TaxTMI 
TaxTMI 
2014 (12) TMI 720
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.... residential unit and the aggregate area of the same was more than 1500 sq.ft. He further noted that the assessee has not constructed any flat but instead has constructed 30 Row Houses in the project (Rolling Hills). On physical verification of these row houses, it was noted that the assessee has constructed a big bungalow for the owner of the land, the area of which is more than 1500 sq.ft. In addition, there are 5 instances where the area of residential unit is more than 1500 sq.ft, the details of which are as under : Unit No. Name of Purchaser Built up Area (sq.ft.) Total Area (sq.ft.) 1.1 VISPUTE PANKAJ SUDHAKAR 729 1458 1.2 VISPUTE PANKAJ SUDHAKAR 729 10 PADMANABHAN PREETH 1358 2208 11.1 ADVANI TIRATH JHAMATMAL 850 21.1 OZA SNEHAL BHAVESH 908 1557 21.2 OZA SNEHAL BHAVESH 649 22.1 PATIL RANJIT BABURAO 983 1808 22.2 PATILRANJIT BABURAO 825 30.1 APTE NEERAJ DILIP 850 1488 30.2 APTE REKHA DILIP 638 2.1 The AO referred to the statement of one Shri Chitravanshi Rajat who has purchased residential unit No.4. Similarly, Shri Sharad varma has purchased residential unit No.3 whose statements were recorded u/s.131 of the I.T. Act. On the basis of the ....
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....s Shri Dilip Apte, Unit Nos. 30.1 + 30.2 and Shri Ranjeet Baburao Patil unit Nos. 22.1 + 22.2 wherein they have stated that they have joined the units after taking possession for their comfort and convenience. 3. However, the AO was not satisfied with the explanation given by the assessee. So far as the contention of the assessee regarding the separate purchase agreements, separate gas connections, separate electrical meters etc., are concerned, he noted that all these things are related to the ownership and use of units after taking possession and therefore are not relevant. What is relevant for section 80IB(10) is to examine whether the assessee has constructed all the residential units having built up area of less than 1500 sq.ft. From the various details furnished by the assessee, he observed that some of the units constructed by the assessee have the built up area of more than 1500 sq.ft., the details of which are as under : Unit No. Purchaser Built up area sq.ft. Total area Sq.ft. 10 Padmanabhan Preeth 1358 2208 11.1 Advani Tirath Jhamatmal 850 21.1 Oza Snehal Bhavesh 908 1557 21.2 Oza Snehal Bhavesh 649 3. Varma Sharad 1470 2940 4. Chitravanshi Rajat 1470 &nb....
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....2 Regarding the built up area of Row house No. 18, the assessee reiterated the submission made before the Assessing Officer during the assessment proceedings and submitted that the area of the residential unit calculated by the valuer appointed by the assessee AOP was at 1377.55 sq.ft as against 1855.95 worked out by Mr. Khandagale, the valuer appointed by the Assessing Officer. 4.3 It was argued that the definition of the "built up" area was not available during A.Y. 2004-05 and, therefore, in absence of any guideline under the IT. Act, the assessee had adopted the definition available as per the local authority i.e. PMC and after the introduction of the definition of the built up area w.e.f. 1-4- 2005, the same could not be applied retrospectively as the assessee cannot back track or rewind the planning. It was accordingly contended that the definition of the built up area available at the time of planning has to be considered for 80IB(10) purpose. It was thus contended that after applying the definition of the built up area as per the PMC guidelines and the area of the units recalculated, the same worked out below 1500 sq.ft. It was submitted that the definition of the built up....
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.....2 do not exist and the same had been referred to as numbers of each floor. The aforesaid units were independent and are not combined with any other unit. Regarding the unit Nos. 3 & 4, it was stated that they are independent residential units with independent kitchens. However, a connecting door between the two living rooms exist. A photograph of the said door was also annexed to the report. The Assessing Officer in its report dt. 18-4- 2012 stated with respect to units 3 & 4 that the aforesaid units were independent residential units with independent kitchens, however, a connecting door lies between the two living rooms of the two units. The Assessing Officer reiterated that the inter connection of the units was done by the builder and the filing of the affidavit was an afterthought. 4.6 Regarding the units No. 30.1 & 30.2, 22.1 & 22.2 and 21.1 & 21.2, the Assessing Officer noted that the valuer has submitted that separate numbers of the units does not exist and they referred to the numbers of each floor of an independent unit which is not combined with any other unit. The Assessing Officer thus observed that units 1, 10, 11, 18, 22 and 30 are a two storied building and had a si....
