Income Tax Appellate Tribunal - Pune
Paranjape Schemes & Associates, Shri ... vs Department Of Income Tax on 2 December, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA No. 2404/PN/2012
(Assessment Year 2004-05)
ITO, Ward-3(1), Pune .. Appellant
Vs.
Paranjape Schemes & Associates,
Shri Krishna Kunj,
49/2, Erandwana, 112/2,
Anand Colony, Pune - 411004 .. Respondent
PAN No.AAAAP1557C
Assessee by : Shri Sunil Pathak
Revenue by : Shri P.S. Naik
Date of Hearing : 09-10-2014
Date of Pronouncement : 02-12-2014
ORDER
PER R.K. PANDA, AM :
This appeal filed by the Revenue is directed against the order dated 31-07-2012 of the CIT(A)-II, Pune relating to Assessment Year 2004-05.
2. Facts of the case, in brief, are that the assessee is an AOP and is engaged in the business of Developers and Builders. It filed its return of income on 30-10-2004 declaring Nil income after claiming deduction of Rs.2,24,44,975/- u/s.80IB(10) of the Income Tax Act. During the course of assessment proceedings the AO asked the assessee to substantiate the claim of deduction 2 u/s.80IB(10) of the Income Tax Act. From the various details furnished by the assessee the AO noted that the maximum built up area of some of the flats exceeded the permissible limit of 1500 sq.ft. He noted that Row House Nos.3 & 4 were inter connected with each other and therefore the same has to be considered as one residential unit and the aggregate area of the same was more than 1500 sq.ft. He further noted that the assessee has not constructed any flat but instead has constructed 30 Row Houses in the project (Rolling Hills). On physical verification of these row houses, it was noted that the assessee has constructed a big bungalow for the owner of the land, the area of which is more than 1500 sq.ft. In addition, there are 5 instances where the area of residential unit is more than 1500 sq.ft, the details of which are as under :
Unit No. Name of Purchaser Built up Area (sq.ft.) Total Area (sq.ft.) 1.1 VISPUTE PANKAJ SUDHAKAR 729 1458 1.2 VISPUTE PANKAJ SUDHAKAR 729 10 PADMANABHAN PREETH 1358 2208 11.1 ADVANI TIRATH JHAMATMAL 850 21.1 OZA SNEHAL BHAVESH 908 1557 21.2 OZA SNEHAL BHAVESH 649 22.1 PATIL RANJIT BABURAO 983 1808 22.2 PATILRANJIT BABURAO 825 30.1 APTE NEERAJ DILIP 850 1488 30.2 APTE REKHA DILIP 638 2.1 The AO referred to the statement of one Shri Chitravanshi Rajat who has purchased residential unit No.4. Similarly, Shri Sharad varma has purchased residential unit No.3 whose statements were recorded u/s.131 of the I.T. Act. On the basis of the above finding, the AO issued a show cause notice to the 3 assessee, the details of which are as under :
"In addition to the details of rowhouse numbers mentioned in this office show cause did. 29.11.2006, there are some more instances where two row house have been joined to construct a bigger residential unit having area more than 1500 sq. ft. One such example is row house No. 3 and row house No. 4. A Statement of Shri. Chitravanshi Rajat was recorded u/s. 131 of I. T.Act 1961 on 7.12.2006. A copy of the statement is enclosed with this letter. In answer to question no. 2,3,4 and 5 of the statement, Shri. Chitravanshi Rajat has informed that he has purchased row house No. 4 in Rolling Hills i.e. the scheme constructed by you. The total area of row house No. 4 purchased by Shri. Chitravanshi Rajat, as per agreement is 1485 sq.ft. In addition to row house No. 4, the brother of Shri. Chitravanshi Rajat which is named Shri. Sharad varma had also purchased row house No. 3 in your scheme "Rolling Hills". Shri. Chitravanshi Rajat has informed that row house No. 3 and 4 are connected from inside which means that it is a single residential unit. He has further informed that these row houses have been connected by the builder during the construction itself and the row houses were connected at the time of possession itself. This also confirms that you have constructed many residential units which do not fulfill the requirement specified u/s. 80IB(10) (c). Please give your explanation on the above."
2.2 In response to the above, it was replied by the assessee that the 2 residential units were purchased by separate agreements by the purchasers and these units were joined by the purchasers subsequently. It was submitted that the property tax assessment by PMC for these are separate. Further, there are separate electrical meters and separate gas connections. The assessee also filed an affidavit of Shri Chitravanshi Rajat according to which he was in a confused mind at the time of recording statement u/s.131 and has given the answers as per his impressions and beliefs without checking the documents. It was stated that joining of the units was actually done by Shri Sharad varma, brother of Shri Chitravanshi Rajat 3 years back and therefore Shri Chitravanshi 4 Rajat gave the answers in the statement in a casual manner. The assessee also submitted letters from 2 other unit holders Shri Dilip Apte, Unit Nos. 30.1 + 30.2 and Shri Ranjeet Baburao Patil unit Nos. 22.1 + 22.2 wherein they have stated that they have joined the units after taking possession for their comfort and convenience.
3. However, the AO was not satisfied with the explanation given by the assessee. So far as the contention of the assessee regarding the separate purchase agreements, separate gas connections, separate electrical meters etc., are concerned, he noted that all these things are related to the ownership and use of units after taking possession and therefore are not relevant. What is relevant for section 80IB(10) is to examine whether the assessee has constructed all the residential units having built up area of less than 1500 sq.ft. From the various details furnished by the assessee, he observed that some of the units constructed by the assessee have the built up area of more than 1500 sq.ft., the details of which are as under :
Unit No. Purchaser Built up Total area
area sq.ft. Sq.ft.
10 Padmanabhan Preeth 1358 2208
11.1 Advani Tirath Jhamatmal 850
21.1 Oza Snehal Bhavesh 908 1557
21.2 Oza Snehal Bhavesh 649
3. Varma Sharad 1470 2940
4. Chitravanshi Rajat 1470
3.1 Relying on various decisions the AO noted that the assessee
has built residential units having built up area of more than 1500 5 sq.ft. which is maximum limit prescribed u/s.80IB(10)(c) of the I.T. Act and therefore the assessee is not eligible for claiming deduction u/s.80IB(10) of the I.T. Act. He accordingly rejected the claim of deduction u/s.80IB(10) made by the assessee.
4. Before the CIT(A) the assessee made elaborate submissions.
It was submitted that the two units 10 and 11.1. owned by Mr. Padmanabhan Preeth and Advani Tirath Jhamatmal are unrelated customers and the aforesaid two units are not connected and are separate units and that even the combined built up area was less than 1500 sq.ft as per the PMC definition. Regarding unit No. 21.1 and 21.2 owned by Oza Snehal Bhavesh it was submitted that the built up area as per the definition given as per PMC regulations is only 1086.95 sq.ft. Regarding units No. 3 & 4 owned by Sharad varma and Chitravanshi Rajat it was stated that the two units were purchased under separate agreements, though the two were real brothers. It was further contended that the two row houses were separate units having separate property tax bills and separate electricity meters and also having two separate entrances and one common wall separating the two units. It was submitted that the unit holders after taking possession of the units have put a small door in the common wall for convenience of their old parents.
However, the identity of two independent residential units were maintained as both the units had been conceptualized, planned and executed as two separate residential units and they had two 6 independent kitchen cum dining room and separate gas connections. It was submitted that there is a substantial compliance of the provisions of sec. 80IB(10) of the IT. Act, 1961 and therefore the deduction should be allowed.
