ITO 29(1)(1), MUMBAI V. AVANI DEVELOPERS, MUMBAI

ITA 7368/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1196 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 10-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: K GOPAL SHRI JITENDRA SINGH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD , JUDICIAL MEMBER ITA NO. 7368 /MUM/ 2014 : (A.Y : 2010 - 11 ) ITO - 29(1)(1), MUMBAI (APPELLANT) VS. M/S. AVANI DEVELOPERS A - 201, VINAYAK ASHISH, NEAR TELEPHONE EXCHANGE, MADAN MOHAN MALAVIYA MARG, MULUND (W), MUMBAI 400 080 PAN : AAMFA0232C (RESPONDENT) APPELLANT BY : SHRI RAJESH KUMAR YADAV RESPONDENT BY : SHRI K. GOPAL, SHRI JITENDRA SINGH & MS. NEHA PARANJPE DATE OF HEARING : 22 / 02 /201 7 DATE OF PRONOUNCEMENT : 12 /0 4 /201 7 O R D E R PER G.S. PANNU , AM : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 26 , MUMBAI DATED 18.9.2014 , PERTAINING TO THE ASSESSMENT YEAR 2010 - 11 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 25.3.2013 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 ITA NO. 7368/MUM/2014 M/S. AVANI DEVELOPERS 2. IN THIS APPEAL, ALTHOUGH REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT THE SOLITARY GR IEVANCE IS THAT THE CIT(A) ERRED IN ALLOWING THE CLAIM OF ASSESSEE FOR DEDUCTION U/S 80 - IB (10) OF THE ACT. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE RESPONDENT - ASSESSEE IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN DEVELOPMENT OF SLUM REHABILITATION SCHEM E. IN THE COURSE OF SUCH ACTIVITY, IT HAS UNDERTAKEN DEVELOPMENT AND CONSTRUCTION OF A HOUSING PROJECT NAMED VINAYAK BLESSINGS AND WITH RESPECT TO THE PROFITS DERIVED FROM SUCH PROJECT, IT CLAIMED DEDUCTION U/S 80 - IB (10) OF THE ACT FOR A SUM OF RS. 1,61, 00,007/ - . THE ASSESSING OFFICER HAS DENIED THE CLAIM OF ASSESSEE FOR DEDUCTION ON THE GROUND THAT THE BUILT UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS IN THE PROJECT VIOLATED THE LIMIT PRESCRIBED IN CLAUSE (D) OF SEC. 80 - IB (10) OF THE ACT. THE ASSESSING OFFICER ALSO NOTICED THAT THE DEDUCTION U/S 80 - IB (10) OF THE ACT WAS ALSO DISALLOWED IN THE PRECEDING ASSESSMENT YEAR OF 2010 - 11 FOR VIOLATION OF THE LIMIT PRESCRIBED FOR COMMERCIAL AREA. 4. THE ABOVE DISALLOWANCE WAS CARRIED BY THE ASSESSEE IN APPEAL BEFORE THE CIT(A) CONTESTING THE DENIAL OF DEDUCTION ON VARIOUS GROUNDS. ONE OF THE PERTINENT POINTS RAISED BY THE ASSESSEE WAS THAT THE LIMIT PRESCRIBED IN SEC. 80 - IB (10) OF THE ACT WOULD BE BREACHED ONLY IN CASE THE AREA OF THE BASEMENT WAS T O BE CONSIDERED , WHERE AS AS PER THE ASSESSEE, THE AREA OF THE BASEMENT WA S EXCLUDIBLE IN ORDER TO COMPUTE THE BUILT UP AREA FOR THE PURPOSES OF SEC. 80 - IB(10)(D) OF THE ACT. ASSESSEE PLACED RELIANCE ON THE DEVELOPMENT CONTROL REGULATIONS FOR GREATER MUM BAI, 1991 (IN SHORT DCR) IN THIS REGARD . ACCORDING TO 3 ITA NO. 7368/MUM/2014 M/S. AVANI DEVELOPERS THE ASSESSEE, ONCE THE PORTION OF BASEMENT IS REDUCED, THE RESULTANT BUILT UP AREA OF THE COMMERCIAL ESTABLISHMENTS WOULD FALL WITHIN THE LIMIT PRESCRIBED IN SEC. 80 - IB (10)(D) OF THE ACT. THE CIT(A) HAS ACCEPTED THE AFORESAID PLEA OF THE ASSESSEE AND HELD THAT AFTER EXCLUDING THE AREA OF BASEMENT, THE BUILT UP AREA OF THE REMAINING COMMERCIAL AREA IS WITHIN THE LIMIT PRESCRIBED U/S 80 - IB (10)(D) OF THE ACT. THE FOLLOWING DISCUSSION IN THE ORDER OF CI T(A) IS RELEVANT IN THIS REGARD : - 3.18 FACTS OF THE CASE AND SUBMISSIONS MADE HAVE BEEN EXAMINED CAREFULLY. THERE IS NO DISPUTE ON FACTS. THE ONLY DISPUTE IS WHETHER THE BASEMENT AREA CAN BE CONSIDERED AS COMMERCIAL AREA TO DETERMINE WHETHER COMMERCIAL BUILT UP AREA OF THE PROJECT EXCEEDS 5000 SQ. FT. 3.19 THE DEFINITION OF BUILT UP AREA AS IN SEC.80IB(10) SPECIFICALLY REFERS TO BUILT UP AREA OF RESIDENTIAL UNITS. THEREFORE, IT CANNOT BE SAID TO DEFINE BUILT UP AREA OF A COMMERCIAL UNIT ALSO SINCE IT SPECIFICALLY REFERS TO RESIDENTIAL UNITS AND THEREFORE CAN BE SAID TO EXCLUDE COMMERCIAL UNIT AS ARGUED. IN SUCH A SITUATION THE BUILT UP AREA AS DEFINED IN DCR.91 MAY BE ADOPTED. IT HAS ALSO BEEN SO HELD IN CASE M/S. GLOBAL REALITY 134 ITD 407 (INDORE ) THOUGH IN CONNECTION WITH THE BUILT UP AREA OF A RESIDENTIAL UNIT BUT CAN BE EXTENDED TO COMMERCIAL UNIT IN VIEW OF SPECIFIC DEFINITION OF BUILT UP AREA IN THE ACT AND NO SUCH DEFINITION OF COMMERCIAL BUILT UP AREA IN THE ACT. 3.20 AS PER DCR, THE BUILT UP AREA OF A BASEMENT IS NOT TO BE CONSIDERED AS PART OF FSI IF IT CONFIRMS TO THE RESTRICTIVE USES UNDER REGULATION 38(9). APPLYING THIS DEFINITION OF BUILT UP AREA FOR THE COMMERCIAL UNITS, BASEMENT AREA CANNOT BE CONSIDERED AS PART OF BUILT UP AREA IF CONDITIONS MENTIONED IN REGULATION 38(9) ARE FULFILLED. 3.21 AS PER DOCUMENTS SUBMITTED, THE BASEMENT HAS BEEN SANCTIONED FOR USE AS STRONG ROOM AND STATIONERY ROOM FOR BANK AND IT HAS ALSO BEEN PUT TO SAME USE. AS PER SALE AGREEMENT PRODUCED, BASEMENT HAS BEEN SOLD WITH RESTRICTIVE USES CONDITIONS. ALSO AS PER 4 ITA NO. 7368/MUM/2014 M/S. AVANI DEVELOPERS JUDGEMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF DISTRICT BOARD OF HOSHIARPUR VS F. HIRA SINGH JAGAT SINGH AND ORS. AIR 1968 PH 289 CITED BY LD. A.R, BASEMENT AREA CANNOT BE HELD AS COMM ERCIAL AREA. 3.22 CONSIDERING THE ABOVE, IT IS HEREBY HELD THAT THE BASEMENT CONSTRUCTED AS PER DC REGULATION 38(9) CANNOT BE HELD AS PART OF COMMERCIAL BUILT UP AREA OF THE PROJECT. IF THIS IS EXCLUDED FROM THE COMMERCIAL BUILT UP AREA OF THE PROJECT, T HE REMAINING COMMERCIAL AREA IS LESS THAN 5000 SQ. FT. THEREFORE, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB(10). THIS GROUND IS ALLOWED. AGAINST SUCH A DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LD. DR HAS VEHEMENTLY CONTENDED THAT THE BASEMENT AREA WAS CONSTRUCTED FOR THE PURPOSE OF USE AS A COMMERCIAL ESTABLISHMENT AND THE ASSESSING OFFICER HAS BROUGHT OUT THE SAME BY OBSERVING THAT IT WAS LEASED OUT TO A BANK , AND IT WAS BEING USED BY THE BANK AS A S TRONG ROOM/STORAGE AREA, WHICH WAS AN INTEGRAL PART OF BANKING ACTIVITY. IT WAS, THEREFORE, CONTENDED THAT THE ASSESSING OFFICER WAS QUITE JUSTIFIED IN CONCLUDING THAT THE BUILT UP AREA FOR THE PURPOSE OF SEC. 80 - IB (10)(D) OF THE ACT WAS TO BE COMPUTED AF TER TAKING INTO CONSIDERATION THE AREA OF BASEMENT CONSTRUCTED IN THE PROJECT. 6. ON THE OTHER HAND, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE HAS DEFENDED THE ORDER OF CIT(A) BY PLACING RELIANCE THEREON AND ALSO REFERRED TO THE PAPER BOOK WHEREIN IS PL ACED THE RELEVANT MATERIAL, WHICH HAS FORMED THE BASIS FOR CIT(A) TO CONCLUDE THAT AFTER EXCLUDING THE AREA OF BASEMENT, THE RESIDUAL BUILT UP AREA FOR COMMERCIAL USE WAS WITHIN THE LIMIT PRESCRIBED U/S 80 - IB (10)(D) OF THE ACT. APART THEREFROM, 5 ITA NO. 7368/MUM/2014 M/S. AVANI DEVELOPERS THE LEARNED REPRESENTATIVE ALSO RELIED UPON THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF DISTRICT BOARD OF HOSHIARPUR VS F. HIRA SINGH JAGAT SINGH AND ORS. AIR 1968 PH 289 TO CONTEND THAT USE OF THE BASEMENT AS A STRONG ROOM BY TH E BANK DOES NOT AMOUNT TO COMMERCIAL USE AND, THEREFORE, ON THIS COUNT ALSO, IT COULD NOT BE SAID THAT THE AREA OF BASEMENT IS TO BE UNDERSTOOD AS A PART OF COMMERCIAL AREA IN THE PROJECT. THE LEARNED REPRESENTATIVE ALSO POINTED OUT THAT EVEN AS PER THE D CR, THE PERMITTED USAGE OF THE AREA OF BASEMENT, INTER - ALIA , INCLUDED USE FOR STORE ROOMS, BANK LOCKERS OR SAFE DEPOSIT VAULTS. IT WAS, THEREFORE, POINTED OUT THAT THE AREA OF BASEMENT WAS BEING USED FOR THE PURPOSE S, WHICH W ERE PERMISSIBLE IN TERMS OF TH E DCR AND, THEREFORE, ACCORDING TO THE ASSESSEE, CIT(A) MADE NO MISTAKE IN APPLYING THE DEFINITION OF BUILT UP AREA IN DCR AND EXCLUDING THE AREA OF BASEMENT FOR CONSIDERING THE LIMIT PRESCRIBED IN SEC. 80 - IB (10)(D) OF THE ACT. 7. WE HAVE CAREFULLY CONS IDERED THE RIVAL SUBMISSIONS. SEC. 80 - IB (10)(D) OF THE ACT PERMITS DEDUCTION FOR THE PROFITS DERIVED FROM HOUSING PROJECTS WHICH ARE APPROVED BY A LOCAL AUTHORITY SUBJECT, OF COURSE, TO THE CONDITIONS PRESCRIBED THEREIN. SHORN OF OTHER DETAILS, THE CONDI TION WHICH IS RELEVANT FOR OUR PURPOSE IS CONTAINED IN CLAUSE (D) OF SEC. 80 - IB (10) OF THE ACT. CLAUSE (D) OF SEC. 80 - IB (10) OF THE ACT PRESCRIBES THAT THE DEDUCTION IS ALLOWED IF THE BUILT UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED 3% OF THE AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR 5000 SQ. FT., WHICHEVER IS HIGHER. IN THE INSTANT CASE, THE DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT AS PER THE SANCTIONED 6 ITA NO. 7368/MUM/2014 M/S. AVANI DEVELOPERS PLAN OF THE PROJECT, THE BUILT UP AREA OF THE COMMERCIAL ESTABLISHMENTS IS TO THE EXTENT OF 482.99 SQ. MTRS. THE ASSESSING OFFICER HAS NOTED THAT THE COMMERCIAL AREA COMPRISED IN THE PROJECT IS 571.21 SQ. MTRS. BE THAT AS IT MAY, GOING BY EITHER OF THE TWO, THE ASSESSING OFFICER NOTED THAT THE BUILT UP AREA OF THE COMMERCIAL ESTABLISHMENTS INCLUDED IN THE INSTANT PROJECT WAS IN EXCESS OF THE LIMIT PRESCRIBED IN SEC. 80 - IB (10)(D) OF THE ACT. NOTABLY, VIOLATION OF THE CONDITION PRESCRIBED IN CLAUSE (D) OF SEC. 80 - IB (10) OF THE ACT IS THE SOLE BASIS FOR DENIAL OF DEDUCTION BY THE ASSESSING OFFICER AND, THEREFORE, WE CONFINE OUR DISCUSSION TO THE SAME. 8. BEFORE PROCEEDING FURTHER, IT MAY ALSO BE NOTED THAT DURING THE COURSE OF HEARING, THE LEARNED REPRESENTATIVE FOR THE RESPONDENT - ASSESSEE HAD POINTED OUT THAT IN THE PRECEDING ASSESSMENT YEAR OF 2009 - 10, THE CLAIM OF ASSESSEE FOR DEDUCTION WAS DENIED BY THE ASSESSING OFFICER AND WHICH HAS SINCE BEEN ALLOWED BY THE TRIBUNAL VIDE ORDER DATED 29.7.2016 IN ITA NO. 7188/MUM/2014 , A COPY OF WHICH IS PLACED ON RECORD. 9. AS THE AFORESAID DISCUSSION REVEALS, THE CRUX OF THE CONTROVERSY REVOLVES AROUND THE MEANING OF EXPRESSION BUILT - UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS USED IN SEC. 80 - IB (10)(D) OF THE ACT. QUITE CLEAR LY, THE ACT DOES NOT PRESCRIBE A DEFINITION OF BUILT UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS . T HOUGH SEC. 80 - IB (1 4 ) OF THE ACT PRESCRIBES THE MEANING OF BUILT - UP AREA BUT INCIDENTALLY IT IS WITH REFERENCE TO RESIDENTIAL UNITS. OSTENS IBLY, THE CONTROVERSY BEFORE US IS TO UNDERSTAND THE MEANING OF BUILT - UP AREA WITH REFERENCE TO COMMERCIAL ESTABLISHMENTS AND NOT RESIDENTIAL AREA ; 7 ITA NO. 7368/MUM/2014 M/S. AVANI DEVELOPERS THEREFORE, SEC. 80 - IB (14) OF THE ACT IS OF NO HELP. IN THIS BACKGROUND, IT WOULD BE APPROPRIATE TO FALL B ACK ON THE LOCAL LAWS, I.E., DCR TO UNDERSTAND THE MEANING OF BUILT - UP AREA FOR COMMERCIAL ESTABLISHMENTS SINCE THE PROVISIONS OF SEC. 80 - IB (10)(D) OF THE ACT ITSELF PRESCRIBE THAT THE DEDUCTION IS AVAILABLE TO ONLY SUCH HOUSING PROJECTS , WHICH ARE APPRO VED BY THE LOCAL AUTHORITY. 10. IN THIS CONTEXT, WE HAVE PERUSED THE PROVISIONS OF THE DCR WHEREIN SEC. 2(13) OF THE REGULATIONS DEFINE S THE EXPRESSION BUILT - UP AREA. AS PER THE DCR, BUILT - UP AREA MEANS THE AREA COVERED BY A BUILDING ON ALL FLOORS ............................. BUT EXCEPTING THE AREAS EXCLUDED SPECIFICALLY UNDER THESE REGULATIONS . SEC. 35(1) OF THE DCR PROVIDES THE MANNER OF COMPUTATION OF FLOOR SPACE INDEX/BUILT - UP AND SEC . 35(2) OF THE DCR PRESCRIBES THE EXCLUSIONS FROM SUCH CALCULATION OF THE BUILT UP/FLOOR SPACE INDEX. CLAUSE (E) OF SEC. 35(2) OF THE DCR SEEKS TO EXCLUDE THE AREA OF BASEMENT AS PROVIDED IN SEC. 38(9) OF THE DCR FROM THE PURVIEW OF BUILT - UP AREA. NOTABL Y, THE CIT(A) IN THE IMPUGNED ORDER HAS REPRODUCED REGULATION 38(9) OF THE DCR WHICH DEALS WITH THE PERMITTED USES FOR THE BASEMENT WHICH, INTER - ALIA , INCLUDES THE USE AS STORE ROOM, BANK LOCKERS OR SAFE DEPOSIT VAULTS. ON THE SAID BASIS, CIT(A) HAS CONCL UDED THAT THE AREA OF BASEMENT IN THE INSTANT PROJECT WAS BEING USED IN THE MANNER PRESCRIBED IN REGULATION 38(9) OF THE DCR AND, THEREFORE, THE SAME IS LIABLE TO BE EXCLUDED FOR THE PURPOSE OF CALCULATING THE BUILT - UP AREA OF COMMERCIAL ESTABLISHMENTS CON TAINED IN THE INSTANT PROJECT. NOTABLY, THE BUILDING PLANS OF THE ASSESSEE WHICH HAVE BEEN DULY APPROVED BY THE LOCAL AUTHORITY INCLUDES THE AREA OF BASEMENT AND, THEREFORE, IT IS CORRECT TO PROCEED ON THE PREMISE THAT 8 ITA NO. 7368/MUM/2014 M/S. AVANI DEVELOPERS THE BASEMENT IS AS PER THE APPROVED PLANS OF THE LOCAL AUTHORITY. IN PARA 3.10 OF THE ORDER, CIT(A) HAS SPECIFICALLY NOTED THAT IN TERMS OF THE APPROVED PLANS, THE BASEMENT HAS BEEN APPROVED AS A BANK STRONG ROOM AND BANK STATIONERY ROOM . IT IS ALSO ABUNDANTLY CLEAR THAT THE AREA OF BASEMEN T LEASED OUT BY THE ASSESSEE TO THE BANK IS BEING TO BE USED FOR THE PERMITTED PURPOSES, AN ASPECT WHICH IS NOT DISPUTED BY THE ASSESSING OFFICER. THEREFORE, CONSIDERED IN THE SAID LIGHT, THE FINDING OF CIT(A) THAT AFTER EXCLUSION OF THE AREA OF BASEMENT, THE COMMERCIAL BUILT UP AREA IN THE PROJECT DOES NOT EXCEED THE LIMIT PRESCRIBED U/S 80 - IB(10)(D) OF THE ACT IS WELL - FOUNDED BOTH ON FACTS AND I N LAW. I N THE ABSENCE OF ANY MATERIAL OR EVIDENCE LED BY THE REVENUE TO THE CONTRARY, WE HEREBY DEEM IT FIT AN D PROPER TO AFFIRM THE FINDINGS OF THE CIT(A) ON THIS ASPECT. AS A CONSEQUENCE, THE CONCLUSION OF CIT(A) TO ALLOW THE CLAIM OF ASSESSEE FOR DEDUCTION U/S 80 - IB(10) OF THE ACT IS HEREBY AFFIRMED. IN THE RESULT, REVENUE HAS TO FAIL IN ITS APPEAL. 11 . RE SULTANTLY, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2017. SD/ - SD/ - ( RAVISH SOOD ) JUDICIAL MEMBER ( G.S. PANNU ) ACCOUNTANT MEMBER MUMBAI, DATE : 12 TH APRIL , 201 7 * SSL * COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 9 ITA NO. 7368/MUM/2014 M/S. AVANI DEVELOPERS 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, A BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI