HIGH COURT OF MADRAS
Viswas Promoters (P.) Ltd.
Versus
Assistant Commissioner of Income-tax
T.C. (APPEAL) NOs. 1014 OF 2009, 857 OF 2010
& 190 TO 192 OF 2012
W.A. NO. 471 OF 2010
M.P. NOS. 1,1,1,2 AND 2 OF 2012
NOVEMBER 2, 2012
JUDGMENT
Mrs. Chitra Venkataraman, J. – The assessee is on appeal as against the order of the Tribunal relating to the assessment years 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09 in T.C. No. 1014 of 2009, T.C. No. 857 of 2010 and T.C. Nos. 190, 191 and 192 of 2012 respectively. Although a composite question of law is raised in these Tax Cases, since the issues relate to the same transaction, the substantial questions of law framed in respect of the assessment year 2004-05 in T.C. No. 1014 of 2009 extracted herein, fit in with the questions raised in the other cases too and hence, is apposite to other Tax Cases. The substantial questions of law raised in respect of assessment year 2004-05 read as under:
(i) Whether on the facts and circumstances of the case, the Appellate Tribunal is right in denying under Section 80IB(10) in respect of project Agrini and Vajra for flats less than 1500 sq.ft. on proportionate basis?
(ii) Whether on the facts and circumstances of the case, the Appellate Tribunal is right in law in holding that in a consolidated residential units having more than 1500 sq.ft. And less than 1500 sq.ft., proportionate deduction under Section 80IB(1)(c) cannot be allowed for flats less than 1500 sq.ft.?
2. The assessee herein is engaged in the business of development and construction of flats. There were four projects to its credit by name Agrini, Vajra, Porkudam Phase I and Porkudam Phase II. Of these four projects, in Agrini and Vajra, the assessee had constructed and sold flats measuring less than 1500 sq.ft as well as more than 1500 sq.ft. The assessee claimed deduction under Section 80IB(10) of the Income Tax Act (hereinafter referred to as “the Act”) in respect of flats measuring less than 1500 sq.ft. of built up area and did not claim deduction in respect of flats exceeding an extent of 1500 sq.ft., i.e., for 32 flats in Agrini and one flat in Vajra exceeding 1500 sq.ft.
3. On a notice issued by the Officer as to why the claim of the assessee under Section 80IB of the Act on a proportionate basis should not be disallowed on account of the violation of the conditions laid down under Section 80IB(10)(c) of the Act, the assessee pointed out that it had claimed deduction only on a proportionate basis in respect of flats less than 1500 sq.ft. of built-up area; that they were marking separate records for different units and that they had not violated the conditions. The Assessing Officer viewed that the deduction under the Section being for the project as a whole and all the residential units in the project must satisfy the conditions therein, namely, built up area to be less than 1500 sq.ft., on the admitted facts as to the units having built-up area more than 1500 sq.ft., the assessee was not eligible for deduction for the entire projects Agrini and Vajra, but was only eligible for deduction in respect of the other two projects namely, Porkudam Phase I and Porkudam Phase II, where there was no violation.
4. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals), wherein it was specifically pointed out by the assessee that all these four independent projects were commenced at different points of time; each project was an identifiable independent project having separate plan. The assessee had not claimed any deduction in respect of the residential units having plinth area of more than 1500 sq.ft. The assessee claimed that there was no violation to reject the claim of the assessee with reference to the Units satisfying the conditions under Section 80IB of the Act in respect of each block. The Commissioner of Income Tax (Appeals) pointed out that in respect of each of the projects, separate blocks are identifiable; out of the total built-up area of 2,81,900 sq.ft. in the two housing projects, only an area of 50,610 sq.ft related to units in excess of 1500 sq.ft., which come to 19.36%. Referring to Section 80IB(10)(c) of the Act, he held that within the composite building project, if there were both eligible and ineligible Units, the assessee would be eligible to claim deduction in respect of eligible Units. Relying on the decision of the Income Tax Appellate Tribunal, Calcutta Bench, in the case of Bengal Ambuja Housing Developments Ltd. v. CIT [ITA No.1595/Kol/2005, dated 24.03.2006], the Commissioner of Income Tax (Appeals) pointed out that the assessee was entitled to succeed in respect of Units which satisfied the conditions of 1500 sq.ft as given under Section 80IB(10)(c) of the Act, that proportionate deduction was available to the eligible units.
5. Aggrieved by this, the Revenue went on appeal before the Income Tax Appellate Tribunal, which pointed out that the assessee had formulated four schemes, namely, Agrini, Vajra, Porkudam Phase II and Porkudam Phase II. These four schemes were approved by the local authorities. The Tribunal viewed that a project could not be approved in piecemeal; that the approval was for the entire project; and blocks of residential units were parts of a project and not project by itself. Since in respect of a block, the assessee did not comply with the conditions stipulated under Section 80IB(10) of the Act, all the blocks comprising in that particular project would lose the relief. Aggrieved by this, the assessee is on appeal before this Court.
6. Learned counsel appearing for the assessee placed before us the sanction given by the competent authority in respect of each of the blocks in each project and submitted that the consistent case of the assessee had been that each block is a project by itself and that the claim itself was restricted only to those Units which are less than 1500 sq.ft. Thus the view of the Tribunal that each block of residential units could not be considered as a separate project, is erroneous in law. He further pointed out that a similar relief, as had been claimed by the assessee, was granted by the Income Tax Appellate Tribunal, Calcutta Bench, in the case of Bengal Ambuja Housing Developments Ltd. (supra), which was confirmed by the Calcutta High Court in ITA No. 458/2006 by order dated 05.01.2007. In the light of the decision of the Calcutta High Court, the Tribunal’s order is wrong. Learned counsel pointed out that having regard to the decision of this Court in T.C. Nos. 1348 and 1349 of 2007 dated 10.10.2012, the assessee has to succeed on the principle of proportionality to the extent of the units satisfying Section 80IB(10)(c) of the Act in the matter of granting deduction.
7. Per contra, learned Standing Counsel appearing for the Revenue countered the claim of the assessee and placed reliance on the decision of the Tribunal.
8. Heard learned counsel appearing on either side and perused the material placed on record.
9. It is seen from the narration of facts before the Commissioner of Income Tax (Appeals) as well as before the other authorities, that in the project under the name “Agrini”, separate blocks were there, the details of which read as follows:
