Income Tax Appellate Tribunal - Pune
Bhujbal Brothers Const. Co., Pune vs Department Of Income Tax on 6 February, 2013
ITA No.641/PN/2011 M/s. Bhujbal Brothers Const. Co., Pune
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND
SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA No.641/PN/2011
Assessment Year : 2007-08
JCIT (OSD), Circle-3 M/s. Bhujbal Brothers Const. Co.
Pune Vs. Pune
(Appellant) (Respondent)
PAN No.AAGFB 7974A
Appellant By: Shri Mukesh Verma
Respondent By: Shri C.H. Naniwadekar
Date of hearing : 06.02.2013
Date of pronouncement : 25.02.2013
ORDER
PER R.S. PADVEKAR:-
In this appeal the revenue has challenged the impugned order of the Ld. CIT(A)-II, Pune dated 22.2.2011 for the assessment year 2007-08. The revenue has taken the following grounds:
1. The order of the ld. CIT(A) is contrary to law and to the facts and circumstances of the case.
2. The ld. CIT(A) grossly erred in allowing the assessee's appeal instead of confirming the assessment made by the Assessing Officer.
3. The ld. CIT(A) grossly erred in failing to appreciate that the assessee was not the owner of the land on which the project "Bhujbal Township" was constructed, and, instead, merely had development rights in respect of the said land. Therefore, and, in the circumstances, the assessee cannot be considered as entitled to deduction u/s 80IB(10) in respect of the said project.
4. The ld. CIT(A) grossly erred in failing to appreciate that the area of the land on which the project was undertaken was not demarcated.
5. For these and such other grounds as may be urged at the time of the hearing, the order of the ld. CIT(A) may be vacated and that of the Assessing Officer be restored.
2. The solitary issue in controversy is whether the Ld. CIT(A) justified in holding that in respect of the area of the plot of land on which the eligible housing project is undertaken by the assessee, complies with the condition laid down in section 80 IB (10)(c) of the Act. The facts which reveal from the record are as under. The assessee is a firm engaged in construction business. Ground nos.1 to 5 of appeal are related to disallowance of deduction u/s 80IB(10) amounting to Rs.2,05,56,550/-. It is contended by the assessee that in ground no.3, the Assessing Officer has wrongly observed that the commercial area in the project was more than 2000 Sq.ft., whereas there was no such commercial area in the project and further it was contended that the Assessing Officer has ITA No.641/PN/2011 M/s. Bhujbal Brothers Const. Co., Pune misdirected himself in possibly construing the common amenity space which was related to other project, which was not eligible for claim u/s 80IB(10) of the Act. The assessee further objected to the Assessing Officer's observation that the area of plot could not be demarcated separately, whereas the assessee has complete dominio and control over the plots which were more than one acre in area. So far as amenities are concerned, it is also observed that the claim of the A.O. that the amenities were shared with other projects, was factually incorrect and also irrelevant for deciding the deduction u/s 80IB(10) of the Act.
3. The A.O. disallowed the deduction claimed by the assessee under section 80IB(10) of the Act. More particularly on the issue that the area of the plot was not properly demarcated to identify that it is more than 1 acre. The assessee challenged the action of the A.O. before the Ld. CIT(A). Before the Ld. CIT(A), the assessee pleaded as under.
"1. The only issue involved in this appeal is rejection of claim of Rs.20,556,550/- u/s 80IB(10). The claim is in respect of our housing projects called "Bhujbal Township" (involving Bldg no. 82, 85 & B9) at S. No. 67 and another project called "Damodar Residency" (consisting Bldg No. A/2 & A/3 at S. No. 8 at Kothrud, Pune 29). At the outset, we constrained to state that the assessment and consequent rejection of our claim has been made in a perfunctory manner and is based on mis- appreciation of facts and without appreciating at all the assessee's contentions.
2. Bhujbal Township S. No 67:
The said project is situated at S. No. 67 and consists of Bldg. 85, 89 and 82. This Survey No. 67 is of a total measurement of 40,700 Sq. Mtrs. The entire property belongs to Bhujbal Family and was an ancestral property of Bhujbal Family. Bhujbal Brothers Construction Company i.e. present assessee, is a partnership firm consisting of two brothers in the family and their family members. In the mutual understanding with larger family, an area of 4,902 Sq. Mtrs. out of the total area of 40,700 Sq. Mtrs. in S. No. 67 was acquired by the said partnership firm i.e. the said assessee vide agreement dated April 13, 2006 and August 21, 2007, which were registered with Subregistrar Haveli on April 15, 2006 and August 21, 2007 respectively by payment of consideration. As a result of these agreements the area of the plot on which building No 85, 69 and 62 are situated or were proposed to be constructed became in complete ownership, control and dominion of the assessee firm. This area is 4,902 Sq. Mtrs. which is more than 1 acre. Both these agreements were executed to give effect to an Agreement to Sale dated April 5, 2006 which speaks of Building No 85, 89, 82, A4 and open space of 1,628 Sq. Mtrs. and internal roads of 2,017.87 Sq. Mtrs. All these agreements expressly speak of open space of 1,628 Sq. Mtrs on which the assessee has paid stamp duty separately. We also invite your attention to a Supplementary Agreement cum Confirmation deed dated May 5, 2008, wherein the assessee's exclusive dominion over open space has been brought out succinctly with a well demarcated plan of the land belonging to assessee.
2.1 The total project is situated thus on a single piece of land admeasuring 4,902 Sq. Mtrs and is thus eligible for deduction u/s 801B (10).
2.2 The Assessing Officer however has rejected the assessee's claim and has relied exclusively on Departmental Valuation Officer's (DVO) report. We submit that the DVO's report suffers from factual errors, misinterpretation, and inaccuracies with which we shall deal in following paragraphs:2 ITA No.641/PN/2011 M/s. Bhujbal Brothers Const. Co., Pune
2.3 In para 5.1 of the report, the DVO states that the project has 26 buildings in the plot admeasuring 40,700 Sq. Mtrs. This statement is factually incorrect as far as the assessee is concerned. As stated above the area of 40,700 Sq. Mtrs earlier belonged to larger Bhujbal Family of which 4,902 Sq. Mtrs has been carved out and acquired by assessee firm by payment of consideration buildings namely 82, 85 and 89 are situated on the area of to assessee firm.
2.4 In the same para the DVO further states that assessee has not produced any demarcated sanctioned plan with reference to corner points of the plot of his share of buildings. It is submitted that the Sale Agreements and the Agreement to Sale referred to above, clearly bring out the fact the assessee has complete dominion, control and ownership over the land on which building is situate as well as open space which forms part and parcel of same land. The supplemental agreement dated May 5, 2008 also clearly brings out this fact. In any case as long as the assessee has complete dominion and control over land to the exclusion of other, the assessee is entitled to deduction u/s 801B (10). In our case we have acquired not only the dominion and control but also possession over a single piece of land by payment of consideration. In this behalf we rely on the Ahmedabad Tribunal decision in case of Radhe Developers v/s ITO 113 TTJ 300.
2.5 In para 5.2.1, the DVO states that the plot area of 4,778 Sq.Mtrs (should be read as 4902 Sq. Mtrs) is not separately demarcated. We submit that in the first place the Supplementary agreement dated May 8, 2008 clearly shows the area of the plot properly demarcated. Even otherwise all the agreements refer to above clearly bring out the fact that assessee has complete dominion and control over the plot which is sufficient to claim deduction u/s 80IB(10).
2.6 In para 5.2.2, the DVO states that Building No. A4 and B2 are separated by an internal road. While admitting this position, we wish to clarify that Building No A4 is a separate building in itself and does not form part of the project on which deduction u/s 80IB(10) is claimed. Building No. A4 is not at all included in the subject plot of 4,902 Sq. Mtrs. We have not claimed any deduction on Building No A4 u/s 80IB(10).
2.7 In the same para, DVO further states that the assessee's share in open space in common area out of 40,700 Sq.Mtrs is undivided. This is factually incorrect. All the agreements refer to earlier clearly bring out the fact that the open space belonging to assessee is clearly identified and demarcated.
2.8 In para 5.2.3 the DVO states that the plot should have one ownership, separate identification number. For this purpose he relies on the definition of plot given under Maharashtra Regional and Town Planning Act.
3. It is submitted that separate identification number etc. are not the requirement of Section 80IB (10). What is relevant of Section 80IB (10) that project should be situated on plot of land admeasuring more than 1 acre. As long as the assessee has a complete dominion over a continuous piece of land admeasuring more than 1 acre, the requirement of Sec 80IB(10) will be met. In this behalf we rely on Mumbai Tribunal decision in Vandana Properties 27 DTR 282.
3.1 On legal grounds we state that the definition of a plot as per Maharashtra Regional and Town Planning Act and adopted by the DVO is totally irrelevant in the context of Sec 801B (10) of the Income Tax Act. As has been held by the Supreme Court in various cases such as AIR 1981 SO 951, AIR 1985 SC 76 that the definition of an expression in one Act must not be imported into another. Neither the meaning nor the definition of the term in one statute affords a guide to the construction of the same term in another statute and in the sense in which the term has been understood in several statutes does not necessarily throw any light on the manner in which term should be understood generally. And therefore we submit the definition of the plot in Maharashtra Regional and Town Planning Act is totally irrelevant. This can be illustrated by way of small example. Suppose a developer purchases 5 adjacent plots admeasuring 900 Sq. Mtrs each from 5 different owners and starts a housing project. Although the total area of the plot is 4,500 Sq. Mtrs, 3 ITA No.641/PN/2011 M/s. Bhujbal Brothers Const. Co., Pune still if one goes by the definition adopted by the learned DVO, there would be 5 separately demarcated plots of 900 Sq. Mtrs each and not on the plot of 4,500 Sq.
Mtrs. In such case the deduction u/s 80/6 (10) would not be admissible. However, that would not be correct interpretation looking at the scheme of the Section. Once the developer has complete dominion over the area of 4,500 Sq. Mtrs, the assesses has to be given deduction u/s. 801B (10). We therefore submit that the term "plot" has to be understood in a general sense i.e. one single piece of land. The learned DVO has also stated that the open space is common undivided area. This is factually not correct. It is submitted that over the open space are of 1,628 Sq. Mtrs, which incidentally is a part of the entire plot area claimed by us, assessee has exclusive dominion possession and ownership rights."
4. It was contended that though the assessee has undertaken two eligible projects for the purpose of section 80IB(10) of the Act, namely Bhujbal Township and Damodar Residency but the deduction of Rs.2,05,56,550/- claimed by the assessee which was disallowed by the A.O. relates only to the one project i.e. Bhujbal Township and not to another project Damodar Residency. The Damodar Residency project had been just started during the financial year relevant to the A.Y. 2007-08 and there were no profits for which deduction can be claimed u/s 80IB(10) of the Act. The Ld. CIT(A) accepted the plea of the assessee that the area of the plot on which the residential project has been constructed is having the area of more than one acre. The relevant finding and reasons of the Ld. CIT(A) are as under:
