CIT v. M/s. Vandana Properties

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The Tax Publishers2012 TaxPub(DT) 0975 (Bom-HC) : (2012) 044 (I) ITCL 0445 : (2013) 353 ITR 0036 : (2012) 206 TAXMAN 0584 : (2012) 076 DTR 0363 INCOME TAX ACT, 1961 --Deduction under section 80-IB(10)--Profits and gains derived from developing and building of housing projectsConstruction of new building on existing project--On a plot of land, admeasuring 2.36 acres, the assessee had constructed buildings A, B, C and D over a period of years. Intimation of disapproval in respect of those buildings were granted during the year 1993 to 1996. By following the work in progress method of accounting, the assessee offered to tax the income earned by constructing buildings A, B, C and D from time-to-time. Deduction under section 80IB(10) of the Act on the income earned from buildings A, B, C and D buildings was not claimed as the approval for construction of those buildings were granted prior to 1-10-1998. Pursuant to an order passed by the State Government in the year 2001 permitting conversion of the status of the land, the assessee became entitled to construct an additional building 'E' on the aforesaid plot of land. Accordingly, building plan for construction of building 'E' with several residential units on the said plot of land was submitted by the assessee. By an Intimation of Disapproval dated 11-10-2002, the building plan for 'E' building consisting of various residential units was approved by the Municipal Corporation subject to various conditions set out therein. Thereafter, commencement certificate for construction of the 'E' building was issued on 10-3-2003. In the returns of income filed for assessment years 2004-05 and 2005-06, the assessee estimated its profits from 'E' building by following the work in progress method of accounting and claimed deduction under section 80IB(10) at Rs.71,42,590 and Rs.71,73,660 respectively. AO held that the approval for 'E' building was granted on 11th October 2002 as an extension of the approvals granted for A, B, C and D buildings commencing from 9th June 1993 and, therefore, 'E' building being continuation of A, B, C and D buildings, the project must be held to have commenced prior to 1-10-1998 and, hence, not eligible for section 80IB(10) deduction. Held: When the plans for A, B, C and D buildings were approved during the period from 1993 to 1996, construction of 'E' building was not even contemplated on the plot in question. It is only in the year 2001 when the status of the land was converted from surplus vacant land into within the ceiling limit land by the State Government, an additional building could be constructed on the plot in question and accordingly building plan for construction of 'E' building was submitted and the same was approved by the local authority on 11-10-2002. The fact that the local authority, namely the Municipal Corporation approved the building plan for 'E' building on the condition that all the objections raised in the Intimation of Disapproval dated 12-5-1993 relating to the earlier housing project on the same plot of land shall be applicable and should be complied with, cannot be a ground to hold that 'E' building was extension of the earlier housing project because the earlier housing project was completed prior to 1-10-1998 and the housing project for construction of 'E' building was approved for the first time on 11-10-2002. Nowhere in the Intimation for Disapproval granted for construction of 'E' building on 11-10-2002, it was stated that building 'E' constituted extension of the earlier housing project which is already completed. The fact that the objections raised while approving the earlier housing project on the same plot of land were made applicable to the housing project in question, it cannot be inferred that the housing project in question constituted extension of the earlier housing project. Therefore, in the facts of the present case, where, neither the assessee had sought approval of the building plan for construction of 'E' building as extension of the earlier housing project, nor the Municipal Corporation had granted approval for the housing project consisting of 'E' building as extension of the earlier housing project, it is not open to the income-tax authorities to contend that approval to the housing project granted by the Municipal Corporation on 11-10-2002 constituted extension of the housing project which was approved in the year 1993. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0975 (Bom-HC) : (2012) 044 (I) ITCL 0445 : (2013) 353 ITR 0036 : (2012) 206 TAXMAN 0584 : (2012) 076 DTR 0363

INCOME TAX ACT, 1961

--Deduction under section 80-IB(10)--Profits and gains derived from developing and building of housing projectsConstruction of new building on existing project--On a plot of land, admeasuring 2.36 acres, the assessee had constructed buildings A, B, C and D over a period of years. Intimation of disapproval in respect of those buildings were granted during the year 1993 to 1996. By following the work in progress method of accounting, the assessee offered to tax the income earned by constructing buildings A, B, C and D from time-to-time. Deduction under section 80IB(10) of the Act on the income earned from buildings A, B, C and D buildings was not claimed as the approval for construction of those buildings were granted prior to 1-10-1998. Pursuant to an order passed by the State Government in the year 2001 permitting conversion of the status of the land, the assessee became entitled to construct an additional building 'E' on the aforesaid plot of land. Accordingly, building plan for construction of building 'E' with several residential units on the said plot of land was submitted by the assessee. By an Intimation of Disapproval dated 11-10-2002, the building plan for 'E' building consisting of various residential units was approved by the Municipal Corporation subject to various conditions set out therein. Thereafter, commencement certificate for construction of the 'E' building was issued on 10-3-2003. In the returns of income filed for assessment years 2004-05 and 2005-06, the assessee estimated its profits from 'E' building by following the work in progress method of accounting and claimed deduction under section 80IB(10) at Rs.71,42,590 and Rs.71,73,660 respectively. AO held that the approval for 'E' building was granted on 11th October 2002 as an extension of the approvals granted for A, B, C and D buildings commencing from 9th June 1993 and, therefore, 'E' building being continuation of A, B, C and D buildings, the project must be held to have commenced prior to 1-10-1998 and, hence, not eligible for section 80IB(10) deduction. Held: When the plans for A, B, C and D buildings were approved during the period from 1993 to 1996, construction of 'E' building was not even contemplated on the plot in question. It is only in the year 2001 when the status of the land was converted from surplus vacant land into within the ceiling limit land by the State Government, an additional building could be constructed on the plot in question and accordingly building plan for construction of 'E' building was submitted and the same was approved by the local authority on 11-10-2002. The fact that the local authority, namely the Municipal Corporation approved the building plan for 'E' building on the condition that all the objections raised in the Intimation of Disapproval dated 12-5-1993 relating to the earlier housing project on the same plot of land shall be applicable and should be complied with, cannot be a ground to hold that 'E' building was extension of the earlier housing project because the earlier housing project was completed prior to 1-10-1998 and the housing project for construction of 'E' building was approved for the first time on 11-10-2002. Nowhere in the Intimation for Disapproval granted for construction of 'E' building on 11-10-2002, it was stated that building 'E' constituted extension of the earlier housing project which is already completed. The fact that the objections raised while approving the earlier housing project on the same plot of land were made applicable to the housing project in question, it cannot be inferred that the housing project in question constituted extension of the earlier housing project. Therefore, in the facts of the present case, where, neither the assessee had sought approval of the building plan for construction of 'E' building as extension of the earlier housing project, nor the Municipal Corporation had granted approval for the housing project consisting of 'E' building as extension of the earlier housing project, it is not open to the income-tax authorities to contend that approval to the housing project granted by the Municipal Corporation on 11-10-2002 constituted extension of the housing project which was approved in the year 1993.