AJMERA HOUSING CORPORION, MUMBAI v. DCIT CC-10, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI P.M. JAGTAP AM AND SHRI N.V. VASUDEV AN JM I.T.A.NOS. 3172 & 3173/MUM/2009 ASSESSMENT YEARS : 2004-05 & 2005-06 M/S. AJMERA HOUSING CORPORATION REHMAN BLDG. 2 ND FLOOR 24 VEER NARIMAN ROAD FORT MUMBAI 400 001. PAN: AAAFA 3654 J VS. THE DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 10 MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAKASH JOTHWANI RESPONDENT BY : SHRI PAVAN VED O R D E R PER P.M. JAGTAP AM: THESE TWO APPEALS FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX CENTRAL- I MUMBAI BOTH DATED 30.03.2009 UNDER SECTION 263 OF THE INCOME-TAX ACT 1961 FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 INVOLVE COMMON ISSUES AND THE SAME THEREFORE HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS SINGLE COMPOSITE ORDER. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERS HIP FIRM WHICH IS ENGAGED IN THE BUSINESS AS PROMOTER AND DEVELOPER OF HOUSIN G PROJECTS. THE RETURNS OF INCOME FOR THE YEARS UNDER CONSIDERATION WERE FILED BY IT ON 30.10.2004 AND 27.10.2005 DECLARING TOTAL INCOME OF RS. 2 900/-AND NIL FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 RESPECTIVELY. IN THE SAID RETU RNS DEDUCTION UNDER SECTION 80- IB WAS CLAIMED BY THE ASSESSEE AT RS. 31 71 13 021/ - AND RS. 72 41 360/- FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 RESPECTIVELY. IN THE ASSESSMENTS COMPLETED UNDER SECTION 143(3) VIDE ORDERS DATED 27.12.2006 THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IB WAS ALLOWED BY THE ASS ESSING OFFICER FOR BOTH THE ASSESSMENT YEARS. THE RECORDS OF THE SAID ASSESSMEN TS THEREAFTER CAME TO BE ITA NOS.3173-3174/M/09 M/S.AJMERA HOUSING CORPORATION . . 2 EXAMINED BY THE LEARNED COMMISSIONER OF INCOME-TAX AND ON SUCH EXAMINATION HE WAS OF THE OPINION THAT THE ISSUE RELATING TO THE A SSESSEES CLAIM FOR DEDUCTION U/S.80IB(10) WAS NOT CONSIDERED BY THE ASSESSING O FFICER IN THE RIGHT PERSPECTIVE. ACCORDING TO HIM THE SAID CLAIM OF THE ASSESSEE SH OULD HAVE BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE BASIS OF THE FACTS AVAILAB LE ON RECORD. HE THEREFORE SOUGHT TO REVISE THE ASSESSMENTS MADE BY THE ASSESSING OFF ICER FOR BOTH THE YEARS UNDER CONSIDERATION BY EXERCISING THE POWERS CONFERRED UP ON HIM UNDER SECTION 263 OF THE ACT AND ISSUED NOTICES TO THE ASSESSEE ON 18.02.200 9 RAISING THEREIN THE FOLLOWING ISSUES : THAT VERIFICATION OF THE DETAILS AVAILABLE ON RECOR D REVEAL THAT 5201 SQ.FT. OF THE CONSTRUCTED AREA IS COMMERCIAL ( SHOP AREA AS MEASURED BY THE DEPARTMENTAL VALUATION OFFICER VIDE REPORT DATED 25/2/2005). AS THE PROJECT WAS COMPLETED IN T HE A.Y. 2004-05 NO COMMERCIAL CONSTRUCTION WAS PERMISSIBLE IN A HOUSING PROJECT. PROVISION OF COMMERCIAL CONSTRUCTION WITHIN A HOUSI NG PROJECT WERE INTRODUCED W.E.F.1/4/2005 AND THE MAXIMUM PERM ISSIBLE LIMIT FOR THE SAID COMMERCIAL CONSTRUCTION IS 2000 SQ.FT. EVEN UNDER THIS PROVISION THE AREA OF COMMERCIAL CONSTRU CTION EXCEEDS THE PRESCRIBED LIMIT OF 2000 SQ. FT. ON THE BASIS OF THE ABOVE ISSUES THE LEARNED COMMI SSIONER OF INCOME-TAX REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE A SSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER ALLOWING DEDUCTION CLAIMED BY IT UNDER SECTION 80-IB FOR BOTH THE YEARS UNDER CONSIDERATION SHOULD NOT BE REVISED TRE ATING THE SAME AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE . IN REPLY THE FOLLOWING SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE BEFORE THE LEAR NED COMMISSIONER OF INCOME- TAX : THE ASSESSEE HAS SATISFIED ALL THE CONDITIONS STATE D IN 80IB(10) ABOVE. COPY OF DVO IS PLACED ON RECORD. THE HOUSING PROJEC T CONCERNED HAD BEEN APPROVED BEFORE 31 ST MARCH 2005 BY THE LOCAL AUTHORITIES CONCERNED. THE UNDERTAKING HAD COMMENCED DEVELOPMEN T AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER 1 ST DAY OF OCTOBER 1998. THE PROJECT WAS ON PLOT OF LAND WHICH HAD MINIMU M AREA OF 1 ACRE. THE RESIDENTIAL UNITS HAD MAXIMUM BUILT AREA OF 100 0 SQ. FT. A VERY SMALL PORTION WAS UTILIZED FOR CONSTRUCTION OF CONV ENIENT SHOPS BY WAY OF AMENITIES AND FACILITIES PROVIDED TO THE RESIDEN TS OF HOUSING PROJECT. ITA NOS.3173-3174/M/09 M/S.AJMERA HOUSING CORPORATION . . 3 THE ABOVE FACTS HAVE BEEN ACCEPTED BY THE DEPARTMEN T IN A.Y. 2004- 05. ON A REPRESENTATION MADE BY THE MAHARASHTRA CHAMBER OF HOUSING INDUSTRY TO THE HONOURABLE FINANCE MINISTER IN WHIC H INTER ALIA AMONGST OTHER MATTERS IT WAS ALSO REQUESTED THAT A SUITAB LE CLARIFICATION BE MADE TO DEFINE THE TERM HOUSING PROJECT SO AS TO INCLUDE VARIOUS AMENITIES AND FACILITIES INCLUDING THAT OF CONVENIE NT SHOPPING ETC. IN RESPONSE TO THE SAME THE CBDT DEPARTMENT OF REVE NUE ADDRESSED A REPLY UNDER F.NO.205/3/2001/ITA-II DT.4 TH MAY 2001 CLARIFYING THAT ANY PROJECT WHICH HAS BEEN APPROVED BY THE LOCAL AUTHO RITY AS HOUSING PROJECT SHOULD BE CONSIDERED ADEQUATE FOR THE PURPO SE OF SS.10(23G) AND 80-IB(10). IT HAS BEEN HELD BY THE I.T.A.T MUMBAI-A BENCH IN C ASE OF HARSHAD P. DOSHI VS. ACIT ON 26 TH JANUARY 2007 THAT IN VIEW OF CBDT CLARIFICATION UNDER F.NO.205/3/2001/IT A-II DT.4 TH MAY 2001 ANY PROJECT WHICH HAS BEEN APPROVED BY THE LOCAL AUTHORITY AS HOUSING PRO JECT SHOULD BE CONSIDERED ADEQUATE FOR THE PURPOSE OF 80-IB(10). T HEREFORE ASSESSEES PROJECT APPROVED BY THE MUNICIPAL CORPO RATION AS HOUSING PROJECT WAS ELIGIBLE FOR DEDUCTION U/S.80-IB(10) AN D NO DISALLOWANCES CAN BE MADE ON ACCOUNT OF SHOPS INCLUDED IN IT. THE CONDITION IN SUB-SECTION (D) OF 80IB(10) REGARD ING BUILT UP AREA OF SHOPS AND COMMERCIAL ESTABLISHMENTS SHOULD NOT EXCE ED 5% IF THE AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR 2 000 SQ.FEET WHICHEVER IS LESS HA BEEN INTRODUCED IN THE STATUTE WITH EFFECT FROM 01.04.2005. THUS THIS CONDITION WOULD NOT BE APPLIC ABLE FOR THE ASSESSMENT YEAR 2004-05 WHEN THE ABOVE MENTIONED PR OJECT WAS COMPLETED. THIS CONDITION WOULD ALSO NOT APPLY FOR ANY PROJECT APPROVED BEFORE 01/04/2005. THE ABOVE VIEW IS AFFIRMED BY I.T.A.T.MUMBAI E BEN CH IN THE CASE OF SAROJ SALES CORPORTION VS. INCOME-TAX OFFICER DTED 24 TH JANUARY 2008 WHEREIN IT HAS BEEN HELD AS REGARDS THE OBJECTION OF THE AO THAT THE PERMISSIBLE SHOPPING AREA OF HOUSING PROJECT EXCEED 5 PERCENT THE ASSESSEE IS NOT ENTITLED FOR RELIEF UNDER S.80-IB(1 0). WE ARE OF THE VIEW THAT THE HOUSING PROJECT WERE APPROVED BEFORE 31 ST MARCH 2005 AND FOR SUCH PROJECT WHICH WERE SO APPROVED THERE WAS NO S TIPULATION AS TO THE SHOPPING COMPLEX AREA IS PERMISSIBLE IN THE PRO JECT. A ALREADY STATED EARLIER THAT THE AMENDMENTS WERE SUBSEQUENTL Y MADE WHILE EXTENDING THE DEDUCTION OF INCOME FROM HOUSING PROJ ECT APPROVED UP TO 31 ST MARCH 2007 THE DENIAL OF DEDUCTION IN OUR VIEW I S CLEARLY NOT IN ACCORDANCE WITH LAW. THE ABOVE CLARIFICATIONS BY CBDT & THE VARIOUS JUDG MENTS OF THE MUMBAI TRIBUNAL ARE DIRECTLY APPLICABLE TO THE ASS ESSEES CASE ON FACTS AND SINCE THE ASSESSEES PROJECT WAS APPROVED BEFOR E 31/3/2005 THE CONDITION OF 5% OR 2000 SQ. FT. WHICHEVER IS LESS D OES NOT APPLY TO THE ASSESSEE. HENCE THE ORDER PASSED BY THE ASSESSING OFFICER IS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THE DEDUCTION ALLOWED IS CORRECT. WITHOUT PREJUDICE TO THE ABOVE THE ASSESSING OFFIC ER HAS EXAMINED THE FACTS OF THE CASE OF SECTION 80IB(10) AND REACHED T HE CORRECT DECISION IN HIS ASSESSMENT ORDER. FURTHER THE JUDICIAL ORDER S BY THE I.T.A.T MUMBAI BENCH ALSO CONCUR WITH THE VIEW OF THE ASSES SING OFFICER. ITA NOS.3173-3174/M/09 M/S.AJMERA HOUSING CORPORATION . . 4 THE SUPREME COURT HAS OBSERVED IN THE MALABAR INDUS TRIAL CO. LTD. CASE THAT: A BARE READING OF SECTION 263 OF THE IN COME-TAX ACT 1961 MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCI SE OF JURISDICTION BY THE COMMISSION SUO MOTU UNDER IT IS THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE COMMISSION HAS TO BE SATISFIED OF TWIN CONDITIONS NAMELY (I) THE ORDER OF THE ASSESSING OFFICER SOUGH T TO BE REVISED IS ERRONEOUS AND (II) IT IS PREJUDICIAL TO THE INTERES T OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE RECOURSE CA NNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED B Y THE ASSESSING OFFICER IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF ACTS OR AN IN CORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY ALL ORDERS PASSED WITHOUT APPLYING TH E PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NOT AN EXPRESSI ON OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEAN ING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHE ME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISI ONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME TAX OFFICER THE REVENUE IS LOSING TAX L AWFULLY PAYABLE BY A PERSON IT WILL CERTAINLY BE PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REV ENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY TH E ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS A PREJUDICI AL TO THE INTEREST OF THE REVENUE FOR EXAMPLE WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSE PERMISSIBLE IN LAW AND IT HAS RESULTED I N LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFF ICER HAS TAKEN ON VIEW WITH WHICH THE COMMISSION DOES NOT AGREE IT C ANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST O F THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUST AINABLE IN LAW. 3. THE LEARNED COMMISSIONER OF INCOME-TAX DID NOT F IND MERIT IN THE ABOVE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE FOR THE FOLLOWING REASONS: THE FIRST ARGUMENT OF THE ASSESSEE IS ONE DIMENSIO NAL IN AS MUCH AS THAT THE ASSESSEE IS EMPHASIZING A CLARIFICATION WITHOUT STA TING THAT THE PROJECT UNDER CONSIDERATION IS IN REALITY BOTH HOUSING AS WELL AS COMMERCIAL. THOUGH THE NOMENCLATURE OF THE PROJECT MAY NOT BE VERY RELEVAN T THE FACT REMAINS THAT THE PROJECT OF THE ASSESSEE CONSISTED OF COMMERCIAL SHO PS ADMEASURING 5201 SQ.FT. ACCORDINGLY IN REALITY THIS PROJECT WAS HOUSING CU M COMMERCIAL PROJECT. RELIANCE PLACED BY THE ASSESSEE ON CBDTS CLARIFICA TION IS MISPLACED A NOWHERE IN THE INSTRUCTION IT IS MENTIONED THAT CONSTRUCTIO N OF COMMERCIAL UNITS WILL ALSO BE ALLOWED WITHIN THE HOUSING PROJECTS. BE THAT AS IT MAY IT IS A FACT THAT FOR A PROJECT TO QUALIFY FOR DEDUCTION IT IS ESSENTIAL TH AT ITS COMMENCEMENT SHOULD BE AFTER 1.10.1998. IN THIS CASE THE PERMISSION FOR CO MMENCEMENT WAS RECEIVED ON 11.10.1996. THIS FACT HAS NOT BEEN DENIED BY THE ASSESSEE BUT ON THE OTHER HAND IN THE SUBMISSIONS DATED 25.03.2009 IT HAS CAT EGORICALLY BEEN ACCEPTED. WHILE ACCEPTING THE ASSESSEE STATES THAT ACTUAL CON STRUCTION WAS STARTED AFTER 1.04.1999. IT IS DIFFICULT TO ACCEPT THAT FOR ALMOS T TWO YEARS AFTER THE PERMISSION THE ASSESSEE DID NOT START THE PROJECT. IF FOR A MO MENT THE ARGUMENT ADVANCE IS ACCEPTED THEN SHOULD THE ASSESSEE NOT HAVE STATE D THIS FACT DURING THE ASSESSMENT PROCEEDINGS? IT DID NOT. DURING THE ASSE SSMENT PROCEEDINGS THE ONLY SUBMISSION MADE WAS THAT THE PROJECT WAS START ED AFTER 1.04.99. IN THE ITA NOS.3173-3174/M/09 M/S.AJMERA HOUSING CORPORATION . . 5 ABOVE BACKGROUND I AM UNABLE TO ACCEPT THE CONTENTI ON OF THE ASSESSEE AND HOLD THAT THE PROJECT COMMENCED BEFORE 1.10.1998 AN D WAS NOT LEGIBLE FOR DEDUCTION U/S.80IB(10). THESE FACTS ARE CLEARLY COV ERED BY THE RATIO OF THE DECISION OF THE HONBLE I.T.A.T MUMBAI I THE CASE O F M/S. LAUKIK DEVELOPERS WHEREIN THE HONBLE I.T.A.T HAS HELD THAT ONCE A PR OJECT ID NOT FULFILL THE CONDITIONS OF LEGIBILITY THERE WAS NO QUESTION OF D EDUCTION. IN THIS CASE THE BASIC CONDITIONS OF LEGIBILITY WHICH WERE MISSING W ERE - THE PROJECT COMMENCED BEFORE 1.10.1998 AS WOULD BE CLEAR FROM THE COMMENCEMENT PERMISSION DATED 11.10.1996; THE PROJECT HAS COMMERCIAL CONSTRUCTION IN EXCESS O F THE PERMISSIBLE AREA. 4. FOR THE REASONS GIVEN ABOVE THE LEARNED COMMISS IONER OF INCOME-TAX HELD THAT THE ORDERS PASSED BY THE ASSESSING OFFICER FOR BOTH THE YEARS UNDER CONSIDERATION UNDER SECTION 143(3) ALLOWING THE DED UCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80-IB WERE ERRONEOUS AS WELL AS PREJU DICIAL TO THE INTERESTS OF THE REVENUE AND SET ASIDE THE SAME. HE DIRECTED THE AS SESSING OFFICER TO MAKE FRESH ASSESSMENTS KEEPING IN VIEW HIS OBSERVATIONS/FINDIN GS RECORDED IN THE ORDERS PASSED UNDER SECTION 263 AFTER GIVING REASONABLE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. 5. AGGRIEVED BY THE ORDERS OF THE LEARNED COMMISSI ONER OF INCOME-TAX PASSED UNDER SECTION 263 THE ASSESSEE HAS PREFERRED THESE APPEALS BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS WHICH ARE IDENTICAL FOR BOTH THE YEARS UNDER CONSIDERATION: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW: 1(A) THE LEARNED CIT ERRED IN PASSING AN ORDER U/S.263 BY HOLDING THE ASSESSMENT MADE U/S.144 R.W.S.153A WAS ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF REVENUE ON THE GROUND THAT U/S.8 0IB(10) COMMERCIAL CONSTRUCTION IS NOT A PART OF HOUSING PR OJECT PRIOR TO 1.4.2005 AND HENCE DEDUCTION ALLOWED U/S.80IB(10) O N A RESIDENTIAL CUM COMMERCIAL PROJECT WAS NOT JUSTIFIED. (B) THE LEARNED CIT ERRED IN HOLDING TH AT THE CONSTRUCTION OF HOUSING PROJECT DID NOT COMMENCE AFTER 1.10.1998 BUT COMMEN CED PRIOR TO IT. 2. THE LEARNED CIT ERRED IN APPLYING THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF LAUKIK DEVELOPERS WHICH HAS BEEN OVERRU LED BY PUNE SP. BENCH IN THE CASE OF BRAHMA ASSOCIATES. FURTHER THE LEARNED CIT ERRED IN HOLDING THAT THE AO HAD NOT APPLIED H IS MIND FAILED TO MAKE ENQUIRIES AND NOT EXAMINED THE CLAIM IN DETAIL . ITA NOS.3173-3174/M/09 M/S.AJMERA HOUSING CORPORATION . . 6 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D HAVE ALSO PERUSED THE MATERIAL ON RECORD. IT IS OBSERVED THAT IN THE CASE OF ANIK DEVELOPMENT CORPORATION THE ASSESSMENTS COMPLETED BY THE A.O. UNDER SECTION 143(3) FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.80IB(10) IN THE SIMILAR FACTS AND CIRCUMSTANCE S WERE SET ASIDE BY THE LEARNED CIT VIDE ORDERS PASSED UNDER SECTION 263 FOR SIMILA R REASONS AS GIVEN IN THE PRESENT CASE. THE SAID ORDERS WERE CHALLENGED BY THE ASSESS EE VIZ. ANIK DEVELOPMENT CORPORATION BY WAY OF APPEALS FILED BEFORE THE TRI BUNAL AND THE COORDINATE BENCH OF THE TRIBUNAL VIDE ITS ORDER DATED 30.09.2010 IN IT A NOS. 3175 AND 3176/MUM/2009 SET ASIDE THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TAX PASSED UNDER SECTION 263 OF THE ACT AND RESTORED THE ORDERS PASS ED BY THE ASSESSING OFFICER UNDER SECTION 143(3) FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NOS. 8 TO 10 OF ITS ORDER : WE FIND THAT THE ONLY REASON FOR LEARNED COMMISSIO NERS COMING TO THE CONCLUSION THAT THE ASSESSMENT ORDERS ARE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IS THAT ACCORDING TO HIM SECTION 80IB(10) AS IT STOOD PRIOR T THE AMENDMENT WITH EFFECT FROM 1 ST APRIL 2006 DID NOT PERMIT ANY COMMERCIAL CONSTRUCTION IN A HOUSING PROJECT. IN S UPPORT OF THIS PROPOSITION LEARNED COMMISSIONER HAS RELIED UPON A DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF LAUKIK DEVELOPERS (SUP RA). HOWEVER THAT VIEW OF THE MATTER IS AT THE MINIMUM IS NOT AT ALL FREE F ROM DOUBT. AS A MATTER OF FACT THERE HAS BEEN A CLEAVAGE OF OPINION ON THIS ISSUE SO FAR AS COORDINATE BENCHES OF THIS TRIBUNAL WERE CONCERNED. IT WAS FOR THIS RE ASON THAT A SPECIAL BENCH WAS CONSTITUTED IN THE CASE OF BRAHMA ASSOCIATES V. JCIT (119 ITD SB 255) TO RESOLVE THESE CONFLICTING VIEWS OF THE CO-ORDINATE BENCHES. THE SPECIAL BENCH INTER ALIA HELD THAT MERELY BECAUSE AN ASSESSEE HA S BUILT SOME COMMERCIAL AREA DEDUCTION UNDER SECTION 80IB(10) CANNOT BE DE CLINED AS LONG AS PROJECT IS A PREDOMINANTLY A HOUSING PROJECT IN NATURE. AS A M ATTER OF FACT THE VIEW CANVASSED BY THE LEARNED COMMISSIONER IN THE IMPUGN ED ORDER I.E. THERE CANNOT BE ANY COMMERCIAL CONSTRUCTION IN A HOUSING PROJECT AS WAS ALSO HELD BY THE DIVISION BENCH IN THE CASE OF LAUKIK DEVELOP ERS (SUPRA) IS MUCH MORE HARSH THAN THE VIEW CANVASSED BY THE DEPARTMENT BEF ORE THE SPECIAL BENCH AS WILL BE EVIDENT FROM THE FOLLOWING OBSERVATIONS IN THE SPECIAL BENCH ORDER: WE HAVE ALSO NOTED REVENUES PLEA THAT AS LONG AS I T IS USE OF BUILT UP AREA FOR COMMERCIAL PURPOSES IS CONFINED T O CONVENIENCE SHOPPING WITHIN PERMISSIBLE LIMITS AND SUBJECT TO T HE CONDITIONS AS PER DEVELOPMENT CONTROL RULES ELIGIBILITY FOR D EDUCTION UNDER S. 80IB(10) REMAINS INTACT AND THAT THE MOMENT SUCH USAGE GOES BEYOND WHAT IS PERMISSIBLE AS CONVENIENCE SHOPPING AS PER ITA NOS.3173-3174/M/09 M/S.AJMERA HOUSING CORPORATION . . 7 DEVELOPMENT CONTROL RULES THE ELIGIBILITY FOR DEDU CTION UNDER S.80-IB(10) IS LOST. IT IS THUS CLEAR THAT THE VERY FOUNDATION OF THE IM PUGNED REVISION ORDER CONSISTS OF A LEGAL PROPOSITION WHICH HAS NOT ONLY BEEN DISA PPROVED BY A SPECIAL BENCH OF THIS TRIBUNAL BUT ALSO ABANDONED BY THE INCOME TAX DEPARTMENT ITSELF IN PLEADINGS BEFORE THE SPECIAL BENCH IN ANY EVENT IN VIEW OF THE SPECIAL BENCH DECISION IN THE CASE OF BRAHMA ASSOCIATES (SUPR) WHICH IS A BINDING PRECEDENT SO FAR AS THIS DIVISION BENCH OF THE TRIBUNAL IS CO NCERNED WE CANNOT APPROVE THE STAND OF THE COMMISSIONER TO THE EFFECT THAT ME RELY BECAUSE THERE HAS BEEN AN ELEMENT OF COMMERCIAL CONSTRUCTION IN THE H OUSING PROJECT THE ASSESSEE IS DISENTITLED TO DEDUCTION UNDER SECTION 80IB(10) PARTICULARLY HEN THE COMPONENT OF COMMERCIAL CONSTRUCTION IS MUCH LESS T HAN NORMS LAID DOWN BY THE SPECIAL BENCH. WHEN WE PUT THIS POSITION TO TH E LEARNED DEPARTMENTAL REPRESENTATIVE HE FAIRLY STATED THAT THE SPECIAL B ENCH DECISION DIRECTLY COVERS THE ISSUE BUT ADDED THAT THE SPECIAL BENCH DECISION IS NOT BINDING ON US BECAUSE IT IS PER INCURIUM INASMUCH AS IT DOES NOT TAKE INTO ACCOUNT CORRECT LEGAL POSITION AND BINDING JUDICIAL PRECEDENTS. WE DO NO HOWEVER SHARE THAT PERCEPTION. IT IS NOT OPEN TO US TO QUESTION CORREC TNESS OF THE SPECIAL BENCH DECISION AND IT WOULD INDEED BE AGAINST THE NORMS O F JUDICIAL DISCIPLINE TO QUESTION THE CORRECTNESS OF DECISIONS OF THE HIGHER FORUM. IT IS ALSO IMPORTANT TO BEAR IN MIND THAT AS HELD BY HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT (2 43 ITR 83). EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF ASSESSING O FFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE FOR EXAMPLE WHEN AN ITO ADOPTS ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HA RES ULTED IN A LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE ITO HAS TAKEN A VIEW WITH WHICH THE CIT DOES NOT AGREE IT CANNOT BE TREATED AS AN ORDER PREJUDI CIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUST AINABLE IN LAW. VIEWED IN THIS LIGHT CAN IT BE SAID THAT AN ORDER ALLOWING T HE DEDUCTION UNDER SECTION 80IB(10) IN CONSTRUCTION IN THE RELEVANT ASSESSMENT YEARS EVEN WHEN THERE IS AN ELEMENT OF COMMERCIAL CONSTRUCTION IN A HOUSING PROJECT CAN BE SAID TO ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE? THE VIEW THAT AN ELEMENT OF COMMERCIAL CONSTRUCTION PER SE WOULD NOT VITIATE CLAIM OF DEDUCTION UNDER SECTION 80IB(10) IS NOT ONLY A POSSIBLE VIEW OF THE MATTER IT IS A VIEW ADOPTED BY THE SPECIAL BENCH OF THIS TRIBUNAL AS AL SO A VIEW ACCEPTED BY THE TAX DEPARTMENT IN PROCEEDINGS BEFORE THE SPECIAL BE NCH THE POINT OF DEBATE IF AT ALL HAS BEEN QUANTUM OF SUCH COMMERCIAL CONSTRU CTION. LEARNED COMMISSIONERS VIEW OF THE MATTER MAY BE ONE OF THE POSSIBLE VIEWS OF THE MATTER BUT THE VIEW HE CLAIMS TO BE WHOLLY ERRONEO US IS ALSO A POSSIBLE VIEW OF THE MATTER AND IS NOT ONLY VIEW OF THE SPECIAL BEN CH OF THIS TRIBUNAL IN THE CASE OF BRAHMA ASSOCIATES (SUPRA) BUT ALSO A VIEW F AIRLY ACCEPTED BY THE DEPARTMENT ITSELF IN PROCEEDINGS BEFORE THE SPECIAL BENCH. THE VERY FOUNDATION OF LEARNED COMMISSIONERS IMPUGNED REVIS ION ORDERS IS THUS DEVOID OF LEGALLY SUSTAINABLE MERITS. THERE IS NO LEGALLY SUSTAINABLE FINDINGS BY THE LEARNED COMMISSIONER TO THE EFFECT THAT THE ASSESSM ENT ORDERS IN QUESTION ARE ERRONEOUS IN LAW AND IN THE ABSENCE OF SUCH A FIND ING WHICH IS SINE QUA NON FOR EXERCISE OF POWERS UNDER SECTION 263 WE CANNOT UPHOLD THE ACTION OF THE LEARNED COMMISSIONER. 7. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WE LL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE ADMITTEDLY SIMILAR TO THAT OF THE CASE OF M/S. ANIK DEVELOPMENT CORPORATION (SUPRA) WE RESPECTFULLY FOLLOW THE ORD ER OF THE TRIBUNAL DATED 30/09/2010 PASSED IN THE SAID CASE AND SET ASIDE TH E IMPUGNED ORDERS OF THE ITA NOS.3173-3174/M/09 M/S.AJMERA HOUSING CORPORATION . . 8 LEARNED COMMISSIONER OF INCOME-TAX PASSED UNDER SEC TION 263 RESTORING THAT OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) OF TH E ACT. 8. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF FEBRUARY 2011. SD. SD. (N.V. VASUDEVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 9 TH FEBRUARY 2011. COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT CENTRAL-I MUMBAI 4. THE DR G BENCH MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR ITAT MUMBAI