TaxTMI 
TaxTMI 
2016 (6) TMI 180
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.... erred in allowing relief out of deduction u/s, 801B(10) ignoring that the assessee has violated the condition that the housing units shall not exceed 1000 sq.ft area by construction of flats of more than the area prescribed." 2. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in allowing relief out of deduction u/s 801B(10) ignoring that the area of the flats should not be more than 1000 sq.ft. and if any of the eligibility condition is not fulfilled, deduction u/s 801B(10) is not available since the deduction is eligible on the project and not on individual residential unit. 3. On the facts and in the circumstances of the case and in law, the CIT(A) has failed to appreciate that there is no mention in the Income Tax Act that the assessee may be allowed deduction on proportionate basis. 4. The appellant prays that the order of Ld.CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored." 3. At the time of hearing before us, none appeared on behalf of the assessee-firm. Therefore, we proceed to dispose of the appeal after hearing the learned D.R. 4. The brief facts of the case are that....
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....s. 8.26 crores. The relevant part of the statement of Shri Prashant Shamra admitted withdrawing of deduction u/s 80IB(10) of the Act , recorded u/s. 131 of the Act on 27th October, 2010 during the course of survey are as under:- "Q. No. 7: Your attention is drawn to Q. No. 7, 10 & 11 of the statement of Shri Manish S. Karnawat, Sales manager of M/s. Suncity Housing wherein it has been stated that there are 50 flats of 3 BHK in Neptune having built up area of 1260 sq.ft. each. You are required to explain, how deduction u/s.80IB is allowable in respect of Neptune project. Ans: 1 agree with the statement of Shri Manish S. Karnawat who is the Sales Manager of M/s Suncity Housing. However, I want to clarify that the areas in the 3 BHK & 2 BHK are super built up area, which includes common areas of staircase and common passages outside the flat. Considering all these things, the built up area in 3 BHK is on border line of the satisfying condition of Section 80IB(l0). But on the presumption that these 3BHK flats are having built up area is less 1000 sq.ft. we have claimed deduction on the entire profit of Neptune project During the course of survey, when this matter was ....
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....e assessee firm whereby statement of Shri Prashant Sharma, partner of the assessee firm was recorded in addition to the statement of Shri Ramakrishnan Iyer, purchaser of flat No. 204 & 205 in Neptune Tower and other purchaser's statement were also recorded in the course of survey action whereby the buyer Shri Ramakrishnan Iyer in his statement stated that he had purchased two flats i.e. flat No. 204 & 205 by two separate agreements but that he had been handed over one unit of area 1260 sq.ft. by the builder having a single entrance and he had not made any structural changes in the flat. The same statement was given by the other purchasers of the flat also i.e. Shri Pravin Shankarlal Jaiswal, Sh. Rajesh Kapoor and Shri Avinash Shetty. In the statement recorded on 20th Januray, 2012, Shri Prashant Sharma, partner of the assessee firm stated that the assessee firm was claiming proportionate deduction u/s 80IB(10) of the Act in respect of the flats having built up area less than 1000 sq. ft. in Neptune project based on legal opinion. The said statement of Shri Prashant Sharma are as under:- "Q. No. 11: As per Income Tax Act there is no such provision of proportionate deduction....
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....se area did not exceed 1000 sq. ft. . It was also held by the learned CIT(A) that for computing the area of the plot of land for the project it is the total area of the project of 8.98 acres for all the buildings in the layout which has to be considered and not the area of land on notional basis for the Neptune building only. However, the above decision of the learned CIT (A) for the assessment year 2009-10 was not accepted by the Revenue and accordingly appeal was filed before the Tribunal against the order of the learned CIT(A). 8. The AO after considering the facts observed that the objective of the tax benefit for housing project is to build housing stock for low and middle income residential houses. However, this is circumvented by the developers by entering into agreement to sell multiple adjacent units to a single buyer, therefore new clauses (e) & (f) has been inserted by the Finance Act, 2009 in section 80IB (10) of the Act w.e.f. the assessment year 2010-11 whereby the housing project will not be allowed to allot more than one residential unit in the housing project to the same person, not being an individual, and in the case of individual, no other residential unit in....
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....hennai decision in the case of ACIT v. Viswas Promoters Private Limited (2010) 5 ITR(Trib.) 449(Chennai) , vide assessment orders dated 26-03-2013 passed by the AO u/s 143(3) of the Act . 9. Aggrieved by the assessment orders dated 26-03-2013 passed by the AO u/s 143(3) of the Act , the assessee firm filed its first appeal before the learned CIT(A). 10. Before the learned CIT(A), the assessee firm submitted that the assessee firm has constructed project 'Neptune' and there were total 150 flats which are comprised of 144 saleable flats and 6 refuge flats as per the following approved plan: Number of flats Area 50 950 sq. ft. 47 890 sq. ft. 47 370 sq. ft. 144 The assessee firm submitted that out of the above, 50 flats having area less than 1000 sq. ft. has been allowed deduction u/s 80IB(10) of the Act by the learned CIT(A) vide his appellate orders dated 23rd May, 2012 for assessment year 2009-10 . The assessee firm submitted that during the year under consideration, the assessee firm has sold 14 flats of various areas amounting to Rs. 5,86,55,000/- , and that out of which 10 flats amounting to Rs. 4,02,41,000/- were sold to persons spec....
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....sent of developer? c) Whether the built up area of the 47 flats of 1260 sq ft saleable area is less them 1000 sq ft. It is noted from the copy of the approved plan that in the Wing B the so called 1 bedroom flat of 370 sq.ft (l BHK) has only one living room and 1 Kitchen but no bedroom and hence it cannot be termed in commercial parlance as a 1 BHK flat. It was only after amalgamation that 3 BHK flat of 1260 sq ft was made as an independent residential unit. The flats of 370 sq.ft is only on paper design but practically never existed physically. Though a contract for sale can be registered for any immovable property or any type of built up area, if it is approved by local authority but for claiming deduction under the provisions of 80IB(10), it has to be necessarily a residential unit only. Similarly a separate electricity connection can be taken for any place including a shop, garage, temporary hutments but that does not by itself mean that any place where such connection is there, has to be treated as independent residential unit. Therefore the contention of appellant that 47 flats with 370 sq. ft. area were independent residential units is not tenable, even if ....
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....the flats and sell them as 3BHK flats. Had it been an arrangement between customer and contractor, then there was no need for the developer to have pre-printed such brochures/pamphlets showing flats of 1260 sq ft. It is not a case of some causal alteration done without permission of BMC; rather it is with a predesigned intention to make larger flats. Hence it cannot be said that the flats in question were actually two independent residential units and the contention that the developer had no role in amalgamation of flats is not correct. The another argument of Ld AR that the built up area of those 47 amalgamated of saleable area of 1260 sq ft, is less than 1000 sq ft has been considered. The copy of agreements enclosed by Ld AR suggest that the total carpet area of the amalgamated flat is 907 sq ft and ld. AR has been enhanced the same further by 10% to arrive at built up area of 997 sq ft. However, the Ld AR has computed the built up area by enhancing the carpet area, @ 10% on adhoc basis only to arrive at the built up area of flats at 997 sq ft. The ratio of carpet to built up area varies from 10-15% depending upon the design of the building. Hence the calculation of bui....
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....Venus, Sundle, Jupiter, Neptune & Pluto are constructed is of 36,365 sq mts on which appellant has constructed various buildings namely Mercury, Sundle, Venus, Neptune & Pluto on the said plot from time to time. It has been contended by the Ld AR that all the buildings are part of one common layout on a single plot of land which is of 36,365 sq mts with no specific area of land' allocated to each building individually and all the land under common amenities such as internal roads, open area, club house, amenities area etc. are common to all the buildings. There is no-boundary wall segregating one building from other. The total plot of land of project is 9.8 acres which demarcation as CTS No 40/1 & 40/3 as per the municipal records. The plot of land for Neptune building is not separately demarcated in the Municipal records nor is there any physical demarcation of land for Neptune building by the appellant from other buildings of the project, which are also constructed on the same plot of land. It is further contended that the development rights was obtained by appellant for total plot of 8.98 acres by single agreement and the said plot has also not been subdivided in sub-plots f....
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....ft which comes to 59,220 sq ft (as mentioned in asstt order also) is excluded, then also against the total constructed area on the entire plot of land of 8.98 acres for all buildings of the project of 4,32,820 sq ft, only' 59,220 sq ft fails into non eligible use which is only 13.68%. Thus, even if 13.68% of the area of plot of land of 36,365 sq mts (8.98 acres] is excluded (though not required in view of ITAT decision in case of Akruti city), still the remaining area of plot of land of project is at 31,390 sq mts (86.4% of 36365) which is equivalent to 7.75 acres. Accordingly even if the area under construction of ineligible flats is excluded, then also the plot of Land of the project under eligible use remains at 7.75 acres against the actual plot of land size of 8.98 acres. 3.5. In view of the findings in Para 3.3 and 3.4 above, the appellant is thus entitled for the proportionate deduction of profits in respect of flats whose size does not exceed 1000 sq ft as all other conditions are fulfilled. From the asstt order it is noted that the AO has found 44.51 % of constructed area of Neptune building to be covered by flats below 1000 sq ft. Accordingly the appellant....
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....h forms part of the official records, namely approved plan by the BMC, the commencement certificate dated 27.06.05, the occupancy certificate dated 30.03.09 etc. to show that the flats were constructed as per the approved plan and further that the occupancy certificate was given by the local authority after verification of the fact that the project was constructed as per the approved plan. Further, the separate sale deeds were executed for each of the flats and separate electricity connections were obtained for each of the flats. The assessee has not sold the said flats as a single unit but as separate units to the purchasers. It is not the case of the Revenue that the assessee had violated any of the provisions of section 80IB(10) of the Act at the time or before the sale of flats in question. Even if we assume that end users might have joined the two flats on a floor so as to make it one unit, then no fault can be attributed on the part of the assessee in this respect. To be more clear, we reproduce the provisions of section 80IB(10) of the Act as herein under: "Section 80-IB(10) (10) The amount of deduction in the case of an undertaking developing and building ....
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....e hundred square feet at any other place; [***] (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed [three] per cent of the aggregate built-up area of the housing project or [five thousand square feet, whichever is higher];] (e) not more than one residential unit in the housing project is allotted to any person not being an individual; and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:- (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta, (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. [Explanation.-For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by ....
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.... section 80IB(10) as per the prevalent law during the assessment year in question, the same cannot be denied to the assessee by applying the provisions which have prospective effect. When faced with almost similar facts and circumstances, the co-ordinate bench of the Tribunal, in the case of "Emgeen Holdings Pvt. Ltd." ITA Nos.3594 & 3595/M/2009 decided on 29.07.11, has observed as under: "7. We find that the deduction u/s.801B(10) has been declined by the Assessing Officer on the ground that size of the residential unit was in excess of 1,000 sq.ft which, in turn, proceeds on the basis that the flats sold to the family members admittedly by separate agreements, should be treated as one unit. We are unable to approve this approach. We have noted that the size of each flat, as evident from building plan as duly approved by Muncipal authorities was less than 1,000 sq.ft. We have also noted that it is not even revenue's case that each of flat on standalone basis was not a residential unit. Even if flats were constructed or planned in such a way that two flats could indeed be merged into one larger unit, as long each flat was an independent residential unit, deduction u/s.....
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....k for low and middle income households. This has been ensured by limiting the size of the residential unit. However, this is being circumvented by the developer by entering into agreement to sell multiple adjacent units to a single buyers. Accordingly, it is proposed to insert new clauses in the said sub-section to provide that the undertaking which develops and builds the housing project shall not be allowed to allot more than one residential unit in the housing project to the same person, not being an individual, and where the person is an individual, no other residential unit in such housing project is allotted to any of the following person:- (I) Spouse or minor children of such individual; (II) The Hindu undivided family in which such individual is the karta; (III) Any person representing such individual, the spouse or minor children of such individual or the Hindu undivided family in which such individual is the karta. This amendment will take effect from the 1st April, 2010 and shall accordingly apply in relation to assessment year 2010-2011 and subsequent years." 8. It is thus clear that the aforesaid amendment has been brought w....
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....e find that the Revenue has not produced any evidence to prove that what were the actual dimensions of the flats in question, no measurement etc. has been produced on the file. The Revenue has simply relied upon the broacher/pamphlet of the assessee. The assessee has been fair enough to submit to the Revenue Authority that the same was an advertisement gimmick of the assessee to attract the customers. As observed above, even if the assessee had adopted this gimmick to attract the customers and further to give them the idea to adjoin the flats in question, while remaining within the four corners of the provisions of section 80IB(10), can not be said to have committed any violations of the prevalent provisions during the period. Finding a loophole in the provisions and suggesting the prospective buyers that they can join the flats together in itself cannot be said to be a violation of the provisions of section 80IB(10) on the part of the assessee. In common parlance every businessman, assessee etc. tries to get maximum benefit and to avoid the tax but without violating the provisions of the statutes. Moreover, the provisions of section 80IB(10) are for beneficial purpose, intended to....