DCIT,Cir.-3, Pune V. M/s. Magarpatta Township Development& Construction Co., Pune

ITA 822/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9690 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 13-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: SUNIL PATHAK SHRI D R BARVE
• Keywords: Business income; Depreciation; Rule of consistency; Retrospective amendment; Question of law
• Section: 43B; 80IB; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K.PANDA, ACCOUNTANT MEMBER. ITA.NO.822/PN/2011 (ASSTT. YEAR : 2007-08) DCIT, CIRCLE-3, PUNE .. APPELLANT VS. MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO., 13, MEGASPACE, SOLAPUR BAZAR ROAD, EAST STREET, PUNE 411001. .. RESPONDENT AND C.O. NO.04/PN/2012 (ASSTT. YEAR : 2007-08) MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO., 13, MEGASPACE, SOLAPUR BAZAR ROAD, EAST STREET, PUNE 411001. .. APPELLANT VS. DCIT, CIRCLE-3, PUNE .. RESPONDENT APPELLANT BY : SHRI S.K.SINGH, CIT(DR) RESPONDENT BY : SHRI SUNIL PATHAK/ SHRI D.R.BARVE DATE OF HEARING : 08.08.2012 DATE OF PRONOUNCEMENT : 18.09.2012 ORDER PER SHAILENDRA KUMAR YADAV, JM : THE REVENUES APPEAL AND THE CROSS OBJECTIONS OF T HE ASSESSEE ARE ARISING FROM THE SAME ORDER OF CIT(A). SO THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE APPEAL OF THE REVENUE HAS BEEN FI LED ON THE FOLLOWING GROUNDS: 2 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN HOLDING THAT THE INCOME DERIVED BY THE ASS ESSEE FROM THE LETTING OUT OF PREMISES OF THE 'CYBER CITY ' HAS TO BE ASSESSED AS BUSINESS INCOME AND NOT AS INCOME UN DER THE HEAD 'HOUSE PROPERTY' AS HAD BEEN TAKEN IN THE ASSESSMENT. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN HOLDING THAT THE SERVICES PROVIDED BY THE ASSESSEE TO THE TENANTS IN CYBER CITY WERE IN THE NATURE OF EXTENSIVE AND SPECIALIZE SERVICES AND, THEREFORE, T HE PREMISES LET OUT BY THE ASSESSEE COULD NOT BE REGAR DED AS BARE TENEMENT BUT THE COMPLEX ONE WITH INFRASTRUCTU RE FACILITIES, THE INCOME DERIVED THERE FROM WHICH IS NOT SEPARABLE FROM LETTING OUT OF THE BUILDING.' 4. THE LEARNED COMMISSIONER OF INCOME-TAX. (APPEAL S) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE ASS ESSEE HAD LET OUT THE PREMISES IN EXERCISE OF THE PROPERTY RI GHTS VESTED IN IT, I.E., AS ANY ORDINARY HOUSE OWNER WOU LD TURN HIS PROPERTY TO PROFITABLE ACCOUNT, AND ALSO THE AS SESSEE HAD NEITHER OCCUPIED NOT LET OUT THE PREMISES FOR T HE PURPOSE OF ANY BUSINESS CARRIED ON BY IT AND, IN TH E CIRCUMSTANCES, THE PROFITS DERIVED FROM THE PREMISE S COULD ONLY BE ASSESSED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY' WITHIN THE PROVISION OF SEC. 22 OF THE INCOME-TAX ACT, 1961. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE PRIMARY OBJ ECT OF THE ASSESSEE WAS TO LET OUT THE PROPERTIES IN ORDER TO DERIVE INCOME THERE FROM AND NOT TO EXPLOIT THEM COMMERCIA LLY AND MERELY BECAUSE CERTAIN INFRASTRUCTURE HAS BEEN PROVIDED TO FACILITATE SUCH LETTING OUT, SUCH PROVI SION CAN BY NO MEANS AMOUNT TO CARRYING ON COMPLEX COMMERCIA L ACTIVITIES SO AS TO INVEST THE LETTING OUT WITH THE CHARACTER OF BUSINESS. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE INFRASTRUCT URE AND SERVICES PROVIDED BY THE ASSESSEE TO THE TENANTS WE RE SUCH AS ANY ORDINARY HOUSE OWNER WOULD PROVIDE DEPENDING ON THE NATURE OF THE TENEMENT AND, THEREF ORE, THE MERE FACTUM OF SUCH PROVISION WOULD NOT ALTER T HE NATURE OF THE INCOME DERIVED FROM THE PROPERTY WHEN THE DOMINANT INTENTION IS TO DERIVE INCOME THERE FROM. 3 7. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN ATTACHING UNDUE IMPORTANCE TO A CLAUSE IN THE AGREEMENT AS PER WHICH THE COST INVOLVED IN THE SER VICES IS BUILT INTO THE COST PER SQ.FT. AS PER THE TENANC Y AGREEMENT AND WITHOUT . APPRECIATING THAT THE ASSES SEE HAS PROVIDED THE SERVICES IN THE PROPERTIES SO THAT THE SAME COULD BE LET OUT TO THE TARGET GROUPS. 8. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE INFRASTRUCT URE AND SERVICES PROVIDED BY THE ASSESSEE WERE INCIDENTAL T O THE LETTING OUT OF THE PROPERTIES AND ALSO IN FAILING T O APPRECIATE THAT THE VERY FACT THAT SUBSTANTIAL INCO ME AS PER THE AGREEMENT WAS TOWARDS RENT ON THE LET OUT O F THE SUPER AREA AND NOT TOWARDS PROVISION OF SERVICES WO ULD TESTIFY TO THE ABOVE. 9. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN HOLDING THAT IF ANY DISALLOWANCES U/S. 43B , 40(A)(IA) AND 35(1)(VA) RELATES TO THE 'HELLICONIA' PROJECT, THEN THE ASSESSEE'S CLAIM OF DEDUCTION U/S. 80-IB(1 0) IN RESPECT OF THIS PROJECT WOULD HAVE TO BE CONSIDERED ON THE CORRESPONDINGLY ENHANCED INCOME. 10. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS ) GROSSLY ERRED IN FAILING TO APPRECIATE THAT DISALLOWANCES U /S. 43B, 40(A)(IA) AND 35(1)(VA) DO NOT GIVE RISE TO ANY INC OME 'DERIVED FROM' THE UNDERTAKING AND, THEREFORE, SUCH INCOME CAN BY NO MEANS BE CONSIDERED FOR COMPUTING DEDUCTION U/S. 80-18{10) AS PER THE RATIO OF THE DE CISION OF THE HON'BLE APEX COURT IN THE CASE OF STERLING F OODS LTD., 237 ITR 579 (S.C) AND PANDIAN CHEMICALS, 262 ITR 278 (S.C) 2. THE MAIN ISSUE IN REVENUES APPEAL IS WITH REGAR D TO TREATMENT OF RENTAL RECEIPTS FOR LETTING OUT THE PR EMISES IN CYBER CITY IN MAGARPATTA CITY PROJECT. THE ASSESSING OFF ICER NOTICED THAT ASSESSEE HAD SHOWN RECEIPTS OF RS.36,97,05,084/- UN DER THE HEAD OTHER INCOME WHICH WAS IN THE NATURE OF RENTAL RECE IPTS FOR LETTING OUT PREMISES IN THE CYBER CITY IN THE MAGARPATTA CI TY PROJECT. THESE RECEIPTS WERE TREATED BY THE ASSESSEE AS BUSI NESS INCOME AND DEPRECIATION WAS CLAIMED FOR THE ASSETS OF CYBER CI TY AMOUNTING TO RS.24,87,04,429/-. THE PROPORTIONATE EXPENSES WHIC H COULD BE APPORTIONED TO THE ACTIVITY OF LETTING OUT OF CYBER CITY WAS COMPUTED IN THE ORDER AT RS.6,11,56,123/-. IT WAS OBSERVED BY ASSESSING 4 OFFICER THAT ACTUALLY THE ASSESSEE WAS INCURRING LO SSES IF THE EXPENSES ON ACCOUNT OF INTEREST ARE ALSO CONSIDERED . THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY INCOME ON ACCO UNT OF THE RECEIPT FROM LETTING OUT OF THE PREMISES IN CYBER C ITY SHOULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY. IT WAS EXPL AINED ON BEHALF OF THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT T HE MAGARPATTA CITY PROJECT OF THE ASSESSEE CONSISTED OF I.T. PARK , COMMERCIAL COMPLEXES, SCHOOLS AND RESIDENTIAL COMPLEXES, ETC., AND THE MEMORANDUM OF ARTICLES OF THE COMPANY WAS TO DEVELO P AND MAINTAIN I.T. PARKS, WHICH WAS THEREFORE A SYSTEMAT IC BUSINESS ACTIVITY OF THE ASSESSEE. THIS I.T. PARK HAD BEEN FOR USE TO VARIOUS SOFTWARE/OTHER COMPANIES AND THE I.T. PARK OF THE C OMPANY WAS RECOGNIZED/SANCTIONED U/S.80IA OF THE ACT. FURTHER , THE BUILDINGS IN THE I.T. PARK WERE SHOWN AS BUSINESS ASSETS IN T HE SCHEDULE OF FIXED ASSETS OF THE COMPANY, AND WERE DEPRECIABLE A SSETS. IT WAS ALSO CONTENDED ON BEHALF OF ASSESSEE THAT THE I.T. PARK WAS WELL EQUIPPED WITH THE REQUIRED INFRASTRUCTURE, AND VARI OUS FACILITIES AND SERVICES LIKE PROVISIONS OF FURNITURE AND FIXTURE, AIR-CONDITIONER PLANT, VARIOUS MACHINERIES, 24-HOURS SECURITY GUAR DS, PROVISION FOR ELECTRICITY IN THE COMMON I.T. PARK CAMPUS ETC. IT WAS ALSO SUBMITTED THAT THESE POINTS WERE EXPLAINED DURING T HE ASSESSMENT PROCEEDINGS OF THE EARLIER YEARS AS WELL WHEREIN SU CH INCOME HAS BEEN ACCEPTED AS BUSINESS INCOME IN SAID EARLIER YE ARS. FURTHER, THE LOCAL AUTHORITY, I.E., PUNE MUNICIPAL CORPORATI ON AND THE MAHARASHTRA STATE ELECTRICITY DEVELOPMENT ALSO CONS IDERED THE I.T. PARK PROJECTS AS COMMERCIAL PROJECTS AND ACCORDINGL Y THE TAXES AND RATES WERE APPLIED. 3. THE ASSESSING OFFICER RELYING ON THE PROVISIONS OF SECTION 22 OF THE ACT REGARDING CHARGEABILITY UNDER THE HEAD INCO ME FROM HOUSE PROPERTY, EXAMINED THIS CHARGEABILITY IN THE ASSESS EES CASE UNDER THIS HEAD AS BUSINESS INCOME. FOR THIS PURPOSE, TH E ASSESSING OFFICER ANALYSED THE ISSUE IN LIGHT OF LEGAL PREPO SITION ON THIS ISSUE 5 AND FOLLOWING MAIN CONCLUSIONS WERE DRAWN BY THE AS SESSING OFFICER: I) THE RENTAL INCOME FROM A BUILDING WHETHER A COMME RCIAL OR RESIDENTIAL WAS TO BE ASSESSED UNDER THE HEAD INCOM E FROM HOUSE PROPERTY. II) IF THE MAIN INTENTION WAS TO LET OUT PROPERTY THE N IT WAS TO BE CONSIDERED AS INCOME FROM HOUSE PROPERTY. III) THIS WAS TRUE EVEN IT WAS DERIVED FROM SHOPS AND STALLS, AND EVEN IF IT WAS EARNED BY COMPANY FORMED WITH THE OB JECT OF DEVELOPING AND SETTING UP OF MARKETS. IV) IF THE MAIN INTENTION WAS TO EXPLOIT THE PROPERTY BY WAY OF OWN COMPLEX COMMERCIAL ACTIVITIES, IN THAT EVENT AL ONE IT SHOULD BE TREATED AS BUSINESS INCOME. V) WHEN INCOME OBTAINED IS NOT SO MUCH BECAUSE OF BA RE LETTING OF TENEMENTS BUT BECAUSE OF FACILITIES AND SERVICES RENDERED IN SUCH CASE, THE NATURE OF BUSINESS INCOME. WHEN THE LETTING WAS ONLY INCIDENTAL TO THE MAIN BUSINESS OF THE ASSESSEE, THEN ALSO IT WAS INCOME FROM BUSINESS. VI) WHEN INCOME WAS DUE TO EXERCISE OF PROPERTY RIGHT S, IT SHOULD BE ASSESSABLE UNDER THE HEAD INCOME FROM PROPERTY. VII) IF INCOME FALLS UNDER THE HEAD INCOME FROM PROPERTY , IT WAS TO BE TAXED U/S.22 ONLY, AND CANNOT BE TAKEN ON SEC TION 28 ON THE GROUND THAT THE BUSINESS OF THE ASSESSEE WAS TO EXPLOIT PROPERTY. VIII) IF THE PROPERTY WAS GIVEN ON LEAVE AND LICENSE BASI S, IT IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. THIS CHARAC TER IS NOT CHANGED EVEN IF THE HIRING IS INCLUSIVE OF CERTAIN INSIGNIFICANT AND INCIDENTAL SERVICES LIKE HEATING, CLEANING, LIG HTING AND SANITATION. IX) IF THE PROPERTY WAS LET OUT FOR A FIXED AMOUNT FO R A FIXED PERIOD, THE LIKELIHOOD OF IT BEING INCOME FROM HOUS E PROPERTY IS MORE. 4. THE ASSESSING OFFICER THEN ANALYSED THE PROVISIO NS OF LEASE AGREEMENT ENTERED BETWEEN THE ASSESSEE AND THE SOFT WARE COMPANIES. THE ASSESSING OFFICER OBSERVED THAT WHI LE LEASE RENT FROM THE PREMISES WAS CHARGED AT RS.14.30 PER SQ.FT ., THE AMOUNT CHARGED TOWARDS MAINTENANCE WAS ONLY RS.0.50 PER SQ .FT. THEREFORE, IT WAS STATED THAT THE RENT WAS PREDOMIN ANTLY FOR THE SPACE AND THE PRIME INTENTION WAS TO LET OUT THE PR OPERTY ON A MONTHLY RENT, AND THERE WAS NO COMPLEX COMMERCIAL A CTIVITY INVOLVED IN THIS LETTING OUT. HE ALSO OBSERVED THA T IT WAS NOT A CASE THAT THE LEASING OF THE PROPERTY WAS INCIDENTAL OR SUBSERVIENT TO THE 6 MAIN BUSINESS OF THE ASSESSEE. THE MAINTENANCE CHAR GES RECEIVED WERE SUBSERVIENT TO THE EXPLOITATION OF THE PROPERT IES. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSE ES CONTENTION THAT IT WAS IN THE BUSINESS OF RUNNING AND MAINTENA NCE OF I.T. PARK, AND THEREFORE, IT WAS A BUSINESS INCOME, WAS ALSO N OT TENABLE, SINCE THE PROPERTIES WERE EXPLOITED IN A BASIC AND SIMPLE WAY OF LETTING OUT ON A MONTHLY BASIS AND THERE WAS NO COMPLEX COM MERCIAL ACTIVITY INVOLVED AS ENVISAGED IN THE APEX COURT JU DGEMENT IN THE CASE OF CIT VS. SHAMBHU INVESTMENTS PVT. LTD. (2003 ) 263 ITR 143 (SC). IT WAS STATED THAT THOUGH THE PROPERTIES COL LECTIVELY FORMED AN I.T. PARK AND WAS RECOGNIZED AS SUCH, IT DID NOT AL TER THE BASIC NATURE OF ACTIVITY OF LETTING OUT OF THE PROPERTIES . THE ASSESSING OFFICER ALSO RELIED ON THE DECISION OF THE ITAT PUN E BENCH IN THE CASE OF NUTAN WAREHOUSING LTD. (2007) 106 TTJ 137 T O HOLD THAT INCOME DERIVED FROM THE LETTING OUT OF THE PREMISES OF THE I.T. PARK KNOWN AS CYBER CITY WAS ASSESSABLE UNDER THE HEAD I NCOME FROM HOUSE PROPERTY WHICH WAS COMPUTED AS UNDER: TOTAL RENTAL RECEIPTS (LICENSE FEES) RS.36,97,05,084/- LESS: 30% FOR REPAIRS RS.11,09,11,525/- INCOME UNDER THE HEAD HOUSE PROPERTY RS.25,87,93,55 9/- 5. FURTHER, THE ASSESSING OFFICER DISALLOWED THE DE PRECIATION CLAIMED ON THE CYBER CITY BUILDING, FURNITURE AND P LANT AND MACHINERY TOTALLING TO RS.24,87,04,429/- OF WHICH T HE BREAK UP WAS GIVEN ON PAGE 16 OF THE ASSESSMENT ORDER. FURTHER THE COMMON EXPENSES UNDER THE HEAD ADMINISTRATIVE EXPENSES, I. E., EMPLOYEES COST AND MARKETING COST, TOTALLING TO RS.39,05,24,4 15/- WAS APPORTIONED TO THE LETTING OUT ACTIVITY IN THE RATI O OF LICENSE FEE TO TOTAL RECEIPTS, WHICH WORKED OUT TO 15.66%. OUT OF THE TOTAL EXPENSES CLAIMED AT RS.39.05 CRORES MENTIONED ABOVE , THE EXPENSES APPORTIONED TO LETTING OUT, WORKING OUT TO RS.6,11, 56,123/- WAS ALSO ADDED BACK. THUS, THE INCOME FROM BUSINESS WA S COMPUTED AT RS.14,76,15,597/- AS AGAINST INCOME FROM BUSINESS S HOWN IN 7 RETURN, WHICH WAS RS.20,74,60,129/-. ACCORDINGLY, THE GROSS TOTAL INCOME BECAME RS.25,87,93,559/- + RS.14,76,15,595/- = RS.40,64,09,154/- AS AGAINST THE GROSS TOTAL INCOME SHOWN UNDER THE HEAD BUSINESS INCOME AT RS.20,74,60,129/- WHICH RESULTED IN NET ADDITION OF RS.19,89,49,025/- TO THE TOTAL INCO ME. 6. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AU THORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF THE AS SESSEE AND CIT(A) AFTER CONSIDERING THE VARIOUS CONTENTIONS ON BEHALF OF THE ASSESSEE, HAS DECIDED THIS ISSUE IN FAVOUR OF THE A SSESSEE BY HOLDING THAT THE ASSESSEES INCOME WAS TO BE ASSESS ED AS BUSINESS INCOME. SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF THE REVENUE. THE LD. DEPARTMENTAL REPRESENTATIVE CONT ENDED THAT THE CIT(A) ERRED IN HOLDING THAT INCOME DERIVED BY THE ASSESSEE FROM THE LETTING OUT OF PREMISES OF THE 'CYBER CITY' HAS TO BE ASSESSED AS BUSINESS INCOME AND NOT AS INCOME UNDER THE HEAD 'H OUSE PROPERTY' AS HAD BEEN TAKEN IN THE ASSESSMENT. THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE SERVICES PROVIDED BY THE ASSESSEE TO THE TENANTS IN CYBER CITY WERE IN THE NATURE OF EXTENSI VE AND SPECIALIZE SERVICES AND, THEREFORE, THE PREMISES LET OUT BY TH E ASSESSEE COULD NOT BE REGARDED AS BARE TENEMENT BUT THE COMPLEX ON E WITH INFRASTRUCTURE FACILITIES, THE INCOME DERIVED THERE FROM WHICH IS NOT SEPARABLE FROM LETTING OUT OF THE BUILDING. THE CI T(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAD LET OUT THE PREMIS ES IN EXERCISE OF THE PROPERTY RIGHTS VESTED IN IT, I.E., AS ANY ORDI NARY HOUSE OWNER WOULD TURN HIS PROPERTY TO PROFITABLE ACCOUNT, AND ALSO THE ASSESSEE HAD NEITHER OCCUPIED NOR LET OUT THE PREMISES FOR T HE PURPOSE OF ANY BUSINESS CARRIED ON BY IT. IN THE CIRCUMSTANCE S, THE PROFITS DERIVED FROM THE PREMISES COULD ONLY BE ASSESSED UN DER THE HEAD 'INCOME FROM HOUSE PROPERTY' WITHIN THE PROVISION O F SEC. 22 OF THE INCOME-TAX ACT, 1961. THE CIT(A) FAILED TO APPRECI ATE THAT THE PRIMARY OBJECT OF THE ASSESSEE WAS TO LET OUT THE P ROPERTIES IN ORDER TO DERIVE INCOME THERE FROM AND NOT TO EXPLOIT THEM COMMERCIALLY AND MERELY BECAUSE CERTAIN INFRASTRUCTURE HAS BEEN PROVIDED TO 8 FACILITATE SUCH LETTING OUT, SUCH PROVISION CAN BY NO MEANS AMOUNT TO CARRYING ON COMPLEX COMMERCIAL ACTIVITIES SO AS TO INVEST THE LETTING OUT WITH THE CHARACTER OF BUSINESS. THE C IT(A) FAILED TO APPRECIATE THAT THE INFRASTRUCTURE AND SERVICES PRO VIDED BY THE ASSESSEE TO THE TENANTS WERE SUCH AS ANY ORDINARY H OUSE OWNER WOULD PROVIDE DEPENDING ON THE NATURE OF THE TENEME NT AND, THEREFORE, THE MERE FACTUM OF SUCH PROVISION WOULD NOT ALTER THE NATURE OF THE INCOME DERIVED FROM THE PROPERTY WHEN THE DOMINANT INTENTION IS TO DERIVE INCOME THERE FROM. THE CIT( A) GROSSLY ERRED IN ATTACHING UNDUE IMPORTANCE TO A CLAUSE IN THE AGREE MENT AS PER WHICH THE COST INVOLVED IN THE SERVICES IS BUILT IN TO THE COST PER SQ.FT. AS PER THE TENANCY AGREEMENT AND WITHOUT . A PPRECIATING THAT THE ASSESSEE HAS PROVIDED THE SERVICES IN THE PROPE RTIES SO THAT THE SAME COULD BE LET OUT TO THE TARGET GROUPS. THE CIT (A) FAILED TO APPRECIATE THAT THE INFRASTRUCTURE AND SERVICES PRO VIDED BY THE ASSESSEE WERE INCIDENTAL TO THE LETTING OUT OF THE PROPERTIES AND ALSO IN FAILING TO APPRECIATE THAT THE VERY FACT THAT SU BSTANTIAL INCOME AS PER THE AGREEMENT WAS TOWARDS RENT ON THE LET OUT O F THE SUPER AREA AND NOT TOWARDS PROVISION OF SERVICES WOULD TESTIFY THE ABOVE. THE CIT(A) ERRED IN HOLDING THAT IF ANY DISALLOWANCES U /S. 43B, 40(A)(IA) AND 35(1)(VA) RELATES TO THE 'HELLICONIA' PROJECT, THEN THE ASSESSEE'S CLAIM OF DEDUCTION U/S. 80-IB(10) IN RESPECT OF THI S PROJECT WOULD HAVE TO BE CONSIDERED ON THE CORRESPONDINGLY ENHANC ED INCOME. THE CIT(A) ALSO FAILED TO APPRECIATE THAT DISALLOWA NCES U/S. 43B, 40(A)(IA) AND 35(1)(VA) DO NOT GIVE RISE TO ANY INC OME DERIVED FROM THE UNDERTAKING AND, THEREFORE, SUCH INCOME CAN BY NO MEANS BE CONSIDERED FOR COMPUTING DEDUCTION U/S. 80-IB(10) A S PER THE RATIO OF THE DECISION OF THE HON'BLE APEX COURT IN THE CA SE OF STERLING FOODS LTD., 237 ITR 579 (S.C) AND PANDIAN CHEMICALS , 262 ITR 278 (SC). IN THIS BACKGROUND IT WAS SUBMITTED THAT THE ORDER OF THE CIT(A) BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 7. ON THE OTHER HAND, THE LD. AUTHORISED REPRESENTA TIVE SUBMITTED THAT THE ASSESSEE HAS NOT MERELY GIVEN TH E PREMISES ON 9 RENT BUT LETTING OUT IS COUPLED WITH WELL EQUIPPED AMENITIES, FACILITIES AND SERVICES TO I.T. COMPANIES. THE ASS ESSEE HAS CLAIMED DEPRECIATION ON THE COST OF THE BUILDINGS CONSTRUCT ED AND FURTHER CLAIMED PROPORTIONATE EXPENDITURE INCURRED ON MAINT ENANCE OF THE PREMISES. ATTENTION WAS DRAWN TO THE PROFIT AND LO SS ACCOUNT IN RESPECT OF CYBER CITY PROJECT. THE ASSESSING OFFIC ER HELD THAT THE SAID RENTAL INCOME IN THE FORM OF LICENSE FEES IS A SSESSABLE AS INCOME FROM HOUSE PROPERTY AS THE MAIN INTENTION OF THE ASSESSEE WAS TO EXPLOIT THE PROPERTY BY WAY OF LETTING OUT O N RENT. VARIOUS REASONS GIVEN BY THE ASSESSING OFFICER TO HOLD THAT THE RENTAL INCOME IS TAXABLE AS INCOME FROM HOUSE PROPERTY ARE SUMMARISED AS UNDER: I) THE A.O. ON PAGE 13 OF THE ASST. ORDER HAS STATED T HAT AS PER THE RENT AGREEMENT BETWEEN THE ASSESSEE AND EXL . SERVICES.COM (INDIA) PVT. LTD., THE ASSESSEE IS REC EIVING RS.14.50/- PER SQ.FT. AS LEASE RENT AND ONLY RS.0.5 0/- PER SQ.FT., AS MAINTENANCE CHARGES. HENCE, ACCORDING T O HIM, THE RENT RECEIVED IS PREDOMINANTLY FOR RENTING THE SPACE AND THEREFORE, THE INCOME IS TAXABLE AS INCOME FROM HOU SE PROPERTY. II) ACCORDING TO THE ASSESSING OFFICER THE PRIMARY OBJE CT OF THE ASSESSEE WAS TO GIVE THE PREMISES ON RENT AND NO CO MPLEX COMMERCIAL ACTIVITY WAS CARRIED OUT BY THE ASSESSEE . III) THE ASSESSING OFFICER REFERS TO THE DECISION OF HON 'BLE SUPREME COURT IN THE CASE OF SHAMBHU INVESTMENTS PV T LTD. (SUPRA) TO HOLD THAT THE RENT RECEIVED WAS FOR MERE LETTING OUT OF THE PREMISES AND HENCE, THE INCOME W AS TAXABLE AS INCOME FROM HOUSE PROPERTY. THE ASSESSI NG OFFICER HAS FURTHER RELIED UPON THE DECISION OF ITA T PUNE IN THE CASE OF NUTAN WAREHOUSING PVT. LTD. (SUPRA). 8. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT CIT(A) HAS HELD THAT INCOME FROM LEASING I.T. PARK SHOULD BE A SSESSED AS BUSINESS INCOME SINCE THE ASSESSEE HAS PROVIDED VAR IOUS COMPLEX INTEGRATED SERVICES, FACILITIES AND EQUIPMENTS AND HENCE, THE ASSESSEE HAD CONDUCTED A SYSTEMATIC AND COMPLEX ACT IVITY TO EARN PROFIT. THE VARIOUS REASONS GIVEN BY THE CIT(A) FO R ALLOWING THE CLAIM OF THE ASSESSEE ARE AS UNDER. 10 I) THE ASSESSEE HAS CONSTRUCTED I.T. PARK WITH WELL EQUIPPED AND EXCELLENT INFRASTRUCTURE ALONG WITH VA RIOUS SPECIALISED INTEGRATED AMENITIES AND SERVICES IN TH E FORM OF CAR PARKING AREA WITH CABINS, INDEPENDENT AIR- CONDITIONING ROOMS WITH MULTIPLE COMPRESSORS, CHILL ED WATER SYSTEMS, DOUBLE SKIN AHUS TO TAKE CARE OF NOI SE, CHILLER UNITS, AIR PURIFICATION SYSTEMS, 100% POWER BACK UP WITH DIESEL GENERATORS, INDEPENDENT TRANSFORMER TO CONTROL ELECTRICITY LOAD, SPECIAL SECURITY SYSTEMS WITH DOG SQUADS, 24 HOURS MANNED CCTV, SINEAGE, CLUB MEMBERSHIPS, TOILET BLOCKS WITH SENSORS AS PER LESS EES SPECIFICATIONS, FIBRE AND SATELLITE CONNECTIVITY, R ADIO MICROWAVE TOWER WITH OFFICE, CELL PHONE BOOSTERS AN D INDEPENDENT CAFETERIA TERRACE. II) IN THE EARLIER YEARS, THE RENTAL INCOME RECEIVED IS TAXED AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPER TY. THE COPY OF THE ASSESSMENT ORDER FOR A.Y. 2004-05 I S GIVEN ON PAGE 118-124 OF THE PAPER BOOK FILED BY ASSESSEE. THE CIT(A) HAS NOTED THAT AS PER PRINCIP LE OF CONSISTENCY, THE STAND OF THE ASSESSEE SHOULD BE ACCEPTED. III) IN PARA 3.10 OF HIS ORDER, THE LEARNED CIT(A) HAS S TATED THAT THE OBSERVATION OF THE ASSESSING OFFICER THAT RENT OF RS.14.50/- PER SQ.FT. IS NOT FOR OTHER AMENITIES IS NOT CORRECT. HE HAS REPRODUCED THE RELEVANT CLAUSE OF THE AGREEMENT WITH EXL. SERVICE.COM (INDIA) PVT. LTD. A ND WHEREIN IT IS CLEARLY MENTIONED THAT THE SAID AMOUN T OF RS.14.50/- PER SQ.FT. IS INCLUDING THE CHARGES FOR PROVIDING THE ADDITIONAL AMENITIES. THE COPY OF TH E SAID RENTAL AGREEMENT WITH EXL. SERVICE.COM (INDIA) PVT. LTD. IS GIVEN ON PAGES 86 TO 117 OF THE PAPER BOOK. ON PAG E 105, THE VARIOUS AMENITIES PROVIDED BY THE ASSESSEE ARE MENTIONED WHICH ARE AS UNDER: I. CAB PARKING 11 II. CAR PARKING III. CLUB MEMBERSHIP IV. AIR CONDITIONING V. POWER BACK UP VI. HOOKED UP ELECTRICITY LOAD VII. SIGNAGE VIII. TOILET BLOCKS WITH SENSORS IX. FIBRE AND SATELLITE CONNECTIVITY X. RADIO MICROWAVE XI. CELL PHONE BOOSTERS XII. INDEPENDENT CAFETERIA TERRACE IV) ACCORDINGLY, THE CIT(A) APPRECIATED THAT THE RENTAL INCOME OF RS.14.50/- PER SQ.FT. RECEIVED BY THE ASS ESSEE IS FOR LETTING OUT OF THE PREMISES AS WELL AS FOR P ROVIDING VARIOUS ADDITIONAL AMENITIES. APART FROM THAT, THE ASSESSEE PROVIDES SERVICES OF PLUMBER, ELECTRICIAN, MECHANIC, WATCHMAN, GARDENER, ETC. AND THE ASSESSEE LOOKS AFTER THE MAINTENANCE OF THE SOFTWARE PARK. T HE ASSESSEE HAS A NUMBER OF PERSONS ON ITS PAY ROLE FO R THE ABOVE PURPOSE. V) THE CIT(A) FURTHER NOTES THAT THE ASSESSEE HAS INCU RRED RS.445.75 CRORES ON PROVIDING VARIOUS INFRASTRUCTUR E FACILITIES IN THE IT PARK. THE DETAILS OF THE SAME ARE GIVEN ON PAGE 137 138 OF THE PAPER BOOK. THE POINT TO BE APPRECIATED IS THAT THE ASSESSEE HAS INCURRED SUBST ANTIAL EXPENDITURE ON PROVIDING ADDITIONAL AMENITIES WHICH CLEARLY INDICATE THAT THE ASSESSEES INTENTION WAS TO EARN INCOME FROM COMPLEX LETTING OUT OF THE PREMISES. VI) IT IS ALSO TO BE NOTED THAT THE ASSESSEE HAS INCURR ED SUBSTANTIAL EXPENDITURE ON MAINTENANCE OF THE INFRASTRUCTURAL FACILITIES PROVIDED. VII) THE LEARNED CIT(A) THEREAFTER REFERS TO VARIOUS DEC ISIONS OF THE COURTS TO HOLD THAT THE INCOME RECEIVED COMP LEX COMMERCIAL ACTIVITIES OF LETTING OUT PREMISES WAS T AXABLE AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY AS DETERMINED BY THE LEARNED ASSESSING OFF ICER. 12 VIII) THE ASSESSEE PLACES RELIANCE ON THE FOLLOWING DECIS IONS WHEREIN THE COURTS HAVE HELD THAT THE RENTAL INCOME RECEIVED FROM COMPLEX COMMERCIAL ACTIVITIES IS TO B E TAXED AS INCOME FROM BUSINESS AND NOT AS INCOME FRO M HOUSE PROPERTY: 1. ITAT, BANGALORE GLOBAL TECH PARK (P) LTD. (2008) 119 TTJ (BANG) 421. 2. ITAT, BANGALORE GOLFLINK SOFTWARE P. LTD. (ITA.NO .52 & 53/BANG/10) 3. ITAT, MUMBAI HARVINDERPAL MEHTA (2009) 122 TTJ (MUMBAI) 163. 4. ITAT, MUMBAI SHANAYA ENTERPRISES (ITA.NO.3647/MUM/2010) 5. ITAT, MUMBAI GESCO CORPORATION (ITA.NO.3404/MUM/06) 6. ITAT, MUMBAI KRISHNA LAND DEVELOPERS. (ITA.NO.1057/MUM/2010) IN THIS BACKGROUND IT WAS SUBMITTED THAT ASSESSEE H AS EXPLOITED THE BUSINESS ASSETS TO CONDUCT A SYSTEMATIC BUSINESS CO MMERCIAL ACTIVITY. THE MAIN INTENTION OF THE ASSESSEE IN LE ASING OUT THE IT PARK WAS TO EXPLOIT THE PROPERTY COMMERCIALLY BY WA Y OF PROVIDING VARIOUS INTEGRATED SERVICES AND HENCE, THE SAME MAY BE TREATED AS BUSINESS INCOME. IT WAS SUBMITTED THAT THE CASE LA WS AS LISTED AT SL.NO. (I), (II) AND (VI) ARE OF SOFTWARE PARKS AND ON IDENTICAL FACTS, THE RENTAL INCOME IS TREATED AS BUSINESS INCOME. TH EREFORE, THE ABOVE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECISIONS. REGARDING THE ISSUE OF DEDUCTION U/S.80 IB(10) IN RESPECT OF DISALLOWANCES MADE U/S.40(A)(IA) OR 43B, IT WAS SUBMITTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80IB(10) IN RESPECT OF THE HOUSING PROJECTS. THERE WERE DISALLOWANCES ON ACCO UNT OF SECTION 40(A)(IA), 43B AND 35(1)(VA). THE ASSESSEE STATED THAT DUE TO SUCH DISALLOWANCES, THE BUSINESS INCOME INCREASED AND HE NCE, THE DEDUCTION U/S.80IB(10) SHOULD BE ALLOWED ON THE ENH ANCED BUSINESS INCOME. THE ASSESSING OFFICER HAS NOT ALL OWED THE CLAIM OF THE ASSESSEE AND HELD THAT THE DEDUCTION U/S.80I B(10) IS NOT AVAILABLE IN RESPECT OF THE AMOUNTS WHICH ARE DISAL LOWED U/S. 13 40(A)(IA) OR 43B. THE CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE BY RELYING ON THE FOLLOWING DECISIONS: A. CIT VS. GEM PLUS JEWELLERY INDIA LTD. [330 ITR 175] B. S.B.BUILDERS & DEVELOPERS VS. ITO [136 TTJ 420 (BOM )] C. ITO VS. COMPUTERFORCE [136 TTJ 221]. IN THIS BACKGROUND, LD. AUTHORISED REPRESENTATIVE S UBMITTED THAT ORDER OF THE CIT(A) ON THE ISSUE BE UPHELD. 9. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS ENGAGED IN CON STRUCTION BUSINESS AND HAS DEVELOPED A TOWNSHIP UNDER THE NAM E AND STYLE OF MAGARPATTA CITY PROJECT. THE ASSESSEE HAS CONST RUCTED AND LET OUT THE I.T. PARK CALLED CYBER CITY. INCOME RECEIV ED FROM THE LETTING OUT OF THE ABOVE SAID COMMERCIAL PREMISES WAS OFFER ED TO TAX BY ASSESSEE AS INCOME FROM BUSINESS WHICH IS EVIDENT F ROM THE COPY OF THE COMPUTATION OF THE RETURN PLACED AT PAGE 80 OF THE PAPER BOOK. THE ASSESSEE HAS EXPLAINED THAT IN MAGARPATTA CITY PROJECT, THERE WAS A DEVELOPMENT OF INFORMATION TECHNOLOGY (IT) PA RK, WHICH WAS APPROVED U/S.80IA AND WAS A BONDED AREA UNDER THE S OFTWARE TECHNOLOGY PARK OF INDIA (STPI) NORMS. IT HAD HUGE AIRCONDITIONING PLANTS, CHILLERS, ETC., AND SPECIAL SECURITY GUARDS WITH DOG SQUAD. THE ASSESSEE HAS INVESTED HUGE AMOUNTS IN INSTALLAT ION OF MANY SPECIALISED AMENITIES/EQUIPMENTS LIKE TRANSFORMERS FOR THE I.T. PARK, SPECIAL POWER SUB-STATIONS TO ENSURE UNINTERR UPTED POWER SUPPLY, PROVIDING FOR 24 HOURS MANNED CCTVS, FIBRE SATELLITE CONNECTIVITY, RADIO MICROWAVE CELL PHONE BOOSTERS, RESTAURANTS ETC., AND THE PREMISES HAD BEEN PROVIDED TO THE I.T. COMP ANIES WITH ALL THESE FACILITIES AND AMENITIES. THE TOTAL INVESTME NT MADE WAS TO THE TUNE OF RS.445.75 CRORES IN THE I.T. PARK FOR C REATING THE SPECIFIC INFRASTRUCTURE REQUIRED FOR THE I.T. PARK. THE INC OME FROM THE LICENSE AGREEMENT WITH THE SOFTWARE COMPANIES TO WH OM I.T. PARK PREMISES HAD BEEN LET OUT HAS BEEN REGULARLY SHOWN AS BUSINESS INCOME IN THE EARLIER YEARS. THERE IS NOTHING ON R ECORD TO SUGGEST 14 THAT SAME HAS BEEN DISTURBED IN ANY MANNER. IN THI S REGARD ATTENTION WAS DRAWN TO DECISION OF THE HON'BLE BOMB AY HIGH COURT IN THE CASE OF OCEAN CITY TRADING (INDIA) PVT. LTD. , IN ITA NO.2417 OF 2009 DATED 12.03.2010 SPEAKS ON EMPHASISING ON THE PRINCIPLE OF CONSISTENCY. ACCORDING TO US CONSISTENCY SHOULD BE OBSERVED UNLESS THERE IS ANY THING CONTRARY ON RECORD. 10. COMING TO THE LICENSE FEE EARNED FROM LETTING O UT OF PREMISES IN I.T. PARK WAS A CONTINUOUS/SYSTEMATIC ACTIVITY W HICH WAS IN THE NATURE OF COMPLEX COMMERCIAL ACTIVITY. SINCE LICEN SEE WERE ENGAGED IN THE I.T./SOFTWARE BUSINESS, THE SERVICES WERE PR OVIDED BY THE ASSESSEE ROUND THE CLOCK, BECAUSE THE LICENSEES WER E WORKING ACCORDING TO THE TIMINGS IN THE USA/WESTERN COUNTRI ES. THE ASSESSEE HAS SPECIFIED AS TO HOW THE NORMAL RENTING OF PREMISES WAS DIFFERENT FROM THE GIVING OF PREMISES TO I.T. C OMPANIES FOR I.T./SOFTWARE WORK ALONGWITH THE NUMEROUS SERVICES AND FACILITIES IN THESE PREMISES. ALL THE PREMISES WERE PROVIDED WIT H HUGE AIRCONDITIONING PLANTS FOR CENTRAL AIRCONDITIONING, SPECIAL ELECTRIFICATION, UNINTERRUPTED POWER SUPPLY, ETC. DUE TO THE PECULIAR NATURE OF WORK AND ODD HOURS OF WORK, THERE WERE AR RANGEMENTS FOR RESTAURANTS, GYMNASIUM, BANKING FACILITIES IN THE P REMISES, SECURITY SERVICE WITH DOG SQUAD, ETC. ATTENTION WAS DRAWN T O THE LEASE AGREEMENT WITH ONE OF THE SOFTWARE COMPANY EXL. SER VICES.COM (INDIA) LTD., WHEREIN PARA 15 OF THE SAID AGREEMENT READS AS UNDER: THE LESSOR SHALL ALSO PROVIDE TO THE LESSEE CERTAI N ADDITIONAL AMENITIES IN THE DEMISED PREMISES, AS DE TAILED IN SCHEDULE-II HEREIN. THE COST OF PROVIDING SUCH ADD ITIONAL AMENITIES HAS ALREADY BEEN INCLUDED IN THE MONTHLY RENT AND THE LESSEE SHALL NOT BE REQUIRED TO PAY TO THE LESS ER ANY ADDITIONAL AMOUNT(S) TOWARDS IT. THIS SHOWS THAT MONTHLY LEASE RENT/LICENSE FEE OF R S.14.30 PER SQ.FT. INCLUDED COST OF PROVIDING SUCH ADDITIONAL SERVICES AND AMENITIES AS HAS BEEN GIVEN IN DETAIL IN SCHEDULE-II OF THE LICE NSE AGREEMENT AND NOTHING EXTRA HAS BEEN CHARGED FROM THE LESSEE FOR THIS. IT IS 15 EVIDENT FROM SCHEDULE-II OF THE AGREEMENT THAT THE AMENITIES/SERVICES PROVIDED WERE ALSO TECHNICAL ONE AND OF A MAJOR NATURE, E.G. PROVISION OF INDEPENDENT AC PLANT WITH MULTIPLE COMPRESSORS, CHILLED WATER SYSTEM AND DOUBLE SKIN A HUS (TO TAKE CARE OF NOISE), AIRCONDITIONING CHILLER CONFIGURATI ON WITH ADEQUATE AHUS, WHICH INCLUDED ADEQUATE PROVISION FOR GETTIN G FRESH AIR INTO THE PREMISES VIA MECHANICAL SYSTEM, AND TWO CHILLER UNITS; A 100% POWER BACK UP WITH AUTO SWITCHERS FOR THE ENTIRE PO WER GIVEN ON LEASE ON A 24 HOURS BASIS, INCLUSIVE OF GENERATORS ETC.; INDEPENDENT TRANSFORMERS OF 600 KW PER FLOOR TO THE LESSEE FOR SOLE USE OF ITS REQUIREMENT IN THE TOWER, 24 HOURS MANNED CCTV IN C OMMON AREAS AND BASEMENT AREA, FIBRE AND SATELLITE CONNECTIVITY AND A RADIO MICROWAVE TOWER WHICH WOULD BE PROVIDED BY THE STPI , CELL PHONE BOOSTERS, AND UNLIMITED ACCESS TO THE PREMISES 24 X 7, AND IN 365 DAYS IN A YEAR, WITH SUPPORT SERVICES LIKE SECURITY AND PARKING. APART FROM THESE A SUBSTANTIAL PARKING AREA WERE AL SO PROVIDED FOR 50-CAR PARKING AND 20 TWO-WHEELER PARKING AND 60 CA BS PARKING ETC., FOR THE TOWER BUILDING. SUCH SERVICES WERE I NDEED OF A COMPLEX COMMERCIAL NATURE AND CANNOT BE TREATED AS MERELY I NCIDENTAL TO MERE LETTING OUT OF THE PREMISES. IN SCHEDULE-II A ND THE EARLIER MENTIONED PARA 15 OF THE LEASE AGREEMENT THAT FOR P ROVISION OF THESE