TaxTMI 
TaxTMI 
2017 (4) TMI 1544
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct, 1961 ['the Act' for short], the case was selected for scrutiny by issuing notice u/s 143(2) of the Act and the assessment was completed u/s 143(3) vide order dated 27/03/2014 at total income of Rs. 10,36,88,014/-. The disparity between returned income and the assessed income is on account of disallowing the claim of deduction of a sum of Rs. 10,29,94,124/- under sub-section (10) of section 80-IB of the Act. 5. Brief facts leading to this addition are as under: The assessee undertaken construction of a housing project called 'Epitome Project' in the land bearing survey No.51/ 54/2 of Bilekahally, Bengaluru South Taluk, Bengaluru. The assessee has started construction of the project on 30/03/2007 and the assessee has been claiming deduction under the provisions of sub-section (10) of section 80-IB of the Act since assessment year 2008-09. During the course of assessment proceedings, the Assessing Officer (AO) made a reference to the District Valuation Officer (DVO) vide his letter dated 25/10/2010 requesting the DVO to measure size of flats built in order to find out whether the built-up area of each flat of the project exceeds 1500 sq.ft. The DVO submitted a report da....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... very fact that occupancy certificate issued by the BDA on 31/03/2011 goes to prove that the project was completed as per sanctioned plan. It was submitted that the assessee had entered into an agreement in the form of Memorandum of Sale Agreement in respect of each flats separately details of such agreements are mentioned below: Alterations to the sanctioned plan were carried out by the purchaser of the flats subsequently and therefore, he submitted that the project was completed as per sanctioned plan. As regards failure of clause (f) of sub-section (10) of section 80-IB, learned authorized representative of the assessee submitted that agreements of sale or memorandum have been entered into prior to insertion of clause (f) of sub-section (10) to section 80-IB. Therefore, he submitted that the provisions of clause (f) of subsection (10) of section 80-IB, have no application to the facts of the case. He relied on the decision of the Hon'ble Karnataka High Court decision in CIT vs. Gopalan Enterprises; CIT vs. Classic Developers; CIT vs. G.R.Developers, CIT vs. Anriya Project Management Services, Hon'ble Madras High Court decision in CIT vs. Sanghvi & Doshi Enterprises ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of clause (f) of sub-section (10) of section 80-IB as no evidence was filed to show that any consideration was paid on the date of agreement and the possession was handed over nor the memorandum of sale agreements were registered. Thus, he prayed for sustenance of the addition. 9. We heard rival submissions and perused material on record. The issue that comes up for consideration in the present appeal is whether the assessee is entitled to deduction u/s 80-IB(10) of the Ac t. For better appreciation of the law on the issue, the relevant provisions of sub-section (10) of section 80-IB are extracted below: "80-IB(10) The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 by a local authority shall be hundred per cent of the profits derived in the 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 completes such construction,- (i) in a case where a housing project has been approved by the local au....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:- (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta, (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. Explanation.-For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall apply to any undertaking which executes the housing project as a works contract awarded by any person (including the Central or State Government)." 9.1 From the bare perusal of the above provisions of the Act, it is clear that the provisions of sub-section (10)of section 80-IB of the Act provide for 100% deduction of profits derived by an undertaking from developing and building housing project. The deduction is available subject to fulfillment of the following conditions: i. The project is approved by a local authority before 31/3/2008 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot take place without sanction from the local body/authority as well as the flat owners association. The assessee had not brought any evidence on record to show that the buyers of flats have applied for conversion of individual units into duplex flats and no conclusive evidence was brought on record except making a bald statement that the assessee is not responsible for such conversion of the flats. The onus lies on the assessee to prove the same, as he is know of facts. iv) The assessee has also not chosen to controvert the finding of the AO that the assessee had paid fine for violation of the sanctioned plan at the time of obtaining occupancy certificate on 31/3/2011. These facts clinch the issue against the assessee to hold that the assessee violated the provisions of clause (c) of section 80-IB(10) of the Act. 9.3 As regards violation of clause (f) of sub-section (10) of section 80-IB, the submission of the appellant, that the agreements for sale were entered before insertion of clause (f) and therefore, have no substance, for the simple reason that in respect of M.Vani M Rao, the date of agreement is 15th April 2013 which is clearly after insertion of clause (f)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....preme Court in the case of CIT vs. Veena Developers and CIT vs. Sarkar Builders has no relevance to the issue before us. It may be mentioned that the object behind the tax benefit for housing project is to build housing to low middle income groups. This has been ensured by limiting size of residential units to 1000 sq.ft. or 1500 sq.ft. as the case may be. However, rule is circumvented by some developers by entering into agreements to sell multiple adjacent units to single buyers. To curb this practice clause (f) has been inserted to sub-section (10) of section 80-IB. Thus restriction imposed on allotment of flats is only intended to safeguard the objects of the beneficial provision. Any ingenious method adopted to circumvent this provision cannot be permitted. Therefore, we hold that the assessee is not entitled to deduction u/s 80-IB as he has clearly violated the provisions of clause(f) to sub-section (10) of section 80-IB of the Act. The several judicial precedents relied upon by the assessee are not referred to as those decisions are not applicable to the facts of the present case. 10. In the result, the appeal filed by the assessee is dismissed. Order pronounce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g (B-903 and B-1003 to Mrs. Vani M Rai and B-902 and B-1002 to Mr. Syed Hidayatullah). Two other flats viz., B-904 and B-1004 were allotted to the family members of Mr. Abdul Shakeeb Mondal. Under the provisions of sec.80IB, with effect from 1.4.2010, another condition required to be satisfied is that not more than one residential unit can be allotted to any individual and no other unit should be allotted to his spouse or minor children or other members of his undivided family. It is seen from these details that Mrs Vani M Rai (represented by Mr. Ravindranath Bhandari) and Mr. Syed Hidayatullah were allotted two flats. The payments from Mr. Syed Hidayatullah were in fact received after the date of registration i.e., 24.9.2011 in respect of both the flats as evident from the ledger account submitted by the assessee. All these apartments converted into duplex apartments were sold after 1.4.2010. Thus the assessee failed to comply with provisions of sub-clause (f) of sec. 80IB(10). 6. Another observation is that as per the plan sanction as originally obtained on 30.3.2007, the building is in two wings, wing I and wing II. The apartments in win....
X X X X Extracts X X X X
X X X X Extracts X X X X
....such housing project should be allotted either that individual or the spouse or the minor children of such individual, the Hindu undivided family in which such individual is the karta, any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta. so as to enable the assessee to get a deduction from such profits and gains in computing the total income. The sub clause (f) was inserted with an intention that the benefit of deduction availed by the undertaking should be passed on to maximum number of households and thus there was an embargo was placed in allocation of any other unit to the individual or family members etc by insertion of sub clause (f) in sec 80IB(10) of the Act. The assessing officer has observed that the appellant has not complied with the provisions of clause (f) of 80 IB (10) thus deduction under this section is not available to the appellant. 6.1 The appellant relied upon decisions of various courts which were perused carefully. In the case of M/s Gopalan enterprise India private limited, ITA number 120 of 2009 the Hon'ble Karn....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as finalised on 27.03.2014, the three duplex flat holders gave their declaration in a similar pattern letter on the same day. 6.4 The appellant in his statement of facts has submitted that "further, with regard to the allegation of the Assessing Officer of violation of clause (f) of section 80IB (10), it was pleaded that no unit was allotted to either to spouse or minor children of karta or any person representing spouse or minor or HUF and therefore, there was no violation whatsoever of the aforesaid provision." However in this submission the appellant has deliberately or may be unknowingly omitted the word "Individual" and did not mention that no flat has been allotted to the same individual. 6.5 The Appellant has further argued during the hearing that the flats were sold out to the above mentioned person before the insertion of clause (f) of section 80IB(10). The clause (f) of section 80IB(10) was inserted by finance act 2009 w.e.f. 01.04.2010. The sale agreements of the three above mentioned persons were examined and it was found that all the sale has been executed after the insertion of clause (f) 80IB(10) of IT Act. The following table d....