Income Tax Appellate Tribunal - Mumbai
Haware Engineers & Buildes P. Ltd, ... vs Department Of Income Tax on 1 November, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH 'H' BENCH
BEFORE SHRI I.P.BSNSAL (JUDICIAL MEMBER) AND
SHRI RAJENDRA (ACCOUNTANT MEMBER)
ITA No.7125/Mum/2011
Assessment Year: 2005-06
ACIT, Cent. Circle-29, M/s. Haware Engineers & Builders Pvt
Room No.411, 4th floor, Aayakar Ltd., 413-416, Vardhaman Market,
Bhavan, M.K. Road, Sector-17, Vashi, Navi Mumbai-400
Mumbai-20 Vs. 075
PA No.AAACH 2577 C
(Appellant) (Respondent)
ITA No.7144/Mum/2011
Assessment Year: 2005-06
M/s. Haware Engineers & Builders Pvt ACIT, Cent. Circle-29,
Ltd., 413-416, Vardhaman Market, Room No.411, 4th floor, Aayakar
Sector-17, Vashi, Navi Mumbai-400 075 Bhavan, M.K. Road,
PA No.AAACH 2577 C Vs. Mumbai-20
(Appellant) (Respondent)
Assessee by : Shri S.K.Mutsaddi
Revenue by: Shri K.C.P Patnaik.
Date of hearing: 1.11.2012
Date of pronouncement: 1. 11.2012
ORDER
Per I.P.Bansal, JM:
These are cross appeals directed against order passed by ld CIT(A) dated 11.8.2011 for assessment year 2005-06.
2. Ground raised by department reads as under:
"Under the facts and circumstances of the case and in law, ld CIT(A) erred in modifying the penalty levied u/s.271(1)(c) holding that no penalty was leviable in respect of deduction amount disallowed u/s.80IB(10) relating to Panchavati & Vrindavan projects."2 ITA No.7125/Mum/2011 ITA No.7144/Mum/2011
Assessment Year: 2005-06
3. Ground raised by assessee reads as under:
"On the fats and circumstances of the case and in law, ld CIT(A) has erred in upholding the AO's view in respect of the penalty levied u/s.271(1)(c) of the I.T.Act arising out of the claim made u/s.80IB(10) for the projects Shanti Niketan, Balaji Tower and Silicon Towers. The levy of penalty upheld u/s.271(1)(c) of the I.T.Act should be cancelled."
4. The assessee is involved in the business of construction of building projects. During the year under consideration, assessee carried out following six projects and claimed deduction u/s.80IB(10) of the Act:
3 ITA No.7125/Mum/2011 ITA No.7144/Mum/2011Assessment Year: 2005-06
5. The deduction u/s.80IB(10) has been disallowed by the AO and on such disallowance, concealment penalty amounting to Rs.2,77,11,908/- has been imposed vide order dated 12.3.2010. Ld CIT(A) has deleted the penalty with respect to two projects i.e. projects stated at Sl. Nos.5 & 6 (Panchavai and Vrindaban). The penalty on these projects has been deleted by ld CIT(A) on the ground that in earlier years, deduction u/s.80IB(10) was allowed by the department in respect of these projects. Hence, the disallowance is based on disputable legal issue of which, penalty cannot be levied. The department in its appeal is aggrieved with the deletion of penalty with respect to aforementioned two projects. The assessee in its appeal is disputing levy of penalty in respect of remaining four projects. Hence, cross appeals have been filed by both the parties.
6. At the outset, it was brought to our notice that the Tribunal in quantum proceedings vide its order dated 4.5.2012 in I.T.A. No.393/Mum/2009 vide para 34 has held that deduction u/s.80IB(10) is available to the assessee in respect of the projects except project 'Shanti Niketan', which is mentioned at Sl. No.1 in the aforementioned table. Copy of the order of the Tribunal has been filed by the assessee in its paper book at pages 1 to 27 and vide para 34, the observations of the Tribunal are as under:
"34. Accordingly, the grounds of assessee with reference to claims of deduction u/s.80IB(10) on various projects as discussed above are allowed, except the Ground No.1(on Santi Niketan) which was withdrawn."
7. Therefore, it is the case of ld A.R. of the assessee that penalty cannot be levied in respect of projects mentioned at Sl. Nos. 2 to 6 as in the quantum appeal, deduction u/s. 80IB(10) has been allowed and disallowance does not exist.
8. In respect of project mentioned at Sl. No.1, i.e. Santi Niketan project, it is the case of ld A.R. that in assessment year 2004-05, the Tribunal has held that assessee is entitled to deduction u/s.80IB(10). Reference in this regard was made to the order of the Tribunal dated 30.3.2011 in I.T.A. No.6431/M/2007, copy of which has been filed at pages 52 to 68 of PB. The relevant observations of the Tribunal are as under:
"Shantiniketan Project
3. Briefly stated, the material facts are like this. During the course of scrutiny assessment proceedings, the Assessing Off icer noticed that the assessee has claimed a deduction under section 80 IB (10), amounting to Rs 4 ITA No.7125/Mum/2011 ITA No.7144/Mum/2011 Assessment Year: 2005-06 12,44,455 in respect of Shantiniketan project. The Assessing Off icer had, however, two objections to this claim of deduction - f irst, that area of plot of land is 4,000.02 square meters, which is less than one acre (one acre is equal to 4,046.82 square meters); and - second, that built up area of shops and commercial units is 4,302.88 square feet, which is more than 2,000 square feet. As regards the second point, i.e. regarding built up area of commercial units being more than 2,000 square feet, the Assessing Off icer noted the same, but did not deal with the same in much detail. The Assessing Off icer noted that this residential project was developed by the assessee on 4,000.02 square meter land allotted by City & Industrial Development Corporation of Maharashtra Limited (CIDCO, in short), as plot number 8 A, on 6 t h February, 2001. It was also noted that construction was completed on 28 t h May 2002, and that the occupation certif icate of the project was also issued on 11 t h July 2002. The Assessing Off icer was of the view that since size of plot was admittedly less than one acre ( i.e. 4,046.82 square meters), the assessee was not entitled to deduction under section 80 IB (10). While the Assessing Off icer noted that the assessee was subsequently allotted an adjacent plot, admeasuring 48.13 square meters, by CIDCO as plot number 8B, he also held that this subsequent allotment did not make good this def iciency in eligibility for entitlement to deduction under section 80 IB(10) because " additional land was allotted to the assessee for purpose of playing ground/ green area only, and, as per terms specif ied by CIDCO, no development or construction was permitted therein"
and "additional land, as such, could never have been utilized for development of housing project". The Assessing Off icer also noted that, by way of this, " even though the agreement dated 1.4.2003 ( whereby CIDCO allotted the plot no. 8 B, admeasuring 48.13 square meters, to the assessee) modif ies the original assessment retrospectively, the fact remains that the original plot of 4000.27 square meters only was utilized for housing project, and there was no development on additional plot for the simple reason that the additional plot was not available to the assessee at all" and "even otherwise, additional plot is actually a separate plot (plot 8 B) distinct from the original plot (plot 8A)". It was thus concluded that, "
the assessee's contention that area of additional plot should also be included for considering area of housing project is, therefore, unacceptable".
Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. The assessee's plea to the effect that subsequent allotment of an adjacent plot, admeasuring 48.13 square meters, by CIDCO, as plot number 8B, made good this def iciency in eligibility for entitlement to deduction under section 80 IB(10), was rejected by the CIT(A) on the ground that "it is certainly not the intention of legislature that housing projects, which have already been completed on a smaller plot, will also be eligible for deduction [under section 80 IB(10)] if subsequently it buys additional adjacent land to make the total area more than one acre". The CIT(A) also noted that plot number 8B allotted by CIDCO was not to be used for any construction but was to be developed as green belt to be used as children's playground which will also have access to public at large, and observed that it was thus "manifestly clear that the appellant has tried to get its irregular claim of deduction under section 80 IB(10) regularized through the allotment of additional plot number 8B". The CIT(A), accordingly, concluded that "additional land cannot be regarded as part of the original project as it has neither been allotted exclusively for the project nor has been used for housing project" and the size of original plot being marginally less than once acre, the assessee was not entitled for deduction under section 80 IB (10). The disallowance was thus conf irmed by the 5 ITA No.7125/Mum/2011 ITA No.7144/Mum/2011 Assessment Year: 2005-06 CIT(A) as well. The assessee is not satisf ied by the stand so taken by the CIT(A), and is in further appeal before us.
4. We have heard the rival contentions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position.
5. We have noted that though there is no dispute about the fact that size of the original plot on which housing project was developed was less than one acre, the assessee was subsequently allotted an adjacent plot which made good this def iciency so far as requirement about minimum size of plot was concerned. The claim for deduction under section 80 IB (10) has, however, been rejected by the Assessing Off icer on the ground that "no development or construction was permitted thereon", and, therefore, this additional land "could never have been utilized for development of housing project", as also on the ground that "additional plot is actually a separate plot (plot 8 B) distinct from the original plot (plot 8A)". The f irst limb of these objections, regarding utilization of additional land for construction, however proceeds on the fallacy that only such plot area can be included in the size of the plot on which construction is permissible. It is important to bear in mind that it is area of the plot, and not built up area, which is relevant for the purpose of deciding eligibility of the project. Section 80 IB(10) (b) provides that the housing project, in order to be eligible for deduction, must, inter alia, satisfy the condition that (b) the project is on the size of a plot which was a minimum area of one acre. It is clearly area of the plot and not built up area which is important to determine eligibility in terms of Section 80 IB (10)(b). In our considered view, the size of the plot includes entire area of the project which is developed by the builder for the residents of the project, including all common areas and public amenities for the residents of the project, and cannot be conf ined to only such area on which construction is permissible. Whether construction is permissible on the additional land or not is wholly irrelevant as long it is not in dispute that the said additional land was actually allotted, with or without conditions, for the purposes of the project. We have also noted that, vide allotment dated 6 t h April 2004 (pages 27- 30 of paperbook, @ page 28), the land use permitted, for the additional land so allotted, was only "for the purpose of development of green belt or children playground for the members of the society" (emphasis supplied by us ), but then development of green belt or children playground "for the members of the society" cannot but be an integral part of the housing project itself. Undoubtedly, the lease deed in favour of the society (pages 31 to 36,@page34) provides that the licensee "shall develop green belt or children's playground for the members of the society on the same (plot), which will have free access to public at large without discrimination on the ground of religion, caste, creed etc.", but the expression 'public at large' in this sentence is to be read in conjunction with the words immediately following these words, i.e. without discrimination on the ground of religion, caste, creed etc.". It is not a case that the assessee has been permitted to develop a public park in the additional land so allotted, and the benef it to the residents in this project is only incidental; in fact, it is the other way round. The development in this land, as a park or children's playground or as green belt, is for the purposes of the residents of the project - as has been specif ically approved by CIDCO, and the benef it to others, if at all, is only incidental. The additional land is as much a part of the housing project as much the original plot is, as evident from the fact that supplementary agreement, to lease out 6 ITA No.7125/Mum/2011 ITA No.7144/Mum/2011 Assessment Year: 2005-06 additional land, is not even a standalone agreement but it only seeks to modify the original lease by including plot number 8 B in the area allotted for housing project. The mere fact that certain conditions have been put for use of additional land does not take away the fact that additional land is an integral part of the housing project which, consequent to the additional land having been allotted, now stands on plot no. 8A and 8B, as against plot no. 8A originally, collectively shown, in location plan attached to the modif ied agreement, as area allotted to assessee for the housing project. It is also important to bear in mind that the Central Board of Direct Taxes itself, vide circular no. 5/ 2005 dated 15 t h July 2005 has observed that "This section [ i.e. 80 IB (10)] 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 the local authority in accordance with the regulations in force". This also makes it clear that even areas of gardens, development plan roads etc. are to be treated as part of the housing project as long as the same are approved by local authority in accordance with the regulations in force. It is, therefore, not correct to proceed on the basis that areas not used for construction, such as garden and roads etc., will not be included in the area of the project. The local authority in the present case is CIDCO itself as the housing project has been approved by CIDCO (page 14 of the paper-book) and commencement and completion certificates have been issued by CIDCO (pages 15-17 and 37-38 of the paper-book), and it is in accordance with the specif ic permission of CIDCO that the additional land has been developed, for the use of members of the society, as green belt and children's playground. The use of additional land, therefore, has to be treated as a part of the approved project. The other objection of the Assessing Off icer was that plot no. 8 B is a distinct plot and, therefore, it cannot be included in the housing project. We see no substance in this plea either. As evident from location plan attached to the modif ied lease agreement, plot 8A and 8B are adjacent to each other and are collectively shown as belonging to this project. It is not even necessary that area of each plot, on standalone basis, must at least be one acre. Once it is not in dispute that these two plots are adjacent plots which can be viewed as a cohesive unit, as are the admitted facts of this case, deduction under section 80 IB (10) cannot be declined only on the ground that the plot on which housing project is built originally consists of more than one units. In any event, even the lease agreement executed by CIDCO is only one, and by way of allotment of additional land, only the old agreement is modif ied "with retrospective effect". When lease agreement is one, plot 8 A and 8 B are adjacent plots and a cohesive unit on which project is now situated, declining deduction under section 80 IB(10) on the ground that plot 8B is a distinct plot is neither factually correct nor sustainable in law. The ground on which the Assessing Off icer declined deduction under section 80 IB(10) are thus devoid of legally sustainable merits.
6. As regards learned CIT(A)'s observations to the effect that "it is manifestly clear that the appellant has tried to get its irregular claim of deduction under section 80 IB(10) regularized through the allotment of additional plot number 8B", and that it is not intention of legislature that that "housing projects, which have already been completed on a smaller plot, will also be eligible for deduction [under section 80 IB(10)] if subsequently it buys additional adjacent land to make the total area more than one acre", we are unable to see any merits in these observations 7 ITA No.7125/Mum/2011 ITA No.7144/Mum/2011 Assessment Year: 2005-06 either. In case an assessee f inds that he is not eligible for deduction under section 80 IB(10) because size of the plot, on which project is built, is less than minimum necessary size, and he makes good that def iciency, and ensures that all the necessary preconditions are satisf ied and approvals obtained, the assessee is eligible for deduction under section 8 IB(10). The fact that he satisf ied 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 preconditions for being eligible to the claim are satisf ied, and that is the case before us. The deduction under section 80 IB(10) is, therefore, admissible on the facts of this case. We make it clear that we have arrived at these conclusions on the peculiar facts of this case, and considering smallness of the size of additional plot of land which is just 48.13 meters, and this decision should, therefore, not be construed as of general applications in all such cases where additional plot of land has been added subsequently in the project. As regards the commercial built up area being in excess of 2,000 square feet, we have noted that the issue is now squarely covered by Hon'ble Bombay High Court's judgment in the case of CIT Vs. Brahma Associates ( 51 DTR 298 ) wherein Their Lordships have held that the restriction on the area of commercial use of built up area comes into play only with effect from 2005. The assessment year before us is 2004-05 and, therefore, use of commercial are in excess of 2,000 square feet does not vitiate assessee's claim for deduction under section 80 IB (10). In view of these discussions and bearing in mind entirety of the case, we hold that the assessee was eligible for deduction under section 80 IB(10) in respect of Shantiniketan project. We direct the Assessing Off icer to grant the said deduction.
7. Grievance of the assessee, against CIT(A)'s upholding the disallowance of deduction under section 80 IB(10) in respect of Shantiniketan project, is thus upheld."
9. Referring to the aforementioned order of the Tribunal, it was submitted by ld A.R. that assessee has been held to be eligible for deduction u/s.80IB(10) in respect of that project and assessee had not pressed this issue before the Tribunal. It is therefore, the claim of the assessee in respect of the impugned assessment year has not been accepted by the Tribunal. He submitted that as the deduction has been held to be eligible in respect of this respect in earlier year, assessee has a very good prima facie case and thus, it is a disputed issue on which concealment penalty cannot be levied.
10. On the other hand, ld D.R. relied upon order of Assessing Off icer and ld CIT(A) in respect of which penalty has been upheld by him and for the purpose of departmental appeal, it was submitted by ld D.R. that penalty has been wrongly deleted by ld CIT(A) in respect of two projects mentioned in the departmental grounds of appeal.
8 ITA No.7125/Mum/2011 ITA No.7144/Mum/2011Assessment Year: 2005-06
11. We have heard both the parties and rival contentions have carefully been considered.
12. So far as it relates to penalty leviable in respect of projects other than 'Santi Niketan' as quantum itself has been deleted, we see no justification in levy of penalty in respect of those projects.
13. Now coming to deduction u/s.80IB(10) in respect of Santi Niketan project, once the Tribunal has accepted such claim of the assessee, the relevant observations of the Tribunal have already been reproduced, therefore, it was a debatable issue. Hence, penalty cannot be held to be justified in respect of that project. Therefore, we see no justification of levy of concealment of penalty in respect of deduction u/s.80IB(10) claimed by the assessee. The penalty is deleted in its entirety.
14. In the result, appeal filed by department is dismissed and appeal filed by assessee is allowed.
Pronounced in the open court on 1st November, 2012
Sd/- Sd/-
(RAJENDRA) (I.P.BANSAL)
Accountant Member Judicial Member
Mumbai, Dated 1st November, 2012
Parida
Copy to:
1. The appellant
2. The respondent
3. Commissioner of Income Tax (Appeals),40, Mumbai
4. Commissioner of Income Tax, C-II , Mumbai
5. Departmental Representative, Bench 'H' Mumbai
//TRUE COPY// BY ORDER
ASSTT. REGISTRAR, ITAT, MUMBAI