TMI Blog2017 (11) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... at:- Both the CIT(A) as well as the Tribunal have on facts concluded the issue in favour of the respondent assessee. This concurrent finding of fact is duly supported by the remand report of the Assessing Officer accepting the fact that even when flats are joined, the combined area is less than 1000 sq.ft.. The Revenue has not shown the concurrent finding of fact leading to satisfaction of clause (c) of Section 80IB(10) of the Act to be perverse in any manner. No substantial question of law - Income Tax Appeal No. 444 of 2015, Income Tax Appeal No. 452 of 2015, Income Tax Appeal No. 479 of 2015, Income Tax Appeal No. 500 of 2015 With Income Tax Appeal No. 441 of 2015 - - - Dated:- 25-9-2017 - MR. S. C. DHARMADHIKARI AND MR. PRAKASH D. NAIK, JJ. For The Appellant : Mr. Vimal Gupta, Senior Advocate a/w Mr. Tejveer Singh Mastan Singh For The Appellant : Mr. Vimal Gupta, Senior Advocate a/w Mr. Sham Walve ORDER P.C. : 1. In all these matters, the Revenue has proposed more or less identical questions. 2. They revolve around Section 80IB of the Income Tax Act, 1961 (for short, the IT Act ). 3. The common questions and arising in all these Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dayanand Garden project particularly when no separate books of accounts have been maintained by the assessee in respect of these two projects? 2) Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Income Tax Appellate Tribunal erred in failing to appreciate that 'Shivanand Garden' Project was started in the FY 199394, when the cost of materials and labour was much lower than in 200001 when construction of 'Dayanand Garden' project was started. As both the projects are similar in nature (wholly residential), having been located in the same area (merely 100 m from each other), there is no justification for incurring lower profit margins in the 'Shivanand Garden' project? 3) Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Income Tax Appellate Tribunal erred in ignoring the very fact that no justification has been given by the assessee regarding the high cost of construction (Rs 783 per sq ft) for the Shivanand Garden Project as against ₹ 482/per sq ft only for Dayanand Garden Project? 5. In all these matters, at our request, Mr. Vimal Gupta, learned Senior Counsel has app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in the case of Commissioner of Incometax vs. Veena Developers (Special Leave Petitions/Civil Appeals No.22450/2011 and others) decided on 30th April, 2015. 10. Mr. Gupta would rely upon paragraph no. 5 of this judgment to submit that it was brought to the notice of the Hon'ble Supreme Court that a project which was cleared as residential plus commercial project cannot be treated as housing project and any direction to treat that as housing project would be contrary to Section 80IB(10). Mr. Gupta would further submit that all that the Hon'ble Supreme Court has clarified is that commercial user which is permitted in the residential units as per the Development Control Rules (DCR) would not take the project out of the definition of the expression housing project , and therefore, out of the provision itself, namely, Section 80IB (10). Mr. Gupta would submit that the Hon'ble Supreme Court has clarified this conclusion by setting out and referring to several illustrations such as commercial user to the extent permissible of the professionals like Doctors, Chartered Accountants, Advocates etc. Thus, the direction (b) of paragraph 30 of the order of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present Appeals. 13. We have considered these contentions very carefully for they have been raised again and again and number of Petitions or Appeals are brought in this Court and they are pending after the authoritative pronouncements by this Court and which pronouncements have not been interfered with or overturned or reversed by the Hon'ble Supreme Court. 14. As far as the case of Bramha Associates is concerned, we would refer to its facts a little latter, but before that, it would be advisable to reproduce Section 80IB as far as it is relevant for our purpose. Section 80IB falls under Chapter VIA. The heading of the Section is deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings . Subsection (10) of Section 80IB reads as under: S.80IB (10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if, ( a) Such undertaking has commenced or comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her; ( 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 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. Explanation.For the removal of doubts, it is hereby declared that nothing contained in this subsection shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government). 15. A bare perusal of this Subsection would reveal that the amount of deduction in the case of an undertaking developing and building housing projects approved before 31st March, 2008 by a local authority shall be 100% of the profits derived in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of these Appeals and their annexures. 23. The assessee in this case was in the business of construction and development of properties. 24. It filed a return of income as a firm on 31st October, 2006 declaring total income of ₹ 1,40,47,172/. The assessee claimed a deduction under Section 80IB( 10) amounting to ₹ 1,45,90,939/. Pertinently, the assessment year in this case is 20062007. The assessee's claim of deduction was rejected by the Assessing Officer on the ground that the project was not completed within the stipulated period of time as prescribed by Section 80IB( 10)(a) of the IT Act. The project also comprises of building G which contains 10 shops admeasuring 2490 sq. ft. and violated the condition, namely, Section 80IB( 10)(d). The other ground was that there were two bungalows in the project with builtup area of 2690 sq. ft. and 3767 sq. ft. respectively, which exceeds the limit of 1500 sq. ft. set out in clause (c) of Subsection (10) of Section 80IB of the IT Act. 25. These facts with slight difference in dates and events, are common to all these Appeals. Against such an order of the Assessing Officer, the assessee brought Appeals before the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commencement certificate no. 1237 dated 6th October, 1999, which was repeatedly revised. Subsequently, and as per the last revised building plan commencement certificate no. 2147 dated 17th March, 2004, there were 10 buildings in the project commencing from building A to building J . Out of these, G block had 40 tenements including 10 shops on the ground floor and these 10 shops had builtup area 2490 sq. ft. H and J buildings were bungalows with builtup areas of 2690 sq.ft. and 3767 sq. ft. respectively. One building was a club house which was shelved in the last revised plan. The Assessing Officer noted that this project was to be completed by 31st March, 2008 as per Section 80IB (10)(a) subclause (i) of the IT Act. The Assessing Officer held that completion certificate of G building was not available, while the assessee could produce the completion certificates for J and H buildings which were both bungalows. In respect of other buildings, the completion certificates were already furnished during the assessment proceedings for the assessment year 20052006. 32. Mr. Gupta argued that the project envisages construction of buildings A to J , the building I bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tension of the approvals granted for the A, B, C and D buildings commencing from June 9, 1993, and, therefore, the E building being continuation of the A, B, C and D buildings, the project must be held to have commenced prior to October 1, 1998, and, hence, not eligible for section 80IB( 10) deduction. ( b) The A, B, C, D and E buildings are constructed on a plot admeasuring 2.36 acres and if 2.36 acres of land is proportionately divided between five buildings, the land pertaining to the E building would be less than one acre and, hence, deduction under section 80IB( 10) cannot be allowed. ( c) During the survey, it was noticed that Flat Nos. 138 and 153 on the ground floor of the E building were found to be merged into one flat and since the area of the merged flat exceeds 1000 square feet, the deduction under section 80IB( 10) cannot be granted. For the identical reasons, the deduction under section 80IB( 10) was disallowed for the assessment year 200506. 33. Appeals were filed against this disallowance to the Commissioner of Income Tax, which also were dismissed. 34. On further Appeals to the Tribunal, the assessee was held to be entitled to the dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng into one flat as a result whereof the size of the residential unit in the housing project exceeded 1000 square feet which is in contravention of section 80IB( 10)(c) of the Act and, hence, the benefit of that section could not be granted to the assessee. Accordingly, it is submitted that the appeals filed by the Revenue be allowed by answering the question raised in the appeal in favour of the Revenue and against the assessee. Counsel for the assessee as also the counsel for the intervenors have made elaborate arguments supporting the order passed by the Tribunal and the same are considered in the subsequent paras of this judgment. 37. Then, the Division Bench reproduced Section 80IB( 10) prior to its substitution by the Finance (No.2) Act, 2004 with effect from 1st April, 2005 and thereafter, it adverted to the very explanations and then in paragraphs 17 to 22, the Bench held as under : 17. The first question to be considered herein is, whether, in the facts of the present case, construction of the E building constitutes building a housing project under section 80IB( 10) of the Act. 18. The expression housing project is neither defined under section 2 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocal authority on October 11, 2002. 21. The fact that the local authority, namely, the Municipal Corporation approved the building plan for the E building on the condition that all the objections raised in the intimation of disapproval dated May 12, 1993, relating to the earlier housing project on the same plot of land shall be applicable and should be complied with, cannot be a ground to hold that the E building is the extension of the earlier housing project because the earlier housing project was completed prior to October 1, 1998, and the housing project for construction of the E building was approved for the first time on October 11, 2002. Nowhere in the intimation for disapproval granted for construction of the E building on October 11, 2002, it is stated that the building E constitutes extension of the earlier housing project which is already completed. The fact that the objections raised while approving the earlier housing project on the same plot of land were made applicable to the housing project in question, it cannot be inferred that the housing project in question constitutes extension of the earlier housing project. Therefore, in the facts of the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, there are five buildings (A, B, C, D and E) on a plot admeasuring 2.36 acres, hence the proportionate area for each building would be less than one acre and, therefore, the benefit of section 80IB( 10) could not be granted in respect of the housing project consisting the E building. 24. As rightly contended by the counsel for the assessee and the intervenors, section 80IB( 10)(b) specifies the size of the plot of land but not the size of the housing project. The size of the plot of land, as per section 80IB( 10), must have minimum area of one acre. The section does not lay down that the plot having minimum area of one acre must be a vacant plot. 25. The question, therefore, to be considered is, whether the Revenue is justified in reading the expression plot of land in section 80IB( 10)(b) as vacant plot of land ? 26. The object of section 80IB( 10) in granting deduction equal to one hundred per cent of the profits of an undertaking arising from developing and constructing a housing project is with a view to boost the stock of houses for lower and middle income groups subject to fulfilling the specified conditions. The fact that the maximum size of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. The expression 'housing project' is not defined but it is an expression which is capable of interpretation and construction. It is a project meant for residential units but not including commercial units. The construction placed by the Tribunal to include such commercial units in the housing project would make a mockery of the provisions. Then, the approvals obtained by the assessee were considered. The Division Bench also noted the arguments of the assessee who, inter alia , urged that the deduction is provided to a housing project approved by a local authority. If a local authority approves a project to be a housing project with commercial units to the extent permitted, then the incometax authorities cannot hold that such project is not a housing project. The assessee's counsel also equated this expression with the other one to be found in the enactment, namely, house property . On all these contentions, the Division Bench judgment authored by His Lordship Justice J. P. Devadhar (as he then was) who also authored the judgment in the case of Vandana Properties , in paragraph 15, summarized the claim of deduction under Section 80IB( 10) as it stood prior to 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t). 21. Rule 2.56.1 of the DC Rules Pune defines the expression residential buildings as follows: Residential buildings.These shall include any building in which sleeping accommodation is provided for normal residential purposes with or without cooking or dining or both facilities. It includes one or two or multifamily dwellings, lodging or rooming houses, hostels, dormitories, apartment houses and flats, residential hotels and private garages. 22. Thus, the Development Control Rules Pune permits commercial user in residential buildings. 23. Rule 13.6 of the Development Control Rules Pune provides that in the case of layouts or subdivision of areas in residential and commercial zones, provision shall be made for convenient shopping. The size of the convenient shopping and categories of the convenient shopping are specified in that rule. The total area for convenient shopping permitted is not less than 2 per cent. but not exceeding 5 per cent of the area of the plot. Rule M1.1 in Appendix M to the Development Control Rules Pune provides for commercial user specified therein even in a purely residential zone (R1). Under rule M2.2 of Appendix M, a building or pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , then the project approved with the permissible commercial user would be eligible for section 80IB( 10) deduction irrespective of the fact that the project is approved as housing project or approved as residential plus commercial . In other words, where a project fulfills the criteria for being approved as a housing project, then deduction cannot be denied under section 80IB( 10) merely because the project is approved as residential plus commercial . 27. From the fact that the deduction under section 80IB( 10) prior to April 1, 2005 was allowable on the profits derived from housing projects constructed during the specified period, on a specified size of the plot with residential units of the specified size, it cannot be inferred that the deduction under section 80IB( 10) was allowable to housing projects having residential units only, because, restriction on the size of the residential unit is with a view to make available a large number of affordable houses to the common man and not with a view to deny commercial user in residential buildings. In other words, the restriction under section 80IB( 10) regarding the size of the residential unit would in no way curtail the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing clause (d) to section 80IB( 10) with effect from April 1, 2005. Therefore, it was not open to the Tribunal to hold that prior to April 1, 2005, projects having commercial user up to 10 per cent. of the plot area alone would be eligible for section 80IB( 10) deduction. 31. In the present case, though the commercial user is more than 10 per cent of the plot area, the Tribunal has allowed section 80IB( 10) deduction in respect of 15 residential buildings on the ground that the profits from these exclusively residential buildings could be determined on stand alone basis. In our opinion that would not be proper, because, section 80IB( 10) allows deduction to the entire project approved by the local authority and not to a part of the project. If the conditions set out in section 80IB( 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 a part of the project. In the present case, the commercial user is allowed in accordance with the Development Control Rules and hence the assessee was entitled to section 80IB( 10) deduction on the entire project approved by the local authority. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) Clause (d) inserted to section 80IB( 10) with effect from April 1, 2005 is prospective and not retrospective and hence cannot be applied for the period prior to April 1, 2005. 49. We do not think that any questions which are considered and answered in the above judgments can be proposed by the Revenue again and again and by raising the plea that the decisions do not bind the Tribunal and the Revenue as a whole on facts. In other words, they are distinguishable on facts. 50. We do not see how in the present case, the argument of the Revenue's counsel that the assessee has not completed the project and the completion certificate has not been issued by the Pune Municipal Corporation in respect of G building, could have been sustained. Once this conclusion and reasoning falls to the ground in the light of the authoritative pronouncements, the paragraphs and conclusions from which we have reproduced above, then, the extent of the commercial user is the other argument which must be equally rejected. 51. Mr. Vimal Gupta would rely upon the judgment of the Hon'ble Supreme Court of India in the case of Veena Developers (supra). In Veena Developers , the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt where the project is predominantly housing/residential project but the commercial activity in the residential units is permitted. With the aforesaid clarification, we dispose of all these special leave petitions. 54. We are not in agreement with Mr. Gupta that when the Hon'ble Supreme Court gave illustrations of the commercial user in residential projects that user must be restricted to professional activities, particularly of Doctors, Chartered Accountants, Advocates, etc. The clarification by the Hon'ble Supreme Court also does not lead to an acceptance of his argument and where the project is predominantly housing/residential, but commercial activity in the residential units is permitted. We do not think that the Hon'ble Supreme Court restricted the commercial activities in the residential units to its own illustrations. It clearly referred to the Development Control Regulations in the preceding paragraphs and thus, upheld the conclusions of the High Courts that an element of the commercial activity is provided but the project as a whole is still treated as a housing project. What could be the permissible limit on commercial activity would depend upon the De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ₹ 482/per sq. ft. The Assessing Officer inquired as to why there is a difference in the cost of construction of the two projects. In relation to the Shivanand Garden project, the rate was worked out at ₹ 783/per sq. ft. by the Assessing Officer. Since the assessee did not give details of cost of construction of Shivanand Garden project, the Assessing Officer made his own working and held that there was no justification for higher construction cost for Dayanand Garden project and after this exercise, he concluded that the deduction will have to be reallocated. He reallocated it and passed an order on 31th December, 2007, which was partly interfered with by the Commissioner of Income Tax (Appeals). 59. Thereafter, the matter was taken to the Tribunal and by the impugned order, the addition made by the Assessing Officer of ₹ 98,28,829/after adopting the gross profit percentage of 49.27% of Dayanand Garden project to the Shivanand Garden Project, was deleted. The Assessing Officer's order, as maintained by the Commissioner of addition of ₹ 8,92,604/on the issue of lower profit margin of Shivanand Garden project as compared with higher profit margin of D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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