Income Tax Case

1 TXA NO.47-2016 IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 47 OF 2016 M/s. Kamat Constructions Pvt. Ltd.Through its Managing DirectorMr. Dattaprasad A. KamatOffice at F-1, F-2, Indira Apts.Opp. Hotel Delmon, CaetanaoAlbuquerque Road,Panaji – Goa. PAN: Versus 1. Assistant Commissioner of Income TaxCentral Circle,Panaji – Goa. ... Appellant 2. Union of India,Through the Secretary (Revenue),Ministry of Finance,North Block, New Delhi. ... Respondents Ms. Arti Sathe along with Mr. P. Karpe, Advocates for the Appellant. Ms. Susan Linhares, Standing Counsel for the Respondents. Coram:- M. S. SONAK & DAMA SESHADRI NAIDU, JJ. thReserved on:- 26 November 2020 stPronounced on:-1 December 2020 2 TXA NO.47-2016 Heard Ms. Arti Sathe along with Mr. P. Karpe for the Appellantand Ms. Susan Linhares for the respondents. 2.This Appeal was admitted on 01.08.2016 on the followingsubstantial questions of law:- I. Whether on the facts and in the circumstances of the case, theITAT was justified in disallowing the deductions claimed unders. 80IB(10) of the Income Tax Act on the basis that certain flatsof the project were sold to the same person/family, withoutappreciating that there was no such bar in law as on the date ofthe commencement of the project as also on the date of relevanttransactions?ITAT was justified in disallowing the deductions claimed unders. 80IB(10) of the Income Tax Act on the basis that certain flatsof the project were sold to the same person/family, withoutappreciating that there was no such bar in law as on the date ofthe commencement of the project as also on the date of relevanttransactions? II. Whether on the facts and in the circumstances of the case,and without prejudice to the claim of the assessee that the entireprofits were entitled to deduction u/s 80IB(10), the ITAT wasjustified in refusing the assessee's alternative claim of pro-rata/proportionate deduction? 3. In this case the Assessing Officer (AO) vide Order dated31.01.2014 disallowed deductions to the assessee under Section80IB(10) of the Income Tax Act, 1961 (said Act) in respect of itshousing project “Kamat Riviera” inter alia on the ground that 4 out ofthe 60 residential units in the said project, did not comply with thecondition prescribed in Section 80IB(10)(f) of the said Act. This isbecause Flat Nos.401 and 402 were allotted to the same individualnamely Mr. Suraj Kamble vide agreements dated 13.03.2009 and 3 TXA NO.47-2016 29.06.2009 and Flat Nos.104 and 103 were allotted to Ms. Sangita V.N. Panvelcar vide agreement dated 26.06.2009 and to her husband,Mr. Vivek V. N. Panvelcar vide agreement dated 10.10.2009. Theassessee appealed to the Commissioner (Appeals), who, vide orderdated 28.08.2015, partly allowed the appeal and directed the AO togrant the pro-rata deductions under Section 80IB(10) of the said Actto the assessee. 4.The Revenue appealed to the Income Tax Appellate Tribunal(ITAT) against the Commissioner (Appeals') order dated 28.08.2015for the relevant Assessment Year 2012-13. The assessee filed cross-objections claiming that the entire deduction and not merely pro-ratadeduction under Section 80IB (10) ought to have been allowed. 5. The ITAT, vide impugned order dated 01.03.2016 has allowedthe Revenue’s appeal and dismissed the assessee’s cross-objections.Hence the present appeal by the assessee on the aforesaid substantialquestions of law. 6. Ms. Sathe, the learned counsel for the appellants submits thatthe amendment by which clause (f) came to be introduced in Section80IB (10) in its present form entered into effect only on 19.08.2009.She, therefore, submitted that the said provisions cannot applyretrospectively to housing projects which were approved much before19.08.2009. She points out that the housing project “Kamat Riviera” 4 TXA NO.47-2016 5. The ITAT, vide impugned order dated 01.03.2016 has allowedthe Revenue’s appeal and dismissed the assessee’s cross-objections.Hence the present appeal by the assessee on the aforesaid substantialquestions of law. 6. Ms. Sathe, the learned counsel for the appellants submits thatthe amendment by which clause (f) came to be introduced in Section80IB (10) in its present form entered into effect only on 19.08.2009.She, therefore, submitted that the said provisions cannot applyretrospectively to housing projects which were approved much before19.08.2009. She points out that the housing project “Kamat Riviera” 4 TXA NO.47-2016 was approved sometime on 26.03.2007. She relies on The PrincipalCIT v. Bramha Associates – (2019) 414 ITR 47 (BOM) in supportof her contention. 7. Ms. Sathe submits that in any case, the ITAT was not at alljustified in upsetting the pro-rata deduction granted by theCommissioner (Appeals) in his order dated 28.08.2015. She submits,without prejudice, that even the Commissioner (Appeals) could have atthe highest, denied a deduction in respect of Flat No.103 which wasallotted on 10.10.2009. She submits that even here, there was nobreach as such of the condition in Section 80IB(10)(f) since theresidential units were allotted at different points of time to the wifeand the husband. She relies on the following decisions in support ofher contention based on pro-rata deduction: (i)Viswas Promoters Pvt. Ltd. v. Assistant CIT, Circle I,Madras – (2013) 29 TaxMan.Com 19 (Madras);Madras – (2013) 29 TaxMan.Com 19 (Madras); (ii)CIT Chennai v. Arun Excello Foundations Pvt.Ltd. - (2013)29 TaxMan.Com 149 (Madras);29 TaxMan.Com 149 (Madras); (iii)CIT v. S.G. Estates Pvt. Ltd. – (2015) ITMI 1302 (Delhi); and (iv) CIT & Anr. v. M/s. Brigade Enterprises Limited – ITA No.54 of 2012 decided on 22.09.2020 by the KarnatakaHigh Court.High Court. 8. Ms. Sathe further points out that the findings and reasoning ofthe ITAT on the issue of the area of the plot on which the housingthe ITAT on the issue of the area of the plot on which the housing 5 TXA NO.47-2016 project has been put up are perverse. She submits that even if the areaproportionate to the 4 residential units is excluded from consideration,the plot area which remains for consideration is about 4500 sq. meters.which is above 1 Acre i.e. 4000 sq. meters. She demonstrated thiserror by pointing out the admitted documents on record. 9. Ms. Linhares, the learned counsel for the Revenue defends theimpugned order of the ITAT based on the reasoning reflected therein.She submits that the provisions of Section 80IB(10) of the said Act donot contemplate grant of any pro-rata deductions. She also submitsthat the provisions of Section 80IB(10)(f) of the said Act beingprocedural can be given retroactive effect and she relies upon theexplanatory note of the Finance (2) Act, 2009 by which such provisionwas introduced in the said Act. She relies on the decisions of thisCourt in CIT v. Vandana Properties – (2013) 353 ITR 36 (BOM),Bramha Associates (supra), and Britannia Industries Ltd. v. CIT –(2005) 148 TaxMan.Com 468 SC in support of her contentions. 10. The rival contentions now fall for our determination. 11.There is no dispute that the provisions of Section 80IB(10) (f)entered into force on 19.08.2009. Therefore, the allotment of FlatNos.401 and 402 to Mr. Suraj Kamble on 13.03.2009 and 29.06.2009would not constitute a breach of the condition in Section 80IB(10)(f)of the said Act. The same is the position about allotment of flat no. 6 TXA NO.47-2016 10. The rival contentions now fall for our determination. 11.There is no dispute that the provisions of Section 80IB(10) (f)entered into force on 19.08.2009. Therefore, the allotment of FlatNos.401 and 402 to Mr. Suraj Kamble on 13.03.2009 and 29.06.2009would not constitute a breach of the condition in Section 80IB(10)(f)of the said Act. The same is the position about allotment of flat no. 6 TXA NO.47-2016 104 to Ms. Sangita Panvelcar. At the highest, there may be some issueabout the allotment of Flat No.103 on 10.10.2009. This is becauseclause (f) to Section 80IB(10) entered into force on 19.08.2009, interms of which, there was a prohibition for allotment in favour of aspouse. Therefore, deduction proportionate to the amount involvedfor allotment of Flat No.104 could have been denied to the assesseebut certainly not the deduction in respect of the entire housing projectcomprising of 60 residential units. 