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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI JOGINDER SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the Revenue. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-18, Mumbai [in short ‘CIT(A)’]and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal
read as under: i. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.2,63,57,396/-made u/s.80IB(10)of the IT Act, 1963 by relying on the CIT(A)’s decision in assessee's own case in the earlier years (i.e. in AYs 2004-05 to 2007-08) ignoring that the said decision was not accepted by the Department and appeal filed against it is pending before the Tribunal for adjudication. ii. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that the provisions of Section 80IB(10) of the IT Act do not postulate that the first approval of plan shall be deemed commencement of development and construction of the housing project. iii. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating that in the Explanation (i) to Section 80IB(IO) of the Act, it has been categorically clarified that where the approval in respect of 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. iv. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that when the provisions of statute are clear and unequivocal, no further meaning can be assigned to it. v. The appellant prays that the order of the CIT (A) on the above grounds be set aside and that of the AO be restored.
3. The assessee filed its return of income for the assessment year (AY) 2010-11 on 30.09.2010 declaring Nil income after claiming deduction u/s 80IB to the extent of Rs.2,63,57,397/- and computing book profit u/s 115JB that Rs.7,46,072/-. As per the profit and loss account (P&L) for the year ending 31.03.2010, it has shown sale of flats in its two projects, viz. ‘Trans Residency’ and ‘Vini Garden’. In the computation of income, it has claimed deduction of Rs.2,63,57,396/- u/s 80IB(10) in respect of both these projects. In response to a query raised by the Assessing Officer (AO), the assessee filed the details. Having examined the said details, the AO observed that the erstwhile partnership firm, M/s Vaman Estate had entered into a Joint Venture Agreement (JVA) dated 20.08.2001 with M/s Abode Builders and had taken up for construction a project known as ‘Trans Residency’. Further, a supplementary JVA was executed on 14.03.2005 between the two parties. On perusal of the agreement dated 28.08.2001, the AO observed that the development of the project was started on 1991. Further, as per the supplementary agreement dated 14.03.2005, the Bombay Municipal Corporation (BMC), then local authority, had sanctioned the lay out by letter dated 21.09.1996 and amended the same on 07.05.2002. In clause 2 of page 4 of the supplementary JVA dated 14.03.2005 executed Abode Builders and Vaman Estate, there is a mention of sanctioning of the layout plan by the BMC, which has been reproduced by the AO at para 3.4.2 of his assessment order dated 26.03.2013 which is as under: “And whereas as the Vendors have prepared a layout in respect of said property and the layout is submitted to the BMC and the BMC has sanctioned that said layout by letter dated 21st September, 1996 and finally amended on 07.05.2002 under CE/1534/Loken& 1.”
From the above clause, the AO observed that Abode Builders submitted a layout plan for development of the building to BMC and received sanction vide letter dated 21.09.1996. As per explanation to section 80IB(10), in the case where the approval in respect of housing project is obtained more than once, the said project shall be deemed to have been approved from the date on which the building plan of such housing project is first approved by the local authority. The commencement certificate issued by BMC vide letter dated 24.07.2007 refers to Application No.7094/7092 for seeking permission for development and grant of commencement certificate dated 07.11.1996. Sub-section 10 to section 80IB provides for 100% deduction of the profits of the housing project, development and construction of which commenced/commences on or after 01.10.1998. The AO came to a finding from the above observations that the development of property started in 1991 and the layout plans of the project ‘Trans Residency’ was sanctioned by BMC as early as 21.09.1996, i.e. prior to 01.10.1998. As the assessee-company failed to fulfil the above criteria to be eligible for deduction u/s 80IB(10) of the profits of its project ‘Trans Residency’, the AO made a disallowance of Rs.2,42,57,090/- u/s 80IB(10) of the Act.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) followed the order of his predecessor for the AYs 2004-05 to 2007-08 and extracted the same at page 7-12 of his appellate order dated 27.02.2014. The Ld. CIT(A) has also followed the order of the Tribunal in Smt. Manju Gupta v. ACIT 134 ITD 503 and deleted the disallowance made by the AO u/s 80IB(10) of the Act.
Before us, the Ld. DR refers to para 3.4.1 of the assessment order passed by the AO stating that the first mention of carrying out the development of work at the given land appears in the JVA dated 28.08.2001 entered into between M/s Abode Builders and M/s Vaman Estate. He refers to the relevant part which is reproduced below: “(xii) After entering into the Principal Agreement dated 24-08-1991, the developer has spent substantial amount, in connection with the development of the said property and more particularly of the following: (a) payments made to various occupiers for obtaining vacant possession from them who were occupying different portions of the said property. (b) expenses for levelling the property and for putting up the boundary wall around the property and for engaging the service of watchman and security personnel at the property to prevent further encroachment. (c) developing access/approach road to the said property and constructing a road on the said property as per development plan. (d) expenses relating to obtaining No Objection Certificate under Urban Land Ceiling Act and obtaining various permission, sanctions, approval, etc. from Government, Bombay Municipal Corporation and other authorities, including IOD. (e) Payments to Architects, engineers, surveyor, legal consultants, Bombay Municipal Corporation, etc. (f) Though the party of First Part have so far spent the amounts as stated hereinabove, in order to fully develop and complete the project, the party of First Part do not possess the financial capacity to do so, and therefore has approached the Party of Second Part for Joint Venture who has financial capacity, ability and skill to complete the project.”
Thus the Ld. DR submits that the development of property started in 1991 and the layout plans of the project ‘Trans Residency’ was sanctioned by BMC on 21.09.1996 i.e. prior to 01.10.1998. As the assessee does not fulfil the criteria to be eligible for deduction u/s 80IB(10) of the project ‘Trans Residency’, the Ld. DR supports the order of the AO.
Per contra the Ld. counsel of the assessee submits that the issue has been decided in favour of the assessee by the order of the Tribunal in Smt. Manju Gupta (supra) and ACIT v. M/s Abode Builders (ITA No. 2890/Mum/2013 & 841/Mum/2014) for the AY 2007-08 and 2010-11 by the order of the ITAT ‘A’ Bench Mumbai. Also it is submitted by him that if the deduction is granted in the initial assessment year, then the same cannot be withdrawn in the subsequent assessment year. Reliance is placed by him inter alia on the judgment of the Hon’ble Bombay High Court in CIT v. Paul Brothers 216 ITR 548 (Bom), CIT v. Fateh Granite (P) Ltd. 314 ITR 32 (Bom) and CIT v. Western Outdoor Interactive (P) Ltd. 254 CTR 593 (Bom). The Ld. counsel thus supports the order passed by the Ld. CIT(A).
We have heard the rival submissions and perused the relevant materials on record. In the case of Smt. Manju Gupta (supra), relied on by the Ld. counsel the assessee was to start a housing project, for which it had applied for issuance of commencement certificate before the local authority. Commencement certificate was issued on 15.05.1991. As construction work could not be started, the commencement certificate automatically lapsed. Another commencement certificate was issued on 12.02.1993 which was also lapsed. Ultimately, commencement certificate was issued on 02.03.2001 and construction work was started for the year ending 31.01.2002. The assessee claimed deduction u/s 80IB(10). The AO denied the deduction inter alia on the ground that the project had commenced prior to 01.10.1998 i.e. before the stipulated date prescribed u/s 80IB(10) when the commencement certificate was issued on 15.05.1991. On appeal, the Tribunal held that (i) the date of commencement of development and construction of housing project was the date when the assessee actually started and carried out work of development and construction and not the date when the project was first approved by the local authority. 7.1 Also we find from the order of the Tribunal in assessee’s own case for the AYs 2004-05 to AY 2007-08 that the impugned assessment year is not the first assessment year in which claim of deduction u/s 80IB(10) has been made by the assessee. The Hon’ble Bombay High Court in the case of Western Outdoor Interactive Pvt. Ltd. (supra)has held that when a benefit of deduction is available for a particular number of years on satisfaction of certain conditions and under the provisions of the Act, then without withdrawing or setting aside the relief granted for the first AY in which claim was made and accepted, the AO cannot withdraw the relief for subsequent assessment years. This ratio was laid down in the context of section 80A of the Act. Subsequently, similar issue was upheld in CIT v. Arts & Crafts Exports (2012) 246 CTR 463 (Bom).
The Hon’ble Delhi High Court in the case of CIT v. Tata Communication Internet Services Ltd. (2012) 204 Taxman 606 (Del) has held that bar as provided u/s 80IA(3) is to be considered only for the first year of a claim for deduction u/s 80IA and not in the subsequent years. In that case, the AO had raised the issue of splitting up or reconstruction of already existing business in the subsequent year, when in the first year of claim this issue was not disturbed. Again the Hon’ble Bombay High Court in Paul Brothers(supra), Direct Information (P) Ltd. v. ITO (2011) 203 Taxman 70 (Bom) has held that once a benefit of deduction was extended in respect of a provision for a particular number of years then unless the benefit is withdrawn for the first year, it cannot be withdrawn subsequent years, particularly, when there is no change in the facts. 7.2 Facts being identical, we follow the order of the Co-ordinate Bench in Smt. Manju Gupta (supra) and the ratio laid down in the decisions delineated para 7.1 hereinbefore and uphold the order of the Ld. CIT(A).