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TMI Blog2012 (11) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... by Municipal Corporation only when the plan is approved prior to commencement of project. Though, there is violation/change in the approved plan, assessee firm did not inform the Municipal Corporation nor there is evidence to show or intimation/application was made to Municipal Corporation regarding charges in the original plan. Ld CIT(A) has categorically stated that the partner of the assessee firm himself admitted during the survey action that they had not informed the Municipal Corporation regarding changes in original plan - Thus considering above facts need to agree with CIT(A) that it is not enough if there are documents evidencing an apparent situation, if such documents are made to cover up what could be inferred reasonably as unreal. The position will have to be viewed as per direct observation of the survey team and it was found that one combined flat being shows as two separate units. So, we uphold the findings of CIT(A) on this aspect. Inclusion of balconies and projections in the built up area - Held that:- CIT(A) has rightly stated that when the projections/elevations are just have 4”, 3”, 5” and 7” of the floor level, they implies that there are extended area a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter relying on Mettur Chemical Industrial Corporation Ltd. vs CIT (1996) 217 ITR 768/86 Taxman 157(SC) wherein it has been held that there is no scope for allowing partial relief or splitting up of relief, the Ld. CIT(A) erred in allowing the partial claim of the appellant. 3. Since there is no provision for the proportionate deduction u/s 80 IB(10), so it will be against the intention of legislature or enacting this provision which is meant for constructing the smaller units for lower middle class and weaker section of society. 5. Grounds of appeal taken by assessee are as under: 1. The learned CIT(A) erred in not allowing the full claim of deduction u/s. 80IB( 10) of the Act without appreciating the facts and circumstances of the case and hence, the deduction u/s. 801B(10) of the Act allowed proportionately is without any justification and the entire claim of deduction u/s.8O IB(10) made as per the return of income amounting to ₹ 4,95,00,837/- may be allowed. 2. The learned CIT(A) failed to appreciate that the appellant had constructed and sold separate and independent units and not combined units and that some of the units were combined by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as conducted on 29/08/2007 at the office premises of the assessee at 302, 3rd Floor, Vardhaman Chambers, Cawasji Patel Street, Fort, Mumbai-400001 (Registered Office) and also at the site office at Shreepati, Royal Complex Shanti Nagar, Mira Road (E), Dist-Thane which is the site address of the assessee for housing project in which deduction u/s 80IB is claimed. During the survey action, it was found that the assessee had combined 30 Nos. 1-BHK flats into one unit. Flats were either allotted to one individual or to two persons of the same family. The survey team measured the area of the combined flats, the site measurement taken by the survey team along with Shri Mahendra Kanungo, one of the partner of the firm and the architect Shree Kurmar Pal Kothari revealed that the area of the flat no. D-201 202 in the building Shreepati - 4 which had been combined into one flat exceeded 1000 sq. ft. Similarly, area of the flat no. 403 and 404 in Shreepti - 4 which were combined into one unit was measured at 1046 sq. ft. During the course of survey action u/s 133A of the IT Act, statement of one of the partners Shri Mahendra Kanungo was recorded on 29/08/2007. Relevant portions of the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea because that s the requirement of registration authorities. The Assessing Officer stated that besides relying on the issue that the chajjas and projection have not been sold, the assessee tried to rely on the definition of built up area given under section 8OIB(14)(a), stating that if the projections and chajjas were made above the floor levels then the same could not be included in built up area, The assessee failed to realize that the floor level mentioned in section 80 IB(14)(a) indicated that any lofts, or cooking platforms made in the flats should not be considered while calculating the built up area in para 4.16 of the assessee s letter dated 08/12/2009, the assessee stops relying on definition of built up area as per section 80 IB(14)(a) and states that the definition provides by the local authority should be applied. Relevant para is reproduced below: Without prejudice to above the assessee submits that section 80IB (14)(a) has been inserted by Finance (No.2) Act, 2004 w.e.f. 01/04/2005 and the same does not apply to the project of the assessee. The project was approved on 19/07/2003 much before the amendment was carried out arid therefore one has to cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee while developing the projects had only one aspect in mind i.e. to sell/allot flats as per the prevalent market needs. At no point of time the assesee tried to adhere to the spirit of section 80IB i.e. flats were to be made of certain areas and allotted to different individuals/persons to serve the social objective of the society which in turn would grant the assessee deduction under chapter VI A. The main intention of legislature for enacting this provision is meant to construct smaller units for lower middle class and weaker section. That two agreements have been made to avoid the provisions of section 80IB(10)(c). This is a huge violation of the provision and it can not be said that it is a mistake, but is a deliberate attempt to have the benefits of section 80IB (10) by the builder/developer for which he is not entitled. The assessee himself is trying to pick and choose the provisions of the Act only to have the benefits of the provisions in the case of Kalikumar Sen (AIR 1969 A N 66), it has been held that when me benefit is conferred under an Act subject to the performance of certain conditions, and the benefit to be enjoyed affects the rights of other adversely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that after the occupation certificate is issued and possession given to the purchasers of the flats, there is no control of the builder upon such constructed flats and if the purchasers make any modifications, it is beyond the control of the builder to restrict such modifications. Since the purchasers modified the two separate flats sold after the possession was handed over, it is irrelevant as to whether the modifications were carried out by the assessee upon their request or any third party because even if the assessee would have denied to remove the wall in between the two flats purchased, the purchasers could have done the same on their own without the knowledge of the assessee. It was contended that survey action was carried out by the Income Tax Department on 29-8- 2007, i.e. after 5 months from the receipt of the occupation certificate and handing over the possession of the residential units to the purchasers thereof. It was contended that assessee has not violated any of the conditions stipulated in Sec. 80IB(10) of the Act more particularly the built-up area of the residential units since assessee has constructed separate and independent residential units of 1 BHK and 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of built up area introduced w.e.f. 1.4.2005 and prior to this introduction, the built up area would not include projections and balconies and placed reliance on the decision of Mumbai ITAT in ACIT v/s Sheth Developers (P) Ltd (2009) 33 SOT 277 (Mum). In respect of the contention of the assessee that the said amendment of inserting of definition of built up area would apply to the projects after 1.4.2005 and not to the project approved prior to the insertion of section, assessee placed reliance of ITAT Nagpur in the case of ITO vs. Air Developers, 123 TTJ 959(Nag), the decision of ITAT Mumbai in the case of ITO vs. M/s. Pathare Associates (I.T.A. No.993/M/2009) for assessment year 2005-06 dt.17.12.2009 and decision of ITAT Mumbai in the case of Hiranandani Akruti JV vs ACIT (I.T.A. No.5416/M/09) dated 30.3.2010. 9. Without prejudice to above contention, it was also submitted before ld CIT(A) that the deduction u/s. 80IB (10) should be allowed on residential portion having built up area of less than 1000 sq. ft proportionately and entire claim cannot be denied and placed reliance of ITAT Kolkata in the case of Bengal Ambuja Housing Development vs DCIT (I.T.A. No.1595/K/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 29/08/2007. Considering above facts, ld CIT(A) has stated that the case of the assessee lacked credibility and a transaction lacking in credibility by itself would deserve an adverse inference with reference to the probabilities of the case. He has stated that it is not enough if there are documents evidencing an apparent situation, if such documents are made to cover up what could be inferred reasonably as unreal. He has stated that in the case of the assessee, the substance of the real transaction is to be seen and the position will have to be viewed as per direct observation of the survey team that there was one combined flat being shows as two separate units. 12. Ld CIT(A) has further considered the contention of the assessee in regard to the definition of built up area that inner measurement at floor level has to be taken and thus balconies and projections which are not at the floor level cannot be taken into account. Ld CIT(A) has stated that the Assessing Officer noted that assessee itself accepted total built up area of the flat No.D-201 202 combined into one flat including the projections/elevation admeasuring at 1031 sq. ft. The projections of 140.17 sq. ft wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 1 .2 times. Ld CIT(A) has stated that sub-section (14)(a) of section 80IB which lays down the meaning of built up area was introduced by the Finance (No.2) Act, 2004 w.e.f. 01-04-2005 is merely an explanatory provision to describe the meaning of built up area. Ld CIT(A) has stated the said provision is explanatory in nature and is not relevant because it relates to assessment year 2005-06 i.e. relating to the period before the amendment came into effect. He has further stated that other decisions cited by the assessee also do not relates to the issues of built up area but relates to the built up area of shops and commercial establishments as to whether it exceeded 5% of the aggregate built up area of housing project or 2000 sq. ft. Hence, the arguments made by the assessee and the reliance placed are not relevant. 13. Now coming to the further contention of the assessee as to whether assessee can claim pro-rata deduction, ld CIT(A) considered the decision of ITAT Mumbai in the case of Sheth Developers (supra) and held that benefit of section 80IB(10) could be given to a project even where some of the units exceeded 1000 sq. ft of built up area. He also considered the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat definition of built up area is inserted by Finance (No.2) Act, 2004 w.e.f. 1.4.2005 and the said amendment can be considered as retrospective and, accordingly will not apply to the projects of the assessee as the same are approved prior to 1.4.2005. He submitted that even if combined flats are considered, once elevations/projections/balconies are excluded, the built up area of combined flats is below 1000 sq. ft. He submitted that the elevations/projections are above floor level and, therefore, they cannot be included in the definition of built up area. He referred pages 54 to 56 and 65 to 68 of PB to demonstrate that the photographs taken shows the level of flats and not usable for residential purposes. He submitted that detailed submissions were made before the AO as well as before ld CIT(A) on this issue and same was not accepted by them. Ld A.R submitted that without prejudice to above and for any reasons, the contention of the assessee is not accepted, order of ld CIT(A) be sustained to allow pro-rata relief to the assessee and referred to the decision of ITAT Kolkata in the case of Bengal Ambuja Housing Development(supra). He further submitted that said decision of ITAT K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e but on physical examination and considering the surrounding circumstances, when it was found that adjoining flats were meant to be a single unit, which was more than the prescribed limit i.e. 1000 sq. ft, we are of the considered view that ld CIT(A) has rightly held them to a single unit irrespective of the fact that there are separate sale agreements entered into by the assessee. It is not in dispute that the broachers of the assessee itself gave the option to the buyers to have 3 bed rooms after combining the flats into one clearly shows the intention of the assessee that assessee intended to construct the flat of more than 1000 sq,. ft i.e. exceeding the prescribed limit. AO as well as ld CIT(A) have categorically stated that the completion certificate is issued by Municipal Corporation only when the plan is approved prior to commencement of project. Though, there is violation/change in the approved plan; assessee firm did not inform the Municipal Corporation nor there is evidence to show or intimation/application was made to Municipal Corporation regarding charges in the original plan. Ld CIT(A) has categorically stated that the partner of the assessee firm himself admitted d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ld CIT(A) has rightly stated that when the projections/elevations are just have 4 , 3 , 5 and 7 of the floor level, they implies that there are extended area and can be utilized as carpet area. Not only this, ld CIT(A) has also stated that the booking confirmation/particulars sheets that are made at the time of booking the flats give the exact area that is sold to the buyers and the books impounded and inventoried also give the picture to the actual area sold, and this includes all projections and other common areas. Therefore, we agree with ld CIT(A) that the said extended area of projections/elevations/balconies are to be included while admeasuring all the flats and, accordingly, ld CIT(A) has rightly held that area of some of the flats exceeded the prescribed limit of 1000 sq. ft. We also agree that sub-section (14)(a) as inserted by Finance (No.2) Act, 2004 w.e.f. 1.4.2005 is only clarificatory in nature particularly the said definition will be applicable to the assessment year under consideration as the projects are admittedly completed in F.Y. 2006-07, and, therefore, the cases cited by ld A.R(supra) are not relevant to the facts of the case before us. Hence, we hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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