2014 (3) TMI 1036 - AT - Income Tax

Eligibility for deduction under section 80IB - additional constructed area is not eligible for deduction under section 80IB as per CIT(A) - Held that - As seen from the permission granted by the GHMC the original sanctioned plan was for cellar, stilt 9 floors consisting of 9763.76 sq. meters. The revised plan was also stated to be cellar, stilt 9 floors pent house. We are unable to understand whether addition of only pent house will increase the space of built up area by 6543.84 sq. meters or there are any other increase in the area of additional buildings constructed. Since the plans are not placed on record, we are unable to give any finding on this. Moreover, the BPS scheme was applicable only to the applications made on before 31-03-08. The plans were approved only in July 2007. Payments for penalty were made later as can be seen from copy of approval placed on record. Since revised plans were not placed on record we are unable to decide issue only on legal principles. The A.O. is directed to examine the original plans, revised plans and examine whether the deduction under 80IB is eligible for revised plan. In case of area of flats have changed, to verify whether the constructed apartments are within the norms prescribed under section 80IB(10). Needless to say that balconies and common areas are not to be considered as part of flat area as per the decisions of the Coordinate Bench on the issue. However, the pent house constructed and the additional space for which revised plans were taken should be examined whether the project itself is eligible for 80IB (10), on which there is no finding from the A.O. or by the CIT(A) in the orders. Not only that as seen from the P & L account assessee is still carrying closing stock of more than ₹ 4 crores, whereas sales during the year was ₹ 6.24 crores. Whether assessee hass continued to claim 80IB(10) in later year also on the balance of constructed area required to be examined, keeping in mind the method of accounting followed. As AO estimated income for non production of books of account, we are of the opinion that these aspects also require examination.

Summary

Issues involved:
Claim of deduction under section 80IB for additional constructed area in violation of approved plan.

Analysis:
The case involved cross-appeals by the Assessee and Revenue against the orders of the CIT(A)-VI, Hyderabad dated 31.01.2013, focusing on the claim of deduction under section 80IB. The Assessee, a firm engaged in real estate development, claimed a deduction of &8377; 32,22,094 under section 80IB(10) for a housing project. The Assessee had constructed an area exceeding the originally approved plan, leading to a dispute with the Assessing Officer (A.O.) regarding the eligibility for the deduction. The A.O. disallowed the claim under 80IB, citing violations of the approved plan and lack of proper documentation. The CIT(A) partially agreed with the A.O., allowing deduction only on the original approved area but rejecting the estimation of income by the A.O. The Revenue challenged the CIT(A)'s decision, arguing against the allowance of deduction for the additional constructed area and the estimation of income.

The Tribunal held that the Assessee was eligible for deduction under section 80IB(10) only for the originally sanctioned area of 9763 sq. meters, as the additional constructed area was not in compliance with the approved plan. The Tribunal rejected the Revenue's grounds, emphasizing that the permission in the name of the developer was not a requirement for claiming the deduction, as confirmed in a previous case. The Tribunal also addressed the issue of income estimation, supporting the CIT(A)'s decision to disapprove the estimation due to lack of evidence against the Assessee's books of accounts.

Regarding the additional constructed area in violation of the approved plan, the Tribunal referred to a similar case and highlighted the importance of interpreting the deduction provision under section 80IB in a manner that aligns with the legislative intent of promoting affordable housing. However, due to insufficient evidence and lack of clarity on the revised plans and construction details, the Tribunal directed the A.O. to reexamine the eligibility of the additional constructed area for the deduction under section 80IB(10). The Tribunal stressed the importance of considering factors like flat area norms, penthouse construction, and accounting methods in determining the eligibility for the deduction.

In conclusion, the Tribunal partly allowed the appeals for statistical purposes, emphasizing the need for a thorough reexamination by the A.O. to determine the extent of profits disclosed by the Assessee and ensuring a fair opportunity for the Assessee to present their case.