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2015 (6) TMI 803 - ITAT HYDERABAD

2015 (6) TMI 803 - ITAT HYDERABAD - TMI - Reopening of assessment - deduction u/s. 80IB(10) denied - contention of the later AO that since assessee has purchased the land as early as 1996, the project was to be deemed to have started then and the same was prior to 01-10-1998. Therefore, the assessee is not eligible for deduction - Held that:- As far as reopening of assessments u/s. 147/148 are concerned, we agree with the Ld.CIT(A) that this is a mere change of opinion. In fact, the AO at the ti .....

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bers contributed their land as capital, whereas the project was conceived and constructed by the AOP and the claim was accordingly made in the hands of the AOP. Since these aspects were examined by the AOs at the time of original assessment, the opinion of the subsequent AO that AOP continued the project cannot be accepted. Lastly, with reference to the ‘project completion’ which was one of the reasons for reopening assessments and also for denying the deduction in AY. 2006-07 (which was upheld .....

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did not issue the 'Project Completion Certificate' as requested by assessee, it is not possible to furnish the said certificate to the Revenue authorities. All the evidences on record do indicate that assessee has completed the project, therefore, just because assessee could not furnish the 'Project Completion Certificate', the deduction cannot be denied on that basis. the eligible deduction cannot be denied to the assessee. - Decided in favour of assessee - ITA NO.1498 to1501/Hyd/2012,CO 159 t .....

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ed by M/s. Sahara States. There are cross objections by assessee mostly supporting the orders of the CIT(Appeals). 2. Briefly stated facts common to appeals in all these years are that, assessee is an AOP, constituted vide agreement dt. 30-11-2001. The joint venture agreement was made between M/s. Sahara India Commercial Corporation Ltd., Sahara India Financial Corporation Ltd., Sahara India Corporation Ltd., and Sain Processing and Weaving Mills Pvt. Ltd., with an intention to continue and carr .....

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ments and also field verification by the Inspector in respective assessment years. Subsequently, while completing the assessment for AY. 2006-07, the AO insisted on furnishing 'Project Completion Certificate'. Since assessee could not furnish the same, AO took the view that assessee was not eligible for deduction u/s. 80IB(10). Consequently, the assessments completed in earlier years were re-opened u/s. 147 mainly on the reason that assessee has failed to furnish the 'Project Complet .....

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embers; and (c) That the project has not been completed within the specified limits i.e., on or before 31-03-2008. By elaborately discussing these issues, the AO in the impugned assessment years, disallowed the claim in the re-assessment proceedings in AY. 2003-04, 2004-05 & 2005-06 and u/s. 143(3) in AY. 2006-07. 3. Before the Ld.CIT(A) it was contended that assessee has complied with all the conditions of Section 80IB(10). These were verified by the AO at the time of original assessment, i .....

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ence to project completion and evidence that the project was completed, but the necessary certificate was not given by the authorities. The Ld.CIT(A) while upholding the assessment and the stand of the AO in AY. 2006-07 however, cancelled/set aside the assessments which were reopened, as bad in law. His order, in detail in AY. 2005-06, was as under: "5.3 Given the above ratios, the facts in the present case are examined. Firstly, I find that in the present case, the Assessing Officer had ex .....

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rporation Ltd., (Lucknow), M/s. Sahara India Corporation Ltd., (New Delhi) and M/s. Sain Processing and Weaving Mills (P) Ltd., New Delhi. During the previous year relevant to the AY. 2005-06, the assessee claimed deduction under sub-section 10 of Sec. 80IB of the IT Act for an amount of ₹ 3,45,15,612/- the profits being derived from developing & building housing project. The sub section 10 of Sec. 80 IB relevant for the AY. 2005-06 stipulated as under: The amount of deduction in the c .....

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he 1st day of April, 2004 on or before the 31st day of March, 2008; (ii) In a case where a housing project has been or is approved by the local authority on or after the 1st day of April, 2004, within 4 years from the end of the FY in which the housing project is approved by the local authority; Explanation - for the purpose of this clause - (i) In a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on .....

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ccordance with a scheme framed by the Central Govt. or State Govt. for reconstruction or redevelopment of existing building in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; c) The residential unit has a maximum built up area of 1,000 sq. ft., where such residential unit is situated within the cities of Delhi or Mumbai or within 25 kilometers from the municipal limits of these cities and 1,500 sq. ft., at any oth .....

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he construction of group housing projects and as per the documents and the information produced during scrutiny proceedings, the project is spread over on a total land of 44.63 acres situated at Mansoorabad Village, Saroor nagar Mandal, Ranga Reddy District. This land was acquired by the assessee in the year 1996 from Sri Mayur Kunj & other. As this land was earlier notified for the use of conservation, later on it was changed from conservation use to residential use by the State Govt. of AP .....

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.63 acres. The assessee's AR stated that the project consisting of various types of houses and these types are further divided into blocks. Copies of typical floor plans approved by HUDA/LB Nagar Municipality in respect of all the types/blocks relevant to the financial year 2003-04 and the details of such approvals are furnished by the assessee's Authorised Representative as mentioned below: Type Name of the Block Date of HUDA approval Date of LB Nagar Municipality approval Type-I Type-I .....

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criteria for claiming deduction under sec. 80IB (10) of IT Act and whether the project was built within the frame-work of this Section, the Inspector of this office was directed to visit the project site and verify the construction activity going on in the site. The Inspector physically inspected the project with the help of one Civil Engineer, Shri Balakrishna and submitted a detailed report which is reproduced below: "As directed by the ACIT, Circle-5(1), Hyderabad, I have visited the sit .....

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i) Gandhar ii) New Malhar 4 13 13 16 144 156 156 19 10 81 Type-III Plotted Malhar Kalyani 16 Independent 192 80 06 11 Houses Row Bahar - A & B -do- 280 15 - (BA 9+BB 6) Future Group Houses i) New Bahar ii) Yaman -do-do- 38 17 7 2 Total sold 184 HUDA Original approval for construction of group houses dt. 07-07-1999 was produced for verification at the time of my visit (Copy of which is available on record). During my visit, I had taken the help of Site engineer of Shara Group, Shri Balakrishn .....

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sq. ft. to 779 sq. ft. Row Houses Bahara - A (West) Category I - 640 sq. ft. to 648 sq. ft. Alfa - 819 sq. ft. to 829 sq. ft. Beta - 940 sq. ft. to 951 sq. ft. Gama - 1460 sq. ft. to 1464 sq. ft. Future Group Houses Yaman Type-I - 1130 sq. ft. to 1135 sq. ft. Type-II - 810 sq. ft. to 815 sq. ft. New Bahar - 810 sq. ft. to 816 sq. ft. Kalyani Plotted Houses 1508 sq. ft. to 1520 sq. ft. No. of shops sold 30 shops The assessee has taken separate approval for each Type of Block. During the year, th .....

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7; 3,49,855/- is not properly supported by vouchers. Hence, the same is disallowed and added. 5.3.1. From the above, I find that complete details of the project were called for during assessment proceedings and examined. The eligibility criteria under section 80IB(10) were examined in detail. Even physical inspection of the site was carried out and help of the site engineer was also taken. Detailed investigations were made and lay out plans, sanction letters, approvals, valuations, physical meas .....

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Assessing Officer was never given or shown to the appellant inspite of specific requests. In any case, the letter referred to did not give information on tax evasion by the appellant". 4. While adjudicating the issue, the Ld.CIT(A) also relied on the following for various legal principles, ie. that the assessment cannot be reopened by a mere change of opinion or by drawing a different inference from the same facts as were earlier available : (a) CIT Vs. Kelvinator of India Ltd., [320 ITR 5 .....

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o change of opinion as contended by assessee and accepted by the Ld.CIT(A) as assessee has not furnished 'Project Completion Certificate' nor furnished the complete details of AOP as pointed out by the AO. It was the submission that the original project has started way back in 1996 and therefore, it did not satisfy the conditions laid down u/s. 80IB(10). Ld. DR relied on the following: (a) Hon'ble Supreme Court in the case of Rajesh Jhavery stock Brokers P. Ltd [291 ITR 500] (SC); (b .....

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96 on which there is no dispute. But, the AOP was constituted by the members contributing the land as their capital and referred to various findings by the AO at the time of original assessment that the various approvals have been obtained consequently and the project has started after 01- 10-1998. He referred to the Paper Book filed in this regard to submit that AO at the time of assessment u/s. 143(3) in respective assessment years not only examined in detail the eligibility of the assessee wi .....

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as reopened within four years, as held by the Hon'ble Gujarat High Court in the case of Kalpataru Sthapatya (P) Ltd. Vs. ITO [346 ITR 371] and also Hon'ble Bombay High Court in the case of Prashant S. Joshi Vs. ITO & Anr. [324 ITR 154], there cannot be any reason to believe so as to reopen the assessment when assessee satisfied all the conditions and the deductions were allowed. Accordingly, he supported the order of the CIT(A) in cancelling the reopening of assessments. 8. Coming to .....

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ing the project and the same cannot be implemented or could not be visualized. For this proposition relied on the judgment of Hon'ble Supreme Court in the case of CIT-19, Mumbai Vs. M/s. Sarkar Builders in Civil Appeal No. 4476 of 2015 arising out of SLP (C) No. 24330 of 2011 dt. 15th May, 2015. Not only that Ld. Counsel also placed on record the correspondence with the local authorities for furnishing the completion certificate and evidence with reference to the fact that project was comple .....

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ed and the condition was not stipulated at the time of claiming the deduction. 9. We have considered the rival contentions and perused the records and Paper Book placed on record. As far as reopening of assessments u/s. 147/148 are concerned, we agree with the Ld.CIT(A) that this is a mere change of opinion. In fact, the AO at the time of completion of assessment has indeed taken pains in examining the eligibility and also deputed his inspector and allowed the deduction after due verification. T .....

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the housing project on or after the 1st day of October, 1998; (b) The project is on the size of a plot of land which has a minimum area of one acre; and (c) The residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place". Thus, there are three conditions stipulat .....

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land use was published in Andhra Pradesh gazette on 19-03-1998. (iii) The Housing project has seven blocks namely, Vrindavani, Gandhar, Mallhar, New Mallhar, Bahar, New Bahar and Yaman. These block have flats as well as row houses ranging from 345.83 sq. ft to 1498 sq. ft. (iv) The Hyderabad Urban Development Authority (HUDA), sanctioned building plans in respect of blocks Vrindavani, Gandhar and Mallhar vide letter dated 07-07-1999 in respect of Bahar building plans were sanctioned on 15-02-20 .....

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to be deemed to have started then and the same was prior to 01-10-1998. Therefore, the assessee is not eligible for deduction. This contention cannot be accepted as the project was not even approved by the local authorities. Not even by 01-10-1998, as can be seen from the approvals stated above. Therefore, the project has started after 01-10-1998 and therefore, the contention of the AO that the project started before that date is not factually correct. Moreover, claim of assessee that assessee .....

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mpletion which was one of the reasons for reopening assessments and also for denying the deduction in AY. 2006-07 (which was upheld by the CIT(A)), this was on the basis of subsequent amendment to Sub-Section 10 of Section 80IB(10) w.e.f. 01-04-2005. Furnishing of 'Project Completion Certificate' was not even stipulated in AYs. 2003-04 and 2004-05, therefore, that cannot be the basis for reopening the assessments. Therefore, AO's stand on this regard cannot be accepted. 12. As far as .....

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ai Vs. M/s. Sarkar Builders (supra), this issue was set at rest by the Hon'ble Supreme Court, while examining the amended provisions of the Section 80IB. (extracts) "We are concerned with the amendment to the said sub-section carried out by Finance No.2, Act, 2004 w.e.f. 01-04-2005. In all these cases, though the housing projects were sanctioned much before the said amendment but have been completed after 01-04-2005 when amended provision has come into operation. It is also not in dispu .....

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the amended provision have also to be fulfilled only because the housing projects in question, though started before 01-04-2005, were completed after the said date. The question of law, that arises for discussion that needs to be answered is thus common in all these appeals and can be formulated as under: "Whether Section 80IB(10)(d) of the Income Tax Act, 1961 applies to a housing project approved before 31-03-2005 but completed on or after 01-04-2005?" 13. Even though the Hon'ble .....

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operation, viz., with effect from 01-04-2005, and this legal position is not disputed by the Revenue before us. Wheat follows from the above is that prior to 01-04-2005, these developers/assessees who had got their projects sanctioned from the local authorities as 'housing projects' even with commercial user, though limited to the extent permitted under the DC Rules, were convinced that they would be getting the benefit of 100% deduction of their income from such projects under Section 8 .....

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04-2005. Once they arrange their affairs in this manner, the Revenue cannot deny the benefit of this section applying the principle of retroactivity even when the provision has no retrospectivity. Take for example, a case where under the extant DC Rules, for shops and commercial activity construction permitted was, say, 10% and the project was also sanctioned allowing a particular assessee to construct 10% of the area for commercial purposes. The said developer started with its project much prio .....

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sessment year after 01-04-2005 and for the purpose of assessment of the said return, law prevailing as on that date would be applicable? Answer has to be in the negative on the principle that with the aforesaid planning as per the law prevailing prior to 01-04- 2005, these assessees acted and acquired vested right thereby which cannot be taken away. It is ludicrous on the part of the Revenue authorities to expect the assessees to do something which is almost impossible". Respectfully follow .....

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has requested the local authorities for approving the final project. If the local authorities did not issue the 'Project Completion Certificate' as requested by assessee, it is not possible to furnish the said certificate to the Revenue authorities. All the evidences on record do indicate that assessee has completed the project, therefore, just because assessee could not furnish the 'Project Completion Certificate', the deduction cannot be denied on that basis. the eligible dedu .....

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