2011 (5) TMI 960 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the CIT(A)'s order.
2. Entitlement to deduction under Section 80IB(10) of the Income-tax Act.
3. Inclusion of open terrace in the built-up area for the purpose of Section 80IB(10).
4. Development and construction on lands not part of the development agreement.

Detailed Analysis:

1. Validity of the CIT(A)'s Order:
The appellant argued that the CIT(A)'s order was "bad in law" as it was passed without considering and appreciating the facts of the appellant's case. The Tribunal noted that the CIT(A) had indeed considered the facts and submissions of the appellant in detail, as evidenced by the comprehensive discussion and findings in the impugned order.

2. Entitlement to Deduction under Section 80IB(10):
The appellant firm, engaged in the business of construction, claimed deduction under Section 80IB(10) for the project "Safal Parivesh." The Assessing Officer (AO) denied the deduction on several grounds:
- The built-up area of certain units exceeded 1500 sq. ft.
- The appellant was not both a builder and developer as required by the provisions of Section 80IB(10).
- The appellant was merely a contractor for the project.
- The appellant had not sold any unit to the purchaser; the societies executed the sale deeds.
- As per the amendment to Section 80IB by the Finance Act, 2009, a works contractor is not eligible for deduction under Section 80IB.

The CIT(A) upheld the AO's findings, emphasizing that the appellant did not fulfill the conditions stipulated in Section 80IB(10), particularly regarding the built-up area limit and the nature of the appellant's role as a contractor rather than a developer.

3. Inclusion of Open Terrace in the Built-up Area:
The AO included the area of the open terrace in the built-up area, resulting in certain units exceeding the 1500 sq. ft. limit. The appellant argued that the terrace should not be considered part of the built-up area. The Tribunal referred to the definition of built-up area, which includes "balconies and projections," and concluded that a private terrace, sold to the individual buyer and in their exclusive possession, should be included in the built-up area. This interpretation was consistent with the findings of the District Valuation Officer (DVO).

4. Development and Construction on Lands Not Part of the Development Agreement:
The CIT(A) found discrepancies between the survey numbers mentioned in the development agreements and those in the Building Use (BU) permission. The appellant had constructed residential units on lands for which no development agreements were entered into. The Tribunal noted that the development permission and BU permission did not match the land survey numbers given in the two development agreements. This discrepancy indicated that the appellant violated the conditions stipulated in Section 80IB(10)(a).

Tribunal's Findings:
The Tribunal considered the submissions and evidence provided by the appellant, including the development agreements, sale deeds, and permissions from the local authority (AUDA). It concluded that:
- The appellant had acquired dominant rights over the land and developed the housing project, fulfilling the conditions of Section 80IB(10).
- The inclusion of the open terrace in the built-up area was justified, and the built-up area of certain units exceeded the prescribed limit.
- The discrepancies in survey numbers indicated that the appellant violated the conditions of Section 80IB(10)(a).

Conclusion:
The Tribunal allowed the appeal, directing the AO to grant deduction under Section 80IB(10) to the appellant, as the appellant had fulfilled the conditions and requirements of the section. The Tribunal emphasized a liberal interpretation of the beneficial provision under the Income-tax Act, consistent with judicial precedents.