TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 689
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.... pertaining to the assessment year 2007-08. 3. In the appeal of the assessee, the following Grounds of Appeal have been raised :- "1. The learned CIT(A) has erred on facts and in law in confirming the disallowance of claim u/s 80IB(10) of Rs. 1,04,36,500/- in relation to the Sai Nisarg Park - Mayureshwar Project on the grounds that 8 units of the Housing Project have a built-up area exceeding 1500 sq.ft. if the area of the terrace open to sky is included. 2. (a) The learned CIT(A) has further erred on facts and in law in considering the amount of Rs. 60 lacs declared as undisclosed receipts against advances from bookings of a project qualifying u/s 80IB(10) as not constituting income eligible for a claim of deduction u/s 80IB(10). (b) Without prejudice to the above, the learned CIT(A) has erred on facts and in law in treating the receipts as income without granting a deduction for the payments/expenditure, when both constituted data from the same seized material." 4. The issue in Ground of Appeal No.1 relates to assessee's claim for deduction u/s 80IB(10) of the Act on account of the profits derived from Sai Nisarg Park - Mayureshwar Project amounting to Rs. 1,39,50,823/-.....
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....er took into consideration the area comprised of the projected terrace also for the purpose of computing the 'built-up area' prescribed in clause (c) of section 80IB(10) of the Act. The following discussion in the order of the Assessing Officer in para 7.2. is worthy of notice :- "7.2 So far as the project of the assessee is concerned, the terraces which have been mentioned in the report are outside the building line, attached to respective floors. In that sense these terraces are a projection attached to the residential unit. There is also no room under the terrace. These terraces are usable exclusively from the relative flats. Hence, projected terrace becomes the part of the "Built-up area" of the respective flat. Therefore, the same is required to be taken for working out the "Built-up area" of the respective flats." 9. On the basis of the aforesaid, Assessing Officer concluded that the built-up area of the row houses No. 21, 24, 33, 35, 68 & 75 was in excess of the limit prescribed in clause (c) of section 80IB(10) of the Act. As a result, the Assessing Officer held that the project of the assessee violated the condition prescribed in clause (c) of section 80IB(10) of....
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....for the proposition that open terrace, not being a balcony or verandah cannot be considered as a part of the 'built-up area' as defined in section 80IB(14)(a) of the Act. According to the learned counsel, the Ahmedabad Bench of the Tribunal was considering the stand of the Revenue that open terrace was to be considered a part of the 'built-up area'. According to him, the Ahmedabad Bench of the Tribunal considered the definition contained in section 80IB(14)(a) of the Act and opined that the definition of expression 'built-up area' includes a balcony which is not an open terrace. Further, it has also been submitted that a 'terrace' is not to be equated to a 'projection', which is one of the components finding place in the definition of the expression 'built-up area' as per section 80IB(14)(a) of the Act. The learned counsel further clarified that in so far as the present case is concerned, it is a case of terrace (open to sky) which is quite distinct from a balcony. It is asserted that the two terms are independent and for that matter a reference was also made to the Development Control Rules of the local authority in question i.e. Pim....
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....ood for the purposes of sale-purchase between builder and the ultimate buyer can also be relevant factor to consider as to what all areas are to be considered as a part of the expression 'built-up area' contained in clause (c) of section 80IB(10) of the Act. 14. We have carefully considered the rival submissions. Section 80IB(10) provides for deduction in relation to profits derived from undertaking development and building of a housing project subject to certain conditions prescribed therein. One of the foremost condition is contained in clause (a) of section 80IB(10) of the Act which is to the effect that the housing project eligible for the claim of deduction shall be approved by the local authority. The assessee before us is a builder who has undertaken development and construction of a housing project, named, 'Sai Nisarg Park - Mayureshwar' and the said project has been approved by the concerned local authority i.e. PCMC on 29.07.2005 and undisputedly it complies with the requirement of clause (a) to section 80IB(10) of the Act. There are other conditions prescribed in section 80IB(10) by way of clauses (b) to (f) of the Act, so however, the only controversy b....
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....e same is applicable for ascertaining the fulfillment of condition prescribed in clause (c) of the Act in relation to the present project, since the project of the assessee has been approved by the local authority on 29.07.2005 i.e. after the definition of built-up area contained in section 80IB(14)(a) of the Act came into force w.e.f. 01.04.2005. Therefore, in the present case, it is imperative that the meaning of expression 'built-up area' is to be understood having regard to its definition contained in clause (a) of section 80IB(14) of the Act. 17. The Hon'ble Madras High Court in the case of M/s Ceebros Hotels Private Limited (supra) was considering the following question of law :- "Whether on the facts and in the circumstances of the case, the Tribunal was correct in including the open space of the terrace of the 7th floor, within the meaning of the 'built-up area', which has been defined to include the inner measurements of the residential unit at the floor level including the projections and balconies as increased by the thickness of the walls but does not include the common areas shared with other residential units?" 18. A bare perusal of the aforesai....
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.... the definition of 'built-up area' contained in section 80IB(14)(a) of the Act, which was inserted w.e.f. 01.04.2005. As per the Hon'ble High Court even after assuming that such definition was to be retrospectively applied yet the area of open terrace would not fall within the meaning of the expression 'built-up area'. The Hon'ble High Court referred to the Indian Standard Method of Measurement of Plinth, Carpet and Rentable Areas of Buildings as issued of Bureau of Indian Standards and also the meaning of the aforesaid expression assigned as per the rules and regulations of the local authority and concluded that an open terrace could not be equated to a 'projection' or 'balcony' referred to in section 80IB(14)(a) of the Act. The relevant discussion in the order of the Hon'ble High Court is reproduced hereinafter :- "31. As far as the introduction of definition portion in Section 80- IB(14) w.e.f. 01.04.2005 is concerned, even assuming that the definition Section has retrospective effect, we do not think that the definition given under Section 80-IB (14) would in any manner prejudice the claim of the assessee herein, for the definition g....
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....a Industries), dated 13.04.2012. A reading of the decision of the Bombay High Court shows that the issue raised therein related to the Assessment Year 2004-2005. Similar contention raised before the Court was taken before the Bombay High Court too. Holding the view that the expression "Built-up area" in a Housing Project approved by the Local Authority does not include the balcony area for the period prior to 1st April 2005, the Bombay High Court held that when the Legislature has introduced the definition of ''Built-up area" by including the balcony area from a particular date, then, the same could not be applied retrospectively. 34. In the decision reported in [2012] 21 Taxmann.com 140 (Karnataka), Commissioner of Income Tax, Central circle vs. Anriya Project Management (Services) Private Limited, rendered by Karnataka High Court, a similar such question was considered. The Karnataka High Court pointed out that prior to 01.04.2005, open balcony area have to be excluded in calculating the built-up area. The Karnataka High Court further pointed out as the Project was approved by 14.06-2002 arid the balcony ware shown, but, were excluded in the built-up area, the Income Tax....
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....al Authority have excluded open terrace from the working of Built-up area, it is not open to the Revenue to review the approval given by the competent authority to hold that terrace would also be included in the built-up area. As already held the definition also does not speak in different language from what is given in the measurement provision of Bureau of Indian Standard in the context of the definition of Balcony in the Indian Standard. 37. In the circumstances, we have no hesitation in allowing the assessee's appeal, by setting aside the order of the Tribunal. Thus, we hold that the assessee is entitled to deduction in respect of flats in the 7th floor, which do not exceed the required extent as per Section 80-IB (10)(c) that open terrace area, cannot form part of the built-up area." 21. Notably, the Hon'ble High Court also considered an argument from the side of the Revenue to the effect that the sale of the area of open terrace by the assessee to the respective purchaser would justify the inclusion of such terrace area into the calculation of 'built-up area'. Before us also, the learned CIT-DR has raised the said issue though she has fairly conceded that su....
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....of the Act. Thus, the argument of the learned CIT-DR is hereby rejected. 23. In view of the aforesaid judgement of the Hon'ble Madras High Court, we are unable to uphold the stand of the Assessing Officer to include area of terrace as a part of the 'built-up area' in a case where such terrace is a projection attached to the residential unit and there being no room under such terrace, even if the same is available exclusively for use of the respective unitholders. 24. Before parting, we may also refer to the decisions of the Mumbai Bench of the Tribunal in the case of Siddhivinayak Homes, Mumbai (supra) and that of the Hyderabad Bench of the Tribunal in the case of Modi Builders & Realtors (P.) Ltd. (supra) which have been relied upon by the learned CIT-DR in support of her submissions. The Mumbai Bench of the Tribunal was considering as to whether the projections/elevations which were at the floor level and could be utilized as a carpet area were to be considered for the purposes of computing built-up area or not. The Mumbai Bench of the Tribunal was considering a project which was approved on 19.07.2003, much before the insertion of section 80IB(14)(a) of the Act by ....
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.... the Hon'ble Karnataka High Court in the case of CIT vs. Anriya Project Management (Services) Private Limited, (2012) 21 taxmann.com 140 (Karnataka) and held that the introduction of definition of 'built-up area' in section 80IB(14)(a) of the Act came into force from 01.04.2005 and "the same will have relevance to those Housing Projects, which were approved subsequent to 01.04.2005". The aforesaid view rendered by the Hon'ble Madras and Karnataka High Courts is divergent to what has been concluded by the Mumbai Bench of the Tribunal to the effect that the definition contained in section 80IB(14)(a) of the Act is applicable to assessment year 2007-08 though the project was approved prior to 01.04.2005. In view of the ratio of the decision of the Mumbai Bench of the Tribunal being divergent to that held by the Hon'ble Madras High Court in the case of M/s Ceebros Hotels Private Limited (supra), we are unable to apply it in preference to that of the Hon'ble Madras High Court, which is a superior authority. 26. Secondly, reliance has been placed by the learned CIT-DR on the decision of the Hyderabad Bench of the Tribunal in the case of Modi Builders & Realtors (....
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....d therefore the entire project of the assessee is eligible for deduction u/s 80IB(10) of the Act. In such circumstances, we reject the Grounds of Appeal No.1 to 3 raised by the Revenue. 30. Now, we take-up the Ground of Appeal No.2 in the appeal of the assessee for assessment year 2007-08. The said Ground relates to assessee's claim for deduction u/s 80IB(10) of the Act in respect of an income of Rs. 60,00,000/- declared by the assessee in the course of search conducted u/s 132(1) of the Act. 31. The relevant facts in the context of the above controversy can be summarized as follows. The assessee individual is a part of Wadhwani group of cases, which was subject to a search and seizure action by the Department u/s 132 of the Act on 13.08.2008. In the course of search, certain incriminating material and information was found. Some of the entities in the group were also simultaneously covered by survey actions u/s 133A of the Act. The group was found to be dealing in purchase and sale of land, development of land, etc. on a very large scale basis. In the course of search and seizure action, undisclosed income amounting to Rs. 7 crores was disclosed on account of unaccounted rec....
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....ed the entries found noted in the seized material, which showed the respective projects and the amounts received from different customers. Furthermore, a reference has also been made to an order passed by the Assessing Officer for the impugned assessment year u/s 154 of the Act dated 18.04.2011, wherein the impugned sum of Rs. 60,00,000/- has been accepted as undisclosed receipts from the customers on sale of flats relating to the housing project in question, a copy of the said order has been placed at pages 24 to 31 of the Paper Book. On the basis of the aforesaid fact-situation, the plea of the assessee is that the income in question was nothing but undisclosed sale proceeds received from customers of the Sai Nisarg Park - Mayureshwar; and, therefore the same was to be treated as 'business income' relating to the housing project, which is eligible for section 80IB(10) benefits. Thus, such additional income was also entitled to the benefits of section 80IB(10) of the Act. In support of his submissions, the learned counsel has relied upon the judgement of the Hon'ble Bombay High Court in the case of CIT vs. Sheth Developers (P) Ltd., 254 CTR 127 (Bom). 33. On the other....
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...., reveals the names of the customers, the date and the amounts received in relation to the housing project, Sai Nisarg Park - Mayureshwar undertaken by the proprietary concern, M/s Mangalmurti Developers. A copy of the deposition made by the assessee u/s 132(4) of the Act has also been placed in the Paper Book at pages 189 to 214, which also supports the aforesaid fact-situation. Therefore, considering the (i) material seized in the course of search; (ii) deposition made by the assessee in the course of search u/s 132(4) of the Act; and, (iii) findings of the Assessing Officer in the assessment order passed u/s 153A(a) r.w.s. 143(3) of the Act dated 27.10.2010 (especially paras 8.2, 8.4 and 8.13) read with order u/s 154 dated 18.04.2011 (supra), it would be appropriate to deduce that the source of the impugned additional income is the housing project, Sai Nisarg Park - Mayureshwar, which has been executed by the assessee in his proprietary concern, M/s Mangalmurti Developers. In other words, factually speaking, the income represented by the impugned sum of Rs. 60,00,000/- has been earned by the assessee in the course of development and execution of housing project, Sai Nisarg Park ....
