Tribunal grants deductions for built-up area and commercial space under section 80IB(10)

The Tribunal allowed the assessee's appeals, granting deductions under section 80IB(10) for issues related to built-up area and commercial area, while dismissing the revenue's appeal. It held that for projects commenced before 01.04.2005, the built-up area calculation should exclude terrace area, and the inclusion of commercial area does not disqualify a project if it began before the amendment date. The judgment emphasized that the 01.04.2005 amendments to section 80IB(10) were not retroactively applicable.

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Issues Involved:
1. Deduction under section 80IB(10) concerning built-up area exceeding the prescribed limit.
2. Deduction under section 80IB(10) concerning the inclusion of commercial area in the housing project.

Detailed Analysis:

1. Deduction under section 80IB(10) concerning built-up area exceeding the prescribed limit:

In ITA.No.1077/PN/2010, the primary issue was the deduction under section 80IB(10) amounting to Rs.2,49,21,620/- for the project Dwarakadeesh Residency. The Assessing Officer (A.O.) disallowed the deduction because the built-up area of Row House No.36 exceeded the prescribed limit of 1500 sq.ft., considering the terrace area of 108 sq.ft. The A.O. concluded that the entire project was ineligible for the deduction.

The Tribunal referred to the case of Brahma Builders, where it was established that the terrace area should not be included in the built-up area for projects commenced before 01.04.2005. The built-up area definition, as per section 80IB(14), was introduced with effect from 01.04.2005 and was not applicable retroactively. Therefore, for projects started before this date, the built-up area should be calculated according to the DC rules of the local municipal authority, which did not include the terrace area. Consequently, the Tribunal held that the built-up area of Row House No.36 was within the prescribed limit, and the assessee was entitled to the deduction under section 80IB(10).

2. Deduction under section 80IB(10) concerning the inclusion of commercial area in the housing project:

In ITA.No.1078/PN/2010, the second issue was the rejection of the assessee's claim for deduction under section 80IB(10) due to the inclusion of commercial area in the project. The A.O. and the CIT(A) disallowed the deduction, stating that the project included shops exceeding the permissible limit as per the amendment effective from 01.04.2005.

The Tribunal noted that the project commenced in F.Y. 2003-04, prior to the amendment. It referred to the Bombay High Court's decision in Brahma Builders, which held that the inclusion of commercial area does not disqualify a project as a housing project if it commenced before the amendment date. The Tribunal also cited decisions from ITAT in Opel Shelters Pvt. Ltd. and D.S. Kulkarni Developers, which supported the view that the amendment was not applicable to projects started before 01.04.2005. Thus, the Tribunal concluded that the assessee was entitled to the deduction under section 80IB(10) despite the inclusion of commercial area, as the project commenced before the amendment.

Conclusion:

The Tribunal allowed both appeals of the assessee, granting the deduction under section 80IB(10) for the built-up area and commercial area issues, while dismissing the revenue's appeal. The judgment emphasized that the amendments to section 80IB(10) effective from 01.04.2005 were not applicable to projects commenced before this date.

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