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2016 (1) TMI 800 - ITAT PUNE

2016 (1) TMI 800 - ITAT PUNE - TMI - Deduction under section 80IB(10) in respect of row houses constructed under the name and style of M/s. Suman Constructions - Held that:- The two projects which have been commenced on different dates after taking separate approvals cannot be said to be a single project, in which the residential row houses also included the commercial area. We hold that the assessee is entitled to the claim of deduction under section 80IB(10) of the Act in respect of residentia .....

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In view thereof, there is no merit in the observations of Assessing Officer that the assessee is not entitled to the claim of deduction under section 80IB(10) of the Act since the commercial area exceeded 2000 sq.ft.

Denial of deduction to the assessee was since the total built up area of some units exceeded 1500 sq.ft., by including the area of canopy / porch in the built up area - Admittedly, as pointed out by us from the certificate of Grampanchayat, the built up area of each unit .....

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CIT(A) during the course of appellate proceedings had sought remand report in this regard from the Assessing Officer and under para 6.2, the finding of the Assessing Officer is that the canopy was not a habitable area. In view thereof, the CIT(A) allowed the claim of the assessee and the Revenue vide ground of appeal No.6 has agitated the issue. The case of the Revenue before us is that the said canopy could be accessed from the first floor and used as portion. We find no merit in the plea of t .....

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) of the Act. Further, in respect of the bills found during the course of Survey, the same related to renewal and replacement work to be carried out in bungalow Nos.12, 13 and 15. The major construction work was completed by 31.03.2008. The completion certificate in this regard was issued by the Grampanchayat, Wadi, against construction of 129 units for completion before 31.03.2008. Thus we hold that the assessee is entitled to the claim of deduction under section 80IB(10) of the Act in the capt .....

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143(3) of the Income Tax Act, 1961 (in short the Act ). Another two appeals filed by the Revenue are against the consolidated order of CIT(A)-II, Pune, dated 30.04.2012 relating to assessment years 2007-08 and 2009-10 against respective orders passed under section 143(3) r.w.s. 147 and 143 of the Income Tax Act, 1961 . 2. All the appeals filed by the Revenue relating to the same assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The .....

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al area exceeded the prescribed limits. 3. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that in the original plan commercial area was very much part of the project undertaken by 'M/s Suman Constructions' and that 'M/s Suman Developers', the concern to which the said commercial project is claimed to belong, came into existence only on 15.06.2007 i.e. after the initiation of the project in 2004. 4. The learned Commissioner of Income-tax (A .....

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ial project overlapped with the earlier residential cum commercial project which in itself would establish that both are integral parts of the same project. 6. The learned Commissioner of Income-tax (Appeals) grossly erred in holding that canopy was not part of built-up area without appreciating that the same could be accessed from the first floor and used as a terrace and, therefore, after including its area to the built-up area of the bungalow, the total built-up area exceeded 1500 sq. fts. wh .....

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that bungalows No.12, 13 & 15 had remained incomplete. 9. The learned Commissioner of Income-tax (Appeals) grossly erred in routinely accepting the assessee's submission that the pending works were related to renewal and replacement whereas as per the assessee's own admission, "major construction work of 'M/s Suman Constructions' was completed by 31.03.2008" which in itself proves that the project had not been completed fully. 10. For these and such other grounds a .....

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t the facts and issue in all the appeals slated for hearing are identical. 5. The issue arising in the present appeal is in relation to the deduction claimed under section 80IB(10) of the Act against the housing project known as M/s. Suman Construction. The first aspect of the said claim of deduction under section 80IB(10) of the Act is where the assessee in the original plan had included commercial area exceeding 2000 sq.ft, then is the assessee entitled to the aforesaid claim of deduction. The .....

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in the business of construction under the name and style of M/s. Suman Constructions. The assessee had undertaken residential cum commercial project at Sr. No.23/B, Konark Vihar, Farandenagar, Wadi Budurk, Nanded and had claimed deduction under section 80IB(10) of the Act. In assessment year 2008-09, the assessee had claimed deduction under section 80IB(10) of the Act at ₹ 45,40,947/-. Survey under section 133A of the Act was carried out at the premises of the assessee on 19.12.2008. The .....

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menced construction on 21.03.2004, while as per the plan sanctioned by the local authority i.e. Grampanchayat, Wadi (Budurk), Nanded, commencement Certificate for the project was given on 15.05.2004. Since the assessee had already started incurring expenses for development, the Assessing Officer adopted the commencement date as 21.03.2004 and hence, the project should have been completed before 31.03.2008. However, during the course of Survey and inspection of Bungalow Nos.12, 13 and 15, it was .....

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cum residential project. The Assessing Officer however, on perusal of the original and revised plans, concluded that there were no different projects, but a single project. The Assessing Officer also noted that during the course of survey, certain documents were impounded, which showed that the bills were raised in the name of M/s. Suman Construction and entries in the Register maintained at the site were continuing still 05.12.2008. The claim of the assessee that the land was demarcated for th .....

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ded while calculating the built up area of the bungalows. The Certificate submitted by the assessee of Grampanchayat regarding built up area of bungalows and drawings of the bungalows, was not accepted by the Assessing Officer holding that the said area is includable in the hands of assessee. Since the assessee had failed to comply with the provisions of section 80IB(10) of the Act, the claim of deduction was denied to the assessee. 7. Before the CIT(A), the assessee made elaborate submissions w .....

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ing Officer. The replies of the assessee are reproduced in the appellate order itself. The CIT(A) after considering the submissions of the assessee and various material produced, noted that the Assessing Officer had formed an opinion regarding the project being integral on the basis of copy of original plan though the original plan was later revised and the Assessing Officer did not accept the submissions of the assessee in this regard and noted that a single project could not converted into two .....

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he project was contemplated under the name of "Suman constructions". Out of the total area of 2,71,778 sq.ft, 2,30,864 sq.ft was earmarked for the housing project dividing into different sizes of plots and total number of such plots were 136 which were exclusively earmarked for housing projects. The remaining area of 40,914 sq.ft was earmarked for commercial units and the said area was divided into 4 plots No 1 to 4 having different sizes. Plot No.1 9836 sq.ft. Plot No.2 9962 sq.ft. Pl .....

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iginally four plots The three plots were as under : Plot A 15,216 sq.ft. Plot B 11,750 sq.ft. Plot C 11,862 sq.ft. The number of plots for bungalows was reduced from 136 to 129 and a new road was laid from the main road to the housing colony. Thus the housing project of Suman construction, the proprietary concern of the appellant consisted of 129 dwelling/residential units which was completed before 31-3-2008. The necessary completion certificates for the same has been obtained by the appellant .....

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ight 1 - 14 flats are constructed from 1st to 3rd floor and 25 shops on the ground floor. In Suman Heights 2 - 42 flats are constructed from 1st to 3rd floor and 24 shops are constructed on the ground floor. The appellant has also stated that separate books of accounts, separate bank accounts, separate offices, separate shop and establishment licenses for the two proprietary concerns Suman construction and Suman developers were taken, service tax registration, which is not applicable to resident .....

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the appellant is not one integral project but com rises of two separate projects. 8. The CIT(A) thereafter, accepted the plea of the assessee of existence of two separate proprietary concerns M/s. Suman Construction and M/s. Suman Developers and observed as under:- 4.6.1 The submission made by the appellant and the material on record has been perused. The existence of two separate proprietary concerns viz. Suman Construction and Suman Developers is undisputed. The project initially planned was s .....

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te offices and even establishment licenses taken by the appellant have been separately taken for the two proprietary concerns. The A.O. has not examined and looked into these aspects of the two projects while deciding the issue. Another important aspect which has been overlooked by the A.O. is the statement recorded of the Site Engineer during the course of survey action in which it has been categorically mentioned regarding the existence of two separate projects. The delivery challan on which t .....

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t, but has only reiterated the findings of the Assessing Officer as recorded in the assessment order. The facts brought on record clearly indicates that the two projects are not one integral project but two separate projects as even the timing of the project with respect to its construction are separate as the marketing done by the appellant by way of advertisement have been done for two projects separately. 4.7 Thus on going through the various fact and aspect of the projects as brought out by .....

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cer that the total built up area of the commercial cum residential units exceeded 2000 sq.ft., was also rejected by the CIT(A) since he accepted that there were two separate projects undertaken by two proprietary concerns of the assessee and where the commercial area was calculated on the basis of original plan, which in turn was revised, but which formed part of the second project, it cannot be said that the assessee had violated the provisions of section 80IB(10) of the Act. 10. The next objec .....

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ranging from 575 sq.ft to 1470 sq.ft and the same is evident from the certificates issued by the local authority. It was also submitted by the appellant that the A.O. has added the area of 'canopy' to the built up area, however, the area of canopy cannot be included in the built up area as it is not a 'projection' on floor level on ground floor not it is a projection on the first floor. It has also been contended that the local authorities are more meticulous with reference to co .....

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orch are not to be calculated in the built up area. It has further been explained by the appellant that 'canopy' is allowed by all local authorities within the open space around housing unit and the canopy is a "Means of access" and to protect the person from sun and rain while getting down from the vehicle and entering the premises, thus it is a weather shed without any side wall and not a habitable room. 6.2 On the basis of the submission made by the appellant my predecessor .....

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Vs Smt. Saroj Kapoor (2010) 38 OTR (Ind)(Trib) 475 ITAT Indore Bench decided that cognizance to the certificate issued by technical expert i.e. Architect and certificates issued by the Local Authority to be given. Certificate issued by the Gram Panchayat dated 28.10.2007 and dated 3103.2008 and certificate issued by Architect dated 25.03.2008 are kept on record. From these certificates it is clear that built-up area of any unit (bungalow) does not exceed the prescribed limit of 1500 sq.ft. In vi .....

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include the common area shared with other residential units. I have taken 'the latest photographs of row houses which shows that the upper area of canopy is not usable as evident from the photograph which is enclosed herewith for kind perusal. On seeing the photograph, it is found that canopy is open to sky and is not used by any habitant. " 6.3 Thus, in view of the clear and unambiguous findings of the A.O. that the canopy is not a habitable area and the fact is also evident from the .....

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a of the residential bungalows without the area of canopy being considered in arriving at the built up area remains below 1500 sq.ft and, therefore, no violation of the conditions of Sec. 80lB (10) has been done by the appellant as per the finding of the A.O. in the assessment order that 26 bungalows exceeds 1500 sq.ft area. 11. The last objection of the Assessing Officer was the non-completion of the project by 31.03.2008 i.e. four years, since the plans were sanctioned on 21.03.2004. The CIT(A .....

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ement mentioned in the audit report and the finding during the survey action u/s 133A with reference to the dwelling units No. 12, 13 & 15, the appellant has contended that the relevance of the commencement date mentioned in the audit report is with reference to the expenses incurred and not the stipulated and prescribed u/s 80lB (10). Regarding the reference made by the A.O. of non-completion of the bunglow No 12, 13 & 15 as held by the A.O. the appellant has drawn attention towards the .....

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uction of the 129 units of Suman constructions has been completed before 31-3-2008. On going through the submission of the appellant and also the statement of the site engineer and finally the certificate issued by the local authority, it becomes clear that the project has been completed before 31-3-2008 and the A.O.'s finding that the three bungalow No. 12,13 & 15 were not completed is without any basis and the finding has been done without bringing any material on record. In the result .....

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May, 2004. Our attention was drawn to the lay out plan placed at page 74 of the Paper Book and it was pointed out that the finding of the Assessing Officer was that the activity of construction had started on 31.03.2004, so the project had to be completed by 31.03.2008. The learned Departmental Representative for the Revenue further pointed out that the tax audit report filed by the assessee also says that the project was started in March, 2004. On page 78 of the Paper Book, the learned Departme .....

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ee under section 80IB(10) of the Act was against 127 row houses. It was pointed out by him that the Assessing Officer had denied the deduction under section 80IB(10) of the Act by treating both the projects as one and the commercial area being in excess, no deduction was allowable. Further, reference was made to the Survey action carried out by the Assessing Officer with special reference to para 4.3 of the assessment order. The learned Departmental Representative for the Revenue also stated tha .....

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210/PN/2012 , relating to assessment years 2008-09 and 2009-10, order dated 15.04.2013 for the proposition that the garden area is to be included in the covered area to compute the total area of the row houses. The learned Departmental Representative for the Revenue was of the view that if the assessee claimed that it has separate two projects in 2007, then the onus was on the assessee to establish separate projects. The learned Departmental Representative for the Revenue also pointed out that t .....

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e assessee further pointed out that the permission for construction of row houses partly i.e. 121 to 135 was given on 15.05.2004, as per the plans placed at pages 75 and 76 of the Paper Book. On page 78 of the Paper Book, revised lay out plan for 128 row houses was passed on 28.10.2007. The learned Authorized Representative for the assessee pointed out that there was no commercial area in this project. Then, he referred to the completion Certificate of 129 units placed at pages 104 and 105 of th .....

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al project No.C1 and on 24.04.2008, sanction was given for project C2 and the construction was after completion of 129 row houses. The relevant documents have been placed at pages 84 to 89 of the Paper Book. The learned Authorized Representative for the assessee stressed that the term housing project is not defined in the Act and even group of buildings is housing project. Reliance was placed on the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Vandana Properties reported in 353 IT .....

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the list of advances for row houses placed at pages 126 and 127 of the Paper Book and also at pages 131 and 132, separate advance being received for C1 and C2. The learned Authorized Representative for the assessee further drew our attention to the plan placed at page 160 and pointed out that there was road between C1 and C2 on one side and row houses on the other side. He further pointed out that during the course of Survey, the assessee has submitted that he was undertaking two projects, which .....

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ated 31.01.2013. The learned Authorized Representative for the assessee further stressed that commencement was in May, 2004, which in any case was completed by 31.03.2008 and there was no dispute in this regard. 14. As far as 26 row houses are concerned, where the canopy area was provided, the learned Authorized Representative for the assessee referred to the remand report, wherein the Assessing Officer had certified that the canopy area was not useable. It was further pointed out by him that si .....

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ections, which was in the form of garden. 15. We have heard the rival contentions and perused the record. The assessee is engaged in the construction business and for the year under consideration had claimed deduction under section 80IB(10) of the Act in respect of row houses constructed under the name and style of M/s. Suman Constructions. The case of the assessee before us is that it developed a plot for which the layout plan is placed at page 74 of the Paper Book. The layout plan is in respec .....

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the residential project under the name and style of M/s. Suman Constructions, which is approved on 08.10.2007, which is placed at page 78 of the Paper Book and is for 127 row houses, the revised layout plan sanctioned by the Grampanchayat on 28.10.2007. At page 79 of the Paper Book is attached the layout plan of the commercial area C1 and C2. Originally, in the initial layout plan dated 24.02.2004, there were three portions of commercial area C1 to C4. However, as per the revised plan, there we .....

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s of row houses on 31.03.2008. The completion certificate with its English transaction is placed at pages 104 and 105 of the Paper Book. The certificate of the Grampanchayat, Wadi dated 31.03.2008 that the construction has been completed before 31.03.2008 is placed at page 106 of the Paper Book along with the list of unit numbers and their built up area at pages 107 to 109 of the Paper Book. The perusal of the said list placed at pages 107 to 109 of the Paper Book of row houses numbering 127 ref .....

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ven the sanction for constructing C2 unit, commercial area was granted after the completion of 129 row houses. The CIT(A) has elaborately considered the factual aspects of the case vide paras 4.1 to 4.3, which we have reproduced in the paras hereinabove. In line with the documents referred to by us and the findings of CIT(A), we uphold the order of CIT(A) in holding that the project undertaken by the assessee was not one integral project but comprised of two separate projects. The project undert .....

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constructed by the assessee was much after the construction of row houses and even in respect of one project i.e. C2, the permission to construct was sanctioned on 24.04.2008 i.e. even after the residential project claimed to have been completed on 31.03.2008, for which the completion certificate was also issued by the authorities. The project initially planned by the assessee was revised and the assessee constructed the residential project of 129 row houses, which was reduced from original pla .....

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a 4.6.1 has also referred to the statement recorded of the site engineer during the course of Survey, in which he admitted the existence of two separate projects. Further, the Assessing Officer had rejected the claim of the assessee since during the course of Survey, certain delivery challans were impounded which included the bills of two concerns. The said engineer during the course of Survey itself, had explained that the said challans pertain to M/s. Suman Developers and he also stated that t .....

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included the commercial area. We hold that the assessee is entitled to the claim of deduction under section 80IB(10) of the Act in respect of residential project. The commercial project which has been sanctioned, commenced and completed on a later date and on which, no deduction under section 80IB(10) of the Act has been claimed by the assessee, is a separate project from the residential project of row houses completed by the assessee. Accordingly, we find no merit in the order of Assessing Offi .....

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the total built up area of some units exceeded 1500 sq.ft., by including the area of canopy / porch in the built up area. Admittedly, as pointed out by us from the certificate of Grampanchayat, the built up area of each unit of row houses was below 1500 sq.ft. However, in respect of the first floor, there was an area of canopy which was lower than the first floor unit. The case of the assessee was that the area of canopy could not be included in the built up area since it was not a projection on .....

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essee and the Revenue vide ground of appeal No.6 has agitated the issue. The case of the Revenue before us is that the said canopy could be accessed from the first floor and used as portion. We find no merit in the plea of the Revenue and the ground of appeal raised in this regard is dismissed. 17. Another objection of the Assessing Officer in denying the deduction under section 80IB(10) of the Act is that where the plans were sanctioned on 21.03.2004 by the local authority, the project had to b .....

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f 129 row houses in all as against the original plan for 136 row houses. In view thereof, where the first sanction of the plan i.e. commencement certificate has been issued on 15.05.2004, the obligation on the assessee to complete the project was before 31.03.2009 as per the conditions stipulated under section 80IB(10) of the Act. However, the assessee claims to have completed before 31.03.2008. The Assessing Officer had come to a conclusion that the project was not completed based on date of co .....

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