Income Tax Appellate Tribunal - Hyderabad
M/S Environ Estates Private Limited, ... vs Dcit., Circle-2(2), Hyderabad, ... on 27 July, 2017
ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ' B ' Bench, Hyderabad
Before Smt. P. Madhavi Devi, Judicial Member
AND
Shri S.Rifaur Rahman, Accountant Member
ITA Nos.1760, 1761 & 1762/Hyd/2014
(Assessment Years: 2007-08 to 1009-10)
M/s. Environ Estates Vs Dy. Commissioner of
Private Limited Income Tax, Circle 2 ( 2 )
Hyderabad Hyderabad
PAN: AABCE 0796 K
(Appellant) (Respondent)
For Assessee : Shri A.V. Raghu Ram
For Revenue : Smt. N. Swapna, DR
Date of Hearing: 06.06.2017
Date of Pronouncement: 27.07.2017
ORDER
Per Smt. P. Madhavi Devi, J.M.
All the three appeals are filed by the assessee for the A.Ys 2007-08 to 2009-10 respectively against the orders of the CIT (A)-III, Hyderabad, dated 19.09.2014.
2. Brief facts of the case are that, the assessee company which is engaged in the business of construction and sale of apartments, filed its return of income for the A.Y 2007-08 on 30.10.2007 admitting total income of Rs.3,47,890 after claiming deduction of Rs.60,30,579 u/s 80IB of the Act. The return was initially processed u/s 143(1) of the Act. Subsequently, the case was taken up for scrutiny and the assessment was completed u/s 143(3) of the Act on 1.12.2009, by accepting the returned income.
Page 1 of 23ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
Subsequently, the case was reopened by issuance of notice u/s 148, dated 5.3.2013. The AO observed that the assessee company started construction of residential apartments at Nagole, Hyderabad, in an area of 2.5 acres, by obtaining the necessary approval from HUDA, vide letter dated 27.05.2005 and building permission from LB Nagar Municipality, vide letter dated 24.10.2005. He observed that the total proposed flats to be constructed for the said venture are as under:
Block-A: 140 Flats of 2 B/R @ 1000 sft.
Block-B: 100 Flats of 3 bed room with built up area
of 1240 & 1460 sft.
The AO observed that the assessee company has to complete the project within five years from the end of the financial year in which the project was approved i.e. from the financial year 2006- 07 to 2010-11 and therefore, the project has to be completed by 31.03.2011. The AO therefore, asked the assessee to produce the project completion certificates issued by the local authority as required u/s 80IB(10)(a)(iii) and Explanation (ii) thereunder. Assessee, vide letter dated 30.09.2013 submitted that the assessee's project comprises of two blocks and construction of Block-A has been completed and the flats have been sold and the buyers have also occupied the flats, but due to severe slump in the real estate market, the assessee could not complete the construction of Block-B. It was submitted that since the assessee has fulfilled all the conditions precedent to claim deduction u/s 80IB(10) of the Act in respect of Block-A, the deduction u/s 80IB may be allowed proportionately for the profits attributable to Block-A only. AO however, disallowed the claim by observing as under:
Page 2 of 23ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
i) The assessee obtained the approval for the housing project in entirety as one Project i.e. Block-A and Block-B and the assessee's land on which the housing project is built should have a minimum of one acre on actual basis and not on notional basis;
ii) The assessee could not furnish completion certificates issued by the local authority for Block-A; and
iii) In the balance sheet of the A.Y 2011-12, the assessee company has shown work-in-progress of Nagole project which is the subject matter of deduction u/s 80IB, which means the assessee could not complete the project in its entirety within the due date.
Thus, the deduction was denied. On appeal to the CIT (A), the assessee's appeal was dismissed and the assessee is in second appeal before us by raising the following grounds of appeal:
"1. On the facts and in the circumstances of the case, the order of the learned CIT(A) is perverse, illegal and against the facts of the case and law, and prejudicial to the interests of the appellant.
2. The CIT(A) erred in sustaining the order of the Assessing Officer denying deduction under section 80IB of the Income Tax Act, 1961 to the Appellant.
3. The CIT(A) failed to appreciate that the Appellant had completed the project well within time but was unable to secure completion certificate on account of alleged deviations.
