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Income Tax Officer, Ward-2, Ratnagiri And Others Versus M/s. Paras Builders And Others

2015 (6) TMI 286 - ITAT PUNE

Pro-rata deduction u/s 80IB - whether there is no provision for allowing such partial deduction in terms of provisions of section 80IB(10)? - Held that:- Following the ratio laid down in the case of Pharande Developers, Vs. The Income Tax Officer [2013 (6) TMI 690 - ITAT PUNE] 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 denied in entire .....

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ect by limiting the denial only in respect of row houses D-3 and D-4 and for the balance units the assessee would be entitled to the said deduction under section 80IB(10) of the Act. Thus, the grounds of appeal raised by the Revenue are dismissed. - Decided in favour of assessee - ITA No. 583/PN/2013, CO No. 16/PN/2014 - Dated:- 31-3-2015 - G. S. Pannu, AM And Sushma Chowla, JM,JJ. For the Appellant : Shri Sunil Ganoo For the Respondent : Shri A K Modi & Shri B C Malakar ORDER Per Sushma Cho .....

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ounds of appeal:- 1. In facts and circumstances of the case, and in law, the Hon'ble CIT(A) is not justified in accepting the assessee's claim of "pro-rata" deduction u/s 80IB of the Act, when there is no provision for allowing such partial deduction in terms of provisions of section 80IB(10) of the Act. 2. On the facts and in the circumstances of the case, and in law, the CIT (A) is not justified in accepting the assessee's claim to allow piece-meal deduction, when the pro .....

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contemplated. 4. The appellant prays that the order of the Commissioner of Income-tax (Appeals), Kolhapur be vacated and that of the Assessing Officer be restored. 5. The appellant craves leave to add, alter, amend, raise, any of the above, or any other grounds raised. 4. The assessee in CO No.16/PN/2014 has raised the following grounds of objections:- 1. In the facts and circumstances of the case and in law, the learned C.I.T.[A] who passed the impugned appellate order has acting as Commissione .....

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ng the deduction in respect of profits arising on sale of Unit Nos.D3 & D4 on the alleged ground that the said tenements did not comply with the statutory requirements. The aforesaid finding being arbitrary, perverse, and devoid of merits the same may please be vacated. 3. The Respondent assessee craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of cross objections, if deemed necessary at the time of hearing of the 5. The issue raised by the Re .....

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yat, which revealed that two row units i.e. D-3 and D-4 in Plot Nos.37 and 38 had been converted into one row bungalow and its built up area was 1871 sq. ft. On further enquiries, the Assessing Officer observed that the assessee had constructed and sold one independent row bungalow having plot size of 1754 sq. ft. and built up area 1871 sq. ft. for ₹ 12,00,000/-, which was not as per the approved plan of the local authority. The Assessing Officer further observed that the unit under consid .....

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e show-cause issued by the Assessing Officer in this regard pointed out that the building was constructed as per revised sanctioned plans and hence, had complied with the conditions laid down under section 80IB(10) of the Act. In respect of two units i.e. D-3 and D-4, the claim of the assessee was that it had constructed independent units which had been amalgamated by the buyer and hence, the assessee was entitled to the claim of deduction under section 80IB(10) of the Act in entirety. In the al .....

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es of the decisions of the various Benches of the Tribunal i.e. Mr. Johar Hassan Zojwall Vs. Addl. CIT [IT Appeal No. 5404 (Mum.) of 2008, dated 12.01.2011, M/s. Saroj Sales Organisation ITA No. 4008/M/07 order dated 24.01.2008 and Bengal Ambuja Housing Development Ltd. Vs. DCIT [ITA No. 1595/Kol/2005, assessment year 2002-03], Bench 'C' order dated 24.03.2006. All the said decisions had laid down the proposition that even as the constructed units were small and large with reference to t .....

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Enterprise Vs. ITO (2011) 12 taxmann.com 240 (Chennai) (TM) and it was held that even construction of one unit in respect of the row houses D-3 and D-4 would not affect the claim for deduction under section 80IB(10) of the Act on pro-rata basis. 8. The Revenue is in appeal against the order of CIT(A). The Ld. DR for the Revenue placed reliance on the order of the Assessing Officer. 9. The Ld. AR for the assessee placed reliance on the ratio laid down in the Pune Bench of the Tribunal in the cas .....

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units constructed in the project. Admittedly, after merging of the two units i.e. row houses D-3 and D-4, the total covered area was more than 1500 sq. ft. which is the condition stipulated in section 80IB(10)(c) of the Act. The assessee had violated the said condition while constructing the said units in project "Pushpendranagar". However, the alternate claim made by the assessee was that pro-rata deduction should be allowed to the assessee in respect of the balance eligible units co .....

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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) wherein the following discussion is relevant :- "20. In this background, the alternative plea of the assessee springs up. The plea is that the deduction under Section 80-IB(10) be denied only with respect to the units which do not conform to the condition contained in Sectio .....

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some of the residential units in the project violated the condition contained in Section 80-IB(10)(c) of the Act. The Mumbai Bench after noticing the precedents in the case of - i) ITO vs. Air Developers, 25 DTR 287 (Nag.); ii) DCIT vs. Brigade Enterprises Pvt. Ltd., 14 DTR 371 (Bang.); iii) ACIT vs. Sheth Developers P. Ltd., 33 SOT 277 (Mum.) iv) Bengal Ambuja Housing Development Ltd. vs. DCIT; v) SJR Builders vs. ACIT, 3 ITR 569 (Mum.) held that the assessee would not loose the exemption unde .....

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of proportionate deduction in such circumstances. The relevant discussion, as contained in paragraphs 8 and 9 of the order of the Tribunal in the case of M/s Ekta Housing Pvt. Ltd. (supra) 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 judgement, we find that nowhere it is stated that proportionate deduction should be allowed, in case certain .....

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ved 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 pl .....

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uction under Section 80-IB(10). As noted earlier, restriction regarding commercial user has been imposed for the first time by introducing clause (d) to Section 80-IB(10) with effect from 01.04.2005. Therefore, it was not open to the Tribunal to hold that prior to 01.04.2005, projects having commercial user upto 10% of the plot area alone would be eligible for Section 80-IB(10) deduction. 28. In the present case, though the commercial user is more than 10% of the plot area, the Tribunal has allo .....

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ority and there is no question of allowing deduction to part of the project. In the present case, the commercial user is allowed in accordance with the DC Rules and hence the assessee was entitled to Section 80-IB(10) deduction on the entire project approved by the local authority. However, the assessee has not challenged the decision of the Tribunal in restricting the deduction to a part of the project. Therefore, while holding that in law, the assessee was entitled to section 80-IB(10) deducti .....

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area would be entitled to deduction under section 80-IB(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 the case of Brahma Associates (supra) does not come .....

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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 amalgamated Bunglow G1 & G2 alone. For balance of .....

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ance, section cannot be interpreted to granted pro rata relief. The aforesaid argument of the Revenue has been negated by the Hon'ble Madras High Court and therefore the claim of the assessee for proportionate deduction under Section 80-IB(10) of the Act cannot be denied. 12. Thus, on the aforesaid aspect, assessee succeeds and we direct the Assessing Officer to re-compute the deduction under Section 80- IB(10) of the Act in relation to the 'Lakshdweep' project by limiting the denial .....

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entitled to the said deduction under section 80IB(10) of the Act in respect of balance units which have been constructed as per the conditions laid down in section 80IB(10)(c) of the Act. Only in respect of two units i.e. D-3 and D-4, deduction under section 80IB(10) of the Act would be denied to the assessee. Accordingly, we uphold the order of CIT(A) in directing the Assessing Officer to re-compute the deduction under section 80IB(10) of the Act in relation to the said project by limiting the .....

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by the assessee is that there was violation of judicial propriety as the CIT(A) who had passed the impugned appellate order, had acting as Commissioner of Income Tax Administration authorized the present appeal as appellant. The Ld. AR for the assessee pointed out that after passing of the appellate order, the Commissioner of Income Tax Administration who was earlier the CIT(A) in the case of the assessee, had asked the Assessing Officer to file the appeal against his own order. Where the CIT h .....

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t in Ashok Kumar Yadav And Others Vs. State of Haryana And Others reported in 1985-(SC2)-GJX-0211-SC judgment dated 10.05.1985, copies of which were filed on record. 14. The Ld. DR for the Revenue on the other hand pointed out that the appellate authority had acted judicially in deciding the appeal but when he was the Commissioner of Income Tax Administration, he further acted judicially and proposed the filing of the appeal before the Tribunal. Our attention was drawn to the order sheet entries .....

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ellate Tribunal against the said order. In the facts of the present case, the Commissioner of Income Tax (Appeals) had passed the impugned appellate order and thereafter acting as Commissioner of Income Tax Administration has authorized the Assessing Officer to file an appeal against the said order, which was passed by him in the capacity of Commissioner of Income Tax (Appeals). The plea of the assessee that there was judicial impropriety in the case was not established, where the present Commis .....

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setting in judgment of the earlier order passed by him but was acting in the capacity of administrator wherein the issues were put before higher forum to adjudicate the same. 16. The reliance by the Ld. AR for the assessee on the ratio laid down by the Allahabad High Court in the case of Mohd. Chand And Another (supra) is misplaced as in the facts before the Hon'ble High Court, the person who had passed the basic order was later sitting in appeal and was hearing the appeal against his own or .....

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