TaxTMI 
TaxTMI 
2016 (9) TMI 1260
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....e is 1772.81 sq. ft. that exceeds the limit of 1500 sq. ft., thereby ignoring the definition as given in section 80IB(14)(a) of Income-tax Act, 1961." 2. Briefly stated the facts are that the case of the assessee was picked up for scrutiny and the assessment was framed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) vide order dated 25.03.2013. While framing the assessment, the AO rejected the claim of deduction under section 80IB(10) of the Act, on the ground that the assessee has not fulfilled the basic eligibility condition for deduction u/s 80IB(10) as there is violation of clause (c). The assessee aggrieved by this order, preferred appeal before ld. CIT (A), who after considering the submissions of the assessee allowed the appeal of the assessee and held that the assessee is eligible for deduction under section 80IB(10) of the Act. 3. Now the revenue is in appeal before the Tribunal. 4. The ld. D/R vehemently argued that the ld. CIT (A) was not justified in deleting the disallowance and directed the AO to allow deduction. He submitted that as per section 80IB (10) the covered area exceeded 1500 sq. ft but in the present case the AO foun....
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....oor of the villa. This is not a common area which is shared with other residential units. That being so, this area has to be included for the purpose of calculation of built up area. If this area is included, the built up area of the villa exceeds the limit of 1500 s. ft. prescribed under section 80B(10). Even otherwise, the assessee himself has included 33.33% of the area taken by it as terrace (i.e. 105 s.ft) in the calculation, but this has been excluded for working out built up area. If we add this area of 105 S.ft, the total comes to 1580.81 S.ft, which is more than the prescribed limit of 1500 S. ft. In this case, the assessee has made an attempt to exclude the balconies attached and accessible from the two bed-rooms, terming it as "terrace" so as to claim the deduction. As discussed above, if the area of the balconies is included, the built up area comes to 1772.81 S. ft, which is much more than the prescribed limit of 1500 S. ft. Since the basic eligibility condition as laid down in clause (c) of Sec. 80IB(10) is not fulfilled, the benefit of deduction u/s 80IB(10) cannot be allowed to the assessee. The built-up area of the shops and other commercial establishments included....
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.... and is the roof of the ground floor. (vi) As per plan of the first floor of the residential unit, annexed to the assessment order, the brochure and photographs of the residential unit, there is no construction in this area and it is open to sky. (vii) 33.33% of the area of this balcony/terrace was charged from the customers. However, this fact may not be directly relevant to the issue at hand in view of the definition of built up area, given expressly in the Act. 3.3. At this stage, it will be pertinent to discuss the case laws on this issue - (a) In the case of CIT vs. Mahalakshmi Housing (2014) 222 Taxman 356 (Mad), the Madras High Court has held that open terrace cannot form a part of the built up area. (b) In the case of Commonwealth Developers CD Fountainhead vs. ACIT (2014) 267 CTR 297 (Bom.), the Bombay High Court has held that the rear courtyard cannot form a part of the 'built up area' of a row house. In this case, the ITAT, Panaji had earlier held that rear courtyard would form part of the built up area of the row house. The Bombay High Court quashed the above decision by holding that - for including any area as built up area there should be something bu....
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....jection of the dwelling unit and therefore had to be included in the built up area. In appeal, the Madras High Court, in the above case (2013) 81 DTR (Mad) 75, reversed the above decision of the ITAT Chennai and held that open, private terrace area could not be the subject matter of inclusion to built up area to deny the benefit of section 80IB of the I.T. Act, 1961. (d) In the case of Amaltas Associates vs. ITO (2011) 142 TTJ (Ahd.) 849, the ITAT Ahmedabad on a similar issue has held as under :- " Built-up area means inner measurement 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. It was an admitted fact that the open terrace in front of pent-house was considered as balcony/verandah. The open terrace being not covered and open to sky would not be part of the inner measurement of the residential floor at any floor level. The definition of 'built-up area' is inclusive of balcony which is not open terrace. The DVO had considered the open terrace as analogous to balcony/verandah without any basis. Therefore, the lower authoriti....
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....ttached with the rooms and covered by enclosure but it is not supported by the walls of the room underneath. We find that the Coordinate Bench under the identical facts in ITA No. 12/Kol/2014 in the case of M/s. Ashina Amar Developers vs. ITO after considering the case law and provisions of section 80IB has decided the issue by observing as under :- "4.2.1. We find that the Learned AO during the course of assessment proceedings asked the assessee inter alia to submit before him the copies of brochure issued by the assessee to the prospective buyers for effecting the sale of residential units during the asst year under appeal. The assessee duly made available the copies of the brochure issued in order to attract prospective buyers and also copies of original sale deeds before the Learned AO which were duly returned by the Learned AO after verification. We find that the Learned AO calculated the super built up area of each building based on the brochures by including the area of open terrace and therefrom estimated the built up area by taking 90% of the super built up area of each building as built up area. We find that the Learned AO brushed aside the argument of the assessee that....
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....hat DVO has considered the open terrace as analogous to balcony/ verandah without any basis. Therefore, it took the view that the authorities below were not justified in taking the open terrace as balcony / verandah rejecting the claim of the assessee. 4.2.4. Reliance in this regard is placed on the decision of Hon'ble Madras High Court in the case of CIT vs M/s Mahalakshmi Housing in Tax Case (Appeal) Nos. 583 & 584 of 2011 and 316 & 317 of 2012 dated 2.11.2012, wherein the questions raised before their Lordships and the decision rendered thereon are as under:- Whether on the facts and circumstances of the case, the Appellate Tribunal is right in law in holding that the private terrace area should be included in the built up area of the flats for the purpose of making out statutory extent of built up area as per Clause (a) of Section 80IB(14) of the Income Tax Act ? Held: 5. It is seen from the facts narrated herein that the assessee is engaged in the business of construction. The assessee entered into an agreement of sale with one Ashok Kumar for joint development of the property. The assessee's claim for deduction under Section 80IB(10) of the Income Tax Act is rejec....
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....e issue related to whether open space of the terrace would fall within the expression 'built-up area'. The facts before the Hon'ble High Court were that assessee had constructed various apartment blocks and each block had 64 apartments. The apartments located at first to sixth floor were of areas less than 1500 sq.ft.. However, the flats located on the 7th floor had the advantage of exclusive open terrace. While considering the relief u/s 801B(10) of the Act, the Assessing Officer took into consideration the area of such exclusive/private open terrace as a part of the built-up area of the units located at the 7th floor. After considering the above aspect, the built-up area of the flats located at the 7th floor exceeded 1500 sq.ft. and hence the Assessing Officer held that the condition prescribed in clause (c) of section 8018(10) of the Act was not fulfilled. The said position taken by the Assessing Officer was upheld right up to the Tribunal. However, the Hon'ble High Court disagreed with the stand of the Revenue and held that such open terrace would not be includible in the calculation of 'built-up area' for the purpose of examining the condition prescribe....
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....High Court has noted and dealt with the said argument in the following words ;- '29. Thus, in the face of terrace being an open area, not being a projection and hence, not included in the plinth area, the question herein is as to whether the Tribunal is justified in confirming the order of assessment to include the terrace area into the built-up area solely by reason of the fact that the assessee had sold it to purchasers of the 7th floor as a private terrace. 30. We do not think, the Tribunal is justified in taking the view that open terrace would form part of the built-up area for the purpose of sub-clause (c) of section 80-IB(10). As already seen in the preceding paragraphs, an assessee having an Approved Plan project alone has the right to claim deduction under section 80-IB. Any project undertaken not approved by the Local Authority is outside the purview of the Act. Thus, when a Local Authority, endowed with the jurisdiction to grant the approval is guided in its approval by Regulation as to what constitutes the plinth area, which is the built-up area, it is difficult for us to agree with the contention of the Revenue as well as the reasoning of the Tribunal that for ....