SPECIALIZED SERVICES, THE COST/RENT WERE INCLUDED I N THE PER SQ.FT. LEASE RENTAL AMOUNT OF RS.14.30. THEREFORE, THE AS SESSING OFFICER WAS NOT JUSTIFIED IN STATING THAT THIS AMOUNT OF RS .14.30 PER SQ.FT. MERELY REPRESENTS LETTING OUT OF THE SPACE. SO FAR AS THE AMOUNT OF RS.0.50 PER SQ.FT. TOWARDS MAINTENANCE CHARGES IS C ONCERNED, IT WAS BASICALLY FOR MAINTAINING AND CLEANING OF THE PREMI SES, TOILETS, DRAINAGE ETC. THE AGREEMENT ALSO MAKES IT CLEAR TH AT THIS AMOUNT OF RS.0.50 PER SQ.FT. WAS FOR MAINTENANCE OF WATER LINES, AND FOR DRAINS, GARBAGE DISPOSAL, COMMON AREAS ETC., WHEREA S THE SPECIALISED SERVICES AND INFRASTRUCTURE AS INCORPOR ATED IN SCHEDULE-II IS INCLUDED IN THE MONTHLY LEASE RENT A MOUNT AS SPECIFIED IN CLAUSE 15 OF THE AGREEMENT AS STATED A BOVE. THUS, IT WAS MADE CLEAR AS TO HOW THESE SPECIALISED SERVICES FOR I.T. 16 COMPANIES WERE OF COMPLEX NATURE AND THEREFORE, THE INTENTION AND OBJECT OF THE COMPANY WAS TO DEVELOP I.T. PARK AS A SYSTEMATIC COMMERCIAL ACTIVITY TO EARN PROFIT AND NOT JUST EAR NING OF RENTAL INCOME. THE HON'BLE SUPREME COURT IN THE CASE OF S HAMBHU INVESTMENT PVT. LTD., (SUPRA) HAS LAID DOWN THAT IF THE PROPERTY WHETHER FURNISHED OR UNFURNISHED WAS LET OUT WITH A N INTENTION TO HAVE RENTAL INCOME, IT WOULD BE ASSESSABLE AS INCOM E FROM HOUSE PROPERTY. ON THE OTHER HAND, IF THE PRIMARY OBJECT IS TO EXPLOIT THE PROPERTY BY WAY OF COMPLEX COMMERCIAL ACTIVITIES, T HE INCOME FROM THE SAME WAS TO BE CONSIDERED AS BUSINESS INCOME. THE CASE OF SHAMBHU INVESTMENT (SUPRA) DOES NOT GO AGAINST THE ASSESSEE. ONE POINT WHICH WAS EMPHASISED IN SAID CASE IS THAT THE ASSESSEE HAS RECOVERED THE ENTIRE COST OF THE PROPERTY LET O UT TO THE OCCUPIER BY WAY OF INTEREST FREE ADVANCE RECEIVED FROM THEM. THEREFORE, IT WAS HELD THAT IN SUCH A CASE THE ASSESSEE WAS NOT E XPLOITING THE PROPERTY FOR COMMERCIAL BUSINESS ACTIVITY AND THE P ROVISIONING OF SOME FURNISHING WAS MERELY INCIDENTAL TO THE BARE L ETTING OUT OF THE PROPERTY. IN CASE BEFORE US, THE ASSESSEE HAS NOT RECOVERED MAJOR COST OF THE BUILDING AND INFRASTRUCTURE AND PROVIDI NG A HOST OF SERVICES WITH RECURRING OPERATING COST AS DISCUSSED ABOVE. 11. THE DECISION OF ITAT PUNE BENCH IN THE CASE OF NUTAN WAREHOUSING PVT. LTD. (SUPRA) RELIED ON BY THE ASSE SSING OFFICER HAS BEEN SET ASIDE AND REMANDED TO THE ASSESSING OFFICE R FOR RECONSIDERATION BY THE HON'BLE BOMBAY HIGH COURT. THE HON'BLE BOMBAY HIGH COURT HAS SET ASIDE THE MATTER TO EXAMI NE THE PRIME OBJECT OF THE ASSESSEE WHETHER IT WAS TO SIMPLY LET OUT THE PROPERTY OR TO EXPLOIT A COMMERCIAL ASSET BY CARRYING ON A C OMMERCIAL ACTIVITY OF WAREHOUSING. THE HON'BLE ALLAHABAD HIG H COURT IN THE CASE OF CIT VS. GOEL BUILDERS (2010) 235 CTR 472 (A LL.) WHEREIN THE ASSESSEE WAS OPERATING THE COMMERCIAL COMPLEX NAMED GOEL COMPLEX AND IT WAS HELD THAT FROM THE VERY BEGINNIN G THE CONSTRUCTION OF THE BUILDING ITSELF WAS FOR COMMERC IAL PURPOSES AND THEREFORE, THE RENTAL INCOME WAS HELD TO BE ASSESSA BLE AS BUSINESS 17 INCOME. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MOHIDDIN HOTELS (2006) 284 ITR 229 (BOM), HAS HELD THAT WHEN THE SUBJECT MATTER THAT IS LET OUT IS NOT A BARE TENEMENT, BUT THE COMPLEX ONE WITH INFRASTRUCTURE FACILITIES, THE INCOME DERIVED THEREFROM WHICH IS NOT SEPARABLE FROM LETTING OUT OF THE BUILDING, SUC H INCOME SHALL NOT BE TREATED AS INCOME FROM HOUSE PROPERTY. ITAT MUM BAI BENCH IN THE CASE OF GESCO CORPORATION LTD. (2009) 31 SOT 32 (MUM) WHEREIN ASSESSEE HAS LET OUT COMMERCIAL PREMISES AS BUSINESS CENTRE AND A LARGE NUMBER OF SPECIALISED SERVICES A ND FACILITIES WERE PROVIDED IN THESE BUSINESS CENTRES, LIKE AIRCONDITI ONING, POWER BACKUP, WATER FILTRATION PLANT, SECURITY SYSTEM THR OUGH CCTV, STATE OF ART COMPUTER-TELEPHONE INTEGRATION, VIDEO CONFER ENCING FACILITIES, SECRETARIAL SERVICES, THE TRIBUNAL HELD AS UNDER: IT WAS CLEARLY DISCERNIBLE FROM THE AGREEMENTS THA T THE PARTIES HAD ENTERED INTO THE ARRANGEMENT WITH THE ASSESSEE WITH THE INTENTION OF USING THE SERVICES AND AMENITIES. THE ASSESSEE WAS GIVING SPACE WITH SERVICES AND FACILITIES WHICH WERE VARIED AND WIDE AND SUCH ACTIVITIES TOGETHER WOULD DEFINIT ELY CONSTITUTE AN ORGANIZED STRUCTURE FOR MAKING PROFIT S AND WOULD NECESSARILY CONSTITUTE A BUSINESS. THUS THE ASSESS EE HAD CREATED A COMMERCIAL INFRASTRUCTURE AND THE SERVICE S RENDERED WERE COMPLEX COMMERCIAL/BUSINESS ACTIVITIES. A PER USAL OF AGREEMENTS AND THE STIPULATIONS CONTAINED THEREIN W OULD NOT LEAVE ANY DOUBT ABOUT THE COMMERCIAL CHARACTER OF T HE RELATIONSHIP BETWEEN THE PARTIES, AS DISTINGUISHED FROM THAT MERELY OF A LANDLORD AND HIS TENANT. OCCUPATION OF SPACE WAS INSEPARABLE FROM THE PROVISION OF SERVICES AND AMEN ITIES. IN GESCO CORPORATION LTD., ITAT MUMBAI BENCH HAS DI STINGUISHED THE FACTS FROM SHAMBHU INVESTMENTS PVT. LTD. (SUPRA ). IN CASE OF PRESTIGE ESTATE PROJECTS (P) LTD. (2010) 129 TTJ 68 0 (BANGALORE), FOLLOWING THE DECISION OF GESCO CORPORAITON LTD., A ND HARVINDARPAL MEHTA (HUF) VS. DCIT (2009) 122 TTJ 163 (MUM), HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF ASSESSEE. IN THE SAID D ECISION, THE PREMISES WAS RELATED TO A BUSINESS CENTRE WITH MULT IFARIOUS FACILITIES LIKE CENTRAL AIRCONDITIONING SERVICES, A TTENDANTS, SWEEPERS, FAX MACHINE, FURNITURE, RECEPTIONISTS, TELEPHONE OP ERATORS, COMMON 18 WAITING/GUEST ROOM WITH ATTACHED TOILETS, ETC. AND IT WAS HELD THAT THE RECEIPTS FROM SUCH ACTIVITIES ALONGWITH THESE F ACILITIES WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM BUSINESS RATHER THAN THE INCOME FROM HOUSE PROPERTY OR INCOME FROM OTHER SOU RCES, AS THE OBJECT OF THE ASSESSEE WAS TO RUN THE BUSINESS CENT RE BY EXPLOITING THE PROPERTY AND NOT MERELY LETTING OUT THE PROPERT Y. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SAPTARSHI SERVICES 265 ITR 379 (GUJ), WHICH ALSO RELATED TO THE LEASING OU T A BUSINESS CENTRE WITH VARIOUS SERVICES, HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE SLP FILED ON BEHALF OF THE REVENUE WAS DISMISSED BY THE HON'BLE SUPREME COURT AS REPORTED IN 264 (ST ) 36. IN THIS BACKGROUND, IT IS CLEAR THAT ASSESSEE HAS PROVIDED VARIOUS COMPLEX INTEGRATED SERVICES AS MENTIONED IN SCHEDULE-II TO THE LEASE AGREEMENT WITH THE I.T. COMPANY. THE SERVICES ARE VAST AND THE AMENITIES PROVIDED WERE IN THE NATURE OF PLANT AND MACHINERY AS CONTENDED BY THE ASSESSEE AND IT HAS BEEN ESTABLISH ED BY THE CLAUSES OF THE AGREEMENTS THAT THE COST OF PROVIDIN G THESE SERVICES WAS ALSO INCLUDED IN THE LEASE RENT OF RS.14.30 PER SQ.FT. THE ASSESSEE ALSO CLARIFIED THAT COST INVOLVED IN THE S ERVICES PROVIDED TO THE PARTICULAR COMPANY I.E., EXL SERVICES.COM WAS R S.2.83 CRORES WHICH WAS ALMOST 40% OF THE LAND AND BUILDING COST OF THAT TOWER. BY NO STRETCH OF IMAGINATION SUCH EXTENSIVE AND SPE CIALIZED SERVICES WHICH COULD ONLY BE UTILISED BY THE IT/SOFTWARE/BPO S BUSINESSES TO BE LOCATED IN THE I.T. PARK COULD BE TREATED AS FOR MING PART OF INCOME FROM HOUSE PROPERTY. IT IS CERTAINLY A CONS TITUTION OF ORGANISED STRUCTURE FOR CARRYING OUT BUSINESS ACTIV ITIES. SECTION 22 PROVIDES ONLY FOR RENTAL INCOME OUT OF BUILDING OR LAND APPURTENANT THERETO, WHEREAS IN THE CASE BEFORE US, COMPLEX AND VARIED SERVICES PROVIDED AND THE HUGE INVESTMENT TH EREIN WERE IN THE NATURE OF PLANT AND MACHINERY WHICH COULD BE IN CLUDED WITHIN THE EXPRESSION BUILDING OR LAND APPURTENANT THERETO . THUS, THE ASSESSEE HAS CONDUCTED SYSTEMATIC ACTIVITY TO EARN PROFIT AND ACCORDINGLY INCOME WAS TO BE ASSESSED AS INCOME FRO M BUSINESS. IN VIEW OF THE SUBMISSIONS MADE ON BEHALF OF THE ASSES SEE, AND 19 ANALYSIS OF VARIOUS CLAUSES AND SCHEDULE-II OF THE AGREEMENT ENTERED WITH THE I.T. COMPANY, CIT(A) WAS JUSTIFIED IN HOLDING THAT IN ASSESSEES CASE THE SAID INCOME WAS TO BE ASSESS ED AS BUSINESS INCOME. THIS REASONED FACTUAL FINDING NEED NO INTER FERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 12. THE ISSUE IN GROUND NO.9 TO 10 PERTAINS TO CLAI M OF DEDUCTION U/S.80IB(10) IN RESPECT OF DISALLOWANCE MADE U/S. 4 0(A)(IA)/43B. THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION U/S. 80I B(10) IN RESPECT OF THE HOUSING PROJECTS. THERE WERE DISALL OWANCES ON ACCOUNT OF SECTION 40(A)(IA), 43B AND 35(1)(VA). T HE ASSESSEE STATED THAT DUE TO SUCH DISALLOWANCES, THE BUSINESS INCOME INCREASED AND HENCE, THE DEDUCTION U/S.80IB(10) SHOULD BE ALLOWED ON THE ENHANCED BUSINESS INCOME. THE ASSESSING OFFICER H AS NOT ACCEPTED THE CLAIM OF THE ASSESSEE AND HAS HELD THA T THE DEDUCTION U/S. 80IB(10) IS NOT AVAILABLE IN RESPECT OF THE AM OUNTS WHICH ARE DISALLOWED U/S. 40(A)(IA) OR 43B. 13. IN APPEAL, THE LEARNED CIT(A) HAS ACCEPTED THE CLAIM OF THE CASE. IN PARA 5.3 TO 5.5 OF HIS ORDER, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: 5.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AND MATERIAL AVAILABLE ON RECORD. THE APPELLANT HAS CI TED CERTAIN DECISIONS IN FAVOUR OF ITS CLAIM. IT IS CONTENDED B Y THE APPELLANT THAT THE TURNOVER WAS FROM THE SAME SOURC E IN RESPECT OF THE CLAIM U/S.80IB(10), AND THEREFORE, I T WAS ENTITLED FOR THE DEDUCTION AFTER INCLUDING THE STATUTORY DIS ALLOWANCES, I.E. ON THE CORRESPONDINGLY ENHANCED INCOME. IN THE JUDGEMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GEMS JEWELLERY INDIA LTD., (2010) 233 CT R 248 (BORN.) THE CLAIM OF DEDUCTION U/S.10A WAS MADE DUE TO ENHANCED PROFIT AFTER DISALLOWANCE U/S.43B. THE HON 'BLE BOMBAY HIGH COURT OBSERVED AS UNDER: AS A MATTER OF FACT THE QUESTION OF LAW WHICH IS FORMULATED BY THE REVENUE PROCEEDS ON THE BASIS THA T THE ASSESSED INCOME WAS ENHANCED DUE TO THE DISALLOWANC E OF THE EMPLOYER'S AS WELL AS THE EMPLOYEES' CONTRIB UTION TOWARDS PF/ESIC AND THE ONLY QUESTION WHICH IS 20 CANVASSED ON BEHALF OF THE REVENUE IS WHETHER ON TH AT BASIS THE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE A SSESSING OFFICER TO GRANT THE EXEMPTION ULS.10A. ON THIS POS ITION, IN THE PRESENT CASE IT CANNOT BE DISPUTED THAT THE NET CONSEQUENCE OF THE DISALLOWANCE OF THE EMPLOYER'S A ND THE EMPLOYEES' CONTRIBUTION IS THAT THE BUSINESS PR OFITS HAVE TO THAT EXTENT BEEN ENHANCED. THERE WAS AN ADD BACK BY THE ASSESSING OFFICER TO THE INCOME. ALL PR OFITS OF THE UNIT OF THE ASSESSEE HAVE BEEN DERIVED FROM MANUFACTURING ACTIVITY. THE SALARIES PAID BY THE ASSESSEE, IT HAS NOT BEEN DISPUTED, RELATE TO THE MANUFACTURING ACTIVITY. THE DISALLOWANCE OF THE PF/ ESIC PAYMENTS HAS BEEN MADE BECAUSE OF THE STATUTORY PROVISIONS - S.43B IN THE CASE OF THE EMPLOYERS CONTRIBUTION AND S.36(V) R.W.S.2(24)(X) IN THE CASE OF THE EMPLOYEES' CONTRIBUTION WHICH HAS BEEN DEEMED TO BE THE INCOME OF THE ASSESSEE. THE PLAIN CONSEQUENCE OF TH E DISALLOWANCE AND THE ADD BACK THAT HAS BEEN MADE BY THE ASSESSING OFFICER IS AN INCREASE IN THE BUSINES S PROFITS OF THE ASSESSEE. THE CONTENTION OF THE REVE NUE THAT IN COMPUTING THE DEDUCTION U/S. 10A THE ADDITI ON MADE ON ACCOUNT OF THE DISALLOWANCE OF THE PF/ESIC PAYMENTS OUGHT TO BE IGNORED CANNOT BE ACCEPTED. NO STATUTORY PROVISION TO THAT EFFECT HAVING BEEN MADE , THE PLAIN CONSEQUENCE OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER MUST FOLLOW. 5.4 THEREFORE, THE HON'BLE BOMBAY HIGH COURT HAS AL LOWED DEDUCTION U/S.10A ON AN ENHANCED PROFIT DUE TO DISA LLOWANCE U/S.43B ON THE BASIS THAT ALL THE PROFITS OF THE UN ITS OF THE ASSESSEE HAVE BEEN DERIVED FROM MANUFACTURING ACTIV ITY ONLY, AND THERE WERE NO STATUTORY PROVISIONS THAT INCOME ENHANCED DUE TO SUCH DISALLOWANCE COULD NOT BE CONSIDERED FO R THE DEDUCTION. 5.5 THE APPELLANT HAS ALSO CITED THE DECISION OF TH E AHMEDABAD BENCH IN THE CASE OF ITO VS. COMPUTER FOR CE (2011) 136 TTJ 221 (AHD.), ITA NOS.1636/AHD/2009, 2441/AHD/2007, 2442/AHD/2007 AND 1637/AHD/2009 ORDE R DTD.30.7.2010, WHICH ALSO RELATES TO DEDUCTION U/S. 80IB FOR UNIT LOCATED IN DAMAN, WHICH WAS A BACKWARD AREA. THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM U/S.80IB ON THE ENHANCED INCOME DUE TO DISALLOWANCE U/S.40(A)(IA). HOWEVER, THE CIT(A) AND THE ITAT ALLOWED THE CLAIM, STATING THAT THE ENHANCED INCOME DUE TO THIS DISALLOWANCE WAS ELIGIB LE INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND P ROFESSION, ON WHICH CLAIM U/S.80LB WAS ALLOWABLE. ANOTHER DECI SION GIVEN BY THE ASSESSEE WAS THAT OF THE MUMBAI BENCH IN THE CASE OF S.R.BUILDERS AND DEVELOPERS VS. ITO IN ITA. NO. 1245/MUM/2009, A.Y. 06-07, ORDER DTD. 14.5.2010. TH IS WAS A CASE RELATED TO DEDUCTION U/S.801B(10) ITSELF, AN D HERE THE 21 ISSUE WAS REGARDING NON-ALLOWABILITY OF DEDUCTION U /S.80IB(10) ON THE ENHANCED INCOME DUE TO DISALLOWANCE U/S.40(A )(IA) AMOUNTING TO RS.4,50,12,485/-. THE TRIBUNAL HELD T HAT AS PER THE SECTION 80IB(1) THE ASSESSEE WAS TO BE ALLOWED DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED FROM ANY BU SINESS MENTIONED IN SECTION 80IB(10), I.E., FOR AN UNDERTA KING DEVELOPING AND BUILDING HOUSING PROJECTS. IT WAS HE LD BY THE TRIBUNAL AS UNDER: THE SECTION FALLS UNDER CHAPTER VIA OF THE ACT, UN DER THE SUB-HEAD C-DEDUCTIONS IN RESPECT OF CERTAIN INCOME S'. THERE IS NO INDICATION IN THE SECTION AS TO WHAT WO ULD BE CONSIDERED AS PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINESS. SECTION 80AB, INTRODUCED BY THE FINANCE ( NO.2) ACT, 1980 W.E.F. 1.4.1981 HOWEVER STATES THAT WHERE ANY DEDUCTION IS REQUIRED TO BE MADE UNDER ANY SECTION FALLING UNDER CHAPTER VI-A UNDER THE HEAD 'C-DEDUCT IONS IN RESPECT OF CERTAIN INCOMES' IN RESPECT OF ANY IN COME OF THE NATURE REFERRED TO IN THAT SECTION, THEN, 'NOTWITHSTANDING ANYTHING CONTAINED IN THAT SECTION , FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT SECTION, THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT (BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER) SH ALL ALONE BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE WHICH IS DERIVED OR RECEIVED BY THE ASSESSEE AND WHICH IS INCLUDED IN HIS GROSS TOTAL INCOME'. IN OU R HUMBLE OPINION, THIS SECTION AFFORDS A COMPLETE ANS WER TO THE PROBLEM POSED BEFORE US. IN OTHER WORDS, UNDER SECTION 80AB THE INCOME THAT IS DERIVED FROM THE ELIGIBLE BUSINESS MUST BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 30 TO 43 D, AS PROVIDED IN SECTION 29. SECTION 29 PROVIDES THAT TH E INCOME CHARGEABLE TO TAX UNDER THE HEAD PROFITS AN D GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTIONS 30 TO 43D. UNQUESTIONABLY, SECTION 40(A)(IA) IS A SECTION FALL ING BETWEEN SECTIONS 30 TO 43D AND THEREFORE EFFECT MUS T BE GIVEN TO THE SAME IN COMPUTING THE PROFITS AND GAIN S DERIVED FROM THE ELIGIBLE BUSINESS, WHICH IN THIS C ASE IS A HOUSING PROJECT. IT FOLLOWS THAT IF THE ASSESSEE HA S NOT DEDUCTED TAX FROM ANY PAYMENT WHICH IT WAS REQUIRED TO OR HAS FAILED TO DEPOSIT THE TAX WITHIN THE PRESCRI BED TIME LIMIT, IT CANNOT BE CLAIM ANY DEDUCTION IN RESPECT OF THE PAYMENT WHILE COMPUTING THE PROFITS DERIVED FROM TH E ELIGIBLE BUSINESS. THE PAYMENT HAS TO BE DISALLOWED AND ADDED BACK TO THE PROFITS, THEREBY SWELLING THE SAM E. THE RESULTANT FIGURE OF PROFITS, ENHANCED BY THE AMOUNT OF DISALLOWANCE, WOULD BE ELIGIBLE FOR THE DEDUCTION ULS.80IB(10). 22 5.6. IN VIEW OF THE RATIO OF THESE DECISIONS, IT IS ABUNDANTLY CLEAR THAT IN THE APPELLANT'S CASE ALSO DEDUCTION U /S.80IB(10) WAS LIABLE TO BE ALLOWED IN CASE THERE WERE ENHANCE D INCOME ON ACCOUNT OF SUCH STATUTORY DISALLOWANCES U/S.43B, 40(A)(IA) & 36(1)(VA) ETC. AS MENTIONED ABOVE; SINCE THE NATU RE OF RECEIPTS ON THE CREDIT SIDE OF PROFIT AND LOSS ACCO UNT FOR THE ELIGIBLE HOUSING PROJECT U/S.80IB(10) WAS THE SAME, AND THE DISALLOWANCE WAS OF THE EXPENDITURE ON THE DEBIT SI DE, WHICH WOULD ONLY RESULT INTO ENHANCEMENT OF THE NET PROFI T. TECHNICALLY, I.E. FOR ACADEMIC PURPOSES, THEREFORE, THE APPELLANTS CLAIM IS LIABLE TO BE ALLOWED. HOWEVER , IN THIS CASE, IT HAS ALREADY BEEN HELD THAT THE APPELLANT IS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10) PERTAINING TO ITS COSMOS PRO JECT. THE ASSESSING OFFICER HAS HELD IN THE ASSESSMENT ORDER THAT THE CLAIM U/S.80IB(10) WAS ALLOWABLE TO THE APPELLANT F OR ITS HELICONIA PROJECT. THUS, IF ANY DISALLOWANCE U/S.43 B, 40(A)(IA) & 35(1)(VA) ETC. RELATES TO THE HELICONIA PROJECT, THAT ONLY CAN BE CONSIDERED FOR CLAIM U/S.80IB(10) ON THE CORRESP ONDINGLY ENHANCED INCOME. SUBJECT TO THIS DISCUSSION, THERE FORE, THIS GROUND OF APPEAL WILL BE TREATED AS PARTLY ALLOWED. 14. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND M ATERIAL ON RECORD, WE ARE NOT INCLINED TO INTERFERE IN THE FIN DING OF THE CIT(A) ON THE ISSUE. THE CIT(A) OBSERVED THAT TURNOVER WA S FROM THE SAME SOURCE IN RESPECT OF THE CLAIM U/S.80IB(10). THERE FORE, IT WAS ENTITLED FOR DEDUCTION AFTER INCLUDING THE STATUTOR Y DISALLOWANCE I.E., ON CORRESPONDINGLY ENHANCED INCOME. HON'BLE JURISD ICTIONAL HIGH COURT IN THE CASE OF CIT VS. GEMS JEWELLERY INDIA L TD., (SUPRA), HAS ALLOWED THE CLAIM OF DEDUCTION MADE U/S.10A ON ENHA NCED PROFIT. WE ALSO FIND THE MUMBAI BENCH OF THE TRIBUNAL IN TH E CASE OF S.R.BUILDERS VS. ITO IN ITA.NO.1245/MUM/2009 FOR A. Y. 2006-07 DATED 14.05.2010 HAS DECIDED THE APPEAL IN FAVOUR O F THE ASSESSEE, WHEREIN ISSUE OF DEDUCTION U/S.80IB(10) WAS INVOLVE D. IN THE SAID CASE THE ISSUE WAS REGARDING NON-ALLOWABILITY OF DE DUCTION U/S.80IB(10) ON ENHANCED INCOME DUE TO DISALLOWANCE U/S. 40(A)(IA) AMOUNTING TO RS.4,50,12,485/-. THE TRIBUNAL HELD T HAT AS PER SECTION 80IB(10) THE ASSESSEE WAS TO BE ALLOWED DED UCTION IN RESPECT OF PROFITS AND GAINS DERIVED FROM ANY BUSIN ESS MENTIONED IN SECTION 80IB(10), I.E. FOR UNDERTAKING DEVELOPING A ND BUILDING HOUSING PROJECTS. IN VIEW OF ABOVE, ASSESSEE WAS H ELD ENTITLED FOR DEDUCTION U/S.80IB(10) IN CASE THERE WAS ENHANCED I NCOME ON 23 ACCOUNT OF STATUTORY DISALLOWANCE U/S.43B, 40(A)(IA ) AND 36(1)(VA), ETC. IN THE INSTANT CASE NATURE OF RECEIPTS ON CRED IT SIDE OF PROFIT AND LOSS ACCOUNT FOR ELIGIBLE HOUSING PROJECTS U/S.80IB (10) WAS THE SAME AND DISALLOWANCE OF EXPENDITURE ON THE DEBIT S IDE WOULD ONLY RESULT INTO ENHANCEMENT OF NET PROFIT. ACCORDINGLY , THE ASSESSEES CLAIM WAS LIABLE TO BE ALLOWED IN VIEW OF THE RATIO OF THE DECISIONS CITED (SUPRA). AS STATED ABOVE, ASSESSEE IS NOT EL IGIBLE FOR DEDUCTION U/S.80IB(10) PERTAINING TO ITS COSMOS PROJECT. THE ASSESSING OFFICER HAS HELD IN ASSESSMENT ORDER THAT SUM OF CL AIM U/S. 80IB(10) WAS ALLOWABLE TO ASSESSEE FOR ITS HELICONI A PROJECT. THUS, IF ANY DISALLOWANCE U/S.43B, 40(A)(IA) OR 36(10(VA) ET C., RELATE TO HELICONIA PROJECT THAT ONLY CAN BE CONSIDERED FOR C LAIM U/S.80IB(10) AND CORRESPONDING ENHANCED INCOME. THIS REASONED F INDING OF THE CIT(A) ON THE ISSUE NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 15. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISS ED. 16. IN THE CROSS OBJECTIONS, THE ASSESSEE HAS RAISE D THE FOLLOWING GROUNDS: 1) THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE OF DEDUCTION OF RS.13,62,01,380/- U/S.80IB(10) IN RESP ECT OF COSMOS PROJECT CONSTRUCTED BY THE ASSESSEE. 2) THE LEARNED CIT(A) WAS NOT JUSTIFIED IN HOLDING THA T A. BECAUSE FLATS IN BUILDING PRIME HAD BUILT UP AREA EXCEEDING 1500 SQ.FT., THE ENTIRE COSMOS PROJECT DID NOT QUALIFY FOR DEDUCTION U/S.80IB(10) IN RESPECT OF IT S PROFITS. B. EVEN IF, ONE FLAT IN A PROJECT EXCEEDS THE BUILT UP AREA LIMIT PRESCRIBED UNDER THE SECTION 80IB(10), THE DEDUCTION IS TO BE DISALLOWED IN RESPECT OF THE ENT IRE PROJECT AND IT CANNOT BE ALLOWED IN RESPECT OF THE OTHER FLATS/BUILDINGS WHICH SATISFY THE VARIOUS CONDITION S IN THE SECTION. C. IN VIEW OF BOMBAY H.C. DECISION IN THE CASE OF BRAH MA ASSOCIATES, THE PROPORTIONATE DEDUCTION U/S.80IB(10 ) COULD NOT BE ALLOWED IN RESPECT OF THE FLATS WHICH SATISFIED THE CONDITIONS U/S.80IB(10). 24 3) THE LEARNED CIT(A) FAILED TO APPRECIATE THAT A. THERE WERE IN ALL 25 BUILDINGS IN THE COSMOS PROJE CT OUT OF WHICH EXCEPT PRIME BUILDING ALL OTHER BUILDING S SATISFIED THE CONDITIONS OF BUILT UP AREA LIMIT OF 1500 SQ.FT. AND THEREFORE, THE DEDUCTION U/S.80IB(10) SH OULD HAVE BEEN ALLOWED IN RESPECT OF THE PROFITS FROM SU CH BUILDINGS. B. WITHOUT PREJUDICE, THE PROJECT FOR THE PURPOSES OF DEDUCTION U/S.80IB(10) HAD TO BE CONSIDERED AS CONSISTING OF OTHER 24 BUILDINGS IN THE COSMOS PRO JECT EXCLUDING THE PRIME BUILDING AND AS THESE 24 BUIL DINGS SATISFIED THE VARIOUS CONDITIONS U/S.80IB(10), THE DEDUCTION U/S.80IB(10) HAD TO BE ALLOWED IN RESPECT OF THE PROFITS FROM THESE 24 BUILDINGS. C. JUST BECAUSE A COUPLE OF ADJACENT FLATS WERE COMBIN ED INTO ONE FLAT BY THE PURCHASERS LATER ON, THE DEDUC TION U/S.80IB(10) COULD NOT BE DENIED IN RESPECT OF THE PROJECT. D. THE ASSESSEE HAD ALREADY OFFERED THE PROFITS IN RES PECT OF THE BUILDING PRIME ASCERTAINED ON STAND-ALONE BA SIS TO TAX. E. THE BUILDING PLAN OF BUILDING PRIME HAS INDEPENDE NT SANCTION OF PUNE MUNICIPAL CORPORATION (P.M.C.). 4) THE RESPONDENTS PRAYS FOR DEDUCTION U/S.80IB(10) IN RESPECT OF ENTIRE PROFITS COMPUTED AFTER MAKING ADDITIONS/DISALLOWANCES IN RESPECT OF THE COSMOS P ROJECT CONSISTING OF 24 BUILDINGS EXCLUDING PRIME BUILDI NG. 17. THE ISSUE RAISED BY ASSESSEE BY WAY OF CROSS OB JECTIONS IS WITH REGARD TO DISALLOWANCE OF DEDUCTION U/S.80IB(10) AM OUNTING TO RS.13,62,01,380/-. THE ASSESSING OFFICER NOTED THA T IN RESPECT OF ASSESSEES PROJECTS DAFFODILS AND HELLICONIA, WHICH WERE COMPLETED IN THE EARLIER YEARS RELEVANT TO ASSESSMENT YEAR UN DER CONSIDERATION, ONLY RESIDUAL RECEIPTS OF RS.20,000/ - AND RS.16,67,600/- HAD BEEN SHOWN IN THE YEAR UNDER CON SIDERATION. HOWEVER, THE RECEIPT FROM THE PROJECT COSMOS WHICH AMOUNTED TO RS.122,78,44,857/- FORM THE MAJOR PORTION OF THE SA LE PROCEEDS SHOWN DURING THE YEAR. ADDITIONALLY FOR ERICA PROJ ECT A LOSS OF RS.8,56,900/- WAS SHOWN. THE ASSESSING OFFICER HAS MADE REFERENCE U/S.131(1)(D) TO A REGISTERED VALUER SHRI LELE TO VERIFY THE FULFILMENT OF CONDITIONS GIVEN U/S.80IB(10) AGAINST WHICH THE REPORT 25 DATED 28.12.2009 WAS SUBMITTED BY HIM. IN RESPECT OF THE COSMOS PROJECT, THE REGISTERED VALUER GAVE A FINDING THAT IN THE PRIME BUILDING IN THE PROJECT, WHICH IS ONE OF THE 24 BUI LDINGS OF THE PROJECT, ALL THE FLATS HAVE BUILT UP AREA OF MORE T HAN 1500 SQ.FT. FURTHER, HE REPORTED THAT 28 OTHER FLATS OF OTHER B UILDINGS I, N, R, S, T, U, V, W & Z WERE ALSO COMBINED AND HAD BUILT UP AREA EXCEEDING 1500 SQ.FT. FOR EACH OF THE COMBINED UNITS. IN RES PONSE TO THE SHOW CAUSE LETTER ISSUED BY THE ASSESSING OFFICER, THE A SSESSEE HAS EXPLAINED THAT THE BUILDING PRIME WAS SEPARATE AND COMPLETION OF THE RESIDENTIAL UNITS IN THESE BUILDINGS WAS ALSO S EPARATE. IT WAS THEREFORE, ADMITTED THAT THE BUILT UP AREA OF EACH OF THE UNITS IN THE PRIME BUILDING EXCEEDED 1500 SQ.FT. BUT THE ASSESSE E HAD OFFERED THE TOTAL PROFIT OF THESE BUILDING FOR TAXATION AND DID NOT MAKE CLAIM U/S.80IB(10) ON THE SAME. IT WAS CONTENDED ON BEHA LF OF ASSESSEE THAT THE ENTIRE CLAIM SHOULD NOT BE REJECTED SINCE IT WAS SEPARATELY APPROVED AND COMPLETED. THE ASSESSEE ALSO CITED TH E JUDGMENT OF THE ITAT, NAGPUR BENCH REGARDING PROPORTIONATE DEDU CTION U/S.80IB(10), EVEN IF A FEW RESIDENTIAL UNITS EXCEE DED THE BUILT UP AREA OF 1500 SQ.FT. 18. IN RESPECT OF VALUERS OBSERVATION REGARDING CO MBINATION OF ADJACENT FLATS, IT WAS CONTENDED BY THE ASSESSEE TH AT THESE WERE SOLD AS INDEPENDENT UNITS THROUGH SEPARATE AGREEMEN TS, THE MSEB METERS WERE SEPARATE, THERE WERE TWO SEPARATE ENTRA NCES AT THE TIME OF HANDING OVER POSSESSION AND THE MUNICIPAL TAXES ASSESSMENT WAS ALSO SEPARATE. IT WAS FURTHER CONTENDED THAT O NLY FLATS NO.102 AND 103 REFERRED BY THE REGISTERED VALUER WERE ACTU ALLY COMBINED, BUT THOSE ALSO WERE NOT COMBINED AT THE TIME OF SAL E, BUT WERE SOLD TO TWO SEPARATE INDIVIDUALS AND THE OWNERS MIGHT HA VE COMBINED THE SAME LATER. THEREFORE, IT WAS STATED THAT CLAI M U/S.80IB(10) SHOULD NOT BE DISALLOWED ON THIS BASIS. THE ASSESS ING OFFICER HAS DEALT THIS ISSUE, FROM PAGE 28 ONWARDS OF HIS ORDER , OF DEDUCTION U/S.80IB(10) RELATED TO THE COSMOS PROJECT. THIS P ROJECT CONSISTED OF 24 BUILDINGS A TO Z (EXCLUDING Q, X & Y) AND PRI ME. ALL THESE 26 BUILDINGS HAD BEEN SANCTIONED BY A COMMON SANCTION ORDER VIDE COMMENCEMENT CERTIFICATE DATED 4.8.2004 ISSUED BY P MC, WHICH WERE REVISED ON VARIOUS DATES. IT WAS POINTED OUT THAT THE ASSESSEE HAS ACCEPTED THAT ALL THE 45 FLATS IN PRIME BUILDIN G UNDER THE COSMOS PROJECT HAD BUILT UP AREAS EXCEEDING 1500 SQ .FT. THE ASSESSING OFFICER GAVE DETAILS OF COMPLETION CERTIF ICATE FOR ALL THE BUILDINGS, AND ALL THE 85 FLATS IN THE 24 BUILDINGS , ON PAGE 28 AND 29 OF THE ASSESSMENT ORDER. THEREFORE, HE OBSERVED THAT THE BUILDING PRIME COMMENCED AND COMPLETED AS A PART OF THE ENTIRE PROJECT NAMED COSMOS CONSISTING OF 24 BUILDINGS AND IT WAS NOT SANCTIONED SEPARATELY BY THE LOCAL AUTHORITY. THUS IT WAS INTEGRAL PART OF THE COSMOS PROJECT. 19. THE ASSESSING OFFICER FURTHER OBSERVED THAT PRO VISIONS OF SECTION 80IB(10) SPEAKS REGARDING SANCTION TO A HOU SING PROJECT AND NOT TO AN INDIVIDUAL BUILDING IN THE PROJECT AND WH AT WAS IMPORTANT WAS WHETHER THERE ARE SEPARATE SANCTIONS FOR PRIME BUILDING OR NOT. ACCORDING TO THE ASSESSING OFFICER, IN FACT, BUILDI NG PLAN FOR PRIME WAS AN ENCLOSURE/ANNEXURE OF COMMON SANCTION ISSUED BY PUNE MUNICIPAL CORPORATION FOR ENTIRE COSMOS PROJECT CON SISTING OF 24 BUILDINGS AND THERE WAS NO SEPARATE BUILDING PLAN S ANCTIONED FOR BUILDING PRIME. THUS, THE ASSESSING OFFICER CONCLU DED THAT SINCE FLATS IN PRIME BUILDING WERE ALL HAVING BUILT-UP AR EA EXCEEDING 1500 SQ.FT., COSMOS PROJECT HAS FAILED TO SATISFY THE MA NDATORY CONDITION U/S.80IB(10) RENDERING IT INELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT. FURTHER, IT WAS STATED THAT AS PER VALUER REPORT, FLATS NO.101 AND 102 IN I BUILDING WERE COMBINED OF WHI CH COMBINED AREA EXCEEDED 1500 SQ.FT., WHICH AGAIN VIOLATED CON DITION GIVEN U/S.80IB(10). THIS WAS THE ADDITIONAL POINT FOR DI SQUALIFICATION OF COSMOS PROJECT. THE ASSESSING OFFICER FURTHER OBSE RVED THAT ALTERNATIVE PLEA OF THE ASSESSEE TO ALLOW PROPORTIO NATE DEDUCTION IN VIEW OF THE DECISION OF NAGPUR BENCH IN THE CASE OF AIR DEVELOPER WAS NOT TENABLE IN LAW DUE TO THE DECISIONS OF MUMB AI BENCH IN THE 27 CASE OF LAUKIK DEVELOPERS, 105 ITR 657 AND SPECIAL BENCH OF ITAT, PUNE IN THE CASE OF BRAHMA ASSOCIATES, 119 ITD 255 (PUNE)(SB). 20. THE ASSESSING OFFICER ALSO MADE DISCUSSION ABOU T DAFFODILS AND ERICA PROJECTS, AND ARRIVED AT THE FINDING THAT THESE WERE ALSO NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10). HOWEVER, IT WAS NOTICED THAT THERE WAS NO CLAIM IN THE YEAR FOR THESE PROJE CTS. FURTHER, IN RESPECT OF HELICONIA PROJECT, THE ASSESSING OFFICER HAS GIVEN THE FINDING THAT THE CLAIM OF DEDUCTION WAS ALLOWABLE A ND IT WAS WORKED OUT AT RS.1,05,566/- IN THE ASSESSMENT ORDER, ON TH E SALES OF RS.16,97,456/-. 21. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS OF THE ASSESSEE WERE RAISED AND THE CIT(A) HAVING CONSIDERED THE SUBMISSIONS RAISED ON BEHALF OF THE ASSESSEE, DISALLOWED THE CLAIM OF ASSESSEE ON MAIN AS WELL AS ALTERNATIVE GROUNDS FOR PROPORTIONATE DEDUCTION. SAME HAS BEEN OPPOSED BEFORE US AND VARIOUS CONTENTIONS WERE RAISED ON BE HALF OF ASSESSEE IN THIS REGARD AND REQUESTED TO ALLOW THE CLAIM. O N OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED ORDER OF REVE NUE AUTHORITIES BELOW. 22. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S .80IB(10) IN RESPECT OF THE COSMOS PROJECT. THE ASSESSING OFFIC ER HAS DENIED THE DEDUCTION ON THE GROUND THAT THE BUILT UP AREA OF T HE UNITS IN BUILDING PRIME INCLUDED IN THE SAID PROJECT EXCEEDE D 1500 SQ.FT. THUS, THE ASSESSING OFFICER HAS DISALLOWED THE CLAI M OF THE ASSESSEE. THE ASSESSING OFFICER HAS FURTHER STATED THAT THE TWO FLATS IN BUILDING I WERE COMBINED AND AFTER COMBINING, THE BUILT UP AREA OF THE COMBINED UNITS EXCEEDED 1500 SQ.FT. ON THES E TWO GROUNDS, THE LEARNED ASSESSING OFFICER HAS DISALLOWED THE CL AIM OF THE ASSESSEE. IN THIS REGARD LD. AUTHORISED REPRESENTA TIVE SUBMITTED THAT THE ASSESSEE ITSELF HAS EXCLUDED PRIME BUILDIN G AND THE 28 DEDUCTION HAS BEEN CLAIMED ON THE REMAINING 24 BUIL DINGS. THE CONTENTION OF THE ASSESSEE HAS BEEN THAT THE WORDS HOUSING PROJECT ARE NOT DEFINED IN THE SECTION AND THEREFORE, IT CA NNOT BE CONSIDERED AS WHAT IS SANCTIONED BY THE CORPORATION. IT HAS B EEN HELD IN VARIOUS CASES THAT WHATEVER PORTION OF THE PROJECT SATISFIES THE CONDITIONS OF THE SECTION SHOULD BE CONSIDERED AS A HOUSING PROJECT FOR THE PURPOSES OF SECTION 80IB(10). WE FIND THA T HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. VANDANA PR OPERTIES [ITA.NO.3633 OF 2009 WITH ITA.NO.4361/2010] HAS OBS ERVED AS UNDER: 17. THE FIRST QUESTION TO BE CONSIDERED HEREIN IS, WHETHER, IN THE FACTS OF THE PRESENT CASE, CONSTRUCTION OF E BUILDING CONSTITUTES BUILDING A HOUSING PROJECT UNDER SECT ION 80IB(10) OF THE ACT. 18. THE EXPRESSION HOUSING PROJECT IS NEITHER DEF INED UNDER SECTION 2 OF THE ACT NOR UNDER SECTION 80IB(10) OF THE ACT. EVEN UNDER THE MUMBAI MUNICIPAL CORPORATION ACT, 19 88 AS ALSO UNDER THE DEVELOPMENT CONTROL REGULATIONS FOR GREATER MUMBAI, 1991, THE EXPRESSION HOUSING PROJECT IS N OT DEFINED. THEREFORE, THE EXPRESSION HOUSING PROJECT IN SECT ION 80IB(10) WOULD HAVE TO BE CONSTRUED AS COMMONLY UNDERSTOOD. 19. AS RIGHTLY CONTENDED BY MR.INAMDAR, LEARNED SEN IOR ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE AND MR .MISTRI, LEARNED SENIOR ADVOCATE AND MR.JOSHI, LEARNED ADVOC ATE APPEARING ON BEHALF OF THE INTERVENORS, THE EXPRESS ION HOUSING PROJECT IN COMMON PARLANCE WOULD MEAN CONSTRUCTING A BUILDING OR GROUP OF BUILDINGS CONSISTING OF SEVERA L RESIDENTIAL UNITS. IN FACT, THE EXPLANATION IN SECTION 80IB(10 ) SUPPORTS THE CONTENTION OF THE ASSESSEE THAT THE APPROVAL GR ANTED TO A BUILDING PLAN CONSTITUTES APPROVAL GRANTED TO A HOU SING PROJECT. THEREFORE, IT IS CLEAR THAT CONSTRUCTION OF EVEN ONE BUILDING WITH SEVERAL RESIDENTIAL UNITS OF THE SIZE NOT EXCEEDING 1000 SQUARE FEET (E BUILDING IN THE PRESENT CASE) WOULD CONSTITUTE A HOUSING PROJECT UNDER SECTION 80IB(1 0) OF THE ACT. 22.1. WE FIND THAT THE PUNE BENCH IN THE CASE OF DC IT VS. ADITYA DEVELOPERS [ITA.NO.791 & 792/PN/2008] HAS OBSERVED AS UNDER: 29 6.1. LIKEWISE, IN THE CASE OF VANDANA PROPERTIES V S. ACIT (SUPRA), THE MUMBAI BENCH OF THE TRIBUNAL HAS DECID ED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THAT CASE, THE ASSESSEE HAD PLAN FOR 4 INDEPENDENT BUILDINGS A, B, C & D BUT, SO FAR AS E IS CONCERNED ONLY PLANNED WHEN THE STATUS OF T HE SURPLUS LAND WAS CONVERTED AS WITHIN CEILING LIMIT AND TH E ASSESSEE COULD GET ADDITIONAL FSI FOR LAUNCHING WING E, WI NG E WAS PLANNED AND CONSTRUCTION WAS COMMENCED AFTER 1 ST OCTOBER 1998 AND BUILDING/WING E WAS AN INDEPENDENT HOUSI NG PROJECT AS CONTEMPLATED U/S.80IB(10). THE TRIBUNAL HELD THAT THE CONCEPT OF HOUSING PROJECT DOES NOT MEAN THAT S HOULD BE THE GROUP OF BUILDINGS AND ONLY THEN SAME IS CALLED A HOUSING PROJECT. IT WAS FURTHER HELD THAT BUILDING/WING E CANNOT BE PASSED WITH EARLIER BUILDINGS, I.E., A, B, C & D WH ICH WORK WAS COMMENCED IN THE YEAR 1993 WHEREAS PLAN FOR WING E WAS APPROVED FOR ONLY ONCE IN THE YEAR 2002. IT WAS HE LD FURTHER THAT THE CONCLUSION DRAWN BY THE AUTHORITIES BELOW THAT THE COMMENCEMENT OF WING E IS A CONTINUATION OF THE E XISTING PROJECT IS ERRONEOUS. 22.2. WE ALSO FIND THAT THE PUNE BENCH IN THE CASE OF RAHUL CONSTRUCTION CO. VS. ITO [ITA.NO.1250/PN/09 & 707/P N/2010] HAS OBSERVED AS UNDER: 10. IN VIEW OF ABOVE DISCUSSION, WE COME TO THE CONCLUSION THAT FOR VERIFICATION OF ELIGIBILITY OF BENEFIT CLAIMED U/S. 80 IB (10) OF THE ACT BY THE ASSESSEE ON BUILDINGS A1 TO A5 IN ATUL NAGAR AND BUILDINGS B1 TO B6 IN RAHUL NISARG CO-OPERATIVE HOUSING SOCIETY LT D., THE ASSESSING AUTHORITY HAS TO VERIFY AS TO WHEN TH E BUILDING PLANS FOR THESE BUILDINGS WERE FIRSTLY APP ROVED BY THE LOCAL AUTHORITY AND TAKING THE SAID DATE OF APPROVAL A STARTING POINT, HE HAS TO VERIFY AS TO W HETHER THESE BUILDINGS WERE COMPLETED WITHIN THE PRESCRIBE D TIME LIMIT I.E. 31ST MARCH 2008 ON THE BASIS OF THE COMPLETION CERTIFICATE IN RESPECT OF SUCH HOUSING P ROJECT ISSUED BY THE PMC. WHEN WE EXAMINE THE FACTS OF THE PRESENT CASE UNDER THE ABOVE BACKGROUND, WE FIND TH AT THE AUTHORITIES BELOW HAVE NOT DISPUTED THE FACT FURNISHED IN THIS REGARD BY THE ASSESSEE THAT UNDER THE PROJECT ATUL NAGAR CONSISTING OF BUILDINGS A1 TO A5, THE FIRST BUILDING PLAN FOR A TYPE WAS APPROVED BY THE PMC ON 29.4.2003 VIDE COMMENCEMENT CERTIFICATE NO. 4269 (PAGE NO. 4 OF THE PAPER BOOK). HOWEVER, ACTUAL CONSTRUCTION OF A TYPE BUILDING WAS EXECUTED AS PER THE REVISED PLAN VIDE NO. C.C. 4101/27/6/2003 (PAGE NO. 5 OF THE PAPER BOOK). THE SIZE OF THE PLOT ON WHICH T HE A TYPE BUILDING I.E. A1 TO A6 HAVE BEEN CONSTRUCTED I S 1,39,466 SQ.FT. THE PROJECT A TYPE BUILDING I.E. A1 TO A5 30 CONSISTS OF 360 RESIDENTIAL UNITS AND THE CONSTRUCT ION HAS BEEN COMPLETED BETWEEN 10.1.2005 TO 31.8.2005 (PAGE NOS. 6 TO 9 OF PAPER BOOK). THE AUTHORITIES B ELOW HAVE ALSO NOT DISPUTED THIS MATERIAL FACT THAT RESI DENTIAL UNITS HAS A MAXIMUM BUILT UP AREA OF 1500 SQ.FT. LIKEWISE, THESE MATERIAL FACTS THAT B GROUP BUILDIN GS IN RAHUL NISARG COOPERATIVE HOUSING SOCIETY LTD., HA VE BEEN CONSTRUCTED ON LAND AREA OF 138203 SQ.FT., HAS NOT BEEN DENIED BY THE AUTHORITIES BELOW. THEY HAVE ALS O NOT DENIED THESE MATERIAL FACTS THAT THE FIRST BUILDING PLAN WAS SANCTIONED ON 29.4.2003 VIDE COMMENCEMENT CERTIFICATE NO. 4269 ISSUED BY THE PMC (PAGE NO. 16 OF THE PAPER BOOK). THE OTHER MATERIAL FACTS LIKE ACTU AL CONSTRUCTION WAS EXECUTED AS PER THE REVISED PLAN SANCTION ON 20TH MARCH 2004 VIDE CC NO. 2225 (PAGE NO. 17), THE PROJECT CONSISTS OF 396 FLATS AND CONSTRUC TION OF THESE FLATS HAVE BEEN COMPLETED ON 14.7.2006 AS PER THE COMPLETION CERTIFICATE ISSUED BY THE PMC (PAGE NOS. 13 TO 18 OF PAPER BOOK) ARE NOT IN DISPUTE. THE AUTHOR ITIES BELOW HAVE ALSO NOT DENIED THAT BUILT UP AREA OF EA CH OF THESE FLATS DOES NOT EXCEED 1500 SQ.FT. IT IS ALSO NOT IN DISPUTE THAT BOTH THE PROJECTS ARE ENTIRELY A RESID ENTIAL PROJECT AND THERE IS NO COMMERCIAL AREA THEREIN. UN DER THE ABOVE CIRCUMSTANCES, WE ARE OF THE VIEW THAT TH E ASSESSEE IS VERY MUCH ENTITLED TO THE CLAIMED DEDUC TION U/S. 80 IB (10) OF THE ACT ON THE BUILDINGS A1 TO A 5 IN ATUL NAGAR AND BUILDINGS B1 TO B6 IN RAHUL NISAR G CO- OPERATIVE HOUSING SOCIETY LTD. THE ISSUE IS THEREF ORE DECIDED IN FAVOUR OF THE ASSESSEE. WE THUS WHILE SE TTING ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THE IS SUE, DIRECT THE A.O TO ALLOW THE CLAIMED DEDUCTION U/S. 80 IB(10) IN QUESTION. THE RELATED GROUNDS ARE ACCORDI NGLY ALLOWED. 11. IN RESULT, APPEAL IS ALLOWED. 22.3. WE FIND THAT ITAT MUMBAI BENCH IN THE CASE OF MUDHIT MADANLAL GUPTA VS. ACIT [51 DTR 271(MUM)(TRIB)] HAS OBSERVED AS UNDER: DEDUCTION UNDER S.80-IB INCOME FROM DEVELOPING A ND BUILDING HOUSING PROJECT CONDITIONS PRECEDENT A SSESSEE ENGAGED IN CONSTRUCTION BUSINESS ENTERED INTO A JOI NT DEVELOPMENT AGREEMENT FOR CONSTRUCTION OF RESIDENTI AL FLATS TOTAL PLOT MEASURED APPROXIMATELY 7633.82SQ.MTRS. DEDUCTION WAS DENIED BY AO ON THE GROUNDS THAT (I) ASSESSEE HAD COMPLETED ONLY A, B AND C WINGS UPTO 31 ST MARCH, 2008 AND D WING WAS NOT COMPLETED (II) TOTAL PROJECT ARE A WAS 1.88 31 ACRES AND SINCE ASSESSEES SHARE WAS ONLY 51 PER CE NT OF THE BUILT-UP AREA, THE PROJECT AREA WAS OF LESS THAN ON E ACRE AND (III) IN SOME OF THE FLATS UNITS AREA EXCEEDED 1000 SQ.FT. NOT JUSTIFIED CIT(A) WAS SATISFIED THAT EACH UNIT OF THE RESIDENTIAL FLAT IN ALL THE THREE WINGS WAS LESS THAN 1000 SQ.F T. AND SOME OF THOSE FLATS WERE LATER CONVERTED BY THE BUYERS B Y JOINING THE SAME WHEREVER THE BUYERS HAD PURCHASES MORE THAN ON E UNIT AND SINCE REVENUE HAS NOT FILED ANY CROSS-OBJECTION AGAINST THIS FINDING, THE SAME HAS BECOME FINAL AND BINDING ON THE REVENUE INDEPENDENT UNITS ARE RESIDENTIAL UNITS A ND HAVE TO BE TREATED AS SEPARATE HOUSING PROJECTS FOR THE PUR POSE OF DEDUCTION UNDER S.80-IB(10) AS LONG AS THEY FULFIL THE OTHER CONDITIONS PRESCRIBED UNDER THE ACT THERE IS NO R EQUIREMENT THAT SUCH UNDERTAKING OF ASSESSEE SHOULD BE THE OWN ER OF SUCH LAND ASSESSEE IS A DEVELOPER OF THE WHOLE OF THE PROJECT AND, THEREFORE, THE SHARE COULD NOT BE ALLOCATED ON LY IN TERMS OF 51 PER CENT OF THE LAND AREA BECAUSE THE WHOLE P ROJECT IS DEVELOPED AND CONSTRUCTED BY THE ASSESSEE AND 49 PE R CENT SHARE IS GOING TO THE LAND OWNERS IN RESPECT OF THE LAND COST AREA UNDER THE PROJECT WAS ABOUT 7000 SQ.MTRS. WHIC H WAS MEANT FOR DEVELOPMENT AND WHICH IS MORE THAN ONE AC RE AND, THEREFORE, DEDUCTION CANNOT BE DENIED ON THIS GROUN D ASSESSEE WAS THEREFORE ENTITLED TO DEDUCTION UNDER S.80- IB(10). 22.4. WE FIND THAT ITAT BANGALORE BENCH IN THE CASE OF DY.CIT VS. BRIGADE ENTERPRISES (P) LTD. [119 TTJ 269 (BANG.)] HAS OBSERVED AS UNDER: DEDUCTION UNDER S.80-IB INCOME FROM DEVELOPING A ND BUILDING HOUSING PROJECT DIFFERENT UNITS OF A GRO UP PROJECT WHERE SOME OF THE RESIDENTIAL UNITS IN A BIGGER HOU SING PROJECT, TREATED INDEPENDENTLY, ARE ELIGIBLE FOR RE LIEF UNDER S.80-IB(10), RELIEF SHOULD BE GIVEN PRO RATA AND SH OULD NOT BE DENIED BY TREATING THE BIGGER PROJECT AS A SINGLE U NIT, MORE SO, WHEN ASSESSEE OBTAINED ALL SANCTIONS, PERMISSIONS A ND CERTIFICATES FOR SUCH ELIGIBLE UNITS SEPARATELY A SSESSEE UNDERTOOK A DEVELOPMENT PROJECT IN AN AREA OF 22 AC RES 19 GUNTAS CONSISTING OF 5 RESIDENTIAL BLOCKS, ROW HOUS ES, OAK TREE PLACE, A CLUB, A COMMUNITY CENTRE, A SCHOOL AND A P ARK AND CLAIMED DEDUCTION UNDER S.80-IB(10) IN RESPECT OF T WO RESIDENTIAL UNITS ONLY WHICH IF TAKEN SEPARATELY, W ERE ELIGIBLE FOR THE RELIEF AO TREATED THE ENTIRE PROJECT AS A SINGLE UNIT AND DENIED RELIEF UNDER S.80-IB IN ENTIRETY CIT(A ) ALLOWED RELIEF UNDER S.80-IB(10) TREATING THE SAID TWO UNIT S AS INDEPENDENT UNITS JUSTIFIED MATERIAL ON RECORD SHOWED THAT THE VARIOUS LOCAL AUTHORITIES DULY INSPECTED THE PL OT AND SANCTIONED PLAN FOR EACH OF THE BLOCKS SEPARATELY GROUP HOUSING APPROVAL WAS APPROVAL OF A MASTER PLAN AS A CONCEPT 32 FURTHER, THE USE OF THE WORDS RESIDENTIAL UNIT IN CL.(C) OF S.80- IB(10) MEANS THAT DEDUCTION SHOULD BE COMPUTED UNIT -WISE THEREFORE, IF A PARTICULAR UNIT SATISFIES THE CONDI TION OF S.80-IB, THE ASSESSEE IS ENTITLED FOR DEDUCTION AND IT SHOUL D BE DENIED IN RESPECT OF THOSE UNITS ONLY WHICH DO NOT SATISFY THE CONDITIONS AGAIN, THE ACCOUNTING PRINCIPLES WOULD ALSO MANDATE RECOGNITION OF PROFITS FROM EACH UNIT SEPAR ATELY. 23. AS REGARDS THE TWO FLATS COMBINED IN BUILDING I , IT IS SUBMITTED THAT THE FLATS ARE COMBINED BY THE CUSTOMERS. THE ASSESSEE HAS RECEIVED COMPLETION CERTIFICATE INDEPENDENTLY FOR T HE TWO UNITS AND THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED I N CALCULATING THE BUILT UP AREA BY COMBINING THE TWO UNITS. THE ASSES SEE SUBMITS THAT IF UNITS ARE COMBINED BY THE CUSTOMERS, THE BU ILT UP AREA SHOULD BE COMPUTED INDEPENDENTLY AND THE ASSESSEE C ANNOT BE DENIED THE DEDUCTION. FOR THIS PROPOSITION, THE A SSESSEE PLACES RELIANCE ON THE FOLLOWING DECISIONS A. HAWARE CONSTRUCTIONS PVT. LTD. [64 DTR 251 (MUM)] B. EMGEEN HOLDINGS P. LTD. VS. DCIT [ITA.NO.3594 & 3595/MUM/09] C. DCIT VS. ARCADE BHOOMI ENTERPRISES [ITA.NO.366/MUM/ 10] 23.1. WE FIND THAT THE ITAT MUMBAI BENCH IN THE CAS E OF HAWARE CONSTRUCTIONS (P) LTD. VS. ITO (2011) 64 DTR (MUM)( TRIB) 251, HAS HELD AS UNDER: DEDUCTION UNDER S. 80-IB - INCOME FROM DEVELOPING AND BUILDING HOUSING PROJECT-BUILT UP AREA EXCEEDING 1, 000 SQ. FT.- BUILT-UP AREA OF EACH FLAT AS APPROVED BY CIDCO IS LESS THAN 1,000 SQ. FT. AS PER THE APPROVED PLAN AND THE ASSE SSEE HAS SOLD EACH FLAT UNDER SEPARATE AGREEMENTS AND NOT SO LD TWO FLATS BY COMBINING THEM TOGETHER AS ONE FLAT TO ONE PARTY- FURTHER, THERE IS NO EVIDENCE ON RECORD TO SUGGEST THAT THE ASSESSEE HAS DRAWN THE PLAN IN SUCH A MANNER THAT E ACH RESIDENTIAL UNIT IS SHOWN AS SMALLER THAN 1,000 SQ. FT. MERELY TO GET THE BENEFIT OF DEDUCTION UNDER S. 80-IB(10)- IT IS ALSO NOT THE CASE OF THE REVENUE THAT EACH FLAT IN THE HOUSI NG PROJECT COULD NOT HAVE BEEN USED AS AN INDEPENDENT OR AS A SELF- CONTAINED RESIDENTIAL UNIT AND THAT THERE WOULD BE A COMPLETE HABITABLE RESIDENTIAL UNIT ONLY IF TWO OR MORE FLAT S ARE JOINED TOGETHER-THEREFORE, MERELY BECAUSE SOME OF THE PURC HASERS HAVE PURCHASED MORE THAN ONE FLAT AND COMBINED THE SAME, ASSESSEE'S CLAIM FOR DEDUCTION UNDER S. 80-IB(10) C ANNOT BE 33 DISALLOWED-FURTHER, THE CONDITION THAT NOT MORE THA N ONE RESIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO ONE PERSON NOT BEING AN INDIVIDUAL HAS BEEN INSERTED BY FINANC E (NO.2) ACT, 2009, W.E.F. 1ST APRIL, 2010, AND HENCE, IT IS NOT APPLICABLE TO THE FACTS OF THE CASE. 23.2. WE FIND THAT THE ITAT MUMBAI BENCH IN THE CAS E OF EMGEEN HOLDINGS P. LTD. VS. DCIT IN ITA.NO.3594 & 3595/MU M/09, HAS OBSERVED AS UNDER: 7. WE FIND THAT THE DEDUCTION U/S.80IB(10) HAS BEE N DECLINED BY THE ASSESSING OFFICER ON THE GROUND THA T SIZE OF THE RESIDENTIAL UNIT WAS IN EXCESS OF 1,000 SQ.FT WHICH , IN TURN, PROCEEDS ON THE BASIS THAT THE FLATS SOLD TO THE FA MILY MEMBERS ADMITTEDLY BY SEPARATE AGREEMENTS, SHOULD BE TREATE D AS ONE UNIT. WE ARE UNABLE TO APPROVE THIS APPROACH. WE HA VE NOTED THAT THE SIZE OF EACH FLAT, AS EVIDENT FROM BUILDIN G PLAN AS DULY APPROVED BY MUNICIPAL AUTHORITIES WAS LESS THAN 1,0 00 SQ.FT. WE HAVE ALSO NOTED THAT IT IS NOT EVEN REVENUE'S CA SE THAT EACH OF FLAT ON STANDALONE BASIS WAS NOT A RESIDENTIAL U NIT. EVEN IF FLATS WERE CONSTRUCTED OR PLANNED IN SUCH A WAY THA T TWO FLATS COULD INDEED BE MERGED INTO ONE LARGER UNIT, AS LON G EACH FLAT WAS AN INDEPENDENT RESIDENTIAL UNIT, DEDUCTION U/S. 80IB(10) COULD NOT BE DECLINED IT IS IMPORTANT TO BEAR IN MI ND THE FACT THAT WHAT SECTION 80IB(10) REFERS TO IS 'RESIDENTIA L UNIT' AND, IN THE ABSENCE OF ANYTHING TO THE CONTRARY IN THE INCO ME TAX ACT, THE EXPRESSION 'RESIDENTIAL UNITS' MUST HAVE THE SA ME CONNOTATIONS AS ASSIGNED TO IT BY LOCAL AUTHORITIES GRANTING APPROVAL TO THE PROJECT. THE LOCAL AUTHORITY HAS AP PROVED THE BUILDING PLAN WITH RESIDENTIAL UNITS OF LESS THAN 1 ,000 SQ.FT, AND GRANTED COMPLETION CERTIFICATE AS SUCH. THAT LE AVES NO AMBIGUITY ABOUT THE FACTUAL POSITION. WE HAVE FURTH ER NOTED THAT THE PROHIBITION AGAINST SALE OF MORE THAN ONE FLAT IN ,A HOUSING PROJECT TO MEMBERS OF A FAMILY HAS BEEN INS ERTED SPECIFICALLY WITH EFFECT FROM 1 ST APRIL 2010, AND, IN OUR HUMBLE UNDERSTANDING, THIS AMENDMENT IN LAW CAN ONLY BE TR EATED AS PROSPECTIVE IN EFFECT. WHAT IS, THEREFORE, CLEAR IS THAT SO FAR AS PRE-AMENDMENT POSITION IS CONCERNED, AS LONG A RESI DENTIAL UNIT HAS LESS THAN SPECIFIED AREA, IS AS PER THE DU LY APPROVED PLANS AND IS CAPABLE OF BEING USED FOR RESIDENTIAL PURPOSES ON STANDALONE BASIS, DEDUCTION U/S.8018(10) CANNOT BE DECLINED IN RESPECT OF THE SAME MERELY BECAUSE THE END USER, BY BUYING MORE THAN ONE SUCH UNIT IN THE NAME OF FAMILY MEMBE RS, HAS MERGED THESE RESIDENTIAL UNITS INTO A LARGER RESIDE NTIAL UNIT OF A SIZE WHICH IS IN EXCESS OF SPECIFIED SIZE. THAT P RECISELY IS THE CASE BEFORE US. WHILE ON THE SUBJECT, IT IS USEFUL TO TAKE NOTE OF LEGISLATIVE AMENDMENT BY THE VIRTUE OF WHICH LEGISL ATURE PUT CERTAIN RESTRICTIONS ON SALE OF RESIDENTIAL UNITS T O CERTAIN FAMILY MEMBERS OF A PERSON WHO HAS BEEN SOLD A RESIDENTIAL UNIT IN 34 THE HOUSING PROJECT. SECTION 80IB(10) NOW PROVIDES AN ADDITIONAL ELIGIBILITY CONDITION THAT IN A CASE WHE RE A RESIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO ANY PERSON BEING AN INDIVIDUAL NO OTHER RESIDENTIAL UNIT IN SU CH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSON, NAMELY (I) THE INDIVIDUAL OR THE SPOUSE, OR THE MINOR CHILDREN OF SUCH INDIVIDUAL (II) THE HUF IN WHICH SUCH INDIVIDUAL IS A KARTA (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL THE SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HUF IN WHICH SUC H INDIVIDUAL IS A KARTA. THE EXPLANATION MEMORANDUM E XPLAINED THE LEGISLATIVE AMENDMENT AS FOLLOWS: (314 ITR(ST) 203) 'FURTHER, THE OBJECT OF THE TAX BENEFIT FOR HOUSING PROJECTS IS TO BUILD HOUSING STOCK FOR LOW AND MIDDLE INCOME HOUSE HOLDS. THIS HAS BEEN ENSURED BY LIMITING THE SIZE OF THE R ESIDENTIAL UNIT. HOWEVER, THIS IS BEING CIRCUMVENTED BY THE DE VELOPER BY ENTERING INTO AGREEMENT TO SELL MULTIPLE ADJACENT U NITS TO A SINGLE BUYERS. ACCORDINGLY. IT IS PROPOSED TO INSER T NEW CLAUSES IN THE SAID SUB-SECTION TO PROVIDE THAT THE UNDERTA KING WHICH DEVELOPS AND BUILDS THE HOUSING PROJECT SHALL NOT B E ALLOWED TO ALLOT MORE THAN ONE RESIDENTIAL UNIT IN THE HOUSING PROJECT TO THE SAME PERSON, NOT BEING AN INDIVIDUAL AND WHERE THE PERSON IS AN INDIVIDUAL NO OTHER RESIDENTIAL UNIT I N SUCH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSON:- (I) SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL; (II) THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDI VIDUAL IS THE KARTA; (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL THE SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDI VIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA. THIS AMENDMENT WILL TAKE EFFECT FROM THE 1 ST APRIL 2010 AND SHALL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT Y EAR 2010- 2011 AND SUBSEQUENT YEARS.' 8. IT IS THUS CLEAR THAT THE AFORESAID AMENDMENT HA S BEEN BROUGHT WITH PROSPECTIVE EFFECT I.E. FROM 1ST DAY O F APRIL 2010, AND THERE IS NO INDICATION WHATSOEVER TO SUGGEST TH AT THESE RESTRICTIONS NEED TO BE APPLIED WITH RETROSPECTIVE EFFECT. THE AMENDMENT SEEKS TO PLUG A LOOPHOLE BUT RESTRICTS TH E REMEDY WITH EFFECT FROM 1ST DAY OF APRIL 2010, I.E. AY 201 0-2011. THE LAW IS VERY CLEAR THAT UNLESS PROVIDED IN THE STATU TE, THE LAW IS ALWAYS PRESUMED TO BE PROSPECTIVE IN NATURE. IT WIL L THEREFORE, BE CONTRARY TO THE SCHEME OF LAW TO PROCEED ON THE BASIS THAT WHEREVER ADJACENT RESIDENTIAL UNITS ARE SOLD TO FAM ILY MEMBERS, ALL THESE RESIDENTIAL UNITS ARE TO BE CONS IDERED AS ONE UNIT. IF LAW PERMITTED SO, THERE WAS NO NEED OF THE INSERTION OF CLAUSE (F) TO SECTION U/S 80IB(10). IT WILL BE UNREASONABLE TO PROCEED ON THE BASIS THAT LEGISLATI VE 35 AMENDMENT WAS INFRUCTUOUS OR UNCALLED FOR -PARTICUL ARLY AS THE AMENDMENT IS NOT EVEN STATED TO BE 'FOR REMOVAL OF DOUBTS'. ON THE CONTRARY, THIS AMENDMENT SHOWS THAT NO SUCH ELIGIBILITY CONDITIONS COULD BE READ INTO PRE-AMEND MENT LEGAL POSITION. 9. AS REGARDS THE AO'S STAND THAT THE ASSESSEE HIMS ELF HAS OFFERED THE DEDUCTION U/S.80IB(10) IN RESPECT OF TH ESE UNITS DURING THE COURSE OF SURVEY PROCEEDINGS, IT IS ONLY ELEMENTARY THAT NEITHER STATEMENT RECORDED UJS.133A HAS AN EVI DENTIARY VALUE, NOR A LEGAL CLAIM CAN BE DECLINED ONLY BECAU SE ASSESSEE, AT SOME STAGE, DECIDED TO GIVE UP THE SAME. IN VIEW OF THESE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CA SE, ARE OF THE CONSIDERED VIEW THAT THE DEDUCTION UJS.80IB(10) OUGHT TO HAVE BEEN ALLOWED TO THE ASSESSEE ENTIRELY. TO THIS EXTENT, WE MODIFY THE ORDER OF THE CIT(A) AND ALLOW FURTHER RE LIEF TO THE ASSESSEE. 23.3. WE FIND THAT THE ITAT MUMBAI BENCH IN THE CAS E OF ARCADE BHOOMI ENTERPRISES VS. DCIT IN ITA.NO.366/MUM/2010, HAS TAKEN SIMILAR VIEW. 24. IN VIEW OF ABOVE DISCUSSION, WE HOLD THAT CIT(A ) WAS NOT JUSTIFIED IN HOLDING THAT FLATS IN BUILDING PRIME H AD BUILT UP AREA EXCEEDING 1500 SQ.FT., THE ENTIRE COSMOS PROJECT DI D NOT QUALIFY FOR DEDUCTION U/S.80IB(10) IN RESPECT OF ITS PROFITS. THERE IS NOTHING ON RECORD TO SUGGEST THAT ASSESSEE HAS CLAIMED DEDUCTI ON IN RESPECT OF BUILDING PRIME WHEREIN BUILT UP AREA OF ITS UNITS I S EXCEEDING 1500 SQ.FT. IN FACT THERE WERE 25 BUILDINGS IN COSMOS P ROJECT OUT OF WHICH EXCEPT BUILDING PRIME, ALL OTHER BUILDINGS SA TISFY THE CONDITIONS OF BUILT UP AREA LIMIT OF 1500 SQ.FT. T HEREFORE, DEDUCTION U/S.80IB(10) SHOULD BE ALLOWED IN RESPECT OF PROFIT FROM SUCH BUILDINGS. THIS VIEW IS FORTIFIED BY THE DECISIONS IN VANDANA PROPERTIES (SUPRA) AND ADITYA DEVELOPERS (SUPRA) DI SCUSSED ABOVE. AS REGARDS TWO FLATS COMBINED TOGETHER, THE ALLEGAT ION IS THAT SOME UNITS WERE COMBINED INTO ONE, SO DEDUCTION U/S.80IB (10) SHOULD NOT BE ALLOWED. IN THIS REGARD, ASSESSEES STAND H AS BEEN THAT ASSESSEE CONCEIVED THE FLATS AS INDEPENDENT UNITS A ND THESE WERE CONSTRUCTED AS INDEPENDENT UNITS. THERE IS NOTHING ON RECORD TO SUGGEST THAT ASSESSEE HIMSELF HAS JOINED THE ADJACE NT FLATS. IN THIS 36 SITUATION, ASSESSEE SHOULD NOT SUFFER FOR ITS NO FA ULT IF PURCHASER JOIN THE ADJOINING FLATS. THIS VIEW IS FORTIFIED B Y THE DECISION OF MUMBAI BENCH OF ITAT IN HAWARE CONSTRUCTIONS PVT. L TD. (SUPRA), EMGEEN HOLDINGS P. LTD. (SUPRA) AND ARCADE BHOOMI E NTERPRISES (SUPRA), ETC., AS DISCUSSED ABOVE. IN VIEW OF ABOV E, WE HOLD THAT ASSESSEE IS ENTITLED FOR DEDUCTION U/S.80IB(10) IN RESPECT OF ENTIRE PROFITS COMPUTED AFTER MAKING ADDITIONS/DISALLOWANC ES IN RESPECT OF COSMOS PROJECT CONSISTING OF 24 BUILDINGS EXCLUDING PRIME BUILDING. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 25. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED A ND CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 18 TH DAY OF SEPTEMBER, 2012. SD/- SD/- ( R.K.PANDA ) ( SHAILENDRA KUMAR YAD AV ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 18 TH SEPTEMBER, 2012 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DCIT, CIRCLE-3, PUNE. 3. THE CIT(A)-II, PUNE. 4. THE CIT-II, PUNE. 5. THE DR B BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.