DCIT, NEW DELHI vs. M/S. OMAXE BUILDHOME (P) LTD., NEW DELHI

PER I.C. SUDHIR: JUDICIAL MEMBER Assessment year: 2008-09: In the case of Omaxe Ltd., the parties are in

cross appeals against the common First Appellate Order. The grounds are

revolving on the issue of validity of claimed deduction under sec. 80IB (10)

of the Income-tax Act, 1961.

orders of the authorities below and the material available on the record in

view of the decisions relied upon.

development and construction of large scale residential/ housing projects. For the previous year relevant to the assessment year, 2008-09, the appellant filed e-return on 29th September, 2008 declaring income of Rs. 265,77,67,830. In the return of income, the appellant claimed deduction of Rs.189,70,14,901 under section 80IB(10) of the Income- tax Act, 1961 (‘the Act’) in respect of income derived from various eligible housing projects.

In the assessment completed vide order dated 31st December, 2010 under section 4. 143(3) of the Act, the assessing officer assessed the income of the assessee at Rs.454,03,62,210 against income of Rs. 265,77,67,830 declared by it. In the assessment order, the assessing officer denied the aforesaid deduction claimed under section 80IB(10) of the Act to the extent of Rs.188,25,94,379.

Grounds ITA No. 4034: 1. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in allowing deduction u/s. 10IB(10) of the Income-tax Act, 1961 in respect of profits from housing projects which are Group housing schemes of multistoried flats in the projects namely Omaxe Heights, Faridabad, Omaxe Heights, Badadurgarh, Omaxe Heights, Sonepat, Omaxe Parkwood, Baddi and Omaxe Reviera, Pant Nagar. 2. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in holding that the Group housing projects of housing projects namely Omaxe Heights, Faridabad, Omaxe Heights, Bahadurgarh, Omaxe Heights, Sonepat, Omaxe Parkwood, Baddi and Omaxe Reviera, Pant Nagar are separately satisfying the conditions of sec. 80IB(10) of the Income-tax Act, 1961 despite observing that the

consolidated approval of the local authority is for the entire project. 3. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in holding that the commercial area is not part of Group housing projects of housing projects namely Omaxe Heights Faridabad, Omaxe Heights, Bahadurgarh, Omaxe Heights, Sonepat, Omaxe Parkwood, Baddi and Omaxe Reviera, Pant Nagar. 4. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in holding that the commercial area of housing projects namely Omaxe Heights, Faridabad, Omaxe Heights, Bahadurgarh, Omaxe Heights, Sonepat, Omaxe Parkwood, Baddi and Omaxe Reviera, Panat Nagar which, though, exceeded the limit prescribed in clause (d) of sec. 80IB(10) of the Income-tax Act, 1961 was a separate unit. 5. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in holding that the transfer of commercial area of housing projects namely Omaxe Heights, Faridabad, Omaxe Heights, Bahadurgarh, Omaxe Heights, Sonepat, Omaxe Parkwood, Baddi and Omaxe Reviera, Panat Nagar to the Group companies was not a mere book entry. 6. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in allowing

deduction u/s. 10IB(10) of the Income-tax Act, 1961 on profits from the sale of villas included in the projects namely Omaxe City, Sonepat, Omaxe City, Lucknow, Omaxe City, Jaipur and Omaxe City, Palwal. 7. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in holding that the plots and villas included in the projects namely Omaxe City, Sonepat Omaxe City, Lucknow, Omaxe City, Jaipur and Omaxe City, Palwal are separate projects. 8. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in holding that the commercial area in the projects namely Omaxe City, Sonepat, Omaxe City, Lucknow, Omaxe City, Jaipur and Omaxe City, Palwal, which, though, exceeded the limit prescribed in clause (d) of section 80IB (10) of the Income-tax Act, 1961, was a separate unit. 9. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in holding that the transfer of commercial area in the projects namely Omaxe City, Sonepat Omaxe City, Lucknow, Omaxe City, Jaipur and Omaxe City, Palwal, to the group companies was not a mere book entry. 10. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in holding that the project Omaxe Heights, Sonepat and plots and villas

included in Omaxe City, Sonepat as district housing projects, when the assessee himself has considered the projects Omaxe City, Sonepat which contains plots and villas and Omaxe Heights, Sonepat as one project and in allowing deduction under sec. 80IB(10) of the Income-tax Act, 1961 to the assessee in excess of the deduction claimed by the assessee in the return of income. 11. The order of the CIT(A) is erroneous and is not tenable on facts and in law.

Name of the project Deduction claimed and disallowed under sec. 80IB(10) in Rs. Omaxe City, Rohtak 1,91,34,660 Omaxe Parkswood II, Chakkan 2,26,45,075 Baddi

Omaxe City Mayakheri, Indore 6,86,87,350 Omaxe City-II, Mangaliya, Indore 19,17,82,533 PDA Omaxe City Patiala 48,82,09,699

By holding that deduction u/s. 80IB(10) of the Act in respect of profits derived from the housing projects consisting of unbuilt housing sites cannot be allowed.

(ii) Erred in confirming the disallowance of deduction under sec. 80IB(10) on part of the housing project comprising of unbuilt housing sites out of deduction claimed by the appellant on the eligible housing projects, claim of deduction on unbuilt housing sites bearing as under:

Name of the project Confirmed disallowance of deduction claimed under sec. 80IB(10) in Rs. Omaxe City, Lucknow 13,54,30,598 Omaxe City, Jaipur 8,39,27,677 Omaxe City, Palwal 46,86,6233

By holding that deduction u/s. 80IB(10) of the Act in respect of profits derived from that part of housing projects which consists of unbuilt housing sites cannot be allowed.

(iii) Misinterpreted the provisions of sec. 80IB(10) by holdng that the conditions (a) and (c) of the aforesaid section regarding commencement of construction of the housing project and maximum built up area of a residential units respectively cannot be fulfilled, if housing sites are sold without any construction thereon. (iv) Misinterpreted the provisions of section 80IB(10) of the Act by holding that activity of developing housing sites along with construction of all infrastructural facilities and amenities is not ‘development and construction of housing project’ rather, construction of residential units is must for constituting a housing project. 2. That the Learned CIT(Appeals) erred on facts and in law in confirming charging interest under sec. 234B of the Act ont the revised income of the appellant.

Departmental Appeal: The primary issue raised in the present case 10.

relates to the aforesaid projects undertaken by the assessee satisfying some

of the conditions prescribed in section 80IB(10) of the Act. The major legal

issues on which deduction has been denied to the assessee may be

summarized as follows.

(i) As per sub-clause (c) of section 80IB(10) of the Act, the maximum built up area of residential unit has to be 1000/1500 sq ft as per location of the project, however the consolidated projects consist of residential units having area more than prescribed limit.

(ii) As per sub clause (d) to the section 80IB(10) built up commercial area in the housing project should not exceed the prescribed limit, whereas the consolidated projects consisted of commercial area more than the prescribed limit. It was alleged that Transfer of commercial area by the assessee was merely a book entry to circumvent the provisions of section 80IB(10).

(iii) As per the Assessing Officer, fulfillment of various conditions for claiming deduction under section 80IB(10) of the Act have to be examined vis-à-vis the entire housing project as originally approved by the local authority and the same cannot be seen/ examined vis-à-vis that part of the

independent/ separate housing project, within the large project as approved by the local authority, in respect of which deduction has been claimed by the assessee.

(iv) The assessing officer held that the entire project was approved as one project and therefore, it is not permissible to bifurcate the project and claim deduction in respect of part of the project.

In the first appeal, the learned CIT(A) allowed deduction in respect of eligible housing projects having built up residential units within the prescribed limit on the basis of various judicial precedents that deduction can be allowed in respect of eligible portion of the housing project on a standalone basis, even if the project as a whole consists of residential units and commercial area having built up area more than the prescribed limit. Department is in appeal before us against the order of learned CIT(A) to the extent of relief allowed to the assessee.

Approval is accorded to the entire project. Blocks of residential units are part s of a project and not project by itself. As such a block of residential unit cannot be construed to be a separate project.

(a) area of such eligible housing projects is clearly identifiable in the layout plans approved by the local authority.

Such eligible projects have clearly demarcated the area/ layout in the approved plans and one can easily separate the eligible part therein;

(b) separate books of account are maintained and profits of the eligible housing project are identifiable and can easily be deduced from such books of account as being maintained by the appellant;

(c) eligible housing project satisfies all the conditions prescribed in section 80IB(10) of the Act;

(d) separate occupation certificates are received for the eligible project.

12.1. The Learned AR further submitted that the claimed deduction only in respect of profits derived from the eligible housing projects and no part of the profits of the ineligible portion has been included therein. Under section 80IB(10) of the Act, deduction, as stated above, is allowed in respect of the profits derived from a housing project which is approved by the local authority. The said section, as per his submission, nowhere mandates that one has to simply go by the license granted by the local authority and examine the satisfaction of conditions with reference to the entire project as approved. It may be appreciated that where the developer proposes to develop a township on a large plot of land, consolidated application is filed with the local authority for approval of the housing project, merely as a matter of administrative convenience. It is also open to the assessee to apply for approval of the housing project on part of the plot of land, rather than filing consolidated application for the entire plot available with the assessee. Once approval is granted by the local authority, the entire project is approved. Merely because consolidated application is filed by the assessee for approval of the housing project, that does not, in his submission, mean that one has to only look at the complete/ consolidated project as such. What is material and important is to examine whether the consolidated license consists of any independent and separate eligible housing project, which independently and separately satisfies the various conditions for claiming deduction under section 80IB(10) of the Act or not. If any part of the consolidated project consists of eligible independent/ separate housing project, which satisfies all the conditions of that section, there is, no reason to deny deduction in respect of the profits derived from such eligible housing project. Further, the commercial area, also, did not form part of the eligible housing project. It is, important to note that deduction was not at all claimed by the assessee in respect of profits from the commercial area. Despite the aforesaid, in order to put the matter beyond any doubt and to strengthen the claim, the assessee decided to transfer the commercial area at book value to other group companies. The Learned AR contended that the findings/ allegations of the assessing officer regarding transfer of commercial area are totally misconceived and factually incorrect. The assessee actually transferred the commercial area to other companies is supported by the following documents:

(i) MOU entered into between the assessee and transferee company(ies) for transfer of commercial area;

(ii) Intimation filed before the DTCP/ other regulatory authorities intimating transfer of commercial area.

It may be pertinent to mention here in cases where commercial area was transferred in the financial year 2008-09, intimation was given to the regulatory authorities in March, 2009, much prior to the date of survey by the Tax Department in December, 2009. (iii)Agreements were entered into by transferee company(ies) with various buyers for transfer of the commercial area [sample copies submitted for each of the projects];

(iv) Post-transfer, entire expenditure on construction of commercial area was borne by the transferee company(ies) and not the assessee;

(v) Profits/ losses relating to the commercial area was accounted for by the transferee company(ies) and not the assessee;

(vi) Completion certificates in respect of the commercial area forming part of some of the projects were issued by the local authority in the name of the transferee company(ies).

(vii) In the revised map/ layout plans of some of the projects approved by the local authority, commercial area is clearly demarcated in the name of the transferee company(ies). :

12.2 The aforesaid documentary evidences, the Learned AR submitted, clearly establish beyond any reasonable doubt that the commercial area was transferred by the assessee to other company(ies) not merely by way of book entry, as alleged by the assessing officer. It is emphatically reiterated that the decision to transfer the commercial portion was taken by the assessee for business considerations and to strengthen its claim of deduction under section 80IB(10) of the Act. The appellant fails to appreciate as to how the contents of the aforesaid annexure have been understood/ read by the assessing

officer as an attempt by the assessee to circumvent provisions of section 80IB(1) of the Act.

12.3 The Learned AR further reiterated that the assessing officer failed to appreciate that commercial area, in any case, was not at all claimed by the assessee to be part of the eligible housing project in respect of which deduction was claimed. The assessing officer had proceeded on the ground that the entire housing project has to be seen with reference to the consolidated approval granted by the local authority and, therefore, the commercial area shall continue to form part of the housing project, despite the fact that the same was transferred to other company(ies). Such contention of the assessing officer, as elaborately discussed supra, is not legally sustainable. As discussed supra, the mere fact that a consolidated license had been approved for the large housing project does not, it was submitted, bar transfer of any part thereof, to be independently developed by a third party, and cannot be the ground for denying deduction in respect of profits of the eligible housing project.

12.4 In view of the aforesaid, it was submitted by the Learned AR that the assessing officer totally misconstrued the provisions of section 80IB(10) of the Act to hold that if the consolidated project does not satisfy all the conditions prescribed in the said section, then no deduction is admissible even in respect of profits derived from eligible housing projects forming part of the consolidated project.

12.5 The Learned AR placed reliance on the following decisions to support his contentions that various Courts and various benches of the Tribunal have consistently held that pro-rata deduction can be granted with reference to profits of area/ residential unit(s) which qualifies for deduction under section 80IB(10) of the Act:

section 80IB(10) of the Act (Tribunal order was relied upon by the Assessing Officer while denying deduction). The following questions were referred for consideration before the Hon’ble Court “(i) Whether on the facts and circumstances of the case, the Appellate Tribunal is right in denying under Section 80IB(10) in respect of project Agrini and Vajra for flats less than 1500 sq.ft. on proportionate basis? (ii) Whether on the facts and circumstances of the case, the Appellate Tribunal is right in law in holding that in a consolidated residential units having more than 1500 sq.ft. And less than 1500 sq.ft., proportionate deduction under Section 80IB(1)(c) cannot be allowed for flats less than 1500 sq.ft.?”

Reversing the decision of the Tribunal and answering the aforesaid questions in favour of the assessee, their Lordships observed as under: “….On the facts admitted by the Revenue, in the projects "Agrini" and "Vajra", there are number of flats which are below 1500 sq.ft., and the relevant built-up area requirement is specified under Section 80IB(10)(c) of the Income Tax Act. Thus, the built-up area in some of the flats in both these projects are in excess of 1500 sq.ft., i.e., 32 flats in Agrini and only one flat in Vajra and that the assessee had not claimed any deduction on this. We hold that the Tribunal is not correct in its view, that by reason of these Units being in excess of 1500 sq.ft., the entire claim of the assessee in respect of these two projects would stand rejected under Section 80IB(10) of the Income Tax Act. Thus, going by the definition of "housing project" under Explanation to Section 80HHBA of the Act as referred to above as the construction of "any building" and the wordings in Section 80IB(10) of the Act, the question of rejection in entirety of the project on account of any one of the blocks not complying with the conditions, does not arise. Even in the case of each one of the blocks, wherever there are flats which satisfied the conditions particularly of the nature stated under Section 80IB(10)(c) of the Act, we have already upheld the case of the assessee in T.C.Nos.1348 and 1349 of 2007 dated 10.10.2012 for grant of relief under Section 80IB(10) of the Act on a proportionate basis, by following the decision of the Bombay High Court reported in [2011] 333 ITR 289 (CIT Vs. Brahma Associates). Thus applying the decision of this Court in T.C.Nos.1348 and 1349 of 2007 dated 10.10.2012, we hold that the assessee is entitled to succeed both on the principle of proportionality as well as by reason of the construction on the meaning of the expression "housing project" as referring to construction of any building and the wordings in Section 80IB(10) of the Act. In the circumstances, we hold that the mere fact that one of the blocks have units exceeding built-up area of 1500 sq.ft, per se, would not result in nullifying the claim of the assessee for the entire projects. Consequently, in respect of each of the blocks, the assessee is entitled to have the benefit of deduction in respect of residential units satisfying the requirement under Section

80IB(10)(c) of the Act. In so holding, we also agree with the decision of the Bombay High Court reported in [2012] 206 TAXMAN 584 (CIT v. Vandana Properties), which was decided by the Bombay High Court on similar lines as in the assessee's case before us….”

It will, thus, kindly be observed from the above discussion, that Hon’ble Chennai High Court has even allowed deduction residential unit wise, within a single block.

On behalf of the Revenue, it was contended that there is no provision for pro-rata deduction, as under: “10. As regards the claim of proportionate relief, learned standing counsel pointed out that if the law contemplated proportionate relief to be granted on a partial compliance, the Section itself would have provided for such a situation. However, in the absence of any such contemplation stated so in clear terms under Section 80IB of Act, it is not open to the Tribunal to dilute the said Section to grant pro-rata relief.”

Answering the aforesaid question in the affirmative, their Lordships of the Madras High Court observed as under: “37. Leaving that aspect aside, on a reading of the three clauses, it is clear that in a given case, when the housing project, a 100% residential unit, satisfies other clauses (a) and (b) and the built-up area as given under clause (c) of Section 80-IB(10) of the Act, there could be no difficulty for the Revenue to grant the deduction. The question becomes a little complicated when 100% residential housing project has built-up area of mixed nature. While few of the units may satisfy the criteria of the built-up area of less than 1500 sq.ft., there may be units which have built-up area crossing the limit as specified in clause (c) of Section 80-IB(10) of the Act. In such an event, on a reading of the provision, we hold that the assessee would not be entitled to have the benefit of 100% absolute deduction under Section 80-IB(10) of the Act in respect of the entire project, but would be entitled to pro-rata deduction on the units satisfying the condition under Clause (c). Given the object of the provisions under Section 80-IB(10) of the Act, when the deduction to be granted is on the profits and gains of undertaking developing and constructing approved

housing projects, in the absence of restrictive covenant under sub- Section (10) of Section 80-IB, we do not find any justifiable ground to hold that on the mere fact of some of the units having the built-up area exceeding the condition specified under clause (c), the claim for deduction would stand rejected on the entire project. As pointed out in the decision of the Bombay High Court reported in [2011] 333 ITR 289 CIT v. BRAHMA ASSOCIATES, with zones classification permitting commercial establishment in residential flats too, once the local authorities approved the project with or without the commercial use as permitted under the Rules, the project approved is eligible for deduction under Section 80IB(10). The fact that the housing project has residential flats and commercial user, by itself, cannot, in any way, stand in the way of granting deduction. The restriction under Section 80IB(10)(c) cannot be construed as a negative condition to deny the benefit to an assessee, when the approved project has residential units of more than 1500 sq. ft. The idea of prescribing such restriction is to encourage construction of affordable houses to common man and the restriction is not by way of negative condition to reject a claim where the housing projects have units with the built-up area exceeding the prescribed limit as well as within the limits. So too, in a case where the project contains commercial as well as residential area.” (emphasis supplied)

12.6 Though the aforesaid decision relates to pre-amendment period, i.e. before insertion of clause (d) w.e.f. 01.04.2005, it is however pertinent to note that the Hon’ble High Court after considering the amended law held that relief should be granted to the extent of compliance. On allowability of pro-rata deduction, the Court further observed as under:

“41. It is seen from the order of the Tribunal that the assessee made an alternative submission that to the extent of compliance of the built-up area under residential unit, pro-rata relief be given to the assessee. As far as this relief is concerned, in similar circumstances, in the decision reported in 238 ITR 38 H.P.T.D.C. v. UNION OF INDIA, the Himachal Pradesh High Court considered the possibility of granting the proportionate relief on pro-rata basis to the extent of compliance of the provisions. It is no doubt true that the Section does not provide any such working. Yet, this being a deduction provision and there being no such indication that the conditions have to be cumulatively satisfied in the context of the meaning of a 'housing project' to include residential-cum-commercial complex, we feel, in fairness to the claim of the assessee, the proportionate relief has to be read into the provisions, so that deduction provisions are sustained.”

“…..Moreover plain reading of Section 80IB(10) does not even remotely suggest that the plot of land having minimum area of one acre must be vacant. The said section allows deduction to a housing project (subject to fulfilling all other conditions ) 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..”

12.7 In the aforesaid case, the project of the assessee consisted of buildings A, B, C, D and E, out of which only building E was eligible for deduction under section 80IB(10) of the Act. The assessing officer, however, denied deduction on the ground that the size of the plot in relation to Building E did not exceed the prescribed area of 1 acre and therefore, the assessee was not eligible for deduction. The Bombay High Court, approving the order of the Tribunal held that the plot of land may have other housing projects, which may not be eligible for deduction under section 80IB(10) of the Act; nevertheless, the deduction will be admissible on that part of the housing project which is eligible for deduction under that section. It will, thus, kindly be appreciated that the aforesaid decision, in fact, goes a step further and held that claim of deduction cannot be denied on portion of the housing project, even though the eligible portion was construction on plot of land less than the prescribed area.

12.8 In case of Bengal Ambuja Housing Development Ltd., Kolkata Bench of the

Tribunal similarly held as under: “It is apparent from the perusal of s. 80-IB(10) that this section has been enacted with a view to provide incentive for businessmen to undertake construction of residential accommodation for smaller residential units and the deduction is intended to be restricted to the profit derived from the construction of smaller units and not from larger residential units. Though the AO has denied the claim of the assessee observing that larger units were also constructed by the assessee, at the same time, it is also a fact on record that the assessee had claimed deduction only on account of smaller residential units which were fulfilling all the conditions as contained in s. 80-IB(10) and the same has not been disputed by the AO also. We have also noted down the fact that even the provision as laid down in s. 80-IB(10) does not speak regarding such denial of deduction in case of profit from a housing complex containing both the smaller and large residential units and since the assessee has only claimed deduction on account of smaller qualifying units by fulfilling

all the conditions as laid down under s. 80-IB(10), the denial of claim by the assessee is on account of rather restricted and narrow interpretation of provisions of cl. c of s. 80-IB(10) while coming to such conclusion, we also find support from the order of the Hon’ble Supreme Court in case of Bajaj Tempo Ltd. vs. CIT (supra), wherein it was held that provisions should be interpreted liberally and since in the present case also, the assessee by claiming pro rata income on qualifying units has complied with all the provisions as contained in the said section, in our considered opinion, such claim of the assessee was rightly allowed by the learned CIT(A) by reversing the order of AO."

