M/s B.K.Pate Enterprises, Pune V. CIT-I, Pune

ITA 736/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49855 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 12-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MITHALI MADHUSMITA
• Assessee Lawyers: S U PATHAKNIKHIL PATHAK
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 736/PN/2010 (ASSTT. YEAR : 2005-06) M/S. B.K. PATE ENTERPRISES ... APPELLANT NARAYAJN PETH PUNE PAN : NOT AVAILABLE V. ACIT, 11(2), RESPONDENT PUNE APPELLANT BY : S/SHRI S.U. PATHAK/NIKHIL PATHAK RESPONDENT BY : MS. MITHALI MADHUSMITA ORDER PER I.C. SUDHIR, JM THE ASSESSEE HAS QUESTIONED VALIDITY OF REVISIONAL ORDER PASSED U/S. 263 OF THE ACT ON SEVERAL GROUNDS INVOLVING THE SOL E ISSUE AS TO WHETHER LD CIT HAS ERRED IN HOLDING THAT THE ASSESSEE WAS N OT ENTITLED TO CLAIM DEDUCTION U/S. 80IB(10) OF RS. 2,62,32,323/- IN RES PECT OF THE PROFITS ARISING FROM THE HOUSING PROJECT PATE SANSKRUTI. 2. THE RELEVANT FACTS ARE THAT DURING THE YEAR, TH E ASSESSEE HAD CLAIMED DEDUCTION U/S. 80 IB (10) OF THE ACT AT RS. 2,62,32 ,323 IN RESPECT OF HOUSING PROJECT NAMED PATE SANSKRUTI. THE A.O ALLOWED THE CLAIM IN THE ASSESSMENT FRAMED U/S. 143(3) OF THE ACT. THE LD CIT REMAINED OF THE VIEW THAT THE NET BUILDABLE AREA OF THE PLOT ON WHICH THE SAID PROJECT WAS CONSTRUCTED IS 3592.34 SQ. MTRS., WHICH IS BELOW THE PRESCRIBED LIMIT OF ONE ACRE AS LAID D OWN IN SEC. 80 IB (10), HENCE THE PROJECT DID NOT FULFILLED THE CONDITIONS LAID DOWN UNDER THE SAID SECTION FOR ELIGIBILITY OF THE CLAIMED DEDUCTION. THE LD CIT ISSUED SHOW C AUSE NOTICE U/S. 263 OF THE ACT TO THE ASSESSEE FOR WITHDRAWAL OF THE DEDUCTION. H E WAS, HOWEVER, NOT SATISFIED WITH THE CAUSE SHOWN BY THE ASSESSEE AND HELD THE A SSESSMENT ORDER ALLOWING THE DEDUCTION AS ERRONEOUS. THE LD CIT HAS SET ASIDE THE ASSESSMENT ORDER ON THE ITA . NO 736/PN/2010 M/S. B.K. PATE ENTERPRISES A.Y 2005-06 PAGE OF 7 2 ISSUE TO THE FILE OF THE A.O WITH DIRECTION TO RE-C OMPUTE THE ASSESSABLE INCOME OF THE ASSESSEE. AGAINST THIS ACTION OF THE LD CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 3. IN SUPPORT OF THE GROUND, THE LD. A.R. SUBMITTE D THAT THE A.O HAD ALLOWED CLAIMED DEDUCTION U/S. 80 IB (10) AFTER APPLICATION OF HIS MIND. THE ASSESSEE HAD SUBMITTED THE AUDITORS REPORT CERTIFYING THE CLAIM OF DEDUCTION U/S. 80 IB (10) ALONG WITH THE RETURN. DURING THE COURSE OF THE ASSESSM ENT PROCEEDINGS, THE A.O. LOOKED INTO THE VARIOUS ASPECTS OF THE PROJECT. IT IS APP ARENT FROM THE NOTICE ISSUED BY THE A.O AND REPLIES DATED 30-11-2007 TO THE A.O , A CO PY WHEREOF HAS BEEN MADE AVAILABLE AT PAGE NOS. 10 TO 14 OF THE PAPER BOOK F ILED ON BEHALF OF THE ASSESSEE. THE A.O HAD ALSO ISSUED A QUESTIONNAIRE DATED 6.11. 2007 ASKING THE ASSESSEE TO GIVE DETAILS OF THE SIZE OF THE PLOT ON WHICH THE HOUSING PROJECT IS CONSTRUCTED. IN POINT NO. 9 OF THE SAID LETTER DT. 30 TH NOVEMBER 2007, THE ASSESSEE HAD CLARIFIED THAT THE PROJECT PATE SANSKRUTI WAS CONSTRUCTED ON THE LAND SITUATED AT SR. NO. 89/1 + 90/1 + 91/1. IN THAT LETTER, THE ASSESSEE HAS CLEA RLY STATED THAT LAND AREA IS 49,628 SQ. FT. THE ASSESSEE HAD ALSO GIVEN THE DETAILS O F THE ENTIRE PLOT IN THE ENCLOSURE TO THE SAID LETTER CLARIFYING THAT THE PLOT AREA AS 4 612.34 SQ. MTRS. AND AFTER DEDUCTING OF THE AREA FOR ROAD, THE NET PLOT AREA IS 3592.34 SQ. MTRS. IN THE SAID LETTER WITH ANNEXURE ENCLOSED, THE ASSESSEE SUBMITTED THAT ALL THE DETAILS OF THE PLOT OF LAND ON WHICH THE PROJECT WAS CONSTRUCTED WERE FURNISHED TO THE A.O . THUS ALL THE RELEVANT DETAILS WERE MADE AVAILABLE TO THE A.O DURING THE C OURSE OF ASSESSMENT PROCEEDINGS AND THE A.O HAD ALSO SPECIFICALLY ENQUI RED ABOUT SIZE OF THE PLOT. THUS, THE ASSESSMENT HAS BEEN COMPLETED AFTER DUE APPLICA TION OF MIND AND AFTER VERIFYING OF THE DETAILS. THE LD. A.R. SUBMITTED FURTHER TH AT THE AUTHORITIES BELOW ARE BOUND BY THE CBDT CIRCULAR NO. 5 OF 2005 DT. 15.7.2005 WH EREIN IT HAS BEEN SPECIFICALLY MENTIONED THAT THE AREA OCCUPIED BY INTERNAL ROADS, D.P. ROADS ETC., SHOULD NOT BE EXCLUDED WHILE COMPUTING THE AREA OF THE PLOT FOR THE PURPOSES OF THE DEDUCTION U/S. 80 IB(10). HE SUBMITTED THAT THE ASSESSEE HAD ACQUIRED THE RIGHTS IN THE LAND BY A DEVELOPMENT AGREEMENT EXECUTED ON 23.3.2006, A COPY WHEREOF HAS BEEN ITA . NO 736/PN/2010 M/S. B.K. PATE ENTERPRISES A.Y 2005-06 PAGE OF 7 3 MADE AVAILABLE AT PAGE NOS. 18 TO 54 OF THE PAPER B OOK. AT PAGE NO. 25 OF THE SAID AGREEMENT, SCHEDULE B, DEFINING THE AREA OF PLOT HAS BEEN GIVEN. AS PER THIS SCHEDULE, THE PLOT AREA IS 4612.34 SQ. MTRS. I.E. EQUIVALENT TO 49628.78 SQ.FT. WHICH IS MORE THAN 1 ACRE. AT PAGE NO. 1 OF THE PA PER BOOK, COPY OF THE SANCTIONED BUILDING PLAN OF THE PROJECT IN QUESTION, APPROVED BY THE PUNE MUNICIPAL CORPORTION (PMC) HAS BEEN MADE AVAILABLE WHEREIN THE TOTAL ARE A OF THE PLOT OF THE PROJECT HAS BEEN MENTIONED AS 4612.34 SQ.MTRS. IN CASE, THE P LOT AREA WAS DIFFERENT, PMC WOULD NOT HAVE STATED THE ABOVE AREA AS THE BASIS F OR ALLOWING THE ASSESSEE THE FSI TO BE CONSTRUCTED. THE LD. A.R. SUBMITTED THAT AT PAGE NO. 46 OF THE PAPER BOOK, THE LAY OUT OF THE PLOT HAS BEEN MADE AVAILABLE POI NTING THAT D.P. ROAD HAS BEEN SANCTIONED THEREIN. THE ASSESSEE HAD TO SURRENDER THIS LAND TO PMC FOR THE PURPOSE OF THE D.P. ROAD. THE AREA OF THE D.P. ROAD IS 102 0 SQ. MTRS. AND IT HAS BEEN SHOWN SPECIFICALLY AS PART OF THE PLOT FOR THE PURPOSES O F CONSIDERING THE AREA OF THE PLOT IN VIEW OF THE CBDT CIRCULAR NO. 5 OF 2007 DT. 15.7.20 05 MADE AVAILABLE AT PAGE NO. 15 TO 17 OF THE PAPER BOOK. THE LD. A.R. POINTED O UT THAT WHEN THE PROJECT WAS SANCTIONING, THE ABOVE AREA WAS NOT EVEN HANDED OVE R BY THE ASSESSEE TO PMC AND IT REMAINED A PART OF THE PLOT. HE SUBMITTED THAT A DDITIONAL FSI WAS ALSO GRANTED BY THE PMC TO THE DEVELOPERS ON ACCOUNT OF ACQUISITION OF LAND FOR ROAD PURPOSE. THE PMC HAS ALLOWED THE ASSESSEE THE CONSTRUCTION OF FS I OF 4607.198 SQ. MTRS. AS IT IS EVIDENT FROM THE SANCTIONED PLAN. THE LD. A.R. SUB MITTED FURTHER THAT FROM THE PLAN, IT CAN BE FURTHER NOTICED THAT ADJOINING OF THE PLOT OF THE ASSESSEE IS THE OPEN SPACE OF ABOUT 644.80 SQ. MTRS. ON WHICH ASSESSES SEE HAS CONSTRUCTED THE CLUB HOUSE AND DEVELOPED A GARDEN FOR THE FLAT OWNERS OF THE PROJECT AS A PART OF THE PROJECT. THE LD. A.R. THUS SUBMITTED THAT THE LD CIT WAS NOT JUSTIFIED IN COMING TO THE CONCLUSION THAT THE ASSESSMENT ORDER WHEREBY TH E A.O HAS ALLOWED CLAIMED DEDUCTION U/S. 80IB(10) TO THE ASSESSEE IS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF REVENUE ONLY BECAUSE THE LD CIT WAS OF DIFFERENT VIEW THAT AREA OF THE PLOT ON WHICH, THE PROJECT WAS CONSTRUCTED WAS LESS THAN 1 ACRE SINCE THE AREA MEANT FOR D.P. ROAD CANNOT BE INCLUDED IN COMPUTING THE TOTAL AREA. THE LD. A.R PLACED ITA . NO 736/PN/2010 M/S. B.K. PATE ENTERPRISES A.Y 2005-06 PAGE OF 7 4 RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF H IS SUBMISSIONS THAT AREA SPECIFIED FOR ROAD IS INTERNAL MEANS OF EXCESS LAND WHICH HAV E TO BE TREATED AS A PORTION OF THE HOUSING PROJECT : I) M/S. NAVNIRMAN DEVELOPERS V/S. ACIT, ITA NOS. 7 TO 9/PN/2007 (2007), A.Y. 2000-01 TO 2002-03, ORDER DATED 4 TH MAY 2010 II) BUNTY BUILDERS V/S. ITO (2010), 127 ITD 286 (PUNE) 4. ON THE VALIDITY OF THE REVISIONAL ORDER IN QUEST ION, THE LD. A.R. PLACED RELIANCE ON THE FOLLOWING DECISIONS : I) MALABAR INDUSTRIAL CO. LTD., 243 ITR 83 (SC) II) MAX INDIA LTD., 295 ITR 292 (SC) 5. THE LD. D.R. , ON THE OTHER HAND, TRIED TO JUST IFY THE REVISIONAL ORDER IN QUESTION. HE REFERRED ASSESSMENT ORDER IN SUPPOR T WITH THIS SUBMISSION THAT THE A.O HAS NOT DISCUSSED THE AREA OF LAND ETC., WHICH WAS RELEVANT FOR EXAMINING THE CLAIMED DEDUCTION U/S. 80IB (10) OF THE ACT. 6. CONSIDERING THE ABOVE SUBMISSIONS, WE ARE OF TH E VIEW THAT ONLY BECAUSE THE A.O HAS NOT DISCUSSED THE ISSUE, I.E. ALLOWABILITY OF THE CLAIMED DEDUCTION U/S. 80 IB (10) OF THE ACT, IN DETAIL IN THE ASSESSMENT ORDER , AN INFERENCE CANNOT BE DRAWN THAT THE A.O HAS NOT APPLIED HIS MIND ON THE ISSUE. THE MATERIAL AVAILABLE ON RECORD I.E. COPY OF QUESTIONNAIRE ISSUED BY THE A.O (PAGE NOS. 5 TO 9 OF THE PAPER BOOK) AND REPLY DATED 30 TH NOVEMBER 2007 OF THE ASSESSEE THERETO (PAGE NOS. 1 0 TO 14 OF THE PAPER BOOK) CLEARLY SUGGEST THAT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE A.O HAD ASKED THE ASSESSEE TO FURNISH THE DETAI LS OF SIZE OF THE PLOT ON WHICH THE HOUSING PROJECT WAS CONSTRUCTED. IN POINT NO. 9 OF THE SAID LETTER DATED 30 TH NOVEMBER 2007, THE ASSESSEE HAS CLARIFIED THAT THE PROJECT PATE SANSKRUTI WAS CONSTRUCTED ON THE LAND SITUATED AT S.NO. 89/1 +9 0/1 + 91/1. IN THE SAID LETTER, ASSESSEE HAS ALSO CLARIFIED THAT THE AREA IS 49,62 8 SQ.FTS. THE DETAILS OF THE ENTIRE ITA . NO 736/PN/2010 M/S. B.K. PATE ENTERPRISES A.Y 2005-06 PAGE OF 7 5 PLOT HAS ALSO BEEN GIVEN IN ANNEXURE ENCLOSED TO TH E SAID LETTER DT. 30.11.2007 OF THE ASSESSEE TO THE A.O CLARIFYING THAT THE PLOT AR EA IS 4612.34 SQ.MTRS AND AFTER DEDUCTION OF THE AREA FOR THE ROAD, THE NET PLOT AR EA IS 3592.34 SQ. MTRS. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE HAD SUBMITTED THE AUDITORS REPORT CERTIFYING THE CLAIM OF DEDUCTION U/S. 80 IB (10) ALONG WITH T HE RETURN. THE CBDT VIDE IT CIRCULAR NO. 5 OF 2005 DT. 15.7.2005 (MADE AVAILAB LE AT PAGE NOS. 15 TO 17 OF THE PAPER BOOK) HAS MADE IT CLEAR THAT AREA OCCUPIED B Y INTERNAL ROADS, D.P ROADS ETC., SHOULD NOT BE EXCLUDED WHILE COMPUTING THE AREA OF THE PLOT FOR THE PURPOSE OF THE DEDUCTION U/S. 80 IB (10). FOLLOWING THE SAID CIRC ULAR OF THE CBDT, THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. NAVNIRMAN DEVEL OPERS V/S. ACIT (SUPRA) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE THAT RO ADS AND GARDENS SHOULD COMPLY WITH THE STANDARDS, RULES AND REGULATIONS IN FORCE AND MANDATED BY LOCAL AUTHORITIES. THE PUNE BENCH HAS ALSO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF BUNTY BUILDERS V/S. ITO (SUPRA) HOLDING THAT THOUGH THE SECTION DO NOT SPECIFICALLY PROVIDE FOR THE DEVELOPMENT PLAN, ROADS OR GRANT OF OTHER FACILITIES ETC., IN A HOUSING PROJECT, BUT THE SAME SHOULD CONFIRM TO THE PROJEC T PLAN APPROVED BY THE LOCAL AUTHORITY. THE HOUSING PROJECT CONSTITUTE DEVELOP MENT PLAN, ROADS, AND GRANT OF OTHER FACILITIES, THEREFORE, THOSE AREAS SHOULD EXI ST WITHIN THE PRESCRIBED LIMITS AND TO BE CONSIDERED AS PART AND PARCEL OF THE PROJECT. T HE ASSESSEE HAD ALSO FURNISHED SUFFICIENT EVIDENCE BY WAY OF DEVELOPMENT AGREEMENT EXECUTED ON 23.6.2006 (PAGE NOS. 18 TO 54 OF THE PAPER BOOK) ALONG WITH SCHEDUL E B DEFINING THE AREA OF THE PLOT AS 4612.34 SQ. MTRS.; SANCTIONED BUILDING PLA N OF THE PROJECT APPROVED BY THE PMC (PAGE NO. 1 OF THE PAPER BOOK) SHOWING TOTAL AR EA OF THE PLOT ON WHICH THE PROJECT HAS BEEN APPROVED AS 4612.34 SQ. MTRS. ; O N PAGE NO. 46 OF THE PAPER BOOK, THE ASSESSEE HAS MADE AVAILABLE THE LAY OUT P LAN OF THE PLOT SHOWING THE SANCTION OF THE D.P. ROAD. THE AREA OF D.P. ROAD H AS BEEN SHOWN AS 1020 SQ. MTRS. IT IS ALSO EVIDENT FROM THE SANCTIONED PLAN MADE AV AILABLE AT PAGE NO.1 OF THE PAPER BOOK THAT PMC HAS ALLOWED TO THE ASSESSEE THE CONS TRUCTION OF THE FSI OF 4607.198 SQ. MTRS. GENERALLY, THE FSI ALLOWED IS IN PMC LI MIT. UNDER THESE CIRCUMSTANCES, ITA . NO 736/PN/2010 M/S. B.K. PATE ENTERPRISES A.Y 2005-06 PAGE OF 7 6 ESPECIALLY IN VIEW OF CBDT CIRCULAR NO. 5 OF 2005 DATED 15.7.2005 AND THE DECISIONS OF PUNE BENCH OF THE TRIBUNAL IN THE ABO VE CITED CASES RELIED UPON BY THE LD. A.R, WE ARE OF THE VIEW THAT A.O HAS RIGHTLY A LLOWED THE CLAIMED DEDUCTION U/S. 80 IB(10) TREATING THE SIZE OF THE PLOT AS REQUIRE D UNDER SUB-CLAUSE (B) TO SUB- SECTION (10) TO SECTION 80IB OF THE ACT. THE LD C IT WAS THUS NOT JUSTIFIED IN EXCLUDING THE AREA OF THE LAND MEANT FOR D.P. ROAD WHILE COMPUTING THE AREA OF THE PLOT FOR THE PURPOSE OF THE DEDUCTION U/S. 80IB (10 ) OF THE ACT. IT IS EVIDENT THAT LD CIT HAS HELD THE ASSESSMENT ORDER GRANTING THE CLA IMED DEDUCTION U/S. 80IB (10) TO THE ASSESSEE AS ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF REVENUE ONLY ON THE BASIS THAT THE AREA OF THE PLOT ON WHICH THE PROJEC T WAS CONSTRUCTED IS BELOW THE PRESCRIBED LIMIT OF 1 ACRE. IN VIEW OF THE FOREGOIN G DISCUSSION ON THE SUBJECT, WE HOLD THAT LD CIT WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT AGAINST OF THE ASSESSMENT ORDER ON THE ISSUE, ONLY BECAUSE HE WAS NURTURING DIFFERENT VIEW WHICH CANNOT BE STATED AS EVEN THE DIFFERENT POSSIBLE VIEW WITHIN THE MEANING OF SECTION 80 IB (10) OF THE ACT R.W. CBDT CIRCULAR NO.5 OF 2005 DATED 15.7.2005. WE THUS WHILE SETTING ASIDE REVIS IONAL ORDER IN QUESTION, RESTORE THE ASSESSMENT ORDER ON THE ISSUE WITH THIS FINDING THAT THE A.O HAS RIGHTLY ALLOWED THE CLAIMED DEDUCTION U/S. 80 IB OF THE ACT IN QUES TION. THE GROUNDS INVOLVING THE ISSUE ARE THUS DECIDED IN FAVOUR OF THE ASSESSEE. THE GROUNDS ARE ACCORDINGLY ALLOWED. 7. CONSEQUENTLY, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8TH JULY, 2011 SD/- SD/- ( D. KARUNAKARA RAO ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 8TH JULY, 2011 US COPY OF THE ORDER IS FORWARDED TO : ITA . NO 736/PN/2010 M/S. B.K. PATE ENTERPRISES A.Y 2005-06 PAGE OF 7 7 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT -I, PUNE 4. THE D.R. B BENCH, PUNE 5. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE