Th] Floor, Joffre Residency,Behind Goa College Of Pharmacy,Panaji – Goa v. Deputy Commissioner Of Income Tax

1 TXA NO.2-2016 TAX APPEAL NO. 2 OF 2016 M/s. Models Construction Pvt. Ltd. 4[th] Floor, Joffre Residency,Behind Goa College of Pharmacy,Panaji – Goa.... Appellant Versus Deputy Commissioner of Income Tax Central Circle, Panaji – Goa. ... Respondent Mr. D. Pangam along with Mr. P. Sawant, Advocates for the Appellant. Ms. Susan Linhares, Standing Counsel for the Respondent. Coram:- M. S. SONAK &DAMA SESHADRI NAIDU, JJ. Date:-26th November 2020 JUDGMENT (Per M. S. Sonak, J.): Heard Mr. D. Pangam along with Mr. P. Sawant for theappellants and Ms. Susan Linhares for the respondents. 2.The learned counsel for the parties state that they have noobjection to this Bench taking up this matter. 2 TXA NO.2-2016 3.This Appeal was admitted on 05.07.2016 on the followingsubstantial questions of law:- A. Whether, on the facts and in the circumstance of the case andin law, the ld. ITAT erred in unjustly disallowing the Appellantherein to claim deductions under Section 80 IB (10) for the A.Y.2010-11, 2011-12 and 2012-13? B. Whether, on the facts and in the circumstance of the case andin law, the ld. ITAT has erred in failing to recognise that Sub-Clause(e)to Section 80IB(10) of the I.T. Act, 1961 came intoeffect only on 1st April, 2010 and not 19th August 2009 aspresumed? 4. By Order dated 31.03.2014 the Assessing Officer (AO)disallowed deductions to the assessee in respect of its housing project“Models Legacy” inter alia on the ground of breach of the provisions ofSection 80IB(10)(e) of the Income Tax Act, 1961 (said Act) in respectof 5 of the residential units in the said project, which otherwisecomprised of a total of 352 residential units. 5. The assessee's appeal before the Commissioner (Appeals) waspartly allowed by order dated 26.08.2015. The Commissioner(Appeals) held that the assessee was entitled to pro-rata deductionsunder Section 80IB(10) of the said Act. The Revenue appealed to theIncome Tax Appellate Tribunal (ITAT) against the Commissioner(Appeals') order dated 26.08.2015. The assessee also filed cross-objections urging that deductions in respect of all the 352 residentialunits ought to have been granted. 3 TXA NO.2-2016 6. The ITAT, by the impugned order dated 20.01.2016 has setaside the Commissioner (Appeals') order dated 26.08.2015 andrestored the AO's order dated 31.03.2014. Hence the present appealby the assessee on the aforesaid substantial questions of law. 7. Mr. Pangam, the learned counsel for the appellants submits thatthe substantial question of law at (B) is required to be answered infavour of the assessee and against the Revenue because of the decisionof this Court in CIT v. Bramha Associates– (2019) 414 ITR 47(BOM). He pointed out that the decision in Bramha Associates(supra) was followed by another Division Bench of this Court in TaxAppeal No.13/2014 concerning this very assessee, which was disposedof by Judgment and Order dated 20.03.2014. 8. Mr. Pangam submits that in any case, the pro-rata deduction, aswas granted by the Commissioner (Appeals) by his order dated26.08.2015 could not have been disturbed by the ITAT. He submitsthat the High Courts of Madras, Delhi, and Karnataka have held thatsuch pro-rata deduction is required to be granted in the followingdecisions: (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); 4 TXA NO.2-2016 (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.No.54 of 2012 decided on 22.09.2020 by the KarnatakaHigh Court. (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); 4 TXA NO.2-2016 (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.No.54 of 2012 decided on 22.09.2020 by the KarnatakaHigh Court. 9. Mr. Pangam, based on instructions, and without prejudicesubmits that in case the assessee is granted the benefit of pro-ratadeductions, the assessee, will not press the contention that there is nobreach whatsoever of Section 80IB(10) of the said Act, even though,the legal position is in favour of the assessee. He, however, submitsthat such not pressing ought not to come in the way of the assessee inraising such contention in any collateral proceedings i.e. proceedingsfor penalty, etc. 10. 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)(e) 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. 5 TXA NO.2-2016 12.The reasoning of the ITAT that the exclusion of the 5 residentialunits from out of the 352 residential units in the entire housing projectmight affect the condition about the size of the plot which is requiredto have a minimum area of 1 Acre deserves no acceptance. Even if thearea proportionate to the 5 residential units is excluded, the size of theplot which admeasures 28,014 sq. meters. i.e. almost about 7 Acres orthereabouts, will, in no manner, stand reduced to below 1 Acre.Therefore, this could not have been a ground to deny pro-ratadeduction as was granted by the Commissioner (Appeals) in his Orderdated 26.08.2015. 13. Since, Mr. Pangam, the learned counsel for the assessee oninstructions has made a statement that the assessee would be satisfiedwith pro-rata deductions, we frame the following additional substantialquestion of law, which, according to us, arises in this appeal:“Whether, in the facts and circumstances of the present case andgiven the law laid down by various High Courts, the ITAT wasjustified in denying even pro-rata deductions to the assesseeunder Section 80IB(10) of the said Act?” 14. It is necessary to note that in the appeal memo, grounds to theaforesaid effect were raised by the assessee as ground Nos. (M), (N) and(O). However, such a question was not framed at the time ofaforesaid effect were raised by the assessee as ground Nos. (M), (N) and(O). However, such a question was not framed at the time of 6 TXA NO.2-2016 admission of this appeal. Such a question undoubtedly arises in thismatter and therefore, taking into consideration the provisions inSection 260A(4) read with the provisions in Section 260A(7) of thesaid Act, we frame the aforesaid additional substantial question of lawwhich is involved in this appeal. 15. This appeal was taken up along with connected Tax AppealNos.4 to 8 of 2016 and Tax Appeal Nos.49 and 52 of 2016, in whichthe issue of pro-rata deductions under Section 80IB(10) of the said Actwas involved. In the said connected appeals as well, Ms. Linhares,relying upon the very same decisions had urged that Section 80IB(10)of the said Act does not contemplate grant of any pro-rata deduction. 6 TXA NO.2-2016 admission of this appeal. Such a question undoubtedly arises in thismatter and therefore, taking into consideration the provisions inSection 260A(4) read with the provisions in Section 260A(7) of thesaid Act, we frame the aforesaid additional substantial question of lawwhich is involved in this appeal. 15. This appeal was taken up along with connected Tax AppealNos.4 to 8 of 2016 and Tax Appeal Nos.49 and 52 of 2016, in whichthe issue of pro-rata deductions under Section 80IB(10) of the said Actwas involved. In the said connected appeals as well, Ms. Linhares,relying upon the very same decisions had urged that Section 80IB(10)of the said Act does not contemplate grant of any pro-rata deduction. 16. Upon consideration of the rival contentions in the aforesaidconnected tax appeals, we have held that pro-rata deductions can begranted under Section 80IB(10) of the said Act. In our decision inTax Appeal Nos.4 to 8 of 2016 and Tax Appeal Nos.49 and 52 of 2016decided on 26.11.2020, we answered the substantial question of law asto the allowability of pro-rata deduction in favour of the assessee andagainst the Revenue after distinguishing the decisions relied upon byMs. Linhares in those appeals as well as in this appeal. 17.Accordingly, by adopting our reasoning in the Judgment andOrder by which we disposed of the aforesaid connected appeals, weanswer the additional substantial question of law in favour of theassessee and against the Revenue. 7 TXA NO.2-2016 18. This appeal is therefore disposed of by making the followingorder: (a) The appeal is partly allowed and the additional substantialquestion of law referred to in para 13 above, is answered infavour of the assessee and against the Revenue; (b) As a consequence, the impugned Order dated 20.01.2016 made by the ITAT is set aside to the extent it denies the benefitof pro-rata deductions to the assessee and the order of theCommissioner (Appeals) dated 26.08.2015 to the extent itgrants pro-rata deductions under Section 80IB(10) of the saidAct to the assessee, is hereby restored; (c)The other substantial questions of law involved in thisappeal are not answered since, the same are not pressed by theassessee without prejudice to the right of the assessee to raise allsuch issues in any collateral proceedings i.e. penalty proceedings,etc. 19.This appeal is disposed of accordingly. There shall be no order asto costs. DAMA SESHADRI NAIDU, J. M. S. SONAK, J. ss