The aforesaid decision of the Tribunal has been upheld by the Hon’ble, Calcutta High Court in IT Appeal No. 453 of 2006 wherein the Hon’ble High Court vide order dated 5th Jan., 2007 held as under:

“The appeal is now taken up for hearing and after hearing the learned counsel for the parties and perusing the order passed by the Tribunal, we find that no substantial question of law is involved in this matter. Hence we dismiss the appeal.”

12.9 The Special Bench of the Tribunal in the case of Brahma Associates vs. JCIT: 119 ITD 255/ 30 SOT 155 (Pune), while considering the provisions prior to 1.04.2005, held that:

(i) Once a housing project consisting of residential and commercial establishments is approved by the local authority, then the same is eligible for deduction;

(ii) There was no specific limit/ restriction as to the commercial area forming part of the housing project. In case residential area was 90% or more of the built up area, then, the entire project was eligible for deduction;

(iii) However, in case commercial area is 10% or more of the built up area, but residential segment on a standalone basis satisfies the conditions of section 80- IB(10) of the Act, then, deduction would be admissible in respect of residential segment of the project.

12.10 In further appeal preferred by the Revenue against the aforesaid decision of the Special Bench of the Tribunal, the Bombay High Court has partly affirmed the decision in CIT v. Brahma Associates: 333 ITR 289 (Bom.). The Hon’ble Court held that restriction inserted with effect from 1.4.2005 as to permissible limit of commercial use in project is not retrospective and hence once housing project is approved by local authority having residential and commercial units, then prior to 1.4.2005 entire profits would be entitled to deduction under section 80-IB(10) of the Act. However, in the absence of claim made by the assessee in that behalf, no further relief could be allowed by the Court. The order of the Tribunals, in the aforesaid circumstances was approved. It will, thus, kindly be appreciated that the Hon’ble High Court did not agree with the Tribunal in imposing 10% limit to the commercial area. The legal position that emerges from the aforesaid decisions is that:

(a) Prior to assessment year 2005-06, entire profits from the approved housing project was eligible for deduction under section 80IB(10) of the Act, irrespective of the commercial area;

(b) From assessment year 2005-06, profits of commercial area can only be included in the eligible profits if the commercial area does not exceed the limit prescribed in clause (d) of section 80IB(10) of the Act.

If, however, the commercial area exceeds the prescribed built up area, but residential segment on a standalone basis satisfies the conditions of section 80IB(10) of the Act, then deduction would be admissible only in respect of profits derived from such standalone residential segment of the project.

12.11 Following the aforesaid, the Third Member of the Tribunal in the case of Sanghvi & Doshi Enterprise v. ITO: 131 ITD 151 (Chennai) (TM) held that the assessee was entitled to pro-rata deduction under section 80IB(10) of the Act in respect of flats having built up area not exceeding 1500 sq ft and not entitled to deduction in respect of those flats having built up area exceeding 1500 sq.ft. On further appeal by Revenue to the Hon’ble High Court, decision of the Tribunal has been affirmed.

12.12 In case of Ansal Housing and Constructions Ltd. ITA No. 1922 and 1923/ Del/2005, Hon’ble Delhi ITAT held that even if some flats exceeded 1000 sq. ft. of built- up area that did not disentitle the assessee to the deduction; a proportionate deduction on flats which exceed the statutory limit of 1000 sq. ft. alone can be disallowed, as held by Calcutta, Delhi and Bangalore Benches of the Tribunal in certain cases. This view of ITAT was affirmed by Hon’ble Delhi High Court in ITA Nos. 480 and 485/201015. It held as under:

“For the above reasons, we are of the view that no substantial question of law arises for our consideration in ITA Nos.485/2010 & 480/2010. The orders of the Tribunal are accordingly upheld and the appeals filed by the Revenue are dismissed.”

12.13 Pro-rata deduction has similarly been held allowable in the following decisions:

- Brigade Enterprises (P) Ltd.: [2009] 28-SOT-7 (Bang.) - ITO v. AIR Developers: [2010] 122 ITD 125 (Nag) - G.V. Corporation V. ITO: [2010] 38 SOT 174 (Mum.) - ACIT v. Sheth Developers (P.) Ltd.: [2009] 33-SOT-277 (Mum)

- Prakruti Constructions (P) Ltd V. ITO: ITA No. 2264 & 2265/ Mum/ 2011 - Delhi Iron and Steel Pvt. Ltd in ITA No. 2497/ Del/ 2007

12.14 The Learned AR thus pointed out that the Hon’ble High Courts and various benches of the Tribunal have consistently held that proportionate deduction can be allowed in respect of profits of residential units forming part of the housing project, which satisfies conditions prescribed in section 80IB(10) of the Act.

12.15 The Learned AR submitted further that once pro-rata deduction has been held to be admissible in respect of eligible area of the project, the location of the eligible residential units, within the larger housing project, is irrelevant. Being so, irrespective of the fact that some of the eligible units are located in the same tower or building or vicinity or are located at distant location, but is part of the larger approved housing project, pro-rata deduction is admissible in respect of profits of the eligible residential unit(s).

12.16 When we considered the above submission in view of the above cited decisions of the Hon'ble High Courts an the different Benches of the ITAT, we come to the conclusion that pro-rata deduction on the residential units fulfilling the conditions laid down under sec. 80IB(10) of the Income-tax Act, 1961 or stand above basis. Now, we have to receive the First Appellate Order on the issue in view of the legal position approved in the above cited decisions. Para Nos. 5 to 5.3 of the First Appellate Order are

relevant which deal with the issues raised in the grounds of the appeal before us. For

ready reference, these paragraphs are being reproduced hereunder:

The appellant company during the year under consideration has claimed deduction u/s .80IB (10) of 1. T. Act on percentage completion method. I would segregate the claim of deduction u/s. 80IB (l0) of 1. T. Act in two category. First category is of various Group housing projects which are multi-storeyed residential towers with commercial space in the projects and another is development of city where land is developed & plotted & sold to customers either as plot or after constructing the villas on such plot. There are also commercial space available in such city.

Under the category of claim deduction u/s 80IB (10) multi-storeyed residential tower during the year, the appellant has following projects :-

In all the above projects, there are various residential towers. Out of the above five projects, projects at Sr. No. 2,3,4 i.e. Bahadurgarh, Sonepat & Baddi all the residential towers have residential units satisfying the criteria of constructed maximum built up area of 1000 sq. ft. or 1500 sq. ft, as per the requirement of clause (c). For the projects at Sr. No. (1) & (5), some of the residential Towers have flats/residential units having built up area more than the prescribed limit as per clause (c) of Section 80IB (10) i.e. 1000 sq. ft. within the city of Delhi or Mumbai or within 25 Kms from the limit of Municipal Limits of these two cities or 1500 sq. ft. at any other place. In all such cases there is consolidated approval for the entire projects from Local authority. The assessing officer has denied the deduction on one of the ground that since some of residential towers have residential units more than constructed area of 1000 sq. ft. or 1500 sq. ft. as the case may be, therefore conditions contained in clause (c) is violated as there is consolidated approval from local Authority. Therefore, the assessing officer has treated

entire project as one housing project & has held that the condition contained in clause (c) is not fulfilled. Second ground for denial of deduction u/s 80IB (10) for all these project IS commercial area exceeded the limit prescribed under clause (d) of Section 80IB (10). Ld. AR has argued that the appellant has claimed deduction only from the profit of 'eligible housing projects' within the consolidated project. Ld. AR argued that the towers having residential unit with constructed area less than or equal to 1000 sq. ft. or 1500 sq. ft. as the case may be itself constitutes a housing project within the consolidated approval of Local Authority. He argued that these towers which are separate housing projects are in demarcated area, and having all amenities such as separate green area, separate road etc. and stand on there own. These towers have different section plan for its residential units, separate completion certificate. Therefore, these towers are satisfying all the criteria of Section 80lB Cl 0) separately. The fulfilment of criteria of clause (b) & (c) are as under :-

S.No. Name of the Details of eligible Towers Details of eligible Towers. Commercial projects. as per appellant's claim area Total Land No. of Total Land No. of Sq. Mtrs. area (in Towers area Towers acres.) 1. Omaxe 16.5 22 11.79 14 623.37 Heights, Faridabad (Total area 28.443 acres) 2. Omaxe Heights 10.19 14 - - 236.166 Bahadurgarh - (Total area I 10.25 acres) 3 Omaxe Heights 22.64 13 459.64 , . - ~. - , Sonipat, i I Haryana (Total I area 22.75 acres) 4. Omaxe 12.28 36 - 752.6 Parkwoods, I' Village BiIlanwali, Baddi, (Total " 12.47 area acres)

Ld. AR argued that these residential eligible project stand on their own & self sufficient & not dependent on other parts of the projects. He emphasized that total project area are too large to form single housing project. I agree with the argument of Ld. AR that eligible housing projects are separate housing projects satisfying the conditions of Section 8OIB(lO) for each housing project. For each eligible housing project Land area is much more than 1 acres as per the chart above each residential units have separate section plan approval & completion certificate. These eligible housing projects are having separate road, separate green area & other amenities. All the residential projects are spread over vast area of Land. Therefore, I hold that these residential towers of each project are separate housing projects.

Ld. AR argued that Judicial pronouncements are m favour of even allowing deduction on prorata basis in same Tower if some of the flats do not conform to the requirement of clause (c) of Section SOIB (10). He relied upon various decisions of hon'able ITAT cited supra. Apart from honable ITAT decision, Ld. AR has argued that all the decision of high courts are in favour of assessee on the issue of allowing proportionate deduction uls 80lB (l0).

He also argued that assessing officer's reliance on honable IT AT, Chennai in the case of Vishwas Promoters Pvt. Ltd. has been reversed by Madras High Court. Ld. AR argued that claim of deduction U/S 80m (l0) as all designated Towers are separate, having separate infrastructure & does not have any residential unit which have constructed area in violation of clause (c) of section 80m (l0).

Second issue raised for all the projects by the assessing officer is violation of clause (d) of Section 80m (l0). There has been amendment in clause (d) w.e.f. 01-04-2010. Prior to amendment the permissible commercial area in the housing project was five percent of the agreegate built up area of the housing project or two thousand sq. ft. which even is less. W.e.f. 01-04-2010, the permissible commercial area is three percent of the aggregate built up area of the housing project or five thousand sq. ft. whichever is higher. On factual aspect Ld. AR has argued that total commercial area in entire project is not conforming to the condition prior to 01-04-2010, but conforms to the condition in clause (d) after 01-04-2010. Further, he argued, that amendment w.e.f. 01-04-2010 is curative & clarificatory. I do not agree with the view of Ld. AR that the amendment in clause (d) is clarificatory & apply retrospectively. The amendment has been made prospectively w.e.f 01-04-2010 & not retrospectively. If the purpose of amendment was clarificatory then it should have been made retrospectively as it is substantive provision. Accordingly I do not agree with arguments of Ld. AR on this issue.

Second arguments of Ld. AR is that the development right of commercial area has been transferred to other companies. The transfer is not a mere book entry but through memorandum of understanding & is duly intimated to local Authority which has not only been recognized but issued completion certificate in the name of the transferee Ld. AR argued that as commercial area was transferred, there it proves that the said commercial area was a separate unit & hence clause (d) of Section 80m (10) will not come as obstacle in providing deduction.

5.1.2 I have considered entire arguments of Ld. AR and carefully considered the entire facts and circumstances of the case. All five projects are developed on large area of Land. Though there is consolidated approval of local authority for the entire project, these housing projects are separately identifiable in consolidated map having separate green area, road & other amenities to stand on its own. There is no dependence of these housing projects on other parts of the consolidated projects. Section map of each residential unit in these towers are approved separately by the local authority. In fact, the local authority has accepted transfer of commercial area shows that consolidated approval consists of different projects, one being eligible housing project. These eligible housing projects fulfil all the conditions contained in Section 80m (10) separately. Therefore, I agree with the arguments of Ld. AR that these eligible housing project is separately satisfying the condition of Section 80m (10). The appellant has maintained separate books of accounts for these housing projects & claimed deduction on the profits of these housing project.

The assessing officer has relied upon the decision of hon' able ITA T Chennai, in the case of Vishwas promoters Pvt. Ltd. & chitra Construction Pvt. Ltd. cited supra where it has been held that if there is violation of any residential unit having constructed area more than 1000 sq. ft. or 1500 sq. as applicable, the conditions contained in section 80IB are net fulfilled. Ld. AR argued that hon'able Chennai High Court in case of Vishwas promoters Pvt. Ltd. cited supra has reversed the decision of hon' able ITAT, Chennai. The relevant portion of Judgement is reproduced as under :-

A perusal of above Judgment, it clearly reveals that hon'able High Court has taken and interpreted the definition of housing project u/s 80HHA to arrived at the concept of composite housing project which has eligible & ineligible units in the project for the purpose of Section 80IB (10) for eligible units on proportion basis.

The assessing officer has relied on the Judgement of honable Mumbai High Court in the case Brahma Associates (citied supra). Ld. AR argued that the said judgment was delivered in the context of commercial area & argued that the said judgment has been considered by hon'able Madaras High Court in the case of Vishwas Promoters Pvt. Ltd.

and after analyzing the Judgement of Mumbai High Court, Madras High Court has delivered the Judgement.

Ld. AR further 'argued that on proportional deduction of eligible housing projects U/S 80IB (10) the' Kolkata High Court has concurred the view by not interfering the Judgment of Kolkata Tribunal on this issue in the case of Bengal Ambuja Housing Development Ltd. in ITA No. 453 of 2006.

Ld. AR further has relied on numerous decisions of honable IT AT in assessees favour holding that prorata deduction is available with respect to residential unit which satisfies the requirement of maximum constructed area where the other residential units violates the maximum built up area that the appellant's case is on much better footings where these eligible residential houses are identifiable cluster of Towers, having separate identified Land & Various facilities. These residential towers do not contain even a single residential unit which violates the maximum constructed area norm.

Further, Ld. AR has argued the findings of surveys narrated by the assessing officer in the assessment order in no way negates the claim of deduction U/S 80IB (10). These correspondences are tax planning to strengthen the deduction u/s 80IB, which each assessee is entitled to do. There is no manipulation of facts to fulfil the condition Section 80IB (10). As I have held that these housing project is separate entities, the commercial area is not part of such eligible housing project violation of condition contained in clause (d) will not come in the way of allowing deduction u/s 80IB (10). Considering all the facts & circumstances of the case & Judicial pronouncements, I hereby allow the deduction u/s. 80IB (10) to the extent of Profits from such eligible housing projects which are Group housing scheme of multistoried flats. 5.1.3 Another issue of disallowance of deduction u/s 80IB (10) in respect of following plotted colony termed as city :- 1 Omaxe City, Sonepat 2 Om axe City, Rohtak 3 Omaxe City. Lucknow 4. Omaxe CiIY. Jaipur 5. Omaxe Ciry, Palwal 6. Omaxe Parkwood-Il. Chakkan Baddi 7. Omaxe City-II Mangaliya. Indore 8. Omaxe City. Mayakheri, Indore 9. PDA Omaxe City, Patiala

The assessing officer has denied deduction u/s. 80IB (10) on two grounds. one the approval of the project is for plotted colony & not for housing project &: Secondly commercial area in the said project exceeds the limit prescribed in clause (d) of Section 80B

(10). 5.2 All the nine projects numerated above has been approved as plotted housing colony. It was ascertained during the appellate proceeding that the appellant has in some colony only sold the residential plot & in some colony it sold residential plot as well as villas after the construction on the plot. In all the projects, there are commercial area. The assessing officer has denied deduction uls 80IB (10) on the ground that the said deduction is not available to such approved plotted colony. Further, the assessing officer has held that commercial area in these colony far exceeds the prescribed maximum area as per the clause (d) of Section 80IB (10). The assessing officer has denied deduction uls 80IB (10) even on residential units called villas which has constructed area less than 1000 sq. ft. and 1500 sq. ft. as the case may be on prorata basis.

During appellate proceedings, Ld. AR has segrated the projects where only 5.2.1 plot were sold & where the appellant has sold both plot & villas.

5.2.2 In following projects, the appellant has sold only residential plots without construction of residential units. 1. Omaxe City, Rohtak 2. Omaxe Parkwood II, chakkan Baddi. 3. Omaxe City-II, Mangaliya, Indore 4. Omaxe City, Mayakheri, Indore 5. PDA Omaxe City, Patiala

5.2.3 In following projects, the appellant has sold residential plots as well as villas.

5.2.4 Firstly I would consider 5 projects mentioned in para 5.2.3, where the appellant has sold only residential plots. The Ld. AR has relied upon the decision of Sreevasta Real Estate Ltd. 9 ITR Trib 808 (IT A T, Chennai) & argued that housing project is not defined under the section 0IB, therefore even residential plot will be included in housing project.

I have perused the decision of Sreevastsa Real Estate Ltd. Cited Supra. In that case the issue was whether there was approval of local authority. Facts of the case is as under :-

“Now if we see sub-section (lO) of section 80-IB, it specifies approval by a local authority and who or what is such local authority is not defined anywhere. We cannot say that a Village Administrative Officer or a Deputy Director of Town Planning is not a local authority. Hence the question now boils down to whether the approval obtained by the assessee }vas for a housing project. The Assessing officer himself has admitted that the assessee had produced a certificate dated February 2, 2005 from the Village Administrative Officer, but he rejected it on a reasoning that the Village Administrative oOfficer was not an authority for issuing a certificate of approval. In any case paragraphs reproduced above, from the letter of the Deputy Director, Town Planning would show that such approval was for construction in the plots. It is also specified that the applicant should get sanction for building from local panchayat. Pursuant to this, the individual owners to whom plots were given had obtained sanction for constructing the units, and constr uctions carried out by the assessee. The approved layout placed at paper book page J 3, shows the bifurcation of/he site to various plots, areas earmarked for shops and houses. All these would lead to an irresistible conclusion that the project had the approval of a local authority. and each individual house ,vere only part of a whole.

From the above it is clear that plots were allotted to the individuals & construction was carried out by Srivastsa Real Estate Pvt. Ltd., the assessee in question. Honable ITA T allowed deduction as Pro-rata basis for eligible residential units. The facts of the present case is entirely different. Since the appellant in instant case has sold residential plots without any construction on it. There is no question of housing projects. If Plot can be said to be a rcsidentia unit. then how the conditions contained in Section 80IB (10) will be fulfilled. Condition contained in clause (a) i.e. talks about commencement of construction of housing project. Similarly clause (c) specifically refers to ceiling of maximum built up area of a residential unit. If there is no construction, only plot is allotted. how conditions relating to construction of Section 80IB are fulfilled.

Considering these facts and circumstances, I am of the strong view that deduction uls 80IB in respect of sale of plots cannot be allowed. Accordingly, the assessing officer's action for non-allowance the deduction u/s 80IB in respect of these 5 projects are hereby confirmed .

5.2.6 Now I would consider the allow ability of deduction uls SOIB (10) in respect of other projects as numerated in para 5.2.4, these are the projects where, the appellant has sold some plots without construction & some plots after construction. The appellant claims that where ever constructed residential units are sold, construction area is less than

the prescribed limit as per condition c of section 80IB (10). The Ld. AR has argued that the appellant has taken approval for each residential units for its sectioned construction plan and completion certificate for each villas are separately issued in favour of the appellant. Therefore, Ld. AR argued that assessing officer's claim that the approval is for plotted colony & there is no approval of construction of residential units is not proper. The total constructed area, No. of villas & Land area of different project is as under :-

S.No. Projects Name Components No. Of Area of land in and total area of Towers/Plots/Villas/Area acres relatable the project. of Commercial to the component 1 2 3 4 5 1. Omaxe City Plots 1811 275.98 Sonepat, (Total area 329.78 acres, including GH of 22.75 acres separately Vilas 445 19.48 discussed at point no.3) 2. Omaxe City Plots 1111 127.54 Lucknow Uttarpradesh- Villas (Total area 149.57 acres) Commercial 5.57 3 Omaxe City Plots Villas and 836 92.03 Palwal (Total G+2 133 6.41 area 102.46 Commercial 4.02 acres) 4 Omaxe City Plots 1952 Jaipur (Total Villas 487 area 342.66 GH acres) Commercial

Ld. AR argued that though there is a consolidated approval for colony. the area _ for plots and villas are specifically marked & satisfies the conditions of Section 80IB. These plots & villas constitute together a housing project which stand on their own. This housing project is demarcated from commercial area. I agree with the view of Ld. AR that these plots & villas are separate projects. The appellant has claimed the deduction U/S 80lE for the entire income on plots and constructed villas. As per my findings in para 5.2.5, income on the sale of plot is not eligible for deduction u/s 80IB Cl 0) of LT. An. Therefore entire profit on these projects cannot be allowed as deduction u/s 80IB (10).

The Ld. AR has alternatively argued that deduction for constructed villas may be allowed

on prorata basis for constructed villas. Ld. AR has relied upon various Judicial pronouncement. I have considered the plea of Ld. A~ & has given the findings after analyzing Judicial pronouncements that on pro-rata basis, deduction is allowable for eligible housing projects in earlier parts of this order. The facts are similar i.e. constructed villas constitutes eligible housing projects & pro-rata deduction is allowable. Ld. AR specially argued that pro-rata deduction was allowed u/s 80IB (l0) in the case of Sreevastsa Real Estate Ltd. 9 ITR Trib. 808 (ITA T, Chennai) in case of eligible villas constructed on plots. Second issue raised by the assessing officer is violation of clause (d) of Section 80IB (l0). There has been amendment in clause (d) w.e.f. 01-04-2010. Prior to amendment. the permissible commercial area in the housing project was five percent of the aggregate built up area of the housing project or two thousand sq. ft, which even is less. W.e.f. 01- 04-2010, the permissible commercial area is three percent of the aggregate built up area of the housing project or five thousand sq. ft. whichever is higher. On factual aspect Ld. AR has argued that total commercial area in entire project is not conforming to the condition prior to 01-C4-201O, but conforms to the condition in clause (d) after 01-04- 2010. However, he h •. -s argued, that amendment w.e.f. 01-04-2010 is curative & clarificatory. I do not agree with the view of Ld. AR that the amendment in clause (d) is c1arificatory & apply retrospectively, the amendment has been made prospectively w.e.f . 01-04-2010 & not retrospectively. If the purpose of amendment was clarificatory then it should have been retrospectively as it is substantive provision. Accordingly I do not agree with arguments of Ld. AR on this issue.

Second arguments of Ld. AR is that the development right of cornmercial area has been transferred to other companies. The transfer is not u were book entry but through memorandum of Association & is duly intimated to local Authority which has recognized the same. Ld. AR argued that as commercial area was transferred, there it proves that the said commercial area was a separate unit & hence clause (d) of Section 80IB (10) will not come as obstacle in providing deduction. 5:2.7 After considering the entire facts & circumstances of the case, I direct the assessing officer to allow profit on the villas whose constructed area is less than the prescribed limit as per condition (c) of Section 80IB UO) for all the four projects. The Ld. AR has- already submitted profit of housing project considering villas only before the assessing officer & during appellate authority in written submission which was forwarded to the assessing officer. Accordingly, this ground of appeal is partly allowed.

5.3 As a result, all the grounds of appeals for allowing deduction uls.80IB are partly allowed.”

12.17 The Assessing Officer denied deduction of Rs.1,88,25,94,379 claimed by the

assessee in respect of following housing projects under sec. 80IB(10) of the Income-tax

Act, 1961 (the ‘Act’).

Name of the Project Amount (Rs.)

Omaxe Heights, Sonepat 3,54,67,703

Omaxe City, Sonepat

Omaxe Heights, Faridabad 7,85,67,605

Omaxe City, Lucknow 16,55,75,848

Omaxe City, Jaipur 13,50,33,053

Omaxe City, Rohtak 1,91,34,660

Omaxe Heights, Bahadurgarh 16,59,89,596

Omaxe City, Palwal 84,48,158

Omaxe Parkwood-I, Baddi 5,08,14,862

Omaxe Parkwood-II, Chakkan Baddi 2,26,45,075

Omaxe City, Patiala 48,82,09,699

Omaxe Reviera, Pant Nagar, Uttranchal 45,22,38,237

Omaxe City, Mayakheri, Indore 19,17,82,533

Omaxe City, Mayakheri, Indore 6,86,87,350

Total 1,88,25,94,379

12.18. The Assessing Officer has discussed the eligibility of the claimed deduction on

projectwise and has denied the claim to the above extent mainly on the basis that out of

several conditions laid down under sec. 80IB(10) of the Act, the assessee has not fulfilled

the conditions laid down under clause (c) and (d) of section 80IB(10) of the Act. The

conditions laid down in clause (c) of the section is that the residential unit should have

maximum built up area of 1500 sq. feets as the project is not located within 25 kilometers

from the municipal limit of Delhi and 1000 sq. ft. where project falls in the said 25

kilometers. As per the Assessing Officer, this condition was not satisfied as the

prescribed area was exceeding in some of the flats of the projects. The Assessing Officer

was also of the view that the claimed deduction is not allowable on plots. As per clause

(d) of the section, there was no construction on the commercial plot and the commercial

area belonged to other subsidiary company which was transferred in financial year 2009-

12.19 The Learned CIT(Appeals) has discussed above has basically allowed the claimed

deduction on only those residential units, built up area of each of which was found as per

the prescribed area in clause (c) to section 80IB(10) of the Act. We do not find infirmity

in the First Appellate Order in this regard as it is well supported by the decisions of

Hon'ble High Courts and different Benches of the ITAT followed by the Learned

CIT(Appeals). The same is upheld. The ground Nos. 1 to 10 of the appeal preferred by

the Revenue revolving on the issue of allowability of the claimed deduction by the

assessee under sec. 80IB (10) of the Act on the profit arising out of the sale of the

housing project approved by the local authorities are accordingly rejected.

12.20 In result, the appeal is dismissed.

13.1 The submissions of the Learned AR in support of the above grounds (reproduced in Para No. 7) of the appeal preferred by the assessee are as under:

(i) Deduction under section 80IB(10) of the Act is allowed to an assessee in respect of profit derived from a “housing project” approved by the local authority. In the present case, all the projects undertaken by the appellant, involving inter alia, development of plots, construction of built up units were approved as integrated and composite housing projects.

It can be appreciated that there is no definition of ‘housing project’ under section 80IB but housing project is defined in section 80HHBA, which finds its place in the same chapter i.e. chapter VIA- ‘Deductions in respect of certain incomes’. Relevant extract is as under:

80HHBA. Deduction in respect of profits and gains from housing projects in certain cases.:………………… Explanation: (a) "housing project" means a project for—

(i) the construction of any building, road, bridge or other structure in any part of India; (ii) the execution of such other work (of whatever nature) as may be prescribed;

The assessee did undertake construction of roads, other structures like STP, water tanks, bridges etc. in its housing projects. It also undertook construction of residential houses/flats in the housing projects, albeit, in some cases, profits from the same were booked in succeeding years.

Perhaps the law makers, in all their wisdom, did not see the need of defining the housing project again in section 80IB as reference could very well be drawn from section 80HHBA, as both the sections fall in the same chapter and are incentive provisions for development of housing projects.

In fact this view has been approved by Hon’ble Madras High Court in case of CIT vs Arun Excello Foundations Pvt Ltd (259 CTR 362) (Madras) in ITA No. 1348 and 1349 of 2007. Relevant extracts are as under:

“…………..There is no definition of 'housing project' under Section 80IB(10) of the Act. This, however, does not pose any difficulty. For reading Section 80HHBA and Section 80IA, it is clear that Section 80IB is concerned about housing project namely, construction of any building other than what is contemplated as an infrastructure facility under Section 80IA. Thus when under the very same Chapter dealing with deduction, the expression "housing project" has already been defined in a related provision, we do not find, the absence of the same under Section 80IB should pose a problem in understanding the meaning of the said expression. In the absence of definition of the expression 'housing project' anywhere else in the Act and the said expression being defined in a related deduction provision under the same Chapter VIA, we feel, it would be more appropriate to go by the definition of the expression 'housing project', as

available under Section 80HHBA for the purpose of understanding the said expression of 'housing project' under Section 80-IB of the Act.

(ii) It is worthwhile to mention here that a representation had been made by the Maharashtra Chamber of Housing Industry to the Hon'ble Finance Minister by its memorandum dt. 1st Jan., 2001 in which, inter alia amongst other matters, it was also requested that a "suitable clarification be made to define the term 'housing project'.

Consequently, CBDT, Department of Revenue, addressed a reply under F. No. 205/3/ 2001/IT A-II dt. 4th May, 2001, giving the following clarification:

“With regard to your query regarding the definition of housing project, it is clarified that any project which has been approved by a local authority as a housing project should be considered adequate for the purpose of Sections 10(23G) and 80-IB(10).”

Hon’ble Mumbai ITAT in case of Laukik Developers vs DCIT 105 ITD 657 has also placed reliance on the aforesaid definition and observed as under:

“The clarification of CBDT vide letter dt. 04.05.01 to Maharastra Chamber of Housing Industry clearly states that any project, which is approved by local authority as a "housing project", should be considered adequate for the purpose

of Section-10(23G) and 80IB(10) of the Act. This clarification by the CBDT is of no help to the case of the assessee for the reason that the Building Project of the assessee was not approved by the local authority namely KDMC as a "Housing Project" and was in fact approved as a "residential as well as commercial project" by them.”

Though the aforesaid case was decided against the assesse as his project was approved not as a housing project but as a ‘residential and commercial project’, but Hon’ble ITAT has reached on this conclusion by placing reliance on the clarification given by CBDT.

The learned AR submitted that the aforesaid decisions support the case of the Appellant inasmuch the project under consideration was, as discussed supra, undisputedly approved as residential project by the local authority. Thus, applying the ratio laid down in the cases discussed above, once the project was approved as housing project by the local authority, the assessee was eligible for deduction in respect of profit derived from such project under section 80IB(10) of the Act.

Further, the expression “housing project”, in the absence of any specific definition in section 80IB(10) ought to be give a wider/ purposive meaning/ interpretation, similar to the one given in Explanation to section 80HHBA of the Act.

(iii) Construction/ development of housing sites, constitutes development of the housing project, which is the heart and soul of allowance of deduction under section 80IB(10) of the Act. Further, in the absence of any specific bar in section 80IB(10) of the Act from claiming deduction in respect of profit derived from development and sale of housing sites/plots, there was no justifiable reason for the lower authorities to reject the claim of the Appellant, despite the fact that the project had, undisputedly been approved as residential/ housing project.

(iv) The expression “housing project” in section 80IB(10) of the Act does not simply mean constructing built up residential/ dwelling units. On the other hand, developing and constructing a housing project involves various activities for providing housing facility, which primarily involves creation of infrastructure for housing, as has, undisputedly, been done by the assessee.

(v) Ld. CIT(A) has totally misconstrued the expression “development and construction of housing project” in section 80IB(10) of the Act in an extremely narrow sense to “development and construction of residential unit” which, is neither legally unsustainable nor does the same accord with the legislative intent.

He failed to appreciate that clause (a) of section 80IB(10) provides for commencement of construction of the ‘housing project’ and not of the ‘residential unit’. He further failed to appreciate that that clause (c) of section 80IB(10) of the Act only provides that the maximum built up area of the residential unit should not exceed the specified limit The said clause nowhere mandates construction of residential units as part of the eligible housing project, as a condition precedent to claim deduction; on the contrary, the aforesaid condition only provides maximum built-up area of 1,000/ 1,500 sq. ft.; there is, however, no condition/ stipulation regarding the minimum built up area.

(vi) It was admitted by the Learned AR that both development and construction of the housing project are preconditions for claiming deduction under section 80IB(10). However Ld. CIT(A) has interpreted this provision in a very narrow manner. What is specified is development and construction of housing project and not residential units. Construction of the housing project includes construction of roads, boundary walls, overhead tanks, STP, etc. The appellant undertook development and construction of the housing project as under: � Construction of sector road, service road and internal circulation road � Provision of sewerage system, drainage, STP � Electrification of the residential township and provision of street lights.

� Provision of water supply system � Provision of parks and plantation of trees � Provision of basic amenities like community centre, schools, dispensary, crèches, playground etc. � Provision for units reserved for economically weaker section � Providing developed and demarcated housing sites in the residential township as per the approved lay out plan.

(vii) The Learned AR submitted that various activities are involved in the development and construction of a housing project, of which construction of residential units is a very small part as compared to other activities, which may be done by the individual buyer himself.

It would, in this regard, be pertinent to briefly describe the procedure for developing a housing project, as under:

- Town and Country Planning Department declares controlled areas and prepares the development plan for that area by identifying different zones such as residential, commercial and institutional, etc; - Colonizer acquires land from the owners; - Colonizer applies for licenses and approval of layout plan; - DTCP grants license, subject to certain conditions and approves layout plan as per norms prescribed in Development rules and regulations; - Once the project is approved, development and construction work is undertaken by the colonizer as under. - Land cleaning and leveling; - Demarcation of different constituents of the project such as roads, parks, residential, commercial, community, EWS, STP, etc.; - Provision of space for educational, medical, recreational and community sites; - Laying of water supply lines, drainage pipelines, electrical wiring, etc. - Construction and metalling of roads, paving of footpaths; - Construction of water tank, STP, electric sub-stations;

- Development of parks and green area, turfing and plantation of trees; - Installation of street lights; - Demarcation, identification and numbering of individual housing sites;

Once the aforesaid activities are carried out, the raw land gets converted into a developed housing project with the necessary infrastructural facilities, contended the Learned AR.

It is thereafter, up to the developer to either undertake to construct the residential units also thereon or sell the developed housing sites/ plots as it is for construction by the buyer, according to his individual requirement/ needs and the financial capacity. The critical part of the development/ construction of a residential colony, however, are creation of the basic infrastructure facilities, so as to make any plot of land fit for housing a residential colony.

(viii) The intention of the Legislature was to give fillip to the housing development. Reference, in this regard, may also be made to National Urban Housing and Habitat Policy-2005 issued by the Ministry of Housing and Urban Poverty Alleviation, Government of India. Deduction under section 80IB(10) has been provided in order to promote the housing policy of the Government, which not only aims at construction of the dwelling units but providing well planned housing schemes with adequate infrastructure facilities as under:

(i) Creation of adequate housing stock both on rental and ownership basis. (ii) Facilitating accelerated supply of serviced land and housing with particular focus to EWS and LIG categories and taking into account the need for development of supporting infrastructure and basic services to all categories. (iii) Facilitate Upgradation of infrastructure of towns and cities and to make these comparable to the needs of the times. (iv) Ensuring that all dwelling units have easy accessibility to basic sanitation facilities and drinking water.

Development of the housing project consisting of residential plots, as done by the appellant, it is respectfully submitted, also achieves the aforesaid objective inasmuch as the same results in development of housing sites leading to development of states and towns. (ix) Lower Authorities failed to appreciate that provision in a taxing Statute granting incentive for promoting growth and development should be construed liberally and any restriction on it too has to be so construed so as to advance the objective of the provision and not to frustrate it [refer Bajaj Tempo Limited v. CIT 196 ITR 188 (SC), P.R. Prabhakar V. CIT: 284 ITR 548 (SC)].

13.2 Without prejudice to the aforesaid submissions, the Learned AR submitted that one of the assessee’s subsidiary companies, M/s Navratan Techbuild (P) Ltd had also claimed deduction in respect of its project u/s 80IB(10) consisting of mainly housing sites. Deduction in that case was also disallowed by the Assessing Officer. Appeal was preferred by the assessee against the order. The learned CIT(A), vide order dated 01.08.2012, dismissed the appeal filed by the Appellant and held that deduction was not admissible qua profits derived from sale of developed plots. The learned CIT(A), despite observing that the Director of Town and Country Planning (in short “DTCP”) had accorded approval for development of “residential colony”, held that deduction under section 80IB(10) of the Act was admissible only for profit derived from development of those residential colonies where houses are also built by the developer.

13.3 On further appeal, the Tribunal vide order dated 30.07.2013 affirmed the order passed by the learned CIT(A). It is of utmost importance to note that the Tribunal, in para 8 agreed that the approval had been granted for development of housing project. Still,

however, the Tribunal held that deduction was not admissible in respect of profit on sale of developed plots as construction of residential units thereon is must for claim of deduction.

13.4 Against the aforesaid order of the Tribunal, the assessee had filed appeal under section 260A of the Act before the Hon’ble High Court of Madhya Pradesh. The Hon’ble High Court, however, vide order dated 27.01.2014 dismissed the appeal preferred by the assessee in limine, without even admitting and considering/ adjudicating the substantial questions of law raised by the assessee and arising in the appeal. The Hon’ble High Court held that the grant of permission with respect to the aforesaid project which would have made the assessee eligible for exemption, requires not only development of the residential plots, but also construction of the plots, which was admittedly not done. Accordingly, in the opinion of the Hon’ble High Court construction of residential plots or construction of some plots in later years would not qualify the assessee for exemption. The Hon’ble Court further observed that the legal issues were clearly understood by the Tribunal and it is not a case where any interpretation of law was required by the High Court. Accordingly, the Hon’ble High Court proceeded to dismiss the appeal filed by the Appellant holding that no substantial question of law was involved.

13.5 The Learned AR fairly inferred that review petition filed by the Appellant was also dismissed by the Hon’ble High Court vide order dated 14.03.2014.

of the authorities below on the above issues.

(a) Such undertaking has commenced or commences development and construction of the housing project on or after the Ist day of October, 1998 and completes such construction, - x x x x x x x x

x x x x x x x x

(b) The residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty five kilometers from the municipal limits of these cities and one thousand and five hundred square feet at any other place.”

15.1 In this regard, we also find support from the above cited decision of

the Hon'ble Madhya Pradesh High Court in the case of Navrattan Techbuild

(P) Ltd. (supra). In result, ground No.1 of the appeal preferred by the

assessee is rejected and ground No.2 questioning the charging of interest

under sec. 234B on the revised income of the assessee is consequential in

nature, hence, does not need independent adjudication.

deduction u/s. 80IB(10) of the Income-tax Act, 1961 amounting to Rs.24,92,55,574 in respect of profits derived from group housing scheme GH-03 in housing project, Omaxe Grand Woods, Sec. 93B, Noida. 2. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in holding that the Group housing scheme GH-03 in housing project, Omaxe Grand Woods, Sec. 93B, Noida constitutes a separate housing project despite a single approval by the competent authority in respect of Group housing schemes GH-01, GH-02 & GH-03. 3. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in allowing deduction u/s. 80IB(10) of the Income-tax Act, 1961 amounting to Rs.16,82,15,090 in respect of profits derived from 24 towers in project Omaxe Palms, Greens, Sec. MU, Gr. Noida where each residential unit is having constructed area less than 1500 sq. ft. 4. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in holding that the 24 towers in project Omaxe Palms Greens, Sec. MU, Gr. Noida where each residential unit is having constructed area less than 1500 sq. ft. are separate housing project despite a single approval by the competent authority for the entire project.

and is not tenable on facts and in law.

Name of the Project Amount (Rs.) Omaxe Grandwoods, Sector 93B, Noida. 24,92,55,574 Omaxe Palm Greens Sector MU, Greater Noida 16,82,15,090 Total 41,74,70,664

18.1 The Assessing Officer denied deduction in respect of the group housing project ‘Omaxe Grandwoods, Sector-93B, Noida, holding that the condition has specified in clause (c) of the section 80IB(10) is not satisfied. He did not agree with the assessee that

plot No. GH-03 Forms and Independent, distinct and separate project which satisfied all

the conditions laid down in section 80IB(10) of the Act on standalone basis. The

Assessing Officer was of the view that proportionate deduction cannot be allowed under

sec. 80IB(10) of the Act. The Learned CIT(Appeals) has allowed the claimed deduction

on proportionate basis on the residential units not exceeding the prescribed area. The

Revenue has questioned this action of the Learned CIT(Appeals) in ground Nos. 1 and 2

before the ITAT.

18.2 The Assessing Officer also denied the deduction claimed by the assessee under

sec. 80IB(10) of the Act in respect of group housing project “Omaxe Palm Greens”,

Sector-MU, Greater Noida holding that the conditions specified in clauses (c) and (d) of

section 80IB(10) are not satisfied. The contention of the assessee was that while denying

the claimed deduction, the Assessing Officer erred in not considering the amended law

for the purpose of applying the limit as specified in conditions (d) of sec. 80IB(10); the

plot area approved for commercial while applying the limit as specified in clause (d) of

sec. 80IB(10) instead of actual built up area of shops and other commercial

establishments; and the fact that blocks/pockets consisting of residential unit having a

built-up area within the limit prescribed under sec. 80IB(10) forms an independent,

distinct and separate project which satisfies all the conditions laid down in sec. 80IB(10)

of the Act on standalone basis. The Assessing Officer also held that proportionate

deduction cannot be allowed under sec. 80IB(10) of the Act. The Learned CIT(Appeals)

has allowed the claimed deduction on those residential units complying the conditions

laid down under sec. 80IB(10) of the Act on standalone and proportionate basis, which

has been questioned by the Revenue before the ITAT vide ground Nos. 3 to 5 of the

appeal.

the appeal as they have advanced on identical issues hereinabove in the appeal of the

department in the case of Omaxe Ltd. for the assessment year 2008-09.

together which is regarding allowability of deduction under sec. 80IB(10) of the Act in

respect of profit derived from Group Housing Scheme “GH-03” in Housing Project,

Omexe Grand Woods, Sector 93B, Noida and as to whether the group housing scheme

“GH-03” in housing project, Omexe Grandwood, Sector-93, Noida constitutes a separate

housing project despite a single approval by the competent authority in respect of group

housing scheme “GH-01, GH-02 and GH-03”.

20.1 We have already discussed the related facts in the preceding paragraphs and the

respective submissions of the parties with cited decisions. In nut shell, the assessee

developed housing project “Omexe Greenwood” in sector 93B consisting of 33 towers

(T-1 to T-33) under three group housing schemes GH-01, GH-02 and GH-03. Tower T-1

to T-12 (12 towers) in original plan which was revised to 11 (T-1 to T-11) are named as

GH-03 having each flat (housing units) less than 1000 sq. fts. Other towers T-13 to T-33

(21) which was revised to 14 towers T-12 to T-25 are under group housing schemes 01

and 02 namely GH-01 and GH-02, having bigger flats. The assessee company had

maintained separate books of accounts for GH-01, GH-02 and GH-03 claimed deduction

under sec. 80IB in respect of profits derived from GH-03. These are undisputed facts by

the Assessing Officer.

20.2 The objection of the Assessing Officer against the claimed deduction of the

assessee relating to profit derived from group housing scheme GH-03 remained that

entire project, namely, Omexe Greenwood” consisting of 33 towers is a single housing

project and in Towers-13 to T-33, built up area of each residential unit is more than 100-

sq. fts., therefore, condition (C) of Section 80IB(10) is not fulfilled. This objection of the

Assessing Officer was based on his logic that single approval by the competent authority

has been given. The submission of the assessee in this regard remained that the approval

recognizes separate group housing schemes, namely, GH-01, GH-01 and GH-03 and in

support, master plan, allotment of Noida dated 03.10.2006 were furnished. The Learned

CIT(Appeals) meeting out the objections raised by the Assessing Officer and those

explained by the assessee has come to the following findings:

“4.8 Findings: I have considered the assessment order, written submission and arguments of Ld. AR. The assessing officer's main basis of disallowing deduction U/S 80IB (10) is the non fulfilment of condition (c) of Section 801B (l0) which is basically that each residential unit should have built area of less than 1000 sq. ft. in the housing project as the project is within 25 Kms from Delhi.

The appellant has developed housing project 'Omaxe Green wood' in Sec 93B consisting of33 Towers (T-l to T-33) under three group housing scheme GH- Ol, OH-02 & GH-03. Tower T-l to T-12 (12 towers) in original plan which was revised to 11 (T-l to T -11) are named as G H -03 having each flat (housing units)

less than 1000 sq. ft. Other Towers T-l3 to T-33(21) which was revised to 14 towers T-12 to T-25 are under Group Housing Scheme 01 & 02 namely GH-O 1 & GH-02, having bigger flats. The appellant company has maintained separate Books of accounts for GH-Ol, GH-02 & OH-03 claimed deduction uls. 80IB in respect of profit derived from GH-03. These facts are not disputed by the assessing officer. The basic issued raised by the assessing officer is that entire projects namely 'Omaxe Greenwood' consisting of 33 Towers is a single housing projects & in towers 13 to 33 built up area of each residential unit is more than 1000 sq. ft. Therefore, condition( c) of Section 80IB is not fulfilled. He has supported his logic on the basis of single approval by the competent authority.

I have perused the allotment of NOIDA dated 03-10-2006 in favour of the appellant company which is part of the paper book. Subject of this letter is " Allotment of Group Housing Plot No. OH-OI, 02, 03 Sector 93B under Group Housing Scheme GH 2006(4)".

This letter is basically approval of the Local authority. That being the case, this approval recognizes separate Group Housing schemes namely GH-OI, GH-02 & OH-03. Ld. AR has drawn my attention to the master plan which reveals that there is separate identifiable plot for group housing GH-OI, GH-02 & OH-03 separated by road. Each Group housing Scheme has its own green field & other separate amenities. Section plan for 2 bed room & bigger flats for different group housing schemes are different & approved separately. Ld. AR has provided list of amenities for each housing scheme as mentioned in earlier paragraph. Subsequently, during appellate proceeding the Ld. AR has submitted fresh evidence in form of letter from NOIDA Towers of GH-03 was constructed on separate piece of Land. This is evident from master plan itself that OH-O 1, GH- 02 & GH-03 are on separate pieces of Land.

On the basis of above facts, whether GH-03 can be said as separate housing project as envisaged in Section 80IB (l0), and conditions contained in section 80IB have to satisfied separately for this project. It may be mentioned here that the local authority at the time of allotment of Land has already envisaged three types of housing schemes, GH-01, GH-02 & GH-03 on vast area of Land admeasuring 119020.12 square meters (29.41 acres) out of which Land measuring 8.4 acres is relatable to GH-03. Therefore, local authority has given a consolidated allotment order 3 Separate housing schemes namely GH-Ol, GH-02 & GH- 03 having different features. Ld. AR argued that accordingly all three Group housing scheme is separate entities having been approved in common approval. Common approval in no way dilutes the independent housing schemes as demarcated in approved plan & independent facilities. Now I will consider various Judicial pronouncement relied upon the Ld. AR & the assessing officer. The assessing officer has relied upon the decision of hen' able ITA T Chennai, in the case of Vishwas promoters Pvt. Ltd. & Chitra Construction Pvt. Ltd. cited supra where it has been held that if there is violation of any residential unit having constructed area more than 1000 sq. ft. or 1500 sq. as applicable, the conditions contained in section 80IB are not fulfilled. Ld. AR argued that Hon'ble Chennai High Court in case of Vishwas promoters Pvt. Ltd. cited supra has reversed the decision of Hon'ble ITAT, Chennai. The relevant portion of Judgement is reproduced as under :-

blocks which satisfied the conditions under Section BOIB (] 0) of the Act by reason of some of the stocks not satisfying the condition under Section BOIB (10) of the Act. 14. On the facts admitted by the Revenue in the projects "Agrini" and "Vajra" there are number of flats which are below 1500 sq. ft. and the relevant built-up area requirement is specified under Section BOIB (IO)(c) of the Income Tax Act. Thus, the built-up area in some of the flats in both these projects are in excess of 1500 sq. ft., i. e., 32 flats in Agrini and only one flat in Vajra and that the assessee had not claimed any deduction on this. We hold that the Tribunal is not correct in its view, that by reason of these Units being in excess of 1500 sq. ft., the entire claim of the assessee in respect of these two projects would stand rejected under Section 80lB (10) of the Income Tax Act. Thus, going by the definition of "housing project" under Explanation to Section 80HHBA of the Act as referred to above as the construction of "any building" and the wordings in Section 80lB (10) of the Act, the question of rejection in entirety of the project on account of anyone of the blocks not complying with the conditions, does not arise. Even in the case of each one of the blocks, wherever there are flats which satisfied the conditions particularly of the nature stated under Section 80lB (lO)(c) of the Act, we have already upheld the case of the assessee in TiC, Nos. 1348 and 1349 of2007 dated 10-10-2012 for grant of relief under Section 80lB (10) of the Act on a proportionate basis, by following the decision of the Bombay High Court in CIT v. Brahma Associates [20ll} 333 1TR 2891197 Taxman 459/9 taxmann.com 289. Thus applying the decision of this Court in 'LC. Nos. 1348 and 1349 of2007 dated 10-10-2012, we hold that the assessee is entitled to succeed both on the principle of proportionality as well as by reason of the construction on the meaning of the expression "housing project" as referring to construction of any building and the wordings in Section 80lB (10) of the Act. In the circumstances, we hold that the mere fact that one of the blocks have units exceeding built-up area of 1500 sq. ft. per se, would not result in nullifying the claim of the assessee for the entire projects. Consequently, in respect of each of the blocks, the assessee is entitled to have the benefit of deduction in respect of residential units satisfying the

requirement under Section 80lB (lO)(c) of the Act. In so holding, we also agree with the decision of the Bombay High Court in CIT v. Vandana Properties [2012} 206 Taxman 584/ 19 taxmann. Corn 316, which was decided by the Bombay High Court on similar lines as in the assessee's case before us.

A perusal of above Judgment, it clearly reveals that Hon'ble High Court has taken and interpreted the definition of housing project U/S 80HHA to arrived at the concept of composite housing project which has eligible & ineligible units in the project for the purpose of Section 80IB (10) for eligible units on proportion basis. The assessing officer has relied on the Judgement of Hon'ble Mumbai High Court in the case Brahma Associates (citied supra). Ld. AR argued that the said judgment was delivered in the context of commercial area & argued that the said judgment has been considered by Hon'ble Madaras High Court in the case of Vishwas Promoters Pvt. Ltd. and after analyzing the Judgement of Mumbai High Court, Madras High Court has delivered the Judgement. Ld. AR further argued that on proportional deduction of eligible housing projects u/s 80lB (10) the Kolkata High Court has concurred the view by not interfering the Judgment of Kolkata Tribunal on this issue in the case of Bengal Ambuja Housing Development Ltd. in ITA No. 453 of2006. Ld. AR further has relied on numerous decisions of hen' able IT A T in assessee's favour holding that prorata deduction is available with respect to residential unit which satisfies the requirement of maximum constructed area where the other residential units violates the maximum built up area that the appellant's case is on much better footings where these eligible residential houses are identifiable cluster of Towers, having separate identified Land & Various facilities. These residential towers do not contain even a single residential unit which violates the maximum constructed area norm. Further, Ld. AR has argued the findings of surveys narrated by the assessing officer in the assessment order in no way negates the claim of deduction U/S 80IB (10). These correspondences are tax planning to strengthen the

deduction U/S 80IB, which each assessee is entitled to do. There is no manipulation of facts to fulfill the condition Section 80IB (l0). Considering the entire facts of the case & Judicial pronouncement, I am of the opinion that profit derived from Group housing Scheme GH-03 is eligible for deduction U/S 80IB(l0) of LT. Act as it is a separate housing project satisfying the condition of Section 80IB (l0). Accordingly I direct the assessing officer to delete the addition. This ground of appeal is hereby allowed”.

20.3 On perusal of orders of the authorities below, we find that before the first

appellate authority, the assessee has been able to meet out the objections raised by the

Assessing Officer against the claimed deduction under sec. 80IB(10) of the Act on the

profits derived from group housing scheme GH-03 and in coming to the conclusion that

group housing scheme GH-03 in housing project, Omexe Grandwood, Sector 93B, Noida

constitutes a separate housing project despite a single approval by the competent

authority in respect of group housing scheme GH-01, GH-02 and GH-03. The assessee

has been able to establish that as per master plan and approval of the local authority that

though the entire projects “Omexe Greenwood” consisting of 33 towers was a single

housing projects but approval was recognizing separate group housing schemes, namely,

GH-01, GH-02 and GH-03 and as per master plan, there was separate identifiable plots

for group housing GH-01, GH-02 and GH-03 separated by roads. Each group housing

scheme was having its own green field and other separate amenities. Sanctioned plan for

two bed rooms and bigger flats for different housing schemes were different and

approved separately. The assessee has been able to submit a letter from Noida that towers

of GH-03 was constructed on separate piece of land which was also supported by the

master plan itself that GH-01, GH-02 and GH-03 were own separate pieces of land. We

thus concur with the finding of the Learned CIT(Appeals) that common approval does not dilute the independent housing scheme and demarcated in approved plan and independent facilities. Under these circumstances and keeping in view the decision followed by the Learned CIT(Appeals), we are of the view that the Learned CIT(Appeals) has rightly allowed the claimed deduction on prorate basis available with respect to residential unit which satisfied the requirement of maximum constructed area. It has not been disputed in the present case that these eligible residential houses were identifiable cluster of towers, having separate identified land and various facilities. We thus do not find reason to interfere with the first appellate authority. In this regard, the same is upheld. Ground Nos. 1 and 2 are accordingly rejected.

project as a single approval by the competent authority has been given for the entire

project. He contended that the Learned CIT(Appeals) was also not justified in holding

that the commercial area of 4004.24 sq. mtr. in the said project more than the limit

prescribed under sec. 80IB(10) of the Act and its transfer to other group companies is not

material for examining the allowability of deduction under sec. 80IB(10) of the Act.

the assessee before the authorities below. He has adopted similar argument to support his

contention advanced hereinabove against ground Nos. 1 and 2 that proportionate

deduction under sec. 80IB(10) should be given in respect of the residential units having

built up area of less than 1500 sq. fts.

23.1 Considering the above submission, we find that the Assessing Officer had denied

the claimed deduction under sec. 80IB(10) of the Act to the extent of Rs.16,82,15,090 in

the project “Omaxe Palm Green”, Sector MU, Greater Noida on the basis that claim of

the assessee that it had carried out two projects on the plot of land and cannot be accepted

as the lease deed dated 26.3.2007 between the assessee and Greater Noida Industrial

Development Authority and the approved lay out plan shows that the authority has

approved only one project. The Assessing Officer alleged that the assessee has artificially

divided the entire project into two projects – (i) one consisting of flats eligible for

deduction under sec. 80IB(10) and the other consisting of bigger flats having more than

permissible built up area and not eligible for deduction under sec. 80IB(10) and has

stated that it has claimed deduction only in respect of the flats showing built up area of

less than the maximum permissible limit. The Assessing Officer observed that the lease

deed dated 26.3.2007 between Greater Noida Industrial Development Authority and the

assessee in respect of the said plot is with reference to “Project” and not “Projects”. The

Assessing Officer noted further that the commercial area included in the project is 404.24

sq. mtr. which is much more than the prescribed limit. The assessee tried to meet out all

the objections. Regarding approval of the project or projects, the Learned AR adopted

similar arguments as advanced by him in relation to the issues raised in ground Nos. 1

and 2 hereinabove. Regarding the exceeding commercial area, it was contended that the

commercial area was a part of other projects which was not accepted by the Assessing

Officer on the basis that the entire projects is only one project and that the assessee is not

entitled to divide the project into two parts as per its sweet will. He held that the approved

commercial area is on integral part of the entire project. Meeting out objections raised by

the Assessing Officer and explanation thereto provided by the assessee, the Learned

CIT(Appeals) has come to the following conclusion vide para No. 5.4 of his order:

“5.4 Findings: I have considered entire facts & circumstances of the case. The assessing officer has raised two objection for satisfaction of conditions contained in Section'8OIB (l0) of LT. Act. The first objection is non fulfilment of 46 clause(c) of section 80IB (l0) of I.T. Act, 1961 that some of the residential units do not confirm to the requirements of built up area i.e. 1500 sq. ft. Ld. AR argued that the facts are similar to Noida project i.e. Grand woods, Sector 93B, Noida. In this project also for no. of eligible Towers are 24 where each residential unit is having constructed area less than 1500 sq. ft. as per the requirement of clause (c) of section 80IB (l0), where as ineligible no. of towers are 11 spread over on 24.174 acres & these towers are separately Located and separated from other Towers. Hence these towers together is a separate housing projects spread over 25.83 acres of Land & Satisfying all the conditions of section 80IB (l0)

separately. Though there is a common approval of entire 50 acres of Land consisting of eligible housing project along with commercial area on 24.174 acres of Land. Both eligible & non eligible projects are separate by road & have separate common facilities. Ld. AR has relied upon various Judicial pronouncements on similar lines as in Omaxe Green Land, Sector 93B, Noida. I have considered entire facts & circumstances of the case. Present eligible projects is similar to Omaxe Green Land project. Therefore, I treat the eligible projects as a separate housing project on similar lines of Noida project. Second objection of the assessing officer that the commercial area of entire housing scheme is more than permissible limit as per clause( d) of Section 80IB (l0). Ld. AR has firstly argued that the eligible projects is a separate housing projects, therefore, eligible for deduction u/s 80IB (l0). Alternatively, Ld. AR has tried to argue that the commercial area are within the limit of amended permissible area as per clause (d) of Section 80IB (l0) introduced by finance Act, 2010. Ld. AR has made argued that amendment in clause (d) of Section 80IB (l0) is only clarificatory as it would apply to project started before 31-03-2008. I do not agree with the Ld. AR that the amendment in clause (d) is clarificatory & therefore would apply retrospectively. Third argument of Ld. AR is that the commercial area is not developed & right to develop the same is transferred to other companies & the said transfer is duly intimated to the local authority. The transfer is not a were book entry as claimed by the assessing officer. In my view this fact is not material for examining the allowability of deduction u/s 80IB (10). However as I have held earlier that these eligible Towers are separate housing projects, therefore deduction u/s 80IB (10) is available. In view of the above, I allow deduction u/s 80IB (l0) in respect of profit of the eligible housing projects U/S 80IB (l0). I, accordingly allow the deduction U/S 80IB (l0) on the project. As a result, this ground of appeal is allowed”.

23.2 On perusal of the orders of the authorities below, we find that the Learned

CIT(Appeals) has rightly accepted the eligible projects as a separate housing project on

similar lines of Noida Project adjudicated upon in Ground Nos. 1 and 2, which we have

discussed in detail hereinabove while dealing with the ground Nos. 1 and 2 which is also

supported by the decisions of the Hon'ble High Courts and different Benches of the ITAT

followed therein. The finding of the Learned CIT(Appeals) in this regard is thus upheld.

23.3 So far the second objection of the Assessing Officer that the commercial area of

entire housing scheme is more than permissible limit as per clause (d) of Section

80IB(10) is concerned, the Learned CIT(Appeals) did not agree with the assessee that the

commercial area are within the limit of amended permissible area as per clause D of

section 80IB(10) introduced by Finance Act, 2010 as clarificatory in nature as it would

apply to the project started before 31.3.2008. We concur with this finding of the Learned

CIT(Appeals) that amendment in the said clause (d) is not clarificatory and, therefore, it

would not apply retrospectively. The Learned CIT(Appeals) has, however, held that the

eligible towers are separate housing projects and, therefore, deduction under sec. 80IB

(10) is available. The further contention of the assessee that the commercial area is not

developed and right to develop the same is transferred to other company and the said

transfer is duly intimated to the local authority and that a transfer is not a mere book entry

as claimed by the Assessing Officer was kept open by him in view of his above findings

and treating the same as not relevant. We are agreeable to this finding of the Learned

CIT(Appeals) especially when the assessee was found eligible to claim deduction under

sec. 80IB(10) of the Act on the projects having residential units constructed within the

prescribed limit of 1500 sq. fts. The same is upheld. The ground Nos. 3 to 5 are

accordingly rejected.

10 preferred by the Revenue, similar issues as raised in the grounds in the

appeal for the assessment year 2008-09 have been raised. In the assessment

year 2007-08, it is regarding allowability of deduction under sec. 80IB(10)

claimed on the profit arising from the project GH-03 holding the same as

separate housing project (Ground Nos. 1 and 2) and secondly holding that

24- towers in project Omaxe Palm Greens – Plot No. GH-02 – Sector MU,

Greater Noida having each residential unit constructed area less than 1500

sq. fts. are separate housing projects (Ground Nos. 3 & 4). For a ready

reference, the grounds of the appeal for the assessment year 2007-08 are

being reproduced hereunder:

towers in project Omaxe Palms Greens, Plot No. GH- 02, Sec.-MU, Gr. Noida where each residential unit is having constructed area less than 1500 sq. ft. are separate housing project. 4. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in allowing deduction u/s. 80IB(10) of the Income-tax Act, 1961 amounting to Rs.41,18,93,907 in respect of income arising from 24 towers in project Omaxe Palms Greens, Plot No. GH-02, Sec. MU, Gr. Noida where each residential unit is having constructed area less than 1500 sq. ft.

of profits derived from group housing scheme – GH-03 in housing project “Omaxe Grandwoods, Sector 93B, Noida” holding that it constitutes a separate housing project despite a single approval by the competent

authority in respect of group housing scheme – GH-01, GH-02 and GH-03 (ground Nos. 1 and 2 ). For a ready reference, these grounds are being reproduced hereunder:

deduction u/s. 80IB(10) of the Income-tax Act amounting to Rs.15,13,82,537 in respect of profits derived from Group housing scheme GH-03 in housing project, Omaxe Grand Woods, sec. 93B, Noida. 2. On the facts and in the circumstances of the case, the Learned CIT(Appeals) has erred in holding that the Group housing scheme GH-03 in housing project, Omaxe Grand Woods, Sec. 93B, Noida constitutes a separate housing project despite a single approval by the competent authority in respect of Group housing schemes GH-01, GH-02 and GH-03. 3. The order of the CIT(A) is erroneous and is not tenable on facts and in law.

the above appeals of the Revenue for the assessment years 2007-08 and 2009-10 hereinabove under similar set of facts in the appeal of the Revenue for the assessment year 2008-09. Following the same, these issues are

decided against the Revenue by upholding the First Appellate Order in this regard. The grounds Nos. 1 to 4 in the appeal for the assessment year 2007- 08 and ground No. 1 and 2 in the appeal for the assessment year 2009-10

preferred by the Revenue are accordingly rejected.

In summary, appeals preferred by both the parties are dismissed. 29. Order pronounced in the open court on 12 .11.2015 Sd/- Sd/- ( LAXMI PRASHADSAHU ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 12 /11/2015 Mohan Lal