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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI G.S. PANNU, HONBLE & SHRI C.N. PRASAD, HONBLE
PER C.N. PRASAD (JM) 1. These cross appeals are filed by the assessee and Revenue against the order of the Ld.CIT(A)-3, Thane dated 05.10.2015 for the Assessment Year 2012-13.
The assessee in its appeal raised ground of appeal stating the Ld.CIT(A) erred in law as well as on facts while restricting the claim of deduction on prorate basis instead of granting 100% deduction u/s.80IB(10) of the Act. Revenue also filed appeal against the order of the Ld.CIT(A) in allowing the claim for deduction u/s. 80IB(10) of the Act on prorate basis instead of disallowing the entire claim as was done by the Assessing Officer.
Facts of the case are the assessee is a partnership firm engaged in the business of construction and development of land and properties. The assessee had filed its return of income on 27.09.2012 declaring total income of ₹.3,17,800/-. The assessee developed a housing Project named 'Mohan Valley' at Hendrapada, Kulgaon, Badalapur (West). The project was approved on 29.03.2007 and completed on 13.05.2011, vide certificate No. KBMC/TPD/348. The said project consisted of buildings A to M (i.e. 13 buildings) having 409 residential units with each unit area
3 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction less than 1500 sq. feet. Out of 13 buildings, only one building contained two commercial units admeasuring 312 sq. ft. The case was selected for scrutiny and the Assessing Officer required the assessee to explain as to why deduction claimed u/s. 80IB(10) of the Act should not be disallowed since transactions in respect of following parties did not satisfy the conditions of clause (f) of section 80IB(10) of the Act. Sr. Flat Nos Building's Agreement Buyer's name Sale (₹) no sold name date B-Blue Bells Milind Baburao I. 501-502 05.01.2010 21,84,500/- Patil Bharatbhushan ii. 601-602 D-Daffodil 27.11.2009 19,50,460/- Sudam Surve Pramod Kautik iii. 201-202 L-Lilac 16.07.2010 28,09,300/- Sonawane Veneet Venkatesh iv. 101 Lilac 23.02.2011 16,67,500/- Kamath Vidyal Venkatesh v. 102 Lilac 23.02.2011 16,67,500/- Kamath Narandra vi. 201 Aster 22.01.2010 10,92,250/- Raghunath Patil Satish Raghunath vii. 403 Aster 11.12.2009 9,97,200/- Patil 4. The assessee explained to the Assessing Officer that Flat No.101 and Flat No. 102 were sold to Mr. Veneet Venkatesh Kamath and Mr. Vidyal Venkatesh Kamath respectively, who are brothers, and, hence, this relationship is not hit by provisions of S.80IB(10)(f) of the Act. Similarly, Flat No.201 and Flat No. 403 of Aster building were sold to Mr. Narandra Raghunath Patil and Mr. Satish Raghunath Patil respectively, but these two persons are not related to each other and merely have same family name. Mr. Satish was resident of Ulhasnagar and Mr. Narandra was 4 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction resident of Dombivali. Even considering resemblance, at the most they appeared to be brothers, which relationship is not hit by provisions of S. 80IB(10)(f) of the Act.
In other three cases in Sl.Nos. (i) to (iii) where flats were sold to same individual, the buyer wanted to buy flats with bigger area. The flats sold were separate when initially constructed but when combined together, it fulfilled the requirements of the buyer.
The Assessing Officer accepted the explanation in respect of four parties, namely Shri Veneet Venkatesh Kamath, Shri Vidyal Venkatesh Kamath, Shri Narandra Raghunath Patil and Shri Satish Raghunath Patil, purchasers of Flat Nos. 101, 102, 201 and 403 respectively. However, he did not agree with the explanation of the assessee in so far as the flats sold to three parties, viz. Shri Pramod Kautik Sonawane to whom Flat Nos.201-202 in L-Lilac were sold; Shri Milind Baburao Patil to whom Flat Nos. 501-502 in B-Blue were sold and Shri Bharatbhushan Surve to whom Flat Nos. 602- 603 in D-Daffodil were sold. According to the Assessing Officer, the conditions prescribed u/s. 80IB(10)(f) of the Act were not fulfilled in respect of sale of flats to the aforesaid three parties.
5 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction 7. The assessment was completed by the Assessing Officer u/s.143(3) of the Act vide order dated 27.03.2015 determining total income of the assessee at ₹.30,24,67,270/- by disallowing the deduction claimed by the assessee u/s. 80IB(10) of the Act in its entirety for following reasons: a. On assessee's own admission the flats were amalgamated and combined and allotted to one individual, two different conveyances were executed in the name of the same individual, which violates the condition prescribed i.e. S.80IB(10)(f) of the Act. b. Since the assessee has sold flats to same individual, the assessee has violated provisions of S. 80IB(10) of the Act. c. The fulfilment of the prescribed conditions is cumulative i.e. all conditions must be satisfied for the purpose of claiming the deduction u/s.80IB(10) of the Act. d. There is no condition that deduction should be allowed proportionately if the assessee has allotted two flats to the person and his family members. The Statute has to be interpreted on the basis of words used by the Statute.
The assessee preferred appeal before the Ld.CIT(A) and filed submissions and offered explanation to each of the reasons of the Assessing Officer for disallowing claim of deduction u/s. 80IB(10) of the Act. The Ld.CIT(A) disposed off the appeal directing the Assessing Officer to allow proportionate deduction u/s.80IB(10) of the Act. Ld.CIT(A)
6 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction took into account the reasons recorded by the Assessing Officer for disallowing the claim and submissions/details filed by the assessee before the Ld.CIT(A) and the reasons for issuing such direction to the Assessing Officer by the CIT(A) are summarized as under: a. The assessee had fulfilled all the conditions u/s. 80IB(10) of the Act except that 6 flats were converted into 3 flats but after combining, they did not exceed the limit related to area, i.e., 1500 sq. ft. per unit/flat. b. The condition referred in clause (f) was inserted by Finance Act (no.2) of 2009 is applicable w.e.f. 1.4.2010. Since the project of the assessee was approved on 29.03.2007, this condition is not applicable in the case of the assessee. c. In view of various decisions (listed below) and following judicial precedents, the assessee is eligible to claim proportionate deduction u/s. 80IB(10) of the Act. i) Emgeen Holdings P. Ltd. v. DCIT in ITA.No. 332/Mum/2010 A.Y.2003-04 order dated 11.05.2011. ii) Bengal Ambuja Housing Development Ltd. v DCIT in ITA.No. 1595/Kol/2005 A.Y.2003-04 order dated 24.03.2006. iii) CIT v. Shree Balaji Developers in ITA.No.2592/Mum/2006 A.Y.2004-05 order dated 21.10.2008. iv) DCIT v Brigade Enterprises [24 DTR 371 (Bang)]. v) Arun Excello Foundations P. Ltd v. ACIT [108 TTTJ 71] (Chennai). vi) Saroj Sales Corporation in ITA.No. 4008/Mum/2007 order dated 24.01.2008.
7 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction 9. Since the Ld.CIT(A) has granted only proportionate deduction as against full deduction claimed u/s. 80IB(10) of the Act, the assessee has filed the present appeal. Similarly, Department is also aggrieved against granting proportionate deduction and not disallowing the entire claim on the ground that there is no such provision in the Act to allow proportionate deduction.
Ld. Counsel for the assessee invited our attention to the clause “(c)” and “(f)” of Section 80IB(10) of the Act which reads as under:-
“(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; ….. (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely: — (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta, 8 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta.”
Learned Counsel for the assessee submitted that all the residential units constructed in the project “Mohan Valley” is less than 1500 sq.feet and the project is beyond 25 K.M of Mumbai Municipal Corporation and this is not in dispute. Learned Counsel for the assessee submitted that it is not disputed that residential units have been combined by the assessee and sold as one residential house. In fact, subsequent to the amendment carried out in the records of local authority, the combined units, i.e. residential house became a residential unit. In these circumstances, there is neither any violation of clause (c) (which prescribes condition of maximum built-up area of 1,500 sq. ft. of unit) nor clauses (e) and (f) (which stipulate that more than one residential unit cannot be sold to relatives).
Learned Counsel for the assessee submitted that while interpreting clause (c), it was always the argument of the Department that one has to see the area of the actual and physical residential units (after amalgamation of units) and if the area of such amalgamated residential house exceeded such limit, the assessee would not be eligible for deduction. Applying the same analogy to clauses (e) and (f), it can be 9 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction safely concluded that the residential units as per these clauses would mean a residential house after amalgamation of residential units. In this view of the matter also, there is no violation of clause (e) and (f) in the present case.
Learned Counsel for the assessee further submitted that, the purpose of insertion of clauses (e) and (f) is to ensure that assessee does not violate clause (c) by selling more than one unit to same person/relatives where the area of the residential house exceeds the ceiling prescribed. It is submitted that in the present case, admittedly, the area of residential house (even after amalgamation of units) does not exceed the ceiling and, hence, there is no violation of the provisions of the Act either in letter or in spirit.
Learned Counsel for the assessee submitted that as held by the Hon'ble Supreme Court in a series of decisions, the conditions imposed by the section meant for encouragement of economic activities and beneficial provision should be construed liberally. Reliance is placed upon the decision of the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT [196 ITR 188 (SC)]. It is submitted that the Ld.CIT(A) having given finding that the assessee has fulfilled all the conditions prescribed, he ought to have allowed the deduction u/s.80IB(10) of the Act in its entirety.
10 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction 15. Without prejudice to the above, Ld. Counsel submitted that the law to be applied for claim of deduction u/s. 80IB(10) of the Act should the law as on the date of approval of the housing project. The project of the assessee was approved by the local authority before 31.03.2008 i.e. 29.03.2007. The clause (f) of section 80IB(10) of the Act has been inserted by the Finance (No.2) Act, 2009 w.e.f. 1.4.2010. Therefore, the condition incorporated in clause (f) of section 80IB(10) of the Act is not applicable in the case of the assessee. For this reason, also, the claim of the assessee was well founded.
Ld. Counsel for the assessee further referring to the letter issued by Kulgaon Badalapur Municipal Council submits that the Municipal Council amended the occupancy certificate in respect of Flat Nos. 201-202; 501-502 and 602-603 and amended their records to treat the said flats as single unit i.e. 201-202 as a single residential unit and similarly the other flats. Therefore the Ld. Counsel for the assessee submitted before us that since the Municipal Authorities have treated by amending their occupation certificate and also the records that the flats No.s 201-202; 501-502 and 602-603 as single residential units it cannot be said that there is a violation of clause (f) of section 80IB(10) of the Act.
11 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction 17. Coming to the Revenue’s appeal Learned Counsel for the assessee submits that whether the assessee is entitled for the proportionate deduction under the provisions of section 80IB(10) or not has been decided in various decisions holding that assessee indeed entitled for proportionate deduction. Therefore, Learned Counsel for the assessee submits that in view of the various judicial pronouncements there is no merit in the appeal of the Department and the same may be dismissed. In support of his contentions he placed reliance on the following decisions: a. Viswas Promoters (P) Ltd v. Asst. CIT [255 CTR 149 (Mad)]; b. Rohan Homes v. Asst. CIT (ITA No: 423/PN/2011) dated 31.01.2013; c. Dy. CIT v. Ekta Housing Pvt. Ltd. (ITA No: 3649/Mum/2009) dated 20.05.2011; d. Asst. CIT v. Suncity Housing (ITA No: 5183/Mum/2014) dated 30.05.2016; e. Bengal Ambuja Housing Development Ltd v. Asst. CIT (1TA No:1595/Ko1/2005) dated 24.03.2006 upheld by Hon'ble Calcutta High Court in IT Appeal No 458 Of 2006 dated 05.01.2007; f. Arun Excello Foundation Pvt. Ltd. v. ACIT [108 TTJ 71 (Chen)]; g. G.V. Corporation v. ITO [38 SOT 174 (Mum)]; h. SJR Builders v. ACIT [3 ITR(T) 569 (Bang)]; and i. ITO v. Air Developers [122 ITD 125 (Nag)].
Ld. DR submitted before us that the residential units i.e. Flat Nos. 201-202; 501-502 and 602-603 are separate units and they are assessed separately by Municipal Authorities. Since all these flats are independent and separate units they cannot be treated as single residential units for 12 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction the purpose of clause(f) of Section 80IB(10) of the Act and therefore since the assessee sold more than one residential flat there is a violation of condition prescribed in clause (f) of Section 80IB(10) of the Act. Therefore, the Ld. DR submitted that Assessing Officer has rightly denied the deduction u/s. 80IB(10) to the assessee. The Ld. DR further submitted that the decisions discussed in the Ld.CIT(A) order and relied upon by the Ld. Counsel for the assessee are all prior to the amendment. Ld. DR submitted that in the case of ITO v. Poddar Ashish Developers in ITA.No. 4894/Mum/2013 order dated 10.04.2015 Coordinate Bench considered the provisions of clause (f) of Section 80IB(10) of the Act after amendment and concluded that since the assessee converted the flats into duplex flats the deduction u/s.80IB(10) was not allowed on entirety.
In reply Learned Counsel for the assessee submitted that the Tribunal in the case of ITO v. Poddar Ashish Developers (supra) they have set-aside the issue to be examined by the Ld.CIT(A) with reference to the facts of that case. Learned Counsel for the assessee further submits that the facts in the case of ITO v. Poddar Ashish Developers (supra) as well as the facts in the assessee’s own case are different and therefore that decision has no application to the facts of the assessee’s case.
13 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction 20. We have heard the rival submissions, perused the orders of the authorities below and the decisions relied on. Assessee has raised several contentions and prepositions before us to show that there is no violation of provisions of section 80IB(10)(f) of the Act. The reason for denial of deduction u/s. 80IB (10) of the Act in this case by the Assessing Officer is that the assessee violated the provisions of clause (f) of Section 80IB (10) of the Act. As per the provisions of clause (f) of Section 80IB(10) of the Act, in a case where a residential unit in the housing project is allotted to an individual, no other residential unit shall be allotted to the very same individual or to his spouse or minor children in the same project. In the case on hand since the assessee allotted two flats namely 201-202 in L-Lilac to Pramod Kautik Sonawane; flat Nos. 501-502 in B-Blue Bells to Milind Baburao Patil and Flat Nos. 601-602 in D-Daffodil to Bharatbhushan Sudam Surve, the Assessing Officer held that there is a violation of provisions of clause (f) of Section 80IB (10) of the Act. As per the provisions of section 80IB(10) of the Act assessee is eligible for deduction who develops the housing projects approved by Local Authorities. The Housing project consisting of 13 buildings i.e. buildings A-M with 409 flats situated at Hendrapada, Kulgaon, Badalapur (West) and the buildup area of each residential unit is less than that of permissible area of 1500 Sq. Feet as stipulated in Clause “c” of Section 80IB(10) of 14 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction the Act. It is not in dispute that this project is approved by the Local Authorities. Though initially the plan of approval was sanctioned for 412 flats later by letter dated 25.02.2015 Municipal Council of Kulgaon, Badalapur expressed no objection to amend the plan and occupancy certificate and reduced the total flats to 409 flats and treat the flat Nos. 201-202; 501-502 and 602-603 as three single units instead of six residential units. The Kulgaon, Badalapur Municipal Council in its letter had stated as under: - “In accordance with the above referred matter, we inform that, in the housing Complex Mohan Valley, constructed on Land Hissa No.1 (part), Survey No.61 in Kulagaon, Badlapur, Flat No. 501 and Flat No. 502 on 5th floor in B Wing each area of 43.52 Sq.m,tr. Sold by Agreement dated 05/01/2010, Flat No. 602 and 603 in D Wing each area of 43.52 Sq. mtr. Sold by Agreement dated 27/11/2009 and Flat No. 201 and Flat No. 202 in L Wing each area of 43.52 sq.mtr. sold by Agreement dated 16/07/2010. In each case, after amalgamation of these flats as one flat, total area become 87.04 sq.mtr. As regards your application requesting for amendment of records in this regard, this is to inform you according to earlier approval by City Council as per Record No: KBNP/NRV/BP/348 dated 13/05/2011, for occupancy there is no change in Total Built-up Area of building (Carpet, Index), Composite Space, Height of Building etc., and therefore within permissible limit, there is no objection to amendment in total flats from 412 to 409 and as against 6, it is determined at 3.”
As could be seen from the above, letter issued by Kulgaon, Badalapur Municipal Council dated 25.02.2015 it is informed that the there
15 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction is no objection to amend the earlier approval issued by City Council and occupancy certificate to treat the amalgamated flats as single unit. Since the Municipal council expressed no objection to amend its plan and issue occupancy certificate treating the composite flats as single unit, the composite flat becomes one residential unit as per the plan of Local Authorities. Further the area of the flats after the amalgamation is only 887 Sq. feet and less than 1500 Sq. feet as specified in clause (c) of Section 80IB(10) of the Act. In the circumstances in our view there shall not be any violation of clause (f) of section 80IB(10) of the Act. However, the assessee before us submitted only the letter issued by Kulgaon, Badalapur Municipal Council, it is not clear from this letter as to whether the occupancy certificate had been issued to the flat owners of 201-202; 501-502 and 602-603 treating the composite flats as single units. Therefore in principle, we hold that if the Municipal Council amended its plan and issued occupation certificate for the composite flats treating them as a single unit there shall not be any violation of clause (f) to section 80IB(10) of the Act and the assessee is entitled for deduction in Toto. However, since the occupancy certificate is not furnished before us, we restore this issue to the file Assessing Officer and the assessee shall furnish the occupancy certificate to show that the composite flats have been treated as single unit by the Municipal Council. If it is proved that 16 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction this contention is true, then the claim of the assessee shall be allowed without any restrictions; if it is not proved by the assessee that the occupancy certificate issued by Municipal council treating the composite flats as single unit the assessee shall be entitled for proportion deduction in view of the following judicial pronouncements: (a) Judgment of the Hon'ble Madras High Court in the case of CIT v. Elegant Estates [383 ITR 49] (b) Order of the Hon'ble Tribunal in the case of ACIT v. Suncity Housing in ITA.No. 5183/Mum/2014 dated 30.05.2016. (c) Order of the Hon'ble Tribunal in the case of DCIT v. Ekta Housing Pvt. Ltd in ITA.No. 3649/Mum/2009 dated 20.05.2011. (d) Order of the Hon'ble Tribunal in the case of Roham Homes v. DCIT in ITA.No. 423/PN/22011 dated 31.01.2013.
Thus, we restore this issue to the file Assessing Officer who shall consider the claim of the assessee in the light of our above observations. The assessee is at liberty to file evidence in support of its contentions that the composite flats have been treated as single units by the Municipal Authorities. Needless to say that the Assessing Officer shall give the adequate opportunity of being heard to the assessee.
The other contentions raised by the Ld. Counsel for the assessee are not gone into since they would be only academic, in view of our above findings and decision on the claim of the assessee based on the approval
17 ITA.No.336/MUM/2016 (A.Y: 2012-13) ITA.No.164/MUM/2016 (A.Y: 2012-13) M/s. Soham Construction and occupancy certificate which is a crucial fact to determine the eligibility of the assessee.
In the result, appeal of the assessee is partly allowed for statistical purposes and the appeal of the Revenue is dismissed.
Order pronounced in the open court on the 01st March, 2018.