GRANDEUR HOMES PVT. LTD., SECUNDERABAD,HYDERABAD vs. ACIT, CIRCLE-2(2), HYDERABAD, HYDERABAD

Brief facts of the case are that the assessee company engaged in the business of Real Estate Developers/Managers, filed its return of income for the A.Y 2012-13 on 29.9.2012 admitting total income of Rs.19,14,700/- after claiming deduction u/s 80IB(10). During the assessment proceedings u/s 143(3) of the Act, the AO observed that the assessee has claimed deduction u/s 80IB(10) of the Act with respect to profits of Rs.30,54,002/- and Rs.4,64,73,118/- derived respectively from the Housing Projects Splendour (Gajularamamaram) and Emerald Heights (Ghanapur). The assessee was asked to produce the copy of the project lay out and completion certificates etc. In response to the same, the assessee furnished the approval letters and on perusal of the same, the AO observed that the housing project Emerald Heights was approved by the HUDA on 23.03.2007 and the projects consist of four blocks viz., A, B, C and D. Observing that all the blocks and club house are part of one single project, the AO observed that the occupancy certificate has been issued by the Grama Panchayat only for two blocks i.e. A & D as having been completed on 5.1.2012 and that further verification by the Inspector also revealed that only A, D blocks and Club House have been completed and that the block of B is under construction and that the construction of Block C has not yet been started. Since the entire project was not completed, the AO disallowed the claim of deduction u/s 80IB(10) in respect of “Emerald Heights”. However, the deduction u/s 80IB(10) was

The learned Counsel for the assessee submitted that the assessee has completed the projects A & D and also the Club House and has accordingly filed the occupancy certificate before the AO which is placed at Page No.51 of the Paper Book filed before us. He submitted that the entire project was of 10.02 acres and the Blocks A & D were in an area of 4.2 acres. Thus, he submitted that the blocks themselves also satisfied the conditions of deduction u/s 80IB(10) and therefore, the deduction should be allowed.

The learned DR, however, supported the orders of the authorities below.

Having regard to the rival contentions and the material on record, we find that in the case of Manjeera Projects, the Coordinate Bench of this Tribunal (to which both of us are signatories) have considered various judicial precedents on the issue and have held that if the blocks of the housing project which are completed also fulfils the conditions of 80IB(10), then the assessee shall be eligible for deduction u/s 80IB(10) in respect of such completed blocks only. For the sake of ready reference, the relevant paragraphs of the above order are reproduced hereunder:

The Hon'ble Bombay High Court in the case of CIT vs. Vandana Properties reported in (2013) 355 ITR 36 (Bom.) has considered similar situation wherein the assessee therein had obtained approval to construct four buildings on a plot of land admeasuring 2.36 acres and intimation of the approval in respect of those buildings was granted during the years 1993-96 and following the percentage completion method, the assessee therein had offered to tax, the income earned from construction of buildings A, B, C & D from time to time and deduction u/s 80IB(10) of the Act was also claimed and allowed. Subsequently, the State Govt. in the year 2001, permitted conversion of the status of the land and the assessee became entitled to construct additional building "E" on the plot of land and accordingly the building plan was submitted by the assessee which was approved by the Municipal Corporation, subject to various conditions set out therein. Thereafter, the commencement certificate for construction of "E" building was issued on March 10,2003 and in the return of income for the A.Ys 2004-05 and 2005-06, the assessee estimated the profit from E building and claimed deduction u/s 80IB(10) of the Act. The AO disallowed the claim on the ground that the approval for "E" building was granted on 11th of October, 2002, as an extension of the approval granted for the buildings in A to D and therefore, the E block, being continuation of A, B, C & D buildings, the project must be held to have commenced prior to October 1, 1998, and hence is not eligible for deduction u/s 80IB(10) of the Act. The AO also held that the buildings were constructed in a plot of land admeasuring 2.36 acres of the land and if it was proportionately divided between all the buildings, then the land pertaining to E building would be less than one acre and hence, deduction u/s 80IB(10) could not be allowed. The Hon'ble Bombay High Court held that the building E was approved by the local authority on October 11, 2002 by a separate approval and therefore, it constituted an independent housing project and that section 80IB(10) while specifying the size of the plot of land, does not specify the size or the number of housing projects that are required to be undertaken on a plot having a minimum area of one acre. Thus, the Hon'ble High Court has held that if the assessee has constructed a building on minimum of one acre, as per the sanctioned plan and obtained the completion certificate, the assessee is entitled to deduction u/s 80IB(10).

The Hon'ble Madras High Court in the case of CIT vs. Voora Property Developers (P) Ltd reported in (2015) 373 ITR 317 (Mad) was considering the case of an assessee, who received approval of the local authority in respect of a composite housing scheme and had obtained separate plan permits for six blocks on one acre and 6.5 cents of land. The AO therein had denied the deduction u/s 80IB(10) on the ground that the assessee had developed six separate projects in one single piece of land measuring 1.065 acres and therefore, the assessee did not fulfil the essential conditions of the minimum area of one acre for a single project as laid down u/s 80IB(10).

The Coordinate Bench of this Tribunal in the case of M/s. Sriram Constructions vs. Dy.CIT in ITA No.1300/Hyd/2011 vide orders dated29.04.2016 has also considered similar situation and has held that the assessee will not automatically loose the deduction u/s 80IB(10) for the entire project but is eligible for pro-rata deduction as allowed by the CIT (A) in the said case.

The Coordinate Bench of this Tribunal at Ahmedabad in the case of Pushkar Construction Co vs. ITO reported in (2015) 43 ITR (Trib.) 293 (ITAT Ahm.) has followed the decision of the Hon'ble Bombay High Court in the case of CIT vs. Vandana Properties (Supra) and also the Hon'ble Madras High Court in the case of CIT vs. Voora Property Developers (P) Ltd (Supra) to hold that the assessee is entitled to deduction u/s 80IB(10) of the Act, if the assessee fulfills the condition of constructing a housing project on a plot having the area of more than one acre. It was held that on a plot of land having minimum area of one acre, there could be any number of housing projects and since the housing projects were approved by the local authority and fulfilled the conditions set out u/s 80IB(10), deduction could not be denied to all the housing projects. It was also held that section 80IB(10) specified the size of the plot of land but not the size or the number of housing projects that were required to be undertaken on a plot having minimum area of one acre.

In the case of M/s. Viswas Promoters Pvt. Ltd (cited Supra), the Hon'ble Madras High Court has observed that there is no definition of the expression "Housing Project" u/s 80IB of the Act and that said expression is defined under Explanation to section 80HHBA of the Act. The Hon'ble High Court, after considering the said definition, has held as under:

On the facts admitted by the Revenue, in the projects "Agrini" and "Vajra", there are number of flats which are below 1500 sq.ft., and the relevant built-up area requirement is specified under Section 80IB(10)(c) of the Income Tax Act. Thus, the built-up area in some of the flats in both these projects are in excess of 1500 sq.ft., i.e., 32 flats in Agrini and only one flat in Vajra and that the assessee had not claimed any deduction on this. We hold that the Tribunal is not correct in its view, that by reason of these Units being in excess of 1500 sq.ft., the entire claim of the assessee in respect of these two projects would stand rejected under Section 80IB(10) of the Income Tax Act. Thus, going by the definition of "housing project" under Explanation to Section 80HHBA of the Act as referred to above as the construction of "any building" and the wordings in Section 80IB(10) of the Act, the question of rejection in entirety of the project on account of any one of the blocks not complying with the conditions, does not arise. Even in the case of each one of the blocks, wherever there are flats which satisfied the conditions particularly of the nature stated under Section 80IB(10)(c) of the Act, we have already upheld the case of the assessee in T.C.Nos.1348 and 1349 of 2007 dated 10.10.2012 for grant of relief under Section 80IB(10) of the Act on a proportionate basis, by following the decision of the Bombay High Court reported in [2011] 333 ITR 289 (CIT Vs. Brahma Associates). Thus applying the decision of this Court in T.C.Nos.1348 and 1349 of 2007 dated 10.10.2012, we hold that the assessee is entitled to succeed both on the principle of proportionality as well as by reason of the construction on the meaning of the expression "housing project" as referring to construction of any building and the wordings in Section 80IB(10) of the Act. In the circumstances, we hold that the mere fact that one of the blocks have units exceeding built-up area of 1500 sq.ft, per se, would not result in nullifying the claim of the assessee for the entire projects. Consequently, in respect of each of the blocks, the assessee is entitled to have the benefit of deduction in respect of residential units satisfying the requirement under Section 80IB(10)(c) of the Act. In so holding, we also agree with the decision of the Bombay High Court reported in [2012] 206 TAXMAN 584 (CIT v. Vandana Properties), which was decided by the Bombay High Court on similar lines as in the assessee's case before us".

The next question to be considered is whether the assessee is entitled to deduction u/s 80IB(10) on the profits from blocks F, K & L for which the assessee has not obtained the occupancy certificate from GHMC,

Respectfully following the same, we deem it fit and proper to remand the issue to the file of the AO with the direction to examine whether the area of blocks A&D together fulfills the conditions of 80IB(10) i.e. the project should have been completed within the stipulated period and the area should be more than one acre and none of the flats should exceed 1500 sq. ft and the

In the result, assessee’s appeal is treated as allowed for statistical purposes.