2015 (4) TMI 41 - AT - Income Tax

Tribunal Upholds CIT(A)'s Decision on Section 80IB(10) Deduction

The Income Tax Officer Versus M/s. Rane Associates

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow the deduction under section 80IB(10) of the Income Tax Act. The ... Deduction u/s.80IB(10) - whether the project 'Vanshaj Prestige' had commenced construction much before the amendment to section 80IB(14)(a) and therefore it is not possible for the assessee to comply with the definition of built up area? - whether CIT(Appeals) erred in holding that the assessee is eligible for deduction u/s.80IB(10) without appreciating that as per provisions of section 80IB(14)(a) built up area is to be calculated taking into account all the projections and balconies and as such the flats on the first floor of building B exceeded the built up area of 1500 sq.ft. making the assessee ineligible for deduction ? Held that:- Firstly, it is contented that the definition of the ‘built-up’ area contained in section 80IB(14)(a) of the Act was inserted by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005 and it is not applicable in the present case as assessee’s project was approved and commenced prior to 01.04.2005. We are in complete agreement with the aforesaid plea, which has also been accepted by the CIT(A). As decided D.S. Kulkarni Developers Ltd. Vs. ACIT [2015 (4) TMI 6 - ITAT PUNE] in The extract of Rule 15.4.2, has been placed in the Paper Book at page 36, and it reflects that a multi storied stilt flooring space constructed under a building is allowed to be used as a parking subject to height restrictions. In terms thereof, it is sought to be made out that the area of car parking is specifically excludible while calculating ' builtup area' as per the Development Control Rules and therefore, the Assessing Officer was wrong in considering such area for the purpose of computing 'built- up area' of the residential units. A bare perusal of the Development Control Rules, in our view, supports the assertions put forth by the assesses and therefore, the area of car parking is not to be includible for the purposes of computing 'built- up area' of residential units in the facts and circumstances of the present case. Decided in favour of assessee Inclusion of common terrace identified in the built-up area of the respective flats - Held that:- CIT(A) has given a factual finding that the agreements with flat owners do not indicate that the common terrace was a part of the flat agreement. It is also observed by the CIT(A) that the respective flat owners were not the owners of so called common terrace and the assessee also pointed out before him that even the Government Registered Valuer in his report nowhere stated that the common terrace area is exclusively used by the four flat owners referred above. Having regard to the aforesaid, in the absence of any controversion from the side of the Revenue, we find no reasons to approve the action of Assessing Officer in including the area styled as ‘additional common terrace’ as a part of the built-up area of the four residential units in question. - Decided in favour of assessee Issues Involved:1. Eligibility for deduction under section 80IB(10) of the Income Tax Act, 1961.2. Definition and applicability of the term 'built-up area' under section 80IB(14)(a) of the Act.3. Inclusion of terrace projections and common terrace in the built-up area.4. Validity of the Assessing Officer's reliance on the Government Registered Valuer's report.Detailed Analysis:1. Eligibility for Deduction under Section 80IB(10) of the Income Tax Act, 1961:The primary issue in the appeal was whether the assessee was eligible for a deduction under section 80IB(10) of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] had allowed the deduction of Rs. 4,35,03,664/- which the Assessing Officer (AO) had disallowed. The AO's disallowance was based on the built-up area of certain flats exceeding the prescribed limit of 1500 sq. ft., thus violating clause (c) of section 80IB(10).2. Definition and Applicability of the Term 'Built-up Area' under Section 80IB(14)(a) of the Act:The CIT(A) held that the definition of 'built-up area' in section 80IB(14)(a), which includes projections and balconies, was not applicable to the assessee's project as it was approved and commenced before 01.04.2005. This interpretation was supported by various Tribunal decisions, including the case of ITO Vs. Prime Properties and D.S. Kulkarni Developers Ltd. Vs. ACIT. The Tribunal affirmed this view, agreeing that the definition introduced by the Finance (No.2) Act, 2004, effective from 01.04.2005, could not retroactively apply to projects approved before this date.3. Inclusion of Terrace Projections and Common Terrace in the Built-up Area:The AO included terrace projections and common terrace areas in the built-up area calculation, which led to the exceeding of the 1500 sq. ft. limit. The assessee argued that these areas should not be included as the project was approved before the amendment. Additionally, the common terrace was not exclusively used by any flat owner and was not part of the flat agreements. The CIT(A) accepted this argument, noting that the common terrace was not exclusively used by the flat owners and was not included in the flat agreements. The Tribunal upheld this view, reinforcing that incidental use of common terrace by flat owners did not constitute exclusive ownership, thus it should not be included in the built-up area.4. Validity of the Assessing Officer's Reliance on the Government Registered Valuer's Report:The AO relied on a Government Registered Valuer's report, which indicated that the built-up area of four flats exceeded the prescribed limit. However, the CIT(A) found that the Valuer's report did not state that the common terrace was exclusively used by the flat owners. The Tribunal agreed with the CIT(A), noting that the Valuer's report did not provide sufficient grounds to include the common terrace in the built-up area calculation.Conclusion:The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to allow the deduction under section 80IB(10) of the Act. The Tribunal also dismissed the assessee's Cross Objection as infructuous, as it was merely in support of the CIT(A)'s order. The Tribunal's decision was based on the interpretation that the definition of 'built-up area' in section 80IB(14)(a) did not apply to projects approved before 01.04.2005 and that the common terrace should not be included in the built-up area calculation.