TaxTMI 
TaxTMI 
2010 (8) TMI 1081
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....he original assessment order was passed u/s 143(3) on 27-02-2004 for the assessment year 2001-02 and the total income was assessed at Rs. 2,44,58,100/-. The claim for deduction u/s.80(IB) (10) was allowed. 3. Search and seizure operation was carried out u/s 132 of the Income-tax Act, 1961 in the Akruti Group of cases including the assessee on 10-08-2006. Notice u/s 153A was served on the assessee on 09-04-2006. The assessee filed a return of income in response to the notice u/s 153A, on 08-05-2007, declaring the total income of Rs. 2,48,33,420/-. In this return of income, the assessee claimed a deduction u/s 80IB(10) as was done in the original return of income. On the claim of deduction u/s 80IB the AO at para 3, 3.1 and 3.2 of page No.2 of the assessment order brings out the following facts. "3. Claim of Deduction Under Section 80IB 3.1 During the period from Assessment Year 2001-02 to 2007-08 the assessee had undertaken several projects, the details of which are as under : i. SRA Project at Saiwadi ii. SRA Project at Gavanpada iii. SRA Project at Mayanagar iv. SRA project at Ashram Chawl v. SRA Project at MIDC vi. Project at Shastri Nagar vii. Commercial Proje....
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....e evidence gathered during the course of search and subsequently, clearly showed that the assessee had made false claim for deduction. After considering the objections of the assessee at para 3.9 page 13 of his order, he held that claim for deduction u/s. 80-IB(10) for assessee's project at Pocket 7 at MIDC and for the assessee's Ashram Chawl Project arise in the impugned assessment years and that in both these cases, the assessee has fulfilled all conditions specified u/s.80-IB(10) except the condition of the "Project" being on a plot of land which is more than one acre. 4. In all these four appeals we are concerned only with Pocket 7 and 10 of the MIDC and Ashrm Chawl Project and the only issue thast is to be decided is whther the project is constructed on a plot of land which is more than one acre. 5. The issue is the claim of deduction u/s 80IB(10) of the Act with regard to project at Pocket No.7 MIDC arises for the assessment years 2002-03 and 2003-04 and the issue in respect to claim of deduction u/s 80IB(10) with respect to Project at Ashram Chawl in Vile Parle (East), Mumbai arises for the assessment years 2002-03 and 2004-05. 6. As already stated the sole ground on whic....
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....w, the learned CIT(A) erred in disallowing the claim under section 80IB(10) of the I.T. Act, 1961 of Rs. 2,87,51,140/- that was made for the project at Pocket 10, MIDC holding (by enhancement) that the appellant would have been eligible for deduction only if it had constructed commercial are up to a maximum of 6404.35 q.ft. (10% of rehab building portion of 64043.54 sq.ft.) and the appellant could not show that the income from construction of residential unit could be worked out separately. 9. The learned counsel for the assessee Mr. Vijay Mehta filed an additional ground of appeal in all the four appals, which reads as follows : "The learned CIT(A) has erred in law and in facts in confirming/enhancing the rejection of claim u/s 80IB(10) of the Act in respect of projects at Pocket 7 and Pocket 10, MIDC, Andheri without appreciating the fact that no incriminating material pertaining to the above projects have been found during the course of search. The learned CIT(A) ought to have appreciated that in the absence of any incriminating document found during the course of search which could be relied upon by the AO/CIT(A) while rejecting the above claim, the assessment order passed u....
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....rder of the Tribunal in the case of LMJ International Ltd. vs. DCIT 119 TTJ 214 (Kol). b) Order of the Tribunal in the case of Shri Anil Kumar Bhatia vs. ACIT and Anr. In ITA Nos. 2660 to 2665/Del/2009 and others for A.Ys. 2000-01, 2002-03 to 2006-07. c) Order of the Tribunal in the case of Shri Anil P. Khemani vs. DCIT in ITA Nos. 2885 to 2860/Mum/2008 for A.Ys. 1999-00 to 2004-05. d) Order of the Tribunal in the case of M/s Viraj Forgings Ltd. vs. DCIT and Anr. in ITA No. 1948 and 1949/Mum/08 for A.Y. 2001-02. e) Order of the Tribunal in the case of Meghmani Organics Ltd. vs. DCIT 129 TTJ 255 (Ahd). f) Order of the Tribunal in the case of S.K. Jain vs. ACIT in IT(SS)A Nos. 210 to 216/Ind/2007 dated 28-01-2010. The learned counsel submitted that the AO did not acquire any jurisdiction to make the impugned addition as the original assessment in question, did not abate. He submitted that the mandate of section 153A of the Act, is to compute the total income as it is understood, in the sense the total income means, income originally assessed plus any further income arising out of seized material. He submitted that the assessment orders passed u/s 143(3) become final and no....
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.... section 80IB(10) of the Act is to be taken as per the records or the same is required to be divided or apportioned notionally on certain basis. He vehemently contends that the working in section 80IB(10)(b) is amply clear and does not call for any lengthy process of interpretation and that literal interpretation has to be applied. He submitted that the section does not provide for any formula for notional division of the plot area. He further submits that the section also does not provide for any prohibition, on the nature or type or extent of the construction on the said plot of land, outside the eligible project. Thus he argues that, since it is accepted that the rehab building is an eligible project and the sale building is an ineligible project, there is no question of providing any artificial condition about the nature and extent of the ineligible construction outside eligible project. He placed reliance on the decision of the Tribunal in the case of Vandana Properties 30 SOT 392. He referred to the representation made by the Maharashtra Chamber of Housing Industry to the Hon'ble Finance Minister which is at page 90 to 93 of the paper book and submitted that from the reply, o....
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.... by the decisions of the Division Bench of the Tribunal in the case of Vandana Properties and Saroj Sales Organisation. 16. The learned counsel reiterated his contention that the rehab building is completely different in all respects from the sale building and hence these are two different projects. He further contended that without prejudice to his main contention, if at all a portion of the plot is to be deducted from the total plot area, then only the land beneath the sale building may have to be eliminated and not any other portion of the land. He submits that this is only an alternative argument and that his primary argument is that literal interpretation of section 80IB(10)(b) of the Act is to be applied. 17. Coming to ground No.2, which is disallowance of claim u/s 80IB(10) in respect of Pocket 10, MIDC, Andheri, the learned counsel submitted that the project consisted of both residential as well as commercial areas and the CIT(Appeals) had committed an error and enhanced the assessment order by holding that the commercial area of 10,012 sq.ft. is more than 10% of the plot area and that the order of the Special Bench of the Tribunal in the case of Bramha Associates is appl....
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....ring the course of search. He submitted that the non obstante clause in section 153A, makes this intention very clear. He submits that the issue of notice for the period of 6 years for making of assessments u/s 153A(1)(b) is mandatory, irrespective of any other provisions of the Act and that it grants automatic jurisdiction to the AO. He submits that these are mandatory provisions and the AO has no discretion in the matter and notice has to be issued for six years. He contends that once a notice is mandatory, the AO automatically assumes jurisdiction for all the six years and the Act provides that the AO has to assess or reassess the total income for six years, after considering all other provisions of the Act and evidence available with him on the basis of seized material as well as otherwise. He submitted that the total income as defined in section 2(45) is the total income as per section 5 computed in accordance with the provisions of the Act. Thus he submits that the assessments need not be based on seized material, since the word used is 'total income' and the AO is bound to make an assessment, whether based on seized material or otherwise, so as to compute the total income as....
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....submits that it is not material and physical form that can be construed as evidence and information can be in intangible form and that in income-tax proceedings the rigours of evidence are much lesser. He relied on number of case laws for these propositions. Further he relied on series of case laws for the proposition that even in a block assessment, when entries are found in the books of account and when there is no material sized during the course of search, the AO can still make an addition u/s 158BC. On similar analogy he submits that even u/s 153A, additions can be made when there is no tangible material. 23. The learned DR further relied on the decision of the Delhi Bench of the Tribunal reported in 117 ITD 74 (Del) in the case of Shivnath Roi Harnarain (India) Ltd. vs. DCIT for the proposition that there is no requirement for an assessment u/s 153A being based on any material seized in the course of search. He further relied upon another decision of the Delhi 'G' Bench of the Tribunal in the case of Shyam Lata Kaushik 114 ITD 940 (Del) wherein it is held that the AO gets jurisdiction for making an assessment made u/s 153A, being based on any material search seized in the co....
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....ich has a single demarcation number in the municipal record. While agreeing that the rehab portion is a separate project and the sale building portion is a separate project and while agreeing that the area of the plot of land is of 1.43 acres, he submitted that the land beneath project is not common and that the same can be physically identified separately. He submitted that the plot area used under rehab portion is 0.79 acres only and the plot under same building portion is 0.64 acres. He submitted that the assessee himself admitted and treated these two projects separately and is considered the sale building portion, as distinct and ineligible project as far as deduction u/s 80IB(10) is concerned. The rehab portion was only claimed as eligible for deduction u/s 80IB(10). The sum and substance of the submission of the learned Departmental representative is that, he does not dispute the contention of the assessee that these are different projects. 26. Mr. Srivawsta submitted that a plain reading of section 80IB(10) makes it clear that deduction is project specific and all conditions of that section have to be fulfilled in respect of each project on standalone basis. He submits tha....
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....which has been actually used in the eligible project, can be considered, for this purpose of computing the size of the plot of eligible project. He submitted that the words used is 'profits derived from an undertaking' and thus the profits of an undertaking have to be separately computed on standalone basis 28. Mr. Srivastava further submitted that the assessee has only authority to construct on the plot of land and that it does not own it. He argued that once the two projects are separate and independent, the land used under the commercial project cannot be taken on notional basis for computing the minimum limit of one acre of land used for eligible project. He relied on the decision of the Pune Bench of the Tribunal in the case of Om Engineers and Builders 109 ITD 235 (Pune). He strongly disputed the contention of the assessee that the judgment of Brahma Associates is distinguishable and submitted that the case of the assessee is worse than that of Brahma Associates. He submitted that in the case before the Special Bench, it was held that one acre limit, has to be satisfied after excluding the area under commercial unit, though in that case the commercial unit was part of the sa....
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....ibunal in the case of Saroj Sales Corpn. and Vandana Properties, he submitted that these decisions were not referred to in the case of Brahma Associates. On a plea of the assessee that on principle of consistency the claim should be allowed, as the Department has been allowing the claim of the assessee in the earlier assessment years, he submitted that the rule of consistency does not apply and for this he relied on the decision of the Hon'ble Supreme court in the case of Oswal Agro Mills 313 ITR 24 (SC) and the case of C.K. Gangadharan 304 ITR 61 (S.C.). He submitted that in this case also a substantial question of law is involved as to whether the assessee fulfils the condition of one acre or not and hence the principle of consistency cannot be applied. He prayed that the order of the first appellate authority be upheld. 31. In his rejoinder, the learned counsel for the assessee, Mr. Vijay Mehta, submitted that : a) it is a common case of both the assessee and the Revenue that the rehab portion and the sale building portion are two different projects and that the deduction u/s 80IB(10) is being claimed on the project consisting of rehab portion. Hence, he submitted that the un....
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....Brahma Associates there is no wholly residential project to begin with and the project is having commercial area of more than 10%, it would make the assessee ineligible in normal circumstances. He contended that in the case of the assessee the fact that it is a pure residential project, without any commercial component is not in dispute. He repeated his contention that simply there are some ineligible construction on the plot of land, the question of denying exemption does not arise when the conditions are satisfied. Referring to the CBDT letter, he submitted that it talks about fulfilment of other conditions and this means the conditions other than the condition of one acre land. He referred to page No. 90 of the paper book. He strongly disputed the contentions of the learned DR that the plot actually used under the residential project should be 1 acre and submits that no such requirement exists in the statute. On the other hand, he submits that if it is the intention of the legislature that the assessee should use the entire 1 acre for commercial purpose, then the same would have been interpreted in the statute itself. He contended that there is no absurd result in the present ca....
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...., nothing incriminating was found during the course of search as far as the assessment year 2001-02 is concerned, we find that in case where no material whatsoever is found in the search, there are different views taken by different Bench of the Tribunal on this issue. 37. The case laws in favour of the assessee are as follows : g) Order of the Tribunal in the case of LMJ International Ltd. vs. DCIT 119 TTJ 214 (Kol). h) Order of the Tribunal in the case of Shri Anil Kumar Bhatia vs. ACIT and Anr. In ITA Nos. 2660 to 2665/Del/2009 and others for A.Ys. 2000-01, 2002-03 to 2006-07. i) Order of the Tribunal in the case of Shri Anil P. Khemani vs. DCIT in ITA Nos. 2885 to 2860/Mum/2008 for A.Ys. 1999-00 to 2004-05. j) Order of the Tribunal in the case of M/s Viraj Forgings Ltd. vs. DCIT and Anr. in ITA No. 1948 and 1949/Mum/08 for A.Y. 2001-02. k) Order of the Tribunal in the case of Meghmani Organics Ltd. vs. DCIT 129 TTJ 255 (Ahd). l) Order of the Tribunal in the case of S.K. Jain vs. ACIT in IT(SS)A Nos. 210 to 216/Ind/2007 dated 28-01-2010. 38. The case laws in favour of the Revenue are as follows : i) Shivnath Roi Harnarain (India) Ltd. vs. DCIT ITA Nos. 4109, 4103....
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....No. 1 on merits. Before adjudicating the matter it would be appropriate to list out the facts which are not in dispute between the parties. 42. Pocket 7 consists of Building 1, Building 2, Building 4, Building 5, Building 6 as well as sale building. Each of these buildings has been treated as a separate project by the assessee and has been assessed as such, by the Revenue. The other undisputed fact is that buildings 1, 2, 4, 5 and 6, i.e. except sale building are purely residential buildings and have no commercial component in the same. Sale building is a purely commercial building with no residential component in the same. The project in the form of 'Re-hab' building No.4 and the project in the form of 'Re-hab' building No. 6 were completed during the assessment year 2000-01 and the assessee had claimed deduction u/s 80IB(10) and the same was allowed u/s 143(3) in the original assessment proceedings. Possibly, because these projects were completed beyond the period of 6 years from the date of search, due to limitation, they could not be reassessed u/s 153A read with section 143(3). The other undisputed fact is that the total area of the plot is 1.43 acres i.e. 62571.13 sq.ft. It ....
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....ound that this is a project by itself. Each such a project is on a size of a plot of land, which has a minimum area of 1 acre in fact the plot area is 1.43 acre. The literal interpretation would lead to a conclusion that the profits from that project would be ordinarily eligible for deduction u/s 80IB(10). Such an interpretation cannot be rule out though the arguments of the ld. Departmental Representative at some points seemed to attractive at the first blush. When the meaning is evident from the plain reading of the statute, there is no necessity of going into the intention of legislature, mischief rule or other interpretations. It appears to us that the literal interpretation, gives the benefit to the assessee. This is our prima facie opinion. Before we decide the issue we examine the case laws as well as the reply of the Finance Ministry to a query by the Chamber of Housing Industry. 44. At page 90 of the assessee's paper book, a photo copy of a letter addressed by the Mahrashtra Chamber of Housing Industry dated 1st January, 2001, to the then Hon'ble Minister of Finance is enclosed. Para 2 of the letter is extracted below for ready reference: "2. There were certain areas in....
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....round that there exists shopping centres within the residential complex, though it may form a very insignificant portion of the total project area. However, going by the present day concept of township, facilities like school, garden play area etc. are mandatory. The undertaking developing the housing project is likely to lose the benefit merely on the ground that any such housing project include the facilities enumerated or a public circular may be issued to ensure that such legal complications may not arise in future. On the alternative, it is recommended that suitable amendment be made to define the term "Housing Project" to include various ameneticies and facilities. Inter-alia, including that of a 'convenient shopping' etc. In response, the Ministry of Finance, Government of India in F.No.205 3 001 ITA II vide letter dated 4th May, 2001 has clarified as under : "The undersigned is directed to refer to your letter No. MCHIRSAim:388/19799/3 dated 1st January, 2001 and to state that the additional housing project on existing housing project site can qualify as infrastructure facility under section 10(23G) and 80IB(10) provided it is taken up by a separate undertaking having se....
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....page 336 brings out the issue in the following manner. "(a) The deduction under section 80IB(10), as applicable prior to April 1, 2005, subject to and in the light of the observations made in the preceding paragraphs, is admissible in the case of a 'housing project' comprising of residential housing units and commercial establishments. In case these projects are approved as projects by the local authority, such an approval as housing project is sufficient for the purpose of eligibility. In any other case, where 90 per cent or more of the total built-up area is used for dwelling units, in accordance with the scheme of section 80IB(10), the benefit of deduction under section 80-IB(10) will not be declined. 49. Reading of the above shows that the decision was on the residential segment of the project, which means as claimed by the ld. Counsel of the assessee that a single project has both a residential segment, as well as a commercial segment. In this case the undisputed fact is that a residential project in the form of rehab buildings 1, 2, 3, 5, 6 do not have any commercial built up area or segment at all. Thus, we may have to agree with the ld. Counsel for the assessee that the ....
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....enities and the assessee has not claimed any relief in respect of project which admittedly does not admit the test laid down under s. 80IB(10). Combining these two projects into one will lead to a result which manifestly will be unjust and absurd and defeat the very provisions of deduction sections. Unless there is a clear intention of the legislature the Revenue cannot be permitted to do so. After all the assessee has obtained different commencement certificates and started on different periods of time. They are separate by time, space and statutory approvals and even in designs, maintenance of separate books of account. The Revenue is not right in treating both the projects as one and integrated without the facts warranting for such conclusion. Objection of the AO that as the permissible shopping area of housing project exceeds 5 per cent, the assessee is not entitled for relief under s. 80IB(10) is not sustainable. The housing projects were approved before 31st March, 2005 and for such project which were so approved, there was no stipulation as to the shopping complex area is permissible in the project. The amendments were subsequently made while extending the deduction of incom....
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....buildings, then area allocated to building 'E' was less than one acre. In clause (b) to section 80-IB(10), it is provided that the project should be on a size of plot of land which has minimum area of one acre. As the area statement given in the plans, there was no specific demarcation made in respect of the plot of 2.36 acres. The surplus land available with the assessee or earlier owner was given the status as 'Within Ceiling Limit (WCL) and due to change or conversion of the land status, the assessee was able to plan the project for Building 'E'. The assessee brought to the Tribunal's notice the correspondence made by the Maharashtra Chamber of Housing Industry, Mumbai with the Finance Minister, Government of India, New Delhi, seeking clarification of certain aspects on section 10((23G) and section 80-IB(10). The main issue was in respect of the treatment to be given to the Transfer of Development Rights (TDR) which was purchased by the developer and used on the existing plot of land or the project. As per the letter dated 4-5-2001, the CBDT, New Delhi had replied giving the clarification that additional housing project on the existing housing project can qualify for exemption....
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....-03, both the parties submitted that the facts and arguments are similar to the facts and arguments for the assessment year 2001-02 though the project in question is at Ashram Chawl. As the plot area recorded by the CIT(Appeals) is 1.298 acres, for the same reasons given while disposing of ITA No. 4869/Mum/2009 for the assessment year 2001-02, we allow this ground of the assessee. 56. For the assessment year 2003-04 the additional ground is dismissed for the same reasons as those given while disposing of the additional ground for the assessment year 2001-02 and ground No.2 is set aside to A.O. allowed for the same reasons given while disposing of ground No.2 for the assessment year 2001-02. 57. Coming to assessment year 2004-05 both the parties submitted that ground No.1 is in respect of project Ashram Chawl and the issue is identical to ground No.1 for the assessment year 2002-03 and for the same reasons that are given while dealing with the issue for the assessment year 2001-02, we allow this ground. 58. Coming to ground No.2 for the assessment year 2004-05, it is with respect to an addition made u/s 2(22)(e). The facts are brought by the AO at para 8 page 29 to 31 of the asse....
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.... of funds are with the object of achieving a common objective. 60. In the case of M/s Chandra Cement vs. DCIT 68 TTJ (Jaipur) 35, the Jaipur Bench held as follows : "When one single individual is managing the affairs of two concerns and the decision to transfer the funds from one concern to another or to repay the funds could have been said to have been largely influenced by the same individual, it cannot be said that transaction partake the nature of either deposit or loan. The Hon'ble Madhya Pradesh High Court has in the case of Patiram Jain held that : It has also been accepted by the respondents that the transactions made between the two sister concerns were under exceptional circumstances to accommodate the emergency needs of the sister concern for a very short and temporary period. As such, it did not amount to a loan or deposit as defined under Section 269SS of the Income-tax Act. The Cochin Bench of the Tribunal in Muthoot M. George Bankers vs. ACIT (1994) 47 TTJ (cochin) 435 held as under : "Against the background, we examine the transactions between the sister concerns and the assessee There are transfer of funds from and to the sister concerns. There is no evide....