Income Tax Appellate Tribunal - Hyderabad
Mrs. Swapna Cherukuri, Hyderabad vs Assessee on 12 June, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER
AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No.183/Hyd/2014 : Assessment year 2008-09
Smt. Swapna Cherukuri, V/s. Dy. Commissioner of Income-tax
Hyderabad Central Circle 6, Hyderabad
(PAN - ACGPG 3296 C)
(Appellant) (Respondent)
Appellant by : Shri J.J.Varun
Respondent by : Shri Ramakrishna Bandi
Date of Hearing 30.4.2015
Date of Pronouncement 12.6.2015
ORDER
Per P.M.Jagtap, Accountant Member :
This appeal filed by the assessee is directed against e order of the learned Commissioner of Income-tax(Appeals)-I Hyderabad dated 23.1.2014 and the solitary issue arising out of the same relates to the disallowance of Rs.3,29,78,844 made by the Assessing Officer on account of assessee's claim for deduction under S.80IB(10) which is sustained by the learned CIT(A).
2. The assessee in the present case is an individual, who is engaged in the business of real estate development in the name and style of her proprietary concern, M/s. Lahari Constructions. The return of income for the year under consideration was filed by her on 17.11.2009 declaring total income of Rs.6,38,627 after claiming deduction of Rs.3,29,78,844 under S.80IB(10) of the Act. The said deduction was claimed by the assessee in respect of profit derived from housing project developed by her at Bhanoor Village in Medak District.
2 ITA No.183/Hyd/2014Smt. Swapna Cherukuri, Hyderabad For the said project 16 Acres and 7 Guntas of land was purchased by the assessee and after obtaining the approval from the Gram Panchayat on 20.10.2006, 138 residential units were proposed to be constructed with the average size of plot of 325 sq. yards and built up area of 1475 sq. ft. During the previous years relevant to assessment years 2009-10, 2010- 11 and 2011-12, 38, 16 and 37 residential units were sold by the assessee and deduction under S.80IB(10) for the profits derived from the said project for the year under consideration, i.e. 2009-10 was claimed in the return of income to the extent of Rs.3,29,78,844.
3. During the course of assessment proceedings, the claim of the assessee for deduction under S.80IB(10) was examined by the Assessing Officer. In this regard, a commission under S.131(1)(d) of the Act was also issued by the Assessing Officer to the DVO, who inspected the project site of the assessee on 17.12.2011 with his team of engineers. The Assessing Officer also accompanied the DVO during the said visit. On the basis of the report received from the DVO on 20.12.2011, the Assessing Officer proposed to make a disallowance of deduction claimed by the assessee under S.80IB(10) He accordingly issued a show cause notice calling for the explanation of the assessee. According to the Assessing Officer, the project undertaken by the assessee was not completed in as much as only 91 residential units were sold upto the date of assessment. In this regard, the explanation offered by the assessee was that the project was nearing completion and she had time limit available upto 31st March, 2012 to complete the project. The Assessing Officer did not dispute the position that the time limit available for completion of project was upto March,2012. He however did not accept the stand of the assessee that the housing project was nearing completion. According to him, as found during the physical inspection, 30% of the residential units were under construction and there was no possibility of completing the entire project by March, 3 ITA No.183/Hyd/2014 Smt. Swapna Cherukuri, Hyderabad 2012 and to obtain completion certificate from the local authority by that time.
4. As found by the DVO during the physical inspection of the project site, the built up area of ground floor of residential unit 118 itself was 1,430.97 sq. ft. while the first floor of the said unit was under
construction. According to the Assessing Officer, the area of residential unit No.118 thus was more than 1,500 sq. ft. and there was thus a violation of the condition situated for claiming deduction under S.80IB(10). The Assessing Officer also found that another residential unit No.121 was a duplex under construction and the area thereof was also more than 1,500 sq. ft, resulting into violation of the conditions stipulated. In this regard, the explanation offered by the assessee before the Assessing Officer was that the Residential Unit No.118 with plot of land and ground floor having less than built up area of 1500 sq. ft. was completed and sold on 3.9.2010 and the construction of the first floor on the said plot was being done at the relevant time by the plot owner and not by the assessee. As regards the residential unit No.21 (mentioned as 121 by the Assessing Officer), it was explained by the assessee that although the same was a duplex residential unit under construction on a corner plot, the total built up area of the same was less than 1,500 sq. ft. It was contended by the assessee that there was thus no violation of the condition stipulated for claiming deduction under S.80IB(10). This contention of the assessee was not accepted by the Assessing Officer. He held that although the assessee has generally followed 1,500 sq. ft. norm of each residential units, there was violation of that norm in respect of two residential units, which disentitled the assessee to claim deduction under S.80IB(10).
