TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 115
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.... of survey, it was found that there were some flats in the housing project developed by the assessee which were of an area exceeding 1000 sq.ft. (built up). It was also found that the assessee had sold the flats by two separate agreements to the same family members but in effect, the flat was one only. The said flats were sold by two separate agreements and thus the area of each agreement was shown as less than 1000 sq.ft. For claiming deduction under section 80IB(10), one of the condition is that the residential unit in the housing project should have an area not exceeding 1000 sq.ft. Thus, it was found that the assessee had violated the conditions of section 80IB(10). Accordingly, notice under section 148 r.w.s. 147 was issued on 1.2.2007. The reasons for re-opening was recorded as under:- "The scrutiny assessment under section 143(3) was completed on 28.11.2005 and the total income was assessed at Rs. 2,83,36,485 allowing deduction claimed under section 80IB(10) of the Act of Rs. 10,03,63,270. In this case, survey action under section 133 was conducted on 27.9.2006 by DDIT, Unit-IV(3), Mumbai, and the crux of the survey report is that "M/s. Ekta Housing P. Ltd., is not eligible....
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....e A.O. one of the conditions of section 80IB(10) was violated and therefore the whole of the profit of the said housing project was held as not eligible for deduction under section 80IB(10) and accordingly the deduction allowed earlier was withdrawn." 3. The first appellate authority followed the decision of Kolkata Bench of the Tribunal in Bengal Ambuja Housing Development Ltd. v/s DCIT, ITA no.1595/Kol./2005, order dated 24th March 2006, and held as follows:- "2.8 ....... This rule of proportionately is well founded in the Incometax law and is recognized under various provisions of the Act. the Hon'ble ITAT Chennai in the case of Arun Excello Foundations Pvt. Ltd. v/s ACIT, (2007) 108 TTJ 71 (Chennai), has also upheld the pro-rata deduction on eligible residential units. Thus, respectfully following the above judgments of the various ITAT and Courts and particularly the jurisdictional ITAT in the case of Saroj Sales Organization (supra) I hold that assessee is entitled for deduction under section 80IB on prorata basis. The A.O. is therefore directed to allow the deduction under section 80IB(10) on pro-rata basis as discussed above. This ground of appeal is allowed." 7. Aggriev....
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....ts had a built up area in excess of 1,000 sq.ft. She further points out that the assessee to cover up this issue, has entered into a deed of rectification which was specific to an amendment made in the Bombay Municipal Corporation approved plan so as to divide three bed room flat into two parts i.e., one two bed room flats and one studio apartment. She filed a copy of a certificate given by the architect where a studio apartment adjoining the two bed room apartment was separately disclosed so as to satisfy the condition that each flat has an area which does not exceed 1,000 sq.ft. per unit. She took this Bench to the provisions of section 80IB(10) and contends that the provisions are cumulative and if any one of the provisions is violated, then the Assessing Officer should disallow the entire claim for deduction. Referring to the various case laws relied upon by the learned Counsel, the learned Departmental Representative relied on the judgment of Hon'ble Bombay High Court in Brahma Associates, Income Tax Appeal no.1194 of 2010, judgment dated 22nd February 2011, and submits that in this judgment, the Hon'ble High Court has held that proportionate disallowance is not permitted unde....
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....ances, it cannot be said that the built-up area of any single flat was above 1,000 sq.ft.. He submits that despite the strength on merits, the assessee, for the purpose of purchasing peace, has offered to tax income on a proportionate basis depending upon the number of units and area which, according to Assessing Officer, violate the provisions of section 80IB(10). He submits that the judgment of Hon'ble Bombay High Court is not on this issue and the decision of co-ordinate bench of this Tribunal applies. He also relied on the CBDT Circular no.5/2010 dated 3rd June 2010 and submits that the amendments to Finance Act, 2009, will be applicable from 19th August 2009. 11. Rival contentions heard. On careful consideration of the facts and circumstances of the case and on perusal of the papers on record, orders of the authorities below as well as the case laws cited before us, we hold as follows:- i) The controversy can be brought out by extracting Para-6 from the assessment order, which reads as under:- "6. The submissions of the assessee have been duly considered. The same are not acceptable as section 80IB(10) does not lay down the theory of proportionate deduction. If the assessee....
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....rately." v) Mumbai "G" Bench of this Tribunal in Sheth Develpers Pvt. Ltd. (supra), has held as follows:- "...... As regards the A project assessee is eligible for relief on prorata basis in respect of the flats which did not have a built-up area exceeding 1,000 sq.ft. - quantum of deduction in respect of the flats which have built-up area less than 1,000 sq.ft., has to be worked out on pro-rata basis - A.O. accordingly directed to verify the claim of the assessee and allow the deduction on pro-rata basis in respect of flats in A Project." vi) Kolkata "C" Bench of this Tribunal in Bengal Ambuja Housing Development Ltd. v/s DCIT, ITA no.1595/Kol./2005, vide order dated 24th March 2006, held as under:- "It is apparent from the perusal of section 80IB(10) that this section has been enacted with a view to provide incentive for businessmen to undertake construction of residential accommodation for smaller residential units and the deduction is intended to be restricted to the profit derived from the construction of smaller units and not from larger residential units. Though the A.O. has denied the claim of the assessee observing that larger units were also constructed by the assesse....
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....ement in a residential project, will the assessee be denied the entire exemption. In this case, the Hon'ble High Court has observed that when the local authority approved a plan as a housing project or a residential cum commercial project, the assessee would be entitled to claim for deduction under section 80IB(10) even if the project had commercial element in excess of 10%. At Paras-27 and 28, the Court observed as follows:- "27. The question then to be considered is, whether the Special Bench of the Tribunal was justified in holding that the projects having commercial area upto 10% of the built-up area of the plot are eligible for deduction under section 80IB(10) on the entire project upto 1.4.2005. Once the basic argument of the revenue that the housing projects with commercial user are not entitled to section 80IB(10) deduction is rejected, then in the absence of any restriction imposed under the Act, it was not open to the Tribunal to hold that the projects approved by the local authorities having residential buildings with commercial user upto 10% of the plot area would alone be entitled to deduction under section 80IB(10). As noted earlier, restriction regarding commercial ....
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....scue of the Revenue. x) On the other hand, all the decisions of the co-ordinate benchs of the Tribunal cited before us are in favour of the assessee. Respectfully following the same, we uphold the following finding of the Commissioner (Appeals), vide Para-2.8 of his order:- "2.8 The appellant's claim is supported by the decision of Hon'ble Mumbai ITAT in case of M/s. Saroj Sales Organisation ITA no.4008/ Mum./2007 order 24.1.2008, wherein on identical facts the Hon'ble ITAT following the Hon'ble Supreme Court decision in the case of Bajaj Tempo Ltd. reported in 196 ITR 188 has observed that the provisions should be interpreted liberally. Further, following the Hon'ble ITAT decision in the case of Bengal Ambuja Housing Development Ltd. Kolkata, the Hon'ble Mumbai ITAT allowed the assessee's claim on prorata basis on qualifying units which satisfied the conditions laid down by section 80IB(10). The Hon'ble ITAT Kilkata in the case of Bengal Ambuja Housing Development Ltd. v/s DCIT (ITA no.1595/Kol./2005, A.Y. 2002-03, Bench "C", order dated 24.3.2006 (2007) 39 D BCAJ 546) has held tha teven if the units constructed are both smaller and larger units with reference to the stipulated ....