Income Tax Appellate Tribunal - Mumbai
Haware Engineeers & Builders P. Ltd, ... vs Assessee on 27 April, 2012
ITA Nos.393 and 685
Haware Engineers & Builders P Ltd Mumbai H Bench
IN THE INCOME TAX APPELLATE TRIBUNAL
"H" Bench, Mumbai
Before Shri Shri B. Ramakotaiah, Accountant Member
and Shri S.S. Godara, Judicial Member
ITA Nos.393/Mum/2009 & ITA No.685/Mum/2010
(Assessment Years: 2005-06 & 2006-07)
Haware Engineers & Builders ACIT Central Circle -29
Pvt Ltd, 413/416 Vardhaman Aayakar Bhavan,
Vs
Market, Sector 17 DBC Vashi MK Road
Navi Mumbai Mumbai 400020
Mumbai 400075
PAN - AAACH 2577 C
(Appellant) (Respondent)
Appellant by: Shri S R. Wadhwa and
Shri S.K. Mutsaddi
Respondent by: Shri V.V. Shastri, DR
Date of Hearing: 27/04/2012
Date of Pronouncement: /05/2012
ORDER
Per B. Ramakotaiah, A.M.
These two appeals are filed by assessee for assessment years 2005-06 and 2006-07 against the orders of the CIT (A) dated 10/11/2008 and 2/12/2009. We have heard Ld. Counsel and Ld. DR in detail, perused the paper book and orders placed on record.
2. Briefly stated, assessee is a private limited company, engaged in the business of real estate and construction of housing projects. It was incorporated on 10.01.1996. The issue involved in both the appeals is regarding the incorrect allowance/denial of deduction u/s 80-IB(10) of the Income-tax Act, 1961.
Page 1 of 27 ITA Nos.393 and 685Haware Engineers & Builders P Ltd Mumbai H Bench
3. Assessee filed revised grounds/amended grounds in form No.36 as under:
i) In not granting deduction of `.11,68,208/- as claimed by assessee under section 80IB(10) of the Income Tax Act in respect of the project Shanti Niketan Plot No.8-A Sector-8 Kharghar.
ii) In not granting deduction of `.1,58,26,407/- as claimed by assessee under section 80IB(10) of the IT Act in respect of the project Balaji Tower Plot No.29,32,36 & 37 Sector-30 Vashi.
iii) In not granting deduction of `.1,40,57,113/- as claimed by assessee under section 80IB(10) of the Income Tax Act in respect of the project Silicon Tower, Sanpada, Vashi 46-C/30A.
iv) In not granting deduction of `.(-)5,21,198/- as claimed by assessee under section 80IB(10) of the Income Tax Act in respect of the project Kaveri, Plot No.4, Sector-5 Kharghar.
v) In not granting deduction of `.1,31,52,889/- as claimed by assessee under section 80IB(10) of the Income Tax Act in respect of the project Panvhavati, Plot No.92 to 96, Sector-5 Ghansoli.
vi) In not granting deduction of `.3,35,62,319/-/- as claimed by assessee under section 80IB(10) of the Income Tax Act in respect of the project Vrindavan, Plot No.52, Sector-9, Panvel.
vii) In not appreciating that Section 80IB (10) of the IT Act is an incentive provision for economic growth and has to be interpreted liberally. In doing so, AO as well as CIT (A) have not followed the principles in this regard as laid down by the Apex Court in Bajaj Tempo Vs. CIT 196 ITR 188 (SC).
4. In the course of hearing vide letter dated 17/4/2012, assessee withdrew Ground No.1 in both assessment years in respect of section 80IB deduction of Project Shanti Niketan. Accordingly the ground is treated as withdrawn. The claims of Page 2 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench assessee under section 80IB in respect of assessment years with reference to the various projects are as under:
S. Name of the project Date of Deduction claimed No approval and under section 80-IB (10) nature of project of the Income-Tax Act, 1961 A.Y 2005- A.Y 2006-
06 (`) 07 (`.)
1 Balaji Tower, Plot NMMC/TPO/BP/4 1,58,26,406 89,53,978
No.29,32,36 & 37 188 dt 27.9.02.
Sector-30 Vashi Press Residential-cum-
& Commercial
Complex
2 Silicon Tower, NMMC/TPO/BP/3 1,40,57,113 Loss-
Sanpada, Vashi 46- 854 dt 20.11.2000 1,50,40,265
C/30A Sanpada Vashi Press Residential-
cum- Commercial
Complex
3 Kaveri, Plot No.4, CIDCO/EE/BP/AT Loss - 11,77,997
Sector-5 Kharghar. P/O/758 dt 5,21,198/-
30.10.2001
Residential
4 Panchavati, Plot No.92 CIDCO/EE/BP/AT 1,31,52,889 1,57,33,163
to 96, Sector-5 P/O/341 dt 9.9.02
Ghansoli. Residential-cum-
Commercial
building
5 Vrindavan, Plot No.52, CIDCO/EE/BP/AT 3,35,62,319 2,44,40,391
Sector-9, Panvel. P/O/1124 dt
1.2.02 Residential
Cum Commercial
Building
6 Tulsi, Plot No.52 CIDCO/EE/BP/AT Nil 54,76,660
Sector-9 Panvel P/O/1124
dt.1.2.02
Residential cum
Commercial
building
Add: Provisions for OC 50,00,000
charges disallowed
under section 43B
Total 7,72,45,739 4,78,74,288
Page 3 of 27
ITA Nos.393 and 685
Haware Engineers & Builders P Ltd Mumbai H Bench
5. AO had allowed deduction with respect to the projects Kaveri, Panchavati, Vrindavan in assessment year 2004-05 as the conditions therein were satisfied, but in view of the change in law w.e.f. 1.4.2005, he denied the deduction with respect to assessment years 2005-06 and 2006-07. With reference to Balaji Towers and Silicon Towers, AO disallowed the deduction on the reason that commercial area was exceeding the limits, whereas the ITAT has adjudicated and allowed deduction in assessment year 2004-05. The deduction on project Tulsi was claimed in AY 2006-07 which was not allowed on the reason that this is an extension of the project sanctioned earlier and assessee has not satisfied the conditions under section 80IB(10). The claim of assessee, contentions of AO and submissions of assessee project-wise are as under.
1. Balali Towers. Plot No. 29-- 32. 36 & 37, Sector 30, Vashi:
6. Deduction u/s 80-lB (10) in respect of this project was denied as it was not approved as a residential project but as residential-
cum-commercial project and the size of some of the residential units was more than 1000 sq. fts (including the area of balconies and terraces).
7. The ITAT, has discussed the two issues in Paras 8 to 17 of their order dated 30.03.2011, for the AY 2004-05 in assessee's own case. With regard to the first issue at (a) of approval as a residential-cum-commercial project, the same is squarely covered by the judgment of the jurisdictional High Court of Bombay in the case of Brahma Associates 51 DTR 298. In para-12 of the said Tribunal's order, it has been held as under:
Page 4 of 27 ITA Nos.393 and 685Haware Engineers & Builders P Ltd Mumbai H Bench "In the light of Hon'ble jurisdictional High Court judgment in the case of Brahma Associates 51 DTR 298 as long as project is an approved project, even as commercial-cum- residential -- as was the position in Brahma Associates case (supra) and as in the present case, deduction u/s 80- IB(10) cannot be declined on the ground that it is not a purely residential project or on the ground that it has substantial commercial built up area. As far as co ordinate bench decision in the case of Laukik Enterprises 105 lTD 657, it was overruled by the Special Bench decision in the case of Brahma Associates and Hon'ble Bombay High Court has upheld the action of the Special Bench in this regard. The very foundation of impugned disallowance thus does not hold good in law any longer".
9. With regard to the issue at (b) above, namely, the size of some of the residential units being more than 1000 sq. fts, the Hon'ble ITAT in assessee's own case, in para-14 of its order have observed that "we have also noted that as noted by the Special Auditor appointed by the revenue authorities (page 116 of the paper book), if area of the balcony is to be excluded, none of the flats will exceed the area of one thousand square feet.
There is thus no legally sustainable merit in Assessing Officer's objections with regard to the size of the flat as well. Once balcony area is excluded, even according to the revenue authorities, no flat is of more than one thousand square feet".
10. The above view is also confirmed by the order of Tribunal in the following cases:
(i) ACIT v. Sheth Developers 33 SOT 277 (Mum) page 36, para-13
(ii) Haware Constructions Pvt. Ltd ITA No. 5601 dated 05.08.2011
11. The Hon'ble Karnataka High Court has also in its recent judgment dated 25.02.2012 in CIT v. Anya Project Management, ITA No. 130-31/2010 (at pp.152-164/PB) --by relying on the earlier Page 5 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench judgment in CIT v. G.R. Developers (ITA No. 355/2009) held on page-161/PB that:
"the definition of 'built up area' inserted by Finance No. 2 of 2004 which came into effect from 01.04.2005 is only prospective in nature. It has application to the housing projects approved by the local authority prior that dates prior to that date. Prior to 01.04.2005, in calculating the 1500 sq. ft. of a residential unit, the area covered by a balcony was excluded'.
2. Silicon Tower Project:
12. The deduction in respect of this project has been denied almost for the same reasons for which, deduction was denied in respect of Balaji Tower Project; namely that assessee constructed residential cum commercial projects and some of the flats, after including the balcony area, exceeded the requisite size of 1000 sq. ft.
13. It was submitted that commercial shopping was only 117.405 sq. mtr or 381.56 sq.ft. i.e. only 1.20% of the total covered area of 9777.33 sq.mtr. Thus, basically it is a residential project and not a commercial project. The conditions mentioned in section 80-IB(10) are fulfilled and the project is eligible for deduction for both the years, namely, A.Ys. 2005-06 and 2006-07.
14. The ITAT has upheld assessee's claim for deduction u/s 80-lB (10) in assessee's own case for AY 2004-05. The ITAT has held that:
"Whatever we decide for Balaji Tower Project will follow here as well. We have upheld assessee's claim for deduction u/s 80-IB(1O) and the same observation will apply mutatis mutandis here as well'.Page 6 of 27 ITA Nos.393 and 685
Haware Engineers & Builders P Ltd Mumbai H Bench
3.Panchvati. Plot Nos. 92 to 96, Sector-5, Ghansoli, Navi Mumbai
15. Deduction in respect of this housing project though allowed by the AO in A.Y. 2004-05, has been denied for A.Ys. 2005-06 and 2006-07 on the following grounds, due to change in law: -
(a) The total commercial area of the project exceeded the maximum permissible built up area of 2000 sq. ft. as stipulated in section 80IB(10).
(b) Certain units have built up area, after including balcony or terrace areas, exceeded 1000 sq. ft.
