Income Tax Appellate Tribunal - Mumbai
Fortaleza Developers, Mumbai vs Assessee on 4 April, 2012
आयकर अपील य अ धकरण,
धकरण मंुबई यायपीठ 'आई'
आई' मंुबई ।
IN THE INCOME TAX APPELLATE TRIBUNAL "I" BENCH, MUMBAI
सव ी वजयपाल राव,
राव या.स
या स एवं एन.
एन के. बलै या,
या लेखा सद य ।
BEFORE SHRI VIJAY PAL RAO, JM & SHRI N. K. BILLAIYA,
BILLAIYA, AM
आयकर अपील सं./I.T.A.
I.T.A. No.3686/Mum/2012
No. 3686/Mum/2012
( नधारण वष / Assessment Year :2008-09)
आयकर अपील सं./I.T.A.
I.T.A. No.3687/Mum/2012
No. 3687/Mum/2012
( नधारण वष / Assessment Year :2009-10)
M/s Fortaleza Developers, बनाम ITO 15(1),
बनाम/
601, Commerce House, 140, Matru Mandir, Ta rdeo Road,
Vs.
Nagindas Master Road, Fort, Mumbai-400007
Mumbai-400023
(अपीलाथ /Appellant
Appellant)
Appellant .. ( यथ / Respondent)
Respondent
आयकर अपील सं./I.T.A.
I.T.A. No.449
No. 4492
449 2 /Mum/2012
( नधारण वष / Assessment Year :2008-09)
आयकर अपील सं./I.T.A.
I.T.A. No.449
No. 4492
449 2 /Mum/2012
( नधारण वष / Assessment Year :2009-10)
ITO 15(1), बनाम M/s Fortaleza Developers,
बनाम/
Matru Mandir, Ta rdeo Road, 601, Commerce House, 140,
Vs.
Mumbai-400007 Nagindas Master Road, Fort,
Mumbai-400023
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. :AAAJF0056B
(अपीलाथ /Appellant
Appellant)
Appellant .. ( यथ / Respondent)
Respondent
अपीलाथ ओर से / Appellant by : Shri Vijay Mehta
यथ क ओर से/Respondent by : Shri P. K. Shukla
सनवाई
ु क तार ख / D at e o f H e a ri n g : 3rd September 2013
घोषणा क तार ख/D
ख a te O f P ro n o u n c e m e n t: 13th September 2013
आदे श / O R D E R
PER : वजयपाल राव, या.स. / VIJAY PAL RAO, JM
These two set of cross appeals are directed against two separate orders of the Commissioner of Income Tax(Appeals) both dated 4.4.2012 for the assessment year 2008-09 and 2009-10 respectively.
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2. The assessee has raised one common ground in these appeals. The ground raised for the assessment year 2008-09 as under:
"1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the reduction of business income by ` 14,64,64,961/- being the share of profit of one the members of the appellant AOP erroneously holding that the agreement entered into between the members of the AOP is for sharing of the revenue and not for sharing of the net profit. Reduction of business income being bad in law, the same needs to be cancelled and returned business income and consequential claim u/s 80IB(10) on that amount needs to be accepted."
3. We have heard the Ld. AR as well as the Ld. DR and considered the relevant material on record. At the outset we note that an identical issue has been considered and decided by this Tribunal is assessee's own case for the assessment year 2007-08 vide order dated 12.10.2012 in ITA No. 2648/2012 in para 5.5 to 5.7 as under:
"5.5 We have carefully considered the version of Ld. CIT in the light of available on our record. We have carefully gone through the clause-7 of the agreement and the distribution of revenue by the assessee in its account. The distribution of the revenue in the account of the assessee is in accordance with intent and purpose of clause-7 of the agreement. According to clause-7 of the agreement SPPL is entitled to 35% share of the gross sale proceeds of the units inclusive of the value of the land. According to distribution in the account of the assessee SPPL has received Rs. 15.11 crore which is 35% of gross sale proceeds of the unit amounting to Rs.43. 17 crores. A sum of Rs. 11.62 crore is credited to the account of SPPL on account of land etc. and Rs.3.49 crore is considered as profit share of SPPL. Out of balance 65%, after including the MSEB and incidental charges and reducing the developmental charges a sum of Rs. 10.76 crore has been considered as prop share of RRKC. Therefore, the distribution of profit made by the assessee between its members is in accordance with clause 7 of the agreement. The interpretation of clause-7 sought to be adopted by Ld. CIT will be against the very intent and purpose for which the assessee AOP has been formed and if such interpretation is adopted it will tantamount to denial of existence of AOP which is not even the case of Ld. CIT. It has already been pointed out that AOP is a separate and distinct assessable entity and is also entitled to 3 ITA No.3686& 3687, 4492 & 4491/M/2012 Fortaleza Developers claim the deductions permitted under the Income Tax Act provided it fulfil the conditions laid down in the section governing that deduction. The assessee AOP in the present case has been assessed as AOP and found to have fulfilled the condition laid down in section 80 IB(l0) and has been held to be eligible for such deduction. The quantum of deduction under section 80 lB (10) will depend on the income earned from eligible project. The quantum of deduction will not depend upon the mode of distribution of shares amongst the members of AOP as income of AOP is taxable at maximum marginal rate. Therefore, manner in over eligible quantum of deduction under section u/s. 801B (10) as the eligible quantum will be gross receipts from the project reduced by expenses incurred on the project. It is not even the case of Ld. CIT that assessee AOP is not entitled to get the benefit of deduction under section 80 lB (10). The only objection of Ld. CIT is that distribution of revenue in the account of the assessee is inappropriate and by this manner assessee has been benefited by larger deduction in place of smaller deduction available to it. In our opinion such observations of Ld. CIT are incorrect, firstly, on the ground that even distribution of revenue in the books of account of the-assessee cannot be said to be contrary to the purpose and intent described in clause-7 of the agreement. Secondly, the allowability or otherwise of deduction under section 80 IB (10) is not dependent upon the manner in which the profit has been distributed among the members of AOP but it depend upon the fulfilment of the conditions laid down in that section and also the deduction is available to an undertaking and not to the individual constituent of an undertaking.
5.6 We have also not found any force in the submission Ld. DR that 35% share allocable to SPPL was in the nature of overriding title. Clause-7 of the agreement which has been sought to be interpreted by Ld. CIT DR in this manner does not indicate that 35% of the gross revenue to be shared by SPPL was in the nature of overriding title, therefore, this argument of Ld. CIT DR has to be rejected and it is to be held that 35% share received by SPPL was not in the nature of overriding title to the revenue but it is only share of profit of SPPL.
5.7 In view of above discussion it is held that the impugned assessment order is neither erroneous nor prejudicial to the interest of revenue on account of allocation of profit between members as per accounts of the assessee as allocation of profit in the accounts of the assessee is in accordance with clause-7 of the agreement and manner of allocation of profit in the account cannot alter the quantum of deduction available to AOP under section 80 18(10)."
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4. The facts for the assessment year 2007-08 and for the assessment years under consideration are identical as this issue is regarding the clause 7 of AOP agreement dated 29.4.2003. Accordingly following the earlier order of this Tribunal we decide this issue in favour of the assessee. The orders of the authorities below qua this issue set aside.
5. The Revenue has raised the common grounds in these appeals. The grounds raised for the assessment year 2008-09 are as under:
"1. On the facts and circumstances of the case as well as in law, the Ld. CIT(A) erred in directing AO to grant deduction u/s. 801B(10) of the Income Tax Act, 1961 without considering the facts that area of some of the flats exceeds 1500 sq.ft. in contravention of provisions of section 801B(10)(c) disentitling the assessee to claim deduction u/s. 801B (10) ".
"2. On the facts and circumstances of the case as well as in law, the Ld. CJT(A) has erred in law to allow deduction u/s. 801B(10) ignoring the fact that only one combined project was approved which was conveniently divided later on into two separate projects i.e. Residential project and Commercial project to be run by the assessee and M/s. R. K Associates (sister concern of the assessee) respectively in order to circumvent the provisions of 801B(1 0) to claim deduction u/s. 801B(10) which otherwise disqualifies the assessee to claim deduction u/s. 801B(10)."
6. The Assessing Officer has disallowed the claim of deduction u/s 80IB on the ground that area of some of the flats exceeds the maximum permissible limit of 1500 square feet as well as on the ground of commercial project. On appeal, the CIT(A) decided the issue in favour of the assessee by following the order for the assessment year 2007-08 wherein the decision of Special Bench of this Tribunal in case of Brahma Associates had been followed.
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7. We have heard the Ld. DR as well Ld. AR and considered the relevant material on record. The Ld. AR of the assessee has submitted that this issue is covered by the decision of this Tribunal is assessee's own case for the assessment year 2007-08. He has pointed out that the AO has represented the addition on the basis of the finding for the assessment year 2007-08. On the other hand, the Ld. DR has submitted that during the course of survey certain papers were impounded and as per page no.
15, 17 and 22 to 27 of the impounded papers some flats were having the area of more than 1500 square feet. He has referred para 3.ii of the AO in this respect. The Ld. DR has also relied upon the decision of Co-ordinate Bench of this Tribunal in case of ITO Vs Everest Home Construction India Pvt. Ltd. 26 Taxman.com 246 in rejoinder the Ld. AR of the assessee has relied upon the decision of Hon'ble Gujarat High Court in case of Manan Corporation Vs ACIT 255 CTR (Guj.) 415 and submitted that the issue in case of Everest Home Construction India Pvt. Ltd. decided by the Co-
ordinate Bench of this Tribunal is now covered by the decision of Hon'ble Gujarat High Court.
8. Having considered the rival submissions and carefully gone through the relevant record as well as the decisions relied upon by the parties we note that an identical issue has been considered and decided by this Tribunal in assessee's own case for the assessment year 2007-08 vide order dated 25.4.2012 in ITA No. 4327/2010 in para 2 to 6.2 as under:
"2. The revenue has raised the following grounds:
01 On the facts and circumstances of the case as well as in law, the Ld. CIT(A) erred in directing Assessing Officer to 6 ITA No.3686& 3687, 4492 & 4491/M/2012 Fortaleza Developers delete the addition made of Rs.4,43,366/- towards receipts not shown ignoring material facts available on record." 02 "On the facts and circumstances of the case as well as in law, the Ld. CIT(A) erred in directing Assessing Officer to grant deduction u/s. 801B (10) of the Income Tax Act, 1961 without considering the facts that area of some of the flats exceeds 1500 square feet Section 8OlB(10) (10)(c) disentitling the assessee to claim deduction u/s. 801B (10). 03 "On the facts and circumstances of the case as well as in law, the Ld. CIT(A) erred in law to allow deduction u/s.801B(10) ignoring the fact that only one combined project was approved which was conveniently divided later on, into two separate projects that is Residential Project and Commercial Project to be run by the assessee and MIs.
R. K. Associates (Sister Concern of the assessee) respectively in order to circumvent the provisions of 80(IB(10)(d) to claim deduction u/s 8OlB(10) which otherwise disqualifies the assessee to claim deduction u/s 801 B(10).
3. First we will take upon the ground no.2 regarding the disallowing the claim on the ground that some of the flats have exceeds 1500 sq.ft area in contravention of provisions of sec. 80IB(10(e).
4 . We have heard the ld DR as well as the ld AR of the assessee and considered the relevant material on record. The ld DR has relied upon the order of the Assessing Officer and submitted that the area of the flats shown in the sale agreement is more than 1500 sq.ft; therefore, there is a violation of sec.80IB (10), 4.1 On the other hand, the ld AR of the of the assessee has pointed out that there is no dispute regarding the built up area of the flats is less than 1500 sq.ft and the Assessing Officer has taken into consideration the saleable area and not the built up area. He has referred the impugned order of the CIT(A) and submitted that the CIT(A) has reproduced all the details of the area of each and every flats at pages 12 & 13 of the impugned order, which clearly shows that the area of the flat is less than 1500 sq.ft.
4.2 After considering the rival contention and perusal of records, we find that the there is no dispute on the point that the flats constructed as per the sanctioned plan having less than 1500 sq.ft area. Therefore, the built up area of the flats in the project is not disputed as it is less than 1500 sq.ft. However, the assessee has received the consideration in some of the flats for more than 1500 sq.ft area which includes built up area plus the common area and may be called as 'super built up area'. It is 7 ITA No.3686& 3687, 4492 & 4491/M/2012 Fortaleza Developers pertinent to note that when the project has been sanctioned and the completion certificate has been issued as per the sanctioned plant which is for the residential flats having less than 1500 sq.ft, then even if the assessee has received the consideration for more than 1500 sq.ft in some of the flats, which would not constitute violation of conditions as prescribed u/s 80IB(10)( c) because the built up area is less than 1500 sq.ft. The CIT(A) has given the details of the flats in question at page 12 & 13 as under:
COPA CABNA 'A' AND 'C' Flat Build up area of flats Build up referr including carpet area, area (in ed in thickness of walls and sq.fts) impou enclosed Balcony (in sq.mt) nded paper s 1001 94.88 1021.28 1002 94.87 1021.18 BONITA, AND EVORA 102 132.81 1429.57 103 132.81 1429.57 201 132.33 1424.40 202 132.81 1429.57 203 132.63 1427.63 301 132.34 1424.51 302 132.81 1429.57 303 132.81 1429.57 401 132.84 1424.51 402 132.84 1429.57 403 132.63 1427.63 501 132.34 1424.51 502 132.81 1429.57 503 132.81 1429.57 601 132.34 1424.51 602 132.81 1429.57 603 132.63 1427.63 701 132.34 1424.51 702 132.81 1429.57 703 132.81 1429.57 801 132.34 1424.51 802 132.81 1429.57 803 132.63 1427.63 901 132.34 1424.51 902 132.81 1429.57 903 132.81 1429.47 RIOGRANDE AND SALVAVIDA 8 ITA No.3686& 3687, 4492 & 4491/M/2012 Fortaleza Developers 102 128.99 1388.45 103 128.94 1387.91 201 129.47 1393.62 202 129,02 1388.77 203 129.02 1388.77 301 129.47 1393.62 302 129.03 1388.88 303 129.02 1388.77 401 129.47 1393.62 402 129.02 1388.77 403 129.02 1388.77 501 129.47 1393.62 502 129.03 1388.88 503 129.03 1388.88 601 129.47 1393.62 602 129.02 1388.77 603 129.02 1388.77 701 129.47 1393.62 702 129.03 1388.88 703 129.02 1388.77 801 129.47 1393.62 802 129.03 1388.88 803 129.02 1388.77 901 129.47 1393.62 902 129.03 1388.88 903 129.02 1388.77 4.3 This factual aspect has not been disputed before us.
Therefore, when each of the flats have been constructed as per the building plan duly approved by the local authorities and also completed as per the completion certificate, wherein the built up area of each flats has been shown less than 1500 sq.ft, then receiving the consideration by the assessee for more than 1500 aq.ft showing as saleable area of the flats would not enhance the built up area of the flats/residential units as per the sanctioned plant and completion certificate.
4.4 In view of the above discussion as well as in the facts and circumstances of the case, we do not find any error or illegality in the order of the Cit(A), qua this issue.
5 Ground no.3 is regarding disallowance of deduction u/s 80IB(10) on the ground that the assessee is having commercial project in contravention of provisions of sec. 80IB(10)(d).
5.1 We have heard the ld DR as well as the ld AR of the assessee and considered the relevant material on record. The Assessing 9 ITA No.3686& 3687, 4492 & 4491/M/2012 Fortaleza Developers Officer has considered the residential flat and commercial project as one integrated project and thereby held that the area of commercial establishment in the project is more than the limit prescribed u/s 80IB(10)(d).
5.2 On appeal, the CIT(A) held that the residential and commercial projects are totally independent; therefore, the claim cannot be disallowed.
6. We find that the layout plan of the entire building, which was redeveloped by the assessee and assessee's sister concern M/s R Associates was approved by the Pune Municipal Corporation (PMC) by one approval order and subsequently two separate projects for residential and commercial was sanctioned by the PMC. Therefore, the Assessing Officer took the entire project as one as the layout of the development of the building was approved by the PMC by one approval. Without going into the controversy, whether the residential or commercial project are two separate projects or parts of once project, we are of the view that as per the pre- amended provisions of sec. 80IB(10), there is no such condition of commercial area in the project; therefore, once a project has been approved prior to 1.4.2005 by the Municipal Authorities, then in the absence of any such condition in the provisions of sec. 80IB(10) as exits at the relevant point of time, the subsequent amendment w.e.f 1.4.2005 cannot be applied with retrospective effect. When the amendment itself takes effect from 1.4.2005, then it cannot be presumed to be applied from retrospective effect. Our view has been supported by the decision of the Tribunal in the case of Saroj Sales Organisation vs ITO reported in 115 TTJ 485(Mum).
6.1 Even otherwise, the law on the point is very clear that unless provided in the statute, the law is always presumed to be prospective in nature. The CIT(A) has followed the decision of the Special Bench of the Tribunal in the case of Commissioner of Income-tax v. Brahma Associates, which has been upheld by the Hon'ble Jurisdictional High Court in 333 ITR 289(Bom). The Hon'ble Jurisdictional High Court has held in para 33 as under:
"In the result, the questions raised in the appeal are answered thus :
(a) Up to March 31, 2005 (subject to fulfilling other conditions), deduction under section 80-IB(10) is allowable to housing projects approved by the local authority having residential units with commercial user to the extent permitted under the Development Control Rules/ Regulations framed by the respective local authority.10
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(b) In such a case, where the commercial user permitted by the local authority is within the limits prescribed under the Development Control Rules/Regulation, the deduction under section 80-IB(10) up to March 31, 2005 would be allowable irrespective of the fact that the project is approved as "housing project" or "residential plus commercial".
(c) In the absence of any provisions under the Income Income--tax Act, the Tribunal was not justified in holding that up to March 31, 2005 deduction under section 80 80--IB(10) would be allowable to projects approved by the local authority having residential building with commercial commercial user up to 10 per cent.
built--up area of the plot.
of the total built
(d) Since the deduction under section 80-IB(10) is on the profits derived from the housing projects approved by the local authority as a whole, the Tribunal was not justified in restricting the section 80-IB(10) deduction only to a part of the project. However, in the present case, since the assessee has accepted the decision of the Tribunal in allowing section 80-IB(10) deduction to a part of the project, we do not disturb the findings of the Tribunal in that behalf.
(e) Clause (d) inserted to section 80-IB(10) with effect from April 1, 2005 is prospective and not retrospective and hence cannot be applied for the period prior to April 1, 2005."
6.2 Therefore, as per the pre-a-mended provisions of sec 80IB(10), once the project has been approved by the local authorities, then in the absence of any such condition of commercial area in the provisions of sec. 80IB(10), deduction cannot be denied on this point. Hence, we do find any reason to interfere with the impugned order of the CIT(A), qua this issue."
9. It is to be noted that the issue has been decided by this Tribunal on the basis of the peculiar fact and it was found that the build up area of each flat was less than 1500 square feet and further the commercial project was found a separate project. The decision of Hon'ble Jurisdiction High Court in case of Brahma Associates 333 ITR 289 has been followed.
11ITA No.3686& 3687, 4492 & 4491/M/2012 Fortaleza Developers Therefore, the decision relied upon b y the Ld. DR would not help the case of the revenue when the issues have been decided on the facts.
Accordingly following the earlier order of this Tribunal we decide the issue of deduction u/s 80IB in favour of the assessee and against the revenue.
10. In the result, the appeals of the assessee are allowed and the appeals of the Revenue are dismissed.
Order pronounced in the open Court on this 13th day of September 2013 Sd/- Sd/-
(एन. के. बलै या) ( वजयपाल राव)
लेखा सद य या यक सद य
(N. K. BILLAIYA) (VIJAY PAL RAO)
Accountant Member Judicial Member
Place: Mumbai : Dated: 13th September 2013 Subodh Copy forwarded to:
1 Appellant 2 Respondent 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER Dy /AR, ITAT, Mumbai