5. As further found during the physical inspection of the project site of the assessee, there was a big commercial complex at plot No.10 within the project. According to the report of the DVO the built up area 4 ITA No.183/Hyd/2014 Smt. Swapna Cherukuri, Hyderabad of the said commercial complex was 11,913 sq. ft. In this regard, the explanation offered by the assessee before the Assessing Officer was that the plot No.10 was sold to Md. Zaheeruddin and Md. Zamiluddin, who constructed the commercial complex thereon, which had nothing to do with the project of the assessee. According to the Assessing Officer, the said commercial complex, however, was a part and parcel of the project undertaken by the assessee and in order to circumvent the provisions of law, a third party was introduced by the assessee for the purposes of constructing a commercial complex. Since the total commercial area of 11,913 sq. ft. was more than 5% of the total built up area of the project, the Assessing Officer held that there was a violation of other condition also stipulated for claiming deduction under S.80IB(10). Accordingly, the claim of the assessee for deduction under S.80IB was disallowed by the Assessing Officer for non-completion of the project in time, as well as violation of the conditions relating to the maximum area of each unit being less than 1,500 sq. ft., in respect of two units, as well as commercial space being more than 5% of the total project.
6. The disallowance made by the Assessing Officer on account of her claim for deduction under S.80IB(10) was challenged by the assessee in an appeal filed before the learned CIT(A). During the course of appellate proceedings before the learned CIT(A), a copy of the completion certificate of the project issued by the concerned local authority on 12.3.2012 was produced by the assessee, to show that the project was completed before the stipulated date of 31.3.2012. Keeping in view the said certificate filed by the assessee, the learned CIT(A) accepted that the project of the assessee was completed before the stipulated date of 31.3.2012 and the condition stipulated in this regard for claiming deduction under S.80IB(10) was duly satisfied.
5 ITA No.183/Hyd/2014Smt. Swapna Cherukuri, Hyderabad
7. As regards the claim of the assessee regarding norm of 1,500 sq. ft. built up area not being violated in respect of the residential unit No.118, the stand taken before the Assessing Officer was reiterated by the assessee before the learned CIT(A). The same however was not found acceptable by the learned CIT(A) on the ground that the same was not supported by any documentary evidence in the form of sale deed to show that the residential unit no.118 comprising of plot of land and ground floor only was sold by the assessee and the construction of first floor was done at the relevant point of time by the owner of the plot and not by the assessee.
8. As regards the residential unit No.121, it was submitted on behalf of the assessee before the learned CIT(A) that although the same was a duplex house having been built up on a corner plot, the total built up area was only 1,475 sq.ft. Copy of the relevant sale deed was also produced by the assessee as evidence to show that the total built up area of housing unit no.121 was less than 1,500 sq. ft. According to the learned CIT(A), this evidence produced by the assessee, however, was not sufficient to prove that the built up area of unit No.121 was less than the limits prescribed under S.80IB(10). He also observed that there was no confirmation from the concerned purchaser filed by the assessee in support of her claim. He therefore, held that there was a violation of the norm of 1,500 sq.ft. in respect of two residential units bearing Nos.118 and 121.
