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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: Shri Mahavir Singh & Shri G Manjunatha
Date of hearing 22-05-2018 Date of pronouncement 31-05-2018 O R D E R
Per G Manjunatha, AM :
This appeal filed by the revenue and cross objection filed by the assessee are directed against the order of the CIT(A)-12, Mumbai dated 18-04-2017 and it pertains to AY 2012-13. Since facts are identical and 2 Indorigin Electric Ltd issues are common, the appeal as well as the cross objection were heard together and are disposed of by this common order, for the sake of convenience.
The revenue has raised the following grounds of appeal:-
"”1. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in relying on the order of the Hon'ble Bombay High Court in the case of Vandana Properties no. of 2009 and the ITAT Kolkata in the case of M/s Bengal Ambuja Housing Development Ltd. in directing that for the purpose of claiming deduction u/s 80IB(10) of the I.T .Act, the project can be treated as independent of each other based on different commencement certificates, disregarding the fact that the condition of minimum plot area applies independently and not collectively and that the project as a whole was not completed within 4 years, without appreciating the fact that these decisions of the High Courts were not accepted by the department and SLP has been filed.
2. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in relying on the order of the Hon'ble Bombay High Court in the case of Vandana Properties no. ITA no. 3633 of 2009 and the ITAT Kolkata in the case of M/s Bengal Ambuja Housing Development Ltd. in holding that deduction u/s 80IB(10) of the I.T .Act is allowable with reference to one tower independently, disregarding the fact that the conditions are not satisfied with reference to the whole project, without appreciating the fact that these decision, s of the High Courts were not accepted by the department and SLP has been filed.
3. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in relying on the order of the Hon'ble Bombay High Court in the case of Vandana Properties no. ITA no. 3633 of 2009 and the ITAT Kolkata in the case of M/s Bengal Ambuja Housing Development Ltd. in holding that pro-rata allowance u/s 80IB(10) of the I. T .Act is permitted, where T5 and T6 of the flats exceed the stipulated area restriction of 1500 sq.ft., without appreciating the fact that these decision's of the High Courts were not accepted by the department and SLP has been filed.
On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in accepting that the disallowance of deduction u/s 80IB(10) of the I T Act as revenue neutral for the reason that the income was assessable u/s 115JB of the I T Act, disregarding the fact that the assessee is eligible to avail MA T credit in subsequent years.”
The brief facts of the case are that the assessee company is engaged in the business of development of housing projects, filed its return of income for the assessment year 2012-13 on 30-09-2012
3 Indorigin Electric Ltd declaring total income of Rs.2,56,48,330. The case has been selected for scrutiny and accordingly notices u/s 143(2) and 142(1) of the Act were issued. In response to notices, the authorized representative of the assessee appeared from time to time and filed various details, as called for. During the course of assessment proceedings, the AO noticed that the assessee has claimed deduction u/s 80IB amounting to Rs.4,93,66,415, therefore, called upon the assessee to explain and also furnish necessary details in respect of deduction claimed u/s 80IB(10) of the Act. In response to show cause notice, the assessee, vide letter dated 15-01-2015 has submitted the working of deduction claimed u/s 80IB(10) of the Income-tax Act, 1961 for AY 2010-11 and AY 2012-13.
The assessee also furnished a copy of an assessment order passed for AY 2010-11, wherein deduction claimed u/s 80IB(10) was denied. The AO, after considering relevant submissions of the assessee and also considering the order passed by the AO for the assessment year 2010- 11 observed that the assessee has not fulfilled all conditions prescribed u/s 80IB(10) so as to claim deduction u/s 80IB(10) which is evident from the fact that the flats constructed in Towers T5 & T6 are more than 1500 sq.ft and also the assessee has not filed any agreement copy for verification of area constructed inspite of repeated directions. Since the assessee has filed to provide the required details to determine and verify the exact area of flats constructed, it was concluded that the assessee is 4 Indorigin Electric Ltd not eligible for deduction u/s 80IB(10) of the Income-tax Act, 1961.
3. Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee has filed various details to justify deduction claimed u/s 80IB(10). Assessee also filed copy of order of ITAT for AY 2010-11 and argued that the ITAT has allowed the claim of assessee in respect of super built up area / carpet area of flats constructed was less than 1500 sq.ft. The sum and substance of the arguments of the assessee before the Ld.CIT(A) are that in view of the decision of Hon’ble Bombay High Court in the case of CIT vs Vandana Properties (2013) 353 ITR 36 (Bom), the assessee is eligible for proportionate deduction towards profit of eligible housing project where the flat size is less than 1500 sq.ft. The CIT(A), after considering relevant submissions of the assessee and also relying upon the decision of Hon’ble Bombay High Court in the case of CIT Vs Vandana Properties (supra) and also the decision of Hon’ble Calcutta High Court in case of Bengal Ambuja Housing Development Ltd in of 2006 vide order dated 02-01-2007 held that the assessee is eligible for proportionate deduction towards eligible profit where the flat size is less than 1500 sq.ft. However, the CIT(A) failed to give any findings in respect of proportionate deductions claimed by the assessee towards Towers T5 & T6 of Kapil Malhar Intelligent Homes by holding that the deduction claimed u/s 80IB(10) will be revenue neutral as 5 Indorigin Electric Ltd regular tax liability is less than tax paid on the book profit. The relevant portion of the order of CIT(A) is extracted below:- During the course of hearing, attention VasT invited to predecessor CIT(A)-14 order dated 24.6.2014 vide appeal ry. CIT(A)-U/DCIT 6(1)/IT-42/201344 for the A.Y. 2010-11 wherein thetTTJk) had allowed claim for Section 80IB of the LT. Act, 1961 on the basis of Hon. Bombay High Court decision in the case of M/s. Vandana Properties in Appeal no. of 2009 and of M/s. Bengal Ambuja Housing Development Ltd. wherein the Hon. IT AT, West Bengal had decided that smaller flats should not be denied deduction u/s. 80IB and the same view had been confirmed by Hon. High Court of Calcutta in ITA no. 453 of 2206 vide order dated 2.1.2007. It is seen that the appellant's contention is correct. It is also stated that there is no such claim by the appellant for the A.Y. 2011-12. Thus, respectfully, following the order of predecessor CIT(A) for the A.Y. 2010-11, since the case here is identical for the A.Y. 2012-13, the ground of appeal is allowed. It is directed that the A.O. is to grant deduction u/s.80IB(10) on the basis of the calculation below for Tower 4 only.
ASST. YEAR 2010-11 ASST.YEAR 2012-13 Tower Eligible Allowed by Tower Eligible Area (Sq. Flats CIT(A) Flats metres) T1 36 36 T4 36 2889.48 T2 24 NIL T5 24 3076.03 T3 24 NIL T6 24 3308.07 84 84 9273.58 It is seen that Section 80IB relief claimed for A.Y. 201243 in the return of income was Rs. 4,93,66,4157- for 84 flats. However, since relief is granted only for Flats of T4 i.e. 36 Flats, as per earlier order of predecessor CIT(A) for A.Y. 2010-11, the deduction will be as follows : 36 Flats : I 84 flats X 4,93,66,415 = Rs. 2,11,57,034 .
6 Indorigin Electric Ltd It is also seen that the claim for Tower T5 and T6 (Rs. 2,82,09,3817-) of Kapil Malhar Intelligent Homes will be revenue neutral as regular tax liability is less than tax paid on the book profit. Hence, the eligible deduction would be tax neutral and the adjudication of balance amount becomes merely academic in nature. Thus, the A.O. is directed to allow deduction u/s. 80IB of the I.T. Act, 1961 of Rs. 2,11,57,034/- towards Tower T4 for A.Y. 2012-13. In the light of the discussion above, Ground no, 2 is allowed.”
4. The Ld.DR submitted that the Ld.CIT(A) erred in allowing proportionate deduction towards Tower T4 by relying upon the decision of Hon’ble Bombay High Court, in the case of CIT Vs Vandana Properties (supra) disregarding the fact that the conditions laid down u/s 80IB(10) are not satisfied with regard to whole project and also without appreciating the fact that this decision of Hon’ble Bombay High Court was not accepted by the department and Special Leave Petition has been filed before the Hon’ble Supreme Court. The Ld.DR further submitted that the Ld.CIT(A) was erred in holding that each project can be treated as independent of each other based on different commencement certificate disregarding the fact that the condition of minimum flat area applies independently and not collectively and also the whole project needs to be completed within 4 years as per the provisions of section 80IB(10) of the Act. The AO has brought out clear facts to the effect that as per the assessee’s admission itself, the flat area in T5 &T6 is more than 1500 sq.ft. and hence, the assessee failed
7 Indorigin Electric Ltd to fulfil the condition specified u/s 80IB(10) and hence not eligible for deduction.
On the other hand, the Ld.AR for the assessee strongly supporting the order of the CIT(A) in respect of grounds 1 to 3 submitted that the issue is covered in favour of the assessee by the decision of ITAT, Mumbai Bench “I” in assessee’s own case for AY 2010-11 in wherein the co-ordinate bench by following the decision of Hon’ble Bombay High Court in the case of CIT Vs Vandana Properties (supra) held that the assessee is eligible for proportionate deduction for the units satisfying the extent of built up area. The CIT(A), after carefully considered the facts and also by following the decision of Hon’ble Bombay High Court rightly directed the AO to allow proportionate deduction towards eligible profit from Tower T4.
Therefore, the order of the CIT(A) should be upheld.
We have heard both the parties, perused the materials available on record and gone through the orders of authorities below. The AO disallowed deduction claimed u/s 80IB(10) of the Act, on the ground that the assessee has failed to fulfil conditions specified u/s 80IB(10) as the flat size of Tower T5 & T6 is more than 1500 sq.ft. and hence, the assessee is not eligible for deduction u/s 80IB(10) in respect of whole project. The AO never disputed the fact that the assessee is eligible for proportionate deductions wherever the project fulfils the conditions of 8 Indorigin Electric Ltd super built up area of each flat; however, denied the benefit for the sole reason that although the issue is covered by the decision of Hon’ble Bombay High Court in CIT Vs Vandana Properties (supra), the department has not accepted the decision of Hon’ble Bombay High Court by filing a Special Leave Petition before the Hon’ble Supreme Court. It is the contention of the assessee that in respect of Tower T4, the assessee has fulfilled all conditions including size of each flat which is less than 1500 sq.ft. In respect of Towers T5 & T6, assessee has claimed proportionate deduction wherever the flat size is less than 1500 sq.ft. on the basis of details submitted before the AO. The assessee further contended that a similar disallowance has been made for AY 2010-11 by the AO. However, on appeal before the ITAT, the ITAT has allowed proportionate deduction towards the project wherever the flat size is less than 1500 by relying upon the decision of Hon’ble Bombay High Court in the case of CIT Vs Vandana Properties (supra).
Having heard both the sides and considered material on record, we find merit in the arguments of the assessee for the reason that the principle is now well settled with the decision of Hon’ble Bombay High Court in the case of CIT Vs Vandana Properties (supra), wherein the Hon’ble Court has made it clear that the assessee is eligible for proportionate deduction from eligible profit in a housing project in respect of flat which is having super built up area of less than 1500 sq.ft.
9 Indorigin Electric Ltd This view is further supported by the decision of ITAT, Kolkatta in the case of Bengal Ambuja Housing Development Ltd and this decision has been affirmed by the Hon’ble Calcutta High Court in ITA No.453/2006.
The CIT(A), after considering relevant facts has rightly directed the AO to allow proportionate deductions in respect of Tower T4 out of total deductions claimed by the assessee including Towers T5 & T6. In this view of the matter and consistent with the view taken by the co-ordinate bench in assessee’s own case in line with the decision of Hon’ble Bomby High Court in the case of CIT Vs Vandana Properties (supra), we are of the view that the assessee is eligible for proportionate deduction of eligible profit wherever the flat size is less than 1500 sq.ft. subject to fulfillment of other conditions specified in section 80IB(10) of the Act.
Accordingly, we affirm the findings of the Ld.CIT(A) and reject these grounds raised by the revenue.
The next issue that came up for our consideration from revenue’s ground No.4 and assessee’s cross objection is not adjudicating the issue of deduction claimed towards Towers T5 & T6 on the ground that the deduction claimed u/s 80IB(10) in respect of Towers T5 & T6 is revenue neutral as regular tax liability is less than tax computed on the book profit. Before adverting to the facts of the issue, first we shall decide the delay in filing cross objection filed by the assessee.
The Ld.AR for the assessee at the time of hearing submitted that 10 Indorigin Electric Ltd there is a delay of 10 days in filing cross objection for which the assessee has filed petition for condonation of delay alongwith affidavit.
The Ld.AR further submitted that the director of the company, who was looking after the tax matter was unwell and facing health problems because of his old age. Due to this, he could not attend the tax matters before the counsel; hence, there is a delay of 10 days in filing the cross objection which may be condoned and the issue may be decided on merits. On the other hand, the Ld.DR fairly accepted that the delay in filing cross objection may be condoned.
Having heard both the sides, we find that the reasons given by the assessee for delay in filing cross objection appears to be genuine and reasonable and hence, we condone the delay in filing cross objection and proceed to decide the issue on merits.
The Ld.AR for the assessee submitted that the Ld.CIT(A) failed to adjudicate the specific ground taken by the assessee in respect of denial of deduction claimed u/s 80IB(10) for Tower T5 & T6 on the sole ground that the deduction claimed u/s 80IB(10) will be revenue neutral as regular tax liability is less than tax effect on the book profit disregarding the fact that the assessee is eligible to avail MAT credit in subsequent years. The Ld.AR further submitted that the issue of deduction claimed u/s 80IB(10) has to be examined in the light of provisions of section 80IB(10); however, the CIT(A) failed to give findings on the allowability
11 Indorigin Electric Ltd of such deduction, hence, the matter may be set aside to the file of the Ld. CIT(A) or the AO to be decided on merits. The Ld.DR, on the other hand, submitted that the Ld.CIT(A) was erred in accepting that the disallowance of deduction u/s 80IB(10) of the Act, was revenue neutral for the reason that the income was assessable u/s 115JB of the Act is more than the normal profit computed disregarding the fact that the assessee is eligible to avail MAT credit for subsequent years and also the issue to be decided in the light of provisions of section 80IB(10), but not on the basis of section 115JB of the Act.
Having heard both the sides and considered material on record, we find merits in the arguments of the assessee as well as the Ld.DR for the reason that the Ld.CIT(A) has not decided the issue of deductibility of eligible profit from Tower T5 & T6 in the light of provisions of section 80IB(10) of the Income-tax Act, 1961. The deduction claimed u/s 80IB(10) needs to be examined in the light of said provisions to ascertain whether the assessee is eligible for deduction or not in the given facts and circumstances of the case. The issue of revenue neutrality in the light of book profit computed u/s 115JB does not in any way hamper the allowability of deduction claimed u/s 80IB(10) as the assessee could always claim tax credit on taxes paid on book profit in subsequent years. Therefore, we are of the view that the issue needs to be re-examined by the Ld.CIT(A) in the light of facts of assessee’s case
12 Indorigin Electric Ltd and provisions of section 80IB(10) of the Income-tax Act, 1961 in respect of Tower T5 & T6. Hence, we set aside ground 4 raised by the revenue in their appeal and cross objection filed by the assessee to the file of the CIT(A) and direct him to decide the issue. 13. In the result, appeal filed by the revenue in is partly allowed for statistical purpose and cross objection filed by the assessee is allowed for statistical purpose.
Order pronounced in the open court on 31st May, 2018.