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TMI Blog2015 (1) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... the intention. What is required to be seen is if the 1-BHK flats are planned, designed, approved for construction, constructed and finally obtained the ‘completion certificate’ or not. If the answer is affirmative, the claims cannot be denied based on the intention of the assessee.the revenue authorities have decided the issue against the assessee prejudicially and ignored the evidences that are given against the revenue. In such case, the orders of the revenue cannot be held judicious ones. It is undisputed fact that few 1-BHK flats remain so without any merger despite the provision of ‘hole’ left and others are merged into duplex during the post sale using such provision. In our opinion, the developer cannot be penalized by denying the deduction. As such claim of deduction was found allowable by the then CIT(A) who decided the issues in earlier asst years. Of course, these orders are not relevant now considering the order of the Tribunal. Mere making a provision of a hole for future use by the flat buyers for erecting the stair case or so, should not come on the way of the assessee to claim deduction. Thus set aside the order of the CIT(A) on the impugned issue and direct th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cognition of profits of the project. AO disturbed the accounts of the assessee and thrust on him the percentage completion method/WIP method in place of the project completion method (PCM)followed by the assessee. The matter traveled to the SAA ie ITAT and eventually, it is a decided issue now and the profits of the project needs to be completed based on the project completion method as originally followed by the assessee. Further, he narrated the finding of the survey team during the action u/s 133(A) on 11/03/2008, when the project is still in progress. It is an undisputed fact that the project was approved by the local authorities and the assessee has approval to construct 1-BHK flats, 24 in number. Registration of each of such flats was done as 1-BHK flat and not as duplex flats as alleged by the revenue. The ownership each of the flats is individualized. On the finding of the survey team about the providing provision for square shaped hole in the ceiling/floor and providing a single kitchen platform is a matter of making a provision for facilitating creation of duplex flat, if the flat owners/buyers so desire after the sale. Making such a provisions is aimed at the marketi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention to the decision in the case of Baba promoters and developers in ITA No. 629/PN/2009 A.Y.2004-05, ITA No.625/PN/2011 A.Y.2006-07 ITA No.159/PN/2010 A.Y. 2005-06 dated 29/02/2012 and relied on the contents of the para 13 of the said order. 14. Further, ld. Counsel brought our attention to the decision of coordinate Bench ITAT, Mumbai in the case of G.V. Corporation 38 SOT 174 for identical proposition that where the purchaser have requested for joining of two flats thereby exceeding the prescribed limit, the assessee is found eligible for deduction. Para 12 of the order of the Tribunal is relevant 15. Drawing parallel in the instant case, ld counsel mentioned that the impounded brochure merely provides for manner/design of converting the flats in duplex and it never advertised for the sake of flat s exceeding the area of 1000 sq. ft. for each 1BHK flats. Further, he brought our attention to the facts gathered during the post survey action and mentioned that most of the flats are never joined by not even the flat buyers. T 16. On the other hand ld. DR for the revenue relied on the order of the CIT(A) on this issue and mentioned that assessee has clear intention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 133(6) of the Act and in fact made a personal inspection along with the DVO and eventually ignored the said evidences garnered in the proceedings. CIT(A) confirmed the opinion of the AO by referring to the intention of the assessee and interpreting the said providing a hole in the roof against the assessee. In the process, the facts relating to the design and plan of each of the residential flat, approval granted by the local authorities, completion certificate issued by the local authorities etc are ignored. Thus, in the assessee s appeal, only dispute for adjudication relates to if there is any violation by the assessee of the conditions specified in clause (c) to Explanation to section 80IB(10) of the Act relating to the maximum built up area of each residential unit ie 1-BHK flat. To decide the issue under consideration, we need to delve on the following aspects and they are: A. Relevance of the discrepancies noticed during the survey action on 11/03/2008, when the profits of project are assessable to tax in AY 2009-10 based on Project C Method: 19. Taking into consideration the timing of the discrepancies noted during the survey action in March 2008, AOs who made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is made use by the AO to deny the benefits of deduction u/s 80IB (10) of the Act. But the fact is that the assessee got the approval for constructing impugned 10BHK flats from the Authorities and completed the constructed as per the approved plans. Assessee obtained completion certificate too from the concerned authorities about which there is no dispute. In our opinion, what is required to be seen should include, what are the plans, designs of the project and built up areas particulars of the residential units at the approval stage, construction stage and finally at sales point. In the instant case, from the approval stage till the stage of issuance of the completion certificate, there is no violation by the developer. The discrepancies noted during the survey action could have been made good during the period from date of survey ie 11/03/2008, to the date of completion of the housing project ie March 2009. There is no evidence to suggest that it is the developer who planned and generated duplex flats out of the 1- BHK flats and then sold as such to the buyers. In fact there is evidence to indicate that it is the flat buyers who merged the flats into duplex flats during the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Tribunal. E. Flat buyers owns up the fact of merger of flats into duplex flats by them using the design of the developer: 23. We have discussed this issue in the earlier paragraphs of the order. It is borne on the records that the AO invoked the provision of section 133(6) of the Act and the flat buyers stated categorically, they merged the flats vertically into duplex flats availing the provisions provided by the developer. In our opinion, mere making a provision of a hole for future use by the flat buyers for erecting the stair case or so, should not come on the way of the assessee to claim deduction. F Scope of the legal pronouncements on the merger of flats by the buyers and by assessee at the instance of flat buyers: 24. The provisions of clause (c) of the Explanation to section 80IB(10) of the Act specifies a condition for the assessee to claiming deduction in respect of the undertaking developing and building housing projects. The condition so specified as part of the Explanation is for the purpose of clause (a) to section 80IB(10) of the Act and the said clause provides that the undertaking has commenced or commences the development and construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a request is made by the purchasers to the builder or developer of the housing project to join the flats/residential units and the request is carried out by the builder. In such cases, it is not possible to hold that the builder built the residential flat of more than 1,000 sq.ft. of builtup area. There is no evidence on record to suggest that the assessee itself advertised that the flats were of more than 1,000 sq.ft. and that merely to get the benefit of section 80-IB he drew the plans in such a manner that each residential unit was shown as not more than 1,000 sq.ft. of built-up area. It is not also the case of the CIT that each flat in the housing projects undertaken by the assessee could not have been used as an independent or self-contained residential unit not exceeding 1,000 sq.ft. of built-up area and that there would be a complete, habitable residential unit only if two or more flats are joined with each other, which would ultimately exceed 1,000 sq.ft. of built-up area. In such a situation, merely because 9 out of 140 purchasers desired to join the flats purchased by them into one single unit, which exceeded 1,000 sq.ft. of built-up area, cannot disentitle the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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