TaxTMI 
TaxTMI 
2015 (4) TMI 6
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....0-IB(10) of the Act in respect of the profits derived from undertaking of development and building of housing projects. The deductions have been denied by the income-tax authorities primarily for the reason that the projects undertaken by the assessee do not fulfill the conditions prescribed under section 80- IB(10) of the Act. The facts and circumstances in the two assessment years are quite similar and, therefore, we deem it fit and proper to take up for detailed discussion the issues arising in the assessment year 2004-05 initially. 3. For the assessment year 2004-05, the assessee company filed its return of income declaring an income of Rs. 20,01,590/- which, inter alia, included a claim of deduction under section 80-IB(10) of the Act of the Act amounting to Rs. 1,51,13,133/- in relation to the profits from the housing project. The assessee claimed such deduction in relation to two of its projects, namely, DSK Vishwa III amounting to Rs. 1,11,66,314/- and DSK Frangipani amounting to Rs. 39,46,818/-. The claim of the assessee that profits from both the two housing projects were eligible for deduction under section 80-IB(10) of the Act was rejected by the Assessing Officer and....
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....e has contended that the assessee is ineligible for the claim of deduction under section 80-IB(10) of the Act in relation to DSK Vishwa III project. 6. On the above aspect, the learned Counsel for the assessee pointed out that reference made to clause (d) of section 80-IB(10) of the Act by the Revenue in order to dis-entitle the assessee is misplaced, inasmuch as the said amendment is placed in section 80-IB(10) of the Act with effect from 1.4.2005 by way of Finance (No.2) Act, 2004. The plea raised is that prior to its substitution, section 80IB(10) of the Act did not provide for any restriction on the area earmarked for commercial purposes in a housing project. The Legislature has imposed the ceiling of 2000 sq.ft. or 5% of the total area whichever is less in relation to commercial area only by the Finance (No.2) Act, 2004 and it has been vehemently pointed out that such restriction cannot be applicable to the projects which have commenced prior to the assessment year 2005-06, inasmuch as the law as applicable at the time of commencement of such project did not contain such a restriction. Therefore, it is sought to be made out that the condition prescribing for a restriction o....
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....d construction of the DSK Vishwa project III project in terms of the approval by the Pune Municipal Corporation, which is the prescribed ' local authority' in this case within the meaning of section 80-IB(10) of the Act. The project consisted of 436 residential flats and 13 shops, entailing commercial area of 6132 sq. ft. It is not disputed that the local authority had approved the project as residential-cum-commercial. It has also been sought to be pointed out by the appellant, as is also emerging from page 1 of the Paper Book, that the proportion of the commercial area to the total area of the project was less than 2%. It is also not in dispute that the project commenced on 13.10.2000 as noted by the Assessing Officer at page 12 of the assessment order and that the same was also completed prior to 31.3.2005 and to be precise the date of completion of the project has been stated as 31.12.2004, as evident from page 1 of the Paper Book filed before us. 9. Now, we may refer to clause (d) to section 80-IB(10) of the Act, which has been inserted by the Finance (No 2) Act, 2004 with effect from 1.4.2005 which reads as under: "(d) - the built-up area of the shops and other commerci....
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....se (d) to section 80- IB(10) of the Act as inserted by the Finance (No. 2) Act, 2004 and which has also been relied by the Revenue before us, the Hon'ble High Court decided the issue in favour of the assessee and held the assessee eligible for deduction u/s. 80IB(10) of the Act. The assessment year before us is also prior to 1.4.2005 and, in our view, having regard to the fact that in the instant case the project in question has been approved by the local authority as a residential cum commercial project, therefore, the same qualifies to be seen in the same manner as seen by the Hon'ble Bombay High Court in the case of Brahma Associates (supra). Therefore, in this view of the matter, the plea of the Revenue for the assessment year 2004-05 is untenable. 11. Now, we may deal with the Revenue's aforesaid objection with regard to the DSK Vishwa Project III for the A.Y. 2005-06. As per the Revenue, Clause (d) of Sec. 80 IB (10) is inserted w.e.f. 1.4.2005 prescribing restriction on the presence of commercial area in a housing project, and as the commercial area in this case, being 6232 Sq.ft., exceeds the restriction contained in 80 IB (10)(d), therefore, for A.Y. 2005-06, the deduct....
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.... page 2 of the Paper Book. The solitary objection of the Assessing Officer is that the flats constructed by the assessee do not conform to the condition prescribed in clause (c) to Sec. 80 IB (10) of the Act. As per Assessing Officer built- up area of the flats exceeded the limit prescribed in clause (c ) to Sec. 80 IB (10) of the Act in as much as the built up area of individual residential units exceeded 1500 Sq. ft. In coming to such conclusion, the Assessing Officer has differred with assessee on three counts. Firstly, as per Assessing Officer, the area covered by balconies and terraces was includible while calculating the built- up area of the residential units. Secondly, as per the Assessing Officer, the area covered by the car parking provided to occupier of each tenement was also includible for the purpose of calculating built- up area of a residential unit. Thirdly, as per the Assessing Officer, the assessee had combined four flats in each wing into two duplex flat on 11th floor and the area of such combined flats have to be considered. Accordingly, the Assessing Officer has considered the built-up area of such flats by combining the two flats in terms of which the built-u....
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....d 1500 sq. ft. 15. Even with regard to the inclusion of area of car parking, the Ld Counsel for the assessee referred to the definition of 'built- up area' as contained in clause 2.13 of the Development Control Rules, Pune, to justify that the same is not includible while calculating ' built- up area' of a unit. 16. With regard to the flats on the 11th floor in each wing which have been combined, the assessee submitted that such flats are considered as separate flats by the Municipal authority, and therefore, their 'built- up area' has to be considered individually and not after combining the same. The Ld. Counsel pointed out that even if the plea of the Assessing Officer is to be upheld, the deduction u/s. 80 IB (10) be granted in respect of the flats upto the 10th floor and it be denied only in relation to the combined flat on the 11th floor and therefore, the claim of deduction cannot be not denied in entirety. For the aforesaid proposition, reliance has been placed on the following decisions : (1) M/s. Ekta Housing Pvt. Ltd., ITA No. 3649/Mum/2009, order dated 20th May 2011 (2) Sanghavi & Joshi, 139 ITD 151, Chennai ( TM) (3) Bengal Housing Development Ltd. Vs. D....
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.... " 2.13 Built-up Area - Area covered immediately above the plinth level by the building or external area of any upper floor whichever is more excepting the areas covered by rule No. 15.4.2 " Ostensibly, a perusal of above definition shows that an area covered by Rule 15.4.2 is not includible in the meaning of ' built up area'. 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 ' built- up 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 assessee 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. 19. Now, we may....
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.... ACIT, 3 ITR 569 (Mum.) held that the assessee would not loose the exemption u/s. 80 IB (10) in entirety where some of the residential units wings had a 'built- up area' in excess of the limit prescribed in clause (c ) of Sec. 80 IB (10) but, it would be entitled to proportionate deduction u/s. 80 IB (10) of the Act with regard to the profits earned on the eligible units.. Particularly, the Tribunal also considered the decision of the Hon'ble Bombay High Court in the case of Brahma Associates (Supra) and held that the same does not envisage denial of proportionate deduction in such circumstances. The relevant discussion, as contained in paragraphs 8 & 9 of the order of the Tribunal in the case of M/s Ekta Housing Pvt. Ltd. reads as under : "viii) We now examine the applicability of the decision of the Hon'ble Bombay High Court in Brahma Associates (supra) to the facts of this case. On a careful reading of this judgment, we find that nowhere it is stated that proportionate deduction should not be allowed, in case certain residential units had built up area in excess of prescribed limit of 1,000 sq.ft. In fact, this issue was not before the Hon'ble Jurisdictional High Court. The q....
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....sent case, the commercial user is allowed in accordance with the DC Rules and hence the assessee was entitled to section 80IB(10) deduction on the entire project approved by the local authority. However, the assessee has not challenged the decision of the Tribunal in restricting the deduction to a part of the project. Therefore, while holding that in law, the assessee was entitled to section 80IB(10) deduction on the profits of the entire project, in the facts of the present case, since the assessee has not challenged the decision of the Tribunal, we are not inclined to disturb to disturb the decision of the Tribunal in restricting the section 80IB(10) deduction only in respect of the profits derived from 15 residential buildings." ix) Thus, it could be seen that the Hon'ble High Court do not approve the findings of the Tribunal that a residential building with commercial user up to 10% of the plot area would alone be entitled to deduction under section 80IB(10). The issue that, in case where certain residential units are of a built up area in excess of the prescribed limit of 1,000 sq.ft. in residential project, this would result in the entire exemption being lost, or whether t....