Income Tax Appellate Tribunal - Pune
Baba Promoters & Developers,, Pune vs Assessee on 20 March, 2004
IN THE INCOME TAX APPELLATE TRIBUNAL
Pune Bench "B" , Pune
Before Shri I.C. Sudhir (JM)
and Shri G.S. Pannu (AM)
ITA No. 629/PN/2009
(Asstt. Year : 2004-2005)
M/s. Baba Promoters & Developers ... Appellant
Address - M.G. Road, Pune - 411001
PAN : AAFFB8179C
v.
Income Tax Officer, Ward 4(6), Pune ... Respondent
ITA No. 625/PN/2011
(Asstt. Year : 2006-07)
M/s. Baba Promoters & Developers ... Appellant
Flat No.5 Hrishikesh Dham,
Above Parihar Sweets, I.T.I. Road
Aundh Pune 411007
PAN : AAFFB8179C
v.
Asstt. C.I.T, Circle -4, Pune ... Respondent
ITA No. 159/PN/2010
(Asstt. Year : 2005-06)
M/s. Baba Promoters & Developers ... Appellant
1st Floor, Espanya Heights
1616, M.G. Road,
Pune 411 001
PAN : AAFFB8179C
v.
Income Tax Officer, Ward 4(5), Pune ... Respondent
PMT Building, Swargate, Pune 411 037
Appellant by : Shri. Sunil Ganoo
Respondent by : Shri. Satindersingh Navrath &
Ms. Ann Kapthuama
ORDER
Per I.C. Sudhir, JM
ITA No. 629/PN/2009
2 ITA . Nos 629/PN/2009, 625/PN/2011 &
159/PN/2010
M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07
Page of 21
In this appeal, the assessee has question validity of revisional
order passed u/s. 263 of the Act on several grounds running into 10 pages which are consisting of arguments as well.
2. The relevant facts are that the assessee, a partnership firm, working as land developers started construction of residential project "Castle World" at S. No. 242/1+2/1 Banar, D.P. Road, Aundh, Pune. As per the original lay out plan approved by Pune Municipal Corporation (in short PMC), the total area of the plot was shown to be 3995.34 Sq. Mtrs. i.e. marginally lesser than the prescribed area of " 1 acre" in the Section 80 IB(10) of the Act. The submissions of the assessee remained that in addition to the above stated area of land, an additional land measuring 5 'Are' was also acquired by the assessee for the approach road to the said project vide a separate agreement made with the same landlords from whom the above stated area of 3995.34 Sq. Mtrs. of land was purchased. The assessee contended that requirement of 1 acre of land in view of Section 80IB(10) was fulfilled as the area of the approach road cannot be excluded from the area of the project for the simple reason that if that area would not have been acquired, the PMC would not have sanctioned the Plan and issued Commencement Certificate. The A.O. visited the site and being satisfied with the fulfillment of the required area of land and accepting the explanation of the assessee regarding other discrepancies, the A.O had allowed the claimed deduction u/s. 80 IB(10) of the Act in the assessment framed u/s. 143(3) of the Act. The Ld CIT found the assessment order as erroneous as well as prejudicial to the interest of the Revenue on the following reasons :
1) The area of the project is less than 1 acre.
3 ITA . Nos 629/PN/2009, 625/PN/2011 &
159/PN/2010
M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07
Page of 21
2) As per Sale Agreement of row house, the saleable area
mentioned is more than 1500 Sq.ft, similar position is there in unit Nos. 2, 8 & 5.
3) In A.Y. 2005-06, the I.T.O. in its order passed u/s. 143(3) has denied the deduction u/s. 80 IB (10) to the assessee on the grounds that (No. 1, the area of the plot is less than 1 acre; (2) row house in building No. D is having built up area exceeding 1500 Sq.ft); and No.
4) There are flats which were merged together and modification is not as per approved plans.
3. Being not satisfied with the explanation of the assessee, the CIT while holding that the assessment order in question is erroneous as well as prejudicial to the interest of revenue has directed the A.O to withdraw the deduction granted u/s. 80 IB (10) of Rs. 47,95,506/- from the assessed income.
4. The Ld. A.R. while reiterating the contentions made before the authorities below, submitted that the assessee had commenced the construction of the project in the F.Y. 2003-04. The original lay out plan was approved by PMC vide Certificate No. DPO/6754/D/636 dt. 5.12.2002. The Collector, Pune had passed an order under Maharashtra Land Revenue Code 1966 to grant permission for construction of residential building on an area admeasuring 3988.34 Sq.mtrs. vide order dt. 7.3.2003. The PMC issued Commencement Certificate for construction vide letter No. 2983 dt. 21.2.2003. In the lay out plan dt. 5.12.2002, the area of the plot was shown at 3995.34 Sq. Mtrs. A separate agreement dt. 20th March 2004 was entered into with the same landlords for further 4 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 acquisition of an area of 5 'Are' so as to have the approach road for the project. In support, the Ld. A.R. drew our attention to the copy of the said agreement made available at page Nos.3 to 7 of the paper book filed on behalf of the assessee. The Ld CIT has erred in holding that the plea of the assessee that 5 Are of land purchased on 20th March 2004 for the purpose of approach road and subsequently transferred to the society makes plot area more than 1 acre as the approach road cannot be said to be the integral part of the project as it was never the part of the project as on 21st February 2003. The Ld. A.R. submitted that commencement of project cannot be granted by the PMC unless the project has necessary approach road. The project was approved by the PMC with this specific condition that assessee will be responsible for providing the road to the project. The assessee accordingly acquired 5 Are of land for approach road to the Society. He submitted that there is no other approach road than the road in question available to the Society. He cited decision of Mumbai Bench of the Tribunal in the case of Haware Engineers and Builders (P) Ltd. v/s. ACIT (2011), 11 Taxman .Com 286 (Mum), ITAT, copy supplied. The Ld. A.R. submitted that in that case also, the Department had declined deduction u/s. 80 IB(10) on the ground that additional plot acquired subsequently by allotment was a distinct plot which cannot be included in computation of the area of the plot. The Tribunal held the approach of the Department neither factually correct nor sustainable in law and accordingly, the claimed deduction was allowed holding that area of the plot acquired subsequently is also to be included in the measurement of the total area and thus the total area was as per the requirement of Section 80 IB(10) of the Act.
5 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21
5. The Ld. A.R. submitted further that the project consists of 37 residential flats and 11 row houses, out of which, the built up area of the none of the flats and row house exceeds 1500 Sq. ft.. The built up area of row house No. 11C in Building 'D' does not exceed 1500 Sq.ft. area. The residential units has a maximum built up area of 1500 Sq.ft. The built up area of the shops and other commercial establishments included in the housing project does not exceed 5% of the aggregate built up area of the housing project or 2000 Sq.ft., whichever is less. The Ld. A.R. submitted further that built up area for the purpose of the Section as defined in Clause (a) to Sub-section 14 of Section 80IB means the inner measurement of the residential unit at the floor level, including the projections and balconies as increased by thickness of the walls but does not include the common areas shared with other residential units.
6. The Ld. A.R. submitted further that in the sale agreement of row house, the saleable area mentioned is more than 1500 Sq.ft. because it includes area of open land/garden. If that area is excluded, then area of row house is less than 1500 Sq.ft. As per the provisions of Section 80IB(10), the area of open land/garden are not being included in the built up area. The Ld. A.R. submitted that even in the case of A.Y. 2005-06, the assessee has preferred appeal against the assessment order denying the claimed deduction u/s. 80 IB(10) on similar basis.
