TaxTMI 
TaxTMI 
2016 (2) TMI 884
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....ruction of a housing project "Kumar Paradise" at Hadapsar, Pune. The project was commenced on 21-10-2003 vide commencement certificate No.CC/0362/03 issued by the PMC on 21-10-2003 and continued even after 31-03-2008, i.e. the date on which the project should have been completed as per the provisions of section 80IB(10) of the Act. The AO noted that the previously revised and sanctioned plan on 28-06-2006 was again revised on 22-06-2010 sanctioning 276 tenements in total. Thus, it is clear that as on 31-03-2008 the housing project was not complete. The AO, therefore, issued a show cause notice asking the assessee to explain as to why the deduction claimed u/s.80IB(10) should not be disallowed since the housing project was not complete within the stipulated period. 2.1 The assessee vide letter dated 24-10-2011 inter alia submitted as under which has been reproduced by the AO at page 5 of his order: "As regards B 2 building, said building is not completed. However, without considering B 2 building the project fulfills all the conditions on stand alone basis. Relying on the decision in the case of Saroj Sales Organisation V. ITO (115 TTJ 486 (Mum), DCIT v. Brigade Enterpri....
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....which the completion certificate in respect of such housing project is issued by the local authority. In view of the above, the AO held that assessee has not fulfilled the conditions laid down in sub-clause (a) of section 80IB(10) of the Act. According to him, what is required to be completed by the assessee is the housing project in totality and not the individual flats as claimed by the assessee. In view of the above, the AO disallowed the claim of deduction made u/s.80IB(10) of the Act. 5. Before CIT(A) it was submitted that the assessee has commenced development and construction of housing project "Kumar Paradise" at Plot No.2, at Survey No.134/1/1A/1, Hadapsar, Pune on 08-01-2004. The DP layout plan was sanctioned on 21-10- 2003. The said plan is divided into 2 parts, i.e. Part A and Part B which is evident from the sanctioned plan. The sanctioned plan for Part A consisting of Buildings A1 and A2 was obtained on 08-01-204 and 18-05-2004. The sanctioned plan for Part B consisting of Buildings B1 and B2 was separately obtained on 28-06-2006. Thus, the complete venture of the assessee was divided into construction of A1 and A2 of Part A and construction of B1 and B2 of Part B.....
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....nstruction of a housing project by the name "Kumar Paradise" at S.No.134/1/1A/1, Plot No.2, Part A Hadapsar, Pune and had also claimed deduction u/s.80IB(10) of Rs. 2,82,73,541/- in respect of the project. The Assessing Officer noticed that the project was commenced on 21-10-2003 and subsequently revised on 8-1-2004, 18- 5-2004, 28-6-2006 and on 22-6-2010. The occupancy/completion certificates issued by the Pune Municipal Corporation (PMC for short) were on 6-1-2006 for 108 units, 54 in A-1 wing and A & B having 54 units each; 6-11-2007 for another 108 units in A-2, A&B wing; on 18-3- 2007 for 44 units in B-1 wing. The Assessing Officer also noticed that the project continued even after 31-3-2008 i.e. the date on which the project should have been completed as per the provisions of see 80IB(10), as the previously revised and sanctioned plan dated 28-06-2006 was again revised on 22-06-2010 sanctioning further 276 tenements. The Assessing Officer thus held the housing project to be incomplete. The appellant, however, admitting that B-2 building was not completed requested for allowance of the claim of deduction on a proportionate basis which was rejected by the Assessing Officer, who....
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....ficer that the sanction plan dated 28-06-2006 was revised on 22-6-2010 for 276 tenements and the project not completed before 31-3-2008 is not correct as the 276 tenements were sanctioned vide sanction plan dated 28-6-2006 and there was no revision/additional sanction granted. The appellant has filed the copies of the sanctioned plans of 2006 and 2010 during the appellate proceedings to support its claim. The appellant has thus contended that Building B1 on a standalone basis satisfies all the conditions u/s 80IB(10). The appellant has placed reliance on the following authorities for the aforesaid proposition: 1. CBDT Notification 2. CIT Vs Vandana Properties (2012) 76 DTR 363/ (2013) 353 ITR 36(Bom) 3. CIT Vs. Apoorva Properties and Estates Pvt. Ltd, ITA No.113/PN/2007 4. Rahul Construction Co. Vs ITO (2012) 51 SOT 192 (Pune)(URO) 5. Mudhit Madanlal Gupta Vs ACIT (2011) 51 DTR 217 (Mumbai)(Trib) 6. DCIT Vs Brigade Enterprises (P) Ltd. (2008) 119 TT J (Bang) 269 7. Saroj Sales organization Vs ITO (2008) 115 TT J 485 (Mumbai) 3.4 The appellant has also distinguished the decision of the Bombay High Court in the c....
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....t in the case of Bramha Associates (supra) allowed deduction u/s 80IB(10) on proportionate basis to those units having area less than 1000 sq.ft. The appellant has also distinguished the case of ACIT Vs Vishwas Promoters P. Ltd. (2010) 5 ITR 449 (Chennai) (Trib) relied upon by the Assessing Officer. The appellant has also submitted that the legislative intent for providing benefit u/s 80IB(10) is to encourage development of residential tenements for the people and such tax incentive provided u/s 80IB (10) should not be denied and the said proposition is supported by judicial precedents wherein it has been held that incentive provisions should be interpreted liberally so as to advance the object sought to be achieved and not frustrate it. The appellant has placed reliance on the following decisions in support: 1. Bajaj Tempo Ltd Vs CIT 196 ITR 188 (SC) 2. CIT Vs Gwalior Rayon Silk Manufacturing Co Ltd 196 ITR 129 (SC) The appellant has thus contended that the buildings covered under Part A and Part B on the plot are different projects which gets substantiated based on the following fact: 1. Separate commencement certificates obtained for Part A co....
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....was sanctioned by the local authority i.e. PMC on 21-10- 2003. The appellant proposed two separate projects A and B on the aforesaid plot No.2. The project A of the plot comprised of buildings A 1 and A2 and project B on Part B & C of the plot comprised of buildings B1, B2, B3 and B4. The total area of the project A is 8853 sq.mtrs. The appellant started the construction of the building A 1 vide commencement certificate dated 8-1-2004 and the said building A 1 comprising of 108 units was completed on 6-7-2006. The other building of Part A i.e. building A2 commenced construction vide commencement certificate dated 18th May 2004 and the said building also comprised of 108 Units was completed on 06-11-2007. Thus the appellant had completed the construction of Part A with 216 residential units much before the stipulated date i.e. 31-3-2008. The other project B comprised of 10,394.66 sq.mtr of Part Band 1606.02 sq.mtr of Part C. The building B1 commenced construction vide commencement certificate dated 28- 06-2006 and the same comprised of 44 residential units and the said building B2 was completed on 18-3-2008. The other building B2 was commenced vide commencement certificate dated 28-....
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....s, and there is substantial gap of nearly 30 months between the commencement dates of the said projects. The Assessing Officer during the assessment proceedings for A.Y. 2007-08 had infact accepted the contention of the appellant that Part A and Part B are separate projects and accordingly allowed the claim of deduction u/s 80IB(10). Thus the Assessing Officer's contention that Part A and B are one and the same project is not correct in the given set of facts of the case. 3.6 The reliance placed by the appellant on the decision of the Pune ITAT in the case of Rahul Construction Co. (cited supra) is relevant and which has held as under: "9. There is no dispute on from material facts that out of 16 buildings in the housing project of the assessee only 11 buildings were completed within the prescribed time-limit up to 31-3-2008. The layout plan in respect of entire complex was sanctioned by PMC vide order dated 3-4- 2003 and the building plan was sanctioned vide commencement certificate dated 29-4-2003. Admittedly, the term 'housing project' has not been defined in the Act but in the context of deduction under section 80-IB(10) an Explanation has been pro....
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....vented by a reasonable cause which was completely impossible on the part of the assessee. In this regard the decision of the Pune ITAT in the case of Ramsukh properties Vs DCIT (Supra) also relied upon by the appellant becomes relevant and which held as under: "5. After going through rival submissions and material on record, we find that the assessee is a firm engaged in business of builder and promoter. The issue before us is regarding allowability of deduction u/s.80IB(10) of the Act on partially complete project. The Assessing Officer has denied the deduction on the ground that project was not complete within the stipulated time. There is no dispute with regard to other conditions laid u/s. 801B(10) of the Act, i.e., commencement of project, area of land of project, etc. Assessee's housing project was approved vide commencement certificate No.3837/04 dated 13.01.2005 out of which completion certificate was obtained and furnished before the Assessing Officer for 173 out of 205 flats. Same was rejected by the Assessing Officer and confirmed by the CIT(A). The request for granting whole deduction in respect of whole project has rightly been rejected because deduction u....
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....gal position that the law always give remedy and the law does wrong to no one. We agree to proposition put forward by Ld. Departmental Representative that plain reading of section 80IB(10) of the Act suggests about only completion of construction and no adjective should be used along with the word completion. This strict interpretation should be given in normal circumstances. However, in case before us, assessee was prevented by reasonable cause to complete construction in time due to intervention of CID action on account of violation of provisions of Urban Land Ceiling Act applicable to land in question. Assessee was incapacitated to com lete the same in time due to reasons beyond his control. Assessee should not suffer for same. The revision of plan is vested right of assessee which cannot be taken away by strict provisions of statute. The taxing statute granting incentives for promotion of growth and development should be construed liberally and that provision for promoting economic growth has to be interpreted liberally. At the same time, restriction thereon too has to be construed strictly so as to advance the object of provision and not to frustrate the same. The provisions o....
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....tention of the assessee that the approval granted to a building plan constitutes approval granted to a housing project. Therefore, it is clear that construction of even one building with several residential units of the size not exceeding 1000 square feet ('E' building in the present case) would constitute a 'housing project' under Section 80IB (10) of the Act. 20. . . . . . . . . . . . . . . . . . . . . . . . .when the plans for A, B, C and D buildings were approved during the period from 1993 to 1996, construction of 'E' building was not even contemplated on the plot in question. It is only in the year 2001 when the status of the land was converted from surplus vacant land into within the ceiling limit land by the State Government, an additional building could be constructed on the plot in question and accordingly building plan for construction of 'E' building was submitted and the same was approved by the local authority on 11th October 2002. 21. The fact that the local authority, namely the Municipal Corporation approved the building plan for 'E' building on the condition that all the objections raised in the Intimation of D....
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....) refers to the approval granted to the same housing project more than once and the said Explanation would not apply where the approval is granted to different housing projects. In the present case, as noted earlier, construction of 'E' building constitutes an independent housing project and, therefore, the date on which the earlier housing project had commenced construction could not be applied to the housing project consisting of 'E' building merely because the conditions set out while granting approval to the earlier housing project have also been made applicable to the housing project in question." Thus the set of reasoning of the Hon'ble Bombay High Court which has held that the expression 'housing project' in common parlance would mean constructing a building or group of buildings consisting of several residential units. In fact, the Explanation in Section 80IB(10) supports the contention of the assessee that the approval granted to a building plan constitutes approval granted to a housing project that construction of even one building with several residential units of size not excluding 1000 "sq. ft. would constitute a housing project u/s....
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....ne the applicability of the decision of the Hon'ble Bombay High Court In Brahma Associates (supra) to the facts of this case. On a careful reading of this Judgment, we find that nowhere it is stated that proportionate deduction should not be allowed, In case certain residential units had built up area in excess of prescribed limit of 1,000 sq.ft. In fact, this issue was not before the Hon'ble Jurisdictional High. Court. The questions before the Hon'ble Jurisdictional High Court were different and, hence the judgment cannot be said to be on this issue. The only issue before the High Court is when there is a commercial element in a residential project, will be 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 pr....
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.... 3.9.1 Similarly, in the case of DCIT Vs. Brigade Enterprises (P) Ltd. (cited supra) the Tribunal held - Where some of the residential units in a bigger housing project, treated independently, are eligible for relief under s. 80IB (10), relief should be given pro-rata and should not be denied by treating the bigger Project as a single unit, more so, when assessee obtained all sanctions, permissions and certificates for such eligible units separately. Likewise, in the case of Rahul Construction Co. (cited supra) the Pune ITAT has held as under : "10. In view of the above discussion, for verification of eligibility of benefit claimed under section 80-IB(10) by the assessee on buildings A1 to A5 in 'AN' and buildings B 1 to B6 in 'RN, the assessing authority has to verify as to when the building plans for these buildings were firstly approved by the local authority and taking the said date of approval as a starting point, he has to verify as to whether these buildings were completed within the prescribed time-limit, i.e., 31-3- 2008 on the basis of the completion certificate in respect of such housing project issued by the PMC. The authorities below have not di....
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....s claimed deduction in respect of 'Prime building', wherein built-up area of its units is exceeding 1500 sq.ft. In fact there were 25 buildings in cosmos project out of which except 'Prime building', all other buildings satisfy the conditions of built-up area limit of 1500 sq.ft. Therefore, deduction under section 80IB(10) should be allowed in respect of profit from such buildings. As regards two flats combined together, the assessee's stand has been that it conceived the flats as independent units and these were constructed as independent units. There is nothing on record to suggest that the assessee itself has joined the adjacent flats. In this situation, the assessee should not suffer for its no fault if purchaser join the adjoining flats. Therefore, the assessee was entitled for deduction under section 80-IB(10) in respect of entire profits computed after making additions/disallowances in respect of cosmos project consisting of 24 buildings excluding 'Prime building'. " 3.9.3 The Madras High court in the case of Viswas Promoters (P) Ltd Vs ACIT (Supra) also relied upon by the appellant has held as under: "13. Going by the definition....
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....conditions specified u/s.80IB(10) of the Act. 3. The learned Commissioner of Income-tax (Appeals) erred in not considering the decision of jurisdictional High Court in the case of CIT vs. Brahma Associates, 333 ITR 289 wherein it was held that if the conditions set out in section 80IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project. 4. The appellant craves leave to add, alter or amend any or all the grounds of appeal." 9. The Ld. Departmental Representative heavily relied on the order of the AO. He submitted that since the project was not completed before the specified date, therefore, the CIT(A) was not justified in allowing the claim of deduction u/s.80IB(10) of Building B1 of the housing project on standalone basis when Building B2 of Part B of the housing project was incomplete. 10. Referring to the decision of Hon'ble Bombay High Court in the case of CIT Vs. Brahma Associates reported in 333 ITR 289 he submitted that the Hon'ble High Court in the said decision has held that if the condition set out in 80IB(10) are satisfied then d....
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....5 TTJ 485 (Mumbai ITAT) 4. DCIT Vs. Magarpatta Township Development Construction Co. reported in (2012) 150 TTJ 590 (Pune) 15. He submitted that where due to arise of certain contingencies, making compliance impossible, benefit bestowed on the assessee cannot be completely denied. Therefore, whatever portion is completed shall be treated as a housing project and deduction shall be allowed u/s.80IB(10) of the Act. For the above proposition, he relied on the following decisions : 1. Ramsukh Properties Vs. DCIT reported in (2013) 153 TTJ 211 (Pune) 2. CIT Vs. Tarnetar Corporation reported in (2014) 362 ITR 174 (Guj.) 16. Referring to the following decisions he submitted that only those statutory conditions which are present on the statute book on the date of approval of the housing project needs to be fulfilled for claiming deduction under the Act : 1. System Enterprises Vs. ITO - ITA No.1123/PN/2013 2. CIT Vs. Happy Homes Enterprises - ITA No. 201 of 2012 and 308 of 2012 (Bom.) 3. CIT Vs. Viraj Properties Bombay - ITA No.451 of 2013 17. Referring to the recent decision of the Tribunal in the case of Padmavati Developers V....
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....r the other 2 buildings, i.e. B3 and B4 on Part C of the plot another commencement certificate was obtained and building plan was sanctioned as there was no adequate FSI for building B2 itself. 19. It is the case of the Revenue that since the assessee has not completed the B2 project, therefore, the assessee is not entitled to deduction u/s.80IB(10). It is the case of the assessee that it has completed A1, A2 and B1 of the project and because of inadequate FSI the assessee did not complete B2 building as it was not economically viable. Therefore, on stand alone basis itself, it is entitled to deduction u/s.80IB(10) in respect of whatever portion is completed. It is also the case of the assessee that in A.Y. 2007-08 the deduction claimed u/s.80IB(10) was allowed in order passed u/s.143(3). In A.Y. 2008-09 the deduction claimed was allowed in the order passed u/s.143(3)/147. Therefore, there is no justification for denying the claim of benefit of deduction u/s.80IB(10). 20. We find merit in the above submissions of the Ld. Counsel for the assessee. The AO in the assessment proceedings for A.Y. 2007- 08 has accepted the contention of the assessee that Part A and Part B are separ....