ORDER

Pradeep Parikh, Vice-President. - In all these are five appeals by three different assessees. All the appeals are against five different orders of the ld. CIT(A), all dated 29-1-2010. In the case of first two assessees they are for assessment years 2005-06 and 2006-07. In the case of third assessee, it is for assessment year 2006-07. Since common issues are involved in all the five appeals, they are being disposed of together by this combined order for the sake of convenience. The appeals of M/s. Sanghvi and Doshi Enterprise are taken up first for consideration.

2. The main ground in these two appeals is against the decision of the authorities below that the assessee is not a builder and developer but merely a building contractor and hence, is not eligible for deduction under section 80-IB(10) of the Income-tax Act, 1961 (the Act). The remaining grounds are against the decision that even otherwise, the assessee is not eligible for the said deduction as it has not fulfilled all the conditions required to claim such deduction.

3. The assessee firm is engaged in the business of construction. In assessment year 2005-06, the assessee computed a profit of Rs. 2,02,65,109 following the percentage completion method and the entire amount was claimed as deduction under section 80-IB(10) of the Act. In assessment year 2006-07, the assessee computed a profit of Rs. 2,96,02,224 on the same basis as in the earlier year and claimed deduction of Rs. 2,93,00,835 under section 80-IB(10) of the Act. In both the years, the profit was derived from a housing project named as "Vimalachal" at No. 1088, PH Road, Vepery, Chennai. The said project was constructed on a land owned by Hotel Mullai Pvt. Ltd. (HMPL).

4. The Assessing Officer considered the agreement dated 28-4-2003 entered into between HMPL and the assessee. He observed that HMPL as the owner of the land decided to develop the project for which the assessee was nominated as its builder for construction. The other observations of the Assessing Officer can be summarised as follows:

The Assessing Officer was of the view that development includes many aspects and construction is only one of it. Based on the above facts and the provisions of section 80-IB(10), the Assessing Officer concluded that the assessee has assisted the owner, i.e., HMPL in construction only and all other developmental aspects have been done by HMPL. Accordingly, it was held that the assessee is not eligible for deduction under section 80-IB of the Act.

5. Besides the above, the Assessing Officer noticed that certain other conditions in order to claim the deduction were violated. They are as follows:

The above details were on the basis of the report of the valuation officer of the department. In respect of all the above objections, the assessee submitted its explanation in detail. However, they did not find favour with the Assessing Officer and hence, the deduction was denied. The total income for assessment year 2005-06 was computed at Rs. 2,02,65,109. For the same reasons, the impugned deduction was denied in assessment year 2006-07 also and the total income was computed at Rs. 2,96,02,224.

6. The CIT(A) confirmed the order of the Assessing Officer in toto in both the years for the same reasons as mentioned by the Assessing Officer.

7. The ld. counsel for the assessee, first submitted his arguments on the question whether the assessee is a developer-builder or not. He took us through the agreement between the assessee and HMPL dated 28-4-2003. It was pointed out that the assessee has been described as a builder in the said agreement and moreover, it is also the finding of the CIT(A) in paragraph 8.6 of his order that the assessee is a builder which finding is contradictory to the finding of the Assessing Officer that the assessee is a contractor. Next, his submission was that section 80-IB(10) nowhere requires the assessee to be the owner of the land. Elaborating on this submission, the ld. counsel referred to the extracts from the Memorandum explaining the Finance Bill, 2009 through which an Explanation was added to section 80-IB(10) with retrospective effect from 1-4-2001. The emphasis was that the objective of the tax concession is to provide tax benefit to the person undertaking the investment risk i.e., the actual developer. In this connection, our attention was drawn to clauses 7, 8 & 9 of the agreement dated 28-4-2003 to show that it was the assessee who has to fix the rate per sq.ft. for the constructed area, that assessee was entitled to receive the entire sales consideration on its own behalf and that HMPL had no claim on such amounts. It was also pointed out that the rate for sale of proportionate undivided share of land was fixed at Rs. 600 per sq.ft. as per clause 4 of the agreement. It was emphatically stated that HMPL was entitled to this amount only which constituted the rate for sale of land and describing it on per sq.ft. basis was only a mode of determining the amount payable to HMPL. It did not in any way indicate that HMPL had any share in the sale consideration of the built-up areas. Therefore, the argument was that it was the assessee who had undertaken all the investment risks and if any purchaser failed to make the payment, it was the assessee's loss only. It was contended that even if some flats are not sold, it was the assessee's risk and since it had taken the risk of development, the assessee was a developer and builder.

8. The ld. counsel took up the next objection of the revenue authorities. It was observed by the authorities that two flats though sold separately to two different persons, they were combined together to make one dwelling unit. Together, it measured more than 1500 sq.ft. and hence, one of the conditions to claim deduction was violated. The contention of the ld. counsel was that the assessee had sold two flats separately under two separate agreements. It was the allottees of the two flats that combined the flats together over which the assessee had no control. In support of this contention, the ld. counsel drew our attention to the confirmation letter given by the two purchasers of the flats stating that they had combined the two flats after taking possession for their own convenience. Thus, according to the ld. counsel the assessee had not violated this condition.

9. The next objection of the revenue was that the purchaser of the flat on the top floor had an exclusive right over the terrace and hence it should form part of the built-up area. This objection was countered by the ld. counsel by stating that though the top floor occupant had paid for the exclusive right of the terrace, the occupant did not have such a right. Only thing was that the access to the terrace was through the flat only and there was no independent access. Alternatively, it was contended that if after adding terrace to the built-up area, the total area exceeded 1500 sq.ft., then pro rata deduction should be given. For this alternative contention reliance was placed on the decision of the Special Bench of the Tribunal in the case of Brahma Associates v. Jt. CIT (OSD) [2009] 30 SOT 155 (Pune) and on several other decisions of the Tribunal. These decisions, it was contended, were based on the decision of the Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra).

10. The next objection of the revenue is with regard to certain flats measuring more than 1500 sq.ft. In this connection, the ld. counsel drew our attention to the certificate given by the registered valuer as per which the concerned flats measured less than 1500 sq.ft. However, he had no objection if the matter was remitted for verification and it was stated that let both the valuers take measurement together for which the assessee will extend its co-operation.

11. The last objection of the revenue was that the project was not completed within the stipulated time of four years and hence, deduction was not available. It was pointed out that though the assessee had applied to obtain completion certificate from CMDA in time, for certain reasons it was rejected. The assessee then approached the High Court and the Court directed CMDA to issue the certificate. Ultimately CMDA did issue the completion certificate, albeit late by about three months. Nonetheless, it was submitted that the Corporation of Chennai has issued a certificate dated 28-12-2007 stating that the building was inspected on 23-11-2007 and it is found that it satisfies the approved building permit conditions. The fact that Corporation is the local authority to approve the construction is supported by the decision of the Chennai Bench of the Tribunal in the case of Jain Housing & Constructions Ltd. [IT Appeal No. 1369 (Mds.) of 2009, dated 5-2-2010.] The certificate of the Corporation is sought to be filed as additional evidence. Thus, finally the ld. counsel wound up his arguments by stating that the assessee was a developer-builder, that no conditions prescribed under section 80-IB(10) were violated and hence, was eligible for the impugned deduction.

12. The ld. D.R. first drew our attention to the provisions in section 80-IB(10) to point out that an undertaking claiming deduction under this provision should be both, a developer as well as a builder. If the undertaking is only one of them, it will not be entitled to the deduction. He then referred to the order of the CIT(A) in which was extracted certain portions of the assessment order which stated that it was HMPL who decided to develop the project, nominated the assessee as its builder for construction and that the land handed over to the assessee was not towards part performance of the contract under section 53A of the Transfer of Property Act or under section 2(47) of the Act. The ld. D.R. drew our attention to the remand report obtained by the CIT(A). As per the said report, the finding was that the payment to be made by the assessee to HMPL was on sq. foot basis which made it obvious that the payment was not a consideration for land alone. The agreement also nowhere stated that HMPL would jointly develop the property along with the assessee. According to him, the decision of the Chennai Bench of the Tribunal in the case of Sashwat Constructions (P.) Ltd. [IT Appeal No. 1828 (Mds.) of 2007, dated 27-2-2009] was squarely applicable and the same should be followed. The ld. D.R. next referred to the agreement dated 28-4-2003 entered into between HMPL and the assessee. From the agreement it was pointed out that the construction was to be carried out as per the specifications given by HMPL and that the assessee as the builder could not deviate from it. The quality of construction was to be as per the standards set by HMPL's architects. He also referred to the other agreements viz., one between HMPL and the purchaser of flat for sale of undivided share in the land. The next was the construction agreement between the assessee and the purchaser of the flat and the third was also a construction agreement between the assessee and the purchaser of flat for sale of common areas. The thrust of his arguments by referring to these agreements was that HMPL had applied and obtained all the necessary permissions from CMDA and the Corporation, that the deed of sale in respect of flats was to be registered in favour of the purchaser only after the entire consideration was paid up and hence, there was no risk on the part of the builder. It was also pointed out that the allottees of the flats had requested HMPL to arrange for the builder. The builder was to receive monies in advance from the allottees and hence, on that count also the builder has no investment risk. The construction agreement specifically mentioned that the builder was not to incur any liability if the latter was unable to deliver possession within the stipulated period. On the other hand, if there was a delay in payment by the allottees, the builder was entitled to interest. It was emphatically repeated that all the procedures to obtain all the necessary permissions were obtained by HMPL and hence, unquestionably HMPL was the developer. The ld. D.R. relied on the judgment of the Supreme Court in the case of K. Raheja Development Corporation v. State Of Karnataka. 2005 AIR SC 2350. With regard to the violation of other conditions, the ld. D.R. relied on the orders of the lower authorities. He objected to the admission of additional evidence in the form of the completion certificate obtained from the Corporation of Chennai. It was contended that since the main permission was from CMDA, the completion certificate also should have been obtained from the said authority within the stipulated period. He also objected to the alternate contention of the assessee with regard to pro rata deduction in cases where the flats measured more than 1500 sq.ft.

13. In his counter reply, the ld. counsel made several submissions. Against the revenue's contention that assessee was not the owner of the land, it was contended that there was no such condition in section 80-IB(10) to claim the deduction. With regard to the contention that the payment to HMPL was on sq. foot basis, it was submitted that it was only the manner to determine the consideration for sale of undivided share of land. With regard to the contention that building permission was in the name of HMPL, it was submitted that under the local laws it was only the legal owner who could make application and hence the procedures were undertaken by HMPL. With regard to the completion certificate obtained from Corporation, it was contended that CMDA approves only the structure but the construction is approved by the Corporation and hence completion certificate given by it is to be treated as due compliance under section 80-IB(10). With regard to the argument about the involvement of HMPL's architect, the ld. counsel drew our attention to clause (1) in the construction agreement dated 14-11-2003 which stated that the areas computed by the architect of the assessee was to be final and binding on all the parties. As regards the decision in the case of Sashwat Constructions (P.) Ltd. (supra), it was submitted that the order relied upon by the ld. D.R. was dated 27-2-2009 and was in respect of assessment year 2004-05. The ld. counsel furnished a copy of the order of the Tribunal dated 25-2-2009 in the case of the same assessee for assessment year 2005-06 in which the claim of the assessee was upheld by the Tribunal. Therefore, the contention was that the order for assessment year 2004-05 was itself erroneous insofar as that it did not follow the order for assessment year 2005-06 and hence the same cannot be relied upon. Again, it was submitted that in the case of Sashwat Constructions(P.) Ltd. ( supra), in its order for assessment year 2004-05 the Tribunal had followed the judgment of the Supreme Court in the case of Faqir Chand Gulati v. Uppal Agencies (P.) Ltd. [C.A. No. 3302 of 2005]. It was contended that this judgment of the Supreme Court was under Consumer Protection Act to answer the question whether a land owner who enters into an agreement with a builder is a consumer entitled to maintain a complaint against the builder as a service provider under the Consumer Protection Act. Therefore, for that reason also, the decision given in the case of Sashwat Constructions (P.) Ltd. (supra) for assessment year 2004-05 cannot be relied upon. Next, it was contended that HMPL has not objected to the claim of the assessee of it being a developer and has also not claimed any deduction under section 80-IB of the Act. Therefore, when the parties are not disputing each other's status, the intentions of the parties should be carried out. As regards the contention that HMPL incurred all the charges for various approvals, it was contended that the assessee reimbursed all the charges and the same have been allowed as deduction by the department. With regard to investment risks it was contended that irrespective of the amount collected by the assessee, it had to make over Rs. 600 per sq. foot to HMPL. If prices of building materials were to go up, the assessee had to bear the same. If the assessee borrowed monies for construction, it was its liability to repay the same. Therefore, full risk was involved on the part of the assessee. The contention of the ld. D.R. that the assessee had no liability for delayed possession was negatived by the ld. counsel by stating that it was only a force majeure clause of the agreement. Collection of money from the allottees in advance was the prerogative of the assessee and once the assessee proceeded to construct the building, the risk was totally his. Referring to the judgment in the case of K. Raheja Development Corpn. (supra), it was submitted that under the Sales-tax Act extended meaning was given to the term "works contract" and as per the said definition the assessee was a works contractor but only for the purpose of sales-tax. With regard to other objections, the ld. counsel reiterated his earlier contentions. Thus, the ld. counsel concluded his arguments by making a fervent plea that the assessee should be held to be a developer and builder and hence entitled to deduction under section 80-IB(10) of the Act.

14. We have duly considered the rival contentions and the material on record. It is an interesting situation. The assessee claims to be the developer of land but the revenue is not agreeable to it. HMPL does not claim to be the developer but the revenue wants to thrust that status on it. Admittedly, neither of the party says that there was a third entity who developed the property. In fact, one of the arguments of the ld. D.R., as mentioned in paragraph 12 above, was that the property is not developed jointly by HMPL and the assessee. Fortunately, one undisputed fact remains that the property has been developed. No one doubts this factual aspect. The only question to be answered is as to who developed it. Certainly it is not any providential hand. It is either HMPL or the assessee.

15. Before we go into the facts of the case, it would be appropriate to understand certain expressions which may be relevant to appreciate the purport of section 80-IB(10).

The above meanings/explanations of the various expressions are as per Law Lexicon by P. Ramanatha Aiyar (2nd Edition - 2009). From the above it can be seen that the meanings of different expressions at times overlaps each other and in particular, the distinction between a "builder", "developer" and "contractor" is quite blurred. As a matter of fact, different persons often use the expressions interchangeably and according to their own perceptions. As a result, the agreements entered into by the persons involved in these activities are also quite often blurred and lacking clarity leading to avoidable litigation. Be that as it may, let us try to ascertain the status of the assessee from amidst the different hues that the expressions described above radiate.

16. One of the major objections of the revenue is that the assessee is not the owner of the land and as the preamble of the agreement dated 28-4-2003 goes, it was HMPL who decided to develop the project. In our view, nothing turns on it. It is very obvious that the first step, i.e., to develop a piece of land always rests with the owner of the land and no other person is expected to be in picture at the time of making this decision. The question is not who decided to develop the land but the question is who actually developed the land.

17. Having decided to develop the land, HMPL approached the assessee. They jointly evolved the scheme for development. This is evident from clause 1 of the agreement. In other words, the owner and the builder jointly evolved the scheme. At this juncture, we may hasten to add that they jointly only evolved the scheme. They did not jointly develop the scheme. Having jointly decided upon the scheme, the next step was to obtain the necessary permissions. Obviously, since the land is owned by HMPL, permissions have to be in its name only. Obtaining permissions in one's name does not ipso facto make that person a developer.

Again, this too does not answer the question as to who developed the land or who carried out the development.

18. Having evolved the scheme and having obtained the necessary permissions, the builder, i.e., the assessee actually entered the scene to execute the scheme and the plans. Firstly, the assessee was handed over the possession of the land. Unless the possession is actually handed over to the assessee, the latter cannot proceed further. Therefore, clause 5 of the agreement states about handing over the possession of the land. It is to be noted that the land is not sold to the assessee and this is made clear in clause 5 itself that the possession is not given as a part performance of a contract as contemplated under section 53A of the T.P. Act. However, this has been one of the attacking points of the revenue that since the land does not belong to the assessee, the latter cannot develop it. The argument is too far-fetched to be accepted. If a land owner wants to exploit unused land to his advantage, he may hand it over to a builder to develop the same without parting with the ownership. There may be several reasons not to part with the ownership despite the fact that he will be parting with a substantial portion of the land for development purpose. The owner may want to retain the ownership of the remaining land and division of the land into two portions may not be feasible. In that case, the owner will have to retain the ownership of the entire land. The Legislature must have kept such situations in mind while providing for the deduction. And again, when Explanation was added to section 80-IB(10) by Finance Bill, 2009, the Memorandum explaining the provisions emphasized about the investment risk which may be taken either by the owner or the builder or jointly by both. In the instant case, who has actually taken the risk, we shall see later. For the present, suffice it to say that ownership of the land will not be the criterion to decide the status of a developer as such.

19. The builder then actually starts the development work. As per the agreement, the builder has the exclusive right to sell the flats to the persons of his choice. He has the exclusive right to determine the sale price of the flats. He has the exclusive right to collect the entire sales consideration of the flats. Out of the total sales consideration received by him, he has to make over only the cost of undivided share of land to the owner which is fixed at Rs. 600 per sq.ft. of the super built-up area. At this juncture, we may deal with one of the arguments of the revenue that since the price to be paid to the owner is based on built-up area, it automatically proves that the owner is the developer. We are not inclined to buy this argument. Apparently it may seem to be so. But then, one has to interpret the document as may have been intended by the parties. The owner is entitled to receive only the cost of land. It has no interest in what cost the builder incurs for construction and also has no interest in what sale price per flat the builder receives. Further, only that part of the land is to be transferred which is utilised for construction. Therefore, the best way to describe the owner's consideration of land is to determine it on the basis of super built-up area. Considering the discussion in this paragraph, one is lead to frame an opinion that the assessee is not only a builder but is also a developer. However, this is not the end of the story and after all, it is said that opinion may be stronger than impression, but not as strong as a belief. There are other dimensions also to the aspect of builder and developer which we shall examine now.

20. We take up the most important dimension which relates to the investment risk involved. In paragraph 15 above we have given the meaning of the expression "development" which means the realisation of the potentialities of land or territory by building or mining. In the present case, undoubtedly, HMPL as the owner of the land has ventured to realise the potentialities of the land. It has indeed realised the potentialities, not by developing the land but by handing over the land for development to the builder. This is evident from the fact that HMPL is to receive only the cost of the undivided share of land. It is not that HMPL had purchased the land with a view to put up the present project. It had purchased the land way back in 1970 and it was only in 2003 that it decided to exploit its potentialities. Further, HMPL will undoubtedly receive the cost of land irrespective of the fact whether the builder is able to sell the flats or not. Thus, HMPL is merely encashing part of the investment made more than three decades ago. On the other hand, the builder on its part would be investing in material and labour now and the recoupment of this investment is uncertain. Whether all the flats are booked or not, the builder will have to construct the entire building. This is so because if a person has booked a flat on 4th floor and the flat on 3rd floor is not booked, he will have to hand over the possession of the 4th floor flat for which necessarily he will have to construct the 3rd floor. Thus, he would be investing in the 3rd floor without any certainty of it being sold. In other words, the builder will have to pump in the funds to build the entire project the realisation from which is quite uncertain. As against this, what is the risk of HMPL. At worst, the builder may defer the payment for a while. But once the construction of the project is over, HMPL would certainly demand its pound of flesh. Thus, the risk of HMPL is many times lesser than that of the builder. The opinion which we had formed in paragraph 19 above that the builder is also the developer gets strengthened with these facts. We may still go further.

21. There is a construction agreement between the assessee as the builder and the purchaser of each flat. The overall implication of such an agreement will be examined later. At the moment we deal only with certain important clauses of the agreement. Firstly, the preamble to the agreement gives complete rights to the builder to enter into builder's agreement for allotment and construction of built-up area directly with the parties. The price for each flat is fixed by the builder and the purchaser and HMPL is nowhere in picture. The builder has to purchase all the required materials and supply labour. One of the important rights given to the builder is that as per clause 30 of the construction agreement, builder has the right to raise additional storeys and make additions in the proposed blocks to be constructed. HMPL is in no way interested in this right of the builder. As per clause 25 of the agreement, the builder will always have the option and right to maintain all common services like security arrangement, maintenance of lifts, common passage and lobbies etc. As per clause 52 of the agreement the builder has the right to change the usage of certain areas on the ground floor from generator room, air conditioning plant room, garbage room etc. on the one hand to gymnasium, health club, community room etc. on the other hand. In all such matters, HMPL has no role to play. As per clause 27 of the agreement, the builder has the right to collect maintenance expenses in advance from the purchaser of the flat. All these facts go to show that it is the builder who is responsible to develop the property, maintain it and satisfy the purchasers. We reiterate, HMPL is nowhere in the picture. This further strengthens our view that the assessee is a builder as well as a developer. Let us now have a holistic view of the entire arrangement.

