TaxTMI 
TaxTMI 
2010 (12) TMI 903
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....unga, Mumbai and the total plot measured approximately 7633.82 sq.mts. Through this agreement the assessee was granted development rights. Out of this land area admeasuring 637.48 sq.mts. was excluded which was referred to a 'Reserved land' falling under School Reservation which was not to be included in the project. However, the project included 200 sq.mts. of land referred to as 'Office Block land' which was for self use. Through 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 charges and development of land etc., were to be incurred by the assessee. The assessee filed an application seeking approval of the plans from Municipal Corporation which were sanctioned by intimation of Disapproval [for short IOD] dated 8-1-2004. A detailed block plan showed that assessee wanted to construct four wings known as wings A, B, C and D and these were supposed to be independent wings. Initially, assessee decided to develop wings A, B and C as a housing project consisting of residential units measuring in the range of 500 sq.ft. to 800 sq.ft. It was also....
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....ell units in excess of 1000 sq.feet. In the entire project, out of 100 flats and more, only 2 flats have been combined (that also by the owners). This clearly evidences the intention of the builder. Had there been an entire 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 mala fide and to abuse the law. However, the facts of the assessee are quite to the contrary. The 100 plus flats are constructed as separate independent residential units with less then 1000 sq. feet built up area. All flats were constructed as per approved plan and were marketed and sold as single units. • Further, you will appreciate that at the time of giving 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 decision of the owner to combine the flats. In fact when it was bought to the knowledge of the a....
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....ree with these submissions as he was of the view that it is not relevant who has created the combined 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, in 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 objection that assessee has not filed completion certificate in respect of D wing. In A.Y 2007-08 again detailed queries were raised and in response it was mainly stated that assessee had fulfilled all the conditions prescribed in section 80IB(10). Another issue was raised that assessee was not the owner of the land. It was submitted that there is no requirement under the section that assessee should be owner of the land and in this regard reliance was placed on the decision of the Ahmedabad Bench of the Tribunal in the case of Radhe Developers & Ors. v. ITO 113 TTJ (Ahd.) 300. In respect of non submission of completion certificate, it was submitted that the housing project consisted of four wings i.e. A, B, C and D. It was further submitted that wing A had 13 floors with fou....
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....cluded his finding vide para 3.4.5 which is as under: "I find that as discussed above certain basic condition such as completion of the project before 31st March, 2008 has not been accomplished by the assessee. In this scenario deduction under section 80 IR cannot be given. Reliance placed by the assessee on the case of Brigade Enterprises 119 ITJ Bangalore 269 is also not acceptable. In the cited case the sanctions and permissions were obtained separately for eligible units. However, in the case of the assessee the project under consideration, Emgee Green, is a single unit and this project has not been completed. Other case laws cited by the assessee 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 Rs. 1,78,70,807/- is upheld. This ground of appeal is dismissed." 7. Before us, Ld. counsel of the assessee carried us through the assessment order and CIT[A]'s order and summarized the facts again. He pointed out that the assessee entered into a Development Agreement dated 3-11-2003....
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....ailable out of these two wings was 43516 sq. fts. [Wing B 23410 sq.ft. + Wing C 20097 sq.ft.]. The entire cost of construction was booked under the head 'Work-in-progress' [WIP] Wadala. Out of this, during A.Y 2005-06 assessee sold 10441 sq.ft. area and received a total consideration of Rs. 4,27,09,133/- which was credited to the profit & loss account. The cost of construction regarding this portion amounting to Rs. 2,21,94,564/- was transferred from work-in-progress account which ultimately resulted into net profit of Rs. 1,79,03,569/- in A.Y 2005-06 against which deduction 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 recorded and it was found that the size of the flat was more than 1000 sq.ft. He submitted that during assessment proceedings itself it was pointed out to the AO that assessee had constructed all the flats for less than 1000 sq.ft. and it was the purchaser who had joined the same. In fact, one of the buyers had confirmed this fact in his statement itself. Though AO did not accept this position, but when this was explained to the Ld. CIT[A], he agreed with the submissions of the ass....
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....which means that the project was approved by the local authority before 31-3-2007. The land area of the project 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.ft. thus, less than 1000 sq.ft. Even the commercial area was to be less than 5% of the aggregate built up area or 2000 sq.ft. whichever is less. He pointed out 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 would not be said to have been completed; and (ii) the area of the land was less than 1 acre. 11. Coming to the first objection he pointed out that the housing project has not been defined in section 80IB(10). Therefore, to understand the definition of housing project, one has to either look at the dictionary or at various judicial decisions. In various decisions it has been held that the housing project does not necessarily mean that there should be group of buildings and only then same can be called as the housing project. In fact, Board itself on 4-5-2001 in its clarification pointed out that a....
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....pies 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 Organisation v. ITO 115 TTJ 484 (Mum.). He submitted that this is a first judgment in the series of judgments where the definition of housing project was considered and in almost identical circumstances it was held that each wing or block would constitute a separate housing project. Then he carried us through the judgment and pointed out that how ultimately 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 assessee. 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 Development Ltd. v. DCIT [I.T.A. No. 1594 & 1737/Cal./2005] wherein in identical 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 plac....
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....assessee must be owner of the land on which the housing project is to be constructed and the Tribunal had held that such contention was not sustainable because there is no such condition prescribed in the provisions of section 80IB(10). What is required is development and building work and as such carried out by the assessee through repatriate agreement through land owner, would also make the assessee eligible for deduction u/s. 80IB(10). He further 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 the 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, therefore, owners were allocated 49% share of the built up area and the cost 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 case, similar objection was raised in the case of Vandana Properties v. ACIT (supra) wherein it was pointed out that if the said land was proportionately allocated amongst each buildings, then area....
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....lso referred to the provisions of section 80IB(10) and pointed out that deduction was possible only when the project was situated on a land which is measuring more than one acre. Since the assessee's share in the built up area was only 51% and if the land area was proportionately allocated, the share of the assessee 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 order. 17. We have considered the rival submissions carefully. 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 an undertaking developing and building housing projects approved before 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 any assessment year from such housing project if,- (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of Oc....
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....ed before 31-03-2008, and 3. The area of the land on which the housing project is 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 assessee had constructed all the residential units between the size of 500 sq.ft. to 800 sq.ft. and some of those flats were later converted by the buyers by joining the same wherever the buyers had purchased more than one unit. The assessee had no control on such joining of the flats and this position has already been accepted by the Ld. CIT[A] and, therefore, this finding has become final. We find that the Ld. CIT[A] while dealing with the size of the units observed vide para 3.4.4 as under: "3.4.4 The third ground on which deduction under section 80-IB 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 that builder will have no control if after the sale the certain flat-owners decide to me....
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....ail and observed vide para 12 as under: 12. There is no dispute that the housing project in the case of 'Nisarg' is approved before 31st March, 2005. The substituted section extended the benefit of 100 per cent deduction of income derived from housing projects approved upto 31st March, 2007 but simultaneously imposed a restriction on the area of shopping complex that is permissible to be included in the housing project by inserting the sub-s. 80-IB(10)(d) w.e.f. 1st April, 2005. The legislature nowhere provided the definition of a housing project either in the section or anywhere in the IT Act. Is it open for the Revenue to consider all the housing activities undertaken by the assessee as one project or different projects ? The Concise Oxford Dictionary (9th Edition) defines a 'project' as "a plan, a scheme, a planned undertaking, a usually long-term task undertaken by a student to be submitted for assessment. The commencement certificates in respect of building No. 1 were received by the principal developer on 7th March, 2001 and 30th March, 2001 respectively. But the commencement certificates for various wings were approved by the municipality as per the details given below : ....
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.... ft. and the total built-up area of that housing project was 3,46,599 sq. ft. The said project contained 150 residential units with a built-up area 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 other 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 assessee was more than 1,500 sq. ft., the assessee's claim for deduction under s. 80-IB (10) was not entertained. The Tribunal after appreciating the clear provisions of s. 80-IB(10), which does not speak regarding such denial of deduction in case of profit from a housing complex 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. 80-IB(10) of the Act. They drew support from the decision of the Hon'ble Su....
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.... in this case has been approved by the local authorities before 1st April, 2004 and the construction is required to be completed before 31st March, 2008. As the occupation certificate in respect of the wings F, Fl and G have been issued on 20th Dec. 2006, i.e. prior to 31st March, 2008, the 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 result, the assessee's claims for deduction under s. 80-IB(10) are accepted and the appeal is to be treated as allowed. The AO is directed to allow the deduction as claimed by the assessee in the light of the above discussions. Thus, from the above it is clear that legislature has not provided any definition of the housing project and, therefore, the 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 decision the Tribunal has referred to the decision of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. v....
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....ained in the said section, in our considered opinion, such claim 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 Hon'ble Calcutta High Court which was dismissed in I.T.A. No. 458 of 2006 by holding that no substantial question of law was involved [copy of this order is available at pages 26-27 of the paper book containing case laws]. From the above it becomes clear that even the Hon'ble Calcutta High Court confirmed the fact that deduction u/s. 80-IB(10) is allowable in respect of the part of the project which was eligible for deduction. 20. Again in the case of Vandana Properties v. ACIT, the assessee was engaged in the construction of various flats consisting of A, B, C, D and E wings on the land area of 2.36 acres. The assessee claimed deduction u/s. 80-IB(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 issue we shall deal later while dealing with the second objection], and the block E could not be considered as a separate housing project. The deduction was furthe....
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....itional FSI for launching Wing 'E'. Another Co-ordinate Bench of the Tribunal has considered somewhat identical situation in the case of Saroj Sales Organisation (supra) and said decision of the Co-ordinate Bench of the Tribunal is more relevant also to decide issue before us. As in the said case, the different units of the building were completed step by step and it was the case of the Department that all the buildings were comprise of one project only. Rejecting the contention of the Revenue, it is held as under:" Thus, again it is clear that the housing project does not necessarily have to be various group of buildings constructed on a particular land but it can also be a particular building or any building which is part of the large project. 22. This type of issue also came up for consideration before Bangalore Bench of the Tribunal in the case of DCIT v. 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 place, a club community centre and school etc. The deduction u/s. 80-IB(10) was claimed in respect of two residential units only....
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....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 to 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 opinion, are not entitled to benefit of exemption as those undertakings have not worked in accordance with spirit and intendment of the statutory provision." From the above, it is clear that whatever portion of the housing project is other wise found to be eligible has to be considered as a housing project for the purpose of deduction u/s. 80-IB(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. 80-IB(10) as long as they fulfil the other conditions prescribed under the Act. 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 recitation claus....
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....was to be used for other wings. The plan for whole of the project was sanctioned 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 paper book it seems to be a one building consisting of four wings, but four wings have been separately marked in different colours. The wings are independent wings become clear from commencement certificate 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. EB/118/FN/A of 08/02/2005 d This C.C. is hereby endorsed as per approved amended 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/....
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....gs 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 office block area which was already constructed and was to be developed again only as an office area and, therefore, it cannot be said that purpose of deduction itself has been defeated because office area was meant for different purpose and even the legislature has recognized that 5% of the area could be in terms of shops or commercial establishments. Even if this wing was constructed, it would have been within the prescribed limits provided in the section itself. Therefore, 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 entitled to deduction u/s. 80-IB(10) because the housing project was not completed 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 Agreement shows and it is an admitted fact that whole of the construction and development expenses....
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.... consisting of A, B, C, D and E wings was constructed on 2.36 acres. This issue was dealt with by the Tribunal at para-13 which reads as under: "13. Now the next objection is in respect of the size of the plot of the land. There is no dispute about the fact that assessee acquired the development rights in respect of the plot which was admittedly 2.36 acres on which assessee executed the different building projects. The case of the AO for rejecting the claim of the assessee is that if the said land is proportionately allocated among different buildings, 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 on 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 demarcation in respect of the plot of 2.36 acres has been made. It is seen that the surplus land available with the assessee or earlier owner was given the status as 'within ceiling limit' (WCL) and due to change or conversion 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 corr....
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....see's undertaking was engaged in the development of the project and deduction is available to an undertaking which is engaged in the development of the project. In view of this discussion, we are of the view that the area under the project was about 7000 sq.mts. which was meant for development and which is more than one acre and, therefore, deduction cannot be denied on this ground. 29. At the very beginning we have reproduced provisions of section 80-IB(10) and also the conditions which were required to be fulfilled for availing of deduction u/s. 80-IB(10). Therefore, as we have seen the first condition is met because the project is commenced after 1-10-1998 and the same has been completed before 31-03-2008 because of the relevant Occupation Certificates for A, B and C wings have been obtained before 31-03-2008. The project was approved on 8-01-2004 which means the same has been approved before the dead-line given in the provision i.e. 31-03-2007. As discussed above, the land area of the project was more than one acre i.e. approximately 7000 sq.mts. The built-up area of the units was less than 1000 sq.ft. as has been accepted by the Ld. CIT(A) does not exceed 5%. In fact, Reven....
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....using Pvt.Ltd. and this should have been credited to expenses account. AO disallowed this amount by observing that the assessee has shown 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 incurred by the assessee. It was further submitted that AO has already examined the books of account and no expenditure was found excessive and, therefore, disallowance is unwarranted. 35. On the other hand, Ld. DR supported the orders of 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 the AO and also before us that this amount should have been credited to the expenses account, then expenses would stand reduced to that extent. Simply because AO has examined the books of account, would not amount that he has seen each and every entry in the books. When assessee himself is accepting the position that expenses should have been credited to the expenses account, which means expenses have been shown at a higher side and....
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....tible." 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. 45. Ground No. 5: During assessment proceedings AO noticed that assessee has incurred certain cash expenses amounting to Rs. 58,006/-. It was further noticed that assessee has shown expenses of Rs..33,032/- on entertainment, Rs. 15,013/- on conveyance and Rs. 21,094/- on travelling. AO observed that most of these expenses are supported by self made vouchers and, therefore, he disallowed 10% of the same amounting to Rs. 48,006/-. The addition has been confirmed by the Ld. CIT(A). 46. Before us, it was submitted that all the vouchers were duly produced before the AO and no specific defect has been found and addition has been made merely on conjectures and surmises on the above basis which cannot be sustained under the law. 47. On the other hand, Ld.DR relied on the orders of 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 particula....
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.... deduction u/s. 80-IB(10). 52. Ground No. 2: During assessment proceedings, AO disallowed 20% of the car insurance and car expenses being personal 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 has been enclosed with the paper book, would show that assessee has sufficient withdrawals. 54. On the other hand, Ld. DR relied on the order of the Ld. CIT(A). 55. After considering the rival submissions, we find that element of personal usage has not been denied before us. Even if sufficient withdrawals have been shown, this does not mean that assessee has not used the vehicle for personal use. 20% disallowance 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 amounting to Rs. 51,880/-. It was further noticed that assessee has shown entertainment expenses of Rs. 76,274, Rs. 14,718/- on conveyance and Rs. 14,219/- on travelling. AO observed that most of these expenses are supported by self ....