Income Tax Appellate Tribunal - Ahmedabad
Manan Corporation, Surat vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "B" AHMEDABAD
Before Shri T.K. Sharma, Judicial Member and
Shri A.K.Garodia, Accountant Member
IT A No.2424/ Ahd/2009 &
C.O. No.204/ Ahd/2009
(arising out ITA No.2424/Ahd/2009)
Assessment Year:2006-07
Date of hearing:27.4.11 Drafted:28.4.11
ACIT, Circle-5, Room V/s. M/s. Manan Corporation,
No.309, Aayakar 606, Lalbhai Contractor
Bhavan, Majura Gate, Complex, Opp. Parsi
Surat Library, Nanpura, Surat
M/s. Manan V/s. ACIT, Circle-5, Room
Corporation, 606, No.309, Aayakar
Lalbhai Contractor Bhavan, Majura Gate,
Commercial, Surat - Surat
395001
PAN No. AADFM9787M
(Appellant) .. (Respondent)
Assessee by :- Shri Mehul K Patel, AR
Revenue by:- Shri Alok Johri, CIT-DR
ORDER
PER A.K.Garodia, Accountant Member:-
This appeal is filed by Revenue and Cross Objection (CO) is field by assessee which are directed against the order of Ld. Commissioner of Income-tax (Appeals)-III, Surat dated 21-05-2009 for assessment year 2006-
07. For the sake of convenience, both are being disposed of by way of this common order.
ITA 2424/Aahd/2009 & CO 204/Ahd/2009 A.Y. 2006-07 ACIT Cir-5, SRT v. M/s. Manan Corpn. Page 2 First we will take up the CO filed by assessee.
2. It was submitted by Ld. Authorized Representative of the assessee that the CO filed by assessee is merely in support of the order passed by Ld. CIT(Appeals). Hence, this CO of assessee is not maintainable and accordingly dismissed.
3. In the result the CO filed by assessee is dismissed being infructuous. Now we take up the appeal filed by Revenue.
4. The only effective ground raised by Revenue is as under:-
"[1} On the facts and in the circumstances of the case and in Law, the Ld. CIT(A)-III, Surat has erred in allowing deduction u/s.80IB(10) of Rs.6,84,44,461/- (Rs.1,80,25,587/- and Rs.5,04,18,874/-) relying upon the order of the ITAT Special Bench Pune's judgement dated 6/4/2009 in the case of Brahma Associates & Others."
5. The brief facts are that it is noted by Assessing Officer in para-3 of the assessment order that while verifying the submissions filed by assessee along with return of income, it is observed that assessee had claimed deduction u/s.80IB(10) for two projects i.e. for Krishna Park Project for Rs.1,80,25,587/- and Prasiddhi Project for Rs.5,04,28,874/- total Rs.6,84,44,461/-. It is further noted by assessee that after verification of details filed by assessee and after physical verification of the project by him, it is unearthed that the assessee had not fulfilled the conditions laid by income-tax Act for claiming the deduction u/s.80IB(10). Regarding Krishna Park project, it is noted by Assessing Officer that the built-up area of row houses comprising of house No.80 to 99 has four units which were bigger in size compared to the other units. The AO has worked out the total built-up area of these four houses as 1654 sq.ft. each. Thereafter, it is observed by AO that project does not fulfill the basic requirement and condition of limitation for built up area of 1500 sq.ft per unit and the project has thus violated the condition laid down u/s 80IB(10). The second objection raised by AO regarding this project is this that the other important condition regarding the total area of commercial shops/offices were ITA 2424/Aahd/2009 & CO 204/Ahd/2009 A.Y. 2006-07 ACIT Cir-5, SRT v. M/s. Manan Corpn. Page 3 also bound to have been violated. It is noted by AO that total built up area of shops are more than 2000 sq.ft. as prescribed u/s 80IB(10) and hence, for this reason also, the assessee's claim for deduction u/s.80IB(10) is to be rejected. Regarding the second project Parshiddhi, there is no objection of AO that any house is having build up area of more than 1500 sq.ft. The only objection regarding this project, is this that the total build-up area of commercial shops is 351.01 sq.mt. i.e. 3778.27 sq.ft. which is more than 5% of the aggregate build-up area of housing project or 2000 sq.ft. whichever is less. Hence, as per the AO, the assessee is not eligible for deduction u/s.80IB(10) for both these projects. It was submitted by assessee before AO that out of total build- up area of 1654 sq.ft. worked out by AO in respect of row house of Krishna Park project, total build-up area is only 900 sq.ft. and the remaining 754 sq.ft. is open area which cannot be included in built-up area and hence, this objection of AO is not valid. Regarding the second objection of AO i.e. regarding shop/commercial area of more than 2000 sq.ft. in both the projects, it was submitted by assessee before AO that condition of limiting the commercial shop/establishment to 2000 sq.ft. came into force with effect from 01-04-2005 and therefore it is applicable only for the projects approved on or after 01-04-2005 and since date of approval for these two projects are prior to 31-03-2005 i.e. 28-12-2004 for Krishna Park project and 18-01-2003 for Prashiddhi project, the amended provision are not applicable to these projects. The AO was not satisfied and it is held by him that the assessee is not eligible for deduction u/s.80IB(10) for both these projects. He completed the assessment after disallowing the claim of assessee regarding deduction u/s 80IB(10). Being aggrieved, assessee carried the matter in appeal before Ld. CIT(Appeals). Ld. CIT(A) has decided this issue in favour of assessee by following the decision of Special Bench of Tribunal rendered in the case of Brahma Associates v. JCIT (2009) as reported in 119 ITD 255 (Pune) (SB). Regarding the first objection of the AO regarding Krishna Park project that build-up area of row houses is more than 1500 sq.ft. it was held by LD. CIT(A) ITA 2424/Aahd/2009 & CO 204/Ahd/2009 A.Y. 2006-07 ACIT Cir-5, SRT v. M/s. Manan Corpn. Page 4 that the AO is not justified in adding the open area in build-up area. Now the Revenue is in appeal before us.
6. It is submitted by Ld. CIT-DR of Revenue that issue regarding applicability of amended provision of Section 80IB(10) in the present case is covered against the assessee by the judgment of Hon'ble Bombay High Court in the case of CIT v. M/s. Brahma Associates in Income-tax Appeal No.1194 of 2010 dated 22-02-2011. He submitted a copy of judgment of Hon'ble Bombay High Court, which is kept on record. He submitted that this question was also before the Honb'ble Bombay High Court as to whether clause-(d) of Section 80IB(10) was applicable in that case because the A.Y. involved was 2003-04 and hence the project in question was approved before 31-03-2005. It is submitted that this aspect has been decided by Hon'ble Bombay High Court and it was held that clause-(d) inserted to Section 80IB(10) with effect from 01-04-2005 is applicable from assessment year 2005-06. It is submitted that the decision of Special Bench in the case of Bhrahma Associates (supra) is also on similar line and it was held by Special Bench also that clause-(d) inserted in u/s 80IB(10) vide Finance (No.2) Bill, 2004 is applicable from assessment year 2005-06. It is submitted by him that neither the Special Bench nor Hon'ble Bombay High Court has held that clause-(d) of Section 80IB(10) is applicable to only those projects which were approved on or after 01-04-2005 as being contended by the assessee and the decision of both the authorities are that this clause-(d) of Section 80IB(10) is applicable from assessment year 2005-06. It was also submitted by him that in the case of Reliance Jute & Industries Ltd. v CIT as reported in (1979) 120 ITR 921 (SC), it was held that it is a cardinal principle of tax law that the law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication. It is submitted that as per this judgment of Hon'ble apex court, the law applicable in assessment year 2006-07 has to be applied. In support of same contention, reliance was also placed on the judgment of Hon'bel Karnataka High Court rendered in the case of Jayaakumari & Dilhar ITA 2424/Aahd/2009 & CO 204/Ahd/2009 A.Y. 2006-07 ACIT Cir-5, SRT v. M/s. Manan Corpn. Page 5 Kumari v. CIT (1987) as reported in 165 ITR 792 (Kar) and also on the judgment of Hon'ble apex court rendered in the case of CIT v. Isthmian Steamship Lines as reported in (1950) 20 ITR 572 (SC). He strongly supported AO's order and submitted that the order of Ld. CIT(Appeals) should be reversed and that of AO should be restored.
7. As against this, it is submitted by Ld. Counsel for the assessee that when these projects were approved by Competent Authority, clause-(d) of Section 80IB(10) was not on statute book and the assessee was required to comply with only clause-(a), (b) & (c) of Section 80IB(10) and the assessee is complying with all these three clauses and hence clause-(d) inserted by Finance (No.2) Bill, 2004 is not applicable for the projects approved prior to 31-03-2005. It is submitted that as per Finance (No.2) of 2004, clause-(d) was inserted in respect of those projects only which are approved on or after 01- 04-2005 and not to these projects which are approved on or before 31-03- 2005. It is also submitted by him that this issue is squarely covered in favour of assessee by the decision of Co-ordinate Bench of Tribunal rendered in the case of Saroj Sales Organization v. ITO as reported in (2008) 115 TTJ 485 (Mum) and also by another decision of co-ordinate of this Tribunal rendered in the case of Hiranandani Akruti Jv v. DCIT as reported in (2010) 39 SOT 498 (Mum) in which earlier Tribunal decision rendered in the case of Saroj Sales Organization (supra) was followed. It is also submitted by him that in the case of Raj Developers v. ITO as reported in (2011) 43 SOT 184 (Ahd), the issue was although restored back to the file of Assessing Officer but the decision of co-ordinate Bench of this Tribunal rendered in the case of Saroj Sales Organisation (supra) was taken note of with approval. It is submitted that since the issue is squarely covered by these judgments of co-ordinate Bench of Tribunal, such decisions of co-ordinate Bench of this Tribunal should be followed and appeal of Revenue should be dismissed.
ITA 2424/Aahd/2009 & CO 204/Ahd/2009 A.Y. 2006-07 ACIT Cir-5, SRT v. M/s. Manan Corpn. Page 6
8. Reliance was also placed by him on two judgments of Hon'ble apex court rendered in the case of CIT v. J.H. Gotla (1985) as reported 156 ITR 323 (SC) and in the case of CIT v. Alom Extrusions Ltd. as reported in (2009) 319 ITR 306 (SC) in support of this contention that the interpretation should be such that it does not result into absurd result. It is submitted by him that if it is held and interpreted that clause-(d) of Section 80IB(10) is applicable to even these projects also which were approved by the Competent Authority as a housing project on or before 31-03-2005 then it will lead to absurd result. Hence such interpretation should be avoided. It is also submitted by him that for exemption and deduction liberal interpretation should be there and in support of this contention, reliance was placed by him on the judgment of Hon'ble apex court rendered in the case of Bajaj Tempo Ltd. v. CIT (1992) 196 ITR 188 (SC).
9. One more submission was made by him that if a co-ordinate Bench's decision is available, the subsequent Bench cannot differ and if the subsequent Bench is not in agreement then it is to refer the matter to President for constitution of a larger Bench and in support of this contention, reliance was placed by him on the judgment of Hon'ble jurisdictional High Court rendered in the case of Sayaji Iron And Engg. Co. v. CIT as reported in (2002) 253 ITR 749 (Guj). In rejoinder, it was submitted by Ld. CIT-DR of the Revenue that the facts in the case of Saroj Sales Organization (supra) are different and hence this Tribunal's decision is not applicable in the present case. Regarding difference in facts in that case, it was submitted by him that in that case, the assessee was following accounting system of declaring profit on work-in-progress basis and in earlier years also, deduction u/s.80IB(10) was allowed to the assessee for the same project, whereas in the present case, the assessee has declared profit of these two projects for the first time in the present year because the assessee is following completed project method of accounting.