12. The reasoning of the ITAT in the context of the area of the ploton which the housing project was put up is vitiated by perversity. Evenif the area proportionate to the 4 residential units were to be excludedfrom consideration, still, the available area exceeded 4000 sq. meters or1 Acre. In any case, now that only one of the residential units can beexcluded, the area exceeds 1 Acre and there is no breach whatsoever onthis count. 13. On the issue of pro-rata deduction, in the connected Tax AppealNos.4 to 8 of 2016 and Tax Appeal Nos.49 and 52 of 2016, we havealready held that such pro-rata deductions can be granted underSection 80IB(10) of the said Act. This is after considering the verysame contentions of Ms. Linhares as have been raised in the presentmatter. We have considered and distinguished the rulings relied uponby Ms. Linhares in this appeal, since, the very same rulings were reliedupon in the connected appeals. 7 TXA NO.47-2016 14.Therefore, by adopting our reasoning in our Judgment andOrder dated 26.11.2020 disposing of the aforesaid connected appeals,we answer the second substantial question of law in favour of theassessee and against the Revenue. 15.Similarly, we also partly answer the first substantial question oflaw in favour of the assessee and against the Revenue. This means thatthe Revenue will be entitled to withhold deductions on a pro-ratabasis, in respect of Flat No.103 allotted to Mr. Vivek Panvelcar on10.10.2009 but not withhold deductions in respect of the entirehousing project save and except Flat No.103 therein. 16. Accordingly, we dispose of this appeal by making the followingorder:order: (a)The first substantial question of law is answered partly infavour of the assessee and against the Revenue and it is held thatthere was no justification in disallowing deductions underSection 80IB (10) of the said Act in respect of the assessee’shousing project “Kamat Riviera” except on pro-rata basis inrespect of Flat No.103 therein; favour of the assessee and against the Revenue and it is held thatthere was no justification in disallowing deductions underSection 80IB (10) of the said Act in respect of the assessee’shousing project “Kamat Riviera” except on pro-rata basis inrespect of Flat No.103 therein; (b)The second substantial question of law is answered infavour of the assessee and against the Revenue and it is held thatthe assessee is entitled to pro-rata deduction in respect of theentire housing project “Kamat Riviera”, including in respect of 8 TXA NO.47-2016 Flat Nos.401, 402 and 104 therein but not in respect of FlatNo.103 which was allotted only on 10.10.2009. (c)As a consequence, the impugned Order dated 01.03.2016is set aside and the Revenue is directed to allow a deduction tothe assessee in respect of its housing project “Kamat Riviera”except, on pro-rata basis in respect of Flat No.103 therein. As a consequence, the impugned Order dated 01.03.2016 17.The appeal is partly allowed in the aforesaid terms. There shallbe no order as to costs. (b)The second substantial question of law is answered infavour of the assessee and against the Revenue and it is held thatthe assessee is entitled to pro-rata deduction in respect of theentire housing project “Kamat Riviera”, including in respect of 8 TXA NO.47-2016 Flat Nos.401, 402 and 104 therein but not in respect of FlatNo.103 which was allotted only on 10.10.2009. (c)As a consequence, the impugned Order dated 01.03.2016is set aside and the Revenue is directed to allow a deduction tothe assessee in respect of its housing project “Kamat Riviera”except, on pro-rata basis in respect of Flat No.103 therein. As a consequence, the impugned Order dated 01.03.2016 17.The appeal is partly allowed in the aforesaid terms. There shallbe no order as to costs. DAMA SESHADRI NAIDU, J. M. S. SONAK, J. ss