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2015 (5) TMI 401 - ITAT PUNE

2015 (5) TMI 401 - ITAT PUNE - TMI - Disallowance of the claim u/s 80IB(10) - assessee had claimed the deduction under section 80IB(10) of the Act against the sale proceeds of residential project ‘Daffodil Avenue’ - Held that:- As relying on Siddhivinayak Kohinoor Venture Vs. ACIT [2013 (10) TMI 1295 - ITAT PUNE ] merely because the assessee had not completed the building No.D within prescribed time under the provisions of Act, the deduction under section 80IB(10) could not be denied in entirety .....

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Shri G.S. Pannu And Ms. Sushma Chowla JJ. For the Appellant : Shri V.L. Jain For the Respondent : Shri B.C. Malakar 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 ₹ .....

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ounds 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 development and builders. During the year under consideration, the assessee had offered a sum of ₹ 7,06,90,849/- as income from business and had claimed the deduction under section 80IB(10) of the Act declar .....

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e layout. As per the revised layout, one more building No.D was included in the project. The Assessing Officer during the course of assessment proceedings, noted the conditions which had to be fulfilled while claiming the deduction under section 80IB(10) of the Act and the same were enumerated under para 6 at page 4 of the assessment order. The Assessing Officer made certain enquiries from the Pune Municipal Corporation under the provisions of section 133(6) of the Act. The Assessing Officer als .....

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, the assessee was found to have failed to satisfy the pre-condition of minimum area of one acre as envisaged under clause (b) of section 80IB(10) of the Act. 5. The second disqualification of the assessee, noted by the Assessing Officer was that as the first commencement certificate was issued by the local authority on 31.10.2005, the housing project was supposed to be completed within five years from the end of the financial year, in which the first commencement certificate was obtained i.e. o .....

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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 .....

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e order of Assessing Officer observing as under:- 5.7 From the above stated discussion it is seen that the housing project of the appellant which was approved initially on 31.10.2005 was to be completed within 5 years from the end of the financial year in which the housing project was first approved by the local authority viz. by 31.3.2011. A perusal of sec.80IB(10)(a) which was introduced by the Finance Act 2004 w.e.f. 1.4.2005 shows that there are specified time limits for completion of the de .....

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lowing deduction u/s 80IB(10) of the Act is upheld. Grounds of appeal No.1 and 2 are dismissed. 7. The assessee is in appeal against the said denial of deduction under section 80IB(10) of the Act. The learned Authorized Representative for the assessee pointed out that the project was originally sanctioned on 31.10.2005 comprising of building Nos. A, B and C. Thereafter, the plans of the buildings were revised on 26.03.2007 and building D was added for the first time. The learned Authorized Repre .....

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ng over of possession of the completed units prior to 31.03.2011. Even the electricity bills in respect of the flats in building D had been raised in the names of flat owners prior to 31.03.2011. However, the final completion certificate for the building D was issued 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 unde .....

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aised 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 pointed out that the assessee s claim that buildin .....

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at page 66 of the Paper Book and also the English transaction of the said letter under para 8.4 of assessment order in which, the PMC clearly certified that the building D was not completed. 9. The learned Authorized Representative for the assessee pointed out that there was an alternate plea that prorata claim of deduction under section 80IB(10) of the Act in respect of buildings A, B and C should be allowed to the assessee. It was further pointed out by the learned Authorized Representative f .....

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arned Authorized Representative for the assessee was the fact that the assessee had not envisaged the construction of building in first phase, the construction of building No.D was separate. As per the learned Authorized Representative for the assessee, where there was no plan for building No.D initially, the same should be considered separately and allowed deduction under section 80IB(10) of the Act, in view of the ratio laid down in DCIT Vs. Aditya Developers in ITA Nos.791 & 792/PN/2008, .....

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essee 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 th .....

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i.e. 0.9654 acres, which was less than one acre. The plea of the learned Authorized Representative for the assessee before us in this regard was that initially the Assessing Officer had taken note of the factum of area of land, but while completing the assessment, the only addition made in the hands of the assessee was for non-completion of project vis-à-vis building No.D. Our attention was drawn to the concluding paras of the assessment order and it was pointed out that the explanation w .....

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have perused the building plans and we find merit in the plea of the assessee in this regard. 11. The issue on which the deduction under section 80IB(10) of the Act was denied to the assessee, the disqualification as envisaged under clause (a) to section 80IB(10) of the Act. The said clause provides the time limit within which, the housing projects have to be completed in view of the date of sanctioning of projects by the local authority. The assessee had received the first commencement certifi .....

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that it had received the completion certificate of building Nos.A, B and C before prescribed date under the Act i.e. 31.03.2011. In respect of building No.D, the first plea of the assessee was that the building No.D had been physically completed before 31.03.2011 as is evident from the Architecture Certificate. Further, the sale of all units of building No.D have been recognized in financial year 2010-11, which in turn confirms the handing over the possession of the said units prior to 31.03.201 .....

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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, w .....

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was placed on the ratio laid down by Pune Bench of Tribunal in M/s. Siddhivinayak Kohinoor Venture Vs. ACIT in ITA Nos.1112 & 1527/PN/2011, relating to assessment years 2006-07 and 2007-08, vide order dated 31.10.2013 for the proposition that even a building or a group of buildings comprised in larger projects approved by local authority can be construed as a housing project for the purpose of deduction under section 80IB(10) of the Act. Another reliance was placed on the ratio laid down by .....

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ng the conditions under section 80IB(10) of the Act and the assessee would be entitled to the relief on proportionate basis. 13. In the alternate, the plea raised by the learned Authorized Representative for the assessee was that it was entitled to the pro-rata deduction in respect of building Nos.A, B and C, which were completed before the due date. After going through the facts of the case, we find that the building plans for the project comprising of building Nos.A, B and C were sanctioned on .....

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g Nos.A, B and C. Thereafter, certain changes were carried 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 lo .....

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ase 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 the end of financial year in which the first commencement certificate was obtained i.e. on or before 31.03.2011. The assessee received part completion certificate for the building Nos.A, B and C before the due date i.e. 31.03.2011. However, as per .....

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r certificate was from Mr. Zuber Rashid Shaikh of Space Designers Syndicate dated 15.03.2011, who in respect of building No.D of Daffodil Avenue stated that the construction upto plinth level had been completed at the above mentioned site as per the permit commencement certificate dated 11.12.2009. It further stated that the plinth may be checked and permission be given to proceed with further work. Both these communications which are issued in the month of March, 2011 confirm that the building .....

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ng Officer, copies of which are annexed as Annexure B to E to the assessment order, we find no merit in the plea of the assessee that the building No.D had been completed much before 31.03.2011, in view of the architect s certificate confirming the completion by 31.03.2011. The assessee has further stated that no deduction under section 80IB(10) of the Act has been claimed in the current year as income from sale of units in building D has been accounted for in subsequent periods. 14. Now, coming .....

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m 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 jud .....

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nder Section 80- IB(10) be denied only with respect to the units which do not conform to the condition contained in Section 80-IB(10)(c) and for the balance eligible residential units, the deduction should be allowed. The Revenue has opposed the said plea on the ground that the assessee is not entitled to a proportionate deduction under Section 80-IB(10) of the Act. 21. On this aspect, we find that the Mumbai Bench of the Tribunal in the case of M/s Ekta Housing Pvt. Ltd., ITA No.3649/Mum/2009 d .....

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lopment Ltd. vs. DCIT; v) SJR Builders vs. ACIT, 3 ITR 569 (Mum.) held that the assessee would not loose the exemption under Section 80-IB(10) in entirety where some of the residential units wings had a built-up area in excess of the limit prescribed in clause (c) of Section 80-IB(10) but, it would be entitled to proportionate deduction under Section 80-IB(10) of the Act with regard to the profits earned on the eligible units. Particularly, the Tribunal also considered the decision of the Hon bl .....

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we find that nowhere it is stated that proportionate deduction should 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 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 .....

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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 to hold that the projects approved by the local authorities having residential build .....

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hough the commercial user is more than 10% of the plot area, the Tribunal has allowed Section 80-IB(10) deduction in respect of 15 residential buildings on the ground that the profits from these exclusively residential buildings could be determined on stand along basis. In our opinion, that would not be proper, because Section 80-IB(10) allows deduction to the entire project approved by the local authority and not to a part of the project. If the conditions set out in Section 80- IB(10) are sati .....

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, while holding that in law, the assessee was entitled to section 80-IB(10) deduction on the profits 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 the decision of the Tribunal in restricting the section 80-IB(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 Tribuna .....

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onal 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 .....

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the amalgamated Bunglow G1 & G2 alone. For balance of the residential units, which complied with the requirements of clause (c) of Section 80-IB(10) of the Act, assessee shall be eligible for deduction. The Hon ble Madras High Court in the case of Arun Excello Foundations (P) Ltd. vs. CIT (2013) 29 taxmann.com 149 (Madras) considered an argument on behalf of the Revenue, similar to what has been argued before us, to the effect that in the absence of any contemplation under Section 80-IB(10) .....

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kshdweep project by limiting the denial only to the profits in respect of Bunglow G1 & G2. For balance of the residential units, assessee shall be allowed deduction under Section 80-IB(10) of the Act. 11. Following the aforesaid ratio laid down by the Pune Bench of the Tribunal (supra) we hold that merely because the assessee had violated the provisions of section 80IB(10)(c) of the Act in respect of two units i.e. row houses D-3 and D-4, the deduction under section 80IB(10) could not be den .....

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