Tax Appeal Nos. 4, 5, 6, 7 & 8 Of 2016 v. The Assistant Commissioner Of Income-Tax

IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NOS. 4 OF 2016, 5 OF 2016, 6 OF 2016, 7 OF 2016,8 OF 2016, 52 OF 2016 AND 49 OF 2016 TAX APPEAL NOS. 4, 5, 6, 7 & 8 OF 2016 Devashri Nirman LLP.Dempo House, Campal,Panaji Goa.PAN: …Appellant Versus 1. The Assistant Commissioner of Income-Tax, having his office atAayakar Bhavan,Patto-Plaza,Panaji Goa. 2. Union of India,Through the Secretary (Revenue)Ministry of Finance,North Block, New Delhi....Respondents WITH TAX APPEAL NOS. 52 & 49 OF 2016 The Principal Commissioner of Income Tax,Aaykar Bhavan, Patto,…Panaji Goa. AppellantVersusDevashri Nirman Ltd.2nd Floor, Dempo House,D. B. Bandodkar Marg. Campal,Panaji Goa.PAN No. …Respondent Mr. Mihir Naniwadekar with Ms. Vinita V. Palyekar, Advocates for theAppellants in Tax Appeal Nos. 4, 5, 6, 7, 8 of 2016 and for theRespondent in Tax Appeal Nos.52 of 2016 and 49 of 2016. Ms. Susan Linhares, Standing Counsel for the Respondents in TaxAppeal Nos.4, 5, 6, 7, 8 of 2016 and for the Appellant in Tax AppealNos.52 of 2016 and 49 of 2016. Coram:- M. S. SONAK & DAMA SESHADRI NAIDU, JJ.th November 2020. Date :- 26 ORAL JUDGMENT ( Per M. S. Sonak, J ) Heard Mr. Mihir Naniwadekar, learned counsel for theAssessee, and Ms. S. Linhares, learned Standing Counsel for theRevenue. 2.The learned counsel for the parties submit that the issueinvolved in all these appeals is common though the appeals may relate todifferent Assessment Years. They, therefore, agree that all these appealscan be disposed of by a common judgment and order. They submit thatthe Tax Appeal No. 5 of 2016 which relates to the Assessment Year 2008-2009 may be taken as the lead matter. 3.The challenge in this appeal is to the judgment and orderdated 14.07.2015 made by the Income Tax Appellate Tribunal (ITAT) inITA Nos. 19 to 23/PNJ/2015 relating to the Assessment Years 2007-2008, 2008-2009, 2009-2010, 2010-2011 and 2011-2012. 4.Since, the assessee was partly aggrieved by the impugnedorder dated 14.07.2015, the assessee has instituted the Tax Appeal Nos.4 3 TXA4-16&Ors. dt.26.11.2020 of 2016 to 8 of 2016 in respect of the aforesaid five Assessment Years.Further, since the Revenue was also aggrieved by the impugned orderdated 14.07.2015, even the Revenue had instituted five Tax Appealschallenging the same. However, three of the Tax Appeals instituted bythe Revenue were withdrawn by the Revenue on account of the tax effectbeing less than one crore. This is evident from the order dated23.09.2019 in Tax Appeal Nos. 33 of 2016, 50 of 2016, and 51 of 2016.Therefore, only Tax Appeal Nos. 52 of 2016 and 49 of 2016 institutedby the Revenue, survive. 5.the following substantial question of law. In Tax Appeal No.5 of 2016 was admitted on 23.03.2016 on “Whether on the facts and in the circumstances of the caseand in law, the ITAT was justified in not holding that all theunits of the Appellant -assessee's housing project were and in law, the ITAT was justified in not holding that all theunits of the Appellant -assessee's housing project werecompliant with Section 80IB(10), particularly in view of thefact that prior to 1/4/2010, there was no bar on adjacentunits being sold to members of the same family?” fact that prior to 1/4/2010, there was no bar on adjacent 6.Similarly, Tax Appeal No.52 of 2016 instituted by theRevenue was admitted on 18.07.2016 on the following substantialquestion of law. “Whether the Income Tax Appellate Tribunal was justified tocome to the conclusion that the Assessees was further entitledfor exemption under Section 80IB(10) of the Income Tax Acton proportionate basis ?” The assessee in the present matters has put up two housing 4 TXA4-16&Ors. dt.26.11.2020 and in law, the ITAT was justified in not holding that all theunits of the Appellant -assessee's housing project werecompliant with Section 80IB(10), particularly in view of thefact that prior to 1/4/2010, there was no bar on adjacentunits being sold to members of the same family?” fact that prior to 1/4/2010, there was no bar on adjacent 6.Similarly, Tax Appeal No.52 of 2016 instituted by theRevenue was admitted on 18.07.2016 on the following substantialquestion of law. “Whether the Income Tax Appellate Tribunal was justified tocome to the conclusion that the Assessees