DCIT, CIR-12(1), KOLKATA, KOLKATA vs. M/S BENGAL AMBUJA HOUSING DEVELOPMENT LTD., KOLKATA

आदेश /O R D E R PER S.S.Godara, Judicial Member:- This Revenue’s appeal for assessment year 2012-13 arises against the Commissioner of Income Tax (Appeals)-4 Kolkata’s order dated 28.03.2016 passed in case No.19357/CIT(A)-4/Range-12/14-15, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 2 trade to be assessable as ”income” u/s22 r.w.s. 23 of the Act. The Revenue’s case is that the CIT(A) has erred in law and on facts in deciding the first issue in assessee’s favour. The taxpayer on the other hand files before us a copy of this tribunal’s order dated 18.10.2019 in Revenue’s appeal(s) ITA Nos.1514 & 1515/Kol/2015 for assessment year(s) 2010-11 and 2011-12 deciding the very issue in its favour as under:- “31. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to addition on account of notional annual letting value of the unsold units made under the head 'income from house property'. We note that the assessee was jointly promoted by the Government of West Bengal along with M/s Ambuja Housing & Urban Infrastructure Co Ltd, both holding equal equity stake. From the Development Agreement dated 16.05.2005 entered into between the assessee and the West Bengal Housing Board, it is noted that the assessee company was given the development rights in the land having area of 18.62 acres for undertaking large scale construction of residential & commercial complexes within the State of West Bengal. From the plain reading of the transactional documents we find that the role of the appellant as envisaged in the entire scheme formulated at the behest of the State Government was limited to being Developer of the project. In the circumstances therefore we find that it was never intended that the appellant would be permitted to hold and own the completed apartments on its own accord or that the appellant would act as the landlord / owner of the property. Since the assessee was an SPV promoted by the State Government for undertaking the development of civic urban infrastructure including construction of the housing / commercial complex, in the State of West Bengal, immediately after the project was launched the assessee and the Housing Board had undertaken drive to allot the units amongst the willing purchasers of these units. On the given facts therefore we find merit in the Ld. AR’s contention that the appellant could not be regarded as ‘owner’ of the ‘House property’ of the unsold inventory for the purposes of Section 22 of the Act because its role was limited as the Developer who held the units in trust to be ultimately sold to the persons to whom the allotments would be approved by the Board. We find that on similar facts this Tribunal in the case of Bengal DCL Housing Development Co. Ltd. Vs DCIT in ITA No.429/Kol/2018 dated 24.05.2019, deleted similar addition made on account of deemed rent on unsold inventory by observing as under: “9. From plain reading of the aforesaid provisions of the Act, it is apparent that the annual value of the property is assessed as income in the hands of the "owner". In order to attract the charge of tax under the head 'House Property' it is necessary for the AO to prove that the assessee is the owner of the house property as defined for the purposes of Chapter - IVC of the Act. The term 'owner' of the house property is defined in Section 27 of the Act. In the present case we note that the appellant is a joint sector company promoted by West Bengal Housing Board also with M/s DC Properties Ltd for undertaking

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 3 large scale construction of housing complexes within the State of West Bengal to solve the basic housing problems subject however to the supervision and overall control by the State Government of West Bengal. With this objective in mind the Government of West Bengal had transferred in favour of the Housing Board certain parcels of land and the said Board in turn had entered into a Development Agreement dated 23.09.2004 appointing the appellant herein as developer and/or an agent of the Board for the purpose of construction of the housing complex to be developed on the land parcel allotted to the Board by the State Government. Pursuant to the Developer's Agreement the appellant undertook the construction of the housing complex known as 'Uttara' which consisted of several apartment buildings which were constructed in phases and the revenue from the activity of development and construction of the apartments was recognized in the books of the appellant at the time of delivery of possession of the apartments to the respective flat purchasers. From the plain reading of the transactional documents we therefore find that the role of the appellant as envisaged in the entire scheme formulated at the behest of the State Government was limited to being Developer of the housing project. The scheme formulated provided that the appellant which was the SPV was obliged to carry out construction of the residential apartments to be sold to actual users so that the housing problems faced by the populous in the urban area was addressed. In the circumstances therefore we find that it was never intended that the appellant would be permitted to hold and own the completed apartments on its own accord or that the appellant would act as the landlord / owner of the property. Since the appellant was an SPV promoted by the Housing Board for undertaking the construction of the housing complex, immediately after the project was launched the appellant and the Housing Board had undertaken drive to allot the apartments amongst the willing purchasers of these apartments. Considering these events harmoniously the only conclusion that one can draw is that the appellant was never owner of the apartments but its role was limited only to the Developer who held the apartments under construction in trust to be ultimately owned by the persons to whom the allotments were approved by the Board. We therefore find merit in the submissions of the Ld. AR that the appellant could never be regarded as 'owner' of the finished apartments and in that view of the matter the provisions of Chapter IV-C was not applicable and therefore the notional annual value of the unsold flats could not be assessed in the hands of the appellant under Section 23 of the Act. 10. We also find merit in the submission that even though the value of finished apartments was included under the head 'Inventory' disclosed in the Balance Sheet, yet such apartments could not be considered to be owned by the appellant for the purposes of Section 22 of the Act. From the detailed break-up of such inventory we note that the apartments included by way of Inventory were allotted prior to Balance Sheet date and in respect of such allotment the substantial part of the consideration was also received by the appellant and the same was

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 4 reflected by way of 'Liability' in the appellant's books. Once the appellant had executed requisite documentation evidencing the allotment of specific units / apartments in favour of intending purchasers and thereafter received consideration amounts in accordance with the terms of allotment, then the rights of specific performance as well as right to obtain conveyance in respect of the specified apartment had accrued in favour of the respective purchaser. In the circumstances even though the husk of a title, if any, vested in the Owner, in law such person could not be considered to be the 'owner' of the house property for the purposes of Section 22 of the Act. Once the Board and the appellant- developer had entered into valid documentation for transferring the completed apartment in favour of the purchaser, then vested right in the said property stood accrued in favour of the flat purchaser which the appellant or the Board could not have usurped. Till the completion of the construction of the flats in all respects, the Developer retained its possession only in trust and for the purpose of carrying out its obligations under the Development Agreement. The Developer in such factual and legal background was debarred from claiming ownership rights in the apartments already allotted to the flat purchasers. Viewed from any angle therefore the appellant / Developer could not be regarded as the owner of the house property so as to attract charge of tax under Section 22 read with Section 23 of the Act.” 32. We also find merit in the contention of the ld. AR of the appellant that when the business of the assessee is to develop, construct & sell immovable properties and the unsold units have all along been considered by the AO to be "stock-in- trade" of the assessee’s business then it was unjustified on the AO’s part to take a contrary stand on the same set of facts and invoke Section 22 & 23 in respect of certain ‘stock-in-trade’ which was lying vacant and assess deemed rent under the head "income from house property". It is noted from the annual accounts of the company and the computation of income which are available at Pages 1 to 26 of the paper book, that the rental income actually derived from the properties let out to the tenants was assessed by the AO under the head ‘Business’. We therefore find substance in the contention of the assessee that when the actual rental income derived from properties was assessed by the AO under Chapter IV-D i.e. ‘Profits & Gains of Business’ then only with reference to the vacant and unsold properties, which were neither given on rent nor the assessee had intention to let them out, the AO could not have computed deemed rental income u/s 22 & 23 and assessed it under Chapter IV-C of the Act i.e. ‘Income from House Property’. 33. We note that the Revenue’s case solely rests on the decision Hon’ble Delhi High Court in the case of Ansal Housing Finance and Leasing Co Ltd (supra) which has taken a view that ALV of unsold flats held by a builder is assessable as income from house property. We however find that Hon'ble Gujarat High Court in the case of CIT Vs. Neha Builders Pvt. Ltd (164 Taxmann 342) has held that when the business of the assessee is to construct the property and sell it or to construct or let out then the properties

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 5 are in the nature of ‘stock-in-trade’ and any income derived there from would be taxed under the head ‘Business’ and any income derived from such ‘stock-in-trade’ cannot be termed as ‘income from house property’. We further note that the jurisdictional Calcutta High Court in the case of Shyam Burlap Co Ltd Vs CIT (61 taxmann.com 121) has also held that where the assessee company is formed with the purpose of acquiring, developing and dealing in properties, then any income derived from sale, lease or letting out of the properties would be assessable as ‘business income’ and not ‘income from house property’. 34. We find that on similar facts and circumstances the co-ordinate Bench of this Tribunal at Mumbai in the case of M/s. Kankia Spaces Pvt Ltd in ITA No. 7288 & 7289/Mum/2017 dated 23.04.2019 after considering the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Neha Builders (P) Ltd., (supra) and the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Ansal Housing and Construction (supra) held that no notional annual letting value in respect of unsold flats held by way of ‘stock-in-trade’ can be assessed in the hands of the assessee under the head ‘Income from House Property’. The relevant findings of the Co-ordinate Bench of the Tribunal are as under:- “9. We have considered the submission of parties and gone through the orders of authorities below. During the assessment the assessing officer added Rs. 1.57 Crore under the head ‘ income from house property’ by estimating the deemed rental income of the assessee in respect of unsold units and after grating statutory deduction of 30% treated the remaining as ‘income of house property’. The ld CIT(A) confirmed the action of assessing officer by relying on the decision of Delhi High Court in Ansal Hosing Finance and Leasing Ltd (supra). We are conscious of the facts that that the legislature has inserted sub- section (5) in section 23 of the Act by Finance Act, 2017, with effect from 01.04.2018, which is not applicable for the years under consideration. 10. We have noted that in assessee’s own case for AY 2012-13, similar addition was made by assessing officer was upheld by ld CIT(A), however on appeal before Tribunal the same was deleted in ITA No. 6686/Mum/2016 vide order dated 31.10.2018. The relevant part of the decision is extracted below: “7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decision are given below. On the above issue, we come across one decision for the assessee and another decision for the revenue. The decision in Neha Builders Pvt. Ltd.(supra) is for the assessee, whereas the decision in Ansal Hsg. Finance & Leasing Co. Ltd.,(supra) is for the Revenue. The Hon’ble Supreme Court in the case of CIT v. Vegetable Products 88 ITR 192 (SC) has held that “if two reasonable constructions of a taxing provisions are possible, that construction which favours the tax payer

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 6 must be adopted.” Thereby, we will follow the decision in Neha Builders Pvt.Ltd. (supra). 7.1 The following sub-section (5) has been inserted after sub- section (4) of section 23 by the Finance Act, 2017, w.e.f. 01.04.2018: “(5) Where the property consisting any building or land appurtenant thereto is held as stock-in-trade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to one year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to nil.” Thus, in order to give relief to Real Estate Developers, section 23 has been amended w.e.f. AY 2018-19 (FY 2017-18). By this amendment, it is provided that if the assessee is holding any house property as his stock-in-trade which is not let out for the whole or part of the year, the annual value of such property will be considered as Nil for a period up to one year from the end of the financial year in which a completion certificate is obtained from the competent authority. In view of the above amendment to section 23, we are not adverting to the case laws relied on by the Ld. counsel and Ld. DR. In the instant case, the assessee is in the business of real estate development. The issue of taxability is with regard to unsold flats/units of Rs.1,85,95,17,274/- held by the appellant under the head ‘Closing Inventories’. The AY is 2012-13. In view of the insertion of sub-section (5) in section 23 by the Finance Act, 2017, w.e.f. 01.04.2018 narrated hereinbefore, we set aside the order of the Ld. CIT(A) and allow the 1st & 2nd grounds of appeal.” 11. Further, in assessee’s group case the coordinate bench of Mumbai Tribunal in Sarang Property Developers Pvt Ltd in ITA No. 5620/Mum/2016 passed the following order; “4. We have considered the submission of parties and gone through the orders of authorities below. We have noted that Assessing Officer as well as ld. CIT(A) while relying upon the decision of Delhi High Court i.e. in Ansal Housing Financing & Leasing Co. Ltd. (supra) wherein it was held that assessee is liable to be taxed on notional ALV of unsold units under the head “Income from House Property”. The ld. AR of the assessee is relying upon the decision of Hon’ble Gujarat High Court in CIT vs. Neha Builders P. Ltd. (supra) wherein it was held that when the assessee-company engaged in the business

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 7 of construction of property and one of the building/property was included in the closing stock in the balance-sheet drawn by assessee, the property would partake the character of “stock” and any income derived from stock would not be taken to be Income from House Property. The Hon’ble High Court further held that business of the assessee is to construct the property and sale it, then that would be the business and business stock, would be taken as “stock-in-trade” and any income derived from such stock cannot be termed as ‘Income from House Property’. 5. In the case in hand, there is no dispute that assessee treated the unsold unit is treated as ‘stock-in-trade’ in its books of account. Further, the unit sold by the assessee has been offered under the head “Income from Business”. Thus, the unsold flat which are stock-in-trade, when are sold, they are assessable under the head “Income from Business” and therefore, the Assessing Officer is not correct in bringing those units to tax on the basis of notional ALV under the head “Income from House Property”. 6. We are conscious of the fact that the decision of Hon’ble Delhi High Court in Ansal Housing Financing & Leasing Co. Ltd. (supra) is against the assessee. The Hon’ble Supreme Court in case of CIT vs. Vegetable Products Ltd. (88 ITR 92) held that wherein two reasonable construction to tax provision are possible that construction which favours assessee must be adopted. Therefore, with utmost regard to the decision of Delhi High Court in case in Ansal Housing Financing & Leasing Co. Ltd. (supra), we are accepting the view taken by Gujarat High Court in CIT vs. Neha Builders (supra). 7. The Hon’ble Supreme Court in case of Chennai Property (373 ITR 673) held that when the company is primarily engaged in business of construction and development, which is the main object of the assessee, ITA No. 7288, 7289 Mum 17 & 209 and 210 Mum 18-M/s Kanakia Spaces Pvt. Ltd. 12 the income derived by assessee would be “Income from Business”. On the same analogy in the case in hand, the assessee is engaged in the business of construction and development, which is the main business of the assessee, the units which could not be sold at the end of the year and were shown as ‘stock-in-trade’, estimating rental income on notional ALV was not justified. Particularly when, there is no evidence on record that these units were either given on rent or that the assessee has intention to let out those units. The Units which are not sold are stock-in-trade and the income arising of its sale is liable to be taxed as Business Income, therefore, we do not find any justification in calculating notional ALV of the vacant units. Therefore, we direct the Assessing Officer to delete the addition

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 8 made on estimate basis. In the result, Ground of appeal raised by assessee is allowed” 8. In Runawal Constructions &Runawal Builders Pvt Ltd (supra), the following order was passed; “…..10. In the case on hand before us it is an undisputed fact that both assessee’s have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head 'income from business'. Thus, respectfully following the above said decisions we hold that the unsold flats which are stock in trade when they were sold they are assessable under the head 'income from business' when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head 'income from Runwal Constructions &Runwal Builders house property'. Thus, we direct the AO to delete the addition made under Section 23 of the Act as income from house property.” 9. Further, by following the decision of Runawal Constructions & Runawal Builders (supra), identical relief was granted in Arihant Estate Pvt Ltd (supra). In ACIT Vs Haware Constructions (P) Ltd (supra) the coordinate bench of Mumbai Tribunal also took the view that if a real estate developer holds any house property as his stock-in-trade which is not let out for whole or part of year, annual value of such property will be considered as Nil for a period up to one year from end of financial year in which a completion certificate is obtained. 10. The Hon’ble Delhi High Court in CIT Vs Ansal Housing Finance Ltd (supra) has taken a view that ALV of unsold flat built by the builder is assessable as income from the house property. However, there is contrary view of Hon’ble Gujarat High Court in Neha Builders (supra) that income derived from the property would always be termed as ‘income’ from the property, but if the property is used as ‘stock in trade’, then the said property would become or partake the character of the stock, and income derived from the stock, would be ‘income’ from the business, and not from the property. If the business of the assessee is to construct the property and to sell it or to construct and let out the same, then would be the ‘business’ and the business stocks, may included moveable or immoveable, would be taken to be ‘stock in trade’ and any income from such stock cannot be termed as ‘income from property’. There is no direct decision on this issue by jurisdictional High Court; therefore, the view in favour of the assessee has to be adopted in view of decision of Hon’ble Apex Court in CIT Vs Vegetable product Ltd. (88 ITR 192 SC). As we have already referred that sub-section (5) in section 23 was inserted by finance Act 2017 w.e.f. 01.04.2018;

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 9 therefore, the same is not applicable for the assessment year under consideration. 11. Therefore, respectfully following the decisions of coordinate bench in assessee’s own case for AY 2011-12, in assessee’s group case in Sarang Property Developers Pvt Ltd (supra) and other various decisions of coordinate bench and the decisions of Gujarat High Court in Neha Builders (supra) we are of the view that the assessing officer was not justified in bringing the unsold flat / units under income from house property. In the result the grounds of appeal raised by the assessee are allowed.” 35. We further note that identical view has been expressed by the coordinate Benches of this Tribunal in the following cases holding that the flats which remained vacant and unsold, no deemed ALV thereof could be assessed as income u/s 23 of the Act. - C.R. Development Pvt. Ltd. v. JCIT (ITA No. 4277/Mum/2012) dt.13.05.2015 - Runwal Constructions v. ACIT (ITA No. 5408/Mum/2016) dt. 22.02.2018 - Cosmopolis Construction Vs DCIT (ITANos.230 and 231/Pn/2018) dt.12.09.2018 - Kolte Patil Developers Limited Vs DCIT (ITA No.2206/Pn/2016) dated 03.05.2019 - Progressive Homes v. ACIT (ITA No. 5082/Mum/2016) dated 16.05.2018 - ACIT v. Haware Construction Pvt. Ltd. (ITA No. 3321/Mum/2016) dated 31.08.2019 36. The ld. CIT, DR was unable to point out any distinguishing feature in the facts of the present case, from the facts involved in the cases cited above. In view of the aforesaid facts and following the above decisions (supra), we uphold the action of the Ld. CIT(A) deleting the addition on account of deemed rent of Rs.3,08,98,602/- made by the AO u/s 23 of the Act. These grounds are therefore dismissed.“ 3. The Revenue is fair in not drawing any distinction on facts or law in the twin assessment years. We therefore adopt judicial consistency and go by the foregoing detailed reasoning mutatis mutandis to affirm the CIT(A)’s findings qua the instant first issue.

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 10 raised its third and fourth substantive grounds seeking to revive the impugned disallowance. It transpires herein as well that the tribunal’s earlier order (supra) has decided on very issue as well in assessee’s favour as under:- “38. We have heard the rival contentions of both the parties. We find that before the lower authorities as also before us the assessee has furnished the complete details of the foreign visits undertaken by the officials inter alia including their names, dates and places visited. It is noted that none of the family members of the company’s officials accompanied them on these visits. It is noted that the assessee had also furnished a note explaining the reasons for the foreign visits undertaken by the officials which was found to be justifiable by the Ld. CIT(A). We hold in this regard that, an allowability of claim of the assessee has to be judged from the view point of the prudent businessman and not from the view point of the Revenue. We find that in the instant case, the senior employees of the assessee visited foreign countries in connection with business of the appellant. Further, the said expenses have been incurred out of commercial expediency and hence it should be viewed from a businessman's point of view. We further note the assessee had incurred similar foreign travel expenses in earlier years also. The Revenue in the assessments framed u/s 143(3) had accepted the same till assessment year 2009-10 by allowing the same as business expenditure. When there is no change in the facts and circumstances of the case during the year under appeal, then there is no need for the Revenue to take a different stand ignoring the principle of consistency. Reliance in this regard is placed on the decision of Hon'ble Supreme Court in the case of Radhasaomi Satsang vs. CIT reported in 193 ITR 321 (SC). 39. In view of the aforesaid findings and respectfully following the ratio of the aforesaid decisions we direct uphold the Ld. CIT(A)’s order deleting the disallowance of foreign travel expenses of Rs.10,35,175/-. Ground Nos. 4 & 5 are therefore dismissed.” 5. We adopt judicial consistency qua the instant second issue as well to decline Revenue’s corresponding third and fourth substantive grounds raised in the instant appeal. 6. The Revenue’s fifth substantive grievance is that CIT(A) has erred in law and on facts in deleting sec. 14A r.w.s. Rule 8D disallowance of ₹46,09,608/- made by the Assessing Officer in his assessment order dated 28.03.2015. We are taken to CIT(A)’s detailed discussion qua the instant third issue reading as under:- “7.2 I have considered the submissions of the AR and perused various judicial decisions cited before me in support of the appellant's claim. I have also examined the impugned order wherein the disallowance u/s 14A has been made by invoking Rule 80 of the IT Rules, 1962. According to AO the assessee's submissions that its capital was much more than investment was not sufficient to establish that borrowed funds was not used for investment purposes. The AO after excluding the interest on borrowings which were directly retable to business assets of the appellant, computed disallowance under Rule 80(2)(ii) and accordingly interest of ₹41,52,719/- was

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 11 disallowed out of interest paid. Besides the AO also disallowed ₹4,57,729/- being half percent of the average investments amounting to ₹9,14,85,775/-. The aggregate disallowance made was thus ₹46,09,608/-. 7.3. I have considered these findings in the light of detailed submissions made by the AR. From the audited accounts it is apparent that the average cost of investments during the relevant year was ₹914,85 lacs whereas the appellant’s net owned funds in the form of share capital & reserves were ₹10,318,.27 lacs. As such it is apparent that the assessee’s net owned funds both at the beginning and at the closing of the relevant year were substantially higher than the cost of investments. Ono these facts therefore I find merit in the submissions of the AR that when the assessee has both own funds and borrowed funds then the presumption would be that the investments were acquired out of own funds. This proposition finds support in the decision of the ITAT, Kolkata in the case of H S I L Limited Vs Addl. CIT (ITA 83/KoIl2012) dated 05.08.2014. I further note that the ITAT, Kolkata in their recent decision in the case of DCIT Vs Binani Industries Ltd (ITA No. 144/KoI/2013) dated 02.03.2016, on similar set of facts as involved in the appellant's case, held that where the AO fails to establish that the borrowed funds were utilized for the purpose of acquiring the shares and in view of availability of own funds with the assessee to meet the cost of investments, no interest could be disallowed under Section 14A read with Rule 8D(2)(ii). 7.4. I further find that out of the total investments of ~938.75 lacs, investments to the tune of ₹765.83 lacs was made by the appellant in four companies namely, Ganpati Parks Ltd, BAHDL Hospitality Ltd. GGL Hotel & Resort Co. Ltd & S.E. Builders & Realtors Ltd. All these companies belong to the same group to which the appellant belong. The appellant is one of its promoters and as such the investment was made for strategic business purposes and not for the purposes of earning tax free income in the form of dividend. Through holding shares, the assessee was exercising management and control over the affairs of these companies who had common strategic business objectives. The Delhi High Court in the case of Oriental Structure Engineers Pvt. Ltd (216 taxmann 92) has held that where the assessee had made investments in shares of subsidiaries on the principal of commercial expediency and with a view to achieve business objective and not for the purposes of earning dividend simplicitor then no disallowance u/s 14A is warranted. A similar view has been adopted by the ITAT. Kolkata Bench in the case of DCIT Vs Binani Industries Ltd (supra) & ITAT, Mumbai Benches in the cases of Garware Wall Ropes Limited (540S/Mum/2012), ATE Enterprises Limited (102 ITD 110) and Shristi Securities Pvt. Ltd (148 Taxman 49). The Calcutta High Court in the case of Rajeev Lochan Kanoria (208 ITR 616) has similarly held that where an assessee acquires shares of other companies with a view to acquire controlling interest then use of borrowed funds for acquiring shares amounts to business purpose and therefore interest is to be allowed u/s 36(1)(iii) of the Act. If the ratio laid down in these decisions is applied to the assessee's case then I find that a substantial amount of investment was made by the assessee in the companies of which the appellant itself was promoter and therefore the purpose of acquiring investment was not to earn dividend simplicitor but to achieve business objectives. In my considered opinion, therefore, the disallowance u/s 14A r.w. Rule 80(2)(ii) was not warranted under the facts and circumstances of the case. In any case, since the assessee's net own funds substantially exceeded the cost of investments and the AO not having established any proximate cause between use of borrowed funds and acquiring Investments, disallowance was not justified simply on presumption for the reasons set out in the foregoing, therefore, I do not find merit in the AO's action of disallowing interest of ₹41 ,52,179/- for which the same is directed to be deleted.

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 12 7.5. Similarly the AO disallowed 0.5% of the average investments by invoking Rules 8D(2)(iii). From the AO's working, I note that the disallowance was made at 0.5% of average investments which inter alia included strategic investments in group and subsidiary companies. In the first instance, I find that the AO did not identify any specific item of expenditure which he found to be relatable to earning of tax free income. As pointed out by the AIR, the dividend was received by ECS mode without incurring any collection or bank charges. Whatever little administrative expenses incurred for accounting of the expenses, did not amount to ₹4.57 lacs. Moreover no disallowance out of administrative expenses was permissible where the investments were made for strategic business purposes. In the circumstances only the expenses incurred in relation to other investments amounting to ₹172.92 lacs could have been disallowed u/s 14A. On the contrary I find that the assessee itself had identified and suo moto disallowed expenses of ₹8,73,212/-, such expenditure being offered for disallowance is, therefore, held to be disallowable u/s 14A of the Act. Under the facts and circumstances, the AO is accordingly directed to delete the disallowance of ₹4,57,429/- made under Rule BO(2)(iii). [Ground Nos. 6 & 7are allowed].” 7. It is clear from a perusal of the above extracted lower appellate findings that the assessee had derived exempt income from dividends of ₹26,10,000/- in the relevant previous year. It made suo motu disallowance of ₹8,73,212/-. The Assessing Officer computed impugned disallowance under the second and third head(s) of proportionate interest and administrative expenses amounting to ₹41,52,179/- and ₹4,57,429/- totalling to ₹46,09,608/-. The assessee’s interest free funds as on 31.03.2012 reads ₹10318.27 lakhs as against the corresponding exempt investments of ₹938.75 lakhs. The CIT(A) has taken note of a catena of case law (supra) that the necessary presumption in such an instance of that of deployment of non-interest bearing fund in exempt investment only. We go by the very reasoning to decide the Revenue’s corresponding arguments regarding the proportionate interest disallowance. 8. Next comes administrative expenditure disallowance of ₹4.57 lakhs. We have made it clear that the assessee’s suo motu disallowance of ₹8,73,212/- is already more than that in dispute under this head. The fact also remains that the said disallowance figure pertains to direct expenditure only whereas we are dealing with this third limb in the nature of indirect expenditure only. Learned counsel has taken pains to refer to the tribunal’s earlier order (supra) declining Revenue’s arguments on the ground that its suo motu disallowance figure exceeded the third head of disallowance involving figures of ₹6,05,290/-

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 13 and ₹5,47,199/-; respectively. As against this, there is no indication before us that the assessee’s suo motu disallowance contained the impugned administrative head as well. We thus accept the Revenue’s arguments qua this third limb in principle. Next comes equally important aspect of computation of this indirect head of expenditure. Case file suggests that the Assessing Officer did not include only the dividend income yielding investments in computation as per REI Agro Ltd. vs. DCIT (2014) 144 ITD 141 (Kol). Faced with this submission we deem it appropriate to restrct the impugned disallowance to ₹1,00,000/- only of that in issue of ₹4.57 lakhs. Necessary computation to follow as per law. This issue is partly accepted in Revenue’s favour.

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 14 “The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2007 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,— (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,— (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority. Explanation.—For the purposes of this clause,— (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place; and (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less.” 8. From the language employed by the Legislature we note that an assessee engaged in the business of development and construction of ‘housing project’ is eligible to claim deduction only if the conditions prescribed in Section 80IB(10) are fulfilled. The primary condition which an undertaking claiming deduction, must fulfill is that the undertaking should develop a ‘housing project’. Although development of ‘housing project’ is the prerequisite, the said term is nowhere defined in Section 80IB of the Act. In absence of the definition of this term, the word ‘housing project’ has been judicially interpreted by different appellate forums by taking aid of the analogous provisions contained in the Act. We note that the issue as to what

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 15 constitutes a ‘housing project’ for the purposes of Section 80-IB(10) came up for consideration before the Hon’ble Madras High Court in the case of Vishwas Promoters Pvt Ltd Vs ACIT (29 taxmann.com 19) wherein the assessee had undertaken four projects which inter alia included Project ‘Vajra’ and ‘Agrini’ consisting several building blocks in which flats admeasuring less than 1500 sq.ft and more than 1500 sq.ft were constructed. The deduction under Section 80IB(10) was however claimed in respect of certain building blocks in which flats measuring less than 1500 sq.ft were situated. It was the assessee’s contention that for the purposes of Section 80IB(10), it was not necessary for the assessee to show that entire project consisting of several building blocks together constituted a single ‘housing project’. It was sufficient that if some of the building blocks consisted within the said project fulfilled the conditions prescribed in Section 80IB(10). In such case also, it could be held to be a ‘housing project’ for the purposes of grant of deduction u/s 80IB(10). Such contention was not accepted by the AO and Tribunal. However on appeal under Section 260A the Hon’ble Madras High Court held as follows: “9. It is seen from the narration of facts before the Commissioner of Income Tax (Appeals) as well as before the other authorities, that in the project under the name "Agrini", separate blocks were there, the details of which read as follows: Sector Name Plinth area No. of units Land area allocated (in sft.) Sector-I SREENIDHI 2140 48 04.65 acres Sector-1A SREENIDHI 1690 4 - - Sector-II VIMALI 1265 40 01.04 acres Sector-IIA MITHRA 1050 160 03.08 acres Sector-IIIB MITHRA DELUXE & 1095 36 - - NIRMAL DELUXE Sector-IV NIRMAL 875 240 03.53 acres Sector-V VAANYA 650 150 01.41 acres 10. It is not denied by the Revenue that as far as the project "Vajra" is concerned, as in the case of Agrini, there are six blocks consisting of 24 flats. The dispute in these cases herein is on an issue as to whether the assessee has to lose the deduction in respect the entirety of the projects "Vajra" and "Agrini", solely by reason of the fact that one of the blocks developed by the appellant in this project, had flats exceeding 1500 sq.ft. 11. It is an admitted fact that each one of blocks had separate sanction from the competent authority. Even though the larger area comprised in the name and style of "Agrini" and "Vajra" is stated to be the master plan of the project, it is not denied by the Revenue that each block in each of the projects has its own specification; hence, had gone for planning approval by the competent planning authority. In the background of this, the question that arises for consideration is as to whether the assessee would lose its claim for deduction in respect of those blocks which satisfied the conditions under Section 80IB(10) of the Act by reason of some of the stocks not satisfying the condition under Section 80IB(10) of the Act. 12. It is not denied by the Revenue that there is no definition of the expression "Housing project" under Section 80IB of the Act. The said expression is defined under Explanation to Section 80HHBA of the Income Tax Act, which reads as under: "Section 80HHBA. - Deduction in respect of profits and gains from housing projects in certain cases. ** ** **

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 16 Explanation : For the purposes of this section, - (a) "Housing project" means a project for - (i) The construction of any building, road, bridge or other structure in any part of India " 13. Section 80IA of the Act is a specific provision which deals with deduction in respect of profits and gains from industrial undertakings or enterprises engaged in the development of infrastructural facilities such as roads, bridges and other structure as regards the grant of deduction in respect of development and construction of a housing project. Section 80IB is a specific provision in respect of profits and gains from undertakings engaged in developing and constructing housing projects other than infrastructure development undertakings. Thus, housing projects considered herein under Section 80IB refers to any building other than road, bridge or other structure. Thus, going by the definition of "housing project" to mean the construction of "any building" and the deduction under Section 80IB of the Act is hundred per cent of the profits derived in the previous year relevant to the assessment year from such housing project complying with the condition, each block in the larger project by name "Agrini" and "Vajra", has to be taken as an independent building and hence a housing project, for the purpose of considering a claim of deduction. Section 80IB(10) begins by stating: "(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2007 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if, (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction, ** ** **" Thus the undertaking qualifying for deduction under Section 80IB of the Act is an "undertaking developing and building housing projects" and the deduction is in respect of "profits and gains derived from" such housing project, satisfying the conditions stipulated in the clause therein. Thus, within a composite housing project, where there are eligible and ineligible units, the assessee can claim deduction in respect of eligible units in the project and even within the block, the assessee is entitled to claim proportionate relief in the units satisfying the extent of the built-up area. 9. We also find that a similar issue came up for consideration before the coordinate bench of this Tribunal at Pune in the case of Siddhivinayak Kohinoor Venture Vs ACIT reported in 54 taxmann.com 32. In that case also it was the assessee’s plea that it had executed two independent housing projects which were sanctioned by single approval granted by local authority. Out of the two projects, the assessee had completed the construction of 293 units in one project comprising of 295 units and deduction under Section 80IB(10) was claimed only in respect of the completed units. The claim was rejected principally on the ground that both the housing projects sanctioned simultaneously together constituted a single composite housing project and therefore deduction was not permissible since completion certificate for the entire housing project was not obtained by the assessee. On appeal this Tribunal allowed the assessee’s claim. The relevant findings of the Tribunal in the said decision are reproduced hereunder: “10. The AO has not accepted the plea of the assessee that 'SWRH' and 'S3' projects were two independent and separate projects for the purpose of s. 80- IB(10) of the Act. The AO, after noticing the chronology of events which we

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 17 have dealt in the earlier paras, pointed out that 'SWRH' project comprising of 295 row houses did not come into existence by way of any specific approval of PCMC. As per the AO, in the plan approvals dt. 10th Sept., 2003 and 29th March, 2005, PCMC has approved construction of row houses as well as construction of flats. In para 12(3) at p. 20 of the assessment order, the assertion of the AO is that the two projects, i.e. 'SWRH' project for row houses and 'S3' project for flats, have a 'single umbilical cord' by way of a common building permission granted by the PCMC on 29th March, 2005. 11. The second point made by the AO to show that the two projects are a composite project is contained in para 12(6) of the assessment order wherein it is observed that the PCMC allowed the assessee to use the unutilized extra FSI of 24,645 sq. mtrs. of the row houses area to build the flats because the construction of row houses and flats was considered as a composite project. …. 13. In nutshell, the AO held that assessee had undertaken only one project, which comprised of construction of row houses as well as flats, and, that the two were not separate projects, as claimed by the assessee. Accordingly, the AO concluded that assessee had undertaken a singular project consisting of construction of 611 residential units (i.e. 295 row houses and 316 flats) and since prior to the stipulated date of 31st March, 2008 the completion certificates were obtained from PCMC only for 293 units out of the total 611 residential units, assessee did not comply with the condition specified in s. 80- IB(10)(a)(i) of the Act. Consequently, the deduction claimed by the assessee under s. 80- IB(10) of the Act was denied. …. 16. Apart from the aforesaid, learned counsel contended that factually also the two projects were not only perceived but also executed as independent and separate projects by the assessee. For this purpose, he has referred to the relevant pages of the paper book containing the plans and brochures of the two projects to show that they have been conceived and marketed separately. Reference has also been made to certain advertisements of the projects, copies of which have been placed in the paper book, to point out that the two projects were advertised altogether separately. 17. With regard to the action of the AO in relying upon the statement of the Chief Engineer, PCMC, the learned counsel pointed out that from the point of PCMC all the buildings sanctioned under one plan may constitute a single project, so however this was not the position for the purposes of examining assessee's claim for deduction under s. 80- IB(10) of the Act. It was also submitted that utilization of extra FSI of the row houses project for the purposes of construction of flats does not indicate that it was a single project. The learned counsel emphasized that the 295 row houses project can independently constitute a 'housing project' and the eligibility of assessee's claim for deduction under s. 80-IB(10) of the Act is to be considered in that light. It was submitted that no deduction, either in this year or in the subsequent years, have been claimed with regard to the 'S3 ' project and that on this aspect there is no dispute. 23. We have considered the rival submissions, perused the orders of the authorities below and the decisions cited at Bar. Sec. 80-IB(10) of the Act permits deduction to an assessee undertaking development and building of a 'housing project' approved by a 'local authority'; and, such deduction is allowed to the extent of 100 per cent of profits derived from the 'housing project', subject to the conditions specified therein. Shorn of other details, the

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 18 only condition relevant for the present purpose is contained in cl. (a) of s. 80- IB(10) of the Act, which is with regard to time-limits for completion of construction of 'housing project'. In the present case, there is no dispute that the permissible period for completion of construction is to be governed by sub-cl. (i) of cl. (a) to s. 80-IB(10) of the Act, because the housing project has been approved by the local authority i.e. PCMC before 1st April, 2004; and, accordingly the project is required to be completed on or before 31st March, 2008. To the aforesaid extent, there is no difference between assessee and the Revenue. However, the difference arises as to which is the 'housing project' that is required to be evaluated to ascertain whether construction has been completed on or before 31st March, 2008 in terms of s. 80-IB(10)(a)(i) of the Act. As per the Revenue, the project to be considered comprises of 611 residential units (i.e. 295 row houses and 316 flats) and, if it is so considered, the assessee has not completed construction of the project before 31st March, 2008 and thus assessee becomes ineligible for the claim of deduction under s. 80TB(10) of the Act. 25. Ostensibly, the pertinent issue which is required to be adjudicated in the present case is as to whether 'SWRH' project and 'S3' project are two independent projects or a single project for the purposes of determining assessee's eligibility for the claim of deduction under s. 80-IB(10) of the Act. We may emphasize here that the claim of the assessee for deduction under s. 80-IB(10) of the Act is confined to the profits derived in respect of the 'SWRH' project alone. Sec. 80-IB(10) of the Act allows exemption of profits derived from developing and building of a housing project, subject to the conditions prescribed therein. Notably, the expression 'housing project' has not been defined in s. 80-IB(10) of the Act, a situation that has also been noted by the Hon'ble Bombay High Court in the case of Vandana Properties (supra). In fact, the Hon'ble High Court was considering a project which was falling in the purview of the Mumbai Municipal Corporation Act, 1988 as also under the Development Control Regulations for Greater Mumbai, 1991 and the Hon'ble Court noticed that the expression 'housing project' is not defined in the aforesaid two enactments also. Therefore, the expression 'housing project' in s. 80-IB(10) of the Act would have to be construed as "commonly understood", as per the Hon'ble Bombay High Court in the case of Vandana Properties (supra). As per the Hon'ble Bombay High Court, construction of even one building with several residential units of the prescribed size would constitute a 'housing project' for the purposes of s. 80-IB(10) of the Act. 30. From the aforesaid discussion, it can be inferred that in order to understand the meaning of the expression 'housing project' for the purpose of s. 80-IB(10) of the Act, in the absence of any definition in s. 80-IB(10) of the Act or even in the Local Development Control Rules for PCMC, it has to be construed as "commonly understood". The plea of the Revenue that expression 'housing project' should be understood to mean the project as approved by the 'local authority' is not justified because evidently the Development Control Rules of the 'local authority' i.e. PCMC does not define a 'housing project'. In fact, from the discussion in the foregoing paras it is evident that even a building or a group of buildings comprised in a larger project approved by a 'local authority' can be construed as a 'housing project' for the purpose of considering a claim of deduction under s. 80- IB(10) of the Act. Considered in this background, in the instant case, the plea of the assessee that 'SWRH' project is an independent project for the purpose of considering a claim of deduction under s. 80-IB(10) of the Act cannot be shut out merely because PCMC approved it along with the 'S3' project. Therefore, while evaluating the compliance with the condition of completion of

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 19 construction of the project contained in s. 80-IB(10)(a)(i) of the Act, we upheld assessee's plea that 'SWRH' project be construed as a 'housing project’ especially when the claim for deduction under s. 80-IB(10) of the Act is confined to the profits of 'SWRH' project. 31. Apart from the aforesaid, factually speaking also, it emerges that 'SWRH' project has been developed and executed by the assessee independent of the 'S3 ' project. Firstly, by its very nature the two projects are different in as much as 'SWRH' project consists of row houses on a contiguous plot size of more than, one acre; whereas the 'S3 ' project consists of only multi-storeyed flats. Secondly, it is also notable that assessee marketed and advertised the two projects separately. At pp. 255 to 260 of the paper book is placed the brochure of 'SWRH' project in which there is no reference to the 'S3 ' project consisting of flats. Similarly, the brochure in respect of 'S3 ' project placed in the paper book at pp. 471 to 475 also does not contain any reference to the 'SWRH' project consisting of row houses. On p. 263 of the paper book is a copy of a newspaper advertisement released by the assessee regarding the 'SWRH' project of row houses, which does not contain any reference to 'S3 ' project comprising of flats. Thirdly, even in the audit report filed in Form No. 10CCB certifying the claim of deduction under s. 80-IB(10) of the Act, the deduction has been computed by considering 'SWRH' project as a separate project. In this report, size of the plot of land is stated to be 55,950 sq. mtrs., which is the plot area on which the 'SWRH' project consisting of 295 row houses is constructed. Considering all the aforesaid factors, we find ample force in the plea of the assessee that 'SWRH' project was not only perceived but also developed and executed as a separate project independent of the 'S3 ' project, and thus assessee was justified in considering 'SWRH' project as 'housing project' for the purposes of s. 80-IB(10) of the Act.”(emphasis supplied) 10. Subsequent to phasing out of Section 80IB(10) similar deduction is now provided in Section 80IBA of the Act under which 100% profits derived from the housing projects are allowed to be deducted. Section 80IBA(2)(b) specifically provides that the deduction is permissible if the project is completed within five years from the date of approval by the competent authority. The proviso to Section 80IBA(2) expressly clarifies that the project shall be deemed to have been completed when, a certificate of completion of project as a whole is obtained in writing from the competent authority. We further note that clause (e) of sub-section (2) of Section 80IBA requires that the project is the only housing project on the plot of land as specified in clause (d). On conjoint reading of the provisions of Section 80IB(10), 80HHBA and 80IBA and the judicial decisions (supra), we note that the provisions of Section 80IB(10) have been judicially held to be wider in its application and therefore even a single building comprised in a larger concept plan sanctioned by the local authority and which houses several residential units of the specified size is considered to be a ‘housing project’ provided that the same fulfills the conditions laid down in Section 80IB(10). We find that wherever the Legislature intended to restrict the scope & application of a profit-linked deduction then the specific restrictive provisions have been enacted as is evident from the language expressly used in Section 80IBA. Applying the ratio laid down in the decisions (supra) to the facts of the case, we note that the ‘concept plan’ for the project titled as ‘Upohar – The Condoville’ was given approval by KMC on 30.03.2007. From the copy of approved concept plan we find that although land plot size in aggregate was 18.62 acres, this plot was divided and demarcated into five different zones in the following manner: Zone Project Land

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 20 A Residential buildings “Efficiency & Comfort for LIG & MIG categories 2.846 acres B Vocational Training Centre & Shopping zone 1.112 acres C Club Zone 2.021 acrea D Luxury zone consisting of 5 Phases of residential housing towers for HIG 11.454 acres category E Area comprised in common installations for civic infrastructure 1.187 acares TOTAL 18.62 acres 11. From the assessment order we note that the AO per se did not question or dispute the fact that zone wise development of 18.62 acres was carried out by the assessee independently. We also note from the AO’s impugned order that it was his case that entire land admeasuring 18.62 acres was to be developed as a single composite and integrated ‘housing project’. In any case, from the sanctioned concept plan we note that each of the five Zones comprised in the concept plan were to be set-up and developed on demarcated land parcels and therefore it could not be construed to be single or composite or an integrated project as claimed before us by the ld. CIT, DR. Having regard to the facts and material on record, we therefore find merit in the ld. AR’s submissions that for the purposes of grant of deduction u/s 80IB(10) the entire land parcel covering 18.62 acres cannot be considered to be a single ‘housing project’. 12. We further note that the appellant’s claim for deduction u/s 80IB(10) was in respect of housing project named as ‘Upohar – The Condoville’ HIG Luxury segment which the assessee developed in five different and distinct phases. Eleven residential towers comprised in HIG Luxury Zone were divided into five phases and each phase was constructed on the demarcated land area exceeding one acre, details of which are as follows: Phase Area in Acres Tower Nos I 3.124 2, 3 4 II 3,124 5, 6 7 III 2,083 8 & 9 IV 1.041 10 V 2.083 I & II 13. We note that the eleven towers of HIG Luxury Zone comprised flats which individually measured less than as well as more than 1500 sq ft. The deduction was however claimed only in respect of profit derived from sale of flats individually admeasuring less than 1500 sq ft. of the built up area.From the facts on record it is found that the assessee maintained separate books of account for each phase and also obtained audit reports in prescribed Form 10CCB for each housing project separately. The assessee regularly followed percentage of completion method of revenue recognition and for this purpose the revenue recognized for each phase substantially differed in each year as is noted from the following chart: Asst. Phase-I Phase-II Phase- Phase-IV Year III 2010-11 39.92% 39.83% 39.62% Nil 2011-12 100% 63.31% 56.56% 60.23% 2012-13 Nil 99.71% 97.94% 93.48% 14. We find that in the orders for the years under consideration, for the purpose of assessing the income, the AO did not dispute or challenge the revenue recognition method adopted by the assessee. We therefore find merit in the Ld. AR’s submission that the assessee did not arbitrarily bifurcate development of 11 towers in five phases

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 21 only for deriving undue tax benefit. We also note that marketing of each phase was carried out at different points in time and therefore the average price realization for each phase differed significantly. We also note that the completion of each phase was certified by the architect on different dates and the relevant certificates were furnished before the lower authorities. Having regard to these foundational facts and the judicial decisions cited above, we therefore do not find merit in the Revenue’s arguments to the effect that either entire project covering 18.62 acres or even the entire HIG Luxury Zone of 11.454 acres consisting of 11 towers together constituted single housing project for the purpose of Section 80IB(10) of the Act. We therefore hold that the ld. CIT(A) was justified on facts in concluding that the assessee had developed five independent housing projects which comprised in HIG Luxury Zone of ‘Upohar – The Condoville’. Since we have held that HIG Luxury Zone – Phase I was a separate and independent housing project, which comprised of only residential units, the Revenue’s objection that the commercial area in the housing project exceeded three percent of the total area comprised in the Concept Plan has no bearing in deciding the question of eligibility of deduction u/s 80IB(10) in respect of profits derived from HIG Luxury Zone – Phase I. 15. Another ground on which the Revenue objected to the order of Ld. CIT(A) is that the housing project ‘Upohar – The Condoville’ HIG Luxury Zone did not qualify for deduction u/s 80IB(10) because all the residential units comprised in the said project did not have individual flat size of less than 1500 sqft of built up area which is the condition precedent for availing the deduction. We however note that the deduction which the appellant claimed and as was allowed by Ld. CIT(A), pertained to the profits attributable to sale of residential units of Phase – I and which were having individual flat size of less than 1500 sqft of built-up area. We find that the issue of pro-rata deduction under Section 80IB(10) attributable to sale of flats having individual flat size of less than 1500 sqft was considered and decided by the coordinate bench of this Tribunal in the appellant’s own case for the AY 2002-03 & 2003-04 in ITA Nos.1595 & 1735/Kol/2005. The relevant finding of the Tribunal is reproduced below: "22. It is apparent from the perusal of section 80-IB(10) that this section has been enacted with a view to provide incentive for businessmen to undertake construction of residential accommodation for smaller residential units and the deduction is intended to be restricted to the profit derived from the construction of smaller units and not from larger residential units. Though the Assessing Officer has denied the claim of the assessee observing that larger units were also constructed by the assessee, at the same time, it is also a fact on record that the assessee had claimed deduction only on account of smaller residential units which were fulfilling all the conditions as contained in section 80-IB(10) and the same has not been disputed by the Assessing Officer also. We have also noted down the fact that even the provision as laid down in section 80-IB(10) does not speak regarding such denial of deduction in case of profit from a housing complex containing both the smaller and large residential units and since the assessee has only claimed deduction on account of smaller qualifying units by fulfilling all the conditions as laid down under section 80- IB(10), the denial of claim by the assessee is on account of rather restricted and narrow interpretation of the provisions of clause (c) of section 80-IB(10) while coming to such conclusion, we also find support from the order of the hon'ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 (SC), wherein it was held that the provisions should be interpreted liberally and since in the present case also, the assessee by claiming pro rata income on qualifying units has complied with all the provisions as contained in the said section, in our considered opinion, such

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 22 claim of the assessee was rightly allowed by the learned Commissioner of Income-tax (Appeals) by reversing the order of the Assessing Officer." 16. It is further noted that the Revenue’s appeal u/s 260A of the Act against the decision of this Tribunal was dismissed by the Hon’ble Calcutta High Court. We also note that the judgment of the Hon’ble Calcutta High Court in the appellant’s case was followed with approval by the Hon’ble Madras High Court in the cases of CIT Vs Elegant Estate (383 ITR 149), CIT Vs Arun Excello Foundations (P.) Ltd (259 CTR 362) &Viswas Promoters (P.) Ltd Vs ACIT (supra), and Hon’ble Karnataka High Court in the case of CIT Vs Oceanus 29 I.T.A No.1514/Kol/2015 & ITA No. 1515/Kol/2015 A.Ys 2010-11 & 2011-12 M/s. Bengal Ambuja Housing Development Ltd. Dwellings (P.) Ltd (395 ITR 376). In view of the aforesaid decisions we do not find merit in this objection raised by the Revenue. 17. The last objection of the Revenue is that the completion certificate dated 29.04.2011was only a partial completion certificate, and the same being not the final completion certificate, the assessee did not comply with requirement of clause (ii) contained in Explanation to Section 80IB(10) of the Act, which required the assessee to obtain final completion certificate on or before 31.03.2012. In this regard we note that the assessee had undertaken construction of different phases of HIG Luxury Zone at different points in time and for revenue recognition the assessee had followed percentage of completion method. From the audit reports in prescribed Form 10CCB filed in support of the deduction claimed u/s 80IB, we note that 100% of the revenue derived from Phase –I was recognized by 31.03.2011. We note that for the purposes of assessing income derived from Phase–I, the Revenue never disputed the fact that hundred percent of the revenue from Phase I had accrued by 31.03.2011 because the development of Phase – I was completed by that date. We therefore see no reason for the Revenue to dispute and disbelieve the assessee’s contention that the housing project was completed prior to 31.03.2012. We also find that on completion of the Phase–I, the assessee not only obtained the certificate from the registered architect but it also filed an application with KMC for issue of completion certificate. We find that after the application was filed, KMC conducted inspection of Towers 2, 3 & 4 comprised in Phase – I and thereafter issued certificate titled as ‘partial completion certificate’ under Rule 27 of the KMC Building Rules, certifying that Towers 2, 3 & 4 were completed in conformity with the partial completion plan. The corporation also certified that the building was fit for occupation as residential purpose. We therefore note that although the certificate dated 29.04.2011 was claimed to be partial completion yet in the said certificate the KMC after conducting physical inspection of Towers 2, 3 & 4 of Phase – I had certified the same to be fit for residential occupation. We therefore do not find any material infirmity in the Ld. CIT(A)’s finding that the certificate dated 29.04.2011 constituted completion certificate contemplated for the purpose of clause (ii) of Explanation to Section 80IB(10). 18. We also note that KMC issued completion certificate dated 14.02.2014 also under Rule 27 of KMC Rules, 1990 in which it was certified as follows: "Grant of completion Certificate under rule 27 of KMC Building rules 1990. The building complex was sanctioned (B.P.No.776/XII/06-07, dt. 30/03/07 for 11 Nos. HIG Towers (62M) 2 Nos. MIG Towers (55 M) 1 No.LIG Tower (55M) 2 Nos. Club House (Ht. 4.5 & 8. 1 M.) 1 Mo. Commercial & Vocational Training Center (Ht.1.8M) Dept. has already issued Partial C.C. for 3 Nos. HIG, 2 Nos. MIG, 1 No. LIG, 2 Nos. Club & 1 Noncommercial & Vocation Training Center. Now Completion Certificate issued for rest of HIG Towers, 1, 5, 6. 7, 8, 9, 10 & 11."

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 23 19. From the above we note that while issuing this certificate, KMC had taken note of the partial completion certificates earlier issued and therefore the Completion certificate was issued only for the rest of the eight residential towers comprised in Phases II, III, IV & V of HIG Luxury Zone. Before us the Ld. CIT DR did not dispute the fact that the assessee has completed the development of the entire project and the all buildings developed by the assessee in the said project are occupied by residents pursuant to completion certificates granted by KMC. We also note that after the issue of the so called partial completion Certificates, KMC did not issue any other completion certificates in respect of the buildings for which partial completion certificates were issued. We therefore find force in the submissions of the Ld. AR that the completion certificate issued by KMC on 29.04.2011 in respect of Towers 2,3,and 4 of Phase I was the only completion certificate that was issued by KMC till date and therefore the assessee fulfilled the conditions prescribed in clause (ii) of Explanation to Section 80IB(10). We also note that in view of the objections taken by the Ld. CIT, DR, the assessee had filed an application under the RTI Act, 2006 before the SPIO, Kolkata Municipal Corporation in which the assessee requested the corporation to clarify as to whether the Partial Completion Certificates being nos. 31/XII/2011-12, dt: 29.04.2011 issued for HIG towers 2,3 & 4; no. 279/XII/2010-2011, dt 20.10.2010 issued for Block – MIG(A), MIG (B), LIG & “MIG-LIG” HALL no. 175/XII/2011-12, dt: 01.12.2011 issued for CLUB HOUSE and no. 184/XII/2013-14, dt: 21.01.2014 issued for Commercial Vocational training Centre should be treated as Completion Certificate in respect of the building OR a separate and specific Completion Certificate is to be issued for the same prior to occupation. We thus note that KMC was specifically requested to spell out the legal position as to whether in addition to obtaining partial completion certificate dated 29.04.2011 in relation to Phase – I, whether it was obligatory for the assessee to obtain ‘completion certificate’ to comply with provisions of the KMC Act and rules there under. In response, the SPIO, KMC furnished the following reply to the assessee: “In reference to your query raised in RTI application dated-22.01.2019, vide No. RTI/Bldg/Br-XII, dated-24.01.2019, this is to inform you that KMC Building Department had issued Partial Completion Certificate for different building/Block in different time. However last Completion Certificate was issued vide no:202/XII/13-14, dated 14/02/2014. It is mentioned that all the Partial Completion Certificate issued by KMC Building department is considered as good as the Completion Certificate for the building exist within premises no-2052 Chakgaria which are specifically mentioned in the certificate.” 20. From the foregoing reply of KMC which was provided by the competent authority under the RTI Act, we note that the authority implementing the provisions of KMC Act, 1980 had unequivocally clarified that the certificate dated 29.04.2011 was to act as the Completion Certificate for all intents and purposes in relation to Towers 2, 3 & 4 comprised in Phase – I. In the circumstances, if the local authority who was vested with the power and authority of issuing completion certificate itself certified that the certificate dated 29.04.2011 was to act as the ‘completion certificate’ and the assessee had no legal obligation to obtain yet another completion certificate then we see no reason for the Revenue to insist on furnishing ‘final completion certificate’. It is a trite law that a subject is not expected to perform an impossibility. If the authority vested with power of issuing completion certificate has unequivocally has certified that the certificate issued by it on 29.04.2011 was the completion certificate then the assessee cannot be expected to produce before the tax authority some other certificate only because the AO interpreted the law in some other manner. We must bear in mind that in interpreting the beneficial provisions of the Act, one must

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 24 eschew the interpretation which leads to absurdity or requires the assessee to comply with an impossibility. For the foregoing reasons therefore we do not find much force in the argument of the ld. CIT, DR that the benefit of deduction was not permissible because the assessee had failed to obtain final completion certificate prior to 31.03.2012. 21. In support of our foregoing conclusions, we rely on the decision of the Hon’ble Gujarat High Court in the case of CIT Vs Tarnetar Corporation (362 ITR 174). In the instant case assessee has undertaken a housing project which it was required to complete on or before 31.03.2008 so as to avail deduction u/s 80IB(10) of the Act. The assessee had completed the construction in 2006 and several residential units were also occupied by the residents. The assessee applied to the local authority for issuing completion certificate on 15.02.2006. The said application was however rejected on 01.07.2006. The assessee thereafter paid penalty and got the same regularized from the municipality subsequent to 31.03.2008. The AO however denied the deduction claimed u/s 80IB(10) since necessary completion certificate was not obtained by the assessee prior to 31.03.2008. On appeal the Hon’ble High Court allowed the deduction claimed u/s 80IB(10) by observing as under: “6 In the present case, therefore, the fact that the assessee had completed the construction well before 31st March, 2008 is not in doubt. It is, of course, true that formally BU permission was not granted by the Municipal Authority by such date. It is equally true that explanation to clause (a) to section 80- IB(10) links the completion of the construction to the BU permission being granted by the local authority. However, not every condition of the statute can be seen as mandatory. If substantial compliance thereof is established on record, in a given case, the court may take the view that minor deviation thereof would not vitiate the very purpose for which deduction was being made available. 7. In the present case, the facts are peculiar. The assessee had not only completed the construction two years before the final date and had applied for BU permission. Such BU permission was not rejected on the ground that construction was not completed, but the some other technical ground. In that view of the matter, granting benefit of deduction cannot be held to be illegal. 22. The above decision of the Hon’ble Gujarat High Court was followed with approval by the same Court in the subsequent decision rendered in the case of ITO Vs Saket Corporation (234 Taxman 435). In the decided case the assessee had completed construction of all 43 units comprised in the housing project within the prescribed period of years. It was however able to obtain permission from the local authority with respect to 20 units and although application was filed in respect of remaining 23 units but permission could not be obtained in relation thereof. The AO disallowed the deduction claimed u/s 80IB(10) observing that the necessary completion certificate was not obtained by the assessee from local authority. On appeal the High Court, following the decision in the case of CIT Vs Tarnetar Corporation (supra), held as under: “8 Considering the aforesaid decision of the Division Bench of this Court and the facts of the case on hand, as the assessee completed project/construction of all 43 units within 4 years from the date of approval by the competent authority and also applied for B.U. Permission within a period of four years with respect to all 43 units, however, could obtain B.U. Permission with respect to 20 units only and for whatever reasons, with respect to remaining 23 units, B.U. Permission was not issued by the authority and as observed hereinabove, construction of all 43 units was completed, the assessee is entitled to deduction under section 80IB(10) of the Act, no error has been

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 25 committed by the learned tribunal in holding that the assessee shall be entitled to deduction claimed under section 80IB(10) of the Act.” 23. In this regard, we may also gainfully refer to the decision of the Hon’ble Punjab & Haryana High Court in the case of Pr.CIT Vs Ambey Developers Pvt Ltd reported in 399 ITR 216. The relevant observations are as follows: “Adverting to the interpretation and meaning to be assigned to Explanation (ii) to section 80-IB(10(a) of the Act, essentially it has to be seen whether the term "shall" used therein is to be treated as mandatory or it is in the nature of a directory requirement. In our opinion, though the word used in Explanation (ii) to section 80-IB(10)(a) of the Act is "shall", but it would not necessarily mean that in every case, it shall be taken to be mandatory requirement instead would depend upon the intent of the Legislature and not the language in which the provision is clothed. The meaning and the intent of the Legislature would be gathered not on the basis of the phraseology of the provision but taking into consideration its nature, its design and the consequences which would follow from interpreting it in a particular way alone. The purport of the said Explanation (ii) to section 80-IB(10)(a) of the Act is to safeguard the interests of the Revenue wherever the construction has not been completed within the stipulated period. Thus, it cannot mean that the requirement is mandatory in nature and would disentitle an assessee to the benefit of section 80-IB(10)(a) of the Act even in respect of those cases where the assessee had completed the construction within the stipulated period and had made an application to the local authority within the prescribed time. The issuance of the requisite certificate was within the domain of the competent authority over which the assessee had no control. From the findings recorded by the Commissioner of Income-tax (Appeals) as affirmed by the Tribunal, it was clear that the construction had been completed before the stipulated date, i.e., March 31, 2010. It was also not disputed that the certificate of completion was applied on March 29, 2010 which was issued to the assessee on December 31, 2011. The assessee in such circumstances could not be denied the benefit of section 80-IB(10)(a) of the Act. The Commissioner of Income-tax (Appeals) and the Tribunal had rightly adjudicated the issue in favour of the assessee-respondent. Learned counsel for the appellant-Revenue has not been able to show any illegality or perversity in the findings recorded by the Commissioner of Income-tax (Appeals) as well as the Tribunal, warranting interference by this Court.” 24. Applying the ratio laid down in these decisions to the facts of the assessee’s case, we find that in the given facts of the assessee, its case stands on much better footing. In this case admittedly, after conducting physical inspection KMC had issued a completion certificate dated 29.04.2011 certifying the completion of Phase – 1 and further declared it to be fit for occupation for residential purpose. Moreover in the reply to the RTI application, the local authority clarified that the certificate dated 29.04.2011 by itself constituted ‘completion certificate’. In light of these facts therefore we have no hesitation in holding that the Phase – I of the housing project was completed prior to 31.03.2012 which was the last date. Since all the conditions prescribed in Section 80IB(10) were fulfilled by Phase – I of HIG Luxury Zone of ‘Upohar – The Condoville’, the Ld. CIT(A) was justified in restricting the appellant’s claim for deduction u/s 80IB(10) only in relation to profits of Phase – I. We therefore do not see any reason to interfere with the findings of the Ld. CIT(A) and accordingly dismiss the grounds raised by the Revenue in this appeal.”

ITA No.1298/Kol/2016 A.Y. 2012-13 DCIT Cir-12(1), Kol. Vs. M/s Bengal Ambuja Housing Development Ltd. Page 26 Learned departmental representative fails to pin-point any distinction on facts and or law in these two assessment years. We therefore adopt judicial consistency to affirm the CIT(A)’s findings under challenge qua this last issue as well. No other argument has been raised before us.

Sd/- Sd/- (लेखा सद%य) (�या'यक सद%य) ( A.L.Saini) (S.S.Godara) (Accountant Member) (Judicial Member) Kolkata, *Dkp (दनांकः- 20/11/2019 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-DCIT Cir-12(1),7th Fl. Aayakar Bhawan, P-7, Chowringhee Sq. Kol-69 2. ��यथ�/Respondent-M/s Bengal Ambuja Housing Development Ltd.,”Vishwakarma”86C Road (South), Kolkata-46 3. संबं3धत आयकर आयु4त / Concerned CIT Kolkata 4. आयकर आयु4त- अपील / CIT (A) Kolkata 5. 7वभागीय �'त'न3ध, आयकर अपील�य अ3धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड< फाइल / Guard file. By order/आदेश से, /True Copy/ सहायक पंजीकार आयकर अपील�य अ3धकरण, कोलकाता ।