2011 (8) TMI 1141

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....B(10) of the Act to the assessee in respect of the housing project developed by it. 3. The facts relating to the said issue are set out in brief. The assessee company is in the real estate business. It developed a housing project by name "Narayanapuram Housing Colony" on a land having an extent of Acres 19.12. The lay out was approved by competent authority in two phases on 14.10.2002 and 22.8.2003. The assessee constructed 256 houses on the above said area during the years relevant to the assessment years 2003-04 to 2007-08 and claimed deduction under section 80IB(10) on the profits earned on the said project. For the year under consideration, the assessee claimed a deduction of Rs. 75,92,639/- under section 80IB(10) of the Act. The assessing officer conducted a survey operation under section 133A of the Act on 23/10/2008 in order to verify the compliance of conditions prescribed under section 80IB(10) of the Act. After seeking explanations from the assessee, the Assessing Officer finally concluded that the assessee is not eligible for deduction under section 80IB(10) of the Act, since the Assessing Officer felt that the assessee did not derive profit from development and const....

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.... in the colony itself, it was intimated to the buyer very clearly in the allotment letter that the plot will be registered in his name and construction will be taken up as per the construction agreement to be entered into. Further, full freedom was allowed to the buyers to finalize the building plans, the extent of built-up area and the type of building material to be used in construction. The buyers were also given the freedom to provide their own building material and the cost of construction to be paid to the assessee was accordingly modified. Thus, it is seen that in substance also, the assessee had only carried out contract for construction of the houses as per the requirements of the buyers. b) The Narayanapuram Colony project cannot be considered as an "approved housing project" for the following reasons: i) There was no approval from a Local Authority for the project as a whole i.e. for development of residential plots and construction of houses thereon.' ii) The approval obtained by the assessee company from the Local Authority (VGTM-UDA) pertains only to development of the land into residential plots. No approval has been obtained by the assesse....

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.... housing scheme as intended in sec. 80IB(10) of the Act. Accordingly he submitted that the activity carried on by the assessee cannot be termed as ""Developing and building of housing projects" as mentioned under section 80IB(10) of the Act. 5. On the other hand, the Learned A.R submitted that the assessee has fully complied with the various conditions prescribed under section 80IB(10) of the Act. The assessee obtained approval of the project from the VGTMUDA, i.e. from the competent authority in 2 phases, vides approvals dated 14-10-2004 and 22-8-2003. The project was named as "Narayanapuram Colony". The assessee published advertisement calling for applications from the prospective buyers only for purchase of houses and not plots as assumed by the Assessing Officer. The total consideration quoted by the assessee consisted of both cost of land and the cost of building. The prospective buyers were allowed to pay the total consideration in instalments. On payment of specified percentage of the total consideration, the assessee registered the plot in the name of the buyer. On payment of subsequent instalments, the assessee completed constructions according to the building plan obta....

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.... 4) Fixing windows, doors and construction of partition walls for Rs. 70,000/- 5) When house is handed over Rs. 7,000/-" Another brochure issued by the assessee in respect of the impugned housing project gives the details of the housing project and also the terms of payment. For the sake of convenience, we extract the same below: "NARAYANAPURAM COLONY, PORANKI 1) This colony is situated 3 kms from Bandar Road and 1 km from Eluru Road in Poranki Grama Panchayat. 8 Kms from Benji Circle and 10 Kms from Railway Station. 2) This layout way approved by VGTM Vuda. 3) There is City Bus facility 4) Colony is very nearer to education & medical facilities 5) Colony area is 15 acres 6) Total plots numbering to 200 7) Independent House: Plot area - 160 sq. yards Building Plinth Area - 575 sq. feet 8) Group Housing: Building plinth area - 600 sq. feet. OTHER FACILITIES a) Temple b) Tanker for water supply c) Omni Bus facility provided by Raghava Estates. d) B.T. Road e) There is alarm for each individual house and compound wall around colony. ....

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....iform and homogeneous. The Assessing Officer cannot interpret this section in a different way which was not the intention of the Legislature. The intention of the Legislature was to promote housing sector by giving benefits to the developers. Thus, the definition of "housing project" adopted by the Assessing Officer is not in conformity with the spirit of the section. ix) The Assessing Officer has denied deduction under section 80-IB(10) on the ground that a certificate dt: 9/8/2008 from VGTM-UDA cannot be construed as completion certificate. During assessment proceedings, the appellant has contended that the house completion certificate was not in vague in and around Vijayawada. However, the moment local tax is levied, it is deemed the house is completed. The house tax was levied on all houses of Narayanapuram Colony before 31/3/2007 which is a full compliance of Explanation of sub section 10 of Sec.80-IB of Income Tax Act, 1961. During appellate proceedings, appellant has furnished a letter dt: 12/2/2008 issued by Panchayat Secretary, Gram Sachivalayam, Poranki stating that there is no procedure for issuing a separate certificate for completion of the house. Panchayat Se....

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....ssessing Officer denied deduction under section 80IB(10) of the Act to the assessee in the assessment year 2006-07 for the reasons stated in the Assessing Officer, which were extracted in paragraph 3 (Supra). After the date of the said assessment order, the learned CIT initiated the revision proceeding under section 263 of the Act in the hands of the assessee for the assessment years 2004-05 and 2005-06 and for the identical reasons set aside the order of the Assessing Officer with a direction to the Assessing Officer to disallow the deduction allowed under section 80IB(10) of the Act. Aggrieved by the said orders of Learned CIT, the assessee is in appeal before us. 12. We have heard the parties on these two appeals. The scope of revision proceedings has been well explained by Hon'ble Supreme Court in the case of Malabar Industrial Company (2000)(243 ITR 83) in the following lines. "A bare reading of this provision makes it clear that the pre-requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be sa....