TaxTMI 
TaxTMI 
2009 (6) TMI 670
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....jects. This claim was scrutinized by the Assessing Officer and in respect of three projects, namely, Aishwariya, Netpune and Jupiter, Assessing Officer was not satisfied regarding the claim of the assessee. The common lacunae noted by the Assessing Officer on the claims were that some of the units in the respective projects had a built up area, exceeding one thousand sq. ft. thereby rendering such projects ineligible for claiming deduction under section 80-IB(10) of the Act. During the course of assessment, assessee was required to submit the maps forming part of the occupancy certificate issued by the Bombay Municipal Corporation (in short 'BMC') for these respective projects. After verifying the carpet area and built up area on each of the floors from such the maps, Assessing Officer worked out the ratio of carpet area to built up area. On this basis, assessee was required to submit a chart of built up area of each flat in each of the floors in each of the projects. Requirement of the Assessing Officer was that after ascertaining the carpet area of each of the units, the ratio as arrived at from the maps mentioned supra was to be applied for working out the built up area in respe....
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.... area (in Sq.Mtrs.) Add: Wall area (in Sq.Mtrs.) BUP (in Sq.Mtrs.) BUP (in Sq.Mtrs.) Ratio BUP Carpet Wing A 2 to 8th floor 1 84.33 11.90 96.23 1035.82 1.14 2 79.70 11.77 91.47 984.58 1.14 Total 164.03 23.67 187.7 2020.4 After rejecting the above work out, Assessing Officer attempted to work out a chart for the various flats, wherein he started from the carpet area, which correctly tallied with what was given by the assessee, and grossed up such carpet area, based on the ratio worked out by him from the maps to arrive at the built up area. To such grossed up area, he added the area of the balcony as relatable to each of the flats for arriving at the final built up area. According to him BMC Rules allowed balcony area for a floor up to 10 per cent of the carpet area and such 10 per cent alone would be excluded for FSI calculation. In the opinion of the Assessing Officer, balcony exceeding 10 per cent of the carpet area had to be considered as a part of the built up area, for, according to him, excess over 10 per cent would deplete the FSI availability with the assessee. Though the Assessing Officer noted tha....
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....essee and as per the occupancy certificate plan. Therefore, in case of 'Jupiter', Assessing Officer distributed such difference in wall area between various flats and arrived at a result whereby the unit area exceeded 1,000 sq.ft in a number of flats. 5. For not accepting the method followed by the assessee, whereby it had argued for calculating the built up area by aggregating the carpet area with the wall thickness area, Assessing Officer was of the opinion that it was highly complicated. According to him built up area as understood in common parlance Id meant area enclosed by the outer boundary of the external walls and instead of following this method, assessee had followed a complicated method leading to irrational results. Thus, effectively, Assessing Officer denied the claim of the assessee under section 80-IB(10) of the Act in respect of projects Aishwariya, Netpune and Jupiter. It has to be noted that the denial of the claim was made solely on the reason of exceeding the flat area limit and but for that no other disqualifications were ever found by the Assessing Officer. Thus the claim of deduction of Rs. 8,42,47,434 under section 80-IB was not allowed. 6. In its app....
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....by the Assessing Officer in view of the fact that wall thickness area varied from flat to flat based on the size of the flat. As for not giving the details of work out of carpet area and wall thickness area of each and every unit, submission of the assessee was again on the same lines as for the Aishwariya project, that only in those cases where there was any chance of the measurement of a flat exceeding 1,000 sq. ft. by adding the wall area, such work out was relevant. 8. Learned CIT(A) noting that the work out given by the assessee for built up area included the area of the wall thickness came to a conclusion that built-up area in none of the flats exceeded 1000 sq. ft. and assessee was therefore for deduction under section 80-IB(10) in respect of the Neptune project. According to the CIT(A) Assessing Officer's opinion that the working of the assessee was not cross verifiable was not correct. Ld. CIT(A) further noted that assessee had given such workings in relation to each of the units, which exceeded carpet area of 80 sq.mtrs. and the built-up area of flats in floors 'A', 'B' wings of the Neptune project tallied with built-up as per the approved BMC plan. Learned CIT(A) was ....
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....ratio based on floor areas to all the units of a particular floor. Thus he accepted the workings given by the assessee and came to a conclusion that none of the flats exceeded 1000 sq. fit and allowed the assessee's claim for deduction under section 80-IB(10) of the Act, for Jupiter project also. 10. Now both the assessee as well as the revenue is in appeal before us in relation to deduction under section 80-IB. Revenue is aggrieved that learned CIT(A) directed allowance of such deduction for Jupiter and Neptune projects. According to the revenue CIT(A) had accepted new evidence in the form of work out of built-up area in respect of these projects which was in contravention of rule 46A of the Income-tax Rules. As against the above assessee is aggrieved that it was denied deduction under section 80-IB(10) of the Act with respect to Aishwariya project. 11. Before us the learned Departmental Representative, initiating the arguments, strongly supported the orders of the learned CIT(A) vis-a-vis the disallowance of deduction under section 80-IB for Aishwariya project whereas he strongly assailed the order of CIT(A) for allowing such deduction on Neptune and Jupiter projects. Accor....
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....hrough Finance (No. 2) Act, 2004. According to him, the expression 'built-up area' as per this circular, was defined so as to remove the confusion and retrospectivity was therefore implied. When pointed out by the Bench that Assessing Officer himself had admitted to prospective operation of the definition of 'built-up area' with effect from 1-4-2005, learned D.R. replied that there was no estoppel against law. According to him even if the Assessing Officer had considered a wrong interpretation of law, revenue could raise this contention. Therefore, he submitted that, CIT(A)'s decision to exclude balcony area and go by the measurements given by the assessee in respect of Neptune and Jupiter Projects were incorrect. Further submission by the learned D.R. was that even if retrospectivity of clause (a) of sub-section (14) of section 80-IB was not accepted, definition of built-up area would necessarily include balconies in view of the Development Control Rules of BMC. According to him, as per such Development Control Rules, balcony area in excess of 10 per cent of the carpet area was to be deducted from the FSI thereby implying that such excess would form a necessary component of built-....
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....t defined under the Income-tax Act, a definition given by a local authority could not be imported into it. Ld. counsel submitted that local authorities and local enactments could differ from State to State and place to place, and interpreting a central statute based on such varying definition would result in contradictory and undesirable results. Thus, according to him the common meaning of the built up area which was carpet area aggregated with the area of the thickness of the walls was the correct approach, and the assessee had worked out on this basis for all the three projects and submitted such work outs to the Assessing Officer, which were arbitrarily rejected by the latter. According to him the learned CIT(A) had correctly appreciated such work out and accepted the contentions of the assessee vis-a-vis Neptune and Jupiter projects. In any case it was submitted that Assessing Officer himself had considered the amendment defining built-up area vide clause (a ) to sub-section (14) of section 80-IB of the Act to be prospective and the revenue could not be allowed to improve upon the case of the Assessing Officer. Assessing Officer himself having admitted to the non-retrospectivi....
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....d aspects held that commercial use up to 10 per cent would not vitiate a claim of deduction under section 80-IB(10) of the Act. 14. In reply the learned Departmental Representative submitted that assessee had not produced the pi-diagrams in supporting of its work out of built-up area. For this learned A.R. submitted that the work outs given by the assessee before the Assessing Officer were based on pi-diagrams but despite this the Assessing Officer went on a different tangent for ascertaining the built-up area. 15. We have heard the rival contentions and perused the orders. First we take up the common issues involved in all the three projects. These common issues can be summed up in three questions :- (1) Whether the method followed by the Assessing Officer in grossing up the carpet area to arrive at the built-up area based on a ratio arrived at on the floor map appended to the occupancy certificate was correct; (ii) whether built up area can include balcony, especially so, since the Assessing Officer himself considered Finance (No. 2) Act, 2004 introducing clause (a) to sub-section (14) of section 80-IB to be prospective in effect; and (iii) if the definition of bui....
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....elevant were all given by it, is seen to be correct and accepted by the Ld. CIT(A). 17. Now coming to the second question which is whether balcony is to be construed as a part of the built-up area. According to the Assessing Officer if the balcony area is also added, the built-up area would exceed 1000 sq. ft. per unit in number of cases. For resolving this we have to once again go back to the definition of built-up area introduced by the Finance (No. 2) Act, 2004, as clause (a) to sub-section (14) of section 80-IB and first decide whether it is retrospective or not. For brevity, this definition is reproduced once again hereunder : "(14) for the purpose of this section:- (a)'built-up area' means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units." Though, both the learned D.R. as well as the learned A.R. have delved into a large number of cases for their respective contentions for and against retrospectivity, we find that the answer to this question can be found easily from the definitio....
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.... prior to that as well. However, there the issue was the extension of a benefit of time-limit and this cannot be treated as equivalent to introduction of a definition which hitherto before had a different meaning as understood in common business parlance. Even otherwise, revenue is precluded from taking the plea that such definition is having retrospective effect for the simple reason that Assessing Officer himself had accepted it to be only prospective. Various contentions of the learned DR that there can be no estoppel against law even if the Assessing Officer himself had taken a different view becomes irrelevant on the face of our finding that definition of built-up area is only prospective with effect from 1-4-2005. Thus prior to 1-4-2005, balcony would not form part of the built-up area, irrespective of the area of such balcony. 18. Having come to a conclusion that definition of built-up area as in sub-clause (a) of sub-section (14) of section 80-IB had only prospective effect, we have to decide whether the Assessing Officer's view that definition as per BMC Rules has to apply is correct. BMC Rules vide sub-para 22 of para 38 of the Development Control Regulations for Great....
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....on of clause (a) to sub-section(14) to section 80-IB, built-up area would mean what was understood in the common parlance, which would only be carpet area aggregated with the area covered by the thickness of the walls and no part of balcony could be included therein. Character of a balcony remains and would not change whether it is in excess of 10 per cent of the carpet area or otherwise. Based upon the above understanding of the law, we have to see whether assessee had given a work out of the built-up area based on measurements and the specific reasons why its claims were rejected in relation to the three projects. 19. Taking project 'Neptune' as mentioned in para four above, assessee had given a work out of built-up area by aggregating carpet area to wall thickness area. Of course, assessee had not given the work out in respect of every unit in the project, but wherever the carpet area exceeded 60 sq.mtrs.(equivalent to 645 Sq. Ft.) it had indeed given the work out. There is much strength in the argument that any addition of wall area thickness would not take it beyond 92.25 sq.mtr. which is equivalent to 1000 sq. ft. Assessing Officer had rejected this work out only for the r....
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....ds the finding of fact that the reconciliation error in the BMC plan was explained remains unrebutted. Thus, we find that the learned CIT(A) had accepted the work of the built-up area given by the assessee only after verification. If we look at the D.V.O. Report dated 12-5-2008, though as aforesaid, it was obtained after the assessment it clearly shows that in none of the flats in Jupiter project exceeded 1000 sq. ft. Therefore, we find no error in the order of the learned CIT(A) in allowing the assessee the benefit of section 80-IB(10) for Jupiter project also. 21. Coming to the last of the three projects, namely, Aishwariya, apart from the common reasonings for rejecting assessee's work out of the built-up area, Assessing Officer has also noted that in the workings submitted, assessee itself showed a built-up area exceeding 1000 sq. ft. in one flat each of first to eighth floors of Wing 'A'. We have already ruled against considering any part of the balcony area for calculating the built-up area and also held that measurement based data furnished by the assessee with regard to the built-up area, is in accordance with commonly understood meaning of the term 'built-up area'. In t....
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....f profit from a housing complex containing both the smaller and large residential units and since the assessee has only claimed deduction on account of smaller qualifying units by fulfilling all the conditions as laid down under section 80-IB(10), the denial of claim by the assessee is on account of rather restricted and narrow interpretation of provisions of clause (c) of section 80-IB(10) while coming to such conclusion, we also find support from the order of the Hon'ble Supreme Court in case of Bajaj Tempo Ltd. (supra), wherein it was held that provisions should be interpreted liberally and since in the present case also, the assessee by claiming pro rata income on qualifying units has complied with all the provisions as contained in the said section, in our considered opinion, such claim of the assessee was rightly allowed by the ld. CIT(A) by reversing the order of the Assessing Officer." Again in the case of Brigade Enterprises (P.) Ltd. (supra) decided by the Bangalore Bench of this Tribunal, it was held that where some of the residential units in a bigger housing project if treated independently were eligible for relief under section 80-IB(10), then relief should be give....
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....s of this Tribunal had clearly held even where some of the units exceeded the area limit relief had to be given on pro rata basis. We also find that Special Bench of the Tribunal in the case of Brahma Associates (supra) allowed pro rata relief, even where assessee had utilized space for commercial purpose up to the extent of 10 per cent in an approved housing project. Following these, we are of the opinion that assessee is eligible for relief on pro rata basis in respect of the flats which did not have a built up area exceeding 1000 sq.ft. in respect of Aishwariya project. Thus, the quantum of deduction under section 80-IB(10) in respect of the Aiswariya project for the flats which have built-up area less than 1000 sq. ft., has to be worked out on pro rata basis in line with our discussion in the preceding paras. 22. In the result, Grounds 1 to 3 of the revenue stands dismissed, whereas grounds 1 to 4 of the assessee are allowed. Assessing Officer is directed to verify the claim of the assessee for deduction under section 80-IB(10) of the Act in respect of Aishwariya project and allow it deduction on pro rata basis in respect of flats having built-up area less than 1000 sq. ft. ....
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....he Club House and the home for aged were being used by all the persons who had purchased the area measuring 6,49,990 sq.ft. and major part of the project was completed and sold. As per the assessee it had correctly debited the expenses incurred for club house and home for the aged in its profit & loss account. However, the above contentions were rejected by the Assessing Officer. 27. In its appeal before the CIT(A), assessee reiterated the same contentions as made before the Assessing Officer. Further, it also submitted that major part of the project was completed and sold and if it was to postpone the debit of the expenses relating to the home for aged and Club House, till the sale of the last building, it would result in abnormal losses in such year. Further contention was that the construction was completed in the relevant previous year though commenced in financial year 2002-03. Ld. CIT(A) was of the opinion that the expenses are to be allowed since assessee was following project completion method for accounting its income. According to the learned CIT(A) the expenses incurred were for business purposes and related to the project and the assessee had correctly claimed it as ....