Income Tax Appellate Tribunal - Mumbai
U.K. Builders , Mumbai vs Assessee on 20 February, 2015
"F"
IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI
BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER &
SHRI VIVEK VARMA, JUDICIAL MEMBER
I.T.A. No.3920 to 3922 /Mum/2012
( Assessment Years: 2006-07, 2007-08 & 2008-09
I.T.A. No.6557 /Mum/2012
( Assessment Years: 2009-2010
M/s U.K. Builders, Asstt. Commissioner of
308, New Majestic Income Tax - Central
Vs.
Shopping Centre, Circle -2, Thane,
144 JSS Road, Power Industrial Estate,
Mumbai - 400 004. 2 n d floor, Edulji Road,
CHARAI,
THANE 400 601.
PAN : AABFU 2463 L
( Appellant) .. ( Respondent)
AND
I.T.A. No.4673 to 4675 /Mum/2012
( Assessment Years: 2006-07, 2007-08 & 2008-09
Asstt. Commissioner of M/s U.K. Builders,
Income Tax - Central Circle 308, New Majestic
-2, Thane, Shopping Centre,
Power Industrial Estate, 2 n d 144 JSS Road,
floor, Edulji Road, Mumbai - 400 004.
CHARAI, THANE - 400 601.
PAN : AABFU 2463 L
( Appellant) .. ( Respondent)
2 ITA 3920 to 3922/M/12 &
ITA 4673 to 4675/M/12
ITA 6557/M/12
Assessee by Shri Vimal Punmiya
Respondent by : Shri Rajesh Ranjan Prasad
Date of Hearing : 14-01-2015
/Date of Pronouncement : 20-02-2015
[
ORDER
PER R.C. SHARMA, A.M. :
These are the cross appeals filed by the assessee and Revenue against the order of ld. CIT(A) for assessment years 2006-07 to 2009-10.
2. The common grievance in all these appeals relates to the disallowance of claim of deduction u/s 80IB(10) of the Income Tax Act, 1961.
3. Rival contentions have been heard the record perused. Facts in brief are that the assessee is engaged in the business of development and construction of housing project. In .this case, a Search & Seizure operation was carried out on 21.02.2007.' However, after the Search & Seizure operation, the assessee has filed a return of income for the A.Y. 2006-07 on 30.05.2008 showing total income of Rs. 21,21,835/- in response to a notice issued u/s 153A on 25-04-2008. In the return of income filed in response to the notice u/s 153A, the assessee has claimed deduction u/s 80IB(10) of the Act. The assessee has claimed that, it has constructed two projects on a land of 17.67 acre at Bolsar, one is called as U.K. Residential and other s U.K. Commercial. In case of the U.K. Commercial, the deduction u/s 80IB(10) has not been claimed and due tax has also been paid. In respect of U.K. Residential, consisting of 30 buildings the convenience shopping area is 70,269.60 sq. ft. and residential area is 5,21,094.70 sq. ft. Thus, the convenience shopping area in the U.K. residential project works out to 13.485% of total built 3 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 up area of 5,91,365 sq. ft. The project has been stated to be approved on 08-04-2003 as residential as well as commercial project by the Local Authority. During the course of assessment proceedings, the A.O. examined the claim of assessee made u/s 80IB(10) of the Act vis-à-vis submission of the assessee. The main submissions of the assessee before the A.O. were as under:-
"1. M/s U.K. Residential is a residential project approved to be on a plot of land measuring 17.67 acre, which is more than one acre.
ii. The project has 30 residential buildings having a total constructed residential area of 5,21,094.70 sq. ft. and 70,369.60 sq. ft. of commercial area..
iii. The IT Act has not defined „housing project‟. In the clarification addressed to the Maharashtra Chamber of Housing Industries (MCHI) by CBDT, any housing project approved as „housing project‟ by the local authority shall be taken as „housing project‟ for the purpose of section 80IB(10).
iv. The project commenced on 8-4-03 v. The residential units did not exceed 1500 sq. ft. of built up area.
vi. Occupation Certificate is received in respect of all the buildings from Grampanchayat and the same is endorsed by the Zilla Parishad.
vii. The allowance of deduction needs to be enhanced by Rs. 21,21,835/- since lesser deduction is claimed in the return filed, i.e. deduction n respect of residential units only claimed through appellant is eligible for full deduction.
2.3 However, the A.O. disallowed the deduction u/s 80IB(10) in full on the basis of following reasonings:
4 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12
(i) The housing project is approved as residential as well as commercial project and not as Housing project as is evident from the Approved Certificate.
(ii) The project has not been completed within the specified time i.e. upto 31-08-2008. Further, Completion Certificate has not been granted by the Competent Authority i.e. Zilla Parishad, Thane.
(iii) The commercial area exceeded the prescribed limit of 5% of total built up area or 2000 sq. ft. whichever is lower.
iv) Built up area of three residential row houses exceeded 1500 sq. ft.
v) Since U.K. Commercial was under construction as on 31--
03-2008 which was part of the same project, the project was not completed before the specified date.
vi) Since the conditions of section 80IB(10 were not satisfied, the assessee was not entitled to claim even proportionate deduction. In his regard, the A.O. has relied upon the decision of Hon‟ble ITA, Mumbai in the case of Laukik Developers (2008) 108 TJ 364.
4. By the impugned order the ld. CI(A) allowed proportionate claim of deduction u/s 80IB(10) attributable to residential building, after having the following observation:-
"Now coming to the admissibility of claim of deduction u/s 80IB(10), I have carefully considered the facts of the case, submission of appellant and judicial pronouncements on the subject. The A.O. has disallowed the claim of deduction u/s 80IB(10) on various grounds as discussed above. The same are being taken up for consideration and adjudication as under:-
3.2.1. The project is approved as residential as well as commercial project and not as Housing Project.
5 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12
(a) In this regard, the submission of appellant is as under:-
"UK RESIDENTIAL AND U.K. COMMERCIAL BOTH THE PROJECTS ARE APPROVED IN THE SAME BLOCK PLAN:- There cannot be any effect whether there are two projects or five projects in one approved block plan. Block plans are approved by the local authority as per development plan of the area. There is no project wise approval and once particulars block plan is approved than also let it be five different developers, plan will be approved once and every developers has to carry out project according to that only. This deduction is available to any undertaking of the assessee who has carried out the projects. Therefore, let us first understand meaning of undertaking. As per the dictionary meaning and generally used in Indian Income Tax Act, 1961, it is doing a business or an enterprise. It means an association can have many undertaking or units of business. So in this case we should confine to profit of undertaking not to entire activity of the assessee. It may have land purchases and also transactions or any other business but it is very important whether business unit has claimed any deduction in respect of profit on land transaction then such profit from the land will not be allowed. To develop housing project itself is activity of the undertaking of the assessee then profit of such unit shall be allowed as deduction. In this case also there are two different undertaking of the Partnership firm ie. (1) U.K. Residential (2) U.K. Commercial and both are maintaining separate books of accounts. The entire commercial units are constructed by U.K. Commercial and paid income taxes on total income. Therefore, both the undertaking are working one block of plan should not affect eligibility to claim the deduction u/s 80IB (10) of the Income tax Act.
Our client also relied on ITAT Mumbai "F" Bench judgment ITA No. 1253 Mumbai in the case of Vandana Properties where it has been held that each wing can be separate housing projects. We also quot from the judgment "all the building projects have planned i.e. A, B, C, D & E though some of the buildings do not qualify for deduction u/s 80IB (10) of the Act and admittedly, the same is also not claimed. We, therefore, do not agree with the view taken by the A.O. as well as the Learned CIT(A) that the assessee has violated the another condition in respect of the size of the plot". We give few more judgments for your kind perusal in this matter.
6. PROJECT IS NOT APPROVED AS A HOUSING PROJECT BUT IT WAS A RESIDENTIAL CUM COMMERCIAL PROJECT:- The learned Assessing Officer is not aware about development regulation of Maharashtra Government for the housing development. There is no category like housing complex. Whenever 6 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 there is commercial portion is approved along with residential then category will be residential cum commercial. Under the housing complex it is requirement of development authority to construction of certain type of shopping then only residential complex become housing complex. There are few judgment which support our views in this matter."
(b) On plain reading of the provisions of the Act, I find that the deduction u/s 80IB(10) is available on the income derived from an undertaking developing and building housing project and not on the income of an assessee as a whole. Thus an assessee can run as many undertakings as he desires. In the instant case, the appellant has got a residential as well as commercial housing project approved from the Local Authority on the same plot, but developed them separately. The appellant has also maintained separate books of account for both the undertakings named as UK Residential and U.K. Commercial and claimed the deduction u/s 80IB(10) on the profits derived from UK Residential project. Undisputedly conditions regarding approval by Local Authority and size of plot under UK Residential are fully satisfied by the appellant. Therefore, submissions of appellant in this regard are acceptable. Moreover, this issue has been decided by the Hon‟ble ITAT in the case of Vandana Properties vs. ACIT (2009) 31 SOT 392 (Mum) in the favour of assessee by holding that each wing can be a separate housing project and those satisfying the conditions are eligible for deduction u/s 80IB(10). Further, Hon‟ble High Court in the case of CIT vs. Brahma Associates, 239 CR 30 (Bom) has held that the section 80IB(10) (pre-amendment w.e.f. A.Y. 2005-06), does not define the expression "housing projects" with commercial user to the extent permitted under the D.C. Rules. The decision of Special Bench of ITAT that a project with residential and commercial user would be a housing project has been upheld accordingly.' Respectfully following the decisions of Hon'ble Jurisdictional High Court and Tribunal as above, I' hold hat the appellant cannot be denied deduction u is: 801B(10) merely on the ground that the project was approved as residential as well commercial projects on the same plot or was not approved as residential project exclusively. The ground is, thus, decided in the favour of appellant.
On careful consideration of facts on record and submission of appellant, I find that the approval of the project was granted by Grampanchayats as well Zilla Parishad before 31.03.2004 and Completion Certificates have also been obtained by the appellant from respective Grarnpanchavats between 24.11.2005 to 18.03.2005. The appellant has applied for obtaining Occupation Certificate to the respective Grampanchayats on the advice of Architect as Grampanchayat is stated to be competent authority for this purpose because all the necessities 7 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 and' infrastructure facilities are provided by them. Further, the house tax has also been collected by the Grampanchayats from 2006 onwards, receipts of which for the period from 2006 to 2008 are placed on the record. Most importantly, the appellant has also applied to Zilla Parlshad, Thane, for obtaining Completion Certificate on 12.10.205 and 19.03.2008 well before the specified date. It is also noticed that the Zilla Parishad, Thane, vide its letter dt. 28.12.2009 has very clearly stated that all the Buildings were completed before 31.03.2008. This letter of Zilla Parishad, Thane, was also forwarded to AO vide letter dt. 04.0l.2011 has stated that on enquiry frorn Zilla Parishad, Thane, it is noticed that the Building Completion Certificate has not been issued. However, there is no denial that the buildings have been completed before 31.03.2008. Since Village Panchayats which ate also the Local Authorities [Explanatlon below section 10(20)] have Issued Completion Certificates and applications are also made for the same to Zilla Partshad, Thane, before the specified date, I am of the view that the project under consideration has been completed before the due date l.e. 31.03.2008. The letter dt, 28.12.2.009 of' Zilla Parlsfrad, Thane, addressed to partners of appellant firm which Is available on record, makes its abundantly clear that the housing project was completed before 31.03.2.008. The A.O has also personally visited the site and found all residential units completed by March, 2007 except some portion of Upper floors of E & G Buildings which are commercial ones not considered by the appellant u/s 80IB(10) deduction.
Even if it is presumed that the Housing project in the case of appellant was not completed before 31.03.2008, then the appellant's arguments that since the project was approved before 31.03.2005, the amended provisions w.e.f. 01.04.2005 specifying the date of completion as 31.03.2008 for the projects approved before 01.04.2004 are not applicable, are found to be convincing. In support of arguments, reliance of appellant on the decisions of Hon'ble ITAT, Mumbai, in the cases of Saroj Sales Organization Vs. ITO, 115 TTJ 485 (Mum), Bhumiraj Homes Ltd. Vs. DCIT (A.Y. 2005-06), ITA No. 506/Mum/2009 dt. 20.05.2011, and Hiranandani Akruti J.V. v« DCIT (A.Y. 2006-07) ITA No. 5416/Mum/2009 dt. 30.03.2010 is well founded. In these cases, after analyzing the provisions of section 80IB(10) as amended from time to time, it has been held that the law as stood at the time of submission of proposal and its approval will apply and hence the amended provisions w.e.f. 01.04.2005 specifying date of completion will not apply to the projects approved before 01.04.2004. In vew of these decisions of Hon‟ble jurisdictional Tribunal which are binding in nature, I hold that in the case of appellant the condition that the housing project should be completed on or before 31.03.2008 will not otherwise apply. Thus, I further hold that there is no violation of any conditions in this regard and accordingly appellant cannot be denied claim of deduction u/s 8OIB(10) on the ground that the Completion Certificate was not obtained 8 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 from Zllla Parlshad, Thane, on or before 31.03.200B.
3.2.3 Commercial Area In U.K. Residential is more than prescribed limit.
(a) The appellant has made a detailed written submission In this regard which is as below:-
"3. U.K. RESIDENTIAL IS HAVING COMMERCIAL AREAS MORE THAN 2000 SQ.FT.: -
Sir, The project U. K. Residential was started from 8th April 2003 very much before amendment proposed by finance act, 2004 where there was no restriction on commercial area of 2000 sq. ft. In U.K. Residential Housing Complex convenient shopping are parts of housing complex as per D. C. regulation of Authority. The learned assessing officer has not understood proper meaning of housing project. She even not considered the proper spirit of notification no. 205/3/2001/ITA 11 dated 4th May 2001 issued by the C.B.D.T. in the assessment order U/s 153A Assessing officer has not allowed the deduction because of some convenient shopping are constructed according to approved plan from Zilla Parishad, Thane and disallowed deduction u/s 80 IB and this Appeal is preferred.
The Assessing officer has raised the point in the assessment order that such undertaking should have activity of housing only; In this case also U.K. Residential undertaking is having activity of housing only along with convenient shopping. A housing complex means residential buildings with 15% to 20% Convenience shopping as allowed by the authorities which are approved under the residential category.
What is convenient shopping as define in development Control Regulations of Zilla parishad authority is as under:
"Convenience shopping" means shops, each with a carpet are not exceeding 20 sq. mts. except where otherwise indicated and comprising those dealing with day-to-day requirements. As distinguished from wholesale trade or shopping, it includes:-
i) Food grain or ration shops, each with carpet area not exceeding 50 sq.mts.
ii) Pan shops
9 ITA 3920 to 3922/M/12 &
ITA 4673 to 4675/M/12
ITA 6557/M/12
iii) Tobacconists
iv) Shops for collecting and distribution of clothes and other
materials for cleaning and dyeing establishments
v) Tailor or darner shops.
vi) Groceries, confectioneries, wine and general provision shops, each with a carpel area not exceeding 50 sq.m.
vii) Hair dressing saloons and beauty parlors.
viii) Bicycles hire and repair shops . ix) Vegetable and fruit shops. x) Milk and milk product shops. xi) Medical and dental practitioners dispensaries or clinics,
pathological or diagnostic clinics and pharmacies, each with a carpet are not exceeding 50 sq.m.
xi Florists.
xiii) Shops dealing in ladies ornaments such as bangles etc.
xiv) Shops selling bakery products.
xv) Newspaper, magazine stall and circulating libraries. xvi) Wood, coal and fuel shops, each with a carpet area not exceeding 30 sq. mts.
xvii) Books and stationery shops or stores.
xviii) Cloth and garment shops.
xix) Plumbers, electricians, radio, television and video equipment repair shops and video libraries.
xx) Restaurants and eating houses each with a carpet area not exceeding 50 sq.mts.
xxi) Shoes and sports shops each not exceed 15 sq. mt. with carpet area.
All these shopping are part of housing complex where 100% profit should be allowed as deduction 80IB of the Income tax act and therefore in this case also your appellant as claimed 100% deduction.
Further, We also draw your attention on following judgments:
(1) Commissioner of Income Tax (appeals)·1 Thane, dated 20111 September 2006 in case of Veena Developers has allowed proportionate deduction in respect Profit on Residential portion of projects, which is directly applicable to our client, (2) Commissioner of Income Tax (appeals)-II Thane, dated 17th September 2007 in case of SONAM BUILDERS has allowed 10 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 proportionate deduction in respect Profit on Residential portion of projects, which is directly applicable to our client.
(3) Commissioner of Income Tax (appeals)·" Thane, dated 17TH September 2008 in case of Shree Ostwal Builders Limited has allowed proportionate deduction in respect Profit on Residential portion of projects.
(4) Brahma Associates Vs Jt. CIT Pune Special Bench 122 TTJ (Sb pune) 433 order dated 6"1 April, 2009 where it was held that "what was brought into effect by insertion of cl.(d) in s.80-IB (10) vide Finance (No.2) Act,2004, was a restriction on use of built-up area for commercial purposes, and not a relaxation to use' the build-up area for commercial purpose-This indicates that there was no such limit in force' for the earlier years". The limit of commercial use of built up area has no retrospective application and therefore 100% deduction shall be allowed which has been confirmed by the Bombay high court.
(5) Hershed P. Doshi vs. ACIT 109 TTJ 335 where it has been held that full deduction of profit from such eligible undertaking should be allowed.
(6) Hon'ble Tribunal SMC Bench, Mumbai Judgment in case of ITO ward 4(1) Thane Vs M/s Ideal Realtors Vasai Dist. Thane ITA No. 4292/MUM/2007 where M/s Laukik Development has been discussed and allowed total deduction even there is shopping because whole project is approved under Housing category.
(7) Hon‟ble Tribunal "C" Bench, Mumbai judgment in case of ACIT 22(3) Vashi vs. M/s Shree Balaji Developer ITA No. 2592/Mum/2006 where proportionate deduction is allowed.
The assessing officer has relied on the ITAT order in case of Laukik developers 108 TTJ 364 but without considering that it has been reconsidered by the next Tribunal order in case of CIT Vs Harshad Doshi 109 TTJ 335 where the judgment of Laukik Developers considered and allowed the full deduction. A copy of both the judgments are already submitted to your honour.
Learned Assessing officer has also referred Purshottam Das, 112 Taxman 0122, 247 ITR 516, which we totally disagree with comments appeared in 11 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 point no. 11 on page 18 of Assessment Order by referring Delhi High Court judgment (supra) given unwanted reference of submission made by learned Counsel for the revenue. She has just put one paragraph of the judgment without mentioning actual facts of the case. Even she is not aware that by the same judgment reference application of revenue was dismissed this judgment was with reference to temporary use of the residential premises for the commercial purpose does not change the character of residential housing property.
We also disagree with comment of Assessing officer in point no. 12 treating deduction u/s 80 IB (10) are in nature of exception provision to general chargeability of the income to tax by giving reference of Delhi High Court for judgment (Supra) that principal of beneficial construction in favour of Assessee as decided in Novopan India Limited Vs. CCE Jt. 1994 (SC) is not applicable. This is a just reference from revenue side quoted In the judgment but that is not relevant and also not from final judgment.
The assessing officer has referred Reliance Jute Ind. Vs CIT reported in 120 ITR 921 (SC), CIT vs. Isthmain Seamship Lines reported in 20 ITR 573 (SC) and Kesimtharuvi Tea Estate Ltd reported in 60 ITR 262 (SC) in the assessment order without any reason. The assessee has claimed deduction, as per provision of the Act applicable to particulars assessment year. Further she has mentioned following four judgments where above judgment of Reliance Jute Ind. is applied.
(1) 279 ITR 310 (SC) 2005 (2) 203 CTR 195 (Allahabad) (3) 205 CTR 481 (MAD) (4) 296 ITR 516 (ALL) We did not understand relevance of above judgments to this case.
Our client further relied on judgment in case of Saroj Sales Organisation vs. ITO Mumbai "E" bench 115 TTJ (Mumbai) 485 where it has been held "The date of approval of plan is important i.e. before amendment therefore old provisions will be applicable" it is also very important to mention relevant portion of the judgment "As regards the objection of the AO that the permissible shopping are of housing project exceeds 5 per cent, the assessee is not entitled for relief under section 80 -IB (10). We are of the view that the housing project were approved before 31st March, 2005 and for such project which were so approved, there was no stipulation as to the shopping complex area is permissible in the project. As already stated earlier that the amendments were subsequently made while extending (he deduction of income from housing project approved upto 31st March 2007, the denial of deduction, in our view, is clearly not in accordance with law,"
12 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 There is a definite vested rights possessed by the assessee with reference to such a project and the provision granting relief shall have to be read in a manner as was available at the time when relief was granted and the subsequent amendment shall not affect the claim for such a relief. Reliance for this proposition is placed on the Supreme Court decisions in CIT Vs. Shah Sadiq & Sons (166 ITR 102) and the Madras High Court decision in CIT vs. SSC. Shoes Ltd. (259 ITR 674). Expecting the assessee to be compliant in subsequent years under the amended position with reference to a project which is already underway and which is compliant with the then prevailing provisions, is expecting impossibility. In fact, it would be asking the assessee to do the impossible which cannot be the intent of any statute. [CIT vs. Shapoorjl Pallonji Mistri 44 ITR 891 (SC); ACIT vs. Jindal Irrigation Systems Ltd. 56 ITT 164 (Hyd)].
According to Agreement & Plan actual Area is less than 1500 sq. ft. but assessing officer has not given Measurement Report to appellant how she has calculated area more than 1500 sq. ft.
The learned assessing officer erred in not accepting order of commissioner of income tax (appeals) - II for the assessment year 2003-04 at 2004-05 in case of Shree Ostwal Builders Ltd on the same matter.
The appellant has submitted many Tribunal judgments, where Full deductions as well as proportionate deduction were allowed. However we are submitting herewith few more judgment for your kind perusal."
5. By the impugned order, the ld. CIT(A) allowed proportionate deduction u/s 80IB(10) of the Act on profits of residential units of U.K. Residential complex after having the following observations :-
"As is evident from the facts of the case that the assesse has constructed commercial area of 70,269.69 sq. ft. as Convenience Shopping out of total built up area of 5,21,094.70 sq. ft. of U.K. Residential Complex which is 13.485% i.e. more than the prescribed limit of 5% or 2000 sq. ft. whichever is less. However, undisputedly the project has been approved by' the Local Authority along with Convenience Shopping area as per their Development Control Regulations. Thus, I find that the issue under consideration has been dealt with by the Hon'ble ITAT, Pune, and Hon'ble High Court Bombay In the land mark judgment of Brahma Associates, respectively, reported in Brahma Associates vs. Jt.CIT, 122 TTJ 433 13 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 (Pune) (S.B) and CIT vs. Brahma Associates, 239 CTR 30 (Bomb) wherein it has been clearly held that a project with residential and commercial user to the extent permitted under DC Rules would be a "housing project" and eligible for deduction u/s 80IB(10). However, the Hon'ble ITAT, Pune (SB) was of the view that in case of commercial user exceeded 10% of the total built up area, the deduction was allowable only on the profits derived from residential units i.e. the appellant was entitled to proportionate deduction. The appellant has also relied upon various judgments in its submission wherein proportionate deduction relating to residential units has been approved and keeping in view such an established legal position, the proportionate deduction u/s 80IB(10) had been claimed in return of income filed u/s 153A. Only during the course of assessment proceedings, the appellant claimed full deduction. Now during the course of appellate proceedings, the appellant has also raised additional grounds before me vide its letter dated 31.01.2012 filed on 02.02.2012 in this regard which are as follows:-
1. "The Assessing Officer erred in not allowing additional deduction under section 80IB of Rs. 21,21,835/- claimed during the assessment proceeding as noted on page No. 9 and 10 of the assessment order.
2. The learned assessing officer erred in disallowing 100% deduction u/s 80IB in case of the U.K. Resident Projects of Rs.
1,45,80,138/-.
3. The learned Assessing officer should have considered the full deduction in the assessment order
4. The learned Assessing Officer may be directed to allow full deduction u/s 80IB of the Income Tax Act, 1961.
5. The appellant craves leave to amend, alter or delete any of the above grounds of appeal."
In support of its claim of full deduction, the assessee has relied upon the decision in the case of Harshad P. Doshi Vs. ACIT 109 TTJ 335 (Mum). However, on going through various judgments on the issue of Hon'ble Court/Tribunals as also of CIT(A)- I & II, Thane, I 14 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 find that the majority view is in favour of proportionate deduction where commercial user exceeded the prescribed limit. Thus, respectively following the majority view, I hold that the appellant is entitled to a proportionate deduction u/s. 80IB(10) i.e. on the profits derived from residential units of UK Residential Complex only. The A.O is accordingly, directed to allow the relief. Eventually, additional grounds raised, stand dismissed."
6. The ld. CIT(A) also allowed claim of deduction in respect of three row houses after having the following observation :-
"On careful consideration of facts of the case and submission of appellant, I find that the 3 row houses have been approved for Built up area of 1471 sq.ft. each and only on inclusion of 50% area of open terrace i.e. 306.62 sq:ft., the Built up Area exceeded the prescribed' limit of 1500 sq.ft. As per the definition of "built up area" which came on the statute only w.e.f. 01.04.2005, the "built up area" means the inner measurements of the residential units 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. Thus, even as per this definition, the open terrace cannot be included in the built up area. Moreover, since the project of appellant was approved in F.Y. 2003-04, the built up area has to be considered as per D.C. Rules which undisputedly is 1471 sq.ft. i.e. below prescribed limit. This view gets support from the decision of ITO vs. AIR Developers (2009) 122 ITD 125 (Nag). In the case of Amaltas Associates Vs. ITO (2011) 131 ITD 142 (Ahd.}, it has been very clearly held that the "open terrace" cannot be considered in "built up area" even as per the definition of the same given in section 80IB(10) of the Act. Accordingly this issue is decided in the favour of appellant."
7. With regard to A.O.‟s observation that U.K. Residential & U.K. Commercial are part of one approval and some portion of commercial was under construction, therefore, the claim of deduction u/s 80IB(10) cannot be allowed to the assessee. The assessee‟s submission on this ground was under:-
"4. UK RESIDENTIAL AND UK COMMERCIAL IS PART OF ONE 15 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 APPROVAL AND SOME PORTION OF THE UK COMMERCIAL IS STILL UNDER CONSTRUCTION ;-
As explained to above the appellant is having two undertaking of which U.K. Commercial having shopping on ground & offices at first & second floor. During the assessment year 2006-07 there was no sale in U.K. Commercial and total project was under construction which has been shown as closing WOI* in progress. The undertaking which has not claimed any deduction u/s 80 IB than there is no provision in the income tax which says U.K. Commercial should get completion certificate. Your appellant doesn't agree with assessing officer to say that if U.K. Commercial is not obtain completion certificate than she will not allow deduction u/s 80 IB in case of U.K. Residential. Both undertakings are having separate set of accounts which were, already submitted to assessing officer for her verification during the, assessment proceeding/ therefore this cannot reason to disallow deduction."
8. By the impugned order, the ld. CIT(A) allowed assessee‟s claim by treating the same as two different projects after observing as under:-
"(b) Since I have already held that U.K. Commercial & U.K. Residential are two different projects on the same piece of land of 17.67 Acres, the non-completion of commercial project will not in any way affect the eligibility of U.K. Residential project for deduction u/s. 80IB(10). Thus, this issue, undoubtedly needs to be decided in the favour of appellant and hence the same decided accordingly."
In respect of strict interpretation of provisions relating to exemption as stated by the A.O, the appellant has heavily relied upon the decision of Hon'ble Kolkata High Court in the case of CI vs. Bengal Ambuja Housing Development Ltd. In I.T. Appeal No. 458 of 2006 dated 05.01.2007 wherein the appeal of revenue was dismissed on the ground that no substantial question of law is involved in the matter. Thus, the decision of Hon'ble ITAT Kolkata in the case of Bengal Ambuja Housing Development Ltd. Vs. DCIT (ITA No. 1595/Kol/200S dt. 24.03.2006) stands confirmed. The Hon'ble ITAT, Kolkata has .held that the section 80IB(10) has been enacted with a view to provide incentive for businessmen to undertake 16 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 construction of residential accommodation of smaller residential units and the deduction was intended to be restricted to the profit derived from small units and not from larger ones. Since the assessee had claimed deduction only on account of smaller units which were fulfilling all the conditions as contained in section 80IB(10), the deduction cannot be disallowed on profit of housing project containing both small and larger units as the section also does not speak of such denial. It is also held that denial of such deduction is on account of rather restricted ad narrow interpretation of the provisions of clause (c) of section 80IB(10) while the provisions should be liberally interpreted in view of the decision of Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. 196 ITR 188 (SC). Thus, the claim of assessee on pro-rata income on qualifying units was rightly allowed by the CIT(A).
10. Since the issue regarding interpretation of provisions for deduction u/s 80IB(10) is specifically covered by the above decisions in the favour of assessee, I also hold that the appellant is entitled to proportionate deduction on income arising from the residential portion of the U.K. Residential project which otherwise satisfies all the conditions of section 80IB(10) of the Act. The A.O is directed to work out the deduction u/s. 80(10) accordingly and allow the same to the assessee."
9. Against the above order of the ld. CIT(A) both assessee and Revenue are in appeal before us.
10. We have considered the rival contentions and found from record that assessee‟s claim for deduction u/s 80IB(10) of the Act was declined by the A.O. on the plea that housing project of assessee was approved by the Local Authority as "residential as well as commercial project" and not as "Housing Project". The A.O. also stated that assessee has not completed the project within the specified time i.e. 31-08-2008 and Completion Certificate has not been granted by the Competent Authority. The A.O. also observed that the commercial area exceeded the prescribed limit of 5%. The A.O. also found that built up area of 17 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 three residential row houses exceeded 1500 sq. ft. By the impugned order, the ld. CIT(A) after considering the facts of the case, assessee‟s submission as well as judicial pronouncements held that assessee is eligible for deduction with respect to the residential portion and not on the entire project. The ld. CIT(A) held that project of assessee was approved before 1-4-2005 and at that time there was nothing was mentioned relating to commercial area. Accordingly by relying on the decision of Hon‟ble Bombay High Court in the case of CIT vs. Brahma Associates [2011] 333 ITR 289, allowed assessee‟s claim on the residential portion. The ld. CIT(A) had dealt with each and every objection of A.O. and after recording detailed finding allowed proportional claim of deduction on residential portion of project.
11. We found that assessee has claimed deduction only with respect to UK Residential Project and not with respect to UK Commercial Project. The project was approved on 8-4-2003 i.e. before introduction of limit of commercial area. Commercial area was constructed as per D.C. Rules. The issue with respect to claim u/s 80IB(10) having commercial area has been considered by the Hon‟ble Bombay High Court in the case of CIT vs. Happy Home Enterprises [2014) 51 taxmann.com 281 (Bombay) and CIT vs. Kanakia Spaces Pvt. Ltd. ITXA No. 308 of 2012 vide order dated 19th September, 2014 wherein it was held that there was no restriction on the quantum of commercial area that could be included in the said housing project and the same was to be determined by the local authority in accordance with its own rules and regulations. In respect of project which has been approved before 31-3-2005, the condition imposed by Finance (No.2) Act 2004 w.e.f. 1-4-2005 regarding the quantum of commercial area is not applicable. The precise observation of the Hon‟ble Bombay High Court is as under:-
18 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 "It would be important to note another amendment that was brought about by Finance (No.2) Act, 2004 to sub-section (14) of section 80-IB, w.e.f. Ist April 2005, section 80-IB(14) was also amended by the same Finance (No.2) Act, 2004 and for the first time under clause (a) thereof, the words "built-up area" were defined. Section 80-IB(14)(a) reads thus:-
"(14) For the purposes of this section,-
(a) "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;"
23. Prior to insertion of section 80-IB(14)(a), in many of the rules and regulations of the local authority approving project, "built-up area" did not include projections and balconies. Probably, taking advantage of this fact, builders provided large balconies and projections making the residential units far bigger than as stipulated in section 80-IB(10), and yet claimed the deduction under the said provision. To plug this lacuna, clause (a) was inserted in section 80-IB(14) defining the words "built-up area" to mean the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls, but did not include the common areas shared with other residential units. The reason we' are referring to this provision is because it too was brought about for the first time w.e.f. 1 st April, 2005 and the Karnataka High Court had the occasion to consider whether it would apply to housing projects approved by the local authority before 31 st March, 2005. We have relied upon the reasoning of the judgement of the Karnataka High Court for coming to the findings that we have, in this judgement."
12. In view of the above, since the project of the assessee has been approved prior to 1-4-2005, the old law shall apply and the conditions with regard to commercial establishment which has been inserted w.e.f. 1-4-2005 will not be applicable. Similar view has been taken by the Hon‟ble Gujarat High Court in the case of Manan Corporation vs. ACIT (2012) 78 DTR 205 (Guj.), Mumbai ITAT in the cases of Ramprasad Agarwal in ITA No. 2435 & 2163/Mum/2010 dated 5-9-2012 and ITO vs. Sai Krupa Developers in ITA No. 3661/Mum/2011 dated 13-3-2012. In view of the above, we modify the order of ld. CIT(A) and direct the 19 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 A.O. to allow the full claim of deduction u/s 80IB(10) of the Act with respect to the entire project without restricting the same to residential area. Thus, the grounds taken by the assessee in all he years for allowing full claim of deduction u/s.80IB(10) are allowed.
13. With regard to the completion certificate, the ld. CIT(A) after careful consideration of the facts of the case held that in respect of project approved prior to 1-4-2005, no completion certificate was required. The view of the ld. CIT(A) is also supported by the decision of Hon‟ble Madras High Court in the case of CIT vs. Jain Housing & Construction Ltd. (2013) 30 taxmann.com 131.
14. In respect of A.O.‟s objection in respect of three raw houses, the ld. CIT(A) held that open terrace area cannot be included in built up area in respect of project approved prior to 1-4-2005. The built up area has to be considered as per DC rules according to which the area worked out to be 1471 sq. ft. ie. below the prescribed limit.
15. With regard to the A.O.‟s allegation regarding UK Commercial and UK residential are part of one approval, therefore, assessee is not eligible for deduction in respect of UK residential project also, the ld. CIT (A) held that these are two different projects on the same piece of land of 17.67 acres. Since the assessee has not claimed any deduction in respect of UK Commercial project, the assessee‟s claim for deduction u/s 80IB(10) cannot be declined in respect of UK residential project having land of more than one acre. In view of the above discussion, respectfully following the decision of Hon‟ble jurisdictional High Court in the cases of M/s Happy Home Enterprises and M/s Kanakia Spaces Pvt. Ltd. (supra), we direct the A.O. to allow full claim of the deduction u/s 20 ITA 3920 to 3922/M/12 & ITA 4673 to 4675/M/12 ITA 6557/M/12 80IB(10) of the Act in respect of entire residential project in all the relevant assessment years under consideration.
16. In the result, all appeals of the Revenue are dismissed.
Order pronounced in the open court on 20th February, 2015.
20/02/2015
Sd/- Sd/-
(VIVEK VARMA) (R.C. SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated 20/02/2015
RK , Sr. PS
Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. / The CIT -Concerned, Mumbai
4. / CIT --Concerned, Mumbai
5. / DR, ITAT, Mumbai F Bench
6. Guard file.
/ BY ORDER,
//True Copy//
(Dy./Asstt. Registrar)
/ ITAT, Mumbai
21 ITA 3920 to 3922/M/12 &
ITA 4673 to 4675/M/12
ITA 6557/M/12