TMI Blog2017 (9) TMI 1855X X X X Extracts X X X X X X X X Extracts X X X X ..... tive of the tax benefit for housing projects was to build housing stock for low and medium income households by ensuring the size of the residential unit. It was circumvented by the developers by entering into agreement to sell multiple adjacent units to a single buyer. Accordingly the new clause was inserted to provide that the undertaking which develops and builds the housing project shall not be allowed to allot more than one residential unit in the housing project to the same person not being an individual and where the person is an individual, no other residential unit in such housing project to spouse or minor children of such individual, to HUF in which the individual is a karta. In the present case at the time of making sale/booking a unit and for complying with the requirement of clause (e) and (f), the assessee is required to exercise normal due diligence expected of a normal businessman and proceed on the basis of the documents/information furnished by the other person and is not supposed to act like a detective and microscopically investigate and go behind the documents and verify the background of those submissions. Further no guidelines have issued by Revenue Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer disallowed the deduction claimed under section 80IB(10) on account of violation of the provision of sub-clause (f) of section 80IB(10) of the Income Tax Act 1961 for the reason that the appellant had sold Row House no. 38 and 39 to husband and wife. The honourable CIT(A) allowed the proportionate deduction under section 80IB(10) denying the deduction in respect of profit derived from the sale of Row House no. 38 and 39. On the facts and in the circumstances of the case and in law the honourable CIT(A) erred and is not justified in denying the deduction in respect of profits derived from Row House no. 38 and 39 without appreciating the fact that The appellant firm sold the Row House no. 38 and 39 to the purchasers under the bonafide impression that the purchasers are not related to each other as husband and wife The purchasers misrepresented and misguided the appellant firm by concealing/hiding their identity and getting the agreement registered in different non existent names The purchasers - Jeet Kaur Rohida got the agreement registered in her old/non existent name and making fraudulent representation even before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forms the purchasers had used the names as J K Rohida and Anneel Khatrrie, the addresses given them were different, the possession letters was signed by the respective purchasers as J K Rohida and Anneel Khatrrie and that the assessee was under the genuine impression that the two purchasers were not related to each other were not found acceptable to the AO. AO was of the view that for claiming deduction u/s 80IB(10) of the Act, the assessee is required to cumulatively fulfill all the required conditions stipulated in clauses (a) to (f) of Sec.80(IB)(10) of the Act and non-fulfillment of even one clause would entail disallowance of deduction u/s 80IB(10) of the Act. AO was of the view that the object behind the introduction of clauses (e) and (f) of Sec.80IB(10) of the Act by Finance Act, 2009 was to put an end to the practice of allotting more than one unit in a project to closely related persons/entities. He concluded that assessee has breached the condition laid down in clasue (f) of Sec.80IB(10) of the Act and hence was not eligible for deduction. He accordingly denied the claim of deduction of ₹ 8,35,95,698/-. Aggrieved by the order of AO, assessee carried the matter befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the documents were registered on the same day in the sub-registrar's office on 08.06.2010 is also difficult to be ignored. Though one can argue as claimed by the appellant as to what benefit the appellant will derive in indulging into such complicity as alleged by the Assessing Officer so as to jeopardize its claim of deduction u/s. 80IB(10) of Income6 tax Act with such a huge tax implication, the fact remains that conditions stipulated in Sec. 80IB(10)(f) of Income-tax Act have been breached by lack of due diligence on the part of the appellant. One may also say that of all the Sale Deeds why the appellant would have submitted the copies of these two Sale Deeds to the Assessing Officer as sample copies if there was complicity on behalf of the appellant firm, but that in itself will not absolve the appellant from lack of due diligence. May be the appellant could have exercise more precaution by way of asking for affidavit in this regard. There appears to be clear case of misrepresentation on the part of allotees of Unit No. 38 39, but the appellant cannot take shelter behind such misrepresentation without caring for due diligence on this account as stipulated in the Act. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G2 in Lakshdweep Project which were sold to one family and area of the two units aggregated to 1975 sqft. The Bunglows were treated as one unit as the same were amalgamated into one. The Tribunal while examining the claim of deduction u/s. 80IB(10) held that the appellant was entitled to deduction u/s. 80IB(10) of Income-tax Act excluding Bunglow No. G1 G2. The relevant portion of the order is reproduced as under: . 16. Therefore, considering the peculiar facts of the case leading to violation of clause (f) of Sec.80IB(10) of Incometax Act and also relying upon the above referred decision of Hon'ble Pune Tribunal in the case of Pharande Developers(supra), the Assessing Officer is directed to recompute the deduction u/s. 80IB(10) of Income-tax Act in relation to Sukhwani Oasis project by limiting the denial only to the profits in respect of Row houses No. 38 39 where conditions of clause (f) of Sec. 80IB(10) of Income-tax Act have been breached. For the remaining project the Assessing Officer is directed to allow deduction u/s. 80IB(10) of Income-tax Act. Thus, the ground is partly allowed. Aggrieved by the order of CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance be restricted only with respect to parties of row houses 38 and 39, we find that Ld.CIT(A) while granting partial relief had relied on the decision of Income Tax Appellate Tribunal, Pune Bench in the case of Pharande Developers (ITA No.715/PN/2009). Before us, no material has been placed by Revenue to demonstrate that the aforesaid decision of Pune ITAT in the case of Pharande Developers (supra) has been set aside by higher Judicial Authority. On the issue of proportionate deduction, we also find that Hon ble Madras High Court in the case of CIT Vs. Arun Excello Foundations (P.) Ltd [2013] 29 taxmann.com 149 (Madras) has approved the principle of proportionate deduction to the extent the assessee has complied with the provisions of Sec.80IB(10) of the Act. Following the aforesaid decision of Hon ble Madras High Court we are of the view that the assessee cannot be denied the deduction for the complete housing project and therefore find no fault in the order of Ld.CIT(A) and thus the grounds of Revenue are dismissed. 9. On the issue of denial of deduction u/s 80IB(10) on account of non compliance of the condition stipulated in clause (f) to Sec. 80IB(10) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kumar Rohida and Anneel Khatrrie respectively. We are of the view that at the time of making sale/booking a unit and for complying with the requirement of clause (e) and (f), the assessee is required to exercise normal due diligence expected of a normal businessman and proceed on the basis of the documents/information furnished by the other person and is not supposed to act like a detective and microscopically investigate and go behind the documents and verify the background of those submissions. Further no guidelines have issued by Revenue Department to show as to what and how the verification has to be conducted and therefore it is not a case of Revenue that the required guidelines issued by Revenue Department so as to check the compliance of clause (e) and (f) have not been followed by assessee. In view of the foregoing, we are of the view that in the present case, the assessee had prima facie exercised normal due diligence expected of a normal businessman more so when the purchasers at the time of booking had given different addresses, were having different surnames and then later on they turned out to be closely related. In such a situation, we are of the view that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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