TMI Blog2012 (5) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... lat is less than 1500 sq.ft. and therefore, the CIT(A) was justified in allowing the deduction as claimed by the assessee. Deduction u/s 80-IB(10) - Held that:- If the project is started prior to 1-4-2005 the limit of 2000 sq.ft. or 5% whichever is lower is not applicable and the deduction is to be allowed to the entire project. Assessing Officer was not justified to take date of commencement as 20/04/2005 which was date of revalidation. So Brahma Aangan project already commenced on 17/03/2001 i.e. prior to 01/04/2005. Similarly in respect of Brahma Majestic plan was sanctioned on 27/06/2003 i.e. much before 01/04/2005. We direct the authorities below to allow deduction u/s 80-IB(10) of the Act on account of both these projects. - I.T.A. No. 647 and 649/PN/2009, ITA No. 1003/PN/2010 - - - Dated:- 15-5-2012 - SHRI SHAILENDRA KUMAR YADAV, J.M. AND SHRI G.S. PANNU, A.M. For the Appellant : S.Shri Sunil Pathak and Nikhil Pathak For the Respondent : Shri Hareshwar Sharma ORDER PER SHAILENDRA KUMAR YADAV, JM All these appeals pertain to the same assessee. So they were heard together and are being decided by this consolidated order for the sake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Assessing Officer passed u/s 143(3) dt. 21-12-2006 was erroneous and prejudicial to the interest of revenue and required revision/modification/setting aside on above issues and accordingly show cause notice u/s 263 dt. 22-12- 2008 was issued and served on the assessee whereby assessee was asked to give its submissions on the issues. In response to notice, the learned AR for the assessee filed detailed written submissions vide letter dated 9-2-1999 as detailed on page 3 to 12 of the order of the CIT. 4. After considering the written submissions filed on behalf of the assessee and material on record, the CIT found that the assessee has not filed any balance sheet and profit and loss account pertaining to Brahma Aangan project, an undertaking which is to be considered as separate and distinct entity as per Rule 18BBB(2) of the I .T. Rules 1962 for the purpose of claim of deduction u/s 80-IB of the Act. The form No. 10CCB filed along with the return of income also does not contain any balance sheet, profit and loss account. The report in form No. 10CCB was also prepared in a very casual manner without giving any major details. In view of the above, the CIT observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h project cannot be considered as housing project entitled for deduction u/s 80-IB(10) as this section is mainly introduced to promote low cost residential units. Further, as per amended provision of clause (d) to section 80IB(10), commercial area more than 2000 sq.ft. is not permissible, though this clause is introduced w.e.f. 1-4-2005, but being clarificatory in nature, it applies to earlier years as well. 4.2 Further, assessee s project also included duplex flats in B4 and B5 buildings having built up area exceeding 1500 sq.ft. As per assessee, terrace cannot be included in built up area prior to A.Y. 2005-06, as provisions of section 80IB(10)(a) were introduced w.e.f. 1-4-2005. So, according to the CIT it is clarificatory in nature and applies to earlier years also. In view of the above, the CIT held that assessee s project has violated two important conditions discussed above, and hence the assessee was not entitled for deduction u/s 80-IB(10) of the Act. Thus, the Assessing Officer has passed an order without considering or examining the requirements of Rule 18BBB(2) of the I .T. Rules and other provisions of section 80-IB(10) of the Act. 4.3 The CIT further observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no reason to disallow the deduction on this ground. 5.3 The CIT erred in disallowing the deduction on the ground that the assessee had constructed commercial area of 7555 sq.ft. without appreciating that the amendment introduced w.e.f. 1-4-2005 was not applicable to the current year and was applicable only to the projects which had started after the insertion of the amendment. 5.4 The CIT failed to appreciate that the issue involved regarding allowability of deduction in respect of a project which included certain commercial area was a debatable one and two opinions were clearly possible and therefore, revision u/s 263 was not permissible. 5.5 The CIT erred in denying the deduction on the ground that the built up area of certain residential units exceeded 1500 sq.ft. without appreciating that the built up area of all the units was below 1500 sq.ft. and hence there was no reason to disallow the deduction. 5.6 The CIT erred in holding that the area covered by terrace was also includible in the built up area without appreciating that the terrace area did not form part of built up area and hence, the same ought to be excluded. 5.7 The CIT erred in holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 and therefore, there is a violation of clause (d). (c) In building B4 and B5 the duplex flats are having the built up area of 1595 sq.ft. each. Thus, the built up area condition mentioned in sub-clause (c) of 80IB(10) that the flat should be below 1500 sq.ft. built up area, is violated. This area is calculated after including the terrace (built up area 1330 sq.ft. and terrace 265 sq.ft). (d) Along with the return, the assessee has not submitted separate P L account and balance sheet for the project. Secondly, the form No. 10CCB (audit report) is not attached with the P L account and balance sheet of the project and it is blank in various columns which are pertaining to the deduction u/s 80- IB(10) of the Act. 7.1 On account of the above mentioned reason, the CIT held that the assessee is not entitled for deduction u/s 80IB(10) of the Act as the various conditions mentioned in the section are violated. According to the assessee, the order of the CIT is bad in law as the assessment order passed by the Assessing Officer is neither erroneous nor prejudicial to the revenue. On merits, the relief is allowable to the assessee u/s 80- IB(10) as none of the conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceed 1500 sq.ft. each. He stated that the built up area including the terrace is 1595 sq.ft. in building No. B4 and B5. This is arrived at by considering the built up area at 1330 sq.ft. and terrace of 265 sq.ft. for each flat and therefore, he held that the deduction is not allowable to Brahma Aangan Project as the built up area of a few flats exceeded 1500 sq.ft. each. In this context, it was the stand of the assessee that the built up area was wrongly calculated and in a separate paper book containing 6 pages, the assessee has given detailed working of the built up area as per the definition in the Act. Accordingly the total area was worked out to 1212.93 sq. ft and terrace of 281.93 sq.ft. Thus the total is less than 1500 sq.ft. Hence the objection of the CIT is misplaced. 7.4 Alternative argument on behalf of the assessee was that the question of including the terrace in the built up area comes up only w.e.f. 1-4-2005, because the definition is introduced in the section with effect from that date. For the period prior to 1-4-2005 no such definition was on the statute and hence the built up area has to be considered as per the DC rules of the sanctioning authority. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT on this account does not justify the invoking of provisions u/s. 263 of the Act. 7.5 Without prejudice to above the CIT is not justified in holding that the entire project Brahma Aangan is not entitled to the deduction just because 4 duplex flats in B4 and B5 buildings are having the built up area exceeding 1500 sq.ft. The ITAT Third Member in the case of Sanghvi Doshi Enterprises Vs. ITO (2011) 60 DTR (Chennai) (TM)(Trib) 306 has held that only the flats exceeding the limit of built up area can be excluded and the deduction should be allowed on the balance flats which are within the limits of built up area mentioned in the section. Similar view is also taken by ITAT Kolkata Bench in the case of Bengal Ambuja Cement. In view of this alternate contention, CIT was not justify to invoke provisions of 263 of the Act on this account. 7.6 Other issue is that the assessee has submitted the audit report which is blank in respect of the columns relating to the deduction u/s 80-IB(10). The CIT mentioned that the auditor has not attached the P L account and the balance sheet of the Brahma Aangan project along with the audit report and hence the deduction u/s 80IB(10) was wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial establishments. 4. The learned CIT(Appeals) erred in failing to appreciate the letter and spirit of section 80 IB(10) prior to its substitution by the Finance (No.2) Act, 2004 w.e.f. 01/04/2005 which had avowedly been brought into the Statute to promote housing as a priority area and which (the un-amended section) did neither contemplate, nor provide for, any commercial space or area whatsoever as constituting a part of a Housing Project and contrary to this the assessee s project Brahma Angan consists of commercial area of 7562.85 sq.ft. 5. The learned CIT(Appeals) erred in holding the assessee as eligible for deduction u/s.80-IB(10) when the assessee s project Brahma Angan had been approved as a residential-cum-commercial project , and not as a Housing Project per se. 6. The learned CIT(Appeals) erred in deciding the appeal without applying the provisions of section 80-IB(10) as applicable to the relevant Assessment Year (i.e. A.Y.2003-04) and by reading into the section qualifications (such as utilization of upto 10% of the built up area for commercial use) which did not exist in the section at all. 7. The learned CIT(Appeals) err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction u/s 80IB(10) as applicable prior to 1-4-2005 is admissible in the case of a Housing project comprising residential housing unit and commercial establishments. Further, it was submitted that the CIT(A) erred in holding that the assessee is eligible for deduction u/s 80IB(10) when the assessee s project Brahma Aangan had been approved as a residential cum commercial project and not as a housing project per se. It was submitted that the CIT(A) erred in deciding the appeal without applying the provisions of sec. 80-IB(10) as was applicable to the relevant assessment and in introducing new conditions pertaining to commercial construction in residential project. The learned DR further submitted that the CIT(A) erred in proceeding on the basis of an assumption that the Pune Municipal corporation does not permit/sanction residential housing project unless convenience shopping is provided. The CIT(A) further erred in accepting assessee s plea that the area covered by terrace enclosed to certain flats does not form part of built up area and ought to be excluded while working out the built up area of such flats. The learned DR therefore, pleaded that the order of the CIT(A) be vacated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment and therefore, the assessee was not entitled to claim the deduction in respect of the profits of Brahma Angan Project for this year. 1.2] The learned CIT(A) ought to have appreciated that a. Simply because the project Brahma Angan consisted of commercial area of 7555 sq.ft, the same was still a housing project and eligible for deduction u/s.80IB(10). b. The project Brahma Angan was started in F.Y.2000-01 i.e. much prior to the insertion of the amendment restricting the total commercial area and therefore, since the project was started prior to the amendment, there was no restriction on the commercial area includible in the housing project. c. The amendment restricting the total commercial area in the housing project was not retrospective and was applicable only to the projects which had commenced construction after the insertion of the amendment and accordingly, there was no reason to deny the deduction in respect of the profits for this year. 2] The learned CIT(A) erred in confirming the disallowance of deduction of ₹ 9,37,92,482/- u/s. 80IB(10) claimed in respect of Brahma Majestic Project only on the ground that the said project c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial project. Further, out of total built up area of the project of 19695.696 per sq. mtrs, 702.216 sq. mtrs (3.58%) was the commercial or non-residential area. Therefore, this violated the restriction of 2000 sq.ft. of commercial area in a housing project which was introduced as section 80-IB(10)(d) by the Finance Act 2004 w.e.f. 1- 4-2005. Stand on behalf of the assessee was that this project was approved prior to this amendment and therefore, the imposition of this condition was subsequent to the building plan having been approved by the PMC. The Assessing Officer held that actual building commencement certificate was obtained on 20-4-2005 which was after introduction of clause (d) of sec. 80IB(10) of the Act. The Assessing Officer also stated that MC permits only convenience shops in residential project but not offices and these shops were to have areas less than 2000 sq. mtrs. The Assessing Officer further stated that there were amendment in the building plans and the assessee was already aware of amendment and hence it should have taken necessary steps for alterations for availing the benefit of sec. 80IB(10) of the Act. In view of the fact that the commercial area als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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