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Before: Shri V. Durga Rao & Shri G. Manjunatha
O R D E R
PER V. DURGA RAO, JUDICIAL MEMBER:
Both the appeals filed by the Revenue are directed against different orders of the ld. Commissioner of Income Tax (Appeals)-1, Coimbatore dated 10.12.2018 for the assessment year 2014-15 and order dated 15.02.2019 for the assessment year 2013-14.
Brief facts of the case are that the assessee filed return of income for the assessment year 2014-15 on 29.11.2014. The case was selected for scrutiny and after following due process, the assessment under section 143(3) of the Income Tax Act, 1961 [“Act” in short] was completed. In the return of income, the assessee has claimed deduction under section 80IB of the Act of ₹.4,95,80,290/-. During the course of assessment proceedings, the details relating to the deduction claimed were furnished before the Assessing Officer. After considering the submissions of the assessee as well as the provisions of section 80IB of the Act as well as reply to the show cause notice, the Assessing Officer rejected the claim of deduction of ₹.4,95,80,290/- made under section 80IB(10) of the Act and brought to tax.
On appeal, by following the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. Arun Excello Foundations [29 Taxman.com 149 (Mad)] as well as decision of the Tribunal in the case of M/s. Elegant Estates v. ITO in dated 25.02.2015, the ld. CIT(A) directed the Assessing Officer to work out the pro-rata deduction in respect of the units satisfying the conditions under section 80IB(10) of the Act.
Aggrieved, the Revenue is in appeal before the Tribunal. By relying upon the grounds of appeal, the ld. DR has submitted that the construction agreement was made on 17.05.2011 and the assessee failed to prove that part of the amount had been received prior to 01.04.2010. It was further submission that the assessee was trying to take the advantage of the fact that section 80-IB(10(f) of the Act was inserted w.e.f. 01.04.2010 and it was an afterthought to substantiate the deduction claimed and pleaded for reversing the appellate order and restore that of the assessment order.
5. On the other hand, besides relying upon the decision in the case of CIT v. Arun Excello Foundations (supra) and the decision of the Tribunal in the case of M/s. Elegant Estates v. ITO (supra) the ld. Counsel for the assessee strongly supported the order passed by the ld. CIT(A).
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the assessee made a claim of deduction under section 80IB(10) of the Act. As called for, the assessee has furnished books of accounts, copies of sale deeds, copies of construction agreement, confirmation letters from the buyers having paid the booking advances for the purchase of flats and copies of allotment letters, etc. In the grounds of appeal, the Department has raised a specific ground in Ground No. 2 that the Assessing Officer in the assessment order has clearly brought out the fact that the construction agreement was made on 17.05.2011. We have carefully gone through the assessment order and nowhere in the assessment order, the Assessing Officer has stated that the construction agreement was made on 17.05.2011. In fact, in para 3 of the assessment order, the Assessing Officer has stated to have perused the books of accounts, copies of sale deeds, list of flat buyers and copies of construction agreement. In the same paragraph, the Assessing Officer mentioned that Mr. Prabhu Kesan, S/o Mr. A.V. Kesavan, No. 504 A, Heritage Classic Apartments, Puliakulam Road, Coimbatore has purchased flat No. “I-2-A” vide sale deed document No. 622/2011 dated 07.02.2011 and Mrs. K.L. Vijayalakshmi, w/o Prabhu Kesavan has purchased flat No. “I-2-C” vide sale deed document No. 623/2011 dated 07.02.2011. Once the sale deed document for the purchase of flat has been executed on 07.02.2011, the construction agreement would not have been executed on a later date of 17.05.2011. Thus, the contention of the Department stands ruled out.
7. We have gone through the case law relied on by the ld. CIT(A) as well as the ld. Counsel for the assessee. By following the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. Arun Excello Foundations (P.) Ltd., the Coordinate Benches of the Tribunal in the case of Elegant Estates v. ITO (supra) has observed and held as under: “5. We have heard both parties and gone through the relevant findings. Admitted factual position is that assessee has sold two residential units jointly to Shri and Smt. K. Ramachandran on 16th and 17th July, 2008 i.e. much before the relevant previous year. Meaning thereby that the residential units with all rights and title stood transferred much before insertion of clause (f) in section 80 IB(10) by the Finance Act, 2009 w.e.f. 01.04.2010 having prospective effect only. The assessee has recognized the said receipts in the relevant previous year as per its system of accounting regularly followed. We find that a co-ordinate bench of the ‘tribunal’ in Emgeen Holdings (P) Ltd vs. DCIT (2011) 47 SOT 98 (Mumbai) has held that this amendment would only have prospective effect. It is an undisputed fact that the assessee’s residential units stood transferred to the aforesaid vendees well before the amendment. This makes us to observe that its act of merely recognizing the said receipts in subsequent assessment years would not turn the clock back to the year 2008 (supra). We reiterate that section 80IB(10) is a deduction provision to be liberally construed. Therefore, the assessee succeeds so far as application of clause (f) of section 80IB(10) is concerned. 6. Now, we come to other CIT(A)’s finding that assessee flats no.403 and 404 measure more than 1500 sq.feet i.e. 1653 and 1572 sq.feet respectively. The assessee fails to rebut this factual position. Section 80IB(10)(c) prescribes measurement of a residential unit to be upto 1500 sq.feet only. We find that the language used in this specific clause refers the residential unit. In other words, this expression does not bar a deduction claim altogether if some of the units sold exceed the specified dimensions. We observe that in such a case, the consequential disallowance has to be proportionate only. It has to be restricted to profits derived from the residential units violating section 80IB(10)(c). Case law CIT vs. ARUN EXCELLO FOUNDATIONS (P) LTD (2013) 212 TAXMAN 342 (Mad) is also quoted in support. The assessing authority is accordingly directed to make proportionate disallowance and pass its consequential order.”
8. Against the above decision of the Tribunal, the Department preferred further appeal before the Hon’ble Jurisdictional High Court and vide its order in CIT v. Elegant Estates [2016] 383 ITR 49 (Mad), the Hon’ble High Court confirmed the order of the Tribunal by dismissing the appeal filed by the Department.
9. Moreover, similar view has also been taken by the Mumbai Benches of the Tribunal in the case of Om Swami Smaran Developers (P.) Ltd. v. ITO [2018] 90 taxmann.com 267 (Mumbai – Trib.) and relevant head-notes are reproduced as under: “Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings (Housing project) - Assessment year 2011- 12 - Assessee, a developer, had developed a housing project and claimed deduction under section 80-18(10) - Assessing Officer disallowed same on grounds that assessee had allotted three flats to a single person, thus, violated conditions of section 80-IB(10)(f) which provides that more than one residential unit in a housing project cannot be sold to one person/individual - Whether merely because assessee had violated conditions of section 80-IB(10)(f) in respect of three flats, deduction under section 80-IB(10) could not be disallowed for entire housing project and, assessee was entitled to deduction proportionately in respect of flats which fulfilled all conditions of section 80-18(10) - Held, yes [Para 8] [In favour of assessee]”
10. Respectfully following the decisions of the Hon’ble Jurisdictional High Court in the case of CIT v. Arun Excello Foundations (P.) Ltd. as well as decision of the Coordinate Benches of the Tribunal in the case of Elegant Estates v. ITO (supra), the ld. CIT(A) has rightly directed the Assessing Officer to work out the pro-rata deduction in respect of units satisfying the conditions under section 80IB(10) of the Act and allow the claim of deduction. Thus, we find no infirmity in the order passed by the ld. CIT(A).
11. Similar grounds on identical facts and circumstances have been raised in the assessment year 2013-14 also. Since the grounds raised in the assessment year 2013-14 are similar on an identical fact, our decision for the assessment year 2014-15 hereinabove shall also apply for the assessment year 2013-14 as well.
In the result, both the appeals filed by the Revenue are dismissed. Order pronounced on 24th January, 2022 at Chennai.