TMI Blog2014 (1) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer with a direction to measure a flat in the presence of DVO as well as Registered Valuation Officer appointed by the assessee. Private terrace area should be included in the built-up area of the flats for the purpose of working out statutory extent of the built-up area - Decided against the assessee. Based on majority view, deduction should be allowed to the assessees under section 80-IB(10) in respect of flat having built-up area not exceeding 1500 sq. ft. are not entitled for deduction in respect of these flats having built-up area exceeding 1500 sq. ft. - Decided against the assessee. There need not be any cap of 10 per cent for flats having built-up area exceeding 1500 sq. ft., with regard to a claim for deduction under section 80-IB(10) of the Act - Decision in the case of CIT v. Brahma Associates [2009 (4) TMI 215 - ITAT PUNE] followed. - Decided partly in favor of assessee. - ITA Nos. 259 & 263 (Mds.) of 2010 - - - Dated:- 17-6-2011 - Pradeep Parikh, George Mathan And Abraham P. George,JJ. For the Appellant T. Banusekar. For the Respondent Shaji P. Jacob and R. Srinivas. ORDER Per Pradeep Parikh, V. P. In all these are five ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for short), Airport Authority of India (AAI) etc. were obtained by HMPL and not the assessee. (c)There was no outright purchase of land on payment by the assessee from HMPL. (d)The order of the DCTO described the assessee's nature of business as works contract. (e)The assessee had sub-contracted the civil work of the project to GK Shetty Builders Pvt. Ltd. (GKSB) and that the assessee's status is similar to that of GKSB and it cannot be better. The Assessing Officer was of the view that development includes many aspects and construction is only one of it. Based on the above facts and the provisions of section 80-IB(10), the Assessing Officer concluded that the assessee has assisted the owner, i.e., HMPL in construction only and all other developmental aspects have been done by HMPL. Accordingly, it was held that the assessee is not eligible for deduction under section 80-IB of the Act. 5. Besides the above, the Assessing Officer noticed that certain other conditions in order to claim the deduction were violated. They are as follows: (a)The built-up area of certain flats exceeded the statutory limit of 1500 sq.ft. (b)In some cases, two flats were combined to make a si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted area, that assessee was entitled to receive the entire sales consideration on its own behalf and that HMPL had no claim on such amounts. It was also pointed out that the rate for sale of proportionate undivided share of land was fixed at Rs. 600 per sq.ft. as per clause 4 of the agreement. It was emphatically stated that HMPL was entitled to this amount only which constituted the rate for sale of land and describing it on per sq.ft. basis was only a mode of determining the amount payable to HMPL. It did not in any way indicate that HMPL had any share in the sale consideration of the built-up areas. Therefore, the argument was that it was the assessee who had undertaken all the investment risks and if any purchaser failed to make the payment, it was the assessee's loss only. It was contended that even if some flats are not sold, it was the assessee's risk and since it had taken the risk of development, the assessee was a developer and builder. 8. The ld. counsel took up the next objection of the revenue authorities. It was observed by the authorities that two flats though sold separately to two different persons, they were combined together to make one dwelling unit. Together, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reasons it was rejected. The assessee then approached the High Court and the Court directed CMDA to issue the certificate. Ultimately CMDA did issue the completion certificate, albeit late by about three months. Nonetheless, it was submitted that the Corporation of Chennai has issued a certificate dated 28-12-2007 stating that the building was inspected on 23-11-2007 and it is found that it satisfies the approved building permit conditions. The fact that Corporation is the local authority to approve the construction is supported by the decision of the Chennai Bench of the Tribunal in the case of Jain Housing Constructions Ltd. [IT Appeal No. 1369 (Mds.) of 2009, dated 5-2-2010.] The certificate of the Corporation is sought to be filed as additional evidence. Thus, finally the ld. counsel wound up his arguments by stating that the assessee was a developer-builder, that no conditions prescribed under section 80-IB(10) were violated and hence, was eligible for the impugned deduction. 12. The ld. D.R. first drew our attention to the provisions in section 80-IB(10) to point out that an undertaking claiming deduction under this provision should be both, a developer as well as a bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. The construction agreement specifically mentioned that the builder was not to incur any liability if the latter was unable to deliver possession within the stipulated period. On the other hand, if there was a delay in payment by the allottees, the builder was entitled to interest. It was emphatically repeated that all the procedures to obtain all the necessary permissions were obtained by HMPL and hence, unquestionably HMPL was the developer. The ld. D.R. relied on the judgment of the Supreme Court in the case of K. Raheja Development Corpn. v. State of Karnataka 2005 AIR SC 2350. With regard to the violation of other conditions, the ld. D.R. relied on the orders of the lower authorities. He objected to the admission of additional evidence in the form of the completion certificate obtained from the Corporation of Chennai. It was contended that since the main permission was from CMDA, the completion certificate also should have been obtained from the said authority within the stipulated period. He also objected to the alternate contention of the assessee with regard to pro rata deduction in cases where the flats measured more than 1500 sq.ft. 13. In his counter reply, the ld. c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that reason also, the decision given in the case of Sashwat Constructions (P.) Ltd. (supra) for assessment year 2004-05 cannot be relied upon. Next, it was contended that HMPL has not objected to the claim of the assessee of it being a developer and has also not claimed any deduction under section 80-IB of the Act. Therefore, when the parties are not disputing each other's status, the intentions of the parties should be carried out. As regards the contention that HMPL incurred all the charges for various approvals, it was contended that the assessee reimbursed all the charges and the same have been allowed as deduction by the department. With regard to investment risks it was contended that irrespective of the amount collected by the assessee, it had to make over Rs. 600 per sq. foot to HMPL. If prices of building materials were to go up, the assessee had to bear the same. If the assessee borrowed monies for construction, it was its liability to repay the same. Therefore, full risk was involved on the part of the assessee. The contention of the ld. D.R. that the assessee had no liability for delayed possession was negatived by the ld. counsel by stating that it was only a force maj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a contract, especially a builder who works by contract. (e)Development of Land: The expression "development" means the realisation of the potentialities of land or territory by building or mining. The above meanings/explanations of the various expressions are as per Law Lexicon by P. Ramanatha Aiyar (2nd Edition - 2009). From the above it can be seen that the meanings of different expressions at times overlaps each other and in particular, the distinction between a "builder", "developer" and "contractor" is quite blurred. As a matter of fact, different persons often use the expressions interchangeably and according to their own perceptions. As a result, the agreements entered into by the persons involved in these activities are also quite often blurred and lacking clarity leading to avoidable litigation. Be that as it may, let us try to ascertain the status of the assessee from amidst the different hues that the expressions described above radiate. 16. One of the major objections of the revenue is that the assessee is not the owner of the land and as the preamble of the agreement dated 28-4-2003 goes, it was HMPL who decided to develop the project. In our view, nothing turns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship of the entire land. The Legislature must have kept such situations in mind while providing for the deduction. And again, when Explanation was added to section 80-IB(10) by Finance Bill, 2009, the Memorandum explaining the provisions emphasized about the investment risk which may be taken either by the owner or the builder or jointly by both. In the instant case, who has actually taken the risk, we shall see later. For the present, suffice it to say that ownership of the land will not be the criterion to decide the status of a developer as such. 19. The builder then actually starts the development work. As per the agreement, the builder has the exclusive right to sell the flats to the persons of his choice. He has the exclusive right to determine the sale price of the flats. He has the exclusive right to collect the entire sales consideration of the flats. Out of the total sales consideration received by him, he has to make over only the cost of undivided share of land to the owner which is fixed at Rs. 600 per sq.ft. of the super built-up area. At this juncture, we may deal with one of the arguments of the revenue that since the price to be paid to the owner is based on buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not booked, he will have to hand over the possession of the 4th floor flat for which necessarily he will have to construct the 3rd floor. Thus, he would be investing in the 3rd floor without any certainty of it being sold. In other words, the builder will have to pump in the funds to build the entire project the realisation from which is quite uncertain. As against this, what is the risk of HMPL. At worst, the builder may defer the payment for a while. But once the construction of the project is over, HMPL would certainly demand its pound of flesh. Thus, the risk of HMPL is many times lesser than that of the builder. The opinion which we had formed in paragraph 19 above that the builder is also the developer gets strengthened with these facts. We may still go further. 21. There is a construction agreement between the assessee as the builder and the purchaser of each flat. The overall implication of such an agreement will be examined later. At the moment we deal only with certain important clauses of the agreement. Firstly, the preamble to the agreement gives complete rights to the builder to enter into builder's agreement for allotment and construction of built-up area direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn between the expressions "developer and builder" and "builder and contractor". If a person is a contractor only, then, his job would be merely to construct the building as per the designs provided by the owner and hand over the constructed building to the owner. His job will not include designing the project, selling the flats in the project, entering into agreements with the purchasers of the flat of the type they are entered into in this case. He will not be running after the buyers to sell the flats or realise the money for the sold flats. He would not be maintaining the property after the project is completed. He would not be having any right to extend the height of the building. He would not be having any right to convert any area for a different usage. All these rights have been discussed in paragraph 21 above. Thus, the assessee is not a contractor simpliciter, he is not a builder simpliciter, he is not a developer simpliciter. He is all rolled into one i.e., he is a developer, a builder and also a contractor. It is because of this practical situation which is quite common, Law Lexicon says that the word "builder" has been used by lawyers, judges and courts as synonymous w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t coupled with the terms loosely used in the agreements, that made us say in paragraph 15 that the distinction between a "builder", "developer" and "contractor" is quite blurred. It is in order to remove this haziness we have gone in detail into various agreements to find out the exact status of the assessee. Our conclusion is that the assessee is a developer, a builder and a contractor, all rolled into one. On the other hand, HMPL is only a developer and not a builder. Even though, the assessee and HMPL are joint developers, in our view, the roll of the assessee as a developer is greater than the roll of HMPL as developer. To reiterate briefly, HMPL is a developer because it has jointly evolved the entire scheme along with the builder and has attempted to realise the potentialities of the land owned by it. However, this realisation of the potentialities is merely by way of encashing a past investment made three decades ago. There is no risk involved so far as HMPL is concerned, in the present project. On the other hand, the assessee is a developer because it has jointly evolved the project along with HMPL and will realise the potentialities of the land by risking his finances toda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of completion certificate by the CMDA but completion certificate issued by the Corporation of Chennai was placed on record. The Tribunal in paragraph 3.5 of its order stated that the project layout plan may be required to be approved by the CMDA but as far as the construction of the building is concerned, the local authority, i.e., the Corporation of Chennai is the appropriate authority to regulate the construction as per the building bye-laws and sanction plans. When it is not disputed that the Corporation is the local authority, certificate issued by it cannot be disregarded. The assessee has placed on record the completion certificate issued by the Corporation by way of additional evidence. Since the allowability of the entire deduction depends on all the conditions being fulfilled, we admit this additional evidence. The certificate clearly mentions that the building was inspected on 23-11-2007 and that it is found to be satisfied the building permit conditions. We may also mention that the role of CMDA is quite distinct from that of the Corporation. CMDA looks at the plans from the perspective of the development and urbanisation of the city as a whole. On the other hand, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the terrace and hence it should form part of the built-up area. If the total built-up area including the terrace is considered, the said flat would measure more than 1500 sq.ft. The expression "built-up area" has been defined in clause (a) of section 80-IB(14). It is meant to be the inner measurements 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. It is not disputed that the terrace which is the subject-matter of dispute is adjoining to the dwelling unit. In other words, it has to be considered as a projection of the dwelling unit itself. It is also not disputed that it is only the owner of the top floor who has access to the said terrace and no other occupant of the building has access to it. Though the ld. counsel vehemently argued that it has to be considered as a part of common area, we cannot accept the said argument. Accordingly, the area of the terrace will have to be included in the built-up area. In paragraph 25 we have restored the matter relating to certain flats allegedly having area exceeding 1500 sq.ft. for ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, and it must be interpreted in that light. The Bench also considered numerous judicial pronouncements and ultimately came to the conclusion that if the commercial built-up area is not more than 10 per cent of the total built-up area, the assessee should not lose the entire benefit of section 80-IB(10). The Bench also considered the claim of the assessee for pro rata deduction. However, the Bench ruled out the claim on the ground that the deduction is available only in respect of the profit of the housing project. One of the several authorities referred to by the Bench, and which according to us is most relevant for the present case is the case of Kammins Ballrooms Co. Ltd. v. Zenith Investments (Torquay) Ltd. [1971] AC 850. In this case, Lord Diplock approved of what he called 'a purposive approach to statutory interpretation'. A brief discussion on this is found in paragraph 98 of the Special Bench order. According to Lord Diplock, the purposive approach would enjoin a judge to impute to Parliament an intention not to impose a prohibition inconsistent with the objects which the statute was designed to achieve, though the draftsman has omitted to incorporate in express words any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at limit, giving deduction to him will serve the purpose of the legislation. Therefore, we have drawn the limit of 10 per cent and have also held that if it exceeds the limit of 10 per cent then the assessee will lose entire deduction. This explains our directions given in paragraphs 25 and 26. 29. Besides the inspiration and guidance we have from the decision in the case of Brahma Associates ( supra), we also have the judgment of the Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) and which is placed on record before us. In this case, the High Court was considering the decision of the Kolkata Bench of the Tribunal in the same case in I.T.A. Nos. 1595 and 1735/Kol./2005, dated 24-3-2006. In this case, the assessee had constructed smaller as well as larger residential units. The assessee had claimed deduction only on account of smaller residential units which were fulfilling all the conditions contained in section 80-IB(10). The Tribunal allowed the claim of the assessee. The High Court, dealing with the same case, dismissed the appeal filed by the department holding that no substantial question of law is involved in this matter. The question is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 32. In the case of this assessee, the two appeals relate to assessment years 2005-06 and 2006-07. In both the assessment years, the main issue is whether the assessee is a builder and developer or not and hence, entitled to deduction under section 80-IB(10) or not. It is admitted by both the parties that the facts are similar to those in the case of Sanghvi Doshi Enterprise dealt with above. Therefore, following our above order, it is held that the assessee is a builder and developer and hence, entitled to deduction under section 80-IB(10). Another common issue in both the years is whether the area of private terrace has to be included in the built-up area or not. In this regard, as in the above case, the flats with exclusive terrace rights be measured again after including the private terrace and then follow the directions given in paragraphs 25 and 26 above. 33. In assessment year 2006-07, there is one more issue which pertains to the area of commercial part constructed by the assessee. On perusal of the order of the CIT(A), it appears that the assessee is not agreeing with the manner in which the department has computed the area. Therefore, the matter is restored to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IB (10) of the Income- tax Act, 1961 on pro rata basis? A perusal of section 80-IB(10)(b) of the Income-tax Act, 1961 provides that the project is to be on the size of a plot of land which has a minimum area of one acre. One should remember here that the wordings are that "the project is on the size of the plot of land". The wordings are not that the undertaking developing and building the housing project should be owner of a plot of land having a size of minimum area of one acre. Thus as long as the land on which the project is completed is having a minimum area of one acre the undertaking developing and building such housing projects on such lands would be entitled to the deduction under section 80-IB(10) subject to the other conditions being fulfilled. In the present case the land is owned by one person and the assessee has undertaken the development and building of the housing project on the said land. Indisputably, the project is on a land exceeding one acre. Even assuming that the undivided interest in the land has been sold by the land owners to the various purchasers of the flats, still the plot of land on which the housing project is being developed and built by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser of the flat then, obviously, the said private terrace does not fall within the common areas shared with the other residential units and consequently would have to be included in the measurement for arriving at the " built up area". The terrace talked about here is not the roof top terrace. It is the terrace, the access to which is through the flat of the purchaser and which is at the floor level and is the terrace of the immediately lower flat. The regular terrace is considered as part of the common area. The terrace that is sold and that is attached to the flat and which is having exclusive access is separate from the regular terrace. Section 80-IA(14)(a ) uses the words "inner measurements of the residential unit at the floor level". Therefore if the terrace is part of the inner measurement at the floor level, then it is to be included in the computation of "built up area". The assessee has also not placed before us the floor plan of the flat having the private terrace to show that the private terrace is in fact not part of the projection to the flat or that it is not at the floor level and that there is any method by which such private terrace can be accessed, without hindra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion certificate which has been obtained after the due date but for which the application has been given before the due date should be considered as due compliance, I am in agreement with my learned brother. Accordingly, the issue No. (ii) as to whether the completion certificate which has been obtained after the due date but for which the application had been given before the due date should be considered as due compliance is held in favour of the assessee. 45. Here I may specifically mention that in regard to issue No. (i) as to whether the assessee is a contractor, builder or developer, I agree with the finding as given by my learned brother. 46. In regard to the issue as to whether the undertaking, developing and building the housing project should be the owner of the size of a plot of land having the minimum area of one acre, even though my learned brother has not specifically given any finding on the same but he has touched upon the issue when deciding the issue No. (i ) as to whether the assessee is a contractor, builder or developer. 47. In regard to the issue as to whether the private terrace is to be considered as part of the built up area of the flat for computing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal built up area of the project, then the assessee would lose the deduction on the entire project. It is these portions of the order which I am unable to subscribe to. 51. A perusal of the paper book as filed by the assessee shows flat No. 1501 to have 1308 s.ft. but as per the sale agreement and the letter of the purchaser the area is 1230 s.ft. Similarly, flat No. 502 has been shown to have an area of 1285 s.ft. as per page 19 of the paper book of the assessee. But as per the letter of the purchaser and the sale agreement the area is 1157 s.ft. Similarly, flat No. 402 is mentioned as 1495 s.ft. but the assessee has claimed the same to be 1397 s.ft. in the letter to the Assessing Officer which finds mentioned in page 6 of the order of the CIT(A). Similarly, Flat No. 501 in Block-I shows 1495 s.ft. in the letter at page 19 of the paper book and the claim of the assessee is 1397 s.ft. before the Assessing Officer. Similarly, Flat No. 1105 in Block-II has been mentioned to be 1333 s.ft. in the letter at page 19 of the paper book and this flat is said to include open terrace whereas the sale agreement shows the area of the flat to be 1210 s.ft. and open terrace of 700 s.ft. Thus wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard the decision of another Division Bench of equal strength. If at all such a situation is to arise, what is required under judicial discipline is to refer the issue to a Special Bench or a Larger Bench. Similarly, a Division Bench is bound by the decision of the Larger Bench. A decision by a Division Bench contrary to the decision of a Larger Bench cannot have a binding force. This view of mine is supported by the decision of the co-ordinate Bench of this Tribunal in the case of Asstt .CIT v. MSS India (P) Ltd. 123 TTJ (Pune) 657. . 54. In the case of Brahma Associates (supra) in paras 113 and 114 the Hon'ble Special Bench has held as follows: "113. The next question is whether or not the deduction under section 80-IB(10) is to be granted in respect of only of such profits as are attributable to the residential units. 114. There is not much of a dispute on this aspect also. Learned representatives agree that there are no enabling provisions so far as allocation of profits into profits relatable to residential units and commercial units are concerned. We have noted that section 80-IB(10) categorically refers to the "profits derived in the previous year, relevant to any as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Pradesh Chambers of Commerce Industry v. State of Andhra Pradesh 247 ITR 36 riterated the basic principle that 'it is trite law that a taxing statute has to be strictly construed and nothing can be read into it. .In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look fairly at the language used'. The Hon'ble Supreme Court further went on to hold that 'the courts in interpreting a taxing statute will not be justified in adding words thereto so as to make out some presumed object of the Legislature .. If the Legislature has failed to clarify its meaning by the use of appropriate language, the benefit thereof must go to the taxpayer. It is settled law that in case of doubt, that interpretation of a taxing statute which is beneficial to the taxpayer must be adopted.' 58. A reading of section 80-IB(10) shows that the said provision is unambiguous. The Legislature clearly did not want to grant exemption to a housing project wherein the "built up area" of a residential unit exceeded the area specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the 'Lakshman Rekha" be drawn at 47 per cent and not 10 per cent. Would this not lead to doing violence to the provisions of section 80-IB(10) to the extent of frustrating the said provision? When the wordings of the provisions of section 80-IB(10) are clear and ambiguous and the Hon'ble Supreme Court has also laid down the principles in regard to the interpretation of the taxing statute, as already referred to supra in the case of Federation of Andhra Pradesh Chambers of Commerce and Industry (supra) as also in the case of Bajaj Tempo Ltd. (supra) an appellate authority should not, cannot, must not and shall not tinker with the provisions of the Act in such a manner as to cause violations to the provisions of the statute. Had the assessee constructed two different blocks and had maintained separate books of account and one of the blocks did not comply with the provisions of section 80-IB(10) and one did, then the deduction in respect of the block which complied with the provisions of section 80-IB(10) could be granted as has been held by the Mumbai Bench of this Tribunal in the case of Saroj Sales Organization v. ITO [2008] 115 TTJ (Mum.) 485. However, this is not the case here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court in the case of Britannia Industries Ltd. v. CIT [2005] 278 ITR 546. This order of the co-ordinate Bench of the Tribunal was the subject-matter of a miscellaneous petition in MP No. 379/Mds./2009, wherein the same counsel, as in the present case, had represented. It was claimed that an error had crept in the order inasmuch as the Tribunal had not considered the decision of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra). The Miscellaneous Petition had been dismissed vide order dt. 30-1-2009. Against this order, the assessee had filed a writ petition before the Hon'ble High Court of Madras in Visvas Promoters (P.) Ltd. v. ITAT 323 ITR 114 wherein the Hon'ble jurisdictional High Court had categorically held that a decision of the High Court of a different jurisdiction is not binding on the Tribunal which is not under its jurisdiction and the rectification sought for on that basis under section 254(2) was not valid. In the said decision the Hon'ble jurisdictional High Court had also laid down the principles of judicial discipline wherein it had also been held that where there are conflicting decisions of courts of co-or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes any of the conditions as specified in section 80-IB(10) of the Income-tax Act, 1961, as is applicable for the relevant assessment year, the assessees shall not be entitled to any deduction under section 80-IB(10) in respect of such housing projects in which there has been such violation. 64. In result, all the appeals of the assessees are partly allowed for statistical purposes. THIRD MEMBER Dr. O.K. Narayanan, Vice-President This is a bunch of five appeals. The appeals are filed by assessees, who are three in numbers. The relevant assessment years are 2005-06 and 2006-07. 2. All the three assessees are firms engaged in construction business. The assessee firms, in addition to their traditional contract business, also ventured into development of building projects. The assessees having engaged in the construction of such projects of residential buildings, claimed deduction provided under section 80-IB(10) of the Income-tax Act, 1961. The assessees have accounted income from the projects for the impugned assessment years computing on the basis of project completion method. 3. But the claim of deduction made by the assessees under section 80-IB(10) has been denied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st March, 2008 and whether entitled for deduction or not? (iv)Where in certain cases the built up area of a single flat is more than 1500 sft., whether the assessees are eligible for deduction or not? (v)Whether the private terrace should also be included in the built up area of the flats for the purpose of working out the statutory extent of the built up area? (vi)Whether deduction should be allowed even though some of the flats of the projects exceeded the built up area of 1500 sft.?" 5. These issues were considered by the Regular Bench of the Tribunal in the hearing concluded on 9-7-2010. The Bench was constituted of the learned Vice-President and the learned Judicial Member. The learned Vice-President authored the order on 9-9-2010. The learned Judicial Member passed a separate order on 15-9-2010, because of difference of opinion with the learned Vice-President on certain issues. 6. The dissent was not on all the points of decision arrived at by the learned Vice-President. On the first issue as to whether the assessees are builders/developers entitled for deduction under section 80-IB(10), the Bench agreed that the assessees are builders and developers as construed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce-President held that deduction should be allowed in the case of flats having built up area not exceeding 1500 sft., even though some of the flats are exceeding 1500 sft. He held that deduction should be denied in the case of flats having built up area in excess of 1500 sft. The learned Vice-President also held that the assessees are to be allowed deduction under section 80-IB(10) in respect of flats satisfying all conditions, only if the total built up area of all the flats measuring more than 1500 sft. does not exceed 10 per cent of the total built up area of the project. 11. The learned Judicial Member on the other hand held that even if one of the flats in the project violates any specified condition, the assessees are not entitled for the deduction. The learned Judicial Member held that deduction under section 80-IB(10) cannot be allowed on a pro rata basis. The learned Judicial Member also expressed his dissenting view on the ten per cent cap suggested by the learned Vice-President. 12. To sum up, the learned Vice-President and the learned Judicial Member agreed on five issues raised before their Bench and unanimously adjudicated four issues in favour of the assessees an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of ascertaining whether certain flats are exceeding the prescribed built up area of 1500 sft. or not. The physical aspect of exceeding the built up area of 1500 sft. has been remitted back to the Assessing Officer for fresh verification. The second issue, which is relevant for the present, is the question whether in a case where flats are exceeding a built up area of 1500 sft. whether the deduction can be given or not. The learned Vice-President has stated that deduction should be given where the built up area is not more than 1500 sft. 17. In the last part of the said paragraph the learned Vice-President has also made it clear that the deduction should be allowed only if the built up area of flats measuring more than 1500 sft. does not exceed 10 per cent of the total built up area. 18. In short the findings of the learned Vice-President are as follows: "(i)Flats having a built up area of not more than 1500 sft. are entitled for the deduction under section 80-IB(10); (ii)Flats having built up area exceeding 1500 sft. are not entitled for the above deduction. (iii)The deduction is subject to the condition that the area of flats having built up area of more than 1500 sft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncements, the learned Vice-President came to the conclusion that in the absence of any decision of the jurisdictional High Court to the contrary, not only the decision of the Special Bench of the Tribunal in the case of Brahma Associates (supra) but also the decision of the Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) are binding precedents and therefore it is to be held that even if the assessee has constructed residential houses of larger area, deduction under section 80-IB(10) will still be available but will be restricted to the profits arising from the sale of smaller residential units. 20. The learned Judicial Member's dissenting view discussed the statutory provisions of the deduction available under section 80-IB(10) in paragraph 55 of the order as under :-- "55.The provisions of section 80-IB(10) do not recognize a pro rata deduction. It is not as if the Legislature did not recognize pro rata deduction. When the Legislature desired to give such pro rata deduction, it specifically provided for it. For e.g., sections 54, 54(2), 54B(2), 80HHC etc. Further a perusal of section 80-IB(10) shows that the word used at the end of sub-clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociates (supra) relied upon by the learned Vice-President, in fact supports the proposition that deduction should not be given on a pro rata basis. He observed that the said decision in fact supports the arguments of the Revenue on the issue. The learned Judicial Member thereafter observed that a coordinate Bench of the Chennai Tribunal itself has decided the very same issue in the case of Viswas Promoters (P.) Ltd. (supra) and held that the restriction imposed by the statute is applicable on the entire project and therefore if some of the residential units of the project are exceeding the prescribed limit of built up area, the benefit of deduction under section 80-IB(10) cannot be granted to the entire project. He further observed that the above decision of the coordinate Bench of the Chennai Tribunal was the subject-matter of a miscellaneous petition in M.P. No. 379(Mds.)/2009, wherein it was claimed that an error had crept in the order inasmuch as the Tribunal had not considered the decision of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra). The miscellaneous petition has been dismissed vide order, dated 30-1-2009. He further obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. The learned Vice-President and the learned Judicial Member have extensively discussed the grounds of their decisions before arriving at their respective conclusions. Both of them have discussed in detail the decisions governing the question of judicial precedence in the light of a number of judicial pronouncements. 26. As the Third Member in these appeals, I am not here to make any critical appraisal of their thought process and its reflections. That is not my domain as I am not competent to do so. That is the domain of constitutional courts. The duty cast on me is to examine the facts of the case in the light of the statutory provisions and the relevant judicial pronouncements and to agree with one of the views. Therefore I am confining myself to the skeleton task of zeroing down the view to which I may agree. 27. The observations of the Hon'ble Vice-President are as follows:- (i)As held by the Special Bench of the Tribunal in case of Brahma Associates v. JCIT 122 TTJ 433 (Pune) (SB), section 80-IB(10) is aimed at promoting construction of housing projects so as to address the problem of shortage of dwelling units and it must be interpreted in that light and deduction un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Housing Development Ltd. (supra) was taken in appeal before the Hon'ble Calcutta High Court by the Revenue. The appeal filed by the Revenue under section 260A in IA No. 458/2006 has been dismissed by the Hon'ble High Court through judgment of their Lordships dated 5-1-2007. The copies of the judgment were made available on 28-3-2007. The court dismissed the appeal filed by the Revenue on the ground that no substantial question of law was involved in the matter. 32. Likewise the decision of the Chennai Bench of the Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) was also taken before the Hon'ble Madras High Court in writ petition, in another context. The assessee in that case after the appeal filed by the Revenue was allowed by the Tribunal, had filed a Miscellaneous Petition in M.P. No. 379(Mds.)/2008, which was dismissed by the Tribunal through its order dated 13-1-2009. The Writ Petition was filed against the said order of the Tribunal, dismissing the Miscellaneous Petition. The Madras High Court while dismissing the writ petition had observed that the Tribunal has explicitly taken note of the substance of the issue decided by the Calcutta Tribunal in Bengal Ambuja H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he principles of statutory interpretation discussed by the Hon'ble Supreme Court in the case of Padmasundara Rao(decd.) (supra), the Tribunal has not considered or discussed the decision of the Calcutta Tribunal or the Hon'ble Calcutta High Court which are directly on the point. It was only while disposing of the Miscellaneous Petition filed by the assessee that the Tribunal has made a mention about the decision of the Calcutta Tribunal to make it clear that the said decision was also considered by the Tribunal while passing the earlier order. It may be because of this subsequent observation that the Hon'ble Madras High Court has observed in its order dismissing the writ petition filed by the assessee that the Tribunal has explicitly taken note of the substance of the issue decided by the Calcutta Tribunal in Bengal Ambuja Housing Development Ltd. (supra). 36. But as a matter of fact it is to be seen from the order of the Chennai Bench of the Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) that the Tribunal has not effectively considered the order of the Calcutta Tribunal and the judgment of the Hon'ble Calcutta High Court. Therefore the argument that all the earlier d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no direct decision of the jurisdictional High Court on the subject and where there is already an existing decision of the Calcutta High Court on the subject, which decision is to be followed to decide the issue at hand, whether the decision of the Chennai co-ordinate Bench or the judgment of the Hon'ble Calcutta High Court? 41. Now, when coming to the finding that the issue has been adjudicated by the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) it is also necessary to examine the fact of dismissal of an appeal by the High Court holding that no substantial question of law arises. The Delhi Bench of the Tribunal in the case of Medicare Investments Ltd. (supra) has considered this question in an elaborate manner in its order. Relying on the judgment of the Hon'ble Gujarat High Court in the case of Nirma Industries Ltd. (supra), the Hon'ble Special Bench held as follows:- "The effect of dismissal of appeal by the High Court holding that no substantial question of law arises is that the order of the Tribunal on the issue which was agitated by the appellant before the High Court stands merged in the order of the High Court and for all in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l survives and till date the Hon'ble Madras High Court has not decided the issue on its merits. Therefore, the only judgment of a High Court available on the subject, is the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra). 44. Again, I may repeat that the question is whether I should follow the order of the coordinate Bench of the Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) or the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Dev. Ltd. (supra). 45. The Hon'ble Bombay High Court in the case of CIT v. Smt. Godavaridevi Saraf 113 ITR 589 has held that Income-tax Appellate Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question. The Hon'ble Bombay High Court again the case of CIT v. Thana Electricity Supply Ltd. 206 ITR 727 , has held that the decision of another High Court does have persuasive value on subordinate Courts and Tribunals outside its jurisdiction. 46. Further the Hon'ble Supreme Court in the case of CIT v. Vegetable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving built up area not exceeding 1500 sft. and not entitled for deduction in respect of those flats having their built up area exceeding 1500 sft. 49. The learned Judicial Member has also expressed his dissenting view on the 10 per cent cap (Lakshman Rekha) proposed by the learned Vice President. The learned Vice-President has relied on the order of the Hon'ble Special Bench of the Tribunal in the case of Brahma Associates (supra) to arrive at a Lakshman Rekha of 10 per cent. In the appeal filed against the order of the Special Bench, the Hon'ble Bombay High Court in the case of CIT v. Brahma Associates 122 TTJ 433 has held that it was not open to the Tribunal to fix such a limit. Therefore the basis of the finding of the learned Vice President on that issue does not hold good any more. Therefore on the issue of Lakshman Rekha, I agree with the learned Judicial Member that there is no need of any such stipulation. 50. In fact the question referred to the Third Member does not contain anything about the 10 per cent Lakshman Rekha. But I thought to refer that issue to avoid confusion /controversy that may surface before the regular Division Bench while disposing the impugned app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve of the Hon'ble Tribunal, it is prayed that (a)deduction under section 80-IB(10) be allowed as claimed by the appellant (b)such other orders may be passed as the Hon'ble Tribunal may deem fit. 2. Hon'ble Vice President, sitting as Third Member, had succinctly, formulated the questions raised through these grounds on page 5 of his order, as under:- (i)Whether the assessees are builders/developers and therefore eligible for deduction under section 80-IB(10)? (ii)Where the purchasers of flats have combined two flats together thereby exceeding the limit of the built-up area of 1500 sq. ft. can be considered as compliance of the stipulation provided in section 80-IB(10) that the built-up area should not exceed 1500 sq. ft. and hence eligible for deduction under section 80-IB(10)? (iii)Whether the assessees have furnished project completion certificates on or before 31st March, 2008 and whether entitled for deduction or not? (iv)Whether in certain cases the built-up area of a single flat is more than 1500 sq. ft., whether the assessees are eligible for deduction or not? (v)Whether the private terrace should also be included in the built-up area of the flats for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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