S.B. Developers , Thane vs Assessee

सर्वश्री आय.सी.शभमव, रेखम सदस्म एवुं श्री संजम गगव, न्ममयमक सदस्म BEFORE SHRI R.C.SHARMA, AM & SHRI SANJAY GARG, JM आमकय अऩीर सं./ITA No.1767/Mum/2013 ( नििाारण वषा / Assessment Years :2009-2010) ITO WD 3(3), Thane-400604 Vs. M/s S.B.Developers, G-2, Marotraovji Bhavan, Dr. Moose Road, Talaopali, Thane(W ).

स्थममी रेखम सं ./ जीआइआय सं ./ PAN/GIR No. : AAZFS 1880 K (अऩीरमथी /Appellant) .. (प्रत्मथी / Respondent) AND Cross Objection No.80/Mum/2014 ((Arising out of ITA No.1767/Mum/2013) ( नििाारण वषा / Assessment Year :200 9-2010) M/s S.B.Developers, G -2, Vs. ITO WD 3(3), Thane-400604 Marotraovji Bhavan, Dr. Moose Road, Talaopali, Thane(W ).

स्थममी रेखम सं ./ जीआइआय सं ./ PAN/GIR No. : AAZFS 1880 K (अऩीरमथी /Appellant) .. (प्रत्मथी / Respondent)

यमजस्र् की ओर से /Revenue by : Shri Neil Philip यनधमवरयती की ओर से /Assessee by : Shri Shri Sunil U Pathak & Shri Subodh Ratnaparkhi सन ु र्मई की तमयीख / Date of Hearing : 15/05/2015 घोषणम की तमयीख/Date of Pronouncement 03/07/2015

आदे श / O R D E R PER R.C.SHARMA, (AM) :

This is an appeal filed by the revenue and cross objection by the

assessee against the order of CIT(A)-1, Thane for the assessment year

2009-2010, in the matter of order passed u/s.143(3) of the I.T.Act.

2 ITA No.1767/13 & CO No.80/14 2. In the appeal filed by the revenue, the revenue is aggrieved for

allowing the claim of deduction u/s.80IB(10) of the Act.

3. At the outset, ld. AR placed on record order of the Tribunal in

assessee's own case for the assessment year 2006-07, dated 29-4-2011,

wherein exactly similar issue was decided in favour of the assessee by

rejecting revenue's appeal.

4. Rival contentions have been heard and records perused. Brief facts

relevant to the issue concerned are that the appellant, a partnership firm,

is engaged in the business as developer & builder and has undertaken

the construction of a housing project called 'Prakruti Park' at Ghodbunder

Road, Thane. The appellant had filed return of income showing income at

Rs. NIL for the year under consideration after claiming deduction u/s.

80IB(10) amounting to Rs 4,48,97,145/-. The project 'Prakruti Park' was

found to have been constructed on a plot of land admeasuring 18,704.22

sq mtrs. and the project comprised of 13 buildings. A survey u/s. 133A of

the I.T. Act 1961 was carried out on the assessee on 10.03.2006. On

physical verification of the housing project, the survey party noticed that

14 adjoining flats in buildings 'Varsha' and 'Grishma' of the project

"Prakruti Park" were combined thereby resulting in 7 flats having built up

area exceeding 1000 sq. ft. It is for this reason that 14 flats of the housing

project exceeded area of 1000 sq. ft. and therefore the assessee was not

eligible for deduction u/s. 80IB(10). These findings were first given by the

AO. during the assessment year 2005-06 for denying the deduction u/s.

3 ITA No.1767/13 & CO No.80/14 80IB(10) to the assessee. For the year under consideration, the AO has

not given any specific finding on the issue but has simply followed the

orders of his predecessor for AY. 2005-06 to AY. 2008-09 and on the

basis of reasons given in these assessment orders proceeded to deny the

deduction u/s. 80IB(10) for the current year i.e. AY. 2009-10.

5. By the impugned order, the CIT(A) allowed assessee's claim

u/s.80IB(10) of the Act except 12 units in Prakruti Park by observing that

housing project was approved on 21-9-2004 when the plan was approved

by the Thane Municipal Corporation. The CIT(A) further observed that

correspondence between the assessee and Thane Municipal Corporation

prior to that approval of building is not relevant to decide the date of

approval as per the Explanation to Section 80IB(10). The precise

observation of the CIT(A) are as under :-

"5.1. I have considered the various facets of these grounds in the background of the provisions of law. I have also deliberated at length with the AO as well as the authorized representative of the appellant, both of whom have argued their cases in detail. I have also gone through the voluminous record on this issue forming part of the appeal proceedings for the earlier asst. years as well as for the year under appeal.

5.2. The case of the appellant is that having complied with all the conditions laid down under the local authority letter dated: 27.02.04, the appellant firm was granted "Commencement Certificate" being the approval for commencing construction on 21.09.04.

5.3. It is accordingly the argument of the appellant that the building plans were first approved for construction on 21.09.2004. The date of first approval, being crucial to decide the date by which the housing project should be completed. The A.R. contended that if the date of first approval is considered to be 27.2.2004, being the date of grant of development permission, then the project should have been completed by 31.3.2008. However, if the date of commencement certificate i.e. 21.9.2004 is considered to be the date of first approval, then the project should be completed by 4 ITA No.1767/13 & CO No.80/14

31.3.2009. There is no dispute about the act that last occupancy certificate in-respect of the project has been granted on 19.06.2008.

5.4. In the assessment order, the AD has extensively relied upon the development control regulations for the City of Thane to say that the first approval of building plans for construction was on grant of development permission on 27.02 2004 and therefore the project should have been completed prior to 31.03.2008. The last of occupancy certificate being received on 19.06.2008, the completion of the project was beyond the time granted by section 80IB(10)(a)(i) and therefore the denial of deduction was correct.

5.5. In the order of assessment as well as during the course of appellate proceedings, the AO has relied upon the various clauses of the development regulations for the City of Thane to justify the argument that the approval of building plans was first granted on 27.02.2004.

5.6. In the appeal proceedings, the AO also filed a letter dated 02.7.2012 wherein he has raised issue of commencement certificate dated: 21.09.2004 being signed by Executive Engineer, Town Planning Department, whereas the Development Permission issued on 27.02.2004 under the signature of Asst. Director of Town Planning, thereby implying that the Development Permission was issued under the approval of the Commissioner as an executive function, whereas the Commencement Certificate was issued by the sub-ordinate officer as a matter of procedure.

5.7. The above arguments of the AO on the issue does not hold good because in the matters related to the decisions taken by any functionary of the Thane Municipal Corporation, these are taken on behalf of the Corporation under the powers delegated to them by the Commissioner Municipal Corporation and all the decisions are taken on behalf of the commissioner. All the approvals are in reality issued in the name of the Commissioner - TMC but the relevant papers are signed by different officers to whom powers have been delegated by the corporation. This has been clarified by the Thane Municipal Corporation vide its letter dated: 15.03.2004 which is placed on record. Thus the above contention of the A.D. has no substance.

5.8. The AO also vide letter dated: 09.07.2012, drew attention to various clauses of the development regulations of the local authority as well as has commented upon in writing on the written submission filed by the assessee. The comments of the AO have been considered but lacks merit in view of the detailed discussions on the issue in the preceding paras.

5.9. Apart from the above, the AO has also relied upon the various contentions forming part of the assessment orders for AY. 2005-06 5 ITA No.1767/13 & CO No.80/14

to 2008-09 in support of the disallowance. The AO also personally attended the appeal proceedings and vehemently argued for upholding the disallowance and mostly reiterated the same arguments taken in the assessment order.

5.10. The perusal of the assessment records and the appellate orders on the issue in the earlier years reveal that the issue has been discussed elaborately and the threadbare in the appellate orders in the case of the appellant in the years from the AY. 2005- 06 to AY. 2008-09 by my predecessors and the issue has been decided in favour of the appellant for all these years. Even the jurisdictional ITAT Mumbai, Bench "E" Mumbai in the order (ITA No. 5170/M/2009 dt. 29.04.2011) in the case of the appellant for AY. 2006-07 has decided the issue in favour of the appellant. While deciding the issue, the Hon,ble ITAT has held as under :-

16. Accordingly the housing project in question was approved on 21.09.04 when the plan was approved by the Thane Municipal Corporation.

The correspondence between the assessee and the Thane Municipal Corporation prior to that approval of the building is not relevant to decide the date of approval as per the explanation to section 8018(10).

17. In view of the above discussion, we decide this issue against the revenue and in favour of the assessee. The order of the CIT(A) is confirmed qua this issue".

5.11. It is also noticed from the clarifications received by my predecessor during the appellate proceedings for the A.Y. 2008-09 from Thane Municipal Corporation, Thane, (which being a Local Authority, is a final authority so far as approval of Housing Project is concerned), that any development can only be carried out after grant of Development Permission as well as Commencement Certificate as per the provisions of Development Control Regulation

- 3 of Development Control Regulations,1994. It has been further clarified by the Thane Municipal Thane, that the reply sent to ITO, Ward - "(3}, Thane vide letter dated: 30/08/2011 was about the process of approval of Development Permission and Commencement Certificate. The perusal of sanction letters dated:

27/02/2004 and 21/09/2004 reveals that both the letters are in same proforma with the heading- SANCTION OF DEVELOPMENT PERMISSION 1 COMMENCEMENT CERTIFICATE and in the letter dated: 27/02/2004, the words "COMMENCEMENT CERTIFICATE" have been struck off while in the second letter dated: 21/09/2004, nothing has been struck off. This shows that the letter issued on 21/09/2004 by Thane Municipal Corporation is not only a Commencement Certificate but also a Sanction of Development Permission. Arguments and submissions of A.O that the housing project was actually approved on issuance of sanction 6 ITA No.1767/13 & CO No.80/14

of Development Permission dated: 27/02/2004 are of no significance in view of the above clarification and observations of the local authority. It is also relevant to mention that both Sanction of Development Permission and Commencement Certificate can be issued simultaneously at the first instance itself, if all the conditions provided by Development Control Regulations are satisfied before submitting the proposal. As regards the observations of AD. that expenditure of Rs. 21,86,495/- was incurred before the issuance of Commencement Certificate i.e. immediately after approval on 27.02,04, the AR.'s submission that the expenses referred to as recorded in the books of the appellant by the Id AO. pertain to Construction of temporary shelter for security personnel at main entry point and at the boundary line, temporary shed for storage of material-which was to be procured on receipt of commencement certificate, bore well for water, erection of boundary markers on the plot of land, general beautification of plot to attract customers, security charges paid to Royal Security Force, advance to construction contractor, etc. appears to be correct and reasonable and also acceptable looking to the total project plot area of 18704.22 sq. mtrs. i.e. about 4 % acres and requirement of such expenditure before start of any project is the basic requirement before the start of such a huge project.

5.12. From the facts and circumstances explained above, it can be concluded that the issue at hand regarding the commencement and completion of the housing project of the appellant has already been decided by the IT AT in the case of the appellant itself for the A. Y. 2006-07 as outlined in the preceding paras. The facts being the identical for the year under consideration and the decision from the Jurisdictional ITAT Mumbai binding in nature, it is held that the housing project of the appellant was first approved on 21/09/2004 and as such it had time to complete the project on or before 31/03/2009 as per the provisions of section 80IB(10)(a)(ii) which are actually applicable in the case of appellant. Since the appellant has complied with the requirement of provisions of section 801B(10)(a)(ii) by obtaining a final occupation certificate on 19/06/2008 well within the time available to the appellant as per the provisions of Income-tax Act, the grounds of appeal No. 3A to 3F are allowed. Accordingly, the issue in question is decided in the favour of appellant.

5.13. My predecessor vide his order dated: 30101/2012 (A.Y. 2008-

09), has also decided the alternate plea taken by the appellant in its favour that if, the date of 27/02/04 is to be considered as the date of approval of Housing Project, then the requirement to have the project completed within 4 years, i.e., before 31/03/08 would not apply to the case of the appellant, since this is only the amended Act w.e.f. 01/04/04, which introduced the cap of 4 years and prior to the amendment, there was no such requisite condition to get the project completed within 4 years. He relied upon the decision in a 7 ITA No.1767/13 & CO No.80/14

recent case of Hiranandani Akruti JV Vs DCIT, Central Circle-36, Mumbai, of the Hon ITAT, 'E' Bench Mumbai in ITA No 5416/Mum/09 (A.Y. 06-07) dated: 30103/2010. Since it has already been held in the preceding paras that the Housing Project was approved only on 21-09-2004, in my view, no specific adjudication on alternate plea is necessary.

5.14. In view of the facts stated above and the legal position on the issue, the deduction u/s. 801B(10) is to be allowed to the assessee for the A.Y. 2009-10 and therefore the ground nos. 3A to 3C of the appellant are allowed. The grounds raised under 3D to 3F are in- fructuous and not adjudicated."

6. We have carefully gone through the order of the Tribunal dated 29-

4-2011 for assessment year 2006-07. The precise observation and

conclusion of the Tribunal was as under :-

"12. We have considered the rival contentions and relevant record. The dispute is only regarding the date of approval of the project and there is no dispute about the completion of the project related to these two buildings as on 19.06.2008 when the completion certificate was issued by the Thane Municipal Corporation. The AO held that the project was approved on 27.2.2004 which is prior to 1.4.2004 and therefore the completion on 19.6.2008 is after 31.3.2008. Thus, the AO was of the view that the assessee is not entitled for deduction u/s.80IB(10). The CIT(A) held that the housing project to be considered as approved when both the sanction of development permission and commencement certificate are issued as both are essential. There is no ambiguity about the requirement of the provisions of Section 80IB(10) that if the project is approved prior to 1.4.2004 then same has to be completed on or before 31.3.2008. As per explanation to section 80IB(10) of the Act in case where approval in 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 first accorded by the local authority. Explanation to section 80IB(10) for the sake of ready reference is reproduced below :-

"80IB[(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) ............

Explanation.--For the purposes of this clause,--

8 ITA No.1767/13 & CO No.80/14 (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)............

(c).............

(d)............

(e),.............

(f)..............

[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)."

It is manifest from the explanation that in case the approval is obtained on more than once the date on which the building plan of such house housing project first approved shall be deemed to have been the date of approval of the housing project. In the case in hand the Thane Municipal Corporation first issued a letter dated 27.02.2004 the contends of which are reproduced below :

"With reference to your application no.2586 dated 9.07.2003 for development permission/grant of commencement certificate under section 45 and 69 of the Maharashtra Regional and Town Planning Act 1966 to carry out development work and or to erect building no as above in village kolshat section no.5, ward no.1 situated at road/street 40 mtr. D.P.Road, CTs No.95-Hissa No.1,2,3, 4(Pai) 5,6,7,9,11,12,13, survey no.13, hissa no.1,2,3 H.No.----T No._____ the development permission/the commencement certificate is granted subject to the following conditions;

1. The land vacated in consequences of the enforcement the set back line shall form part of the public street;

2. No new building or part thereof shall be occupied or allowed to be occupied or permitted to be used by any person until occupancy permission has been granted.

3. The development permission/commencement certificate shall remain valid for a period of one year commencing from the date of its; issue;

4. This permission does not entitled you to develop the land which does not vest in you.

5........

6........

7. ........

8. ........

9. ........

9 ITA No.1767/13 & CO No.80/14 10. ........

11. Before CC, NOC from ULC department required in respect of units as per sanctioned plan to be given to government.

12. ........

13. Before CC, Non-agricultural permission required to be presented.

14. ........

15. ........

13. As it is evident from the above letter, the Thane Municipal Corporation had set out certain conditions to be fulfilled by the assessee for development permission. Accordingly, the assessee obtained the necessary approval from the various authorities such as the permission of non-agricultural use of the land was obtained used on 15.07.2004 and permission from Urban Land Ceiling authority was taken on 26.07.2004. After compliance of certain conditions as set out in the letter dated 24.2.2008 the Thane Municipal Corporation has issued a sanction letter/commencement certificate vide letter dated 21.9.2004 the contentions of which are reproduced as under :-

"VP 2003/59.TMC/TDD/2060 dated 21.9.2004 to Shri M/s Arketype Consultant (I) P.Ltd. Shri Dhansorabji Kharas and ors (-owner, Shri Naresh Khetwani and Shri Jagdish Khetwani and Shri Prabhudhas Thakkar (Power of attorney holder).

Sir,

With reference to your application no.13510 dated 17.07.2003 for development permission/grant of commencement certificate under section 45 and 69 of the Maharashtra Regional and Town Planning act, 1966 to carry out development work and or to erect building no. as above in village Kollshet section no.5, ward no.1 situated at road/street 40 mtrs. D.P.Road CTS No.95-Hissa No.1, No.1,2,3, 4(Pai) 5,6,7,9,11,12,13, survey no.13, hissa no.1,2,3 H.No.----T No._____ the development permission/the commencement certificate is granted subject to the following conditions;

1. The land vacated in consequences of the enforcement the set back line shall form part of the public street;

2. No new building or part thereof shall be occupied or allowed to be occupied or permitted to be used by any person until occupancy permission has been granted.

3. The development permission/commencement certificate shall remain valid for a period of one year commencing from the date of its; issue;

4. This permission does not entitled you to develop the land which does not vest in you.

10 ITA No.1767/13 & CO No.80/14 14. The assessee claimed that the approval of the project is only 21.9.2004 because before that the assessee was not authorized or allowed to start construction work. It is pertinent to note that as per requirement of the provisions the approval of the housing project is deemed to be on the date when the plan of the housing project is for the first time approved by the authorities.

15. We have carefully considered the plan filed by the assessee even we have directed the revenue to produce the assessment record for the perusal and verification of the sanction plan. The learned DR has produced the assessment record before us. We find that the building plan of the housing project has been first approved by the Thane Municipal Corporation on 21.9.2004 which was sanctioned by the Executive Engineer, Thane Municipal corporation on 17.09.2004. Once it is established that the building plan of the housing project was first approved on 21.9.2004 and no plan was approved prior to that date, we need to go into the other aspects of question.

16. Accordingly the housing project in question was approved on 21.09.2004 when the plan was approved by the Thane Municipal Corporation. The correspondence between the assessee and the Thane Municipal Corporation prior to that approve of the building is not relevant to decide the date of approval as per the Explanation to section 80IB(10).

17. In view of the above discussion, we decide this issue against the revenue and in favour of the assessee. The order of the CIT(A) is confirmed qua this issue."

7. As the facts and circumstances during the year under consideration

are same and the CIT(A) has followed the order of the Tribunal, therefore,

we uphold the order of CIT(A) for allowing claim of deduction u/s.80IB(10)

of the Act.

8. In the cross objection the assessee is aggrieved for denying benefit

of deduction u/s.80IB(10) in respect of profits arising from development of

12 residential units of buildings Varsha and Grishma of the housing

project "Prakruti Park"at Thane by arriving at the conclusion that these 12

residential units were combined into 6 residential units, each having area

exceeding 1000 sq. ft. and accordingly the condition prescribed under 11 ITA No.1767/13 & CO No.80/14

sub-section (c) of section 80 IB (la) was breached in respect of these 12

residential units ignoring the evidence that

(i) the local authority, Thane Municipal Corporation had confirmed that none of the residential units of the two buildings of the project "Prakruti Park" were combined with each other at the time of grant of "Occupation Certificate" by the local authority.

(ii) the report of the Valuation Officer of the Income Tax department, Thane who had at the instance of the Id A.O. made verification and certified that on the date of inspection also only 8 residential units were found to be combined thereby resulting in only 4 residential units having area exceeding 1000 sq. ft.

The assessee has also taken the following grounds in its cross objection:-

"2. On the facts and in law, the Id. CIT (Appeals) erred in holding that the six combined residential units of the appellant's housing project had area exceeding the permissible maximum built up area of 1000 sq. feet prescribed under sub section ( c) to sec. 80IB(10) by not appreciating the fact that the location of the appellants housing project was situated more than 25 Kms. from the Municipal limit of the "City" of Mumbai and accordingly the maximum permissible, built up area as per sub section ( c) of sec. 80IB(10) available to the appellant was 1500 sq. ft. and not 1000 sq. ft."

9. We have considered rival contentions and found that this issue is

also covered by the order of the Tribunal, wherein order of the CIT(A)

declining claim of deduction in respect of 12 residential units of housing

project Prakruti Park was upheld after having following observation :-

"26. As evident from the order of the CIT(A), this Tribunal has been following consistently the view taken by the Calcutta bench of This Tribunal in the case of Bengal Ambuja Housing Development Limited (supra) which has been approved by the Hon'ble High Court. Therefore, to maintain the consistency, we do not find any reason to interfere with the order of the CIT(A). However, we clarify that the proportionate deduction is allowable when the other conditions regarding the area of plot is fulfilled after reducing the proportionate area of the plot representing the residential units which have the area exceeding 1000 sq.ft.. In the case in hand, the learned AR of the assessee has pointed out from the record that the total area of plot is 18742.2 sq.mtrs. and if proportionate area of 12 flats combined into six residential units is reduced from the total area of plot, ,the balance would be much more than the requirement of one acre. We note that the total number of flats in two buildings 12 ITA No.1767/13 & CO No.80/14

are 192 out of which 13 flats are merged for making six residential units. Therefore, keeping in view of the total area of the plot, we find that the remaining area is more than one acre as required u/s.80IB(10). We do not find any error or illegality in the order of the CIT(A) qua this issue. Hence this ground of revenue and cross- objection of the assessee stand rejected."

10. Respectfully following the order of the Tribunal for assessment year

2006-07, we confirm the action of CIT(A) for declining claim of deduction

in respect of 12 units of Prakruti Park.

11. In the result, appeal of revenue as well as cross objection of assessee are dismissed.

Order pronounced in the open court on this 03/07/2015.

Sd/- Sd/- (संजम गगव) (आय.सी.शभमव) (SANJAY GARG) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भंफ ु ई Mumbai; ददनमंक Dated 03/07/2015 प्र.कु.मभ/pkm, यन.स/ PS

आदे श की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to :

1. अऩीरमथी / The Appellant

2. प्रत्मथी / The Respondent.

3. आमकय आमक् ु त(अऩीर) / The CIT(A), Mumbai.

4. आमकय आमुक्त / CIT आदे शािसार/ BY ORDER,

5. वर्बमगीम प्रयतयनधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai

6. गमर्व पमईर / Guard file.

उप/सहायक पुंजीकार सत्ममवऩत प्रयत //True Copy// (Asstt. Registrar) आयकर अपीऱीय अधिकरण, भंफ ु ई/ ITAT, Mumbai