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TMI Blog2010 (6) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... of deny of opportunity by DVO in submitting his report dated 28-12-2008 by amending the report dated 27-12-2008. The learned CIT(A) has also relayed on the said report without discussing the appellant submissions. 3. The report of the DVO with regard to the commercial area of the project is incorrect and based on surmises and conjectures as the inspection has been done in haste with a predetermined mind. The plots and the commercial area do not from part of the project eligible for deduction under section 80-IB(10), but are a separated project in itself. That the learned CIT(A) is not justified in upholding the valuation. Assessing authority be directed to allow relief under section 80-IB and delete the other. 4. That the learned CIT(A) has erred in confirming the addition of Rs. 5,90,000. 5. That the learned CIT(A) has failed to appreciate on fact in upholding the disallowance of Rs. 82,937 incurred on account of development charges. The appellant had not kept the records of past 13 years. 3. The issue raised in the present appeal is against the claim of deduction under section 80-IB(10) of the Income-tax Act. The brief facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) Category 'C' 1439.00 Sq.Ft 4. The said report was forwarded to the assessee to which the learned counsel replied that he had nothing to say in the matter except his submissions in earlier letter dated 11-12-2007. 5. The second aspect considered by the Assessing Officer was the area under commercial occupation. As per the housing project, 1212 square yards of commercial area plus 864.5 square yards area for parking for commercial area, out of total notified area of 42067 square yards was marked. The Assessing Officer further noted that besides the originally marked commercial area of the project, the assessee had converted some of its residential area into commercial area which was in addition to the commercial area already under construction. The issue of exact measurement of commercial area of the housing project was also referred to DVO who vide his report dated 27-12-2007 mentioned that "on the left side of the entry of the project, the total built up area is 4764 Sq.Ft. which is being used as site office by the assessee. He further mentioned that adjacent to this property there is a plot having total size of 135 ft x 60 ft. for a commercial complex. The total b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... locks that are Gulmohar Block, Alpine Block and Centre Block. (d) The houses in Alpine block area under the scheme on which the assessee undertaking has claimed deduction under section 80-IB(10) of Income-tax Act, 1961. All the houses built in the scheme from Nos. 25 to 92 are below 1500 square feet of covered area and qualify for the deduction. (e) The assessee has neither constructed any commercial complex during the year under reference nor claimed any exemption on such activities. (f) It is further submitted that the assessee has neither built any house above 1500 square feet nor sold during the year. 6. The Assessing Officer on the consideration of assessee's reply and DVO's report concluded as under:- "(iii) the assessee's next contention is that the houses in Alpine Block are under the scheme on which the assessee undertaking has claimed deduction under section 80-IB(10) of the Income-tax Act and that all the houses built in the scheme from H.Nos. 25 to 92 are below 1500 Sq. Feet of the covered area and qualify for deduction. The assessee has further contended that the assessee has neither built any house above 1500 sq. feet nor sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the claim of deduction under section 80-IB(10) of the Income-tax Act as it had not fulfilled the conditions laid down in the said section. Reliance was placed on the ratio laid down by Mumbai Bench of the Tribunal in Laukik Developers v. Dy.CIT [2007] 105 ITD 657. 8. Before the CIT(A), the plea of the assessee was that the report of the DVO was contradictory and also reliance was placed on the submissions made before the Assessing Officer. During the course of Appellant proceedings, vide letter dated 26-3-2008, the CIT(A) asked the Assessing Officer for clarification from the Valuation Officer with reference of definition of built up area as per section 80-IB(14)(a) of the Act. The DVO was also asked to clarify the reasons for different reports given on 27-12-2007 and 28-12-2007. The DVO reported that the measurements were done as per the provisions of section 80-IB. The said report was confronted to the assessee. In reply, the plea of the assessee was that the DVO should be asked to work out the area as per the complete valuation report of the full property. It was also alleged by the assessee that the report of the DVO was contrary and he should be asked to measure the resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (10344.4 square yards) distinctly identifiable for construction of houses, less than 1500 square feet covered area to avail exemption under section 80-IB(10) of the Act. The brochure was published for launch of market campaign for 68 numbers of houses of three different categories in the said earmarked area, which had no commercial plot whatsoever. Further, the brochure describes the covered area as 1500 to 1650 square feet and mentions the term 'super area' which includes all common utility areas, stair case, balconies and the net covered area was below 1500 square feet in each category. The next submission of the learned counsel was that the report of the DVO was contradictory i.e., in the first report, the covered area of each category of house was less than 1500 square feet but in the second report given on the next date itself, the figures were changed. The learned AR specifically pointed out that the covered stair case which is open on the ground floor for a car porch had been measured twice i.e. on ground Floor and first floor each time, which had to be counted only once. The learned AR pointed out that the Assessing Officer made the reference to DVO on 24-12-2007. On 26-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial project also, there was non fulfilment of the conditions of section 80-IB(10) of the Act. 12. We have heard the rival contentions and perused the records. The assessee had a plot area of about 10 acres on which a Town Planning Scheme was envisaged. The assessee at the outset sold about 3 acres of land and plans for development of 8.7 acres were submitted. The project of the said 8.7 acres was notified under the Capital Town Planning Scheme by the Department of Local Govt., Govt. of Punjab. It was published in the Gazette of Punjab Govt. dated 22-3-2002. The assessee had submitted plans for three blocks - Gulmohar, Alpine and Centre. The assessee further sold 3 acres of land and the purchasers developed Gulmohar Enclave on the same. The assessee on the balance 5.7 acres constructed two blocks - Alpine with 68 houses and Centre Block with 35 houses. In addition the assessee had earmarked the area for commercial use. 13. The first objection of the Assessing Officer in denying the exemption under section 80-IB(10) is sale of land by the assessee before the start of the project and consequently lesser area available with the assessee than the area, which were submitted for approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r such scheme to provide facilities. The promoter may sell or chunk of plots to one or different buyers form the salable area of plots earmarked in the layout plan. However, the buyer/s of such plots shall submit plant of plot/s with municipal authorities for sanctioning of building plan/s before starting any construction. However, the promoter may submit a plan for sanctioning of individual plot of scheme for permission to erect residential units." 15. The said reply has been received after passing of the order by CIT(A) and has been filed on record by the learned AR for the assessee. The sale of plot of 3 acres in such circumstances does not disentitle the assessee from the claim of deduction under section 80-IB(10) of the Act. 15.1 Under section 80-IB(10), it is provided as under:- "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 if,- (a) such undertaking has commenced or commences development and construction of the housing project on or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the local authorities. (iii) The date of commencement of the hosing project is on or after 1st day of October, 1998 and the date of completion is (a) on or before 31st day of March, 2008, where the housing projects had been approved by the local authority before 1-4-2004 and ; (b) within four years from the end of the financial year in which the housing project was approved, where the housing project is approved by the local authority on or after 1st day of April, 2004. (iv) The project is on a plot size of minimum area of one acre. (v) Each residential unit has a maximum built up area of 1000 Sq.feet where such unit is situated within the city of Delhi or Mumbai or within 25 kms from the Municipal limit of these cities; each residential unit has a maximum built up area of 1500 square feet at any other place. (vi) The built up area of shops and other commercial establishment in the said housing project does not exceed 5 per cent of the aggregate built up area of the housing project or 2000 square feet, whichever is less. Thus, provision has been brought into effect from assessment year 2005-06. (vii) The deduction under section 80-IB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 80-IB(10) of the Act was further denied to the assessee as the covered area of each unit was found to be in excess of 1500 sq. feet as per the report of DVO. During the course of assessment proceedings, a reference was made by the Assessing Officer to the DVO to verify the covered area of the units sold by assessee. The assessee claims to have sold 42 houses in different categories in the aforesaid housing project during the year. The assessee claims that all these houses are with covered area less that 1500 sq. feet as stipulated under section 80-IB(10) of the Act, though super area alongwith common facilities was more than 1500 sq. feet. The assessee has elaborately explained the difference between covered area and super area and has also brought to our notice that in the brochure published for advertisement and market campaign, both the covered area and super area are mentioned. Further, it is claimed by learned AR for the assessee that the building plans were approved accordingly by the prescribed authority. 20. The Assessing Officer had made a reference to DVO to verify the measurements of the flats sold. Though in the assessment order, the Assessing Officer refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Further, the explanation of the assessee is also to be addressed on the point of 'covered area' and 'super area', which we find missing. We find no merit in the order of Assessing Officer in his reliance on the contents of brochure issued by the assessee vis-a-vis the super area sold by assessee. The assessee claims that it had sought exemption under section 80-IB(10) of the Act in respect of flats in Alpine Project, which housing project is part of project developed on 2 acres of land, for which necessary permission was sought from the Municipal Council, Zirakpur. The balance plots and commercial area are not part of the project. Further development of 14151 Sq feet of residential area was distinct from the development of 2 acres of plot of land against which the assessee had claimed deduction under section 80-IB(10) of the Act. In the interest of justice, we deem it fit to restore the issue back to the file of Assessing Officer. The Assessing Officer is directed to verify the above said claim of the assessee and decide the same in line with our directions in paras hereinabove and in accordance with law. A reasonable opportunity of hearing be provided to the assessee. According ..... X X X X Extracts X X X X X X X X Extracts X X X X
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