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2015 (11) TMI 920 - ITAT MUMBAI

2015 (11) TMI 920 - ITAT MUMBAI - TMI - Deduction u/s 80IB(10) - no compliance of the requirement of the provision of the Act in some flats, the built up area was more than the stipulated condition of 1,000 sq. ft. - Held that:- Whether the assessee can be held liable for extension of area in the alleged flats after the sale to the respective purchasers. The obvious reply is ‘NO’ because the project of the assessee was completed on 28/03/2008 after examining the area of each flat of the project .....

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ation by the survey team (during first survey in 2006) that the assessee was not constructing as per the approved plan. The completion certificate was issued by the competent authority after examining whether the assessee has fulfilled the conditions stipulated in the Act and also whether construction has been completed as per the sanctioned plan dated 15/04/2002. If, at the later stage, the allottees/occupants of the flats makes any addition, the assessee cannot be held liable for their omissio .....

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t when there is no compliance of the requirement of the provision of the Act in some flats, the built up area was more than the stipulated condition of 1,000 sq. ft. 2. During hearing, the ld. DR, advanced his arguments which are broadly identical to the ground raised by contending that area of some of the flats is more than 1,000 sq. ft. which came to light pursuant to survey carried out by the Department. Our attention was invited to para 11.6 (page-26) of the impugned order. 2.1. On the other .....

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the assessee by the competent authority by further claiming that the entire building was sold up to 2011, therefore, if any, merger of flats was done by the occupants themselves, the assessee cannot be held liable as the assessee was not having any control over the flats. Reliance was placed upon the decision in Haware Construction Pvt. Ltd. vs ITO 64 DTR 251 (Mum. Trib.), Emgeen Holdings Pvt. ltd. vs DCIT 47 SOT 98 (Mum. Trib.) and in DCIT vs Magarpatta Township Development & Construction .....

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operties [ITA.No.3633 of 2009 with ITA.No.4361/2010] has observed as under: 17. The first question to be considered herein is, whether, in the facts of the present case, construction of E building constitutes building a housing project under section 80IB(10) of the Act. 18. The expression housing project is neither defined under Section 2 of the Act nor under section 80IB(10) of the Act. Even under the Mumbai Municipal Corporation Act, 1988 as also under the Development Control Regulations for G .....

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nsisting of several residential units. In fact, the Explanation in section 80IB(10) supports the contention of the assessee that the approval granted to a building plan constitutes approval granted to a housing project. Therefore, it is clear that construction of even one building with several residential units of the size not exceeding 1000 square feet ( E building in the present case) would constitute a housing project under section 80IB(10) of the Act. 22.1. We find that the Pune Bench in the .....

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, wing E was planned and construction was commenced after 1st October 1998 and building/wing E was an independent housing project as contemplated u/s.80IB(10). The Tribunal held that the concept of housing project does not mean that should be the group of buildings and only then same is called a housing project . It was further held that building/wing E cannot be passed with earlier buildings, i.e., A, B, C & D which work was commenced in the year 1993 whereas plan for wing E was approved f .....

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ldings A1 to A5 in Atul Nagar and buildings B1 to B6 in Rahul Nisarg Co- Operative Housing Society Ltd. , the assessing authority has to verify as to when the building plans for these buildings were firstly approved by the local authority and taking the said date of approval a starting point, he has to verify as to whether these buildings were completed within the prescribed time limit i.e. 31st March 2008 on the basis of the Completion Certificate in respect of such housing project issued by th .....

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7/6/2003 (PAGE No. 5 of the paper book). The size of the plot on which the A type building i.e. A1 to A6 have been constructed is 1,39,466 sq.ft. The project A type building i.e. A1 to A5 consists of 360 residential units and the construction has been completed between 10.1.2005 to 31.8.2005 (page Nos. 6 to 9 of paper book). The authorities below have also not disputed this material fact that residential units has a maximum built up area of 1500 sq.ft. Likewise, these material facts that B Group .....

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the project consists of 396 flats and construction of these flats have been completed on 14.7.2006 as per the Completion Certificate issued by the PMC (Page Nos. 13 to 18 of paper book) are not in dispute. The authorities below have also not denied that built up area of each of these flats does not exceed 1500 sq.ft. It is also not in dispute that both the projects are entirely a residential project and there is no commercial area therein. Under the above circumstances, we are of the view that .....

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d that ITAT Mumbai Bench in the case of Mudhit Madanlal Gupta vs. ACIT [51 DTR 271(Mum)(Trib)] has observed as under: Deduction under s.80-IB - Income from developing and building housing project - Conditions precedent - Assessee engaged in construction business entered into a joint development agreement for construction of residential flats - Total plot measured approximately 7633.82sq.mtrs. - Deduction was denied by AO on the grounds that (i) assessee had completed only A, B and C wings upto 3 .....

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ore than one unit and since Revenue has not filed any cross-objection against this finding, the same has become final and binding on the Revenue - Independent units are residential units and have to be treated as separate housing projects for the purpose of deduction under s.80-IB(10) as long as they fulfil the other conditions prescribed under the Act - There is no requirement that such undertaking of assessee should be the owner of such land - Assessee is a developer of the whole of the projec .....

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at ITAT Bangalore Bench in the case of Dy.CIT vs. Brigade Enterprises (P) Ltd. [119 TTJ 269 (Bang.)] has observed as under: Deduction under s.80-IB - Income from developing and building housing project - Different units of a group project - Where some of the residential units in a bigger housing project, treated independently, are eligible for relief under s.80-IB(10), relief should be given pro rata and should not be denied by treating the bigger project as a single unit, more so, when assessee .....

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tirety - CIT(A) allowed relief under s.80-IB(10) treating the said two units as independent units - Justified - Material on record showed that the various local authorities duly inspected the plot and sanctioned plan for each of the blocks separately - Group housing approval was approval of a master plan as a concept - Further, the use of the words residential unit in cl.(c) of s.80- IB(10) means that deduction should be computed unitwise - Therefore, if a particular unit satisfies the condition .....

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calculating the built up area by combining the two units. The assessee submits that if units are combined by the customers, the built up area should be computed independently and the assessee cannot be denied the deduction. For this proposition, the assessee places reliance on the following decisions - a. Haware Constructions Pvt. Ltd. [64 DTR 251 (Mum)] b. Emgeen Holdings P. Ltd. vs. DCIT [ITA.No.3594 & 3595/Mum/09] c. DCIT vs. Arcade Bhoomi Enterprises [ITA.No.366/Mum/10] 23.1. We find tha .....

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no evidence on record to suggest that the assessee has drawn the plan in such a manner that each residential unit is shown as smaller than 1,000 sq. ft. merely to get the benefit of deduction under s. 80-IB(10)-It is also not the case of the Revenue that each flat in the housing project could not have been used as an independent or as a selfcontained residential unit and that there would be a complete habitable residential unit only if two or more flats are joined together-Therefore, merely beca .....

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td. vs. DCIT in ITA.No.3594 & 3595/Mum/09, has observed as under: 7. We find that the deduction u/s.80IB(10) has been declined by the Assessing Officer on the ground that size of the residential unit was in excess of 1,000 sq.ft which, in turn, proceeds on the basis that the flats sold to the family members admittedly by separate agreements, should be treated as one unit. We are unable to approve this approach. We have noted that the size of each flat, as evident from building plan as duly a .....

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it' and, in the absence of anything to the contrary in the Income tax Act, the expression 'residential units' must have the same connotations as assigned to it by local authorities granting approval to the project. The local authority has approved the building plan with residential units of less than 1,000 sq.ft, and granted completion certificate as such. That leaves no ambiguity about the factual position. We have further noted that the prohibition against sale of more than one fla .....

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d in respect of the same merely because the end user, by buying more than one such unit in the name of family members, has merged these residential units into a larger residential unit of a size which is in excess of specified size. That precisely is the case before us. While on the subject, it is useful to take note of legislative amendment by the virtue of which legislature put certain restrictions on sale of residential units to certain family members of a person who has been sold a residenti .....

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ildren of such individual or the HUF in which such individual is a karta. The explanation memorandum explained the legislative amendment as follows: (314 ITR(St) 203) "Further, the object of the tax benefit for housing projects is to build housing stock for low and middle income households. This has been ensured by limiting the size of the residential unit. However, this is being circumvented by the developer by entering into agreement to sell multiple adjacent units to a single buyers. Acc .....

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such individual is the karta; (III) Any person representing such individual the spouse or minor children of such individual or the Hindu undivided family in which such individual is the karta. This amendment will take effect from the 1st April 2010 and shall accordingly apply in relation to assessment year 2010- 2011 and subsequent years." 8. It is thus clear that the aforesaid amendment has been brought with prospective effect i.e. from 1st day of April 2010, and there is no indication wha .....

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are to be considered as one unit. If law permitted so, there was no need of the insertion of clause (f) to section u/s 80IB(10). It will be unreasonable to proceed on the basis that legislative amendment was infructuous or uncalled for -particularly as the amendment is not even stated to be 'for removal of doubts'. On the contrary, this amendment shows that no such eligibility conditions could be read into pre-amendment legal position. 9. As regards the AO's stand that the assessee h .....

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t, we modify the order of the CIT(A) and allow further relief to the assessee. 23.3. We find that the ITAT Mumbai Bench in the case of Arcade Bhoomi Enterprises vs. DCIT in ITA.No.366/Mum/2010, has taken similar view. 24. In view of above discussion, we hold that CIT(A) was not justified in holding that flats in building Prime had built up area exceeding 1500 sq.ft., the entire Cosmos Project did not qualify for deduction u/s.80IB(10) in respect of its profits. There is nothing on record to sugg .....

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above. As regards two flats combined together, the allegation is that some units were combined into one, so deduction u/s.80IB(10) should not be allowed. In this regard, assessee s stand has been that assessee conceived the flats as independent units and these were constructed as independent units. There is nothing on record to suggest that assessee himself has joined the adjacent flats. In this situation, assessee should not suffer for its no fault if purchaser join the adjoining flats. This vi .....

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ed the rival submissions and perused the material available on record. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, and the conclusion drawn in the aforementioned cases including cited from both sides, if kept in juxtaposition and analyzed, the facts, in brief, are that the assessee is engaged in the business of construction and de .....

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The whole case of the department is demolished by the observation made in the assessment order itself (para-3), wherein, the ld. Assessing Officer himself concluded that the project was completed in the preceding year relevant to assessment year, whereas, the second survey was conducted on 01/12/2011. It is pertinent to note here that the construction started on 15/04/2002 and completed on 28/03/2008, the date when after examining the flats, the competent authority issued completion certificate .....

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q. ft. Now, question arises whether the assessee can be held liable for extension of area in the alleged flats after the sale to the respective purchasers. The obvious reply is NO because the project of the assessee was completed on 28/03/2008 after examining the area of each flat of the project by the competent authority and only then the completion certificate was issued to the assessee. The case of the assessee is further fortified by the fact that the assessee started construction on 15/04/2 .....

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er the assessee has fulfilled the conditions stipulated in the Act and also whether construction has been completed as per the sanctioned plan dated 15/04/2002. If, at the later stage, the allottees/occupants of the flats makes any addition, the assessee cannot be held liable for their omissions/acts, if any. Our view is fortified by the decision in Haware Construction Pvt. Ltd. vs ITO (2011) 64 DTR 251 (Mum), Sanghavi & Doshi Enterprises vs ITO (2011) 60 DTR 406 (Chennai)(TM)(Trib.), ITO vs .....

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