THE ACIT (OSD-II), MUMBAI V. M/S. G.H.P. ENTERPRISES, MUMBAI

ITA 6749/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1485 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 08-06-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 07-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P N DEVDASAN
• Assessee Lawyers: K SHIVARAMAN
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, G, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 6746 TO 6749/MUM/2007 (ASSESSMENT YEARS: 2000-2001 TO 2003-04) ACIT (OSD-II), ROOM NO.413,4 TH FL, AAYAKAR BHAVAN M K ROAD. MUMBAI-400020 .APPELLANT V/S G H P ENTERPRISES MILLENIUM TOWER, 3 RD FL, BEHIND, IOC PETRL PUMP, POWAI,MUMBAI-400078. PAN: AADFG8909R RESPONDENT ASSESSEE BY : SHRI K SHIVARAMAN AND P ARAS SAVLA REVENUE BY : SHRI P N DEVDASAN O R D E R PER VIJAY PAL RAO,JM THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST T HE COMPOSITE ORDER DATED 24.08.2007 OF CIT(A)-XXI, MU MBAI FOR THE ASSESSMENT YEARS 2000-2001 TO 2003-04. SINCE ALL THESE APPEALS PERTAIN TO SAME ASSESSEE AND THE GROUNDS O F APPEAL RAISED IN ALL THESE FOUR APPEALS ARE COMMON THEREF ORE, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGET HER AND ARE BEING DECIDED BY THIS CONSOLIDATED ORDER. ITA NO. 6746 TO 6749/MUM/2007 (ASSESSMENT YEARS: 2000-2001 TO 2003-04) 2 2. THE REVENUE HAS RAISED FOLLOWING EFFECTIVE COM MON GROUNDS OF APPEAL IN ALL THESE APPEALS.: A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO ALLOW DEDUCTION U/S 80IB IN RESPECT OF RESIDENTIAL FLATS HAVING BUILT UP AREA O F 1000 SQ.FT.S OR LESS I.E. ON PRO-RATE BASIS WHEN THERE IS NO EXPRESS PROVISION IN THE ACT TO ALLOW T HE SAME IN SUCH MANNER; C. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO ALLOW DEDUCTION U/S 80IB BY NOT APPRECIATING THE FACT THAT THE ASSESSEES PROJECT ALSO HAD SOME COMMERCIAL UNITS/ESTABLISHMENTS WHICH WAS NOT CONTEMPLATED BY THE ACT. THE ACT SAYS THAT IT SHOULD BE HOUSING PROJECT: D ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE PROJECT HAS NOT BEEN COMPLETED WITHIN THE STIPULATED TIME 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CONSTRU CTION AND DEVELOPMENT OF LAND AND BUILDING. DURING ALL THESE YEARS UNDER CONSIDERATION, THE ASSESSEE CLAIMED DEDUCTION U/S 80IB OF THE ACT. IN THE ASSESSMENT FOR THE ASSESSMENT YEAR 2 003-04, THE AO DENIED DEDUCTION U/S 80IB(10) CLAIMED BY THE AS SESSEE, FIRSTLY, ON THE GROUND THAT THE PROJECT WAS NOT CO MPLETED DURING THE STIPULATED TIME AS THE ASSESSEE DID NOT RECEIVED COMPLETION CERTIFICATION FORM BOMBAY MUNICIPAL CORP ORATION TILL 31.03.2003; SECONDLY, THE PROJECT WAS HAVING COMMER CIAL AREA ITA NO. 6746 TO 6749/MUM/2007 (ASSESSMENT YEARS: 2000-2001 TO 2003-04) 3 WHEREAS NO SUCH INCLUSION IS PERMISSIBLE UNDER SECT ION 80IB(10); AND THIRDLY; THE BUILT UP AREA OF THE SOM E OF THE FLATS WAS MORE THAN 1000 SQ. FT.. ACCORDINGLY, THE AO H AS CONCLUDED THAT THE ASSESSEE HAS NOT COMPLY WITH THE CONDITIONS SPECIFIED IN SECTION 80IB(10) EITHER WIT H RESPECT TO COMPLETION BEFORE 31.3.2003 OR THE RESTRICTION TO BUILT UP AREA OF RESIDENTIAL UNITS NOT EXCEEDING 1000 SQ. FT. A ND THE COMMERCIAL AREA NOT EXCEEDING THE LIMIT SPECIFIED IN THE ACT. ACCORDINGLY, THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IB(10) WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. SIMILARLY, FOR THE OTHER ASSESSMENT YEARS, THE AO MADE SIMILAR ADDITION BASED ON THE FINDINGS OF T HE ASSESSMENT YEAR 2003-04. 4. ON APPEAL, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE IN VIEW OF THE AMENDED PROVISIONS OF SECTI ON 80IB(10) BY FINANCE (NO.2) ACT 2004 W.E.F. 01.04.20 05. THE CIT(A) HAS NOTED THAT THE CONDITION FOR COMPLETION OF PROJECT HAS BEEN WAIVED AS PER THE AMENDMENT AND MORE SPECI FICALLY IN THE FOOT NOTE REGARDING THE AMENDMENT. 4.1 AS REGARDS THE COMMERCIAL AREA IS CONCERNED, TH E CIT(A) HAS REFERRED THE CBDT CIRCULAR NO.F.NO.205/03/2001/ ITA/II DATED 04.05.2001 WHEREBY IT IS CLARIFIED THAT ANY PROJECT WHICH HAS BEEN APPROVED BY A LOCAL AUTHORITY AS A HOUSING PROJECT SHOULD BE CONSIDERED ADEQUATE FOR THE PURP OSES OF SECTION 10(23G) AND 80IB(10). FURTHER, THE CIT(A) WAS OF ITA NO. 6746 TO 6749/MUM/2007 (ASSESSMENT YEARS: 2000-2001 TO 2003-04) 4 THE VIEW THAT CLAUSE (D) OF SECTION 80IB(10) CAME I NTO EXISTENCE BY FINANCE (NO.2) ACT 2004 W.E.F AY 2005- 06, THEREFORE, CLAUSE (D) TO SECTION 80IB(10) IS NOT AP PLICABLE IN THE EARLIER ASSESSMENT YEAR AND NO RETROSPECTIVE E FFECT IS TO BE GIVEN. 4.2 WITH RESPECT TO THE FLATS HAVING BUILT UP AREA OF MORE THAN 1000 SQ. FT, THE CIT(A) HAS ALLOWED THE PROPO RTIONATE DEDUCTION IN RESPECT OF THE FLATS HAVING BUILT UP AREA UP TO 1000 SQ.FT OR LESS BY FOLLOWING THE DECISION OF KOL CATA BENCH OF THIS TRIBUNAL IN THE CASE OF BENGAL AMBUJA HOUSI NG DEVELOPMENT LTD V/S CIT IN ITA NO.1595/KOL/2005 (AY -2002- 03). THUS, OUT OF 43 FLATS, THE CIT(A) ALLOWED TH E DEDUCTION IN RESPECT OF 37 FLATS WHICH WERE FOUND HAVING LESS THAN 1000 SQ.FT. BUILT UP AREA. 5. BEFORE US, THE LEARNED DR SUBMITTED THAT THERE I S NO EXPRESS PROVISION IN THE ACT TO ALLOW THE PROPORTIO NATE DEDUCTION IN RESPECT OF THE FLATS HAVING LESS THAN 1000 SQ.FT. AREA OR HAVING MORE THAN 1000 SQ. FT. BUILT UP AREA . THE ASSESSEE HAS NOT FULFILLED THE CRITERION PRESCRIBE D UNDER SECTION 80IB BECAUSE SOME OF THE FLATS HAVING MORE THAN 1000 SQ. FT BUILT UP AREA. THE CONDITION PRESCRIBE D UNDER SECTION 80IB IS FOR THE ENTIRE PROJECT AND NOT FOR THE INDIVIDUAL FLATS. THEREFORE, IF ANY OF THE CONDITION IS NOT F ULFILLED BY THE PROJECT, THEN THE ASSESSEE IS NOT ENTITLED FOR THE DEDUCTION. ITA NO. 6746 TO 6749/MUM/2007 (ASSESSMENT YEARS: 2000-2001 TO 2003-04) 5 THE LD. DR HAS FURTHER CONTENDED THAT THE ASSESSEE S PROJECT HAS SOME COMMERCIAL UNITS/ESTABLISHMENTS WHICH WER E NOT CONTEMPLATED BY THE ACT. AS PER THE PROVISIONS OF ACT, THE PROJECT SHOULD BE HOUSING PROJECT AND THERE IS NOT SCOPE FOR ANY COMMERCIAL ESTABLISHMENT. 6. THE THIRD LINE OF ARGUMENT OF THE LEARNED DR IS THAT THE PROJECT IS NOT COMPLETED WITHIN THE STIPULATED TIME . HE HAS POINTED OUT THAT AS PER THE EXISTING PROVISIONS OF LAW AT THE RELEVANT POINT OF TIME OF THE ASSESSMENT, THE REQU IRED PROJECT WOULD HAVE BEEN COMPLETED BY 31.3.2003. THEREFORE , WHEN THE PROJECT COULD NOT BE COMPLETED UP TO THE TIME L IMIT PRESCRIBED UNDER THE EXISTING LAW, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER THE PROVISIONS OF SECTION 80IB. HE HAS RELIED UPON THE ORDER OF THE AO. 7. ON THE OTHER HAND, THE LEARNED AR OF THE ASSESSE E HAS SUBMITTED THAT THE CONDITION OF COMPLETION OF HOUSI NG PROJECT IN THE PRESENT CASE WAS SANCTIONED AFTER 1 ST OCTOBER 1998, THE SAME TO BE COMPLETED BEFORE ON OR BEFORE 31.03.2001 . BY THE FINANCE ACT 2000 IT WAS EXTENDED UP TO 31.03.2003 A ND AGAIN BY THE FINANCE ACT, 2003, THE CONDITION OF COMPLET ION WAS REMOVED FROM THE STATUTE BOOK. THEREFORE, WHEN THE CONDITION OF COMPLETION HAS BEEN REMOVED BY THE FINANCE ACT, 2003 THEN THE CLAIM OF DEDUCTION CANNOT BE DENIED ON THE GROUND ITA NO. 6746 TO 6749/MUM/2007 (ASSESSMENT YEARS: 2000-2001 TO 2003-04) 6 THAT THE PROJECT WAS NOT COMPLETED BEFORE 31.03.200 3. HE HAS REFERRED EXPLANATORY NOTE OF FINANCE ACT 2003 AND S UBMITTED THAT THIS AMENDMENT WAS BROUGHT INTO THE STATUTE FO R ALLOWING THE NEW HOUSING PROJECT TO AVAIL THE BENEFIT OF TAX HOLIDAY. THE LIMIT FOR OBTAINING THE APPROVAL FROM THE LOCAL AUTHORITY HAS BEEN EXTENDED UP TO 31.03.2005. THEREFORE, HE HAS FURTHER POINTED OUT THAT THIS AMENDMENT WAS RETROSP ECTIVE WITH EFFECT FROM 1 ST APRIL 2002. 8. AS REGARDS THE PROPORTIONATE DEDUCTION ALLOWED BY THE CIT(A), THE LEARNED AR OF THE ASSESSEE HAS SUBMITTE D THAT THE CLAIM OF THE ASSESSEE IS ALLOWED ONLY WITH RESPECT TO THE UNITS WHICH ARE LESS THAN 1000 SQ. FT. AND THEREFORE IN V IEW OF THE DECISION OF THE KOLKATA BENCH OF THE TRIBUNAL IN T HE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD V/S CIT (SUPR A), WHICH WAS ALSO UPHELD BY THE HON.CALCUTTA HIGH COUR T VIDE ITS ORDER DATED 05.01.2007, PROPORTIONATE DEDUCTION U/S 80IB BE ALLOWED TO THE ASSESSEE. THE LEARNED AR OF THE ASS ESSEE ALSO RELIED UPON THE DECISION OF THE NAGPUR BENCH OF THE TRIBUNAL IN THE CASE OF ITO V/S AIR DEVELOPERS REPORTED IN (2009) 25 DTR (NAG) (TRIB) 287 AND THE DECISION OF BENGALORE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V/S BRIGADE ENTE RPRISES (P) LTD (2008) 14 DTR 371 (BANG) (TRIB). THE LD. AR OF THE ASSESSEE FURTHER CONTENDED THAT AS PER THE AMENDED PROVISIONS OF SECTION 80IB SHOPS AND COMMERCIAL ITA NO. 6746 TO 6749/MUM/2007 (ASSESSMENT YEARS: 2000-2001 TO 2003-04) 7 ESTABLISHMENTS ARE PERMITTED WHICH NEED NOT BE ES SENTIALLY SELLING ONLY MILK, DIARY PRODUCTS, BAKERY ITEMS AND OTHER GENERAL STORES OF KIRANA OR FLOUR MILL ONLY. THE O NLY CONDITION FOR COMMERCIAL ESTABLISHMENT IS THAT THERE SHOULD B E AN APPROVAL BY LOCAL AUTHORITY FOR ESTABLISHMENT AND C OMMERCIAL ESTABLISHMENT. HE HAS RELIED UPON THE ORDER OF THI S TRIBUNAL IN THE CASE OF HARSHAD P DOSHI V/S ACIT 25(2), IN ITA NO.2305/M/2006 DATED 28.01.2007. 9. THE LEARNED AR HAS CONTENDED THAT THE ASSESSEE H AS SATISFIED ALL THE CONDITIONS LAID DOWN IN THE SECTI ON 80IB(10) OF THE ACT AND MUNICIPAL CORPORATION HAS APPROVED THE PROJECT HAVING CONVENIENCE SHOP FOR THE BENEFITS OF RESIDEN TS. THEREFORE, AS PER THE CBDT CIRCULAR NO.F. NO.205/03/2001/ITA/II DATED 04.05.2001 WHEREBY IT H AS BEEN CLARIFIED THAT THE PROJECT WHICH HAS BEEN APPROVED BY THE LOCAL AUTHORITY AS A HOUSING PROJECT SHOULD BE CONSIDERE D ADEQUATE FOR THE PURPOSE OF SECTION 10(23G) AND 80IB(10). H E HAS SUPPORTED THE ORDER OF CIT(A).. 10 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND REL EVANT RECORD. AS FAR AS THE ISSUE OF PROJECT COMPLETION W ITHIN THE STIPULATED PERIOD IS CONCERNED, AFTER THE AMENDMEN T IN THE STATUTE BY THE FINANCE ACT, 2003, WHEN THE CONDITI ON OF COMPLETION OF THE PROJECT IS REMOVED THEN THERE IS NO ITA NO. 6746 TO 6749/MUM/2007 (ASSESSMENT YEARS: 2000-2001 TO 2003-04) 8 JUSTIFICATION FOR THE DENIAL OF THE DEDUCTION ON TH IS GROUND. WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) QUA THIS ISSUE. 11. WITH REGARD TO THE PRO-RATA DEDUCTION IN RESPEC T OF THE FLATS HAVING LESS THAN 1000 SQ.FT AREA AND PROPORTI ONATE TO THE FLATS HAVING MORE THAN 1000 SQ. FT AREA, WE NOTE THAT THIS ISSUE IS COVERED BY THE DECISION OF THE KOLKATA BEN CH OF THE TRIBUNAL IN THE CASE OF BENGAL AMBUJA HOUSING DEVE LOPMENT LTD V/S CIT (SUPRA) WHICH HAS BEEN UPHELD BY THE HO NBLE .CALCUTTA HIGH COURT VIDE ORDER DATED 05.01.2007. H OWEVER, PRO-RATA DEDUCTION IS ALLOWABLE ONLY IN THE CASE WH EN ALL OTHER CONDITIONS PRESCRIBED UNDER THE PROVISIONS OF SECTI ON 80IB(10) ARE SATISFIED AND PARTICULARLY THE AREA OF THE PROJ ECT SHOULD NOT BE REDUCED TO LESS THAN THE AREA AS PRESCRIBED IN T HE SECTION 80IB AFTER EXCLUDING THE PROPORTIONATE AREA OF THE UNIT OF THE FLATS HAVING BUILT UP AREA MORE THAN 1000 SQ. FT. THEREFORE, IN OTHER WORDS IN ORDER TO ALLOW PRO-RATA DEDUCTION U/S 80IB(10) IT HAS TO BE SEEN THAT AFTER EXCLUDING PROPORTIONAT E AREA OF THE PROJECT IN THE RATIO OF BUILT UP AREA OF THE FLATS HAVING MORE THAN 1000 SQ.FT TO THE BUILT UP AREA OF FLAT LAVIN G LESS THAN 1000 SQ. FT AND IF AFTER EXCLUDING THE PROPORTIONAT E AREA OF THE PROJECT WITH RESPECT TO THE FLATS HAVING MORE THAN 1000 SQ.FT BUILT UP AREA THE REMAINING PROJECT IS STILL HAVING MINIMUM ONE ACRE OF THE AREA THEN PRO-RATA DEDUCTION IS ALLOWAB LE. ITA NO. 6746 TO 6749/MUM/2007 (ASSESSMENT YEARS: 2000-2001 TO 2003-04) 9 ACCORDINGLY THE ISSUE OF PRORATE DEDUCTION REQUIRES VERIFICATION ON THIS ASPECT AS TO WHETHER AFTER EXCLUDING ANY P ROPORTIONATE AREA OF PROJECT IN THE RATIO OF TOTAL AREA OF TH E FLATS HAVING BUILT UP AREA OF MORE THAN 1000 SQ. FT AND THE FLAT S HAVING AREA OF LESS THAN 1000 SQ. AREA, THE REMAINING PROJECT FULFILLS THE CONDITION OF MINIMUM AREA OF ONE ACRE. ACCORDINGLY , WE REMIT THE ISSUE TO THE RECORD OF THE AO FOR NECESSARY VER IFICATION AND EXAMINATION AND THEREAFTER PASS THE ORDER AS PE R LAW AS DISCUSSED ABOVE. 12. AS REGARDS THE COMMERCIAL ESTABLISHMENT /SHOPS ARE CONCERNED IN THE PROJECT WHEN THIS ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF HARSHAD P DO SHI V/S ACIT (SUPRA), AND THE PROJECT WAS APPROVED BY THE LOCAL AUTHORITY AS WELL AS THE CLAUSE (D) HAS BEEN INSE RTED W.E.F. 2005-06 THEN WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A) QUA THIS ISSUE. THE SAME IS UPHELD. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 18.06.2010 SD SD (P.M.JAGTAP) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI, DATED 18TH JUNE 2010 ITA NO. 6746 TO 6749/MUM/2007 (ASSESSMENT YEARS: 2000-2001 TO 2003-04) 10 SRL:10610 COPY TO: 1. ACIT (OSD-II), ROOM NO.413,4 TH FL, AAYAKAR BHAVAN M K ROAD. MUMBAI-400020 2.G H P ENTERPRISES MILLENIUM TOWER, 3 RD FL, BEHIND, IOC PETRL PUMP, POWAI,MUMBAI-400078. 3. CCIT CITY-XI, MUMBAI. 4.CIT CITY-XXI, MUMBAI 5 CIT(A)-XXI, MUMBAI. 6. DR G BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI