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TMI Blog2014 (6) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... enced and developed by the assessee is not as per the old project for which approval was obtained by M/s. Gas Property Developers on 28th November, 1992. These expenses also cannot be connected with the project got approved by the assessee in the financial year 2003 and on the basis of those expenditure it cannot be said that the project developed by the assessee is continuation of the earlier project for which approval was obtained by M/s. Gas Property Developers on 28th November, 1992. No expenditure, whatsoever, has been shown to be incurred on the housing project for which approval was obtained by the assessee after entering into Development Agreement, i.e. on 10th July, 2003. The expenditure incurred by M/s. Gas Property Developers were not on the housing project approved by the municipal corporation on the revised layout The expenditure incurred by M/s. Gas Property Developers was on repair of the boundary wall. Therefore, on the basis of the earlier approval obtained by M/s. Gas Property Developers, which has already lapsed, and the expenses were on account of repair of boundary wall the project cannot be stated to have been commenced before 01.10.1998. Therefore, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008-09 ₹ 21,28,55,116/- 4.1 During the course of assessment proceedings for A.Y 2006-07, while examining the details, the AO found that commencement certificate originally was issued under No.EEBPC/9706/FS/A of 28/11/ 1992 for the development of the proposed residential buildings and club house on the aforementioned plot of M/s. Bombay Gas Company Ltd., Empire House, Dr. D.N.Road, Mumbai 400001. According to AO the same was revalidated upto 27/11/2003 and the same was also being extended for further periods as per notings in the commencement certificate dated 28/11/1992. The part occupation certificate on the basis of which deduction under section 80 IB(10) was claimed in respect of completion of wing A,B C was also issued in favour of M/s. Bombay Gas Company Limited by BMC under No.EEBPC/9706/FS/A dated 18/2/2006. Therefore, Ld. AO issued show cause notice to the assessee to furnish copy of the agreement regarding purchase of plot on which the project was constructed and also to explain that as to why in view of explanation (i) under Sub-section (10) amount of ₹ 7,18,02,721/- should not be disallowed. The AO also called for some i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and they have no connection with each other. Regarding query of the A.O regarding the expenditure incurred on housing project by M/s. Gas Property Developers, it was submitted that they also did not incur expenditure on development and construction of housing project and out of those expenditure a sum of ₹ 4,16,300/- is paid in connection with approval of the building plan to the Architect and Engineers. The other expenses of ₹ 13,500/-, ₹ 13,950/- and ₹ 12,963/- are on bricks, cement and sand respectively, which are incurred for repair of boundary wall of the project. It was submitted that none of other expenses could be related to the development and construction of the housing project. It was submitted that original building plan which was approved by the Local Authority on 28/11/1992 was totally different from the revised building plan approved by Local Authority in 2003. It was submitted that as per original building plan approved on 28/11/1992 two buildings were to be constructed on the aforesaid plot of land. Whereas according to revised building plan approved by Local Authority in 2003, seven buildings were to be constructed. The possession of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80-IB(10) of the Income-Tax Act, 1961 (the Act), to the extent of ₹ 7,18,02,721 3. The case of the appellant for the AY 2006-07 was selected for scrutiny. 4. The Assessing Officer (AO) called for a number of details from the appellant, in regard to the aforesaid claim of the appellant, under section 80-IB(10) of the Act. 5. The appellant had purchased a plot of land, bearing CS No. 1/44, 1/28, 44 of Parel Sewree Division, Off. Dr. Babasaheb Ambedkar Road, Lalbaug, Mumbai and started developing and constructing a housing project there, in the financial year (FY) 2003-04. The relevant details in this regard are as follows: (i) The aforesaid plot of land was purchased from M/s. Gas Property Developers, vide a Development Agreement, dated 10.7.2003. (ii) The original lay-out plan for the construction of two buildings on the aforesaid plot of land was approved by the local authority on 28.11.1992. Accordingly, only two buildings were to be constructed on the aforesaid plot of land. However, the original owners, viz. M/s. Gas Property Developers could not start construction activity, as per the aforesaid lay-out plan, on account of certain difficulties/problems. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he form of bricks, cement and sand to the extent of ₹ 13,300/-, ₹ 123,950/- and ₹ 12,963/- respectively, which were incurred on the repair of boundary wall of the aforesaid plot of land and these expenditure were incurred before 31st March, 1994. Thus it was pleaded that from the expenses incurred by M/s. Gas Property Developers it can be seen that these were for the business activity carried on by them and no part of the expenses debited by them relate to any development/construction activity except the minor expenditure incurred on brick, cement and sand for the repair of the boundary wall. It was also submitted that no construction was done as per the original layout plan and all the construction done in the project is as per the revised layout plan approved in the financial year 2003-04 which relate to seven buildings and in which year the revised housing project work was commenced. It was further submitted that number of no objection certificates had to be taken before commencement of the project and the assessee had obtained the following certificates from the local authority for commencement of the project:- i. ULC Permission revalidated on 23.05.2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by M/s. Gas Property Developers of ₹ 13,300/-, ₹ 13,950/- and ₹ 12,963/- on bricks, cement and sand for repair of the boundary wall do not amount to construction done at all by the earlier owner. The possession of the land in question was taken over by the assessee vide Development Agreement dated 10th July, 2003 and development was started after that date only. As per the original plan submitted by the earlier developer only two buildings were to be constructed on the land in question but as per the new plan of the present owner seven buildings were to be constructed. Therefore, after considering various facts and evidences brought on record by the assessee the learned CIT(A) had concluded that the AO was wrong in his conclusion that the development of project work was started before 1st October, 1998 and the assessee did not fulfil the condition laid down in section 80IB(1). It is further observed by the learned CIT(A) that though the assessee has relied upon various case law in support of his grounds of appeal but the case of the assessee is very clear on the basis of the facts and evidences placed on record and after going through those records there remains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the assessee has entered into development agreement only on 10th July, 2003 and prior to that no expenditure, whatsoever, in respect of the housing project was incurred by the assessee or by M/s. Gas Property Developers. He submitted that the learned CIT(A) has recorded a finding that the only expenses debited by M/s. Gas Property Developers which could be related to construction are minor expenses of ₹ 13,300/-, ₹ 13,950/- and ₹ 12,973/- relating to bricks, cement and sand respectively and these were in respect of repair of the boundary wall and thus the AO was wrong in coming to the conclusion that the project was commenced by M/s. Gas Property Developers. He submitted that prior to the commencement of the project not only approval has to be obtained but various no objection certificates have also to be obtained without which it is not possible to commence the development. He submitted that before the CIT(A) the details of all these no objection certificates were mentioned and these are recorded in para 8 of the order of the CIT(A). Apart from those no objection certificates certain municipal charges were also to be paid, which have been paid by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y after that date the assessee started construction work on Ostwal Nagri project. As per the relevant provision, deduction under section 80IB(10) is allowable in the case of an undertaking developing and building housing project if such undertaking has commenced development and construction of the said housing project on or after 1st October 1998. It was observed that in the present case, the assessee company is such an undertaking which has developed and completed the housing project and the relevant land has been purchased by it only in the month of August, 2001, therefore, it cannot be said that it has commenced development and construction of housing project prior to 1st October, 1998. It was held that the learned CIT(A) was right in holding that the Ostwal Nagri project could have commenced by the assessee company only after purchase of land in the month of August, 2001 and the assessee was held to be entitled for deduction under section 80IB(10). (iii) Smt. Manju Gupta vs. ACIT (2011) 15 taxmann.com 287 (Mum), copy placed on pages 202 to 217 of the paper book. In the said case the assessee was to start a housing project for which an application was moved for issuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paper book at pages 1 to 32, as per clause (e) of the recital, i.e. page 5 of the agreement, the validity of the sanctioned plans alongwith IOD and CC which were issued in the year 1992 and 1993 had lapsed and as per that clause the owner of the plot have informed the developer that the developer will have to submit fresh proposal for development of the said property to the authorities of Brihan Mumbai Mahanagar Palika and all such other authorities as may be necessary and to get the same sanctioned as mentioned herein. The developers shall be entitled either to get the said plans alongwith IOD and CC revalidated or to submit a fresh plan to the authorities of Brihan Mumbai Mahanagar Palika and all such authorities as may be necessary and to get the same sanctioned and to obtain IOD and CC at the cost of the developer. Thus, it is clear from the aforementioned clause that when the assessee entered into Development Agreement with the owner of the plot at that point of time the IOD and CC and other sanctions issued in the name of the owner of the property had lapsed and the assessee company had to submit fresh applications for revalidation of earlier IOD and CC and plans, etc. or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilding plan as extension of earlier housing project nor the municipal corporation granted approval for the fresh housing project as extension of earlier housing project. It was also held that it will not be open to the Income Tax authorities to contend that the approval to the housing project granted by the municipal corporation subsequently constitute extension of housing project which was earlier approved. In the said case the assessee had constructed building A, B, C and D on a plot of 2.36 acres of land. Subsequently, pursuant to the order passed by the State Government permitting conversion of status of land, assessee firm submitted building plan for construction of building E with several residential units. Vide intimation dated 11th October, 2002 the layout plan for building E was approved by the municipal corporation and on the sale proceeds of E building the assessee claimed deduction under section 80IB. However, the AO observed that approval for building E was granted as an extension of approvals granted for building A, B, C and D, construction of which was commenced from 09.06.1993. The AO disallowed deduction on the ground that the project commenced prior to 01.10.1998 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2002 in pursuance of commencement certificate dated 2nd March, 2001 and it was held by the Tribunal that the date of commencement of development and construction of the housing project is the date when the assessee actually started and carried out the work of development and construction of the housing project and not the date when the project was first approved by the local authority. Relevant observations of the Tribunal are as under:- 17. In view of the above discussion, we hold that the date of commencement of development and construction of the housing project is the date when the assessee actually started and carried out the work of development and construction of the housing project and not the date when the project was first approved by the local authority. The order of the CIT(A) is upheld, qua, this issue. ii) ITO vs. Ashray Premises (P.) Ltd. (supra). In the said case the assessee started the housing project and took approval for layout plan on 22nd January, 2002. It was noticed by the AO that the housing project was started before 01.10.1998 as the date of approval for layout plan was 28th August, 1997 and that some expenditure was incurred towards the said p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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