22. As per section 80-IB(10), the deduction is available to an undertaking which is engaged in the developing and building housing projects. In other words, the undertaking should be both, a builder as well as a developer. In paragraph 15 we have given the meanings of certain expressions as per Law Lexicon. As per the meanings given, a builder is one who builds or whose occupation is that of building. In the instant case, by the revenue's own admission, the assessee is a builder. The meaning goes further to state that a builder is specifically one who controls or directs the work of building in any capacity. In the present case, the facts go to show that the assessee has been engaged as a builder and it is the assessee who will control and direct the work of building construction. Next, as per Law Lexicon, a contractor is a person who makes a contract, especially a builder who works by contract. Now here the real distinction needs to be drawn between the expressions "developer and builder" and "builder and contractor". If a person is a contractor only, then, his job would be merely to construct the building as per the designs provided by the owner and hand over the constructed building to the owner. His job will not include designing the project, selling the flats in the project, entering into agreements with the purchasers of the flat of the type they are entered into in this case. He will not be running after the buyers to sell the flats or realise the money for the sold flats. He would not be maintaining the property after the project is completed. He would not be having any right to extend the height of the building. He would not be having any right to convert any area for a different usage. All these rights have been discussed in paragraph 21 above. Thus, the assessee is not a contractor simpliciter, he is not a builder simpliciter, he is not a developer simpliciter. He is all rolled into one i.e., he is a developer, a builder and also a contractor. It is because of this practical situation which is quite common, Law Lexicon says that the word "builder" has been used by lawyers, judges and courts as synonymous with "contractor" when used in connection with building contracts. In the beginning of paragraph 21 we have referred to the construction agreement entered into by the assessee with the purchaser of the flat and it is mentioned that the implication of this agreement, we shall see later. The time to see this implication has now come. It has been in the argument of the revenue that since the assessee has entered into a construction agreement with the purchaser of the flat, it makes the assessee a contractor and not a developer. At the outset, it needs to be reminded that as per the agreement between HMPL and assessee, the former had nominated the latter as a builder and as per clause 1 of the agreement the project was jointly evolved by HMPL and the assessee. In other words, they jointly decided upon the project but the job of actually developing the land, building and constructing the project was the exclusive domain of the assessee. Thus, it is not that the purchasers of the flats have engaged the services of the assessee as a contractor. The question may arise, then why such an agreement. Well, it is merely to define the rights and liabilities of the assessee vis-a-vis the purchasers of the flats. We may examine some of the important rights and responsibilities. The agreement decides the sale price of the flat, it decides the terms of payment, it decides upon the time schedule for delivering the flat, it decides upon the consequences for default on either side, it prevents the purchaser to make any structural changes in the flat, it defines the defects which the assessee will have to remove and those which he is not liable to remove and so on. It also gives the assessee the option and right to maintain all common services in the project and to collect maintenance charges. The point is that if the assessee is not the developer, why should he take upon himself the responsibilities of providing security arrangement, maintenance of common services, providing with a captive source of water and so on. In short, the construction agreement in the present case is not one by which the assessee is engaged as a contractor by the purchasers of the flats but having been appointed as a builder and a joint developer, the agreement has been entered into only to define the rights and liabilities vis-a-vis of the purchasers of the flats. It is because of this complex arrangement coupled with the terms loosely used in the agreements, that made us say in paragraph 15 that the distinction between a "builder", "developer" and "contractor" is quite blurred. It is in order to remove this haziness we have gone in detail into various agreements to find out the exact status of the assessee. Our conclusion is that the assessee is a developer, a builder and a contractor, all rolled into one. On the other hand, HMPL is only a developer and not a builder. Even though, the assessee and HMPL are joint developers, in our view, the roll of the assessee as a developer is greater than the roll of HMPL as developer. To reiterate briefly, HMPL is a developer because it has jointly evolved the entire scheme along with the builder and has attempted to realise the potentialities of the land owned by it. However, this realisation of the potentialities is merely by way of encashing a past investment made three decades ago. There is no risk involved so far as HMPL is concerned, in the present project. On the other hand, the assessee is a developer because it has jointly evolved the project along with HMPL and will realise the potentialities of the land by risking his finances today. Whereas HMPL is sure to realise its money, for assessee, the realisation remains uncertain, or at best one may say, it is not as certain as in the case of HMPL. In the final analysis, we conclude that the assessee is a builder and a developer entitled to deduction under section 80-IB(10) subject to fulfilment of other conditions mentioned in the section.

23. We now take up certain other objections raised by the Assessing Officer on account of which also the deduction is denied. One of the objections is that in some cases, two flats have been combined to make a single dwelling unit as a result of which the total built-up area of the combined flat exceeds 1500 sq.ft. In this connection, the assessee has placed on record the confirmation given by the purchasers of the flats stating that they had combined the two flats after taking possession for their own convenience. In our opinion, once the flats which are sold separately under two separate agreements, the builder has no control unless the joining of the flats entails structural changes. Nothing is brought on record to evidence such structural changes. Therefore, it is quite clear that the two flat owners have themselves combined the flats whereby the area has exceeded 1500 sq.ft. The project as a whole and the assessee cannot be faulted for the same. Moreover, clauses (e) & (f ) of section 80-IB(10) are effective from 1-4-2010 and they are not retrospective in operation. Therefore, they do not apply to the present case which pertains to the years prior to 1-4-2010. Accordingly, we do not see any force in this objection and the deduction cannot be denied on this ground.

24. Next objection of the Assessing Officer is that the project had to be completed on or before 31-3-2008 and since the assessee did not furnish the completion certificate, the assessee is not eligible for deduction. The objection is to the effect that the completion certificate from CMDA is dated 13-6-2008, i.e., three months after the due date for completing the project. In this connection, it has to be noted that the completion certificate is to be issued by the local authority. The question is, whether CMDA can be considered to be a local authority or not. This issue had come up before the Chennai Bench of the Tribunal in the case of Jain Housing & Constructions Ltd. (supra). In that case, assessee was denied deduction in the absence of completion certificate by the CMDA but completion certificate issued by the Corporation of Chennai was placed on record. The Tribunal in paragraph 3.5 of its order stated that the project layout plan may be required to be approved by the CMDA but as far as the construction of the building is concerned, the local authority, i.e., the Corporation of Chennai is the appropriate authority to regulate the construction as per the building bye-laws and sanction plans. When it is not disputed that the Corporation is the local authority, certificate issued by it cannot be disregarded. The assessee has placed on record the completion certificate issued by the Corporation by way of additional evidence. Since the allowability of the entire deduction depends on all the conditions being fulfilled, we admit this additional evidence. The certificate clearly mentions that the building was inspected on 23-11-2007 and that it is found to be satisfied the building permit conditions. We may also mention that the role of CMDA is quite distinct from that of the Corporation. CMDA looks at the plans from the perspective of the development and urbanisation of the city as a whole. On the other hand, the role of the Corporation while issuing completion certificate is to see that the unit is habitable in all respects like civic amenities and so on. Even for the sake of argument if the CMDA certificate is to be considered, then in that case, the assessee did apply for the completion certificate to CMDA on 13-3-2006. It is a different matter that CMDA raised certain objections and the matter went up to the Hon'ble High Court also. However, the fact remains that the project was completed much before the due date, may be with certain defects. Also, it has to be noted that the CMDA certificate is dated 13-6-2008, i.e., only two months and thirteen days beyond the due date. It is inconceivable that the type of defects which were pointed out by the CMDA could have been rectified in such a short period. Be that as it may, the Hon'ble High Court also ratified the deviations and directed the CMDA to consider the explanation of the assessee. All these facts go to point that the project was indeed completed before 31-3-2008. Thus, this ground also has no force to deny the assessee the impugned deduction.

25. The next objection of the Assessing Officer is that certain flats in the project measure more than 1500 sq.ft. According to the ld. counsel, as per the measurement taken by the registered valuer appointed by the assessee, the said flats measured less than 1500 sq.ft. However, he had no objection if the matter was remitted for verification. Accordingly, we restore this issue to the file of the Assessing Officer with the direction that the flats which are allegedly more than 1500 sq.ft. in area be measured again and the departmental valuer as well as the assessee's valuer, both should remain present. The assessee is directed to extend its fullest co-operation. If on measuring the flats, they are found to be of more than 1500 sq.ft., the Assessing Officer is then directed to allow deduction only in respect of the profits arising from the sale of those flats which measure less than 1500 sq.ft. In other words, flats measuring more than 1500 sq.ft. should be left out. At the same time, we make it clear that the deduction should be allowed only if the built-up area of flats measuring more than 1500 sq.ft. do not exceed 10 per cent of the total built-up area.

26. The last objection of the revenue is that the purchaser of the flat on the top floor had an exclusive right over the terrace and hence it should form part of the built-up area. If the total built-up area including the terrace is considered, the said flat would measure more than 1500 sq.ft. The expression "built-up area" has been defined in clause (a) of section 80-IB(14). It is meant to be the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units. It is not disputed that the terrace which is the subject-matter of dispute is adjoining to the dwelling unit. In other words, it has to be considered as a projection of the dwelling unit itself. It is also not disputed that it is only the owner of the top floor who has access to the said terrace and no other occupant of the building has access to it. Though the ld. counsel vehemently argued that it has to be considered as a part of common area, we cannot accept the said argument. Accordingly, the area of the terrace will have to be included in the built-up area. In paragraph 25 we have restored the matter relating to certain flats allegedly having area exceeding 1500 sq.ft. for verification. Along with those flats, the flats with exclusive terrace rights also be measured again to find out whether the built-up area exceeds 1500 sq.ft. or not. If any or all of them are found to be in excess of 1500 sq.ft., then the same direction as mentioned in paragraph 25 will apply. It is clarified that the built-up area of the flats without terrace rights and the flats with terrace rights, both put together should not exceed 10 per cent of the total built-up area. To make it abundantly clear it is reiterated that separate limits of 10 per cent should not be worked out for the two categories of the flats but both put together should not exceed 10 per cent of the total built-up area. Also, deduction should be computed only in respect of flats which do not exceed 1500 sq.ft. In other words, flats which exceed 1500 sq.ft. should be totally ignored for the purpose of deduction. If the built-up area of the flats exceeding 1500 sq.ft.(flats with and without terrace rights put together) is more than 10 per cent of the total built-up area of the project, then the assessee will lose deduction on the entire project.

27. Before finally concluding, it may not be out of place to explain the genesis of our direction given in paragraphs 25 & 26 above. In giving the said direction, we have relied on the decision of the Special Bench of the Tribunal in the case of Brahma Associates (supra). In that case, the assessee developed a housing project, which not only comprised of residential housing units but also commercial establishments. Clause (d) of section 80-IB(10) which permits certain percentage of commercial establishments in the housing project was not on the statute book for the year with which the Special Bench was concerned. Therefore, the question before the Special Bench was whether deduction under section 80-IB(10) is admissible in case of a housing project comprising residential housing units and commercial establishments. After a detailed discussion, at paragraph 75, the Special Bench observed that a plain reading of section 80-IB(10) makes it clear that this section is aimed at promoting construction of housing projects so as to address the problem of shortage of dwelling units. At paragraph 76, the Bench observed that the tax incentive by way of deduction under section 80-IB(10) is predominantly for the purpose of augmenting affordable dwelling units, and it must be interpreted in that light. The Bench also considered numerous judicial pronouncements and ultimately came to the conclusion that if the commercial built-up area is not more than 10 per cent of the total built-up area, the assessee should not lose the entire benefit of section 80-IB(10). The Bench also considered the claim of the assessee for pro rata deduction. However, the Bench ruled out the claim on the ground that the deduction is available only in respect of the profit of the housing project. One of the several authorities referred to by the Bench, and which according to us is most relevant for the present case is the case of Kammins Ballrooms Co. Ltd. v. Zenith Investments (Torquay) Ltd. [1971] AC 850. In this case, Lord Diplock approved of what he called 'a purposive approach to statutory interpretation'. A brief discussion on this is found in paragraph 98 of the Special Bench order. According to Lord Diplock, the purposive approach would enjoin a judge to impute to Parliament an intention not to impose a prohibition inconsistent with the objects which the statute was designed to achieve, though the draftsman has omitted to incorporate in express words any reference to that intention. The essence of the purposive approach, according to Lord Diplock, is for the judge to answer a series of questions; "What is the subject-matter of the Act (or part of the Act) being interpreted? What object in relation to that subject-matter Parliament intended to achieve by the Act? And lastly, what part in the achievement of that object the section under construction was intended to play?" The particular section will then be interpreted according to the object which the court deems the legislation is intended to serve. This operates even if Parliament has failed to incorporate the intention which the judge believes that the section possesses. Lord Diplock re-emphasised the importance of making a purposive approach in Reg. v. Nat. Ins. Commr.: Ex parte Hudson [1972] AC 944 at p.1005 : [1972] 2 WLR 210, 251 (HL) thus :

"Meticulous linguistic analysis of words and phrases used in different contexts in particular sections of the Act should be subordinate to this purposive approach. It should not distract your Lordships from it."

28. Taking inspiration from the above, and addressing to ourselves the questions suggested by Lord Diplock, what answers do we get. The provision which we are interpreting pertains to housing projects. The object of the provision as mentioned earlier and as discussed at length in the Special Bench order, is to augment affordable dwelling units. Can it be said that by having only very insignificant number of flats exceeding 1500 sq.ft., has the assessee failed to augment affordable dwelling units. The reply to this question has to be in the negative. However, as observed in paragraph 94 of the Special Bench order, we have to draw up some lakshman rekha nonetheless so as to ensure that the basic character of the project continues to remain in harmony with the object of the tax incentive i.e., augmenting affordable dwelling units. Further, it needs to be emphatically stated that pro rata deduction has to be ruled out because if that is permitted, some assessee may construct substantial number of flats exceeding 1500 sq.ft. and may claim deduction without serving the purpose of the legislation. Likewise, the flats which exceed 1500 sq.ft. also have to be left out of the purview of the deduction. On the other hand, in the present case if the aforesaid lakshman rekha is drawn, and if the assessee is within that limit, giving deduction to him will serve the purpose of the legislation. Therefore, we have drawn the limit of 10 per cent and have also held that if it exceeds the limit of 10 per cent then the assessee will lose entire deduction. This explains our directions given in paragraphs 25 and 26.

29. Besides the inspiration and guidance we have from the decision in the case of Brahma Associates ( supra), we also have the judgment of the Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra)and which is placed on record before us. In this case, the High Court was considering the decision of the Kolkata Bench of the Tribunal in the same case in I.T.A. Nos. 1595 and 1735/Kol./2005, dated 24-3-2006. In this case, the assessee had constructed smaller as well as larger residential units. The assessee had claimed deduction only on account of smaller residential units which were fulfilling all the conditions contained in section 80-IB(10). The Tribunal allowed the claim of the assessee. The High Court, dealing with the same case, dismissed the appeal filed by the department holding that no substantial question of law is involved in this matter. The question is whether this decision of the High Court is binding or not when it has come to the conclusion that no substantial question of law arises. The Gujarat High Court in the case of Nirma Industries Ltd. (supra) has held that in a case where the High Court comes to the conclusion that no substantial question of law arises on a particular issue, it could not be stated that when the appeal is dismissed by the High Court, the subject-matter of the controversy between the parties has not been dealt with by the High Court. It is further stated that the effect of dismissal is that the order of the Tribunal on the issue which was agitated before the High Court stands merged in the order of the High Court, and for all intents and purposes, it is the decision of the High Court which is operating and which is capable of being given effect to. It is not open to any person to contend that there is no decision of the High Court and the subordinate forum is entitled to take a contrary view than the one adopted in the earlier proceedings which have been affirmed by the High Court by a process of dismissal of the appeal simpliciter.

30. The above issue and the judgment of the Gujarat High Court were considered by the Special Bench of the Tribunal in the case of Medicare Investments Ltd. v Joint CIT [2008] 114 ITD 34 (Delhi) . The Special Bench held that such a decision where the High Court has dismissed the appeal on the ground that no substantial question of law arises, is binding on the subordinate forums. Thus, it is clear that in absence of any decision of the jurisdictional High Court to the contrary, not only the decision of the Special Bench in the case of Brahma Associates (supra) but also the decision of the Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) are binding precedents on the issue that even if the assessee has constructed residential houses of larger area, deduction under section 80-IB(10) will still be available but will be restricted to the profits arising from the sale of smaller residential units. Accordingly, the Assessing Officer is directed to follow our directions in paragraphs 25 and 26 above.

31. In the result, the two appeals in the case of Sanghvi & Doshi Enterprise [IT Appeal Nos. 259 and 260 (Mds.) of 2010] are partly allowed for statistical purposes.

Sri Mahalakshmi Housing [IT Appeal Nos.261 & 262 (Mds.) 2010]

32. In the case of this assessee, the two appeals relate to assessment years 2005-06 and 2006-07. In both the assessment years, the main issue is whether the assessee is a builder and developer or not and hence, entitled to deduction under section 80-IB(10) or not. It is admitted by both the parties that the facts are similar to those in the case of Sanghvi & Doshi Enterprise dealt with above. Therefore, following our above order, it is held that the assessee is a builder and developer and hence, entitled to deduction under section 80-IB(10). Another common issue in both the years is whether the area of private terrace has to be included in the built-up area or not. In this regard, as in the above case, the flats with exclusive terrace rights be measured again after including the private terrace and then follow the directions given in paragraphs 25 and 26 above.

33. In assessment year 2006-07, there is one more issue which pertains to the area of commercial part constructed by the assessee. On perusal of the order of the CIT(A), it appears that the assessee is not agreeing with the manner in which the department has computed the area. Therefore, the matter is restored to the file of the Assessing Officer for the limited purpose of measuring the commercial area and then decide about the deduction in accordance with law.

34. In the result, both the appeals of the assessee are partly allowed for statistical purposes.

Sri Mahalakshmi Builders (ITA No. 263/Mds./2010)

35. This appeal pertains to assessment year 2006-07. In this appeal also, the main issue is whether the assessee is a builder and developer or not. Admittedly, the facts are identical to the facts in the case of Sanghvi & Doshi Enterprise and accordingly, following our order above, it is held that the assessee is a builder and developer entitled to deduction under section 80-IB(10).

36. The only other dispute relates to the inclusion of private terrace in the built-up area. It is directed that the flats with exclusive terrace rights be measured again and then our directions in paragraphs 25 and 26 be followed.

37. In the result, the appeal of the assessee is partly allowed for statistical purposes.

38. Summarizing the result of this order, all the five appeals in respect of the three assessees are partly allowed for statistical purposes.

George Mathan, Judicial Member. - I have perused the order of my learned brother, Hon'ble Vice President and I am unable to convince myself to agree with all the findings as arrived at by him. Consequently, I hereby pass my order on the issues in the appeal wherein the issues of specific difference is also brought out .

40. The facts as recorded by my learned brother, Hon'ble Vice President are accepted as correct and adopted.

41. Indisputably the issues in the appeal revolve around 5 issues being,

A perusal of section 80-IB(10)(b) of the Income-tax Act, 1961 provides that the project is to be on the size of a plot of land which has a minimum area of one acre. One should remember here that the wordings are that "the project is on the size of the plot of land". The wordings are not that the undertaking developing and building the housing project should be owner of a plot of land having a size of minimum area of one acre. Thus as long as the land on which the project is completed is having a minimum area of one acre the undertaking developing and building such housing projects on such lands would be entitled to the deduction under section 80-IB(10) subject to the other conditions being fulfilled. In the present case the land is owned by one person and the assessee has undertaken the development and building of the housing project on the said land. Indisputably, the project is on a land exceeding one acre. Even assuming that the undivided interest in the land has been sold by the land owners to the various purchasers of the flats, still the plot of land on which the housing project is being developed and built by the assessee remains more than one acre and thus complies with the requirements of section 80-IB(10)(b) of the Act. Thus there is no violation in respect of the provisions of section 80-IB(10)(b) of the Act. Therefore, the issue No. (iii) is to be held in favour of the assessee.

42. A perusal of the terms of the contract shows that the assessee herein is basically doing the business of developing land and building flats which are nothing but housing projects. For the purpose of avoiding service tax the assessee, it is true, has entered into agreements with the individual purchasers of the flats undertaking to do the construction of their flats on behalf of them. These are but just jugglery of wordings in the contract. The actual fact remains that the assessee is doing the business of developing and building housing projects. Just because the plan sanction, plan approval etc. have been taken in the name of the land owner it would not deny the assessee the benefit of being treated as an undertaking developing and building the housing projects insofar as it is the assessee, through the power of attorney specifically taken from the land owner, that the plans have been drawn, approval obtained, sanction taken and the building constructed. Thus it would have to be held as an undertaking which has done the business of developing and building housing projects on the said land measuring minimum of one acre. Therefore the issue that the assessee is liable to be held as an undertaking which has done the business of developing and building housing projects would have to be held in favour of the assessee. Consequently, issue No. (i) is decided in favour of the assessee.

43. Coming to the issue as to whether the private terrace is to be included in the computation of built up area, it is noticed that the term "built up area" has been defined in section 80-IB(14)(a) to include the projections and the balconies. Thus the private terrace is nothing but the projection of the flat. It can also be termed as an open balcony. The learned authorised representative has specifically agreed that the access to the private terrace is only through the specified flat. A perusal of the agreement in respect of the flats which have the private terrace clearly shows that the private terrace is for the exclusive use of the purchaser. Once the private terrace is for the exclusive use of the purchaser of the flat then, obviously, the said private terrace does not fall within the common areas shared with the other residential units and consequently would have to be included in the measurement for arriving at the " built up area". The terrace talked about here is not the roof top terrace. It is the terrace, the access to which is through the flat of the purchaser and which is at the floor level and is the terrace of the immediately lower flat. The regular terrace is considered as part of the common area. The terrace that is sold and that is attached to the flat and which is having exclusive access is separate from the regular terrace. Section 80-IA(14)(a ) uses the words "inner measurements of the residential unit at the floor level". Therefore if the terrace is part of the inner measurement at the floor level, then it is to be included in the computation of "built up area". The assessee has also not placed before us the floor plan of the flat having the private terrace to show that the private terrace is in fact not part of the projection to the flat or that it is not at the floor level and that there is any method by which such private terrace can be accessed, without hindrance, by the other flat owners in any way other than through the flat with which the private terrace is attached and sold. Consequently, the issue No. (iv) as to whether the private terrace is to be considered as part of the built up area of the flat for computing the built up area of 1500 s.ft. is held against the assessee holding that the private terrace is to be considered as part of the built up area of the flat for computing the built up area of 1500 s.ft.

44. In respect of the issue of the completion certificate it is noticed that the assessee has completed the building and has made the application for the completion certificate on 13-3-2006. Though initially the CMDA had not granted the completion certificate, subsequently after the direction from the Hon'ble Madras High Court the CMDA has given the completion certificate on 13-6-2008 and the compliance certificate has also been issued by the Corporation of Chennai in December, 2007. Here one should remember that when sanction is given normally the sanction would contain a date. In the present case the certificate issued is a completion certificate that is a certificate accepting the claim of the assessee that the project has been completed, i.e., the certificate is issued on an application given by the assessee. The assessee can give an application for completion certificate only when the completion of the project is done. Thus the grant of a completion certificate after verification by the competent authority even on a subsequent date would revert back to the date on which the application is made. Thus the completion certificate having been issued by the CMDA on 13-6-2008 would in fact be a certificate accepting the claim of the assessee that the project has been completed as made in its application on 13-3-2006. Thus I am of the view that the grant of this completion certificate reverts back to the date of the application for certificate as the completion certificate has been applied for before the due date and the completion certificate having been issued by the competent authority without any qualifications, the project should be deemed to have been completed as mentioned in the application, i.e., before the due date and consequently the assessee should be held to have complied with the provisions of section 80-IB(10)(a)( ii) of the Act. Therefore, in regard to the issue as to whether the completion certificate which has been obtained after the due date but for which the application has been given before the due date should be considered as due compliance, I am in agreement with my learned brother. Accordingly, the issue No. (ii) as to whether the completion certificate which has been obtained after the due date but for which the application had been given before the due date should be considered as due compliance is held in favour of the assessee.

45. Here I may specifically mention that in regard to issue No. (i) as to whether the assessee is a contractor, builder or developer, I agree with the finding as given by my learned brother.

46. In regard to the issue as to whether the undertaking, developing and building the housing project should be the owner of the size of a plot of land having the minimum area of one acre, even though my learned brother has not specifically given any finding on the same but he has touched upon the issue when deciding the issue No. (i ) as to whether the assessee is a contractor, builder or developer.

47. In regard to the issue as to whether the private terrace is to be considered as part of the built up area of the flat for computing the built up area of 1500 s.ft., I am in agreement with my learned brother.

48. There is an issue in regard to two of the flats being Flat Nos. 501 and 502 having been combined by the purchaser after the purchase, for which certificates have also been issued by the purchasers themselves which clearly show that the flats have been combined by the purchasers themselves. The combination of the flats have not been done by the assessee and the assessee has sold only two flats separately and the combining of the flats by the purchasers after the purchase cannot be held to the detriment of the assessee. On this ground also I am in agreement with the finding of my learned brother.

49. My learned brother has also directed that in regard to the flats which are having the private terrace as also the objection of the Assessing Officer that certain flats in the project measure more than 1500 s.ft., the issue has been restored to the file of the Assessing Officer with the direction that the said flats which are alleged to be more than 1500 s.ft. area be measured again and the departmental valuer as well as the assessee's valuer both should remain present and the assessee is to extend its fullest co-operation. To this extent of re-measuring the flats by restoration of the issue before the Assessing Officer I am in full agreement with my learned brother.

50. In regard to the issue as to whether the built up area if it exceeds 1500 s.ft. in respect of any flats, the assessee would be entitled to the deduction under section 80-IB(10) on pro rata basis, my learned brother has relied upon the decision of the Hon'ble Special Bench of the Tribunal in the case of Brahma Associates v. Jt. CIT (OSD) [2009] 122 TTJ 976/ 119 ITD 255/ 30 SOT 155 (Pune) as also the decision of the Calcutta High Court in the case of CIT v. Bengal Ambuja Housing Development Ltd. [IT Appeal No. 458 (Cal.) of 2006, dated 5-1-2007] wherein the Hon'ble High Court had considered the decision of the Calcutta Bench of this Tribunal in the same case in CIT v. Ambuja Housing Development Ltd. [IT Appeal Nos. 1595 (Kol.) 2005 and 1735 (Kol.) of 2005, dated 24-3-2006] as also the decision of the Gujarat High Court in the case of Nirma Industries Ltd. v. Deputy Commissioner Of Income-Tax [2006] 283 ITR 402 / 155 Taxman 330 . In effect, my learned brother has held that if the violations in respect of the built up area of 1500 s.ft. per flat exceeds the limit of 10 per cent of the total built up area of the project, then the assessee would lose the deduction on the entire project. It is these portions of the order which I am unable to subscribe to.

51. A perusal of the paper book as filed by the assessee shows flat No. 1501 to have 1308 s.ft. but as per the sale agreement and the letter of the purchaser the area is 1230 s.ft. Similarly, flat No. 502 has been shown to have an area of 1285 s.ft. as per page 19 of the paper book of the assessee. But as per the letter of the purchaser and the sale agreement the area is 1157 s.ft. Similarly, flat No. 402 is mentioned as 1495 s.ft. but the assessee has claimed the same to be 1397 s.ft. in the letter to the Assessing Officer which finds mentioned in page 6 of the order of the CIT(A). Similarly, Flat No. 501 in Block-I shows 1495 s.ft. in the letter at page 19 of the paper book and the claim of the assessee is 1397 s.ft. before the Assessing Officer. Similarly, Flat No. 1105 in Block-II has been mentioned to be 1333 s.ft. in the letter at page 19 of the paper book and this flat is said to include open terrace whereas the sale agreement shows the area of the flat to be 1210 s.ft. and open terrace of 700 s.ft. Thus what is evident is that as per the agreement the assessee is showing a specified area as mentioned in the agreement but as per the actuals the area is far higher. This far higher area has been shown by the assessee itself as per the measurements made by the assessee's registered valuer. Therefore it does not lie in the mouth of the assessee to say that the higher measurement has been arrived at by the Revenue. It is to be kept in mind that as per section 80-IB(14)(a) of the Act the "built up area" is specified and defined. It is not the ordinary "plinth area" calculation nor is it the "built up" area as defined for local authority purposes. The definition of "built up area" for income-tax purposes is different from the definition under the local laws and the method of calculation is also different. For example, under the plinth area calculation, the balcony, washing area, etc. are taken at ½ the actual area and in respect of the parabolic balcony only 1/3, whereas for income-tax purposes the same would be treated as projections and balconies and its area in full taken. The Assessing Officer has also specifically made a statement that the plans submitted by the assessee further points out that the flats are vertically placed above one another on successive floors are of equal dimension which lead to the conclusion that the flats claimed to be of 1397 s.ft. of flat area are, in fact, above 1500 sq.ft. of built up area and based on the same there are many flats which are having a built up area exceeding 1500 s.ft. In the circumstances, the Assessing Officer challenged the built up area calculation of all the flats in the project.

52. Here it would also be worthwhile to mention that page No. 19 of the paper book which is the area calculation of various flats as done by the registered valuer of the assessee shows that the registered valuer has adopted "plinth area" method. As mentioned in the earlier portion, the plinth area calculation would not be the same as the built up area calculation provided under the Income-tax Act. In any case, this issue of measurement of the flats in dispute has been restored to the file of the Assessing Officer for de novo measurement by the departmental valuer after granting the assessee adequate opportunity to co-operate in the proceedings.

53. One of the basic principles of judicial discipline is that a Division Bench cannot disregard the decision of another Division Bench of equal strength. If at all such a situation is to arise, what is required under judicial discipline is to refer the issue to a Special Bench or a Larger Bench. Similarly, a Division Bench is bound by the decision of the Larger Bench. A decision by a Division Bench contrary to the decision of a Larger Bench cannot have a binding force. This view of mine is supported by the decision of the co-ordinate Bench of this Tribunal in the case of Asstt .CIT v. MSS India (P) Ltd. [2009] 123 TTJ (Pune) 657/ 32 SOT 132 .

54. In the case of Brahma Associates (supra) in paras 113 and 114 the Hon'ble Special Bench has held as follows:

"113. The next question is whether or not the deduction under section 80-IB(10) is to be granted in respect of only of such profits as are attributable to the residential units.

114. There is not much of a dispute on this aspect also. Learned representatives agree that there are no enabling provisions so far as allocation of profits into profits relatable to residential units and commercial units are concerned. We have noted that section 80-IB(10) categorically refers to the "profits derived in the previous year, relevant to any assessment year, from such housing project". What is deductible is 'profit of the housing project', and not the profit attributable to the residential units". Once, therefore, we hold that the project in question is a housing project, entire profits of the housing project are deductible under section 80-IB(10). The question of proportionate deduction is, therefore, not at all relevant in this context."

In the said decision, the Hon'ble Special Bench has not given a finding that pro rata deduction in respect of the flats which are having an area of 1500 s.ft. specified in section 80-IB(10)(c) can be given. In fact, an in-depth reading of the said decision shows to the contrary.

55. The provisions of section 80-IB(10) do not recognize a pro rata deduction. It is not as if the Legislature did not recognize pro rata deduction. When the Legislature desired to give such pro rata deduction, it specifically provided for it. For e.g., sections 54, 54(2), 54B(2), 80HHC etc. Further a perusal of section 80-IB(10) shows that the word used at the end of sub-clause (c) is "and" and not "or" nor is it just a coma. The term "and" means that all the conditions in section 80-IB(10) must be complied with individually and cumulatively. Violation of any one of the sub-clauses of section 80-IB(10) as are available for the relevant assessment years leads to the loss of the eligibility of deduction under section 80-IB(10) in toto. The wordings of section 80-IB(10) of the Income-tax Act, 1961 are "in the case of an undertaking developing and building housing projects". It is not "undertaking developing and building houses or flats". It is the project as a whole that has to be considered. This view draws support from the decision of the Hon'ble Special Bench in the case of Brahma Associates ( supra). The floor of one flat is the roof of another. The outer walls of two flats would be common.

56. The Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. v. Commissioner Of Income-Tax. [1992] 196 ITR 188/ 62 Taxman 480 has categorically held that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it.

57. The Hon'ble Supreme Court in the case of Federation of Andhra Pradesh Chambers of Commerce & Industry v. State of Andhra Pradesh [2001] 247 ITR 36/ 115 Taxman 143 riterated the basic principle that 'it is trite law that a taxing statute has to be strictly construed and nothing can be read into it. …………….In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can look fairly at the language used'. The Hon'ble Supreme Court further went on to hold that 'the courts in interpreting a taxing statute will not be justified in adding words thereto so as to make out some presumed object of the Legislature……….. If the Legislature has failed to clarify its meaning by the use of appropriate language, the benefit thereof must go to the taxpayer. It is settled law that in case of doubt, that interpretation of a taxing statute which is beneficial to the taxpayer must be adopted.'

58. A reading of section 80-IB(10) shows that the said provision is unambiguous. The Legislature clearly did not want to grant exemption to a housing project wherein the "built up area" of a residential unit exceeded the area specified in section 80-IB(10)(c). The wordings of section 80-IB(10) are not the deduction …..100 per cent of the profits derived in the previous year relevant to any assessment year from such housing projects in respect of residential units having a maximum built up area of 1500 s.ft. The wordings used are "the amount of deduction………shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing projects if, - [Emphasis supplied]

(c)the residential unit has a maximum built-up area of …………."

The word "if" denotes the intention in its clarity of the Legislature.

59. Coming to the issue of the granting of the deduction only if the built up area of the flats measuring more than 1500 s.ft. does not exceed 10 per cent of the total built up area, reliance has been placed on the decision of the Hon'ble Special Bench of the Tribunal in the case of Brahma Associates ( supra). I have already mentioned earlier that an in-depth reading of the decision of the Special Bench in the case of Brahma Associates (supra) shows that the Hon'ble Special Bench has not given any approval in regard to the pro rata deduction in such situation. Further why 10 per cent? The decision of the Calcutta Bench of this Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra) which has approved pro rata deduction and the appeal by the revenue from which has been dismissed by the Hon'ble Calcutta High Court holding that no substantial question of law arises, shows that in that case the assessee therein had put up 261 residential units in the housing project and out of which only 150 units were having the individual built up area of less than 1500 s.ft., i.e., only 57 per cent of the housing project therein complied with the conditions in section 80-IB(10) and 43 per cent failed. The said decision itself would be contrary to the decision of the Hon'ble Special Bench in the case of Brahma Associates (supra), wherein the Hon'ble Special Bench has said categorically that it is the housing project which is to be considered and not the individual units. In any case, the Hon'ble Calcutta High Court having dismissed the appeal filed by the revenue against the said decision of the Calcutta Bench of the Tribunal by holding that no substantial question of law arose should not be the 'Lakshman Rekha" be drawn at 47 per cent and not 10 per cent. Would this not lead to doing violence to the provisions of section 80-IB(10) to the extent of frustrating the said provision? When the wordings of the provisions of section 80-IB(10) are clear and ambiguous and the Hon'ble Supreme Court has also laid down the principles in regard to the interpretation of the taxing statute, as already referred to supra in the case of Federation of Andhra Pradesh Chambers of Commerce and Industry (supra) as also in the case of Bajaj Tempo Ltd. (supra) an appellate authority should not, cannot, must not and shall not tinker with the provisions of the Act in such a manner as to cause violations to the provisions of the statute. Had the assessee constructed two different blocks and had maintained separate books of account and one of the blocks did not comply with the provisions of section 80-IB(10) and one did, then the deduction in respect of the block which complied with the provisions of section 80-IB(10) could be granted as has been held by the Mumbai Bench of this Tribunal in the case of Saroj Sales Organization v. ITO [2008] 115 TTJ (Mum.) 485 . However, this is not the case here.

60. When the assessee made its plan for construction of the housing projects, the assessee very well knew that the housing project included flats which were having areas exceeding 1500 s.ft. This is evident from the clause 51 of the sale agreements entered into by the assessee with the purchasers of the flats wherein the assessee has recognized that the buildings would have pent houses having areas in excess of 2000 s.ft. Thus knowing fully well that the housing project of the assessee did contain flats exceeding the prescribed maximum built up area provided under section 80-IB(10), the assessee still decided to take its chance in claiming the deduction under section 80-IB(10). The assessee also very well knew this position when it had its flats measured by its registered valuer and obtained the certificate on 5-12-2009 that some of its flats did exceed the 1500 s.ft. limit. Interestingly, the registered valuer of the assessee instead of taking the "built up area" as specified in the provisions of section 80-IB(14) decided to talk of only the "plinth area" and that too by specifically excluding the exclusive open terrace.

61. In such a situation can it be said that the decision of the Calcutta Bench of this Tribunal as also the decision of the Hon'ble Calcutta High Court rejecting the revenue's appeal holding that no substantial question of law would have a binding precedence? The Hon'ble Gujarat High Court in the case of Nirma Industries Ltd. (supra) has held 'Yes'.

62. However, the co-ordinate Bench of this Tribunal at Chennai itself has in the case of Commissioner Of Income-Tax v. Vikas Promoters P. Ltd. [2010] 126 ITD 263 answered the identical question in respect of the issue as to whether the deduction under section 80-IB(10) was available even if some of the flats in the housing project exceeded the maximum specified area in section 80-IB(10)(c). The co-ordinate Bench has held that the restriction is applicable on the entire project. If some of the residential units of the project comprised area exceeding the prescribed limit, the benefit as per the language of the section cannot be extended to the project. In interpreting the provisions, the co-ordinate Bench had placed reliance on the decision of the Hon'ble Supreme Court in the case of Padmasundara Rao (decd.) v. State of Tamil Nadu [2002] 255 ITR 147 as also the decision of the Hon'ble Supreme Court in the case of Britannia Industries Ltd. v. CIT [2005] 278 ITR 546/ 148 Taxman 468 . This order of the co-ordinate Bench of the Tribunal was the subject-matter of a miscellaneous petition in MP No. 379/Mds./2009, wherein the same counsel, as in the present case, had represented. It was claimed that an error had crept in the order inasmuch as the Tribunal had not considered the decision of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra). The Miscellaneous Petition had been dismissed vide order dt. 30-1-2009. Against this order, the assessee had filed a writ petition before the Hon'ble High Court of Madras in Visvas Promoters (P.) Ltd. v. ITAT [2010] 323 ITR 114 /[2009] 185 Taxman 145 wherein the Hon'ble jurisdictional High Court had categorically held that a decision of the High Court of a different jurisdiction is not binding on the Tribunal which is not under its jurisdiction and the rectification sought for on that basis under section 254(2) was not valid. In the said decision the Hon'ble jurisdictional High Court had also laid down the principles of judicial discipline wherein it had also been held that where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions. The Hon'ble jurisdictional High Court in the said decision had also considered the issue of deduction under section 80-IB(10) though no specific finding had been given in regard to the finding of the Tribunal in the appeal.

63. In the circumstances, with utmost obedience to the decision of the Hon'ble jurisdictional High Court in the case of Viswas Promoters (P.) Ltd. (supra), as it is noticed that the decision of the co-ordinate Bench of this Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) is subsequent to the decision of the Calcutta Bench of this Tribunal in the case of Bengal Ambuja Housing Developments Ltd. (supra) which is passed on 24-3-2006 and as it is noticed that the co-ordinate Bench of this Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) has considered all the issues and has arrived at its decision after full consideration of the principles as considered in the case of Bengal Ambuja Housing Development Ltd. (supra) as also on account of the fact that the decision of the Calcutta Bench of this Tribunal does not reflect the correct position of law, relying upon the decision of the Hon'ble jurisdictional High Court in the case of Income Tax v. Hi Tech Arai Limited [2010] 321 ITR 477 (Mad.) I follow the decision of the co-ordinate Bench of this Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) as also the decision of the jurisdictional High Court in the case of Viswas Promoters (P.) Ltd. (supra) and hold that if there is any violation in respect of any of the conditions specified in section 80-IB(10) of the Income-tax Act, 1961 in respect of any of the residential units in the housing project on which the claim of deduction under section 80-IB(10) has been made, the assessee shall be disentitled to the deduction under section 80-IB(10) in respect of the total project. In the circumstances, the issue No. (v) being whether the built up area if it exceeds 1500 s.ft. the assessee would be entitled to the deduction under section 80-IB(10) of the Act on pro rata basis, is held against the assessee. In the circumstances I am of the view that the Income-tax Act, 1961 does not recognize a Lakshman Rekha being drawn by an appellate authority. Further I am of the view that even if one of the flats in the housing project violates any of the conditions as specified in section 80-IB(10) of the Income-tax Act, 1961, as is applicable for the relevant assessment year, the assessees shall not be entitled to any deduction under section 80-IB(10) in respect of such housing projects in which there has been such violation.

64. In result, all the appeals of the assessees are partly allowed for statistical purposes.

THIRD MEMBER ORDER

Dr. O.K. Narayanan, Vice-President As a Third Member. - This is a bunch of five appeals. The appeals are filed by assessees, who are three in numbers. The relevant assessment years are 2005-06 and 2006-07.

2. All the three assessees are firms engaged in construction business. The assessee firms, in addition to their traditional contract business, also ventured into development of building projects. The assessees having engaged in the construction of such projects of residential buildings, claimed deduction provided under section 80-IB(10) of the Income-tax Act, 1961. The assessees have accounted income from the projects for the impugned assessment years computing on the basis of project completion method.

3. But the claim of deduction made by the assessees under section 80-IB(10) has been denied by the assessing authority and later confirmed by the Commissioner of Income-tax(Appeals). The claim has been denied on various grounds, such as:

4. In the light of the above reasons stated by the assessing authority to deny the claim of deduction made by the assessees, which has been confirmed in first appeals, the assessees have raised six issues in the second appeals filed before the Tribunal. These six issues reflected in various grounds raised in these appeals may be short listed as below :--

5. These issues were considered by the Regular Bench of the Tribunal in the hearing concluded on 9-7-2010. The Bench was constituted of the learned Vice-President and the learned Judicial Member. The learned Vice-President authored the order on 9-9-2010. The learned Judicial Member passed a separate order on 15-9-2010, because of difference of opinion with the learned Vice-President on certain issues.

6. The dissent was not on all the points of decision arrived at by the learned Vice-President. On the first issue as to whether the assessees are builders/developers entitled for deduction under section 80-IB(10), the Bench agreed that the assessees are builders and developers as construed in section 80-IB(10) and therefore entitled for deduction under that section. The issue whether two flats in a project when combined together could be eligible for deduction, even if the combined extent of the built up area exceeded 1500 sft. was also decided by the Bench unanimously by holding that deduction should not be denied on the ground that two flats were combined by the purchasers of the flats. The Bench held that this is because the flats were purchased by the buyers as single units not exceeding a built up area of 1500 sft. each. The flats were combined only after the purchase of those flats and after taking possession of them. In such cases the flats concerned are to be treated as constructed and sold as independent flats with built up area not exceeding 1500 sft., each. Regarding the question of project completion certificates, the Bench again unanimously held that even though the certificates are dated beyond 31-3-2008, inspections of the properties were carried out by the concerned agencies well before 31-3-2008 and the certificates were issued on the basis of such inspections and therefore the certificates relate back to the dates on which the applications for the certificates were made by the assessees.

7. The next question as to when the built up area of certain flats measured more than 1500 sft., whether they are entitled for deduction has been restored by the Bench to the files of the Assessing Officer with a direction to measure the flats in the presence of the departmental valuation officer as well as the registered valuers appointed by the assessees, if any. There was no dissent on this issue as well.

8. All the above four issues have been decided by the Bench in favour of the assessees without any dissent.

9. The fifth issue as to whether the private terrace area should also be included in the built up area of the flat for the purpose of determining the limit of 1500 sft. has been unanimously decided by the Bench against the assessee by holding that the area of private terrace should be included in the built up area of the flat.

10. As far as the sixth issue as to whether deduction should be allowed even though some units exceeded the built up area of 1500 sft., the Bench could not arrive at an unanimous decision. The learned Vice-President and the learned Judicial Member have come to different views on the issue. The Hon'ble Vice-President held that deduction should be allowed in the case of flats having built up area not exceeding 1500 sft., even though some of the flats are exceeding 1500 sft. He held that deduction should be denied in the case of flats having built up area in excess of 1500 sft. The learned Vice-President also held that the assessees are to be allowed deduction under section 80-IB(10) in respect of flats satisfying all conditions, only if the total built up area of all the flats measuring more than 1500 sft. does not exceed 10 per cent of the total built up area of the project.

11. The learned Judicial Member on the other hand held that even if one of the flats in the project violates any specified condition, the assessees are not entitled for the deduction. The learned Judicial Member held that deduction under section 80-IB(10) cannot be allowed on a pro rata basis. The learned Judicial Member also expressed his dissenting view on the ten per cent cap suggested by the learned Vice-President.

12. To sum up, the learned Vice-President and the learned Judicial Member agreed on five issues raised before their Bench and unanimously adjudicated four issues in favour of the assessees and one issue against the assessees. The difference of opinion has in fact cropped up only in respect of a single issue as to whether deduction should be allowed to the assessees even if some of the units exceeded the built up area of 1500 sft.

13. The point of difference was referred to the Hon'ble President, Income-tax Appellate Tribunal through the question framed by the Bench under section 255(4) of the Income-tax Act, 1961, which reads as:

"In the facts and circumstances of the case, is the assessee entitled to deduction under section 80-IB(10) of the Income-tax Act, 1961 if there is violation even in respect of a single residential unit in the project?"

14. The Hon'ble President of the Income-tax Appellate Tribunal nominated me as the Third Member through his honour's proceedings dated 22-2-2011 and it is how this matter has been placed before me.

15. The issue of granting deduction under section 80-IB(10) in respect of flats having built up area exceeding 1500 sft., has been considered by the Hon'ble Vice-President in paragraph 25 of his order. The said paragraph is reproduced below:

"25. The next objection of the Assessing Officer is that certain flats in the project measure more than 1500 sft. According to the ld. Counsel, as per the measurement taken by the registered valuer appointed by the assessee, the said flats measured less than 1500 sft. However, he had no objection if the matter was remitted for verification. Accordingly, we restore this issue to the file of the Assessing Officer with a direction that the flats which are allegedly more than 1500 sft. in area be measured again and the departmental valuer as well as the assessee's valuer, both should remain present. The assessee is directed to extend its fullest co-operation. If on measuring the flats, they are found to be more than 1500 sft., the Assessing Officer is then directed to allow deduction only in respect of the profits arising from the sale of those flats which measure less than 1500 sft. In other words, flats measuring more than 1500 sft. should be left out. At the same time, we make it clear that the deduction should be allowed only if the built up area of flats measuring more than 1500 sft. do not exceed 10 per cent of the total built up area."

16. In the above said paragraph two issues have been adjudicated by the learned Vice-President. The first point is the question of ascertaining whether certain flats are exceeding the prescribed built up area of 1500 sft. or not. The physical aspect of exceeding the built up area of 1500 sft. has been remitted back to the Assessing Officer for fresh verification. The second issue, which is relevant for the present, is the question whether in a case where flats are exceeding a built up area of 1500 sft. whether the deduction can be given or not. The learned Vice-President has stated that deduction should be given where the built up area is not more than 1500 sft.

17. In the last part of the said paragraph the learned Vice-President has also made it clear that the deduction should be allowed only if the built up area of flats measuring more than 1500 sft. does not exceed 10 per cent of the total built up area.

18. In short the findings of the learned Vice-President are as follows:

19. The learned Vice-President has explained the grounds of his decision in paragraphs 27, 28, 29 and 30 of his order. In paragraph 27 the learned Vice-President has relied on the decision of the Special Bench of the Pune Tribunal in the case of Brahma Associates ( supra), to support his view that proportionate deduction is permissible as section 80-IB(10) is a beneficial section and the overall limit of 10 per cent of the built up area is a fair restriction. In paragraph 29 the learned Vice-President has relied on the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra). In that case the High Court has confirmed the finding of the Kolkata Bench of the Tribunal that deduction under section 80-IB(10) is permissible on a pro rata basis. In fact the Calcutta High Court has dismissed the appeal filed by the revenue against the order of the Kolkata Bench of the Tribunal stating that no question of law arose out of the order passed by the Appellate Tribunal. The learned Vice-President has relied on the judgment of the Hon'ble Gujarat High Court in the case of Nirma Industries Ltd. (supra), wherein it has been held that in a case where the High Court comes to the conclusion that no substantial question of law arises on a particular issue, it could not be stated that when the appeal is dismissed by the High Court, the subject-matter of the controversy between the parties has not been dealt with by the High Court. It is further stated that the effect of dismissal is that the order of the Tribunal on the issue which was agitated before the High Court stands merged in the order of the High Court and for all intents and purposes it is the decision of the High Court which is operating and which is capable of being given effect to. Relying on the above judgment of the Hon'ble Gujarat High Court, the learned Vice-President held that the decision of the Hon'ble High Court is squarely applicable to the issue considered by the Bench. He also relied on a Special Bench decision of the Delhi Tribunal in the case of Medicare Investments Ltd. (supra), where the Bench has adopted the view expressed in the judgment delivered by the Hon'ble Gujarat High Court in the case of Nirma Industries Ltd. (supra). In the light of the above judicial pronouncements, the learned Vice-President came to the conclusion that in the absence of any decision of the jurisdictional High Court to the contrary, not only the decision of the Special Bench of the Tribunal in the case of Brahma Associates (supra) but also the decision of the Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) are binding precedents and therefore it is to be held that even if the assessee has constructed residential houses of larger area, deduction under section 80-IB(10) will still be available but will be restricted to the profits arising from the sale of smaller residential units.

20. The learned Judicial Member's dissenting view discussed the statutory provisions of the deduction available under section 80-IB(10) in paragraph 55 of the order as under :--

"55.The provisions of section 80-IB(10) do not recognize a pro rata deduction. It is not as if the Legislature did not recognize pro rata deduction. When the Legislature desired to give such pro rata deduction, it specifically provided for it. For e.g., sections 54, 54(2), 54B(2), 80HHC etc. Further a perusal of section 80-IB(10) shows that the word used at the end of sub-clause(c) is "and" and not "or" nor is it just a coma. The term "and" means that all the conditions in section 80-IB(10) must be complied with individually and cumulatively. Violation of any one of the sub-clauses of section 80-IB(10) as are available for the relevant assessment years leads to the loss of the eligibility of deduction under section 80-IB(10) in toto. The wordings of section 80-IB(10) are "in the case of an undertaking developing and building housing projects". It is not "undertaking developing and building houses or flats". It is the project as a whole that has to be considered. This view draws support from the decision of the Hon'ble Special Bench in the case of Brahma Associates, cited supra. The floor of one flat is the roof of another. The outer walls of two flats would be common."

21. The learned Judicial Member has further elucidated the statutory provision of deduction as under in para 58 of his order :--

"58. A reading of section 80-IB(10) shows that the said provision is unambiguous. The Legislature clearly did not want to grant exemption to a housing project wherein the "built up area" of a residential unit exceeded the area specified in section 80-IB(10)(c). The wordings of section 80-IB(10) are not the deduction…….100 per cent of the profits derived in the previous year relevant to any assessment year from such housing projects in respect of residential units having a maximum built up area of 1500 sft. The wordings used are "the amount of deduction………shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing projects if,- [Emphasis supplied]

(c)the residential unit has a maximum built-up area of……

The word "if" denotes the intention in its clarity of the Legislature."

22. The learned Judicial Member thereafter examined the generally accepted rules of binding precedence arising out of the decisions of higher Courts, Special Benches and coordinate Benches. Relying on the decision of the Special Bench of the Tribunal in the case of MSS India (P.) Ltd. (supra), the learned Judicial Member held that in the absence of any other direct decision on the issue, the earlier decision of the coordinate Bench is binding on the subsequent Bench. He held that the decision of the Special Bench in the case of Brahma Associates (supra) relied upon by the learned Vice-President, in fact supports the proposition that deduction should not be given on a pro rata basis. He observed that the said decision in fact supports the arguments of the Revenue on the issue. The learned Judicial Member thereafter observed that a coordinate Bench of the Chennai Tribunal itself has decided the very same issue in the case of Viswas Promoters (P.) Ltd. (supra) and held that the restriction imposed by the statute is applicable on the entire project and therefore if some of the residential units of the project are exceeding the prescribed limit of built up area, the benefit of deduction under section 80-IB(10) cannot be granted to the entire project. He further observed that the above decision of the coordinate Bench of the Chennai Tribunal was the subject-matter of a miscellaneous petition in M.P. No. 379(Mds.)/2009, wherein it was claimed that an error had crept in the order inasmuch as the Tribunal had not considered the decision of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra). The miscellaneous petition has been dismissed vide order, dated 30-1-2009. He further observed that against the above order of the Tribunal, the assessee had filed a Writ Petition before the Madras High Court in Visvas Promoters (P.) Ltd. (supra), wherein the Hon'ble jurisdictional High Court has categorically held that the decision of the High Court of a different jurisdiction is not binding on the Tribunal, which is not under its jurisdiction and the rectification sought for on that basis under section 254(2) was not valid. In the said decision the Hon'ble jurisdictional High Court had also laid down the principles of judicial discipline wherein it had also been held that where there are conflicting decisions of courts of coordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions.

23. In the light of the above observations the learned Judicial Member, relying on the judgment of the Hon'ble Madras High Court in the case of Visvas Promoters (P.) Ltd. (supra) held that the decision of the coordinate Bench of the Chennai Tribunal in the case of Visvas Promoters (P.) Ltd. ( supra) is subsequent to the decision of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra) which was passed on 24-3-2006 and therefore as the co-ordinate Bench of the Chennai Tribunal in the case of Visvas Promoters (P.) Ltd. (supra) has considered all the earlier decisions and has arrived at its finding after full consideration of the principles as considered in the case of Bengal Ambuja Housing Development Ltd. (supra) the said decision applies to the present case. Again, relying on the judgment of the Hon'ble Madras High Court in the case of Hi-tech Arai Ltd. (supra) the learned Judicial Member followed the decision of the Chennai Bench of the Tribunal in the case of Visvas Promotors (P.) Ltd. (supra) and held that if there is any violation in respect of any of the conditions specified in section 80-IB(10) of the Income-tax Act, 1961 in respect of any of the residential units in the housing project on which the claim of deduction under section 80-IB(10) has been made, the assessee shall not be entitled to the deduction under section 80-IB(10) in respect of the total project. He held that the entire project should be denied the benefit of deduction available under section 80-IB(10) of the Act.

24. I heard both sides at length and considered the issue in detail.

25. The learned Vice-President and the learned Judicial Member have extensively discussed the grounds of their decisions before arriving at their respective conclusions. Both of them have discussed in detail the decisions governing the question of judicial precedence in the light of a number of judicial pronouncements.

26. As the Third Member in these appeals, I am not here to make any critical appraisal of their thought process and its reflections. That is not my domain as I am not competent to do so. That is the domain of constitutional courts. The duty cast on me is to examine the facts of the case in the light of the statutory provisions and the relevant judicial pronouncements and to agree with one of the views. Therefore I am confining myself to the skeleton task of zeroing down the view to which I may agree.

27. The observations of the Hon'ble Vice-President are as follows:-

28. On the other hand the learned Judicial Member has held that the Special Bench in the case of Brahma Associates (supra) has not given a finding that pro rata deduction in respect of the flats which are having area of not exceeding 1500 sft. specified in section 80-IB(10) can be given. Such a proposition is contrary to the findings of the said Special Bench of the Tribunal. The provisions of section 80-IB(10) do not recognize a pro rata deduction. Violation of any of the conditions in section 80-IB(10) would result in loss of eligibility of deduction under section 80-IB(10) as a whole. After the decision of the Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra), the coordinate Bench of this Tribunal in Viswas Promoters (P.) Ltd. (supra) has held that if some of the flats in the housing project exceeded the maximum specified area provided in section 80-IB(10) the benefit cannot be extended to the project and following the decision of the coordinate Bench it is necessary to hold that even if a single flat exceeded 1500 sft. in its built up area, deduction will not be available to the entire project.

29. The Chennai Bench-B of the Tribunal in the case of Viswas Promoters (P.) Ltd., (supra) has held that approval is accorded to the entire project and blocks of residential units are parts of a project and not project by itself and hence a block of residential units cannot be construed to be a separate project and therefore the assessee is not entitled for the deduction under section 80-IB(10). In that case the assessee had completed four housing projects out of which in two projects the assessee constructed flats exceeding 1500 sft. and also flats of less than 1500 sft. in area and claimed deduction under section 80-IB(10) in respect of flats which have area measuring less than 1500 sft. The above order was passed by the Chennai Bench on 13th October, 2008.

30. The Calcutta C-Bench of the Tribunal has considered the very same issue in the case of Bengal Ambuja Housing Development Ltd. (supra) in their order dated 24-3-2006.

31. The above order of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra) was taken in appeal before the Hon'ble Calcutta High Court by the Revenue. The appeal filed by the Revenue under section 260A in IA No. 458/2006 has been dismissed by the Hon'ble High Court through judgment of their Lordships dated 5-1-2007. The copies of the judgment were made available on 28-3-2007. The court dismissed the appeal filed by the Revenue on the ground that no substantial question of law was involved in the matter.

32. Likewise the decision of the Chennai Bench of the Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) was also taken before the Hon'ble Madras High Court in writ petition, in another context. The assessee in that case after the appeal filed by the Revenue was allowed by the Tribunal, had filed a Miscellaneous Petition in M.P. No. 379(Mds.)/2008, which was dismissed by the Tribunal through its order dated 13-1-2009. The Writ Petition was filed against the said order of the Tribunal, dismissing the Miscellaneous Petition. The Madras High Court while dismissing the writ petition had observed that the Tribunal has explicitly taken note of the substance of the issue decided by the Calcutta Tribunal in Bengal Ambuja Housing Development Ltd. (supra) and therefore on the allegation that it was not considered, no mistake could be noticed in the order of the Tribunal. In the course of disposal of the said writ petition, the Hon'ble High Court also discussed certain propositions relating to the binding nature of decisions of High Courts. While laying down those propositions, the High Court also held that where there are conflicting decisions of court of coordinate jurisdiction, the later decision is to be preferred being reached after full consideration of the earlier decisions. The court also observed that the decision of one High Court is neither binding precedent for another High Court nor for Courts or Tribunals outside its own territorial jurisdiction.

33. It is on the basis of the above observations made by the Hon'ble Madras High Court in the writ petition filed by Visvas Promoters (P.) Ltd.'s case (supra) that the learned Judicial Member has decided to rely on the decision of the Chennai coordinate Bench delivered in the case of Viswas Promoters (P.) Ltd. (supra).

34. On the other hand it is on the basis of the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) that the learned Vice-President has held in favour of the assessee that pro rata deduction is available under section 80-IB(10).

35. Incidentally the present Third Member was a party to the order of the Tribunal, B-Bench, Chennai in the case of Viswas Promoters (P.) Ltd. (supra). In that case the Commissioner of Income-tax (Appeals) had accepted the contention of the assessee on the basis of the decision of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra). The said order of the Commissioner (Appeals) was reversed by the Tribunal and held that pro rata deduction is not available under section 80-IB(10). But as a matter of fact it is to be brought on record that the Tribunal while disposing of that appeal in the case of Viswas Promoters (P.) Ltd. (supra) has not discussed anything about either the order of the Calcutta Bench of the Tribunal in the case of Bengal Ambuja Housing Development Ltd. (supra) dated 24-3-2006 or the decision of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra). Even though the Tribunal has considered the matter in detail in the light of the principles of statutory interpretation discussed by the Hon'ble Supreme Court in the case of Padmasundara Rao(decd.) (supra), the Tribunal has not considered or discussed the decision of the Calcutta Tribunal or the Hon'ble Calcutta High Court which are directly on the point. It was only while disposing of the Miscellaneous Petition filed by the assessee that the Tribunal has made a mention about the decision of the Calcutta Tribunal to make it clear that the said decision was also considered by the Tribunal while passing the earlier order. It may be because of this subsequent observation that the Hon'ble Madras High Court has observed in its order dismissing the writ petition filed by the assessee that the Tribunal has explicitly taken note of the substance of the issue decided by the Calcutta Tribunal in Bengal Ambuja Housing Development Ltd. (supra).

36. But as a matter of fact it is to be seen from the order of the Chennai Bench of the Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) that the Tribunal has not effectively considered the order of the Calcutta Tribunal and the judgment of the Hon'ble Calcutta High Court. Therefore the argument that all the earlier decisions on the subject were considered by the Chennai Bench of the Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) is not a correct statement of fact.

37. It is also not correct to argue that the said order of the Tribunal Chennai Bench in the case of Viswas Promoters (P.) Ltd. (supra) has been confirmed by the Hon'ble Madras High Court. The Hon'ble Madras High Court in its writ order has dealt with only the writ application filed by the assessee against the order of the Tribunal dismissing the Miscellaneous Petition filed by the assessee. The Hon'ble Court has specifically mentioned that the writ petition was misconceived and therefore liable to be dismissed. The ratio laid down by the Hon'ble High Court in the said case was that writ petition against order under section 254(2) cannot be rejected on the ground of availability of alternate remedy. The Hon'ble Madras High Court has not considered anything concerning the merit of the issue that whether in the circumstances stated above the assessee could claim deduction under section 80-IB(10) or not. The Hon'ble Court clarified that it was still open for the assessee to appeal against the finding of the Tribunal on merits of the issue in appeal before the Hon'ble High Court permitted under section 260A. Therefore it is premature to hold that the order of the Tribunal, Chennai Bench in the case of Viswas Promoters (P.) Ltd. (supra) has been upheld by the Hon'ble jurisdictional High Court.

38. Therefore I find that the premises relied on by the learned Judicial Member in the light of the order of the coordinate Bench and the judgment of the jurisdictional High Court are not in the correct perspective.

39. As already stated, the Tribunal has not considered either the order of the Calcutta Tribunal or the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) even though the said order and the judgment were delivered prior to the order of the Chennai Bench of the Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) Therefore it is to be seen that the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) has not been considered by the Chennai Bench while passing its order in the case of Viswas Promoters (P.) Ltd. (supra).

40. Now the question is, in the above circumstances where there is no direct decision of the jurisdictional High Court on the subject and where there is already an existing decision of the Calcutta High Court on the subject, which decision is to be followed to decide the issue at hand, whether the decision of the Chennai co-ordinate Bench or the judgment of the Hon'ble Calcutta High Court?

41. Now, when coming to the finding that the issue has been adjudicated by the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) it is also necessary to examine the fact of dismissal of an appeal by the High Court holding that no substantial question of law arises. The Delhi Bench of the Tribunal in the case of Medicare Investments Ltd. (supra) has considered this question in an elaborate manner in its order. Relying on the judgment of the Hon'ble Gujarat High Court in the case of Nirma Industries Ltd. (supra), the Hon'ble Special Bench held as follows:-

"The effect of dismissal of appeal by the High Court holding that no substantial question of law arises is that the order of the Tribunal on the issue which was agitated by the appellant before the High Court stands merged in the order of the High Court and for all intents and purposes, it is the decision of the High Court which is operative and which is capable of being given effect to."

42. The Hon'ble Special Bench held that where the jurisdictional High Court has dismissed the appeal against the order of the Tribunal holding that no substantial question of law arises, the said decision of the High Court is a decision on merits confirming the findings arrived at by the Tribunal and it is not possible to argue that the High Court has not considered the merits of the issue decided by the Tribunal. Where the High Court dismisses the appeal stating that no question of law arises from the order passed by the Tribunal it means that the Hon'ble High Court has considered the merits of the issue discussed and decided by the Tribunal in the light of the relevant law and the High Court is in agreement with the views of the Tribunal and it is not required to repeat all those issues again. What the High Court is stating in short is that the appeal is dismissed as no question of law arises. On this we cannot presume that a High Court has not considered the merits of the issue decided by the Tribunal. An appeal always raises question arising out of the merits of an issue. Whether the Hon'ble High Court discusses a case in very many words or dismisses the appeal shortly stating that no question of law arises, the judicial result is the same that the High Court has upheld the reasonings and findings given by the Tribunal in its order.

43. Therefore, in the light of the judgment of the Hon'ble Gujarat High Court in the case of Nirma Industries Ltd. (supra) and the order of the Hon'ble Special Bench of the Tribunal in the case of Medicare Investments Ltd. (supra), I find that the judgment of the Hon'ble Calcutta High Court rendered in the case of Bengal Ambuja Housing Dev. Ltd. (supra) is a judgment directly on the issue upholding the view of the Calcutta C-Bench of the Tribunal that a pro rata deduction is permissible under section 80-IB(10). As I have stated above, the judgment of the Hon'ble Madras High Court rendered in the case of Visvas Promoters (P.) Ltd. (supra) is not on the issue agitated in this case. The said judgment concerned only with the question that whether there is a mistake in the order of the Tribunal or not. The right of the assessee to file an appeal under section 260A before the Hon'ble Madras High Court still survives and till date the Hon'ble Madras High Court has not decided the issue on its merits. Therefore, the only judgment of a High Court available on the subject, is the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra).

44. Again, I may repeat that the question is whether I should follow the order of the coordinate Bench of the Tribunal in the case of Viswas Promoters (P.) Ltd. (supra) or the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Dev. Ltd. (supra).

45. The Hon'ble Bombay High Court in the case of CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589 has held that Income-tax Appellate Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question. The Hon'ble Bombay High Court again the case of Commissioner Of Income-Tax v. Thana Electricity Supply Ltd. [1994] 206 ITR 727 , has held that the decision of another High Court does have persuasive value on subordinate Courts and Tribunals outside its jurisdiction.

46. Further the Hon'ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 , has held that if in a case of taxing provision two interpretations are possible, the interpretation which favours the assessee must be adopted. The same view is reflected again in the decision of the Supreme Court in the case of CIT v. Kulu Valley Transport Co.(P.)Ltd. [1970] 77 ITR 518 .

47. Therefore, it is to be stated that the decision of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) alone is available directly on the subject-matter as the judgment of a constitutional Court. Two decisions, including the decision in the case of Viswas Promoters (P) Ltd. (supra) have been rendered by co-ordinate Benches of the Tribunal, Chennai against the assessee. But it is to be seen that a co-ordinate Bench of the very same Tribunal (Chennai Bench-A) has taken a view in favour of the assessee in the case of Arun Excello Foundations (P.) Ltd. v. Asstt. CIT [2007] 108 TTJ 71 /[2008] 166 Taxman 53 (Chennai (Mag.) in spite of the fact that contrary decisions of co-ordinate Benches were available. I do not wish to make it a point of controversy now.

48. I am only concerned of the binding effect of the judgment of the Hon'ble Calcutta High Court in the case of Bengal Ambuja Housing Development Ltd. (supra) In the light of the discussion made above, I am of the considered opinion that I should be lead by the judgment of the Hon'ble Calcutta High Court, which is a constitutional and a court of law. As there is no direct decision of the jurisdictional High Court still available on the subject, I find it my duty to follow the judgment of the Hon'ble Calcutta High Court. I do not think it as a good judicial behaviour to dwell upon the technicalities of jurisdiction and ignore the judgment of a competent constitutional Court. So long as there is no decision by my jurisdictional High Court, I am immediately bound by the judgment of any other High Court available to me, directly on the subject. Therefore, I hold that the controversy placed before me as a Third Member is covered by the judgment of the Hon'ble Calcutta High Court rendered in the case of Bengal Ambuja Housing Development Ltd. (supra). In the light of the findings arrived at above, I agree with the view taken by the Hon'ble Vice President, where he has held that the assessees are entitled for deduction under section 80-IB(10) in respect of flats having built up area not exceeding 1500 sft. and not entitled for deduction in respect of those flats having their built up area exceeding 1500 sft.

49. The learned Judicial Member has also expressed his dissenting view on the 10 per cent cap (Lakshman Rekha) proposed by the learned Vice President. The learned Vice-President has relied on the order of the Hon'ble Special Bench of the Tribunal in the case of Brahma Associates (supra) to arrive at a Lakshman Rekha of 10 per cent. In the appeal filed against the order of the Special Bench, the Hon'ble Bombay High Court in the case of CIT v. Brahma Associates [2011] 197 Taxman 459/ 9 taxmann.com 289 has held that it was not open to the Tribunal to fix such a limit. Therefore the basis of the finding of the learned Vice President on that issue does not hold good any more. Therefore on the issue of Lakshman Rekha, I agree with the learned Judicial Member that there is no need of any such stipulation.

50. In fact the question referred to the Third Member does not contain anything about the 10 per cent Lakshman Rekha. But I thought to refer that issue to avoid confusion /controversy that may surface before the regular Division Bench while disposing the impugned appeals in accordance with the majority view.

51. Now these files will be placed before the regular Bench for passing orders, to finally dispose the appeals.

ORDER GIVING EFFECT

1. In all these appeals there arose difference of opinion between Members of the Division Bench, hearing the appeals. Therefore, the matter was referred to Third Member. Hon'ble Vice President acting as Third Member has given his opinion on the matter referred to him.

2. Grounds raised by the assessees in these appeals were as follows:-

2. Hon'ble Vice President, sitting as Third Member, had succinctly, formulated the questions raised through these grounds on page 5 of his order, as under:-

3. Based on the decision of Hon'ble Vice President sitting as Third Member on the matters where there were difference of opinion, and on other points based on the unanimous view of the Division Bench, we hold that -

4. There was one more issue on which there was a difference of opinion between the Members of the Division Bench, which though not specifically referred to the Hon'ble Vice President sitting as Third Member, was answered by him. This was regarding 10 per cent cap (Lakshman Rekha) for flats having built-up area exceeding 1500 sq. ft. Hon'ble Vice President has agreed with the view of Ld. Judicial Member that there was no need for any such stipulation of limit. Therefore, based on the majority view, we hold that there need not be any cap of 10 per cent for flats having built-up area exceeding 1500 sq. ft., with regard to a claim for deduction under section 80-IB(10) of the Act.

5. In the result, appeals of assessees are treated as partly allowed.