Case Law Details
DECIDED BY: ITAT MUMBAI BENCH `H’ MUMBAI, IN THE CASE OF: ITO Vs. Khyati Financial Services, APPEAL NO: ITA No. 3740/Mum/2008, DECIDED ON June 25, 2010
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The assessee is a partnership firm consisting of two partners viz M/s Khyati Financial Services P.Ltd & Shri. Paresh Mohanlal Parekh. The appellant firm entered into a development agreement on 25.4.2003 with Hickson & Dadajee P.Ltd a company duly incorporated under the Companies Act, 1956 to develop property situated at Village Pahadi, Goregaon (E) owed by M/s Hickson & Dadajee P.Ltd In pursuance of said development agreement, the assessee firm undertook to construct residential building viz., “Acmee Armay” to be residential area constructed at 60,000 sq.ft. approx. comprising 200 flats in 7 wings in ground plus upper floors to be approved. The said residential building has to be constructed on a shopping complex comprising of approx.10,566 sq/ft/ built up area wherein the limited development right to construct shopping complex was assigned to a different concern viz Lakshadeep Investment & Finance P.Ltd hereinafter called as LIFPL, being a sister concern of the appellant through a separate development agreement dt 25.4.2003 entered between LIFPL & M/s Hickson & Dadajee Pvt .Ltd (owner of the property) In other words the development right of the property was divided between the assessee for constructing residential flats and shopping complex at ground floor to LIFPL. The considerations to be paid by the appellant and LIFPL were fixed at Rs.11.56 crore & 2 crore respectively in lieu of development rights received by them. The appellant claimed that the intimation of disapproval (IOD) and Commencement Certificate (CC) were issued in the name LIFPL on 6.11.2003 and 13.11.2003 respectively in respect of construction of shopping complex on ground floor and there were evidences to support it. The AO wrote letter to B.M.C. to verify the above facts. B.M.C. initially stated that the sanction of shop in position accepting the IOD dated 6.4.03 and C.C. on 6.11.03 issued in the name of LIFPL. In the said letter dated 7.12.07 addressed to AO it was also made clear that the revised IOD dated 29.1.04 was issued in the name of the appellant due to change of ownership. It was remarked that the said building is approved under file No.CHE/8637/BP(WS)/AP as Housing Project with shop on Ground Floor. On the strength of above facts, the AO drew adverse conclusion that the entire project inclusive of shopping complex at ground floor essentially belonged to the appellant and it deemed to have been constructed by them only.AO also concluded that BMC also recognised only one project belonging to the appellant. Thus the necessary approval for the project was given by Municipal Corporation of Greater Mumbai on 29.1.2004 in the name of appellant. The Commencement Certificate was issued on 6.2.2004 in the name of the appellant which in fact was a combined one in respect of shopping complex as well as residential premises with reference to the separate applications filed by the LIFPL as well as the appellant. The appellant firm constructed the residential building as per plan approved by BMC and claimed 100% deduction u/s 80IB(10) in respect of profit derived in the previous year relevant to assessment year. Further, it may also be mentioned that LIFPL constructed its shopping complex at ground floor as per their plan and did not claim any deduction in respect of the profit as claimed by the appellant.
3. The AO after scrutinizing the facts of the case found certain lacuna which stood in the way of fulfilling the conditions given in sec 80IB(10). The first flaw pointed out by the AO was that the appellant has not received the completion certificate of the project till date. According to the AO since the entire project is not yet completed and the final date of obtaining the completion certificate is 31st March 2008 as per sec.80IB(10) the claim of deduction u/s 80IB is quite premature and is depended upon happening of an event on or before 31.3.2008 for completion of project and obtaining the completion certificate from the local authority. The AO found this as a disqualification for claiming deduction u/s 80IB(10). The second point mentioned by AO was that 8 flats were joined together and as a result 4 flats in this project are having built up area more than 1000 sq.ft. which is more than the stipulated limit. This was the second disqualification found by the AO coming in the way of claiming deduction u/s 80IB (10). Further the AO went on to find that the shopping complex was comprising of more than 10,000 sq.ft. in built up area which is beyond the upper limit of 2000 sq.ft. or in excess of 5% of aggregate built up area of housing project. Whichever is less if the shopping complex and housing building are combined together as if the entire complex were constructed by the appellant himself. The AO gave his categorical finding that the construction of shopping complex and residential housing was deliberately separated by bifurcation of development right assigned to two sister concerns in order to circumvent the amended provision of sec. 80IB(10)(d) substituted by Finance Act (No.2) 2004, In this way the AO denied the claim of sec 80IB(10) broadly on all these three grounds.
4. Aggrieved the Assessee preferred an appeal before the CIT(A). As regards date of completion of the building the Ld.CIT(A) held as under:
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