Income Tax Appellate Tribunal - Panji
Varsha Builder Venture (Aop),, Pune vs Deputy Commissioner Of Income Tax,, ... on 20 September, 2017
आयकर अऩीऱीय अधधकरण "ए" न्यायऩीठ ऩण
ु े में ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, PUNE
श्री डी. करुणाकरा राव, ऱेखा सदस्य, एवं श्री ववकास अवस्थी, न्याययक सदस्य के समक्ष ।
BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM
आयकर अऩीऱ सं. / ITA No. 1722/PUN/2014
यनधाारण वषा / Assessment Year : 2010-11
Varsha Builder Venture,
1231/2, Gurukrupa,
Deccan Gymkhana,
Pune
PAN : AAAAV3681P
.......अऩीऱाथी / Appellant
बनाम / V/s.
Assistant Commissioner of Income Tax,
Circle - 7, Pune
......प्रत्यथी / Respondent
आयकर अऩीऱ सं. / ITA No. 1938/PUN/2014
यनधाारण वषा / Assessment Year : 2010-11
Deputy Commissioner of Income Tax,
Circle - 7, Pune
.......अऩीऱाथी / Appellant
बनाम / V/s.
Varsha Builder Venture,
1231/2, Gurukrupa,
Deccan Gymkhana,
Pune
PAN : AAAAV3681P
......प्रत्यथी / Respondent
2
ITA Nos. 1722 & 1938/PUN/2014 and
CO No. 22/PUN/2017, A.Y. 2010-11
प्रत्याक्षेऩ सं. / CO No. 22/PUN/2017
यनधाारण वषा / Assessment Year : 2010-11
Varsha Builder Venture,
1231/2, Gurukrupa,
Deccan Gymkhana,
Pune
PAN : AAAAV3681P
.......अऩीऱाथी / Appellant
बनाम / V/s.
Deputy Commissioner of Income Tax,
Circle - 7, Pune
......प्रत्यथी / Respondent
Assessee by : S/Shri Sunil Pathak &
S.N. Puranik
Revenue by : Shri Mukesh Jha
सुनवाई की तारीख / Date of Hearing : 13-09-2017
घोषणा की तारीख / Date of Pronouncement : 20-09-2017
आदे श / ORDER
PER VIKAS AWASTHY, JM :
These cross appeals have been filed by the assessee and Department against the order of Commissioner of Income Tax (Appeals)-III, Pune dated 12-08-2014 for assessment year 2010-11. Cross Objections in CO No. 22/PUN/2017 has been filed by Shri Sanjay M. Kokate legal heir of Shri Mahadeo B. Kokate one of the constituent of assessee/appellant (AOP). 3
ITA Nos. 1722 & 1938/PUN/2014 and CO No. 22/PUN/2017, A.Y. 2010-11
2. The facts germane to the present appeals and the cross objections are : The assessee - Varsha Builder Venture is a joint venture between M/s. Varsha Buildcon, a partnership firm and Shri Mahadeo B. Kokate. The assessee is being assessed under the provisions of Income Tax Act, 1961 (hereinafter referred to as "the Act") in the status of Association Of Persons (AOP). A Joint Venture (JV) Agreement was entered into between M/s. Varsha Buildicon and Shri Mahadeo B. Kokate for development of a housing project on land owned by Shri Mahadeo B. Kokate. As per terms and conditions of the joint venture agreement Varsha Buildcon was to make investment and bear all expenditure for developing the housing project and Shri M.B. Kokate apart from providing land was required to obtain confirmation from members of family, jointly execute agreements with prospective purchasers of flats, etc. The profits/income of the JV project was shared by the two constituents of JV as under :
i. Shri Mahadeo B. Kokate was to receive 20% of the gross sale proceeds from the sale of flats in the building plus 1% of the balance profit/income/loss arrived at after deducting aforesaid share of profit/income.
ii. Varsha Buildcon was to receive 99% of balance profit/income/loss arrived at after deducting share of profit/income of Shri M.B. Kokate.
The assessee filed its return of income for the impugned assessment year on 08-10-2010 declaring Nil income after claiming deduction u/s.
80IB(10) of the Act. The case of assessee was selected for scrutiny under CASS and accordingly, notice u/s. 143(2) was issued to the assessee on 02-09-2011.4
ITA Nos. 1722 & 1938/PUN/2014 and CO No. 22/PUN/2017, A.Y. 2010-11 2.1 During the course of scrutiny assessment proceedings, the Assessing Officer observed that the area of land on which the assessee has developed housing project is less than 1 acre, thus, the Assessing Officer held that the assessee is not eligible for claiming deduction u/s. 80IB(10) of the Act.
