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2011 (1) TMI 934 - AT - Income Taxin this case, Tribunal has been explained the meaning and conditions of the Housing Project for the purpose of deduction u/s 80-IB of Income Tax Act, 1961 - There are following issues in this case - 1. Ownership of the property whether Development right constitute ownership or not 2. built up area of Housing Project whether Balcony will be included in the built up area or not 3. approval from Local Authority, in the case where more than one approval required which approval is considered for deduction u/s 80-IB in this case Tribunal held that The definition of built-up area is inclusive of balcony which is not open terrace and Development right will be considered as ownership of property and first approval will be considered for the purpose of deduction u/s 80-IB. The Case has been decided in the favor of Assessee.
Issues Involved:
1. Entitlement to deduction under section 80-IB(10) of the Income-tax Act. 2. Ownership and development rights of the land. 3. Compliance with conditions stipulated in section 80-IB(10) clauses (a) to (d). 4. Calculation of built-up area and inclusion of terrace and parking space. 5. Pro rata deduction applicability. Detailed Analysis: 1. Entitlement to Deduction under Section 80-IB(10): The primary issue was whether the appellant firm was entitled to deduction under section 80-IB(10) of the Income-tax Act. The Assessing Officer disallowed the deduction on the grounds that the permissions and approvals were not in the name of the assessee but in the name of Kanji Maharaj Cooperative Housing Society Ltd. Additionally, the land was owned by the society, not the assessee, making the assessee merely an agent of the cooperative housing society. The Commissioner of Income-tax (Appeals) confirmed this finding, stating that the assessee did not fulfil the conditions stipulated in section 80-IB(10). 2. Ownership and Development Rights of the Land: The Assessing Officer argued that since the land was not owned by the assessee, it only acted as an agent of the cooperative housing society. The appellant contended that by virtue of the development agreement, it had obtained land possession together with the rights to develop and construct the project. The Tribunal examined the development agreement and found that the appellant had not proved the payment of Rs. 3,00,000 for land development rights to the society. The Tribunal distinguished this case from Radhe Developers, where the assessee had purchased the land by virtue of the development agreement itself. 3. Compliance with Conditions in Section 80-IB(10) Clauses (a) to (d): The Tribunal analyzed the compliance with the conditions stipulated in section 80-IB(10): - Clause (a): The housing project should be approved before 31st March 2008. The Tribunal found that the development agreement authorized the construction of 94 units, but the assessee claimed deductions for 110 units, violating the condition. - Clause (b): The project should be on a plot of land with a minimum area of 1 acre. The Tribunal found no dispute on this condition. - Clause (c): The residential unit should have a maximum built-up area of 1500 square feet. The Tribunal found that the fifth-floor flats exceeded this limit when the exclusive terrace in front of the penthouse was included in the built-up area. - Clause (d): The built-up area of shops and other commercial establishments should not exceed 5% of the aggregate built-up area or 2000 sq. ft., whichever is less. This condition was not disputed. 4. Calculation of Built-Up Area and Inclusion of Terrace and Parking Space: The Tribunal discussed the definition of "built-up area" as per section 80-IB(14)(a), which includes inner measurements of the residential unit at the floor level, including projections and balconies, but not common areas. The Departmental Valuation Officer (DVO) included the area of the terrace in front of the penthouse in the built-up area, which the Tribunal found incorrect. The Tribunal held that the open terrace, being open to the sky, should not be included in the built-up area. Regarding parking space, the Tribunal disagreed with the DVO's opinion that exclusive parking areas allotted to each flat owner should be included in the built-up area. 5. Pro Rata Deduction Applicability: The appellant argued for pro rata deduction if any units exceeded the 1500 sq. ft. limit. The Tribunal found no provision for pro rata deduction for an assessee violating the conditions prescribed in the statute. However, the Tribunal referred to the ITAT, Nagpur Bench decision in AIR Developers, which allowed pro rata deduction if the majority of the residential units met the prescribed limit. The Tribunal ultimately held that the assessee fulfilled the conditions of section 80-IB(10) and directed the Assessing Officer to grant the deduction as claimed by the assessee. Conclusion: The Tribunal allowed the appeal, setting aside the orders of the authorities below and directing the Assessing Officer to grant deduction under section 80-IB(10) to the assessee. The Tribunal found that the assessee had complied with the conditions of section 80-IB(10) and was entitled to the claimed deduction.
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