DEPUTY COMMISSIONER OF INCOME-TAX vs. M/S. OM ASSOCIATES,, PUNE

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This is the appeal filed by the Revenue against the order of CIT(A)- 5, Pune, dated 26-02-2016 for the Assessment Year 2011-12.

is a partnership firm and is engaged in the business of Promoters,

Builders and Developers. Assessee filed the original return of income

on 30-09-2011 declaring income of Rs.35,84,143/-. Assessee developed

a residential housing project named ‘Faith” at Balewadi, Pune and

claimed the deduction of Rs.16,82,85,520/- u/s.80IB(10) of the Act.

The project was referred to the Valuation Officer and the Valuation

Officer submitted a report dated 19-02-2014. There are certain issues

relating to date of completion of the project consisting of various

buildings. Assessee did not complete Building A by the due date.

Eventually, the AO, relying on the decision of Chennai Bench of the

Tribunal in the case of Vishwas Promoters Pvt. Ltd. 12 ITD 263 and the

decision of Special Bench of the Tribunal in the case of Brahma

Associates and Others 122 TTJ 433 (SB) (Pune), denied the entire claim

of deduction u/s.80IB(10) of the Act by holding as holder :

“20. The issue of pro-rata deduction has been set to rest by the decision of the jurisdictional High Court in the case of Brahma Associates 333 ITR 289 wherein the Hon’ble Court has held that the question of allowing deduction to a part of the project does not arise. The observations of the Hon’ble High Court is reproduced as under : 28. In the present case, though the commercial user is more than 10 percent of the plot area, the tribunal has allowed s.80IB(10) deduction in respect of 15 residential buildings on the ground that the profits from these exclusively residential buildings could be determined on standalone basis. In our opinion that would not be proper, because section 80IB(10) allows deduction to the entire housing project approved by the local authority and not to a part of the project. If the conditions set out in section 80IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project . . . . . . .” 21. In view of the above discussion, it is concluded that the assessee is not eligible to claim deduction u/s.80IB(10) in respect of its project “Faith”. Deduction of Rs.16,82,85,520/- claimed u/s.80IB(10) in respect of its project, “Faith” is disallowed and back to the income of the assessee. Penalty proceedings u/s.271(1)(c) are separately initiated for furnishing inaccurate particulars of income and concealment of income.”

submissions and the decisions relied on before him, concluded that the

AO misinterpreted the factual and legal matrix of the said decision in

applying the ratio to the appellants case under consideration. AO has

only partly quoted the Para Nos. 123 to 125 of the said judgment. The

decision in the case of Brahma Associates (supra) on the other hand

directed to allow proportionate deduction for the residential units

constructed fulfilling the conditions of section 80IB(10) of the Act.

Eventually, the CIT(A) allowed the claim of pro-rata deduction

u/s.80IB(10) to the assessee holding as under. Contents of Para No.8.5

of the order of CIT(A) are relevant and therefore, the same are extracted

here as under:

“8.5 I tend to agree with the appellant’s interpretation about the factual and legal matrix of the case of Brahma Associates & others (supra). Further, nowhere in the said case has it been stated that, wherein a project is sanctioned as a residential project and could be considered as a residential project on a standalone basis, could not be granted proportionate deduction u/s.80IB(10) of the Act. On the other hand, the said case categorically has given findings for allowing proportionate deduction. The interpretation, the AO has given to the decision of the said case and thereby denied the appellant its claim of deduction u/s.80IB(10) of the Act, as far as the 108 residential flats in Buildings ‘B’, ‘C’ and ‘D’ are concerned, is according to me a misconstrued interpretation. This is especially so, when the appellant has fulfilled all the prescribed conditions laid down in section 80IB(10) of the Act for the said flats all the prescribed conditions laid down in section 80IB(10) of the Act for the said flats and when the completion certificate for the same was issued by the local authority indicating completion prior to 31-3- 2012. The AO referred to the relevant Para of the said deduction applicable to the facts of the said case but failed to quote the relevant Para wherein the Tribunal has directed to allow the deduction for the residential units, as applicable in the appellant’s case under consideration. My view, regarding the misconstrued interpretation by the AO, in the case of Brahma Associates & Others (supra) is further fortified by the above judicial pronouncements referred to by the appellant and thus, denying the appellant proportionate deduction u/s.80IB(10) is not justified. These judicial decisions have given categorical findings, that for a housing project, if all the conditions as laid down in section 80IB(10) of the Act are fulfilled, the assessees are entitled to proportionate deduction and/or deduction on pro-rata basis for the part completed by it within the prescribed time limit. In the case of the appellant, it has been seen, that the appellant’s project ‘Faith’ commenced on 29-03-2007 and the first and second completion certificates for Building ‘B’, ‘C’ and ‘D’ were issued on 31-03-2010 and 24-03-2011 well before the due date of completion of the said project, i.e. 31-03-2012. The appellant, had obtained the completion certificates for 108 residential tenements (Each building having 36 residential tenements). It is also seen that the

appellant had complied with all the conditions to be eligible for deduction u/s.80IB(10) of the Act, in respect of aforesaid 3 buildings consisting of 108 flats. The completion of these 108 flats has not been disputed by the AO who has categorically issued by the local authority and also by the report of the Valuer appointed by the AO. The Valuation Officer appointed by the AO has also confirmed, that the assessee complied with all the conditions for granting of deduction u/s.80IB(10), as submitted by the appellant before him. Though the aforesaid facts were considered by the AO in Para 16 of the assessment order, the AO has commented on such the valuation report inter alia stating that “Valuation Officer had merely given the factual report” and “he has not offered any comments on whether the project is eligible for claim of deduction u/s.80IB(10)”. This clearly indicates that even the report given by the Valuer appointed by the AO himself, was brushed aside lightly by the AO. In view of the discussions in the preceding paragraphs and as the appellant had complied with the provisions laid down in Sec.80IB(10) of the Act in respect of 3 buildings for 108 residential flats constructed, and the project was entirely a residential project, relying on the ratio of the decisions of the plethora of judicial pronouncements cited by the appellant. I do not find any reason, not to allow the appellants claim of proportionate deduction u/s.80IB(10) of the Act. The appellant is therefore entitled to proportionate deduction u/s.80IB(10) for the ‘B’, ‘C’, ‘D’ buildings constructed and completed. The AO is directed to allow deduction u/s.80IB(10) of the Act on the profit earned by the appellant from the said buildings. The additional ground raised by the appellant is accordingly allowed.”

us with the grounds extracted above.

deduction u/s.80IB(10) of the Act and perused the orders of AO and the

CIT(A) and the decisions relied upon by the assessee. On going through

the finding of CIT(A) on this issue, we find the CIT(A) has rightly allowed

the deduction u/s.80IB(10) of the Act to the assessee after considering

the following important aspects :

It is a settled legal proposition that the claim of deduction is allowable

on pro-rata basis qua the complete part of the project. Considering the

above, we are of the opinion that the assessee is entitled to pro-rata

deduction u/s.80IB(10) of the Act for the buildings B, C and D. We

therefore, uphold the order of CIT(A). The grounds raised by the

Revenue are dismissed.

Order pronounced in the open court on this 06th day of June, 2018.

Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य

पुणे Pune; �दनांक Dated : 06th June, 2018 सतीश आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत

अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-5, Pune 4. The Pr.CIT-, Pune-4, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “A Bench” Pune; 5. गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune