Income Tax Appellate Tribunal - Pune
Income-Tax Officer,, vs Manas Developers,, Bhusawal on 30 March, 2017
आयकर अपील य अ धकरण] पण
ु े यायपीठ "ए" पण
ु े म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
सु ी सष
ु मा चावला, या यक सद य एवं
ी अ नल चतव
ु द
" , लेखा सद य के सम%
BEFORE MS. SUSHMA CHOWLA, JM AND
SHRI ANIL CHATURVEDI, AM
आयकर अपील सं. / ITA No.1543/PUN/2014
नधा'रण वष' / Assessment Year : 2010-11
The Income Tax Officer, .......... अपीलाथ /
Ward 2(1), Jalgaon,
Appellant
Old B.J. Market, Jalgaon,
Pin - 425001.
बनाम v/s
Manas Developers,
C/o. Color Stop, Khadka Road,
Bhusawal - 425201. .......... यथ /
Respondent
PAN : AAMFM1444J
अपीलाथ क ओर से / Appellant by : Shri Anil Kumar Chaware.
यथ क ओर से / Respondent by : None
(Written submissions)
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing : 08.03.2017 Date of Pronouncement: 30.03.2017
आदे श / ORDER
PER ANIL CHATURVEDI, AM :
This appeal filed by the Revenue is emanating out of the order of Commissioner of Income Tax (A) - 2, Nashik dt.23.05.2014 for the assessment year 2010-11.
2. The relevant facts as culled out from the material on record are as under :-
2.1 Assessee is a partnership firm stated to be engaged in the business of developing lands, construction and houses.2 ITA No.1543/PUN/2014
AY.No.2010-11 Assessee filed its return of income for A.Y. 2010-11 on 30.09.2010 declaring total income at Rs.Nil after claiming deduction of Rs.33,48,612/- u/s 80IB(10) of the Act. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dt.08.03.2013 and the total income was determined at Rs.33,48,610/- inter-alia by disallowing the claim of deduction u/s 80IB(10) of the Act.
Aggrieved by the order of AO, the matter was carried before the Ld. CIT(A), who vide order dt.23.05.2014 (in appeal No.Nsk/CIT(A)-2/83/13-14) allowed the appeal of the assessee.
Aggrieved by the order of Ld. CIT(A), Revenue is now in appeal before us and has raised the following grounds :
"1. In the facts & circumstances of the case & law, whether the Ld. CIT(A) was justified in directing the assessing officer to allow the deduction u/s 80IB(10) of the Income Tax Act 1961(hereinafter referred as "Act") of Rs 33,48,612/- to the assessee?
2. In the facts & circumstances of the case & law, whether the Ld. CIT(A) was justified in directing the assessing officer to allow the deduction u/s 80IB(10) of the Act to the assessee ignoring the fact that the assessee had constructed the residential unit in excess of 1500 sq.ft. in violation to the provisions of section 80IB(10) of the Act?
3. In the facts & circumstances of the case & law, whether the Ld. CIT(A) was justified in directing the assessing officer to allow the deduction u/s 80IB(10) of the Act to the assessee by relying upon the ITAT Bench "A" Pune's order dt.30.9.2013 in assessee's own case for AY 2007-08 & 2008-09, when the section 80IB(10) (f)of the Act clearly prohibits the assessee to sell more than one residential unit to the buyer, his/her spouse, his/her minor children of the buyer in case the buyer is an individual?
4. In the facts & circumstances of the case & law, whether the Ld. CIT(A) was justified in directing the assessing officer to allow the deduction u/s 80IB(10) of the Act to the assessee, ignoring the fact that deviation 3 ITA No.1543/PUN/2014 AY.No.2010-11 or violation of even a single clause of sub-section (10) of section 80IB, called for disallowance of claim u/s 80IB(10) as it is given for the entire project?
5. In the facts & circumstances of the case & law, whether the Ld. CIT(A) had erred in allowing the deduction u/s 80IB(10) without appreciating the following facts of the case:
i) That the land on which the said project was claimed to have been developed was in the name of the individual partners whom can never mean to "industrial undertaking or undertaking" within the meaning of section 80IB.
ii) That the project as a whole had not been approved by the local authority. The separate approvals obtained for construction of residential unit on each plot was against the scheme of section 80IB(10) and Circular No 05/2005 dated 15.07.2005 and they were not "Building Plan" as per the said circular.
iii) That the completion certificate from Local Authority was not obtained for the entire "Building" but for individual unit separately.
6. On the facts and in circumstances of the case, the order of the CIT(A) be vacated and that of the A.O. be restored."
3. Before us, at the outset, ld. D.R. submitted that though the Revenue has raised various grounds but the sole controversy to be decided is with respect to allowing the claim of deduction u/s 80IB(10) of the Act.
4. During the course of assessment proceedings, AO noticed that assessee had shown sale of bungalow in its project named Sunder Nagar and the profit earned from the sale of Rs.33,48,612/- was claimed as deduction u/s 80IB(10) of the Act. AO noticed that the land on which the project was constructed was purchased by Shri Nareshkumar Kanhiyalal 4 ITA No.1543/PUN/2014 AY.No.2010-11 and Shri Husnoddin Shamsoddin in their individual capacity. It was submitted that the land was contributed by the aforesaid two persons as their capital in the firm. AO noted that in the capital account of the aforesaid two persons, there was no entry of capital contribution. He therefore concluded that the land did not belong to the firm but it belonged to the two persons in their individual capacity. He also noticed that the commencement and completion certificate was obtained in respect of each unit as and when it was sold and was not for the whole project.
According to AO, the deduction u/s 80IB(10) of the Act was allowed to a housing project and not to a residential unit. He also noticed that the individual plans involving construction of small bungalow were being separately taken from local authorities and assessee did not have any approved project by name Sunder Nagar and the individual projects / bungalow were having area less than one acre. He was therefore of the view that assessee is not eligible for deduction u/s 80IB(10) of the Act and accordingly denied the claim of deduction. Aggrieved by the order of AO, assessee carried the matter before Ld. CIT(A), who held as under :
"6.1. I have carefully gone through the submission of the appellant and the material on record. Though the land is in the name of partners, they have contributed the same as their capital contribution to the firm and 'thereafter, all the expenses for development of land have been incurred by the firm. Further, the sale receipts from residential units have also been credited by the firm. In order to claim deduction u/s 80-IB(l0), the assessee needs not be the owner of the land. While going through the relevant section, it can be seen that nowhere it is mentioned that the undertaking in order to claim deduction u/s 80-IB(10) should be the owner of the land. The said issue specifically relating to deduction u/s 80-IB(10) has already been decided in number of cases including the following:-5 ITA No.1543/PUN/2014
AY.No.2010-11 i] Radhe Developers vs. ITO [2008]113 TTJ (Ahd) 300. The said decision of the Hon'ble IT AT has been upheld by the Hon'ble Gujarat High Court. [2012] 204 Taxmann 543 Guj] ii] ITO vs. Shakti Corporation [2009] 32 SOT 438 [ Ahd ] iii] KZK Developers vs. ITO [2010 ]130 TTJ [CTK] [UO] 57.
iv] Amaltas Associates vs. ITO [2011] 142 TTJ(Ahd) 849.
v] ACIT vs. Bombay Real Estate Dev. Co. (P)Ltd[2011] 64DTR [mum]137 vi] Commissioner of Income Tax vs. Ceebros Property Development· Pvt Ltd [2012] 83 CCH 098 Chennai HC Further, Section 45 (3) of the Income Tax Act, 1961 clearly states the law relating to transfer of capital asset to the firm by its partners as their capital contribution. Also u/s 2 (47) of the Income Tax Act, 1961, the transfer includes possession of immovable property given without registration of conveyance deed; and also transactions in agreements to buy or sell any immovable property or any rights thereon. The AO has not considered this important aspect. The judicial decisions cited by the appellant are applicable to his case and therefore the appellant firm is eligible for deduction on this ground.
7. That the Housing project as a whole has not been approved by the Local Authority:-
i) The appellant firm has submitted that the housing project has been built on a survey number 110/2A+2B+2C+111/3/1 and has been named as Sundar Nagar at Bhusawal. The whole layout as one single layout plot has been approved by the local authority, i.e. Bhusawal Municipal Council which further as a whole has been approved by the Hon. Collector, Jalgaon as a residential project. The total area under the layout is 25300 sq mtrs. which exceed 1 acre and after reducing land under roads and garden, the net area comes 16365.64 sq mtrs. After getting approval, only the further development has commenced and therefore, it is one layout and has been approved as a whole housing project. The application for the approval of building permission admeasuring total 10327.66 sq mtrs with total built up area 5894.69 sq mtrs was first made on 12/09/2006 and the first approval was received on 09/10/2006 for a total 84 row houses. Thereafter, the second approval was received dated 29/11/2006 for 14 row houses, 18 flats and 8 shops totally admeasuring 121.34 sq m [approx 1306 sq ft which is far less than 2000 sq ft allowed u/s 80-IB (10)]. The details of all building sanctioned plans granted by Bhusawal Municipal Council are discussed in a chart submitted by the appellant.
Thus, there is no force in the observation made by the AO. that the permission has been taken as and when required. Photocopies of all the above mentioned approved building 6 ITA No.1543/PUN/2014 AY.No.2010-11 permission plans were submitted to the AO's and were on the record of the AO. at the time of assessment.
(ii) The appellant relied on the Explanation [i] to section 80 - IB (10) clause "a" and stated that the restriction is cast on the date of completion with regards to the first approval. The development charges for the entire land was paid in one time. The whole project is only one housing project and has been named as Sundar Nagar and is on the Survey Number which have been wholly numbered as 110/2A+2B+2C+111/3/1 and the said land is above 1 Acre. There is no ambiguity mentioned even by the A.O that the housing project is not on a land exceeding 1 Acre. We have provided one common entrance gate, garden area, etc. to all the resident of the project. The whole residential project has been approved and implemented as a concept of group housing and is one housing project only.
(iii) The Hon. ITAT Nagpur Bench in the case of Income Tax Officer vs. Air Developers (2009) 123 TTJ (Nag) 959, the approval was taken from NIT (Nagpur Improvement Trust) more than once in fact was taken on 6 different occasions. It cannot be said that the assessee developed 6 different housing projects. In view of totality of above facts, the assessee developed one housing project which was on the area exceeding 1 acre.
iv) The Hon.ITAT Ahmadabad "A" Bench in case of Radhe Developers vs. Income Tax Officers and Ors. [2008] 113 TTJ (Ahd) 300, held that wherein the assessee firm had obtained approvals from Local Authority [Vadodara Municipal Corporation] more than once in different financial year, still the benefit of deduction u/s 80-IB (10) was allowed to the Firm.
v) The Hon. ITAT Mumbai "A" Bench in case of Saroj Sales Organization vs. Income Tax Officers [2008] 115 TTI (Mumbai) 485, held that wherein the assessee firm had also obtained building permission of its various wings on various dates and still the benefit u/s 80-IB (10) was granted to the firm.
vi) The appellant further stated that the building permissions are to be taken in accordance with the local laws and the regulations in force and in the instant case, the building permissions have been taken as per guidelines applicable to Class-A Municipal Council. The appellant also cited Circular No 5 of 2005 dated 15/07/2005 issued by CBDT.
The CBDT in a Circular No 5 dated 15/07/2005 in Explanatory Notes relating to Direct Taxes relating to guidelines have issued as follows:
"Extension of the time-limit for obtaining approval of housing projects for the purpose of tax holiday u/s 80 - IB (10) and allowing deduction for re-development or reconstruction of existing building in slum areas have stated that this section does not specifically provide area limit for the garden, the development plan roads, internal means of access etc in the housing project. Therefore, the 7 ITA No.1543/PUN/2014 AY.No.2010-11 same should conform to the project plan approved by the local authority in accordance with the regulations in force.
Also, the area limit of the plot has to be construed with reference to the area of the site on which the housing project is constructed and not with reference to the demarcation of land done by the land development authority"
Thus, through this Circular, the CBDT has already issued clarification stating that the area of the plot for 1 acre should be calculated considering the whole site and not the demarcated land as per land development authority [Town Planning, Department in our case]. The above Circular has been referred by Hon. ITAT, Pune Bench which is a jurisdictional Tribunal in Bunty Builders vs. Income Tax Officer, Ward 2[2], Pune reported in [2010] 127 ITD 286 [Pune] and its decision are binding on the A.O. The circulars issued by the CBOT are also binding on all the A.OS.
vii) In Sreevatsa Real Estates (P) Ltd vs. Income Tax Officer reported in (2010) 41 DTR (Chennai) (Trib) 497, the Hon ITAT Chennai D Bench, has held that the sanction obtained for individual plots forming part of the whole layout should be considered as only a part of whole and thus deduction u/s 80-
IB (10) was allowed to the firm.
viii) In the Commissioner of Income Tax vs. M/s Vandana Properties ITA No 3633 of 2009 with ITA No 4361 of 2010 Dated 28/03/2012 In this case, the Hon'ble Bombay High Court has held that the expression 'housing project' in common parlance would mean constructing a building or group of buildings consisting of several residential unit. In fact the explanation in Section 80 IB [10] supports the contention of the assessee that the approval granted to a building plan constitutes approval granted to a housing project. It further held that in 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 80 - IB [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.
8 ITA No.1543/PUN/2014AY.No.2010-11 The Hon'ble Bombay High Court further held that "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 80 - IB (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 projects that are required to be undertaken on a plot having minimum area of one acre".
7.1 I have carefully considered the Circular No 5 of 2005 dated 15/07/2005 issued by CBDT which have also expressed the same views that" the housing project should conform to the project plan approved by the local authority in accordance with the regulations in force. Also the area limit of the plot has to be construed with reference to the area of the site on which the housing project is construed and not with reference to the demarcation of land done by the land development authority." Moreover, the appellant has also submitted a copy of relevant Section 5 of Standardized Building Bye Laws and Development Control Rules for "A" Class Municipal Councils of Maharashtra wherein it states that "No Person shall carry out any development work including development of land by laying out into suitable plots or development of any land ........................ without first obtaining a separate building permit and commencement certificate for each such building from the authority".
This clearly supports the appellant firm's claim as they cannot override the local laws and has to build the project as per rules laid down by the Bhusawal, Municipal Council [Local Authority] which being an A class municipal council which is bound to follow the statute. It is further seen from the correspondence made between the appellant and the Bhusawal Municipal Corporation that the layout as a whole has been approved by the local authority. The case laws cited by the appellant are also squarely applicable to his case. I, therefore, hold that though the permission for each unit has been taken separately, the appellant firm has taken the same in accordance with the Bye- laws which are binding on the appellant and circular No 5 of CBDT dated 15/07/2005 also upholds the appellant's case and I, therefore, allow this ground of appeal and treat the project as being developed as one housing project.
8. That one of the housing unit sold is in excess of built up area 1500 sq ft as prescribed under section 80 - IB (10). [in case of Rajkumar Parwani and Smt Meena Parwani r/o Bhusawal] The appellant firm stated that they would like to keep a fact on record that Shri Rajkumar Parwani and his wife had purchased 2 separate blocks each admeasuring built up area below 1500 sq ft. The photocopies of 2 sale deeds were submitted to the AO. They are 2 separate blocks and their permissions were also taken separately. These facts were stated to the A.O. In this connection, if the A.O. wanted to confirm whether it was 1 9 ITA No.1543/PUN/2014 AY.No.2010-11 unit or 2 units, a report from Bhusawal Municipal Council could have taken where the AO. had already deputed his Inspector to enquire various other things of the project. In fact, a request could have been made to us to obtain a certificate from Local Authority that the building work had been done/carried according to the permission issued. This would have served the purpose of the AO., whereas a wrong and misleading statement had been taken from Mr. Parwani by the A.O.'s predecessor just to deny the rightful benefit of deduction u/s 80 - IB (10) to the firm.
The appellant enclosed photocopy of a certificate from Bhusawal Municipal Council stating that "the building permission has already been granted for the plots in the whole layout and the building work has been done/carried in accordance with the building permission as granted by Bhusawal Municipal Council". Thus, it is now clear that the Firm built 2 units which later on have been converted by the buyer to 1 to suit his needs.
Further, the appellant stated that it had sold 2 adjacent units to Mr. Rajkumar Parwani and it had submitted the following documents to the AO. in support of its contention that the firm built 2 units:-
a] Building permission from Local Authority for both units obtained separately.
b] Agreement to Sale dated 08/03/2007 executed separately for both the units. At the time of executing the agreement to sale both the units were complete in all respect and the same is also mentioned in the agreement to sale itself. c] Sale deed dated 24/07/2007 of both the units executed separately for both the units.
d] Statement recorded of Mr Badriprasad Chourasiya by the I T Officials at the time of assessment proceedings of AY 2008 - 09, who also had purchased 2 units and have stated that he has purchased 2 separate units from the Firm. e] Certificate from Local Authority dated 17.01.2011 wherein it has certified that the owners have carried the work in accordance with the building permission as granted by Bhusawal Municipal Council.
f] Certificate from Consulting Civil Engineer Shri Deepak Gajare stating that about the Foundation work and structural design is for 2 units.
g] Municipal Tax Receipt issued in the name of Mr Rajumar Parwani & Smt Meena Parwani for 2 units mentioning 2 separate House No .
h] RCC design plans for the 2 houses The appellant further states that the residential units of Mr. Parwani has 2 porches which also further justifies our stand that the firm built 2 units. Your Honour nowhere we will find 2 porches or will built 2 porches in such type of residential units.
Thus, the firm has proved beyond doubt that it has built 2 separate units and which later on have been merged into 1 unit by Mr Rajkumar Parwani by making certain minor amendments. Whereas, the AO. only has the Statement of Mr Parwani in 10 ITA No.1543/PUN/2014 AY.No.2010-11 support but does not have any documentary evidence to support that the firm sold merged 1 unit only to Mr Parwani. In this case the statement of Mr Parwani was taken after 18 months from the handing over of possession which cannot be accepted under any circumstances. The AO's predecessor himself has not accepted Mr Rajkumar Parwani's statement in full because Mr Rajkumar Parwani throughout his statement has also stated that he has purchased the 2 units from Manas Developers only but the AO.'s predecessor did not consider these facts and made the said point as his first ground of disallowance that the property is not in the name of the firm. Thus, the AO. himself disbelieves the statement of Mr. Rajkumar Parwani himself also has not been able to substantiate his stand that he purchased 1 unit and also that all the amendments were carried by the firm.
In Commissioner of Income Tax (Central), Pune vs. M/s Ankit Enterprises ITA (LOD) no 1795 of 2012, the Hon'ble Bombay High Court was faced with the following question of law in Question ( ii ) "Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that even two adjoining flats joined to constitute a single residential unit cannot be treated as one unit if adjoining flats were approved by local authority as separate unit?"
The Hon'ble Bombay High Court held that "so far as question ( ii ) is concerned, in the impugned order the Tribunal has recorded a finding of fact that two adjoining flats were approved by the local authority as separate units and completion certificate issued on that basis. Therefore, on the above finding of fact, the Tribunal held that the two flats cannot be treated as one unit to compute the built up area for the purposes of Section 80- IB (10) of the Income Tax Act, 1961. The decision of the Tribunal being based on finding of fact, we see no reason to entertain question(ii).
In fact, in the following cases pro-rata deductions or full deduction has been allowed where the built up area exceeded the specified area u/s 80 - IB (10)
i) G V Corporation vs. Income Tax Officer [2010]133 TTJ (Mumbai)l78.
ii) Sreevatsa Real Estates [P] Ltd vs. Income Tax Officer [2010] 41 DTR (Chennai) (Trib) 497
iii) SJR Builders vs. Asst. commissioner of Income Tax [2010] 3 ITR 569 [ Bang]
iv) Asst Commissioner of Income Tax vs. Sheth Developers (P) Ltd ( 2009 ) 33 SOT 277 ( Mumbai ) .
v) Asst CIT vs. Bengal Ambuja Housing Development Ltd [ 2007 ] 39 - D , BCAJ 546
vi) Emgeen Holdings Pvt Ltd vs. DCTT ,Range 9 (l) , Mumbai TA No 332/Mum/2010 order dt 11.05.2011
vii) The Income Tax Officer vs. M/s Raghvendra Construction ITA No 7l5/Bang/2010 order dt 07.01.2011 11 ITA No.1543/PUN/2014 AY.No.2010-11
viii) M/s Namah Estates vs. ITO. ITA No.29/Hyd /2010 order dt 09.04.2010
ix) Sanghvi & Doshi Enterprises vs. IT O. (2011) 141 TTJ (Chennai ) (TM) 1
x) Haware Constructions (P) Ltd vs. ITO. (2011) 64 DTR (Mumbai ) (Trib) 251
xi) DCIT vs. Brigade Enterprises (P) Ltd [2008] 119 TTJ (Bang) 269 In view of the above submission it is requested to allow the deduction u/s 80 - IB (10) and oblige on this ground."
8.1 I have gone through the written submission and material on record. During the appellate proceedings in order to verify the built up area about the adjacent row houses, my predecessor had asked the appellant to produce sale deeds of adjacent residential units near Mr. Parwani & Building Permission of all the units issued by the Local Authority. It is observed that no building permission is in excess of 1500 sq ft as prescribed u/s 80 - IB 10). Besides this appellant firm has voluntarily submitted a Certificate from Chief Officer, Bhusawal Municipal Council dated 17/01/2011 which states that the "Building permission has already been granted for the plots in whole layout and the building work has been done/carried in accordance with the building permission as granted by Bhusawal Municipal Council." Further, the appellant has submitted one more Certificate from Bhusawal Municipal Council dated 07/02/2011 which in its annexure enclosed also summarizes the built up area of each building completed and in this also none of the residential unit is having built up area exceeding 1500 sqft, The appellant has produced adequate material in support of his contention that no unit was more than 1500 sq ft. A perusal of record reveals that the AO also got the inspection done of the residential unit of Shri Parwani. The A.R. of the Appellant has also discussed the Jurisdictional Bombay High Court judgement in the case of Commissioner of Income Tax (Central), Pune vs. M/s Ankit Enterprises ITA (LOD) no 1795 of 2012, in which the Hon'ble Bombay High Court held that "the Tribunal has recorded a finding of fact that two adjoining flats were approved by the local authority as separate units and completion certificate issued on that basis. Therefore, on the above finding of fact, the Tribunal held that the two flats cannot be treated as one unit to compute the built up area for the purposes of Section 80 - IB (10) of the Income Tax Act, 1961. The decision of the Tribunal being based on finding if fact, we see no reason to entertain question (ii)."
However, the A.O. is of the opinion that the said unit is one single unit and exceeds the prescribed limit of 1500 sqft. The statement of Mr Parwani though under dispute goes against the contention of the appellant. However, evidences produced by the appellant cannot be brushed aside. It has come to the notice that Mr. Parwani has let out the entire building to one PSU and probably undertook the alteration of the building to the requirement of the tenant. The issue therefore, remains disputed. However, I am of the considered view, especially under the circumstances of the case, that deduction u/s 80 - IB(10) should not have been disallowed in full on this issue alone. At best, 12 ITA No.1543/PUN/2014 AY.No.2010-11 deduction u/s 80-IB(10) could be disallowed on pro rata basis as held by various decision given by the appellant. In view of the facts and circumstances mentioned above, I am of the considered opinion that the appellant would be entitled for deduction u/s 80-IB(10) but for the amount involved in transactions with Parwanis with respect to plot no 8. (8A & 8B). The A.O. is to be directed to reduce the amount claimed by the appellant on plot no. 8 from the total consideration on which the appellant has claimed deduction u/s 80 - IB(10) in the year under consideration. Thus, the appellant will not be denied deduction u/s 80-IB(10) on the whole amount on this ground alone. Now, the ITAT has decided the issue of disallowance on pro rata basis in the appellant's own case for A. Yrs. 2007-08 and 2008-09 in favour of the appellant. As mentioned in Para no. 12 of this order, the claim of the appellant is allowed following the Tribunal's impugned order dated 30th September, 2013.
9. That the completion certificate has also been obtained for each unit and not for the whole project.
That as the building permission has been obtained for each row house separately, it is not possible for the Local Authority to issue one completion certificate for the whole project. As the building permission was taken for each row house same way completion certificate has also been taken for the said such row house.
The condition to obtain completion certificate is 4 years from the date of sanction and which has now been increased to 5 years and hence in this case the time limit to obtain completion certificate is 31/03/12 and the appellant firm had already obtained completion certificate for the units within time. Hence, it is unjustified to disallow the deduction on this ground.
The appellant stated that they are following percentage completion method of accounting and whatever units are sold they have offered profit on the same and thus claimed deduction u/s 80-IB (10) on it. The said method of accounting is also recognized by the CBDT which has issued Circular Instruction no 4/2009 dated 30/06/2009. The photocopy of the said instruction is enclosed for ready reference. The Hon. ITAT, Pune has allowed the deduction u/s 80 - IB (10) where the assessee had followed percentage completion method and has further held that Section 80-IB (10) does not debar a claim of deduction in respect of incomplete projects. The said case is B K Pate Enterprises vs. Dy CIT reported in (2009) 125 TTJ (Pune) 974 . In this case the project was only 24 % completed but still deduction u/s 80-IB (10) was allowed by the Hon. ITAT.
"The A.R. of the appellant stated that the firm had" submitted completion certificate during the course of assessment proceedings itself and thus had rightly complied with the conditions laid down in Section 80-IB (10). The units were complete in all respect at the time of sale itself and the same could have been confirmed by the A.O. from the sale deed submitted to him of each block sold during the relevant A.Y. As 13 ITA No.1543/PUN/2014 AY.No.2010-11 already discussed, the time limit for obtaining completion certificate for projects commenced after 01/04/2005 is 4 years [ amended to 5 years]. Faced with similar circumstances in a recent judgement ,the Hon. Chennai ITAT 'D' Bench in Ramaniyam Castles (P) Ltd vs. Asst. CIT (Chennai) reported in [2011] 128 ITD 130 has held that "the pertinent question here was whether, for giving the benefit of deduction u/s 80 - IB (10), where an assessee was following the percentage completion method, it was necessary to obtain such completion certificate for each year of his claim or was it sufficient that such certificate is obtained on the completion of the housing project as a whole. Stipulation for obtaining completion certificate should not be so interpreted to mean that an assessee can claim exemption under section 80 - IB (10) only in the year of completion of the whole of the housing project, even where the project stretches over a number of years and the assessee returns its income based on percentage completion method. It would only mean that the assessee has to obtain such certificate on completion of the project, it would loose the deduction already granted under section 80 - IB (10) for the earlier year. Clause (a) of the section 80 - IB (10) specifies that development and construction of the project has to start on or before first day of October, 1995 and the project has to be completed within 4 years from the end of the financial year in which approval for the project was received from local authority. Thus, a project can have a span of not more than four years from the end of the financial year it had received approval. Explanation under clause (a) only specifies how to reckon the date of approval and date of completion. It would not mean that an assessee can have the benefit of section 80 - IB (l0) only in the year of completion of the project, especially so, for an assessee not following project completion method for accounting its income. If otherwise interpreted , it would be equivalent to forcing an assessee to follow a particular method of accounting , which would never have been the intention of legislation. Intention would only have been that for the projects as a whole, there should be certification from the relevant authority proving the commencement and completion and not that a completion certificate should be there in every year of the project span. The certifications are for ensuring that the project span does not exceed the prescribed period and nothing more. Of course if such period exceeds the prescribed limit, the revenue would be well within its rights to withdraw the claims already allowed, following the procedure prescribed under the Act . Thus ,if the Assessing Officer did not insist on the completion certificate in the impugned year, he was not acting in contravention of the statute , but was only following it in the right meaning. In any case, nobody could say that the view taken by the Assessing officer was not a possible one. This view has also been taken by the CBDT in its Instruction No 4 /2009! dated 0.06.2009 . Further , in the instant case , there was a letter from Corporation, Chennai issued to its Asstt. Revenue Officer, clearly demonstrating that the project was completed by the assessee. The method of percentage completion method has been allowed vide CBDT Instruction No 4 / 2009 dated 30.06.2009 which is reproduced hereunder:14 ITA No.1543/PUN/2014
AY.No.2010-11 " 2. Clarifications have been sought by various CCsIT on the issue whether the deduction u/s 80 - IB (10) would be available on a year-to-year basis where an assessee is showing profit on partial completion or if it would be available only in the year of completion of the project u/s 80 - IB (10) .
3. The above issue has been considered by Board & is clarified as under:-.
(a) The deduction can be claimed on a year-to-year basis where the assessee is showing profit from partial completion of the project in every year.
(b) In case it is late and it is found that the condition of completing the project within the specified time - limit of 4 years as stated in Section 80 - IB (10) has not been satisfied, the deduction granted to the assessee in the earlier years should be withdrawn.
4. The above instruction will override earlier clarification on this issue contained in Member ( R)'s D.O. Letter No. 58 / Misc / 2008 / CIT ( IT & CT), dated 29.04.2008 and Member (IT),s DO letter N0279/Misc/46/08-ITJ dated 02.05.2008 ".
In M/s Vishnu Builders vs. ACIT, Central Circle, Vijay Wad a ,ITA No 178, 179 & 180 / Vizag / 2011 dated 27.07.2011 The Hon'ble ITAT Visakhapatnam Bench in the matter relating to submission of completion certificate has held that the "the requirement of law u/s 80IB (10) for allowing a deduction under this section is only that the project should be commenced and completed within the period prescribed under clause (a) of this section 80IB (10) of the Act. To prove the completion of project within the specified period if the assessee is not able to file a completion certificate other evidence in this regard may be taken into account to determine the actual date of completion. Therefore, the filing of completion certificate is not a condition precedent for allowing a deduction u/s 80IB (10) of the Act".
In Nagarjuna Homes VS. Income Tax Officer, ITA No 722/Hyd/2009 dated 30/09/2010 reported in [2011] 46 SOT 287 [Hyd] the Hon'ble ITAT Hyderabad 'A' Bench has held that even if the assessee constructed any of the units which exceeded 1500 sq. ft., the assessee is eligible for deduction in respect of all the units of the residential block, which are less than 1500 sq ft each excluding the unit which exceeded 1500 sq ft. Therefore, no infirmity is found in the order of the CIT [A] on this aspect. Accordingly, the same is confirmed and this ground of the Revenue is rejected.
From the above Instruction, it is clear that the assessee can obtain completion certificate within a period of 4 years from the date of first approval and in our case the same has been obtained and furnished to Your Honour during the assessment proceedings itself within the stipulated period.
15 ITA No.1543/PUN/2014AY.No.2010-11 Your Honour, we further request that all provisions relating to deduction exemption or relief should be construed reasonably and in favor of the assessee. The said observation have been made by the Hon. Supreme Court in CIT vs. Gwalior Rayon Silk Manufacturing Company Ltd. [1992] 104 CTR [SC ]
243. In the case of Bajaj Tempo Ltd vs. CIT [1992] 104 CTR [SC] 116 approving decisions of Hon. Bombay High Court reported in Capsulation Services [P] Ltd vs. CIT [1973] 91 ITR 566 [Born] and the Hon. Punjab and Haryana High Court in Phagoo Mal Sant Ram vs. CIT [1969] 74 ITR 734 [P&H], the Hon. Supreme Court held "a provision in a taxing statute granting incentives for promoting growth and developments should be construed liberally and since a provision for Promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it."
9.1 I have gone through the submission and material on record and it is seen that the AO has accepted that the completion certificate has been submitted by the appellant during the assessment proceedings itself. Further, the AO has not questioned the completion of the unit before sale deed. The A.R. of the appellant firm stated that the sale deed of all the residential units were submitted to the AO and the sale deed clearly mentions that the unit is complete in all respect. The A.R. also mentioned that the Bank will not issue final payments if the units are incomplete at the time of execution of sale deed. Further, a perusal of annexure enclosed by Municipal Council, Bhusawal along with their certificate dated 07.02.2011 reveals that the date of completion certificate in respect of all the units is within the time limit prescribed under sec.80-IB(10). I hold that mere delay in obtaining completion certificate and further hold that obtaining completion certificate of each unit individually will also not adversely affect the assessee. The appellant has 4 years [now 5 years] to obtain completion certificate. It is the date of 'completion' which is required to be taken into consideration to decide the applicability of sec. 80- IB(10) and not the date of completion certificate per section. It is not the case of the AO that the completion certificate are not obtained within 4 years from the date of first approval. Hence, the deduction on this ground also cannot be denied to the appellant. Thus, the appellant succeeds on this ground of appeal.
10. As far as deduction u/s 80-IB (10) is concerned, the AO. is directed to allow deduction u/s 80-IB (10) to the appellant subject.
11. The appellant has stated that in its appeal for AY. 2007-08 to 2009-10 on similar facts and grounds of appeal, the then CIT(A) has already accepted the appellant's grounds of appeal and allowed the appeal on this issue and rightly allowed the deduction u/s 80 - IB (10).
16 ITA No.1543/PUN/2014AY.No.2010-11 The AR. of the appellant further stated that his appeal with Hon. ITAT, Pune Bench has also been allowed in respect of proportionate pro-rata disallowance in the matter of row house sold to Shri Rajkumar Parwani and his wife and further the Appeal filed by the Revenue in respect of AY. 2007-08 and AY. 2008-09 has been rejected by the Hon. ITAT Pune Bench against the Appellate Order of Hon. CIT Appeals II, Nasik. The photocopy of the Hon'ble Pune, IT AT Bench order is already submitted by AR. Advocate Rajesh R. Sharma on 08/04/2014 for record and ready reference.
12. I have gone through the Appellate Order of my predecessor in this case for AY. 2007-08 to AY. 2009-10 and also the ITAT order dated 30/09/2013 for AY. 2007-08 and 2008-09. The Tribunal has held as under:-
11.4 "We find merit in the above submission of the Ld. Counsel for the assessee. The Ld. CIT(A) has given the finding that no building permission is in excess of 1500 sq.ft. as prescribed u/s 80IB(10). The certificate obtained from the Chief Officer, Bhusawal Municipal Council dated 17/01/2011 states that the building work has been done/carried in accordance with the building permission granted by Bhusawal Municipal Council. The built up area of each completed building does not exceed 1500 sa.ft. in any case. As per the second certificate obtained from Bhusawal Municipal Council dated 07/02/2011 although the Ld. CIT(A) in his order held that the various evidences produced by the assessee cannot be brushed aside, still he held that the unit exceeds 1500 sq.ft. Since in the instant case, there is no dispute to the fact that the 2 units sold to Mrs. And Mr. Rajkumar Parwani were sanctioned as separate units by the Municipal Council, there were separate sale agreements entered into for the sale of the 2 units, there were 2 separate completion certificates issued by the Municipal Council and separate municipal tax bills were issued for the 2 units, therefore, respectfully following the decision of the Hon'ble High Court in the case of Ankit Enterprises (Supra) we hold that the above 2 flats cannot be treated as one unit to compute the built up area for the purpose of section 80IB(10) of the I.T. Act. Accordingly, the ground raised by the assessee is allowed."
12.1 Following the Tribunal's decision, the claim of the appellant is allowed."
Aggrieved by the order of Ld. CIT(A), Revenue is now in appeal before us.
4. On the date of hearing none appeared on behalf of assessee nor was any adjournment application was filed but 17 ITA No.1543/PUN/2014 AY.No.2010-11 however written submissions have been filed. From the case records, it is seen that even in the past none appeared on behalf of the assessee. In the written submissions it is submitted that on the same ground, the appeal of Revenue for A.Ys. 2007-08 to 2009-10 were dismissed by the Tribunal and the appeal for A.Y. 2008-09 was decided in its favour. The copy of the orders of Tribunal was also furnished along with the written submissions.
We therefore proceed to dispose of the appeal ex-parte-qua the assessee on the basis of submissions made by ld. D.R. and material on record. Before us, Ld. D.R. supported the order of Ld. CIT(A).
5. We have heard Ld. D.R. and perused the material on record. The issue in the present case is with respect to allowing of deduction u/s 80IB(10) of the Act. Before us, in the written submission, it is stated that in earlier year, the issue has been decided in assessee's favour. We find that for A.Y.s 2007-08 and 2008-09, the issue was decided by the Co-ordinate Bench of the Tribunal in assessee's favour by holding as under :
"7. We have heard the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decision cited before us. We find the AO in the instant case denied the deduction u/s.80IB(10) on the ground that (a) the land is in the name of the partners and not in the name of the firm (b) the project as a whole has not been approved by the local authority (c) one of the units sold to a customer is in excess of 1500 sq.ft. (d) the completion certificate from local authority has not been obtained till 27-02-2009 and (e) the pamphlet of the project shows the planned independent bungalows having built up area 1752 sq.ft. We find all the objections have been decided in favour of the assessee by the Ld.CIT(A) which has already 18 ITA No.1543/PUN/2014 AY.No.2010-11 been reproduced in the preceding paragraphs which has been challenged by the revenue in the grounds of appeal.
7.1 So far as the grievance of the revenue that the land is not in the name of the firm and is in the name of the partners and therefore the assessee is not entitled to deduction u/s.80IB(10) of the I.T. Act, 1961 we find the issue stands decided in favour of the assessee by the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Radhe developers reported in 341 ITR 403 wherein the Hon'ble High Court has upheld the decision of the Tribunal which was relied on by the Ld.CIT(A). The relevant observation of the Hon'ble High Court reads as under :
"Section 80IB(10) of the Income Tax Act, 1961, requires involvement of an undertaking in developing and building housing projects approved by the local authority. Certain conditions are prescribed in sub section (10) such as the date by which the undertaking must commence and developing and construction work and the minimum area of plot of land on which such project would be put up as well as the maximum built up area of each of the residential units to be located thereon. The provisions nowhere required that only those developers who themselves own the land would receive the deduction under Section 80IB(10) of the Act. Neither the provisions of Section 80IB nor any other provisions contained in other related statutes demonstrate that ownership of the land would be a condition precedent for developing the housing project. Such requirement cannot be read into the statute because there is nothing in Section 80IB (10) of the Act requiring that ownership of the land must vest in the developer for him to be able to qualify for such deduction. Moreover, the term "developer" has been understood in common parlance as well as in the legal sense carrying a much wider connotation.
It is well settled that while interpreting a statute, particularly, a taxing statute, nothing can be read into the provisions which has not been provided by the Legislature. The condition which is not made part of Section 80IB(10) of the Act, namely, that of owning the land which the assessee develops, cannot be supplied by any purported legislative intent.
The assessee claimed deduction under Section 80IB(10) of the Act on the premise that such income was derived from the business of the undertaking developing and building housing projects approved by the local authority. To execute such housing projects, the assessee had entered into development agreements with land owners. Under these development agreements, the assessee agreed to develop the land belonging to the land owners on certain terms and conditions. On the same day the 19 ITA No.1543/PUN/2014 AY.No.2010-11 land owners entered into agreements to sell the land in question to the assessees. The assessees were described as purchasers and the land owners were described as the sellers. The profit or loss from the project was to be the assessees. In some cases, the assessee was to receive a fixed remuneration for the development. The Assessing Officer rejected the assessee's claim for deduction under section 80- IB(10) of the Act on the ground that the assessees were not the owners of the land, that approval by the local authority and permission to develop the project and commence construction were not in the name of the assessees and that the assessees had merely acted as agents or contractors for construction of 13 residential houses. The Tribunal held the assessees entitled to the deduction. On appeals by the Department :
Held accordingly (i) that the terms and conditions under which the assessees undertook the development projects and took over the possession of the land from the original owners, indicated that the assessees had total and complete control over the land in question. The assessees could put the land to use as agreed between the parties. The assessee had full authority and also responsibility to develop the housing project by not only putting up the construction but by carrying out various other activities including enrolling members, accepting members, carrying out modifications engaging professional agencies and so on. Most significantly, the risk element was entirely that of the assessees. The land owners agreed to accept only a fixed price for the land in question. The assessees agreed to pay off the land owners first before appropriating any part of the sale consideration of the housing units for their benefit. In short, the assessees took the full risk of executing the housing project and thereby making profit or loss, as the case may be. The assessees invested their own funds in the cost of construction and engagement of several agencies. It could not be said that the assessees acted only as works contractors. In that view of the matter, the addition of the Explanation to section 80-IB(10) with retrospective effect from April 1, 2001, would have not material bearing in the cases on hand.
(ii) That the assessee had, in part performance of the agreement to sell the land in question, been given possession thereof and had also carried out the construction work for development of the housing project. A combined reading of Section 2(47)(v) of the Act and Section 53A of the Transfer of Property Act, 1882, would lead to a situation where the land would for the purpose of the Act be deemed to have been transferred to the assessees. In that view of the matter, for the purpose of income derived from such 20 ITA No.1543/PUN/2014 AY.No.2010-11 property, the assessees would be the owners of the land for the purpose of the Act although title in the land had not yet passed on to the assessees and would pass only upon execution of a duly registered sale deed. For the limited purpose of deduction under section 80-IB(10) of the Act, the assessees had satisfied the condition of ownership also, even if it was necessary.
(iii) That even in cases where the agreement provided that the assessee was to receive a remuneration, the assessee was given full rights to develop the land by putting up the housing project at its own risk and cost. The entire profit flowing therefrom was to be received by the assessee. The project was being developed by the assessee at its own risk and cost and not that of the land owners. The assessee thus was not working as a works contractor. Introduction of the Explanation to section 80-IB(10) in this case also would have no effect. The assessee was entitled to the benefit under section 80-IB(10) of the Act even where the title to the land had not passed on to the assessee and the development permission may also have been obtained in the name of the original land owners."
7.2 Respectfully following the above decision of the Hon'ble High Court and in absence of any contrary material brought to our notice on this point the first objection of the Revenue that the land is in the name of the partners 14 and not in the name of the firm is rejected and the same is decided in favour of the assessee.
7.3 So far as the objection of the revenue that the housing project as a whole has not been approved by the local authority we find the Ld.CIT(A) while deciding the issue has relied on CBDT Circular No.05/2005 dated 15- 07-2005 and section 5 of standardised Building Bye-laws and Development Control Rules apart from relying on various decisions. He also observed from the correspondence between the assessee and Bhusawal Municipal Corporation that the layout as a whole has been approved by the local authority. The Ld. Departmental Representative could not controvert the findings of the Ld.CIT(A) on this issue. Accordingly, the second issue on which the AO has denied the deduction u/s.80IB(10) is decided in favour of the assessee and the order of the CIT(A) on this issue is upheld.
7.4 So far as the grievance of the revenue that one of the housing units sold is in excess of built up area of 1500 sq.ft. we find the Ld.CIT(A) has held that even though the unit may be more than 1500 sq.ft., however, the entire deduction cannot be denied and only pro-rata disallowance can be made. However, in view of our findings in subsequent paras in assessee's appeal wherein it has been held that the 2 units cannot be held as one unit, the grievance of the revenue on this issue is also dismissed.
21 ITA No.1543/PUN/2014AY.No.2010-11 7.5 So far as the denial of deduction u/s.80IB(10) on the ground that the Bhusawal Municipal Council has not issued completion certificate upto 27- 02-2009 we find the Ld. CIT(A) has thoroughly discussed the issue and has given a categorical finding that the AO has accepted that the completion certificates have been submitted by the assessee during assessment proceedings itself. The Ld. Departmental Representative could not 15 controvert the findings given by the Ld.CIT(A) that sale deed of all the residential units were submitted to the AO which clearly mentions that the units are complete in all respect. Once the assessee completes the building in all respect, hands over the possession and applies for completion certificate well before time, then merely because of some delay in part of the local authority for issuing the completion certificate late for no fault on the part of the assessee will not be a ground to deny deduction u/s.80IB(10). The finding given by the Ld.CIT(A) could not be controverted by the Ld. Departmental Representative. Accordingly, the order of the CIT(A) on this issue is also upheld and the grievance of the revenue is dismissed.
7.6 So far as the grievance of the revenue that the pamphlets of the project shows the planned independent bungalow having built up area of 1752 sq.ft. we find in the A.Y. 2008-09 the AO has accepted the plea of the assessee that none of the units are in excess of the prescribed limit. Further, the submission of the assessee that the plan was never implemented and in the building permission plan not a single building has exceeded the prescribed limit of 1500 sq.ft. could not be controverted by the revenue. The certificate from the Municipal Council certifying that the building work has been done/carried in accordance with the building permission as granted by the Bhusawal Municipal Council also could not be controverted by the Ld. Departmental Representative. Under these circumstances, we find no infirmity in the order of the CIT(A) on this issue. In this view of the matter, we are of the considered opinion that the CIT(A) was fully and legally justified in allowing the claim of deduction u/s.80IB(10) and the ground raised by the revenue is accordingly dismissed."
6. Before us, Revenue has not placed any material on record to demonstrate that the decision of Co-ordinate Bench of the Tribunal in assessee's own case for earlier years has been set aside by Higher Judicial Authorities nor has pointed any distinguishing feature in the facts of the case under consideration and that of earlier years. We further find that Ld. 22 ITA No.1543/PUN/2014 AY.No.2010-11 CIT(A) by a well reasoned order and after considering all the aspects had decided the issue in favour of assessee. We therefore find no reason to interfere with the order of Ld. CIT(A).
Thus, the grounds of the Revenue are dismissed.
7. In the result, the appeal of the Revenue is dismissed.
Order pronounced on 30th day of March, 2017.
Sd/- Sd/-
(SUSHMA CHOWLA) (ANIL CHATURVEDI)
या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
पुणे Pune; दनांक Dated : 30th March, 2017.
Yamini
आदे श क) * त+ल,प अ-े,षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. Commissioner of Income Tax-V, Pune.
4. Commissioner of Income Tax (A) - VI, Pune.
5. #वभागीय &त&न'ध, आयकर अपील य अ'धकरण, "ए" / DR, ITAT, "A" Pune;
6. गाड, फाईल / Guard file.
आदे शानस ु ार/ BY ORDER,स या // True Copy // सहायक रिज12ार/ Assistant Registrar, आयकर अपील य अ'धकरण ,पुणे / ITAT, Pune.