Deputy Commissioner of Income-tax, Central Circle -1 (3), Pune V. M/s. Gera Development Pvt.Ltd, Pune

ITSSA 128/PUN/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3642 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-07-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 03-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANURAG SRIVASTAVA
• Section: 153A; 80IB

Judgement Text

आयकर अपीऱीय अधिकरण “ए” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI S.S.GODARA, JM AND SHRI DR. DIPAK P. RIPOTE, AM आयकर अपीऱ सं. / ITA SS No.127 to 130/PUN/2019 ननधधारण वषा / Assessment Year : 2012-13 to 2015-16 DCIT, Cir-1(3), Pune .......अपऩलधथी / Appellant बनधम / V/s. M/s. Gera Developments Pvt. Ltd. 200, Gera Plaza, Boat Club Road, Pune – 411 001 PAN : AAACG6703F ......प्रत्यथी / Respondent Assessee by : Shri Ramesh Soniminde Revenue by : Shri Anurag Srivastava सपनवधई की तधरऩख / Date of Hearing : 08.06.2022 घोषणध की तधरऩख / Date of Pronouncement : 06.07.2022 आदेश / ORDER PER S. S. GODARA, JM : 1. These Revenue’s four appeals for assessment years 2012-13 to 2015-16 arise against the CIT(A)-11, Pune’s common order dated 31.07.2019 passed in case Nos.Pn/CIT(A)-11/ACIT Cen.Cir 1(3)/PN/ 468 to 471/16-17, in proceeding u/s. 143 r.w.s. 153A of the Income Tax Act, 1961, in short the “Act”. Heard both the parties. Case files perused. 2 ITA SS No.127 to 130/PUN/2019 A.Y. 2012-13 to 2015-16, M/s. Gera Developments Pvt. Ltd. 2. The Revenue’s identical twin substantive grounds in all of these four appeals read as under : “1. On the facts and circumstances of the case and in law, the CIT(A) erred in law, the CIT(A) erred in holding that the assessee is entitled to pro rata basis deduction u/s 80IB(10) of the Act when the tenor of the section is to grant deduction for the housing project as a whole u/s 80IB of the Act. 2. On the facts and circumstances of the case and in law, without prejudice to any other ground raised in this appeal, the Ld. CIT(A) erred in considering/ holding that the “terrace” area be excluded from the built up area even when the “terrace” functions more as an “extended balcony” rather than a normal “terrace” and forms a part of built up area as per section 80IB(14)(a).” 3. We next note that the CIT(A)’s detailed discussion accepting the assessee’s pro rata section 80IB(10) deduction claim reads as follows. 45. From the above discussion, it is held that the sale of the following Flats are in contravention to the provisions of Sec. 80IB(10): i) Flats nos. 601 and 602 - Contravention of Sec. 80IB(10) (e) - revenues recognised in A.Y. 2012-13 by the appellant. ii) Flat nos. 324 and 424 held to be in contravention to the provisions of Sec. 80IB( 10)(f) of the Act - revenues recognised for A.Y. 2012-13 by the appellant. 3 ITA SS No.127 to 130/PUN/2019 A.Y. 2012-13 to 2015-16, M/s. Gera Developments Pvt. Ltd. iii) Flat nos. 318 and 816 held to be in contravention to provisions of \ec. 80IB(10)(f) of the Act - revenues recognised in A.Y. 2014-15 by the appellant. In view of the above, the issue that is to be decided is, if on account of the above contraventions by the appellant, the claim of deduction u/s 80IB(10) on the project „Gera Astoria‟ can be entirely denied to the appellant in different years i.e. from A.Ys 2012-13 to 2015-16. Courts have held that where certain conditions having not been fulfilled by the appellant with respect to certain dwelling units of a project, the assessee is entitled to deduction in respect to other units which fulfil the conditions laid down u/s 80IB(10) and that the entire claim of deduction cannot be denied to the appellant. In a recent ruling in the case of M/S. Namrata Developers, Pune us Assistant Commissioner Of Income Tax. (2018) the Pune bench of the Income-tax Appellate Tribunal (Tribunal) held that the taxpayer should be entitled to a pro-rata deduction under section 80IB of the Income-tax Act, 1961 (the "Act") on the profits earned, excluding the profits earned on two flats that are alotted to the spouses of the respective individuals. In the said judgement, the ITAT, Pune has judgement of CIT(A) who had relied upon the ratio laid down by the Madras High Court in the case of CIT Vs Arun Excello Foundation Pvt. Ltd. 86 DTR 99 (Mad) and Vishwas Promoters Pvt. Ltd Vs ACIT81 DTR 58 (Mad). In Brahma Associates v. Jt. CIT, (2009) 122 TTJ (Pune)(SB) 433; the special bench of ITAT, Pune held as under: 126. An exception, however, will have to be made out in a case where commercial use of built-up area is more than 10 per cent of the total area, and yet, in terms of our observations in Para 115 above, the assessee is eligible for deduction in respect of profits of the residential units segment of the project. In such a situation, since residential unit segment is being treated on a standalone basis for eligibility to deduction under s. 80- IB(10), the eligibility for such deduction can only be for the profits which 4 ITA SS No.127 to 130/PUN/2019 A.Y. 2012-13 to 2015-16, M/s. Gera Developments Pvt. Ltd. are in respect of residential unit segment of the overall project, because, in the light of the discussions, only that part of the overall project can be said to be housing project. Accordingly, eligibility for deduction under 80- IB(10) must remain confined to the same. In DCIT v. Magarpatta Township Development and Construction Company(2013) 141 ITD 682 ITAT, Pune held : Entire housing project is not disqualified for deduction under s. 80-IB(10) simply because the built-up area of the units in one of the 25 buildings comprising the project is in excess of 1,500 sq. ft.; deduction under s. 80- IB(10) is to be allowed in respect of profit from other buildings; deduction cannot be denied simply because some purchasers have joined adjoining flats whereby the combined built-up area exceeds 1,500 sq. ft. In SJR Builders v. ACIT [2010] 3 ITRTrib. 569 (Bang) the court held that assessee constructing residential units some of which were above specified, limit and some below such limit. The assessee is entitled to deduction in respect of residential units below specified area. Similarly, in Sreevatsa Real Estates Pvt. Ltd. v. ITO [2010] 41 DTR 497 (Chenn.) (Trib) the court held that the project had been approved as Housing Project by local authority, if built-up area of some of the housing units being more than 1500 So. Ft. the assessee is entitled for deduction u/s 80 IB(10),Pro rata for the housing units built-up area less than 1500 Sq.Ft. In view of the above decisions of various courts including Pune Tribunal, I am of the view that the entire claim of deduction on the project GERA Astoria cannot be denied to the appellant. However, as held above; for the Flat Nos. 601 and 602, 324 and 424 and 318 and 816; as the conditions stipulated u/s 80IB(10) of the Act have been violated; therefore, the AO is directed to disallow the claim of deduction u/s 80IB of profits with respect to the above said flats on a pro rata basis in the years in which the revenues were recognised by the appellant for the 5 ITA SS No.127 to 130/PUN/2019 A.Y. 2012-13 to 2015-16, M/s. Gera Developments Pvt. Ltd. above said flats. The AO is directed accordingly. The ground of appeal for the years under consideration are partly allowed.” 4. The factual position is no different regarding the latter issue of inclusion of “terrace area” in built up area of the assessee’s corresponding residential units u/s. 80IB(14) (a) wherein the CIT(A) has directed exclusion thereon for the purpose of measuring 1500 sq.fts. as follows. “37. As regards, the first floor flats namely 101,103,109,118 & 122, the break - up of the flat area and the terrace area are as under : 38. As per the Govt. Registered valuer‟s report, the comments of the Govt., valuer with respect to the first floor flats are as under: First floor flats • The podium projection on the first floor is utilised as terrace by flat owners. Those flats are flat no. 101 103,105,107,109,111,116,118,120& 122. • This terrace are shown as 'Terrace" which are attached to the flat and used by the flat owners. No other flat owner have access to the terrace • We checked the agreements of these flats. However agreement do not mention these terraces. • The representative contested that they have not sold it. Bui the said terrace are in exclusive possession of respective flat owners. • The representative also contested that the floor level of the slab is below the floor level of flat (i.e. it is Flat No Flat area including balcony sq.ft. Terrace area in sq.ft. Total built- up area in sq.ft. 101 1408.36 327.66 1736.02 103 1139.48 442.19 1581.67 109 1164.77 348.65 1513.42 118 1188.88 348.75 1537.63 122 1360.46 368.13 1728.59 6 ITA SS No.127 to 130/PUN/2019 A.Y. 2012-13 to 2015-16, M/s. Gera Developments Pvt. Ltd. sunken slab) & the said terrace is used as garden. However, it is a technical requirement to do water proofing. In the house toilet & bathroom slabs are also sunken slabs and after water proofing brought to floor level. Also the use is partially garden & partially floor, but garden & floor are at floor level. 39. From the above, it is seen that the „terrace‟ are attached to the flat, and are in exclusive possession of the respective flat owners. It is clearly mentioned that no other flat, owner have access to the „terrace‟. The Govt. Valuer has specifically mentioned that the said „terrace‟ are in exclusive possession of the respective flat owners. On behalf of the appellant, reliance is placed on Pune Tribunal in the case of Naresh T. Wadhwani cited (supra) and Madras High Court in the case of Ceebros Hotel Pvt Ltd. Section 80IB(14)(a) was inserted by Finance Act 2004 w.e.f. 1/4/2005 and defines that the „built up area‟ for the purposes of sec.80IB to mean the inner measurements of the residential unit at the floor level, including the projections and balconies as increased by the thickness of the walls but does not include the common areas shared with other residential units. From this definition of the „built up area‟ my understanding is that „terrace‟ which is exclusive to the flat owner and which is not available for common use with other flat owners in the apartment as per the definition incorporated under the Act by virtue of sec.80IB(14)(a) must be included in the calculation of „built up area‟ for the purposes of sec.80IB(10) of the Act. However, these arguments were considered by the ITAT, Pune in the case of Naresh T. Wadhwani cited (supra). The relevant extracts of the ITAT judgment wherein, these 7 ITA SS No.127 to 130/PUN/2019 A.Y. 2012-13 to 2015-16, M/s. Gera Developments Pvt. Ltd. issues have been discussed and the judgment of the ITAT based on the judgment of the Madras High Court is being reproduced below: " On the other hand, the learned CIT-DR has vehemently submitted that open terrace which is a subject- matter of controversy was a private terrace which was available for use of the owner of the unit to the exclusion of others. The learned CIT-DR has emphasized that in the present case the housing project of the assessee is comprising of independent row houses built on a Duplex model and it is not a case of multi-storey building having independent flats. It was, therefore, contended that the aforesaid distinction has to be borne in mind while appreciating the meaning of expression 'built-up area' contained in s. 80IB(14)(a) of the Act. Nevertheless, the learned CIT- DR has relied upon the following decisions : (i) Hyderabad Bench of the Tribunal in the case of Modi Builders & Realtors (P) Ltd. (2011) 12 taxmann 129 (Hyd); and. (ii) Mumbai Bench of the Tribunal in the case of Siddhivinayak Homes vs. Department of Income-tax on 28 September, 2012, vide ITA No. 8726/Mum/2010 order dt. 26th Sept., 2012, for the proposition that all projections and elevations at the floor level are liable to be included in the definition of 'built-up area' for the purposes of examining the condition prescribed in cl. (c) of s. 80-IB(10) of the Act. The learned CIT-DR also raised an issue that the built-up area for the purposes of cl. (c) of s. 80-IB(10) of the Act has to be understood in the light of what has been sold by the assessee builder to the respective customers. According to the learned CIT-DR, though the said aspect is not emerging from the orders of the authorities below, so however, the built-up area as understood for the purposes of sale-purchase between builder and the ultimate buyer can also be relevant factor to consider as to what all areas are to be considered as a part of the expression 'built-up area' contained in cl. (c) of s. 80-IB(10) of the Act". (Para 13) " We have carefully considered the rival submissions, s. 80-IB(10) provides for deduction in relation to profits derived from undertaking development and building of a housing project subject to certain 8 ITA SS No.127 to 130/PUN/2019 A.Y. 2012-13 to 2015-16, M/s. Gera Developments Pvt. Ltd. conditions prescribed therein. One of the foremost condition is contained in cl. (a) of s. 80-IB(10) of the Act which is to the effect that the housing project eligible for the claim of deduction shall be approved by the local authority. The assessee before us is a builder who has undertaken development and construction of a housing project, named, 'Sai Nisarg Park-Mayureshwar' and the said project has been approved by the concerned local authority i.e. PCMC on 29th July, 2005 and undisputedly it complies with the requirement of cl. (a) to s. 80-IB(10) of the Act. There are other conditions prescribed in s. 80- IB(10) by way of cls. (b) to (f) of the Act, so however, the only controversy before us revolves around the condition prescribed in cl. (c) of s. 80-IB(10) of the Act. As per cl. (c) of s. 80-IB(10) of the Act, the maximum built-up area of the residential units comprised in the eligible housing project shall not exceed 1000 sq. ft. where such units are situated within city of Delhi and Mumbai or within 25 km. from the Municipal limit of such cities and in other places the prescribed limit is 1500 sq.ft.. The housing project of the assessee before us is located within the Municipal limits of PCMC and therefore in terms of cl. (c) of s. 80-1B (10) of the Act, the maximum built-up area of the residential unit is capped at 1500 sq.ft. The dispute before us is with regard to six residential units, which have been detailed by us earlier, wherein as per the Assessing Officer, the individual built-up area exceed 1500 sq. ft. The working of built-up area done by the Assessing Officer is sought to be resisted by the assessee and the bone of contention is whether or not to include the area of projected terrace (open to sky) for computing the built-up area of the respective units". (Para 14) The Finance (No. 2) Act, 2004 inserted the definition of built-up area w.e.f. 1st April, 2005 in terms of s. 80-1B (14)(a) of the Act. In terms of the said definition, built-up area means the inner measurement of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units. On the strength of the aforesaid definition, the claim of the Revenue is that the terraces in question are projections attached to the respective 9 ITA SS No.127 to 130/PUN/2019 A.Y. 2012-13 to 2015-16, M/s. Gera Developments Pvt. Ltd. residential units and also that there is no room under the area of the terrace and such terraces are exclusively used by the respective unit owners. In other words, as per the Revenue the projected terrace falls within the meaning of words „projections' and 'balconies' contained in s. 80IB(14)(a) of the Act and the same is not a common area shared with other residential units and in this manner, in terms of s. 80IB(14)(a) of the Act, such an area is liable to be included in the expression „built-up area". (Para 15) " In so far as the applicability of the definition of built-up area inserted by Finance (No. 2) Act, 2004 w. e. f. 1st April, 2005 is concerned, it is quite clear that the same is applicable for ascertaining the fulfillment of condition prescribed in cl. (c) of the Act in relation to the present project, since the project of the assessee has been approved by the local authority on 29th July, 2005 i.e. after the definition of built-up area contained in s. 80IB(l4)(a) of the Act came into force w.e.f. 1st April, 2005. Therefore, in the present case, it is imperative that the meaning of expression 'built-up area ' is to be understood having regard to its definition contained in cl. (a) of s. 80IB(14) of the Act". (Para 16) “ As per the Hon'ble High Court, terrace area would not form part of the built-up area by the reason of the fact that assessee sold it to the purchaser as a private terrace. At this stage, we may also point out that there is nothing in s. 80IB(14)(a) of the Act to suggest that the factum of the terrace being available for exclusive use of the respective unit owner is a ground to consider it as a part of 'built-up area' for the purposes of cl. (c) of s. 80-IB(10) of the Act. Thus, the argument of the learned CIT-DR is hereby rejected" (Para 22) " In view of the aforesaid judgement of the Hon'ble Madras High Court, we are unable to uphold the stand of the Assessing Officer to include area of terrace as a part of the 'built-up area' in a case where such terrace is a projection attached to the residential unit and there being no room under such terrace, even if the same is available exclusively for use of the respective unit holders". 10 ITA SS No.127 to 130/PUN/2019 A.Y. 2012-13 to 2015-16, M/s. Gera Developments Pvt. Ltd. (Para 23) 40. Respectfully following the finding of the Pune ITAT, as mentioned above, on similar facts as in the case of the appellant, I allow the claim of the appellant that with respect to flat nos. 101,103,109,118 &122, the „terrace‟ area shall not be included in the calculation of „built up area‟ of these flats and accordingly, it is held that all these flats are within the stipulated 1500 sq.ft „built up area‟ prescribed in sec 80IB(10) of the Act and therefore eligible for deduction u/s 80IB(10) of the Act.” 5. Learned CIT DR vehemently argued during the course of hearing that not only the CIT(A) erred in law and on facts in granting proportionate section 80IB(10) deduction to the assessee thereby excluding the latter’s ineligible housing units but also his lower appellate findings that its “terrace” area is not to be included in “built up area” as defined in section 80IB (14) (a) of the Act are not sustainable in law. Mr. Srivastava sought to invoke the principles of stricter interpretation as per Commissioner of Customs V/s. Dilip Kumar & Co. 2019 SCC page 1 (SC)(FB). 6. We have given our thoughtful consideration to the foregoing twin legal issues and find no merit in the Revenue’s stand. This is for the reason that a catena of case law (supra) has already held that the assessee is very much entitle for the impugned deduction on proportionate basis qua the eligible housing units/projects only. We make it clear that there does not appear to be any dispute between the parties regarding the assessee’s eligibility to claim section 80IB(10) deduction except flats no. 601 and 602 (violating clause “e”) 11 ITA SS No.127 to 130/PUN/2019 A.Y. 2012-13 to 2015-16, M/s. Gera Developments Pvt. Ltd. with number 324 & 424 and 318with 816 covered under clause “f” of the impugned statuary provision. This is indeed coupled with the fact that the assessee’s “terrace” area (supra) has also been held to be not satisfying the statutory definition of “inner measurement” since open to sky. Suffice to say, the CIT(A) has followed a list of judicial precedents qua the instant latter aspects of section 80IB(10) deduction as well. We therefore reject the Revenue’s instant twin identical substantive grounds in very terms. Ordered accordingly. No other ground has been pressed before us. 7. These Revenue’s four appeals are dismissed in above terms. A copy of this common order be placed in the respective case files. Order pronounced in the Open Court on this 6 th day of July, 2022. Sd/- Sd/- (DR.DIPAK P.RIPOTE) (S.S. GODARA) लेखध सदस्य/ ACCOUNTANT MEMBER न्यधनयक सदस्य/JUDICIAL MEMBER पपणे / Pune; ददनधांक / Dated : 6 th July, 2022. Ashwini 12 ITA SS No.127 to 130/PUN/2019 A.Y. 2012-13 to 2015-16, M/s. Gera Developments Pvt. Ltd. आदेश की प्रनतनलनप अग्रेनषत / Copy of the Order forwarded to : 1. अपऩलधथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The CIT(A)-11, Pune. 4. The Pr.CIT (Central), Pune. 5. नवभधगऩय प्रनतनननध, आयकर अपऩलऩय अनधकरण, “ए” बेंच, पपणे / DR, ITAT, “A” Bench, Pune. 6. गधर्ा फ़धइल / Guard File. आदेशधनपसधर / BY ORDER, // True Copy // Senior Private Secretary आयकर अपऩलऩय अनधकरण, पपणे / ITAT, Pune. 13 ITA SS No.127 to 130/PUN/2019 A.Y. 2012-13 to 2015-16, M/s. Gera Developments Pvt. Ltd. S.No . Details Date Initial s 1 Draft dictated on 08.06.2022 2 Draft placed before author 04.07.2022 3 Draft proposed & placed before the Second Member 4 Draft discussed/approved by Second Member 5 Approved Draft comes to the Sr. PS/PS 6 Kept for pronouncement on 7 Date of uploading of Order 8 File sent to Bench Clerk 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order