9911796707
TMI Blog2013 (11) TMI 1745X X X X Extracts X X X X X X X X Extracts X X X X ..... loping the land with basic infrastructure like roads, parks, street lights, children play area, etc. The assessee filed his return of income for the year under consideration by declaring total income of Rs. . 8,32,052/- after claiming deduction under section 80IB(10) of the Income Tax Act. The Assessing Officer has rejected the claim of the assessee on the following reasons: 1. The project was not a housing project as envisaged under section 80-IB(10). 2. The project was of the nature of works contract and the assessee undertook contract risk and not investment risk. 3. The conditions pertaining to dates of approval, dates of completion and area of project had not been adhered to. 4. The condition with respect to built up area had not been adhered to. 3. With regard to whether the project is a housing project or not as per section 80IB(10), the Assessing Officer has observed that as per section 80IB(10), there are two categories viz. (i) apartments and (ii) row house/ Villas. According to him, single approval for the project as a whole was given by the CMDA. The buyer of the housing unit gets the housing unit and an undivided share of lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee constructs independent houses on independent plots of land. The assessee had started work on construction of the houses only after entering into construction agreement with the customers. He had received payments from the customers after which he had commenced construction work. The assessee had obtained building plan approval from the Pallikaranai Panchayat and then only started the construction. The assessee received payment from the customers on various dates as the house construction progresses. The Assessing Officer has noted that the buyer/customer is the owner of the land on which the construction of the house is being made, which shows that the assessee merely takes contract risk and not investment risk. The assessee's job is in the nature of works contract. Moreover, many of the lands were not in the name of the assessee at any point of time. It was either in the name of the original owner or the customer to whom the house was sold later. Therefore, the housing scheme of the assessee is of the nature of a works contract and accordingly, the Assessing Officer has denied the claim of deduction under section 80-IB(10) of the Act. 5. The next aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no single approval for the entire project. The assessee has taken different approvals and therefore, the assessee has not satisfied the conditions laid out under section 80IB(10) with respect to the housing project approvals, date of approval and completion dates and denied the claim of deduction under section 80-IB(10). 8. The Assessing Officer has examined the entire aspect as to whether the condition with respect to built up area is adhered to by the assessee or not. In the assessment order, the Assessing Officer has observed that the issue of built up area has been discussed by placing strong reliance on the decision of the ITAT in the case of Sanghvi and Doshi Enterprise v. ITO. While considering Tribunal's decision in the case of Sanghvi and Doshi Enterprise (supra), the Assessing Officer has observed that the "Private terrace area" should be included in the built-up area and stressed on the fact that exclusive access to the terrace was available to only one of the buyers and hence, the terrace area should be considered as part of the built up area. In the above cited case, the Tribunal has held that "The expression "built-up area" has been defined in clause (a) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n extent of 7.11 acres and approval was taken for prototype houses and therefore the project area is more than 1 acre and therefore, the assessee is eligible for deduction under section 80IB(10) of the Act. * So far as approval and completion of the project, it was submitted that initial approval for 3 prototype units were obtained on 06.05.2005 from the local authority i.e. Pallikaranai Panchayat and the last approval was obtained on 29.03.2007 i.e. well before 31.03.2008 as required by section 80IB(10) and the project was completed and certificate obtained from local authority was on 03.03.2011, well before 31.03.2011 as required by clause (a) of section 80IB(10) of the Act. * So far as whether the assessee is a developer or works contractor, it was submitted that the assessee paid advance money to the land owners and to develop the land, the assessee had incurred expenditure of Rs. . 79.27 lakhs and entered into sale and construction agreement with the prospective buyers and construction was completed. It was also submitted that even as on date, the maintenance of the park and play areas is continued to be done by the assessee. Therefore, the assessee has taken inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uildings consisting of several residential units. The legislature has introduced the provisions of section 80-IB(10) to encourage residential housing projects with a cap that the individual units should not exceed specified limit of built up area. Any undertaking has to fulfill all the conditions laid down under the beneficial provisions of section 80-IB(10) of the Act to avail deduction under this section. In the case of the appellant, it is seen from the records submitted, the building plan of the residential units have been approved by the local authority as mandated by section 80-IB (10) and the AO has not disputed regarding the building plan approval by the local authority. In my opinion the reasons cited by the AO for denying the deduction is merely a presumption. Plain reading of section 80-IB(10) reveals that deduction is available to an undertaking which is developing and building housing projects as approved by the local authority, The section does not lay down any further conditions as presumed by the AO. It is well settled legal principle that while interpreting the statue, particularly the taxing statue; nothing can be read in to the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cres. Similarly in respect of the subsequent agreements dated 27/09/2005 and 31/08/2006 entered with the land owners, the appellant had acquired rights to develop further extent of 7.64 acres and in all to the extent of 14.75 acres. The appellant has paid Rs. 1.31 crore as advance money to the original owners apart from spending Rs. 79.20 lacs on laying out the basic infrastructure for the housing project and thus invested an amount of nearly Rs. 2.00 crores upfront before generating any revenue and in turn the appellant had obtained possession of the lands and also the rights to develop and resell the land to the prospective clients. At one stage about 70 of the approved plots were registered in the name of the appellant after making entire purchase consideration. As per the appellant, all the activities connected with the development of land, approval, preparation of scheme drawings, submission of plans to the local authority and payment of development fees to the concerned authority have all been undertaken by the appellant and also all the activities connected with selling and marketing were carried out by the appellant. It was further argued that the land owners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement and taken over possession of the property irrespective of the fact that the consideration is passed or not. In any case legal ownership over the land ha~ never been any relevant criteria for allowing or not allowing deduction u/s 80-IB (10) of the Act. What is important is that the undertaking should have complete control, dominance and right to carry on the project as sanctioned by the local authority. In the present case, since the contrary had not been made out by the AO, it can be safely assumed that the appellant had full control and dominance over the property or he could not have completed the project within the stipulated time as envisaged by the section 80-IB(10) of the Act. The AO's contention that the appellant undertook the contract work on behalf of the final buyers of the residential units does not go well when the records and documents are perused. What the appellant did was, he sold the finished product to the buyer (in this case residential unit) by executing a sale deed and housing development agreement and conveyed the ownership to the ultimate buyers. It is purely a legal issue and no way had the AO showed that the appellant undertook contract work on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) is whether the conditions pertaining to dates of approval, dates of completion and area of project had been adhered to: "The case of the appellant is that he has executed the housing projects in an area of measuring 14.75 acres and whereas the minimum requirement of land area as per the clause (b) of section 80-IB(10) of the Act is one acre of land. The appellant after developing the land with the basic infrastructure for the housing projects like roads, parks street lights children's play area etc., has obtained building plan approval for 3 prototype houses on the said date and built the model housing units and subsequently obtained plan approval for the remaining housing units in a phased manner and completed the construction of all the remaining units within the stipulated time as prescribed in the said section. The case of the AO is that, the appellant has obtained building plan approval only for three houses comprising of 5988 sq.ft of land on 6-5-2005 hence the housing scheme of the appellant is on an area of less than one acre of land, that the appellant has carried out the housing scheme on a land which has five layout approvals. Jf the date of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval has no relevance to the issue under consideration. It is to be noted that the AO has failed to understand that the conditions laid down in section 80-IB (10) are specific conditions and their satisfaction must be very strict. Since the conditions are very specific, there is no reason to interpret their meaning. Once it is seen that the conditions are satisfied, the deduction is available to the assessee automatically. Therefore, referring sale of divided share of rand or FSI or that the dwelling unit of same built up area should have the same undivided share of land and should be sold at the same price and dwelling units constructed by the appellant are not multi-storey buildings by the AO are not acceptable. As far as compliance of clause (a) of section 80-18 (10) is concerned, it clearly states in each of its sub-clauses that the building plan has to tie approved by the local authority. In the instant case, the building plan approval for three prototype houses has been obtained by the appellant on 06.05.2005 from the local authority namely Pallikarani Panchayat. The housing project of the appellant consists of 162 houses and for all these housing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xman.com 316(Bombay). Therefore I am of the view that the conditions pertaining to dates of approval, dates of completion and area of project had been adhered to by the appellant." 14. The fourth issue raised before the ld. CIT(Appeals) is whether the condition with respect to built up areas is adhere to?: "As far as the size of the dwelling unit is concerned, the AO has concluded that all the units in the housing project except one unit exceeded the built up area limit of 1500 sq.ft. as stipulated in section 80-IB(10) of the Act. In this regard, the AO has concluded that all the space within the compound wall of each housing unit is a private space and if all that private spaces are included then all the units exceeded 1500 sq.ft of built up area. The AO has further contended that open terrace area is to be included in the built up area placing reliance on the decision of the Hon'ble ITAT in M/s. Sanghvi and Doshi Enterprises. The AR of the appellant has contested the reliance placed by the AO on the decision in the case of M/s. Sanghvi and Doshi Enterprises as the same is not applicable to the facts of the present case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and first floor of one independent unit (Unit NO.15 of the housing project) with the following built up area computation: GROUND FLOOR living + verandah (9" + 14'3" + 9 + 4'4 ½ ") x (9" + 12'0") = 256.59 Dining + Sit out (9" + 14'3" + 9" + 4'4 ½ ") x (9" + 13'0") = 276.72 Kitchen + Toilet + Bed (9"+8'0"+4½ "+ 4'0"+ 4½"+10'0"+9") x (9"+12'0"+9") = 327.38 = 860.69 sq.ft. FIRST FLOOR Front Bed + Toilet + Sit out (9"+13'9"+4½"+4'6"+9") x (9"+12'0") = 256.59 Corridor (9"+4'6") x (9"+13'0') = 72.19 Master Bed Room (9"+14'4½"+9) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; By reading of the above definitions I meaning of the term Balcony I am convinced beyond doubt that the open terrace talked about in the appellant's case is neither a Balcony nor a projection. I am also of the considered view that the private car parking, private washing space, private sit out and other private open spaces within the compound wall of each housing unit cannot be included in a blanket fashion without specific provisions in this respect. If there is nothing built and it is an open space, such space cannot be included in the meaning of built up area without a specific provision in that regard. The AR of the appellant has also placed reliance on the following cases in support their argument: (i) ACIT vs. M/s. Yug Corporation, ITA Nos. 2700,2701,2702 and 2703/ Ahd/2009, 'C' Bench, ITA T, Ahamedabad. (ii) M/s. Amaltas Associates vs. ITO, ITA NO.2401(Ahd) of 2010, 'A' Bench, ITAT, Ahmadabad. (iii) M/s. Safal Associates vs. ITO (OSD), ITA No.520/Ahd/2011, 'D' Bench, ITAT, Ahmadabad. (iv) Global- reality Bhopal Vs. ITO in ITA Nos. 86 and 145/Ind/2011 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ize of plot of land having an area of minimum one acre. When the assessee initially submitted for approval from local authority for 3 prototype houses, it was not one acre of land and therefore, the assessee is not eligible for deduction under section 80IB(10). Further, the ld. DR has argued that the project of the assessee is of works contract and therefore, not eligible for deduction under section 80IB(10) of the Act. The ld. DR has further argued that the assessee has failed to adhered to in respect of built up area and submitted that the open terrace area should be included in the built up area and if that is the case, the flats constructed by the assessee are crossing more than 1500 sq.ft. each and therefore, the assessee is not eligible for deduction under section 80IB(10) of the Act. 17. On the other hand, the ld. Counsel for the assessee has submitted that the assessee himself has referred the matter to the CMDA and the CMDA has stated that for independent houses, CMDA approval is not required by referring assessee's paper book page No. 185 and 186. Further, the ld. Counsel for the assessee has replied that the project conceived by the assessee is only 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54 acres and carried out the project in the same lines. The entire project was executed in a total area of 14.75 acres consisting of 162 independent houses covering an area of approved plots totally measuring an extent of 8.18 acres of land. The last building plan approval was obtained from the local authority by 29.03.2007 and completed the project by 03.03.2011 i.e. well before 31.03.2011. 19. The assessee, who is claiming benefit under section 80IB(10) of the Act, following conditions are to be satisfied: (i) allowed to all assessees; (ii) it is allowed on account of housing project which is approved by a local authority before 31.03.2008; (iii) the project is on the size of the plot of land having an area of minimum of one acre; (iv) the residential unit has a built up area not exceeding 1000 sq.ft., where such residential unit is situated within the cities of Delhi or Mumbai or within 25 kms of Municipal limits of these cities and 1500 sq.ft. at any other place; (v) the built up area of the shops and other commercial establishments included in the housing project does not exceed 5% of the aggregate built up area of the housing project or 2000 sq.ft., whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as prospective buyers and constructed 162 independent houses. Therefore, in our opinion, the assessee's project is an housing project, which is within the ambit of section 80IB(10) of the Act. The ld. CIT(Appeals) has considered the issue elaborately in his order [page 28 and 29]. Therefore, we do not find any infirmity in the order of the ld. CIT(Appeals) on this issue and the ground raised by the Revenue stands dismissed. 21. The second issue for our consideration is whether the approval of the project and completion date is a per section 80IB(10) of the Act or not. The assessee, initially entered into an agreement dated 15.06.2004 with 17 land owners to develop the land to the extent of 7.11 acres and built housing project on a lay out, which has already been approved by the CMDA and paid advance of Rs. .86,05,000/-. Thereafter, the assessee has developed roads, parks, play areas, etc. The assessee has applied for approval of construction of 3 prototype houses and the same was approved on 06.05.2005 by the Pallikaranai Panchayat; and started negotiating with prospective buyers and after registration, the assessee has constructed independent house. The objection r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land owners and paid an advance and developed the land and after negotiation with prospective buyers, he has sold the plots and constructed independent houses. Therefore, in our opinion, the approving authority is local authority i.e. Pallikaranai Panchayat. Hence, no separate CMDA approval is required. In the assessment order the Assessing Officer has raised one more objections that the date on which the lay out approved has to be taken into consideration for the purpose of approval of the project. We find no reason to take layout approval date for approval of the housing project for simple reason that the layout was approved on 22.09.2003 and subsequently assessee had entered into an agreement with the land owners on 15.06.2004. When the layout was approved, the assessee was not conceived the project. In the assessment order, the Assessing officer has raised one more objection that the assessee has taken several approvals and then multiple approvals for the same project was taken, then the first approval of the project should be taken as the date of approval of the project. In this case, the assessee, after entering into an agreement with the land owners, taken approval for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case, at the cost of repetition, we have to state that the so called initial approval on 06.05.2005 was, in fact, obtained in respect of 3 prototype units. It will be misleading, if we say that the said approval of the prototype units cover the entire units of the project and the said approval should be taken at the approval for the whole project. Such a conclusion will be a travesty of truth. It is on the basis of the approval of the prototype units that the assessee had finalized its project and commenced negotiations with potential customers. When the assessee was successful in selling out the individual units of the project on the basis of the prototype, the occasion actually arose to the assessee to seek for the approval of the projects as a whole. Since the project consisted of individual dwelling unit, it was necessary to obtain individual approval and the last approval for the last unit obtained was, in fact, on 29.03.2007. Therefore, it is this date on 29.03.2007, which is to be reckoned as the date of approval of the local authority for the whole housing project contemplated by the assessee. The limitation period of five years of completion of the project runs from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that the assessee is not the owner of the property, which he undertakes to develop nor can it be denied on the ground that the development agreement is not registered. In another case CIT v. Radhe Developers [2012] 341 ITR 403 (Guj), wherein the Hon'ble Gujarat High Court has observed that section 80IB(10) allows deduction to an undertaking engaged in the business of developing and constructing housing projects, there is no requirement that the land must be owned by the assessee seeking the deduction. Further, as the assessee was in part performance of the agreement to sell the land, given possession and had also carried out the construction work for the development of the housing project, it had to be deemed to be the owner under section 2(47)(v) read with section 53A of the Transfer of Property Act, 1882 even though formal title had not passed. In the present case, the assessee is in similar position of the above case decided by the Hon'ble Gujarat High Court. In this case, the assessee had entered into an agreement with the land owners and paid advance and possession of the land was taken, developed the area as well as carried out construction. Similar view has been taken b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008 and 136 of 2009 in the case of M/s. Ceebros Hotels Private Limited v. DCIT dated 19.10.2012 and accordingly, the order of the Tribunal on this issue is set aside. The assessee's appeal viz. T.C.A. No. 318 of 2012 stands allowed holding that open terrace area cannot form part of built up area and the assessee would be entitled to deduction under section 80IB(10) of the Act. Keeping in view of the facts and circumstances and the decision of the Hon'ble Jurisdictional High Court and respectfully following the same, the open terrace area could not be included in the built up area for the purpose of benefit under section 80IB(10) of the Act. The ld. CIT(Appeals) has elaborately discussed the issue in his order at page Nos. 36 to 39 and held that the open terrace area are not to be included in the built up area and decided the issue in favour of the assessee. Keeping in view of above decisions of Hon'ble Jurisdictional High Court, we do not find any reason to interfere with the order passed by the ld. CIT(Appeals) and dismiss the grounds raised by the Revenue. 26. In view of the facts and circumstances of the case, materials placed on record as well as from the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
