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Income Tax Appellate Tribunal, MUMBAI BENCHES “F”, MUMBAI
Before: Shri Sanjay Garg, & Shri Ashwani Taneja
तार�ख / 04/01/2016 सुनवाई क� Date of Hearing : 20/01/2016 आदेश क� तार�ख /Date of Order: आदेश / O R D E R Per Bench: These appeals have been filed by the Revenue against the order of Ld. Commissioner of Income Tax (Appeals)-26,
2 U.K. Construction Mumbai {(in short ‘CIT(A)’}, dated 25.04.2014 for the assessment years 2010-12 and 2011-12, passed against the assessment order of the Assessing Officer (in short ‘AO’) u/s 143(3) of the Act. The grounds raised in both the appeals are identical and reproduced hereunder for the sake of ready reference:
1. On the facts and the circumstances of the case, the CIT(A) erred in deleting the disallowance of Rs. 1,69,67,521/- made by the assessing officer u/s 801B(10) of the I.T. Act and not appreciating the fact that the assessee had not fulfilled all the conditions required for claim of deduction under the said section.
2. On the facts and in the circumstances of the case, the CIT (A) erred in deleting the disallowance made by the assessing officer u/s 80IB(10) of the I.T. Act on the basis that the assessee is not the entity which commenced the project.
3. On the facts and in the circumstances of the case, the CIT(A) erred in deleting the disallowance made by the assessing officer u/s 80IB(10) of the IT Act on the basis that the completion certificate issued by local gram panchayat authority is not a requisite completion certificate.
4. On the facts and in the circumstances of the case, the CIT(A) erred in deleting the disallowance made by the assessing officer u/s 80IB(10) of the IT Act by not appreciating the fact that language of this section intend that completion certificate in respect of housing project is issued by the local authority granting approval. 5.On the facts and in the circumstances of the case, the CIT(A) erred in deleting the disallowance made by the assessing officer u/s 80IB(10) of the I.T. Act on the basis the commercial area in the project which was approved as per original plan was more than 2000 sq. ft. the entire project of the group having being approved
3 U.K. Construction in one approval plan and subsequently divided into parts vide various agreements within the group concerns the details of which had not been submitted by the assessee."
During the course of hearing, arguments were made by Shri Vimal Punmiya, Authorised Representative (AR) on behalf of the Assessee and by Shri Sanjeev Kashyap, Departmental Representative (DR) on behalf of the Revenue.
During the course of hearing, it was brought to our notice, at the very outset by the Ld. Counsel of the assessee that identical issues arose in the earlier years i.e. A.Ys. 2008-09 & 2009-10 and Hon’ble Tribunal has decided these issues in favour of the assessee in its order dated 04.03.2015 in and ITA No.854/M/2013. On the other hand, Ld. DR has placed reliance upon the order of the AO.
3.1. We have gone through the orders of the lower authorities as well as order of the Hon’ble Tribunal in assessee’s own case for A.Y. 2008-09 & 2009-10. For the sake of ready reference, relevant paras of the order of the Tribunal are reproduced below:
“2. Brief facts emerging from records are that the assessee is a builder and developer, filed its return of income claiming deduction u/s 80IB(10). The assessee has purchased land development rights from its sister concern M/s. U.K. Builders vide agreement dated 15.05.2006 which was registered on 07/06/2006. Vide this agreement, the assessee firm got development rights for a residential cum commercial housing project on an area of 4 U.K. Construction 5.797 acres. The plan for the development of this housing project was already sanctioned on 18/10/2003 by the local authorities in the name of Shri Kuldeep U. Ostwal and Shri Gyanchand K. Sancheti, the two partners of M/s. U.K. Builders. This plan was later on amended and as per revised plan the total area of the project was increased to 1,18,805 sq. ft. During the course of assessment proceedings, the Assessing Officer observed that the permission to commence the development work in the housing project in question was issued in the name of Shri Kuldeep U. Ostwal and Shri Gyanchand K. Sancheti in the year 2003 and, therefore, the assessee firm has not commenced this housing project. According, to the Assessing Officer, section 80IB(10) of the Act, stipulates and provides that the deduction is available to the undertaking, if such undertaking has commenced or commences the development and construction of the housing project and completes such construction. Thus the Assessing Officer was of the view that the commencement of the project was by the separate persons and not by the assessee firm whereas the completion is claimed by the assessee firm. Accordingly, the Assessing Officer denied the deduction u/s 80IB(10) to the assessee. Apart from this the Assessing Officer has also held that the completion certificate issued by the Local Gram Panchayat authority is not a requisite completion certificate and further the commercial construction in the project is more than 2,000 sq. ft.
3. The assessee challenged the action of Assessing Officer before the CIT(A) and contended that it is not necessary that the permission/sanction granted by the local authority should be in the name of the person developing the housing project. The assessee has relied upon various decisions of this Tribunal in support of its contention.
4. The CIT(A) has decided this issue in para 5.9 to 5.11 and then in para 7.1 to 7.7 and finally in para 9.1 to 9.8 as under:-
5.9. There is a force in the above argument of the appellant. In my opinion, the only condition imposed by section 80IB(10) for being eligible for claiming deduction u/s. 80IB(10) is that the undertaking claiming the 5 U.K. Construction deduction should have "developed and built" the housing project, subject to other conditions contained in sub- clause's (a) to (d) being duly complied with. The provisions pertaining to the date of commencement and date of completion of the housing project as contained in sub- clause (a) (i) & (ii) of section 80IB(10) are only for the purpose for identifying the date after which the project should have commenced construction and the date by which it should be completed. As long as the project is commenced after 1.10.98 and is completed prior to 31.3.08 (as applicable in the case of the assessee), the condition imposed by said sub-clause (a) of section 80IB(10) can be held to be compiled with.
5.10. Similar view has been taken by the Hon'ble ITAT, Mumbai in the case of Saroj Sales Organization-Vs- ITO, 3 DTR (Mum) 494" and ITAT, Mumbai in the case of Vandana Properties and the Hon'ble High Court of Bombay has approved the above decision of the ITAT, Mumbai.
5.11. In the present case also it is the appellant firm who has developed and built the housing project in question and earned profits from development of the said housing project although the plans were got sanctioned by Shri Kuldeep U. Ostwal and Shri Gyanchand K. Sancheti, the partners of MIs. U.K. Builders and some initial construction might have been commenced by the earlier developer or builder of the land i.e. MIs. U.K. Builders. Subsequently, the project was taken over by the appellant and completed the same. The appellant would therefore be the correct entity to claim the benefit of deduction u/s. 80IB(10). The action of the AO therefore to deny the deduction to the appellant on the contention that the appellant is not the entity who commenced the project, is not in order and hence not justified. The judicial pronouncements cited supra have clearly laid down the principle that there' is no such conditions in section 80IB(10) that the approval or sanction for the housing project should be granted by the local authority in the name of the undertaking claiming the deduction. As long as the assesses is the owner of the undertaking which has developed and built the housing project, the benefit of the said deduction cannot be denied
6 U.K. Construction to them. In view of the same, on this issue, I uphold the claim of the assessee firm for deduction u/s. 80IB(10) on its housing project and thus ground nos. 3 & 4 stands decided in favour of the appellant. ******************* ******************* 7.1. I have perused the order of the AO on the issue and also gone through the written submissions made by the appellant carefully and I do not find any logic in the arguments of the AO that the completion certificates issued by the Boisar and Khairpeda Grampanchayats to all the buildings of the housing project of the appellant before 31/03/2008 are not the requisite completion certificates as envisaged in section 8018(10). The validity of these occupation certificates issued by the Grampanchayat can only be challenged after proving that the Grampanchayats are not the local authority. The AO without proving the same, has simply proceeded to deny the deduction on this ground that it is not the requisite completion certificates as envisaged in section 8018(10) but why this requisite certificate has not been elaborated by the AO. Admittedly, the buildings have been completed before 31/03/2008 as per the completion certificate issued by the Grampanchayats. 7.2. The explanation (ii) to section 8018(10) envisage a completion certificate from the local authority. The local authority is not defined in section 8018(10) but the same has been defined u/s. 10(20) of the I.T. Act, 1961. The Explanation to section 10(20) of the Act defines the local authority as under :- [ Explanation - For the purposes of this clause, the expression "local authority" means- (i) Panchayat as referred to in clause (d) of the article 243 of the constitution or (ii) Municipality as referred to in clause (e) of the article 243 of the constitution or (iii) Municipal Committee and District Board, Legally entitled to, or entrusted by the Government with, the control or management of Municipal or local fund; or (iv) Cantonment Board as defined in section of the Cantonment Act 1924 (2 of 1924).
7 U.K. Construction 7.3. It is clear from the above definition of the "local authority" as given in the I. T. Act, 1961 that the Gram Panchayat is a local authority. In the instant case, the Gram Panchayat of Boisar & Kherapada has been entrusted with the imposition, collection and management of the local fund. All the basis infrastructure facilities as required by the local people as well as to the appellant for the housing project have been provided by the Gram Panchayat. The appellant has submitted the details and receipts of the collection of the sanitation and other charges of the local area by the Gram Panchayat of Boisar, which undoubtedly puts the Gram Panchayat in the category of local authority and thereby competent to issue completion certificate of the housing project of the appellant. The completion certificate issued by any local authority is a valid proof of the completion of the housing project and so is true in the case of the appellant submitting the completion certificates from the Gram Panchayat of Boisar & Kherapada in respect of each building completed by it during the period under consideration and these completion certificates from 24/11/2005 to 18/03/2008 are placed on record.
7.4. The appellant has also filed a letter dated: 28/12/2009 of Zila Parishad, Thane, though it is not a completion certificate, but certifies that all the buildings were completed before 31/08/2008, which is also an evidence that the buildings of the appellant were completed before the specified date to make the appellant eligible for deduction u/s.80IB(10).
7.5. The AR of the appellant has also made an alternative argument that since the housing project of the appellant was approved and commenced construction in the year 2003, the amended provision which came into effect from 01104/2005 requiring the appellant to complete the project before 31/03/2008, is not applicable in their case as the amendment was prospective and does not apply to the projects commenced before this date.
7.6. There is a merit in the above arguments of the appellant. There are number of judicial pronouncements on 8 U.K. Construction the issue as on date. In the case of Hiranandani Akruti J. V. Vs. octt (A. Y. 2006-07), dt. 30.03.2010 and Bhumiraj Homes Ltd Vs DelT, ITA no. 5061Muml2009 dated 2010512011, wherein it has been held that the law as stood at the time of submission of proposal and its approval will apply and hence the amended provisions w.e.f. 01.04.2005 specifying date of completion will not apply to the projects approved before 01.04.2004.
7.7. In view of the above binding decision of Hon'ble jurisdictional Tribunal, I hold that in the case of appellant the condition that the housing project should be completed on or before 31.03.2008 will not otherwise apply and therefore there is no violation of any conditions in this regard and accordingly appellant cannot be denied claim of deduction u/s. 80IB(10) on the ground that the Completion Certificate was not obtained from Zilla Parishad, Thane, on or before 31.03.2008. This ground of appeal is therefore decided in favour of the appellant. ******************** ******************** 9.1. I have perused the order of the AO on the issue and also gone through the written submissions made by the appellant carefully and there is a substance in the above arguments of the AR of the appellant.
9.2. The contention of the AR of the appellant is that the firm has constructed the commercial area in the housing project to the extent of 1585 sq. feet which is well below the prescribed limit of 2000 sq. feet, which is mentioned in the assessment order itself. The housing project of the appellant is distinct from the housing project of M/s. U.K. Builders, even though of the same approved plan, and this housing project qualifies for deduction u/s. 8018(10) on standalone basis and therefore this is eligible project for the benefit of deduction u/s. 80IB(10).
9.3. The above arguments of the AR has merit. The AO has nowhere given the details as to how the commercial component of the housing project of the appellant is above
9 U.K. Construction the specified limit of 2000 sq. feet. The claim of the appellant is that its project has a commercial area of 1585 sq. feet which is well within the prescribed limit of 2000 sq. feet. The housing project of the appellant is separate housing project and qualifies for deduction on standalone basis and cannot be equated with the housing project developed by Mis. U.K. Builders. The appellant has maintained separate books of accounts for the project, separate audit report has been obtained, separate completion certificate has been obtained and is on separate identified piece of land and therefore a distinct project. It qualifies for deduction u/s. 80IB(10) on standalone basis as it fulfils the other conditions specified in the above section.
9.4. As of now, there are number of judicial pronouncements on the same issue, wherein the courts have decided that the developers and builders cannot be denied the deduction u/s. 80IB(10) in respect of any project, if such project fulfils the conditions laid down in the above section on standalone basis.
9.5. In the case of Saroj Sales Organisation Vs ITO 115 TT J 485 (Mumbai), it was held by the Hon'ble ITAT that when two projects were separate and distinct, the fact that the project was ineligible for deduction under section 80IB(10) would not bar the assessee from claiming relief under that section in respect of the other distinct project. Similar view has been taken by the Hon'ble High Court of Bombay recently in the case of CIT Vs MIs Vandana Properties, in and 4361 of 2010 dated: 28/03/2012.
9.6. Moreover, the AO has not brought out any fact on record that the appellant has violated the clause (d) of section 80IB(10) by constructing commercial area more than 2000 sq. feet and has merely proceeded to disallow the deduction on presumption of this housing being part of the housing project of Mis. U.K. Builders, which is not correct. The project of the appellant firm is a separate project for all practical purposes. In the absence of bringing any fact in this regard on record that the commercial area in the housing project constructed by the appellant is in 10 U.K. Construction excess of 2000 sq.ft., no adverse view on the issue can be taken.
9.7. Further, in view of the judicial pronouncement of the Hon'ble High Court of Bombay in the case of CIT Vs Brahma Associates 333 ITR 289 (2011) (Born), wherein on the issue of the commercial area, it has been held that – " If the conditions set out in section 8018(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project. In the present case, the commercial user is allowed in accordance with the DC Rules and hence the assessee was entitled to section 8018(10) deduction on the entire project approved by the local authority. "
9.8. In view of the facts and circumstances and the judicial pronouncement cited above, in my considered opinion, the housing project of the appellant is distinct and separate project on standalone basis and also covered by the ratio of judgement in the case of CIT Vs Brahma Associates 333 ITR 289 (2011) (Born) and therefore eligible for deduction u/s. 80IB(10). In view of the same, the AO is directed to allow the deduction to the housing project of the appellant for the year under consideration as it fulfils the conditions specified in the above section.”
We have heard the Ld. DR as well as Ld. AR and considered the relevant material on record. The Ld. Authorized Representative of the assessee has pointed out that in the case of the assessee’s sister concern M/s. U.K. Builders, the Tribunal vide its order dated 20th February 2015 in to 3922 has decided an identical issue in para 12 to 15 as under:-
“12. In view of the above, since the project of the assessee has been approved prior to 1-4-2005, the old law shall apply and the conditions with regard to commercial establishment which has been inserted w.e.f. 1-4-2005 will not be applicable. Similar view has been taken by the Hon’ble Gujarat High Court in the case of Manan Corporation vs. ACIT (2012) 78 DTR 205 (Guj.), Mumbai
11 U.K. Construction ITAT in the cases of Ramprasad Agarwal in & 2163/Mum/2010 dated 5-9-2012 and ITO vs. Sai Krupa Developers in ITA No.3661/Mum/2011 dated 13-3- 2012. In view of the above, we modify the order of ld. CIT(A) and direct the A.O. to allow the full claim of deduction u/s 80IB(10) of the Act with respect to the entire project without restricting the same to residential area. Thus, the grounds taken by the assessee in all he years for allowing full claim of deduction u/s.80IB(10) are allowed.
With regard to the completion certificate, the ld. CIT(A) after careful consideration of the facts of the case held that in respect of project approved prior to 1-4-2005, no completion certificate was required. The view of the ld. CIT(A) is also supported by the decision of Hon’ble Madras High Court in the case of CIT vs. Jain Housing & Construction Ltd. (2013) 30 taxmann.com 131.
In respect of A.O.’s objection in respect of three raw houses, the ld. CIT(A) held that open terrace area cannot be included in built up area in respect of project approved prior to 1-4-2005. The built up area has to be considered as per DC rules according to which the area worked out to be 1471 sq. ft. ie. below the prescribed limit.
With regard to the A.O.’s allegation regarding UK Commercial and UK residential are part of one approval, therefore, assessee is not eligible for deduction in respect of UK residential project also, the ld. CIT (A) held that these are two different projects on the same piece of land of 17.67 acres. Since the assessee has not claimed any deduction in respect of UK Commercial project, the assessee’s claim for deduction u/s 80IB(10) cannot be declined in respect of UK residential project having land of more than one acre. In view of the above discussion, respectfully following the decision of Hon’ble jurisdictional High Court in the cases of M/s Happy Home Enterprises and M/s Kanakia Spaces Pvt. Ltd. (supra), we direct the A.O. to allow full claim of the deduction u/s 80IB(10) of the Act in respect of entire residential project in all the relevant assessment years under consideration.
12 U.K. Construction
Apart from this, we note that the objections raised by the Assessing Officer in respect of the ownership of the land, sanction granted by the Grampanchayat being a competent local authority and completion certificate issued by the Zilha Parishad as well as the commercial area is more than 2,000 sq. ft. are covered by the various decisions as relied upon by the assessee. On the issue of ownership of the land for claiming deduction u/s 80IB(10), there is no requirement that the land should be owned by the assessee enterprise as has been held in the various Judgments including the following:- a) CIT Vs. Radh Developers [2010 329 ITR 1 ] [Gujarat HC] b) CIT Vs. Vishal Constructions [2013 35 taxmann.com182] [Guj. HC.] c) ITO Vs. Sai Krupa Developers ITA No. 3661/Mum/2011
In support of its contention that the Grampanchayat is a competent local authority, the assessee has relied upon the following decisions:- a) KRISHNA NAHRUBHAU LOHOKARE V/s ITO [Income Tax Act NO.937/PN/2010 [PUNE TRIB.] b) Krish Enterprises V/s DCIT Income Tax Act No. 6728/Mum/2013
It is clear from the above decisions of the Tribunal that the Grampanchayat is a competent local authority and, therefore, the sanction of plan and commencement certificate issued by the Grampanchayat is a valid certificate. The CIT(A) has decided all these issues by following the various decision. Accordingly, we do not find any error or illegality in the impugned order of CIT(A) qua this issue.
In the result both appeals of the revenue are dismissed.”
3.2. It is noted by us that Ld. CIT(A) has also relied upon its own orders of earlier years while passing the orders of years before us. Orders of earlier passed by the CIT(A) have been 13 U.K. Construction upheld by the Tribunal in aforesaid order. It is further noted by us that all the issues as were raised by the AO in the impugned orders for denying the benefit of deduction u/s 80 IB(10), have already been well addressed by the Tribunal. It is further brought to our notice that SLP filed by the department against the judgment of Hon’ble Gujarat High Court in the case of CIT vs. Radhe Developers 329 ITR 1 has been dismissed by Hon’ble Supreme Court. No distinction has been made by the Ld. DR before us on facts or law. Thus in view of the judgments of coordinate bench in assessee’s own case, we find that no interference is called for in the order of Ld CIT(A) and same is upheld and the AO is directed to allow the benefit of deduction claimed by the assessee u/s 80IB, following the order of the Tribunal for A.Ys. 2008-09 & 2009-10.
In the result, both the appeals filed by the Revenue are dismissed.
Order pronounced in the open court on 20th January, 2016.