The Assessing Officer further observed that as per Clause 11 of the joint venture agreement Shri M.B. Kokate is entitled to receive 20% of the gross sale proceeds from the sale of flats. The payment of such 20% of gross receipt from sale of flats is the cost of land paid to Shri M.B. Kokate. The Assessing Officer reduced 20% of the sale proceeds i.e. Rs.2,42,53,146/- as cost of land from total income of joint venture and reduced the claim of deduction u/s. 80IB(10) of the Act, accordingly.
Aggrieved by the assessment order dated 11-03-2013, the assessee filed appeal before the Commissioner of Income Tax (Appeals). In First Appellate proceedings, the Commissioner of Income Tax (Appeals) held that the assessee is eligible to claim deduction u/s. 80IB(10) as the total area of plot before excluding area of DP road, open space, and other amenities is more than 1 acre. The Commissioner of Income Tax (Appeals) placed reliance on the decision of Pune Bench of the Tribunal in the case of Bunty Builders Vs. Income Tax Officer reported as 139 TTJ 367 and granted relief to the assessee qua claim of deduction u/s. 80IB(10) of the Act. In respect of findings of Assessing Officer on the issue of treating 20% of the total gross sale proceeds accruing to Shri M.B. Kokate as cost of land, the Commissioner of Income Tax (Appeals) upheld the findings of Assessing Officer.
Against the order of Commissioner of Income Tax (Appeals), both, the assessee and Revenue are in appeal before the Tribunal. 5
ITA Nos. 1722 & 1938/PUN/2014 and CO No. 22/PUN/2017, A.Y. 2010-11
3. Shri Sunil Pathak appearing on behalf of the assessee submitted at the outset that necessary relief has been granted to the assessee by Commissioner of Income Tax (Appeals). The entire amount of sale proceeds from residential units are held to be eligible for deduction u/s. 80IB(10) of the Act, therefore, taxable income of assessee has been reduced to Nil. Now, the assessee has no grievance against the impugned order and hence, the assessee wishes to withdraw the appeal.
4. Shri Mukesh Jha representing the Department submitted that the Department has no objections in case the assessee wishes to withdraw the appeal. In respect of appeal filed by the Department, the ld. DR submitted that the Commissioner of Income Tax (Appeals) has erred in coming to the conclusion that the area of land on which housing project has been developed by the assessee is more than 1 acre. The ld. DR submitted that the Commissioner of Income Tax (Appeals) has erred in not taking into consideration that the plan approved by Pune Municipal Corporation (PMC) shows that area to be developed is 2417.05 sq. mtrs. which is less than 1 acre. The area reserved for school and DP road aggregating to 4414.88 sq. mtrs. is not to be considered as part of area of the project while computing statutory limit of minimum 1 acre. The ld. DR prayed for reversing the findings of Commissioner of Income Tax (Appeals) on this issue and allowing the appeal of Department.
5. The ld. AR rebutting the submissions made on behalf of the Department submitted that the order of Commissioner of Income Tax (Appeals) is well reasoned. The Commissioner of Income Tax (Appeals) while allowing claim of assessee u/s. 80IB(10) has placed reliance on the decision in the case of Bunty Builders Vs. Income Tax Officer (supra), 6 ITA Nos. 1722 & 1938/PUN/2014 and CO No. 22/PUN/2017, A.Y. 2010-11 wherein, it has been held that the area reserved for DP road is not to be excluded while computing the area of plot. The ld. AR further draws support from CBDT Circular No. 5 of 2005 reported in 276 ITR 170 (statute) to contend that section does not specifically provide area limit for the garden, DP roads etc. in the housing project. The ld. AR to buttress his submissions placed reliance on the following decisions :
i. Income Tax Officer Vs. M/s. Yash Promoters and Builders in ITA No. 498/PN/2012 for assessment year 2008-09 decided on 17-04-2013;
ii. M/s. B.K. Pate Enterprises Vs. ACIT in ITA No. 736/PN/2010 for assessment year 2005-06 decided on 08-07-2011; and iii. Shri Moti Udharam Panjabi Vs. Asstt. CIT in ITA Nos. 442 & 443/PN/2009 for assessment years 2004-05 & 2005-06 decided on 29-07-2011.
