TaxTMI 
TaxTMI 
2011 (7) TMI 1283
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....ed a sanctioned building plan on 06/5/2004, which was later revised on 12/5/2005. In conformity with the said revised building plan, the assessee started construction on 15/8/2005 of 72 individual residential units on the said land, each admeasuring less than 1500 sq. ft. of built-up area, relevant to F.Y. 2005-06. The Architect & Structural Engineers, who supervised the development of the housing project, issued the completion certificate on 26/3/2007, relevant to F.Y. 2006-07. The assessee filed application with Kolkata Municipal Corporation (KMC) on 28/3/2007 for issuance of completion certificate and KMC after conducting inspection issued completion certificate on 12/5/2007, which was within four years from the end of the financial year in which the housing project was sanctioned by KMC on 06/5/2004. The assessee thus undertook the development of the housing project in F.Y. 2004-05 and expenses incurred in respect of the said housing project appeared in the books since A.Y. 2005-06. The expenses incurred from year to year were accumulated and accounted under the head "value of work-in-progress". In respect of business of developing and constructing housing project, the assessee....
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..... for recasting the P/L Account and thereby estimating the total income after denying the benefit of deduction u/s. 80-IB of the Act are as under :- (i) That the exemption/deduction under section 80-IB(10) of the said Act is available only in respect of 'profits derived from undertaking developing and building the housing project', the eligible business. The connotation of the words used in the section 'derived from' is narrower to that of the words 'attributable to' used in other sections of the statute. By using the expression 'derived from', Parliament intended to cover sources not beyond the first degree. Reliance in this respect has been placed by the learned AO, inter alia, on decision of the Hon'ble Supreme Court in Liberty India v. CIT (2009) 317 ITR 218 (SC). (ii) That incomes having 'direct nexus' with the development and sale of housing units shall be regarded as 'profits from such housing projects' and not profits from some other activities which may be attributable to and not exactly derived from the housing project. If these other income or profits which may be merely attributable to the housing project are included in the Profit & Loss Account and/or the Balance ....
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....ical goods' and under the heading 'electrical works' were actually for items like switch boards, wiring and other electrical works carried out in the building project having no direct nexus with the construction of the buildings in the capacity of Developer, and acted as a facilitator/middleman/agent, for which assessee-firm realized separately the said sum of ₹ 45,70,703 against 'CESC, Electricity & Generator'. (vii) That profits of ₹ 18,04,718 (gross receipts of ₹ 45,70,703 under the heading 'CESC, Electricity & Generator' less the related expenses of ₹ 27,65,985 representing payments made to CESC and for Generator etc.) are not profits of the undertaking derived from development of the housing project in the light of principles laid down by the Hon'ble Supreme Court in Liberty India's case (supra). These profits may be attributable to such business activity and are outside purview of deduction admissible under section 80-IB(10) of the said Act. (viii) That profits for extra work carried out after handing over of possession to the buyers are neither eligible to be included in the separate Profit. & Loss Account of the undertaking doing the development ....
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.... Banerjee, which amount according to the assessee was payable to the original buyer, B.L. Agarwal & Sons (HUF). The assessee could not establish that said sum of ₹ 4,49,000 had ever been transferred to B.L. Agarwal & Sons (HUF). The assessee firm has kept the said money with itself. The said sum of Rs,4,49,000 is income of the assessee for allowing the transfer by way of nomination from the original buyer M/s. B.L.Agarwal & Sons (HUF) to the second buyer (nominee of the original buyer) Mr. Sukumar Banerjee and this receipt is not eligible for deduction under section 80-IB(10) of the said Act. The inclusion of said sum of ₹ 4,49,000 in the Profit & Loss Account of the undertaking has made such Profit & Loss Account incorrect. 3. The A.O. after invoking provision of sec. 145(3) of the Act rejected the P/L Account of the undertaking and recasted the same as per details in tables III & IV of the assessment order at pages 12 & 13 and assessed the profit from housing project at ₹ 6,08,74,646.88 and profit from other activities attributable to housing project but do not have direct nexus with it at ₹ 66,56,508/-. The A.O. has stated that the latter is always outsi....
