DEPUTY COMMISSIONER OF INCOME-TAX,, PANVEL vs. M/S. SAI HOMES,, NAVI MUMBAI

आयकर अपीलीय अिधकरण “ए” �यायपीठ पुणे म� । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE �ी डी. क�णाकरा राव, लेखा सद�य एवं �ी िवकास अव�थी, �याियक सद�य के सम� BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM आयकर अपील सं. / ITA No.1198/PUN/2017 िनधा�रण वष� / Assessment Year : 2012-13 DCIT, Panvel Circle, .......अपीलाथ� / Appellant Panvel. बनाम / V/s. M/s. Sai Homes, 310/313, 3rd Floor, Persipolis Co-op. Society, Plot No.74-A, Sector-17, Vashi, New Mumbai-400703. ……��यथ� / Respondent PAN : ABAFS3226K Revenue by : Shri Vilas Munde Assessee by : Shri Nikhil Pathak सुनवाई क� तारीख / Date of Hearing : 20.08.2019 घोषणा क� तारीख / Date of Pronouncement : 26.08.2019 आदेश / ORDER PER D. KARUNAKARA RAO, AM: This appeal is filed by the Revenue against the order of CIT(A)-2, Thane dated 28.02.2017 for the Assessment Year 2012-13. 2. The issue raised in this appeal relates to the granting of proportionate deduction u/s 80IB(10) of the Act when there is violation to the conditions specified in the clauses (c) & (f) i.e. merger of flats and sale of flats to relatives of section 80IB(10) of the Act in respect of certain flats as well as the on-money receipts in respect of few flats.

2 ITA No.1198/PUN/2017 3. Briefly stated the relevant facts include that the assessee is a firm engaged in business of construction as Builders and Developers. The assessee filed the return of income declaring total income of Rs.3,44,13,540/- after claiming deduction of Rs.1,01,15,20,943/- u/s.80IB(l0) of the Act. Thereafter, the case was selected for scrutiny through CASS. To ascertain the genuineness of the claim of deduction, a survey action u/s.133A of the Act was carried out at the office/business premises of the assessee at Vashi, Navi Mumbai on 08.10.2013. The assessee was engaged in three projects namely Rosalie, Rosalie LX and Riverdale. The total sales and profit declared for the three projects was as under :- Profit declared Total sales Rosalie Rs.12,98,72,979/- Rs.88,01,45,967/- Rosalie LX Rs.37,72,06,505/- Rs.63,72,98,146/- Riverdale Rs.53,88,55,002/- Rs.88,39,02,060/- 4. The Assessing Officer during the course of assessment proceedings found that the assessee had joined 30 flats in Project Rosalie and 4 flats in Project Rosalie LX as a result of which the area of these flats exceeded the permissible area u/s.80IB(10)(c) of the Act. Further, the Assessing Officer also observed that the assessee had violated the provisions of section 80IB(10)(f) of the Act in as-much-as 43 flats in Rosalie and 8 flats in Rosalie LX were sold to the relatives. 5. In view of these facts, the Assessing Officer disallowed the entire claim of deduction u/s.80IB(10) of the Act at Rs.47,26,65,941/- (Rs.11,04,44,814/- in respect of Rosalie and Rs.35,86,21,127/- in

3 ITA No.1198/PUN/2017 respect of Rosalie LX). The Assessing Officer rejected the deduction based on the “Principle of proportion”. 6. The Assessing Officer also held that the assessee had preponed its sales in respect of all the three projects to avoid the payment of AMT which was applicable from the next year i.e. A.Y. 2013-14. Such preponed sales were excluded from the Sales reported for the year and the profits thereof were reduced from the claim of deduction u/s 80IB(10 of the Act. 7. During the course of the survey action, it was found that the assessee had received on-money of Rs.3,52,39,130/-. The Assessing Officer also added the on-money received by the assessee of Rs.3,52,39,130/- u/s 69 of the Act. The Assessing Officer, after considering the facts gathered and submissions made, finalized the assessment order u/s 143(3) of the I T Act, on 30.03.2015, at total income of Rs.54,23,18,610/ 8. Aggrieved with order of Assessing Officer, the assessee preferred the appeal before CIT(A). The Ld. CIT(A) in his order has held that the claim of deduction u/s.80IB(10) of the Act cannot be completely denied to the assessee on account of any violations of the conditions laid down in sections 80IB(10)(c)/(f) of the Act and proportionate allowance of the claim of deduction u/s.80IB(10) of the Act should be allowed to the assessee. In this regard, the CIT(A) has relied on the decision of his predecessor in the assessee’s own case for AY 2009-10 as well as various

4 ITA No.1198/PUN/2017 Courts’ decisions including, Happy Homes Enterprises, 271 CTR 524 (Bom-2014), Rohan Homes, Brahma Associates Vs. JCIT (2009), 122 TTJ (Pune) 433, Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. V/s. CIT, 196 ITR 188 and so on etc. 9. As regards the preponment of sales, the CIT(A) directed the Assessing Officer to work out the sales made after 31.03.2012 and work out the profits thereof to be excluded from computation of deduction u/s. 80IB(10) of the Act. 10. As regards the on-money, the CIT(A) directed that the on-money pertaining to Project Aster amounting to Rs.2,30,85,200/- to be considered in that project. The CIT(A) upheld the addition of Rs.1,21,53,930/- on account of on-money. It was also however directed that the assesse would be entitled to deduction u/s. 80IB(10) of the act in respect of such addition on account of on-money. 11. Aggrieved with the above relief granted by the CIT(A) to the assessee, the Revenue filed the present appeal before us. 12. Before us, at the outset, ld. Counsel for the assessee submitted that the issue raised in the present appeal now stands covered in favour of the assessee by the order of the Tribunal in assessee’s own case for the assessment years 2006-07, 2008-09 & 2009-10 vide ITA No.5836/M/2012, ITA Nos.2032 & 2033/PUN/2012, ITA Nos.5837 & 5838/M/2012 order dated 31.03.2017. The relief granted by the CIT(A)

5 ITA No.1198/PUN/2017 has strength of other orders of the ITAT, Pune Bench in the case of (i) Belvalkar Housing Schemes vs. ITO vide ITA No.524/PN/2013 for the assessment year 2009-10 dated 24.08.2015 and (ii) M/s Malpani Estates vs. ACIT vide ITA Nos.2296 to 2298/PN/2012 for the assessment years 2008-09 to 2010-11 dated 30.01.2014. 13. Referring to the assessee’s own case (supra), ld. Counsel for the assessee brought our attention to para 31 and submitted that the Pune Bench of the Tribunal in the case of ITO vs. Gajraj Constructions, 41 ITR 425 was approved the principle of prorata deduction u/s 80IB(10) of the Act with reference to the flats to which on-money receipts are reported. 14. Referring to the decision of ITAT, Pune Bench in the case of M/s. Malpani Estates (supra), ld. Counsel brought our attention to para 17 of the said order where the Tribunal, relying on the Jurisdictional High Court judgement in the case of (i) CIT vs. Sheth Developers (P) Ltd., 254 CTR 124 (Bom) and (ii) CIT vs. Gem Plus Jewellery India Ltd., 330 ITR 175 (Bom), approved the principle of prorata deduction u/s 80IB(10) of the Act. These decisions are relevant for the proposition that the undisclosed income/on-money discovered during the search action are eligible for deduction u/s 80IB(10) of the Act. Similarly, in the decision of Belvalkar Housing Schemes (supra) at para 7, the Tribunal approved the principle of prorata deduction u/s 80IB(10) of the Act.

6 ITA No.1198/PUN/2017 15. On the other hand, ld. DR for the Revenue heavily relied on the order of the Assessing Officer. On hearing both the sides, we find the principle of prorata 16. deduction u/s 80IB(10) of the Act is now settled law at the level of the Tribunal in the various decisions as well as the Jurisdictional High Court in the case of Gajraj Constructions (supra). Further, we find the contents of para 31 of the order of the Tribunal in assessee’s own case (supra) being the operational paragraph are relevant the same are extracted hereunder :- “31. Now, coming to the balance flats which are constructed by the assessee, wherein the Assessing Officer had given a finding that the area of flats was more than 1000 sq.ft. since he has included the area of balcony or open terrace. Various physical verification exercise and statements of the persons and also perusal of the documents seized during the course of search were based upon by the Assessing Officer for coming to the said conclusion. However, the issue is now settled by the Hon’ble Supreme Court in CIT Vs. Sarkar Builders reported in 375 ITR 392 (SC), wherein it has been held that in respect of projects which were sanctioned prior to 01.04.2005, the area of balcony and terrace is to be excluded from the area of units for working out the total area of the flats, which is eligible for deduction under section 80IB(10) of the Act. The amendment brought in by insertion of 80IB(14) of the Act is w.e.f. 01.04.2005 and accordingly, is applicable for such projects which are approved after 01.04.2005. The project of the assessee was approved on 24.03.2005 and consequently, the amendment brought in on 01.04.2005 is not applicable to the project of assessee. Where the assessee has received sanction on 24.03.2005 and the local authority has even issued the completion certificate on 08.06.2007 for construction of the said flats, then in order to determine the built up area of the flats, the area of balcony and terrace is to be excluded and since in respect of balance flats after such exclusion, the area is less than 1000 sq.ft., the assessee is entitled to prorata deduction under section 80IB(10) of the Act. Further, the assessee is also entitled to prorata deduction under section 80IB(10) of the Act in respect of on-money received on such flats which are entitled to the claim of deduction. In this regard, we find support from the ratio laid down by the Pune Bench of Tribunal in ITO Vs. Gajraj Constructions (supra).”

7 ITA No.1198/PUN/2017 17. Considering the above settled legal proposition, we are of the opinion that on all the issues raised by the Revenue in the grounds, the order of the CIT(A) is fair and reasonable and it does not call for any interference. Thus, the relevant grounds raised by the Revenue are dismissed. 18. In the result, the appeal of the Revenue is dismissed. Order pronounced on 26th day of August, 2019. Sd/- Sd/- (िवकास अव�थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �याियक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 26th August, 2019. Sujeet आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A)-2, Thane. 4. The CCIT, Thane. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.