TMI Blog2015 (5) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... sly and consequently the claim of the assessee is to be looked into in line with the amended provisions of section 80-IB(10) of the Act, which have been made applicable for the construction of the housing project, which had commenced development and construction after the 1st day of October, 1998 but before 1st day of October, 2004, then such housing projects in order to avail the aforesaid deduction, had to be completed on or before 31st day of March, 2008. We uphold the order of CIT(A) in this regard. We hold that the provisions of section 80-IB(10)(a)(i) are clearly applicable to the facts of the case and the assessee had to complete its project on or before 31st March, 2008 in order to avail the deduction under section 80-IB(10) of the Act. Each of the project developed by the assessee was independent project itself and consequently if the individual project satisfies the conditions of section 80-IB(10) of the Act, then the said project is entitled to the claim of deduction. The housing project in Sector No.1 comprising of five buildings was completed on 28.03.2008, against which the assessee had received part completion certificate and since the project has been complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to assessment years 2006-07 and 2007-08 against order passed under section 143(3) of the Income-tax Act, 1961. Further, the assessee has filed another appeal against the order of the CIT(A) dated 27.08.2012 relating to assessment year 2009-10 against order passed under section 143(3) of the Act. 2. All the appeals relating to the same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee in ITA No s.1691 1692/PN/2012 relating to assessment years 2006-07 and 2007-08 has raised the common grounds of appeal. However, reference is being made to the facts and issues in ITA No.1691/PN/2012 to adjudicate the issue. The grounds of appeal read as under:- 1. On the facts and in the circumstances of the case and in law the honourable CIT(A) erred in confirming the disallowance of deduction claimed under section 80IB(10) in respect of Sector No. 7 without appreciating the fact and the legal position that the amendment brought in by Finance Act, 2004 is applicable prospectively to the housing project and the building plan of which is approved after 1st April 2005. The appellant hereby prays t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of which is approved on or after 1st April 2005. The appellant hereby prays that the deduction claimed under section 801B(10) in respect of profits derived from Sector No. 7 may please be granted. 2. On the facts and in the circumstances of the case and in law the honourable CIT(A) erred in confirming the disallowance of deduction claimed under section 801B(10) in respect of Sector No. 7 even though the appellant has completed the construction of substantial portion of the Sector No. 7. The appellant hereby prays that the deduction may please be granted. 3. On the facts and in the circumstances of the case and in law the honourable Commissioner of Income Tax (Appeals) Pune erred in not allowing the proportionate deduction under section 80IB(10) in respect of the project completed on Sector No. 7 before 31st March 2008. The appellant hereby prays that the proportionate deduction in respect of project completed before 31st March 2008 may please be granted. 4. The appellant hereby reserves the right to add, raise, delete any additional ground/grounds before the completion of the hearing. Padmavati Developers 6. The issue arising in the present appeal is against the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction under section 80-IB(10) of the Act. In response, the assessee explained that the project named Empire Estate consisted of 15 buildings and 536 flats. It was further pointed out by the assessee that the PCMC had issued completion certificate dated 28th March, 2008 in respect of 6 buildings i.e. E, F, G, H, I-1 I-2. The completion certificate in respect of Q-1, Q-2 Q-3 was granted except 4 residential units of the said buildings. In connection with the approval of the plan on 15th December, 2003 i.e. before 31st March, 2004, the Ld. Authorized Representative for the assessee pointed out that in order to consider the eligibility of the housing project, one has to go through the legislative history of the section and the provisions applicable on the assessee. It was further pointed out by the Ld. Authorized Representative for the assessee that section 80-IB(10) of the Act was brought on statute by the Finance Bill, 1999 which was amended year to year. The plea of the assessee before the Assessing Officer was that since the provisions of section 80-IB(10) of the Act were substantive in nature, no retrospective effect of the same could be given. The Assessing Officer, in turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not been completed, the alternative plea of the assessee on this issue was also rejected. The plea of the assessee that it had not claimed deduction on profits of P-1 to P-6 and the row houses was held to be irrelevant by the Assessing Officer. The contention of the assessee that the clause of time limit for completion of the project was not there in the Act at the time of approval of the project, as per the Assessing Officer, was illogical, where the Finance (No.2) Act, 2004 had made very clear that the project approved prior to 31.03.2004 had to be completed by 31.03.2008. Since the project of the assessee was approved prior to 01.04.2004 where the assessee had not fulfilled the condition laid down in the Act to be eligible for the said deduction and hence deduction under section 80-IB(10) of the Act cannot be allowed to the assessee on this account. The claim of the assessee for deduction to the tune of ₹ 3,78,78,880/- under section 80-IB(10) of the Act was rejected. 10. Before the CIT(A), the main plank of argument of the assessee was that there was no condition for time limit within which the project had to be completed, since the project of the assessee was appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d written submissions along with the prayer for admission of additional evidence in the form of certificate from the Architect and Government Approved Valuer Shri Harshad Ruparel dated 21.10.2009 stating that the projects developed in Sector No.1 and Sector No.7 were separate and independent projects. Further, the contention of the assessee before the CIT(A) was that the said evidence could not be produced before the Assessing Officer due to time constraint. However, the approved plans were available with the Assessing Officer, from which it was discernable that the projects of Sector No.1 and Sector No.7 were separate, so far as deduction under section 80-IB(10) of the Act was concerned. The said additional evidence along with the submissions of the assessee were confronted to the Assessing Officer and remand report was called for. The CIT(A) has reproduced remand report at pages 24 to 26 of the appellate order, in which the Assessing Officer objected to the admission of the additional evidence. It is further stated that there was no merit in the said certificate of the Architect filed by the assessee, wherein Architect had not explained in anyway the reasoning for considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this regard was absolutely baseless, where the building permission for constructing Sector No.1 and Sector No.7 and development charges for layout sanction for Sector No.1 and Sector No.7 were paid by the builder to the respective parties of PCMC considering both the Sector No.1 and Sector No.7 as single unified project only. 12. The CIT(A) noted that the total plot area of land situated at Chinchwad, Pune was admeasuring 1,03,884 sq.mtrs. which was purchased by the Cooperative Society from Premiere Automobiles Ltd.. Further, the layout plan divided the entire area into 7 plots being called as Sector for which permission was obtained by the said owner from PCMC by order dated 15.12.2003. Out of the above 7 Sectors, the assessee firm obtained development rights in respect of Sector No.1 and Sector No.7. Further, it was noted by the CIT(A) that it was not in dispute that a D.P. Road of 45 mtrs. width was passing through the aforesaid land and Sector No.1 and Sector No.7 were lying on the opposite sides of the D.P. Road and were not facing each other. Another contention raised by the CIT(A) was that the Assessing Officer had accepted in the assessment order that the size of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought in section 80-IB(10) of the Act relating to the completion of project was not applicable to the assessee as the project was approved for the first time on 15.12.2003 i.e. prior to the said amendment. The second claim of the assessee before the CIT(A) was that the project in Sector No.1 and Sector No.7 were separate and should be considered separately for granting deduction under section 80-IB(10) of the Act. The CIT(A) in relation thereto noted that the assessee had clarified that it was following mercantile system of accounting regularly. It was further clarified that for revenue recognition, project completion method was followed. However, units which were completed in the previous year and whose possession was handed over to the purchaser was considered as sales receipt in the Profit Loss Account. The direct and indirect expenses incurred on the project from time to time were debited to the work-in-progress account of the respective projects and the proportionate land cost as well as cost of construction relating to the units recognized as sold, was considered as cost of the unit for the purpose of Profit Loss Account. The assessee, in this regard, made reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B(10) of the Act were held to be applicable then where the project is one or separate assume significance because all the buildings in Sector No.1 were found to have been completed by 31.03.2008, whereas only some of the buildings of Sector No.7 were completed by 31.03.2008. The CIT(A) noted the arguments/submissions of the assessee that though building plans and commencement certificate were issued for plots situated in Sector No.1 and Sector No.7, but the same were separated by D.P. road and further the statutory authority i.e. PCMC had considered the same independently for working out the FSIs of the respective Sectors under consideration. Where the plots had not been amalgamated and the commencement certificate is common, only because the assessee held the right of development for developing in both the Sectors, for which it had made the application together, the CIT(A) admitted the additional evidences filed by the assessee i.e. certificate from the registered Architect and the City Engineer, PCMC. It was also noted by the CIT(A) that the registered Architect was the same Mr. Harshad Ruparel, who was appointed by the Assessing Officer for carrying out the verification of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for Sector NO.7, it was computed at ₹ 90,48,732/-. The CIT(A) further noted that there was no dispute that all the buildings of Sector No.1 were completed before 31.03.2008 therefore, the profit of Sector No.1 would be eligible for deduction under section 80-IB(10) of the Act. Since only some of the buildings of Sector No.7 were completed before 31.03.2008, the CIT(A) held that there was a definite failure on the part of the assessee to complete the project of Sector No.7 before the due date prescribed in clause (a)(i) of section 80-IB(10) of the Act and therefore the said profit was held to be not eligible for deduction under section 80-IB(10) of the Act. The Assessing Officer was directed to verify the computation of profit of Sector No.1 and Sector No.7 separately. 16. In respect of second claim of the assessee vis- -vis pro-rata deduction to be allowed on the housing units completed in Sector No.7, the CIT(A) held that the issue involved in the present case was in respect of non-fulfillment of condition prescribed in clause (a)(i), as per which the project was required to be completed before 31.03.2008. The CIT(A) was of the view that unless the project as a whole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed under section 80-IB(10) of the Act by submitting one Audit Report in respect of both Sectors No.1 and 7. He further fairly admitted that building in Sector No.7 was not completed before 31.03.2008, though the commencement certificate was dated 15.12.2013. The Ld. Authorized Representative for the assessee further pointed out that it had complied with all the other conditions contained in section 80-IB(10) of the Act i.e. there was no commercial establishment and the size of the residential units were within the permissible limit. It was further submitted by him that the Assessing Officer deputed the Inspector for inspecting the property. None of the units were found to exceed 1500 sq.fts. in area. It was further pointed out that during the course of survey conducted on the premises of the assessee on 14.06.2006, Survey Team noted that some of the buildings in Sector No.7 were no t completed. The Assessing Officer, in view thereof, since the buildings were not completed in Sector No.7, denied the deduction under section 80-IB(10) of the Act. The Ld. Authorized Representative for the assessee pointed out that whether the housing project was approved on 01.04.2005, the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the order of the CIT(A). 21. The Ld. Authorized Representative for the assessee pointed out that in assessment year 2006-07, the claim of deduction under section 80-IB(10) of the Act was in relation to Sector No.1 and Sector No.7. However, in assessment year 2007-08 and 2009-10, the deduction was claimed only in respect of Sector No.7. Reliance in this regard was placed on the ratio laid down by the Pune Bench of the Tribunal in Opel Shelters Pvt. Ltd. vs. ACIT and D.S. Kulkarni Associates vs. ITO (supra) that the provisions which have been inserted on a later date cannot apply to the projects which were sanctioned prior to the same. 22. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in relation to the claim of deduction under section 80-IB(10) of the Act. For granting the aforesaid deduction under section 80-IB(10) of the Act, the statute provides certain conditions to be fulfilled by the claimant before the person is found to be eligible for the said deduction. The first condition provided in sub-clause (a) of section 80-IB(10) of the Act is the period during which the said construction has to be completed. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd five hundred square feet is prescribed. Clause (d) of section 80-IB(10) of the Act provides that the built-up area of the shop and other commercial establishment in the said project does not exceed three per cent of the aggregate built-up area of the housing project or five thousand sq.fts., whichever is highest. Under clause (e) of section 80-IB(10) of the Act it is provided that not more than one residential in the housing project is to be allowed to any person not being an individual. Further, clause (f) of section 80-IB(10) of the Act provides that 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 to be allotted to his family members as provided thereunder. Clauses (e) and (f) to section 80- IB(10) of the Act have been inserted by the Finance (No.2) Act, 2009 w.e.f. 01.04.2010. 24. In the present case, assessee had entered into a development agreement, under which it received the rights to develop Sector No.1 and Sector No.7 of plot in Chinchwad. The area in Sector No.1 was 7323.92 sq.mtrs. and the area to be developed in Sector No.7 was 13,768.43 sq.mtrs.. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment by treating both the projects as single project and since the same were not completed before the 31st March, 2008, the deduction claimed under section 80-IB(10) of the Act was denied. 25. The case of the assessee before us is that the projects at Sector No.1 and Sector No.7 were separate and independent projects. In this regard, assessee placed reliance on the position of the projects in the layout plant in the first instance. Further, the plea of the assessee before the CIT(A) and even before us was that the Architect Mr. Harshad Ruparel had certified that the projects constructed at Sector No.1 and Sector No.7 were separate and independent. It was also pointed out by the Ld. Authorized Representative for the assessee before us that pursuant to the survey operations, the Assessing Officer had verified the status of the building completed or not through the same Architect, Mr. Harshad Ruparel. Our attention was drawn to the certificate placed at page 32 in the Paper Book. In this regard, another reference made by the assessee was to the certificate issued by the PCMC, which is placed at page 36 of the Paper Book-I with English Translation at pages 37 38 of the Pape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , against which the assessee could separately claim the deduction under section 80-IB(10) of the Act, where the projects had fulfilled the conditions laid down in the said section. The first claim of the assessee before us is in respect of Sector No.1, which the assessee claims to have completed the construction prior to 31.03.2008. The second part of the claim of the assessee was by way of alternate plea that the said deduction under section 80-IB(10) of the Act should be allowed vis- -vis the completed buildings of Sector No.7, even though the project has not been completed by 31.03.2008. Both these pleas raised by the assessee were stressed by the Ld. Authorized Representative for the assessee elaborately and took us through the provisions of the Act and stressed that the amended provisions brought by Finance (No.2) Act, 2004 were not applicable to the assessee i.e. there was no provision under which it had to complete the construction by 31.03.2008, since it had acquired the permission to construct the said buildings prior to the insertion of the relevant provisions. 28. As referred by us in paras hereinabove under the provisions of section 80-IB(10) of the Act, the conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority before 1st day of April, 2004, then how could the provisions would apply only prospectively. The said provisions are applicable to all the projects which were pending on the date when the section was substituted, as clause (a)(i) very clearly talks of all the housing projects which have been approved by the local authority before 1st day of April, 2004 and have to be completed on or before 31st day of March, 2008, for making it eligible for the claim of deduction under section 80-IB(10) of the Act. The beneficial provisions provided by the legislature have to be interpreted and it is not the intention of the legislature that liberty should be given to the builders not to complete the projects within the time frame which, in turn, would put the prospective buyers at disadvantage. The conditions have been laid down in the said section in order to streamline the development and building of the housing projects which, in turn, would be handed-over to the prospective buyers within the time frame. Further period of four years have been provided in the sub-section for compliance to the conditions laid therein. Accordingly, we hold that in the present case, where the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted the said project within the stipulated period. The completion of construction and handing over of the possession was admittedly in the hands of the assessee and such non-completion of the project within reasonable time would put the prospective buyers at disadvantage and it can never be the intention of the legislature to cause such hardship. 30. The Hon ble Supreme Court in Reliance Jute and Industries Ltd. vs. CIT, 120 ITR 921 (SC) had held that claim by an assessee under the law in force in the particular assessment year is ordinarily available only in relation to a proceeding pertaining to that year. In the facts of the case before the Hon ble Supreme Court for assessment year 1959-60, the Assessing Officer set-off the unabsorbed business loss for 1949-50 and 1950-51, against the business income of that year and directed that ₹ 15,50,189/- represented the loss remaining unabsorbed should be carried forward. In the assessment proceedings for the assessment year 1960-61, which was before the Hon ble Apex Court, the assessee claimed that the unabsorbed loss should be carried forward and set-off against the business income of the current year. The Assessing Officer re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction of the housing project, which had commenced development and construction after the 1st day of October, 1998 but before 1st day of October, 2004, then such housing projects in order to avail the aforesaid deduction, had to be completed on or before 31st day of March, 2008. We uphold the order of CIT(A) in this regard. 32. The Ld. Authorized Representative for the assessee placed reliance on the ratio laid down in Saroj Sales Organization vs. ITO, (2008) 115 TTJ 485 (Mum) for the proposition that the amended provisions of section 80-IB(10) of the Act have prospective application. In the facts of the case before the Tribunal, the deduction under section 80-IB(10) of the Act was denied to the assessee as the commercial area was more than as provided in the amended section. The Tribunal thus held where the plans were approved before the amended provisions were introduced then the conditions of shopping area not exceeding 5 per cent of built-up area as introduced by subsequent amendment and applicable in respect of projects approved before 31st March, 2007 would not apply. In such circumstances, where there was a requirement of commercial area to a certain extent, the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions laid down in section 80-IB(10) of the Act and in respect of clause (a) since the projects were completed before 31.03.2008, the first condition was held to have been complied with. In respect of other conditions of the built-up area of shops and commercial establishment, it was held by the Tribunal that where the plans were approved prior to the insertion of the amended provisions w.e.f. 01.04.2005, it would be impossible to apply the said provisions, which was not on statute at the time of approval and commencement of the construction of the project. 34. The Ld. Authorized Representative for the assessee placed strong reliance on the above-said decision for the proposition that even vis- -vis the compliance stipulated in clause (a)(i), the said provisions were not applicable to the assessee, since the housing project was approved prior to 1st day of April, 2004. We find no merit in the said reliance placed by the Ld. Authorized Representative for the assessee. In view of our discussion in the paras hereinabove and even otherwise if we accept the contention of the assessee, the provisions of clause (a)(i) would become infructuous proposition of law. Rejecting the same, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. 36. Now, coming to the second housing project in Sector No.7. Admittedly, the assessee in assessment year 2006-07 has completed only 2 buildings i.e. Q-1, Q-2 and some flats in assessment year 2007-08. The building comprised in P-1 to P-6 and the row houses have not been constructed by the assessee till the date of survey and upto 31.03.2008. 37. The Hon ble Madras High Court in Viswas Promoters Pvt. Ltd. vs. ACIT, (2013) 255 CTR 149 (Mad.) have laid down that within a composite housing project, where there are eligible and intelligible units, the assessee can claim deduction in respect of eligible units in the project and even within the block, the assessee is entitled to claim proportionate relief against the units satisfying the extent of built-up area. 38. Similar proposition has been laid down by the Bangalore Bench of the Tribunal in DCIT vs. Brigade Enterprises (P.) Ltd., (2008) 119 TTJ 269 (Bang) and the Pune Bench of the Tribunal in Runwal Multihousing Pvt. Ltd. vs. ACIT in ITA No s.1015, 1016 and 1017/PN/2011 relating to assessment years 2003- 04 to 2005-06, order dated 21.11.2012. Following the same parity of reasoning, we hold that the assessee is entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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