Income Tax Appellate Tribunal - Mumbai
Hiranandani Akruti Jv, Mumbai vs Assessee on 16 April, 2014
आयकर अपीलीय अिधकरण,' अिधकरण ,p' खंडपीठ मुंबई INCOME TAX APPELLATE TRIBUNAL,MUMBAI - 'H' BENCH.
सव[ ौी राजेÛि,ले
ि लेखा सदःय एवं Mk0 ,l Vh ,e ikoyu Ûयाियक सदःय
Before S/Sh. Rajendra,Accountant Member & Dr. S.T.M. Pavalan,Judicial Member आयकर अपील सं/.ITA No.374/Mum/2014,िनधा[ िनधा[रण वष[/Assessment Year-2006-07 Hiranandani Akruti JV, DCIT CC 36 Akruti Trade Centre, Road No.7, Vs Room No. 11, Ground Floor, Marol MIDC, Andheri(E) Aayakar Bhavan, Mumbai-400093 Mumbai-400020 PAN:AAAAH1443H (अपीलाथȸ/ Appellant) (ू×यथȸ / Respondent) िनधा[ǐरती कȧ ओर से/ Assessee by : Shri Vijay Mehta राजःव कȧ ओर से / Revenue by : Shri K.C.P. Patnaik सुनवाई कȧ तारȣख/ Date of Hearing : 16-04-2014 घोषणा कȧ तारȣख / Date of Pronouncement : 07-05-2014 आयकर अिधिनयम, अिधिनयम 1961 कȧ धारा ( 1 ) 254 के अ Ûतग[ त आ दे श Order u/s..254(1)of the Income-tax Act,1961(Act) Per Rajendra,AM ले खा सदःय राजे Ûि के अनु सार:
ार Challenging the order dated 29.11.2013of the CIT(A)-41,Mumbai,assessee-AOP has raised following Grounds of Appeal:
1.The CIT(A) has passed the impugned order without jurisdiction in as much as the appeal was arising out of the proceedings of 'order giving effect to the order of the Tribunal. The CIT(A)ought to have appreciated that in these proceedings the Assessing Officer or the CIT(A)can neither go beyond the scope of direction given by the Hon'ble Tribunal nor decide against the view taken by the Hon'ble Tribimal.
2.The CIT(A) has passed the impugned order without jurisdiction in as much as the appeal was arising out of rectification order passed by the Assessing Officer u/s. 154 of the Act wherein the scope of power is limited to rectifying mistake apparent from the record.
3.The CIT (A) has erred in law and on facts in enhancing the income of the appellant by withdrawing deduction u/s. 80-IB(10) of the Act amounting to Rs.44,42,20,424/- in the impugned order.The CIT (A) ought to have held that the appellant is eligible for deduction u/s. 80-IB(10) of the Act amounting to Rs.51,58,84,600/- being 100% of the profit derived from the project.
4.The CIT(A) ought to have held that the Assessing Officer was not justified in passing the order u/s.
154 of the Act, there being no mistake apparent from the record.
5.The CIT(A) has erred in law and on facts in confirming the order u/s. 154 of the Act which was assessed in violation of the principles of natural justice.
6.The CIT(A) has erred in law and on facts in passing Corrigendum dated 29.11.2013 (received on 10.01.2014).The action of the CIT(A)in passing the Corrigendum and thereby initiating the penalty u/s. 271(1)(c) of the Act is without jurisdiction and bad in law.
7.The appellant craves leave to add to, amend, alter or delete all or any. of the foregoing grounds of appeal."
Brief history of the case:
2.The assessee is an Association of Persons (AOP) and is a Joint Venture (JV) between Akruti City Limited and Hiranandani Group.It undertook slum rehabilitation project assigned by NMRDA.2 ITA No.374/Mum/2014 Hiranandani Akruti JV
During the year under consideration the SRA project was completed.In its return of income,filed on 31.10.2005,gross total income was declared at Rs 51,06,27,772/-out of which deduction u/s.
80IB(10) of the Act was claimed at Rs.51,06,05,521/-. AO vide his order dated 28.11.2009, passed u/s.143(3) disallowed assessee's claim of deduction of Rs,51,06,05,521/- made u/s.80-IB(10) and First Appellate Authority confirmed it .Vide its order dated 30.03.2010, ITAT set aside the order of FAA and remanded the matter back to the AO for the limited purpose of satisfying himself as to whether the assessee would be entitled to deduction u/s. 80IB(10) as per the ratio laid down by the ITAT,Special Bench in the case of Brahma Associates(BA)-(122TTJ 433) and to decide the issue as per the law applicable in AY 2004-05 when the project was approved. Aggrieved by direction of the Tribunal that deduction in full be given to the assessee if the area of commercial units in the project did not exceed 10% of total area it filed an appeal with the Hon'ble Bombay High Court.The appeal was admitted by the Hon'ble Court vide order dated 14.06.2012 and is pending for disposal.Meanwhile Hon'ble jurisdictional High Court had decided the appeal filed in the case of BA. Taking into account the said judgment,assessee filed an MA arising out of the ITAT's order dated 30.03.2010.Adjudicating the appeal filed by the assessee,Tribunal directed the AO to examine the eligibility of the assessee to deduction u/s. 80BI(10) of the Act as per the ratio laid down by the Hon'ble Bombay High Court instead of the ratio laid down by the Special Bench.On 04.11.2011,AO passed order giving effect to aforesaid order of ITAT and allowed 100% deduction to the assessee u/s. 80IB(10) of the Act.Vide his notice issue u/s.154 of the Act,AO informed the assessee that while allowing deduction u/s.801B(10), deduction in respect of commercial component of the project was not disallowed,that it was a mistake apparent from the record and had to be rectified.In its reply,assessee stated that its case was fully covered by the decision of Hon'ble Bombay High Court delivered in the case of BA,that rectification of order giving effect to ITAT's order was not possible since it had been passed after following the directions of the Tribunal.However,the AO vide his order dated 31.01.2012 allowed its claim of deduction u/s.80IB(10) to the extent of Rs.44,42,20,424/- after excluding 13% commercial component of the project.Aggrieved by the order passed u/s.154 of the Act,assessee preferred further appeal. In the course of appellate proceedings,before the First Appellate Authority(FAA),assessee submitted that the decision of the Hon'ble Bombay High Court in the case of BA envisaged deduction to the entire project approved by the local authority and not to a part of the project,that if the conditions set out in Section 80-IB(10) were satisfied then deduction was allowable on the entire project approved by the local authority,that the AO was not justified in restricting deduction only to the residential component of the project,that the SRA project of the assessee was approved before 31.03.2004 and was within limits as prescribed by the DC Rules and Regulations,that considering the direction of the Hon'ble High Court, the restraining clauses with regard to commercial units were not applicable to it,as same could not be applied retrospectively to projects approved before 01.04.2004,that in the impugned order passed u/s.154of the Act the AO had subscribed his own interpretation of the BA decision,that by agreeing to give deduction up to 87% of the total claim, the AO had implicitly agreed that the project meets all the criteria and is eligible for the claim as per the mandate of the said decision, that the AO had completely disregarded the observation of the Hon'ble High Court that deduction be restricted and has to be given in full.
3.After considering the submissions of the assessee and the order of the AO,FAA held that the main question for determination was whether the impugned order passed by the AO giving effect to the order of the ITAT in MA was in conformity with the ratio laid down by the, Hon'ble High Court in the case of BA, as directed by the Tribunal.He was of the opinion that from perusal of the said judgment of the Hon'ble jurisdictional High Court the following significant propositions emerged:
i.Up to 31.03.2005 deduction u/s.80-IB(10)was allowable to housing projects approved by the local authority having residential units with commercial use to the extent permitted under the DC Rules/Regulations framed by the respective local authority.
ii.Where the commercial use permitted by the local authority was within the limits prescribed under the DC Rules/Regulation,said deduction up to 31.03.2005 was allowable irrespective of the fact that the project is approved as housing project or residential plus commercial.3 ITA No.374/Mum/2014 Hiranandani Akruti JV
iii.Deduction u/s.80-IB(10) was available on the profits derived from the housing projects approved by the local authority as a whole, iv.Clause (d) inserted to Section 80-IB(10) with effect from 01.04.2005 was prospective and not retrospective and hence could not be applied for the period prior to 01.04.2005. FAA further observed that the assessee had obtained approval for development of a slum rehabilitation project from the MMRDA on 17.11.2003,that during year under consideration,the assessee had completed the said residential-cum commercial project and received the Occupation Certificates in July,2005 and December,2005,that in his statement recorded u/s.131 of the Act on 10.03.2007, one of the member of the assessee-AOP confirmed that the total built up area of the residential units of the said project was 81046.65 sq.mtrs. and the total built up area of commercial units therein was 117800 sq ft approximately,that the built up area of residential units in comparison to the total area was 87% while the commercial component accounted for the balance 13%,that it had been held by the Hon'ble High Court that deduction u/s.80-IB(10) was allowable on the profits derived from the housing projects approved by the local authority as a whole and not to a part of it,that the AO had allowed deduction to the assessee to the extent of 87% after excluding 13% commercial component of the project,that the order of the AO was not in accordance with the ratio of the judgment of the Hon'ble High Court delivered in the case of BA,that the housing project undertaken by the assessee was approved by the local authority on 17.11,2003 and the project was completed vide Occupation Certificates issued in July 2005 and December, 2005,that the commercial area included in the housing project of the assessee was 1,17,800 sq.feet which was much higher than the prescribed limit,that the assessee satisfied all conditions except the one laid down in the clause (d) of Section 80IB(10),that the true,clear and dominant objective of the incentive provision of Section 80-IB(10)was to provide affordable dwelling units for low and middle class,that before insertion of clause (d) to said section w.e.f. 01.04.2005,it was clear that there was no restriction on the extent of commercial user in a residential building,that the true reason for insertion of clause(d)in Section 80 IB(10) was to curb the abuse of the incentive provision and to ensure that the benefit of deduction under the said section extended only to those housing projects where commercial area was within permissible limits.
FAA was of the opinion that the plea of the assessee;that while disposing of its MA No.151/Mum/20l1 (arising out of ITA/5416/M/2009-AY.2006-07,dated 04.05.2011)ITAT had upheld the eligibility to the deduction based on Bombay High Court decision in case of BA;was not only factually incorrect but also misconceived and misleading.He reproduced the order of the Tribunal and held that instead of 'upholding' the eligibility of the assessee to deduction u/s.80- IB(l0),the issue was restored back to the file of the AO for examination in light of the ratio laid down by the Hon'ble Bombay High Court in the BA,that while giving effect to the aforesaid order of ITAT the AO failed to examine the question of eligibility of the appellant to deduction u/s.80- IB(10) in light of above findings/conclusions,that he failed to appreciate that clause(d)inserted to the said section had been held to prospective,that he did not invoke the amended provisions in the present case for the AY.under appeal.
He held that the AO ought to have disallowed the said deduction in full because the requirement of clause (d) of Section 80-lB(10) was not satisfied by the assessee,that AO was justified in passing order u/s.154 of the Act,that as per the decision of the Hon'ble Bombay High Court if the commercial use of the projects was beyond the limit prescribed therein,even though such use was approved by the local authority,then the assessee was not entitled to claim deduction under the said section.Referring to the order of the decision of the ITAT, Murnbai Bench in the case of Everest Home Construction(India)Ltd.(139ITD1),he held that with the insertion of clause (d) w.e.f. 01,04.2005 there was a cap on the commercial area in the eligible project,that after the amendment the assessee was not eligible for deduction u/s. 80IB(10) of the Act,that the assessee could not claim to have any vested right to the deduction under the said section based on the pre-amended provisions and its eligibility to such deduction had to be examined with reference to the legal provisions in force in the AY.under consideration.
Finally,he held that while giving effect to the order of the ITAT in MA filed by the assessee the AO failed to apply the ratio of judgment of the Hon'ble jurisdictional High Court in the case of BA 4 ITA No.374/Mum/2014 Hiranandani Akruti JV correctly to the facts of the present case and thereby wrongly allowed deduction of Rs. 44, 42, 20,424/-to the assessee,whereas he ought to have disallowed the deduction in full as the appellant had not satisfy the mandatory requirement of clause (d) of Section 80-IB(10) of the Act,that the total income assessable in hands of the assessee for the AY.under consideration would remain unchanged at Rs.51,58,84,600/- as originally assessed.As it resulted in enhancement of income of the assessee 'owing to wrong allowance of deduction u/s. 80-IB(10) of the Act',so he directed the AO to revise the total income of the assessee accordingly while giving effect to this order. FAA had issued a notice u/s.251(2)of the Act to the assessee before enhancing its income.
4.Before us,Authorised Representative argued that the issue on which enhancement had been made was debatable issue,that mistake pointed out by AO was not upheld by the FAA,that in guise of enhancement fresh mistake could not be rectified,that mistake rectified by the AO was not apparent because the FAA had another view.
He relied upon the decision of Manan Corporation(356ITR44),Anriya Project Management Services(P)Ltd.(353ITR12),G.R.Developer(351ITR1)PoonamGruhNirman(ITA/6926/Mum/2010- AY.2007-08,dated12.02.2014),M/s.VelentineDeveloper(ITA/6901and8469/Mum/2010-AY.s.20 06-07&2007-08dated14.03.2014),M/s.Magnet Enterprises ITA/5802/Mum/ 2012-AY.2008-09 dated 27.11.2013).Departmental Representative supported the order of the FAA and relied upon the order of Everest Home Construction (India)Ltd.(supra).
5.We have heard the rival submission and perused the material before us.It is found that initially AO had denied the benefit of deduction u/s.80IB of the Act,made by the assessee for a project developed by the it.Deciding the appeal filed by the assessee against the order of the FAA,ITAT directed the AO to pass order as per the decision of BA delivered by the Special Bench.Hon'ble Bombay High Court pronounced its decision in the matter of BA.Assessee filed an application before the Tribunal to amend its order and direct the AO to follow the order of the Hon'ble High Court.Tribunal,taking cognizance of the decision of the Hon'ble Court,directed the AO to decide the issue of deduction u/s.80IB in light of the said order.In pursuance of the order of the Tribunal initially,AO allowed the assessee 100% deduction u/s.80IB of the Act,but later on,he partially withdrew it,while passing a rectification order u/s.154 of the Act.In the appellate proceedings,FAA held that stand taken by the AO was not as per law.He held that assessee was not entitled to claim any deduction u/s.80IB of the act.Referring to the provisions of sub section (d) of the section 80IB and the order of the Tribunal delivered in the case of M/s. Everest Home Construction(India) Pvt. Ltd.(supra),he enhanced the income of the assessee.We find that in the case of Manan Corporation (supra)issue of availability of deduction u/s.80IB had been resolved and the Hon'ble Gujarat High Court had taken a decision after considering the background of introducing the section and it had held that that amendment introduced in section 80IB(10)(d) was not applicable to a project which was approved prior to 01.04.2005.In the case under consideration project was approved prior to 01.04.2005,so,thus the matter is covered by the pre amended section.We are of the opinion that pre amended section did not mandate the ceiling of commercial area.We find that in the case of M/s.Magnet Enterprises ITA/5802/ Mum/ 2012-AY. 2008-09 dated 27.11.2013,to which one of us was the party,has discussed the issue of allowability of deduction u/s.80 IB as under :
"5.We have heard the rival submissions and perused the material before us.We find that issue before us was discussed and decided by the Hon'ble High Court of Gujarat conclusively in the case of Manan Corporation(supra).Hon'ble Court has held under :
"20.In our opinion,the Tribunal has misdirected itself in interpreting paragraph 25 of the said judgment and thereby denying the benefit of Section 801B(1 0) to the appellant herein in as much as before the Bombay High Court it was Revenue's case that residential project having commercial construction cannot be held entitled to the benefit under Section 801B(1 0) of the Act and for supporting its version, reliance was placed on inclusion of clause (d) of Section 801B(10) from 1.4.2005, which restricts area of commercial construction in residential project. It was a project of residential housing with commercial user for assessment year 2003 -2004 as noted above.
In this backdrop, the Court rejected,' refuted such version and for fortifying its denial, it mentioned 5 ITA No.374/Mum/2014 Hiranandani Akruti JV inclusion of clause(d) from 1.4.2005 by holding that by insertion of clause(d) of Section 801B(10) of the Act, Legislature made it clear that though the housing project approved by local authority with commercial user to the extent permissible under the rules and regulations were entitled to Section 801B(
10) deduction, such deduction would be subject to the restriction set out in clause (d) of section 801B(10) from 1.4.2005. In our opinion,Tribunal has quoted the judgment out of context to deny the said benefit to the appellant erroneously.
21. Neither the assessee nor 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% of the total built up area or 5000 sq.feet whichever is higher (now in post 2010 period)or 5% of the aggregate built up area or 2000 sq.feet whichever is less. 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% to the total built up area by way of amendment and reduction of which by further amendment to 3% of the total built up area, has to be necessarily construed on prospective basis.
22. As is very apparent form 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 to the assessment year as made available otherwise under the statue.
24.Karnataka High Court in the case of Commissioner of Income Tax,Central Circle vs. Anriya Project Management Services (P.) Ltd. reported in [2012J 21 taxmann.com140 (Karnataka)was also examining this provision where the question was whether the definition of 'built-up area' inserted by Finance (No.2) Act, which became effective from 1.4.2005 is prospective or retrospective in nature and it held that the same to be prospective in nature. It held that amendment provision would have no application to housing projects, which were approved by the local authority prior to 1.4.2005 in calculating 1500 sq.feet of residential unit and it further held that once such housing project of assessee is approved by local authority prior to 1.4.2005, it would be entitled to 100% benefit of Section 801B(10). While so holding, it relied on the judgment of the Karnataka High Court in the case of CIT vs. G.R. Developers [IT Appeal No.355 of 2009].
27.The entire object of such deduction is to facilitate construction of residential housing project and while approving such project when initially there was no restriction and by amendment as stated permissible ratio for construction is 5% of the total built up area, reduction of this ratio to 3% of the total built up area has to be necessarily on prospective basis.
As mentioned hereinabove criterias to hold this amendment retrospective are absent as there is no as explicit and specific wording expressing retrospectivity and even if it is assumed for the sake of arguments that the same is to be read by implication the same does not appear to be reasonable but, in fact emerges to be harsh and unreasonable when it comes to implementation.
34.Above discussion cumulatively when examined with the objectives and intent it sought to achieve in bringing about the said provision of Section 801B(10), this amended taxing statute requires to be interpreted in favour of the assessee rather than insisting upon strict compliance leading to absurdity.
35.It can be also held that this being a substantive amendment and not a clarificatory amendment, the amendment of this nature cannot have retrospective effect."
We find that when the I Bench of Mumbai Tribunal had decided the issue of 80IB(10)of the Act, it did not have the benefit of the judgment of Hon'ble High Court of Gujarat.We further find that Pune Bench of the Tribunal has considered all the decisions,including the decision of Everest Home Construction(India)(P)Ltd.,(supra)while deciding the issue in favour of the assessee.After considering the judgment of the Hon'ble High Courts of Gujarat Karnataka,we are of the opinion that the order of the FAA does not suffer from any legal infirmity.Therefore,upholding his order we decide the effective ground of appeal against the AO."
6 ITA No.374/Mum/2014 Hiranandani Akruti JVConsidering the above,we are of the opinion that the order of the FAA cannot be endorsed.He had interpreted the provisions of section 80IB(10)(d)in a particular manner and had relied upon one of the orders of the Tribunal.But,now after the decision of the Hon'ble Gujarat High Court in the case of Manan Corporation there is clarity about the provision.Therefore,following the said order of the Hon'ble Gujarat High Court we decide the effective ground of appeal in favour of the assessee.In our opinion,AO was not justified in amending the order by passing order u/s.154 of the Act,as held by the FAA.We are also opinion that enhancement made by the FAA to the income of the assessee- AOP has to be deleted.Grounds no.1-5,filed by the assessee are allowed.Ground no.6,pertaining to levy of penalty u/s.271(1)(c)of the Act is allowed for statistical purposes,as the quantum addition has been deleted.
As a result,appeal filed by the assessee stands allowed.
फलतः िनधा[ǐरती Ʈारा दाǔखल कȧ गई अपील मंजरू कȧ जाती है .
Order pronounced in the open court on 7th May,2014.
आदे श कȧ घोषणा खुले Ûयायालय मɅ Ǒदनांक 7 ebZ 2014 को कȧ गई ।
Sd/- Sd/-
(Mk0
Mk0 ,l Vh ,e ikoyu/Dr. S.T.M.Pavalan) राजेÛि/Rajendra)
(राजे ि
Ûयाियक सदःय/JUDICIAL
सदःय MEMBER लेखा सदःय /ACCOUNTANT MEMBER
मुंबई/Mumbai,Ǒदनांक/Date: 07.05.2014.
SK
आदे श कȧ ूितिलǒप अमेǒषत/
षत Copy of the Order forwarded to :
1. Assessee /अपीलाथȸ 2. Respondent /ू×यथȸ
3. The concerned CIT(A)/संबƨ अपीलीय आयकर आयुƠ,4.The concerned CIT /संबƨ आयकर आयुƠ
5. DR 'H' Bench, ITAT, Mumbai /ǒवभागीय ूितिनिध ,p खंडपीठ,आ.अ.Ûयाया.मुंबई
6. Guard File/गाड[ फाईल स×याǒपत ूित //True Copy// आदे शानुस ार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुब ं ई /ITAT, Mumbai