TMI Blog2015 (4) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... as a parking subject to height restrictions. In terms thereof, it is sought to be made out that the area of car parking is specifically excludible while calculating ‘ built- up area’ as per the Development Control Rules and therefore, the Assessing Officer was wrong in considering such area for the purpose of computing ‘built- up area’ of the residential units. A bare perusal of the Development Control Rules, in our view, supports the assertions put forth by the assessee and therefore, the area of car parking is not to be includible for the purposes of computing ‘built- up area’ of residential units in the facts and circumstances of the present case. Merely because the assessee has violated the condition u/s. 80 IB(10)(c ) in relation to the flats on the 11th floor, the deduction u/s. 80 IB(10) cannot be denied in its entirety, but, the denial shall be limited to the profits in respect of the flats on the 11th floor alone. For the balance of the residential units, the plea of the assessee for deduction u/s. 80 IB(10) of the Act is justified, and the assessee succeeds on this aspect. With regard to the project DSK Frangipani for the A.Y. 2005-06 also, the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take up for detailed discussion the issues arising in the assessment year 2004-05 initially. 3. For the assessment year 2004-05, the assessee company filed its return of income declaring an income of ₹ 20,01,590/- which, inter alia, included a claim of deduction under section 80-IB(10) of the Act of the Act amounting to ₹ 1,51,13,133/- in relation to the profits from the housing project. The assessee claimed such deduction in relation to two of its projects, namely, DSK Vishwa III amounting to ₹ 1,11,66,314/- and DSK Frangipani amounting to ₹ 39,46,818/-. The claim of the assessee that profits from both the two housing projects were eligible for deduction under section 80-IB(10) of the Act was rejected by the Assessing Officer and the total income in the assessment finalized under section 143(3) of the Act dated 29.12.2006 was determined at ₹ 1,71,14,720/-. The appeal of the assessee before the Commissioner of Income-tax (Appeals) also met with the same fate and accordingly, assessee is in appeal before us. 4. In the above background, the rival parties have made their submissions. The assessee has filed voluminous Paper Book containing details o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with effect from 1.4.2005 by way of Finance (No.2) Act, 2004. The plea raised is that prior to its substitution, section 80IB(10) of the Act did not provide for any restriction on the area earmarked for commercial purposes in a housing project. The Legislature has imposed the ceiling of 2000 sq.ft. or 5% of the total area whichever is less in relation to commercial area only by the Finance (No.2) Act, 2004 and it has been vehemently pointed out that such restriction cannot be applicable to the projects which have commenced prior to the assessment year 2005-06, inasmuch as the law as applicable at the time of commencement of such project did not contain such a restriction. Therefore, it is sought to be made out that the condition prescribing for a restriction on commercial area has been wrongly invoked by the authorities in the present case and in fact, it has been canvassed that the Hon ble Bombay High Court in the case of CIT v Brahma Associates 333 ITR 289 (Bom) has upheld the proposition that such amended provisions cannot be applied with retrospective effect and that the same would be applicable with effect from 1.4.2005 alone and cannot be applied for the period prior to 1.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also been sought to be pointed out by the appellant, as is also emerging from page 1 of the Paper Book, that the proportion of the commercial area to the total area of the project was less than 2%. It is also not in dispute that the project commenced on 13.10.2000 as noted by the Assessing Officer at page 12 of the assessment order and that the same was also completed prior to 31.3.2005 and to be precise the date of completion of the project has been stated as 31.12.2004, as evident from page 1 of the Paper Book filed before us. 9. Now, we may refer to clause (d) to section 80-IB(10) of the Act, which has been inserted by the Finance (No 2) Act, 2004 with effect from 1.4.2005 which reads as under: (d) - the built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less. In terms thereof, the case of the Revenue is that firstly the said amendment, though applicable from 1.4.2005 seeks to show that the meaning of the expression housing project has to be understood as a purely residential project not involving a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been approved by the local authority as a residential cum commercial project, therefore, the same qualifies to be seen in the same manner as seen by the Hon ble Bombay High Court in the case of Brahma Associates (supra). Therefore, in this view of the matter, the plea of the Revenue for the assessment year 2004-05 is untenable. 11. Now, we may deal with the Revenue s aforesaid objection with regard to the DSK Vishwa Project III for the A.Y. 2005-06. As per the Revenue, Clause (d) of Sec. 80 IB (10) is inserted w.e.f. 1.4.2005 prescribing restriction on the presence of commercial area in a housing project, and as the commercial area in this case, being 6232 Sq.ft., exceeds the restriction contained in 80 IB (10)(d), therefore, for A.Y. 2005-06, the deduction is not allowable. In this context, the issue is as to whether the restriction contained in Sec. 80 IB (10)(d), inserted by the Finance (No.2) Act, 2004 w.e.f. 1.4.2005, can be made applicable to a project wherein the construction commenced prior to 1.4.2005. It has been pointed out that similar controversy was a subject matter of consideration by Pune Bench of the Tribunal in the case of Opel Shelters Pvt. Ltd. (ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n coming to such conclusion, the Assessing Officer has differred with assessee on three counts. Firstly, as per Assessing Officer, the area covered by balconies and terraces was includible while calculating the built- up area of the residential units. Secondly, as per the Assessing Officer, the area covered by the car parking provided to occupier of each tenement was also includible for the purpose of calculating built- up area of a residential unit. Thirdly, as per the Assessing Officer, the assessee had combined four flats in each wing into two duplex flat on 11th floor and the area of such combined flats have to be considered. Accordingly, the Assessing Officer has considered the built-up area of such flats by combining the two flats in terms of which the built-up area exceeded 1500 sq. ft. For the above three reasons, as per the Assessing Officer, the residential units of the assessee did not meet with the requirements of clause (c ) to Sec. 80 IB (10) of the Act and, therefore, deduction u/s. 80 IB (10) was denied in relation to the project DSK Frangipani. The stand of the Assessing Officer has been affirmed by the CIT(A), against which, the assessee is in appeal before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that such flats are considered as separate flats by the Municipal authority, and therefore, their built- up area has to be considered individually and not after combining the same. The Ld. Counsel pointed out that even if the plea of the Assessing Officer is to be upheld, the deduction u/s. 80 IB (10) be granted in respect of the flats upto the 10th floor and it be denied only in relation to the combined flat on the 11th floor and therefore, the claim of deduction cannot be not denied in entirety. For the aforesaid proposition, reliance has been placed on the following decisions : (1) M/s. Ekta Housing Pvt. Ltd., ITA No. 3649/Mum/2009, order dated 20th May 2011 (2) Sanghavi Joshi, 139 ITD 151, Chennai ( TM) (3) Bengal Housing Development Ltd. Vs. DCIT, ITA No. 1595/KOL/2005 dated 24.3.2006 17. On the other hand, the Ld. D.R. appearing for the Revenue has contested the plea of the assessee by pointing out that the assessee is not entitled to a proportionate deduction, in as much as the project, as a whole, has to be considered and if the condition is not fully complied with, the deduction shall be denied on the entire project. 18. We have carefully considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a multi storied stilt flooring space constructed under a building is allowed to be used as a parking subject to height restrictions. In terms thereof, it is sought to be made out that the area of car parking is specifically excludible while calculating built- up area as per the Development Control Rules and therefore, the Assessing Officer was wrong in considering such area for the purpose of computing built- up area of the residential units. A bare perusal of the Development Control Rules, in our view, supports the assertions put forth by the assessee and therefore, the area of car parking is not to be includible for the purposes of computing built- up area of residential units in the facts and circumstances of the present case. 19. Now, we may take up for consideration the third objection of the Revenue with regard to the four flats in each wing which have been combined into two duplex flats on 11th floor whereby upon combining the two flats, the area exceeded the limit of 1500 Sq.ft. In this connection, we find that the Assessing Officer has concluded, after carrying out a survey that two adjoining flats were combined into one unit in as much as there was no sepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Hon ble Bombay High Court in the case of Brahma Associates (Supra) and held that the same does not envisage denial of proportionate deduction in such circumstances. The relevant discussion, as contained in paragraphs 8 9 of the order of the Tribunal in the case of M/s Ekta Housing Pvt. Ltd. reads as under : viii) We now examine the applicability of the decision of the Hon ble Bombay High Court in Brahma Associates (supra) to the facts of this case. On a careful reading of this judgment, we find that nowhere it is stated that proportionate deduction should not be allowed, in case certain residential units had built up area in excess of prescribed limit of 1,000 sq.ft. In fact, this issue was not before the Hon ble Jurisdictional High Court. The questions before the Hon ble Jurisdictional High Court were different and, hence the judgment cannot be said to be on this issue. The only issue before the High Court is when there is a commercial element in a residential project, will be assessee be denied the entire exemption. In this case, the Hon ble High Court has observed that when the local authority approved a plan as a housing project or a residential cum commercial p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the entire project, in the facts of the present case, since the assessee has not challenged the decision of the Tribunal, we are not inclined to disturb to disturb the decision of the Tribunal in restricting the section 80IB(10) deduction only in respect of the profits derived from 15 residential buildings. ix) Thus, it could be seen that the Hon ble High Court do not approve the findings of the Tribunal that a residential building with commercial user up to 10% of the plot area would alone be entitled to deduction under section 80IB(10). The issue that, in case where certain residential units are of a built up area in excess of the prescribed limit of 1,000 sq.ft. in residential project, this would result in the entire exemption being lost, or whether the assessee would be entitled to a proportionate deduction was not before the High Court. Thus, in our opinion, the decision of Hon ble Jurisdictional High Court in Brahma Associates (supra) does not come to the rescue of the Revenue. 22. Following the aforesaid precedent, we, therefore, hold that merely because the assessee has violated the condition u/s. 80 IB(10)(c ) in relation to the flats on the 11th floor, the dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
