DCIT CEN CIR 24, MUMBAI v. SHETH DEVELOPERS P. LTD, MUMBAI

ITA 6016/MUM/2009 | 2004-2005
Pronouncement Date: 29-07-2011 | Result: Dismissed

Appeal Details

RSA Number 601619914 RSA 2009
Assessee PAN AAACS9943H
Bench Mumbai
Appeal Number ITA 6016/MUM/2009
Duration Of Justice 1 year(s) 8 month(s) 16 day(s)
Appellant DCIT CEN CIR 24, MUMBAI
Respondent SHETH DEVELOPERS P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 29-07-2011
Date Of Final Hearing 11-07-2011
Next Hearing Date 11-07-2011
Assessment Year 2004-2005
Appeal Filed On 12-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI. BEFORE SHRI PRAMOD KUMAR ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER I.T.A NO.5673/ MUM/2009 ASSESSMENT YEAR: 2004-05 SHETH DEVELOPERS PVT.LTD. .. APPELLANT 11 VORA PALACE NEXT TO DENA BANK M.G.ROAD KANDIVLI(W) MUMBAI-400 067 PA NO.AAACS 9943 H VS DY.CIT CENTRAL CIRCLE -24 . RESPONDEN T AAYAKAR BHAVAN M.K. ROAD MUMBAI. I.T.A NO.6016/ MUM/2009 ASSESSMENT YEAR: 2004-05 DY.CIT CENTRAL CIRCLE -24 . APPELLANT AAYAKAR BHAVAN M.K. ROAD MUMBAI. VS SHETH DEVELOPERS PVT.LTD. .. RESPONDENT 11 VORA PALACE NEXT TO DENA BANK M.G.ROAD KANDIVLI(W) MUMBAI-400 067 PA NO.AAACS 9943 H APPEARANCES: VIJAY MEHTA FOR THE ASSESSEE B. JAYA KUMAR FOR THE REVENUE I.T.A NO.5673/ MUM/2009 I.T.A NO.6016/ MUM/2009 ASSESSMENT YEAR: 2004-05 2 DATE OF HEARING : 11-07-2011 DATE OF PRONOUNCEMENT : 29-0702011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THESE CROSS APPEALS THE APPELLANTS HA VE CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 24 TH AUGUST 2009 PASSED IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT 1961 FOR THE ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES : 1.1 THE LD CIT(A) ERRED IN LAW AND FACT IN CONFIRM ING THAT THE PROFIT EARNED ON SALE OF FLATS OF WILLOWS TWIN TOWERS BLI SS VASANT MILESTONE & TEAKWOOD PROJECTS DID NOT QUALIFY FOR DEDUCTION U /S.80-IB ON THE ALLEGED GROUND THAT TWO CONTIGUOUS FLATS PURCHASED BY ONE BUYER IS ONLY ONE RESIDENTIAL UNIT WHICH WERE HAVING BUILT-U P AREA OF MORE THAN 1000 SQ.FT. 1.2. THE LD CIT(A) FAILED TO APPRECIATE THAT THESE TWO CONTIGUOUS FLATS PURCHASED BY ONE BUYER ARE SEPARATE RESIDENTIAL UNI T CONSTRUCTED IN THE PROJECT OF WILLOW TWIN TOWERS BLISS VASANT MI LESTONE & TEAKWOOD AND BUILT-UP AREA OF EACH UNIT IS LESS THA N 1000 SQ.FT AND THAT ALL THE CONDITIONS OF SECTION 80IB(10) WERE SA TISFIED BY THE APPELLANT. 1.3. THE APPELLANT PRAYS THAT DEDUCTION U/S.80IB(10 ) IN RESPECT OF WILLOW TWIN TOWERS BLISS VASANT MILESTONE & TEAKW OOD PROJECTS AMOUNTING TO ` .21 79 57 698 BE ALLOWED CONSIDERING THAT THESE TWO CONTIGUOUS FLATS PURCHASED BY ONE BUYER ARE SEPARAT E RESIDENTIAL UNITS CONSTRUCTED IN THE PROJECT OF WILLOWS TWIN TOWERS BLISS VASANT MILESTONE & TEAKWOOD AND BUILT UP AREA OF EACH UNIT IS LESS THAN 1000 SQ.FT AND THAT ALL THE CONDITIONS OF SECTION 80IB(1 0) WERE SATISFIED BY THE APPELLANT. 2..(I) THE APPELLANT PRAYS THAT DEDUCTION U/S.80IB( 10) IN RESPECT OF WILLOW TWIN TOWERS BLISS VASANT MILESTONE & TEAKW OOD PROJECTS I.T.A NO.5673/ MUM/2009 I.T.A NO.6016/ MUM/2009 ASSESSMENT YEAR: 2004-05 3 AMOUNTING TO ` .21 79 57 698 BE ALLOWED CONSIDERING THAT THESE TWO CONTIGUOUS FLATS PURCHASED BY ONE BUYER ARE SEPARAT E RESIDENTIAL UNIT CONSTRUCTED IN THE PROJECT OF WILLOW TWIN TOWERS B LISS VASANT MILESTONE & TEAKWOOD AND BUILT UP AREA OF EACH UNIT IS LESS THAN 1000 SQ.FT AND THAT ALL THE CONDITIONS OF SECTION 80IB(1 0) WERE SATISFIED BY THE APPELLANT. 3. THE REVENUE HAS RAISED THE FOLLOWING GRIEVANCES: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD CIT(A) ERRED IN DIRECTING THE AO TO ALLOW DE DUCTION U/S.80IB(10) OF THE I.T.ACT ON PROPORTIONATE BASIS EVEN IF THE BUILT UP AREA OF SOME FLATS IN THE PROJECT EXCEEDS 1000 SQ.F T. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD CIT(A) ERRED IN DIRECTING THE AO TO ALLOW DEDUCT ION U/S.80IB(10) OF THE I.T.ACT ON THE PROJECT VASANT MILESTONE WHICH IS NOT ON A PLOT OF LAND MORE THAN 1 ACRE OF LAND ON STAND ALONE BASI S. 4. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE A S FOLLOWS. THE ASSESSEE IS ENGAGED INTER ALIA IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. THE A SSESSEE HAD COMPLETED 9 PROJECTS DURING THE RELEVANT ASSESSMENT YEARS ON WHICH THE ASSESSEE HAD CLAIMED DEDUCTION U/S.80IB(10) TO THE TUNE OF ` .40 28 04 098. HOWEVER IN THE COURSE OF A SURVEY SUBSEQUENTLY CONDUCTED ON THE AS SESSEE IN RESPECT OF FOUR UNITS I.E. WILLOW TWIN TOWERS BLISS VASANT MILESTONE & TEAKWOOD PROJECTS IT WAS NOTICED THAT SOME OF THE RESIDENTIAL UNITS HAD AREA EXCEEDI NG 1 000 SQ. FT. INASMUCH AS IT WAS FOUND THAT THE ASSESSEE HAD SOLD THE FLAT BY TWO SE PARATE AGREEMENTS TO THE MEMBERS OF THE SAME FAMILY THOUGH AS SUCH SUCH PAIRS OF FLATS SOLD SEPARATELY WOULD BE VIEWED ONLY AS ONE UNIT. ON THE BASIS OF THESE FIND INGS AS ALSO THE ADMISSION MADE BY THE ASSESSEE IN SURVEY PROCEEDINGS THE STAND TAKE N BY THE ASSESSING OFFICER WAS THAT IN ORDER TO BE ELIGIBLE FOR DEDUCTION UNDER SE CTION 80IB(10) THE TOTAL AREA OF RESIDENTIAL UNIT SHOULD NOT EXCEED 1 000 SQ.FT BUT AS THESE PAIRS OF FLATS COULD BE VIEWED ONLY AS ONE UNIT AND THE AREA OF SUCH UNITS EXCEEDS 1 000 SQ.FT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S.80IB(10). ACCOR DINGLY THE ASSESSEE WAS DECLINED THE DEDUCTION U/S.80IB(10) IN RESPECT OF WILLOW TWI N TOWERS BLISS VASANT MILESTONE I.T.A NO.5673/ MUM/2009 I.T.A NO.6016/ MUM/2009 ASSESSMENT YEAR: 2004-05 4 & TEAKWOOD PROJECTS. AGGRIEVED ASSESSEE CARRIED T HE MATTER IN APPEAL BUT WITHOUT COMPLETE SUCCESS. WHILE THE CIT(A) UPHELD DISALLOWA NCE OF DEDUCTION U/S.80IB(10) IN RESPECT OF SUCH UNITS AS EXCEED 1 000 SFT.FT THE C IT(A) FURTHER HELD THAT THE DISALLOWANCE HOWEVER MUST REMAIN RESTRICTED ON PR ORATA BASIS ONLY TO DEDUCTION RELATABLE TO SUCH UNITS. 5. NONE OF THE PARTIES IS SATISFIED BY THE STAND SO TAKEN BY THE CIT(A). WHILE ASSESSEE IS AGGRIEVED OF PARTIAL CONFIRMATION OF DI SALLOWANCE BY THE CIT(A) THE ASSESSING OFFICER IS AGGRIEVED THAT ASSESSEE IS EVE N ALLOWED DEDUCTION U/S.80IB(10) IN RESPECT OF THE UNITS LESS THAN 1 000 SQ.FT. BOT H THE PARTIES ARE IN APPEAL BEFORE US FOR BOTH THE ASSESSMENT YEARS. 6 VIDE OUR ORDER OF EVEN DATE AND ON THE SAME SET O F FACTS IN THE CASE OF EMGEEN HOLDINGS P.LTD. (NOW WINDSOR REALTY P. LTD.) VS DC IT IN I.T.A NOS.3594 & 3595/ MUM/2009 AND I.T.A NOS.3647 & 3648/ MUM/2009 WE H AVE ALLOWED THE APPEAL OF THE ASSESSEE AND REJECTED THE GRIEVANCE RAISED BY T HE ASSESSING OFFICER. WHILE DOING SO WE HAVE INTER ALIA OBSERVED AS FOLLOWS: 6. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 7. WE FIND THAT THE DEDUCTION U/S.80IB(10) HAS BEEN DECLINED BY THE ASSESSING OFFICER ON THE GROUND THAT SIZE OF THE RESIDENTIAL UNIT WAS IN EXCESS OF 1 000 SQ.FT WHICH IN TURN PROCEEDS ON THE BASIS THAT THE FLATS SOLD TO THE FAMILY MEMBERS ADMITTEDLY BY SEPARATE AGREEMENTS SHOULD BE TREATED AS ONE UNIT. WE ARE UNABLE TO APPROVE THIS APPROACH. WE HAVE NOTED THAT THE S IZE OF EACH FLAT AS EVIDENT FROM BUILDING PLAN AS DULY APPROVED BY MUNCIPAL AUTH ORITIES WAS LESS THAN 1 000 SQ.FT. WE HAVE ALSO NOTED THAT IT IS NOT EVEN REVE NUES CASE THAT EACH OF FLAT ON STANDALONE BASIS WAS NOT A RESIDENTIAL UNIT. EVEN I F FLATS WERE CONSTRUCTED OR PLANNED IN SUCH A WAY THAT TWO FLATS COULD INDEED BE MERGED INTO ONE LARGER UNIT AS LONG EACH FLAT WAS AN INDEPENDENT RESIDENTIAL UN IT DEDUCTION U/S.80IB(10) COULD NOT BE DECLINED. IT IS IMPORTANT TO BEAR IN M IND THE FACT THAT WHAT SECTION 80IB(10) REFERS TO IS RESIDENTIAL UNIT AND IN TH E ABSENCE OF ANYTHING TO THE CONTRARY IN THE INCOME TAX ACT THE EXPRESSION RES IDENTIAL UNITS MUST HAVE THE I.T.A NO.5673/ MUM/2009 I.T.A NO.6016/ MUM/2009 ASSESSMENT YEAR: 2004-05 5 SAME CONNOTATIONS AS ASSIGNED TO IT BY LOCAL AUTHOR ITIES GRANTING APPROVAL TO THE PROJECT . THE LOCAL AUTHORITY HAS APPROVED THE BUILDING PLAN W ITH RESIDENTIAL UNITS OF LESS THAN 1 000 SQ.FT AND GRANTED COMPLETION CE RTIFICATE AS SUCH. THAT LEAVES NO AMBIGUITY ABOUT THE FACTUAL POSITION . WE HAVE FURTHER NOTED THAT THE PROHIBITION AGAINST SALE OF MORE THAN ONE FLAT IN A HOUSING PRO JECT TO MEMBERS OF A FAMILY HAS BEEN INSERTED SPECIFICALLY WITH EFFECT FROM 1 ST APRIL 2010 AND IN OUR HUMBLE UNDERSTANDING THIS AMENDMENT IN LAW CAN ONLY BE TRE ATED AS PROSPECTIVE IN EFFECT. WHAT IS THEREFORE CLEAR IS THAT SO FAR A S PRE-AMENDMENT POSITION IS CONCERNED AS LONG A RESIDENTIAL UNIT HAS LESS THA N SPECIFIED AREA IS AS PER THE DULY APPROVED PLANS AND IS CAPABLE OF BEING USED FOR RESID ENTIAL PURPOSES ON STANDALONE BASIS DEDUCTION U/S.80IB(10) CANNOT BE D ECLINED IN RESPECT OF THE SAME MERELY BECAUSE THE END USER BY BUYING MORE THAN ONE SUCH UNIT IN THE NAME OF FAMILY MEMBERS HAS MERGED THESE RESIDENTIA L UNITS INTO A LARGER RESIDENTIAL UNIT OF A SIZE WHICH IS IN EXCESS OF SP ECIFIED SIZE. THAT PRECISELY IS THE CASE BEFORE US. WHILE ON THE SUBJECT IT IS USEFUL TO TAKE NOTE OF LEGISLATIVE AMENDMENT BY THE VIRTUE OF WHICH LEGISLATURE PUT CE RTAIN RESTRICTIONS ON SALE OF RESIDENTIAL UNITS TO CERTAIN FAMILY MEMBERS OF A PER SON WHO HAS BEEN SOLD A RESIDENTIAL UNIT IN THE HOUSING PROJECT. SECTION 8 0IB(10) NOW PROVIDES AN ADDITIONAL ELIGIBILITY CONDITION THAT IN A CASE WHER E A RESIDENTIAL UNIT IN THE HOUSING PROJECT IS ALLOTTED TO ANY PERSON BEING AN I NDIVIDUAL NO OTHER RESIDENTIAL UNIT IN SUCH HOUSING PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSON NAMELY (I) THE INDIVIDUAL OR THE SPOUSE OR THE MINOR CHILDREN OF SUCH INDIVIDUAL (II) THE HUF IN WHICH SUCH INDIVIDUAL IS A KARTA (III) ANY PERS ON REPRESENTING SUCH INDIVIDUAL THE SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HUF IN WHICH SUCH INDIVIDUAL IS A KARTA. THE EXPLANATION MEMORANDUM EXPLAINED THE LEGISLATIVE AMENDMENT AS FOLLOWS: (314 ITR(ST) 203) FURTHER THE OBJECT OF THE TAX BENEFIT FOR HOUSING PROJECTS IS TO BUILD HOUSING STOCK FOR LOW AND MIDDLE INCOME HOUSEHOLDS. THIS HA S BEEN ENSURED BY LIMITING THE SIZE OF THE RESIDENTIAL UNIT. HOWEVER THIS IS BEING CIRCUMVENTED BY THE DEVELOPER BY ENTERING INTO AGREEMENT TO SELL MULTIP LE ADJACENT UNITS TO A SINGLE BUYERS. ACCORDINGLY IT IS PROPOSED TO INSERT NEW C LAUSES IN THE SAID SUB-SECTION TO PROVIDE THAT THE UNDERTAKING WHICH DEVELOPS AND BUILDS THE HOUSING PROJECT SHALL NOT BE ALLOWED TO ALLOT MORE THAN ONE RESIDENT IAL UNIT IN THE HOUSING PROJECT TO THE SAME PERSON NOT BEING AN INDIVIDUAL AND WHERE THE PERSON IS AN INDIVIDUAL NO OTHER RESIDENTIAL UNIT IN SUCH HOUSI NG PROJECT IS ALLOTTED TO ANY OF THE FOLLOWING PERSON:- (I) SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL; (II) THE HINDU UNDIVIDED FAMILY IN WHICH SUCH INDIVIDUAL IS THE KARTA; (III) ANY PERSON REPRESENTING SUCH INDIVIDUAL THE SPOUSE OR MINOR CHILDREN OF SUCH INDIVIDUAL OR THE HINDU UNDIVIDED FAMILY IN WH ICH SUCH INDIVIDUAL IS THE KARTA. THIS AMENDMENT WILL TAKE EFFECT FROM THE 1 ST APRIL 2010 AND SHALL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2010-2011 AND SUBSEQUENT YEARS. I.T.A NO.5673/ MUM/2009 I.T.A NO.6016/ MUM/2009 ASSESSMENT YEAR: 2004-05 6 8. IT IS THUS CLEAR THAT THE AFORESAID AMENDMENT HA S BEEN BROUGHT WITH PROSPECTIVE EFFECT I.E. FROM 1 ST DAY OF APRIL 2010 AND THERE IS NO INDICATION WHATSOEVER TO SUGGEST THAT THESE RESTRICTIONS NEED TO BE APPLIED WITH RETROSPECTIVE E FFECT. THE AMENDMENT SEEKS TO PLUG A LOOPHOLE BUT RESTRICTS THE REMEDY WITH EFF ECT FROM 1 ST DAY OF APRIL 2010 I.E. AY 2010-2011. THE LAW IS VERY CLEAR THAT UNLE SS PROVIDED IN THE STATUTE THE LAW IS ALWAYS PRESUMED TO BE PROSPECTIVE IN NATURE. IT WILL THEREFORE BE CONTRARY TO THE SCHEME OF LAW TO PROCEED ON THE BASI S THAT WHEREVER ADJACENT RESIDENTIAL UNITS ARE SOLD TO FAMILY MEMBERS ALL TH ESE RESIDENTIAL UNITS ARE TO BE CONSIDERED AS ONE UNIT. IF LAW PERMITTED SO THERE WAS NO NEED OF THE INSERTION OF CLAUSE (F) TO SECTION U/S 80IB(10). IT WILL BE UNRE ASONABLE TO PROCEED ON THE BASIS THAT LEGISLATIVE AMENDMENT WAS INFRUCTUOUS OR UNCALLED FOR PARTICULARLY AS THE AMENDMENT IS NOT EVEN STATED TO BE FOR REMO VAL OF DOUBTS. ON THE CONTRARY THIS AMENDMENT SHOWS THAT NO SUCH ELIGIBIL ITY CONDITIONS COULD BE READ INTO PRE-AMENDMENT LEGAL POSITION. 9. AS REGARDS THE AOS STAND THAT THE ASSESSEE HIM SELF HAS OFFERED THE DEDUCTION U/S.80IB(10) IN RESPECT OF THESE UNITS DU RING THE COURSE OF SURVEY PROCEEDINGS IT IS ONLY ELEMENTARY THAT NEITHER STA TEMENT RECORDED U/S.133A HAS AN EVIDENTIARY VALUE NOR A LEGAL CLAIM CAN BE DECLI NED ONLY BECAUSE ASSESSEE AT SOME STAGE DECIDED TO GIVE UP THE SAME. IN VIEW OF THESE DISCUSSIONS AND BEARING IN MIND ENTIRETY OF THE CASE ARE OF THE C ONSIDERED VIEW THAT THE DEDUCTION U/S.80IB(10) OUGHT TO HAVE BEEN ALLOWED TO THE ASSESSEE ENTIRELY. TO THIS EXTENT WE MODIFY THE ORDER OF THE CIT(A) AND ALLOW FURTHER RELIEF TO THE ASSESSEE. 10. AS WE HAVE HELD THE ADMISSIBILITY OF DEDUCTION U /S.80IB(10) IN RESPECT OF ENTIRE PROJECT REVENUES GRIEVANCE AGAINST PARTIAL RELIEF GRANTED TO THE ASSESSEE IS INFRUCTUOUS AND ACADEMIC WE ACCORDINGLY DISMI SS THE SAME. 7. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US IN THE CASE OF EMGEEN HOLDINGS P.LTD. (NOW WINDSOR REALTY P. LTD.) VS DCIT. .(SUPRA). FOLLOWING THE VIEW SO TAKEN US WE ALLOW THE RELIEF CLAIMED BY THE ASSESSEE REJECT THE GRIEVANCE RAISED BY THE ASSESS ING OFFICER. 8. AS REGARDS THE SECOND GROUND OF APPEAL RAISED BY THE ASSESSEE LEARNED REPRESENTATIVES FAIRLY ACCEPTS AS RIGHTLY NOTED BY THE CIT(A) IN THE IMPUGNED ORDER THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION DATED 29.4.2009 OF A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF VANDANA PROPERTIES VS ACIT IN ITA NO.1253/M/2007. IN VIEW OF THIS MATTER AND RESPECT FULLY FOLLOWING THE ESTEEMED I.T.A NO.5673/ MUM/2009 I.T.A NO.6016/ MUM/2009 ASSESSMENT YEAR: 2004-05 7 VIEWS OF THE COORDINATE BENCH WE UPHOLD THE STAND OF THE CIT(A) AND SEE NO NEED TO INTERFERE IN THE MATTER. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011 SD/- (VIJAY PAL RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI DATED 29 TH JULY 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) IV MUMBAI 4. COMMISSIONER OF INCOME TAX CENT-II MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH E MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI