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2017 (4) TMI 774 - ALLAHABAD HIGH COURT

2017 (4) TMI 774 - ALLAHABAD HIGH COURT - TMI - Fulfillment of condition laid down in Section 80IB(10)(b) - area of the plot of land being minimum one acre - Held that:- Explanation (i) is clarificatory in nature and, therefore, subsequent approvals obtained by Assessee in view of addition of land to its credit, will not make any difference. In view thereof, question answered in favour of Revenue and against Assessee and we hold that Assessee did not satisfy the requirement of area of plot of la .....

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h Section 80IA (7)? - Held that:- We answer question in favour of Assessee and against Revenue, holding that it is not mandatory and only directory and Assessee cannot be made to suffer if it filed audit report in form 10CCB in the course of assessment proceedings and not alongwith return.- Decided against Revenue - Income Tax Appeal No. 73 of 2010, Income Tax Appeal No. 6 of 2012, Income Tax Appeal No. 1 of 2013, Income Tax Appeal No. 29 of 2014 - Dated:- 7-4-2017 - Hon'ble Sudhir Agarwal A .....

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now Bench, Lucknow (hereinafter referred to as 'Tribunal') in I.T.A. No. 67/LUC/09 relating to A.Y. (hereinafter referred to as 'A.Y.') 2005-06. It was admitted on two substantial questions of law which read as under: "(i) Whether Income Tax Appellate Tribunal was correct in law, under the facts and circumstances of the case in holding that the Assessee fulfilled the conditions laid down in section 80IB(1) of the Act without appreciating that at the time of commencement of t .....

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claim of the Assessee on the basis of report furnished in the course of assessment proceedings." 2. Connected Appeal No. 6 of 2012 has arisen from judgement and order dated 15.12.2011 passed by Tribunal in I.T.A. No. 72/LKW/2011 relating to A.Y. 2007-08. Revenue has preferred this appeal and it was admitted on the following substantial question of law: "Whether learned Income Tax Appellate Tribunal erred in law while recording a finding that the Assessee fulfilled the condition laid do .....

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Assessee'). 4. Third appeal i.e. Income Tax Appeal No. 1 of 2013, has arisen from the judgement and order dated 22.8.2012 passed by Tribunal in I.T.A. No. 283/LKW/2012 relating to A.Y. 2006-08. The substantial questions of law are substantially same but since differently worded, therefore, to make record straight, we are reproducing the same as under: "(i) Whether on a true and correct interpretation of the provisions contained in the Section 80I-B (10), the Tribunal was legally correct .....

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filed before 31.03.2008, the Assessee's claim for exemption under Section 80I-B (10) stood disqualified, even though the project had duly been executed and completed well in time. (iii) Whether there existed any material / information which could validly lead to an observation that the project formulated by the Assessee (for which approval has been granted by LDA prior to 1st April, 2004) had not been completed by the stipulated dated i.e. 31.03.2008, so as to call for a deviation from the f .....

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d by Tribunal in C.O. No. 18/LKW/2013 filed by Assessee, together with I.T.A. No. 319/LKW/2013. It was admitted on followings question of law : "(i) Whether Section 80IB (10) as had been brought on the statute book by Finance (No.2) Act of 2004 w.e.f. 1.4.2005, in substitution of earlier provision, could be made applicable in the instant case where the project had been approved by the prescribed authority on 22.06.2003 i.e. prior to 1.4.2004. (ii) Whether on a true and correct interpretatio .....

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IB (10) and the regulatory provisions contained in the allied statutes, it could be validly held that in the absence of completion certification having been filed before 31.03.2008, the Assessee's stood disqualified in its claim for exemption under Section 80IB (10), even though the project had duly been executed and completed well in time. (iv) Whether there existed any material before Tribunal to deviate from the finding of fact recorded by a coordinate bench in Assessee's own case for .....

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s "Fortuna Apartment" on three contiguous plots of land, admeasuring 4550.07 sq. mts. Details of plots are as under: Sl. No. Plot No. and address thereof Instrument through which acquisition had been made Area in Sq. Mtrs. (i) 27A/1, Jopling Road, Lucknow. Purchase deed executed by the owner Sri Karuna Shankar Dubey 52.44 (ii) 27A/2, Jopling Road, Lucknow. Builders' agreement dated 24.4.2001 2657.00 (iii) 27A/3, Jopling Road, Lucknow. Builders' agreement 1840.63 Total 4550.07 8 .....

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ar commencing from A.Y. 2004-05 (Financial Year 2003-04). 10. For A.Y. 2005-06, Asseessee filed return on 31.10.05 showing net income of ₹ 1934180/-. It also claimed deduction under Section 80IB (10) at ₹ 2365254/-. 11. Assessing Officer (hereinafter referred to as 'AO') disallowed deduction claimed by Assessee under Section 80IB (10) on the following grounds: "1. Audit report as per Rule 18BBB in form no. 10CCB had not been filed along with the return. 2. Such report da .....

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and CIT (A) held that Assessee is eligible for deduction. Revenue carried the matter in appeal before Tribunal, who, vide order dated 8.4.2010, upheld the view taken by CIT (A) that Assessee is entitled for exemption as claimed under Section 80IB (10). Appeal of Revenue on this ground was rejected. 13. This has been challenged in Income Tax Appeal No. 73 of 2010, pointing out that first approval was granted by LDA to the building plan of housing project of Assessee on 24.11.01, when total area, .....

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numbers, hence condition of area being more than one acre for claiming deduction under Section 80IB (10)(b) was not satisfied. Appeal preferred by Assessee before CIT (A) failed. CIT (A) upheld disallowance of deduction vide order dated 30.8.2010 on the following grounds: "(i) It was not an integrated project but two distinct projects undertaken by the appellant and accordingly the requirement of land area of at least one acre had not been fulfilled; (ii) Lucknow Development Authority from .....

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ub-section (10) of section 80IB of the Income Tax Act, 1961; (iv) The assessee merely carried out 'works contract' as per the agreement with Shri Karuna Shanker Dubey and for such 'works contract' there is a specific prohibition for claiming deduction under section 80IB (10) as per 'explanation' inserted by the Finance (no. 2) Act, 2009 w.e.f. 1.4.2001." 15. Tribunal, however, allowed appeal preferred by Assessee and held on this question that project has started on .....

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377; 6160410/-. CIT (A) dismissed appeal and confirmed assessment order vide order dated 30.11.2011. Assessee carried the matter to Tribunal. It has also dismissed Assessee's appeal upholding disallowance of deduction on the ground of non-availability of completion certificate. 17. Now coming to Assessee's appeals for A.Y. 2008-09, income of ₹ 1216014/- was disclosed in the return filed on 30.9.08 after claiming deduction under Section 80IB (10). The said deduction was disallowed b .....

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elevant to any assessment year from such housing project if, - (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998; (b) the project is on the size of a plot of land which has a minimum area of one acre; and (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometres from the muni .....

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st day of March, 2008 by a local authority shall be hundred percent of the profits derived in the previous year relevant to any assessment year from such housing project if,- (a) such undertaking has commenced or commences development and construction of the housing project on or after the Ist day of October, 1998 and completes such construction- (i) in a case where a housing project has been approved by the local authority before the Ist day of April, 2004, on or before the 31st day of March, 2 .....

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is approved by the local authority. Explanation- For the purposes of this clause,- (I) in a case where the approval in respect of the 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 is first approved by the local authority; (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housi .....

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his behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place; (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed three percent of the aggregate built-up area of the housing project of .....

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l 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 Hindu undivided family in which such individual is the karta, (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. Explana .....

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.2013. 23. Revenue preferred appeal against order dated 6.2.2013 insofar as the ground relating to size was answered in favour of Assessee and Assessee also filed cross-objections with regard to denial of deduction for want of completion certificate. Tribunal vide judgement dated 11.4.2014 has dismissed Revenue's appeal upholding Assessee's cross-objection hence Assessee has brought the I.T.A. No. 29 of 2014 in which the questions raised have already been quoted above. 24. First of all, .....

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. 4550.07 sq. mts. 26. One of the essential conditions to attract deduction under Section 80IB (10) is that the housing project approved by local authority must be on the size of a plot of land which has a minimum area of one acre. The word 'plot' itself has not been clarified or explained anywhere that it may include contiguous plots, more than one, so as to satisfy requirement of minimum area of one acre. 27. CIT (A) called for a remand report from AO during course of appellate proceed .....

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o. 27-A/1, Jopling Road, Lucknow, area 52.44 sq. mts. was purchased by Assessee vide sale deed dated 15.4.2002 executed in its favour by Karuna Shankar Dubey. 30. Total area of plot no. 27-A was 50902 sq. ft. where against sub-division was allowed by competent authority on 18.7.2000 separating 6002.50 sq. ft. in favour of Yogda Satsang Society. 31. So far as Assessee is concerned, it got another part of plot no. 27-A/2 on 24.4.2001 under a builder's agreement executed between Assessee and Ka .....

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t proceedings and subsequent appeals. 34. Assessee further claimed that on 10.10.2010 it had deposited a sum of ₹ 836640/- as free-hold charge for the entire land bearing number 27-A. It shows that plot no., 27-A was a nazul land owned by State of U.P. and up to 10.10.2000 ownership of State continued. 35. The aforesaid facts show; (i) the first land i.e. plot no. 27-A/2 area 2657 sq. mtrs. came to be possessed by Assessee pursuant to builder's agreement dated 24.4.2001 executed betwee .....

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pursuant to builder's agreement dated 14.10.2003. 36. There is no condition in Section 89 and 80IB (10) that developer must hold the plot it proposed to develop by constructing a housing project, still area of land for which housing project was approved by LDA on 24.11.2001 was only 2657 sq. mtrs. Rest of land became available to Assessee on and after 15.4.2002 and 14.10.2003, therefore, approval granted by LDA on 24.11.2001 cannot be deemed to be applicable to those plots which became avai .....

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pacity. 38. Sub-section (10) of Section 80IB was broadly amended by Finance Act of 2004 w.e.f. 1.4.2005. With regard to clause (d) of sub-section (10), in Commissioner of Income Tax-19, Mumbai Vs. Sarkar Builders (2015) 375 ITR 392(SC), Court has already held that it is prospective and shall not apply to the projects which were approved before 1.4.2005. Same is the position in respect of clause (c) of Section 80IB (10). However, with respect to clause (a) and its explanation, we find that it was .....

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ve of the fact whether housing project was approved before 31.3.2005 or subsequently. 39. Further, in our view, explanation (i) is clarificatory in nature and, therefore, subsequent approvals obtained by Assessee in view of addition of land to its credit, will not make any difference. In view thereof, question no. 1 in ITA 73 of 2010 and sole question in ITA No. 6 of 2012 are answered in favour of Revenue and against Assessee and we hold that Assessee did not satisfy the requirement of area of p .....

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h return but filed before assessment, will it amount to non-compliance of Section 80IB (13) read with Section 80IA (7). 41. In CIT Vs. Ace Multitaxes System (P) Ltd. [2009] 317 ITR 207 (Karnataka), it was held that when a relief is sought for under Section 80-IB of Act, 1961, there is no obligation on the part of Assessee to file return accompanied by audit report, thereby, holding that same is not mandatory. 42. Same view was taken by Delhi High Court in CIT Vs. Contimeters Electrical (P) Ltd. .....

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and only directory and Assessee cannot be made to suffer if it filed audit report in form 10CCB in the course of assessment proceedings and not alongwith return. 45. Question No. 1 in ITA No. 29 of 2014 has to be answered partly in favour of Assessee and partly in favour of Revenue. 46. Clause (d) of Section 80IB (10) came to be inserted for the first time, is prospective and shall not apply to housing projects approved before 1.4.2004 but the same effect is not applicable to other parts of Sect .....

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t will apply to the projects approved before 1.4.2004 also and it is only clause (d), came to be inserted w.e.f. l.4.2005, which is prospective. 47. Questions no. 2, 3 and 4 in ITA No. 29 of 2014 and questions no. 1 to 4 in ITA No. 1 of 2013 are connected with completion of project and submission of completion certificate before stipulated date. All these questions, in our view, have to be answered against Assessee, as we have already said that requirement of completion of project within stipula .....

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