ITO 3(1)(4), MUMBAI v. HOPEWELL BUILDERS P. LTD, MUMBAI

ITA 102/MUM/2009 | 2005-2006
Pronouncement Date: 29-10-2010 | Result: Partly Allowed

Appeal Details

RSA Number 10219914 RSA 2009
Assessee PAN AAACH7816E
Bench Mumbai
Appeal Number ITA 102/MUM/2009
Duration Of Justice 1 year(s) 9 month(s) 23 day(s)
Appellant ITO 3(1)(4), MUMBAI
Respondent HOPEWELL BUILDERS P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-10-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 29-10-2010
Date Of Final Hearing 14-10-2010
Next Hearing Date 14-10-2010
Assessment Year 2005-2006
Appeal Filed On 06-01-2009
Judgment Text
1 ITA 102/M/09 4746/M/09 M/S PRESCON BUILDERS(FOR MERLY KNOWN AS HOPEWELL BUILDERS) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H BEFORE SHRI P.M. JAGTAP A.M. AND SHRI R.S. PADVEKA R JM ITA NO. 102/MUM/09 ASSESSMENT YEAR 2005-06 ITA NO. 4746/MUM/09 ASSESSMENT YEAR 2006-07 INCOME TAX OFFICER 3(1)(4) AAYAKAR BHAWAN ROOM NO. 666 M.K. ROAD MUMBAI -20 VS. M/S PRESCON BUILDERS P. LTD. (FORMERLY KNOWN AS HOPEWELL BUILDERS PVT. LTD.) 201 PRESTIGE PRECINT 2 ND FLOOR ALMEIDA ROAD PANCHPAKHADI THANE (W). PIN 400601. PAN AAACH7816E APPELLANT RESPONDENT APPELLANT BY SHRI SANDEEP DAHIYA RESPONDENT BY SHRI SHIVRAM ORDER PER P.M. JAGTAP A.M. THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINST THE TWO SEPARATE ORDERS PASSED BY THE LD. CIT(A) 27 MUMBAI DATED 15.10.08 AND 1 2.6.09 FOR A.Y. 2005-06 AND 2006- 07 WHEREBY HE DELETED THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION U/S 80IB(10). 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS CARRYING ON ITS BUSINESS AS BUILDERS AND DEVELOPERS. THE RETURNS OF INCOME FOR THE YEARS UNDER CONSIDERATION I.E. 2005-06 AND 2006-07 WERE FILED BY IT ON 26.10.05 AN D 29.1.06 RESPECTIVELY DECLARING TOTAL INCOME AT NIL. THE ASSESSEE COMPANY HAD UNDERTAK EN A PROJECT COMPRISING OF EIGHT BUILDINGS ON A PLOT OF LAND AT VILLAGE KAVESAR GHOD BUNDER ROAD THANE WHICH WAS 2 ITA 102/M/09 4746/M/09 M/S PRESCON BUILDERS(FOR MERLY KNOWN AS HOPEWELL BUILDERS) UNDER EXECUTION DURING THE YEARS UNDER CONSIDERATIO N. IN ITS RETURN OF INCOME FILED FOR THE YEARS UNDER CONSIDERATION THE DEDUCTION OF ` 1 97 63 000/- AND ` 2 43 27 342/- WAS CLAIMED BY THE ASSESSEE IN RESPECT OF INCOME DERIVE D FROM THE SAID PROJECT IN A.Y. 2005- 06 & 2006-07 RESPECTIVELY. IN ORDER TO VERIFY THE CLAIM OF THE ASSESSEE FOR THE SAID DEDUCTION A SURVEY U/S 133A WAS CONDUCTED BY THE A .O. AT THE OFFICE PREMISES OF THE ASSESSEE AS WELL AS CONSTRUCTION SITE AT GODBUNDER ROAD ON 15.2.07. AS FOUND DURING THE COURSE OF SURVEY AS WELL AS DURING THE COURSE OF EN QUIRY MADE IN THE ASSESSMENT PROCEEDINGS THE PROJECT UNDERTAKEN BY THE ASSESSEE HAD TOTAL BUILT UP AREA OF 3 21 465 SQ. FT. OUT OF WHICH COMMERCIAL AREA WAS TO THE EXTENT OF 9929 SQ. FT. ACCORDING TO THE A.O. AS PER CL. (D) TO SECTION 80IB(10) INSERTED BY THE FINANCE (NO.2) ACT 2004 W.E.F. 1.4.05 THE PERMISSIBLE COMMERCIAL AREA IN THE PROJECT WAS ONLY 5% OF THE TOTAL BUILT UP AREA OF 2000 SQ. FT. WHICHEVER IS LESS. HE HELD THAT THE C ONDITION LAID DOWN IN CL. (D) TO SECTION 80IB APPLICABLE TO THE YEARS UNDER CONSIDERATION TH US WAS NOT SATISFIED IN THE CASE OF THE PROJECT UNDERTAKEN BY THE ASSESSEE COMPANY AND IT W AS THEREFORE NOT ENTITLED FOR DEDUCTION U/S 80IB(10) IN RESPECT OF INCOME DERIVED FROM THE SAID PROJECT. IN THIS REGARD HE REJECTED THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE COMPANY THAT THE SAID PROJECT HAVING BEEN APPROVED BY THE CONCERNED LOCAL AUTHORI TY PRIOR TO 1.4.05 THE CONDITION LAID DOWN IN CL. (D) TO SECTION 80IB(10) INSERTED W.E.F. 1.4.05 WAS NOT APPLICABLE. ACCORDINGLY THE CLAIM OF THE ASSESSEE FOR DEDUCTIO N U/S 80IB WAS DISALLOWED BY THE A.O. IN BOTH THE YEARS UNDER CONSIDERATION. ON APPEAL T HE LD. CIT(A) HOWEVER DELETED THE SAID DISALLOWANCE MADE BY THE A.O. RELYING ON THE D ECISION OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANISATION VS. ITO 115 TTJ (MUM) 485 WHEREIN IT WAS HELD THAT THE CONDITIONS STIPULATED IN CLAUSE (D) TO SECTION 80IB (10) INSERTED W.E.F. 1.4.05 WAS NOT APPLICABLE FOR THE PROJECTS WHICH WERE APPROVED BEF ORE 31 ST MARCH 2005. AGGRIEVED BY THE ORDERS OF THE LD. CIT(A) THE REVENUE HAS PREFE RRED THESE APPEALS BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING BEFORE US THE LD. REPRES ENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THE COMMON ISSUE INVOLVED IN BOTH THESE APPEALS RELATING TO ASSESSEES CLAIM FOR DEDUCTION U/S 80IB STANDS SQUARELY COVERED BY T HE DECISION OF PUNE SPECIAL BENCH OF 3 ITA 102/M/09 4746/M/09 M/S PRESCON BUILDERS(FOR MERLY KNOWN AS HOPEWELL BUILDERS) ITAT IN THE CASE OF BRAHMA ASSOCIATES 119 ITD 255(P UNE) [SB] WHEREIN AFTER TAKING INTO CONSIDERATION OF THE RELEVANT ASPECTS THE DEC ISION ON THIS ISSUE HAS BEEN SUMMARIZED BY THE TRIBUNAL IN PARA NO. 120 OF ITS ORDER AS UND ER: A) THE DEDUCTION UNDER SECTION 80-IB(10) AS APPLIC ABLE PRIOR TO 1.4.2005 SUBJECT TO AND IN THE LIGHT OF THE OBSERVATIONS MA DE IN THE PRECEDING PARAGRAPHS IS ADMISSIBLE IN CASE OF A PROJECT COMPRISING RESIDE NTIAL HOUSING UNITS AND COMMERCIAL ESTABLISHMENTS. IN CASE THESE PROJECTS ARE APPROVED AS HOUSING PROJECTS BY THE LOCAL AUTHORITY SUCH AN APPROVAL AS HOUSING PROJECT IS SUFFICIENT FOR THE PURPOSES OR ELIGIBILITY. IN ANY OTHER CASE WHERE 90 PERCENT OR MORE OF THE TOTAL BUILT UP AREA IS USED FOR DWELLING UNITS IN ACCORDANCE W ITH THE SCHEME OF SECTION 80- IB(10) THE BENEFIT OF DEDUCTION UNDER SECTION 80-I B(10) WILL NOT BE DECLINED. IN CASE COMMERCIAL USE OF BUILT UP AREA IS MORE THAN 1 0 PER CENT BUT THE RESIDENTIAL SEGMENT OF THE PROJECT SATISFIES REQUIREMENTS OF SE CTION 80-IB(10) ON STANDALONE BASIS I.E (I) THE SIZE OF THE PLOT EXCLUDING PORTI ON UNDER COMMERCIAL UNIT IS MORE THAN MINIMUM AREA OF ONE ACRE (II) RESIDENTIAL UNI TS BUILT ON SUCH AREA MUST SATISFY CONDITION OF CLAUSE (C) OF THE PROVISION AND (III) OTHER NECESSARY CONDITIONS ARE FULFILLED AND WHERE INCOME FROM CONSTRUCTION OF RES IDENTIAL DWELLING UNITS CAN BE WORKED OUT ON STANDALONE BASIS DEDUCTION UNDER SEC TION 80-IB(10) WILL BE AVAILABLE IN RESPECT OF RESIDENTIAL SEGMENT OF THE PROJECT. B) THE DEDUCTION UNDER SECTION 80-IB(10) IS AVAILA BLE IN RESPECT OF PROFITS OF HOUSING PROJECT AS A WHOLE AND AS SUCH IT IS NOT RELEVANT AS TO WHAT IS THE PORTION OF PROFITS WHICH CAN BE SAID TO BE ATTRIBUTABLE TO RES IDENTIAL UNITS. THIS IS SUBJECT TO THE RIDER THAT IN CASE COMMERCIAL USE OF BUILT UP AREA IN A PROJECT IS MORE THAN 10 PER CENT AND FOR THIS REASON THE PROJECT CANNOT BE SAI D TO BE A PREDOMINANTLY HOUSING PROJECT BUT IN TERMS OF OBSERVATIONS MADE IN PARA GRAPH 115 ABOVE THE ASSESSEE IS ENTITLED TO DEDUCTION IN RESPECT OF RESIDENTIAL UNI T SEGMENT OF THE OVERALL PROJECT ON FULFILLMENTS OF NECESSARY CONDITIONS THE ENTITLEME NT OF INCENTIVE DEDUCTION WILL BE CONFINED TO ONLY TO THE PROFITS TO THE RESIDENTIAL SEGMENT OF THE OVERALL PROJECT. (C) THE LIMIT ON COMMERCIAL USE OF BUILT UP AREA A S PRESCRIBED BY CLAUSE (D) OF SECTION 80-IB(10) HAS NO RETROSPECTIVE APPLICATION AND IT APPLIES ONLY WITH EFFECT FROM THE ASSESSMENT YEAR 2005-06. 4. THE LD. REPRESENTATIVES OF BOTH THE SIDES THUS H AVE AGREED THAT THE COMMON ISSUE INVOLVED IN BOTH THESE APPEALS MAY THEREFORE BE SEN T BACK TO A.O. FOR DECIDING THE SAME AS PER THE DECISION OF THE PUNE SPECIAL BENCH OF IT AT IN THE CASE OF BRAHMA ASSOCIATES (SUPRA). ACCORDINGLY THE IMPUGNED ORDERS OF THE L D. CIT(A) ON THE ISSUE IN DISPUTE ARE SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE A.O. FOR DECIDING THE SAME KEEPING IN VIEW THE DECISION OF THE PUNE SPECIAL BENCH OF ITAT IN THE CASE OF BRAHMA ASSOCIATES (SUPRA). 4 ITA 102/M/09 4746/M/09 M/S PRESCON BUILDERS(FOR MERLY KNOWN AS HOPEWELL BUILDERS) 5. IN THE RESULT APPEALS OF THE REVENUE ARE TREATE D AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 29 TH OCTOBER 2010. SD/- SD/- (R.S. PADVEKAR) (P.M. JAGTAP) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI DATED OCTOBER 2010. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXVII - MUMBAI 4. THE CIT- CITY - 3 MUMBAI 5. THE DR BENCH H 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI 5 ITA 102/M/09 4746/M/09 M/S PRESCON BUILDERS(FOR MERLY KNOWN AS HOPEWELL BUILDERS) DATE INITIALS 1. DRAFT DICTATED 15.10.10 SR.P.S./P.S. 2. DRAFT PLACED BEFORE AUTHOR 21.10.10 SR.P.S./P.S. 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER. - J.M./A.M. 4.DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER. J.M./A.M. 5. APPROVED DRAFT COMES TO THE SR.P.S./P.S. SR.P.S./P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S. 8. DATE OF WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER.