Deputy Commissioner of Income Tax, Circle- 1, Margap., Margao V. M/s Sanatan Financiers & Real Estates Pvt. Ltd., Goa

ITA 68/PAN/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93611 (ITAT-PANAJI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 16-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S NATARAJ
• Keywords: Question of law
• Section: 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 67 & 68 /PNJ/201 5 (ASST. YEAR : 200 9 - 1 0 & 2010 - 11 ) D CIT, CIRCLE - 1, MARGAO. VS. M/S. SANATAN FINANCERS & REAL ESTATES PVT. LTD., 172/1, PEACE VALLEY, DEUMOL, SHIRVOI, QUEPEM - GOA. PAN NO. AAECS 0088 H (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE . DEPARTMENT BY : SHRI S. NATARAJ - D R DATE OF HEARING : 27 / 0 7 /2015 . DATE OF PRONOUNCEMENT : 27 / 0 7 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER TH E S E ARE THE APPEALS FILED BY THE REVENUE AGAINST THE CONSOLIDATED ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS), PANAJI , DATED 17 / 11 /201 4 FOR THE ASSESSMENT YEARS 2009 - 10 & 2010 - 11 . 2. THE COMMON GROUND OF APPEAL TAKEN BY THE REVENUE IN BOTH THE APPEALS IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING PROPORTIONATE DEDUCTION UNDER SEC. 80IB(10) . 3 . BRIEF FACTS OF THE CASE AS OBSERVED FROM THE ASSESSMENT ORDER ARE THAT THE ASSESSING OFFI CER OBSERVED THAT THE ASSESSEE H AS CONSTRUCTED A PROJECT CALLED P EACE V ALLEY. WHEN ENQUIRED FROM THE MUNICIPAL 2 ITA NO S . 67 & 68 /PNJ/201 5 CORPORATION OF QUEPEM, THEY VIDE LETTER NO. QMC /MUN/2011/4821 DATED 03/11/2011 STATED THAT NO APPROVAL FOR ANY PROJECT CALLED PEACE VALLEY AS WHOLE WAS EVER OBTAINED BY THE ASSESSEE. FURTHER ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CONSTRUCTED UNITS WHICH WERE MORE THAN 1500 SQ.FT. AND, THER EFORE, THE SAME WOULD RENDER THE PROJECT INELIGIBLE FOR DEDUCTION UNDER SEC. 80IB(10) . THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE CONSTRUCTED SHOPS AND OTHER COMMERCIAL ESTABLISHMENT S EXCEEDING 5% OF THE AGGREGATE BUILT UP AREA OR 2000 SQ.FT. , THEREFORE, ASSESSEE WAS INELIGIBLE FOR D EDUCTION UNDER SEC. 80IB(10) . THE ASSESSING OFFICER ALSO OBSERVED THAT THE PROJECT OF THE ASSESSEE WAS A 5 STAR FACILITY AND FROM THE SALE DEED, IT WAS EVIDENT THAT BUNGALOWS, VILLAS AND FLATS WERE SOLD TO NON - RESIDENTS AND COMPANIES WHOSE DIRECTORS ARE FOREIGN NATIONALS AND , THEREFORE, THE ASSESSEE NEVER INTENDED TO BUIL D HOUSING PROJECT FOR COMMON MAN AS WAS THE INTENTION OF THE LEGISLATURE AND STAND AS EVIDENCE FOR DISALLOWING THE CLAIM OF THE ASSESSEE CO MPANY UNDER SEC. 80IB(10) . CONSEQUENTLY , THE ASSESSING OFFICER DENIED DEDUCTION UNDER SEC.80IB(10) OF RS. 93,16,791/ - FOR THE ASSESSMENT YEAR 2009 - 10 AND RS.67,65,657/ - FOR THE ASSESSMENT YEAR 2010 - 11. 4 . ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE CLAIM UNDER SEC. 80IB(10) TO THE ASSESSEE ON PROPORTIONATE BASIS BY OBSERVING AS UNDER: - 7. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. A SURVEY U/S.133A OF THE I.T. ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF THE APPELLANT COMPANY AND BASED ON SURVEY FINDINGS, THE A.O. HAS COMPUTED THE ASSESSMENT. THE A.O. FOUND THAT THE APPELLANT COMPANY HAS NOT FULFILLED THE CO NDITIONS AS STIPULATED IN S.80 I B (10), MAINLY IN THE FOLLOWING RESPECT. I) A PPROVAL OF THE LOCAL AUTHORITY: THE ACT REQUIRES THAT THE LOCAL AUTHORITY HAS TO APPROVE THE HOU S ING PROJECT. THE A.O. FOUND THAT THE LICENSE FOR CONSTRUCTION WAS GIVEN BY THE LOCAL AUTHORITY IN PIECEMEAL, EACH APPROVAL FOR 3 ITA NO S . 67 & 68 /PNJ/201 5 FEW BUILDINGS, OR ONE VILLA, B UNGALOW. THE A.O. CONCLUDED THAT THESE SEPARATE PERMISSIONS INDICATED THAT THE CO M PANY WAS BUILDING INDIVIDUAL HOUSES AND NOT A PROJECT AS A WHOLE AND ALSO T HAT REFUGE TO DEDUCTION U/S.80 I B (10) WAS TAKEN ONLY WHEN SALES WERE EFFECTED IN THE ACCOUNTING YE AR 2008 - 09. THE A.O. INQUIRED FROM THE MUNICIPAL CORPORATION OF QUEPEM ASKING WHETHER ANY PROJECT CALLED PEACE VALLEY WAS APPROVED BY THEM. THE MUNICIPALITY REPLIED THAT NO APPROVAL FOR ANY PROJECT CALLED PEACE VALLEY AS WHOLE WAS EVER OBTAINED BY THE ASSESSEE. THE A.O. CONCLUDED THAT THE CONDITION OF BEING A HOUSING PROJECT, APPROVAL FROM THE LOCAL AUTHORITY IS NOT FULFILLED. HOWEVER, THE A.O. HAS HIMSELF MENTIONED IN THE ASSESSMENT ORDER THAT APPROVAL FROM QUEPEM MUNICIPALITY WAS TAKEN ON 13.08.2004, 15.07.2005, 18.10.2005, 01.02.2006, 08.02.2006, 05.09.2006, 17.10.2006 AND FINALLY ON 20.11.2007. THE A.O. HAS MENTIONED THAT THE PROJECT LAYOUT IS 55000 SQ. METRES AND CONSISTS OF 23 VILLAS, 174 APARTMENTS IN A BUILDINGS, 20 SHOPS IN ONE BUI LDING (D BLOCK), COMMUNITY HALL AND SWIMMING POOL . A.OS OBSERVATION THAT NO APPROVAL FROM THE MUNICIPALITY WAS TAKEN FOR THE PROJECT KNOWN AS PEACE VALLEY, IN MY OPINION, IS IRRELEVANT, AS THERE IS NO LEGAL REQUIREMENT TO TAKE APPROVAL IN THE NAME OF THE PROJECT. THE LEGAL REQUIREMENT U/S.80 IB(10) IS THAT THE PROJECT SHOULD BE A HOUSING PROJECT, APPROVED BY THE LOCAL AUTHORITY AND THE AREA OF THE PROJECT SHOULD BE AT LEAST AN ACRE. FROM THE ASSESSMENT ORDER ITSELF, IT IS CLEAR THAT AREA IS MUCH BIGGE R THAN ONE ACRE, THE PROJECT CONSISTS OF DWELLING UNITS AND APPROVAL HAS BEEN OBTAINED FROM THE LOCAL MUNICIPALITY. THEREFORE, IN MY OPINION, THE APPELLANT HAS SATISFIED THIS CONDITION AS PER THE PROVISIONS OF THE ACT. II) THE RESIDENTIAL UNIT BUILT UP A REA SHOULD NOT EXCEED 1,500/ - SQ. FEET: DURING THE COURSE OF SURVEY U/S.133A AND ASSESSMENT PROCEEDINGS, THE A.O. FOUND THAT IN THE SAME PROJECT, THE ASSESSEE HAD CONSTRUCTED 24 VILLAS, WHOSE AREA EXCEEDED THE LIMIT OF 1500 SQ. FEET. THE A.O. HELD THAT T HIS CONDITION OF MAXIMUM AREA OF EACH DWELLING UNIT HAS BEEN VIOLATED AND RENDERS THE ASSESSEE INELIGIBLE FOR CLAIM OF DEDUCTION U/S.80 IB(10). THE A.O. ALSO CONCLUDED THAT THE PROJECT WAS AIMED AT SEEKERS OF LUXURY RESIDENTIAL UNITS. T1IE ASSESSEE AGREED THAT SOME OF THE UNITS EXCEEDED THE AREA OF 1500 SQ. FEET. IN THIS REGARD THE APPELLANT CONTENDED THAT HIS ENTIRE PROJECT IS SPREAD OVER AN AREA OF 55,000 SQ. MTRS. WHICH IS MORE THAN 11 ACRES WHEREAS THE AREA OF ALL UNITS, WHICH EXCEEDS THE LIMIT OF 1500 SQ. FEET IS ABOUT 4500 SQ. 4 ITA NO S . 67 & 68 /PNJ/201 5 MTRS . AND THEREFORE, EVEN IF THE AREA OF UNITS EXCEEDING THE MAXIMUM LIMIT IS EXCLUDED, THE ASSESSEE QUALIFIES FOR CLAIM OF DEDUCTION U/S.80 IB(10). THE APPELLANT REQUESTED FOR PRO - RATA ALLOWANCE OF DEDUCTION U/S.80 IB(10) AND TO SUPPORT ITS CLAIM, PLACED RELIANCE ON MANY JUDICIAL PRONOUNCEMENTS LIKE JOHAR HASAN ZOJWALA, IN ITO NO. 581 OF 2 012, ITAT MUMBAI, J BENCH, SJR BUILDERS VS. ACIT, ITAT BANGALORE, BENCH A, EKTA SANKAIP DEVELOPERS VS. ADD L . C.I.T., ITAT MUMBAI, DCIT VS BRIGADE ENTERPRISES LTD, ITAT BANGALORE, BENCH B, BRAHMA ASSOCIATES VS CIT - II , HC. BOMBAY REPORTED IN (2009) 119 I TD 255. OUT OF THE ABOVE, I WOULD LIKE TO DISCUSS THE DECISION OF HON. JURISDICTIONAL HIGH COURT OF BOMBAY, GIVEN IN THE CASE OF BRAHMA ASSOCI ATES. IN THIS CASE, ONE QUESTION OF LAW WAS AS UNDER: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE INCOME TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE PROJECTS WHEREIN THE COMMERCIAL AREA IS MORE THAN 10% OF THE PROJEC TS AND THE PROFITS FROM THE RESIDENTIAL DWELLING UNITS IN THAT PROJECT CAN BE WORKED OUT SEPARATELY THEN, SUBJECT TO FULFILLING OTHER CONDITIONS, DEDUCTION ON THE PROFITS RELATABLE TO THE RESIDENTIAL PART OF THE PROJECT WOULD BE ELIGIBLE FOR DEDUCTION UNDE R SECTION 80 IB(L0)? IN THIS CASE, THE APPELLANT HAD CONSTRUCTED 15 RESIDENTIAL AND TWO COMMERCIAL BUILDINGS. THE COMMERCIAL BUILDINGS WERE IN EXCESS OF 10% OF THE TOTAL AREA CONSTRUCTED. THE A.O. DISALLOWED THE CLAIMED OF DEDUCTION OF THE ASSESSEE. TH E ITAT HELD THAT SINCE THE ASSESSEE FULFIL S ALL OTHER CONDITIONS OF ELIGIBILITY. HE IS ENTITLED TO DEDUCTION OF PROFITS IN RESPECT OF 15 RESIDENTIAL BUILDINGS. THE HONBLE HIGH COURT OF BOMBAY CONFIRMED THE VIEWS OF THE ITAT WITH A REMARK THAT SINCE APP ELLANT HAS ACCEPTED THE DECISION OF THE ITAT, WHEREIN THE ITAT HAS ALLOWED DEDUCTION IN R ESPECT OF RESIDENTIAL BUILDINGS ONLY AND HAS NOT ALLOWED DEDUCTION IN RESPECT OF COMMERCIAL BUILDINGS, THE ORDER OF THE ITAT IS NOT BEING DISTURBED. FACTS OF THE INSTANT CASE IS SIMILAR IN MANY RESPECTS. APPLYING THE LOGIC OF DECISION OF HONBLE BOMBAY HIGH COURT, THE FACTS CAN BE SUMMARIZED AS UNDER: I. THE PROJECT IS A HOUSING PROJECT, COMPRISING OF 174 APARTMENTS IN 4 BUILDINGS, 23 VILLAS AND 20 SHOPS WITH COM MUNITY HALL AND SWIMMING POOL. II. THE VILLAS ARE BIGGER IN SIZE THAN 1500 SQ. FEET. III. 20 SHOPS EXCEED THE CUMULATE AREA OF 5% OF TOTAL AREA OR 2000 SQ. FEET, WHICHEVER IS LESS. 5 ITA NO S . 67 & 68 /PNJ/201 5 IV. APPROVAL FOR THE PROJECT WAS OBTAINED FROM THE LOCAL MUNICIPALITY. THE APPELLANT HAS HIMSELF PROPOSED THAT DEDUCTION U/S.80 IB(L0) BE DISALLOWED ON PROFITS FROM BUNGALOWS AND EXCESS AREA OF COMMERCIAL SHOPS AND HAS REQUESTED FOR ALLOWING DEDUCTION ON PROPORTIONATE BASIS. OTHER JUDICIAL PRONOUNCEMENTS RELIED UPON ALSO SUP PORT THIS VIEW. A.OS OBSERVATION THAT THIS PROJECT HAS FIVE STAR FACILITY AND THAT THE BUYERS OF DWELLING UNITS ARE NRIS AND FOREIGNERS AND THEREFORE THE ASSESSEE NEVER INTENDED TO BUILD HOUSING PROJECT FOR COMMON MAN AS WAS THE INTENTION OF THE LEGIS LATURE AND STAND AS EVIDENCE FOR DISALLOWING THE CLAIM OF THE ASSESSEE COMPANY U/S.80 IB(L0), IS IRRELEVANT AS THERE IS NO SUCH REQUIREMENT UNDER THE LAW, I.E. UNDER THE PROVISIONS OF S. 80 IB(10). THEREFORE, IN VIEW OF ABOVE DISCUSSION AND FACTS OF THI S CASE, IN MY OPINION, DEDUCTION U/S.80 IB(L0) IS ALLOWABLE TO THE ASSESSEE ON PROPORTIONATE BASIS, ON THE PROFITS OF DWELLING UNITS. DURING THE COURSE OF APPELLATE PRO CE EDINGS, THE APPELLANT VAS ASKED TO FURNISH THE PROFITS DERIVED FROM ELIGIBLE UNITS. THE DETAILS FURNISHED BY THE APPELLANT IS REPRODUCED AS UNDER: REVISED GROUND OF APPEAL LEARNED INCOME TAX OFFICER FAILED TO APPRECIATE THAT ALL CONDITIONS STIPULATED U/S.80 - IB(10) ARE COMPLIED WITH BY THE ASSESSEE AND ERRED IN DENYING PROPORTIONATE DED UCTION U/S.80 - IB(10) WITH REFERENCE TO PROFIT ATTRIBUTABLE TO BUILT UP AREA WHICH WAS OCCUPIED BY RESIDENTIAL UNITS HAVING INDIVIDUAL FLAT SIZE OF LESS THAN 1500 SQ. FT. DETAILS OF PROPORTIONATE DEDUCTION U/S.80 - IB(10) IS AS UNDER: PARTICULARS AY 2009 - 2010 AY 2010 - 2011 NO. OF UNITS SOLD 21 13 AREA IN SG.FT 18438.47 13443.81 NO. OF UNITS > 1500 SG.FT 3 2 AREA IN SG.FT 4973.15 5407.10 ELIGIBLE FOR DEDUCTION U/S.80 - IB(10) 13465.32 8036.71 ELIGIBLE AREA IN PERCENTAGE 73.03% 59.78% PROFIT FOR THE YEAR 9316791.00 7699180.00 ELIGIBLE DEDUCTION 6804052.00 4602570.00 # REFER ANN E XURE FOR UNIT WISE DETAILS. 6 ITA NO S . 67 & 68 /PNJ/201 5 ANNEXURE TO GROUND OF APPEAL DETAILS OF UNITS SOLD & 80 - IB(10) DEDUCTION CLAIMED FOR A.Y. 2009 - 10 SR NO UNIT NO AREA SQ MT AREA SQ MT 1 AF/SD13 44.34 477.12 2 AS/D08 86.96 935.68 3 AS/D12 44.34 477.12 4 AS/514 68.58 737.97 5 AS/S15 69.50 747.86 6 VILLA 7 158.44 1704.81 7 VILLA 19 94.48 1016.6 8 AGDO1 856I 921.14 9 AF/D09 85.61 921.14 10 AS/S06 68.77 739.97 11 AS/D09 85.61 921.14 12 AS/SD13 44.34 477.12 13 VILLA 21 148.80 1601.08 14 VILLA 18 94.48 1016.6 15 AS/D02 76.95 828 16 VILLA 23 154.95 1667.26 17 BF/D02 45.00 484.18 18 BS/D08 84.41 908.24 19 BG/D09 84.99 914.44 20 BGSD04 43.73 470.5 21 BG/SD13 43.73 470.5 1713.61 18438.47 DETAILS OF UNITS SOLD & 80 - IB( 10) DEDUCTION CLAIMED FOR A.Y. 2010 - 11 SR NO UNIT NO AREA SQ MT AREA SQ MT 1 AF/SDO4 44.38 477.58 2 AG/S07 69.94 752.58 3 BF/D07 75.80 815.62 4 SHOP NO 11 18.30 196.94 5 VILLA NO 9 324.81 3494.95 6 BG/SD12 43.73 470.5 7 BG/D16 84.99 914.44 8 AG/D08 86.96 935.68 9 BF/D01 84.41 908.25 10 BF/D08 84.41 908.25 11 VILLANO8 177.71 1912.15 12 VILLANO68 109.61 1179.29 13 AG/SDO4 44.38 477.58 1249.44 13443.81 7 ITA NO S . 67 & 68 /PNJ/201 5 IN VIEW OF THE ABOVE, FOR A. Y R. 2009 - 10, DEDUCTION U/S.80 IB( 10) IS ALLOWED FOR AN AMOUNT OF RS.68,04,052/ - AND BALANCE RS.25,12,739/ - IS DISALLOWED. FOR A. YR. 2010 - 11 DEDUCTION U/S.80 IB(1 0) IS ALLOWED FOR AN AMOUNT OF RS.46,02,570/ - AND BALANCE RS. 30,96 ,610/ - IS DISALLOWED. THE A. O . IS DIRECTED ACCORDINGLY. IN THE RESULT, BOTH THE APPEAL S ARE TREATED AS PARTLY ALLOWED. 5. DEPARTMENTAL REPRESENTATIVE DURING THE COURSE OF HEARING RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE COULD NOT POINT OUT ANY SPECIFIC MISTAKE IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). WE , THEREFORE, DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS HEREBY CONFIRMED AND THE GROUND OF THE APPEAL OF THE RE VENUE FOR BOTH THE YEARS UNDER CONSIDERATION ARE DISMISSED. 6 . IN THE RESULT, BOTH THE APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON MONDAY , THE 27 TH DAY OF JULY , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DA TED : 27 TH JU LY , 201 5 . VR/ - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI . 8 ITA NO S . 67 & 68 /PNJ/201 5 DATE INITIAL ORIGINAL DICTATION PAD IS ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 27 .0 7 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 28 .07 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 28 /07 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 28 /0 7 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 28 /07 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 27 /0 7 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 28 /07 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER