TMI Blog2016 (2) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... -2007. The project B comprising of 10, 394.66 sq.mtrs of Part B and 1606.02 sq.mtrs of Part C. The Building B1 commenced construction vide commencement certificate dated 28-06-2006 and the same comprised of 44 residential units and the said building B1 was completed on 18-03-2008. The other building B2 was commenced vide commencement certificate dated 28-06-2006. However, the same was not completed as according to the assessee there was inadequate FSI to complete the entire building since the same was sanctioned with only 16 units with an FSI of 677.64 sq.mtrs. Since according to the assessee the same was not economically viable the assessee did not complete the residential floors but only completed the parking floors for want of adequate FSI. However, subsequently, the assessee renewed the same on 22-06-2010 vide a separate commencement certificate. For the other 2 buildings, i.e. B3 and B4 on Part C of the plot another commencement certificate was obtained and building plan was sanctioned as there was no adequate FSI for building B2 itself. It is the case of the assessee that it has completed A1, A2 and B1 of the project and because of inadequate FSI the assessee did not compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. the date on which the project should have been completed as per the provisions of section 80IB(10) of the Act. The AO noted that the previously revised and sanctioned plan on 28-06-2006 was again revised on 22-06-2010 sanctioning 276 tenements in total. Thus, it is clear that as on 31-03-2008 the housing project was not complete. The AO, therefore, issued a show cause notice asking the assessee to explain as to why the deduction claimed u/s.80IB(10) should not be disallowed since the housing project was not complete within the stipulated period. 2.1 The assessee vide letter dated 24-10-2011 inter alia submitted as under which has been reproduced by the AO at page 5 of his order: As regards B 2 building, said building is not completed. However, without considering B 2 building the project fulfills all the conditions on stand alone basis. Relying on the decision in the case of Saroj Sales Organisation V. ITO (115 TTJ 486 (Mum), DCIT v. Brigade Enterprises Pvt. Ltd., 119 TTJ 269 (Bang). Support can also be drawn with reference to Special Bench decision in the case of Brahma Associates V JCIT (119 ITD 255)(Pune), which is upheld by Bombay High Court, for the legal principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act. According to him, what is required to be completed by the assessee is the housing project in totality and not the individual flats as claimed by the assessee. In view of the above, the AO disallowed the claim of deduction made u/s.80IB(10) of the Act. 5. Before CIT(A) it was submitted that the assessee has commenced development and construction of housing project Kumar Paradise at Plot No.2, at Survey No.134/1/1A/1, Hadapsar, Pune on 08-01-2004. The DP layout plan was sanctioned on 21-10- 2003. The said plan is divided into 2 parts, i.e. Part A and Part B which is evident from the sanctioned plan. The sanctioned plan for Part A consisting of Buildings A1 and A2 was obtained on 08-01-204 and 18-05-2004. The sanctioned plan for Part B consisting of Buildings B1 and B2 was separately obtained on 28-06-2006. Thus, the complete venture of the assessee was divided into construction of A1 and A2 of Part A and construction of B1 and B2 of Part B. The following statistics was also submitted before the CIT(A) : Sr.No. Kumar Paradise Plot No.2 Hadapsar Part A Part B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f deduction claimed by the appellant u/s.80IB(10) of ₹ 2,82,73,541/- has been contested. During the assessment proceedings, the Assessing Officer found that the appellant had continued construction of a housing project by the name Kumar Paradise at S.No.134/1/1A/1, Plot No.2, Part A Hadapsar, Pune and had also claimed deduction u/s.80IB(10) of ₹ 2,82,73,541/- in respect of the project. The Assessing Officer noticed that the project was commenced on 21-10-2003 and subsequently revised on 8-1-2004, 18- 5-2004, 28-6-2006 and on 22-6-2010. The occupancy/completion certificates issued by the Pune Municipal Corporation (PMC for short) were on 6-1-2006 for 108 units, 54 in A-1 wing and A B having 54 units each; 6-11-2007 for another 108 units in A-2, A B wing; on 18-3- 2007 for 44 units in B-1 wing. The Assessing Officer also noticed that the project continued even after 31-3-2008 i.e. the date on which the project should have been completed as per the provisions of see 80IB(10), as the previously revised and sanctioned plan dated 28-06-2006 was again revised on 22-06-2010 sanctioning further 276 tenements. The Assessing Officer thus held the housing project to be incomple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant has further stated that Part B is a separate housing project consisting of B1 and B2 buildings and due to the noncompletion of building B-2 the benefit of deduction u/s 80IB(10) for B1 building was denied by the Assessing Officer. The appellant has stated that building B-1 on a standalone basis satisfies all the conditions u/s 80IB(10) as it had commenced on 28-6-2006 and completed on 18-03- 2008; is built on a plot area of more than 1 acre; built up area of all residential units being less than 1500 sq.ft and there is no construction of commercial area. The observation of the Assessing Officer that the sanction plan dated 28-06-2006 was revised on 22-6-2010 for 276 tenements and the project not completed before 31-3-2008 is not correct as the 276 tenements were sanctioned vide sanction plan dated 28-6-2006 and there was no revision/additional sanction granted. The appellant has filed the copies of the sanctioned plans of 2006 and 2010 during the appellate proceedings to support its claim. The appellant has thus contended that Building B1 on a standalone basis satisfies all the conditions u/s 80IB(10). The appellant has placed reliance on the following authorities for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the judgment must be read as a whole and the observation of the judgment have to be considered in the light of the questions involved in the case in which it is rendered. The appellant has contended that the contention of fallowing proportionate deduction u/s 80IB(10) still stands merit as the judicial precedents and authorities relied upon supports the claim. The appellant has also placed reliance on the decision of the Mumbai ITAT in the case of Ekta Housing Pvt. Ltd, ITA No 3649/Mum/2009, which after considering the decision of the High Court in the case of Bramha Associates (supra) allowed deduction u/s 80IB(10) on proportionate basis to those units having area less than 1000 sq.ft. The appellant has also distinguished the case of ACIT Vs Vishwas Promoters P. Ltd. (2010) 5 ITR 449 (Chennai) (Trib) relied upon by the Assessing Officer. The appellant has also submitted that the legislative intent for providing benefit u/s 80IB(10) is to encourage development of residential tenements for the people and such tax incentive provided u/s 80IB (10) should not be denied and the said proposition is supported by judicial precedents wherein it has been held that incentive provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Pvt. Ltd. ITA No. 3649/Mum/2009 5. DCIT Vs Brigade Enterprises (P) Ltd (2008) 119 TTJ 269 (Bang) 3.5 The submission made by the appellant has been considered and material on record perused. The fact of the case is that the appellant started construction of a housing project 'Kumar Paradise' at Hadapsar on the plot No. 2, S.No 134/1/1A/1A. The said plot No.2 is divided into three parts i.e. Part A, Part B and Part C. The first layout plan of the entire scheme was sanctioned by the local authority i.e. PMC on 21-10- 2003. The appellant proposed two separate projects A and B on the aforesaid plot No.2. The project A of the plot comprised of buildings A 1 and A2 and project B on Part B C of the plot comprised of buildings B1, B2, B3 and B4. The total area of the project A is 8853 sq.mtrs. The appellant started the construction of the building A 1 vide commencement certificate dated 8-1-2004 and the said building A 1 comprising of 108 units was completed on 6-7-2006. The other building of Part A i.e. building A2 commenced construction vide commencement certificate dated 18th May 2004 and the said building also comprised of 108 Units was completed on 06-11-2007. Thus th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanctioned the layout plan of the entire project on that date and not the commencement of the entire project. The construction of the project commences with the issuance of commencement certificate and sanction plan of the buildings by the local authority and hence not by the sanction of the layout plan of the entire scheme. In the fact of the case the two parts of the project viz. Part A and Part B has been commenced by different commencement certificates and sanction plans, and there is substantial gap of nearly 30 months between the commencement dates of the said projects. The Assessing Officer during the assessment proceedings for A.Y. 2007-08 had infact accepted the contention of the appellant that Part A and Part B are separate projects and accordingly allowed the claim of deduction u/s 80IB(10). Thus the Assessing Officer's contention that Part A and B are one and the same project is not correct in the given set of facts of the case. 3.6 The reliance placed by the appellant on the decision of the Pune ITAT in the case of Rahul Construction Co. (cited supra) is relevant and which has held as under: 9. There is no dispute on from material facts that out of 16 build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 677.64 sq. mtrs. The said building was found to be commercially and otherwise not viable and feasible to construct. Thus the appellant could not complete the said building B2 as the same was not possible to construct. The Assessing Officer, has however, held that due to non-completion of building B2 the entire benefit of the project of sec.80IB(10) in respect of profits derived from building B1 has been denied. Thus as evident the appellant was prevented by a reasonable cause which was completely impossible on the part of the assessee. In this regard the decision of the Pune ITAT in the case of Ramsukh properties Vs DCIT (Supra) also relied upon by the appellant becomes relevant and which held as under: 5. After going through rival submissions and material on record, we find that the assessee is a firm engaged in business of builder and promoter. The issue before us is regarding allowability of deduction u/s.80IB(10) of the Act on partially complete project. The Assessing Officer has denied the deduction on the ground that project was not complete within the stipulated time. There is no dispute with regard to other conditions laid u/s. 801B(10) of the Act, i.e., commencement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not approve the modification as their files have been taken over by concern intelligence department for investigation of violation of urban land ceiling Act applicable to land in question at relevant point of time. This fact has not been disputed on behalf of revenue. Thus, assessee was prevented by sufficient reasonable cause which compelled the impossibility on part of the assessee to have completion certificate in time. It is settled legal position that the law always give remedy and the law does wrong to no one. We agree to proposition put forward by Ld. Departmental Representative that plain reading of section 80IB(10) of the Act suggests about only completion of construction and no adjective should be used along with the word completion. This strict interpretation should be given in normal circumstances. However, in case before us, assessee was prevented by reasonable cause to complete construction in time due to intervention of CID action on account of violation of provisions of Urban Land Ceiling Act applicable to land in question. Assessee was incapacitated to com lete the same in time due to reasons beyond his control. Assessee should not suffer for same. The revisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n housing project is not defined. Therefore, the expression housing project in Section 80IB(10) would have to be construed as commonly understood. 19. . . . . . . . . . . . . . . . . . . . . . the expression 'housing project' in common parlance would mean constructing a building or group of buildings consisting 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. 20. . . . . . . . . . . . . . . . . . . . . . . . .when the plans for A, B, C and D buildings were approved during the period from 1993 to 1996, construction of 'E' building was not even contemplated on the plot in question. It is only in the year 2001 when the status of the land was converted from surplus vacant land into within the ceiling limit land by the State Government, an additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... housing project, the assessee may seek amendment of the building plan at several stages of the construction and the same may be approved. In such a case, the explanation provides that for the purposes of Section 80IB (10) the housing project shall be deemed to have been approved on the date on which the first approval was granted by the local authority. Thus, the Explanation to Section 80IB (10)(a) refers to the approval granted to the same housing project more than once and the said Explanation would not apply where the approval is granted to different housing projects. In the present case, as noted earlier, construction of 'E' building constitutes an independent housing project and, therefore, the date on which the earlier housing project had commenced construction could not be applied to the housing project consisting of 'E' building merely because the conditions set out while granting approval to the earlier housing project have also been made applicable to the housing project in question. Thus the set of reasoning of the Hon'ble Bombay High Court which has held that the expression 'housing project' in common parlance would mean constructing a b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Bombay High Court in the case of Brahma Associates (Supra) and held that the same does not envisage denial of proportionate deduction in such circumstances. The relevant discussion, as contained in paragraphs 8 9 of the order of the Tribunal in the case of M/s Ekta Housing Pvt. Ltd. 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 Judgment, we find that nowhere it is stated that proportionate deduction should not 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 judgment 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he profits of the entire project, in the facts of the present case, since the assessee has not challenged the decision of the Tribunal, we are not inclined to disturb to disturb the decision of the Tribunal in restricting the section 80IB(10) deduction only in respect of the profits derived from 15 residential buildings. 3.9.1 Similarly, in the case of DCIT Vs. Brigade Enterprises (P) Ltd. (cited supra) the Tribunal held Where some of the residential units in a bigger housing project, treated independently, are eligible for relief under s. 80IB (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 obtained all sanctions, permissions and certificates for such eligible units separately. Likewise, in the case of Rahul Construction Co. (cited supra) the Pune ITAT has held as under : 10. In view of the above discussion, for verification of eligibility of benefit claimed under section 80-IB(10) by the assessee on buildings A1 to A5 in 'AN' and buildings B 1 to B6 in 'RN, the assessing authority has to verify as to when the building plans for these buildings were firstly approved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities were not justified in holding that since the flats in 'Prime building' had built-up area exceeding 1500 sq. ft. , the entire cosmos project did not qualify for deduction under section 80- IB(10) in respect of its profits. There is nothing on record to suggest that assessee has claimed deduction in respect of 'Prime building', wherein built-up area of its units is exceeding 1500 sq.ft. In fact there were 25 buildings in cosmos project out of which except 'Prime building', all other buildings satisfy the conditions of built-up area limit of 1500 sq.ft. Therefore, deduction under section 80IB(10) should be allowed in respect of profit from such buildings. As regards two flats combined together, the assessee's stand has been that it conceived the flats as independent units and these were constructed as independent units. There is nothing on record to suggest that the assessee itself has joined the adjacent flats. In this situation, the assessee should not suffer for its no fault if purchaser join the adjoining flats. Therefore, the assessee was entitled for deduction under section 80-IB(10) in respect of entire profits computed after making addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate buildings constructed as part of such projects and, therefore, in order to be eligible for deduction u/s.80IB(10), it is the housing project in its entirety and not specific buildings constructed thereunder, which will have to fulfill the conditions specified u/s.80IB(10) of the Act. 3. The learned Commissioner of Income-tax (Appeals) erred in not considering the decision of jurisdictional High Court in the case of CIT vs. Brahma Associates, 333 ITR 289 wherein it was held that if the conditions set out in section 80IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project. 4. The appellant craves leave to add, alter or amend any or all the grounds of appeal. 9. The Ld. Departmental Representative heavily relied on the order of the AO. He submitted that since the project was not completed before the specified date, therefore, the CIT(A) was not justified in allowing the claim of deduction u/s.80IB(10) of Building B1 of the housing project on standalone basis when Building B2 of Part B of the housing project was incomplete. 10. Referring to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Constructions Co. Vs. ITO reported in (2012) 51 SOT 192 (Pune ITAT) 2. Mudhit Madanlal Gupta Vs. ACIT reported in (2011) 51 DTR 217 (Mumbai ITAT) 3. Saroj Sales Organisation Vs. ITO reported in (2008) 115 TTJ 485 (Mumbai ITAT) 4. DCIT Vs. Magarpatta Township Development Construction Co. reported in (2012) 150 TTJ 590 (Pune) 15. He submitted that where due to arise of certain contingencies, making compliance impossible, benefit bestowed on the assessee cannot be completely denied. Therefore, whatever portion is completed shall be treated as a housing project and deduction shall be allowed u/s.80IB(10) of the Act. For the above proposition, he relied on the following decisions : 1. Ramsukh Properties Vs. DCIT reported in (2013) 153 TTJ 211 (Pune) 2. CIT Vs. Tarnetar Corporation reported in (2014) 362 ITR 174 (Guj.) 16. Referring to the following decisions he submitted that only those statutory conditions which are present on the statute book on the date of approval of the housing project needs to be fulfilled for claiming deduction under the Act : 1. System Enterprises Vs. ITO ITA No.1123/PN/2013 2. CIT Vs. Happy Homes Enterprises ITA No. 201 of 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but only completed the parking floors for want of adequate FSI. However, subsequently, the assessee renewed the same on 22-06-2010 vide a separate commencement certificate. For the other 2 buildings, i.e. B3 and B4 on Part C of the plot another commencement certificate was obtained and building plan was sanctioned as there was no adequate FSI for building B2 itself. 19. It is the case of the Revenue that since the assessee has not completed the B2 project, therefore, the assessee is not entitled to deduction u/s.80IB(10). It is the case of the assessee that it has completed A1, A2 and B1 of the project and because of inadequate FSI the assessee did not complete B2 building as it was not economically viable. Therefore, on stand alone basis itself, it is entitled to deduction u/s.80IB(10) in respect of whatever portion is completed. It is also the case of the assessee that in A.Y. 2007-08 the deduction claimed u/s.80IB(10) was allowed in order passed u/s.143(3). In A.Y. 2008-09 the deduction claimed was allowed in the order passed u/s.143(3)/147. Therefore, there is no justification for denying the claim of benefit of deduction u/s.80IB(10). 20. We find merit in the above submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nwal Multihousing Pvt. Ltd. vs. ACIT in ITA Nos.1015, 1016 and 1017/PN/2011 relating to assessment years 2003-04 to 2005-06, order dated 21.11.2012. Following the same parity of reasoning, we hold that the assessee is entitled to pro-rata deduction in respect of residential units in the housing project No.7, which have complied with the conditions and were eligible for the deduction under section 80-IB(10) of the Act. However, the said deduction is allowable to the assessee only in respect of units construction of which has been completed upto 31st March, 2008. Accordingly, we direct the Assessing Officer to verify the claim of the assessee in this regard in assessment years 2006-07 and 2007-08 and if the assessee has fulfilled the aforesaid conditions under section 80- IB(10) of the Act, pro-rata deduction under the said section could be allowed to the assessee in relation to the buildings / flats completed in Sector No.7. Consequently, the ground of appeal raised by the assessee is partly allowed. 22. Since the assessee in the instant case has completed the 44 units of project B1 before 31-03-2008, a fact brought on record by the AO at page 2 of the order, therefore, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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