TaxTMI 
TaxTMI 
2011 (5) TMI 597
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....t eligible for deduction under section 80-IB(10) of the Income-tax Act, 1961 (the Act). The remaining grounds are against the decision that even otherwise, the assessee is not eligible for the said deduction as it has not fulfilled all the conditions required to claim such deduction. 3. The assessee firm is engaged in the business of construction. In assessment year 2005-06, the assessee computed a profit of Rs. 2,02,65,109 following the percentage completion method and the entire amount was claimed as deduction under section 80-IB(10) of the Act. In assessment year 2006-07, the assessee computed a profit of Rs. 2,96,02,224 on the same basis as in the earlier year and claimed deduction of Rs. 2,93,00,835 under section 80-IB(10) of the Act. In both the years, the profit was derived from a housing project named as "Vimalachal" at No. 1088, PH Road, Vepery, Chennai. The said project was constructed on a land owned by Hotel Mullai Pvt. Ltd. (HMPL). 4. The Assessing Officer considered the agreement dated 28-4-2003 entered into between HMPL and the assessee. He observed that HMPL as the owner of the land decided to develop the project for which the assessee was nominated as its bui....
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....re on the basis of the report of the valuation officer of the department. In respect of all the above objections, the assessee submitted its explanation in detail. However, they did not find favour with the Assessing Officer and hence, the deduction was denied. The total income for assessment year 2005-06 was computed at Rs. 2,02,65,109. For the same reasons, the impugned deduction was denied in assessment year 2006-07 also and the total income was computed at Rs. 2,96,02,224. 6. The CIT(A) confirmed the order of the Assessing Officer in toto in both the years for the same reasons as mentioned by the Assessing Officer. 7. The ld. counsel for the assessee, first submitted his arguments on the question whether the assessee is a developer-builder or not. He took us through the agreement between the assessee and HMPL dated 28-4-2003. It was pointed out that the assessee has been described as a builder in the said agreement and moreover, it is also the finding of the CIT(A) in paragraph 8.6 of his order that the assessee is a builder which finding is contradictory to the finding of the Assessing Officer that the assessee is a contractor. Next, his submission was that section 80-IB....
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....ording to the ld. counsel the assessee had not violated this condition. 9. The next objection of the revenue was that the purchaser of the flat on the top floor had an exclusive right over the terrace and hence it should form part of the built-up area. This objection was countered by the ld. counsel by stating that though the top floor occupant had paid for the exclusive right of the terrace, the occupant did not have such a right. Only thing was that the access to the terrace was through the flat only and there was no independent access. Alternatively, it was contended that if after adding terrace to the built-up area, the total area exceeded 1500 sq.ft., then pro rata deduction should be given. For this alternative contention reliance was placed on the decision of the Special Bench of the Tribunal in the case of Brahma Associates v. Jt. CIT (OSD) [2009] 30 SOT 155 (Pune) and on several other decisions of the Tribunal. These decisions, it was contended, were based on the decision of the Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra). 10. The next objection of the revenue is with regard to certain flats measuring more than 1500 sq.ft. In thi....
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.... the CIT(A). As per the said report, the finding was that the payment to be made by the assessee to HMPL was on sq. foot basis which made it obvious that the payment was not a consideration for land alone. The agreement also nowhere stated that HMPL would jointly develop the property along with the assessee. According to him, the decision of the Chennai Bench of the Tribunal in the case of Sashwat Constructions (P.) Ltd. [IT Appeal No. 1828 (Mds.) of 2007, dated 27-2-2009] was squarely applicable and the same should be followed. The ld. D.R. next referred to the agreement dated 28-4-2003 entered into between HMPL and the assessee. From the agreement it was pointed out that the construction was to be carried out as per the specifications given by HMPL and that the assessee as the builder could not deviate from it. The quality of construction was to be as per the standards set by HMPL's architects. He also referred to the other agreements viz., one between HMPL and the purchaser of flat for sale of undivided share in the land. The next was the construction agreement between the assessee and the purchaser of the flat and the third was also a construction agreement between the assessee....
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....ke application and hence the procedures were undertaken by HMPL. With regard to the completion certificate obtained from Corporation, it was contended that CMDA approves only the structure but the construction is approved by the Corporation and hence completion certificate given by it is to be treated as due compliance under section 80-IB(10). With regard to the argument about the involvement of HMPL's architect, the ld. counsel drew our attention to clause (1) in the construction agreement dated 14-11-2003 which stated that the areas computed by the architect of the assessee was to be final and binding on all the parties. As regards the decision in the case of Sashwat Constructions (P.) Ltd. (supra), it was submitted that the order relied upon by the ld. D.R. was dated 27-2-2009 and was in respect of assessment year 2004-05. The ld. counsel furnished a copy of the order of the Tribunal dated 25-2-2009 in the case of the same assessee for assessment year 2005-06 in which the claim of the assessee was upheld by the Tribunal. Therefore, the contention was that the order for assessment year 2004-05 was itself erroneous insofar as that it did not follow the order for assessment year 20....
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....ontentions. Thus, the ld. counsel concluded his arguments by making a fervent plea that the assessee should be held to be a developer and builder and hence entitled to deduction under section 80-IB(10) of the Act. 14. We have duly considered the rival contentions and the material on record. It is an interesting situation. The assessee claims to be the developer of land but the revenue is not agreeable to it. HMPL does not claim to be the developer but the revenue wants to thrust that status on it. Admittedly, neither of the party says that there was a third entity who developed the property. In fact, one of the arguments of the ld. D.R., as mentioned in paragraph 12 above, was that the property is not developed jointly by HMPL and the assessee. Fortunately, one undisputed fact remains that the property has been developed. No one doubts this factual aspect. The only question to be answered is as to who developed it. Certainly it is not any providential hand. It is either HMPL or the assessee. 15. Before we go into the facts of the case, it would be appropriate to understand certain expressions which may be relevant to appreciate the purport of section 80-IB(10). (a)&n....
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....her words, the owner and the builder jointly evolved the scheme. At this juncture, we may hasten to add that they jointly only evolved the scheme. They did not jointly develop the scheme. Having jointly decided upon the scheme, the next step was to obtain the necessary permissions. Obviously, since the land is owned by HMPL, permissions have to be in its name only. Obtaining permissions in one's name does not ipso facto make that person a developer. Again, this too does not answer the question as to who developed the land or who carried out the development. 18. Having evolved the scheme and having obtained the necessary permissions, the builder, i.e., the assessee actually entered the scene to execute the scheme and the plans. Firstly, the assessee was handed over the possession of the land. Unless the possession is actually handed over to the assessee, the latter cannot proceed further. Therefore, clause 5 of the agreement states about handing over the possession of the land. It is to be noted that the land is not sold to the assessee and this is made clear in clause 5 itself that the possession is not given as a part performance of a contract as contemplated under section 5....
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....d which is utilised for construction. Therefore, the best way to describe the owner's consideration of land is to determine it on the basis of super built-up area. Considering the discussion in this paragraph, one is lead to frame an opinion that the assessee is not only a builder but is also a developer. However, this is not the end of the story and after all, it is said that opinion may be stronger than impression, but not as strong as a belief. There are other dimensions also to the aspect of builder and developer which we shall examine now. 20. We take up the most important dimension which relates to the investment risk involved. In paragraph 15 above we have given the meaning of the expression "development" which means the realisation of the potentialities of land or territory by building or mining. In the present case, undoubtedly, HMPL as the owner of the land has ventured to realise the potentialities of the land. It has indeed realised the potentialities, not by developing the land but by handing over the land for development to the builder. This is evident from the fact that HMPL is to receive only the cost of the undivided share of land. It is not that HMPL had purcha....
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.... 25 of the agreement, the builder will always have the option and right to maintain all common services like security arrangement, maintenance of lifts, common passage and lobbies etc. As per clause 52 of the agreement the builder has the right to change the usage of certain areas on the ground floor from generator room, air conditioning plant room, garbage room etc. on the one hand to gymnasium, health club, community room etc. on the other hand. In all such matters, HMPL has no role to play. As per clause 27 of the agreement, the builder has the right to collect maintenance expenses in advance from the purchaser of the flat. All these facts go to show that it is the builder who is responsible to develop the property, maintain it and satisfy the purchasers. We reiterate, HMPL is nowhere in the picture. This further strengthens our view that the assessee is a builder as well as a developer. Let us now have a holistic view of the entire arrangement. 22. As per section 80-IB(10), the deduction is available to an undertaking which is engaged in the developing and building housing projects. In other words, the undertaking should be both, a builder as well as a developer. In paragrap....
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....es the assessee a contractor and not a developer. At the outset, it needs to be reminded that as per the agreement between HMPL and assessee, the former had nominated the latter as a builder and as per clause 1 of the agreement the project was jointly evolved by HMPL and the assessee. In other words, they jointly decided upon the project but the job of actually developing the land, building and constructing the project was the exclusive domain of the assessee. Thus, it is not that the purchasers of the flats have engaged the services of the assessee as a contractor. The question may arise, then why such an agreement. Well, it is merely to define the rights and liabilities of the assessee vis-a-vis the purchasers of the flats. We may examine some of the important rights and responsibilities. The agreement decides the sale price of the flat, it decides the terms of payment, it decides upon the time schedule for delivering the flat, it decides upon the consequences for default on either side, it prevents the purchaser to make any structural changes in the flat, it defines the defects which the assessee will have to remove and those which he is not liable to remove and so on. It also g....
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.... denied. One of the objections is that in some cases, two flats have been combined to make a single dwelling unit as a result of which the total built-up area of the combined flat exceeds 1500 sq.ft. In this connection, the assessee has placed on record the confirmation given by the purchasers of the flats stating that they had combined the two flats after taking possession for their own convenience. In our opinion, once the flats which are sold separately under two separate agreements, the builder has no control unless the joining of the flats entails structural changes. Nothing is brought on record to evidence such structural changes. Therefore, it is quite clear that the two flat owners have themselves combined the flats whereby the area has exceeded 1500 sq.ft. The project as a whole and the assessee cannot be faulted for the same. Moreover, clauses (e) & (f) of section 80-IB(10) are effective from 1-4-2010 and they are not retrospective in operation. Therefore, they do not apply to the present case which pertains to the years prior to 1-4-2010. Accordingly, we do not see any force in this objection and the deduction cannot be denied on this ground. 24. Next objection of the....
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.... completed much before the due date, may be with certain defects. Also, it has to be noted that the CMDA certificate is dated 13-6-2008, i.e., only two months and thirteen days beyond the due date. It is inconceivable that the type of defects which were pointed out by the CMDA could have been rectified in such a short period. Be that as it may, the Hon'ble High Court also ratified the deviations and directed the CMDA to consider the explanation of the assessee. All these facts go to point that the project was indeed completed before 31-3-2008. Thus, this ground also has no force to deny the assessee the impugned deduction. 25. The next objection of the Assessing Officer is that certain flats in the project measure more than 1500 sq.ft. According to the ld. counsel, as per the measurement taken by the registered valuer appointed by the assessee, the said flats measured less than 1500 sq.ft. However, he had no objection if the matter was remitted for verification. Accordingly, we restore this issue to the file of the Assessing Officer with the direction that the flats which are allegedly more than 1500 sq.ft. in area be measured again and the departmental valuer as well as the ass....
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....a. To make it abundantly clear it is reiterated that separate limits of 10 per cent should not be worked out for the two categories of the flats but both put together should not exceed 10 per cent of the total built-up area. Also, deduction should be computed only in respect of flats which do not exceed 1500 sq.ft. In other words, flats which exceed 1500 sq.ft. should be totally ignored for the purpose of deduction. If the built-up area of the flats exceeding 1500 sq.ft.(flats with and without terrace rights put together) is more than 10 per cent of the total built-up area of the project, then the assessee will lose deduction on the entire project. 27. Before finally concluding, it may not be out of place to explain the genesis of our direction given in paragraphs 25 & 26 above. In giving the said direction, we have relied on the decision of the Special Bench of the Tribunal in the case of Brahma Associates (supra). In that case, the assessee developed a housing project, which not only comprised of residential housing units but also commercial establishments. Clause (d) of section 80-IB(10) which permits certain percentage of commercial establishments in the housing project was ....
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....rding to the object which the court deems the legislation is intended to serve. This operates even if Parliament has failed to incorporate the intention which the judge believes that the section possesses. Lord Diplock re-emphasised the importance of making a purposive approach in Reg. v. Nat. Ins. Commr.: Ex parte Hudson [1972] AC 944 at p.1005 : [1972] 2 WLR 210, 251 (HL) thus : "Meticulous linguistic analysis of words and phrases used in different contexts in particular sections of the Act should be subordinate to this purposive approach. It should not distract your Lordships from it." 28. Taking inspiration from the above, and addressing to ourselves the questions suggested by Lord Diplock, what answers do we get. The provision which we are interpreting pertains to housing projects. The object of the provision as mentioned earlier and as discussed at length in the Special Bench order, is to augment affordable dwelling units. Can it be said that by having only very insignificant number of flats exceeding 1500 sq.ft., has the assessee failed to augment affordable dwelling units. The reply to this question has to be in the negative. However, as observed in paragraph 94 of th....
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....as not been dealt with by the High Court. It is further stated that the effect of dismissal is that the order of the Tribunal on the issue which was agitated before the High Court stands merged in the order of the High Court, and for all intents and purposes, it is the decision of the High Court which is operating and which is capable of being given effect to. It is not open to any person to contend that there is no decision of the High Court and the subordinate forum is entitled to take a contrary view than the one adopted in the earlier proceedings which have been affirmed by the High Court by a process of dismissal of the appeal simpliciter. 30. The above issue and the judgment of the Gujarat High Court were considered by the Special Bench of the Tribunal in the case of Medicare Investments Ltd. v Joint CIT [2008] 114 ITD 34 (Delhi). The Special Bench held that such a decision where the High Court has dismissed the appeal on the ground that no substantial question of law arises, is binding on the subordinate forums. Thus, it is clear that in absence of any decision of the jurisdictional High Court to the contrary, not only the decision of the Special Bench in the case of Brah....
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....dly, the facts are identical to the facts in the case of Sanghvi & Doshi Enterprise and accordingly, following our order above, it is held that the assessee is a builder and developer entitled to deduction under section 80-IB(10). 36. The only other dispute relates to the inclusion of private terrace in the built-up area. It is directed that the flats with exclusive terrace rights be measured again and then our directions in paragraphs 25 and 26 be followed. 37. In the result, the appeal of the assessee is partly allowed for statistical purposes. 38. Summarizing the result of this order, all the five appeals in respect of the three assessees are partly allowed for statistical purposes. George Mathan, Judicial Member. - I have perused the order of my learned brother, Hon'ble Vice President and I am unable to convince myself to agree with all the findings as arrived at by him. Consequently, I hereby pass my order on the issues in the appeal wherein the issues of specific difference is also brought out . 40. The facts as recorded by my learned brother, Hon'ble Vice President are accepted as correct and adopted. 41. Indisputably the issues in the appeal revolve ....
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....loping land and building flats which are nothing but housing projects. For the purpose of avoiding service tax the assessee, it is true, has entered into agreements with the individual purchasers of the flats undertaking to do the construction of their flats on behalf of them. These are but just jugglery of wordings in the contract. The actual fact remains that the assessee is doing the business of developing and building housing projects. Just because the plan sanction, plan approval etc. have been taken in the name of the land owner it would not deny the assessee the benefit of being treated as an undertaking developing and building the housing projects insofar as it is the assessee, through the power of attorney specifically taken from the land owner, that the plans have been drawn, approval obtained, sanction taken and the building constructed. Thus it would have to be held as an undertaking which has done the business of developing and building housing projects on the said land measuring minimum of one acre. Therefore the issue that the assessee is liable to be held as an undertaking which has done the business of developing and building housing projects would have to be held ....
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....part of the built up area of the flat for computing the built up area of 1500 s.ft. 44. In respect of the issue of the completion certificate it is noticed that the assessee has completed the building and has made the application for the completion certificate on 13-3-2006. Though initially the CMDA had not granted the completion certificate, subsequently after the direction from the Hon'ble Madras High Court the CMDA has given the completion certificate on 13-6-2008 and the compliance certificate has also been issued by the Corporation of Chennai in December, 2007. Here one should remember that when sanction is given normally the sanction would contain a date. In the present case the certificate issued is a completion certificate that is a certificate accepting the claim of the assessee that the project has been completed, i.e., the certificate is issued on an application given by the assessee. The assessee can give an application for completion certificate only when the completion of the project is done. Thus the grant of a completion certificate after verification by the competent authority even on a subsequent date would revert back to the date on which the application is ma....
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....ombination of the flats have not been done by the assessee and the assessee has sold only two flats separately and the combining of the flats by the purchasers after the purchase cannot be held to the detriment of the assessee. On this ground also I am in agreement with the finding of my learned brother. 49. My learned brother has also directed that in regard to the flats which are having the private terrace as also the objection of the Assessing Officer that certain flats in the project measure more than 1500 s.ft., the issue has been restored to the file of the Assessing Officer with the direction that the said flats which are alleged to be more than 1500 s.ft. area be measured again and the departmental valuer as well as the assessee's valuer both should remain present and the assessee is to extend its fullest co-operation. To this extent of re-measuring the flats by restoration of the issue before the Assessing Officer I am in full agreement with my learned brother. 50. In regard to the issue as to whether the built up area if it exceeds 1500 s.ft. in respect of any flats, the assessee would be entitled to the deduction under section 80-IB(10) on pro rata basis, my learne....
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....essee to say that the higher measurement has been arrived at by the Revenue. It is to be kept in mind that as per section 80-IB(14)(a) of the Act the "built up area" is specified and defined. It is not the ordinary "plinth area" calculation nor is it the "built up" area as defined for local authority purposes. The definition of "built up area" for income-tax purposes is different from the definition under the local laws and the method of calculation is also different. For example, under the plinth area calculation, the balcony, washing area, etc. are taken at ½ the actual area and in respect of the parabolic balcony only 1/3, whereas for income-tax purposes the same would be treated as projections and balconies and its area in full taken. The Assessing Officer has also specifically made a statement that the plans submitted by the assessee further points out that the flats are vertically placed above one another on successive floors are of equal dimension which lead to the conclusion that the flats claimed to be of 1397 s.ft. of flat area are, in fact, above 1500 sq.ft. of built up area and based on the same there are many flats which are having a built up area exceeding 1500....
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....0). The question of proportionate deduction is, therefore, not at all relevant in this context." In the said decision, the Hon'ble Special Bench has not given a finding that pro rata deduction in respect of the flats which are having an area of 1500 s.ft. specified in section 80-IB(10)(c) can be given. In fact, an in-depth reading of the said decision shows to the contrary. 55. The provisions of section 80-IB(10) do not recognize a pro rata deduction. It is not as if the Legislature did not recognize pro rata deduction. When the Legislature desired to give such pro rata deduction, it specifically provided for it. For e.g., sections 54, 54(2), 54B(2), 80HHC etc. Further a perusal of section 80-IB(10) shows that the word used at the end of sub-clause (c) is "and" and not "or" nor is it just a coma. The term "and" means that all the conditions in section 80-IB(10) must be complied with individually and cumulatively. Violation of any one of the sub-clauses of section 80-IB(10) as are available for the relevant assessment years leads to the loss of the eligibility of deduction under section 80-IB(10) in toto. The wordings of section 80-IB(10) of the Income-tax Act, 1961 are "in th....
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.... a maximum built up area of 1500 s.ft. The wordings used are "the amount of deduction.........shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing projects if, - [Emphasis supplied] (a) & (b)** *** ** (c) the residential unit has a maximum built-up area of ............." The word "if" denotes the intention in its clarity of the Legislature. 59. Coming to the issue of the granting of the deduction only if the built up area of the flats measuring more than 1500 s.ft. does not exceed 10 per cent of the total built up area, reliance has been placed on the decision of the Hon'ble Special Bench of the Tribunal in the case of Brahma Associates (supra). I have already mentioned earlier that an in-depth reading of the decision of the Special Bench in the case of Brahma Associates (supra) shows that the Hon'ble Special Bench has not given any approval in regard to the pro rata deduction in such situation. Further why 10 per cent? The decision of the Calcutta Bench of this Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra) which has approved pro rata deduction....
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....1 of the sale agreements entered into by the assessee with the purchasers of the flats wherein the assessee has recognized that the buildings would have pent houses having areas in excess of 2000 s.ft. Thus knowing fully well that the housing project of the assessee did contain flats exceeding the prescribed maximum built up area provided under section 80-IB(10), the assessee still decided to take its chance in claiming the deduction under section 80-IB(10). The assessee also very well knew this position when it had its flats measured by its registered valuer and obtained the certificate on 5-12-2009 that some of its flats did exceed the 1500 s.ft. limit. Interestingly, the registered valuer of the assessee instead of taking the "built up area" as specified in the provisions of section 80-IB(14) decided to talk of only the "plinth area" and that too by specifically excluding the exclusive open terrace. 61. In such a situation can it be said that the decision of the Calcutta Bench of this Tribunal as also the decision of the Hon'ble Calcutta High Court rejecting the revenue's appeal holding that no substantial question of law would have a binding precedence? The Hon'ble Gujarat H....
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....e issue of deduction under section 80-IB(10) though no specific finding had been given in regard to the finding of the Tribunal in the appeal. 63. In the circumstances, with utmost obedience to the decision of the Hon'ble jurisdictional High Court in the case of Viswas Promoters (P.) Ltd. (supra), as it is noticed that the decision of the co-ordinate Bench of this Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) is subsequent to the decision of the Calcutta Bench of this Tribunal in the case of Bengal Ambuja Housing Developments Ltd. (supra) which is passed on 24-3-2006 and as it is noticed that the co-ordinate Bench of this Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) has considered all the issues and has arrived at its decision after full consideration of the principles as considered in the case of Bengal Ambuja Housing Development Ltd. (supra) as also on account of the fact that the decision of the Calcutta Bench of this Tribunal does not reflect the correct position of law, relying upon the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Hi Tech Arai Ltd. [2010] 321 ITR 477 (Mad.) I follow the decision of the co-ordinate Bench ....
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....hat the assessees are not builders and developers but only building contractors and therefore not entitled for deduction under section 80-IB(10); (ii) that the assessees cannot be considered as builders as lawful possession of the land was not handed over to them and the assessees were given only permission to construct the residential buildings; (iii) that the statutory permits from different agencies like Chennai Metropolitan Development Authority (CMDA), Chennai Corporation, Airport Authority of India (AAI) were obtained by the land owners and not obtained in the names of the assessees themselves; (iv) that the construction work has been sub-contracted to others; (v) that the built up area of certain flats exceeded the statutory limit of 1500 sft. provided in section 80-IB(10); (vi) that in certain cases two flats were combined to make a single dwelling unit with a single entrance and in such cases again the combined area exceeded the statutory limit of 1500 sft. (vii) that in certain cases the purchasers of the flats have exclusive rights over the terrace area and in such cases the extent of the built up a....
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....B(10) and therefore entitled for deduction under that section. The issue whether two flats in a project when combined together could be eligible for deduction, even if the combined extent of the built up area exceeded 1500 sft. was also decided by the Bench unanimously by holding that deduction should not be denied on the ground that two flats were combined by the purchasers of the flats. The Bench held that this is because the flats were purchased by the buyers as single units not exceeding a built up area of 1500 sft. each. The flats were combined only after the purchase of those flats and after taking possession of them. In such cases the flats concerned are to be treated as constructed and sold as independent flats with built up area not exceeding 1500 sft., each. Regarding the question of project completion certificates, the Bench again unanimously held that even though the certificates are dated beyond 31-3-2008, inspections of the properties were carried out by the concerned agencies well before 31-3-2008 and the certificates were issued on the basis of such inspections and therefore the certificates relate back to the dates on which the applications for the certificates wer....
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....ssue against the assessees. The difference of opinion has in fact cropped up only in respect of a single issue as to whether deduction should be allowed to the assessees even if some of the units exceeded the built up area of 1500 sft. 13. The point of difference was referred to the Hon'ble President, Income-tax Appellate Tribunal through the question framed by the Bench under section 255(4) of the Income-tax Act, 1961, which reads as: "In the facts and circumstances of the case, is the assessee entitled to deduction under section 80-IB(10) of the Income-tax Act, 1961 if there is violation even in respect of a single residential unit in the project?" 14. The Hon'ble President of the Income-tax Appellate Tribunal nominated me as the Third Member through his honour's proceedings dated 22-2-2011 and it is how this matter has been placed before me. 15. The issue of granting deduction under section 80-IB(10) in respect of flats having built up area exceeding 1500 sft., has been considered by the Hon'ble Vice-President in paragraph 25 of his order. The said paragraph is reproduced below: "25. The next objection of the Assessing Officer is that certain flats in the project ....
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....g built up area of more than 1500 sft. put together does not exceed 10 per cent of the total built up area of the project." 19. The learned Vice-President has explained the grounds of his decision in paragraphs 27, 28, 29 and 30 of his order. In paragraph 27 the learned Vice-President has relied on the decision of the Special Bench of the Pune Tribunal in the case of Brahma Associates (supra), to support his view that proportionate deduction is permissible as section 80-IB(10) is a beneficial section and the overall limit of 10 per cent of the built up area is a fair restriction. In paragraph 29 the learned Vice-President has relied on the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra). In that case the High Court has confirmed the finding of the Kolkata Bench of the Tribunal that deduction under section 80-IB(10) is permissible on a pro rata basis. In fact the Calcutta High Court has dismissed the appeal filed by the revenue against the order of the Kolkata Bench of the Tribunal stating that no question of law arose out of the order passed by the Appellate Tribunal. The learned Vice-President has relied on the judgment ....
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.... the word used at the end of sub-clause(c) is "and" and not "or" nor is it just a coma. The term "and" means that all the conditions in section 80-IB(10) must be complied with individually and cumulatively. Violation of any one of the sub-clauses of section 80-IB(10) as are available for the relevant assessment years leads to the loss of the eligibility of deduction under section 80-IB(10) in toto. The wordings of section 80-IB(10) are "in the case of an undertaking developing and building housing projects". It is not "undertaking developing and building houses or flats". It is the project as a whole that has to be considered. This view draws support from the decision of the Hon'ble Special Bench in the case of Brahma Associates, cited supra. The floor of one flat is the roof of another. The outer walls of two flats would be common." 21. The learned Judicial Member has further elucidated the statutory provision of deduction as under in para 58 of his order :-- "58. A reading of section 80-IB(10) shows that the said provision is unambiguous. The Legislature clearly did not want to grant exemption to a housing project wherein the "built up area" of a residential unit exceeded t....
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....smissed vide order, dated 30-1-2009. He further observed that against the above order of the Tribunal, the assessee had filed a Writ Petition before the Madras High Court in Visvas Promoters (P.) Ltd. (supra), wherein the Hon'ble jurisdictional High Court has categorically held that the decision of the High Court of a different jurisdiction is not binding on the Tribunal, which is not under its jurisdiction and the rectification sought for on that basis under section 254(2) was not valid. In the said decision the Hon'ble jurisdictional High Court had also laid down the principles of judicial discipline wherein it had also been held that where there are conflicting decisions of courts of coordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions. 23. In the light of the above observations the learned Judicial Member, relying on the judgment of the Hon'ble Madras High Court in the case of Visvas Promoters (P.) Ltd. (supra) held that the decision of the coordinate Bench of the Chennai Tribunal in the case of Visvas Promoters (P.) Ltd. (supra) is subsequent to the decision of the Calcutta Bench of the Tribunal in the c....
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....elling units and it must be interpreted in that light and deduction under section 80-IB(10) should be given to those flats whose built up area does not exceed 1500 sft. and that deduction should be denied only to those flats whose built up area exceeds the prescribed limit of 1500 sft. 28. On the other hand the learned Judicial Member has held that the Special Bench in the case of Brahma Associates (supra) has not given a finding that pro rata deduction in respect of the flats which are having area of not exceeding 1500 sft. specified in section 80-IB(10) can be given. Such a proposition is contrary to the findings of the said Special Bench of the Tribunal. The provisions of section 80-IB(10) do not recognize a pro rata deduction. Violation of any of the conditions in section 80-IB(10) would result in loss of eligibility of deduction under section 80-IB(10) as a whole. After the decision of the Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra), the coordinate Bench of this Tribunal in Viswas Promoters (P.) Ltd. (supra) has held that if some of the flats in the housing project exceeded the maximum specified area provided in section 80-IB(10) the be....
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.... substance of the issue decided by the Calcutta Tribunal in Bengal Ambuja Housing Development Ltd. (supra) and therefore on the allegation that it was not considered, no mistake could be noticed in the order of the Tribunal. In the course of disposal of the said writ petition, the Hon'ble High Court also discussed certain propositions relating to the binding nature of decisions of High Courts. While laying down those propositions, the High Court also held that where there are conflicting decisions of court of coordinate jurisdiction, the later decision is to be preferred being reached after full consideration of the earlier decisions. The court also observed that the decision of one High Court is neither binding precedent for another High Court nor for Courts or Tribunals outside its own territorial jurisdiction. 33. It is on the basis of the above observations made by the Hon'ble Madras High Court in the writ petition filed by Visvas Promoters (P.) Ltd.'s case (supra) that the learned Judicial Member has decided to rely on the decision of the Chennai coordinate Bench delivered in the case of Viswas Promoters (P.) Ltd. (supra). 34. On the other hand it is on the basis of the ....
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.... the Hon'ble Calcutta High Court. Therefore the argument that all the earlier decisions on the subject were considered by the Chennai Bench of the Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) is not a correct statement of fact. 37. It is also not correct to argue that the said order of the Tribunal Chennai Bench in the case of Viswas Promoters (P.) Ltd. (supra) has been confirmed by the Hon'ble Madras High Court. The Hon'ble Madras High Court in its writ order has dealt with only the writ application filed by the assessee against the order of the Tribunal dismissing the Miscellaneous Petition filed by the assessee. The Hon'ble Court has specifically mentioned that the writ petition was misconceived and therefore liable to be dismissed. The ratio laid down by the Hon'ble High Court in the said case was that writ petition against order under section 254(2) cannot be rejected on the ground of availability of alternate remedy. The Hon'ble Madras High Court has not considered anything concerning the merit of the issue that whether in the circumstances stated above the assessee could claim deduction under section 80-IB(10) or not. The Hon'ble Court clarified that it was ....
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....ant before the High Court stands merged in the order of the High Court and for all intents and purposes, it is the decision of the High Court which is operative and which is capable of being given effect to." 42. The Hon'ble Special Bench held that where the jurisdictional High Court has dismissed the appeal against the order of the Tribunal holding that no substantial question of law arises, the said decision of the High Court is a decision on merits confirming the findings arrived at by the Tribunal and it is not possible to argue that the High Court has not considered the merits of the issue decided by the Tribunal. Where the High Court dismisses the appeal stating that no question of law arises from the order passed by the Tribunal it means that the Hon'ble High Court has considered the merits of the issue discussed and decided by the Tribunal in the light of the relevant law and the High Court is in agreement with the views of the Tribunal and it is not required to repeat all those issues again. What the High Court is stating in short is that the appeal is dismissed as no question of law arises. On this we cannot presume that a High Court has not considered the merits of th....
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....nals outside its jurisdiction. 46. Further the Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192, has held that if in a case of taxing provision two interpretations are possible, the interpretation which favours the assessee must be adopted. The same view is reflected again in the decision of the Supreme Court in the case of CIT v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518. 47. Therefore, it is to be stated that the decision of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) alone is available directly on the subject-matter as the judgment of a constitutional Court. Two decisions, including the decision in the case of Viswas Promoters (P) Ltd. (supra) have been rendered by co-ordinate Benches of the Tribunal, Chennai against the assessee. But it is to be seen that a co-ordinate Bench of the very same Tribunal (Chennai Bench-A) has taken a view in favour of the assessee in the case of Arun Excello Foundations (P.) Ltd. v. Asstt. CIT [2007] 108 TTJ 71/[2008] 166 Taxman 53 (Chennai (Mag.) in spite of the fact that contrary decisions of co-ordinate Benches were available. I do not wish t....
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....t I thought to refer that issue to avoid confusion /controversy that may surface before the regular Division Bench while disposing the impugned appeals in accordance with the majority view. 51. Now these files will be placed before the regular Bench for passing orders, to finally dispose the appeals. ORDER GIVING EFFECT 1. In all these appeals there arose difference of opinion between Members of the Division Bench, hearing the appeals. Therefore, the matter was referred to Third Member. Hon'ble Vice President acting as Third Member has given his opinion on the matter referred to him. 2. Grounds raised by the assessees in these appeals were as follows:- (1) For that the order of the Commissioner of Income-tax (Appeals) is without jurisdiction, contrary to law, facts and circumstances of the case and at any rate is opposed to the principles of equity, natural justice and fair play. (2) For that the order of the Commissioner of Income-tax (Appeals) failed to appreciate that the appellant is eligible for deduction under section 80-IB(10). (3) For that the order of the Commissioner of Income-tax (Appeals) failed to appreciate that....
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....ion certificates on or before 31st March, 2008 and whether entitled for deduction or not? (iv) Whether in certain cases the built-up area of a single flat is more than 1500 sq. ft., whether the assessees are eligible for deduction or not? (v) Whether the private terrace should also be included in the built-up area of the flats for the purpose of working out the statutory extent of the built-up area? (vi) Whether deduction should be allowed even though some of the flats of the projects exceeded the built-up area of 1500 sq. ft.? 3. Based on the decision of Hon'ble Vice President sitting as Third Member on the matters where there were difference of opinion, and on other points based on the unanimous view of the Division Bench, we hold that - (i) Assessees were builders/developers and therefore eligible for deduction under section 80-IB(10). (ii) Even where the purchasers of the flats combined two flats together thereby exceeding the limit of the built-up area of 1500 sq. ft., it could still be considered as proper compliance of the stipulation provided in section 80-IB(10) that the built-up area should not exceed 1500....