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Income Tax Appellate Tribunal, “A” BENCH,
Before: SHRI S.S.GODARA & SHRI DIPAK PANDURANG RIPOTE
आयकर अपीलीय अिधकरण “ए” �ायपीठ पुणे म� । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI DIPAK PANDURANG RIPOTE, ACCOUNTANT MEMBER आयकरअपीलसं. / ITA No’s.1679 to 1682/PUN/2016 िनधा�रण वष� / Assessment Years: 2010-11 to 2013-14 M/s. Namrata Developers Flora The Deputy Commissioner of City, Vs Income Tax, Central Circle-2(1), 592, Ravivar Peth, Talegaon- Pune. Dabhade, Taluka Maval, Pune – 410 506. PAN: AAAAN 4708 C Appellant/ Assessee Respondent /Revenue
आयकरअपीलसं. / ITA No’s.1684 to 1687/PUN/2016 िनधा�रण वष� / Assessment Years: 2010-11 to 2013-14 The Assistant Commissioner of M/s. Namrata Developers Flora Income Tax, Central Circle- Vs City, 2(1), Pune. 592, Ravivar Peth, Talegaon- Dabhade, Taluka Maval, Pune – 410 506. PAN: AAAAN 4708 C Appellant/ Assessee Respondent /Revenue Assessee by Dr. Vardhaman L. Jain – AR Revenue by Shri Rajeev Kumar - DR Date of hearing 10/05/2022 Date of pronouncement 09/06/2022 आदेश / ORDER PER S.S.GODARA, JM: These assessee’s and Revenue’s appeals four cross appeals each ITA No’s.1679 to 1682/PUN/2016 with ITA No’s.1684 to 1687/PUN/2017, for Assessment Years 2010-11 to 2013-14, arise against Commissioner of Income Tax(Appeals)-12, Pune’s common order dated 13.05.2016 in Appeal No.PN/CIT(A)-12/DCIT Cent Cir 2(1), Pn/108, 109, 110, 111/15-16
ITA No’s.1679 to 1682/PUN/2016 [A] & Cross Appeals ITA No’s.1684 to1687/PUN/2016 [R] For the A.Y’s 2010-11 to 2013-14 / Namrata Developers Flora City
respectively involving proceedings under section 143(3) r.w.s 153C of the Act (in short “the Act), respectively.
Heard both the parties. Case files perused.
It emerges at the outset that both the parties raise the identical substantive issue of assessee’s section 80IB(10) deduction claim involving various aspects. We note that the impugned “lis” has arisen on account of department’s “Search” action dated 12.02.2013 in M/s.Namrata, Pristine and Jalah group of cases. There is hardly any dispute that the foregoing search led to initiation of section 153C proceedings against the assessee; which in turn, has given rise to all these cross appeals preferred by both the parties.
It further transpires that the assessee’s sole substantive issue pressed during the course of hearing seeks to reverse both the lower authorities action denying section 80IB(10) deduction thereby holding that the corresponding residential units had built up “BUA” area exceeding 1500 sq.ft. The CIT(A)’s detailed discussion upholding the Assessing Officer’s action to this effect reads as follows: “III.Flat exceeding built-up area of 1500 sq.ft.(including garden area): During the course of assessment proceedings, the AO gathered that flat No.O1-1, O1-2, O2-1 and O2-2 had built up area exceeding 1500 sq.ft, on inclusion of garden area attached to the unit. On the other hand, appellant contended that garden area is required to be excluded to work out built-up area. The AO relied on the judgment of jurisdictional Tribunal, Pune in case of Kumar Builders Consortium (ITA No.2210/PN/2012) wherein it was held that if well demarcated garden area with clear boundary was attached to the flat, garden area was not open to the others for use and also garden area was sold to the buyer then same was required to be included in the built-up area. The facts being identical, hence AO did not exclude the garden area and held
ITA No’s.1679 to 1682/PUN/2016 [A] & Cross Appeals ITA No’s.1684 to1687/PUN/2016 [R] For the A.Y’s 2010-11 to 2013-14 / Namrata Developers Flora City
that 4 flats were constructed with built-up area exceeding 1500 sq.ft, which violated clause (c) of section 80IB(10). During the course of appellate proceedings appellant placed reliance on the various decisions which were not directly on the issue but were regarding inclusion or otherwise of mezzanine floor area , car parking area and portico area for purpose of working out built up area. Decision of jurisdiction of ITAT Pune, relied upon by the AO, is directly on the issue of garden area attached to the residential unit. Respectfully following the judgment of ITAT Pune in case of Kumar Builders Consortium, the finding of AO that 4 units 01-1, 01-2, 02-1 and 02-2 were constructed in violation of clause (c) of section 80IB(10) is upheld. 4. Mr. Jain quoted Common Wealth Developers vs. DCIT [2014] 267 CTR 297, ITA No.1837/PUN/2014 dated 13.01.2017 ACIT vs. Sonata Reality, Tax Appeal No.139 of 2009 CIT vs. Shri Subba Reddy (HUF) dated 17.01.2015 (Madras), to contend that both the lower authorities have erred in law and on facts in including the assessee’s garden area as liable to be included in the prescribed built up area of 1500 sq.feet.
The Revenue has placed strong reliance on the CIT(A) foregoing detailed discussion.
We have given our thoughtful consideration to vehement rival contentions against and in support that the impugned disallowance and find due merit in the Revenue’s stand herein. We first of all note that the CIT(A)’s common order herein as followed his conclusion drawn in A.Y. 2009-10’s which has been reproduced in the preceding paragraphs. The same appears to have attained finality as there is no material on record to suggest the contrary. This is coupled with the fact that the corresponding site plan of these four units O1-1, O1-2, O2-1 and O2-2 in issue is on record (page 10) wherein it is clearly indicates that this garden area is meant for the concerned allottees’
ITA No’s.1679 to 1682/PUN/2016 [A] & Cross Appeals ITA No’s.1684 to1687/PUN/2016 [R] For the A.Y’s 2010-11 to 2013-14 / Namrata Developers Flora City
exclusive use and ownership and falls within the walls only than any common area not covered u/s 80IB(14)(a) of the Act.
We further wish to reiterate here that legislature has not only defined “inner measurements” of the residential unit “at the floor level” in section 80IB(14)(a) but also the same has to be increased by the thickness of the walls.” It is in this backdrop that this tribunal’s order in Kumar Builders Consortium (supra) has already decided the issue in Revenue’s favour. We therefore, adopt judicial consistency to affirm both the lower authorities’ action disallowing the assessee’s 80IB(10) deduction claim to this effect.
Mr.Jain does not press for assessee’s legal ground(s) challenging validity of section 153C proceedings in these appeals. Rejected accordingly. The assessee’s instant four appeals ITA No’s.1679 to 1682/PUN/2016 fail in above terms.
This leaves us with Revenue’s four cross appeals ITA No.1684 to 1687/PUN/2016 raising identical as many issues. Its first and foremost substantive grievance is that the assessee had allotted more than one flat to one person i.e. Smt. Sandhya Rakesh Sharma and therefore, the same violates section 80IB(10)(f) of the Act. A perusal of the case file suggests that the assessee had sold flat no.I-1 to Ms.Shyamalee Rakesh Sharma and Smt.Sandhya Rakesh Sharma whereas the latter allottee had also got another flat no.I-2 in her individual capacity. The CIT(A)’s detailed discussion in page 39 para (I) and page 41 appears to have decided the said issue in Revenue’s favour only. Be that as it may, the fact remains that Mr. Jain has
ITA No’s.1679 to 1682/PUN/2016 [A] & Cross Appeals ITA No’s.1684 to1687/PUN/2016 [R] For the A.Y’s 2010-11 to 2013-14 / Namrata Developers Flora City
neither placed on record the corresponding joint sale deed that Ms.Syamlee only owned or possessed the entire share in Flat I-1 independently. This is in addition to the fact that the Commission’s report in assessee’s paper book dated 22.01.2015 at pages number 1 to 9 held that it had allotted “more than one flat “to Smt.Sandhya Rakesh Sharma and therefore, we find no merit in the taxpayer’s stand. The Revenue succeeds in all of its corresponding substantive ground(s) to this effect.
The Revenue’s second substantive ground is that the assessee’s scheduled date of completion of its residential project “Flora City” was 31.03.2012 whereas the last completion certificate stood issued only on 02.09.2011 which disentitles’ it for the impugned deduction. We note that the instant issue is hardly res-integra as this tribunal co-ordinate bench in A.Y. 2009-10 involving Revenue and assessee’s cross appeals in ITA No.1795/PUN/2012 and 1866/PUN/2013 dated 25.07.2014 rejects the former’s very stand as follows: “13. With regard to the period specified for complying the construction of the project, we find that the CIT(A) has aptly dealt with the objection of the Assessing Officer. In this case, the approval of first building plan is dated 31.05.2006 and therefore in terms of section 80IB(10)(a)(iii) of the Act, the project is required to be completed within five years from the end of the financial year in which the housing project is approved by the local authority. Explanation (i) below clause (a) of section 80IB(10) of the Act, as seen earlier, provides that the date of approval of the first building plan of the housing project shall be considered as the date of approval by the local authority. As a consequence in terms of clause (a) of section 80IB(10) of the Act, construction of the impugned housing project was liable to be completed within five years from the end of the financial year in which the building plan of the housing project is first approved by the local authority i.e. calculated from 31.05.2006 (i.e. date of approval of first building plan), the housing project was liable to be completed by 31.03.2012. Factually speaking, there is no dispute that the construction of the project by the assessee has been completed by 31.03.2011, a position which also
ITA No’s.1679 to 1682/PUN/2016 [A] & Cross Appeals ITA No’s.1684 to1687/PUN/2016 [R] For the A.Y’s 2010-11 to 2013-14 / Namrata Developers Flora City
stands certified by the Talegaon Dabhade Municipal Council, which has been also relied upon by the CIT(A). In terms of the said material, it is evident that with regard to the development of the housing project undertaken by the assessee, last of the completion certificate is dated 31.03.2011. The claim of the Assessing Officer is that a completion certificate has also been issued by the local authority on 02.09.2011, which is the last certificate. Even if the said certificate is taken into consideration, yet it does not breach the outer limit of 31.03.2012 which is stipulated date in the present case for completion of project, as seen earlier. However, the claim of the assessee and which has been upheld by the CIT(A) is that the said completion certificate pertains to construction on a plot, which was undertaken by the purchaser himself. Assessee explained that the said plot was sold as such and the purchaser obtained the building sanction and the assessee had no role to play in the development and construction of the said plot. The aforesaid factual finding is not controverted by the Revenue before us. Accordingly, the stand of the CIT(A) on this aspect is also hereby affirmed. 14. As a result of the aforesaid discussion, we find that on all the aspects raised by the Assessing Officer, the CIT(A) made no mistake in upholding assessee’s plea for the claim of deduction u/s 80IB(10) of the Act with respect to its housing project, ‘Flora City’ undertaken at Talegaon Dabhade, Pune. Thus, the order of the CIT(A) is hereby affirmed.” 11. The Revenue is fair enough in not pin-pointing any distinction on facts as well as in law. We thus adopt the judicial consistency to affirm the CIT(A)’s foregoing findings under challenge. This second substantive issue is decided in assessee’s favour.
Next comes the Revenue’s third substantive ground(s) that the CIT(A)’s has erred in law and on facts in holding that the assessee’s residential unit(s) sold in the impugned assessment year had not exceeded the prescribed area 1500 sq.ft thereby excluding “terrace” part thereof vide following detailed discussion: “II. Flat exceeding built-up area of 1500 sq.ft.(including terrace): During the course of assessment proceedings, the AO gathered that flat No.Pl-301(303 as per builder), Pl-302(304 as per builder), 02-301 &
ITA No’s.1679 to 1682/PUN/2016 [A] & Cross Appeals ITA No’s.1684 to1687/PUN/2016 [R] For the A.Y’s 2010-11 to 2013-14 / Namrata Developers Flora City
02-302 had built up area exceeding 1500 sq.ft, after the area of terrace was included in the built up area. On the other hand, the appellant contended that terrace open to sky was not part of built-up area hence it was not required to be included in the built-up area for the purpose of deduction u/s 80IB(10). The appellant relied on the decision of ITAT Pune Bench in case of N.T. Wadhwani (ITA NO.18/PN/2013). The AO noted the decision but in view of the fact that issue of exclusion of terrace area has not reached finality she treated the same as violative of the clause (c) of section 80IB(10). During the course of appellate proceedings, appellant furnished the copy of the order of ITAT Pune in the case of N.T. Wadhwani and it was noted that relying on the decision of Madras High Court in case of Ceebros Hotels Pvt. Ltd. (ITA No.581 of 2008) it was held that area of terrace open to sky would be excluded from the working of built-up area. Respectfully following the decisions of Madras High Court and ITAT Pune, it is held that above discussed 4 units did not exceed the built-up area and were not in violation of clause (c) of section 801 B( 10) of the Act.” 13. Suffice to say, it has come on record that the foregoing judicial precedents have already held that such that a “terrace” in a residential unit does not satisfy the section 80IB(14)(a) basic benchmark of “inner measurement” since open to sky. We, thus, adopt the very reasoning mutatis- mutandis to uphold the CIT(A) action deleting the impugned disallowance qua this “terrace” inclusion issue. This third substantial ground canvassed at the Revenue behest stands declined.
The Revenue’s fourth substantive grievance is that the CIT(A) has erred on law and facts in treating the assessee’s alleged “on money’ receipts as eligible for sec 80IB(10) deduction as follows: “37.2 I have considered the assessment order and submission filed by the appellant. Brief facts are that during the course of search entries in respect of on money received over and above recorded transaction were found recorded. In the statement recorded u/s 132(4) Shri Shailesh Shah admitted on behalf of Namrata Group of charging on money during FYs 2010-11 to 2012-13 in various entities of the group. Accordingly, total on money of Rs 10,46,17,306 was offered as additional income in 3 FYs in 11 entities of the group. In the case of appellant on money of Rs 41,00,000 was admitted for the year under consideration. However, AO noted that in the return filed after the
ITA No’s.1679 to 1682/PUN/2016 [A] & Cross Appeals ITA No’s.1684 to1687/PUN/2016 [R] For the A.Y’s 2010-11 to 2013-14 / Namrata Developers Flora City
search, the appellant had disclosed on money of only Rs 31,82,080. It was explained before the AO that amount of Rs 9,17,912 out of on money was already found recorded in the books of accounts. During the course of assessment proceedings, the AO pointed out entries against TB5 on the same page indicating on money which was not found recorded in the books of accounts. The appellant admitted that amount of Rs 6,67,439 was remained to be included and offered the same as additional income. During the course of appellate proceedings appellant claimed that on money received was part of profit derived from the project eligible for deduction u/s 80IB( 10) of the Act Reliance was placed on the decision of Hon'ble Bombay High Court in case of Sheth Developers (254 CTR 0127) and according to which a project was eligible for deduction, as a natural corollary, the on money received would be part of profit from the project and shall be entitled to claim u/s 80IB(10). Respectfully following the decision of Bombay High Court, the AO is directed to allow deduction in respect of on money received against the units eligible for deduction u/s 80IB(10). In respect of units which have been held in violation of stipulated conditions, the amount would be added to work out profit on sale of such unit including the on money received and no deduction would be allowed on the same. Ground raised by the appellant is partly allowed.” 15. Both parties reiterated their respective stands against and in support of correctness of the CIT(A) foregoing directions. The assessee relies upon the hon’ble jurisdictional high court’s decision (supra). There would hardly be any issue about the legal preposition settled hereinabove. The fact however remains that the assessee is eligible for sec 80IB(10) deduction on proportionate basis only as it has already failed on the foregoing “garden area” and “multiple allotment” issues in preceding paras. We make it clear that it has not filed any evidence on record that the impugned ‘on-money’ pertains to sec 80IB(10)’s eligible units only. Or that the remaining allottees except Smt.Sharma or those having garden area only had paid the entire sum. Faced with this situation, we restore the impugned disallowance on account of the assessee’s failure to prove all the foregoing clinching factual aspects. The
ITA No’s.1679 to 1682/PUN/2016 [A] & Cross Appeals ITA No’s.1684 to1687/PUN/2016 [R] For the A.Y’s 2010-11 to 2013-14 / Namrata Developers Flora City
Revenue succeeds in all of its corresponding substantive grounds to this effect. 16. Learned departmental representative vehemently argued before parting that the CIT(A) has further erred in granting the assessee’s proportionate sec 80IB(10) deduction regarding the eligible housing units only. We find no merit in the Revenue’s instant last argument as the CIT(A) has discussed the issue as follows: “16.6 Vide alternate ground No.2 the appellant prayed that pro-rata deduction may be allowed in case alleged violations were considered fatal to the admissibility of the claim. During the course of appellate proceedings, appellant submitted that the principle of pro-rata deduction has been accepted by the Apex Court in case of Shri Ostwal Builders Ltd. In the case of Shri Ostwal Builders Ltd. findings of IT AT Mumbai (vide ITA No.7292 & 7293/Mum/2008 dated 17.2.2010) were upheld by Hon'ble Bombay High Court vide ITA No.1015 of 2011 dated 19.9.2011 and against the order of. High Court the SLP filed by the department was dismissed by the Apex Court vide CC15585/2012 dt.14.12.2012. The appellant also placed reliance on the following decisions for the proposition that pro-rata deduction should be allowed on the portion of project. which fuifiled ail the conditions prescribed u/s 80IB(10): i) G. V. Corporation v ITO 133 TTJ178 ii) CiT vArun Excelio Foundation Pvt.Ltd. (Madras) 86 DTP 99 iii) Surana Mutha Developers v ITO (ITA NO.360/PN/2013) iv) Vishwas Promoters Pvt.Ltd. v ACIT (Madras) 81 DTR 58 v) CIT v B.M. & Brothers (Guj) 86 CCH194. 16.7 I find merit in the submissions of the appellant. As held by Madras High Court, Kolkata High Court, Gujarat High Court, Bombay High Court and by the jurisdictional ITAT, Pune, the project would be entitled for deduction u/s 80IB(10) on pro-rata basis in respect of residential units which fulfilled all the conditions. Respectfully following the ratio laid down in the decisions relied upon by the appellant, the AO is directed to allow deduction U/S 80IB(10) in respect of all the units which fulfilled all the stipulated conditions. In other words, the AO is directed to withdraw deduction u/s 80IB(10) on the profits recorded on the sale of units (I1 or I2 whichever allotted later), O1-1, O1-2, O2-1 and O2-2 including the ‘on money’, if any, received against such units which were in violation of stipulated conditions. The grounds raised by the appellant are hereby partly allowed.”
ITA No’s.1679 to 1682/PUN/2016 [A] & Cross Appeals ITA No’s.1684 to1687/PUN/2016 [R] For the A.Y’s 2010-11 to 2013-14 / Namrata Developers Flora City
The Revenue could not pin-point any judicial precedent to the contrary. We accordingly uphold the CIT(A) foregoing directions granting proportionate section 80IB(10) deduction to the assessee. Ordered accordingly. These Revenue’s cross appeals in ITA No.1684 to 1687/PUN/2016 are partly allowed in above terms. Necessary computation shall follow as per law. [No other grounds or an argument has been pressed before us.]
To sum up, the assessee’s four appeals in ITA No.1679 to 1682/PUN/2016 are dismissed and Revenue’s cross appeals ITA No.1684 to 1687/PUN/2016 are partly allowed in above terms. A copy of this common order be placed in the respective case files.
Order pronounced in the open Court on 9th June, 2022.
Sd/- Sd/- (DIPAK P.RIPOTE) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; �दनांक / Dated : 9th June, 2022/ SGR* आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A) concerned. 4. The Pr. CIT concerned. ि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 आयकरअपीलीयअिधकरण, पुणे/ITAT, Pune.