ITO,Ward-12(2), Bangalore V. M/s SRK Gold Earth Construction Pvt Ltd, Bangalore

ITA 79/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57448 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 28-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOPALA RAO CI TI
• Assessee Lawyers: CHERIAN K BA
• Section: 80IB

Judgement Text

PAGE 1 OF 6 ITA NO.79/BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.79/BANG/2011 (ASSESSMENT YEAR 2006-07) THE INCOME TAX OFFICER, WARD-12(2), BANGALORE. VS M/S SRK GOLD EARTH CONSTRUCTION PVT. LTD., 37/38, RAHEJA ARCADE, KORAMANGALA, BANGALORE-34. PA NO.AAHCS4626C (APPELLANT) (RESPONDENT) DATE OF HEARING 17.01.2012 DATE OF PRONOUNCEMENT 17.01.2012 APPELLANT BY : SHRI GOPALA RAO, CI T-I RESPONDENT BY : SHRI CHERIAN K BABY, C.A. ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-III, BANGALORE DATE D 19.10.2010. THE RELEVANT ASSESSMENT YEAR IS 2006-07. 2. THE SOLITARY EFFECTIVE GROUND RAISED BY THE REVEN UE READS AS FOLLOWS:- THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN ALLOWING DEDUCTION U/S 80IB(10) IN RESPECT OF A PROJECT WHICH IS NOT A HOUSING PROJECT AS IS EVIDEN T FROM THE BROCHURE BROUGHT OUT BY THE ASSESSEE, PAGE 2 OF 6 ITA NO.79/BANG/2011 2 THE ARRANGEMENT OF SALE AND LEASE BACK OF THE APARTMENTS AND OTHER SURROUNDING CIRCUMSTANCES WHICH PROVE THAT THE APARTMENTS ARE MEANT TO BE RUN AS SERVICE APARTMENTS, AND THEREFORE, THE PROJECT IS TO BE CONSIDERED AS A COMMERCIAL VENTURE BETWEEN THE BUILDER AND THE BUYERS WHICH DOES NOT QUALIFY TO BE A HOUSING PROJECT AS ENVISAGED IN SECTION 80IB OF THE I T ACT, 1961. 3. BRIEFLY STATED THAT FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE B USINESS OF DEVELOPMENT AND CONSTRUCTION OF SITES AND FLATS. FOR THE CONCERNED ASST. YEAR, RETURN OF INCOME WAS FILED ON 29.11.2006 DECLARING AN INCOME OF RS.1,92,657/- AFTER CLAIMING DEDUCTION U/S 80IB(10) OF THE I T ACT AMOUNTING TO RS.2,14,24,099 /-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143(2) OF THE ACT. THE SCRUTINY ASSESSMENT U/S 143( 3) WAS COMPLETED VIDE ORDER DATED 24.12.2008 WHEREIN THE CLAIM OF TH E ASSESSEE U/S 80IB WAS DENIED BY THE A.O. FOR THREE REASONS, NAMEL Y, I) THE PROJECT OF THE ASSESSEE, ACCORDING TO THE AO, CONSISTED OF CONSTRUCTION OF SERVICED APARTMENTS AND THEREFORE, IT WAS A COMMERCIAL VENTURE AND NOT A HOUSING PROJECT; HENCE, THE PROJECT WAS NOT ENTITLED DEDUCTION U/S 80IB OF THE ACT. II) ACCORDING TO THE AO, THE ASSESSEE DID NOT ITSELF UNDERTAKE THE CONSTRUCTION OF THE PROJECT, BUT OUTSOURCED THE SAME TO CONTRACTORS. III) THE ASSESSEE COMPANY HAD NOT FURNISHED FORM NO.10CCB ALONG WITH THE RETURN OF INCOME. PAGE 3 OF 6 ITA NO.79/BANG/2011 3 4. AGGRIEVED BY THE REJECTION OF THE CLAIM OF THE A SSESSEE U/S 80-IB OF THE ACT, THE MATTER WAS CARRIED IN APP EAL BEFORE THE FIRST APPELLATE AUTHORITY THE FIRST APPELLATE AUTHO RITY DIRECTED THE AO TO GRANT DEDUCTION U/S 80IB(10) OF THE ACT. THE FIRST APPELLATE AUTHORITY HELD THAT THE THREE REASONS ON THE BASIS O F WHICH THE AO DISALLOWED THE CLAIM OF DEDUCTION U/S 80IB(10) OF T HE ACT IS NOT SUSTAINABLE. 5. THE REVENUE, BEING AGGRIEVED BY THE GRANT OF DED UCTION U/S 80IB IS IN APPEAL BEFORE US. IT IS TO BE MENTI ONED HERE THAT THE REVENUE IS ONLY AGGRIEVED BY THE CIT(A)S ORDER IN NO T AGREEING TO THE FIRST REASON STATED BY THE AO IN DENYING THE CLAIM OF DEDUCTION U/S 80IB, NAMELY, THE ASSESSEE HAS CONSTRUCTED SERVICED APARTMENTS AND NOT RESIDENTIAL APARTMENTS. 6. THE LEARNED DR SUPPORTED THE ORDER OF THE AO WH EREAS THE LEARNED AR SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF TH E TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 (ITA NO.1166/BANG/2010 DATED 22/7/2011). A COPY OF THE O RDER OF THE TRIBUNAL CITED SUPRA IS PLACED ON RECORD. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE IN QUES TION IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF TH E TRIBUNAL CITED SUPRA. THE RELEVANT FINDING OF THE TRIBUNAL IN ASS ESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 READS AS FOLLOWS:- PAGE 4 OF 6 ITA NO.79/BANG/2011 4 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE RELEVANT FINDING OF THE FIRST APPELLATE AUTHORITY IN HOLDING THAT THE ASSESSEE HAD CONSTRUCTED THE RESIDENTIAL APARTMENTS AND NOT SERVICED APARTMENTS, READS AS FOLLOWS:- 11. TO CONCLUDE, I FIND THAT (A) THE APARTMENTS WERE APPROVED BY THE CONCERNED AUTHORITIES AS RESIDENTIAL APARTMENTS, (B) ALL THE APARTMENTS WERE SOLD AND HANDED OVER AS RESIDENTIAL APARTMENTS, (C) A LARGE MAJORITY OF THE APARTMENTS, I.E. 68 OUT OF 96 APARTMENTS WERE USED AS RESIDENTIAL APARTMENTS AND (D) THE APPELLANT HAD NOT APPLIED FOR OR OBTAINED ANY REGULATORY PERMISSION TO BUILD OR OPERATE SERVICED APARTMENTS. ON THE OTHER HAND, APART FROM DEPENDING ON THE CONTENTS OF THE BROCHURE AND THE IDENTICAL SIZE, DESIGN AND FURNITURE OF THE APARTMENTS, THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SUPPORT HIS CLAIM THAT THE APARTMENTS WERE CONCEPTUALIZED AS SERVICED APARTMENTS. IN THIS REGARD I HAVE ALREADY HELD THAT THOUGH THE APARTMENTS OF THE APPELLANT ARE IDENTICAL IN SIZE AND DESIGN AND ALSO IDENTICALLY FURNISHED IT CANNOT BE CONCLUDED ON THAT BASIS ALONE THAT THE APARTMENTS HAVE BEEN CONCEPTUALIZED AS SERVICED APARTMENTS. I HAVE FURTHER HELD THAT WHEN THE APPELLANT HAD NOT OBTAINED ANY REGULATORY PERMISSION TO BUILD SERVICED APARTMENTS MERE TALL CLAIMS MADE IN A BROCHURE IS NOT SUFFICIENT AND CONCLUSIVE EVIDENCE TO HOLD THAT THE APARTMENTS WERE CONCEPTUALIZED AS SERVICED APARTMENTS. 11.1 IN VIEW OF THE ABOVE DISCUSSION, I HOLD HAT THE 96 APARTMENTS BUILT BY THE APPELLANT UNDER THE PROJECT NAMES AS SRK SAMRUDHI WERE ALL RESIDENTIAL APARTMENTS (OPTIONALLY PAGE 5 OF 6 ITA NO.79/BANG/2011 5 CONVERTIBLE TO SERVICED APARTMENTS) AND THEREFORE, THE SAID PROJECT OF THE APPELLANT WAS A HOUSING PROJECT AND HENCE ENTITLED TO DEDUCTION UNDER SECTION 80IB(10) OF THE INCOME TAX ACT, 1961. THUS, THE FIRST REASON FURNISHED BY THE AO (I.E. THAT THE PROJECT OF THE APPELLANT CONSISTED O F CONSTRUCTED OF SERVICED APARTMENTS) TO HOLD THAT THE APPELLANT WAS NOT ENTITLED TO DEDUCTION UNDER SECTION 80IB(1)) OF THE INCOME TAX ACT, 1961, IS NOT VALID. 7.1 THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IB(1) IN RESPECT OF THE PROJECT, NAMED, SRK SAMRUDDHI AND IN TOTAL, CONSTRUCTED 96 FLATS. THE FIRST APPELLATE AUTHORITY HAS CATEGORICALLY FOUND THAT THE PLAN FOR THE CONSTRUCTION OF THE APARTMENTS BY THE NAME SRK SAMRUDDHI HAS BEEN APPROVED BY THE CONCERNED LOCAL AUTHORITIES AS RESIDENTIAL APARTMENTS. SINCE APARTMENTS HAVE BEEN APPROVED AND CERTIFIED BY THE CONCERNED LOCAL AUTHORITIES AS RESIDENTIAL APARTMENTS, UNLESS AND UNTIL THE FACTS AND CIRCUMSTANCES OF THE CASE SHOW OTHERWISE, IT IS TO BE ASSUMED THAT THE APARTMENTS CONSTRUCTED BY THE ASSESSEE COMPANY WERE RESIDENTIAL APARTMENTS. FURTHER, THE FIRST APPELLATE AUTHORITY HAS CATEGORICALLY STATED THAT OUT OF THE 96 APARTMENTS CONSTRUCTED, 4 APARTMENTS HAD BEEN RETAINED BY THE DEVELOPER AND THE BALANCE 92 WERE SOLD TO OUTSIDERS AND OUT OF THE 92 APARTMENTS, 68 FLATS WERE USED AS RESIDENTIAL APARTMENTS. IT WAS FURTHER FOUND BY THE FIRST APPELLATE AUTHORITY THAT AT THE TIME OF SALE OF THESE APARTMENTS, IT WERE SOLD AS RESIDENTIAL APARTMENTS BY THE ASSESSEE COMPANY TO THE INDIVIDUAL OWNERS AND THERE IS NOTHING ON RECORD TO SUGGEST OR TO SHOW THAT THE ASSESSEE HAD APPLIED FOR OR OBTAINED ANY REGULATORY PERMISSION TO BUILD OR OPERATE SERVICED PAGE 6 OF 6 ITA NO.79/BANG/2011 6 APARTMENTS. THESE FINDINGS OF THE FIRST APPELLATE AUTHORITY HAVE NOT BEEN DISPELLED BY THE DEPARTMENT WITH ANY EVIDENCE. THEREFORE, WE HOLD THAT THE CIT(A) IS CORRECT IN HOLDING THAT THE ASSESSEE HAD CONSTRUCTED RESIDENTIAL APARTMENTS AND THE SAME WERE SOLD AS SUCH BY THE ASSESSEE COMPANY. IN THE LIGHT OF THE ABOVE REASONING, WE HOLD THAT THE CIT(A)S ORDER IS CORRECT AND IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7.1 FACTS IN THIS CASE ARE IDENTICAL TO THE FACTS CONSIDERED BY THE TRIBUNAL IN ITA NO.1166/BANG/2010 DATED 22/7/ 2011. THEREFORE, FOLLOWING THE COORDINATE BENCH DECISION CITED SUPRA, WE UPHOLD THE ORDER OF THE CIT(A). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED ON THE 17 TH DAY OF JANUARY, 2012 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.