TMI Blog2015 (5) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER Per Sushma Chowla, JM: This appeal filed by the assessee is against the order of CIT(A)-I, Pune dated 06.11.2012 relating to assessment year 2009-10 passed under section 143(3) of the Income-tax Act. 2. The assessee has raised the following grounds of appeal: 1. The learned CIT(A) has erred on facts and in law in confirming the disallowance of the claim u/s 80IB(10) of ₹ 7,06,90,849/-for our project Daffodils Avenue . 2. Without prejudice to Ground No.1 above, the learned CIT(A) has erred on facts and in law in not granting the claim u/s 80IB(10) in relation to the project comprising of Buildings A, B and C. 3. Without prejudice to Ground Nos.1 and 2 above, the learned CIT(A) has erred on facts and in law in not granting a pro-rata claim in relation to the eligible portion of the project. 4. The appellant craves leave to amend or alter any of the grounds of appeal or add to the same if deemed necessary. 3. The issue raised in the present appeal is with regard to the claim of deduction under section 80IB(10) of the Act. 4. The brief facts of the case are that, the assessee was a partnership firm engaged in the activity of property develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not completed as on 31.03.2011. Reliance was placed in this regard on the documents received from the PMC under section 133(6) of the Act which indicated that the construction work of building No. D had commenced and only plinth level was completed around the date of certificate i.e. 18.03.2011, 21.03.2011 and 15.03.2011. Further confirmation was received from the PMC dated 26.12.2011 in which it was pointed out that as per the sanctioned lay out dated 26.03.2007, part completion certificate for buildings A, B and C of the housing scheme was given. However, the construction work of building D of the said project as on 31.03.2011 was not completed and the completion certificate for the said building D in the final completion certificate had not been given. The assessee was show caused and asked to explain as to why the deduction claimed under section 80IB(10) of the Act in view of the second disqualification, should not be disallowed. The reply of the assessee is reproduced under para 10, pages 8 and 9 of the assessment order and in view of the assessee not possessing the final completion certificate and also the completion certificate for building D , the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued on 15.03.2012 by the local authority. The learned Authorized Representative for the assessee pointed out that since the plan for building D had been sanctioned on 29.03.2007, the expected date of completion of the said building under the provisions of section 80IB(10) of the Act was 31.03.2012. However, the buildings A to C were completed within stipulated time and there was no merit in the disallowance of the claim of deduction under section 80IB(10) of the Act. The learned Authorized Representative for the assessee placed reliance on series of decisions for the proposition that there is no requirement of completion of certificate for allowing the claim of deduction under section 80IB(10) of the Act. Another proposition raised by the learned Authorized Representative for the assessee that the meaning of the word housing project . As per the learned Authorized Representative for the assessee, the buildings A to D were not one project as the building D was not part of the commencement certificate sanctioning construction of buildings A, B and C. Our attention was drawn to series of case laws on this issue. 8. The learned Departmental Representative for the Revenue point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee before us is in appeal against the denial of deduction under section 80IB(10) of the Act. During the year under consideration, the assessee had claimed the deduction under section 80IB(10) of the Act against the sale proceeds of residential project Daffodil Avenue . The assessee claims that there were certain changes in the lay out plan and the building plans were revised along with the revision of layout plans and one more building No.D was envisaged for construction on the said piece of land. During the course of assessment proceedings, the Assessing Officer made certain enquiries from the Pune Municipal Corporation under the provisions of section 133(6) of the Act. The Assessing Officer also visited the site of the assessee on 18.11.2011 and noted that there were certain alterations and deviations in the original structure of the plan. Another issue noted by the Assessing Officer was that the plot area of the land as per original sanctioned plan was 4638.65 sq. mtrs. However, the revised area of the plot was 3443 sq. mtrs., and after adding open space of 463.86 sq. mtrs., the total plot area was 3906.86 sq. mtrs. i.e. 0.9654 acres, which was less than one acre. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... session of the said units prior to 31.03.2011. Even the electricity bills have been raised in respect of said flats in building No.D in the name of other purchasers prior to 31.03.2011. The Assessing Officer on the other hand, had received the information from PMC that the construction work of building No.D of the said project was not completed as on 31.03.2011 and the completion certificate for the said building was issued on 15.03.2012. The deduction under section 80IB(10) of the Act was denied to the assessee, in view of non-completion of the building No.D by 31.03.2011. 12. The first plea raised by the assessee in this regard was that building Nos. A, B and C constitute one project and building No.D comprised another project and the completion date of both the projects were different as the date of commencement of both the projects were different. As per the assessee, building plans for Building Nos.A, B and C were issued by the local authority on 31.10.2005 and the assessee was to complete the said building by 31.03.2011, which had been completed and hence, the assessee was eligible for deduction under section 80IB(10) of the Act. Further, the building No.D was first sancti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried out and commencement certificate dated 29.03.2007 and 11.12.2009 were issued to the assessee, as per which one more building No.D was included in the project. Under the provisions of section 80IB(10)(a) of the Act, where an undertaking had commenced or developed and construction of the housing project on or after 1st day of October, 1998, then the said project is to be completed in a case where housing project has been approved by the local authority on or after 1st day of April, 2004, within four years from the end of financial year, in which the housing project is approved by the local authority. The explanation under section 80IB(10)(a) of the Act further provides that in a case where the approval in respect of the housing project is more than once, then such housing project shall be deemed to have been approved on the date on which the building plan of such housing project was first approved by the local authority. In the case of assessee, the project was approved by the local authority on 31.10.2005 and in case, the explanation under section 80IB(10)(a) of the Act is to be applied, then the assessee is supposed to complete the said housing project within five years from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate has been received prior to 31.03.2011 i.e. the stipulated date within which the said project had to be completed. We find merit in the alternate plea raised by the assessee that where building Nos.A, B and C have been completed before the stipulated date, the assessee is entitled to the pro-rata deduction in respect of profits earned from building Nos.A, B and C. We find support from the ratio laid down by the Pune Bench of the Tribunal in the case of Pharande Developers Vs. The Income Tax Officer in ITA No. 715/PN/2009 and ITA No. 175/PN/2011 relating to assessment year 2005-06 order dated 25.06.2013 and in turn reliance was placed on the ratio laid down by the Pune Bench of the Tribunal in the case of D.S. Kulkarni Developers Ltd. Vs. ACIT in ITA Nos. 1428 1429/PN/2008, order dated 08.08.2012 and also the subsequent judgment of the Hon'ble Madras High Court in the case of Viswas Promoters (P) Ltd. (2013) 29 taxman.com 19 (Madras) and it was held as under:- 10. On this aspect, we have considered the plea of the assessee in the light of the precedents. A similar situation has been considered by this Bench in the case of D.S. Kulkarni Developers Ltd. (supra) where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Jurisdictional High Court. The questions before the Hon ble Jurisdictional High Court were different and, hence the judgement 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 project, the assessee would be entitled to claim for deduction under Section 80-IB(10) even if the project had commercial element in excess of 10%. At paras 27 and 28, the Court observed as follows :- 27. The question then to be considered is, whether the Special Bench of the Tribunal was justified in holding that the projects having commercial area upto 10% of the built-up area of the plot are eligible for deduction under Section 80- IB(10) on the entire project upto 01.04.2005. Once the basic argument of the revenue that the housing projects with commercial user are not entitled to Section 80-IB(10) deduction is rejected, then in the absence of any restriction imposed under the Act, it was not open to the Tribunal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 the case of 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 under Section 80-IB(10)(c) in relation to the flats on the 11th floor, the deduction under Section 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 under Section 80-IB(10) of the Act is justified, and the assessee succeeds on this aspect. 11. Following the aforesaid precedent, we hold that merely because assessee violated the condition prescribed under Section 80-IB(10)(c) of the Act in relation to the amalgamated Bunglow G1 G2, the deduction under Section 80-IB(10) of the Act cannot be denied in its entirety. In other words, the denial of deduction shall be limited to the profits in respect of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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