7. The Ld. A.R. submitted that the assessment u/s. 143(3) in the present case has been framed by the A.O after raising queries on the issue and after verification of the claim of the assessee by his personal visits to the site. The Ld. A.R. submitted that the Surveyor Mr. S.D. Kulkarni has wrongly included store/gym. Room area meant for common 6 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 use of the residents of the society, in built-up area of the said row- house. The store/gym. House having independent access is common area of residence owners of the said society. The ground floor area is 518 Sq.ft. whereas Mr. Kulkarni has mentioned in his report at item No. 9 (page 4) at 783.21 Sq.ft., hence the difference of 264.79 Sq.ft. will be reduced from total built up i.w. 783.21 - 264.79 = 518.42 Sq.ft. and FF area is 890.29 Sq.ft., thus total comes to 1408.7 Sq.ft. The Ld. A.R. referred the report of Mr. S.D. Kulkarni, Registered Valuer submitted to ITO, made available at page No. 15 to 24 of the Paper Book.
8. The Ld. A.R. submitted that in view of aforesaid submissions, the assessment order in question cannot be held as erroneous and prejudicial to the interest of revenue to invoke the provisions of Section 263 of the Act. The provisions u/s 263 are invoked when an assessment order is erroneous and prejudicial to the interest of revenue. There is no incorrect assumption of fact or an incorrect application of law involved on the issue by the A.O. He placed reliance on the following decisions :
i) CIT v/s. Export House, 256 ITR 603 (Pun. & Har.)
ii) Moffusil Warehouse v/s. CIT, 238 ITR 867 (Mad.)
iii) Arvee International v/s. ACIT, 290 ITR 80 (AT)8 (Mum.)
iv) Dhariwal Indusries Ltd. v/s. ACIT, 300 ITR 90(SB)(Pune)
v) Bunty Builders v/s. ITO (2010) 127 ITD 286 (Pune)
vi) Radhe Developers & Ors. v/s. ITO 113 TTJ (Ahd.) 300
vii) ACIT v/s. Smt. C. Rajini (2011) 9 Taxman.com 115 (Chennai)
viii) Nikhil Associates v/s. ITO (2011) 12 Taxman.com 76 (Ahd.) 7 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21
9. The Ld. D.R., on the other hand, submitted that the A.O. while allowing the claimed deduction u/s. 80 IB(10) of the Act has accepted the claim blindly without making independent verification of the claim. He failed to appreciate that approval by the PMC was granted on the plan having area of less than 1 acre of land. No approval for 5 Are land used for road was granted by the PMC. This road was due to arrangement with neighbors. The story of acquisition of 5 Are land for road purpose is nothing but an after-thought by assessee as the agreement for acquisition of land is dated 20th March 2004 and no amount of consideration for the acquisition has been mentioned in the agreement. In this regard, the Ld. D.R. referred page No. 5 & 6 of the paper book i.e. part of the agreement. The Ld. D.R. submitted further that the A.O is not competent to verify the area on his own being not a technical person. He has not mentioned about taking assistance of any technical person. It is his wrong assumption of fact by the A.O that the area of land of the project was 1 acre. He failed to appreciate that the approval by the PMC was granted to the plan for less than 1 acre area. Since it is a case of wrong assumption of fact by the A.O, the assessment order is erroneous. He placed reliance on the following decisions :
i) K.A. Ramaswamy Chettiar & Ors.Vs. CIT,220 ITR 657 (Mad.)
ii) Gee Vee Enterprises Vs. ACIT, 99 ITR 375 (Del.)
iii) F.L. Smidh Ltd. v/s. ACIT, 2009-TIOL-419-ITAT-Mad
iv) Shri D.K. Singhal v/s. CIT, 2008 - ITOL - 311-ITAT -Delhi
v) M/s. M G Motors v/s. ITO, 2008-TIOL-136-ITAT-Delhi
vi) CIT v/s. M/s. Alborz Industries, 2011 - TIOL - 61- SC-HP-IT 8 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21
10. The Ld. A.R. rejoined with this submission that u/s. 131 of the Act, it is well within the power of A.O to inspect the area for which, no technical assistance was required. It is generally in the case of estimation of valuation of a property or an asset, the assistance of technical person is required, but A.O is not even bound by the report of such technical person.
11. We have considered the arguments advanced by the parties in view of orders of the authorities below and have gone through the material available on record as well as the decisions relied upon. The order in question is revisional order passed u/s. 263 of the Act for which, the foremost requirement is that the assessment order is erroneous and prejudicial to the interest of revenue. The assessee has questioned the revisional order on the basis that the A.O before framing assessment u/s. 143(3) and allowing the claimed deduction u/s. 80IB(10) of the Act had verified the correctness of the claim which also included his personal visits to the site. As we have discussed herein-above, the Ld. A.R. has tried to meet out all the objections raised by the Ld CIT on the basis of which, the Ld CIT has treated the assessment order erroneous and prejudicial to the interest of revenue to invoke the provisions of Sec. 263 of the Act and has withdraw the claimed deduction u/s. 80 IB(10) allowed by the A.O. The Ld CIT has alleged that the A.O has allowed the deduction without verifying the correctness of the claimed deduction u/s. 80IB of the Act as in the lay out plan approved by PMC, the area of the plot has been shown to be 3995.34 Sq.mtrs. only, which is marginally lesser than the prescribed minimum limit of 1 acre; one of the dwelling units is more than the prescribed ceiling of 1500 Sq.ft. and merger of 2 flats exceeding the prescribed ceiling of 1500 sq.ft. We have already 9 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 discussed hereinabove the explanation of assessee to these basis. In brief, the assessee tried to explain that the plan was approved by the PMC with this condition that making availability of approach road to a society is the responsibility of assessee and the assessee by a separate agreement dt. 20th March 2004 had acquired 5 'Are' of land for the road purpose and it is the only road available to the society for ingress and outgress. It was submitted that if the land of 5 'Are' is included in the land area shown in the plan, the total area exceeds 1 acre of land. His further contention remained that in view of the decision of Mumbai Bench of the Tribunal in the case of Haware Engineers and Builders (P) Ltd. v. ACIT (Supra) ( holding that deduction u/s. 80 IB(10) denied on the ground that additional plot was a distinct plot was neither actually correct nor sustainable in law) the area of 5 'Are' will be included for computing the total area of the land. The contention of the Ld. D.R. remained that the acquisition of the said area of 5 Are for the purpose of road to the society is an after-thought since in the agreement with the owner of the said land, amount in consideration agreed for the transaction of land has not been mentioned and the land is stated to be shared with neighbours. The Ld CIT, besides noting this fact has also noted that there was no registered document for acquisition of 5 'Are' land. Having gone through the agreement of Sale of the 5 Are land, made available at page No. 387 of the Paper Book, we find that at page Nos. 5 & 6, it has been mentioned that besides 40 Areas of land sold to the assessee society, the owner has contributed 5 'Are' land for road. In the same paragraph, it has been further mentioned that the owner will be having right to use the road for ever by agreement dt. 10.1.1980. Due to this sentence, it appears that the Ld CIT was of the opinion that the 5 Are area of land which is stated to be acquired for the purpose of road by the 10 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 assessee was actually to be shared with the owners. We, however, find from the concluding part of the agreement under the head "NOW THEREFORE THIS AGREEMENT WITNESSETH AND IT IS HEREBY AND BETWEEN THE PARTIES HERETO AS UNDER :-
"
1) The owner has sold the right of 5 Aar land and access through said road to the purchaser herein forever.
2) The owner has received consideration amount from purchaser vide registered development agreement is registered in the office of Sub-Registrar Haveli No. 4 at Sr.No. 5166, 5168, 5170, 5172, 5174 dated 20/06/2002.
3) The owner shall not withdraw, cancel his permission in any case for ownership right of 5R land and using the said road.
4) The owner assures that all the flats bungalow, row house owner their relatives, agent, servant have a right to use the said road.
5) The owner given assurance that he will clear, rectify all the objections which will raised by society or other people without any expenses."
Thus, in the concluding paragraph of the agreement, it has been made clear that 5 'Are' of land was acquired by the assessee through this agreement. The A.O. in the assessment order has mentioned about his personal visit at the site and thereafter, being satisfied with the explanation of the assessee regarding fulfillment of requirements of 11 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 Section 80IB(10) he has accepted the claim. In the case of Haware Engineers and Builders (P) Ltd., the assessee was engaged in construction of the building project. During the course of scrutiny assessment proceedings, the A.O noticed that the assessee in that case had claimed deduction u/s. 80IB(10) in respect of residential project developed by assessee on 4000.02 Sq. Mtr land allotted by CIDCO. He disallowed the said deduction on the grounds that size of the plot was admittedly less than 1 acre i.e. 4046.82 Sq. Mtrs., with subsequent allotment of adjacent plot measuring 48.13 Sq.mtr. did not make good the deficiency in eligibility for entitlement to deduction u/s. 80 IB(10) as it was allotted for purpose of playing ground/green area and non- development/construction was permitted therein and that additional plot was actually a separate plot distinct from original plot. On appeal, the Commissioner(Appeals) confirmed the disallowance on the ground that the assessee had tried to get its irregular claim of deduction u/s. 80 IB(10) regularized through allotment of additional plot. After detailed discussion on the issue, the Bombay Bench of the Tribunal on the observation of the Commissioner (Appeals) to the effect that it was manifestly clear that the assessee had tried to get its claim of deduction u/s. 80IB(10) regularized through the allotment of additional plot and that it was not the intention of the legislature that the housing projects which have already been completed on a smaller plot will also be eligible for deduction u/s. 80IB(10) if subsequently it possesses additional adjacent land to make the total area more than 1 acre. The Tribunal held that there was no merit in these observations. It was held that in case an assessee finds that he is not eligible for the deduction u/s. 80IB(10), because size of the plot on which project is built, is less than minimum necessary size, and he makes good that deficiency, and ensures that all 12 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 the necessary pre-conditions are satisfied and approvals obtained, the assessee is eligible for deduction u/s. 80IB(10). It was further held that the fact that he satisfied the conditions later, does not adversely affect its claim for deduction. What is material is that at the point of time when matter comes up for examination of the claim, the necessary pre- conditions for being eligible to the claim are satisfied, therefore, the deduction u/s. 80IB(10) was admissible on the facts of the case. Similar are the facts in the present case before us as the assessee has acquired the additional land of 5 'Are' subsequently after the acquisition of the main plot of land from the same seller. It is also a well established proposition of law that for transfer of a plot within the meaning of Income Tax Act 1961, the requirement is handing over of the possession and payment of consideration. Thus, registration of document of the transaction is not foremost requirement to establish the transfer for the purpose of Income Tax Act, 1961.
12. In the case of Radhe Developers & Ors. v/s. ITO (Supra) relied upon by the Ld. A.R, the Ahmedabad Bench of the Tribunal gone further by holding that contention of the Revenue that in order to claim deduction u/s. 80IB(10), the assessee must be the owner of land on which the housing project is constructed is not sustainable. It was held that there is no such condition in the provisions of Section 80IB(10). It was further held that once the assessee had taken possession of the immovable property and retained it in part performance of a contract of a nature referred to Sec. 53A of the Transfer of Property Act 1882, it amounts to transfer u/s. 2(47)(V) of the I.T. Act 1961. Likewise, the Chennai Bench of the Tribunal in the case of ACIT v/s. Smt C. Rajini (2011) 9 Taxman.Com 115 Chennai has held that in order to claim deduction u/s.
13 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 80 IB(10) assessee was not required to be owner of land on record. The Ahmedabad Bench of the Tribunal in the case of Nikhil Associates v/s. ITO (Supra) (2011) 12 Taxman.Com 76 (Ahd.) has held that legal ownership over the land has never been any relevant criteria for allowing or not allowing deduction u/s. 80IB(10), what is necessary is that assessee should have complete control, dominions or right to carry on project as sanctioned by local authority. Department in the present case before us has not disputed the claim of the assessee that there is a dominion of the assessee developer over the land in as much as the possession of land is given to the assessee and the land has been marked and used as road meant for the society. The Pune Bench of the Tribunal in the case of Bunty Builders v/s.ITO (Supra) has held that CBDT Circular in (2005) 276 ITR (ST.) 170 gives a clear indication that though the Sec. 80IB(10) do not specifically provide for the development plan roads or grant of other facilities etc., in a housing project but the same should conform to the project plan and approved by the local authority. It was held further that housing project constitute development plan, roads and grant of other facilities, therefore, those areas should exist within the prescribed limits and to be considered as a part and parcel of the project. There is no dispute in the case before us that after addition of 5 Are of land purchased by the assessee vide agreement dt. 20th March 2004, for the purpose of approach road, to the area given in the lay out plan, it fulfills the 1 Acre prescribed area for eligibility of claiming deduction u/s. 80IB(10) of the Act.
13. So far as next ground on the basis of which the Ld CIT(A) has invoked revisionary provision u/s. 263 of the Act about row house having area more than 1500 Sq.ft. is concerned, we find substance in the 14 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 contention of the Ld. A.R. in this regard that as per sale agreement of row house, the saleable area was mentioned more than 1500 Sq.ft. since it included area of open land/garden and if that is excluded, then area of row house is less than 1500 Sq.ft. Even as per the definition of "built-up area" provided in Sec. 80 IB(14), it includes thickness of wall and projections and balconies but does not include common area shared with other residential units. Ld. CIT has included the open land/garden while computing the total area of the row house. It is not the case of the Ld CIT that there was projections or balconies, addition of which was exceeding 1500 Sq.ft. area. Any way, the issue was debatable in nature and thus provisions u/s. 263 could not be invoked only because the Ld CIT was having different view on the issue than the A.O. The Ld CIT has also mentioned that in the A.Y. 2005-06, the I.T.O has denied deduction u/s. 80 IB(10) to the assessee on the basis that the area of the plot is less than 1 Acre, row house in Building 'D' is having built up area exceeding 1500 Sq.ft. and there are flats which were merged together and modifications is not as per approved plans. We have already dealt with the issue of area of the plot hereinabove. There is no specific allegation that during the year also, row house in Building 'D' was having built up area exceeding 1500 Sq.ft. but the Ld CIT has made general allegation that in some row houses, the area was exceeding the prescribed limit of 1500 Sq.ft. which we have already dealt with hereinabove. The submission of Ld. A.R. regarding built up area of row house No. 11C in D building has been discussed hereinabove wherein he has mentioned that the surveyor had wrongly taken store/gym. Room area in built area of the said row house ignoring this fact that the said store/gym. room is common area of residence/owners of the said society. It was further submitted that Ground Floor area of the said row 15 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 huse is 518.5 Sq.ft. whereas the surveyor has mentioned in his report the area as 783.21 Sq.ft., hence the difference of 264.79 Sq.ft (store/gym. Room area) will be reduced from total built up area shown as 783.21 sq.ft. which comes to 518.42 Sq.ft. and first floor area 890.29 sq.ft., thus total comes to 1408.79 Sq.ft. We do not find reasons to disbelieve this explanation of the assessee as the same has also been verified by the A.O in his personal visit of the site. Personal visit of the site by the A.O has not been denied by the ld CIT nor in absence of substantive rebuttal of above explanation of the assessee it can be alleged that A.O has wrongly accepted lesser area without verification. So far as merger of flats and thereby exceeding the prescribed limit of 1500 Sq.ft. taken as a basis for denial of the deduction in the A.Y. 2005-06 by the I.T.O is concerned, there is no substance since it is undisputed fact that each flat was within the prescribed limit of 1500 Sq.ft. area and if after purchasing of 2 flats owner(s) of flats merges it into a larger flat, the claimed deduction to the assessee cannot be denied on this basis. In view of the above discussion, we find that the grounds on which, the Ld CIT has treated the assessment order as erroneous and prejudicial to the interest of revenue under the provisions of sec. 263 of the Act and has withrdrawn the deduction granted by the A.O, are not sustainable also because the issues regarding area of land, row houses etc., were debatable in nature and only because CIT was having different view than the A.O, revisional provisions u/s. 263 cannot be invoked. The decisions relied upon by the Ld. D.R. to justify the action of the Ld CIT in the present case having distinguishable facts are not helpful to the Revenue. In the case of F.L. Smidth Ltd. V/s. ACIT, 2009-TIOL-419-ITAT-Mad, the action u/s. 263 taken by the Ld CIT was justified since the assessment order passed without any enquiry on the issue of eligibility of deduction 16 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 u/s. 80 IB on duty draw back receipts. Such is not the case before us as admittedly, the ITO before allowing deduction had raised queries in this regard and had visited the site to verify the area of the land, row houses and flat. Similarly, in the case of Shri D.K. Singhal v/s. CIT, 2008-ITOL - 311-ITAT -Delhi, the ITO has not conducted any enquiry before accepting the income surrendered by the assessee. In the case of M/s. M.G. Motors v/s. ITO, 2008-TIOL - 136 ITAT Delhi, the A.O. had wrongly allowed the claim on insufficient material. Likewise in the case of CIT v/s. M/s. Alborz Industries, 2011-TIOL- 61-SC-HP- IT the un-rebutted allegation of no application of the mind by the A.O before allowing the benefits to the assessee was there. Whereas, in the present case as it is evident from the assessment order, the A.O has fully applied his mind before allowing the deduction. Under these circumstances, the assessment order in question can not be held as erroneous and prejudicial to the interest of the revenue. We thus set aside the revisional order impugned and restore the assessment order in question, holding that the assessment order is neither erroneous nor prejudicial to the interest of revenue as discussed above. The grounds questioning the validity of the revisional order in question are thus allowed in favour of the assessee.
14. In result, appeal is allowed.
ITA No. 159/PN/2010
15. The assessee has questioned first appellate order on the ground that Ld CIT(A) has erred in confirming the disallowance of deduction of Rs. 98,66,499/- claimed u/s. 80IB(10) of the Income Tax Act 1961 made 17 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 by the A.O without appreciating the facts of the case in proper perspective.
16. We have already discussed the general facts of the case hereinabove while adjudicating the ITA No. 629/PN/2009. During the year, the A.O denied the claimed deduction u/s. 80IB(10) of the Act on the basis that in the lay out plan sanctioned by the PMC on 5.12.2002, the total area of plot has been shown 3995.34 Sq. Mtrs, which was lesser than 1 Acre. The A.O also mentioned the report of the surveyor Shri. S.D. Kulkarni confirming that the area of the plot mentioned in PMC approval was 43005 Sq.ft. which is less than 1 Acre (43560 Sq.ft.). The A.O did not agree with the explanation of the assessee that another 5 Are of land was purchased subsequently from the same owners which could be included in the calculation of area of the plot. The further objection of the A.O for the denial of the claim was that one row house in building 'D' appeared to be having area in excess of 1500 Sq.ft. He sought report of approved valuer in this regard who also reported that the built up area of row house No. 11C in building 'D' was 1673.50 Sq.ft. besides the roof, terrace of 442.92 Sq.ft. The A.O. also alleged that the assessee had modified/merged 4 flats whereas the approved plan from local authority should not be subjected to such modification.
17. Similar arguments have been adopted by the parties as advanced by them hereinabove during the course of hearing of ITA No. 629/PN/2009 on similar issues.
18. We have already discussed the issues of the land area and area of the row house hereinabove in ITA No. 629/PN/2009. Though we have 18 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 allowed the appeal ITA No. 629/PN/2009 in favour of the assessee, also on the basis that the issues raised therein for examining the eligibility of the assessee to claim deduction u/s. 80IB were debatable, hence only because Ld CIT was having different view on those issues, the provisions laid down u/s. 263 cannot be invoked to treat the assessment order as erroneous and prejudicial to the interest of revenue, still we have observed that the area of 5 Are land purchased by the assessee subsequently vide an agreement and not shown in the approved plan for the purpose of providing road to the society can be added in the area of land while calculating the minimum prescribed area of 1 Acre required for claiming deduction u/s. 80 IB (10) of the Act. In this regard, we have referred some decisions cited by the Ld. A.R. Following the same, we hold here that the area of land was fulfilling the condition of the minimum prescribed area limit of 1 Acre.
19. Regarding the excess area in row house No. 11C in building 'D', the Ld. A.R. in addition to the above submission made in ITA No. 629/PN/2009 drew our attention to page No. 14 of the paper book i.e. lay out plan of the row house showing that the approved valuer Shri D.K. Kulkarni had wrongly included the common area of store/gym room while computing the total area of row house and if the area of the said store room/gym room (39.60 x 52.93 Sq.ft.) is excluded, then the total area of the row house is well within 1500 Sq.ft. The Ld. A.R. also furnished a photograph to support his contention that the gym. Room had basement floor level in 'D' building is meant for common use of the residents of the Society and access to it is provided from outside not under the domain of the owner of the row house.
19 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21
20. On verification of the plan of the row house made available at page No. 14 of the paper book, we find that if the area of store room/gym. as claimed by the approved valuer is really excluded from the total area of the row house, it does not exceed 1500 sq.ft. limit. The approved valuer though has mentioned in his report referred in para 3.2 of the first appellate order that the area of gym. Room at basement floor level in 'D' building was not included in the built up area of 1673.50 sq.ft. but in reality, we find that the valuer has not excluded the area of gym. Room/store room. We thus do not find substance in this ground, on the basis of which, the A.O had denied the claimed deduction. The further ground on the basis of which A.O has denied the deduction is the alleged merger of 4 flats deviating from approved plans. We have dealt with this issue hereinabove in ITA No. 629/PN/2009 and held that merger of flats after purchase by the owners thereof to make it into a larger flat for their own convenience will not be a cause for denial of claimed deduction especially when an undisputed fact that each of those flats does not exceed the prescribed area limit 1500 Sq.ft. Under these circumstances, we find that the authorities below were not justified in denying and upholding the claimed deduction u/s. 80IB(10) in question to the assessee on the above discussed untenable basis. We thus while setting aside orders of the authorities below direct the A.O to allow the claimed deduction at Rs. 98,63,499/- u/s. 80IB(10) of the Act. The ground is accordingly allowed.
21. In result appeal is allowed.
ITA No. 625/PN/2010
20 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21
22. The assessee has questioned first appellate order on several grounds involving the issue as to whether the Ld CIT(A) has erred in upholding the disallowance of deduction of Rs. 12,10,775/- claimed by the assessee u/s. 80IB(10) of the Act.
23. Having gone through the orders of the authorities below, we find that the authorities below have denied the claimed deduction u/s. 80IB(10) of the Act to the assessee on similar basis that the area of the land is below 1 Acre and the area of row house No. 11C in building "D" is more than 1500 Sq.ft.
24. The parties have adopted the same arguments as advanced by them in above appeals. On an identical issue in above appeals, we have decided the issue regarding fulfillment of area of land as 1 Acre and the area of row house No. 11C in building 'D' and held that the addition of further area of 5 'Are' land purchased by the assessee subsequently for providing road to the Society is fulfilling the 1 Acre area requirement and the area of the row house No. 11C in building 'D' is within the prescribed maximum area limit of 1500 Sq.ft. We, thus, while setting aside the orders of the authorities below, direct the A.O to allow the claimed deduction u/s. 80 IB(10) to the assessee as the grounds on the basis of which, the authorities below have denied the claimed deduction are not sustainable. The grounds involving the issue are accordingly decided and allowed in favour of the assessee.
25. In result, appeal is allowed.
26. In summary all the appeals are allowed.
21 ITA . Nos 629/PN/2009, 625/PN/2011 & 159/PN/2010 M/s. Baba Promoters & Developers.
A.Y. 2004-05, to 2006-07 Page of 21 The order is pronounced in the open Court on 29th February 2012.
Sd/- Sd/-
(G.S. PANNU) (I.C. SUDHIR )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, dated the 29th February, 2012
US
Copy of the order is forwarded to :
1. The Appellant
2. The Respondent
3. The CIT-, Aurangabad
4. The CIT(A)- Aurangabad
5. The D.R. "A" Bench, Pune
6. Guard File By order
Assistant Registrar
Income Tax Appellate Tribunal
Pune