WAS SHOWN AS NOT MORE THAN 1000 SQ. FT. OF BUILT UP AREA. IT IS ALSO NOT THE C ASE OF THE REVENUE THAT EACH FLAT IN THE HOUSING PROJECT UNDERTAKEN BY THE ASSESSEE COULD NOT HAVE BEEN USED AS AN INDEPENDENT OR AS A SELF CONTAINED RESIDENTIA L UNIT NOT EXCEEDING 1000 SQ. FT. OF BUILT UP AREA AN D THERE WOULD BE COMPLETE HABITABLE RESIDENTIAL UNIT ONLY IF TWO OR MORE FLATS ARE JOINED WITH EACH OTHER WHI CH WOULD ULTIMATELY EXCEED 1000 SQ. FT. OF BUILT UP AR EA. THEREFORE, MERELY BECAUSE SOME OF THE PURCHASERS HAVE PURCHASED MORE THAN ONE FLAT AND COMBINED THE SAME, THE SAME IN OUR OPINION, WILL NOT DISENTITLE THE ASSESSEE TO CLAIM THE DEDUCTION U/S.80IB(10). 31. FURTHER THE CONDITION THAT NOT MORE THAN ONE RESIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO ANY PERSON NOT BEING AN INDIVIDUAL HAS BEEN INSERTED BY THE FINANCE (NO.2) ACT, 2009 W.E.F. 01.04.2010. THEREFORE, THE ALLEGATION OF THE REVENUE IS ALSO NO T APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR. 32. NOW COMING TO THE THIRD ALLEGATION OF THE REVEN UE THAT THE BUILT UP AREA OF SOME OF THE FLATS IS MORE THAN 1000 SQ. FT. , WE FIND THE ASSESSEE HAS ALREADY SUBMITTED THE CHART WHICH GIVES THE BUILT UP AREA A S ANALYZED BY THE AO. IT IS THE CASE OF THE REVENUE T HAT IF THE TERRACE AREA IS INCLUDED, THE TOTAL BUILT UP AR EA IN SOME OF THE CASES EXCEEDS 1000 SQ. FT. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE DEFINITION OF BUILT UP AREA AS GIVEN IN THE SUB S ECTION 14(A) OF SECTION 80IB IS INSERTED BY THE FINANCE (N O.2) ACT, 2004 W.E.F. 01.04.2005 AND, THEREFORE, THE SAM E IS APPLICABLE ONLY IN RESPECT OF THE PROJECTS APPROVED AFTER 01.04.2005. WE FIND MERIT IN THE ABOVE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. THE CO-ORDINATE BENCHES OF THE TRIBUNAL ARE TAKING THE CONSISTENT V IEW THAT WHEN THE ASSESSEE SUBMITS THE PROPOSAL FOR CARRYING OUT THE DEVELOPMENT OF A HOUSING PROJECT, THEN WHATEVER LAW IS THERE ON THAT DAY, THAT WOULD REGUL ATE THE RIGHTS OF THE ASSESSEE. IN THE INSTANT CASE, UNDISPUTEDLY THE PROJECT WAS APPROVED ON 10.10.2003 I.E. PRIOR TO 01.04.2005, THEREFORE, WE ARE OF THE OPINION, THAT THE REVENUE AUTHORITIES ARE NOT JUSTI FIED IN INCLUDING THE BALCONY/TERRACE IN THE BUILT UP AREA SO AS TO DENY THE BENEFIT OF DEDUCTION U/S.80IB(10). FURT HER THE ASSESSEE HAS GIVEN THE CHART, COPY OF WHICH IS PLACED AT PG. NO. 165, ACCORDING TO WHICH THE AO IN ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 12 SOME OF THE CASES HAS ADOPTED THE WRONG FIGURE, ALTHOUGH THE BUILT UP AREA INCLUDING THE BALCONY PU T TOGETHER DOES NOT EXCEED 1000 SQ. FT. 32.1 IT HAS BEEN HELD IN VARIOUS DECISION THAT IF S OME OF THE FLATS IN A HOUSING PROJECT EXCEED THE PERMIS SIBLE LIMIT, THEN THE BENEFIT OF DEDUCTION U/S.80IB(10) H AS TO BE GRANTED ON PRO-RATE BASIS AND THE ASSESSEE CANNO T BE DENIED THE EXEMPTION. HOWEVER, SINCE THE AREA OF ONE OF THE FLATS EXCEEDS 1000 SQ. FT. AFTER EXCLUDI NG THE BALCONY/TERRACE, THE ASSESSEE, IN OUR OPINION, HAS NOT VIOLATED THIS CONDITION. 33. CONSIDERING THE TOTALITY OF THE FACTS OF THE CA SE AND IN VIEW OF THE DECISIONS CITED ABOVE, WE DO NOT FIND ANY REASON WHY THE ASSESSEE SHALL NOT BE GRANTED TH E BENEFIT OF DEDUCTION U/S.80IB(10). WE THEREFORE, SE T ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO GRANT THE BENEFIT OF DEDUCTION U/S.80IB(10). THE GROUNDS OF APPEAL NO. 1(I) AND 1(II) BY THE ASSESSE E ARE ALLOWED. 11. IN THE AFORESAID CASES, THE FACT WAS THAT TWO FLATS WERE SOLD TO ONE PARTY, WHEREAS IN THE ASSESSEES CASE, TWO FLATS WE RE SOLD TO DIFFERENT PARTIES EVEN THOUGH THEY WERE FOUND COMBINED AT THE TIME OF SEARCH. SINCE THE ASSESSEES CASE IS ON A STRONGER FOOTING AND THE ON LY EVIDENCE RELIED UPON BY THE REVENUE IS THE STATEMENT OF THE PARTY AT THE TI ME OF ENQUIRY THAT THE BUILDER HAS HANDED OVER POSSESSION AS A SINGLE UNIT CANNOT BE ACCEPTED SO AS TO DENY THE DEDUCTION U/S. 80-IB(10) WHEN RECORD OF MUNICIPAL AUTHORITIES AND SOCIETY INDICATE OTHERWISE. THEREFORE, RESPECTF ULLY FOLLOWING THE PRINCIPLES LAID DOWN IN THE ABOVE SAID CASES AND ON THE FACT T HAT THE ASSESSEE HAS CONSTRUCTED ALL THE APARTMENTS OF LESS THAN 1000 SQ . FT. AND SOLD ACCORDINGLY TO DIFFERENT PERSONS, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80-IB(10) ON ALL THE APARTMENTS INCLUDING THE SO-CALLED TWIN APA RTMENTS. IF THERE WERE VIOLATIONS IN THE APPROVED PLANS TO THE EXTENT OF J OINING TWIN APARTMENTS FOR CONVENIENCE, THOSE VIOLATIONS HAVE OCCURRED AFTER THE ASSESSEE HAS SOLD THE ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 13 APARTMENTS AND AS PER THE RECORD EVEN THE SOCIETY I S DEALING THESE APARTMENTS AS INDEPENDENT SEPARATE UNITS IN ITS REC ORDS WHICH WAS AFFIRMED BY THE STATEMENT OF THE SECRETARY. THEREFORE, WE AR E OF THE OPINION THAT THE ASSESSEE CANNOT BE DENIED THE DEDUCTION U/S.80-IB(1 0) FOR THE SO-CALLED VIOLATION AFTER THE SALE OF THE APARTMENTS, WHICH A RE ORIGINALLY CONSTRUCTED AS PER THE NORMS. THE AO IS DIRECTED TO GRANT DEDUCTIO N AS CLAIMED. 12. IN VIEW OF THE ABOVE, THE ASSESSEES GROUN D NOS.1 & 2 ARE ALLOWED AND REVENUES GROUND NOS.1(A) TO 1(F) ARE DISMISSED. 13. GROUNDS NO. 3 IN ASSESSEES APPEALS IS WITH REFERENCE TO DISALLOWANCE U/S.14A READ WITH RULE 8D. FOLLOWING THE DECISION O F SPECIAL BENCH OF TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEMENT PV T. LTD., THE CIT(A) CONFIRMED THE DISALLOWANCE INVOKING RULE 8D. IN VIE W OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO. LTD. VS. DCIT (323 ITR 81) (BOM), THE ISSUE IS SET ASIDE TO THE FILE OF AO FOR RE- CONSIDERATION TO DETERMINE THE REASONABLE AMOUNT F OR DISALLOWANCE IN RESPECTIVE ASSESSMENT YEARS OF 2005-06, 2006-07 AND 2007-08. ACCORDINGLY, THE ASSESSEES GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO.1(G) IN REVENUES APPEAL IN ASSESSMEN T YEARS 2005-06 AND 2006-07 IS ON THE ISSUE OF DISALLOWANCE U/S 43B. TH E AO DISALLOWED THE AMOUNTS WHICH WERE PAID AFTER DUE DATES, WHEREAS TH E CIT(A) ALLOWED THE AMOUNTS ON OBSERVATION THAT MANY OF THE PAYMENTS W ERE MADE WITHIN THE GRACE PERIOD, WHILE SOME OF THE PAYMENTS ARE, THOUG H PAID BEYOND THE GRACE PERIOD, BUT PAID BEFORE THE END OF THE PREVIOUS YEA R. FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. AL OM EXTRUSIONS LTD. (319 ITR 306) AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF AIMIL LTD. (327 ITR 508), THE CIT(A) DELETED THE AD DITIONS. SINCE THE CIT(A) ITA NOS.6331 TO 6333 & 6604 TO 6606/MUM/2010 ANILKUMAR AGARWAL 14 FOLLOWED THE HONBLE SUPREME COURT/ HIGH COURT JUDG MENTS ON THE ISSUE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE SAID OR DER AS ON THE FACTS THE AMOUNTS WERE PAID WITHIN THE GRACE PERIOD AND EVEN THOUGH THERE WAS SOME DELAY IN SOME OF THE PAYMENTS, THEY WERE PAID WITHI N THE FINANCIAL YEAR ITSELF. THEREFORE, BOTH ON FACTS AND ON LAW, THE REVENUES CONTENTION CANNOT BE ACCEPTED. ACCORDINGLY, THE GROUND IS REJECTED. 15. IN THE RESULT, THE ASSESSEES APPEALS FOR ALL THE YEARS ARE ALLOWED, WHILE THE REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED ON THE 20 TH DAY OF APRIL, 2012 IN OPEN COURT. SD/- SD/- (S.S. GODARA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 20 TH APRIL , 2012. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-39,MUMBAI. 4 CIT, CENTRAL-II, MUMBAI. 5.DR,H BENCH, MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST. REGISTRAR, ITAT, MUMBAI.