9911796707
TMI Blog2013 (4) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Facts apropos are that assessee, a partnership firm engaged in construction and promotion of flats sin e 1986, was subjected to a search proceeding on 29.8.2007. Assessee had developed about 35 house projects in Tiruchi. Assessee had originally filed its returns for assessment year 2004-05 on 1.10.2004, for assessment year 2005-06 on 31.10.2005, for assessment year 2006-07 on 31.10.2006 and for assessment year 2007-08 on 31.10.02007. Thereafter, pursuant to search proceedings, assessee was issued notice under Section 153A for filing returns for these assessment years as well as assessment years 2002-03 and 2008-09. In the returns filed pursuant to such notice, it seems assessee declared the same income as shown in the original returns. 4. One of the housing projects undertaken by the assessee was called "Shri Vijaya Rengam" and assessee had claimed deduction under Section 80-IB(10) on the profits arising out of such project in its returns for assessment years 2004-05 to 2007-08. Assessing Officer was of the opinion that assessee was not owner of the land on which the housing project was being developed and assessee had merely acted as contractor. Further, as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Vis-à-vis commercial area exceeding 2000 sq.ft., learned A.R. submitted that when the project was started, there was no restriction on commercial area that could be built within a project. According to him, sub-section (10) of Section 80-IB was substituted by Finance (No.2) Act, 2004 with effect from 1.4.2005. Assessee had started claiming deduction under Section 80-IB(10) on "Shri Vijaya Rengam" project from assessment year 2004-05 onwards. The law as it stood prior to such substitution, did not place any restriction on the area of commercial use included in a housing project. According to him, Hon'ble jurisdictional High Court in the case of CIT v. Arun Excello Foundation (P.) Ltd. [TC(A) Nos. 1348 & 1349 of 2007 dated 18.10.2012] had held that Section 80-IB(10) mentioned construction of any building and widest possible meaning had to be given to such building. According to learned A.R., it could not be given a restricted meaning to mean that only if all the area in a housing project was used for residential purpose, then only a deduction under Section 80-IB(10) will be available. Further, according to him, assessee had not claimed any deduction unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Tribunal in the case of Radhe Developers (supra), which was not followed by the Assessing Officer, was later confirmed by the Hon'ble Gujarat High Court in Radhe Developers (supra). Thus, the position as of now is that there is no requirement that a developer of a project necessarily had to be the owner of the land, for availing a deduction under Section 80-IB(10) of the Act. 10. Coming to the argument of the Department that one of the flats exceeded 1500 sq.ft., Assessing Officer himself had given a clear finding that the said flat No.101 in project "Shri Vijaya Rengam" was having a built-up area less than 1500 sq.ft. when the car parking area was excluded. Assessing Officer had himself also noted that there was no violation of clause (c) of Section 80-IB(10) of the Act. 11. This leaves us with the last ground taken by the Department regarding commercial area having exceeded 2000 sq.ft. There is no dispute that in the valuation report of "Shri Vijaya Rengam" project filed by the assessee, plinth area of commercial establishment was mentioned as 2567 sq.ft., equivalent to 3.81% of the total plinth area of all the residential flats. It is also not disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be seen that the built-up area of 8.33%, as relatable to commercial area, has nothing to do with the dispute raised, since the assessee has not made any claim for deduction on this. However, as a matter of principle, considering the understanding that we place on the expression 'housing project', in a given case, we do not find such occupation of commercial area in a housing project would negate the claim of the assessee for 100% deduction of the profits and gains from the business of undertaking, development and construction of housing project subject to the assessee complying with the other conditions under Clauses (a), (b) and (c) of Section 80-IB(10) of the Act. 37. Leaving that aspect aside, on a reading of the three clauses, it is clear that in a given case, when the housing project, a 100% residential unit, satisfies other clauses (a) and (b) and the built-up area as given under clause (c) of Section 80-IB(10) of the Act, there could be no difficulty for the Revenue to grant the deduction. The question becomes a little complicated when 100% residential housing project has built-up area of mixed nature. While few of the units may satisfy the criteria of the buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (d) was inserted under Finance (No.2) Act of 2004, which restricted the built-up area of the shops and other commercial establishments included in the housing project as not to exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less. 39. Thus, going by Section 80-IB(10) of the Act, as it stood during the assessment year, four things are clear, namely expression 'housing project' cannot receive a restricted meaning, as had been propounded by the Revenue. The meaning of the expression "housing project", as given under Section 80HHBA of the Act, hence, would govern the case herein. Hence, the housing project would include commercial buildings also. Secondly, there is no restriction that the built-up area for the housing project cannot have any commercial units. Thirdly, the provision of law as it stood prior to the amendment in 2005 contained no such ceiling as to the extent of the built-up area of the shops and commercial units included in the housing project. Finally, this is made clear by the insertion of the clause (d) under the Finance Act in Section 80-IB(10) of the Act, which, for the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been introduced wherein it is mentioned that built-up of shops and commercial establishment included in a housing project shall not exceed 5% of the aggregate built-up area or 2000 sq.ft., whichever was less. Admittedly, the commercial area in the housing project here exceeded 2000 sq.ft. Nevertheless, as noted by us, the first year in which assessee had claimed deduction under Section 80-IB(10) in respect of "Shri Vijaya Rengam" was assessment year 2004-05, when no such stipulation was there in the Act. The claim in the subsequent year was also on the same project. In our opinion, once the assessee fulfilled the requirement of Section 80-IB(10), as it stood for assessment year 2004-05, it cannot be declined such deduction in a subsequent year, for a reason that some limitations were brought into the Act through later amendment. In other words, the substituted sub-section (10) of Section 80-IB will apply only to projects, which were initiated after 1.4.2005 and not prior to that. Projects prior to that date, in our opinion, will be governed by earlier law. A benefit already given to assessee could not have been denied through a subsequent amendment, especially when ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax, Tiruchy, assessee filed similar details with respect to its other projects as well, namely, Sri Ganesh Darshan, Sri Kanda, Sri Kapila, Sri Vijaya Rangam and Sri Annamalai. The amounts collected by the assessee from its customers, as per such details were as under:- Sl.No. Name of the Project Amount received in cash for extra work Total amount received in cash including extra work Asst. Year of completion 1. Sri Annamalai 20,43,210 31,77,040 2008-09 2. Sri Vijayarengam 33,42,021 1,04,71,302 2007-08 3. Sri Ganesh Dharsan 5,38,250 30,75,750 2002-03 4. Sri Kapila 10,00,000 16,70,000 2004-05 5. Sri Kanda 9,51,163 17,01,163 2006-07 6. Sri Lambodara 41,79,183 78,87,891 2008-09 TOTAL 1,20,53,827 2,79,83,146 Assessee was required to explain why the sum of ₹ 2,79,83,146/-should not be treated as unaccounted receipts and added to income of the respective assessment years as per the above split-up given by it. Reply of the assessee was that the sums received from the flat buyers were for effecting payments to various statutory boards and authorities and also for meeting cost of extra work in the flats. As per the assessee, such extra works were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenses relating to extra work being loaded in the construction cost already accounted could not be ruled out. There were no separate register for material purchased, or for labour payments effected for the extra work. Therefore, he considered whole of the amount ₹ 1,20,53,827/- received for extra work, as income of the assessee in the respective assessments. Nevertheless, since such amount was included in the total amount of ₹ 2,79,83,146/-, which he proposed to add, no separate addition was made. Effectively, an addition of ₹ 2,79,83,146/- was made for impugned assessment years as per the break-up given in the table at para 17 above. 19. Assessee moved in appeal before CIT(Appeals) against these additions. As per assessee, there was a detailed break-up of various services rendered and money collected from the flat buyers for such services. Each of the party had given affidavit certifying the work done by the assessee on their behalf and payments effected for such work. As per the assessee, such supplementary services to flat buyers were an accepted trade practice and not something new. Hence, considering whole of the receipts as income was unfair. 20. Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ror when he held that such collections were made by the assessee for meeting statutory payments on behalf of flat owners. There was nothing on record to show that assessee had expended any sum out of the cash received for doing extra work. Despite no evidence being produced by the assessee, ld. CIT(Appeals) reduced the addition to 8% of such receipts. In other words, CIT(Appeals) gave substantial relief to the assessee without any corroborating evidence but, merely relying on the submissions of the assessee. Further, according to him, there was nothing on record to show that assessee had produced vouchers for such payments. Thus, learned D.R. submitted that the order of ld. CIT(Appeals) had to be set aside and addition of the A.O. had to be reinstated. 23. Per contra, learned A.R., in support of the order of CIT(Appeals), submitted that assessee had furnished break-up of collection and expense details head-wise and page-wise during the course of post-search enquiries before Assistant Director of Income-tax. According to him, this fact was very much noted by the Assessing Officer himself in the assessment order. A copy of such break-up was before him as well. This break-up, accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee called "Sri Lambodara" alone. It is an admitted position that with respect to the other projects, assessee itself had filed similar details, during the post-search proceeding before ADIT (Inv.), Trichy. This is mentioned at para five of the assessment order itself. In the statement taken from Shri T.V. Murali, who was the Managing Partner of the assessee-firm, in answer to question No.46, it was mentioned as under:- "Q.No.46: In the same annexure as referred in the above Q.No.45, in Sheet No.26 there is a noting that for doing extra work cash received is ₹ 80,12,762/-. Whether these receipts have been reflected in the books of accounts. Ans: No. The above said amount was collected from the prospective flat owners towards extra work as reimbursement for the internal works carried out by the firm as an added service." Thus, insofar as receipt for extra work was concerned, assessee all along maintained that these were reimbursement of internal work termed by it as additional service to its customers. As for the collections made by the assessee towards sales tax, service tax, registration charges, etc., there was one another question numbered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or reimbursements for extra work, it is a normal practice of flat builders to do such extra work as required by their customers and get paid for it. No doubt, some of such expenses for extra work might have been loaded into the expenditure items accounted by the assessee for the work. But, to consider whole of the money for such extra work as income, will not be fair. Assessee, though it had not accounted the cash receipts for extra work in its books of accounts, would have necessarily incurred expenditure for meeting the additional requirements of its customers. Considering the probability of duplication of expenses, the CIT(Appeals) had held 8% of such amount to be income of the assessee over and above what it had returned. There is nothing on record to show that assessee had made any income in excess of normal profit that it would have made out of such extra work. As pointed out by learned A.R., there is no seized record which would show any income arising to the assessee out of such extra work. In fact, details with regard to such extra work as also service charges and reimbursement were given by the assessee itself before the ADIT, Trichy, during the course of post-search proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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