TMI Blog2018 (10) TMI 1692X X X X Extracts X X X X X X X X Extracts X X X X ..... a BUA of less than 1,000 sq. feet and allotted residential units to the purchasers with a BUA of less than 1,000 sq. feet. Accordingly, there is no infirmity in the order of CIT(A) allowing assessee s claim of deduction u/s.80IB(10) of the IT Act. With regard to the AO s contention of treating income derived from leave and licence fee not in the nature of income leviable for deduction u/s.80IB(10), we observe that the ITAT, in assessee's own appeals against the orders u/s 143(3) of the Act for assessment years 2005-06 to 2007-08 [ 2014 (10) TMI 973 - ITAT MUMBAI] has held such income to be eligible for deduction u/s 801B(10) of the Act. With regard to the AO s reliance on the decision of Hon ble Supreme Court in the case of Dilip Kumar and Company [ 2018 (7) TMI 1826 - SUPREME COURT] wherein it was held by the Constitution Bench that when there is an ambiguity in an exemption notification, it should be interpreted strictly, we found that the applicability of this decision is only when there is an ambiguity. In a case there is no ambiguity in the language of the section, the ratio of this decision is not applicable. Since the DR has not pointed out any ambiguity in the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 2011-12 5,09,84,409/- Total 35,63,51,733/- 5. The claim of assessee was allowed in principle in the original assessment orders passed u/s 143(3) for all the A.Yrs. under consideration. Assessee did not sell all the flats built in the project. The unsold flats were leased out and on the lease income also assessee claimed 80IB deduction which was disallowed by AO in the original assessments. On appeal, CIT (A) confirmed the disallowance of 80IB on lease income. On further appeal Hon ble ITAT held that assessee is eligible for 80 IB deductions even on lease income. 6. Meanwhile, there was a search action on Patel engineering group of companies on 16/12/2010 and interalia Shri. Danish Merchant one of the directors of AHCEL-PEL was also covered. During search at the premises of Danish Merchant, a loose paper containing a lease deed was found and seized as per which combined built up area of two flats A301 302 which was to be leased out, was shown as 3600 sq.ft. Mr. Danish merchant was confronted and his statement was recorded on 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot the finding that each residential unit, as per approved plan, cannot be used on a standalone basis unless it is apart of the adjoining residential unit (6) The municipal authorities levy property tax separately for each residential unit (7) There were no brochures or other promotional material which showed that the two residential units can be combined into one. (8) The provisions of the section until amended by the Finance Act, 2009 did not prohibit sale of more than one unit to the same individual or his relative. The amendment is prospective. (9) CBDT has in its Circular No. 05/2010 dated 3.6.2010 has recognized the fact that prior to the amendment multiple adjoining residential units were being sold by developers to the same individual who then combined them and thereby the restriction on the size of the residential unit imposed by the section was being circumvented. CBDT states that in order to curb this practice, the section was amended and the amendment is prospective. (10) Municipal authorities while assessing the property for levy of property tax, visited the property, got it surveyed from an independent surveyor and fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing original assessments did not reveal anything against the assessee. With regard to plans of merging the flats there can be no denial that assessee might have shown these plans to prospective buyers that the flats can be merged after buying them. However this in itself, in my considered opinion, cannot prove that assessee constructed merged flats to begin with. The evidence in the form of BMC verifications and OC issued cannot be brushed aside lightly. Assessee can always take refuge under the plea that the merger is done by the purchasers and there is nothing preventing the buyers from merging the flats once purchase is made and registration is done. Enquiries made by AO while completing the original assessment reveal that the purchasers themselves got the flats merged. AO did not controvert this finding by making any fresh enquiries. There is no evidence to show that it is the assessee who constructed merged flats and sold them as single unit. On the contrary the sale deeds registered clearly show that units of less than 1000 sft were sold and registered. This piece of evidence in the form of registration by state govt. authorities cannot also be ignored. The fact that various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective residential unit. Prior to the amendment of the provision of section 80IB(10) of the Act by Finance (No. 2) Act, 2009, adjoining units have been sold to husband and wife but that was something which was then permissible. The amendment to clause (f) of Explanation to section 80IB(10) is prospective and not retrospective. In fact, even the CBDT Circular No. 05/2010 dated 3rd June, 2010 has stated that the amendment does not apply to residential units allotted before 19.8.2009. Each of the purchasers are members of the society and have been allotted shares. Even as of date, which is about more than 10 years from the date of issuance of occupancy certificate, the society charges separate maintenance charges in respect of each of the residential units. The maintenance bills raised by the Society are in respect of residential units as per the municipal approved plans. As far as reliance of the Assessing Officer on the statement of Mr. Shashi Chhatrawala is concerned, it needs to be noted that the AO has considered Mr. Chhatrawala as the planner / designer / architect of the building whereas in the reply to the second question raised to him he has stated that he is SSC by qualifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant, leave aside establishing / proving, there is not even a mention that the residential units have been combined or that the construction is not in accordance with the approved plans. Even assuming that the two adjoining flats can be merged into a bigger flat, as long as the Appellant satisfies all the conditions prescribed for claiming deduction under section 80IB(10) and the Appellant has constructed residential units which have built-up area less than 1000 sq. feet, deduction cannot be denied to the Appellant. In fact, even CBDT Circular recognizes that before the amendment of the section by the Finance (No. 2) Act, 2009, developers were selling multiple residential units to a single buyer who later on combined the adjoining units and converted them into one bigger house. It was with a view to curb this loop hole that the Finance (No. 2) Act, 2009 amended the provisions of section 8013(10) but the legislature chose to amend the provisions prospectively. Deduction cannot be denied when the Appellant has actually constructed residential units which satisfy all the conditions prescribed. The Appellant got the plans approved with each residential unit having a built-up are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said housing project was completed as per the plans approved by the SRA and full occupation certificate (OC) was issued to assessee on 10.4.2003. The approved plans submitted to the lower authorities show that the built up area (BUA) of each residential unit is less than 1,000 sq. feet, which fact is not in dispute. Subsequently, additional FSI became available to the assessee which was used to construct residential units on the 13th floor as per the amended plan approved by the authorities on 16th December 2005. Originally assessee has filed return for the A.Y.2005-06 to 2007-08 u/s.139(1) of the Act and for A.Y.2008-09 to 2010-11 u/s.153C and u/s.143(2) for A.Y.2011-12 wherein the assessee claimed deduction u/s 80IB(10) of the Act on the profits and gains derived by it from the development of the Quantum Park housing project, inter alia, on the profits from the sale of residential units and profits from leave and licence fees on residential units, held as stock-in-trade, let out pending its sale. In the scrutiny assessment orders u/s 143(3) of the Act for AYs 2005-06 to 2007-08, the AO, after a detailed verification of the fulfillment of the conditions of eligibility o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010, and on 18.1.2011 statements of Mr. Danish Merchant were recorded, relevant extracts of which is reproduced by the AO in the assessment orders of all the captioned years (AY 2005-06 on pages 3-4 and 7-8 of the assessment order, being show cause notice dated 1.11.2012 14. It was contention of AO that the assessee, from the very beginning, had planned to reap the benefit of section 80IB for the Quantum Park project. He relied on the evidences found and seized, belonging to Jivesh, during the course of search on Samir Builders, wherein Jivesh was found to be incorrectly claiming deduction u/s 80IB(10) based on seizure of two sets of plans one of which has two flats per floor having BUA of around 2,000 sq. feet per flat (referred to as the original plan), whereas the second plan, which is approved by authorities, has four flats on each floor having a BUA of less than 1,000 sq. feet per flat. The AO relied on the statements of Mr. Shashikant P. Chhatrawala and Mr. Sarnir Bhojwani, recorded on 30.11.2010 and 1.12.2010 respectively, during the course of search on Samir Builders, extracts of which are reproduced in the assessee's assessment order on pages 6 -7. The AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that during the course of search action u/s. 132 conducted on 30.11.2010 at the premises of Samir Builders (director of Jivesh) two sets of plans in respect of the Quantum project were found of which one set of plan dated 31.12.2011 (it should be year 2001) showed two flats per floor having built up area (BUA) of 2,000 sq. feet each and the other plan showed four flats per floor having BUA of less than 1,000 sq. feet each and that the later plan was approved by the BMC for SRA project. He contended that Mr. Chhatrawala, who was working under the direction of Mr. Samir Bhojwani has stated on oath on 30.11.2010 that the unapproved plan was given to sales personnel to market the flats. He therefore alleged that the clearances and approvals from BMC is simply to hoodwink the law and that from the beginning the project was conceptualised to claim deduction u/s 80IB(10) without adhering to the conditions mentioned therein. 18. As per learned DR the CIT (A) has wrongly allowed the claim of deduction u/s 80IB(10) of the assessee on the flats sold as well as those given on lease by heavily relying on BMC clearances and the OC issued and the order of the CIT (A) in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this fact was reiterated as under: AHCL-PEL, a Partnership Firm, wherein Patel Engineering Ltd. is a Partner, has developed a Housing Project Quantum Park in accordance with the approvals granted by the local authority. The development of the said project commenced in the year 2000 and was completed in the year 2005, i.e. A.Y. 2005-06. The assessee has income/receipts from sale of residential units in the housing project, as also from leave and license fees from the residential units given on such basis. It has claimed deduction on the above income u/s. 80IB(10), which has been allowed by the Revenue Authorities in successive scrutiny assessments to the extent of profits and gains derived from the sale of the residential units. Hence, the fulfillment of all conditions laid down u/s. 8016(10) and the eligibility for deduction u/s. 80IB(10) has been tested and verified by the Assessing Officers in successive scrutiny assessments. However, such deduction claimed by the assessee in respect of leave and license fees has been rejected on the ground that such income is not derived from the business of developing and building housing projects, against which appeals filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in his statement recorded during the course of search on 16th December 2010 that the construction was indeed done as per the approved plans only, but later on the flats were amalgamated by the buyers (page 4 of the assessment order); the AO has also not contradicted this statement. It is to be noted that the full OC was received on 10.4.2003 and the final OC on 18th July 2006. In fact, the AO himself states in the assessment order that in the original plan (unapproved), there was no AHU in the floor plan; however, the plan approved by the municipal authorities has two AMDs in the floor plan, which are missing when the flats were merged later by the occupants (page 11 of the assessment order). The AO further states that nobody has the authorization to modify the municipal approved plan even though they may have bought two separate flats and merged as one; assuming that all the flats owners have two flats each and have decided to merge the flats simultaneously, still the municipal plan has to remain the same. 23. In respect of the flat sold out, the AO has come to a conclusion that the assessee did construct two residential units; the assessee did sell two residential uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 8th floor and there are firefighting passages on 9th to 12th floors. Besides and more importantly, the said unapproved plan could not have been acted upon because the FSI which would be required to construct the building as per the said unapproved plan would be about 10,750 sq. mts. whereas the FSI as per plans approved on the basis of which occupancy certificate dated 10th April, 2003 has been granted was 8,110 sq. mts.; this 2001 unapproved plan could have been workable only if the assessee got additional FSI which has not happened. 25. We also found that in respect of constructed project, the OC is granted by the local authority only after the concerned authority's senior officers verify the construction on site and find it completely in accordance with the approved plans. The local authority has issued full OC dated 10.4.2003 and the plans as per OC are the same as were approved, wherein the BUA of each residential unit is less than 1,000 sq. feet. Therefore, the apprehension of there being two residential units per floor instead of four as per approved plans is unfounded and without any basis. 26. From the record we also found that in the case of Jive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments, for AYs from 2005-06 to 2007-08, all completed u/s 143(3), the AOs have granted deduction u/s 801B(10) after examining that all the conditions required to be fulfilled for claiming this deduction have been satisfied by the assessee. In the assessments completed under section 153C of the Act, the only new material with the AO is page no. 54 of Annexure 1 seized from the residence of Mr. Danish Merchant, the statement of Mr. Danish Merchant and the reliance on the statement of Mr. Shashikant P. Chhatrawala obtained during the course of search on Samir Builders group. As observed earlier, in the case of Jivesh, the order of the CIT (A) holding it to be eligible for deduction u/s 80IB(10) has been upheld by the Hon'ble Tribunal. 28. With regard to observation of the AO to the effect that assessee from the very beginning had planned to reap the benefit of Section 80IB(10). We found that a perusal of the assessment order shows that the AO has heavily relied on the statements of Mr. Shashikant P. Chhatrawala and Mr. Samir Bhojwani taken on oath in the independent search proceedings on Samir Builders group. It is stated in the assessment order, that Mr. Chhatrawala is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Area calculations of Plot A and Plot B Set back area diagram and its calculations; Location Plan; Set back area diagram from existing road to slum fisheries / reservation, etc.; Set back area calculations from existing road to slum fisheries / reservation, etc.; Area calculations of reservation of fishing complex, net drying, etc.; Area calculations of various portions of the building and each flat; Information required to be given in Proforma C; Area calculations of sub-divided Plot *E' and Plot T'; Area diagram of R G area for rehab plot and also area calculation of RG area for rehab plot; Area diagram of R G area for sale plot and also area calculation of RG area for sale plot; Summary; The Form 1 in the plan has information about area of the plot; area accepted by PRC / PA / ULC; Road set back area; area of Proposed road; area of reservation; total area; balance area of plot; permissible floor area; total built-up area proposed; FSI consumed; number of parkings required by regulations; total number of parkings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of merger of flats by the licencee, a copy of LLA between the assessee (licensor) and Bayer (licencee) would show that, para 9(iii) and (iv) of the said agreement states that licencee shall be required to take the permission of the licensor to carry out any work being work of structural or permanent nature and that the licencee can carry out all minor repairs to the licenced premises and therefore the licencee cannot be held responsible for any kind of addition or modification in the floor plans. In this regard we observe that nowhere in the agreement is it mentioned that the two flats are merged; merely because a single agreement is entered into or a single invoice is raised towards letting out of two flats, no adverse inference can be drawn. In fact such an argument of there being a single invoice of leave and licence, of the learned DR before the Hon'ble Tribunal in Jivesh case was not accepted by the Hon'ble Tribunal. In the decision of Jivesh who was a co-developer of the assessee for the same project viz. Quantum Park, the Hon'ble Tribunal has held as under: 19. We have considered rival submissions and perused materials on record We have also applied ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved plan bearing the seal of BMC. Thus, as could be seen from the aforesaid facts, since necessary information / factual details were not forthcoming from the Assessing Officer, learned Commissioner (Appeals) decided to conduct an independent enquiry on his own to ascertain the correct factual position relating to construction of the housing project. Section 250 of the Act lays down the procedure to be followed by the Commissioner (Appeals)......... 20......... So far as the other aspects of the Departments challenge to allowance of assessee s claim of deduction under section 80IB(10) of the Act are concerned, a bare perusal of the assessment order would reveal that relying heavily upon the seized unapproved plan dated 31st December 2001, the Assessing Officer has concluded that four flats in each floor of the housing project have been merged into two as a result of which the floor area of each flat has exceeded 1,000 sq.ft., thereby, violating the condition of section 80IB(l0)(c) of the Act. Of course, the Assessing Officer selectively relied upon the statement recorded from Shahikant Chatrawala, whom the Assessing Officer presumed to be the architect of the housing pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly no evidence worth its name has been placed before us by the department to persuade us to reverse the decision of the Commissioner (Appeals). On the contrary, the evidences brought on record clearly support the factual findings of learned Commissioner (Appeals) and which, in our view, the department has failed to controvert In (Appeals) on the issue. As regards the case laws cited by learned Departmental Representative, though, the principle laid down therein are well accepted, however, they do not come to the rescue of the department as the decision of the learned commissioner (Appeals) is purely on factual basis and on appreciation of facts and evidences brought on record. Ground nos. (i) to (v) are dismissed. 33. We observe that third party evidence in the nature of: BMC approved plans as per which the BUA of each residential unit is less tha 1,000 sq. feet and no allegation that the construction is not as per such approved plans, Independent access to lift and common staircase, occupation certificate which is given by the BMC only after senior officers verify that the construction is in accordance with the approved pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the decision is extracted hereunder: 3. At the outset, Shri Mayur Kisnadwala, Ld Counsel for the assessee mentioned that the assessee is a builder and engaged in the business of development of housing project which is allowable for deduction u/s 80IB of the Act. There is no dispute about the project and the allowability of deduction of profits relatable to the sale proceeds of the flats of the said housing project. The only dispute relates to the allow/ability of deduction u/s80IBof the Act in respect of the rental income earned by the assessee in respect of certain unsold flats held as stock-in-trade. It is the case of the assessee that some of the flats which are left unsold were let out under,,leave and license system and the said income being directed connected to the flats, which is integral part of the housing project is also allowable for deduction u/s 80IB of the Act. He relied on various decisions in support of the same. 4. On the other hand. Revenue Officers are of the opinion that such receipts are not allowable profits and denied the claim of deduction. 5. Before us. Id Counsel for the assessee submitted that there is no dispute on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CIT (A) on this issue and allow the ground No.l in all the three appeals. 36. With regard to the AO s reliance on the decision of Hon ble Supreme Court in the case of Dilip Kumar and Company CA No. 3327 of 2007, wherein it was held by the Constitution Bench that when there is an ambiguity in an exemption notification, it should be interpreted strictly, we found that the applicability of this decision is only when there is an ambiguity. In a case there is no ambiguity in the language of the section, the ratio of this decision is not applicable. Since the DR has not pointed out any ambiguity in the language of section 80IB(10), the ratio of this decision is not applicable in the instant case. 37. In view of the above discussion, we do not find any infirmity in the well reasoned order of CIT(A) wherein CIT(A) has dealt with the issue of assessee s eligibility u/s.80IB threadbare after recording detailed findings. The findings recorded by him are as per material on record which do not require any interference on our part. 38. In the result, appeals of Revenue are dismissed. Order pronounced in the open court on this 26/10/2018 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
