9911796707
TMI Blog2014 (11) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of appeal:- 1. On the facts and in the circumstances of the case and in law, the ld.CIT(Appeals) erred in not considering 25.10.2000 as the base year for deciding the completion year and date of the project in view of the decision of the Hon'ble ITAT in ITA No.3074/Ahd/2008 dated 27.11.2009. 2. On the facts and in the circumstances of the case and in law, the ld.CIT(Appeals) erred in directing the Assessing Officer to allow deduction u/s.80IB(10) of the Act proportionately on the completed units of the project without appreciating that the assessee is eligible for deduction u/s.80IB(10) only when all the conditions of section 80IB(10) in respect of the 'entire project' is completed. 3. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal It is prayed that the order of the CIT(Appeals) be set aside and that of the Assessing Officer be restored. 3. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 22.11.2011, thereby the Assessing Officer (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s.143(2) on 25.06.2010 and u/s.142(1) of the IT Act on 30.05.2011 and 27.10.2011 to furnish all the documentary evidence in support of their claim and also to furnish the completion certificate in respect of the said project." 3.1. The AO in pursuance of the direction of the Tribunal gave finding that so far as the first direction is concerned, the terms of the development agreement is such that the assessee i.e. developer has possesses all rights and risks on the constructed property and land owner only interested in receiving his part of the land consideration for transfer of land title. In respect of the second direction, the AO gave a finding that completion certificate was not issued within the stipulated time, therefore the assessee has failed to comply with the provisions of section 80IB(10) of the Act and proceeded to make disallowance claimed u/s.80- IB(10) of the Act. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions directed the AO to allow the deduction on 220 Units out of 223 Units. 3.2. The ld.Sr.DR submitted that the ld.CIT(A) was not justified in deleting the disallowance. He submitted that the appellant could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered in the case of Tarnetar Corporation(supra). Wherein the Hon'ble High Court held that the assessee had not only completed the construction two years before the final date but had applied for the building use permission. Such building permission was not rejected on the ground that construction was not completed but on some other technical ground. Thus, granting the benefit of deduction could not be held to be illegal. In the instant case also, the assessee had completed the construction and applied for the issuance of completion certificate. While making application, the assessee also enclosed the certificate issued by the Architect/Engineer who have given the completion certificate. It is noteworthy that the ld.CIT(A) has recorded a finding that out of 223 Units, the concerned authority gave completion certificate in respect of 129 units which is not disputed by the Revenue. Furthermore, the ld.CIT(A) has also given a finding that in respect of 91 units, the assessee had made application for issuance of the completion certificate on 09/05/2007. This fact is supported by the evidence of Form No.7 enclosed at page No.97 of the paper-book of the assessee. The Coordinate Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord. The ld.CIT(A) while deciding the issue has observed as under:- "On the issue of proportionate deduction u/s.80IB(10) also High Court has opined in favour of the assessee that the same is allowable on the units which are fulfilling the eligibility condition. Though, in that case, the built up are was under consideration and in the present case, the issue is of completion certificates. However, in my opinion the ratio is the same and will apply on the residential units which are completed but where completion certificates have not been issued by the BMC. Hon'ble Madras High Court in case of Sanghvi and Doshi Enterprise (supra) held that: "36. This leaves us with the last question on proportionality, which was considered by us in T.C.(A)Nos.1348 and 1349 of 2007 dated 18.10.2012. Though the assessee had complied with the extent of built-up area as per clause (c) and the assessee is entitled to have the benefit of deduction under Section 80IB of the Income Tax Act, since the Tribunal had remanded the portion of the built-up area for verification before the Assessing Officer and a factual enquiry has to be made thereon as to whether the built-up area is in fact 1500 sq.ft. or m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as High Court rendered in the case of CIT vs. Sanghvi and Doshi Enterprise reported at (2013) 255 CTR 156 (Mad.) . Therefore, we do not find any infirmity in the order of the ld.CIT(A), same is hereby upheld on this issue. Thus, this ground of Revenue's appeal is rejected. 7.2. During the course of hearing, ld.Departmental Representative raised an additional ground with regard to allowance of deduction u/s.80IB(10) of the Act in respect of unutilized FSI in view of the judgement of Hon'ble Gujarat High Court rendered in the case of CIT vs. Moon Star Developers in Tax Appeal No.549 of 2008. The ld.Sr.counsel for the assessee submitted that he has no objection if this issue is restored to the file AO for verification and decision afresh in the light of the judgement of Hon'ble Gujarat High Court rendered in the case of Moon Star Developers (supra). The ld.counsel for the assessee has relied on the judgement of Hon'ble High Court of Gujarat rendered in the case of CIT vs. Shreenath Infrastructure reported at (2014) 44 taxmann.com 461 (Guj.). The Hon'ble Gujarat High Court in the case of CIT vs. Shreenath Infrastructure has followed the judgement of Hon'ble Gujarat High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity of construction, be it residential or commercial complex maximum utilization of FSI is of great importance to the developer. Ordinarily, therefore, it would be imprudent for a developer to under-utilize available FSI. Sale price of constructed properties is decided on the built up area. It can thus be seen that given the rate of constructed area remaining same, non-utilization of available FSI would reduce the profit margin of the developer. When a developer therefore utilizes only say 25% of FSI and sells the unit leaving 75% FSI still available for construction, he obviously works out the sale price bearing in mind this special feature. Let us compare two instances. In the same area two residential schemes are developed. Both have residential units of 1500 sq. feet. In one scheme 100% FSI is used in another 25% FSI is used and 75% is passed on to the buyer of the unit. Price of the unit in the later scheme would for apparent reason be considerably higher than the former because the buyer there gets not only a residential unit of 1500 sq. feet, he also gets the right to build further construction of 4500 sq. feet. Whether this includes open land or not is not important. In te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that arising out of the net sell of FSI must be resorted to. In the present case, none of the assessees have made any special ground for non-utilization of the FSI. 32. The contention of the counsel for the assessee that as long as there has been 100% utilization of the maximum permissible area on the ground floor, deduction under section 80IB(10) of the Act cannot be declined, cannot be accepted. As noted earlier, in case of M/s. Moon Star Developers and many other assessees, such full utilization of the ground floor area available for construction resulted into barely 20% to 25% of the FSI being used, remaining more than 75% being left unused. 33. What is available for deduction under section 80IB(10) of the Act is the profit of an undertaking derived from developing and building a housing project. Mere sale of open land or unused FSI as part of the housing project where utilization of the FSI is way short of permissible limits cannot be said to have been derived from such housing project. Terms "derived from", "arising out of and "attributable to" are often times used in the context of income tax in different connotation. In the case of Sterling Foods (supra), the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest u/s.234B/234C & 234D of the Act is not justified. 4. Initiation of penalty u/s.271(1)(c) of the Act is not justified. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 10. Ground Nos.1 & 2 are inter-connected and, therefore, the same are decided together. Facts are identical to the facts of Revenue's appeal in ITA No.1686/Ahd/2013 for AY 2005-06(supra) except that in the AY 2005-06 the ld.CIT(A) has allowed the appeal of the assessee holding that the assessee is eligible for deduction in respect of 220 Units out of 223 Units. In the present year, the ld.CIT(A) has disallowed the deduction on the basis that the assessee could not produce the completion certificate. The ld.Sr.counsel for the assessee adopted the argument in the as advanced in the AY 2005-06 and submitted that this issue is squarely covered by the judgement of the Hon'ble Jurisdictional High Court rendered in the case of CIT-IV vs. Tarnetar Corporation (2012) reported at 210 Taxman 206 (Guj.), judgement of the Hon'ble Delhi High Court rendered in the case of CIT vs. CHD Developers Ltd. (2014) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conditions laid down under the provisions of the section were not fulfilled by the appellant. The order of ld.CIT(A) being harsh, unjust and bad in law deserves to be quashed. 2. Learned CIT(A) erred in law and on facts in not taking cognizance of the fact that the appellant had already obtained completion certificate for 129 units whereas application in respect of another 91 units was pending before the authorities that were completed within prescribed time limit as laid down in the section. Ld.CIT(A) ought to have appreciated the fact that the conditions for grant of deduction u/s.80IB(10) of the Act were complied in substance by the appellant and hence ought to have granted deduction as claimed by the appellant. 3. Alternatively and without prejudice ld.CIT(A) ought to have held that proportionate allowance for the units in respect of which completion certificate was obtained from the competent authority be allowed u/s.80IB(10) of the Act. 4. Learned CIT(A) erred in making applicable observations of the Special Bench decision dealing with concept of 'profit of housing project' for denying the benefit of proportionate deduction failing to appreciate that the appellant obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dwelling units in favour of the en-users was made by the landowner and not by the assessee. 2. On the facts and in the circumstances of the case and in law, the ld.CIT(Appeal) erred in directing the Assessing Officer to allow the deduction u/s.80IB(10) r.w.s.80IB(1) of the Income-tax Act to the on profit derived from sale of unutilized FSI, without appreciating that this profit not an element of profits derived from the business activity of development and construction of the housing project relating to the sale of tenements. 3. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal It is prayed that the order of the CIT(Appeals) be set aside and that of the Assessing Officer be restored. 18.1. Parties have adopted the same argument as advanced in ITA No.1686/Ahd/2013 (Revenue's appeal-supra) for AY 2005-06. 18.2. Ground No.1 is against the disallowance on the basis that the relationship between the assessee and the end user of the units was that of 'work contract' since the approval by the local authority as well as completion certificate was not granted to the assessee but to the landowner and the rights a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtionate allowance for the units in respect of which completion certificate was obtained from the competent authority as 'housing project' to allow deduction u/s.80IB(10) of the Act. 3. Levy of interest u/s.234A/234B & 234C of the Act is not justified. 4. Initiation of penalty u/s.271(1)(c) of the Act is not justified. 20.2. Ground Nos.1 & 2 are inter-connected. Since the facts are identical to the facts in AY 2008-09 of Assessee's appeal(supra) and Revenue has not pointed out any change in the facts, therefore taking a consistent view for this year as well, these two grounds are decided in favour of assessee. Therefore, ground Nos.1 & 2 of assessee's appeal are allowed. 20.3 Ground No.3 is against levy of interest u/s.234A/234B & 234C of the Act. The levy of interest being consequential in nature. We direct accordingly. 20.4. Ground No.4 is against initiation of penalty u/s.271(1)(c) of the Act which is premature. 21. As a result, Assessee's appeal in ITA No.2434/Ahd/2012 for AY 2009-10 is partly allowed. 22. Now, we take up the Revenue's appeal in ITA No.2331/Ahd/2012 for AY 2009-10, wherein following grounds have been taken:- 1. On the facts and in the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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