2011 (3) TMI 206 - AT - Income Tax

Deduction u/s 80-IB(10) - Scrutiny - there is no dispute about the fact that size of the original plot on which housing project was developed was less than one acre, the assessee was subsequently allotted an adjacent plot which made good this deficiency so far as requirement about minimum size of plot was concerned - It is important to bear in mind that it is area of the plot, and not built up area, which is relevant for the purpose of deciding eligibility of the project - It is, therefore, not correct to proceed on the basis that areas not used for construction, such as garden and roads etc., will not be included in the area of the project - When lease agreement is one, plots 8A and 8B are adjacent plots and a cohesive unit on which project is now situated, declining deduction under section 80-IB(10) on the ground that plot 8B is a distinct plot is neither factually correct nor sustainable in law What is material is that at the point of time when matter comes up for examination of the claim, the necessary preconditions for being eligible to the claim are satisfied - Whether the Special Bench of the Tribunal was justified in holding that the projects having commercial area upto 10 per cent of the built-up area of the plot are eligible for deduction section 80-IB(10) on the entire project upto 1-4-2005 - The deduction was declined on the ground that the project was not a housing project and because some of the flats, after including the balcony area, exceed the requisite size of one thousand square feet - Decided in the favour of the assessee

Summary

Issues Involved:
1. Eligibility for deduction under section 80-IB(10) for Shantiniketan project.
2. Eligibility for deduction under section 80-IB(10) for Balaji Towers project.
3. Eligibility for deduction under section 80-IB(10) for Silicon Tower project.

Issue-wise Detailed Analysis:

Shantiniketan Project:
The primary issue was whether the CIT(A) was justified in upholding the Assessing Officer's decision to decline deduction under section 80-IB(10) due to the plot size being less than one acre and the commercial area exceeding 2,000 square feet. The Assessing Officer noted that the original plot size was 4,000.02 square meters, less than the required one acre (4,046.82 square meters). Although an adjacent plot of 48.13 square meters was subsequently allotted, it was designated for green belt/children's playground and not for construction, making it ineligible to be included in the project area. The CIT(A) upheld this view, stating that subsequent acquisition of adjacent land to meet the area requirement did not align with legislative intent. However, the Tribunal found that the area of the plot, not the built-up area, is relevant for eligibility under section 80-IB(10)(b) and that the additional plot was integral to the housing project. The Tribunal also noted that the commercial area restriction applied only from 2005, making the project eligible for the deduction for the assessment year 2004-05. Consequently, the Tribunal directed the Assessing Officer to grant the deduction.

Balaji Towers Project:
The issue was the denial of deduction under section 80-IB(10) due to the project being approved as 'press cum housing cum residential project' and having substantial commercial area. The Assessing Officer also noted that some residential units exceeded 1,000 square feet. The CIT(A) upheld the disallowance, relying on a coordinate bench decision that no deduction is allowable if the project is not approved as a 'housing project'. However, the Tribunal referred to the Special Bench decision in Brahma Associates, upheld by the Bombay High Court, which stated that projects with residential and commercial use, as per local authority approval, are eligible for deduction up to 31-3-2005. The Tribunal also found that the term 'built-up area' did not include balconies before 1-4-2005, and excluding balcony areas, none of the flats exceeded 1,000 square feet. Therefore, the Tribunal upheld the assessee's claim for deduction under section 80-IB(10).

Silicon Tower Project:
The facts were similar to the Balaji Towers Project, with the project being a residential cum commercial development. The Assessing Officer and CIT(A) denied the deduction, citing the project was not solely a housing project and some flats exceeded the size limit when including balconies. The Tribunal applied the same reasoning as in the Balaji Towers Project, noting that the commercial area did not affect eligibility before 1-4-2005 and that balcony areas should not be included in the built-up area calculation. Consequently, the Tribunal upheld the assessee's claim for deduction under section 80-IB(10) for the Silicon Tower Project as well.

Conclusion:
The Tribunal allowed the appeal, directing the Assessing Officer to grant the deduction under section 80-IB(10) for all three projects, emphasizing that the additional plot area, commercial area restrictions, and balcony area considerations were not grounds for disallowance for the assessment year 2004-05.