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....he units had put a small door for the convenience of their old parents however, the identity of units as two independent residential units had been maintained. 5. Based on the arguments advanced by the assessee the Ld.CIT(A) allowed the claim of deduction u/s.80IB(10) made by the assessee by observing as under : "3.2 I have carefully considered the submission of the appellant and perused material available on record. The appellant has raised two grounds of appeal and in Grounds No. 1, (1.2 and 1.3), the appellant has contested the disallowance of the claim of deduction u/s 80IB(10) amounting to Rs. 2,24,44,975/-. During the assessment proceedings, the Assessing Officer noticed that appellant had shown net profit of Rs. 2,24,44,975/- and the entire income had been claimed exempt u/s 80IB(10) of the IT Act 1961. The appellant had constructed 30 residential units/row houses in the scheme "Rolling Hills". The Assessing Officer found on verification that the appellant had constructed a bungalow for the owner of the land which exceeded the built up area of more than 1500 sq.ft and in addition there were five other instances where the residential area was more than 1500 sq.ft., which wa....
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.... 'built up area' in Sec. 80IB(14)(a) was 1786.74 sq.ft., which also included the staircase and balcony area. The appellant during the appellate proceedings has contended that the two units 10 and 11.1. owned by Mr. Padmanabhan Preeth and Advani Tirath Jhamatmal are unrelated customers and the aforesaid two units are not connected and are separate identified units and that even the combined built up area was less than 1500 sq.ft as per the PMC definition. The appellant regarding unit No. 21.1 and 21.2 owned by Oza Snehal Bhavesh admitted that the built up area as per the definition given of PMC regulations is only 1086.95 sq.ft. The appellant regarding units No. 3 & 4 owned by Sharad Verma and Chitravanshi Rajat has stated that the two units were purchased under separate agreements, though the two were real brothers and has further contended that the two row houses were separate having separate property tax bills and electricity meters and also having two separate entrances and one common wall separating the two units. The appellant further states that the unit holders after taking possession of the units have put a small door in the common wall for convenience of their old par....
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....been stated that the completion certificate of all the units and specially those disputed by the Assessing Officer viz. unit No. 1.1 and 1.2, 11.1, 11.2, unit No. 18, Unit No. 21.1 and 21.2, 22.1 and 22.2, unit No.30.1 and 30.2 had been issued on 27-3- 2003 which is prior to the introduction and passing of the Finance (No. 2) Act, 2004 and it is settled principle in law that statute cannot impose condition retrospectively which is impossible to comply. The appellant has placed reliance on the following judicial decisions in support of their claim: i) ITO Vs Air Developers (2009) 123 TTJ (Nag) 959 ii) Arun Excello Foundations (P) Ltd Vs ACIT (2007)108 TTJ (Chennai) 71 iii) ACIT Vs Sheth Developers (P) Ltd (2009) 33 SOT 277 (Mum) iv) Bramha Associates Vs Jt CIT (2009) 122 TTJ 433 (Pune)(SB) 3.4 The appellant has also commented on the remand report of the Assessing Officer dated 18-4-2012 wherein the Assessing Officer had directed the govt. approved valuer to visit, inspect and measure the 'built up area' of the various residential tenements. The govt. approved valuer Shri. Harshad Ruparel, in its report dated 22-8-2011 has also given the measurement as per the 'built....
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....ing of the various units as the sanctioned plan was showing them to be one unit only. The Assessing Officer has further noted that the built up area of units No. 21 and 22 as per the report was 1542.80 sq.ft. and 1902.10 sq.ft, respectively which clearly exceeded the limit of the built up area as per amended Sec. 80IB(10) of the Act. The Assessing Officer also has held that the amendment brought about in Sec. 80IB(10) w.e.f. 1-4-2005 by inserting the definition of 'built up area1 is clarificatory in nature and, therefore, the disallowance of the claim of Sec. 80IB(10) deduction was correct and the appellant's claim was not acceptable. 3.6 The appellant in its rejoinder to the report of the Assessing Officer has submitted that the Bombay High court in the case of Bramha Associates (2011) 333 ITR 289 (Bom) has held that the clause (a) inserted in Sec. 80IB(10)(14) w.e.f. 1-4-2005 is prospective in nature and, therefore, cannot be applied for period prior to 1-4-2005 and hence the definition of built up area as per the DC Rules framed by PMC will prevail. The appellant has also stated that similar view has also been held in a host of tribunal decisions including ITO Vs AIR De....
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....ajat on 7-12-2006 who had purchased unit No. 4 and whose brother Mr. Sharad Varma had purchased residential unit No. 3. The Assessing Officer sought the explanation of the appellant that the two units 3 & 4 have joined to construct a bigger residential unit having area of more than 1500 sq.ft. It was also emphasized by the Assessing Officer that Mr. Chitravanshi had stated that the two row houses/units had been connected by the builders during the construction stage. Thereafter, the Assessing Officer visited the housing project along with the govt. approved valuer Mr. Netaji Khandagale and in the report dated 7-12-2006, it was submitted that on measuring bungalow No. 18, the total built up area was of 1855.92 sq.ft. The Assessing Officer, therefore, sent the show-cause seeking the explanation of the appellant with respect to the discrepancies noted regarding non-fulfillment of the requirement/conditions specified u/s 80IB (10). 3.8 The appellant in the explanation furnished before the Assessing Officer explained that the 'Built up' area mentioned in the agreement should not form the basis of calculating the 'built up area'. The appellant undertook the exercise of measuring....
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....B (10) deduction, though the explanation furnished with respect to other units including 30.1 & 30.2 and 22.1 & 22.2 and 1.1 & 1.2 appears to have been accepted by the A.O. as the same were not considered to be a reason for the disallowance of deduction. 1. The following two residential units have been combined and the total area exceeded 1500 sq.ft. Unit No Purchaser Built up area Total area Sq.ft 10 Padmanabhan Preeth 1358 2208 11.1 Advani Tirath Jhamatmal 850 21.1 Oza Snehal Bhavesh 905 1557 21.2 Oza Snehal Bhavesh 649 2. 3 Varma Sharad 1470 2940 4 Chitravanshi Rajat 1470 Both units joined together to construct a bigger residential unit. 3. The built up area of unit No. 18 as per the definition of built up area in Sec. 80IB (14)(a) was 1786.74 sq.ft. The Assessing Officer arrived at the above conclusion for making the disallowance after considering the explanation and evidences furnished during the assessment proceedings. In fact, the Assessing Officer had earlier held nearly ten units which had exceeded the permissible limits of the built up area of more than 1500 sq.ft. and which had been held to have been joined by the builder for the respec....
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....22-8-2011 is as follows: S. No Unit No. Built up area as per amended law Total area sq.ft Built up area as per PMC / DC Rules Name 1 3 Sharad Varma 1487.26 1041.09 2 4 Chitravanshi Rajat 1487.26 1041.09 3 10 Padmanabhan Preeth 1398.88 980.49 4 11 Advani Tirath 1487.26 1041.09 5 18 Harish Warrier 1363.04 1081.02 6 21 Snehal Oza 1542.80 1086.51 7 22 Ranjeet Patil 1902.10 1348.62 8 30 Apte 1487.26 1041.09 The valuer has categorically mentioned that Nos. like 10.1 & 10.2 or 22.1 or 22.2 does not exist and they refer to the numbers for each floor of an independent unit which is not combined with any other unit. It has thus been observed that units No. 1, 10, 11, 18, 21, 22 & 30 were a two storied building and had a single number in the plan. The valuer in respect of units No. 30.1 & 30.2 and 22.1 & 22.2. had confirmed regarding joining of the units after taking possession of their own. The appellant had explained in the submission before the A.O. that units no. 10 and 11.1 were relating to two customers who were not related and that the two units were not connected and were separate units. The valuer in its report in the remand proceedings has also affirmed th....
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....residential unit of not more than 1500 sq.ft to be eligible for the deduction. The registered valuer appointed by the Assessing Officer during the remand proceedings has given the findings regarding the area of the respective units which had been disputed by the Assessing Officer to have exceeded the prescribed limits of 1500 sq.ft. However, on perusal of the table of the area statement as submitted by the valuer, Shri. Ruparel, it is noticed that the total area as per the amended provisions of Sec. 80IB(14)(a), with respect to the definition of the 'built up area' in most cases the built up area exceeds the limit of 1500 sq.ft. However, definition of area as per the DC Rules of PMC the built up area in all the cases is much below the permissible limit of 1500 sq.ft. The appellant has contended that the amended definition of built up area w.e.f. 1-4-2005 is not retrospective. It has also been claimed by the appellant that the amended definition cannot be given effect to the project as it was approved on 30.03.2001 when no such definition was available in the section and the project even completed before the introduction of the definition as per Sec. 80IB(10)(a) of 'buil....
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.... by the Finance Act (No.2), 2004 w.e.f. 1-4-2005, the judgment of the Pune ITAT though on the issue of clause (d) of Sec. 80IB(10) can have application on the issue under consideration. As per the ratio of these judgments, it was claimed, before the definition of built-up area was introduced in Sec. 80IB(14) the meaning to the built up area or the residential unit has to be given as is commercially understood. On this interpretation, it can be seen that the claim of the appellant that the area of the residential units is less than 1500 sq.ft. appears to be correct if the implication of the definition is not applied as the project was approved on 30.03.2001 when this definition was not in the statute and, therefore, the appellant cannot be asked to fulfill a substantive condition introduced subsequent to the approval of the project when a vested right got created subject to the fulfillment of the conditions then prevailing. The decisions of the Pune ITAT in the case of Opel Shelters Pvt. Ltd and DS Kulkarni & Associates have also been followed by the tribunal in several other cases on similar issues. The Pune ITAT has held that the assessee had started the project in F.Y. 2000-01 an....
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....equired to construct what has been approved. The only fissile compliance is required to be met as per the harmonious interpretation of Section 80IB(10) as amended is to complete such projects (approved before 1.4.2004) on or before 31.3.2008. In the cases before us the projects have been completed well before this date. Putting of such condition of time limit is well understood. Since the legislature intended the completion of projects within a time frame to avoid inconvenience to the beneficiaries i.e. the buyers. In this regard the Legislature has categorized the time limit for the projects approved on different period before 31.3.2007 but requirement remained the same that projects would be approved by the local authority. Compliance of the requirement provided in clause (d) to the Section is possible only in those projects which have been started on or after 1.4.2005 as by those assessees were all aware about the provisions laid down in clause (d). 20. By applying the principle of harmonious construction to interpret the provisions under Sub-section (10) to Section 80IB as amended w.e.f. 1.4.2005 we come to the conclusion that the Legislature always intended that the project m....
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....g commercial area to 2000 sq. ft. or 5% of the built-up area whichever is lower. This amendment restricting the commercial area was also introduced w.e.f. 01.04.2005 by the same Finance Act which introduced the definition of the built-up area. In view of the above, in my considered opinion, the ratio of the decision laid down in the above three cited decisions of Pune ITAT are clearly applicable to the facts of the case of the appellant. The project Rolling Hills Scheme have commenced construction much before the amendment and, therefore, it is not possible for the appellant to comply with the definition of built-up area introduced at a much later date i.e. 01.04.2005. Thus, in view of the decision of the jurisdictional ITAT, which has held that the amendment restricting the commercial area is not applicable to the project started prior to 31.03.2005, similarly, in the case of the appellant the issue is of built-up area and as the aforesaid project has started prior to the amendment, the definition of built-up area as envisaged in the amended provisions of sub clause (d) to Sec. 80IB (10) w.e.f. 01.04.2005 is not applicable for the project was not in existence. 3.13 In view of the....
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.... not denied the putting up of the door for the convenience of their old parents. The Assessing Officer has, however, not looked into and considered the other aspect of the unit which indicated their independent existence such as the sale deed, electricity meter/bills, municipal tax records, plans, society charges etc before arriving at the correct conclusion. The appellant's contention that the two units had been conceptualized, planned and executed as two separate independent residential units ab initio having two independent kitchen cum dining room and separate gas connection has also been affirmed by the valuer appointed by the Assessing Officer. Thus in view of the above fact, the existence of two independent units cannot be doubted and the reliance placed by the Assessing Officer on the statement of one of the unit holders Shri. Chitravanshi Rajat depicts only half the truth as the other unit holder was never examined by the Assessing Officer, and the Assessing Officer has also not taken into consideration other relevant material brought on record. Though the two unit holders are related to each other being brothers, the restriction for not selling residential units of the....
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.... lives together and gets more space to live. In many cases, a request is made by the purchasers to the builder or developer of the housing project to join the flats/residential units and the request is carried out by the builder. In such cases, it is not possible to hold that the builder built the residential flat of more than 1,000 sq. ft. of built26 up area. There is no evidence on record to suggest that the assessee itself advertised that the flats were of more than 1,000 sq. ft. and that merely to get the benefit of s. 80-IB he drew the plans in such a manner that each residential unit was shown as not more than 1,000 sq. ft. of built-up area. It is not also the case of the CIT that each flat in the housing projects undertaken by the assessee could not have been used as an independent or selfcontained residential unit not exceeding 1,000 sq. ft. of built-up area and that there would be a complete, habitable residential unit only if two or more flats are joined with each other, which would ultimately exceed 1,000 sq. ft. of built-up area. In such a situation, merely because 9 out of 140 purchasers desired to join the flats purchased by them into one single unit, which exceeded 1....
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....n appeal before us with the following grounds : "1) The learned Commissioner of Income tax (Appeals) erred in allowing deduction of Rs. 2,24,44,980/- u/s.80IB(10) of Income tax Act, 1961. 2) The learned Commissioner of Income tax (Appeals) erred in allowing the above deduction even though some of the flats exceeded the built up area of 1500 sq.ft. violating the specific provisions u/s.80IB(10)(c) of Income tax Act, 1961. 3) The learned Commissioner of Income tax (Appeals) has erred in allowing the above deduction relying upon the Affidavit filed later on rather than the statement of the flat owner before the Assessing Officer that the flats were conjoined by the builder before sale. 4) The learned Commissioner of Income tax (Appeals) has erred in allowing the above deduction even though such joining of the flats was not approved in the original or revised plan passed by the Pune Municipal Corporation (PMC). 5) The learned Commissioner of Income tax (Appeals) has erred in holding that provision of section 80IB(14)(a) are prospective and not clarificatory and, therefore, definition of built up area as per PMC Rules would apply prior to 01.04.2005. 6) Without prejudice to the ab....
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.... 'built up area', the AO has considered the same in the 'built up area'. The action of the AO in our opinion is not correct since in a row house there will be a stair case from the ground floor to the first floor and the same cannot increase the 'built up area' of the row house. This in our opinion is within the boundary of the plinth area and therefore the same has to be excluded which the Departmental Valuer himself has correctly done. Further, the Departmental Valuer has considered the 'built up area' as per the Pune Municipal Corporation's rules and regulations and therefore the Ld.CIT(A) has correctly appreciated the facts and has correctly excluded the same from the total 'built up area'. 7.2 So far as the row house No.18 belonging to Shri Harish Warrier is concerned, we find the area of the said unit was measured by the earlier departmental valuer one Shri Khandangale, a report of which is placed at pages 74 to 77 of the paper book. He had computed the area at 1855 sq.ft. While doing so, he included therein the terrace area and the parking area. However, according to the succeeding Departmental Valuer Shri Harshad Ruparel, the area of this row house as per Pune Municipal Co....