2014 (7) TMI 90 - HC - Income Tax

Deduction u/s 80IB (10) - Built up area Effect of amendment from 1-4-2005 - Whether the Tribunal was justified in holding that the area of balcony and rewas are not to be included while computing the built up area of the residential units in a housing project eligible for deduction u/s 80IB (10) of the Act Held that - If the expression built up area in a housing project approved by the local authority does not include the balcony area, then, prior to 1st April 2005 it would apply while considering the eligibility u/s 80IB (10) of the Act - where the Legislature with effect from a particular date has defined a particular expression by including a meaning which is not ordinarily included in that expression, then, the definition cannot be applied retrospectively - the inclusive definition of the expression built up area introduced with effect from 1st April 2005 could not be applied retrospectively and the CESTAT was justified in holding that upto 1st April 2005, the expression built up area would exclude the balcony area CESTAT was justified in holding that the assessee was entitled to Section 80IB (10) deduction Decided against Revenue.

Summary

Issues involved:
1. Eligibility of income for deduction under Section 80IB (10) of the Income Tax Act, 1961 for a housing project on a plot of land less than one acre.
2. Interpretation of the expression 'built up area' under Section 80IB (10) for the assessment year 2004-2005.

Analysis:

Issue 1:
The first question raised in the appeal was whether the Income Tax Appellate Tribunal (CESTAT) was correct in allowing deduction under Section 80IB (10) for a housing project on a plot of land measuring less than one acre. The court noted that a similar issue had been decided in favor of the assessee in a previous case. Therefore, the court held that this question could not be entertained as it had already been settled in favor of the assessee.

Issue 2:
The second question revolved around the interpretation of the expression 'built up area' under Section 80IB (10) for the assessment year 2004-2005. The court observed that the Legislature had defined the expression 'built up area' with effect from April 1, 2005, but the case in question pertained to a period before this date. The court emphasized that the expression 'built up area' should be understood based on common understanding for the relevant period. It was noted that under the Development Control Regulations, the balcony area was required to be excluded while calculating the 'built up area.' The court held that since the definition of 'built up area' introduced in 2005 included the balcony area, it could not be applied retrospectively. Therefore, the court agreed with CESTAT's decision that, until April 1, 2005, the balcony area should be excluded from the 'built up area' calculation.

Additionally, the court addressed the issue of whether the 'rewas area' should be excluded while computing the 'built up area.' The court found this question to be academic as, after excluding the balcony area, the total built-up area of the residential units fell below the threshold of 1000 square feet as required by Section 80IB (10). Consequently, the court upheld CESTAT's decision that the assessee was entitled to the deduction under Section 80IB (10) based on the specific facts of the case.

In conclusion, the court dismissed the appeal, finding no merit in it and ordered no costs to be paid.