ITA 2424/Aahd/2009 & CO 204/Ahd/2009 A.Y. 2006-07 ACIT Cir-5, SRT v. M/s. Manan Corpn. Page 7
10. We have considered the rival submissions and perused the materials on record and gone through the orders of authorities below and judgments cited by both the sides. We find that there are two objections of the Assessing Officer regarding Krishna Park project. First objection is that for the row houses of this project, the build-up area is more than 1500 sq.ft per unit. The second objection for this project and the only objection for the second project i.e. Prashiddhi project is this that total commercial/shop area of both these projects are more than 2000 sq.ft. as prescribed in clause-(d) of Section 80IB(10). Regarding first objection in respect of Krishna Park project, we find that a clear finding is given by Ld. CIT(A) that the Assessing Officer has included open area of 754 sq.ft. for computing the total build-up area of each unit of row house as 1654 sq.ft. and open area cannot be included in working out the total built-up area and therefore, this objection of AO is not justified. Ld. CIT-DR of the Revenue could not point out any mistake in this finding of Ld. CIT(A) and hence, on this aspect, we do not find any reason to interfere with the order of Ld. CIT(A) .
11. Regarding the second objection which is common for both the projects i.e. assessee is violating the provision of clause-(d) of Sec. 80IB(10), we find that Ld. CIT-DR of Revenue has placed reliance on the judgment of Hon'ble Bombay High Court rendered in the case of M/s. Brahma Associates (supra) whereas the Ld. Counsel for the assessee has placed reliance on various decisions of co-ordinate Bench of this Tribunal which are prior to this judgment of Hon'ble Bombay High Court rendered in the case of M/s. Brahma Associates (supra) on 22-02-2011. Hence, we feel that we have to first decide the applicability of this judgment of Hon'ble Bombay High Court and if it is found that this decision of Hon'ble Bombay High Court is applicable in the present case, then the Tribunal's decisions cited by Ld. Counsel for the assessee are not required to be considered because in preference to any decision of co-ordinate Bench of this Tribunal, any decision of Hon'ble High Court has to be followed. We find that there are four questions raised before ITA 2424/Aahd/2009 & CO 204/Ahd/2009 A.Y. 2006-07 ACIT Cir-5, SRT v. M/s. Manan Corpn. Page 8 Hon'ble Bombay High Court and one of the question raised is that whether clause-(d) of Section 80IB(10) is applicable from assessment year 2005-06 or whether it had to be applied retrospectively. In that case also, the project in question was approved by the Competent Authority before 31-03-2005 because the assessment year itself before Hon'ble Bombay High Court was assessment year 2003-04. Under these facts, it was held by Hon'ble Bombay High Court that with effect from 01-04-2005, deduction u/s.80IB(10) would be subject to the restriction set out in clause-(d) of Section 80IB(10). The relevant para of this judgment of Hon'ble Bombay High Court i.e. para-25 is reproduced as under:-
"25. The above conclusion is further fortified by Clause (d) to Section 80IB(10) inserted with effect from 1/4/2005. Clause (d) to Section 80IB(10) inserted w.e.f. 1/4/2005 provides that even though shops and commercial establishments are included in the housing project, deduction under Section 80IB(10) with effect from 1/4/2005 would be allowable where such commercial user does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet whichever is lower. By Finance Act, 2010, clause (d) is amended to the effect that the commercial user should not exceed three per cent of the aggregate built-area of the housing project or five thousand square feet whichever is higher. The expression 'included' in clause (d) makes it amply clear that commercial user is an integral part of a housing project. Thus, by inserting clause (d) to Section 80IB(10), the legislature has made it clear that though the housing projects approved by the local authorities with commercial user to the extent permissible under the DC Rules / Regulation were entitled to Section 80IB(10) deduction, with effect from 1/4/2005 such deduction would be subject to the restriction set out in clause (d) of Section 80IB(10). Therefore, the argument of the revenue that with effect from 1/4/2005 the legislature for the first time allowed Section 80IB(10) deduction to housing projects having commercial user cannot be accepted."
12. From the above para of judgment of Hon'ble Bombay High Court, it is seen that it is not held by Hon'ble Bombay High Court that clause (d) of Section 80IB(10) is applicable to those projects which are approved on or after 01-04-2005. But it is held that from 01-04-2005, deduction u/s.80IB(10) would be subject to the restriction set out in clause-(d) of Section 80IB(10). In our humble understanding, this judgment of Hon'ble Bombay High Court covers ITA 2424/Aahd/2009 & CO 204/Ahd/2009 A.Y. 2006-07 ACIT Cir-5, SRT v. M/s. Manan Corpn. Page 9 this issue against the assessee and therefore, the various decisions of co- ordinate Bench of this Tribunal cited by Ld. Counsel for the assessee are of no use in the light of this judgment of Hon'ble Bombay High Court. We respectfully follow this judgment of Hon'ble Bombay High Court in preference to various decisions of co-ordinate Bench of this Tribunal. Regarding the decision of Hon'ble jurisdictional High Court rendered in the case of Sayaji Iron And Engg. Co. (supra) in which it was held that subsequent Bench cannot defer with an earlier decision of co-ordinate Bench of this Tribunal, we are of the considered opinion that this judgment is not applicable in the present case because factual situation has changed in the present case since guidance is available to us from the judgment of Hon'ble Bombay High Court rendered in the case of M/s. Brahma Associates (supra) and we are following this judgment of Hon'ble Bombay High Court.
13. Regarding other arguments of Ld. Counsel for the assessee in relation to rule of interpretation and liberal interpretation, we would like to observe that we are not required to go into interpretation aspect because we are simply following the judgment of Hon'ble Bombay High Court and hence, this contention and various judgments cited by Ld. Counsel for the assessee in this regard are not relevant in the present case.
14. In view of the above discussion, we hold that the assessee is not eligible for deduction u/s.80IB(10) because the assessee is not complying with requirement of clause-(d) of Section 80IB(10) which is applicable from 01-04- 2005. Although we are following the judgment of Hon'ble Bombay High Court, still we would like to observe regarding this argument of Ld. Counsel for the assessee that amended provision i.e. clause-(d) of Section 80IB(10) is applicable to only those projects which are approved by the Competent Authority on or after 01-04-2005. We would like to mention that in the amended provision of Section 80IB(10), it is mentioned that deduction is allowable in respect of housing project approved before 31-03-2008 by local ITA 2424/Aahd/2009 & CO 204/Ahd/2009 A.Y. 2006-07 ACIT Cir-5, SRT v. M/s. Manan Corpn. Page 10 authority which includes those projects also which are approved on or before 31-03-2005 because no exception has been carved out by specifying that the amended provision are applicable in respect of those projects which are approved on or after 01-04-2005 but before 31-03-2008. Had the legislatures wanted to exempt old projects from the operation of clause-(d) of Section 80IB(10), this could have been specified by making a specific provision for new provision being applicable to only those housing projects which are approved on or after 01-04-2005 but before 31-03-2008 since it was not done, this argument of Ld. Counsel for the assessee is not acceptable.
15. In the result, the appeal of Revenue is allowed.
16. In the combine result, CO of assessee is dismissed and the appeal of Revenue is allowed.
Order pronounced in Open Court on 13/05/2011
Sd/- Sd/-
(T.K.Sharma) (A.K. Garodia)
(Judicial Member) (Accountant Member)
Ahmedabad,
Dated : 13/05/2011
*Dkp
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT(Appeals)-III, Surat
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
/True copy/
Deputy/Asstt.Registrar
ITAT, Ahmedabad