4.1 In a without prejudice submission it was stated that the provisions in a taxing statue granting incentives for promoting growth and development should be construed liberally and in view of the ratio of the decision of the apex court in the case of Bajaj Tempo Ltd Vs CIT (1992) 196 ITR 188 (SC), the deduction u/s 80IB(10) was allowable. The assessee has also submitted in without prejudice to the above submission that pro-rata deduction be allowed on the eligible and qualifying residential units.
4.2 Regarding the built up area of Row house No. 18, the assessee reiterated the submission made before the Assessing Officer during the assessment proceedings and submitted that the area of the residential unit calculated by the valuer appointed by the assessee AOP was at 1377.55 sq.ft as against 1855.95 worked out by Mr. Khandagale, the valuer appointed by the Assessing Officer.
4.3 It was argued that the definition of the "built up" area was not available during A.Y. 2004-05 and, therefore, in absence of any guideline under the IT. Act, the assessee had adopted the definition available as per the local authority i.e. PMC and after the introduction of the definition of the built up area w.e.f. 1-4- 7 2005, the same could not be applied retrospectively as the assessee cannot back track or rewind the planning. It was accordingly contended that the definition of the built up area available at the time of planning has to be considered for 80IB(10) purpose. It was thus contended that after applying the definition of the built up area as per the PMC guidelines and the area of the units recalculated, the same worked out below 1500 sq.ft. It was submitted that the definition of the built up area in sec. 80IB(10) inserted by the Fin.(No. 2) Act, 2004 w.e.f 1-4-2005 is not retrospective and, therefore, the definition of the 'built up area' as per the Development Control Rules of PMC will prevail. It was argued that the completion certificate of all the units and specially those disputed by the Assessing Officer viz. unit No. 1.1 and 1.2, 11.1, 11.2, unit No. 18, Unit No. 21.1 and 21.2, 22.1 and 22.2, unit No.30.1 and 30.2 had been issued on 27-3-2003 which is prior to the introduction and passing of the Finance (No. 2) Act, 2004. It was argued that it is the settled principle in law that statute cannot impose condition retrospectively which is impossible to comply.
The assessee placed reliance on the following judicial decisions in support of its claim:
i) ITO Vs Air Developers (2009) 123 TTJ (Nag) 959
ii) Arun Excello Foundations (P) Ltd Vs ACIT (2007) 108 TTJ (Chennai) 71
iii) ACIT Vs Sheth Developers (P) Ltd (2009) 33 SOT 277 (Mum)
iv) Bramha Associates Vs Jt CIT (2009) 122 TTJ 433 (Pune)(SB) 8 4.4 Based on the arguments of the assessee the Ld.CIT(A) called for a remand report from the AO. The Assessing Officer directed the Govt. Approved Valuer to visit, inspect and measure the 'built up area' of the various residential tenements. The govt.
approved valuer Shri. Harshad Ruparel, in his report dated 22-8- 2011 has given the measurement as per the 'built up area' as defined u/s 80IB(14)(a) as inserted by the Finance Act (No. 2) 2004, w.e.f. 1-4-2005 and 'built up area' as per the Development Control Rules framed by the PMC. The details of the same especially with respect to the residential units where total built up area was disputed by the A.O. during the assessment proceedings, are as under :
Sl.No. Unit No./Name Built up Projected Total As per area terrace area sq.ft. PMC including Total Balconies area 1 3 Sharad Varma 1412.02 75.24 1487.26 1041.09 2 4 Chitravanshi 1412.02 75.24 1487.26 1041.09 3 10 Padmanabhan 1265.41 133.47 1398.88 980.49 4 14 Advani 1412.02 75.24 1487.26 1041.09 5 18 Harish Warrier 1363.04 0.00 1360.04 1081.02 6 21 Snehal Oza 1407.93 134.87 1542.80 1086.51 7 22 Ranjit Patil 1762.82 139.28 1902.10 1348.62 8 30 Apte 1412.02 75.24 1487.26 1041.09 4.5 The govt. approved valuer noted in the report dated 22.08.2011, that numbers like 11.1/11.2, 18.1. & 18.2 or 21.1 or 9 21.2 do not exist and the same had been referred to as numbers of each floor. The aforesaid units were independent and are not combined with any other unit. Regarding the unit Nos. 3 & 4, it was stated that they are independent residential units with independent kitchens. However, a connecting door between the two living rooms exist. A photograph of the said door was also annexed to the report. The Assessing Officer in its report dt. 18-4-
2012 stated with respect to units 3 & 4 that the aforesaid units were independent residential units with independent kitchens, however, a connecting door lies between the two living rooms of the two units. The Assessing Officer reiterated that the inter connection of the units was done by the builder and the filing of the affidavit was an afterthought.
4.6 Regarding the units No. 30.1 & 30.2, 22.1 & 22.2 and 21.1 & 21.2, the Assessing Officer noted that the valuer has submitted that separate numbers of the units does not exist and they referred to the numbers of each floor of an independent unit which is not combined with any other unit. The Assessing Officer thus observed that units 1, 10, 11, 18, 22 and 30 are a two storied building and had a single number in plan as well as at site. The Assessing Officer further observed that the report of the valuer has given rest to the controversy of joining of the various units as the sanctioned plan was showing them to be one unit only. The Assessing Officer noted that the built up area of units No. 21 and 10 22 as per the report was 1542.80 sq.ft. and 1902.10 sq.ft, respectively which clearly exceeded the limit of the built up area as per amended Sec. 80IB(10) of the Act. The Assessing Officer also held that the amendment brought about in Sec. 80IB(10) w.e.f. 1-4-2005 by inserting the definition of 'built up area' is clarificatory in nature and, therefore, the disallowance of the claim of Sec. 801B(10) deduction was correct and the assessee's claim was not acceptable.
4.7 The assessee in its rejoinder to the report of the Assessing Officer submitted that the Hon'ble Bombay High court in the case of Bramha Associates (2011) 333 ITR 289 (Bom) has held that the clause (a) inserted in Sec. 80IB(10)(14) w.e.f. 1-4-2005 is prospective in nature and, therefore, cannot be applied for period prior to 1-4-2005 and hence the definition of built up area as per the DC Rules framed by PMC will prevail. It was stated that similar view has been held in a host of tribunal decisions including the decisions of the Pune Bench of the Tribunal in the case of Opel Shelters Pvt. Ltd Vs ACIT, ITA No. 219/PN/2009 for A.Y. 2005- 06 and D S Kulkarni & Associates Vs ITO, ITA No. 17/PN/2009 for A.Y. 2005-06 and of the Mumbai ITAT in the case of Hiranandani Akruti JV vs DCIT (2010) 9 SOT 498 (Mum), which have held that Sec. 80IB(10) as it existed in the statute in the year in which the project commenced should apply. It was reiterated that the definition of the built up area as per DC Rules of PMC 11 will apply and, therefore, the built up area of all the tenements was less than 1500 sq.ft. Regarding the residential units 3 & 4 owned by Mr. Sharad Varma and Mr. Chitravanshi Rajat, it was argued that the Govt approved valuer has affirmed that the two units are independent residential units having independent kitchens. It was reiterated that the two units were two separate row houses and the property tax bills and electricity meters were separate and had two separate entrances and a common wall separating the two units. It was emphasized that the unit holders after taking possession of the units had put a small door for the convenience of their old parents however, the identity of units as two independent residential units had been maintained.
5. Based on the arguments advanced by the assessee the Ld.CIT(A) allowed the claim of deduction u/s.80IB(10) made by the assessee by observing as under :
"3.2 I have carefully considered the submission of the appellant and perused material available on record. The appellant has raised two grounds of appeal and in Grounds No. 1, (1.2 and 1.3), the appellant has contested the disallowance of the claim of deduction u/s 80IB(10) amounting to Rs. 2,24,44,975/-. During the assessment proceedings, the Assessing Officer noticed that appellant had shown net profit of Rs. 2,24,44,975/- and the entire income had been claimed exempt u/s 80IB(10) of the IT Act 1961. The appellant had constructed 30 residential units/row houses in the scheme "Rolling Hills". The Assessing Officer found on verification that the appellant had constructed a bungalow for the owner of the land which exceeded the built up area of more than 1500 sq.ft and in addition there were five other instances where the residential area was more than 1500 sq.ft., which was subsequently reduced to 2 residential units 10/11.1 and 21.2/21.3.12
Unit No. Name of Purchaser Built up Total area
area (sq.ft) (Sq.ft)
1.1 VISPUTE PANKAJ SUDHAKAR 729 1458
1.2 VISPUTE PANKAJ SUDHAKAR 729
10 PADMANABHAN PREETH 1358 2208
11.1 ADVANI TIRATH JHAMATMAL 850
21.1 OZA SNEHAL BHAVESH 908 1557
21.2 OZA SNEHAL BHAVESH 649
22.1 PATH RAN JIT BABURAO 983 1808
22.2 PATILRANJIT BABURAO 825
30.1 APTE NEERAJ DILIP 850 1488
30.2 APTE REKHA DILIP 638
The Assessing Officer also recorded the statement of Shri. Chitravanshi Rajat who had purchased the residential unit No.4 u/s 131 on 7-12-2006. In the statement Shri. Rajat had informed that the row house No. 4 was purchased by him and the area of the said units as per the agreement was 1485 sq.ft. It was also stated that his brother Shri. Sharad Verma had purchased row house No. 3 in the scheme and that the aforesaid two row houses i.e. 3 & 4 were connected from inside. The Assessing Officer thus held the two residential units as a single one and that the two row houses were stated to have been connected by the builder. The Assessing Officer also visited the said housing project along with the govt. approved valuer Shri. Netaji Khandagale who also submitted the report on 7-12-2006. The Assessing Officer found that the valuer had taken measurements of bungalow No. 18 of the project, the total built up area of which was of 1855.92 sq.ft. being more than the stipulated 1500 sq.ft. as per Sec. 80IB(10). Thus the Assessing Officer on the basis of the above findings came to the conclusion that the conditions for claim of deduction u/s 80IB(10) were not fulfilled and, therefore, the entire claim of deduction u/s 80IB(10) amounting to Rs.2,24,44,875/- was disallowed.
3.3 The appellant during the appellate proceedings has contended that the disallowance made by the Assessing Officer was based on the following findings:
1. The two residential units had been combined and the combined built up area exceeded 1500 sq.ft. in respect of the following units.
Unit No. Purchaser Built up Area Total Area
Sq.ft. Sq.ft.
10 Padmanabhan Preeth 1358
11.1 Advani Tirath Jhamatmal 850 2208
21.1 Oza Snehal Bhavesh 905
21.2 Oza Snehal Bhavesh 649 1557
13
2. The unit No. 3 & 4 had been joined whose total area exceeded 1500 sq.ft.
3. The built up area of unit No. 18 as per the definition of 'built up area' in Sec. 80IB(14)(a) was 1786.74 sq.ft., which also included the staircase and balcony area.
The appellant during the appellate proceedings has contended that the two units 10 and 11.1. owned by Mr. Padmanabhan Preeth and Advani Tirath Jhamatmal are unrelated customers and the aforesaid two units are not connected and are separate identified units and that even the combined built up area was less than 1500 sq.ft as per the PMC definition. The appellant regarding unit No. 21.1 and 21.2 owned by Oza Snehal Bhavesh admitted that the built up area as per the definition given of PMC regulations is only 1086.95 sq.ft. The appellant regarding units No. 3 & 4 owned by Sharad Verma and Chitravanshi Rajat has stated that the two units were purchased under separate agreements, though the two were real brothers and has further contended that the two row houses were separate having separate property tax bills and electricity meters and also having two separate entrances and one common wall separating the two units. The appellant further states that the unit holders after taking possession of the units have put a small door in the common wall for convenience of their old parents, although the identity of two independent residential units were maintained as both the units had been conceptualized, planned and executed as two separate residential units and they had two independent kitchen cum dining room and separate gas connections. The appellant has thus further submitted that there is a substantial compliance of the provisions of sec. 80IB(10) of the IT. Act, 1961 and in a without prejudice submission, stated that the provisions in a taxing statue granting incentives for promoting growth and development should be construed liberally and in view of the ratio of the decision of the apex court in the case of Bajaj Tempo Ltd Vs CIT (1992) 196 ITR 188 (SC), the deduction u/s 80IB(10) was allowable. The appellant has also submitted in without prejudice to the above submission that pro-rata deduction be allowed on the eligible and qualifying residential units. The appellant regarding the built up area of Row house No. 18 has reiterated the submission made before the Assessing Officer during the assessment proceedings had submitted that the area calculated by the valuer appointed by the appellant AOP of the residential unit was at 1377.55 sq.ft as against 1855.95 worked out by Mr. Khandagale, the valuer appointed by the Assessing Officer. The appellant during the assessment proceedings had submitted that the definition of the built up area was not available during A.Y. 2004-05 and, therefore, in the absence of any guideline from the IT. Act, the assessee had adopted the definition available as per the local authority i.e. PMC and after the introduction of the definition of the built up area w.e.f. 1-4-2005, the same could not be applied retrospectively as the appellant cannot back track or rewind the planning. The appellant thus contended that the definition of the built p area available at the time of planning has to be considered for 80IB(10) purpose. The appellant thus contended that after applying the definition of the 14 built up area as per the PMC guidelines and the area of the units recalculated the same worked out below 1500 sq.ft. The appellant has thus submitted that the definition of the built up area in sec. 80IB(10) inserted by the Fin.(No. 2) Act , 2004 w.e.f 1-4-2005 is not retrospective and, therefore, the definition of the 'built up area' as per the Development Control Rules of PMC will prevail. Moreover, it has been stated that the completion certificate of all the units and specially those disputed by the Assessing Officer viz. unit No. 1.1 and 1.2, 11.1, 11.2, unit No. 18, Unit No. 21.1 and 21.2, 22.1 and 22.2, unit No.30.1 and 30.2 had been issued on 27-3- 2003 which is prior to the introduction and passing of the Finance (No. 2) Act, 2004 and it is settled principle in law that statute cannot impose condition retrospectively which is impossible to comply. The appellant has placed reliance on the following judicial decisions in support of their claim:
i) ITO Vs Air Developers (2009) 123 TTJ (Nag) 959
ii) Arun Excello Foundations (P) Ltd Vs ACIT (2007)108 TTJ (Chennai) 71
iii) ACIT Vs Sheth Developers (P) Ltd (2009) 33 SOT 277 (Mum)
iv) Bramha Associates Vs Jt CIT (2009) 122 TTJ 433 (Pune)(SB) 3.4 The appellant has also commented on the remand report of the Assessing Officer dated 18-4-2012 wherein the Assessing Officer had directed the govt. approved valuer to visit, inspect and measure the 'built up area' of the various residential tenements.
The govt. approved valuer Shri. Harshad Ruparel, in its report dated 22-8-2011 has also given the measurement as per the 'built up area' as defined u/s 80IB(14)(a) as inserted by the Finance Act (No. 2) 2004, w.e.f. 1-4-2005 and 'built up area' as per the Development Control Rules framed by the PMC. The details of the same especially with respect to the residential units where total built up area was disputed by the A.O. during the assessment proceedings, are reproduced below:
S.No Unit No./Name Built up area Projected Total area As per PMC including terrace sq.ft. Total area Balconies 1 3 1412.02 75.24 1487.26 1041.09 Sharad Varma 2 4 1412.02 75.24 1487.26 1041.09 Chitravanshi Rajat 3 10 1265.41 133.47 1398.88 980.49 Padmanabhan Preeth 4 11 1412.02 75.24 1487.26 1041.09 Advani 15 5 18 1363.04 0.00 1363.04 1081.02 Harish Warner 6 21 1407.93 134.87 1542.80 1086.51 Snehal Oza 7 22 1762.82 139.28 1902.10 1348.62 Ranjeet Patil 8 30 1412.02 75.24 1487.26 1041.09 Apte The govt. approved valuer has also noted in the report dated 22.08.2011, that numbers like 11.1/11.2, 18.1. & 18.2 or 21.1 or 21.2 does not exist and the same had been referred to as numbers of each floor. The aforesaid units were independent and are not combined with any other unit. Regarding the unit Nos. 3 & 4, it has been stated that they are independent residential units with independent kitchens, however, a connecting door between the two living rooms exist. A photograph of the said door has also been annexed to the report. The Assessing Officer in its report dt.
18-4-2012 has stated with respect to units 3 & 4 that the aforesaid units were independent residential units with independent kitchens, however, a connecting door lies between the two living rooms of the two units. The Assessing Officer has reiterated that the inter connection of the units was done by the builder and the filing of the affidavit was an afterthought.
3.5 Regarding the units No. 30.1 & 30.2, 22.1 & 22.2 and 21.1 & 21.2, the Assessing Officer has noted that the valuer has submitted that separate numbers of the units does not exist and they referred to the numbers of each floor of an independent unit which is not combined with any other unit. The Assessing Officer has thus observed that units 1, 10, 11, 18, 22 and 30 are a two storied building and had a single number in plan as well as at site. The Assessing Officer has then further observed that the report of the valuer has given rest to the controversy of joining of the various units as the sanctioned plan was showing them to be one unit only. The Assessing Officer has further noted that the built up area of units No. 21 and 22 as per the report was 1542.80 sq.ft. and 1902.10 sq.ft, respectively which clearly exceeded the limit of the built up area as per amended Sec. 80IB(10) of the Act. The Assessing Officer also has held that the amendment brought about in Sec. 80IB(10) w.e.f. 1-4-2005 by inserting the definition of 'built up area1 is clarificatory in nature and, therefore, the disallowance of the claim of Sec. 80IB(10) deduction was correct and the appellant's claim was not acceptable.
3.6 The appellant in its rejoinder to the report of the Assessing Officer has submitted that the Bombay High court in the case of Bramha Associates (2011) 333 ITR 289 (Bom) has held that the clause (a) inserted in Sec. 80IB(10)(14) w.e.f. 1-4-2005 is prospective in nature and, therefore, cannot be applied for period prior to 1-4-2005 and hence the definition of built up area as per the DC Rules framed by PMC will prevail. The appellant has also stated that similar view has also been held in a host of tribunal decisions including ITO Vs AIR Developers, Arun Excello 16 Foundation (P) Ltd Vs ACIT, ACIT Vs Sheth Developers (P) Ltd, Bramha Associates quoted supra. The appellant has also drawn attention towards the decision of the Pune ITAT in the case of Opel Shelters Pvt. Ltd Vs ACIT, ITA No. 219/PN/2009 for A.Y. 2005-06 and D S Kulkarni & Associates Vs ITO, ITA No. 17/PN/2009 for A.Y. 2005-06 and of the Mumbai ITAT in the case of Hiranandani Akruti JV vs DCIT (2010) 9 SOT 498 (Mum), which have held that Sec. 80IB(10) as it existed in the statute in the year in which the project commenced should apply. Thus the appellant has reiterated that the definition of the built up area as per DC Rules of PMC will apply and, therefore, the built up area of all the tenements was less than 1500 sq.ft. The appellant regarding the residential units 3 & 4 owned by Mr. Sharad Varma and Mr. Chitravanshi Rajat, has stated the govt approved valuer has affirmed that the two units are independent residential units having independent kitchens. It has again been stated that the two units were two separate row houses and the property tax bills and electricity meters were separate and had two separate entrances and a common wall separating the two units. It has been emphasized that the unit holders after taking possession of the units had put a small door for the convenience of their old parents however, the identity of units as two independent residential units had been maintained.
3.7 The appellant AOP has undertaken the construction of 30 residential units in the scheme 'Rolling Hills' which commenced development and construction of the project vide commencement certificate dated 30-03-2001 issued by the PMC. The size of the plot of land of the housing project was having area of 16200 sq. mtrs i.e. around 4 acres. The aforesaid project was completed as per the certificates of occupancy of the units as the certificates issued by PMC dated 27-3-2003. The Assessing Officer during the assessment proceedings has not disputed the above facts, which were relevant for the claim of deduction u/s 80IB (10). The Assessing Officer had initially raised objection with respect to units 1.1 & 1.2, 10 & 11.1, 21.1& 21.2, 22.1 & 22.2 and 30.1 and 30.2, stating that they were having areas more than 1500 sq.ft. and the owners of some of the units were same. The Assessing Officer also recorded the statement u/s 131 of Mr. Chitravanshi Rajat on 7-12-2006 who had purchased unit No. 4 and whose brother Mr. Sharad Varma had purchased residential unit No. 3. The Assessing Officer sought the explanation of the appellant that the two units 3 & 4 have joined to construct a bigger residential unit having area of more than 1500 sq.ft. It was also emphasized by the Assessing Officer that Mr. Chitravanshi had stated that the two row houses/units had been connected by the builders during the construction stage. Thereafter, the Assessing Officer visited the housing project along with the govt. approved valuer Mr. Netaji Khandagale and in the report dated 7-12-2006, it was submitted that on measuring bungalow No. 18, the total built up area was of 1855.92 sq.ft. The Assessing Officer, therefore, sent the show-cause seeking the explanation of the appellant with respect to the discrepancies noted regarding non-fulfillment of the requirement/conditions specified u/s 80IB (10).
173.8 The appellant in the explanation furnished before the Assessing Officer explained that the 'Built up' area mentioned in the agreement should not form the basis of calculating the 'built up area'. The appellant undertook the exercise of measuring the residential units with the assistance of Mr. Nitin Lele, a govt. approved surveyor and a Chartered Engineer and submitted the calculation of the built up area for the combined units which indicated even the combined built up areas below 1500 sq.ft of all the units viz. 1.1 & 1.2, 11.1 & 11.2, 21.1 & 21.2, 22.1 & 22.2 and 30.1 & 30.2. The appellant also submitted the detailed drawings and measurements and the calculation for verification by the Assessing Officer. The appellant regarding units No. 3 & 4 submitted that the two row houses were separate having separate electric meters and property tax bills and separate entrance and independent kitchen-cum-dining rooms and separate gas connections. The owner of one of the units Mr. Sharad Varma also clarified that the small door in common wall was made by him by engaging a contractor and payment made in cash and the other owner of the unit Mr. Chitravanshi Rajat submitted an affidavit subsequently in which he submitted, that the answers and information given during the course of statement was in a casual manner and was not correct which included specific information regarding area in the agreement, total payments made to the builder etc. The appellant regarding unit No. 18 submitted that the built up area of the above unit was at 1377.55 sq.ft as against 1855.95 sq.ft. The appellant also explained before the Assessing Officer that the owner of the residential unit No. 30.1 and 30.2 and 22.1 and 22.2 had joined the units after taking possession for their comfort and convenience and the letters of the owners. confirming the above fact was submitted before the Assessing Officer. The appellant also submitted that the key issue was with respect to the definition of 'Built up area' which was not defined in the IT. Act 1961. It was also stated by the appellant before the Assessing Officer that the built up area calculated by the builder for the purpose of sales was generally and loosely calculated at carpet area plus a loading factor which varies between 25% to 33% to accommodate other area allowances and, therefore, the 'built up area1 mentioned in the agreement should not form the basis for built up area for the purposes of Sec. 80IB(10).
3.9 The Assessing Officer, however, did not accept the explanation furnished by the appellant and on the basis of the following reasons disallowed the claim of Sec. 80IB (10) deduction, though the explanation furnished with respect to other units including 30.1 & 30.2 and 22.1 & 22.2 and 1.1 & 1.2 appears to have been accepted by the A.O. as the same were not considered to be a reason for the disallowance of deduction.
1. The following two residential units have been combined and the total area exceeded 1500 sq.ft.
18Unit Purchaser Built up area Total area Sq.ft
No
10 Padmanabhan Preeth 1358
11.1 Advani Tirath Jhamatmal 850 2208
21.1 Oza Snehal Bhavesh 905
21.2 Oza Snehal Bhavesh 649 1557
2.
3 Varma Sharad 1470 2940
4 Chitravanshi Rajat 1470
Both units joined together to construct a bigger residential unit.
3. The built up area of unit No. 18 as per the definition of built up area in Sec. 80IB (14)(a) was 1786.74 sq.ft.
The Assessing Officer arrived at the above conclusion for making the disallowance after considering the explanation and evidences furnished during the assessment proceedings. In fact, the Assessing Officer had earlier held nearly ten units which had exceeded the permissible limits of the built up area of more than 1500 sq.ft. and which had been held to have been joined by the builder for the respective customer. However, the Assessing Officer accepted the explanation and the evidences with respect to units no. 1.1 & 1.2, 22.1 & 22.2, 30.1 and 30.2. The Assessing Officer was guided by the definition of the 'built up area' in Sec. 80IB (10) inserted by the Finance (No.2) Act, 2004 w.e.f. 1-4-2005 which was held by him, to be clarificatory amendment, with a purpose to clear the doubt about calculation of built up area. The Assessing Officer also held the amendment to be declaratory in nature and having application for the earlier years. In view of the above fact, the Assessing Officer while calculating the area included the projections and balconies in the calculation of built up area. The submission made by the appellant and the reliance placed on the judicial decisions with respect to 'built up area' was not at all considered by the Assessing Officer during the assessment proceedings.
3.10 The appellant's submission during the appellate proceedings with regard to the reason for the disallowance of deduction u/s 80IB(10) and the reliance placed on number of judicial decisions, the matter was remanded to the Assessing officer for making necessary enquiries including from the unit holders. The Assessing Officer during the remand proceedings issued letter to the departmental approved valuer Shri. Harshad Ruparel for verification and measurement of the built up area of the residential units. In the report submitted by the Assessing Officer after taking into account the findings of the Departmental approved valuer, Shri. Ruparel, it has been categorically stated by the Assessing Officer that the units No. 3 & 4 were independent 19 residential units with independent kitchens, however, it has been mentioned there is a connecting door in between connecting living room of both the units. The Assessing Officer has also enclosed the valuer's report which specifies the area both as per the amended definition of Sec. 80IB(10), as well as as per the DC Rules of PMC respect of the residential units. The Assessing Officer, has however, on the definition of the 'built up area' as per the amended law held the residential units to have exceeded the permissible limit of 1500 sq.ft as the amendment has been held by him to be clarificatory in nature.
3.11 The built up area statement of the residential units as per the valuer's report dated 22-8-2011 is as follows:
S.No Unit No. Built up area as per Built up area
Name amended law Total as per PMC /
area sq.ft DC Rules
1 3 1487.26 1041.09
Sharad Varma
2 4 1487.26 1041.09
Chitravanshi Rajat
3 10 Padmanabhan 1398.88 980.49
Preeth
4 11 Advani Tirath 1487.26 1041.09
5 18 Harish Warrier 1363.04 1081.02
6 21 Snehal Oza 1542.80 1086.51
7 22 1902.10 1348.62
Ranjeet Patil
8 30 Apte 1487.26 1041.09
The valuer has categorically mentioned that Nos. like 10.1 & 10.2 or 22.1 or 22.2 does not exist and they refer to the numbers for each floor of an independent unit which is not combined with any other unit. It has thus been observed that units No. 1, 10, 11, 18, 21, 22 & 30 were a two storied building and had a single number in the plan. The valuer in respect of units No. 30.1 & 30.2 and 22.1 & 22.2. had confirmed regarding joining of the units after taking possession of their own. The appellant had explained in the submission before the A.O. that units no. 10 and 11.1 were relating to two customers who were not related and that the two units were not connected and were separate units. The valuer in its report in the remand proceedings has also affirmed the contention of the appellant. The A.O. has not brought any material contrary to the facts raised by the appellant. Further, the residential units 21.1 & 21.2 owned by Oza Snehal Bhavesh has been admitted to be one unit and also affirmed by the valuer in its report, however, the area as per the DC Rules was only 1086.51 sq. ft. However, as per the amended provisions the area of the units was taken by the A.O. to be 1557 sq. ft. which was more than 20 the present area of 1500 sq. ft. The valuer in its report submitted during the remand proceedings, -however, gave the area as per the amended provisions to be 1542.80 sq.ft. and as per the DC Rules to be 1086.51 sq.ft., which was less than the area stipulated u/s 80IB(10) of the IT. Act. The A.O. had also objected to the area of residential unit no. 18 being 1786.74 after including the staircase and balcony area as per the amended law. However, as per the DC Rules the total area worked out by the valuer is less than 1500 sq. ft. i.e. within the permissible limits as per section 80IB(10). However, the A.O. during the remand proceedings in its report dated 18.04.2012 has again disputed the area of the units no. 21 & 22 being 1542.80 sq. ft. and 1902.10 sq.ft., respectively based on the report dated 22.08.2011 of the valuer Shri Ruparel. The valuer in its report had given the measurement of the residential units both as per the DC Rules of PMC, Pune and as per the amended law as defined in section 80IB(10)(14)(a) inserted by the Finance (No.2) Act, 2004 w.e.f. 1.4.2005. The built-up area of the two units as per the DC Rules has been of unit no. 21 is at 1086.51 sq.ft. and unit no. 22 at 1348.62 sq.ft. Thus the basic objection of the Assessing Officer relates to the area of the residential units being more than 1500 sq.ft. as per amended law. This condition is prescribed in clause (c) of Sec. 80IB(10). There is no dispute to the fact that this condition exists in the statute and is required to be adhered to for availing the benefit of Sec. 80IB(10) clause (c) says as under:
"The residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and thousand five hundred square feet at any other place".
Therefore, the section requires the housing project to have a residential unit of not more than 1500 sq.ft to be eligible for the deduction. The registered valuer appointed by the Assessing Officer during the remand proceedings has given the findings regarding the area of the respective units which had been disputed by the Assessing Officer to have exceeded the prescribed limits of 1500 sq.ft. However, on perusal of the table of the area statement as submitted by the valuer, Shri. Ruparel, it is noticed that the total area as per the amended provisions of Sec. 80IB(14)(a), with respect to the definition of the 'built up area' in most cases the built up area exceeds the limit of 1500 sq.ft. However, definition of area as per the DC Rules of PMC the built up area in all the cases is much below the permissible limit of 1500 sq.ft. The appellant has contended that the amended definition of built up area w.e.f. 1-4-2005 is not retrospective. It has also been claimed by the appellant that the amended definition cannot be given effect to the project as it was approved on 30.03.2001 when no such definition was available in the section and the project even completed before the introduction of the definition as per Sec. 80IB(10)(a) of 'built up area'. The appellant has claimed that the above proposition has been accepted in various judgments including Bombay High court in the case of CIT Vs Bramha Associates (2011) 333 ITR 289 (BOM) that clause (a) inserted in Sec. 80IB(14) w.e.f. 1-4-2005 is 21 prospective in nature and, therefore, cannot be applied for a period prior to 1-4-2005 and hence, the definition of 'built up area' as per DC Rules framed by PMC will prevail. The finding given by the Bombay High Court in this regard is as under:
27. Lastly, the argument of the Revenue that s. 80-IB(10) as amended by inserting cl. (d) w.e.f. 1st April, 2005 should be applied retrospectively is also without any merit, because, firstly, cl. (d) is specifically inserted w.e.f. 1st April, 2005 and, therefore, that clause cannot be applied for the period prior to 1st April, 2005. Secondly, cl. (d) seeks to deny s. 80-IB(10) deduction to projects having commercial user beyond the limit prescribed under cl. (d), even though such commercial user is approved by the local authority. Therefore, the restriction imposed under the Act for the first time w.e.f. 1st April, 2005 cannot be applied retrospectively. Thirdly, it is not open to the Revenue to contend on the one hand that s. 80-IB (10) as it stood prior to 1st April, 2005 did not permit commercial user in housing projects and on the other hand contend that the restriction on commercial user introduced w.e.f. 1st April, 2005 should be applied retrospectively. The argument of the Revenue is mutually contradictory and hence liable to be rejected. Thus, in our opinion, the Tribunal was justified in holding that cl. (d) inserted to s. 80-
IB(10) w.e.f. 1st April, 2005 is prospective and not retrospective and hence cannot be applied to the period prior to 1st April, 2005.
The appellant has also placed reliance on various tribunal decisions where similar view has been taken. The appellant has also submitted that even for subsequent assessment years i.e. A.Y. 2005-06 onwards, the tribunal have held that Sec. 80IB(10) as it existed in the statue in the year in which the project commenced should apply. The appellant has relied on the Pune ITAT decisions in the case of Opel Shelters Ltd and D S Kulkarni & Associates (cited supra) and Hiranandani Akruti J V vs DCIT (2010) 7 SOT 498 (Mum).
3.12 It is a fact that definition of built up area has been introduced by the Finance Act (No.2), 2004 w.e.f. 1-4-2005, the judgment of the Pune ITAT though on the issue of clause (d) of Sec. 80IB(10) can have application on the issue under consideration. As per the ratio of these judgments, it was claimed, before the definition of built-up area was introduced in Sec. 80IB(14) the meaning to the built up area or the residential unit has to be given as is commercially understood. On this interpretation, it can be seen that the claim of the appellant that the area of the residential units is less than 1500 sq.ft. appears to be correct if the implication of the definition is not applied as the project was approved on 30.03.2001 when this definition was not in the statute and, therefore, the appellant cannot be asked to fulfill a substantive condition introduced subsequent to the approval of the project when a vested right got created subject to the fulfillment of the conditions then prevailing. The decisions of the Pune ITAT in the case of Opel Shelters Pvt. Ltd and DS Kulkarni & Associates have also been followed by the tribunal in several other cases on similar issues. The Pune ITAT has held that 22 the assessee had started the project in F.Y. 2000-01 and the amendment restricting the commercial area was introduced from 01.04.2005. The ITAT, in this context held that the amendment restricting the commercial area would not be applicable for the project started prior to 31.03.2005. According to ITAT, as per harmonious interpretation of section 80IB(10), the assessee would not be able to comply with a condition introduced at a later date and, therefore, the contention of the A.O. that the amended definition was applicable is not correct. The relevant paras of the ITAT order are as under:
"19. We, thus, find that the issues raised in the present appeals are fully covered in favour of the assessee by the decision of Mumbai Bench of the Tribunal in the case of Hiranandani Akruti J. V v/s. DCIT (Supra). Respectfully following the said decision in the case of Hiranandani Akruti J. V. (Supra), we decide the issues in favour of the assessees that a housing project will also consist of commercial area to a permissible limit, as settled by the Special Bench of the Tribunal in the case of Bramha Associates (Supra) (now upheld by the Hon'ble Bombay High Court) as applicable upto A.Y. 2004-05. And secondly, the law as it existed in the Assessment Year when the assessee submitted its proposal of the project and permission for the same was accorded to and when the assessee commenced the project is to be applied. In the present case, undisputedly the assessees had started the project in the year 2001 when sub-clause (d) to section 80IB(10) was not in existence, hence it cannot be applied on such projects as held by the Mumbai Bench of the Tribunal in the case of Hirnandani Akruti J. V. (Supra). In this regard, we also find strength from this plea of the Ld. A.R. which was also raised before in the case of Hiranandani Akruti J.V. that if the assessee had followed WIP (Work-in-progress) method, the income from the project would have been taxable in the earlier years as the project was completed earlier to the amendment and in that case, as per the old provision the assessee would have been eligible for the deduction. But, just because the assessee has followed the Project Completion method, in these cases, the deduction is being denied because it falls in A. Y. 2005-06. In our view the newly inserted clause (d) to Section 80IB(10) will not apply on the projects approved upto 31.3.05 since in those projects assessees are required to construct what has been approved. The only fissile compliance is required to be met as per the harmonious interpretation of Section 80IB(10) as amended is to complete such projects (approved before 1.4.2004) on or before 31.3.2008. In the cases before us the projects have been completed well before this date. Putting of such condition of time limit is well understood. Since the legislature intended the completion of projects within a time frame to avoid inconvenience to the beneficiaries i.e. the buyers. In this regard the Legislature has categorized the time limit for the projects approved on different period before 31.3.2007 but requirement remained the same that projects would be approved by the local authority. Compliance of the requirement provided in clause (d) to the Section is possible only in those projects which have been started on or after 1.4.2005 as by those assessees were all aware about the provisions laid down in clause (d).23
20. By applying the principle of harmonious construction to interpret the provisions under Sub-section (10) to Section 80IB as amended w.e.f. 1.4.2005 we come to the conclusion that the Legislature always intended that the project must be approved by the local authority, thus in those approved projects where construction has been started much earlier than 1.4.2005, the assessees are required to complete the plan as it has been approved. As putting such assessees to complete the plan meeting out condition under clause (d) of the subsection would lead into absurdity and impossibility for the assessee and in contradiction to the provisions u/s. 80 IB(10) as prevailed at the time of approval and commencement of the construction of the project well before 1.4.2005. Bombay Bench of the Tribunal in the case of Hiranandani Akruti J.V (supra) has discussed all these relevant aspects raised by the Department. In the case of Hiranandani Akruti J. V V/s. DCIT, it has been held that the law as existed when the assessee submitted its proposal and permission for carrying out the development was accorded and when the assessee commenced development is to be applied. In the present cases, as per page nos. 17 and 20 of the paper book in the case of Opel Shelter the project was commenced on 23.2.2001 and even completed on 14.5.2004, similarly as per the contents of page No.2 of the assessment order and page no. 41 of the paper book in the case of D.S. Kulkarni and Associates, the project was commenced on 12.4.2001 and completed in the month of November 2003. Thus, the assessees were supposed to complete the projects as per the law as existed in the A. Y. 2001-02 in the case of Opel Shelters and in the A.Y. 2002-03 in the case of D.S. Kulkarni & Associates. We thus following the decision in the case of Hiranandani Akruti JV Vs DCIT (supra) hold that amended provisions u/s 80IB(10) w.e.f. 01.04.2005 are not applicable in the present case, hence assessees are eligible for the claimed deduction u/s 80IB(10) of the Act. We accordingly direct the A.O. to allow the claimed deduction to the assessee."
In the case of the appellant it is seen that the project 'Rolling Hills Scheme' was started by the commencement certificate issued on 30.03.2001 is an undisputed fact and, therefore, it can be seen that the project has prior to 31.03.2005. In respect of the case of the appellant, the issue is regarding the application of the definition of the built-up area introduced w.e.f. 01.04.2005 while before the Pune ITAT in the case cited (supra) of Opel Shelters, the issue was application of the amendment restricting commercial area to 2000 sq. ft. or 5% of the built-up area whichever is lower. This amendment restricting the commercial area was also introduced w.e.f. 01.04.2005 by the same Finance Act which introduced the definition of the built-up area. In view of the above, in my considered opinion, the ratio of the decision laid down in the above three cited decisions of Pune ITAT are clearly applicable to the facts of the case of the appellant. The project Rolling Hills Scheme have commenced construction much before the amendment and, therefore, it is not possible for the appellant to comply with the definition of built-up area introduced at a much later date i.e. 01.04.2005. Thus, in view of the decision of the jurisdictional ITAT, which has held that the amendment 24 restricting the commercial area is not applicable to the project started prior to 31.03.2005, similarly, in the case of the appellant the issue is of built-up area and as the aforesaid project has started prior to the amendment, the definition of built-up area as envisaged in the amended provisions of sub clause (d) to Sec. 80IB (10) w.e.f. 01.04.2005 is not applicable for the project was not in existence.
3.13 In view of the above fact and the ratio of the above decisions including that of the jurisdictional High Court and also the finding of the valuer with respect to the residential units being independent, the definition of built up area as per DC Rules of PMC will apply and thus all the tenements of the project are held to be having area of less than 1500 sq.ft. including the residential units 10, 11, 18, 21 and 22 whose area had been disputed by the A.O. 3.14 As regards Units No. 3 & 4 owned by Mr. Sharad Varma and Mr. Chitravanshi Rajat, the govt. approved valuer has affirmed that these two units are separate and independent residential units and sold to two independent buyers i.e. Unit No. 3 to Mr. Sharad Varma and Unit No. 4 to Mr. Chitravanshi Rajat by way of separate sale deeds. It has also been demonstrated that the PMC has not only issued two occupation certificates for the two units but issued separate property tax bills. Even the electricity meters have been claimed to be separate and also the two units have two separate entrances. It has also been contended that the above two units have two independent kitchen-cum-dining rooms and separate gas connections, a fact which also has been affirmed by the valuer Shri. Ruparel in the valuation report submitted before the Assessing Officer. The appellant has also claimed that the unit holders after taking possession of the units have put a small door in the common wall for the convenience of their old parents, however, the identity as two independent residential units has been maintained. This fact has also been confirmed by the valuer in its report, who has also submitted the photograph of the door connecting the two units but has categorically mentioned that the two units are independent units. The Assessing Officer on the other hand has relied on the statement recorded of Mr. Chitravanshi Rajat during the assessment proceedings who had stated that the builder himself had constructed the door though this fact was later denied by Shri. Rajat by way of an affidavit. The other person Shri. Sharad Varma had subsequently confirmed to the fact of having built the door after taking possession of the residential unit. The Assessing Officer has claimed the affidavit to be an afterthought and has not taken into consideration its content as well as the letter filed by Mr. Sharad Varma in this regard. The appellant in any case has not denied the putting up of the door for the convenience of their old parents. The Assessing Officer has, however, not looked into and considered the other aspect of the unit which indicated their independent existence such as the sale deed, electricity meter/bills, municipal tax records, plans, society charges etc before arriving at the correct conclusion. The appellant's contention that the two units had been conceptualized, planned and executed as two separate independent residential units ab initio having two independent 25 kitchen cum dining room and separate gas connection has also been affirmed by the valuer appointed by the Assessing Officer. Thus in view of the above fact, the existence of two independent units cannot be doubted and the reliance placed by the Assessing Officer on the statement of one of the unit holders Shri. Chitravanshi Rajat depicts only half the truth as the other unit holder was never examined by the Assessing Officer, and the Assessing Officer has also not taken into consideration other relevant material brought on record. Though the two unit holders are related to each other being brothers, the restriction for not selling residential units of the same project to different family members of the same family was not in statute at the relevant point of time and this restriction was introduced in Sec. 80IB (10) by way of clauses (e) and (f) w.e.f. 1-4-2010, which restricts the developer / builder to allot more than one residential unit to the same person or to two individuals of the same family and, therefore, the law as was applicable in the assessment year has no provision placing any such restriction of selling units to members of the same family. The fact brought on record clearly indicate that the appellant has sold the flats separately to two persons and, therefore, the legal independence of the two residential units in the eyes of law cannot be denied to be existing. It is also evident from the material on record that the appellant was not selling different flats in the project as combined units and in no other residential units the instance of a door between two units has been found by the Assessing Officer. Thus it can be held that the action of putting a door was as per the wish of the two owners for the convenience of their old parents.
3.15 In the case of Thistle Properties (P) Ltd Vs ACIT, 138 TTJ 538 (Mum), the deduction u/s 80IB (10) was denied as it was found that in a housing project all the 104 units were joined and sold to two members of the same family and, therefore, it was visible that the appellant had developed the project in a manner to defeat the purpose of the restriction placed in clause (c) of 80IB(10) of the IT. Act. In the present case before me, no such fact exists. The third member judgment in the case of Sanghvi and Doshi Enterprises Vs ITO, (2011) TTJ (Chennai)(TM) in a similar fact has held that where flats are sold vide separate agreements and if the flats are joined after sale, the builder cannot be penalized for the same. This proposition has been accepted for the period falling before 1-4-2010 when clauses (e) and (f) were introduced in Sec. 80IB(10) w.e.f. 1-4-2010. In the case of G.V. Corporation Vs. ITO (2010) 43 DTR 329 (Mum), the issue of the merger of two units has been considered and the Tribunal has held as under :
It is common knowledge that members of the same family who purchase separate residential units adjacent or contiguous to each other often join them by breaking down a wall or by opening a door-way or in many other ways so that the entire family lives together and gets more space to live. In many cases, a request is made by the purchasers to the builder or developer of the housing project to join the flats/residential units and the request is carried out by the builder. In such cases, it is not possible to hold that the builder built the residential flat of more than 1,000 sq. ft. of built-26
up area. There is no evidence on record to suggest that the assessee itself advertised that the flats were of more than 1,000 sq. ft. and that merely to get the benefit of s. 80-IB he drew the plans in such a manner that each residential unit was shown as not more than 1,000 sq. ft. of built-up area. It is not also the case of the CIT that each flat in the housing projects undertaken by the assessee could not have been used as an independent or self- contained residential unit not exceeding 1,000 sq. ft. of built-up area and that there would be a complete, habitable residential unit only if two or more flats are joined with each other, which would ultimately exceed 1,000 sq. ft. of built-up area. In such a situation, merely because 9 out of 140 purchasers desired to join the flats purchased by them into one single unit, which exceeded 1,000 sq. ft. of built-up area, cannot disentitle the assessee to the deduction. If each residential unit does not exceed the built-up area of 1,000 sq. ft., the fact that they were joined together by the purchasers for better living or for more space or for any other reason does not disentitle the assessee to the claim for deduction under s. 80-IB.
3.15.1 In Mudhit Madanpal Gupa Vs ACIT, ITAT (2011) 51 DTR 217, the Mumbai ITAT held that where the facts clearly show that the / builders/developer had no intention to construct and sale residential units in excess of the limit prescribed, the deduction cannot be denied only because two of the owners combined their units as per their requirements. Therefore, after considering the different decisions available on this issue, the principle that is emerging is that the benefit can be denied if it could be found on available facts that the builder/developer had the intention to sale residential units to different persons in a manner so that it can be combined and the purpose of clause (c) of section 80IB(10) gets defeated. Thus after carefully considering the fact, which clearly shows that the residential units were sold to two different individuals, the individual ownership is legally enforceable, the individuality of the ownership exists before different authorities, organization like PMC for corporation tax, MSEB for electric meters, housing society for membership, it will be difficult to hold that the appellant has constructed units 3 & 4 as one residential unit. The construction of a small door connecting the units has been driven by the requirement of the individual buyers for the convenience of the old parents, having no complicity of builder. Therefore, in the facts and circumstances of the case the finding to that extent is difficult to be upheld and the earlier finding that the combined measurement is also less than 1500 sq.ft without application of the definition of built up area also goes in favour of the appellant.
3.16 In view of the above facts and the law as has been propounded by different Tribunals and High Court, the disallowance made by the Assessing Officer is not sustainable in the facts of the case and, therefore, the same is directed to be deleted and ground of appeal No I [1.1 to 1.3] raised by the appellant are liable to be allowed."27
6. Aggrieved with such order of CIT(A) the Revenue is in appeal before us with the following grounds :
"1) The learned Commissioner of Income tax (Appeals) erred in allowing deduction of Rs.2,24,44,980/- u/s.80IB(10) of Income tax Act, 1961.
2) The learned Commissioner of Income tax (Appeals) erred in allowing the above deduction even though some of the flats exceeded the built up area of 1500 sq.ft. violating the specific provisions u/s.80IB(10)(c) of Income tax Act, 1961.
3) The learned Commissioner of Income tax (Appeals) has erred in allowing the above deduction relying upon the Affidavit filed later on rather than the statement of the flat owner before the Assessing Officer that the flats were conjoined by the builder before sale.
4) The learned Commissioner of Income tax (Appeals) has erred in allowing the above deduction even though such joining of the flats was not approved in the original or revised plan passed by the Pune Municipal Corporation (PMC).
5) The learned Commissioner of Income tax (Appeals) has erred in holding that provision of section 80IB(14)(a) are prospective and not clarificatory and, therefore, definition of built up area as per PMC Rules would apply prior to 01.04.2005.
6) Without prejudice to the above, the learned Commissioner of Income tax (Appeals) has erred in ignoring that built up area of one of the conjoint flat exceeded 1500 sq.f.t even as per the definition of PMC Rules.
7) The appellant craves leave to add, alter or amend any or all the grounds of appeal."
7. We have considered the rival arguments made by both the sides, perused 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 relied on by both the sides. We find the AO in the instant case disallowed the claim of deduction u/s.80IB(10) on the ground that some of the units had 'built up 28 area' exceeding more than 1500 sq.ft. and therefore the assessee does not fulfil one of the conditions laid down in provisions of section 80IB(10) of the I.T. Act. We find the Ld.CIT(A) allowed the claim of the assessee on the ground that the 'built up area' of none of the flats exceed 1500 sq.ft. From the various details filed by the assessee in the paper book, we find the assessee AOP in the instant case has commenced the housing project namely "Rolling Hills" at Baner Road, Pune on 30-03-2001 as per copy of the commencement certificate placed at page 8 of the paper book.
Similarly, the project was completed on 27-03-2003 as per the part completion certificate placed at page 10 of the paper book. Since the assessment year involved in the instant case is A.Y. 2004-05, therefore, the question of applying the definition of 'built up area' which was introduced w.e.f. 01-04-2005 does not arise in this case in view of the decision of the Pune Bench of the Tribunal in the case of Opel Shelters Pvt. Ltd., (Supra). According to the said decision, the 'built up area' is to be measured as per the Pune Municipal Corporation Rules. Therefore, the question of including the terrace, balcony etc., in the 'built up area' does not arise. Similar view has been taken by the Pune Bench of the Tribunal in various other decisions. Once the same is excluded from the 'built up area', the total area of each of the unit will be less than 1500 sq.ft. as per report of the Departmental Valuer.
Therefore, the Ld.CIT(A) in our opinion is justified in allowing the claim of the assessee on this issue.
297.1 As regards the inclusion of staircase area in the 'built up area', we find although the departmental valuer has excluded the same from the 'built up area', the AO has considered the same in the 'built up area'. The action of the AO in our opinion is not correct since in a row house there will be a stair case from the ground floor to the first floor and the same cannot increase the 'built up area' of the row house. This in our opinion is within the boundary of the plinth area and therefore the same has to be excluded which the Departmental Valuer himself has correctly done. Further, the Departmental Valuer has considered the 'built up area' as per the Pune Municipal Corporation's rules and regulations and therefore the Ld.CIT(A) has correctly appreciated the facts and has correctly excluded the same from the total 'built up area'.
7.2 So far as the row house No.18 belonging to Shri Harish Warrier is concerned, we find the area of the said unit was measured by the earlier departmental valuer one Shri Khandangale, a report of which is placed at pages 74 to 77 of the paper book. He had computed the area at 1855 sq.ft. While doing so, he included therein the terrace area and the parking area.
However, according to the succeeding Departmental Valuer Shri Harshad Ruparel, the area of this row house as per Pune Municipal Corporation rules is only 1081 sq.ft. after excluding the balcony etc. If the balcony etc. are included, then also the total area comes 30 to 1363.04 sq.ft., i.e., including the balcony. Thus, by both the methods it is less than 1500 sq.ft. Since the Ld.CIT(A) has correctly appreciated the facts, therefore, we find no infirmity in the same.
7.3 So far as the observation of the AO that certain row houses were combined and the total 'built up area' exceeds 1500 sq.ft.
after combining, we find the Departmental Valuer has evaluated this issue in his report, a copy of which is placed at pages 80 to 83 of the paper book. So far as row house Nos. 3 & 4 belonging to Shri Sharad Varma and Shri Chitravanshi Rajat are concerned, we find from the details furnished in the paper book that both the units have separate occupation certificate, separate corporation tax assessment, separate electricity meters etc. The affidavit of the owner Shri Chitravanshi Rajat to the effect that he has combined the row houses later on for the convenience of his parents is also on record. The kitchen and entrance doors are also separate. The report of the valuer appointed by the AO shows that none of the units as per Pune Municipal Corporation rules exceed 1500 sq.ft.
Therefore, we find no infirmity in the order of the Ld.CIT(A) who has allowed the claim of the assessee by following various judicial decisions. The Ld. Departmental Representative could not point out any adverse material so as to take a contrary view than the view taken by the Ld.CIT(A) who has followed various decisions while allowing the claim of the assessee. In this view of the 31 matter and in view of the detailed reasoning given by the Ld.CIT(A) while allowing the claim of deduction made by the assessee u/s.80IB(10), we find no infirmity in his order.
Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed.
8. In the result, the appeal filed by the Revenue is dismissed.
Pronounced in the open court on 02-12-2014.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune Dated: 02nd December, 2014
Satish
Copy of the order forwarded to :
1. Assessee
2. Department
3. The CIT(A)-II Pune
4. The CIT-II, Pune
5. The D.R, "B" Pune Bench
6. Guard File
By order
// True Copy //
Assistant Registrar
ITAT, Pune Benches, Pune