GUIDANCE NOTE ON MAINTENANCE OF COST ACCOUNTING RECORDS FOR CONSTRUCTION INDUSTRY INCLUDING REAL ESTATE AND PROPERTY DEVELOPMENT ACTIVITY
--
Best Wishes
CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
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http://pdicai.org/MyPage/203038.aspx
Best Wishes
CA. V.M.V.SUBBA RAO
Chartered Accountant
Door No.24-2-1885,
I Floor, Flat No.5,
Siddivinayaka Residency, I Cross,
Central Avenue, MSR Nagar,
Magunta Layout,
Nellore-524 003
Andhra Pradesh
India
Mobile:+91 - 0 9390221100
+91 - 0 9440278412
e-Mail: vmvsr@rediffmail.com
vmvsr@yahoo.co.uk
http://pdicai.org/MyPage/203038.aspx
GOODS AND SERVICE TAX REPORTS (GSTR) HIGHLIGHTS
F Sale price cannot be treated as normal price for quantification of assessable value on existence of extra-commercial consideration : Commissioner of Central Excise v. Fiat India P. Ltd. . . . 569
F Interpretation of taxing statutes : Hardship not a valid consideration for distorting language of provisions : Commissioner of Central Excise v. Fiat India P. Ltd. . . . 569
F Terms or expressions of well-known legal significance or connotation to be interpreted as understood in popular sense in absence of definition in statute : Commissioner of Central Excise v. Fiat India P. Ltd. . . .569
F Words used by Legislature are safe guide to its intention : Commissioner of Central Excise v. Fiat India P. Ltd. . . 569
F Where application for conversion of shipping bills from duty-free replenishment certificate scheme to duty entitlement passbook scheme not filed in time for want of documents, application filed in 2010 not barred by limitation : Rajguru Impex (India) P. Ltd. v. Commissioner of Customs . . . 562
F Where no fraud, misdeclaration or misleading information regarding conversion of free-shipping bills to drawback shipping bills, matter to be considered sympathetically : Rajguru Impex (India) P. Ltd. v. Commissioner of Customs . . . 562
F Notifications :
F Central Excise Act, 1944 :
F Notification under section 5A(1) :
Concessional rate of duty on specified goods : Amendments . . . 160
F Customs Act, 1962 :
F Notification under section 14 :
Rate of exchange of conversion of each of the foreign currency . . . 157
F Notification under section 14(2) :
Rates of basic customs duty on specified goods : Amendments 157, 159
F Finance Act, 1994 :
F Notification under sections 93 and 94 :
Provision of certain taxable services prescribed as continuous supply of service : Amendment . . . 142
Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 : Rescission . . . 142
F Notification under section 93(1) :
Exemption to certain services : Rescission of notifications . . . 137
Exemption to services provided by Technology Business Incubator or Science and Technology Entrepreneurship Park : Supersession . . . 133
Exemption to services received by unit located in SEZ or developer of SEZ for authorised operations : Supersession . . . 147
Threshold level of service tax exemption : Supersession . . . 135
F Service Tax Rules, 1994 :
F Notification under rule 6A :
Export of service : Rebate . . . 143
F Finance (No. 2) Act, 2004 :
F Notification under section 95(3) :
Exemption to services received by unit located in SEZ or developer of SEZ for authorised operations : Supersession . . . 147
F Finance Act, 2007 :
F Notification under section 140(3) :
Exemption to services received by unit located in SEZ or developer of SEZ for authorised operations : Supersession . . . 147
F Interpretation of exemption notifications under Central Excise Law (Dr. K. R. Chandratre, Practising Company Secretary, Pune, Past President, ICSI) . . . 31
| COMPANY LAW INSTITUTE OF INDIA PVT. LTD. No. 2, Vaithyaram Street, T.Nagar, Chennai - 600017. Phone: (044) 24350752 - 55 Fax: (044) 24322015 info@cliofindia.com |
IT : Prior to amendment of section 80-IB with effect from 1-4-2010,
adjacent residential units sold to family members could not be
considered as one unit having area exceeding specified limit so as to
deny deduction to assessee
nnn
[2011] 12 taxmann.com 468 (Mum. - ITAT)
IN THE ITAT MUMBAI BENCH 'J'
Emgeen Holdings (P.) Ltd.
v.
Deputy Commissioner of Income-tax, Range 9(1)
PRAMOD KUMAR, ACCOUNTANT MEMBER
AND VIJAY PAL RAO, JUDICIAL MEMBER
IT APPEAL NOS. 3594, 3595, 3647 AND 3648 (MUM.) OF 2009
[ASSESSMENT YEARS 2003-04 AND 2004-05]
JULY 29, 2011
Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and
gains from industrial undertakings other than infrastructure
development undertakings - Assessment years 2003-04 to 2004-05 -
Whether amendment made to section 80-IB with effect from 1-4-2010, is
prospective in nature - Held, yes - Whether under pre-amended section
as long a residential unit has less than specified area, is as per
duly approved plans and is capable of being used for residential
purposes on stand alone basis, deduction under section 80-IB(10)
cannot be declined in respect of same merely because end user, by
buying more than one such unit in name of family members, has merged
those residential units into a larger residential unit of a size which
is in excess of specified size - Held, yes [In favour of assessee]
FACTS
The assessee-company was engaged in the business of real estate
development and claimed deduction under section 80-IB in respect of a
housing project developed by it. The Assessing Officer disallowed the
deduction observing that some of residential units had area exceeding
1000 square feet inasmuch as where the assessee had sold pair of
flats, though by two separate agreements, to members of same family,
such flats would be viewed only as one unit and area of such units
exceeded 1000 sq. ft. On appeal, the Commissioner (Appeals) partly
allowed the claim by holding that disallowance must remain restricted
on pro rata basis only to deduction relatable to such units whose area
exceeded 1000 sq. ft.
On second appeal :
HELD
It was noted that the size of each flat, as evident from building plan
as duly approved by Municipal authorities, was less than 1,000 sq. ft.
It was not even revenue's case that each of flat on stand alone basis
was not a residential unit. Even if flats were constructed or planned
in such a way that two flats could indeed be merged into one larger
unit, as long each flat was an independent residential unit, deduction
under section 80-IB(10) could not be declined. What section 80-IB(10)
refers to is 'residential unit' and in the absence of anything to the
contrary in the Act, the expression 'residential units' must have the
same connotations as assigned to it by local authorities granting
approval to the project. The local authority had approved the building
plan with residential units of less than 1,000 sq.ft. and granted
completion certificate as such. There was no ambiguity about the
factual position. Further, the prohibition against sale of more than
one flat in a housing project to members of a family has been inserted
specifically with effect from 1-4-2010 and, said amendment in law can
only be treated as prospective in effect. So far as pre-amendment
position is concerned, as long a residential unit has less than
specified area, is as per the duly approved plans and is capable of
being used for residential purposes on stand alone basis, deduction
under section 80-IB(10) cannot be declined in respect of the same
merely because the end user, by buying more than one such unit in the
name of family members, has merged these residential units into a
larger residential unit of a size which is in excess of specified
size. It is useful to take note of legislative amendment by virtue of
which the legislature put certain restrictions on sale of residential
units to certain family members of a person who has been sold a
residential unit in the housing project. Section 80-IB(10) now
provides an additional eligibility condition that in a case where a
residential unit in the housing project is allotted to any person
being an individual, no other residential unit in such housing project
is allotted to any of the following person, namely (i) the individual
or the spouse, or the minor children of such individual, (ii) the HUF
in which such individual, is a karta' (iii) any person representing
such individual the spouse or minor children of such individual, or
the HUF in which such individual is a karta. [Para 7]
It is clear that the amendment has been brought with prospective
effect from 1-4-2010, and there is no indication whatsoever to suggest
that these restrictions need to be applied with retrospective effect.
The amendment seeks to plug a loophole but restricts the remedy with
effect from 1-4-2010, i.e., assessment year 2010-11. The law is very
clear that unless provided in the statute, the law is always presumed
to be prospective in nature. It will, therefore, be contrary of the
scheme of law to proceed on the basis that wherever adjacent
residential units are sold to family members, all these residential
units are to be considered as one unit. If law permitted so, there was
no need of the insertion of clause (f) to section under section
80-IB(10). It will be unreasonable to proceed on the basis that
legislative amendment was infructuous or uncalled for - particularly
as the amendment is not even stated to be 'for removal of doubts'. On
the contrary, this amendment shows that no such eligibility conditions
could be read into pre-amendment legal position. [Para 8]
In view of aforesaid discussion, the deduction under section 80-IB(10)
was to be allowed to the assessee entirely. [Para 9]
S.C. Tiwari for the Appellant. Kusum Ingale for the Respondent.
ORDER
Pramod Kumar, Accountant Member. - By way of these cross appeals, the
appellants have called into question correctness of CIT(A)'s separate
orders dated 30-3-2009, passed in the matter of assessment under
section 143(3) read with section 147 of the Income-tax Act, 1961, for
the assessment years 2003-04 and 2004-05.
2. Common grounds raised by the assessee in both the assessment years
are as follows:—
"1. (a) The ld. CIT(A) erred in restricting the deduction under
section 80-IB(10) on a proportionate basis of the total profit of the
project in proportion to the eligible square feet area sold.
(b) The ld. CIT(A) erred in failing to specifically deal with the
appellant's claim that it was entitled to a deduction under section
80-IB(10) of Rs. 6,54,82,573 for assessment year 2003-04 and Rs.
1,91,72,008 for assessment year 2004-05.
(c) The appellant submits that its housing project complied with all
the conditions mentioned in section 80-IB(10) and, accordingly, the
claim for deduction amounting to Rs. 6,54,82,573 for assessment year
2003-04 and Rs. 1,91,72,008 for assessment year 2004-05 was correctly
allowed while completing the original assessment and the ld. CIT(A)
erred in allowing only the proportionate claim.
(d) The appellant submits that the ld. CIT(A) failed to appreciate
that all the flats in the appellant's housing project were of an area
of less than the specified limit and each such flat was sold
separately by a separate registered sale deed on which stamp duty was
paid.
2. The appellant submits that the ld. CIT(A) ought to have deleted the
interest levied under section 234B or in the alternative without
prejudice, ought to have held that interest under section 234B(3) will
be levied for the period comprised between the original assessment and
reassessment and on the amount by which the tax on the total income
determined on the basis of the reassessment exceeds the tax on the
total income determined under section 143(3).
3. The appellant submits that the Assessing Officer be directed to :—
(a) grant deduction under section 80-IB, 100 amounting to Rs.
6,54,82,573 for assessment year 2003-04 and Rs. 1,91,72,008 for
assessment year 2004-05 as per original assessment order.
(b) to delete interest levied under section 234B or in the
alternate, without prejudice, work out such interest in accordance
with the provisions of section 234B(3)."
3. The revenue has raised the following common grievances in both the
assessment years:
"1. On the facts and in the circumstances of the case and in law,
the ld. CIT(A) erred in allowing deduction under section 80-IB(10) on
pro rate basis without appreciating that during the course of survey
operation some of the residential flats having built up area exceeding
1000 sq.ft. were sold by two separate agreements to the same family
members violating the conditions laid down under section 80-IB(10) of
the Income-tax Act,1961.
2. On the facts and in the circumstances of the case and in law,
the ld. CIT(A) erred in allowing deduction under section 80-IB(10) of
the Income-tax Act, 1961 to the assessee on pro rata basis on the
qualifying units which satisfied the conditions laid down under
section 80-IB(10) of the Income-tax Act, 1961 without appreciating
that the conditions laid down under section 80-IB(10) were not
satisfied as section 80-IB(10) does not permit for the allowance of
proportionate deduction."
4. Briefly stated the relevant material facts are as follows. The
assessee is engaged, inter alia, in the business of real estate
development. One of the housing project developed by the assessee,
known by the name of 'Garden Enclave', was claimed to be eligible for
deduction under section 80-IB(10), and, accordingly, deduction of Rs.
6,54,82,573 for assessment year 2003-04 and Rs. 1,91,72,008 for
assessment year 2004-05 was allowed to the assessee. However, in the
course of a survey subsequently conducted on the assessee, it was
noticed that some of the residential units had area exceeding 1,000
sq. ft. inasmuch as it was found that the assessee had sold the flat
by two separate agreements to the members of the same family, though,
as such, such pairs of flats sold separately would be viewed only as
one unit. On the basis of these findings, as also the admission made
by the assessee in survey proceedings, the stand taken by the
Assessing Officer was that in order to be eligible for deduction under
section 80-IB(10), the total area of residential unit should not
exceed 1,000 sq.ft. but as these pairs of flats could be viewed only
as one unit and the area of such units exceeds 1,000 sq.ft. the
assessee was not eligible for deduction under section 80-IB(10).
Accordingly, the assessee was declined the deduction under section
80-IB(10). Aggrieved, assessee carried the matter in appeal but
without complete success. While the CIT(A) upheld disallowance of
deduction under section 80-IB(10) in respect of such units as exceed
1,000 sq.ft. the CIT(A) further held that the disallowance, however,
must remain restricted on pro rata basis only to deduction relatable
to such units. While doing so, the CIT(A), inter alia, observed as
follows :
"3.5 I have carefully considered the above facts of the case, the
appellant's submission, Assessing Officer's contention as well as
various case laws as cited above. The Assessing Officer, while
disallowing the claim for deduction under section 80-IB(10) of the
assessee, observed that all the units in the project were not having
individual area of 1000 sq.ft. and some of the residential units had
individual area of more than 1000 sq.ft. therefore, the claim of the
assessee was rejected by the Assessing Officer as the condition
prescribed in the section for claiming the deduction wherein each
residential unit should have a maximum built up area of 1000 sq.ft.
has not been satisfied. However, it is the appellant's contention that
full deduction under section 80-IB(10) of the Act is allowable or
alternatively proportionate deduction should be allowed. As per the
details submitted by the assessee the total built up area of all the
flats (189 flats) in the housing project is 116278 sq.ft. and the
built up area of combined adjoining 114 flats is 59898 sq.ft. which
comes to 42.30 per cent of the total area of the project. The
proportionate area for remaining flats is 56380 sq.ft. which comes to
57.70 per cent. The appellant company relying on the various decisions
of ITAT and High Courts has claimed that it is entitled to
proportionate deduction being 57.705 of the total profit of the
project in proportion to the eligible sq.ft. area sold.
3.6 The appellant's claim is supported by the decision of Hon'ble
Mumbai ITAT in the case of M/s. Saroj Sales Organisation ITA No.
4008/M/07 order dated 24-1-2008, wherein, on identical facts the
Hon'ble ITAT following the Hon'ble Supreme Court decision in the case
of Bajaj Tempo Ltd., reported in 196 ITR 188 has observed that the
provisions should be interpreted liberally. Further, following the
Hon'ble ITAT decision in the case of Bengal Ambuja Housing Development
Ltd., Kolkata, the Hon'ble Mumbai ITAT allowed the assessee's claim on
pro rata basis on qualifying units which satisfied the conditions laid
down by section 80-IB(10). The Hon'ble ITAT, Kolkata in the case of
Bengal Ambuja Housing Development Ltd. v. DCITG [ITA No.
1595/Kol/2005, assessment year 2002-03], Bench 'C' order dated
24-3-2006 (2007) 39-D BCAJ 546 has held that even if the units
constructed are both smaller and larger units with reference to the
stipulated area, the profit derived from the construction of the
smaller units i.e., within the stipulated area of 1000 sq.ft. builtup
area ought to have allowed as deduction under section 80-IB(10) of the
Act. The above decision is approved by the Hon'ble Kolkata High Court
as referred in the decision of ACTI v. Shree Balaji Developers (ITA
No. 2592/M/2006, assessment year 2004-05, Bench 'C' order dated
21-10-2008), wherein, the theory of pro rata deduction is approved and
held the deduction under section 80-IB on pro rata basis meets the
objectives of the provisions of section 80-IB.The Hon'ble ITAT
Bangalore Bench in the case of DCIT v. Brigade Enterprises (P.) Ltd.
(24 DTR 371) Bangalore [2008] has held that the disallowance, if any,
will have to be restricted to the extent of non-compliance of the
provisions. This rule of proportionately is well founded in the
Income-tax law and is recognized under various provisions of the Act.
The Hon'ble ITAT Chennai in the case of Argun Excello Foundations (P.)
Ltd. v. Asstt. CIT [2007] 108 TTJ 71 has also upheld the pro rata
deduction on eligible residential units. Thus, respectfully following
the above judgments of the various ITAT and Courts and particularly
the Jurisdictional ITAT in the case of Saroj Sales Organisations
(supra), I hold that the assessee is entitled for deduction under
section 80-IB on pro rata basis. The Assessing Officer is therefore
directed to allow the deduction under section 80-IB(10) subject to
verification of the area-wise calculation done during the course of
survey operation. This ground of appeal is partly allowed."
5. None of the parties is satisfied by the stand so taken by the
CIT(A). While assessee is aggrieved of partial confirmation of
disallowance by the CIT(A), the Assessing Officer is aggrieved that
assessee is even allowed deduction under section 80-IB(10) in respect
of the units less than 1,000 sq.ft. Both the parties are in appeal
before us for both the assessment years.
6. We have heard the rival contentions, perused the material on record
and duly considered factual matrix of the case as also the applicable
legal position.
7. We find that the deduction under section 80-IB(10) has been
declined by the Assessing Officer on the ground that size of the
residential unit was in excess of 1,000 sq.ft. which, in turn,
proceeds on the basis that the flats sold to the family members
admittedly by separate agreements, should be treated as one unit. We
are unable to approve this approach. We have noted that the size of
each flat, as evident from building plan as duly approved by Municipal
authorities was less than 1,000 sq.ft. We have also noted that it is
not even revenue's case that each of flat on standalone basis was not
a residential unit. Even if flats were constructed or planned in such
a way that two flats could indeed be merged into one larger unit, as
long each flat was an independent residential unit, deduction under
section 80-IB(10) could not be declined. It is important to bear in
mind the fact that what section 80-IB(10) refers to is 'residential
unit' and, in the absence of anything to the contrary in the
Income-tax Act, the expression 'residential units' must have the same
connotations as assigned to it by local authorities granting approval
to the project. The local authority has approved the building plan
with residential units of less than 1,000 sq.ft. and granted
completion certificate as such. That leaves no ambiguity about the
factual position. We have further noted that the prohibition against
sale of more than one flat in a housing project to members of a family
has been inserted specifically with effect from 1-4-2010, and, in our
humble understanding, this amendment in law can only be treated as
prospective in effect. What is, therefore, clear is that so far as
pre-amendment position is concerned , as long a residential unit has
less than specified area, is as per the duly approved plans and is
capable of being used for residential purposes on standalone basis,
deduction under section 80-IB(10) cannot be declined in respect of the
same merely because the end user, by buying more than one such unit in
the name of family members, has merged these residential units into a
larger residential unit of a size which is in excess of specified
size. That precisely is the case before us. While on the subject, it
is useful to take note of legislative amendment by the virtue of which
legislature put certain restrictions on sale of residential units to
certain family members of a person who has been sold a residential
unit in the housing project. Section 80-IB(10) now provides an
additional eligibility condition that in a case where a residential
unit in the housing project is allotted to any person being an
individual, no other residential unit in such housing project is
allotted to any of the following person, namely (i) the individual or
the spouse, or the minor children of such individual, (ii) the HUF in
which such individual is a karta' (iii) any person representing such
individual, the spouse or minor children of such individual, or the
HUF in which such individual is a karta. The explanation memorandum
explained the legislative amendment as follows: (314 ITR (St) 203) :
"Further, the object of the tax benefit for housing projects is to
build housing stock for low and middle income households. This has
been ensured by limiting the size of the residential unit. However,
this is being circumvented by the developer by entering into agreement
to sell multiple adjacent units to a single buyers. Accordingly, it is
proposed to insert new clauses in the said sub-section to provide that
the undertaking which develops and builds the housing project shall
not be allowed to allot more than one residential unit in the housing
project to the same person, not being an individual, and where the
person is an individual, no other residential unit in such housing
project is allotted to any of the following person :—
(I) Spouse or minor children of such individual;
(II) The Hindu undivided family in which such individual is the karta;
(III) Any person representing such individual, the spouse or minor
children of such individual or the Hindu undivided family in which
such individual is the karta.
This amendment will take effect from the 1st April, 2010 and shall
accordingly apply in relation to assessment year 2010-2011 and
subsequent years."
8. It is thus clear that the aforesaid amendment has been brought with
prospective effect i.e., from 1-4-2010, and there is no indication
whatsoever to suggest that these restrictions need to be applied with
retrospective effect. The amendment seeks to plug a loophole but
restricts the remedy with effect from 1-4-2010, i.e., assessment year
2010-2011. The law is very clear that unless provided in the Statute,
the law is always presumed to be prospective in nature. It will,
therefore, be contrary to the scheme of law to proceed on the basis
that wherever adjacent residential units are sold to family members,
all these residential units are to be considered as one unit. If law
permitted so, there was no need of the insertion of clause (f) to
section under section 80-IB(10). It will be unreasonable to proceed on
the basis that legislative amendment was infructuous or uncalled for
particularly as the amendment is not even stated to be 'for removal of
doubts'. On the contrary, this amendment shows that no such
eligibility conditions could be read into pre-amendment legal
position.
9. As regards the Assessing Officer's stand that the assessee himself
has offered the deduction under section 80-IB(10) in respect of these
units during the course of survey proceedings, it is only elementary
that neither statement recorded under section 133A has an evidentiary
value, nor a legal claim can be declined only because assessee, at
some stage, decided to give up the same. In view of these discussions,
and bearing in mind entirety of the case, are of the considered view
that the deduction under section 80-IB(10) ought to have been allowed
to the assessee entirely. To this extent, we modify the order of the
CIT(A) and allow further relief to the assessee.
10. As we have held the admissibility of deduction under section
80-IB(10) in respect of entire project, revenue's grievance against
partial relief granted to the assessee is infructuous and academic,
we, accordingly, dismiss the same. Grievances against reopening of
assessment, in the absence of specific arguments in support of the
same, are treated as abandoned and, as such, dismissed.
11. In the result, appeals of the assessee are allowed in the terms
indicated above and appeals of revenue are dismissed as infructuous.
__._,_.___
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