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2016 (11) TMI 1246 - ITAT PUNE

2016 (11) TMI 1246 - ITAT PUNE - TMI - Claim of deduction under section 80IB(10) - prorata deduction under section 80IB(10) on such flats which complied with the conditions laid down under the said section i.e. where the area was less than 1500 sq.ft. - whether the area of the flats is within limits prescribed under the Act in order to avail the deduction under section 80IB(10) of the Act and in case it is so, then the said deduction cannot be denied to the assessee? - Held that:- Assessee i .....

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Valuer were correct as against the approximation of the DVO. In the totality of the above said facts and circumstances and in order to meet the ends of justice, we are of the view that the issue needs to be looked into at the level of Assessing Officer, who shall direct the DVO to measure each of 16 flats which, according to him exceeds area of 1500 sq.ft. The Assessing Officer shall also consider the valuation report submitted by the assessee in this regard and after providing reasonable opport .....

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10-11 against the order passed under section 143(3) of the Income Tax Act, 1961 (in short the Act ). 2. The cross appeals filed by the assessee and Revenue were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee in ITA No. 1839/PN/2014 has raised the following grounds of appeal :- 1. On the facts and in the circumstances of the case and in law, learned CIT(A) erred in upholding the finding of AO that, based on the report of the DVO of .....

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of appeal :- 1. The learned Commissioner of Income-tax (Appeals) erred in allowing the assessee's claim of deduction u/s 80IB(10) on pro-rata basis. 2. The learned Commissioner of Income-tax (Appeals) erred in not appreciating the import of Section 80IB(10)(c) which clearly lays down that in order to envisage the benefits of this section, all the conditions laid down therein has to be fulfilled. 3. The learned Commissioner of Income-tax (Appeals) erred in allowing the deduction u/s 80IB(10) .....

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ire project approved by the Local Authority and there is no question of allowing deduction to a part of the project. 5. The issue arising in the cross appeals is in relation to the claim of deduction under section 80IB(10) of the Act. 6. Briefly, in the facts of the case, the assessee for the year under consideration had declared income from development and construction of housing project named Mont Vert Grande , at Pashan Sus Road, Pune. The assessee had claimed deduction under section 80IB(10) .....

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ation was carried out by the DVO and he submitted his report vide letter dated 21.03.2013. He reported that the area of plot of land was 5.7410 acres and the date of commencement of project was 12.07.2005, which was completed on 31.03.2011. He further reported that out of approved residential buildings A to F, building D was not completed and only parking slab was completed and the work was stopped. The assessee had constructed 248 residential units and 5 commercial establishments. The DVO repor .....

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with the said section. The assessee was thereafter, issued show cause notice on 22.03.2013 in this regard as to why the deduction claimed under section 80IB(10) of the Act should not be withdrawn. In response thereto, the assessee furnished submissions on 23.03.2013 and pointed out that the report of Government Valuer was factually incorrect. The assessee in turn, got the verification done through another Government Valuer and the valuation report was filed along with submissions. The assessee .....

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he Government Valuer had given two measurements in respect of odd numbers of flats in building E. He stressed that the findings were not based on measurement of sites but on table calculation from building plans for different flats. Reliance was placed on the Valuation Report submitted by the assessee in this regard and it was pointed out that the Valuer had visited and measured all the flats. The Assessing Officer has tabulated the measurements by the Government Valuer and measurements by the V .....

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amount of ₹ 3.39 crores. 7. The CIT(A) did not accept the plea of assessee vis-à-vis measurements of built up area of the flats and held that the finding of Assessing Officer based on the report of DVO of the project being 16 flats exceeding the area of 1500 sq.ft. as per section 80IB(14)(a) of the Act is liable to be upheld. However, the second claim of assessee of prorata deduction under section 80IB(10) of the Act in respect of those units which satisfy the conditions stipulated .....

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. 9. Shri Pramod Shingte appeared on behalf of the assessee and Shri Hitendra Ninawe appeared on behalf of the Revenue and put forward their contentions. 10. We have heard the rival contentions and perused the record. First, we shall take up the appeal of Revenue, which is against the order of CIT(A) in allowing the prorata deduction under section 80IB(10) of the Act on such flats which complied with the conditions laid down under the said section i.e. where the area was less than 1500 sq.ft. We .....

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tion of provisions of section 80IB(10)(c) of the Act by amalgamation of two units i.e. row houses D-3 and D-4 and whether deduction under section 80IB(10) of Act should be allowed for the balance eligible units constructed in the project. Admittedly, after merging of the two units i.e. row houses D-3 and D-4, the total covered area was more than 1500 sq. ft. which is the condition stipulated in section 80IB(10)(c) of the Act. The assessee had violated the said condition while constructing the sa .....

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/PN/2008, order dated 08.08.2012 and also the subsequent judgment of the Hon'ble Madras High Court in the case of Viswas Promoters (P) Ltd. (2013) 29 taxman.com 19 (Madras) and it was held as under:- 10. On this aspect, we have considered the plea of the assessee in the light of the precedents. A similar situation has been considered by this Bench in the case of D.S. Kulkarni Developers Ltd. (supra) wherein the following discussion is relevant :- 20. In this background, the alternative plea .....

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case of M/s Ekta Housing Pvt. Ltd., ITA No.3649/Mum/2009 dated 20.05.2011 has upheld the plea of the assessee for a proportionate deduction under Section 80-IB(10) of the Act where some of the residential units in the project violated the condition contained in Section 80-IB(10)(c) of the Act. The Mumbai Bench after noticing the precedents in the case of - i) ITO vs. Air Developers, 25 DTR 287 (Nag.); ii) DCIT vs. Brigade Enterprises Pvt. Ltd., 14 DTR 371 (Bang.); iii) ACIT vs. Sheth Developers .....

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ly, the Tribunal al so considered the decision of 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 and 9 of the order of the Tribunal in the case of M/s Ekta Housing Pvt. Ltd. (supra) 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 .....

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e 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 commercial project, the assessee would be entitled to claim for deduction under Section 80-IB(10) even if the project had commercial element in excess of 10%. At paras 27 and 28, the Court observed as follows :- 27. The question then to be considered is, whethe .....

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s approved by the local authorities having residential buildings with commercial user upto 10% of the plot area would alone be entitled to deduction under Section 80-IB(10). As noted earlier, restriction regarding commercial user has been imposed for the first time by introducing clause (d) to Section 80-IB(10) with effect from 01.04.2005. Therefore, it was not open to the Tribunal to hold that prior to 01.04.2005, projects having commercial user upto 10% of the plot area alone would be eligible .....

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t. If the conditions set out in Section 80- IB(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 part of the project. In the present case, the commercial user is allowed in accordance with the DC Rules and hence the assessee was entitled to Section 80-IB(10) deduction on the entire project approved by the local authority. However, the assessee has not challenged the decision of the Tribunal in re .....

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n ble High Court do not approve the findings of the Tribunal that a residential building with commercial user up to 10% of the plot area would be entitled to deduction under section 80-IB(10). The issue that, in case where certain residential units are of a built-up area in excess of the prescribed limit of 1,000 sq.ft. in residential project, this would result in the entire exemption being lost, or whether the assessee would be entitled to a proportionate deduction was not before the High Court .....

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11th floor alone. For the balance of the residential units, the plea of the assessee for deduction under Section 80-IB(10) of the Act is justified, and the assessee succeeds on this aspect. 11. Following the aforesaid precedent, we hold that merely because assessee violated the condition prescribed under Section 80-IB(10)(c) of the Act in relation to the amalgamated Bunglow G1 & G2, the deduction under Section 80-IB(10) of the Act cannot be denied in its entirety. In other words, the denial .....

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n the absence of any contemplation under Section 80-IB(10) of the Act for proportionate relief on partial compliance, section cannot be interpreted to granted pro rata relief. The aforesaid argument of the Revenue has been negated by the Hon ble Madras High Court and therefore the claim of the assessee for proportionate deduction under Section 80-IB(10) of the Act cannot be denied. 11. Further, the Calcutta Bench of the Tribunal in Bengal Ambuja Housing Development Ltd. vs. DCIT in ITA No.1595/K .....

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ds of appeal raised by the Revenue. 13. Now, coming to the appeal filed by the assessee, wherein the assessee is aggrieved by denial of the said deduction under section 80IB(10) of the Act on 16 flats on the surmise that the same do not fulfill the basic conditions of the area of flats being 1500 sq. ft. or less. Under the provisions of section 80IB(14)(a) of the Act, the definition of built up area is provided, where the built up area of flats should not exceed 1500 sq.ft. In the case of the as .....

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ithdrawn. On the next date of hearing i.e. on 23.03.2013, the assessee pointed out that the verification exercise carried out by the DVO was only in respect of four flats of which the measurements were taken and for the balance flats, the area was worked out on the basis of other documents but no physical verification was carried out. In order to meet the requirement of built up area in respect of various flats built by it, the assessee furnished report from another Valuer Smt. Arti Sanghvi. The .....

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