was further entitledfor exemption under Section 80IB(10) of the Income Tax Acton proportionate basis ?” The assessee in the present matters has put up two housing 4 TXA4-16&Ors. dt.26.11.2020 projects “Devashri Garden” comprising of 105 residential units and“Vasant Vihar” comprising of 90 residential units. The assessee wasdenied the deduction under Section 80IB of the Income Tax Act (ITAct) by the Assessing Officer (AO) vide order dated 21.12.2010 on theground that the area of five residential units in “Devashri Garden” andthree residential units in “Vasant Vihar” exceeded 1500 square feet andthis was in breach of conditions contained in sub-clause (c) of Clause 10of Section 80IB of the IT Act. In denying this deduction under Section80IB, the AO in his order dated 21.12.2010 relied on the judgment ofITAT (Chennai ) in CIT Vs Vishwas Promoters (P) Ltd. (2010) 126ITD 263 (Chennai), which had taken the view that there was noprovision for grant of any proportionate deduction. 8.The assessee appealed to the Commissioner (Appeals) who,vide order dated 05.11.2014 partly allowed the appeal of the assessee anddirected the AO to allow deduction under Section 80IB(10) to theassessee on a proportionate basis. The Commissioner (Appeals), interalia, relied upon the decision of Madras High Court in the case of M/s.Viswas Promoters (P) Ltd. Vs ACIT, (2013) 29 Taxman. com 19(Madras) which had reversed the decision of ITAT (Chennai) uponwhich reliance had been placed by the AO in his order dated21.12.2010. 9.The assessee as well as the Revenue appealed to the ITAT,being aggrieved by the orders of the Commissioner (Appeals). Theassessee was aggrieved because it was the case of the assessee that there was no breach even in respect of 8 out of a total of 195 residential unitsin the two housing projects. The Revenue was aggrieved on account ofdirection to grant proportionate deduction to the housing project. 10.The ITAT, by the impugned order dated 14.07.2015dismissed the appeals instituted by the assessee as well as the Revenue.Hence, these two sets of appeals by the assessee and the Revenue. 11.Mr. Naniwadekar, learned counsel for the assessee submitsthat in this case the approvals were obtained by the assessee from theLocal Authorities and the planning Authorities for putting up a housingproject having residential units of less than 1500 square feet. He submitsthat if thereafter the allottees combined two residential units, thededuction under Section 80IB(10) can never be denied to the assessee.He submits that this contention of the assessee which was backed bydocumentary evidence which was not even considered by the ITAT.Hence, the appeals by the assessee. Mr. Naniwadekar relied upon severaldecisions in support of his contention. 12.Ms. Linhares, learned counsel for the Revenue submittedthat there is no error in the findings of fact concurrently recorded bythree Authorities that 8 out of 195 residential units in two projectsadmeasured more than 1500 square feet and consequently, there was abreach of conditions contained in Section 80IB(10)(c) of the IT Act.She, therefore, submits that the appeals instituted by the assessee deserveto be dismissed. 12.Ms. Linhares, learned counsel for the Revenue submittedthat there is no error in the findings of fact concurrently recorded bythree Authorities that 8 out of 195 residential units in two projectsadmeasured more than 1500 square feet and consequently, there was abreach of conditions contained in Section 80IB(10)(c) of the IT Act.She, therefore, submits that the appeals instituted by the assessee deserveto be dismissed. 13.Ms. Linhares submits that there is no provision under the ITAct for extension of any proportionate deduction. She submits that theview taken by the Commissioner (Appeals) and the ITAT on the issue ofthe proportionate deduction is contrary to the law laid down by thisCourt in CIT Vs Brahma Associates (2019) 414 ITR 47 (Bom), CITVs Vandana Properties (2013) 353 ITR 36 (Bom.) and rulings of theHon'ble Supreme Court in Britannia Industries Ltd. VsCommissioner of Income Tax (2005) 148 Taxman 468 (SC). She,therefore, submits that the appeals instituted by the Revenue are liable tobe allowed. 14.Mr. Naniwadekar, learned counsel for the assessee submitsthat in the undermentioned decisions, various High Courts have takenthe view that the proportionate deductions can be granted under Section80IB(10) of the IT Act:- (i) Viswas Promoters (P) Ltd. Vs Assistant Commissionerof Income Tax, Circle 1, (2013) 29 Taxman. Com 19;of Income Tax, Circle 1, (2013) 29 Taxman. Com 19; (ii)CIT Chennai Vs Arun Excello Foundations (P)Ltd. (2013) 29 Taxman. com 149 (Madras);Ltd. (2013) 29 Taxman. com 149 (Madras); (iii) CIT Vs S. G. Estates Ltd., 2015 (7) TMI 1302(Delhi);(Delhi); (iv)CIT Vs M/s Brigade Enterprises Ltd., ITA No. 54of 2012 decided on 22.09.2020 by Karnataka High Court. 15.Mr. Naniwadekar further pointed out that even the decisionsin Brahma Associates (supra) and Vandana properties ( supra) assist thecase of the assessee and not of the Revenue. He points out that in Commissioner of Income Tax-21 Vs Aakash Nidhi Builders andDevelopers (2016) 76 Taxman. com 73 (Bombay) the Revenueconceded that the proportionate deduction can be granted because of thedecision in Vandana properties ( supra). 16.Mr. Naniwadekar relied upon some other decisions as well tosubmit that the proportionate deduction can always be granted underSection 80IB(10) of the IT Act, even assuming that the area of some ofthe residential units was more than the ceiling prescribed in clause (c) ofSection 80IB(10) of the IT Act. He, therefore, submitted that the appealsof the Revenue be dismissed. 17. Mr. Naniwadekar based on instructions made a statementthat in case the appeals of the Revenue are dismissed, then, the assesseeswill not press for any reliefs in the appeals instituted by them as theassessees would be satisfied with the relief of proportionate deduction.He, however, submitted that all contentions of the assessees may be keptopen particularly since the assessees were contesting the collateralproceedings i.e. penalty, etc., and would not want to be prejudiced onaccount of this concession which was being made without prejudice. 18.The rival contentions now fall for our determination. 19.On the issue of proportionate deduction under Section80IB(10) of the IT Act, we are satisfied that the view taken by theCommissioner (Appeals) as well as the ITAT calls for no interference. 8 TXA4-16&Ors. dt.26.11.2020 20.The view taken by the Commissioner (Appeals ) and theITAT is quite consistent with the view taken by the High Courts ofMadras, Delhi, and Karnataka. It was pointed out that even the SpecialLeave Petition against the Madras High Court's decision was dismissedby the Hon'ble Supreme Court. Accordingly, there is no good ground tointerfere with the view taken by the Commissioner (Appeals ) and theITAT on the issue of proportionate deduction, at the instance of theRevenue, in these matters. 18.The rival contentions now fall for our determination. 19.On the issue of proportionate deduction under Section80IB(10) of the IT Act, we are satisfied that the view taken by theCommissioner (Appeals) as well as the ITAT calls for no interference. 8 TXA4-16&Ors. dt.26.11.2020 20.The view taken by the Commissioner (Appeals ) and theITAT is quite consistent with the view taken by the High Courts ofMadras, Delhi, and Karnataka. It was pointed out that even the SpecialLeave Petition against the Madras High Court's decision was dismissedby the Hon'ble Supreme Court. Accordingly, there is no good ground tointerfere with the view taken by the Commissioner (Appeals ) and theITAT on the issue of proportionate deduction, at the instance of theRevenue, in these matters. 21.The Karnataka High Court in Brigade EnterprisesLtd.( supra) has held that the legislature has used the expression “ theresidential unit” in clause (c) of Section 80IB(10) of the IT Act andomitted to use the expression “each residential unit”. This omission isdeliberate because in several sections like Section 5A, 6(5), 10(10),35D(1), 44AD(3), 80HHB, 80I(5), 153C, 153D, 158DA, 293A(3), 296and 298(4) of the IT Act as well as under Rules 2BA, 20(4), 22(3),62(3), 74(2), 74(6) and 104, the legislature has expressly used the word“each”. The Karnataka High Court has reasoned that it is well settledthat when a situation has been expressed differently, the legislature mustbe taken to have been tended to express a different intention {See:Commissioner of Income Tax – Delhi Vs East West Import andExport(P) Ltd. 1989 (1) SCC 760.} Therefore, on a plain reading ofclause (c) of Section 80IB(10) of the IT Act, it is evident that the samedoes not exclude the principle of proportionality in any manner. 22.Brahma Associates ( supra) relied upon by Ms. Linhares doesnot support the contention now advanced by her. In that case, the issue 9 TXA4-16&Ors. dt.26.11.2020 involved was whether a housing project, in which, a portion of thepremises was permitted to be used for commercial purposes, was entitledto deduction under Section 80IB(10) of the IT Act. In that context, thisCourt held that where the commercial user was allowed under theDevelopment Control Rules, the assessees were entitled to deductionunder Section 80IB(10) on the entire project approved by the LocalAuthorities and there was no question of only some proportionatededuction. Some of the observations in Brahma Associates ( supra)therefore, cannot be torn out of the context to urge that noproportionate deduction was contemplated under Section 80IB(10) ofthe IT Act. 23.Similarly, in Vandana properties (supra), the issue involvedwas whether an assessee was entitled to claim deduction under Section80IB(10) of the IT Act where the assessee failed to fulfill primaryconditions laid down under Section 80IB(10) of the IT Act, such as thecondition that the area of plot being at least one-acre or the area of theresidential units being less than 1000 square feet, at the time ofcommencement of the project. This Court agreed with the Tribunal thatin fact, there was no merger of two flats and consequently, there was nobreach of condition that required the area of the residential units to notexceed 1000 square feet. Vandana properties (supra) is, therefore, of noassistance to the Revenue in this matter. 24.Similarly, the issue involved in Britannia Industries Ltd( supra ) was entirely different, and in the present matters, it is not eventhe case of the Revenue that two projects put up by the assessee were not 10 TXA4-16&Ors. dt.26.11.2020 housing projects. Accordingly, even Britannia Industries Ltd. (supra) canbe of no assistance to the Revenue in these matters. 24.Similarly, the issue involved in Britannia Industries Ltd( supra ) was entirely different, and in the present matters, it is not eventhe case of the Revenue that two projects put up by the assessee were not 10 TXA4-16&Ors. dt.26.11.2020 housing projects. Accordingly, even Britannia Industries Ltd. (supra) canbe of no assistance to the Revenue in these matters. 25.In Aakash Nidhi Builders and Developers (supra) theRevenue conceded that the issue of proportionate deduction was decidedby the ITAT in favour of the assessee by following Vandana properties( supra) and this appeal had been filed only because the Revenue hadchallenged the decision in Vandana properties ( supra ) in the ApexCourt. Although we do not propose to go by the concession made onbehalf of the Revenue, we think that the rulings relied upon by Ms.Linhares do not in any manner detract from the views taken by the HighCourts of Madras, Delhi, and Karnataka on the issue of proportionatededuction under Section 80IB(10) of the IT Act and therefore, there isno case made out to interfere with the view of Commissioner (Appeals)and the ITAT, which view is quite consistent with the views taken bythese High Courts. 26.Now that we are dismissing the appeals instituted by theRevenue, we accept the statement made by Mr. Naniwadekar on behalfof the assessee that they would not press the Tax Appeal Nos. 4 of 2016,5 of 2016, 6 of 2016, 7 of 2016 and 8 of 2016 instituted by them,without prejudice to their rights to raise all permissible contentions incollateral proceedings. 27.Accordingly, we dispose of all these appeals by making thefollowing order:- (A) Tax Appeal Nos.49 of 2016 and 52 of 2016 are hereby 11 TXA4-16&Ors. dt.26.11.2020 dismissed by answering the substantial question of law framed thereinagainst the Revenue and in favour of the assessee; (B) Tax Appeal Nos. 4 of 2016, 5 of 2016, 6 of 2016, 7 of2016, and 8 of 2016 are dismissed as not pressed, without answering thesubstantial question of law framed therein. However, it is clarified thatsuch disposal shall not prevent the assessee from raising all permissiblecontentions, particularly in the collateral proceedings i.e. penaltyproceedings, etc. (C) There shall be no order as to costs. DAMA SESHADRI NAIDU, J. M. S. SONAK, J. at*