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TMI Blog2013 (11) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned. Therefore, it cannot be said that such was the intention of the legislature while bringing in the substitution. So, one should keep in mind the object behind enacting this provision, namely, to bring in investments and to encourage the infrastructure development of middle income housing projects. If the aforesaid provision is held to be retrospective in nature, it would negative the object of the said provision. It is settled law that the Courts have to harmonize these provisions and interpret the same in a manner to achieve the object of the legislature than to distress the said object. In that view of the matter, the definition of built-up area as inserted in sub-section (14) of section 80-IB by Finance (No.2) Act of 2004, which came into effect from 1-4-2005, cannot be held to be retrospective; It applies only to such housing projects, which are approved subsequent to 1-4-2005 Decided against the Revenue. Disallowance of entire deduction under section 80IB of the Act because area of 10 flats was more than the area prescribed by the Act Held that:- Reliance has been placed on the judgment of the Madras High Court in the case of Viswas Promoters (P) Ltd [ 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit derived by the respondent from three floors (i.e. 10th, 11th 12th floor) of building no.3, named Nilgiri of the housing project "Cosmos Hills" for the reason that completion certificate in respect of the said three floors was not issued by the local authority before 31.03.2008. 2. On the facts and in law, the Ld. CIT(Appeals) erred in denying the benefit of deduction u/s. 80 IB (10) to the extent of profit derived from development of certain units of the housing project "Cosmos Hills" by holding such units to exceed the maximum built up area permissible under the said section. 3. The respondent craves leave to add, alter, amend, delete and/or vary any of the above grounds of cross objections at any time before the decision of the appeal/cross objection. Assessee, an, AOP engaged in the business of builders and developers filed its return of income on 26.10.2007declaring total income at Rs. Nil.AO finalised the assessment on 31.12.2009 determining the total income of the assessee at Rs. 5.57 Crores. 2. During the assessment proceedings, AO found that assessee had developed a housing project called Cosmos Hills in Thane, that the project was a complex of 4 bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itchen, that construction of duplex flat was not as per the approved plan, that the built up area of such flats was more than 1000 sq ft. On the basis of the said report, AO held that by constructing the flats of more than 1000 sq ft. assessee had violated the provisions of clause (c) of section 80IB(10) of the Act, that assessee was not eligible to claim deduction u/s 80IB(10). Finally, he disallowed the claim amounting to Rs. 5.57 Crores, made by the assessee. 2.2. Assessee preferred an appeal before the First Appellate Authority(FAA). After considering the submissions of the assessee and the assessment order, he held that Devgiri, Himgiri, Nilgiri and Saptgiri building of the project Cosmos Hills were situated on plot of land measuring more than 1 acre, that the CO in respect of all the buildings (except Nilgiri) was obtained by the assessee prior to 31.03.2008, that AO had not disputed the fact. Relying upon the orders of the Mumbai Tribunal delivered in the case of Vandana Properties (31 SOT 392) and Saroj Sales Organisation (3 DTR 494) he held that ratio laid down by the above decisions was equally applicable in the case under consideration, that concept of housing project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. (255 CTR 149), Runwal Multi-housing Pvt. Ltd-(ITA No.1015, 1016 1017/PN/2011 Dt. 21.11.2012) 2.3.a. With regard to the report submitted by the Approved Valuer, AR submitted that residential flats were constructed as independent residential units and were completed in all respect by the assessee, that possession of such flats was granted to the purchasers concerned, that each of the constructed flat was as per the sanction plan with independent entry door, kitchen and all other amenities as mentioned in the sale agreements of the flats concerned, that the modification in the flats had been made by the purchasers, that assessee had no control over the changes made by the purchasers, that at the time of grant of OC local authorities had examined this aspect and only then OC was issued, that Approved Valuer had erroneously considered built up area of premises to be "Carpet area + 20%", that as per the provisions of the Act there was specific definition of built up area, that as per the provisions of section 80IB(14)(a) of the Act built up area of flats had to be determined on the basis of the said definition, that built up area determined by the valuer was on ad-hoc basis and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before 31.03.2008. DR could not controvert the fact. Therefore, we are of the opinion that FAA was justified in directing the AO to allow the deduction for all the four buildings other than three floors of Nilgiri building. Section 80IB(10) was introduced in the Act for a specific purpose and it has been held a benevolent legislation. The section is about development and construction of a housing project of residential units of specified areas and it has to be commenced and completed during specified period and on a plot of particular size. If these basic conditions are fulfilled, AO cannot deny the benefits of the said section to an assessee. AO has mentioned that three buildings were completed before 31.03.2008 and OC was also obtained before due date. Considering these facts, in our opinion, he was not justified in disallowing the claim made by the assessee-AOP for the said buildings. Similar is the position for the nine floors of Nilgiri builidng. Cases relied upon by the AR also support the submissions made by the AR. 2.4.b. Now, we would like to discuss the second reason for disallowing the deduction and that is the size of 10 flats. AO had held that the built up area more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Act.Then only, they would be entitled to the benefit of tax exemption under section 80-IB.Normally, when an amendment is effected by way of insertion, the effect is that the earlier section which is substituted by this section is wiped out and in its place, this substituted section is inserted, as the said section was in the statute book from the day, the enactment was passed.Therefore, it is retrospective in nature. But it is not an invariable rule. Except adding the said provision by way of insertion, the legislature has not made the said provision retrospective by any express words. On the contrary, on the day this provision was inserted, they have also substituted the main provision by way of insertion. From the aforesaid provision it is clear that the first condition to be satisfied for application of this provision is that the housing project requires to be approved by a local authority. Before an approval is sought for, the assessee has to get the plan prepared. If the assessee wants to have the benefit of the aforesaid section, notwithstanding the law contained in the building bye-laws, the said plan also should be in conformity with the aforesaid provision un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case. Secondly, sub-section, nowhere stipulates that 20% area should to increased for computing the built up area of a residential unit. Lastly, AO had not decided the issue as whether the flats were outside the City of Mumbai? We find that in the CO, assessee has raised the said issue. We will deal with it at appropriate place, but for the present it is sufficient to hold that AO was not justified in denying the claim of the assessee on the basis of the report of the valuer. 2.4.d. Cases relied upon by the AR support the submission that only proportionate disallowance can be made, while granting deduction u/s.80IB(10) of the Act, if certain units exceed the area as stipulated in the section. We find that in the matters of Vandana Properties, Mudhit M.Gupta, Saroj Sales Organization, Brigade Enterprises Pvt. Ltd, Magarpatta Township Development Construction Co, M/s. Rahul Construction Co., Runwal Multi-housing Pvt. Ltd.(supra) different benches of the Tribunal have held that only proportionate disallowance can be made if an assessee does not fulfills the conditions stipulated in the section. In other words an assessee is entitled to proportionate deduction u/s.80IB of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.1. The second ground is about denial of deduction u/s.80IB(10) of the Act.Whiled finalising the assessment, AO held that the assessee has violated the provisions of clause (c) of section 80IB(10) of the Act. As stated earlier, AO after considering the report of the approved valuer, had held that the assessee was not entitled to claim deduction as it had constructed 10 flats that had area more than 1000 sq.ft., that it had combined two flats/two floors. 3.2. Assessee preferred an appeal before the FAA. After considering the submissions of the assessee and the assessment order he held that on physical verification it was reported by the approved valuer that certain residential units were more than permissible limit of 1000 sq ft., that the said vital part could not be ignored, that deduction u/s. 80IB(10) of the Act could not be denied to the assessee for the entire project only on the ground that certain residential units were more than permissible limit of 1000 sq ft. Relying upon the order of the Seth developers (33 SOT 277) and AIR Developers (123 TTJ 959), he held that assessee was entitled for deduction on proportionate basis. He directed the AO to calculate the deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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