Assessee denied full deduction under Section 80IB(10) for exceeding unit size limit

The Tribunal held that the assessee did not qualify for a deduction under Section 80IB(10) for units exceeding the 1000 sq. ft. limit. However, it allowed pro-rata deductions for units within the permissible limit. The appeals of both the assessee and revenue were dismissed, affirming the CIT(A)'s decision. The issue of Section 147 was not adjudicated as it was not argued.

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Issues Involved:
1. Eligibility for deduction under Section 80IB(10) concerning the built-up area of residential units.
2. Pro-rata deduction under Section 80IB(10) for units complying with the permissible built-up area.
3. Definition and interpretation of "municipal limits" of the city of Mumbai.
4. Inclusion of terrace and flower bed areas in the built-up area calculation.

Detailed Analysis:

Issue 1: Eligibility for Deduction under Section 80IB(10) Concerning Built-Up Area
The main issue is the disallowance of deduction under Section 80IB(10) due to certain residential units exceeding the permissible built-up area of 1000 sq. ft. The assessee argued that the project is situated beyond 25 km from the municipal limits of the city of Mumbai, thus qualifying for a higher permissible built-up area of 1500 sq. ft. The Assessing Officer (AO) and CIT(A) held that the project is within 25 km of the BMC limits, thus restricting the permissible built-up area to 1000 sq. ft. The Tribunal upheld this view, stating that the municipal limits refer to the BMC limits, not the city of Mumbai as defined in various enactments. Therefore, the project did not qualify for the higher permissible built-up area, and units exceeding 1000 sq. ft. were not eligible for the deduction.

Issue 2: Pro-Rata Deduction under Section 80IB(10)
The assessee contended that even if certain units exceeded the permissible built-up area, a pro-rata deduction should be allowed for units that complied with the 1000 sq. ft. limit. The CIT(A) agreed and directed the AO to allow deduction on a pro-rata basis for units within the permissible limit. The Tribunal upheld this decision, citing various judicial pronouncements supporting pro-rata deductions. It was directed that the AO should allow deductions for units in Wings A and B, which were below 1000 sq. ft., and for any such units in Wing C.

Issue 3: Definition and Interpretation of "Municipal Limits"
The assessee argued that the municipal limits of the city of Mumbai should be considered up to Chunabhatti near Sion, as per various enactments. The AO and CIT(A) disagreed, stating that the municipal limits refer to the BMC limits. The Tribunal supported this interpretation, emphasizing that the statute uses the term "municipal limits," which pertains to the BMC, the governing civic body of Mumbai. The Tribunal referenced the ITAT decision in Laukik Developers vs. DCIT, which held that the distance should be measured from the outer limits of the BMC.

Issue 4: Inclusion of Terrace and Flower Bed Areas in Built-Up Area Calculation
The AO included the terrace and flower bed areas in the built-up area calculation, leading to certain units exceeding the 1000 sq. ft. limit. The assessee argued that these areas should not be included. The Tribunal upheld the AO's detailed analysis and inclusion of these areas, stating that the flower bed and terrace are part of the built-up area as per the architectural design and should be considered in the calculation.

Conclusion:
The Tribunal concluded that the assessee was not eligible for the deduction under Section 80IB(10) for units exceeding the 1000 sq. ft. limit. However, it upheld the CIT(A)'s decision to allow pro-rata deductions for units within the permissible limit. The appeals of the assessee were dismissed, and the revenue's appeals were also dismissed, affirming the CIT(A)'s directions. The additional ground on the issue of Section 147 was not argued and thus not adjudicated.

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