UMIYA ENTERPRISES, MUMBAI v. ITO WD 3(3), MUMBAI

ITA 2750/MUM/2009 | 2004-2005
Pronouncement Date: 08-02-2010 | Result: Allowed

Appeal Details

RSA Number 275019914 RSA 2009
Assessee PAN AABFU0185B
Bench Mumbai
Appeal Number ITA 2750/MUM/2009
Duration Of Justice 9 month(s) 9 day(s)
Appellant UMIYA ENTERPRISES, MUMBAI
Respondent ITO WD 3(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 08-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 08-02-2010
Date Of Final Hearing 25-01-2010
Next Hearing Date 25-01-2010
Assessment Year 2004-2005
Appeal Filed On 29-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH MUMBAI. BEFORE SHRI R.V.EASWAR SR.VP AND SHRI RAJENDRA SINGH AM I.T.A. NO.2750/MUM/2009 (ASSESSMENT YEAR : 2004-05) M/S.UMIYA ENTERPRISES 112 VASUDEV LAXMI BUILDING B/H.TILAK TALKIES ABOVE SATKAR HOTEL DOMBIVLI(E). PAN:AABFU0185B VS. THE INCOME TAX OFFICER-WARD- 3(3) 2 ND FLOOR RANI MANSION MURBAD ROAD KALYAN(W). (APPELLANT) (RESPONDENT) APPELLANT BY : MR. H.S.RAHEJA RESPONDENT BY : MR. S.B.MOREY DR O R D E R PER R.V.EASWAR SENIOR VICE PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE AND IT PERTAINS TO THE ASSESSMENT YEAR 2004-05. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE C ONSTRUCTION OF HOUSING PROJECTS. IN THIS APPEAL WE ARE CONCERN ED WITH THE DISALLOWANCE OF THE ASSESSEES CLAIM FOR DEDUCTION OF RS.11 53 650/-UNDER SECTION 80IB(10) OF THE INCOME TAX ACT. DURING THE RELEVANT PREVIOUS YEAR THE ASSESSEE CAR RIED OUT THE CONSTRUCTION WORK OF UMIYA COMPLEX PROJECT ON PLO T NO. S.NO.182/3 & 114/6/1 AT TITWALA KALYAN TALUK. IT CREDITED WORK-IN-PROGRESS OF RS.75 12 000/- IN THE TRADING A ND PROFIT AND LOSS ACCOUNT AND ARRIVED AT A NET PROFIT OF RS. 11 53 650/- WHICH WAS CLAIMED AS A DEDUCTION UNDER SECTION 80IB (10). THIS SECTION PROVIDES FOR DEDUCTION FROM THE PROFITS OF AN UNDERTAKING WHICH DEVELOPS AND BUILDS HOUSING PROJ ECTS APPROVED BY A LOCAL AUTHORITY. THE ENTIRE PROFITS O F SUCH UNDERTAKING HAS BEEN GRANTED EXEMPTION FROM THE INC OME TAX SUBJECT TO FULFILMENT OF SEVERAL CONDITIONS. ONE SU CH CONDITION IS THAT THE HOUSING PROJECT SHOULD BE ON THE SIZE OF P LOT OF LAND WHICH HAS A MINIMUM AREA OF ONE ACRE. THIS CONDITIO N HAS BEEN PRESCRIBED BY CLAUSE(B) OF SECTION 80IB(10) WHICH IS APPLICABLE ITA NO.2750/MUM/09 2 FOR THE YEAR UNDER APPEAL. THERE IS ALSO ANOTHER CO NDITION LAID DOWN BY CLAUSE(C) TO THE EFFECT THAT EACH RESIDENTI AL UNIT IN THE HOUSING PROJECT SHOULD HAVE A MAXIMUM BUILT UP AREA OF 1500 SQUARE FEET IF IT IS SITUATED WITHIN THE CITY OF M UMBAI (OR DELHI). WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3 ) OF THE ACT THE ASSESSING OFFICER NOTICED THAT THE UMIYA COMPLEX PROJECT CONSISTED OF 251 RESIDENTIAL FLATS AND 10 S HOPS SPREAD OUT IN 15 BUILDINGS. THE TOTAL BUILT UP AREA OF TH E PROJECT WAS NOTICED TO BE 136475 SQ.FT. OF WHICH RESIDENTIAL AR EA WAS 134620 SQ.FT AND COMMERCIAL CONSTRUCTION AMOUNTED T O 1855 SQ.FT.. THE ASSESSING OFFICER THEREFORE CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE CLAIM FOR DEDUCTION CANNOT BE DE NIED ON THE GROUND THAT THE PROJECT WAS NOT A 100% RESIDENTIAL PROJECT. THE ASSESSEE WOULD APPEAR TO HAVE SUBMITTED THAT THERE IS NO SUCH STRICT CONDITION PRESCRIBED IN THE SECTION AND AT A NY RATE THE COMMERCIAL CONSTRUCTION AMOUNTED ONLY TO 1.36% OF THE TOTAL PROJECT AREA OF 136475 SQ.FT. AND THERE IS THUS SU BSTANTIAL COMPLIANCE WITH THE CONDITION IF AT ALL THERE IS A NY PRESCRIBED BY THE SECTION AND AT ANY RATE THE AREA OCCUPIED BY THE COMMERCIAL SPACE WAS VERY VERY NEGLIGIBLE AND THER EFORE THE CLAIM FOR DEDUCTION SHOULD NOT BE REFUSED. THE ASSE SSEES SUBMISSIONS DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER WHO DENIED THE DEDUCTION AND COMPLETED THE ASSESSMENT ACCORDINGLY. 2. ON APPEAL THE CIT(A) AGREED WITH THE VIEW TAKEN BY THE ASSESSING OFFICER. HE FURTHER TOOK THE VIEW IN THE COURSE OF THE APPELLATE PROCEEDINGS THAT THE PROJECT WAS NOT I N A PLOT OF LAND WHICH HAD A MINIMUM AREA OF ONE ACRE AND THAT FOR T HIS REASON ALSO THE ASSESSEE WAS NOT ENTITLED TO THE DEDUCTION . THIS POINT WAS RAISED BY THE CIT(A) FOR THE FIRST TIME THOUGH IT WAS NOT RAISED BY THE ASSESSING OFFICER. ACCORDING TO THE C IT(A) THOUGH THE TOTAL AREA OF THE PLOT WAS 4600 SQ. METRES THE AREA OF ITA NO.2750/MUM/09 3 656.75 SQ. METRES HAD TO BE EXCLUDED FOR THE D.P. ROAD AND IF THIS IS EXCLUDED THE SIZE OF THE PLOT WOULD BE RED UCED TO 3943.25 SQ.METRES WHICH IS LESS THAN ONE ACRE (ONE ACRE EQUALS 4050 SQ. METRES). IN THIS VIEW OF THE MATTER HE HE LD THAT THERE WAS A VIOLATION OF THE CONDITION PRESCRIBED BY THE CLAUSE(B) OF SUB-SECTION 10 OF SECTION 80IB. ON THE GROUND THAT THE ASSESSEE COULD NOT SUBSTANTIALLY EXPLAIN THE DISCREPANCY TH E CIT(A) HELD THAT FOR THIS REASON ALSO THE CLAIM FOR DEDUCTION S HOULD FAIL. HE ACCORDINGLY DISMISSED THE ASSESSEES APPEAL. 3. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRI BUNAL. AS REGARDS THE POINT RAISED BY THE ASSESSING OFFICER N AMELY THAT THE HOUSING PROJECT WAS NOT ENTIRELY RESIDENTIAL BU T WAS PARTIALLY COMMERCIAL THE SAME IS GOVERNED BY THE ORDER OF TH E SPECIAL BENCH (PUNE) OF THE TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES VS. JCIT. (2009) 119 ITD 255(SB). IN THIS CASE IT HAS BEEN HELD THAT THE MARGIN OF 10% CAN BE GIVEN FOR COMMERCIAL AREA AND SO LONG AS THE COMMERCIAL SPACE IN THE BUILT UP AREA I S LESS THAN 10% OF THE TOTAL BUILT UP AREA THE CLAIM FOR DEDUC TION UNDER SECTION 80IB(10) CANNOT BE DENIED. THIS ORDER SUPP ORTS THE ASSESSEES CLAIM THAT THE COMMERCIAL AREA OF UMIY A COMPLEX BEING ONLY 1.36% OF THE TOTAL BUILT UP AREA THE DE DUCTION CANNOT BE REFUSED. ACCORDINGLY WE HOLD THAT THE AS SESSEES CLAIM CANNOT BE REFUSED ON THIS GROUND NAMELY THE G ROUND THAT THE ASSESSEE DID NOT SATISFY THE CONDITION PRESCRIB ED BY CLAUSE (C) OF SECTION 80IB(10). 4. SO FAR AS THE POINT RAISED BY THE CIT(A) ON THE BASIS OF CLAUSE (B) OF SECTION 80IB(10) IS CONCERNED THE LE ARNED COUNSEL FOR THE ASSESSEE HAS PRODUCED BEFORE US THE RELEVAN T PAPERS SUCH AS THE DEVELOPMENT AGREEMENT DATED 23.9.1999 THE CHART SHOWING THE DETAILS OF AREA OF UMIYA COMPLEX PHAS E I AND PHASE II APPROVED & AMENDED PLANS FOR THESE PHASE S THE COMPLETION CERTIFICATES CORRESPONDENCE WITH KALYAN -DOMBIVLI ITA NO.2750/MUM/09 4 MAHANAGAR PALIKA WHICH IS THE APPROVING AUTHORITY THE AREA DIAGRAMS DIAGRAMS OF THE PLOTS ETC. IN THE FORM O F PAPER BOOK WHICH HAVE BEEN CONSIDERED BY US. THE POINT SOUGHT TO BE MADE ON THE BASIS OF THESE PAPERS IS TWO FOLD (A) THAT THE ASSESSEE AS WELL AS THE APPROVING AUTHORITY HAVE CONSIDERED THE ENTIRE PROJECT OF UMIYA COMPLEX AS ONE SINGLE PROJECT T HOUGH IT HAD AS MANY AS 15 BUILDINGS CONSTRUCTED IN DIFFERENT PH ASES; AND (B) THAT THE SIZE OF THE PLOT IS NOT LESS THAN 4050 SQ. METRES AS ERRONEOUSLY CALCULATED BY THE CIT(A). 5. SO FAR AS THE FIRST POINT IS CONCERNED IT IS SE EN FROM THE AUDIT REPORT REQUIRED TO BE GIVEN IN FORM NO.10CCB FOR THE PURPOSE OF SECTION 80IB (AT PAGES 12 TO 15 OF THE P APER BOOK) THAT THE NAME OF THE ENTERPRISES OR UNDERTAKING EL IGIBLE FOR DEDUCTION UNDER SECTION 80IB HAS BEEN STATED IN COL UMN 6 OF THE REPORT AS UMIYA ENTERPRISES (PROJECT : UMIYA COMPLEX) AND IN COLUMN 18 SIZE OF PLOT OF LAND OF THE PROJECT H AS BEEN SHOWN AS 13 000 SQ. METRES CONSISTING OF TWO PLOTS ONE O F 9200 SQ. METRES AND THE OTHER IS 4600 SQ. METRES. THE CIT(A) HAS SINGLED OUT THE PLOT OF 4600 SQ. METRES AND HAS HELD THAT I F THE AREA OF 656.75 SQ. METRES FOR D.P. ROAD IS EXCLUDED THE BA LANCE WOULD BE ONLY 3943.25 SQ. METRES WHICH IS LESS THAN ONE ACRE. IN ADDITION TO THE FACT THAT THE ASSESSEE ITSELF HAS T REATED THE ENTIRE PROJECT AS A SINGLE PROJECT THOUGH IT WAS SPREAD O VER TWO PLOTS OF LAND WE FIND FROM THE ANNEXURE TO THE DEVELOPME NT AGREEMENT THAT BOTH THE PLOTS ARE CONTIGUOUS TO EAC H OTHER (SEE DRAWING AT PAGE 54 OF THE PAPER BOOK). IN THE SCHED ULE TO THE DEVELOPMENT AGREEMENT A COPY OF WHICH IS AT PAGE 3 4 OF THE PAPER BOOK DATED 23.9.1999 BOTH THE SURVEY NUMBERS HAVE BEEN SHOWN AS THE PLOT OF LAND WHICH IS THE SUBJECT MATTER OF THE DEVELOPMENT AGREEMENT. THUS BOTH THE PLOTS OF LAND HAVE BEEN TREATED TOGETHER AND DEVELOPED TOGETHER. THE D EED OF CONFIRMATION CUM DECLARATION WHICH WAS ENTERED INTO EARLIER ON ITA NO.2750/MUM/09 5 4 TH JULY 2008 ALSO SHOWS THAT BOTH THE PLOTS OF LAND AGGREGATING TO 13 800 SQ. METRES WERE TREATED ON A CONSOLIDATED BASIS AS IS SHOWN IN THE SCHEDULE OF PROPERTY THERETO. IT IS FU RTHER SEEN FROM THIS DEED THAT THE TOTAL CASH CONSIDERATION T AKING BOTH THE PLOTS TOGETHER PAID BY THE ASSESSEE WAS RS.5 LAKHS IN ADDITION TO CONSTRUCTED AREA ADMEASURING 19 000 SQ.FT. IN TH E BUILDINGS TO BE CONSTRUCTED OVER THE ENTIRE LAND. THUS BOTH T HE PLOTS WERE PURCHASED BY THE ASSESSEE UNDER A SINGLE DEED AND W ERE ALSO DEALT WITH ON THAT BASIS. SO FAR AS THE PRECISE POI NT RAISED BY THE CIT(A) IS CONCERNED IT IS SEEN FROM PAGE 66 W HICH IS A COPY OF THE COMMUNICATION DATED 20.09.2003 SENT BY KALYA N- DOMBIVLI MAHANAGAR PALIKA THAT IT MENTIONS THE SIZE OF THE PLOT AS 4600 SQ.METRES ONLY. THE COMMUNICATION DATED 29. 6.2000 (PAGE 63 OF THE PAPER BOOK) ALSO REFERS TO THE AREA OF THE PLOT AS 4600 SQ.METRES. THE ASSESSEE HAS ALSO FILED AT PAGE 68 OF THE PAPER BOOK AN ANNEXURE TO THE COMMUNICATION ISSUED BY THE KALYAN-DOMBIVLI MAHANAGAR PALIKA DATED 20.09.2003 REFERRED TO EARLIER. THIS ANNEXURE IS A MAP SHOWING THE DET AILS OF THE SITE PLANS PLAN OF THE RESIDENTIAL UNITS TO BE BUI LT BY THE ASSESSEE ETC. IT ALSO CONTAINS AN AREA STATEMENT WH ICH SHOWS THAT THE AREA OF THE PLOT IS 4600 SQ. METRES. IT FU RTHER SHOWS THAT THERE IS A DEDUCTION 656.75 SQ. METRES FOR ROA D SET BACK. THIS DEDUCTION IS THEREAFTER SET OFF BY AN ADDITION OF EQUIVALENT AREA ALLOWED BY MNP. THE NET AREA OF THE PLOT AFTER THE DEDUCTION OF THE AREA FOR ROAD SET BACK HAS BEEN SH OWN AT 3943.25 SQ. METRES. THEREAFTER THERE IS A DEDUCTION OF 591.49 SQ. METRES FOR RECREATION OPEN SPACE AND 411 SQ. ME TRES FOR INTERNAL ROAD . THE NET PLOT AREA IS THEN SHOWN AT 2940.76 SQ. METRES. THE AREA OF 656.75 SQ. METRES WHICH WAS EA RLIER DEDUCTED FOR ROAD SET BACK IS ADDED AND THE TOTAL AREA PLOT IS SHOWN AT 3597.51 SQ. METRES. IT WILL BE SEEN THAT T HE TOTAL PLOT AREA HAS BEEN WORKED OUT BY THE MNP AT 3597.51 SQ.M ETRES ONLY AFTER DEDUCTING 591.49 SQ. METRES FOR RECREATI ON OPEN ITA NO.2750/MUM/09 6 SPACE. THE RECREATION OPEN SPACE IS HOWEVER PART OF THE PLOT AND THOUGH FOR THE PURPOSE OF MUNICIPAL REGULATIONS A PORTION OF THE PLOT HAS TO BE RESERVED AS A RECREATION AREA BU T FOR THE PURPOSE OF CLAUSE (B) OF SECTION 80IB(10) THE RECR EATION AREA HAS ALSO TO BE CONSIDERED AS PART OF THE PLOT ONLY. THE RE IS NO CONDITION IN THE CLAUSE THAT RECREATION AREA HAS TO BE EXCLUDED WHILE EXAMINING WHETHER THE PLOT IS OF THE SIZE OF ONE ACRE OR LESS. IF THE RECREATION AREA OF 591.49 SQ. METRES I S ADDED TO THE TOTAL PLOT AREA OF 3597.91 SQ. METRES IT GIVES AN AREA OF 4189 SQ. METRES WHICH IS THE SIZE OF THE PLOT. THE TOTAL PLOT AREA HAS BEEN ARRIVED AT BY MNP 3597.51 ONLY FOR THE PURPOSE OF CALCULATING THE PERMISSIBLE FSI. THE PERMISSIBLE FS I AS PER COLUMN 9 OF THE AREA STATEMENT IS ONE WHICH MEANS THAT THE ASSESSEE CAN BUILD 3597.91 SQ.METRES IN THE SAID PL OT. HOWEVER FOR THE PURPOSE OF CLAUSE (B) OF SECTION 80IB(10) THE PLOT AREA HAS BEEN TAKEN AT 4189 SQ. METRES IF NOT AT 4600 S Q. METRES EVEN ON THIS BASIS THE SIZE OF THE PLOT IS MORE TH AN ONE ACRE. IN OUR OPINION THE CIT(A) COMMITTED AN ERROR IN SIMP LY EXCLUDING 656.75 SQ.METRES FROM THE AREA OF 4600 SQ.METRES W ITHOUT APPRECIATING THAT THE EXCLUSION IS ONLY FOR THE PUR POSE OF D.P. ROAD WHICH DOES NOT REDUCE THE SIZE OF THE PLOT AS A WHOLE. WE ARE THEREFORE SATISFIED THAT THERE IS NO VIOLATION OF THE CONDITIONS PRESCRIBED BY CLAUSE(B). 6. IN THE AFORESAID VIEW OF THE MATTER WE DIRECT T HE ASSESSING OFFICER TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IB(10). THE APPEAL OF THE ASSESSEE IS THUS ALLOWED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED ON THIS 8 TH DAY OF FEBRUARY 2010. SD/- (RAJENDRA SINGH) SD/- ( R.V.EASWAR ) ACCOUNTANT M EMBER SENIOR VICE PRESIDENT MUMBAI DATED 8 TH FEBRUARY 2010. SOMU ITA NO.2750/MUM/09 7 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-I THANE 4. THE CIT(A)-I THANE 5. THE DR F BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR I.T.A.T MUMBAI