BHARAT TUKARAM BHOIR,MUMBAI vs. ADDLCIT RG 22 (3), MUMBAI

Thus, the main issue involved is with regard to disallowance of deduction under Section 80IB (10). Brief facts of the case are that assessee is an individual carrying out the business of builders & developers in the name of his proprietary firm, M/s. Jai Gurudeo Builders & Developers. In the year under appeal, the appellant has developed a housing project on a plot bearing nos. 16 to 19 and 21 to 25 of Sector 17, Kamothe, Navi Mumbai. During the year under assessment, profit derived from development of the said housing project was offered to tax in accordance with the method of accounting regularly followed by the assessee. The return of income for the year under appeal was e-filed by the assessee on 30.09.2009 declaring total income of ₹24,58,950/- The appellant has claimed deduction u/s 80IB (10) to the extent of ₹ 9,76,62,309 for A.Y. 2011-12. The assessee had declared income of ₹ 1,69,41,520/- after claiming deduction of ₹11,78,42,627/- under section 80IB(10). The assessee‟s project had 3 wings with 2 wings having 12 floors and 3rd wing having 13 floors named as A, B & C wing. The commencement certificate was dated 26/11/2006 & 28/03/2007 and occupation certificate was obtained on 04/11/2010. In all, there were 144 units in all the three wings. The learned Assessing 7 I.T.A. Nos. 895,288,287,896,897,289 /Mum/2020 Bharat Tukaram Bhor. Officer noted that certain residential units of „C‟ wing of the housing project exceeded the limit of 1000 Sq. ft. as per definition of built up area given in section 80 IB (14)(a). The main contention of the assessee before the Assessing Officer was that the project is not situated within 25 kms of outer limit of city of Mumbai and therefore, the benefit of eligible/allowable maximum built up area of 1500 Sq. ft. is not available to the assessee. The Assessing Officer had noted that certain flats measured slightly more than 1000 sq. ft. but less than 1100 Sq. ft. and therefore according to him, assessee was not eligible for any deduction under section 80IB(10). The assessee referred to sub-section (c) objection 80 IB(10) which reads as under:

According to the assessee the city of Mumbai has to be taken from Mumbai town/Mumbai city and the Municipal limit of city of 8 /Mum/2020 Bharat Tukaram Bhor. Mumbai hence falls on the eastern side between Sion and Kurla. Whereas the assessee‟s housing project is situated at Kamothe Navi Mumbai which is more than 25 kms from this point by road and therefore, the maximum built up area permissible is 1500 Sq. ft. and not 1000 Sq. ft. The assessee had also referred to Mumbai Municipal Corporation Act of 1988 which has distinguished the city of Mumbai and the Corporation of Greater Mumbai which is known as „Brihanmumbai‟. Assessee had also referred to various enactments to demonstrate that „city of Mumbai‟ has been identified upto Chunabhatti near Sion on the eastern side. Therefore, the Municipal limit has to be seen from the city of Mumbai as defined in these enactments. The learned Assessing Officer held that there is only one Municipal Corporation in Mumbai which is known as BMC and the outer limit of the BMC of Mumbai is upto, Panvel octroi check naka in Mankhurd area. Thus, the distance of assessee project is less than 23 kms., which limit is to be counted from this check naka and if the distance by road from this place to the assessee‟s project is measured as per Google Earth then the road distance between Mankhurd station and sector 17 Kamothe is around 21 kms. The learned Assessing Officer in support of his 9 I.T.A. Nos. 895,288,287,896,897,289 /Mum/2020 Bharat Tukaram Bhor. conclusion has also placed reliance on the decision of ITAT, Mumbai bench in the case of Laukik developers versus DCIT (2007) 105 ITD 657, wherein the Tribunal has held that distance of 25 kilometers has to be measured from the outer limit of jurisdiction of BMC.

In so far as controversy, whether the areas of the flats in some of the floors were not more than 1000Sq. ft., Assessing Officer on perusal of the drawings and map noted that these flats has a larger area because of „flower bed‟ and „terrace‟. He thus, included this area into built up area specially the flower bed part.

One of the contentions of the assessee was that in so far as residential units of A & B wings were concerned, the same were below 1000 Sq. ft., which fact has not been denied by the Assessing Officer. The assessee has given the following details of each wing and the profit shown therein:

Assessing Officer then after deeply examining the area of every unit and detail calculation of different flats had proposed certain calculation to hold that in so far as „C wing‟ is concerned, the area of various floors exceeded 1000 Sq. ft. after adding the area of flower bed and terrace. The detailed calculations have been given in Pages 11-17 of the assessment order. In sum and substance, AO had held that area of flower beds and terrace is part of built up area and as per his calculation the area of these flats were approximately 1023.303 Sq. ft., which had 902 Sq. ft. of flat area and 121.303 Sq. ft. of terrace and flower bed area. Accordingly, he held that assessee is not eligible for deduction under Section 80IB(10) of entire project as it exceeded 1000 sq. ft.

The learned CIT(A) in so far as the assessee‟s claim that the project was beyond 25 kms from the city of Mumbai, rejected the 11 /Mum/2020 Bharat Tukaram Bhor. said contention and upheld the order of the Assessing Officer holding that assessee is only entitled for Maximum built up area 1000 Sq. ft. and not 1500Sq. ft. in respect of project at Kamothe, Navi Mumbai, because AO has correctly taken the municipal limit of BMC which is the only municipal corporation of Mumbai and that alone has to be taken for the purpose of calculating the distance of 25 Kms. However, in so far as the assessee contention that certain residential units of the housing project did not exceeded 1000Sq. ft. therefore, Pro-rata deduction should be given. The relevant observation and finding of the CIT (A) are as under :

Before us the learned counsel for the assessee submitted that, the phrase used „municipal limit of the city of Mumbai‟ in sub 16 /Mum/2020 Bharat Tukaram Bhor. section C of Section 80IB(10) means the city of Mumbai as defined in the following enactments: Sr. No Enactment (i) Mumbai Municipal Corporation Act of 1888. (ii) Bombay General Clauses Act 1904. (iii) The Greater Bombay Laws and Bombay High Court (Declaration of Limits) Act 1945. (iv) Maharashtra Land Revenue Code 1966. (Commentary by A.K. Gupte Advocate) (v) Sanctioned development plan part IF/North ward Map of Municipal Corp of Greater Mumbai.

Ld. Counsel further submitted that the disallowance of deduction u/s 80IB (10) has been made by the ld. AO for the reason that certain units of "C" Wing of the housing project marginally exceeded 1000 sq. ft. built-up area is unjustified on facts and 18 /Mum/2020 Bharat Tukaram Bhor. circumstances of the case. The ld. Assessing Officer has erred in including the terrace area of residential units which is open to sky and therefore, cannot be part of inner measurement of residential units in determining the built-up area of the residential units. The AO has failed to appreciate that such terrace area is not part of built up area as defined by sec. 80IB (14)(a) of the IT Act, 1961. He pointed out that, after reducing the terrace area from the area of disputed flats of the housing project, many of the flats of 'C' wing of the project have built up area less than 1000 sq. ft. He then submitted that the flower bed as taken by the Assessing Officer has to be excluded, because as per the architectural design of the residential units of the housing project "flower beds" was in the form of cantilever projection given in front of a habitable room to be used for the limited purpose of plantation only. Such cantilever projection is beyond the building line habitable area by 750 mm and is sunk 200 mm below the floor level of the unit. Such projection is only for the purpose of growing flowering shrubs to enhance the aesthetic beauty of the building. The flower bed area is not part of built up area of the residential unit. A certificate from the Architect of the project, M/s Dimensions dt. 24.02.2014 was 19 I.T.A. Nos. 895,288,287,896,897,289 /Mum/2020 Bharat Tukaram Bhor. filed explaining the concept of "flower bed” and as to how the same is not part of the built-up area and is below the floor level of the residential unit.

On the issue of pro-rata deduction on the flats of A & B wing being less that 1000 sq. ft. to be granted as has been allowed by the learned CIT (A) which is the subject matter of issue raised the revenue appeal, Ld. Counsel submitted that, as per the assessment order, the built-up areas of residential units of Wing "A" and “B” are undisputedly below 1000 sq. ft. The built-up areas of certain flats of Wing 'C' have been stated by the ld. AO to be above maximum permissible area of 1000 sq. feet but below 1500 sq. feet. Without prejudice to the claim, that none of the residential units of the housing project exceed the maximum permissible area, the Ld. Counsel contended that in case if it is held that certain residential units of Wing „C‟ of the project exceed the maximum permissible area, then in such a situation, proportionate deduction may be granted in respect of units which undisputedly comply with the conditions prescribed u/s 80IB (10) of the I. Tax Act 1961. He pointed out that even as per the ld. AO, none of the residential 20 /Mum/2020 Bharat Tukaram Bhor. units of the 'A' & 'B' Wing of the housing project exceed 1000 sq. ft. (built-up) area. In such circumstances, denial of deduction in respect of those units of Wing 'A' & Wing 'B' is not justified. In support of this preposition learned counsel relied upon the following judgments of the Hon‟ble Bombay High Court: (i) Devashri Nirmann LLP-vs-ACIT, 429 ITR 597 (Bom)(2020)/ 124 tanmann.com 125 (Bombay)(2021) (ii) Models Construction (P) Ltd.-vs-DCIT, 429 ITR 605 (Bom)(2020)/ 124 taxmann.com 362 (Bombay)(2021) (iii) Kamat Construction (P) Ltd.-vs-ACIT, 429 ITR 609 (Bom)(2020)/ 124 taxmann.com 362 (Bombay)(2021) (iv) CIT-vs-Aakash Nidhi Builders & Developers, 76 taxmann.com 73 (Bom)(2016) (v) Vishwas Promotors (P) Ltd.-vs-ACIT, 255 CTR 149 (Mad) 14. On the other hand, learned DR has given his written statement submissions which for the sake of ready reference: The appellant in relation to Ground Nos. (2) to (4) on allowability of the deduction claimed under sections 800(10) of the Income-tax Act, 1961 (the Act) has argued that the Ld CIT (Appeals) ed in approving the order of the Assessing Officer holding that 21 I.T.A. Nos. 895,288,287,896,897,289 /Mum/2020 Bharat Tukaram Bhor. maximum permissible built up area in the case of appellant is 1000 sq ft and not 1500sq ft since the project was within 25 kms from the Municipal Limits of the City of Mumbai. 2.1 The argument canvassed by the assessee is that its housing project was at Kamothe, Navi Mumbai and the same was located more than 25 kms from the Municipal Limits of the City of Mumbai and therefore, the maximum built up area permitted as per sub- section (c) of section 80IB(10) is 1500 sq ft and not 1000 sq ft As, none of the residential units have area exceeding 1500 sq ft no disallowance of deduction was warranted. The appellant has further submitted that: i. The word used in section 801B(10Xc) is Municipal Limit of the city of Mumbai and that it would be incorrect to assume it to mean Municipal limit of Municipal Corporation, i.e. Brihanmumbai Municipal Corporation (BMC) since the words "city" and "corporation" refer to distinct entities and one cannot be equated with the other. ii. There are several enactments where the term 'city of Mumbai" has been identified to exist upto Chunnabhatti (near Sion) on the eastern side. Hence, the housing project 22 /Mum/2020 Bharat Tukaram Bhor. at Kamothe, Navi Mumbai is to be measured by road from this point iii.Since the aforesaid distance of the said project is greater than 25kms from limits of "city of Mumbai, the maximum permissible limits for claiming 80IB(10) deduction is 1500 sq.ft. and not 1000 sq ft. 2.2 It is strongly contended that argument of the appellant is incorrect and untenable. It is undisputed that there is only one Municipal Corporation for the city of Mumbai which is the Brihanmumbai Municipal Corporation (BMC). Consequently, the term "Municipal Limit of City of Mumbai” has to be construed as referring to 'limit of BMC‟. 2.3 At this stage, kind attention of the Hon'ble Bench is also invited to the section 80-IB(1)(c) of the Act, which reads as under (emphasis supplied): (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; 23 I.T.A. Nos. 895,288,287,896,897,289 /Mum/2020 Bharat Tukaram Bhor. If the arguments of the assessee regarding the distinction between the word "city" and "corporation" were to be accepted, then the very purpose of explicitly mentioning the word "municipal" by the Legislature would be rendered nugatory. In other words, the aforesaid section does not merely deploy the word "limits" of the city, but prefixes "municipal" to it The argument of the assessee is erroneous since in such a case it would not have been necessary for the statute to use the word "municipal" which cannot be read down. It is, therefore, apparent beyond doubt that "municipal" refers and pertains to a municipality and, in the context of the instant appeal means the municipality of Mumbai which is the Brihanmumbai Municipal Corporation the governing civic body of the city. 2.4. The assessee has stated that the deduction under consideration was with the intent of giving "a boost to the development of that particular business in places that require such help" However, the intent of granting a tax benefit is no longer a basis for the assessee to seek a favourable interpretation. Even if purely for the sake of argument it is presumed that there is an ambiguity in the said deduction provision, it may be mentioned that a Constitutional Bench of the Hon'ble Apex Court in Commissioner 24 /Mum/2020 Bharat Tukaram Bhor. of Customs (Import). Mumbai v Dilip Kumar & Company reported [2018] 95 in taxmann.com 327, held that for an exemption notification, the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State. Thus, the Hon'ble Supreme Court has overruled the rule of interpretation adopted in earlier cases (such as Sun Export Corpn Collector of Customs) that whenever there is an ambiguity in a tax exemption provision or notification, the same must be interpreted in the manner favourable to the assessee allowing the assessee to claim the exemption. 2.5 Adverting to the decisions relied upon by the assessee, in the case of Shri Mavji Mulji Merchant vs State Of Maharashtra And Ors [1993 (3) BomCR 220], the writ petition related to the non- agricultural assessment under the Maharashtra Land Revenue Code, 1966, which is far removed from the provisions section 80- IB(10) of the Income-tax Act which is pivoted around the words "municipal limits" If section 801B-10(c) of the Act supra is perused, it may be noted that the geographical attributes of the residential unit should be such that it is situated: (i) within the city of Delhi or Mumbai, or 25 I.T.A. Nos. 895,288,287,896,897,289 /Mum/2020 Bharat Tukaram Bhor. (ii) within twenty-five kilometres from the municipal limits of Mumbai The word "or" separates the two conditions. The dispute obtaining in the present appeal is not pertaining to (i) but to (i) above. Thus, the interpretation of the phrase "city of Mumbai" fail to have any relevance. The appeal involves a dispute on “municipal limits of Mumbai” Accordingly, the case law relied upon the assessee does not come to its assistance. For this reason, the reliance placed by the assessee on the Bombay General Clauses Act, 1945 or Bombay Land Revenue Code. 1966, are also not apposite as no issues involving the expressions „City of Bombay‟ and „Greater Bombay‟ are involved.

On the other hand, reliance in support of the impugned order of assessment is placed on the judgment dated 10 July, 2006 27 /Mum/2020 Bharat Tukaram Bhor. passed by Hon'ble ITAT Mumbai in the case of Laukik Developers vs DCIT, reported in [2007] 105 ITD 657 (copy enclosed). The relevant portion of the aforesaid judgment is reproduced as under: 8. The other issue is with regard to measurement of 25 Kms distance from the city of Mumbai. The case of the assessee is that the six residential units of whose built up area exceeds 1000 sq ft constructed by the assessee are not hit by provisions of Section 80IB(10)(c) of the Act for the reason that the assessee's site is outside the 25 KMs distance from the limits of city of Mumbai. In the provisions of Section 801B(10)(c) the word 25 Kms from the municipal limits of city of Mumbai is mentioned. The case of the Department is that the distance of 25 Km has to be measured from the outer limits of municipality of Mumbai and there being only "BMC having jurisdiction over the municipal limits of Mumbai, the site of the building project of the assessee has to be measured from the outer municipal limits of "BMC" only The other controversy regarding this provision is that the Revenue insist that straight line distance has to be measured in accordance with provisions of Section 11 of the General Clause Act whereas the case of the assessee is that the 28 I.T.A. Nos. 895,288,287,896,897,289 /Mum/2020 Bharat Tukaram Bhor. distance between the municipal limits and the assessee's site has to be measured having regard to the road distance only We find that the issue regarding distance to be measured with regard to road distance or a straight line distance is covered with the decision of the Pune Tribunal in the case of Mangalam Inorganics Pvt Ltd Sangamner v CIT(supra) wherein held that the distance between the municipal limits and assessee's industrial undertaking is to be measured having regard to the road distance and not as per the crow's flies i.e. a straight line distance as canvassed by the Revenue. There being no contradictory decision before us on this issue, we hold that the distance of 25 Kms for the purpose of Section 80IB(10) of the Act has to be measured as per the road distance and not as per the straight line distance on a horizontal plain. The other issue regarding whether this Section 80IB(10)(c) referred the outer limit of city of Mumbai or outer limits of municipal Corporation of Greater Mumbai, we find that it is the "BMC" having the jurisdiction over the municipal limits of Mumbai and therefore, the site of building project of the 29 I.T.A. Nos. 895,288,287,896,897,289 /Mum/2020 Bharat Tukaram Bhor. assessee has to be measured from the outer municipal limits of municipal corporation Le. "BMC" only. [Emphasis Supplied] It is respectfully submitted that the aforesaid decision is squarely applicable to the facts obtaining in the appeal under consideration.

In view of the submissions made as foregoing, it is respectfully prayed that the decision of the Ld CIT holding that appellant is ineligible to claim deduction under section 80IB(10) of the Act in view of relevant project falling within 25kms from the limits of BMC with the units therein having built up area greater than 1000 sq ft, may kindly be upheld. 15. On the issue of proportionate deduction Ld. DR relied upon order of the Assessing Officer and also on the point where Assessing Officer has given every detail calculation about the built up area which included flower beds and the terrace of the flat which has been confirmed by the learned CIT (A).

We have heard the rival submissions, perused the relevant finding given in the impugned orders as well as material referred to before us at the time of hearing. In both the cross appeals mainly two issues are involved, firstly, whether on the facts and circumstances the assessee is eligible for claim of deduction under section 80IB(10) where maximum permissible built up area in the projects have marginally exceeded 1000 Sq. ft., but are below 1500 Sq. ft. is eligible for deduction or not on the ground that it is beyond 25 Kms from the municipal limits of city of Mumbai; and secondly, whether proportionate deduction on pro-rata basis can be given on the units which are less than 1000 Sq. ft. specially in two of the three wings, i.e., A & B wings wherein all the flats are below 1000 Sq. ft. therefore the entire disallowance of deduction relating to all the three wings, A, B & C were entire project should not be denied.

First we will take up the first issue, whether project is within 25 Kms of the municipal limit of city of Mumbai as per the words used in clause (c) of section 80 IB (10). The main thrust of the learned counsel of the assessee is that, there are several enactments where term „City of Mumbai‟ has been identified to exist 31 /Mum/2020 Bharat Tukaram Bhor. upto Chunabhatti (near Sion) on the eastern side and therefore, from this limit the housing project of assessee at Kamothe, Navi Mumbai is beyond 25 Kms. Once that is accepted then the maximum permissible limit for claiming deduction under section 80IB(10) is 1500 Sq. ft. Clause (c) of Section 80IB(10) reads as under:

From the bare perusal of the above provision, it is seen that the statue has used the words within 25 kms from the municipal limits of city of Delhi or Mumbai. The section uses the words limits of the city with the prefix of „municipal limit‟. The municipal limit refers to municipality and municipality of Mumbai is known as Brihanmumbai Muncipal Corporation which is the governing civic body of the city known as „BMC’. Further, the statue has provided in clause (c) the residential unit must be of maximum built up area 32 /Mum/2020 Bharat Tukaram Bhor. of 1000 Sq. ft. if such residential unit is situated within the municipal limit of city of Delhi or Mumbai. It is only when the residential unit is outside 25 Kms from the municipal limits of Delhi or Mumbai, the maximum built up area eligible for deduction is 1500 Sq. ft. The enactments which has been referred by the learned counsel before us mainly envisages about the area of city of Mumbai which extend from Colaba in the South, Mahim on the western side and Sion on the eastern side. And Mumbai Suburban extends from Kurla to Dahisar on western side and Mulund on the eastern side. These are two administrative districts but it does not refer that this is the municipal limit and these are two Municipal Corporation or there are two municipal limits, one for city of Mumbai and one for Mumbai Suburban district. Though, in colloquial terms the Mumbai is divided into town area is referred as Mumbai city and suburban area as „suburbs‟. However, there is only one municipal corporation known as BMC and the entire Mumbai is covered under BMC and within its municipal limit lies both the administrative zones, city and suburban. What the statue has provided is the municipal limit of the city and not the limit of any administrative limit. In Mumbai there is only one Municipal 33 I.T.A. Nos. 895,288,287,896,897,289 /Mum/2020 Bharat Tukaram Bhor. Corporation and therefore the limit has to be seen from the municipal limit of BMC and not „city of Mumbai‟ as understood under the various enactments for the purpose of district division. Thus, we agree with the contention of the learned DR as incorporated above and we are tandem with his reasoning given by him. Moreover, this issue is also squarely covered by the decision of ITAT, Mumbai in case of Laukik Developers Vs DCIT Supra as incorporated in the submissions of the learned DR in the 14 paragraph. Thus, this issue is resided against the assessee.

Now in so far as controversy, whether the terrace is part of the built up area or the flower bed area is to be excluded from the built up floor area. We find that Assessing Officer has discussed in detail as to how the flower bed area and some of the terrace area is part of the floor area and covered in the built up area. Even the learned counsel at the time of hearing has not rebutted the findings of the Assessing Officer as described by him in detail in the assessment order. Though, it is bit harsh an interpretation that if this flower bed and terrace is included the built up area marginally crosses the 1000 Sq. ft. limit and may not be used for the purpose 34 /Mum/2020 Bharat Tukaram Bhor. of internal flat, however, Assessing Officer has analyzed the designs and has measured the entire exact built up area, therefore, we don‟t find any reason to deviate from such a finding of the Assessing Officer and accordingly same is confirmed. Thus, we hold that deduction of 80IB (10) will not be allowed on the units/flats which have exceeded 1000 Sq. ft. even marginally. Accordingly, appeal of the assessee is dismissed.

In so far as, deduction 80IB (10) on pro-rata basis on the units which are less than 1000 sq. ft., we find that it is undisputed fact in so far as the units in wing A & wing B are concerned they are undisputedly below 1000 Sq. ft. and therefore learned CIT(A) has rightly allowed the deduction for claim made under section 80IB(10) which is in conformity with the various judgment of Hon‟ble Bombay High Court and series of ITAT order as incorporated in the earlier part of order dealing with the submissions of the learned counsel for the assessee. However, it is not borne out from the record, whether there is any flat or unit in wing „C‟ which is slightly less than 1000 Sq. ft.; and incase if there is any such unit, then Assessing Officer is directed to allow the proportionate deduction on 35 /Mum/2020 Bharat Tukaram Bhor. pro-rata basis and allow the deduction of under section 80IB(10). Thus, the revenue appeal is dismissed.