ITO WD 1(2), MUMBAI V. CMS HOMES, THANE

ITA 8554/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79339 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 24-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 09-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M SUBRAMANIAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUN AL 'C' BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 8554/MUM/2010 (ASSESSMENT YEAR: 2007-08) INCOME TAX OFFICER WARD 1(3) VARDAAN BLDG. MIDC, WIE THANE (W)-400 601. VS. M/S. CMS HOMES MEZANNINE FLOOR, KONARK TOWER NR. SHRI SAI BABA MANDIR GHANTALI DEVI ROAD THANE. (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. : AAXPK 2317 H ASSESSEE BY : SHRI M. SUBRAMANIAN REVENUE BY : SHRI SUNIL KUMAR AGARWAL DATE OF HEARING : 08/07/2014 DATE OF PRONOUNCEMENT : 16/07/2014 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 27/08/2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-0 8. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LD. CIT(A) HAS ERRED IN DIRECTING AO TO GRA NT DEDUCTION U/S.80IB(10) OF THE I.T. ACT IN RESPECT O F PROFITS DERIVED BY THE ASSESSEE FROM SALE OF UNITS IN THE 2 BUILDINGS (MARKED AS A1 AND A2) ON PROPORTIONATE BASIS BY IGN ORING THE FOLLOWING FACTS AND PROVISIONS OF LAW:- A) THAT SECTION 80IB(10) DOES NOT PERMIT DEDUCTION ON PROPORTIONATE BASIS. B) THAT THE PROJECT CONSISTING OF 3 BUILDINGS IS INCOMPLETE BECAUSE ONLY PART OCCUPATION CERTIFICATE WAS OBTAINED FOR A1 AND A2 WINGS UPTO SIX FLOORS ITA NO.8554/M/10 AY:07-08 2 WHICH HAD STILT + 7 FLOOR AS PER THE APPROVAL PLAN BUT ACTUALLY CONSTRUCTED UPTO 10 TH FLOOR IN ALL BUILDINGS. C) THAT NO OCCUPATION CERTIFICATE/COMPLETION CERTIFICATE HAD BEEN OBTAINED AT ALL FOR B WING. D) EACH WING HAVING LESS THAN 1 ACRE OF LAND DOES NOT CONSTITUTE A PROJECT. 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E BUSINESS OF HOUSING PROJECT. DURING THE YEAR UNDER CONSIDERATIO N THE ASSESSEE HAS UNDERTAKEN CONSTRUCTION OF HOUSING PROJECT CALLED U RVI PARK HAVING WINGS A-1, A-2 AND B EACH COMPRISING OF STILT PLUS SIX FLOORS. THE AO NOTED THAT THE PLAN OF THE HOUSING PROJECT WAS ORIG INALLY APPROVED FOR BUILDING A-1 AND A-2 HAVING STILT PLUS SIX FLOORS A ND BUILDING B HAVING STILT PLUS SIX FLOORS. THE PLAN WAS LATER ON MODIFI ED AND REVISED PROPOSAL FOR APPROVAL OF PLAN FOR CONSTRUCTION OF SEVEN FLOO RS WAS MADE TO THE LOCAL AUTHORITIES. THANE MUNICIPAL CORPORATION (TMC) APPR OVED THE MODIFIED PLAN FOR THE HOUSING PROJECT VIDE APPROVAL DATE 17/ 05/2003. THE AO FURTHER NOTED THAT THE ASSESSEE OBTAINED OCCUPATION CERTIFICATE IN RESPECT OF BUILDING A-1 AND A-2 PRIOR TO 31/03/2007 BUT IN RESPECT OF BUILDING B THE ASSESSEE DID NOT GET ANY OCCUPATION CERTIFICATE BEFORE THE STIPULATED DATE. THE AO FURTHER OBSERVED THAT THE ASSESSEE ORI GINALLY HAD BEEN PERMITTED TO CONSTRUCT HOUSE BUILDING UP TO STILT P LUS SEVEN FLOORS BUT THE OCCUPANCY CERTIFICATE IN RESPECT OF BUILDING A1 AND A2 HAS BEEN GRANTED ONLY UPTO STILT PLUS SIX FLOORS. THE AO WAS OF THE VIEW THAT THE ASSESSEE DID NOT GET OCCUPANCY CERTIFICATE IN RESPE CT OF THE ENTIRE HOUSING PROJECT TILL THE STIPULATED DATE AS ON 31/03/2007. THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IB(10 ). ACCORDINGLY THE AO DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80I B(10). THE ASSESSEE CHALLENGED THE ACTION OF AO BEFORE CIT(A). CIT(A) A LLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) IN RESPECT OF TWO BUILDINGS A-1 AND A-2 ON PROPORTIONATE BASIS. SINCE THE ASSESSEE DID NOT CLAIM DEDUCTION UNDER ITA NO.8554/M/10 AY:07-08 3 SECTION 80IB(10) IN RESPECT OF BUILDING B , THEREFO RE, THERE WAS NO QUESTION OF GRANT OR DENIAL OF DEDUCTION IN RESPECT OF BUILDING B. 3. BEFORE US THE LD. DR HAS SUBMITTED THAT DEDUCTIO N U/S. 80IB(10) CAN NOT BE PERMITTED ON PROPORTIONATE BASIS. THE PR OJECT OF THE ASSESSEE WAS INCOMPLETE AS THE ASSESSEE OBTAINED ONLY PART O CCUPANCY CERTIFICATE. HE HAS FURTHER SUBMITTED THAT EVEN IF THE DEDUCTION IS ALLOWED IN RESPECT OF EACH BUILDING SEPARATELY THEN THE SIZE OF PLOT O F LAND SHOULD NOT BE LESS THAN ONE ACRE FOR EACH BUILDING. THE LD. DR HAS SUB MITTED THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS AS PRESCR IBED U/S. 80IB(10). THEREFORE, AO WAS JUSTIFIED IN REJECTING THE CLAIM OF ASSESSEE. ON THE OTHER HAND THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THERE IS NO SUCH CONDITION THAT ALL THE BUILDINGS UNDER A PROJECT SHOULD FULFILL THE CONDITIONS AS PRESCRIBED U/S. 80IB(10). THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80IB(10) ONLY W ITH RESPECT TO THE BUILDINGS IN THE PROJECT WHICH FULFILL THE CONDITIO NS U/S. 80IB(10). HE HAS SUPPORTED THE IMPUGNED ORDER AND SUBMITTED THAT CIT (A) HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF VANDANA PROPERTIES VS. ACIT ( 31 SOT 392) AS WELL AS IN CASE OF SAROJ SALES ORGANISATION VS. ITO 3 DTR (MUM.) 494. IT HAS BEEN HELD BY THIS TRIBUNAL IN A NUMBER OF D ECISIONS THAT THE CONCEPT OF HOUSING PROJECT DOES NOT MEAN T HAT THERE SHOULD BE A GROUP OF BUILDINGS AND EVEN ONE BUILDING CAN CONSTI TUTE AN INDEPENDENT HOUSING PROJECT AND WHICH IS ELIGIBLE FOR DEDUCTION U/S.80IB(10). HE HAS ALSO RELIED UPON THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES VS. JCIT (2009) 30 SOT 155(PUNE) (ITAT-SB) AS WELL AS IN THE CASE OF DCIT VS. ANSAL HOUSING AND CONSTRUCTION LTD. (2009) (116 ITD 253). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE AS SESSEE CLAIMED DEDUCTION U/S. 80IB(10) IN RESPECT OF ONLY TWO BUIL DINGS A1 AND A2 ITA NO.8554/M/10 AY:07-08 4 WHICH WERE COMPLETED AND OCCUPANCY CERTIFICATE WAS GRANTED BY THE LOCAL AUTHORITY BEFORE 31.03.2007. THOUGH THE ASSESSEE HA S ALSO CONSTRUCTED A THIRD BUILDING B BUT DUE TO NON-COMPLIANCE OF AMENITIES BUILDING WHICH WAS TO BE HANDED OVER TO THE LOCAL AUTHORITIE S, THE OCCUPANCY CERTIFICATE WAS NOT ISSUED BY LOCAL AUTHORITIES UP TILL 31/03/207. THEREFORE, THE ASSESSEE DID NOT CLAIM DEDUCTION U/S . 80IB(10) IN RESPECT OF BUILDING B. THE OBJECTION OF AO IS BASED ON TWO GROUNDS THAT THE ENTIRE HOUSING PROJECT WAS NOT COMPLETED BEFORE 31/ 03/2007 AND OCCUPATION CERTIFICATE EVEN IN RESPECT OF BUILDING A1 AND A2 WERE NOT FOR ALL 7 FLOORS. IT IS PERTINENT TO NOTE THAT CIT(A) H AS ALLOWED THE CLAIM U/S. 80IB(10) ONLY IN RESPECT OF BUILDING A1 AND A2 AND THAT TOO PROPORTIONALLY TO THE EXTENT OF BUILDING WHICH WAS COMPLETED AND OCCUPANCY CERTIFICATE WAS ISSUED BY LOCAL AUTHORITY . AS PER PROVISIONS OF SECTION 80IB(10) THE CONSTRUCTION OF BUILDING IS RE COGNIZED AS COMPLETE ONLY WHEN THE OCCUPANCY CERTIFICATE IS ISSUED BY LO CAL AUTHORITIES. WHEN THE LOCAL AUTHORITY HAS ISSUED COMPLETION CERTIFICA TE IN RESPECT OF BUILDING A1 AND A2 TO THE EXTENT OF STILT AND SIXTH FLOOR TH EN THESE TWO BUILDINGS ARE COMPLETED TO THE EXTENT OF CONSTRUCTION FOR WHI CH THE OCCUPANCY CERTIFICATE IS GRANTED. AS REGARDS THE OBJECTION OF THE AREA OF PLOT IT IS SETTLED LEGAL PROPOSITION THAT THE AREA OF PLOT IS TAKEN INTO CONSIDERATION AS AN ENTIRE PLOT ON WHICH THE PROJECT IS CONSTRUCT ED AND NOT BY DIVISION OF THE PLOT. THE CIT(A) HAS CONSIDERED THE FACTS AN D DECIDED THE ISSUE IN PARA-13 TO 17 OF THE IMPUGNED ORDER AS UNDER :- 13. I HAVE GONE THROUGH THE ASSESSMENT ORDER PASSE D BY THE AO AND THE SUBMISSIONS MADE BY THE APPELLANT CAREFULLY . DURING THE COURSE OF APPELLATE PROCEEDINGS, A R OF THE APPELL ANT HAS VEHEMENTLY ARGUED THAT THE DEDUCTION U/S SECTION 80 IB (10) CANNOT BE DENIED TO HIM ONLY ON THE GROUND THAT THE OCCUPANCY CERTIFICATE IN RESPECT OF ONE BUILDING B HAS NOT BE EN GRANTED BY THE LOCAL AUTHORITY BEFORE 31.03.2007. THE OTHER TWO BU ILDINGS A 1 AND A2 WERE ADMITTEDLY FULLY COMPLETE AND THE OCCUPANCY CERTIFICATE TO THOSE BUILDINGS WAS OBTAINED FROM THE LOCAL AUTHORI TY BEFORE 31.03.2007. ACCORDING TO 'THE APPELLANT, THE OCCUPA NCY CERTIFICATE IN RESPECT OF BUILDING B WAS NOT GRANTED BY THE LOC AL AUTHORITY DUE ITA NO.8554/M/10 AY:07-08 5 TO THE REASON THAT ONE AMENITIES BUILDING WHICH WAS TO BE CONSTRUCTED AND HANDED OVER TO LOCAL AUTHORITY TMC WAS NOT COMPLETE AND THAT IS WHY THE OCCUPANCY CERTIFICATE TO BUILDING B WAS NOT GRANTED THOUGH THE SAME BUILDING WAS FULLY COMPLETE AND OCCUPIED BY THE TENANTS BEFORE 31.03.2007. MOREOVER THE APPELLANT HAS NOT CLAIMED ANY DEDUCTION IN RESPECT OF THIS BUILDING B AND THE DEDUCTION U/S 80IB(1 0) HAS BEEN CLAIMED ONLY IN RESPECT OF BUILDINGS A 1 AND A2 WHICH WERE COMPL ETE IN ALL RESPECTS AND OCCUPANCY CERTIFICATE RECEIVED AS ON 3 1.03.2007 AND ELIGIBLE FOR DEDUCTION U/S. 80IB(10) OF THE I.T. AC T, 1961. 14. I HAVE CONSIDERED THE ABOVE ARGUMENTS OF THE AP PELLANT AND THERE IS MERIT IN THESE ARGUMENTS. THE HOUSING PROJ ECT OF THE APPELLANT IS ADMITTEDLY COMPLIED WITH ALL OTHERS CO NDITIONS AS STIPULATED IN THE SECTION 80IB(10) AND THE ONLY POI NT OF DISPUTE IS THAT THE OCCUPANCY CERTIFICATE IN RESPECT OF ONE BU ILDING B WHICH WAS NOT GRANTED BY THE MUNICIPAL CORPORATION BEFORE 31.03.2007. THE AO HAS ALSO ADMITTED THE FACT THAT THE OCCUPANC Y CERTIFICATE IN RESPECT OF OTHER BUILDINGS A1 AND A2 WHICH WERE FU LLY COMPLETE AND THE OCCUPANCY CERTIFICATE TO THOSE BUILDINGS WA S OBTAINED FROM THE LOCAL AUTHORITY BEFORE 31.03.2007. 15. IT IS CLEAR FROM THE EXAMINATION OF THE FACTS O F THE CASE THAT ALL THE THREE BUILDINGS OF THE PROJECT OF THE APPELLAN T 'URVI PARK' ARE SITUATED ON A PLOT OF LAND MEASURING MORE THAN ONE ACRE AND THE COMPLETION CERTIFICATE IN RESPECT OF THE TWO BUILDI NGS I.E. A 1 AND A2 EXCEPT BUILDING B HAS BEEN OBTAINED PRIOR TO 31. 03.07. THERE IS JUDICIAL CONSENSUS NOW ON THIS ISSUE AMONG THE VARI OUS COURTS THAT THE DEDUCTION U/S.80IB(10) CANNOT BE DENIED TO THE DEVELOPERS ON THE GROUND THAT ONE OF THE BUILDINGS OF THE PROJECT WAS NOT GRANTED THE OCCUPANCY CERTIFICATE WHILE ALL OTHER BUILDINGS OF THE PROJECTS WERE COMPLETED IN ALL RESPECTS AND FULFILLED THE CONDITIONS AS STIPULATED IN THAT SECTION ON STAND A LONE BASIS. 16. IT HAS BEEN HELD BY THE JURISDICTIONAL ITAT, MU MBAI IN THE CASE OF VANDANA PROPERTIES VS ACIT, 31 SOT 392 (MUM ) (2009) THAT THE CONCEPT OF HOUSING PROJECT DOES NOT MEAN THAT THERE SHOULD BE A GROUP OF BUILDING AND ONLY THEN CAN THE SAME BE CALLED AS 'HOUSING PROJECT'. IN THE SAID CASE, IT W AS HELD THAT EVEN ONE BUILDING CAN CONSTITUTE AN INDEPENDENT HOU SING PROJECT AND BE ELIGIBLE FOR DEDUCTION U/S 80IB(10). ' 16.1. SIMILAR, INTERPRETATION WAS ALSO GIVEN IN THE CASE OF SAROJ SALES ORGANIZATION - VS - ITO, 3 DTR (MUM) 494 WHER EIN CERTAIN WINGS OF ONE BUILDING WERE ACCEPTED BY THE HON. TRI BUNAL TO CONSTITUTE A HOUSING PROJECT. 16.2. THE RATIO LAID DOWN BY THE ABOVE QUOTED TRIBU NAL ORDERS, ARE EQUALLY APPLICABLE IN THE PRESENT CASE. THEREFORE, IN MY OPINION, ITA NO.8554/M/10 AY:07-08 6 THE ASSESSEE'S CLAIM FOR DEDUCTION U/S. 80IB(10) IN RESPECT OF PROFIT FROM SALE OF UNITS IN THE BUILDINGS A1 AND A 2 COMPLETED PRIOR TO 31.3.07 AND OCCUPATION CERTIFICATE RECEIVE D DESERVES TO BE ACCEPTED. THESE TWO BUILDINGS HAVE BEEN ADMITTEDLY COMPLETED PRIOR TO 31.3.07 AND THE UNITS DEVELOPED THEREIN AS WELL AS THE OTHER FEATURES ARE WELL WITHIN THE PARAMETERS LAID DOWN BY THE PROVISIONS OF SECTION 80IB(10). THE CLAIM OF DEDUCT ION AS PER PROVISIONS OF SECTION 80IB(10) CANNOT BE REJECTED E NTIRELY ON THE PLEA, THAT SOME PART OF THE HOUSING PROJECT HAS NOT BEEN GRANTED THE COMPLETION CERTIFICATE BY THE LOCAL AUTHORITY, THOUGH THE SAME HAS BEEN APPLIED BY THE APPELLANT BEFORE 31.03.2007 . IN MY CONSIDERED OPINION, THE CLAIM OF DEDUCTION UNDER SE CTION 80IB(10) SHOULD BE ALLOWED IN RESPECT OF THOSE BUILDINGS WHI CH HAVE BEEN COMPLETED AND COMPLETION CERTIFICATE HAS BEEN GRANT ED TO THESE BUILDINGS BY THE LOCAL AUTHORITY PRIOR TO 31.03.200 7. 17. THE CLAIM OF THE APPELLANT ACCORDINGLY IS UPHEL D FOR GRANT OF DEDUCTION U/S.80IB(10) IN RESPECT OF PROFITS DERIVE D BY THE ASSESSEE FROM SALE OF UNITS IN THE ABOVE 2 BUILDING S BUILDING A1 & A2) ON PROPORTIONATE BASIS. THE AO IS ACCORDINGLY DIRECTED TO RECOMPUTE THE PROFIT FROM THE BUILDINGS ON PROPORTI ONATE BASIS AND ALLOW DEDUCTION U/S 80IB(10) WITH REGARD TO SUC H PROFIT DETERMINED FOR FULLY COMPLETED BUILDING IN RESPECT OF WHICH THE COMPLETION CERTIFICATE HAS BEEN OBTAINED PRIOR TO 3 1.03.2007. 5. IT IS CLEAR FROM THE IMPUGNED ORDER OF THE CIT(A ) THAT THE CLAIM OF THE ASSESSEE WAS ALLOWED PROPORTIONATELY BY FOLLOWI NG THE DECISIONS OF THIS TRIBUNAL IN THE CASE OF VANDANA PROPERTIES (SUPRA) AND AS WELL AS SAROJ SALES ORGANISATION LTD. (SUPRA). NO CONTRARY DECISION IS PLACED BEFORE US. ACCORDINGLY WE DO NOT FIND ANY REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE CIT(A). 6. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JULY, 2014. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (VIJAY PAL RAO ) JUDICIAL MEMBER MUMBAI, DATED: 16/07/2014. JV. ITA NO.8554/M/10 AY:07-08 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.