M/S. South City Projects (Kolkata) Limited v. Principal Commissioner Of Income Tax, Kolkata-4

IA No. GA/1/2020In ITAT/169/2019 IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE M/S. SOUTH CITY PROJECTS (KOLKATA) LIMITEDVERSUSPRINCIPAL COMMISSIONER OF INCOME TAX, KOLKATA-4 BEFORE : THE HON’BLE JUSTICE T.S. SIVAGNANAMAndTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYA Date : 1[st] December, 2021 Appearance :- Mr. J. P. Khaitan, Sr. Adv.Mr. Saurabh Bagaria, Adv.Mr. Rites Goel, Adv.Mr. Pranav Sharma, Adv.… For AppellantMr. S. N. Dutta, Adv.Mr. Soumen Bhattacharya, Adv.… For Respondent The Court : This appeal by the assessee filed under Section260A of the Income Tax, 1961 (the Act, for brevity) is directed againstthe order dated 21[st] June, 2019 passed by the Income Tax AppellateTribunal, “B” Bench, Kolkata in ITA No. 1543/Kol/2014 for the assessment year 2009-10. The assessee has raised the followingsubstantial question of law for consideration :- i) ii) Whether deduction under the provisions of Section 80IB(10) ofthe Income Tax Act, 1961, as it stood prior to its amendment bythe Finance (No.2) Act, 2009, was admissible in respect ofseparate sales to the same buyer of two separately situatedindependent residential units, each having built up area of lessthan one thousand five hundred square feet? Whether the built up area of the two independent residentialunits can be clubbed merely because one of the units is for theresidence of the servants and the purported findings of theTribunal denying deduction of Rs.4,05,48,257/- under Section80IB(10) of the Income Tax Act, 1961 are arbitrary, erroneous,unreasonable and perverse? We have heard Mr. J. P. Khaitan, learned Senior Counsel,assisted by Mr. Pranav Sharma, learned Advocate appearing for theappellant and Mr. S. N. Dutta, learned Standing Counsel, appearingfor the respondent. The assessee is a company engaged inundertaking various real estate and housing development projects.During the assessment year under consideration (A.Y. 2009-10) theassessee has shown profit derived from housing project at Flat No.375, Prince Anwar Shah Road, Kolkata, which included profit fromsale of residential units and rent from commercial properties. Theassessee claimed that they are entitled for deduction under Section80IB(10) of the Income Tax Act, 1961 for its profits derived from saleof residential units. The Assessing Officer considered the said claimand rejected the same holding that the embargo placed under Section80IB(10) of the Income Tax Act, 1961 would stand attracted as thearea of the residential complex exceeds 1500 sq. ft. The assesseecarried the matter on appeal before the Commissioner of Income Tax(Appeal) [CIT(A)] contending that the utility area is a separate unit andcannot form integral part of the housing area for the project and thatthe agreement entered into between the assessee company and thepurchaser is separate in respect of the residential flat and that of theutility area and the Assessing Officer committed a serious factualerror in not appreciating the documents placed before him whilerejecting the claim for deduction under Section 80IB(10). The CIT(A)rejected the appeal by order dated 28[th] May, 2014. The sum andsubstance of the conclusion arrived at by the CIT(A) is that it is notthe case of the assessee that the utility rooms can be treated as aseparate and independent unit and utility room and flats arecombined unit and therefore the limit of the area contemplated underSection 80IB(10)(c) will apply. Further, considering the argument of the assessee that separateconveyance deeds were executed in regard to the flats and utilityrooms, the CIT(A) held that at best it can be treated to be an attemptto avoid tax liability by deliberately keeping the flat area within thestipulated limit 1500 sq. ft. The assessee being aggrieved by suchorder filed appeal before the Tribunal. The Tribunal on its own partre-examined the factual position and took note of the terms andconditions of the agreement entered into between the appellantassessee and the purchaser of the flats. The Tribunal after noting thefinding recorded by the CIT(A) held that the assessee sold residentialflats and utility rooms in the housing project and profits received fromthe sale of flats and utility rooms were claimed to be eligible fordeduction under Section 80IB(10). The Tribunal noted that theAssessing Officer had called upon the assessee to furnish details ofsale with bifurcation of unit wise area of flats and utility rooms soldand in response to which the details were furnished and the AssessingOfficer observed that in respect of 73 parties the assessee had soldflats along with the utility rooms wherein the total area had exceededthe limit of 1500 sq. ft, which had resulted in violation of provisions ofSection 80IB(10)(c). It is the factual conclusion which was held by theCIT(A) was noted by the Tribunal and the Tribunal while consideringthe submission made by the assessee held that the utility rooms inthe instant case is nothing but servants cottages and 73 flats were sold together with the utility rooms thereby the area which has beensold exceeded 1500 sq. ft. The argument advanced by the assesseebefore the Tribunal as has been advanced before us by the learnedSenior Counsel for the appellant assessee with regard to the fact thattwo units were separate and thereby separate documents in respect ofthe sale, was considered by the Tribunal and a factual finding hasbeen recorded by the Tribunal that the utility rooms/servantsquarters cannot be sold independently to any other person other thanthe flat owner to whom the said servant quarters is attached.Therefore, the Tribunal concluded that it is of absolutely no relevancewhether servant quarters documentation has been made by a separateconveyance deed or by way of a separate letter to the concerned flatowner and the substance of the transaction needs to be seen than itsform. Thereafter, the Tribunal also noted the facts which are broughton record by the Assessing Officer in respect of the various saleswhich have been done by the appellant assessee and concluded that itis not in dispute that while taking into account inner measurement ofthe 73 residential units plus the respective servants quarters, the totalextent exceeds 1500 sq. ft. thereby violating Section 80IB(10)(c).Thus, it rejected the case of the assessee. Considering the findings recorded by the Assessing Officer, thefirst appellate authority and the Tribunal, we find that the matter isentirely factual and the documents have been gone into and on our part also we have examined the Indenture of Conveyance dated 20[th]September, 2010 executed by the assessee in favour of the purchaser,which clearly shows that prior to the execution of conveyance deedthere were agreements entered into between the parties which will goto show that the utility rooms/servants quarters forms integral part ofthe residential flat. Thus, we find that no questions of law, much lesssubstantial questions of law arises for consideration in this appeal. Accordingly, the appeal fails and is dismissed. With the dismissal of the appeal, the connected application isalso dismissed. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.)