2011-VIL-736-ITAT-MUM

Equivalent Citation: [2011] 11 ITR 699

Income Tax Appellate Tribunal MUMBAI

ITA No.2170/Mum/2009

Date: 25.03.2011

BHUMIRAJ HOMES LTD.

Vs

DEPUTY COMMISSIONER OF INCOME-TAX

BENCH

Order

JUDGMENT

The order of the Bench was delivered by R. S. Syal (Accountant Member).-This appeal by the assessee arises out of the order passed by the Commissioner of Income-tax (Appeals) on January 23, 2009 in relation to the assessment year 2004-05. It is a recalled matter inasmuch as the earlier ex parte order passed by the Tribunal was recalled vide its later order dated May 31, 2010 in M. A. No. 07/Mum/2010.

The second ground raised in this appeal is against the confirmation of disallowance of deduction of Rs. 2,55,56,221 claimed by the assessee under section 80-IB(10) of the Act. Briefly stated the facts of the case are that the original assessment in this case was completed under section 143(3) disallowing deduction under section 80-IB(10) to the tune of Rs. 31,70,650 out of the total deduction claimed at Rs. 2,55,56,221. Thus deduction was allowed under section 80-IB(10) to the extent of Rs. 2,23,85,571. The Assessing Officer issued notice under section 148 on the ground that the assessee had claimed excess deduction under section 80-IB(10). The reasons recorded by the Assessing Officer, copy of which is available at page 34 of the paper book, indicate that the assessee was allowed deduction under this section on the total residential area of 97,162 sq.ft. as against disallowance of deduction in the original assessment on commercial area at 11,414 sq.ft. Since the provisions of section 80-IB(10) were applicable only when the project is approved as "housing project" and in the assessee's case it was "residential as well as commercial project" approved by the Navi Mumbai Municipal Corporation, the Assessing Officer opined that the proportionate deduction allowed to the assessee to the extent of residential units constructed by it in the building project, was also not eligible. In the assessment order passed, the Assessing Officer also examined that the total saleable area of the project was for 1,08,576 sq.ft. and the commercial area at 11,414 sq.ft. was 10.51 percent of the total saleable area of the project. Considering all these facts the Assessing Officer denied the remaining amount of deduction under section 80-IB(10). No relief was allowed in the first appeal.

We have heard the rival submissions and perused the relevant material on record. It is noticed that in the original assessment deduction under section 80-IB(10) was disallowed to the extent it was relatable to the profits of commercial area. However in the instant proceedings under section 147, the Assessing Officer denied the remaining part of the deduction which was earlier allowed as in his opinion only the projects approved as "housing projects" were eligible and not those approved as "residential as well as commercial project" by the local authority, which in this case is Navi Mumbai Municipal Corporation.

It would be relevant to note that the Special Bench of the Tribunal in Brahma Associates v. Joint CIT [2009] 315 ITR (AT) 268 (Pune) ; [2009] 119 ITD 255 (Pune) [SB] held that deduction under section 80-IB(10) as applicable prior to April 1, 2005 is admissible in case of a housing project comprising residential units and commercial establishments if it is approved as a housing project by the local authority or where 90 percent or more of the total built up area is used for dwelling unit. This Special Bench order came up for consideration before the hon'ble Bombay High Court in CIT v. Brahma Associates in Income Tax Appeal No. 1194 of 2010 reported as [2011] 333 ITR 289 (Bom). While its recent judgment, copy of which has been placed on record by the learned authorised representative, it has been held that up to March 31, 2005 deduction under section 80-IB(10) is eligible 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 authorities subject to the fulfilment of other conditions. It has also been held that in such a situation deduction has to be allowed irrespective of the fact that the project is approved as "housing project" or "residential plus commercial". Still further it has been laid down that if the above conditions are fulfilled deduction under section 80-IB(10) has to be allowed irrespective of the fact whether or not the commercial area is up to 10 percent of the total built up area of the plot.

Adverting to the facts of the instant case it is noted that the instant project has been approved by the Navi Mumbai Municipal Corporation as "residential plus commercial project". From the copy of the commencement certificate of the project, available in the paper book, it is seen that permission was granted by the authority for total residential built up area at 5,942.558 m2 plus commercial area at 387.3990 m2 totalling 6310.357 m2. Page 20 of the paper book is certificate of architect M/s. Anil Doshi and Associates certifying total carpet area of 7070.743 sq.mtr. with residential carpet area of 5,635.490 sq.mtr., commercial carpet area of 625.600 sq.mtr. along with staircase, lift area and lift room having carpet area of 809.653 sq.mtr. in total. Percentage of commercial built up area to the total built up area in this case, thus comes to 8.8 percent Going by the aforenoted Special Bench order in Brahma Associates [2009] 315 ITR (AT) 268 (Pune), the assessee becomes entitled to deduction.

The Assessing Officer has calculated the percentage of commercial area to the total area at 10.51 per cent., which is otherwise not correct, as even accepted by the learned Departmental representative. Even if we do not enter into the arena of calculation of the percentage of commercial area vis-a-vis total built up area, the assessee deserves to succeed on the basis of the judgment of the hon'ble jurisdictional High Court as the project has been approved by the Navi Mumbai Municipal Corporation and it is nobody's case that the residential units with commercial user are not to the extent permitted under the Development Control Rules/regulations. If that be the position the assessee becomes entitled to deduction under this section for the entire amount of deduction.

The learned Departmental representative placed reliance on the order passed by the Kolkata Bench of the Tribunal in Bengal Abuja Housing Development Ltd. v. Deputy CIT I. T. A. No. 1595/Kol/2005 dated March 24, 2006 by contending that the second condition for allowability of deduction under section 80-IB(10) as provided under clause (b), was not satisfied by the assessee. He stated that as per clause (b), the project should be on the size of a plot of land which has a minimum area of one acre. Referring to page 19 of the paper book, being certificate issued by the architects of the assessee certifying total plot area of the land in question is 4300 sq.mtr. However, while referring to page 20 of the paper book, which is certificate issued by the assessee's architect showing total built up area 7070.743 sq.mtr. and commercial area of 625.600 sq.mtr., the learned Departmental representative contended that though percentage of 625 to 7070 was 8.8 percent but that was not the end of the matter. He opined that the built up area covered by staircase and passage, lift area and lift room should also be apportioned between residential and commercial in the ratio of 5635 : 625. He further admitted that one acre is equal to 4046.8 sq.mtr. Taking his contention further he stated that although the plot area was more than that, being 4300 sq.mtr. in the present case, but the unbuilt up area was also to be bifurcated in proportion to commercial as well as residential built up area. If that is considered the learned Departmental representative contended that the commercial area in this case would exceed 10 percent and hence the assessee becomes ineligible to deduction.

We are not convinced with the submission advanced by the learned Departmental representative. On a pertinent query it was admitted by him that there was no evidence about the commercial area not being on the ground floor. It, therefore, depicts that the commercial area being shops, etc. were situated on the ground floor of the building. If that be the case then the built up area for staircase and passage, lift or lift room are to be considered as part and parcel of residential area because these are only to facilitate residents for going up and coming down from the building. It does not assist shops, in any manner, to function with the help of staircase, lift area, lift room, etc. In such a situation the built up are covered under staircase, life passage, lift room etc. has to be considered as part and parcel of residential area and not as commercial area. The learned Departmental representative then contended about the size of plot which is admittedly more than one acre in this case as per his calculation. We are unable to appreciate the view point of the Department that the unbuilt-up area should also be considered in proportion to the residential and commercial area. It is obvious that there cannot be 100 percent construction on any plot. Some area has to be left open as per the plan and construction can be done only as per the specifications approved by the competent authority. By no stretch of imagination can an open area be considered as proportionately relatable to residential as well as commercial area. As the size of the plot in this case is more than one acre, condition under section 80IB(10)(b) also stands fully satisfied. In so far as the reliance of the Kolkata Bench order in Bengal Abuja Housing Development Ltd. is concerned, we are again unable to find any finding given by the Tribunal which comes in the way of granting deduction to the assessee in consonance with the judgment of the hon'ble jurisdictional High Court. The learned Departmental representative has referred to certain submissions made before the Kolkata Bench but was unable to point out the relevant parts of the Tribunal order wherein such submissions have been accepted. We are further not convinced with the contention put forth by him that only the "housing projects" should be considered as eligible for deduction which, in his opinion, emerges from the plain reading of sub-section (10) of section 80-IB. The reason is obvious that the hon'ble jurisdictional High Court, after thorough analysis of the provision, has held that deduction is eligible to housing project approved by the local authority as such or as "residential plus commercial project" having residential as well as commercial units to the extent permitted under the Development Control Rules. As the assessee all the relevant conditions for the grant of deduction under this section, we are of the considered opinion that the learned Commissioner of Incometax (Appeals) was not justified in refusing to grant deduction accordingly.  

Since the present proceedings are emerging from notice under section 148 and the assessment has been framed under section 143(3) read with section 147, the assessee can be allowed deduction under section 80-IB(10) only to the extent it was disallowed in the present proceedings which amounts to Rs. 2,23,85,571. In so far as the disallowance of deduction to the tune of Rs. 31,70,650 is concerned, the same cannot be conferred on the assessee for the reason that it was disallowed in the original assessment order passed under section 143(3) and no material has been brought to our notice to indicate that such order has been modified in any manner. As the reassessment proceedings are aimed at taxing the income which has escaped assessment, these cannot be taken as a tool for putting the assessee in a better position than in which it was before such proceedings. We, therefore, direct to allow deduction under section 80-IB(10) for Rs. 2.23 crores and odd, which has been disallowed in the present proceedings.

The first ground about challenge to initiation of reassessment proceedings has become infructuous in view of relief given to the assessee on merits in ground No. 2. No submission was advanced in support of ground No. 3 which deals with the violation of natural justice. This ground is hereby dismissed.

Ground No. 4, being the charging of interest is consequential and accordingly disposed of

In the result, the appeal is partly allowed.

The order pronounced on this 25th day of March, 2011.

 

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