Income Tax Appellate Tribunal - Mumbai
Veena Developers, Thane vs Department Of Income Tax on 31 October, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI
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BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND
SHRI RAJENDRA, ACCOUNTANT MEMBER
ITA NO.6806/Mum/2012
Assessment year: - 2008-09
ITA NO.6807/Mum/2012
Assessment year: - 2009-10
ITA NO.6808/Mum/2012
Assessment year: - 2010-11
Assistant Commissioner of Vs. M/s Veena Developers
Income Tax Nikunj House, Manav
Central Circle -2 Mandir,
Thane, Pawar Industrial Ambadi Rd.
Estate, Edulji Road, Vasai (W)
Charai, Thane - 401202.
Thane - 4 00 601.
PAN: AAEFV3871C
Appellant Respondent
Revenue By Shri R.R. Prasad
Assessee By Shri Ajay Singh & Neelam Jadhav
Date of hearing 28-10-2014
Date of pronouncement 31.10.2014
ORDER
Per Vijay Pal Rao, JM
These three appeals by the revenue are directed against three separate orders of CIT(A) all dated 14-08-2012, arising from the assessment u/s 143(3) r.w.s 153A of Income Tax Act for the A.Y. 2008-09 to 2010-11 respectively. The revenue has raised common grounds in these appeals, the ground raised by the revenue in A.Y. 2008-09 is as under:-
M/s Veena Developers
01. Whether on the facts and circumstances of the case and in law the Ld./ CIT(A) is correct in allowing deduction u/s 80IB(10) of Rs.
1,77,51,803/- without appreciating the fact that "In respect of "Veena Santoor" project Development rights of commercial units were transferred to its sister concern M/s Nikunj Developers to avail the deduction u/s 80IB(10) of he Income Tax Act 1961."
2. In this case a search & seizure action u/s. 132(1) of the Act was carried out on 10.07.2009. Accordingly, notices u/s. 153A were issued to the assessee. In response to notices issued u/s 153A, the assessee filed return of income, wherein claimed deduction u/s 80IB(10). On examination of details furnished, the Assessing Officer noted that in respect of the housing project Veena Santoor, the assessee has claimed deduction u/s 80IB(10) of the Act. Whereas, the commercial area in this housing project was approximately 12,381 sq. ft. Accordingly, the Assessing Officer asked the assessee as to why the deduction u/s. 80IB(10) be not disallowed. The assessee contended that the project was approved prior to 01.04.2005 and, therefore, the amended provisions of section 80IB(10) w.e.f 1.4.2005 vide Finance Act, 2004 whereby the condition of maximum area of commercial project is provided under clause (d) is not applicable in the case of the assessee. The Assessing Officer did not accept the contention of the assessee and disallowed the claim of deduction u/s 80IB(10) on the ground that area of commercial establishment in the project is more than the limit prescribed under clause (d) of section 80IB(10).
3. The assessee challenged the action of Assessing Officer before CIT(A). The CIT(A) allowed the claim of the assessee by noting the fact that the assessee has not claimed deduction u/s 80IB(10) in respect of the commercial establishment in the project and the claim is only with respect to the housing project. CIT(A) referred the decision of this Tribunal in the case of Khyati Financial Services, (6 Taxmann.com 56) and submitted that the Tribunal in the said case held that there
2|Page M/s Veena Developers is no violation by the assessee of any condition prescribed, the claim of assessee should be allowed.
