M/s. Kohli Constructions, Pune V. ITO, Wd. 9(2), Pune

ITA 8/PUN/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49839 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 02-01-2009
• Court: TRIBUNAL
• Department Lawyers: L RAMAJI RAO
• Keywords: Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 08/PN/2009 (ASSTT. YEAR : 2005-06) M/S KOHLI CONSTRUCTIONS, ... APPELLANT 108, DR. AMBEDKAR ROAD, DEHU ROAD, 412101 PAN : NOT AVAILABLE V. INCOME TAX OFFICER, WARD 9 ( 2 ) , RESPONDENT PUNE APPELLANT BY : SHRI C.H. NANIWADEKAR RESPONDENT BY : SHRI L. RAMAJI RAO ORDER PER I.C. SUDHIR, JM THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED ON FACTS AND IN LAW IN UPHOLDING DENIAL OF DEDUCTION U /S 80-IB(10). 2. THE LEARNED C.I.T.(A) FAILED TO APPRECIATE THAT THE HOUSING PROJECT IS ACTUALLY ON THE PLOT OF LAND ADMEASURING MORE THAN 1 ACRE. HE ERRED IN IGNORING AUTHENTIC GOVERNMENT DOC UMENTS IN THIS REGARD. HE FURTHER FAILED IN NOT PROPERLY APPRECIA TING THE FACTS OF THE CASE AND ARGUMENTS AND CONTENTIONS OF THE ASSES SEE. 3. THE LEARNED C.I.T.(A) ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE OF DEDUCTION OF DEVELOPMENT CHARGES OF RS.1,21,950/- . GROUND NO. 1 & 2 2. THE RELEVANT FACTS ARE THAT THE A.O. DENIED THE CLAIMED DEDUCTION U/S. 80 IB(10) OF THE ACT AMOUNTING TO RS. 22,23,50 6/- ON THE BASIS THAT THE SIZE OF THE PLOT ON WHICH THE PROJECT SOUDAGAR GARDEN WAS CONSTRUCTED AS PER THE SANCTIONED PLAN WAS LESS THA N 1 ACRE. BEFORE THE ITA . NO. 8/PN/2009 KOHLI CONSTRUCTIONS, A.Y 2005-06 PAGE OF 8 2 LD CIT(A), THE ASSESSEE SUBMITTED THAT IT WAS MISTA KE OF ARCHITECT IN MENTIONING IN THE PLAN THAT AREA OF THE LAND IS LES S THAN 1 ACRE, WHEREAS THE AREA OF THE LAND WAS ACTUALLY 4134 SQ MTRS AND AS PER THE LOCAL MEASUREMENT, IT WAS 41.34 R. IN SUPPORT, DEMARCATI ON CERTIFICATE DATED 19.6.2000 AND 7/12 EXTRACT WERE PRODUCED TO SHOW TH AT THE LAND AREA WAS 4134 SQ MTRS . IT WAS SUBMITTED THAT THE FIRM HAD PURCHASED THE LAND AT SURVEY NO. 40 AT POST KIWALE , TAL. HAVEL I, DIST. PUNE. THE FIRM HAD DEVELOPED THE PLOT BY CONSTRUCTION OF FLATS ON THE SAID PLOT IN TERMS OF THE PLAN SANCTIONED BY PIMPRI CHINCHWAD MUNICIPA L CORPORATION (PCMC) ON 18.5.1999. DURING THE FINANCIAL YEARS 2003-04 A ND 2004-05, THE ASSESSEE FIRM WAS ENGAGED IN CONSTRUCTION ACTIVITY AT SURVEY NO.40 KIWALE WITHIN THE LIMIT OF PCMC. THE PROJECT CONS ISTS OF 62 FLATS AND NIL SHOPS AND TOTAL AREA OF CONSTRUCTION IS ABOUT 3474. 26 SQ MTRS REQUIRED TO BE LEFT AS OPEN SPACE WHICH IS AS PER SANCTIONED P LAN. IT WAS SUBMITTED THAT IT HAD COMPLIED WITH ALL THE CONDITIONS LAID D OWN IN SECTION 80 IB (10) OF THE ACT. IN THE PREVIOUS YEAR RELEVANT TO THE A.Y. 2004-05, THE ASSESSEE HAD SOLD FLATS TO VARIOUS CUSTOMERS AND H AD GIVEN POSSESSION OF THE SAME. THE ASSESSEE FIRM HAD ALSO OBTAINED COM PLETION CERTIFICATE FROM THE COMPETENT AUTHORITY. THE ASSESSEE HAD ALS O FURNISHED THE STATEMENTS OF THE ARCHITECT DULY CROSS EXAMINED BY THE ASSESSEE ON 26.12.2007 IN THE PRESENCE OF THE A.O, STATING THA T HE HAD NOT PHYSICALLY MEASURED THE PLOT OF LAND. THE A.O HAD MADE HIS RE PORT AS A BASIS WHILE COMING TO THE CONCLUSION THAT THE PLOT AREA WAS BEL OW 1 ACRE. THE LD CIT(A) DID NOT AGREE WITH THIS SUBMISSION OF THE A SSESSEE AND UPHELD THE ACTION OF THE A.O IN DENIAL OF THE CLAIMED DEDUCTIO N. THE LD CIT(A) ON THE ISSUE OF DEMARCATION CERTIFICATE AND 7/12 EXTRA CT FOR THE PURPOSE OF MESUREMENT OF THE PLOT AREA, OBSERVED THAT THIS CAN ONLY SPEAK ABOUT THE EXTENT OF HOLDING OF THE LAND AND AS SUCH CANNO T BE DETERMINATIVE OF SIZE OF PLOT OF LAND ON WHICH THE PROJECT IS CONST RUCTED. THE LD CIT(A) ITA . NO. 8/PN/2009 KOHLI CONSTRUCTIONS, A.Y 2005-06 PAGE OF 8 3 ALSO REMAINED OF THE VIEW THAT IN ORDER TO CORRECTL Y ASCERTAIN THE AREA OF PLOT USED FOR THE PROJECT, THE AUTHENTIC DOCUMENT I S SANCTIONED PLAN OF THE PROJECT WHICH CLEARLY SPILLS OUT THE AREA OF L AND ON WHICH THE PROJECT IS TO BE CONSTRUCTED. 3. BEFORE THE TRIBUNAL, THE LD. A.R. HAS REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE ALSO ASSERT ED THAT IT WAS MISTAKE ON THE PART OF THE ARCHITECT IN SHOWING THE PLOT AR EA AT 3994.75 SQ MTRS IN THE PLAN INSTEAD OF THE CORRECT AREA 4134 SQ MTR S. THE LD. A.R. REFERRED STATEMENT OF ARCHITECT SHRI HARSHAD RUPARE L, THE ARCHITECT & REGISTERED VALUER, WHO WAS CROSS EXAMINED BY THE AS SESSEE BEFORE THE A.O ON 26.12.2007 WHEREIN IN RESPONSE TO QUESTION N O. 2, HE HAS STATED THAT HE HAD NOT PHYSICALLY MEASURED THE PLOT OF LAN D. HOWEVER, HE HAD NOTICED THE DIFFERENCE IN THE AREA OF THE PLOT AS THE DEMARCATION CERTIFICATE AND THAT MENTIONED IN SANCTIONED PLAN AFTER CHECKING THE DOCUMENTS. IN ANSWER THE QUESTION NO. 4, I.E. IS IT NECESSARY TO SUBMIT DEMARCATION CERTIFICATE AND/ OR 7/12 EXTRACT AT TH E TIME OF SUBMITTING PLAN FOR APPROVAL, SHRI RUPAREL REPLIED AS YES, G ENERALLY DOCUMENT RELATED TO PROPERTY AREA AND SIZE ARE REQUIRED TO B E SUBMITTED TO THE CONCERNED AUTHORITY AT THE TIME OF SUBMITTING PLANS FOR APPROVAL. THE LD. A.R. ALSO REFERRED QUESTION NO. 5 RAISED TO MR. RUPAREL I.E. ARE DEMARCATION CERTIFICATES AND 7/12 EXTRACTS MORE RE LIABLE DOCUMENTS TO CONFIRM THE AREA OF PLOT OF LAND ?. MR. RUPAREL RE PLIED AS YES, THE DEMARCATION CERTIFICATE AND 7/12 EXTRACTS ARE RELIA BLE DOCUMENTS TO CONFIRM THE AREA OF HOLDING REFERRED TO IN THESE DO CUMENTS SINCE THESE DOCUMENTS ARE ISSUED BY CONCERNED GOVERNMENT DEPAR TMENTS. THE LD. A.R. SUBMITTED FURTHER THAT AS PER LOCAL MEASUREM ENT STANDARD WHICH IS IN PRACTICE, THE AREA OF LAND IS 41.34 R WHICH IS EQUIVALENT TO 4134 SQ MTRS. HE SUBMITTED FURTHER THAT 1 ACREA IS EQUIVAL ENT TO 4048 SQ MTRS. ITA . NO. 8/PN/2009 KOHLI CONSTRUCTIONS, A.Y 2005-06 PAGE OF 8 4 HE ALSO REFERRED TITLE REPORT FOR THE LAND, NON-AGR ICULTURAL USER ORDER FOR THE LAND ISSUED BY THE COLLECTORATE, PUNE, 7/12 EXT RACT OF THE LAND, MEASUREMENT MAP BY THE LAND RECORD AUTHORITY, AND A GREEMENT FOR DEVELOPMENT/PURCHASE OF LAND MADE AVAILABLE AT PAG E NO. 1 TO 7, AND 11 TO 64 OF THE PAPER BOOK. THESE DOCUMENTS HAVE BEEN REFERRED TO SUPPORT THE AREA OF LAND AT 4134 SQ MTRS. THE LD. A.R. THU S CONCLUDED HIS ARGUMENT THAT ONLY BECAUSE THE ARCHITECT HAS MISTA KEN IN MENTIONING THE AREA OF LAND LESSER THAN THE ACTUAL AREA, THE ASSES SEE SHOULD NOT BE DENIED THE ELIGIBLE CLAIM OF DEDUCTION U/S. 80 IB ( 10) OF THE ACT THOUGH ALL OTHER DOCUMENTS ISSUED BY THE GOVERNMENT DEPARTMENT S SUPPORT THE CLAIM OF THE ASSESSEE ABOUT THE AREA OF LAND. 4. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT THERE IS NO DENIAL OF THE FACT THAT DEVELOPMENT CONTROL RULES GOVERN THE OPEN SPACE, CITED MARGIN ETC., BUT SUCH AREA IS INCLUDED IN THE TOTA L AREA OF LAND FOR WHICH THE PROJECT PLAN IS SANCTIONED WHICH MEANS THAT I N THE CASE OF THE ASSESSEE, THE AREA OF 3994.79 SQ MTRS SANCTIONED FO R THE PROJECT IS INCLUSIVE OF THE AREA RELATING TO OPEN SPACE ETC.,. IN THE PRESENT CASE, THERE IS NO DISPUTE ABOUT THE FACT THAT AS PER THE SANCTIONED PLAN, THE AREA OF LAND ON WHICH CONSTRUCTION OF PROJECT HAS B EEN SANCTIONED BY THE LOCAL AUTHORITY IS 3994.79 SQ METERS I.E. LESS THAN 1 ACRE. THUS, THE AUTHORITIES BELOW HAVE RIGHTLY DENIED CLAIMED DEDUC TION U/S. 80 IB (10) OF THE ACT SINCE THE ASSESSEE WAS NOT FULFILLING THE C ONDITION OF REQUIRED LAND AREA OF 1 ACREA MINIMUM. 5. CONSIDERING THE ABOVE SUBMISSIONS, ESPECIALLY TH E STATEMENT OF THE DEPARTMENTAL ARCHITECT MR. HARSHAD RUPAREL, HIS CRO SS EXAMINATION BEFORE THE A.O ON 26.12.2007, AS DISCUSSED ABOVE, T HAT HE HAD NOT PHYSICALLY MEASURED THE PLOT OF LAND THOUGH HE HAD NOTICED THE DIFFERENCE ITA . NO. 8/PN/2009 KOHLI CONSTRUCTIONS, A.Y 2005-06 PAGE OF 8 5 IN AREA OF PLOT AS THE DEMARCATION CERTIFICATE AN D THAT MENTIONED IN THE SANCTIONED PLAN AFTER CHECKING THE DOCUMENTS, WE F IND THAT THERE WAS SOME MISTAKE IN NOTING REGARDING THE ACTUAL AREA OF THE PLOT OF THE LAND IN QUESTION. IN THIS REGARD, WE ALSO FIND STRENGTH FROM THE NON-AGRICULTURE USER ORDER FOR THE LAND ISSUED BY THE OFFICE OF THE COLLECTOR, DURING MARCH 2000, MADE AVAILABLE AT PAGE NO. 3 OF THE PAPER BOO K SHOWING THE AREA OF LAND IN QUESTION AT 4134 SQ MTRS. THE TITLE REP ORT FOR THE LAND, MADE AVAILABLE AT PAGE NO. 1 & 2 OF THE PAPER BOOK ALSO SPEAKS ABOUT THE AREA OF LAND AT 4134 SQ MTRS. THE 7/2 EXTRACT OF THE LA ND MADE AVAILABLE AT PAGE NO. 4 TO 6 ALSO SUPPORTS THE CLAIM ABOUT THE A REA OF LAND AT 4134 SQ MTRS. THE MEASUREMENT MAP BY THE LAND RECORDS AUTH ORITY MADE AVAILABLE AT PAGE NO. 7 OF THE PAPER BOOK IS ALSO S HOWING AREA OF THE LAND AT 4134 SQ MTRS. IN HIS CROSS EXAMINATION, SHRI HA RSHAD RUPAREL HAS ALSO AFFIRMED IN REPLY TO QUESTION NO. 5 THAT THE DEMARC ATION CERTIFICATE & 7/12 EXTRACTS ARE RELIABLE DOCUMENTS TO CONFIRM THE AREA OF HOLDING REFERRED TO IN THESE DOCUMENTS SINCE THESE DOCUMENT S ARE ISSUED BY CONCERNED GOVERNMENT DEPARTMENTS. WE, UNDER THESE CIRCUMSTANCES, TO MEET THE END OF JUSTICE, ARE OF THE VIEW THAT IT WO ULD BE JUST AND PROPER TO REMAND THE MATTER TO THE FILE OF A.O TO VERIFY T HE CLAIM OF THE ASSESSEE ABOUT THE AREA OF THE LAND IN QUESTION BY PHYSICAL VERIFICATION ON THE BASIS OF THE ABOVE REFERRED DOCUMENTS ISSUED BY THE GOVE RNMENT DEPARTMENTS MADE AVAILABLE BY THE ASSESSEE IN THE PAPER BOOK FI LED ON ITS BEHALF BEFORE THE TRIBUNAL WHICH WERE ALSO MADE AVAILABLE BEFORE THE AUTHORITIES BELOW AS PER THE CERTIFICATE GIVEN BY THE ASSESSEE. THE GROUND NOS. 1 & 2 ARE THUS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO.3 ITA . NO. 8/PN/2009 KOHLI CONSTRUCTIONS, A.Y 2005-06 PAGE OF 8 6 6. THE ASSESSEE CLAIMED DEDUCTION OF DEVELOPMENT CH ARGES OF RS. 1,21,950/- DEBITED TO THE PROFIT & LOSS ACCOUNT. THE A.O. DENIED THE SAME ON THE BASIS THAT THE BILLS PRODUCED BY THE AS SESSEE IN RESPECT OF THE CLAIMED EXPENDITURE PERTAIN TO EARLIER YEARS. THE DETAILS OF THESE AMOUNTS ARE AS UNDER : SR NO PARTICULARS AMOUNT (RUPEES) 01 CH NO 144607 DT. 16.11.2004 ISSUED TO PCMC FOR FEES FOR COMPLETION CERTIFIATE 60450.00 02 GARDEN DEPOSIT PAID TO PCMC PAID IN EARLIER YEAR 19500.00 03 TREE DEPOSIT PAID TO PCMC ON 07.06.2003 42000.00 TOTAL 121950.00 REGARDING THE EXPENDITURE INCURRED ON PROCURING CO MPLETION CERTIFICATE BY PAYING FEES TO PCMC, IT WAS SUBMITTED THAT THE ASSESSEE FIRM COULD NOT PRODUCE THE RECEIPT ISSUED BY PCMC DURING THE COURSE OF ASSESSMENT. IT WAS EXPLAINED TO THE A.O THAT PAYME NT WAS MADE BY CHEQUE FOR OBTAINING COMPLETION CERTIFICATE, WHICH WAS SUBMITTED TO THE A.O. 7. IN RESPECT OF THE 2 ND AND 3 RD PAYMENT, IT WAS EXPLAINED TO THE A.O THAT THE PROJECT UNDERTAKEN BY THE ASSESSEE FIRM WA S COMPLETED DURING THE PREVIOUS YEAR RELEVANT TO THE A.Y. UNDER APPEAL , THE AMOUNTS SHOULD HAVE BEEN REFUNDED BY PCMC AND AS THE SAID AMOUNT S WERE NOT REFUNDED DURING THE RELEVANT F.Y.; THESE AMOUNTS W ERE WRITTEN OFF BY DEBITING TO PROFIT & LOSS ACCOUNT. IT WAS ALSO EXP LAINED THAT IN FUTURE, IF THE REFUND OF THE SAID AMOUNT IS RECEIVED BY THE AS SESSEE FIRM, THE SAME WILL BE TAXABLE AS INCOME OF THE ASSESSEE FIRM. ITA . NO. 8/PN/2009 KOHLI CONSTRUCTIONS, A.Y 2005-06 PAGE OF 8 7 8. SINCE EVEN BEFORE THE LD CIT(A), THE ASSESSEE CO ULD NOT PRODUCE THE RECEIPT ISSUED BY PCMC AGAINST THE PAYMENT OF F EES FOR COMPLETION CERTIFICATE, THE LD CIT(A) DID NOT ALLOW THE CLAIM AND HAS UPHELD THE DISALLOWANCE OF RS. 60,450/- MADE BY A.O IN THIS RE GARD. 9. DEDUCTION OF RS.19,500/- IN RESPECT OF THE GARDE N DEPOSITS AND RS. 42,000/- IN RESPECT OF TREE DEPOSIT CLAIMED BY THE ASSESSEE BY WRITING OFF THESE AMOUNTS IN PROFIT & LOSS A/C. HAVE ALSO BEEN DENIED BY THE LD CIT(A) ON THE BASIS THAT THESE AMOUNTS CANNOT BE SA ID TO BE IRRECOVERABLE AND THEREFORE, THE SAME CANNOT BE TRE ATED AS BUSINESS LOSS NOR THE AMOUNT CAN BE ALLOWED AS BAD DEBT WRITTEN O FF U/S. 36(1)(VII) AS THE CONDITION ENVISAGED AS PER SECTION 36(2) IS NOT SATISFIED. THE LD CIT(A) HAS ACCORDINGLY UPHELD THE DISALLOWANCE OF T HE TOTAL CLAIM OF RS.1,21,950/-. 10. SIMILAR ARGUMENTS HAVE BEEN ADVANCED BY THE LD. AR BEFORE THE TRIBUNAL IN SUPPORT OF THE CLAIM AS MADE BEFORE THE AUTHORITIES BELOW. THE LD A.R, ON THE OTHER HAND, TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW. 11. CONSIDERING THE ABOVE SUBMISSION, SO FAR AS THE CLAIMED DEDUCTION OF RS. 60,450/- MADE BY THE ASSESSEE AS A FEE TO PC MC FOR OBTAINING COMPLETION CERTIFICATE IS CONCERNED, THOUGH THE AS SESSEE COULD NOT FURNISH THE RECEIPT ISSUED BY PCMC IN THIS REGARD, BUT, IT WAS SUBMITTED THAT THE PAYMENT WAS MADE BY CHEQUE AND SAME IS STR ENGTHENED BY THIS FACT THAT THE COMPLETION CERTIFICATE WAS ISSUED. T HUS, EVEN IF RECEIPT HAS NOT BEEN PRODUCED BY THE ASSESSEE, THE CLAIMED PAYM ENT CAN BE ASCERTAINED FROM THIS MATERIAL FACT THAT THE ASSESS EE WAS REQUIRED TO PAY RS.60,450/- TO PCMC FOR FEES FOR COMPLETION CERTIFI CATE, WITHOUT WHICH ITA . NO. 8/PN/2009 KOHLI CONSTRUCTIONS, A.Y 2005-06 PAGE OF 8 8 COMPLETION CERTIFICATE COULD NOT HAVE BEEN PROCESSE D. WE, THUS, REMAND THE MATTER TO THE FILE OF A.O TO CONSIDER T HE ISSUE AFRESH IN VIEW OF THE ABOVE OBSERVATIONS, AFTER AFFORDING OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. 11.1. SO FAR AS THE OTHER PAYMENTS ARE CONCERNE D, WE DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER IN THIS REG ARD, SINCE THE AMOUNT TREATED AS BAD DEBT IN THE PREVIOUS YEAR AS BECOMI NG BAD DEBT IN THE PREVIOUS YEAR, RELEVANT TO THE A.Y. UNDER CONSIDERA TION, IS NOT FALLING BEYOND THE PERIOD OF 4 PREVIOUS YEARS IMMEDIATELY P RECEDING THE PREVIOUS YEAR IN WHICH SUCH DEBT IS WRITTEN OFF. THE DISALLOWANCE OF RS.19,500/- AND RS. 42,000/- CLAIMED ON ACCOUNT OF GARDEN DEPOSITS AND TREE DEPOST RESPECTIVELY ARE THUS UPHELD. THE GROU ND NO. 3 IS, THUS, PARTLY ALLOWED. 12. IN THE RESULT, APPEAL IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 20TH JUNE 2011. SD/- SD/- ( D. KARUNAKARA RAO ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 20TH JUNE, 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-V, PUNE 4. THE CIT(A)- III, PUNE 5. THE D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR