2017 (10) TMI 1285 - AT - Income Tax

Claim of deduction u/s. 80IB(10) - Held that - It is a well settled principle of law that when the language of a statute is clear and unambiguous, the courts are to interpret the same in its literal sense. A perusal of discussions discussed above indicates that two diagonally opposite views have been taken by the different Hon ble High Courts while interpreting the provisions of section 139(1) and 139(4) read with section 80AC. The Hon ble High Court of Andhra Pradesh liberally interpreting the provisions of section 80AC has granted relief of deduction by extending the time specified for filing return of income u/s 139(1) to time limit specified under sub-section (4) of section 139. On the other hand, Hon ble Calcutta High Court and Hon ble Uttrakhand High Court by literal interpreting the provisions of section 80AC has restricted benefit of deduction u/s. 80IB where return of income has been filed within the time specified u/s. 139(1) of the Act. It is a trait law that where two divergent views are available and there is no direct decisions on the issue by Hon ble Jurisdictional High Court, the view in favour of assessee has to be followed CIT Vs. Vegetables Products (1973 (1) TMI 1 - SUPREME Court). Thus assessee is eligible for claiming deduction u/s. 80IB(10) of the Act. Whether four residential units i.e. D-601, D-602, E-601 & E-602 in the housing project, Hill View developed by assessee have built up area beyond 1500 sq.ft and hence, ineligible for claiming deduction u/s. 80IB(10)? - Held that - A perusal of the building plan at page No. 236 of the paper book shows that open area mentioned adjoining to the living room and bedroom is terrace and not balcony . The open area which has been included while computing built up area of flat is terrace and not balcony. The definition of built up area does not include terrace and in the case of CIT Vs. Amaltas Associates (2016 (10) TMI 359 - GUJARAT HIGH COURT) has held that terrace is different from balcony. Thus, open area of terrace would not form part of built up area of flats in question. Accordingly, second issue i.e. Ground no. 1.b. raised in the appeal is decided in favour of the assessee.

Summary

Issues Involved:
1. Eligibility for claiming deduction under Section 80IB(10) when the return of income is filed beyond the due date specified under Section 139(1) but within the extended period under Section 139(4).
2. Determination of built-up area for four residential units and its compliance with Section 80IB(10).

Detailed Analysis:

1. Eligibility for Claiming Deduction under Section 80IB(10):

The core issue was whether the assessee is eligible for claiming deduction under Section 80IB(10) if the return of income was filed beyond the due date specified under Section 139(1) but within the extended period specified under Section 139(4). The provision of Section 80AC mandates that unless the return of income is furnished on or before the due date specified under Section 139(1), the assessee would not be admissible for deduction under Section 80IB of the Act.

The assessee argued that the return was filed within the extended time allowed under Section 139(4) due to disputes among directors and non-cooperation from auditors. Several judgments were cited to support the claim that the extended time under Section 139(4) should be considered as within the due date under Section 139(1). The Tribunal noted that different High Courts had divergent views on this matter. The Andhra Pradesh High Court, in the case of CIT Vs. Sri S. Venkataiah, held that the claim of deduction should not be denied on technicalities if the return is filed within the extended time under Section 139(4). On the other hand, the Calcutta High Court in CIT Vs. Shelcon Properties and the Uttarakhand High Court in Umesh Chandra Dalakoti Vs. ACIT held that the return must be filed within the due date specified under Section 139(1) to be eligible for the deduction.

Given the conflicting judgments and following the principle that in the absence of a jurisdictional High Court decision, the view favoring the assessee should be adopted, the Tribunal decided in favor of the assessee, allowing the deduction under Section 80IB(10).

2. Determination of Built-up Area:

The second issue was whether the built-up area of four residential units (D-601, D-602, E-601, and E-602) exceeded 1500 sq. ft., making them ineligible for deduction under Section 80IB(10). The authorities below included the area of the terrace while computing the built-up area, which led to the conclusion that the area exceeded 1500 sq. ft.

The definition of "built-up area" under Section 80IB(14) includes the inner measurements of the residential unit at the floor level, including projections and balconies but does not explicitly mention terraces. The Gujarat High Court in CIT Vs. M/s. Amaltas Associates held that the term 'balcony' does not include an open terrace adjoining a residential unit. The Tribunal referred to the building plan and observed that the open area adjoining the living room and bedroom was a 'terrace' and not a 'balcony'. Since the definition of 'built-up area' does not include terraces, the Tribunal concluded that the built-up area of the flats in question did not exceed 1500 sq. ft.

Thus, the Tribunal decided in favor of the assessee on the second issue as well, allowing the deduction under Section 80IB(10) for the four residential units.

Conclusion:

The appeal was allowed, with the Tribunal holding that the assessee is eligible for claiming deduction under Section 80IB(10) despite filing the return within the extended period under Section 139(4) and that the built-up area of the residential units did not exceed the prescribed limit when terraces were excluded from the calculation.