Income Tax Appellate Tribunal - Indore
Rama Construction, Bhopal vs Assessee on 2 August, 2011
1
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER
And
SHRI R.C. SHARMA, ACCOUNTANT MEMBER
ITA Nos.309 & 310/Ind/2011
A.Ys. 2006-07 & 2007-08
M/s. Rama Construction, Bhopal
PAN - AAIFR 5615 C :: Appellant
Vs
ACIT-1(1), Bhopal :: Respondent
Appellant by Shri Sumit Nema
Respondent by Shri Arun Dewan
Date of hearing 23.05.2012
Date of pronouncement 23.05.2012
O R D E R
PER JOGINDER SINGH , judicial member
Both these appeals are by the assessee against the common impugned order dated 2.8.2011 passed by the learned first appellate authority, Bhopal on the ground that learned 2 Commissioner of Income Tax (Appeals) erred in upholding the disallowance of the exemption u/s 80IB(10) of the IT Act and levy of interest u/s 234B & 234C of the Act.
2. During hearing of this appeal, we have heard Shri Sumit Nema, learned counsel for the assessee and Shri Arun Dewan, learned Senior DR. At the outset, the learned Senior DR asserted that the impugned issue is covered against the assessee by the decision of the Tribunal in the case of M/s Agrawal Builders (ITA No. 337/Ind/2010) and strongly defended the impugned order.
This factual matrix was not controverted by the assessee.
However, the learned counsel for the assessee has preferred written submissions, which are placed on record, by submitting that these submissions may be considered.
3. We have considered the rival submissions and perused the material available on the record. The facts, in brief, are that the assessee firm claimed to have engaged in the business of civil construction developing building and housing projects, showed 3 construction receipts of Rs. 1,68,25,023/- and claimed deduction u/s 80IB(10) of the Act for an amount of Rs. 66,73,761/-. The case was selected for scrutiny through CASS, therefore, notice u/s 143(2) was served upon the assessee along with questionnaire. The assessee attended the proceedings from time to time and preferred written submissions. The books of accounts, bills, vouchers were also produced. The learned Assessing Officer was of the view that deduction u/s 80IB(10) of the Act is allowable "to an undertaking developing and building housing project approved before 31st March, 2007 by the local authority" and since the assessee was not selling any constructed properties to customers and the sums so received were credited as construction receipt and further only the registry of the land was made, the assessee merely acted as a contractor, the deduction is not allowable. It has also been noted in the assessment order that on physical verification of the constructed area (as a test check plot no. 40), it was found of 1719.24 sq.ft. and 1988.47 sq.ft. (plot no. 39) exceeded the 4 maximum limit of 1500 sq.ft. This measurement was provided to the assessee. Ultimately it was concluded that the claimed deduction u/s 80IB(10) of the Act is not allowable to the assessee. On appeal, the learned CIT(A) affirmed the stand of the Assessing Officer. The assessee is in further appeal before this Tribunal.
3.1 Before coming to any conclusion and in view of the assertion made by the learned Senior DR, we are reproducing hereunder the relevant portion from the order dated 23rd June, 2011 of the Tribunal in the case of M/s Agrawal Builders; ITA No. 337/Ind/2010 :-
"The sum and substance of the grounds taken by the assessee in this appeal is that the learned Commissioner of Income Tax (Appeals) was not justified in holding that the assessee was not eligible for deduction u/s 80IB(10) of the Act.
2. We have heard the rival submissions of the parties and have gone through the material available on the file. The crux of arguments on behalf of the assessee is that the assessee applied for completion certificate to the Competent Authority/Municipal Corporation on 16.1.2008, which was not issued till date. It was claimed that possession of the dwelling unit/bungalows was handed over to the 62 customers for which, our attention was invited to page 42 & 43 of the paper book, contending that the possession was handed over on the dates mentioned against the respective names. It was also claimed that registered sale deeds were executed in favour of such customers. It was specifically claimed that when the map of such dwelling units was sanctioned in 5 2004, therefore, the law applicable on that date will be applicable when the plan was sanctioned/approved by the Competent Authorities. Reliance was placed upon the decisions in 39 SOT 498 (Mum), Essar Construction P. Ltd. vs. ACIT (17 ITJ 138) (Indore) and D.K. Construction vs. ITO, 17 ITJ 1 (Indore) and also the decision of the Tribunal in the case of the assessee for assessment year 2004-05 vide ITA No.242 & 243/Ind/2008.
3. On the other hand, the ld. CIT DR strongly defended the impugned order by contending that completion certificate was not granted to the assessee till date and the area is very much prescribed in the section itself, therefore, no deviation is required to be made from the provisions of the Act. It was emphatically submitted that in the year 2005, built up area was defined, therefore, balconies and mumties are very much part of the bungalows/constructed area. From 1.4.2005, the definition of built up area was argued to be changed. It was strongly contended that the cases relied upon by the assessee are not applicable to the facts of the present appeal. The ld. CIT DR relied upon the decision of the Mumbai Bench in Heeranandani Akruti J.V. vs. DCIT (2010) 39 SOT 498 by submitting that this case clearly supports the case of the Revenue. Reliance was also placed upon the cases which have been mentioned in the impugned order.
4. We have considered the rival submissions of ld. representatives of both sides and perused the material available on record. The brief facts are that the assessee is engaged in the business of developing housing projects declared total income at Nil, after claimed deduction of Rs.1,45,55,377/- u/s 80IB(10) of the Act on 31.10.2006 in its return. The assessment was completed u/s 143(3) determining the total income at Rs.1,45,55,308/- vide order dated 24.12.2008 after disallowing the claimed deduction of the assessee. The permission for constructing/developing the housing projects namely, Sagar Royal Homes on an area of 6.04 acres of land was granted by the local authority on 6.8.2002. In order to ascertain the fulfillment of the condition laid down u/s 80IB(10) of the Act, the verification/measurement of the built up area was got done through the registered valuer, in the presence of the representative of the assessee, and it was found that the built up area of House no.A77 (as sample) was 1811.23 sq. ft. The assessee was confronted to this fact. However, the claim of the assessee was that if the space such as, balconies and mumties is reduced then the built up area comes to 1387.99 sq. ft. which is within the prescribed limit. However, this claim of the assessee could not find favour at the hand of the ld. Assessing Officer and the claimed deduction was disallowed. On appeal, the stand of the ld. Assessing Officer was affirmed by the ld. CIT(A) which is under challenge before this Tribunal. The claimed deduction was 6 disallowed by the ld. Assessing Officer by observing that the following requirements of sec. 80IB(10) were not fulfilled by the assessee:
"1. The assessee is merely acting as a contractor to the customers to whom land has been sold.
2. No registry whatsoever is being made for the construction work done by the assessee. No new residential property is being constructed or transferred by the assessee as per books of accounts of the assessee.
3. Intention behind any deduction u/s 80IB is to promote investment in a particular section, which is less profitable. In assessee's case virtually no investment was made to start the project and return on capital or profitability is very substantial.
4. Project is not approved as a whole by the Municipal Corporation individual building permission has been given.
5. The assessee has constructed the duplexes, which exceeds the maximum limit of 1500 sqft specified in section 80IB(10) which in fact is one of the main basic condition to be fulfilled in order to claim the exemption. The assessee has failed to fulfill this main basic condition.
6. For being eligible for deduction u/s 80IB(10), it is essential that the approved project is completed as laid down u/s 80IB(10). The section 80IB(10) prescribed that the date of completion is to be taken as the date on which completion certificate was issued by the Local Authority. No such certificate has been issued by the Local Authority."
In the light of the above objections, we are reproducing hereunder the relevant provisions of the Act:
80-IB. (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to 81 [(11), (11A) and (11B)81a] (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. ....................................................................................................................................... .....................
....................................................................................................................................... .....................7 6
[(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 6a[2008] by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,--
(a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,--
(i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008;
(ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority.
Explanation.--For the purposes of this clause,--
(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;
(ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority;
(b) the project is on the size of a plot of land which has a minimum area of one acre:
Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under
any law for the time being in force and such scheme is notified by the Board in this behalf;
(c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; 6b[and]
(d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less.] 8 The following clauses (e) and (f) shall be inserted after clause (d) of sub-section (10) of section 80-IB by the Finance (No. 2) Act, 2009, w.e.f. 1- 4-2010 :
(e) not more than one residential unit in the housing project is allotted to any person not being an individual; and
(f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:--
(i) the individual or the spouse or the minor children of such individual,
(ii) the Hindu undivided family in which such individual is the karta,
(iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta.
6c [Explanation.--For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government).]
5. If the language used in the provisions of the Act (supra) is kept in juxtaposition with the facts of the present appeal along with the arguments advanced by the ld. respective counsel, one clear fact is oozing out that the assessee was granted permission for the housing project by the local authority on 6.8.2002. In the absence of fulfillment of conditions laid down u/s 80IB(10), the claim of the assessee was denied. The whole dispute is twofold, firstly, as per the Revenue, the total built-up area of the house (sample house) was 1811.32 sq.ft. which includes the area of balcony & mumty etc. and the same is above the prescribed limit of 1500 sq.ft. The built-up area has been defined in sub-sec. (14) of sec. 80IB which is reproduced as under:
14) For the purposes of this section,--14
[(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;] 15 [(aa)] "cold chain facility" means a chain of facilities for storage or transportation of agricultural produce under scientifically controlled conditions including refrigeration and other facilities necessary for the preservation of such produce;
916 17 [ [(ab)] "convention centre" means a building of a prescribed area comprising of convention halls to be used for the purpose of holding conferences and seminars, being of such size and number and having such other facilities and amenities, as may be prescribed18;]
(b) "hilly area" means any area located at a height of one thousand metres or more above the sea level;
(c) "initial assessment year"--
(i) in the case of an industrial undertaking or cold storage plant or ship or hotel, means the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things, or to operate its cold storage plant or plants or the cold chain facility or the ship is first brought into use or the business of the hotel starts functioning;
(ii) in the case of a company carrying on scientific and industrial research and development, means the assessment year relevant to the previous year in which the company is approved by the prescribed authority for the purposes of sub-section (8);
(iii) in the case of an undertaking engaged in the business of commercial production or refining of mineral oil referred to in sub-section (9), means the assessment year relevant to the previous year in which the undertaking commences the commercial production or refining of mineral oil;
19[(iv) in the case of an undertaking engaged 20[in the business of processing, preservation and packaging of fruits or vegetables or] in the integrated business of handling, storage and transportation of foodgrains, means the assessment year relevant to the previous year in which the undertaking begins such business;] 21 [(v) in the case of a multiplex theatre, means the assessment year relevant to the previous year in which a cinema hall, being a part of the said multiplex theatre, starts operating on a commercial basis;
(vi) in the case of a convention centre, means the assessment year relevant to the previous year in which the convention centre starts operating on a commercial basis;] 22 [(vii) in the case of an undertaking engaged in operating and maintaining a hospital in a rural area, means the assessment year relevant to the previous year in which the undertaking begins to provide medical services;]
(d) "North-Eastern Region" means the region comprising the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura;
10 23[(da) "multiplex theatre" means a building of a prescribed area, comprising of two or more cinema theatres and commercial shops of such size and number and having such other facilities and amenities as may be prescribed24;]
(e) "place of pilgrimage" means a place where any temple, mosque, gurdwara, church or other place of public worship of renown throughout any State or States is situated;
(f) "rural area" means any area other than--
(i) an area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the preceding census of which relevant figures have been published before the first day of the previous year; or
(ii) an area within such distance not being more than fifteen kilometres from the local limits of any municipality or cantonment board referred to in sub- clause (i), as the Central Government may, having regard to the stage of development of such area including the extent of, and scope for, urbanisation of such area and other relevant considerations specify in this behalf by notification in the Official Gazette25;
(g) "small-scale industrial undertaking" means an industrial undertaking which is, as on the last day of the previous year, regarded as a small-scale industrial undertaking under section 11B26 of the Industries (Development and Regulation) Act, 1951 (65 of 1951).] In sub-clause (a) of sub-sec. 14 of sec. 80IB means the measurement of residential units which includes projections and balconies but does not include the common area shared with other residential units. The assessee has built up independent bungalows and not the flats, therefore, there is no question of common areas, consequently, the built-up area in these bungalows is beyond the prescribed limit of 1500 sq.ft.
6. As per sub-clause (ii) to Explanation to sub-sec. (10), the date of the construction of the housing project shall "be taken to the date on which, the completion certificate, in respect of the housing project, is issued by the local authority. Whereas in the present appeal, as per the Revenue, till date no such certificate was issued to the assessee, therefore, from this angle also, the assessee has not fulfilled the stipulated condition. The basic idea as per sub-clause (iii) to sub-sec. 10(a) is to complete the housing projects within five years from the end of the F.Y. in which the housing project is approved by the local 11 authority. The approval was granted by the local authority to the assessee on 6.8.2002 and till date, no completion certificate was issued by the local authority, meaning thereby, the housing project was not completed within the prescribed period, therefore, the assessee is not entitled to claim the deduction.
7. During hearing, the ld. Counsel for the assessee relied upon the decision in the case of M/s. D.K. Construction vs. ITO [2011] 17 ITJ 1 (Tribunal) wherein the completion certificate was obtained on 15.12.2008 and application was made for the certificate prior to 31.3.2008 and there was a regular follow-up. Since the completion certificate was issued to the assessee, therefore, this case may not help the assessee because no completion certificate was issued to the assessee till date. It is pertinent to mention here that since no date was mentioned on the completion certificate, therefore, the matter was remanded to the Assessing Officer. So far as the decision Essar Construction P. Ltd. (17 ITJ 138), relied upon by the assessee, is concerned, the construction was completed before the proposed amendment, therefore, it was held that sec. 80IB(14)(a) is not applicable. Whereas the facts are different in the present appeal as the assessment year involved is 2004-05 whereas the present appeal pertains to assessment year 1006-07. As far as the decision in ITA No.242 and 243/Ind/2008 (assessment year 2004-05) is concerned, first of all, it pertains to the period before amendment took place and secondly, the decision in the case of Smt. Saroj Kappor (ITA No.194/Ind.2008 and CO No.51/Ind/2008) was relied upon by the assessee and the factual matrix contained therein was not controverted by the Revenue. At the same time, the assessee developed and sold flats in Green City and in the flats, there were certain common areas, consequently, a particular decision was taken. The assessee also gave details of the residential flats measuring 929.54 sq.ft. for which no measurement was done by the department and in the second phase, A-II type duplex also, the measurement was also found less than 1500 sq.ft. by the approved valuation officer. Even the department of its own indicated that the representative of the assessee had not checked the measurement and its calculation, therefore, the facts of assessment year 2004-05 are different. Amendment was made in sub-sec. (10) by the Finance (No.2) Act, 2004 w.e.f. 1.4.2005 and prior to its substitution, sub-sec. (10) as amended by Finance Act, 2000, was w.e.f. 1.4.2001 and Finance Act, 2003 with retrospective effect from 1.4.2002, having different conditions. In the present appeal, firstly, the assessee did not fulfill the conditions as mentioned in para 4 (supra) and secondly, the completion certificate was not issued till date, therefore, these judicial pronouncements may not help the assessee.
128. The benefit of deduction was first introduced by the Finance Act, 1998 w.e.f. 1.4.99 in the form of sub-sec. (4F) to sec. 80IA of the Act. By the Finance Act, 1999 w.e.f. 1.4.2002, the benefit of such deduction was available u/s 80IB(10). By the Finance Act, 2000 w.e.f. 1.4.2001, the words "before 31st day of March, 2001" were inserted after the words "housing project approved". Thus, all conditions for grant of deduction remained the same except the approved of local authority for the development has to be obtained before 31st day of March, 2001. For assessment year 2002-03, the law applicable was that the condition regarding completion of the project before 31.3.2003 was dispensed with.
9. For the assessment year 2003-04 and 2004-05, the law applicable was that all the conditions remained same except the condition regarding the approval of the project from the local authority which could be before 31.3.2005. Another important change was that the period of completion of the construction on or before 31.3.2003 was dispensed with and there was no time-limit given for completion of the construction. This was the law for assessment year 2004-05 when the assessee submitted its proposal for slum rehabilitation and the permission for carrying out the development was accorded on 17.11.2003 and when the assessee commenced development.
10. By the Finance Act, 2004 w.e.f. 1.4.2005, clause (d) to sec. 80IB(10) was introduced which provided that built-up area of shops or other commercial establishments included in the housing project should not exceed 5 per cent of the aggregate built-up area of the housing project or 2000 sq.ft. whichever is less. The provisions as they read applicable from assessment year 2005-06. In the present appeal, the assessment year 2006-07, therefore, the law applicable to the relevant assessment year will be applicable.
11. We have noted, as argued, the built-up area of the bungalow is more than the prescribed limit and since the completion certificate was not issued to the assessee till date, therefore, we are of the view that the decision in Heeranandani Akruti J.V. (39 SOT 498) (Mum) rather supports the case of the Revenue, consequently, the assessee is not entitled to claimed deduction. We, therefore, find no infirmity in the stand of the ld. CIT(A). The same is affirmed.
Finally, the appeal of the assessee is dismissed. Order pronounced in the open Court 23rd June, 2011."
133.2 If the observation made in the assessment order, conclusion drawn in the impugned order, assertion made by the learned respective counsel and the aforesaid order of the Tribunal, are kept in juxtaposition and analysed, we find that there is categorical finding in the impugned order that the land for housing project was purchased by the assessee and subsequently conversion of the same was obtained for residential use by the assessee. The assessee thereafter constructed residential units and gave possession of such completed houses to the customers, therefore, the assessee acted as a builder and developer. So far as excess built up area of the residential units and completion of construction within the specified period is concerned, we find that by the Finance (No. 2) Act, 2004, substitution was made in section 80IB(10) of the Act with effect from 1.4.2005, therefore, the substitution in the sub-section is applicable prospectively to assessment year 2005-06 and subsequent assessment years. The present appeals are for the assessment years 2006-07 and 2007-08, therefore, the amended 14 provision is clearly applicable to the present appeals. If the language used in the section is analysed, as per sub-clause (2) to the Explanation to sub-section (10) the date of completion of construction of the housing projects shall be taken on the date when completion certificate is issued by the local authority and as per sub-clause ©, the maximum built up area should not exceed 1500 sq.ft. (as applicable to the present assessee). So far as the applicability of the statute is concerned, it is settled principle that the law prevailing on Ist April of the relevant assessment year will be applicable. The amendment was made in sub-section (10) of section 80IB was with effect from 1.4.2005, thus, the amended provision is very much applicable to the facts of the present appeals, consequently, the assessee is supposed to fulfill all the conditions laid down in the Act at the relevant time, therefore, the contention of the learned counsel for the assessee that the law applicable when the project was approved will be applicable is not tenable because the legislature in its wisdom has made the amendment and the language used is unambiguous. If there 15 would have been the intention, as claimed by the assessee, then nothing prevented the legislature to specifically incorporate the same. This proposition of law is very much clear from the plain and unambiguous words of clause (a), (i) of section 80IB(10) which specifically mentions the dates on or after 1.10.1998 and before 1.4.2004. The interpretation which makes the provision oteise has to be avoided. The housing project of the assessee was approved by the local authority on 3.1.2004 i.e. before 1.4.2004, therefore, the assessee was expected to complete the construction on or before 31.3.2008. The assessee was also supposed to get completion certificate from the local authority. It is an uncontroverted fact that no such certificate was issued by the local authority before 31.3.2008, therefore, it is clear that the assessee has not fulfilled the conditions laid down under the Act, consequently, we find no infirmity in the impugned order. So far as the cases relied upon in the written submissions are concerned, in view of the clear cut provisions of the Act, these judicial pronouncements may not help the assessee. So far as 16 the contention of the ld. Counsel for the assessee that it is an incentive provision, therefore, has to be construed liberally, we are of the view that when language of the Act is clear and unambiguous, no contrary view can be taken which is in violation of the Act. Even till today, no evidence has been produced that the local authority issued the completion certificate to the assessee, therefore, there is no merit in the appeals of the assessee. Both the appeals are dismissed.
Finally, both the appeals of the assessee are dismissed.
This order was pronounced in the open Court in the presence of learned representatives from both the sides at the conclusion of the hearing on 23.5.2012.
Sd sd (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 01.6.2012
Copy to: Appellant, Respondent, CIT, CIT(A), DR, Guard File Dn/-2829.5 17