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2015 (3) TMI 980 - ITAT MUMBAI

2015 (3) TMI 980 - ITAT MUMBAI - TMI - Eligibility for deduction u/s. 80IB(10) on profits arising from commercial building - Held that:- The claim of the assessee qua decision in the case of Brahma Associates [2011 (2) TMI 373 - BOMBAY HIGH COURT] is totally misplaced because in the case what the Hon’ble High Court held that clause (d) was inserted to Sec. 80IB(10) w.e.f. 1.4.2005 and is prospective and not retrospective and hence could not be applied for the period prior to 1.4.2005 which means .....

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t that the legislature intended to allow Sec. 80IB(10) deduction to all housing projects approved by local authority without all with commercial user to the extent permitted under the rules. This is further verified by clause (d) of Sec. 80IB(10) inserted with effect from 1.4.2005. It provides that even though shops and commercial establishments are included in the housing project, deduction u/s. 80IB(10) w.e.f. 1.4.2005 would be allowable where such commercial user does not exceed 5% of the agg .....

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assessee itself vide letter dt. 18.12.2007 has admitted that four buildings are approved as purely residential buildings and one is approved as commercial and the assessee has kept separate project-wise accounts in respect of Rehab Component i.e. 17 Rehab buildings, 4 Residential buildings and one free sale commercial premises. Thus in assessee’s own submission, it is clear that the commercial building is a separate project and is not included as an integral part of the Housing project.

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for deduction u/s. 80IB(10) on the sale of the commercial user is declined. - Decided against assessee. - I.T.A. Nos. 5394, 5395 & 5396/Mum/2012, I.T.A. Nos. 2607, 4097 & 4098/Mum/2011, C.O. Nos. 196, 197 & 198/Mum/2012 - Dated:- 11-3-2015 - Shri Vijay Pal Rao And shri N.K. Billaiya JJ. For the Appellant : Shri Surinder Jeet Singh For the Respondent : Dr. K. Shivaram Shri Rahul Hakani ORDER Per Bench: ITA No. 2607,4097 & 4098/M/2011 are appeals by the Revenue for A.Yrs 2005-06 to 2007-08, IT .....

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he assessment proceedings for A.Y. 2005-06 vide letter dt. 18th December, 2007 placed at page-183-184 of the Paper Book. The assessee firm Heritage Housing Development Corporation (HHDC) is engaged in building construction activities for the last several years. It has commenced construction of one project entitled Heritage on various plots of land bearing Plot F. P. 18-19/11 to 15, 16B (18-19/109), 20 pt, 28, 29, 31, 32, 33, 88, 89, 90 to 99, 100, 102, 106, 107 of TPS VI of Santacruz (W), admeas .....

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Meters, and sale component permissible is 72966.66 sq. meters taking into account both Slum Plot and Non-Slum Plot. The sale component permissible is hereinafter called the Free Sale Residential component , Free Sale Commercial component and Rehabilitation Component is hereinafter called the Rehab Component . The Developers have also prepared the plans for construction of 17 Rehab Buildings, 4 Residential Buildings and 1 Commercial Building which have been approved under intimation of approval a .....

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see firm has chosen to construct 5 buildings on the said F.S.I granted by the local authority out of which 4 buildings are approved as purely residential purposes and 1 is approved as commercial. For the purpose of proper accounting the assessee firm has created separate project wise accounting in respect of (1.) Rehab Component that is 17 Rehab Buildings (2). 4 free sale Residential premises and (3). 1 free sale commercial premises. Accordingly the income derived from rehab component and that f .....

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the AO was of the firm belief that the assessee has contravened the said provisions of the Act. A show cause notice was accordingly issued. The assessee filed a detailed reply which is incorporated by the AO from pages- 2 to 5 of the assessment order. It M/s. Heritage Housing & Development 4 Corpn. was strongly submitted that the SRA has approved the residential housing project and the commercial project as separate projects. The AO observed that from the copy of the approved plan construct .....

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CIT(A) was of the opinion that since the housing project was approved before 31.3.2005, the amended provisions do not apply to the facts of the case. After drawing support from various decisions of the Tribunal, the Ld. CIT(A) allowed the claim of the assessee u/s. 80IB(10) of the Act. 4. Aggrieved by this, the Revenue is before us. 5. The sum and substance of the grievance of the Revenue for assessment year 2005-06 is that the Ld. CIT(A) erred in allowing the claim of deduction u/s. 80IB(10) of .....

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Development 5 Corpn. commercial building at ₹ 98,84,148/- and towards residential building at ₹ 88,63,017/-. The AO was of the firm belief that when the total FSI received has been allocated in ratio of 64.48:35.52. The maintenance expenses should also have been allocated on the total saleable area of the residential and commercial building in the same ratio. The assessee was asked to justify its allocation. On receiving no plausible reply, the AO proceeded by allocating maintenance .....

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ese 4 plots of land are separate from each other, the area of each of these four plots of land is less than one acre. The AO was convinced that provisions of clause (b) of 80IB(10) is thus violated by the assessee. 7.1. Proceeding further, the AO noticed that some of the flats have exceeded the carpet area of 1000 sq ft. On physical inspection, it was found that 3 flats were actually a single unit. The details of physical inspection of the flat are mentioned at para-12.1. of the assessment order .....

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, drawing support from the findings in A.Y. 2005-06, the AO was of the opinion that the assessee has exceeded the commercial area included in such project by the limit prescribed in clause (d) of Sec. 80IB(10) and hence violated the said condition and therefore not eligible for deduction. The AO denied the claim of deduction u/s. 80IB(10) of the Act. 8. Aggrieved, The assessee carried the matter before the Ld. CIT(A). In so far as allocation of maintenance expense is concerned, the Ld. CIT(A) wa .....

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ed the addition. 8.1. In so far as the claim of deduction u/s. 80IB is concerned, the Ld. CIT(A) followed the findings given in assessment year 2005-06 and after relying upon the same decisions as relied upon in A.Y 2005-06, the Ld. CIT(A) allowed the claim of deduction u/s. 80IB(10) of the Act. 9. Aggrieved by this, the Revenue is before us. Facts of assessment year 2007-08 are identical to the facts of assessment year 2006-07 in so far as apportionment of maintenance expenditures are concerned .....

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Representative strongly submitted that the documents relating to the approval by the slum rehabilitation authority, the notification issued by the CBDT as exhibited in the paper book have never been examined by the lower authorities. It is the say of the Ld. DR that it appears that these documents have been submitted for the first time. Pointing towards the commencement certificate in the Paper book, the Ld. DR stated that the assessee has only submitted the certificates of commencement of proje .....

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re the appeals should be restored to the file of the AO for re-verification of certain documentary evidences. 11. Per contra, the Ld. Counsel for the assessee strongly objected to the submissions made by the DR. It is the say of the Ld. Counsel that none of the lower authorities have raised this issue that whether the project is approved as housing project or not therefore the point raised by the Ld. DR is not coming out of the order of the Ld. CIT(A). Supporting the claim of deduction u/s. 80IB .....

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TR 524. The Ld. Counsel concluded by stating that the claim cannot be denied on the ground of commercial area. In so far as the objection of the AO that certain flats were sold as one unit, the Ld. Counsel stated that the responsibility of the builder is only upto the date of handing over of the possession, what the purchasers do after taking the possession cannot be used against the builder. Therefore, the observations of the AO are without any basis and the Ld. CIT(A) has rightly allowed the c .....

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he assessee has prepared the plans for construction of 17 Rehab buildings, 4 residential buildings and one commercial building. The dispute raised relates to the commercial part involved in this project. This issue is no more res-integra as the jurisdictional High Court has settled this issue in favour of the assessee and against the Revenue by holding that the amendment brought to Sec. 80IB(10) w.e.f. 2005-06 are not applicable to the projects sanctioned prior to 1.4.2005. The assessee passes t .....

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lats were sold separately, there is a possibility that the owners of the flat may have joined 3/2 flats together. However, this act of the borrowers cannot go against the builder as the liability/responsibility of the builder is only up to the date of sale and on the date of sale the flats sold were less than 1000 Sq. ft in built up area, hence eligible for deduction u/s. 80IB(10) of the Act. 12.2. Another allegation made by the AO is that 4 residential buildings are on 4 separate plots, each pl .....

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in it has been mentioned that the notification shall come into force w.e. f the date of its publication. 12.5. Vide corrigendum issued in respect of the notification mentioned hereinabove, the correction has been made by the CBDT which reads as under: This notification shall come into force w.e.f the date of its publication has to be reads as under: This notification shall be deemed to apply to projects approved by a local authority under the aforesaid scheme on or after the 1st day of April, 20 .....

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after the 1st day of April, 2004 and before 31st day of March, 2008. 12.7. Going through the notification, we find that the notification has been issued for the scheme contained in Regulation 33(10) of Development Control Regulation for Greater Mumbai 1991 subject to the following conditions: i) slum Development falling in Category VII mentioned in notification No. TPB-4391/4080(A)/UD-11(RDP) dt. 3rd June, 1992 shall be excluded from the scheme. ii) slum development falling within clause 7.7 of .....

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fore us for the first time, we understand that the lower authorities had no occasion to consider the facts of the case in hand in the light of this notification and the conditions mentioned therein. 12.9. To be fair to the Revenue, we restore this issue to the files of the AO only for the limited purpose for the verification of the scheme under which the assessee has made the construction and has claimed deduction u/s. 80IB(10). The AO is directed to verify the scheme in the light of the notific .....

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ased with the issue relating to the order made by the Commissioner u/s. 263 of the Act wherein the CIT was of the opinion that the apportionment of the market value of F.S.I. amounting to ₹ 29.29 crores should be apportioned between residential building and commercial building in the ratio of 48:52. The Tribunal has upheld the order of the CIT made u/s. 263 of the Act. The AO has rightly allocated the maintenance expenditure in the ratio of saleable area between residential and commercial .....

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mmercial building. 15.1. It is pertinent to mention here that appeal for A.Y. 2005-06 is late by 1211 days and appeal for A.Yrs. 2006-07 and 2007-08 are late by 465 days. Similarly, the C.O for 2005-06 is late by 1047 days and C.O. for A.Yrs 2006-07 and 2007-08 are late by 156 days. In all these appeals and cross objections, identical application for condonation of delay is filed by the assessee. 16. Let us understand the facts for A.Y. 2005-06, The assessment order was made on 28.12.2007 u/s. 1 .....

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o the allocation on reasonable basis vide order dt. 29.8.2009. Against this order of the CIT, assessee preferred an appeal before the Tribunal which was disposed off by the Tribunal on 29.6.2012 upholding the order of the CIT. This order of the Tribunal was received on 13.7.2012. The assessee has filed the appeals for the assessment years under consideration and the cross objections only after receiving the order of the Tribunal. This conduct of the assessee cannot be considered as a reasonable .....

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matrix show that the assessee waited for the order of the Tribunal to see whether Tribunal upheld the order of the Ld. CIT made u/s. 263 of the Act or dismisses the same. The claim of the assessee that the delay was neither deliberate nor with malicious, intention is totally false and against the facts of the case as demonstrated hereinabove, the assessee has waited for the outcome of the decision of the Tribunal against 263 order of the CIT. Therefore, the reliance on the decision of the Hon bl .....

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duction u/s. 80IB(10) on profits arising from commercial building. The claim of the assessee qua decision in the case of Brahma Associates (supra) is totally misplaced because in the case of Brahma Associates, what the Hon ble High Court is held that clause (d) was inserted to Sec. 80IB(10) w.e.f. 1.4.2005 and is prospective and not retrospective and hence could not be applied for the period prior to 1.4.2005 which means that the amendment is not applicable to the projects approved before 1.4.20 .....

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ing projects approved by local authority without all with commercial user to the extent permitted under the rules. This is further verified by clause (d) of Sec. 80IB(10) inserted with effect from 1.4.2005. It provides that even though shops and commercial establishments are included in the housing project, deduction u/s. 80IB(10) w.e.f. 1.4.2005 would be allowable where such commercial user does not exceed 5% of the aggregate built up area of the housing project or 2000 Sq.ft whichever is lower .....

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