Court: Terrace/Balcony not counted for Section 80-IB(10) deduction. Commercial area limits clarified.

The court ruled that for projects approved before 01.04.2005, the built-up area should not include the terrace/balcony for Section 80-IB(10) deduction. The completion of the housing project within the stipulated period was found mandatory, and the inclusion of commercial establishments within the housing project was limited to 5% of the aggregate built-up area or 2000 sq. ft. The amendments to Section 80-IB(10) were held to be prospective, not retrospective. The Tribunal's judgments were partly allowed, remanding the matter for further consideration of compliance with Section 80-IB(10)(a) and eligibility for deduction.

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Issues Involved:
1. Built-up area calculation for Section 80-IB(10) deduction.
2. Completion of the housing project within the stipulated period.
3. Inclusion of commercial establishments within the housing project.
4. Applicability of amendments to Section 80-IB(10) retrospectively or prospectively.

Detailed Analysis:

Issue 1: Built-up Area Calculation for Section 80-IB(10) Deduction
Relevant Questions:
- Income Tax Appeal No. 9 of 2014: Questions (i) and (ii)
- Income Tax Appeal No. 16 of 2014: Question (ii)

Summary:
The court examined whether the "built-up area" should include the terrace/balcony for the purpose of Section 80-IB(10) deduction. The definition of "built-up area" was inserted w.e.f. 01.04.2005, which included the projections and balconies. However, for projects approved before this date, the court held that the definition is prospective and should not apply retroactively. The court cited various judgments, including *CIT Vs. Anriya Project Management Services (P.) Ltd.*, *CIT Vs. Brahma Associates*, and *CIT-19, Mumbai Vs. Sarkar Builders*, to support this view. Consequently, the court ruled that for projects approved before 01.04.2005, the built-up area should not include the terrace/balcony.

Conclusion:
Questions (i) and (ii) in Income Tax Appeal No. 9 of 2014 and Question (ii) in Income Tax Appeal No. 16 of 2014 were answered in favor of the Assessee.

Issue 2: Completion of the Housing Project within the Stipulated Period
Relevant Questions:
- Income Tax Appeal No. 9 of 2014: Question (iii)
- Income Tax Appeal No. 13 of 2017: Questions (iii), (iv), and (v)

Summary:
The court analyzed whether the Assessee complied with the requirement of completing the housing project within the specified period as per Section 80-IB(10)(a). The provision for completion was reintroduced w.e.f. 01.04.2005, and the court held that this requirement was not new but had been temporarily omitted between 01.04.2002 and 31.03.2005. The court cited the judgment in *The Commissioner of Income Tax, Bhopal Vs. M/s Global Reality*, which emphasized that the completion certificate from the local authority before the cut-off date is mandatory. The court concluded that the Assessee must comply with the completion requirement as per the amended provision.

Conclusion:
Question (iii) in Income Tax Appeal No. 9 of 2014 and Questions (iii), (iv), and (v) in Income Tax Appeal No. 13 of 2017 were answered in favor of Revenue.

Issue 3: Inclusion of Commercial Establishments within the Housing Project
Relevant Questions:
- Income Tax Appeal No. 9 of 2014: Question (iv)

Summary:
The court examined whether the built-up area of shops and commercial establishments should be included within the housing project for Section 80-IB(10) deduction. The condition was inserted w.e.f. 01.04.2005, limiting commercial establishments to 5% of the aggregate built-up area or 2000 sq. ft., whichever is less. The court referred to *CIT-19, Mumbai Vs. Sarkar Builders* and *CIT Vs. Veena Developers*, which held that the amendment is prospective and not applicable to projects approved before 01.04.2005.

Conclusion:
Question (iv) in Income Tax Appeal No. 9 of 2014 was answered in favor of the Assessee.

Issue 4: Applicability of Amendments to Section 80-IB(10) Retrospectively or Prospectively
Relevant Questions:
- Income Tax Appeal No. 13 of 2017: Questions (i), (ii), and (vi)
- Income Tax Appeal No. 16 of 2014: Questions (i) and (iii)

Summary:
The court considered whether the amendments to Section 80-IB(10) made w.e.f. 01.04.2005 should apply retrospectively or prospectively. The court held that the amendments are prospective and cannot be applied retroactively to projects approved before the amendment date. The court emphasized the principle of certainty in tax laws and the need to avoid absurd results, as discussed in *CIT-19, Mumbai Vs. Sarkar Builders* and *CIT Vs. Veena Developers*.

Conclusion:
Questions (i), (ii), and (vi) in Income Tax Appeal No. 13 of 2017 and Questions (i) and (iii) in Income Tax Appeal No. 16 of 2014 were left open for the Tribunal to decide on remand.

Final Judgment:
The appeals were partly allowed. The Tribunal's judgments were set aside to the extent questions were answered in favor of Revenue, and the matter was remanded to the Tribunal to consider the compliance of Section 80-IB(10)(a) by the Assessee and determine eligibility for deduction under Section 80-IB(10). Each party was to bear its own costs.

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