M/S. MANDAVI BUILDERS, vs DY. COMMISSIONER OF INCOME TAX

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 22ND DAY OF SEPTEMBER 2020

PRESENT

THE HON’BLE MR. JUSTICE ALOK ARADHE

AND

THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD

I.T.A. NO.281/2015 BETWEEN:

M/S. MANDAVI BUILDERS REPRESENTED BY ITS MANAGING PARTNER JERRY VINCENT DIAS MANDAVI PALACE END POINT ROAD, MANIPAL UDUPI-576104.

... APPELLANT (BY SRI. A. SHANKAR, SR. COUNSEL A/W SRI. M. LAVA, ADV.,)

AND:

DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE C.R. BUILDING ANNEXE ATTAVAR, MANGALORE-575001. ... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) - - -

THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 20.02.2015 PASSED IN ITA NOs.1786 & 1787/BANG/2013 FOR THE ASSESSMENT YEARS 2010-11 & 2011-12, PRAYING THAT THIS HON’BLE COURT MAY BE PLEASED TO:

(I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ANSER THE SAME IN FAVOUR OF THE APPELLANT. (I) ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO THE EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY THE ITAT, BANGALORE ‘C’, BENCH IN ITA NOs.1786 & 1787/BANG/2013 RELATING TO ASSESSMENT YEARS 2010-11 AND 2011-12 VIDE ITS ORDER DATED 20-02-2015.

THIS ITA COMING ON FOR FURTHER HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:

JUDGMENT

This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter of the appeal pertains to the Assessment years 2010-11 & 2011-12. The appeal was admitted by a bench of this Court vide order dated 01.03.2017 on the following substantial question of law: (i) Whether the appellate Tribunal is justified in law in denying the deduction under Section 80IB(10) of the Act in respect of two flats of the housing project by holding that conditions laid down in Section 80IB(10) have not been complied with in respect of these two flats, contrary to evidence on record and

consequently passing a perverse order on the facts and circumstances of the case?

Facts leading to filing of the appeal briefly stated are that the assessee, is a registered partnership firm is engaged in the business of constructing and developing residential buildings. The assessee undertook the construction of a housing project called Mandavi Pearl City in Manipal consisting of three blocks with total number of 195 flats. A search under Section 132 of the Act was conducted in the premises of the assessee and its sister concern on 04.02.2011. Thereafter, a notice under Section 153(c) of the Act was issued on 20.06.2011, by which the assessee was asked to file returns of income for Assessment Years 2010-11 and 2011-2012. The assessee filed the return in response to the notice and declared the income as ‘NIL’ for both Assessment Years after claiming deduction under Section 80IB(10) of the Act to the tune of

Rs.12,26,80,417/- and Rs.6,49,29,278/- for Assessment Years 2010-11 and 2011-12 respectively. The Assessing Officer by an order dated 28.12.2012 determined the total income of the assessee for the Assessment Years 2010-11 and 2011-12 at Rs.12,68,83,697/- and Rs.6,49,29,278/- respectively. The assessee filed appeals before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) by a common order dated 20.09.2013 partly allowed the appeals. The assessee as well as the revenue approached the Income Tax Appellate Tribunal by filing appeals. The Tribunal by a common order dated 20.02.2015 partly allowed the appeal of the assessee and dismissed the appeal preferred by the revenue. In the aforesaid factual background, this appeal has been filed by the assessee.

Learned Senior counsel for the assessee submitted that the only issue involved in this appeal pertains to denial of proportionate deduction under

Section 80IB(10) of the Act in respect of two flats. It is further submitted that in respect of flats bearing No.G201 and G208 situate in Block ‘B’ were allotted on 25.05.2009 and the same were registered on 12.08.2010. It is further submitted that aforesaid flats were allotted to the partners of the assessee. It is also submitted that clause (e) and (f) of Section 80IB(10) of the Act have a prospective effect and do not apply to the fact situation of the case as the flats in question were allotted prior to 19.08.2009. It was further submitted that the Tribunal grossly erred in holding that two flats were allotted after 19.08.2009, which is contrary to the evidence on record. On the other hand, learned counsel for the revenue submitted that the order passed by the Tribunal is just and proper, however, the issue whether the flats were allotted on 25.05.2009 or after 01.04.2010 i.e., 12.08.2010 requires factual adjudication.

We have considered the submissions made by learned counsel for the parties and have perused the record. The Central Board of Direct Taxes (CBDT) in Circular No.5/2010 dated 3.06.2010 has clarified that clauses (e) and (f) have prospective operation. In case, the flats in question have been allotted prior to 01.04.2010, the assessee will be entitled to the benefit of deduction under Section 80IB(10) of the Act in respect of the flats in question, but if the flats have been allotted subsequent to 01.04.2010, i.e., on 12.08.2010, the assessee shall not be entitled to the benefit of deduction under Section 80IB(10) of the Act. The aforesaid issue requires factual adjudication, which has not been specifically adjudicated by the authority. Therefore, in the fact situation of the case, the order passed by the Assessing Officer, Commissioner of Income Tax (Appeals) and the order passed by the Income Tax Appellate Tribunal in I.T.A.No.1786 & 1787/BANG/2013 insofar as it pertains to aforesaid two

flats in question are hereby quashed and the matter is remitted to the Assessing Officer to adjudicate the issue whether or not the flats in question were allotted on 25.05.2009 or after 01.04.2010 i.e., on 12.08.2010 and thereafter to decide the claim of the assessee for deduction under Section 80IB(10) of the Act.

In view of preceding analysis, it is not necessary to answer the substantial questions of law framed by this court.

In the result, the appeal is disposed of.

Sd/- JUDGE

Sd/- JUDGE ss

M/S. MANDAVI BUILDERS, vs. DY. COMMISSIONER OF INCOME TAX