Income Tax Appellate Tribunal - Mumbai
Vandana Enterprises, Mumbai vs Department Of Income Tax on 16 February, 1990
1
ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10
Vandana Enterprises.
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI 'F' BENCH
MUMBAI BENCHES, MUMBAI
BEFORE SHRI N.V. VASUDEVAN, J.M. AND SHRI R.K. PANDA, A.M.
ITA No. 1251/Mum/2007
ITA No. 7258/Mum/2008
(Assessment Year 2003-04)
ITA No. 6529/Mum/2007
(Assessment Year 2004-05)
ITA No. 6240/Mum/2008
(Assessment Year 2005-06)
Vandana Enterprises, Vs Income Tax Officer Wd.25(2)(4),
B-602 Prem Nagar, Bandra-Kurla Complex,
Bldg. No. 6, Bandra East,
M.C.F. Udyan Marg, Mumbai 400 051.
Borivali West, Bandra East,
Mumbai 400 051.
(Appellant) (Respondent)
PAN AAAFV1466H
ITA No. 2673/Mum/2010
(Assessment Year 2004-05)
Income Tax Officer Wd.25(2)(4), Vs Vandana Enterprises,
C-11, Ist Floor, B-602 Prem Nagar,
Pratyakshkar Bhavan, Bldg. No. 6,
Bandra (E), M.C.F. Udyan Marg,
Mumbai 400 051. Borivali West, Bandra East,
Mumbai 400 051.
(Appellant) (Respondent)
PAN AAAFV1466H
Assessee by Shri Sashi Tulsiyan
Respondent by Shri Pavan Ved (D.R.)
Date of hearing 23.01.2012
Date of pronouncement 24.02.2012
ORDER
PER R K PANDA, AM
ITA No. 1251/Mum2007, ITA No. 6529/Mum/2007 & ITA No. 6240/Mum/2008 filed by the assessee are directed against the separate 2 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
orders dtd. 23.11.2006, 08.08.2007 and 31.07.2008 of the ld. CIT(A) XXV, Mumbai relating to A.Y. 2003-04, 2004-05 & 2005-06 respectively. ITA No. 2673/Mum/2010 filed by the Revenue is directed against the order dtd. 11.01.2010 of the ld. CIT(A) XXV, Mumbai relating to A.Y. 2004-05 deleting the penalty of Rs. 4 lacs levied by the A.O. u/s 271(1)(c) of the Act. ITA No. 7288/Mum/2008 filed by the assessee is directed against the order dated. 10.11.2006 of the ld. CIT(A) XXV, Mumbai confirming the penalty levied by the A.O. u/s 271(1)(c) of the Act for A.Y. 2003-04. For the sake of convenience all these appeals were heard together and are being disposed of by this common order.
ITA No. 1251/Mum/2007 for A.Y. 2003-04 (By assessee).
2. Facts of the case in brief are that the assessee firm is engaged in the business of construction and sale of flats in residential buildings. During the relevant previous year it constructed a building known as wing 'F of the housing project known as 'Jay Nagar' located in Malad Suburb of Mumbai. The 'Jay Nagar' housing project consisted of 8 wings, namely A, B, C, D, E, E-1,F and G. Except the wing 'F' all other wings were constructed years back starting from 1990 while the construction of wing 'G' was yet to begin. The wing 'F' consisted of 32 residential units of approximate saleable area of 19,665 sq ft. The assessee is following project completion method for revenue recognition. During the A.Y 2002-03 the construction of wing 'F' was completed and estimated sales @ 2350 for the 19.665 sq ft were shown at Rs.4,62,12,750/-. After showing the estimated construction cost at 3 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
Rs.2,26,14,7150/- @ Rs.1,150/- per sq ft, the expected estimated profit of the project was shown at Rs.2,35,98,000/-. This profit to the extent of Rs.2,35,87,101/- was claimed exempt u/s 80IB(10) of the l.T. Act after adjustment of some portion of brought forward loss of AY 2002-03. 2.1 A survey action u/s 133A of the I.T. Act was carried out on the business premise of the assessee on 11.10.2005. On scrutinising the documents of the 'Jay Nagar" Project and other evidences gathered during the course of survey proceedings it was apparently seen that the assessee firm did not fulfil the conditions laid down in section 80IB(10) of the Act to be eligible for any benefits under that section. The A.O. thereafter issued notice u/s 148 of the Act after recording the reasons. The assessee filed return in response to notice u/s 148 of the Act which was identical in all respect to the original return filed on 29.11.2005. The assessee firm also continued with its claim of deduction of Rs. 2,35,87,101/- u/s 80IB(10) of the Act. The A.O. issued detailed questionnaire to the assessee calling for various information to substantiate that the assessee fulfils the conditions laid down u/s 80IB (10) of the Act. After examination/verification of various details/documents filed by the assessee the A.O. was of the opinion that the assessee is not entitled to deduction u/s 80IB(10) of the Act. 2.2 The A.O. analysed the provisions of section 80IB(10). He observed that the first condition for deduction u/s 80IB(10) that the eligible project should commence or commences development and construction of such Housing 4 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
Project on or after 01.10.1998. The assessee has stated that the approval to construct wing 'F' of the Jay Nagar project was accorded by the Municipal Corporation of Greater Mumbai (MCGM), the local authorities for Mumbai City, on 12.08.1999. From the photocopy of such approval furnished by the assessee the A.O. noticed that it was granted as an amendment to the building plan approved vide Intimation of Disapproval (IOD) NO:CHE/5583/BP(WS)/AP dated 16.02.1990. The said approval to construct wing 'F' was subjected to revision of certain condition imposed in the original IOD dated 16.02.1990. The relevant portion of the approval dated 12.08.1999 as reproduced by the A.O. in the body of the order reads as under:-
1) All the objections of this office IOD under odd No.16.02.1990 shall be applicable and should be compiled with.
2) That the revised RCC design and calculations should be submitted before C.C."
2.3 The A.O. further noted from the photocopy of the "Commencement Certificate" (CC) issued by the MCGM that the actual commencement of the construction / development of the project was granted on 12.08.1999 and the approval to start construction of wing 'F' is an extension of the original CC dated 30.04.1990. The relevant portion of the CC is reproduced below:
"12) This CC is now further extended for the work of wing 'F' and 'G' upto plinth level only as per approved amended plans dated 12.08.1999.
Date: 10th December, 1999 [Signature of AEBP (P)] 5 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
13) This CC is now further extended for the entire work of wing 'F' i.e. ground + 7 upper floors as per approved amended plans dated 12.08.1999.
Date: 7" August, 2000 (Signature of AEBP (P)]"
2.4 In view of the above the A.O. came to the conclusion that the approval to construct wing 'F' was mere an amendment to the original building plan approved on 16.02.1990 and cannot be regarded as separate Housing Project within the meaning of section 80IB(10) of the Act.
2.5 The second condition according to the A.O. as laid down in section 80IB(10)(b) of the Act is that the eligible Housing Project should be on the plot of land of not less than one acre in size. On being questioned by the A.O. it was submitted that in the MCGM approved building plan dated 12.08.1999, the plot lay out is of three acres and that the section does not require the plinth area of the eligible project should be one acre or more. 2.6 However the A.O. rejected the above contention of the assessee. According to him when the section requires that the eligible Housing Project is on the plot of land exceeding one acre in size, it means a vacant land meant for the eligible project.
2.7 The A.O. observed that when it comes to show compliance to the condition stipulated in 80IB(10)(a) the assessee is treating the wing 'F' as a separate housing project excluding the other wings but in order to show the 6 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
compliance to the condition laid down in 80IB(10)(b) it even included the land occupied and meant for the use of the other wings. The housing project intended under section 80IB(10)(a) and 80IB(10)(b) can not be different. On one hand the assessee is emphatically drawing the attention of the revenue to the intimation approving project by M.C.G.M. under reference CHE/5583/BP(WS)/AP dated 12.08.1999 specifying that proposed building on CTS No. 335A to 335G and area of same is 3 acres", on the other hand it is conveniently overlooking the fact that the approval to construct other wings were also granted vide same approval no. and such other wings are also standing on the same CTS No. 335A to 335G. The contradiction is result of a deliberate attempt to try to fit a misfit and unintended case within the four corners of section 80IB(10) of the Act. 2.8 Therefore the A.O. observed that the assessee failed to satisfy the conditions stipulated in section 80IB(10)(b) of the Act that the eligible Housing Project should be constructed on the plot of land not less than one acre in size and thereby not eligible for any deduction under that section. 2.9 The A.O. observed that the third and final condition stipulated in section 80IB(10)(c) of the Act requires that the residential units constructed in the eligible housing project should not exceed 1000 sq ft in built up area. He noted that during the course of survey proceedings it came to the notice of the survey team that the assessee, to circumvent the said condition, merged the two adjoining units of built up area of less than 1000 sq ft each 7 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
to form a single continuous unit of built up area exceeding much beyond 1000 sq ft. The amalgamated flats were either sold to the same person or the different members of the same family. The statements of some of the occupants of such merged units ware recorded u/s. 131 of the Act in which they have stated that the assessee handed over the possession of such units after completing the amalgamation work. The occupants also admitted that all other changes necessary to convert two units into single residential units such as only one kitchen for the merged unit instead of two as per the MCGM approved plans were made by the assessee before handing over the possession. Not to leave any room for doubt, the project Architect, Shri Prakash Sapre and the officials of the local authority, the MCGM, responsible for conducting inspection for certifying the work as per the approved plans, were made to conduct physical verification of the units in the wing 'F'. Both of them admitted in the statement recorded u/s. 133A of the Act that all the adjoining units in the said wing, available for verification on the date of inspection, were found merged to take the aggregate built up area of the merged unit beyond 1000 sq ft. They also confirmed the existence of single kitchen in the merged unit. The most importantly Mr Prakash Sapre has stated that all the available occupants of the merged units confirmed that they were handed over the possession by the builder in the amalgamated form.
2.10 On being confronted by the A.O. it was stated that it has obtained the Occupation Certificate (CC) from the MCGM with the latter certifying the 8 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
construction as per the approved plans. On the evidence offered by the occupants and the project architect the assessee stated that it rejects such evidence. With regard to the evidence of confirmation of amalgamation by the MCGM authorities the assessee stated that the owners of the merged units might have done the work of amalgamation after handing over the possession to them.
2.11 However, the A.O. was not satisfied with the above explanation . According to the A.O. the statements of the owners of the merged units that the builder handed over the possession in the merged form proves that the work of amalgamation was done by the assessee after obtaining OC. He noted that despite opportunity given the assessee turned down the offer of cross examination of the witnesses giving such evidences, therefore, the assessee can not reject them now.
2.12 The A.O. therefore came to the conclusion that the assessee had separate plans for records and actual construction. The section does not require compliance to it merely on the paper. The actual construction too has to be in perfect conformity with the conditions laid down in that section. The submission of the assessee that there were separate agreements and separate electricity meters were installed for each unit was rejected by the A.O. on the ground that cosmetic gestures would have no admittance value if the same person or the same bank account is paying for such two different meters or if the same family is staying in these units. Such paper 9 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
compliance according to the A.O. is meaningless and much against the spirit and essence of the section. Therefore, he came to the conclusion that the assessee does not fulfil the conditions stipulated in section 80IB(10) of the Act that the residential units constructed under the eligible housing project should not exceed in built up area beyond 1000 sq. ft. and thereby not eligible for any deduction under that section. He accordingly rejected the claim of deduction u/s 80IB (10) of the Act made by the assessee.
3. Before the ld. CIT(A) the assessee submitted that the assessee firm has undertaken to construct building A to E-1 as old project and building 'F '&' G' as a new project without sub division of base land. It was submitted that separate books of accounts are maintained to determine the profit earned from project building A to E-1 and then from building F & G. Old project i.e. A to E-l was shown completed by determining profits and keeping unsold flats as stock in hand during the period from A.Y. 1992-93 to 1998-
99. New building 'F' is approved as additional housing project on old housing project site on the same land which is more than one acre. It was submitted that the A.O. has given importance only to the date 30.04.1990 of the commencement permission in respect of old building project, ignoring the wording of section which mentions " if such undertaking has commenced or commences development or construction of housing project after 1st day of October, 1998". It was submitted that building 'F' of the project is granted commencement permission after 1.10.1998, hence deduction is allowable. With regard to selling of flats having built up area of 10 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
more than 1000 sq.ft., it was submitted that the MCGM has certified that the project contained units below1000 sq.f.t. It was also submitted that on the date of possession most of the flat purchasers purchased flats below 1000 sq.ft. and they must have connected the flats by making it above 1000 sq.ft. It was accordingly requested to allow deduction u/s.80IB(10) of the I.T. Act.
3.1 However the ld. CIT(A) was also not satisfied with the explanation given by the assessee and upheld the action of the A.O. While doing so she observed that the project 'Jay Nagar' was granted approval on 30.4.1990 and commencement is started in the same year as per commencement certificate issued by MCGM. No separate IOD is issued for 'F' wing of Jay Nagar project. Had F wing been a separate project, separate IOD must have been issued by MCGM. After analysing the chronology of dates for permission of commencement of construction for A to G wings, the ld. CIT(A) came to the conclusion that 'F' wing is a part of Jay Nagar project for which commencement is started in 1990. Since deduction u/s 80IB(10) is allowable to the project if commencement of construction of project is started after 1.10.1998 and since in the instant case the project of the assessee has started in 1990 therefore the asssessee is not entitled to deduction u/s 80IB(10) of the Act for the 'F' wing. She observed that the clarificatory explanation as inserted in section 80IB(10) w.e.f. 1.4.2005 reads as under:-
" (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 11 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
building plan of such housing project is first approved by the local authority."
3.2 However in the case of the assessee first building plan was approved on 30.04.1990. Therefore she held that the same cannot be said to have commenced construction after 1.10.1998.
3.3 Without prejudice to above, she observed that 'if asseeeee's version is accepted for the sake of argument only, then also assessee fails to satisfy that 'F' Wing itself has plot of area of one acre. 'F' wing is admittedly constructed on a plot of area having land less than one acre. If all the Wings of Jay Nagar project is taken together then only the area of plot is more than one acre hence claim of the assessee fails on both the counts. 3.4 Regarding joint flats in whole 'F' Wing to make them one unit of more than 1000 sq.ft., she observed that documentary evidence as well as circumstantial evidences clearly show that the assessee has contravened the provisions of section 80IB(10)(c). It has also contravened the approval granted by MCGM to construct flats/units below 1000 sq.ft. According to her following facts show that the assessee constructed flats above 1000 sq.f.t. (para 3.13 of the order of CIT(A)).
(i) During the Survey operation, in all the flats of 'F' Wings it was found that two flats were joined together to make them one unit of more 12 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
than 1000 sq. ft. They all consisted only one kitchen and one entrance from outside.
(ii) Even in the case of four unsold flats it was found that those flats were joint together to make them 3 BHK fiats having area of above 1000 sq.ft. None of the unsold flat was of the area below 1000 sq.ft. as all were joint.
(iii) At the time of survey brochure in huge number were found which highlighted (a) availability of 3BHK / 4 BKH only (b) saleable area of 1510 and 1647 sq. (c) 80% carpet area vis-a-vis saleable area (d) occupation certificate given by Municipal Corporation of Greater Mumbai. This shows that the appellant was selling only 3 BHK / 4 BHK flats and none of the flats are available in the above project of one BHK having saleable area less than 1000 sq.ft.
(iv) Statement of two fiat owners viz Shri Ashok Kumat Raheja and Shri John D'mello were recorded u/s. 131 of the I.T.Act. Shri Ashok Kumar Raheja in his reply to question No.3 specifically stated that two flats 149 & 150 having area 847 sq.ft. and 800 sq.ft. have been converted into one flat by the builder M/s. Vandana Enterprises before he & his wife took possession i.e. it has already been converted by the builder Mr. John D'mello also in his reply to question No.3 of his statement stated that Flat No. 147 & 148 having area 720 Sq.ft. & 790 Sq.ft. have been converted into one flat by the builder M/s. Vandana Enterprises before the possession was given to them. When he specifically said that they came to stay in the said flat it was already converted into one flat by the builder. Above statement of flat owners show that the appellant was selling joint flats and just to claim 13 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
deduction u/s. 80IB(10), two separate agreements were entered into with two members of the family. On papers there may be two flats of below 1000 sq.ft, but for all practical purpose the appellant sold two flats converted into one flat having area above 1000 sq.ft. None of the owner of the joint flats joined the flats themselves. When they occupied the flats, joint flat had one kitchen and one entrance.
(v) Architect of the project Shri Prakash Sapre in his statement while replying to question No. 3 & 4 admitted that on physical verification of Jay Nagar project , it was found that all the flats in 'F' Wing were found joined and internally connected to form an uniform single flat admeasuring more than 1000 sq.ft. build up area. He also admitted that the occupants of the flat have stated in his presence that these flats were handed over to them by the builder in the unified form.
(vi) Statement of Officer of the 1ocal authority responsible or giving certificate of occupation Shri Mahesh Revdekar. was also recorded u/s. 131 and in reply to question No. 5 & 6 , he stated that he conducted physical inspection of all the flats of 'F' Wing on 26.10.2005 and observed that all the adjoining flats from floor onwards (except flat No. 129& 130, 131 & 132 133 & 134) till the 7th floor were found amalgamated by removing wall separating the kitchen of these flats. He also stated that in such amalgamated and adjoining units the kitchen platform and the Nahani trap (below the sink) was not Seen. According to him "These changes are against the approved plan". Thus the above statement of the officer of Municipal Corporation shows that the appellant has constructed the flat against the plan approved by Municipal Corporation and thereby cannot be allowed deduction u/s. 80IB(10).
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ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
(vii) In a pre survey enquiry the Inspector who posed himself as a customer was told by the representative of the appellant that the project had unsold amalgamated flat and there was no availability of one BHK or 2 BHK. The brochure found in survey was handed over to him as it was given to a customer. All the above documentary evidence as well as circumstantial evidences prove that the appellant has not fulfilled even conditions mentioned in section 80IB(10)(c). It has violated the approval granted by the MCGM. Construction of flats in 'F' wing of Jay Nagar project is not done as per plan approved by the MCGM. Mere construction of walls in unsold flats after survey is an eyewash. It is worthwhile to mention that those walls were removed later on. In view of above, it is held that appellant has not fulfilled the conditions mentioned in section 80IB(10) (a) (b) & (c), and as such disallowance made by the A.O. u/s. 80IB( 10) is confirmed.
4. Aggrieved with such order of the ld. CIT(A) the assessee is in appeal before us with the following grounds:-.
The learned Commissioner of Income-tax (Appeals) has erred in upholding disallowance of claim u/s.80-iB of income-tax Act, 1961 Rs. 2,35,87,101 on following grounds:
a. Learned assessing officer has wrongly initiated proceedings u/s. 147 of the Income Tax Act by issuing notice u/s. 148 of the income Tax Act and started assessment proceeding u/s. 143 (2) of Income Tax Act.
b. Undertaking has not commenced construction of the housing project on or after 1 day of October 1998, in fact plan was approved on 12.08.1999 and accordingly commencement of construction granted on 10.12.1999.
c. Size of land is less than 1 acre, In fact size of plot is more than 1 acre and accordingly plan dated 12.08.1999 was approved considering size of plot. d. the residential unit has a built-up area exceeds 1,000 sq.ft., in fact none of the flat is constructed or delivered having area above 1,000 sq.ft.15
ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
4.1 The ld. Counsel for the assessee at the time of hearing did not press for ground 'a' relating to reopening of assessment u/s 148 of the Act. The ld. D.R. has no objection for the same. Accordingly ground of appeal No. 'a' is dismissed as not pressed.
4.2 So far as the remaining three grounds are concerned the ld. Counsel for the assessee referring to the decision of the Tribunal in the case of Vandana Properties vs. ACIT vide ITA No. 1253/Mum/2007 order dtd. 29th April, 2009 for A.Y. 2005-06 submitted that the tribunal in the above mentioned case, which is a sister concern of the assessee, has decided the first two grounds in favour of the assessee. He submitted that in the case of Vandana Properties the block consisted of five buildings i.e. A,B,C,D,E. The original commencement certificate was granted on 9.6.1993 for buildings A,B,C,D. Building 'E' was approved on 11.10.2002 and commencement certificate was issued on 10.03.2003. The assessee claimed deduction u/s 80IB(10) in respect of the profits for building 'E' only. In the said case permission to construct building 'E' was granted by virtue of conversion of land status from surplus vacant land into within ceiling limit by state government on plot bearing city survey No. 54C and 54D. Building 'E' became possible because of the change in land status. The assessee was following mercantile system of accounting. The A.O. denied the benefit of deduction u/s 80IB(10) on the ground that the undertaking has not stated construction of housing project on or after Ist October, 1998. The Tribunal came to the conclusion that it cannot be said that the permission for 16 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
construction of building 'E' was originally granted in year 1993. Building 'E' is not a continuation of the earlier plan.
4.3 Coming to the case of the assessee, he submitted that the block consists of 8 buildings i.e. A,B,C,D,E, E-1, F & G. The assessee claimed deduction u/s 80IB(10) of the Act only for building 'F'. Original commencement certificate was granted on 30.04.1990 for buildings A,B,C,D,E,E-1. The building 'F' was approved on 12.08.1999 and commencement certificate was issued on 10.12.1999. It became eligible to construct building 'F' only because of the grant of development rights in lieu of surrender of land under reservation on plot bearing city survey No. 335C given to MCGM vide receipt No. 385 dated 16.06.2000. Building 'F' became possible because of the grant of TDR in lieu of surrender of land and the assessee was following project completion method. He accordingly submitted that the first issue on which the A.O. denied benefit of deduction u/s 80IB(10) on the ground that the undertaking has not started construction of housing project on or after Ist October, 1998 has been decided by the Tribunal in favour of the assessee in the case of Vandana Properties (supra).
4.4 So far as the next issue on which the A.O. denied benefit of deduction u/s 80IB(10) that the size of plot is less than 1 acre, he submitted that the same is also decided in favour of the assessee in the case of Vandana Properties (supra) wherein it has been held that additional housing on 17 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
existing housing project can qualify for exemption/deduction u/s 10(23G) and 80IB(10) provided separate books are maintained and correct profit can be ascertained. It has been held that the entire area of the plot on which the building project was planned is to be taken into consideration i.e. A,B,C,D,E though some of the buildings do not qualify for deduction u/s 80IB(10) of the Act. Coming to the case of the assessee he submitted that the assessee is maintaining separate books of account for building 'F' from which correct profit can be ascertained. Total size of the plot on which all the buildings A,B,C,D,E, E-1, F were constructed is about 3 acres. Therefore in view of the decision of the Tribunal in the case of Vandana Properties, the second issue is also decided in favour of the assessee. 4.5 Now coming to the third issue on which the A.O. denied benefit of deduction u/s 80OB(10) that the residential units have built up area of more than 1,000 sq. ft. he submitted that the issue is also decided in favour of the assessee by the decision of the Tribunal in the case of ACIT v. M/s Miraj Enterprises in ITA No. 960 & 961/Mum/2007 order dtd. 13th July, 2009 for A.Y. 2004-05 & 2005-06 wherein it has been held that once completion certificate issued by local authority stating that the housing project building is as per approved plan then the duty of the assessee ends on the said date. He submitted that as per the approved plan there are no residential units having built up area of more than 1000 sq. ft. In the case of the assessee the completion certificate dtd. 14.09.2004 issued by MCGM shows constructed "as per approved plan". As regards the rejection of the 18 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
A.O. that at the time of survey some brochures were found which contain the plan to sale amalgamated units of built up area exceeding 1000 sq. ft. he submitted that two amalgamated flats were purchased by the related party on the same date and the flats were sold before the date of survey. He submitted that separate agreement, possession letter and electricity bill for different units were submitted. He submitted that under identical circumstances the Tribunal in the case of Miraj Enterprises (supra) has allowed the claim of the assessee. The facts of the instant case being identical to the facts of the case of Miraj Enterprises, therefore, the same is covered in favour of the assessee.
4.6 Again referring to the decision of the Tribunal in the case of M/s Girish associates vs. ITO 20(1)(2) vide ITA No. 4535/Mum/2008 order dtd. 29th September 2009 for A.Y. 2005-06 he submitted that similar issue has arose wherein benefit of deduction u/s 80IB(10) of the Act was denied on the ground that residential units had built up area of more than 1000 sq. ft. When the matter travelled up to the Tribunal it was argued that flats were separate and independent units as per approved plan. The units were purchased separately as per separate agreement. The flats were subsequently joined for their own purposes and there is no prohibition in the section for combining two or more flats to form a larger unit after the sale/purchase agreement has been entered into. The Tribunal thereafter held that the assessee is entitled to deduction u/s 80IB(10) of the Act. The ld. Counsel for the assessee accordingly submitted that since the case of the 19 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
assessee is identical to the facts of the case cited above, therefore, deduction u/s 80IB(10) has to be allowed.
5. The ld. D.R., on the other hand, while supporting the order of the ld. CIT(A) submitted that the first two issues on which the benefit u/s 80IB(10) was denied are in favour of the assessee by the decision of the Tribunal. So far as the third issue on which deduction u/s 80IB(10) was denied, he submitted that the same is on facts.
6. We have considered the rival arguments made by both the sides, pursued the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the 'Jay Nagar' housing project of the assessee consists of 8 wings namely A,B,C,D,E, E-1, F & G. Except the wing 'F', all the other wings were constructed years back starting from 1990 and the construction of wing 'G' was yet to begin. The construction of 'F" wing was completed during the impugned assessment year. The claim of deduction u/s 80IB(10) made by the assessee was denied by the A.O. on three issues; (a) undertaking has not commenced construction of the housing project on or after Ist day of October 1998, (b) size of the plot is less than 1 acre & (c) residential unit has a built up area of more than 1000 sq. ft.
6.1 So far as the first issue is concerned that the undertaking has not commenced construction of the housing project on or after Ist day of 20 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
October 1998 we find commencement certificate extending further for the work of wing 'F' and wing 'G' up to plinth level only as per approved amended plan dt. 12th August 1999 was sanctioned on 10.12.1999 which is as per order sheet entries of the Municipal Corporation of Greater Bombay, a copy of which is placed at paper book page 18 to 20. We find the issue stands decided in favour of the assessee by the decision of the Tribunal in the case of Vandana Properties (supra) wherein the Tribunal after analysing the issue has held as under:-
"In the present case, Building 'E' is planned and construction was commenced after 1.10.1998 and in our opinion, Building/Wing 'E' itself is a independent Housing Project as contemplated u/s 80IB(10) of the Act and it cannot be fastened with earlier buildings i.e. 'A', 'B', 'C' and 'D' which work was commenced in the year 1993. In respect of the argument of the ld. D.R. that in view of Expl. 2, which is newly inserted w.e.f. 1.04.2005 as the assessee has commenced construction of building "E" for which permission was originally granted cannot be accepted for our elaborate discussion on this issue hereinabove. We therefore reject the same as plan for Building 'E' was only approved for only once in the year 2002. We, therefore, hold that the conclusion drawn by both the authorities that the commencement of wing 'E' is a continuation of the existing project is erroneous."
6.2 Respectfully following the decision of the Tribunal we hold that the assessee fulfils the condition that the undertaking has commenced construction of the housing project after 1.10.1998. 6.3 The second issue on which the A.O. denied deduction u/s 80IB(10) of the Act is that the size of the plot is less than 1 acre. We find the total size of the plot on which all the buildings including wing 'F' were constructed being 3 acre is admittedly more than 1 acre. It is the case of the Revenue that if 21 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
the total area is equally apportioned in all the buildings then in such case the area belonging to wing 'F' would be less than 1 acre. Further the area on which building 'F' is constructed is also less than one acre. We find the above issue is also covered in favour of the assessee by the decision of the Tribunal in the case of Vandana Properties wherein the Tribunal at para 13 of the order has held as under:-
"Now the next objection is in respect of the size of the plot of the land. There is no dispute about the fact that assessee acquired the Development Rights in respect of the plot which was admittedly 2.36 acres on which assessee executed the different building projects. The case of the A.O for rejecting the claim of the assessee is that if the said land is proportionately allocated among different buildings, then area allocated to building 'E' is less than one acre. As per clause (b) to Section 80 IB(10), it is provided that the project should be on a size of plot of land which has the minimum area of one acre. As per the area statement given in the plans, we find that no specific demarcation in respect of the plot of 2.36 acres has been made. It is seen that the surplus land available with the assessee or earlier owner was given the status as "Within Ceiling Limit' (W.C.L.) and due to change or conversion of the land status, that the assessee was able to plan the project for Building Wing' E'. The Ld. Counsel brought to our notice, the correspondence made by the Maharashtra Chamber of Housing Industry, Mumbai with the Hon'ble Finance Minister, Government of India, New Delhi, seeking clarification of certain aspects on 10(23G) and Section 80 IB(10). The main issue was in respect of the treatment to be given to the Transfer of Development Rights (TDR) which is purchased by the Developer and used on the existing plot of land or the project. As per the letter dated 4.5.2001, it appears that the CBDT, New Deihi has replied giving the clarification that additional housing project on the existing housing project can qualify for exemption /deduction u/s 10(23G) and 10 lB (10) provided the correct profit can be ascertained So far as the present case is concerned, we have to take into consideration the entire area of the plot on which all the building projects have been planned i.e. A,B,C,D & E though some of the buildings do not qualify for deduction u/s. 801B (10) of the Act and admittedly, the same is also not claimed. We, therefore, do not agree with the view taken by the A.O as well as the Learned CIT(A) that the assessee has violated the another condition in respect of the size of the plot."
6.4 Respectfully following the decision of the Tribunal cited above we hold that the assessee fulfils the condition in respect of size of the plot. 22
ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
6.5 The third issue on which the A.O. denied deduction u/s 80IB(10) of the Act is that the residential unit has a built-up area of more than 1000 sq. ft. We find the assessee before the A.O. has stated that as per the completion certificate dtd. 14th September, 2004 issued by MCGM the project has been constructed "as per approved plan" and there are no residential units having built-up area of more than 1000 sq. ft. The relevant submission by the assessee reads as under:
"Regarding area of flat more than 1,000 sq. ft. I would like to draw your kind attention to the plan submitted before taking approval and occupation certificate received from M.C.G.M. dated 14.09.2004 wherein it was certified that building was constructed according to approved plan. Your assessee has constructed 32 flats in Jay Nagar Building."
6.6 We find the above issue is also covered in favour of the assessee by the decision of the Tribunal in the case of Miraj Enterprises (supra) wherein the Tribunal at para 12 & 13 of its order has held as under:-
"12. As regards the occupation certificate issued by the BMC dated 6- 1-05, we find that it certifies that the flats have been constructed by the builder as per approved plan. But there is circumstantial evidence as well as on physical verification of the flats during the survey that the flats have been amalgamated. This clearly shows that the additions or alternations were made after the issue of the occupancy by the BMC and after they were sold to the buyers. Thus the changes have to be presumed to have been made by the purchasers.
13. For the purpose of allowing deduction u/s.801B[ 10], the assessee should fulfill all the conditions mentioned therein. From the brochures found during the course of survey, it is clear that the assessee's intention was to build 3 BHK flats on 6th to 9th floors of 'A' wing. The actual construction as found during the survey is as per the plan shown in the brochures. This has thus created a doubt in minds of the revenue 'authorities. As provided under the Explanation [ii) to clause [a] of sub-section [10] of Sec. 80IB, the dare of completion of construction of the housing project shall be 23 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority. In the case before us the completion certificate dated 6-1-05 has been issued by MCGM as constructed as per approved plan. The duty of the assessee company ends on the said date. As per the approved plan, there are no residential units having area of more than 1000 sq.ft. Therefore, we are of the opinion, that the assessee has fulfilled the conditions prescribed u/s.801B[10j of the Act and we see no reason to interfere with the findings of the C1T[A] on this issue. In view of the same, the alternate prayer of the assessee need no adjudication and is rejected.
6.7 We find the Tribunal in the case of M/s Girish & Associates (supra) at para No. 25 of the order has held as under:
"Coming to the third objection, we find that the municipal authorities have approached for construction of two flats each the area of which are less than 1000 sq. ft. that is to say 800 sq. ft. We also find that the assessee had constructed the flats initially as per the approved drawings. We also find that each of these flats was separately sold by way of separate agreements of sale. It is only after they were sold that the purchasers decided to join them and convert them into single units. On this factual matrix, we agree with the argument of the learned counsel for the assessee that the assessee cannot be found fault with for such a violation done by the purchaser. In the case of Brahma Associates (supra), the Special Bench of the Tribunal has clearly laid down that what is deductible is profit of housing project and not the profit attributable to the residential units. Once the project in question is a housing project, the entire profits of the housing project are deductible u/s 801B(10), the question of pro-rata deduction therefrom is not relevant in this context. Thus, we agree with the arguments of the learned counsel for the assessee and direct the assessing officer to grant deduction on the 4 flats which were constructed as independent units and sold as such and which were subsequently joined. As a result, we allow the sole ground raised by the assessee.
26. In the result, the appeal filed by the assessee is allowed and the appeal filed by the revenue is dismissed.
6.8 Since in the instant case nothing has been brought on record by the Revenue that completion certificate dtd. 14th September, 2004 issued by MCGM showing constructed "as per approved plan" is wrong or incorrect and since as per the approved plan there are no residential units having 24 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
built-up area of more than 1000 sq. ft. and since the assessee has produced separate agreements, separate possession letters and separate electricity bills for different units, therefore, respectfully following the decisions of the Tribunal cited supra and in absence of any distinguishing feature brought to our notice by the Revenue against the decisions of the Tribunal, we hold that the Revenue is not justified in denying the benefit u/s 80IB(10) of the Act on the ground that residential unit has built-up area more than 1000 sq. ft. In this view of the matter the assessee is entitled to benefit of deduction u/s 80IB(10) of the Act. The grounds of appeal No. (b), (c) and (d) are accordingly allowed.
6.9. The appeal filed by the assessee is accordingly partly allowed.ITA No. 6529/Mum/2007 for A.Y. 2004-05 (By assessee)
7. The grounds raised by the assessee read as under:-
"a. Undertaking has not commenced construction of the housing project on or after 1 day of October 1998, in fact plan was approved on 12.08.1999 and accordingly commencement of construction granted on 10.12.1999.
b. Size of land is less than 1 acre, In fact size of plot is more than 1 acre and accordingly plan dated 12.08.1999 was approved considering size of plot.
c. the residential unit has a built-up area exceeds 1,000 sq.ft., in fact none of the flat is constructed or delivered having area above 1,000 sq.ft.
7.1 After hearing both the sides we find the grounds in the above appeal are identical to the grounds of appeal No. (b), (c) and (d) in ITA No. 1251/Mum2007 for A.Y. 2003-04. We have already decided the issue and the grounds raised by the assessee have been allowed. Following the same 25 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
ratio, the grounds in the impugned appeal by the assessee are allowed. Thus the appeal filed by the assessee is allowed.
ITA No. 7258/Mum/2008 for A.Y. 2003-04 (By assessee)
8. The assessee in this appeal has challenged the order of the ld. CIT(A) in confirming the levy of penalty of Rs. 86,68,259/- u/s 271(1)(c) of the Act for wrong claim of deduction u/s 80IB(10) of the I.T. Act. 8.1 After hearing both the sides we find the appeal filed by the assessee challenging the order of the ld. CIT(A) denying benefit of deduction u/s 80IB(10) of the Act has been allowed in the preceeding paragraphs. Since the claim of the assessee has been allowed, therefore, penalty u/s 271(1)(c) levied by the A.O. and upheld by the CIT(A) does not survive. Accordingly the same is deleted. The appeal filed by the assessee is accordingly allowed. ITA No. 2673/Mum/2010 for A.Y. 2004-05 (By Revenue)
9. The Revenue in its grounds of appeal has challenged the order of the ld. CIT(A) in deleting the penalty of Rs. 4 lacs levied by the A.O. u/s 271(1)(c) of the Act.
9.1 After hearing both the sides we find the penalty was levied by the A.O. on the ground that the assessee has made wrong claim of deduction u/s 80IB(10) of the Act which was deleted by the CIT(A). We have already decided the issue and the appeal filed by the assessee challenging the denial of deduction u/s 80IB(10) by the A.O. and upheld by the ld. CIT(A) has been allowed. Since the deduction claimed by the assessee has been allowed, 26 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
therefore, levy of penalty u/s 271(1)(c) does not survive. Accordingly the grounds raised by the Revenue are dismissed.
ITA No. 6240/Mum/2008 for A.Y. 2005-06 (By assessee).
10. The assessee in its grounds of appeal has challenged the order of the ld. CIT(A) confirming the disallowance of deduction u/s 80IB(10) and upholding the various additions made by the A.O. in the ex-parte order. 10.1 After hearing both the sides we find the A.O. following his order for A.Y. 2003-04 and 2004-05 disallowed the claim of deduction u/s 80IB(10) amounting to Rs. 6,77,500/-. The A.O. further made addition of Rs. 4,43,295/- on account of difference in opening & closing stock and addition of Rs. 5,49,850/- by disallowing various expenses. In absence of non- compliance before the ld. CIT(A), the ld. CIT(A) upheld the action of the A.O. 10.2 We find the notice dtd. 30.05.2008 fixing the hearing on 25th June 2008 was complied by the assessee since the A.R. of the assessee appeared before the ld. CIT(A) and sought adjournment. Since nobody appeared on 25th June 2008 the ld. CIT(A) vide notice dtd. 10.7.2008 issued another notice fixing the hearing on 24.7.2008. Since nobody appeared on that date, the ld. CIT(A) following the orders of his predecessors for A.Y. 2003-04 and 2004-05 in assessee's own case confirmed the disallowance of deduction u/s 80IB(10) of the Act. She also upheld the other two additions. In our opinion, since the order has been decided ex-parte, therefore, in the interest of justice the assessee may be given one final opportunity to appear before the 27 ITA 1251/M/07,,6529/M/07,6240/M/08,7288/M/08 & 2673/M/10 Vandana Enterprises.
ld. CIT(A) and explain its case. We therefore restore the issue to the file of the ld. CIT(A) with a direction to give one more opportunity to the assessee to explain its case. The ld. CIT(A) shall decide the issue in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purpose.
11. In the result, ITA No. 1251/Mum2007 is partly allowed, ITA No. 6529/Mum/2007 & ITA No. 7288/Mum/2008 area allowed and ITA No. 2673/Mum/2010 by the Revenue is dismissed and ITA No. 6240/Mum/2008 is allowed for statistical purpose.
Order pronounced on 24.02.2012.
Sd/- Sd/-
(N.V. VASUDEVAN) ( R K PANDA )
Judicial Member Accountant Member
Place: Mumbai : Dated: 24.02.2012.
RK
Copy forwarded to:
1 Appellant
2 Respondent
3 CIT - Concerned , Mumbai
4 CIT(A) Concerned, Mumbai,
5 DR Bench F
6 Master File
/TRUE COPY/
BY ORDER
Dy /A.R, ITAT, Mumbai