TMI Blog2014 (12) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... Opel Shelters Pvt. Ltd. And Others Versus ACIT, Circle 3, Pune [2014 (2) TMI 593 - ITAT PUNE] - the ‘built up area’ is to be measured as per the Pune Municipal Corporation Rules - Therefore, the question of including the terrace, balcony etc., in the ‘built up area’ does not arise – once it is excluded from the ‘built up area’, the total area of each of the unit will be less than 1500 sq. ft. as per report of the Departmental Valuer - CIT(A) in our opinion is justified in allowing the claim of the assessee. Inclusion of staircase in built up area – Held that:- As regards the inclusion of staircase area in the ‘built up area’, although the departmental valuer has excluded the same from the ‘built up area’, the AO has considered the same in the ‘built up area’ - The action of the AO is not correct since in a row house there will be a stair case from the ground floor to the first floor and the same cannot increase the ‘built up area’ of the row house - This is within the boundary of the plinth area and therefore it has to be excluded which the Departmental Valuer himself has correctly done - the Departmental Valuer has considered the ‘built up area’ as per the Pune Municipal Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to Assessment Year 2004-05. 2. Facts of the case, in brief, are that the assessee is an AOP and is engaged in the business of Developers and Builders. It filed its return of income on 30-10-2004 declaring Nil income after claiming deduction of ₹ 2,24,44,975/- u/s.80IB(10) of the Income Tax Act. During the course of assessment proceedings the AO asked the assessee to substantiate the claim of deduction u/s.80IB(10) of the Income Tax Act. From the various details furnished by the assessee the AO noted that the maximum built up area of some of the flats exceeded the permissible limit of 1500 sq.ft. He noted that Row House Nos.3 4 were inter connected with each other and therefore the same has to be considered as one residential unit and the aggregate area of the same was more than 1500 sq.ft. He further noted that the assessee has not constructed any flat but instead has constructed 30 Row Houses in the project (Rolling Hills). On physical verification of these row houses, it was noted that the assessee has constructed a big bungalow for the owner of the land, the area of which is more than 1500 sq.ft. In addition, there are 5 instances where the area of residential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself and the row houses were connected at the time of possession itself. This also confirms that you have constructed many residential units which do not fulfill the requirement specified u/s. 80IB(10) (c). Please give your explanation on the above. 2.2 In response to the above, it was replied by the assessee that the 2 residential units were purchased by separate agreements by the purchasers and these units were joined by the purchasers subsequently. It was submitted that the property tax assessment by PMC for these are separate. Further, there are separate electrical meters and separate gas connections. The assessee also filed an affidavit of Shri Chitravanshi Rajat according to which he was in a confused mind at the time of recording statement u/s.131 and has given the answers as per his impressions and beliefs without checking the documents. It was stated that joining of the units was actually done by Shri Sharad varma, brother of Shri Chitravanshi Rajat 3 years back and therefore Shri Chitravanshi Rajat gave the answers in the statement in a casual manner. The assessee also submitted letters from 2 other unit holders Shri Dilip Apte, Unit Nos. 30.1 + 30.2 and Shri Ranje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it was stated that the two units were purchased under separate agreements, though the two were real brothers. It was further contended that the two row houses were separate units having separate property tax bills and separate electricity meters and also having two separate entrances and one common wall separating the two units. It was submitted that the unit holders after taking possession of the units have put a small door in the common wall for convenience of their old parents. However, the identity of two independent residential units were maintained as both the units had been conceptualized, planned and executed as two separate residential units and they had two independent kitchen cum dining room and separate gas connections. It was submitted that there is a substantial compliance of the provisions of sec. 80IB(10) of the IT. Act, 1961 and therefore the deduction should be allowed. 4.1 In a without prejudice submission it was stated that the provisions in a taxing statue granting incentives for promoting growth and development should be construed liberally and in view of the ratio of the decision of the apex court in the case of Bajaj Tempo Ltd Vs CIT (1992) 196 ITR 188 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bramha Associates Vs Jt CIT (2009) 122 TTJ 433 (Pune)(SB) 4.4 Based on the arguments of the assessee the Ld.CIT(A) called for a remand report from the AO. The Assessing Officer directed the Govt. Approved Valuer to visit, inspect and measure the 'built up area of the various residential tenements. The govt. approved valuer Shri. Harshad Ruparel, in his report dated 22-8- 2011 has given the measurement as per the 'built up area' as defined u/s 80IB(14)(a) as inserted by the Finance Act (No. 2) 2004, w.e.f. 1-4-2005 and 'built up area' as per the Development Control Rules framed by the PMC. The details of the same especially with respect to the residential units where total built up area was disputed by the A.O. during the assessment proceedings, are as under : Sl.No. Unit No./Name Built up area including Balconies Projected terrace Total area sq.ft. As per PMC Total area 1 3 Sharad Varma 1412.02 75.24 1487.26 1041.09 2 4 Chitravanshi 1412.02 75.24 1487.26 1041.09 3 10 Padmanabhan 1265.41 133.47 1398.88 980.49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature and, therefore, the disallowance of the claim of Sec. 801B(10) deduction was correct and the assessee's claim was not acceptable. 4.7 The assessee in its rejoinder to the report of the Assessing Officer submitted that the Hon ble Bombay High court in the case of Bramha Associates (2011) 333 ITR 289 (Bom) has held that the clause (a) inserted in Sec. 80IB(10)(14) w.e.f. 1-4-2005 is prospective in nature and, therefore, cannot be applied for period prior to 1-4-2005 and hence the definition of built up area as per the DC Rules framed by PMC will prevail. It was stated that similar view has been held in a host of tribunal decisions including the decisions of the Pune Bench of the Tribunal in the case of Opel Shelters Pvt. Ltd Vs ACIT, ITA No. 219/PN/2009 for A.Y. 2005- 06 and D S Kulkarni Associates Vs ITO, ITA No. 17/PN/2009 for A.Y. 2005-06 and of the Mumbai ITAT in the case of Hiranandani Akruti JV vs DCIT (2010) 9 SOT 498 (Mum), which have held that Sec. 80IB(10) as it existed in the statute in the year in which the project commenced should apply. It was reiterated that the definition of the built up area as per DC Rules of PMC will apply and, therefore, the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PATH RAN JIT BABURAO 983 1808 22.2 PATILRANJIT BABURAO 825 30.1 APTE NEERAJ DILIP 850 1488 30.2 APTE REKHA DILIP 638 The Assessing Officer also recorded the statement of Shri. Chitravanshi Rajat who had purchased the residential unit No.4 u/s 131 on 7-12-2006. In the statement Shri. Rajat had informed that the row house No. 4 was purchased by him and the area of the said units as per the agreement was 1485 sq.ft. It was also stated that his brother Shri. Sharad Verma had purchased row house No. 3 in the scheme and that the aforesaid two row houses i.e. 3 4 were connected from inside. The Assessing Officer thus held the two residential units as a single one and that the two row houses were stated to have been connected by the builder. The Assessing Officer also visited the said housing project along with the govt. approved valuer Shri. Netaji Khandagale who also submitted the report on 7-12-2006. The Assessing Officer found that the valuer had taken measurements of bungalow No. 18 of the project, the total built up area of which was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e identity of two independent residential units were maintained as both the units had been conceptualized, planned and executed as two separate residential units and they had two independent kitchen cum dining room and separate gas connections. The appellant has thus further submitted that there is a substantial compliance of the provisions of sec. 80IB(10) of the IT. Act, 1961 and in a without prejudice submission, stated that the provisions in a taxing statue granting incentives for promoting growth and development should be construed liberally and in view of the ratio of the decision of the apex court in the case of Bajaj Tempo Ltd Vs CIT (1992) 196 ITR 188 (SC), the deduction u/s 80IB(10) was allowable. The appellant has also submitted in without prejudice to the above submission that pro-rata deduction be allowed on the eligible and qualifying residential units. The appellant regarding the built up area of Row house No. 18 has reiterated the submission made before the Assessing Officer during the assessment proceedings had submitted that the area calculated by the valuer appointed by the appellant AOP of the residential unit was at 1377.55 sq.ft as against 1855.95 worked out b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a as defined u/s 80IB(14)(a) as inserted by the Finance Act (No. 2) 2004, w.e.f. 1-4-2005 and 'built up area' as per the Development Control Rules framed by the PMC. The details of the same especially with respect to the residential units where total built up area was disputed by the A.O. during the assessment proceedings, are reproduced below: S. No Unit No./Name Built up area including Balconies Projected terrace Total area sq.ft. As per PMC Total area 1 3 Sharad Varma 1412.02 75.24 1487.26 1041.09 2 4 Chitravanshi Rajat 1412.02 75.24 1487.26 1041.09 3 10 Padmanabhan Preeth 1265.41 133.47 1398.88 980.49 4 11 Advani 1412.02 75.24 1487.26 1041.09 15 5 18 Harish Warner 1363.04 0.00 1363.04 1081.02 6 21 Snehal Oza 1407.93 134.87 1542.80 1086.51 7 22 Ranjeet Patil 1762.82 139.28 1902.10 1348.62 8 30 Apte 1412.02 75.24 1487.26 1041.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 80IB(10)(14) w.e.f. 1-4-2005 is prospective in nature and, therefore, cannot be applied for period prior to 1-4-2005 and hence the definition of built up area as per the DC Rules framed by PMC will prevail. The appellant has also stated that similar view has also been held in a host of tribunal decisions including ITO Vs AIR Developers, Arun Excello Foundation (P) Ltd Vs ACIT, ACIT Vs Sheth Developers (P) Ltd, Bramha Associates quoted supra. The appellant has also drawn attention towards the decision of the Pune ITAT in the case of Opel Shelters Pvt. Ltd Vs ACIT, ITA No. 219/PN/2009 for A.Y. 2005-06 and D S Kulkarni Associates Vs ITO, ITA No. 17/PN/2009 for A.Y. 2005-06 and of the Mumbai ITAT in the case of Hiranandani Akruti JV vs DCIT (2010) 9 SOT 498 (Mum), which have held that Sec. 80IB(10) as it existed in the statute in the year in which the project commenced should apply. Thus the appellant has reiterated that the definition of the built up area as per DC Rules of PMC will apply and, therefore, the built up area of all the tenements was less than 1500 sq.ft. The appellant regarding the residential units 3 4 owned by Mr. Sharad Varma and Mr. Chitravanshi Rajat, has stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing non-fulfillment of the requirement/conditions specified u/s 80IB (10). 3.8 The appellant in the explanation furnished before the Assessing Officer explained that the 'Built up' area mentioned in the agreement should not form the basis of calculating the built up area . The appellant undertook the exercise of measuring the residential units with the assistance of Mr. Nitin Lele, a govt. approved surveyor and a Chartered Engineer and submitted the calculation of the built up area for the combined units which indicated even the combined built up areas below 1500 sq.ft of all the units viz. 1.1 1.2, 11.1 11.2, 21.1 21.2, 22.1 22.2 and 30.1 30.2. The appellant also submitted the detailed drawings and measurements and the calculation for verification by the Assessing Officer. The appellant regarding units No. 3 4 submitted that the two row houses were separate having separate electric meters and property tax bills and separate entrance and independent kitchen-cum-dining rooms and separate gas connections. The owner of one of the units Mr. Sharad Varma also clarified that the small door in common wall was made by him by engaging a contractor and payment made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chitravanshi Rajat 1470 Both units joined together to construct a bigger residential unit. 3. The built up area of unit No. 18 as per the definition of built up area in Sec. 80IB (14)(a) was 1786.74 sq.ft. The Assessing Officer arrived at the above conclusion for making the disallowance after considering the explanation and evidences furnished during the assessment proceedings. In fact, the Assessing Officer had earlier held nearly ten units which had exceeded the permissible limits of the built up area of more than 1500 sq.ft. and which had been held to have been joined by the builder for the respective customer. However, the Assessing Officer accepted the explanation and the evidences with respect to units no. 1.1 1.2, 22.1 22.2, 30.1 and 30.2. The Assessing Officer was guided by the definition of the 'built up area' in Sec. 80IB (10) inserted by the Finance (No.2) Act, 2004 w.e.f. 1-4-2005 which was held by him, to be clarificatory amendment, with a purpose to clear the doubt about calculation of built up area. The Assessing Officer also held the amendment to be declaratory in nature and having application for the earlier years. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 21 Snehal Oza 1542.80 1086.51 7 22 Ranjeet Patil 1902.10 1348.62 8 30 Apte 1487.26 1041.09 The valuer has categorically mentioned that Nos. like 10.1 10.2 or 22.1 or 22.2 does not exist and they refer to the numbers for each floor of an independent unit which is not combined with any other unit. It has thus been observed that units No. 1, 10, 11, 18, 21, 22 30 were a two storied building and had a single number in the plan. The valuer in respect of units No. 30.1 30.2 and 22.1 22.2. had confirmed regarding joining of the units after taking possession of their own. The appellant had explained in the submission before the A.O. that units no. 10 and 11.1 were relating to two customers who were not related and that the two units were not connected and were separate units. The valuer in its report in the remand proceedings has also affirmed the contention of the appellant. The A.O. has not brought any material contrary to the facts raised by the appellant. Further, the residential units 21.1 21.2 owned by Oza Snehal Bhavesh has been admitted to be one unit and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive units which had been disputed by the Assessing Officer to have exceeded the prescribed limits of 1500 sq.ft. However, on perusal of the table of the area statement as submitted by the valuer, Shri. Ruparel, it is noticed that the total area as per the amended provisions of Sec. 80IB(14)(a), with respect to the definition of the 'built up area' in most cases the built up area exceeds the limit of 1500 sq.ft. However, definition of area as per the DC Rules of PMC the built up area in all the cases is much below the permissible limit of 1500 sq.ft. The appellant has contended that the amended definition of built up area w.e.f. 1-4-2005 is not retrospective. It has also been claimed by the appellant that the amended definition cannot be given effect to the project as it was approved on 30.03.2001 when no such definition was available in the section and the project even completed before the introduction of the definition as per Sec. 80IB(10)(a) of 'built up area'. The appellant has claimed that the above proposition has been accepted in various judgments including Bombay High court in the case of CIT Vs Bramha Associates (2011) 333 ITR 289 (BOM) that clause (a) inser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments, it was claimed, before the definition of built-up area was introduced in Sec. 80IB(14) the meaning to the built up area or the residential unit has to be given as is commercially understood. On this interpretation, it can be seen that the claim of the appellant that the area of the residential units is less than 1500 sq.ft. appears to be correct if the implication of the definition is not applied as the project was approved on 30.03.2001 when this definition was not in the statute and, therefore, the appellant cannot be asked to fulfill a substantive condition introduced subsequent to the approval of the project when a vested right got created subject to the fulfillment of the conditions then prevailing. The decisions of the Pune ITAT in the case of Opel Shelters Pvt. Ltd and DS Kulkarni Associates have also been followed by the tribunal in several other cases on similar issues. The Pune ITAT has held that the assessee had started the project in F.Y. 2000-01 and the amendment restricting the commercial area was introduced from 01.04.2005. The ITAT, in this context held that the amendment restricting the commercial area would not be applicable for the project started prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 004) on or before 31.3.2008. In the cases before us the projects have been completed well before this date. Putting of such condition of time limit is well understood. Since the legislature intended the completion of projects within a time frame to avoid inconvenience to the beneficiaries i.e. the buyers. In this regard the Legislature has categorized the time limit for the projects approved on different period before 31.3.2007 but requirement remained the same that projects would be approved by the local authority. Compliance of the requirement provided in clause (d) to the Section is possible only in those projects which have been started on or after 1.4.2005 as by those assessees were all aware about the provisions laid down in clause (d). 20. By applying the principle of harmonious construction to interpret the provisions under Sub-section (10) to Section 80IB as amended w.e.f. 1.4.2005 we come to the conclusion that the Legislature always intended that the project must be approved by the local authority, thus in those approved projects where construction has been started much earlier than 1.4.2005, the assessees are required to complete the plan as it has been approved. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of the built-up area. In view of the above, in my considered opinion, the ratio of the decision laid down in the above three cited decisions of Pune ITAT are clearly applicable to the facts of the case of the appellant. The project Rolling Hills Scheme have commenced construction much before the amendment and, therefore, it is not possible for the appellant to comply with the definition of built-up area introduced at a much later date i.e. 01.04.2005. Thus, in view of the decision of the jurisdictional ITAT, which has held that the amendment restricting the commercial area is not applicable to the project started prior to 31.03.2005, similarly, in the case of the appellant the issue is of built-up area and as the aforesaid project has started prior to the amendment, the definition of built-up area as envisaged in the amended provisions of sub clause (d) to Sec. 80IB (10) w.e.f. 01.04.2005 is not applicable for the project was not in existence. 3.13 In view of the above fact and the ratio of the above decisions including that of the jurisdictional High Court and also the finding of the valuer with respect to the residential units being independent, the definition of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent existence such as the sale deed, electricity meter/bills, municipal tax records, plans, society charges etc before arriving at the correct conclusion. The appellant's contention that the two units had been conceptualized, planned and executed as two separate independent residential units ab initio having two independent kitchen cum dining room and separate gas connection has also been affirmed by the valuer appointed by the Assessing Officer. Thus in view of the above fact, the existence of two independent units cannot be doubted and the reliance placed by the Assessing Officer on the statement of one of the unit holders Shri. Chitravanshi Rajat depicts only half the truth as the other unit holder was never examined by the Assessing Officer, and the Assessing Officer has also not taken into consideration other relevant material brought on record. Though the two unit holders are related to each other being brothers, the restriction for not selling residential units of the same project to different family members of the same family was not in statute at the relevant point of time and this restriction was introduced in Sec. 80IB (10) by way of clauses (e) and (f) w.e.f. 1-4-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out by the builder. In such cases, it is not possible to hold that the builder built the residential flat of more than 1,000 sq. ft. of built26 up area. There is no evidence on record to suggest that the assessee itself advertised that the flats were of more than 1,000 sq. ft. and that merely to get the benefit of s. 80-IB he drew the plans in such a manner that each residential unit was shown as not more than 1,000 sq. ft. of built-up area. It is not also the case of the CIT that each flat in the housing projects undertaken by the assessee could not have been used as an independent or selfcontained residential unit not exceeding 1,000 sq. ft. of built-up area and that there would be a complete, habitable residential unit only if two or more flats are joined with each other, which would ultimately exceed 1,000 sq. ft. of built-up area. In such a situation, merely because 9 out of 140 purchasers desired to join the flats purchased by them into one single unit, which exceeded 1,000 sq. ft. of built-up area, cannot disentitle the assessee to the deduction. If each residential unit does not exceed the built-up area of 1,000 sq. ft., the fact that they were joined together by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) The learned Commissioner of Income tax (Appeals) erred in allowing the above deduction even though some of the flats exceeded the built up area of 1500 sq.ft. violating the specific provisions u/s.80IB(10)(c) of Income tax Act, 1961. 3) The learned Commissioner of Income tax (Appeals) has erred in allowing the above deduction relying upon the Affidavit filed later on rather than the statement of the flat owner before the Assessing Officer that the flats were conjoined by the builder before sale. 4) The learned Commissioner of Income tax (Appeals) has erred in allowing the above deduction even though such joining of the flats was not approved in the original or revised plan passed by the Pune Municipal Corporation (PMC). 5) The learned Commissioner of Income tax (Appeals) has erred in holding that provision of section 80IB(14)(a) are prospective and not clarificatory and, therefore, definition of built up area as per PMC Rules would apply prior to 01.04.2005. 6) Without prejudice to the above, the learned Commissioner of Income tax (Appeals) has erred in ignoring that built up area of one of the conjoint flat exceeded 1500 sq.f.t even as per the definition of PMC Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the ground floor to the first floor and the same cannot increase the built up area of the row house. This in our opinion is within the boundary of the plinth area and therefore the same has to be excluded which the Departmental Valuer himself has correctly done. Further, the Departmental Valuer has considered the built up area as per the Pune Municipal Corporation s rules and regulations and therefore the Ld.CIT(A) has correctly appreciated the facts and has correctly excluded the same from the total built up area . 7.2 So far as the row house No.18 belonging to Shri Harish Warrier is concerned, we find the area of the said unit was measured by the earlier departmental valuer one Shri Khandangale, a report of which is placed at pages 74 to 77 of the paper book. He had computed the area at 1855 sq.ft. While doing so, he included therein the terrace area and the parking area. However, according to the succeeding Departmental Valuer Shri Harshad Ruparel, the area of this row house as per Pune Municipal Corporation rules is only 1081 sq.ft. after excluding the balcony etc. If the balcony etc. are included, then also the total area comes to 1363.04 sq.ft., i.e., including the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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