4. Without prejudice, the CIT(A) failed to appreciate that the Appellant has completed its project in two phases, Block-1 and Block-2 each of them consisting flats of less than 1500 sft and both the blocks were built on more than 1 acre of land and hence qualify for deduction under section 80IB( 10) of the I.T. Act independently. The C!T(A) failed to appreciate that his predecessor for AY 2010-11 has granted relief to the Appellant on proportionate basis as the Page 3 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
Appellant complied with all the requirements with respect to Block-1".
3. Further, vide letter dated 24.6.2016 has raised the following two additional grounds of appeal:
"1. On the facts and in the circumstances of the case, the authorities below erred in insisting the (completion certificate' which was not contemplated under the provisions of Municipal Corporation Act, and in rejecting the claim of deduction under section 80IB(10) of the Act on the alleged ground that the said certificate was not filed.
2. In the absence of requirement of filing (completion certificate', the Authorities below ought to have granted deduction in respect of in respect of the one of the towers wherein all the units were constructed and the tower as such is spread over more than 1 acre of land as required under the Act."
4. Further, the assessee has also filed additional evidence in the form of a Paper Book containing pages 31 to 62 and submitted that the said evidence is necessary for adjudication of the case and therefore, may be admitted and remanded to the file of the AO for consideration. In support of the assessee's contention that the Block-A itself should be considered as a separate housing project and proportionate deduction u/s 80IB(10) of the Act should be allowed, he placed reliance upon the decision of 'B' Bench of the Tribunal at Pune in the case of ITO vs. Rajendra Construction in ITA No.979 & 980/PN/2012 dated 10th October, 2014 and also the decision of the Income Tax Appellate Tribunal Bench at Mumbai in the case of Mudhit Madanlal Gupta vs. ACIT reported in (2011) 51 DTR 0217. In support of his Page 4 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
contention that there is no provision in the local laws for issuance of completion certificate, the learned Counsel for the assessee relied upon the Hyderabad Municipal Corporation Act of 1955 which provides for issuance of only occupancy certificates and not the completion certificates. He placed reliance upon the decision of the Coordinate Bench at Bangalore in the case of Keerthi Estates and also of Hon'ble Karnataka High Court in the case of CIT vs Ittina Properties (P) Ltd in ITA No. 556 of 2013 dated 15.7.2014. Further, he also submitted that for the A.Y 2010-11, the CIT (A) has granted relief to the assessee by considering various judicial precedents and remanded the issue to the file of the AO for verification as to whether the assessee has fulfilled the conditions u/s 80IB of the Act including the covered area. He therefore, prayed that as per the rule of consistency and uniformity for the relevant A.Y also, the appeal may be remanded to the AO.
5. The learned DR, on the other hand, opposed the admission of the additional grounds as well as the additional evidence filed by the assessee. He submitted that as rightly held by the AO, the assessee has obtained the approval of the project as a whole and therefore, the entire project has to be completed by 31.03.2011. Even for Block-A, he submitted that the assessee has not furnished the completion certificate as required under the provisions of section 80IB(10). He placed reliance upon the decision in the case of Tribunal at Hyderabad in the case of Sainath Estates Pvt. Ltd vs. Dy. CIT dated 8.2.2013 wherein it has been held that the completion certificate issued by the Municipal Page 5 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
Authorities is mandatory without which the deduction u/s 80IB(10) cannot be allowed.
6. Having regard to the rival contentions and the material on record, we find that the assessee has obtained the approval of the project for both Block-A & Block-B but, however, it is now claiming deduction only in relation to profits attributable to Block-A as only Block-A has been constructed within due date. But, since the assessee has not furnished the completion certificate issued by the local authority, the revenue is disputing this fact also. The Revenue has disallowed the claim also on the ground that the entire project has to be completed before the due date and completion certificates to that effect have to be furnished to be eligible to claim the deduction u/s 80IB of the Act. Grounds 1 & 2 raised by the assessee are general in nature, while Grounds 3 & 4 are with regard to the claim of deduction pertaining to Block-A. So, let us therefore, examine if the assessee is eligible for proportionate deduction u/s 80IB(10). For the sake of clarity and ready reference, the relevant provision is reproduced hereunder:-
"Section 80IB(10): The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, [2008] by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,--
(a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,--
(i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008;
(ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004 84[but not later than Page 6 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
the 31st day of March, 2005], within four years from the end of the financial year in which the housing project is approved by the local authority;
(iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority.
Explanation.--For the purposes of this clause,--
(i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority;
(ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority;"
7. The question before us is where a housing project consists of different buildings/blocks/wings, whether on completion of only one or more of such buildings/blocks/wings, the developer would be eligible for deduction u/s 80IB(10) of the Act in respect of the profits relatable to such completed building/block/wing?. We find that similar question had arisen before the 'B' Bench of the Tribunal at Mumbai in the case of Mudhit Madanlal Gupta (cited Supra) and the Tribunal after considering the judicial precedents on the issue, has held as under:
"18. Coming to the second objection raised by the Revenue i.e. that the assessee has not completed the project. This objection is raised on the basis that since the project consisted of four wings i.e. A, B, C and D and since completion certificate has not been filed for D wing and, therefore, the project cannot be said to have been completed. This would lead us to the question as to what is the meaning of a housing project. For understanding the meaning of the housing project, we would straight way go to the case law cited by the ld. counsel for the assessee.Page 7 of 23
ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
19. In the case of Saroj Sales Organization (supra), the firm M/s. A.W.Pereira & Ors. were the owners of certain plots of land and M/s. Kenwood Agency Pvt. Ltd. acquired the development rights of these plots of land from the said owners. A building plan for construction of eleven wings was made and got sanctioned from the Municipal authorities. The principal developers i.e. M/s. Kenwood Agency Pvt. Ltd., constructed two wings viz., A and B of this building and granted the sub- development rights for the remaining nine wings of the building to the assessee firm i.e.Saroj Sales Organisation (supra). As per this agreement, assessee firm was to construct six wings of the aforesaid building which were named as 'Nisarg'. Later on another agreement was entered into by which assessee was entitled to construct three more wings of the building which was to be named as 'Breezy Corner'. The assessee claimed deduction under section 80-IB(10) in respect of 'Nisarg' complex. The claim was rejected by the revenue authorities on the basis that only one building having eleven wings was approved by the Municipal authorities and, therefore, construction of six wings of the same building of the assessee could not be treated as a separate independent housing project. Moreover, if three wings consisting of 'Breezy Corner' were included, some of the flats in 'Breezy Corner' were more than 1000 sq.ft. and, therefore, assessee violated the conditions prescribed under section 80- IB(10). The Tribunal considered the issue in detail and observed vide para 12 as under:
"12. There is no dispute that the housing project in the case of 'Nisarg' is approved before 31st March, 2005. The substituted section extended the benefit of 100 per cent deduction of income derived from housing projects approved up to 31st March, 2007 but simultaneously imposed a restriction on the area of shopping complex that is permissible to be included in the housing project by inserting the sub-section 80- IB(10)(d) w.e.f. 1st April, 2005. The Legislature nowhere provided the definition of a housing project either in the section or anywhere in the IT Act. Is it open for the Revenue to consider all the housing activities undertaken by the assessee as one project or different projects ? The Concise Oxford Dictionary (9th Edition) defines a 'project' as "a plan, a scheme, a planned undertaking, a usually long-term task undertaken by a student to be submitted for assessment. The commencement certificates in respect of building No. 1 were received by the principal developer on 7th March, 2001 and 30th March, 2001 respectively. But the commencement Page 8 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
certificates for various wings were approved by the municipality as per the details given below : Wing-C on 10-9-2001 Wing-E on 11-9-2001 Wings-C, D, E, F & G on 27-3-2002 Wings-F & G on 7-5-2002 Wing-Fl on 23-9-2003 All the above wings are part of 'Nisarg' block and independently satisfies the necessary approval of a housing project. It really makes no difference whether M/s. Conwood Agencies had applied for or the assessee had applied to the municipal corporation to make any difference in deciding the assessee's claim for deduction under section 80-IB(10) of the Act. It must be appreciated that the main developer was M/s. Conwood Agencies (P) Ltd. The sanction plan have only approved the construction of the dwelling units of less than 1,000 sq. ft. in all the wings of the said project. There is no dispute that all the flats in these wings contain the eligible units. It is not open to the Revenue to conclude the next project as part of the earlier housing project just to deny the statutory relief which the assessee is entitled in respect of the eligible housing project. In that way the legislative intention to give a relief to the assessee who are undertaking the low housing projects will get defeated. 'Breezy Corner' project which was meant for higher strata of the society. The assessee has segregated the same and in no way mixed in these projects either in the design or in the structural manipulation or in the provision of amenities and the assessee has not claimed any relief in respect of project which admittedly does not admit the test laid down under section 80-IB(10) of the Act. In our view, combining these two projects into one will lead to a result which manifestly will be unjust and absurd and defeat the very provisions of deduction sections. Unless there is a clear intention of the Legislature the Revenue cannot be permitted to do so. After all the assessee have obtained different commencement certificates and started on different periods of time. They are separate by time, space and statutory approvals and even in designs, maintenance of separate books of account. The Revenue, in our view, is not right in treating both the projects as one Page 9 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
and integrated without the facts warranting for such conclusion. In identical situation in the case of Bengal Ambuja Housing Development Ltd. (supra), the assessee was having a housing project which consisted of 261 residential units and the individual flat size varied between 800 sq. ft. to 3,000 sq. ft. and the total built-up area of that housing project was 3,46,599 sq. ft. The said project contained 150 residential units with a built-up area of individual unit of less than 1,500 sq. ft. aggregating to 1,59,005 sq. ft. The remaining built-up area of 1,87,593 sq. ft. was consumed by other residential units wherein the size of individual unit exceeded 1,500 sq. ft. of built-up area. The Assessing Officer on the basis of these facts was of the view that since the units comprised in the housing project of the assessee was more than 1,500 sq. ft., the assessee's claim for deduction under section 80-IB(10) was not entertained. The Tribunal after appreciating the clear provisions of section 80- IB(10), which does not speak regarding such denial of deduction in case of profit from a housing complex containing both the small and large residential units and since the assessee has only claimed deduction on account of smaller qualifying units by fulfilling all the conditions as laid down under section 80-IB(10), the denial of claim by the assessee was held to be based on narrow and restricted interpretation of the provisions of clause (c) of section 80-IB(10) of the Act. They drew support from the decision of the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT (1992) 104 CTR (SC) 116 : [1992] 196 ITR 188 (SC), wherein it was held that provisions should be interpreted liberally and since the present case also, the assessee by claiming pro rata income on qualifying units which satisfied the condition laid down by section 80-IB(10), the assessee's claim should accepted. This order of the Tribunal was taken up in appeal before the Kolkata High Court, the Kolkata High Court dismissed the appeal arising from this order. The ratio laid down by this Tribunal order, in our view, based on the same set of facts as exist in our present case are equally applicable and the assessee's claim for deduction of section 80-IB(10) in respect of the eligible units of this housing project is therefore, deserves to be accepted.
13. As regards the objection of the Assessing Officer that the permissible shopping area of housing project Page 10 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
exceeds 5 per cent, the assessee is not entitled for relief under section 80-IB(10). We are of the view that the housing project were approved before 31st March, 2005 and for such project which were so approved, there was no stipulation as to the shopping complex area is permissible in the project. As already stated earlier that the amendments were subsequently made while extending the deduction of income from housing project approved up to 31st March, 2007, the denial of deduction, in our view, is clearly not in accordance with law.
14. One of the objections of the Assessing Officer in his assessment order is failure of the assessee to obtain a completion certificate in respect of 6 wings in the block 'Nisarg' from which it has returned the income in the asst. yr. 2005-06. The assessee has filed completion certificate issued by the local authority in respect of 3 wings viz. C, D and E before submission of its return and for the rest of the wings viz. F, F1 and G, it had applied for such certificate on 17th Aug., 2004, but the same was not received till date of filing of the return. It was reported in the course of hearing by the learned counsel for the assessee that the occupation certificate in respect of the remaining wings i.e. F, F1 and G has also been issued by the municipal authorities on 20th Dec., 2006. Copies of such certificates issued by the local authorities have been placed in the paper book filed by the learned counsel for the assessee. It was explained that since the housing project in this case has been approved by the local authorities before 1st April, 2004 and the construction is required to be completed before 31st March, 2008. As the occupation certificate in respect of the wings F, F1 and G have been issued on 20th Dec., 2006, i.e. prior to 31st March, 2008, the condition relating to completion of the construction as prescribed in section 80-IB(10)(a) should also be taken to be satisfied.
15. In the result, the assessee's claims for deduction under section 80-IB(10) are accepted and the appeal is to be treated as allowed. The Assessing Officer is directed to allow the deduction as claimed by the assessee in the light of the above discussions."
Thus, from the above it is clear that Legislature has not provided any definition of the housing project and, therefore, the definition has to be construed by making reference to the Page 11 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
dictionary and as long as the segregated blocks are being eligible for deduction under section 80-IB(10), then same shall be construed as eligible housing project and deduction has to be allowed accordingly. In fact, in this decision the Tribunal has referred to the decision of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra). In that case the assessee had undertaken construction of a housing project Eastern Metropolitan Bye-Pass, which was also known as Udayan. This project, inter alia, included Udita-III housing project which was under construction during the relevant year and such construction was being made on land measuring 4.2 acres. The said housing project consisted of 251 residential units and the individual flat size varied between 800 sq.ft. to 3000 sq.ft. The assessee claimed deduction under section 80-IB(10) on the part of the project in which 150 residential units were constructed where area was less than 1500 sq.ft. The deduction was denied by the Revenue authorities. In appeal the Tribunal allowed the deduction vide para 22 which reads as under:
"22. It is apparent from the perusal of section 80- IB(10) that the section has been enacted with a view to provide incentive for businessmen to undertaken construction of residential accommodation for smaller residential units and the deduction is intended to be restricted to the profit derived from the construction of smaller units and not from larger residential units. Though the Assessing Officer has denied the claim of the assessee observing that larger units were also constructed by the assessee, at the same time, it is also a fact on record that the assessee had claimed deduction only on account of smaller residential units which were fulfilling all the conditions as contained in section 80-IB(10) and the same has not been disputed by the Assessing Officer also. We have also noted down the fact that even the provision as laid down in section 80-IB(10) does not speak regarding such denial of deduction in case of profit from a housing complex containing both the smaller and large residential units and since the assessee has only claimed deduction on account of smaller qualifying units by fulfilling all the conditions as laid down under section 80-IB(10), the denial of claim by the assessee is on account of rather restricted and narrow interpretation of provisions of clause (c) of section 80-IB(1) while coming to such conclusion, we also find support from the order of the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. (supra), Page 12 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
wherein it was held that provisions should be interpreted liberally and since in the present case also, the assessee by claiming pro rata income on qualifying units has complied with all the provisions as contained in the said section, in our considered opinion, such claim of the assessee was rightly allowed by the ld. CIT(A) by reversing the order of Assessing Officer."
This matter was carried by the Revenue before the Hon'ble Calcutta High Court which was dismissed in I.T.A. No. 458 of 2006 by holding that no substantial question of law was involved [copy of this order is available at pages 26-27 of the paper book containing case laws]. From the above it becomes clear that even the Hon'ble Calcutta High Court confirmed the fact that deduction under section 80-IB(10) is allowable in respect of the part of the project which was eligible for deduction.
20. Again in the case of Vandana Properties (supra) he assessee was engaged in the construction of various flats consisting of A, B, C, D and E wings on the land area of 2.36 acres. The assessee claimed deduction under section 80-IB(10) only in respect of building 'E'. This deduction was denied by the Revenue authorities on the basis that the size of the plot was less if only E block was completed [This issue we shall deal later while dealing with the second objection], and the block E could not be considered as a separate housing project. The deduction was further denied on the basis that size of the flat was more than the prescribed size [this issue has already been decided by the CIT(A) in favour of the assessee in the case before us].
21. The issue regarding definition of housing project has been dealt by the Tribunal vide paras 10 & 11 wherein the decision in the case of Saroj Sales Organisation (supra) has been followed. The relevant paras 10 & 11 reads as under:
"10. The first issue is to be decided before us is the interpretation of the phrase "housing project" which is contemplated in section 80-IB(10) of the Act. There is no definition of the term 'housing project' given either in the section 80-IB or in the Act itself. But so far as section 80HHBA which provides for a deduction in respect of profits and gains derived from the execution of the housing project which are awarded on the basis of global tender and also aided by the World Bank, deduction is allowed as prescribed in sub-section (1) to section 80HHBA. In the said Page 13 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
section, the Legislature had defined the expression "housing project" by way of Explanation to mean that project for the construction of any building, road, bridge or other structure in any part of India. The concept of housing project in section 80HHBA is much more wider, but so far as section 80-IB(10) is concerned, as there is no definition of expression "housing project", then definition given in section 80HHBA will be internal aid to decide whether housing project means the project of the group of the buildings or whether it can be the project of a single building also. As per the definition of housing project in section 80HHBA, housing project includes construction of "any building". If the legislature was desiring to define nature of the housing project for the purpose of section 80-IB(10), then either the specific definition would have been incorporated in the Act or it would have been explained by way of Explanation to section 80-IB.
11. In our opinion, the concept of housing project does not mean that there should be the group of the buildings and only then same is called as "housing project". In the present case, it is seen that initially, as per the documents on record i.e. copy of CC the assessee had planned for four independent buildings, but, so far as Wing 'E' is concerned, that was only planned when the status of the surplus land was converted as 'within ceiling limit' (WCL) and the assessee could get additional FSI for launching Wing 'E'. Another Co-ordinate Bench of the Tribunal has considered somewhat identical situation in the case of Saroj Sales Organisation (supra) and said decision of the Co-ordinate Bench of the Tribunal is more relevant also to decide issue before us. As in the said case, the different units of the building were completed step by step and it was the case of the Department that all the buildings were comprise of one project only. Rejecting the contention of the Revenue, it is held as under:"
Thus, again it is clear that the housing project does not necessarily have to be various group of buildings constructed on a particular land but it can also be a particular building or any building which is part of the large project.
22. This type of issue also came up for consideration before Bangalore Bench of the Tribunal in the case of Brigade Enterprises (P.) Ltd (supra). In that case assessee undertook Page 14 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
development of a project in an area of 22 acres 19 gunthas consisting of five residential blocks, row houses, oak tree place, a club community centre and school etc. The deduction under section 80-IB(10) was claimed in respect of two residential units only which if taken separately were eligible for relief. Assessing Officer treated the entire project as single project and denied the deduction. On appeal, CIT(A) allowed the relief and on further appeal by the Revenue, Tribunal confirmed the order of the CIT(A) by holding that group housing was approved as a master plan as a concept and the words "residential unit" in clause (c) of section 80-IB(10) means that deduction should be computed unit-wise.
23. In fact, the Special Bench of the Tribunal in the case of Brahma Associates (supra) while dealing with issue of deduction under section 80-IB(10) observed at para 105 as under:
"105. There may be cases where the total built-up commercial area is more than 10 per cent of total area. These projects, normally should not get benefit of exemption unless such undertaking can show that income from construction of residential dwelling units can be worked out separately and even after excluding the commercial use of plot, the project satisfies all the requirements of section 80-IB(10). In other words, in order that the profits from dwelling unit segment of the project is eligible for deduction under section 80-IB(10) in such a case, size of the plot, excluding portion under commercial unit, must be more than minimum area of one acre and residential units built on such area must satisfies condition of clause (c) of the provision. Above income of undertaking from project referred to above should be granted exemption under the statutory provision, as such income satisfy the purpose of the enactment. In any case, denial of deduction in such cases will be purely based on hyper-technical ground, because instead of seeking approval as residential- cum-commercial project for the entire project, the assessee could have as well taken separate approval for residential segment which, even on standalone basis, would have satisfied all the requisite conditions. Approval as residential project was not a condition precedent for grant of deduction under section 80-IB, and in city like Pune, there was no provision in the local regulation to approve project as a 'housing project'. There would be no legal justification to deny exemption to residential segment Page 15 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
of such a housing project, which satisfies conditions of section 80-IB(10) on standalone basis, merely because their project has been approved by local authority as a residential-cum-commercial project. If the income of the project pertaining exclusively to the construction of the residential units can be separately worked and other requirements of section are satisfied, there is no good reason to withhold grant of incentive to such income of the undertaking. Apart from the above, other undertakings exceeding above limit i.e. those with commercial built-up of more than 10 per cent of area, in our opinion, are not entitled to benefit of exemption as those undertakings have not worked in accordance with spirit and intendment of the statutory provision."
From the above, it is clear that whatever portion of the housing project is other wise found to be eligible has to be considered as a housing project for the purpose of deduction under section 80- IB(10).
24. From all the above decisions, it becomes clear that independent units are residential units and have to be treated as separate housing projects for the purpose of deduction under section 80-IB(10) as long as they fulfil the other conditions prescribed under the Act".
8. We also find that the Coordinate Bench of the Tribunal at Pune in the case of Rajendra Constructions in ITA No.979 & 980/PN/2012 dated 10.10.2014, has also held in favour of the assessee by observing as under:
"14. At this stage, we may also refer to the case of M/s Apporva Properties and Estates Pvt. Ltd. (supra). In the case of M/s Apporva Properties and Estates Pvt. Ltd. (supra), assessee claimed deduction u/s 80IB(10) of the Act in respect of a project by the name of Kumar Karishma Phase II. The Assessing Officer noted that the layout of the project was approved by the local authority in 1995 and construction started thereon and before 1998 construction of 'B' wing and residential buildings A-1 to A-4 was completed. It was Page 16 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
further noted by the Assessing Officer that as per the layout plan, assessee had to construct the residential building A-5 as it happened to be next unit in order of sequence. At that point of time, assessee regrouped the wings falling under the project by construing the buildings A-1 to A-4 as Phase-I and buildings A-is to A- 12 as Phase-II of the project. Since assessee's claim for deduction was limited to the Phase-II of the project, the Assessing Officer examined as to whether Phase-I and Phase-II were two different and distinct projects or that they were merely bifurcated to facilitate claim of deduction u/s 80IB(10) of the Act in relation Phase-II. As per the Assessing Officer, Phase-II was not a unique and distinct project but merely a part of the initially conceived singular project for which layout plan was sanctioned much before 1998 i.e. in 1995. It was also noted that there was separate provision for amenities, etc. for Phase-II project. In the background of such objections, the Tribunal upheld assessee's claim for deduction u/s 801B(10) of the Act in relation to the Phase-II project by making the following discussion :-
" That leaves us a question as to whether Kumar Karishma is to be treated as an integral and inseparable project or various projects of this project can be considered on a standalone basis. One of the major arguments in support of the entire project being treated as one project is common facility used by the flat owners but then we are unable to appreciate as to how mere fact of facilities being common can be used against the assessee's claim of separate project. It is very well possible that the amenities of one project can be used by the residents of other project and that alone cannot alter the character of independent project. As we Page 17 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
mentioned earlier, there are number of decisions of coordinate benches including Saroj Sales Organisation Vs. ITO (2008) 115 TTJ (Bom) 485 and CIT Vs. Brigade Enterprises (2008) 119 TTJ (Bang) 269 wherein it is held that as long as different blocks can satisfy the requirement of sec. 8olB(10) on a standalone basis, their claim cannot be rejected merely on the ground that they are part of larger layout. In the present case, there is no dispute that the assesses has constructed different blocks of residential buildings and he has not claimed deduction u/s 80IB(10) in respect of building which was not eligible for the same. It is not disputed that separate sanctions were granted by the Pune Municipal Corporation for the Phase-II of the project and that it satisfies the conditions of sec. 8olB(1o) on a standalone basis. As has been held by the coordinate benches the concept of housing projects does not mean that there should be a group of buildings and only then the same can be collectively called as housing projects. In the case of Saroj Sales Organisation (supra), while dealing with this contention the coordinate bench has observed as follows".
15. In our considered opinion, the aforesaid decision of the Tribunal is fully applicable to the facts of the present case inasmuch it is quite evident that separate building sanction has been granted by PMC in relation to the project of six buildings on which assessee has claimed deduction u/s 80IB(10) of the Act and the buildings plan for the three buildings is approved on a separate date, on which the assessee has not claimed any deduction u/s 80IB(10) of the Act. It is also clear that on a standalone basis, the project consisting of six buildings involving construction of 142 flats satisfies the condition prescribed in section 80IB(10){a) of the Act.
Page 18 of 23ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
16. Apart from the aforesaid, factually speaking also assessee has pointed out that the project comprising of six buildings (142 flats) and the project of three buildings (15 units) are distinct and cannot be considered as one project. It is sought to be pointed out that the two projects are separated by space; the building plan of the six buildings are ground plus three floors consisting of flats only.
Ground floor includes flats as well as parking area. In contrast, the three additional buildings approved subsequently are architecturally different. Building F approved subsequently has a ground floor only and includes six shops admeasuring about 109 square meters. Building G is parking plus two floors. The ground floor does not include any flat. Building H is a single row house and a standalone unit admeasuring about 90 square meters. The aforesaid facts were pointed out during the course of hearing before us, and it shows that the two projects are distinct.
17. Considered in the aforesaid light, in our view, the project of six buildings involving construction of 142 flats is to be considered as an independent housing project in order to evaluate assessee's claim for deduction u/s 80IB(10) of the Act. Thus, in our view, the CIT(A) made no mistake in concluding that assessee was eligible for claim of deduction u/s 80IB(10) of the Act in relation to the profits derived from construction of 142 flats comprised in six buildings, whose building plans was first approved on 05.11.204. In this manner, the action of the CIT(A) is hereby affirmed".
Page 19 of 23ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
9. In view of the above decisions, the assessee would be eligible for deduction u/s 80IB(10) of the Act, in respect of the profits derived from Block-A, provided it was completed within the time allowed and it independently satisfied the conditions laid down u/s 80IB(10). In fact, the CIT(A), in the assessee's own case for the A.Y 2010-11 has directed the AO to allow the deduction in respect of A Block after verifying whether the assessee has fulfilled the conditions u/s 80IB(10) of the Act. The Revenue appears to have accepted the said decision by not filing any appeal before the Tribunal. Further we also find that the assessee's entire project is on 2.5 acres of land and it is not known as to whether the land under Block-A would conform to the condition of being on more than one acre of land. Since this issue requires verification by the AO, we deem it fit and proper to admit the additional evidence and remit the matter back to the file of the AO for consideration as to whether Block-A fulfills the conditions of section 80IB and also whether the assessee has completed Block-A within the time permitted under the law.
10. As regards the completion of Block-A is concerned, undisputedly, the assessee has not obtained the completion certificate. The assessee has stated that it has not been able to obtain the completion certificate because of the deviations. But the assessee has filed the additional grounds that the completion certificate is not contemplated by the Municipal Corporation Act which is quite contradictory. The assessee has filed before us the copy of the relevant provisions of the Municipal Corporations Act Page 20 of 23 ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
and we find therefrom that section 455 of the said Act reads as under:
455. Completion of certificates, permission to occupy or use:-
(1) Every person shall, within one month after the completion of the erection or re-erection of building or the execution of any such work as is described in Section 343 deliver or send or cause to be delivered or sent to the Commissioner at his office, a notice in writing of such completion accompanied by a certificate in the form specified in the bye-law signed and subscribed in the necessary facilities for the inspection of such building or of such work and shall apply for permission to occupy the building.
(2) No person shall occupy or permit to be occupied any such building, or use or permit to be used the building or part thereof affected by any work, until:-
(a) permissions has been received from the Commissioner in this behalf; or
(b) the Commissioner has failed for twenty-one days after receipt of the notice of completion to intimate his refusal of the said permission".
11. Thus, the local Municipal laws do contemplate issuance of completion and occupancy certificates and if the authority does not reject the assessee's application within 21 days, it is deemed to have been issued. The assessee has not filed any evidence before us, that the assessee has ever approached the Municipal authorities for issuance of any certificate including for the regularization of the deviations. However, assessee has filed the additional evidence of assessments of property tax as proof of completion of the construction.
Page 21 of 23ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
12. The learned DR has relied upon the decision of the Coordinate Bench of the Tribunal in the case of Sainath Estates Pvr Ltd dated 8.2.2013 in ITA No.299 & 300/Hyd/2012 wherein it has been held that completion certificate is compulsorily to be produced. He also relied upon the decision of the Hon'ble Bombay High Court in the case of Brahma Associates in ITA NO.1194 OF 2010, dated 22.02.2011 in support of above contentions. At this stage, the learned Counsel for the assessee submitted that the assessee may be permitted to file the copy of the letter of the concerned Engineer/Architect who have certified that construction of the building was completed. However, since, the AO is required to verify whether Block A fulfils the conditions of section 80IB(10), we are of the opinion that the issue of completion of Block A also needs verification by the AO. The additional grounds filed by the assessee are therefore, rejected and the additional evidence is admitted and remanded to the file of the AO for all the three years. In view of the same, all the three appeals of the assessee are treated as partly allowed for statistical purposes.
13. In the result, appeals of the assessee are partly allowed for statistical purposes.
Order pronounced in the Open Court on 27th July, 2017.
Sd/- sd/-
(S.Rifaur Rahman) (P. Madhavi Devi)
Accountant Member Judicial Member
Hyderabad, dated 27th July, 2017.
Vinodan/sps
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ITA Nos 1760 to 1762 of 2014 Environ Estates P Ltd Hyderabad.
Copy to:
1 Shri A.V. Raghu Ram & P. Vinod, Advocates, No.610 Babukhan Estate, Basheerbagh, Hyderabad 500001 2 Dy. CIT, Circle 2(2) 8th Floor, I.T. Towers, AC Guards, Hyderabad- 500004 3 CIT (A)-III Hyderabad 4 CIT - II Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order Page 23 of 23