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Income Tax Appellate Tribunal, “E” Bench, Mumbai
Before: Shri Shamim Yahya & Shri Ravish Sood
O R D E R
PER RAVISH SOOD, JM
The present appeals filed by the assessee are directed against the order passed by the CIT(A)-23, Mumbai for A.Y. 2009-10 & A.Y. 2010-11, dated 11.12.2013 & 25.06.2014, respectively, which in turn arises from the respective assessment orders passed under Sec.143(3) Income Tax Act, 1961 (for short „Act‟) for the said years. As a common issue is involved in the captioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. We shall first advert to the appeal of the assessee for A.Y. 2010- 11. The assessee has assailed the impugned order by raising the following grounds of appeal before us:
P a g e | 2 & 1457/Mum/2014 AYs. 2009-10 & 2010-11 M/s Siddhivinayak Homes Vs. ITO-12(1)(1) “1. The learned CIT(A) erred in confirming the disallowance made u/s. 80IB(10) of the Act of Rs.40,50,078/- without appreciating that the project of the appellant was approved 19.07.2003 i.e. prior to the amendment carried out w.e.f. 1/4/2005 and therefore the provisions of sec. 80I8(10) of the Act as on the date of approval would apply and not the amended provision and hence, the disallowance of deduction claimed u/s. 80IB(10) of the Act of Rs.40,50,078/- is without any justification and liable to be deleted.
2. The learned CIT (A) failed to appreciate that in definition of 'built-up area' of the residential units was inserted w.e.f 1/4/2005 and therefore applied to projects approved on or after 1/4/2005 and since the definition of 'built- up area' did not apply to the project of the appellant, the same could not be invoked and thus, the built-up area as per D.C. Rules and as understood in common parlance ought to be considered whereby the projections and balconies need to be excluded and once excluded, even the built-up area of combined flats is less than 1000 sq.ft. and hence, the disallowance of deduction u/s 80I8(10) of the Act of Rs. 40,50,078/- applying the definition of built-up area is without any justification and liable to be deleted.
3. The learned CIT(A) failed to appreciate that even if for the sale of argument, the amended provisions wet. 1/4/2005 applied, in that case, the definition of built-up area included only the inner measurement of the flat at the floor level including projections and balconies thereby excluding projections and balconies not at the floor level or which cannot be used/impossible to use for any residential purposes, and hence, such projections/balconies ought to be excluded, and if excluded, the built-up area of the combined flats sold by the appellant were within the prescribed limit of 1000 sq.ft. and hence, the entire claim of deduction u/s 80IB(10) of the Act of Rs. 40,50,078/- may be allowed.
4. The learned CIT(A) failed to appreciate that the decisions rendered by the High Court ought to be followed instead of the decision Tribunal, even though rendered in the case of the appellant for earlier years, since the decision was rendered without considering the High Court decisions and hence, the disallowance of deduction u/s. 80IB(10) of the Act of Rs. 40,50,078/- is without any justification and liable to be deleted.
The appellant craves leave to add, amend, alter, or delete all or any of the aforesaid grounds of appeal.”
Briefly stated, the assessee firm which is a builder and developer had e-filed its return of income for A.Y. 2010-11 on 18.09.2010, declaring its total income at Rs.6,75,933/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act.
During the course of the assessment proceedings it was observed by the A.O that the assessee had claimed a deduction under Sec.80IB(10) of Rs.40,50,078. It was observed by the A.O that the P a g e | 3 & 1457/Mum/2014 AYs. 2009-10 & 2010-11 M/s Siddhivinayak Homes Vs. ITO-12(1)(1) assessee who was engaged in construction activity had in A.Y 2007-08 completed one project at Mira Road in the name and style of “Shreepati Royal Complex” having 4 buildings viz. Shreepati-1, Shreepati-2, Shreepati-3 and Shreepati-4. The assessee had during the year sold 6 flats forming part of the building viz. Shreepati-4. It was noticed by the A.O that for the aforesaid project the commencement certificate and completion certificate were given by Mira Bhayander Municipal Corporation. On a perusal of the records, it was noticed by the A.O that survey proceedings under Sec. 133A were conducted on 29.08.2007 at the office premises of the assessee at 302, 3rd Floor, Vardhaman Chamber, Cawasji Patil Street, Fort, Mumbai on 29.08.2007, and also at its site office at Shreepati Royal Complex, Shantinagar Mira Road (E), District: Thane. During the course of the survey action it was found that the assessee had combined 30 Nos. of 1-BHK Flats into one unit. Apart there from, it was gathered that the flats were either allotted by the assessee to one individual or to two persons of the same family. The survey team measured the area of the combined flats, which revealed, that the area of certain flats which had been combined into one flat/unit exceeded 1000 sq. ft. The aforesaid fact was also admitted by Shri Mahindra Kanungo, partner of the assessee firm, who in his statement recorded during the course of the survey action had in reply to Q.30 admitted that the “built-up area” of 30 Nos. of 1-BHK flats which had been joined together had a “built-up area” exceeding 1000 sq. ft. each.
The assessee in the course of the assessment proceedings was confronted by the A.O as regards the discrepancies found in the course of the survey proceedings, which disentitled it from claiming deduction under Sec. 80IB(10). In reply, it was submitted by the assessee that while working out the area the Chajjas/projections could be considered as part of the “built up area” only if they were P a g e | 4 ITA Nos. 4932 & 1457/Mum/2014 AYs. 2009-10 & 2010-11 M/s Siddhivinayak Homes Vs. ITO-12(1)(1) habitable and usable as a residential area. It was the claim of the assessee that even if one were to consider the Chajjas/projections, only projections at floor levels were to be considered. However, the aforesaid claim of the assessee did not find favour with the A.O, who was of the view that the floor level mentioned in Sec. 80IB(14)(a) indicated that any lofts or cooking platforms made in the flats should not be considered while calculating the “built-up area”. Accordingly, it was observed by the A.O that the assessee had misinterpreted the definition of “built-up area” as provided in Sec. 80IB(4) of the Act. 5. It was further observed by the A.O that the assessee had misinterpreted the definition of “built-up area” as envisaged in Sec. 80IB(14)(a), and had wrongly stated that the definition provided by the local authority would be applicable. The A.O did not find favour with the claim of the assessee that the definition of “built-up area” of the residential unit that was inserted by the Finance (No.2) Act, 2004, w.e.f 01.04.2005, would only be applicable to the projects approved on or after 01.04.2005 and had no application as regards the “housing projects” approved prior to that date. Accordingly, the claim of the assessee that as its project was approved on 19.07.2003 i.e much prior to the insertion of the definition of “built-up area” as was made available on the statute vide the Finance (No.2) Act, 2004 w.e.f 01.04.2005, therefore, the same would not be applicable in its case, did not find favour with the A.O. It was observed by the A.O that as the definition of “built-up area” that was made available on the statute by way of Sec.80IB(14)(a) was clarificatory in nature, therefore, the same would be applicable to the case of the assessee. Also, the A.O declined to accept the claim of the assessee for proportionate allowability of deduction under Sec. 80IB(10) of the Act. On the basis of his aforesaid observations the A.O disallowed the assesses claim for deduction of Rs. 40,50,078/- under Sec. 80IB(10) of the Act.
P a g e | 5 & 1457/Mum/2014 AYs. 2009-10 & 2010-11 M/s Siddhivinayak Homes Vs. ITO-12(1)(1) 6. Aggrieved, the assessee carried the matter in appeal before the CIT(A). It was observed by the CIT(A) that an identical issue in respect of the same “housing project” of the assessee was decided by the Tribunal, vide its order in ITA No. 8726/Mum/2010 and ITA No.7306/Mum/2010 for A.Y. 2007-08 and ITA No. 5986/Mum/2011 and ITA No. 5378/Mum/2011 for A.Y. 2008-09, vide its order dated 26.09.2012. As the Tribunal in its aforesaid order had observed that the assessee was not eligible for claim of deduction under Sec. 80IB(10), therefore, the CIT(A) following the said view declined the assesses claim for deduction under Sec.80IB(10) in respect of the flats whose area after being combined exceeded 1000 sq. ft. It was observed by the CIT(A) that as the area of all the flats was in excess of the prescribed limit of 1000 sq. ft., therefore, the A.O had rightly declined the assesses claim for deduction of Rs. 40,50,078/- under Sec. 80IB(10) of the Act. Also, it was observed by the CIT(A) that the appeal filed by the assessee against the aforesaid order of the Tribunal had been admitted by the Hon‟ble High Court of Bombay and was pending adjudication. Accordingly, the CIT(A) following the view taken by the Tribunal dismissed the appeal.
The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. authorized Representative (for short „A.R‟) for the assessee fairly admitted that the Tribunal while disposing off the appeals of the assessee for A.Y. 2007-08 and A.Y. 2008-09 had held that the assessee was not entitled for claim of deduction under Sec. 80IB(10) in respect of the residential project under consideration. However, it was submitted by the ld. A.R, that subsequent to the aforesaid order of the Tribunal the Hon’ble Supreme Court in the case of CIT-19, Mumbai Vs. Sarkar Builder (2015) 375 ITR 392 (SC) had inter alia observed, that as the definition of “built-up area” as provided in clause (d) of Sec. 80IB(14)
P a g e | 6 & 1457/Mum/2014 AYs. 2009-10 & 2010-11 M/s Siddhivinayak Homes Vs. ITO-12(1)(1) that was made available on the statute vide the Finance (No. 2) Act, 2004, w.e.f 01.04.2005 was inextricably linked with the approval and construction of the housing project, therefore, an assessee cannot be called upon to comply with the said condition when it was not in contemplation of either the assessee or even the legislature at the time when the housing project was accorded approval by the local authorities. In sum and substance, it was averred by the ld. A.R that as the approval in the case of the residential housing project of the assessee was granted by the local authority on 19.07.2003 i.e much prior to the insertion of the definition of “built-up area” as had been made available on the statute in clause (a) to Sec. 80IB(14), vide the Finance (No.2) Act, 2004 w.e.f 01.04.2005, therefore, the same was not applicable in its case.
Per contra, the ld. Departmental Representative (for short „D.R‟) relied on the orders of the lower authorities.
We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Admittedly, the residential housing project of the assessee in the case before us was approved by the local authority viz. Mira Bhayandar Municipal Corporation, Mumbai on 19.07.2003 i.e much prior to the insertion of the definition of “built-up area” as was made available on the statute in clause (a) to Sec. 80IB(14), vide the Finance (No.2) Act, 2004 w.e.f 01.04.2005. As observed by us hereinabove, the Tribunal while disposing off the appeals of the assessee for A.Y. 2007-08 and A.Y. 2008-09, vide its order dated 26.09.2012, had observed, that the assessee was not entitled for deduction under Sec. 80IB(10) in respect of the residential project under consideration. The appeal filed by the assessee against the P a g e | 7 ITA Nos. 4932 & 1457/Mum/2014 AYs. 2009-10 & 2010-11 M/s Siddhivinayak Homes Vs. ITO-12(1)(1) aforesaid order of the Tribunal had been admitted by the Hon‟ble High Court of Bombay, vide its order passed in ITA No. 229 of 2013, dated 18.03.2013 and is pending adjudication as on date.
We find that it is the claim of the assessee that the Hon’ble Supreme Court vide its order passed in the case of CIT-19, Mumbai Vs. Sarkar Builders (2015) 375 ITR 392 (SC) had inter alia concluded that the definition of “built-up area” envisaged in clause (a) to Sec.80IB(14), as had been made available by the legislature vide the Finance (No.2) Act, 2004 w.e.f 01.04.2005 would be applicable only to those cases where the “housing project” had been approved by the municipal corporation after 01.04.2005. Accordingly, the ld. A.R had tried to impress upon us that as the residential “housing project” in the case of the assessee had been approved on 19.07.2003 i.e much prior to the insertion of the definition of “built-up area” in clause (a) to Sec.80IB(14) as was made available on the statute vide the Finance Act, 2004 w.e.f 01.04.2005, therefore, the same would not be applicable in its case. We have perused the afore stated judgment of the Hon’ble Supreme Court in the case of CIT-19, Mumbai Vs. Sarkar Builder (20150 375 ITR 392 (SC) and find substantial force in the contention advanced by the ld. A.R. We find that the Hon‟ble Apex Court had observed that that as the definition of “built-up area” in clause (a) of Sec. 80IB(14) that was made available on the statute, vide the Finance (No. 2) Act, 2004, w.e.f 01.04.2005 was inextricably linked with the approval and construction of the housing project, therefore, an assessee cannot be called upon to comply with the said condition when it was not in contemplation of either the assessee or even the legislature at the time when the housing project was accorded approval by the local authorities. However, at the same time, we also cannot remain oblivious of the fact that the factual position in the case of the assessee before us, as had been canvassed by the ld.
P a g e | 8 & 1457/Mum/2014 AYs. 2009-10 & 2010-11 M/s Siddhivinayak Homes Vs. ITO-12(1)(1) A.R, cannot be summarily accepted and would require to be verified. Accordingly, in all fairness, we restore the matter to the file of the A.O who is directed to adjudicate the issue as regards the entitlement of the assessee towards claim of deduction under Sec. 80IB(10) after considering the aforesaid judgment of the Hon’ble Supreme Court in the case of CIT-19, Mumbai Vs. Sarkar Builder (20150 375 ITR 392 (SC). In terms of our aforesaid observations the matter is set aside to the file of the A.O for fresh adjudication.
The appeal of the assessee is allowed for statistical purposes. A.Y. 2009-10 12. We shall now advert to the appeal of the assessee for AY 2009-10. Briefly stated, the assessee firm had e-filed its return of income for A.Y. 2009-10 on 20.08.2009, declaring its total income at Rs.11,05,591/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act.
During the course of the assessment proceedings it was observed by the A.O that the assessee had claimed deduction of Rs. 21,81,135/- under Sec. 80IB(10). Observing, that the assessee had failed to satisfy the conditions contemplated in Sec. 80IB(10) the A.O declined the aforesaid claim of deduction raised by the assessee.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). Observing, that the Tribunal while disposing off the appeals of the assessee for A.Y. 2007-08 and A.Y. 2008-09 had held that the assessee was not entitled for deduction under Sec.80IB(10), the CIT(A) followed the view therein taken and on similar terms concluded that the assessee was not entitled for claim of deduction under Sec.80IB(10) in respect of the flats whose area after being combined had exceeded 1000 sq. ft. At the same time, the CIT(A) observed that P a g e | 9 ITA Nos. 4932 & 1457/Mum/2014 AYs. 2009-10 & 2010-11 M/s Siddhivinayak Homes Vs. ITO-12(1)(1) the assessee would be eligible for deduction under Sec. 80IB(10) on pro rata basis in respect of the flats having an area not exceeding 1000 sq. ft. On the basis of his aforesaid observations the CIT(A) partly allowed the appeal.
The assessee being aggrieved with the order of the CIT(A), wherein disallowance of deduction under Sec. 80IB(10) of Rs.7,41,585/- was upheld, has carried the matter in appeal before us. The ld. representatives for both the parties submitted that the facts and the issue involved in the present appeal are identical to those which were there before us in the appeal of the assessee for A.Y. 2010- 11 viz. . As the facts and the issue involved in the present appeals remains the same as were there before us in the appeal of the assessee for A.Y. 2009-10 viz. ITA No. 4932/Mum/2014, therefore, our order therein passed shall apply mutatis mutandis for disposing off the present appeal of the assessee for A.Y. 2009-10. Accordingly, the matter is restored to the file of the A.O for fresh adjudication in terms of our aforesaid observations recorded while disposing off the appeal of the assessee for A.Y. 2010- 11.
The appeal of the assessee is allowed for statistical purposes.
The appeals of the assessee in A.Y. 2010-11 viz. ITA No. 4932/Mum/2014 and A.Y. 2009-10 viz. ITA No. 1457/Mum/2014 are allowed for statistical purposes.