ACIT 19(3), MUMBAI v. SARKAR BUILDERS, MUMBAI

ITA 6172/MUM/2010 | 2006-2007
Pronouncement Date: 18-11-2011 | Result: Dismissed

Appeal Details

RSA Number 617219914 RSA 2010
Assessee PAN AANFS9561M
Bench Mumbai
Appeal Number ITA 6172/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 5 day(s)
Appellant ACIT 19(3), MUMBAI
Respondent SARKAR BUILDERS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 18-11-2011
Date Of Final Hearing 03-11-2011
Next Hearing Date 03-11-2011
Assessment Year 2006-2007
Appeal Filed On 12-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL ' E ' BENCH MUMBAI BEFORE SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NOS. 6171 & 6172/MUM/2010 (ASSESSMENT YEARS: 2005-06 & 2006-07) ADDITIONAL COMMISSIONER OF INCOME SARKAR BUILDERS TAX 19(3) ROOM NO.305 3 RD FLOOR HOTEL METRO PALACE BUILDING PIRMAL CHAMBERS PAREL 1 ST FLOOR 355 HILL ROAD MUMBAI 400012 BANDRA(W)MUMBAI 400050 PAN AANFS 9561 M APPELLANT RESPONDENT APPELLANT BY: MR. B. JAYA KUMAR DR RESPONDENT BY: MR. CHETAN A. KARIA DATE OF HEARING: 03/11/2011 DATE OF PRONOUNCEMENT:18/11/2011 O R D E R PER B. RAMAKOTAIAH A.M. THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST T HE ORDER OF THE CIT (A) DATED 25.05.2010 FOR A.Y 2005-06 AND 2006-07. 2. THE REVENUE HAS RAISED THE FOLLOWING COMMON GROUND S: (1). ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED CIT (A) ERRED IN TREATING THAT THE PROJ ECT HAD COMMENCED AFTER 01/10/1998 WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HAD BROUGHT OUT SUFFICIE NT MATERIAL ON RECORD TO CONCLUDE THAT THE PROJECT HAD COMMENCE D MUCH PRIOR TO 01/10/1998 AND HENCE NOT ELIGIBLE FOR DEDU CTION U/S 80IB. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) ALSO FAILED TO APPRECIATE THE FACT THAT THE CONDITIONS SPECIFIED IN SECTION 80IB (10) WERE NOT FULFILLED BY THE ASSESSEE IN AS MUCH AS THAT THE PROJECT HAD CO MMERCIAL UNITS AND HENCE NOT A HOUSING PROJECT WITHIN THE ME ANING OF THE SECTION. ITA NO. 2482/MUM/2010 2 (3) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT ( A) ON THE ABOVE GROUND BE SET SIDE AND THAT OF THE AO BE REST ORED. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DE VELOPMENT OF PROPERTY. DURING THE YEAR THE ASSESSEE HAS TWO PROJECTS VIZ. DEVELOPMENT OF THE PROPERTY NAMELY RANGWALA BUILDING SITUATED AT MAZ GAON AND DHURU PROJECT AT PRABHADEVI. THE RANGWALA PROJECT COMP RISED OF THE PLOT OF LAND ADMEASURING ABOUT 5602 SQ.MTS AND THE TOTAL CONSTRU CTED AREA WAS 89826 SQ.FT OUT OF WHICH 2864 SQ.FT WAS CONSTRUCTION OF S HOPS I.E. COMMERCIAL AREA AND THE BALANCE 86962 SQ.FT WAS FOR RESIDENTIAL FLA TS. THE TOTALS OF 3 RESIDENTIAL BUILDINGS HOUSING 196 FLATS WERE CONSTR UCTED. THE PROPERTY RANGWALA BUILDING HAD EXISTING OLD TENANTS IN OCC UPATION OF COMMERCIAL PREMISES AND IN THE RE-DEVELOPMENT SCHEME APPROVED BY THE ADDL. COLLECTOR AND THE COMPETENT AUTHORITY UNDER URBAN LAND CEILIN G ACT THE OLD TENANTS WERE TO BE GIVEN EQUIVALENT COMMERCIAL PREMISES. OU T OF THE TOTAL SHOPS AREA OF 2864 SQ.FT CONSTRUCTED MIN THE NEW BUILDING AN AREA OF 2290 SQ.FT IN THE NEW BUILDINGS WERE TO BE GIVEN TO THE OLD TENANTS A GAINST THEIR ORIGINAL HOLDING OF THE SHOPS IN THE OLD BUILDINGS. ONLY AN AREA OF 574 SQ.FT WAS COMMERCIALLY SOLD. 4. THE PROJECT WAS COMPLETED DURING THE YEAR ENDED 31. 03.2004 AND IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE PROFIT FROM THE SALES MADE IN RANGWALA PROJECT I N THE YEAR ENDING 31.03.2005 WAS SHOWN BY THE ASSESSEE AT ` 4 12 16 172. THIS PROFIT OF ` 4 12 16 712 WAS CLAIMED AS DEDUCTION UNDER THE PROV ISION OF SEC 80IB(10) OF THE INCOME TAX ACT 1961 IN THE RETURN OF INCOME FILED. EARLIER THE ASSESSEE HAD ALSO OFFERED INCOME FROM THE RANGWALA PROJECT IN THE YEAR ENDING 31.03.2004 AT ` 7 54 53 651/- IN RESPECT OF THE FLATS SOLD IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2004-05. THIS PROFIT OF ` 7 54 53 651/- WAS ALSO CLAIMED AS EXEMPT U/S 80IB(1 0) OF INCOME TAX ACT 1961 BUT ITS CLAIM FOR DEDUCTION WAS REJECTED BY TH E ASSESSING OFFICER ON THE GROUNDS THAT T5HE RANGWALA PROJECT WAS APPROVED ON 16.04.1996 BY THE LOCAL AUTHORITY AND AS PER THE PROVISION OF SEC.80I B(10)(A) THE ITA NO. 2482/MUM/2010 3 COMMENCEMENT OF THE PROJECT SHOULD BE ON OR AFTER 1 ST DAY OF OCTOBER 1998. FOLLOWING THE SAME THE ASSESSING OFFICER HAS DISALL OWED DEDUCTION U/S 80IB(10) IN THESE YEARS ON TWO REASONS: (A) IN RESPECT OF RANGWALA PROJECT FROM WHICH DEDUCTIO N IS CLAIMED THE BMC HAD GRANTED APPROVAL OF THE PROJECT VIDE CO MMENCEMENT CERTIFICATE DT. 16.04.1996 WHICH WAS LATER ON AMEND ED BY BMC VIDE CERTIFICATE DT. 28.03.2001. IN VIEW OF THE CONDITIO N PRESCRIBED IN EXPLANATION(1) TO SEC.80IB(10)(A) FOR ALLOWANCE OF DEDUCTION U/S 80IB(10)(A) NAMELY THAT THE HOUSING PROJECT HAS TO BE APPROVED BY THE LOCAL AUTHORITY ON OR AFTER 1 ST DAY OF OCTOBER 1998 THE DEDUCTION U/S 80IB(10) WAS DENIED TO THE ASSESSEE. (B) THE ASSESSEE HAS CONSTRUCTED SHOP AREA IN THE RANG WALA PROJECT AT 2864 SQ.FT AND AS PER THE AMENDED PROVISION OF S EC.80IB(10)(D) APPLICABLE W.E.F. ASSESSMENT YEAR 01.04.2005 THE A GGREGATE BUILT UP AREA OF THE HOUSING PROJECT CANNOT EXCEED 5% OF THE AGGREGATE BUILT UP AREA OF THE HOUSING PROJECT OR 2000 SQ. FT WHICHEVER IS LESS. IN THE CASE OF THE ASSESSEE SINCE THE CONSTRUCTED AREA OF THE SHOPS IN THE RANGWALA PROJECT EXCEEDED 2000 SQ.FT THE CO NDITION IN SEC.80IB(10(D) WERE NOT COMPLIED WITH AND HENCE THE DEDUCTION U/S 80IB(10) WAS DENIED TO THE ASSESSEE ON THIS GRO UND ALSO. ON THE SAME REASONS THE AO DISALLOWED THE CLAIM IN AY 2006-07 OF ` 36 18 713. THE LD. CIT (A) FOLLOWING VARIOUS ORDERS ON THE ISSUE INCLUDING FINDINGS IN AY2004-05 BY ITAT IN ASSESSEE OWN CASE GAVE RELIEF TO ASSESSEE. THE REVENUE IS AGGRIEVED ON THESE TWO ISSUES. 5. REGARDING THE GROUND 1 SO FAR AS THE DATE OF COMME NCEMENT CERTIFICATE OF THE HOUSING PROJECT BY THE LOCAL AUT HORITY WAS CONCERNED ON AN APPEAL FILED BEFORE ITAT FOR ASSESSMENT YEAR 2004-0 5 THE ITAT VIDE ITS ORDER NO.ITA NO.4835/MUM/2007 DATED 23.10.2009 FOR ASSESS MENT YEAR 2004-05 AFTER A DETAILED REASONING HAD RULED THAT THE DATE OF COMMENCEMENT CERTIFICATE IN THE CASE OF THE ASSESSEE HAS TO BE TAKEN AS 28.03.2001 AND NOT 16.04.1996. THIS FINDINGS OF THE ITAT MUMBAI IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 WAS FOLLOWED BY TH E CIT (A) IN BOTH THE ITA NO. 2482/MUM/2010 4 YEARS. AS THERE IS ALREADY FINDING ON THE DATE OF C OMMENCEMENT WE DO NOT SEE ANY REASON TO CONSIDER THE GROUND RAISED BY THE REVENUE AS THE PROJECT WAS APPROVED AND ASSESSEE SATISFIED THE CONDITION O F COMMENCEMENT OF PROJECT. THE PROFITS CLAIMED EXEMPT WERE EMANATING FROM THE SAME PROJECT BEING SALE OF STOCK AVAILABLE AFTER COMPLETION OF P ROJECT. THE GROUND IS REJECTED. 6. THE GROUND 2 RAISED IS ON THE AVAILABLE COMMERCIAL AREA EXCEEDING 2000 SQ.FT IN THE PROJECT OF THE ASSESSEE. THE LD. CIT (A) ALLOWED THE CLAIM OF ASSESSEE CONSIDERING VARIOUS ORDERS ON THE ISSUE. T HE ASSESSEE RELIED ON THE DECISION OF THE ITAT SPECIAL BENCH PUNE IN THE CASE OF BRAHMA ASSOCIATES VS. JCIT ITAT SPL. BENCH IN ITA NO.1417/PN/06 DATE D 6.4.09 IN WHICH IT WAS HELD THAT IN RESPECT OF PROJECT WHICH WERE APPR OVED PRIOR TO 31.3.2004 COMMERCIAL AREA NOT EXCEEDING 10% OF THE AGGREGATE BUILT-UP AREA CAN BE PERMITTED FOR GRANTING DEDUCTION U/S 80IB(10). THE DECISION OF BRAHMA ASSOCIATES (SUPRA) HAD ALSO GIVEN A CATEGORICAL FIN DING THAT IN RESPECT OF THE PROJECT APPROVED PRIOR TO 31.03.2004 IT WILL BE SU FFICIENT IF THE IMPUGNED PROJECT IS APPROVED AS A HOUSING PROJECT; BY THE L OCAL AUTHORITY FOR GRANT OF DEDUCTION U/S 80IB(10) OF THE INCOME TAX ACT 1961. THE ASSESSEE ALSO RELIED ON THE MUMBAI ITAT DECISION IN THE CASE OF P ATHARE ASSOCIATES IN ITA NO.993/MUM/2009 DATED 17.12.2009 FOR ASSESSMENT YEA R 2005-06 AND ON THE MUMBAI ITAT DECISION IN THE CASE OF SAROJ SALES CORPORATION VS. ITO REPORTED IN 115 TTJ 485 (MUM) FOR ASSESSMENT YEAR 2 005-06 IN SUPPORT OF THE VIEW THAT WHERE THE PROJECT IS APPROVED PRIOR T O 31.3.2004 THEN THE PROFITS FROM SUCH PROJECT CAN BE AVAILABLE FOR DEDU CTION U/S 80IB(10) IN ASSESSMENT YEAR 2005-06 OR LATER ON AND THE AMENDED STIPULATION FOUND IN SEC.80IB(10)(D) OF THE INCOME TAX ACT 1961 RESTRIC TING THE COMMERCIAL AREA TO 5% OF THE AGGREGATE BUILT-UP AREA OF THE PROJECT OF 2000 SQ.FT WHICHEVER IS LESS IS NOT APPLICABLE AND SUCH STIPULATION DO NOT DEBAR OR DISENTITLE THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IB(10) OF ITS PROFIT SHOWN IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. THE L D DR REITERATED THE OBJECTION OF AO WHILE DENYING THE CLAIM. WE ALREADY NOTED THAT THE PROJECT ITA NO. 2482/MUM/2010 5 WAS COMMENCED BY ISSUE OF COMMENCEMENT CERTIFICATE DT. 28.03.2001 AND THE PROJECT WERE COMPLETED ON 15.9.2003. THE TOTAL COMMERCIAL AREA CONSTRUCTED IN THE PROJECT IS 2864 SQ.FT OUT OF THE TOTAL AREA OF THE PROJECT AGGREGATING TO 89826 SQ.FT. THUS THE TOTAL COMMERCI AL AREA IS ABOUT 3% OF THE TOTAL CONSTRUCTED AREA. ALSO THE IMPUGNED PROJE CT HAS BEEN DULY APPROVED AS A HOUSING PROJECT WHICH FACT IS ALSO NOT DISPUTED BY THE ASSESSING OFFICER. FURTHER FOR THE PURPOSE OF DEDUC TION U/S 80IB(10) IN ASSESSMENT YEAR 2005-06 THE RESTRICTIVE STIPULATIO N OF COMMERCIAL AREA FOUND IN SECTION 80IB(10)(D) AS MENTIONED ABOVE I S NOT APPLICABLE TO THE CASE OF THE ASSESSEE BECAUSE AS PER THE JUDGMENT C ITED IN THE CASE OF M/S PATHARE ASSOCIATES THAT CONDITION IS APPLICABLE IN RESPECT OF PROJECT APPROVED AFTER 31.03.2004. SINCE THE LD.CIT (A) FOLLOWED THE ABOVE PRINCIPLE AND ORDERS OF COORDINATE BENCHES WE SEE NO REASON TO D IFFER FROM THE SAME. IN THE RESULT THE GROUND RAISED BY THE REVENUE ON THIS IS REJECTED. 8. IN THE RESULT APPEALS OF REVENUE IN BOTH THE YE ARS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER 2011. SD/- SD/- ( VIJAY PAL RAO ) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED:18 TH NOVEMBER 2011 VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR E BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI