9911796707
TMI Blog2009 (8) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.10.05. The return was processed u/s.143(1) on 28.3.07 resulting in a demand of Rs.2,42,590/-. Subsequently the case was selected for scrutiny and there was a survey u/s.133A on 8.7.07. Notice u/s.143(2) was issued along with questionnaire u/s.142(1) on 19.2.07. The assessee vide reply dt.26.2.07 contested the transfer of jurisdiction. Subsequently, the objection was withdrawn. 3. The assessee is engaged in the construction and real estate business in the name and style of SJR Builders. There are two partners in the firm namely, J. Vijay Reddy and J. Bhupesh Reddy sharing the profit and loss equally. During the period under consideration the assessee had undertaken layout projects in the name of SJR Eastwood and multistorey residential project in the name of SJR Redwood. Park Vista, Spencer and Brookland residential projects were in the initial stage. The turnover shown by the assessee ITA.1192/B/08 was Rs.27,43,95,992/-. After claiming various expenses the profit shown was Rs.2,73,72,397/-. During the period under consideration the assessee changed the method of accounting from project completion method to percentage completion method and the assessee claimed deduction u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the land to the assessee under the joint development agreement dt.16.4.04 and1.9.04. The said project was approved by BBMP, the competent statutory authority. ITA.1192/B/08 . The assessee had derived income of Rs.202.09 lakhs from the said project. The assessee satisfied all the conditions prescribed u/s.80IB(10). Therefore, the assessee claimed deduction of the entire amount of Rs.202.09 lakhs which was denied on the ground that the built-up area of some of the flats was exceeding the maximum permissible area of 1500 sft. The assessee contended that the built-up area means "the inner measurement of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but, does not include the common areas shared with other residential units." The learned representative argued before the Commissioner of Income-tax(A) that the construction done is in conformity with the stipulated provisions in the relevant Act and so the residential units does not include the common areas shared with the other units. Therefore, it was contended that the construction undertaken is in conformity with the provisions under the relevant Act. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... frustrate the legislative intention of mitigate the sufferings of the common man. The Commissioner of Income-tax(A) held as far as the assessee's case is concerned, the assessee's project is a joint development project aimed at seekers of luxury-residential units, otherwise, the assessee would not have exceeded the maximum BUA specifications. He further held that the assessee had violated the sanctioned plan by constructing pent houses which are luxurious units on the fourth floor of the above project, which reveals that the project is not intended to address the housing needs of the common man, but it aimed at meeting the luxurious requirements of a few. Therefore, he held that since some of the residential units are not conforming to the maximum built-up area of 1500 sft prescribed u/s.80IB, assessee's project is not entitled for the relief. He further held that the assessee's act of change the method of accounting from project completion method to percentage completion ITA.1192/B/08 method, that too only for the current assessment year is suggestive of the project having not been conceived as a housing project within the scope of Section 80IB(10). He further held, conceding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not exceed 1/3rd of covered area of ground floor. ITA.1192/B/08 The learned representative brought our attention to paper book no.1 at page 20 under 3.3 the term 'Floor' is defined as under : The lower surface of storey on which one normally walks into the building; the general term floor does not refer to basements/cellar or mezzanine floor. In other words, the above are to be excluded while calculating the floor level area. 7. In the premises of the above facts the assessee's representatie further submitted briefly as under. Section 80IB(10) provides for deducting from the total income the profit and gains derived from a housing project, if the conditions prescribed in clauses (a) to (d) are fulfilled. He submitted that even according to the revenue authorities the assessee has fulfilled all the conditions specified in the said clauses including the one in clause (c) to the extent of built-up area as defined in section 80IB(14)(a). The premises was inspected by the DVO for measurement purposes on 5.7.07 after more than one year from the date of issue of Occupancy Certificate on 16.10.06. There could be every possibility of the occupants themselves making certain cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative reiterated that clause (c) of section 80IB(10) refers to area of "the residential unit". The residential u nit means deduction should operate and be computed unit-wise and, therefore, a particular unit satisfied the condition of section 80IB, deduction should be automatically allowed in respect of that unit. It is only in respect of those units which have not fulfilled the stipulated condition the deduction is to be denied. He further submitted that if the law had wanted all the units to be within the specified limits, it would have stated that "all the residential units" should have a maximum built up area of 1500 sft. In the absence of such all-pervasive condition, deduction should be allowed in respect ITA.1192/B/08 of profits for the units that fulfills the condition. Law prescribes maximum permissible size with reference to each residential unit. It does not do so qua the commercial units. Instead, it provides for the maximum overall size and all such commercial area together. This differentiation in stipulation indicates that exemption for residential apartment should be computed unit-wise. For the above proposition, he relied on the decision of the Bangalore Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction." ITA.1192/B/08 For the above proposition he relied further on the case reported in Commissioner of Income-tax v. Gwalior Rayon Silk Manufacturing Co. Ltd., (AIR 1992 SC 1782). In Bajaj Tempo Ltd., (96 ITR 188) and also on the case of R. Kanakasabai & Others (89 ITR 251). The assessee's representative summed up that where there is a partial non- compliance of the requirements of the law, there should not be complete disallowance of the deductions. Disallowance, if any, the assessee's representative submitted will have to be restricted to the extent of non-compliance of the provisions. This rule of proportionality is well founded in the Income-tax law and is recognized under various sections of the Act. For eg., the assessee's representative submitted that sections 10A(4), 10B(4), 10BA(4), 80HHC(3)(c)(i), 80HHD(3), 80HHE(3) and 80HHF(3), allow deduction in proportion of the export turnover to the total turnover. Further, u/s.54EA, 54EB, 54EC, 54ED and 54F, exemption towards capital gains and under section 115F(1)(b), the benefit is available in proportion of the net consideration utilized to acquire new consideration arising out of transfer of old assets. In the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the middle class investors showing wishing to purchase dwelling unit, in order to promote the middle income group housing projects and to boost the viability of the housing finance companies. Keeping this in view, the built-up area for dwelling units in cities other than Mumbai and Delhi was increased from 1,000 sft to 1500 sft. The learned DR submitted incentive provisions are to be interpreted strictly so as to give the benefit only to the intended group of people and not to others. Undisputedly, even according to the assessee, the area of some of the flats are more than 1,500 sft and some of the flats are ITA.1192/B/08 pent houses, the whole built area of each of such pent houses are to be considered as the area of one flat. On the premises of the above facts, the learned DR relying upon the decision of the Tribunal in the case of Loukik Developers v. DCIT (2008) 303 ITR 356, submitted that the assessee is not entitled for the benefit contemplated u/s.80IB(10). The DR submitted that in this case, the assessee got permission for construction of residential project but the assessee also constructed shops/commercial spaces along with the housing project and the Tribunal held that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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