2012 (8) TMI 84 - AT - Income Tax

Deduction u/s 80IB(10) - housing project - whether ownership of land is necessary - computation of eligible land - held that - assessee was not required to be owner of land on record. - housing project constitute development plan, roads and grant of other facilities, therefore, those areas should exist within the prescribed limits and to be considered as a part and parcel of the project. There is no dispute in the case before us that after addition of 5 Are of land purchased by the assessee vide agreement dt. 20th March 2004, for the purpose of approach road, to the area given in the lay out plan, it fulfills the 1 Acre prescribed area for eligibility of claiming deduction u/s. 80IB(10) of the Act. Revisionary provision u/s. 263 of the Act - revisional order passed u/s. 263 of the Act for which, the foremost requirement is that the assessment order is erroneous and prejudicial to the interest of revenue alleged that row house having area more than 1500 Sq.ft. Held that - Each flat was within the prescribed limit of 1500 Sq.ft. area and if after purchasing of 2 flats owner(s) of flats merges it into a larger flat, the claimed deduction to the assessee cannot be denied on this basis - A.O has fully applied his mind before allowing the deduction - assessment order in question can not be held as erroneous and prejudicial to the interest of the revenue - grounds questioning the validity of the revisional order in question are thus allowed in favour of the assessee Disallowance of deduction claimed u/s. 80IB(10) alleged that area of the project is less than 1 acre - explanation of the assessee that another 5 Are of land was purchased subsequently from the same owners which could be included in the calculation of area of the plot - A.O has denied the deduction is the alleged merger of 4 flats deviating from approved plans Held that - Merger of flats after purchase by the owners thereof to make it into a larger flat for their own convenience will not be a cause for denial of claimed deduction especially when an undisputed fact that each of those flats does not exceed the prescribed area limit 1500 Sq.ft. deduction is allowed - appeal is allowed Disallowance of deduction - authorities below have denied the claimed deduction u/s. 80IB(10) of the Act to the assessee on similar basis that the area of the land is below 1 Acre and the area of row house No. 11C in building D is more than 1500 Sq.ft. Held that - Addition of further area of 5 Are land purchased by the assessee subsequently for providing road to the Society is fulfilling the 1 Acre area requirement and the area of the row house No. 11C in building D is within the prescribed maximum area limit of 1500 Sq.ft. - A.O directed to allow the claimed deduction u/s. 80 IB(10) to the assessee - in favour of the assessee.

Issues Involved:
1. Validity of the revisional order passed under Section 263 of the Income Tax Act.
2. Eligibility of the assessee for deduction under Section 80IB(10) of the Income Tax Act.
3. Determination of the plot area for the housing project.
4. Built-up area of the residential units exceeding the prescribed limit of 1500 sq. ft.
5. Merger of flats and modifications not as per approved plans.

Detailed Analysis:

1. Validity of the Revisional Order under Section 263:
The assessee challenged the revisional order passed under Section 263 of the Income Tax Act, claiming that the assessment order was neither erroneous nor prejudicial to the interest of revenue. The Tribunal noted that the Assessing Officer (A.O.) had verified the claim of the assessee, including personal visits to the site, and found the assessment order to be neither erroneous nor prejudicial to revenue. Thus, the revisional order was set aside.

2. Eligibility for Deduction under Section 80IB(10):
The primary issue was whether the assessee was eligible for the deduction under Section 80IB(10), which requires the project to be on a plot of at least 1 acre and each residential unit to have a built-up area not exceeding 1500 sq. ft. The Tribunal found that the assessee had acquired an additional 5 'Are' of land for the approach road, which, when included, made the total plot area exceed 1 acre. Thus, the requirement of Section 80IB(10) was fulfilled.

3. Determination of Plot Area:
The A.O. initially allowed the deduction based on the total plot area, including the additional 5 'Are' acquired for the approach road. The Commissioner of Income Tax (CIT) later found this inclusion erroneous. However, the Tribunal held that the approach road was integral to the project and should be included in the plot area, thus meeting the 1-acre requirement.

4. Built-up Area of Residential Units:
The CIT noted that some row houses exceeded the 1500 sq. ft. limit. The assessee argued that the saleable area mentioned in the agreements included open land/garden, which should not be considered in the built-up area. The Tribunal agreed, stating that the built-up area should exclude common areas, and thus, the residential units met the criteria under Section 80IB(10).

5. Merger of Flats and Modifications:
The CIT also raised concerns about the merger of flats, which allegedly exceeded the prescribed limit of 1500 sq. ft. The Tribunal found that each flat, before merging, was within the prescribed limit, and the merger by the owners did not affect the eligibility for deduction. Therefore, the modifications were not a valid ground for denying the deduction.

Conclusion:
The Tribunal allowed the appeals, setting aside the revisional order under Section 263 and directing the A.O. to allow the claimed deductions under Section 80IB(10). The Tribunal emphasized that the issues raised were debatable and that the A.O. had conducted sufficient verification, including site visits, before allowing the deductions. The Tribunal also noted that the additional land for the approach road should be included in the plot area, and the built-up area calculations should exclude common areas, thereby meeting the requirements of Section 80IB(10).

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