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2011 (4) TMI 1373 - AT - Income TaxDeduction u/s 80IB - Commercial Area - Assessee was engaged in the construction of two buildings known as Amurt Dham and Vidhi Complex - As per AO, in Project Vidhi Complex there was commercial area and since it was not a building project in the sense consisting of only buildings for residential purposes, the deduction was not to be allowed - Assessee contended there is no commercial area in vidhi complex but in Amrut Dham project for which deduction is not claimed HELD THAT - AO will verify the sanctioned plan to find out if the Project Vidhi Complex has any commercial area.The fact that commercial area in the form of shops exist in the buildings Amrut Dham which is part of the same sanctioned layout, but not forming part of the housing project Vidhi Complex, for which deduction u/s.80-IB(10) is claimed will not in any manner vitiate the claim for deduction u/s.80- IB(10). Decision of SAROJ SALES ORGANISATION. VERSUS INCOME-TAX OFFICER. 2008 (1) TMI 420 - ITAT BOMBAY-E supports the view that the existence of commercial area for the project for which deduction u/s.80-IB(10) is claimed alone should be seen though commercial area is built in the same sanctioned layout but in a different project. On verification, if commercial area is found to exist in the project Vidhi Complex AO will also verify if such area is within the permitted limits as laid down in Sec.80-IB(10).AO is accordingly to directed to verify the facts in this regard and while considering the claim for deduction u/s.80-IB(10) Total area of the plot on which the project was constructed - Condition for allowing deduction u/s.80-IB(10) of the Act is that the project is on the size of a plot of land which has a minimum area of one acre - whether the area given for the purpose of forming DP road has to be excluded or included for the purpose of calculating the size of the plot on which the housing project has been constructed? - CIT(A) held plot is less than one acre, Also, project is not sanctioned by KDMC, thus not eligible for deduction - HELD THAT - We find that in the case of UMIYA ENTERPRISES VERSUS INCOME TAX OFFICER-WARD-3 (3) , KALYAN (W) 2010 (2) TMI 1187 - ITAT MUMBAI has considered this issue, wherein it was held that there is no condition in the clause (b) of Section 80IB (10) that recreation area has to be excluded while examining whether the plot is of the size of one acre or less. For the purpose of clause (b) of section 80IB(10), the plot area has been taken at 4189 sq. metres, if not at 4600 sq. metres, even on this basis, the size of the plot is more than one acre. In our opinion, the CIT(A) committed an error in simply excluding 656.75 sq.metres from the area of 4600 sq.metres without appreciating that the exclusion is only for the purpose of D.P. Road which does not reduce the size of the plot as a whole. In view of the decision of the Tribunal referred above we are of the view that the order of the CIT(A) on this issue has to be reversed. We direct accordingly. Assessee would be entitled to deduction under section 10 IB(10) of the Act subject to the verification of the existence of commercial area in the project Vidhi Complex. The fact that the commercial complex exists in the Amurt Dham Project would not be relevant for denying the claiming of the assessee for deduction under section 80IB(10) of the Act for the Project Vidhi Complex.
Issues Involved:
1. Rejection of deduction claim under Section 80 IB(10) of the Income Tax Act. 2. Disallowance under Section 40(a)(ia) of the Income Tax Act. 3. Proportionate exclusion of profit attributable to commercial shops. 4. Verification of the commercial area in the housing project. 5. Total area of the plot for the housing project. Issue-wise Detailed Analysis: 1. Rejection of Deduction Claim under Section 80 IB(10) of the Income Tax Act: The primary issue was whether the assessee was eligible for a deduction under Section 80 IB(10) for its project 'Vidhi Complex.' The assessee argued that it met all requisite conditions for the deduction, including the completion of construction within the specified timeframe and adherence to the built-up area limits for residential units and commercial establishments. The CIT(A) and AO had rejected the claim, citing that the project did not meet the conditions, particularly regarding the commercial area and the total plot size. 2. Disallowance under Section 40(a)(ia) of the Income Tax Act: The assessee contended that even if the deduction under Section 80 IB(10) was not granted, the disallowance of Rs. 19,58,399 under Section 40(a)(ia) was not warranted. This issue was ancillary and contingent upon the primary issue of the deduction claim under Section 80 IB(10). 3. Proportionate Exclusion of Profit Attributable to Commercial Shops: The assessee argued that if the deduction for the entire project was disallowed due to the presence of commercial shops, only the proportionate profit attributable to these shops should be excluded from the deduction. This argument was based on the premise that the commercial area should not invalidate the entire deduction claim. 4. Verification of the Commercial Area in the Housing Project: The AO objected to the deduction claim on the grounds that the project 'Vidhi Complex' included commercial areas, which would disqualify it from the deduction under Section 80 IB(10). However, the assessee clarified that the commercial area was part of a different project 'Amurt Dham' and not 'Vidhi Complex.' The Tribunal noted that the CIT(A) had not provided a specific finding on this matter and directed the AO to verify the sanctioned plan to confirm whether 'Vidhi Complex' included any commercial area. If commercial areas were found, the AO was to ensure they were within the permissible limits. 5. Total Area of the Plot for the Housing Project: A critical condition for the deduction under Section 80 IB(10) is that the project must be on a plot of land with a minimum area of one acre. The AO had reduced the plot area by excluding the area used for D.P. Road, resulting in a net area of 3461.68 sq. meters, which is less than one acre. The assessee argued that the total plot area, including the area for D.P. Road, was 4746.26 sq. meters. The Tribunal referred to the decision in the case of Umiya Enterprises vs. ITO, which held that areas set aside for roads and recreation should not be excluded when calculating the plot size for Section 80 IB(10) compliance. Consequently, the Tribunal reversed the CIT(A)'s order on this issue, holding that the plot area should include the D.P. Road, making it compliant with the one-acre requirement. Conclusion: The Tribunal directed the AO to verify the commercial area in 'Vidhi Complex' and, if found compliant with Section 80 IB(10), to allow the deduction. The Tribunal also reversed the CIT(A)'s decision regarding the plot size, including the D.P. Road area in the total plot size calculation. The appeal was allowed for statistical purposes, with directions for further verification by the AO. Order Pronounced: The appeal of the assessee was allowed for statistical purposes, and the order was pronounced in the open court on the 8th day of April, 2011.
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