Income Tax Appellate Tribunal - Delhi
M/S. Shipra Estate Ltd. & Jai Krishan ... vs Acit, New Delhi on 26 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'B' NEW DLEHI
BEFORE SHRI R.S.SYAL, VICE PRESIDENT
AND
SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER
I.T.A. Nos.2022 & 2023/Del/2016
Assessment Years: 2010-11 & 2011-12
Shipra Estate Ltd. & Jai Krishan Vs Asstt. Commissioner of Income-tax ,
Estate Developers P. Ltd., Circle -36(1), New Delhi.
C/o Pradeep & Co., Tax Advocates
7, Navyug Market, Ghaziabad.
(PAN: ABGFS9748C)
I.T.A. No.2552/Del/2016
Assessment Year: 2011-12
Asstt. Commissioner of Income-tax , vs Shipra Estate Ltd. & Jai Krishan
Circle -36(1), New Delhi. Estate Developers P. Ltd.,
C/o Pradeep & Co., Tax Advocates
7, Navyug Market, Ghaziabad.
(PAN: ABGFS9748C)
(Appellant) (Respondent)
Assessee by: Shri Prateek Gupta
Respondent by: Shri Vijay Kumar Tiwari, Sr. DR
Date of hearing : 25.04.2018
Date of Pronouncement: 26.04.2018
2
ORDER
PER K. NARASIMHA CHARY, JM
Aggrieved by the orders dated 04.02.2016 passed by the learned Commissioner of Income-tax (Appeals)- 19, New Delhi (for short hereinafter called as "the learned CIT(A)') in Appeal No.20/13-14, for AY 2010-11 assessee preferred appeal ITA 2022/Del/2016 whereas challenging the findings of the Ld. CIT(A) in the order dt. 04.02.2016 in Appeal No 42/2014-15 both the assessee and the Revenue preferred ITA Nos 2023 and 2552/Del/2016. Facts and questions raised are similar, as such, all the appeals are disposed of by way of this common order.
2. Assessee is a partnership firm engaged in the business of real estate development. They had two projects namely Project Vista and Project Srishti. They have claimed deduction only in respect of Project Vista which is subdivided into five sub projects, namely, Project A and B, Project D and E, Project C (B1,B2,B3), Project F (B4,B5,B6,B7) and Vista Commercial. The assessee has been claiming deduction under section 80 IB of the Income-tax Act, 1961 ("the Act") in respect of the profits of Project A&B and D&E.
3. During the scrutiny assessment, Ld. AO disallowed the deduction claimed by the assessee under section 80-IB(10) of the Act, on the ground that the assessee had not fulfilled the conditions like obtaining separate approvals and obtained only a common approval of map for all the projects, deduction was claimed on certain units exceeding 1000 Sq ft. in area and that the overall area of the commercial project is exceeding the prescribed limits. Ld. AO rejected the 3 Project Completion Method adopted by the assessee and adopted Percentage Completion Method and partly disallowed the deduction under section 80 IB(10) of the Act in respect of profits earned on project.
4. When the assessee preferred an appeal before the learned CIT(A), learned CIT(A) partly allowed the deduction under section 80 IB(10) in respect of all the units wherein the area of the units was less than 1000 Sq.ft. basing on the report of the District Valuation Officer (DVO) of Income Tax Department. Further, learned CIT(A) observed that the overall area of the commercial project was well within the limits prescribed under the Act. Further, in respect of AY 2011-12 also learned CIT(A) accepted the Project Completion Method adopted by the assessee as against the Percentage Completion Method adopted by the Ld. AO .
5. Assessee preferred an appeal in ITA No. 2022/Del/2016 in respect of AY 2010-11 challenging the disallowance of deduction in respect of the units contending that the built up area exceeds the limit of 1000 Sq.ft. only when area of open to sky balcony is added to the built up area, and disallowance of deduction in respect of corner units of the projects on the ground that such area does not exceed the prescribed limits under section 80 IB(10) of the Act; and ITA No. 2023/Del/2016 in respect of AY 2011-12 challenging the disallowance of deduction in respect of corner units of the projects on the ground that it does not exceed prescribed limits. Revenue preferred ITA No. 2552/Del/2016 in respect of AY 2011-12 aggrieved by the order of the learned CIT(A) accepting the project completion method of accounting followed by the assessee as against the percentage completion method adopted by the Ld. AO.
46. At the outset it is the submission on behalf of the assessee that in assessee's own case filed for earlier Assessment Years 2008-09 and 2009-10, in ITA No 1950/Del/2012 and batch, similar facts were involved and challenging the denial of the deduction under section 80 IB(10) of the Act, the assessee and the revenue preferred those appeals; and by way of common order dated 30/05/2016, a coordinate Bench of this Tribunal dealt with these aspects at length and disposed of the matters. Ld. Authorized Representative of the assessee submitted that the findings of the coordinate Bench of this Tribunal are applicable to the facts of these cases also. He further submitted that the Hon'ble Jurisdictional High Court confirmed the findings of the learned CIT(A) and the Tribunal in respect of the Project Completion Method of accountancy adopted by the assessee. Though the Ld. DR argued that in view of the decisions reported in
(i) DCIT vs Ace Multi Axes Systems Ltd. (2017) 88 taxmann.com 69 (SC); (ii) Om Engineers & Builders vs ITO (ITAT Pune) 109 ITD 235; (iii) ACIT vs Viswas Promoters (P) Ltd. (ITAT, Chennai) 126 ITD 263; and (iv) Histle Properties (P) Ltd. vs ACIT (ITAT, Mumbai) 134 ITD 6, the claim of the assessee is not tenable, the revenue does not dispute the submission advanced on behalf of the assessee that for the earlier assessment years the matter was dealt with by a coordinate Bench of this Tribunal and the issues involved are directly and substantially of the same.
7. We have gone through the record in the light of the submissions made on either side. On a reading of the impugned orders as well as the order dated 30/05/2016 in ITA No. 1950/Del/2012 and batch, we find that such a decision was rendered in assessee's own case for the Assessment Years 2008-09 and 2009- 10 and the issues involved in all these matters are directly and substantially the same.
58. Vide paragraph Nos. 34 and 35 of the order, the coordinate Bench of this Tribunal in the above case, dealt with the aspect of the requirement of separate approval for all the sub projects and held as follows: -
"34. As far as the issue of requirement of a separate approval for each housing project is concerned (corresponding to ground no 3 of the Department's appeal), we are of the considered opinion that section 80IB (10) prescribes approval of a housing project. A Housing Project may comprise of both eligible as well as ineligible units. The deduction will be available and limited to the claim on eligible units irrespective of the fact that the entire project comprising of eligible and ineligible units has been approved by the authority by way of a single approval/composite approval. Section 80IB(10) refers to the approval of a housing project but does not prescribe a pre-condition that the deduction will be available in respect of only that unit or part of the project which has been separately approved by the local authority. Hence, it is our considered view that a separate approval for each eligible unit or project is not the intention of the Act. The Hon'ble Madras High Court in the case of Viswas Promoters (P) Ltd. vs ACIT 255 CTR 149 has held that the mere fact that one of the blocks have units exceeding built-up area of 1500 sq ft per se, would not result in nullifying the claim of the assessee for the entire project. Consequently, it was held, that assessee was entitled to the benefit of deduction u/s 80IB (10(c) of the Act in respect of each of the blocks. The Pune Bench of the ITAT has held in the case of Siddhivinayak Kohinoor Venture vs ACIT (2014) 159 TTJ 390 that construction of even one building with several residential projects of the prescribed size would constitute a housing project for the purpose of section 80IB(10) of the Act. The Pune Bench further held that each block in a particular project has to be taken as an independent building and hence is to be considered a housing project for the purpose of claiming deduction u/s 80IB(10). Para 32 of the order is relevant in the present appeal also and is being reproduced herein under for a ready reference:-
"32. The argument of the Revenue, based on the statement of Chief Engineer, PCMC, in our view, does not h e l p the case of the Revenue as the following discussion would show. The case set up by the Revenue is that two projects have been sanctioned by a common approval and thus the PCMC has viewed the two projects as a single composite project. It is contended by the Revenue that the expression 'housing project', though not defined in s. 80-113(10) of the Act, should be taken to be the project per se, as approved by a 'local authority' for the purposes of s. 80-IB( 10) of the Act. No doubt, for a 'housing project' to be eligible for deduction under 6 s. 80-IB (10) of the Act, it is required to be approved by a 'local authority', so however, the phraseology of s. 80-IB (10) of the Act does not reflect a legislative intent that the project should be 'as approved' by a 'local authority'. The requirement of s. 80-IB (10) of the Act to the effect that project should be approved by a 'local authority' is fulfilled no sooner when the 'housing project' considered by an assessee is approved by a 'local authority'. Moreover, the expression 'housing project' is not defined in the Development Control Rules for PCMC i.e. the 'local authority' in the case before us and thus, the said enactment cannot be resorted to for the purpose of understanding the meaning of expression 'housing project' contained in s. 80-IB(10) of the Act. Therefore, so long as the claim of deduction is in relation to a 'housing project', which has been approved by the 'local authority', it would satisfy the requirement of s. 80- IB(10) of the Act. Pertinently, if the proposition of the Revenue is to be upheld, the same would be quite contrary to the manner in which the expression 'housing project' contained in s. 80-IB (10) of the Act has been understood by the Hon'ble Bombay High Court in the case of Vandana Properties (supra) and also by the Hon'ble Madras High Court in Viswas Promoters (P.) Ltd. (supra) and Arun Excello Foundations (P.) Ltd. (supra). It may also be pertinent to observe that the Hon'ble Bombay High Court in Vandana Properties (supra) not only noted that the expression 'housing project' is not defined under s. 80-IB(10) of the Act but also noted that the same was not defined even under the relevant local regulations before it, viz. the Mumbai Municipal Corporation Act, 1988 and the Development Control Regulations for Greater Mumbai, 1991. Thus, the Hon'ble High Court proceeded to observe that the expression 'housing project' in s. 80-IB(10) would have to be construed as commonly understood. Even in the case before us, there is no dispute that the expression 'housing project' is not defined in the Development Control Rules for PCMC and therefore, the concept of 'housing project' as sought to be understood by the Ld. AO based on the explanation of Chief Engineer. PCMC is not relevant for the purposes of s, 80IB (I0) of the Act. Thus, the argument of the Revenue to the effect that since SWRH and 'S'1 projects have been approved by PCMC under a common approval, the two projects should be combined and considered as a single project for the purpose of s. under s. 80-IB( 10) of the Act in our opinion is misplaced."
35. Therefore, in view of the facts of the case as well as the judicial precedents discussed above, we dismiss ground no. 3 of the Department's appeal. Ground nos. 4 & 5 of the Department's appeal being general in nature are not being 7 adjudicated upon and are dismissed. In the result, the appeal of the department is dismissed."
9. On the aspect of the eligibility of the units exceeding 1000 Sq.ft. in area as per the report of the DVO, vide paragraph number 38, Tribunal remanded the issue to the file of the Ld. AO for adjudication with the following observations,-
"38. The only issue remaining for adjudication after this is the claim of the assessee challenging the measurements of the DVO in respect of flats at Sl. no. 1 & 4 of the chart (Para 28 of this order). It is the assessee's contention that the correct measurement is 988.79 sq ft whereas the DVO has calculated the buildup area at 1029.28 sq. ft. It is also the assessee's plea that it had not been afforded a proper opportunity to explain the discrepancy before the Ld. CIT (A). Hence in the interest of justice, we deem it proper to restore this limited issue of discrepancy in measurement, as claimed by the assessee, to the file of the Assessing Officer for fresh examination and adjudication thereon after giving due opportunity to the assessee to present its case. In the result, the appeal of the assessee is partly allowed."
10. Regarding the admissibility of area of open to sky balcony in total built-up area, this issue is decided in favour of the assessee by paragraph No.3 7 of the order in the following terms: -
"37. In the proceedings before us, the Department could not point out any judgment/judicial precedent to the contrary. We accordingly hold that the balconies open to the sky are to be excluded from the calculation of the built-up area of a particular residential unit. We, therefore, direct that the assessee be allowed the claim of deduction u/s 80IB (10) in respect of flats (at S.Nos. 2 & 3 as in the chart reproduced in on Para 28 of this order) which have been excluded from the benefit of deduction by including the balconies open to sky for the purpose of calculating the built-up area of the individual units."
11. In respect of the disallowance of a deduction due to a commercial project the contention of the assessee is that it is a separate project wherein the assessee has never claimed deduction under section 80 IB(10) of the Act since it has built 8 up area of 4896 Sq meters as against the total built-up area of housing project of 1,68,701 Sq.meters constituting 2.90% of total built-up area, the coordinate bench of this tribunal accepted the findings of the Ld. CIT(A) and allowed the claim of deduction under section 80IB(10) of the Act.
12. In view of the above decision, while respectfully following the same, we hold that the balconies open to the sky are to be excluded from the calculation of the built-up area of a particular residential unit and accordingly qualify for deduction under section 80 IB(10) of the Act. We further hold that in view of the dispute as to the measurements between the assessee and the DVO, we restore this limited issue as to the discrepancy in measurements in respect of the alleged units with the area exceeding 1000 Sq.ft. to the file of the Assessing Officer for fresh examination and adjudication thereon after giving due opportunity to the assessee to present their case. Grounds of appeals of the assessee are answered accordingly.
13. Now coming to the appeal of the revenue, in respect of the method of accountancy, in view of the order dated 16/11/2016 passed by the Hon'ble jurisdictional High Court in ITA 802/2016, we uphold the finding of the learned CIT(A) and confirm the project completion method adopted by the assessee. Ground No. 3 and 4 of Revenue's appeal relating to the allowability of deduction under section 80 IB(10) of the Acts, are identical to those of the AY 2009-10 and since the Tribunal allowed the claim for such year, following the same, we find the grounds of revenue being devoid of merits, and are liable to be dismissed.
914. In the result, both the appeals of the assessee are allowed in part for statistical purpose and the appeal of the revenue is dismissed.
Order pronounced in the Open Court on 26th April, 2018.
Sd/- Sd/-
(R.S.SYAL) (K. NARASIMHA CHARY)
VICE PRESIDENT JUDICIAL MEMBER
Dated: 26th April, 2018
'VJ'
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
By order
Asstt. Registrar