2013 (9) TMI 366 - AT - Income Tax

Condonation of Delay - Held that - There had been no willful neglect on the part of the Assessee - In such matters the advice of the professional would be the point of time at which the Assessee would begin to explore the option of exhausting all legal remedies - The advice was given by the counsel who appeared on behalf of the Assessee before the Hon ble High Court - The decision of the Hon ble High Court was rendered on 28.2.2012 - Following the Principles of Collector, Land Acquisition v. Mst. Katiji & Ors. 1987 (2) TMI 61 - SUPREME Court - substantial justice should prevail over technical considerations - a litigant does not stand to benefit by lodging the appeal late - every day s delay must be explained does not mean that a pedantic approach should be taken. The doctrine must be applied in a rational common sense and pragmatic manner - The appeal had been filed by the Assessee before the Tribunal on 26.3.2012 - by condonation of delay there was no loss to the revenue as legitimate taxes payable in accordance with law alone would be collected - the reason given for condonation of delay in filing the appeal was accepted - The delay in filing the appeal is accordingly condoned. Deduction u/s 80-IB(10) - To be eligible for exclusion from the built up area, whether the common areas have to be shared with all the residents, who have occupied the residential units, or even if it was shared with one, the assessee would be entitled to the said benefits - Held that - The Assessee should get the benefit of the provisions of Sec.80IB(10) which were exemption provisions - the Assessee would be entitled to deduction u/s.80-IB(10) of the Act on the profits of the 16 flats which were excluded by the CIT(A) in the order - The fact that it was not common area for all the flats in the building cannot be the basis to apportion the area of covered balcony in measuring the area of the two adjoining flats to which the covered balcony was common. The definition of the built up area in the provisions of sec.80-IB(1) does not speak of common area for all flats in a housing project. The balcony areas, which were added as forming part of the built of area of the 16 flats which were considered as exceeding the built up area of 1500 sq.ft., were common areas and had to be excluded while measuring the built up area - There was covered balcony area in the 16 flats and such covered balcony could be used by two adjoining flats and was common between them - The DVO in measuring the area of these flats divided the covered balcony area and apportioned them between the two flats - The definition of built up area for the purpose of Sec.80-IB(10) of the Act excluded area which are meant for common use Decided in favour of Assessee.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act, 1961.
2. Inclusion of balcony area in the built-up area calculation.
3. Proportionate deduction for flats exceeding the built-up area limit.
4. Condonation of delay in filing the appeal.

Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(10):
The primary issue was whether the assessee, a partnership firm engaged in developing and constructing apartments, was eligible for deduction under Section 80IB(10) of the Income Tax Act, 1961, for the assessment year 2007-08. The assessee had declared Nil income after claiming a deduction of Rs. 18,36,78,280 under this section. The project in question involved the construction of 160 flats on a 2-acre plot.

2. Inclusion of Balcony Area in Built-up Area Calculation:
A survey under Section 133A of the Act revealed that 16 flats had a built-up area exceeding 1500 sq.ft., as per the DVO's report. The Assessing Officer (AO) included the balcony area in the built-up area calculation, arguing that the balcony was under the exclusive possession of the flat owners. The assessee contended that the balcony area was a common area shared by other flat owners and should not be included in the built-up area calculation.

3. Proportionate Deduction for Flats Exceeding the Built-up Area Limit:
The CIT(A) held that the assessee should be allowed deduction under Section 80IB(10) only for the profits attributable to the flats with a built-up area of 1500 sq.ft. or less. The CIT(A) referenced various tribunal decisions, including those in the cases of Brigade Enterprises, Mystic Investment, and SJR Builders, which supported the view that deduction should be proportionate to the area of compliant flats.

4. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal against the CIT(A) order with a delay of 678 days. The delay was attributed to the advice received from counsel after the High Court's decision on a related revenue appeal. The assessee argued that the delay was not willful and that denying the condonation would cause irreparable injury. The Tribunal considered precedents, including the Supreme Court's decision in Mst. Katiji and the Karnataka High Court's decision in ISRO Satellite Centre, which emphasized that substantial justice should prevail over technicalities.

Judgment Summary:
The Tribunal allowed the condonation of delay, noting that the assessee acted upon professional advice and there was no willful neglect. On merits, the Tribunal referred to the Karnataka High Court's decision, which held that the balcony areas in question were common areas and should not be included in the built-up area calculation. Consequently, the Tribunal concluded that the assessee was entitled to deduction under Section 80IB(10) for the profits attributable to all flats, including the 16 disputed flats, as the built-up area did not exceed 1500 sq.ft. when excluding the balcony areas.

Conclusion:
The appeal by the assessee was allowed, granting the deduction under Section 80IB(10) for the entire project, including the 16 flats initially excluded by the CIT(A). The Tribunal emphasized the importance of interpreting tax provisions in light of their intended purpose and the need to encourage housing projects. The decision was pronounced in the open court on 14.12.2012.