TMI Blog2010 (8) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... w of the information that has come to light during the course of search and seizure operations on the claims of exemption made by the assessee u/s 80IB(10) during the period prior to the search, it is held that there is information, which is intangible material, unearthed as a result of search, and this material can be used for the purpose of assessment made u/s 153A read with section 143(3). Hence, on facts, we fully agree with the submission of the ld. Departmental Representative Deduction u/s.80(IB)(10) - whether the project is constructed on a plot of land which is more than one acre.? - HELD THAT:- Additional housing project constructed on an existing project, which fulfils the requirement of the size of the plot of land of minimum 1 acre, would be eligible for deduction u/s 80IB(10). This clarification, in our considered opinion supports the literal interpretation pleaded by the learned counsel for the assessee. In view of the factual position that the project in question is purely a residential project without a commercial element and as this project is located on a plot of land of a size of 1.43 acres as following VANDANA PROPERTIES case [ 2009 (4) TMI 530 - ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this common order. 2. Facts in brief : The assessee is a Company and is engaged in the business of real estate development and slum rehabilitation. For the assessment year 2001-02, the assessee had originally filed its return of income on 31-10-2001 declaring an income of ₹ 1,49,46,426/-. The original assessment order was passed u/s 143(3) on 27-02-2004 for the assessment year 2001-02 and the total income was assessed at ₹ 2,44,58,100/-. The claim for deduction u/s.80(IB) (10) was allowed. 3. Search and seizure operation was carried out u/s 132 of the Income-tax Act, 1961 in the Akruti Group of cases including the assessee on 10-08-2006. Notice u/s 153A was served on the assessee on 09-04-2006. The assessee filed a return of income in response to the notice u/s 153A, on 08-05-2007, declaring the total income of ₹ 2,48,33,420/-. In this return of income, the assessee claimed a deduction u/s 80IB(10) as was done in the original return of income. On the claim of deduction u/s 80IB the AO at para 3, 3.1 and 3.2 of page No.2 of the assessment order brings out the following facts. 3. Claim of Deduction Under Section 80IB 3.1 During the period from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence the facts cannot be revisited, the AO held that the assessee himself has admitted in his return of income filed u/s 153A that certain projects had some units in excess of 1000 sq.ft. of built up area. He held that the assessee s claim for deduction in many projects was allowed incorrectly as the projects could not be completed within the stipulated time. He pointed out that the evidence gathered during the course of search and subsequently, clearly showed that the assessee had made false claim for deduction. After considering the objections of the assessee at para 3.9 page 13 of his order, he held that claim for deduction u/s. 80-IB(10) for assessee s project at Pocket 7 at MIDC and for the assessee s Ashram Chawl Project arise in the impugned assessment years and that in both these cases, the assessee has fulfilled all conditions specified u/s.80-IB(10) except the condition of the Project being on a plot of land which is more than one acre. 4. In all these four appeals we are concerned only with Pocket 7 and 10 of the MIDC and Ashrm Chawl Project and the only issue thast is to be decided is whther the project is constructed on a plot of land which is more than one acre. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firming the disallowance of deduction of ₹ 56,42,820/- that was claimed under section 80IB of the I.T. Act, 1961 for the project at Pocket 7, MIDC holding that even though the total area of the plot is more than one acre (1.43 Acres), the area covered by the eligible component of the project on a STANDLONE BASIS is less than one acre. 2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in disallowing the claim under section 80IB(10) of the I.T. Act, 1961 of ₹ 2,87,51,140/- that was made for the project at Pocket 10, MIDC holding (by enhancement) that the appellant would have been eligible for deduction only if it had constructed commercial are up to a maximum of 6404.35 q.ft. (10% of rehab building portion of 64043.54 sq.ft.) and the appellant could not show that the income from construction of residential unit could be worked out separately. 9. The learned counsel for the assessee Mr. Vijay Mehta filed an additional ground of appeal in all the four appals, which reads as follows : The learned CIT(A) has erred in law and in facts in confirming/enhancing the rejection of claim u/s 80IB(10) of the Act in respect of projects at Poc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee Mr. Vijay Mehta first submitted the arguments on this additional ground. He argued that as nothing has been found during the course of search, which could be said to be incriminating material relatable to the assessment year 2001-02, the AO had no valid jurisdiction to issue notice u/s 153A or to complete the assessment in pursuance thereof. Reliance was placed on the following decisions : a) Order of the Tribunal in the case of LMJ International Ltd. vs. DCIT 119 TTJ 214 (Kol). b) Order of the Tribunal in the case of Shri Anil Kumar Bhatia vs. ACIT and Anr. In ITA Nos. 2660 to 2665/Del/2009 and others for A.Ys. 2000-01, 2002-03 to 2006-07. c) Order of the Tribunal in the case of Shri Anil P. Khemani vs. DCIT in ITA Nos. 2885 to 2860/Mum/2008 for A.Ys. 1999-00 to 2004-05. d) Order of the Tribunal in the case of M/s Viraj Forgings Ltd. vs. DCIT and Anr. in ITA No. 1948 and 1949/Mum/08 for A.Y. 2001-02. e) Order of the Tribunal in the case of Meghmani Organics Ltd. vs. DCIT 129 TTJ 255 (Ahd). f) Order of the Tribunal in the case of S.K. Jain vs. ACIT in IT(SS)A Nos. 210 to 216/Ind/2007 dated 28-01-2010. The learned counsel submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area of Pocket No.7 is more than one acre.. He further submits that there is no sub-division or demarcation of this plot area. He filed an additional evidence in the form of certificate at page 3 of the paper book and submitted that this is an Architect certificate and that this clarifies the position. As per Mr. Vijay Mehta, the short issue involved in the present case is as to whether, the plot area referred to in sub-clause (b) of section 80IB(10) of the Act is to be taken as per the records or the same is required to be divided or apportioned notionally on certain basis. He vehemently contends that the working in section 80IB(10)(b) is amply clear and does not call for any lengthy process of interpretation and that literal interpretation has to be applied. He submitted that the section does not provide for any formula for notional division of the plot area. He further submits that the section also does not provide for any prohibition, on the nature or type or extent of the construction on the said plot of land, outside the eligible project. Thus he argues that, since it is accepted that the rehab building is an eligible project and the sale building is an ineligible project, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the years holding each building as a different project. He drew attention of the Bench to the chart given by the AO and submitted that it is accepted by the AO that different buildings are different projects. Thus he submits that once there is no commercial area within a particular building which is accepted as a separate project, the ratio of the decision of the Special Bench does not apply. Thus he submits that his case is fully covered by the decisions of the Division Bench of the Tribunal in the case of Vandana Properties and Saroj Sales Organisation. 16. The learned counsel reiterated his contention that the rehab building is completely different in all respects from the sale building and hence these are two different projects. He further contended that without prejudice to his main contention, if at all a portion of the plot is to be deducted from the total plot area, then only the land beneath the sale building may have to be eliminated and not any other portion of the land. He submits that this is only an alternative argument and that his primary argument is that literal interpretation of section 80IB(10)(b) of the Act is to be applied. 17. Coming to ground No.2, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other hand, opposed the contentions of the assessee and submitted that an assessment u/s 153A(1)(b) need not be based only on seized material. He submitted that section 153A introduced by the Finance Act, 2003, as a complete new code and it now requires the AO to mandatorily issue notice u/s 153A(1)(a), where a search has been initiated. He submitted that the section nowhere requires that, notice can be issued only when there is material found or seized during the course of search. He submitted that the non obstante clause in section 153A, makes this intention very clear. He submits that the issue of notice for the period of 6 years for making of assessments u/s 153A(1)(b) is mandatory, irrespective of any other provisions of the Act and that it grants automatic jurisdiction to the AO. He submits that these are mandatory provisions and the AO has no discretion in the matter and notice has to be issued for six years. He contends that once a notice is mandatory, the AO automatically assumes jurisdiction for all the six years and the Act provides that the AO has to assess or reassess the total income for six years, after considering all other provisions of the Act and evidence avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h has escaped assessment, but it is duty to levy tax on entire income that has escaped assessment during the year. He pointed out that under section 153A, the word is assessed or reassessed , instead of computing or aggregating as u/s 158BB. He referred to the decision of the Kolkata Bench of the Tribunal in the case of LMJ International 119 TTJ 214 (Kol) and submitted that the interpretation of law by the Hon ble Bench cannot be accepted. He further submits that it is not material and physical form that can be construed as evidence and information can be in intangible form and that in income-tax proceedings the rigours of evidence are much lesser. He relied on number of case laws for these propositions. Further he relied on series of case laws for the proposition that even in a block assessment, when entries are found in the books of account and when there is no material sized during the course of search, the AO can still make an addition u/s 158BC. On similar analogy he submits that even u/s 153A, additions can be made when there is no tangible material. 23. The learned DR further relied on the decision of the Delhi Bench of the Tribunal reported in 117 ITD 74 (Del) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no material found during search, on which the assessment has been made disallowing deduction u/s 80IB(10). 25. On merits the learned DR submitted that it should be noted that the assessee himself admits that the rehab portion and the sale of building portion, constructed in Pocket 7 of MIDC are two separate and distinct projects, though the projects are approved under common rehabilitation scheme and though they are located on a single plot of land which has a single demarcation number in the municipal record. While agreeing that the rehab portion is a separate project and the sale building portion is a separate project and while agreeing that the area of the plot of land is of 1.43 acres, he submitted that the land beneath project is not common and that the same can be physically identified separately. He submitted that the plot area used under rehab portion is 0.79 acres only and the plot under same building portion is 0.64 acres. He submitted that the assessee himself admitted and treated these two projects separately and is considered the sale building portion, as distinct and ineligible project as far as deduction u/s 80IB(10) is concerned. The rehab portion was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in the project. He submits that the land or the plot portion which is not used in that project but which is referable to some other project cannot be considered, as otherwise, it would lead to distortion of profits which is not permitted, in view of restriction u/s 80IB(13) read with section 80IB(8) and section 80IB(10). Thus he contends that for the purpose of calculation of size of the plot of one acre, only that portion of the plot which can be considered and which has been actually used in the eligible project, can be considered, for this purpose of computing the size of the plot of eligible project. He submitted that the words used is profits derived from an undertaking and thus the profits of an undertaking have to be separately computed on standalone basis 28. Mr. Srivastava further submitted that the assessee has only authority to construct on the plot of land and that it does not own it. He argued that once the two projects are separate and independent, the land used under the commercial project cannot be taken on notional basis for computing the minimum limit of one acre of land used for eligible project. He relied on the decision of the Pune Bench of the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally reasonable interpretations. He submitted that when the conditions specified in the section are not fulfilled, the question of grant of deduction does not arise. He further submitted that when strict interpretation leads to absurd results, such interpretations are not to be adhered. For this proposition he relied upon the judgment of Hon ble Bombay High Court in the case of CIT vs. Kishoresinh Kalyansinh Solanki 39 ITR 522 (Bom). 30. Coming to the decisions of the Tribunal in the case of Saroj Sales Corpn. and Vandana Properties, he submitted that these decisions were not referred to in the case of Brahma Associates. On a plea of the assessee that on principle of consistency the claim should be allowed, as the Department has been allowing the claim of the assessee in the earlier assessment years, he submitted that the rule of consistency does not apply and for this he relied on the decision of the Hon ble Supreme court in the case of Oswal Agro Mills 313 ITR 24 (SC) and the case of C.K. Gangadharan 304 ITR 61 (S.C.). He submitted that in this case also a substantial question of law is involved as to whether the assessee fulfils the condition of one acre or not and hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is applicable to the facts of the case. 33. He further submitted that in the case of Brahma Associates, the basic condition of the project being residential is not satisfied and in such a situation the Special Bench held that, if the commercial area goes beyond 10% of the total area, the project ceased to be residential project. As an exception, the special Bench says that in certain circumstances, a proportionate allowance can be granted. Thus he contends that in the case of Brahma Associates there is no wholly residential project to begin with and the project is having commercial area of more than 10%, it would make the assessee ineligible in normal circumstances. He contended that in the case of the assessee the fact that it is a pure residential project, without any commercial component is not in dispute. He repeated his contention that simply there are some ineligible construction on the plot of land, the question of denying exemption does not arise when the conditions are satisfied. Referring to the CBDT letter, he submitted that it talks about fulfilment of other conditions and this means the conditions other than the condition of one acre land. He referred to page No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found during the course of search, the AO could not reject the claim of the assessee u/s 80IB(10). As already stated as this is a legal issue on the issue of jurisdiction, and as in our opinion the facts are on record, we admit this ground. 36. On the issue whether the AO has jurisdiction to issue notice u/s 153A of the Act and in completing assessment proceedings u/s 143(3) read with section 153A and disallowing the claim of deduction u/s 80IB(10) of the Act, according to the assessee, nothing incriminating was found during the course of search as far as the assessment year 2001-02 is concerned, we find that in case where no material whatsoever is found in the search, there are different views taken by different Bench of the Tribunal on this issue. 37. The case laws in favour of the assessee are as follows : g) Order of the Tribunal in the case of LMJ International Ltd. vs. DCIT 119 TTJ 214 (Kol). h) Order of the Tribunal in the case of Shri Anil Kumar Bhatia vs. ACIT and Anr. In ITA Nos. 2660 to 2665/Del/2009 and others for A.Ys. 2000-01, 2002-03 to 2006-07. i) Order of the Tribunal in the case of Shri Anil P. Khemani vs. DCIT in ITA Nos. 2885 to 2860/Mum/2008 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that there is information, which is intangible material, unearthed as a result of search, and this material can be used for the purpose of assessment made u/s 153A read with section 143(3). Hence, on facts, we fully agree with the submission of the ld. Departmental Representative, Shri Srivastava. 40. In the result, this additional ground of the assessee is dismissed on facts, as devoid of merit. We do not give any finding on law, as it would be on academic exercise. 41. This brings us to ground No. 1 on merits. Before adjudicating the matter it would be appropriate to list out the facts which are not in dispute between the parties. 42. Pocket 7 consists of Building 1, Building 2, Building 4, Building 5, Building 6 as well as sale building. Each of these buildings has been treated as a separate project by the assessee and has been assessed as such, by the Revenue. The other undisputed fact is that buildings 1, 2, 4, 5 and 6, i.e. except sale building are purely residential buildings and have no commercial component in the same. Sale building is a purely commercial building with no residential component in the same. The project in the form of Re-hab building No.4 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of land for getting exemption. The argument of the learned DR that no project, which does not have beneath the constructed area, i.e. which does not physically occupy, a minimum area of 1 acre of land, would be eligible for incentive u/s 80IB(10), can be considered as adding something more or reading some additional conditions into sec. 80IB(10)(b), of the Act. The undisputed fact is that each rehab building is a project by itself and that the profit from that rehab building is assessed on a standalone basis on the ground that this is a project by itself. Each such a project is on a size of a plot of land, which has a minimum area of 1 acre in fact the plot area is 1.43 acre. The literal interpretation would lead to a conclusion that the profits from that project would be ordinarily eligible for deduction u/s 80IB(10). Such an interpretation cannot be rule out though the arguments of the ld. Departmental Representative at some points seemed to attractive at the first blush. When the meaning is evident from the plain reading of the statute, there is no necessity of going into the intention of legislature, mischief rule or other interpretations. It appears to us that the literal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rises is with regard to a Developer developing and building a township and/or a residential complex etc. In such schemes, a developer is obliged to provide all basic necessities within the township such as park, green area, health-care facilities, telephone booth, convenient store, shopping facilities etc. There is a possibility that legal controversy may arise where a housing project mainly meant for residential purpose will also have shopping areas. The Department is likely to take a stricter view in the matter and reject the claim of the developer merely on the ground that there exists shopping centres within the residential complex, though it may form a very insignificant portion of the total project area. However, going by the present day concept of township, facilities like school, garden play area etc. are mandatory. The undertaking developing the housing project is likely to lose the benefit merely on the ground that any such housing project include the facilities enumerated or a public circular may be issued to ensure that such legal complications may not arise in future. On the alternative, it is recommended that suitable amendment be made to define the term Housing Proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn any proposition, in cases where a housing project has no element of commercial construction. This fact is not disputed by the ld. Departmental Representative, but his argument is that, if the ratio is applied, the assessee will not be eligible for any deduction u/s.80(1)(B)(10) when it is common ground that the order of the Special Bench relates to a project having both residential and commercial components and that this case is not similar, we hold that the propositions therein do not apply to this case. 47. This is clear from the extract given herein below The Special Bench in its conclusions at page 336 brings out the issue in the following manner. (a) The deduction under section 80IB(10), as applicable prior to April 1, 2005, subject to and in the light of the observations made in the preceding paragraphs, is admissible in the case of a housing project comprising of residential housing units and commercial establishments. In case these projects are approved as projects by the local authority, such an approval as housing project is sufficient for the purpose of eligibility. In any other case, where 90 per cent or more of the total built-up area is used for dwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that all the flats in the wings in block N contain the eligible units. It is not open to the Revenue to include the next project BC block as part of the earlier housing project just to deny the statutory relief which the assessee is entitled in respect of the eligible housing project. In that way the legislative intention to give a relief to the assessee who is undertaking the law housing projects will get defeated. BC project was meant for higher strata of the society. The assessee has segregated the same and in no way mixed in these projects either in the design or in the structural manipulation or in the provision of amenities and the assessee has not claimed any relief in respect of project which admittedly does not admit the test laid down under s. 80IB(10). Combining these two projects into one will lead to a result which manifestly will be unjust and absurd and defeat the very provisions of deduction sections. Unless there is a clear intention of the legislature the Revenue cannot be permitted to do so. After all the assessee has obtained different commencement certificates and started on different periods of time. They are separate by time, space ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it could not be fastened with earlier buildings, i.e., A , B , C and D which work was commenced in the year 1993. As plan for building E was only approved once in the year 2002, the conclusion drawn by both the lower authorities that the commencement of building E was a continuation of the existing project was erroneous. There was no dispute about the fact that the assessee acquired the development rights in respect of the plot which was, admittedly, 2.36 acres on which the assessee executed the different building projects. The case of the Assessing Officer for rejecting the claim of the assessee was that if the said land was proportionately allocated among different buildings, then area allocated to building E was less than one acre. In clause (b) to section 80-IB(10), it is provided that the project should be on a size of plot of land which has minimum area of one acre. As the area statement given in the plans, there was no specific demarcation made in respect of the plot of 2.36 acres. The surplus land available with the assessee or earlier owner was given the status as Within Ceiling Limit (WCL) and due to change or conversion of the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a is less than or more than 10% of the total built up area. If the commercial built up area is less than 10% of the total built up area, the case of the assessee should succeed. If it is not so, the assessee will not be entitled for any exemption u/s.80IB(10). With these observations we set aside the issue to the file of the A.O. for fresh adjudication. In the result, this ground is allowed for statistical purposes 54. Coming to the appeal for the assessment year 2002-03 in ITA No. 4870/Mum/09, the additional ground is dismissed for the same reason as given while disposing of the ground in the in assessment year 2001-02. 55. As far as the issues on merits are concerned, for the assessment year 2002-03, both the parties submitted that the facts and arguments are similar to the facts and arguments for the assessment year 2001-02 though the project in question is at Ashram Chawl. As the plot area recorded by the CIT(Appeals) is 1.298 acres, for the same reasons given while disposing of ITA No. 4869/Mum/2009 for the assessment year 2001-02, we allow this ground of the assessee. 56. For the assessment year 2003-04 the additional ground is dismissed for the same reasons as those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee are having business transactions and are working in tandem to complete certain projects as a common objection. Finding of the CIT(Appeals) also indicates that the copy of account indicates periodical transactions. 59. We now examine whether the financial transactions between sister concerns, which are admittedly working together in many cases for the same project, after dividing their functions, through under the same management, can be considered loans or advances. Every financial transaction cannot be a loan or advance. Commercial expediency, business necessity and emergency needs result in financial accommodation between sister concerns. This cannot be termed either a loan or an advance. These transfer of funds are with the object of achieving a common objective. 60. In the case of M/s Chandra Cement vs. DCIT 68 TTJ (Jaipur) 35, the Jaipur Bench held as follows : When one single individual is managing the affairs of two concerns and the decision to transfer the funds from one concern to another or to repay the funds could have been said to have been largely influenced by the same individual, it cannot be said that transaction partake the nature of either depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. From the above, it is clear that transaction between sister concerns are just diversion of funds for meeting vistitudes of business and are neither loans or advances. These decisions support the view that current account transactions between the sister concerns cannot be called loans or advances for the purpose of invoking section 2(22)(e). The term advances in this section is used along with the word loan and this word does not include transfer of funds for trade or business advances as held by the Hon ble Delhi High Court in CIT v. Raj Kumar (2009) 181 Taxman 155 (Del.). 61. The Hon ble Delhi High Court in the case of CIT vs. Ambassador Travels P. Ltd. (2009) 318 ITR 376 (Del) held that when the assessee entered into normal business transaction as a part of day to day business activity, this cannot be treated as loans or as advances. The Mumbai A Bench of the Tribunal in the case of N.H. Securities Ltd. vs. DCIT reported in 11 SOT 302 held that where payments are made by a company in the course of carrying on its regular business through a mutual, open and current account to a related party do not come under the purview of section 2(22)(e). Applying the proposi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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