9. As regards the violation in the norms of commercial space, it was submitted by the assessee before the learned CIT(A) that the commercial complex was not part of the project. It was submitted that the land on which commercial complex was constructed had been sold by the assessee vide sale deed dated 13.9.2007 to Md. Zaheeruddin and Md. Zamiluddin and the commercial complex was developed and built by them on the said plot of land. This stand of the assessee was also not 6 ITA No.183/Hyd/2014 Smt. Swapna Cherukuri, Hyderabad found acceptable by the learned CIT(A). According to him, the plot of land on which the commercial complex was constructed, did form part of the total project as approved by the concerned authority. He also noted that even the completion certificate dated 12.3.2012 submitted by the assessee clearly indicated that the project was comprising of 136 housing units and one commercial unit-cum-club house. He held that the commercial complex was thus very much a part of the project for which deduction under S.80IB was claimed by the assessee and since the total built up commercial area exceeded the limit of 5% of the total built up area of the project, there was a clear violation of the condition for claiming deduction under S.80IB(10). The learned CIT(A) thus held that even though the project of the assessee was completed well within the time specified under S.80IB(10), there was violation of other norms in terms of maximum built up area of each unit and maximum built up commercial space. Accordingly, the disallowance made by the Assessing Officer on account of assessee's claim for deduction under s.80IB(10) in respect of the said project was confirmed by the learned CIT(A). Aggrieved by the order of the learned CIT(A), assessee has preferred this appeal before the Tribunal.
10. Learned counsel for the assessee submitted that out of the total 137 residential units forming part of the project developed by the assessee, only two units bearing unit Nos.118 and 121 are alleged to have violated the norm of maximum built up area of each unit of 1,500 sq. ft. He submitted that the residential unit No.118, comprising of plot of land with built up area of 1,475 sq. ft was actually sold by the assessee to one Shri Sk. Md. Rafi vide sale deed executed on 3rd September, 2010. He submitted that the said purchaser subsequently undertook the construction of first floor on his own and when the DVO alongwith the Assessing Officer visited the project, the said construction being made by the owner was in progress. He submitted that the area of the unit as sold by the assessee, however, was only 1,475 sq. ft. and 7 ITA No.183/Hyd/2014 Smt. Swapna Cherukuri, Hyderabad the first floor having been constructed by the owner of the unit and not by the assessee, there was no violation of the condition of maximum of 1,500 sq. ft. area for claiming deduction under S.80IB(10). He invited our attention to the copy of the relevant sale deed placed at pages 67 to 78 of the paper-book to support and substantiate his contention and also further invited our attention to the copy of the sale deed of unit No. 11 placed at page nos.57 to 66 of the paper-book to point out that the total built up area of duplex house was only 1,364 sq. ft., which was less than the prescribed limit of 1,500 sq. ft. He contended that there was thus no violation of the norm of maximum area of 1,500 sq. ft. built up area even in respect of these two units, as alleged by the authorities below. He also contended alternatively that even if it is assumed that there is such violation either in respect of one unit or even two units, the claim of the assessee for deduction under S.80IB(10) can be disallowed only proportionately and not entirely as done by the authorities below.
11. As regards the violation of the norm of maximum commercial area allowed in the project, the learned counsel for the assessee submitted that no commercial area was actually built up by the assessee in the project undertaken by her. He submitted that one vacant plot in the project was sold by the assessee in the year 2007 itself and the profit of Rs.3 lakhs arising from the said sale was duly offered to tax by the assessee in assessment year 2008-09. He submitted that the purchasers of the said plot actually built up the commercial area and since the assessee neither constructed nor sold the commercial area, the commercial area did not form part of the housing project developed by the assessee and no deduction under S.80IB(10) was claimed by the assessee in respect of the said commercial complex. He submitted that the commercial area developed by the concerned owners/purchasers of the plot was sold by them and the profit arising from such sale was duly offered to tax, without claiming any deduction 8 ITA No.183/Hyd/2014 Smt. Swapna Cherukuri, Hyderabad under S.80IB(10). He contended that the deduction under S.80IB(10) thus was claimed by the assessee in respect of residential units only and the project of the assessee comprising of such units being eligible for deduction under S.80IB(10) having satisfied all the conditions, there was no justification on the part of the authorities below to disallow her claim for deduction under S.80IB(10) of the Act.
12. The Learned Departmental Representative, on the other hand, strongly relied on the orders of the authorities below in support of the Revenue's case that the assessee having violated the norms of maximum built up area of individual housing units and maximum commercial area as permissible in the project, is not entitled to claim deduction under S.80IB(10). He contended that both these norms involve appreciation of facts and if at all there are some contradictions in the relevant facts, as noted in the respective orders of the authorities below and as stated by the learned counsel for the assessee now before the Tribunal, opportunity may be given to the Assessing Officer to verify the same.
