TaxTMI 
TaxTMI 
TaxTMI 
2011 (8) TMI 680
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....g the decision of the Special Bench of the Tribunal in the case of ITO v. Daga Capital Management (P.) Ltd. [2008] 119 TTJ 289 (Mum.). 4. Before us the ld AR has mainly contended that the Rule 8D is not applicable for the Assessment Years under consideration. He has further pointed out that when no interest expenditure was incurred by the assessee in relation to earning of tax free income (dividend), then, no disallowance is called for. He has relied upon the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT v. Hero Cycles Ltd. [2010] 323 ITR 518. He has also relied upon the decision of the Hon'ble jurisdictional High Court in the case of Godrej & Boyce Mfg Co. Ltd. v. Dy. CIT [2010] 328 ITR 81 (Bom.). The ld AR further pointed out that the assessee has invested in shares from the surplus funds available with it and no borrowed funds were used for the purpose of investment as well as investment in shares. 4.1 On the other hand, the ld DR has relied upon the orders of the lower authorities and submitted that in view of the decision of the Hon'ble Jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd (supra), the matter is required to be examined....
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.... which has been affirmed by the Hon'ble Koltaka High Court vide order dated 15.1.2007. The CIT(A), after following the decisions of the Tribunal including the decision of the Kolkata Bench of the Tribunal in the case of Ambuja Housing Development Ltd (supra) directed the Assessing Officer to work out the deduction u/s 80IB(10) after excluding the profit from the sale of these two flats. 9. Before us, the ld AR of the assessee has reiterated the contentions as raised before the CIT(A) and submitted that as per the plan approved by the BMC, the built up area is less than 1000 sq.ft. When the assessee has constructed these flats of less than 1000 sq.ft area and the BMC has given completion certificate according to the construction as per the approved plan having less than 1000 sq.ft area, then the deduction u/s 80IB(10) cannot be denied only because as per the demand and requirement of the buyer one room has been added from the adjacent flat. He has further contended that the total area of the flats remains the same and there is no addition in the total area of the constructed flats. 9.1 Per contra, the ld DR has submitted that when the assessee has violated the condition as prescri....
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....duction/s 80IB irrespective of the area of shops and/or other commercial establishments in the project and that it is only with effect from 1.4.2005, when sub clause 80IB(10(d) has been inserted, that shops and other commercial establishments subject to the stipulated limits, have been included in the house project." 11.1 For the AY 2007-08, and 2008-09, the revenue has raised another common ground as under: (1) On the facts and in the circumstances of the case and in law, the ld CIT(A) erred in directing the Assessing Officer to allow deduction u/s 80IB in respect of the project named N G Complex, Marol after excluding the profit derived from sale of two flats whose built-up area exceeds the stipulated limit of 1000 sq.ft." The other grounds raised by the revenue in these appeals are only in the nature of arguments and in support of the main grounds. 12. Ground nos 1 & 2 regarding commencement of the development and construction of housing project. 12.1 The assessee claimed deduction u/s 80IB(10) in respect of N G Estate, Mira Road (E) project. The Assessing Officer denied the deduction inter-alia on the ground that the project did commence prior to 1.10.1998 as the date stip....
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....opment and the construction of the project could not be commenced. The assessee finally got issued the certificate u/s 20 of the ULC Act vide letter dated 10.2.2000. The land in question was continued to be shown as land till 31.3.2001 and no expenditure towards the construction and other development has been incurred prior to the year 2001 when the assessee paid the development charges to MBMC on 29.1.2001. Thereafter, the construction work was started from the year ending 31.1.2002. 13.3 The ld AR has also referred the occupation certificate dated 23.7.2002 issued for completion of the project in pursuance of commencement certificate issued on 2.3.2001. He has further submitted that the conditions of commencement of construction and development of housing project are separate and independent of conditions of the approval of the housing project. The approval of the housing project on or prior to the date as mentioned u/s 80IB(10) is only for the fixing time period of completion of the project and nothing to do with the commencement of the project. The project, which has been approved on or after 1.4.2002, the same has been completed within four years from the end of the FY in whi....
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....om 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 Oct 1998 and complete the same before the 31st day of Mar 2003; (b) the project is on the size of a plot of land which has a minimum area of one acre; and (c) the residential unit has a maximum built up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place." 14.1 Initially the provision contemplates three conditions for availing the deduction section 80IB(10) namely ; (i) such undertaking has commenced or commences development and construction of housing project on or after 1.10.98 (ii) the project on the size of minimum one acre of the plot and (iii) the residential unit has maximum built up area of 1000 sq.ft or 1500 sq.fst as the case may be. 14.2 At that point of time, the amount of profits of undertaking with respect to a housing project approved by the local authority was eligible for deduction of such housing project comme....
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....istinct from the "approval of the housing project". There is no restriction about the approval of the housing project prior to 1.10.98 whereas there is a thread-hold condition for the housing project to avail deduction u/s 80IB(10) that the said project has been commenced development and construction on or after 1.10.98. The provision does not postulate that the first approval of plan shall be deemed commencement of development and construction of the housing project. Therefore, the date of approval in case in hand has no relevance so far as the issue of commencement of development and construction of the housing project is concerned. There is no dispute about the completion of the project within the stipulated period of time; therefore, the date of approval has no role to play. Even otherwise, it is not the case of the revenue that the assessee has actually started the work of development and construction prior to 1.10.l98 or in this regard has incurred any expenditure towards development and construction of the housing project. We have referred the assessment order in the earlier part of this order and noted that the Assessing Officer took the date of commencement of the developm....
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....e housing project and not the date when the project was first approved by the local authority. The order of the CIT(A) is upheld, qua, this issue. 18. Ground no.3 regarding conditions of commercial area in the housing project. 18.1 The Assessing Officer obtained the report of the valuation officer dt 27.3.2008 whereby reported that the project N G Estate consists of 19 shop. The Assessing Officer mentioned that the carpet area of the shops actually measured is 2368.90 sq.ft which is more than 2000 sqf.ft as provided under clause (d) of section. 80IB(10). Accordingly, the Assessing Officer held that the deduction u/s 80IB(10) is not admissible as the entire project loses its eligibility. 18.2 Apart from this, the Assessing Officer also took a note of the fact that the assessee sold 32 flats to M/s Action Construction Equipment Ltd. The carpet area of each flat is 225 sq.ft and the total carpet area of the 32 flats is 7200 sq.ft. These 32 flats were further let out by M/s Action Construction Equipment Ltd to M/s Unique Hospitalities. The Assessing Officer, accordingly, held that the built up area of the shop and other establishment (32 flats) in the project, as a whole, exceeds th....
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....for selling more than one flat to one person prior to the amendment of clause (e) of sec. 80IB(10) w.e.f. 1.4.2010. He has further submitted that the housing project has been constructed as per the approved plan. The completion and occupancy certificates have been granted in respect of the housing project completed as per the approved plan including these 32 flats which were constructed as an independent residential unit and have been sold to M/s Action Construction Equipment Ltd., being separate and individual resident unit through separate sale documents. He has submitted that after the sale of these flats, if the purchaser sold these flats to a third person, who has used these flats for commercial purposes, then the same would not amount to construction of commercial establishment or non-residential unit. The deduction u/s 80IB(10) is available, if the housing project is developed and constructed as per the approved plan and the conditions provided u/s 80IB(10). Once the project is completed and the residential units are transferred subsequently development or change of user would not affect the eligibility of the project for deduction u/s 80IB(10). 21. We have considered the r....
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....person in the housing project and there is no indication that these restrictions are applied with retrospective effect. 23.1 The explanatory memorandum explained the legislative amendment reported in 314 ITR(St) 203) as under: "Further, the object of the tax benefit for housing projects is to build housing stock for low and middle income households. This has been ensured by limiting the size of the residential unit. However, this is being circumvented by the developer by entering into agreement to sell multiple adjacent units to a single buyers. Accordingly, it is proposed to insert new clauses in the said sub-section to provide that the undertaking which develops and builds the housing project shall not be allowed to allot more than one residential unit in the housing project to the same person, not being an individual, and where the person is an individual, no other residential unit in such housing project is allotted to any of the following person:- (I) Spouse or minor children of such individual; (II) The Hindu undivided family in which such individual is the karta; (III) Any person representing such individual, the spouse or minor children of such individual or the Hindu ....
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....ssessee will be eligible for deduction under section 80-IB(10) in respect of entire profits of the housing project, such an interpretation will clearly lead to an absurdity inasmuch as the benefit of tax incentive under section 80-IB(10) will then be available in respect of a project which is not even aimed at augmenting the supply of affordable dwelling units. Such a project, by no stretch of logic, can be construed as a project which can be said to be for the purpose of making available the dwelling units. Similarly, the limit of 51 per cent on residential use of built-up area, as suggested by learned counsel for the assessee, is also incompatible with our finding that dominant objective of section 80-IB(10) is to provide tax incentive for a housing project which is predominantly for affordable dwelling units. When commercial use and residential use is almost equal, it cannot at all be said that predominant objective of the project is for providing dwelling units. When two different type of usage are equal or close to equal, as fifty one per cent ceiling on residential built-up area necessarily mandates, none of the usage can be said to be predominant, as, on a conceptual note, e....
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....at 90 per cent of compliance is taken as substantial or full compliance of the provision, for example, of discharging advance tax obligations. We, therefore, hold that where 90 per cent is built-up for residential unit, and commercial use is 10 per cent or less, there is substantial compliance of the statutory provisions and the purpose of the provision is duly met. In this connection, we may usefully refer to and rely upon provision of section 234B of the Act which holds that when 90 per cent or more advance tax is paid by the assessee, the advance tax obligations are treated as discharged. In cases where commercial use of built-up area is 10 per cent or less, it should not be open to the revenue to proceed on the basis that the project is not a housing project. The enactment did not provide for any limit on commercial built-up area out of total area. The view that non-residential use of built-up area up to 10 per cent will not vitiate the true character of a housing project is fully justified in the background of provision discussed above. In our view, it would be illegal to apply ceiling of 5 per cent to assessment years prior to assessment year 2005-06 though no such ceiling wa....