TMI Blog2013 (8) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... s - The project is separate and not contiguous to the part of the building developed by assessee. The same is entirely separate block and in no way connected to the assessee project, except approved on the same plot of land. Moreover, the development rights were sold in March, 2009 and other party developed much later. Nothing was brought on record to indicate that assessee developed commercial project as well - Assessee has completed the residential project which satisfies the conditions, it is eligible for deduction u/s 80IB(10). The AO after satisfying the conditions has in fact allowed deduction in A.Y. 2007-08 and AY 2008-09 on the same project - Thus, the AO and ld.CIT(A) erred in disallowing the claim this year on the reason that commercial project is part of the same housing project and that portion exceeded the 5% or 2000 sq ft whichever is less - Commercial building is a separate project and assessee project satisfies the conditions prescribed – Deduction allowed – Decided in favor of Assessee. - ITA No. 6622/Mum/2012 - - - Dated:- 14-8-2013 - Shri B. Ramakotaiah And Shri Vivek Varma,JJ. For the Petitioner : Shri Sunil U. Pathak Shri Subodh Ratnaparkhi F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6675.538 sq mtrs Commercial building developed by M/s. Pyramid Developers 18.10.2006 04.08.2010 496.81 sq mtrs 745.219 sq mtrs 2.2 It was submitted that the claim for deduction u/s 80IB (10) has been allowed in the earlier asst. years as per details as under: (i) Assessment for A.Y. 2008-09 framed u/s 143(3) on 28.12.2010 where under the claim for deduction u/s 80IB(10) has been upheld by the ld AO after examination of the facts of the case including the sale of commercial building area to M/s. Pyramid Developers. (ii) Appeal order for A.Y. 2007-08 being order no. CIT (A)-26/IT- 95/DCIT 15(3)/09-10 dt. 23.07.2010 wherein the Hon. CIT(A) 26 has upheld the claim of your appellant for deduction u/s 80IB (10) in respect of the housing project Eden Garden. (However, the issue of commercial development is not discussed in the said appeal order.)" 2.3 The AO disallowed the claim u/s. 80IB in this year on the reason that the housing project is same in which the commercial area exceeded 2000 sq ft or 5% of built up area whichever is less, whereas the assessee contends that the commercial portion is not part of the project and also it was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buildings A, B, C and D on a plot admeasuring 2.36 acres. Pursuant to an order passed by the State Government permitting conversion of the status of the land, the assessee- firm submitted building plan for construction of building 'E' with several residential units. By intimation dated 11.10.2002, the building plan for building "E" was approved by the Municipal Corporation. In its return of income, the assessee estimated its profits from building 'E' by following the work-in-progress method of accounting and claimed deduction under section 80IB for building 'E'. However, the Assessing Officer A, B, C and D construction of which commenced from 09.06.1993. He denied deduction on ground that the project commenced prior to 1.10.1998; if the plot was proportionately divided between five buildings, the land pertaining to building 'E' would be less than one acre' and that two flats on the ground floor of building 'E' were found to be merged into one flat and the area of the merged flat exceeded 1000 square feet. On appeal, the Commissioner (Appeals) upheld the disallowance. However, the Tribunal held that assessee was entitled to deduction under section 80IB(10) On further appeal by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes extension of the earlier housing project which is already completed. From the fact that the objections raised while approving the earlier housing project on the same plot of land were made applicable to the housing project in question, it cannot be inferred that the housing project in question constitutes extension of the earlier housing project. Therefore,, in the facts of the preset case, where, neither the assessee had sought approval of the building plan for construction of building 'E' as extension of the earlier housing project, nor the Municipal Corporation had granted approval for the said project as extension of earlier housing project, it is not open to the income -tax authorities to contend that approval granted on 11.10.2002 constituted extension of the housing project which was approved in the year 1993. Reliance placed by the revenue on the Explanation to section 80IB(10)(a) which was introduced with effect from 1.4.2005 is also misplaced. What the said Explanation contemplates is that where the approval in respect of a housing project is granted more than once, then that housing project shall be deemed tohave 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 ..... on man. However, in absence of defining the expression 'housing project' and in the absence of specifying the size or the number of housing project required to be constructed on a plot of land having minimum area of one acre, even one housing project containing multiple residential units of a size not exceeding 1000 square feet constructed on a plot of land having minimum area of one acre would be eligible for section 80IB(10) deduction. If the construction of section 80IB(10) put forth by the revenue is accepted, it would mean that if on a vacant plot of land, one housing project fulfilling all condition it undertaken, then deduction would be available to that housing project and if thereafter several other housing projects are undertaken on the very same plot of land, the deduction would not be available to those housing projects as the plot ceases to be a vacant plot after the construction of the first housing project. Such a construction, if accepted would defeat the object with which section 80IB(10) was enacted.(para 26) Moreover, plain reading of section 80IB(10) does not even remotely suggest that the plot of land having minimum area of one acre must be vacant. The said s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation of the facts arrived at the conclusion that there was no merger of flats and in fact both the flats in question were neither sold nor any application was made before the local authority seeking merger of same and, thus, no fault can be found with the decision of the Tribunal in rejecting the argument of the revenue relating to the merger of the flats. (para 30) 6. Co-ordinate Bench in the case of DCIT vs. Neel Sidhi Enterprises in 1761-1763/M/2010 dated 30.3.2012 considered similar issue and held: "3.1 The appellant was allotted a plot of land admeasuring 7770 sq. mtrs from CIDCO Ltd. at Vashi, Mumbai for the purpose of developing residential and commercial units. Out of this portion, a plot admeasuring 777 sq. mtrs (i.e. 10%) which was meant exclusively for commercial unit was sold to an another firm "M/s. Thakkar Enterprises". The original project was approved as residential-cum-commercial project, however the development rights in respect of commercial unit i.e. 777 sq. mtrs. was sold off to the aforesaid concern. The Assessing Officer came to the conclusion that the assessee has deliberately sold off this piece of plot to entitled itself to the benefits of deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.80IB(10) on the profits derived from sale of such residential units. Once again if this fact has been accepted, then there would be no dispute that, the per unit area in the project will be less than 1500 sq. ft and, therefore, the conditions of section 80IB(10)(c) gets fulfilled. On this issue, the decision of ITAT Mumbai Bench in the case of Saroj Sales Organisation vs. ITO (supra) would be fully applicable in the case of the appellant, wherein it has been held that if both eligible and ineligible units are constructed under single sanction plan, then the independent units or blocks which are less than eligible criteria of 1000 sq. ft. (here in this case 1500 sq. ft.), then the other ineligible units/blocks cannot be included for the purpose of denying the statutory relief to which the assessee is entitled for. This is also supported by another decision of ITAT Mumbai Bench in the case of Vandana Properties vs. ACIT reported in (2010) 128 TTJ (Mum) 89, wherein it was held that the concept of housing project does not mean that there should be a group of building and only then the same would be called as "housing project" and if the project contains independent building, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence cannot be applied for the period prior to April 1, 2005." The facts in the above case are similar to the facts of assessee case, in the sense, here also asseseee sold the development rights to another concern and developed only residential project and offered profits for deduction. 7. In the case of Saroj Sales Organization vs. ITO 115 TTJ485, the firm M/s A.W.Pereira Ors. were the owners of certain plots of land and M/s Kenwood Agency Pvt. Ltd. acquired the development rights of these plots of land from the said owners. A building plan for construction of eleven wings was made and got sanctioned from the Municipal authorities. The principal developers i.e. M/s Kenwood Agency Pvt. Ltd., constructed two wings viz., A and B of this building and granted the sub-development rights for the remaining nine wings of the building to the assessee firm i.e. M/s Saroj Sales Organisation. As per this agreement, assessee firm was to construct six wings of the aforesaid building which were named as 'Nisarg'. Later on another agreement was entered into by which assessee was entitled to construct three more wings of the building which was to be named as 'Breezy Corner'. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly approved the construction of the dwelling units of less than 1,000 sq. ft. in all the wings of the said project. There is no dispute that all the flats in these wings contain the eligible units. It is not open to the Revenue to conclude the next project as part of the earlier housing project just to deny the statutory relief which the assessee is entitled in respect of the eligible housing project. In that way the legislative intention to give a relief to the assessee who are undertaking the low housing projects will get defeated. ' Breezy Corner ' project which was meant for higher strata of the society. The assessee has segregated the same and in no way mixed in these projects either in the design or in the structural manipulation or in the provision of amenities and the assessee has not claimed any relief in respect of project which admittedly does not admit the test laid down under s. 80-IB (10) of the Act. In our view, combining these two projects into one will lead to a result which manifestly will be unjust and absurd and defeat the very provisions of deduction sections. Unless there is a clear intention of the legislature the Revenue cannot be permitted to do so. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et of facts as exist in our present case are equally applicable and the assessee ' s claim for deduction of s. 80-IB(10) in respect of the eligible units of this housing project is therefore, deserves to be accepted. 13. As regards the objection of the AO that the permissible shopping area of housing project exceeds 5 per cent, the assessee is not entitled for relief under s. 80-IB(10). We are of the view that the housing project were approved before 31st March, 2005 and for such 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 of income from housing project approved upto 31st March, 2007, the denial of deduction, in our view, is clearly not in accordance with law. 14. One of the objections of the AO in his assessment order is failure of the assessee to obtain a completion certificate in respect of 6 wings in the block ' Nisarg ' from which it has returned the income in the asst. yr. 2005-06. The assessee has filed completion certificate issued by the local authority in respect of 3 wings viz. C, D and E before sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a was less than 1500 sq.ft. The deduction was denied by the Revenue authorities. In appeal the Tribunal allowed the deduction vide para 22 which reads as under: "22. It is apparent from the perusal of section 80IB(10) that the section has been enacted with a view to provide incentive for businessmen to undertaken construction of residential accommodation for smaller residential units and the deduction is intended to be restricted to the profit derived from the construction of smaller units and not from larger residential units. Though the AO has denied the claim of the assessee observing that larger units were also constructed by the assessee, at the same time, it is also a fact on record that the assessee had claimed deduction only on account of smaller residential units which were fulfilling all the conditions as contained in section 80IB(10) and the same has not been disputed by the AO also. We have also noted down the fact that even the provision as laid down in section.80IB(10) does not speak regarding such denial of deduction in case of profit from a housing complex containing both the smaller and large residential units and since the assessee has only claimed deduction on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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