Deduction under Section 80IB(10) for housing projects: projected open terraces excluded from built-up area, deduction allowed.

Computation of built-up area for clause (c) of Section 80IB(10) was examined to determine eligibility for deduction in a housing project. The built-up area calculation must exclude projected open terraces (open to sky) when assessing whether individual flats exceed the prescribed 1500 sq. ft. limit; excluding such terrace area brings each flat within the statutory size cap and results in entitlement to deduction under Section 80IB(10). The assessing officer is directed to grant the deduction on profits from the housing project accordingly.

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Issues: (i) Whether the area of a projected terrace (open to sky) should be included in computing the built-up area for the purpose of clause (c) of Section 80IB(10) of the Income-tax Act, 1961; (ii) Whether deduction under Section 80IB(10) can be allowed on a proportionate basis when only some units in a housing project exceed the permissible built-up area.

Issue (i): Whether the area of a projected terrace (open to sky) is to be included in the computation of built-up area for the purpose of clause (c) of Section 80IB(10) of the Income-tax Act, 1961.

Analysis: The Tribunal examined whether the projected terrace (open to sky) forms part of the built-up area for clause (c) of Section 80IB(10). Reliance was placed on a co-ordinate bench decision which concluded that projected open terraces are not to be included in built-up area computation. Revenue did not place any binding contrary authority or material demonstrating that the co-ordinate bench decision has been set aside or is inapplicable. The factual position that excluding the open terrace brings the concerned units within the 1500 sq. ft. limit was not controverted by Revenue.

Conclusion: Projected terrace (open to sky) is not to be included in computing built-up area for clause (c) of Section 80IB(10); deduction under Section 80IB(10) is allowable where exclusion of such terrace keeps units within the prescribed area limit.

Issue (ii): Whether deduction under Section 80IB(10) can be granted on a proportionate basis when only certain units exceed the permissible built-up area.

Analysis: The Tribunal considered whether denial of the deduction in entirety is required where only a subset of units contravenes the area limit. The appellate authority had granted deduction proportionately by denying benefit only for the profits attributable to the non-complying units. Revenue did not demonstrate any error in that approach nor did it produce binding contrary precedent. The finding that only 40 of 176 units exceeded the permissible area supported limited disallowance rather than total denial.

Conclusion: Where only specific units of a housing project exceed the permissible built-up area under Section 80IB(10), deduction can be denied only in respect of profits attributable to those non-complying units and allowed proportionately for the remainder; the proportionate allowance is upheld.

Final Conclusion: The assessee's claim for deduction under Section 80IB(10) is allowable after excluding projected terraces (open to sky) from built-up area calculations, and where non-compliance is confined to certain units, deduction may be granted on a proportionate basis; accordingly, the assessee's appeal is allowed and the Revenue's appeal is dismissed.

Ratio Decidendi: For Section 80IB(10) purposes, projected terraces open to sky are not part of the built-up area calculation; if exclusion of such terraces brings units within the statutory area limit, deduction is allowable, and where non-compliance affects only specific units, deduction may be proportionately denied only for those units.

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