TMI Blog2010 (6) TMI 776X X X X Extracts X X X X X X X X Extracts X X X X ..... a by another entity. Housing project does not include construction of the commercial establishment carried out by another entity in that area. Therefore claim of the assessee for deduction u/s 80 IB (10) for the housing project cannot be denied because the commercial project was carried out by a sister concern in the same area. Having accepted the percentage completion method of determining the profits, it will not be correct to hold that such profits before the completion of the housing project, which otherwise satisfies all the conditions of sec 80 IB(10), though assessed as profits from the housing project will not be entitled to deduction u/s 80 IB (10). the profits from the Housing project assessed on a year to year project will be entitled to deduction u/s 80 IB (10), if it otherwise does not contravene the provisions/ requirements of that section. We find that the CBDT has also clarified vide their Instruction No 4 of 2009 dated 30.6.2009 that relief u/s 80IB (10) can be allowed on a year to year basis where the assessee is showing profits on partial completion of the project. If at the end of the period the Assessee is found not to have complied with the provisions of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm undertook to construct residential building viz., Acmee Armay to be residential area constructed at 60,000 sq.ft. approx. comprising 200 flats in 7 wings in ground plus upper floors to be approved. The said residential building has to be constructed on a shopping complex comprising of approx.10,566 sq/ft/ built up area wherein the limited development right to construct shopping complex was assigned to a different concern viz Lakshadeep Investment Finance P.Ltd hereinafter called as LIFPL, being a sister concern of the appellant through a separate development agreement dt 25.4.2003 entered between LIFPL M/s Hickson Dadajee Pvt .Ltd (owner of the property) In other words the development right of the property was divided between the assessee for constructing residential flats and shopping complex at ground floor to LIFPL. The considerations to be paid by the appellant and LIFPL were fixed at ₹ 11.56 crore 2 crore respectively in lieu of development rights received by them. The appellant claimed that the intimation of disapproval (IOD) and Commencement Certificate (CC) were issued in the name LIFPL on 6.11.2003 and 13.11.2003 respectively in respect of construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g deduction u/s 80IB(10). The second point mentioned by AO was that 8 flats were joined together and as a result 4 flats in this project are having built up area more than 1000 sq.ft. which is more than the stipulated limit. This was the second disqualification found by the AO coming in the way of claiming deduction u/s 80IB (10). Further the AO went on to find that the shopping complex was comprising of more than 10,000 sq.ft. in built up area which is beyond the upper limit of 2000 sq.ft. or in excess of 5% of aggregate built up area of housing project. Whichever is less if the shopping complex and housing building are combined together as if the entire complex were constructed by the appellant himself. The AO gave his categorical finding that the construction of shopping complex and residential housing was deliberately separated by bifurcation of development right assigned to two sister concerns in order to circumvent the amended provision of sec. 80IB(10)(d) substituted by Finance Act (No.2) 2004, In this way the AO denied the claim of sec 80IB(10) broadly on all these three grounds. 4. Aggrieved the Assessee preferred an appeal before the CIT(A). As regards date of completi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion certificate is issued before 31.3.2008. The AO has pointed out that since the completion of the building is subject to happening of future event of completion of building the deduction u/s 80IB(10) cannot be given until happening of such event. In my opinion the view of the AO is misconceived particularly in the cases where the profit has already been derived long before the completion of project for certain assessment years as it has happened in the present appeal for AY 2005-06. The AO has tried to bring a proposition that the deduction u/s 80IB(10) should be kept in abeyance till the completion certificate is finally issued does not fit in the scheme of provision of sec 80IB(10). The view of the AO is legally untenable as the profit derived cannot await for getting the entire project completed. The completion of housing project is an ongoing process and wherever profit has been derived. The assessee is entitled for deduction u/s 80IB(10) for partially completed portion of project. Looking to the totality of the facts of the case and also placing reliance on the decision of Saroj Sales Organisation v ITO Ward 25(2)(3) Mumbai in ITA No.4008/M/07 order dated 24 th January 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee the owner of flat No A/601 602 have also confirmed the independence of two adjacent flats. The crux of the argument of the appellant was that as far as developer is concerned they handed over independent flats to the purchasers and any subsequent alteration in the two adjacent flats should not make any material difference on the claim made by them as they have no authority to stop such alteration. The CIT(A) accepted the contention of the assessee observing as under: I have perused facts available on record. I find that there is no dispute on the act that the appellant has constructed the residential flats as per approved plan only. There is nothing on record to say that the appellant has tinkered the construction plan in any way deviating from the approved plan. Further there is no quarrel on the fact that the separate agreement was entered into for each and every flat sold to the purchaser. Possession has been given for each flat separately. I also find that each flat is self contained having its own electrical meter, kitchen, drawing room, dining room front door and passage etc. AO has not brought any material on record to hold that any alteration in alleged ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd parcel of the same project. The AO stressed on the point that the BMC has rejected the artificial bifurcation of the same project by separating residential that from shopping complex. According to the AO the BMC has approved only one project consisting of both shops and residence in the hand of assessee only for a single project. In this way the AO has made a point that the shopping complex shown to have constructed by LIFPL and the residential flat constructed by the appellant should be together taken as a Single project for the purpose of applying provision of sec. 80IB(10). The AO also placed reliance on the decision of Mcdowell Co v CTO 154 ITR 148 to say that it was colourable design to reduce the tax liability. 7. The AO also applied the amended provision of sec 80IB (10(d) inserted by Finance Act 2004 w.e.f. 1.4.2005 which requires that the built up area of shops included in housing project should not exceed 5% of the aggregate built up area of the housing project or 2000 sq.ft. whichever is less. Since, the AO found that the shopping complex measures 10,566 sq.ft. area out of total built up area measuring at 70,566 sq.ft., the AO gave a finding that it is a clear cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the facts. The appellant also tried to send an important point home that when the development plan was put up and got approved they have no inkling or any guess regarding the additional condition which was inserted by Finance Act. 2004 w.e.f. 1.4.2005 in form of sec 80IB(10)(d) which was heavily relied and applied by AO to disclaim the deduction u/s 80IB(10) to level allegation against them for colourable and dubious design to defraud the revenue. The appellant further has drawn the attention to the clarification issued by the CBDT vide letter dt 4.5.2001 (F./No.205/3/2001/ITA II) wherein it was mentioned that additional housing project on existing housing project can also qualify deduction u/s 80IB(10). The CIT(A) accepted the contention of the assessee observing as under: I have circumspected the material evidence available on record. I find that there are enough documentary evidence on record to say that housing complex and shopping complex though they are part of same building were constructed by two concerns viz the appellant firm and LIFPL. I find that development rights for residential and shopping complex were separately acquired by the appellant firm and LIFPL in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the copy of IOD dt 29.1.2004 with set of approved plan dated 29.1.2004 and commencement certificate dt 6.2.2004 issued in the name of appellant s firm. At last, the letter gives the following remark. In the instant case, the shops were approved and constructed by Lakshadeep Investment Finance P.Ltd. Subsequently, he amended plan and revised IOD was issued in name of Khyati Financial Services on 29.1.2004 due to change of ownership. The said building is approved under the file No. CHE/8637/BP(WS) AP as housing project its shops on the ground floor. From the perusal of the content of the above letter, I find that the BMC has accepted the construction of shopping complex and residential flats in principle by two different concerns and it was been combined together only for their record being the shopping complex and residential flats got constructed on the same land. The letter written by BMC in my opinion no way establishes that both the shopping complex and residential flats were constructed by the same person i.e. the appellant firm. In fact, it was none of the concern of BMC to look into as to who constructs which part of the project except to place into their re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is applicable from A.Y. 2005-06 as there is no shopping or commercial establishment indeed in the project undertaken by the appellant firm. 9. The next issue to be considered is whether the sub-clause (d) of sec 80IB(10) inserted by Finance Act, 2004 w.e.f. 1.4.2005 would be applicable to the present case. The AO, in the assessment order has given a finding that the provisions of sec 80IB(10)(d) are squarely applicable on the facts of the case being the A.Y. 2005-06. The AO, since, held that the entire building constituting shopping complex on ground floor and residential flats above are falling under the single project in view of approval given by the BMC and the built up area of shopping complex, exceeded 5% of total building up area of the project or 2000 sq.ft. whichever is less, the case is squarely hit by the provision of sec 80IB(10)(d). Accordingly, the AO disqualified the assessee from the claim of deduction u/s 80IB(10) on this ground. 10. The CIT(A) has accepted the contention of the Assessee observing as under: From the plain reading of provisions of sec 80IB(10) applicable before 1.4.2005 and after 1.4.2005, I find that the amended provisions inserted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied w.e.f. AY 2005-06. Here, it is important to note that primary condition of application of sec 70IB(10) is with reference to the date of approval of housing project. Therefore, the question may arise as to whether the post amended provisions of sec 80IB(10)(d) are to be applicable with reference to assessment year or with reference to date of the approval of housing project. It is well accepted principles of jurisprudence that every legislation is to be regarded as prospective if it amends substantive law. The legislature should clearly specify its intention to apply the law retrospectively. If it is likely to affect the vested rights to the citizens created by earlier. The conditions u/s 80IB(10)(d) require to be tested at the time of the project was conceptualised. A vested right created by earlier legislation cannot be snatched away or divested unless there is clear cut retrospective amendment to do so. A harmonious doctrine of interpretation is to be adopted to harmonize the operation of the provisions of sec 80IB(10). The expression used in a statute ordinarily be understood in the sense in which it is best harmonious to the object of a statute and which effectuates the ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h project which were so approved. There was no stipulation as to the shopping complex area is permissible in the project / As already stated earlier that the amendments were subsequently made while extending the deduction in our view is clearly not in accordance of law It may be seen that Hon. ITAT has given a finding that if the housing projects were approved before 31.3.2005 there was no stipulation as to the shopping complex area is permissible in the project in other words in respect of Housing Projects approved before 31.3.2005, the convenient shopping has been accepted u/s 80IB(10) if the housing project is so approved. In the present case, the BMC approved the plan of the appellant as Housing Project with shops at ground floor. Hence I hold that post amended provisions of sec 80IB(10)(d) is not applicable in cases where the housing project got approved before 31.3.2005. Since, in the present case housing project got approved before 31.3.2005 the mischief of provisions sec 80IB(10)(d) is not applicable. The facts of circumstances of instant case is very much symmetrical and compatible to M/s Saroj Sales Organization v ITO in ITA No.4008/M/.07 decided by Mumbai E B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of M/s Saroj Sales Organization v ITO. In ITA No. 4007/M/07 decided by Mumbai ITAT E bench dated 24.1.08 for AY 2005-06 being the housing project approved before 31.3.05. In any case, if there are two opinions of law or inferences the view favourable to the assessee should be followed as held by Hon. Supreme Court in the case of CIT v Podar Cement P. Ltd 226 ITR 625 (SC). The appellant gets relief on this ground also. Further, I also hold that the combining two adjacently located flats in case of 4 pair of flats by the purchasers on the facts of the case, does not affect the claim of deduction made u/s 80IB(10). At last, I do not find any legal infirmity in the claim made u/s 80IB(10) in respect of completion of housing project. In the result, the appeal is allowed . 11. Aggrieved the Revenue is in appeal. The facts are that the assessee had executed a housing project for which the approval of the Local Authority was obtained. The necessary approval for the project was given by Municipal Corporation of Greater Mumbai on 29.1.2004 in the name of appellant. The Commencement Certificate was issued on 6.2.2004 in the name of the assessee. The Assessee has already rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim of relief u/s 80 IB (10) by the Assessee should be considered only for the Housing project and the construction of commercial project is a separate undertaking. Profits from the construction of commercial areas was offered and assessed in the hands of the company. CBDT has also issued a clarification vide letter dated 4 th May 2001 (F.No. 205/3/2001/ITA 11) which reads as under: The undersigned is directed to refer to your letter No.MCIII.RSA m.388/19799/3 dated 1 st January 2001 and to state that the additional housing project on existing housing project site can qualify as infrastructure facility under section 10(23G) and 80IB(10) provided it is taken up by a separate undertaking having separate books of accounts so as to ensure that correct profits can be ascertained for the purpose of section 80IB and also to identify receipts and repayments of long term finances under the provisions of sec 10(23G). Separately financing arrangements and also if it separately fulfils all other statutory conditions listed in sections 10(23G) and 80IB(10). With regard to your query regarding the definition of housing Project it is clarified that any project which has been appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion becomes academic. 17. The next issue is regarding completion of the project before 31.3.2008 as required u/s 80IB (a)(i). Sub sec (a) of sec 80 IB (10), requires that an undertaking which undertakes a housing project which has been approved by the local authority before 1.4.2004 should complete construction before 31st day March 2008. The section does not require the completion certificate to be obtained before that date. It is well known that even after completion of a building it will take some time to obtain the completion certificate from the local authority who may inspect the building before giving the certificate. It does not mean that construction is not over. In the present case the Assessee has already received the occupancy certificate in respect of Wing A,B C. on 13.9.2005 Wing F G H on 26.9,2006. As regard to the E Wing still 1 to 12 floors the appellant has applied for occupancy certificate on 18.1.2008 after having completed the building which is the last final wing of the building. It was also submitted that construction work is now completed and application for completion certificate has been made by the Architect vide his letter dated 18.1.2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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