Income Tax Appellate Tribunal - Pune
M/S Aditya Developers, Pune vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench "A" , Pune
Before Shri I.C. Sudhir Judicial Member and
Shri G.S. Pannu Accountant Member
ITA No. 791 & 792/PN/2008
(Asstt. Years : 2003-04 & 2004-05)
The Dy. Commissioner of Income-Tax ... Appellant
Central Cir-1(1), Pune
v.
M/s. Aditya Developers ... Respondent
619, Sadashiv Peth,
Pune - 411 030.
PAN : AACFA0856C
Appellant by : Shri Sunil Pathak & Shri Suhas P.
Bora
Respondent by : Shri Hareshwar Sharma &
Shri S.K. Ambastha
Date of Hearing: 18/01/12
Date of Pronouncement : /01/12
ORDER
Per I.C. Sudhir, Judicial M ember In these appeals, the revenue has questioned first appellate order on the following common grounds :
1. The Ld. CIT(A) has erred in allowing relief (of Rs.
6,90,51,536/- in A.Y. 2003-04 and Rs. 2,31,65,627/- in A.Y. 2004-
05) on account of deduction u/s. 80IB(10) of the I.T. Act 1961. 2 ITA . Nos. 791 & 792/PN/2008
M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14
2. The Ld CIT(A) erred in holding that the assessee is entitled to deduction u/s 80IB(10) of the I.T. Act, even when the project has commercial space measuring 30,000 sq.ft.
3. The learned CIT(A) erred in not appreciating the stand of the Assessing Officer that the extra profit earned on account of waiver of applicability of Urban Land Ceiling Act is not a profit derived out of the Housing Project.
4. The order of the Ld CIT(A) be vacated and that of the A.O be restored.
Thus we find that the issue involved in the grounds is as to whether the Ld CIT(A) was justified in holding that the assessee is entitled to the claimed deduction u/s. 80 IB(10) of the Act during the A.Ys. under consideration ?
2. The relevant facts are that during the A.Ys. under consideration, the assessee in the business of builder and developer had claimed deduction u/s. 80IB(10) of Rs. 6,90,51,536/- in A.Y. 2003-04 and Rs. 2,31,65,627/- in the A.Y. 2004-05. The A.O. denied the same mainly on the ground that the project undertaken was nothing but an extension of old project. The contention of the assessee, on the other hand, remained that the assessee had developed and constructed an independent housing project namely Krishna Keval Township (KKT) at Pune and had derived profit from the said housing project. It was contended that the assessee has complied with all the requirements of Sec. 80IB(10). It was submitted that the housing project was developed on a plot of land exceeding 1 acre, work of construction and development of the Housing Project had started on or after 1.10.1998, the housing project comprised of residential units only, size of each of the residential units was less 3 ITA . Nos. 791 & 792/PN/2008 M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14 than 1500 Sq. ft. and that housing project was completed within the prescribed time limit. It was further submitted that separate books of accounts for the housing project KKT were maintained and audited. The Ld CIT(A) after verifying relevant facts, has allowed the claimed deduction against which revenue is in appeal under consideration.
3. In support of the grounds involving the issue, framed hereinabove, the Ld. D.R. has basically placed reliance on the assessment order. He submitted that the project on which deduction u/s. 80 IB (10) has been claimed by the assessee is nothing but continuation of the old project. Thus there is factual inaccuracy in the findings of the Ld CIT(A) in its first appellate order. He drew our attention to page No. 94 of the paper book i.e. proposed building lay out plan dated 25th May 1990 approved by the Pune Municipal Corporation. The Ld. D.R. also refered page No. 110 of the paper book i.e. copy of the letter dated 4th May 2001 by the Central Board of Direct Taxes to M/s. Maharashtra Chamber of Housing Industry making clarification under the provisions of Section 10(23 G) of the Income Tax Act 1961. The Ld. D.R. submitted further that the decision in the case of Nirmiti Construction Vs. DCIT,ITA No.1389/PN/ 2003, order dated 11th August, 2004, A.Y. 2000-01 followed by the Ld CIT(A) is having different facts and thus is not helpful to the assessee. He placed reliance on the decision of Chennai Bench of the Tribunal in the case of ACIT Vs. Viswas Promoters (P.) Ltd. (2010) 12 ITD 263 (Chennai).
4. The Ld. A.R. on the other hand tried to justify the first appellate order on the issue.He submitted that the proposed buildings lay out was initially approved by the Pune Municipal Corporation (PMC) on 25.5.1990, copy made available at page 94 of the paper book. This lay out plan was 4 ITA . Nos. 791 & 792/PN/2008 M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14 again revised on 31.3.2001 (Page 5 of the paper book) by Pune Municipal Corporation on 31st March 2001. He submitted that the KKT having land area of 8966 Sq. Mtrs. has been marked in red in the building lay out. He submitted that the laid down plan was approved by the Pune Municipal Corporation in the year 1990. He referred page No. 83 & 84 of the paper book i.e. lay out of buildings in Krishna Keval Niketan (KKN) having land area of 23089 sq. mtrs., KKT having land area of 12366 sq.mtrs. He thereafter referred page No. 93 of the paper book i.e. details about KKT Housing Project. He pointed out that KKN project constituted buildings A to J whereas the project under consideration i.e. KKT consisted Wings I,M,N,O,P and K1 and K2. The Ld A.R. referred to page No. 103 (Wings I, M,N,O, P) & 104 (Wings K1 and K2) i.e. the copies of approved building plans dated 29.3.2001 and 09.3.2001 in respect of KKT housing project. In these building plans, details about KKT housing project has been given. The Ld. A.R. submitted further that in these building plans of the KKT housing project wings were completed on 10.10.2002 and wings I, M, N,O, P were completed on 10.2.2003 (page No.93 of the paper book). He submitted that total number of units in the project was 188. The area of plot of land in 'KKT' was 8966 sq. mtrs. The project is fully residential and there is no unit having built up area more than 1500 sq.ft. About the letter dt. 4.5,.2001 written by CBDT to M/s. Maharashtra Chamber of Housing Industry, made available at page No. 110 of the paper book, the Ld. AR. submitted that it is clarification by the CBDT on the query raised by Maharashtra Chamber of Housing Industry vide its letter dated 1st January 2001, a copy whereof has also been furnished by the assessee. The Ld. A.R. submitted that the clarification made by the CBDT regarding additional housing project on existing housing project site makes the position in favour of the 5 ITA . Nos. 791 & 792/PN/2008 M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14 assessee. In that letter also the CBDT has made it clear that the definition of 'housing project' is any project which has been approved by a local authority as 'housing project' should be considered adequate for the purpose of Section 10(23 G) and 80 IB (10) of the I.T. Act. It has been made clear in that letter that the additional housing project on existing project site can qualify as infrastructural facility u/s. 10 (23G) and 80 IB(10) provided it is taken up by a separate undertaking having separate books of accounts so as to ensure that correct profit can be ascertained for the purpose of Section 80IB (10) and also to identify receipts and payments for long term finances under the provisions of Section 10 (23G), separate financing arrangements, if at all separately fulfills all other statutory conditions listed in Secs. 10 (23/g) and 80 IB (10). The Ld. A.R. made it clear that for the portion of land in question, no building plan was passed earlier. The KKT is a separate society. He also referred Explanation (i) to Sec. 80 IB (10) of the Act to support his arguments that housing project and building plan are two different things. He submitted that lay out is a master plan as a concept. For the background of the project, the Ld. A.R. referred page No. 1 of the paper book i.e. submission dated 16.10.2006 of the assessee in response to the letter dated 3.10.2006 by the Ld. DCIT. The Ld. A.R. placed reliance on the following decisions :
1. DCIT Vs. Brigade Enterprises (P) Ltd.
14 DTR 371 (Bang.)
2. Saroj Sales Organisation Vs. ITO, 3 DTR 494 (Bom.)
3. Vandana Properties Vs. ACIT, 27 DTR 282 (Mum.)
4. Mudhit Madhanlal Gupta Vs. ACIT, 51 DTR 217 (Bom.)
5. Apoorva Properties and Estates Pvt.Ltd. Vs. DCIT, ITA No. 113/PN/2007 (A.Y. 2003-04) order dated 21.8.09. 6 ITA . Nos. 791 & 792/PN/2008 M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14
5. The Ld. D.R. submitted in rejoinder that if the argument of the Ld. A.R. is accepted then the whole purpose of the provisions of 80IB(10) of the Act would be defeated to ensure completion of the project in time, the date of completion of the project has been given importance under the provisions of Sec. 80IB (10). He pointed out that in the present case, there are same assessee, same addition in the same project. Ignoring these material facts, the Ld CIT(A) erred in allowing the claimed deduction.
