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TMI Blog2011 (8) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial establishment by the assessee in the housing project and therefore, deduction u/s 80IB(10) cannot be declined because of these reasons. commercial area 2638 sq.ft. being less than 10% of the total built-up area of 71,56 sq.ft, the assessee is entitled to deduction/s 80IB - Held That:- In view of Brahma Associatess (2011 -TMI - 205564 - BOMBAY HIGH COURT) decided in favour of assessee and is eligible for deduction. - ITA NOS. 4332 TO 4336, 4806 TO 4810 AND 4842 (MUM.) OF 2010 - - - Dated:- 12-8-2011 - SHRI P. M. JAGTAP, SHRI VIJAY PAL RAO, JJ. Represented by: J.P. Bairagra for the Appellant. Goli Sriniwas Rao for the Respondent. 1. For the Assessment Years 2004-05 to 2007-08 the assessee as well as the revenue filed cross appeals against the respective orders of the CIT(A). For the AY 2002-03, the assessee is in appeal before us whereas for the AY 2003-04 and 2008-09 only the revenue has filed the appeals against the order of the CIT(A). 2. In the appeals for AY 2002-03 to 2006-07, the assessee has raised the only common ground as under: "the CIT(A) erred in confirming the disallowance made by the AO u/s 14A of the I T Act." 3. We have heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (BMC), the carpet area of each of the flats no.B-103 and B-903 is 701 sq. ft approximately. The assessee sold these two flats as per the requirement of the buyer after including one room each of 225 sq.ft area approx, from the adjacent flat thereby the built-up area of these flats sold by the assessee exceeded 1000 sq.ft. The Assessing Officer held that the assessee is not entitled for deduction u/s 80IB(10) inter-alia on the ground that the area of these two flats exceeds 1000 sq.ft. 8.1 On appeal, the assessee has contended before the CIT(A) that the assessee constructed the flats B-103 B-903 as per the approved plan and the area as per the approved plan is less than 1000 sq.ft. Therefore, even if the assessee added one room to these flats as per the requirement of the buyer that does not violate condition prescribed u/s 80IB(10) of the Act. The assessee has further contended before the CIT(A) that out of 212 flats, only these two flats were sold after adding one room from the adjacent flat as per the need and requirement of the buyer. 8.2 Alternatively, the assessee has also urged before the CIT(A) that merely because these two flats exceeds 1000 sq.ft area, the deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld these two flats after merging one room each from adjacent flat and as per the sale agreement, the area of the flats sold by the assessee is more than 1000 sq.ft. Therefore, we approve the findings of the CIT(A), qua this issue being consistent with the view taken by the Tribunal in various decisions as relied upon by the CIT(A). Accordingly, the appeal of the assessee is dismissed. 11. In the appeals for AYs 2003-04 to 2008-09, the revenue has raised the following common grounds: "(1) On the facts and in the circumstances of the case and in law, the ld CIT(A) erred in directing the Assessing Officer to allow deduction u/s 80IB in respect of the project named NG Estate. (2) On the facts and in the circumstances of the case and in law, the ld CIT(A) erred in holding that the assessee had commenced the project only in 2001, without appreciating the fact that the assessee had received the IOD for the first time in the year 1991 and on such IOD is received, for all practical proposes, the assessee is free to commence the project. (3) On the facts and in the circumstances of the case and in law, the ld CIT(A) erred in holding that the commercial area 2638 sq.ft. being less tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate was issued on 12.2.1993. He has contended that these commencement certificates were issued for a period of one year and when the construction work was not started within the one year, they automatically lapsed, as it can be seen from clause 28 of the Commencement Certificate issued on 15.5.1991 and 12.2.1993. The ld AR has referred the copies of the Commencement Certificates dated 15.5.1991 and 12.3.1993. The English translation of the same are placed at pages 143 to 147 and 148 to 152 of the paper book. He has further contended that thereafter commencement certificate dated 2.3.2001 was issued by the BMC and by virtue of the said Commencement Certificate; the earlier commencement certificate issued on 12.2.1993 was stand cancelled. He has referred clause 22 of the commencement certificate dated 2.3.2001, the English translation of which is placed at pages 153 to 158 of the paper book and submitted that a reference of cancellation of earlier commencement certificate dt 12.3.1993 is made under this clause 22. The ld. AR of the assessee, thus, contended that when the earlier commencement certificates were expired when no development and construction was commenced within the stipu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enced prior to 1.10.1998. The Assessing Officer was of the view that the commencement date is the date when the assessee received the approval for the first time from the authorities concerned. The relevant part or the assessment order is reproduced as under: "Next, the assessee has contended that the IOD date should not be taken into account while determining the commencement date of the project. This stand of the assessee is also not acceptable. The commencement date is the date when the assessee received approval for the first time from the authority concerned. Once the assessee receives the IOD, for all practical purposes, the assessee is free to commence the project. In this case, the IOD was received in 1991, which is way prior to 1.10.1998 stipulated in section 80IB." It is evident from the assessment order that the Assessing Officer took the date of commencement as the date when the project was approved by local authority and the Commencement Certificate was issued on 15.5.1991. Before discussion on the issue it is opt to quote the relevant provision of section 80IB of the I T Act. The sub section (10) of section 80-IB was amended by the Finance Act 2000 w.e.f. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... housing project is approved by the local authority. Explanation for the purpose of these clauses: (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority. (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority" 15. Thus, from the plain reading of provision of sub-section (10) of section 80IB, it is clear that the time of approval of the project is relevant for the period of completion or in other words, the duration of completion period reckoned from the date of approval of the project by the local authority. Since the post substitution of provisions by Finance Act 2002, the date of completion provided under sub clause (i) (ii) depends as when the project has been approved by the local authority. Therefore, in the case when more than one approval s have been granted by the local authority, the Explanation to clause (a) has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had incurred a sum of Rs. 6000 towards the cleaning of land and also incurred an expense of Rs. 1,140 towards Pooja expense. In our considered view, these expenses do not indicate that development and construction of housing project had been commenced before 1st Oct 1998. Rs. 6000 was incurred for cleaning he land, so that correct measurement of the land could be done. As per the provisions of the Maharashtra Land Revenue Code, 1966, mentioned hereinabove, there is a procedure for conversion of use of land from one purpose to another and there is a provision for penalty also for violating the provisions of s.44 of the said code. There is no material on record to show that the assessee had made any material change on the land before 1st Oct 1998. From the above discussion, it would be clear that the assessee had commenced the development and construction of the housing project after 1st day of Oct 1998 and completed the same before the specified date. There is no dispute that the assessee had fulfilled the remaining conditions under the law for claiming deduction under section 80IB(1) of the act. Accordingly, we reverse the findings of the CIT(A) and direct the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndividual. The assessee sold 32 residential units to one person namely M/s Action Construction Equipment Ltd. He has further submitted that these flats further let out by M/s Action Construction Equipment Ltd. to M/s Unique Hospitalities for running hospitality services by hiring out the said apartments to its customers. Therefore, these units have to be considered as non-residential units for the purpose of deduction u/s 80IB(10). The ld DR has submitted that the assessee has violated the specific condition u/s 80IB(10) and therefore, the claim of deduction u/s 80IB(10) is not available to the assessee. 19.1 On the other hand, the ld AR of the assessee has submitted that the housing project, undisputedly approved in the year 2001 and also commenced the development and construction in the year 2001; therefore, the amendment of of clause (d) of provisions of sec. 80IB(10) of the I T Act is not applicable to the project of the assessee as far as 5% limit of commercial establishment is concerned. He has further contended that even otherwise the commercial area is less than 10% of the total built-up area and therefore, in view of the decision of the Pune Special Bench of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval to the project. When there is no dispute about the facts that these flats were constructed as standalone residential unit as per the approved plan and also as per the completion certificate, then any use of non-residential purpose of these flats by the end-user being transferred by the assessee would not change the nature of the residential unit in the housing project. Therefore, subsequent use of the flats for non-residential purpose would not be considered as construction of commercial establishment by the assessee in the housing project and therefore, deduction u/s 80IB(10) cannot be declined because of these reasons. 23. As far as the prohibition against the sale of more than one flat in a housing project to one person is concerned, now the said condition has been inserted specifically w.e.f. 1.4.2010 and therefore, this amendment in our view can only be treated as prospective in nature until and unless there is a clear and expressed intention of the Legislature of retrospective effect. Therefore, it is clear that so far as pre-amendment position is concerned as long as a residential unit has less than specified area constructed as per the duly approved plans and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Bench of the Tribunal in the case of Brahma Associates (supra), he has allowed the claim of the assessee in para 36 37 as under: "36. With regard to item no.(ii), the Assessing Officer has stated that since the project is commenced prior to the accounting year relevant to AY 2005-06, there should be no commercial area of the project if the project is to be entitled for deduction section 80IB(10) of the act. In this project, the commercial area is 2638 sq.ft.(more than 2000 sq.ft which is mentioned in the amended provisions of section 80IB(10(d) of the Act. The Assessing Officer held that the appellant is not eligible for deduction u/s 80IB of the Act. The appellant is of the view that the amended provisions are applicable from AY 2005-06 and prior to that commercial area can exceed 2000 sq.ft. The appellant relied on the ITAT special Bench's decision in the case of Brahma Associated 119 ITD 255 ((SB)(Pune). The Hon'ble ITAT has held in para 92 to 94 and para 114 has held (taken from the held and it is extracted below: "dominant objective of the tax incentive is to augment the supply of affordable dwelling units. The project eligible for this tax concession, therefore, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units. In the above background, it will only be reasonable, in our opinion, grant benefit of incentive provision to projects in which built-up area for commercial purposes is more than 5 per cent say 6 per cent to 9 per cent. It would be palpable injustice to deny benefit of exemption to border line cases merely because commercial built-up area in their cases has exceeded the built up area by a small percentage on the touchstone of condition (d) applied subsequently. We are of view that Benches of the Tribunal were correct in holding that conditions of section were satisfied where the commercial built up area had exceeded 9 per cent of total area. This was rightly done by adopting purposive interpretation of an incentive provision under consideration. We are, therefore, of the view that cases where commercial built-up area did not exceed 10 per cent of the total area, the benefit of statutory provision could not be denied in such cases. Where approximately 90 per cent or more of the total area is utilised for building dwelling units of specified area and other conditions of the section are fulfilled, there is no justification to deny the benefit merely because the project had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld fulfil the requirement of section 80-IB if 90 per cent of the area is utilised for building of dwelling units and utilisation of commercial building is restricted to 10 per cent of the built-up area. Such project should be held to be predominantly residential project and, therefore, satisfying description of "housing projects" as envisaged under the statutory provision prior to assessment year 2005-06. It will not be just and fair or even legal to deny exemption of the section to the aforesaid type of projects carried by an undertaking. - Ideal Realtors (ITA No.4292/Mum/2007). Arun Excello Foundation P Ltd v. ACIT [2007] 108 TTJ (Chennai) 71, Harshad Doshi v. ACIT [2007] 109 TTJ (Mum) 335 and Saroj Sales Origination v. ITO [2008] 115 TTJ (Mum) 485 approved; Laukik Developers v. DCIT [2007] 108 TTJ (Mum) 364 (207) 105 ITD 657 (Mum) overruled." 37. In this project, the total built-up area is 71,506 sq.ft whereas the commercial area is only 2638 sq.ft which is less than 10% of the total built-up area. Respectfully following the Hon'ble ITAT Special bench's decision, I hold that this project will not lose its deduction section 80IB(10) just because it has commercial built-up area ..... X X X X Extracts X X X X X X X X Extracts X X X X
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