TaxTMI 
TaxTMI 
2012 (6) TMI 386
X X X X Extracts X X X X
X X X X Extracts X X X X
....he project Shanti Niketan Plot No.8-A Sector-8 Kharghar. ii) In not granting deduction of Rs. 1,58,26,407/- as claimed by assessee under section 80IB(10) of the IT Act in respect of the project Balaji Tower Plot No.29,32,36 & 37 Sector-30 Vashi. iii) In not granting deduction of Rs. 1,40,57,113/- as claimed by assessee under section 80IB(10) of the Income Tax Act in respect of the project Silicon Tower, Sanpada, Vashi 46-C/30A. iv) In not granting deduction of Rs.(-)5,21,198/- as claimed by assessee under section 80IB(10) of the Income Tax Act in respect of the project Kaveri, Plot No.4, Sector-5 Kharghar. v) In not granting deduction of Rs. 1,31,52,889/- as claimed by assessee under section 80IB(10) of the Income Tax Act in respect of the project Panvhavati, Plot No.92 to 96, Sector-5 Ghansoli. vi) In not granting deduction of Rs. 3,35,62,319/-/- as claimed by assessee under section 80IB(10) of the Income Tax Act in respect of the project Vrindavan, Plot No.52, Sector-9, Panvel. vii) In not appreciating that Section 80IB (10) of the IT Act is an incentive provision for economic growth and has to be interpreted liberally. In doing so, AO as well as CIT (A) h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion of the project sanctioned earlier and assessee has not satisfied the conditions under section 80IB(10). The claim of assessee, contentions of AO and submissions of assessee project-wise are as under. 1. Balali Towers. Plot No. 29-32. 36 & 37, Sector 30, Vashi: 6. Deduction u/s 80-IB (10) in respect of this project was denied as it was not approved as a residential project but as residential cum- commercial project and the size of some of the residential units was more than 1000 sq. fts (including the area of balconies and terraces). 7. The ITAT, has discussed the two issues in Paras 8 to 17 of their order dated 30.03.2011, for the AY 2004-05 in assessee's own case. With regard to the first issue at (a) of approval as a residential-cum-commercial project, the same is squarely covered by the judgment of the jurisdictional High Court of Bombay in the case of Brahma Associates 51 DTR 298. In para-12 of the said Tribunal's order, it has been held as under: "In the light of Hon'ble jurisdictional High Court judgment in the case of Brahma Associates 51 DTR 298 as long as project is an approved project, even as commercial-cumresidential - as was the position in Brahm....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... flats, after including the balcony area, exceeded the requisite size of 1000 sq. ft. 13. It was submitted that commercial shopping was only 117.405 sq. mtr or 381.56 sq.ft. i.e. only 1.20% of the total covered area of 9777.33 sq.mtr. Thus, basically it is a residential project and not a commercial project. The conditions mentioned in section 80-IB(10) are fulfilled and the project is eligible for deduction for both the years, namely, A.Ys. 2005-06 and 2006-07. 14. The ITAT has upheld assessee's claim for deduction u/s 80-lB (10) in assessee's own case for AY 2004-05. The ITAT has held that: "Whatever we decide for Balaji Tower Project will follow here as well. We have upheld assessee's claim for deduction u/s 80-IB(1O) and the same observation will apply mutatis mutandis here as well'. 3. Panchvati. Plot Nos. 92 to 96, Sector-5, Ghansoli, Navi Mumbai 15. Deduction in respect of this housing project though allowed by the AO in A.Y. 2004-05, has been denied for A.Ys. 2005-06 and 2006-07 on the following grounds, due to change in law: - (a) The total commercial area of the project exceeded the maximum permissible built up area of 2000 sq. ft. as stipulated in sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns that clause (d) of section 80-IB(10) having been inserted by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005, it is prospective and there being no limit on commercial area, the fact that the commercial area in the case of Panchavati Project was more than 2500 sq.ft. did not stand in the way of assessee being granted deduction. This is in accordance with the judgment of the Hon'ble jurisdictional High Court in CIT v. Brahma Associates 333 ITR 289 (Bom) 6. Tulsi Project. Plot No.52, Sector 9, Panvel 20. In respect of Tulsi Project, the deduction was claimed for the first time in A.Y. 2006-07. The same has been denied on the ground that it was not a separate project but only an extension of the Vrindhavan project, and therefore, not entitled for deduction u/s 80-IB(10). 21. The salient facts are that assessee had purchased 10442.63 sq. mtr of land of Plot No. 52, Sector 9, Panvel. Originally, certain buildings were constructed on this plot known as Vrindavan Project. As has been mentioned in the assessment order, there have been A to W wings laid out in rectangle shape in two loops (rings). The outer ring has E to W wings of one BHK and two BHK unit. The inner loop is havin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'ble Bombay High Court in the case of Vandana Properties. Subsequent project known as Tulsi Project is also a project within the meaning of section 80-IB(10)(b) of the Act and since the total area of the plot was more than 2.5 acres being 10443.63 sq. mtrs and each of the units built being less than 1000 sq. ft. and the entire construction being residential in nature, the deduction for this project is admissible. 25. It was submitted that deduction u/s 80-lB (10) in respect of the four projects; namely: (i) Panchvati (ii) Kaveri, (iii) Vrindavan and (iv) Tulsi as also the earlier three projects; namely, (v) Shantiniketan (vi) Balaji and (vii) Silicon Tower projects were undertaken by assessee company and were duly approved by the local authorities, except in the case of Tulsi Project, much before the amendment brought in by the Finance (No.2) Act, 2004 with effect from 1 April, 2005. Therefore, the assessee company should be granted deduction u/s 80-lB (10) as per the provisions relating to built up area of the shops/ commercial establishments as per clause (d) of section 80- IB(10) and clause(a) of section 80-IB(14) respectively which stood in the statute b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the local authority and there is no question of allowing deduction to a part of the project". E. The law does not expect any person to do the impossible. This is a well established maxim of interpretation. The Delhi High Court in Escorts Ltd. v. CIT 257 ITR 468 (Del) held that a person cannot be expected to do what is not possible. Once the project is approved and the construction started, and in several cases, it may have reached almost the completion stage as at 31st March, 2005, the changes are impossible. The law has, therefore, to be interpreted in a reasonable and practical manner which is only possible by applying the provisions which stood in the statute book as on the date of approval. F. The Bombay ITAT in the case of Saroj Sales Organization 3 DTR 494 while deciding an identical issue for A.Y. 2005-06, held in Para 13 of the order that "we are of the view that housing projects were approved before 31st March, 2005 and for such project which were so approved, there was no stipulation as to the shopping complex are permissible in the project. As already stated earlier that the amendments were subsequently made while extending the deduction of income from housing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee company for A.Ys. 2005-06 & 2006-07 as well on the basis of criteria stipulated by the statute at the time of approval of these projects which are duly met by assessee company. In respect of Tulsi Project, for which deduction has been claimed for the first time in A.Y. 2006-07, the deduction u/s 80-IB(10) is admissible for the reasons stated above that it was a new project. 28. The learned Departmental Representative in reply submitted that conditions prescribed are being modified w.e.f. 2005-06 and accordingly AO disallowed deduction in these years. It was fairly admitted that many of the projects were allowed by AO in assessment year 2004-05 and other projects were allowed by the ITAT. The main objection is with reference to the Tulsi Project which was considered as an extension of the earlier one and not a separate project. Therefore, deduction claimed was not allowable. He reiterated the contentions as made out by AO and the CIT (A). 29. We have considered the issue. As far as the deduction on Balaji Towers, Silicon Towers Projects are concerned, we find that the issue was covered by the ITAT in assessee's own case for assessment year 2004-05. vide Para 11 to 17 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....some of individual flats were more than 1,000 sq. ft. rendering the appellant ineligible for deduction under section 80 IB (10). The appeal of the appellant, on this point, is, accordingly, dismissed". .... ..... "11. We find that the basic reason of the impugned disallowance of deduction is that the project was not approved as a housing project but as a housing cum commercial project, and because the project had substantial commercial area. The issue as to what should be done in such cases came up before a Special Bench of this Tribunal in the case of Brahma Associates Vs JCIT (119 ITD 255). That was a case in which the project was not approved as a housing project but as 'residential + commercial project', and deduction under section 80 IB (10) was declined, following coordinate bench decision in the case of Laukik Developers (supra), on the ground that it was not a housing project. The Special Bench, inter alia, held that "as long as the residential use of built-up area is 90 per cent or more, it cannot be said that the project is not a predominantly housing project and, accordingly, deduction under section 80-IB(10) cannot be declined". It was thus held that a com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e position in Brahma Associates case (supra) and as the position in the present case, deduction under section 80 IB (10) cannot be declined on the ground that it is not a purely residential project or on the ground that it has substantial commercial built up area. As for the co ordinate bench decision in the case of Laukik Enterprises (supra), it was overruled by the Special Bench decision in the case of Brahma Associates and Hon'ble Bombay High Court has upheld the action of the Special Bench in this regard. The very foundation of impugned disallowance thus does not hold good in law any longer. 13. The other objection of the Assessing Officer was that the size of some of the residential units was more than one thousand square feet. However, even according to the Assessing Officer, this working was "calculated as predetermined percentage of super built up area/ saleable area mentioned in the agreement and after taking into consideration the area of attached terrace". The expression 'built up area' has been defined, with effect from 1stApril 2005, "inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....projection and balcony, would definitely exclude the latter. Even according to the Assessing Officer himself, built-up area as normally understood in common parlance means area enclosed within the external lines of the external walls. Therefore, there can be no doubt that prior to the introduction of the definition clause aforesaid, built-up area would not include projections and balconies as normally understood. Now the question whether the definition clause mentioned above can be deemed as retrospective, we are afraid we have to answer against the revenue. Number one, the enactment itself clearly specifies that clause will have effect from 1-4-2005. Number two, it is not a procedural section but a definition section, where an enlarged meaning is given to the term 'built-up area' and such enlarged meaning would not have been in the realm of understanding of any person, prior to its introduction, and assessees would have gone ahead with their respective projects based on a common understanding of the term built-up area. Thus, the enlarged meaning, if given a retrospective effect, will definitely affect the vested rights of an assessee. Therefore, we have no hesitation to co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....following the principles of consistency, we must allow the same for this year as well. Some arguments were advanced on the issue as to whether orders of settlement commission have precedential value. However, having regard to the fact that the issue has been decided on merits, we do not consider it necessary to deal with these arguments and adjudicate upon the same. 16. One more argument of the assessee has been that as far as assessee is concerned, its project is only for the residential units and the assessee constructed other commercial area for lessee of the land, in consideration of so using the land and FSI for residential purposes. It is submitted that land was allotted to Danik Pundhir and, it was in consideration of assessee doing construction for their needs as press, the assessee was allowed to use the area for residential use. The project of the assessee was thus only with regard to the housing units built by the assessee, and what has been built as commercial units and for press, is in fact consideration for allowing the assessee to develop residential segment of the overall project. However, in view of the fact that the quantum of commercial construction, in view of H....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mended provisions will apply. Since the project was approved before 1.4.2005 and as AO allowed deduction in earlier years, there is no need for disallowing the deduction in these years, as revised provisions do not apply to the projects approved earlier to 01-04-05. Therefore, assessee is eligible for deduction under section 80IB(10). The principle was laid down by ITAT in the case of Saroj Sales Organization 3 DTR 494 while deciding an identical issue for A.Y. 2005-06, held in Para 13 of the order that "we are of the view that housing projects were approved before 31st March, 2005 and for such project which were so approved, there was no stipulation as to the shopping complex are permissible in the project. As already stated earlier that the amendments were subsequently made while extending the deduction of income from housing project approved up to 31 March, 2007, the denial of deduction, in our view, is clearly not in accordance with law". Similar view has been taken by ITAT, Mumbai in the case of Hiranandani Akruti JV v. DCIT (2010) 39 SOT 498 (Mum) and ACIT v. Sheth Developers 33 SOT 277 (Bom) wherein they have followed the judgment of ITAT in Saroj Sales Organization (s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in section 801B(10) would thus have to be applied as applicable to the Vrindavan project and not the Tulsi Tower. In view of this, the submissions of the appellant that the amended provisions of section 801B(10) are applicable for the Tulsi Tower are misplaced. The other arguments put forth by the appellant viz., filing of the necessary particulars, built-up areas of the flats being within the prescribed limits, recognition of the revenue from this project on percentage completion method are all irrelevant once it stands proved that this project is only an extension of another project which is found to be ineligible for the facts applicable to that project. In line with the foregoing, I find that the Assessing Officer has rightly denied deduction to the Tulsi Project. His action is confirmed. In line with the foregoing, the ground of appeal is dismissed". 33. As can be seen from the above, the CIT (A) also agrees that this project is an extension of Vrindavan Project. Assessee's contentions are to be accepted as this is a separate project, as there is a separate approval and fulfilled conditions as applicable post amendment, so the project is entitled for deduction under sect....