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....t. Even in the deposition made u/s 132(4) of the Act, the partner of the assessee firm made a yearwise detail of additional income declared on account of on-money received on sale of flats in the project. Accordingly, the impugned sum has been declared as unaccounted income from the housing project in question. In the return of income filed in response of notice issued u/s 153A(1)(a) of the Act, assessee has declared such additional income as income from housing project, 'The Crest' at Pimple Saudagar, Pune. The declaration made in the return of income has not been disputed by the Assessing Officer. The only dispute raised by the Assessing Officer is with regard to nature of such income, which according to the Assessing Officer "does not fall under of the any heads of income as described u/s 14 of the I.T. Act". In coming to such conclusion, he has disagreed with the stand of the assessee that such additional income was a 'business income' of the assessee relating to the housing project, 'The Crest' at Pimple Saudagar, Pune. However, as per the CIT(A), the income in question is assessable under the head 'income from other sources'. Ostensibly, the CI....
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....t made in the return of income originally filed under section 139 of the Act. In this regard, the learned Departmental Representative has referred to the judgment of the Hon'ble Supreme Court in the case of CIT vs. Sun Engineering Works Pvt. Ltd., 198 ITR 297 (SC) to point out that even in the cases of re-assessment u/s 147/148 of the Act fresh claims cannot be raised by the assessee. Secondly, it is pointed out by the learned Departmental Representative that even if the claim was to be considered then it was not allowable because the requisite condition that the return of income has to be accompanied by the prescribed audit report has not been complied with by the assessee. On the basis of aforesaid reasons, the claim of the assessee has been opposed. 13. Sections 153A to 153C of the Act contain provisions relating to assessments to be made in cases where search is initiated u/s 132 or a requisition is made u/s 132A of the Act after 31st May, 2003. Clause (b) of sub-section (1) of section 153A postulates assessment or re-assessment of total income of six assessment years preceding the assessment year relevant to the previous year in which such search is conduced or requisitio....
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.... noted above, does not support the premise arrived at by the CIT(A) and accordingly, the same is rejected. Therefore, assessee's claim for deduction u/s 80IB(10) of the Act even with regard to the enhanced income was well within the scope and ambit of an assessment u/s 153A(1)(b) of the Act and the Assessing Officer was obligated to consider the same as per law. 15. The other argument of the Ld. CIT-DR to the effect that the return of income was not accompanied by the prescribed audit report on the enhanced claim of deduction is too hyper-technical, and superficial. Pertinently, the Assessing Officer has not altogether denied the claim of deduction and in any case, the claim was initially made in the return originally filed, which was duly accompanied by the prescribed audit report. 16. The argument set-up by the learned Departmental Representative on the basis of the judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works Pvt. Ltd. (supra), in our view, is also untenable having regard to the facts of the present case. No doubt the Hon'ble Supreme Court has observed that reopening of an assessment u/s 147/148 is for the benefit of the Revenue. In th....
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....pers (P) Ltd. (supra) was considering the claim of deduction u/s 80IB(10) of the Act in relation to the undisclosed income declared consequent to the search action. In the case before the Hon'ble High Court, it was factually emerging that undisclosed income was earned by the assessee in the course of carrying on his business activity of a 'builder' and the same was accepted by the Department, but the claim of the deduction u/s 80IB(10) was denied in relation to such income. However, the claim was upheld by the Hon'ble Bombay High Court. In the present case, factually, there is no material to negate the assertion of the assessee, which are borne out of the material on record, that the additional income in question has been received in the course of carrying on its business activity of developing the housing project, 'The Crest' at Pimple Saudagar, Pune, which is eligible for section 80IB(10) benefits. Therefore, in terms of the parity of reasoning laid down by the Hon'ble Bombay High Court in the case of Sheth Developers (P) Ltd. (supra), the claim of the assessee is justified. 18. In-fact, once it is factually explicit that the additional income in ques....
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.... of the Tribunal, the undisclosed income surrendered by the assessee in the course of search was in the shape of unaccounted cash, investments etc. and the material seized did not show the sources of acquisition of the undisclosed income reflected by such unaccounted cash, etc.. So however, in the present case, it is factually clear that the impugned additional income is nothing but monies received by the assessee from customers against sale of flats in its housing project, Sai Nisarg Park - Mayureshwar, which was not recorded in the regular account books. Clearly, in the case before us, source of additional income is the execution of the housing project and once the source of income is established, the assessability has to follow. The said fact-position is quite different and distinct from what was before the Chandigarh Bench of the Tribunal and therefore the proposition laid down by the Chandigarh Bench of the Tribunal is not applicable to the present fact-situation. Hence, reliance placed by the learned CIT-DR on the said decision does not help the case of the Revenue. 40. In the result, we set-aside the order of the CIT(A) and direct the Assessing Officer to allow the deductio....