MUDHIT MADANLAL GUPTA, MUMBAI v. DCIT 17(2), MUMBAI

ITA 3444/MUM/2010 | 2007-2008
Pronouncement Date: 23-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 344419914 RSA 2010
Assessee PAN AACPG3554F
Bench Mumbai
Appeal Number ITA 3444/MUM/2010
Duration Of Justice 7 month(s) 23 day(s)
Appellant MUDHIT MADANLAL GUPTA, MUMBAI
Respondent DCIT 17(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-12-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 23-12-2010
Date Of Final Hearing 02-12-2010
Next Hearing Date 02-12-2010
Assessment Year 2007-2008
Appeal Filed On 30-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH BEFORE SHRI N.V.VASUDEVAN JUDICIAL MEMBER & SHRI T.R.SOOD ACCOUNTANT MEMBER I.T.A.NOS.3220 3445 & 3444/MUM/2010 A.YRS.2005-06 2006-07 & 2007-08 SHRI MUDHIT MADANLAL GUPTA PROP. M/S EMGEE DEVELOPERS & CONSULTANTS 17/17H BAHUBALI BUILDING CAWASJI PATEL STREET FORT MUMBAI 400 001. PAN: AACPG 3554 F VS. ASST. COMMISSIONER OF I.T. 17(2) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. S. K. TULSIYAN. RESPONDENT BY : MR. HARI GOVIND SINGH & MS.REENA JHA TRIPATHI. O R D E R PER T.R.SOOD AM: IN ALL THESE APPEALS THE ISSUE REGARDING DEDUCTION U/S.80IB(10) IS COMMON IN ALL THE THREE YEARS. THEREFORE FIRST OF ALL WE SHALL TAKE UP THIS ISSUE. WITH THE CONSENT OF THE PARTIES FOR THIS PURPOSE THE ASSESSMENT ORDER AND FIRST APPELLATE AUTHORITYS OR DER FOR A.Y 2007-08 WAS CONSIDERED BECAUSE ACCORDING TO BOTH THE PARTI ES ALL THE FACTS IN RESPECT OF DEDUCTION U/S.80IB(10) ARE AVAILABLE IN DETAILE FOR THIS YEAR. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE BEING AN INDIVIDUAL WAS CARRYING ON PROPRIETARY BUSINESS OF CONSTRUCTION AN D DEVELOPMENT OF RESIDENTIAL LAND BUILDING PROJECTS IN THE NAME AND STYLE OF M/S. EMGEE DEVELOPERS & CONSULTANTS. THE ASSESSEE VIDE DEVELOP MENT AGREEMENT DATED 3-11-2003 WITH VARIOUS CO-OWNERS ENTERED INTO A DEVELOPMENT 2 AGREEMENT FOR CONSTRUCTION OF RESIDENTIAL FLATS ON THE LAND SITUATED AT ANTOP HILL WADALA MATUNGA MUMBAI AND THE TOTAL P LOT MEASURED APPROXIMATELY 7633.82 SQ.MTS. THROUGH THIS AGREEMEN T THE ASSESSEE WAS GRANTED DEVELOPMENT RIGHTS. OUT OF THIS LAND AR EA ADMEASURING 637.48 SQ.MTS. WAS EXCLUDED WHICH WAS REFERRED TO A RESERVED LAND FALLING UNDER SCHOOL RESERVATION WHICH WAS NOT TO B E INCLUDED IN THE PROJECT. HOWEVER THE PROJECT INCLUDED 200 SQ.MTS. OF LAND REFERRED TO AS OFFICE BLOCK LAND WHICH WAS FOR SELF USE. THRO UGH THIS AGREEMENT ASSESSEE WAS TO GET 51% OF THE CONSTRUCTED AREA AND 49% OF THE CONSTRUCTED AREA WAS TO GO TO THE LAND-LORD IN LIEU OF THE LAND. THE COSTS TOWARDS CONSTRUCTION AND VARIOUS OTHER CHARGE S AND DEVELOPMENT OF LAND ETC. WERE TO BE INCURRED BY THE ASSESSEE. THE ASSESSEE FILED AN APPLICATION SEEKING APPROVAL OF THE PLANS FROM MUNI CIPAL CORPORATION WHICH WERE SANCTIONED BY INTIMATION OF DISAPPROVAL [FOR SHORT IOD] DATED 8-1-2004. A DETAILED BLOCK PLAN SHOWED THAT A SSESSEE WANTED TO CONSTRUCT FOUR WINGS KNOWN AS WINGS A B C AND D AN D THESE WERE SUPPOSED TO BE INDEPENDENT WINGS. INITIALLY ASSESS EE DECIDED TO DEVELOP WINGS A B AND C AS A HOUSING PROJECT CONSI STING OF RESIDENTIAL UNITS MEASURING IN THE RANGE OF 500 SQ.FT. TO 800 S Q.FT. IT WAS ALSO PROPOSED THAT BUILT-UP AREA OF SHOPS AND OTHER COMM ERCIAL ESTABLISHMENTS WOULD NOT EXCEED 5% OF THE AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR 2000 SQ.FT. WHICHEVER IS LES S. THE COMMENCEMENT CERTIFICATE OF THE GROUND WORK OF THE ENTIRE PLOT OF LAND WAS SANCTIONED VIDE COMMENCEMENT CERTIFICATE CC 3 NO.EEBPC/118/FN/A DATED 11-2-2004. THIS CERTIFICATE WAS ISSUED UPTO TO PLINTH LEVEL ONLY. SOME AMENDMENTS WERE MADE TO THE PLANS AND THEREFORE A FRESH COMMENCEMENT CERTIFICATE DATED 12 -3-2004 WAS ISSUED. AFTER THIS CERTIFICATE ASSESSEE WANTED TO DEVELOP WINGS B AND C OF THE PROJECT AND ACCORDINGLY OBTAINED COMMENCEMEN T CERTIFICATE FOR THE ENTIRE WORK OF WINGS B AND C VIDE COMMENCEMENT CERTIFICATE DATED 29-3-2004. THE WORK OF THESE BLOCKS WAS COMPLETED D URING THE A.Y 2005-06. LATER ON WORK ON WING A WAS ALSO COMMENCE D AND ULTIMATELY OCCUPATION CERTIFICATES WERE RECEIVED AS UNDER: PARTICULARS OF OCCUPATION CERTIFICATE AREA CERTIFICATE AVAILABLE AT PAPER BOOK PAGE NO (I) OCCUPATION CERTIFICATE CC NO. EEBPC/118/FN/A OF 31/05/05 B WING (FULL) 48A (II) OCCUPATION CERTIFICATE CC NO.EB/118/FN/A OF 20/01/06 C WING (PART) 49-50 (III) OCCUPATION CERTIFICATE CC NO.EB/118/FN/A OF 11/09/07 C WING (BALANCE) 51 (IV) OCCUPATION CERTIFICATE CC NO.EB/118/FN/A OF 03/03/08 A WING (FULL) 52-53 THE AREAS WHICH WERE COMPLETED DURING A.YRS. 2005-0 6 2006-07 AND 2007-08 AND WHICH CAME TO THE SHARE OF THE ASSESSEE WERE SOLD DURING THESE YEARS AND DEDUCTION U/S.80IB(10) WAS CLAIMED DURING ALL THESE YEARS ON THE PROFITS ON SALE OF FLATS. ACCORDING TO THE ASSESSEE ASSESSEE HAD COMPLIED WITH AND FULFILLED ALL THE CO NDITIONS LAID DOWN IN SEC.80IB(10) OF THE I.T.ACT. 3. A SURVEY WAS CONDUCTED ON 01-03-2006. IN THIS SU RVEY STATEMENTS OF FEW OF THE FLAT OWNERS WERE RECORDED IN WHICH IT WAS ACCEPTED THAT SOME OF THE FLAT HAVE BEEN JOINED BY SUCH OWNERS 4 TOGETHER AND THE COMBINED UNIT AREA WAS IN EXCESS O F 1000 SQ.FT. VIDEO CDS AND PHOTO CLIPS WERE ALSO TAKEN DURING THE SURV EY. ON A QUERY BY THE AO IN THIS REGARD THE ASSESSEE DURING A.Y 2005 -06 STATED VIDE LETTER DATED 18-12-2007 AS UNDER: 4.4. IN REPLY THE ASSESSEE FILED A LETTER DATED D ECEMBER 18 2007 WHEREIN IT WAS STATED AS UNDER: FROM THE FACTS ABOVE IT IS RESPECTFULLY SUBMIT TH AT THE ASSESSEE HAD AT NO POINT OF TIME INTENDED TO CONSTRUCT AND SELL UNI TS IN EXCESS OF 1000 SQ.FEET. IN THE ENTIRE PROJECT OUT OF 100 FLATS AN D MORE ONLY 2 FLATS HAVE BEEN COMBINED (THAT ALSO BY THE OWNERS). THIS CLEARLY EVIDENCES THE INTENTION OF THE BUILDER. HAD THERE BEEN AN EN TIRE WIN OR A SECTION WHERE TWO OR MORE FLATS HAVE BEEN COMBINED TO FORM RESIDENTIAL UNITS IN EXCESS OF 1000 SQ.FEET. ONE COULD ARGUE THAT THE INTENTION OF THE BUILDER WAS MALAFIDE AND TO ABUSE THE LAW. HOWEVER THE FACTS OF THE ASSESSEE ARE QUITE TO THE CONTRARY. THE 100 PLUS F LATS ARE CONSTRUCTED AS SEPARATE INDEPENDENT RESIDENTIAL UNITS WITH LESS TH EN 1000 SQ.FEET BUILT UP AREA. ALL FLATS WERE CONSTRUCTED AS PER APPROVE D PLAN AND WERE MARKETED AND SOLD AS SINGLE UNITS. FURTHER YOU WILL APPRECIATE THAT AT THE TIME OF GI VING POSSESSION THE FLATS WERE SEPARATE INDEPENDENT RESIDENTIAL UNITS. THEY HAD SEPARATE ENTRANCES SEPARATE KITCHEN BATHROOMS ETC. IT MAY BE NOTED THAT THE FLATS WERE COMBINED BY THE OWNERS AT THEIR COST AND MEANS. THE ASSESSEE WAS NOT EVEN INFORMED BY THE FLAT OWNERS. THE ASSESSEE HAD NOT KNOWLEDGE AND WAS IN NO MANNER A PARTY TO THE D ECISION OF THE OWNER TO COMBINE THE FLATS. IN FACT WHEN IT WAS BO UGHT TO THE KNOWLEDGE OF THE ASSESSEE HE OBJECTED TO THE SAME AND INSTRUCTED THE OWNER TO SEEK APPROVAL PRIOR TO ANY FURTHER RENOVAT ION. IT IS RESPECTFULLY SUBMITTED THAT THE ASSESSEE CANN OT IN ANY MANNER BE HELD RESPONSIBLE FOR THE UNILATERAL ACT OF THE OWNE R SPECIALLY AFTER THE POSSESSION IS GIVEN. THE ASSESSEE HAD NO CONTROL OVER THE FLATS AN IT WOULD BE UNFAIR AND UNJUST TO PENALIZE THE ASSESSEE FRO WHAT THE OWNER OF THE FLATS HAS DONE. IT IS RESPECTFULLY SUBMITTED THAT SECTION 80IB(10) REQUIRES THAT THE DEVELOPER CONSTRUCTS UNITS LESS THEN 1000 SQ.FEET. NO WHERE IN LAW IS THE BUILDER PROHIBITED TO SELL ADJOINING FLATS TO M EMBERS OF THE SAME FAMILY. ALSO THE LAW DOES NOT REQUIRE ONCE THE PR OJECT IS COMPLETED OR THE FLATS ARE HANDED OVER THE BUILDER SHOULD ENSUR E THAT THE CONDITION SPECIFIED IN 80IB(10) ARE CONTINUED TO BE COMPLIED WITH BY THE NEW OWNERS. THE LAW CANNOT MAKE THE BUILDER PERMANEN TLY RESPONSIBLE FOR THE PROJECT. THE SECTION 80IB(10) PROVIDES TAX RELIEF TO THE DEV ELOPER. AS LONG AS THE DEVELOPER HAS SATISFIED THE CONDITIONS OF SECTI ON 80IB(10) HE SHOULD BE ENTITLED TO THE RELIEF. IT WOULD BE WR ONG AND BAD IN LAW TO DENY THE BENEFIT TO THE DEVELOPER FOR REASONS AND A CT OF A THIRD PERSON. 5 IT IS ONCE AGAIN SUBMITTED THAT THE ASSESSEE HAS SA TISFIED ALL THE CONDITIONS SPECIFIED U/S.80IB AND THEREFORE RIGHTLY ENTITLED TO THE DEDUCTION. FURTHER THE ASSESSEE SHOULD NOT BE PEN ALIZED FOR THE ACT DONE BY THE OWNER OF THE FLAT WITHOUT THE KNOWLEDGE AND APPROVAL OF THE ASSESSEE. WITHOUT PREJUDICE TO THE ABOVE WE WOULD FURTHER LIKE TO SUBMIT THAT EVEN IF THE DISALLOWANCE IS TO BE MADE ON THIS GROU ND DISALLOWANCE SHOULD BE ON PROPORTIONATE BASIS. FURTHER YOU WIL L APPRECIATE THE FACT THAT EVEN AFTER COMBINING THE FLAT NO.301 (349 SQ.F T.) AND 302 (456 SQ.FT.) OF MR. D. PRASAD THE AREA OF FLAT STILL WOU LD NOT DOES EXCEED 1000 SQ.FT. HENCE THERE IS ONLY ONE UNIT (FLAT N O.103 AND 104) IN THE ENTIRE PROJECT WHICH IS EXCEEDING 1000 SQ.FT. ACCO RDINGLY SINCE ONLY ONE UNIT DOES NOT SATISFYING THE CONDITIONS OF SECT ION 80IB DISALLOWANCE SHOULD BE RESTRICTED TO PROFIT ATTRIBU TABLE TO THIS UNIT ONLY. IN THIS REGARDS RELIANCE IS PLACE ON THE JUDGMENT OF HONBLE ITAT IN THE CASE OF ARUN EXCELLO FOUNDATION (P) LTD. VS. AS STT. COMMISSIONER OF INCOME TAX (2007) 108 TTJ (CHENNAI) 71. HOWEVER AO DID NOT AGREE WITH THESE SUBMISSIONS AS HE WAS OF THE VIEW THAT IT IS NOT RELEVANT WHO HAS CREATED THE CO MBINED UNIT AS LONG AS THE SIZE OF THE EACH UNIT WAS MORE THAN 1000 SQ. FT. DEDUCTION U/S.80IB(10) COULD NOT BE ALLOWED AND THEREFORE I N A.Y 2005-06 DEDUCTION U/S.80IB(10) WAS DENIED ON THIS ACCOUNT. 4. IN A.Y 2006-07 DEDUCTION WAS DENIED ON THE BASIS OF SIZE OF THE UNITS AS DISCUSSED ABOVE AS WELL AS A FURTHER OBJEC TION THAT ASSESSEE HAS NOT FILED COMPLETION CERTIFICATE IN RESPECT OF D WING. IN A.Y 2007- 08 AGAIN DETAILED QUERIES WERE RAISED AND IN RESPON SE IT WAS MAINLY STATED THAT ASSESSEE HAD FULFILLED ALL THE CONDITIO NS PRESCRIBED IN SECTION 80IB(10). ANOTHER ISSUE WAS RAISED THAT ASSESSEE WA S NOT THE OWNER OF THE LAND. IT WAS SUBMITTED THAT THERE IS NO REQUIRE MENT UNDER THE SECTION THAT ASSESSEE SHOULD BE OWNER OF THE LAND A ND IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF THE AHMEDABA D BENCH OF THE TRIBUNAL IN THE CASE OF RADHE DEVELOPERS & ORS. VS. ITO 113 TTJ (AHD) 6 300. IN RESPECT OF NON SUBMISSION OF COMPLETION CER TIFICATE IT WAS SUBMITTED THAT THE HOUSING PROJECT CONSISTED OF FOU R WINGS I.E. A B C AND D. IT WAS FURTHER SUBMITTED THAT WING A HAD 13 FLOORS WITH FOUR FLATS ON EACH FLOOR AND WINGS B AND C HAD TEN FLOOR S WITH FOUR FLATS ON EACH FLOOR. THE D WING WAS TO HAVE ONLY TWO FLOORS WITH FIVE FLATS AND THEREFORE THE AREA IN D WING WAS ONLY 3% OF THE TOT AL PROJECT. FURTHER A B AND C WINGS WERE COMPLETED BEFORE 31 ST MARCH 2008 AND HENCE SAME SHOULD BE TREATED AS AN INDEPENDENT HOUSING PR OJECTS. IT WAS ALSO POINTED OUT THAT D WING WAS DELAYED BECAUSE OF LOCAL REGULATORY PROBLEMS AND EVEN THE COMMENCEMENT CERTIFICATE WAS NOT ISSUED FOR THE SAME. SINCE ASSESSEE HAD NOT COMPLETED D WING A ND HAD ALSO NOT SOLD ANY OF THE FLATS IN THE D WING AND DEDUCTION WAS CLAIMED ONLY IN RESPECT OF A B AND C WINGS SAME WERE ALLOWABLE AN D IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANISATION VS. ITO 115 TTJ 485. 5. THE AO AFTER CONSIDERING THESE SUBMISSIONS HELD THAT ASSESSEE HAD COMPLETED ONLY A B AND C WINGS UPTO 31 ST MARCH 2008 AND D WING WAS NOT COMPLETED AND ACCORDINGLY NO COMPLET ION CERTIFICATION WAS OBTAINED FOR D WING FROM MUNICIPAL AUTHORITIES AND THEREFORE THE HOUSING PROJECT WAS NOT COMPLETED. IT WAS FURTHER O BSERVED THAT TOTAL PROJECT AREA WAS 1.88 ACRES AND SINCE ASSESSEES SH ARE WAS ONLY 51% OF THE BUILT UP AREA. THEREFORE THE PROJECT AREA W AS ONLY OF LESS THAN ONE ACRE. LASTLY THE AO RELYING ON THE OBSERVATION S MADE IN THE 7 ASSESSMENT YEARS 2005-06 AND 2006-07 THAT IN SOME O F THE FLATS UNITS AREA EXCEEDED 1000 SQ.FT. DEDUCTION U/S.80IB(10) W AS DENIED. 6. THE LD. CIT[A] AFTER CONSIDERING THE SUBMISSIONS OPINED THAT AS FAR AS OBJECTION REGARDING SIZE OF EACH UNIT BEING MORE THAN 1000 SQ.FT. IS CONCERNED THE ASSESSEE HAS SUCCESSFULLY EXPLAIN ED. IN FACT IT WAS OBSERVED BY THE CIT[A] VIDE PARA 3.4.4 AS UNDER: 3.4.4 THE THIRD GROUND ON WHICH DEDUCTION UNDER SE CTION 80IB HAS NOT BEEN GIVEN IS THAT CERTAIN FLATS HAVE BEEN MERGED AND THEIR AREA EXCEED 1000 SQ.FT. THIS HAS SURFACED DURING SURVEY CONDUCTED U/ S.133A AT THE PROJECT SITE. HOWEVER THE APPELLANT HAS SUCCESSFULLY EXPLAINED TH AT BUILDER WILL HAVE NO CONTROL IF AFTER THE SALE THE CERTAIN FLAT-OWNERS D ECIDE TO MERGE THE FLATS. HOWEVER HE FURTHER OBSERVED THAT SINCE D WING WAS NOT COMPLETED THEREFORE THE HOUSING PROJECT WAS NOT COMPLETED. S IMILARLY SINCE ASSESSEES SHARE WAS ONLY 51% OF THE BUILT UP AREA THEREFORE THE TOTAL LAND AREA WITH ASSESSEE WAS LESS THAN ONE ACRE. IN FACT HE CONCLUDED HIS FINDING VIDE PARA 3.4.5 WHICH IS AS UNDER: I FIND THAT AS DISCUSSED ABOVE CERTAIN BASIC CONDI TION SUCH AS COMPLETION OF THE PROJECT BEFORE 31 ST MARCH 2008 HAS NOT BEEN ACCOMPLISHED BY THE ASSESSEE. IN THIS SCENARIO DEDU CTION UNDER 80 IR CANNOT BE GIVEN.RELIANCE PLACED BY THE ASSESSEE ON THE CASE OF BRIGADE ENTERPRISES 119 ITJ BANGALORE 269 IS ALSO NOT ACCEP TABLE. IN THE CITED CASE THE SANCTIONS AND PERMISSIONS WERE OBTAINED SE PARATELY FOR ELIGIBLE UNITS. HOWEVER IN THE CASE OF THE ASSES SEE THE PROJECT UNDER CONSIDERATION EMGEE GREEN IS A SINGLE UNIT AND TH IS PROJECT HAS NOT BEEN COMPLETED. OTHER CASE LAWS CITED BY THE ASSES SEE DO NOT ADDRESS THIS ISSUE. THEREFORE I FIND THAT DISALLOWANCE MADE BY THE ASSESSING OFFICER IS ACCORDING TO LAW. THE ASSESSEE HAS ALSO NOT SATISFIED THE SECOND REQUIREMENT THAT THE PROJECT HAS TO BE ON AN AREA EXCEEDING ONE ACRE. THE DISALLOWANCE OF `.1 78 70 807/- IS UPHEL D. THIS GROUND OF APPEAL IS DISMISSED. 7. BEFORE US LD. COUNSEL OF THE ASSESSEE CARRIED U S THROUGH THE ASSESSMENT ORDER AND CIT[A]S ORDER AND SUMMARIZED THE FACTS AGAIN. HE POINTED OUT THAT THE ASSESSEE ENTERED INTO A DEV ELOPMENT 8 AGREEMENT DATED 3-11-2003 THROUGH WHICH A PARCEL OF THE LAND WAS TAKEN FOR DEVELOPMENT. THE TOTAL AREA OF THE LAND W AS 7633.82 SQ.MTS. WHICH WOULD BE ABOUT 1.88 ACRES. OUT OF THIS 637.48 SQ.MT. WAS NOT TAKEN UP FOR DEVELOPMENT BECAUSE THAT PORTION OF TH E LAND FELL UNDER SCHOOL RESERVATION. FURTHER 200 SQ.MT. OF THE LAND ON WHICH AN OFFICE BLOCK WAS CONSTRUCTED WAS TO BE USED FOR CONSTRUCTI ON OF PERSONAL USE IN THE SHAPE OF OFFICE ETC. HE POINTED OUT THAT A C OPY OF THE DEVELOPMENT AGREEMENT IS ANNEXED AT PAGES 1 TO 30 O F THE PAPER BOOK AND THE FACTS ARE CLEARLY MENTIONED AT PAGE 5 OF THE PAPER BOOK. THE BUILT UP AREA WAS TO BE SHARED WITH THE CO-OWNE RS OF THE LAND AND ASSESSEE WAS ENTITLED TO 51% OF THE BUILT UP AREA N ON DEDUCTION OF TAX AT SOURCE. BALANCE 49% WOULD GO TO THE LAND OWNER A S PER CLAUSE 13 OF THE AGREEMENT. IN PURSUANCE OF THIS DEVELOPMENT AGREEMENT ASSESSEE MADE PLANS AND SOUGHT APPROVAL OF THE BOMB AY MUNICIPAL CORPORATION AND ULTIMATELY THE PLANS WERE APPROVED BY AN IOD VIDE LETTER DATED 8-1-2004 COPY OF WHICH IS PLACED AT P AGES 3`1 TO 38 OF THE PAPER BOOK. HE THEN REFERRED TO PAGE 39 OF THE PAPER BOOK WHICH IS A COPY OF PLANS AND EXPLAINED THAT ASSESSEE HAD PLANNED TO CONSTRUCT FOUR WINGS CONSISTING OF A B C AND D WI NGS. WING D WAS MEANT FOR PERSONAL USE OF THE ASSESSEE AND THE OWNE RS OF THE LAND AS OFFICE COMPLEX AND IN FACT AN OLD COMPLEX WAS ALR EADY EXISTING THERE. 8. THE ASSESSEE INITIALLY DECIDED TO DEVELOP A B A ND C WINGS CONSISTING OF RESIDENTIAL UNITS BETWEEN 500 SQ.FT. TO 800 SQ.FT. IN VIEW OF THE IOD DATED 8-1-2004 COMMENCEMENT CERTIFICATE WAS ISSUED TO 9 THE ASSESSEE ON 11-2-2004 THROUGH WHICH PERMISSION TO CONSTRUCT UPTO PLINTH LEVEL WAS ONLY GIVEN AND THE COPY OF THE SAM E IS PLACED AT PAGE 47 OF THE PAPER BOOK. LATER ON THERE WAS SOME AMEN DMENT IN THE PLANS AND ACCORDINGLY THESE AMENDED PLANS WERE AP PROVED BY THE BMC VIDE LETTER DATED 11-3-2004 COPY ENCLOSED AT P AGE 40 OF THE PAPER BOOK AND A FURTHER COMMENCEMENT CERTIFICATE W AS ISSUED ON 12- 4-2004. THE ASSESSEE DECIDED TO DEVELOP INITIALLY B AND C WINGS AND ACCORDINGLY A COMMENCEMENT CERTIFICATE FOR THE ENTI RE WORK OF WINGS A B AND C WAS ISSUED BY THE MUNICIPAL CORPORATION AND ENDORSEMENT FOR THE SAME WAS MADE ON 29-3-2004 WHICH IS AVAILABLE A T PAGE 48 OF THE PAPER BOOK. ACCORDINGLY THE WORK FOR THESE TWO WIN GS WAS COMMENCED AND SAME WAS COMPLETED IN A.Y 2005-06 AND TOTAL SALEABLE AREA AVAILABLE OUT OF THESE TWO WINGS WAS 43516 SQ. FTS. [WING B 23410 SQ.FT. + WING C 20097 SQ.FT.]. THE EN TIRE COST OF CONSTRUCTION WAS BOOKED UNDER THE HEAD WORK-IN-PRO GRESS [WIP] WADALA. OUT OF THIS DURING A.Y 2005-06 ASSESSEE SO LD 10441 SQ.FT. AREA AND RECEIVED A TOTAL CONSIDERATION OF ` `` ` .4 27 09 133/- WHICH WAS CREDITED TO THE PROFIT & LOSS ACCOUNT. THE COST OF CONSTRUCTION REGARDING THIS PORTION AMOUNTING TO ` `` ` .2 21 94 564/- WAS TRANSFERRED FROM WORK- IN-PROGRESS ACCOUNT WHICH ULTIMATELY RESULTED INTO NET PROFIT OF ` `` ` .1 79 03 569/- IN A.Y 2005-06 AGAINST WHICH DEDUCTI ON U/S.80IB(10) WAS CLAIMED WHICH WAS MAINLY DENIED ON THE BASIS OF THE SURVEY REPORT IN WHICH THE STATEMENTS OF FEW FLAT OWNERS WERE REC ORDED AND IT WAS FOUND THAT THE SIZE OF THE FLAT WAS MORE THAN 1000 SQ.FT. HE SUBMITTED 10 THAT DURING ASSESSMENT PROCEEDINGS ITSELF IT WAS PO INTED OUT TO THE AO THAT ASSESSEE HAD CONSTRUCTED ALL THE FLATS FOR LES S THAN 1000 SQ.FT. AND IT WAS THE PURCHASER WHO HAD JOINED THE SAME. IN FA CT ONE OF THE BUYERS HAD CONFIRMED THIS FACT IN HIS STATEMENT ITS ELF. THOUGH AO DID NOT ACCEPT THIS POSITION BUT WHEN THIS WAS EXPLAIN ED TO THE LD. CIT[A] HE AGREED WITH THE SUBMISSIONS OF THE ASSESSEE VIDE PARA 3.4.4. SINCE THE DEPARTMENT HAS NOT FILED ANY APPEAL OR CROSS OB JECTION AGAINST THIS FINDING THEREFORE THIS ISSUE HAS BECOME FINAL IN FAVOUR OF THE ASSESSEE. 9. LATER ON AFTER COMPLETED OF B & C WINGS ASSESSE E PROPOSED TO START WORK ON A WING FOR WHICH COMMENCEMENT CERTIFI CATE WAS AGAIN ISSUED BY THE MUNICIPAL CORPORATION VIDE ENDORSEMEN T DATED 18-3- 2005. THE CERTIFICATE WAS ISSUED FOR CONSTRUCTION U PTO THE FOURTH FLOOR. THIS WAS FURTHER EXTENDED UPTO THE 9 TH FLOOR VIDE ENDORSEMENT DATED 24-3-2006 AND LATER ON THE CONSTRUCTION WAS ALLOWED UPTO 10 TH & 11 TH FLOORS. HE SUBMITTED THAT OCCUPATION CERTIFICATES F OR THE ABOVE CONSTRUCTION HAVE BEEN OBTAINED WELL BEFORE 31 ST MARCH 2008 AND RELEVANT CERTIFICATES ARE AVAILABLE AT PAGES 48A TO 53 OF THE PAPER BOOK. THE AREA CONSTRUCTED IN A.YRS. 2006-07 AND 20 07-08 WAS ACCORDINGLY SOLD AND PROPORTIONATE COST WAS DEBITED FROM WORK-IN- PROGRESS ACCOUNT AND DEDUCTION U/S.80IB(10) WAS CLA IMED. THE DEDUCTION HAS BEEN MAINLY DENIED BY THE AO AND CONF IRMED BY THE LD. CIT[A] ON TWO POINTS VIZ. (I) THAT THE HOUSING PROJ ECT WOULD CONSIST OF A B C AND D WINGS AND SINCE ASSESSEE HAS NOT CONS TRUCTED AND 11 COMPLETED THE D WING THEREFORE DEDUCTION WAS NOT ALLOWABLE; AND (II) THE ASSESSEE WAS ENTITLED ONLY TO 51% SHARE OF THE BUILT UP AREA ON THE TOTAL PROJECT IN 1.88 ACRES OF LAND THEREFORE ASSESSEES SHARE WAS LESS THAN 1 ACRE AND AS SUCH ASSESSEE IS NOT ENTITL ED TO THE DEDUCTION. 10. HE CARRIED US THROUGH THE PROVISIONS OF SECTION 80IB(10) AND SUBMITTED THAT BASICALLY DEDUCTION IN HOUSING PROJE CT IS TO BE ALLOWED IF THE FOLLOWING CONDITIONS ARE FULFILLED: 1. THE DEVELOPMENT AND CONSTRUCTION OF HOUSING PROJECT COMMENCES ON OR AFTER 1-10-98 AND IS COMPLETED BEFO RE MARCH 31 2008; 2. THE PROJECT IS APPROVED BY THE LOCAL AUTHORITY BEFO RE 31-3- 2007; 3. LAND AREA FOR THE PROJECT SHOULD NOT BE LESS 1 ACRE ; 4. BUILT UP AREA OF FLAT SHOULD NOT EXCEED 1000 SQ.FT. IF PROJECT IS LOCATED IN MUMBAI; 5. BUILT UP AREA OF SHOPS SHOULD NOT EXCEED 5% OF AGGR EGATE BUILT UP AREA OR 2000 SQ.FT. WHICHEVER IS LESS. HE POINTED OUT THAT THE ASSESSEE HAD FULFILLED ALL THESE CONDITIONS BECAUSE THE PROJECT WAS APPROVED ON 8-1-2004 AND CO MPLETED BEFORE 31-3-2008 WHICH MEANS THAT THE PROJECT WAS APPROVED BY THE LOCAL AUTHORITY BEFORE 31-3-2007. THE LAND AREA OF THE PR OJECT WAS MORE THAN 1 ACRE THE SIZE OF THE FLATS IN ALL THE THREE WINGS I.E. A B AND C WAS BETWEEN 500 SQ.FT. TO 800 SQ.F.T. THUS LESS TH AN 1000 SQ.FT. EVEN THE COMMERCIAL AREA WAS TO BE LESS THAN 5% OF THE A GGREGATE BUILT UP AREA OR 2000 SQ.FT. WHICHEVER IS LESS. HE POINTED O UT THAT DEDUCTION HAS BEEN MAINLY DENIED BY THE AO AND THE DENIAL HAS BEEN CONFIRMED BY THE LD. CIT[A] ON THE BASIS OF THE TWO ISSUES I. E. (I) SINCE D WING WAS NOT COMPLETED THEREFORE THE HOUSING PROJECT W OULD NOT BE SAID TO 12 HAVE BEEN COMPLETED; AND (II) THE AREA OF THE LAND WAS LESS THAN 1 ACRE. 11. COMING TO THE FIRST OBJECTION HE POINTED OUT TH AT THE HOUSING PROJECT HAS NOT BEEN DEFINED IN SECTION 80IB(10). T HEREFORE TO UNDERSTAND THE DEFINITION OF HOUSING PROJECT ONE H AS TO EITHER LOOK AT THE DICTIONARY OR AT VARIOUS JUDICIAL DECISIONS. IN VARIOUS DECISIONS IT HAS BEEN HELD THAT THE HOUSING PROJECT DOES NOT NECESSA RILY MEAN THAT THERE SHOULD BE GROUP OF BUILDINGS AND ONLY THEN SA ME CAN BE CALLED AS THE HOUSING PROJECT. IN FACT BOARD ITSELF ON 4-5-2 001 IN ITS CLARIFICATION POINTED OUT THAT ADDITION TO HOUSING PROJECT ON EXI STING HOUSING PROJECT SITE CAN QUALIFY AS INFRASTRUCTURE FACILITY U/S.10( 23G) AND SECTION 80IB(10) PROVIDED THAT IT IS TAKEN UP AS A SEPARATE UNDERTAKING HAVING SEPARATE BOOKS OF ACCOUNTS SO AS TO ENSURE THAT COR RECT PROFITS CAN BE ASCERTAINED FOR THE PURPOSE OF SECTION 80IB(10). TH EREFORE IT IS CLEAR THAT WHERE THERE ARE DIFFERENT WINGS IN A PARTICULA R BUILDING EACH ONE OF THEM SINGLY OR JOINTLY CAN FORM A HOUSING PROJEC T IS ALLOWABLE FOR DEDUCTION U/S.80IB(10). 12. HE ALSO SUBMITTED THAT ASSESSEE HAD PLANNED FOU R WINGS I.E. A B C AND D AS HOUSING PROJECT BUT RIGHT FROM THE B EGINNING THE INTENTION WAS TO CLEARLY CONSTRUCT A B C AND D WI NGS WHICH ARE RESIDENTIAL BUILDINGS. THE D WING WAS TO BE CONSTRU CTED ONLY AS AN OFFICE BLOCK AND WAS TO BE USED FOR PERSONAL USE AN D NEVER MEANT TO BE SOLD. IN THIS REGARD REFERENCE WAS ALSO MADE TO THE RECITATION CLAUSES IN THE DEVELOPMENT AGREEMENT PARTICULARLY CLAUSE (H) AT PAGE 13 5 WHERE THIS FACT HAS BEEN CLEARLY MENTIONED. IN AN Y CASE THE PLAN WAS APPROVED FOR ALL THE WINGS TOGETHER BUT AS FAR AS T HE COMMENCEMENT CERTIFICATE IS CONCERNED THE SAME WAS NEVER GIVEN BY THE AUTHORITIES FOR D WING WHICH IS CLEAR FROM THE VARIOUS COMMENCE MENT CERTIFICATES GIVEN BY THE MUNICIPAL CORPORATION COPY OF WHICH IS PLACED AT PAGES 47 & 48 OF THE PAPER BOOK. HE EXPLAINED THAT NO CONSTR UCTION CAN TAKEN PLACE UNLESS COMMENCEMENT CERTIFICATE IS RECEIVED. THE MUNICIPAL CORPORATION TRIES TO CONTROL THE CONSTRUCTION ACTIV ITIES IN VARIOUS PARTS OF THE CITY CONSIDERING VARIOUS FACTORS LIKE NOISE LEVELS DISPOSAL OF DEBRIS AND OTHER DISTURBANCES CREATED DURING CONSTR UCTION AND THEREFORE THE CONSTRUCTION ACTIVITY IS CONTROLLED THROUGH THE MEDIUM OF COMMENCEMENT CERTIFICATE. IN THE CASE BEFORE US CON STRUCTION WAS NOT POSSIBLE AT ALL IN RESPECT OF THE D WING IN THE ABS ENCE OF COMMENCEMENT CERTIFICATE. HE ALSO POINTED OUT THAT THOUGH IT IS NOT DISPUTED THAT ASSESSEE HAS DETERMINED THE PROFITS S EPARATELY FOR A B AND C WINGS BUT AS A MATTER OF RECORD HE CLARIFIED THAT ASSESSEE HAS MAINTAINED SEPARATE ACCOUNTS FOR WADALA PROJECT BY WAY OF WORK-IN- PROGRESS ACCOUNT THROUGH WHICH PROFIT IN RESPECT OF A B C WINGS WAS DETERMINED. HE ALSO POINTED OUT THAT OCCUPATION CER TIFICATES IN RESPECT OF THESE THREE WINGS WERE ALSO RECEIVED BEFORE 31 ST MARCH 2008 THE CUT OFF DATE PROVIDED IN U/S.80IB(10) AND THE COPIE S OF THE SAME ARE AVAILABLE AT PAGES 48A TO 53 OF THE PAPER BOOK. 13. COMING TO THE CASE LAWS HE FIRST OF ALL RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANISATIO N VS. ITO 115 TTJ 14 484 (MUM). HE SUBMITTED THAT THIS IS A FIRST JUDGME NT IN THE SERIES OF JUDGMENTS WHERE THE DEFINITION OF HOUSING PROJECT W AS CONSIDERED AND IN ALMOST IDENTICAL CIRCUMSTANCES IT WAS HELD THAT EACH WING OR BLOCK WOULD CONSTITUTE A SEPARATE HOUSING PROJECT. THEN H E CARRIED US THROUGH THE JUDGMENT AND POINTED OUT THAT HOW ULTIM ATELY THE TRIBUNAL CONCLUDED THAT DEDUCTION U/S.80IB(10) WAS AVAILABLE IN RESPECT OF SIX WINGS WHICH COMPLIED WITH THE CONDITIONS PRESCRIBED U/S.80IB(10) OUT OF THE TOTAL ELEVEN WINGS CONSTRUCTED BY THE ASSESS EE. IN THIS CASE REFERENCE HAS ALSO BEEN MADE TO THE DECISION OF THE CALCUTTA BENCH OF THE TRIBUNAL IN THE CASE OF BENGAL AMBUJA HOUSING D EVELOPMENT LTD. VS. DCIT I.T.A.NO.1594 & 1737/CAL/2005 WHEREIN IN I DENTICAL CIRCUMSTANCES DEDUCTION U/S.80IB(10) WAS ALLOWED BY THE TRIBUNAL AND WHEN THE MATTER WAS FURTHER CARRIED TO THE HON'BLE CALCUTTA HIGH COURT THE APPEAL OF THE REVENUE WAS DISMISSED. THE ORDER OF THE HON'BLE CALCUTTA HIGH COURT IS PLACED AT PAGES 26 & 27 OF T HE PAPER BOOK DEALING WITH THE CASE LAWS. HE SUBMITTED THAT SIMIL AR VIEW WAS TAKEN IN THE CASE OF VANDANA PROPERTIES VS. ACIT 128 TTJ (MU M) (UO) 89. HE ALSO RELIED ON THE FOLLOWING DECISIONS- A) ITO VS. KHYATI FINANCIAL SERVICES I.T.A.NO.3740-M-0 8 COPY OF THE DECISION AVAILABLE AT PAGES 42 TO 59 OF THE PAP ER BOOK; AND B) DCIT VS. BRIGADE ENTERPRISES PVT. LTD. 199 TTJ 269 HE ALSO RELIED ON THE FOLLOWING OBSERVATIONS OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BRAMHA ASSOCIATES VS. JCIT 315 ITR (AT) 268- 15 .IF THE INCOME OF THE PROJECT PERTAINING EXCLUSIV ELY TO THE CONSTRUCTION OF RESIDENTIAL UNIT CAN BE SEPARATELY WORKED OUT AND THE OTHER REQUIREMENTS OF THE SECTION ARE SATISFIED THE RE IS NO GOOD REASON TO WITHHOLD GRANT OF INCENTIVES TO SUCH INCOME OF T HE UNDERTAKING. 14. COMING TO THE SECOND OBJECTION OF THE AO REGARD ING AREA OF LAND BEING LASS THAN ONE ACRE WHICH HAS BEEN CONFIR MED BY THE LD. CIT[A] HE SUBMITTED THAT LAND AREA ON WHICH THIS P ROJECT WAS UNDERTAKEN WAS 1.88 ACRES I.E. ABOUT 7633.88 SQ.MTS . IN FACT THE DEVELOPMENT AGREEMENT WOULD SHOW THIS POSITION IN T HE RECITATION CLAUSES. OUT OF THIS TOTAL AREA A SMALL PORTION AD MEASURING 637.48 SQ.MT. WAS DESIGNATED SEPARATELY BECAUSE THE SAME W AS RESERVED FOR LAND FALLING UNDER SCHOOL RESERVATION CATEGORY. ANO THER POTION OF THE LAND I.E. 200 SQ.MT. ON WHICH AN OFFICE BLOCK WAS C ONSTRUCTED WAS BASICALLY MEANT FOR CONSTRUCTION OF COMMERCIAL SPAC E AS D WING AND ULTIMATELY THE NET AREA OF THE PROJECT WAS ABOUT 70 00 SQ.MT. AS MENTIONED IN CLAUSE (H) OF THE RECITATION CLAUSES O F THE DEVELOPMENT AGREEMENT WHICH IS MORE THAN ONE ACRE. THE ONLY OBJ ECTION OF THE DEPARTMENT IS THAT SINCE AS PER THE DEVELOPMENT AGR EEMENT ASSESSEE WAS ENTITLED TO ONLY 51% SHARE OF THE BUILT UP AREA THE PLOT OF LAND COMING TO THE ASSESSEES SHARE WOULD BE REDUCED TO 0.96 ACRE AND HENCE THE CONDITION PRESCRIBED U/S.80IB(10) WOULD N OT BE FULFILLED. HE ARGUED THAT A CAREFUL READING OF SECTION 80IB(10) W OULD REVEAL THAT THERE IS NO CONDITION PRESCRIBED THAT FOR CLAIMING DEDUCTION U/S.80IB(10) THE OWNERSHIP OF THE LAND IS ALSO REQU IRED AND THIS ASPECT HAS ALREADY BEEN CONFIRMED BY THE AHMEDABAD BENCH O F THE TRIBUNAL 16 IN THE CASE OF RADHE DEVELOPERS & ORS. VS. ITO 113 TTJ 300 WHEREIN IT WAS ARGUED BY THE REVENUE THAT FOR CLAIMING DEDU CTION U/S.80IB(10) ASSESSEE MUST BE OWNER OF THE LAND ON WHICH THE HOU SING PROJECT IS TO BE CONSTRUCTED AND THE TRIBUNAL HAD HELD THAT SUCH CONTENTION WAS NOT SUSTAINABLE BECAUSE THERE IS NO SUCH CONDITION PRES CRIBED IN THE PROVISIONS OF SECTION 80IB(10). WHAT IS REQUIRED IS DEVELOPMENT AND BUILDING WORK AND AS SUCH CARRIED OUT BY THE ASSESS EE THROUGH REPATRIATE AGREEMENT THROUGH LAND OWNER WOULD ALS O MAKE THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S.80IB(10). HE FU RTHER SUBMITTED THAT WHAT IS REQUIRED BY SECTION 80IB(10) IS THAT THERE SHOULD BE A HOUSING PROJECT ON A LAND MEASURING ABOVE ONE ACRE. IN THE CASE BEFORE US THE HOUSING PROJECT ON THE LAND EVEN AFTER EXCLUDING TH E PORTION RESERVED FOR SCHOOL IS ABOUT 7000 SQ.MTS. WHICH IS MORE THAN ONE ACRE. SINCE THE ASSESSEE WAS NOT OWNER OF THE LAND AND THEREFO RE OWNERS WERE ALLOCATED 49% SHARE OF THE BUILT UP AREA AND THE CO ST OF CONSTRUCTION WAS TO BE BORNE BY THE ASSESSEE. THEREFORE AS FAR AS THE PROJECT IS CONCERNED IT REMAINED ON THE WHOLE AREA. IN ANY CAS E SIMILAR OBJECTION WAS RAISED IN THE CASE OF VANDANA PROPERT IES VS. ACIT [SUPRA] WHEREIN IT WAS POINTED OUT THAT IF THE SAID LAND WAS PROPORTIONATELY ALLOCATED AMONGST EACH BUILDINGS T HEN AREA ALLOTTED TO BUILDING E WOULD BE LESS THAN ONE ACRE. THE TRIBU NAL REJECTED THIS OBJECTION ON THE BASIS OF CLARIFICATION GIVEN BY TH E BOARD WHERE EVEN ADDITIONAL PROJECT WITHIN THE SAME HOUSING PROJECT WAS TO BE 17 CONSIDERED FOR THE PURPOSE OF DEDUCTION U/S.80IB(10 ) AND IT WAS SPECIFICALLY OBSERVED AS UNDER: SO FAR AS THE PRESENT CASE IS CONCERNED WE HAVE T O TAKE INTO CONSIDERATION THE ENTIRE AREA OF THE PLOT ON WHICH ALL THE BUILDING PROJECTS HAVE BEEN PLANNED I.E. A B C D & E THOUGH SOME OF THE BUILDINGS DO NOT QUALIFY FOR DEDUCTION U/S.80IB(10) OF THE ACT AND ADMITTEDLY THE SAME IS ALSO NOT CLAIMED. WE THERE FORE DO NOT AGREE WITH THE VIEW TAKEN BY THE AO AS WELL AS THE LEARNE D CIT[A] THAT THE ASSESSEE HAS VIOLATED THE ANOTHER CONDITION IN RESP ECT OF THE SIZE OF THE PLOT. THUS IN VIEW OF THE ABOVE DECISIONS AND IN VIEW OF THE PROVISIONS OF SECTION 80IB(10) AS WELL AS THE CLARIFICATION OF TH E BOARD WHEREBY DEDUCTION IS AVAILABLE EVEN FOR ADDITIONAL BUILDING ON THE SAME AREA THEN THE PROJECT WAS DEFINITELY ON AN AREA OF MORE THAN ONE ACRE AND WOULD QUALIFY FOR DEDUCTION U/S.80IB(10). RELIANCE WAS ALSO PLACED ON THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SHAKTI CORPORATION 32 SOT 438. 15. ON THE OTHER HAND LD. DR MS. REENA J. TRIPATHI REFERRED TO PAGE 39 OF THE PAPER BOOK WHICH IS A COPY OF THE PL AN OF VARIOUS WINGS AND SUBMITTED THAT A MERE LOOK AT THIS PLAN WOULD S HOW THAT ALL THE WINGS WERE BASICALLY CONNECTED AND IT WAS A CASE OF ONLY ONE BUILDING. THEN SHE REFERRED TO THE PROVISIONS OF SECTION 80IB (10) AND POINTED OUT THAT A READING OF THIS PROVISION WOULD SHOW THA T THE INTENTION OF THE LEGISLATION WAS TO GIVEN DEDUCTION FOR CONSTRUC TING HOUSES FOR ECONOMICALLY BACKWARD CLASSES AND THE DEDUCTION WAS MEANT FOR THE WHOLE PROJECT AND IF ONE PORTION OF THE BUILDING IS NOT CONSTRUCTED THEN 18 IT CANNOT BE SAID THAT THE HOUSING PROJECT HAS BEEN COMPLETED AND THUS IT WOULD NOT FULFILL THE CONDITIONS LAID DOWN IN SE CTION 80IB(10). IN THE CASE BEFORE US ADMITTEDLY D WING WAS NOT COMPLETE D. IN FACT CONSTRUCTION ITSELF HAS NOT COMMENCED AND THEREFOR E IT CANNOT BE SAID THAT THE HOUSING PROJECT HAS BEEN COMPLETED BEFORE 31-3-2008 AS PROVIDED IN SECTION 80IB(10). 16. FURTHER TO ABOVE LD. DR SHRI HARI GOBIND SINGH SUBMITTED THAT IT HAS NOT BEEN DISPUTED THAT ASSESSEE HAD ONLY 51% SHARE IN THE BUILT UP AREA. HE ALSO REFERRED TO THE PROVISIONS OF SECT ION 80IB(10) AND POINTED OUT THAT DEDUCTION WAS POSSIBLE ONLY WHEN T HE PROJECT WAS SITUATED ON A LAND WHICH IS MEASURING MORE THAN ONE ACRE. SINCE THE ASSESSEES SHARE IN THE BUILT UP AREA WAS ONLY 51% AND IF THE LAND AREA WAS PROPORTIONATELY ALLOCATED THE SHARE OF THE ASS ESSEE IN LAND AREA WOULD COME TO LESS THAN ONE ACRE AND THEREFORE IT CANNOT BE SAID THAT THE CONDITION REGARDING PROJECT BEING ON MORE THAN ONE ACRE OF LAND WOULD NOT BE FULFILLED AND THEREFORE CIT[A] HAS RIGHTLY DISALLOWED THE DEDUCTION ON THIS COUNT VIDE PARA 3.3 OF HIS OR DER. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. FIRST OF ALL LET US REPRODUCE THE PROVISIONS OF SECTION 80IB(10) WHICH READ AS UNDER: 80IB(10)- THE AMOUNT OF DEDUCTION IN THE CASE OF A N UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECTS APPROVED B EFORE THE 31ST DAY OF MARCH [ 2008 ] BY A LOCAL AUTHORITY SHALL BE HUNDRED PER CENT OF THE PROFITS DERIVED IN THE PREVIOUS YEAR RELEVANT TO AN Y ASSESSMENT YEAR FROM SUCH HOUSING PROJECT IF 19 ( A ) SUCH UNDERTAKING HAS COMMENCED OR COMMENCES DEVEL OPMENT AND CONSTRUCTION OF THE HOUSING PROJECT ON OR AFTER THE 1ST DAY OF OCTOBER 1998 AND COMPLETES SUCH CONSTRUCTION ( I ) IN A CASE WHERE A HOUSING PROJECT HAS BEEN APPROV ED BY THE LOCAL AUTHORITY BEFORE THE 1ST DAY OF APRIL 2004 ON OR BEFORE THE 31ST DAY OF MARCH 2008; ( II ) IN A CASE WHERE A HOUSING PROJECT HAS BEEN OR I S APPROVED BY THE LOCAL AUTHORITY ON OR AFTER THE 1ST DAY OF APRI L 2004 WITHIN FOUR YEARS FROM THE END OF THE FINANCIAL YEAR IN WH ICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE ( I ) IN A CASE WHERE THE APPROVAL IN RESPECT OF THE HO USING PROJECT IS OBTAINED MORE THAN ONCE SUCH HOUSING PROJECT SHALL BE DEEMED TO HAVE BEEN APPROVED ON THE DATE ON WHICH THE BUIL DING PLAN OF SUCH HOUSING PROJECT IS FIRST APPROVED BY THE LOCAL AUTHORITY; ( II ) THE DATE OF COMPLETION OF CONSTRUCTION OF THE HOU SING PROJECT SHALL BE TAKEN TO BE THE DATE ON WHICH THE COMPLETI ON CERTIFICATE IN RESPECT OF SUCH HOUSING PROJECT IS ISSUED BY THE LOCAL AUTHORITY; ( B ) THE PROJECT IS ON THE SIZE OF A PLOT OF LAND WHIC H HAS A MINIMUM AREA OF ONE ACRE: PROVIDED THAT NOTHING CONTAINED IN CLAUSE ( A ) OR CLAUSE ( B ) SHALL APPLY TO A HOUSING PROJECT CARRIED OUT IN ACCORDANC E WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT OR A STATE GOVERNM ENT FOR RECONSTRUCTION OR REDEVELOPMENT OF EXISTING BUILDIN GS IN AREAS DECLARED TO BE SLUM AREAS UNDER ANY LAW FOR THE TIM E BEING IN FORCE AND SUCH SCHEME IS NOTIFIED BY THE BOARD IN THIS BE HALF; ( C ) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP AREA OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY-FIVE KILOMETRES FR OM THE MUNICIPAL LIMITS OF THESE CITIES AND ONE THOUSAND A ND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE [ AND ] ( D ) THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCI AL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT DOES NOT EXCEED FIV E PER CENT OF THE AGGREGATE BUILT-UP AREA OF THE HOUSING PROJECT OR T WO THOUSAND SQUARE FEET WHICHEVER IS LESS.] A PERUSAL OF ASSESSMENT ORDER SHOWS THAT DEDUCTION HAS BEEN DENIED BY THE AO ON THE BASIS OF FOLLOWING THREE ISSUES: 1. THAT THE SIZE OF SOME OF THE RESIDENTIAL UNITS WAS MORE THAN 1000 SQ.FT. 20 2. THE HOUSING PROJECT WAS NOT COMPLETED BECAUSE D WIN G WAS NOT COMPLETED BEFORE 31-03-2008 AND 3. THE AREA OF THE LAND ON WHICH THE HOUSING PROJECT I S SITUATED IS LESS THAN ONE ACRE. AS POINTED OUT BY THE LD. COUNSEL OF THE ASSESSEE AS FAR AS THE FIRST OBJECTION IS CONCERNED IT WAS EXPLAINED DURING THE ASSESSMENT PROCEEDINGS AS WELL AS APPEAL PROCEEDINGS THAT ASSE SSEE HAD CONSTRUCTED ALL THE RESIDENTIAL UNITS BETWEEN THE S IZE OF 500 SQ.FT. TO 800 SQ.FT. AND SOME OF THOSE FLATS WERE LATER CONVE RTED BY THE BUYERS BY JOINING THE SAME WHEREVER THE BUYERS HAD PURCHAS ED MORE THAN ONE UNIT. THE ASSESSEE HAD NO CONTROL ON SUCH JOINI NG OF THE FLATS AND THIS POSITION HAS ALREADY BEEN ACCEPTED BY THE LD. CIT[A] AND THEREFORE THIS FINDING HAS BECOME FINAL. WE FIND T HAT THE LD. CIT[A] WHILE DEALING WITH THE SIZE OF THE UNITS OBSERVED V IDE PARA 3.4.4 AS UNDER: 3.4.4 THE THIRD GROUND ON WHICH DEDUCTION UNDER SE CTION 80IB HAS NOT BEEN GIVEN IS THAT CERTAIN FLATS HAVE BEEN MERGED AND THEIR AREA EXCEED 1000 SQ.FT. THIS HAS SURFACED DURING SURVEY CONDUCTED U/ S.133A AT THE PROJECT SITE. HOWEVER THE APPELLANT HAS SUCCESSFULLY EXPLAINED TH AT BUILDER WILL HAVE NO CONTROL IF AFTER THE SALE THE CERTAIN FLAT-OWNERS D ECIDE TO MERGE THE FLATS. THUS FROM THE ABOVE IT BECOMES CLEAR THAT THE LD. CIT[A] WAS SATISFIED THAT EACH UNIT OF THE RESIDENTIAL FLAT IN ALL THE THREE WINGS WAS LESS THAN 1000 SQ.FT. AND SINCE REVENUE HAS NOT FIL ED ANY CROSS OBJECTION AGAINST THIS FINDING THE SAME HAS BECOME FINAL AND BINDING ON THE REVENUE. 21 18. COMING TO THE SECOND OBJECTION RAISED BY THE RE VENUE I.E. THAT THE ASSESSEE HAS NOT COMPLETED THE PROJECT. THIS OB JECTION IS RAISED ON THE BASIS THAT SINCE THE PROJECT CONSISTED OF FOUR WINGS I.E. A B C AND D AND SINCE COMPLETION CERTIFICATE HAS NOT BEEN FIL ED FOR D WING AND THEREFORE THE PROJECT CANNOT BE SAID TO HAVE BEEN COMPLETED. THIS WOULD LEAD US TO THE QUESTION AS TO WHAT IS THE MEA NING OF A HOUSING PROJECT. FOR UNDERSTANDING THE MEANING OF THE HOUSI NG PROJECT WE WOULD STRAIGHT WAY GO TO THE CASE LAW CITED BY THE LD.COUNSEL OF THE ASSESSEE. 19. IN THE CASE OF SAROJ SALES ORGANIZATION VS. ITO [SUPRA] THE FIRM M/S A.W.PEREIRA & ORS. WERE THE OWNERS OF CERTAIN P LOTS OF LAND AND M/S KENWOOD AGENCY PVT. LTD. ACQUIRED THE DEVELOPME NT RIGHTS OF THESE PLOTS OF LAND FROM THE SAID OWNERS. A BUILDIN G PLAN FOR CONSTRUCTION OF ELEVEN WINGS WAS MADE AND GOT SANCT IONED FROM THE MUNICIPAL AUTHORITIES. THE PRINCIPAL DEVELOPERS I.E . M/S KENWOOD AGENCY PVT. LTD. CONSTRUCTED TWO WINGS VIZ. A AN D B OF THIS BUILDING AND GRANTED THE SUB-DEVELOPMENT RIGHTS FOR THE REMA INING NINE WINGS OF THE BUILDING TO THE ASSESSEE FIRM I.E. M/S SAROJ SALES ORGANISATION VS. ITO [SUPRA]. AS PER THIS AGREEMENT ASSESSEE FI RM WAS TO CONSTRUCT SIX WINGS OF THE AFORESAID BUILDING WHICH WERE NAME D AS NISARG. LATER ON ANOTHER AGREEMENT WAS ENTERED INTO BY WHICH ASSE SSEE WAS ENTITLED TO CONSTRUCT THREE MORE WINGS OF THE BUILD ING WHICH WAS TO BE NAMED AS BREEZY CORNER. THE ASSESSEE CLAIMED DEDU CTION U/S.80IB(10) IN RESPECT OF NISARG COMPLEX. THE CL AIM WAS REJECTED BY 22 THE REVENUE AUTHORITIES ON THE BASIS THAT ONLY ONE BUILDING HAVING ELEVEN WINGS WAS APPROVED BY THE MUNICIPAL AUTHORIT IES AND THEREFORE CONSTRUCTION OF SIX WINGS OF THE SAME BUILDING OF T HE ASSESSEE COULD NOT BE TREATED AS A SEPARATE INDEPENDENT HOUSING PR OJECT. MOREOVER IF THREE WINGS CONSISTING OF BREEZY CORNER WERE INCL UDED SOME OF THE FLATS IN BREEZY CORNER WERE MORE THAN 1000 SQ.FT. AND THEREFORE ASSESSEE VIOLATED THE CONDITIONS PRESCRIBED U/S.80I B(10). THE TRIBUNAL CONSIDERED THE ISSUE IN DETAIL AND OBSERVED VIDE PA RA 12 AS UNDER: 12. THERE IS NO DISPUTE THAT THE HOUSING PROJECT IN THE CASE OF NISARG IS APPROVED BEFORE 31ST MARCH 2005. THE SUBSTITUTE D SECTION EXTENDED THE BENEFIT OF 100 PER CENT DEDUCTION OF INCOME DER IVED FROM HOUSING PROJECTS APPROVED UPTO 31ST MARCH 2007 BUT SIMULTA NEOUSLY IMPOSED A RESTRICTION ON THE AREA OF SHOPPING COMPLEX THAT IS PERMISSIBLE TO BE INCLUDED IN THE HOUSING PROJECT BY INSERTING THE SU B-S. 80-IB(10)(D) W.E.F. 1ST APRIL 2005. THE LEGISLATURE NOWHERE PRO VIDED THE DEFINITION OF A HOUSING PROJECT EITHER IN THE SECTION OR ANYWH ERE IN THE IT ACT. IS IT OPEN FOR THE REVENUE TO CONSIDER ALL THE HOUSING ACTIVITIES UNDERTAKEN BY THE ASSESSEE AS ONE PROJECT OR DIFFER ENT PROJECTS ? THE CONCISE OXFORD DICTIONARY (9TH EDITION) DEFINES A PROJECT AS 'A PLAN A SCHEME A PLANNED UNDERTAKING A USUALLY LO NG-TERM TASK UNDERTAKEN BY A STUDENT TO BE SUBMITTED FOR ASSESSM ENT. THE COMMENCEMENT CERTIFICATES IN RESPECT OF BUILDING NO . 1 WERE RECEIVED BY THE PRINCIPAL DEVELOPER ON 7TH MARCH 2001 AND 3 0TH MARCH 2001 RESPECTIVELY. BUT THE COMMENCEMENT CERTIFICATES FOR VARIOUS WINGS WERE APPROVED BY THE MUNICIPALITY AS PER THE DETAIL S GIVEN BELOW : WING-C ON 10.9.2001 WING-E ON 11.9.2001 WINGS-C D E F & G ON 27.3.2002 WINGS-F & G ON 7.5.2002 WING-F1 ON 23.9.2003 ALL THE ABOVE WINGS ARE PART OF NISARG BLOCK AN D INDEPENDENTLY SATISFIES THE NECESSARY APPROVAL OF A HOUSING PROJE CT. IT REALLY MAKES NO DIFFERENCE WHETHER M/S CONWOOD AGENCIES HAD APPLIED FOR OR THE ASSESSEE HAD APPLIED TO THE MUNICIPAL CORPORATION T O MAKE ANY DIFFERENCE IN DECIDING THE ASSESSEE S CLAIM FOR D EDUCTION UNDER S. 80- IB(10) OF THE ACT. IT MUST BE APPRECIATED THAT THE MAIN DEVELOPER WAS M/S CONWOOD AGENCIES (P) LTD. THE SANCTION PLAN HAV E ONLY APPROVED THE CONSTRUCTION OF THE DWELLING UNITS OF LESS THAN 1 000 SQ. FT. IN ALL THE 23 WINGS OF THE SAID PROJECT. THERE IS NO DISPUTE THAT ALL THE FLATS IN THESE WINGS CONTAIN THE ELIGIBLE UNITS. IT IS NOT OPEN TO THE REVENUE TO CONCLUDE THE NEXT PROJECT AS PART OF THE EARLIER HO USING PROJECT JUST TO DENY THE STATUTORY RELIEF WHICH THE ASSESSEE IS ENT ITLED IN RESPECT OF THE ELIGIBLE HOUSING PROJECT. IN THAT WAY THE LEGISLATI VE INTENTION TO GIVE A RELIEF TO THE ASSESSEE WHO ARE UNDERTAKING THE LOW HOUSING PROJECTS WILL GET DEFEATED. BREEZY CORNER PROJECT WHICH WAS M EANT FOR HIGHER STRATA OF THE SOCIETY. THE ASSESSEE HAS SEGREGATED THE SAME AND IN NO WAY MIXED IN THESE PROJECTS EITHER IN THE DESIGN OR IN THE STRUCTURAL MANIPULATION OR IN THE PROVISION OF AMENITIES AND T HE ASSESSEE HAS NOT CLAIMED ANY RELIEF IN RESPECT OF PROJECT WHICH ADMI TTEDLY DOES NOT ADMIT THE TEST LAID DOWN UNDER S. 80-IB (10) OF THE ACT. IN OUR VIEW COMBINING THESE TWO PROJECTS INTO ONE WILL LEAD TO A RESULT WHICH MANIFESTLY WILL BE UNJUST AND ABSURD AND DEFEAT THE VERY PROVISIONS OF DEDUCTION SECTIONS. UNLESS THERE IS A CLEAR INTENTI ON OF THE LEGISLATURE THE REVENUE CANNOT BE PERMITTED TO DO SO. AFTER ALL THE ASSESSEE HAVE OBTAINED DIFFERENT COMMENCEMENT CERTIFICATES AND ST ARTED ON DIFFERENT PERIODS OF TIME. THEY ARE SEPARATE BY TIME SPACE A ND STATUTORY APPROVALS AND EVEN IN DESIGNS MAINTENANCE OF SEPAR ATE BOOKS OF ACCOUNT. THE REVENUE IN OUR VIEW IS NOT RIGHT IN TREATING BOTH THE PROJECTS AS ONE AND INTEGRATED WITHOUT THE FACTS WA RRANTING FOR SUCH CONCLUSION. IN IDENTICAL SITUATION IN THE CASE OF B ENGAL AMBUJA HOUSING DEVELOPMENT LTD. (SUPRA) THE ASSESSEE WAS HAVING A HOUSING PROJECT WHICH CONSISTED OF 261 RESIDENTIAL UNITS AN D THE INDIVIDUAL FLAT SIZE VARIED BETWEEN 800 SQ. FT. TO 3 000 SQ. FT. AN D THE TOTAL BUILT-UP AREA OF THAT HOUSING PROJECT WAS 3 46 599 SQ. FT. T HE SAID PROJECT CONTAINED 150 RESIDENTIAL UNITS WITH A BUILT-UP ARE A OF INDIVIDUAL UNIT OF LESS THAN 1 500 SQ. FT. AGGREGATING TO 1 59 005 SQ. FT. THE REMAINING BUILT-UP AREA OF 1 87 593 SQ. FT. WAS CONSUMED BY O THER RESIDENTIAL UNITS WHEREIN THE SIZE OF INDIVIDUAL UNIT EXCEEDED 1 500 SQ. FT. OF BUILT- UP AREA. THE AO ON THE BASIS OF THESE FACTS WAS OF THE VIEW THAT SINCE THE UNITS COMPRISED IN THE HOUSING PROJECT OF THE A SSESSEE WAS MORE THAN 1 500 SQ. FT. THE ASSESSEE S CLAIM FOR DEDU CTION UNDER S. 80- IB(10) WAS NOT ENTERTAINED. THE TRIBUNAL AFTER APPR ECIATING THE CLEAR PROVISIONS OF S. 80-IB(10) WHICH DOES NOT SPEAK RE GARDING SUCH DENIAL OF DEDUCTION IN CASE OF PROFIT FROM A HOUSING COMPL EX CONTAINING BOTH THE SMALL AND LARGE RESIDENTIAL UNITS AND SINCE THE ASSESSEE HAS ONLY CLAIMED DEDUCTION ON ACCOUNT OF SMALLER QUALIFYING UNITS BY FULFILLING ALL THE CONDITIONS AS LAID DOWN UNDER S. 80-IB(10) THE DENIAL OF CLAIM BY THE ASSESSEE WAS HELD TO BE BASED ON NARROW AND RESTRICTED INTERPRETATION OF THE PROVISIONS OF CL. (C) OF S. 8 0-1B(10) OF THE ACT. THEY DREW SUPPORT FROM THE DECISION OF THE HON BL E SUPREME COURT IN THE CASE OF BAJAJ TEMPO LTD. VS. CIT (1992) 104 CTR (SC) 116 : (1992) 196 ITR 188 (SC) WHEREIN IT WAS HELD THAT P ROVISIONS SHOULD BE INTERPRETED LIBERALLY AND SINCE THE PRESENT CASE ALSO THE ASSESSEE BY CLAIMING PRO RATA INCOME ON QUALIFYING UNITS WHICH SATISFIED THE CONDITION LAID DOWN BY S. 80-IB(10) THE ASSESSEE S CLAIM SHOULD ACCEPTED. THIS ORDER OF THE TRIBUNAL WAS TAKEN UP I N APPEAL BEFORE THE KOLKATA HIGH COURT THE KOLKATA HIGH COURT DISMISSE D THE APPEAL 24 ARISING FROM THIS ORDER. THE RATIO LAID DOWN BY THI S TRIBUNAL ORDER IN OUR VIEW BASED ON THE SAME SET OF FACTS AS EXIST I N OUR PRESENT CASE ARE EQUALLY APPLICABLE AND THE ASSESSEE S CLAIM FOR D EDUCTION OF S. 80- IB(10) IN RESPECT OF THE ELIGIBLE UNITS OF THIS HOU SING PROJECT IS THEREFORE DESERVES TO BE ACCEPTED. 13. AS REGARDS THE OBJECTION OF THE AO THAT THE PERMISSIBLE SHOPPING AREA OF HOUSING PR OJECT EXCEEDS 5 PER CENT THE ASSESSEE IS NOT ENTITLED FOR RELIEF UNDER S. 80-IB(10). WE ARE OF THE VIEW THAT THE HOUSING PROJECT WERE APPROVED BEF ORE 31ST MARCH 2005 AND FOR SUCH PROJECT WHICH WERE SO APPROVED T HERE WAS NO STIPULATION AS TO THE SHOPPING COMPLEX AREA IS PERM ISSIBLE IN THE PROJECT. AS ALREADY STATED EARLIER THAT THE AMENDME NTS WERE SUBSEQUENTLY MADE WHILE EXTENDING THE DEDUCTION OF INCOME FROM HOUSING PROJECT APPROVED UPTO 31ST MARCH 2007 THE DENIAL OF DEDUCTION IN OUR VIEW IS CLEARLY NOT IN ACCORDANC E WITH LAW. 14. ONE OF THE OBJECTIONS OF THE AO IN HIS ASSESSMENT ORDER IS FAILURE OF THE ASSESSEE TO OBTAIN A COMPLETION CERTIFICATE IN RESP ECT OF 6 WINGS IN THE BLOCK NISARG FROM WHICH IT HAS RETURNED THE INC OME IN THE ASST. YR. 2005-06. THE ASSESSEE HAS FILED COMPLETION CERTIFIC ATE ISSUED BY THE LOCAL AUTHORITY IN RESPECT OF 3 WINGS VIZ. C D AND E BEFORE SUBMISSION OF ITS RETURN AND FOR THE REST OF THE WINGS VIZ. F F1 AND G IT HAD APPLIED FOR SUCH CERTIFICATE ON 17TH AUG. 2004 BU T THE SAME WAS NOT RECEIVED TILL DATE OF FILING OF THE RETURN. IT WAS REPORTED IN THE COURSE OF HEARING BY THE LEARNED COUNSEL FOR THE ASSESSEE THA T THE OCCUPATION CERTIFICATE IN RESPECT OF THE REMAINING WINGS I.E. F F1 AND G HAS ALSO BEEN ISSUED BY THE MUNICIPAL AUTHORITIES ON 20TH DE C. 2006. COPIES OF SUCH CERTIFICATES ISSUED BY THE LOCAL AUTHORITIES H AVE BEEN PACED IN THE PAPER BOOK FILED BY THE LEARNED COUNSEL FOR THE ASS ESSEE. IT WAS EXPLAINED THAT SINCE THE HOUSING PROJECT IN THIS CA SE HAS BEEN APPROVED BY THE LOCAL AUTHORITIES BEFORE 1ST APRIL 2004 AND THE CONSTRUCTION IS REQUIRED TO BE COMPLETED BEFORE 31ST MARCH 2008. A S THE OCCUPATION CERTIFICATE IN RESPECT OF THE WINGS F F1 AND G HAV E BEEN ISSUED ON 20TH DEC. 2006 I.E. PRIOR TO 31ST MARCH 2008 TH E CONDITION RELATING TO COMPLETION OF THE CONSTRUCTION AS PRESCRIBED IN S. 80-IB(10)(A) SHOULD ALSO BE TAKEN TO BE SATISFIED. 15. IN THE RE SULT THE ASSESSEE S CLAIMS FOR DEDUCTION UNDER S. 80-IB(10) ARE ACCEPTE D AND THE APPEAL IS TO BE TREATED AS ALLOWED. THE AO IS DIRECTED TO ALL OW THE DEDUCTION AS CLAIMED BY THE ASSESSEE IN THE LIGHT OF THE ABOVE D ISCUSSIONS. THUS FROM THE ABOVE IT IS CLEAR THAT LEGISLATURE H AS NOT PROVIDED ANY DEFINITION OF THE HOUSING PROJECT AND THEREFORE T HE DEFINITION HAS TO BE CONSTRUED BY MAKING REFERENCE TO THE DICTIONARY AND AS LONG AS THE SEGREGATED BLOCKS ARE BEING ELIGIBLE FOR DEDUCTION U/S.80IB(10) THEN SAME SHALL BE CONSTRUED AS ELIGIBLE HOUSING PROJECT AND DEDUCTION HAS TO BE ALLOWED ACCORDINGLY. IN FACT IN THIS DECISIO N THE TRIBUNAL HAS 25 REFERRED TO THE DECISION OF THE CALCUTTA BENCH OF T HE TRIBUNAL IN THE CASE OF BENGAL AMBUJA HOUSING DEVELOPMENT LTD. VS. DCIT [SUPRA]. IN THAT CASE THE ASSESSEE HAD UNDERTAKEN CONSTRUCTION OF A HOUSING PROJECT EASTERN METROPOLITAN BYE-PASS WHICH WAS ALSO KNOWN AS UDAYAN. THIS PROJECT INTER ALIA INCLUDED UDITA-II I HOUSING PROJECT WHICH WAS UNDER CONSTRUCTION DURING THE RELEVANT YE AR AND SUCH CONSTRUCTION WAS BEING MADE ON LAND MEASURING 4.2 A CRES. THE SAID HOUSING PROJECT CONSISTED OF 251 RESIDENTIAL UNITS AND THE INDIVIDUAL FLAT SIZE VARIED BETWEEN 800 SQ.FT. TO 3000 SQ.FT. THE A SSESSEE CLAIMED DEDUCTION U/S.80IB(10) ON THE PART OF THE PROJECT I N WHICH 150 RESIDENTIAL UNITS WERE CONSTRUCTED WHERE AREA WAS L ESS THAN 1500 SQ.FT. THE DEDUCTION WAS DENIED BY THE REVENUE AUTHORITIES . IN APPEAL THE TRIBUNAL ALLOWED THE DEDUCTION VIDE PARA 22 WHICH R EADS AS UNDER: 22. IT IS APPARENT FROM THE PERUSAL OF SECTION 80I B(10) THAT THE SECTION HAS BEEN ENACTED WITH A VIEW TO PROVIDE INC ENTIVE FOR BUSINESSMEN TO UNDERTAKEN CONSTRUCTION OF RESIDENTI AL ACCOMMODATION FOR SMALLER RESIDENTIAL UNITS AND THE DEDUCTION IS INTENDED TO BE RESTRICTED TO THE PROFIT DERIVED FROM THE CONSTRUCT ION OF SMALLER UNITS AND NOT FROM LARGER RESIDENTIAL UNITS. THOUGH THE A O HAS DENIED THE CLAIM OF THE ASSESSEE OBSERVING THAT LARGER UNITS W ERE ALSO CONSTRUCTED BY THE ASSESSEE AT THE SAME TIME IT IS ALSO A FAC T ON RECORD THAT THE ASSESSEE HAD CLAIMED DEDUCTION ONLY ON ACCOUNT OF S MALLER RESIDENTIAL UNITS WHICH WERE FULFILLING ALL THE CONDITIONS AS C ONTAINED IN SECTION 80IB(10) AND THE SAME HAS NOT BEEN DISPUTED BY THE AO ALSO. WE HAVE ALSO NOTED DOWN THE FACT THAT EVEN THE PROVISION AS LAID DOWN IN SECTION.80IB(10) DOES NOT SPEAK REGARDING SUCH DENI AL OF DEDUCTION IN CASE OF PROFIT FROM A HOUSING COMPLEX CONTAINING BO TH THE SMALLER AND LARGE RESIDENTIAL UNITS AND SINCE THE ASSESSEE HAS ONLY CLAIMED DEDUCTION ON ACCOUNT OF SMALLER QUALIFYING UNITS BY FULFILLING ALL THE CONDITIONS AS LAID DOWN UNDER SECTION 80IB(10) THE DENIAL OF CLAIM BY THE ASSESSEE IS ON ACCOUNT OF RATHER RESTRICTED AND NARROW INTERPRETATION OF PROVISIONS OF CLAUSE OF SECTION 80IB(1) WHILE COMING TO SUCH CONCLUSION WE ALSO FIND SUPPORT FROM THE ORDER OF THE HON'BLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO LTD. (SUPR A) WHEREIN IT WAS HELD THAT PROVISIONS SHOULD BE INTERPRETED LIBERALL Y AND SINCE IN THE 26 PRESENT CASE ALSO THE ASSESSEE BY CLAIMING PRO-RAT A INCOME ON QUALIFYING UNITS HAS COMPLIED WITH ALL THE PROVISIO NS AS CONTAINED IN THE SAID SECTION IN OUR CONSIDERED OPINION SUCH C LAIM OF THE ASSESSEE WAS RIGHTLY ALLOWED BY THE LD. CIT[A] BY REVERSING THE ORDER OF AO. THIS MATTER WAS CARRIED BY THE REVENUE BEFORE THE H ONBLE CALCUTTA HIGH COURT WHICH WAS DISMISSED IN I.T.A.NO.458 OF 2 006 BY HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW WAS INVOLVED [C OPY OF THIS ORDER IS AVAILABLE AT PAGES 26-27 OF THE PAPER BOOK CONTAINI NG CASE LAWS]. FROM THE ABOVE IT BECOMES CLEAR THAT EVEN THE HONBLE C ALCUTTA HIGH COURT CONFIRMED THE FACT THAT DEDUCTION U/S.80IB(10) IS A LLOWABLE IN RESPECT OF THE PART OF THE PROJECT WHICH WAS ELIGIBLE FOR D EDUCTION. 20. AGAIN IN THE CASE OF VANDANA PROPERTIES VS. ACI T THE ASSESSEE WAS ENGAGED IN THE CONSTRUCTION OF VARIOUS FLATS CO NSISTING OF A B C D AND E WINGS ON THE LAND AREA OF 2.36 ACRES. THE A SSESSEE CLAIMED DEDUCTION U/S.80IB(10) ONLY IN RESPECT OF BUILDING E. THIS DEDUCTION WAS DENIED BY THE REVENUE AUTHORITIES ON THE BASIS THAT THE SIZE OF THE PLOT WAS LESS IF ONLY E BLOCK WAS COMPLETED THIS I SSUE WE SHALL DEAL LATER WHILE DEALING WITH THE SECOND OBJECTION] AND THE BLOCK E COULD NOT BE CONSIDERED AS A SEPARATE HOUSING PROJECT. TH E DEDUCTION WAS FURTHER DENIED ON THE BASIS THAT SIZE OF THE FLAT W AS MORE THAN THE PRESCRIBED SIZE [THIS ISSUE HAS ALREADY BEEN DECIDE D BY THE CIT(A) IN FAVOUR OF THE ASSESSEE IN THE CASE BEFORE US]. 21. THE ISSUE REGARDING DEFINITION OF HOUSING PROJE CT HAS BEEN DEALT BY THE TRIBUNAL VIDE PARAS 10 & 11 WHEREIN THE DEC ISION IN THE CASE OF 27 M/S SAROJ SALES ORGANISATION VS. ITO [SUPRA] HAS BE EN FOLLOWED. THE RELEVANT PARAS 10 & 11 READS AS UNDER: 10. THE FIRST ISSUE IS TO BE DECIDED BEFORE US IS THE INTERPRETATION OF THE PHRASE 'HOUSING PROJECT' WHICH IS CONTEMPLATED IN S. 80-IB(10) OF THE ACT. THERE IS NO DEFINITION OF THE TERM 'HOUSIN G PROJECT' GIVEN EITHER IN THE S. 80-IB OR IN THE ACT ITSELF. BUT SO FAR AS S. 80HHBA WHICH PROVIDES FOR A DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE EXECUTION OF THE HOUSING PROJECT WHICH ARE AWAR DED ON THE BASIS OF GLOBAL TENDER AND ALSO AIDED BY THE WORLD BANK DED UCTION IS ALLOWED AS PRESCRIBED IN SUB-S. (1) TO S. 80HHBA. IN THE SA ID SECTION THE LEGISLATURE HAD DEFINED THE EXPRESSION 'HOUSING PRO JECT' BY WAY OF EXPLANATION TO MEAN THAT PROJECT FOR THE CONSTRUCTI ON OF ANY BUILDING ROAD BRIDGE OR OTHER STRUCTURE IN ANY PART OF INDI A. THE CONCEPT OF HOUSING PROJECT IN S. 80HHBA IS MUCH MORE WIDER BU T SO FAR AS S. 80- IB(10) IS CONCERNED AS THERE IS NO DEFINITION OF E XPRESSION 'HOUSING PROJECT' THEN DEFINITION GIVEN IN S. 80HHBA WILL B E INTERNAL AID TO DECIDE WHETHER HOUSING PROJECT MEANS THE PROJECT OF THE GROUP OF THE BUILDINGS OR WHETHER IT CAN BE THE PROJECT OF A SIN GLE BUILDING ALSO. AS PER THE DEFINITION OF HOUSING PROJECT IN S. 80HHBA HOUSING PROJECT INCLUDES CONSTRUCTION OF 'ANY BUILDING'. IF THE LEG ISLATURE WAS DESIRING TO DEFINE NATURE OF THE HOUSING PROJECT FOR THE PUR POSE OF S. 80-IB(10) THEN EITHER THE SPECIFIC DEFINITION WOULD HAVE BEEN INCORPORATED IN THE ACT OR IT WOULD HAVE BEEN EXPLAINED BY WAY OF EXPLA NATION TO S. 80-IB. 11. IN OUR OPINION THE CONCEPT OF HOUSING PROJECT DOES NOT MEAN THAT THERE SHOULD BE THE GROUP OF THE BUILDINGS AND ONLY THEN SAME IS CALLED AS 'HOUSING PROJECT'. IN THE PRESENT CASE IT IS SE EN THAT INITIALLY AS PER THE DOCUMENTS ON RECORD I.E. COPY OF CC THE ASSESSE E HAD PLANNED FOR FOUR INDEPENDENT BUILDINGS BUT SO FAR AS WING 'E' IS CONCERNED THAT WAS ONLY PLANNED WHEN THE STATUS OF THE SURPLUS LAN D WAS CONVERTED AS 'WITHIN CEILING LIMIT' (WCL) AND THE ASSESSEE COULD GET ADDITIONAL FSI FOR LAUNCHING WING 'E'. ANOTHER CO-ORDINATE BENCH O F THE TRIBUNAL HAS CONSIDERED SOMEWHAT IDENTICAL SITUATION IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA) AND SAID DECISION OF THE CO-OR DINATE BENCH OF THE TRIBUNAL IS MORE RELEVANT ALSO TO DECIDE ISSUE BEFO RE US. AS IN THE SAID CASE THE DIFFERENT UNITS OF THE BUILDING WERE COMP LETED STEP BY STEP AND IT WAS THE CASE OF THE DEPARTMENT THAT ALL THE BUILDINGS WERE COMPRISE OF ONE PROJECT ONLY. REJECTING THE CONTENT ION OF THE REVENUE IT IS HELD AS UNDER: THUS AGAIN IT IS CLEAR THAT THE HOUSING PROJECT DO ES NOT NECESSARILY HAVE TO BE VARIOUS GROUP OF BUILDINGS CONSTRUCTED O N A PARTICULAR LAND BUT IT CAN ALSO BE A PARTICULAR BUILDING OR ANY BUI LDING WHICH IS PART OF THE LARGE PROJECT. 28 22. THIS TYPE OF ISSUE ALSO CAME UP FOR CONSIDERATI ON BEFORE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. BRIGADE ENTERPRISES PVT. LTD. 119 TTJ 269. IN THAT CASE ASSESSEE UNDERTOOK DEVELOPMENT OF A PROJECT IN AN AREA OF 22 ACRES 19 GUNTHAS CONSISTING OF FIVE RESIDENTIAL BLOCKS ROW HOUSES OAK TREE PL ACE A CLUB COMMUNITY CENTRE AND SCHOOL ETC. THE DEDUCTION U/S.80IB(10) W AS CLAIMED IN RESPECT OF TWO RESIDENTIAL UNITS ONLY WHICH IF TAKE N SEPARATELY WERE ELIGIBLE FOR RELIEF. AO TREATED THE ENTIRE PROJECT AS SINGLE PROJECT AND DENIED THE DEDUCTION. ON APPEAL CIT(A) ALLOWED THE RELIEF AND ON FURTHER APPEAL BY THE REVENUE TRIBUNAL CONFIRMED T HE ORDER OF THE CIT(A) BY HOLDING THAT GROUP HOUSING WAS APPROVED A S A MASTER PLAN AS A CONCEPT AND THE WORDS RESIDENTIAL UNIT IN CL AUSE (C) OF SEC.80IB(10) MEANS THAT DEDUCTION SHOULD BE COMPUTE D UNIT-WISE. 23. IN FACT THE SPECIAL BENCH OF THE TRIBUNAL IN T HE CASE OF BRAHMA ASSOCIATES VS. JCIT [SUPRA] WHILE DEALING WITH ISSU E OF DEDUCTION U/S.80IB(10) OBSERVED AT PARA 105 AS UNDER: 105. THERE MAY BE CASES WHERE THE TOTAL BUILT-UP C OMMERCIAL AREA IS MORE THAN 10 PER CENT OF TOTAL AREA. THESE PROJECTS NORMALLY SHOULD NOT GET BENEFIT OF EXEMPTION UNLESS SUCH UNDERTAKING CA N SHOW THAT INCOME FROM CONSTRUCTION OF RESIDENTIAL DWELLING UNITS CAN BE WORKED OUT SEPARATELY AND EVEN AFTER EXCLUDING THE COMMERCIAL USE OF PLOT THE PROJECT SATISFIES ALL THE REQUIREMENTS OF S. 80- IB (10). IN OTHER WORDS IN ORDER THAT THE PROFITS FROM DWELLING UNIT SEGMENT O F THE PROJECT IS ELIGIBLE FOR DEDUCTION UNDER S. 80-IB(10) IN SUCH A CASE SIZE OF THE PLOT EXCLUDING PORTION UNDER COMMERCIAL UNIT MUST BE MORE THAN MINIMUM AREA OF ONE ACRE AND RESIDENTIAL UNITS BUIL T ON SUCH AREA MUST SATISFIES CONDITION OF CL. (C) OF THE PROVISION. AB OVE INCOME OF UNDERTAKING FROM PROJECT REFERRED TO ABOVE SHOULD B E GRANTED EXEMPTION UNDER THE STATUTORY PROVISION AS SUCH IN COME SATISFY THE PURPOSE OF THE ENACTMENT. IN ANY CASE DENIAL OF DE DUCTION IS SUCH CASES WILL BE PURELY BASED ON HYPER-TECHNICAL GROUN D BECAUSE INSTEAD 29 OF SEEKING APPROVAL AS RESIDENTIAL-CUM- COMMERCIAL PROJECT FOR THE ENTIRE PROJECT THE ASSESSEE COULD HAVE AS WELL TAK EN SEPARATE APPROVAL FOR RESIDENTIAL SEGMENT WHICH EVEN ON STANDALONE B ASIS WOULD HAVE SATISFIED ALL THE REQUISITE CONDITIONS. APPROVAL AS RESIDENTIAL PROJECT WAS NOT A CONDITION PRECEDENT FOR GRANT OF DEDUCTIO N UNDER S. 80-IB AND IN CITY LIKE PUNE THERE WAS NO PROVISION IN TH E LOCAL REGULATION TO APPROVE PROJECT AS A HOUSING PROJECT . THERE WOULD BE NO LEGAL JUSTIFICATION TO DENY EXEMP TION TO RESIDENTIAL SEGMENT OF SUCH A HOUSING PROJECT WHICH SATISFIES CONDITIONS OF S. 80- IB(10) ON STANDALONE BASIS MERELY BECAUSE THEIR PR OJECT HAS BEEN APPROVED BY LOCAL AUTHORITY AS A RESIDENTIAL-CUM-CO MMERCIAL PROJECT. IF THE INCOME OF THE PROJECT PERTAINING EXCLUSIVELY TO THE CONSTRUCTION OF THE RESIDENTIAL UNITS CAN BE SEPARATELY WORKED AND OTHER REQUIREMENTS OF SECTION ARE SATISFIED THERE IS NO GOOD REASON T O WITHHOLD GRANT OF INCENTIVE TO SUCH INCOME OF THE UNDERTAKING. APART FROM THE ABOVE OTHER UNDERTAKINGS EXCEEDING ABOVE LIMIT I.E. THOSE WITH COMMERCIAL BUILT-UP OF MORE THAN 10 PER CENT OF AREA IN OUR O PINION ARE NOT ENTITLED TO BENEFIT OF EXEMPTION AS THOSE UNDERTAKI NGS HAVE NOT WORKED IN ACCORDANCE WITH SPIRIT AND INTENDMENT OF THE STA TUTORY PROVISION. FROM THE ABOVE IT IS CLEAR THAT WHATEVER PORTION O F THE HOUSING PROJECT IS OTHER WISE FOUND TO BE ELIGIBLE HAS TO BE CONSID ERED AS A HOUSING PROJECT FOR THE PURPOSE OF DEDUCTION U/S.80IB(10). 24. FROM ALL THE ABOVE DECISIONS IT BECOMES CLEAR THAT INDEPENDENT UNITS ARE RESIDENTIAL UNITS AND HAVE TO BE TREATED AS SEPARATE HOUSING PROJECTS FOR THE PURPOSE OF DEDUCTION U/S.80IB(10) AS LONG AS THEY FULFILL THE OTHER CONDITIONS PRESCRIBED UNDER THE A CT. 25. IN THE CASE BEFORE US ASSESSEE ENTERED INTO A DEVELOPMENT AGREEMENT ON 3-11-2003 COPY OF WHICH IS AVAILABLE AT PAGES 1 TO 30 OF THE PAPER BOOK. IN THIS AGREEMENT THE RECITATIO N CLAUSES (H) (I) AND (J) READS AS UNDER: (H) A PORTION ADMEASURING APPROXIMATELY 637.48 SQ.M TS. DELINEATED ON THE PLANT THEREOF HERETO ANNEXED AND THEREON DEMARC ATED BY GREEN COLOUR HATCHED LINES AND HEREINAFTER REFERRED TO AS RESERVED 30 LAND FALLS UNDER SCHOOL RESERVATION AND IS NOT IN TENDED TO BE DEVELOPED; AND (I) ON ANOTHER PORTION ADMEASURING APPROXIMATELY 20 0 SQ.MTS. OF THE SAID LANDS ONE OFFICE BLOCK IS CONSTRUCTED. THE SAI D ANOTHER PORTION IS DELINEATED ON THE PLAN THEREOF ANNEXED HERETO AN D THEREON DEMARCATED BY YELLOW COLOUR WASH AND IS HEREIN AFTE R REFERRED TO AS THE OFFICE BLOCK LAND:; AND (J) THE LANDS MEASURING APPROXIMATELY 7000 SQ.MTS. OTHER THAN RESERVED LAND BUT INCLUSIVE OF THE OFFICE BLOCK LAND IS HEREAFTER REFERRED TO AS THE DEVELOPMENT LANDS DE LINEATED ON THE PLAN THEREOF HERETO ANNEXED AND THEREON DEMA RCATED BY BLUE COLOUR HATCHED LINES. FROM THE ABOVE IT BECOMES CLEAR THAT ASSESSEE GOT RIGHTS OF DEVELOPMENT IN APPROXIMATELY 7000 SQ.MTS. OF LAND A FTER EXCLUDING 637.48 SQ.MTS. ON RESERVED LAND WHICH FELL UNDER SC HOOL RESERVATION. THE 200 SQ. MTS. OF LAND ON WHICH AN OFFICE BLOCK W AS ALREADY THERE WAS INCLUDED IN THE DEVELOPMENT PROJECT. THE D WING WAS SUPPOSED TO BE CONSTRUCTED ON THIS PORTION OF THE LAND AND WAS STATED TO BE ONLY HAVING TWO FLOORS AND WAS MEANT FOR PERSONAL USE. W HILE DEALING WITH THE DEVELOPERS IT IS PROVIDED IN CLASE (I) WHICH IS AVAILABLE AT PAGE-8 OF THE PAPER BOOK] AS UNDER: (I) HE HAS SURVEYED THE SAID LANDS AND IS AWARE THA T THE SAID LAND HAVE BEEN CONVERTED FROM I-2 ZONE TO R ZONE AS PER BMMC ORDER DATED 4 TH AUGUST 2003. THE DEVELOPER CONFIRMS THAT THE SAID DEVELOPMENT LANDS ADMEASURES APPROXIM ATELY 7000 SQ.MTS. AND PARTICULARS REGARDING D.P.ROAD SE T-BACK BES & T. SUBSTATION SAS AMENITY CREATION ETC. ARE AS PER DETAILS FURNISHED IN ANNEXURE I HERETO. THE TOTAL F SI AVAILABLE ON THE SAID LANDS FOR DEVELOPMENT AFTER DEDUCTING 250.68 31 SQ.MTS. FSI UTILISED FOR CONSTRUCTED AREA OF THE OF FICE BLOCK IS 7930.69 SQ.MTS. THE OFFICE BLOCK WILL NOT BE DEMOLI SHED BUT BALANCE FSI OF THE OFFICE BLOCK LAND AREA WILL BE U TILISED IN THE REMAINING PORTION OF DEVELOPMENT LAND. FROM THE ABOVE IT BECOMES CLEAR THAT ONLY 250.68 S Q. MTS. OF FSI WHICH WAS ALREADY UTILIZED FOR CONSTRUCTION OF OFFI CE BLOCK AND WHICH WOULD NOT BE DEMOLISHED REST OF THE FSI WAS TO BE USED FOR OTHER WINGS. THE PLAN FOR WHOLE OF THE PROJECT WAS SANCTI ONED ON 8-1-2004 COPY OF THE SAME LETTER IS AVAILABLE AT PAGES 31 TO 38 OF THE PAPER BOOK. THOUGH IN THE MAP ANNEXED AT PAGE 39 OF THE P APER BOOK IT SEEMS TO BE A ONE BUILDING CONSISTING OF FOUR WINGS BUT FOUR WINGS HAVE BEEN SEPARATELY MARKED IN DIFFERENT COLOURS. T HE WINGS ARE INDEPENDENT WINGS BECOME CLEAR FROM COMMENCEMENT CE RTIFICATE WHICH WAS ORIGINALLY ISSUED ON 11-02-2004 AND LATER ON THE FOLLOWING ENDORSEMENTS HAVE BEEN ISSUED: A THIS C.C. IS ISSUED UPTO PLINTH LEVEL ONLY SD/- 11/2/04 SD/-11/2/04 SINCE IX ------------ EB/118/FN/A OF 12/03/2004 B THIS C.C. IS ENDORSED AS PER AMENDED APPROVAL PLAN DT.11/03/2004 UPTO PLINTH LEVEL SD/- 12/03/04 SD/-12/3/04 SINCE IX EB/118/FN/A OF 29/03/2004 C THIS C.C. IS FURTHER EXTENDED FOR ENTIRE WORK WING B AND WING C ONLY. 32 EB/118/FN/A OF 08/02/2005 D THIS C.C. IS HEREBY ENDORSED AS PER APPROVED AMENDE D PLAN DT.15/12/2004 UPTO PLINTH FOR WING A AND D AND ENTIRE WORK (I.E. FULL C.C .) FOR WING B AND C. SD/- 08/2/05 SD/- 08/2/05 SINCE IX ------ EB/118/FN/A OF 18/03/2005 E THIS C.C. IS FURTHER EXTENDED UP TO 4 TH FLOORS FOR WING A SD/- 18/3/05 SD/- 18/03/05 SINCE IX ---- EB/118/FN/A OF 24/8/2006 F THIS C.C. IS FURTHER EXTENDED FOR ENTIRE WORK I.E. UPTO 9 TH FLOORS FOR WING A SD/- 24/8/2006 SD/- 24/8/06 SINCE IX ------ EB/FN/A OF 28/05/2007 G THIS C.C. IS GRANTED FOR THE 10 TH AND 11 TH FLOOR OF WING A EB/FN/A OF 26/07/2007 H THIS C.C. IS EXTENDED FOR 12 TH & 13 TH FLOOR FOR WING A THE ABOVE ENDORSEMENTS MAKE IT CLEAR THAT VARIOUS C OMMENCEMENT CERTIFICATE ENDORSEMENTS WERE MADE IN RESPECT OF A B AND C WINGS AND FOR D WING ONLY ENDORSEMENT UPTO THE PLINTH LEVEL I S DATED 8-02-2005 WAS MADE WHICH MAKES IT CLEAR THAT ASSESSEE WAS NEV ER PERMITTED TO GO BEYOND THE PLINTH LEVEL IN RESPECT OF D WING AND THEREFORE COULD NOT HAVE CONSTRUCTED THE SAME. HOWEVER AT THE SAME TIME THIS WING IS STATED TO BE USED FOR BUSINESS PURPOSES AND THE REFORE SAME CANNOT BE TREATED AS RESIDENTIAL UNIT. SINCE THE AREA INVO LVED IN THIS WING WAS ONLY 3% THEREFORE IT IS IMMATERIAL WHETHER THIS I S CONSIDERED FOR THE PURPOSE OF HOUSING PROJECT OR NOT. IN ANY CASE AS HELD IN THE ABOVE 33 NOTED CASES WHICH HAVE BEEN DISCUSSED IN DETAIL WH ATEVER PORTION IS ELIGIBLE FOR DEDUCTION HAS TO BE ALLOWED DEDUCTION U/S.80IB(10). WE ALSO FIND THAT EVEN OCCUPATION CERTIFICATES WERE IS SUED SEPARATELY BY THE MUNICIPAL AUTHORITIES [COPY FILED AT PAGES 48A TO 53 OF THE PAPER BOOK]. THE DETAILS OF THE SAME ARE AS UNDER: PARTICULARS OF OCCUPATION CERTIFICATE AREA CERTIFICATE AVAILABLE AT PAPER BOOK PAGE NO (I) OCCUPATION CERTIFICATE CC NO. EEBPC/118/FN/A OF 31/05/05 B WING (FULL) 48A (II) OCCUPATION CERTIFICATE CC NO.EB/118/FN/A OF 20/01/06 C WING (PART) 49-50 (III) OCCUPATION CERTIFICATE CC NO.EB/118/FN/A OF 11/09/07 C WING (BALANCE) 51 (IV) OCCUPATION CERTIFICATE CC NO.EB/118/FN/A OF 03/03/08 A WING (FULL) 52-53 THIS ONLY SHOWS THAT EACH WING WAS A SEPARATE WING AS HAS BEEN RECOGNIZED BY THE MUNICIPAL AUTHORITIES. 26. WE FURTHER FIND NO FORCE IN THE SUBMISSION OF T HE LD.DR THAT THE INTENTION OF THE GOVERNMENT IN GIVING DEDUCTION U/S .80IB(10) WAS TO ENCOURAGE HOUSING PROJECTS FOR THE POOR PEOPLE AND THEREFORE UNLESS AND UNTIL ALL THE WINGS WERE COMPLETED IT CANNOT BE SAID THAT THE PROJECT HAS BEEN COMPLETED. AS POINTED OUT EARLIER AND AS MENTIONED IN THE DEVELOPMENT AGREEMENT D WING CONSISTED OF O FFICE BLOCK AREA WHICH WAS ALREADY CONSTRUCTED AND WAS TO BE DEVELOP ED AGAIN ONLY AS AN OFFICE AREA AND THEREFORE IT CANNOT BE SAID TH AT PURPOSE OF DEDUCTION ITSELF HAS BEEN DEFEATED BECAUSE OFFICE A REA WAS MEANT FOR DIFFERENT PURPOSE AND EVEN THE LEGISLATURE HAS RECO GNIZED THAT 5% OF THE AREA COULD BE IN TERMS OF SHOPS OR COMMERCIAL E STABLISHMENTS. 34 EVEN IF THIS WING WAS CONSTRUCTED IT WOULD HAVE BE EN WITHIN THE PRESCRIBED LIMITS PROVIDED IN THE SECTION ITSELF. T HEREFORE IN VIEW OF THE ABOVE DISCUSSION AND FACTS WE ARE OF THE OPINION THAT THE REVENUE WAS NOT RIGHT IN HOLDING THAT ASSESSEE IS NOT ENTIT LED TO DEDUCTION U/S.80IB(10) BECAUSE THE HOUSING PROJECT WAS NOT CO MPLETED AS D WING WAS NEVER COMPLETED BEFORE THE SPECIFIED DATE. 27. COMING TO THE SECOND OBJECTION THAT AREA OF THE LAND IS LOWER THAN THE ONE ACRE BECAUSE THE ASSESSEE IS ENTITLED ONLY TO 51% OF THE TOTAL BUILT-UP AREA A PERUSAL OF THE DEVELOPMENT A GREEMENT SHOWS AND IT IS AN ADMITTED FACT THAT WHOLE OF THE CONSTR UCTION AND DEVELOPMENT EXPENSES WERE TO BE INCURRED BY THE ASS ESSEE AND THE LAND OWNERS WERE TO BE ALLOTTED 49% OF THE CONSTRUC TED AREA FREE OF COST IN VIEW OF THE LAND GIVEN BY THE LAND OWNERS F OR THE PURPOSE OF THE DEVELOPMENT. THE PLAIN READING OF THE SECTION I TSELF SHOWS THAT THE DEDUCTION IN RESPECT OF A HOUSING PROJECT WHICH AN UNDERTAKING IS DEVELOPING IS FOR DEVELOPMENT AND THEREFORE IT I S CLEAR THAT THERE IS NO REQUIREMENT THAT SUCH UNDERTAKING OR ASSESSEE SH OULD BE THE OWNER OF SUCH LAND AND THIS POSITION HAS BEEN CONFIRMED B Y THE DECISION OF THE AHMDABAD BENCH OF THE TRIBUNAL IN THE CASE OF R ADHE DEVELOPERS & ORS. VS. ITO [SUPRA]. IN THAT CASE IT WAS HELD TH AT THERE IS NO CONDITION THAT ASSESSEE MUST BE THE OWNER OF THE LA ND ON WHICH THE HOUSING PROJECT IS CONSTRUCTED BECAUSE DEVELOPMENT AND BUILDING WORK CARRIED OUT BY THE DEVELOPERS IS NOT WORKING ON REM UNERATION FOR THE LAND OWNER BUT IS WORKING FOR HIMSELF IN ORDER TO EXPLOIT THE POTENTIAL 35 OF ITS BUSINESS OF DEVELOPING THE PROJECT. SAME VIE W WAS TAKEN IN THE CASE OF ITO VS. SHAKTI CORPORATION 32 SOT 438. 28. FURTHER THE DEDUCTION IS MEANT FOR THE HOUSING PROJECT AND NOT FOR THE SHARE OF THE DEVELOPER. HAD THE ASSESSEE PU RCHASED THIS LAND THEN ASSESSEE WOULD HAVE DEFINITELY INCURRED SOME C OST IN TERMS OF LAND AND ASSESSEE WOULD HAVE BECOME THE OWNER OF TH E 100% BUILT-UP AREA AND WOULD HAVE GOT DEDUCTION ON SUCH 100% BUIL T-UP AREA SUBJECT TO DEDUCTION OF SUCH COST OF LAND. THEREFOR E IN REALITY IT DOES NOT MAKE A DIFFERENCE WHETHER ASSESSEE HAS PURCHASE D THE LAND OR SIMPLY SHARED THE BUILT-UP AREA WITH THE LAND OWNER S. THIS SITUATION BECOMES FURTHER CLEAR FROM THE DECISION OF THE MUMB AI BENCH OF THE TRIBUNAL IN THE CASE OF VANDANA PROPERTIES VS. ACIT [SUPRA] WHEREIN THE DEDUCTION U/S.80IB(10) WAS DENIED ON ACCOUNT OF VARIOUS OBJECTIONS AND ONE OF THE OBJECTION WAS THAT THE LA ND AREA PERTAINING TO WING E ON WHICH DEDUCTION WAS CLAIMED WAS LESS T HAN ONE ACRE. WE HAVE ALREADY DISCUSSED THE FACTS OF THIS CASE IN TH E ABOVE NOTED PARAS BUT TO SUMMARISE THE SAME AGAIN IN THIS CASE THE AS SESSEE WAS CONSTRUCTING FIVE WINGS KNOWN AS A B C D AND E A ND PERHAPS THE AREA OF FLATS IN THESE A B C D WINGS WAS MORE OR BECAUSE OF SOME OTHER REASONS DEDUCTION WAS CLAIMED IN RESPECT OF ONLY E WING. AO DENIED THE DEDUCTION ON ACCOUNT OF THE FACT THAT PR OPORTIONATE AREA OF E WING WOULD BE LESS THAN ONE ACRE BECAUSE THE TOTA L PROJECT CONSISTING OF A B C D AND E WINGS WAS CONSTRUCTED ON 2.36 A CRES. THIS ISSUE WAS DEALT WITH BY THE TRIBUNAL AT PARA-13 WHICH REA DS AS UNDER: 36 13. NOW THE NEXT OBJECTION IS IN RESPECT OF THE SI ZE OF THE PLOT OF THE LAND. THERE IS NO DISPUTE ABOUT THE FACT THAT ASSES SEE ACQUIRED THE DEVELOPMENT RIGHTS IN RESPECT OF THE PLOT WHICH WAS ADMITTEDLY 2.36 ACRES ON WHICH ASSESSEE EXECUTED THE DIFFERENT BUIL DING PROJECTS. THE CASE OF THE AO FOR REJECTING THE CLAIM OF THE ASSES SEE IS THAT IF THE SAID LAND IS PROPORTIONATELY ALLOCATED AMONG DIFFERENT B UILDINGS THEN AREA ALLOCATED TO BUILDING 'E' IS LESS THAN ONE ACRE. AS PER CL. (B) TO S. 80- IB(10) IT IS PROVIDED THAT THE PROJECT SHOULD BE O N A SIZE OF PLOT OF LAND WHICH HAS THE MINIMUM AREA OF ONE ACRE. AS PER THE AREA STATEMENT GIVEN IN THE PLANS WE FIND THAT NO SPECIFIC DEMARC ATION IN RESPECT OF THE PLOT OF 2.36 ACRES HAS BEEN MADE. IT IS SEEN TH AT THE SURPLUS LAND AVAILABLE WITH THE ASSESSEE OR EARLIER OWNER WAS GI VEN THE STATUS AS 'WITHIN CEILING LIMIT' (WCL) AND DUE TO CHANGE OR C ONVERSION OF THE LAND STATUS THAT THE ASSESSEE WAS ABLE TO PLAN THE PROJECT FOR BUILDING WING-'E'. THE LEARNED COUNSEL BROUGHT TO OUR NOTICE THE CORRESPONDENCE MADE BY THE MAHARASHTRA CHAMBER OF H OUSING INDUSTRY MUMBAI WITH THE HON'BLE FINANCE MINISTER GOVERNMENT OF INDIA NEW DELHI SEEKING CLARIFICATION OF CERTAIN ASPECTS ON S. 10(23G) AND S. 80-IB(10). THE MAIN ISSUE WAS IN RESPECT OF THE TREATMENT TO BE GIVEN TO THE TRANSFER OF DEVELOPMENT RIGHTS (TDR) W HICH IS PURCHASED BY THE DEVELOPER AND USED ON THE EXISTING PLOT OF L AND OR THE PROJECT. AS PER THE LETTER DT. 4TH MAY 2001 IT APEARS THAT THE CBDT NEW DELHI HAS REPLIED GIVING THE CLARIFICATION THAT ADD ITIONAL HOUSING PROJECT ON THE EXISTING HOUSING PROJECT CAN QUALIFY FOR EXEMPTION/DEDUCTION UNDER SS. 10(23G) AND 10-IB(10) PROVIDED THE CORRECT PROFIT CAN BE ASCERTAINED. SO FAR AS THE PR ESENT CASE IS CONCERNED WE HAVE TO TAKE INTO CONSIDERATION THE E NTIRE AREA OF THE PLOT ON WHICH ALL THE BUILDING PROJECTS HAVE BEEN PLANNE D I.E. A B C D AND E THOUGH SOME OF THE BUILDINGS DO NOT QUALIFY F OR DEDUCTION UNDER S. 80-IB(10) OF THE ACT AND ADMITTEDLY THE SAME IS ALSO NOT CLAIMED. WE THEREFORE DO NOT AGREE WITH THE VIEW TAKEN BY THE AO AS WELL AS THE LEARNED CIT(A) THAT THE ASSESSEE HAS VIOLATED T HE ANOTHER CONDITION IN RESPECT OF THE SIZE OF THE PLOT. IN THE ABOVE CASE TRIBUNAL ALSO REFERRED TO THE LE TTER DATED 4 TH MAY 2001 (F.NO.205/3/01/I.T.ACT 11) WHEREIN IT IS CLE ARLY EXPLAINED BY THE BOARD THAT IF SOME ADDITIONAL HOUSING PROJECT IS CO NSTRUCTED ON THE EXISTING HOUSING PROJECT THEN EVEN THE SAME IS ELI GIBLE FOR DEDUCTION U/S.80IB(10) AS LONG AS SEPARATE BOOKS ARE MAINTAIN ED SO THAT THE PROFIT FOR THIS ADDITIONAL AREA CAN BE ASCERTAINED SEPARATELY. IN THE CASE BEFORE US ASSESSEE HAS ALREADY MENTIONED SEPARATE WORK-IN-PROGRESS 37 IN RESPECT OF WADALA PROJECT AND THIS ASPECT HAS NO T BEEN DISPUTED BY THE REVENUE. THE SECOND ASPECT OF THAT LETTER IS TH AT EVEN IF THE ADDITIONAL PROJECT IS MOUNTED ON THE EXISTING PROJE CT EVEN THEN THE DEDUCTION IS AVAILABLE. WE HAVE ALREADY OBSERVED TH AT IN THE PRESENT CASE ASSESSEE IS A DEVELOPER OF THE WHOLE OF THE PR OJECT AND THEREFORE THE SHARE COULD NOT BE ALLOCATED ONLY IN TERMS OF 51% OF THE LAND AREA BECAUSE THE WHOLE PROJECT IS DEVELOPED AN D CONSTRUCTED BY THE ASSESSEE AND 49% SHARE IS GOING TO THE LAND OWN ERS IN RESPECT OF THE LAND COST. IN FACT ASSESSEE GOT ITS 51% SHARE TOWARDS THE COST TO BE INCURRED FROM THIS PROJECT. THEREFORE ASSESSEE WAS NOT RECEIVING ANY FIXED REMUNERATION. THE ASSESSEES UNDERTAKING WAS ENGAGED IN THE DEVELOPMENT OF THE PROJECT AND DEDUCTION IS AVA ILABLE TO AN UNDERTAKING WHICH IS ENGAGED IN THE DEVELOPMENT OF THE PROJECT. IN VIEW OF THIS DISCUSSION WE ARE OF THE VIEW THAT TH E AREA UNDER THE PROJECT WAS ABOUT 7000 SQ.MTS. WHICH WAS MEANT FOR DEVELOPMENT AND WHICH IS MORE THAN ONE ACRE AND THEREFORE DEDUCTI ON CANNOT BE DENIED ON THIS GROUND. 29. AT THE VERY BEGINNING WE HAVE REPRODUCED PROVIS IONS OF SECTION 80IB(10) AND ALSO THE CONDITIONS WHICH WERE REQUIRE D TO BE FULFILLED FOR AVAILING OF DEDUCTION U/S.80IB(10). THEREFORE AS W E HAVE SEEN THE FIRST CONDITION IS MET BECAUSE THE PROJECT IS COMME NCED AFTER 1-10- 1998 AND THE SAME HAS BEEN COMPLETED BEFORE 31-03-2 008 BECAUSE OF THE RELEVANT OCCUPATION CERTIFICATES FOR A B AND C WINGS HAVE BEEN OBTAINED BEFORE 31-03-2008. THE PROJECT WAS APPROVE D ON 8-01-2004 38 WHICH MEANS THE SAME HAS BEEN APPROVED BEFORE THE D EAD-LINE GIVEN IN THE PROVISION I.E. 31-03-2007. AS DISCUSSED ABOV E THE LAND AREA OF THE PROJECT WAS MORE THAN ONE ACRE I.E. APPROXIMATE LY 7000 SQ.MTS. THE BUILT-UP AREA OF THE UNITS WAS LESS THAN 1000 S Q.FT. AS HAS BEEN ACCEPTED BY THE LD. CIT(A) DOES NOT EXCEED 5%. IN F ACT REVENUE HAS NOT RAISED ANY OBJECTION OR ANY ARGUMENTS ON THIS P OINT. IN THE LIGHT OF FULFILLMENT OF THESE CONDITIONS WE ARE OF THE VIEW THAT ASSESSEE IS ENTITLED TO DEDUCTION U/S.80IB(10). 30. NOW WE SHALL PROCEED TO DECIDE THE INDIVIDUAL APPEALS. 31. I.T.A.NO.3220/MUM/2010 A.Y 2005-06 : IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER (A O) AS CONFIRMED BY COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] YOUR APPELLANT PREFERS AN APPEAL AGAINST THE SAME ON FOLLOWING GRO UNDS WHICH IT IS PRAYED MAY BE CONSIDERED WITHOUT PREJUDICE TO ONE A NOTHER. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED AO ERRED IN DISALLOWING DEDUCTION U/S.80IB AMOUNTING TO RS.1 78 70 807. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED AO ERRED IN DISALLOWING RS.28 868/- BEING A MOUNT PAYABLE TO VIKAS HOUSING PRIVATE LIMITED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED AO ERRED IN DISALLOWING RS.6 742/- BEING 20 % OF CAR INSURANCE AND CAR EXPENSES INCURRED BY THE ASSESSEE . 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED AO ERRED IN DISALLOWING RS.41 044/- BEING PROPORTIONATE INTEREST EXPENSES INCURRED BY THE ASS ESSEE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED AO ERRED IN DISALLOWING RS.58 006/- BEING 1 0% OF MISCELLANEOUS EXPENSES ENTERTAINMENT EXPENSES CON VEYANCE AND TRAVELLING EXPENSES INCURRED BY THE ASSESSEE. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED AO ERRED IN LEVYING INTEREST U/S.234B OF TH E ACT. 39 32. GROUND NO.1: THIS ISSUE WE HAVE ADJUDICATED RIGHT AT THE OUTSET OF OUR ORDER VIDE PARAGRAPH NOS.2 TO 29 AND IN THE LIGHT OF ABOVE DISCUSSION WE HOLD THAT ASSESSEE IS ENTITLED TO DED UCTION U/S.80IB(10) AND THEREFORE WE SET ASIDE THE ORDER OF THE LD. C IT(A) AND DIRECT THE AO TO ALLOW DEDUCTION U/S.80IB(10). 33. GROUND NO.2 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE AO THA T ASSESSEE HAS SHOWN A SUM OF LRS.28 868/- AS LIABILITY PAYABLE TO VIKAS HOUSING PVT. LTD. IN RESPONSE TO THE QUERY IT WAS STATED THAT T HIS SUM WAS SHOWN AS LOAN. IN FACT THE AMOUNT REPRESENTED REIMBURSEM ENT OF CERTAIN EXPENSES INCURRED BY THE ASSESSEE ON BEHALF OF VIKA S HOUSING PVT.LTD. AND THIS SHOULD HAVE BEEN CREDITED TO EXPENSES ACCO UNT. AO DISALLOWED THIS AMOUNT BY OBSERVING THAT THE ASSESSEE HAS SHOW N THE EXPENSES IN EXCESS OF THIS AMOUNT. ON APPEAL THE ADDITION WAS CONFIRMED BY THE LD. CIT(A). 34. BEFORE US LD.COUNSEL OF THE ASSESSEE SUBMITTED THAT ACTUALLY THIS AMOUNT REPRESENTED REIMBURSEMENT OF EXPENSES I NCURRED BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT AO HAS ALRE ADY EXAMINED THE BOOKS OF ACCOUNTS AND NO EXPENDITURE WAS FOUND EXCE SSIVE AND THEREFORE DISALLOWANCE IS UNWARRANTED. 35. ON THE OTHER HAND LD.DR SUPPORTED THE ORDERS O F THE AO AND THE LD. CIT(A). 36. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE DO NOT AGREE WITH THE CONTENTIONS OF THE LD.COUNSEL OF THE ASSESSEE. IF AS STATED BEFORE 40 THE AO AND ALSO BEFORE US THAT THIS AMOUNT SHOULD H AVE BEEN CREDITED TO THE EXPENSES ACCOUNT THEN EXPENSES WOULD STAND REDUCED TO THAT EXTENT. SIMPLY BECAUSE AO HAS EXAMINED THE BOOKS OF ACCOUNTS WOULD NOT AMOUNT THAT HE HAS SEEN EACH AND EVERY ENTRY IN THE BOOKS. WHEN ASSESSEE HIMSELF IS ACCEPTING THE POSITION THAT EXP ENSES SHOULD HAVE BEEN CREDITED TO THE EXPENSES ACCOUNT WHICH MEANS EXPENSES HAVE BEEN SHOWN AT A HIGHER SIDE AND THEREFORE ADDITIO N IS JUSTIFIED AND WE CONFIRM THE SAME. 37. GROUND NO.3 : DURING ASSESSMENT PROCEEDINGS AO DISALLOWED 20% OF THE CAR INSURANCE AND CAR EXPENSES BEING PER SONAL IN NATURE BECAUSE NO LOG BOOK ETC. WERE PRODUCED. ON APPEAL THE ADDITION WAS CONFIRMED BY THE LD. CIT(A). 38. BEFORE US GENERAL SUBMISSIONS WERE MADE AND IT WAS STATED THAT PERUSAL OF THE PERSONAL BALANCE-SHEET WHICH HA S BEEN ENCLOSED WITH THE PAPER BOOK WOULD SHOW THAT ASSESSEE HAS S UFFICIENT WITHDRAWALS. 39. ON THE OTHER HAND LD.DR RELIED ON THE ORDER OF THE LD. CIT(A). 40. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIN D THAT ELEMENT OF PERSONAL USAGE HAS NOT BEEN DENIED BEFORE US. EVEN IF SUFFICIENT WITHDRAWALS HAVE BEEN SHOWN THIS DOES NOT MEAN THA T ASSESSEE HAS NOT USED THE VEHICLE FOR PERSONAL USE. 20% DISALLOW ANCE SEEMS TO BE REASONABLE AND THEREFORE WE CONFIRM THE SAME. 41. GROUND NO.4 : THE ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS.1 17 516/-. IT WAS FOUND DURING THE ASSESSMENT P ROCEEDINGS THAT 41 ASSESSEE HAD ADVANCED VARIOUS LOANS TO VARIOUS CONC ERNS WHICH ARE RELATED TO THE ASSESSEE. SINCE THE ASSESSEE HAD GIV EN INTEREST FREE ADVANCES THEREFORE PROPORTIONATE INTEREST WAS DIS ALLOWED WHICH WAS WORKED OUT AS UNDER: TOTAL FUNDS EMPLOYED = 40111777 TOTAL LOAN/ADVANCE GIVEN = 14009475 INTEREST DISALLOWED =117516 X (14009475 / 40111777) = ` 41044 THE ADDITION WAS CONFIRMED BY THE LD. CIT(A). 42. BEFORE US LD.COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS ADDITION HAS BEEN MADE WITHOUT ESTABLISHING ANY NEX US BETWEEN THE BORROWED FUNDS AND INTEREST FREE ADVANCES AND THER EFORE ADDITION MADE IS ON AN ADHOC BASIS. 43. ON THE OTHER HAND LD.DR RELIED ON THE ORDERS O F THE AO AND THE LD. CIT(A). 44. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIN D THAT RECENTLY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RE LIANCE UTILITIES POWERS LTD. 313 ITR 340 HAS HELD AS UNDER: HELD DISMISSING THE APPEAL THAT IF THERE WERE FU NDS AVAILABLE BOTH INTEREST- FREE AND OVERDRAFT AND/OR LOANS TAKEN THEN A PRESU MPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY IF THE INTEREST-FREE FUNDS WERE S UFFICIENT TO MEET THE INVESTMENTS. IN THIS CASE THIS PRESUMPTION WAS ESTA BLISHED CONSIDERING THE FINDING OF FACT BY THE COMMISSIONER (APPEALS) AND T HE TRIBUNAL. THE INTEREST WAS DEDUCTIBLE. THEREFORE WE SET ASIDE THE ORDER OF THE LD. CIT[A] AND REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO READJUDICATE THIS ISSUE IN THE LIGHT OF THE ABOVE DECISION. 42 45. GROUND NO.5 : DURING ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS INCURRED CERTAIN CASH EXPENSES AMOUNTI NG TO RS.58 006/-. IT WAS FURTHER NOTICED THAT ASSESSEE HAS SHOWN EXPE NSES OF RS..33 032/- ON ENTERTAINMENT RS.15 013/- ON CONVE YANCE AND RS.21 094/- ON TRAVELING. AO OBSERVED THAT MOST OF THESE EXPENSES ARE SUPPORTED BY SELF MADE VOUCHERS AND THEREFORE HE DISALLOWED 10% OF THE SAME AMOUNTING TO KRS.48 006/-. THE ADDITION HA S BEEN CONFIRMED BY THE LD. CIT(A). 46. BEFORE US IT WAS SUBMITTED THAT ALL THE VOUCHE RS WERE DULY PRODUCED BEFORE THE AO AND NO SPECIFIC DEFECT HAS B EEN FOUND AND ADDITION HAS BEEN MADE MERELY ON CONJECTURES AND SU RMISES ON THE ABOVE BASIS WHICH CANNOT BE SUSTAINED UNDER THE LAW . 47. ON THE OTHER HAND LD.DR RELIED ON THE ORDERS O F THE AO AND THE LD. CIT(A). 48. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND SOME FORCE IN THE SUBMISSIONS OF THE LD.COUNSEL OF THE ASSESSEE THAT AO HAS NOT GIVEN ANY SPECIFIC DEFECT IN RESPECT OF ANY PARTICULAR EX PENDITURE. AT THE SAME TIME HE HAS MENTIONED ONLY IN RESPECT OF THREE ITEMS OF EXPENSES I.E. ENTERTAINMENT EXPENSES OF RS.33 073/- CONVEYA NCE OF RS.15 013/- AND TRAVELING EXPENSES OF RS.21 094/-. ON THE BASIS OF SELF MADE VOUCHERS IN RESPECT OF THESE ITEMS THE ADDITION SE EMS TO BE ON A HIGHER SIDE. SINCE THE EXPENSES WERE ONLY SELF SUPP ORTED ONLY REASONABLE DISALLOWANCE SHOULD HAVE BEEN MADE. CONS IDERING THE ALL OVER FACTS WE ARE OF THE VIEW THAT IF AN ADDITION OF RS.15 000/- IS 43 MADE THAT WOULD MEET THE ENDS OF JUSTICE THEREFORE WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO MAKE D ISALLOWANCE OF ONLY RS.15 000/- OUT OF CASH EXPENSES. 49. GROUND NO.6 : THE LEVY OF INTEREST U/S.234B IS OF CONSEQUENTIAL NATURE AND THEREFORE WE SET ASIDE THE ORDER OF TH E LD. CIT(A) AND DIRECT THE AO TO LEVY INTEREST IN ACCORDANCE WITH L AW. 50. I.T.A.NO.3445/MUM/10- A.Y 2006-07 : IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER (A O) AS CONFIRMED BY COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] YOUR APPELLANT PREFERS AN APPEAL AGAINST THE SAME ON FOLLOWING GRO UNDS WHICH IT IS PRAYED MAY BE CONSIDERED WITHOUT PREJUDICE TO ONE A NOTHER. 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED AO ERRED IN DISALLOWING DEDUCTION U/S.80IB AMOUNTING TO RS.1 78 70 807. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED AO ERRED IN DISALLOWING RS.51 397/- BEING 2 0% OF CAR INSURANCE AND CAR EXPENSES INCURRED BY THE ASSESSEE . 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED AO ERRED IN DISALLOWING RS.75 549/- BEING PROPORTIONATE INTEREST EXPENSES INCURRED BY THE ASS ESSEE. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED AO ERRED IN LEVYING INTEREST U/S.234B OF TH E ACT. 5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED AO ERRED IN INITIATING PENALTY PROCEEDINGS U/S.271[1][C] OF THE ACT. 51. GROUND NO.1 : THIS ISSUE WE HAVE ADJUDICATE RIGHT AT THE OUTSET OF OUR ORDER VIDE PARAGRAPH NOS.2 TO 29 AND IN THE LIGHT OF ABOVE DISCUSSION WE HOLD THAT ASSESSEE IS ENTITLED TO DED UCTION U/S.80IB(10) AND THEREFORE WE SET ASIDE THE ORDER OF THE LD. C IT(A) AND DIRECT THE AO TO ALLOW DEDUCTION U/S.80IB(10). 44 52. GROUND NO.2 : DURING ASSESSMENT PROCEEDINGS AO DISALLOWED 20% OF THE CAR INSURANCE AND CAR EXPENSES BEING PER SONAL IN NATURE BECAUSE NO LOG BOOK ETC. WERE PRODUCED. ON APPEAL THE ADDITION WAS CONFIRMED BY THE LD. CIT(A). 53. BEFORE US GENERAL SUBMISSIONS WERE MADE AND IT WAS STATED THAT PERUSAL OF THE PERSONAL BALANCE-SHEET WHICH HA S BEEN ENCLOSED WITH THE PAPER BOOK WOULD SHOW THAT ASSESSEE HAS S UFFICIENT WITHDRAWALS. 54. ON THE OTHER HAND LD.DR RELIED ON THE ORDER OF THE LD. CIT(A). 55. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIN D THAT ELEMENT OF PERSONAL USAGE HAS NOT BEEN DENIED BEFORE US. EVEN IF SUFFICIENT WITHDRAWALS HAVE BEEN SHOWN THIS DOES NOT MEAN THA T ASSESSEE HAS NOT USED THE VEHICLE FOR PERSONAL USE. 20% DISALLOW ANCE SEEMS TO BE REASONABLE AND THEREFORE WE CONFIRM THE SAME. 56. GROUND NO.3 : DURING ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAS INCURRED CERTAIN CASH EXPENSES AMOUNTI NG TO RS.51 880/-. IT WAS FURTHER NOTICED THAT ASSESSEE HAS SHOWN ENTE RTAINMENT EXPENSES OF RS.76 274 RS.14 718/- ON CONVEYANCE AN D RS.14 219/- ON TRAVELING. AO OBSERVED THAT MOST OF THESE EXPENSES ARE SUPPORTED BY SELF MADE VOUCHERS AND THEREFORE HE DISALLOWED 10 % OF THE SAME AMOUNTING TO 75 549/-. THE ADDITION HAS BEEN CONFIR MED BY THE LD. CIT(A). 57. BEFORE US IT WAS SUBMITTED THAT ALL THE VOUCHE RS WERE DULY PRODUCED BEFORE THE AO AND NO SPECIFIC DEFECT HAS B EEN FOUND AND 45 ADDITION HAS BEEN MADE MERELY ON CONJECTURES AND SU RMISES ON THE ABOVE BASIS WHICH CANNOT BE SUSTAINED UNDER THE LAW . 58. ON THE OTHER HAND LD.DR RELIED ON THE ORDERS O F THE AO AND THE LD. CIT(A). 59. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND SOME FORCE IN THE SUBMISSIONS OF THE LD.COUNSEL OF THE ASSESSEE THAT AO HAS NOT GIVEN ANY SPECIFIC DEFECT IN RESPECT OF ANY PARTICULAR EX PENDITURE. AT THE SAME TIME HE HAS MENTIONED ONLY IN RESPECT OF THREE ITEMS OF EXPENSES I.E. ENTERTAINMENT EXPENSES OF RS.76 274/- CONVEYA NCE OF RS.14 718/- AND TRAVELING EXPENSES OF RS.14 219/-. ON THE BASIS OF SELF MADE VOUCHERS IN RESPECT OF THESE ITEMS THE ADDITION SE EMS TO BE ON A HIGHER SIDE. SINCE THE EXPENSES WERE ONLY SELF SUPP ORTED ONLY REASONABLE DISALLOWANCE SHOULD HAVE BEEN MADE. CONS IDERING THE ALL OVER FACTS WE ARE OF THE VIEW THAT IF AN ADDITION OF RS.20 000/- IS MADE THAT WOULD MEET THE ENDS OF JUSTICE THEREFORE WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO MAKE D ISALLOWANCE OF ONLY RS.20 000/- OUT OF CASH EXPENSES. 60. GROUND NO.4 : THE LEVY OF INTEREST U/S.234B IS OF CONSEQUENTIAL NATURE AND THEREFORE WE SET ASIDE THE ORDER OF TH E LD. CIT(A) AND DIRECT THE AO TO LEVY INTEREST IN ACCORDANCE WITH L AW. 61. GROUND NO.5 : AFTER HEARING BOTH THE PARTIES WE FEEL THAT THE ISSUE REGARDING INITIATION OF PENALTY PROCEEDINGS U /S.271[1][C] IS PREMATURE AND THEREFORE DISMISSED AS INFRUCTUOUS. 46 62. I.T.A.NO.3444/MUM/2010 A.Y 2007-08 : IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER (A O) AS CONFIRMED BY COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] YOUR APPELLANT PREFERS AN APPEAL AGAINST THE SAME ON FOLLOWING GRO UNDS WHICH IT IS PRAYED MAY BE CONSIDERED WITHOUT PREJUDICE TO ONE A NOTHER. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED AO ERRED IN DISALLOWING DEDUCTION U/S.80IB AMOUNTING TO RS.2 50 48 491/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED AO ERRED IN LEVYING INTEREST U/S.234B OF TH E ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED AO ERRED IN LEVYING INTEREST U/S.234C OF TH E ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED AO ERRED IN GIVING TDS OF RS.56 000/- RS.64 456/- WAS CLAIMED IN RETURN FILED WHEREAS CREDIT GIVEN B Y AO IS RS.8 456/-.. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED AO ERRED IN INITIATING PROCEEDINGS U/S.271[ 1][C] OF THE ACT. 63. GROUND NO.1 : THIS ISSUE WE HAVE ADJUDICATE RIGHT AT THE OUTSET OF OUR ORDER VIDE PARAGRAPH NOS.2 TO 29 AND IN THE LIGHT OF ABOVE DISCUSSION WE HOLD THAT ASSESSEE IS ENTITLED TO DED UCTION U/S.80IB(10) AND THEREFORE WE SET ASIDE THE ORDER OF THE LD. C IT(A) AND DIRECT THE AO TO ALLOW DEDUCTION U/S.80IB(10). 64. GROUND NOS.2 &3 : THE LEVY OF INTEREST U/S.234B & 234C IS OF CONSEQUENTIAL NATURE AND THEREFORE WE SET ASIDE T HE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO LEVY INTEREST IN ACCORD ANCE WITH LAW. 65. GROUND NO.4 : IT WAS SUBMITTED BY THE LD.COUNSEL OF THE ASSESSEE THAT PROPER CREDIT FOR TDS HAS NOT BEEN GI VEN. THE CREDIT WAS CLAIMED FOR RS.64 456/- WHEREAS CREDIT HAS BEEN GI VEN ONLY TO RS.8456/-. WE REMAND THE MATTER REGARDING CREDIT OF TDS TO THE FILE OF 47 THE AO WITH A DIRECTION TO VERIFY THE TDS CERTIFICA TES AND ALLOW THE PROPER CREDIT. 66. GROUND NO.5 : AFTER HEARING BOTH THE PARTIES WE FEEL THAT THE ISSUE REGARDING THE INITIATION OF PENALTY PROCEEDIN GS U/S.271[1][C] IS PREMATURED AND THEREFORE SAME IS DISMISSED AS INF RUCTUOUS. 67. IN THE RESULT ALL THE APPEALS ARE PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF DECEMBER 2010. SD/- SD/- (N.V.VASUDEVAN) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 23 RD DECEMBER 2010. P/-*