3.6 The other observation of the A.O. is regarding plot of land not 'demarcated in respect of the Bhujbal Township project. It was explained by the appellant before the A.O. that the area of 4902 sq. mtrs. of this project was a single piece of land on which the assesee firm had exclusive ownership rights and complete dominion, to the exclusion of others. It is further contended that the sub-division of the bigger chunk of land of this particular plot in the Municipal records was not at all required and not a precondition. It was also explained that the definition of plot adopted by The approved valuer in accordance with the Maharashtra Regional and Town Planning Act was irrelevant in the context of section 80IB(10) of the I.T. Act, for which the appellant has cited the judgement of the hon'ble Apex court reported in AIR 1981 SC 951 and AIR 1985 SC 76, to the effect that the definition of an expression in one Act must not be imported into another Act. As an example the appellant has explained that as per the approved valuer's definition, if a developer purchased 5 adjacent plots of 900 sq. mtrs. each from five different owners and starts a housing project, although the total area of the plot is 4500 sq. mtrs., but, by the definition mentioned above it would be 5 separate plots of 900 sq. mtrs. each. The appellant has also cited the decision of the Ahmedabad Tribunal in the case of Radhe Developers, (2008) 113TTJ 300 and also Vandana Properties vs. ACIT (2009), 31 SOT 392 (Mum.) 3.7 Similar explanation has also been submitted during the appellate proceedings. It was explained by the appellant that the particular plot of 4902 sq.mtrs. was purchased from the Bhujbal family, and, was duly registered with the concerned authorities on 15.04.2006 and 21.08.2007 after payment of agreed consideration. This was in consequent to agreement to sale dated 05.04.2006 A perusal of this agreement shows that the owners had granted development rights by this agreement in respect of building nos. B-5, B-9, B-2 & A-4, along with the some open space and internal roads etc. to the appellant firm. The decisions of the Ahmedabad Bench in the case of Radhe Developers (supra) shows that in that case it was held that an undertaking developing a housing project was entitled to deduction u/s 80IB(10) irrespective of the fact that whether it was the owner of the land or not, and acquisition of development rights through development agreement 4 ITA No.641/PN/2011 M/s. Bhujbal Brothers Const. Co., Pune was sufficient. The Tribunal also took cognizance of the part performance in accordance of section 53A of Transfer of Property Act, 1882, and it was held that in accordance with the development agreement, the assessee required a dominion over the land for its development, to the exclusion of others. Similar decision was also given by the Ahmedabad Bench in another case of ITO vs. Shakti Corporation (2009) 32 SOT 438 (Ahd.). The appellant has cited another decision of Vandana Properties of Mumbai Bench (supra) for this purpose. During the course of appellate proceedings, the appellant had submitted various commencement certificates along with the layout plans, approved building plan etc. as called for vide order-sheet dated 07.02.2011. The details furnished by the appellant showed that while the layout plan for the particular survey no. 67 at Kothrud for the entire 40700 sq. mtrs. of land, belonging to the entire Bhujbal family, was got approved on 03.03.2006; the particular building plans were separately approved by PMC on 28.03.2006, 01.06.2006 and 28.03.2007 in respect of buildings B5, B9 and B2, respectively. Further, the area for these three buildings comprised in the appellant's Bhujbal Township project was also a continuous area on the layout plan, of which the ownership for the purpose of development was of the appellant firm, by way of a development agreement, a duly registered document with payment of a consideration. This area was admeasuring 4902 sq. mtrs., which was more than 1 acre. The appellant has also explained that the approved valuer's statement that the project has 26 buildings in the plot admeasuring 40,700 sq. mtrs. was not which the impugned land area was acquired by the appellant through a registered development agreement. It was only for the particular area related to these three buildings that the rights were taken by this firm by way of registered document and payment of consideration, and which has been utilised for the 'Bhujbal Township' project. Therefore, the appellant had total dominion and control for 4902 sq. mtrs for the purpose of development of this project. The appellant's contention in this regard is therefore found to be acceptable and the A.O's rejection of claim on the ground of area not demarcated is not tenable in law.
3.8 So far as the observation regarding completion of projects in the approved valuer's report is concerned, the appellant was asked to clarify the position vide order-sheet dated 18.02.2011. Vide explanation dated 22.02.2011, it was stated that the appellant was following percentage completion method of accounting, and out of the three buildings, building B5 was completed to the extent of 65% and B9 to the extent of 35% upto the end of this year. It was contended that in the tax audit report the disclosure of the accounting policy and calculations of revenue etc. was shown, and the claim u/s 80IB(10) was made on that basis. Further, it is also stated that for a housing project approved on or after 1.04.2005, for completion, a period of 5 years from the end of the financial year has been allowed, and therefore, time was available upto 31.03.2011 in respect of this project. Accordingly, the appellant had moved an application before the PMC for issuing of the final occupancy certificate during February, 2011. Then the appellant has referred to the CBDT Instruction No. 4/2009 dated 30.06.2009, in which it has been clearly stipulated that in case of percentage completion method, claim u/s 80IB(10) can be allowed on a year to year basis, where the assessee was showing profit from the partial completion of the project every year. The instructions also provided that in case it was later found that the project was not completed within the stipulated period of time, the deduction granted earlier will have to be withdrawn. The decision of ITAT Pune in the case of B.K. Pate Enterprises vs. DCIT, (2009) 125 TTJ 974 was cited for the proposition that deduction u/s 80IB(10) was allowable based on the percentage completion method, for the portion for which profit was shown. Accordingly, it is held that the appellant was entitled to the claim u/s 80IB(10) based on the method followed, being the percentage completion method. This is subject to the condition that in accordance with the CBDT Instruction No. 04/2009 cited above, in case it is found later that the project was not completed within the limitation period allowed u/s 80(IB)(10)(a)(iii) of the Act; the deduction granted earlier will have to be withdrawn by taking appropriate remedial action. The A O has to take note of this position in accordance with the CBDT Instruction No. 4 of 2009 dated 30.06.2009; and take necessary action as per law if any such contingency arises. In accordance 5 ITA No.641/PN/2011 M/s. Bhujbal Brothers Const. Co., Pune with the discussion made above, ground of appeal regarding deduction u/s 80IB(10) is held to be allowable for the appellant's project and accordingly ground nos. 1 & 4 of appeal are allowed. Since these grounds are allowed, there is no need to adjudicate on ground no. 2.
Now being seriously aggrieved by the decision of the Ld. CIT(A), revenue is in appeal before us.
5. We have heard the rival submissions of the parties and perused the record. The assessee has filed the paper book which has been also perused. It is seen that the project is situated in survey no.67 and consist of the building B- 5, B-9 & B-2. The survey no.69 is having the area of 40,700 sq.mtrs. and the entire property belong to Bhujbal family and it is the ancestral property. The present assessee firm is consisting of the family members as partners. There was a MOU with the bigger Bhujbal family and an area of 4902 sq.mtrs. out of the total area of 40700 sq.mtrs. in the survey no.67 was acquired by the said Partnership firm for the development vide agreement dated 13.4.2006 and 21.8.2007 which is also duly registered with the sub-registrar. The assessee firm proceeded to construct the building no.B-5, B-9 & B-2 on the said area. Admittedly in the agreements, the open space is shown at 1628 sq.ft. in addition to area covered by the internal roads i.e. 2017.87 sq.mtrs. As per the document on record, the project is situated on the piece of land admeasuring 4902 sq.mtrs. We find that the A.O. is influenced with the report of the Department Valuation officer (DVO). The DVO has referred to 26 buildings in the plot admeasuring 40700 sq.mtrs. but the said area belong to the Bhujbal family or Bhujbal (HUF). Out of the said area, 4902 sq.mtrs. has been acquired by agreement by the assessee firm. In our opinion, we have to only consider the project on which the assessee has claimed the deduction u/s 80IB(10) of the Act, more particularly, in the context of the area of the plot. We find that the finding of the A.O. is erroneous on this issue. The Ld. CIT(A) has explained the area statement in his order which does not require any interference. We accordingly, confirm the order of the Ld. CIT(A).
6. In the result, the revenue's appeal is dismissed.
Pronounced in the open Court on 25.02.2013
Sd/- Sd/-
(G.S. PANNU) (R.S. PADVEKAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
VG/SPS
Pune,
Dated 25th February, 2013
6
ITA No.641/PN/2011 M/s. Bhujbal Brothers Const. Co., Pune
Copy to
1 Assessee
2 Department
3 The CIT(A)-II, Pune
4 The CIT-II, Pune
5 The DR, ITAT, Pune.
6 Guard file.
By Order
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