Income Tax Appellate Tribunal - Mumbai
Riddhi Siddhi Developers , Mumbai vs Department Of Income Tax on 20 April, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND
SHRI RAJESH KUMAR, ACCOUNTANT MEMBER
ITA no.3856/Mum./2013
(Assessment Year : 2007-08)
Income Tax Officer
Ward-15(3)(2), Matru Mandir
................ Appellant
Tardeo Road, Grant Road (W)
Mumbai 400 007
v/s
M/s. Riddhi Siddhi Developers
1/3, Krishnai, Unnat Nagar no.1
Opp. Gajanan Temple, Off M.G. Road ................ Respondent
Goregaon (W), Mumbai 400 062
PAN - AAHFR7117C
Revenue by : Ms. Kusum Bansal
Assessee by : Ms. Aarti Sathe
Date of Hearing - 11.04.2016 Date of Order - 20.04.2016
ORDER
PER SAKTIJIT DEY, J.M.
Instant appeal of the Department is directed against the order dated 18th February 2013, passed by the learned Commissioner (Appeals)-28, Mumbai, for the assessment year 2007-08.
2. Brief facts are, the assessee a partnership firm is engaged in the business of builder and developer. As revealed from the facts on record, the Municipal Corporation of Greater Bombay (MCGB) was the 2 M/s. Riddhi Siddhi Developers owner of a property declared as a slum at CTS-50A (PT) of Village Pahadi, Goregaon, Mumbai, admeasuring 2652.28 sq.mtrs. In terms of provisions of Maharashtra Slum Area Act, 1971, the authority concerned entered into an agreement with the assessee for developing the said property under the slum re-development scheme formulated by the Government. As stated, while the assessee constructed building "A", "B", "C", "D" and "E" in one portion of the plot of land, other portion of the land was divided into two pieces. One piece of land of TDR admeasuring 580 sq.mtrs. was sold to Lakha Real Estate Pvt. Ltd. for a consideration of ` 68,67,432 on 28th September 2006, and other piece of land was transferred to Ashwin Shroff for a consideration of ` 35,52,120. It is further stated, out of the building constructed by the assessee, building "A", "B" and "C", were meant for slum occupants under SRA Scheme and building "D", and "E", were meant for sale / transfer by the assessee on its own. For the assessment year under consideration, assessee filed its return of income on 3rd October 2007, declaring nil income after claiming deduction under section 80IB(10). As alleged by the Assessing Officer, statutory notices issued were returned un-served by the postal authorities with remark "left". Subsequently, a fresh notice under section 142(1), issued On 9th September 2009, was purportedly served on assessee, however, no one appeared. The Assessing Officer, therefore, proceeded to complete 3 M/s. Riddhi Siddhi Developers the assessment under section 144 of the Act by disallowing assessee's claim of deduction under section 80IB(10) and in the process determined the total income at ` 65,28,579.
3. Being aggrieved of the assessment order so passed assessee preferred appeal before the learned Commissioner (Appeals). In the course of hearing of appeal, the assessee not only challenged the validity of the order passed under section 144, in the absence of service of statutory notice but also produced certain additional evidence to justify its claim of deduction under section 80IB(10). On the basis of submissions made and additional evidences produced the learned Commissioner (Appeals) called for a remand report from the Assessing Officer. As observed by the learned Commissioner (Appeals), the Assessing Officer in his remand report dated 1 st April 2011, observed, the assessee after becoming owner of the FSI / TDR had divided the plot of land in various pieces and not only constructed building for slum dwellers but also sold other pieces and derived profit. He observed, the profit derived by the assessee, therefore, is not out of construction activities. The Assessing Officer observed, though, the assessee has no cost for getting ownership of the plot of land sold but since the transfer of plot of land was within 12 months from becoming the owner, the gain derived therefrom is assessable as short term 4 M/s. Riddhi Siddhi Developers capital gain, hence, no deduction under section 80IB(10) is allowed. Subsequently, the Assessing Officer submitted another report on 2 nd September 2012, wherein though he accepted that the profit derived from sale of TDR is business income of the assessee but he opined assessee would not be eligible for deduction under section 80IB(10) as the plot of land on which the SRA project was built is less than one acre. The Assessing Officer further observed though, restriction of one acre is not applicable to SRA project in terms of provision to section 80IB(10)(a)(b), but the notification issued by the CBDT pertaining to slum re-development in Greater Bombay having came into force w.e.f. 3rd August 2010, will not be applicable to assessment year 2007-08. Hence, the assessee is not eligible for deduction under section 80IB(10).
4. The learned Commissioner (Appeals), after considering the remand report of the Assessing Officer as aforesaid and perusing the CBDT notification dated 3rd August 2010, referred to by the Assessing Officer, was of the view that the said notification would be applicable to the projects approved by the local authority from 1 st April 2004 to 31st March 2008, and such projects shall be eligible for deduction under section 80IB(10) from the assessment year 2005-06 onwards. Learned Commissioner (Appeals) opined that the logic of the Assessing 5 M/s. Riddhi Siddhi Developers Officer that the CBDT notification would be only applicable from assessment year 2010-11 as it was issued on 3rd August 2010, is illogical because the provisions of section 80IB(10) were in force up to assessment year 2008-09, hence, it cannot be construed that the benefit conferred will only be applicable from the assessment year 2010-11. The learned Commissioner (Appeals) further observed, the Assessing Officer himself having allowed deduction under section 80IB(10) for the assessment year 2008-09, there is no reason why it should be rejected for assessment year 2007-08. Accordingly, he allowed assessee's claim of deduction.
5. Learned Departmental Representative submitted, in course of assessment proceedings, since the assessee did not comply with the statutory notices, the Assessing Officer was compelled to complete the assessment ex-parte under section 144 of the Act, denying assessee's claim of deduction under section 80IB(10). He submitted, as the Assessing Officer has not examined the issue at the time of completion of assessment, matter may be restored back to his file for considering afresh.
6. Learned Authorised Representative strongly supporting the findings of the first appellate authority submitted, the Assessing Officer having himself in the second remand report admitted that the 6 M/s. Riddhi Siddhi Developers profit on sale of TDR is business income of the assessee there is no reason to disallow assessee's claim of deduction under section 80IB(10), as it clearly applies to slum rehabilitation scheme project and the condition that plot size should be more than one acre is not applicable to such project. Learned Authorised Representative submitted, as far as the allegation of the Assessing Officer in the first remand report that sale of TDR rights is not a business income she submitted that the Tribunal, Mumbai Bench, in ITO v/s Suraksha Realtors, ITA no.6760/ Mum./2011, dated 12th September 2012, has held that consideration received on sale of TDR is a business income and assessee is eligible for claim of deduction under section 80IB(10). Thus, learned Authorised Representative submitted, there is no reason to interfere with the order of the learned Commissioner (Appeals).
7. We have considered the submissions of the parties and perused the material available on record. As could be seen at the time of completion of assessment, the Assessing Officer disallowed assessee's claim of deduction under section 80IB(10) without examining the issue in proper perspective since there was no compliance from the assessee for whatever may be the reason. However, before the first appellate authority, the assessee produced certain additional evidences in support of its claim of deduction under section 80IB(10). As could be 7 M/s. Riddhi Siddhi Developers seen on the basis of evidences produced and submissions made, learned Commissioner (Appeals) called for remand report of the Assessing Officer. Though, in the first remand report dated 1st April 2011, the Assessing Officer observed that the gain derived from sale of TDR is assessable as short term capital gain but in his subsequent report dated 2nd July 2012, the Assessing Officer observed that the consideration received by the assessee on transfer of TDR is additional benefit received by the assessee as per SRA scheme during the course of its business and development of SRA projects, hence, it is the business income of the assessee. However, he was of the view that assessee is not eligible to claim deduction under section 80IB(10) as the plot of land on which the SRA project is developed is less than one acre. Though, the Assessing Officer was conscious of the fact that as per the proviso to section 80IB(10), more than one acre restriction imposed is not applicable to SRA projects but referring to the CBDT circular dated 3rd August 2010, he observed that as the circular has come into effect from 3rd August 2010, the assessee would not derive the benefit therefrom for the assessment year 2007-08. Thus, from the aforesaid narration of facts, it is amply clear that the Assessing Officer has accepted in principle that the profit derived from sale of TDR right is the business income of the assessee. Therefore, the only issue which needs to be addressed is whether the restriction imposed 8 M/s. Riddhi Siddhi Developers under section 80IB(10) that the housing project should be built on a plot of not less than one acre would apply to SRA project. In this context, it is relevant to note that as per proviso to section 80IB(10), the restriction imposed in clause (a) & (b) of section 80IB(10) would not apply to a project carried out in accordance with a scheme framed by the Central Government or State Government for re-construction or re-development of existing buildings in slum areas. However, the Assessing Officer has stated that such proviso would be applicable to the project approved after coming into force of CBDT notification dated 3rd August 2010. In our view, the interpretation of the Assessing Officer is thoroughly misconceived. The CBDT notification dated 3rd August 2010, cannot be interpreted in a manner to suggest that it will only apply to an assessment year commencing on / or after publication of notification on 3rd August 2010. Neither the proviso to section 80IB(10) nor CBDT notification under reference gives such an impression. Moreover, it is not denied or disputed that the Assessing Officer in the subsequent assessment years has allowed assessee's claim of deduction under section 80IB(10) on the very same housing project. A copy of the assessment order passed for the assessment year 2008-09, under section 143(3), clearly reveals this fact. Had it been the case that the assessee has not fulfilled the condition of section 80IB(10) by constructing a project in a plot of land 9 M/s. Riddhi Siddhi Developers admeasuring less than one acre, assessee's claim of deduction under section 80IB(10) could not have been allowed in subsequent assessment years. In the aforesaid view of the matter finding no infirmity in the order of the learned Commissioner (Appeals), we uphold the same by dismissing the ground raised by the Department.
8. In the result, Department's appeal stands dismissed.
Order pronounced in the open Court on 20.04.2016 Sd/- Sd/-
RAJESH KUMAR SAKTIJIT DEY
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 20.04.2016
Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The CIT(A);
(4) The CIT, Mumbai City concerned;
(5) The DR, ITAT, Mumbai;
(6) Guard file.
True Copy
By Order
Pradeep J. Chowdhury
Sr. Private Secretary
(Dy./Asstt. Registrar)
ITAT, Mumbai