TaxTMI 
TaxTMI 
2015 (5) TMI 1172
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....nce. 3. The assessee in ITA No s.1691 & 1692/PN/2012 relating to assessment years 2006-07 and 2007-08 has raised the common grounds of appeal. However, reference is being made to the facts and issues in ITA No.1691/PN/2012 to adjudicate the issue. The grounds of appeal read as under:- "1. On the facts and in the circumstances of the case and in law the honourable CIT(A) erred in confirming the disallowance of deduction claimed under section 80IB(10) in respect of Sector No. 7 without appreciating the fact and the legal position that the amendment brought in by Finance Act, 2004 is applicable prospectively to the housing project and the building plan of which is approved after 1st April 2005. The appellant hereby prays that the deduction claimed under section 801B(10) in respect of profits derived from Sector No. 7 may please be granted. 2. On the facts and in the circumstances of the case and in law the honourable CIT(A) erred in confirming the disallowance of deduction claimed under section 801B(10) in respect of Sector No. 7 even though the appellant has completed the construction of substantial portion of the Sector No. 7. The appellant hereby prays that the....
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....gh the appellant has completed the construction of substantial portion of the Sector No. 7. The appellant hereby prays that the deduction may please be granted. 3. On the facts and in the circumstances of the case and in law the honourable Commissioner of Income Tax (Appeals) Pune erred in not allowing the proportionate deduction under section 80IB(10) in respect of the project completed on Sector No. 7 before 31st March 2008. The appellant hereby prays that the proportionate deduction in respect of project completed before 31st March 2008 may please be granted. 4. The appellant hereby reserves the right to add, raise, delete any additional ground/grounds before the completion of the hearing." Padmavati Developers 6. The issue arising in the present appeal is against the deduction under section 80-IB(10) of the Act. 7. Briefly, in the facts of the present case, assessee was a builder and had undertaken project at Chinchwad. The land on which the assessee had constructed the project was initially purchased by a Co-operative Housing Society namely Premier Sahakari Gruh Rachana Sanstha Maryadit, wherein some of the partners of the assessee firm and the....
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....xcept 4 residential units of the said buildings. In connection with the approval of the plan on 15th December, 2003 i.e. before 31st March, 2004, the Ld. Authorized Representative for the assessee pointed out that in order to consider the eligibility of the housing project, one has to go through the legislative history of the section and the provisions applicable on the assessee. It was further pointed out by the Ld. Authorized Representative for the assessee that section 80-IB(10) of the Act was brought on statute by the Finance Bill, 1999 which was amended year to year. The plea of the assessee before the Assessing Officer was that since the provisions of section 80-IB(10) of the Act were substantive in nature, no retrospective effect of the same could be given. The Assessing Officer, in turn, observed as under : - "6. The Issue of whether an amended provision is substantive or clarificatory came in the Apex Court in the case of Gold Coin Health Food Pvt. Limited (Civil Appeal No.5065 of 2008). In this case, the issue before the Hon'ble Apex Court was to see whether explanation 4 to section 271(1)(c) substituted by Finance Act 2002 w.e.f. 01.04.2003 is substantive or cla....
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....proval of the project, as per the Assessing Officer, was illogical, where the Finance (No.2) Act, 2004 had made very clear that the project approved prior to 31.03.2004 had to be completed by 31.03.2008. Since the project of the assessee was approved prior to 01.04.2004 where the assessee had not fulfilled the condition laid down in the Act to be eligible for the said deduction and hence deduction under section 80-IB(10) of the Act cannot be allowed to the assessee on this account. The claim of the assessee for deduction to the tune of Rs. 3,78,78,880/- under section 80-IB(10) of the Act was rejected. 10. Before the CIT(A), the main plank of argument of the assessee was that there was no condition for time limit within which the project had to be completed, since the project of the assessee was approved by the PCMC vide commencement certificate dated 15.12.2003. It was further argued that the provision relevant to section 80-IB(10) of the Act at the relevant time did not provide any time limit within which the project has to be completed and the Finance (No.2) Act, 2004 had specified two conditions from assessment year 2005-06 where the projects were approved before 01.04.2004, ....
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....ot be produced before the Assessing Officer due to time constraint. However, the approved plans were available with the Assessing Officer, from which it was discernable that the projects of Sector No.1 and Sector No.7 were separate, so far as deduction under section 80-IB(10) of the Act was concerned. The said additional evidence along with the submissions of the assessee were confronted to the Assessing Officer and remand report was called for. The CIT(A) has reproduced remand report at pages 24 to 26 of the appellate order, in which the Assessing Officer objected to the admission of the additional evidence. It is further stated that there was no merit in the said certificate of the Architect filed by the assessee, wherein Architect had not explained in anyway the reasoning for considering the Sector No.1 and Sector No.7 were separate and independent projects. The Assessing Officer further placed reliance on the project verification report dated 28.03.2008 submitted by the Architect in the office of the DCIT, Central Circle 1(1), under which the said Architect had nowhere considered Sector No.1 and Sector No.2 being two different projects. It was categorically mentioned in the cer....
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....d at Chinchwad, Pune was admeasuring 1,03,884 sq.mtrs. which was purchased by the Cooperative Society from Premiere Automobiles Ltd.. Further, the layout plan divided the entire area into 7 plots being called as "Sector" for which permission was obtained by the said owner from PCMC by order dated 15.12.2003. Out of the above 7 Sectors, the assessee firm obtained development rights in respect of Sector No.1 and Sector No.7. Further, it was noted by the CIT(A) that it was not in dispute that a D.P. Road of 45 mtrs. width was passing through the aforesaid land and Sector No.1 and Sector No.7 were lying on the opposite sides of the D.P. Road and were not facing each other. Another contention raised by the CIT(A) was that the Assessing Officer had accepted in the assessment order that the size of both the plots is in excess of 1 acre i.e. the size of plot of Sector No.1 was 7612.76 sq.mtrs. and plot of Sector No.7 was 13,852.5 sq.mtrs.. The assessee had obtained the first commencement certificate of the building plan vide a common order dated 15.12.2003 for both the Sectors. However, from the details, the CIT(A) observed that in respect of the building to be constructed on both the Sect....
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....0-IB(10) of the Act. The CIT(A) in relation thereto noted that the assessee had clarified that it was following mercantile system of accounting regularly. It was further clarified that for revenue recognition, project completion method was followed. However, units which were completed in the previous year and whose possession was handed over to the purchaser was considered as sales receipt in the Profit & Loss Account. The direct and indirect expenses incurred on the project from time to time were debited to the work-in-progress account of the respective projects and the proportionate land cost as well as cost of construction relating to the units recognized as sold, was considered as cost of the unit for the purpose of Profit & Loss Account. The assessee, in this regard, made reference to Note B of the notes to the accounts appended to the audited financial statements. 14. In respect of the first proposition raised by the assessee that the conditions as existing when the project was first approved would apply, the CIT(A) made reference to the provisions of the Act and the judicial pronouncements of the Apex Court and the Hon'ble Bombay High Court and held that the claim of the ....
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....ued for plots situated in Sector No.1 and Sector No.7, but the same were separated by D.P. road and further the statutory authority i.e. PCMC had considered the same independently for working out the FSIs of the respective Sectors under consideration. Where the plots had not been amalgamated and the commencement certificate is common, only because the assessee held the right of development for developing in both the Sectors, for which it had made the application together, the CIT(A) admitted the additional evidences filed by the assessee i.e. certificate from the registered Architect and the City Engineer, PCMC. It was also noted by the CIT(A) that the registered Architect was the same Mr. Harshad Ruparel, who was appointed by the Assessing Officer for carrying out the verification of the eligibility of the project for deduction under section 80- IB(10) of the Act and on whose report the Assessing Officer had placed reliance. The assessee had furnished a report from registered Architect who, in turn, had certified that the projects in Sector No.1 and Sector No.7 are separate in all respects. Further, the City Engineer, PCMC under whose jurisdiction the project had been developed an....
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....inite failure on the part of the assessee to complete the project of Sector No.7 before the due date prescribed in clause (a)(i) of section 80-IB(10) of the Act and therefore the said profit was held to be not eligible for deduction under section 80-IB(10) of the Act. The Assessing Officer was directed to verify the computation of profit of Sector No.1 and Sector No.7 separately. 16. In respect of second claim of the assessee vis-à-vis pro-rata deduction to be allowed on the housing units completed in Sector No.7, the CIT(A) held that the issue involved in the present case was in respect of non-fulfillment of condition prescribed in clause (a)(i), as per which the project was required to be completed before 31.03.2008. The CIT(A) was of the view that unless the project as a whole is found to be completed, it would be incorrect to allow the deduction. The CIT(A) also observed that "it is not the case of the appellant that the buildings of Sector No.7 which were completed upto 31.03.2008 is a separate project". Entire Sector No.7 has been claimed by Ld. Authorized Representative for the assessee as one project. Therefore, reliance placed by the Ld. Authorized Representative....
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....tion 80-IB(10) of the Act i.e. there was no commercial establishment and the size of the residential units were within the permissible limit. It was further submitted by him that the Assessing Officer deputed the Inspector for inspecting the property. None of the units were found to exceed 1500 sq.fts. in area. It was further pointed out that during the course of survey conducted on the premises of the assessee on 14.06.2006, Survey Team noted that some of the buildings in Sector No.7 were no t completed. The Assessing Officer, in view thereof, since the buildings were not completed in Sector No.7, denied the deduction under section 80-IB(10) of the Act. The Ld. Authorized Representative for the assessee pointed out that whether the housing project was approved on 01.04.2005, the provisions of completion of the building brought in by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005 were applicable. It was the claim of the assessee that even though the project was not completed, the deduction is to be granted to the assessee. An alternate plea raised before the authorities below was that occupancy certificate was issued first for Sector No.1 on 28.03.2008 and the deduction should be g....
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....own by the Pune Bench of the Tribunal in Opel Shelters Pvt. Ltd. vs. ACIT and D.S. Kulkarni & Associates vs. ITO (supra) that the provisions which have been inserted on a later date cannot apply to the projects which were sanctioned prior to the same. 22. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in relation to the claim of deduction under section 80-IB(10) of the Act. For granting the aforesaid deduction under section 80-IB(10) of the Act, the statute provides certain conditions to be fulfilled by the claimant before the person is found to be eligible for the said deduction. The first condition provided in sub-clause (a) of section 80-IB(10) of the Act is the period during which the said construction has to be completed. The present section 80-IB(10) of the Act has been substituted by Finance (No.2) Act, 2004 w.e.f. 01.04.2005 . After the amendment, it is provided that where such undertaking has commenced or commences development and construction of the housing project on or after the 1st day of October, 1998 and completes such construction; (i) in a case where a housing project has been approved by the local authorit....
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.... one residential in the housing project is to be allowed to any person not being an individual. Further, clause (f) of section 80-IB(10) of the Act provides that 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 to be allotted to his family members as provided thereunder. Clauses (e) and (f) to section 80- IB(10) of the Act have been inserted by the Finance (No.2) Act, 2009 w.e.f. 01.04.2010. 24. In the present case, assessee had entered into a development agreement, under which it received the rights to develop Sector No.1 and Sector No.7 of plot in Chinchwad. The area in Sector No.1 was 7323.92 sq.mtrs. and the area to be developed in Sector No.7 was 13,768.43 sq.mtrs.. The assessee's plot is situated at CTS No.4510/1, Chinchwad and the said plot of land was owned by the society Premiere City Sahakari Group Rachana Sanstha Maryadit which, in turn, had purchased the land admeasuring 1,03,884 sq.mtrs. situated at Chinchwad, Pune from Premiere Automobiles Ltd.. The owners got the layout plan of the said land approved from PCMC and the copy of the layout is placed at page 71 o....
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....ts in the layout plant in the first instance. Further, the plea of the assessee before the CIT(A) and even before us was that the Architect Mr. Harshad Ruparel had certified that the projects constructed at Sector No.1 and Sector No.7 were separate and independent. It was also pointed out by the Ld. Authorized Representative for the assessee before us that pursuant to the survey operations, the Assessing Officer had verified the status of the building completed or not through the same Architect, Mr. Harshad Ruparel. Our attention was drawn to the certificate placed at page 32 in the Paper Book. In this regard, another reference made by the assessee was to the certificate issued by the PCMC, which is placed at page 36 of the Paper Book-I with English Translation at pages 37 - 38 of the Paper Book-I, in which, it was certified that the project No.1 and 7 approved with reference to the land of the respective Sectors. The City Engineer, PCMC further certified that Sector No.1 and Sector No.7 were not amalgamated. He further certified that the project in Sector No.1 and Sector No.7 were separate and independent projects. Another certification given by him was that the commencement certi....
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....ate plea that the said deduction under section 80-IB(10) of the Act should be allowed vis-à-vis the completed buildings of Sector No.7, even though the project has not been completed by 31.03.2008. Both these pleas raised by the assessee were stressed by the Ld. Authorized Representative for the assessee elaborately and took us through the provisions of the Act and stressed that the amended provisions brought by Finance (No.2) Act, 2004 were not applicable to the assessee i.e. there was no provision under which it had to complete the construction by 31.03.2008, since it had acquired the permission to construct the said buildings prior to the insertion of the relevant provisions. 28. As referred by us in paras hereinabove under the provisions of section 80-IB(10) of the Act, the conditions are laid down which entitles the assessee to the claim of equivalent to 100% of the profit derived from the development and building of housing projects. Admittedly, the assessee has fulfilled the conditions laid down in clauses (b), (c) and (d) of section 80-IB(10) of the Act and both the authorities below have admitted that there is no violation of the said conditions. The only conditi....
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....r before 31st day of March, 2008, for making it eligible for the claim of deduction under section 80-IB(10) of the Act. The beneficial provisions provided by the legislature have to be interpreted and it is not the intention of the legislature that liberty should be given to the builders not to complete the projects within the time frame which, in turn, would put the prospective buyers at disadvantage. The conditions have been laid down in the said section in order to streamline the development and building of the housing projects which, in turn, would be handed-over to the prospective buyers within the time frame. Further period of four years have been provided in the sub-section for compliance to the conditions laid therein. Accordingly, we hold that in the present case, where the assessee had received permission for construction vide order dated 15.12.2003 and following the provisions of clause (a)(i) to section 80-IB(10) of the Act, the said project had to be completed before 31st day of March, 2008, in order for the assessee to avail the benefit of deduction under the said section. The assessee has completed the housing project in Sector No.1 and some of buildings in Sector No....
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....e Jute and Industries Ltd. vs. CIT, 120 ITR 921 (SC) had held that claim by an assessee under the law in force in the particular assessment year is ordinarily available only in relation to a proceeding pertaining to that year. In the facts of the case before the Hon'ble Supreme Court for assessment year 1959-60, the Assessing Officer set-off the unabsorbed business loss for 1949-50 and 1950-51, against the business income of that year and directed that Rs. 15,50,189/- represented the loss remaining unabsorbed should be carried forward. In the assessment proceedings for the assessment year 1960-61, which was before the Hon'ble Apex Court, the assessee claimed that the unabsorbed loss should be carried forward and set-off against the business income of the current year. The Assessing Officer rejected the claim on the ground that the unabsorbed loss could not be carried forward for more than eight years. The Hon'ble Supreme Court held that assessee claims a vested right under section 24(2)(iii) of the Act, as it stood before its amendment in 1957, to have the unabsorbed loss of 1950-51 carried forward from year to year until the loss is completely absorbed. The claim is based on a mis....
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....ance on the ratio laid down in Saroj Sales Organization vs. ITO, (2008) 115 TTJ 485 (Mum) for the proposition that the amended provisions of section 80-IB(10) of the Act have prospective application. In the facts of the case before the Tribunal, the deduction under section 80-IB(10) of the Act was denied to the assessee as the commercial area was more than as provided in the amended section. The Tribunal thus held where the plans were approved before the amended provisions were introduced then the conditions of shopping area not exceeding 5 per cent of built-up area as introduced by subsequent amendment and applicable in respect of projects approved before 31st March, 2007 would not apply. In such circumstances, where there was a requirement of commercial area to a certain extent, the same could have been taken care of by the assessee in the plans which were approved prior to the introduction of such restriction. In those facts, it was held by the Tribunal that the provisions which were introduced were prospective provision and could not be applied retrospectively. In the said decision itself, it was noted by the Tribunal that the occupation certificate of three wings had been issu....
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....w.e.f. 01.04.2005, it would be impossible to apply the said provisions, which was not on statute at the time of approval and commencement of the construction of the project. 34. The Ld. Authorized Representative for the assessee placed strong reliance on the above-said decision for the proposition that even vis-à-vis the compliance stipulated in clause (a)(i), the said provisions were not applicable to the assessee, since the housing project was approved prior to 1st day of April, 2004. We find no merit in the said reliance placed by the Ld. Authorized Representative for the assessee. In view of our discussion in the paras hereinabove and even otherwise if we accept the contention of the assessee, the provisions of clause (a)(i) would become infructuous proposition of law. Rejecting the same, we hold that the provisions of section 80-IB(10)(a)(i) are clearly applicable to the facts of the case and the assessee had to complete its project on or before 31st March, 2008 in order to avail the deduction under section 80-IB(10) of the Act. 35. The other aspect of the issue is where the assessee had commenced the construction of two buildings in Sector No.1 and Sector No.7 vi....
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....t in Viswas Promoters Pvt. Ltd. vs. ACIT, (2013) 255 CTR 149 (Mad.) have laid down that within a composite housing project, where there are eligible and intelligible units, the assessee can claim deduction in respect of eligible units in the project and even within the block, the assessee is entitled to claim proportionate relief against the units satisfying the extent of built-up area. 38. Similar proposition has been laid down by the Bangalore Bench of the Tribunal in DCIT vs. Brigade Enterprises (P.) Ltd., (2008) 119 TTJ 269 (Bang) and the Pune Bench of the Tribunal in Runwal Multihousing Pvt. Ltd. vs. ACIT in ITA No s.1015, 1016 and 1017/PN/2011 relating to assessment years 2003- 04 to 2005-06, order dated 21.11.2012. Following the same parity of reasoning, we hold that the assessee is entitled to pro-rata deduction in respect of residential units in the housing project No.7, which have complied with the conditions and were eligible for the deduction under section 80-IB(10) of the Act. However, the said deduction is allowable to the assessee only in respect of units construction of which has been completed upto 31st March, 2008. Accordingly, we direct the Assessing Officer t....