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2015 (4) TMI 6 - AT - Income TaxDeduction under section 80-IB(10) - claim of the assessee that profits from both the two housing projects were eligible for deduction under section 80-IB(10) of the Act was rejected by the Assessing Officer - Held that - In the case before us, the project in question has commenced prior to 01.4.2005 and also stands completed on 31.12.2004 i.e. prior to 31.3.2005, and in this view of the matter, the newly inserted clause (d) to Sec. 80 IB (10) cannot be invoked to disentitle the assessee from the claim of deduction u/s. 80 IB (10) of the Act for the A.Y. 2005-06. Therefore, in so far as the project DSK Vishwa - Phase III is concerned, the objections made out by the Revenue for the A.Ys. 2004-05 and 2005-06 in order to deny the claim of deduction u/s. 80 IB (10) are unfounded and deserve to be negated. We hold so. Area covered by Rule 15.4.2 is not includible in the meaning of built up area . The extract of Rule 15.4.2, has been placed in the Paper Book at page 36, and it reflects that a multi storied stilt flooring space constructed under a building is allowed to be used as a parking subject to height restrictions. In terms thereof, it is sought to be made out that the area of car parking is specifically excludible while calculating built- up area as per the Development Control Rules and therefore, the Assessing Officer was wrong in considering such area for the purpose of computing built- up area of the residential units. A bare perusal of the Development Control Rules, in our view, supports the assertions put forth by the assessee and therefore, the area of car parking is not to be includible for the purposes of computing built- up area of residential units in the facts and circumstances of the present case. Merely because the assessee has violated the condition u/s. 80 IB(10)(c ) in relation to the flats on the 11th floor, the deduction u/s. 80 IB(10) cannot be denied in its entirety, but, the denial shall be limited to the profits in respect of the flats on the 11th floor alone. For the balance of the residential units, the plea of the assessee for deduction u/s. 80 IB(10) of the Act is justified, and the assessee succeeds on this aspect. With regard to the project DSK Frangipani for the A.Y. 2005-06 also, the facts and circumstances are identical. In this year also, in our considered opinion, our decision in the aforesaid paragraph fully applies. Though in A.Y. 2005-06, the definition of built-up area as per Section 80 IB (14)(a) was on Statute, but, admittedly, assessee s project was approved and commenced prior to 1.4.2005, therefore, the calculation of built- up area shall not be governed by such definition. Therefore, for the A.Y. 2005-06 also, the project DSK Frangipani is eligible for deduction u/s. 80 IB(10), albeit on a proportionate basis in respect of the flats whose built up area does not succeed 1500 Sq.ft. as prescribed u/s. 80 IB (10)(c ) of the Act. In this view of the matter, the order of the CIT(A) for both the years is set aside and the Assessing Officer is directed to re-compute the deduction allowable to the assessee u/s. 80 IB (10) of the Act in terms of our above discussions. - Decided partly in favour of assessee.
Issues Involved:
1. Eligibility for deduction under section 80-IB(10) of the Income-tax Act, 1961, for housing projects with commercial areas. 2. Applicability of the definition of "built-up area" for projects commenced before 1.4.2005. 3. Proportionate deduction for projects with some non-eligible residential units. Detailed Analysis: 1. Eligibility for Deduction Under Section 80-IB(10): The primary issue revolves around the eligibility of the assessee for deductions under section 80-IB(10) of the Income-tax Act, 1961, for two housing projects: DSK Vishwa III and DSK Frangipani. The deductions were denied by the Assessing Officer (AO) on the grounds that the projects did not meet the conditions prescribed under section 80-IB(10). For DSK Vishwa III, the AO noted that the project included commercial areas (6132 sq.ft.), which exceeded the limits prescribed by clause (d) of section 80-IB(10). The assessee argued that the amendment introducing this restriction was effective from 1.4.2005 and should not apply retrospectively to their project, which commenced on 13.10.2000. The Tribunal upheld this view, citing the Bombay High Court's decision in CIT v Brahma Associates, which held that the amendment is prospective and not applicable to projects commenced before 1.4.2005. For DSK Frangipani, the AO's objection was that the built-up area of some flats exceeded the 1500 sq.ft. limit prescribed in clause (c) of section 80-IB(10). The Tribunal found that the AO included balconies, terraces, and car parking areas in the built-up area calculation, which was incorrect for projects commenced before 1.4.2005. The Tribunal referred to the Development Control Rules of the local authority, which did not include these areas in the built-up area, and thus ruled in favor of the assessee. 2. Applicability of the Definition of "Built-Up Area": The Tribunal addressed the issue of whether the definition of "built-up area," which includes balconies and terraces and was introduced by the Finance (No.2) Act, 2004, effective from 1.4.2005, applies to projects commenced before this date. The Tribunal concluded that this definition does not apply retrospectively. For projects like DSK Frangipani, which commenced on 12.12.2003, the built-up area should be calculated according to the Development Control Rules of the local authority, which exclude balconies and terraces. 3. Proportionate Deduction for Projects with Some Non-Eligible Residential Units: The Tribunal also considered whether the presence of some non-eligible residential units (those exceeding 1500 sq.ft. in built-up area) in a project should result in the denial of the entire deduction under section 80-IB(10). The Tribunal ruled that the deduction should be proportionate, allowing for eligible units while denying it for non-eligible ones. This decision was based on precedents, including the Mumbai Bench's ruling in M/s. Ekta Housing Pvt. Ltd., which allowed for proportionate deductions in similar circumstances. Conclusion: The Tribunal ruled in favor of the assessee on several grounds: - The restriction on commercial area introduced by the Finance (No.2) Act, 2004, does not apply retrospectively to projects commenced before 1.4.2005. - The definition of "built-up area" including balconies and terraces, applicable from 1.4.2005, does not apply to projects commenced before this date. - Proportionate deductions under section 80-IB(10) should be allowed for eligible residential units, even if some units exceed the prescribed built-up area limits. The Tribunal directed the AO to re-compute the deduction allowable to the assessee under section 80-IB(10) based on these findings. The appeals of the assessee were partly allowed.
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