TMI Blog2013 (6) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... 005-06 is set-aside and the Assessing Officer is directed to re-compute the assessee’s claim for deduction under Section 80-IB(10) on the aforesaid lines. Disallowance made under Section 40(a)(ia) - Held that:- The only source of profits declared by the assessee during the year is from undertaking development of its housing project ‘Lakshdweep’. Therefore, even if the expenditure of ₹ 5,22,600/- is found to be not allowable on account of Section 40(a)(ia) of the Act as assessee has not complied with the requirements of deducting/depositing the TDS, it cannot be denied that such disallowance ultimately increases the profits of the assessee derived from its housing project ‘Lakshdweep’. According to the parity of reasoning laid down by the Hon’ble Gujarat High Court in the case of Keval Construction (2013 (7) TMI 291 - GUJARAT HIGH COURT) the aforesaid profit reflected by the disallowance under Section 40(a)(ia) of the Act, qualified for deduction under Section 80-IB(10) of the Act in the present case. Thus, on this aspect, assessee has to succeed. - Decided in favour of assessee. - ITA No.715/PN/2009, ITA No.175/PN/2011 - - - Dated:- 25-6-2013 - SHRI G.S. PANNU AND SHRI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mistake and immediately our partnership firm filed an appeal before the Hon. Income Tax Appellate Tribunal, Pune on 09.02.2011 with an application for condonation of delay of about 114 days in filing the said appeal. 7. Since due to my serious lapse and mistake our partnerships firm had been put to serious inconvenience and prejudice, I was feeling ashamed of myself and had immense guilty feeling as a result of which I voluntarily retired from the said partnership firm w.e.f. 01.04.2011. 8. That this affidavit is executed for filing the same before the Hon. Income Tax Appellate Tribunal, Pune in the matter of condonation of delay in filing the appeal for the A.Y. 2006-07. 3. The learned counsel explained that it was for mere inadvertence, this appeal could not be filed in time and the primary reason for the same was the shifting of the office from one place to another during the relevant period. Nevertheless, the entire circumstances have been explained by the partner in 3 its affidavit and as per the learned counsel having regard to the judgement of the Hon ble Supreme Court in the case of Collector of Land Acquisition vs. Mst. Katiji Others (1987) 167 ITR 471 (SC) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, in the interest of justice, we condone the delay of 114 days in filing of the present appeal. 6. Now, we may take-up the two substantive disputes raised in the captioned appeals. In both the appeals, the primarily issue relates to the deduction claimed by the assessee under Section 80-IB(10) of the Act which has been denied by the income-tax authorities. In order to appreciate the controversy and the factual aspects, we may take-up for discussion, the appeal of the assessee in ITA No.715/PN/2009 for assessment year 2005-06. The appellant-assessee is firm engaged in the business of development of land, construction of building and sale thereof. For the assessment year 2005-06, assessee claimed deduction under Section 80-IB(10) of the Act amounting to ₹ 65,26,760/- in relation to the profits derived from the development and construction of housing projects. The assessee had undertaken development and construction of two housing projects namely, (i) Lakshdweep and (ii) Samarth Nagari . The Assessing Officer denied the benefit of deduction under Section 80-IB(10) of the Act in relation to the profits derived from both the projects and the same has since been uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there was no evidence to substantiate the aforesaid position and therefore it may be taken that the amalgamated Bunglow namely G1 G2 consisted of built-up are of 1794 sq.ft., which was in excess of the limit prescribed in clause (c) of Section 6 80-IB(10) of the Act. However, according to the learned counsel, the aforesaid violation in the built-up area of the amalgamated Bunglow G1 G2 would not lead to wholesome denial of deduction under Section 80-IB(10) of the Act with respect to the Lakshdweep project. It was pointed out that in such a situation deduction under Section 80-IB(10) of the Act be denied only with respect to the profits attributable to the units not complying with the condition contained in Section 80-IB(10)(c) of the Act and for the balance eligible units contained in the project, the deduction should be allowed. In other words, as per the assessee the deduction should be allowed in proportion to the eligible units contained in the project. In support of the aforesaid, reliance has been placed on the decision of the Pune Bench of the Tribunal in the case of D.S. Kulkarni Developers Ltd. vs. ACIT in ITA Nos. 1428 1429/PN/2008 dated 08.08.2012 and also th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same does not envisage denial 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 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 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-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Tribunal that a residential building with commercial user up to 10% of the plot 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 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a and after including the same the built-up area came to 1687 and 1683 sq.ft. Accordingly, the project Samarth Nagari was also held to be ineligible for the claim of deduction under Section 80-IB(10) of the Act, which has also been sustained by the CIT(A). 14. On the aforesaid aspect, the learned counsel submitted that the Assessing Officer as well as the CIT(A) have understood the expression builtup area on the basis of the definition contained in Section 80-IB(14)(a) of the Act. Section 80-IB(14)(a) of the Act defines built-up area to mean the inner 10 measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units. Learned counsel submitted that the aforesaid definition of built-up area was inserted by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005. According to the assessee, the said definition has included the area covered by projections and balconies in the expression built-up area but the same should be applicable to only such projects which have been approved on or after 01.04.2005 i.e. the date from which such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2005, the expression built-up area has to be understood in the context of the relevant Development Control Rules of the local authority. The insertion of the definition of the builtup area in Section 80-IB(14)(a) by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005 was held to be prospective in nature and not applicable for the evaluating the claim of deduction under Section 80-IB(10) of the Act in relation to projects approved by the local authority prior to 01.04.2005. Following the aforesaid precedent, as in the present case the Samarth Nagari project of the assessee has been approved by the local authority prior to 01.04.2005, the built-up area of the units is required to be calculated as per the relevant Development Control Rules of the local authority and on that basis the area covered by canopy and balcony are not includible. In view of the aforesaid position, the objection of the Assessing Officer, in our view is untenable. 17. Accordingly, the order of the CIT(A) for assessment order 2005-06 is set-aside and the Assessing Officer is directed to re-compute the assessee s claim for deduction under Section 80-IB(10) on the aforesaid lines. 18. In so far as the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mate profit of assessee as computed even after making disallowance under section 40(a)(ia) of the Act, would qualify for deduction as provided under the law. 23. In the present case, the only source of profits declared by the assessee during the year is from undertaking development of its housing project Lakshdweep . Therefore, even if the expenditure of ₹ 5,22,600/- is found to be not allowable on account of Section 40(a)(ia) of the Act as assessee has not complied with the requirements of deducting/depositing the TDS, it cannot be denied that such disallowance ultimately increases the profits of the assessee derived from its housing project Lakshdweep . According to the parity of reasoning laid down by the Hon ble Gujarat High Court in the case of Keval Construction (supra) the aforesaid profit reflected by the disallowance under Section 40(a)(ia) of the Act, qualified for deduction under Section 80-IB(10) of the Act in the present case. Thus, on this aspect, assessee has to succeed. 24. In the result, appeals of the assessee for the assessment years 2005-06 and 2006-07 are allowed as above. Order pronounced in the open Court on 25th June, 2013. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
