The DCIT, Central Circle-2, Vadodara V. M/s. Karmvir Builders, Nadiad

ITSSA 56/AHD/2021

AI Insights

The case involves three appeals by the Deputy Commissioner of Income Tax, Central Circle-2, Vadodara against M/s. Karmvir Builders concerning the eligibility for deduction under Section 80IB(10) of the Income Tax Act for three different housing projects over the Assessment Years 2010-11 to 2012-13. The primary issues revolved around the completion of the projects within the statutory time limits, the maintenance of separate books of accounts for each project, and the allotment of more than one unit to a single individual in the same project. The CIT(A) had earlier allowed the deductions, which the Revenue challenged in the Tribunal. The Tribunal's decision affirmed the CIT(A)'s ruling, supported by a valuation report from the District Valuation Officer, which found no discrepancies in the assessee's compliance with the statutory requirements.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125041 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-08-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-08-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 06-05-2021
• Other Referred Cases: Bajaj Tempo Ltd. vs. CIT, Radhe Developers vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Cost of acquisition; Valuation report; Competent authority; Bonafide mistake
• Section: 143(3); 142(1); 153A; 80IB; 80IA; 201; 143(2); 44AB; 72; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ I. T(SS). A. No. 55 to 5 7/Ahd /2021 ( नधा रण वष / Assess ment Year : 2010 -11 to 201 2-1 3) D e pu t y C o m mi s s io ne r o f I n co me- t a x C e n tr a l C ir cle -2 , 6 08 , 6 th Fl oo r , Aa yk ar B ha v an , R ac e C o u r se C ir c le , V a do da r a - 39 00 0 7 बनाम/ Vs . M/ s. K a r m v ir B u il de r s K a r m v ir T o w e r , K a pa d w a nj T o w e r , K a pa d w a nj R o a d, O p p. – C it y G y mk h an a , N a dia d - 3 8 70 01 थायी लेखा सं./जीआइआर सं./P A N / G I R N o . : A I FK 2 4 8 0 J (अपीलाथ /Appellant) . . ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri Sudhendu Das, CIT. DR यथ क ओर से/Respondent by : Shri Parin S. Shah, A.R. स ु नवाई क तार ख / D a t e o f H e a r i ng 21/08/2023 घोषणा क तार ख /D a t e o f P ro n o u nc e me n t 29/08/2023 O R D E R PER Ms. MADHUMITA ROY - JM: All three appeals filed at the behest of the Revenue are directed against the common order dated 26.02.2021 passed by the Ld. Commissioner of Income Tax (Appeals)-12, Ahmedabad (in short ‘CIT(A)’) arising out of the order dated 30.03.2016 passed by the DCIT, Central Circle-2, Baroda under Section 153A r.w.s. 143(3) of the Income Tax Act, 1961, (hereinafter referred to as ‘the Act’) for Assessment Years 2010-11 to 2012-13. IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 2 - 2. Since, the matters relate to identical issue, these appeals are heard analogously and are being disposed of by a common order for the sake of convenience. IT(SS)A No. 55/Ahd/2021 (A.Y. 2010-11) 3. The grounds of appeal preferred by Revenue for A.Y. 2010-11 are as under: “[i] On the facts and in the circumstance of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of claim of deduction u/s. 80IB(10) of the Act to the tune of Rs.3,77,37,439/-ignoring the fact that the assessee has failed to comply with the conditions prescribed by the relevant provisions of the Act. [ii] On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in in deleting the disallowance of claim of deduction claimed u/s. 80IB(10) of the Act despite the fact that the approved project was partially completed and accordingly the Building Completion Certificate was also issued by the Local Authority for the said part only. For instance in respect of project Karamvir Nagar- II comprising of 88 residential units and 14 shops, out of this Local Authority had issued completion certificate only in respect of 88 residential units only. [iii] On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of claim of deduction u/s. 80IB(10) of the Act without appreciating the fact that the project was not completed within the stipulated time limit viz. within five years from the end of the financial year in which such housing project was approved by local authority, as required by the provisions of the Act. [iv] On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that the assessee is eligible for claiming deduction u/s. 80IB(10) of the Act inspite of the fact that assessee firm has allotted more than one unit in the name of single individual in same project viz. assessee firm has allotted B-9 & S-l 1 units in Karamvir Nagar-IH to Bharatbhai Dhulabhai Sharma (Valand)[AHZPV24721QJ [v] On the facts and in the circumstance of the case, the Ld. CIT(A) has erred in allowing deduction u/s. 80IB(10) of the Act without appreciating the fact that no separate books of account were maintained for each projects. [vi] On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the claim of deduction under Sec.80IB(10) of the Act without IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 3 - appreciating the fact that Assessing Officer has enumerated the instances where the assessee has not complied with the relevant provisions of the Act.” 4. It appears that disallowance of claim under Section 80IB(10) of the Act to the tune of Rs.3,77,37,439/- has been challenged before us by Revenue on very many counts. 5. In fact, we have gone through the entire order passed by both the authorities below and each and every counts on the basis of which the disallowance of the claim under Section 80IB(10) of the Act was made by the Ld. AO against the assessee and deletion of the same by the Ld. CIT(A) will be dealt with in appropriate manner. 6. Brief facts leading to this case is this that a search operation under Section 132 of the Act was conducted on 26.04.2013 in Karmvir Builder Group cases which include the case of the assessee and as per provision of law, notice under Section 153A of the Act was issued to the assessee directing him to furnish the return of income within 45 days from the date of service of such notice. In response whereof, the return of income under Section 153A of the Act dated 17.01.2014 declaring total income at Rs.5,58,990/- after claiming deduction under Section 80IB(10) of the Act to the tune of Rs.3,77,37,439/- was filed. The relevant notice under Section 143(2) of the Act and 142(1) of the Act along with questionnaires were duly issued and served upon the assessee. This search assessment was culminated into the order determining the total income of the assessee at Rs.3,82,96,430/- upon making disallowance of Rs.3,77,37,439/- on account of deduction under Section 80IB(10) of the Act, which was, in turn, deleted by the ld. CIT(A). Hence, the instant appeal filed by the Revenue before us. IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 4 - 7. In fact, the appellant firm is in the business of building and developing projects which are eligible for deduction under Section 80IB(10) of the Act. The Ld. AO was of the opinion that the assessee failed to comply with the condition stipulated under Section 80IB(10) of the Act and thus not found to be eligible for deduction. The assessee claimed deduction for the year under appeal in respect of the three schemes, namely, Karmvir Nagar-II, KarmvirNagar-III & Karmvir Nagar-IV. The sum and substance of the order passed by the Ld. AO while rejecting the claim of the assessee is this that there was non-completion of the project before the cutoff date. Sale deed made in respect of the land only. More than one unit in the name of single individual in different projects has been sold by the assessee. The assessee was not maintaining the separate books of accounts for each project. 8. It is also a fact borne on record that the Ld. AO asked for valuation report from the District Valuation Officer in respect of such projects while verifying the claim of deduction under Section 80IB(10) of the Act in the case of assessee company whereupon by and under report dated 13.01.2016, the District Valuation Officer submitted the valuation report to the Deputy Commissioner of Income Tax, Central Circle-2 , Vadodara. A copy, whereof, has been duly provided before us by the Ld. DR as per the direction made by the Bench on 04- 05/07/2023. It appears that mentioning of the said valuation report as submitted by the District Valuation Officer did not find any place in the order passed by the Ld.AO while rejecting the claim of the assessee. Upon perusal of the said District Valuation Officer report, it further appears that the same has given clean chit to the assessee in regard to compliance made under Section 80IB(10) of the Act by the assessee company. IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 5 - 9. The Ld. CIT(A) upon perusal of the entire set of documents summarized the entire episode in the following manner: “11.3 KARMVIR NAGAR - II I) Non-completion of project before cut-off date:- The A.O has made an allegation on Page 8 “Thus that it is very clear that project as approved by assessee was consisting of 88 residential units and 14 shops, out of which construction of 14 shops was not done by assessee till the statutory cut-off date. No revised plan in this matter was passed by assessee. Thus s as the shops which were part of the project as approved by local authority was not constructed before cut-off date, it cannot be said that the project was complete by the statutory cut-off date and hence not liable for deduction u/s. 80IB(10) of the LT. Act”. In this regard, the appellant firm as submitted that the AO has failed to properly and entirely consider appellant’s reply dated 12.11.2015 filed in the assessment proceedings. In the present case, the appellant firm has fulfilled all the ingredients which are necessary for claiming deduction u/s.80IB(10) of the Act and in support of the same, the appellant has submitted the following details / explanation : i) The housing project “Karmvir Nagar-II ” is being approved by local authority vide approval letter dated 29/08/2005. A copy of approval letter along with approved plan has been provided to the A.O as per Exhibit-I of appellant’s letter dated 12.11.2015. ii) The other condition is that the housing project should be completed within 5 years from the end of the financial year in which the housing project is approved by the local authority. In the present case the housing project is approved by the local authority on 29/8/2005 and the housing project is completed during the F.Y.2009- 10 relevant to A.Y.2010-11 and completion certificate has also been issued by the local authority. Copy of the said certificate has been provided to the A.O. Hence, the housing project has been completed within the stipulated time period. (iii) The appellant firm has developed housing project “Karmvir Nagar-II” on the plot of land having area of 8815 Sq. Mtrs. (2.1782 acres), and the land area is more than 1 acre. (iv) The residential unit in the housing project “Karmvir Nagar-II” is less than 1500 sq. ft. There are 88 housing units. The details of built up area of housing units is as under: IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 6 - Sr.No Type No. of Housing Units Built up area per Hsg. Unit 1 E - Type 54 350 to 400 sq.ft, per unit 2 F - Type 34 500.ft, per unit (v) The accounts of the appellant firm has been duly audited by a Chartered Accountant and has submitted audit report in Form No.10CCB and the same has been provided to the A.O as per Exhibit-Ill of appellant firm’s letter dated 12.11.2015 to the AO. (vi) During the year under consideration (i.e. A.Y. 2010-11) the appellant firm has booked the profit of 88 housing units as the completion certificate has been received by the appellant firm during the year under consideration and it is one of the condition that the completion certificate is required to be obtained and hence during the year under consideration the profit of the entire housing project has been booked by the appellant firm. Further, the appellant firm has built and developed the housing project on its own land and it is a developer and not a contractor. (vii) At the time of obtaining the development permission, the permission was obtained for 14 shops having approximately built up area of construction of 1820 sq.ft. However, in the appellant firm has not constructed any commercial shop and hence in the housing project there is no commercial establishment. It is further submitted that during the year under consideration i.e. A.Y.2010-11 the case was under scrutiny assessment u/s. 143(3) of the Act and during the course of assessment proceedings u/s. 143(3) of the Act all the necessary details for claiming deduction u/s.80IB(10) of the Act were called for by the then A.O. and those were provided to the A.O. and after verification of all the details, the then A.O. has allowed the claim of deduction u/s.80IB(10) of the Act. It is also worth here to mention that the completion certificate had been issued by the competent authority as per relevant rules. So there is no question arises that the project was incomplete^ With the completion certificate the project is treated as completed irrespective of any change in the project which is also not envisaged under the provisions of section 80IB(10) of IT Act. ii) Sale Deed made in respect of land only In Para (ii) on Page 9, the A.O has made an observation that “ the sale of land is being done by Shri Dharmvirsingh G. Rajpurohit in individual capacity and not as a partner of assessee firm. No development agreement has been signed by the assessee firm with owner of land i.e. Shri Dharmvirsingh G. Rajpurohit. No registered sale deed for the whole residential unit has been done with customers. Thus even if the assessee has constructed the building later on, on the said plots, he has done so in the capacity of a contractor. The appellant has submitted that the A.O has not properly and entirely considered appellant’s detailed reply dated 21.03.2016. IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 7 - The appellant further submitted that the said observation of the A.O is factually incorrect and without considering the various submissions made by the appellant firm. The partner has introduced the land as capital contribution at the cost of acquisition of land as per provisions of the sec. 45(3) of the I. T. Act, 1961. On introduction of the said land into a partnership firm, capital account of the partner has been given credit for the cost of acquisition of the land and the land account has been debited in the books of account of partnership firm as cost of acquisition of land. On introduction of the land, the said land has become the property of the appellant firm having the ownership, right, title and interest in the said property also vest with the appellant firm. The appellant firm has acquired the dominant control and possession over the land and has build and develop the housing project by incurring all expenses and taking all risks involved therein and it is not executing housing project as works contractor. The appellant firm has built and developed residential housing project “Karmvir Nagar - II” on its own land. All the expenses for the housing project have been incurred by the appellant firm. While working out the profit / loss of the entire project, land consideration paid by the appellant firm has also been considered as scheme cost. The appellant firm has entered into composite booking agreement with the members of the scheme. Wherein entire consideration of the housing unit has been fixed with the members including land and construction. On sample basis composite agreement and sample possession letter has also been provided to the A.O. The appellant firm has further stated that it is following the project completion method for accounting and the revenue for the project is recognized only after completion of project, no accounting entry is also passed in the books for execution of land conveyance deed. Copy of ledger accounts of the members were also provided to the A.O. In the present case, it is not a case like first of all to sale the land and then to entered into construction agreement with the members and hence the appellant firm has not carried out the work as a works contractor on behalf of the members. It is to be taken note of that in the entire housing project scheme all the units are having uniform construction. It is possible only when the builder has developed the housing project as per approved plan at its own cost and expenses. It is further to be taken note that as per the rule of Land Revenue, the land lord is required to approve the plan of the housing unit/project. The appellant firm is builder and developer and has got the housing plan approved. If the appellant firm has sold the land to the members and then after if the construction work carried out by the appellant firm, then in that case approval is required to be taken by the member for the construction of his housing unit. In the present case, members have not taken approval for construction. Hence, it is otherwise establishes that the appellant firm has carried out construction and build housing project and the entire housing unit along with land has been sold to the member. The fees for necessary approval of plan and completion is also paid by firm. The property tax, water connection charges etc. have been paid by the appellant firm. The land under construction IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 8 - belongs to firm. The permission from competent authority & completion certificates are also in the name of partner/firm. The firm also develops common amenities being Common garden, Security gate, water supply infrastructure, compound wall, common gate etc. The firm has also undertaken advertisement, selling & marketing, develop broachers including creation of art work, theme designing and publicity, hording & newspaper advertisement etc. The appellant firm has also constructed all the units of the projects irrespective of booking and had borne the carrying cost of unsold units. The appellant firm is builder and developer of the housing project “Karmvir Nagar- II”, wherein the entire profit of the scheme (both land and construction) belonging to the appellant firm and if any loss arisen from the housing project (both the land and construction), then the same is required to be borne by the appellant firm. In the case of contractor the loss is not required to be borne by contractor, it is possible only in the case of builder & developer. Hence, the appellant firm has not carried out work as contractor but carried out the work as builder & developer. With regard to execution of sale deed it is submitted that the activity of development & construction is carried out as a joint & single activity as per the composite agreement, however the land sale-deed are executed to achieve cost saving and to ensure reliability. The registration for the land was made only to facilitate conveyance of the parties and as an incidental formality to protect the interest of the parties which need not be viewed as fatal to the claim of the appellant for deduction under section 80IB (10). Ultimately, the entire work from the stage of purchase of land to the stage of making residential unit habitable had been carried out by the appellant firm only. The possession of the land and building however is only transferred on the date of handing over possession upon completion of the project. The said fact is also placed on record in the notes to the accounts and in the notes to the computation of income annexed with the return of income. It is also submitted that the A.O himself had confirmed in the show cause notice that no construction agreement is found during the course of search which itself confirms the fact that the appellant firm is engaged in the activity of development & construction of Housing projects. Further, the appellant has also provided to the A.O a complete set of documents from booking to the time till possession is handed over for the units, as per the papers seized in Annexure BS-3 justifying the role of the firm as of development & construction of Housing projects. The sample affidavits of respective unit holder confirming role of the appellant firm as a builder and developer from members were also provided to the A.O. iii) More than one unit in the name of single individual in different projects:- IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 9 - In Para (iii) on Page 9 the A.O has made an observation that the individual named Thakorbhai Maganbhai Rami (ACOPR3413J) has been allotted following units in the above mentioned 80IB(10) projects of the assessee firm. Sr No Name of the individual Project name Unit No Deed No Dated 1 Thakorbhai Magan bhai Rami Karmvir Nagar-II F/26 2796 28.07.2006 Karmvir Nagar-III S/5 2898 27.05.2008 Karmvir Nagar-IV S-10 3436 26.06.2009 The A.O further made an observation on Page 12 as under:- “ Thus as can be seen here also single individual has been allotted various units in the adjoining projects all claiming benefit of deduction u/s. 80IB(10) of the same assessee firm in the same period. Thus as per the intent of legislature the motive of the deduction u/s.80IB10) was to provide, housing to low and middle class individuals, this motive is being hampered as on single individual is benefitted having 3 houses and still claiming deduction u/s. 80IB(10). Thus assessee is not eligible for claiming deduction u/s.80IB (10) of the Act. Further, as per assessee, this project consists of 88 residential units, out of which allotment details of only 87 units has been submitted. No details with regard to remaining unit have been submitted. Thus, in the absence of these details, it cannot be said that assessee has complied with provisions of section 80IB (10).” In this regard, the appellant has submitted that as mentioned in the above table Mr. Thakorbhai Maganbhai Rami has purchased residential Unit “F/26” in Scheme “Karmvir Nagar - II. Further, he has also purchased two commercial unit i.e Shop “S/5” & “S/10” in scheme “Karmvir Nagar - III & IV respectively, which are residential cum commercial scheme. All the three units have been purchased in three different housing schemes. One of the Condition of Section: 80IB (10) clause (e) & (f) is reproduced as under:- (e) not more than one residential unit in the housing project is allotted to any person not being an individual, and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely (i) the individual or the spouse or the minor children of such individual, (ii) (ii) the Hindu undivided family in which such individual is the karta (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 10 - According to clause “(e)” and “(f)” of section: 80IB (10) mentioned above the requirement is not to allot more than one residential unit in the housing project to one person. Here, Mr. Thakorbhai Maganbhai Rami have been allotted 3 units in all the different housing Projects and not a Single housing Project. Moreover, the three units consists were residential units and two commercial units. Thus, no violation of the relevant provisions of law is observed. So no adverse inference could be drawn. Further, the appellant firm also mentioned that the A.O has failed to properly consider appellant’s letter dated 21.03.2016 wherein the appellant has contended that the Hon’ble Supreme Court in case of Bajaj Tempo Ltd. 196 ITR 188, in which supreme court considering the provisions of section 80IA of the Act held that “provision in the Taxation Statute granting incentives for promoting growth and development should be construed liberally. Since provision intended for promoting and economic growth has to be interpreted liberally, restriction of it too has to be construed so as to advance the objectives of the provisions and not to frustrate it” Further the A.O. has made observation that the appellant firm out of 88 units, allotment details of only 87 units has been submitted. In this regard, the appellant has submitted that in the sales register all the 88 residential units ledger account have been given during the assessment proceedings, but while providing the summary sheet by bonafide mistake it has mentioned the details of 87 Units only. So there is no discrepancy in this regard. Thus, observations of the AO does not have much relevance. (iv) Non-maintenance of separate books of accounts The A.O has made an observation in Para (iv) on Page 12 that “during the course of assessment proceedings, assessee was asked to produce, project wise cost details. But even after giving sufficient time and opportunity, assessee could not produce project-wise cost details. In it has been maintaining composite account for all its projects and no separate books were being maintained for each project. Thus it is found that assessee is not maintaining projectwise separate books of accounts which is necessary requirement”. In this regard, the appellant submitted that the A.O has failed properly to consider appellant firm’s reply dated 15.09.2015. The appellant submitted that it is maintaining accounting records for all the projects in a single books of accounts however all direct expenses relating to relevant project are recorded to that project account and there after all indirect expenses common to all projects are accounted in the profit & loss account wherein the cost of each project is brought down. Further, it is also submitted that the appellant firm is engaged in the business of development and construction. Accordingly all differently named projects were executed under the supervision control and management under single roof i.e. partnership firm. The projects were under one block entitled to deduction u/s 80IB (10) of the act. There is no project on hand during P.Y. which can be considered as non- entitled deduction u/s. 80IB (10). IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 11 - Further the appellant further submitted that at the time of search various files containing daily report of project wise expenditure incurred and recorded were found and seized. The explanation and proof of recording project wise expenses in tally software had also been provided with the explanation to material found and seized and the A.O. has already accepted the explanation. It is further submitted that appellant has separately submitted report in Form No. 10CCB of the Act for each project and all the conditions are duly complied for each projects and AO neither pointed any defect in the books of accounts nor rejected books of accounts. Appellant in support of his claim submitted Form 10CCB which quantifies amount of deduction and accordingly there is no violation of condition as mentioned in 80IB(10) of the Act. From perusal of above section it can be concluded that section prescribes report of chartered accountant and nowhere it describe separate profit & loss Accounts. Appellant is only building and developing scheme which is eligible for deduction u/s 80(IB)(10) of the Act and not carried any other business in firm and accordingly there is no need to maintain separate books of accounts for each of the projects. Hence, no adverse inference can be drawn. 11.4 KARMVIR NAGAR - III (i) More than one unit in the name of single individual in the same project The A.O has made an observation in Para (i) on Page 13 that the individual named Bharatbhai Dhulabhai Sharma (Valand) (AHZPV2421Q) has been allotted the following units in the above mentioned 80IB(10) project of the assessee. Sr No Name of the individual PAN Project name Unit No Deed No Dated 1 BharatbhaiDulabhai Sharma (Valand) AHZPV2421Q Karmvir Nagar- III B/9 5368 11.11.2008 2 BharatbhaiDulabhai Sharma (Valand) Karmvir Nagar- III S/11 3685 12.06.2014 The A.O has further observed that the above mentioned provision was inserted vide Finance Act 2009 w.e.f A.Y. 2010-11. As can be seen, in the same project, two units are allotted to single individual and thus, assessee has clearly violated the above provision and hence assessee will not be eligible to claim deduction u/s. 80IB(10) of the Act. Further, project Karmvir Nagar-III consist of 57 units, out of which allotment details of only 52 units have been submitted. In this regard, the appellant firm submitted that as mentioned in the above table Mr. Bharatbhai Dulabhai Sharma has purchased residential Unit “B/9” and shop “S/11” in Scheme “Karmvir Nagar - III which is a residential scheme cum IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 12 - Commercial Scheme. The two units purchased are different in the way i.e. one unit purchased is residential Project and another unit purchased is commercial unit. The Conditions of Section: 80IB (10) clause (e) 8s (f) is reproduced as under:- (3) not more than one residential unit in the housing project is allotted to any person not being an individual, and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely :- (iv) the individual or the spouse or the minor children of such individual, (v) the Hindu undivided family in which such individual is the karta (vi) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. According to clause “e” and “f” of section: 80IB (10) mentioned above the requirement is not to allot more than one residential unit in the housing project to one person. Here Mr. Bharatbhai Dulabhai Sharma have been allotted one residential unit and one commercial Unit. So no adverse inference shall be drawn. Further A.O. has observed that project Karmvir Nagar - III consist of 57 units out of which allotment details of only 52 units have been submitted. Against this observation made by the A.O. the appellant firm have to state that during the F.Y. 2009-10, 52 units have been sold out against the total 57 units constructed. The remaining 5 Units have remained Unsold during the A.Y. 2010-11 and the same have been reflected in the Balance sheet under the head Inventory of Completed Projects. The appellant firm has provided the project completion certificate during the assessment Proceedings vide letter dated 11-12-2015 to the AO. (ii) Sale deed in respect of land only The A.O. has made an observation that “the sale of land is done by Shri Dharmirsingh G. Rajpurohit in his individual capacity and not as a partner of assessee firm. No development agreement has been signed by assessee firm with owner of land i.e. Shri Dharmvirsingh G. Rajpurohit. No registered sale deed for whole residential unit has been done with the customers. Thus even if the assessee has constructed the building later on, on the sold plots, he has done so in the capacity of contractor. Considering the above, assessee is not eligible for the claim of deduction u/s. 80IB(10), as it is available for undertaking developing housing projects and not to a land contractor”. In this regard, the appellant has drawn the notice to reply submitted at para (ii) herein above under the head Karmvir Nagar-II. Similar issue has been discussed therein and to avoid repetition, the same is not repeated again. Hence no adverse inference based on above observation can be drawn. IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 13 - (iii) Non-completion of project before cut off date:- This issue has been discussed by the A.O in Para (v) Page 16 of the order. The A.O. has made an observation that “the assessee has taken permission for construction of project from Bilodra Gram Panchayat on 16.03.2010. However, during the course of search proceeding at the office premises of Karmvir Group of Builders, certain registered deeds and documents were found and seized and annexed as annexure BS-4, BS-7 and BS-11. On verification of the above deeds, it is found that the deeds are for the land only. And the dates of registration of deeds as mentioned in the chart below are after the completion certificates issued by the gram panchayat. Still in the photograph attached with the sale deeds it is found that there is no construction whatsoever on the above plots on the date of registration which is after the date of completion as claimed by the assesses’’. In this regard, the appellant submitted that the A.O has failed to properly and entirely consider appellant’s letter dated 21.03.2016. Against the aforesaid observation, the appellant further submitted that as Bilodra Gram Panchayat has issued certificate on 16/03/2010. However, AO mentions the reference of certain seized papers in which conveyance deeds are for land only, for which appellant submitted that as appellant entered the agreement for transfer of land and subsequently possession letter were issued after completion of construction. The issue of sale deed with respect to land only has also been explained hereinabove and there are judicial precedents in favour of the appellant. Hence no adverse inference based on above observation can be drawn. (iv) Non maintenance of separate books for each project The A.O has made an observation in Para (iv) on Page 12 that “during the course of assessment proceedings, assessee was asked to produce, project wise cost details. But even after giving sufficient time and opportunity, assessee could not produce project-wise cost details. It has been maintaining composite account for all its projects and no separate books are being maintained for each project. Thus it is found that assessee is not maintaining projectwise separate books of accounts which is necessary requirement”. In this regard, the appellant has submitted that it is maintaining accounting records for all the projects in a single books of accounts however all direct expenses relating to relevant project are recorded to that project account and there after all indirect expenses common to all projects are accounted in the profit & loss account wherein the cost of each project is brought down. Further, it is also submitted that the appellant firm is engaged in the business of development and construction. Accordingly all differently named projects are executed under the supervision control and management under single roof i.e. partnership firm. The projects are under one block entitled to deduction u/s 80IB (10) of the act. There is no project on hand during P.Y. which can be considered as non- entitled deduction u/s. 80IB (10). IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 14 - Further the appellant firm would like to state that at the time of search various files containing daily report of project wise expenditure incurred and recorded were found and seized. The explanation and proof of recording project wise expenses in tally software is also provided with the explanation to material found and seized and the A.O. has already accepted our explanation. The Auditor has also in his audit report given u/s 44AB of the Income Tax Act, 1961 has disclosed specifically in the notes forming part of the financial statements under Point No. (c) which is as under: “Separate Accounting is made in respect of each project in the single set of books of account.” It is further submitted that appellant has separately submitted report in Form No. 10CCB of the Act for each project and all the conditions are duly complied for each projects and AO neither pointed any defect in the books of accounts nor rejected books of accounts. Appellant in support of his claim submitted Form 10CCB which quantifies amount of deduction and accordingly there is no violation of condition as mentioned in 80IB(10) of the Act. 11.5 KARMVIR NAGAR - IV (i) More than one unit in the name of single individual in adjoining projects:- In Para (i)(a), the AO has made an allegation that the individual named Anjali Girdhar Kelvani (BCVPK0713N) has been allotted following units in the above mentioned 80IB(10) projects of the assessee:- (a) Sr No Name of the individual Project name Unit No Deed No. Dated 1 Anjali GirdharKelvani Karmvir Nagar-IV S-5 6296 02.12.2009 2 Anjali GirdharKelvani Karmvir Nagar-V A-43 6015 20.11.2009 The appellant firm has submitted that as mentioned in the above table Anjali Girdhar Kelvani has purchased residential Unit “A/43” in Scheme “Karmvir Nagar — V which is a residential scheme. She has also purchased Shop “S/5” in scheme “Karmvir Nagar - IV” which is a commercial scheme. The two units purchased are different in the way i.e. one unit purchased is residential and another unit purchased is commercial unit. b) Sr No Name of the individual Project name Unit No Deed No. Dated 1 Naresh Narayan Pandit and Karmvir Nagar-IV B-18 5157 20.10.2008 IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 15 - AlkaNreshPandit 2 Naresh Narayan Pandit and AlkaNreshPandit Karmvir Nagar-V. A-6 5961 18.11.2009 The appellant firm has submitted that as mentioned in the above table Naresh Narayan Pandit has purchased residential Unit “B-18” in Scheme “Karmvir Nagar - IV which is a residential scheme. He has also purchased residential unit “A/6” in scheme “Karmvir Nagar - V” which is also residential scheme. The two residential units purchased are in different housing project in different scheme. One of the Conditions of Section: 80IB (10) clause (e) & (f) are reproduced as under:- (e) not more than one residential unit in the housing project is allotted to any person not being an individual, and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely :- (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. According to clause “(e)” and “(f)” of section: 80IB (10) mentioned above the requirement is to allot one residential unit in the housing project to one person. Here Mr. Bharatbhai Dulabhai Sharma have been allotted one residential unit in Karmvir Nagar-IV and another in Karmvir Nagar-V. Since both the projects are different and located separately. Their approvals are also differently taken. Therefore, there is no violation of the provisions of IT Act. In fact in a single project not more than one residential units have been sold. ii) Sale deed made in respect of land only:- This issue has been discussed by the A.O in Para (ii) on Page 22 of the order. The A.O has made an observation as under:- “During the course of search various sale deeds in respect of several units of this project were found and seized. On perusal of the same, it is found that in majority of cases, the sale deed has been done in respect of land only. During the course of search proceedings, in the statement recorded on oath dated 29.04.2013 in response to Q.No. 31 Shri Dharamvirsing G. Rajpurohit, Partner of the assessee firm stated that in many case, he sold land after plotting and construction were done later on by him. During the course of assessment proceedings, in reply to show cause, assessee submitted composite agreements and possession letters in some cases to prove that assessee firm is engaged in construction of housing project as a whole. Submission of the assessee is perused. But after going through seized material, it is noticed that the land is in the name of the partner and agreements are done by the partner in the individual capacity with the customer E.g. Annexure BS- IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 16 - 7, Page 46-53 found from the premises of Karmvir Towers contain the sale deed for land of plot no. S-8, dated 04.11.2008 ( R.No. 5274). As per this deed, land is sold by Dharmvir Gangasingh Rajpurohit to Bhanubhai Haribhai Darji. Nowhere in the sale deed mention of assessee firm i.e. Karmvir Builders is being found. Various such sale deeds have been found and seized during the course of search. The sale of land is being done by Shri Dharmvirsingh G. Rajpurohit in individual capacity and not as a partner of assessee firm. No development has been signed by assessee firm with owner of land i.e Shri Dharmvirsingh G. Rajpurohit. No registered sale deed for the whole residential unit has been done with the customers. Thus even if the assessee has constructed the building later on, on the sold plots, he has done so in the capacity of contractor. Considering the above, assessee is not eligible for the claim of deduction u/s.80IB(10), as it is available for undertaking developing housing projects and not to a land contractor”. In this regard, the appellant submitted that the said observation of the A.O has factually incorrect and without verifying various details provided by the appellant firm in the assessment proceedings. In this regard, the appellant had made the submission at para (ii) herein above under the head Karmvir Nagar-II. Similar issue has been discussed therein and to avoid repetition, the same is not repeated again. Hence no adverse inference based on above observation can be drawn. iii) Non-completion of project before cut-off date:- This issue has been discussed by the A.O in Para (iii) on Page 23 of the order. The A.O has made an allegation that as can be seen from the above deeds, photographs have been attached for specification of property to be sold. In all the photographs it is only land and no construction is seen. Against the aforesaid observation, the appellant would like to submit that as Bilodra Gram Panchayat has issued certificate on 16/03/2010. However, AO mentions the reference of certain seize paper in which conveyance deeds are for land only, for which appellant firm wants to submits that as appellant entered the agreement for transfer of land and subsequently possession letter are issued after completion of construction. The issue for sale deed with respect to land only has also explained hereinabove and there are judicial precedents in favour of the appellant. Hence no adverse inference based on above observation can be drawn. iv) Non-maintenance of separate books for each project:- The A.O has made an observation in Para (v) on Page 24 that “during the course of assessment proceedings, assessee was asked to produce, project wise cost details. In its submission, assessee submitted that it has been maintaining composite account for all its projects and no separate books are being maintained for each project. Thus it is found that assessee is not maintaining projectwise separate books of accounts which is necessary requirement”. IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 17 - In this regard, the appellant would like to submit that the A.O has failed properly consider appellant firm’s reply dated 15.09.2015. The appellant had submitted that it is maintaining accounting records for all the projects in a single books of accounts however all direct expenses relating to relevant project are recorded to that project account and there after all indirect expenses common to all projects are accounted in the profit & loss account wherein the cost of each project is brought down. Further, it is also submitted that the appellant firm is engaged in the business of development and construction. Accordingly all differently named projects are executed under the supervision, control and management under single roof i.e. partnership firm. The projects are under one block entitled to deduction u/s 80IB (10) of the act. There is no project on hand during P.Y. which can be considered as non- entitled deduction u/s. 80IB (10). Further the appellant firm would like to state that at the time of search various files containing daily report of project wise expenditure incurred and recorded were found and seized. The explanation and proof of recording project wise expenses in tally software is also provided with the explanation to material found and seized and the A.O. has already accepted our explanation. The Auditor has also in his audit report given u/s 44AB of the Income Tax Act, 1961 has disclosed specifically in the notes forming part of the financial statements under Point No. (c) which is as under: “Separate Accounting is made in respect of each project in the single set of books of account.” It is further submitted that appellant has separately submitted report in Form No. 10CCB of the Act for each project and all the conditions are duly complied for each projects and AO neither pointed any defect in the books of accounts nor rejected books of accounts. Appellant in support of his claim submitted Form 10CCB which quantifies amount of deduction and accordingly there is no violation of condition as mentioned in 80IB(10) of the Act. From perusal of above section it can be concluded that section prescribes report of chartered accountant and nowhere it describe separate profit & loss Accounts. Appellant is only building and developing scheme which is eligible for deduction u/s 80(IB)(10) of the Act and not carried any other business in firm and accordingly there is no need to maintain separate books of accounts. Hence, no adverse inference can be drawn.” 10. The sum and substance of the case made out by the Revenue and the rebuttal of the assessee in support of each count as mentioned hereinabove regarding the violation of the provision under Section 80IB(10) of the Act is summarized below: IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 18 - Karamvir Nagar – II A. Non-completion of project before cut-off date: i. As project was approved consisting of 88 residential units and 14 shops, out of which since those 14 shops were not constructed till the statutory cutoff date, the project was found to be incomplete and not found liable for deduction under Section 80IB(10) of the Act by the Revenue. ii. However, the assessee’s case is this that the project was approved by the local authority on 29.08.2005, which was duly provided to the Ld. AO by the forwarding letter dated 12.11.2015. The completion certificates were also duly issued by the local authority in due time. iii. The land consisting of area of 8815 sq. mtrs. i.e. more than one acre. The residential unit is less than 1500 sq.mtr. The accounts of the assessee firm duly accounted by the Chartered Accountant and submitted Form No.10CCB. The same was provided to the Ld. AO on 12.11.2015. iv. The assessee firm booked the profit of 88 housing units as the completion certificate has been received by the assessee firm during the year under consideration as per provision of law and therefore the profit of the entire housing project had been booked by the assessee firm. Moreso, the firm had built and developed the housing project on its own land and the assessee is not a contractor and thus, a developer as the case of the assessee. v. Though, the permission was obtained for 14 shops having approximately built up area of construction of 1820 sq.ft. as the assessee did not construct shops, the project is not a commercial establishment. Necessary details whereof IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 19 - were duly placed before the Ld. AO for A.Y. 2010-11 in the scrutiny assessment under Section 143(3) of the Act and upon due verification of those details, the claim under Section 80IB(10) of the Act was allowed as the objection made by the assessee. B. Sale Deed made in respect of land only: It is the case of the Revenue that no registered sale deed for the whole residential unit has been done with customers. Even if the assessee constructed the building later on, on the said plots, he has done so in the capacity of a contractor. On the other hand, it is the case of the assessee that on introduction of the said land into partnership firm capital account of the partner has been given credit for the cost of acquisition of the land and the land has been debited in the books of accounts of partnership firm as cost of acquisition of land. On introduction of the land, the said land has become the property of the assessee firm having its ownership. Right, title and interest in the said property also vests with the assessee firm. Further that, the firm has built and developed residential housing project ‘Karmvir Nagar – II’ on its own land and all the expenses for the housing project was incurred by the assessee firm only. While working out the profit/loss of the entire project, land consideration paid by the assessee firm has also been considered as scheme cost. The assessee firm had entered into booking agreement with the members of the scheme wherein entire consideration of the housing unit has been fixed with the members including land and construction. Such sample composite agreement and sample possession letter were duly furnished before the Ld. AO by the assessee. It was also the case made out by the assessee and also argued before us that the registration of the land was made only to facilitate conveyance of the parties and as an incidental formality to IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 20 - protect the interest of the parties which need not be viewed as fatal to the assessee for claiming deduction under Section 80IB(10) of the Act. C. More than one unit in the name of single individual in different projects was also alleged by the Revenue: The Ld. AO pointed out the case of one Mr. Thakorbhai Maganbhai Rami who has allotted number of projects of the assessee firm, namely, Unit Nos. F/26, S/5 and S/10 of Karmvir Nagar-II, Karmvir Nagar-III & Karmvir Nagar-IV; respectively, which was registered through deed of conveyance. It is the case of the assessee that the requirement of law is not to allot more than one residential unit in the housing project to one person. Mr. Thakorbhai Maganbhai Rami was allotted three units in all the three different housing projects and not in a single housing project. Therefore, there was no violation of the relevant provisions of law so as to make any adverse order against the assessee. The assessee relied upon the judgment passed in the case of Bajaj Tempo Ltd., reported in 196 ITR 188, wherein it was held that provision in the Taxation Statute granting incentives for promoting growth and development should be construed liberally. Since provision intended for promoting and economic growth has to be interpreted liberally, restriction of it too has to be construed so as to advance the objectives of the provisions and not to frustrate it. D. It was also an allegation made against the assessee by the Revenue that the assessee did not maintain separate books of accounts. The assessee by and under a letter dated 15.09.2015 submitted that it is maintaining accounting records for all the projects in a single books of accounts. However, all direct expenses relating to relevant project are recorded to that project account and thereafter all indirect expenses common to all projects are IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 21 - accounted in the profit & loss account wherein the cost of each project is brought down. Further, it is also submitted that the appellant firm is engaged in the business of development and construction. Accordingly all differently named projects were executed under the supervision control and management under single roof i.e. partnership firm. The projects were under one block entitled to deduction u/s 80IB (10) of the Act. There is no project on hand during F.Y. which can be considered as non-entitled deduction under Section 80IB(10) of the Act. Further that, the assessee separately submitted report in Form 10CCB for each project and all the conditions were duly complied for each projects which was neither found to be defective by the Ld. AO. In fact, it appears from the order passed by the Ld. AO that only on these four counts, the benefit of the deduction under Section 80IB(10) of the Act was also denied in respect of the other two projects Karmvir Nagar-III & Karmvir Nagar-IV. 11. So far as the first condition for denial of deduction is concerned so as to project not completed before cutoff date the following details as submitted by the assessee reflects that within the stipulated statutory time limit the same has been completed and that too upon issuance of completion certificate passed by the competent authority: Assessment Year Projects Date of Approval Date of Completion 2011-12 Karmvir Nagar-V 26.09.2007 20.07.2010 2011-12 Karmvir Villa 27.03.2008 21.12.2010 2012-13 2013-14 Karmvir Nagar-III 31.01.2007 16.03.2010 2012-13 2013-14 Karmvir Sundervan-I & II 28.03.2007 Revised on 20.07.2010 IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 22 - 28.03.2008 2013-14 Karmvir Nagar-IV 02.07.2007 16.03.2010 12. So far as the land area of more than 1 acre in each of the project as one of the questions raised by the Revenue, particularly, the Ld. AO, the following details were duly submitted by the assessee which establishes the fact of having land more than 1 acre: Assessment Year Projects Area of Land 2011-12 Karmvir Nagar-V 12748 Sq. Meter i.e. 3.17 Acre 2011-12 Karmvir Villa 12743 Sq. Meter i.e. 3.17 Acre 2012-13 2013-14 Karmvir Nagar-III 5463 Sq. Meter i.e. 1.35 Acre 2012-13 2013-14 Karmvir Sundervan-I & II 45436 Sq. Meter i.e. 11.36 Acre 2013-14 Karmvir Nagar-IV 5160 Sq. Meter i.e. 1.27 Acre Further that, it is an admitted position that each unit has the built up area of less than 1500 Sq. Ft. within the prescribed statutory condition. 13. So far as the sale deed made separately in respect of land and the seller was Shri Dharamvirsingh G. Rajpurohit one of the partners of the assessee firm is concerned, the assessee is on this footing that partner has introduced the land in the firm as capital contribution under Section 45(3) of the Act and upon introduction of the same, once it became the property of the firm having ownership right, title and interest of the said land, the assessee firm acquired dominant control over the land and all cost incurred related to construction over the said land has been debited in the books of accounts of the assessee firm. Moreso, the composite agreement was also made with the members. The Ld. IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 23 - AO’s observation on denial of deduction under Section 80IB(10) of the Act is on the ground that the sale deed has been made separately in respect of the land is devoid of any merit. The assessee on over all ground relied upon the judgment passed by the Jurisdictional High Court in case of Radhe Developers, reported in 341 ITR 403, wherein it was held that if dominant control of the project is with developer and all risk and rewards has been borne by the developer then developer is entitled to claim of deduction under Section 80IB(10) of the Act. The assessee holds a better footing as land has been introduced by partners by debiting land account and crediting partners account in the books of firm so dominant control, ownership, risk and reward now in the shoes of the assessee firm. Further that, this particular aspect of the matter has not been doubted by the Ld. AO as it appears from the order passed by him while denying deduction under Section 80IA(10) of the Act. 14. Apart from that, the allegation of the Ld. AO that more than 1 unit was allotted in projects in the name of single individual which violates the condition for coming under the zone of consideration for deduction under Section 80IB(10) of the Act, it is found that each project developed by the assessee firm is a separate project, separate approval from local authority, separate plan and separate completion certificate as per the provision of the Act was obtained. The deduction under Section 80IB(10) of the Act is in respect of a project and not to the firm as each project has separate approval and completion so as to identify different project. On this score, this ground fails. The assessee submitted that the assessee is maintaining accounts for all the projects in single book of account through Cost Centre in Talley Software and all expenses relating to relevant project are recorded to that project account and thereafter all indirect expenses common to all projects are accounted for in the Profit & Loss Account wherein IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 24 - the cost of each project is brought down which has been found to be true from the financial statement filed by the assessee before us. 15. There is no project in hand during the year which can be considered as not entitled deduction under Section 80IB(10) of the Act. We make it clear that the entire set of documents as relied upon by the assessee before the Ld. AO and before the First Appellate Authority as well also before us and only upon perusal of the entire documents, we have come to the observation as narrated hereinabove. 16. It is relevant to mention that we have further considered the report dated 13.01.2016 passed by the District Valuation Officer, which has been submitted before us by the Ld. DR, the contents whereof is as follows: “No. 8(1 )/DVO/Ahm/80IB/Karmvir/2015-16/685 Dated 13.01.2016 To The Deputy Commissioner of Income Tax, Central Circle - 2, Baroda Room No. 608, Aayakar Bhawan, Race Course Circle, Baroda - 390 007 Sub: Verification of claim of deduction section “80IB(10)” in the case of M/s Karmvir Builders in respect of their projects: 1. Karmvir Villa, R.S. No.780, Hirji Party Dairy Road, Nadiad, Distt. Khera. 2. Karmvir Sundervan, R.S. No. 29, 269, 267, 270 at Manjipura, Tai: Nadiad, Distt. Khera. 3. Karmvir Nagar V, R.S. No. 202/1, 202/2, 202/3, 202/4 at Post new Bilodra, Tail Nadiad, Distt. Khera. Ref: Your letter no. BRD/DCIT.CC.2/Karmvir/15-16 dated 30.10 2015. Madam, IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 25 - This is with reference to your office letter cited above vide which you have requested to submit report regarding compliance of provisions of section 80IB( 10) of the Income Tax Act, 1961 during construction of dwelling units by M/s Karmvir Builders in respect of various projects as cited in the subject above. Upon receiving the reference from your end, a notice regarding submission of relevant documents and site inspection by the Valuation Cell, Income Tax department, Ahmedabad was sent to the Assessee vide this office letter of No. 8(1)/DVO/2015-16/522 dated 20.11.2015 under intimation to you. In reply to this notice, the Assessee submitted their reply along with all the documents in support of their claim u/s 80IB(10) vide letters dated 08.12.2015 (3 letters project wise) and further undertaking vide their letter dated 11.12.2015. The inspection of all the three housing projects was carried out by the valuation cell, Ahmedabad on 11.12.2015 after prior intimation to your office by fax dated 10.12.2015. Since no one confirmed from your office to attend the joint inspection, the inspection of the project was thus carried but in the absence of your representative by the undersigned along with Sh. N.S. Shrimali, AVO, Valuation Cell, Ahmedabad in the presence of Sh. Dharamvir Singh, Assessee and CA Ravi H. Shah and other concerned housing project staff on 11.12.2015. The measurements were taken by Sh. N. S. Shrimali, AVO jointly with the Assessee’s representative. Please refer telephonic discussion held with you on 04.01.2016 when your good self requested to take the measurements of the housing units again in your presence. Thus another program of taking measurement was fixed in consultation with you on 07.01.2016. On the scheduled day of re-inspection, Sh. V.S.J. Taffy, AVO, Valuation Cell, Ahmedabad visited the projects along with your good self and your staff to take the joint measurement again when Assessee’s representatives were also present. The details of the joint measurements of various sample units pertaining to all different sizes of units in various projects are given below. The built-up areas were measured in accordance with the laid down definition of the built-up area as per section 80IB(10) of the Income Tax Act, 1961, as per which the "built-up area means 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” The individual project wise report based on the submission of documents by the Assessee and the joint measurement taken is summarized below: Project: ‘Karmvir Villa, R.S. No. 780, Hirji Party Dairy Road, Nadiad, Distt. Khera'. (i) The project comprises of 72 nos. row houses, out of which construction of 59 nos. have been completed by the Assessee as confirmed by Nadiad Area Development Authority (NADA) vide letter dated 21.12.2010, which may IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 26 - be treated as part-completion certificate. Upon taking joint measurement of sample house no. A-42, the built up area was found as 1360 sq. feet. (ii) The area of the land on which the housing project is constructed is more than one acre. (iii) The date of approval of the project by Nadiad Town Planning Office 27.03.2008 and date of part completion of 59 units as given by the Nadiad Area Development Authority (NADA) is 21.12.2010. So the partial completion of the project is within 5 years excluding the FY in which the project was approved. (iv) There is no built-up commercial area noted in the project. (v) The Assessee has submitted an undertaking vide his letter dated 11.12.2015 with regards to/ compliance as required under para (e) and (f) of Section 80IB(10). As per the details summarized above, the housing project complies with the provisions under section 80IB(10) of the Income Tax Act, 1961 so far as pro-rata benefit is concerned as the Assessee has completed 59 units in place of sanctioned 72 units in the stipulated period. In this regard, please refer to various ITAT judgments in the past which allows deduction u/s 80IB(10) on partially completed projects also. Project: Karmvir Sundervan, R.S. No. 29, 269, 267, 270 at Manjipura, Tai: Nadiad, Distt. Khera’. (i) The project comprises of 275 nos. row houses of total 6 types and all have been completed by the Assessee as per the approved plan. The category wise area of the houses are detailed below: Name of Project Type of Row Houses No. of units constructed Built-up Area Sample Unit Measured As per plan submitted by Assessee As per actual measuremen t done at site 1A 54 1250 1486 A-13 Karmvir Sundervan- 1 & 2 1B 70 1180 1365 B-31 1C 24 950 1238 C-15 1D 50 500 646 D-53 2A 47 1250 1492 A-64 2D 30 500 646 D-53 IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 27 - (ii) The area of the land on which the housing project is constructed is more than one acre. (iii) The date of approval of the project by Manjipura Gram Panchayat is 28.03.2007 and again revised approval was accorded on 28.03.2008. The date of part completion pertaining to Sundevan-1 comprising of 198 units (shown in first 4 rows in the above table) has given by Manjipura Gram Panchayat on 20.07.2010. The date of final completion pertaining to Sundevan-1 & 2 comprising of total 275 units has given by Manjipura Gram Panchayat on 14.11.2011. So the completion of the project is within 5 years excluding the FY in, which the project was approved by Manjipura Gram Panchayat. (iv) There is no built-up commercial area noted in the project. (v) The Assessee has submitted an undertaking vide his letter dated 11.12.2015 with regards to compliance as required under para (e) and (f) of Section 80IB(10). As per the details summarized above, the housing project complies with the provisions under section 80IB(10) of the Income Tax Act, 1961. Project ‘Karmvir Nagar V, R.S. No. 202/1, 202/2, 202/3, 202/4 at Post new Bilodra, Tai: Nadiad, Distt. Khera’. (i) The project comprises of 112 nos. row houses of total 2 types and all have been completed by the Assessee as per the approved plan. Name of Project Type of Row Houses No. of units constructed Built-up Area Sample Unit Measured As per plan Assessee As per actual measurement Karmvir Nagar A 77 500 672 A-11 B 35 350 406 B-1 (ii) The area of the land on which the housing project is constructed is more than one acre. (iii)The date of approval of the project by Bilodra Gram Panchayat is 26.09.2007. The revised approval was accorded by the same authority on 28.09.2009. The date of final completion regarding residential units has been accorded by Bilodra Gram Panchayat is 20.07.2010. So the completion of the project is within 5 years excluding {the FY in which the project was approved by same authority. (iv) There is no completely built-up commercial area noted in the project. IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 28 - (v) The Assessee has submitted an undertaking vide his letter dated 11.12.2015 with regards to compliance as required under para (e) and (f) of Section 80IB(10). As per the details summarized above, the housing project complies with the provisions under section 80IB(10) of the Income Tax Act, 1961. So far as details of AY and Corresponding amount of deduction claimed by the Assessee project wise is concerned, the same may please be verified at your end. The report is submitted for taking further necessary action in the matter. Yours faithfully, Sd/- (PRADEEP GUPTA) District Valuation Officer Income Tax Department, Ahmedabad” 17. We also make it clear that we have not found iota of any observation in regard to this particular above document submitted before the Ld. AO, though the clean chit has been given by the District Valuation Officer to the assessee as it appears from the DVO report as reproduced hereinabove. So far as the claim under Section 80IB(10) of the Act is concerned, it has mentioned that each and every condition has been fulfilled by the assess for all the projects. We find that the Ld. CIT(A) dealt with all these aspects of the matter raised by the Ld. AO while rejecting the claim as already discussed by us hereinabove and such observations made therein found to be unambiguous. Thus, considering the entire gamut of the matter, we find the observations made by the Ld. CIT(A) while deleting addition in holding the assessee firm eligible for deduction under Section 80IB(10) of the Act for all projects is just and proper so as to warrant interference. The same is, thus, hereby upheld. The Revenue’s appeal is found to be devoid of any merit and thus dismissed. 18. The identical issue involved in IT(SS)A Nos. 56 & 57/Ahd/2021 for A.Ys. 2011-12 & 2012-13 has already been dealt with by us in IT(SS)A No. IT(SS)A Nos. 55 to 57/Ahd/2021 (DCIT vs. M/s. Karmvir Builders) A.Y.– 2010-11 to 2012-13 - 29 - 55/Ahd/2021 for A.Y. 2010-11 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, both appeals are also dismissed. 19. In the combined result, all three appeals preferred by Revenue are dismissed. This Order pronounced on 29/08/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 29/08/2023 S. K. SINHA True Copy आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं%धत आयकर आय ु 'त / Concerned CIT 4. आयकर आय ु 'त(अपील) / The CIT(A)- 5. *वभागीय -त-न%ध, आयकर अपील य अ%धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड3 फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad