Karnataka High Court
The Commissioner Of Income Tax vs M/S.Gopalan Enterprises on 29 February, 2012
Bench: N.Kumar, Ravi Malimath
b
S
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 7H
29
DAY OF FEBRUARY, 2012
PRESENT
THE HON'BLE MR. JUSTICE N KUMAR
AND
THE HON'BLE MR. JUSTICE RAVI MAUMATH
INCOME-TAX APPEAL NO.228 OF 2010
BETWEEN:
1. The Commissioner of Income-tax
C.R.Bullding,
Queens Road,
Bangalore.
2. The Income-Tax Officer,
Ward--1(4),
Bangalore.
...Appeliants
(By Shri K.V. Aravlnd, Advocate)
AND:
M/s. Gopalan Enterprises
No.5, Richmond Road
Bangalore 560 025
-
.Respondent
This ITA is filed under Section 260-A of I.T. Act, 1961
arising out of order dated 10.02.2010 passed in ITA
No.977/Bang!2009, for the Assessment Year 2005-06 prayIng to
(I) formulate the substantial questions of law stated. therein; (II)
allow the appeal and set aside the orders passed by the ITAT
Bangalore in ITA No.977/Bang/2009 dated 10.02.2010
conforming the order of the Appellate Commissioner and
confirm the order passed by the Income Tax Officer, Ward-1(4),
Bangalore, and etc.
This ITA coming on for Admission this day, N. KUMAR J,
delivered the following:
JUDGMENT
The issue involved in this appeal is granting of exemption under Section 80(18) of the Income Tax Act, The appeal is decided on merits based on the orders of the lower authorities and the facts as found by the Tribunal. Both the parties have addressed on the merit of the issues involved in the appeal.
2. The assessee is in the business of developing and building multistoried residential flats. The assessee claimed deduction under Section 80IB(10) of the Income Tax Act, 1961 Efor short hereinafter referred to as 'the Act'] in respect of housing project "Millennium Habitat" undertaken by the assessee in Bangalore. The case of the assessee was selected for scrutiny under Section 143(3) of the Act. Notice under Section 143(2) of the Act was issued to the assessee, which was duly served on them. The assessee has furnished the details sought for and a. iso the books•• of account for verification in the course of scrutin proceedinqs. The details were also collected from the SubReqistrar and Corporation offices reardin the plan sanction, property sale, etc. The registered sale deeds vere taken as documentary evidence with regard to the builCup area The workinq of the three hiLr,m fiat expaining 3 built-up area, including common area such as corridor, stair case, community hail, gym, swimming pool, etc. and the actual area of the flat available for exclusive use of the buyer, has been taken as an example. The built-up area is considered as per the explanation, excluding common area, which Is being reflected In the schedule of the sale deed as built-up area with minor deviations of 5 to 10 sqSt., If any. The Assessing Officer in paragraph 9 has held that three flats in Millennium Habitat has exceeded the specified limits. In respect of three flats sold, terrace/projection, which is registered for the exclusive use of the owner, is in the range of 390, 600 and 795 sq.ft. If the terrace/projection is included in the built-up area, those five flats exceed the area of 1,500 sq.ft.
3. The Assessing Officer was of the opInion that as per the Act, the project is eligible for deductIon, if conditions therein are fulfilled, and the fiats of the project verified for the eligibility conditions, do not satisfy the aforesaid requirement. Therefore, the claim of the assessee for deduction under Section 80-18(10) was withdrawn and the profit thereon was brought to tax.
4. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals), who dismissed the appeal as the order under SectIon 143(3) of the 4 Act was set aside by the Commissioner under Section 263 of the Act.
5 Aggrieved by the order of the Commissioner of Income Tax (Appeals), the assessee preferred an appeal to the Tribunal. The Tribunal held that the definition of the built-up area was inserted by the Finance Act (No.2) 2004 with effect from 1 April, 2005 and therefore this definition is not applicable to the assessment year 2004-2005. The actual built up area of the three flats on the third floor Including pent-house is 1475 1420 and 1475 sq.ft respectively, and is actually less than 1500 sq ft The Tribunal observed that the Assessing Officer held that the projection to the pent-house registered for the exclusive use of the buyer in all the three fiats was added to ti' s It as nly dftcr thi addition thc arei crossed 1,500 sq.ft he projcction and balcony were included ir the built up nrea only after the charoe that ame ;tn f.rrn with effect fron', "Ap I 'o hef oVc tot € L14 e ii ty 'e & •es ec .' it wcre ot fi wY 'he r 3pecti f'ats U'a it vaa .omrr..r. ntranre in the agreert.&r,r '.,r sale c c Da'dc '-- j[j prl- .?.ii ",, tia flat 1 fl It P I f .: t.ø.. , ,,. j' .4 a . . r, i 5 rejected the said contention and held that if two flats are separately sold and subsequently if the owner removes the wall by adding a stair case, the same is connected and it Is difficult to hold that as far as the buyer is concerned at the time of his selling both was one single fiat and definitely this provision Is not applicable if the change is made by the occupants or purchaser subsequent to the sale of the fiats. The Tribunal observed that if the builder himself had built and provided the facility before saie, then Section 80-IB(1O) is vloiated. Therefore, the Tribunal set aside the order passed by the lower authorities and granted exemption.
6. Being aggrieved by the said order of the Tribunal, the present appeal is filed. The iearned counsel for the revenue assailing the impugned orders contended that when once three or five flats in a housing project, where several residential units are constructed, contravene the requirement of 1,500 sq.ft. provided under Section 80-18(10) of the Act, the Assessee is not entitled to the benefit of exemption. Therefore, he submits that the order passed by the Tribunal is erroneous and require to be Interfered with
7. Per contra, the learned counsel for the assessee supported the impugned order.
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8. This appeal was admitted on th 14 December 2010 to consider the following substantial questions of law:
I) Whether the Tribunal was correct In holding that the provisions of Section 80 IB(14) of the Act are applicable for the assessment year 2006-07 as the same has been brought into effect with effect from 1.4.2005 when the same was applicable for the assessment year 2005-06?
Ii) Whether the Tribunal was correct In holding that the main flat and the pent house/projected area are different units and the same cannot be treated as one unit without taking into consideration that the construction has been carried out as a single unit and there was no provision for the others to utilize the projected area/pent house except the occupants of the main fiat?
9. From the material on record, it is clear that the assessee has developed and constructed a housing project. The project consists of several residential units and is construct ed on an area of more than one acre of land. The project is approved by the local authority. It is constructed within a period of four years prescribed under law. Each of the residential unit/flat measures less than 1,500 sq.ft. of built-up area. It Is only in three residential units at the top floor where an entrance is provided to the terrace, the assessee has sold the said terrace portion to the owners of the residential flats. Undoubtedly, the terrace portion cannot be taken into consideration for calculating the built-up area and has to be excluded. It appears that along with the terrace some walls constructed were also sold to them. Even the construction of the walls would not add to the built-up area. After sale, the purchaser of the flat appears to have put up some construction. If that portion is taken Into consideration, it exceeds the area of 1,500 sq.ft., the limit prescribed under law. It is on that ground the Assessing Officer has denied the benefit of Section 80-IB(10) to the assessee. While Interpreting this provision, what Is to be kept In mind Is the object with which this provision was introduced. This provision was Introduced with the following object:
"2. Changes made by the finance (No.2) Act, 2004 Extension of the time limit for obtaining approval of housing projects for the purpose of tax holiday under section 80-18, and allowing deduction for redevelopment or reconstruction of existing buildings in slum areas Under the existing provisions contained in sub-section (10) of section 80-18, a deduction equal to one hundred per cent of the profits of an undertaking deveioping and building housing projects is allowed if the housing project is approved by a local authority before 31.3.2005. The deduction is subject to the conditions that the undertaking should have commenced development of the 1- 9
housing project on or after the 1.10.1998, the project should be on a size of a plot of land which has a minimum area of one acre, and that the residential unit should have a maximum built-up area of one thousand square fee where such residential unit Is situated In Delhi or Mumbai and one thousand and five hundred square feet at other places.
This tax incentive was provided to increase the stock of houses for lower and middle income groups. Keeping in view the fact that there is still a huge shortage of houses, the time limit for obtaining approval from the local authority has been extended from 31 .3.2005 to 31.3.2007 However, a time limit has been introduced for completion of the housing project, where development and construction has commenced or commences on or after 1.1 0.1 998. Such housing project approved by the local authority before 1.4.2004 has to be completed on or before 31.3.2008 and the housing project approved on or after 1.4.2004 should be completed within four yeats from the end of the financial year in which the project Is approved by the local authority. For this purpose the date of approval shall be the date on which the building plan is first approved by the local authority and the date of completion of the housing project, shall be the date on which the completion certificate is issued by such authority. It has also been provided that the built-up area of the shops and other commercial establishments Induded in the housing project should not exceed five per cent of the aggregate built-up area of the housing project or 2000 sq.ft., whichever Is less. The expression "built up area" has also been defined for this purpose.
1--••
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This section does not specifically provide area limit for the garden, the development plan roads, internal means of access, etc. in the housing project. Therefore, the same should conform to the project plan approved by the local authority in accordance with the regulations in force. Also the area limit of the plot has to be construed with reference to the area of the site on which the housing project is constructed and not with reference to the demarcation of land done by the land development authority.
Further, with a view to encourage the redevelopment of slum dwellings, the condition of minimum plot size of one acre and also the time limit for completion of the construction has been relaxed in the case of a housing project, carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law in force, and notified by the Board in this behalf.
These amendments take effect from i April, 2005 and apply in relation to the assessment year 2005-06 and subsequent years."
10. In a construction of several residential units, if three units, which are on the top floor, do not conform strictly to this requirement of 1,500 sq.ft. built-up area, that Is not a justification to deny the benefit of exemption from payment of Income-tax under this provision. In fad, the evidence on record is very clear that purchasers of the flats have put up the construction after the sale for which the assessee cannot be held responsible. Merely because the assessee had made the provision which enable the purchaser to put-up the construction, is no ground to deny the benefit which is granted under the Act, when the object of housing scheme in substance is implemented strictly in accordance with law.
11. Simflarly, the Income Tax Act in 2009 has been amended and introduced restriction of not selling more than one flat to the same person. Even as per the Board Circular the same is applicable only prospectively. The present Assessment is for the year 2005-2006.
12. In the instant case the Assessment Year 2005-2006 and both the amendments have come later. The baicony or projection cannot be considered.
13. In that view of the matter, the Tribunal was justified in grantino the relief to the assessee to which it was entitled to.
14. In the facts and circumstances of this case, we are satlsfled that no case is made out by the revenue and the substantial question of law i.s accordingly a. nswered in favour of the assessee and açainst the rvnu uuI I sjso ON 91 passiwsjp leaddy %T