9911796707
TMI Blog2017 (4) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... d raised by the assessee has no substance and therefore, the ground raised by the assessee is dismissed. Denying the claim for deduction u/s 80IB(10) for including the flower bed area which is open to sky and not on floor level and 50% of common wall area as part of built up area prescribed under section 80IB(14) - Held that:- We find considerable force in the submissions of the assessee that the flower bed area and common wall area are not includible in the definition of built up area while calculating the eligible limit of 1000 sq. ft for the purpose of allowing deduction u/s 80IB(10) of the Act. The flower bed area is open to sky and not covered by any sides whereas balcony is covered with three sides. The flower bed area is few inches below floor level. It is the submission of the assessee that the flower bed area is outside the balcony area and the starting point for the flower bed area is a point where the balcony area ends.After considering the rival submissions and materials placed before us including the decisions of the rival parties we find that the flower beds which are below the floor level can not form part of constructed area of flat for the purpose of determining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the appellant case and under Law, the ld.CIT(A) erred in confirming the order of the Ld. AO which was passed Under section 143(3) r.w.s 153A on non-existing entity, is void-ab-initio and hence same is liable to be quashed under the provisions of Income Tax Act 1961. 2. On the facts and circumstances of the appellant case and under Law, the CIT(A) as well as Ld. AO erred in solely placing the reliance of the valuation report issued by the Ld. DVO, the appointment of which itself was bad in law as ld.DVO was not the member of the Search Party. 3. On the facts and circumstances of the appellant case and under the Law, Ld. CIT (A) erred in denying the claim of deduction u/s 801B(10) of ₹ 179,28,44,008/ - by including the following areas as a part of Built up are prescribed u/s 80IB(14)(a) of the Act: a) Flower Bed area which are Open to Sky and not at Floor Level ; b) 50% of Common Wall area even though the Common area is specifically excluded from the said definition. 4. On the facts and circumstances of the appellant case and under the Law, Ld. CIT (A) as well as Ld. AO erred in not appreciating the understated material facts: a) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm claimed deduction u/s 80IB(10) of the Act in respect of residential buildings from the assessment years 2006-07 to 2011-12 6. A search action u/s 132(1) and also survey action u/s 133A were carried out on 2.2.2012 on Nahar Group of cases and its associate concerns. The search was concluded on 28.3.2012 being the last date on which authorization was executed. The assessee and its entire group of concerns were engaged in the business of development of commercial and residential projects. A search warrant was issued in the name of erstwhile firm M/s Nahar Enterprises a non existent entity and so was the search whereas as a matter of fact the business of M/S Nahar Enterprises was taken over by M/s Nahar Builders Ltd upon dissolution on the date of search and was non-existent. The assessee firm was dissolved on 20.11.2011 and not in existence when the warrant was served on 2.2.2012. Thus, the warrant was issued in the name of assessee firm which was dissolved with effect from 20.11.2011 even though the department was informed to this fact of dissolution of assessee firm by a letter dated 1.12.2011. Whereas in Punchanama No. 9303, dated 27.3.2012 and in the Punchanana dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early shows that the warrant had been issued in the name of M/s. Nahar Enterprises (now known as M/s. Nahar Builders Ltd.), though the other Panchnama drawn at Chandivali carries the name of M/s.Nahar Enterprises only and the name of M/s. Nahar Builders Ltd. has not been' mentioned. But that may be because of some oversight. 14. From the assessment order, therefore, it appears that warrant of authorization for search was apparently issued in the name of M/s. Nahar Enterprises (now known as M/ s. Nahar Builders Ltd.) and the correct address of the office premises as also the project site were mentioned therein. On conclusion of the search proceedings, the Panchnama has been drawn in the name of M/s. Nahar Enterprises (now known as M/s. Nahar Builders Ltd.) and the entire proceedings were carried out in the presence of two independent Panchas, who have signed and verified the Panchnamas. Further, the Panchnamas have also been signed and verified by Shri Sukhraj Nahar, the main person of the group. Accordingly, the objections raised by the learned AR about the validity of the search proceedings are misplaced and untenable and the same are therefore rejected. Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings framed on the basis of invalid search warrants were bad in law and void ab- initio. The ld. AR further submitted that the entity on which the search warrant was served was holding PAN AAAFN1599D which was disallowed on 20.11.2011 meaning thereby that the assessment proceedings were initiated against the non-existing person and ultimately the assessment order was passed on the very same entity which is not in existence and therefore the assessments made on such entity u/s 143(3) r.w.s.153A were bad in law and prayed that the same should be quashed as being invalid and void-abinitio. 10. The ld. DR , on the other hand, strongly opposed the arguments of the ld. AR and submitted that there is only one Punchanama bearing No.9303 dated 27.3.2012 which was executed in the name of several parties out of which one name appearing was NAHAR ENTERPRISES whereas other Punchanama bearing No.9302 dated 28.3.2012 was issued in the name of M/s Nahar Enterprises (now known as M/s Nahar Builders Ltd) and thus correctly issued. The ld. DR argued that Punchanama was drawn in the name of M/s Nahar Enterprises (now known as M/s Nahar Builders Ltd) and thus cannot be said to be it was iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue before us for adjudication is as to whether the search warrant was issued in the name of dissolved entity or the existing company and whether the consequent assessments were void abinitio and non-est. It is an admitted fact and also apparent from the AO in the assessment order that the search warrant was issued in the name of the erstwhile firm i.e.Nahar Enterprises and the same is evident from the Punchanama itself. The AO observed that while drawing up the Punchanama some clerical mistake or by one sight the full name was not mentioned but just it was mentioned as Nahar Enterprises. It is the observation of the AO that it is a procedural mistake and no way affects the legality of the search as the warrant is correctly issued according to law. The relevant observations are as under : The above allegation is absolutely unfounded, baseless and arbitrary and it seems has been made with a motive to divert attention from the main issue and/ or to dilute the sanctity of search action conducted u/s 132(1) of the Income Tax Act, 1961. In support of your allegation you have taken support of the copy of Panchnama enclosed by you. A per this in Col A it is written as- Wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the privacy of any person by the investigating and searching the premises of any person with extreme powers bestowed on the department. Search action u/s 132(1) of the Act cannot be allowed to be taken place without proper evidence and information in the hands of the department. The revenue is expected to exercise utmost precaution while exercising these powers as search action is normally conducted after detailed enquiry and investigation by investigating authority after analyzing the background of group companies, partners, and directors, their PAN, residential status, address etc. We are therefore not in agreement with the conclusion of the authorities below that mistake is simply a clerical and procedural mistake of either side in mentioning the full name of the existing entity. Moreover, the appellant has duly informed the department vide its letter dated 1.12.2011 which was acknowledged by the office of the Dy.CIT on 1.12.2011 with reference to the dissolution of the firm. For the sake of convenience, we reproduce the letter dated 30.11.2011 intimating the AO about the dissolution as under : Udani Mehta and Co, Chartered Accountants Tushar D Udani B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d had been dissolved with the said amalgamating company will be null and void or whether framing of assessment in the name of such a company is a mere procedural defect which can be cured. The appeals were, thus, finally admitted and heard on the following questions of law : (i) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the action of the AO in framing assessment in the name of 'Spice Corp. Ltd.', after the said entity stood dissolved consequent upon its amalgamation with MCorp (P) Ltd. w.e.f 1st July, 2003, was a mere procedural defect ? (ii) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that in view of the provisions of s. 292B of the Act, the assessment, having in substance and effect, been framed on the amalgamated company which could not be regarded as null and void ? 4. The rationale given by the Tribunal, giving it to be a mere procedural defect is summed up as under : (i) Spice Corporation Ltd. (the amalgamating company) was an income-tax assessee in the status of a company incorporated under the provisions of Companies Act, 1956. (ii) The ama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case, we find that the assessment, in substance and effect, has been made against amalgamated company in respect of assessment of income of amalgamating company for the period prior to amalgamation and mere omission to mention the name of amalgamated company along with the name of amalgamating company in the body of assessment against the item 'name of the assessee' is not fatal to the validity of assessment but is a procedural defect covered by s. 292B of the Act. We hold accordingly. 7. The aforesaid line of reasoning adopted by the Tribunal is clearly blemished with legal loopholes and is contrary to law. No doubt, M/s Spice was an assessee and as an incorporated company and was in existence when it filed the returns in respect of two assessment years in question, however, before the case could be selected for scrutiny and assessment proceedings could be initiated, M/s Spice got amalgamated with MCorp (P) Ltd. It was the result of the scheme of the amalgamation filed before the Company Judge of this Court which was duly sanctioned vide orders dt. 11th Feb., 2004. With this amalgamation made effective from 1st July, 2003, M/s Spice ceased to exist. That i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lending of two or more existing undertakings into one undertaking, the shareholders of each blending company become substantially the shareholders in the company which is to carry on the blended undertakings. There may be amalgamation either by the transfer of two or more undertakings to a new company, or by the transfer of one or more undertakings to an existing company. Strictly amalgamation does not cover the mere acquisition by a company of the share capital of other company which remains in existence and continues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. See Halsburys Laws of England 4th Edition Vol. 7 para 1539. Two companies may join to form a new company, but there may be absorption or blending of one by the other, both amount to amalgamation. When two companies are merged and are so joined, as to form a third company or one is absorbed into one or blended with another, the amalgamating company loses its entity. 9. The Court referred to its earlier judgment in General Radio Appliances Co. Ltd. vs. M.A. Khader (1986) 60 Comp Cas 1013 (SC). In view of the aforesaid clinching position in law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of income, assessment, notice, summons or other proceedings is in substance and effect in conformity with or according to the intent and purpose of this Act. 13. The Punjab Haryana High Court stated the effect of this provision in CIT vs. Norton Motors (2006) 200 CTR (P H) 604 : (2005) 275 ITR 595 (P H) in the following manner : A reading of the above reproduced provision makes it clear that a mistake, defect or omission in the return of income, assessment, notice, summons or other proceeding is not sufficient to invalidate an action taken by the competent authority, provided that such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the provisions of the Act. To put it differently, s. 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other words, if the notice, summons or other proceeding taken by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also, the proceedings had been initiated against a non-existing company/SSS Limited even after the amalgamation of the said company with M/s Intel Technology India Pvt. Ltd.. We do not see any good ground to differ with the said judgment of the Delhi High Court. 8. Accordingly, for the reasons given in the judgment of the Delhi High Court in the case of Spice Infotainment Ltd. (supra), these appeals are dismissed and we decide the substantial questions of law in favour of the assessee and against the revenue. 18. In the case of CIT V/s Micron Steels (P.) Ltd. [2015] 372 ITR 386 (Delhi), the Hon ble High Court of Delhi has held as under : The Revenue in these appeals claims to be aggrieved by the order of the Income-tax Appellate Tribunal ( the ITAT ), dated February 19, 2013. The Income-tax Appellate Tribunal had affirmed the order of the Commissioner of Income-tax (Appeals) who had set aside the block assessment of M/s. Micron Steels Pvt. Ltd. (the original assessee which subsequently amalgamated with M/s. Lakhanpal Infrastructure Pvt. Ltd. with effect from February 1, 2008, by virtue of an order dated February 19, 2010). The assessment years in question are 2003-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Appellate Tribunal relied upon several judgments including one of the Division Bench of this court in Spice Entertainment Ltd. v. CST [I.T. Appeal No. 475 of 2011, dated August 3, 2011] the Income-tax Appellate Tribunal held as follows : 8. We have carefully considered the submission in this regard and perused the records. We fully concur with the finding of the learned Commissioner of Income-tax (Appeals) that a company incorporated under the Indian Companies Act is a juristic person. It takes its birth and gets life with incorporation and it dies with the dissolution as per the provisions of the Companies Act. On amalgamation, the company ceases to exist in the eye of the law. Thus, assessment upon a dissolved company is impermissible as there is no provision in the Income-tax Act to make an assessment thereupon. The learned Commissioner of Income-tax (Appeals), in our view, has, therefore, rightly held that the assessment on a company which has been dissolved by amalgamation under sections 391 and 394 of the Companies Act, 1956, is invalid. Admittedly, the assessee-company in the present case stood dissolved on September 19, 2010, on amalgamation with M/s. Lakhanpal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mainwaring (T/A Inshore) [1986] BCLC 342 (CA) that 'once a company is dissolved it becomes a non-existent party and, therefore, no action can be brought in its name. Thus, an insurance company which was subrogated to the rights of another insured company was held not to be entitled to maintain an action in the name of the company after the latter had been dissolved. 19. In the case of CIT V/s Micra India (P) Ltd (2015) 231 Taxman 809 (Delhi), the Hon ble Delhi High Court has held as under: 10. In the present case, no doubt there was participation during the course of assessment; however, the AO, despite being told that the original company was no longer in existence, did not take remedial measures and did not transpose the transferee as the company which had to be assessed. Instead, he resorted to a peculiar procedure of describing the original assessee as the one in existence; the order also mentioned the transferee's name below that of M/s Micra India Pvt. Ltd. Now, that did not lead to the assessment being completed in the name of the transferee company. According to the AO, M/s Micra India Pvt. Ltd. was still in existence. Clearly, this was a case where the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmon wall area as part of built up area prescribed under section 80IB(14) of the Act. The AO while completing the assessment included the service area, window projection, cupboard projection, sunken area (flower bed) and common wall area in arriving at the eligible limit of 1000 sq.ft. of built up area of each flat. The AO observed that after inclusion of these areas in built up area, the total built up area is exceeding 1000 sq.ft and therefore he denied the assessee the benefit of deduction 80IB(10) of the Act on various flats. 24. However, the ld. CIT(A) sustained the action of the AO in including sunken area (flower bed) and 50% of common wall area for the purpose of computing eligible area of 1000 sq. ft of built up area for the purpose of computing deduction u/s 80IB(10) of the Act. 25. The assessee before us filed detailed written submissions and argued extensively and submitted that the flower bed area should not be included in the definition of built up area as the flower bed area is below the floor level open to sky and outside the scope of definition of built up area. It was submitted that the flower bed area is open to sky and area open to sky including terrace sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... most relevant to determine the built-up area, which spell as under:- a) built-up area means the inner measurements of the residential unit at the floor level including the projections and balconies, as increased by the thickness of the walls but does no include the common areas shared with other residential units The deduction was provided for a housing project which is habitable in nature. If we read the definition word by word it is get clear that only habitable area is covered under the definition. First word inner measurements of the residential unit at the floor level : These words covers the carpet area which is actual habitable area used by the resident of the flat. Such areas are enclosed and surrounded by four walls and are at floor level. Second Word , including the projections and balconies, The word start from , and end with , and rest of the word are in continuity and independently. Thus, the second word is attached with first word. Means i.e. area inside outside but at floor level. Because when inner area is considered only when at floor level. therefore, the outer area will also be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... built up area of the flat, which prima facie appeared to be correct, considered under the definition of the built up area under the Act and DCR provisions. Thus, the Area below the floor even in inner side of outer side will not be consider while calculating built up area for section 80IB(14). In this connection, relevant extracts of opinion given by Shri. M.L.Bhakta, Senior Partner of Kanga and Co, a leading firm of Solicitors, are reproduced herewith: 17. It is well settled principle that a subject is not be taxed unless he is taxable within the strict meaning of the taxing statute. The principle has been applied is a plethora of cases, some of which are cited below. 18. A frequently-cited dictum of Rowlatt J. in his judgment in case of Cape Brandy Syndicate v. IRC [1921) 1KB 64 at 71 is: ... in a taxing statute one has to look merely at what is clearly said There is no room for any intendment. There is no equity about tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used 19. Further, His Lordship the Hori'ble Bhagwati J. of the Supreme Court of India, in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thickness of the walls but does not include the common areas shared with other residential units. (Emphasis supplied) 24. In his Treatise entitled Principles of Statutory Interpretation' 12al edition at page 180. Justice G. P. Singh (Recd.) states that: A definition which defines a word to mean A and to include Band C cannot. in its application. be construed to exclude A and to include only B and C. 25, In view of the above cited case law and principles of interpretation of statues, the provisions of Section 80-IB(14)(a) of the Act must be interpreted strictly . Therefore, for the purposes of Section 80-IB(10) of the Act, the areas of the . projections and balconies can be included, if and only if, the same are at the same floor level as the residential unit. 26. Another well settled principle of interpretation of statutes is that the Legislature is deemed not to waste its words or to say anything in vain and a construction which attributes redundancy to the Legislature will not be accepted except for compelling reasons. This principle has been applied by the Hon'ble Supreme Court in case Aswini Kumar Ghose Arabinda Bose [AIR 1952 SC 369J wherein i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have deposed in favour of the appellant, copies of which have already been placed on record during assessment proceedings. The Ld. AO has wrongly included Flower Bed Area, etc in the BUA. These areas have not been defined in the DC Regulations nor in the IT Act. Hence, the decision of the Corporation under DC Regulations could not have been brushed aside by the Ld. AO on extraneous reasons. The Ld. AO has observed that since BUA has been defined in section 80 IB[14](a) which contains the words means and includes , the said definition should be read broadly and not narrowly. According to GP Singh on Interpretation of Statutes, the definition which defines a word or a term [like BUA in this case} to mean A and to include Band C, cannot in its application be construed to exclude A and to include only Band C. [see : Page 130, 13th edition). The word includes enlarges the meaning of the words in the the first part, but the word includes cannot exclude the words at the floor level , which expression finds place in the means part of the definition of BUA u/s.80IB [14j(a}. If the ornamental projections are not at the floor level, they cannot be included in the BUA. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r gallery may be allowed to project up to 0.75m. Balcony means a horizontal projections, including a parapet, hand-rail balustrade, to serve as a passage or sitting out place . 10.9. By a combined reading of the provisions of the Income tax Act and the Development control regulations, it transpires that the areas of a unit at the floor level used in the I T Act and the exception of area with the level difference of 0.3 Mts under the DCR have a greater significance. They have not been used in the relevant provision without any meaning or reason. The areas stipulated under the DCR to be with the level difference to the floor level are chajjas , flower beds, dry balcony etc. which are to be provided for proper ventilations, light and protection from weather to the actual useable flat area of the flat. They are not on the same floor level as the useable area for the occupant and therefore under the definition of built up area, these areas are not includable. However, inner built-up area and projection and balconies and thickness of wall is to be included as per IT Act, 1961. The counsel referring to the sanctioned plans filled before me which was also filed before the AO, submits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... governi.ng and regulating the construction, regularization and development of housing projects. The Carpet areas, Wall areas, Built-up area, ornamental projections, sunken area, balcony, service slabs, dry balcony, cupboard area are all defined under various sections and provisions of Development Control Regulations of Greater Mumbai, which is the Supreme body and the most appropriate authority in case of development of housing projects. (ii) It is a settled history that no two Acts work in the opposite manner. They need to be harmonious and in consonance with each other. In case of development of housing projects also, the local Authority has to work in consonance with Environment Act Regulations to maintain the Natural Environment. Likewise the intention of Income Tax Act and the legislation also works in consonance with DC Rules Regulations provided by the Local Authority. The definition of Built up areas as per IT Act providing the floor level concept has greater significance and importance attached to it. The DC Rules have provisions of floor level difference in case of ornamental projections to claim areas of free FSI and accordingly, the definition of Built -up area w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The underlying eligibility of Sec 80lB (10) is the approval of Housing Project by a local authority. However if the plan is not approved by the local authority, no claim of deduction u/s 80lB(10) is allowed. Accordingly if once the plan is sanctioned and approved how can the built up area sanctioned and certified by the local Authority clearly excluding the projections such as flower bed, be completely ignored. iv) The plans are approved by the Municipal Corporation under the provisions of Sec. 37 of the Bombay Municipal Corporation Act and Sec. 43, 44 45 of the MR TP Act, 1966. These approved plans provide detailed calculations of various areas included for working out the FSI consumed on the plot and the detailed plans of each Plot consisting of various Flats. The calculations are of Carpet areas, Balcony areas, Built up area of each floor and various elevation features are also shown on the Plan in terms of Plan and cross sections through the Building. These Plans clearly show the Floor Levels as also Levels of various projections permitted in the sanctioned Building Plans. It is clear from scrutiny of the Plans that Balconies are permitted in level with the Floor of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the Built up area below 1000 sq.ft. (h) Municipal Rateable Value Assessment Bill which collects property tax on area less than 1000 sq.ft. (i) Auditors Certificate in Form 1OCCB duly certifying Built up area less than 1000 sq.ft. Accordingly, on the plain reading of the provisions of Sec 801B(10) it is crystal clear that the intention of the legislature is not to override or ignore the approvals or sanctions in respect of areas (Carpet and Built up area) given the local authority governing the entire development of housing projects. Moreover to substantiate further the purpose of projections such as Flower bed, and their interpretation as per the definition of Built up area, an expert opinion of Licensed Engineer and Surveyor Mr. Rajesh Shah has been: enclosed herewith for your reference (Paper Book Page No. 175-180) (viii) However it is pertinent to note that department has grossly erred in not appreciating the working mechanism and the role of the governing authority in respect of Development of Housing Projects and its approval mechanisms which is the heart of the provisions of sec 801B(10). The relevant extract from the Ld. A.O. assessment order u/s 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not expected it to monitor each unit! block whether construction is as per the BUA as defined and written in the Act. h. BMC is the local authority responsible for local construction activities in the jurisdictional area, planning of the city, to stop and control illegal, unplanned and uncontrolled construction. So it merely issues commence certificate, approves building plans The appellant also submits that the Ld.AO has commented on the system of working and plan approval mechanism, monitoring of day to day working of construction work and issue of completion certificate. The above comments on the working of MCGM by the Ld. AO is not correct, baseless and without any reasoning. It is further submitted that MCGM is the highest and ultimate Government authority entrusted with the task of regulating housing construction, approval of plan till issue of completion certificate, stopping unauthorized constructions etc. The local authority also takes a serious view on any lapses and imposes a heavy monetary penalty and other penal measures. Further the appellant had complied with all the terms and conditions of building plans and approvals and accordingly the MCGM has appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how that the area of each flat is less than 1000 sq. ft. a) Approved building plans b) Area stated in the title deed registered with the Subregistrar c) Area for which the sale amount was obtained d) Area which was stated in the occupation certificate issued by the local authority . No physical verification of any of the building was carried out during the course of survey of the built up area of any of the residential unit. The only evidence that the wing had was the statement of Shri Abhiram Bhattacharjee who stated that he had purchased 3 flats 1407, 1408 and 1409 in Building no 24 and the same was purchased as a single flat. The Inspector sent by the AO has not found any single instance wherein in the sale deed the fiat is of more than 1000 sq. ft. Neither the Addl CIT nor the AO has found any discrepancy in the following evidence filed by the appellant. a) Approved building plans b) Area stated in the title deed registered with the Sub registrar c) Area for which the sale amount was obtained d) Area which was stated in the occupation certificate issued by the local authority. ACIT V/s M/s Samartha Devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the occupancy Certificate and sale of these residential flats, the owners of the flats decided to put up a head room and engaged the very same contractor and the engineer may have put identical structures, it could not be said that the assessee had put up the construction and thus contravened the requirement of section 80IB(10) CIT v/s G R Developers (2013) (353 ITR 1) (Karnataka HC) It has been held that If, at the later stage, the allottees/ occupants of the flats makes any addition, the assessee cannot be held liable for their omissions/ acts, the claimed deduction u/s 8OIB(10) of the Act cannot be disallowed. a. Harware Construction Pvt. Ltd vs ITO (2011) 64 DTR 251 (Mum) b. Sanghavi Doshi Enterprises vs ITO (2011) 60 DTR 406 (Chennai)(TM)(Trib.) c. ITO vs AIR Developers (ITA No.447/Nag/2007) d. M/s Global Reality vs ITO (2012) 134ITD 407 (Indore) e. ITO VS M S VARDHAN BUILDERS ITA NO. 4635 MUM 2013 There is no evidence on record to suggest that the builder has constructed the residential unit with a built-up area of more than 1000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iving or for more space or for any other reason did not disentitle the assessee to the claim for deduction under section 80-IB. G. V. Corporation [133 TTJ 178] Deduction cannot be disallowed on conversion of residential area into commercial use by the purchaser. ACIT Vis Shree Ostwal Builders Ltd (ITA No. 2144/Mum/ 2010 ITA No. 2153/Mum/ 2010) There is no dispute that each of the 32 flats has been constructed as per the building plan as duly approved by Municipal authorities having 225 Sq. ft. area each, which is much less than the prescribed limit. There is also no dispute that each of the flat is an independent and separate residential unit. If after the sale of these flats, the end-user of the flats using these flats for non-residential purposes would not render the construction of these flats as non-residential units. It is pertinent to note that what is required under section 80-IB(10) is residential unit and in the absence of anything to the contrary in the IT Act, the expression 'residential units' must have the same connotation as assigned t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt era, manual architectural designs are become old technique and due to that architects have developed various software like AutoCAD. Accordingly, the carpet areas and the wall areas as calculated and depicted as per the AutoCAD are accurate and precise as compared to the rough sketches of the Ld. DVO. The Ld. DVO was not justified in brushing aside the built up area certified by the recognized architect and approved engineers appointed by the appellant which had been approved by the BMC and other authorities on the basis of which the commencement and Occupation certificate are issued to the appellant. The department's valuer in hasty manner erroneously included the wall areas of the sunken areas also as a part of wall area and no separate working of the wall of sunken areas were given by Ld DVO Report. Accordingly during the appellate proceedings before Ld CIT (A), the appellant was directed by Ld. CIT(A) to bifurcate the total wall area as calculated by the DVO into wall area and wall of sunken areas such as service slabs, flower bed and window projection. The exercise was undertaken and a detailed bifurcation of the same was provided during the appellate proceedings wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residential units. In respect of A-1 and A-2 the common area is shared by the owners of flats A-1 and A-2. This common area is not the subject matter of sale as is clear from the recitals in the sale deed. In other words, the owners of the residential units do not have exclusive right to use these balconies as they have to share it with others. It is immaterial whether they have to share it with other 159 owners of the residential units or they have to share it with the adjoining owner of the residential unit, that area cannot be taken into consideration to decide the built-up area. From the facts, it is clear that if this balcony space is excluded all the160 units are less than 1500 sq.ft and therefore the assessee was entitled to 100% tax exemption on this project However; the Appellate Authority as well as the Tribunal have not extended the said benefit to 16 residential units. As the assessee has not preferred any appeal against the said order, it will not be appropriate for this Court to extend the said benefit in these proceedings. However, as the law stands today, in view of the interpretations placed by them on the aforesaid provisions, the assessee has not violated the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reply: The Ld. AO confirmed by Ld. CIT(A) had included area of flower-bed in calculation of built-up area by treating it as balcony even though flower bed is below the floor level and different from the Balcony due to following features:- Feature Balcony Flower Bed Covered By 3 Sides Not Covered Level At floor Below the Floor level FSI Calculation as per DRC Included Excluded Reflected in approved plan combined or separately Separately Separately Starting Point When Room ends When Balcony ends Thus, balcony and flower bed are completely different. Further Regulation 3 of D.C.R specifies for various ornamental features etc to be created at O.3m below the floor level. This arrangement is made so that the water accumulated from flower pots or from rains shall be drained and shall enter the main living area as this ornamental feature (flower bed) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... built up area. 29. It was further contended before us that the flower bed area is ornamental and elevative feature provided on the outer side of the residential unit, these are not habitable area, provided mainly for the elevation or designing part of the building, such area are not covered by wall of either sides and hence did not constitute the inner part of the residential unit which makes it a non habitable area. Therefore, it was contented that since the flower bed area are open to sky and not covered by the wall it cannot be counted in built up area. For the proposition that an area open to sky cannot be included in built up area, the assessee relied upon the following cases: i) Naresh Wadhwani ITA No.18/PN/2013; ii) Ceebros Hotel (P) Ltd V/s DCIT TC NO.581,1186 of 2008 and 136 of 2009 judgment dated 19.10.2012 (Madras High Court); iii) CIT v/s Mahalakshmi Housing (2014) 41 taxmann.com 146 (Madras High Court); iv) CIT V/s Sanghvi and Doshi Enterprise Tax Case (Appeal) Nos. 581 and 582 of 2011 and 314 and 315 of 2012 MP No.1 of 2011(Madras High Court) v) Amaltax Associates V/s ITO (2011) 11 taxmann.com 420 (Ahd); vi) Commonwealth Developers V/s ACIT (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p to bottom, and in case of any blockage of pipes or repair or leakage, etc, the mechanic has to enter this area for repairing the same. Generally speaking, this area, being small, cannot be used for any other purposes. This area has also not been sold by the assessee to the flat owners, as is evident from sale agreements. Further, it is also not part of the carpet area or BUA calculated by the BMC authorities. This is not also considered for FSI computation of the building, as per bye laws. In fact, on physical inspection, it was noticed that some of these pipes were leaking, giving a foul smell, and, therefore, I am of the view that it cannot be used for any other purposes. The photographs submitted by the assessee clearly show that these ducts are open and dangerous, and a child may in fact fall through it. These photos were forwarded to the AO for her comments. Also, for the sake of clarity, the same are enclosed as annexure to this order.Though the AO has enclosed some photos of such areas in respect of some flats, where such areas are being used towards storage, etc. by a few flat owners, but it is on their own peril and builder cannot be blamed for it. As per the bye laws, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold this area to various flat owners. Accordingly, this area is also directed to be excluded. while calculating BUA. I would like to further clarify that this area is very small and still have very insignificant bearing upon overall BUA. 32. On going through the above findings of the ld. CIT(A), we do not find any valid reason to include service area, window area, window projections and cupboard projection in the built up area for calculating eligible built up area of 1000 sq.ft for the purpose of computation of deduction u/s 80IB(10) of the Act. 33. For the assessment year 2011-12 in ITA No.2854/Mum/2014 apart from the above common ground the following new ground has been raised: On the facts and circumstances of the case and in law the ld CIT(A) erred in upholding the action of the AO in treating two housing projects namely Jonquille-Jamaica and Laurel-Lilac as incomeplete by ignoring the part occupation certificate issued by the local authority on 31.03.2011 thereby disallowing the claim of deduction u/s 80IB(10) of ₹ 61,56,52,158/- without considering the vital facts that the occupation certificate is issued only after the building is deemed to be fit for o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the local authority on or after the 1 st day of April, 2004 but not later than the 31 st day of March,2005, within four years from the end of he 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 is first approved by the local authority; (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority The ld. Counsel argued that a vital requirement of the incentive provision u/s 80IB(10)(a)(iii) is that the construction of the housing project should be completed within the time frame prescribed in the Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beyond doubt, that the construction of the said housing project had been completed before 31/3/2011. The appellant further submits that obtaining of the completion certificate (O.C) from the local authority (BMC) is the final proof to prove the completion of the construction of the housing projects and there is no further certification required to justify the completion of the project. It is also vital to note that words used in the Explanation is 'Shall which means that the housing project is mandatorily required to be treated as completed on the date when the completion certificate is issued by the local authority (BMC). The appellant further submits that competent authority (BMC) on taking the physical inspection and on verification of various plan documents and certifications had issued the occupation certificate on 30.3.2011. The appellant further submits that once the competent authority had issued the completion certificate (O.C), then Income tax department have no authority to disbelieve the completion of the housing project. Your honour is requested to obtain the confirmation of the completion certificate (O.C) issued by BMC on 30/3/2011 and may also seek any clarific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (10), the appellant relied on understated direct judicial decisions i) ITO vis. Saket Corporation 62 Taxman 38 (HC- Gujarat); ii) CIT Vs. Tarnetar Corporation 26 Taxman 180 (HC- Gujarat); iii) Ramsukh Properties V Is DCIT [2012] 25 taxmann.com 558; iv) . Joharl-Iasan'Zojwalla vis DCIT ITA No. 581/Mum/2012; v) Satish Bora Associates Vs. ACIT ITA No. 713 7141 2010 (ITAT- Pune); vi) Runwal Multihousing Pvt Ltd. vis. ACIT ITA No. 1015-1017/2011 (ITAT- Pune) vii) The City Development Corporation v] , DCIT ITA No. 1489/2009 1100/2010 (Pune- Trib) viii) Hindustan Samuha Awas Ltd V/s ITO ITA No. 945 to 950/2010 (ITAT- Pune) ix) Surendra Developers V/s. DCIT ITA no.2743 to 2745/ 2010 (ITAT- Delhi) Further it is pertinent to note that the appellant has received Full Occupation Certificate on 28 02/2014 in respect of the above two housing projects which has already been placed on assessment record filed at Page 62-65 of Paper book. Finally the ld AR argued that on the above proposition the housing projects were complete in all sense abd respect as being evidenced through possession of Part Occupation Certificate dated 30/03/2011 (now ..... X X X X Extracts X X X X X X X X Extracts X X X X
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