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TMI Blog2016 (6) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... ely covered with the ratio of law laid down by the Tribunal in afore-stated decision(s) which we respectfully follow with respect to four flats as per terms indicated above , while deductions u/s 80IB(10) of the Act is disallowed with respect to ten flats as there is non-compliance of provisions of Section 80(IB) of the Act clauses (e) and (f) as applicable to the instant assessment year 2010-11. - I.T.A. No. 5183/Mum/2014 - - - Dated:- 30-5-2016 - Shri Saktijit Dey, Judicial Member And Shri Ramit Kochar, Accountant Member For the Revenue : Shri Ritesh Misra, DR For the Assessee : None ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the Revenue, being ITA No. 5183/Mum/2014, is directed against the appellate order dated 12-05-2014 passed by learned Commissioner of Income Tax (Appeals)- 32, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2010-11, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 26-03-2013 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made whereby it was admitted by Shri Manish S. Karnavat, Sales Manager that 47 flats were having area of 1260 square feet:- Q No. 10: Now, I am showing you a list of flats in NEPTUNE. As per this list, the total no. of flats are 150. However, as per your statement the total flats in NEPTUNE is 100. Please explain the difference? Ans. Your attention is drawn to the 3BHK flats having area of 1260 sq.ft. in respect of these 3BHK flats, Suncity Housing has entered into 2 agreements for different areas viz. 890 sq.ft. and 370 sq.ft. As such, the total no. of actual flats are only 100 but due to 2 agreements for each 3 BHK flats, the total no. of flats is at 150. Q.No.11. What is the carpet area and built up area for these 3BHK flats at NEPTUNE? Ans. Carpet area is 84.31 sq.mtr. (59.55. sq.mtr + 24.76 sq.mtr.). Built up/saleable area is after loading 39%. on Carpet area being 117. 05 sq.mtr. As such, Built up/Saleable area comes to approx. 1260 Sq.ft. for 3BHK flat at Neptune. During the course of survey u/s 133A of the Act on 27th October, 2010, statement of Shri Prashant Sharma , partner of the assessee firm was also recorded u/s 131 of the Act and he admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,219/- and income for A.Y. 2010-11 is ₹ 3,35,12,657/- totaling of ₹ 14,89,64,876/- which was claimed as deduction u/s 80IB (10). Now I apprehend that 55.49% of the total built up area of the project is not eligible for deduction u/s. 80lB(l0). Hence, in this proportionate, I hereby state that the claimed deduction u/s.80lB(10) will be withdrawn which comes to ₹ 8,26,60,609/- and necessary taxes will be paid and revise return will be filed. This figure is subject to furnishing of correct details regarding the receipts of amount with respect to the 3BHK flats in the A.Ys.2009-10 2010-11. The withdrawal of deduction u/s. 80IB as stated above is made with a view to purchase peace and avoid litigation. Therefore, 1 request the authorities to take lenient view on the imposition of penalty and other consequences. 3.3 In the statement, Shri Prashant Sharma has further reconfirmed the withdrawal of deduction u/s.80IB (10) as under:- Q. No. 10: Do you want to say anything else. Ans: Yes; I once again confirm about the withdrawal of deduction u/s 80IB(10) to the extent of ₹ 8,26,60,609/- for A.Ys.2009-10 2010-11 subject to filing of correct detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2009-10 , the assessee firm did not file a revised return to withdraw the claim of deduction u/s 80IB(10) of the Act in respect of flats having area of more than 1000 sq. ft. in project Neptune. The statement of Shri Prashant Sharma was recorded during the course of assessment proceedings for assessment year 2009-10 wherein he stated that based on the decision of ITAT, they have got legal opinion that the Neptune project is entitled for 100% deduction u/s 80IB(10) and, hence, the assessee was retracting from the statement recorded in the course of survey carried on 27th October, 2010 and not filing a revised return to withdraw the claim of deduction u/s 80IB (10) of the Act with respect to the flats having are more than area of 1000 sq. ft. . In view of this in the assessment year 2009-10, the entire claim of deduction u/s 80IB (10) of the Act was disallowed in respect of Neptune project on the ground that Neptune project did not fulfill the requirement of section 80IB (10) that is built up area of some of the flats were not less than 1000 sq. ft. and also the size of plot of land after excluding the area of the 47 flats exceeding 1000 sq. ft. would be less than 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14,80,000/- 2 Tresa Paul B/901 769 53,68,250/- Tresa Paul B/906 319 22,31,750/- 3 Shalini Lakshman Rao B/1001 769 53,68,250/- Shalini Lakshman Rao B/1006 319 22,31,750/- 4 Prakash Ramdas Ashar B/2501 769 61,06,400/- Prakash Ramdas Ashar B/2506 319 25,38,600/- 5 Akash N. Rajpal B/2503 821 60,20,000/- Akash N. Rajpal B/2504 769 53,36,000/- The AO held that the Neptune building does not fulfill the conditions laid down in section 80IB(10) of the Act , namely. a. The residential unit has a maximum built- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of those flats. The assessee firm further submitted that in respect of four flats sold to various individuals, the requirement of section 80IB(10) were fulfilled and therefore the assesse firm was entitled to deduction u/s 80IB(10) in respect of these four flats. In support, the assessee firm relied upon the following decisions to contend that if the approved project consists of eligible and non-eligible flats, deduction u/s. 80IB of the Act has to be restricted to the flats having area less than 1000 square feet:- a) ITO v. Air Developers, (25 DTR 287 (Nag.) ) b) DCIT v. Brigade Enterprises Pvt. Ltd., (14 DTR 371(Bang.)) c) ACIT v. Sheth Developers P. Ltd., (33 SOT 277 (Mum.)) d) Bengal Ambuja Housing Development Ltd. v DCIT ITA No 1595/ Kol/ 2005 e) Arpanna Development Corp. v. ITO f) SJR Builders v. ACIT,(3 ITR 569 (Mum.) g) G.V. Corpn. V. ITO, 43 DTR 329 (Mum.) h) CI'T v. Brahma Associates, judgment dated 22.2.2011 (Born.). i) Ekta Housing Pvt, Ltd. v. DCIT'(ITA no. 3649/Mum./2009) j) Aakar Associates v. ITO (ITA No 2903/Ahd/2008). k) ACIT v. GHP Enterprises (ITA No 6746/Mum/2007) l) Arun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence on records they remain two separate flats, cannot be seen de hors the reality which would defeats the intent and purpose of the Act. The deduction u/s 80IB(10) is to promote affordable housing and it is with this intention only the size of flat has been restricted. But taking approval of smaller flats only on paper but in practice making a large flats more than 1000 sq ft, is against the very purpose of the Act and hence to treat the flats as small units of 370 sq ft and 890 sq ft as two different units when physically as well as by design it has been found that they never existed independently as separate units on all floors, will defeat the intent of the statute. Hence a liberal approach needs to be avoided on facts and circumstances of the case as held by Supreme Court and high courts in several decisions. Moreover assessee's inaction to take remedial steps for application of merger of flats to BMC cannot be rewarded when the assessee has violated by amalgamating the flats and constructing the flats in violation of the approved plan approved by BMC. The complicity of appellant is discernible from the fact that in its own pamphlet printed for giving information for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant s calculation, the margin is of only 3 sq. ft. Hence unless there is a scientific working of built up area on technical parameters, such adhoc working of built up area cannot be accepted as gospel truth. Hence the argument that the built up area of the flats even after amalgamation remained below 1000 sq ft cannot be accepted. Thus it is clear that out of the total 150 flats of Neptune building, 47 flats of 1260 sq ft. of area are more than 1000 sq ft. in built up area and hence the appellant is not eligible for deduction in respect of profits in respect of such 47 flats in Neptune Building. 3.4. Now the next question which needs to be examined is that: a) if it is taken that the 47 flats each with area of 1260 sq ft are not of eligible size, then, can there be a proportionate deduction in respect of the remaining flats which are neither amalgamated nor exceed the limit of 1000 sq ft and. b) WhetherU after excluding the area of 47 amalgamated flats, the other conditions of 80IB(10) are fulfilled particularly the size of plot of land of the project being not less than 1 acre? Perusal of the plethora of decisions of ITAT relied upon by the Ld. AR as above, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant in earlier years and this year. It is contended that under this situation, it would not be proper to look into the area of land on notional basis for Neptune building on standalone basis; rather it is the total area of land which has to be considered for ascertaining the eligible limit of area plot of land for the project. In support of the argument, the Ld AR has produced the copy of the ITAT Mumbai decision in case of Akruti City in ITA No . 4869 to 4872/Mum/2009 wherein the ITAT has held that for purpose of ascertaining the size of the plot of land it is the total area of plot in a layout which needs to be considered and not the area of plot on notional basis. I have gone though the above decision relied by the Ld AR. The ratio of the decision squarely applied to the appellant. In fact, the appellant case is on better footings than the case of Akruti City (supra) because in the latter case, on the same plot of land there were two different projects but only one project was eligible residential project and the other project was ineligible 100% commercial project and if the area on notional basis for commercial area was excluded, the remaining plot of land for resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for AY 2009-10 the total profit earned from sale of flats in Neptune building is ₹ 11,54,52,219 out of which only ₹ 5,13,87,782 (being 44.51% of ₹ 11,54,52,219) is eligible for deduction u/ s 80IB(10). The Ld AR vide his alternate arguments has also requested to at least allow the proportionate deduction @ 44.51% of total profits of Neptune building. Accordingly, the disallowance made by A.O. u/s 80IB(10) in respect of profits of Neptune Building is restricted to ₹ 6,40,64,437/- only (11,54,52,219 5,13,87,782). The learned CIT(A) accordingly held that the facts in the year under consideration are similar, directed the A.O. to allow proportionate deduction u/s 80IB (10) of the Act in respect of four flats sold to various persons , other than the persons specified in clauses (e) (f) of section 80IB(10) and where area of each flat sold is less than 1000 sq. ft. , vide appellate orders of the learned CIT(A) dated 12-05-2014. 11. Aggrieved by the orders of the learned CIT(A), the Revenue is in appeal before the Tribunal. 12. The learned D.R. relied on the orders of the A.O. and submitted that the Tribunal has allowed the appeal of the assessee fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year from such housing project if,- (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction,- (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, [but not later than the 31st day of March, 2005]within four years from the end of the financial year in which the housing project is approved by the local authority. [(iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority] Explanation.-For the purposes of this clause,- (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o far as, the point of dispute before us is concerned, as per the clause c above, the residential unit should have a maximum built up area of 1000 sq. ft. for the project which is situated within the city of Mumbai. It is not the case of the Revenue that the project was not approved by the local authority i.e. BMC. It is also not the case of the Revenue that the flats were not constructed as per the approved plan or that the two separate flats had built up area of more than 1000 sq. ft. The case of the Revenue is that the flats were later on joined to make it a one unit. After the completion of the project, the BMC had given the occupancy certificate to the assessee which shows that the flats were constructed by the assessee as per the approved plan and thereafter sold as separate units. Even separate electric connections were obtained by the users/purchasers for the said 94 flats. There was no provision at that time in the act that more than one flat could not have been purchased by an individual or that the individual after purchasing the flat could not join the two flats, so far so the provisions of section 80IB(10) are concerned. Under such circumstances, it cannot be said th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential units' must have the same connotations as assigned to it by local authorities granting approval to the project. The local authority has approved the building plan with residential units of less than 1,000 sq.ft, and granted completion certificate as such. That leaves no ambiguity about the factual position. We have further noted that the prohibition against sale of more than one flat in a housing project to members of a family has been inserted specifically with effect from 1st April, 2010, and, in our humble understanding, this amendment in law can only be treated as prospective in effect. What is, therefore, clear is that so far as preamendment position is concerned, as long a residential unit has less than specified area, is as per the duly approved plans and is capable of being used for residential purposes on standalone basis, deduction u/s.80IB10) cannot be declined in respect of the same merely because the end user, by buying more than one such unit in the name of family members, has merged these residential units into a larger residential unit of a size which is in excess of specified size. That precisely is the case before us. While on the subject, it is useful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 1st day of April, 2010, i.e. AY 2010-2011. The law is very clear that unless provided in the Statute, the law is always presumed to be prospective in nature. It will, therefore, be contrary to the scheme of law to proceed on the basis that wherever adjacent residential units are sold to family members, all these residential units are to be considered as one unit. If law permitted so, there was no need of the insertion of clause (f) to section u/s 80IB(10). It will be unreasonable to proceed on the basis that legislative amendment was infructuous or uncalled for -particularly as the amendment is not even stated to be 'for removal of doubts'. On the contrary, this amendment shows that no such eligibility conditions could be read into pre- amendment legal position. 9. As regards the AO's stand that the assessee himself has offered the deduction u/s.80IB(10) in respect of these units during the course of survey proceedings, it is only elementary that neither statement recorded u/s.133A has an evidentiary value, nor a legal claim can be declined only because ass essee, at some stage, decided to give up the same. In view of these discussions, and bearing in mind enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to restrict the scope and deny the benefits, which otherwise, are available to the assessee. We are in agreement with the view of the co-ordinate bench of the Tribunal in the case of Emgeen Holdings Pvt. Ltd. (supra) that so far as the preamended position is concerned, as long a residential unit has less than specified area, is as per the duly approved plans and is capable of being used for residential purposes on standalone basis, deduction u/s.80IB(10) cannot be declined in respect of the same merely because the end user, by buying more than one such unit in the name of family members, has merged these residential units into a larger residential unit of a size which is in excess of specified size. 10. In view of our above observations and also being in agreement with the decision of the Tribunal cited supra, we hold that the assessee is entitled to deduction under section 80IB(10) of the Act in respect of the 94 flats in question. Accordingly, the appeal of the assessee is thus allowed. ITA No. 4877/M/2012: 1.1 The Revenue through its grounds of appeal has raised the issue relating to the allowability of deduction under section 80IB(10) by the ld. CIT(A) o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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