6. Shri S.N. Puranik appearing on behalf of the intervener Shri Sanjay Kokate, legal heir of Shri M.B. Kokate submitted that if the assessee is allowed to withdraw the appeal, it would be prejudicial to the interest of intervener. The Commissioner of Income Tax (Appeals) in para 3.4 of the impugned order has directed the Assessing Officer of assessee to communicate the findings of proceedings to Assessing Officer of Shri M.B. Kokate for making addition of Rs.2,42,53,146/- on account of cost of land under Capital Gains/business profits in the hands of Shri M.B. Kokate. The ld. AR of the intervener submitted that with the exclusion of cost of land there would be no adverse financial impact on the assessee as the entire income of assessee would be exempt after claiming deduction u/s. 80IB(10) of the Act. On the contrary the findings given by Commissioner of Income Tax (Appeals) in the case of assessee would adversely impact the intervener. The assessments of intervener for assessment year 2010-11 7 ITA Nos. 1722 & 1938/PUN/2014 and CO No. 22/PUN/2017, A.Y. 2010-11 were reopened and addition of Rs.1,55,53,146/- has been made on account of business income and Rs.16,16,200/- has been made on account of Long Term Capital Gain on account of sale of land. Shri S.N. Puranik further submitted that conversion of plot of land from capital asset to stock in trade does not amount to transfer of land by Shri M.B. Kokate to joint venture. Shri M.B. Kokate is one of the constituents of joint venture, after conversion of land from capital asset to stock in trade he contributed the land in joint venture but there was no sale of land to the joint venture. The share of profit in joint venture as mentioned in clause 11 of the Joint Venture Agreement does not in any manner carry element of consideration for sale of plot or the cost of land on which housing project has been developed.
7. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. We have also considered the submissions made on behalf of Shri Sanjay M. Kokate, the intervener. The ld. AR of the assessee has made prayer to withdraw the appeal filed by assessee. The ld. DR has raised no objection on the prayer made on behalf of the assessee. However, the ld. AR of Shri Sanjay M. Kokate has strongly objected to the withdrawal of appeal by assessee. It has been contended that the authorities below have erred in interpreting Clause 11 of the Joint Venture Agreement wherein method of sharing of profit in Joint Venture has been spelled out.
Before proceeding further, it would be relevant to have a quick look at Clause 11 of the Joint Venture Agreement. For the sake of convenience the same is reproduced here-in-below :
8
ITA Nos. 1722 & 1938/PUN/2014 and CO No. 22/PUN/2017, A.Y. 2010-11 "11) The profit/income/loss of the Joint Venture shall be determined only on completion of entire project. The profit/Income of the Joint Venture shall be calculated/computed after deducting/providing all the costs, charges and expenses, including those of development, construction, marketing etc. The Net Profit/Income of the Joint Venture calculated/computed as aforesaid shall be distributed/apportioned between the parties hereto as under:
a] The share of profit/income of the MBK in the Joint Venture hereby constituted shall be 20% (twenty percent) of the gross sale proceeds from the sale of the flats/units in the buildings to be constructed on the Project Land. The term "gross sale proceeds" shall also include proceeds from grant of exclusive rights to use, occupy and enjoy open spaces, terraces, open or covered parking spaces etc. in favour of prospective purchasers of flats/units etc. However, it is hereby clarified that the term "gross sale proceeds" shall not include M.S.E.B. charges, Club House Membership, registration and stamp duty amounts payable on Agreement or any documents executed in favour of such prospective purchasers of flats/units; and b] The balance profit/income/loss thus arrived at i.e after deducting share of profit/income of the MBK as hereinabove provided in Clause 11(a) shall be divided between the parties hereto as follows:
VB : 99% (Ninety Nine Percent)
MBK : 1% (One percent)"
8. The authorities below after examining Clause 11 of the Joint Venture Agreement held that sharing of 20% of gross sale proceeds from the sale of flats amounts to payment of cost of land to Shri Kokate. The Assessing Officer reduced the amount of 20% from gross sale proceeds i.e. 20% of Rs.12,12,65,730/- = Rs.2,42,53,146/- as cost of land and has allowed the same as expenditure in the hands of assessee. The assessee‟s claim of deduction u/s. 80IB(10) was also reduced to that extent. In first appeal, the Commissioner of Income Tax (Appeals) upheld the findings of Assessing Officer on the issue and directed the Assessing Officer of the assessee to communicate the findings of his order to the Assessing Officer of Shri M.B. 9 ITA Nos. 1722 & 1938/PUN/2014 and CO No. 22/PUN/2017, A.Y. 2010-11 Kokate so that he may take necessary action. We observe, with this direction the assessee is not adversely affected as the Commissioner of Income Tax (Appeals) in the impugned order has granted benefit of deduction u/s. 80IB(10) to the assessee and thus, the taxable income of the assessee after claiming benefit of deduction u/s. 80IB(10) has been reduced to Nil.
9. As far as impact of findings of authorities below with regard to Rs.2,42,53,146/- as cost of land paid and to be assessed in the hands of Shri Kokate is concerned, Shri Puranik pointed that the Assessing Officer of Shri Kokate has made addition of aforesaid amount in the hands of Shri Sanjay M. Kokate legal heir of Shri M.B. Kokate as business income. Shri Sanjay Kokate is now in appeal before the Commissioner of Income Tax (Appeals) against the said addition. We are of considered opinion that if the assessee withdraws his appeal it would not in any manner impinge the right of Shri Kokate to assail the addition in appeal, in his own case. Shri Kokate is at liberty to raise all possible pleas within the provisions of Act against the addition made on account of allocation of Rs.2,42,53,146/-
towards cost of land in his own case. Even if the Commissioner of Income Tax (Appeals) would not have made such remarks, the Revenue would have taken steps to assess the said income in the hands of Shri Kokate. Thus, we find no merit in the objection raised by Shri Kokate restraining the assessee to withdraw appeal.
10. We accept the prayer made by ld. AR of the assessee to withdraw the appeal. Accordingly, the appeal of assessee in ITA No. 1722/PUN/2014 is dismissed as withdrawn and the cross objections filed by Shri Sanjay M. Kokate, the intervener, are dismissed.
10
ITA Nos. 1722 & 1938/PUN/2014 and CO No. 22/PUN/2017, A.Y. 2010-11
11. The Revenue in its appeal has assailed the findings of Commissioner of Income Tax (Appeals) in granting relief to the assessee by allowing the benefit of deduction u/s. 80IB(10) of the Act. It has been contended that the area of plot on which housing project has been developed is less than 1 acre after excluding area reserved for DP road, school and other amenities, therefore, the assessee fails to satisfy the condition laid down in clause (b) of section 80IB(10) of the Act. The total area of plot on which housing project was proposed is 6831.93 sq. mtrs. out of which 4414.88 sq. mtrs. has been reserved for school and DP road. Thus, the area available for construction of residential units is 2417.06 mtrs. The layout plan sanctioned by PMC on 15-10-2005 giving the details of total area and area reserved is tabulated here-in-below :
Area of plot ( Least Considered) 6831.93
deduction R P Road 0
Proposed DP Road 831.63
Any Reservation (H.S/P.S) 3583.25
Balance area of plot 2417.06
deduct Open space 241.71
MSEB 25.00
Net area of plot 2150.34
Add Add for open space 241.71
Add for DP Road area 831.63
Add for 40% permissible TDR 860.14
Add for MSEB Transformer Area 25.00
Total permissible area 4108.81
12. The ld. AR of assessee has drawn our attention to CBDT Circular No. 5 dated 15-07-2005 wherein it has been clarified that the area reserved for garden, DP road etc. is not to be excluded for determining the total area. The relevant extract of CBDT Circular reported in 276 ITR 170 (statute) reads as under :
"This section does not specifically provide area limit for the garden, the development plan roads, internal means of access, etc. in the housing project. Therefore, the same should conform to the project plan approved by 11 ITA Nos. 1722 & 1938/PUN/2014 and CO No. 22/PUN/2017, A.Y. 2010-11 the local authority in accordance with the regulations in force. Also the area limit of the plot has to be construed with reference to the area of the site on which the housing project is constructed and not with reference to the demarcation of land done by the land development authority."
A perusal of above extract of the Circular shows that it is not only the DP road but the reservations made for garden, etc. has to be taken into consideration. The ld. AR has pointed that the assessee was granted additional FSI to compensate for the area reserved for amenities, but, the assessee has not utilized the same.
13. The Co-ordinate Bench of the Tribunal in the case of M/s. B.K. Pate Enterprises Vs. ACIT (supra), under similar circumstances where the Revenue had denied the benefit of deduction u/s. 80IB(10) to the assessee on the premise that the plot of area on which housing project is developed is less than 1 acre as DP road has been curved out from the total area of plot held, that for determining the area of plot as 1 acre the area earmarked for DP road is not to be excluded. Similar view has been taken in the cases of Income Tax Officer Vs. M/s. Yash Promoters and Builders (supra) and Shri Moti Udharam Panjabi Vs. Asstt. CIT (supra). We observe that the Commissioner of Income Tax (Appeals) has granted relief to the assessee by following the decision of Tribunal in the case of Bunty Builders Vs. Income Tax Officer (supra). The Co-ordinate Bench in the said case has held :
"9. This circular thus gives a clear indication that though the section does 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 approved by the local authority. Our next reasoning is on the basis of above discussion that the limit of the plot has to be construed with reference to the area available on the site on which the housing project is to be constructed and not with reference to the demarcation of land. Meaning thereby the housing project thus constitutes development plan roads and grant of other facilities; therefore those areas should exist within the prescribed limits and to be considered as part and parcel of the project. Even in the present case 12 ITA Nos. 1722 & 1938/PUN/2014 and CO No. 22/PUN/2017, A.Y. 2010-11 the facts have revealed that the plan would not have been approved if the assessee would not have made 15 per cent amenity space available to the corporation. Though amenity space was stated to be surrendered to the corporation but such sacrifice of the builder was duly recognised and compensated by granting additional FSI for the said project. If we accept the proposition of the Revenue Department that the area which was directly under the building construction should only be held as the project for construction, then a builder has to acquire a land more than 1 acre of land. Then only after the set-apart of the amenity space he could be left with the balance 1 acre for project development. But such a proposition was not intended in the legislature. The language of the section did not prescribe such hypothetication. Therefore an another reasoning of our rejection of such a proposition of the Revenue Department is that it would be illogical to expect from a builder to have excess land area than 1 acre, at least 15 per cent excessive area applicable for Pune Corporation, so that after setting apart 15 per cent area the balance should remain 1 acre for the purpose of construction. This suggestion or approach of interpretation of a statute is not idealistic because we cannot read beyond the scope of the statute. Normal rule of interpretation of statues is that the general words must receive a general construction unless there is something otherwise expressly provided in the statute. General words have ordinarily a general meaning then the first task in interpretation is to give the words their plain and ordinary meaning. This is what we have gathered from the books available on this subject with an attempt to subscribe a simple and realistic meaning to the cl.
(b) of s. 80-IB(10) of IT Act. Nothing more can be added hence we have to restrict the interpretation that the area of 1 acre should be available for the housing project inclusive of amenities required to be set apart as per the norms of a corporation. Therefore a justifiable conclusion is that when there is no doubt more so it is not in dispute that a portion of the land, in the present case it is 15 per cent, to be earmarked or set-apart or reserved or segregated out of the total land in question, minimum 1 acre, meant for the purpose of project in terms of rules/regulation of a local body, i.e., Pune Municipal Corporation, and without that segregation the project could not be sanctioned then that portion being mandatory for amenity purposes has to be taken as a part and parcel of the land available for the project. In the present case since the area available for the housing project was 4,600 sq. mtrs. that is more than 1 acre (4,046 sq. mtrs.) therefore the appellant is entitled for the claim of deduction under s. 80-IB(10)(b) on this portion of land. We hold accordingly."
The Tribunal has been consistently taking a view that area reserved for DP road and amenities is not to be excluded while determining the area of plot eligible for claiming deduction u/s. 80IB(10). The Commissioner of Income Tax (Appeals) in the impugned order has taken cue from Maharashtra Regional and Town Planning Act, 1966, wherein the term „amenity‟ has been defined u/s. 2(2). The definition includes roads, schools etc. within the meaning of amenity.
13
ITA Nos. 1722 & 1938/PUN/2014 and CO No. 22/PUN/2017, A.Y. 2010-11
14. We see no infirmity in the findings of Commissioner of Income Tax (Appeals) in granting the benefit of deduction u/s. 80IB(10) to the assessee by following the decision of Jurisdictional Bench of the Tribunal. Thus, in view of the facts of the case and various case laws referred above, the appeal of Department is dismissed being devoid of merit.
15. In the result, the appeal of assessee, appeal of Revenue and the Cross Objections filed by Intervener are dismissed.
Order pronounced on Wednesday, the 20th day of September, 2017.
Sd/- Sd/-
(डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy)
ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER
ऩुणे / Pune; ददनाांक / Dated : 20th September, 2017
RK
आदे श की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to :
1. अऩीऱाथी / The Appellant.
2. प्रत्यथी / The Respondent.
3. आयकर आयुक्त (अऩीऱ) / The CIT(A)-III, Pune
4. आयकर आयुक्त / The CIT-IV, Pune
5. ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, "ए" बेंच, ऩुणे / DR, ITAT, "A" Bench, Pune.
6. गाडड फ़ाइऱ / Guard File.
//सत्यावऩत प्रयत // True Copy// आदे शानस ु ार / BY ORDER, यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune