This appeal has been filed by the Revenue against the order of CIT(A)-I, [in short CIT(A)) Pune, dt. 29th Nov., 2012 for asst. yr. 2009-10 on the following grounds :
"1. The order of the learned CIT(A) is contrary to law and to the facts and circumstances of the case.
2. The learned CIT(A) grossly erred in deleting the disallowance made by the AO of the assessee's claim of deduction under s. 80-IB(IO) instead of confirming the said disallowance.
3. The learned CIT(A) grossly erred in failing to appreciate that the assessee failed to fulfil the conditions laid down in cls. (a), (b) and (c) of sub~s. (l0) of s. 80-18 and, therefore, was not entitled to deduction under the aforesaid section.
4. The learned CIT(A) grossly erred in failing to appreciate that the size 01 the plot on which the assessee built its project is 3,952 sq. mtrs. which is less than one acre, and thus the condition in cl. (b) of s. 80-IB(1O) is not satisfied.
5. The learned CIT(A) grossly erred in failing to appreciate that in the CBDT's Circular No.5 of 2005, dt. .I5th July, 2005 [(2005) 197 CTR (St) 1] it has been categorically clarified that "the area limit of the plot has to be construed with reference to the area of the site in which the housing project is constructed" which clearly means that the actual area on which construction is made has to be taken into consideration.
6. The learned CIT(A) grossly erred in failing to appreciate that the commercial establishment in the assessee's housing project exceeded 5 per cent of the aggregate built-up area and thus the assessee had violated the condition stipulated in cl. (d) of s. 80-IB(l0).
7. The learned CIT(A) grossly erred in holding that the condition laid down in cl. (d) would apply only to projects approved after 1st April, 2005 and not to projects approved prior thereto. Such an interpretation is alien to s. 80-IB(l0) which is clear and unambiguous.
8. The learned CIT(A) grossly erred in failing to appreciate that reckoned from the date on which the assessee had taken the first approval from the local authority, the housing project ought to have been completed within the prescribed period of four years and the assessee had failed to do so, which is violative of the condition laid down' in sub-cl. (b) of the first Explanation to s. 80-IB(l0).
9. The learned CIT(A) grossly erred in failing to appreciate that s. 80-IB(l0) nowhere envisages allowance of deduction thereunder on a proportionate basis and, on the contrary, stipulates that deduction would be admissible only on completion of the entire housing project, which is evident from cl. (il) of the first Explanation to s. 80- IB( 10).
10. The learned CIT(A) grossly erred in allowing proportionate deduction even after observing that the legislative intent read with the clear proVisions of the requisite sections do not permit any proportionate deduction under s. 80-IB(lO).
11. The learned CIT(A) grossly erred in following the decision of the Hon'ble Tribunal, Pune Bench, in the case of Ramsukh Properties us. Dy. CIT (ITA No. 84jPnj2011 vide order dt. 25th July, 2012) even after noting that in the case of CIT us. Brahma Associates [reported at (2011) 239 CTR (Bom) 30 : (2011) 51 DTR (Bom) 29B-Ed.] the Hon'ble Bombay High Court had disapproved of the concept of proportionate deduction under s. 80~IB(1O).
12. For these and such other grounds as may be urged at the time of the hearing, the order of the learned CIT(A) may be vacated and that of the AO be restored.
13. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal during the course of the appellate proceedings before the Hon'ble Tribunal."
2. In assessment order, the AO had denied the assessee's claim for deduction under s. 80-IB(lD) on the following grounds:
1. The plot size is less than one acre
2. Violation ofterms of approval of the housing project
3. Exceeding limit of commercial establishment beyond permissible limit' 4. Non-completion of the housing projects.
3. The matter was carried before first appellate authority, wherein the various contentions were raised on behalf of assessee and agreeing to the contentions raised on behalf of assessee, the CIT(A) allowed the claim of assessee. The same has been opposed before us on behalf of Revenue for the reasons stated in its grounds of appeal. On the other hand, the learned Authorized Representative has supported the order of CIT(A) on all accounts.
4. After going through the rival submissions and material on record with regard to the size of plot, we find that the CIT(A) observed from the commencement certificate and building plan approved by PMC on 3rd Feb., 2005 that the size of plot acquired by assessee vide development agreement dt. 23rd Oct., 2003 was of size of 43.5 R. As per building plan, the size of plot is 4134.00 sq. mtrs. out of which, 182.99 sq. mtrs. was acquired for road widening by PMC making plot size 3,952 sq. mtrs. However, as per CBDT Circular No.5 of 2005 [(2005) 197 CTR (St) 1] the area earmarked for road and common amenities must conform to the project approved by the local authority. Relying on this, Tribunal Pune and Mumbai Benches have taken a view that simple and plain reading of s. 80-IB(1O) should mean that plot area of one acre should be available for housing project inclusive of amenities required to be set apart as per norms of concerned municipal corporation or local body, whatever applicable. A similar issue in the case of BWlty Builders us. fTO in ITA No. 1808/Pn/2005 [reported at (2011) 139 TTJ (Pune) 367 : (2011) 56 DTR (Pune)(Trib) 300--Ed.] for asst. yr. 2003-04, wherein, the Tribunal has observed as under:
"As per the Revenue authorities, both AO and learned CIT(A), since the net area available for the purpose of construction was less than 1 acre therefore the assessee was not entitled to claim of deduction under s. 80-IB(l0). However, we are not in agreement with such an approach of the Revenue authorities. To give strength to our reasons for such disagreements, we hereby refer one of the points as explained in the CBDT circular cited in [(2005) 276 fTR (St) 170], wherein the guidelines issued were as follows :
'Extension of time-limit for obtaining approval of housing projects, the purpose of tax holiday under s. 80-18(10), and allowing deduction for redevelopment or reconstruction of existing building in slum areas This section does not specifically provide area limit for the garden, the development plan roads, internal means of access etc., in the housing project. Therefore, the same should conform to the project plan approved by the local authority in accordance with the regulations in force. Also, the area limit of the plot has to be construed with reference to the area of the site in which the housing project is construed and not with reference to the demarcation of land done by the land development authority.'
9. This circular thus gives a clear indication that though the section does not specifically provide for the development plan roads or grant of other facilities etc. in a housing project but the same should conform to the project plan approved by the local authority. Our next reasoning is on the basis of above discussion that the limit of the plot has to be construed with reference to the area available on the site on which the housing project is to be constructed and not with reference to the demarcation of land. Meaning thereby the housing project thus constitute development plan roads and grant of other facilities: therefore, those areas should exist within the prescribed limits and to be considered as part and parcel of the project. Even in the present case the facts have revealed that the plan would not have been approved if the assessee would not have made 15 per cent amenity space available to the corporation. Though amenity space was stated to be surrendered to the corporation but such sacrifice of the builder was duly recognized and compensated by granting additional FSI for the said project. If we accept the proposition of the Revenue Department that the area which was directly under the building construction should only be held as the project for construction, then a builder has to acquire a land more than 1 acre of land. Then only after the set apart of the amenity space he could be left with the balance 1 acre for project development. But such proposition was not intended in the legislature. The language of the section did not prescribe such hypothecation. Therefore, an another reasoning of our rejection of such a proposition of the Revenue Department is that it would be illogical to expect from a builder to have excess land area than 1 acre : at least 15 per cent excessive area applicable for Pune Corporation, so that after setting apart 15 per cent area the balance should remain 1 acre for the purpose of construction. This suggestion of approach of interpretation of a statute is not idealistic because we cannot read beyond the scope of the statute. Normal rule of interpretation of statutes is that the general words must receive a general construction unless there is something otherwise expressly provided in the statute. General words have ordinarily a general meaning, the first task in interpretation is toGive the word their plain and ordinary meaning. This is what we have gathered from the books available on this subject with an attempt to subscnbe a simple and realistic meaning to the cl. (b) of s. 80-IB(10) of the IT Act. Nothing more can he added hence we have to restrict the interpretation that the area of 1 acre should be available for the housing project inclusive of amenities required to be set apart as per the norms of a corporation. Therefore, a justifiable conclusion is that when there is no doubt, more so it is not in dispute that a portion of the land, in the present case it is 15 per cent, to be earmarked or setapart or reserved or segregated out of the total land in question, minimum 1 acre, meant for the purpose of project in terms of rules/regulation of a local body I.e., Pune Municipal Corporation, and without that segregation the project could not be sanctioned then that portion being mandatory for amenity purpose has 'to be taken as a part and parcel of the land available for the project. In the present case smce the area available for the project was 4,600 sq. mtrs. that is more than 1 acre (4,046 sq. mtrs.), therefore, the appellant is entitled for the claim of deduction under s. 80-IB(1O)(b) in this portion of land. We hold accordingly. "
5. Nothing contrary has been brought to our knowledge on behalf of revenue. Facts being similar, so following the same reasoning, we are not mclmed to interfere with the finding of CIT(A), who has decided the issue of seize of plot as discussed above, in favour of assessee by following the ratio of Bunty Bwlders (supra). This reasoned finding of CIT(A) on the point of Size of plot of 1 acre needs no interference from our side. We uphold the same.
6. The next objection is with regard to violation of, terms of approval of housing project. The AO noted that housing project was sanctioned initially for three buildings covering 3,358.62 sq. mtrs. of total built-up area (compnsmg of 71 residential tenements and 16 commercial establishments) in the year 2005. The assessee has subsequently revised the plan in 2007 in which two builders were covering 2,398.16 sq. mtrs. of out of total built-up area (comprising of 52 residential tenements and 16 commercial establishments) and one building covering 933.62 sq. mtrs. (19 residential tenements), accordingly, the assessee has violated the terms of approval of housing project. Against the sanctioned plan of total building, built-up area 3,358.62 sq. mtrs. in 2005, the assessee has completed construction of two buildings of total built-up area of 2,398.16 sq. mtrs .. only which is equal to just 71.40 per cent of total built-up area as per mltially approved housing project.
6.2 The matter was carried before first appellate authority, wherein the various contentions were raised on behalf of assessee and it was found that the AO has taken objection to the fact that there was violation in the built-up area as per initial sanction dt. 3rd Feb., 2005 (3,358.62 sq. mtrs.) and subsequent sanction dt. 1st Oct., 2007 (2,398.16 sq. mtrs.) of the Pune Municipal Corporation. This objection of assessee (sic-AO) was not justified since any builder is entitled to get plans revised from PMC depending on financial capacity, convenience and as per business need. While building specifications have to match as per revised plan, the date of approval of such revised plan would be deemed to be date of first approvrl in terms of Explanation to s. 80-IB(1O). This objection does not arise out of relevant provision of s. 80-IB(1O) as per initially approved by local authority, has to be implemented in order to be eligible for claim under s. 80-IB(10). The only rider in s. 80-IB(10) is that no matter how many revised plans were sanctioned by local authority, the date of approval (vis-a.-vis date of completion) would be deemed to be the date of initial approval. This issue has been discussed by AO regarding noncompletion of building in the project in succeeding para. So, the same will be discussed in following para.
7. The next objection of AO is that the assessee has exceeded the limits of commercial establishments beyond permissible limit. The AO observed that as per sanctioned plan by PMC dt. 3rd Feb., 2005, commercial establishment in housing project is 210.92 sq. mtrs. which is more than 3 per cent of aggregate built-up area as permitted under s. 80-IB(10). The matter was carried before first appellate authority. wherein the various contentions were raised on behalf of assessee and having considered the same, the CIT(A) observed that Hon'ble Bombay High Court in the case of CIT us. Brahma Associates (2011) 239 CTR (Bom) 30 : (2011) 51 DTR (Bom) 298 : (2011) 333 ITR 289 (Bom), wherein, it has been held that upto 31st March, 2005 (subject to fulfilling of other conditions) deduction under s. 80-IB(1O) is allowable to housing project approved by local authority having residential units which with commercial user to the extent permitted under DC rules/regulations framed by respective authority. The jurisdictional Bombay High Court in the case of Brahma Associates (supra) held that amendment in cl. (d) of sub-section specifying commercial area up to 10 per cent of project in housing project applies to the project approved after 1st April. 2005 and the amendment affected by Finance Act (No.2) of 2004 w.e.£. 1st April, 2005 would not have retrospective effect and that approval of housing project prior to 1st April, 2005 with commercial user permitted under DC rules/regulations framed by respective local authority would still be exempt under s. 80-IB(10). This issue of commercial limit is fortified by the decision of Hon'ble Bombay High Court in the case of Brahma Associates (supra). This reasoned finding of CIT(A) on the issue of commercial limit needs no interference from our side. We uphold the same.
The next issue is with regard to non-completion of housing project. The AO stated that the assessee has commenced the construction of third building in the year 2010-11 and it clearly shows that the assessee has not completed the housing project witbin prescribed four years from the date of first approval of housing project. The AO observed that if at all the assessee wanted he could have completed the total housing' project except the so-called 189 sq. mtrs. of land under road widening. The action of assessee proves that he had partially completed the construction of building and carried out on the same till 2010-11 by which, it is proved beyond doubt that he had not completed housing project within the prescribed period of four years. The matter was carried before first appellate authority, wherein the various contentions were raised on behalf of assessee and having considered the same, the CIT(A) granted relief to the assessee on this account as well. The same has been opposed before us on behalf of Revenue. On the other hand, the learned Authorized Representative has supported the order of CIT(A) on the issue.
8.1 After going through the rival submissions and material on record, we find that the issue before us is with regard to pro rata deduction under s. 80-IB(l0). On the issue of pro rata deduction, the Tribunal, Pune Bench, has allowed pro rata deduction under s. 80-IB(l0) in the case of Ramsukh Properties us. Dy. CfT in ITA No. 84/Pn/20 11 vide its order dt. 25th July, 2012 [reported at (2013) 153 ITJ (Pune) 211 : (2013) 84 DTR (Pune)(Trib) 38~Ed.]. For the convenience, the relevant portion of the order reads as under:
"We agree to proposition put forward by learned Departmental Representative that plain reading of s. 80-IB(l0) of the Act suggests about only completion of construction and no adjective should be used along with the word completion. This strict interpretation should be given in normal circumstances. However, in case before us, assessee was prevented by reasonable cause to complete construction in time due to intervention of CID action on account of violation of provisions of Urban Land Ceiling Act applicable to land in question. Assessee was incapacitated to complete the same in time due to reasons beyond his control. Assessee should not suffer, for same. The revision of plan is vested right of assessee which cannot be taken away by strict provisions of statute. The taxing statute granting incentives for promotion of growth and development should be construed liberally and that provision for promoting economic growth has to be interpreted liberally. At the same time, restriction thereon too has to be construed strictly so as to advance the object of provision and not to frustrate the same. The provisions of taxing statute should be construed harmoniously with the object of statute to effectuate the legislative intention. In view of above facts and circumstance, we hold that assessee is entitled for benefit under s. 80,IB(1O) of the Act in respect of 173 flats completed before prescribed limit. The AO is directed accordingly."
8.2 In view of above, it is clear that assessee received approval for C building from PMC vide certificate dt. 3rd Feb., 2005 but work on C building could not start since additional FSI in lieu of road widening was not received from PMC. The assessee could not plan the work for C buildjng since engineers and architects could not design the structure of building in the absence of FSI. The details of follow-up done by assessee with PMC have been duly appreciated by CIT(A). The legislative intent read that the clear provisions of the requisite section, do not permit any proportionate deduction under s. 80-IB(l0) of the Act. However, in view of the decision in Ramsukh Properties (supra) as discussed above, the CIT(A) rightly allowed the proportionate deduction in respect of project completed during the impugned assessment year. The provisions of taxing statute should be construed harmoniously with the object of statute to effectuate the legislative intention. Under the circumstances, proportionate deduction under s. 80-IB(l0) of the Act is justified. Accordingly, the order of CIT(A) on this issue needs no interference from our side. We uphold the same.
9. In the result. appeal filed by the Revenue is dismissed.