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TMI Blog2014 (1) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... eloped a housing project in the name of "Ekta Meadows" on plot bearing No. CTS No.279, Village Megathane, Borivali-East, Mumbai-66. The area of the plot, relatable to the project, was 18004 sq.mtrs. The date of approval of the project, by the Local Authority, was 13/05/2005. However, the initial commencement certificate in the case was granted on 13/12/2004. The project of the assessee was made up of two buildings i.e. Building No.1 and Building No.2. The Local Authority, later on, granted completion/occupation certificate, on 03/05/2007, in respect of Building No.2 of the project, and completion/ occupation certificate, dt.26/03/2009, in respect of Building No.1 of the project. Building No.1 consists of four wings i.e. wings A, B, C & D. Building No.2 consists of three wings i.e. wings E, F & G. The wings A, B, C & D were made up of stilt plus 28 floors. The wings E, F & G consist of stilt plus 8 floors. The total number of residential units, within the project, stand at 528. The project of the assessee did not have any commercial built-up area. Building No.2 was completed, during F.Y.2007- 08, and Building No.1 was completed, during F.Y.2008-09. 3. As per the return filed for as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Developers, 25 DTR 287(Nag) held that project of the assessee is not eligible for proportionate deduction of Rs.11,37,50,000 and, therefore, the entire profit of Rs.17.50 crores is to be taxed. Being aggrieved, assessee filed appeal before the first appellate authority. 5. On behalf of assessee, assessee made submissions on the lines of submissions made before the AO that pro-rata deduction u/s.80IB(10) of Rs.11,37,50,000 be allowed and placed reliance on the decision of ITAT Kolkata in the case of Bengal Ambuja Housing Development Ltd(supra). It was contended that the facts in that case are identical to the facts of the assessee. It was also contended that Hon'ble Kolkata High Court also confirmed the order of the Tribunal in the appeal filed by the department. Therefore, it is the settled provision in law and there is no contrary judgment of any other High Courts on the issue. Hence, claim of pro-rata deduction is justified within the four corners of the law. Assessee placed reliance on the decision of ITAT Nagpur Bench in the case of AIR Developers (supra). It was also contended that in view of the decision of Hon'ble Supreme Court in the case of Bajaj Tempo vs CIT, 196 ITR 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons should be interpreted liberally. Further, following the Hon'ble ITAT decision in the case of Bengal Ambuja Housing Development Ltd. Kolkata, the Hon'ble Mumbai ITAT allowed the assessee's claim on prorata basis on qualifying units which satisfied the conditions laid down by section 80IB(10). The Hon'ble ITAT Kilkata in the case of Bengal Ambuja Housing Development Ltd. v/s DCIT (ITA no.1595/Kol./2005, A.Y. 2002-03, Bench "C", order dated 24.3.2006 (2007) 39 D BCAJ P 546) has held tha teven if the units constructed are both smaller and larger units with reference to the stipulated area, the profit derived from the construction of the smaller units i.e., within the stipulated area of 1,000 sq.ft. built-up area ought to be allowed as deduction under section 80IB(10) of the Act. The above decision is approved by the Hon'ble Kolkata High Court as referred in the decision of ACIT v/s Shree Balaji Developers (ITA no.2592/Mum./2006, A.Y. 2004-05, Bench "C" order dated 21.10.2008) wherein the theory of pro-rata deduction is approved and held the deduction under section 80IB on pro-rata basis meets the objectives of the provisions of section 80IB. The Hon'ble ITAT Bangalore Bench in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough the cases cited before us (supra). 11. We observe that assessee has developed one housing project by name "Ekta Meadows" at Borivali(E), Mumbai. This housing project is having two buildings consisting of Wings A,B,C,D, E,F & G and 528 residential units. In the return of income filed for assessment year under consideration i.e. A.Y. 2007-08, assessee stated that 312 flats having built up area less than 1000 sq. ft each and claimed proportionate deduction of Rs.11,37,50,000 under section 80IB(10) of the Act. Assessee itself has stated in the return that 216 flats out of 528 flats have built up area exceeding 1000 sq. ft each that are not entitled for deduction u/s.80IB(10) of the Act and the profit attributable to said 216 flats representing 35% of the project of Rs.6,12,50,000 and assessee offered the same for tax. However, AO did not agree with the assessee to allow proportionate deduction under section 80IB(10) of the Act on the ground that assessee has violated on large scale the conditions u/s 80IB(10) of the Act. Ld CIT(A) has also confirmed the action of AO. 12. During the course of hearing, ld A.R. placed reliance on the decision of ITAT Kolkata in the case of Bengal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O. and the AO has only disallowed the claim considering the fact that there were some other units which had individual flat size of more than 1500 sq.fi. The assessee pleaded that since the land area attributable to 150 resident units was more than I acre in size, the claim of the assessee should have been allowed by the A.O." 13. Ld CIT(A) after considering the submissions of assessee allowed the claim of assessee on pro-rata profit on 150 units having individual area of 1500 sq.ft under section 80IB(10) of the Act. Hence, matter was carried in appeal before the ITAT. Regarding pro-rata deduction allowed by ld CIT(A), the Tribunal after considering submissions of both parties, held in para 22 of the said order as under: "22 it is apparent from the perusal of section 80IB(10) that this section has been enacted with a view to provide incentive for businessmen to undertake construction of residential accommodation for smaller residential units and the deduction is intended to be restricted to the profit derived from the construction of smaller units and not from larger residential units. Though the A.O. has denied the claim of the assessee observing that larger units were als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilt-up area of some of the residential units exceeds 1500 sq.ft." 16. Further ITAT Bangalore Bench in the case of DCIT vs. Brigade Enterprises Pvt Ltd (supra) also held as under: "......... Therefore, if a particular unit satisfies the condition of section 80IB, the assessee is entitled for deduction and it should be denied in respect of those units only which do not satisfy the conditions - Again, the accounting principles would also mandate recognition of profits from each unit separately." 17. Similar issue also came up for consideration before the ITAT Mumbai in the case of Sheth Developers Pvt Ltd (supra), wherein, it has been held as under: ""...... As regards the A project assessee is eligible for relief on prorata basis in respect of the flats which did not have a built-up area exceeding 1,000 sq.ft. - quantum of deduction in respect of the flats which have built-up area less than 1,000 sq.ft., has to be worked out on pro-rata basis - A.O. accordingly directed to verify the claim of the assessee and allow the deduction on pro-rata basis in respect of flats in A Project." 18. ITAT Bangalore Bench in the case of SJR Builders (supra) held that "merely because some flats ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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