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....e housing project, the eligible business, and the profits and gains derived there from in order to claim deduction exemption under section 80-IB(10) of the said Act; and a mere commercial connection between the income and the activity of undertaking developing and building housing project would not be enough since the profits or gains cannot be said to have been derived from an activity merely by reason of the fact that the said activity may have helped to earn the said income or profits in an indirect or remote manner. (ii) But, it must be appreciated that words used in section 80-IB(10) are 'undertaking developing and building housing projects' and not mere 'construction and sale of housing flats' forming part of the housing project. The words 'housing projects' are much wider than the words 'housing flats'. The activity of undertaking developing, constructing and building housing projects include within its purview the entire activity of constructing the residential flats, surrounding open space, common areas and facilities, pathways, air conditioned community hall for social gatherings and domestic functions of the flat owners, garages and parking space, mini gym and health c....
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....ned AO in paragraph 7.1, at page 5 of the said impugned assessment order dated 2912.2009 passed under section 143(3) of the said Act for the year under appeal. (v) The mere fact that the agreement for sale described in Section B of Part I of the Sixth Schedule thereof, the additional amounts payable by the purchaser to the owner/developer, the Appellant Assessee Firm herein calculated at the fixed rate of ₹ 55 per square feet of the super built area of the said flat, by way of consideration for installation of generator for the common portions and for providing power to the said flats, formation of the association for the common purposes, obtaining and providing electricity supply and meter, including those on account of and/or for transformer and electrical sub-station etc., it is respectfully submitted, cannot lawfully exclude such consideration from the purview of 'profits derived from the activity of undertaking developing and building housing projects' the expression used and appearing in section 80-IB(10) of the said Act. it may be appreciated that such additional payments calculated @ ₹ 55 per square feet of the super built area of each of the said flat constru....
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.... respectfully submitted that the learned AO was wholly unjustified in law in arbitrarily and wrongly segregating and/or computing the profits of ₹ 18,04,718 (gross receipts of ₹ 45,70,703 under the heading 'CESC, Electricity & Generator' less the related expenses of ₹ 27,65,985 representing payments made to CESC and for Generator etc) and alleging the same to be not profits of the undertaking 'derived from development of the housing project', and also alleging the same to be only profits attributable to such business activity, as wrongly alleged and/or held or otherwise or at all. The Appellant Assessee Firm states and submits that the entire consideration in the aggregate sum of ₹ 45,70,703 received from each of the flat buyers by way of additional payments calculated @ ₹ 55 per square feet of the super built area of each of the flats is part of the receipt having direct nexus with the activity of undertaking developing and building housing project and therefore part and parcel of the profits derived there from; and that no portion thereof can be either segregated and/or separately computed and/or alleged to be not part of the profits and gains derive....
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....t order dated 29.12.2009, now under appeal before the learned CIT(A). (viii) The Appellant Assessee Firm states that the aggregate expenditure of ₹ 55,00,000 was incurred by it for developing and betterment of the common amenities and facilities in the ground floor, the pathways, the common community hall, mini gym, common lobbies as also landscaping, garden area and beautification of the water body etc. as well as for the drainage facility, which work can be carried out only after obtaining the completion certificate from the KMC, the local authority. The carrying out these activities are part and parcel of the obligations undertaken by the Assessee Firm as owner and developer of the said housing project in terms of the agreements for sale and the printed brochure issued by it in connection with undertaking developing and building the said housing project. The said expenditure of ₹ 55,00,000 has no connection, direct or indirect, whatsoever with the receipt of ₹ 3,66,763 for extra work carried out inside some of the flats in terms of paragraph (c) of Section A of Part-I of the Sixth Schedule to the respective agreements for sale. It was wholly incorrect, unreas....
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....ipts for extra work in the sum of ₹ 83,89,700, and the profits of ₹ 28,89,700 from the so called extra works, adding the said amount to the assessable income of the assessee firm for the year under appeal, and also holding that the said alleged income of ₹ 28,89,700 is not eligible for deduction under section 80-IB(10) of the said Act. It is respectfully submitted that the entire approach of the learned AO with reference to his observations made and/or conclusions drawn in paragraphs 9.7 to 9.9 of his said impugned order in relation to the alleged estimated profits of ₹ 28,89,700 is wholly illegal, against the facts and evidences on record, unreasonable and/or otherwise perverse. (x) The Appellant Assessee Firm states that the learned AO was wholly unjustified in law in alleging and/or holding that its audited Profit & Loss Account of the undertaking, as prepared for the purposes of section 80 IB(10) of the said Act was incorrect and/or in arbitrarily invoking the provisions of section 145(3) of the said Act and/or in rejecting the Profit & Loss Account of the undertaking and/or in recasting the same in the manner set out in Tables III, IV and V, as stated....
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....2 of the impugned assessment order under paragraphs 12.1 & 12.2 thereof respectively. Since the said sum of ₹ 4,49,000 had been actually paid over by the Appellant Assessee Firm to the original buyer, M/s. B.L.Agarwal & Sons (HUF), the same cannot be lawfully added to the total income of the Appellant Assessee Firm. (xii) In view of the facts and circumstances stated herein above, it is respectfully submitted that the learned AO wholly erred in law as well as in facts in arbitrarily computing the profits from other activities in the sum of ₹ 66,56,508, as per calculation given in Table IV, in paragraph 12.2 appearing at page 12 of the impugned assessment order. The profits from other activities should have been limited to income by way of interest in the aggregate sum of ₹ 14,58,171, legal fees in the sum of ₹ 62,942 and miscellaneous receipts in the aggregate sum of ₹ 89,506 as well as income by way of dividends (wholly exempt u/s 10(35) of the said Act) in the sum of ₹ 2,471. Further, the learned AO was wholly unjustified in law in arbitrarily computing the profits from the housing project in the sum of ₹ 6,08,74,647 as against ₹ ....
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.... the Institute of Chartered Accountants of India read with Accounting Standard (AS)-7 dealing with Construction Contracts. The Appellant Assessee Firm states that the construction activity in relation to the said housing project had been commenced by the learned AO in the financial year 2004-05, and during the entire construction period ranging from FY 2004-05 to FY 2006-07, the inventory in the form of work-inprogress as well as the unsold completed flats, had all along been valued by the assessee firm in accordance with the well established method of stock valuation, namely, 'At Cost', as set out in Accounting Standard (AS)-2 on 'Valuation of Inventories' issued by the Institute of Chartered Accountants of India, The said method of stock valuation has been repeatedly recognized by different courts including the Hon'ble Supreme Court for purposes of making assessments under the Income Tax .Act, 1961, and under the said method of stock valuation, the profits would accrue and arise only in the year in which sales of constructed flats by way of handing over physical possession thereof to the respective buyers take place. This principle is also recognized in Accounting Standard (AS)-9....
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....r to the effect that the assessee firm violated the requirement of section 80-IB(10)(c) of the said Act in so far as Flat No.7C & 7D of the said housing project are also wholly contrary to the facts and evidences on record, illegal, unreasonable and/or otherwise perverse. It is a fact that both Flat No.7C & 7D are two independent flats and had been sold by the Appellant Assessee Firm jointly to Sri Rupankar Bagchi & Smt. Chaitali Lahiri in terms of two separate agreements for sale executed on 10.5.2006. A copy of the respective floor plans of each of the said two flats had been duly annexed to each of the said two independent agreements. In these floor plans, the position of entrance gates for each of the said two flats bearing Nos. 7C & 7D had been separately shown. Subsequently, the said two buyers requested for acquiring some more area (17 sq. ft. for flat No.7C & 16 sq. ft. for flat No.7D) in front of each of the said two flats in or about February, 2007, After receipt of additional consideration for such additional areas, the Appellant Assessee Firm, at the request of the said two buyers, shifted the entrance gate to each of the said two flats. But, even on such shifting of ga....
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...., and without any permission from the assessee firm. The Appellant Assessee Firm states and submits that it had sold to the said two buyers, two separate and independent flats having two separate independent gates and doors, and that it was not party to the so called creation of one residential flat of more than 1500 sq. ft., as wrongly and arbitrarily alleged by the learned AO in his said impugned assessment order dated 29-12-2009, or otherwise or at all. The Appellant Assessee Firm also states that separate maintenance bills had all along been issued in respect of each of the said two flats and there are two separate electric meters in respect of the said two flats." 7. The ld. C.I.T.(A) sought remand report from the A.O., copy placed at pages 327 to 334 of the paper book, volume-III. In reply to the said remand report, the assessee filed its submission on 23/2/2010, which is placed at pages 335-343 of paper book, volume-III. The A.O.'s comment dated 01/3/2010 on the letter of the assessee dated 23/2/2010 and rejoinder dated 11/3/2010 are placed at pages 344-345 & 346 to 349 respectively of the paper book, volume-III. Ld. C.I.T.(A) has stated that after perusing the assessment o....
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....tion 145(3) of the Act, In the present case, the assessment order has been passed by the AO u/s 143(3) of the Act, and, not u/s 144. The provisions of section 145(3) read as under- "Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144" 17. The provisions of section 144 prescribe that, before a best judgment is made, the assessee should be given an opportunity by the AO by serving a show- cause notice, calling upon the assessee to explain as to why the assessment should not be completed to the best of his judgment. Section 145(3) permits the AO to make an assessment in the manner provided in section 144, if the AO is not satisfied about the correctness or completeness of the accounts or where the method of accounting provided u/s 145(1) or accounting standards notified u/s 145(2) have not been followed. In the impugned order, the AO has not spelt out as to how the app....
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....in its Profit & Loss account, credited income from "Extra work" amounting to ₹ 3,66,763/-, the AO has, in the recasted Profit & Loss accounts titled as Tables III, IV & V, omitted to consider altogether the income of ₹ 3,66,763/-. I also find that, neither in Table IV nor in Table V, the AO has included the income by way of extra work amounting to ₹ 3,66,763/-, even though the appellant has disclosed such income in its Profit & Loss account. These facts rather show the bona fide, correctness, and, completeness of the appellant's audited accounts. 21. I also find that the sale value of ₹ 15,09,16,077/- as credited in the Profit & Loss account includes sale consideration ₹ 23,31,200/- in respect of Flat No 5H. The said sale consideration inter alia includes nomination charges of ₹ 4,49,000/-, because the original consideration agreed with B.L.Agarwal & Sons (HUF) was ₹ 18,82,200/- only. Since the nomination charges were in turn paid to B.L. Agarwal & Sons (HUF), the appellant has rightly claimed deduction of ₹ 4,49,000/- in order to arrive at the net consideration for sale of Flat No. 5H. In view of the above, I do not find any infirm....
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....e acted as a mere facilitator for providing electricity connection, for which separate payments were received. The A.O. rejected the loss claimed on the assessee on this account of ₹ 18,23,638/- and held that it had actually incurred ₹ 27,65,985/- towards provision of electricity connection, generator etc. and thereby made a profit of ₹ 18,04,718/- in its capacity as facilitator for providing electric connection. He, therefore, held that as the assessee did not derive profit from the development of housing project, the profit of ₹ 18,04,718/- was not eligible for deduction u/s. 80-IB(10) of the Act. The ld. C.I.T.(A) has observed that the reasoning adopted by the A.O. for denying the benefit of deduction u/s. 80-IB(10) of the Act in respect of electrical installations and connection thereof was not proper inasmuch as the A.O. could not divorce provision of such services from the purview of the housing project. He thereafter referring to several clauses of schedules annexed to the agreement for sale observed that provision of electricity connection through CESC and/or installation of Generator sets and fittings etc. were integral part of the assessee's obliga....
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.... co-owner Chaitali Lahiri is a Lyricist and song writer. For the said purpose individual space were required to do "RIYAZ' and practice and to write lyrics in respective capacities for which a certain degree of seclusion was required from the daily household chores. After using the separate flats for some time, for the purpose of convenience and security, we decided to have common entrance for the said two flats. This we did at our own. As this modification did not affect the structures of the building no permission was required to be taken from outside agency. The cost for the modification was borne by us." The ld. C.I.T.(A) opined that the assessee has not violated the conditions prescribed in sec. 80-IB(10) of the Act as none of the individual units exceeded 1,500 sq. ft. of builtup area and, therefore, the A.O. was not justified in denying deduction u/s. 80-IB(10) of the Act. His observation in this regard in para-41 of the order is as under :- "41. Despite above submissions of the AR for the flat purchasers, the AO did not bring on record any material let alone cogent material to refute categorical assertions of the flat purchasers. In the submission, the AR of the fiat pur....
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....0), as none of the individual units exceeded 1500 sq. ft. of built-up area. The AO was therefore not justified in denying deduction u/s 80IB(10)." 11. Regarding fourth issue as summarized by ld. C.I.T.(A) about completion certificate from KMC to justify the claim of deduction u/s. 80-IB(10) of the Act, the A.O. stated that the method of accounting followed by the assessee was not in conformity with AS-7 issued by ICAI, as per which the assessee was obliged to recognize revenue on year to year basis by following the partial completion of project method. He further stated that the benefit of Instruction No. 4 of 2009 of CBDT could only be availed by an assessee who followed partial completion of project method and who also obtained completion certificate within the time prescribed, i.e. in the same accounting year ending 31/3/2007. According to A.O., in this case the assessee obtained completion certificate from KMC (local authority) on 12/5/2007 and as per Explanation (ii) to sec. 80-IB(10)(a) of the Act, the date of completion of construction of the housing project shall be taken to be the date on which completion certificate in respect of such housing project is issued by the loc....
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....condition by using express language as per which the only condition which the assessee was obliged to satisfy was to obtain the completion certificate from the local authority at any time till 31-03-2009, so as to qualify for deduction in respect of profits derived from the housing project. The said condition was not linked with the method of accounting or accounting method followed or with the year in which revenue was recognized. Since the appellant has complied with the conditions prescribed in section 80IB(10)(a)(ii) in letter and spirit, the AO was not justified in rejecting the claim for deduction u/s 80IB(10). In the assessment order as well in his report dated 01-03-2010, the AO has pointed out a procedural irregularity of non-filing of the completion certificate by the auditor along with the audit report in Form 10CCB. According to the AO, para 23(b) of Form 10CCB required the auditor to attach a copy of the completion certificate to his report, which he has failed to do. According to the AO, this has resulted in nonfulfillment of the statutory condition, and therefore, the claim was liable to be rejected. It is not in dispute that the completion certificate was obtained b....
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....never been transferred to B.L. Agarwal & Sons (HUF), rather it was kept with the assessee. He, therefore, considered the said nomination charges to be the actual income of the assessee for allowing the transfer by way of nomination from the original buyer B.L. Agarwal & Sons (HUF) to the second buyer Sri Sukumar Banerjee and, accordingly, denied deduction u/s. 80-IB(10) of the Act. The ld. C.I.T.(A) for the reasons discussed in para-47 of his order has held that the nomination charges of ₹ 4,49,000/- did not constitute assessee's income and hence question of allowing deduction u/s. 80-IB of the Act is irrelevant. The relevant portion of the observation of ld. C.I.T.(A) on this issue reads as under :- "47. …………. From the information available from the documents on record, it appears that the appellant had originally entered into an agreement dated the 24th November, 2005 with B.L. Agarwal & Sons (HUF) for sale of Flat No. 5H for ₹ 18,82,200/-. Pursuant to the agreement, the appellant had received an amount of ₹ 4,70,550/-. B.L. Agarwal & Sons (HUF) thereafter nominated Sri Sukumar Banerjee in its place to purchase the flat 5H for a con....
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....ention did not appreciate the arguments put forward during the course of assessment as well as remand report and subsequent letters in proper context. Ld. CIT(A) also failed to address the legal requirement as per Explanation (ii) below section 80IB(10)(a) of the Act to the effect that KMC's certificate dated 12/05/2007 is actually the date of completion which is not an empty formality and thus assessee's claim for deduction u/s. 80IB was not relevant to AY. 2007-08. Ld. CIT(A) also was not justified holding any lapse on the part of the auditor can be no ground for rejecting the claim for deduction and also failed to consider the materials brought on record during the course of assessment along with various judicial pronouncements as referred in the assessment order resulting the appellate order perverse. 2. Ld. CIT(A) erred both in facts and law in deciding the appeal in favour of the assessee with a direction to assess the income with reference to accounts furnished by the assessee along with Form 10CCB without proper appreciation of arguments put forward during the course of assessment as well as remand report and subsequent letters in respect of invoking provisions u/s. 145(3....
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....nder consideration and as such the assessee was not entitled to get deduction u/s. 80-IB of the Act. 16. On the other hand, the ld. A/R submitted that the basic issue is as to whether the assessee is entitled to deduction 80-IB of the Act or not. He submitted that in this regard it is to be ascertained as to when the housing project was completed and whether the assessee fulfilled the conditions stipulated in sec. 80-IB(10) of the Act. The ld. A/R submitted that approval for commencement of construction is dated 06/5/2004 and referred pages 283-284 of the paper book, volume-II. He submitted that the plan was revised on 12/5/2005 and referred page 367 of the paper book, volumeIV. He submitted that second revised building permit was granted on 05/3/2007 by KMC and copy is placed at page 287 of the paper book, volume-II. The ld. A/R submitted that for the purpose of sec. 80-IB of the Act, the original approval of the plan is to be considered for computing the period of four years for completing the project and as such the date by which the assessee was required to complete the project was 06/5/2008. He submitted that the project was completed on 26/3/2007, i.e. within the period of f....
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....ed per cent of the profits derived in any previous year relevant to any assessment year from such housing project if, - (a) such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and complete such construction,- (i) in a case where a housing project has been approved by the local authority before the 1st day of April, 2004, on or before the 31st day of March, 2008; (ii) in a case where a housing project has been, or, is approved by the local authority on or after the 1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority. Explanation. - For the purpose of this clause, - (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; (ii) the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the....
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....f the Act. 18.2. Without prejudice to what we have stated above, if we go with the contention of the department that the assessee is entitled to get exemption u/s. 80-IB(10) of the Act only after getting the certificate of completion of the project from KMC, in that case, the assessee would not be entitled to get deduction u/s. 80-IB(10) of the Act in spite of the fact that the assessee has claimed the deduction on prorate basis every year, because the certificate of completion is to be given only when the project is fully completed. In view of the above fact also, the certificate of the Architect certifying completion of the project cannot be ignored for considering the benefit of deduction allowable to the assessee u/s. 80-IB(10) of the Act. Obtaining of certificate from KMC is a statutory requirement evidencing that project has been completed as per clause (ii) of Explanation to sec. 80-IB(10)(a) of the Act, but it is not the certificate issued by KMC certifying that the project was completed only on the date on which the certificate of KMC was dated. In view of the above, in our considered opinion, the A.O. went wrong in denying benefit to the assessee u/s. 80-IB(10) of the Ac....
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....tc. as well as for the drainage facility, which work can be carried out only after obtaining the completion certificate from the KMC, the local authority. He submitted that carrying out these activities are part and parcel of the obligations undertaken by the assessee-firm as owner and developer of the said housing project in terms of the agreements for sale and the printed brochure issued by it in connection with undertaking developing and building the said housing project. He submitted that said expenditure of ₹ 55,00,000 has no connection, direct or indirect, whatsoever with the receipt of ₹ 3,66,763/- for extra work carried out inside of some of the flats in terms of paragraph (c) of Section A of Part-I of the Sixth Schedule for the respective agreements for sale. He submitted that the sum of ₹ 3,66,763/- was received by the assessee for post delivery works not forming part of the specifications contracted in the respective agreements and/or that the said sum of ₹ 55,00,000 had been incurred for items not forming part of the specifications contained in the respective agreements. Ld. A/R submitted that A.O. was wholly unjustified in arbitrarily estimating....
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.... the paper book, volume-I, that it also provides the details of the common portions and common facilities to be provided by the assessee as the developer of the project. Considering the above facts, we are of the considered view that the action of the A.O. to estimate the receipt at ₹ 83,79,700/- on account of carrying out the above extra work and also taking the ground to invoke provisions of sec. 145(3) of the Act, inter alia, for not showing the said receipt is without any merit and/or is not based on cogent material on record. We are, therefore, of the considered view that ld. C.I.T.(A)'s action in not accepting the said finding of A.O. is justified. Hence ground No.2 of the department disputing the order of ld. C.I.T.(A) on the above issue is also rejected. 22. In respect of 3rd ground of the appeal, ld. Departmental Representative relied on the order of A.O. and further submitted that the receipt of ₹ 3,66,763/- is the receipt for extra work and could not be considered as income derived from housing project. Therefore, A.O. was justified to treat the said income as other income. 23. Ld. A/R submitted that as per agreement, the assessee was to provide generator, ....
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....to provide all common facilities including electricity supply & meter, transformer & electric sub-station including provision for generator. It is a part and parcel of the entire activity of developing and building a housing project and without which the project developed could not be said to be complete. We observe that as per agreement, it is provided that each of the purchasers is required to pay an additional amount @ ₹ 55/- per sq. ft. of super built-up area of the said flat by way of consideration for installation of generator for the common portions and for providing power to the said flats and also for providing electricity supply & meter etc. for common purposes. We agree that charging of extra amount for providing the above essential common facilities as per the agreement is in the capacity of developing and constructing the housing project by the assessee and not to act as a middleman/agent, as alleged by A.O. These activities, we are of the considered view, are part and parcel of the entire activity of developing and completing the housing project. Hence we hold that charging of the said additional amount, i.e. @ ₹ 55/- per sq. ft. of super built-up area fro....
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....t two separate agreements for sale/memorandum were also entered into with the buyers and referred pages 105 to 130 in respect of flat No. 7C and pages 131 to 156 of the paper book, volume-I in respect of flat No. 7D. Ld. A/R referred pages 274 & 275 of the paper book, volumeII and submitted that the buyers confirmed that they purchased two separate flats being Flat Nos. 7C & 7D in the concerned housing project. He submitted that there were two electricity connections from CESC for the respective flats and the assessee was also raising separate maintenance bills and receiving from the buyers separately. Ld. A/R submitted that the said two buyers later on requested for acquiring some more area, i.e. 17 sq. ft. for flat No. 7C and 16 sq. ft. for flat No. 7D in front of each of the said two flats in or about February, 2007 and after receipt of additional consideration for such additional areas, the said two buyers shifted their entrance gate, but the identity of each of two flats was duly maintained and each of the said two flats continued to be independent to each other. He submitted that each of the flats had separate and independent gates in terms of floor plan annexed to the separa....
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....flats. It is evident from the above documents that each of the flats, i.e. Flat Nos. 7C & 7D, was two independent flats and, therefore, the area of individual flat did not exceed 1500 sq. ft. of the super built-up area. We also observe that prior to the amendment carried out by Finance (No.2) Act, 2009 w.e.f. 01/4/2010, there was no such restriction that an individual could not purchase more than one flat in the same housing project. Considering the above facts, we hold that the ld. C.I.T.(A) has rightly held that A.O. was not justified to deny deduction to the assessee u/s. 80-IB(10) of the Act on the ground that the assessee violated one of the conditions that an individual flat size exceeded 1500 sq.ft., which is factually incorrect. Accordingly, ground No.4 of the appeal taken by the department is also rejected. 28. Before we conclude this appeal, we observe that A.O. has also rejected the book results of the assessee on the ground that the method of accounting followed by the assessee is not in conformity with AS-7 issued by ICAI. According to this method, the assessee shall be obliged to recognize revenue on year to year basis by following the partial completion of project m....