9911796707
TMI Blog2012 (12) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... he original plan has been accorded prior to 01.04.2005 and four year limit for completion of project would not apply. 4. The learned CIT(A) has erred in relying on the ITAT, Mumbai's decision in the case of Saroj Sales Organization Vs. ITO in 3 DTR 494 wherein it is held that the amendments which came into effect from 01.01.2005 would not apply to projects approved prior to that date. 3 Ground number 1 and 2 regarding project completion method rejected by the Assessing Officer. 3.1 The assessee is a firm engaged in the business of builder and developer. During the year under consideration the assessee firm has disclosed income under the head 'miscellaneous income', but has not offered any income from the business of construction and developer. The total expenses relating to the said project transferred to the balance sheet as work in progress of the undertaking. The assessee has shown work in progress of Rs. 2, 31,27,150 upto year ending on 31st of March 2006. The Assessing Officer noted that the assessee was following the project completion method of accounting. The assessee was asked by the Assessing Officer to show cause as to why its income should not be computed by adopting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability to tax under the income tax Act. The Assessing Officer is not constrained by the method of accounting and he is bound to determine the taxability of the true income of the assessee in an assessment proceedings. The learned DR has relied upon the order of assessing officer. 4.1 On the other hand the learned AR of the assessee has submitted that the assessee is following the project completion method consistently from the assessment year 2005 - 06. The Assessing Officer has not pointed out any defect in the books of accounts before rejecting the method of accounting followed by the assessee. He has further submitted that the Assessing Officer has ignored to consider the decision of High Court in the case of CIT versus Dempo Auto Ltd as well as in case of CIT versus Rajesh Builders wherein it has been held that when the Assessing Officer does not find any defect resulting in understatement of income or profit in the project completion method, then the Assessing Officer cannot reject the books of account. The learned AR of the assessee has submitted that only 17 flats have been sold in the building number A and B up to the year ending 31st of March 2006 and not a single flat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 21.51% as per income shown of AY 2008-09. Accordingly the profit from the project up to 31.03.2006 is also estimated by adopting the said profit percentage of 21.51%, which the assessee has itself shown in the return of AY 2008-09. 3. The closing WIP has been shown at Rs. 2,31,27,150/-in the Profit and loss account and Balance sheet flied along with the return of Assessment Year 2006-07. Taking the profit at the rate 21.51% on the WIP, the profit up to 31.03.2006 comes to Rs. 49,74,650/"-. 5.1 When the Assessing Officer himself has given the facts that the project was completed only after 31st March 2008 and up to the end of the year on 31st of March 2006, only 30% of the work was completed. In these undisputed facts, the decisions relied upon by the assessing officer in adopting percentage completion method of accounting is misplaced. It is not a case of substantial completion of project during this year and selling out the same. Further the Assessing Officer accepted this fact that on completion of project, the assessee has offered the income to tax after claiming the deduction under section 80 IB(10). Therefore when the assessee offered the income to tax from the entire pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding D Wing as part completion and of A Wing dated 29.5.2007 for a part completion. The assessee itself vide its letter dated 2.12.2008 submitted the completion certificate was issued by the local authority on 11.9.2008 which shows that the project was not completed as on 31st of March 2008 and therefore, the provisions of section 80 IB(10(a) read with Explanation, the date of completion of construction of housing project shall be taken to be date on which the completion certificate issued by the local authority. He has further submitted that when the 1st approval of the project was given by the local authority on12.9.2003, then as per explanation to section 80 IB(10), the project deemed to have been approved on the date on which such project is 1st approved by the local authority. He has relied upon the order of the Assessing Officer. 8.1 On the other hand the learned A.R. of the assessee has submitted that the 1st plan put up by M/s Mohan Khedar Builders & Developers for approval and was approved on 12th Sept 2003 for the housing project consisting of four Wings of 4 floors each having total built-up area of 3379.76 sq.mtrs. Subsequently the assessee put up the plan of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority, the 1st approval and sanction of building plan of the housing project shall be deemed to be the date of approval as per clause (i) of Explanation to section 80 IB (10). The Assessing Officer denied the deduction under section 80 IB(10)on the ground that the project was commenced prior to 1.4. 2004 and the assessee has not completed the project up to 31st of March 2008; therefore, the assessee failed to fulfil the conditions as per clause (a) of section 80IB(10). The Assessing Officer took the commencement date when the 1st approval was granted by the local authorities on 12.9.2003 in response to the plan put up by M/s Mohan Kheda Builders & Developers. 9.1 There is no doubt that there is more than one approval obtained from the local authorities at different point of time. However, it is to be seen whether all the approvals are for the same housing project or the project itself is changed which has necessitated subsequent approval. 10 In the case in hand, the first approval dated 12.9.2003 was obtained by the earlier owner M/s Mohan Kheda Builders & Developers for the project consisting of four wings of four flows, each having total built up area of 3379.76 sq.mtrs. On our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 80IB(10(a) as existing at the relevant point of time as under: [(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 if,- (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 of such ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee) 13 The assessee has raised the following ground in this cross objection: "On the facts and in the circumstances of the case and in law, the ld Assessing Officer has erred in holding and the ld Commissioner of Income Tax(Appeals) has erred in confirming that area of the plot of the land of the project was less than one acre." 14 There is a delay of 12 days in filing the cross objection. The assessee has filed an application for condonation of delay along with an affidavit. 15 We have heard the ld AR of the assessee as well as the ld DR and considered the averments made in the application and affidavit filed by the assessee. The assessee has stated in the affidavit that Shri Rohit Sikeria, a partner of the assessee firm, who was handling the accounts and income tax matters was not well during the period 5.8.2010 to 20.9.2010. A medical certificate has been placed on record in support of the reasons explained by the assessee. 16 In view of the facts and circumstances of the case and in the interest of justice, we condone the delay in filing the cross objection by the assessee. ON MERITS: 17 The issue raised by the assessee in the cross objection is regarding the si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the other hand has vehemently objected to the additional evidences filed by the assessee and submitted that when the project was sanctioned on the plot of land admeasuring 3940 sq.mtrs., then the assessee has failed to fulfil the conditions required u/s 80IB(10. He has relied upon the orders of the authorities below. 20 We have considered the rival contention as well as relevant material placed before us. It is evident that the area of the plot has been shown in the 7/12 extract as 3940 sq.mtrs whereas as per Urban Land Ceiling Act, it is 3996 sq.mrs. Thus, there is a discrepancy in the records of the Government agencies with regard to the actual size of the plot of land in question. What is relevant for the purpose of section 80IB(10) is the actual size of the plot of land and not area of plot shown by a particular record. The assessee has placed enough material to show that the actual area of the plot is 4100 sq.mtrs which is more than one acre. Even if the size of plot is shown in the 7/12 extract as 3940 sq.mtrs; but if the actual area on the size is more than 1 acre, then the fact remains that the size of the plot is more than 1 acre. Further, it is not the case of any add ..... X X X X Extracts X X X X X X X X Extracts X X X X
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