9911796707
TMI Blog2014 (6) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... y this single order. 3. For assessment year 2006-07 Ld. CIT(A) has passed a speaking order and for other years, order of 2006-07 has been followed since there is no change in facts and circumstances of the case and the issue is identical. 4. The assessee is engaged in the activity of development and construction of housing projects. In the process, it has developed housing project known as "Gundecha Garden" situated at CS No.44, 1/44, 1/28 of Parel Sewri Division of Dr. Babasaheb Ambedkar Road, Lalbagh, Mumbai. According to assessee layout of this project was approved by MCGM vide No.EB/9706/FS/A dated 31/5/2003. The assessee started construction of the building as per approval of BMC dated 13/1/2004 and commencement certificate dated 16/9/2003 for Wing A, B & C. On the said project assessee has claimed deduction under section 80 IB(10) in respect of each of the assessment year as under: Assessment Year Amount. 2006-07 Rs. 7,18,02,721/- 2007-08 Rs. 13,50,93,090/- 2008-09 Rs. 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/970 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 1/10/1998, as the project constructed by the assessee was continuation of the project started by M/s. Bombay Gas Company Limited vide IOD No.EB/9076/A & IOD No.EB/9077/A issued in Aug.1992 by BMC. The AO called for the explanation of the assessee and assessee filed detailed reply which has been reproduced in the assessment order. It was submitted that aforementioned land was taken into possession by the assessee from M/s. Gas Property Developers vide Development agreement dated 10/7/2003, therefore, assessee firm could not incur any expenditure on the impugned housing project before 10/07/2003. It was also submitted that according to factual and legal position no expenditure had been incurred on development and construction of the housing project before 1/10/1998. It was submitted that approval of the housing project by Local Authority and commencement of development and construction of housing project are totally different 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not accept the submissions of the assessee and disallowed the deduction on the ground that the project was started by commencement certificated dated 28th November, 1992 issued to M/s. Gas Property Developers, therefore, the assessee does not fulfilled the conditions laid down in section 80IB(10) according to which for being eligible for deduction under section 80IB(10) the project must have to be started on or after 1st October, 1998. 6. Non-granting of deduction under section 80IB(10) was challenged in an appeal filed before the CIT(A). The assessee's submission before the CIT(A) have been summarised by the learned CIT(A) and read as under: - "1. The appellant is a partnership firm, engaged in the development and construction of a housing project. 2. the appellant filed its return of income for the AY 2006-07 on 31.10.2006 declaring total income at Nil, after claiming deduction under section 80-IB(10) of the Income-Tax Act, 1961 (the Act), to the extent of Rs. 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 appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development/construction activity had commenced on the aforesaid plot of land before 10.07.203, which clearly implies that the development and construction activity by the appellant, in respect of the aforesaid housing project was started after 1.10.1998." It was also submitted before the CIT(A) that the details furnished before the AO by M/s. Gas Property Developers did not contain any item from which it can be inferred that they had incurred any project develop expenditure. The chart of expenditure submitted by the said concern will clearly show that the expenses were in the nature of; (i) Municipal taxes, (ii) Architect's fees for the approval of the layout plan, (iii) Interest payable on the loan obtained for the purchase of the plot of land, and (iv) Salary, bonus and security charges. The only expenditure on construction incurred by M/s. Gas Property Developers were in the form of bricks, cement and sand to the extent of Rs. 13,300/-, Rs. 123,950/- and Rs. 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/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property to the concerned authorities. 8. From the aforementioned facts it was submitted that it is absolutely clear that the development/construction activity in respect of the present housing project was started only after signing of the Development Agreement dated 10th July, 2003, i.e. much after the statutory date of commencement, i.e. 1st October, 1998 and thus it was pleaded that the claim of the assessee has wrongly been rejected by the AO. 9. After considering the submission of the assessee and after perusing the documents and evidences submitted by the assessee the learned CIT(A) has returned a finding that as per the documents placed on record the sanction obtained by the earlier developer had lapsed and fresh approval alongwith changed project report was obtained, which was totally different than the earlier project. The expenditure incurred by M/s. Gas Property Developers of Rs. 13,300/-, Rs. 13,950/- and Rs. 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 developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow the deduction under section 80IB(10) and his order should be set aside and that of the AO be restored. 12. On the other hand, the learned A.R. submitted that the project approved on 28th February, 1992 was regarding construction of two building. The approval dated 28th February, 1992 had lapsed and the fresh approval obtained by the assessee was in respect of an entirely different project, which consisted of seven wings. He submitted that the fact regarding earlier project having been lapsed is recorded in the development agreement and it has also been recorded in the agreement that the assessee will obtain fresh approval at its own cost. Thus, it was submitted by the learned A.R. that the approval obtained by the assessee was in respect of an entirely different project, which will be considered to be a fresh project. He submitted 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 whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the phrase "commenced development" used in section 80IB(10) mean start of project and the initial works which are required to be done such as planning, obtaining approval of the competent authorities, etc. are integral part of the said commencement of the project and its development and thus the deduction was disallowed by the AO. On these facts it was held by the Tribunal that the land on which the said project was to be constructed was purchased by the assessee in the month of August, 2001 and till the date of said purchase there was no construction activity which had commenced in respect of Ostwal Nagri Project. As a matter of fact, the assessee company had revised the building plan, which were originally prepared by M/s. Sonal Venture and approved by CIDO and got sanctioned by CIDO only on 4th January, 2002. Only 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is not eligible for deduction under section 80IB(10). The CIT(A) allowed the claim of the assessee and the order of the CIT(A) was upheld by the Tribunal on the ground that construction of the housing project was in accordance with the plan approved on 22nd January, 2002. Earlier expenditure incurred were not on development and construction of housing project and, therefore, the assessee was eligible for deduction. 14. Thus, it was pleaded by the learned A.R. that relief has rightly been granted by the learned CIT(A) and his order should be upheld. 15. We have heard both the parties and their contentions have carefully been considered. The assessee became entitled to develop the impugned plot vide Development Agreement dated 10th July, 2003. In the Development Agreement, copy of which is filed in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior to 31st March, 1994 and were in respect of repair of the boundary wall. These findings are also not controverted by bringing any contrary material on record. Thus, 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. 16. In the case of CIT vs. Vandana Properties (supra) the Hon'ble Bombay High Court has examined this issue and their Lordships have observed that construction of separate building cannot be considered as an extension of earlier housing project where neither the assessee has sought approval of the building 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 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee had sought approval of the building plan for construction of 'E' building as extension of the earlier housing project, nor the Municipal Corporation has granted approval for the housing project consisting of 'E' building as extension of the earlier housing project, it is not open to the income-tax authorities to contend that approval to the housing project granted by the Municipal Corporation on 11h October 2002 constitutes extension of the housing project which was approved in the year 1993. (emphasis given by us) 17. The other decisions which support the case of the assessee are as under: - (i) Smt Manju Gupta vs. ACIT (supra). In the said case the first commencement certificate was issued on 15th May1991, which had lapsed and ultimately final construction was started in the year 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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