TaxTMI 
TaxTMI 
2014 (12) TMI 720
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....fore the same has to be considered as one 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 residenti....
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....he statement in a casual manner. The assessee also submitted letters from 2 other unit holders 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 Sneh....
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.... without prejudice to the above submission that pro-rata deduction be allowed on the eligible and qualifying residential units. 4.2 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 guidel....
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.... 8 30 Apte 1412.02 75.24 1487.26 1041.09 4.5 The govt. approved valuer noted in the report dated 22.08.2011, that numbers like 11.1/11.2, 18.1. & 18.2 or 21.1 or 21.2 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 eac....
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.... bills and electricity meters were separate and had two separate entrances and a common wall separating the two units. It was emphasized that the unit holders after taking possession of the 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 fo....
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....8 11.1 Advani Tirath Jhamatmal 850 21.1 Oza Snehal Bhavesh 905 1557 21.2 Oza Snehal Bhavesh 649 13 2. The unit No. 3 & 4 had been joined whose total area exceeded 1500 sq.ft. 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., 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 bill....
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.... that the definition of the built up area in sec. 80IB(10) inserted by the Fin.(No. 2) Act , 2004 w.e.f 1-4-2005 is not retrospective and, therefore, the definition of the 'built up area' as per the Development Control Rules of PMC will prevail. Moreover, it has 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 Ass....
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.... unit which is not combined with any other unit. The Assessing Officer has thus observed that units 1, 10, 11, 18, 22 and 30 are a two storied building and had a single number in plan as well as at site. The Assessing Officer has then further observed that the report of the valuer has given rest to the controversy of joining 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....
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....). The Assessing Officer had initially raised objection with respect to units 1.1 & 1.2, 10 & 11.1, 21.1& 21.2, 22.1 & 22.2 and 30.1 and 30.2, stating that they were having areas more than 1500 sq.ft. and the owners of some of the units were same. The Assessing Officer also recorded the statement u/s 131 of Mr. Chitravanshi Rajat 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 no....
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....ea allowances and, therefore, the 'built up area1 mentioned in the agreement should not form the basis for built up area for the purposes of Sec. 80IB(10). 3.9 The Assessing Officer, however, did not accept the explanation furnished by the appellant and on the basis of the following reasons disallowed the claim of Sec. 80IB (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 arrive....
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....he residential units. The Assessing Officer, has however, on the definition of the 'built up area' as per the amended law held the residential units to have exceeded the permissible limit of 1500 sq.ft as the amendment has been held by him to be clarificatory in nature. 3.11 The built up area statement of the residential units as per the valuer's report dated 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 value....
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....r availing the benefit of Sec. 80IB(10) clause (c) says as under: "The residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the city of Delhi or Mumbai or within twenty-five kilometers from the municipal limits of these cities and thousand five hundred square feet at any other place". Therefore, the section requires the housing project to have a 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 ....
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....sment years i.e. A.Y. 2005-06 onwards, the tribunal have held that Sec. 80IB(10) as it existed in the statue in the year in which the project commenced should apply. The appellant has relied on the Pune ITAT decisions in the case of Opel Shelters Ltd and D S Kulkarni & Associates (cited supra) and Hiranandani Akruti J V vs DCIT (2010) 7 SOT 498 (Mum). 3.12 It is a fact that definition of built up area has been introduced 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 subst....
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....r to the amendment and in that case, as per the old provision the assessee would have been eligible for the deduction. But, just because the assessee has followed the Project Completion method, in these cases, the deduction is being denied because it falls in A. Y. 2005-06. In our view the newly inserted clause (d) to Section 80IB(10) will not apply on the projects approved upto 31.3.05 since in those projects assessees are required 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 provi....
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.... was started by the commencement certificate issued on 30.03.2001 is an undisputed fact and, therefore, it can be seen that the project has prior to 31.03.2005. In respect of the case of the appellant, the issue is regarding the application of the definition of the built-up area introduced w.e.f. 01.04.2005 while before the Pune ITAT in the case cited (supra) of Opel Shelters, the issue was application of the amendment restricting 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 amendme....
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....or though this fact was later denied by Shri. Rajat by way of an affidavit. The other person Shri. Sharad Varma had subsequently confirmed to the fact of having built the door after taking possession of the residential unit. The Assessing Officer has claimed the affidavit to be an afterthought and has not taken into consideration its content as well as the letter filed by Mr. Sharad Varma in this regard. The appellant in any case has 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 reli....
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.... in Sec. 80IB(10) w.e.f. 1-4-2010. In the case of G.V. Corporation Vs. ITO (2010) 43 DTR 329 (Mum), the issue of the merger of two units has been considered and the Tribunal has held as under : It is common knowledge that members of the same family who purchase separate residential units adjacent or contiguous to each other often join them by breaking down a wall or by opening a door-way or in many other ways so that the entire family 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 co....
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....t up area also goes in favour of the appellant. 3.16 In view of the above facts and the law as has been propounded by different Tribunals and High Court, the disallowance made by the Assessing Officer is not sustainable in the facts of the case and, therefore, the same is directed to be deleted and ground of appeal No I [1.1 to 1.3] raised by the appellant are liable to be allowed." 6. Aggrieved with such order of CIT(A) the Revenue is in 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 (Appeal....
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....Pune Bench of the Tribunal in various other decisions. Once the same is excluded from the 'built up area', the total area of each of the unit will be less than 1500 sq.ft. as per report of the Departmental Valuer. Therefore, the Ld.CIT(A) in our opinion is justified in allowing the claim of the assessee on this issue. 7.1 As regards the inclusion of staircase area in the 'built up area', we find although the departmental valuer has excluded the same from the '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 ....