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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Smt. P. Madhavi Devi & Shri S.Rifaur Rahman
Per Smt. P. Madhavi Devi, J.M.
Both are Revenue’s appeals for the A.Ys 2012-13 & 2013-14 respectively against the separate orders of the CIT (A)-11, Hyderabad, dated 28th April, 2017.
Brief facts of the case are that the assessee, an individual and a builder, doing the business in the name and style of M/s. Lahari Constructions, filed her return of income for the A.Y 2012-13 on 30.09.2012, admitting income of Rs.35,96,330 after claiming deduction of Rs.74,60,273 and for the A.Y 2013-14 on 28.09.2013, admitting income of Rs.13,86,630 after claiming deduction of Rs.71,01,902 u/s 80IB(10) of the Act
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ITA Nos 1070 and 1071 of 2017 Cherunkuri Swapna Hyderabad.
respectively. During the assessment proceedings u/s 143(3) of the Act, the AO observed that the assessee has developed a housing project at Bhanoor Village in Medak District and has constructed 138 residential units with a construction space of 2,03,550 sft and the average size of the housing plot is 325 sq.yds with a built- up area of 1475 sq.ft. He observed that during the assessment proceedings for the A.Y 2009-10, certain deficiencies such as sale of plot of land instead of sale of house, bearing No.10 and second approval for a house, were noticed and in order to find out the correctness of the claim u/s 80IB(10), the matter was referred to the District Valuation Officer, Hyderabad and the DVO along with his team of Engineers, inspected the site and pointed out certain deficiencies and on the basis of the said deficiencies, the claim of deduction u/s 80IB(10) was disallowed for the A.Y 2010-11. Following the same, the claim u/s 80IB(10) disallowed for the A.Ys 2012-13 and 2013-14 as well, against which, the assessee preferred appeals before the CIT (A) who granted relief to the assessee, by following the decision of the ITAT for the A.Y 2010- 11. Against the relief granted by the CIT (A), the Revenue is in appeal before us by raising the following grounds of appeal: “1. The CIT (A) erred in law and on facts in deleting the disallowance u/s 80IB(10) made by the AO. 2. The CIT (A) erred in ignoring the fact that Revenue’s appeal on identical issue for the A.Y 2010-11 is pending before the Hon'ble High Court”.
As seen from the above grounds of appeals itself, the issue is covered in favour of the assessee by the decision of the Coordinate Bench of the Tribunal in assessee’s own case for the
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A.Y 2010-11 in ITA No.412/HYD/2015 dated 26.06.2015 wherein the Tribunal held as under:
“4. We have considered the contentions and perused the record. There is no doubt with reference to the fact that assessee's claim pertains to AYs. 2009-10 to 2011-12 as recorded by the Revenue authorities. The Ld.CIT(A) also gave a factual finding that issues are similar to AY. 2009-10, therefore, since the issue was decided in favour of assessee in AY. 2009-10, we direct the AO to grant deduction u/s. 80IB(10). For the sake of record, the order of ITAT is reproduced as under:
"13. We have considered the rival submissions and also perused the relevant material on record. It is observed that the disallowance made by the Assessing Officer on account of assessee's claim for deduction under S.80IB(10) in respect of profit derived from the housing project undertaken by her was confirmed by the learned CIT(A) by his impugned order on two grounds. Firstly, he held that the commercial space of 11,913 sq. ft. in the project developed by the assessee was more than the prescribed limit of 5% of the total built up area of the project. Secondly, he held that the out of total 136 units constructed by the assessee in the project, two units bearing Nos.118 and 121 (correct No. is 21, as pointed out by the learned counsel for the assessee) were having built up area of more than the maximum area of 1,500 sq. ft. permissible as per the relevant provisions. The learned CIT(A) held that there was thus violation of at least two norms in the respect of project developed by the assessee to be eligible for deduction under S.80IB(10) and the said project therefore, was not entitled to deduction under S.80IB(10), as rightly held by the Assessing Officer.
In so far as the norm relating to commercial area is concerned, there is no dispute that the relevant plot of land on which the commercial complex was built had already been sold by the assessee to Md. Zaheeruddin and Md. Zamiluddin vide sale deed dated 13.9.2007 and the profit arising from the said sale was duly offered to tax by the assessee for the relevant assessment year, i.e. assessment year 2008-09. There is also no dispute that the commercial complex on the said plot of land was constructed by the owners and not by the assessee and the profit arising from the sale of the commercial complex so constructed was duly offered to tax by the said owners in their returns of income. The learned CIT(A), however, still confirmed the disallowance made by the Assessing Officer on account of assessee's claim for deduction under S.80IB(10) on the ground that the plot of land on which the commercial complex was built was part and parcel of the project of the assessee, as approved by the concerned authorities. He also noted that the said plot of land was found mentioned even in the completion certificate dated 12.3.2012 issued by the concerned authority, which again strengthened the fact that the land on which the commercial complex was built up was a part and parcel of the
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project developed by the assessee. In this regard, it is observed that a similar issue had come up for consideration before the Chennai Bench of this Tribunal in the case of Lavanya Property Developers Pvt. Ltd. V/s. ACIT (ITA No.148/Mds/2010 dated 16.9.2011), wherein the assessee had obtained approval for the project comprising of five blocks to be developed on the land admeasuring 1.445 acres. He, however, sold plot of land pertaining to one block and developed only the balance area of 1.2 acres and claimed deduction under S.80IB(10) in relation to the four blocks only, built by it. The Assessing Officer disallowed the claim of the assessee on the ground that the plot of land pertaining to one block sold by the assessee was part of the original project and the area of the flats in the said block exceeded 1,500 sq. ft. On appeal, the learned CIT(A) confirmed the order of the Assessing Officer, observing that the approval obtained from the local authority for development of the project included the land in relation to one block which was sold by the assessee. On further appeal, it was held by the Tribunal that just because the assessee hived off one block in the project and hived off block had violated the condition prescribed under S.80IB(10), it would not disentitle the complete project from the deduction under S.80IB(10) especially when the hived off block was not in any way connected with the assessee's balance project and the balance project on its own complied with all the conditions under S.80IB(10). In the present case, the plot of land on which the commercial complex was built had already been sold by the assessee and since the commercial complex on the said plot of land was developed by the owners of the land and not by the assessee, we are of the view that the same could not be considered as part of the project of the assessee, especially when the project of the assessee excluding that plot of land independently complied with all the conditions for claiming deduction under S.80IB(10). It is also pertinent to note here that profit arising from the development and sale of commercial complex was duly offered by the owners to tax in their returns of income, and neither they nor the assessee claimed any deduction under S.80IB(10) in respect of the said profit.
In so far as the residential units No.21 and 118 are concerned, which allegedly were having more than the permissible maximum built up area of 1,500 sq. ft. each, the learned counsel for the assessee has filed before us a copy of the relevant sale deed dated 11th September, 2008, whereby the residential unit No.21 comprising of plot of land and duplex house built thereon was sold by the assessee. A perusal of the said sale deed clearly mentions the built up area as 1,364 sq. ft. in the description of the property sold and even the building plan annexed to the said sale deed as approved by the concerned authorities, shows the total area of the ground and first floors as 1336 sq. ft. It is observed that the Assessing Officer, however, presumed the area of this unit as more than 1,500 sq. ft. merely on the basis that the duplex house was having two floors. As explained on behalf of the assessee before the authorities below as well as before us, the said unit was built on a corner plot and keeping in view the location as well as the size of the plot, duplex house was constructed, having a built up area of
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less than 1,500 sq. ft. It is also observed that a copy of the sale deed for residential unit No.21 was filed by the assessee even before the learned CIT(A), but still the learned CIT(A) brushed aside the same, by observing that the same was not sufficient to prove that the built up area of the unit was less than the limit of 1,500 sq. ft. prescribed under S.80IB(10). In our opinion, the said sale deed was sufficient to show that the area of the duplex unit constructed by the assessee as residential unit No.21 was having less than 1,500 sq. ft. built up area and the approved plan annexed to the sale deed further established this position.
As regards the residential unit No.118, is observed that the built up area of the said unit was considered by the Assessing Officer as in excess of 1,500 sq. ft. on the basis that in addition to the ground floor, the first floor was also constructed as found during the course of the visit of the DVO to the project site on 17.12.2011. In this regard, the claim of the assessee right from the beginning was that the residential unit comprising of plot of land with only ground floor constructed thereon was sold to the concerned buyer vide sale deed dated 3rd September, 2010, having built up area of 1,475 sq. ft. and the construction of first floor as found by the DVO during his visit on 17.12.2011, was being done by the owner of the said plot and not by the assessee. As demonstrated by the learned counsel for the assessee at the time of hearing before us, this position is duly supported by the copy of the sale deed dated 3.9.2010, placed at page Nos.67 to 78 of the paper- book, which clearly shows that the residential unit No.118 comprising of plot of land as well as a residential unit having only ground floor with built up area of 1,4765 sq. ft. duly completed, was sold by the assessee. The area of the said unit sold by the assessee on 3.9.2010 was having a built up area of 1,475 sq. ft. only and the additional built up area in the form of first floor which was under construction as found by the DVO on 17.12.2011 was done by the owner of the unit and not by the assessee. Both the residential units bearing Nos. 118 and 21 thus were having built up area of less than1,500 sq. ft. as developed and sold by the assessee and in our opinion, there was no violation of any condition as alleged by the authorities below, for claiming deduction under S.80IB(10). We also find merit even in the alternative contention raised by the assessee that even if one or two units of the project are found to be having built up area of more than 1,500 sq. ft, the deduction under S.80IB(10) is liable to be disallowed only on proportionate basis and the claim of the assessee under S.80IB(10) cannot be disallowed in its entirety, as done by the authorities below.
In the light of the above discussion and considering all the facts and circumstances of the case, we are of the view that there was no violation of any condition in respect of the project developed by the assessee for the purpose of claiming deduction under S.80IB(10) and the learned CIT(A) was not justified in confirming the disallowance made by the Assessing Officer on account of assessee's claim for deduction under S.80IB(10). We therefore, set aside the impugned order of the learned CIT(A) on this issue, and direct the
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Assessing Officer to allow the claim of the assessee for deduction under S.80IB(10)". 5. Respectfully following the same, we allow assessee's grounds and direct the AO to allow the claim”.
Against the above decision, the Revenue has allegedly filed an appeal before the Hon'ble jurisdictional High Court. It is not the case of the Revenue that the decision of the ITAT has been suspended by the Hon'ble High Court and therefore, this decision will not lose its presentational value. In view of the same, respectfully following the decision of the Coordinate Bench, we see no reason to interfere with the order of the CIT (A). Revenue’s appeals for both the A.Ys are accordingly dismissed.
In the result, Revenue’s appeals are dismissed. Order pronounced in the Open Court on 6th June, 2018.
Sd/- Sd/- (S.Rifaur Rahman) (P. Madhavi Devi) Accountant Member Judicial Member
Hyderabad, dated 6th June 2018. Vinodan/sps Copy to: 1 Dy. CIT, Central Circle 1(3) 7th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad 2 Smt. Cherukuri Swapna, Plot No.723/A Road No.37, Jubilee Hills, Hyderabad 3 CIT (A)-11, Hyderabad 4 Pr. CIT – Central, Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order
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