TMI Blog2013 (11) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Commissioner of Income-tax (Appeals)-II, Baroda has grievously erred in law and on facts in holding that the assessee is not entitled to deduction u/s 80IB of the Act. [2] That the learned Commissioner of Income-tax (Appeals)-II, Baroda has grievously erred in law and on facts in holding that the assessee has not fulfilled the condition at Clause (c) of section 80IB of the Act. [3] That on facts and in law, the learned Commissioner of Income-tax (Appeals)-II, has grievously erred in rejecting the alternate argument regarding proportionate deduction allowable in respect of each residential unit as envisaged by the Act. [4] The appellant craves leave to add, alter, amend any of the grounds of appeal. 2. Adverting first to ground nos.1 to 3 in the appeal, facts, in brief, as per relevant orders are that return declaring gross total income of Rs.29,78,820/- filed on 29-8-2005 by the assessee, carrying on the business of housing project, was selected for scrutiny with the service of a notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act) on 14-8-2006.During the course of assessment proceedings, the Assessing Officer[AO in short] noticed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction agreement with the unit holders. v. the assessee firm never sold the units the unit holders as there was no registered document in respect thereof. 2.2 Since the assessee was not the owner of the land on which project was set up nor part of the housing project was in the name of the assessee, the A.O. disallowed the entire claim of Rs.29,78,820/- for deduction u/s 80IB(10) of the Act. The AO further concluded that the assessee earned profit on sale of unutilized FSI on which it was not entitled to deduction u/s. 80IB(10) of the Act. The total profits attributable to the sale of unutilized FSI as per paragraph 11.8 of the assessment order worked out to Rs.4,24,935/-. 3. On appeal, the ld. CIT(A) following the decision of ITAT in the case of Radhe Developers Others in ITA No.2482/Ahd/2006 allowed the claim of the assessee in the following terms:- 2.2. It is contended by the counsel that similar issue came up before the Hon'ble ITAT, Ahmedabad, in ITA No.2482/Ahd./2006 in the case of M/s. Radhe Developers Others. The ITAT, Ahmedabad held that for the purpose of claiming deduction u/s.80IB(10) of the Act, it is not necessary for the assessee to own the land. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or claiming deduction is that such an undertaking must develop and build housing project, be it on their own land or on the land of others and for which a tripartite agreement has been entered into for development and building housing project; or be the assessee a contractor for developing and building housing project or an owner of the land. "45. Therefore, look at from any angle, we are of the considered opinion, that to claim deduction for developing and building housing project, it is not necessary that assessee must be an owner of the land and it would be sufficient if he was an undertaking develops and build housing project. The assessee is also the owner of the project, though the title does not vest in it." 2.2.1. Further, in respect of unutilized FSI, the Hon. ITAT, Ahmedabad, has observed has follows: "63. A question has also been raised by the Revenue that the profit earned by the assessee are not for developing and building housing project alone but for the sale of extra FSI, which has not been utilized for developing and building housing project. On a perusal of the provisions of Sec. 80IB(10). We find that it is not mandatory requirement to fully utilize permiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has sold unutilized FSI without involving any process of development and construction, which is the primary criterion required to be satisfied for the purpose of the claim of deduction under section 80IB of the Act have no force; that the asses sees have claimed deduction under section 80IB of the Act for the profit derived during the year under consideration from the business of development and construction of a housing project which though includes profit earned from sales of unutilized FSI of the housing project also and that the other part of unutilized FSI relating to the approved units have not been constructed or developed but being sold directly, although as a unrestrictive bundle of rights attached with the sale of land plot. As aforesaid, there is no requirement as to the FSI under the scheme of provisions of Sec. 80IB(1). In any case the assessee has not sold FSI of plot, even if the unutilized FSI rights are available with the assessee, it is the only way left out of utilizing such unutilized FSI is to make construction on top of the ground floor, which is already being sold to prospective buyers. With this so called unutilized SI rights, if the assessee wishes to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded u/s.131 that they are living in the above property and it is a single unit and not two separate units as claimed by the assessee. The Assessing Officer stated that the assessee's contention is not tenable keeping in view of the provisions of section 80I(10)(c) of the I. T. Act. 3.2. It is contended by the appellant that in approved plan plot No.54 and 55 are approved separately and built up area of each plot does not exceed 1500 sq. ft. Both are separate units and not a single units within the meaning of section 80IB(10) and no disallowance could have made on this count. In the alternative and without prejudice to the above, it is contended that if both the plots are treated as a single unit, then, the disallowance of claim u/s.80IB(l) of the Act, is required to be restricted to the proportionate profit attributable to the said units only and disallowance of profit attributable to the other units is uncalled for. Appellant relied on the following decisions : 1. Bengal Ambuja Housing Development Ltd. Vs ACIT in ITA No.l595/Kol/2005 2. Saroj Sales Organisation 115 TTJ 484 (ITAT, Mumbai) 3.3. I have considered the submissions of the counsel and facts of the case. Fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The undertaking has commenced development and construction of such housing project after 1st October 1998 4. The project is on the size of a plot of land with minimum one acre area 5. The residential unit has a maximum built up area of 1500 sq. ft, in Cities other than Delhi and Mumbai. 6. Built up area of shops and other commercial establishments does riot exceed 5% of total built up area of housing project or 2000 sq. ft. whichever is less (with effect from 1.4.2005). The deduction under this provision is allowable only in respect of those projects which fulfills all the conditions cumulatively. As per this project should have minimum area of one acre and the residential unit should not have maximum built up area of 1500 sq. ft. If the housing project approved by the local authority does not fulfill any of the condition precedent to such deduction, the entire project goes out of the purview of section 80IB(10). In the case of the appellant the project completed by the appellant had two units above 1500 sq. ft. Therefore, the condition (c) u/s.80IB(10) is not fulfilled. In my considered view which is also supported by the decision of Bombay ITAT in the case of Laukik Dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome group housing and therefore the maximum built up area of each unit in such project has been prescribed. Any project in violation of such condition cannot become eligible for such deduction. u/s. 80IB(10) what is to be seen is whether the project undertaken by the entity is eligible or not, The project become eligible only if all the conditions precedent thereto are satisfied. By not fulfilling a single condition the project goes out of eligibility. Therefore, while deciding the eligibility of any project for beneficial provisions, the interpretation has to be strictly legal and not liberal. The interpretation given by the Assessing Officer is not restricted or narrow. The rule of liberal interpretation of an incentive provision cannot hold good when it impairs the legislative requirement and spirit of provision. These are the supreme court's decisions relevant on this issue 1. Ipca Laboratories Vs DCIT 266 ITR 521 (SC) 2. Pandian Chemicals Ltd., Vs CIT 262 ITR 278 (SC) 3. CIT Vs N C Buddhiraj Co, 204 ITR 412 (SC) These decisions clearly laid down that when the provision is clear, the word cannot be ignored or misinterpreted to confer an unintended benefit. When appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch, both the parties replied that the Revenue is not in appeal against the findings of the ld. CIT(A) based on decision dated 29.06.2007 in the case of M/s. Radhe Developers Other in ITA No. 2482/Ahd/2006. 5. We have heard both the parties and gone through the facts of the case as also the decisions relied upon. Admittedly, the Revenue is not in appeal before us against the findings of the ld. CIT(A) based on decision dated 29.06.2007 in the case of M/s. Radhe Developers Other in ITA No. 2482/Ahd/2006, reported in113 TTJ 300(Ahmedabad) . The only issue before us in this appeal is as to whether the assessee is entitled to deduction u/s 80IB(10) of the Act even when the area of one of the units in the housing project exceeded 1500 sq. ft. We find that in the case of G.V. Corporation(supra), the assessee joined some of its flats/residential units as a result of which built-up area of those flats exceeded 1,000 sq. ft. . In these circumstances, the Bench relied on decision of the Special Bench in the case of Brahma Associates vs. Jt. CIT [2009] 119 ITD 255(Mumbai SB) and concluded as under: 13. Even assuming for the sake of argument that there was a violation of the condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this view of the matter also the grant of deduction by the Assessing Officer in the present case cannot be said to be erroneous and prejudicial to the interest of the revenue. 14. There is one more aspect of the matter which is that the Assessing Officer has considered the alleged violations of clause (c) of sub-section (10) as not material and affecting the merits of the assessee's claim and this is evident from the fact that he has himself not denied the deduction despite the fact that he conducted enquiries under section 131 of the Act in some cases to find out why the residential units were more than 1,000 sq.ft. of built-up area. Apparently, the Assessing Officer has taken the same view which the Special Bench of the Tribunal (Pune) (supra) as well as the Chennai and Bangalore Benches took in the cases cited above. Even while proposing action under section 263 of the Act to the CIT, the Assessing Officer has not referred to any violation of the condition that the residential unit should not be more than 1,000 sq.ft of built-up area. Thus, the Assessing Officer seems to have taken a plausible view of the provisions of law and the consequences of the violation, a view which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mic justification of inequitable burden or progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly, speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction." 6.2 In CIT vs. Gwalior Rayon Silk Manufacturing Co. Ltd. (1992) 104 CTR (SC) 243 : AIR 1992 SC 1782, the Supreme Court observed as under : 'The contextual meaning has to be ascertained and given effect to. A provision for deduction, exemption or relief should be construed reasonably and in favour of the assessee." 6.3 In the case of Bqjqj Tempo Ltd. vs. CIT (1992) 104 CTR (SC) 116 : (1992) 196 ITR 188 (SC), approving decisions of Bombay High Court reported i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n us. /TO (2008) 115 TTJ (Mumbai) 485 granted deduction for two blocks comprising of 9 wings out of total 11 wings on the ground that each such block complied with the conditions of s. 80-IB(10). The Tribunal held as under : "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 all the assessees have obtained different commencement certificates and started on different period of time. They are separate by time, space and statutory approvals and even in designs, maintenance of separate books of account. The Revenue in our view, is not right in treating both the projects as one and integrated without the facts warranting for such conclusion." 7. On the facts and in the circumstances of the case, the deduction under s. 80-IB(10) is available in respect of both the blocks and the learned CIT(A) was justified in upholding the claim of the assessee. It is ordered accordingly. 5.2 Similarly, in the case of SJR Builders vs. ACIT,[2010] 3 ITR(Trib) 569(Bangalore), the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile considering the built up are of 1500 sq. ft. for the purpose of exemption under section 80-IB(10), the mezzanine floor and common areas are to be excluded. As regards the penthouses, the built up area of which was more than 1500 sq. ft., the ITAT held that these may be excluded for exemption . It was further observed in the light of the decision of the Special Bench in the case of Brahma Associates v. JCIT (2009) 315 ITR (AT) 268 (Pune) that merely because some flats were larger than 1500 sq. ft. ,the assessee would not lose the benefit in its entirety. Only with reference to the flats which had more than the prescribed area, the assessee would lose the benefit, the Bench held. 5.3 We further find that view taken in the decision in the case of Laukik Developers reported in 108 TTJ 364, relied upon by the ld. CIT(A) did not find favour of the Special Bench in the case of Brahma Associates . 5.4 The Nagpur Bench of the ITAT in the case of ITO vs. Air Developers,123TTJ(Nag.)959 while distinguishing the aforesaid decision in the case of Laukik Developers(supra) relied upon decision dated 5.1.2007 of the Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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