Income Tax Appellate Tribunal - Hyderabad
Cecon Builders,, Hyderabad vs Assessee on 27 February, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" : HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND
SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA.No.550/Hyd/2013
Assessment Year 2009-2010
M/s Cecon Builders ITO, Ward 10(1)
Hyderabad. vs. Hyderabad
PAN AAOFM3021H
(Appellant) (Respondent)
ITA.No.590/Hyd/2013
Assessment Year 2009-2010
ACIT, Circle 10(1) M/s Cecon Builders
Hyderabad vs. Hyderabad.
PAN AAOFM3021H
(Appellant) (Respondent)
For Assessee : Mr. A.V. Raghuram
For Revenue : Ms. K. Harita
Date of Hearing : 27.02.2014
Date of pronouncement : 07.03.2014
ORDER
PER B. RAMAKOTAIAH, A.M.
These are cross-appeals by Assessee and Revenue against the orders of the CIT(A)-VI, Hyderabad dated 31.01.2013. The issue involved in these appeals is with reference to claim of 80IB.
2. Briefly stated facts are that the assessee is a firm carrying on business as builders and real estate developers. Assessee filed return of income claiming deduction of 2 ITA.No.550 & 590/Hyd/2013 M/s. Cecon Builders, Hyderabad Rs.32,22,094/- under section 80IB(10). Assessee has taken-up development of housing project at Miyapur and the original plan for construction of 9763 sq. meters was approved by the local authority vide proceedings dated 13.07.2007. However, assessee constructed 16307.60 sq. meters which was regularized under the Building Penalization Scheme of Government of Andhra Pradesh and the orders were passed on 26.08.2010. The A.O. in the course of assessment proceedings observed that assessee firm is eligible for the deduction only in respect of constructed area of 9763.76 sq. meters under section 80IB. However, on noticing that the project approval was obtained in the name of land owners Smt. R. Sairani and others, and that assessee has constructed violating the plan approved, the claim of 80IB was not allowed. Further, while denying the claim u/s 80IB, A.O. also concluded that assessee firm has not produced the books of accounts, bills and vouchers in the course of assessment proceedings and estimated the income at 12.5% on the total turnover of Rs.6.24 crores thereby, estimating the income at Rs.78,05,275/- on the project as against Rs.32,22,094/- offered by the assessee.
3. In the appeal before the CIT(A), the learned CIT(A) allowed relief on the estimation of income holding that there is no reason to estimate the profit and A.O. has not proved that the books of accounts are not produced or such books are not reliable. With reference to the claim of 80IB, he partially agreed with the A.O. that 80IB(10) cannot be allowed on the additional area constructed in violation of the plan but directed the A.O. to allow deduction proportionately on the original approved plan of 9763 sq. meters. The assessee is aggrieved on the rejection of claim on part of building whereas, Revenue is aggrieved in its grounds on cancellation of estimation by the 3 ITA.No.550 & 590/Hyd/2013 M/s. Cecon Builders, Hyderabad CIT(A) and permitting deduction under original approved plan even though the same was violated. Another contention made by the Revenue is that the housing project is not in the name of the assessee which the CIT(A) held in favour of the assessee stating that there is no such requirement following the order of the ITAT, Ahmedabad Bench in the case of Radhe Developers and others vs. ITO and others 23 SOT 42.
4. After considering the rival submissions, we are of the opinion that assessee is eligible for deduction to the extent of constructed area of 9763 sq. meters which was originally sanctioned. Therefore, the Revenue ground on allowing proportionate 80IB deduction does not require any reconsideration as the assessee is held otherwise eligible for deduction under section 80IB(10) and the A.O. has not find out any reason to deny except (a) plans are not in the name of the assessee (b) that there is violation of the building plans which was regularized subsequently on 26.08.2010. To that extent, Revenue grounds are not maintainable as the Coordinate Bench in the case of Radhe Developers (supra) held that permission in the name of developer is not required and what is required is permission of the project, on which there is no dispute. Accordingly, these grounds are not maintainable.
5. Other ground contested in the Revenue's appeal is with reference to the estimation of income which learned CIT(A) did not approve as there is no case for rejecting the books of accounts. With reference to this aspect, we need to discuss the same with assessee's contention about claim of 80IB(10) in the additional constructed area.
6. There is no dispute with reference to the original permission being obtained for 9763 sq. meters. There is also 4 ITA.No.550 & 590/Hyd/2013 M/s. Cecon Builders, Hyderabad no dispute that under the Building Penalization Scheme the project was approved by the Greater Hyderabad Municipal Corporation vide permission dated 26.08.2010. The learned CIT(A) was of the view that this additional constructed area is not eligible for deduction under section 80IB. Assessee relied on the decision of Coordinate Bench of Bangalore in the case of ITO vs. Mahavir Calyx (ITA.No.153 & 998/Bang/2011) wherein it was held as under :
"We are of the view that the learned CIT has rightly placed reliance on the decision of the Hon'ble Apex Court in the cases of Petron Engineering Construction Pvt. Ltd., reported in 175 ITR 523, Panyam Chemicals Ltd. reported in 262 ITR 278, N.C. Buddhiraja & Co. reported in 204 ITR 412, IPCA Laboratories Ltd. case reported in 266 ITR 521, to arrive at the view that the tax incentive by way of deduction under section 80IB of the Act is predominantly for the purpose of augmenting affordable dwelling and ought to be interpreted in that light. In view of the matter, the incentive provision must be construed in a manner which advances the object and intention of legislature. The fact that the assessee has obtained approval for the housing project cannot be lost sight of. As for the excess arrear constructed, it is for the BBMP to look into the violations if any, in the construction of the housing project. That does not however, authorize the A.O. to hold that the assessee has not got approval for the housing project or the conditions laid down in section 80IB(10) stated violated."
7. Even though principles considered therein do apply to the present facts, what we are unable to decide is whether the same will apply to the assessee. As seen from the permission granted by the GHMC the original sanctioned plan was for cellar, stilt + 9 floors consisting of 9763.76 sq. meters. The revised plan was also stated to be cellar, stilt + 9 floors + pent house. We are unable to understand whether addition of only pent house will increase the space of built up area by 6543.84 sq. meters or there are any other increase in the area 5 ITA.No.550 & 590/Hyd/2013 M/s. Cecon Builders, Hyderabad of additional buildings constructed. Since the plans are not placed on record, we are unable to give any finding on this. Moreover, the BPS scheme was applicable only to the applications made on before 31-03-08. The plans were approved only in July 2007. Payments for penalty were made later as can be seen from copy of approval placed on record. Since revised plans were not placed on record we are unable to decide issue only on legal principles. The A.O. is directed to examine the original plans, revised plans and examine whether the deduction under 80IB is eligible for revised plan. In case of area of flats have changed, to verify whether the constructed apartments are within the norms prescribed under section 80IB(10). Needless to say that balconies and common areas are not to be considered as part of 'flat area' as per the decisions of the Coordinate Bench on the issue. However, the pent house constructed and the additional space for which revised plans were taken should be examined whether the project itself is eligible for 80IB (10), on which there is no finding from the A.O. or by the CIT(A) in the orders. Not only that as seen from the P & L account assessee is still carrying closing stock of more than Rs. 4 crores, whereas sales during the year was Rs.6.24 crores. Whether assessee hass continued to claim 80IB(10) in later year also on the balance of constructed area required to be examined, keeping in mind the method of accounting followed. As AO estimated income for non production of books of account, we are of the opinion that these aspects also require examination. For these purposes, we are of the opinion that the issue in assessee's grounds require re-examination by AO. Therefore, since the issues are restored to the file of the A.O., he should examine the books of accounts in order to determine the extent of profits disclosed by the 6 ITA.No.550 & 590/Hyd/2013 M/s. Cecon Builders, Hyderabad assessee. Needless to say that assessee should be given adequate opportunity of being heard.
8. In the result, ITA.No.550/Hyd/2013 of assessee and ITA.No.590/Hyd/2013 of the Revenue is partly allowed for statistical purposes.
Order pronounced in the open Court on 07.03.2014.
Sd/- Sd/- (ASHA VIJAYARAGHAVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER Hyderabad, Dated 07th March, 2014 VBP/- Copy to :
1. Cecon Builders, 1-10-74, Technopolis, Suite T-201, Begumpet, Hyderabad.
2. ITO, Ward 10(1), I.T. Towers, Masab Tank, Hyderabad
3. CIT(A)-VI, Hyderabad
4. CIT-V, Hyderabad
5. D.R. ITAT, 'A' Bench, Hyderabad.