M/s Nandanvan Builders, RAJKOT-GUJARAT V. The Income Tax Officer, Ward 2(1), RAJKOT-GUJARAT

ITA 841/RJT/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2245 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 13-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MJ RANPURA
• Section: 143(3); 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER [CONDUCTED THROUGH E COURT AT ITAT, AHMEDABAD] ./ ITA.NO.841/RJT/2010 / ASSTT. YEAR: 2005-2006 M/S.NANDANVAN BUILDERS 29-A, CHOKHAWALA CHAMBERS BARDAN GALI, DANAPITH RAJKOT. VS THE ITO, WARD - 2(1) RAJKOT. ITA NO.522/RJT/2012 / ASSTT. YEAR: 2005-2006 M/S.NANDANVAN BUILDERS C/O. SHRI SURESHBHAI D. NADIAPARA VRAJ NIKUNJ, PARASAR PARK B/H. VORA SOCIETY JAMNAGAR ROAD, RAJKOT. VS THE ITO, WARD - 2(1) RAJKOT. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI M.J. RANPURA, CA REVENUE BY : SHRI YOGESH PANDEY, DR / DATE OF HEARING : 09/02/2016 / DATE OF PRONOUNCEMENT: 17/03/2016 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE PRESENT APPEAL OF THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT-II, RAJKOT DATED 30.3.2010 PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, FOR THE ASSTT.YEAR 2005-06. ITA NO.841/RJT/2010 AND 522/RJT/2012 2 ITA NO.522/RJT/2012 HAS ARISEN FROM THE ORDER OF T HE LD.CIT(A)- III, RAJKOT DATED 29.8.2012 PASSED IN THE ASSTT.YEA R 2005-06. 2. THE AO IN PURSUANCE OF CIT-IIS ORDER DATED 30.3 .2010 PASSED UNDER SECTION 263, HAD PASSED ORDER UNDER SECTION 1 43(3) R.W.S SECTION 263 ON 28.12.2010. THIS ORDER WAS CHALLENGED BEFOR E THE LD.CIT(A), WHICH HAS GIVEN RISE TO THIS APPEAL. 3. FIRST WE TAKE UP THE ITA NO.841/RJT/2010. IN T HIS APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT HAS ER RED IN TAKING ACTION UNDER SECTION 263 OF THE INCOME TAX ACT, AND THEREB Y, DIRECTING THE AO TO DISALLOW DEDUCTION UNDER SECTION 80IB(10) OF THE ACT AMOUNTING TO RS.29,1,359/-. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 27.10.2005 DECLARING NIL INCOME. THE ASS ESSMENT ORDER WAS PASSED UNDER SECTION 143(3) ON 20.12.2007, WHEREBY, THE AO HAS DETERMINED THE TAXABLE INCOME OF THE ASSESSEE AT RS .23,040/-. THE AO HAS MADE ADDITION ON THREE COUNTS; HE DISALLOWED A SUM OF RS.10,000/- OUT OF TRANSPORTATION EXPENSES, RS.10,000/- OUT OF SITE SALARY EXPENSES AND RS.3,043/- OUT OF TELEPHONE EXPENSES. THE ASSE SSEE IN THE RETURN HAS CLAIMED DEDUCTION UNDER SECTION 80IB OF RS.29,17,35 9/-. THE LD.AO HAS ALLOWED THIS DEDUCTION TO THE ASSESSEE. ON PERUSAL OF THE RECORD, THE LD.CIT HAS HARBOURED A BELIEF THAT IN THE ASSTT.YEA R 2004-05, SIMILAR ISSUE HAS COME UP BEFORE THE AO. THE LD.AO HAS OBS ERVED THAT HOUSING PROJECT ON WHICH THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB(10), IT HAS CONSTRUCTED COMMERCIAL SPACE TO TH E EXTENT OF 9.38% OF ITA NO.841/RJT/2010 AND 522/RJT/2012 3 THE TOTAL SPACE. THE LD.AO DISALLOWED THE DEDUCTIO N ADMISSIBLE TO THE ASSESSEE IN THE ASSTT.YEAR 2004-05. THE ASSESSEE T OOK THIS ISSUE IN APPEAL BEFORE THE LD.CIT(A) WHO HAS ALLOWED THE DED UCTION AND THE APPEAL OF THE REVENUE STANDS DISMISSED UPTO THE HON BLE HIGH COURT. THE LD.COMMISSIONER WAS OF THE VIEW THAT SECTION 80 IB(10) HAS BEEN AMENDED W.E.F. 1-4-2005. UNDER CLAUSE-(D), IT HAS BEEN CONTEMPLATED THAT ANY RESIDENTIAL HOUSING PROJECT, THE COMMERCIA L SPACE WOULD NOT EXCEED 5%. THEREFORE, IN THE OPINION OF THE LD.CIT , THE ASSESSEE HAS EXCEEDED THIS COMMERCIAL SPACE TO THE EXTENT OF 9.3 8%, HENCE, IT IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB. THE LD. CIT SET ASIDE THE ASSESSMENT ORDER AND DISALLOWED THE CLAIM MADE BY T HE ASSESSEE HIMSELF BY EXERCISING POWER UNDER SECTION 263 OF THE INCOME TAX ACT. THE TOTAL INCOME HAS BEEN DETERMINED BY THE CIT AT RS.29,40,3 99/-. HE DIRECTED THE AO TO TAKE TOTAL INCOME OF THE ASSESSEE AT THIS FIGURE IN PLACE OF RS.23,040/- TAKEN IN THE ASSESSMENT ORDER PASSED UN DER SECTION 143(3) ON 20.12.2007. 5. WHILE IMPUGNING THE ORDER OF THE LD.CIT, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ISSUE IN DISPUTE IS SQU ARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF ASSESSEE ITSELF IN THE ASSTT.YEAR 2004- 05. HE PLACED ON RECORD COPY OF THE HONBLE HIGH COURT RENDERED IN T AX APPEAL NO.1115/2011. THE LD.DR WAS UNABLE TO CONTROVERT T HE CONTENTIONS OF THE LD.COUNSEL FOR THE ASSESSEE. 6. ON DUE CONSIDERATIONS OF THE FACTS AND CIRCUMSTA NCES, WE FIND THAT THE PROJECT OF THE ASSESSEE WAS APPROVED BY THE LOC AL AUTHORITIES ON ITA NO.841/RJT/2010 AND 522/RJT/2012 4 25.10.2002. THIS PROJECT WAS SUBSEQUENTLY REVISED AND APPROVED ON 3.1.2004. THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IB(10) ON THIS PROJECT FOR A.Y.2004-05 ALSO. THIS DEDUCTI ON WAS DISALLOWED TO THE ASSESSEE ON THE GROUND THAT THERE WAS COMMERCIA L CONSTRUCTION IN THE HOUSING PROJECT COMPRISED OF 9.38% OF THE BUILT UP AREA. THE HONBLE HIGH COURT HAS OBSERVED THAT PRIOR TO 1.4.2005, THE RE WAS NO CEILING PRESCRIBED FOR COMMERCIAL CONSTRUCTION. THE ASSESS EE HAS ALSO DEMONSTRATED THAT IT HAS NOT CLAIMED 80IB DEDUCTION QUA THE COMMERCIAL SPACE. THE OBSERVATION OF THE HONBLE HIGH COURT R EAD AS UNDER: 3) WE MAY NOTICE THAT DURING THE YEAR UNDER CONSIDE RATION, SECTION 80IB (10) OF THE ACT DID NOT PRESCRIBE ANY MAXIMUM LIMIT OF COMMERCIAL CONSTRUCTION IN A HOUSING PROJECT TO BE ELIGIBLE FOR DEDUCTION UNDER SUCH PROVISIONS. THE COMMISSIONER ( APPEALS) AS WELL AS THE TRIBUNAL BOTH NOTED THAT THE PROJECT WA S DULY APPROVED BY THE LOCAL AUTHORITY. THE SHOPS WERE OF SMALL SIZ E AND ALL SHOPS PROVIDED THE DAILY UTILITY SUPPLIES OF THE RESIDENT S. WE ARE CONVINCED THAT THE TRIBUNAL COMMITTED NO ERROR IN U PHOLDING THE COMMISSIONER'S ORDER GRANTING BENEFIT OF DEDUCTION TO THE ASSESSEE UNDER SECTION 80IB(10) OF THE ACT, PARTICULARLY WHE N SUCH DEDUCTION WAS CONFINED TO THE EXCLUSION OF THE AREA OCCUPIED BY THE COMMERCIAL CONSTRUCTION. 4) THE BOMBAY HIGH COURT IN THE CASE OF C.I.T. VS. BRAHMA ASSOCIATES (SUPRA) HAD CONSIDERED A VERY SIMILAR IS SUE AND REJECTED THE REVENUE'S APPEAL, MAKING FOLLOWING OBS ERVATIONS:- 27)FROM THE FACT THAT THE DEDUCTION UNDER SECTION 80- IB(10) PRIOR TO APRIL 1,2005 WAS ALLOWABLE ON THE P ROFITS DERIVED FROM HOUSING PROJECTS CONSTRUCTED DURING TH E SPECIFIED PERIOD, ON A SPECIFIED SIZE OF THE PLOT W ITH RESIDENTIAL UNITS OF THE SPECIFIED SIZE, IT CANNOT BE INFERRED THAT THE DEDUCTION UNDER SECTION 80- IB(10) WAS ALL OWABLE TO HOUSING PROJECTS HAVING RESIDENTIAL UNITS ONLY,BECA USE, RESTRICTION ON THE SIZE OF THE RESIDENTIAL UNIT IS WITH A VIEW TO ITA NO.841/RJT/2010 AND 522/RJT/2012 5 MAKE AVAILABLE A LARGE NUMBER OF AFFORDABLE HOUSES TO THE COMMON MAN AND NOT WITH A VIEW TO DENY COMMERCIAL U SER IN RESIDENTIAL BUILDINGS. IN OTHER WORDS, THE RESTR ICTION UNDER SECTION 80- IB(10) REGARDING THE SIZE OF THE RESIDE NTIAL UNIT WOULD IN NO WAY CURTAIL THE POWERS OF THE LOCAL AUT HORITY TO APPROVE A PROJECT WITH COMMERCIAL USER TO THE EXTEN T PERMITTED UNDER THE DEVELOPMENT CONTROL RULES/REGULATIONS. THEREFORE, THE ARGUMENT OF THE R EVENUE THAT THE RESTRICTION ON THE SIZE OF THE RESIDENTIAL UNIT IN SECTION 80-IB(10) AS IT STOOD PRIOR TO APRIL 1, 200 5 IS SUGGESTIVE OF THE FACT THAT THE DEDUCTION IS RESTRI CTED TO HOUSING PROJECTS APPROVED FOR RESIDENTIAL UNITS ONL Y CANNOT BE ACCEPTED. 28) THE ABOVE CONCLUSION IS FURTHER FORTIFIED BY CL AUSE (D) OF SECTION 80-IB(10) INSERTED WITH EFFECT FROM APRI L 1, 2005. CLAUSE (D) OF SECTION 80-IB(10) INSERTED WITH EFFEC T FROM APRIL 1, 2005 PROVIDES THAT EVEN THOUGH SHOPS AND COMMERCIAL ESTABLISHMENTS ARE INCLUDED IN THE HOUSI NG PROJECT, DEDUCTION UNDER SECTION 80-IB(10) WITH EFF ECT FROM APRIL 1, 2005 WOULD BE ALLOWABLE WHERE SUCH COMMERC IAL USER DOES NOT EXCEED FIVE PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR TWO THOUSAND SQUARE FEET WHICHEVER IS LOWER. BY THE FINANCE ACT, 2010, CLAUS E (D) IS AMENDED TO THE EFFECT THAT THE COMMERCIAL USER SHOU LD NOT EXCEED THREE PER CENT OF THE AGGREGATE BUILT-UP ARE A OF THE HOUSING PROJECT OR FIVE THOUSAND SQUARE FEET WHICHE VER IS HIGHER. THE EXPRESSION INCLUDED IN CLAUSE (D) MAK ES IT AMPLY CLEAR THAT COMMERCIAL USER IS AN INTEGRAL PAR T OF A HOUSING PROJECT. THUS, BY INSERTING CLAUSE (D) TO S ECTION 80- IB(10) THE LEGISLATURE HAS MADE IT CLEAR THAT THOUG H HOUSING PROJECTS APPROVED BY THE LOCAL AUTHORITIES WITH COM MERCIAL USER TO THE EXTENT PERMISSIBLE UNDER THE DEVELOPMEN T CONTROL RULES/REGULATION WERE ENTITLED TO SECTION 8 0-IB(10) DEDUCTION, WITH EFFECT FROM APRIL 1, 2005 SUCH DEDU CTION WOULD BE SUBJECT TO THE RESTRICTION SET OUT IN CLAU SE (D) OF SECTION 80-IB(10). THEREFORE, THE ARGUMENT OF THE R EVENUE THAT WITH EFFECT FROM APRIL 1, 2005 THE LEGISLATURE FOR THE ITA NO.841/RJT/2010 AND 522/RJT/2012 6 FIRST TIME ALLOWED SECTION 80-IB(10) DEDUCTION TO H OUSING PROJECTS HAVING COMMERCIAL USER CANNOT BE ACCEPTED. 5) THIS TAKES CARE OF QUESTIONS NO. A AND D 7. APART FROM ABOVE, THIS ISSUE IS NOW COVERED BY T HE DECISION OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF CIT V S. SARKAR BUILDERS, 57 TAXMANN.COM 313 (SC). THE QUESTION BEFORE THE H ONBLE SUPREME COURT WAS WHETHER SECTION 80IB(10)(D) OF THE INCOME TAX ACT, 1961 APPLIES TO A HOUSING PROJECT APPROVED BEFORE 31.3.2 005, BUT COMPLETED ON OR AFTER 1.4.2005. THE HONBLE COURT HAS HELD T HAT PROJECTS WHICH WERE SANCTIONED AND COMMENCED PRIOR TO 1.4.2005 AND COMPLETED BY THE STIPULATED DATE, THEN, 80IB(10)(D) WOULD NOT BE APP LICABLE ON THOSE PROJECTS. THEREFORE, EVEN IF THE ACTION OF THE CIT TAKEN UNDER SECTION 263 IS JUSTIFIED, THEN ALSO ON MERIT, THE DISALLOWA NCE CANNOT BE MADE. WE SET ASIDE THE ORDER OF THE CIT ON MERIT AND DELE TE THE DISALLOWANCE OF RS.29,17,359/- MADE BY THE CIT. IN OTHER WORDS, ASS ESSMENT ORDER DATED 20.12.2007 IS RESTORED. ITA NO.522/RJT/2012 8. AS OBSERVED EARLIER, CIT HIMSELF HAS ADJUDICATED THE ISSUE ON MERIT AND MADE ADDITION OF RS.29,17,359/- IN THE TO TAL INCOME OF THE ASSESSEE. THE LD.CIT HAS NOT REMITTED ANY ISSUE TO THE AO FOR RE- ADJUDICATION. THE AO HAS NO DISCRETION TO MAKE ANY CHANGE IN THE COMPUTATION OF INCOME. THEREFORE, NO APPEAL AGAINS T HIS ORDER GIVING EFFECT TO THE ORDER OF THE CIT UNDER SECTION 263 WA S MAINTAINABLE UNDER SECTION 246A OF THE INCOME TAX ACT. THE LD.FIRST A PPELLATE AUTHORITY HAS RIGHTLY OBSERVED THAT AS AND WHEN CHANGES WOULD TAKE PLACE IN THE ITA NO.841/RJT/2010 AND 522/RJT/2012 7 ORDER OF THE COMMISSIONER PASSED UNDER SECTION 263, EFFECT WILL BE GIVEN BY THE AO. NOW, WE HAVE ALLOWED THE APPEAL OF THE ASSESSEE AGAINST THE ORDER PASSED UNDER SECTION 263 IN ITA NO.841`/RJT/2 010, THEREFORE, THE DISALLOWANCE OF RS.29,17,359/- WOULD EXTINGUISH, AN D SUBSEQUENT PROCEEDINGS AROSE FROM GIVING EFFECT OF CITS ORDER PASSED UNDER SECTION 263 WOULD BECOME REDUNDANT, BECAUSE, VERY BASIS TO INSTITUTE SUCH PROCEEDINGS HAS BEEN EXTINGUISHED BY VIRTUE OF OUR ORDER. THUS, THIS APPEAL BECOMES REDUNDANT. FOR STATISTICAL PURPOSE, IT IS TO BE TREATED AS DISMISSED. 9. IN THE RESULT, THE ITA NO.841/RJT/2010 IS ALLOWE D AND ITA NO.522/RJT/2012 BECOMES REDUNDANT, HENCE, DISMISSED . ORDER PRONOUNCED IN THE COURT ON 17 TH MARCH, 2016 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 17/03/2016