Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “H ”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN, JM
आदेश / O R D E R PER R.C.SHARMA (A.M):
These are the cross appeals filed by assessee and Revenue against the order of CIT(A)-1, Thane dated 29/07/2015 for A.Y.2011-12 in the matter of order passed u/s.143(3) of the I.T.Act, 1961.
5061/Mum/2015 M/s. Kashish Park Realtors 2. The following grounds have been taken by the assessee in its appeal:-
1. On the facts and in law, the Hon. CIT (A) erred in re-computing the profit of the housing project eligible for deduction u/s 80IB (10) thereby confirming addition to the extent of Rs.1,22,52,643/- on the basis of provisions of sec. 80IB (13) r.w.s. sec. 80IA(10) not appreciating that such disallowance was not justified by law and by facts.
2. Your appellant craves leave to add, alter, amend, delete and/or vary any of the above ground of appeal/relief claimed at any time before the decision of the appeal.
3. The following grounds have been taken by the assessee in its appeal:- 1. "Whether on the facts and in the circumstances of the case, and in law, the Hon’ble CIT(A) erred in not appreciating the fact that the development rights acquired by the assessee firm was a collusive transaction / arrangement to claim unjustified deduction u/s 80IB(10) of the Income Tax Act, 1961. 2. "Whether on the facts and in the circumstances of the case, and in law, the Hon’ble CIT(A) erred in application of CBDT notification No. 205/3/2001/ITA-II Ft. 4/5/2001 by treating additional housing project constructed by the assessee by consuming TDR on existing housing project site as infrastructural facility u/s 80IB(10).
3. The order of the CIT(A) may be vacated and that of the Assessing Officer may be restored.
4. The appellant craves leave to add, amend, alter or delete any ground of appeal."
4. At the outset, learned AR placed on record the order of the Tribunal in assessee’s own case for the A.Y.2010-11 dated 09/03/2018 wherein grounds taken both by the assessee and Revenue are dealt with and appeal was decided in favour of the assessee.
We have heard rival contentions and carefully gone through the orders of the authorities below and found from record that the assessee is 5061/Mum/2015 M/s. Kashish Park Realtors a partnership firm having two partners, namely M/s. Kashish Park Reality Pvt. Ltd., and Shri Saurabh Aggarwal having profit sharing ratio of 25% and 75% respectively. The assessee is engaged in the business of construction of residential houses. The assessee firm has developed a housing project namely "Kashlsh Park" comprising of building nos. MN-6, MN-7 and MN-8 along with one Tower 'A' at FGP complex, Mulund Check Naka, Thane (W). In the year under consideration, the appellant received completion certificate in respect of Tower 'A' and profit therefrom has been offered to tax as per the project completion method of accounting. However, whole of the profit amounting to Rs. 7,19,12,4597- has been claimed as deduction u/s 80IB(10). Building nos. MN-6, MN-7 & MN-8 were completed in A.Y. 2010-11 and profit was offered to tax in A.Y. 2010-11 and whole of the profit resulting in that year was also claimed as deduction u/s 80IB(10). The AO disallowed deduction u/s 80IB(10). 6. By the impugned order, CIT(A) allowed assessee’s claim of deduction u/s.80IB(10). However, he has recomputed the profit of housing project eligible for deduction u/s.80IB(10) thereby confirmed the addition to the extent of Rs.1,22,52,643/-. Both the assessee and Revenue are in further appeal before us. 7. We found that Tribunal in assessee’s own case vide order dated 09/03/2018 held as under:- 18. We have carefully considered the rival submissions. The first objection of the Assessing Officer is based on Sub-Clause (b) of Section 80IB(10) of the Act which prescribes that in order to claim the deduction, the housing project shall, interalia, be on the size of a plot of land which has minimum area of one acre. The case made out by the Assessing Officer is that since the claim 5061/Mum/2015 M/s. Kashish Park Realtors of deduction is with respect to the profits derived from construction and development of three buildings namely MN-6, MN-7 and MN-8, the land covered by such buildings alone should be considered to examine its compliance with Sub-Clause (b) of Section 80 IB(10) of the Act. On this aspect, in our considered opinion, the findings of CIT(A) which we have extracted in the earlier part of this order are justified and do not require any interference. As brought out by the CIT(A), the total area of land with the assessee is 12,484 sq.mtrs with an FSI of 9,581.82 sq. mtrs. The CIT(A) further notes that apart from constructing three buildings in this year, in the immediately subsequent assessment year, the assessee firm constructed Towers A & B of total area of 4885 sq. mtrs and thus, the total area covered by the housing project constructed by the assessee firm works out to 8952.45 sq. mtrs, which is more than one acre. We find no reasons to negate the findings of the CIT(A), which are fair and proper. Apart therefrom, we find that the case of the Assessing Officer is that the area of three buildings is 4067.46 sq. mtrs or 43,782 sq.ft which is less than one acre. At the time of hearing, learned representative for the assessee pointed out that even such conclusion of the Assessing Officer is factually untenable, in as much as similar issue has come up before the Pune Bench of the Tribunal in the case of Bunty Builders vs. ITO reported at 127 ITD 286. In the said decision, it has been explained that one acre would mean 4046 sq.mtrs or 43,560 sq.ft. Reliance has also been placed on the decision of Pune Bench of the Tribunal in the case of Baba Promoters and Development vs. ITO 25 Taxmann.com 84 (Pune) wherein also it has been accepted that one acre would mean 4046 mtrs or 43,560 sq.ft. Considered in this light, even if one goes along with the stand of the Assessing Officer and consider only the land covered by the three buildings even then the area in question fulfils the requirement of being not less than one acre. Therefore, on this aspect, we find no merit in the plea of the Revenue and the decision of the CIT(A) is affirmed.
The other objection by the learned DR is that the project of the assessee was not an independent project, the same has been dealt with by CIT(A) in para -4(b) On this aspect the CIT(A) notes that the main reason given by the Assessing Officer was that M/s. Kashish Park Realty Pvt. Ltd. which is one of the partners of the assessee firm had initially the right to acquire TDR-FSI from M/s. FGP Ltd., However, M/s. Kashish Park Realty Pvt. Ltd., subsequently decided not to acquire the FSI-TDR and requested M/S. FGP Ltd., to sell the same to the assessee firm. As per the Assessing Officer, if M/s. Kashish Park Realty Pvt. Ltd., would have developed the project by acquiring TDR-FSI, it would not be entitled to the claim of deduction u/s.80IB(10) of the Act. In this context, the CIT(A) has noted that the CBDT communication dated 04/05/2001(supra) permitted the claim of deduction u/s.80IB(10) of the Act even where the additional housing project was constructed by consuming TDR’s on an existing housing project, provided the project is taken up by a separate undertaking having books of accounts maintained in such manner to ensure ascertaining of correct profits. On this basis, the CIT(A) found Assessing Officer’s objection as untenable because as per the CBDT, the deduction was available even on construction of a housing project on TDR- FSI acquired in respect of existing housing project site. In our considered opinion no fault can be found with the conclusion by the CIT(A) on this aspect. The charge made by the Assessing Officer is that there is a collusive arrangement in order to claim the benefit u/s.80IB(10) of the Act; this 5061/Mum/2015 M/s. Kashish Park Realtors charge, in our view, is not maintainable because even if M/s. Kashish Park Realty Pvt. Ltd., would have carried out the development, in terms of CBDT communication dated 04/05/2001(supra), such project would also be eligible for the benefits of Section 80IB(10) of the Act. Thus, the order of CIT(A) on this aspect is also affirmed. Considering all these aspects, we confirm the order of CIT(A) and therefore, so far as the grounds raised
by the Revenue are concerned the same are dismissed.
20. Now, we may take up the appeal of the assessee wherein it has challenged the addition of Rs.1,02,02,930/- made by invoking Section 80IB(13) read with Section 80IA (10) of the Act. On this aspect, the relevant facts are that the Assessing Officer noted that assessee had acquired the development rights of the land from M/s. FGP Ltd., at a price much lesser than the market price and therefore, there was unreasonable profits generated for the purpose of claiming deduction u/s.80IB(10) of the Act. Secondly, the Assessing Officer noted that projects developed by M/s. Kashish Park Realty Pvt. Ltd., was in the vicinity and assessee firm was using common facility of other projects and estimated value of such common amenities at Rs.70,05,120/- which according to him showed excessive profits earned by the assessee to that extent. Thus, the Assessing Officer determined total addition of Rs. 6,18,67,801/- on this account, by applying the Section 80IA(10) read with Section 80IB(13) of the Act. The CIT(A) deleted the addition of Rs.70,05,120/- and this aspect has become final as the same has not been challenged by the Revenue before us. So, however with regard to the charge of the Assessing Officer that assessee has paid lesser price to M/s. FGP Ltd., for purchase of TDR-FSI, the CIT(A) noted that consideration at Rs.386.10 per sq.ft was fixed in 2001 itself by M/s. Kashish Park Realty Pvt. Ltd., when assessee was not even in existence. The CIT(A) noted that the ready reckoner price at that point of time was Rs.270 per sq.ft, thus he inferred that the market rate was 43% higher than the ready reckoner rate. In the year 2003, when assessee transacted for the purchase of TDR-FSI from M/s. FGP Ltd., the ready reckoner rate was Rs.372 per sq.ft and on the same analogy of enhancing the rate by 43%, CIT(A) held that the negotiated price ought to have been Rs.539.96 per sq.ft. as against which assessee had paid only Rs.386.10 per sq.ft; and, therefore, he held that assessee had made unreasonable profits which was to be restricted in terms of Section 80IA(10) and 80IB(13) of the Act. The CITA) determined an amount of Rs.1,02,02,903/- on this account on proportionate basis considering the area sold during the year and the balance of the addition has been deleted by him.
21. Before us, learned representative for the assessee pointed out that the CIT(A) ought to have allowed complete relief in as much as the provisions u/s.80IA(10) read with Section 80IB(13) of the Act are not applicable at all, since assessee has no close connection with M/s.FGP Ltd., from whom the development rights have been purchased.
22. On this aspect, learned DR has primarily relied on the order of the CIT(A), which we have already narrated in the earlier parts and not repeated for the sake of brevity.
23. We have carefully considered the rival submissions. Section 80IB(13) of the Act prescribes that provisions of Section 80IA(10) of the Act, so far as may be, shall apply to the eligible business referred to in Section 80IB(10) also. Section 80IA(10) which has been invoked by the Assessing Officer in the present case reads as under:-
5061/Mum/2015 M/s. Kashish Park Realtors Sec.80IA(10) “Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom: Provided that in case the aforesaid arrangement involves a specified domestic transaction referred to in section 92BA, the amount of profits from such transaction shall be determined having regard to arm's length price as defined in clause (ii) of section 92F.”
The perusal of the aforesaid would show that it entitles the Assessing officer to recompute the profits and gains of eligible business under the circumstances prescribed therein. However, it is clear that the prohibition contained therein is invited only due to close connection between the assessee carrying on the eligible business and any other person. Further, it also requires the Assessing Officer to establish that the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business. What we are only trying to emphasise is that the first and foremost requirement in order to invoke Section 80IA(10) is to establish the close connection between the assessee herein and M/s. FGP Ltd., with whom the transaction of acquisition of TDRFSI has been done. On this aspect, there is not even an allegation by the Assessing Officer, much less reference to any evidence in this regard. Before us, it has been pointed out that M/s. FGP Ltd., and assessee firm are unrelated parties and therefore, there is no question of invoking Section 80IA(10) of the Act qua the transaction of purchase of TDR-FSI by the assessee. Thus, on this pertinent point itself we find that the invoking of Section 80IA(10) read with Section 80IB(13) of the Act is untenable. We hold so. Thus, we hereby set aside the order of the CIT(A) to the above extent and allow the appeal of the assessee.
Resultantly, appeal of the assessee is allowed whereas appeal of the Revenue is dismissed.