4. We have heard the Ld. DR as well as Ld. AR and considered the relevant material on record. The threshold question arises is regarding the applicability of the amended provisions of section 80IB(10) w.e.f 1.4.2005 vide Finance Act, 2004, in respect of the project of the assessee which was approved prior to 1.04.2005. The Ld. Authorized Representative of the assessee has relied upon the judgment of Hon'ble Jurisdictional High Court dated 9th September 2014 in the case of CIT Vs. M/s Happy Home Enterprises, in Income Tax Appeal No. 201 of 2012 as well as in the case of CIT Vs. M/s Kanakia Spaces Pvt. Ltd. in Income Tax Appeal no. 308 of 2012. We find that an identical question fell for consideration of Hon'ble Jurisdictional High Court in the case of CIT Vs Happy Home Enterprises (supra) and CIT Vs. Kanakia Spaces Pvt. Ltd (supra), wherein the Hon'ble Jurisdictional High Court after considering the entire history of section 80IB(10) as well as the various decision on this point held in para 35 as under:-
"35. However, the provisions of section 80-IB(10) were substantiallyamended by way of Finance (No.2) Act, 2004 w.e.f. 1st April, 2005. As can be noted from the amended provisions, there were several conditions that were imposed in the newly substituted section 80-IB(10) that were absent in the said section prior to its amendment. One such condition inserted w.e.f. 1st April, 2005 was clause (d) that put a restriction on the quantum of commercial area that could be included in a housing project in order to entitle the assessee to claim the deduction as set out in the said section. It is pertinent to note that in the appeals before us, it is an admitted fact that the housing projects were approved prior to 31st March, 2005. In ITXA No.308 of 2012, in fact, the project was even completed prior to 31st March, 2005 and only the profits were offered to tax in A.Y. 2005-06. We do not think that the Legislature intended to give any retrospectivity to clause (d) of section 80- IB(10). This more so because it is clearly a condition that relates to and/or is linked with the approval and construction of the housing project. At the time when the housing project is approved by the local authority, it decides, subject to its own rules and regulations, what quantum of commercial area is to be included in the said project. It is on this basis that building plans are approved by the local authority and construction is commenced and completed. It is very difficult, if not
3|Page M/s Veena Developers impossible to change the building plans and / or alter construction midway, in order to comply with clause (d) of section 80-IB(10). It would be highly unfair to require an Assessee to comply with section 80-IB(10)(d) who has got his housing project approved by the local authority, before 31st March, 2005 and has either completed the same before the said date or even shortly thereafter, merely because the Assessee has offered its profits to tax in A.Y. 2005- 2006 or thereafter. Requiring the Assessee to comply with the condition set out in clause (d) of sub-section (10) of section 80-IB merely because he has offered his profits to tax in A.Y. 2005-06 or thereafter, even though his housing project was approved before 31st March 2005, would be requiring the Assessee to virtually do a humanly impossible task. This, in our opinion, could never have been the intention of the Legislature. In fact, to our mind, it would run counter to the very object for which these provisions were introduced, namely to tackle the shortage of housing in the country and encourage investment therein by private players. It is therefore clear that clause (d) of sub- section (10) of section 80-IB cannot have any application to housing projects that are approved before 31st March, 2005. The said clause (d) being inextricably linked to the date of approval of the housing project, it will have to be held that the said clause operates only prospectively i.e. for housing projects approved after 1st April, 2005. This is notwithstanding the fact that the profits were offered to tax by the Assessee for the A.Y. 2005-06 or thereafter."
5. Further after considering the Judgment of Hon'ble Karnataka High Court in the case of CIT and Anr. V/s G.R. Developers (353 ITR 1) as well as the decision of Hon'ble Gujarat High Court in the case of Manan Corporation V/s Assistant Commissioner of Income Tax (356 ITR 44). The Hon'ble High Court has held in para 40 and 41 as under:-
"40. As can be discerned from the said judgement, the Karnataka HighCourt categorically held that the said provision viz. sub-section (14)(a) of section 80-IB inserted w.e.f. 1st April, 2005 applied only to housing projects which were approved subsequent to 1st April, 2005. Although, the Karnataka High Court was construing sub-section (14)(a) of section 80-IB that defined the words "built-up area", we find that the same reasoning can even be applied to clause (d) of sub-section (10) of section 80-IB. We should keep in mind that the object of section 80-IB(10) was to bring in investments and to encourage infrastructural development of middle level housing projects. If we were to hold that clause (d) of sub- section (10) of section 80-IB was tobe complied with even by an Assessee whose housing project was approved before 31st March 2005, it would negate the very object and purpose for which section 80-IA(4F) and thereafter section 80-IB(10) were introduced in the first place. In that view of the matter, the condition/restriction imposed by clause (d) of section 80-IB(10) and which came into effect from 1st April 2005, can apply only to such housing projects which are approved on or after 1st April, 2005. It would not be out of place to mention that the said judgment of the Karnataka High Court was challenged before the Supreme Court and the Special Leave Petition against the same was dismissed on 7th January, 2013.
4|Page M/s Veena Developers
41. We also find that a similar issue as the one raised in these Appeals came up for consideration before the Division Bench of Gujarat High Court in the case of Manan Corporation v/s Assistant Commissioner of Income Tax, reported in (2013) 356 ITR 44 (Guj). In the facts before the Gujarat High Court, one of the grounds on which the Assessee was denied the deduction under section 80-IB(10) was the non-fulfillment of clause (d) thereof. The assessment year in question before the Gujarat High Court was A.Y. 2006-07.
It was the case of the Assessee before the Gujarat High Court that a condition of limiting commercial establishments / shops to 5% of the aggregate built-up area of the housing project or 2,000 sq.ft. whichever is less, came into force w.e.f. 1st April, 2005 and therefore the same could be made applicable to projects approved only on or after 1st April, 2005. Whilst dealing with the aforesaid contention and after analysing the provisions of section 80-IB(10), the Gujarat High Court held as under :-
"34. Neither the assessee nor the local authority responsible to approve the construction projects are expected to contemplate future amendment in the statute and approve and / or carry out constructions maintaining the ratio of residential housing and commercial construction as provided by the amended Act being 3 per cent of the total built-up area or 5,000 sq.feet, whichever is higher (now in the post-2010 period) or 5 per cent of the aggregate built-up area or 2,000 sq.feet, whichever is less. The Revenue is also in error to suggest that even if such conditions are onerous, they are required to be fulfilled. The entire object of such deduction is to facilitate the construction of residential housing project and while approving such project when initially there was no such restriction in taxing statute and the permissible ratio for commercial user made 5 per cent to the total built-up area by way of amendment and reduction of which by further amendment to 3 per cent of the total built-up area, has to be necessarily construed on prospective basis.
35. As is very apparent from the record, there was no criteria for making commercial construction prior to the amended section and the plans are approved as housing projects by the local authority for both the projects of the appellant. Permission for construction of shops has been allowed by the local authority in accordance with rules and regulations, keeping in mind presumably the requirement of large townships. However, the projects essentially remained residential housing projects and that is also quite apparent from the certificates issued by the local authority and, therefore, neither on the ground of absence of such provision of commercial shops nor on account of such commercial construction having exceeded the area contemplated in the prospective amendment can be made applicable to the appellant-assessee whose plans are sanctioned as per the prevalent rules and regulations by the local authority for denying the benefit of deduction of profit derived in the previous year relevant tothe assessment year as made available otherwise under the statute."
6. There is no dispute that in the case of the assessee, the project in question was approved prior to 1.4.2005 on 10.01.2005 by the local authority. Therefore, following the Judgment of Hon'ble Jurisdictional High Court in the case of CIT Vs. Happy Home Enterprises (supra) as well as CIT Vs. Kanakia Spaced Pvt. Ltd., we
5|Page M/s Veena Developers do not find any reason to interfere with the order of CIT(A) and the same is upheld
7. In the result appeal of the revenue is dismissed.
Order pronounced in the open court today i.e 31-10-2014
Sd/- Sd/-
(Rajendra) (Vijay Pal Rao)
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(Accountant Member/ys lnL; U;kf;d lnL;)
(Judicial Member/U;kf;d lnL;
Mumbai dated 31-10-2014
SKS Sr. P.S,
Copy to:
1. The Appellant
2. The Respondent
3. The concerned CIT(A)
4. The concerned CIT
5. The DR, "F" Bench, ITAT, Mumbai
By Order
Assistant Registrar
Income Tax Appellate Tribunal,
Mumbai Benches, MUMBAI
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