Surana Mutha Developers, Pune vs Assessee

M/s. Surana Mutha Developers 236, Patil Plaza, Parvati, Pune .... Appellant PAN: ABAFS9964J

Vs.

The Income Tax Officer, Ward 11(4), Pune. .... Respondent

Appellant by : Shri V.L. Jain Respondent by : Shri B.C. Malakar Date of hearing : 01-04-2015 Date of pronouncement : 10-04-2015

ORDER

PER SUSHMA CHOWLA, JM:

This appeal filed by the assessee is against the order of CIT(A)-I, Pune

dated 06.11.2012 relating to assessment year 2009-10 passed under section

143(3) of the Income-tax Act.

2. The assessee has raised the following grounds of appeal:

1. The learned CIT(A) has erred on facts and in law in confirming the disallowance of the claim u/s 80IB(10) of Rs. 7,06,90,849/-for our project "Daffodils Avenue".

2. Without prejudice to Ground No.1 above, the learned CIT(A) has erred on facts and in law in not granting the claim u/s 80IB(10) in relation to the project comprising of Buildings A, B and C.

3. Without prejudice to Ground Nos.1 and 2 above, the learned CIT(A) has erred on facts and in law in not granting a pro-rata claim in relation to the eligible portion of the project.

4. The appellant craves leave to amend or alter any of the grounds of appeal or add to the same if deemed necessary.

3. The issue raised in the present appeal is with regard to the claim of

deduction under section 80IB(10) of the Act.

2 ITA No.360/PN/2013

M/s. Surana Mutha Developers

4. The brief facts of the case are that, the assessee was a partnership firm

engaged in the activity of property development and builders. During the year

under consideration, the assessee had offered a sum of Rs.7,06,90,849/- as

income from business and had claimed the deduction under section 80IB(10)

of the Act declaring net income at Rs.Nil. During the year under consideration,

the assessee had undertaken one residential project viz. 'Daffodil Avenue' at

Survey No.17/271(1)(c) of the Act/A/1+17/2/A, 18/1 Bavdhan Khurd, Pune.

The commencement of project consisted of residential buildings A, B and C

was approved on 31.10.2005. The assessee however, made certain changes

in the layout plan. As per the commencement certificate dated 29.03.2007

and 11.12.2009 under which, the building plans were revised and also the

layout. As per the revised layout, one more building No.D was included in the

project. The Assessing Officer during the course of assessment proceedings,

noted the conditions which had to be fulfilled while claiming the deduction

under section 80IB(10) of the Act and the same were enumerated under para

6 at page 4 of the assessment order. The Assessing Officer made certain

enquiries from the Pune Municipal Corporation under the provisions of section

133(6) of the Act. The Assessing Officer also visited the site of housing

scheme on 18.11.2011 and noted that there were alterations and deviations in

the original structure of the plan. The Assessing Officer further took note that

the plot area of the land as per the original sanctioned plan stood altered and

reduced in view of certain changes made and as against the plot area of

4638.65 sq. mtrs. the revised sanctioned area of the plot was 3443 sq. mtrs.

and after adding open space of 463.86 sq. mtrs., which was less than one

acre. Thus, the assessee was found to have failed to satisfy the pre-condition

of minimum area of one acre as envisaged under clause (b) of section

80IB(10) of the Act.

5. The second disqualification of the assessee, noted by the Assessing

Officer was that as the first commencement certificate was issued by the local 3 ITA No.360/PN/2013 M/s. Surana Mutha Developers

authority on 31.10.2005, the housing project was supposed to be completed

within five years from the end of the financial year, in which the first

commencement certificate was obtained i.e. on or before 31.03.2011. The

Assessing Officer found that the assessee did not possess completion

certificate in respect of building No.D of the said project and hence, the final

completion was not completed as on 31.03.2011. Reliance was placed in this

regard on the documents received from the PMC under section 133(6) of the

Act which indicated that the construction work of building No. D had

commenced and only plinth level was completed around the date of certificate

i.e. 18.03.2011, 21.03.2011 and 15.03.2011. Further confirmation was

received from the PMC dated 26.12.2011 in which it was pointed out that as

per the sanctioned lay out dated 26.03.2007, part completion certificate for

buildings A, B and C of the housing scheme was given. However, the

construction work of building 'D' of the said project as on 31.03.2011 was not

completed and the completion certificate for the said building 'D' in the final

completion certificate had not been given. The assessee was show caused

and asked to explain as to why the deduction claimed under section 80IB(10)

of the Act in view of the second disqualification, should not be disallowed. The

reply of the assessee is reproduced under para 10, pages 8 and 9 of the

assessment order and in view of the assessee not possessing the final

completion certificate and also the completion certificate for building 'D', the

Assessing Officer held the assessee as not eligible for claim of deduction

under section 80IB(10) of the Act.

6. The CIT(A) upheld the order of Assessing Officer observing as under:-

"5.7 From the above stated discussion it is seen that the housing project of the appellant which was approved initially on 31.10.2005 was to be completed within 5 years from the end of the financial year in which the housing project was first approved by the local authority viz. by 31.3.2011. A perusal of sec.80IB(10)(a) which was introduced by the Finance Act 2004 w.e.f. 1.4.2005 shows that there are specified time limits for completion of the development and construction of housing projects approved on or after 1.10.1998. In fact, builders and developers whose projects were approved after 1.4.2005 were given an 4 ITA No.360/PN/2013 M/s. Surana Mutha Developers

extended period of one year from the end of financial year in which housing projects stood approved by local authority, beyond the usual period of 4 years. This amendment came by Finance Act 2010 w.e.f. 1.4.2010. Since the appellant has admittedly not completed the building D by 31.3.2011 the Assessing Officer's action in not allowing deduction u/s 80IB(10) of the Act is upheld. Grounds of appeal No.1 and 2 are dismissed."

7. The assessee is in appeal against the said denial of deduction under

section 80IB(10) of the Act. The learned Authorized Representative for the

assessee pointed out that the project was originally sanctioned on 31.10.2005

comprising of building Nos. A, B and C. Thereafter, the plans of the buildings

were revised on 26.03.2007 and building 'D' was added for the first time. The

learned Authorized Representative for the assessee pointed out that the

completion certificate of buildings A, B and C were received by the assessee

before 31.03.2011. However, the plan for building 'D' which was sanctioned

as per commencement certificate dated 29.03.2007 had been physically

completed before 31.03.2011 which in turn is evidenced by the Architecture

certificate in this regard. Further, even the revenue of sale of the unit of 'D'

had been recognized in assessment year 2011-12 which in turn confirms the

handing over of possession of the completed units prior to 31.03.2011. Even

the electricity bills in respect of the flats in building 'D' had been raised in the

names of flat owners prior to 31.03.2011. However, the final completion

certificate for the building 'D' was issued on 15.03.2012 by the local authority.

The learned Authorized Representative for the assessee pointed out that since

the plan for building 'D' had been sanctioned on 29.03.2007, the expected

date of completion of the said building under the provisions of section 80IB(10)

of the Act was 31.03.2012. However, the buildings A to C were completed

within stipulated time and there was no merit in the disallowance of the claim

of deduction under section 80IB(10) of the Act. The learned Authorized

Representative for the assessee placed reliance on series of decisions for the

proposition that there is no requirement of completion of certificate for allowing

the claim of deduction under section 80IB(10) of the Act. Another proposition 5 ITA No.360/PN/2013 M/s. Surana Mutha Developers

raised by the learned Authorized Representative for the assessee that the

meaning of the word 'housing project'. As per the learned Authorized

Representative for the assessee, the buildings A to D were not one project as

the building 'D' was not part of the commencement certificate sanctioning

construction of buildings A, B and C. Our attention was drawn to series of

case laws on this issue.

8. The learned Departmental Representative for the Revenue pointed out

that the assessee's claim that building 'D' completed by 31.03.2011 was

incorrect as the letter placed at page 65 of the Paper Book dated 15.03.2011

reflects that only plinth was completed by that date. The learned

Departmental Representative for the Revenue further pointed out that it is

difficult to understand how the Architect certifies that the building was

completed by 31.03.2011. Our attention was drawn to the letter of PMC dated

26.12.2011 which was issued in response to the summons issued under

section 133(6) of the Act placed at page 66 of the Paper Book and also the

English transaction of the said letter under para 8.4 of assessment order in

which, the PMC clearly certified that the building 'D' was not completed.

9. The learned Authorized Representative for the assessee pointed out

that there was an alternate plea that prorata claim of deduction under section

80IB(10) of the Act in respect of buildings A, B and C should be allowed to the

assessee. It was further pointed out by the learned Authorized Representative

for the assessee that where the building Nos.A, B and C were constructed

vide the building plan dated 31.10.2005 and building No.D was brought in the

year 2007 vide revised plan, then the same is separate project and deduction

under section 80IB(10) of the Act is allowable. Reliance in this regard, was

placed upon series of decisions and an alternate plea was raised by the

assessee for the allowance of proportionate deduction on the building Nos.A,

B and C completed. Another plea raised by the learned Authorized

Representative for the assessee was the fact that the assessee had not 6 ITA No.360/PN/2013 M/s. Surana Mutha Developers

envisaged the construction of building in first phase, the construction of

building No.D was separate. As per the learned Authorized Representative for

the assessee, where there was no plan for building No.D initially, the same

should be considered separately and allowed deduction under section

80IB(10) of the Act, in view of the ratio laid down in DCIT Vs. Aditya

Developers in ITA Nos.791 & 792/PN/2008, relating to assessment years

2003-04 & 2004-05, vide order dated 30.01.2012. However, the learned

Departmental Representative for the Revenue placed reliance on the ratio laid

down in CIT Vs. Vandana Properties reported in 206 Taxman 584 (Bom)

which has been considered by the CIT(A).

10. We have heard the rival contentions and perused the record. The

assessee before us is in appeal against the denial of deduction under section

80IB(10) of the Act. During the year under consideration, the assessee had

claimed the deduction under section 80IB(10) of the Act against the sale

proceeds of residential project 'Daffodil Avenue'. The assessee claims that

there were certain changes in the lay out plan and the building plans were

revised along with the revision of layout plans and one more building No.D

was envisaged for construction on the said piece of land. During the course of

assessment proceedings, the Assessing Officer made certain enquiries from

the Pune Municipal Corporation under the provisions of section 133(6) of the

Act. The Assessing Officer also visited the site of the assessee on 18.11.2011

and noted that there were certain alterations and deviations in the original

structure of the plan. Another issue noted by the Assessing Officer was that

the plot area of the land as per original sanctioned plan was 4638.65 sq. mtrs.

However, the revised area of the plot was 3443 sq. mtrs., and after adding

open space of 463.86 sq. mtrs., the total plot area was 3906.86 sq. mtrs. i.e.

0.9654 acres, which was less than one acre. The plea of the learned

Authorized Representative for the assessee before us in this regard was that

initially the Assessing Officer had taken note of the factum of area of land, but 7 ITA No.360/PN/2013 M/s. Surana Mutha Developers

while completing the assessment, the only addition made in the hands of the

assessee was for non-completion of project vis-à-vis building No.D. Our

attention was drawn to the concluding paras of the assessment order and it

was pointed out that the explanation with regard to the said aspect was

accepted by the Assessing Officer i.e. the net area of plot of 3443 sq. mtrs.

was after excluding 463.86 sq. mtrs. on account of recreation ground and

695.79 sq. mtrs. on account of amenities space. The total area of the plot was

5600 sq. mtrs. and after deducting the road acquisition area of 961.35, the net

area of the plot was 4638.65 sq. mtrs., which was more than one acre and

hence, the condition prescribed in section 80IB(10)(b) of the Act was fulfilled.

We have perused the building plans and we find merit in the plea of the

assessee in this regard.

11. The issue on which the deduction under section 80IB(10) of the Act was

denied to the assessee, the disqualification as envisaged under clause (a) to

section 80IB(10) of the Act. The said clause provides the time limit within

which, the housing projects have to be completed in view of the date of

sanctioning of projects by the local authority. The assessee had received the

first commencement certificate issued by the local authority on 31.10.2005,

under which the assessee had proposed to build building Nos.A, B and C.

The said housing project was to be completed within five years from the end of

the financial year in which the commencement certificate was obtained i.e. on

or before 31.03.2011. The assessee, however, submitted another plan for the

construction of building No.D, which was sanctioned for the first time as per

the commencement certificate dated 29.03.2007. The assessee claims that it

had received the completion certificate of building Nos.A, B and C before

prescribed date under the Act i.e. 31.03.2011. In respect of building No.D, the

first plea of the assessee was that the building No.D had been physically

completed before 31.03.2011 as is evident from the Architecture Certificate.

Further, the sale of all units of building No.D have been recognized in financial 8 ITA No.360/PN/2013 M/s. Surana Mutha Developers

year 2010-11, which in turn confirms the handing over the possession of the

said units prior to 31.03.2011. Even the electricity bills have been raised in

respect of said flats in building No.D in the name of other purchasers prior to

31.03.2011. The Assessing Officer on the other hand, had received the

information from PMC that the construction work of building No.D of the said

project was not completed as on 31.03.2011 and the completion certificate for

the said building was issued on 15.03.2012. The deduction under section

80IB(10) of the Act was denied to the assessee, in view of non-completion of

the building No.D by 31.03.2011.

12. The first plea raised by the assessee in this regard was that building

Nos. A, B and C constitute one project and building No.D comprised another

project and the completion date of both the projects were different as the date

of commencement of both the projects were different. As per the assessee,

building plans for Building Nos.A, B and C were issued by the local authority

on 31.10.2005 and the assessee was to complete the said building by

31.03.2011, which had been completed and hence, the assessee was eligible

for deduction under section 80IB(10) of the Act. Further, the building No.D

was first sanctioned vide commencement certificate issued on 29.03.2007 as

against which the expected date of completion, as per the provisions of the

Act, was 31.03.2012. Since the building No.D was completed on 15.03.2012,

then the assessee was entitled to the claim of deduction under section

80IB(10) of the Act in respect of the same. Reliance in this regard was placed

on the ratio laid down by Pune Bench of Tribunal in M/s. Siddhivinayak

Kohinoor Venture Vs. ACIT in ITA Nos.1112 & 1527/PN/2011, relating to

assessment years 2006-07 and 2007-08, vide order dated 31.10.2013 for the

proposition that even a building or a group of buildings comprised in larger

projects approved by local authority can be construed as a housing project for

the purpose of deduction under section 80IB(10) of the Act. Another reliance

was placed on the ratio laid down by Hon'ble Bombay High Court in CIT Vs. 9 ITA No.360/PN/2013 M/s. Surana Mutha Developers

Vandana Properties (supra), wherein, it was held that the housing project need

not be a project and the group of buildings, but one single building can

constitute a separate housing project. Another reliance was placed on the

ratio laid down by Hon'ble Madras High Court in Viswas Promoters (P) Ltd. Vs.

ACIT reported in 81 DTR 68 (Madras), wherein it was held that the assessee

was entitled to the claim of deduction to the extent of each of the blocks

satisfying the conditions under section 80IB(10) of the Act and the assessee

would be entitled to the relief on proportionate basis.

13. In the alternate, the plea raised by the learned Authorized

Representative for the assessee was that it was entitled to the pro-rata

deduction in respect of building Nos.A, B and C, which were completed before

the due date. After going through the facts of the case, we find that the

building plans for the project comprising of building Nos.A, B and C were

sanctioned on 31.10.2007. The assessee thereafter, had carried out certain

changes in the layout plan as per commencement certificate dated

29.03.2007. The Assessing Officer vide para 4 notes that another

commencement certificate dated 11.12.2009 was also issued to the assessee,

and as per the revised plan, another building No.10 was included in the

project. Thus, the assessee in order to develop its plot of land was issued

three commencement certificates i.e. first one dated 31.10.2005 in respect of

building Nos.A, B and C. Thereafter, certain changes were carried out and

commencement certificate dated 29.03.2007 and 11.12.2009 were issued to

the assessee, as per which one more building No.D was included in the

project. Under the provisions of section 80IB(10)(a) of the Act, where an

undertaking had commenced or developed and construction of the housing

project on or after 1st day of October, 1998, then the said project is to be

completed in a case where housing project has been approved by the local

authority on or after 1st day of April, 2004, within four years from the end of

financial year, in which the housing project is approved by the local authority. 10 ITA No.360/PN/2013

M/s. Surana Mutha Developers

The explanation under section 80IB(10)(a) of the Act further provides that in a

case where the approval in respect of the housing project is more than once,

then such housing project shall be deemed to have been approved on the

date on which the building plan of such housing project was first approved by

the local authority. In the case of assessee, the project was approved by the

local authority on 31.10.2005 and in case, the explanation under section

80IB(10)(a) of the Act is to be applied, then the assessee is supposed to

complete the said housing project within five years from the end of financial

year in which the first commencement certificate was obtained i.e. on or before

31.03.2011. The assessee received part completion certificate for the building

Nos.A, B and C before the due date i.e. 31.03.2011. However, as per the

information collected by the Assessing Officer in respect of the newly

commenced building No.D of 'Daffodil Avenue', the certificate of assessee's

architect Shri A.N. Watve, dated 21.03.2011 and addressed to City Engineer,

Pune Municipal Corporation certified that he had verified the foundation starta

available on site and found it to be concurrent to the design assumptions. It

was further certified "the work of RCC construction up to plinth has been done

as per my drawing and design". Another certificate was from Mr. Zuber

Rashid Shaikh of Space Designers Syndicate dated 15.03.2011, who in

respect of building No.D of 'Daffodil Avenue' stated that the construction upto

plinth level had been completed at the above mentioned site as per the permit

commencement certificate dated 11.12.2009. It further stated that the plinth

may be checked and permission be given to proceed with further work. Both

these communications which are issued in the month of March, 2011 confirm

that the building No.D was still in construction and it was not completed till

31.03.2011. The Assessing Officer received information from PMC vide letter

dated 26.12.2011, which is annexed as Annexure - E to the assessment

order, in which it was stated that as on 31.03.2011, the construction of the

building No.D was not completed. The English translation of the relevant

portion is reproduced by the Assessing Officer at page 7 of the assessment 11 ITA No.360/PN/2013 M/s. Surana Mutha Developers

order. In view of the above said evidences available with the Assessing

Officer, copies of which are annexed as Annexure B to E to the assessment

order, we find no merit in the plea of the assessee that the building No.D had

been completed much before 31.03.2011, in view of the architect's certificate

confirming the completion by 31.03.2011. The assessee has further stated

that no deduction under section 80IB(10) of the Act has been claimed in the

current year as income from sale of units in building 'D' has been accounted

for in subsequent periods.

14. Now, coming to the alternate claim of the assessee vis-à-vis building

Nos.A, B and C constructed and completed by the assessee against which,

completion certificate has been received prior to 31.03.2011 i.e. the stipulated

date within which the said project had to be completed. We find merit in the

alternate plea raised by the assessee that where building Nos.A, B and C

have been completed before the stipulated date, the assessee is entitled to

the pro-rata deduction in respect of profits earned from building Nos.A, B and

C. We find support from the ratio laid down by the Pune Bench of the Tribunal

in the case of Pharande Developers Vs. The Income Tax Officer in ITA No.

715/PN/2009 and ITA No. 175/PN/2011 relating to assessment year 2005-06

order dated 25.06.2013 and in turn reliance was placed on the ratio laid down

by the Pune Bench of the Tribunal in the case of D.S. Kulkarni Developers Ltd.

Vs. ACIT in ITA Nos. 1428 & 1429/PN/2008, order dated 08.08.2012 and also

the subsequent judgment of the Hon'ble Madras High Court in the case of

Viswas Promoters (P) Ltd. (2013) 29 taxman.com 19 (Madras) and it was held

as under:-

"10. On this aspect, we have considered the plea of the assessee in the light of the precedents. A similar situation has been considered by this Bench in the case of D.S. Kulkarni Developers Ltd. (supra) wherein the following discussion is relevant :-

"20. In this background, the alternative plea of the assessee springs up. The plea is that the deduction under Section 80- IB(10) be denied only with respect to the units which do not conform to the condition contained in Section 80-IB(10)(c) and for the balance eligible residential units, the deduction should be 12 ITA No.360/PN/2013 M/s. Surana Mutha Developers

allowed. The Revenue has opposed the said plea on the ground that the assessee is not entitled to a proportionate deduction under Section 80-IB(10) of the Act.

21. On this aspect, we find that the Mumbai Bench of the Tribunal in the case of M/s Ekta Housing Pvt. Ltd., ITA No.3649/Mum/2009 dated 20.05.2011 has upheld the plea of the assessee for a proportionate deduction under Section 80-IB(10) of the Act where some of the residential units in the project violated the condition contained in Section 80-IB(10)(c) of the Act. The Mumbai Bench after noticing the precedents in the case of --

i) ITO vs. Air Developers, 25 DTR 287 (Nag.); ii) DCIT vs. Brigade Enterprises Pvt. Ltd., 14 DTR 371 (Bang.);

iii) ACIT vs. Sheth Developers P. Ltd., 33 SOT 277 (Mum.);

iv) Bengal Ambuja Housing Development Ltd. vs. DCIT;

v) SJR Builders vs. ACIT, 3 ITR 569 (Mum.) held that the assessee would not loose the exemption under Section 80-IB(10) in entirety where some of the residential units wings had a 'built-up area' in excess of the limit prescribed in clause (c) of Section 80-IB(10) but, it would be entitled to proportionate deduction under Section 80-IB(10) of the Act with regard to the profits earned on the eligible units. Particularly, the Tribunal also considered the decision of the Hon'ble Bombay High Court in the case of Brahma Associates (supra) and held that the same does not envisage denial of proportionate deduction in such circumstances. The relevant discussion, as contained in paragraphs 8 and 9 of the order of the Tribunal in the case of M/s Ekta Housing Pvt. Ltd. (supra) reads as under : -

"viii) We now examine the applicability of the decision of the Hon'ble Bombay High Court in Brahma Associates (supra) to the facts of this case. On a careful reading of this judgement, we find that nowhere it is stated that proportionate deduction should be allowed, in case certain residential units had built-up area in excess of prescribed limit of 1,000 sq.ft.. In fact, this issue was not before the Hon'ble Jurisdictional High Court. The questions before the Hon'ble Jurisdictional High Court were different and, hence the judgement cannot be said to be on this issue.

The only issue before the High Court is when there is a commercial element in a residential project, will be assessee be denied the entire exemption. In this case, the Hon'ble High Court has observed that when the local authority approved a plan as a housing project or a residential cum commercial project, the assessee would be entitled to claim for deduction under Section 80-IB(10) even if the project had commercial element in excess of 10%. At paras 27 and 28, the Court observed as follows :-

"27. The question then to be considered is, whether the Special Bench of the Tribunal was justified in holding that the projects having commercial area upto 10% of the built-up area of the plot are eligible for deduction under Section 80- 13 ITA No.360/PN/2013 M/s. Surana Mutha Developers

IB(10) on the entire project upto 01.04.2005. Once the basic argument of the revenue that the housing projects with commercial user are not entitled to Section 80-IB(10) deduction is rejected, then in the absence of any restriction imposed under the Act, it was not open to the Tribunal to hold that the projects approved by the local authorities having residential buildings with commercial user upto 10% of the plot area would alone be entitled to deduction under Section 80-IB(10). As noted earlier, restriction regarding commercial user has been imposed for the first time by introducing clause (d) to Section 80-IB(10) with effect from 01.04.2005. Therefore, it was not open to the Tribunal to hold that prior to 01.04.2005, projects having commercial user upto 10% of the plot area alone would be eligible for Section 80-IB(10) deduction.

28. In the present case, though the commercial user is more than 10% of the plot area, the Tribunal has allowed Section 80-IB(10) deduction in respect of 15 residential buildings on the ground that the profits from these exclusively residential buildings could be determined on stand along basis. In our opinion, that would not be proper, because 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 part of the project. In the present case, the commercial user is allowed in accordance with the DC Rules and hence the assessee was entitled to Section 80-IB(10) deduction on the entire project approved by the local authority. However, the assessee has not challenged the decision of the Tribunal in restricting the deduction to a part of the project. Therefore, while holding that in law, the assessee was entitled to section 80-IB(10) deduction on the profits of the entire project, in the facts of the present case, since the assessee has not challenged the decision of the Tribunal, we are not inclined to disturb the decision of the Tribunal in restricting the section 80-IB(10) deduction only in respect of the profits derived from 15 residential buildings."

ix) Thus, it could be seen that the Hon'ble High Court do not approve the findings of the Tribunal that a residential building with commercial user up to 10% of the plot area would be entitled to deduction under section 80- IB(10). The issue that, in case where certain residential units are of a built-up area in excess of the prescribed limit of 1,000 sq.ft. in residential project, this would result in the entire exemption being lost, or whether the assessee would be entitled to a proportionate deduction was not before the High Court. Thus, in our opinion, the decision of Hon'ble Jurisdictional High Court in the case of 14 ITA No.360/PN/2013 M/s. Surana Mutha Developers

Brahma Associates (supra) does not come to the rescue of the Revenue."

22. Following the aforesaid precedent, we, therefore, hold that merely because the assessee has violated the condition under Section 80-IB(10)(c) in relation to the flats on the 11th floor, the deduction under Section 80-IB(10) cannot be denied in its entirety, but, the denial shall be limited to the profits in respect of the flats on the 11th floor alone. For the balance of the residential units, the plea of the assessee for deduction under Section 80-IB(10) of the Act is justified, and the assessee succeeds on this aspect."

11. Following the aforesaid precedent, we hold that merely because assessee violated the condition prescribed under Section 80-IB(10)(c) of the Act in relation to the amalgamated Bunglow G1 & G2, the deduction under Section 80-IB(10) of the Act cannot be denied in its entirety. In other words, the denial of deduction shall be limited to the profits in respect of the amalgamated Bunglow G1 & G2 alone. For balance of the residential units, which complied with the requirements of clause

(c) of Section 80-IB(10) of the Act, assessee shall be eligible for deduction. The Hon'ble Madras High Court in the case of Arun Excello Foundations (P) Ltd. vs. CIT (2013) 29 taxmann.com 149 (Madras) considered an argument on behalf of the Revenue, similar to what has been argued before us, to the effect that in the absence of any contemplation under Section 80-IB(10) of the Act for proportionate relief on partial compliance, section cannot be interpreted to granted pro rata relief. The aforesaid argument of the Revenue has been negated by the Hon'ble Madras High Court and therefore the claim of the assessee for proportionate deduction under Section 80-IB(10) of the Act cannot be denied.

12. Thus, on the aforesaid aspect, assessee succeeds and we direct the Assessing Officer to re-compute the deduction under Section 80-IB(10) of the Act in relation to the 'Lakshdweep' project by limiting the denial only to the profits in respect of Bunglow G1 & G2. For balance of the residential units, assessee shall be allowed deduction under Section 80-IB(10) of the Act."

11. Following the aforesaid ratio laid down by the Pune Bench of the Tribunal (supra) we hold that merely because the assessee had violated the provisions of section 80IB(10)(c) of the Act in respect of two units i.e. row houses D-3 and D-4, the deduction under section 80IB(10) could not be denied in entirety. The assessee is entitled to the said deduction under section 80IB(10) of the Act in respect of balance units which have been constructed as per the conditions laid down in section 80IB(10)(c) of the Act. Only in respect of two units i.e. D-3 and D-4, deduction under section 80IB(10) of the Act would be denied to the assessee. Accordingly, we uphold the order of CIT(A) in directing the Assessing Officer to re-compute the deduction under section 80IB(10) of the Act in relation to the said project by limiting the denial only in respect of row houses D-3 and D-4 and for the balance units the assessee would be entitled to the said deduction under section 80IB(10) of the Act. Thus, the grounds of appeal raised by the Revenue are dismissed."

15 ITA No.360/PN/2013

M/s. Surana Mutha Developers

15. Following the aforesaid ratio laid down by the Pune Bench of the

Tribunal (supra) we hold that merely because the assessee had not completed

the building No.D within prescribed time under the provisions of Act, the

deduction under section 80IB(10) could not be denied in entirety. The

assessee is entitled to the prorata deduction under section 80IB(10) of the Act

in respect of building Nos.A, B and C which have been constructed as per the

conditions laid down in section 80IB(10) of the Act. Reversing the order of

CIT(A), the Assessing Officer is directed to allow the prorata claim of assessee

under section 80IB(10) of the Act in respect of building Nos.A, B and C. Thus,

the grounds of appeal raised by the assessee are allowed.

16. In the result, the appeal of the assessee is partly allowed.

Order pronounced on this 10th day of April, 2015.

Sd/- Sd/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER

Pune, Dated: 10 th April, 2015. GCVSR

Copy of the order is forwarded to: - 1) The Assessee; 2) The Department; 3) The CIT(A)-I, Pune; 4) The CIT-I, Pune; 5) The DR "B" Bench, I.T.A.T., Pune; 6) Guard File. By Order //True Copy//

Assistant Registrar I.T.A.T., Pune