Income Tax Appellate Tribunal - Pune
G.K. Builders,, Pune vs Assessee on 2 July, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member,
and Shri G.S.Pannu, Accountant Member.
ITA.No.1077 & 1078/PN/2010
(Asstt. Years : 2005-06 & 2006-07)
G.K.Builders,
S.No.122/1+2+3,
Dwarakadheesh Residency,
Pimpale Saudagar,
Pimpri,
Pune .. Appellant
Vs.
ITO, Ward-8(2),
Pune .. Respondent
Appellant by : Shri Nikhil Pathak
Respondent by : Sri S.K.Singh
Date of Hearing : 02.07.2012
Date of Pronouncement : 30.07.2012
ORDER
PER SHAILENDRA KUMAR YADAV, JM:
Both these appeals pertain to same assessee on the point of deduction u/s.80IB(10). So they are being disposed off by a common order for the sake of convenience.
2. In ITA.No.1077/PN/2010, there is an issue of deduction u/s.80IB(10) of Rs.2,49,21,620/- in respect of the profit of the project Dwarakadeesh Residency. The appellant is a registered firm engaged in the business of development of land, construction of building and sale thereof. From A.Y. 2005-06, assessee firm filed return of income on 27.10.2005 disclosing total income of Rs.7,29,400/-. The Assessing Officer, hereinafter called as "A.O.", vide order dated 24.12.2007 assessed the assessee's total income at Rs.2,56,51,020/-. Matter was carried before the first appellate 2 authority who has upheld the order of the A.O. on main issue and also rejected the contention of the assessee for proportionate deduction. The same has been opposed before us. The assessee has also raised additional ground which reads as under:
1. The appellant submits that the learned A.O. erred in disallowing the deduction u/s.80IB(10) on the ground that the project Dwarakadheesh Residency constructed by the assessee included commercial area and since the project was started prior to 01.04.2005, the assessee is not entitled to claim the deduction.
2. The learned A.O. failed to appreciate that the housing project of the assessee was started in F.Y. 2003-04 and therefore, there was no restriction on the commercial area includible in the housing project and hence, there was no reason to deny the deduction u/s.80IB(10).
3. The facts of the case before us are that A.O. has rejected the claim of deduction u/s.80IB(10) on the point that built up area of row house No.36 consisted of total built up area of 1587 sq.ft.
which exceeded maximum prescribed limit, i.e., 1500 sq. ft. for allowing deduction u/s.80IB(10). He further held that the entire project is not eligible for deduction u/s.80IB(10). In this regard, the Ld. Authorised Representative submitted that the A.O. has rejected the claim of the assessee on the ground that one of the row houses of the whole project is exceeding built up area of 1500 sq.ft. because the said row house consists of 1479 sq. ft. of built up area (main area) plus 108 of Terrace as projection area. So he disallowed the claim u/s.80IB(10) with regard to the whole project.
4. It is undisputed that commencement is dated 11.07.2003, which is evident from commencement certificate placed at page Nos.34 to 35 of the paper book. A.O. at page 3, para 5, has also held that project in question started in F.Y. 2003-04. Our attention was also drawn to the report of the DVO placed at pages 36 to 47 dated 29.11.2007 wherein at page 38 of the paper book filed by the assessee, details of various row houses was given with regard to the project in question and it is Row House No.36 whose built up area has been mentioned at 1479 sq.ft. and terrace area has been 3 mentioned as 108 sq.ft., which is only subject matter of dispute responsible for rejecting the claim of the assessee with regard to the whole project. So the disputed row house has a main area of 1479 sq.ft. and Terrace area of 108 sq.ft. The Ld.AR submitted that this issue has been decided in Brahma Builder wherein on the point of terrace at page 11 para 7.3 and 7.4, the Tribunal has observed as under:
7.3 With regards to area of the flat that we find that the CIT has initially taken a stand that the built up area of the duplex flats on 6 th and 7 th floors exceed 1500 sq.ft. each. He stated that the built up area including the terrace is 1595 sq.ft. in building No. B4 and B5.
This is arrived at by considering the built up area at 1330 sq.ft. and terrace of 265 sq.ft. for each flat and therefore, he held that the deduction is not allowable to Brahma Aangan Project as the built up area of a few flats exceeded 1500 sq.ft. each. In this context, it was the stand of the assessee that the built up area was wrongly calculated and in a separate paper book containing 6 pages, the assessee has given detailed working of the built up area as per the definition in the Act. Accordingly the total area was worked out to 1212.93 sq. ft and terrace of 281.93 sq.ft. Thus the total is less than 1500 sq.ft. Hence the objection of the CIT is misplaced.
7.4 Alternative argument on behalf of the assessee was that the question of including the terrace in the built up area comes up only w.e.f. 1-4-2005, because the definition is introduced in the section with effect from that date. For the period prior to 1-4-2005 no such definition was on the statute and hence the built up area has to be considered as per the DC rules of the sanctioning authority. In this regard, it was submitted that the DC rules do not include terrace in the built up area, the definition of built up area and that the area covered immediately plinth level of the building or the external area of any upper floor whichever is more is the built up area. As the terrace is open to sky, it is not includible in the built up area and that is why it is excluded by the assessee's Architect from the built up area. The view that the amended definition of built up area that the terrace is included w.e.f. 1-4-2005 is not applicable for the earlier years as held by the ITAT Pune Bench in the case of Tushar Developers in ITA No. 165/PN/2007 and 94/PN/2007 for A.Y. 2003-04 and 4 2004-05 dated 31-5-2011, wherein it has been held as under:
"So far as the issue of application of definition of 'Built up area' as brought on the Statute by Finance Act (2004) vide sub-section 14 to section 80-IB of the Act we.f. 1-4- 2005 is concerned, we respectfully following the decision of Hon'ble Bombay High Court in the case of CIT Vs. Brahma Associates (supra) hold that the amended provision is stated to come w.e.f. 1-4-2005 is having prospective effect only. We are however, of the view that in absence of such definition before 1-4-2005 in section 80-IB, the definition "built up area' as per the local law i.e. is related provisions available with the local municipal corporation will be helpful to decide the issue, as to whether terrace area and garden exclusive domain of the flat/row house owners will be included in the area of the flat while examining as to whether the same is well within the prescribed area of the flat/row house i.e. 1500 sq.ft. as per section 80-IB(10) as prevailing during the year under consideration. We, thus, set aside the matter on the issue for fresh consideration to the AO to decide the same as per our above finding in this regard after affording opportunity of being heard to the assessee."
In view of above discussion the CIT was not justified to invoke provisions u/s.263 of Act. Moreover, the ITAT Mumbai Bench in the case of Haware Constructions (P) Ltd. Vs. ITO (2011) 64 DTR (Mumbai) 251 has also taken a view that the terrace is not includible in the built up area of the flat prior to 1-4-2005 and hence for the projects commenced prior to 1-4-2005, terrace is not includible in the built up area. In view of the above, the decision of the CIT on this account does not justify the invoking of provisions u/s. 263 of the Act.
7.5 Without prejudice to above the CIT is not justified in holding that the entire project Brahma Aangan is not entitled to the deduction just because 4 duplex flats in B4 and B5 buildings are having the built up area exceeding 1500 sq.ft. The ITAT Third Member in the case of Sanghvi & Doshi Enterprises Vs. ITO (2011) 60 DTR (Chennai) (TM)(Trib) 306 has held that only the flats exceeding the limit of built up area can be excluded and the deduction should be allowed on the balance flats which are within the limits of built up area mentioned in the section. Similar view is also taken by ITAT Kolkata Bench in the case of Bengal Ambuja Cement. In view of this alternate contention, CIT was not justify to invoke provisions of 263 of the Act on this account.
54.1. Our attention was also drawn to para 13 at page 19 wherein Tribunal has observed as under:
13. In view of above it is undisputed that the project had started prior to 1-4-2005 the definition of built up area as given in section 80IB(14) is not applicable and the built up area as per the DC rules of PMC was less than 1500 sq.ft. The Assessing Officer has included the area covered by the terrace in the built up area. The terrace is not includible in the built up area computed as per DC rules. Accordingly, the built up area of the flat is less than 1500 sq.ft. and therefore, the CIT(A) was justified in allowing the deduction as claimed by the assessee.
4.2. In this regard, it was submitted that the issue was covered and is to be decided as it is covered by Brahma Builders (supra).
On other hand, the Ld. Departmental Representative supported the orders of the authorities below and submitted that amended provisions are not applicable for the A.Y. 2005-06 which is under consideration.
5. After going through the above submissions and material on record, we are not inclined to concur with the finding of the CIT(A). The deduction under question has been rejected by the A.O. and confirmed by the CIT(A) on the ground that it exceeded the prescribed limit with respect to Row House No.36. Accordingly, the whole project was rejected. The A.O. has reached to the conclusion after including the terrace area of 108 sq.ft. In Brahma Builders (supra), whether the terrace in built up area comes only w.e.f. 01.04.2005 because the decision is introduction in the section w.e.f. the said date. For the period prior to 01.04.2005, no such definition was on the statute and hence, the built up area has to be considered as per the DC rule of the sanctioning authority. The DC rules do not include terrace in the built up area. So the amendment which has come in this regard w.e.f. 01.04.2005 will not affect the projects which have commencement prior to 01.04.2005. This issue has been decided following Tushar 6 Developers in ITA.No.165/PN/2007 and 94/PN/2007 in favour of assessee and in Haware Constructions (P) Ltd. similar view has been taken whereby it was held that Tushar Developers is not includible in built up area of the flat prior to 01.04.2005 and hence for the project commenced before 01.04.2005, terrace is not includible in the built up area. In view of this, assessee is entitled for deduction u/s.80IB(10) as claimed.
6. The issue raised by way of additional ground is not arising in the year under consideration but the same is arising in the subsequent year, so the same would be discussed in that year.
ITA.No.1078/PN/20107. This appeal has been filed by the assessee on two issues, one is rejection of assessee's claim u/s.80IB(10) when built up area of Row House No.36 exceeded 1500 sq.ft. and second issue has been raised by way of additional ground wherein claim of assessee has been rejected on the ground of inclusion of commercial area, in view of the amendment to the provisions of section 80IB(10). The issue of disallowance of deduction u/s.80IB(10) on the ground that built up area of the Row House No.36 exceeded 1500 sq.ft. This issue has been discussed and decided in ITA.No.1077/PN/2010. The facts being similar including the project is same, so this is falling in the same analogy, assessee is entitled for deduction u/s.80IB(10) as claimed.
8. Coming to the second issue raised in A.Y. 2006-07 with regard to rejection of the assessee's claim on the point of commercial area. In this regard our attention was drawn to page 3 para 6 of the order of the CIT(A) wherein it has been observed as under:
"6. I have given careful consideration to the contents of the assessment order, the Statement of Facts submitted by the appellant, and the detailed written and oral submissions made by the learned AR of the appellant. The same ground of appeal had been raised by the appellant in their appeal for A.Y. 2005-06. Further, the relevant facts as well as the 7 submissions made on behalf of the appellant were along the same lines for that year too. In my appellate order for that year, I have discussed the factual position obtaining in the appellant's case, as well as the legal requirements for claiming deduction under the said provision in considerable detail before confirming the disallowance of deduction under section 80IB(10). I do not consider it necessary to reproduce everything that has been said in that appellate order, but rely upon my decision in that order to confirm the disallowance of deduction under section 80IB(10) to the appellant for the A.Y. in question under this appeal too."
9. The A.O. as well as the CIT(A) has rejected the claim of the assessee on the point of commercial issue. It is strange to note that the A.O. as well as the CIT(A) has held that following A.Y. 2005-06 this issue is being decided against the assessee. But there was no discussion in A.Y. 2005-06 with regard to the disallowance of section 80IB(10) on the point of commercial issue. In this regard, the Ld. Authorised Representative drew our attention to the statement of facts filed before the CIT(A) wherein at page 2, the assessee has submitted as under:
"According to learned assessing officer the project is not eligible for deduction under section 80IB(10) of the I.T. Act as the project consisted of shops admeasuring about 120.07 square meters. The Finance (No.2) Act 2004 has substituted section 80IB(10) and according to substituted section housing project means a project in which the built up area of shops or other commercial establishment included in housing project does not exceed 5% of the aggregate built up area or two thousand square feet whichever is less. The learned assessing officer stated that the claim of deduction of the appellant was rejected by his predecessor on this ground in the assessment year 2005-06. This is factually a wrong/incorrect statement. The appellant brought to the notice of the appellant that there is not even a whisper in the assessment order on this point for the assessment year 2005-06. As far as the disallowance of deduction on the ground of shops or commercial area, the learned assessing officer passed remark in the beginning of the assessment order. There is not a single reference in respect of the same."
In this background it was submitted that inspite of this, CIT(A) has not adjudicated the issue. Since this issue was raised before the CIT(A) even if it is not mentioned in the order of the CIT(A), it is presumed that the said ground raised specifically mentioned in the 8 statement of facts as discussed above, it amounts to dismissal as held in Sindhia 142 ITR 589. The Ld. Authorised Representative submitted that the same ratio of Sindhia has been followed in 98 TTJ 506 wherein it was submitted that in case CIT(A) failed to deal the issue raised amounts to dismissal and ITAT may adjudicate the same. In this regard the Ld.AR drew our attention to para 7, 7.1 and 7.2 wherein issue of deduction u/s.80IB(10) on the point of commercial area has been discussed and decided as above. So this issue should be decided in favour of the assessee. On other hand, the Ld. Departmental Representative submitted that year under consideration is 2006-07 which is subsequent to the amendment so assessee is not entitled for deduction in view of the amendment.
10. After going through the above submissions and material on record, we find that project consists of commercial operation. Stand of the assessee has been that deduction is held in respect of the house project and not a commercial project. This issue has been decided by Bombay High Court in the case of Brahma Builders reported in 333 ITR 289 wherein it has been held that whether a project is having a commercial area, it does not mean that it is not housing project. Secondly, it was pointed out on behalf of the assessee that the project has commenced much before 01.04.2005 from which date sub-clause (d) of section 80IB(10) was introduced. The commencement certificate is not a subject matter of the dispute as discussed above. The assessee had no occasion to comply with the new condition introduced w.e.f. 01.04.2005 that commercial operation should not exceed 2000 sq.ft. and hence does not applicable in respect to the projects which have commencement before to 01.04.2005. This position is supported by decisions reported by ITAT in Opel Shelters Pvt. Ltd. and D.S.Kulkarni Developers in ITA.No.219/PN/2009 and 73/PN/2003 for A.Y. 2005-06 dated 31.05.2010. Following the same reasoning, we are not inclined to concur with the finding of the CIT(A). The A.O. as well as the CIT(A) were not justified in disallowing the deduction u/s.80IB(10) on the ground that project Dwarakadeesh constructed 9 by the assessee included commercial area and since project was commenced prior to 01.04.2005, the assessee was not entitled for deduction. The A.O. failed to appreciate that the housing project of the assessee has started in F.Y. 2003-04 and therefore is not commercial operation includible in housing projects hence there is no justification for denying deduction u/s.80IB(10). The A.O. is directed accordingly.
11. In the result, both these appeals of assessee are allowed, while appeal of the revenue is dismissed.
Decision is pronounced in the open court on 30th July, 2012.
Sd/- Sd/-
( G.S.PANNU ) ( SHAILENDRA KUMAR YADAV )
ACCOUNTANT MEMBER JUDICIAL MEMBER
gsps
Pune, dated the 30th July, 2012
Copy of the order is forwarded to:
1. The Assessee
2. The ITO, Ward-8(2), Pune
3. The CIT(A)-V, Pune.
4. The CIT concerned.
5. The DR "B" Bench, Pune.
6. Guard File.
By Order
Sr.Private Secretary,
Income Tax Appellate Tribunal,
Pune.