Ekta Sankalp Developers , Mumbai vs Department Of Income Tax

I.T.A. No. 4901/Mum/2013 (Assessment Year: 2010-11) Asst. CIT-15(2), Ekta Sankalp Developers Matru Mandir, Room No. 113, 401, Hallmark Business Plaza, बनाम/ Grant Road (W), Mumbai-400 007 Near Gurunanak Hospital, Vs. Kalanagar, Bandra (E), Mumbai-400 051 PAN/GIR No. AAAAE 2019 E (Appellant) : (Respondent) Appellant by : Shri Neil Philip Respondent by : Shri S. C. Tiwari Date of Hearing : 15.01.2015 Date of Pronouncement : 10.04.2015 ORDER

Per Sanjay Arora, A. M.:

This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-26, Mumbai ('CIT(A)' for short) dated 25.04.2013, partly allowing the Assessee's appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2010-11 vide order dated 31.10.2013.

2. At the very outset, it was submitted by the ld. Authorized Representative (AR), the assessee's counsel, that the Revenue's appeal is covered against it by the decision by the Tribunal in the assessee's own case for the earlier years, placing on record its orders for A.Y. 2007-08 (in ITA No. 3276/Mum/2010 dated 28.09.2012) and A.Ys. 2008-09 and 2009-10 (in ITA Nos. 3316 & 3318/Mum/2012 dated 12.09.2014) on record. In view 2 ITA No. 4901/Mum/2013 (A.Y. 2010-11) Asst. CIT vs. Ekta Sankalp Developers

thereof, the Revenue's appeal merits being dismissed. The ld. Departmental Representative (DR), on being questioned by the Bench, did not object thereto. The hearing was closed at this stage.

3. We have heard the parties, and perused the material on record.

The assessee, a builder, claimed deduction u/s.80-IB(10) on a housing project by the name 'Ekta Meadows' on a proportionate basis, i.e., as attributable to the flats (residential units) satisfying the condition of section 80-IB(10)(c), which represented about 65% of the total constructed (built-up) area (28,832 sq. ft). The proportionate land would also exceed one acre, satisfying the condition of section 80-IB(10)(b), even as project had no commercial area, so that the stipulation with regard to the maximum commercial area, as specified in section 80-IB(10)(d), was also not violated. The Assessing Officer (A.O.), however, did not accept the assessee's claim on the ground that the entirety of the project, i.e., as approved by the local authority, is to be considered or taken into account, i.e., as a single project. Accordingly, the deduction could only be allowed on a cumulative satisfaction of all the conditions by the housing project, for it to be regarded as eligible, and which thus does not stand satisfied in the instant case in view of some of the residential units admittedly exceeding the stipulation with regard to the maximum built-up area of 1000 sq. ft. - the project being located at Mumbai. The same being not satisfied, there was no question of allowing deduction on the profit attributable to a part of the project.

Adjudicating the assessee's assessments for A.Ys. 2008-09 and 2009-10 (in ITA Nos. 3316 & 3318/Mum/2012 dated 12/9/2014), the tribunal examined the issue at length. It noted that the hon'ble jurisdictional high court in CIT vs. Brahma Associates [2011] 333 ITR 289 (Bom), relied upon by the Revenue before it, had clarified that a housing project u/s.80-IB(10), being not defined therein in terms of its qualifying attributes, is only one as approved by the local authority, and which therefore is a single project, so that deduction u/s.80-IB(10), i.e., assuming satisfaction of all the qualifying conditions specified therein for an eligible housing project, could only be qua the profits 3 ITA No. 4901/Mum/2013 (A.Y. 2010-11) Asst. CIT vs. Ekta Sankalp Developers

of the entire such project. A part of the project cannot by itself constitute an eligible project. Per contra, deduction u/s. 80-IB(10) could not be allowed on the profits of or corresponding to a part of the project, by considering it as an eligible project, as clarified by the hon'ble high court, reproducing the relevant part thereof, which we likewise do as under for ready reference: (refer para 31 at pgs. 302-303, also catch notes at pgs. 290-

291) 'Section 80-IB(10) allows deduction to the entire project approved by the local authority and not to a part of the project. If the conditions set out in section 80-IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to the part of the project.' [emphasis ours] The tribunal in the assessee's case for AY 2008-09 & 2009-10 supra, however, was of the view that, even so, the condition prescribed by s. 80-IB(10)(c), on a fair construction, bears the condition with regard to the residential units comprising the housing project. That is, it applies to residential units of a housing project, but, conversely, not to the housing project per se, so that it cannot be said that only a housing project comprising or consisting only of such eligible units would be an eligible housing project, which word, i.e., 'project', was conspicuously absent in clause (c). As such, s. 80-IB(10)(c) represents a condition precedent qua the residential unit comprising the housing project and not qua the project; its language not admitting of such a view. Accordingly, a project, satisfying all other conditions of s. 80-IB(10), would be eligible for deduction u/s. 80-IB(10) qua the profit attributable to the residential units which are s. 80-IB(10)(c) compliant.

So, however, clauses (e) and (f) have since, i.e., by Finance (No. 2) Act, 2009, w.e.f. 01/4/2010, i.e., AY 2010-11 onwards, been added to s. 80-IB(10). The same prescribe conditions, i.e., qua the eligibility of the housing project w.r.t. to the allotment of the residential units in the housing project. That is, the manner of allotment of the residential units in an otherwise eligible project is also made a condition precedent for the eligibility of the project for the purpose of deductibility of its profits under the provision. This is apparently a legislative response to the tendency on the part of the builder- developers to allot more than one residential unit in a project to persons, other than 4 ITA No. 4901/Mum/2013 (A.Y. 2010-11) Asst. CIT vs. Ekta Sankalp Developers

individuals, or the individuals and/or their family members, circumventing, in effect, the prescription of s. 80-IB(10)(c), stipulating the maximum area for a residential unit in an eligible housing project. The said condition is, in contradistinction to s. 80-IB(10)(c), with reference to a housing project, so that even one such allotment, i.e., in contravention of s. 80-IB(10)(e) or s. 80-IB(10)(f), would fail the relevant housing project as an eligible project u/s. 80-IB(10), neutralizing, in effect, the benevolent aspect of the decision in the assessee's case for AYs. 2008-09 & 2009-10.

In the instant case, three flats have been admittedly allotted, albeit free of cost, to a charitable trust. The same stands considered by the Revenue as being not pursuant to any business purpose and, accordingly, not admissible as a business expenditure. Though that aspect stands decided, with the assessee being not in appeal, the parties, in our view, and particularly the ld. DR, ought to have, in view of the changed law, providing for the eligibility of the project w.r.t. allotment, brought this to our notice, which we consider as a serious failing. The purview of an appellate authority is to ascertain the correct tax liability by enabling determination of the correct income chargeable to tax, and the parties are obliged to assist the court in arriving at the correct decision (refer: Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351 (Bom)(FB)). The law, it is trite law, as in force on the first day of April of the relevant assessment year, is to apply (refer, inter alia, CIT vs. Isthmian Steamship Lines [1981] 20 ITR 572 (SC); Karimtharuvi Tea Estate Ltd. v. State of Kerala (1966) 60 ITR 262 (SC); and Reliance Jute & Industries Ltd. v. CIT (1979) 120 ITR 921 (SC)). The consequence would be that profit of the project 'Ekta Meadows' shall not be eligible for deduction u/s. 80-IB(10) for the current year, it being again trite that it is only the cumulative satisfaction of all the qualifying conditions that would render the project as an eligible project.

This aspect of the matter, which we regard as legal, having not been either considered at either the assessment or the first appellate stage, or even before us, we only consider it fit and proper to restore the matter back to the file of the ld. CIT(A) to consider the eligibility of the said project, particularly with reference to the amended law, i.e., clauses (e) and (f) to s. 80-IB(10), inserted with effect from the relevant assessment 5 ITA No. 4901/Mum/2013 (A.Y. 2010-11) Asst. CIT vs. Ekta Sankalp Developers

year, determining the said issue after allowing reasonable opportunity of hearing to both the sides in accordance with law. We decide accordingly.

4. In the result, the Revenue's appeal is allowed for statistical purposes.

Order pronounced in the open court on April 10, 2015

Sd/- Sd/- (Joginder Singh) (Sanjay Arora) Judicial Member Accountant Member Mumbai; Dated : 10.04.2015 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai