ITO, Bangalore v. M/s Raghavendra Construction, Bangalore

ITA 715/BANG/2010 | 2007-2008
Pronouncement Date: 07-01-2011 | Result: Dismissed

Appeal Details

RSA Number 71521114 RSA 2010
Bench Bangalore
Appeal Number ITA 715/BANG/2010
Duration Of Justice 7 month(s) 11 day(s)
Appellant ITO, Bangalore
Respondent M/s Raghavendra Construction, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 07-01-2011
Date Of Final Hearing 24-11-2010
Next Hearing Date 24-11-2010
Assessment Year 2007-2008
Appeal Filed On 26-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO.715/BANG/10 ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER WARD 7(3) BANGALORE. : APPELLANT VS. M/S. RAGHAVENDRA CONSTRUCTION PARAMOUNT RAGHAVENDRA ARISH NO.42/6 KUNDALAHALLI GATE AIRPORT WHITEFIELD ROAD BANGALORE 560 037. : RESPONDENT APPELLANT BY : SMT. PREETHI GARG CIT-III(DR) RESPONDENT BY : NONE O R D E R PER A. MOHAN ALANKAMONY ACCOUNTANT MEMBER THIS APPEAL INSTITUTED BY THE REVENUE IS DIREC TED AGAINST THE ORDER OF THE CIT (A)-III BANGALORE IN ITA NO: 140 /W 7(3)/CIT (A)- III/BNG/08-09 DATED: 18.2.2010 FOR THE ASSESSMENT Y EAR 2007-08 IN THE CASE OF RAGHAVENDRA CONSTRUCTIONS BANGALORE. 2. THOUGH THE REVENUE HAS IN ITS GROUND S OF APPEAL RAISED FIVE GROUNDS THE CRUX OF THE ISSUE WAS CONFINED TO A LO NE GROUND THAT ITA NO.715/BANG/10 PAGE 2 OF 8 THE CIT (A) ERRED IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80-IB PROPORTIONATELY WITH REFERENCE TO THE AREA OF FLATS THE BUILT-UP AREA DOES NOT EXCEED THE PERMIT TED LIMIT OF 1500 SFT. 3. THE FACTS OF THE ISSUE IN BRIEF WER E THAT THE ASSESSEE FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION DEVELOPMEN T AND SALE OF FLATS AND IN ITS COURSE OF BUSINESS ENTERED INTO A JOINT DEV ELOPMENT AGREEMENT [JDA] IN RESPECT OF A LAND ADMEASURING AROUND 2 ACR ES AND DEVELOPED THE RESIDENTIAL COMPLEX CONSISTING OF 160 FLATS. DURIN G THE YEAR UNDER DISPUTE IT HAD CLAIMED THE ENTIRE NET PROFIT OF RS.18.36 CR ORES AS EXEMPT U/S 80-IB (10) OF THE ACT. THE AO FOR THE REASONS SET-OUT IN HIS IMPUGNED ORDER HELD THAT THE ASSESSEE HAVING NOT FULLY SATISFIED ALL T HE CONDITIONS LAID DOWN IN S. 80IB (10) OF THE ACT DENIED THE EXEMPTION SO CLAIM ED. THE AOS REASONING IN BRIEF WAS THAT ON BEING SURVEYED TH E RESIDENTIAL COMPLEX PREMISES IT WAS NOTICED THAT SOME OF THE FLATS IN THE COMPLEX EXCEEDED THE PRESCRIBED PLINTH AREA OF 1500 SFT. AFTER OBTAINING THE REPORT OF THE DISTRICT VALUATION OFFICER AND ALSO CONSIDERING THE ASSESSEE S EXPLANATION/CONTENTIONS 16 OUT OF 160 FLATS HAVING AREA WHICH WERE MORE THAN 1500 SFT THE AO WAS OF THE VIEW THAT THESE FL ATS HAVING BALCONY AREAS WHICH WERE UNDER THE EXCLUSIVE POSSESSION AND ENJOY MENT AND NOT AVAILABLE TO OTHER FLAT OWNERS AND THEREFORE TO B E ADDED TO THE PLINTH AREA FOR THE PURPOSE OF CLAIMING EXEMPTION U/S 80IB (10) OF THE ACT. ACCORDINGLY THE AO HAD COME TO THE CONCLUSION THAT THE PLINTH AREA OF THOSE SIXTEEN FLATS EXCEEDED 1500 SFT AND THUS T HE ASSESSEE HAD VIOLATED ONE OF THE CONDITIONS OF S.80IB (10) AND THEREFORE IT WAS NOT ELIGIBLE FOR EXEMPTION UNDER THE PROVISIONS OF S. 80-IB(10) OF T HE ACT. ITA NO.715/BANG/10 PAGE 3 OF 8 4. AFTER HEARING THE ASSESSEES LENGTHY CONTENTIONS AS RECORDED IN HIS IMPUGNED ORDER UNDER DISPUTE DELIBERATING THE SUB-CLAUSE (A) OF SUB- SECTION (14) OF S.80-IB OF THE ACT AND ALSO PERUSIN G THE FINDINGS OF THE JURISDICTIONAL HONBLE TRIBUNAL ON WHICH THE ASSESS EE HAD PLACED A STRONG RELIANCE THE CIT (A) HAD OBSERVED THUS 6.0. IT IS NO DOUBT TRUE THAT THE COMMON AREAS SH ARED WITH OTHER RESIDENTIAL UNITS ARE TO BE EXCLUDED FOR CALCULATIN G BUILT-UP AREA. THE WORDS COMMON AREA SHARED WITH OTHER RESIDENTIAL UNITS O NLY MEAN THAT SUCH AREA SHOULD BE ACCESSIBLE TO ALL THE USERS/OCCUPIERS OF THE RESIDENTIAL UNITS OF THE COMPLEX. THEREFORE TO FIND OUT THE EXACT POSITION OF THE DISPUTED 16 FLATS THE PLAN OF THE AREA WAS CALLED FOR. FROM THE PERUSAL OF THE DRAWING OF THE PLAN IT IS CLEAR THAT IN EACH OF THE DISPUTED FLAT THERE IS A COMMON AREA BETWEEN 2 FLATS WHICH IS ACCESSIBLE FROM INSIDE THE FLATS BY OWNER/OCCUPIER OF THESE TWO FLATS ONLY. THE OTHER OWNERS OF THE COMPLEX/BUILDI NG DO NOT HAVE ANY ACCESS TO THIS COMMON AREA. THEREFORE IT IS DIFFICULT TO ACCEDE TO THE CLAIM OF THE APPELLANT THAT THE PLINTH AREA OF THE BALCONIES AS REFERRED TO BY AO IN PARA 7 OF HIS ORDER ARE TO BE EXCLUDED FOR CALCULATING THE BUILT-UP AREA OF THE RESPECTIVE FLATS. 7.0. THEREFORE THE APPELLANT FAILS ON THIS POINT. THE ASSESSING OFFICER HAS RIGHTLY HELD THAT FOR THE 16 FLATS THERE IS A VIOLA TION OF THE CONDITIONS LAID DOWN IN SECTION 80IB (10) IN AS MUCH AS THE BUILT A REA OF EACH OF THE FLAT EXCEEDS 1500 SQUARE FEET. 4.1. AFTER DUE PERUSAL OF THE FINDINGS O F THE HONBLE TRIBUNAL IN THE CASES OF (I) BRIGADE ENTERPRISES IN ITA NO;1198(BAN G) 2007 DT.29.8.2008; (II) MYSTIC INVESTMENT IN ITA NO.1170/BANG/2007 DT. 25.4.2008 (III) SJR BUILDERS IN ITA NO:1192/BANG/2008 DT.21.8.2009; AND ALSO (IV) BRAHMA ASSOCIATES V. JCIT REPORTED IN (2009) 122 TTJ (PUNE)(SB) 433; (2009) 119 ITD 255: (2009) 30 SOT 155: (2009) 22 DTR 1 TH E LD. CIT (A) HAD CONCLUDED THAT 9.0. FOLLOWING THE BINDING PRECEDENT OF HONBLE ITAT BANGALORE BENCH I HOLD THAT THE RESTRICTION FOR DEDUCTION U/S 80-IB O F INCOME-TAX ACT 1961 IS TO BE MADE ONLY WITH REFERENCE TO AREA OF THESE 16 FLA TS WHOSE BUILT-UP AREA IS ITA NO.715/BANG/10 PAGE 4 OF 8 MORE THAN THE PRESCRIBED LIMIT OF 1500 SFT. ACCORD INGLY I DIRECT THE ASSESSING OFFICER TO PROPORTIONATELY CALCULATE THE DISALLOWANCE TO BE MADE U/S 80IB FOR IN PROPORTION TO THE AREA OF THESE 16 FLATS AND RESTRICT THE DISALLOWANCE U/S 80IB OF I.T.ACT ONLY TO THE SAME. FOR THE BALANCE AREA THE APPELLANT WOULD BE ENTITLED TO DEDUCTION U/S 80IB O F I.T. ACT 1961. 5. AGGRIEVED THE REVENUE HAS COME U P WITH THE PRESENT APPEAL. THE SUBMISSION OF THE REVENUE IN BRIEF WAS THAT T HE CIT (A) ERRED IN DIRECTING THE AO TO RESTRICT THE DISALLOWANCE OF DE DUCTION U/S 80IB PROPORTIONATELY WITH RESPECT TO THE AREA OF 16 FLAT S IN WHICH THE BUILT-UP AREA EXCEEDED 1500 SFT RELYING UPON THE FINDINGS OF TH E HONBLE TRIBUNAL CITED SUPRA; THAT THE CIT(A) OUGHT TO HAVE APPRECIATED TH E FACT THAT THE SAID FINDINGS HAVE NOT YET BECOME FINAL. TO PROP UP THE STAND FURTHER THE LD. D R INVITED THE REFERENCE OF THIS BENCH TO THE OBSER VATION OF HONBLE TRIBUNAL PUNE SPECIAL BENCH IN THE CASE OF BRAHMA ASSOCIATES CITED SUPRA WHEREIN IT HAS BEEN VIEWED THUS 76. WE ARE THEREFORE OF THE CONSIDERED VIEW THA T THE TAX INCENTIVE BY WAY OF DEDUCTION UNDER S.80-IB(10) IS PREDOMINANTLY FOR THE PURPOSE OF AUGMENTING AFFORDABLE DWELLING UNITS AND IT MUST B E INTERPRETED IN THAT LIGHT. WE ARE UNABLE TO SEE ANY LEGALLY SUSTAINABL E MERITS IN LEARNED COUNSELS PLEA THAT THE PURPOSE OF S.80-IB (10) IS TO ENCOURAGE HOUSE BUILDING ACTIVITY PER SE AND IT IS IMMATERIAL WHETH ER SUCH AN ACTIVITY IS TO CONSTRUCT DWELLINGS UNITS OR COMMERCIAL UNITS. THE INTERPRETATION CANVASSED BY THE LEARNED COUNSEL FOR THE ASSESSEE IS CLEARLY CONTRARY TO THE SCHEME OF THE ACT AND LEGISLATIVE HISTORY OF THE PROVISIONS O F S. 80-IB (10). 6. WE HAVE DULY CONSIDERED THE SUBMISS ION OF THE REVENUE AND ALSO ATTENTIVELY PERUSED THE RELEVANT RECORDS. NON E WAS PRESENT FROM THE ASSESSEES SIDE. 6.1. WHILE APPRECIATING THE LD. D. RS EFFORTS TO DRAW THE ATTENTION OF THIS BENCH TO THE OBSERVATION OF THE HONBLE SPE CIAL BENCH CITED SUPRA WE WOULD LIKE TO POINT OUT THAT THE ABOVE VIEW EXPR ESSED BY THE HONBLE ITA NO.715/BANG/10 PAGE 5 OF 8 SPECIAL BENCH WAS IN THE CONTEXT THAT THE VERY INTENTION OF THE LEGISLATURE WAS TO DOLE OUT THE TAX INCENTIVE BY WAY OF DEDUCTI ON FOR THE PURPOSE OF BOOSTING THE AFFORDABLE DWELLING UNITS . 6.2. AT THE OUT-SET WE WOULD LIKE TO RECORD OUR V IEW THAT FUNDAMENTALLY AND PRIMARILY THE ISSUE BEFORE THE HO NBLE PUNE SPECIAL BENCH WAS WHETHER THE PURPOSE OF S.80-IB(10) WAS TO ENCOURAGE HOUSE BUILDING ACTIVITY PER SE AND IT WAS IMMATERIAL WHET HER SUCH AN ACTIVITY WAS TO CONSTRUCT DWELLING UNITS OR COMMERCIAL UNITS? THE HONBLE SPECIAL BENCH HAD UNAMBIGUOUSLY OBSERVED THAT WHERE APPROX IMATELY 90 PER CENT OR MORE OF THE TOTAL AREA IS UTILIZED FOR BUILDING DWELLING UNITS AND OTHER CONDITIONS OF S.80-IB (10) ARE FULFILLED THERE IS NO JUSTIFICATION TO DENY THE BENEFIT WHERE THE PROJECT HAS BEEN PASSED AS RESIDENTIAL-COMMERCIAL PROJECT. HOWEVER THE ISSUE OF VIOLATION OF THE CONDITIONS L AID DOWN IN SECTION 80IB (10) OF THE ACT IN AS MUCH AS THE BUIL T UP AREA OF RESIDENTIAL FLAT EXCEEDING 1500 SFT WAS CONCERNED IT WAS NOT BEFORE THE HONBLE SPECIAL BENCH AND THE ISSUE BEFORE THE HONBLE BENC H WAS INCIDENTALLY PERTAINING TO THE ASSESSMENT YEAR 2003-04 I.E. P RIOR TO THE AMENDMENT TO S.80-IB (10) OF THE ACT BY THE FINANCE (NO.2) ACT 2004 W.E.F. 2005 WHEREAS THE ISSUE UNDER DISPUTE NOW WAS FOR THE ASSESSMENT YEAR 2007- 08 AND CHIEFLY - WHETHER DEDUCTION U/S 80-IB OF THE ACT WAS TO BE A LLOWED PROPORTIONATELY TO THE PROFITS ATTRIBUTABLE TO UNIT S/FLATS IN WHICH THE ASSESSEE HAD COMPLIED WITH THE REQUIREMENTS OF S. 80-IB OF T HE ACT? THUS WE ARE OF THE FIRM VIEW THAT THE PRESENT ISSUE CANNOT BE EQUA TED WITH THE ISSUE WHICH WAS DEALT BY THE HONBLE PUNE SPECIAL BENCH AS IT W AS STANDING ON A ITA NO.715/BANG/10 PAGE 6 OF 8 DIFFERENT FOOTING IN THE SENSE THAT THE QUESTION OF ALLOWING PROPORTIONATE OR OTHERWISE OF THE ALLOWANCE OF DEDUCTION U/S 80-IB ( 10) IN CASE OF VIOLATION OF BUILT-UP AREA OF RESIDENTIAL FLATS OF MORE THAN THE PRESCRIBED LIMIT I.E. OF 1500 SFT WAS NOT AT ALL BEFORE THE HONBLE SPECIAL BENCH FOR ADJUDICATION. 6.3. REVERTING BACK TO THE ISSUE ON HAND AS PRECI SELY HIGHLIGHTED BY THE LD. CIT (A) THE COMMON AREAS SHARED WITH OT HER RESIDENTIAL UNITS ARE TO BE EXCLUDED FOR CALCULATING BUILT-UP AREA. THE WORDS COMMON AREA SHARED WITH OTHER RESIDENTIAL UNITS ONLY MEAN THAT SUCH AREA SHOULD BE ACCESSIBLE TO ALL THE USERS/OCCUPIERS OF THE RESIDE NTIAL UNITS OF THE COMPLEX. AS COULD BE SEEN FROM THE DRAWING OF THE PLAN OF TH E SAID RESIDENTIAL COMPLEX IT WAS CLEAR THAT IN EACH OF THE DISPUTED FLAT THERE WAS A COMMON AREA BETWEEN 2 FLATS WHICH WAS ACCESSIBLE FROM INSI DE THE FLATS BY THE OWNERS/OCCUPIERS OF THESE TWO FLATS ONLY. THE OTHE R OWNERS OF THE COMPLEX/BUILDING DO NOT HAVE ANY ACCESS TO THIS COM MON AREA. THIS VERY FACT CLEARLY BELIES THE CLAIM OF THE ASSESSEE THAT THE PLINTH AREA OF SUCH BALCONIES AS REFERRED TO BY THE AO IN HIS IMPUGNED ORDER WHICH ARE TO BE EXCLUDED FOR CALCULATING THE BUILT-UP AREA OF THE R ESPECTIVE FLATS. ACCORDINGLY SIXTEEN FLATS AS RIGHTLY HELD BY THE A O THAT THERE WAS A VIOLATION OF THE CONDITIONS LAID DOWN IN SECTION 80 IB (10) IN AS MUCH AS THE BUILT-UP AREA OF EACH OF THE FLAT EXCEEDS 1500 SQUA RE FEET WAS CONCERNED. 6.4. INCIDENTALLY THE ASSESSEE HAD ALSO MADE A DETAILED AND ELABORATE SUBMISSION WITH REGARD TO ITS ALTERNATE G ROUND BEFORE THE FIRST APPELLATE AUTHORITY AND CONCEDED UNAMBIGUOUSLY THAT IN THE EVENT IT WERE ITA NO.715/BANG/10 PAGE 7 OF 8 TO BE HELD THAT THERE WAS A VIOLATION OF CONDITION LAID DOWN IN S.80IB (10) OF THE ACT IN RESPECT OF THESE SIXTEEN FLATS THE DEDU CTION WAS TO BE RESTRICTED ONLY FOR THE PROFIT PROPORTIONATE TO THE AREA COVER ED BY THOSE FLATS. 6.5. IN THIS CONNECTION WE WOULD LIKE TO REFER TO THE FINDING OF THE HONBLE TRIBUNAL IN THE CASE OF SJR BUILDERS IN IT A NO:1192/BANG/2008 DATED:21.8.2009 WHEREIN AN IDENTICAL ISSUE HAD CROP PED IN. TO ILLUSTRATE THE ISSUE FURTHER IN BRIEF THAT THE ASSESSEE HAD DEVELOPED TWO RESIDENTIAL PROJECTS AND ACCORDINGLY CLAIMED DEDUCTION U/S 80 IB (10) OF THE ACT. WHILE CONSIDERING THE ASSESSEES CLAIM THE AO FOUN D THAT SOME OF FLATS EXCEEDED THE BUILT-UP AREA OF MORE THAN 1500 SFT AN D THUS THE ASSESSEE WAS DISENTITLED TO CLAIM SUCH DEDUCTION. ON AN APP EAL AFTER DUE CONSIDERATION OF THE ASSESSEES CONTENTION THAT IT HAD SATISFIED ALL THE THREE CONDITIONS EXCEPT A FEW FLATS WHICH WERE CONSTRUCTE D WITH BUILT-UP AREA EXCEEDING 1500 SFT. THE DEDUCTION BE RESTRICTED TO IN PROPORTION IN RESPECT OF THE FLATS WHICH CONFORM TO THE PRE-CONDITIONS E TC. THE CIT (A) WAS OF THE VIEW THAT THE ASSESSEE HAD VIOLATED THE SANCTIONED PLAN BY CONSTRUCTING PENT HOUSES WERE LUXURIOUS UNITS WHICH REVEALED THA T THE PROJECT WAS NOT INTENDED TO ADDRESS THE HOUSE NEEDS OF THE COMMON M AN BUT IT AIMED AT MEETING THE LUXURIOUS REQUIREMENTS OF A FEW. HE FURTHER HELD THAT SINCE SOME OF THE RESIDENTIAL UNITS WERE NOT CONFORMITY T O THE MAXIMUM BUILT-UP AREA OF 1500 SFT. PRESCRIBED U/S 80IB ASSESSEES PROJECT WAS NOT ENTITLED FOR THE RELIEF. 6.5.1. AFTER ANALYZING THE PROS AND CONS O F THE ISSUE AND ALSO THE JUDICIAL VIEW ON THE SUBJECT THE HONBLE TRIBUNAL HAD OBSERVED THUS ITA NO.715/BANG/10 PAGE 8 OF 8 12. CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT THE APPEAL BY THE ASSESSEE IS TO BE ALLOWED TO THE EXTENT OF T HE FLATS THE BUILT-UP AREA OF THE FLAT IS NOT MORE THAN 1500 SFT. WE AGREE WITH THE SUBMISSION OF THE LEARNED REPRESENTATIVE FOR THE ASSESSEE THAT WHILE CONSIDERING THE BUILT-UP AREA OF 1500 SFT. FOR THE PURPOSE OF EXEMPTION U/S 80-IB (10) THE MEZZANINE FLOOR AND COMMON AREAS ARE TO BE EXCLUDED . THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. WE HOLD THAT IN R ESPECT OF THE PENT HOUSES THE BUILT-UP AREA OF WHICH IS MORE THAN 1500 SFT. THEY MAY BE EXCLUDED FOR EXEMPTION. 6.6. IN AN OVERALL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE AS DELIBERATED UPON IN THE FORE-GOING PAR AGRAPHS AND ALSO IN CONFORMITY WITH THE FINDING OF THE HONBLE TRIBUNAL CITED SUPRA WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED TO CL AIM DEDUCTION U/S 80-IB (10) OF THE ACT TO THE EXTENT OF THE FLATS THE BUI LT-UP AREA OF THE FLAT WAS NOT MORE THAN 1500 SFT. IT IS ORDERED ACCORDINGLY. 7. IN THE RESULT THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF JANUARY 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED THE 7 TH JANUARY 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.