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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri Joginder Singh, & Shri Sanjay Arora
आदेश / O R D E R
Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 10/10/2011, of the ld. First Appellate Authority, Mumbai, upholding the disallowance of deduction amounting to Rs.1,91,12,692/- u/s 80IB(10) of the Income Tax Act, 1961 (hereinafter the Act).
At the outset, the ld. counsel for the assessee, Shri Gyaneshwar Kataram, claimed that the impugned issue is covered in favour of the assessee by the decision of the Tribunal dated 17/11/2014 (ITA No.1591/Mum/2011). This factual matrix was not controverted by the ld. DR, Shri D. Prabhakar Reddy.
We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order of the Tribunal dated 17/11/2014 for ready reference and analysis:-
“This is an appeal filed by the assessee against the order CIT(A) dated 28- 1-2011, in the matter of order passed u/s.143(3) of the I.T. Act, for the assessment year 2007-08.
2. The ground raised by the assessee is in regard to action of the CIT(A) in upholding the disallowance of deduction u/s.80IB(10) of Rs.7,13,40,890/-.
3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is engaged in the business of developing residential projects in Thane. During the year, the residential project namely “Neelkanth Palm” at Majiwade, Thane was developed and completed in addition to Classique Housing Project and Royale Housing Projected completed earlier. During the year, the assessee claimed deduction u/s.80IB(10) out of the profits on proportionate basis on the project namely Royal Housing Project. In view of the above, the assessee was asked by the AO as to how the proportionate deduction u/s.80IB(10) on the units having built up area below 1000 sqf.ft. is allowable when no such provisions are there in the IT Act. The assessee submitted a detailed reply and relied on various decision of the Tribunal and the Courts. The AO did not convince with the explanation of the assessee and disallowed the entire claim of deduction u/s.80IB(10) claimed proportionately at Rs.6,52,49,467/-.
By the impugned order the CIT(A) after relying various judicial pronouncement as well as the decision of the Special Bench of the Tribunal in the case of Brahma Associates, confirmed the disallowance made by the AO u/s.80IB of the Act by holding that the assessee has evidently violated the provision of Section 80IB(10(c) and failed to fulfill all the conditions of law, therefore, the assessee is not entitled for any such deduction on proportionate basis which was claimed at Rs.6,52,47,267/- and revised later before the AO.
Learned AR, before us, submitted that the CIT(A) the proportionate deduction claimed u/s.80IB(10) of the Act was wrongly disallowed by the AO, which was not taken into consideration by the CIT(A). He further submitted that the deduction u/s.80IB(10) of Rs.6,52,47,267/- (which is later in the assessment proceedings revised to Rs.7,13,40,890/-) was claimed in the return of income but the AO did not consider the submission of the assessee and disallowed the deduction as claimed u/s.80IB. He further submitted that the only dispute involved in this case is about merging of some flats which now have the built up area above 1000 sq.ft. and in view of this fact no deduction was claimed on such 152 flats out of 286 flats but proportionate deduction u/s.80IB(10) is claimed only on 144 units having built up area below 1000 sq.ft. which is allowable as per law. In support of his contentions, learned AR relied on the following decisions :- i) G.V. Corporation Vs. ITO, 38 SOT 174(Mum); ii) ACIT Vs. Sheth Developers (P) Ltd., 33 SOT 277 (Mum); iii) Viswas Promoters (P) Ltd. Vs. ACIT, 255 CTR 149; iv) SJR Builders Vs. ACIT, dtd.21.8.2009(Bang) v) Sanghvi & Doshi Enterprise Vs. ITO, 131 ITD 151(Chennai); vi) ITO Vs. AIR Developers, 122 ITD 125 (Nag); vii) DCIT Vs. Brigade Enterprises P. Ltd., 28 SOT 7 (Bang); viii) DCIT Vs. Parkway Development, ITA No.1419/Bang/2010, dtd.20-8- 10; ix) ACIT Vs. Bengal Ambuja Housing Development Ltd., ITA No.458/2006, dated. 5.1.2007 (Calcutta High Court).
On the other hand, learned DR relied on the order of lower authorities.
We have considered rival contentions, carefully gone through the orders of the authorities below. The only grievance of the assessee relates to decline of proportionate claim of deduction u/s.80IB(10) in respect of units having built-up area below 1000 sq.ft. The issue has been decided by the Mumbai bench of the Tribunal in the case of G.V. Corporation Vs. ITO, 38 SOT 174(Mum), wherein it was held that in view of the decision of ITAT Special Bench in the case of Brahma Associates, 119 ITD 255, assessee is eligible for proportionate deduction in respect of profits from eligible housing projects.
Hon’ble Madras High Court in the case of Viswas Promoters (P) Ltd., 255 CTR 149, held that within the composite housing project, where there are eligible and ineligible units, the assessee can claim deduction in respect of eligible units in the project. Respectfully following the decision of Hon’ble Madras High Court and coordinate bench of the Tribunal, we direct the AO to allow assessee’s claim of deduction with respect to houses having area below 1000 sq.ft. subject to fulfilling other conditions of Section 80IB(10).
In the result, appeal of the assessee is allowed for statistical purposes.”
3.1 The issue clearly is the validity of the proportionate deduction of profit u/s.80-IB(10), i.e., with respect to the residential units (in the housing project) having area below 1000 sq. ft. – the project being located at Mumbai, subject of- course to the fulfillment of the other conditions for deduction there-under. The issue stands decided by the Tribunal in the assessee’s case for A.Y. 2007-08 by relying on the decision in the case of CIT vs. Brahma Associates [2011] 333 ITR 289 (Bom) and Viswas Promoters (P) Ltd. [2013] 29 taxmann.com 19 (Mad), advocating such proportionate deduction. However, as clarified by the Bench during hearing, the Hon’ble jurisdictional High Court has in Brahma Associates (supra) clearly held to the contrary, as noted by the tribunal in inter alia Asst. CIT vs. Ekta Sankalp Developers [2015] 152 ITD 805 (Mum), reproducing from the said decision (refer para 31 at pgs. 302-303 of the reports) at para 5 of the order: ‘Section 80-IB(10) allows deduction to the entire project approved by the local authority and not to a part of the project. If the conditions set out in section 80-IB(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 the part of the project.’ [emphasis, ours] So, however, the Tribunal per its’ said decision has also clarified that the condition as to the limit on the built up area, specified per clause (c) of section 80-IB(10), does not apply to the housing project as a whole, but only to each residential unit. We may reproduce herein under the relevant part of the said order (refer para 5): ‘5. We, faced with the decision by the hon’ble jurisdictional high court in the case of Brahma Associates (supra), ……….. The provision is accordingly examined closely, to find clause (c) as worded differently from the other clauses of section 80-IB(10), setting forth the conditions precedent for the eligibility to deduction of the profits of the project. The said clause, on a fair construction, was found to contain a condition with reference to the residential unit comprising the housing project. The condition, by necessary implication, applies to all the residential units of the housing project. The converse, however, cannot be said to hold, so that only such housing project, all the residential units comprising which satisfy the condition of section 80-IB(10)(c), is an eligible project. The word ‘project’, clearly mentioned in each of the other clauses, is conspicuous by its absence in clause (c). That is, s. 80-IB(10)(c) represents a condition precedent qua the residential unit comprising the housing project and not qua the project; its language not admitting of such a view. We may though at once clarify that the decision by the hon’ble court being binding, we would not have for a moment hesitated to hold otherwise if we found anything to so suggest in the decision in Brahma Associates (supra), which is sans any reference to s. 80-IB(10)(c), or if that meaning or intention was found expressed in its plain language; it being trite that there is no equity about tax and there is no room for intendment, so that one has to look fairly at the language used, even as exhorted time and again by the apex court. Also, fiscal statutes are to be strictly interpreted, and so are the exemption provisions. It is only once an entity or income, which is the subject matter of exemption, is found, on such construction, to be within the ambit of the provision, that a liberal approach is to be adopted toward effectuating the object of the provision, for which we may refer to Bajaj Tempo Ltd. vs. CIT [1992] 196 ITR 188 (SC) relied upon by the tribunal in the various orders, as far as appears on a reading of their extracts as listed in the tribunal’s order for A.Y. 2007-08 (supra). The interpretation is also in accord with a purposive and liberal approach, advocated by the apex court in, inter alia, Bajaj Tempo Ltd. (supra). The provision being an incentive provision, toward promoting the growth of affordable housing in the country, the construction enables the same, while at the same time operating to exclude the extension of the incentive to housing that is not covered or targeted by the provision, as sought to be included by the ld. AR. Again, it is trite law that the benefit of any ambiguity, if any, in the language of the provision, so that two reasonable views are permissible, is to go to the tax payer. We may clarify that our decision, even as sought to be emphasized earlier, despite approving the proportionate deduction, i.e., w.r.t. section 80-IB(10)(c), is, for the reasons afore-stated, thus not in conflict with the decision by the hon’ble jurisdictional high court in Brahma Associates (supra). The deduction toward the residential units satisfying the condition of s. 80-IB(10)(c), arrived at on a proportionate basis, is therefore upheld.’ We, accordingly, uphold in principle the allowance of deduction u/s. 80-IB(10) qua the project/s under consideration on a proportionate basis, i.e., as for A.Y. 2007- 08, restoring the matter back to the file of the A.O. for necessary verification, i.e., as to the correctness of the assessee’s claim/s following the order for that year. We decide accordingly. 3.2 Finally, the appeal of the assessee is allowed for statistical purposes.
This order was pronounced in the open court in the presence of ld. representative from both sides at the conclusion of the hearing on 03/03/2016.