THE ACIT.,, NEW DELHI vs. M/S. ANSAL HOUSING & CONSTRUCTION LTD.,, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.3193/Del/2008 Assessment Year : 2004-05 Ansal Housing & Construction ACIT, Central Circle-20, Ltd., New Delhi. UGF-15, Indraprakash Bldg., Vs. 21, Barakhamba Road, New Delhi. PAN : AAACA 0377 R (Appellant) (Respondent)

ITA No.1248/Del/2009 Assessment Year : 2005-06 Ansal Housing & Construction ACIT, Central Circle-20, Ltd., New Delhi. UGF-15, Indraprakash Bldg., Vs. 21, Barakhamba Road, New Delhi. PAN : AAACA 0377 R (Appellant) (Respondent)

ITA No.1254/Del/2009 Assessment Year : 2005-06 ACIT, Central Circle-20, Ansal Housing & Construction New Delhi. Ltd., UGF-15, Indraprakash Bldg., Vs. 21, Barakhamba Road, New Delhi. PAN : AAACA 0377 R (Appellant) (Respondent)

ITA No.1576/Del/2010 Assessment Year : 2006-07 DCIT, Central Circle-20, Ansal Housing & Construction New Delhi. Ltd., UGF-15, Indraprakash Bldg., Vs. 21, Barakhamba Road, New Delhi. PAN : AAACA 0377 R (Appellant) (Respondent)

: Assessee by Shri Ajay Vohra, Sr. Adv., Shri Gaurav Jain, Adv. Ms. Bhavita, Adv. Department by : Shri S. K. Jain, Sr.DR Date of hearing : 08-02-2017 Date of pronouncement : 28-03-2017

O R D E R PER S.V. MEHROTRA, A.M :

Out of four captioned appeals, two appeals relating to assessment years 2004-05 and 2005-06 preferred by the assessee and the other two appeals

relating to assessment years 2005-06 and 2006-07 preferred by the Department, were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity.

ITA No.3193/Del/2008 (A.Y. 2004-05) :

of the Income Tax Act, 1961 (in short “the Act”) relating to assessment year

2004-05.

assessee carried on the business of real estate, development of mini townships,

promotion, development and construction of houses, flats, villas and

commercial complexes. It had filed its return of income declaring total income

of Rs.1,58,08,470/- on 01.11.2004. The assessment was completed at a total

income of Rs.5,27,28,907/- after making following additions :-

(a) Addition on account of Notional ALV of unsold flats/spaces –

Rs.1,56,35,782/-.

(b) Denial of deduction u/s 80IB(10) – Rs.2,12,84,740/-.

assessee is in appeal before us and has taken following grounds of appeal :-

“1. That on the facts and circumstances of the case and in law, the Commissioner of Income-tax erred in similarly dismissing the ground taken by the appellant challenging the action of the Assessing Officer in not considering the revised computation of income filed by the appellant vide letter dated 21st December, 2006. 2. That on the facts and circumstances of the case and in law, the CIT(A) erred in not directing the Assessing Officer to allow depreciation u/s 32 of the Income tax Act, 1961 (‘the Act’) on consultation/ development fees paid in the Assessment Year 2002-03 as the said fees was held to be capital expenditure in that year. 3. Without prejudice and in the alternative, that on the facts and circumstances of the case and in law, the appellant should be held entitled to claim depreciation u/s 32 of the Act on consultation/ development fees paid in the assessment year 2002-03 as the said fees was held to be capital expenditure in that year treating the said ground as an additional ground raised before the Tribunal for the first time.

this ground is to be decided against the assessee because the Delhi Bench of

ITAT and Hon’ble Delhi High (ITA Nos.1261 of 2008, 1278 of 2008, 1287 of

2008, 1402 of 2008 – placed at pages 1-16 of Paper Book-II dated 03.03.2014),

in the asessee’s own case for assessment year 1994-95 to 1998-99, has rejected

the assessee’s plea on this count. Accordingly, ground no.1 is dismissed.

assessment year 2002-03, the assessee incurred consultancy/ technical

assistance expenditure towards extension of existing business of construction in

the field of hospitality by setting up/ running of restaurants. This expenditure

was claimed as revenue expenditure by the assessee, which was disallowed by

the Assessing Officer by treating the same to be capital asset. Ld. CIT(A)

upheld the order of Assessing Officer and allowed the depreciation thereon.

Further, the appeal against the order of ld. CIT(A) was upheld by the Delhi

Bench of Tribunal, in appeal for the assessment years 2001-02, 2002-03 and

2003-04, vide consolidated order dated 09.09.2011 (placed at pages 17-43 of

Paper Book-II dated 03.03.2014).

following grounds of appeal :-

“1. That on the facts and circumstances of the case and in law, the CIT(A)-I has erred in treating the expenses of Rs.46,55,570/- incurred on consultation/ development fee paid to franchiser companies as capital expenditure and in not providing deductions as revenue expenditure claimed u/s 37(1) of the Income Tax Act, 1961. The action of the CIT(A)-I being arbitrary, erroneous, unwarranted and unjust must be quashed with directions for reckoning the same as revenue outgoing.”

The assessee had also taken following additional grounds of appeal :-

“Without prejudice that on facts and circumstances of the case, the expenditure by way of payment of Rs.18,75,195/- to RHW Hotel Management Services Ltd. On account of consultation/ development fees may kindly be directed to be allowed as deduction in the assessment year 2001-02.”

“16.1 A perusal of the facts clearly show that assessee and the operators i.e. M/s RHW Hotel Management Services Ltd., agreed on a formula for two types of fee. The amount in question for A.Y. 2001-02 & 2002-03 was on account of providing of technical know-how and expert knowledge prior to the commencement. By own admission of assessee it was not engaged into hospitality business and diversified from business of construction of buildings. In these circumstances, we see no infirmity in the order of CIT(A), holding that the restaurant business was a new business and expenditure was for setting up the same and the expenses were not allowable as business in nature. We uphold CIT(A)’s order. Assessee’s ground no.1 for A.Y. 2002-03 and additional ground in respect of assessment years 2001-02 & 2002-03 are dismissed.”

page 52 after upholding the assessment order, ld. CIT(A) directed the Assessing

Officer to allow depreciation as per Rules. Therefore, in view of

aforementioned discussion, the Assessing Officer is directed to allow

depreciation as allowed in the past. In the result, ground nos.2 and 3 are

allowed for statistical purposes.

course of assessment proceedings, the assessee vide letter dated 21.12.2006,

filed revised computation of income claiming additional TDS of Rs.50,192/-.

The certificates were also annexed to the said letter justifying the claim made by

the assessee. However, the Assessing Officer completed the assessment u/s

143(3) of the Act, without acknowledging the revised claim of TDS made by

the assessee. Further, vide letter dated 29.01.2007 assessee also filed

rectification application requesting to give effect to the aforesaid TDS claimed.

He submitted that ld. CIT(A) also did not consider the aforesaid revised

computation and completed the assessment in accordance with the original

return filed by the assessee.

had taken following specific ground of appeal :-

“(vi.iii.ii). That on the law, facts and in the circumstances of the case, the Learned Deputy Commissioner of Income Tax has erred in not granting credit of TDS to Rs.1,43,215/- filed vide its letter dated 21st December and 29th December, 2006 during the course of assessment proceedings before completion of assessment u/s 139(5) of the Act.”

issue is restored back to the file of ld. CIT(A) for adjudication. In the result,

these grounds are allowed for statistical purposes.

the Act. Brief facts apropos these grounds are that the assessee had claimed

deduction u/s 80IB(10) amounting to Rs.2,12,84,740/-. The Assessing Officer

denied the assessee’s clam for the following reasons :-

(a) The assessee did not satisfy the conditions contained in clause (a)

to section 80IB(10) because the projects commenced construction prior to

01.10.1998, being the cut-off date stipulated u/s 80IB(10) for claiming

deduction under that section.

(b) The assessee did not fulfill the conditions laid down in clause (c) to

section 80IB(10) because most of the residential unit were with built-up

area exceeding 1000 sq. feet, being the size of housing project stipulated

u/s 80IB(10) for claiming deduction under that section. The Assessing

Officer observed as under :-

“In regard to condition in clause (c) of section 8018(10) that the residential unit has a maximum built up area of 1000 sq. feet within the cities of Delhi and Mumbai or within twenty five kilometers from the municipal limits of these cities, the assessee filed sanctioned plan only in respect of housing project at Ghaziabad. A perusal of said sanction plan of housing project at Ghaziabad revealed that the size of the plot is 200 sq. meter (approx. 2000 sq. feet) and permissible ground floor coverage is 134 sq. meter (approx. 1340 sq. feet) This fact itself indicates that maximum built up area of residential unit permissible as per the building by-laws was beyond 1000 sq. feet. In the housing project, Golf Link-II, on enquiry, it was found that type C & E residential units were with built up area of 1177 and 1133 sq. feet respectively. Enquiry further revealed that the arial distance of all the three projects are within 25 kilometers. Spcl. enquiry of Avantika Akriti housing project at Ghaziabad revealed that most of the residential units were with built up area exceeding 1000 sq. feet and some of them were with two storeyed construction. The assessee's claim that built up area of residential units are less than 1000 sq. feet cannot be accepted as the assessee has taken the area of varanda and other projections at 50% & 25 %. The built up area has now been defined and Finance (No.2) Act, 2002 has inserted clause (a) In sub section 14 of section 80I8(10) defining the meaning of built up area as under:- 80IB(14)(a): "built-up area" means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common area shared with other residential units; This insertion in section 80IB is clarificatory in nature and is applicable for all pending proceedings. The definition of built up area, spot enquiries made in the earlier year, scrutiny of sanctioned plan filed and all other facts prove beyond doubt that the assessee does not fulfill the conditions in regard to maximum built up area as laid down in clause (c) of section 8018(10).”

submitted that this issue is covered by decision in assessee’s own case in ITA

Nos.1922 & 1923/Del/2005 for assessment years 2000-01 & 2001-02 vide order dated 12th June, 2009, wherein, the Tribunal has held as under :-

“9. On a close reading of the provision of this section, it would be evident that the deduction under this section is available on satisfaction of the following conditions: i) The project is approved by a local authority; ii) The size of the plot of land is of a minimum 1 acre; iii) The residential unit should have a built-up area not exceeding 1,000 sq. ft. ; iv) The undertaking commences development and construction of the housing project on or after 1st October, 1998 v) The undertaking completes the development and construction before 31st March, 2001. 10. There is no dispute as regards first two conditions, that the project was approved by a local authority and that the project was being developed on land exceeding 1 acre. This also stands certified by the auditors and details of which are as under:

Project Size of the land Date of approval of lay out plan of residential colony

30th May 1997 Golf Link I, Greater 100 acres Noida 11th March 1999 Golf Link II Greater 38.86 acres Noida 14th October, 1996 Avantika Aakriti 82.69 acres

16th January, 1999 East End Loni 87.10 acres

statutory definition of the same. The completion certificates of the residential houses provided by the relevant authority also approved the constructed area of each house. The local authorities as per the municipal bye laws did not consider the size of the verandah/platform or any projection to the residential unit as part of the built up area in case size of such projections having width up to 1.00 meter. The size of such projections was covered within the constructed/built up area of the residential unit, if the same exceeded 1.00 meter. The built up area as per the completion certificate is less than 1000 sqft in almost all the cases except in case of following few houses forming part of the housing project at East End Loni and Aavantika Aakriti:

S.No. ( as per House No. Built up area as per completion reconciliation) certificate. East End Loni 1. A/c 184 1397.49 2. A/c 185 1397.49 7. A/c 1890 1097.93 22 A/D 103 1255.94 23. A/d 104 1255.94 Aavantika Aakriti 5 AD0/047 1301.91 16 AD0/076 1301.91 66 BDo/269 1301.91 76 BDo/295 1301.91 145 DD1/009 1301.91 148 DD1/012 1301.91

………..

.......... 21. In view of the aforesaid two decisions, we are of the opinion that deduction under section 80-IB(10) has been rightly allowed on housing projects because the building plans of the residential units were approved after 1.10.98 only and the construction has to be deemed to have been commenced on or after the date of approval itself. ……….. 23. We hold therefore that CIT is not right in holding that AO failed to make enquiries or to apply his mind and allowed deduction under section 80IB(10) of the Act. We therefore vacate his order and restore that of the AO. It is, however, except for the construction found to be in excess built up area over 1000 Sq. ft. as aforesaid and in respect of which the assessee would not entitled to deduction.

of the above Tribunal’s order. Ld. counsel further pointed out that this decision

has been approved by Hon’ble Delhi High Court wherein it has been held as

under :-

“14. We are not persuaded to take a view different from the view taken by the Tribunal. A clear finding was recorded by the Tribunal that the assessee had filed the details and calculations about the built-up area of the residential units. It would be unreasonable to hold that the Assessing Officer ignored those details. Moreover the statutory auditors had clearly mentioned the dates of approval of the lay out plan of the residential colonies. The Assessing Officer was thus made aware of the dates on which the approvals were granted in respect of each of the four housing projects. The more important aspect was the applicability of clause (a) of Section 80IB(10). On this aspect the Tribunal held that any construction carried out before the receipt of necessary approvals would be unauthorized and could not be recognized. It was found by the Tribunal that in any case there was only site development by filling of pits, leveling of land, construction of roads; wells, laying of sewerage and electricity lines etc. Further there was no dispute regarding the date of commencement of construction with respect to the projects, namely, Golf Link-Il and East End Loni. The Tribunal has found that both these projects commenced after 1st October, 1998. With regard to the other two projects, namely, Golf Link-I and Avantika Akruti, the Tribunal held that the date of commencement of construction had to be reckoned from the date when the construction of the building plan of each project was approved by the concerned authority. On examination of the details of the chronological events furnished by the assessee, it was held by the Tribunal that the building plans of each house submitted by the assessee were not sanctioned as such by the competent authority before 1st October, 1998. They were rejected and time and again modifications were

proposed by the authority; finally the approvals of the building plans were issued after 1st October, 1998, except for 26 houses in Avantika Akruti Project. The Tribunal has also referred to certain orders of the Pune and Bombay Benches of the Tribunal where the date of approval by the competent authority was considered crucial to determine the date of commencement of development or construction. This discussion of the Tribunal shows that the determination of the question as to when the undertaking commenced development and construction, in the absence of any statutory prescription, has to be decided in a pragmatic and reasonable way. It would have been an entirely different issue had there been a statutory prescription of what would be the date of commencement of construction or development. It is certainly a debatable issue on which more than one plausible view is reasonably possible and merely because the Assessing Officer has taken one plausible view, it cannot be said that the assessment is erroneous or prejudicial to the interest of the Revenue. This position stands well settled by the judgments of the Supreme Court cited supra. The Tribunal applied the tests laid down in these judgments to the case.

in assessee’s own case in ITA Nos.210, 214, 215 & 250/2012, order dated

19.07.2013 in regard to regular assessments for assessment years 2000-01 and

2001-02, wherein, the Hon’ble Delhi High Court held in para 3 as under :-

“3. In view of above observations which also indicates that this Court was satisfied that approval of the building plans were issued after 1.10.1998 except in respect of 26 houses in Avantika Aakruti Project, this Court is not persuaded that any substantial question of law arises and is not inclined to take a different view from the one taken in ITA 480/2010, 485/2010 and 437/2011. The Revenue’s appeal so far as they urged this ground is insubstantial and, therefore, rejected.”

are East End Loni, Avantika, Aakriti, Golf Link I and Golf Link II. He

submitted that the following facts stand confirmed :-

(a) The construction of all the housing projects effectively commenced

after the statutory date of 01.10.1998 and, therefore, deduction u/s

80IB(10) was rightly claimed and allowed in the original assessment

proceedings, except 26 houses in Avantika Aakriti Projects and,

therefore, proportionate deduction was allowed.

(b) The built-up area of houses in the project, except 5 houses in East

End Loni and 6 houses in Aavantika Aakriti, did not exceed the statutory

limit of 1000 sq. ft., as per the completion certificate issued by the

appropriate authority and, therefore, deduction could not be disallowed in

respect of such houses. Ld. counsel further referred to the decision of the

Tribunal for assessment years 1999-2000, 2001-02 to 2003-04 vide ITA

Nos.4277/Del/2009, 4817/Del/2005, 3304/Del/2007 dated 19.07.2013

and ITA No.3192/Del/2008 and 4595/Del/2005 dated 03.03.2014. He

referred to para 5 of the Tribunal’s order, wherein, following the decision

for assessment year 2000-01 and 2001-02, Tribunal has upheld the order

of ld. CIT(A) for all the three years. He pointed out that the projects

covered by this decision were East End Loni, as under :-

“5. We have heard rival contentions and perused the relevant material available on record. We find merit in the argument of the learned counsel for the assessee that the issue in question, in respect of projects - Golf Link I & II, Greater Noida and Avantika Aakriti, is covered by earlier orders dated 12-6-2009 of the ITAT in assessee's own case in ITA nos. 1922 & 1923/Del/2005 for A.Y. 2000-01 and 2001- 02, inter alia, giving following observations: "17. Respectfully following the aforesaid three decisions, we hold that the deduction to the assessee can be allowed with respect to the units which did not exceed the statutory limit of 1000 sq. ft. and the assessee would not be entitled to reductions of the built up area in 5 houses in East End Loni and 6 houses in Avantika Aakriti, as referred to in paragraph 10 of the order aforesaid. We order accordingly. ....

Grade II are concerned, the same commenced in assessment year 2003-04 and,

therefore, there was no dispute regarding its commencement prior to

01.10.1998. In this regard, ld. counsel referred to page 42 of Paper Book-II,

wherein, the Tribunal’s order in ITA No.3304/Del/2007 for assessment year

2003-04 is contained, wherein, the ground raised by the Revenue before the

Tribunal was as under :-

“3. On the facts and circumstances of the case, the ld. Commissioner of Income Tax (Appeals) has erred in directing the Assessing Officer to allow assessee’s claim for deduction u/s 80-IB(10) of the I.T. Act, 1961 amounting to Rs.3,34,10,717/-.”

“34. Apropos ground no.3 i.e. deduction u/s 80-IB(10), following the earlier history of ITAT judgments in assessee’s own case, we uphold the order of CIT(A) allowing deduction u/s 80-IB(10) to the assessee.”

No.10CCB contained at page 148 of Paper Book, wherein, date of

commencement of operation has been mentioned as under :-

“Development of the township project of which the said housing project is part, commenced in the financial year 1996-97. Construction of houses commenced in the financial year 2001-02. The initial assessment year from when claim was being claimed has been referred to as assessment year 2003-04”

residential building-8, Golf Link-I, Greater Noida is contained. He further

referred to page 153, wherein, the profitability regarding Green Glade-I as on

31.03.2004 has been computed. Ld. counsel further referred to page 156 of

Paper Book, wherein, the Form No.10CCB in regard to Green Glade-II (Golf

Link-II) Housing Project is contained, wherein, the date of commencement of

operation by undertaking has been indicated :-

“Development of the township project of which the said housing project is part commenced in the financial year 1996-97. Construction of houses commenced in the financial year 2001-02 and the initial assessment year from when claim was mentioned in assessment year 2003-04”

II, Green Glade-I and Green Glade-II. Ld. counsel pointed out that as far as Green Glade-I and Green Glade-II projects are concerned they are second phase of construction of housing project in Golf Link-I and Golf Link-II respectively.

Permission for erection of residential houses in the aforesaid projects was granted on 31.03.2001 and 01.05.2002 respectively and, therefore, the question of said projects not satisfying the condition of section 80IB(10) does not arise.

He further pointed out that the built-up area of each house in the aforesaid

projects was less than 1000 sq.ft.. He pointed out that the deduction u/s 80IB(10) for the aforesaid projects was disallowed without going into the details

of satisfaction of aforesaid various conditions by simply following the

assessment order for the earlier years. He submitted that the deduction for the aforesaid projects was also claimed in the assessment year 2003-04 which has

been upheld in the order passed by the ITAT for that year which has been

subsequently confirmed by Hon’ble High Court. Ld. counsel further submitted that in so far as the issue regarding non-filing of completion certificate is

concerned, the requirement of completion of eligible projects prior to the

specified date and, consequentially, requirement of obtaining certificate was introduced u/s 80-IB(10) by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005.

He submitted that considering the projects under consideration started prior to

01.04.2005, the aforesaid amendment being prospective in nature, was not applicable for computation of deduction u/s 80IB(10). In this regard, he has

placed reliance on the following decisions :- • CIT v. Sarkar Builders: 375 ITR 392 (SC) • CIT v. Veena Developers: 277 CTR 297 (SC) • CIT v. CHD Developers Ltd.: 362 ITR 177 (Del.), (assessment year involved was A Y 2007-08) • CIT v. Happy Home Enterprises & Kanakia Spaces Pvt. Ltd.: ITA No. 201 & 308/2012 (Born. HC) • CIT v. Ittina Properties (P) Ltd.: I.T.A. NOS. 556 OF 2013 (Kar,)(HC) (assessment year involved was A Y 2004-05 to 2007-08) • Bhumiraj Homes Ltd v Dy CIT: 11 ITR(Trib.) 699: (Mum) (Trib) • DCIT v. M/s Shah Builders & Developers: ITA No. 3195 & 3I96/Murn/2010 (Dated: May 6, 2011) (Mum. Trib.) • ITO v. Velentine Developers: ITA No. 6901 & 8469/Mum/2010 (Mum. Trib.) / 31 ITR( Trib) 452: A Y 2006-07 and 2007-08 • Haware Constructions (P ) Ltd v. ITO ( 2011) 64 DTR 251 ( Mum) (Trib) • ACIT v. Magnete Enterprises: ITA No. 5802/Mum/2012 (Mum. Trib.) • ITO v. Yash Developers: ITA Nos. 809/Mum/ 2011 & 3644/Mum/2012 (Mum. Trib.) • Raj Reality v. DCIT: 152 ITD 716 (Indore Trib.) • ITO v. Kura Homes P. Ltd.: 151 ITD 31 (Hyd. Trib.) • DCIT v. Mangalam Estates: 148 ITD 446 (Chennai Trib.) • ACIT v. Sterling Estates & Properties: ITA No. 316, 336/ Mds/2013 (Mad. Trib.)

apply, while computing the deduction on project approved prior to the aforesaid date, notwithstanding the assessment year involving the claim of deduction as

under :- • Brahma Associates v. JCIT 333 ITR 289 (Bom.) • CIT v. Jogani Constructions: 217 Taxman 95 (Bom. HC) • CIT v. Shreenathji Constructions: 220 Taxman 154 (Guj. HC) • Manan Corporation v. ACIT: 255 CTR 415 (Guj. HC) (A Y 2006-07) • ITO vs. Chheda Construction Co.: ITA No. 2764/Mum/2009 (Mum. Trib.) (A Y2005-06) • Bhumiraj Homes Ltd v Dy CIT: II ITR(Trib.) 699: (Mum) (Trib) • ITO v. Yash Developers: ITA Nos. 809/Mum/ 2011 & 3644/ Mum/2012 (Mum. Trib.) (AY 2007-08 & 2008-09) • DCIT v. M/s Shah Builders & Developers: ITA No. 6250/Mum12010 (AY 2007- 08) • ITO v. Velentine Developers: ITA No. 6901 & 8469/Mum/2010 (Mum. Trib.) / 31 ITR(Trib) 452: A Y 2006-07 and 2007-08 • Haware Constructions (P) Ltd v. ITO (2011) 64 DTR 251 (Mum) (Trib) • ACIT v. Magnete Enterprises: ITA No. 5802/Mum/2012 (Mum. Trib.) • DCIT v. Mangalam Estates: 37 taxmann.com 288 (Mad. Trib.) (AY 2004-05 to 2008-09) • ACIT v. Sterling Estates & Properties: ITA No. 316, 336/ Mds/2013 (Mad. Trib.)

projects were completed before the terminal date of completion and completion

certificates were also received for the majority of the units/houses. Therefore, deduction could not be denied in respect of these units. As regards the balance

units, ld. counsel pointed out that the assessee had filed the application for

obtaining of completion certificate after the completion of the unit/ house and completion certificate was not issued by the local authority. He pointed out that

as per the applicable laws, if no objection is pointed out by the local authority

within 45 days from the date of filing the application, the completion certificate

will be deemed to have been issued. He, therefore, submitted that this condition

was also satisfied in assessee’s case. He placed reliance on the following

decisions for the proposition that if the completion certificate has been issued

subsequently, the same would relate back to the actual date of completion :- • Tarnetar Corporation: 362 ITR 174/210 Taxman 206 (Guj. HC) • CIT v. Ittina Properties: ITA Nos. 556/2013/227 Taxman 236 (Mag.) [TS-461- HC-2014 (KAR HC)] • Sanghvi & Doshi Enterprise v. ITO: 141 TTJ I (Chennai 'A')(TM) [Confirmed by Madras High Court @ 255 CTR 156 (Mad.)] • Global Reality v. ITO (2002) 134 ITO 407 (Indore)(Trib.) • D. K. Construction vs. ITO, ITA No. 243/Ind/2010, dt. 6.12.2010, ITAT Indore Bench, BCAJ p. 24, Vol. 42-B, Part 5, February 2011. (Trib.) • RNS Infrastructure Ltd. v. Dy. CIT: [2012] 54 SOT 94 (Bangalore -Trib.) • Siddhivinayak Kohinoor Venture [TS-590-ITAT-2013(PUN)]/159 TTJ 390

the record of the case. Section 80IB(10) prior to its substitution by the Finance

(No.2), 2004 w.e.f. 01.04.2005 as amended by the Finance Act, 2000 w.e.f.

01.04.2001 and Finance Act, 2003 w.e.f. 01.04.2002 read as under :- “(10) The amount of profits in case of an undertaking developing and building housing projects approved before the 31st day of March, 2005 by a local authority, shall be hundred per cent of the profits derived in any previous year relevant to any assessment year from such housing project if,-”

construction of the housing project shall be taken to be the date on which the

completion certificate in respect of such housing project is issued by the legal

authority. The first objection raised by the Assessing Officer was that the

development and construction had already commenced prior to 01.10.1998. This objection was confirmed by ld. CIT(A). As far as this objections is

concerned, we find that this issue is covered by order dated 24.09.2012 of Hon’ble Delhi High Court in the assessee’s own case for assessment years 2000-01 and 2001-02 projects covered East End Loni, Avantika Aakriti, Golf

Link-I, Golf Link-II, Green Glade-I and Green Glade-II. Further, by Tribunal’s order in the assessee’s own case for assessment years 1999-2000, 2002-03 and 2003-04 vide ITA Nos.4277/Del/2009, 4817/Del/2005, 3304/Del/2007 dated 19.07.2013 and ITA No.3192/Del/2008 and 4595/Del/2005 dated 03.03.2014, this issue is covered in respect of following projects East End Loni, Avantika Aakriti, Golf Link-I, Golf Link-II, Green Glade-I and Green Glade-II. 28. As far as projects Green Glade-I and Green Glade-II are concerned, the assessee has pointed out that they are second phase of construction of housing project in Golf Link-I and Golf Link-II respectively. Ld. counsel pointed out that the permission for erection of residential houses in the aforesaid projects was granted on 31st March, 2001 and 04th May, 2002 respectively and, therefore, the question of said projects not satisfying the conditions of clause (a) of section 80IB(10) does not arise. These facts are not controverted by the ld. DR and, therefore, there could not be any dispute as regards non-compliance of clause (a) to section 80IB(10). Now, coming to the second ground for rejection of assessee’s claim on the ground of some units being of more than 1000 sq.ft.,

we find that this issue has also been considered in earlier year’s appeal and proportionate deduction was allowed. Therefore, for the sake of brevity, we do

not repeat the same. As far as the third issue regarding non-fulfilling of the condition of completion of units is concerned, the contention of ld. counsel is that the amendment is prospective. However, he has also pointed out that in the

case of assessee, all the projects were completed before the terminal date of completion and completion certificate were also received for majority of the units/houses. Therefore, we do not consider it necessary to go into the issue

regarding amendment being prospective or not. The claim of assessee is that

actually it has complied with the condition as per amended provisions. The Assessing Officer is directed to verify this aspect and allow the claim in

accordance with law. In the result, this ground is partly allowed for statistical

purpose. 29. In the result, the appeal of the assessee is partly allowed for statistical

purposes.

ITA No.1254/Del/2009 (A.Y. 2005-06) :

of the Act relating to assessment year 2005-06.

year continued to be the same as in earlier years i.e. real estate, development of mini townships, promotion, development and construction of houses, flats, villas and commercial complexes, etc.. The Assessing Officer noticed that

assessee was the owner and was having possession of various commercial and residential flats and spaces etc. which were lying in its stock in trade as on 31st March, 2003. He noted that the assessee had not disclosed any income from house property in respect of these properties. The assessee in its reply submitted that the spaces/flats form part of stock in trade of the company and the same are for business purposes to be kept in self possession till the time they were sold. It was pointed out that the vacant possession thereof is handed over to the buyers at the time of their sale. The assessee’s contentions were that the flats/spaces being in self occupation for the purposes of company’s business, the profits of which were chargeable to income-tax under the profits and gains of business or profession, no notional ALV thereof could be assessed/charged to tax u/s 22 of the Act. The Assessing Officer did not accept the assessee’s contention for the reason that the assessee was the owner of the properties and as such, notional annual letting value had to be assessed within meaning of provisions u/s 23 of the Act in assessee’s hands particularly as the issue was

pending adjudication before the Hon’ble Delhi High Court in the earlier years of

the assessee. He, accordingly, made an addition of Rs.57,54,533/- as under :-

Notional ALV as computed above 82,20,761.04 Less : 30% for repairs 24,66,228.31 Net notional ALV 57,54,532.73

addition made by Assessing Officer. Being aggrieved, the Department is in

appeal before us and has taken following grounds of appeal :-

“2. Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in law in granting relief of Rs.57,54,532,73 on account of Notional Annual Letting Value of flats held as closing stock.”

in assessee’s own case, wherein, it has been held as under :-

“13. In the present case, the assessee is engaged in building activities. It argues that flats are held as part of its inventory of stock in trade, and are not let out. The further argument is that unlike in the other instances, where such builders let out flats, here there is no letting out and that deemed income – which is the basis for assessment under the ALV method, should not be attributed. This Court is of the opinion that the argument, though attractive, cannot be accepted. As repeatedly held, in East India, Sultan, and Karanpura, the levy of income tax in the case of one holding house property is premised not on whether the assessee carries on business, as landlord, but on the ownership. The incidence of charge is because of the fact of ownership. Undoubtedly, the decision in Vikram Cotton indicates that in every case, the Court has to discern the intention of the assessee; in this case the intention of the assesse was to hold the properties till they were sold. The capacity of being an owner was not diminished one whit, because the assessee carried on business of developing, building and selling flats in housing estates. The argument that income tax is levied not on the actual receipt (which never arose in this case) but on a notional basis, i.e. ALV and that it is therefore not sanctioned by law, in the opinion of the Court is meritless. ALV is a method to arrive at a figure on the basis of which the impost is to

be effectuated. The existence of an artificial method itself would not mean that levy is impermissible. Parliament has resorted to several other presumptive methods, for the purpose of calculation of income and collection of tax. Furthermore, application of ALV to determine the tax is regardless of whether actual income is received; it is premised on what constitutes a reasonable letting value, if the property were to be leased out in the marketplace. If the assessee’s contention were to be accepted, the levy of income tax on unoccupied houses and flats would be impermissible – which is clearly not the case. 14. As far as the alternative argument that the assessee itself is occupier, because it holds the property till it is sold, is concerned, the Court does not find any merit in this submission. While there can be no quarrel with the proposition that "occupation" can be synonymous with physical possession, in law, when Parliament intended a property occupied by one who is carrying on business, to be exempted from the levy of income tax was that such property should be used for the purpose of business. The intention of the lawmakers, in other words, was that occupation of one’s own property, in the course of business, and for the purpose of business, i.e. an active use of the property, (instead of mere passive possession) qualifies as "own" occupation for business purpose. This contention is, therefore, rejected. Thus, this question is answered in favour of the revenue, and against the assessee.”

Supreme Court against the decision of Hon’ble Delhi High Court, which is

pending for disposal. He further pointed out that subsequent to the decision of

Hon’ble Delhi High Court in the assessee’s own case for earlier years, the legal

position regarding taxability of rental income has been altered by the Hon’ble Supreme Court vide order dated 09th April, 2015 in the case of Chennai

Properties & Investments Ltd. vs. CIT, (2015) 373 ITR 673 (SC), wherein, the

Apex Court, while considering the earlier decisions of the Apex Court on the

same issue, held, that, where an assessee is incorporated to commercially

exploit the house property, which is carried on as business activity, the rental

income earned in pursuance of such business would be assessable as business

income and not as income from house property. He further pointed out that this

view has been reiterated by the Hon’ble Supreme Court in the recent decision of Rayala Corporation (P.) Ltd. vs. ACIT in Civil Appeal Nos.6437 to 6441 of

2016. However, ld. counsel fairly pointed out that the Hon’ble Delhi High Court, by order dated 26th July, 2016, passed in the assessee’s own case for

assessment year 1994-95, reported at 389 ITR 373, has summarily rejected the aforesaid reliance placed by the assessee on the decision of the Hon’ble Supreme Court in the case of Chennai Properties (supra), on the ground that the main object of the assessee, in the present case, was not letting out of properties, as laid down by the Apex Court in Chennai Properties where the main object of assessee was holding the properties and earning income by letting out properties. Ld. counsel pointed out that the Hon’ble Supreme Court has admitted the SLP filed by the assessee against the decision of Hon’ble High Court dated 19.09.2016. In the alternative, ld. counsel submitted that section 23 and 24 of the Act relating to computation of annual letting value of residential property were amended by the Finance Act, 2001 w.e.f. 01.04.2002 i.e. assessment year 2002-03. He pointed out that the amended provisions were applicable to the year under consideration and were not subject matter before the Hon’ble High Court in the aforesaid decision of the assessee for the preceding years. He submitted that in terms of the amended provisions of section 23(1)(c), where a residential property remains vacant during, inter-alia,

whole of the previous year and owing to such vacancy actual rent received or

receivable (which would be NIL in case of total residential property vacant

throughout the year) is less than the fair rent, then such former amount shall be

deemed as annual letting value for the purposes of section 22 of the Act. He

relied on the decision in the case of Premsudha Exports (P.) Ltd. vs. ACIT, 110

ITD 158. He also relied on the following decisions :-

(i) Shakuntala Devi vs. DDIT, 31 CCH 32 (Bang.) (ii) Kamal Mishra vs. ITO, 19 SOT 251 (Del.) (iii) ACIT vs. Dr. Prabha Sanghi, 139 ITD 504 (Del.) (iv) Vikas Keshav Garud vs. ITO, 160 ITD 7 (Pune-Trib.) (v) S.M. Chandrashekar vs. ITO, 76 taxman.com 278 (Bang.-Trib.) (vi) CIT vs. Joy Jacob, 151 ITR 19 (Kerala)

14 were merely farm lands, on which no residential unit has been constructed.

Accordingly, annual letting value cannot be determined in respect of such farm

lands in terms of section 22 of the Act.

the record of the case. As far as assessee’s claim of taxability of impugned

property being stock-in-trade under the head income from business is

concerned, the said issue stands decided against the assessee by the decision of

Hon’ble Delhi High Court in assessee’s own case, as noted earlier, in the

arguments advanced by ld. counsel for the assessee. Therefore, as rightly

submitted by ld. counsel for the assessee, the income is to be assessed under the

head income from house property. The assessee’s alternate claim is that if the

income is to be assessed under the head income from house property then since

section 23 got substituted by the Finance Act, 2001 w.e.f. 01.04.2002, therefore,

for assessment year 2005-06, the annual value has to be determined in

accordance with the amended provisions of section 23(1)(c) which reads as

under :-

“23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be— ………. (c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable : Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation.—For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules27 as may be made in this behalf, the amount of rent which the owner cannot realize.”

applicable in respect of let out/ letiable property. However, in the present case,

admittedly, the assessee was holding various commercial and residential flats

and spaces for being sold to the prospective buyers. The assessee in its reply,

inter-alia, clearly stated that spaces/flats formed part of stock-in-trade of the assessee company as the same was for business purposes and was kept in self

possession till the time it was sold. It was further stated that the vacant possession thereof was handed over to the buyers on sale. Thus, the assessee never claimed that the properties were letiable properties and, therefore,

assessee cannot get the benefit of section 23(1)(c). The next objection of ld. counsel for the assessee is in regard to determination of annual letting value in respect of farm lands.

revenue authorities, as to whether annual letting value could be determined in respect of such farm lands in terms of section 22 or not. We may observe that if

there was no building on farm lands then it will not come within the ambit of

section 22. On this aspect, the Assessing Officer is directed to examine the issue afresh.

statistical purposes in terms of aforementioned observations.

ITA No.1248/Del/2009 (A.Y. 2005-06) :

passed by the Commissioner of Income Tax (Appeals)-1, New Delhi, u/s 143(3)

of the Act relating to assessment year 2005-06.

“1. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income-tax (Appeal)-I has erred in upholding the disallowance of deduction u/s 80IB(10) amounting to Rs.2,43,22,929/- made by the Assessing Officer vide Assessment Order dated 20th December, 2007. 2. That on the facts and circumstances of the case and in law, The CIT (A) erred in upholding the findings of the Assessing Officer that the appellant started development and construction of housing project prior to 1st October, 1998 without appreciating that the appellant had merely commenced construction of a preparatory nature on experimental scale prior to that date, which could not have been the basis for denying deduction u/s 80IB(10) of the Act. 3. That on the facts and circumstances of the case and in law, the CIT (A) erred in upholding the findings of the Assessing Officer that residential units constructed by the appellant exceeded the prescribed maximum built-up area of 1000 sq. ft. in respect of old projects commenced prior to 31st March, 2005 that too, by relying upon certain amendments made by the Finance Act, 2004 with prospective effect from 1/4/2005 which were not applicable to the project under consideration. 4. That on the facts and circumstances of the case and in law, The CIT (A) erred in upholding the charging of interest u/s 234B of the Act. 5. The appellant craves leave to add to, alter, amend, or vary the above grounds of appeal at or before the time of hearing.”

assessee’s appeal for assessment year 2004-05 vide ITA No.3193/Del/2008

while disposing of grounds no.8 to 12 of the said assessment year. The decision

for assessment year 2004-05 shall apply mutatis-mutandis in this assessment

year also. Accordingly, the appeal of the assessee is partly allowed for

statistical purposes.

ITA No.1576/Del/2010 (A.Y. 2006-07) : 43. This is an appeal filed by the Revenue against the order dated 08.01.2010

passed by the Commissioner of Income Tax (Appeals)-1, New Delhi, u/s 143(3)

of the Act relating to assessment year 2006-07.

“1. The order of the Ld. CIT(Appeals) is not correct in law and facts. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and facts in deleting the addition of Rs.57,89,199/- made by AO on account of notional ALV in respect of unsold spaces flats treating the same as income from house property. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and facts in allowing part relief towards claim under section 80-IB(10) when there is substantial evidence that the assessee company had made investment to the extent of Rs.103,01,73,852/- prior to 01.04.1998 in all these projects as also admitted to have launched these projects in the Annual reports of 1996-97. 4. Whether there was any material evidence before Learned CIT(A) to hold that the three projects were launched after 01.10.98 and were completed on or before 31.03.2008. 5. The appellant craves leave to add, alter or amend any/ all of the grounds of appeal before or during the course of the hearing of the appeal.”

while deciding the Departmental appeal vide ITA No.1254/Del/2009 for

assessment year 2005-06. The decision for assessment year 2005-06 shall apply

mutatis-mutandis in this assessment year also. Accordingly, this ground is

allowed for statistical purposes.

findings of ld. CIT(A) regarding projects being launched after 01.10.1998 and completed on or before 31st March, 2008. As far as launching of the project

after 01.10.1998 is concerned, we have noted in assessment year 2004-05 in

detail that this objection of Assessing Officer was not correct in view of the

decision of the Hon’ble Delhi High Court in assessee’s own case for assessment

years 2000-01 and 2001-02 order dated 24.09.2012 (supra). As far as the

completion certificate in the various projects is concerned, we direct the Assessing Officer to verify it afresh in view of detailed discussion made earlier.

Accordingly, the appeal of the Revenue for the assessment year 2006-07 is hereby allowed for statistical purposes. 47. Resultantly, both the appeals of the assessee and Revenue are partly

allowed for statistical purposes. Order pronounced in the open court on this 28th day of March, 2017.

Sd/- Sd/- (SUDHANSHU SRIVASTAVA) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 28-03-2017. Sujeet Copy of order to: - 1) The Appellant 2) The Respondent 3) The CIT 4) The CIT(A) 5) The DR, I.T.A.T., New Delhi By Order //True Copy// Assistant Registrar ITAT, New Delhi