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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-3, Pune dated 27-05-2015 for the assessment year 2011-12.
The brief facts of the case as emanating from records are: The assessee is a partnership firm. The assessee is a promoter and builder and
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is also engaged in the business of executing construction schemes for residential/commercial purpose. The assessee filed its return of income for the impugned assessment year on 28-09-2011 declaring total income of Rs.5,98,540/- after claiming deduction of Rs.1,10,74,026/- u/s. 80IB(10) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). The case of the assessee was selected for scrutiny, accordingly, statutory notice u/s. 143(2) was issued to the assessee on 28-09-2012. The assessee firm developed a housing project „Harsh Paradise‟ with 185 flats. On the said housing project, the assessee claimed deduction u/s. 80IB(10) of the Act. The Assessing Officer disallowed assessee‟s claim of deduction on the ground that the project is not complete before due date. The Assessing Officer further held that Flat Nos. 702 and 703 in Building H3 and Flat Nos. 302 and 303 in Building H4 are internally joined. Thus, the built up area of abovesaid units exceed 1500 sq. ft. Therefore, deduction u/s. 80IB(10) is not allowable to the assessee.
Aggrieved by the assessment order dated 31-03-2014, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) following the order of Tribunal in assessee‟s own case for assessment year 2008-09 allowed the appeal of assessee and held the assessee to be eligible for claiming deduction u/s. 80IB(10) on the housing project under dispute. Now, the Revenue is in appeal before the Tribunal assailing the order of Commissioner of Income Tax (Appeals).
The Revenue has raised following grounds assailing the order of Commissioner of Income Tax (Appeals) : “1. On the facts and circumstances of the case & in law, the Ld. CIT(A) erred in allowing the deduction u/s 801B(10) of the Act to the housing project 'Harsh Paradise' approved on 28.05.2003 and was still incomplete by 31.03.2008 in violation of Sec. 801B( 10)(a)(i) of the Act which requires such project to be completed before 31.03.2008.
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On the facts and circumstances of the case & in law, the Ld. CIT(A) erred allowing the claim u/s. 80IB(10) of the Act on partial completion of the housing project holding that such deduction was available on standalone basis without appreciating the fact that the housing project was approved by the local authority on 28.05.2003 wherein construction of H-1, H-2, H-3 & G building and first floor of H-4 building were sanctioned and completion certificate was admittedly not issued by the Pune Municipal Corporation with respect to building H-4. 3. On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate that Flat No. 702 to 704 of H3 building and Flat No. 303 & 302 of H1 building were internally joined, the combined area of which exceeded 1500 Sq. Ft. and therefore, there was contravention of the provisions of Sec. 80IB(10)(d) of the Act via-a-vis the housing project. 4. On the facts and circumstances of the case & in law, the Ld. CIT(A) erred in holding that once the issue of contravention of Sec. 80IB(10)(a)(i) is decided by the Tribunal in favour of the assessee, the contravention u/s. 801B(10)(d) brought out by the Assessing Officer cannot form basis for disallowance of deduction, when such contravention was based on factual verification carried out during the year. 5. The appellant prays that the order of the Ld. CIT(A) be held to be bad in law and quashed and that of the Assessing Officer be restored. 6. The appellant craves leave to add, alter, amend or omit any of the above grounds of appeal during the course of the appellate proceedings.”
Shri Nikhil Pathak appearing on behalf of the assessee submitted at the outset that the ground Nos. 1 and 2 raised in appeal by Revenue are squarely covered by the order of Tribunal in assessee‟s own case in ITA No. 1624/PN/2011 for assessment year 2008-09 decided on 22-03-2013. In the subsequent assessment years i.e. assessment years 2009-10 and 2010-11 similar disallowance of deduction claimed u/s. 80IB(10) was made by Assessing Officer. The matter travelled up to the Tribunal in assessment year 2009-10 in the appeal by assessee in ITA No. 1845/PN/2012 decided on 30-10-2013. The Tribunal following its earlier order allowed the appeal of assessee. In assessment year 2010-11, the Commissioner of Income Tax (Appeals) granted relief to the assessee by following the order of Tribunal. The Department filed appeal before the Tribunal in ITA No. 2030/PN/2013. The Tribunal vide order dated
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27-10-2014 dismissed the grounds raised by Department against allowing assessee‟s claim of deduction u/s. 80IB(10) of the Act.
4.1 In respect of ground Nos. 3 and 4 of the appeal by Department, the ld. AR submitted that Flat Nos. 702 to 704 in Building H3 and Flat Nos. 302 and 303 in Building H1 have been internally joined by the purchasers subsequent to the purchase of flats. The assessee had constructed all the flats as an independent unit. Completion certificate in respect of said flats from Pune Municipal Corporation (PMC) was received for independent residential units. A copy of the completion certificate is at page 64 of the paper book. The ld. AR further referred to possession receipts of flats at pages 14 to 63 of the paper book. The ld. AR pointed that Flat No. 302 was sold to Shri Santosh Vasantlal Bhatewara and Smt. Smita Santosh Bhatewara and Flat No. 303 was sold to Shri Vasantlal Kesharchand Bhatewara. Thus, when the possession of flats were given to the respective buyers, they were independent units. The purchasers of the flats subsequently made modifications to join the flats together. Similarly, Flat Nos. 702 to 704 in Building H3 were sold to different persons, after taking possession of flats they carried out the modification in the flats to make it a single unit. There has been no contravention of provisions of section 80IB(10) by the assessee and area of each flat in the housing project developed by the assessee is less than 1500 sq. ft. The benefit of deduction u/s. 80IB(10) cannot be denied to the assessee merely for the reason that purchasers of flat after taking possession had carried out modifications and combined the flats. The ld. AR in support of his submissions placed reliance on the following decisions : i. The Commissioner of Income Tax Vs. M/s. Ankit Enterprises, Income Tax Appeal (LOD) No. 1795 of 2012 decided on 18-02-2013;
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ii. DCIT Vs. M/s. Amit Enterprises, ITA No. 2210/PN/2013 for assessment year 2008-09 decided on 23-09-2015.
On the other hand Shri Ajay Modi representing the Department vehemently defended the order of Assessing Officer in denying the benefit of deduction u/s. 80IB(10) of the Act. However, the ld. DR fairly admitted that the issue raised by the Department in ground Nos. 1 and 2 have been adjudicated by the Tribunal in earlier assessment years in assessee‟s own case.
We have heard the submissions made by the representatives of rival sides and have perused the orders of authorities below. We have also considered various decisions on which the ld. AR of assessee has placed reliance to support his contentions. The Revenue in appeal has primarily assailed the action of Commissioner of Income Tax (Appeals) in holding assessee eligible for deduction u/s. 80IB(10) of the Act. In ground Nos. 1 and 2 of appeal the Revenue has assailed the order of Commissioner of Income Tax (Appeals) in allowing assessee‟s claim of deduction u/s. 80IB(10) of the Act, despite the fact the project was not complete before due date. We find that for similar reasons the assessee‟s claim of deduction u/s. 80IB(10) was disallowed by Assessing Officer in earlier assessment years. The matter for the first time travelled up to the Tribunal in assessment year 2008-09. The Co-ordinate Bench of Tribunal in ITA No. 1624/PN/2011 (supra) after considering the entire facts of the case accepted the appeal of assessee by observing as under : “14. After going through the rival submissions and material on record, we find that in the instant case assessee has obtained permission for construction of four buildings H-1, H-2, H-3, H-4 and G building. The said G building was to be given to the PMC to be allotted to the weaker section of the society. The housing project was approved by the local authority on 28.05.2003 wherein plan for construction of whole project including H-1, H-2, H-3 & G building, and first floor of H-4 building was sanctioned. The assessee was planning to purchase further TDR for construction of remaining
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floors of H-4 building. As the project was sanctioned before 01.04.2004, the due date of completion of the project was 31.03.2008. It is undisputed that the assessee has received the completion certificate in respect of H-1, H-2, H- 3 & G building on 19.03.2008 and 06.03.2007. However, in respect of the building H-4, the assessee submitted that the TDR could not be purchased and, therefore, the building H-4 could not be completed and hence the completion certificate was not issued by the PMC for the H-4 building having four flats. So the question before us is whether assessee is entitled for claim of deduction in respect of the profits from buildings H-1, H-2, H-3 and G-1 completed through completion certificate dated 06.03.2007 and 19.03.2008 as stated above. According to the Assessing Officer, the housing project was not completed within the stipulated time period i.e., 31.03.2008 and rejected the claim of the assessee which was confirmed by the CIT(A). The undisputed facts remain that assessee has completed the buildings H-1, H-2, H-3 & G on area of plot measuring 6722.12 sq.mtrs. as detailed above. So irrespective of non-construction of building H-4, assessee is entitled for its claim of deduction u/s.80IB(10) with regard to these buildings H-1, H-2, H-3 & G, because, these are on standalone basis, fulfilled the conditions with regard to claim of deduction u/s.80IB(10). 15. We find that ITAT Pune Bench in the case of Rahul Construction Co. (supra) has held that the Assessing Officer has to verify as to when the building plan of these buildings were firstly approved by the local authority and taking the said date of approval as starting point, he has to verify as to whether these buildings were completed within prescribed time limit, i.e., 31.03.2008 on the basis of completion certificate in respect of such housing project issued by the PMC. In case before us, Revenue authorities have not disputed the fact that assessee has completed the construction in respect of buildings H-1, H-2, H-3 and G as discussed above. There is also no dispute of area of the plot as laid down in provisions of section 80IB(10) of the Act, on which project took place. Only dispute is that building H-4 was not completed at relevant point of time so claim of assessee should not be disallowed as a whole. Whatever portion completed by assessee which satisfy the condition prescribed u/s.80IB(10) is eligible for deduction as held in Brigade Enterprises Pvt. Ltd. (supra). 16. In case before us, assessee has received the completion certificate with regards to buildings H-1, H-2, H-3 and G as stated above. So assessee is entitled for claim of deduction u/s.80IB(10) in the stipulated time in respect of completed buildings of the project in question. The construction on H-4 building could not be completed for the conditions beyond the control of the assessee for which assessee is not claiming the deduction u/s.80IB(10). In such situation the assessee should not be denied claim of deduction u/s.80IB(10) in respect of completed buildings and claim of the assessee should not be completely denied. As mentioned above, this view is fortified by decision of Brigade Enterprises Pvt. Ltd. (supra). We also find that such liberal interpretation should be used in favour of assessee when he is incapacitated in completing whole project because assessee could not complete H-4 building for the reasons beyond his control as stated above. It is settled legal position that law always gives remedy and law does wrong to no one. We are aware that plain reading of section 80IB(10) of the Act suggests about only completion of construction and no adjective should be used alongwith word „completion‟. This strict interpretation should be given in normal circumstances. However, in the case before us undisputedly assessee has completed the construction of buildings H-1, H-2, H-3 and G as stated above and assessee could not complete the construction of building H- 4 for the reasons discussed above the assessee should not suffer for the same with regard to the completed portions of the project. The taxing statute granting incentives for promotion of growth and development be construed liberally and the provisions for promoting economic growth has to be interpreted liberally. At the same time restriction thereon has to be construed strictly so as to advance the object of provision and not to frustrate the same. The provisions of taxing statute should be construed harmoniously with the
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object of statute to effectuate legislative intention. This view is fortified by decision of Pune Tribunal in the case of Ramsukh Properties (supra), Rahul Construction Co. (supra), Satish Bohra & Associates (supra). Accordingly we hold that assessee is entitled to the claim of deduction u/s.80IB(10) in respect of all buildings except building H-4. The Assessing Officer is directed accordingly.”
Thereafter, in subsequent assessment years i.e. assessment years 2009-10 and 2010-11 the Assessing Officer for a similar reasons has held the assessee ineligible for claiming deduction u/s. 80IB(10) of the Act. The Tribunal reiterated its view and held the assessee eligible for claiming benefit of deduction u/s. 80IB(10) in respect of building (except building H4) of residential project „Harsh Paradise‟. The DR has not been able to controvert the findings of Tribunal in earlier assessment years. Accordingly, ground Nos. 1 and 2 raised in appeal by Revenue are dismissed and the findings of Commissioner of Income Tax (Appeals) in holding assessee eligible for deduction u/s. 80IB(10) are upheld.
In ground Nos. 3 and 4 the Revenue has assailed the order of Commissioner of Income Tax (Appeals) in allowing benefit of deduction u/s. 80IB(10) in respect of Flat Nos. 702 to 704 in Building H3 and Flat Nos. 302 and 303 in Building H1. The Assessing Officer held that the Flat Nos. 702 to 704 in Building H3 and Flat Nos. 302 and 303 in Building H1 were combined and hence, the area of flats exceeded 1500 sq. ft. The assessee is not eligible to claim deduction u/s. 80IB(10) in respect of flats where the area of flats is more than 1500 sq. ft. The ld. AR has drawn our attention to the completion certificate dated 19-03-2008 issued by PMC and the possession receipts of the flats in question. A perusal of the completion certificate shows Flat Nos. 302 and 303 in Building H1 and Flat Nos. 702 to 704 in Building H3 as an independent unit. A further perusal of possession receipts reveal that the flats were sold to different parties though related to each other. It is only after taking the possession of flats
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that modification were carried out and Flat Nos. 302 and 303 in Building H1 and Flat Nos. 702 to 704 in Building H3 were combined to make a single unit.
The Hon‟ble Bombay High Court in the case of Commissioner of Income Tax Vs. M/s. Ankit Enterprises (supra) had occasion to adjudicate the similar issue. The question before Hon‟ble High Court was : “(ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that even two adjoining flats joined to constitute a single residential unit cannot be treated as one unit if adjoining flats were approved by local authority as separate unit?
The Hon‟ble High Court answered the question as under : “3. So far as question (ii) is concerned, in the impugned order the Tribunal has recorded a finding of fact that two adjoining flats were approved by the local authority as separate units and completion certificate issued on that basis. Therefore, on the above finding of fact, the Tribunal held that the two flats cannot be treated as one unit to compute the built up area for the purposes of Section 80IB(10) of the Income Tax Act, 1961. The decision of the Tribunal being based on finding of fact, we see no reason to entertain question (ii).”
Similar issue had come up before the Co-ordinate Bench of Tribunal in the case of DCIT Vs. M/s. Amit Enterprises (supra). The Tribunal following the decision of Hon‟ble Jurisdictional High Court upheld the findings of Commissioner of Income Tax (Appeals) in allowing the claim of deduction u/s. 80IB(10) to the assessee.
In the instant case, as has been pointed earlier, the PMC had issued completion certificate in respect of flats in question as an independent unit. It is evident from the records that the possessions of the flats were given separately to the respective owners. Thus, all the flats were i.e. Flat Nos. 302 and 303 in Building H1 and Flat Nos. 702 to 704 in Building H3 were made separate residential units by the assessee. Thus, in view of the facts and the case laws discussed above, we do not find any infirmity in the
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order of Commissioner of Income Tax (Appeals). Accordingly, ground Nos. 3 and 4 raised in appeal by Revenue are dismissed being devoid of any merits.
The ground Nos. 5 and 6 are general in nature, hence, require no adjudication.
In the result, the appeal of Revenue is dismissed.
Order pronounced on Wednesday, the 21st day of March, 2018.
Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 21st March, 2018 RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-3, Pune 3. प्रधान आयकर आयुक्त / The Pr. CIT-2, Pune 4. ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “ए” बेंच, 5. ऩुणे / DR, ITAT, “A” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune