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2016 (6) TMI 180 - ITAT MUMBAI

2016 (6) TMI 180 - ITAT MUMBAI - TMI - Eligibility of deduction u/s, 80IB(10) - whether the assessee has violated the condition that the housing units shall not exceed 1000 sq.ft area by construction of flats of more than the area prescribed? - Held that:- The assessee firm has sold 10 flats whereby there is a non-compliance of provisions of clause (e) & (f) of Section 80IB (10) of the Act , which newly introduces clauses (e) & (f) of Section 80IB (10) of the Act are duly applicable for the asse .....

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00 square feet, in accordance with the terms indicated by the Tribunal in its orders [2014 (10) TMI 259 - ITAT MUMBAI] as issue is squarely covered with the ratio of law laid down by the Tribunal in afore-stated decision(s) which we respectfully follow with respect to four flats as per terms indicated above , while deductions u/s 80IB(10) of the Act is disallowed with respect to ten flats as there is non-compliance of provisions of Section 80(IB) of the Act clauses (e) and (f) as applicable to t .....

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essment year 2010-11, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 26-03-2013 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the Revenue in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) read as under:- 1. On the facts and in the circumstances of the case and in law, .....

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fulfilled, deduction u/s 801B(10) is not available since the deduction is eligible on the project and not on individual residential unit. 3. On the facts and in the circumstances of the case and in law, the CIT(A) has failed to appreciate that there is no mention in the Income Tax Act that the assessee may be allowed deduction on proportionate basis. 4. The appellant prays that the order of Ld.CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored." 3. At th .....

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ssee-firm in the return of income filed with the Revenue . 6. A survey action was conducted by the Revenue u/s 133A of the Act on 27th October, 2010 at the business premises of the assessee-firm . The statement of Shri Prashant Sharma, partner of the firm and Shri Manish S. Karnavat, Sales Manager were recorded. 7. It was observed during the course of survey action on 27.10.2010 that in the project Neptune , 47 flats were having built up area of 1260 sq. ft. i.e. more than the prescribed limit o .....

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ttention is drawn to the 3BHK flats having area of 1260 sq.ft. in respect of these 3BHK flats, Suncity Housing has entered into 2 agreements for different areas viz. 890 sq.ft. and 370 sq.ft. As such, the total no. of actual flats are only 100 but due to 2 agreements for each 3 BHK flats, the total no. of flats is at 150. Q.No.11. What is the carpet area and built up area for these 3BHK flats at NEPTUNE? Ans. Carpet area is 84.31 sq.mtr. (59.55. sq.mtr + 24.76 sq.mtr.). Built up/saleable area is .....

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to Shri Prashant Sharma works out to ₹ 8.26 crores. The relevant part of the statement of Shri Prashant Shamra admitted withdrawing of deduction u/s 80IB(10) of the Act , recorded u/s. 131 of the Act on 27th October, 2010 during the course of survey are as under:- Q. No. 7: Your attention is drawn to Q. No. 7, 10 & 11 of the statement of Shri Manish S. Karnawat, Sales manager of M/s. Suncity Housing wherein it has been stated that there are 50 flats of 3 BHK in Neptune having built up .....

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tion of Section 80IB(l0). But on the presumption that these 3BHK flats are having built up area is less 1000 sq.ft. we have claimed deduction on the entire profit of Neptune project During the course of survey, when this matter was pointed out that the measurement of the 3BHK flats is more than 1000 sq.ft., hence we are considering to withdraw our claim of deduction u/s. 80IB(10) on proportionate basis of the flats having built up area of more than 1000 sq.ft. and less than 1000 sq.ft. We are do .....

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fts. I am withdrawing the deduction claimed u/s. 801B(10) which was claimed for AYs 2009-10 & 2010-11 for the project Neptune. The total income shown in project Neptune in A.Y.2009-10 is ₹ 11,54,52,219/- and income for A.Y. 2010-11 is ₹ 3,35,12,657/- totaling of ₹ 14,89,64,876/- which was claimed as deduction u/s 80IB (10). Now I apprehend that 55.49% of the total built up area of the project is not eligible for deduction u/s. 80lB(l0). Hence, in this proportionate, I hereb .....

