ITO WD 1(3), MUMBAI v. COSMOS ENTERPRISES, THANE

ITA 6745/MUM/2010 | 2007-2008
Pronouncement Date: 11-10-2013 | Result: Dismissed

Appeal Details

RSA Number 674519914 RSA 2010
Assessee PAN AAKFC8573E
Bench Mumbai
Appeal Number ITA 6745/MUM/2010
Duration Of Justice 3 year(s) 18 day(s)
Appellant ITO WD 1(3), MUMBAI
Respondent COSMOS ENTERPRISES, THANE
Appeal Type Income Tax Appeal
Pronouncement Date 11-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 11-10-2013
Date Of Final Hearing 14-08-2013
Next Hearing Date 14-08-2013
Assessment Year 2007-2008
Appeal Filed On 23-09-2010
Judgment Text
INCOME TAX APPELLATE TRIBUNAL MUMBAI - C BENCH. . . BEFORE S/SH. B.R. MITTAL JUDICIAL MEMBER & RA JENDRA ACCOUNTANT MEMBER ./ ITA NO. 6745/MUM/2010 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2007-08 ITO WARD 1(3) VARDAAN BUILDING MIDC WIE THANE(W)- 400601 VS. COSMOS DEVELOPERS 201 ARIHANT BUILDING AGYARI LANE TEMBHI NAKA THANE (W) PAN: AAKFC8573E ( #$ / APPELLANT ) ( %&#$ / RESPONDENT ) %&' %&' %&' %&' ./ C.O. NO. 196/MUM/2011 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2007-08 COSMOS DEVELOPERS 201 ARIHANT PARSI AGYARI LANE TEMBHI NAKA THANE (W) PIN: 400602 VS. ITO WARD 1(3) VARDAAN BUILDING MIDC WIE THANE(W)- 400601 PAN: AAKFC8573E ( #$ / APPELLANT ) ( %&#$ / RESPONDENT ) #$ #$ #$ #$ ) ) ) ) / APPELLANT BY : SMT. C.TRIPURA SUNDARI %&#$ * ) / RESPONDENT BY : SHRI SUNIL U.PATHAK & SUBODH RATNAPARKHI ! ! ! ! * ** * + + + + / DATE OF HEARING : 21-08-2013 -.' * + / DATE OF PRONOUNCEMENT : 11-10-2013 ! ! ! ! 1961 * ** * 254(1) +/+ +/+ +/+ +/+ 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT 1961(ACT) PER RAJENDRA A.M. CHALLENGING THE ORDER DATED 03.06.2010 OF THE CIT(A )-2 THANE ASSESSING OFFICER(AO) HAS FILED FOLLOWING GROUNDS OF APPEAL ASSESSEE HAS FILED FOL LOWING GROUNDS IN THE CROSS OBJECTION (CO) FILED BY IT. ITA NO. 6745/MUM/2010 AY-2007-08 1. WHETHER IN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW HONBLE CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTION U/S 80IB (10) OF THE I.T.ACT TO THE ASSESSEE FOR THE A.Y. 2007-08. 2. THE APPELLANT CRAVES LEAVE TO ADD AMEND ALTER OR DELETE ANY GROUNDS OF APPEAL. C.O. NO. 196/MUM/2011 AY-2007-08 1. ON THE FACTS AND IN LAW THE LD. CIT(APPEALS) ERRED IN DENYING THE BENEFIT OF DEDUCTION U/S 80 IB (10) TO THE EXTENT OF PROFIT DERIVED BY THE RESPOND ENT FROM THREE FLOORS (I.E. 10 TH 11 TH & 12 TH FLOOR) OF BUILDING NO.3 NAMED NILGIRI OF THE HOUSING PROJ ECT COSMOS HILLS FOR THE REASON THAT 2 ITA NO.6745/MUM/2010 (AY-2007-08) COSMOS DEVELOPERS . COMPLETION CERTIFICATE IN RESPECT OF THE SAID THREE FLOORS WAS NOT ISSUED BY THE LOCAL AUTHORITY BEFORE 31.03.2008. 2. ON THE FACTS AND IN LAW THE LD. CIT(APPEALS) ERRED IN DENYING THE BENEFIT OF DEDUCTION U/S. 80 IB (10) TO THE EXTENT OF PROFIT DERIVED FROM DEVELOPME NT OF CERTAIN UNITS OF THE HOUSING PROJECT COSMOS HILLS BY HOLDING SUCH UNITS TO EXCEED THE MAXIMUM BUILT UP AREA PERMISSIBLE UNDER THE SAID SECTION. 3. THE RESPONDENT CRAVES LEAVE TO ADD ALTER AMEND D ELETE AND/OR VARY ANY OF THE ABOVE GROUNDS OF CROSS OBJECTIONS AT ANY TIME BEFORE THE DECISION OF THE APPEAL/CROSS OBJECTION. ASSESSEE AN AOP ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS FILED ITS RETURN OF INCOME ON 26.10.2007DECLARING TOTAL INCOME AT RS. NIL.AO FINA LISED THE ASSESSMENT ON 31.12.2009 DETERMIN -ING THE TOTAL INCOME OF THE ASSESSEE AT RS. 5.57 C RORES. 2. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT ASS ESSEE HAD DEVELOPED A HOUSING PROJECT CALLED COSMOS HILLS IN THANE THAT THE PROJECT WAS A COMPLEX OF 4 BUILDINGS VIZ. DEVGIRI (STILT +7 FLOORS) HIMGIRI(STILT+12 FLOORS) NILGIRI(STILT+12 FLOORS)AND SAPTGIRI (STILT+7 FLOORS) THAT IT HAD DE CLA -RED NET PROFIT OF RS. 5 57 28386/- THAT ENTIRE IN COME HAD BEEN CLAIMED AS DEDUCTION U/S. 80IB(10) OF THE ACT.AO FURTHER FOUND THAT FIRST ORDER OF SAN CTION/APPROVAL FOR DEVELOPMENT TO THE HOUSING PROJECT WAS ISSUED BY THANE MUNICIPAL CORPORATION(T MC) ON 26.12.2003 THAT PROJECT WAS FIRST APPROVED BEFORE 31.03.2004.REFERRING TO THE PROVISI ONS OF SECTION 80IB(10)(A)(I) OF THE ACT HE HELD THAT ASSESSEE WAS REQUIRED TO COMPLETE THE CON STRUCTION OF THE SAID HOUSING PROJECT ON OR BEFORE 31.03.2008 THAT IT WAS ALSO REQUIRED TO OBTA IN OCCUPATION CERTIFICATE(OC)/COMPLETION CERTIFICATE(CC) OF ALL THE BUILDINGS FROM THE LOCAL AUTHORITY ON OR BEFORE 31.03.2008 THAT IN THE CASE UNDER CONSIDERATION OC IN RESPECT OF BUILDING NO.3 NAMELY NILGIRI FOR THREE FLOORS HAD BEEN ISSUED BY TMC ON 09.04.2009.FOR CONFIRMING THE DATE S OF ISSUE OF FIRST APPROVAL AND DATE OF ISSUE OF ALL THE COMPLETION CERTIFICATES ISSUED BY TMC AO SENT A LETTER TO MUNICIPAL CORPORATION.VIDE ITS LETTER DATED 10.11.2009 TMC CONFIRMED THAT PROJ ECT WAS FIRST APPROVED FOR DEVELOPMENT ON 26. 12.2003 AND LAST OC WAS ISSUED ON 09.04.2009.CONSID ERING THE ABOVE FACTS AO HELD THAT ASSESSEE HAD VIOLATED THE PROVISIONS OF SUB-SECTION (I) OF C LAUSE (A) OF SECTION 80IB(1) R.W.EXPLANATION (I) AND (II) BY NOT OBTAINING THE OC/CC OF THE LOCAL AU THORITIES BEFORE 31.03.2008. HE ISSUED A NOTICE TO THE ASSESSEE ASKED TO SHOW CAUSE AS TO WHY ITS C LAIM U/S.80IB(10) SHOULD NOT BE DISALLOWED. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AO HELD THAT DATE OF FIRST APPROVAL WAS 26.12. 2003 AND THE DATE OF COMMENCEMENT CERTIFICATE WAS 0 3.3.2004 THAT BOTH THE DATES FELL BEFORE 31.3. 2004 THAT THE LAST DATE FOR OBTAINING OC WAS 31.03. 2008 THAT ASSESSEE HAD APPLIED FOR OC ON 27. 01.2009 THAT ASSESSEE HAD NEITHER COMPLETED THE CON STRUCTION OF THE PROJECT TILL 31.03.2008 NOR HAS OBTAINED OC BEFORE 31.03.2008. 2.1 .FOR VERIFYING THE AREA OF RESIDENTIAL UNITS CONSTR UCTED IN THE HOUSING PROJECT AO APPOINTED A GOVERNMENT APPROVED ARCHITECT. IN HIS REPORT THE AP PROVED VALUER SUBMITTED THAT FOUR DUPLEX FLATS IN NILGIRI 2 FLATS IN SAPTGIRI AND 4 FLATS IN HIMGI RI WERE CONSTRUCTED BY COMBINING LAST TWO TOP FLOORS OF THE BUILDING OR BY COMBINING TWO FLATS WI TH ONLY ONE ENTRY AND ONE KITCHEN THAT CONSTRUC -TION OF DUPLEX FLAT WAS NOT AS PER THE APPROVED PL AN THAT THE BUILT UP AREA OF SUCH FLATS WAS MORE THAN 1000 SQ FT.ON THE BASIS OF THE SAID REPORT AO HELD THAT BY CONSTRUCTING THE FLATS OF MORE THAN 1000 SQ FT.ASSESSEE HAD VIOLATED THE PROVISIONS OF CLAUSE (C) OF SECTION 80IB(10) OF THE ACT THAT ASSESSEE WAS NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80 IB(10).FINALLY HE DISALLOWED THE CLAIM AMOUNT -ING TO RS. 5.57 CRORES MADE BY THE ASSESSEE. 2.2. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDE R HE HELD THAT DEVGIRI HIMGIRI NILGIRI AND SAPTGIRI BUILDING OF THE PROJECT COSMOS HILLS WERE SITUATED ON PLOT OF LAND MEASURING MORE THAN 1 ACRE THAT THE CO IN RESPECT OF ALL THE BUILDINGS(E XCEPT NILGIRI)WAS OBTAINED BY THE ASSESSEE PRIOR TO 31.03.2008 THAT AO HAD NOT DISPUTED THE FACT.REL YING UPON THE ORDERS OF THE MUMBAI TRIBUNAL DELIVERED IN THE CASE OF VANDANA PROPERTIES(31SOT39 2)AND SAROJ SALES ORGANISATION (3 DTR494) 3 ITA NO.6745/MUM/2010 (AY-2007-08) COSMOS DEVELOPERS . HE HELD THAT RATIO LAID DOWN BY THE ABOVE DECISIONS WAS EQUALLY APPLICABLE IN THE CASE UNDER CONSI -DERATION THAT CONCEPT OF HOUSING PROJECT DID NOT M EAN THAT THERE SHOULD BE A GROUP OF BUILDING AND ONLY THEN IT COULD BE CALLED A HOUSING PROJECT THAT EVEN ONE BUILDING COULD CONSTITUTE AN INDEP -ENDENT HOUSING PROJECT AND WOULD BE ELIGIBLE FOR D EDUCTION U/S. 80IB(10) OF THE ACT THAT ALL THE FOUR BUILDINGS HAD BEEN COMPLETED PRIOR TO 31.3.200 8 THAT ASSESSEE HAS FULFILLED ALL THE CONDITIONS AND PARAMETERS LAID DOWN BY THE PROVISIONS OF SECTI ON 80IB(10) THAT CLAIM MADE BY IT COULD NOT BE REJECTED ENTIRELY ON THE PLEA THAT SOME PART OF THE HOUSING PROJECT CC HAD NOT BEEN GRANTED BY THE LOCAL AUTHORITIES THAT CLAIM ON DEDUCTION U/S.80IB( 10) SHOULD BE ALLOWED IN RESPECT OF THOSE UNITS WHICH HAD BEEN COMPLETED AND CC HAD BEEN GRANTED TO THOSE BUILDINGS BY TMC PRIOR TO 31.03. 2008.ACCORDINGLY HE HELD THAT CLAIM OF THE ASSESSEE FOR GRANT OF DEDUCTION IN RESPECT OF PROFITS DERIVED BY IT FROM SALE OF UNITS IN BUILDING DEVGIR I HIMGIRI SAPTGIRI AND NILGIRI (EXCEPT 10 TH 11 TH AND 12 TH FLOOR)ON PROPORTIONATE BASIS.HE UPHELD THE ORDER O F THE AO IN RESPECT OF PROFIT FROM SALE OF UNITS ON 10 TH -12 TH FLOOR OF NILGIRI BUILDING. 2.3. BEFORE US DEPARTMENTAL REPRESENTATIVE(DR) SUBMITTED THAT CC WAS RECEIVED BY THE ASSESSEE AFTER DUE DATE THAT AS PER THE PROVISIONS OF SECTI ON 80IB(10)(A)EXPLANATION(I)(II) ASSESSEE HAD TO OBTAIN CC BEFORE 31.03.2008 THAT APPROVAL VALUER HA D SUBMITTED A REPORT OF THE ON THE SPOT ENQUIRY THAT ASSESSEE HAD BUILT FLATS/DUPLEX FLATS WHICH MEASURED MORE THAN 1000 SQ FT. THAT AO WAS JUSTIFIED IN DENYING THE BENEFITS OF SECTION 80 IB(10) OF THE ACT. AUTHORISED REPRESENTATIVE (AR)SUBMITTED THAT THERE WAS NO JUSTIFICATION TO DENY DEDUCTION IN RESPECT OF THE BUILDING FOR WHICH OC WERE RECEIVED PRIOR TO 31.3.2008 THAT SUCH BUILDINGS WERE QUAILFIED FOR DEDUCTION U/S. 80IB(10)ON STANDALONE BASIS.HE REFERRED THE COPIES OF OC DATED 13. 07.2006 AND 26.12.2006(PAGE NO.35 AND 36 OF THE PAP ER-BOOK PB) ISSUED BY TMC IN RESPECT OF ALL THE BUILDINGS NAMELY DEVGIRI HIMGIRI NILGIRI AND SA PTGIRI(EXCEPT THREE FLOORS I.E.10 11 AND 12 FLOORS OF NILGIRI BUILDING).HE RELIED UPON THE CASE S OF VANDANA PROPERTIES (254CTR258) SAROJ SALES ORGANIZATION (SUPRA) MUDHIT M. GUPTA(51DTR217 ) BRIGADE ENTERPRISES PVT. LTD.(119 TTJ 269) MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO.(150TTJ590) M/S.RAHUL CONSTRUC - TION CO. (ITANO. 1250/PN/ 2009 & 707/PN/2010 DT.30 .03.2012)VISWAS PROMOTERS (P) LTD.(255 CTR 149) RUNWAL MULTI-HOUSING PVT. LTD-(ITA NO.101 5 1016 & 1017/PN/2011 DT. 21.11.2012) 2.3.A. WITH REGARD TO THE REPORT SUBMITTED BY THE APPROVED VALUER AR SUBMITTED THAT RESIDENTIAL FLATS WERE CONSTRUCTED AS INDEPENDENT RESIDENTIAL U NITS AND WERE COMPLETED IN ALL RESPECT BY THE ASSESSEE THAT POSSESSION OF SUCH FLATS WAS GRANTED TO THE PURCHASERS CONCERNED THAT EACH OF THE CONSTRUCTED FLAT WAS AS PER THE SANCTION PLAN WITH INDEPENDENT ENTRY DOOR KITCHEN AND ALL OTHER AMENITIES AS MENTIONED IN THE SALE AGREEMENTS OF TH E FLATS CONCERNED THAT THE MODIFICATION IN THE FLATS HAD BEEN MADE BY THE PURCHASERS THAT ASSESSEE HAD NO CONTROL OVER THE CHANGES MADE BY THE PURCHASERS THAT AT THE TIME OF GRANT OF OC LOCAL AU THORITIES HAD EXAMINED THIS ASPECT AND ONLY THEN OC WAS ISSUED THAT APPROVED VALUER HAD ERRONEOUSLY CONSIDERED BUILT UP AREA OF PREMISES TO BE CARPET AREA + 20% THAT AS PER THE PROVISIONS OF THE ACT THERE WAS SPECIFIC DEFINITION OF BUILT UP AREA THAT AS PER THE PROVISIONS OF SECTION 80IB(14) (A) OF THE ACT BUILT UP AREA OF FLATS HAD TO BE DETERMINED ON THE BASIS OF THE SAID DEFINITION THAT BUILT UP AREA DETERMINED BY THE VALUER WAS ON AD-HOC BASIS AND WAS ERRONEOUS. 2.3.B. HE FURTHER SUBMITTED THAT WORDS USED IN THE SECTION WERE CITY OF MUMBAI THAT THE MUNICIPAL LIMIT CITY OF MUMBAI ENDED ON THE CENTRAL SITE BETW EEN SION-KURLA THAT THE DISTANCE BETWEEN THE PROJECT FROM THE SAID LOCATION WAS MORE THAN 25 KMS BY ROAD THAT MAXIMUM BUILT UP AREA PERMISS -IBLE TO THE ASSESSEE IN RESPECT OF RESIDENTIAL UNI TS WAS 1500 SQ.FT. THAT AO WAS INFORMED ABOUT THIS MATTER DURING THE ASSESSMENT PROCEEDINGS THAT HE RE JECTED THE STATEMENT MADE BY THE ASSESSEE THAT WORD CITY AND CORPORATION HAD DIFFERENT MEANING S-THEY COULD NOT BE EQUATED.REFERRING TO THE PROVISIONS OF SEC.80IB(7)(B) AND 80IB(7A) HE SUBMIT TED THAT WHEREVER THE LEGISLATURE INTENDED TO REFER AREAS FALLING WITHIN THE MUNICIPAL JURISDICTI ON OF CORPORATION IT HAD STATED IN ABSOLUTE TERM THAT WORDS USED IN THE SECTION 80IB(10) WAS CITY ON LY.REFERRING TO MUMBAI MUNICIPAL CORPORA - 4 ITA NO.6745/MUM/2010 (AY-2007-08) COSMOS DEVELOPERS . TION ACT 1988 BOMBAY GENERAL CLAUSE ACT 1904 THE G REATER BOMBAY LAWS AND BOMBAY HIGH COURT (DECLARATION OF LIMITS) ACT 1945 AND MAHARASH TRA LAND REVENUE CODE 1966 HE STATED THAT CITY OF MUMBAI EXISTED UPTO CHUNABHATTI ON THE EAST ERN SIDE.HE REFERRED TO THE MAPS ISSUED BY MUNICIPAL CORPORATION.IN THIS REGARD HE REFERRED TO PAGE NO.88 TO144 OF THE PB.HE RELIED UPON THE CASES OF SILVER LAND DEVELOPERS PVT. LTD. DECIDED B Y THE I BENCH OF MUMBAI (2506/MUM/ 2009) DATED 11.07.2012 AND DECISION OF HONBLE JURISDICTI ONAL HIGH COURT DELIVERED IN THE CASE OF MAVAJI MULJI MERCHANT V/S.STATE OF MAHARASHTRA & OT HERS 1993(3) BOM.C.R.220.(BOM.) 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.EFFECTIVE GROUND OF APPEAL FILED BY THE AO IS ABOUT ALLOWING THE CLAIM MADE BY THE ASSESSEE U/S.80IB(10) OF THE ACT. AO HAD DISALLOWED THE ENTIRE CLAIM MAINLY ON TWO GR OUNDS-FIRST ASSESSEE HAD NOT OBTAINED THE OC /CC BEFORE A PARTICULAR DATE.SECOND OBJECTION OF TH E AO WAS ABOUT THE SIZE OF FLATS. AS PER THE AO AREA OF 10 FLATS WAS MORE THAN THE AREA PRESCRIB ED BY THE ACT. 2.4.A. FIRST WE WOULD LIKE TO DECIDE THE ISSUE OF DATE OF OBTAINING OC/CC.WE FIND THAT EXCEPT FOR THE THREE FLOORS (FLOOR NO.10 11 AND 12 OF NILGIRI ) ASSESSEE HAD OBTAINED THE REQUIRED CERTIFICATES FROM THE LOCAL AUTHORITIES WELL IN TIME.WHILE DECID ING THE APPEAL OF THE ASSESSEE FAA HAS CLEARLY HELD THAT TMC HAD ISSUED CERTIFICATES FOR ALL THE F OUR BUILDINGS(EXCEPT THREE FLOORS OF NILGIRI) BEFORE 31.03.2008.DR COULD NOT CONTROVERT THE FACT. THEREFORE WE ARE OF THE OPINION THAT FAA WAS JUSTIFIED IN DIRECTING THE AO TO ALLOW THE DEDUCTIO N FOR ALL THE FOUR BUILDINGS OTHER THAN THREE FLOORS OF NILGIRI BUILDING.SECTION 80IB(10) WAS INT RODUCED IN THE ACT FOR A SPECIFIC PURPOSE AND IT HAS BEEN HELD A BENEVOLENT LEGISLATION.THE SECTION IS ABOUT DEVELOPMENT AND CONSTRUCTION OF A HOUSING PROJECT OF RESIDENTIAL UNITS OF SPECIFIED A REAS AND IT HAS TO BE COMMENCED AND COMPLETED DURING SPECIFIED PERIOD AND ON A PLOT OF PARTICULA R SIZE.IF THESE BASIC CONDITIONS ARE FULFILLED AO CANNOT DENY THE BENEFITS OF THE SAID SECTION TO AN ASSESSEE.AO HAS MENTIONED THAT THREE BUILDINGS WERE COMPLETED BEFORE 31.03.2008 AND OC WAS ALSO OB TAINED BEFORE DUE DATE.CONSIDERING THESE FACTS IN OUR OPINION HE WAS NOT JUSTIFIED IN DISALL OWING THE CLAIM MADE BY THE ASSESSEE-AOP FOR THE SAID BUILDINGS.SIMILAR IS THE POSITION FOR THE NINE FLOORS OF NILGIRI BUILIDNG.CASES RELIED UPON BY THE AR ALSO SUPPORT THE SUBMISSIONS MADE BY THE AR. 2.4.B. NOW WE WOULD LIKE TO DISCUSS THE SECOND REASON FOR DISALLOWING THE DEDUCTION AND THAT IS THE SIZE OF 10 FLATS.AO HAD HELD THAT THE BUILT UP AREA MORE OF 10 FLATS WAS MORE THAN 1000 SQ FT. HIS OPINION WAS BASED ON THE BASIS OF THE REPORT OF GOVERNMENT APPROVED VALUER.AFTER GOING THROUGH THE REPORT OF VALUER WE FIND THAT FOR CALCU LATING THE AREA OF THE RESIDENTIAL UNIT VALUER HAS ADDED 20% TO THE CARPET AREA OF THE UNIT.WE FIND TH AT WORDS BUILT UP AREA HAS BEEN SPECIFICALLY DEFINED IN THE SECTION ITSELF IN SUB-SECTION 14.WE WOULD LIKE TO REPRODUCE THE SECTION THAT READS AS UNDER : BUILT-UP AREA MEANS THE INNER MEASUREMENTS OF TH E RESIDENTIAL UNIT AT THE FLOOR LEVEL INCLUDING THE PROJECTIONS AND BALCONIES AS INCREASE D BY THE THICKNESS OF THE WALLS BUT DOES NOT INCLUDE THE COMMON AREAS SHARED WITH OTHER RESIDENT IAL UNITS. IN OUR OPINION ONCE A WORD HAS BEEN DEFINED IN A SE CTION THEN IT HAS TO BE CONSTRUED STRICTLY.NO ONE SHOULD ADD OR SUBTRACT ANYTHING TO OR FROM THAT WORD.VALUER OR AO ARE NOT AUTHORISED TO ALTER THE MANDATE GIVEN BY THE PARLIAMENT.IT IS NOT KNOWN AS WHAT WAS THE BASIS FOR ADDING 20% TO THE CARPET ARE OF THE RESIDENTIAL UNIT WHILE DECIDING T HE BUILT OF AREA OF THE FLATS.WE FIND THAT HONBLE KARNATAKA HIGH COURT HAS DEALT THE ISSUE IN THE MAT TER OF G.R.DEVELOPERS(22TAXMANN.COM. 265). ADJUDICATING THE QUESTION HONBLE COURT HELD AS UND ER: PRIOR TO INSERTION OF DEFINITION OF BUILT-UP AREA WITH EFFECT FROM 1-4-2005 BUILT-UP AREA DID NOT INCLUDE PROJECTIONS AND BALCONIES AS PER THE NA TIONAL BUILDING CODE BUILDING INDUSTRY PRACTICE AND ALSO ACCORDING TO THE BUILDING BYE-LAW S.PROBABLY TAKING ADVANTAGE OF THIS FACT THE BUILDERS PROVIDED THESE BALCONIES AND PROJECTIONS W HICH MADE THESE RESIDENTIAL UNITS BIGGER THAN 1 500 SQ.FT. AND THUS HAD THE BENEFIT OF THIS PRO VISION.WHEREAS THE OBJECT WITH WHICH THIS 5 ITA NO.6745/MUM/2010 (AY-2007-08) COSMOS DEVELOPERS . PROVISION WAS MADE IN REALITY WAS DEFEATED AS PROB ABLY SUCH RESIDENTIAL UNITS WOULD BE BEYOND THE REACH OF THE COMMON MAN.IT IS IN THIS BACKGROUN D THAT THIS AMENDMENT WAS BROUGHT TO LAW BY WAY OF INSERTION MAKING IT CLEAR THAT THE SAID PROJ ECTION AND BALCONIES CONSTITUTE COMMON AREA SHARED WITH OTHER RESIDENTIAL UNITS AND THEY HAVE T O BE INCLUDED IN THE DEFINITION OF BUILT-UP AREA AND THEN SUCH PREMISES SHOULD SATISFY THE REQUIRE MENT OF 1 500 SQ.FI. THEREFORE NOTWITHSTANDING THE LAW GOVERNING THE CONSTRUCTION OF THE BUILDING FOR THE PURPOSE OF GETTING A BENEFIT UNDER THE ACT THEY HAVE TO BRING THE CONSTRUCTION WITHIN THE REQUIREMENT PRESCRIBED UNDER THE ACT.THEN ONLY THEY WOULD BE ENTITLED TO THE BENEFIT OF TAX EXEMPTION UNDER SECTION 80-IB.NORMALLY WHEN AN AMENDMENT IS EFFECTED BY WAY OF INSERTION THE EFFE CT IS THAT THE EARLIER SECTION WHICH IS SUBSTITUTED BY THIS SECTION IS WIPED OUT AND IN ITS PLACE THIS SUBSTITUTED SECTION IS INSERTED AS THE SAID SECTIO N WAS IN THE STATUTE BOOK FROM THE DAY THE ENACTMENT WAS PASSED.THEREFORE IT IS RETROSPECTIVE IN NATURE.BUT IT IS NOT AN INVARIABLE RULE.EXCEPT ADDI NG THE SAID PROVISION BY WAY OF INSERTION THE LEGISLATURE HAS NOT MADE THE SAID PROVISION RETR OSPECTIVE BY ANY EXPRESS WORDS. ON THE CONTRARY ON THE DAY THIS PROVISION WAS INSERTED THEY HAVE A LSO SUBSTITUTED THE MAIN PROVISION BY WAY OF INSERTION. FROM THE AFORESAID PROVISION IT IS CLEAR THAT THE F IRST CONDITION TO BE SATISFIED FOR APPLICATION OF T HIS PROVISION IS THAT THE HOUSING PROJECT REQUIRES TO B E APPROVED BY A LOCAL AUTHORITY. BEFORE AN APPROVAL IS SOUGHT FOR THE ASSESSEE HAS TO GET THE PLAN PREPARED. IF THE ASSESSEE WANTS TO HAVE THE BENEFIT OF THE AFORESAID SECTION NOTWITHSTANDING T HE LAW CONTAINED IN THE BUILDING BYE-LAWS THE SAID PLAN ALSO SHOULD BE IN CONFORMITY WITH THE AFO RESAID PROVISION UNDER THE ACT. AFTER PREPARING THE PLAN AND OBTAINING APPROVAL HE HAS TO COMMENCE THE CONSTRUCTION AND COMPLETE IT WITHIN THE PERIOD STIPULATED IN THE SAID PROVISION. IN THE SUB STITUTED PROVISION THE LEGISLATURE HAS CONSCIOUSLY BIFURCATED SUCH CONSTRUCTION OF HOUSING PROJECT INT O THREE CASES. THE FIRST CASE DEALS WITH THE APPROVAL OBTAINED BY THE LOCAL AUTHORITY BEFORE THE 1-4-2004; IN THE SECOND CASE AFTER1-4-2004 AND BEFORE THE 31-3-2005 AND IN THE THIRD CASE APP ROVALS OBTAINED AFTER THE 1 -4-2005. IN RESPECT OF APPROVALS OBTAINED PRIOR TO 1-4-2005 OF SUB-SECTION (14) OF SECTION 80-IB IS HELD TO BE APPLICABLE THEN THE ASSESSEE HAS TO NECESSARILY SEEK FOR A MODIFIED PLAN.OTHERWISE HE PROCEEDS WITH THE CONSTRUCTION WITHOUT OBTAINING THE SANCTIO N OF THE MODIFIED PLAN HE WOULD NOT BE ELIGIBLE FOR BENEFIT OF TAX EXEMPTION UNDER SECTION 80-IB(10 ). SIMILARLY A VALID APPROVAL IS OBTAINED AND THE BUILDING IS CONSTRUCTED IN ALL RESPECTS PRIOR T O 1-4-2005 AND THE SAID SUBSTITUTED PROVISION IS HELD TO BE APPLICABLE RETROSPECTIVELY THE ASSESSEE WOULD NOT BE ENTITLED TO THE BENEFIT OF TAX EXEMPTION HE EFFECTS SALES SUBSEQUENT TO 1-4-2005.S UCH AN INTERPRETATION NOT ONLY WOULD BE ABSURD BUT WOULD HAVE DISASTROUS CONSEQUENCES SO FAR AS TH E ASSESSEE IS CONCERNED. THEREFORE IT CANNOT BE SAID THAT SUCH WAS THE INTENTION OF THE LEGISLAT URE WHILE BRINGING IN THE SUBSTITUTION.SO ONE SHOULD KEEP IN MIND THE OBJECT BEHIND ENACTING THIS PROVISION NAMELY TO BRING IN INVESTMENTS AND TO ENCOURAGE THE INFRASTRUCTURE DEVELOPMENT OF MIDD LE INCOME HOUSING PROJECTS. IF THE AFORESAID PROVISION IS HELD TO BE RETROSPECTIVE IN NATURE IT WOULD NEGATIVE THE OBJECT OF THE SAID PROVISION.IT IS SETTLED LAW THAT THE COURTS HAVE TO HARMONIZE TH ESE PROVISIONS AND INTERPRET THE SAME IN A MANNER TO ACHIEVE THE OBJECT OF THE LEGISLATURE THA N TO DISTRESS THE SAID OBJECT. IN THAT VIEW OF THE MATTER THE DEFINITION OF BUILT-UP AREA AS INSERTED IN SUB-SECTION (14) OF SECTION 80-IB BY FINANCE (NO.2) ACT OF 2004 WHICH CAME INTO EFFECT FROM 1-4 -2005 CANNOT BE HELD TO BE RETROSPECTIVE;IT APPLIES ONLY TO SUCH HOUSING PROJECTS WHICH ARE AP PROVED SUBSEQUENT TO 1-4-2005. 2.4.C. WE FIND THAT IN THE CASE UNDER CONSIDERATION FIRST SANCTION TO CONSTRUCT THE PROJECT WAS RECEIVED ON 26.12.2003 I.E. BEFORE 1.4.2004.THEREFO RE AMENDMENT BROUGHT IN THE SECTION WAS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE.SECONDL Y SUB-SECTION NOWHERE STIPULATES THAT 20% AREA SHOULD TO INCREASED FOR COMPUTING THE BUILT UP AREA OF A RESIDENTIAL UNIT.LASTLY AO HAD NOT DECIDED THE ISSUE AS WHETHER THE FLATS WERE OUTSIDE THE CITY OF MUMBAI ? WE FIND THAT IN THE CO ASSESSEE HAS RAISED THE SAID ISSUE.WE WILL DEAL WITH IT AT APPROPRIATE PLACE BUT FOR THE PRESENT IT IS SUFFICIENT TO HOLD THAT AO WAS NOT JUSTIFIED IN DENYING THE CLAIM OF THE ASSESSEE ON THE BASIS OF THE REPORT OF THE VALUER. 2.4.D. CASES RELIED UPON BY THE AR SUPPORT THE SUBMISSION THAT ONLY PROPORTIONATE DISALLOWANCE CAN BE MADE WHILE GRANTING DEDUCTION U/S.80IB(10) O F THE ACT IF CERTAIN UNITS EXCEED THE AREA AS 6 ITA NO.6745/MUM/2010 (AY-2007-08) COSMOS DEVELOPERS . STIPULATED IN THE SECTION.WE FIND THAT IN THE MATTE RS OF VANDANA PROPERTIES MUDHIT M.GUPTA SAROJ SALES ORGANIZATION BRIGADE ENTERPRISES PVT. L TD MAGARPATTA TOWNSHIP DEVELOPMENT & CONSTRUCTION CO M/S.RAHUL CONSTRUCTION CO. RUNWAL MULTI-HOUSING PVT. LTD.(SUPRA) DIFFERENT BENCHES OF THE TRIBUNAL HAVE HELD THAT ONLY PROPORT IONATE DISALLOWANCE CAN BE MADE IF AN ASSESSEE DOES NOT FULFILLS THE CONDITIONS STIPULATED IN THE SECTION.IN OTHER WORDS AN ASSESSEE IS ENTITLED TO PROPORTIONATE DEDUCTION U/S.80IB OF THE ACT EVEN IF CERTAIN CONDITIONS STIPULATED BY THE SECTION ARE NOT FULFILLED.WE FIND THAT SIMILAR VIEW HAS BEEN TA KEN BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF VISWAS PROMOTERS (P) LTD.(SUPRA) HONBLE CO URT HAS HELD AS UNDER: WITHIN A COMPOSITE HOUSING PROJECT WHERE THERE ARE ELIGIBLE AND INELIGIBLE UNITS THE ASSESSEE CAN CLAIM DEDUCTION IN RESPECT OF ELIGIBLE UNITS IN TH E PROJECT AND EVEN WITHIN THE BLOCK THE ASSESSEE IS ENTITLED TO CLAIM PROPORTIONATE RELIEF IN THE UNITS SATISFYING THE EXTENT OF THE BUILT UP AREA. IN THE MATTER BEFORE THE HONBLE COURT ASSESSEE HAD CONSTRUCTED FLATS UNDER FOUR SCHEMES I.E. BLOCKS.IT CLAIMED DEDUCTION U/S.80IB OF THE ACT IN RESPECT OF FLATS MEASURING LESS THAN 1500 SQ.FT. BUT FOR THE FLATS MEASURING MORE THAN 1500 SQ.FT.NO CLAIM WAS MADE.AO REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT DEDUCTION WAS FOR THE P ROJECT AS A WHOLE AND ALL RESIDENTIAL UNITS IN THE PROJECT SHOULD SATISFY THE CONDITION OF HAVING BUIL T UP AREA OF LESS THAN 1500 SQ.FT.FAA HELD THAT IT WAS ENTITLED TO CLAIM DEDUCTION IN RESPECT OF ELIGI BLE UNITS.HE DIRECTED THE AO TO ALLOW PROPORTION -NATE DEDUCTION.TRIBUNAL REVERSED THE ORDER OF THE FAA.WHEN THE MATTER REACHED TO THE HONBLE HIGH COURT IT FURTHER HELD : ASSESSEE IS ENTITLED TO CLAIM PROPORTIONATE RELIEF IN THE UNITS IN RESPECT OF ALL BLOCKS FORMING PART OF PROJECT CALLED AGRINI AND VAJRA BUT TO THE EXTEN T OF EACH OF THE BLOCKS SATISFYING THE CONDITION U/S. 80IB(10).THE ASSESSEE WOULD BE ENTITLED TO THE RELIEF ON A PROPORTIONATE BASIS. CONSIDERING THE ABOVE WE ARE OF THE OPINION THAT EV EN IF CLAIM WAS TO DISALLOWED IT SHOULD HAVE BEEN RESTRICTED TO TEN FLATS ONLY.WE ALSO HOLD THAT AO WAS NOT JUSTIFIED IN DENYING THE ENTIRE CLAIM MADE BY THE ASSESSEE.WE FIND THAT THE FAA HAD DIREC TED THE AO TO CALCULATE DISALLOWANCE ON PROPORTIONATE BASIS.IN SHORT IN OUR OPINION AO WAS NOT JUSTIFIED IN DISALLOWING THE ENTIRE CLAIM MADE U/S.80IB OF THE ACT ON BOTH COUNTS-DELAY IN OB TAINING CC AND SIZE OF FLATS.FAA HAS RIGHTLY HELD THAT ASSESSEE WAS ELIGIBLE FOR PROPORTIONATE D EDUCTION. THEREFORE UPHOLDING HIS ORDER WE DECI DED GROUND NO.1 AGAINST THE AO. C.O. NO. 196/MUM/2011 AY-2007-08 3. NOW WE WILL TAKE UP THE CO FILED BY THE ASSESSEE.FI RST GROUND OF CO WAS NOT PRESSED BEFORE US DURING THE COURSE OF HEARING THEREFORE SAME STANDS DISMISSED AS NOT PRESSED. 3.1. THE SECOND GROUND IS ABOUT DENIAL OF DEDUCTION U/S. 80IB(10) OF THE ACT.WHILED FINALISING THE ASSESSMENT AO HELD THAT THE ASSESSEE HAS VIOLATED T HE PROVISIONS OF CLAUSE (C) OF SECTION 80IB(10) OF THE ACT.AS STATED EARLIER AO AFTER CONSIDERING T HE REPORT OF THE APPROVED VALUER HAD HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION AS IT HAD CONSTRUCTED 10 FLATS THAT HAD AREA MORE THAN 1000 SQ.FT. THAT IT HAD COMBINED TWO FLATS/TWO FLOORS. 3.2. ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER HE HELD THAT ON P HYSICAL VERIFICATION IT WAS REPORTED BY THE APPROVED VALUER THAT CERTAIN RESIDENTIAL UNITS WERE MORE THAN PERMISSIBLE LIMIT OF 1000 SQ FT. THAT THE SAID VITAL PART COULD NOT BE IGNORED THAT DEDUC TION U/S. 80IB(10) OF THE ACT COULD NOT BE DENIED TO THE ASSESSEE FOR THE ENTIRE PROJECT ONLY ON THE GROUND THAT CERTAIN RESIDENTIAL UNITS WERE MORE THAN PERMISSIBLE LIMIT OF 1000 SQ FT.RELYING UPON T HE ORDER OF THE SETH DEVELOPERS (33SOT277) AND AIR DEVELOPERS(123TTJ 959) HE HELD THAT ASSESSE E WAS ENTITLED FOR DEDUCTION ON PROPORTIONA 7 ITA NO.6745/MUM/2010 (AY-2007-08) COSMOS DEVELOPERS . -TE BASIS.HE DIRECTED THE AO TO CALCULATE THE DEDUC TION U/S. 80IB(10) ON PRO RATA BASIS IN RESPECT OF FLATS WHICH DID NOT HAVE THE BUILT UP AREA EXCEE DING 1000 SQ FT. IN THE HOUSING PROJECT. 3.2.A. BUT HE DID NOT ADJUDICATE THE ISSUE OF DISTANCE OF HOUSING PROJECT AS TO WHETHER IT WAS LOCATED BEYOND 25 KILOMETERS OR NOT FROM THE CITY OF MUMBAI. 3.3. BEFORE US AR MADE THE SUBMISSIONS THAT ARE MENTIONE D AT PARA NO.2.3.B.OF OUR ORDER.IN SHORT HE ARGUED THAT EVEN IF THE SIZE OF THE FLATS WAS MO RE THAN 1000 SQ.FT. ASSESSEE WAS ENTITLED TO CLAIM THE DEDUCTION BECAUSE THE HOUSING-PROJECT-IN-QUESTI ON WAS 25 KILOMETERS AWAY FROM THE CITY OF MUMBAI.DR SUBMITTED THAT MATTER MIGHT BE DECIDED ON MERITS. 3.4 WE HAVE HEARD AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT BOMBAY MUNICIPAL CORPORA - TION ACT DEFINES CERTAIN WORDS USED IN THE ACT.SIMI LARLY BOMBAY GENERAL CLAUSE ACT 1904 THE GREATER BOMBAY LAWS AND BOMBAY HIGH COURT (DECLARAT ION OF LIMITS) ACT 1945 AND MAHARASHTRA LAND REVENUE CODE 1966 HAVE ALSO DEFINED THE WORD CITY OF MUMBAI.AFTER GOING THROUGH THE RELEVANT PROVISIONS OF THE ACTS RELIED UPON BY THE AR WE ARE OF THE OPINION THAT WORDS CITY OF BOMBAY DO NOT CONVEY THE SAME MEANING AS THE WORDS GREATER MUMBAI OR GREATER MUMBAI MUNICIPAL CORPORATION. WHILE DECIDING THE APPEAL FAA HAD NOT ADJUDICATING THE ISSUE.IN OUR OPINION THAT ONCE THE ISSUE HAD BEFORE HIM AND IT HAD DIRECT BEARING ON ELIGIBI LITY OF DEDUCTION U/S. 80IB (10) OF THE ACT HE SHOULD HAVE DECIDED THE ISSUE ON MERITS.IN OUR OPIN ION IF THE DISTANCE BETWEEN CITY OF MUMBAI AND LOCATION OF THE PROJECT WAS MORE THAN 25 KMS BY ROAD THE LIMIT OF SIZE OF THE RESIDENTIAL UNIT WILL CHANGE.IF THE DISTANCE IS HELD TO BE MORE THAN 25 KMS. PERMISSIBLE SIZE OF THE FLATS WOULD BE 1500 SQ FT.THEREFORE IN THE INTEREST OF JUSTICE WE ARE OF THE OPINION THAT MATTER SHOULD BE REMITTED BACK TO THE FILE OF THE FAA FOR FRESH ADJUDICATION. HE SHOULD DECIDE THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO TH E ISSUE AND AFTER CONSIDERING THE CASES RELIED UPON BY THE ASSESSEE AND MENTIONED AT PARA 2.3.B.OF OUR ORDER.GROUND NO.2 OF CO FILED BY THE ASSESSEE IS ALLOWED IN PART AS A RESULT APPEAL/CO FILED BY THE AO /ASSESSEE STANDS DISMISSED /PARTLY ALLOWED 1 +2 !1+ @ !1+ 3 4 / %&' !5 / 0 6 5 7 + 89. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH OCTOBER 2013 . 0 * -.' ; 7! <= 5 11 2013 . * / > SD/- SD/- ( . ? ? ? ? . . B.R.MITTAL ) ( / RAJENDRA ) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI 7! /DATE: 11 TH OCTOBER 2013 SK 0 0 0 0 * ** * %+@ %+@ %+@ %+@ A@'+ A@'+ A@'+ A@'+ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT (A) / B C 4. THE CONCERNED CIT / B C 5. DR C BENCH ITAT MUMBAI / @D/ %+! . . . 8 ITA NO.6745/MUM/2010 (AY-2007-08) COSMOS DEVELOPERS . 6. GUARD FILE/ / E &@+ &@+ &@+ &@+ %+ %+%+ %+ //TRUE COPY// 0! / BY ORDER F / 8 DY./ASST. REGISTRAR /ITAT MUMBAI