13. We have considered the rival submissions and also perused the relevant material on record. It is observed that the disallowance made by the Assessing Officer on account of assessee's claim for deduction under S.80IB(10) in respect of profit derived from the housing project undertaken by her was confirmed by the learned CIT(A) by his impugned order on two grounds. Firstly, he held that the commercial space of 11,913 sq. ft. in the project developed by the assessee was more than the prescribed limit of 5% of the total built up area of the project. Secondly, he held that the out of total 136 units constructed by the assessee in the project, two units bearing Nos.118 and 121 (correct No. is 21, as pointed out by the learned counsel for the assessee) were having built up area of more than the maximum area of 1,500 sq. ft. permissible as per the relevant provisions. The learned CIT(A) held that 9 ITA No.183/Hyd/2014 Smt. Swapna Cherukuri, Hyderabad there was thus violation of at least two norms in the respect of project developed by the assessee to be eligible for deduction under S.80IB(10) and the said project therefore, was not entitled to deduction under S.80IB(10), as rightly held by the Assessing Officer.
14. In so far as the norm relating to commercial area is concerned, there is no dispute that the relevant plot of land on which the commercial complex was built had already been sold by the assessee to Md. Zaheeruddin and Md. Zamiluddin vide sale deed dated 13.9.2007 and the profit arising from the said sale was duly offered to tax by the assessee for the relevant assessment year, assessment year 2008-09. There is also no dispute that the commercial complex on the said plot of land was constructed by the owners and not by the assessee and the profit arising from the sale of the commercial complex so constructed was duly offered to tax by the said owners in their returns of income. The learned CIT(A), however, still confirmed the disallowance made by the Assessing Officer on account of assessee's claim for deduction under S.80IB(10) on the ground that the plot of land on which the commercial complex was built was part and parcel of the project of the assessee, as approved by the concerned authorities. He also noted that the said plot of land was found mentioned even in the completion certificate dated 12.3.2012 issued by the concerned authority, which again strengthened the fact that the land on which the commercial complex was built up was a part and parcel of the project developed by the assessee. In this regard, it is observed that a similar issue had come up for consideration before the Chennai Bench of this Tribunal in the case of Lavanya Property Developers Pvt. Ltd. V/s. ACIT (ITA No.148/Mds/2010 dated 16.9.2011), wherein the assessee had obtained approval for the project comprising of five blocks to be developed on the land admeasuring 1.445 acres. He, however, sold plot of land pertaining to one block and developed only the balance area of 1.2 acres and claimed deduction under S.80IB(10) in relation to the four 10 ITA No.183/Hyd/2014 Smt. Swapna Cherukuri, Hyderabad blocks only, built by it. The Assessing Officer disallowed the claim of the assessee on the ground that the plot of land pertaining to one block sold by the assessee was part of the original project and the area of the flats in the said block exceeded 1,500 sq. ft. On appeal, the learned CIT(A) confirmed the order of the Assessing Officer, observing that the approval obtained from the local authority for development of the project included the land in relation to one block which was sold by the assessee. On further appeal, it was held by the Tribunal that just because the assessee hived off one block in the project and hived off block had violated the condition prescribed under S.80IB(10), it would not disentitle the complete project from the deduction under S.80IB(10) especially when the hived off block was not in any way connected with the assessee's balance project and the balance project on own complied with all the conditions under S.80IB(10). In the present case, the plot of land on which the commercial complex was built had already been sold by the assessee and since the commercial complex on the said plot of land was developed by the owners of the land and not by the assessee, we are of the view that the same could not be considered as part of the project of the assessee, especially when the project of the assessee excluding that plot of land independently complied with all the conditions for claiming deduction under S.80IB(10). It is also pertinent to note here that profit arising from the development and sale of commercial complex was duly offered by the owners to tax in their returns of income, and neither they nor the assessee claimed any deduction under S.80IB(10) in respect of the said profit.
14. In so far as the residential units No.21 and 118 are concerned, which allegedly were having more than the permissible maximum built up area of 1,500 sq. ft. each, the learned counsel for the assessee has filed before us a copy of the relevant sale deed dated 11th September, 2008, whereby the residential unit No.21 comprising of plot of land and duplex house built thereon was sold by the assessee. A 11 ITA No.183/Hyd/2014 Smt. Swapna Cherukuri, Hyderabad perusal of the said sale deed clearly mentions the built up area as 1,364 sq. ft. in the description of the property sold and even the building plan annexed to the said sale deed as approved by the concerned authorities, shows the total area of the ground and first floors as 1336 sq. ft. It is observed that the Assessing Officer, however, presumed the area of this unit as more than 1,500 sq. ft. merely on the basis that the duplex house was having two floors. As explained on behalf of the assessee before the authorities below as well as before us, the said unit was built on a corner plot and keeping in view the location as well as the size of the plot, duplex house was constructed, having a built up area of less than 1,500 sq. ft. It is also observed that a copy of the sale deed for residential unit No.21 was filed by the assessee even before the learned CIT(A), but still the learned CIT(A) brushed aside the same, by observing that the same was not sufficient to prove that the built up area of the unit was less than the limit of 1,500 sq. ft. prescribed under S.80IB(10). In our opinion, the said sale deed was sufficient to show that the area of the duplex unit constructed by the assessee as residential unit No.21 was having less than 1,500 sq. ft. built up area and the approved plan annexed to the sale deed further established this position.
15. As regards the residential unit No.118, is observed that the built up area of the said unit was considered by the Assessing Officer as in excess of 1,500 sq. ft. on the basis that in addition to the ground floor, the first floor was also constructed as found during the course of the visit of the DVO to the project site on 17.12.2011. In this regard, the claim of the assessee right from the beginning was that the residential unit comprising of plot of land with only ground floor constructed thereon was sold to the concerned buyer vide sale deed dated 3rd September, 2010, having built up area of 1,475 sq. ft. and the construction of first floor as found by the DVO during his visit on 17.12.2011, was being done by the owner of the said plot and not by 12 ITA No.183/Hyd/2014 Smt. Swapna Cherukuri, Hyderabad the assessee. As demonstrated by the learned counsel for the assessee at the time of hearing before us, this position is duly supported by the copy of the sale deed dated 3.9.2010, placed at page Nos.67 to 78 of the paper-book, which clearly shows that the residential unit No.118 comprising of plot of land as well as a residential unit having only ground floor with built up area of 1,4765 sq. ft. duly completed, was sold by the assessee. The area of the said unit sold by the assessee on 3.9.2010 was having a built up area of 1,475 sq. ft. only and the additional built up area in the form of first floor which was under
construction as found by the DVO on 17.12.2011 was done by the owner of the unit and not by the assessee. Both the residential units bearing Nos. 118 and 21 thus were having built up area of less than1,500 sq. ft. as developed and sold by the assessee and in our opinion, there was no violation of any condition as alleged by the authorities below, for claiming deduction under S.80IB(10). We also find merit even in the alternative contention raised by the assessee that even if one or two units of the project are found to be having built up area of more than 1,500 sq. ft, the deduction under S.80IB(10) is liable to be disallowed only on proportionate basis and the claim of the assessee under S.80IB(10) cannot be disallowed in its entirety, as done by the authorities below.
16. In the light of the above discussion and considering all the facts and circumstances of the case, we are of the view that there was no violation of any condition in respect of the project developed by the assessee for the purpose of claiming deduction under S.80IB(10) and the learned CIT(A) was not justified in confirming the disallowance made by the Assessing Officer on account of assessee's claim for deduction under S.80IB(10). We therefore, set aside the impugned order of the learned CIT(A) on this issue, and direct the Assessing Officer to allow the claim of the assessee for deduction under S.80IB(10).13 ITA No.183/Hyd/2014
Smt. Swapna Cherukuri, Hyderabad
17. In the result, assessee's appeal is allowed.
Pronounced in the court on 12th June, 2014
Sd/- Sd/-
(Saktijit Dey) (P.M.Jagtap)
Judicial Member Accountant Member
Dt/- 12th June, 2015
Copy forwarded to:
1. Smt. Swapna Cherukuri, H.No.723/A, Road no.37, Jubilee Hills, Hyderabad
2. Dy. Commissioner of Income-tax Central Circle 6, Hyderabad
3. Commissioner of Income-tax(Appeals) I, Hyderabad
4. Commissioner of Income-tax Central Hyderabad
5. Departmental Representative, ITAT, Hyderabad.
B.V.S