Ita/468/2015 Of Pr. Commissioner Of Income Tax v. M/S Oceanus Dwellings Pvt. Ltd

- 1 - IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE O8 DAY OF MARCH 2017 PRESENT THR HON’BLE MR.JUSTICEKJAYANT PATRLANT) THR HON’BLEK MR.JUSTICE N. K. SUDHINDRARAQ INCOME TAX APPEAL NO.468 OF 2015C/W.INCOME TAX APPEAL NO.22 OF 2012INCOME TAX APPEAL NO.591 OF 2013 IN I.T.A.NO.468/2015 BETWEEN: 1.)PR. Commissioner of Income-Tax,C.R. Building,Queens Road,Bangalore. 2. Deputy Commissioner of Income-TaxCircle — 5(1)(2),Bangalore.Circle — 5(1)(2),Bangalore. .. APPELLANTS (By Sri E.I.Sanmathi, Adv.) ANT): M/s. Oceanus Dwellings Pvt. Ltd.No.297, 1[#3]Floor, 1[#3]Crossw[39]Main, BIM 2[$/]stageBangalore — 560 076 ~ RESPONDENT (By Sri N. Jagadish Baliga, Adv.) This appeal is filed under Section 260-A of I.T. Act,1961 arising out of order dated 30.04.2015 passed in ITA)Nos.1466/Bang/2014, for the assessment year 2010-2011,|praying this Hon'ble Court to: 1.Decide the foregoing question of law and/or suchother questions of law as may be formulated by theHon’ble Court as deemed fit.other questions of law as may be formulated by theHon’ble Court as deemed fit. 11.set aside the appellate order dated 30.04.2015 passedin ITA.No.1466/Bang/2014 by the ITAT, ‘A’ Bench,Bangalore as sought for, in the above case.in ITA.No.1466/Bang/2014 by the ITAT, ‘A’ Bench,Bangalore as sought for, in the above case. IN I.T.A.NO.22/2012 BBRIWEKRE 1.Commissioner of Income-Tax - III,Central Revenue Buildings,Central Revenue Buildings, Queens Road,Bangalore — 560 OO1. 2. The Deputy Commissioner of Income-TaxCircle — 7(1),.Circle — 7(1),. Bangalore._ APPRLLANTS~ (By Sri E.I].Sanmathi, Adv.) ANT): M/s. Parkway Development=[39]and 10[39]Floor,Delta Tower.sigma Soit-Tech ParkNo.7, Whitefield| Varthur Road, Bangalore-66 RESPONDENT (By Sri A. Shankar and Sri M. Lava, Advs.) This appeal is filed under Section 260-A of I.T. Act,1961 arising out of order dated 07.09.2011 passed in ITA.Nos.1419/Bang/2010, for the assessment year 2007-2008,|praying this Hon'ble Court to: 111.Formulate the substantial questions of law statedtherein, therein, 11.)set aside the appellate order dated 07.09.2011 passed|by|the.ITAT,‘B’Bench,Bangalore1n appealproceedings ITA No.1419/Bang/2010, as sought for inthis appeal, in the interest of justice and equity.by|the.ITAT,‘B’Bench,Bangalore1n appealproceedings ITA No.1419/Bang/2010, as sought for inthis appeal, in the interest of justice and equity. IN I.T.A.NO.591/2013 BETWEEN: 1.)Commissioner of Income-Tax - III,Central Revenue Buildings,Queens Road,Central Revenue Buildings,Queens Road, Bangalore — 560 OO1. 2. Deputy Commissioner of Income-TaxCircle — 12(2),Circle — 12(2), Bangalore._ APPRLLANTS~ (By Sri E.I.Sanmathi, Adv.) AN): M/s. Oceanus Dwellings Pvt. Ltd. No.297, 1[#3]Floor, 1[St]Cross [[39]Main, BIM 2[$/]stageBangalore — 560 076 RESPONDENT (By Sri N. Jagadish Baliga, Adv.) This appeal is filed under Section 260-A of I.T. Act,1961 arising out of order dated 05.07.2013 passed in ITA)Nos.180/Bang/2013, for the assessment year 2009-2010,|praying this Hon'ble Court to: 1.Decide the foregoing question of law and/or|such other questions of law as may be|formulated by the Hon’ble Court as deemed fit.such other questions of law as may be|formulated by the Hon’ble Court as deemed fit. 11.set aside the appellate order dated 05.07.2013|passed in ITA.No.180/Bang/2013 by the ITAT,|‘B’ Bench, Bangalore.|passed in ITA.No.180/Bang/2013 by the ITAT,|‘B’ Bench, Bangalore.| These Appeals coming on for Final Hearing this day,JAYANT PATEBJ., deliveredthe following: JU DBGMENT All appeals have been preferred by the revenue by raising the following substantial questions of law:| “(1) Whether, on the facts and in_ thecircumstances of the case, the Tribunalwas justified in law in upholding theorder of the Commissioner of IncomeTax (Appeals) in directing the assessingauthoritytoallowproportionate 11.set aside the appellate order dated 05.07.2013|passed in ITA.No.180/Bang/2013 by the ITAT,|‘B’ Bench, Bangalore.|passed in ITA.No.180/Bang/2013 by the ITAT,|‘B’ Bench, Bangalore.| These Appeals coming on for Final Hearing this day,JAYANT PATEBJ., deliveredthe following: JU DBGMENT All appeals have been preferred by the revenue by raising the following substantial questions of law:| “(1) Whether, on the facts and in_ thecircumstances of the case, the Tribunalwas justified in law in upholding theorder of the Commissioner of IncomeTax (Appeals) in directing the assessingauthoritytoallowproportionate deduction u/s.SOIB to the extent ofprofits attributable to the units wherethe built up area is below 1500 sq.ft.even when no such apportionment isprescribed under the provisions of theAct? (2) |Whether on the facts and in thecircumstances of the case, the Tribunalwas Justified in law in holding that theassessee 1s entitled to claim deductionunder section SOIB in respect of profits:derived from the sale of residentialunits, wherein the built up area is below1500 sq.ft. without appreciating the factthat the deduction wu/s.80IB(10) isproject based rather than unit and thereis no concept of proportionate deductionu/ s.8O0IB(10) of the Act? oOWe have heard Sri E.I.Sanmathi, learnedcounsel for the appellants and Sri N. Jagadish Baliga,learnedcounselfor.therespondents1nNITA.Nos.468/2015 and 991/2013 and Sri A. Shankar and Sri M. Lava, learned counsel for respondent inITA.No.22/2012.. 3. Learned counsel for the appellants — revenue isunable to dispute that the Tribunal in the impugnedorder has relied upon its earlier decision in the case ofM/s.S J R Enterprises (2010) 3 ITR (Trib.) 569. He hasfairly contended that the aforesaid decision of theTribunalWaS carriedbeforethisCourtInITA.No.32/2010 and this Court vide order dated19.03.2012 has dismissed the said appeal. | 4. We may record that in the above referreddecision oT|thisCourtdated|19.03.20121n ITA.No.32/2012, it was observed thus: “The revenue has preferred this appealchallenging the order passed by the Tribunalgranting proportionate benefit of exemptionunder Section SOIB(10) of the Income Tax Act,L961.| - 7 - D2 TheaSsSSCS S1SengagedIn|construction and real estate business in the|name and style of SUR Builders. It undertook|construction in the name of ‘SUR Eastwood‘|and multistorey residential project in _ thTLaIrof|‘SJR.Redwood’,‘Park|Vista’,“Spencer and ‘Brookland’ residential projects|were in the initial stage. The plan of the said|project was sanctioned on 18.10.2003. Later,it was modified on 01.06.2004. In all, they|constructed 152 flats, out of which 116 flats|was the developer’s share and 36 flats was|the owners share. In 152 flats, 8 flats|consists of mezzanine floor. However,|separate sale deeds were executed in respectof mezzanine floor and flats in respect of the|very same purchaser. Admittedly, all these|flat totally measured less than 1500 sq. ft.per unit. The total area in which this projectwas undertaken ts 3.38 acres. Therefore, the|assessee claimed 100% benefit of deduction|under Section 80IB/(10) of the Act amountingto Rs.2,02,08,690/- in respect of ‘Redwood|Project’. The Assessing Authority denied thesaid benefit on the ground that the main flats| exceeded the permissible limit of 1500 sq. ft.to become eligible under Section SOIB(10) of|the Act. Aggrieved by the same, the assessee|preferred an appeal to the Commissioner of.Income Tax (Appeals). Agreeing with the saidfindingof|the|AssessingAuthority, hedismissed the appeal. Aggrieved by the said|order, the assessee preferred an appeal to the|Tribunal. The Tribunal held that because|some flats are larger than 1500 sq. ft., theassessee will not lose the benefit in its|entirety. Only with reference to the flats|which are more than the prescribed limit, theassessee will lose the benefit. Accordingly,|the appeal was allowed and the matter was|remitted back to the Assessing Authority for|fresh consideration in the light of theObservations made in the TJTribunal’s order.Aggrieved by the said order, the revenue is inappeal. 3. The learned Counsel for the revenueassatling the impugned order contended that|OTLCEit.1Sestablishedthattheflatsconstructed measures more than 1500 sq. ft., the assessee is not entitled to exemption|under Section SOIB(10) of the Act. It is|immaterial whether such a violation is found|only in few flats and therefore, he submits|that the impugned order requires to be set|aside. — 4Per contra, the learned Counselfor the assessee submitted that on the day.the|planLWASsanctionedandup.To 01.04.2005, in view of the interpretation of|the building regulation, the balcony was not|to be included for the built up area for the|purpose of calculating 1500 sq. ft. Theauthorities by including the balcony area|have come to the conclusion that the built up|area is more than 1500 sq. ft. It is ex-facte|incorrect. Similarly, prior to 01.04.2009, there|was no prohibiting for a person to purchase|two flats in the said project. No doubt, the|total constructed area is more than 1500 sq.ft., but the mezzanine floors as such areregistered under a separate sale deed and|the flat is registered under a separate sale|deed. The total measurement in each of the| sale deeds is not exceeding 1500 sq. ft.Therefore, the authorities were not justified in|holding that the assessee is not entitled to the|benefit of exemption under Section SOIB(10) ofthe Act. Though the Tribunal held that the|assessee is entitled to a proportionate benefit,whichorderis not challenged by|theassessee, in view of the law declared by this|Court in the case of Commissioner of Income|TaxDS,M/s.G.R.Developersin|ITA.No.355/ 2009disposedOffOn29.02.2012, the assessee is entitled to a100% benefit. ©. Prior to 01.04.2005, the balcony areawas not added to the flats for the purpose offinding out the total built up area. It is onlyafter 01.04.2005, it was added. The word|‘built up area’ for the purpose of Section 8OIB|has been defined and the position is made|clear. In the instant case, as the plan was.sanctioned on 18.10.2003 and the modifiedplan was sanctioned on O1.06.2004, forcalculating the total built up area of these|flats, the space occupied by the balcony cannot be taken into consideration. Similarly,prior to 19.08.2009, during that period, therewas no prohibition for a person purchasing|two flats. Therefore, when a mezzanine floor|and a flat is purchased under two separate|sale deeds for the purpose offinding out thebenefit under the aforesaid provision, we|have to look into the measurement contained|in the sale deeds. If that is done, there ts no|violation. At any rate, the appellate Tribunal|though has held that the assessee is entitled|to proportionate benefit has remitted the|mattertotheAssessingAuthorityforadjudication afresh. We do not see any error|committed by the Tribunal in setting aside the|order passed by the lower authorities though|not on the ground on which it is set aside but|on the correct interpretation of the legalposition. | 6. Accordingly the substantial questionsof law are answered in favour of the assessee|and against the assessee. The Assessing|Authority shall keep in mind the statutoryprovisions, the interpretation placed by this. 6. Accordingly the substantial questionsof law are answered in favour of the assessee|and against the assessee. The Assessing|Authority shall keep in mind the statutoryprovisions, the interpretation placed by this. Court and then, pass appropriate orders in|accordance with law. That would meet the|ends of justice. Accordingly, we pass the|following: @0C10 UThe appeal is dismissed. uy)The Assessing Authority shallkeepinmindthe|STALULOTYprovision,theinterpretationplaced by this Court and then,|Dassappropriate orders.In|accordance with law.”keepinmindthe|STALULOTYprovision,theinterpretationplaced by this Court and then,|Dassappropriate orders.In|accordance with law.” o. Under the circumstance, when the Tribunal has followed its earlier decision 1n STREnterprises(supra),which has been not interfered with by this Court in theabove referred ITA.No.32/2010, vide its decision dated19.03.2012, the present appeals are squarely covered bythe decision of this Court. 6. Under the circumstance, as such no substantialquestions would continue to remain, but even if the C-%#3" $#�*&%�3 �B%�%+*!"$%/,�39%4�< -./�#3*$/�*$#<%&%/�*0*"$#3�39%�&%:%$-%�*$/�"$�'*: -&� '�39%�*##%##%%����..�*22%*.#�*&%�/"#2 #%/� '�*(( &/"$0.4�� ��� ����������������� ������� $:G