TMI Blog2009 (10) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... ontentions have been heard and record perused. Facts in brief are that the assessee is a limited company engaged in building construction activities. During the relevant assessment years under consideration, the assessee-company in joint venture with Ghaziabad Development Authority, had been engaged in the business of development and construction of houses of different categories, The assessee-company has undertaken the commencement of construction on two major complexes namely M/s. Shipra Riviera at Indirapuram and M/s. Shipra Suncity at Indirapuram, Each complex was further sub-divided into small projects consisting of number of flats of various sizes. The Shipra Riviera Complex was sub-divided into six projects while Shipra Suncity Complex was sub-divided into five projects. Shipra Riviera Complex is sub-divided into six projects namely : ( a )Bhagirathi Project. ( b )Alaknanda Project. ( c )Brahmaputra Project. ( d )Kaveri Project. ( e )Amravati Project. ( f )Damodar Project. 3. Similarly, Shipra Suncity Complex was sub-divided into five projects namely : ( a )Nilgiri Project. ( b )Shivalik Project. ( c )Sadpura Project, ( d )Kanchenjunga Project. ( e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Riviera Indirapuram project, the categories of flats and built-up area of the flats are as under: Sl. No. Name of Project Land Area (Sq.mtrs.) of flats Total (1) (2) (3) (4) ( i ) Bhagirathi project 10977.37 216 ( ii ) Alaknanda project 13700.00 324 ( iii ) Brahmaputra project 11710.63 248 ( iv ) Kaveri project 7664.69 152 ( v ) Amravati project 13394.63 248 ( vi ) Damodar project 7752.17 72 Total : 1260 ( i )Shipra Riviera Bhagirathi Project Categories No. of flats Size of each flat (sq.ft) ( i ) Classic 120 742 ( ii ) Deluxe 96 664 Total : 216 ( ii )Shipra Riviera Alaknanda Project Categories No. of flats Size of each flat (sq.ft) ( i ) Classic 160 742 ( ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regal 768 flats 926.64 sq.ft ( c ) Regalia Heights 266 flats ( ii ) Shivalik Project 1 School ( iii ) Satpura Project ( a ) Royal 256 flats ( b ) Royal Tower 168 flats ( c ) School 1 ( d ) Shopping Complex 1 ( iv ) Kanchenjunga Project ( a ) Cottage 43 ( b ) Town House 1 ( v ) Aravali Project ( a ) Flats 280 flats 8. In support of its claim of deduction under section 80-IA/80-IB(10) in respect of profit from four projects namely, Amravati, Brahmaputra, Damodar and Kaveri projects of Shipra Riviera Complex, it has been submitted that company entered into an agreement with Ghaziabad Development Authority on 12-12-1996 for the construction of various size of flats in different stage-wise projects. The total projects are known as Shipra Riviera, Indirapuram. The company filed detailed drawing with G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be paid as license fees to GDA. The joint venture committee was constituted under the Chairmanship of Vice Chairman, GDA. The license deed provided for operation of joint bank account in the name of GDA and assessee in Vijaya Bank, Ghaziabad to be operated jointly and the money from this bank account was required to be transferred to the account of GDA and assessee in the ratio of 70:30 to their respective bank account. The assessee has also claimed deduction in respect of profit earned on the sale of flats (Regent/Regal) in Nilgiri project of Shipra Suncity, Indirapuram. The company has divided the entire Shipra Suncity project into five projects with the approval of GDA. In respect of Shipra Suncity project, the assessee submitted that the books of account are separately maintained for each housing projects and no development or construction work was started for Shipra Suncity projects prior to 1-10-1998. The land measuring about 50 acres was given by Ghaziabad Development Authority vide lease deed dated 7-4-1998 and the map was sanction by the GDA vide order dated 9-7-1998. The company awarded the contract for construction of flats on the land of Shipra Suncity to M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or relief should be constructed liberally and in favour of the assessee ( CIT v. South Arcot District Co-operative Marketing Society Ltd. [1989] 176 ITR 117 (SC) and it should be so constructed as to effectuate the object of the Legislature and not to defeat it [ CIT v. Mahindra Mahindra Ltd. [1983] 144 ITR 225 (SC)]. The purpose of bringing section 80-IA(4F) was to encourage house building activity which is clear from the speech of the Union Finance Minister. The Legislature thus, clearly intended that tax holiday may be granted in such cases. Any view that denies this claim would go against the very spirit of the enactment of section 80-IA(4F). In the case of CIT v. J.K. Hosiery Factory [1986] 25 Taxman 80A (SC) it was held that in case of doubt, the assessee is entitled to an interpretation which is favourable to him. The Hon ble Supreme Court in the case of CIT v. Hindustan Bulk Carriers [2003] 126 Taxman 321 held that a construction which reduces the statue to a futility has to be avoided. A statue or any enacting provision therein must be so construed as to make it effective and operative on the principle expressed in the maxim utres magis valeat quam perea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction of only two projects namely Alaknanda and Bhagirathi, which are interspersed by Brahmaputra and Amravati could not have been commenced unless the earth filling and levelling of entire land pertaining to all the projects is carried out. 13. The Assessing Officer also observed that in Schedule 10 of the balance sheet, the assessee has shown the advance of Rs. 93.68 crores as on 31-3- 2000 received from the customers against the booking of flats. Necessary details in this regard are filed on record. In order to verify the contentions of the assessee that the construction of only two projects namely Bhagirathi and Alaknanda in Shipra Riviera, Indirapuram was started prior to 30-9-1998, the details of booking deposits received up to 31-3-1998, as filed on the record for assessment year 1998-99, were verified. It is observed from these details that the assessee had received advances from customers against the booking of flats to the extent of Rs. 31.54 crores as on 31-3-1998. The obvious inference drawn from these facts is that the customer/purchasers of flats had also booked their flats in other projects of Shipra Riviera complex other that Alaknanda and Bhagirathi proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e foundation laying ceremony can be held after the construction of entire project/building. Similarly, as per Assessing Officer, the fact that the construction contracts were entered into by the assessee with the sub-contractors in the form of written agreement after the specified date is also not much relevant as there is no bar in law for oral contracts which may be put in writing at a latter date to suit the convenience. 15. In view of the above observation, the Assessing Officer concluded that the assessee commenced the development and construction of the four projects namely Amravati, Brahmaputra, Damodar and Kaveri prior to 30-9-1998 therefore not eligible for deduction under section 80-IA(4F)/80-IB(10) of the Act in respect of profit earned on these projects. 16. By the impugned orders, the CIT(A) allowed the assessee s claim in all the assessment years except assessment year 1999-2000. Following was the observation of CIT(A) in its order for the assessment year 2000-01: "I have carefully considered the submissions made by the appellant and documents filed on record. I have also perused the case records of the appellant for the year under consideration, and also f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , under the joint venture system. The Shipra Suncity Complex is also divided into five different projects namely, Nilgiri Project Shivalik Project Satpura Project Kanchenjunga Project Aravali Project The appellant had claimed exemption of income derived from Shipra Suncity Nilgiri Project only, started during the year, under the provisions of section 80-IA(4F). For this project the land measuring about 50 acres was given by GDA vide lease deed dated 7-4-1998. The construction plan for Shipra Suncity Complex was sanctioned by the GDA vide their order dated 9-7-1998. The Assessing Officer has accepted the contention of the appellant in this project on the strength that the company awarded contracts for the construction of flats on 5-10-1998, 12-10-1998 and 20-10-1998 respectively and that the foundation ceremony of the project was held on 24-10-1998, and thus the claim of the appellant in respect of Shipra Suncity Nilgiri Project has been accepted by the Assessing Officer and there is no dispute on this issue. Under the Shipra Rivieria Complex the first two projects by the name of Shipra Rivieria Bhagirati and Shipra Rivieria Alaknanda were started on 26-10-1996 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter specified date, in this case 30-9-1998. The activities performed, if any, incidental to achieve the main object by the appellant to under take housing construction would not snatch away from him the benefit, otherwise provided under the law. The statute should be read in its original and simple form that may be normally understandable in the common sense, and every day use. Admittedly, where the definition of a word is not provided, it should be construed in its popular sense. The meaning and the intention of the statute must be gathered without distorting its basic fabric. Respectfully following the views expressed by the Hon ble Supreme Court of India, a statute or any enacting provision therein must be so construed as to make it effective and operative. A liberal construction should be put upon written instrument so to up hold them and carry into effect the intention of the statute. The Legislature had clear intention to allow benefit of the provision to the appellant engaged in the development and construction of housing project. There is no ambiguity in the language used by the Legislature. Any technical interpretation that carries the statute away from its original meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (10) of section 80-IB at the relevant time reads as under : "80-IB(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project, ( a )such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction, ( i )in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; ( ii )in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority. Explanation. For the purposes of this clause, ( i )in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions as laid out under the provisions of section 80-IA/80-IB of the Act. The Assessing Officer has allowed benefit of exemption of income to the Shipra Suncity Complex in respect of the one project that was started and completed during the financial year ending 31-3-2001. The dispute is with regard to the four projects of Shipra Riviera Complex. The exemption in respect of four projects under Shipra Riviera Complex has been denied by the Assessing Officer. 22. It is clear from the order of the Assessing Officer that he has basically declined deduction under section 80-IA/80-IB on the following plea : ( i )The assessee has purchased the land on which proposed construction was to be done prior to 1-10-1999. ( ii )The development authority had sanctioned the plan of construction prior to 1-10-1999. ( iii )The assessee has advertised for booking of flats in the newspaper prior to the insertion of section 80-IA i.e. 1-10-1998. ( iv )The assessee has undertaken earth filling activity of the land so purchased for undertaking the construction of the project prior to 1-10-1998. 23. From the order of the Assessing Officer, we found that the Assessing Officer himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion activities were undertaken prior to perform bhoomi pujan and/or the construction material was available at the site when project was initiated before bhoomi pujan was performed. In respect of the observation of the Assessing Officer to the effect that construction contracts with the sub-contractors in writing can always be framed for convenience is wrong and incorrect, as nothing was brought on record by the Assessing Officer to substantiate his assertion that these agreements were entered into after the specified date. The assessee is a big company and had undertaken a huge project wherein construction is undertaken with the help of the various sub-contractors and without written contracts, the work cannot start at all. As it was a project for constructing thousands of houses, the same cannot be presumed to be initiated without valid and written contracts. Nothing was brought on record by the Assessing Officer to substantiate his assertion to this effect. As per our considered view, in case of such a huge contracts, contractors are short-listed after inviting tenders. Actual construction contract is awarded to them and thereafter only construction work starts. Once the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ousing project" and the Legislature has not used the language "commences development of land and construction of housing project". This shows that Assessing Officer has deviated himself from the language used in the section. The Hon ble Delhi High Court in the case of M.P. Poddar (HUF) v. Appropriate Authority [1999] 107 Taxman 251 observed that meaning and intention of a taxing statute must be gathered from the plain and unambiguous expression used therein rather than to find out what is just or expedient. After discussing in length and recording a categorical finding with respect to each of the project undertaken by the assessee for which claim was made and also the projects for which no claim under section 80-IA was made by the assessee, the CIT(A) held that all the conditions contained under section 80-IA(4F) subsequently amended to section 80-IB(10) of the Act were complied with, the assessee was eligible for claim of benefit. It was further observed that language used in the Act is very clear and unambiguous wherein exemption has been granted to the assessee in respect of income earned on building construction to promote housing sector when undertaken after the specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Shipra Riviera Complex are as under: ( i ) Brahmputra 5-10-1998 ( ii ) Kaveri 10-10-1998 ( iii ) Amravati 6-10-1998 ( iv ) Damodar 15-10-1998 25. Since the work order itself in case of all the four projects were subsequent to 1-10-1998, there is no reason to assume that commencement of development and construction of housing project was started prior to 1-10-1998 for the purpose of declining the claim of deduction under section 80-IA(4F)/80-IB(10) of Income-tax Act. As per evidence placed on record, contract for construction of all the four projects of Shipra Riviera was awarded only after 30-9-1998. 26. The issue with regard to commencement of development and construction of housing project with reference to section 80-IB(10) has been elaborately dealt with by the ITAT Pune Bench in the case of Nirmiti Construction v. Dy. CIT [2005] 4 SOT 383 wherein it was held that activities like approval of plan, marketing for booking the residential units, availing of finance, receipts of advance booking money would not be construed to mean commencement of development and construction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase prejudicial to the interests of the revenue is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the ITO, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase prejudicial to the interest of the revenue has to be read in connection with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding cash book, ledger, stock register, sale and purchase book, bills and vouchers of expenses etc. which were examined. On the basis of material available on record, we do not find any merit in the allegations made in the order under section 263 that assessee has wrongly claimed exemption under section 80-IA(4F)/80-IB(10) on the plea of splitting up and reconstruction of project already in existence. Various evidences placed on record clearly reveals that whatever construction was there prior to 30-9-1998 pertained to Bhagirathi and Alaknanda projects of Shipra Riviera Complex for which assessee has not put any claim either under section 80-IA(4F) or under section 80-IB(10) of Income-tax Act. The CIT in his order under section 263 wrongly understood that Brahmaputra, Kaveri, Amravati and Damodar projects were out of splitting up and reconstruction of old projects already in existence, which actually pertained to Bhagirathi and Alaknanda projects of assessee. It is undisputed fact that assessee has not put any claim of deduction in respect of these two projects, therefore there is no merit in this allegation of CIT. That the CIT was likewise not correct in holding the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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