Income Tax Appellate Tribunal - Mumbai
Gac Constructions , Mumbai vs Department Of Income Tax on 19 October, 2006
आयकर अपील य अ धकरण,
धकरण, मंुबई यायपीठ 'जी
जी'
जी मंुबई
IN THE INCOME TAX APPELLATE TRIBUNAL
"G" BENCH, MUMBAI
ी राजे संह, लेखा सद य,
य एवं ी अ मत शु ला, या यक सद य के सम
BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
आयकर अपील सं. / ITA no. 372/Mum./2007
( नधारण वष / Assessment Year : 2005-06)
Income Tax Officer ....................... अपीलाथ /
Ward-25(2)(4), C-11, R.no.103 Appellant
Pratyakshakar Bhavan
Bandra-Kurla Complex
Bandra (E), Mumbai 400 051
बनाम v/s
M/s. GAC Construction ................... यथ /
602, Soni Shopping Centre Respondent
L.T. Road, Borivali (W)
Mumbai 400 092
थायी लेखा सं./ Permanent Account Number - AAEFG1145Q
या ेप सं. / C.O. no. 54/Mum./2012
(आयकर अपील सं. 372/Mum./2007 से उ त
ू )
(Arising out of ITA no. 372/Mum./2007
( नधारण वष / Assessment Year : 2005-06)
M/s. GAC Construction
602, Soni Shopping Centre ....................... या ेपक /
L.T. Road, Borivali (W) Cross Objector
Mumbai 400 092
बनाम v/s
Income Tax Officer
Ward-25(2)(4), C-11, R.no.103 ................... यथ /
Pratyakshakar Bhavan Respondent
Bandra-Kurla Complex
Bandra (E), Mumbai 400 051
थायी लेखा सं./ Permanent Account Number - AAATG2361E
M/s. GAC Construction
2
राज व क ओर से / Revenue by : Mr. Pavan Ved
नधा रती क ओर से / Assessee by : Mr. Pramod Parida a/w
Ms. Sanjukta Chowdhary
सनवाई
ु क तार ख / आदे श घोषणा क तार ख /
Date of Hearing - 04.12.2012 Date of Order - 21.12.2012
आदे श / ORDER
अ मत शु ला, या यक सद य के ारा /
PER AMIT SHUKLA, J.M.
The present appeal preferred by the Revenue and the cross objection arising out of the said appeal preferred by the assessee are directed against the impugned order dated 19th October 2006, passed by the learned Commissioner (Appeals)-XXV, Mumbai, for the quantum of assessment passed under section 143(3) of the Income Tax Act, 1961 (for short "the Act") for assessment year 2005-06. The Revenue has raised following grounds:-
"1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in allowing the deduction under section 80IB(10) of the Act.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not considering the fact that the assessee did not fulfill the conditions stipulated for eligibility of deduction under section 80IB(10) of the Act on the date of claiming the deduction.
2(i) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that building Kshitij and Globe Heights were one project ignoring the fact that IOD in respect of each building was received on different dates and in different years.
2(ii) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that though the two buildings constitute one project and though only one building is completely finished and other building is in progress, the profits of building should be assessed and section 80IB allowed in this year though the entire project is not completed.
M/s. GAC Construction 3
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made on account of unaccounted on money received which was made on the basis of loose papers recovered during the time of survey action at assessee's premises."
2. The cross objection has been preferred by the assessee on certain directions given by the learned Commissioner (Appeals), however, the same is belated filed by 1,241 days.
3. Insofar as grounds no.1 and 2 above are concerned, brief facts of the case are that the assessee is an AOP (Association Of Persons) which was formed on 13th September 2000, and has taken up business of construction of sale of flats in a housing project on a plot admeasuring 4858.60 sq.mtrs., in Malad (East). The area of the plot was thus more than one acre on which two buildings were proposed to be developed namely - (i) Kshitij (building no.1) and (ii) Globe Heights (building no.2) The assessee applied to BMC for approval of plan on 11th April 2000 and the said plan was approved on 9th October 2000 for construction of two buildings with total six wings. It got IOD of residential building no.1 on 11th May 2000 and the commencement certificate for construction of building no.2, was granted by the BMC on 27th February 2001. For the method of revenue recognition, the assessee adopted "Project Completion Method" and, accordingly, the profit was shown at the time of sale. The building no.1 Kshitij got completed prior to 31st March 2005. For the year under consideration i.e., 2005-06, the assessee had shown profit of ` 7,36,40,530, on sale of 116 flats and the same was claimed as deduction under section 80IB(10) of the Act. Insofar as the second building is concerned, the assessee got commencement certificate on 27th February 2001 and as on 31st March 2005, the said building was not completed, so no claim could have been made.
4. On perusal of the assessment order, it is noticed that a survey under section 133A of the Act was conducted at the business premises of the M/s. GAC Construction 4 assessee on 5th January 2006, wherein it was found that construction of entire building know as "Globe Heights" on the same plot was being carried out. At the time of survey, it was gathered that there was a provision for some of the flats having built-up area exceeding 1,000 sq.ft. The Assessing Officer further observed that various conditions laid down under section 80IB(10) have not been fulfilled viz. Firstly, the two buildings constructed by the assessee are separate projects and, therefore, the criteria of one acre or more as required in section 80IB(10) does not get fulfilled; secondly, in the second building i.e., Globe Heights, some flats have been sold with the built-up area exceeding 1,000 sq.ft; and lastly, completion certificate for proving the completion of entire project has not been furnished. In view of this, the Assessing Officer issued a show cause notice to the assessee which has been reproduced at Pages-3 to 5 of the assessment order. As per the observations made in Page-5 of the assessee order, the assessee could not file relevant details before the Assessing Officer. The Assessing Officer denied the entire deduction under section 80IB(10) claimed by the assessee mainly on the following grounds:-
i) The two buildings constitute two separate projects as none of these two buildings individually occupied land of one acre or more. Even on the date of filing of the return of income for the assessment year 2005-06, the assessee had shown the revenue from first building only and the second building was incomplete, therefore, the entire project was incomplete as on 31st March 2005. Once the assessee is following project completion method for revenue recognition, this itself leads to a conclusion that the assessee itself is treating the two buildings as two separate and distinct housing projects. Hence, the criteria of housing project on a land area of minimum one acre is not fulfilled;
M/s. GAC Construction 5
ii) In the second building i.e., Globe Heights, the assessee had kept provision for the flats of built-up area exceeding 1,000 sq.ft. From the discussion appearing from pages-8 to 15 of the assessment order, the Assessing Officer has observed that the assessee had sold two flats of built-up area exceeding 1,000 sq.ft which violates the conditions stipulated under section 80IB(10). For coming to this conclusion, the Assessing Officer has relied upon the statements recorded at the time of survey and also rejected the assessee's contentions that under the amended IOD issued by the BMC, no flat can be constructed for an area of more than 1,000 sq.ft. and that the assessee has, in fact, not constructed or sold any flat above 1,000 sq.ft. The Assessing Officer has doubted such an amended IOD on the ground that the same was obtained after the detection by the survey team; and lastly;
iii) The assessee could not file completion certificate from the local authority for the completion of housing project and instead has submitted only occupation certificate. In the absence of building completion certificate issued by the local authorities, the assessee could not prove the completion of project.
Thus, on all counts, the assessee is not entitled to claim for deduction under section 80IB(10) and, accordingly, disallowed the entire claim of ` 7,36,40,530.
5. The assessee, being aggrieved by the order so passed by the Assessing Officer, carried the matter before the first appellate authority, wherein it was pleaded that the assessee had constructed two buildings in a phased manner and provisions of section 80IB(10) do not define housing project and in the approved layout plan, there is one common layout plan M/s. GAC Construction 6 of development and construction of housing project, the same has to be treated as one even if such a housing project consist of two buildings. On the facts, it was submitted that the approved plan would show that there was common entrance and common passage / roads for both the buildings including sewerage and other infrastructures, therefore, the entire plan was for one housing project. Secondly, even if one building is completed and the assessee had shown the revenue from sale of flats from one building the claim under section 80IB(10) could not be denied as the assessee is following project completion method wherein revenue is recognised at the time of sale of flats. Without prejudice, if the Assessing Officer is holding that the assessee has to recognise profit only in the terminal year for eligibility of deduction under section 80IB(10), the Assessing Officer should have also assessed the income in the terminal year. Regarding few flats having area more than 1,000 sq.ft. in the second building i.e., Globe Heights, it was submitted that the said provision was amended in March 2006 and none of the flats have either been constructed nor have been sold having area about 1,000 sq.ft. some of the buyers did propose to book flats for area more than 1,000 sq.ft. but later on have agreed to buy the flats of area below 1,000 sq.ft. as per the amended plan and there was actually no such flats exceeding 1,000 sq.ft. In support of this, certificate from architect approved by the BMC was also submitted.
6. The learned Commissioner (Appeals), after noting the relevant dates for approval of plan for both the buildings and the IOD approval found that this plan was sanctioned for the whole project on a plot admeasuring 4983.60 sq.mtrs. which consisted of two buildings. On perusal of the records, he also noted that the commencement certificate for construction of building was granted by the BMC on 27th February 2001, and application for occupation certificate was filed by the assessee vide letter dated 29th March 2005 i.e., prior to 31st March 2005. With respect to the second building i.e., Globe Heights, he noted that as per the certificate of M/s. GAC Construction 7 architect, the built-up area in respect of each flat was below 1,000 sq.ft. and also found on examination of commencement certificate and amended IOD approval that there is no such provision of flat having area of more than 1,000 sq.ft. The relevant observations on this score has been given at Pages-7 and 8 of the appellate order and for better appreciation of facts, the relevant paragraph no.3.7, is reproduced below:-
"3.7 Appellant got IOD for building No.2 i.e 'Globe Heights' on
11..5.1998. Copy of approval got from Mumbai Municipal Corporation and the plan for building No.2 is filed in the paper book. Certificate of architect dated 28.1.2006 certifying that build up area in respect of each flat is below 1000 sq.ft in building No.1 is also filed. Commencement certificate for building No.2 was received from MMC on 27.2.2001, according to which built up area of each flat would be less than 1000 sq.ft. Revised IOD dated 13.10.2005 bearing CHE/7787/BP(WS)/AP is also received from MMC. Architect has certified that in building No.2, few fiats (2 fiats) in E-Wing on 1st floor had build up area more than 1000 sq.ft which has been amended vide IOD dated 28.3.2006 issued by MMC vide IOD No.CHE/7787/BP(WS)/AP. After getting revised IOD, architect has certified that built up area of each fiat in building No.2 is less than 1000 sq. ft. From the documents as stated above, it is clear that the appellant is constructing only one project with 2 buildings titled as 'Kshitij' & 'Globe Heights.' Even in the assessment order of A.Y. 2003-04 u/s. 143(3) passed on 28.3.2005, ITO 25(2)(4) has held that the appellant firm is AOP and a builder and developer and the project comprises of 2 buildings. Building no.1 is in progress and appellant has shown only WIP in A.Y. 2003-04. In the order for A.Y. 2003-04, the A.O. has also discussed that according to the assessee building no.1 would be completed by 31.3.2005."
7. After taking into consideration the entire facts and material available on record, the learned Commissioner (Appeals) observed and held as under:-
"3.8 The discussion made in the preceding paras clearly prove following facts:
a) Appellant is a builder and developer and is constructing only one project. This project consists two buildings viz. 'Kshitij' and 'Globe Heights'.
b) Flats approved earlier in. building No.2 having area above 1000 sq.ft was revised through fresh IOD received from MMC before their construction and the respective buyers were intimated about it.
M/s. GAC Construction 8 They have opted to purchase of flats even of the area below 1000 sq.ft. These flats were not at all constructed. Before they were to be constructed, plan was amended vide IOD dated 28.3.2006.
c) Whole project has common road, common entertainment garden and sewage. The project has only one entry gate for both the building.
d) Appellant is following project completion method for accounting purpose. Hence, it should have offered income from the project when the construction of both the buildings was complete. Despite above method followed, Appellant has offered income from building No.1 only of the project in the year under consideration.
e) The appellant should have claimed deduction uls.801B in the year of completion of project and not on completion one building as is not allowable by section 801B(10) the Act
f) Since the appellant was apprehensive that I.T. department may proceed to assess income on completion of one building of the project due to occupation of flats in that building, appellant filed return suomoto and offered income. It claimed deduction u/s. 801B on the profit of one building.
g) Appellant fulfills all the conditions mention in section 801B(10) except the conditions that deduction would be allowable on the income when the project is complete. Since project is incomplete the year under consideration, the appellant cannot offer income in this year in view of project completion method followed by the appellant.
3.9 However since the appellant has already filed return of income on completion of one building and profit of it is entitled for deduction u/s. 801B(10), same is granted to the appellant subject to completion of whole project before 31.3.2008. A.O is directed to accept the return as has been oluntarily filed by the appellant and grant deduction u/s 801B subject to rectification u/s.155 of the I.T.Act. If A.O. finds that at later stage appellant, does not fulfill any of the conditions laid do in section 80(l0), A.O. is authorised to withdraw the deduction allowed u/s. 801B in the year under consideration."
8. Thus, the learned Commissioner (Appeals) has allowed the claim for deduction under section 80IB(10) in respect of one building. However, he put a rider that deduction under section 80IB(10) granted to the assessee is subject to the completion of whole project before 31st March 2008 and if, at a later stage, the assessee does not fulfill any of the conditions, the M/s. GAC Construction 9 Assessing Officer can rectify the same under section 155 and withdraw the deduction allowed under section 80IB in the year under consideration.
9. Against the aforesaid order passed by the learned Commissioner (Appeals), the Revenue is in appeal before the Tribunal and the assessee by way of cross objection.
10. Before us, at the time of hearing, the learned Counsel, on behalf of the assessee, submitted that insofar as the assessee's claim for deduction under section 80IB(10) with respect to one building is concerned, the same would also constitute a housing project in view of the judgment of Jurisdictional High Court in CIT v/s Vandana Properties, [2012] 206 Taxman 584 (Bom.) that if the construction of a housing project is carried out on a plot having area of one acre of land and if in such area of plot, one building has been completed, the assessee would be entitled for deduction under section 80IB(10). To this extent, he submitted that the assessee's claim for deduction under section 80IB(10) in this year, as claimed by the assessee, has to be allowed.
11. Learned Departmental Representative, fairly agreed that insofar as this issue is concerned, the same stands covered by the judgment of Jurisdictional High Court cited supra. He, however, with regard to the observations and directions given by the learned Commissioner (Appeals) in Para-3.9 of the impugned order, submitted that the same should be upheld. He further brought to our notice that the assessee has filed a completion certificate of the whole project before the Tribunal for the first time which too is dated 6th July 2012. Therefore, the entire claim for deduction under section 80IB(10) ultimately has to be denied to the assessee. For other reasons, he strongly relied upon the findings of the Assessing Officer.
12. Learned Counsel, on the other hand, submitted that insofar as completion of first building is concerned, the same is not in dispute, as the M/s. GAC Construction 10 assessee has completed the said building prior to 31st March 2005 and application for completion certificate was filed on 29th March 2005 and showed us the copy of application filed before the authorities. Regarding second building, he submitted that the same was completed prior to 31st March 2008, for which the assessee moved an application for grant of completion certificate on 25th March 2008. The said completion certificate, though issue on 6th July 2012, however, it relates back to 25th March 2008 only. Therefore, all the conditions provided in section 80IB(10) stand fulfilled. Regarding delay in filing the cross objection, the learned Counsel submitted that the assessee was under a bona-fide belief that unless and until completion certificate is issued, no claim under section 80IB(10) would be entertained. However, after being advised that now various judicial pronouncements have come that the date of application of completion certificate is relevant and not the date of grant of certificate, the cause for action to file the cross objection was also prompted by the fact that the Assessing Officer has raised a demand on the ground that till 31st March 2008, the assessee could not produce completion certificate in view of the directions of the learned Commissioner (Appeals). Therefore, he submitted that the delay should be condoned. On the proposition that once an application for completion certificate has been filed and accepted by the authorities even if approval has been granted at a later stage, the same relates back to the date of application. In support of this contention, he relied upon various decisions of the Tribunal and also the judgment of Jurisdictional High Court in CIT v/s Radomir Dzelatovic, [1994] 206 ITR 320 (Bom.) and the judgment of Hon'ble Supreme Court in CIT v/s Punjab Bone Mills, [2001] 251 ITR 780 (SC). Alternatively, he argued that the Respondent assessee is entitled to raise this plea under Rule 27 of ITAT Rules, 1963, on any of the finding decided against the respondent and in support of this contentions, he relied on various decisions.
13. We have carefully considered the rival contentions of the parties, perused the orders of the authorities below and the material placed on M/s. GAC Construction 11 record. The assessee has undertaken a housing project on an area of more than one acre plot on which the assessee has constructed two buildings namely "Kshitij" and "Globe Heights". The said approval of plan for construction of residential building was granted by the BMC along with IOD and commencement certificate on various dates as noted by us in forgoing paragraphs. Insofar as the first building is concerned, the assessee has applied for completion / occupation certificate on 29th March 2005 i.e., prior to 31st March 2005, which was issued on 31st January 2008. In the return of income, the assessee had shown profit from sale of 116 flats from first building namely "Kshitij" and the same was claimed as deduction under section 80IB(10) for a sum of ` 7,36,40,550. Such a claim has been denied by the Assessing Officer which are broadly that - (i) the two buildings constitute two separate projects and, therefore, the claim for deduction under section 80IB cannot be given in respect of one building as it do not fulfill the requirement of one acre; (ii) in the second building i.e., Globe Heights, there was provisions for flats of built-up area of 1,000 sq.ft. and in fact two flats of built-up area of 1,000 sq.ft. was sold by the assessee in view of the information gathered during the course of survey; and (iii) The assessee has not filed completion certificate from the local authorities for the completion of housing projects. Insofar as the second building is concerned, till 31st March 2005, the same admittedly was not completed. As per the material and information placed on record, it is seen that the assessee has claimed that the same was completed before 31st March 2008 i.e., the time limit laid down under the statutory provisions of section 80IB(10) for which it had applied for completion certificate on 25th March 2008. However, these are subsequent development and are not in the records of the Assessing Officer as well as the learned Commissioner (Appeals). The learned Commissioner (Appeals), though held that insofar as the claim of the assessee under section 80IB(10) is concerned, the same is to be allowed in the year under consideration i.e., assessment year 2005-06. However, the same was subject to a rider that if the whole project gets completed before 31st M/s. GAC Construction 12 March 2008, then only the entire claim can be allowed. Regarding the Assessing Officer's allegation that some of the flats in second building has been proposed or sold which were having area of more than 1,000 sq.ft., the same have been dealt with in the appellate order, vide Para-3.7, wherein he has held that as per the amended IDO dated 28th March 2006, issued by the MMC and certificate issued by the architect, that none of the flats in building no.2 i.e., Globe Heights was more than 1,000 sq.ft. This finding of the learned Commissioner (Appeals) has been strongly relied upon by the learned Counsel and the learned Departmental Representative has merely relied upon the findings of the Assessing Officer without controverting the facts recorded by the learned Commissioner (Appeals).
14. Now, the issues before us are -
(i) whether the assessee's claim for deduction under section 80IB(10) can be allowed with respect to the profits earned from building no.1 - Kshitij, which was completed prior to 31st March 2005 and corollary to this issue is whether one building which was part of one acre land and was completed during the relevant assessment year can be said to be independent housing project for the purpose of claim under section 80IB(10)?
(ii) whether there is any violation of one of the conditions under section 80IB(10) that built-up area of some of the flats are exceeding 1,000 sq.ft?
(iii) whether the completion certificate granted subsequently will relate back to the date on which the application for completion certificate was made before the authorities below? and M/s. GAC Construction 13
(iv) whether on the facts and in the circumstances of the case the housing project of the assessee was completed before 31st March 2008?
15. Insofar as the first issue is concerned, the same stands squarely covered by the judgment of the Jurisdictional High Court in Vandana Properties (supra), wherein the High Court has dealt a similar proposition in a vary elaborate manner after observing and holding as under:-
"17. The first question to be considered herein is, whether, in the facts of the present case, construction of 'E' building constitutes building a 'housing project' under Section 80IB (10) of the Act.
18. The expression 'housing project' is neither defined under Section 2 of the Act nor under Section 80IB (10) of the Act. Even under the Mumbai Municipal Corporation Act, 1988 as also under the Development Control Regulations for Greater Mumbai, 1991, the expression 'housing project' is not defined. Therefore, the expression 'housing project' in Section 80IB (10) would have to be construed as commonly understood.
19. As rightly contended by Mr.Inamdar, learned Senior Advocate appearing on behalf of the assessee and Mr.Mistri, learned Senior Advocate and Mr.Joshi, learned Advocate appearing on behalf of the intervenors, the expression 'housing project' in common parlance would mean constructing a building or group of buildings consisting of several residential units. In fact, the Explanation in Section 80IB (10) supports the contention of the assessee that the approval granted to a building plan constitutes approval granted to a housing project. Therefore, it is clear that construction of even one building with several residential units of the size not exceeding 1000 square feet ('E' building in the present case) would constitute a 'housing project' under Section 80IB (10) of the Act.
20. The question, then, to be considered is, whether construction of building is an independent housing project or extension of the housing project already existing on the plot in question. It is the contention of the Revenue that since the approval for construction of 'E' building was granted by the local authority subject to the conditions set out in the first approval granted on 12th May 1993 for construction of A and B building, construction of 'E' building must be considered to be the extension of the earlier housing project for which approval was granted prior to 1st October 1998 and, therefore, the benefit of Section 80IB (10) cannot be granted. There is no merit in the above argument, because, when the plans for A, B, C and D buildings were approved during the period from 1993 to 1996, construction of 'E' building was not even contemplated on the M/s. GAC Construction 14 plot in question. It is only in the year 2001 when the status of the land was converted from surplus vacant land into within the ceiling limit land by the State Government, an additional building could be constructed on the plot in question and accordingly building plan for construction of 'E' building was submitted and the same was approved by the local authority on 11th October 2002.
21. The fact that the local authority, namely the Municipal Corporation approved the building plan for 'E' building on the condition that all the objections raised in the Intimation of Disapproval dated 12th May 1993 relating to the earlier housing project on the same plot of land shall be applicable and should be complied with, cannot be a ground to hold that 'E' building is extension of the earlier housing project because the earlier housing project was completed prior to 1st October 1998 and the housing project for construction of 'E' building was approved for the first time on 11th October 2002. Nowhere in the Intimation for Disapproval granted for construction of 'E' building on 11th October 2002, it is stated that building 'E' constitutes extension of the earlier housing project which is already completed. The fact that the objections raised while approving the earlier housing project on the same plot of land were made applicable to the housing project in question, it cannot be inferred that the housing project in question constitutes extension of the earlier housing project. Therefore, in the facts of the present case, where, neither the assessee had sought approval of the building plan for construction of 'E' building as extension of the earlier housing project, nor the Municipal Corporation has granted approval for the housing project consisting of 'E' building as extension of the earlier housing project, it is not open to the income-tax authorities to contend that approval to the housing project granted by the Municipal Corporation on 11th October 2002 constitutes extension of the housing project which was approved in the year 1993.
22. Reliance placed by the Revenue on the Explanation to Section 80IB(10)(a) which was introduced with effect from 1st April 2005 is also misplaced. What the said Explanation contemplates is that where the approval in respect of a housing project is granted more than once, then, that housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority. For example, in respect of a housing project, the assessee may seek amendment of the building plan at several stages of the construction and the same may be approved. In such a case, the explanation provides that for the purposes of Section 80IB (10) the housing project shall be deemed to have been approved on the date on which the first approval was granted by the local authority. Thus, the Explanation to Section 80IB (10)(a) refers to the approval granted to the same housing project more than once and the said Explanation would not apply where the approval is granted to different housing projects. In the present case, as noted earlier, construction of 'E' building constitutes an independent housing project and, therefore, the date M/s. GAC Construction 15 on which the earlier housing project had commenced construction could not be applied to the housing project consisting of 'E' building merely because the conditions set out while granting approval to the earlier housing project have also been made applicable to the housing project in question.
23. The next argument of the Revenue is that to avail the deduction under Section 80IB (10), the housing project must be on the size of a vacant plot of land which has minimum area of one acre. In the present case, there are five buildings (A, B, C, D and E) on a plot ad-measuring 2.36 acres, hence, the proportionate area for each building would be less than one acre and, therefore, the benefit of Section 80IB (10) could not be granted in respect of the housing project consisting 'E' building.
24. As rightly contended by the counsel for the assessee and the intervenors, Section 80IB (10) (b) specifies the size of the plot of land but not the size of the housing project. The size of the plot of land, as per Section 80IB (10) must have minimum area of one acre. The Section does not lay down that the plot having minimum area of one acre must be a vacant plot.
25. The question, therefore, to be considered is, whether the Revenue is justified in reading the expression 'plot of land' in Section 80IB (10)(b) as 'vacant plot of land' ?
26. The object of Section 80IB (10) in granting deduction equal to one hundred per cent of the profits of an undertaking arising from developing and constructing a housing project is with a view to boost the stock of houses for lower and middle income groups subject to fulfilling the specified conditions. The fact that the maximum size of the residential unit in a housing project situated within the city of Mumbai and Delhi is restricted to 1000 square feet clearly shows that the intention of the legislature is to make available large number of medium size residential units for the benefit of the common man. However, in the absence of defining the expression 'housing project' and in the absence of specifying the size or the number of housing projects required to be constructed on a plot of land having minimum area of one acre, even one housing project containing multiple residential units of a size not exceeding 1000 square feet constructed on a plot of land having minimum area of one acre would be eligible for Section 80IB (10) deduction. If the construction of Section 80IB (10) put forth by the Revenue is accepted, it would mean that if on a vacant plot of land, one housing project fulfilling all conditions is undertaken, then deduction would be available to that housing project and if thereafter several other housing projects are undertaken on the very same plot of land, the deduction would not be available to those housing projects as the plot ceases to be a vacant plot after the construction of the first housing project. Such a construction if accepted would defeat the object with which Section 80IB (10) was enacted.
M/s. GAC Construction 16
27. Moreover, plain reading of Section 80IB (10) does not even remotely suggest that the plot of land having minimum area of one acre must be vacant. The said Section allows deduction to a housing project (subject to fulfilling all other conditions) constructed on a plot of land having minimum area of one acre and it is immaterial as to whether any other housing projects are existing on the said plot of land or not. In these circumstances, construing the provisions of Section 80IB (10) by adding words to the statute is wholly unwarranted and such a construction which defeats the object with which the Section was enacted must be rejected.
28. Apart from the above, the Central Board of Direct Taxes (CBDT) by its letter dated 4th May 2001 addressed to the Maharashtra Chamber of Housing Industry has stated thus:
"The undersigned is directed to refer to your letter No.MCHI:RSA:
m:388/19799/3 dated 1st January 2001 and to state that the additional housing project on existing housing project site can qualify as infrastructure facility under Section 10(23G) and 80IB (10) provided it is taken up by a separate undertaking, having separate books of accounts, so as to ensure that correct profits can be ascertained for the purpose of Section 80IB and also to identify receipts and repayments of long term finances under the provisions of Section 10(23G), separately financing arrangements and also, if it separately fulfils all other statutory conditions listed in Sections 10 (23G) and 80(B(10). With regard to your query regarding the definition of Housing Project, it is clarified that any project which has been approved by a local authority as a housing project should be considered adequate for the purpose of Section 10(23G) and 80IB (10)"
29. From the aforesaid letter of CBDT, it is clear that for the purposes of Section 80IB (10) it is not the mandate of the Section that the housing project must be on a vacant plot of land having minimum area of one acre and that where a new housing project is constructed on a plot of land having minimum area of one acre but with existing housing projects would qualify for Section 80IB(10) deduction. Even otherwise, the argument of the Revenue does not stand to reason because, in the city of Mumbai where there is acute space crunch, it is difficult to find a vacant plot having minimum area of one acre and even if few such plots are existing it cannot be said that Section 80IB (10) deduction was intended to give benefit only to the undertakings who construct housing projects on those few plots. Therefore, it is clear that on a plot of land having minimum area of one acre, there can be any number of housing projects and so long as those housing projects are approved by the local authority and fulfill the conditions set out under Section 80IB (10), the deduction thereunder cannot be denied to all those housing projects. Section 80IB (10) while specifying the size of the plot of land, does not specify the size or the number of housing M/s. GAC Construction 17 projects that are required to be undertaken on a plot having minimum area of one acre. As a result, significance of the size of the plot of land is lost and, therefore, the assessee subject to fulfilling other conditions becomes entitled to Section 80IB (10) deduction on construction of a housing project on a plot having area of one acre, irrespective of the fact that there exist other housing projects or not. In these circumstances, the decision of the Tribunal in rejecting the contention of the Revenue regarding the size of the plot cannot be faulted.
30. The last argument of the Revenue in declining to grant deduction under Section 80IB (10) is that two flats on the ground floor of building 'E' were merged in to one flat, as a result whereof the maximum size of the residential unit exceeded 1000 square feet which is in violation of the condition set out in Section 80IB (10) and, therefore, the assessee is not entitled to the deduction. The Tribunal on appreciation of the facts and the evidence on record arrived at the conclusion that there was no merger of flats and in fact both the flats in question were neither sold nor any application was made before the local authority seeking merger of two flats on the ground floor of 'E' building. Thus, no fault can be found with the decision of the Tribunal in rejecting the argument of the Revenue relating to the merger of the flats.
16. Thus, respectfully following the ratio laid down by the Jurisdictional High Court, the first issue is decided in favour of the assessee. If the assessee has applied for completion certificate before 31st March 2005 with respect to the first building, the assessee is entitled for exemption under section 80IB(10) with respect to the first building as claimed by the assessee in view of the aforesaid judgment of the Bombay High Court.
17. Insofar as the second issue is concerned, the assessee has claimed before the learned Commissioner (Appeals) that, in fact, no flat has been constructed or sold having constructed area of 1,000 sq.ft. to which the learned Commissioner (Appeals) has given a very categorical finding. Therefore, we do not find any reason to deviate from such findings, as it is a matter of fact and nothing has been brought before us to controvert such findings.
18. Now, coming to the third issue as to whether the completion certificates which has been granted on a subsequent date i.e., in case of M/s. GAC Construction 18 first building on 31st January 2008 and the second completion certificate granted on 6th July 2012, will relate back to the date of application which was submitted before the local authorities. Admittedly, in case of first building, the assessee has applied completion certificate on 29th March 2005 and in case of second building, the date of application is 25th March 2008, which was submitted before the authorities. On this issue, the learned Counsel has relied upon various decisions specifically that of the Bombay High Court in Radomir Dzelatovic (supra) and the decision of Bangalore co-ordinate bench of the Tribunal in Akshay Eminence Developers P. Ltd. v/s ITO. The sum and substance of these decisions are that once the approval has been accorded, it relates back to the date of application and the assessee cannot be denied benefit of exemption or deduction for delay on the part of the Government. Thus, even though the certificates have been issued at a much later dates, it will relate back to the date of application. However, in this case, none of this information was on record before the authorities below. Therefore, this matter is restored back to the file of the Assessing Officer to examine the date of application made and also the completion certificate.
19. Now coming to the last issue i.e., whether the project was completed before 31st March 2008, this is flowing from the aforesaid issue only and the same is, therefore, restored back to the file of the Assessing Officer to examine the completion certificates as they were not available on record and allow the claim in accordance with law.
20. Thus, grounds no.1 and 2, are treated as partly allowed for statistical purposes.
21. In ground no.3, the Revenue has challenged deletion of addition of ` 31,87,500, on account of receipts on the unaccounted sale of three flats in building no.2 - Globe Heights based on seized documents at the time of survey.
M/s. GAC Construction 19
22. The learned Commissioner (Appeals) has discussed the entire facts and the issue in Para-4.1 in the following manner:-
4.1 Issue is discussed by the A.O. from para 14 onwards on page 18 of the assessment order. As per para-14 of the assessment order, during the course of survey operation at the premises of the appellant on 1.5.2006, some loose papers were found which according to A.O. indicated receipts of certain portion of sale proceeds in unaccounted cash. These papers were impounded, The addition is based on two loose papers which are also made part of the assessment order as annexure 1 & 2. As per these papers, one Ms Bharati Das who has purchased flat No.302 in Wing F of 'Globe Heights' appears to have expressed her willingness to shift to a bigger flat of 1425 sq.ft, These papers show calculation of cost on shifting. The paper indicates cash receipts and agreement amount etc. During the survey operation on 1 .5.06 a statement of Shri Anil C.Shah, one of the member of the AOP was recorded u/s. 131 who has given explanation on these papers as under:
"28 What are the contents ofpages no.84 and 92 respectively?
Ans One of our customer Smt. Bharti Das has booked a flat of salable area area of 940 sq.ft in our project earlier known as 'Kshitij Building no.2. This building was later renamed by us as 'Globe Heights'. Later, when we received change the building plans of building 'Globe Heights. The flats of 940 sq.ft area were getting converted into bigger area. So, we had given the offer to our above customer, who was the only customer to book a flat of 940 sq.ft by that time, to shift to the flats of new area. So, she expressed the desire to shift to a flat of area of 1425 sq.ft. area. So, we have worked out a tentative working of the cost of her shifting after taking into account the market rate at the time of shifting. In the page no.84 the working was done at the proposed market rate of 2,250/- and on the page 92 the market rate was adopted at Rs. 2,500/-. She had booked the flat at 1,400/- per sq.ft as per the prevailing market rate in 2003.
Q.29 On the page no.84 the total additional cost of shifting is worked out at Rs. 10,91,250/- and it is also written on the page that the portion of the additional cost of Rs. 4,12,250/- at Rs.850/- for additional saleable area of 485 sq.ft, was a cash consideration. Please comment and state whether M/s. GAC construction accepted any portion of the sales consideration in the form of unaccounted cash? Ans. The 'cash consideration' word was used in on the above page no.84 and 92 to mean the down payment installment out of the total cost of the additional area proposed to be purchased by the said flat purchaser. We have not accepted any portion M/s. GAC Construction 20 of the sale proceeds in unaccounted cash. It may also be noted that the said flat purchaser did not opt for the proposed flat change.
Q.30 But your attention is invited to the statement 'Additional agreement amount for 485 Sq ft at Rs. 1,400/-' written on the said page no.84. Also, under the title 'Total amount due till date' the cash consideration' payable is shown at Rs.4,12,250/-. Please confirm and comment.
Ans Yes, I do confirm the above statement mentioned on page no.
84. Please note that the said customer had booked a flat of 940 sq.ft. at 1,400/- per sq.ft. Out of the total consideration of Rs. 13,16,000/- the customer had paid 40% till the date of preparation of the above proposal, which comes to Rs.5,26,400/-. Under the presumption that the said customer accepts our offer of shifting to a flat of bigger area, by taking into account the market rate of 2,250/- per sq.ft, the additional cost of the extra area of 485 sq.ft came to Rs.10,91,250/-. We proposed that she should pay us difference of the rate of Rs.850/- and the area of 485/- sq.ft. in down payment ie. 485x850 = Rs.4,12,150/- plus 40% Rs.1,400 * 485 Sq.ft. 2,71,600/-, all together we supposed to get from her Rs.6,83.850/-.
Q.31 Was there any logic or pre-decided payment schedule for deciding the payments on above line?. If yes, please explain with supporting agreements.
Ans Instead of applying a new rate for the booking, we bifurcated the old rate for the old area and new rate for the new additional area and as she has not purchased any additional area. So, there is no supporting agreement.
Q.32 But you have not explained the significance of statement' Additional agreement amount for 485 sq.ft at Rs.1,400/- written on the said paged no. 84. Please explain. Ans. Please read the answer to question 30 as the rate difference of Rs.850/- per sq.ft and earlier agreement was 940/- sq.ft. booked by her at Rs.1,400/- per sq.ft, so additional agreement amount over and above Rs.850/-, of proposed 485 sq.ft. should be payable by her, 40% of amount as earlier agreement.
Q.33 Whether the above explanation and logic equally hold good for page no.92?
Ans. Yes. The only difference being the proposed rate of Rs.
2,500/- per.sq.ft.
4.2 The A.O. considered explanation of member of AOP an eye wash. According to the A.O. cash element is always accepted at the time of registration of flat. A.O. also mentioned in the assessment M/s. GAC Construction 21 under that the flat purchaser must have paid first cash component on flat of area 940 sq.ft. at the time registration of original agreement. A.O. issued summons to Smt. Das but could not be served and her statement was not recorded. The A.O. inferred that the proposed working on paper is circumstantial evidence. The A.O. applied decisions of Bombay High court in the case of J.S. Parkar 94 ITR 616, Mc Donald Co. Ltd vs. CTO 154 ITR 148, Union of India vs. Ply world Electronics P.Ltd 84 ITR 308 and :M.V. Vallippan vs. ITO 170 ITR 238 and made additions of Rs.31,87,500/- by adopting market rate of booking of flat at Rs.2,250/-.
4.3 During the course of appellate proceedings, learned counsel of the appellant submitted that while making the addition, the A.O. has not appreciated the factual aspects that there was a gap of time between dates. of booking of earlier flat as well as proposed desire to book larger flat. The rate agreed for sale of flat is always prevailing on the date of booking the flat . All the three flats under 2004 and agreement were executed in August 2004. It is a matter of public knowledge that January 2004 was the phase of recessionary trend in the business of Real Estate. Moreover consideration recorded in the agreement is after reducing deduction for amenities agreed not to be given in respect of said flat. It is also filed that development and construction of 'Globe Heights had not commenced at the time of booking of flat. In the written submission it is also filed that Mr. Anil Shah had given satisfactory explanation of the notings of pages but the A.O. has disregarded and ignored the explanation and made addition merely on based of conjuncture and surmises. Ms. Bharti Das an allottee booked flat having area of 940 sq.ft in 'Globe Heigths but wanted to convert into bigger area of 1425 sq.ft. Notings made on loose papers are proposal based of tentative alternate proposed price. 'Cash proposed' word used therein represents 'down payment only'. The said allottee was the only allottee who expressed desires to opt for bigger flat but finally not opted for bigger flat. The counsel of the appellant also relied on certain decisions placed in the paper books. On the basis of above it is requested to delete the addition."
23. After appreciating the aforesaid facts and contentions of the assessee, the learned Commissioner (Appeals) has deleted the said addition after appreciating the evidence and material available on record.
"4.4 I have gone through the submissions and find that two loose papers on the basis of which addition is made are not the papers of actual sale. They are only proposals for booking bigger flat instead of smaller flat already booked earlier. Calculation on the paper is made as to what would be payable in case of converting booking from smaller flat to bigger flat. Since bigger flat are admittedly not booked, question of receiving unaccounted income also does not risk Tax has to be charged on real income and not on proposed M/s. GAC Construction 22 income. Bigger size of flats were rather never constructed in building No.2 due to change of IOD in March 2006. When those papers were confronted to the member of AOP, appellant at the time of survey, he has explained it while replying to question No.28,29,30,31,32 & 33 reproduced in the assessment order on page 18 & 19. Question answers of the statement of Shri Anil Shah are also reproduced in this order. The A.O. has clearly brushed aside the explanation by the member of the AOP that cash amount meant down payment. A.O. also, did take into consideration the transaction did not materialize at all. Despite this, A.O. made the addition, as per working given on page 25 in para 24.7 of the assessment order. A.O. has done working of flat No.E-305, E-505 of 1425 sq.ft. No such flats having area 1405 sq.ft have ever been constructed in the building. Since impounded papers are projections which can never be executed, no addition can be made. No document is found that in earlier booking, cash element was involved. In view of the above, addition is considered as based on the concept of hypothecated income and hence deleted. Appeal is allowed on this point."
24. On this issue, the learned Departmental Representative has relied on the findings of the Assessing Officer whereas the learned Counsel for the assessee relied upon the findings of the Commissioner (Appeals).
25. After carefully considering the orders passed by the Commissioner (Appeals) as well as by the Assessing Officer on this issue, we find that the Commissioner (Appeals) has recorded a categorical finding that the documents found only show that they were only proposals for booking of bigger flats instead of smaller flats which were already booked earlier. The bigger flats were actually not booked as no such bigger flats were either available or sold and, therefore, there was no occasion that such a transaction materialized at all. Moreover, no flats having area of 1,425 sq.ft was offered which was constructed in the building, therefore, there is no question of having made sale of such flats. In view of these findings recorded by the Commissioner (Appeals), which has not been rebutted, we do not find any reason to deviate from such a conclusion drawn by the Commissioner (Appeals) and, accordingly, the same is upheld. Thus, ground no.3 is dismissed.
M/s. GAC Construction 23
26. प रणामतः राज व क अपील सां यक य उ े य के लए आं शक वीकत ृ क जाती है ।
26. In the result, Revenue's appeal is partly allowed for statistical purposes.
27. We now proceed to dispose off assessee's cross objection no.54/Mum./2012, which is arising out of the Revenue's appeal in ITA no.372/Mum./2007, for assessment year 2005-06, vide which, following grounds have been raised:-
"Conditional grant uls. 801B not the intention of provision
a) The ld. CIT(A) erred in allowing the claim u/s. 801B(10) on the basis of unit completion subject to fulfillment of conditions without appreciating that having complied to all the norms of said section, the declaration of income on the basis of unit completion was appropriate; therefore, imposing conditional restriction has vitiated the legislative intent of the provision much to the prejudice of the Appellant and when the Appellant does not have control over the time bound restriction as to completion due to inherent litigations, restriction and conditional grant makes the decision perverse and the claim of the Appellant on the basis of unit completion may be accepted without any stipulation.
b) The ld. CIT(A) ought to have appreciated that when the expression "housing project" is not defined either u/s. 2 of the Income Tax Act or u/s. 801B(10), the meaning has to be commonly understand to extend the incentive benefit to the Assessee without any stipulation."
28. The issue raised in the cross objection have already been dealt with in the appeal preferred by the Revenue. The submissions and contentions of the learned Counsel for the assessee on this issue have already been entertained and we have given our finding thereon and the issue has been restored to the file of the Assessing Officer to examine the same as per the observations and findings give by us. Therefore, this cross objection is, in fact, has become infructuous and the same is dismissed as such.
29. प रणामतः नधा रती क या ेप खा रज क जाती है ।
29. In the result, assessee's cross objection is dismissed.
M/s. GAC Construction 24
30. नणय के सारांश व प, राज व क अपील सां यक य उ े य के लए आं शक वीकत ृ क जाती है एवं नधा रती क या ेप खा रज क जाती है ।
30. To sum up, Revenue's appeal is partly allowed for statistical purposes and assessee's cross objection is dismissed.
आदे श क धोषणा खले ु यायालय म दनांकः 21st December 2012 को क गई ।
Order pronounced in the open Court on 21st December 2012 Sd/- Sd/-
राजे संह अ मत शु ला
लेखा सद य या यक सद य
RAJENDRA SINGH AMIT SHUKLA
ACCOUNTANT MEMBER JUDICIAL MEMBER
मंुबई MUMBAI, दनांक DATED: 21st December 2012
आदे श क त ल प अ े षत / Copy of the order forwarded to:
(1) नधा रती / The Assessee;
(2) राज व / The Revenue;
(3) आयकर आयु (अपील) / The CIT(A);
(4) आयकर आयु / The CIT, Mumbai City concerned;
(5) वभागीय त न ध, आयकर अपील य अ धकरण, मंुबई / The DR, ITAT, Mumbai;
(6) गाड फाईल / Guard file.
या पत त / True Copy
आदे शानसार
ु / By Order
द प जे. चौधर / Pradeep J. Chowdhury
वर नजी स चव / Sr. Private Secretary
उप / सहायक पंजीकार / (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण, मंुबई / ITAT, Mumbai