6. We have considered the above submissions and have gone through the orders of the authorities below, material available on the record and the decisions relied upon by the parties. The facts in details submitted by the assessee before the A.O vide letter dated 16.10.2006 have also been gone through. For a ready reference, para nos. 1 to 8 of the letter dated 16.10.2006 submitted by the assessee before the A.O are being reproduced hereunder :
"1. M/s Aditya Developers purchased a plot of land bearing Survey No. 1/A(Part) of Kondhwa Khurd, Pune from Ranade and their relatives. Thereafter M/s. Aditya Developers got the clearance from Urban and Land Ceiling Department vide order dated 17-8- 1988. Then we got layout plans sanctioned from the PMC vide order dated 25-5-1990. As per the terms of the ULC we have to show 25 s1.mtr corehouse plots and building in layout plan and get it sanctioned from PMC. If we don't implement their order ad show the vacant land in the plan, the ULC department might have initiated acquisition procedure. The total land area was 28905 sq.mtr. It was not possible for us to start construction and development of entire land. So we started development and construction of front area of land. In the year 1994, we have requested govt. of Maharashtra to accept the consideration in lieu 7 ITA . Nos. 791 & 792/PN/2008 M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14 of certain conditions stipulated in their order for deleting construction of corehouse plots & small area flats. After a long hearings they accepted our request and on payment made, issued us order on 14-12-1994 because of which we were entitled to cancel the certain building and 112 corehousesof 25 Sq.M. proposed for weaker section. We got our land reverted back from ULC Dept. on payment of consideration to Govt. by order on 14-12- 1994.
2. We have completed the development and construction of the buildings A,B,C,D,E,F,G,H & J on portion of land bearing S.No.1(Part), Kondhwa Khurd.
3. Thereafter the provision of the section 80IB(10) came into force. The vacant land area of 8966 s1.mtr was available for the new project with us. So we planned a new project as per the norms of provisions of 80IB(10) on vacant land of 8966 sq.mtr at S.No.1(Part), Kondhwa, The building plans were prepared in such a way that area of each unit will be less than 1500 sq.ft. We got the building plans sanctioned on 9-3-2001 and 29-3-2001 and work of the project started only after the building plans sanction in March 2001. It is very important to note that the land of 8966 sq.mtr was vacant and according to rules of PMC (Local Authority), all the sanctions prior to 9-3-2001 & 29-3-2001 get cancelled and lapsed on vacant land of 8966 sq.mtr. at S.No.1(Part)Kondhwa.
4. We have constructed the buildings K,M,N,I,O & P on vacant land at Survey No. 1(A) (Part) Kondhwa Khurd, Pune which is carved out separately on site. TDR used is less than 40% of area of land of 8966 sq.mtr. We got sanctioned new building plans as per norms of 80IB(10) provisions in March 2001 & constructed all flats following all these norms. Since our new housing project is as per the plans sanctioned in March 2001, it is no way concerned with earlier lapsed sanctions. We have never started any development or construction prior to March 2001 on the rear area of land of 8966 sq.mtr on which buildings K,M,N,I,O,P have been constructed.8 ITA . Nos. 791 & 792/PN/2008
M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14 In support of this we are enclosing herewith photocopy of letter of PMC dt. 5-10-2006. English translation of the same is as under :
PUNE MUNICIPAL CORPORATION Construction Control Dept. Outward No. BCO/5102 Date: 5-10-2006 To, M/s Aditya Develooers, Residing at Sadashiv Peth No. 619,Pune 30 Sub: Regarding construction on S.No. 1(Part),Kondhwa, Pune Ref: Your letter dt. 3-10-2006 On the above mentioned subject and under the letter referred above, it is being informed that permission for construction of 'K' building at S.No. 1(Part) Kondhwa Khurd, Pune was given vide No. 4975 dt. 9-3-01 and certificate of plinth checking was given under No. BCO/03/74 DT. 27-9-2001. Also permission for building MNIOP was given vide letter No. 4981 dt. 29-3-2001 As per the available record there is no mention of any building construction of whatsoever nature was found on the land of above buildings before sanctioning permission for above construction.
Sd/-
Sd Asst. Engineer
Building Inspector Pune Municipal Corporation
_________________________________________________ 9 ITA . Nos. 791 & 792/PN/2008 M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14
5. Certificates of our Architect dated 14-10-2006 confirming this fact is also enclosed for your consideration.
6. The TDR was purchased from the open market and utilized as well as debited to Profit & Loss account in books of account was not more than 40% of 8966 sq.mtr. We have utilized TDR by purchasing it from outside land owners from the open market and then prevailing market price.
7. We have brought all these facts to notice of assessing officer during the scrutiny of our accounts for A.Y. 2001-2002.
It is clearly evident in the assessment order of A.Y. 2001- 2002 that the two projects are separate and P/L account as well as works in progress are separately shown in assessment order also.
8. We have constructed all the residential units each having area of less than 1500 sq.ft. in the buildings K, M,N,I,O,P in our new housing project. It is no way concerned with the residential & commercial unit of earlier constructed building on separate portion of land and same has been reflected in separate books of accounts and we have already paid taxes on it."
The submission of the Ld. D.R. remained that the decision of Pune Bench in the case of Nirmiti Construction Vs. DCIT (Supra) followed by the Ld CIT(A), having different facts is not applicable in the case of the assessee. Having gone through that decision, we do not agree with the above contention of the Ld. D.R. The decision fully covers the case of the assessee on the issue. It appears that the whole confusion on the issue in the mind of the A.O was due to his understanding of lay out plan and building plan one and the same thing, hence he has committed error in treating the date of approval of the] lay out plan by the Municipal Corporation as the date of approval of the building plan to compute the period of completion of the building plan to verify the eligibility of the claimed deduction u/s. 80IB (10) of the Act. Pune Bench of the Tribunal 10 ITA . Nos. 791 & 792/PN/2008 M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14 has occasion to discuss the distinction between the lay out plan and building plan in the case of Nirmiti Construction (Supra). In that case before the Tribunal, the lay outs were furnished to the Municipal Corporation for sanction on 6th June 1998 and construction work was commenced after building permission was sanctioned by the Municipal Corporation on 23rd July 1999. Department took the stand that the development commenced with the development agreement and acquiring irrecoverable power of attorney and more so that lay outs were furnished to the municipal corporation for preliminary sanction on 6th June 1998, the assessees submitted that the preliminary sanction was required to be given which constituted "no objection" from municipal corporation for allowing assessee to have the construction on the said property. It was contended that on the basis of preliminary sanction, the assessee made an application for converting the said land into Non- agricultural land. This application was made on 25th November 1998 and the revenue authorities converted the said agricultural land into Non-agricultural land on 13th June 1999. It was also contended by the assessee that the building plan was submitted to the municipal corporation and the said corporation sanctioned the building plan on 23rd July 1999. In other words, the municipal corporation gave the permission of construction on 23rd July 1999. After discussing the cases of the parties, the Tribunal has accepted the above contentions of the assessee that the housing project has been approved by the local authority on 23rd July 1999 i.e. after 1st October1998, hence the assessee was eligible for the claimed deduction u/s. 80 IB (10) of the Act since it was fulfilling all other requirements of the provisions.
11 ITA . Nos. 791 & 792/PN/2008
M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14 6.1. Likewise, in the case of Vandana Properties Vs. ACIT (Supra), the Mumbai Bench of the Tribunal has decided the issue in favour of the assessee . In that case, the assessee had plan for 4 independent buildings 'A','B', 'C' & 'D' but, so far as 'E' is concerned only planned when the status of 'the surplus land was converted as "within ceiling limit" and the assessee could get additional FSI for launching Wing 'E' . Wing 'E' was planned and construction was commenced after 1st October 1998 and builing/Wing 'E' was an independent housing project as contemplated u/s. 80 IB (10). The Tribunal held that the concept of housing project does not mean that should be the group of the buildings and only then same is called a " housing project" . It was further held that building/wing 'E" cannot be passed with earlier buildings i.e. A, B,C & D which work was commenced in the year 1993 whereas plan for wing 'E' was approved for only once in the year 2002. It was held further that the conclusion drawn by the authorities below that the commencement of wing 'E' is a continuation of the existing project is erroneous. 6.2. In the case of Saroj Sales Organisation Vs. ITO (Supra), the Mumbai Bench has again expressed the same view and held that the commencement certificates in respect of these wings in block "N" were separately received by the assessee and all the flats in block "N" were of less than 1000 sq.ft., hence it is not open to the revenue to include block "B, C" as part of block "N" just to deny relief u/s. 80IB(10) of the Act. The Bangalore Bench of the Tribunal has also got occasion to discuss Distinction between the sanction of lay out plan and approval of building plans by the local authority for consideration of the eligibility of U/s. 80 IB (10) deduction in the case of DCIT Vs. Brigade Enterprises (P) Ltd. (Supra). In that case before the Bangalore Bench, the assessee undertook a development project in an area of 22 Acres 19 guntas consisting of 5 residential block raw houses, Oak Tree Place, a Club, and Community Centre, a School, a Park and claimed deduction u/s. 80 IB 12 ITA . Nos. 791 & 792/PN/2008 M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14 (10) in respect of 2 residential units which if deducted separately were eligible for the relief. The A.O treated the entire project as a single unit and denied relief u/s. 80 IB (10) in entirety. The Tribunal justified the action of the Ld CIT(A) in allowing relief u/s. 80 IB(10) treating the said 2 units as independent units. The Tribunal observed that the group housing approval was approval of a master plan as a concept and if a particular unit satisfies the condition of Section 80 IB (10), the assessee is entitled for deduction. The Tribunal held that Plan for development was only a work order and not final plans sanctioned by local authority. For any project, there could not have been a plan without submission of the detailed building plans by the architect and on the requisite details required to be submitted for approval of the building plans by the local authorities. In other words, the Tribunal accepted the contention of the assessee that the development plan is only conceptual and the detailed construction plans are not submitted nor approved without which no construction can even commence, and this is done only subsequently where the assessee submits the construction plans which are approved by the authority. This is done for each project. The Pune Bench in the cases of Apoorva Properties and Estate Pvt. Ltd. Vs. DCIT, ITA No. 113/PN/2007, A.Y. 2003-04, order dated 21st August 2009 and Mumbai Bench in the case of Mudhit Madanlal Gupta Vs/ ACIT (Supra), 51 DTR (Mum ) Trib 217 have expressed the similar view.
7. There is no reason to dispute on facts in the present case that initially the proposed buildings ( except wings I, M, N, O, P and K in the present form) lay out plan was approved by the PMC on 25.5.1990 ( Page 94 of the paper book). The proposed building lay out plan was revised on 31.3.2001 (Page No. 5 of the paper book). The total area of land was 28905 sq. mtrs. The assessee had firstly completed development and construction of buildings A,B, C,D,E,F,G,H & J in the area of 17,392 sq. mtrs of project KKN, leaving the land area of 8966 sq.mtrs vacant. In that vacant land, the assessee started the construction of buildings in wings K, M, N, I, O, P, K1 and K2 in the project "KKT". In this project, 188 residential units were there each having built up area upto 1500 sq.ft. The building plans of the project "KKT" were approved on 9.3.2001 (wings K1 and K2) and 29.3.2001(wings I, M,N,O, P) which were completed on 10.10.2002 and 10.2.2003 respectively. Copy of 13 ITA . Nos. 791 & 792/PN/2008 M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14 building plan approved on 9.3.2001 has been made available at page No. 104 of the paper book, whereas the building plan approved on 29.3.2001 has been made available at page No. 103 of the paper book. There is no dispute on the dates of completion of the buildings in the housing project. The CBDT in its letter dated 4th May 2001 (page No. 110 of the paper book) has also made it clear that the definition of "housing project" is any project which has been approved by the local authority as a "housing project" should be considered adequate for purpose of Sec. 10(23 G) and 80 IB (10). We also find from the Explanation (i) to S. 801B(10) that the housing project and building plan of such housing project are two different concept. For a ready reference Explanation (i) to the Section is being reproduced hereunder :
"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;"
From the very reading of the Explanation (i) makes it clear that the date on which building plan of such housing project is approved shall be deemed the date of approval of the housing project. We thus find that the assessee is very much eligible for the claimed deduction u/s. 80 IB (10) on the project 'KKT' in view of the above cited decisions including decision of Pune Bench of the Tribunal in the case of Nirmiti Construction Vs. DCIT (Supra), following which, in our view, the Ld CIT(A) has rightly allowed the claimed deduction. The same is upheld. The issue raised are thus decided in favour of the assessee.
8. So far as decision of Chennai Bench of the Tribunal in the case of ACIT Vs. Viswas Promotrs (P) Ltd. (Supra) relied upon by the Ld. D.R. is concerned, we find that the facts therein are distinguishable as in that case, assessee had completed 4 housing projects, out of those 4 projects, in 2 projects assessee had constructed flats exceeding 1500 sq.ft. and also flats of less than 1500 sq.ft. in area, the assessee claimed 14 ITA . Nos. 791 & 792/PN/2008 M/s.Aditya Developers.
A.Y. 2003-04 & 2004-05 Page of 14 deduction u/s. 80 IB (10) in respect of flats having area less than 1500 sq.ft., A.O. denied said deduction on the ground that housing project comprised of residential units exceeding 1500 sq. ft., thus all conditions stipulated in statute were not satisfied. The Tribunal has justified the action of the A.O. This decision is thus not relevant in the facts of the present case wherein the project KKT is fulfilling all the requirements of Sec. 80 IB(10) of the Act and approval to the building plans of the project were given separately by the Municipal Corporation from the earlier project KKN. The grounds are thus rejected.
9. In result, appeals are dismissed.
The order is pronounced in the open Court on 30th January 2012.
Sd/- Sd/-
(G.S. PANNU) (I.C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 30th January, 2012
US
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
3. The CIT, Central, Pune
4. The CIT(A)- I,Pune
5. The D.R. "A" Bench, Pune
6. Guard File
By order
Senior Private Secretary
Income Tax Appellate Tribunal
Pune