Gujarat High Court
The Principal Commissioner Of ... vs M/S. Pratham Developers on 2 March, 2020
Author: Bhargav D. Karia
Bench: J.B.Pardiwala, Bhargav D. Karia
C/TAXAP/25/2020 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 25 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE J.B.PARDIWALA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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1 Whether Reporters of Local Papers may be allowed to NO
see the judgment ?
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the fair copy of the NO
judgment ?
4 Whether this case involves a substantial question of law NO
as to the interpretation of the Constitution of India or any
order made thereunder ?
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THE PRINCIPAL COMMISSIONER OF INCOME-TAX , VADODARA-1
Versus
M/S. PRATHAM DEVELOPERS
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Appearance:
MR.VARUN K.PATEL(3802) for the Appellant(s) No. 1
for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 02/03/2020
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) Page 1 of 7 Downloaded on : Sun Jun 14 00:02:10 IST 2020 C/TAXAP/25/2020 JUDGMENT
1. This tax appeal under Section 260A of the Income Tax Act, 1961 [for short 'The Act, 1961'] at the instance of the Revenue is directed against the order dated 30th April, 2019 passed by the Income Tax Appellate Tribunal, Ahmedabad 'B' Bench, Ahmedabad [for short 'The Tribunal'] in the ITA No.2000/AHD/2014 for the A.Y 201011.
2. The facts giving rise to this appeal may be summarized as under: 2.1 The respondent - assessee firm is engaged in the business of Real Estate Developers. During the assessment year 201011, the assessee had undertaken various housing projects.
2.2 During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee claimed deduction under section 80IB(10) of the Act, 1961 in respect of five projects, for which, the assessee had purchased land in respect of (1) Pratham Citadel Project, (2) Pratham Vatika Project, Ahmedabad, (3) Pratham Shrusti Project, (4) Pratham Residency Project and (5) Pratham Vistas, Bhaily, whereas, in the case of Pratham Srushti, the project was undertaken on the land brought in/ introduced by the partners as a part of their project.
2.3 It is the case of the Assessing Officer that the assessee claimed the deduction under Section80IB(10) in respect of the aforesaid projects undertaken though the assessee was not sole owner of the land on which the housing project was constructed. Accordingly, the Assessing Officer disallowed the deduction claimed by the assessee under Section 80IB(10) of the Act, 1961. The Assessing Officer observed that in respect of the Pratham Vistas, out of the layout plan for 158 residential units, 55 residential units were having a built up areas of 2199 sq.ft., which exceeded, the prescribed built up areas of 1500 sq.ft as envisaged Page 2 of 7 Downloaded on : Sun Jun 14 00:02:10 IST 2020 C/TAXAP/25/2020 JUDGMENT under Section80IB(10)(c) of the Act.
2.4 The assessee being dissatisfied with the assessment order preferred an appeal before the CIT(A). The CIT(A) allowed the appeal after following the decision of this Court in the case of CIT Vs. Radhe Developers (2012) 341 ITR 403 (Guj.). The relevant portion of the CIT(A) is reproduced herein as under: 3.3.3 I have also considered the arguments taken up in the assessment order and the submissions made before me. In the assessment order, the Assessing Officer has disallowed the Assessee's claim for deduction u/s.80IB(10) in respect of the appellant's housing project 'Pratham Vista' by stating that the Raja Chitti/Layout Plan consisted of 158 residential units of which 55 residential units had build up area which exceeded the prescribed built up area of 1500 sq.ft. in contravention of the provisions of section 80IB(10)(c) of the Act. From the submissions made by the learned Authorized Representative, it is seen that the appellant firm has developed a residential housing project namely 'Pratham Vista' which consisted of 103 residential units and from the details furnished, it is also seen that all the residential units developed by the appellant firm under the scheme 'Pratham Vista' are below the prescribed built up area of 1500 sq.ft.
3.3.4. As regards the 55 residential units referred to in the assessment order, the appellant has furnished the following documents to show that the scheme 'Pratham Meadow' was developed by the appellant's associate concern M/s. Pratham Properties and they do not form part of the housing project developed by the appellant. Appellant filed various documents which consist of copy of Brochure of 'Pratham Meadows' developed by Pratham Properties and copy of the Development Agreement entered into between the Land Owners and Pratham Properties on which 'Pratham Meadow' scheme is developed by Pratham Properties. The appellant has also stated that M/s. Pratham Properties is assessed to income tax under PAN AAHFP5012C and has furnished copies of the said firm's return of income filed for A.Y. 201011, 201112 and 201213 together with audited accounts for the year ended 31.03.2010, 31.03.2011 and 31.03.2012. A separate profit & loss account has also been furnished in respect of 'Pratham Meadows' scheme of Pratham Properties to show that the entire expenditure for the project is incurred by Pratham Properties and the income on sale of residential units also forms a part of profit & loss account of Pratham Properties. It is also brought to my notice that all these facts are verifiable from the assessment order passed by the Page 3 of 7 Downloaded on : Sun Jun 14 00:02:10 IST 2020 C/TAXAP/25/2020 JUDGMENT Assessing Officer u/s.143(3) of the Act in respect of A.Y.200809. During the course of assessment proceedings, in that case, the Assessing Officer noted that the partners of the firm are very reputed builders and developers in the real estate business in the market of Baroda. The project undertaken is located in fully developed area. The Assessing Officer had made addition in case of Pratham Properties by applying profit ratio declared in the case of M/s. Pratham Developers in which the assessee has calimed deduction u/s.80IB(10) and has shown profit on around 30%, whereas in the case of Pratham Properties rate of profit was shown 23.47% (in the case of residential projects) and 36.12% (in the case of commercial project). Thus, it can be seen that the issue that the appellant is a separate concern fulfilling the conditions prescribed u/s.80IB(10) of the Act and the profit of the residential units which do not qualify the conditions, is shown in a separate business entity namely M/s. Pratham Properties.
3.3.5 From the order of assessment as well as from above observations, it transpires that the issue of separate taxability of profit earned from the residential units of 'Pratham Meadow' was considered by the Assessing Officer in case of assessment of M/s. Pratham Properties. Incidentally, the Assessing Officer of both the assessee is the same. From the examination of the evidence furnished by the Appellant and in view of the submissions that revenues in respect of the scheme Pratham Vistas are accounted for by the appellant and that of 'Pratham Meadows' is accounted for by M/s. Pratham Properties, I hold that Pratham Meadows consisting of 55 residential units is a separate project developed by another assessee and further hold that the Appellant firm is entitled to deduction under section 80IB(10) in respect of the 103 residential units in 'Pratham Vista' project which fulfils the criteria prescribed as to the size of the plot, the built up area of each residential unit being of less than 1500 sq. ft.
2.5 The Revenue, therefore, went in appeal before the Tribunal. The Tribunal after considering the decision of the Radhe Developers [Supra] and the fact that the development of 55 residential units was a separate project by another assessee M/s. Pratham Properties and not by the assessee, affirmed the order passed by the CIT(A).
3. The Revenue has proposed the following substantial questions of law for the consideration of this Court.
[a] Whether in the facts and circumstances of the case, the learned
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C/TAXAP/25/2020 JUDGMENT
ITAT has erred in law and on facts in upholding the decision of the CIT(A) deleting the disallowance of Rs.7,61,58,914/ with respect to deduction u/s.80IB(10) of the Income Tax Act, 1961 without appreciating that the assessee is not eligible for deduction u/s.80IB(10) of the Act as the assessee had obtained the single approval from Local Authority consisting of approval for development and construction of residential unit having area of more than 1500 sq.ft. which is in violation of provisions of clause (c) of section 80IB(10) of the Act?
[b] Whether in the facts and circumstances of the case, the learned ITAT has erred in law and on facts in allowing deduction u/s.80IB(10) of the Act to the assessee without appreciating the fact that no separate approval was taken from Local Authority for the project 'Pratham Meadows', in which each residential unit has a maximum builtup area of more than 1500 sq.ft.?
[c] Whether in the facts and circumstances of the case, the learned ITAT has erred in law and on facts in upholding the decision of the learned CIT(A) allowing deduction u/s.80IB(10) of the Income Tax Act, 1961 to the assessee on a pro rata basis when there is no such provision under the stature permitting the same?
4. The learned senior standing counsel Mr. V.K. Patel appearing for the appellant submitted that the Assessing Officer has considered the fact that there was only one commencement certificate/Raja Chhiththi for the development of 158 units, which included the project consisting of 103 units, which were developed by the assessee and for other 55 units developed by M/s. Pratham Properties. Therefore, the assessee is not entitled to deduction under Section80IB(10) in view of the common commencement certificate/rajachhiththi because it includes 55 residential units of having more than 1500 sq.ft. built up area.
5. On the other hand, Mr. B.S. Soparkar, the learned counsel appearing for the assessee submitted that the assessee never claimed any deduction for 55 residential units, which are having more than 1500 sq.ft. built up area.
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6. For this purpose, section80IB(10) of the Act reads thus: "Section80IB(10) -
[(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 4[2008] by a local authority shall be hundred percent of the profits derived in the previous year relevant to any assessment year from such housing, if -
(a) Such undertaking has commenced or commences development and construction of the housing project on or after 1st day of October, 1998 and completes such construction. -
(i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008.
(ii) in a case where as housing project has been or is approved by the local authority on or after the 1st day of April, 2004 5[but not later than the 31st day of March, 2005] within four years from the end of the financial year in which the housing project is approved by the local authority;
6[(iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority.] Explanation. - For the purposes of this clause, -
(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;
(ii) the 7date of completion of construction of the housing project shall7 be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority;
(b) the project is on the size of a plot of land which has a minimum area of one acre:
Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf;Page 6 of 7 Downloaded on : Sun Jun 14 00:02:10 IST 2020
C/TAXAP/25/2020 JUDGMENT
(c) the residential unit has a maximum builtup area of one
thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twentyfive kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place; 8[***]..............."
7. In view of the above provisions, it is discernible that as there is no provision of obtaining commencement certificate from the local authority for development and construction of the residential unit having more than 1500 sq.ft area. In the facts of the present case, when the assessee claimed the deduction with respect to the residential units, which are having built up area less than 1500 sq.ft, the condition laid down under Section80IB(10)(c) is fulfilled. Therefore, whether such development permission includes the area for the residential units, which are more than 1500 sq.ft. would not be relevant for deciding eligibility to deducting under Section80IB(10) of the Act.
8. In such circumstances, in view of concurrent findings of fact arrived at by the CIT(A) and the Tribunal, there is no legal infirmity in the impugned orders of allowing deduction under Section80IB(10) of the Act.
9. For the forgoing reasons, no question of law proposed by the Revenue could be termed as the substantial questions of law. The appeal, therefore, fails and stand dismissed.
(J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) aruna Page 7 of 7 Downloaded on : Sun Jun 14 00:02:10 IST 2020