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TMI Blog2011 (5) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... it would not deny the assessee the benefit of being treated as an undertaking developing and building the housing projects insofar as it is the assessee, through the power of attorney specifically taken from the land owner, that the plans have been drawn, approval obtained, sanction taken and the building constructed - decided in favour of the assessee Whether the built up area if it exceeds 1500 s.ft. in respect of any flats, the assessee would be entitled to the deduction under section 80-IB(10) on pro rata basis - Held that:- The flats were combined only after the purchase of those flats and after taking possession of them. In such cases the flats concerned are to be treated as constructed and sold as independent flats with built up area not exceeding 1500 sft., each Whether the private terrace is to be included in the computation of built up area - Once the private terrace is for the exclusive use of the purchaser of the flat then, obviously, the said private terrace does not fall within the common areas shared with the other residential units and consequently would have to be included in the measurement for arriving at the " built up area" - decided in against of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount to delivery of possession as a part performance of the contract under section 53A of the Transfer of Property Act (TP Act) or under section 2(47) of the Income-tax Act. (b) All the necessary permissions required to be obtained from Chennai Metropolitan Development Authority (CMDA), Corporation of Chennai (Corporation for short), Airport Authority of India (AAI) etc. were obtained by HMPL and not the assessee. (c) There was no outright purchase of land on payment by the assessee from HMPL. (d) The order of the DCTO described the assessee's nature of business as works contract. (e) The assessee had sub-contracted the civil work of the project to GK Shetty Builders Pvt. Ltd. (GKSB) and that the assessee's status is similar to that of GKSB and it cannot be better. The Assessing Officer was of the view that development includes many aspects and construction is only one of it. Based on the above facts and the provisions of section 80-IB(10), the Assessing Officer concluded that the assessee has assisted the owner, i.e., HMPL in construction only and all other developmental aspects have been done by HMPL. Accordingly, it was held that the assessee is not eligible fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -4-2001. The emphasis was that the objective of the tax concession is to provide tax benefit to the person undertaking the investment risk i.e., the actual developer. In this connection, our attention was drawn to clauses 7, 8 9 of the agreement dated 28-4-2003 to show that it was the assessee who has to fix the rate per sq.ft. for the constructed area, that assessee was entitled to receive the entire sales consideration on its own behalf and that HMPL had no claim on such amounts. It was also pointed out that the rate for sale of proportionate undivided share of land was fixed at Rs. 600 per sq.ft. as per clause 4 of the agreement. It was emphatically stated that HMPL was entitled to this amount only which constituted the rate for sale of land and describing it on per sq.ft. basis was only a mode of determining the amount payable to HMPL. It did not in any way indicate that HMPL had any share in the sale consideration of the built-up areas. Therefore, the argument was that it was the assessee who had undertaken all the investment risks and if any purchaser failed to make the payment, it was the assessee's loss only. It was contended that even if some flats are not sold, it was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easurement together for which the assessee will extend its co-operation. 11. The last objection of the revenue was that the project was not completed within the stipulated time of four years and hence, deduction was not available. It was pointed out that though the assessee had applied to obtain completion certificate from CMDA in time, for certain reasons it was rejected. The assessee then approached the High Court and the Court directed CMDA to issue the certificate. Ultimately CMDA did issue the completion certificate, albeit late by about three months. Nonetheless, it was submitted that the Corporation of Chennai has issued a certificate dated 28-12-2007 stating that the building was inspected on 23-11-2007 and it is found that it satisfies the approved building permit conditions. The fact that Corporation is the local authority to approve the construction is supported by the decision of the Chennai Bench of the Tribunal in the case of Jain Housing Constructions Ltd. [IT Appeal No. 1369 (Mds.) of 2009, dated 5-2-2010.] The certificate of the Corporation is sought to be filed as additional evidence. Thus, finally the ld. counsel wound up his arguments by stating that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the purchaser only after the entire consideration was paid up and hence, there was no risk on the part of the builder. It was also pointed out that the allottees of the flats had requested HMPL to arrange for the builder. The builder was to receive monies in advance from the allottees and hence, on that count also the builder has no investment risk. The construction agreement specifically mentioned that the builder was not to incur any liability if the latter was unable to deliver possession within the stipulated period. On the other hand, if there was a delay in payment by the allottees, the builder was entitled to interest. It was emphatically repeated that all the procedures to obtain all the necessary permissions were obtained by HMPL and hence, unquestionably HMPL was the developer. The ld. D.R. relied on the judgment of the Supreme Court in the case of K. Raheja Development Corpn. v. State of Karnataka 2005 AIR SC 2350. With regard to the violation of other conditions, the ld. D.R. relied on the orders of the lower authorities. He objected to the admission of additional evidence in the form of the completion certificate obtained from the Corporation of Chennai. It was conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Ltd. [C.A. No. 3302 of 2005]. It was contended that this judgment of the Supreme Court was under Consumer Protection Act to answer the question whether a land owner who enters into an agreement with a builder is a consumer entitled to maintain a complaint against the builder as a service provider under the Consumer Protection Act. Therefore, for that reason also, the decision given in the case of Sashwat Constructions (P.) Ltd. (supra) for assessment year 2004-05 cannot be relied upon. Next, it was contended that HMPL has not objected to the claim of the assessee of it being a developer and has also not claimed any deduction under section 80-IB of the Act. Therefore, when the parties are not disputing each other's status, the intentions of the parties should be carried out. As regards the contention that HMPL incurred all the charges for various approvals, it was contended that the assessee reimbursed all the charges and the same have been allowed as deduction by the department. With regard to investment risks it was contended that irrespective of the amount collected by the assessee, it had to make over Rs. 600 per sq. foot to HMPL. If prices of building materials were to go up, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isan, Architect: In the practice of civil architecture the builder comes between the architect who designs the work and the artisans who execute it. (c) Builder and Contractor: The word "builder" has been used by lawyers, judges, and courts as synonymous with "contractor" when used in connection with building contracts. (d) Contractor: Person who makes a contract, especially a builder who works by contract. (e) Development of Land: The expression "development" means the realisation of the potentialities of land or territory by building or mining. The above meanings/explanations of the various expressions are as per Law Lexicon by P. Ramanatha Aiyar (2nd Edition - 2009). From the above it can be seen that the meanings of different expressions at times overlaps each other and in particular, the distinction between a "builder", "developer" and "contractor" is quite blurred. As a matter of fact, different persons often use the expressions interchangeably and according to their own perceptions. As a result, the agreements entered into by the persons involved in these activities are also quite often blurred and lacking clarity leading to avoidable litigation. Be that as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the ownership. There may be several reasons not to part with the ownership despite the fact that he will be parting with a substantial portion of the land for development purpose. The owner may want to retain the ownership of the remaining land and division of the land into two portions may not be feasible. In that case, the owner will have to retain the ownership of the entire land. The Legislature must have kept such situations in mind while providing for the deduction. And again, when Explanation was added to section 80-IB(10) by Finance Bill, 2009, the Memorandum explaining the provisions emphasized about the investment risk which may be taken either by the owner or the builder or jointly by both. In the instant case, who has actually taken the risk, we shall see later. For the present, suffice it to say that ownership of the land will not be the criterion to decide the status of a developer as such. 19. The builder then actually starts the development work. As per the agreement, the builder has the exclusive right to sell the flats to the persons of his choice. He has the exclusive right to determine the sale price of the flats. He has the exclusive right to collect the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment made more than three decades ago. On the other hand, the builder on its part would be investing in material and labour now and the recoupment of this investment is uncertain. Whether all the flats are booked or not, the builder will have to construct the entire building. This is so because if a person has booked a flat on 4th floor and the flat on 3rd floor is not booked, he will have to hand over the possession of the 4th floor flat for which necessarily he will have to construct the 3rd floor. Thus, he would be investing in the 3rd floor without any certainty of it being sold. In other words, the builder will have to pump in the funds to build the entire project the realisation from which is quite uncertain. As against this, what is the risk of HMPL. At worst, the builder may defer the payment for a while. But once the construction of the project is over, HMPL would certainly demand its pound of flesh. Thus, the risk of HMPL is many times lesser than that of the builder. The opinion which we had formed in paragraph 19 above that the builder is also the developer gets strengthened with these facts. We may still go further. 