4. Kaveri, Plot No. 4, Sector-5, Kharghar
16. Deduction in respect of this project was allowed by the AO in A.Y. 2004-05. It has been denied in A.Ys. 2005-06 and 2006-07 because one Flat No.E-101 sold to M/s Mand LaI Pranab K. & Pallav measures about 1240 sq. ft (super built-up area) and the net built up area, including the balcony area, works out at 1006 sq. ft.
5. Vrindavan Project, Plot No.52, Sector 9, Panvel.
17. Deduction in respect of Vrindavan Project was allowed in A.Y. 2004-05. In respect of Vrindavan Project, deduction has been denied for A.Ys. 2005- 06 and 2006-07 on the ground that the total commercial area of the project exceeded the maximum permissible built up area of 2000 sq. ft. as stipulated in section 80-IB(10).
18. Submissions regarding the projects (3) Panchavati. (4) Kaveri and (5) Vrindavan Project were that the deduction in respect of the above three projects was duly allowed by the Ld. Assessing Officer in respect of the A.Y. 2004-05. For the earlier years, i.e. A.Ys. 2002- 03 and 2003-04, the Hon'ble Settlement Commission allowed the Page 7 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench deduction in respect of these three projects (3) Panchavati Project, (4) Kaveri project, and (5) Vrindavan Project, vide their order dated 11.03.2008. wherein the Hon'ble Commission had considered the issue of open terraces and had allowed the claim of the assessee by holding that prior to the A.Y. 2005-06, in the absence of any definition of the "built up area" in section 80-lB (10), the definition of "built up area" as per the local authority approving the projects should have been accepted. As these projects were approved by CIDCO, the "built up area" as defined by CIDCO rules which excluded balconies and terraces had to be applied. The Department accepted the order of the Settlement Commission. Following the Rule of Consistency, the deduction for the above projects should be allowed for the A.Ys. 2005-06 and 2006-07 also. This issue also arose in assessee's own case for AY 2004-05, wherein, the ITAT by following the decision in ACIT vs. Sheth Developers Ltd. (33 SOT
277) have ruled in favour of assessee.
19. With regard to the issue of total commercial area exceeding 2000 sq.ft., an issue arising in the case of Panchavati Project, it has been held by various decisions that clause (d) of section 80-lB(10) having been inserted by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005, it is prospective and there being no limit on commercial area, the fact that the commercial area in the case of Panchavati Project was more than 2500 sq.ft. did not stand in the way of assessee being granted deduction. This is in accordance with the judgment of the Hon'ble jurisdictional High Court in CIT v. Brahma Associates 333 ITR 289 (Bom) Page 8 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench
6. Tulsi Project. Plot No.52, Sector 9, Panvel
20. In respect of Tulsi Project, the deduction was claimed for the first time in A.Y. 2006-07. The same has been denied on the ground that it was not a separate project but only an extension of the Vrindhavan project, and therefore, not entitled for deduction u/s 80-I B(10).
21. The salient facts are that assessee had purchased 10442.63 sq. mtr of land of Plot No. 52, Sector 9, Panvel. Originally, certain buildings were constructed on this plot known as Vrindavan Project. As has been mentioned in the assessment order, there have been A to W wings laid out in rectangle shape in two loops (rings). The outer ring has E to W wings of one BHK and two BHK unit. The inner loop is having A to D wings. While Vrindavan Project commenced on 01.02.2002 and was completed on 18.06.2003, Tulsi Project was built on C-Wing and is a 15 storied structure known as Tulsi Tower. Being in the inner loop, there are no shops which are in the outer loop E to W which was part of the Vrindavan Project as is also mentioned in para-7 of the assessment order. Thus, Tulsi project was completely residential project having a covered area of 4515.102 sq. ft. with each unit of less than 1000 sq. ft.
22. It commenced on 22.12.2006 and was completed on 31.03.2008. The project satisfies the conditions regarding the approval of the project being after 01 .04.2005 and its completion within 5 years as laid down in sub-clause (iii)to clause (a) of section 80-IB(10) being on 31.03.2008.
23. As regards the point that it is an extension of the Vrindavan Project, it was submitted that the Hon'ble Bombay High Court has Page 9 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench precisely dealt with this issue in its order dated 28.03.2012 in the case of CIT v. Vandana Properties ITA Nos. 3633 of 2009 and 4361 of 2010 at pages 127-142/PB. In that case also, the land of plot admeasuring 2.36 acres had constructed building A, B, C and D over a period during 1993-1996. Pursuant to the decision of the State Government permitting conversion of the status of land, assessee became entitled to construct an additional building E on that plot of land. The plot known as Building No.E was constructed for which the approval of the building plan was granted on 11.10.2002 and commencement certificate was issued on 10.03.2003. Even though the land pertained to E-Building was less than one acre, the Hon'ble Bombay High Court held in Para 29 of the judgment that u/s 80-IB(10), there is no limit on the number of projects. It laid down 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 u/s 80- 18(10), the deduction there under can not be denied to all those housing projects. Section 80-IB(1O) while specifying the size of plot on 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'.
24. It was submitted that facts of assessee's case are identical to those in the aforementioned judgment of the Hon'ble Bombay High Court in the case of Vandana Properties. Subsequent project known as Tulsi Project is also a project within the meaning of section 80- lB(10)(b) of the Act and since the total area of the plot was more than 2.5 acres being 10443.63 sq. mtrs and each of the units built being less than 1000 sq. ft. and the entire construction being residential in nature, the deduction for this project is admissible.
