Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI “I” BENCH, MUMBAI
Before: SHRI SHAILENDRA KUMAR YADAV, JUDICIAL & SHRI RAJESH KUMAR.
These two appeals of which one is filed by Revenue and the other appeal i.e. Cross Objection by assessee are against the order of CIT(A)-14, Mumbai, dated 24.06.2014 for A.Y. 2010-11.
In Revenue has filed the appeal on the following grounds:
“1. On the facts and in the circumstances of the case and in low, the Ld CIT(A) erred in relying on the order of the Hon'ble Madras High Court in the case of Vishwas Promoters Pvt. Ltd. and the order of the Hon'ble Bombay High Court in the case of Vandana Properties while allowing claim of deduction u/s 80IB(10) of the I.T. Act to the assessee, without appreciating the fact that these decisions of the High Courts were not accepted by the department and SLPs have been filed against them.
2. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in treating tower nos T1 to T3 (part of the project of 6 towers) independent of remaining towers nos T4 to T6 based on different commencement certificates while & C.O. No.18/Mum/16 A.Ys. 10-11 [DCIT vs. M/s. Indorigin Electric Ltd.] Page 3
allowing deduction on the profit in respect of towers no. T1 to T3, totally ignoring the facts that while granting deduction u/s 80IB(10), the towers no T4 to T6 were still under construction & section 80IB(10) stipulates that the “entire project” shall be completed within four years.
3. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing deduction u/s 80IB(10) by holding that the condition for deduction is that the minimum plot area on which housing projects are required to be completed shall not be less than one acre and it was not relevant that there are more than one housing project on the some plot (individually housing project does not have plot area of one acre), while allowing deduction on part' of the project i.e T1 to T3 out of total project of six towers in the present case.
4. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that pro -rata deduction is allowable, even though some of the flats in building T2 exceeds the stipulated maximum area condition of 1,500 sq.ft., where as section 80IB(10) laid down the condition that none of the residential unit shall be of area exceeding 1,500 sq.ft.
5. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in accepting that the disallowance of deduction u/s 80IB(10) of the I T Act as revenue neutral for the reason that the income was assessable u/s 115JB of the IT Act, without appreciating the fact that the assessee is eligible to avail MAT credit in subsequent years.”
In C.O. No.18/Mum/2016, assessee has filed the appeal on the following grounds:
“1. The Commissioner of Income-tax (Appeals) [C.I.T.-(A)] ought to have allowed the deduction of Rs.
& C.O. No.18/Mum/16 A.Ys. 10-11 [DCIT vs. M/s. Indorigin Electric Ltd.] Page 4
3,15,00,929/- as claimed by the Respondent assessee under section 80IB [10] of the Income-tax Act, 1961 (hereinafter said the "Act"). The learned C.I.T.[A] has grossly erred in disallowing the deduction in respect of profits arising on sale of Units in Towers T2 and T3 on the alleged ground that all the tenements did not comply with the statutory requirements. The aforesaid finding being arbitrary, perverse, and devoid of merits the same may please be vacated.
2. The learned CIT(A) has erred on facts and in law in confirming the disallowance of claim u/s 80IB(10) of Rs.1 70,09,616/- in relation to the Tower T2 and Tower T3 of the Kapil Malhar Intelligent Home Project on the grounds that some of the units of the Housing Project have a built-up area exceeding 1500 sq.ft.
3. The learned CIT(A) erred in not accepting the Respondent Assessee's claim that the Respondent Assessee is entitled to claim deduction under section 80IB of the Act on proportionate basis in respect of units having built-up area not exceeding 1500 sq.ft. in relation to the Tower T2 and Tower T3 of the Kapil Malhar Intelligent Home Project.”
Assessing Officer observed from the computation of total income that assessee has claimed deduction u/s.80IB(10) of the Act amounting to Rs.3,15,00,929/-. Assessee has developed the project at Kapil Maihar Intelligent Homes, Baner, Pune by deed of assignment dated 10.04.2006. Assessee completed project T1, T2 and T3 and claiming deduction u/s. 80IB(10) of the Act and further observed that presently assessee is in the project of T4, T5 & T6. From the above deeds, it was placed that assessee itself treated T1, T2 & T3 as one phase and T4, T5 and T6 as another phase. Thus, accordingly, the project completion method, the profit & C.O. No.18/Mum/16 A.Ys. 10-11 [DCIT vs. M/s. Indorigin Electric Ltd.] Page 5 was recognized only at the end of the project and the 80IB deduction can be allowed only on the recognized profit and not on the estimated profit. Assessing Officer observed that many of the flats in building T2 like 103, 303, 503, etc. were of 1831sq.ft. Similarly many of the flats in building T3, like 101, 301, 501, are of 1831sq.ft. and assessee itself submitted in their submission dated 15.03.2013, since 2/3 of flats were admeasuring less than 1500sq.ft. at least to allow 2/3rd of deduction u/s.80IB. But it was found important to understand that the deduction u/s.80IB is for one single undertaking and deduction cannot be given on proportionate basis. According to Assessing Officer, as per the provisions of section 80IB the project undertaken to be eligible for 80IB has to be completed within a period of 4 years. But as per the above discussion, it was very clear that the assessee has completed only phase I and yet to complete phase II. Thus, it failed beyond the period of 4 years of completion. In view of this, Assessing Officer disallowed the claim of assessee amounting to Rs.3,15,00,929/-.
Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same CIT(A) granted relief to the assessee.
Same has been opposed before us on behalf of Revenue inter alia submitting that CIT(A) was not justified in granting relief in deduction u/s.80IB(10) of the Act without & C.O. No.18/Mum/16 A.Ys. 10-11 [DCIT vs. M/s. Indorigin Electric Ltd.] Page 6 appreciating the facts of the case. On the other hand, ld. Authorized Representative supported the order of CIT(A).
After going through rival submissions and material on record, we find that all flats in Tower T1 is less than 1500 sq.ft. Hence, as per the revised working submitted before the Assessing Officer, he should be allowed deduction of Rs.1,44,91,313/- u/s.80IB(10) of the Act being eligible profit u/s.80IB of the Act. CIT(A) observed from the above that sole reason for denying the deduction u/s.80IB of the Act is that the entire project of assessee is not yet complete in this regard and deduction cannot be given on proportionate basis. Assessing Officer placed reliance on ITAT Chennai Bench in case of M/s. Viswas Promoters Pvt. Ltd. 126 ITD 263. The said decision has been reversed by Hon’ble Madras High Court in M/s. Viswas promoters (P.) Ltd. Vs. ACIT – T.C. (Appeal) Nos. 1014 of 2009, 857 of 2010 & 190 to 192 of 2012, W.A. No.471 of 2010, M.P. Nos. 1,1,1,2 and 2 of 2012 dated November 2, 2012 wherein issue has been decided in favour of assessee.
7.1 As far as assessee’s entitlement on proportionate basis u/s.80IB(10) of the Act is concerned, Hon’ble Bombay High Court in case of M/s. Vandana Properties in Appeal No. ITA 3633 of 2009 held as under:
“Facts The assessee had constructed buildings A, B, C and D over & C.O. No.18/Mum/16 A.Ys. 10-11 [DCIT vs. M/s. Indorigin Electric Ltd.] Page 7 a period of many years on a plot 01 land, admeasuring 2.36 acres situated at Kandivali (West), Mumbai. Pursuant to an order passed by the State Government in the year 2001 permitting conversion of the status of the land, the assessee became entitled to construct an additional building Yon the aforesaid plot of land. Accordingly, the assessee constructed building E on the said plot of land and estimated its profits from 'E' building by following the work in progress method of accounting and claimed deduction under Section 80IB (10) at Rs.71,42,590/- and Rs.71,73,660/- for Assessment Year 2003-04 and 2004-05 respectively. The assessing officer disallowed the claim for deduction under Section 80IB (10) for the following reasons:- a. The approval for 'E' building was granted on 11th October 2002 as an extension of the approvals granted for A, B, C and D buildings commencing from 9th June 1993 and, therefore, 'E' building being continuation of A, B, C and D buildings, the project must be held to have commenced prior to 1st October1998. b. A, B, C, D and E buildings are constructed on a plot ad-measuring 2.36 acres and if 2.36 acres of land is proportionately divided between five buildings, the land pertaining to 'E' building would be less than one acre
Decision: The court noted that Section 80IB(10)(b) specifies the size of the plot of land but not the size of the housing project. The object of Section 80IB (10) in granting deduction of the profits of an undertaking arising from developing and constructing a housing project was to boost the stock of houses for lower and middle income groups. Court noted that Section 80IB (10) does not suggest that the plot of land having minimum area of one acre must be vacant. The said Section allows deduction to a housing project constructed on a plot of land having minimum area of one acre and it is immaterial as to whether any other housing projects are existing on the said plot of land or not. The court also noted that Central Board of Direct Taxes & C.O. No.18/Mum/16 A.Ys. 10-11 [DCIT vs. M/s. Indorigin Electric Ltd.] Page 8
(CBDT) by its letter dated 4th May 2001 addressed to the Maharashtra Chamber of Housing Industry had stated that additional housing project on existing housing project site can qualify as infrastructure facility under Section 10(23G) provided it is taken up by a separate undertaking, having separate books of accounts, so as to ensure that correct profits can be ascertained for the purpose of Section 80IB.
It was not the mandate of the Section that the housing project must be on a vacant plot of land having minimum area of one acre. It was held that on a plot of land having minimum area of one acre, there can be any number of housing projects and so long as those housing projects are approved by the local authority and fulfil the conditions set out under Section 80IB (10), the deduction there under cannot be denied to all those housing projects. The assessee subject to fulfilling other conditions becomes entitled to Section 80IB (10) deduction 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 Accordingly High Court held that the deduction u/s 80IB should be allowed.”
7.2 CIT(A) also discussed the decision of ACIT vs. Bengal Ambuja Housing Development Ltd. and other decisions, wherein similar issue has been decided in favour of assessee and considering the same, CIT(A) observed that area of project is more than one acre and the flat in building T1 is less than 1500 sq. feet. The definition of ‘housing project’ u/s.80HHBA of the Act, to mean the construction of ‘any building’ and going by the deduction available u/s.80-IB of the Act to be hundred percent of the profits derived in previous year relevant to assessment year from such housing project complying with the condition, each block in the larger project by name ‘T1’, has to be taken as an independent building and & C.O. No.18/Mum/16 A.Ys. 10-11 [DCIT vs. M/s. Indorigin Electric Ltd.] Page 9 hence a housing project, for the purpose of considering a claim of deduction. The undertaking qualifying for deduction u/s.80IB of the Act is an undertaking developing and building housing projects and the deduction is in respect of profits and gains derived from such housing project, satisfying the conditions stipulated in the clause therein. Thus, within a composite housing project, where there are eligible and ineligible units, assessee can claim deduction in respect of eligible units in the project and even within the block, assessee is entitled to claim proportionate relief in the units satisfying the extent of built-up area. CIT(A) rightly held that assessee was eligible for deduction u/s.80IB of the Act for Tower T1 amounting to Rs.1,44,91,313/- being eligible profit u/s.80IB of the Act. For the balance amount of deduction claimed u/s.80IB i.e. Rs.1,70,09,616/- (Rs.3,15,00,929/- minus Rs.1,44,91,313/-) assessee has stated that disallowance in respect of Towers T2 and T3 of Kapil Malhar Intelligent Home would be revenue neutral as regular tax liability is less than tax paid on the book profit. Assessee has not filed any specific submission or details for Tower T2 and T3 regarding the claim made for 80IB of the Act. Since the eligible deduction would be tax neutral the adjudication of balance amount becomes mere academic in nature and same was not directed. Above reasoned finding of CIT(A) needs no interference from our side, whereby CIT(A) has allowed the claim of assessee as discussed above. Same is upheld. & C.O. No.18/Mum/16 A.Ys. 10-11 [DCIT vs. M/s. Indorigin Electric Ltd.] Page 10
Ld. Authorized Representative did not press the issue raised in C.O. So, same are dismissed as not pressed.
In the result, the appeal of Revenue is dismissed and Cross Objection of assessee is dismissed as not pressed.
Pronounced in the open Court on this the 24th day of June, 2016.
Sd/- Sd/- (RAJESH KUMAR) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: Dated 24/06/2016 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार, आयकर अपील�य अ�धकरण, मुंबई ।