21. There is a construction agreement between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building in any capacity. In the present case, the facts go to show that the assessee has been engaged as a builder and it is the assessee who will control and direct the work of building construction. Next, as per Law Lexicon, a contractor is a person who makes a contract, especially a builder who works by contract. Now here the real distinction needs to be drawn between the expressions "developer and builder" and "builder and contractor". If a person is a contractor only, then, his job would be merely to construct the building as per the designs provided by the owner and hand over the constructed building to the owner. His job will not include designing the project, selling the flats in the project, entering into agreements with the purchasers of the flat of the type they are entered into in this case. He will not be running after the buyers to sell the flats or realise the money for the sold flats. He would not be maintaining the property after the project is completed. He would not be having any right to extend the height of the building. He would not be having any right to convert any area for a different usage. All these rights have been discussed in paragraph 21 above. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort, the construction agreement in the present case is not one by which the assessee is engaged as a contractor by the purchasers of the flats but having been appointed as a builder and a joint developer, the agreement has been entered into only to define the rights and liabilities vis-a-vis of the purchasers of the flats. It is because of this complex arrangement coupled with the terms loosely used in the agreements, that made us say in paragraph 15 that the distinction between a "builder", "developer" and "contractor" is quite blurred. It is in order to remove this haziness we have gone in detail into various agreements to find out the exact status of the assessee. Our conclusion is that the assessee is a developer, a builder and a contractor, all rolled into one. On the other hand, HMPL is only a developer and not a builder. Even though, the assessee and HMPL are joint developers, in our view, the roll of the assessee as a developer is greater than the roll of HMPL as developer. To reiterate briefly, HMPL is a developer because it has jointly evolved the entire scheme along with the builder and has attempted to realise the potentialities of the land owned by it. However, this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is connection, it has to be noted that the completion certificate is to be issued by the local authority. The question is, whether CMDA can be considered to be a local authority or not. This issue had come up before the Chennai Bench of the Tribunal in the case of Jain Housing Constructions Ltd. (supra). In that case, assessee was denied deduction in the absence of completion certificate by the CMDA but completion certificate issued by the Corporation of Chennai was placed on record. The Tribunal in paragraph 3.5 of its order stated that the project layout plan may be required to be approved by the CMDA but as far as the construction of the building is concerned, the local authority, i.e., the Corporation of Chennai is the appropriate authority to regulate the construction as per the building bye-laws and sanction plans. When it is not disputed that the Corporation is the local authority, certificate issued by it cannot be disregarded. The assessee has placed on record the completion certificate issued by the Corporation by way of additional evidence. Since the allowability of the entire deduction depends on all the conditions being fulfilled, we admit this additional evidence. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lats measuring more than 1500 sq.ft. should be left out. At the same time, we make it clear that the deduction should be allowed only if the built-up area of flats measuring more than 1500 sq.ft. do not exceed 10 per cent of the total built-up area. 26. The last objection of the revenue is that the purchaser of the flat on the top floor had an exclusive right over the terrace and hence it should form part of the built-up area. If the total built-up area including the terrace is considered, the said flat would measure more than 1500 sq.ft. The expression "built-up area" has been defined in clause (a) of section 80-IB(14). It is meant to be the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units. It is not disputed that the terrace which is the subject-matter of dispute is adjoining to the dwelling unit. In other words, it has to be considered as a projection of the dwelling unit itself. It is also not disputed that it is only the owner of the top floor who has access to the said terrace and no other occupant of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a plain reading of section 80-IB(10) makes it clear that this section is aimed at promoting construction of housing projects so as to address the problem of shortage of dwelling units. At paragraph 76, the Bench observed that the tax incentive by way of deduction under section 80-IB(10) is predominantly for the purpose of augmenting affordable dwelling units, and it must be interpreted in that light. The Bench also considered numerous judicial pronouncements and ultimately came to the conclusion that if the commercial built-up area is not more than 10 per cent of the total built-up area, the assessee should not lose the entire benefit of section 80-IB(10). The Bench also considered the claim of the assessee for pro rata deduction. However, the Bench ruled out the claim on the ground that the deduction is available only in respect of the profit of the housing project. One of the several authorities referred to by the Bench, and which according to us is most relevant for the present case is the case of Kammins Ballrooms Co. Ltd. v. Zenith Investments (Torquay) Ltd. [1971] AC 850. In this case, Lord Diplock approved of what he called 'a purposive approach to statutory interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me assessee may construct substantial number of flats exceeding 1500 sq.ft. and may claim deduction without serving the purpose of the legislation. Likewise, the flats which exceed 1500 sq.ft. also have to be left out of the purview of the deduction. On the other hand, in the present case if the aforesaid lakshman rekha is drawn, and if the assessee is within that limit, giving deduction to him will serve the purpose of the legislation. Therefore, we have drawn the limit of 10 per cent and have also held that if it exceeds the limit of 10 per cent then the assessee will lose entire deduction. This explains our directions given in paragraphs 25 and 26. 29. Besides the inspiration and guidance we have from the decision in the case of Brahma Associates (supra), we also have the judgment of the Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) and which is placed on record before us. In this case, the High Court was considering the decision of the Kolkata Bench of the Tribunal in the same case in I.T.A. Nos. 1595 and 1735/Kol./2005, dated 24-3-2006. In this case, the assessee had constructed smaller as well as larger residential units. The assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of smaller residential units. Accordingly, the Assessing Officer is directed to follow our directions in paragraphs 25 and 26 above. 31. In the result, the two appeals in the case of Sanghvi Doshi Enterprise [IT Appeal Nos. 259 and 260 (Mds.) of 2010] are partly allowed for statistical purposes. Sri Mahalakshmi Housing [IT Appeal Nos.261 262 (Mds.) 2010] 32. In the case of this assessee, the two appeals relate to assessment years 2005-06 and 2006-07. In both the assessment years, the main issue is whether the assessee is a builder and developer or not and hence, entitled to deduction under section 80-IB(10) or not. It is admitted by both the parties that the facts are similar to those in the case of Sanghvi Doshi Enterprise dealt with above. Therefore, following our above order, it is held that the assessee is a builder and developer and hence, entitled to deduction under section 80-IB(10). Another common issue in both the years is whether the area of private terrace has to be included in the built-up area or not. In this regard, as in the above case, the flats with exclusive terrace rights be measured again after including the private terrace and then follow the dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he size of the plot of land having area of one acre? (iv) Whether the private terrace is to be considered as part of the built up area of the flat for computing the built up area of 1500 s.ft. as per section 80-IB(14) of the Income-tax Act, 1961? (v) Whether the built up area if it exceeds 1500 s.ft. the assessee would be entitled to the deduction under section 80-IB (10) of the Income- tax Act, 1961 on pro rata basis? A perusal of section 80-IB(10)(b) of the Income-tax Act, 1961 provides that the project is to be on the size of a plot of land which has a minimum area of one acre. One should remember here that the wordings are that "the project is on the size of the plot of land". The wordings are not that the undertaking developing and building the housing project should be owner of a plot of land having a size of minimum area of one acre. Thus as long as the land on which the project is completed is having a minimum area of one acre the undertaking developing and building such housing projects on such lands would be entitled to the deduction under section 80-IB(10) subject to the other conditions being fulfilled. In the present case the land is owned by one person and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n balcony. The learned authorised representative has specifically agreed that the access to the private terrace is only through the specified flat. A perusal of the agreement in respect of the flats which have the private terrace clearly shows that the private terrace is for the exclusive use of the purchaser. Once the private terrace is for the exclusive use of the purchaser of the flat then, obviously, the said private terrace does not fall within the common areas shared with the other residential units and consequently would have to be included in the measurement for arriving at the " built up area". The terrace talked about here is not the roof top terrace. It is the terrace, the access to which is through the flat of the purchaser and which is at the floor level and is the terrace of the immediately lower flat. The regular terrace is considered as part of the common area. The terrace that is sold and that is attached to the flat and which is having exclusive access is separate from the regular terrace. Section 80-IA(14)(a) uses the words "inner measurements of the residential unit at the floor level". Therefore if the terrace is part of the inner measurement at the floor level ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificate having been issued by the competent authority without any qualifications, the project should be deemed to have been completed as mentioned in the application, i.e., before the due date and consequently the assessee should be held to have complied with the provisions of section 80-IB(10)(a)(ii) of the Act. Therefore, in regard to the issue as to whether the completion certificate which has been obtained after the due date but for which the application has been given before the due date should be considered as due compliance, I am in agreement with my learned brother. Accordingly, the issue No. (ii) as to whether the completion certificate which has been obtained after the due date but for which the application had been given before the due date should be considered as due compliance is held in favour of the assessee. 45. Here I may specifically mention that in regard to issue No. (i) as to whether the assessee is a contractor, builder or developer, I agree with the finding as given by my learned brother. 46. In regard to the issue as to whether the undertaking, developing and building the housing project should be the owner of the size of a plot of land having the minimu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case in CIT v. Ambuja Housing Development Ltd. [IT Appeal Nos. 1595 (Kol.) 2005 and 1735 (Kol.) of 2005, dated 24-3-2006] as also the decision of the Gujarat High Court in the case of Nirma Industries Ltd. v. Dy. CIT [2006] 283 ITR 402/155 Taxman 330. In effect, my learned brother has held that if the violations in respect of the built up area of 1500 s.ft. per flat exceeds the limit of 10 per cent of the total built up area of the project, then the assessee would lose the deduction on the entire project. It is these portions of the order which I am unable to subscribe to. 51. A perusal of the paper book as filed by the assessee shows flat No. 1501 to have 1308 s.ft. but as per the sale agreement and the letter of the purchaser the area is 1230 s.ft. Similarly, flat No. 502 has been shown to have an area of 1285 s.ft. as per page 19 of the paper book of the assessee. But as per the letter of the purchaser and the sale agreement the area is 1157 s.ft. Similarly, flat No. 402 is mentioned as 1495 s.ft. but the assessee has claimed the same to be 1397 s.ft. in the letter to the Assessing Officer which finds mentioned in page 6 of the order of the CIT(A). Similarly, Flat No. 501 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the built up area calculation provided under the Income-tax Act. In any case, this issue of measurement of the flats in dispute has been restored to the file of the Assessing Officer for de novo measurement by the departmental valuer after granting the assessee adequate opportunity to co-operate in the proceedings. 53. One of the basic principles of judicial discipline is that a Division Bench cannot disregard the decision of another Division Bench of equal strength. If at all such a situation is to arise, what is required under judicial discipline is to refer the issue to a Special Bench or a Larger Bench. Similarly, a Division Bench is bound by the decision of the Larger Bench. A decision by a Division Bench contrary to the decision of a Larger Bench cannot have a binding force. This view of mine is supported by the decision of the co-ordinate Bench of this Tribunal in the case of Asstt .CIT v. MSS India (P) Ltd. [2009] 123 TTJ (Pune) 657/32 SOT 132. 54. In the case of Brahma Associates (supra) in paras 113 and 114 the Hon'ble Special Bench has held as follows: "113. The next question is whether or not the deduction under section 80-IB(10) is to be granted in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 992] 196 ITR 188/62 Taxman 480 has categorically held that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it. 57. The Hon'ble Supreme Court in the case of Federation of Andhra Pradesh Chambers of Commerce Industry v. State of Andhra Pradesh [2001] 247 ITR 36/115 Taxman 143 riterated the basic principle that 'it is trite law that a taxing statute has to be strictly construed and nothing can be read into it. .In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look fairly at the language used'. The Hon'ble Supreme Court further went on to hold that 'the courts in interpreting a taxing statute will not be justified in adding words thereto so as to make out some presumed object of the Legislature .. If the Legislature has failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be contrary to the decision of the Hon'ble Special Bench in the case of Brahma Associates (supra), wherein the Hon'ble Special Bench has said categorically that it is the housing project which is to be considered and not the individual units. In any case, the Hon'ble Calcutta High Court having dismissed the appeal filed by the revenue against the said decision of the Calcutta Bench of the Tribunal by holding that no substantial question of law arose should not be the 'Lakshman Rekha" be drawn at 47 per cent and not 10 per cent. Would this not lead to doing violence to the provisions of section 80-IB(10) to the extent of frustrating the said provision? When the wordings of the provisions of section 80-IB(10) are clear and ambiguous and the Hon'ble Supreme Court has also laid down the principles in regard to the interpretation of the taxing statute, as already referred to supra in the case of Federation of Andhra Pradesh Chambers of Commerce and Industry (supra) as also in the case of Bajaj Tempo Ltd. (supra) an appellate authority should not, cannot, must not and shall not tinker with the provisions of the Act in such a manner as to cause violations to the provisions of the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is applicable on the entire project. If some of the residential units of the project comprised area exceeding the prescribed limit, the benefit as per the language of the section cannot be extended to the project. In interpreting the provisions, the co-ordinate Bench had placed reliance on the decision of the Hon'ble Supreme Court in the case of Padmasundara Rao (decd.) v. State of Tamil Nadu [2002] 255 ITR 147 as also the decision of the Hon'ble Supreme Court in the case of Britannia Industries Ltd. v. CIT [2005] 278 ITR 546/148 Taxman 468. This order of the co-ordinate Bench of the Tribunal was the subject-matter of a miscellaneous petition in MP No. 379/Mds./2009, wherein the same counsel, as in the present case, had represented. It was claimed that an error had crept in the order inasmuch as the Tribunal had not considered the decision of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra). The Miscellaneous Petition had been dismissed vide order dt. 30-1-2009. Against this order, the assessee had filed a writ petition before the Hon'ble High Court of Madras in Visvas Promoters (P.) Ltd. v. ITAT [2010] 323 ITR 114/[2009] 185 Taxma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80-IB(10) in respect of the total project. In the circumstances, the issue No. (v) being whether the built up area if it exceeds 1500 s.ft. the assessee would be entitled to the deduction under section 80-IB(10) of the Act on pro rata basis, is held against the assessee. In the circumstances I am of the view that the Income-tax Act, 1961 does not recognize a Lakshman Rekha being drawn by an appellate authority. Further I am of the view that even if one of the flats in the housing project violates any of the conditions as specified in section 80-IB(10) of the Income-tax Act, 1961, as is applicable for the relevant assessment year, the assessees shall not be entitled to any deduction under section 80-IB(10) in respect of such housing projects in which there has been such violation. 64. In result, all the appeals of the assessees are partly allowed for statistical purposes. THIRD MEMBER ORDER Dr. O.K. Narayanan, Vice-President As a Third Member. - This is a bunch of five appeals. The appeals are filed by assessees, who are three in numbers. The relevant assessment years are 2005-06 and 2006-07. 2. All the three assessees are firms engaged in construction business. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isted as below :-- "(i) Whether the assessees are builders/developers and therefore eligible for deduction under section 80-IB(10)? (ii) Where the purchasers of flats have combined two flats together thereby exceeding the limit of the built up area of 1500 sft. can be considered as compliance of the stipulation provided in section 80-IB(10) that the built up area should not exceed 1500 sft. and hence eligible for deduction under section 80-IB(10)? (iii) Whether the assessees have furnished project completion certificates on or before 31st March, 2008 and whether entitled for deduction or not? (iv) Where in certain cases the built up area of a single flat is more than 1500 sft., whether the assessees are eligible for deduction or not? (v) Whether the private terrace should also be included in the built up area of the flats for the purpose of working out the statutory extent of the built up area? (vi) Whether deduction should be allowed even though some of the flats of the projects exceeded the built up area of 1500 sft.?" 5. These issues were considered by the Regular Bench of the Tribunal in the hearing concluded on 9-7-2010. The Bench was constituted of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded in the built up area of the flat for the purpose of determining the limit of 1500 sft. has been unanimously decided by the Bench against the assessee by holding that the area of private terrace should be included in the built up area of the flat. 10. As far as the sixth issue as to whether deduction should be allowed even though some units exceeded the built up area of 1500 sft., the Bench could not arrive at an unanimous decision. The learned Vice-President and the learned Judicial Member have come to different views on the issue. The Hon'ble Vice-President held that deduction should be allowed in the case of flats having built up area not exceeding 1500 sft., even though some of the flats are exceeding 1500 sft. He held that deduction should be denied in the case of flats having built up area in excess of 1500 sft. The learned Vice-President also held that the assessees are to be allowed deduction under section 80-IB(10) in respect of flats satisfying all conditions, only if the total built up area of all the flats measuring more than 1500 sft. does not exceed 10 per cent of the total built up area of the project. 11. The learned Judicial Member on the other hand held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 sft., the Assessing Officer is then directed to allow deduction only in respect of the profits arising from the sale of those flats which measure less than 1500 sft. In other words, flats measuring more than 1500 sft. should be left out. At the same time, we make it clear that the deduction should be allowed only if the built up area of flats measuring more than 1500 sft. do not exceed 10 per cent of the total built up area." 16. In the above said paragraph two issues have been adjudicated by the learned Vice-President. The first point is the question of ascertaining whether certain flats are exceeding the prescribed built up area of 1500 sft. or not. The physical aspect of exceeding the built up area of 1500 sft. has been remitted back to the Assessing Officer for fresh verification. The second issue, which is relevant for the present, is the question whether in a case where flats are exceeding a built up area of 1500 sft. whether the deduction can be given or not. The learned Vice-President has stated that deduction should be given where the built up area is not more than 1500 sft. 17. In the last part of the said paragraph the learned Vice-President has also made it clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operating and which is capable of being given effect to. Relying on the above judgment of the Hon'ble Gujarat High Court, the learned Vice-President held that the decision of the Hon'ble High Court is squarely applicable to the issue considered by the Bench. He also relied on a Special Bench decision of the Delhi Tribunal in the case of Medicare Investments Ltd. (supra), where the Bench has adopted the view expressed in the judgment delivered by the Hon'ble Gujarat High Court in the case of Nirma Industries Ltd. (supra). In the light of the above judicial pronouncements, the learned Vice-President came to the conclusion that in the absence of any decision of the jurisdictional High Court to the contrary, not only the decision of the Special Bench of the Tribunal in the case of Brahma Associates (supra) but also the decision of the Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) are binding precedents and therefore it is to be held that even if the assessee has constructed residential houses of larger area, deduction under section 80-IB(10) will still be available but will be restricted to the profits arising from the sale of smaller residential uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Legislature." 22. The learned Judicial Member thereafter examined the generally accepted rules of binding precedence arising out of the decisions of higher Courts, Special Benches and coordinate Benches. Relying on the decision of the Special Bench of the Tribunal in the case of MSS India (P.) Ltd. (supra), the learned Judicial Member held that in the absence of any other direct decision on the issue, the earlier decision of the coordinate Bench is binding on the subsequent Bench. He held that the decision of the Special Bench in the case of Brahma Associates (supra) relied upon by the learned Vice-President, in fact supports the proposition that deduction should not be given on a pro rata basis. He observed that the said decision in fact supports the arguments of the Revenue on the issue. The learned Judicial Member thereafter observed that a coordinate Bench of the Chennai Tribunal itself has decided the very same issue in the case of Viswas Promoters (P.) Ltd. (supra) and held that the restriction imposed by the statute is applicable on the entire project and therefore if some of the residential units of the project are exceeding the prescribed limit of built up area, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at if there is any violation in respect of any of the conditions specified in section 80-IB(10) of the Income-tax Act, 1961 in respect of any of the residential units in the housing project on which the claim of deduction under section 80-IB(10) has been made, the assessee shall not be entitled to the deduction under section 80-IB(10) in respect of the total project. He held that the entire project should be denied the benefit of deduction available under section 80-IB(10) of the Act. 24. I heard both sides at length and considered the issue in detail. 25. The learned Vice-President and the learned Judicial Member have extensively discussed the grounds of their decisions before arriving at their respective conclusions. Both of them have discussed in detail the decisions governing the question of judicial precedence in the light of a number of judicial pronouncements. 26. As the Third Member in these appeals, I am not here to make any critical appraisal of their thought process and its reflections. That is not my domain as I am not competent to do so. That is the domain of constitutional courts. The duty cast on me is to examine the facts of the case in the light of the statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which in two projects the assessee constructed flats exceeding 1500 sft. and also flats of less than 1500 sft. in area and claimed deduction under section 80-IB(10) in respect of flats which have area measuring less than 1500 sft. The above order was passed by the Chennai Bench on 13th October, 2008. 30. The Calcutta C-Bench of the Tribunal has considered the very same issue in the case of Bengal Ambuja Housing Development Ltd. (supra) in their order dated 24-3-2006. 31. The above order of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra) was taken in appeal before the Hon'ble Calcutta High Court by the Revenue. The appeal filed by the Revenue under section 260A in IA No. 458/2006 has been dismissed by the Hon'ble High Court through judgment of their Lordships dated 5-1-2007. The copies of the judgment were made available on 28-3-2007. The court dismissed the appeal filed by the Revenue on the ground that no substantial question of law was involved in the matter. 32. Likewise the decision of the Chennai Bench of the Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) was also taken before the Hon'ble Madras High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ata deduction is not available under section 80-IB(10). But as a matter of fact it is to be brought on record that the Tribunal while disposing of that appeal in the case of Viswas Promoters (P.) Ltd. (supra) has not discussed anything about either the order of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra) dated 24-3-2006 or the decision of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra). Even though the Tribunal has considered the matter in detail in the light of the principles of statutory interpretation discussed by the Hon'ble Supreme Court in the case of Padmasundara Rao(decd.) (supra), the Tribunal has not considered or discussed the decision of the Calcutta Tribunal or the Hon'ble Calcutta High Court which are directly on the point. It was only while disposing of the Miscellaneous Petition filed by the assessee that the Tribunal has made a mention about the decision of the Calcutta Tribunal to make it clear that the said decision was also considered by the Tribunal while passing the earlier order. It may be because of this subsequent observation that the Hon'ble Madras High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in the case of Bengal Ambuja Housing Development Ltd. (supra) even though the said order and the judgment were delivered prior to the order of the Chennai Bench of the Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) Therefore it is to be seen that the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) has not been considered by the Chennai Bench while passing its order in the case of Viswas Promoters (P.) Ltd. (supra). 40. Now the question is, in the above circumstances where there is no direct decision of the jurisdictional High Court on the subject and where there is already an existing decision of the Calcutta High Court on the subject, which decision is to be followed to decide the issue at hand, whether the decision of the Chennai co-ordinate Bench or the judgment of the Hon'ble Calcutta High Court? 41. Now, when coming to the finding that the issue has been adjudicated by the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) it is also necessary to examine the fact of dismissal of an appeal by the High Court holding that no substantial question of law arises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (supra) is a judgment directly on the issue upholding the view of the Calcutta C-Bench of the Tribunal that a pro rata deduction is permissible under section 80-IB(10). As I have stated above, the judgment of the Hon'ble Madras High Court rendered in the case of Visvas Promoters (P.) Ltd. (supra) is not on the issue agitated in this case. The said judgment concerned only with the question that whether there is a mistake in the order of the Tribunal or not. The right of the assessee to file an appeal under section 260A before the Hon'ble Madras High Court still survives and till date the Hon'ble Madras High Court has not decided the issue on its merits. Therefore, the only judgment of a High Court available on the subject, is the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra). 44. Again, I may repeat that the question is whether I should follow the order of the coordinate Bench of the Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) or the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Dev. Ltd. (supra). 45. The Hon'ble Bombay High Court in the case of CIT v. Smt. Godavaridev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o long as there is no decision by my jurisdictional High Court, I am immediately bound by the judgment of any other High Court available to me, directly on the subject. Therefore, I hold that the controversy placed before me as a Third Member is covered by the judgment of the Hon'ble Calcutta High Court rendered in the case of Bengal Ambuja Housing Development Ltd. (supra). In the light of the findings arrived at above, I agree with the view taken by the Hon'ble Vice President, where he has held that the assessees are entitled for deduction under section 80-IB(10) in respect of flats having built up area not exceeding 1500 sft. and not entitled for deduction in respect of those flats having their built up area exceeding 1500 sft. 49. The learned Judicial Member has also expressed his dissenting view on the 10 per cent cap (Lakshman Rekha) proposed by the learned Vice President. The learned Vice-President has relied on the order of the Hon'ble Special Bench of the Tribunal in the case of Brahma Associates (supra) to arrive at a Lakshman Rekha of 10 per cent. In the appeal filed against the order of the Special Bench, the Hon'ble Bombay High Court in the case of CIT v. Brahma Assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciate that the appellant was at least eligible for proportionate deduction in respect of those units where the permissible limit of 1500 sq. ft. had been exceeded. (8) For that the order of the Commissioner of Income-tax (Appeals) failed to appreciate that the appellant had completed the project within the time required under section 80-IB(10) and that the delay in obtaining completion certificate was more due to procedural delays in the office of the local authority than any lapse on the part of the appellant. (9) For these grounds and such other grounds that may be adduce before or during the hearing of this appeal with the leave of the Hon'ble Tribunal, it is prayed that (a) deduction under section 80-IB(10) be allowed as claimed by the appellant (b) such other orders may be passed as the Hon'ble Tribunal may deem fit. 2. Hon'ble Vice President, sitting as Third Member, had succinctly, formulated the questions raised through these grounds on page 5 of his order, as under:- (i) Whether the assessees are builders/developers and therefore eligible for deduction under section 80-IB(10)? (ii) Where the purchasers of flats have combined two flats together ..... X X X X Extracts X X X X X X X X Extracts X X X X
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