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2015 (7) TMI 611 - ITAT MUMBAI

2015 (7) TMI 611 - ITAT MUMBAI - TMI - Eligibility for deduction u/s.80IB(10) - CIT(A) allowed claim - assessee is engaged in the business of real estate development and construction - Held that:- All the conditions for claiming deduction u/s.80IB has been fulfilled and the CIT(A) has denied the claim in respect of flat No.1602 & 1603 on the plea that their area was more than 1000 sq.ft. We had verified the copies of the relevant pages of the agreement for sale in respect of flat no.1602 wherein .....

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terrace is separate and not attached with the flat and that has not marked as the area sold. For Flat No.1603, similar clause (j) is on page no.28 and the similar plan attached with the agreement is also at page no.39 which also indicates that area of the terrace is not sold to the flat owner and further from the plan it is clear that terrace is not openable from the flat while the way to the terrace is from the passage of the 16th floor. We had also verified the sanctioned plan of the building .....

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3, that the terrace has been exclusively given to flat no.1603 is not correct as, from the agreement and the plan and the certificate of the architect, it is clear that terrace is neither attached with the flat nor this has been given to flat no.1603 for exclusive use and it is for the use of all the members. Furthermore, the amended provision with regard to calculating the area of flat is not applicable in respect of the projects approved and started prior to 01.04.2005 and it is very clear tha .....

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of the Tribunal in group cases of the assessee vis--vis the finding recorded by the CIT(A), we do not find any reason to interfere in the order of CIT(A) with regard to deletion of disallowance made u/s.40A(2).

Distribution of proportionate indirect expenses on the basis of work-in-progress in place of profit of each year - The tribunal in assessee's own case for the assessment year 1994-95 dismissed revenue's appeal by relying on the finding of CIT(A) to the effect that assessee ha .....

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& Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY], wherein it was held that in case of availability of interest free funds presumption is that the same has been utilized for advancing interest free loans, therefore, no disallowance is to be made. The AO is directed to decide the issue after verifying interest free funds available with the assessee in terms of decision of Hon'ble jurisdictional High Court as well as other High Courts cited hereinabove. - Decided in favour of assessee for statisti .....

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/2011, ITA Nos.920&921/Mum/2011, ITA Nos.1632/Mum/2011, ITA Nos.6771/Mum/2012, ITA Nos.2195 & 4478/Mum/2013 - Dated:- 15-5-2015 - R. C. Sharma, AM And Vijay Pal Rao, JM,JJ. For the Appellant : Shri Love Kumar For the Respondent : Shri J P Bairargra ORDER Per R C Sharma These are the cross appeals filed by the revenue and assessee against the order of CIT(A), for the assessment years 2005-06 to 2010-2011, in the matter of order passed u/s.143(3)/271(1)(c) of the I.T.Act. 2. Common grievance of th .....

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certificate for the said project was received on 11th June, 2001 and the said project was completed in the Financial Year 2004 relevant to assessment year 2005-06 and occupation certificate was received on 5th November 2004. A chart of the premises constructed was also filed before the AO during the course of the proceedings in which it was claimed that the built up area of each flat is not more than 1000 sq.ft. In the course of assessment the AO also raised query with regard to the area of the .....

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rd, the AO observed that the Ganga tower-II is a 16 story building comprising of 61 flats. On verification of details submitted, it was noticed by him that the building has got only two flats on 16tt1 floor. As per the Architect's plan filed along with the return', the total built up' area of the 16th floor including that of the balcony and projections but excluding common areas comes to 2255,82 sq.ft. Accordingly, the built up area of Flat No.1603 exceeds 1000 sq.ft. As per definiti .....

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r with balcony area exceeds it limit prescribed u/s.80IB(10). During the course of assessment the appellant was asked to show why the deduction u/s.80IB should not be disallowed since the condition related to the built up area of the residential unit stipulated in the said section is not fulfilled this case. The assessee filed explanation vide letter dated 27-12-2007 as under :- "During the course of assessment proceedings, your Honour has raised the query regarding claim of deduction u/s.8 .....

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0 sq.ft. for which we are enclosing herewith the chart of premises. To fulfill the condition for claim u/s.80IB sub sec. 10 of I. T. Act provide the following conditions : Such undertaking has commenced on commences development and consideration of the housing project on or after 1st day of October 1998. The project on the size of a plot of land which has minimum area of one acre. The residential unit has a maximum limit up are of one thousand sq.ft. The above all condition are fulfilled in our .....

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21 sq.ft and area of Flat 1603 is 958 sq. ft. We are enclosing herewith the architect certificate of the built up area and agreement of sale of the premises. In view of the above, the claim of deduction Lt/s.80IB in our project fulfill all the condition provided in the act." 4. However, the explanation regarding the built-up area of 16th floor flats was not found to be acceptable by the AO. The AO observed that the assessee had sold the flat NO.1602 having area of 921 sq.ft. on 21/10/2003 f .....

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floor which is meant for the exclusive use of the purchaser of flat no.1603. The AO also observed that in the agreement in clause J, it is mentioned that the area mentioned in the agreement includes the built up area including area of the balconies where applicable and, with adjoining terrace if applicable. As per the AO this indicates assessee's intention to sell the adjoining terrace for the exclusive use of the purchaser. As per the AO the terrace in a project is included in the definiti .....

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flats except flat No.1602 & 1603 at 16th floor. The CIT(A) also observed that in all the years size of flat sold was less than 1000 sq.ft., except the two flats sold in A.Y.2005-06. The precise observation of the CIT(A) was as under :- "4.3.2 The first issue is that while working out the built-up area of two flats on the 16th Floor, no / the terrace area has to be treated. This issue is clearly linked to the terrace right. It is stated by the learned Assessing Officer that in clause J .....

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e been acceptable. That not being the case, it is reasonable to hold that since the appellant has not challenged Assessing Officer's finding with reference to Clause J of the agreement assigning terrace rights to the buyers of 16th Floor flat the terrace rights have to be included in the calculation of built-up area of 16th Floor flat. The learned Assessing Officer's conclusion, to this extent, is upheld. 4.3.3. However, there is considerable force in the appellant's argument that no .....

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al 'built-up area of none of the flats exceed 1000 sq. ft. and built-up area for 16th Floor flats are only technically and marginally higher than 1000 sq. ft." 6. Against the above order of CIT(A), assessee is in appeal before us in respect of disallowance of claim of deduction u/s.80IB(10) in respect of flat No.1602&1603, whereas revenue is in appeal before us against deleting disallowance of claim u/s.80IB(10) in respect of remaining flats. 7. We have considered rival contentions .....

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area and not terrace area and, therefore, as per the definition of the built-up area given in Sec.80IB(14)(a) w.e.f.01.04.2005, the built-up area includes projections and balconies and, therefore, the assessee is not entitled to deduction u/s.80-IB(10) on this project. Thereafter the AO has given a finding that the sale price of the Flat No.1602 sold on 21.10.2003 is less than the sale price of the Flat No.1603 which has been sold on 26-6-2003 and, therefore, it is presumed that the terrace on .....

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ined deduction on the plea that flats of Ganga Tower were sold in subsequent years and since claim was declined in A.Y.2005-06, the AO disallowed the claim in the subsequent years also. 8. By the impugned order the CIT(A) after following the decision of Saroj Sales Organisation, Seth Builders Pvt. Ltd. and Hirannandani Akruti JV, held that assessee is eligible for claim of deduction u/s.80IB on all flats except flat No.1602 & 1603, in all the years under consideration. 9. We found that all t .....

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up (including area of balconies where applicable) (with the adjoining terrace if applicable) on the 16th floor in the said building being constructed on the said property and also car parking space admeasuring (nil. Sq.ft. thereabout)." 10. On page No.20, the plan of the flat is also attached with the agreement which shows that terrace is separate and not attached with the flat and that has not marked as the area sold. For Flat No.1603, similar clause (j) is on page no.28 and the similar pl .....

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d access to the terrace is from the staircase and passage of the 16th floor. The terrace is not part of the built-up area, though balcony is part of the built-up area; terrace is a common area shared with the other residential areas, and accordingly, the finding of the AO and CIT(A) merely relying on the higher sale price of flat no.1603, that the terrace has been exclusively given to flat no.1603 is not correct as, from the agreement and the plan and the certificate of the architect, it is clea .....

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ve discussion and respectfully following the proposition of law laid down in the case of Saroj Sales Corp., 115 TTJ 485, Seth Developers, 33 SOT 277, Hiranandani Akruti JV, 39 SOT 498, Manan Corp. 255 CTR (Guj) 415, Anriya Project Management Services Pvt. Ltd. 209 taxman 1 (Kar) and CHD Developers Ltd., 43 taxmann.com 249 and the decision of the ITAT in the case of Haware Construction Pvt. Ltd., ITA No.5601/M/2009, order dated 5-8-2011, we direct the AO to allow assessee's claim of deduction .....

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considered rival contentions and found that the AO has discussed the issue in para 6 of his order for A.Y.2006-07. The assessee is one of the group concerns of Kukreja Builders. All the concerns of Kukreja Builders are carrying on their business from the premises at Lal Ashish, Chembur. The same is maintained by M/s Kukreja Services Pvt. Ltd. which incur all the expenses for maintenance of the building like rent, electricity, security, gardening, computer, accountant and other misc. expenses. In .....

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leting the disallowance u/s.40A(2) reads as under :- "3.7 I have carefully considered the issue. It is a fact that the issue of sister concern viz. M/s. Kukreja Services P. Ltd. providing Business Centre facility and Administrative facility came up for consideration before the Hon'ble ITAT in the case of the appellant's other sister concern viz. M/s. Tolararn & Co. for A.Y.2000-01 in Which it was held that it is very apparent from the facts narrated that the entire office is hir .....

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claim out of expenses incurred by M/s. Kukreja Services Pvt. Ltd. is being claimed by the appellant. That not being the case, the issue in question is squarely covered by Hon'ble ITAT's decision in the case of appellant's sister, concern cited supra, Accordingly, this ground of appeal is decided in favour of the appellant." 16. We have considered rival contentions and gone through the findings recorded by the CIT(A) and found that the issue has been decided by the Tribunal in f .....

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up company Motiram Tolaram ITA No.3683/Mum/2012 for A.Y.2008-09. Respectfully following the decision of the Tribunal in group cases of the assessee vis-à-vis the finding recorded by the CIT(A), we do not find any reason to interfere in the order of CIT(A) with regard to deletion of disallowance made u/s.40A(2). 17. In the assessment year 2008-09, the department is aggrieved for distribution of proportionate indirect expenses on the basis of work-in-progress in place of profit of each year .....

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hat the appellant is engaged in various activities such as construction activities and operation of hotel. There can be a case where indirect expenses need to be apportioned in a ratio other than the respective turnovers. However, the most natural presumption of applying the indirect expenses would be in proportionate in the respective turnovers/WIPs. Applying Indirect expenses in proportion to respective profits would amount to attributing NIL amount to activities which yield loss or no profit. .....

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he ratio of respective WIPs of different activities of the appellant, as claimed by the appellant. This ground of appeal is, accordingly, allowed." 19. As the issue is covered by the Tribunal in assesse's own case in the assessment year 2001-02, we do not find any infirmity in the order of CIT(A) for allocating indirect cost on the basis of work-in-progress in each year in place of proportionate sale of each year as done by the AO. 20. In the assessment year 2009-10 the assessee is aggr .....

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an to sister concerns from the loan taken from bank on which interest is paid and thus he disallowed the interest paid to bank. The AO observed that assessee has debited financial charges of ₹ 2.39 crores during the year as against financial charges of ₹ 1.12 lakhs in the immediately preceding assessment year. The AO also observed that in the immediately preceding assessment year 2008-09 unsecured loan was ₹ 7.98 crores which has increased to ₹ 20.34 crores as on 31.3.200 .....

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allowed. The AO also observed that no new assets have been purchased during the year nor any unsecured loans were repaid. The AO also disregarded assessee's contention regarding availability of interest free funds. The ld.CIT(A) has discussed the issue in para 4 of his order. The CIT(A) has incorporated the cash flow of the assessee firm in para 4.3 from which it is clear that the assessee firm is having interest free funds of ₹ 42.40 crores in which the major balance is lying in Partn .....

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through the orders of authorities below. The Hon'ble Bombay High Court in the case of Reliance Utilities & Power Ltd, 313 ITR 340 and Hon'ble Allahabad High Court in the case of Prem Heavy Engineering Works P. Ltd., 285 ITR 554 have held that where interest free loans to sister concerns were given from the interest free funds available with the assessee, no disallowance on account of interest should be made. In the following judgments it has been held that if the interest free funds .....

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own case for the assessment year 1994-95 dismissed revenue's appeal by relying on the finding of CIT(A) to the effect that assessee had not diverted its interest bearing funds for advancing interest free loans to sister concern, by relying on the decision of the Hon'ble Bombay High Court in the case of Bombay Samachar Ltd. 74 ITR 723 and Hon'ble Kolkata High Court in the case of Indian Explosive Ltd. 192 ITR 144. 24. In view of the above, we restore the matter with regard to disallo .....

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