Income Tax Appellate Tribunal - Bangalore
M/S G.R. Developers , Bangalore vs Department Of Income Tax on 14 June, 2002
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH : BANGALORE
BEFORE GEORGE GEORGE K., JUDICIAL MEMBER
AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
ITA No.405/Bang/2010
Assessment year : 2006-07
The Assistant Commissioner of
Income Tax,
Circle 3(1),
Bangalore. : APPELLANT
Vs.
M/s. G.R. Developers,
No.142/143, Ist Floor,
G.R. Plaza, DVG Road,
Basavangudi,
Bangalore - 560 004. : RESPONDENT
Appellant by : Shri G.V. Gopala Rao, CIT-I(DR)
Respondent by : Shri B.K. Manjunath, C.A.
ORDER
Per A. Mohan Alankamony, Accountant Member
This appeal of the Revenue is directed against the order of the Ld. CIT (A)-II, Bangalore, in ITA No: 105/DC 3(1)/CIT(A)-II/08-09 dated:
8.12.2009 for the assessment year 2006-07 in the case of G.R. Developers.
2. The revenue has raised seven grounds, in which, ground Nos: 1 and 7 being general in nature and no specific issues involved, they do not ITA No.405/Bang/10 Page 2 of 9 survive for adjudication. In the remaining grounds, the crux of the issue is confined to -
"that the CIT(A) has erred in deleting the disallowance of deduction u/s 80IB (10) of the Act amounting to Rs.20,81,746/-."
3. Briefly stated, the assessee firm ('the assessee' in short), a real estate developer, for the assessment year under dispute, had claimed deduction u/s 80 IB(10) of the Act of Rs.1.67 crores in respect of profits from housing projects styled G.R.Grand Residency and G.R. Pinnacle Project. Consequent on an action u/s 133A of the Act on 24.11.2005, according to the Revenue, it was noticed that the project was not in conformity with construction of residential flats but also included a commercial complex. During the course of assessment proceedings, the AO had sought certain clarifications in respect of G.R. Grand Residency Project and after due examination of the same, the assessment was concluded, denying the claim of deduction u/s 80-IB (10) of the Act on the grounds that -
(i) there were several deviations in the construction from the sanctioned plan, for example, the swimming pool was constructed within he residential building area on the ground floor in stead of to be located in the open court;
(ii) an extra apartment was constructed on the ground floor which was attached to the commercial building, but, not finding a place in the plan sanctioned;
(iii) the staircase shifted was not with conformity with the approved plan;
(iv) there were several deviations in the construction, namely -
- car parking lots with common entrance for the commercial complex, extra lifts, balconies, pooja rooms, enlargement of several rooms etc., ITA No.405/Bang/10 Page 3 of 9
- the measurements of built up area exceeds 1500 sft in respect of 39 flats, out of 84 units with a pool at the centre, one unit was sacrificed to accommodate swimming pool;
- flats were provided with pent-houses and the carpet area of such flats exceed 1820 sft and the head rooms measure 225/sft and, accordingly the built-up of each flat exceeds 2000 sft;
- the head rooms were constructed without proper approval and the pent houses alleged to have been constructed by the assessee itself even though it was stoutly denied by the assessee;
(v) the balconies and utilities provided were hit by the definitions of 'built-up area' in the Explanation to s.80IB (10) of the Act; &
(vi) The deviations from the approved plan in construction of this project referred above were confirmed by the District Valuation officer of the Department when the issue was referred for his report.
4. Aggrieved, the assessee took up the issue before the CIT (A) for relief. After duly analyzing the assessee's various contentions as set -out in the impugned order which is under dispute and also extensively quoting the Hon'ble Tribunal's finding in ITA Nos: 668 & 669/Bang/2006 dated: 5.2.2009 in the assessee's own case for the assessment years 2004-05 and 2005-06 on a similar issue and in conformity with the Tribunal's finding, the Ld. CIT (A) had accepted with regard to the built-up area in excess of 1500 sft.
4.1. With regard to the AO's stand that the sanctioned plan approved by the CMC covered both the residential as well as commercial wing of the same project and thus, the assessee had contravened the provisions of s.80IB(10)(d) of the Act as the built up area of the commercial portion of the project also exceeds 5 per cent of the aggregate built-up area of the housing project of 2000 sft whichever is less as the total area of construction of the commercial area of the project is 17600 sft etc ., ITA No.405/Bang/10 Page 4 of 9 approximately 15% of the aggregate built up area of the housing project, the CIT (A) took a leaf out of the Hon'ble Tribunal's finding dt.5.2.2009 wherein the Hon'ble Tribunal quoted the Board's letter F.No.205/3/200/ITA- II dt.4.5.2001 and accepted the assessee's plea on this count. Due consideration of the contentions of the assessee, careful perusal of the assessment order under dispute, extensively quoting the relevant provisions of s.80-IB(10) of the Act w.e.f. 1.4.2005 and also the affirmation of the Commissioner, CMC, Bommanahalli who had approved the plan etc., the CIT (A) had observed thus -
"6.4. As mentioned earlier, clause (d) of section 80-IB(10) was inserted by the finance (No.2) Act 2004 with effect from 1/4/2005 and has no application to the case of the appellant and, therefore, there cannot be any commercial space in the building project of the appellant in order to entitle it for the claim u/s 80IB (10). It is a fact that the appellant has built commercial complex along with residential units in this project. The appellant has not established that the building project only a 'housing project' as discussed in the above paragraph. Hence, the construction of shops or commercial place cannot be considered as a 'housing project' for the purpose of application of section 80-I B(10) of the Act. The building project of the appellant was approved by the local authority i.e., CMC, Bommanahalli under a common L.P No.64/02-03 dated 14.6.2002 as a residential-cum-commercial project and the common approval letter of the CMC itself supports this view. In view of the above discussion, it is clear that the appellant has not fulfilled one of the main conditions for claiming deduction under section 80IB (10) of the Act and, hence, the appellant is not entitled to deduction under the said section on this ground alone.
6.5. in this respect, I may state that the circular has been referred to with regard to the appeal for the assessment year 2004-05. Clause (d) of section 80-IB (10) has been introduced with effect from 1.4.2005 by the Finance (No.2) Act, 2004."
4.2. He had, further, cited the finding of the Hon'ble Tribunal, Pune (Special Bench) in the case of Brahma Associates v. JCIT (2009) 315 ITR ITA No.405/Bang/10 Page 5 of 9 (AT) 268 (Pune) (SB) in which the Hon'ble Bench had dealt with a similar issue. Extensively quoting the Special Bench's finding and applying its ratio (perhaps, inadvertently) the CIT (A) directed the AO to allow proportionate deduction with regard to the profit as is attributable to the residential area only.
5. Agitated over the finding of the Ld. CIT (A) on the issue, the Revenue has come up with the present appeal. During the course of hearing, the Ld. D.R was very specific in his urge that -
(a) the CIT(A) should have appreciated the fact that the assessee had claimed wrong deduction u/s 80IB (10) of the Act which was found prima facie during the survey conducted u/s 133A of the Act on 24.11.2005;
(b) he had failed to appreciate the fact that the conditions stipulated for claiming exemption u/s 80IB (10) have not been fulfilled by the assessee;
(c) he had grossly failed to notice that there were various deviations from the sanctioned plan and the housing project constructed which violated the purview of housing project as envisaged in s.80- IB (10) of the Act; &
(d) that the findings of the Hon'ble Bench on a similar issue for the preceding assessment years (2004-05 & 2005-06) in the assessee's own case had not reached the finality as a reference before the Hon'ble High Court is still pending.
In view of the above, it was fervently pleaded that the stand of the AO requires to be sustained.
5.1. On the other hand, the Ld. A. R had submitted that an identical issue had cropped up for the assessment years 2004-05 and 2005-06 in the assessee's own case which was deliberated upon elaborately and the Hon'ble Bench was pleased to decide the issue in favour of the assessee. As the issue now raised by the Revenue before the Hon'ble Bench was similar in nature, it was submitted that in the interest of natural justice and ITA No.405/Bang/10 Page 6 of 9 in conformity with the earlier finding, the issue be decided in favour of the assessee.
6. We have carefully considered the rival submissions and diligently perused the relevant records.
6.1. At the outset, we would like to point out that a similar issue for the assessment years 2004-05 and 2005-06 came up before the Bench for adjudication. After deliberating the issue in depth, taking into account the stand of the AO and the reasons attributed by the Ld. CIT (A) in confirming the findings of the AO and also analyzing the contentions of the rival parties during the course of hearing, the earlier Bench was pleased to peruse the findings of the various judiciaries, the details of which, for the appreciation of facts, are, in brief, reproduced as under:
(1) In the case of Arun Excello Foundations (P) Ltd v. CIT 108 TTJ 71 (Chennai), on a similar issue, the Hon'ble Bench had granted proportionate deduction based on the percentage of residential units in the housing project on a firm view that clause (d) of s.80 IB(10) is applicable w.e.f. 1.4.2005 and not retrospectively and, thus there was no condition regarding restriction of commercial area prior to 1.4.2005.
(2) In the case of Mystic Investments v. ITO - ITA No:1170/B/2007 dt:
25.4.08, the Hon'ble Tribunal was pleased to observe that "Further, it is to be seen that survey was conducted by the Income-tax Department only on 30.8.2005 almost after 2 years by which time the assessee had sold the units. From the disputed facts, it is obvious that at the time when the assessee had completed the project, the entire transaction were well within the conditions provided in terms of the provisions of s. 80-IB(10) of the Act. Considering all these, we direct the AO to accept the ITA No.405/Bang/10 Page 7 of 9 claim of the assessee and allow deduction u/s 80IB (10) of the Act."
(3) In an identical issue, the very same Bench in the case of DCIT v.
Gopalan Enterprise India Pvt. Ltd. - ITA No:195/B/08 dt: 24.10.08 was very emphatic in its wisdom that "The AO has deliberated on the issue more on assumption and surmise but without bringing out clearly to his denial for deduction as the learned DR has also not brought any material to indicate that the assessee had violated the provisions of s.80IB(10). We are inclined to uphold the order of the learned CIT (A) on the decision thereupon."
6.2. The earlier Bench had discussed the issue comprehensively and recorded its reasoning from Paragraphs 4.18 to 4.22 and, thus, concluded that [at the cost of repetition] -
"4.23. In view of the fore-going facts and circumstances of the issue and respectfully following the decisions of Hon'ble Tribunal referred (2) and (3) supra., we are of the considered view that the assessee is entitled to deduction u/s 80-IB (10) of the Act for both the assessment years under appeal."
6.3. Reverting back to the issue on hand, we shall reproduce the concluding finding of the CIT (A) [verbatim for the sake of clarity] -
"6.8. It is admitted that the commercial area of the project is in excess of 5 per cent of the aggregate built-up area. By virtue of the insertion of clause (d) of section 80-IB (10) with effect from 1/4/2005, the appellant's case is clearly attracted. Secondly, the decision of the Special Bench, Pune was not made available before the Hon'ble ITAT at the time of hearing of the appellant's own case for the assessment years 2004-05 and 2005-06. with due respect of the jurisdictional ITAT, Bangalore and applying the decision of the Hon'ble ITAT, PUNE BENCH, the AO is directed to allow proportionate deduction with regard to the profit as is attributable to the residential area only."ITA No.405/Bang/10 Page 8 of 9
6.4. While applauding the Ld. CIT (A)'s efforts in applying the ratio of the Hon'ble ITAT, Pune (Special Bench) in deciding the issue on hand, we would like to point out the faux pas made by the learned first appellate authority in doing so.
The Hon'ble Pune Bench, in its wisdom ruled that -
(para 114) "..................We have noted that section 80-IB (10) categorically refers to the 'profits derived in the previous year, relevant to any assessment year, from such housing project. What is deductible is 'profit of the housing project', and not the profit attributable to the residential units.' Once, therefore, we hold that the project in question is a housing project, entire profits of the housing project are deductible under section 80-IB(10). THE QUESTION OF PROPORTIONATE DEDUCTION IS, THEREFORE, NOT AT ALL RELEVANT IN THIS CONTEXT.
We have also taken note of the fact that in Arun Excello Foundation Pvt. Ltd. (2007) 108 TTJ (Mumbai) (sic) (Chennai) 71, the Chennai Division Bench has granted proportionate deduction at 90.69 per cent, based on the percentage of residential units in the housing project, but, interestingly, that was the alternate plea raised by the assessee and the Division Bench proceeded to accept the alternate plea without dealing with the main plea at all. The question of dealing with alternate plea arises only when the main plea is rejected. NEITHER, we approve such an approach of the Division Bench in principle nor, as discussed above, are we inclined to approve, on merits, the decision of the Division Bench in the case of Arun Excello Foundation Pvt. Ltd. (2007) 108 TTJ (Chennai) 71 on the question of grant of proportionate deduction".
6.5. In view of the ground reality as deliberated upon in the foregoing paragraphs and as the issue before us is similar to the issue raised for the assessment years 2004-05 and 2005-06 and in conformity with the finding of the Hon'ble Bench in the assessee's own case and also the Special Bench of Hon'ble Pune Bench referred supra, we are of the unanimous ITA No.405/Bang/10 Page 9 of 9 view that the assessee is entitled to deduction u/s 80-IB (10) of the Act for the assessment year under dispute. It is ordered accordingly.
7. In the result, the Revenue's appeal is dismissed.
Pronounced in the open court on this 30th day of September, 2010.
Sd/- Sd/-
( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY )
Judicial Member Accountant Member
Bangalore,
Dated, the 30th September, 2010.
Ds/-
Copy to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT, Bangalore.
6. Guard file
By order
Assistant Registrar
ITAT, Bangalore.