Page 10 of 27 ITA Nos.393 and 685Haware Engineers & Builders P Ltd Mumbai H Bench
25. It was submitted that deduction u/s 80-lB (10) in respect of the four projects; namely (i) Panchvati (ii) Kaveri, (iii) Vrindavan and (iv) Tulsi as also the earlier three projects; namely, (v) Shantiniketan (vi) Balaji and (vii) Silicon Tower projects were undertaken by assessee company and were duly approved by the local authorities, except in the case of Tulsi Project, much before the amendment brought in by the Finance (No.2) Act, 2004 with effect from l April, 2005. Therefore, the assessee company should be granted deduction u/s 80-lB (10) as per the provisions relating to built up area of the shops/ commercial establishments as per clause (d) of section 80- IB(10) and clause(a) of section 80-IB(14) respectively which stood in the statute book as on the dates of approval of the projects. For Tulsi project, the conditions laid down post 1st April, 2005, approved projects were duly complied with as submitted before authorities.
General Submissions:
26. A. It was submitted that the time limit for approval of projects under section 80-lB (10) was amended several times. For the two years under consideration, the time limits amended are the ones substituted by the Finance (No.2) Act 2004 w.e.f. 01.04.2005. Newly substituted sub-section states as under:-
"(10) the amount of deduction in the case of an undertaking developing & building housing projects approved before 31.03.2007 by a local authority "
(Emphasis supplied).
B. Prior to its substitution, sub-section 10 (relevant Para) as amended by the Finance Act, 2003 read as under:
"(10) the amount of deduction in the case of an undertaking developing & building housing projects Page 11 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench approved before 31.03.2005 by a local authority (Emphasis supplied).
C. From the above two versions of the section 80-IB(10) it would be noticed that the section contemplates satisfaction of the conditions for the projects in the two categories, depending upon the date of approval of the projects by the local authority. The projects approved before 31.03.2005 are governed by the provisions in section 80-IB(10) as they stood in the Statute Book till the AY 2004-05, whereas from A.Y. 2005-06, the section applicable, as amended, will govern those projects, which have been approved before 31.03.2007 (by deduction "but after 31 .03.2005"). The law as it stood during the period the projects were approved by the local authorities would be applicable.
D. Project once approved and construction started cannot be modified and has, therefore, to be completed in accordance with the approved plan. Any subsequent change may not be possible or practicable and would cause grave and undue hardship. This matter is now fully covered in favour of the assessee by the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Brahma Associates (2011) 333 ITR 289 (Born). It was held on pages 302-303 of the report that "section 80-IB(iv) allows deduction to the entire project approved by the local authority an not to a part of the project. If the conditions set out in section 80-IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project".
E. The law does not expect any person to do the impossible. This is a well established maxim of interpretation. The Delhi High Court in Escorts Ltd. v. CIT 257 ITR 468 (Del) held that a person cannot Page 12 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench be expected to do what is not possible. Once the project is approved and the construction started, and in several cases, it may have reached almost the completion stage as at 31st March, 2005, the changes are impossible. The law has, therefore, to be interpreted in a reasonable and practical manner which is only possible by applying the provisions which stood in the statute book as on the date of approval.
F. The Bombay ITAT in the case of Saroj Sales Organization 3 DTR 494 while deciding an identical issue for A.Y. 2005-06, held in Para 13 of the order that "we are of the view that housing projects were approved before 31st March, 2005 and for such project which were so approved, there was no stipulation as to the shopping complex are permissible in the project. As already stated earlier that the amendments were subsequently made while extending the deduction of income from housing project approved up to 31 March, 2007, the denial of deduction, in our view, is clearly not in accordance with law".
G. Similar view has been taken by ITAT, Mumbai in the case of Hiranandani Akruti JV v. DCIT (2010) 39 SOT 498 (Mum) and ACIT v. Sheth Developers 33 SOT 277 (Bom) wherein they have followed the judgment of ITAT in Saroj Sales Organization (supra). The ITAT, Ahmedabad in the case of Raj Developers v. ITO (2011) 43 SOT 184 (Ahmd) have also followed the decision of Division Benches in the case Aruna Excello Foundation Pvt. Ltd. v. ACIT (2007) 108 TTJ (Chennai) 71 and Saroj Sales Organization (supra). In recent judgments of the ITAT, Mumbai in :-
(a) Chheda Construction Co. - ITA No. 2767/Mum/2009 --
A.Y. 2005- 06;
Page 13 of 27 ITA Nos.393 and 685Haware Engineers & Builders P Ltd Mumbai H Bench
(b) ACIT v. Girdharilal K. Lulla - ITA No. 4207/Mum/2009 (A.Y. 2006- 07) and
(c) Haware Construction Pvt. Ltd v. ITO - ITA No. 547/Mum/ 2011 (A.Y. 2007-08);
G. The Hon'ble Supreme Court in the case of Govindas v. ITO (1976)103 ITR 123 held on page 132 of the report that :
"it is well settled rule of interpretation hallowed by time and sanctified by judicial decisions that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only".
The interpretation placed by the Revenue would impair an existing vested right and would cause undue hardship and injustice to the appellant.
H. It is now well settled that the provisions relating to tax incentives should be liberally interpreted so as to further the objective of those incentives and not to render them nugatory or meaningless. In this connection, reliance is placed upon the following judgments:
(i) Bajaj Tempo Ltd. v. CIT (1992) 196 ITR 188 (SC)
(ii) CIT v. Baby Marine Exports (2007) 290 ITR 323 (SC)
(iii) Gem Granite v. CIT 271 ITR 322 (SC)
(iv) A.G.S. Tiber & Chemicals Industries (P) Ltd. v. CIT (1998) 233 ITR 207, 212 (Mad).Page 14 of 27 ITA Nos.393 and 685
Haware Engineers & Builders P Ltd Mumbai H Bench
27. In view of the above submissions and the background, it was submitted that deduction u/s 80-IB(10) may be continued to be granted in respect of all the projects undertaken by assessee company for A.Ys. 2005-06 & 2006-07 as well on the basis of criteria stipulated by the statute at the time of approval of these projects which are duly met by assessee company. In respect of Tulsi Project, for which deduction has been claimed for the first time in A.Y. 2006-07, the deduction u/s 80-IB(10) is admissible for the reasons stated above that it was a new project.
28. The learned Departmental Representative in reply submitted that conditions prescribed are being modified w.e.f. 2005-06 and accordingly AO disallowed deduction in these years. It was fairly admitted that many of the projects were allowed by AO in assessment year 2004-05 and other projects were allowed by the ITAT. The main objection is with reference to the Tulsi Project which was considered as an extension of the earlier one and not a separate project. Therefore, deduction claimed was not allowable. He reiterated the contentions as made out by AO and the CIT (A).
29. We have considered the issue. As far as the deduction on Balaji Towers, Silicon Towers Projects are concerned, we find that the issue was covered by the ITAT in assessee's own case for assessment year 2004-05. vide Para 11 to 17 of the ITAT order the deduction on Balaji Towers was considered as under.
"Balaji Towers Project "8. As far as this project is concerned, the relevant material facts are like this. During the course of the assessment proceedings, the Assessing Officer noticed that land, on which this project was developed, was Page 15 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench leased by CIDCO to a partnership firm by the name of Danik Pundhari. This land consisted of plot nos. 29 to 32 and 36 to 37 situated at Sector 30, Vashi, Navi Mumbai, and the total land area was 7,999.79 square meters. The Assessing Officer noted that, out of total built up area of 11,997.813 square meter, permissible FSI being 1.5 of the plot size i.e. 7,999.79 square meters, only 6,231.742 square meter. The Assessing Officer was of the view that, "thus it can be clearly seen that the development undertaken on the said plot of land is predominantly and substantially in nature of commercial establishment". It was also noted that "certain residential units, viz. A/105, B/107, C/102, C/106, C/107, C/207, C/607, C/707 and C/303, have built up area exceeding 1,000 sq. fts (calculated as predetermined percentage of super built up area/saleable area mentioned in the agreement and after taking into consideration the area of attached terrace)". It was in this backdrop that the Assessing Officer declined deduction under section 80 IB (10) in respect of this project as well. Aggrieved by the stand so taken by the Assessing Officer, assessee carried the matter in appeal before the CIT(A) but without any success. Learned CIT(A), relying upon a coordinate bench decision of this Tribunal in the case of Laukik Developers Vs DCIT (105 ITD 657), concluded as follows:
"It is very clear from the decision of Hon'ble Mumbai bench of the ITAT ( in the case of Laukik Developers) that no deduction under section 80 IB- (10) is allowable if the construction project of the assessee is not approved by the local authority as 'housing project'. In the present case, project of the appellant has been approved as 'press cum housing cum residential project'. Therefore, following the decision of the ITAT, Mumbai benches, mentioned above, it is held that the construction project of the appellant, Page 16 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench namely Balaji Tower, is not entitled to ITA No. 6431/Mum/07, deduction under section 80 IB (10). In view of this finding, it is not necessary to examine whether area of some of individual flats were more than 1,000 sq. ft. rendering the appellant ineligible f or deduction under section 80 IB (10). The appeal of the appellant, on this point, is, accordingly, dismissed".
....
.....
"11. We find that the basic reason of the impugned disallowance of deduction is that the project was not approved as a housing project but as a housing cum commercial project, and because the project had substantial commercial area. The issue as to what should be done in such cases came up before a Special Bench of this Tribunal in the case of Brahma Associates Vs JCIT (119 ITD 255). That was a case in which the project was not approved as a housing project but as 'residential + commercial project', and deduction under section 80 IB (10) was declined, following coordinate bench decision in the case of Laukik Developers (supra), on the ground that it was not a housing project. The Special Bench, inter alia, held that "as long as the residential use of built-up area is 90 per cent or more, it cannot be said that the project is not a predominantly housing project and, accordingly, deduction under section 80-IB(10) cannot be declined". It was thus held that a commercial built up area of upto 10 percent would not vitiate the entitlement for deduction under section 80 IB (10). However, when matter travelled in further appeal before Hon'ble Bombay High Court, Their Lordships held that no such limit on commercial use were justified. On the facts of this very case, in which the project was admittedly a residential cum commercial project, Their Lordships, inter alia, observed as follows:
........In the present case, it is not in dispute that the project is approved for residential and commercial buildings as per the DC Rules, Pune. The fact that the residential buildings under the DC Rules can have commercial user upto 50% of the built- up area of the plot cannot be a ground Page 17 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench to hold that the project is not a housing project. It is for the legislature to impose restrictions on commercial user in a project for the purposes of availing Section 80IB(10) deduction and that has been done by inserting clause (d) to Section 80IB(10) with effect from 1/4/2005. Therefore, the decision of the Tribunal in holding that a project with residential and commercial user to the extent permitted under DC Rules would be a housing project and hence eligible for deduction under Section 80IB(10) upto 31/3/2005 cannot be faulted.
