Income Tax Appellate Tribunal - Pune
Manas Developers, Bhusawal vs Assessee on 23 September, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA No. 1107/PN/2011
(Assessment Year 2007-08)
ITO, Ward-2(1), Jalgaon .. Appellant
Vs.
M/s. Manas Developers,
C/o. Colour Stop, Khadka Road,
Bhusawal, Dist :Jalgaon
PAN No. AAMFP1444J .. Respondent
ITA No. 1504/PN/2011
(Assessment Year 2008-09)
ITO, Ward-2(1), Jalgaon .. Appellant
Vs.
M/s. Manas Developers,
C/o. Colour Stop, Khadka Road,
Bhusawal, Dist :Jalgaon
PAN No. AAMFP1444J .. Respondent
ITA No. 1639/PN/2011
(Assessment Year 2008-09)
M/s.Manas Developers,
C/o. Colour Stop, Khadka Road,
Bhusawal, Dist :Jalgaon
PAN No. AAMFP1444J .. Cross objector
Vs.
ITO, Ward-2(1), Jalgaon .. Appellant in the
appeal
Appellant by : Shri Nikhil Pathak
Respondent by : Shri Anil P. Chaware
Date of Hearing : 23-09-2013
Date of Pronouncement : 30-09-2013
ORDER
PER R.K. PANDA, AM :
ITA No.1107/PN/2011 filed by the Revenue is directed against the
order dated 30-06-2011 of the CIT(A)-II, Nashik relating to A.Y. 2007- 2008. ITA No.1504/PN/2011 and ITA No.1639/PN/2011 are cross appeals, 2 the first one filed by the Revenue and the second one filed by the assessee and are directed against the order dated 23-09-2011 of the CIT(A)-II, Nashik for A.Y. 2008-09. Since common issues are involved in all these appeals, therefore, these were heard together and are being disposed of by this common order.
ITA No.1107/PN/2011 (A.Y. 2007-08) :
2. Ground of appeal No.1 by the revenue reads as under :
"On the facts and in the circumstances of the case, the CIT(A) erred in allowing the deduction u/s.80IB(10) without appreciating the following facts of the case :
(i) That the land is in the name of the partners and not in the name of the firm.
(ii) That the project as a whole has not been approved by the Local authority.
(iii) That one of the unit sold to Mr. Rajkumar Parwani is in excess of 1500 sq.ft.
(iv) That the completion certificate from local lauthority has nto been obtained till 27-02-2009.
(v) That the pamphlet of the project shows the planned independent bungalows having built up area of 1752 sq.ft."
2.1 Facts of the case in brief are that the assessee is a partnership firm formed on 01-05-2005 consisting of 2 partners namely, Sri Naresh Kumar Kanhaiyalal and Shaik Husnoddin, both residents of Bhusawal and assessed to Income Tax. The firm is carrying on the business of developing, lands, construction of houses and sale of the same. The assessee filed its return of income on 13-10-2007 declaring Nil taxable income after claiming deduction u/s.80IB(10) of Rs.32,72,308/-. During the course of assessment proceedings the Assessing Officer noted that the claim of the assessee for deduction u/s.80IB(10) is not allowable for the following reasons : 3
"i) The land is in the name of the Partners and not in the name of Firm.
The AO discussed the purchase deed of the agricultural land and also the sale deed of residential units which contain only the name of partners as buyers at the time of purchase and as sellers at the time of execution of sale deed. The AO also discussed the 'commencement certificate' and also the completion certificate which are also in the name of partners and not in the name of Firm.
ii) The project as a whole has not been approved by the Local Authority. The Local Authority has approved the plan in the name of Partners and not in the name of the Firm, The approval has not been taken for the entire project but for individual units separately.
iii) One of the units sold to Mr Rajkumar Parwani is in excess of 1500 sqft.:
The AO recorded the statement of Rajkumar Parwani wherein he has stated that he has purchased one unit having built up area of 3000 sq.ft and also stated that plan was amended at the foundation level and also filed a copy of an approved valuer Shri Ashok Dahad of the layout plan.
iv) The completion certificate from Local Authority has not been obtained till 27/02/2009:
The AO made enquiries with Chief Officer, Municipal Council, Bhusawal and the Chief Officer vide his letter dated 27/02/2009 stated that no completion certificate has been issued by the Council to the construction in plot No 8,/27,/53 & 58 at Survey No 110/2A+2B+2C+111/3A/1 of Kandari Shivar, Bhusawal. The AO stated that the assessee has filed separate completion letters in respect of each unit by the Municipal Council, Bhusawal dated 27/082009. The AO thus held that the appellant sold the units before the completion certificates issued by the local authority.
v) The pamphlet [brouchure] of the project shows the planned independent bunglows having built up area of 1752 sqft.:
The AO referred to the brochure printed by the appellant firm and thus came to the conclusion that the appellant has built row houses exceeding 1500 sq ft."
2.2 Rejecting the various explanations given by the assessee and distinguishing the decisions cited before him the Assessing Officer rejected the claim of deduction u/s.80IB(10) amounting to Rs.32,72,308/- on account of the reasons mentioned above.
3. Before the CIT(A) it was submitted by the assessee that agricultural land was transferred to the firm in AY 2006-2007 and the said issue was already raised by the AO's predecessor in the assessment proceeding u/s.143(3) of AY 2006-2007 and the assessee's reply dated 28/08/2008 has been accepted by his predecessor and which was already on the record of the AO. For A.Y. 2006-2007 the returned income was ` NIL and the 4 assessed income u/s 143 (3) was also ` NIL. It was further submitted that the agricultural land admeasuring 2H 53R (around 6.325 acres) within Bhusawal Municipal limits was purchased in the name of Nareshkumar K. Sadeja and Shaikh Husnoddin on 25-04-2005 as co-owners. The firm was formed on 01-05-2005 wherein the said agricultural land was brought in by both the partners as their contribution which has been credited towards their respective capital. Thereafter all expenses relating to the conversion of the said agricultural land into non-agricultural land, lay out expenditure, nazrana, municipal development fees etc. was borne by the firm. The assessee relied on Section 45(3) of the Income Tax Act, 1961 relating to assets brought by the partners. The photocopy of agreement between the partners and the firm relating to transfer of land to firm was also submitted to the AO stating that the conveyance deed was not registered in the firm's name because it was not-needed as the same 2 co-owners became the partners in the firm in the same profit sharing ratio. It was stated that conveyance deed was not necessary. The assessee further stated that one of the partners namely Shaikh Husnoddin's case was also assessed u/s 143(3) for AY 2006-07, wherein the facts of him transferring the land to firm was also mentioned and the said transfer of immovable property has also been accepted by the Department. Relying on Section 45(3) the assessee stated that when the Partner contributes a capital asset to a Firm in which he becomes a partner, it is a valid transfer and thus the firm becomes the absolute owner of that property and thus no registration is required for becoming the owner. Relying on various decisions it was submitted that the assessee need not be the owner of the land for claiming deduction u/s.80IB(10).5
4. So far as the issue relating to denial of deduction on the ground that the housing project as a whole has not been approved by the local authority, it was submitted that the housing project has been built on survey number 110/2A+2B+2C+111/3/l and has been named as Sundar Nagar at Bhusawal. The whole layout as one single layout plot has been approved by the local authority, ie Bhusawal Municipal Council which further as a whole has been approved by the Collector, Jalgaon as a residential project.
The total area under the layout is 25300 sq.mtrs which exceeds 1 acre and after reducing land under roads and garden, the net area comes to 16365.64 sq mtrs. After getting approval only, the further development has commenced and therefore it is one layout and has been approved as a whole housing project. The application for the approval of building permission admeasuring total 10327.66 sq mtrs with total built up area 5894.69 sq mtrs was first made on 12/09/2006 and the First approval was received on 09/10/2006 for total 84 row houses. Thereafter, the second approval was received on 29/11/2006 for 14 row houses, 18 flats and 8 shops totally admeasuring 121.34 sq m [approx 1306 sq ft which is far less than 2000 sq ft allowed u/s 80-IB(10)]. The details of all building sanctioned plans granted by Bhusawal Municipal Council were filed in shape of a Chart. It was accordingly submitted that there is no force in the observation made by the AO that the permission has been taken as and when required. It was submitted that photocopies of all the above mentioned approved building permission plans were submitted to the AO and are on the record of the AO at the time of assessment. Relying on various decisions and CBDT Circular No.5 of 2005 dated 15-07-2005 it was submitted that the whole residential project has been approved and implemented as a concept of group housing and is one housing project only.
64.1 So far as the denial of deduction on the ground that one of the housing unit sold to Shri Rajkumar Parwani & Smt. Meena R. Parwani is in excess of built up area of 1500 sq.ft. it was stated that it has sold 2 units each admeasuring 105.96 sq mts [1140 sq.ft] to Mr. Rajkumar Parwani and his wife which is evidenced by 2 registered 'Agreement to Sale' dt. 08-03-2007. Thereafter, final 2 sale deeds were registered and executed on 24-07-2007 in their name. They are separate row houses and even their permissions have been taken separately. The photocopy of Municipal House Tax receipt in the name of Mr. Parvani of 2 units were filed. A certificate from consulting engineer Deepak Gajare, who has supervised the construction and is consultant of the Firm, was also filed who has certified that the 'Foundation', RCC and 'Structural design' is for 2 units. The photocopy of RCC Structural design was also submitted. It was accordingly submitted that there is no breach of condition u/s 80-IB (10) as both the row houses are having built up area below 1500 sq.ft each. Moreover the sale deeds were executed in AY 2008-2009 and even on that ground, deduction u/s.80-IB(10) cannot be rejected in A.Y. 2007-2008. The assessee further mentioned another instance of sale deed with Shri. Badriprasad Chourasiya and Smt Sharda Chourasiya and stated that their statements were also recorded by the department's inspector when he enquired about it from them regarding the same issue wherein they have stated that they have bought 2 separate blocks. It was argued that this also proves that the assessee has sold 2 identical blocks to Mr. Parwani, who has thereafter modified the same according to his own needs. It was submitted that the Department official visited other identical blocks at the site of the assessee and may have also submitted his report. It can be confirmed from his report that the Firm has built 2 identical row houses 7 throughout the site. The assessee firm has also submitted Annexure A wherein it has distinguished the Statement on Oath given by Mr. Parwani with actual facts and explaining the factual position on the site with the help of some ready photos of the site.
4.2 As regards denial of deduction on the ground that the Bhusawal Municipal Council has not issued completion certificate, it was submitted that the photocopy of building completion certificates dated 12-08-2009 were submitted to the AO during the assessment proceedings. It was submitted that the residential units were completed before executing the sale deed and the same is also mentioned in the sale deed. It was argued that u/s.80-IB (10), the time limit for completing the project is 4 years from the date of first approval by the Local Authority, i.e. [Bhusawal Municipal Council]. The Building commencement certificate was first applied on 12- 09-2006 and the approval was received first on 09-10-2006 and thus the time limit for completing the building was 09-10-2010 and the assessee has submitted the completion certificate from Bhusawal Municipal Council [Local Authority] dt. 12-08-2009 which is well within the stipulated period as mentioned u/s. 80-IB (10). This fact has also been accepted by the AO in his assessment order. It was accordingly submitted that even on this ground the AO's observations are liable to be rejected and the deduction u/s.80- IB(10) cannot be denied.
4.3 So far as the denial of deduction on the ground that the pamphlet of the project shows the planned independent bungalow having built up area of 1752 sq.ft. it was submitted that the said issue/ground has not even being discussed by the same AO in his assessment order u/s.143(3) for A.Y. 2008-09. It was submitted that the assessee had originally planned the 8 housing project for high income group but looking the potential of buyers in Bhusawal, the said plan was dropped and the project was designed to suit low income group. Thus the plan was never implemented. It was submitted that they had submitted building permission for all the units to the AO and in not a single case, the building permission has exceeded the prescribed limit of 1500 sqft. The Certificate dated 7/01/2011 from Bhusawal Municipal Council stating that the building work at S No 110/2A + 2B + 2C + 111/3A/1 has been done/carried in accordance with the building permission as granted by Bhusawal Municipal Council was filed. It was accordingly submitted that the assessee firm has not built or sold any unit exceeding 1500 sqft being the prescribed limit u/s 80IB (10).
5. Based on the arguments advanced by the assessee the Ld.CIT(A) held that the assessee is entitled to deduction u/s.80-IB(10). He discussed point-wise on which the Assessing Officer had denied deduction u/s.80- IB(10). As regard the objection of the Assessing Officer that the land is not in the name of the firm but in the name of the partners he held that the assessee is entitled to claim deduction u/s.80-IB(10) by observing as under :
"5.1 I have carefully gone through the submission of the appellant and the material on record. Though the land is in the name of Partners, they have contributed the same as their capital contribution to the Firm and thereafter all the expenses for development of land has been incurred by the Firm. Further, the sale receipts from residential units have also been credited by the Firm. In order to claim deduction u/s.80-IB(10), the assessee need not be the owner of the land. While going through the relevant section it can be seen that nowhere it is mentioned that the undertaking in order to claim deduction u/s.80-1B(10) should be the owner of the land. The said issue specifically relating to deduction u/s 80IB(10) has already been decided in number of cases such as :
i) Radhe Developers vs. ITO [2008] 113 TTJ (Ahd) 300
ii) ITO vs. Shakti Corporation [2009] 32 SOT 438 (Ahd)
iii) KZK developers vs. CIT [2010] 130 TTJ [Ctk] [UO] 57
iv) ITO vs. Shakti Builders - ITA No 3697/Ahd/2007
v) ACIT vs. Smt C. Rajni ITA No 1239/Mds/2008 &
ITA No. 1666/Mds /2007 and The DCIT vs. Shri C Subba Reddy (HUF) ITA No 1907/Mds/2008 9
vi) Essem Capital Markets Ltd vs. ITO ITA No.6814/Mum./2006 and 5349/Mum./2007 dt. 25/02/2011 [reported in 171(2011) 43-A BCAJ Further Section 45(3) of the Income Tax Act 1961 clearly states the law relating to transfer of capital asset to the firm by its partners as their capital contribution.
Also u/s. 2(47) of the Income Tax Act, 1961, states 'Transfer' includes possession of immovable property given without registration of conveyance deed; and also transactions in agreements to buy or sell any immovable property or any rights thereon. The AO should have considered this important aspect. The Judicial decisions cited by the appellant are squarely applicable to his case and therefore, the appellant firm is eligible for deduction on this ground." 5.1 As regards the denial of deduction on the ground that the housing project has not been approved by the local authority, he allowed the claim of the assessee by holding as under :
"6.1 I have carefully considered the Circular No. 5 of 2005 dated 15/07/2005 issued by CBDT which has also expressed the same views that "the housing project should conform to the project plan approved by the local authority in accordance with the regulations in force. Also the area limit of the plot has to be construed with reference to the area of the site on which the housing project is construed and not with reference to the demarcation of land done by the land development authority." Moreover, the appellant has also submitted a copy of relevant Section 5 of Standardised Building By-laws and Development Control Rules for "A" Class Municipal Councils of Maharashtra wherein it is stated that "No Person shall carry out any development work including development of land by laying out into suitable plots or development of any land ......... without first obtaining a separate building permit and commencement certificate for each such building from the authority." This clearly supports the appellant Firm's claim as they cannot override the local laws and has to build the project as per rules laid down by the Bhusawal Municipal Council [Local Authority] which being an a class municipal council is bound to follow the statute. It is further seen from the correspondence made between the appellant and the Bhusawal Municipal Corporation that the layout as a whole has been approved by the local authority. The case laws cited by the appellant are also squarely applicable to his case. I, therefore, hold that though the permission for each unit has been taken separately the appellant firm has taken the same in accordance with the Bye-laws which are binding on the appellant and Circular No 5 of CBDT dated 15/07/2005 also upholds the appellant's case and I therefore, allow this ground of appeal and treat the project as being developed as one housing project."
5.2 As regards the objection of the Assessing Officer that one of the unit sold is having built up area of more than 1500 sq.ft., he held in favour of the assessee by holding as under :
"7.1 I have gone through the written submission and material on record. During the appellate proceedings in order to verify the built up area about the adjacent row houses, the appellant was asked to produce sale deeds of adjacent 10 residential units near Mr Parwani & building permission of all the units issued by the Local Authority. It is seen that no building permission is in excess of 1500 sq.ft. as prescribed u/s 80-IB(10), Besides, the appellant firm has voluntarily submitted a certificate from Chief Officer, Bhusawal Municipal Council dated 17/01/2011 which states that the "Building permission has already been granted for the plots in whole layout and the building work has been done/carried in accordance with the building permission as granted by Bhusawal Municipal Council." Further the appellant has submitted one more certificate from Bhusawal Municipal Council dated 07/02/2011 which also summarizes the built up area of each completed building and in this also none of the residential units is having built up area exceeding 1500 sqft. The appellant has produced adequate material in support of his contention that no unit was more than 1500 sq. ft. A perusal of record reveals that AO also got the inspection done of the residential unit of Shri Parwani. AO is of the opinion that the said unit is one single unit and exceeds the prescribed limit of 1500 sq ft.. The statement of Mr. Parwani, though under dispute goes against the contention of the appellant. However, evidences produced by the appellant cannot be brushed aside. It has come to the notice that Mr. Parwani has let out the entire building to one PSU and probably undertook the alteration of the building to the requirement of the tenant. The issue therefore, remains disputed. However, I am of the considered view, especially under the circumstances of the case, that deduction u/s 80-IB(10) should not have been disallowed in full on this issue alone. At best, deduction u/s. 80-IB(10) could be disallowed on pro rata basis as held by various decision given by the appellant. In view of the facts and circumstances mentioned above, I am of the considered opinion that the appellant would be entitled for deduction u/s. 80IB(10) but for the amount involved in transactions with Parwanis with respect to plot No. 8 (8A & 8B). AO is directed to reduce the amount claimed by the appellant on plot No.8 from the total consideration on which the appellant has claimed deduction u/s 80-IB(10). Thus, the appellant will not be denied deduction u/s 80-IB on the whole amount on this ground alone".
5.3 So far as the objection of the Assessing Officer that the Bhusawal Municipal Council has not issued completion certificate upto 27.02.2009 he held in favour of the assessee by holding as under :
"8.1 I have gone through the submission and material on record and it is seen that the AO has accepted that the completion certificates have been submitted by the appellant during the assessment proceedings itself. Further, the AO has not questioned the completion of the unit before sale deed. The Authorised Representative of the appellant firm stated that the sale deed of all the residential units were submitted to the AO and the sale deed clearly mention that the unit is complete in all respect. The AR also mentioned that the Bank will not issue final payments if the units are incomplete at the time of execution of sale deed. Further, a perusal of annexure enclosed by Municipal Council, Bhusawal alongwith their certificate dated 07/02/2011 reveals that date of completion certificate in respect of all the units is within the time limit prescribed under sec. 80-IB(10). I further hold that mere delay in obtaining completion certificate will not adversely affect the assessee. The appellant has 4 years [now 5 years] to obtain completion certificate. It is the date of 'completion' which is required to be taken into consideration to decide the applicability of sec. 80-IB(10) and not the date of completion certificate per section. Hence, the deduction on this ground also cannot be denied to the appellant. Thus the appellant succeeds on this ground of appeal."11
5.4 He also decided in favour of the assessee against the objection of the Assessing Officer that the pamphlet of the project shows the planned independent bungalow having built up area of 1752 sq.ft. by holding as under :
"9.1 I have carefully considered the written submission and also the Asst. order of AY 2008-09 and plea put forth by the AR that the said issue does not find any place in the assessment order for AY 2008-09 and thus the AO himself has accepted this ground and therefore I hold that since this ground has not been mentioned in AY 2008 -09 and also that all building permissions are on the record wherein no residential unit exceeds 1500 sq ft and also that the original plan has not been implemented and hence the deduction on this ground also cannot be denied to the appellant. Thus, the appellant succeeds on this ground of appeal"
6. Aggrieved with such order of CIT(A) the Revenue is in appeal before us.
7. We have heard the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decision cited before us. We find the AO in the instant case denied the deduction u/s.80IB(10) on the ground that (a) the land is in the name of the partners and not in the name of the firm (b) the project as a whole has not been approved by the local authority (c) one of the units sold to a customer is in excess of 1500 sq.ft.
(d) the completion certificate from local authority has not been obtained till 27-02-2009 and (e) the pamphlet of the project shows the planned independent bungalows having built up area 1752 sq.ft. We find all the objections have been decided in favour of the assessee by the Ld.CIT(A) which has already been reproduced in the preceding paragraphs which has been challenged by the revenue in the grounds of appeal. 12 7.1 So far as the grievance of the revenue that the land is not in the name of the firm and is in the name of the partners and therefore the assessee is not entitled to deduction u/s.80IB(10) of the I.T. Act, 1961 we find the issue stands decided in favour of the assessee by the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Radhe developers reported in 341 ITR 403 wherein the Hon'ble High Court has upheld the decision of the Tribunal which was relied on by the Ld.CIT(A). The relevant observation of the Hon'ble High Court reads as under :
"Section 80IB(10) of the Income Tax Act, 1961, requires involvement of an undertaking in developing and building housing projects approved by the local authority. Certain conditions are prescribed in sub section (10) such as the date by which the undertaking must commence and developing and construction work and the minimum area of plot of land on which such project would be put up as well as the maximum built up area of each of the residential units to be located thereon. The provisions nowhere required that only those developers who themselves own the land would receive the deduction under Section 80IB(10) of the Act. Neither the provisions of Section 80IB nor any other provisions contained in other related statutes demonstrate that ownership of the land would be a condition precedent for developing the housing project. Such requirement cannot be read into the statute because there is nothing in Section 80IB (10) of the Act requiring that ownership of the land must vest in the developer for him to be able to qualify for such deduction. Moreover, the term "developer" has been understood in common parlance as well as in the legal sense carrying a much wider connotation.
It is well settled that while interpreting a statute, particularly, a taxing statute, nothing can be read into the provisions which has not been provided by the Legislature. The condition which is not made part of Section 80IB(10) of the Act, namely, that of owning the land which the assessee develops, cannot be supplied by any purported legislative intent.
The assessee claimed deduction under Section 80IB(10) of the Act on the premise that such income was derived from the business of the undertaking developing and building housing projects approved by the local authority. To execute such housing projects, the assessee had entered into development agreements with land owners. Under these development agreements, the assessee agreed to develop the land belonging to the land owners on certain terms and conditions. On the same day the land owners entered into agreements to sell the land in question to the assessees. The assessees were described as purchasers and the land owners were described as the sellers. The profit or loss from the project was to be the assessees. In some cases, the assessee was to receive a fixed remuneration for the development. The Assessing Officer rejected the assessee's claim for deduction under section 80- IB(10) of the Act on the ground that the assessees were not the owners of the land, that approval by the local authority and permission to develop the project and commence construction were not in the name of the assessees and that the assessees had merely acted as agents or contractors for construction of 13 residential houses. The Tribunal held the assessees entitled to the deduction. On appeals by the Department :
Held accordingly (i) that the terms and conditions under which the assessees undertook the development projects and took over the possession of the land from the original owners, indicated that the assessees had total and complete control over the land in question. The assessees could put the land to use as agreed between the parties. The assessee had full authority and also responsibility to develop the housing project by not only putting up the construction but by carrying out various other activities including enrolling members, accepting members, carrying out modifications engaging professional agencies and so on. Most significantly, the risk element was entirely that of the assessees. The land owners agreed to accept only a fixed price for the land in question. The assessees agreed to pay off the land owners first before appropriating any part of the sale consideration of the housing units for their benefit. In short, the assessees took the full risk of executing the housing project and thereby making profit or loss, as the case may be. The assessees invested their own funds in the cost of construction and engagement of several agencies. It could not be said that the assessees acted only as works contractors. In that view of the matter, the addition of the Explanation to section 80-IB(10) with retrospective effect from April 1, 2001, would have not material bearing in the cases on hand.
(ii) That the assessee had, in part performance of the agreement to sell the land in question, been given possession thereof and had also carried out the construction work for development of the housing project. A combined reading of Section 2(47)(v) of the Act and Section 53A of the Transfer of Property Act, 1882, would lead to a situation where the land would for the purpose of the Act be deemed to have been transferred to the assessees. In that view of the matter, for the purpose of income derived from such property, the assessees would be the owners of the land for the purpose of the Act although title in the land had not yet passed on to the assessees and would pass only upon execution of a duly registered sale deed. For the limited purpose of deduction under section 80-IB(10) of the Act, the assessees had satisfied the condition of ownership also, even if it was necessary.
(iii) That even in cases where the agreement provided that the assessee was to receive a remuneration, the assessee was given full rights to develop the land by putting up the housing project at its own risk and cost. The entire profit flowing therefrom was to be received by the assessee. The project was being developed by the assessee at its own risk and cost and not that of the land owners. The assessee thus was not working as a works contractor. Introduction of the Explanation to section 80-IB(10) in this case also would have no effect.
The assessee was entitled to the benefit under section 80-IB(10) of the Act even where the title to the land had not passed on to the assessee and the development permission may also have been obtained in the name of the original land owners."
7.2 Respectfully following the above decision of the Hon'ble High Court and in absence of any contrary material brought to our notice on this point the first objection of the Revenue that the land is in the name of the partners 14 and not in the name of the firm is rejected and the same is decided in favour of the assessee.
7.3 So far as the objection of the revenue that the housing project as a whole has not been approved by the local authority we find the Ld.CIT(A) while deciding the issue has relied on CBDT Circular No.05/2005 dated 15- 07-2005 and section 5 of standardised Building Bye-laws and Development Control Rules apart from relying on various decisions. He also observed from the correspondence between the assessee and Bhusawal Municipal Corporation that the layout as a whole has been approved by the local authority. The Ld. Departmental Representative could not controvert the findings of the Ld.CIT(A) on this issue. Accordingly, the second issue on which the AO has denied the deduction u/s.80IB(10) is decided in favour of the assessee and the order of the CIT(A) on this issue is upheld. 7.4 So far as the grievance of the revenue that one of the housing units sold is in excess of built up area of 1500 sq.ft. we find the Ld.CIT(A) has held that even though the unit may be more than 1500 sq.ft., however, the entire deduction cannot be denied and only pro-rata disallowance can be made. However, in view of our findings in subsequent paras in assessee's appeal wherein it has been held that the 2 units cannot be held as one unit, the grievance of the revenue on this issue is also dismissed. 7.5 So far as the denial of deduction u/s.80IB(10) on the ground that the Bhusawal Municipal Council has not issued completion certificate upto 27- 02-2009 we find the Ld. CIT(A) has thoroughly discussed the issue and has given a categorical finding that the AO has accepted that the completion certificates have been submitted by the assessee during assessment proceedings itself. The Ld. Departmental Representative could not 15 controvert the findings given by the Ld.CIT(A) that sale deed of all the residential units were submitted to the AO which clearly mentions that the units are complete in all respect. Once the assessee completes the building in all respect, hands over the possession and applies for completion certificate well before time, then merely because of some delay in part of the local authority for issuing the completion certificate late for no fault on the part of the assessee will not be a ground to deny deduction u/s.80IB(10). The finding given by the Ld.CIT(A) could not be controverted by the Ld. Departmental Representative. Accordingly, the order of the CIT(A) on this issue is also upheld and the grievance of the revenue is dismissed. 7.6 So far as the grievance of the revenue that the pamphlets of the project shows the planned independent bungalow having built up area of 1752 sq.ft. we find in the A.Y. 2008-09 the AO has accepted the plea of the assessee that none of the units are in excess of the prescribed limit. Further, the submission of the assessee that the plan was never implemented and in the building permission plan not a single building has exceeded the prescribed limit of 1500 sq.ft. could not be controverted by the revenue. The certificate from the Municipal Council certifying that the building work has been done/carried in accordance with the building permission as granted by the Bhusawal Municipal Council also could not be controverted by the Ld. Departmental Representative. Under these circumstances, we find no infirmity in the order of the CIT(A) on this issue. In this view of the matter, we are of the considered opinion that the CIT(A) was fully and legally justified in allowing the claim of deduction u/s.80IB(10) and the ground raised by the revenue is accordingly dismissed. 16
8. Ground No.2 by the revenue reads as under :
"2. On the facts and in the circumstances of the case, the CIT(A) erred in deleting the addition made on account of adhoc disallowance of Rs.2,00,000/- considering that the entire profits are eligible for deduction u/s 80IB(10) why the firm will claim non genuine expenses. But if the deduction u/s.80IB(10) is not allowed, then the said adhoc disallowance will be tenable."
8.1 After hearing both the sides we find the AO disallowed an amount of Rs.2 lakhs on adhoc basis on the ground that certain vouchers towards Sand, bricks and Freight charges and other expenses are not supported by bills and vouchers and therefore the payments are not verifiable. We find in appeal the Ld.CIT(A) allowed the claim of the assessee by observing as under :
"11.1 I have considered the assessment order of the AO as well as the written submission of the appellant. The AO has also disallowed ` 98,000/- u/s. 40(a)(ai) and thus he has accepted that the payments are genuine because non-genuine payments cannot be disallowed u/s.40(a)(ai) and therefore, if he maintains that the expenses are not supported then it will certainly amount to double addition of the same expenses and would lead to a contrary view on his part. Considering the nature of expenses which are mainly on unorganized sector and the fact that the appellant firm had submitted detailed Ledger abstract with narration of all the relevant expenses details, AO was riot justified in making disallowance on estimated basis without bringing on record any specific discrepancy in the expenses a/c. The accounts are audited and self made vouchers are not rare in construction business. Further, considering the argument of AR that when entire profits are claimed as deduction u/s. 80- IB(10) why the Firm will claim non genuine expenses and also whatever expenses are disallowed gets qualified as deduction u/s.80-IB(10) [S.B. Builders and Developers vs. ITO reported in (2011) 136 TTJ (Mumbai) 420, the Hon. Mumbai ITAT 'E' Bench], I do not see any reason for the appellant to inflate the above referred expenses. I, therefore, delete the addition of ` 2 lac made by the AO on account of disallowance out of expenses. The appellant succeeds on this ground of appeal and thus gets relief of Rs.2,00,000 /-
8.2 Since the claim of deduction u/s.80IB(10) made by the assessee has been allowed, therefore, even if certain disallowance is made it will increase the business profit and the entire amount will be qualified for deduction u/s.80IB(10). In this view of the matter and in view of the 17 detailed discussion by the Ld.CIT(A) on this issue we find no infirmity in the same. Accordingly, this ground by the revenue is dismissed.ITA No.1504/PN/2011 ( By Revenue) (A.Y. 2008-09) :
9. Ground appeal No.1 raised by the revenue reads as under :
"On the facts and in the circumstances of the case, the CIT(A) erred in allowing the deduction u/s.80IB(10) without appreciating the following facts of the case :
(i) That the land is in the name of the partners and not in the name of the firm.
(ii) That the project as a whole has not been approved by the Local authority. It has been approved in the name of partners and only of individual units and selling agreement shows only the name of partners and not firm as seller.
(iii) That one of the unit sold to Mr. Rajkumar Parwani is in excess of 1500 sq.ft.
(iv) That the completion certificate from local authority has not been obtained till 27-02-2009.
(v) That the pamphlet of the project shows the planned independent bungalows having built up area of 1752 sq.ft."
9.1 After hearing both the sides we find the ground raised by the revenue is identical to ground of appeal No.1 in ITA No.1107/PN/2011 for A.Y. 2007-08. We have already decided the issue and the ground raised by the revenue has been dismissed. Following the same ratio this ground by the revenue is dismissed.
10. Ground of appeal No.2 by the revenue reads as under :
" On the facts and in the circumstances of the case, the CIT(A) erred in deleting the addition made on account of adhoc allowance of Rs.3,00,000/- considering that the entire profits are eligible for deduction u/s.80IB(10) why the firm will claim non genuine expenses. But if the deduction u/s.80IB(10) is not allowed, then the said disallowance will be tenable".
10.1 After hearing both the sides, we find the above ground is identical to ground of appeal No.2 in ITA No.1101/PN/2011. We have already decided 18 the issue and the ground raised by the Revenue has been dismissed. Following the same ratio, this ground by the revenue is dismissed. ITA No.1639/PN/2011 (By Assessee) (A.Y.2008-09) :
11. Grounds raised by the assessee are as under :
"The following grounds are taken without prejudice to each other - On the facts and in law, 1] The learned CIT(A) erred in holding that the assessee is entitled to proportionate deduction u/s 80IB(10) in respect of the profits from the project SUNDAR NAGAR excluding the profits arising in respect of sale of flats to Mr. & Mrs. Rajkumar Parwani without appreciating that the assessee firm was entitled to claim the deduction in respect of the profits of the entire project including the profits arising on account of sale of flats to Mr. R K Parwani.
2] The learned CIT(A) erred in holding that the two units sold to Mr.Rajkumar Parwani and his wife were combined into one unit and for the purposes of section 80IB(10), they constituted one unit and the built up area of an unit u/s. 80IB(10) had to be calculated by taking into account area of both the combined units.
2.1] The learned CIT(A) erred in holding that since the built up area of the combined units sold to Mr.Parwani and Mrs.Parwani exceeded 1500 sq. ft, the assessee was not entitled to claim the deduction in respect of the profits arising on sale of these two units.
3] The learned CIT(A) failed to appreciate that even, though, the two units sold to Mr.Rajkumar Parwani and his wife were combined into one unit, since as per the sanctioned building plans they constituted separate units and for the purposes of section 80IB(10), both such units were to be considered as separate and as the built up area of each unit was less than 1500 sq. ft. the assessee satisfied the condition u/s. 80IB(10).
4] The learned CIT,(A) ought to have appreciated that -
a. The two units sold to Mr. & Mrs. Parwani were sanctioned as separate units by the Municipal Council.
b. There were separate sale agreements entered into for the sale of the two units.
c. Separate Municipal Tax bills were issued for the two units. d. Shri Parwani had mentioned that he and his wife had purchased two separate units and therefore, there was no reason to deny the deduction u/s.80IB(10) on the ground that the built up area of the two units was to be computed after combining the same.19
11.1 After hearing both the sides, we find the AO denied deduction u/s.80IB(10) on the ground that one of the units sold to Mr.Rajkumar Parwani and his wife is more than 1500 sq.ft. While doing so, he rejected the explanation of the assessee that Mr. Rajkumar Parwani and his wife have purchased 2 separate blocks/admeasuring built up area below 1500 sq.ft. There were 2 separate sale deeds and thus are 2 separate blocks and the premises were also taken separately. He, therefore, denied benefit of deduction of deduction u/s.80IB(10). In appeal the Ld.CIT(A) granted pro-
rata deduction.
11.2 It is the submission of the Ld.counsel for the assessee that the issue stands decided in favour of the assessee by the decision of Hon'ble Bombay High Court in the case CIT Vs. M/s. Ankit Enterprises. Referring to the question of law before the Hon'ble High Court he drew the attention to question No.2 which reads as under :
(ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that even two adjoining flats joined to constitute a single residential unit cannot be treated as one unit if adjoining flats were approved by local authority as separate unit?
11.3 Referring to the finding given by the Hon'ble High Court he drew the attention of the Bench to the following :
"3. So far as question (ii) is concerned, in the impugned order the Tribunal has recorded a finding of fact that two adjoining flats were approved by the local authority as separate units and completion certificate issued on that basis. Therefore, on the above finding of fact, the Tribunal held that the two flats cannot be treated as one unit to compute the built up area for the purposes of Section 80IB(10) of the Income Tax Act, 1961. The decision of the Tribunal being based on finding of fact, we see no reason to entertain question (ii).20
He accordingly submitted that the assessee has to be given the full deduction and the order of the Ld.CIT(A) allowing pro-rata deduction is not justified.
114. We find merit in the above submission of the Ld.counsel for the assessee. The Ld.CIT(A) has given the finding that no building permission is in excess of 1500 sq.ft. as prescribed u/s.80IB(10). The certificate obtained from the Chief Officer, Bhusawal Municipal Council dated 17-01- 2011 states that the building work has been done/carried in accordance with the building permission granted by Bhusawal Municipal Council. The built up area of each completed building does not exceed 1500 sq.ft. in any case.
As per the second certificate obtained from Bhusawal Municipal Council dated 07-02-2011 although the Ld.CIT(A) in his order held that the various evidences produced by the assessee cannot be brushed aside, still he held that the unit exceeds 1500 sq.ft. Since in the instant case, there is no dispute to the fact that the 2 units sold to Mrs. and Mr. Rajkumar Parwani were sanctioned as separate units by the Municipal Council, there were separate sale agreements entered into for the sale of the 2 units, there were 2 separate completion certificates issued by the Municipal Council and separate municipal tax bills were issued for the 2 units, therefore, respectfully following the decision of the Hon'ble High Court in the case of Ankit Enterprises (Supra) we hold that the above 2 flats cannot be treated as one unit to compute the built up area for the purpose of section 80IB(10) of the I.T. Act. Accordingly, the ground raised by the assessee is allowed.21
12. In the result, both the appeals filed by the Revenue are dismissed and the appeal filed by the Assessee is allowed.
Pronounced in the open court on this the 30th day of September 2013.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune Dated: 30th September 2013
Satish
Copy of the order forwarded to :
1. Assessee
2. Department
3. CIT(A)-II, Nashik
4 CIT-II, Nashik
5. The D.R, "A" Pune Bench
6. Guard File
By order
// True Copy //
Senior Private Secretary
ITAT, Pune Benches, Pune