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he imposition of penalty and other consequences. 3.3 In the statement, Shri Prashant Sharma has further reconfirmed the withdrawal of deduction u/s.80IB (10) as under:- Q. No. 10: Do you want to say anything else. Ans: Yes; I once again confirm about the withdrawal of deduction u/s 80IB(10) to the extent of ₹ 8,26,60,609/- for A.Ys.2009-10 & 2010-11 subject to filing of correct details. Necessary taxes will be paid and return of income for above two years will be revised. A survey acti .....

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204 & 205 by two separate agreements but that he had been handed over one unit of area 1260 sq.ft. by the builder having a single entrance and he had not made any structural changes in the flat. The same statement was given by the other purchasers of the flat also i.e. Shri Pravin Shankarlal Jaiswal, Sh. Rajesh Kapoor and Shri Avinash Shetty. In the statement recorded on 20th Januray, 2012, Shri Prashant Sharma, partner of the assessee firm stated that the assessee firm was claiming proporti .....

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you, however as per the legal opinion & some decisions in favour of proportionate deduction from Jurisdictional Appellate Tribunal & High Court , in anticipation of getting benefit of the subject Judgment we are claiming proportionate deduction under Section 80IB(10) of the I.T.Act. Shri Prashant Sharma also stated that the assessee firm has withdrawn deduction u/s 80IB(10) of the Act ₹ 2,07,77,847/- for the assessment year 2010-11 in respect of the Neptune project. However, the A .....

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The statement of Shri Prashant Sharma was recorded during the course of assessment proceedings for assessment year 2009-10 wherein he stated that based on the decision of ITAT, they have got legal opinion that the Neptune project is entitled for 100% deduction u/s 80IB(10) and, hence, the assessee was retracting from the statement recorded in the course of survey carried on 27th October, 2010 and not filing a revised return to withdraw the claim of deduction u/s 80IB (10) of the Act with respec .....

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earned CIT(A) for the assessment year 2009-10 while adjudicating first appeal held that the assessee firm was entitled to proportionate deduction u/s 80IB (10) of the Act in respect of flats whose area did not exceed 1000 sq. ft. . It was also held by the learned CIT(A) that for computing the area of the plot of land for the project it is the total area of the project of 8.98 acres for all the buildings in the layout which has to be considered and not the area of land on notional basis for the N .....

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adjacent units to a single buyer, therefore new clauses (e) & (f) has been inserted by the Finance Act, 2009 in section 80IB (10) of the Act w.e.f. the assessment year 2010-11 whereby the housing project will not be allowed to allot more than one residential unit in the housing project to the same person, not being an individual, and in the case of individual, no other residential unit in such housing project is allotted to any of the following persons:- (i) The individual or spouse or minor .....

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arty Flat No. Built up area (in sq. ft.) Agreement value (in Rs.) 1 Asha Rani Saran B/701 769 35,60,000/- Asha Rani Saran B/706 319 14,80,000/- 2 Tresa Paul B/901 769 53,68,250/- Tresa Paul B/906 319 22,31,750/- 3 Shalini Lakshman Rao B/1001 769 53,68,250/- Shalini Lakshman Rao B/1006 319 22,31,750/- 4 Prakash Ramdas Ashar B/2501 769 61,06,400/- Prakash Ramdas Ashar B/2506 319 25,38,600/- 5 Akash N. Rajpal B/2503 821 60,20,000/- Akash N. Rajpal B/2504 769 53,36,000/- The AO held that the Neptune .....

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building are having built up area of more than 1000 sq. ft. and more than one unit has been allotted to the same person during the previous year relevant to the assessment year 2010-11, hence, the assessee firm is not entitled for deduction u/s 80IB (10) of the Act and the assessee firm s claim of deduction of ₹ 3,35,12,657/- in respect of profits of Neptune building was disallowed by the A.O. and deduction u/s 80IB (10) of the Act was allowed only in respect of Jupitor and Pluto building .....

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and there were total 150 flats which are comprised of 144 saleable flats and 6 refuge flats as per the following approved plan: Number of flats Area 50 950 sq. ft. 47 890 sq. ft. 47 370 sq. ft. 144 The assessee firm submitted that out of the above, 50 flats having area less than 1000 sq. ft. has been allowed deduction u/s 80IB(10) of the Act by the learned CIT(A) vide his appellate orders dated 23rd May, 2012 for assessment year 2009-10 . The assessee firm submitted that during the year under c .....

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fore the assesse firm was entitled to deduction u/s 80IB(10) in respect of these four flats. In support, the assessee firm relied upon the following decisions to contend that if the approved project consists of eligible and non-eligible flats, deduction u/s. 80IB of the Act has to be restricted to the flats having area less than 1000 square feet:- a) ITO v. Air Developers, (25 DTR 287 (Nag.) ) b) DCIT v. Brigade Enterprises Pvt. Ltd., (14 DTR 371(Bang.)) c) ACIT v. Sheth Developers P. Ltd., (33 .....

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1 (Chennai) Thus, the assessee firm submitted that deductions u/s 80IB(10) of the Act be allowed in respect of the 4 flats sold where the area was less than 1000 square feet. The learned CIT(A) observed that the issue involved in this appeal is similar to the issue involved in appeal for the assessment year 2009-10 in assessee firm s own case which was decided by his predecessor learned CIT(A). The relevant findings of the predecessor learned CIT(A) in an appeal for assessment year 2009-10 is re .....

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rea of the 47 flats of 1260 sq ft saleable area is less them 1000 sq ft. It is noted from the copy of the approved plan that in the Wing B the so called 1 bedroom flat of 370 sq.ft (l BHK) has only one living room and 1 Kitchen but no bedroom and hence it cannot be termed in commercial parlance as a 1 BHK flat. It was only after amalgamation that 3 BHK flat of 1260 sq ft was made as an independent residential unit. The flats of 370 sq.ft is only on paper design but practically never existed phys .....

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nit. Therefore the contention of appellant that 47 flats with 370 sq. ft. area were independent residential units is not tenable, even if on paper the appellant has sold it by way of separate agreements or had two separate meters. The contention that no application for merger of flats have been made with BMC and hence on records they remain two separate flats, cannot be seen de hors the reality which would defeats the intent and purpose of the Act. The deduction u/s 80IB(10) is to promote afford .....

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a liberal approach needs to be avoided on facts and circumstances of the case as held by Supreme Court and high courts in several decisions. Moreover assessee's inaction to take remedial steps for application of merger of flats to BMC cannot be rewarded when the assessee has violated by amalgamating the flats and constructing the flats in violation of the approved plan approved by BMC. The complicity of appellant is discernible from the fact that in its own pamphlet printed for giving inform .....

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ding is constructed and maintained in the manner as per approved plans. Moreover the contractor who constructed on behalf of the appellant cannot step into shoes of developer and he has no right to entertain the request of customers without taking approval or consent of the developer. Since all the 47 flats of 370 and 47 flats of 890 have been converted into 47 flats of 1260 sq ft. on all the floors further shows that it was not in natural course that some customers joined the flats rather it wa .....

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ntention that the developer had no role in amalgamation of flats is not correct. The another argument of Ld AR that the built up area of those 47 amalgamated of saleable area of 1260 sq ft, is less than 1000 sq ft has been considered. The copy of agreements enclosed by Ld AR suggest that the total carpet area of the amalgamated flat is 907 sq ft and ld. AR has been enhanced the same further by 10% to arrive at built up area of 997 sq ft. However, the Ld AR has computed the built up area by enhan .....

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f built up area on technical parameters, such adhoc working of built up area cannot be accepted as gospel truth. Hence the argument that the built up area of the flats even after amalgamation remained below 1000 sq ft cannot be accepted. Thus it is clear that out of the total 150 flats of Neptune building, 47 flats of 1260 sq ft. of area are more than 1000 sq ft. in built up area and hence the appellant is not eligible for deduction in respect of profits in respect of such 47 flats in Neptune Bu .....

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Perusal of the plethora of decisions of ITAT relied upon by the Ld. AR as above, it is noted that the ITATs have held in those decisions that proportionate deduction has to be allowed in respect of eligible flats after excluding the profits of non eligible flats provided that the assessee fulfills the other conditions such as the area of plot of land being more than 1 acre. The ITAT Kolkata decision in case of Bengal Ambuja Housing Development Ltd has also been approved by Kolkata High court on .....

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the approved plans it is noted that the plot of land for which the layout for all building i.e. Mars, Venus, Sundle, Jupiter, Neptune & Pluto are constructed is of 36,365 sq mts on which appellant has constructed various buildings namely Mercury, Sundle, Venus, Neptune & Pluto on the said plot from time to time. It has been contended by the Ld AR that all the buildings are part of one common layout on a single plot of land which is of 36,365 sq mts with no specific area of land' allo .....

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r Neptune building by the appellant from other buildings of the project, which are also constructed on the same plot of land. It is further contended that the development rights was obtained by appellant for total plot of 8.98 acres by single agreement and the said plot has also not been subdivided in sub-plots for various buildings of the project. The deduction in respect of other buildings such as Venus, Jupiter and Pluto constructed by appellant on the same plot of land has been allowed to th .....

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as held that for purpose of ascertaining the size of the plot of land it is the total area of plot in a layout which needs to be considered and not the area of plot on notional basis. I have gone though the above decision relied by the Ld AR. The ratio of the decision squarely applied to the appellant. In fact, the appellant case is on better footings than the case of Akruti City (supra) because in the latter case, on the same plot of land there were two different projects but only one project w .....

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on-eligible project except that some flats in Neptune building are more than 1000 sq ft. The deduction in respect of other buildings such as Venus; Jupiter and' Pluto constructed by appellant on the same plot of land has been allowed by AO to the appellant in earlier years and this year. Hence for computing the area of the plot of land of the project, it is the total plot area of project of 8.98 acres for all buildings in the layout, which has to be considered and not the area of land on not .....

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8%. Thus, even if 13.68% of the area of plot of land of 36,365 sq mts (8.98 acres] is excluded (though not required in view of ITAT decision in case of Akruti city), still the remaining area of plot of land of project is at 31,390 sq mts (86.4% of 36365) which is equivalent to 7.75 acres. Accordingly even if the area under construction of ineligible flats is excluded, then also the plot of Land of the project under eligible use remains at 7.75 acres against the actual plot of land size of 8.98 a .....

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arned by appellant during the year from sale of flats of Neptune Building. It is noted that for AY 2009-10 the total profit earned from sale of flats in Neptune building is ₹ 11,54,52,219 out of which only ₹ 5,13,87,782 (being 44.51% of ₹ 11,54,52,219) is eligible for deduction u/ s 80IB(10). The Ld AR vide his alternate arguments has also requested to at least allow the proportionate deduction @ 44.51% of total profits of Neptune building. Accordingly, the disallowance made by .....

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e appellate orders of the learned CIT(A) dated 12-05-2014. 11. Aggrieved by the orders of the learned CIT(A), the Revenue is in appeal before the Tribunal. 12. The learned D.R. relied on the orders of the A.O. and submitted that the Tribunal has allowed the appeal of the assessee firm for the assessment year 2009-10 in ITA No. 3936/Mum/2012 vide orders dated 17.09.2014 , while Revenue appeal in ITA no. 4877/Mum/2012 has been dismissed as infructuous .None appeared for the assessee firm before th .....

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contentions of the ld. representatives of the parties. Except the advertisement/pamphlet in question, the Revenue has not produced any evidence on the file that the flats in question have been adjoined by the assessee to make it a unit. On the other hand, the assessee has produced the documents, which forms part of the official records, namely approved plan by the BMC, the commencement certificate dated 27.06.05, the occupancy certificate dated 30.03.09 etc. to show that the flats were construc .....

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d any of the provisions of section 80IB(10) of the Act at the time or before the sale of flats in question. Even if we assume that end users might have joined the two flats on a floor so as to make it one unit, then no fault can be attributed on the part of the assessee in this respect. To be more clear, we reproduce the provisions of section 80IB(10) of the Act as herein under: Section 80-IB(10) (10) The amount of deduction in the case of an undertaking developing and building housing projects .....

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the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, [but not later than the 31st day of March, 2005]within four years from the end of the financial year in which the housing project is approved by the local authority. [(iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in .....

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e in respect of such housing project is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is .....

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up area of the housing project or [five thousand square feet, whichever is higher];] (e) not more than one residential unit in the housing project is allotted to any person not being an individual; and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:- (i) the individual or the spouse or the minor children of such individual, (ii) the Hin .....

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of the above reproduced provisions of section 80IB(10) reveals that the requirement of law is that the project must be approved by the local authority. So far as, the point of dispute before us is concerned, as per the clause c above, the residential unit should have a maximum built up area of 1000 sq. ft. for the project which is situated within the city of Mumbai. It is not the case of the Revenue that the project was not approved by the local authority i.e. BMC. It is also not the case of the .....

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by the users/purchasers for the said 94 flats. There was no provision at that time in the act that more than one flat could not have been purchased by an individual or that the individual after purchasing the flat could not join the two flats, so far so the provisions of section 80IB(10) are concerned. Under such circumstances, it cannot be said that any violation was committed by the assessee of the provisions of section 80IB(10) as were in operation during the relevant period. We may note tha .....

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taken away by applying the said clause (e) retrospectively. Hence, though the loophole has been plugged by the insertion of clause (e) w.e.f. 01.04.10, but the fact remains that before the insertion of clause (e), the law in operation at that time will be applicable and if the assessee is entitled to deduction under section 80IB(10) as per the prevalent law during the assessment year in question, the same cannot be denied to the assessee by applying the provisions which have prospective effect. .....

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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 approved by Muncipal authorities was less than 1,000 sq.ft. We have also noted that it is not even revenue's case that each of flat on standalone basis was not a residential unit. Even if flats were constructed or planned in such a way that two flats could indeed be merged into one larger unit, as long each flat was an independent residential unit, dedu .....

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ate as such. That leaves no ambiguity about the factual position. We have further noted that the prohibition against sale of more than one flat in a housing project to members of a family has been inserted specifically with effect from 1st April, 2010, and, in our humble understanding, this amendment in law can only be treated as prospective in effect. What is, therefore, clear is that so far as preamendment position is concerned, as long a residential unit has less than specified area, is as pe .....

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which legislature put certain restrictions on sale of residential units to certain family members of a person who has been sold a residential unit in the housing project. Section 80IB(10) now provides an additional eligibility condition that in a case where a residential unit in the housing project is allotted to any person being an individual, no other residential unit in such housing project is allotted to any of the following person, namely (i) the individual or the spouse, or the minor chil .....

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dential unit. However, this is being circumvented by the developer by entering into agreement to sell multiple adjacent units to a single buyers. Accordingly, it is proposed to insert new clauses in the said sub-section to provide that the undertaking which develops and builds the housing project shall not be allowed to allot more than one residential unit in the housing project to the same person, not being an individual, and where the person is an individual, no other residential unit in such .....

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. 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 whatsoever to suggest that these restrictions need to be applied with retrospective effect. The amendment seeks to plug a loophole but restricts the remedy with effect from 1st day of April, 2010, i.e. AY 2010-2011. The law is very clear that unless provided in the Statute, the law is always presumed to be prospective in nature. It will, therefore, .....

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s 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 himself has offered the deduction u/s.80IB(10) in respect of these units during the course of survey proceedings, it is only elementary that neither statement recorded u/s.133A has an evidentiary value, nor a legal claim can be declined only because ass essee, at some stage, decided to give up the same. In view of these discussions, and bearin .....

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essment, in the absence of specific arguments in support of the same, are treated as abandoned and, as such, dismissed. 8.1. The facts of the present case are squarely covered with the above decision of the Tribunal. 8.2. So far so, the second contention of the assessee that even otherwise the built up area calculated by the stamp duty authorities comes to less than 1000 sq. ft. even when the flats are assumed to be joined, we find that the Revenue has not produced any evidence to prove that wha .....

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aining within the four corners of the provisions of section 80IB(10), can not be said to have committed any violations of the prevalent provisions during the period. Finding a loophole in the provisions and suggesting the prospective buyers that they can join the flats together in itself cannot be said to be a violation of the provisions of section 80IB(10) on the part of the assessee. In common parlance every businessman, assessee etc. tries to get maximum benefit and to avoid the tax but witho .....

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n agreement with the view of the co-ordinate bench of the Tribunal in the case of Emgeen Holdings Pvt. Ltd. (supra) that so far as the preamended position is concerned, as long a residential unit has less than specified area, is as per the duly approved plans and is capable of being used for residential purposes on standalone basis, deduction u/s.80IB(10) cannot be declined in respect of the same merely because the end user, by buying more than one such unit in the name of family members, has me .....

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to the allowability of deduction under section 80IB(10) by the ld. CIT(A) on proportionate basis in respect of the flats which were found having area less than 1000 sq. ft. by the Revenue Authorities. 1.2 Since we have already allowed the admissibility of deduction under section 80IB(10) in respect of all the flats in question, hence in view of our finding given above , the appeal of the Revenue has to become infructuous and the same is accordingly dismissed 1.3 In the result, the appeal of the .....

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