GERA DEVELOPMENTS PVT.LTD,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE -1 (3),, PUNE

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND MS ASTHA CHANDRA, JUDICIAL MEMBER IT(SS)A No.122/PUN/2019 Assessment Year : 2012-13 Gera Developments Pvt. Ltd., ACIT, Central Circle – 1(3), 200, Gera Plaza, Boat Club Road, Vs. Pune Pune – 411001 PAN: AAACG6703F (Appellant) (Respondent) Assessee by : Shri Hari Krishan Department by : Shri Keyur Patel, CIT-DR Date of hearing : 16-07-2024 Date of pronouncement : 25-09-2024 O R D E R PER ASTHA CHANDRA, JM :

This appeal filed by the assessee is directed against the order dated 31.07.2019 of the CIT(A), Pune-11, Pune, relating to assessment year 2012-13.

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Officer during the course of assessment proceedings noted that the valuation of the project ‘Gera Astoria’ was done by Shri Nitin, Lele, Government Registered Valuer. From the report, the Assessing Officer found that all the conditions laid down in section 80IB(10) of the Act are not fulfilled for this project, the details of which are as under:

“i. The flat nos.101, 103, 109, 118 & 122 have area more than 1500 sq. ft. The details of total built up area is as below

Flat No. Flat area including Terrace area in sq Total built up Balcony in ft area in sq ft 101 1408.36 327.66 1736.02 103 1139.48 442.19 1581.67 109 1164.77 348.65 1519.42 118 1188.88 348.75 1537.63 122 1360.46 368.13 1728.59

ii. The flat no. 601 and 602 have been purchased by single person Shri. David Andrew D'souza and these units have been joined and the total area of the said combined flat is 2820.60 sq. ft. iii. Flat No. 324 was purchased by Smt Krishna Narvekar and Shri Sandesh Narvekar vide agreement dated 04/03/2009 Flat no. 424 was purchased by Smt Krishna Narvekar vide agreement dated 19/04/2010. Further, the flat no. 325 was allotted to Shri Sunil Salgaonkar and Shri Shekhar Salgaonkar vide agreement dated 31/01/2013 and flat no. 225 was allotted to Shn Sunil Salgaonkar, Shekhar Salgaonkar and Shri Vaikunth Salgaonkar vide agreement dated 31/07/2013. iv. As per the provisions of 801B(10)(f) no residential unit can be allotted to purchasers spouse, minor children, HUF etc. In this project, flat no. 816 was sold to Shri Rampal Singh Katiyar and flat no. 318 was sold to Smt. Kamlesh Katiyar (wife of Shri Rampal Singh Katiyar) and both the agreements were made on 24/01/2014.”

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the various explanations given by the assessee, the Assessing Officer disallowed the claim of deduction u/s 80IB(10) of the Act by observing as under: “5.3 During the course of assessment a submission is made on eligibility and on the report submitted by Govt registered valuer. The submission is perused. However the same is not acceptable and also not factually correct i. The measurement of the flats done by the department is as per law and the contention of the assessee is not acceptable. ii. Further, w.r.t. sale of flat nos. 324 and 424, the assessee has stated that the flat was booked by Smt Narvekar on 23/09/2009 i.e. before 01/04/2010. But as per the Act the agreement date is to be considered for the eligibility of the project for the deduction u/s 80IB(10) of the Act and also there is no mention of booking date in the said section and also there is possibility of manipulation in the date of booking as date of booking can be done solely by the builder without any record.

iii. The assessee has stated that Smt Kamlesh Katiyar has cancelled her agreement to purchase flat no. 318 and hence the section 80IB(10)(c) is not applicable in this respect. It is to be noted that the cancellation of the flat is done after the search action. There is no exception for the cancellation of purchase of flat once it is sold to the related persons as per the Act hence, the contention of the assessee is not acceptable. 5.4 It will when be worthwhile to understand why the legislature brought in the provisions of sub-clause (e) & (f) to sub-sec 10 to sec 80IB. The memorandum explaining the provisions which read as follows- "Further, the objective of the tax benefit for housing projects is to build housing stock for low and middle income households. This has been ensured by limiting the size of the residential unit. However, this is being circumvented by the developer by entering into agreement to sell multiple adjacent units to a single buyer. Accordingly, it is proposed to insert a new clause in the said subsection 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 is allotted to any of the following persons: i. Spouse or 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 minor children of such individual or the Hindu undivided family in which such individual is the karta"

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5.5 It is to be mentioned here that the provisions of (e) & (f) to sub-sec. (10) to sec. 80IB was inserted by the Finance (No.2) Act, 2009 w.e.f. 01/04/2010, i.e.. somewhere in August 2009 the provision was very well made aware, but put into operation from 01/04/2010. Thus, the assessee was very well aware of the amendment to sec. 601B(10) being introduced by the Finance (No.2) Act, 2009 and still the assessee proceeded with the sale of flat to the members of same family knowing fully aware that it would not be entitled to deduction under sес. 80IB(10) and then proceeded to claim deduction under sec. 80IB(10) year after year. 5.6 In view of the above discussion and facts, the assessee has not fulfilled the primary condition for become eligible for claiming of deduction and has violated the stipulated conditions as u/s 80IB(10)(c), 80IB(10)(e), 80IB(10)(1) and hence the deduction of Rs.17,07,71,998/- u/s 80IB(10) claimed by the assessee is disallowed.”

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80IB(10). The AO is directed to disallow the claim of deduction u/s 80IB(10) on the profits on these two flats. From the submissions made dtd. 25/7/2019, the appellant has submitted that the possession letter was given in both the cases i.e. flat nos 601 & 602 on the same date i.e. 13/12/2012 and the revenues were recognized in AY 2012- 13, accordingly, it is held that the sale of flat nos 601 & 602 of the project is in contravention to the provision of Sec. 80IB(10) (e) of the Act 42 As regards flat nos 324 & 424, sold to Mrs. Krishna Narvekar and Mr Sandesh Narvekar, both wife and husband, the defence of the appellant is that the said flats were sold prior to the insertion of clause (f) in sec. 80IB(10) w.e.f. 1/4/2010. The agreement date for flat no 324 is seen as 9/3/2009 and for flat no 424, the agreement date is 19/4/2010. Even if, the argument of the appellant, is accepted, the agreement for flat no 424 is subsequent to the insertion of clause (1) in sec 80IB(10) we.f 1/4/2010. Further, the argument of the appellant that the said conditions was inserted only w.e.f. 1/4/2010 and therefore, the agreements prior to 1/4/2010 should not be held accountable to the said condition is also not very convincing because there is no bar for the appellant to sell the flats to who so ever he deems fit. The conditions are only with respect to the allowability or other wise of the claim of deduction as per sec.80IB(10) for the purposes of taxability of the profits from the project under the Act. Even the possession of the flats were on the same date i.e. 6/11/2011 and much beyond 01/4/2010, i.e. the date when clause (1) of sec. 80IB(10) came into effect. In view of the above position, it is held that the sale of Flat nos 324 & 424 of the project are in contravention to the provisions of Sec 80IB(1)(f) of the Act. From the details filed by the appellant, it is seen that the date of possession for both flats are 6/11/2011 and therefore, the revenues have been recognised for A.Y. 2012-13 43. In respect to flat nos 225 & 325, the appellant has claimed that flat no 225 has been sold to Vaikunth Salgaonkar, whereas, flat no 325 has been sold to Shri Sunil Salgaonkar and Shekhar Salgaonkar, who are both major sons of Shri Vaikunth Salgaonkar and therefore the provisions of sec 80IB(10) will not apply Provision (1) of sec 80IB(10) is reproduced as under "(f) in case of 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 of 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....” From the above provisions, it is clear that there is no bar as per the Act for allotment of residential units in the same housing project to major children of individuals who have acquired flats in the project. Accordingly, the claim of the

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appellant is accepted and the AO is directed to allow 80IB deduction with respect to profits on flat no 225 & 325. As per the date of possession letter the revenues have been recognised in the A.Y. 2013-14 and the same shall be allowed by the AO. 44. As regards, flat nos.318 & 816, it is claimed by the appellant that Mrs. Kamlesh Katiyar, wife of Shri Rampal Katiyar, had cancelled the agreement for purchase of flat no 318. Flat no.816 has been sold to Shri Rampal Katiyar, husband of Smt. Kamlesh Katiyar and as per the AO, Agrociment for both the flats were made on 24/1/2014. The AO has noted that the cancellation of the flat no 318 by Smt Kamlesh Katiyar has been done after the search action. The agreements for both the flats ie. flat no. 318 & 816 were made on 24/1/2014 and the possessions had been taken on 14/2/2014. The revenues were recognised for AY. 2014 15. As per the facts available on record, the cancellation of flat no 318 by Kamlesh Katiyar was done after the search i.e. 11/9/2014 (the appellant has not given the date of cancellation). Therefore, it is held that the sale of the flats i.e. flat nos 318 & 816 are in contravention to Sec. 80IB(1)(f) of the Act, as they have been sold to individuals who are husband and wife. The revenues for the two flats had been recognised in A.Y. 2014-15. 45. From the above discussion, it is held that the sale of the following Flats are in contravention to the provisions of Sec. 80IB(10): i) Flats nos 601 and 502-Contravention of Sec. 80IB(10) (e) revenues recognised in A.Y. 2012-13 by the appellant ii) Flat nos. 324 and 424 held to be in contravention to the provisions of Sec 80IB(10)(f) of the Act revenues recognised for A.Y. 2012-13 by the appellant iii) Flat nos 318 and 816 held to be in contravention to provisions of Sec. 80IB(10)(f) of the Act revenues recognised in A.Y. 2014-15 by the appellant In view of the above, the issue that is to be decided is, if on account of the above contraventions by the appellant, the claim of deduction u/s 80IB(10) on the project 'Gera Astoria can be entirely denied to the appellant in different years i.e. from A.Ys 2012-13 to 2015-16. Courts have held that where certain conditions having not been fulfilled by the appellant with respect to certain dwelling units of a project, the assessee is entitled to deduction in respect to other units which fulfill the conditions laid down u/s 80IB(10) and that the entire claim of deduction cannot be denied to the appellant. In a recent ruling in the case of M/S. Namrata Developers, Pune vs Assistant Commissioner Of Income Tax. (2018) the Pune bench of the income tax Appellate Tribunal (Tribunal) held that the taxpayer should be entitled to a pro-rata deduction under section 80IB of the Income tax Act, 1961 (the "Act") on the profits earned, excluding the profits earned on two flats that were allotted to the spouses o of the respective individuals In the said judgement, the ITAT, Pune has upheld the judgement of CIT(A) who had relied upon the ratio laid down by the Madras High Court in the case of CIT vs Arun Excello Foundation Pvt. Ltd. As DTR 99 (Mod) and Vishwas Promoters Pvt. Ltd. vs ACIT 81 DTR 58 (Mad)

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In Brahma Associates v. Jt. CIT (2009) 122 TTJ (Pune)(SB) 433 : the special bench of ITAT, Pune held as under: 126. An exception, however, will have to be made out in a case where commercial was of built up area is more than 10 per cent of the total area, and yet, in terms of our observations in Para 115 above, the assessee is eligible for deduction in respect of profits of the residential units segment of the project in such a situation, since residential unit segment is being treated on a standalone basis for eligibility to deduction under s. 80-IB(10), the eligibility for such deduction can only be for the profits which are in respect of residential unit segment of the overall project because, in the light of the discussions, only that part of the overall project can be said to be housing project Accordingly, eligibility for deduction under s. 80- 1B(10) must remain confined to the same. In DCIT v. Magarpatta Township Development and Construction Company (2013) 141 ITD 682 ITAT, Pune held Entire housing project is not disqualified for deduction under s. 80-IB(10) simply because the built-up area of the units in one of the 25 buildings comprising the project is in excess of 1,500 sq ft, deduction under s. 80-IB(10) is to be allowed in respect of profit from other buildings, deduction cannot be denied simply because some purchasers have joined adjoining flats whereby the combined built-up area exceeds 1,500 sq ft In SJR Builders v. ACIT (2010) 3 ITR Trib. 569 (Bang) the court held that assessee constructing residential units some of which were above specified limit and some below such limit. The assessee is entitled to deduction in respect of residential units below specified area. Similarly, in Sreevatsa Real Estates Pvt Ltd. v. ITO (2010) 41 DTR 497 (Chenn) (Trib) the court held that the project had been approved as Housing Project by local authority, if built-up area of some of the housing units being more than 1500 Sq. Ft. the assessee is entitled for deduction u/s 80IB(10), Pro rata for the housing units having built-up area less than 1500 Sq. Ft. In view of the above decisions of various courts including Pune Tribunal, I am of the view that the entire claim of deduction on the project GERA Astoria cannot be denied to the appellant. However, as held above; for the Flat nos. 601 and 602, 324 and 424 and 318 and 816; as the conditions u/s 80IB(10) of the Act have been violated, therefore, the AO is directed to disallow the claim of deduction u/s 80IB of profits with respect to the above said flats on a pro rata basis in the years in which the revenues were recognised by the appellant for the above said nuts. The AO in directed accordingly. The ground of appeal for the years under consideration are partly allowed.”

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above four flats were booked prior to 01.04.2010 is already on record. He submitted that the allotment letters in respect of above flats were filed before the Tribunal during the first round of proceedings along with its letter dated 07.09.2022 as required by the Tribunal and has been mentioned in para 2 of the said letter. He submitted that these documents are placed at pages 1 to 5 of the paper book. Therefore, these documents do not fall in the category of additional evidences and these are all filed in support of the contentions already made before the Assessing Officer and the CIT(A).

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the disallowance of deduction u/s 80IB(10) of the Act in respect of these four flats should be upheld and the grounds raised by the assessee should be dismissed.

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Rs.1,50,000/- by cheque on 18.02.2009. Subsequent payments were also made, the details of which are as under:

Cheque / RTGS Date Amount 457826 31-12-2008 4,00,000.00 334342 27-09-2009 2,70,000.00 108805 13-10-2009 1,50,000.00 334343 13-10-2009 2,00,000.00 862688 13-10-2009 1,50,000.00 334344 30-11-2009 7,50,000.00 334335 30-11-2009 7,50,000.00 457801 31-12-2009 4,00,000.00 457828 31-03-2010 2,00,000.00 457803 31-03-2010 3,00,000.00 457829 13-04-2010 5,50,000.00 457804 13-04-2010 4,50,000.00 CASH 16-04-2010 3,200.00 334346 26-04-2010 167000 334337 26-04-2010 160000 334347 31-05-2010 311500 04-10-2011 271500 54,83,200.00

Cheque / RTGS Date Amount 3366 26-05-2007 1,00,000.00 855839 21-09-2007 5,00,000.00 855836 21-09-2007 79,100.00 855840 10-10-2007 5,00,000.00 158250 28-12-2007 13,400.00 751191 30-01-2008 19,00,000.00 379 16-06-2008 1,67,800.00 757326 19-09-2008 7,95,000.00 518 04-10-2008 7,95,000.00

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759094 25-11-2008 7,95,000.00 761494 28-02-2009 4,62,500.00 761485 28-02-2009 7,95,000.00 763962 21-05-2009 7,95,000.00 770284 30-10-2009 3,97,500.00 80,95,300.00

Cheque / RTGS Date Amount 3366 26-05-2007 1,00,000.00 855838 21-09-2007 6,400.00 855837 21-09-2007 79,100.00 187640 24-01-2008 16,70,000.00 373 08-04-2008 12,10,000.00 378 16-06-2008 1,94,800.00 518 04-10-2008 7,95,000.00 1125 22-12-2008 7,95,000.00 1132 05-02-2009 7,95,000.00 1135 28-04-2009 3,97,500.00 1136 28-07-2009 3,00,000.00 3655 20-10-2009 2,00,000.00 3656 24-11-2009 2,00,000.00 37853 19-02-2010 250000 186180 31-05-2010 200000 4081 29-12-2011 902500 80,95,300.00

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2009-10. The Hon'ble Supreme Court upheld the decision of the Hon’ble Karnataka High Court upholding the decision of the Tribunal holding that the transaction entered into with buyers of flats before the introduction of clauses (e) and (f) to section 80IB(10) of the Act were eligible for deduction and the appeal filed against the decision of the Hon’ble High Court by the Revenue has been dismissed by the Hon'ble Supreme Court. The relevant observations of the Hon'ble Supreme Court read as under:

“4. We have considered the submissions made by learned counsel for the parties and have perused the record. Clauses (e) and (f) of section 80-IB(10) of the Act have been inserted by the Finance (No. 2) Act, 2009, with effect from April 1, 2010, which provides that not more than one residential unit in the housing project is allotted to any person not being an individual and in case, a residential unit in a housing project is allotted to a person being an individual, no other residential unit in such housing complex shall be allotted to the individual, the spouse or the minor children of such individual, the Hindu undivided family (HUF) in such individual is karta or any person representing such individual, spouse or minor children of such individual of HUF in which such individual is karta. It is also pertinent to note that in clause (e) of section 80-IB(10) of the Act, the Legislature has used the expression "allotted". In other words, in case, a residential unit is allot. ted prior to April 1, 2010, the conveyance in such a residential unit can be registered subsequently also and in such a case also the assessee will be entitled to the benefit of deduction under section 80-IB(10) of the Act. Clauses (e) and (f) of section 80-IB(10) of the Act are prospective in nature and apply in respect of transactions entered into on or after April 1, 2010, which is evident from Circular No. 5 of 2010 dated June 3, 2010 ([2010] 324 ITR (St.) 293). From a perusal of the order passed by the Assessing Officer, it is evident that unaccounted money during the search proceedings has been treated to be business income by the Assessing Officer. 5. The Tribunal itself has found that all the transactions except in respect of two flats have been entered into by the assessee in the year 2007-08 and therefore, the provisions cannot be applied to transactions entered into by the assessee prior to introduction of clauses (e) and (f) to section 80-IB(10) of the Act. In view of the preceding analysis, the substantial questions of law framed by this court are answered against the Revenue and in favour of the assessee. In the result, the appeal fails and is hereby dismissed."

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fact and law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

Sd/- Sd/- (R. K. PANDA) (ASTHA CHANDRA) VICE PRESIDENT JUDICIAL MEMBER पुणे Pune; दिन ांक Dated : 25th September, 2024 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: अपीलार्थी / The Appellant; 1. 2. प्रत्यर्थी / The Respondent 3. The concerned Pr.CIT 4. DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune

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S.No. Details Date Initials Designation 1 Draft dictated on 19.09.2024 Sr. PS/PS 2 Draft placed before author 20.09.2024 Sr. PS/PS Draft proposed & placed before 3 JM/AM the Second Member Draft discussed/approved by 4 AM/AM Second Member Approved Draft comes to the 5 Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS Date on which the file goes to 9 the Head Clerk Date on which file goes to the 10 A.R. 11 Date of Dispatch of order