27. The question then to be considered is, whether the Special Bench of the Tribunal was justified in holding that the projects having commercial area upto 10% of the built-up area of the plot are eligible for deduction Section 80IB(10) on the entire project upto 1/4/2005.
Once the basic argument of the revenue that the housing projects with commercial user are not entitled to Section 80IB(10) deduction is rejected, then in the absence of any restriction imposed under the Act, it was not open to the Tribunal to hold that the projects approved by the local authorities having residential buildings with commercial user upto 10% of the plot area would alone be entitled to deduction under Section 80IB(10). As noted earlier, restriction regarding commercial user has been imposed for the first time by introducing clause (d) to Section 80IB(10) with effect from 1/4/2005.
12. It is thus clear that, as the law stands now in the light of Hon'ble jurisdictional High Court's judgment in the case of Brahma Associates (supra), as long as project is an approved project, even as commercial cum residential - as was the position in Brahma Associates case (supra) and as the position in the present case, deduction under section 80 IB (10) cannot be declined on the ground that it is not a purely residential project or on the ground that it has substantial commercial built up area. As for the co ordinate bench decision in the case of Laukik Enterprises (supra), it was overruled by the Special Bench decision in the case of Brahma Associates and Hon'ble Bombay High Court has upheld the action of the Special Bench in this Page 18 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench regard. The very foundation of impugned disallowance thus does not hold good in law any longer.
13. The other objection of the Assessing Officer was that the size of some of the residential units was more than one thousand square feet. However, even according to the Assessing Officer, this working was "calculated as predetermined percentage of super built up area/ saleable area mentioned in the agreement and after taking into consideration the area of attached terrace". The expression 'built up area' has been defined, with effect from 1stApril 2005, "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". However, so far as the relevant assessment year is concerned, admittedly the expression 'built up area' was an undefined expression under the Income Tax Act, 1961, and, therefore, meaning assigned to this expression were as understood in common parlance. As to the question whether area of balconies could be included in the definition of 'built up area' for assessment years prior to 2005-06, we find this issue is now covered by a coordinate bench decision in the case of ACIT Vs Sheth Developers Pvt. Ltd (33 SOT 277) wherein coordinate bench has, inter alia, observed as follows:
18. Now coming to the second question which is whether balcony is to be construed as a part of the built-up area.
According to the Assessing Officer if the balcony area is also added, the built-up area would exceed 1000 sq. ft. per unit in number of cases. For resolving this we have to once again go back to the definition of built-up area introduced by the Finance (No. 2) Act, 2004, as clause (a) to sub- section (14) of section 80-IB and first decide whether it is retrospective or not. For brevity, this definition is reproduced once again hereunder:
"(14) for the purpose of this section:--
(a) 'built-up area' means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the Page 19 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench common areas shared with other residential units."
Though, both the learned D.R. as well as the learned A.R. have delved into a large number of cases for their respective contentions for and against retrospectivity, we find that the answer to this question can be found easily from the definition itself. The definition says built-up area 'include' projection and balconies. The accepted rules of interpretation for an inclusive definition as elucidated by the Hon'ble Apex Court in the case of CIT v. Taj Mahal Hotel AIR 1972 SC 168 is that if the word 'include' is used in an interpretation clause, it must be construed as comprehending not only such things as it signify according to their nature and import, but also things which the interpretation clause declares that they shall include. So normal meaning of built-up area, but for the definition including projection and balcony, would definitely exclude the latter. Even according to the Assessing Officer himself, built-up area as normally understood in common parlance means area enclosed within the external lines of the external walls. Therefore, there can be no doubt that prior to the introduction of the definition clause aforesaid, built-up area would not include projections and balconies as normally understood. Now the question whether the definition clause mentioned above can be deemed as retrospective, we are afraid we have to answer against the revenue. Number one, the enactment itself clearly specifies that clause will have effect from 1-4-2005. Number two, it is not a procedural section but a definition section, where an enlarged meaning is given to the term 'built-up area' and such enlarged meaning would not have been in the realm of understanding of any person, prior to its introduction, and assessees would have gone ahead with their respective projects based on a common understanding of the term built-up area. Thus, the enlarged meaning, if given a retrospective effect, will definitely affect the vested rights of an assessee. Therefore, we have no hesitation to conclude that the definition had only prospective effect from 1-4- 2005. We are roboranted in taking this view by the decision of the Special Bench in Brahma Associates' case (supra), where amendment to section 80-IB(10) also effected through same Finance (No. 2) Act, 2004, were considered to have only prospective effect, vis-a-vis sub-clause (d) thereof. No doubt in the case of Dy. CIT v. Ansal Properties & Industries Ltd. [2009] 116 ITD 253 Delhi Bench of the Tribunal has taken a view that extension of time-limit for completion of project, brought into the statute through an amendment which came into effect from 1-4- 2001 would apply prior to that as well. However, there the issue was the extension of a benefit of time-limit and this cannot be Page 20 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench treated as equivalent to introduction of a definition which hitherto before had a different meaning as understood in common business parlance. Even otherwise, revenue is precluded from taking the plea that such definition is having retrospective effect for the simple reason that Assessing Officer himself had accepted it to be only prospective. Various contentions of the learned DR that there can be no estoppel against law even if the Assessing Officer himself had taken a different view becomes irrelevant on the face of our finding that definition of built-up area is only prospective with effect from 1-4-2005. Thus prior to 1-4-2005, balcony would not form part of the built-up area, irrespective of the area of such balcony.
14. In view of the view so adopted by the coordinate bench, with which we are in respectful agreement, area of balcony cannot be included in the built up area. The Assessing Officer thus clearly erred in including the area of balcony. We have also noted that, as noted by the Special Auditor appointed by the revenue authorities (page 116 of the paper book) if area of the balcony is to be excluded, none of the flats will exceed the area of one thousand square feet. There is thus no legally sustainable merits in Assessing Officer's objections with regard to the size of the flat as well. Once balcony area is excluded, even according to the revenue authorities, no flat is of more than one thousand square feet.
15. Learned counsel has submitted that deduction under section 80 IB (10) has been allowed in respect of this project, in the preceding assessment years, by Settlement Commission, and following the principles of consistency, we must allow the same for this year as well. Some arguments were advanced on the issue as to whether orders of settlement commission have precedential value. However, having regard to the fact that the issue has been decided on merits, we do not consider it necessary to deal with these arguments and adjudicate upon the same.
16. One more argument of the assessee has been that as far as assessee is concerned, its project is only for the residential units and the assessee constructed other commercial area for lessee of the land, in consideration of so using the land and FSI for residential purposes. It is submitted that land was allotted to Danik Pundhir and, it Page 21 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench was in consideration of assessee doing construction for their needs as press, the assessee was allowed to use the area for residential use. The project of the assessee was thus only with regard to the housing units built by the assessee, and what has been built as commercial units and for press, is in fact consideration for allowing the assessee to develop residential segment of the overall project. However, in view of the fact that the quantum of commercial construction, in view of Hon'ble Bombay High Court's decision in the case of Brahma Associates (supra), is not coming in the way of assessee's entitlement for deduction under section 80 IB(10), we see no need to adjudicate upon, or deal with, these contentions either.
17. In view of the above discussions, we uphold assessee's claim of deduction under section 80 IB (10) in respect of Balaji Towers project as well. The impugned disallowance is deleted. The assessee will get the relief accordingly".
30. With regard to Silicon Towers, vide Para 18 and 19 of the ITAT order, the issue was discussed as under:
"Silicon Tower Project:
18. The facts relating to Silicon Tower Projects are broadly the same as Balaji Towers Project. It was a case in which 8,200 square meter plot, i.e. plot no. 46 at Sector No. 30 A Sanapada, Navi Mumbai, was allotted by CIDCO to Parbhodhan Prakashan, and, in collaboration with the said concern, the assessee constructed the residential cum commercial project. Out of total built up area of 12,295 square meters, residential area was only 9,036 square meters. The deduction was declined on the ground that the project was not a housing project and because some of the flats, after including the balcony area, exceed the requisite size of one thousand square feet. The CIT(A) also confirmed the action of the Assessing Officer by following the stand taken by him in the matter of Balaji Project. The assessee is aggrieved and is in further appeal before us.Page 22 of 27 ITA Nos.393 and 685
Haware Engineers & Builders P Ltd Mumbai H Bench
19. Learned representatives agree that whatever we decide for Balaji Tower Project will follow here as well. In view of the discussions above, we have upheld assessee's claim for deduction under section 80 IB (10) and the same observations will apply mutatis mutandi here as well. Accordingly, we uphold assessee's claim of deduction under section 80 IB (10) in respect of Balaji Towers project as well. The impugned disallowance is deleted. The assessee will get the relief accordingly"
31. Therefore the assessee is eligible for deduction on these projects( Balaji and Silicon) and respectfully following the above order of coordinate bench in assessee case, we direct AO accordingly. As far as Kaveri, Panchavati & Vrindavan are concerned, the deduction was allowed by AO in assessment year 2004-05 as conditions were satisfied but the deduction was denied on the reason that new norms as per amended provisions will apply. Since the project was approved before 1.4.2005 and as AO allowed deduction in earlier years, there is no need for disallowing the deduction in these years, as revised provisions do not apply to the projects approved earlier to 01-04-05. Therefore, assessee is eligible for deduction under section 80IB(10). The principle was laid down by ITAT in the case of Saroj Sales Organization 3 DTR 494 while deciding an identical issue for A.Y. 2005-06, held in Para 13 of the order that "we are of the view that housing projects were approved before 31st March, 2005 and for such project which were so approved, there was no stipulation as to the shopping complex are permissible in the project. As already stated earlier that the amendments were subsequently made while extending the deduction of income from housing project approved up to 31 March, 2007, the denial of deduction, in our view, is clearly not in accordance with law".Page 23 of 27 ITA Nos.393 and 685
Haware Engineers & Builders P Ltd Mumbai H Bench Similar view has been taken by ITAT, Mumbai in the case of Hiranandani Akruti JV v. DCIT (2010) 39 SOT 498 (Mum) and ACIT v. Sheth Developers 33 SOT 277 (Bom) wherein they have followed the judgment of ITAT in Saroj Sales Organization (supra). The ITAT, Ahmedabad in the case of Raj Developers v. ITO (2011) 43 SOT 184 (Ahmd) have also followed the decision of Division Benches in the case Aruna Excello Foundation Pvt. Ltd. v. ACIT (2007) 108 TTJ (Chennai) 71 and Saroj Sales Organization (supra). Therefore we hold that these projects (Kaveri, Panchavati & Vrindavan) are eligible for deduction and AO is directed accordingly.
32. With reference to the Tulsi Project, the contention was whether Tulsi Towers is a separate project or extension of Vrindavan Project. AO held that Tulsi Towers is only an extension of Vrindavan Project and accordingly he disallowed the claim as he has not allowed the claim for Vrindavan Project. The CIT (A) upheld the contention by holding as under vide Para 3.3.2.
"3.3.2 1 now come to the deduction for the Tulsi Project. Looking into the facts brought on record by the Assessing Officer, the documents relied upon and the provisions of section 801B(10), I find that the Assessing Officer has rightly held this project as only an extension of the Vrindavan project. To this end, I note the following significant features:
i) The Tulsi Tower is only the 'C' wing of the Vrindavan project which has 'A' to 'W' wings laid out in a rectangular shape in two loops.
ii) The commencement certificate dated 01 .2.2002 is in respect of the development of the Vrindavan project.
iii)The separate commencement certificate dated 22.12.2006 for the Tulsi Tower refers to only Additions and Alteration' of the C wing making it clear that this certificate is being issued only for the Addition and Alteration of the existing building on plot no. 52, Sector Page 24 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench 9, New Panvel, Navi Mumbai which is the same plot on which the Vrindavan project has been constructed.
iv) The District Valuation Officer has also in his report dated 3 1.1.2008 mentioned TuIsi Tower' as the last building in the Vrindavan Project.
As may be seen, the above features of the Tulsi Tower project overwhelmingly support the Assessing Officer's stand that this is not a separate project but only an extension of the Vrindavan Project which is not entitled to the deduction. As against these tell-tale evidences brought on record by the Assessing Officer, the appellant has not been able to bring anything on record to substantiate its stand. The Tulsi Tower being part of the Vrindavan Project, the conditions stipulated in section 801B(10) would thus have to be applied as applicable to the Vrindavan project and not the Tulsi Tower. In view of this, the submissions of the appellant that the amended provisions of section 801B( 10) are applicable for the Tulsi Tower are misplaced. The other arguments put forth by the appellant viz., filing of the necessary particulars, built-up areas of the flats being within the prescribed limits, recognition of the revenue from this project on percentage completion method are all irrelevant once it stands proved that this project is only an extension of another project which is found to be ineligible for the facts applicable to that project. In line with the foregoing, I find that the Assessing Officer has rightly denied deduction to the Tulsi Project. His action is confirmed.
In line with the foregoing, the ground of appeal is dismissed".
33. As can be seen from the above, the CIT (A) also agrees that this project is an extension of Vrindavan Project. Assessee's contentions are to be accepted as this is a separate project, as there is a separate approval and fulfilled conditions as applicable post amendment, so the project is entitled for deduction under section 80IB (10). Even if one were to accept that this is an extension of Page 25 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench Vrindavan Project, since Vrindavan Project itself was allowed 80IB (10) deduction, there cannot be any reason for disallowance of 80IB deduction on Tulsi Towers, as part of Vrindavan Project. Looking at it either way, a claim under section 80IB on the Tulsi project cannot be disallowed as all the conditions applicable to 80IB(10) are fulfilled. The Hon'ble Bombay High Court has dealt with the issue of new project on existing plot in its order dated 28.03.2012 in the case of CIT v. Vandana Properties ITA Nos. 3633 of 2009 and 4361 of 2010. In that case also, the land of plot admeasuring 2.36 acres had constructed building A, B, C and D over a period during 1993- 1996. Pursuant to the decision of the State Government permitting conversion of the status of land, assessee became entitled to construct an additional building E on that plot of land. The plot known as Building No.E was constructed for which the approval of the building plan was granted on 11.10.2002 and commencement certificate was issued on 10.03.2003. Even though the land pertained to E-Building was less than one acre, the Hon'ble Bombay High Court held in Para 29 of the judgment that u/s 80-IB(10), there is no limit on the number of projects. It laid down 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 u/s 80- 18(10), the deduction there under can not be denied to all those housing projects. Section 80-IB(1O) while specifying the size of plot on 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'.
Therefore, there can not be any objection for sanction of new project on existing projects sanctioned earlier. However, for record we hold that Tulsi Project is separately approved project as a residential Page 26 of 27 ITA Nos.393 and 685 Haware Engineers & Builders P Ltd Mumbai H Bench housing project and amended provisions of section 80IB(10) effective from 01/04/2005 are applicable and those conditions are satisfied by assessee as the project is a residential project and commercial area is less than the prescribed area and other conditions are satisfied, so we hold that Tulsi project is also eligible for deduction under section 80IB(10).
34. Accordingly the grounds of assessee with reference to claims of deduction u/80IB(10) on various projects as discussed above are allowed, except the Ground No.1(on Santi Niketan) which was withdrawn.
35. In the result, appeals filed by assessee are partly allowed.
Order pronounced in the open court on 4th May, 2012.
Sd/- Sd/-
(S.S.Godara) (B. Ramakotaiah)
Judicial Member Accountant Member
Mumbai, dated 4th May, 2012.
Vnodan/sps
Copy to:
1. The Appellant
2. The Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. The DR, "H" Bench, ITAT, Mumbai
By Order
Assistant Registrar
Income Tax Appellate Tribunal,
Mumbai Benches, MUMBAI
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