TaxTMI 
TaxTMI 
2017 (11) TMI 684
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....01999 and was still incomplete by 31.03.2008 in violation of section 80IB(10)(a)(i) of the Act which requires such project to be completed before 31.03.2008? 2) Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Income Tax Appellate Tribunal erred in allowing the claim u/s.80IB(10) of the Act on partial completion of the housing project holding that such deduction was available on standalone basis without appreciating the fact that the housing project was approved by the local authority on 6101999 wherein construction of complete A to F buildings and were sanctioned and completion certificate was admittedly not issued by Pune Municipal Corporation with respect to building G of Dayanand Gardens since the project also comprised of "G" building which contains 10 shops admeasuring 2490 sq. ft and violated the condition given u/s 80IB(10)(d)? 3) Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Income Tax Appellate Tribunal erred in allowing the deduction u/s. 80IB(10) of the Act to the housing project Dayanand Gardens since the project also comprised of "G" building which contains 10 shops admeasuring 2490 sq.....
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....peals: 1. Order dated 4th February, 2013 in the case of The Commissioner of Income TaxII vs M/s. Rahul Construction Co. [Income Tax Appeal (L) No.1404 of 2012], 2. Order dated 8th April, 2015 in the case of The Commissioner of Income TaxIII, Pune vs Runwal Multihousing Private Limited [Income Tax Appeal No. 1493 of 2013], 3. Order dated 28th January, 2013 in the case of The Commissioner of Income TaxII, Pune vs M/s. Aditya Developers [Income Tax Appeal (L) No.1090 of 2012 & Income Tax Appeal (L) No.1091 of 2012], 4. Order dated 18th June, 2014 in the case of The Commissioner of Income Tax20 vs Shri Laiq Ahmed Shaikh [Income Tax Appeal No. 313 of 2012 with Income Tax Appeal No.314 of 2012], 5. Order dated 29th August, 2016 in the case of The Commissioner of Income TaxII vs Kumar Builders Consortium [Income Tax Appeal No. 250 of 2014], 6. Commissioner of IncomeTax vs Vandana Properties, reported in [2013] 353 ITR 36 (Bom), 7. Order dated 4th February, 2016 in the case of The Commissioner of Income Tax21 vs M/s. Aakash Nidhi Builders & Developers [Income Tax Appeal No. 2244 of 2013]. 6. Therefore, we should also admit these Appeals. 7. We impressed upon the counsel for....
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....he Tribunals throughout have been relying upon the judgments in Brahma Associates (supra) and Vandana Properties (Supra) to hold that a housing project do not cease to be as such even if that project is divided into construction of number of buildings, some of whom are entirely commercial and still the deduction cannot be disallowed. That is without finding out whether such commercial users are permitted within an exclusive residential zone, and therefore, residential buildings and the commercial buildings can qualify for the expression "housing project" or whether such commercial buildings should be excluded from the purview of the same. Similarly, when the housing project comprises of or envisages construction of several buildings, some of whom are constructed earlier but some later on, whether the later buildings can be construed as independent housing projects for the purpose of Section 80IB( 10) deduction or whether they being part and parcel of a single housing project, it would be only on the clear stipulations in the provision that the deduction would be allowed. In other words, if the construction goes beyond the time limit specified by the Section, then no deduction is pe....
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....f March, 2005, within four years from the end of the financial year in which the housing project is approved by the local authority; (iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority. Explanation.For the purposes 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 local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevel....
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....r years from the end of the financial year in which the housing project is approved by the local authority. 16. Then there is a third category and which deals with the projects approved by the local authority on or after the 1st April, 2005, and therefore, it should be within five years from the end of the financial year in which the housing project is approved by the local authority. 17. Then there is an explanation and for the purpose of this clause, namely clause (a) of Section 80IB( 10), which clarifies that 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 approved by the local authority and 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 local authority. 18. The other important conditions are to be found in clauses (b), (c), (d), (e) and (f) and ending finally with an explanation. The explanation declares that nothing contained in Subsection (10) of Section 80IB shall apply to any....
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..... As is the criticism of the Revenue, its selective approach leads to further confusion and conflict. That is not to the benefit of anybody. 29. However, it is conceded that Appeals were filed in the case of Varun Developers for the assessment year 20082009 being Income Tax Appeal (L) No. 1204 of 2013 and filed on 29th July, 2013 and for the assessment year 20092010 being Income Tax Appeal (L) No. 944 of 2014 filed on 5th May, 2014. The orders passed in the case of Varun Developers may not be before us, but what is material for our purpose is that there was an Appeal brought before this Court in the case of one Rahul Construction Co. The very questions proposed as substantial questions of law were proposed in that case also. Similarly, in the case of Vandana Properties (supra) as well, the Commissioner of Income Tax, Mumbai, brought an Appeal. It is contended that the Revenue has not accepted the decision in the case of Vandana properties. 30. Concededly, the Tribunal in the impugned orders has, apart from relying upon the orders passed by its coordinate benches, also relied upon the order in the case of Rahul Construction Co. That was rendered by the Pune Bench. 31. The facts n....
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.... certificate/IOD (Intimation of Disapproval) as is commonly known in the Mumbai Municipal limits, was granted during the year 1993 to 1996. By following the workinprogress method of accounting, the assessee offered to tax the income earned by construction of buildings "A", "B", "C" and "D" from time to time. Deduction under Section 80IB( 10) of the IT Act on the income earned from these buildings was not claimed as the approval for construction of these buildings was granted prior to 1st October, 1998. Pursuant to an order of the State Government in the year 2001 permitting conversion of the status of the land, the assessee became entitled to construct an additional building "E" on the aforesaid plot of land. The building plan for construction of building "E" with several residential units on the said plot of land was submitted by the assessee. The building plan for construction of building "E" was approved on 11th October, 2002. That was a conditional approval. Thereafter, commencement certificate for this "E" building was issued on 10th March, 2003. The returns of income were filed for the assessment years 20042005 and 20052006, in which the assessee estimated its profits from th....
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....ober 11, 2002, as and by way of extension of the approval granted to the earlier housing project consisting of the A, B, C and D buildings. Since approval to the housing project consisting of the A, B, C, D and E buildings was first granted in the year 1993, it must be held in view of the Explanation to section 80IB( 10)(a) of the Act that the housing project has commenced development and construction when the first approval was granted in the year 1993 and to such a housing project which has commenced prior to October 1, 1998, the deduction under section 80IB( 10) could not be granted. 13. Counsel for the Revenue further submitted that for claiming deduction under section 80IB( 10), the housing project must be on the size of a vacant plot of land which has a minimum area of one acre. The submission is that, unless the housing project has commenced development/construction on or after October 1, 1998, on a vacant plot of land of the size having a minimum area of one acre, the benefit of deduction under section 80IB( 10) would not be available. In the present case, the assessee has construed the "E" building on the size of a plot of land admeasuring 2.36 acres on which four build....
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....roup 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. 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. The question, then, to be considered is, whether construction of the "E" building is an independent housing project or extension of the housing project already existing on the plot in question. It is the contention of the Revenue that since the approval for construction of the "E" building was granted by the local authority subject to the conditions set out in the first approval granted on May 12, 1993, for construction of the A and B buildings, construction of the "E" building must be considered to be the extension of the earlier housing project for which approval was granted prior to October 1, 1998, and, therefore, the benefit of section 80IB( 10) cannot be granted. There is no merit in the above....
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....om April 1, 2005, is also misplaced. What the said Explanation contemplates is that where the approval in respect of a housing project is granted more than once, then, that 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. For example, in respect of a housing project, the assessee may seek amendment of the building plan at several stages of the construction and the same may be approved. In such a case, the Explanation provides that for the purposes of section 80IB( 10) the housing project shall be deemed to have been approved on the date on which the first approval was granted by the local authority. Thus, the Explanation to section 80IB( 10)(a) 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 the "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....
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....ble for section 80IB( 10) deduction. If the construction of section 80IB( 10) put forth by the Revenue is accepted, it would mean that if on a vacant plot of land, one housing project fulfilling all conditions is undertaken, then deduction would be available to that housing project and if thereafter several other housing projects are undertaken on the very same plot of land, the deduction would not be available to those housing projects as the plot ceases to be a vacant plot after the construction of the first housing project. Such a construction if accepted would defeat the object with which section 80IB( 10) was enacted. 39. The Division Bench, in paragraphs 27, 28 and 29, referred to the CBDT circulars, the provisions in details and negatived the arguments of the Revenue. 40. Finally, in paragraph 30, the merger of flats was considered. 41. Then, the Tribunal's order was maintained. 42. In Bramha Associates, which was a decision prior to Vandana Properties, the argument was that Section 80IB( 10) as originally enacted, allowed 100% deduction on the profits derived from the housing projects approved by a local authority subject to the conditions set out in the Section. T....
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....which are approved by local authorities. Therefore, for the purposes of section 80IB( 10) which project should be treated as a housing project is left to the local authorities. The question, therefore, to be considered is, whether a local authority can approve a project to be a housing project with commercial establishments. 19. Development of every region is regulated by the concerned local authority in accordance with the Development Control Rules/Regulation framed by the local authority. The Development Control Rules/Regulation are framed by the local authority depending upon the needs of that region and hence differ from region to region. We have perused Development Control Rules framed by the authority at Pune and Mumbai. In both cases, it is seen that the DC Rules framed by the local authorities do not define the expression "housing project". Thus, the expression "housing project" is neither defined under the Incometax Act nor is it defined under the Development Control Rules/Regulation framed by the local authorities. Therefore, which project would qualify to be called as a housing project has to be gathered from the Rules/Regulation framed by the local authority. 20. I....
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....gislature introduced 100% deduction on the profits derived from housing projects approved by a local authority, it was present to its mind that local authorities could approve projects as housing projects with commercial user to the extent permitted under the DC Rules framed by the respective local authorities. In other words, such projects could be approved and if those are approved, there is no question of the incometax authorities going beyond such approval and determining the deduction claim by applying user test. In other words, whether the housing project is of only and purely residential units and not commercial units or no commercial user is contemplated by it, was an issue or question not open for the incometax authorities to decide, particularly when the projects have been approved as housing projects by the planning authority/local authority. 44. It is in these circumstances the Division Bench, in paragraphs 25, 26 and 27 concluded as under : "25. It is not in dispute that where a project is approved as a housing project without or with commercial user to the extent permitted under the Rules/Regulations, then, deduction under section 80IB( 10) would be allowable. In o....
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....nient ('convenience' ought to be the correct expression) shopping could be considered as housing projects under Section 80IB( 10) up to 1st April, 2005. That argument has also been rejected by holding that the incometax authorities cannot contend that the projects with convenience shopping alone could be considered as housing projects and whether the local authority could have approved any project as a housing project without convenience shopping. Therefore, the commercial user should be restricted to that phrase and expression, which was the contention or argument raised in the alternate, came to be rejected. 46. The Special Bench judgment under Appeal in Brahma Associates (supra) was partially reversed and on the point noted in paragraphs 30 and 31. These paragraphs read as under: "30. The question then to be considered is, whether the Special Bench of the Tribunal was justified in holding that the projects having commercial area up to 10 per cent of the builtup area of the plot are eligible for deduction under section 80IB( 10) on the entire project up to April 1, 2005. Once the basic argument of the Revenue that housing projects with commercial user are not entitled ....
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....ionwise in paragraph 33 which reads as under: "33. In the result, the questions raised in the appeal are answered thus: (a) Up to March 31, 2005 (subject to fulfilling other conditions), deduction under section 80IB( 10) is allowable to housing projects approved by the local authority having residential units with commercial user to the extent permitted under the Development Control Rules/Regulations framed by the respective local authority. (b) In such a case, where the commercial user permitted by the local authority is within the limits prescribed under the Development Control Rules/Regulation, the deduction under section 80IB( 10) up to March 31, 2005 would be allowable irrespective of the fact that the project is approved as "housing project" or "residential plus commercial". (c) In the absence of any provisions under the Incometax Act, the Tribunal was not justified in holding that up to March 31, 2005 deduction under section 80IB( 10) would be allowable to projects approved by the local authority having residential building with commercial user up to 10 per cent of the total builtup area of the plot. (d) Since the deduction under section 80IB( 10) is on the pro....
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....al, it has to be treated as a housing project and in that regard, the High Court made observations by relying on the Development Control Regulations under which the local authority sanctions the housing projects and noted that in these Development Control Regulations itself, an element of commercial activities is provided, but the total project is still treated as housing project. 53. The Hon'ble Supreme Court, in paragraphs 4, 5 and 6 of its order held as under : "4. We are in agreement with the aforesaid answers given by the High Court to the various issues. We may only clarify that insofar as answer at para (a) is concerned, it would mean those projects which are approved by the local authorities as housing projects with commercial element therein. 5. There was much debate on the answer given in para (b) above. It was argued by Mr. Gurukrishna Kumar, learned senior counsel, that a project which is cleared as "residential plus commercial" project cannot be treated as housing project and therefore, this direction is contrary to the provisions of Section 80IB( 10) of the Act. However, reading the direction in its entirety and particularly the first sentence thereof, we fi....
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....g of its findings and conclusions in the manner suggested by the Revenue would be plainly violating not only the rule of precedents but also the discipline. It would also be doing violence to the language of those statutes to which we have made a reference in details in the foregoing paragraphs. 56. Hence, we are of the view that the questions which we have reproduced above in all these Appeals would have to be answered in favour of the assessees and against the Revenue. They having been so answered, these Appeals cannot be entertained. Once all these questions stand concluded and answered authoritatively by this Court, then all the more, we are disinclined to entertain these Appeals. 57. As far as the other three questions and stated to be additional questions in Income Tax Appeal No. 452 of 2015 (question nos. 1 to 3 as reproduced above), the Tribunal found on facts that for the assessment year 20052006, the assessee filed return of income declaring certain income after claiming deduction under Section 80IB( 10) of Rs. 1,75,81,295/. 58. The Assessing Officer compared the profitability figures of "Shivanand Garden" project of which deduction under Section 80IB( 10) was not avai....