TMI Blog2012 (4) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... nt assessment disentitling the assessee from the claim of deduction u/s 80IB(10). 3. On the facts and in the circumstances of the case and law the Ld. CIT(A) erred in law in allowing the deduction u/s 80IB(1) of ₹ 4,96,27,406/- on the basis of the facts that the plan was approved before 01/04/2005 and the amended provision of section 80IB(10(d) are not applicable without any legal mandate, as the provision of section 80IB(10)(d) inserted by Finance Act, 2004 w.e.f. 01/04/05 has no retrospective effect and applies only w.e.f. 01/04/05 relevant to AY 2005-06 and onwards which has binding effect in this issue. 3. The facts relating to Ground Nos. 2 3 are that the AO had disallowed the claim of the assessee following the reasons mentioned in the assessment order for AY 2005-06. After examining the details of sale of flats furnished by the assessee, the AO held that the assessee is not entitled for deduction of claim u/s 80IB(1) as according to him relevant provision of law u/s 80IB(10)(d) is to be applied in the year in which profit is earned and not year in which the project was started. He further held that the profits arisen and being taxed at completion or near co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rong on the part of Ld. AO to make baseless remarks against the then CIT(A) that his appellate order was factually erroneous. It can be seen from the appellate order that the then Ld. CIT(A) has referred the order No. B/C/8637-BS-AP dated 29.01.2004 two times at page No.2 and thereafter at page No. 12 of the appellate order dated 18.3.2008, Ld. CIT(A) has considered this IOD with the set of approved plan and also has referred the commencement certificate dated 06.02.2004 and has specifically reproduced the relevant paragraph of the certificate, therefore, the contention and argument of Ld. AO against the finding and decision of the then Ld. CIT(A) is patently wrong. Apparently there is no deficiency as has been presumed by the Assessing Officer while making such observation. The Ld. CIT(A) in. the order dated 18.3.2008 has categorically found out that there were two independent projects carried out by two separate assessees whose income were accepted by two independent assessing officers. Here it becomes imperative to reproduce the finding of Ld. CIT(A) for A.Y. 2005-06, which is s under :- 5.4 I have circumspected the material evidence available on record. I find that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout the application flied by the appellant firm and L1FPL for obtaining necessary approval for the project. This letter also gives reference about the copy of J.O.D. dt. 6-11-2003 with set of approved plan for ground floor shopping only dated 6-11-2003 and commencement certificate di 13-11-2003 issued in the name of LIFPL. Further, it also mentions about the copy of I.O.D. di. 29-1-2004 with set of approved plan dt 29-1 -2004 and commencement certificate di. 6-2- 2004 issued in the name of appellant s firm. At last, the letter gives the following remark. In the instant case, the shops were approved and constructed by Lakshadeep Investment Finance P. Ltd. Subsequently, he amended plan and revised I.O.D. was issued in name of Khyati Financial Services on 29-1-2004 due to change of ownership. The said building is approved under the File No.CHE/8637/BP (WS)/AP as housing project its shops on the groundfloor (Emphasis supplied) 5.4.2 From the perusal of the content of the above letter, I find that the BMC has accepted the construction of shopping complex and residential flats in principle by two different concerns and it was been combined together only for their record be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate concerns. The view expressed by the CBDT also binds the AU and the AU cannot afford to have dfferent view. 5.4.4 1 have also considered the legal claim of the AU regarding the applicability of ratio decidendi on the case of Mac Dowell Co. v. CTO 154 JTR 148 (SC). I find that there may be some tax planning involved in this case in order to consolidate the claim of deduction made u/s 8OIB (1 0) but it cannot be said that appellant has adopted any colourable or dubious devices to reduce the tax liability. There are good documentary material evidences which supports to the claim of the appellant that the shopping complex and residential complex were constructed by two different concerns. Such hard documentary evidences cannot be brushed aside to lightly to apply the ratio of the Mc Dowell s case as referred (supra). in this connection, there are plethora ofjudicial precidens on the applicability of the ratio of McDowell s case which does not support the A. 0. s view. The following precedents are worth mentioning: (i) An interesting decision as to the impact of the judgement of the Supreme Court in Mc.Dowell Co. v. CTO (1985) 154 ITR 148 has been rendered by the Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestioned by Revenue as hit by tax avoidance following the rationale of McDowell Co. Ltd. v. CTO (1985) 154 ITR 148 (SC) in Hela Holdings Pvt. Ltd. v.. CIT (2003) 263 ITR 129 (Cal.), where the High Court elaborately reviewed the ruling decisions on the subject and came to a conclusion that the Tribunal was not just/Ied in assuming that the conditions necessaty for such change are not satisfied. (v) The Bombay High Court in CiT v. Mrs. Santa P. Shirke (2006) 281 ITR 373 (Born) felt, that the extreme view of Chinnappa Reddy I, in the judgement in McDowell Co s case (Supra) should be understood in the light of the majority view, which was that of Ranganath Mishra J., who had faulted only colourable devices and a resort to dubious methods , because they cannot be part of legitimate tax planning. The High Court also pointed out that his was the view taken in Union of India v. Azadi Bachao Andolan (2003) 263 ITR 706 (SC). Even otherwise, the later decision of the Supreme Court in Azadi. Bachao Andolan s case (Supra) waters down the ratio of the decision in McDowell Co s case (Supra) with reference to the majority judgement. In this way, in the light of the above judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot proper. When direct enquiry was made by the Assessing Officer by issue of notice u/s. 133(6) in respect of flat No. 601, 602, it was the responsibility of the AO to make further enquiry or investigation but it is found from the record and page No. 43 of the paper book that notices were served upon these persons on 10.12.2008 and reply was expected to be filed next day on 11.12.2008 reveals the deficiency on the part of the Assessing Officer and not on the part of the appellant. Therefore, it cannot be presumed that their reply was not proper. On the contrary, the reply of these persons also strengthens the stand of the appellant. 6.1 As regards the applicability of law u/s. 801B(10)(d) it is worthwhile to mention that in Plethora of judgement, it has been decided that law under this provision will be applicable for the project commenced after 1.4.2005 and not for the project who have already commenced the project prior to the amendment of provision vide: Harshad P. Doshi by our jurisdictional Hon ble ITAT, Mumbai Bench A ITA No.2305/M 2006 dated 28. 02.2007; M/s. Saroj Organization Vs. ITO Ward 25(2)(3) for the A. Y.2005-06 ITA No. 4008/M/2007 dated 24.01.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-amended provisions of sec.801B (1 0). The post amended provisions of sec.801B (1 0) has enshrined another additional condition in clause (d) of sec.801B (1 0) which brings some threshold limits for shopping and commercial establishment to be included in a housing project. This particular additional condition brings some anomaly, f it is applied strictly for A. Y.2005-06 and onwards in cases where the housing project got approved before 01-04-2005. For example, if the housing project gets approval before 3 1-3-2003 and it derives some profit for the A. Y. 2004-05, it is entitled for deduction u/s. 801(10) for the A Y 2004-05, even though the housing project has included some shopping and commercial establishments. But, the same housing project may not get deduction u/s.801B(10) on deriving certain profit for A. 12005-06 after prima-fade applicability of the post amended provisions of sec. 801B (10) (d) in case the built-uparea of shopping complex and commercial establishment exceeds 5% of aggregate area of built-up-area of project or 2000 sq.ft. whichever is less. In this way, it may be seen that a housing project which has been approved before 1-4-2005 may get disquaflfication o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le strictly w. e.f A. Y. 2 005-06, it may be a case of promissory estoppel, which may not be the intention of legislature. The concept of promissory estoppel has been accepted by Hon. Supreme court in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of UP. - 118 ITR 326 (SC) to mitigate the rigors of strict law in the interest of Justice to an individual. Here, a limited point is to emphasize that the provision is to be interpreted to avoid the case of promissory estoppel. Therefore, I am of the opinion that the post- amended provisions of sec.801B(10)(d) should be made applicable with reference to the date of the approval of housing project, i.e. if the approval of housing project has been made on or after 1-4-2005, this particular condition should be applied in respect of any profit derived from such projects without having any reference to the assessment year. Such view also gets support from the decision of Saroj Sales Organisation. The finding given by ITAT in para 13 of the order, which reads as under: As regards the objection of the AU that the permissible shopping area of Housing Project exceed 5%, the assessee is snot entitled to relief under section 801B(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates that there was no such limit in force for the earlier years - Restriction of 5% is applicable only with prospective effect and there is no justification to presume that such a limit or prohibition was in place in the earlier years as well on the commercial use of area- It would be reasonable to grant benefit of incentive provision to projects in which built-up area for commercial purposes does not exceed 10% of total area Where approximately 90% or more of the total area is utilized for building dwelling where the project has been passed as residential-commercial projects - Where the total built-up commercial area is more than 10% of total area, such projects normally should not get benefit of deduction unless the undertaking can show that the income from construction of residential dwelling units can be worked out separately and even after excluding the commercial use of plot, the project satisfies all the requirements of section 801B (10) on standalone basis. Therefore, the issue regarding applicability of provision of law under clause (d) of sub-section 10 of section 801B of I.T. Act, is relevant for the housing project approved after 01.04.2005 and it cannot be pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in respect of individual flats and possession has been given by the appellant in respect of each and every flat separately and independently. Further, each flat has owned electric meter, independent kitchen, drawing room, dining room and one passage therefore, there +is no deviation of any nature from approved lay out plan by BMC. Further areas of flat from income-tax Act point of view is 913 sq.ft and not 1092 sq.ft. and two or more flats sold to the same family or related persons of the customer cannot be made basis for disallowance of such claim as there is legal bar on it. Therefore, considering the various decision of Hon ble Jurisdictional ITAT, various courts and respectfully following the decision of predecessor ld. CIT(A) in the appellant s own case for AY 2005-06 in order No. CIT(A)-XV/IT122/ITO 15(1)(2)/2007-08 dated 18/03/2008 and after reconsidering the facts of the case, I reach to the conclusion that appellant is entitled for deduction u/s 80IB(1) of the Act. Ld. AO is, therefore, directed to allow the claim of ₹ 4,96,27,406/-. Aggrieved by the order of the CIT(A), the revenue is in appeal before us. 5. The learned DR has relied upon the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ₹ 11 .56 crore 2 crore respectively in lieu of development rights received by them, Thus the s undertaking is only for building the housing project and the is in no way connected in building ol the commercial area. As found as a fact by the CIT(A), the Housing Project was being carried out by the assessee and the construction of the commercial areas are being carried out by another entity. The CIT(A) found it as a fact that commencement certificate was issued separately for the housing Project and for the construction of commercial area. Further the BMC in their letter has clarified as under:- In the instant case, the shops were approved and constructed by Lakshadeep investment Finance P. Ltd. Subsequently, he amended plan and revised IOD was issued in name of Khyati Financial Services on 29.1.2004 due to change of ownership. The said building i.s approved under the file No.CPIE/8637/BP(WS,) AP as housing project its Shops on the ground floor. Thus the BMC had also recognised that the ownership of the two projects are different, In. the circumstances the claim of relief u/s 80lB(10) by the Assessee should be considered only for the Housing project and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use the commercial project was carried out by a sister concern i: the same area. 16. The next issue to be considered is whether the sub-clause (d) of sec 801B(10) inserted by Finance Act, 2001 w.cf.i.4.2005 would he applicable to the present case. Sub clause (d) introduced with effect from 1.4,2005 required the area of commercial establishment included in the Housing project should not exceed 5% of the total built up area of the housing project. By the amendment introduced by Finance Act (No 2), 2004 with effect from 1.4.2005, provisions of sec 80 lB were amended. Further restrictions on completion of project as well as maximum built area of commercial establishments were imposed. In this view of the matter, the amendments are not clarificatory in nature and hence would apply only to projects approved after 1.4.2004 and not to the Housing oject of the assessee, which was approved prior to 1.4.2004. However as we have found that construction of commercial establishments was done by another entity and is not part of the Housing Project of the Assessee, this question becomes academic. 17. The next issue is regarding completion of the project before 31.3.2008 as required u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is to be granted, then most of the profits of the projects which would have been offered in the earlier years would not he entitled o relief u/s 801B(1Q). This will make the section unworkable. Having accepted the percentage completion method of determining the profits, ii. will not be correct to hold that such profits before the completion of the Lou sing project, which otherwise satisfies all the conditions of sec 80 IB(10), though assessed as profits from the housing project will not be entitled to deduction u/s 80lB (10). Therefore profits from the Housing project assessed on a year to year project will be entitled to deduction u/s 80lB (10), if it otherwise does not contravene the provisions/requirements of that section. We find that the CBDT has SISO clarified vide their Instruction No 4 of 2009 dated 30.6.2009 that relief u/s 801B (10) can be allowed on a year to year basis where the assessee is showing profits on partial completion of the project. If at the end of the period the Assessee is found not to have complied with the provisions of the section such as failure to complete the project within the permitted time, then the relief anted for earlier years can be withdraw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the assessee has submitted that, the built up area of the above disputed flats 780 sq.ft. and as per the section 80IB(14) built up area means the inner measurement of the residential unit at the floor level including the projections and balconies as increased by the thickness of the walls but does not include the common areas shared with other residential units. He further submitted that the AO has wrongly taken super built up area instead of taking built up area for the purpose of deduction u/s 80IB(10). 11. We have heard both the sides, perused the record and gone through the orders of the authorities below. The CIT(A) after considering the paper book filed by the assessee gave a specific finding that as per the agreement, the carpet area of the three flats 780 sq.ft. only. He further gave a finding that built up area and super built up area worked out separately by the assessee. On perusal of the details of sale of flats with agreement value, the built up area comes only 913 sq.ft. and super built up area comes to 1092 sq.ft. Therefore, the assessee fulfilled the conditions of the built up area as required by section 80IB(10) and allowed the claim of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
