ITO, CHENNAI vs. A. JAGADEESWARI, CHENNAI

The "Development Control Rules" for Chennai Metropolitan Area regulates the construction within Chennai Metropolitan Area. The rules specify the minimum width of the road that abuts the site of construction at 10 meters where the site was intended to comprise of a residential building with more than four dwelling units.

The project of the assessee was on an area of more than one acre and the assessee intended to construct at least 50 to 60 dwelling units on that area. If the assessee had applied for approval as a single project, the approach road had to be a minimum of 10 meters wide, i.e. at least 32 feet (1 metre = 3.28084 feet). However the approach road for the assessee's project was only 20 feet at its widest. Further these rules were particularly applicable in the case of special buildings. The meaning of special buildings as defined by the Development Control Rules is:

Since the required road width was not available for the site, the assessee took the alternative of considering each block of 4 dwelling units separately and obtaining approval for each block, thereby falling outside the definition of 'special buildings' and consequently not attracting the application of the Development Control Rules. For this reason the assessee had to obtain plan and building permission separately for each block comprised within the single project.

As discussed in detail supra, in the case of the appellant for the AY. 2007 - 08, the AO had allowed the claim u/s 80 IB (10) in favour of the assessee. Since there is no change in the relevant set of facts in the present AY. 2008 - 09 as compared to the AY. 2007-08, the principle of consistency and precedence needs to be followed.

Reliance is placed on the decision of the Supreme Court in New Jehangir Vakil Mills Co. Ltd. v Commissioner of Income Tax [1963]49 ITR 137 (SC), where the Supreme Court held that though the principle of 'res judicata' does not apply to taxation matters, however where there has been no change in facts, on grounds of consistency, the position cannot be changed in a subsequent year. A similar view was also held by the Supreme Court in Radhasoami Satsang v CIT [1992] 193 ITR 321 (SC) as well as the Mumbai Special Bench of the Income Tax Appellate Tribunal in Mls B.Sorabji v ITO Ward 20(1)(2) (ITA No. 6503 I M I 2002). In Assistant Commissioner of Income tax v M.N.Rajendhran [2010] 130 TTJ (Chennai) (TM) 15, a Third Member Bench of Chennai Bench of Income Tax Appellate Tribunal has also held that on the same set of facts, a co-ordinate Bench of the Tribunal cannot come to a diametrically opposite conclusion than arrived at in the earlier case.

Reliance is placed on the decision of the Bombay High Court in Commissioner of Income tax v Mls Vandana Properties [2013] 353 ITR 36 (Bom) where it was held that Section 80-IB(1 0) provided that deduction is available on construction of a housing project on a plot having area of one acre, irrespective of the fact that there exist other housing projects or not. In this case, the assessee had constructed five buildings on a project - A, B, C, D and E but did not claim deduction for A to D since the approval was granted prior to 1.10.1998. Approval for E was obtained on 11.10.2002. Revenue denied claim of deduction since E was a continuation of A to D and the project had commenced prior to 1.10.1998. Moreover the area of plot for E was less than one acre and therefore the conditions of the section had not been met both on approval and size of plot. The High Court held in favour of the assessee on the ground that the mandate of the law was not that the plot should be a vacant area of one acre. Even if there were other housing projects on the land but the entire plot of land was at least one acre, the deduction was available even if the particular construction for which deduction was claimed was not built of the entire one acre of land. Applying this decision to the facts of the assessee's case, even if it is assumed that each plot B to 0 was a separate project, the fact that all the projects were constructed on the total land area of more than one acre should be considered and deduction should be allowed to the assessee.

The Hon'ble Income Tax Appellate Tribunal, Chennai in the case of ACIT v S.Muthu Palaniappan in ITA No. 1650/Mds/2012 dated 12.11.2013 has taken a similar view. Reliance is further placed on the decision of the Nagpur Bench of the Income tax Appellate Tribunal in Income tax Officer v AIR Developers [2010] 122 ITD 125 (Nag) where it was held that merely because for one project, the approval was taken more than once, it cannot be said that the assessee has developed six different housing projects and that the totality of the facts should be considered. If the project as a whole satisfied the conditions of Section 80-IB(1 0), the deduction could not be denied.

Reliance is also placed on CIT v Shantiniketan Property Foundation (P) Ltd [2012] 83 CCH 267 Chen HC, and CIT v Voora Property Developers Pvt Ltd 2015- TIOL-720-HC- MAD-IT which involves a similar situation as that of the appellant wherein it has been held that there was a single housing project with different blocks and hence the deduction u/s.80-IB(10) could not be denied.

Reliance is placed on the orders of the Hon'ble Madras High Court and the Hon'ble Income tax Appellate Tribunal in the assessee's own case for the A.Y 2007-08, wherein it has been held that the assessee was entitled to the deduction u/s 80-IB(10) as she had satisfied all the conditions specified in the said section. Hence, it is noticed that the issue has reached finality and the project of the assessee has been held to be eligible for deduction u/s.80-IB(10).

The Bombay High Court in Commissioner of Income tax v Paul 8rothers [1995]216 ITR 548 (Nagpur) held in the context of Section 80HH and 80 J that there was no provision either in Section 80HH or 80J for withdrawal of special deduction for

The judgement of the Hon'ble ITAT Chennai in the case of Prime Developer vs ITO in ITA No.933/Mds/2013-AY 2009- 10, dated 23.09.2015, as relied on by the AO in the Remand Report, to substantiate the finding that the appellant was engaged in the construction work as a contractor and not as a Developer, cannot be applied to the present case of the appellant when the relevant issues has already been decided in her favour by the Hon'ble High Court.

Therefore, keeping in view the entirety of the facts and the circumstances of the case and also relying on the judgements of the Hon'ble jurisdictional Tribunal and the Hon'ble High Court in the case of the present assessee for the AY. 2007 - 08 and also taking into account the decision of the Ld. CIT(A) in the case of the present assessee for the AY. 2009 -10, I am of the considered opinion that the appellant had fulfilled all the necessary prerequisites to claim deduction u/s 80IB(10) of the Act.”