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Mr. Satyanarayan Ramswarup Agarwal Versus The Income Tax Officer, Ward – 1 (3) , Pune

2016 (5) TMI 313 - ITAT PUNE

Deduction under section 80IB(10) - Held that:- The project in respect of buildings ‘A’ and ‘B’ has been completed by 31.03.2009 and where non-completion of building ‘C' was beyond the control of assessee, since it had not received FSI within stipulated period, we find no merit in the orders of authorities below in denying deduction under section 80IB(10) of the Act to the assessee for prorata units completed by the assessee before stipulated date. The issue in this regard is settled by various d .....

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the Act.

We reverse the order of CIT(A) in denying deduction under section 80IB(10) of the Act to the assessee on completed flats of the project. Accordingly, we direct the Assessing Officer to allow proprata claim of deduction under section 80IB(10) of the Act. - Decided in favour of assessee - ITA No.807/PN/2014 - Dated:- 21-3-2016 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant by : Shri Pramod Singhte For The Respondent : Shri Dheeraj Kumar Jain ORDER PE .....

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961 for a sum of ₹ 91,51,079/- by disregarding appellant s contention in this regard. 2. On the facts and in the circumstances of the case and in law, the Learned CIT(Appeals) erred in not following the orders of jurisdictional Tribunal which are followed by his predecessor in assessee s own appeal for A.Y. 2009-10. The appellant craves for to leave, add, alter, modify, delete above ground of appeal before or at the time of hearing, in the interest of natural justice. 3. The issue raised i .....

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of the Act at ₹ 91,51,076/-. During the course of assessment proceedings the assessee was asked to justify his claim of deduction under section 80IB(10) of the Act i.e. the year of approval, size of plot area, size of residential unit, date of completion and area of commercial units included in the housing project. In reply, the assessee explained that the Scheme was being developed at S.No.36/5, Kale Padal, Near Indrayani Nagar, Hadapsar, Pune. The said Scheme was started on 11.03.2005 on .....

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ceived the completion certificate from the local authority on 20.12.2007 and 19.03.2009. It was further pointed out by the assessee before the Assessing Officer that as per layout plan of the said housing project, the total plot area was 4350 sq.mtrs. and in the said layout, Pune Municipal Corporation had demarcated road widening line from the said plot and area covered was 182.99 sq.mtrs., against which the assessee was entitled to corresponding FSI from the said plot. The land under considerat .....

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completing formalities. The assessee claims that in view thereof, there was revision in plans and eventually permission was received from PMC for revised sanction for second building on 01.10.2007. Since no FSI was released to the assessee till 2009, the assessee claims to have dropped the idea of completing third building and carried out the project with only two buildings on plot of area of one acre. Both these buildings were completed before 31.03.2009 and therefore, eligible for deduction u .....

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ssessing Officer for rejection of claim of deduction was that the housing project was sanctioned initially for three buildings covering 3358.62 sq.mtrs. of total built up area i.e. comprising of 71 residential tenements and 16 commercial establishments. However, the assessee revised the plan in 2007 in which two buildings covering 2398.16 sq.mtrs. of total built up area, one building covering 966.62 sq.mtrs. was sanctioned. As per the Assessing Officer, against the sanctioned three buildings of .....

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0-11 and as per the Assessing Officer, the housing project was n ot completed within prescribed four years from the date of first approval of housing project and the contention of assessee that it had abandoned the construction of third building was factually incorrect and misleading. Since the assessee had not completed the building within stipulated time, the Assessing Officer denied the deduction under section 80IB(10) of the Act. Further claim of the assessee before the Assessing Officer was .....

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rved that the area for development of roads formed part of project plan as approved by the local authority, hence, the total size of plot available at the time of sanction of building was 4134.99 sq.mtrs, which was more than one acre and hence, this condition was fulfilled. 7. The second issue was commercial area exceeding 3% of aggregate built up area. The CIT(A) noted that Pune Bench of Tribunal in the case of Opel Shelter Pvt. Ltd. in ITA No.219/PN/2009 held that clause (d) to section 80IB(10 .....

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PMC for road widening, against which the assessee was permitted to utilized the relatable FSI. The claim of the assessee that it had dropped the building C' because of non-receipt of FSI certification, was considered by the CIT(A) and also the revised sanction plan received from PMC by the assessee on 01.10.2007. Further, the claim of the assessee before the CIT(A) was that it had carried out the project only with two buildings and both these buildings were completed before 31.03.2009. The C .....

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project was contemplated was converted into non-agricultural land on 30.01.1999 and the NA permission was obtained on 30.06.1999. The Tribunal in such circumstances, held that the assessee had commenced the development and construction of project only after 01.10.1998 and applying the said simile to the facts of the present case before him, the CIT(A) held that though initial building plan was sanctioned on 03.02.2005 or 11.03.2005, the actual development of project commenced only after NA orde .....

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mercial area in excess of 2000 sq.ft. or 5% of built up area, which was the limit prescribed under the Act. 8. The next objection of the Assessing Officer considered by the CIT(A) was the project not being completed on or before 31.03.2009. Since the assessee had only constructed two buildings i.e. A and B , total built up area was 2398.16 sq.mtrs. only till the time stipulated in clause (a) to section 80IB(10) of the Act i.e. 31.03.2009, which was equal to 71.40% of total built up area of 3358. .....

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sessee, the commercial area in the project exceeded 2000 sq.ft., and which basic condition was not fulfilled, hence, the assessee was not entitled to claim of deduction under section 80IB(10) of the Act. The other issue that the deduction was allowable on proportionate basis in respect of building Nos.A and B, as per the CIT(A) had become academic and there was no necessity to adjudicate the same. 9. The assessee is in appeal against the order of CIT(A). 10. The learned Authorized Representative .....

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ved prior to 01.04.2005 and consequently, provisions of clause (d) to section 80IB(10) of the Act, which were inserted after 01.04.2005 were not applicable. Reliance in this regard was placed on the ratio laid down by the Hon ble Supreme Court in CIT Vs. Sarkar Builders (2015) 375 ITR 392 (SC). It was pointed out that since the assessee had not received FSI, the building C' could not be started within time frame and further when the same was completed, no deduction under section 80IB(10) of .....

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the assessee was not entitled to the claim of deduction under section 80IB(10) of the Act in the absence of completion certificate. He placed reliance on the ratio laid down by the Hon ble High Court of Madhya Pradesh in CIT Vs. Global Reality (2015) 62 taxmann.com 204 (MP). 12. The learned Authorized Representative for the assessee in rejoinder pointed out that it was not the case of authorities below that the deduction under section 80IB(10) of the Act was not allowable in the absence of compl .....

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which was not the issue before us and the second issue was violation of terms of approval of housing project that as against the approval for three buildings, only two buildings were built within stipulated time. Another issue which was considered by the Tribunal was the coverage of commercial establishment and it was held that the amendment in clause (d) to section 80IB(10) of the Act was prospective in nature and would not have retrospective effect. The CIT(A) had allowed the claim of assesse .....

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r the said plot of land admeasuring more than one acre was approved by the local authority on 11.03.2005. As per clause (a) to section 80IB(10) of the Act, where a housing project has been approved on or after 01.04.2004 but not later than 31.03.2005, then the construction of such project should be completed within four years from the end of financial year in which the housing project is so approved by the local authority. In view thereof, the project being approved on 11.03.2005 is to be comple .....

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tal area is more than one acre available for housing project and hence, the condition laid down in clause (b) to section 80IB(10) of the Act stands fulfilled. Further, the said project as pointed out by us in the paras hereinabove was approved on 11.03.2005 and the profits from the part of project were declared in 2009-10 and the assessee had claimed deduction under section 80IB(10) of the Act in this regard. The Tribunal in assessee s own case vide order dated 28.04.2014 vide paras 4 and 5 has .....

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nal in assessee s own case is thus, decided in favour of the assessee. 14. The next objection was to the commercial area beyond permissible limits. The said claim of the assessee was rejected on the surmise that though initial building plans were approved on 11.03.2005 for the construction of three buildings A , B and C', but the same were revised thereafter in 2007 on 01.10.2007 and hence, the amendment brought in by way of insertion of clause (d) to section 80IB(10) of the Act was applicab .....

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eceived commencement certificate on 03.02.2005 and 11.03.2005 for the construction of three building A , B and C' , where building C' was not constructed and the plans for other buildings were revised by PMC on 01.10.2007, then the revised provisions of section 80IB(10) of the Act were applicable as they came into effect from 01.04.2005 and where the same has been violated, the assessee is not entitled to the claim of deduction under section 80IB(10) of the Act. We find no merit in the o .....

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lt up area as permitted u/s.80IB(10). The matter was carried before first appellate authority, wherein the various contentions were raised on behalf of assessee and having considered the same, the CIT(A) observed that Hon ble Bombay High Court in the case of CIT Vs. Brahma Associates (2011) 333 ITR 289 (Bom), wh erein, it has been held that up to 31.03.2005 (subject to fulfilling of other conditions) deduction u/s.80IB(10) is allowable to housing project approved by local authority having reside .....

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roject prior to 01.04.2005 with commercial user permitted under DC Rules / Regulations framed by respective local authority would still be exempt u/s.80IB(10). This issue of commercial limit is fortified by the decision of Hon ble Bombay High Court in the case of Brahma Associates (supra). This reasoned finding of CIT(A) on the issue of commercial limit needs no interference from our side. We uphold the same. 15. The Tribunal had already allowed this claim of assessee on the argument that this p .....

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Act, the condition laid down is that where any approval in respect of housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project was first approved by the local authority. It is not the case of Department that the time limit for completion of said development of housing project starts from 01.10.2007, it is repeatedly the case of both the authorities below that where the building plans wer .....

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ve been adhered to, then the date of completion of project would stand extended to 31.03.2013, whereas admittedly, the assessee has constructed building C' and sold some units in assessment year 2010-11 and has been found to be not eligible to the claim of deduction under section 80IB(10) of the Act. The assessee himself has not claimed any deduction under section 80IB(10) of the Act in respect of building C'. In the above said facts and circumstances of the case, we find no merit in the .....

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housing project is to be approved by the local authority, even a date by which the housing project is to be completed, is fixed. These dates have a specific purpose which gives time to the deve lopers to arrange their affairs in such a manner that the housing project is started and finished within those stipulated dates. This planning, in the context of facts in these appeals, had to be much before April 1, 2005. (d)… (e)… (f) Clause (d) makes it clear that a housing project includ .....

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gregate built-up area of the hous ing project or 5,000 square feet, whichever is higher. This is a significant modification making complete departure from the earlier yardstick. On the one hand, the permissible built-up area of the shops and other commercial shops is increased from 2,000 square feet to 5,000 square feet. On the other hand, though the aggregate built-up area for such shops and establishment is reduced from 5 per cent. to 3 per cent., what is significant is that it per mits the bu .....

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and/ or commercial establishments. Therefore, by necessary implication, the said provision has to be read prospectively and not retrospectively. As is clear from the amendment, this provision came into effect only from the day the provision was substituted. Therefore, it cannot be applied to those projects which were sanctioned and commenced prior to April 1, 2005, and com pleted by the stipulated date, though such stipulated date is after April 1, 2005. 16. The third aspect of the issue is non- .....

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as not completed the housing project within prescribed four years from the date of first approval of housing project. The Assessing Officer observed that if at all the assessee wanted he could have completed the total housing project except the so called 189 sq. mtrs. of land under road widening. The action of assessee proves that he had partially completed the construction of building and carried out on the same till 2010-11 by which, it is proved beyond doubt that he had not completed housing .....

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ecord, we find that the issue before us is with regard to prorata deduction u/s.80IB(10). On the issue of prorata deduction, the ITAT Pune Bench has allowed prorata deduction u/s.80IB(10) in the case of Ramsukh Properties Vs. DCIT, Circle 1, Pune in ITA No.84/P N/2011 vide its order dated 25.07.2012. For the convenience, the relevant portion of the order reads as under: We agree to proposition put forward by Ld. Departmental Representative that plain reading of section 80IB(10) of the Act sugges .....

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sessee should not suffer for same. The revision of plan is vested right of assessee which cannot be taken away by strict provisions of statute. The taxing statute granting incentives for promotion of growth and development should be construed liberally and that provision for promoting economic growth has to be interpreted liberally. At the same time, restriction thereon too/ has to be construed strictly so as to advance the object of provision and not to frustrate the same. The provisions of tax .....

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since additional FSI in lieu of road widening was not received from PMC. The assessee could not plan the work for C building since engineers and architects could not design the structure of building in the absence of FSI. The details of follow up done by assessee with PMC have been duly appreciated by CIT(A). The legislative intent read that the clear provisions of the requisite section, do not permit any proportionate deduction u/s. 80IB(10) of Act. However, in view of the decision in Ramsukh P .....

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f categorical finding of the Tribunal that where the project in respect of buildings A and B has been completed by 31.03.2009 and where non-completion of building C' was beyond the control of assessee, since it had not received FSI within stipulated period, we find no merit in the orders of authorities below in denying deduction under section 80IB(10) of the Act to the assessee for prorata units completed by the assessee before stipulated date. The issue in this regard is settled by various .....

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pletion certificate has been received by the assessee till the stipulated date i.e. 31.03.2008. First of all, in the order of Assessing Officer, there is mention that the assessee has received the completion certificate before the aforesaid date. However, this aspect needs verification. On the other hand, we find merit in the plea of the assessee that where the housing project has been constructed and the assessee has applied for the completion certificate, it is deemed that the said project has .....

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entative for the Revenue on the other hand has placed reliance on the ratio laid down by the Hon ble High Court of Madhya Pradesh in CIT Vs. Global Reality (supra). However, since the issue is covered by the order of Hon ble Gujarat High Court (supra) in favour of the assessee, which has been applied by Pune Bench of Tribunal in M/s. Gera Developments Pvt. Ltd. Vs. JCIT (supra), we find no merit in the plea of the learned Departmental Representative for the Revenue and the same is dismissed. The .....

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hority. In the present case, the local authority, i.e. Pune Municipal Corporation has not issued the requisite completion certificate (to be understood as occupancy certificate in the context of the PMC) before the stipulated date. However, the assessee has countered the aforesaid objection by pointing out that in-fact it has completed the construction of the project on 04-12-2007 i.e. much before the stipulated date of completion contained in section 80IB(10)(a) of the Act, it had applied to th .....

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per the sanctioned plans within the stipulated date. In this background, in our view, the CIT(A) made no mistake in allowing the claim of the assessee and her approach is not only consistent with the decision of the Pune Bench of the Tribunal in the case of Satish Bora and Associates (supra) but it is also in line with the judgement of the Hon ble Gujarat High Court in the case of CIT vs. Tarnetar Corporation, (2014) 362 ITR 174 (Guj). The relevant portion of the judgement of the Hon ble Gujarat .....

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